Case: Ravi Arya, Indian Inhabitant and Others Vs. Palmview Investments Overseas Limited and Others

3. The appellants are plaintiffs in a suit (Lodging) No. 1676 of 2018 inter alia seeking temporary injunction restraining the respondent nos. 1 to 8 (original Defendants) from proceeding with the Arbitration proceedings as invoked by Communication dated 30 April 2018.The appellant no. 1 and respondent no. 4 Pawan are real brothers. The respective groups are referred to as RA Group and PA Group. The appellants constitute part of RA Group and the respondents i.e. respondent Nos. 4 to 8 constitute the PA Group. Members of both the Groups were partners since long in business and have set up various businesses primarily that of running industrial Units in the State of Odisha. The respondent no. 2-Company i.e. Arya Iron and Steel Pvt. Ltd. was incorporated on 27 July 2004. The Promoters of the Company were RA Group, PA Group & respondent nos. 9 and 10. It is the appellants contention that the RA Group and PA Group collectively held 21.428% each of the share-holding of the respondent no. 2-Company and the respondent nos. 9 and 10 held 41.145% respectively and 11.999% of the share-holding in the said Company.The appellants state that due to global depression in the year 2008-2009, the respondent no. 2-company along with other companies made some losses. The PA Group, at that time, insisted that they should take loan to revive the company from respondent no. 1-company as it would be easy to procure loan on account of the family relations with the PA Group shared with the Jindal Group, the owners of respondent no. 1. It is submitted that respondent no. 1 is married to respondent no. 7, the daughter of one of the brothers of Jindal Group.It was decided that the respondent no. 1 company would purchase 49% share-holding of the respondent no. 2-company. Accordingly, on 25 March 2009, a Share Purchase and Share Subscription Agreement as well as Shareholders Agreement were entered into between the parties. It was represented at this time by all the PA Group that the Promoters Groups comprising of the PA and RA Groups would still be in majority as the respondent no. 1-company was introduced only as a strategic investor. As per the terms, the respondent no. 1-company purchased 49% shareholding of the respondent no. 2-company. Accordingly, Articles of Association (AOA) of the respondent no. 2-company were amended.In or around April 2011, differences arose between RA and PA Groups. It is alleged that shareholding in the respondent no. 2-company was misused by PA Group who got dominance over the affairs of respondent no. 2-company.During the period from 2012-2014, the relations further got strained and therefore, efforts were made to resolve the disputes by involving friends and family members of both sides. While the attempts to resolve the disputes amicably were going-on, the appellants state that PA Group filed Suit (L) No. 194 of 2015 in the High Court at Bombay against the RA Group on or around 25 February 2015 staking illegal claim on the properties belonging to M/s. Kash Foods Private Ltd. and personal properties belonging to the appellant nos. 2 and 4. On-going efforts of settlement suffered due to filing of the suit, according to the appellants.On or about 14 August 2015 Consent Terms were entered into for finding out a solution to the entire dispute arising between RA Group and PA Group. From August 2015, the PA and RA Groups were negotiating for Supplemental Consent Terms as contemplated under the Consent Terms. In the month of May 2016, the PA Group i.e. Pawan Arya Group for execution of part of the Consent Terms, filed Chamber Summons No. 1020 of 2016 along with Execution Application No. 1069 of 2016 before this Court. The PA Group did not intimate or made it known to the RA Group that the Consent Terms given by respondent no. 1 by communication dated 18 August 2015, had elapsed or was not valid beyond 29 August 2015.In the said Chamber Summons, on 3 May 2016, an order came to be passed directing both the parties not to act on the Consent Terms.In or around 20 April 2017, the RA Group filed a Company Petition No. 149 of 2017 under Sections 241 and 242 of the Companies Act, 2013 for oppression and mismanagement against respondent no. 1, PA Group, respondent no. 2-company and others. The petition is pending adjudication before the National Company Law Tribunal, Mumbai (NCLT, Mumbai).On 30 November 2017, the Bombay High Court passed order disposing of Chamber Summons No. 1020 of 2016 along with Execution Application No. 1069 of 2016 in favour of the RA Group. The said order was confirmed by the Division Bench of this Court vide its order dated 21 December 2017.On 15 March 2018, the PA Group challenged the order dated 21 December 2017 passed by the Division Bench of this Court in Special Leave Petition (C) No. 9971-9972 of 2018 before the Apex Court.On 15th March 2018, a Board Meeting of the respondent no. 2-company was held at its registered office. The meeting was attended to by appellant nos. 1 and 2, respondent nos. 3, 4 and 5, Mr. Sunil Kumar Jain, Ms. Daisy Thakur who was the proposed nominee director of respondent no. 1 and Mr. Girish Sharma. Respondent nos. 9 and 10 remained unrepresented. Such a Resolution came to be passed whereby respondent no. 3 and Mr. Pravesh Pandey (GM Corporate Affairs and Commercials of respondent no. 2 company) were jointly authorized to appoint advocates, arbitrators, counsel in all proceedings against respondent no. 2-company.The appellants state that the said Resolution was passed with the active participation of representatives of respondent no. 1. According to the appellants, the joint authority was given to respondent no. 3 and Mr. Pravesh Pandey (GM Corporate Affairs and Commercials of respondent no. 2-company) only to act on behalf of the Board and not as to substitute the Board. The appellants state that in furtherance of the conspiracy hatched by the PA Group, respondent nos. 1 and 3, advocates of respondent no. 4 sent an e-mail on 30 April 2018 attaching a letter dated 30 April 2018 to respondent no. 2-company, the respondent nos. 3 and 4 and the appellants invoking the arbitration (Invocation Notice) under clause 16 of the Shareholders Agreement.Pursuant to the order passed by the Apex Court in SLP dated 7 May 2018, mediation proceedings were initiated under the aegis of Mr. S.J. Vazifdar (Former Chief Justice, Punjab and Haryana High Court) wherein the issue of bidding of the entire shareholding of respondent no. 2-company (including the 49% shareholding of respondent no. 1 being represented by the PA Group), was under consideration along with both the other issues.The appellants contend that by communication dated 30 April 2018 respondent no. 3 sent response to the invocation notice and illegally nominated Justice Mohit Shah, former Chief Justice of Bombay High Court to act as an Arbitrator in the Arbitration Proceedings as invoked by respondent no. 1.It is the appellants contention that on the same day i.e. 30 May 2018, Justice Mohit Shah addressed a letter of consent to his appointment as an Arbitrator along with copy of the Disclosure as per Section 12 of the Arbitration and Conciliation Act, 1996 (Act of 1996) wherein it was mentioned that "out of these 39 arbitrations, there are some arbitrations between same parties or related parties in connected or similar contracts".The appellants contend that respondent no. 2 derived his alleged authority by nominating an Arbitrator on behalf of respondent no. 2-company based on the Resolution passed by the Board Meeting dated 15 March 2018. The appellants contend that as an email was sent without any Board authority, the same was illegal and non-est. Thus, the appellants contend that appointment of Mr. Justice Mohit Shah by respondent no. 3 was unauthorized and illegal.Vide letter dated 8 June 2018, Justice C.K. Thakker Former Judge of the Supreme Court of India, accepted his appointment as Presiding Arbitrator and scheduled a preliminary meeting of the Arbitration Proceedings on 28 June 2018 in Mumbai. On 20 June 2018 advocates of the appellants addressed a letter to Justice C.K. Thakker, Justice Deepak Verma and Justice Mohit Shah (Arbitral Tribunal) followed by communication between the appellants of both the sides.On 25 June 2018 Mediation meeting between both the Groups was initiated. There were 20 meetings held by Justice S.J. Vazifdar, the learned Arbitrator. On 25 June 2018 a preliminary meeting of the proceedings was held in Mumbai which was presided over by the Arbitral Tribunal. In the said meeting, it is submitted that RA Group attended and apprised the Arbitral Tribunal of the on-going mediation between RA and PA Groups, the proceedings were adjourned to 13 September 2018 and thereafter on 14 September 2018. The Board meeting was conducted on 3 September 2018 and 14 September 2018. Vide order dated 28 September 2018, the Tribunal upheld the constitution of the Arbitral Tribunal. On 14 September 2018 the RA Group raised objection with regard to the constitution of the Arbitral Tribunal and requested the Tribunal to disband itself.By an order dated 28 September 2018, the Arbitral Tribunal upheld the constitution of the Arbitral Tribunal. Thereafter, an intimation was given to the parties to file their Statement of Claim on or before 26 October 2018, Statement of Defence/Counter-claim with documents on or before 23 November 2018 and fixed a further program accordingly.On 26 October 2018, respondent no. 1 filed its Statement of Claim with the Tribunal. On 23 November 2018 Statement of Defence was filed by respondent nos. 4 to 8 and respondent no. 2. In this view of the matter, the appellants claim that the Suit (L) No. 1676 of 2018 along with Notice of Motion (L) No. 3049 of 2018 was filed on 10 December 2018 by the appellants seeking reliefs restraining the arbitration proceedings. By an order dated 17 December 2018 the learned Single Judge of this Court dismissed the said Notice of Motion which order is impugned herein.

Reasoning:
51. In the facts of this case, we find that the view adopted by the learned Single Judge is a legal and proper and we do not see any error in the view adopted by the learned Single Judge. The appellants are not remediless. It may be appropriate to observe that in the facts of the case, the only remedy available, would be to challenge the award in case the appellants are aggrieved, by resorting to provisions of Section 34 of the Arbitration and Conciliation Act, 1996.On the ruling of Arbitrator on jurisdiction, no appeal is prescribed under Section 37(2)(a) of the Act. The only remedy prescribed is under Section 34 of the Act. We are therefore, of the view that there is no case made out to interfere in the presentview of the provisions of Section 13(4) and (5) of the Arbitration and Conciliation Act, 1996 which states that if challenge in any procedure agreed upon by the parties or under the procedure under Sub-section (2) is not successful, the Arbitral Tribunal shall continue the proceedings and make an award. The parties are not remediless in a situation and in case the award is made under Sub-section (4) of Section 13, remedy is prescribed to the party for filing an application as stated in Section 34 of the Arbitration and Conciliation Act, 1996.