1. Challenge to an ICC arbitration award and subsequent orders under Sections 34 and 37 of the Arbitration and Conciliation Act, 1996, regarding shareholding and project development. (Para 1 )
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2020 Supreme(SC) 172
SUPREME COURT OF INDIA
UDAY UMESH LALIT, INDU MALHOTRA, JJ.
SHAKTI NATH & ORS. – Appellant
Versus
ALPHA TIGER CYPRUS INVESTMENT NO.3 LTD. & ORS.– Respondent
Civil Appeal No. 1674 of 2020 (Arising Out of SLP(C)No. 22038 of 2017)
Decided on : 18-02-2020
Important Points
The Supreme Court rejected the challenge to an ICC arbitration award and disposed of the appeal based on court-supervised consent terms, allowing the parties to settle the dispute through a structured payment plan and the sale of shares to a third party to satisfy the award.
Subject
Arbitration Law - Enforcement of Award
Act Referred
Headnote
Arbitration and Conciliation Act, 1996 - Section 37 - ICC tribunal awarding claims of respondents 1 and 2 - Challenge rejected by High Court as also appeal against rejection - Appeal rejected by Supreme Court - Parties coming to settlement - Directions issued in terms of the settlement. (Para 4, 5, 6)
Facts of the case:
The Appellant-Promoters entered into a Shareholders Agreement ("SHA") and a Share Subscription and Purchase Agreement ("SSPA") with Respondents No.1 and 2 both dated 21.03.2008 to acquire 50% shareholding in Respondent No. 3 for the development of a Special Economic Zone for Information Technology and Information Technology Enabled Services. The project was to be developed on a sub-leased plot of land in NOIDA ("Project Land").
The SHA and SSPA were terminated. The parties entered into a Restated Shareholders Agreement ("RSHA") and a Restated Share Subscription and Purchase Agreement ("RSSPA") both dated 02.07.2009. As per Clause 3.3 and 3.4 of the RSSPA, Respondents No. 1 and 2 were required to contribute Rs.45 crore to purchase and subscribe the shares in Respondent No.3, which was brought in by 17.12.2009.
The Appellants terminated both the agreements on 17.12.2009. The Respondents No. 1 and 2 invoked arbitration.
The Tribunal vide its award (2:1) dated 20.01.2015 allowed the claim of Respondents No. 1 and 2.
The Appellants filed objections under S. 34 before the High Court. The Single Judge rejected the challenge on merits.
The Appellants preferred an Appeal under S. 37 before the Division Bench of the High Court which was rejected.
Finding of the Court:
Appeal rejected.
Result: Appeal disposed of.
Legal Category Hierarchy
Advocates Appeared:
For the Parties:Abhishek Manu Singhvi, Dhruv Mehta, Pradyuman Dubey, Arpita Bishnoi, Nidhiram Sharma, Samarth Madan, Abhay Kumar, Priyank Ladoia, Paresh B. Lal, V.P. Singh, Raghav Seth, Simran Bhat, Mayank Pandey, Ravindra Kumar, Rajat Mittal, Advocates
For the Parties:Abhishek Manu Singhvi, Dhruv Mehta, Pradyuman Dubey, Arpita Bishnoi, Nidhiram Sharma, Samarth Madan, Abhay Kumar, Priyank Ladoia, Paresh B. Lal, V.P. Singh, Raghav Seth, Simran Bhat, Mayank Pandey, Ravindra Kumar, Rajat Mittal, Advocates
Table of Contents
2. The Appellants challenged the validity of the ICC arbitration award and the subsequent judgments of the High Court rejecting the objections and appeal. (Para 1 , 3 )
3. The court noted the parties' agreement to settle the dispute through a commercial arrangement involving the sale of shares and payment of dues to a third party. (Para 4 , 6 , 7 )
4. Parties to an arbitration award may modify the terms of the award, including interest, through a mutual consent settlement to achieve a prudent commercial resolution. (Para 4 )
5. Challenge to the arbitration award rejected; dispute settled via consent terms involving a fixed payment, share transfer, and discharge of third-party dues. (Para 4 , 8 , 9 )
6. Can an arbitration award be modified by the consent of the parties?
Yes, the court may allow the modification of specific terms of an award, such as interest and penal interest, if the parties reach a mutual agreement as a prudent commercial decision. (Para 4 )
7. What is the legal consequence of defaulting on a court-approved consent settlement of an arbitration award?
If a party defaults on the payments agreed upon in a consent settlement, the original arbitration award becomes enforceable, typically after a specified grace period for compliance. (Para 8 )
8. Can a third party facilitate the settlement of an arbitration award through asset acquisition?
Yes, a third party may enter the settlement process by purchasing the shares or assets of the parties involved and depositing the consideration with the court to satisfy the award and other dues. (Para 4 )
ORDER :
Leave Granted.
1. The present Appeal has been filed to challenge an award passed in an ICC arbitration with its seat in New Delhi.
The Appellant has challenged the judgment dated 08.05.2017 passed under Section 37 of the Arbitration and Conciliation Act, 1996 ("Act"), whereby a division bench of the Delhi High Court rejected the Appeal.
2. The factual background in which the present Appeal has been filed is as follows : -
2.1. The Appellant-Promoters entered into a Shareholders Agreement ("SHA") and a Share Subscription and Purchase Agreement ("SSPA") with Respondents No.1 and 2 both dated 21.03.2008 to acquire 50% shareholding in Respondent No. 3 for the development of a Special Economic Zone for Information Technology and Information Technology Enabled Services. The project was to be developed on a plot of land admeasuring approx. 45,202 sq. mts. in NOIDA ("Project Land") which was allotted to one M/s Sarv Mangal Real Tech Pvt. Ltd. ("M/s Sarv Mangal"). The Project Land was sub-leased by M/s Sarv Mangal to Respondent No. 3.
2.2. The SHA and SSPA were terminated. The parties entered into a Restated Shareholders Agreement ("RSHA") and a Restated Share Subscription and Purchase Agreement ("RSSPA") both dated 02.07.2009. As per Clause 3.3 and 3.4 of the RSSPA, Respondents No. 1 and 2 were required to contribute Rs.45 crore to purchase and subscribe the shares in Respondent No.3, which was brought in by 17.12.2009.
2.3. The Appellants terminated both the agreements on 17.12.2009. The Respondents No. 1 and 2 invoked arbitration, and submitted the Request for Arbitration to the ICC Court under the RSHA and RSSPA.
2.4. The Tribunal vide its award (2:1) dated 20.01.2015 allowed the claim of Respondents No. 1 and 2, and awarded the following : -
(a) payment of Rs. 45,00,27,747/- together with Simple Interest @ 18% p.a. from 31.10.2011 to the date of the award;
(b) payment of Simple Interest @ 15% p.a. on all sums awarded to the claimants in the award, till the date of payment;
(c) the Appellants were not entitled to repayment of lease rental paid to NOIDA from Respondents No. 1 and 2, and the Respondent-Claimants were under no obligation to share future lease rental;
(d) the Appellant-Promoters were directed to pay costs of the arbitration comprising of:
i. fees and expenses of the arbitral tribunal and the ICC administrative expenses fixed by the ICC Court for the total amount of USD 900,000;
ii. Rs.2,39,08,082/- towards the legal fees of the Respondent-Claimants;
iii. costs of the hearing venue in the amount of Rs.6,57,635/-;
iv. a sum of Rs.1,274,931/- in respect of other costs and expenses of the Respondent - Claimants.
2.5. The Appellants filed objections under S. 34 of the 1996 Act before the Delhi High Court. The learned Single Judge vide Order dated 09.02.2017 rejected the challenge on merits, and held that it was an undisputed fact that Respondents No. 1 and 2 had brought in a sum of Rs. 45,00,27,747/- for the project. The Appellants had terminated the RSHA and RSPA soon after the funds were brought in by Respondents No. 1 and 2. The Court found the findings of the arbitral tribunal to be consistent with the terms of the agreement.
2.6. Aggrieved, the Appellants preferred an Appeal under S. 37 of the Act before the Division Bench of the Delhi High Court. The Division Bench vide judgment and order dated 08.05.2017 rejected the Appeal as being devoid of any merit.
3. The Appellants have challenged the Order passed under S. 37 of the 1996 Act by way of the present Special Leave Petition.
3.1. This Court vide interim Order dated 15.09.2017 directed the Appellants to deposit an amount of Rs. 20,00,00,000/- (rupees twenty crore) in the Registry of this Court, which was directed to be invested in a short-term fixed deposit account with a nationalised bank. The Appellants were injuncted from alienating the Project Land, so that in the ultimate eventuality, if the award was sustained by this Court, it could be realised from the sale of the P
