CAUSE TITLE:
Jagrati Trade Services Private Limited Vs. Deepak Bhargava & Ors.
DATE OF ORDER:
31.01.2023
JUDGE(S):
The Hon’ble Justice Shekhar B. Saraf
PARTIES:
Petitioner: Jagrati Trade Services Private Limited
Respondent: Deepak Bhargava & Ors.
SUBJECT
The Arbitrator's authority to give temporary relief under Section 17 of the Arbitration and Conciliation Act, 1996 (A&C Act), which was amended in 2015, is now equal to the Court's authority under Section 9 of the Act, according to the Calcutta High Court.
The Justice Shekhar B. Saraf bench stated that the same criteria used to determine whether to give interim protection under Section 9 would also be used to determine whether an arbitrator's order issued under Section 17 was valid.
BRIEF FACTS
- To buy the shares of respondent no. 13, James Glendye & Company Pvt Ltd, the petitioner, Jagrati Trade Services Pvt Ltd, entered into a Share Purchase Agreement (SPA) with each of the respondents numbered 1 through 12. The first through last respondents held all of the company's shares. The parties' disagreement was sent to arbitration after the petitioner's shares were not transferred following the SPA.
- The petitioner applied the Arbitrator under Section 17 of the A&C Act to prevent the Company from concluding a Development Agreement About the property over which the Company had leasehold rights. By selling the commercial and office space on the land, the petitioner intended to prevent the Company from establishing third-party rights.
QUESTIONS RAISED
Whether, following the 2015 Amendment Act, the Arbitrator's jurisdiction to issue interim measures under Section 17 of the Arbitration and Conciliation Act, 1996 (A&C Act) is equal to the Court's power under Section 9 of the Act?
ARGUMENTS ADVANCED BY THE APPELLANT
- Jagrati Trade Services, the petitioner, claimed before the High Court that the Development Agreement was executed without notifying the petitioner and to bankrupt the business. It claimed that if an arbitral award were made in the petitioner's favour, it would be nothing more than a paper award.
ARGUMENTS ADVANCED BY THE RESPONDENT
- The defendants, including Deepak Bhargava, argued that the petitioner was not entitled to the Company's shares since it did not pay the full amount due following the SPA. It argued that before mounting any claim against the corporation, the petitioner must demonstrate to the Arbitrator that it is entitled to the Company's shares.
- Furthermore, it claimed that the Calcutta High Court rejected the petitioner's motion for interim relief regarding the Development Agreement made under Section 9 of the A&C Act before the start of the arbitral proceedings. The petitioner had been permitted by the court to approach the arbitrator with an application according to Section 17.
- However, there was an excessive four-year wait before the aforementioned application was submitted, which occurred as the arbitral proceedings were coming to a close. It claimed that the Arbitrator had declined to grant the petitioner's request since he was aware of the delay.
ANALYSIS BY THE COURT
- The High Court observed that the Amendment Act of 2015 gave the Arbitrator's powers under Section 17 an upgrade similar to what the Court's powers under Section 9 are. The Arbitrator would therefore be subject to the same rules that apply to Section 9 of the A&C Act when granting interim remedies under Section 17, the Court stated.
- In Shanti Kumar Panda v. Shakuntala Devi (2004) and Essar House Private Limited v. Arcelormittal Nippon Steel India Limited (2022), the Supreme Court stated, "In consonance with the judicial precedents set out above, I can aptly conclude that for granting interim protection, a party must satisfy four specific criteria:-I there is a prima facie case in their favour, (ii) not granting the relief would result in irreparable harm and loss that could not be compensated later, (iii) the balance of convenience, if such interim protection is granted, must be in the applicant's favour, and (iv) the application praying for the relief is made expeditiously."
- According to Essar House (2022), while awarding interim relief, no actual proof of asset disposal is necessary, but rather a significant possibility indicating the same is adequate. The Court noted, after reviewing the Arbitrator's decisions, that the petitioner had not fully convinced the Arbitrator that it had paid the total consideration as specified in the SPA. "When taken in light of the respondent's assertion that the SPA presented by the petitioner is manufactured, this judgment further confuses the situation," the Court stated. It decided that the falsification allegation distinguishes the current dispute from Essar House (2022), where a prima facie case existed but was supported by a legitimate instrument.
- Noting that the arbitrator has yet to adjudicate certain issues, including whether full consideration was paid by the petitioner as per the true and correct SPA, the Court said, "In my opinion, the arbitrator is yet to identify the correctness of several key facts in dispute, few of which I have identified above. Until a precise finding is made on the subject, any order issued by me could jeopardize or damage the existing arbitral procedures, which, according to the explanation indicated above, is prohibited."
- The panel reasoned that even if the petitioner's complaints about asset disposal were found to be genuine in the arbitral procedures, the petitioner was still entitled to seek compensation for the initial entitlement to shares. "There is thus a procedure for the petitioner to be reimbursed, and I do not perceive any irreparable loss or injury occurring," the Court stated.
- The Court noted that the petitioner had knowingly disguised the fact that ads for the sale of office/commercial spaces in the relevant premises had been disseminated much earlier. Furthermore, every application made by the petitioner suffered from the unreasonable delay at every step, and no sufficient cause was established by the petitioner for a delay of several years, it remarked.
- "The petitioner's conduct completely disqualifies any grounds of urgency or a reasonable consideration that they would truly suffer irreparable loss," the court concluded.
- Thus, while holding that the petitioner would suffer no irreparable harm if interim relief was not granted, the bench stated, "There is no urgency in this matter, and the balance of convenience lies in favour of the respondent nos. 1-13, especially given that the arbitrator has already granted the petitioner injunctive reliefs."
- As a result, the Court denied the application.
Click here to download the original copy of the judgement
