Judicial Analysis Court Copy Headnote Facts Arguments Court observation

2021 Supreme(SC) 671

SUPREME COURT OF INDIA
SANJAY KISHAN KAUL, M.M. SUNDRESH, JJ.
Ratnam Sudesh Iyer – Appellant
Versus
Jackie Kakubhai Shroff – Respondent
Civil Appeal No. 6112 of 2021, SLP (C) No. 11267 of 2021
Decided On : 10-11-2021

Advocates appeared:
For the Appellant(s) :Vishal Gandhi, Lalit Bhasin, Nina Gupta, Ananya Marwah, Ruchika Joshi, P. V. Yogeswaran, Advocates
For the Respondent(s):Rahul Chitnis, Chander Shekhar Ashri, Advocates

IMPORTANT POINT
An indiscreet e-mail by his wife, who was not even party to proceedings nor party to Deed of Settlement which contained arbitration clause, by itself cannot deny respondent of his dues.

Headnote:
Arbitration and Conciliation Act, 1996 – Section 34 – Appeal against arbitral award – Dispute emanating from breach of Deed of Settlement – Arbitrator has first hand benefit of recording evidence and examining factual scenario – Present case is one which is solely based on an interpretation of a clause against background of a dispute which gave rise to Deed of Settlement – There was some delay in sale of shares which is what was objected to by wife of respondent and appellant claimed that he could not be pushed into an early sale – Sale did take place – Thus, necessary conditions of Deed of Settlement stood satisfied – Effect of award would be to deprive respondent of due valuation of shares and what was paid to him to bring his complaints to an end – An indiscreet e-mail by his wife, who was not even party to proceedings nor party to Deed of Settlement which contained arbitration clause, by itself cannot deny respondent of his dues – Arbitrator’s conclusions are not in accordance with fundamental policy of Indian law and can be set aside under pre-2015 interpretation of Section 34 of Act – There is no fault in judgment of Single Judge and Division Bench to the extent it interferes with award and sets aside award. (Paras 33, 35, 36, 37, 38 and 39)
Facts of the case:
Arbitrator made the final award on 10.11.2014, awarding a claim for liquidated damages of US$ 1.5 million in favour of appellant, as set out in clause 6 of the Deed of Settlement. The award also held that the respondent would not be entitled to the second cheque of US$ 2 million held in escrow, on account of the respondent’s breach of Deed of Settlement. Respondent moved a petition under Section 34 of the said Act on 24.01.2015 before the Bombay High Court as Arbitration Petition No.167/2015, while the appellant filed for execution of the award. Consequently, the respondent also filed for stay of the enforcement of award. Interim stay was granted on 06.04.2018 and the SLP against same was dismissed, being SLP No.27085 of 2018. Single Judge of High Court set aside the award in terms of the judgment dated 19.05.2020. The appeal filed by the respondent under Section 37 of the said Act was dismissed by the Division Bench in terms of impugned judgment dated 20.04.2021. High Court also granted interim protection against withdrawal of the amount specified under Deed of Settlement for a limited period of time.
Findings of Court:
Only aspect emphasised by the appellant as a cause for denying respondent his dues are the two e-mails sent by his wife. Though the wife was initially impleaded in the proceedings under Section 9 of the said Act, she was later dropped from arbitration proceedings as she was not a party to the agreement vide consent order dated 06.08.2012. In a sense the agreement accepted that wife of the respondent had no role to play and the respondent could not be penalised for her conduct.
Result : Appeal dismissed.

JUDGMENT :

SANJAY KISHAN KAUL, J.

1. Business associations can sour and that is what has happened in the present case. That the association was across the seas is another aspect. The two parties before us were shareholders in the investment holding company called Atlas Equifin Private Limited, India (for short ‘Atlas’) which held 11,05,829 equity shares of Rs. 10 each in Multi Screen Media Pvt. Ltd. (for short ‘MSM’). It appears that the appellant had been attempting to sell the shares in MSM since 2002. In furtherance of the said objective, a placement instruction dated 15.11.2005 was signed by the parties authorising Standard Chartered Bank (for short ‘SCB’) as their agent to identify the purchaser for the appellant’s shares in Atlas. The dispute apparently commenced on account of the stand of the respondent that his signatures on the placement instructions had been forged. Accordingly, he lodged a complaint with the Economic Offences Wing, Mumbai Police (for short ‘EOW’) on 19.04.2010 against both the appellant and the SCB.

2. Better sense appears to have prevailed at that stage amongst the parties, or if one would say commercial sense; and they endeavoured to resolve their disputes by entering into a Deed of Settlement dated 03.01.2011. Since the present proceedings need to be adjudicated on aspects which emerge from the Deed of Settlement, it would be appropriate at this stage to set out the gist of its relevant clauses:

(b) Clause 3 forbade the respondent from writing letters, communications, or complaints to any person about the subject matter of the Deed of Settlement. The latter part of the said clause reads as under:

“3........It is farther agreed that in future Jackie shall not write any letter or communication or complaint to any police authorities and/or any other judicial, quasi-judicial authority or statutory authority or any person or entity complaining about the subject matter of the present Deed.”

(c) As a monetary incentive to the respondent to bring the complaints to an end, an amount of US$ 1.5 million was to be paid to the respondent as per clause 4.1. This amount vide banker’s cheque was to be held in an Escrow by M/s. D.M. Harish and Co. to be handed over to the respondent on confirmation by the EOW of the appellant having withdrawn his complaint dated 19.04.2010. The respondent was also required to give further assurance to ensure that if any quashing proceedings are initiated, he would cooperate in the same.

(d) As per Clause 4.2, US$ 2 million was to be paid to the respondent within seven (7) days of the receipt of the proceeds from the sale of MSM’s shares.

(e) The respondent was put to terms for committing any breach of the Deed of Settlement in clause 6, the consequence of which would be the termination of the Deed of Settlement and the release of US$ 1.5 million kept in escrow back to the appellant.

(f) The Deed of Settlement contained an arbitration clause for resolution of disputes in clause 9. The said clause reads as under:

“9. If any dispute arises between the parties hereto in relation to any provision of this Deed, the dispute shall be referred to Arbitration by a single Arbitrator to be appointed by mutual consent. The Arbitration proceedings shall be governed by the Arbitration and Conciliation Act, 1996 of India or any amendment thereto. Courts in Mumbai shall have jurisdiction in relation to any legal action or proceeding arising out of or in connection with this Deed.”

Trigger for arbitration:

3. The appellant claimed breach of the aforesaid Deed of Settlement by an e-mail dated 09.06.2011 from the wife of the respondent informing the appellant that “....once again you are not being straight with us and I’m concerned about this.” Copy of this e-mail was marked to some of their associates. This was alleged to be the first breach. The second breach was another e-mail dated 15.06.201

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2021 Supreme(SC) 671

SUPREME COURT OF INDIASANJAY KISHAN KAUL, M.M. SUNDRESH, JJ.Ratnam Sudesh Iyer – AppellantVersusJackie Kakubhai Shroff – RespondentCivil Appeal No. 6112 of 2021, SLP (C) No. 11267 of 2021Decided On : 10-11-2021

IMPORTANT POINTAn indiscreet e-mail by his wife, who was not even party to proceedings nor party to Deed of Settlement which contained arbitration clause, by itself cannot deny respondent of his dues.

Cases Referred (8)

SUPREME COURT OF INDIA
SANJAY KISHAN KAUL, M.M. SUNDRESH, JJ.
Ratnam Sudesh Iyer – Appellant
Versus
Jackie Kakubhai Shroff – Respondent
Civil Appeal No. 6112 of 2021, SLP (C) No. 11267 of 2021
Decided On : 10-11-2021

IMPORTANT POINT
An indiscreet e-mail by his wife, who was not even party to proceedings nor party to Deed of Settlement which contained arbitration clause, by itself cannot deny respondent of his dues.