IN THE HIGH COURT OF DELHI
Jyoti Singh, J.
Ashwani Minda - Appellant
Versus
U-Shin Ltd. - Respondent
OMP (I) (COMM.) 90 of 2020
Decided On : 12-05-2020
Based on the provided legal document, the key points are as follows:
The Court held that once a party has invoked emergency arbitration, it cannot seek interim relief under Section 9 of the Arbitration and Conciliation Act, 1996, as this would violate the principle of election and the prior agreement to resolve disputes through arbitration (!) (!) .
The Court emphasized that the arbitration clause in the agreement specifies that arbitration proceedings, including emergency measures, would be conducted under the Rules of the Japan Commercial Arbitration Association (JCAA) and in Japan, with the seat of arbitration outside India. Therefore, the provisions of Part I of the Act, including Section 9, do not apply unless explicitly excluded by the parties’ agreement (!) (!) (!) .
The Court noted that the emergency arbitrator's order, which declined relief, was detailed and well-reasoned, and that the Applicants had already invoked the emergency arbitration mechanism. Consequently, they could not re-approach the Court for similar relief, as the mandate of the emergency arbitrator was still in effect, and no change of circumstances was demonstrated (!) (!) .
The doctrine of election was applied to conclude that the Applicants, having chosen the emergency arbitration route, could not subsequently seek interim relief from the Court under Section 9, especially since the arbitration agreement and rules provided a comprehensive dispute resolution mechanism (!) .
The Court also found that the Applicants lacked locus standi to file the petition because Applicant No.1 was not a signatory or party to the arbitration agreements and had not acquired the rights claimed through the Settlement Deed, which was still subject to conditions. Additionally, Applicant No.2 was not a party to the arbitration agreements and was incorporated after the relevant agreements were executed (!) (!) .
The Court clarified that the dispute resolution mechanism in the joint venture agreement (JVA) and the technical assistance agreement (LTAA) specify arbitration in Japan under JCAA Rules, which explicitly provide for interim measures and allow parties to seek judicial relief. However, these provisions do not override the agreement that arbitration, including emergency measures, is to be conducted under Japanese Rules, which exclude the applicability of Part I of the Indian Arbitration Act unless explicitly incorporated (!) (!) .
The Court highlighted that the amendments to the Arbitration Act and relevant judicial pronouncements establish that Section 9 is applicable to international commercial arbitrations seated outside India only if the parties have not expressly or impliedly excluded its application. In this case, the arbitration agreement explicitly excluded the applicability of Part I of the Act (!) (!) .
The Court dismissed the petition, reaffirming that it cannot act as an appellate authority over the decisions of the emergency arbitrator or arbitral tribunal, especially when the parties have agreed to arbitration rules that govern interim measures and dispute resolution procedures (!) (!) .
In summary, the Court concluded that the dispute resolution clauses and arbitration rules chosen by the parties exclude the application of Section 9 of the Indian Arbitration Act. The Applicants' invocation of emergency arbitration and their subsequent petition under Section 9 were found to be procedurally and substantively barred, given the principles of election, the specific arbitration agreement, and the applicable rules.
| Table of Content |
|---|
| 1. facts surrounding the joint venture agreement and related agreements (Para 5 , 6 , 7 , 8 , 9 , 10 , 11 , 12 , 13 , 14 , 15 , 16) |
| 2. arguments presented by applicants highlighting breaches of contract (Para 17 , 18 , 19 , 20 , 21 , 22 , 23 , 24) |
| 3. respondents' defense and objections regarding maintainability (Para 25 , 26 , 27 , 28 , 29 , 30 , 31 , 32 , 33 , 34 , 35 , 36 , 37) |
| 4. counterarguments regarding locus and appeal rights (Para 38 , 39 , 40 , 41 , 42) |
| 5. court's observations on maintainability and applicable law (Para 43 , 44 , 45 , 46 , 47) |
| 6. final ruling on the petition's maintainability (Para 48 , 49 , 50 , 51 , 52 , 53 , 54 , 55 , 56) |
| 7. ratio decidendi that governs the ruling (Para 62) |
| 8. final conclusion and dismissal of the petition (Para 63) |
JUDGMENT
[Hearing had been conducted through video conferencing]
I.A. 3706/2020 (Exemption from filing legible documents)
1. Exemption allowed, subject to all just exceptions.
2. Application stands disposed of.
I.A. 3707/2020 (Exemption in filing Process/procedures due to COVID-19 Epidemic Lockdown)
3. In view of the reasons stated in the application, the same is disposed of with a direction to the applicants to file duly signed and affirmed affidavits and pay the requisite court fee within a period of one week of lifting of the lockdown.
4. Application stands disposed of.
OMP (I) (COMM.) 90/2020
5. Present petition has been filed by the Applicants under Section 9 of the Arbitration and Conciliation Act, 1996 (hereinafter referred to as the `Act') seeking interim reliefs on account of indirect/direct alleged breach of certain Clauses of the Joint Venture Agreement (hereinafter referred to as `JVA') dated 30.05.1986 and License and Technical Assistance Agreement (hereinafter referred to as `LTAA') dated 17.02.2014.
Case of the Applicants on facts:
6. Applicant No. 1 is son of Mr. J.P. Minda (hereinafter referred to as `Minda'). A JVA was executed and signed on 30.05.1986 between Minda, for and on behalf of M/s Jay Industries, and Respondent No. 1 to establish a JV i.e. Applicant No. 2. By means of a Memorandum of Family Settlement dated 14.02.1988, Minda and Sons acquired all interests in M/s Jay industries, a partnership firm, in respect of the JVA and the JV. Transfer of interest was intimated to Respondent No. 1 and was acknowledged and assented to, by it.
7. Thereafter, Minda acquired the entire interest of M/s Jay industries in respect of the JV, through a Family Settlement executed on 21.02.2013 and finally, the said interest was transferred to Applicant No.1 through a Settlement Deed executed on 12.05.2019. Thus, Applicant No.1 now has the entire interest of M/s Jay industries in respect of the JV i.e. M/s. Jay Ushin Ltd.
8. Applicant No. 2 is a JV with Applicant No.1 as its Managing Director. Respondent No.1 is a Corporation incorporated in Japan, with one of its main business concerns being development, designing, manufacturing, sales, etc. of control machines, mechanical and electrical systems and components for automotive. Respondent No. 2 is also a Corporation incorporated in Japan. Respondent No.1 at present, is a wholly owned subsidiary of Respondent No.2.
9. As per Clauses 5.1 and 5.2 of JVA, Applicant No. 1 was to have majority in the Board of Directors and Clause 3.2 contemplated that he would hold majority shareholding in the JV and thus Applicant No. 1 had complete control over the JV, through day-to-day management responsibilities as well as majority voting rights at the Directors' and Shareholders' meetings. JVA imposed important restrictions on the parties under Clause 4.1 which was the pre-emptive Clause, restricting transfer of shares and Clause 7.1 which was a Non-Assignment Clause. Clauses 4.1 and 7.1 read as under:
"ARTICLE-4 TRANSFER OF SHARES
4.1 - Neither YUHSHIN nor JAY shall sell the shares of New Co to any third parties unless it will first offer the other party to purchase such shares at the price to be offered
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