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IN THE HIGH COURT OF HIMACHAL PRADESH AT SHIMLA
TARLOK SINGH CHAUHAN, CHANDER BHUSAN BAROWALIA, JJ.
EIH LIMITED (FORMERLY KNOWN AS EAST INDIA HOTELS LTD.) – Appellant
Versus
THE STATE OF HIMACHAL PRADESH – Respondent
Arbitration Appeal No. 11 of 2016
Decided On : 13-10-2022
Arbitration and Conciliation Act, 1996 - Section 37 , 34 - Companies Act, 1956 - Sections 9, 75, 402, 100 and 108 - Specific Relief Act, 1963 - Section 19(e) - HP Registration of Tourist Trade Act - Section 10 - Transfer of Property Act, 1882 - Sections 31, 10 and 11 - Joint Venture Agreement - Hotel - Whether and to what extent Joint Venture Agreement is valid and binding on parties and is capable of conferring rights on them - Whether Claimant No. 2 was legally entitled to cancel Joint Venture Agreement and take consequential action, which was subject matter of adjudication by Company Law Board and/of Company Appeal - Whether Claimant No. 1 have rightly and properly constructed building of hotel and construction is in accordance and in-conformity with sanction and permission granted by competent authority of State - Whether Claimant No. 1 in raising construction of entire building or any part thereof, have deviated from sanction plan or have constructed any part of building in excess or in violation of any sanction, validity and/or legitimately granted by competent authority of State - Whether withholding of registration of additional 57 rooms and non-inclusion of same in certificate of registration already granted to Hotel, was justified and valid. [Para 98]
Finding of the Court:
However, notwithstanding same, learned Single Judge did not disturb or upset operative direction of learned Arbitrator that JVA would be deemed to have been terminated - Learned Single Judge found that as per evidence on record, it could not be said that hotel was made fully commercially operational within period prescribed under JVA, and thus, finding of fact in award was not liable to be interfered with - For all reasons stated above, instant case is not a fit case for this Court to exercise its jurisdiction, as under Section 37 of A & C Act, appellate court only has to satisfy itself that jurisdiction under Section 34 while rejecting challenge to arbitral award has been correctly exercised by learned Court below.
Result: Appeal dismissed.
JUDGMENT :
TARLOK SINGH CHAUHAN, J.
1. The appellants have filed the instant appeal under Section 37 of the Arbitration and Conciliation Act, 1996 (for short the ‘A&C Act’) against the judgment rendered by the learned Single Judge on 25.02.2016, whereby the objections filed by them to the award rendered by the sole Arbitrator dated 23.07.2005 have been ordered to be dismissed with a prayer to accept the appeal and consequently set aside the judgment rendered by the learned Single Judge as also the award passed by the sole Arbitrator on 23.07.2005.
2. Respondent No. 1 was the owner of the property named ‘Hotel Wildflower Hall, Chharabra, near Shimla’ which was being used for running a hotel by the Himachal Pradesh State Tourism Development Corporation. In or around 1993, a devastating fire broke out in the hotel and the same got completely and totally burnt down. It is thereafter that respondent No. 1 decided to explore various methods and possibilities of putting the hotel back in operation including that of using the assistance of reputed Companies already operating and established in the public sector in the business of hotel industry and tourist trade. In furtherance thereto, respondent No. 1 floated global tenders inviting offers from various interested parties for making and running of a Five Star Hotel at that site.
3. Appellant No. 1 which already had most established hotel chain in the Country as also abroad participated in the tender process. A High Power Committee of respondent No. 1 comprising of its senior and experienced officers participated and prolonged deliberations, discussions and negotiations took place between appellant No. 1 (EIH Limited) and the State of Himachal Pradesh. Ultimately, the State Government decided to partner with the Appellant East India Hotels Limited (hereinafter “EIH”) owing to the latter's experience in running hotels in Shimla and based upon special representations/offers viz. (a) appellant was to make fully commercially operational a Five Star Deluxe Hotel in 4 years, (b) total cost of project was estimated at 40 crores with shareholding of State to be not less than 35%, (c) appellant was to provide technical services for construction, management and marketing the Hotel and was not to charge any royalty, money or consideration in cash or kind either from the state or the Joint Venture Company to be incorporated for running the hotel. Under the Joint Venture option, the State envisaged effective participation in all significant decisions which require mandatory approval of the State which was incorporated in Article 23 of Articles of Association of the Joint venture Company. The State was continued to have substantial interest in the property under the Joint Venture to ensure good administration of the property in public interest as this was an invaluable asset of the State.
4. Vide Joint Venture Agreement dated 30.10.1995 (hereinafter “JVA”) executed by and between the State Government and EIH, the parties agreed to incorporate a Joint Venture Company by the name of “Mashobra Resorts Ltd.” (hereinafter “MRL”) for the purpose of running a 5 Star Deluxe Hotel at Wild Flower Hall. As per Clauses 5.4 to 5.6 of the JVA, the State Government was to enjoy shareholding of not less than 35% in MRL whereas EIH was to enjoy shareholding of not less than 36% but not more than 55%. The balance 10% was to be reserved for public issue. Article 6 of the Articles of Association of the MRL provided that the basic proportion of holdings of shares in no circumstances were to be derogated. The State Government was to be allotted shares in lieu of the land at Wild Flower Hall which land was to be conveyed to MRL (Clause 5.2 JVA), EIH undertook the responsibility for constructing, running and managing the hotel (Clause 5.8 JVA). The State Government was entitled to terminate the JVA by a written notice in the event the hotel was not made fully commercially operational within 4 years from the date of handing ove
SupremeToday
Award can be set aside under Sections 34/37 of the Arbitration Act, if the award is found to be contrary to, (a) fundamental policy of Indian Law; or (b) the interest of India; or (c) justice or mora....
The arbitration agreement binds all parties, including non-signatories, and disputes must be referred to arbitration despite objections on limitation and jurisdiction.
Compliance with arbitral awards requires actual execution of terms, not mere expression of intent, to avoid revival of prior rights as stated in the award.
The court upheld the specific performance of the Joint Venture Agreement and granted interim measures under Section 17 of the Arbitration and Conciliation Act to prevent the appellant from disrupting....
The interpretation of contract clauses in Joint Venture agreements must reflect the parties' actual understanding, balancing area-sharing and revenue-sharing provisions.
The arbitrator must address allegations of fraud and collusion affecting the enforceability of a contract; failure to do so results in an award being set aside for patent illegality.
The Court does not sit in appeal over the findings and decision of the Tribunal unless the arbitrator construes the contract in such a way that no fair minded person could do.
Disputes related to Joint Venture Agreement must be resolved via arbitration, affirming validity of the arbitration clause despite claims of termination.
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