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2017 Supreme(Del) 1229
IN THE HIGH COURT OF DELHI AT NEW DELHI
VIBHU BAKHRU, J.
ANURADHA SA INVESTMENTS LLC & ANOTHER – Petitioners
Versus
PARSVNATH DEVELOPERS LIMITED & OTHERS – Respondents
OMP (ENF.) (COMM.) No. 12 of 2017 & I.A. Nos. 1004, 4716, 4749 of 2017
Decided On : 20-04-2017
For the Petitioners: Mr. Rajiv Nayar with Mr. Samir Malik, Ms. Shivangi Vaid, Mr. Sourabh Seth and Ms. Divya Sharma.
For the Respondents: Mr. P.V. Kapur with Mr. Vijay Nair, Mr. Manoranjan Sharma, Mr. Vimal Nagrath, Mr. Sidharth Kapur, Ms. Pratibha Sridhar, Ms. Kaveri Gupta and Ms. Divya Kapur.
The main legal point established in the judgment is the enforceability of a Settlement Agreement as an arbitral award under the provisions of the Arbitration and Conciliation Act, 1996.
Headnote:
Arbitration and Conciliation Act - Settlement Agreement - Section 73, Section 74 - The court discussed the enforceability of the Settlement Agreement under the provisions of the Arbitration and Conciliation Act, 1996. The Settlement Agreement was found to be arrived at pursuant to conciliation proceedings under Part III of the Act and was held to be enforceable as an arbitral award.
Fact of the Case:
The petition was filed for enforcement of the Settlement Agreement dated 03.06.2016, which was entered into in the context of disputes arising from an Investment Agreement. The petitioners alleged that the respondents had taken decisions without their consent, contrary to the terms of the Investment Agreement.
Finding of the Court:
The court found that the Settlement Agreement was arrived at pursuant to conciliation proceedings under Part III of the Arbitration and Conciliation Act, and was enforceable as an arbitral award. The court rejected the respondents' contentions regarding the enforceability and service of the Settlement Agreement.
Issues: The issues included the enforceability of the Settlement Agreement as an arbitral award, the service of the Agreement on the respondents, and the compliance with stamp duty and FEMA provisions.
Ratio Decidendi: The court held that the Settlement Agreement was enforceable as an arbitral award under the Act, and that the service of the Agreement on the respondents' lawyers constituted valid service. The court also determined that the Settlement Agreement needed to be stamped as an agreement and not as an award, and deferred the consideration of FEMA compliance to a later stage.
Final Decision: The respondents were directed to file an affidavit disclosing their assets and were restrained from alienating any immovable assets until the next hearing.
1. The above captioned petition has been filed for enforcement of the Settlement Agreement dated 03.06.2016 (hereafter ‘the Settlement Agreement’). It is the petitioners’ case that the Settlement Agreement has been arrived at pursuant to conciliation proceedings under Sections 73/74 under Part III of the Arbitration and Conciliation Act, 1996 (hereafter 'the Act') and therefore, is enforceable as an arbitral award.
2. The respondents seek to challenge the maintainability of the present petition essentially on the ground that the Settlement Agreement is not an agreement under Section 73 of the Act or as a result of conciliation proceedings under Part III of the Act. Without prejudice to the same, the respondents further assert that they had not received the authenticated copy of the Settlement Agreement and, therefore, the limitation period to assail the same under Section 34 of the Act has not expired; consequently the present petition is pre-mature. It is also contended that the Settlement Agreement is insufficiently stamped.
3. The Settlement Agreement was entered into in the context of the disputes that had arisen between the parties in connection with an Investment Agreement dated 21.12.2010 (hereafter ‘the Investment Agreement’), in terms of which the petitioners had invested Rs. 900 million to subscribe to 490,000 Class A equity shares, 100,000 Class B equity shares and 8,751,000 Series A fully convertible debentures of respondent no. 4 company for funding of two of its residential development projects in Ghaziabad and New Delhi.
4. The petitioners are overseas companies; petitioner no. 1 is incorporated under the laws of Mauritius and petitioner no. 2 is incorporated under the laws of Cyprus. Respondent no. 1 is a public company. Respondent nos. 2 and 4 are private companies. Respondent no. 3 is an individual. The respondents are, inter-alia, engaged in dealing and development of real estate.
5. Disputes arose between the parties as the petitioners alleged that respondents had taken decisions in regard to several matters (affirmative voting matters) without prior consent of the petitioners, being contrary to the terms of the Investment Agreement. Admittedly, the parties agreed to resolve the same and entered into the Settlement Agreement. Whereas the petitioners contend that the Settlement Agreement was entered into pursuant to negotiations and conciliation proceedings taken in accordance with Part III of the Act, the respondents dispute the same. The respondents claim that the parties had already arrived at a settlement and the Conciliator was introduced only at the final stages prior to signing of the Settlement Agreement, at the instance of the petitioners. In terms of the Settlement Agreement, respondents agreed to pay a sum of Rs. 104,43,67,139/- as the settlement amount and Rs. 12,66,84,511/- as net interest on fully convertible debentures for the period 01.04.2015 to 31.07.2016. The said amounts were to be paid by 31.07.2016 failing which they would carry interest at the rate of 16% per annum.
6. The respondents were also required to pay a sum of Rs. 9,49,48,350/- as net interest on fully convertible debentures for the period 01.04.2014 to 31.03.2015. In terms of the Settlement Agreement, the said amount was to be paid on or before execution of the Settlement Agreement and the same was paid. Further, the Settlement Agreement provided that subject to the receipt of the settlement amount and net interest, the securities held by the petitioners in respondent no. 4 would be purchased by respondents.
7. Although the sum of Rs. 9,49,48,350/- was paid to the petitioners and the Settlement Agreement was partly performed, the respondents have defaulted in paying the balance amount due to the petitioners.
8. The present petition was moved on 24.01.2017 and on the said date, it was contended on behalf of the respondents that the authenticated copy of the Settlement Agreement had not been received by them. This was disputed
