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2018 Supreme(Del) 1911
IN THE HIGH COURT OF DELHI AT NEW DELHI
NAVIN CHAWLA, J.
Kopastin Holdings Limited - Petitioner
Versus
Uday Bahadur And Anr. - Respondents
ARB. A. (COMM.) 39 of 2018
Decided On : 02-08-2018
For the Petitioners: Mr. Jayant Mehta, Mr.Madhav Khosla, Advs.
For the Respondents: Mr.Arun Kathpalia, Sr. Adv. with Mr.P.R.Rajhans, Mr.Neeraj Kapoor, Mr.Samaksh Goyal, Advs.
Failure to exercise contractual rights and awareness of business dealings can impact the outcome of arbitration proceedings.
Headnote:
Arbitration - Joint Venture Agreement - Arbitration and Conciliation Act, 1996 - Section 37 - Section 17 - Section 9 - Section 13 - Section 38 - Section 5 of the Code of Civil Procedure, 1908
Fact of the Case:
Dispute arose from a Joint Venture Agreement between the parties regarding investment in a company. Appellant alleged non-investment and mismanagement by respondent no. 1. Court had earlier passed an ex parte order of injunction in favor of the appellant. The appeal was remanded to the Arbitrator for consideration under Section 17 of the Act.
Finding of the Court:
The Arbitrator found that the appellant was aware of the company's dealings and failed to exercise its rights under the Joint Venture Agreement. The court upheld the Arbitrator's findings and dismissed the appeal.
Issues: Alleged non-investment and mismanagement by respondent no. 1, applicability of Order 38 Rule 5 of the Code of Civil Procedure, 1908 for restraining respondent no. 1 from alienating property.
Ratio Decidendi: The appellant's failure to exercise its rights under the Joint Venture Agreement and its awareness of the company's dealings led to the dismissal of the appeal. The court found no grounds to restrain respondent no. 1 from alienating property.
Final Decision: The appeal was dismissed with no order as to cost.
NAVIN CHAWLA, J.
IA No. 10172/2018 (Exemption)
Allowed, subject to all just exceptions.
IA No. 10171/2018
For reasons stated in the application, the delay in refiling of the appeal is condoned.
ARB.A. (COMM) 39/2018
1. This appeal has been filed under Section 37 of the Arbitration and Conciliation Act, 1996 (hereinafter referred to as the ‘Act’) challenging the order dated 22.01.2018 passed by the Sole Arbitrator dismissing the application filed by the appellant under Section 17 of the Act.
2. The disputes between the parties have arisen in relation to the Joint Venture Agreement executed between the appellant and respondent no. 1 on 03.03.2008 with respect to the respondent no. 2 company. It is the case of the appellant that in terms of the Joint Venture Agreement, the appellant was to invest in respondent no. 2 a sum of USD 5 million and respondent no. 1 was to invest USD 0.5 million. It is further submitted that in discharge of its obligation, the appellant invested a sum of Rs. 15,24,98,558/- in respondent no. 2 from the financial year 2007-08 to 2010-11, however, the respondent no. 1 failed to invest its part of the committed amount.
3. It is further alleged by the appellant that in terms of the Joint Venture Agreement, the Board of Directors of respondent no. 2 was to consist of Directors of which 3 were to be nominated by the appellant and 2 were to be nominated by respondent no. 1 and all decisions of the Board were to be taken by a majority. The appellant submits that with the money invested by the appellant, the respondent no. 2 purchased approximately 11 acres of land at Village Nistauli, Loni Road, Ghaziabad, UP. It is alleged that in April, 2008 the respondent no. 1 informed the appellant over emails that respondent no. 1 wished to enter into a Joint Development Agreement with one M/s Samiah International Builders Pvt. Ltd and thereafter, a Joint Development Agreement dated 05.05.2008 was also executed between respondent no. 2 and the said Company.
4. The appellant alleges that the respondent no. 1 inducted one Mr. Kumbashi Srinivasanirudha as an alternative Director in place of the nominee Director of the appellant Mr. Yeouda Eitan Passo in 2012 without the consent of and information to the appellant or its nominee Director Mr. Yeouda Eitan Passo. It is alleged that the respondent no. 1 took charge and control of respondent no. 2 and started conducting business and affairs of the respondent no. 2 in an arbitrary manner and without any approval and consent of the appellant. The appellant further alleges that respondent no. 1 assured the appellant that the land owned by respondent no. 2 would be sold by respondent no. 1 and the entire investment of the appellant would be returned in due course. In May, 2015 when the appellant sought return of the investment and sharing of all records of the transaction made by the respondent no. 2, respondent no. 1 refused to share the same or return the investment of the appellant. Thereafter, the appellant in January, 2016 instructed a Chartered Accountant Firm to help the appellant ascertain the Balance Sheet and functioning of respondent no. 2. It is only upon receiving a report from the Chartered Accountant that the appellant realised that the respondent no. 1 had been selling the immovable properties of respondent no. 2 and had even received advance against the same. In fact, in the course of hearing of the petition filed under Section 9 of the Act, the appellant learnt that almost the entire land owned by respondent no. 2 had been sold. The said sale was without knowledge or consent or approval of the appellant. It is further alleged that respondent no. 1 had availed certain unsecured loans from respondent no. 2 in the financial year 2011-12 and 2012-13 and has been drawing remuneration of approximately Rs. 1.08 crores per year from respondent no 2.
5. With these allegations, the appellant had earlier filed an application under Section 9 of the Act seeking interim relief aga
