% + IN THE HIGH COURT OF DELHI AT NEW DELHI Judgment delivered on:
03. 11.2016 EX.P. 408/2015 & EA(OS) 471/2016 IL & FS TRUST COMPANY LTD. ..... Decree Holder Versus C & C CONSTRUCTIONS LTD. & ORS. Advocates who appeared in this case: For the Decree Holder ..... Judgement Debtors For the Judgment Debtor : Mr. P.V. Kapur, Senior Advocate with : Mr Sandeep Sethi, Senior Advocate with Mr Moazzam Khan, Mr Alipak Banerjee and Mr Brijesh Kumar. Ms Romila Joshi and Ms Manusha Chaudhary for JD Nos.1 to 6. Mr. Anil Airi, Senior Advocate with Ms. Rashmeet Kaur and Ms Arpana Majumdar, for JD Nos. 7 to 16. CORAM HON’BLE MR JUSTICE VIBHU BAKHRU VIBHU BAKHRU, J EA(OS) Nos.23-30/2016 JUDGMENT1 The Decree Holder (hereafter „the DH‟) has filed the above captioned execution petition (EX.P. 408/2015) under Section 36 of the Arbitration and Conciliation Act, 1996 (hereafter 'the Act') for enforcement of an arbitral award (hereafter „the consent award') made by the Sole Arbitrator, Mr Ciccu Mukhopadhaya, Senior Advocate on 04.02.2013.
2. These applications have been filed by the Judgment Debtors (hereafter 'JDs'), inter alia, praying that the above captioned execution EX.P. 408/2015 Page 1 of 15 proceedings initiated by the DH be dismissed. EA(OS) 23/2016 is filed by JD No.15; EA(OS) 24/2016 is filed by JD No.5; EA(OS) 25/2016 is filed by JD No.2; EA(OS) 26/2016 is filed by JD No.3; EA(OS) 27/2016 is filed by JD No.4; EA(OS) 28/2016 is filed by JD No.6; EA(OS) 29/2016 is filed by JD No.7 to 14 & 16; and EA(OS) 30/2016 is filed by JD No.1.
3. All the applications are more or less similarly worded and most of the grounds urged in the applications are also similar except, in EA(OS) 30/2016 filed by JD No.1 it is also urged that the DH has abandoned its claim against JD No.1. Since most of the issues urged are similar, all the applications were heard together.
4. All the JDs have objected to the enforcement of the consent award principally on the following grounds:-
"(1) That the arbitration was invoked pursuant to a notice dated 07.11.2012 which was (a) not issued by DH; (b) issued only to JD Nos. 1 to 6; (c) and, was pursuant to clause 21.7.2 of the CCPS Subscription and Investor Rights Agreement (hereafter 'CCPS Agreement') which provided for constitution of the Arbitral Tribunal of three Arbitrators and there was no agreement to amend the arbitration clause. (2) That there was no arbitral award in favour of the DH as the consent award is in favour of India Venture Advisors Pvt Ltd. (hereafter 'IVAPL'); it is contended that IVAPL is a stranger to the CCPS Agreement. (3) That in terms of the CCPS Agreement, the DH had the right to sell the equity shares of JD No.1 Company, which at the time of the first default was `97.20 per share and had fallen to `12.50 per share thereafter. It is contended that the DH had the obligation to mitigate the loss suffered EX.P. 408/2015 Page 2 of 15 by it and by not selling the shares at the time of the first default, it had failed to do so; therefore, the present execution petition is required to be dismissed.
5. Mr Airi, learned Senior Advocate appearing for JD Nos. 7 to 16 initially contended that JD Nos.7 to 16 were not the signatories to the CCPS Agreement and, therefore, were not bound by any arbitration clause or the consent award. However, he subsequently sought to retract from the aforesaid submission and contended that JD Nos.7 to 16 were not parties to the consent award sought to be enforced. In addition, he earnestly contended that the consent award was not in favour of DH and, therefore, there was no arbitral award that could be enforced by the DH. He founded the aforesaid contention on the basis that the cause title of the consent award described the claimant as IVAPL whereas the DH in the present petition is „IL & FS Trust Company Ltd‟.
6. Mr Kapur, learned Senior Advocate appearing for JD Nos.1 to 6 also contended that there was no arbitral award in favour of the DH and, therefore, the present petition was liable to be dismissed. He further contended that the DH had given up its claims against JD No.1 as the consent award was only against the other JDs. He submitted that in terms of the consent award, shares of JD No.1 held by DH were to be purchased and since JD No.1 could not purchase its own shares, the consent award was only against JDs other than JD No.1. He further contended that JD Nos. 3 to 6 did not reside within the National Capital Territory of Delhi and, therefore, the present petition against said JDs was not maintainable.
7. Mr Sandeep Sethi, learned Senior Advocate appearing for the DH countered the submissions made by Mr Airi and Mr Kapur. He referred to EX.P. 408/2015 Page 3 of 15 the terms of the CCPS Agreement wherein the DH was described as the “investor”. He further referred to the notices issued by IVAPL invoking arbitration clause under the CCPS Agreement and pointed out that the notices clearly indicated that the same were issued by IVAPL on behalf of the DH. He further also referred to the power of attorneys executed by JDs which indicated that they had specifically empowered JD Nos. 2 to 6 to enter into the consent terms and invited the Sole Arbitrator to pass the consent award.
8. I have heard the learned counsel for the parties.
9. The consent award was rendered by the Sole Arbitrator in respect of the disputes that had arisen in relation to the CCPS Agreement. It is relevant to note that the CCPS Agreement was entered into between C & C Constructions Ltd. (JD No.1) and “promoters” which were detailed in Annexure 1 to the CCPS Agreement and the DH. The recitals of the CCPS Agreement clearly indicated that the DH - described as an investor therein - had established fund which was being managed by IVAPL. In terms of the CCPS Agreement, the DH agreed to make a financial investment in JD No.1 by subscribing to compulsory convertible preference shares (CCPS) at a price of `10 per CCPS aggregating `50,00,00,000/-. The contention that JDs were not a party to the CCPS Agreement is patently incorrect to say the least. The CCPS Agreement was entered into with due authority of the JDs. Admittedly the DH made the financial investment in JD No.1 Company pursuant to the CCPS Agreement.
10. The contention that the consent award is not valid as the notice invoking the arbitration was defective inasmuch (a) it had not been issued EX.P. 408/2015 Page 4 of 15 by the DH and (b) that it had been issued only to JD nos.1 to 6 is unmerited. The notice dated 07.11.2012 clearly indicates that the same had been issued by IVAPL on behalf of the “investor”. In the first paragraph of the said notice, IVAPL has clearly stated that “we act as the Investment Manager to the investor and write on behalf of the investor”. The subject of the said notice also clearly indicates that it is notice invoking arbitration under Clause 21.7.2 of the CCPS agreement between “C&C Constructions Ltd; the promoters and IL & FS Trust company Ltd. (acting as a sole trustee for India venture trust) (“investor”)”. Thus, the contention that the notice was defective as it was not issued by DH is plainly erroneous.
11. The JDs also cannot make a grievance of the fact that notice invoking arbitration had not been sent individually to each JD. The CCPS Agreement had been signed by JD nos. 2 to 6 on behalf of their respective groups. JD nos.2 to 6 were described as Promoter 1 to Promoter 5 respectively and their respective groups - the persons on whose behalf they were executing the CCPS Agreement - were referred to as Promoter 1-5 group. In terms of Clause 21.6.2 of the CCPS Agreement, notice and communications were required to be sent by registered email or by hand delivery. The said clause also, inter alia, provided relevant notice details of the “promoters”. In terms of the said clause, notices served in the manner as indicated in clause 21.6.2 would be sufficient notice to said JDs as well as to other persons or their respective groups.
12. More importantly, there is no dispute that all JDs were fully aware that the DH had commenced arbitration proceedings in relation to the disputes that had arisen in respect of the CCPS Agreement and that such proceedings had been commenced before the Sole Arbitrator. All the JDs EX.P. 408/2015 Page 5 of 15 had executed Power of Attorneys, the recitals of which clearly indicate that they had authorized their constituted attorneys to sign and file the consent terms before the Sole Arbitrator. In the circumstances, the stand of JDs that they had not received the notices of the arbitration is not only without merit but also less than honest.
13. The contention that the consent award by Sole Arbitrator was contrary to the CCPS Agreement as the arbitration clause provided for an Arbitral Tribunal of three Arbitrators, is not even superficially attractive. By notice dated 07.11.2012, the DH had invoked the arbitration clause and had suggested that instead of a panel of three Arbitrators, the disputes be referred to a Sole Arbitrator. It had also suggested names of persons to be appointed as a Sole Arbitrator and requested the JDs to respond by either accepting any of the nominees as suggested or by suggesting their nominees for the position of a Sole Arbitrator. In paragraph 18 of the notice, it was also stated that if the JDs did not agree to appointment of a Sole Arbitrator and insisted upon a tribunal of three arbitrators, the same should be informed to the DH so that it could nominate its arbitrator; the JDs were also requested to provide the name of their nominee for the tribunal of three arbitrators. Thus, the JD had the option of accepting the suggestion of referring the disputes to a Sole Arbitrator or to insist upon constitution of the Arbitral Tribunal as agreed under the CCPS Agreement. The representatives of the JDs responded to the aforesaid notice by their email dated 27.11.2012 denying the allegations made in the notice and further rejecting the suggestion to appoint a Sole Arbitrator. They called upon the DH to inform them as to its nominee arbitrator. They further confirmed that, thereafter, the JDs would also nominate their arbitrator so that the Arbitral Tribunal could be constituted by the two appointed EX.P. 408/2015 Page 6 of 15 Arbitrators jointly appointing the third Arbitrator.
14. Thereafter, the DH informed the JDs that it had nominated Mr Ciccu Mukhopadhaya as its nominee Arbitrator. Despite being so informed, the JDs failed to nominate their nominee arbitrator. Since, the JDs had failed to nominate their Arbitrator, IVAPL sent a letter dated 17.12.2012 putting the JDs to notice that since the JDs had failed to appoint their nominee arbitrator within the prescribed period of 30 days, they would be compelled to take necessary steps.
15. Thereafter, the parties held discussions and the parties agreed for appointment of Mr Ciccu Mukhopadhaya as the Sole Arbitrator. It is relevant to state that at the material time, the DH had also filed a petition under Section 9 of the Act (being OMP No.1119/2012). This is clearly evident from an email dated 24.12.2012 sent on behalf of JDs, which is reproduced below for ready reference:-
"“Reference: Letter dated December 17 2012 O.M.P. 1119 of 2012 Dear Sir, We refer to the discussions on 14-12-2012 between you with Mr. GS Johar for and on behalf of C & C Constructions Ltd, Mr. Gurjeet Singh Johar, Mr. Charanbir Singh Sethi, Mr. Rajbir Singh, Mr. Sanjay Gupta and Mr. Amritpal Singh Chadha in respect of the captioned matter. We note that you are in agreement with the revised schedule of payments, set out in Annexure A hereof. You have in addition agreed to withdraw forthwith the O.M.P. 1119 of 2012. Based on such agreement we agree to the nomination of Mr. Ciccu Mukhopadhyay, Apartment 5-D, No.10, Bhagwandas Road, New Delhi, 110001 as the Sole Arbitrator to record EX.P. 408/2015 Page 7 of 15 terms of the revised schedule of payments as mentioned in Annexure A.” 16. As is apparent from the above, the JDs had agreed to the nomination of Mr Ciccu Mukhopadhaya as a Sole Arbitrator and the DH had agreed to withdraw its petition under Section 9 of the Act (OMP No.1119/2012), which was pending consideration at the material time. Admittedly, the said petition was withdrawn thereafter.
17. The DH has also produced copies of the Irrevocable Powers of Attorneys executed by the JDs, inter alia, authorizing their constituted attorneys to sign all documents that may be necessary to enter into or give effect to the consent terms before the Sole Arbitrator Mr Ciccu Mukhopadhaya. All powers of attorney are similarly worded. To illustrate the above, the relevant extract of the Power of Attorney executed by Jaideep Singh Johar (Judgment Debtor No.11) in favour of Gurjeet Singh Johar (Judgment Debtor No.2 ) is reproduced below:-
"“Whereas: A. C & C Constructions limited, a company incorporated under the (Indian) Companies Act, 1956, having its registered office at G-11, Hemkunt Chamber, Nehru Place, New Delhi-110019 India ("the Company) B. Gurjeet Singh Johar, Jaideep Singh Johar are Promoters of the Company. C. IL&FS Trust Company Limited, in its capacity as trustee to India Venture Trust - Fund I, a scheme of India Venture Trust (hereinafter referred to as “Investor") currently holds 2,056,005 (Two Million, Fifty Six Thousand and Five) equity shares (hereinafter referred to as the "Investor Shares"), constituting 8.08% of the Company. The Investor has agreed to sell and the share capital of EX.P. 408/2015 Page 8 of 15 Promoters have agreed to purchase the Investor Shares in accordance with the agreed terms and conditions of the proposed Consent Terms ("Consent Terms") arising out of the arbitration by and between the Investor, the Promoters and the Company with sole arbitrator Mr Ciccu Mukhopadhyay. D. Jaideep Singh Johar desirous of granting this specific powr of attorney in connection with the Consent Terms to Gurjeet Singh Johar (the “Attorney”) as is necessary and expedient. KNOW ALL MEN BY THESE PRESENTS THAT we, Parties to these presents (“Power of Attorney”) do hereby, jointly and severally, appoint, nominate and constitute Gurjeet Singh Johar to be the true and lawful attorney for Parties, in the name and on the behalf of the Parties:
1. To sign, execute, seal, deliver, issue or perform by way of agreement or deed, under hand or seal, the following documents or actions in relations to the sale of Investor Shares: a. Documents (including but not limited to the Consent Terms, forms, notices, certificates, letters, instruments, agreements or deeds) relating to, necessary for, or associated with the sale of investor Shares, Consent Terms or any other document contemplated by the Consent Terms, as may be required to be furnished by the Parties; or. b. Negotiations and amendments or additions to any of the Consent Terms as the Attorney may consent to, which consent shall be conclusively evidenced by the Attorney‟s execution of such amending documents; or c. Performance or execution of any other deed, matter, act or thing which, in the opinion of the Attorney, ought to be done, executed or performed, to enter into or give effect to the Consent Terms; or EX.P. 408/2015 Page 9 of 15 d. Any other documents or instruments supplemental to the Consent Terms. To exercise the rights and to perform the obligations of the Parties on their behalf, under Consent Terms and amendments thereto; 3. To execute or to issue all such letters, notices and other documents as may be required for the due performance of the obligations of the Parties under the Consent Terms; 4. To send or to receive correspondence/notices under the Consent Terms on behalf of the Parties; 5. To engage, appoint and/or substitute any (i) lawyer and/or counsel before any court of law, tribunal, arbitrator, and/or any other judicial/quasi-judicial forum/authority, and/or (ii) any other professional experts as may be necessary to discharge his functions under 1-4 above; 6. To do and perform and execute all such other acts, deeds, documents, for and on behalf of the Parties as may be necessary to discharge his functions under 1-5 above.” [Italics and bold for emphasis].
18. It is important to note that the recital C of the Powers of Attorney executed by respective Judgment Debtors clearly indicates that the JDs were aware that (a) that the DH held invested in shares pursuant to the CCPS Agreement; (b) disputes had arisen between the parties in relation to the said investment; (c) that the said disputes were pending adjudication before the Sole Arbitrator, Mr. Ciccu Mukhopadhaya; (d) that the parties had agreed to settle the disputes pending before the Arbitrator in terms of “consent terms”; and (e) that the JDs were agreeable to settle the disputes in terms of the consent terms and had duly authorized their respective EX.P. 408/2015 Page 10 of 15 Power of Attorney holders to specifically take all steps necessary for executing the necessary documents and conclude the settlement, performance and implementation of the consent terms.
19. It is further relevant to note that consent terms expressly record that “the Parties agree that the sole arbitrator was appointed by their informed consent, was properly appointed and that the Parties waive their right to challenge the said appointment in any manner whatsoever.” 20. In view of the aforesaid, the contention that the JDs had not agreed for arbitration by the Sole Arbitrator is wholly bereft of any merit. In my view, it is a clearly dishonest plea since no objection whatsoever had been taken by any JD regarding adjudication of the disputes by a Sole Arbitrator. On the contrary, the JDs had clearly accepted that the disputes be adjudicated by a Sole Arbitrator; they had participated either directly or through their constituted attorneys in the arbitral proceedings; the JDs also executed (either directly or through their constituted attorneys) the consent terms in terms of which the consent award was passed.
21. The next issue to be addressed is whether the consent award is in favour of the DH. Both, Mr Kapur and Mr Airi had emphatically contended that there was no award in favour of DH as the consent award was in favour of IVAPL and, therefore, the present petition was not maintainable. The said contention is premised solely on the basis that in the cause title of the consent award the name of the claimant is reflected as under:-
""INDIA VENTURE ADVISORS PVT. LTD. THROUGH IL&FS TRUST COMPANY LTD. IN EX.P. 408/2015 Page 11 of 15 ITS CAPACITY AS A TRUSTEE TO INDIA VENTURE TRUST - FUND I, A SCHEME OF INDIA VENTURE TRUST, A COMPANY INCORPORATED UNDER THE LAWS OF INDIA AND HAVING ITS REGISTERED OFFICE AT IL & FS FINANCIAL CENTRE, PLOT C-22G BLOCK COMPLEX, BANDRA (EAST) MUMBAI - 400051 (THE "INVESTOR"). ....... CLAIMANT" BANDRA KURLA22 It is apparent from the above that there is a slight error in the description of the claimant because IVAPL was acting for and on behalf of the DH (IL & FS Trust Company Ltd.-. "INVESTOR") and was not acting through the DH.
23. Admittedly, the consent award has been rendered by the parties in connection with the disputes that have arisen in connection with the CCPS Agreement and, undisputedly, that agreement was with India Venture Trust acting through its sole trustee, the DH, described as the "Investor".
24. Recital B of the CCPS Agreement clearly indicated that "the Investor is a fund established and existing under the laws of India and is being managed India Venture Advisors Private Limited". Thus, the parties were fully aware that IVAPL was acting as a manager of the fund of which the DH was the sole trustee. The notice invoking arbitration was issued by IVAPL and it clearly stated that IVAPL was acting as the Investment Manager to the Investor and was writing on behalf of the Investor (the DH). Other notices issued by IVAPL were also sent on behalf of the DH (referred to as "Investor"). The investment was made by a fund of which the DH was a sole trustee. The fund has no identity independent of the DH. EX.P. 408/2015 Page 12 of 15 Thus, it was clear from the very inception that the investment was made by DH and IVAPL only acted on behalf of the DH.
25. Admittedly, there was no dispute between IVAPL and JDs that would warrant a reference of the said dispute to arbitration. It is also not disputed that the disputes referred to the Sole Arbitrator, Mr Ciccu Mukhopadhaya, Senior Advocate were disputes between JD and DH in relation to the CCPS Agreement.
26. It is relevant to state that at the material time, DH had filed a petition before this Court under Section 9 of the Act (O.M.P. 1119/2012) which was withdrawn on 08.02.2013 in terms of the application filed under Order XXIII read with Section 151 CPC (IA No.2085/2013). The relevant extract of the order passed by this Court in the said application reads as under:-
""The abovementioned application has been filed by the petitioner under order XXIII read with Section 151 CPC. It is stated in the application that the parties have resolved their disputes by way of Consent Terms dated 28th January, 2013 and Consent Award dated 4th February, 2013. Copies of the same are available on record. In view thereof, the petitioner wishes to withdraw the present petition. As prayed, the same is dismissed as withdrawn. The interim order as passed on 3rd December, 2012 stands vacated. No costs."
27. The above order also indicates that the disputes between the DH and JDs were settled in terms of the consent award. The consent award also indicates the claimant to be the “investor”, which in all documents has referred to the India Venture Trust/ fund with DH as a sole trustee of the fund/India Venture Trust. A trust is only an ownership annexed with an obligation. The identity of the fund or the India Venture Trust and the DH EX.P. 408/2015 Page 13 of 15 is the same; the India Venture Trust/ fund does not have an identity independent or separate from that of its sole trustee – the DH. Thus the contention that the consent award is not in favour of the DH is not sustainable. The cause title of the consent award incorrectly describes the claimant as “INDIA VENTURE ADVISORS PVT. LTD. THROUGH IL&FS TRUST COMPANY LTD IN ITS CAPACITY AS A TRUSTEE TO INDIA VENTURE TRUST - FUND I…..... (THE "INVESTOR")” because IVAPL was acting “for” and not “through” IL&FS Trust Company Ltd. (DH) in its capacity as a trustee to India Venture Trust – Fund (The "INVESTOR"). The said error is not material and does not entitle the JDs to escape their obligations under the consent award.
28. The next contention that the DH was obliged to sell shares held by it as a security, immediately on the first default to mitigate the losses, is without merit. First of all, there was no certainty that sale of shares of JD no.1 at the time of first default would mitigate the losses; it would not be possible to foresee with certainty that the value of the shares of JD No.1 would fall. It is not difficult to guess the contention that would be advanced by the JDs had the shares in question been sold and the value of the same had increased thereafter. More importantly, the JDs never called upon the DH to liquidate the shares in discharge of their obligations. Therefore, it is not open for the JDs to contend that such steps were necessary to mitigate the losses.
29. In addition to the above contentions, Mr Kapur had further contended that the present petition is not maintainable and this Court has no jurisdiction against JD Nos. 3 to 6 as they do not reside within the National Capital Territory of Delhi. This contention is also unmerited as EX.P. 408/2015 Page 14 of 15 the registered office of JD No.1 is in Delhi and, thus, the situs of shares of JD No.1 owned by other JDs is in Delhi. Since JD's properties are in Delhi, the present execution petition would clearly be maintainable in this Court.
30. The contention that consent award is not executable against JD No.1 also cannot be accepted. JD No.1 is a party to the consent award and its presence is necessary for execution of the consent award. The question whether JD No.1 can be called upon to pay any amount in execution of the consent award is a separate issue and would be considered at an appropriate stage.
31. Before concluding, it is necessary to state that a considerable amount of time was spent on hearing the aforesaid applications and as indicated above, the contentions advanced were unmeritorious and did the JDs no credit to raise them. The JDs are not only parties to the consent award; they were fully aware as to the contents of the consent award and also acted upon them. In my view, the objections taken at this stage are plainly only to delay and obstruct the execution proceedings. Thus, in my view, this is a fit case where costs should be imposed on the JDs.
32. Accordingly, the present applications are dismissed with costs of `50,000/- on each JD. The costs shall be paid by the JDs within a period of two weeks from today. NOVEMBER03 2016 RK/MK EX.P. 408/2015 VIBHU BAKHRU, J Page 15 of 15