Disputes involving serious fraud and malpractices are non-arbitrable under Indian law, and the Companies Act, 2013 influences the resolution of shareholder disputes.

AMIT RAWAL, J.

1. The appellant is aggrieved of the impugned order dated 03.08.2016 whereby the application under Section 9 of the Arbitration and Conciliation Act, 1996 seeking interim direction calling upon the respondents to ensure that the money to the extent of value i.e. invested at Rs. 1,81,25,000/-, further Rs. 5,75,000/- equity shares along with interest @12% out of the funds in the bank account of respondents freezing in terms of the order dated 31.07.2014 passed by Division Bench of Bombay High Court in appeal No.196 of 2014 read with order dated 22.01.2014 passed in arbitration petition No.1062 of 2012, has been dismissed.

2. Mr. Yogesh C. Naidu, learned counsel appearing for the appellant submitted that the appellant continues to be shareholder of the company as in the year 2008, he invested as sum of Rs. 1,81,25,000/-. He submitted that on 25.04.2011, the HSBC PI Holdings (Mauritius) Ltd. (hereinafter called as “HSBC”) being investment holding company for principal investments in Asia Division entered into share subscription agreement and Shareholders Agreement. The HSBC levelled allegation against the respondent company of serious fraud and on 11.05.2012, invoked the arbitration provisions under two agreements bearing No.88 and 89 of 2012. On 14.05.2012, Emergency Arbitrator was appointed as per the provisions of Singapore International Arbitration Centre 2010 Rules. He further submitted that the Emergency Arbitrator on 29.05.2012 passed the interim order ordering freezing of SHA account of the appellant. The HSBC also invoked the original jurisdiction of the Bombay High Court by filing a petition under Section 9 of the Arbitration and Conciliation Act, 1996 and vide order dated 21.01.2014, the High Court restrained the respondent-Company from withdrawing the amount retained by the Corporation Bank in its account to the extent of USD 60 million. The aforementioned order was challenged before the Division Bench in appeal No. 196 of 2014, which was partly allowed and the respondent-company was ordered to maintain a balance of USD 30 millions instead of 60 million within four weeks from the date of passing of the order. The respondent company chose to file the appeal before the Hon'ble Supreme Court in SLP bearing No. 24961 of 2014, which is said to be pending and status quo order has been issued. The aforementioned order dated 31.07.2014 while searching on the internet came to the knowledge of the appellant in June, 2016 and upon reading the said order, he wrote letter to the respondent company about his concern and the respondent-company invited the appellant in meeting of Board of Directors held at Mohali on 11.07.2016 wherein the appellant has been branded as “Investor”. During the aforementioned proceedings, documents were provided to the appellant and he was informed about the aforementioned facts. Even a reference was made to the report of Mr. Roger Best that was submitted by HSBC in arbitration proceeding at Singapore where it valued the shares of the respondent-company as nil.

3. Since the appellant was a shareholder of the company akin to HSBC and on the basis of doctrine of parity, moved an application as noticed above. He submitted that the Principal Court misinterpreted the provisions of law and misdirected itself, rather, failed to appreciate the aforementioned facts on the premise that the petition was not maintainable. In fact, case of the appellant squarely falls within the parameters laid down by Ho'ble Supreme Court in M/s S.B.P. & Co. Vs. M/s Patel Engineering Ltd. and another (2005) 8 SCC 618. He further submitted that the Principal Court has committed illegality in observing that there was no fraud played upon the appellant by HSBC. It merely relied upon the finding contained in the orders passed against the respondent-company. The respondent company did not execute the arbitration clause and rather it was unanimously consented that any dispute raised by the appellant, so long as it is