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IN THE HIGH COURT OF DELHI AT NEW DELHI
Sachin Datta, J.
Dlf Limited - Appellant
Versus
Pnb Housing Finance Limited & Ors. - Respondents
ARB.P. No. 1190 of 2023
Decided On : 22-03-2024
Key Points: - The referral court's role is limited to a prima facie examination of the existence of an arbitration agreement (!) (!) (!) . - The issue of whether non-signatory parties are bound by an arbitration agreement must be left to the arbitral tribunal (!) (!) (!) . - An arbitration clause in a Share Pledge Agreement remains binding on non-signatories after assignment, subject to arbitral determination (!) (!) (!) .
| Table of Content |
|---|
| 1. disputes concerning financial obligations and their legal context within the agreed arbitration framework. (Para 3 , 4 , 5) |
| 2. legal perspectives on arbitration and agreements to arbitrate between parties. (Para 24 , 26 , 27) |
| 3. examination of jurisdictional issues and the limits of referral court authority in arbitration matters. (Para 32 , 34 , 36) |
| 4. recognition of complexities in arbitration involving multiple parties and agreements. (Para 49 , 70) |
JUDGMENT
Sachin Datta, J. - The present petition has been filed by DLF Limited ("DLF" / "petitioner") seeking appointment of a sole arbitrator to adjudicate the disputes between itself and PNB Housing Finance Limited ("PNBHFL" / "respondent no.1"), Omkara Asset Reconstruction Company Limited ("Omkara" / "respondent no.2"), Joyous Housing Limited, ("JHL / "respondent no.3"), Hubtown Limited ("Hubtown" / "respondent no.4"), Chinsha Property Private Limited ("Chinsha / "respondent no.5"), Twenty Five South Realty Limited ("Twenty-Five South" / "respondent no.6") and Akruti Nirman Private Limited ("Akruti / "respondent no.7").
Factual Background
2. DLF alongwith Hubtown and Chinsha have been shareholders in JHL, in the ratio of 37.5% (DLF Ltd.), 37.5% (Chinsha) and 25% (Hubtown). DLF had purchased 37.5% shareholding in JHL vide Memorandum of Understanding dated 15.04.2004.
3. In 2017, JHL had availed a loan of Rs.800 Crores from PNBHFL under a Loan Agreement-cum-Mortgage Deed dated 20.12.2017, later modified vide Supplementary Loan Agreement dated 27.08.2020, for cluster development project/ slum rehabilitation project at Mahalaxmi Racecourse, Tulsiwadi, Mumbai. The said loan was secured by way of a mortgage created in favour of PNBHFL. In addition to the said mortgage, the entire shareholding of JHL was pledged to PNBHFL as additional security. For the said purpose, a Share Pledge Agreement dated 26.12.2017 ("SPA") was executed by the shareholders of JHL i.e., the DLF, Chinsha, Hubtown in favour of PNBHFL. The said SPA contains an arbitration clause as under:
"17.11 Any and all disputes, claims, difference arising out of or in connection with this Agreement and the Schedule(s) of Term/Repayment Schedule/s attached hereto or the performance of this Agreement shall be settled by arbitration to be referred to a sole arbitrator to be appointed by the Lender and the award thereupon shall be binding upon the parties to this Agreement. The place of arbitration shall be in Delhi or any other place as Arbitrator may decide, in accordance with the provisions of the Arbitration and Conciliation Act, 1996 and any statutory amendments thereof. The proceeding of Arbitration Tribunal shall be conducted in English language. Each party shall bear cost of representing its case before the Arbitrator. Costs and charges of arbitrator to be shared equally unless/otherwise provided for in the award."
4. JHL failed to honour its payment obligations under the loan agreement and was declared as an NPA on 04.01.2022. To recover the loan amount, PNBHFL had initially sought to auction the secured assets and for the said purpose it had taken recourse to mechanism under the SARFAESI Act, 2002; however, to no avail.
5. A Memorandum of Understanding (MOU) dated 27.10.2022 (placed on record by Omkara) was executed between DLF Home Developers Ltd., a subsidiary of DLF and PNBHFL, to purchase the entire shareholding of JHL against complete discharge of dues of PNBHFL.
6. PNBHFL had also issued a default notice dated 02.11.2022 read with letter dated 08.11.2022, in terms of the SPA, whereby PNBHFL sought reconstitution of JHL board and further indicated its intention to invoke the pledge and sell the pledged shares at enterprise value. Vide the said notice, PNBHFL further offered/invited offers from existing shareholders of JHL to purchase 100% pledged shares of JHL, with a reserve price of Rs. 1075 crores.
7. DLF, in response to PNBHFL default notice vide its letter dated 10.11.2022 offered an amount of Rs. 145
The court upheld that an arbitration clause within a Share Pledge Agreement remains binding post-assignment, affirming that jurisdictional issues are to be determined by the arbitral tribunal, aligni....
(1) Apex Court or High Court, are not expected to act mechanically merely to deliver a purported dispute raised by an applicant at doors of chosen Arbitrator. Court(s) are obliged to apply their mind....
The arbitration agreement binds all parties, including non-signatories, and disputes must be referred to arbitration despite objections on limitation and jurisdiction.
Dissenting non-signatory member of cooperative society not bound by arbitration clause in development agreement with developer; lacks consent as veritable party despite beneficiary status or executin....
A partner's execution of a Facility Agreement binds the LLP, and objections regarding authority or non-signatory status should be resolved in arbitration.
Non-signatory parties can be compelled to arbitrate if the disputes are fundamentally connected and associated with each other, even if they are not parties to the arbitration agreement.
Judicial scrutiny under Section 11 of the Arbitration Act is limited to the prima facie existence of an arbitration agreement, with substantive issues reserved for the arbitral tribunal.
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