In The Case Of Tomorrow Sales Agency Private Limited Vs Sbs Holdings, Inc. And Ors.

FACTS OF THE CASE 

• The present appeal is filed by the appellant before Delhi High Court under section 37 of the Arbitration and Conciliation Act,1996 against impugned order and judgment dated 07.03.23 in a petition filed by respondent. In the petition, the respondent herein prayed that the appellant and respondent no. 2 to 4 to be directed to disclose their assets and bank accounts and further furnish a security sum aggregating to an amount of Rs. 9,62,08,119 along with interest in order to secure it in terms of arbitral award.
• The appellant (herein) funded the claimants for the arbitral proceedings but was not a party to it. The arbitral proceedings favored the respondent liable to receive arbitral award.
• In the impugned order, learned single judge bench laid down that it was prima facie clear that the appellant TSA had vested interest in the arbitral proceedings. It funded the claimants for benefitting itself from the arbitral proceedings. It was directed to the claimants and TSA to disclose their fixed assets and bank account details.
• The single bench rejected the contention that a foreign award can be executed only against a party to the arbitration.

CONTENTIONS OF THE PARTIES 

• The learned counsel appearing on the behalf of the respondents  submitted that there is no question to of enforcing the arbitral award from the one who is not a party to the arbitral proceedings. A third party is liable only when it participated in the arbitral proceedings.
• On the other hand, it was argued that the claimants and the respondent agreed to follow the arbitral proceedings under the SIAC Rules. It was not permitted under the said rules to the respondent to make appellant as a party to the arbitral proceedings unless certain conditions are met. It was submitted that the respondent SBS, did nit take any steps to fulfill the conditions in the initial stage of proceedings.

OBSERVATIONS OF THE COURT 

• The court allowed the present appeal and set aside the impugned order to the extent where appellant was directed to disclose its assets and furnish the amount of arbitral award.
• Court observed that it was expressly disclosed by the claimants about getting funded by the appellant thus it was transparent and non-exploitative. Thus, enforcement of arbitral award against a third party which has not accepted the risk of the proceedings is not desirable and not permissible as well.
• Court said that third party funding essential to ensure access to justice. A person with lack of necessary resources would have no means to recourse in absence of third party funders.