Failure to disclose material information during arbitral proceedings and waiver of legal rights can preclude a party from challenging an arbitral award under Section 34 of the Arbitration and Conciliation Act, 1996.

Vibhu Bakhru, J.

1. The petitioners have filed the present petition under Section 34 of the Arbitration and Conciliation Act, 1996 (hereafter ‘the Act’), inter alia, praying for setting aside the arbitral award dated 23.11.2017 (hereafter ‘the impugned award’) rendered by the Arbitral Tribunal. The impugned award was rendered in the context of the disputes that had arisen in respect of the Personal Guarantees issued by the petitioners for due repayment of loans availed by Assotech Limited (hereafter ‘Assotech’) by issue of debentures.

2. By the impugned award, the Arbitral Tribunal has held that the petitioners (along with Shri Manoj Shrivastava) are jointly and severally liable to pay an aggregate sum of Rs.25,57,00,000/-to respondent no.1 (hereafter ‘IDBI’). Further the petitioners have also been held to be jointly and severally liable for payment of interest at the rate of 10% per annum on the principal amount of Rs.22,06,00,000/- with effect from 16.02.2017 till the date of realisation of the amount.

3. Assotech is a company engaged in the business of construction and development of real estate. Assotech entered into a Debenture Subscription Agreement (hereafter ‘DSA’) with three lenders (subscribers) for raising funds for meeting expenses in respect of its various real estate projects, repayment of loans and payment of dues to NOIDA (New Okhla Industrial Development Authority). In terms of the said DSA, the three subscribers - namely, Zee Entertainment Enterprises Limited, Hindustan Composites Limited and Essel Finance Advisors and Manager LLP – subscribed to 4500 fully secured redeemable non-convertible debentures of a face value of Rs.1,00,000/- each; Zee Entertainment Limited subscribed to 2900 debentures, Hindustan Composites Limited subscribed to 300 debentures and Essel Finance Advisors and Manager LLP subscribed to 1300 debentures. Thus, in aggregate, the three subscribers lent a sum of Rs.45 crores to Assotech.

4. On 29.03.2014, Assotech executed a Debenture Trust Deed with IDBI (IDBI Trusteeship Services Limited - respondent no.1) to act for the benefit of the subscribers of the 4500 non-convertible debentures issued by Assotech. Petitioner no.1, who was the Managing Director of Assotech at the material time, as well as two other Directors (including petitioner no.2) executed personal guarantees in favour of IDBI.

5. IDBI issued a notice of demand on 01.04.2016 on Assotech as well as on the guarantors – namely, the petitioners and one Mr. Manoj Srivastava – calling upon them to discharge the dues payable under the DSA. There is no dispute that Assotech defaulted in due discharge of its liability under the DSA.

6. Since the said payments were not made, IDBI invoked the arbitration clause and the Arbitration Tribunal was constituted.

7. IDBI filed its statement of claim on 15.07.2016 and the petitioners filed their statement of defence on 16.09.2016.

8. It appears that while the arbitral proceedings were pending, IDBI and Assotech agreed on an arrangement (hereafter ‘the said arrangement’), whereby Assotech agreed that the amounts received from specified real estate projects (named as Nest and Windsor) would be deposited in an escrow account. And, only a specified percentage of the receipts – 77% in case of receipt from Nest and 86% in case of receipts in respect of Windsor – would be utilised by Assotech from the said project and the balance would be available for discharging the dues under the DSA.

9. In the arbitral proceedings, the petitioners filed an affidavit on 10.07.2017; but, the said arrangement was not disclosed in the aforesaid affidavit as well. However, during the cross-examination of petitioner no.1, which was conducted on 06.10.2017, he referred to the said arrangement. He also sought to canvas that the petitioners were discharged from their obligations under the personal guarantees on account of IDBI entering into the said arrangement with Assotech (the principal debtor) without their express consen