IN THE HIGH COURT OF JUDICATURE AT BOMBAY ORDINARY ORIGINAL CIVIL JURISDICTION APPEAL NO.399 OF 2002 APPEAL NO.399 OF 2002 APPEAL NO.399 OF 2002 IN ARBITRATION PETITION NO.395 OF 2001 GTC Industries Ltd., ) a Public Limited Company, ) registered under the Companies ) Act, 1956 and having its ) registered office at ‘Tobacco ) House’, S.V.Road, Vile Parle (West) Mumbai-400 056 )..Appellants Versus Soma Papers & Industries Limited ) a Public Limited Company ) registered under the Companies ) Act, 1956 and having its ) registered office at G.D.Somani ) Marg, Panchak, Nashik Road-422 101) Maharashtra )..Respondent ---- Mr.Zal T.Andhiyarujina with Mr.Hitesh jain i/by Mr.S.R.A.Shaikh for the appellants. Mr.Pradeep Sancheti alongwith Rahul Mascarhans i/by G.S.Manasawala for respondents. ---- Coram : SRI R.M.S.KHANDEPARKAR & Coram : SRI R.M.S.KHANDEPARKAR & Coram : SRI R.M.S.KHANDEPARKAR & SRI.R.S.MOHITE,JJ SRI.R.S.MOHITE,JJ SRI.R.S.MOHITE,JJ Date : 1ST APRIL, 2008. ORAL JUDGMENT :- ( PER : R.S.MOHITE,J) ORAL JUDGMENT :- ( PER : R.S.MOHITE,J) ORAL JUDGMENT :- ( PER : R.S.MOHITE,J) 1. This appeal is filed by GTC Industries Limited (hereinafter referred to as the ‘petitioner’) impugning a judgment and order passed by the learned single Judge of this Court in Arbitration Petition No.395/2001. By the impugned judgment and order the single Judge dismissed an Arbitration Petition filed : 2 : under Section 34 of the Arbitration and Conciliation Act 1996. 2. The brief relevant facts of the case are as follows :- (a) That in the year 1993 a company by name Raigadh Paper Limited filed a reference before the BIFR invoking section 15(1) of the Sick Industrial Companies Act. (b) On 18.3.1995 a Memorandum of Understanding was executed between one Soma Paper & Industries Ltd., (hereinafter referred to as the "respondent") and the petitioners acting on behalf of a significantly large number of shareholders and creditors of Raigadh Papers Limited and one Premier Paper Mills Limited for revival of Raigadh Papers Ltd., and take over of Premier Paper Mills. An amount of Rs.32,51,000/- was paid by the respondent to the petitioners as and by way of earnest money deposit. (c) On 10.4.1995 ICICI was appointed as an operating agency by the BIFR. There were some negotiations and disclosures relevant for the revival of RPL and ultimately by an agreement dated 13.12.1995 executed between the petitioners and the respondent it was agreed that the RPL would be merged into the respondent company and the Premier Paper Mills Ltd., : 3 : would be taken over by the respondent. It may be stated at this stage that just prior to the execution of this agreement, the operating agency had submitted a report dated 10.10.1995 in which they had concluded that the apparatus for effluent treatment would cost about Rs.1.5 crores. (d) In the agreement dated 31.7.1996, a clause being clause no.27 was inserted and the same was in the following terms :- "27. Approval of BIFR and Termination This agreement is subject to the approval of BIFR and in case of non receipt of approval from BIFR, GTC Group shall refund the amount of Rs.32,51,000/- paid in advance as mentioned in clause 16 to SOMA. Further, in case the envisaged acquisition cannot be completed within a period of one year from the date hereof SOMA shall be entitled to but not bound to terminate this Agreement. Upon termination of the Agreement in accordance with the above, neither of the parties shall be held liable for any damages, suits, debts, expenses, fees or costs incurred by the other parties." . The record indicates that thereafter there were : 4 : certain further meetings held by the BIFR. It appears that for the purpose of completing the merger and take over as contemplated by the agreement, the permission of the State Pollution Control Board was required. In a meeting of the BIFR dated 13.2.1996 the representatives of the respondent informed BIFR that the State Pollution Control Board was insisting on a particular kind of apparatus for disposal of effluents which would cost Rs.20 crores. The record indicates that the board gave six weeks time for the resolution of this issue. Ultimately this issue could not be resolved and in the circumstances, in their meeting dated 9.5.1996 BIFR did not give their approval to the scheme proposed under the agreement and directed the issuance of a Show Cause Notice for proposed winding up. The record further indicates that after following due process of law, ultimately by an order dated 31.7.1996, the BIFR recommended a winding up of the sick company. (e) That after this order was passed, the respondent vide their notice dated 8.8.1998 called upon the petitioners to pay a sum of Rs.32,51,000/- paid by way of earnest money. This demand was made as per clause-27 of the agreement dated 13.12.1995. Since this amount was not repaid inspite of demand, a dispute arose which was ultimately referred to the arbitration. : 5 : (f) By their award dated 11.4.2001 the arbitral Tribunal rejected the claim of the petitioners and allowed the counter claim of the respondent. The petitioners were directed to pay the respondent a sum of Rs.32,51,000/- alongwith interest thereon @ 15 % p.a. from 1.1.1997 till payment. The petitioners were further directed to pay a sum of Rs.2,00,000/- by way of cost. 3. In these circumstances, the petitioners preferred Arbitration Petition No.395/2001 before this Court under Section 34 of the Arbitration & Conciliation Act 1996 and the same was dismissed by the impugned order passed by the learned single Judge. 4. On behalf of the petitioners it was contended that the respondent could not have backed out of the agreement dated 13.12.1995 merely because they were required to pay additional amount for the completion of the terms of the said agreement. It was contended that prior to the execution of the agreement there was a full disclosure and due diligence was observed by the parties. We however, find that there is no substance in this contention as what emerges from the record is that prior to the execution of the agreement, the operating agency vide its report dated 10.10.1995 placed on record : 6 : that the effluent treatment plant would be costing only Rs.1.5 crores. If subsequent to the agreement, the price of the necessary equipments required to be installed in order to obtain NOC from the Pollution Control Board, turned out to Rs.20 crores, the respondent could not be faulted for placing their difficulties before the BIFR. Ultimately after hearing all sides, BIFR refused approval to the scheme and directed winding up of the sick company. This decision of the BIFR was its own independent decision and as per clause-27 the respondent was clearly entitled for refund of the earnest money which was paid. 5. Apart from this as rightly observed by the learned single Judge, no fault can be found with the award passed by the arbitral Tribunal and there does not exist any ground as contained in section 34 of the Arbitration & Conciliation Act 1996 on the basis of which the said arbitral award can be set aside. It was sought to be contended that the award passed was against the public policy. It was observed by the learned single Judge that the issues raised in this case do not involve any question of public policy. There is thus, no substance in this appeal and the same therefore, stands dismissed. 6. At this stage an oral application is made for stay of this order. There is no case made out for : 7 : stay and hence application is rejected. (R.M.S.KHANDEPARKAR,J) (R.M.S.KHANDEPARKAR,J) (R.M.S.KHANDEPARKAR,J) (R.S.MOHITE,J) (R.S.MOHITE,J) (R.S.MOHITE,J)