Bombay High Court

Shailendra Bhadauria And 3 Ors vs Matrix Partners India Investment ... on 3 January, 2019

Author:
B. P. Colabawalla

Bench:
B. P. Colabawalla

carbp.913.939.18.single.doc

IN THE HIGH COURT OF JUDICATURE AT BOMBAY
ORDINARY ORIGINAL CIVIL JURISDICTION
IN ITS COMMERCIAL DIVISION
COMMERCIAL ARBITRATION PETITION NO. 913 OF 2018

1.Shailendra Bhadauria ]
Promoter Shareholder of Maharana ]
Infrastructure and Professional Services Ltd ]
at 117/Q/66, Sharda Nagar, ]
Kanpur 208 005 and C-8, Pashchimi Marg ]
Vasant Vihar, New Delhi 110 057 ]

2.Surabhi Bhadauria ]
Promoter shareholder of Maharana ]
Infrastructure and Professional ]
Services Ltd at 117/Q/66, Sharda Nagar, ]
Kanpur 208 005 and C-8, Pashchimi Marg ]
Vasant Vihar, New Delhi 110 057 ]

3.Maharana Infrastructure and Professional ]
Services Ltd at W 32, Sector 11, ]
Noida 201 301 ]

4.Maharana Construction Private Limited ]
at 117/Q/66, Sharda Nagar, ]
Kanpur 208 005 Uttar Pradesh ]..Petitioners
(Org. Respondent Nos.1
to 4)

Vs.

1.Matrix Partners India Investment ]
Holdings LLC at 22 Saint Georges, ]
Suite 218, 2nd Floor, Port Louis, Mauritius ]

2. Matrix Partners India Investments LLC, ]
at 22 Saint Georges, Suite 218, 2nd Floor, ]
Port Louis, Mauritius ]

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3. Resurgence PE Investments Limited ]
(previously known as Avigo PE ]
Investments Ltd) at 3rd Floor, 355 ]
NexTeracom Tower 1, Cybercity, Ebene, ]
Mauritius. ]

4.Maharana Pratap Education Centre ]
at 117/Q/66, Sharda Nagar ]
Kanpur 208 005 Uttar Pradesh ]

5.Sakshi Institute of Technology ]
and Management at 430, Indrapuri, ]
Sharda Nagar Kanpur 208 005 ]

6. Mair Rajput Educational Society ]
at 11/4, Central Market, Ashok Vihar, ]
New Delhi 110 052 ]..Respondents
(Respondent Nos.1 to 3 were
the Original Claimants.
Respondent Nos. 4 to 6 were
Original Respondent Nos. 5 to
7.)

WITH
COMMERCIAL ARBITRATION PETITION NO.939 OF 2018

1.Maharana Pratap Education Center ]
("MPEC") at 117/Q/66, Sharda Nagar ]
Kanpur 208 005 Uttar Pradesh ]

2.Sakshi Institute of Technology ]
and Management ("SITM") ]
at 430, Indrapuri, Sharda Nagar ]
Kanpur, Uttar Pradesh. ]

3.Mair Rajput Educational Society ]
("MRES") at Adriel High School ]..Petitioners
(Original Respondent
Nos. 5 to 7)

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V/s

1.Matrix Partners India Investment ]
Holdings LLC, ("Matrix 1") at 22 ]
Saint Goerges, Suite 218, 2nd Floor, ]
Port Louis, Mauritius ]

2. Matrix Partners India Investments, LLC ]
("Matrix 2") at 22 Saint Goerges, Suite 218, ]
2nd Floor, Port Louis, Mauritius ]

3. Resurgence PE Investments Ltd ]
(Formerly Avigo PE Invt.Ltd ("RPEIL") ]
At 3rd Flr, Nex Teracom Tower 1 ]
Cybercity Ebene, Mauritius. ]

4.Shailendra Bhadauria ]
at A C/8 Paschimi Marg ]
Vasant Bihar, New Delhi. ]

5.Surbhi Bhadauria ]
at A C /8 Paschimi Marg ]
Vasant Bihar, New Delhi. ]

6.Maharana Infrastructure and Professional ]
Services Ltd ]..Respondents
(Respondent Nos.1 to 3 were
Original Claimants. Respondent Nos.
4 to 6 were Original Respondent
Nos.1 to 3.)

...............
Mr. S. U. Kamdar, Senior Advocate a/w Mr. Zal Andhyarujina, Mr.
Samsher Garud, Bijjal Gandhi i/b Jayakar and Partners, for the
Petitioners in CARBP No.913/2018 and for Respondent Nos.4 to 6 in
CARBP No.939/2018

Mr. Pravin K. Samdani, Senior Advocate a/w Mr. Sanjay Jain, Mr.
Ashwin Bhadang, Mr. Nivit Shrivastava, Ms. Sneha Patil, Ms. Khushboo

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Rupan i/b Maniar Srivastava Associates, for the Petitioners in CARBP
No. 939/ 2018 and for Respondent Nos.4 to 6 in CARBP No.918/2018.

Mr.Sharan Jagtiani a/w Mr. Nitesh Jain, Ms. Juhi Mathur, Mr. Aditya
Malhotra, Ms. Atika Vaz i/b Shardul Amarchand Mangaldas and Co, for
Respondent Nos.1 to 3 in both Petitions.
...............

CORAM:- B. P. COLABAWALLA, J.

RESERVED ON : DECEMBER 07, 2018.
PRONOUNCED ON : JANUARY 03, 2019.

JUDGMENT [ PER B. P. COLABAWALLA J. ]:

1. By these two Arbitration Petitions filed under
Section
of the Arbitration and Conciliation Act, 1996 (for short the

"
Arbitration Act
"), the Petitioners challenge the order dated 4th

July, 2018 passed by the Arbitral Tribunal under
Section 17
of the

Arbitration Act (for short the "impugned order"). By the

impugned order, pending the hearing and final disposal of the

arbitration proceedings, and as an interim measure, the Arbitral

Tribunal directed the Petitioners in both Petitions to jointly and

severally deposit an amount of Rs.190 Crores, or in the alternative

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to provide a bank guarantee for the said amount, and deposit the

same with the Tribunal within a period of four weeks from the date

of the impugned order. In addition to the aforesaid direction, the

Arbitral Tribunal also restrained the Petitioners in Arbitration

Petition No. 913 of 2018 (Respondent Nos. 1 to 4 before the

Arbitral Tribunal) from selling, transferring, alienating, disposing

of and / or encumbering their interests (legal, beneficial and/or

economic) in any and all the properties of the Petitioners

(Respondent Nos. 1 to 4 before the Arbitral Tribunal) where ever

located in India or outside, other than in the ordinary course of

business, including the properties as listed in Schedule-I to the

section 17
application. A similar relief was also granted against

the Petitioners in Arbitration Petition No. 939 of 2018

(Respondent Nos.5, 6 and 7 before the Arbitral Tribunal). It is

being aggrieved by this order, that the present Petitions have been

filed.

2. Since both the Arbitration Petitions challenge the

same order, they are being disposed of by this common judgment.

Respondent Nos.1, 2 and 3 in both these Petitions were the

Claimants before the Arbitral Tribunal. The Petitioners in

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Arbitration Petition No. 913 of 2018 were Respondent Nos.1, 2, 3

and 4 before the Arbitral Tribunal. The Petitioners in Arbitration

Petition No. 939 of 2018 were Respondent Nos.5, 6 and 7 before

the Arbitral Tribunal. For the sake of convenience and ease of

reference, I shall hereafter refer to the parties as they were

arrayed before the Arbitral Tribunal.

3. Before setting out and dealing with the legal

submissions of the parties, it would be necessary to set out a few

facts. The Claimants are investors in the Respondent No.3

company (Maharana Infrastructure and Professional Services

Limited) with the aggregate value of their investment being about

Rs.190 Crores. This investment was in the form of the Claimants

holding equity shares of the Respondent No.3 company to the

extent of Rs.41.37%. The rest of the shares of Respondent No.3

are held by Respondent Nos.1 and 2 (who are the promoters) and

two others.

4. This investment of Rs.190 Crores was made by the

Claimants in different tranches and at different points of time.

The inter-se terms of this investment and the rules of the

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investors are governed by the Share Holders Agreement dated

27th December, 2012 and thereafter supplemented by a

supplementary Share Holders Agreement dated 30th July, 2014

and thereafter further amended by the amendment Agreements

dated 29th August, 2014 and 13th November, 2014 respectively.

For the sake of convenience, all these agreements shall hereafter

be collectively referred to as the "SHA".

5. Clause 17.3 of the SHA dated 27th December, 2012

contains an arbitration clause. Clause 17.2 provides that in case

of any dispute arising between the parties with regard to the

subject matter of the agreement, the disputing parties shall in the

first instance attempt to resolve it, failing which any disputing

party may submit a claim to be settled by arbitration.

6. Pursuant to Clause 17.3 of the said Agreement, the

Claimants by their notice dated 2nd August, 2017 invoked

arbitration against the Respondents. I must mention here that

Respondent Nos.1 to 3 are signatories to the arbitration

agreement whereas Respondent Nos. 4 to 7 are not signatories.

Before the Arbitral Tribunal, it was the case of the Claimants that

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Respondent Nos.4 to 7 are equally bound by the arbitration

agreement, inter alia, by reason of their status of being "group

entities" of Respondent No.3 and also by reason of they being the

"alter ego" of Respondent Nos. 1 to 3. It is on this basis that the

Claimants invoked the arbitration proceedings against all the

Respondents and also filed a Petition under
Section 9
of the

Arbitration Act for interim reliefs, pending the constitution of the

Arbitral Tribunal.

7. Suffice it to state that the dispute ultimately landed up

in the Supreme Court and the Supreme Court by its order dated 1st

December, 2017 [passed in Arbitration Petition (Civil) No. 39 of

2017 with Arbitration Petition Nos. 41, 40 and 45 of 2017]

referred the disputes to the Arbitral Tribunal and directed that

the question as to whether the alleged non-signatories to the

agreement (Respondent Nos. 4 to 7) are to be parties in the

arbitral proceedings would be decided by the Arbitrator. Once this

order was passed by the Supreme Court, this Court by its order

dated 14th December, 2017 (Kathawalla, J.), directed that the

Petition filed under
Section 9
of the Arbitration Act be treated as

an application under
Section 17
and be decided by the Arbitral

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Tribunal. That is how the Arbitral Tribunal decided the

application under
Section 17
in which the impugned order was

passed.

8. The application under
Section 17
was made broadly on

the ground that the Claimants were apprehensive that their

investments were unsafe on account of certain activities alleged

against the Respondents. The Claimants also alleged that their

rights under the SHA have not been allowed to be exercised and

the SHA permitted the Claimants to unconditionally exit from

Respondent No.3 on account of an Initial Public Offering (IPO) not

having fructified by the deadline of 31st March, 2013. For this

purpose, the Claimants placed reliance on Clause No. 8.1 of the

SHA and submitted that the said Clause inter alia provided that

Respondent Nos.1 and 2 or Respondent No.3 itself was required to

purchase the equity shares that the Claimants held in Respondent

No.3 at a value to be determined in accordance with Clause 8.5 of

the SHA. This is the fundamental and basic dispute which the

Claimants raised against the Respondents in the arbitration

proceedings.

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9. In the arbitration proceedings, the Claimants valued

their equity shareholding in Respondent No.3 at approximately

Rs. 590 Crores as per the valuation report dated 22nd April, 2017

made by Deloitte Haskins and Sells LLP. It is to secure this claim

that the
Section 9
Petition was filed and which was thereafter

converted into an application under
Section 17
of the Arbitration

Act.

10. The
Section 17
application was basically based on the

allegations that the conduct of the Respondents show that they

have been siphoning monies from Respondent No.3 company to

Respondent No.5 (Society) which has thereafter been diverted to

the promoters (Respondent Nos.1 and 2) or entities controlled by

them. It was the allegation of the Claimants that Respondent

Nos.5 to 7 are affiliated societies and related parties to the

promoters (Respondent Nos.1 and 2). In turn, Respondent No.3

(and which runs educational and infrastructural development

services to affiliated societies, including Respondent No.5),

entered into a Master Services Agreement dated 29th March, 2011

as amended by another agreement dated 8th January, 2013 with

Respondent No.5. Similar Master Services Agreements were also

entered into by Respondent No.3 with Respondent Nos. 6 and 7.

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11. It is the case of the Claimants that under the Master

Services Agreement, for consideration of exclusivity and as a

performance guarantee, a security deposit of Rs. 20 Crores was to

be deposited by Respondent No.3 with Respondent No.5. It is the

specific case of the Claimants that during the financial years

2012-13 and 2013-14, Respondent No.3 did exceedingly well. On

account of this, the Claimants did not object to higher security

deposits of Rs.184.86 Crores being placed by Respondent No.3

with Respondent No.5 even though it was much higher than what

was contemplated originally under the Master Services

Agreement.

12. However, according to the Claimants, during the

financial year 2014-15, the Claimants discovered that the

financials of Respondent No.3 as represented to them, were

completely false and misleading and that the audited financials of

Respondent No.3 for the financial year 2014-15 were significantly

less than the provisional financial statements forwarded to the

Claimants for the said financial year. In these circumstances, the

Claimants questioned any further security deposits being placed

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by Respondent No.3 with the other Respondents. However,

without the knowledge and consent of the Claimants, Respondent

No.3 placed further security deposits of Rs.92.48 Crores with

Respondent No.5 in financial years 2014-15 and 2015-16. It is in

view of this conduct of the Respondents and considering that the

Claimants were kept in the dark, they engaged the services of

Price Water House Coopers Private Limited (for short "PWC") to

carry out a forensic review of Respondent No. 3's financial status.

According to the Claimant, PWC provided its findings on 10th

April, 2017 which corroborated the suspicions of the Claimants

that there was large scale siphoning of monies from Respondent

No.3 which were first diverted to Respondent No.5 and ultimately

dissipated to the promoters and other related parties/entities.

13. It is the case of the Claimants that in addition to the

instances of siphoning monies from Respondent No.3, the

Claimants found that there were various other fundamental

breaches of the SHA. For instance, the holding of the 7th AGM of

the Respondent No.3 company was without notice to the

Claimants and several affairs of Respondent No.3 were being

conducted in breach of the Claimants' affirmative voting rights.

According to the Claimants, their affirmative voting rights have

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been deliberately and systematically denied by Respondent No.3

and its promoters so much so that even the statutory right of

inspection of the books of accounts was denied to the Claimants for

a long period of time. To put it in a nutshell, in view of all this, the

Claimants ultimately filed a Petition under
Section 9
of the

Arbitration Act before this Court and which was then converted

into an application under
Section 17
to be considered by the

Arbitral Tribunal.

14. This application under
Section 17
before the Arbitral

Tribunal was opposed by Respondent Nos.1 to 3 by filing their

affidavit. The crux of the case made out therein was that, there

was no breach of the terms of the SHA by the Respondents; that

the IPO could not fructify in time because of the defaults on the

part of the Claimants; that all dealings between Respondent Nos.1

to 3 and Respondent Nos.5 to 7 were on a Arms Length Basis; that

the deposits were correctly given by Respondent No.3 to

Respondent Nos. 5 to 7 under the terms of the SHA read with the

Master Services Agreement; and that the forensic report

submitted by PWC was one sided and could not be relied upon. To

put it in a nutshell in substance Respondent Nos.1 and 3 denied

that there was any justification for making any interim orders as

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prayed for.

15. Respondent Nos. 5 to 7 also filed an affidavit taking up

the stand that the arbitration proceedings and any applications

made therein were not tenable against Respondent Nos. 5 to 7 as

there was no contractual privity nor any arbitration agreement

between any of the Claimants and Respondent Nos.5 to 7. It was

contended that the
Section 17
application was not sustainable

against Respondent Nos. 5 to 7 and further contended that in any

event all the transactions had taken place on an Armed Length

Basis, as was evident from the facts on record. In the result,

Respondent Nos.5 to 7 prayed for rejecting the application for any

reliefs against them.

16. When the application under
Section 17
was taken up

by the Arbitral Tribunal on 12th February, 2018, the learned

counsel appearing on behalf of Respondent Nos.1 to 4 stated that

although the statement of claim had been filed on 1st February,

2018, the Written Statement of Respondent Nos.1 to 4 was

required to be filed by 15th March, 2018. It was therefore

requested that it would be more appropriate if the
Section 17

application is heard after the Written Statement has been taken on

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record as Respondent Nos. 1 to 4 would not be able to bring any of

the factual details before said date. Similarly, the learned counsel

appearing on behalf of Respondent Nos. 5 to 7 submitted that in

the reply filed to the
Section 9
Petition (and which was now

converted into
Section 17
application) they had merely objected to

being made parties and they had no opportunity of dealing with

the factual aspects pleaded in the Petition.

17. Taking all this into consideration, by an order dated

12th February, 2018, the Arbitral Tribunal directed the Claimants

to make their submissions on all points of facts and law including

the issue as to whether Respondent Nos.5 to 7 could be made

parties to the arbitration proceedings. The Tribunal also directed

that by a short speaking order, the Tribunal would indicate

whether Respondent Nos. 5 to 7 have been properly made parties,

and if so, they would be given an opportunity for dealing with the

factual averments made in the application under
Section 17
before

being called upon to make any submissions. It is in these

circumstances that the application under
Section 17
was heard on

12th February, 2018 and 13th February, 2018 during the course of

which the Claimants made their submissions on facts and law

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including the question as to whether the arbitration proceedings

could be tenable against Respondent Nos. 5 to 7 and who were not

signatories to the arbitration agreement. The matter was

thereafter posted for further hearing on 22nd and 23rd March,

2018.

18. On 22nd March, 2018, the Claimants concluded their

submissions. Respondent Nos. 5 to 7 made their submissions on

the tenability of the proceedings which were thereafter continued

on 23rd March, 2018. At that stage and once those submissions

were completed, the Tribunal took the view that Respondent Nos.

5 to 7 were necessary parties, although no reasons were adduced

for the decision at that stage in view of the directions already

given in the order dated 12th February, 2018, namely, that the

reasons would be contained in the final order disposing of the

application under
Section 17
to the
Arbitration Act
. Hence,

further proceedings were fixed on 24th and 25th April, 2018.

19. On 24th April, 2018, three applications were made for

adjournment. On the said date, the Tribunal passed a detailed

order indicating tortuous course of the proceedings and why the

matters would not be adjourned as requested. One of the

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applications reiterated the following preliminary objections and

requested the Tribunal to decide them as preliminary issues. They

were as under:-

"Issue No.1: Whether the Hon'ble Sole Arbitrator has jurisdiction to
decide this dispute in view of the bar under
Secs.241
,
and
of the
Company's Act, 2013?

Issue No.2: Whether the Hon'ble Sole Arbitrator can without first
disclosing the reasons for holding that it is necessary that "the
Respondent Nos.5 to 7 are made parties to the present proceedings hear
on merits the interim application under
Sec.17
of the Act?

Issue No.3: Whether the preliminary issue set-forth at Issue No.1 above
is required to be disposed of first before the interim application under

Sec.17
of the Act can be heard?"

20. In view of the fact that Respondent No.3 repeatedly

asked for adjournment on one ground or the another, the Arbitral

Tribunal passed an ad-interim order on 24th April, 2018 and

cancelled the hearing fixed on 25th April, 2018 and adjourned the

hearing of the application on 7th and 8th May, 2018. Submissions

on behalf of all the Respondents were started on 7th May, 2018

and completed on 8th May, 2018. The Claimants also completed

their submissions in rejoinder on the said date. It is thereafter

that the impugned order came to be passed on 4th July, 2018.

21. On going through the impugned order, I find that the

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preliminary issues raised by the Respondents and as set out by me

earlier are dealt with by the Arbitral Tribunal in great detail from

paragraphs 16 to 37 thereof (pages 52 to 80 of the paper book).

22. To put it in a nutshell, on Issue No.1 regarding

jurisdiction to decide the dispute in view of the bar under
Sections
,
and
of the Companies Act, 2013, the Arbitral

Tribunal, after discussing the law on the subject, inter alia came to

the conclusion that the arbitration proceedings were not one

which would legitimately fall within the purview of
Sections 241
,
and
of the Companies Act, 2013 nor was it a matter

which would fall exclusively within the special jurisdiction of the

NCLT. The Tribunal took the view that the dispute referred to it

was a purely contractual dispute which could very well be

entertained and adjudicated by a Civil Court / Arbitral Forum. It is

for this reason it overruled the first preliminary issue. Issue No.2

regarding the joinder of Respondent Nos.5 to 7 to the arbitration,

the Arbitral Tribunal, by applying the principles laid down in the

decision of the Supreme Court in the case of
Chloro Controls India

Pvt Ltd v/s Severn Trent Water Purification Inc.
[(2013) 1

SCC 641], came to the conclusion that it had jurisdiction to decide

the claims made against Respondent Nos. 5 to 7. In view of the

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findings of the Tribunal with reference to Issue No.1, Issue No.3

and as reproduced by me earlier did not survive.

23. I must mention here that Respondent Nos. 5 to 7 also

contended that they being societies registered under the
Societies

Registration Act, 1860
, were not sued in the name of the

concerned office bearers identified and determined as per the

respective Rules and Regulations, and hence the proceedings

against them were not tenable. This argument was also negated

by the Arbitral Tribunal.

24. Thereafter, from paragraph 38 onwards, the Arbitral

Tribunal examined the merits of the matter and whether the

Claimants had made out a prima facie case for grant of interim

reliefs under
Section 17
of the Arbitration Act. This discussion of

the Arbitral Tribunal can be found from paragraphs 38 to 47 of the

impugned order (pages 80 to 94 of the paper book). While

examining the merits of the matter, the Arbitral Tribunal placed

reliance on the PWC report and the submissions made in relation

thereto. The Claimants alleged that the PWC report was prepared

principally on the Respondents' own documents which were

forwarded by the Respondents to the Claimants, and therefore, the

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said report was eminently reliable. They submitted that the only

reply given by the Respondents to the said PWC report was that

the same was bogus, inequitable and unilateral. Apart from this

vague and bald denial, no attempt was made by the Respondents

to impugn the findings in the said PWC report on any rational

ground. In a nutshell, it was the case of the Claimants that apart

from merely stating that the PWC report was bogus, inequitable

and unilateral, there was absolutely no explanation given or

reasons stated as to why the said report, at least at the prima facie

stage, could not be relied upon. As far the contents of the PWC

report are concerned, the Claimants highlighted the following

facts in support of their case for grant of interim reliefs:-

i. The audited financial statements of the financial
year 2014-2015 was shared with Claimant No.3
on 17th March 2016 and exhibited a significant
decline in the profit and revenues when
compared with the provisional financial
statements for the said period which had been
sent to the Claimants and which showed
Respondent No.3 to be quite profitable and
growing. The difference between the provisional
financial statement and the audited financial
statement were quite stark and worrying.

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ii. Though the Claimants disputed the audited
financial statements for financial year 2014-

2015, they were purportedly adopted at an AGM
of Respondent No.3 convened on 29th
December, 2015 and it is the case of the
Claimants that this AGM was held without notice
to the Claimants in breach of Clause 6.8.2 of the
S.H.A. and also in violation of
Section 101
of the
Companies Act, 2013. Despite this allegation
being made, the Respondents did not produce
any proof of the notice of the said AGM having
been served on the Claimants.

iii. The PWC Forensic Review (paragraph 2.26)
shows that approximately Rs.24 Crores were
paid by Respondent No.5 (MPEC) to Respondent
No.1 (Mr.Shailendra Bhaduria), his family
members and a related party by the name
"Essbee Media Private Limited". The only
explanation given in the affidavit by Respondent
Nos.1 to 3 in their affidavit in rejoinder dated
16th August 2018 is that the same was extended
"in the normal course of business". Apart from
this bare statement, there is no explanation as to
what the normal course of business was that
required such big payments to be made to
Respondent No.1, his family members and

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related parties.

iv. The PWC Review (vide paragraph 5.18) also
shows that there is wide discrepancy between
services provided by a service provider and the
nature of services sought to have been availed by
Respondent No.3 Company. For instance,
Mahalaxmi Traders, a dealer of marble, is
claimed to have given advertisement services to
Respondent No.3 including media hoarding
services. Similarly, Respondent No.3 claims to
have availed of curriculum development and
Rural Development related services from Core
Vertical Trade Private Limited, when the said
Company is a commission agent, commodity
brokers and auctioneers.

25. It was further contended by the Claimants that the

balance-sheets of Respondent No.5 for the Financial Years 2010 to

2017 (and filed as Annexures to the reply affidavit dated 13th

April, 2018), revealed questionable advances/loans inter-se

between the Respondents and escalation of deposit/security

amounts. Whilst the balance-sheet showed inter-party

transactions amongst the Respondents being negligible in the

Financial Year 2010-11, they had drastically increased after the

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Claimants' investment in Respondent No.3. This, according to the

Claimants, at least prima facie indicated an attempt to

divert/diversify the finances. The Claimants also pointed out

before the Arbitral Tribunal (from balance-sheet of Respondent

No.5), the inter-party/related party transactions which were

seriously questioned. They were:-

i. Respondent No.1 (Shailendra Bhaduria)
advanced an unsecured loan to Respondent No.5
in Financial Year 2010-11 of an amount of
Rs.1,45,448/- which came down to Rs.45,448/ -

in Financial Year 2011-12. Subsequently,
approximately an amount of Rs.11 Crores
appears to have been extended by Respondent
No.5 to Respondent No.1 for which there is no
explanation except a bare statement that the
same "were duly accounted for on production of
end-utilization production bills". No other
material has been placed on record from which
the appropriateness of the transaction can be
examined.

ii. Advances have been made by Respondent No.5
to other Respondents and their family members
as seen from the following instances:

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(a) Respondent No.2 (Mrs.Surabhi Bhaduria)
was advanced an amount of
Rs.1,49,44,349.72 by Respondent No.5 for
the first time in Financial Year 2012-13.

This declined sharply in Financial Year
2013-14 and then increased once again
approximately to Rs.76 lakhs in Financial
Year 2014-15.

(b) Respondent No.1 received an advance of
approximately Rs.10 crores in Financial
Year 2014-15 which is seen to have
increased to Rs.11.03 crores in Financial
Year 2015-16.

(c) Respondent No.1 (Shailendra Bhaduria)
and his family members along with
Respondent No.2 were advanced amounts
of approximately Rs.13 crores in Financial
Year 2016-1 7.

iii. For the Financial Year 2016-17 (as on 31st
March 2017) as seen from the balance sheet
dated 23rd October 2017, advances by
Respondent No.5 to the family members of
Respondent No.1 and Respondent No.3 have
completely vanished from the balance sheet
without any plausible explanation or

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justification.

iv. That there were inter-party/ related party
transactions with Respondent No.3 which
appeared to be doubtful and suspicious. In
Financial Year 2013-14, Respondent No.3
Company is shown as a creditor of Respondent
No.5 to the extent of Rs.17 crores and that the
said amount is shown under the head "Unsecured
Loans" and to the extent of Rs.33.7 crores under
the heading ''Sundry Creditors". Respondent
No.3 seems to have further extended credit of
Rs.75 crores in addition to the deposit of Rs.267
crores as on 31st March 2015. Suddenly, the
credit from Respondent No.3 to Respondent No.5
was reduced by Rs.75 crores in the previous
years to Rs.17 crores in Financial year 2015-16.

There is no explanation as to whether
Respondent No.5 has repaid the amount of Rs.58
crores and in what manner. Despite being
shareholders of Respondent No.3 Company, the
Claimants are kept completely in the dark on this
issue.

v. In the Financial Year 2015-16, Respondent No.5
had advanced Rs.10,54,11,057/- to 'Advance
Medical Science & Educational Society', of which
Respondent No.1 and Respondent no.2 are the

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Chairman and Secretary respectively. In
Financial Year 2016-17, the advances
outstanding to the said Society were
Rs.5,92,17,293/-, but there is no information as
to how the repayment had been done. Nothing is
discernible from the balance sheet of Respondent
No.5.

vi. That the said 'Advance Medical Science &
Education Society' has been debarred by the
Ministry of Health & Family Welfare from
accepting students for academic year 2017-18
and 2018-19 on account of various deficiencies
in faculty, residents, clinical material and
infrastructure. The Writ Petition filed by the said
Society is disposed of without any relief being
granted to the Society on the question of
admitting students in the academic year 2017-

18. In these circumstances, the Claimants
impugn the large amounts of advances given to
'Advance Medical Science & Educational Society'
as wholly doubtful and suspicious.

vii. In Financial Year 2015-16, approximately
Rs.24.74 crores were advanced by Respondent
No.5 to Essbee Media Private Limited (related
party of the Respondents) and security deposits
of Rs.6.19 crores were also advanced in the same
year. Although Essbee Media Private Limited

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provides printing and publishing services to
Respondent No.3, Respondent No.3 has availed
curriculum development services from Essbee
Media Private Limited. There is inconsistency in
the nature of services availed and the nature of
services available from Essbee Media Private
Limited, according to the Claimants.

viii. Mahalaxmi Traders is a related party of the
Respondents. This entity first received an
advance of Rs.35 Lakhs from Respondent No.5 in
Financial Year 2011-12. The amount of advance
stood increased to Rs.70 lakhs in Financial year
2012-13. For the first time in Financial Year
2013-14, Mahalaxmi Traders is reflected in the
balance sheet of Respondent No.5 as a "Sundry
Creditor" to the extent of Rs.3.06 crores. The
credit advance to Mahalaxmi Traders increased
in subsequent years to Rs.8 crores in the
Financial Year 2014-15 and further to Rs.13.16
crores in the Financial Year 2015-16.

26. It is on the basis of all these instances and factors that

the Claimants alleged that there was diversion of funds invested

by the Claimants in Respondent No.3 and also round tripping of

money into the pockets of Respondent Nos.1 and 2 and other

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family members. The facts as set out above were not disputed

before the Arbitral Tribunal. The Arbitral Tribunal in paragraph

44 clearly records that despite all these serious allegations, apart

from a bare denial and characterization of the PWC report as

bogus and one sided, there was no serious attempt made to meet

with the serious allegations made by the Claimants. The Tribunal

further recorded that even during the submissions made before

the Tribunal, the learned counsel appearing on behalf of

Respondent Nos.1 to 3 did not make any submissions with regard

to the material allegations against them. The only attempt made

was to contend that the Claims and the application were beyond

the jurisdiction of the Tribunal, and therefore, no relief could be

granted. What is important to note is that it is nobody's case that

this recording of the Arbitral Tribunal is an incorrect recording in

the impugned order.

27. Be that as it may, the Arbitral Tribunal, upon a

consideration of the material on record was prima facie satisfied

that the Claimants had made out a case for grant of interim reliefs

as prayed for and thereafter proceeded to pass the impugned

order. As mentioned earlier, by the impugned order, the Tribunal

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directed the Respondents to jointly and severally deposit an

amount of Rs.190 Crores or in the alternative to provide a bank

guarantee for the said amount. In addition thereto, the

Respondents were also restrained from alienating, transferring,

disposing of and/or encumbering any of their properties. It is this

order that is challenged before me under
Section 37
of the

Arbitration Act.

28. At the outset, Mr. Jagtiani, the learned counsel

appearing on behalf of the Claimants (Respondent Nos.1 to 3 in

both Petitions), submitted that paragraphs 13 to 37 of the

impugned order deal with preliminary issues that were framed by

the Arbitral Tribunal as to whether the proceedings before it were

tenable and whether it had jurisdiction to entertain the arbitration

proceedings. All these questions were answered in favour of the

Claimants and all the objections with reference to jurisdiction

were overruled by the Arbitral Tribunal. This being the case, Mr.

Jagtiani raised a preliminary objection that the findings given by

the Arbitral Tribunal on jurisdictional issues cannot be challenged

at this stage and can be challenged only once the final award is

passed and if the same is adverse the Respondents. In this regard

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he brought to my attention the provisions of
Section 16
of the

Arbitration Act. He, therefore, submitted that all the Respondents

to the arbitration can only challenge the impugned order insofar

as it relates to the merits of the case.

29. On the other hand, Mr. Kamdar, the learned counsel

appearing on behalf of Respondent Nos.1 to 4 (Petitioners in

Arbitration Petition No.913 of 2018), submitted that Respondent

Nos.1 to 4 had not filed any application under
Section 16
before

the Arbitral Tribunal, and therefore, there was no occasion for the

Arbitral Tribunal to consider the aforesaid jurisdictional issues.

The findings given by the Arbitral Tribunal were only prima facie

in nature to consider whether reliefs can be granted to the

Claimants or otherwise. He submitted that if they are prima facie

in nature, those prima facie findings can certainly be challenged

and to show that even prima facie the Arbitral Tribunal had gone

wrong in coming to the conclusion that it could entertain the claim

filed by the Claimants.

30. As far as Respondent Nos. 5 to 7 are concerned, Mr.

Samdani, the learned Senior Counsel appearing for the said

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Respondents, very fairly stated before me that they had raised

these jurisdictional issues before the Arbitral Tribunal which were

decided by the Arbitral Tribunal in the impugned order, and

therefore, Respondent Nos.5 to 7 are not challenging the findings

of the Arbitral Tribunal on the jurisdictional issues at this stage

and they would challenge the same if and when Respondent Nos. 5

to 7 suffer an Award and the same is challenged under
Section 34

of the Arbitration Act.

31. I will deal with this issue first.
Section 16
of the

Arbitration Act deals with the competence of the Arbitral Tribunal

to rule on its own jurisdiction.
Section 16
reads thus:-

"16. Competence of arbitral tribunal to rule on its jurisdiction.--

(1) The arbitral tribunal may rule on its own jurisdiction, including ruling
on any objections with respect to the existence or validity of the arbitration
agreement, and for that purpose,--

(a) an arbitration clause which forms part of a contract shall be
treated as an agreement independent of the other terms of the
contract; and

(b) a decision by the arbitral tribunal that the contract is null and
void shall not entail ipso jure the invalidity of the arbitration clause.

(2) A plea that the arbitral tribunal does not have jurisdiction shall be
raised not later than the submission of the statement of defence; however,
a party shall not be precluded from raising such a plea merely because
that he has appointed, or participated in the appointment of, an arbitrator.

(3) A plea that the arbitral tribunal is exceeding the scope of its authority
shall be raised as soon as the matter alleged to be beyond the scope of its

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authority is raised during the arbitral proceedings.

(4) The arbitral tribunal may, in either of the cases referred to in sub-

section (2) or sub-section (3), admit a later plea if it considers the delay
justified.

(5) The arbitral tribunal shall decide on a plea referred to in sub-section
(2) or sub-section (3) and, where the arbitral tribunal takes a decision
rejecting the plea, continue with the arbitral proceedings and make an
arbitral award.

(6) A party aggrieved by such an arbitral award may make an application
for setting aside such an arbitral award in accordance with
section 34
."

32.
Section 16(1)
provides that the Arbitral Tribunal can

rule on its own jurisdiction including ruling on any objections with

respect to the existence or validity of the arbitration agreement.

For that purpose, an arbitration clause which forms part of a

contract shall be treated as an agreement independent of the other

terms of the contract.
Section 16(1)
further provides that a

decision by the Arbitral Tribunal that the contract is null and void

shall not entail ipso jure the invalidity of the arbitration clause.

Sub-section (2) of
Section 16
stipulates that a plea that the

Arbitral Tribunal does not have jurisdiction shall be raised not

later than the submission of the statement of defence. However, a

party shall not be precluded from raising such a plea merely

because that he has appointed, or participated in the appointment

of an arbitrator.
Section 16(3)
deals with a plea about the Arbitral

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Tribunal exceeding the scope of its authority and stipulates that

such a plea shall be raised as soon as the matter alleged to be

beyond the scope of its authority is raised during the arbitral

proceedings. Sub-section (4) of
Section 16
gives discretion to the

Arbitral Tribunal to admit a plea regarding its jurisdiction or

authority even at a later stage than the one referred to in sub-

section (2) or sub-section (3), if it considers that the delay is

justified. Sub-section (5) stipulates that when the Arbitral

Tribunal decides on a plea referred to in sub-section (2) or sub-

section (3) and it takes a decision rejecting such a plea, it shall

continue with the arbitral proceedings and make an arbitral

award. In other words, what sub-section (5) of
Section 16

stipulates is that when a jurisdictional issue is raised before the

Arbitral Tribunal and the Arbitral Tribunal rules that it has

jurisdiction, then, the arbitral proceedings would continue until

they culminate into an arbitral Award. The plea of jurisdiction,

when rejected, cannot be challenged before the Court at that stage.

It can only be challenged when the final Award is challenged

under
Section 34
of the Arbitration Act. This is clear from an ex-

facie reading of
Section 16(6)
. This becomes further clear when

one reads
Section 16
with
Section 34
and
Section 37
of the

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Arbitration Act
. In fact,
Section 37
, and which deals with

appealable orders clearly stipulates that an Appeal shall lie from

the orders as mentioned therein (and from no others).
Section

37(2)(a)
specifically stipulates that an Appeal shall lie to a Court

from an order of the Arbitral Tribunal accepting the plea referred

in sub-section (2) or sub-section (3) of
Section 16
. In other words,

what
Section 37(2)(a)
stipulates is that where the Arbitral

Tribunal rules that it has no jurisdiction or that the dispute before

it exceeds the scope of its authority, then, an Appeal shall lie from

such an order of the Arbitral Tribunal under
Section 37
of the

Arbitration Act. However, if such pleas are rejected by the

Arbitral Tribunal, then, no Appeal would lie under
Section 37
of

the Arbitration Act. The rejection of such a plea then can only be

challenged when the arbitral award is challenged under
section 34

of the Act. This position is very clear on an ex-facie reading of

Sections 16
,
and
of the Arbitration Act.

33. Having said this, we shall now examine the

preliminary issues raised before the Arbitral Tribunal and which

have been reproduced by me earlier. As recorded in the impugned

order itself, that one of the applications filed by Respondent Nos. 5

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to 7 reiterated the preliminary objections and requested the

Tribunal to decide them as preliminary issues. Issue No.1 was

whether the Arbitral Tribunal has jurisdiction to decide the

dispute in view of the bar under Sections 241, 242 as well as other

provisions of the
Companies Act, 2013
. As far this issue is

concerned, the Arbitral Tribunal has ruled that it has the

jurisdiction to decide the dispute. As mentioned earlier, the

findings on this issue can be found in paragraphs 19 to 26 of the

impugned order. Since the Arbitral Tribunal has ruled that it has

the jurisdiction to decide the dispute, in my view, the findings

given with reference to this issue cannot be subjected to an Appeal

under
Section 37
of the Arbitration Act at this stage. The

Respondents will always be at liberty to challenge the findings on

this issue, if they suffer an Award adverse to them and the same is

challenged under
Section 34
of the Arbitration Act.

34. As far as Issue No.2 is concerned, the said issue was

with reference to Respondent Nos.5 to 7 being made parties to the

arbitration proceedings. This issue categorically called upon the

Arbitral Tribunal to disclose the reasons for holding that

Respondent Nos. 5 to 7 are necessary parties to the present

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proceedings before hearing the interim application under
Section
of the Arbitration Act on merits. In other words, what this

issue called upon the Arbitral Tribunal to decide was that whether

it had jurisdiction to pass any orders against Respondent Nos. 5 to

7 especially considering that they were not signatories to the

arbitration agreement. This issue also was decided by the Arbitral

Tribunal and it came to the conclusion that it had jurisdiction even

over Respondent Nos. 5 to 7. It came to this conclusion by relying

upon the principles
laid down by
the Supreme Court in the case of

Chloro Controls India Pvt Ltd
(supra). The Arbitral Tribunal,

having come to the conclusion that it has jurisdiction over

Respondent Nos. 5 to 7, the findings on this issue also cannot be

challenged in an Appeal under
Section 37
of the Arbitration Act.

These findings can be challenged by the concerned Respondents, if

they ultimately suffer an Award adverse to them and the same is

challenged under
Section 34
of the Arbitration Act. I must

mention here that as a part of Issue No.2, an issue was also raised

whether the proceedings against Respondent Nos. 5 to 7 would lie

in view of the fact that they were societies registered under the

Societies Registration Act, 1860
and they had not been sued in the

name of the concerned office bearers identified and determined as

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per the respective Rules and Regulations. This plea of Respondent

No.5 to 7 was also rejected by the Arbitral Tribunal. Hence, even

the findings of the Arbitral Tribunal on this issue cannot be

challenged at this stage and can be challenged if the concerned

Respondents ultimately suffer an Award and which is challenged

under
Section 34
of the Arbitration Act.

35. As far as Issue No.3 is concerned, it called upon the

Arbitral Tribunal to decide Issue No.1 first, before deciding the

section 17
application. Accordingly, Issue No.1 was decided by the

Arbitral Tribunal inter alia holding that the dispute between the

parties was a purely contractual dispute which could be decided

by a Civil Court / Arbitral Tribunal. It would not be one which

would legitimately fall within the purview of Sections 241, 242

and other provisions of the
Companies Act, 2013
nor was it a

matter which would fall exclusively within the special jurisdiction

of the NCLT. The Arbitral Tribunal therefore held that it had

jurisdiction to decide the dispute between the Claimants and the

Respondents. It was thereafter that the
section 17
application

was decided on merits, namely, whether the Claimants had made

out a prima facie case for grant of interim reliefs. This being the

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case, the Respondents could have no grievance because Issue No.1

was decided first and thereafter the Arbitral Tribunal decided the

section 17
application, albeit the reasons on all jurisdictional

issues were given in the impugned order.

36. Looking to all these facts, it is clear that all the

preliminary issues that the Arbitral Tribunal was called upon to

decide were touching the jurisdiction of the Arbitral Tribunal.

These issues have been decided by the Arbitral Tribunal by giving

detailed reasons, albeit in the same order that decides the
Section
application. In fact, this was also made clear to the parties by

the Arbitral Tribunal vide its order passed on 12th February,

2018. In this order, the Tribunal directed the Claimants to make

their submissions on all points of facts and law including the

jurisdictional issues. The Tribunal also directed that it would

indicate whether Respondent Nos. 5 to 7 were necessary and

proper parties and if so, they would be given an opportunity for

dealing with the factual averments made in the
Section 17

application before being called upon to make their submissions. It

is in these circumstances that the reasons on the jurisdictional

issues have been set forth by the Arbitral Tribunal in the

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impugned order which also decides whether the Claimants are

entitled to any interim reliefs under
Section 17
of the Arbitration

Act. I, therefore, find that the objection raised by Mr. Jagtiani, the

learned counsel appearing on behalf of the Claimants, that I

cannot give any finding on the jurisdictional issues at this stage, to

be well founded.

37. I am unable to accept the submissions of Mr. Kamdar

that the findings given by the Arbitral Tribunal on these issues are

only prima facie, and therefore, I can look into these findings to

examine whether prima facie the Tribunal had jurisdiction or

otherwise. The Tribunal has taken its decision holding that it has

jurisdiction to decide the disputes between the parties and having

done so, these findings certainly cannot be challenged under

Section 37
of the Arbitration Act at this stage. These findings, if at

all, can be challenged by the Respondents if they suffer an Award

adverse to them and the same is challenged under
Section 34
of

the Arbitration Act. I, therefore, find that the objection raised by

Mr. Jagtiani is fully justified and is required to be upheld.

38. Having said this, I shall now turn my attention as to

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whether the Claimants made out a prima facie case for grant of

reliefs as prayed for in their
Section 17
application. In this regard,

Mr. Kamdar, the learned counsel appearing on behalf of

Respondent Nos.1 to 4, submitted that the Arbitral Tribunal had

gone completely wrong in not only directing the Respondents to

deposit Rs. 190 Crores, but then further went on to grant an

injunction restraining all the Respondents from creating third

party rights and/or interests in all their properties, assets etc. He

submitted that this could never have been done by the Tribunal

considering the concession made by the Claimants as recorded in

paragraph 46 of the impugned order. Mr. Kamdar submitted that

paragraph 46 of the impugned order categorically records that

"the Applicants at this stage" (namely, at the stage of the
Section
application) would be satisfied if the actual amount of invested

money was protected pending the further proceedings. Mr.

Kamdar submitted that it is an admitted position that the actual

amount invested by the Claimants was a sum of Rs. 190 Crores.

This being the position, the Tribunal could not have ordered

deposit of Rs.190 Crores and also granted the injunction, was the

submission.

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39. Mr. Kamdar further submitted that an injunction of

the nature that was granted by the Arbitral Tribunal against all

the Respondents would hamper the entire business activity of the

Respondents and would virtually bring it to a standstill. Merely

because the Tribunal was of the opinion that the balance-sheets

and the PWC report allegedly reveal questionable advances/loss

inter-se between the Respondents and an escalation of the

deposit/security amounts from Respondent No.3 to Respondent

Nos.5 to 7, and that too without there being any material proof

that the transactions were questionable or doubtful or suspicious,

the Arbitral Tribunal could not have blindly accepted the

contention of the Claimants and thereafter pass the interim order

as sought for by the Claimants. Mr. Kamdar submitted that

though the Tribunal has placed heavy reliance on the PWC report,

and which was seriously disputed by the Respondents in their

reply, the same clearly revealed that it was unilateral and a one

sided report based on the material supplied by the Claimants to

PWC. Mr. Kamdar further submitted that the PWC report is

partisan report and at the highest is an unproven opinion of an

expert. This being the case, before any relief could be granted to

the Claimants, they had to make out an independent prima facie

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case. In these circumstances, the Tribunal had completely gone

wrong in placing heavy reliance on the PWC report, was the

submission of Mr. Kamdar.

40. Mr. Kamdar then submitted that the order for deposit

and even the order of injunction did not meet the standards as set

out under Order 38 or
Order 39 of the CPC
to enable the Tribunal

to pass such drastic interim orders. In this regard he took me

through the averments in the Petition filed by the Claimants and

submitted that no case was made out for granting such drastic

reliefs. He submitted that all the balance-sheets of the company

were known to the Claimants and in fact all of them have been

signed by the Claimants. This being the case, and the Claimants

being fully aware of all transactions, could not make any grievance

that they were kept in the dark or that the Respondents were

acting in collusion with each other and behind the back of the

Claimants to allegedly siphon away all the Claimants' investments.

In this regard, Mr. Kamdar relied upon Emails dated 8th August,

2014 and 25th February, 2015 addressed by the Respondents to

the Claimants. These Emails form part of the compilation of

documents that was tendered on behalf of Respondent Nos.1 to 4

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before me and is at pages 2482 and 2484 respectively. Relying

upon these Emails, Mr. Kamdar submitted that this clearly

showed that the Claimants were in the full know of things

including the deposits that were given by Respondent No.3 to

Respondent No.5. He submitted that these Emails were

suppressed before the Arbitral Tribunal and therefore the

Claimants had approached the Tribunal with unclean hands and

on this ground also the Claimants were not entitled to any relief

whatsoever.

41. Mr. Kamdar then submitted that the claim in the

arbitration is nothing but a claim for damages and this being the

case, to secure such a claim, an order of deposit of Rs.190 Crores

could never have been made. This is more-so when one takes into

consideration that the Respondents are carrying on business of

conducting educational institutions involving a large number of

students, faculty and employees. This order of deposit would cause

a greater hardship to the Respondents than to the Claimants and

which was completely lost sight of by the Arbitral Tribunal. Mr.

Kamdar further submitted that the SHA governs the inter-se

rights between the parties to the said SHA and admittedly each of

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the Claimants had entered into separate SHAs for the purpose of

investing in the share capital of Respondent No.3. It was therefore

submitted that the rights and liabilities of each of the Claimants

and cause of action (if any), or entitlement to relief, was a

separate, distinct and an independent cause of action. Hence, the

claim made was also bad for misjoinder of parties and causes of

action, was the submission.

42. Mr. Kamdar then submitted that admittedly the

transactions between Respondent No.3 and Respondent Nos. 5, 6

and 7 were of refundable security deposits and which was to the

knowledge of the Claimants. This is clearly borne out even by the

averments in the Petition filed seeking interim reliefs. Mr.

Kamdar submitted that even assuming that there were incorrect

or fraudulent entries in the books of Respondent No.5, the same

could not be a ground for granting reliefs against Respondent

Nos.1 to 4. To put it differently Mr. Kamdar submitted that

looking into the books of accounts of Respondent Nos. 5 to 7, relief

could not be granted against Respondent Nos.1 to 4. He further

submitted that what the Arbitral Tribunal had effectively done

was to pierce the corporate veil and thereafter proceeded to grant

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relief. This could not be permitted and especially in arbitration

proceedings, was the submission. For all the aforesaid reasons,

Mr. Kamdar submitted that the impugned order passed by the

Arbitral Tribunal cannot be sustained and ought to be set aside in

Appeal under
Section 37
of the Arbitration Act. In support of the

aforesaid submissions, Mr. Kamdar relied upon the following

decisions:-

(
i) Wind World (India) Limited and Others v/s Enercon GmbH
and another
[Arbitration Petition (L)No.374 of 2016 decided
on 29th March, 2016].

(ii) Oil and Natural Gas Corporation Limited v/s M/s Jindal
Drilling and Industries Limited [Arbitration Petition No. 587
of 2014 decided on 28th April, 2015]

(
iii) Balwant Rai Saluja Another v/s Air India Limtied and
Others
[(2014) 9 SCC 407].

(
iv) K. D. Sharma v/s Steel Authority of India Limited and Others

[(2008) 12 SCC 481].

43. Mr. Samdani, the learned Senior Counsel appearing on

behalf of Respondent Nos. 5 to 7 (the Petitioners in Arbitration

Petition No.939/2018), basically adopted the arguments

canvassed by Mr. Kamdar. In addition to the aforesaid

arguments, Mr. Samdani submitted that admittedly Respondent

Nos.5 to 7 were not signatories to the arbitration agreement and

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were sought to be sued as a related party. He brought to my

attention the prayers in the Statement of Claim filed in the

arbitration proceedings and submitted that there was no direct

prayer against Respondent Nos.5 to 7. The prayers against

Respondent Nos.5 to 7 were all indirect prayers, namely, to direct

Respondent No.5 to repay and restitute the refundable security

deposit placed with it by Respondent No.3 to enable Respondent

No.3 to satisfy its payment obligation to the Claimants under the

SHA. He submitted that no direct relief was sought against

Respondent No.5 to 7. This being the case, he submitted that if no

direct final relief was sought against Respondent Nos.5 to 7, no

interim relief could be granted against them either. This was for

the simple reason that interim relief is always granted in the aid of

the final relief and if no direct final relief is claimed, then, there

was no question of granting any interim relief.

44. Mr. Samdani then submitted that the Arbitral

Tribunal, while granting relief under
Section 17
, either of deposit,

attachment before judgment or an injunction, is bound by the

same principles and conditions as set out under Order 38 or
Order

39 of the CPC
. In other words, Mr. Samdani submitted that before

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granting the reliefs sought for by the Claimants, the Arbitral

Tribunal had to be satisfied that the conditions laid down under

the provisions of Order 38 or Order 39 have been duly complied

with by the Claimants. In the facts of the present case, Mr.

Samdani submitted that those conditions were not satisfied by the

Claimants and hence they were not entitled to the reliefs as

prayed for.

45. Over and above this, Mr. Samdani also laid great stress

on paragraph 46 of the impugned order wherein, according to Mr.

Samdani, a statement was recorded on behalf of the Claimants

that they would be satisfied if the actual amount of invested

money is protected pending the further proceedings. He

submitted that in light of this statement made on behalf of the

Claimants, it was highly unjustified that Respondent Nos.5 to 7

were injuncted from dealing with all their properties and whose

value, according to Mr. Samdani, was far in excess of even the

entire claim made in the arbitration proceedings. In other words,

Mr. Samdani submitted that the injunction granted against

Respondent Nos. 5 to 7 was highly excessive and ought to be set

aside on that ground alone. As far as the deposit order is

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concerned, Mr. Samdani fairly did not repeat the arguments that

were canvassed by Mr. Kamdar and only adopted the same that

there was no justification for passing an order of deposit as no case

was made out for such a drastic order. In these circumstances,

Mr. Samdani submitted that the impugned order cannot be

sustained and ought to be set aside.

46. In support of all his propositions, Mr. Samdani relied

upon the following decisions:-

(
i) Adhunik Steels Ltd v/s Orissa Manganese and Minerals (P)
Ltd.
[(2007) 7 SCC 125].

(
ii) Raman Tech and Process Engg. Co and Another v/s Solanki
Traders
. [(2008) 2 SCC 302].

(
iii) Nimbus Communications Ltd v/s Board of Control For
Cricket In India
. [2013 (1) Mh. L. J. 39].

(iv) Board of Control for Cricket in
India v/s Jaipur IPL Cricket
Private India Limited
. [Arbitration Appeal (L)No. 30742 of
2010 decided on 14th December, 2010].

(
v) Jagdish Singh v/s Madhuri Devi
[(2008) 10 SCC 497].

47. On the other hand, Mr. Jagtiani, the learned counsel

appearing on behalf of the Claimants, submitted that there was no

merit in the contentions canvassed by the Respondents. He

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submitted that all these arguments that are now being canvassed

before me and on the merits of the application, were never

canvassed before the Tribunal. In fact, on the merits of the

matter, Mr. Jagtiani was at pains to point out the findings of the

Tribunal at paragraph 44 where the Tribunal specifically records

that apart from a bare denial and characterization of the PWC

report as bogus and one sided, there was no serious attempt made

to meet with the serious allegations made by the Claimants. The

only attempt made before the Tribunal was to contend that the

disputes were beyond the jurisdiction of the Arbitral Tribunal and

hence no interim relief could be granted.

48. Mr. Jagtiani then submitted that the Respondents

have completely misconstrued the statement of the Claimants that

was recorded in paragraph 46 of the impugned order. Prayer (a)

of the
Section 17
application was for liquid security and not with

reference to the injunctions that were prayed for. He submitted

that prayer clauses (a) and (b) of the
Section 17
application

sought for to secure the entire amount of Rs. 590 Crores. It was in

relation to these prayers that a statement was made that for the

time being the Claimants would be satisfied if the actual amount of

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the invested money is protected pending further proceedings. In

other words, Mr. Jagtiani submitted that it was only with

reference to the prayers of liquid security that the Claimants

stated before the Tribunal that they would be satisfied if amount of

Rs.190 Crores was furnished as liquid security. That statement

does not in any way give up their claim or dis-entitle them to the

relief of injunction. He submitted that in fact the relief of

injunction was granted in favour of the Claimants by the Arbitral

Tribunal by its order dated 24th April, 2018 and which was

granted as an ad-interim relief. He, therefore, submitted that it

was completely incorrect on the part of the Respondents to

contend that the injunction could operate only until the deposit

was made or that the injunction was sufficient to secure the claim

of the Claimants and therefore there was no need to pass an order

of deposit of a sum of Rs.190 Crores. Mr. Jagtiani submitted that

even the Arbitral Tribunal understood the statement of Claimants

in the same manner and therefore, after recording the statement

of the Claimants that for the time being they are restricting their

claim to the actual amount of money invested in Respondent No.3

(in paragraph 46), proceeded to grant the relief of deposit of

Rs.190 crores as well as the injunctive reliefs as prayed for (in

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paragraph 47 of the impugned order).

49. As far as the argument canvassed by the Respondents

that the injunction was excessive in nature, Mr. Jagtiani

submitted that this was highly unfair to the Arbitral Tribunal. He

submitted that this Court had passed an order asking the

Respondents to disclose their assets along with the value of each

asset as well as the status thereof. Though the affidavit was filed,

neither the necessary information was given nor was the status of

the properties disclosed. He submitted that in fact Respondent

Nos.5 to 7 have categorically made a statement in their reply that

all their assets are encumbered. This being the factual position,

and since the Respondents did not disclose to the Tribunal as to

what was the value of their assets, the Tribunal has no choice but

to grant an injunction in relation to all the assets belonging to the

Respondents. He submitted that the Respondents cannot take

advantage of their own wrong by first not disclosing the value of

the assets and thereafter contend that the injunction is excessive.

50. As far as the contention of the Respondents that no

case has been made out for granting such drastic orders, Mr.

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Jagtiani took me through PWC report. He submitted that the PWC

report clearly indicated that there were many transactions which

caste a doubt on how money was being taken out from Respondent

No.3 to Respondent No.5 and thereafter routed to the promoters,

namely, Respondent Nos.1 and 2. He submitted that the Arbitral

Tribunal has examined the PWC report in the great detail in the

impugned order and thereafter found that the Claimants have

made out a prima facie case. It was the submission of Mr. Jagtiani

that none of the allegations and the transactions referred to in the

PWC report (and on which the reliance was placed by the

Claimants), were seriously disputed by the Respondents. This

being the case, the Arbitral Tribunal, and in the absence of any

explanation given by the Respondents in this regard, could not be

faulted for relying upon the observations in the report of the PWC

to come to a prima facie finding whether the Claimants had made

out a case or not. He submitted that at least as far as the

injunction granted against Respondent Nos.5 to 7 is concerned,

they cannot make any grievance with reference to the same

because in their affidavit in reply, Respondent Nos. 5 to 7 have

themselves stated that they have no intention of disposing of any

of their properties. This being the case, there was nothing wrong

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in granting injunctive reliefs against Respondent Nos. 5 to 7

restraining them from disposing of their properties except in

usual course of business, was the submission. Mr. Jagtiani

submitted that it now turns out that the apprehension of the

Claimants is well founded because even after the injunction order

was passed by the Tribunal, the Respondents have alienated

several of their properties and which has been recorded by this

Court in its order dated 29th October, 2018 in Chamber Summons

No. 1030 of 2018 in Commercial Execution Application No. 2113

of 2018.

51. As far as the case under Order 38 or under Order 39 is

concerned, Mr. Jagtiani submitted that the Petition elaborately

sets out how the money is siphoned away from Respondent No.3

by giving huge security deposits to Respondent No.5 and which (at

least a part of it), were then routed to the promoters, namely,

Respondent Nos.1 and 2. He submitted that looking to the

transactions in question and which have been elaborated in the

PWC report, there was a serious apprehension that monies of

Respondent No.3 were being routed to Respondent Nos.1 and 2

through Respondent No.5. It was in these circumstances that the

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relief of deposit as well as the injunction was sought for. The

Arbitral Tribunal examined all this material that was placed

before it and thereafter came to a prima facie finding that the case

for grant of interim reliefs was made out. He submitted that this

order of the Arbitral Tribunal was one which is certainly a

plausible view and this Court, under
Section 37
, ought not to

interfere with the discretion exercised by the Tribunal unless it is

found to be wholly perverse or palpably contrary to the provisions

of law. He submitted that in the facts of the present case, no such

case has been made out and therefore this Appeal holds no merit

and ought to be dismissed.

52. Mr. Jagtiani also pointed out that the Claimants have

already filed the evidence of five witnesses including a witness to

prove the PWC report through a partner of PWC. Till date, despite

the directions of the Tribunal, no evidence is filed by the

Respondents. To put it in a nutshell, Mr. Jagtiani submitted that

even till today the findings given in PWC report have not been

refuted by the Respondents. This being the case, the Arbitral

Tribunal could not be faulted for relying upon the same and

thereafter granting the reliefs as was done in the impugned order.

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For all these reasons, Mr. Jagtiani submitted that there was no

merit in the Petitions, and therefore, the same ought to be

dismissed with costs.

53. I have heard the learned counsel for the parties at

great length and have gone through the papers and proceedings in

the Arbitration Petition as well as the impugned order passed by

the Arbitral Tribunal. The first argument that was canvassed

before me was in relation to the statement made by the Claimants

restricting their claim to the sum of Rs.190 Crores at the interim

stage and which has been recorded by the Arbitral Tribunal in

paragraph 46 of the impugned order. According to Mr. Kamdar as

well as Mr. Samdani, since the Claimants had, at the interim stage,

restricted their claim to the sum of Rs.190 Crores, the Arbitral

Tribunal had completely gone wrong in not only directing the

Respondents to deposit the said amount or in the alternative give

a bank guarantee, but thereafter also granted an injunction

against the Respondents from disposing of any of their properties.

It was the submission of the learned counsel that both the reliefs

could not have been granted especially in view of the statement

that was recorded by the Arbitral Tribunal in paragraph 46 of the

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impugned order. This being the case, the order passed by the

Arbitral Tribunal was highly excessive and was liable to be set

aside, was the argument. To understand this argument, it would

be appropriate to reproduce paragraph 46 of the impugned order:

"46: Mr. Jagtiani, learned counsel for the Applicants submitted
that although in the application there has been prayer for securing
an amount of Rs. 591,01,18,200/-, he would be for the time being
satisfied if the actual amount of invested money is protected
pending the further proceedings. The actual amount of invested
money is said to be Rs. 190 Crores."

54. On going through the prayers in the
Section 17

application and reading it with paragraph 46 (reproduced above),

I am unable to agree with the submission of Mr. Kamdar and Mr.

Samdani on this point. Prayer (a) of the
Section 17
application

seeks an order and direction against the Respondents to jointly

and severally deposit an amount of Rs.591 Crores, being the

amount equivalent to the fair value of the equity shares held by

the Claimants in the Respondent No.3 company. Prayer (b), and

which is an alternative prayer, seeks an order and direction

against the Respondents to provide an unconditional bank

guarantee in the sum of Rs. 591 Crores. Thereafter, prayer

clauses (c) to (g) seek an injunction against all the properties

belonging to the Respondents. When one reads the statement

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recorded in paragraph 46 of the impugned order along with the

prayers in the
Section 17
application, it is quite clear that the

statement made and recorded by the Arbitral Tribunal in

paragraph 46 was in relation and restricted only to prayer clauses

(a) and (b). In other words, the statement recorded on behalf of

the Claimants is that for the time being the Claimants would be

satisfied if the liquid security of the invested money (the sum of

Rs.190 Crores) is protected pending the further proceedings. I am

in agreement with Mr. Jagtiani, the learned counsel appearing on

behalf of the Claimants, that it is only with reference to prayer

clauses (a) and (b), and which dealt with the liquid security, that

the Claimants stated before the Arbitral Tribunal that they would

be satisfied if the amount of Rs.190 Crores was furnished as

security. This statement did not in any way give up the claim of

the Claimants or dis-entitle them to the relief of injunction. One

must not lose sight of the fact that the Arbitral Tribunal had

already granted an ad-interim injunction against the Respondents

from disposing of any of their properties by its order dated 24th

April, 2018. That ad-interim injunction has also been continued

by the Arbitral Tribunal in the impugned order. What is also

pertinent to note is that this statement of the Claimants is

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recorded in paragraph 46 of the impugned order. Thereafter, the

Tribunal in paragraph 47 proceeded to grant the interim reliefs

and which is the operative part of the impugned order. In the

operative part, the Tribunal not only directed the Respondents to

deposit a sum of Rs.190 Crores, or in the alternative to provide a

bank guarantee for the said amount, but also proceeded to grant

an injunction restraining the Respondents from disposing of any of

their properties and further directing them to provide a complete

disclosure on affidavit of all the details of any of their immovable

and / or movable properties. On reading the impugned order, I

find that the Arbitral Tribunal also understood the statement

made on behalf of the Claimants as one that was restricted to

prayer clauses (a) and (b) and not with reference to the injunctive

reliefs sought for by the Claimants. If in fact the statement made

on behalf of the Claimants was with reference to all the prayers in

the
Section 17
application, the operative part of the impugned

order and which can be found in the very next paragraph, would

have read quite differently. I, therefore, find considerable force in

the argument of Mr. Jagtiani that the statement made on behalf of

the Claimants and as recorded in paragraph 46, was only

restricted to prayer clauses (a) and (b) of the
Section 17

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application and that is also how the Arbitral Tribunal understood

it. This being the case, I do not think that Mr. Kamdar and Mr.

Samdani are correct in their submission when they say that the

Claimants at the interim stage, restricted their entire claim only

to a sum of Rs. 190 Crores. This argument would therefore have

to be rejected.

55. There is yet another reason for coming to the aforesaid

conclusion. Paragraph 46 clearly records that the learned counsel

for the Applicants submitted that although in the application there

is a prayer for securing an amount of Rs.591 Crores, the

Claimants for the time being would be satisfied, if the actual

amount of invested money is protected pending the further

proceedings. Admittedly, only prayer clauses (a) and (b) deal

with the question of providing security. This also clearly indicates

that the statement recorded in paragraph 46 was with reference

to prayer clauses (a) and (b) only which dealt with to secure the

actual amount and not with reference to the prayers of injunction.

Looking to all these facts, I am clearly of the view that the

statement made on behalf of the Claimants in paragraph 46 of the

impugned order was only restricted to prayer clauses (a) and (b)

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and did not in any way dis-entitle them to seek the relief of

injunction in addition to securing the amount of Rs.190 Crores and

which was sought as a liquid security. As stated earlier, it is quite

clear that the Arbitral Tribunal also understood this statement in

the same fashion, and therefore, directed the Respondents to

furnish security in the sum of Rs. 190 Crores either by way of a

deposit or by furnishing a bank guarantee and thereafter also

proceeded to grant the relief of injunction as sought for by the

Claimants. I, therefore, have no hesitation in rejecting the first

argument canvassed by Mr. Kamdar and Mr. Samdani

respectively.

56. The next submission made by Mr. Kamdar and Mr.

Samdani was that the injunction granted by the Arbitral Tribunal

was highly excessive and if allowed to continue to operate would

hamper the entire business activity of the Respondents thereby

bringing it to a virtual standstill. Both counsels submitted that

heavy reliance placed by the Arbitral Tribunal on the PWC report

was wholly misguided especially considering that this was at the

highest a unilateral and a one-sided report. At best, it was the

opinion of an expert yet to be proved, was the submission. It was

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further submitted that the values of all the properties of the

Respondents were far in excess of the entire claim made in the

Arbitration and hence, the Arbitral Tribunal was not justified in

granting such a drastic order of injunction.

57. I am unable to agree with these submissions. Firstly,

the Arbitral Tribunal has analyzed the entire record before it in

great detail. From Paragraphs 39 to 41, the Arbitral Tribunal has

examined the PWC report as well as the balance-sheets of

Respondent No.5 for the financial years 2010 to 2017. It has

noted that there are very serious allegations in the PWC report

and which have been set out in great detail in the impugned order.

Thereafter, in paragraph 44, the Tribunal categorically records

that despite all these serious allegations, apart from a bare denial

and characterization of the PWC report as bogus and one sided,

there was no serious attempt made to meet these serious

allegations. The Tribunal has categorically recorded that even

during the submissions, the learned counsel appearing for the

respective Respondents did not make any submissions with

regard to the material allegations against them and the only

attempt made was to contend that the claims and the applications

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were beyond the jurisdiction of the Tribunal. It is nobody's case

that this recording of the Arbitral Tribunal in paragraph 44 of the

impugned order, is an incorrect recording. On going through the

impugned order, I find, and in fact the same was also conceded

before me, that as far as the merits of the allegations made in the

Section 17
application were not dealt with by the Respondents

before the Arbitral Tribunal. The Respondents chose to rest their

arguments on the basis that the Arbitral Tribunal had no

jurisdiction and hence could not grant any interim relief. This was

the path that the Respondents chose to take. This being the case,

the Respondents today cannot complain, and that too at the

appellate stage, that the reliefs granted by the Arbitral Tribunal

and based on the PWC report as well as the balance-sheets of

Respondent No.5, was not based on any proof or that the same was

highly excessive. One must also not lose sight of the fact that the

PWC report was prepared admittedly on the basis of the

documents that were supplied by the Respondents to the

Claimants and which were then forwarded to PWC for a forensic

analysis. I, therefore, do not think that this report, at least prima

facie, could be rejected by the Tribunal as being unilateral and one

sided. The Respondents were given a fair opportunity to deal with

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the said report and make their submissions thereon. However, the

Respondents chose not to respond to the same. This being the

position, I do not think that the Arbitral Tribunal in any way

misdirected itself in relying upon the same to grant the reliefs as

sought for in the
Section 17
application. I clearly find that the

material placed on record shows that the Claimants had clearly

made out a case under Order 38 as well as
Order 39 of the CPC
.

The averments to that effect can also be found in paragraphs 142

to 173 and 180 to 185 of the
Section 17
application. It now

transpires that despite the injunction order granted by the

Tribunal, the Respondents have disposed of some of their

properties and in violation of the injunction order. This in fact has

been recorded by this Court in its order dated 29th October, 2018

passed in Chamber Summons No. 1030 of 2018 in Commercial

Execution Application No. 2113 of 2018. This order specifically

records that the 5th Respondent, after the injunction order, had

purported to transfer two properties to third parties for a

consideration of Rs. 7.50 Lakhs and 7.10 Lakhs. This money was

ordered to be brought back in this Court. Pursuant thereto, a

Demand Draft of Rs. 14.60 Lakhs was brought into Court by

Respondent Nos. 5 to 7. The said order of 29th October, 2018

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further records that additional 10 properties were disposed of

with no explanation provided. Looking even to the subsequent

developments (i.e. after passing of the impugned order), it is now

quite clear that despite the injunction order, the Respondents

have purported to transfer and dispose of their properties. I, am

therefore, clearly of the view that the Tribunal was fully justified

in granting the reliefs that it did. In these circumstances, no

interference is called for with the impugned order in an Appeal

under
Section 37
of the Arbitration Act.

58. As far as the argument of the Respondents that the

injunction was excessive in nature, I find this argument to be

wholly ridiculous. Even at the stage when the Petition under

Section 9
was filed, the Respondents were directed by this Court to

disclose on oath all their properties including their value and

status. Though this affidavit was filed, what was the status and

value of the properties was never disclosed. This being the case, I

do not think that the Tribunal was in any way unjustified in

granting the injunction order against the Respondents restraining

them from disposing of any of their properties. Without disclosing

the value of their properties, I do not see how the Respondents can

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contend that the injunction granted is excessive. This is more so

when one takes into consideration that the Tribunal has

restrained the Defendants from disposing of any of their

properties except in the ordinary course of business. This would

clearly indicate that the injunction is not of a nature that would

bring the entire business activities of the Respondents to a

standstill, as was sought to be contended before me by the learned

Senior Counsels appearing for the Respondents. This being the

case, I find that the argument of the counsels for the Respondents

that the injunction granted by the Tribunal was excessive in

nature, to be wholly without any merit and has to be rejected.

59. The argument of Mr. Kamdar regarding the misjoinder

of parties and causes of action does not detain me further. It was

fairly conceded before me that no such argument was ever

canvassed before the Arbitral Tribunal. This being the case, such

an argument cannot be canvassed now before me to try and justify

that the interim order passed by the Tribunal requires

interference. It will always be open to the Respondents to canvass

this argument before the Arbitral Tribunal at the appropriate

stage, if so advised.

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60. Even the argument made by Mr. Samdani that no

direct relief was sought against Respondent Nos. 5 to 7 and hence

no relief could be granted against them at the interim stage is

without any merit. In the statement of claim, there is relief sought

against Respondent Nos. 5 to 7 to repay the security deposits back

to Respondent No.3 so as to ensure that Respondent No. 3 can

satisfy the claim of the Claimants. It is to secure this, that relief

has been granted in the interim application even against

Respondent Nos. 5 to 7. I, therefore, think that it is incorrect on

the part of Mr. Samdani to contend that no interim relief could

have been granted against the said Respondents. This argument

also would therefore have to be rejected. This is more so when

there were serious allegations made against all the Respondents

for siphoning away monies from Respondent No.3 to Respondent

No. 5 and which were then rerouted to Respondent Nos. 1 and 2

and which has been duly set out in great detail in the impugned

order. All these parties, and as recorded in the impugned order,

are related parties. In fact the Chairman and Secretary of

Respondent No.5 are Respondent Nos. 1 and 2 respectively. These

facts have not been disputed. Why the monies were paid by

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Respondent No. 5 to Respondent Nos.1 and 2 has not been

explained at all even before me. Even now no attempt was made

to explain or refute the findings that were given in the PWC report

or the observations made by the Arbitral Tribunal regarding the

monies paid by Respondent No.5 to Respondent Nos. 1 and 2. I

must mention that the amounts were quite large in the sum of

Rs.24 Crores approximately. I, therefore, find that Mr. Samdani is

not correct in simply stating that because no direct relief was

sought against Respondent Nos. 5 to 7, no interim relief could

have been granted against them. I must also mention that in the

Affidavit filed by Respondent Nos.5 to 7 before the Arbitral

Tribunal, they have clearly stated that they do not intend to

dispose of any of their properties. This being the case, I do not

think that the Arbitral Tribunal was in any way wrong in granting

the injunctive reliefs against Respondent Nos.5 to 7 also.

61. This now only leaves me to deal with the decisions that

were relied upon by the Respondents. The first decision relied

upon by Mr. Kamdar was a decision of this Court in the case of

Wind World (India) Limited and Others
(supra). The facts of

this case would reveal that the Arbitral Tribunal by its order dated

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8th March, 2016 had directed the Petitioners to produce various

documents and also granted various interim measures. The

interim measures granted by the majority of the Arbitral Tribunal

was against Petitioner Nos. 2 and 3 to do or not to do various acts

in respect of preservation of partnership assets of various Limited

Liability Partnerships (LLPs) and a Private Limited Company or

preventing of any distribution of the assets etc of those LLPs and

the Private Limited Company. It was an admitted fact that the

LLPs or the Private Limited Company were not parties to the

arbitral proceedings and it was thus argued that no interim

measures could have been passed against those third parties. It is

in these circumstances and in these facts that the observations of

this Court have to be read. This Court held that the power of the

Arbitral Tribunal under
Section 17
is a limited one and the interim

measures must be related to the protection of the subject matter of

the dispute and the order may be addressed only to the party to

the arbitration. It is also in these circumstances that this Court

took the view that the Arbitral Tribunal has no power to lift the

corporate veil. I fail to see how this decision can be of any

assistance to the Respondents. In the facts before me, the reliefs

that have been granted are not against any third party but against

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the Respondents who are parties to the arbitration. They were

duly heard and given an opportunity to make their submissions

even on the merits of the case. This being the case, I find that this

decision is of no assistance to the Respondents.

62. The next decision relied upon was a decision of this

Court in the case of ONGC Ltd Vs. Jindal Drilling and Industries

Ltd (supra). In this case, this Court held that the Arbitral

Tribunal had no power to lift the corporate veil. The facts of this

case also would reveal that relief was granted against a party who

was not a party to the arbitral proceedings.
In fact, in this

decision, a Single Judge of this Court referred to the case of
Chloro

Controls India Pvt Ltd
(supra) and came to the conclusion that

in the factual matrix before it, the Supreme Court decision in the

case of
Chloro Controls India Pvt Ltd
(supra), has no application

at all.

In contrast, in the facts of the present case, the Arbitral

Tribunal, by relying upon
Chloro Controls India Pvt Ltd
(supra),

has come to a categorical finding that Respondent Nos. 5 to 7 were

necessary parties to the arbitration and overruled their objection

that the Arbitral Tribunal had no jurisdiction in relation to them

as they were not signatories to the arbitration agreement.
This

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being the case, I find that the factual matrix in the case of ONGC

Ltd Vs. Jindal Drilling and Industries Ltd (supra) was totally

different from the factual situation in the present matter. This

judgment therefore also is clearly distinguishable on facts and is of

no assistance to the Respondents.

63. Even the decision of the Supreme Court in the case of

Balwant Rai Saluja and Another
(supra) is of no assistance to

the Respondents. This decision of the Supreme Court has not been

rendered with reference to the
Arbitration Act
but with reference

to Labour Laws and the employer-employee relationship. I fail to

see how this decision of the Supreme Court in any way assists the

Respondents. In this decision, the Supreme Court has held that as

a general principle of "Corporate Law", a parent company is not

liable for the acts of its subsidiary. The Doctrine of "Piercing the

Corporate Veil" stands as an exception to the principle that the

Company is a legal entity, separate and distinct from its

shareholders, with its own legal rights and obligations. This

decision, in fact states under what circumstances the Corporate

Veil can be pierced by the Court. This decision does not in any way

seem to suggest that the Arbitral Tribunal, in a given factual

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situation, does not have the power to pierce the corporate veil,

especially when that particular party is a party to the arbitration

proceedings. This decision also, therefore, is of no assistance to

the Respondents.

64. The last decision relied upon by Mr. Kamdar, was a

decision of the Supreme Court in the case of
K.D. Sharma

(supra). This decision clearly lays down that no relief can be

granted to a party that has come to court with unclean hands.

Whilst there is no dispute with the aforesaid proposition, I fail to

see how this decision can be of any assistance to the Respondents.

I do not find that in the facts of this case, the Claimants had

approached the Arbitral Tribunal with unclean hands. There was

nothing on the record of the Arbitral Tribunal to even suggest that

the Claimants had approached the Tribunal with unclean hands.

This argument was sought to be canvassed before me by placing

reliance upon some documents which were tendered before me

and which were never forming part of the proceedings before the

Arbitral Tribunal. In particular, reliance was placed on the Emails

dated 8th August 2014 and 25th February 2015 to contend that the

Claimants were fully in the know-of all things. Even on going

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through these Emails, I do not find that such is the case. These

Emails do not in any way indicate that the Claimants were aware

that monies were being siphoned away from Respondent No.3 to

Respondent No.5 and which were then rerouted to Respondent

Nos.1 and 2. I, therefore, find that the reliance placed on this

decision also is of no assistance to the Respondents.

65. As far as the decisions relied upon by Mr. Samdhani

are concerned, they all deal with the powers to be exercised by the

Arbitral Tribunal while granting reliefs under
section 17
of the

Arbitration Act. These decisions hold that the Arbitral Tribunal is

bound by the principles laid down under Order 38 or
Order 39 of

the CPC
. Whilst there is no real quarrel with these propositions, in

the factual situation before me, I have held earlier that these

principles and tests have been duly considered by the Arbitral

Tribunal before granting any relief to the Claimants. As

mentioned earlier, there were serious allegations made against the

Respondents of siphoning away monies from Respondent Nos.3 to

Respondent No.5 and which were then rerouted to Respondent

Nos.1 and 2. Though ample opportunity was given to the

Respondents to meet these allegations, they chose not to do so.

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They only chose to argue before the Arbitral Tribunal that it had

no jurisdiction and hence no relief could be granted. This being

the case, the Tribunal recorded in paragraph 44 that no attempt

was made by the Respondents to refute the serious allegations

made against them. Considering what was stated in forensic

report of PWC and the Balance Sheets of Respondent No.5, the

Tribunal came to the conclusion that the Claimants were entitled

to the reliefs as sought for. This being the case, I find that the

Tribunal correctly applied the tests laid down under Order 38 and

Order 39 of the CPC
before granting the reliefs that it did. This

being the case, I find that the reliance placed by Mr. Samdhani on

all the aforesaid decisions listed by me earlier can be of no

assistance to the Respondents.

66. In view of the foregoing discussion, I find no merit in

both the Petitions. They are accordingly dismissed. However, in

the facts and circumstances of the case, there shall be no order as

to costs.

( B. P. COLABAWALLA, J. )

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