Case: M/s. Tata Industries Ltd. &amp; Another Vs. M/s. Grasim Industries Ltd

M/s. Apex Investments (Mauritius) Holding Private Limited was originally a member of the AT&T Wireless Group and held 32.9% shares in IDEA. It was then known as AT&T Cellular Pvt. Ltd. It was then argued that it was required under Article 4.01 (a) of the Shareholders Agreement to execute a Deed of Adherence as provided in "Annex C" to the Shareholders Agreement in order to (i) designate AT&T Inc. as its representative to exercise all rights and perform all obligations under the Shareholders Agreement; (ii) agree to be bound by all the provisions of the Shareholders Agreement; (iii) agree not to revoke the designation of the representative without prior written consent of the AV Birla Group and the Tata Group. It was also required that the counter-part of the executed Deed of Adherence should have been delivered to Grasim Industries Ltd. and TIL. It was then pointed out that after TIL acquired AT&T Cellular Pvt. Ltd. itself which held the remaining 16.45% shares in IDEA, M/s. Apex Investments (Mauritius) Holding Private Limited became a wholly owned subsidiary of TIL. It was then pointed out that on 28.09.2005, AT&T Cellular Pvt. Ltd., New Cingular Wireless Service Inc. (successor-in-interest to AT&T Inc.) entered into a Sale and Purchase Agreement with Indian Rayon and Industries Ltd. (now called ABNL), whereby the Shareholders Agreement was specifically terminated as between the Birla Group and the AT&T Wireless Group and all pre-existing rights/liabilities, if any, were specifically extinguished and waived. So also on the same date, the AT&T Wireless Group (of which AT&T Cellular Pvt. Ltd. was a part), executed a similar Sale and Purchase Agreement with the Tata Group, whereby the Shareholders Agreement was terminated between the Tata Group and the AT&T Wireless Group, and thus the Apex Investments (Mauritius) Holding Private Limited (which is a fall out from the AT&T Cellular Pvt. Ltd.) had terminated the Shareholders Agreement and extinguished and waived all accrued rights and obligations against the Birla Group and, therefore, Apex Investments (Mauritius) Holding Private Limited ceases to be a party to the Shareholders Agreement and to any arbitration clause contained therein. Apex Investments (Mauritius) Holding Private Limited, therefore, could no longer have any claim for arbitration or assert any rights or liabilities under the Shareholders Agreement. It was further pointed out that on 15.12.2000, when the Shareholders Agreement was executed, there were only three parties, viz., (i) AT&T Inc., which was acting on behalf of itself and AT&T Wireless Group; (ii) Grasim, acting on behalf of itself and the Birla Group (iii) TIL, acting on behalf of itself and the Tata Group. The argument, therefore, is that since Apex Investments (Mauritius) Holding Private Limited was not a party then, there could be no privity of contract between Apex Investments (Mauritius) Holding Private Limited and the non-applicant Birla Group. It was pointed out that since the modality drafted by clause 4.02 of Shareholders Agreement was not followed, Apex Investments (Mauritius) Holding Private Limited could not join the Shareholders Agreement and as such, Apex Investments (Mauritius) Holding Private Limited not being a party to the Shareholders Agreement, it cannot demand an arbitration through the arbitration clause. This argument is obviously incorrect for the following reasons:(i) It must be seen that after the offer was received from Global Communications, both TIL on its behalf and on behalf of the Apex Investments (Mauritius) Holding Private Limited, offered to sell their entire shareholding in IDEA in terms of the right of first refusal, which offer has been accepted by the non-applicant.(ii) Apex Investments (Mauritius) Holding Private Limited is now a part and parcel of the Tata Group and is its subsidiary. Further, its interests are bound to be affected.(iii) In raising this issue, the non-applicant is making a complete volte face, inasmuch as, when the application had been filed before the Bombay High Court, an objection was taken by the non-applicant that Apex Investments (Mauritius) Holding Private Limited being a foreign company and claiming an arbitration along with Tata Group, the Bombay High Court had no jurisdiction to entertain the application under Section 11 (6). It was in pursuance of that objection only that the Bombay High Court did not proceed further to decide the application under Section 11 (6). The learned counsel argues that this objection regarding the Apex Investments (Mauritius) Holding Private Limited being foreign party, arose on the face of it, but the merits of the case did not fall for consideration in Bombay High Court and as such the issue of Apex Investments (Mauritius) Holding Private Ltd. not being a party to shareholder agreement can still be raised. The contention is not correct. The non-applicant having raised an objection on the ground that the applicant Apex Investments (Mauritius) Holding Private Limited was a foreign company, and, therefore, could not have filed an application before Bombay High Court, cannot now turn around and say that Apex Investments (Mauritius) Holding Private Limited was not a party to the Arbitration Agreement. That will not be permissible. The learned counsel points out that this objection was raised without prejudice, would also be of no consequence, as having succeeded in stalling the decision of the application under Section 11(6), it cannot now raise the argument before this Court that Apex Investments (Mauritius) Holding Private Limited was never a party. This argument should have been addressed to the Bombay High Court, at least in the alternative form. If in the affidavit before the Bombay High Court filed on their behalf of the non-applicant had raised the issue and still chose not to go into the issue whether Apex Investments (Mauritius) Holding Private Limited was or was not a party to the Shareholders Agreement, that will not be permitted to be raised before this Court. In fact, in restricting to the jurisdictional issue and in not perusing the issue of Apex Investments (Mauritius) Holding Private Limited not being a party to the Shareholders Agreement before Bombay High Court, the non-applicant abandoned that issue. The argument is, therefore, rejected.

Decision (1 = appeal accepted, 0 = rejected): 1

Explanation:
1[ds]was pointed out that since the modality drafted by clause 4.02 of Shareholders Agreement was not followed, Apex Investments (Mauritius) Holding Private Limited could not join the Shareholders Agreement and as such, Apex Investments (Mauritius) Holding Private Limited not being a party to the Shareholders Agreement, it cannot demand an arbitration through the arbitration clause. This argument is obviously incorrect for the following reasons:(i) It must be seen that after the offer was received from Global Communications, both TIL on its behalf and on behalf of the Apex Investments (Mauritius) Holding Private Limited, offered to sell their entire shareholding in IDEA in terms of the right of first refusal, which offer has been accepted by the non-applicant.(ii) Apex Investments (Mauritius) Holding Private Limited is now a part and parcel of the Tata Group and is its subsidiary. Further, its interests are bound to be affected.(iii) In raising this issue, the non-applicant is making a complete volte face, inasmuch as, when the application had been filed before the Bombay High Court, an objection was taken by the non-applicant that Apex Investments (Mauritius) Holding Private Limited being a foreign company and claiming an arbitration along with Tata Group, the Bombay High Court had no jurisdiction to entertain the application under Section 11 (6). It was in pursuance of that objection only that the Bombay High Court did not proceed further to decide the application under Section 11 (6). The learned counsel argues that this objection regarding the Apex Investments (Mauritius) Holding Private Limited being foreign party, arose on the face of it, but the merits of the case did not fall for consideration in Bombay High Court and as such the issue of Apex Investments (Mauritius) Holding Private Ltd. not being a party to shareholder agreement can still be raised. The contention is not correct. The non-applicant having raised an objection on the ground that the applicant Apex Investments (Mauritius) Holding Private Limited was a foreign company, and, therefore, could not have filed an application before Bombay High Court, cannot now turn around and say that Apex Investments (Mauritius) Holding Private Limited was not a party to the Arbitration Agreement. That will not be permissible. The learned counsel points out that this objection was raised without prejudice, would also be of no consequence, as having succeeded in stalling the decision of the application under Section 11(6), it cannot now raise the argument before this Court that Apex Investments (Mauritius) Holding Private Limited was never a party. This argument should have been addressed to the Bombay High Court, at least in the alternative form. If in the affidavit before the Bombay High Court filed on their behalf of the non-applicant had raised the issue and still chose not to go into the issue whether Apex Investments (Mauritius) Holding Private Limited was or was not a party to the Shareholders Agreement, that will not be permitted to be raised before this Court. In fact, in restricting to the jurisdictional issue and in not perusing the issue of Apex Investments (Mauritius) Holding Private Limited not being a party to the Shareholders Agreement before Bombay High Court, the non-applicant abandoned that issue. The argument is, therefore, rejected.