The demerger provisions and the transfer of liabilities under the Share Purchase Agreement influenced the court's decision regarding the liability of the parties under the arbitration award.

YOGESH KHANNA, J.

1. Indian Tourism Development Corporation Ltd. (hereinafter referred to as the ITDC) owned various buildings in different cities in India wherein Hotels were established. One such building is in Gaya. A hotel by the name ‘Hotel Bodhgaya Ashok’ was being run from the building. The respondent No.1 : M/s Ashok Chopra & Company was the successful bidder to execute civil, plumbing and electrical works in respect of which a dispute arose. The agreement between the parties having an arbitration clause, the dispute was referred to arbitration, parties wherein were ITDC and respondent No.1.

2. The learned Arbitrator published an award on June 02, 1994 which was filed in this Court in CS (OS) No.964A/1996, in which prayer made was that the award be summoned and be made a Rule of the Court. As per the award, respondent No.1 was awarded Rs.15,14,187.60/- with simple interest @ 13% per annum with effect from July 30, 1990.

3. On May 25, 1996 ITDC filed objections to the award and matter concerning the award remained pending in this Court till when on November 09, 2001 the Government of India took a decision, under its policy of disinvestment to hive-off the hotel business at Gaya. As per the policy, Bodhgaya Hotel Pvt. Ltd., shares whereof were wholly owned by the Government of India was constituted under a Scheme of Arrangement as per Section 391 read with Section 394 of the Companies Act, 1956, between the ITDC and Bodhgaya Hotel Private Limited whereunder the business at Gaya was proposed to be assigned to Bodhgaya Hotel Pvt. Ltd.

4. The Scheme of Arrangement defined and described as under:-

“(a) All the assets including leasehold assets, moveable assets and financial assets, together with all present liabilities and debts pertaining to such undertaking as mentioned in Schedule 1 as per the records of the transferor.

(b) xxxxx

(c) xxxxx

(d) All immovable assets of the transferred undertaking including any leasehold or freehold rights in the land upon which the transferred undertaking is situated.

(e) xxxxx.”

5. Being relevant we note Clause No.3.3 (c) of the Scheme of Arrangement dated November 09, 2001 between ITDC and Bodhgaya Hotels Private Limited. It reads: -

“(c) the debts, liabilities including debts and liabilities lying in the books of accounts of the projects division and corporate office of the Transferor and obligations of the Transferor relating to the Transferred Undertaking, shall, without any further act or deed stand transferred to the Transferee and shall become the debts, liabilities and obligations of the Transferee which it undertakes to meet, discharge and satisfy. All liabilities and obligations arising out of guarantees executed by the Transferor relating to the Transferred Undertaking or any third party/ies shall become the liabilities and obligations of the Transferee which it undertakes to meet, discharge and satisfy on and from the Appointed Date.”

6. Further, clause No.3.4 is as under:-

“3.4 All legal or other proceedings by or against the Transferor pending on the Effective Date and relating to the Transferred Undertaking (including property rights, power, liabilities, obligations and duties of Transferor) shall be continued and enforced by or against the Transferee.”

7. The Scheme of Arrangement providing for demerger between the ITDC and Bodhgaya Hotels Private Limited was confirmed and sanctioned by the Department of Company Affairs, Government of India vide order dated November 09, 2001 and it became binding with effect from March 31, 2001.

8. The Government of India thereafter invited offers to purchase the shares of Bodhgaya Hotels Pvt. Ltd. M/s Lazard India Ltd., an entity tasked to complete the disinvestment made available documents for due diligence to persons whose expression of interest had been accepted to bid for the shares. One such person was the appellant.

9. On November 29, 2001 whilst the objections filed by the ITDC were pending in CS(OS) No.964A/1996, the entire share holding