#arbitration Archives - Page 2 of 4

10 Apr

“Decision of Arbitral Tribunal to not Implead a Party to Arbitration is not an Interim Award”: Delhi High Court

Blog #arbitraltribunal, #arbitration, #ArbitrationAct1996, #ConcessionAgreement, #delhihighcourt, #Impleadment, #judicialreview, #LegalDispute, #StateSupportAgreement 1

Case title: National Highway Authority of India v. Ms IRB Ahmedabad Vadodra Super Express Tollways Pvt. Ltd

Case no.: O.M.P. (COMM) 455/2022 & I.A. 18565/2022

Order on: 2^nd April 2024

Quorum: Justice Prateek Jalan

FACTS OF THE CASE

The petitioner, National Highway Authority of India (NHAI), challenged a decision of a three-member Arbitral Tribunal dated 01.08.2022. This decision rejected NHAI’s application under Order I Rule 10 of the Code of Civil Procedure, 1908 (CPC) for impleadment of the State of Gujarat as a party to the arbitral proceedings. The arbitral proceedings stemmed from a Concession Agreement dated 25.07.2011 between NHAI and the respondent, MS IRB Ahmedabad Vadodra Super Express Tollways Pvt. Ltd.

CONTENTIONS OF THE APPELLANT

Advocates Mr. Ankur Mittal, Mr. Abhay Gupta, and Mr. Ankur Saboo represented NHAI. They argued that the State of Gujarat should be impleaded based on the obligations it undertook in a State Support Agreement dated 11.02.2016, which was related to the Concession Agreement.

CONTENTIONS OF THE RESPONDENTS

Represented by Mr. Atul Nanda, Senior Advocate, the respondent contested NHAI’s application for impleadment, arguing that the Arbitral Tribunal lacked jurisdiction to decide on the impleadment of the State of Gujarat.

Mr. Nanda submits that the question of maintainability of a petition under Section 34 of the Act against an order of an arbitral tribunal declining impleadment of a third party is no longer res integra. He relies upon the decision in National Highway Authority of India vs. Lucknow Sitapur Expressway Ltd. (Lucknow Sitapur Expressway), The Court was, in that case, also concerned with a decision of an arbitral tribunal adjudicating disputes under a Concession Agreement. The Tribunal had rejected an application by NHAI for impleadment of a State Government on the ground that it was a party to a State Support Agreement.

LEGAL PROVISIONS

Section 34 of the Arbitration and Conciliation Act, 1996 – Application for setting aside arbitral award.

It allows parties to challenge an arbitral award before the appropriate court on certain grounds, including that the composition of the arbitral tribunal or the arbitral procedure was not in accordance with the agreement of the parties. In this case, the petitioner NHAI, invoked Section 34 to challenge the decision of the Arbitral Tribunal rejecting its application for impleadment of the State of Gujarat.

ISSUE –

The main issue was whether the decision of the Arbitral Tribunal rejecting NHAI’s application for impleadment of the State of Gujarat constituted an arbitral award, thus making it amenable to challenge under Section 34 of the Arbitration and Conciliation Act, 1996.

COURT’S ANALYSIS AND JUDGEMENT

The court examined precedents, including the case of Lucknow Sitapur Expressway Ltd., which involved similar circumstances. In Lucknow Sitapur Expressway, it was ruled that a decision rejecting an application for impleadment did not constitute an arbitral award under Section 2(1)(c) of the Act. The court emphasized that for a decision to be considered an award, it must decide a substantive dispute or conclusively settle an issue pertaining to the heart of the dispute.

The court further clarified that the distinction between a decision on jurisdiction and one on merits did not affect the characterization of the decision as an award. Even if the tribunal ruled on the jurisdiction to decide on impleadment, it did not change the nature of the decision. The court referenced various legal principles and previous judgments to support its conclusion.

In light of the precedent set by Lucknow Sitapur Expressway and other relevant judgments, the court held that NHAI’s petition under Section 34 of the Act was not maintainable. Consequently, the petition was dismissed, and all pending applications were disposed of.

The court’s decision in the case of O.M.P. (COMM) 455/2022 reaffirmed the legal position established by precedent, particularly the Lucknow Sitapur Expressway case. It clarified the criteria for a decision to be considered an arbitral award and emphasized that decisions on procedural matters like impleadment did not fall under this category.

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Judgement Reviewed by – Chiraag K A

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28 Jan

Zee And Sony’s Proposed Merger Encounters A Hurdle – A Closer Examination Of The Shelved Deal

Prime Legal

Articles #arbitration, #corporatelaw, #internationalarbitration, #merger, #NCLT, #Sony, #zee, #zee5

ABSTRACT:

ZEE Entertainment and Sony’s Indian intended to merge to become one of the biggest entertainment companies in India. The two-year-old announcement of the $10 billion merger included plans to combine two streaming platforms, over 75 television channels, and film assets. Sony, however, has cancelled the merger due to unfulfilled requirements. There have been rumours of a dispute among the leadership, and ZEE has hinted that it might sue Sony. The parties have now cancelled the agreement and filed lawsuits against each other.

INTRODUCTION:

In the fast-paced world of media and entertainment, the proposed merger of ZEE Entertainment Enterprises Ltd. and Sony Pictures Networks India was a watershed moment with the potential to reshape the Indian entertainment industry. However, the highly anticipated merger was officially terminated on January 22, 2024.

ORIGIN AND TERMINATION OF THE DEAL:

In September 2021, the two media behemoths announced their initial merger agreement, which was a calculated decision to merge their digital assets, production operations, linear networks, and programme libraries. The goal of the merger was to establish the biggest entertainment business in India, with a broad range of products and services to appeal to different types of consumers. On December 21, the two companies signed the merger agreement following the completion of the 90-day due diligence period.

The proposed merger would give the Japanese group a sizable market share at a time when consolidation is changing the media landscape in India by creating a 74-channel powerhouse. Sony has pledged to invest $1.6 billion to increase its footprint, and the company will own 53% of the merged company.

Now, Sony Group Corp terminated its merger with ZEE Entertainment Enterprises Ltd. on January 22nd, after nearly two years of negotiating the $10 billion transaction. The situation was first reported on by Bloomberg, who cited leadership conflicts exacerbated by Indian regulatory authorities.

REASON FOR TERMINATION:

Sony released an official statement stating that the definitive agreements required the parties to discuss in good faith an extension of the end date required to make the merger effective by a reasonable period of time in the event that the merger did not close by the date twenty-four months after their signature date. It said that, among other reasons, the closing conditions of the merger had not been met by that date, which is why it did not close by the deadline.

The issues with the appointment were one of the primary reasons for cancelling the deal. Sony and Zee disagreed about who should lead the merged entity. Sony advocated for NP Singh, its India managing director and CEO, to take over as managing director in the interim, citing concerns about Punit Goenka, Zee’s managing director and CEO. These were exacerbated when the Securities and Exchange Board of India (SEBI) barred Goenka from holding any managerial positions while investigating allegations of fund siphoning. Goenka’s ban was eventually lifted. Nonetheless, Sony remained hesitant to proceed. Goenka offered to step down just days before the merger deadline, but he disagreed with N P Singh’s authority over the deal.

AFTERMATH THE TERMINATION:

Sony invoked arbitration and legal action against ZEE for alleged breaches along with a $90 million termination fee with this cancellation, which could result in a protracted legal battle. ZEE, under the direction of Punit Goenka, has declared that it will refute Sony’s assertions.

At the Singapore International Arbitration Centre (SIAC), Sony has filed for arbitration against ZEE. To put the previously approved merger plan into effect, ZEE has filed a petition with the National Company Law Tribunal (NCLT) in Mumbai.

CONCLUSION:

It’s possible that the merger’s termination will be detrimental to both parties. Sony and ZEE were both thinking about growing into the Indian market. Both businesses lost out on a chance to solidify their positions in India’s fiercely competitive entertainment sector as a result of the failed merger.

In conclusion, the ZEE-Sony merger’s unravelling serves as a reminder of the difficulties associated with media mergers and acquisitions. It highlights how crucial it is for all parties involved in such transactions to communicate clearly and conduct due diligence. It will be interesting to watch how ZEE and Sony face the legal implications and handle the opportunities and challenges in the rapidly evolving Indian entertainment industry once the dust settles.

Written by – Surya Venkata Sujith

17 Jan

Bombay HC dismisses petition which seeks for arbitration when the conciliation proceeding was abruptly terminated.

Prime Legal

Blog #arbitration, #bombayhc, #debt, #legalnews

TITLE : Bafna udyog v Micro and Small enterprises, Facilitation council

CORAM : Hon’ble Justice Neela Gokhale

DATE : 16^th January 2024

CITATION : Arbitration Petition No.201 of 2023

FACTS

The petitioner seeks appointment of a retired judge to conduct the arbitration proceedings. The petitioner also requests the court to direct the respondent to produce all records required for the proceedings. The petitioner is registered under MSMED Act, 2006. The respondent owes Rs. 92,41,072 to the petitioner with future interest as per the act.

The dispute among the parties remained unsolved. The petitioner contends that the respondent acknowledged the debt he owes. The petitioner filed a conciliation proceeding which upon getting failed has approached for arbitration under Section 11(6) of the arbitration act. The respondents did not show up during the proceedings even after issuing notice.

LAWS INVOLVED

Section 11(6) states that an arbitrator would be appointed by the arbitral forum if none of the parties take initiative to appoint an arbitrator or fails to seek for an arbitrator.

ISSUES

Whether the petitioner was right in asking for an arbitration proceeding?

JUDGEMENT

The court observed that the arbitration proceeding would be invalid as per the MSMED Act. There is an alternative remedy available in law to first observe failure of conciliation proceeding and then approach for arbitration. In the present matter, the conciliation proceeding was terminated which is against Section 18(3) of the MSMED Act which states that only after failure of conciliation proceeding, an arbitration recourse can be proceeded with.

The petiton was dismissed on the grounds of maintainability.

Written by- Sanjana Ravichandran

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9 Jan

A single person cannot be party to arbitration when the arbitration agreement mandates joint holders to be a party : Bombay HC

Prime Legal

Blog #arbitration, #bombayhc, #contract, #law, #legalnews

TITLE : Ketan Champaklal Divecha V DGS Township Pvt. Ltd. &

CORAM : Hon’ble Justice Manish Pitale

DATE : 2^nd January 2024

CITATION : Arbitration Application No. 21860 of 2023

FACTS

Maintainability of the present petition was challenged under Section 9 and 11 of the Arbitration and Conciliation Act, 1996. According to the respondents, the arbitration clause, in the present case, is so worded and structured that the petitioner, being a member of Co-operative Housing Society, alone cannot seek resolution of disputes under the arbitration clause. In the current case, it was found that the actual area of the plot was less than the area on the basis of which the development agreement was executed.

LAWS INVOLVED

Section 2(1)(h) of the Arbitration and conciliation act states that :

(h) “party” means a party to an arbitration agreement

The arbitration agreement states that :

“35.1 All disputes, claims and questions whatsoever which may arise with respect to this Agreement between the Parties hereto touching or relating to or arising out of these presents or the construction or application thereof or any clauses or thing herein contained or in respect of the duties responsibilities and obligations of either party hereunder or as to any act of omission of any party or as to any other matter in anywise relating to these presents or the rights, duties. and liabilities of either party under these presents shall be referred to arbitration under Arbitration and Conciliation Act, 1996 or any statutory modification and/or re-enactment thereof in the following manner:

35.2 The Society and the Members as one Party and the Developer as the other Party may forward a panel of names to facilitate the task of selection of the Sole Arbitrator, and a Sole Arbitrator shall then be appointed jointly by the Society and the Developer;”

ISSUES

Whether individual members of the society being signatories of the development agreement entitled to invoke arbitration?

JUDGEMENT

The court analysed Section 2(1)(h) of the Act defines who a party is. Section 7 thereof defines an ‘arbitration agreement’, as an agreement by parties to submit to arbitration all or certain disputes which have arisen or which may arise between them in respect of a defined legal relationship. The arbitration clause in the present case has to be interpreted on the basis of the aforesaid definition of ‘party’ and ‘arbitration agreement’. The arbitration agreement states that ‘society and members’ as one party and the developer as the other party. The court held that with respect to the arbitration clause, an individual member does not have the capacity to invoke arbitration.

Written by- Sanjana Ravichandran

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7 Nov

Penalty Is Supposed To Be @ 1% Of The Cost Of Incomplete Work Per Week Of Delay Subject To Maximum Of 10 % Of The Total Cost Of Contract: High Court Of Delhi

Prime Legal

blog #arbitration, #Breach, #compensation, #contract, #delay, #Reward

Title: National Projects Constructions Corporation Ltd. (Npcc) V M/S Aac India Pvt. Ltd

Citation: Fao (Comm) 140/2021

Coram: Hon’ble Mr. Justice Yashwant Varma And Hon’ble Mr. Justice Dharmesh Sharma

Decided On: November 02, 2023

Introduction:

This Judgment shall decide the present appeal preferred by the appellant under Section 37 of the Arbitration and Conciliation Act, 1996 read with Section 13(1A) of the Commercial Courts Act, 2015 for setting aside the impugned judgment dated 12 March 2021 passed by learned Additional District Judge-03, South District, Saket Courts, New Delhi in ARBTN No.20824/2016, whereby the learned ADJ chose to partially set aside the award dated 29 August 2016 on the aspect of liquidated damages to be paid by the appellant to the respondent.

Facts:

The appellant, which is a Government Enterprise under the Ministry of Water Resources and also a company registered under the Companies Act, 1956 consequent to letter of intent dated 03 March 2017 entered into an agreement dated 13 March 2007 as Project Management Consultant of the Central Reserve Police Force with the respondent, which was a micro enterprise stated to be having a turnover of less than Rs. 10 Lacs, for installation of Fire Protection System for the Auditorium Block, CRPF Campus, Vasant Kunj, New Delhi. The project was stipulated to be completed within a period of 7 months from the date of issuance of LOI for total contract value of Rs. 90,79,200/-. However, performance got delayed.

appellant claimed that the respondent was in breach of its obligations under the contract and delayed its performance by taking about 33 months for completion of work, and therefore, in terms of clause 35.5 of the contract, LD was levied and adjusted against the payment payable to the respondent not only for the abnormal delay but also for causing damage to the reputation of the appellant for the delay caused; and accordingly payment for a sum of Rs. 1,13,97,341/- i.e., 10% of the work cost of the CRPF camp project was withheld. The respondent in terms of clause 52 of the ̳General Conditions‘ of the contract invoked arbitration.

The award was challenged by the respondent/claimant under Section 34 of the A&C Act and the learned ADJ vide the impugned judgment dated 12 March 2021 considered the proposition of law propounded in ONGC Ltd. v. Saw Pipes Ltd. And several other cases.

The impugned award is assailed in the present appeal before this Court inter alia on the grounds that the learned ADJ completely misconstrued the letter dated 09 October 2009 on the record and placed an erroneous construction on the provisions of the contract; and that despite concluding that there was delay on the part of the claimant/respondent in completing the project, contradicted itself by not allowing imposition of LD and rather modified the award, which course has no sanction in law.

Court’s Analysis and Judgement:

The court decided that liquidated damages and penalty were stipulated to be @ 1% of the cost of incomplete work per week of delay subject to maximum of 10 % of the total cost of contract value and it was stipulated that LD may be adjusted and set off against any sum payable to the Contractor/NPCC. It is also manifest that the contract stipulated payment by CRPF to the appellant alone. The appellant was enjoined upon to verify the bills towards the work done received from the sub-contractors. As an inevitable corollary, on imposition of LD, the appellant was well within its rights to withhold 10% of the contract value in such proportion from each of the sub-contractors including the claimant/respondent.

There are a catena of cases on the proposition that where damage or loss is difficult or impossible to prove, the Court is empowered to award liquidated amount stipulated in the contract, if it is a genuine pre-estimate of damage or loss, or reasonable compensation for the said amount loss or damage. So there was no ̳patent illegality‘ committed by the Arbitrator in passing the impugned award and the award could not have been modified by the learned ADJ in exercise of his powers under Section 34 of the A&C Act.

Written by- Sushant Kumar Sharma

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