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2017 (2) TMI 1203 - HC - Indian LawsValidity of arbitration ward - whether the negation of the challenge by the AT was valid? - Held that - The Petitioners would be barred in terms of Article 33 of the ICC Rules from raising any objection as to the constitution of the AT since they chose not to adhere to that requirement in respect of their own nominee i.e. M2. In Rail India Technical and Economic Services Limited v. Ravi Constructions (2001 (10) TMI 1170 - KARNATAKA HIGH COURT), the Supreme Court explained the consequences of such waiver. It was observed there that even if there is any violation or irregularity, by subjecting itself to the jurisdiction of Arbitrator, without challenging his appointment, RITES is also barred under the principles of estoppel and waiver from challenging the award of the Arbitrator on the ground that the Arbitrator was not appointed in terms of the appointment procedure. Consequently, this Court rejects the submission of the Petitioners that the AT was improperly constituted thereby vitiating the impugned Award. Challenge on merits There is no merit in the contention that the impugned Award is an attempt by the Respondents to enforce the put option rights under Clause 5.2 of RSHA. The pleadings make it clear that the Respondents did not choose to enforce the put option. The Petitioners were bound by the clauses of the contract. In the decision of State of Haryana v. Jage Ram AIR 1980 (4) TMI 300 - SUPREME COURT , the Supreme Court observed that those who contract with open eyes must accept the burdens of the contract along with its benefits. No ground has been made out by the Petitioners to demonstrate that the impugned majority Award suffers from any legal infirmity attracting Section 34 of the Act. The threshold for a successful challenge to an Award in a petition under Section 34 of the Act is indeed very high and unless the reasoning in the impugned Award is so perverse as to shock the judicial conscience or lead to violation of Section 28 (3) of the Act the Court, the Court would not like to interfere. In the present petition, none of the grounds under Section 34 of the Act stand attracted. The impugned Award is, accordingly, upheld and the petition is dismissed with costs of ₹ 50,000 which would be paid by the Petitioner to the Respondents within four weeks from today.
Issues Involved:
1. Challenge to the constitution of the Arbitral Tribunal (AT). 2. Allegations of coercion and breach of contract. 3. Validity of the Supplemental Agreement (SA). 4. Exercise of put option rights. 5. Compliance with RBI/FEMA guidelines. 6. Award of interest and costs. Detailed Analysis: 1. Challenge to the Constitution of the Arbitral Tribunal (AT): The Petitioners challenged the appointment of M1 as an arbitrator, arguing he lacked the requisite qualifications stipulated in the arbitration agreement. The ICC Rules, which governed the arbitration, required challenges to be made within 30 days of notification of the arbitrator's appointment. The Petitioners' challenge, made over a year later, was deemed time-barred. The ICC Court's decision to reject the challenge without providing reasons was upheld, as the ICC Rules explicitly preclude the requirement to disclose reasons for such decisions. The court emphasized that the parties were bound by their agreement to the ICC Rules, which included the waiver of objections not raised timely. 2. Allegations of Coercion and Breach of Contract: The Petitioners alleged that the Respondents coerced them into signing the Supplemental Agreement (SA) and misused funds intended for the Galaxia Project. The court noted that the Respondents had indeed brought in a sum of ?45,00,27,747 for the project, with specific amounts paid to the Petitioners and Respondent No. 3. Despite the Petitioners' claims, the court found that the Petitioners owed the Respondents the amount transferred to Respondent No. 3 upon failure to meet the obligations under the Galaxia Agreements. The findings of the AT were consistent with the clauses of the agreement, and the court found no merit in the Petitioners' allegations of coercion and breach. 3. Validity of the Supplemental Agreement (SA): The Petitioners contended that the SA substantially varied the RSHA and was entered into under coercion. However, the court found that the SA was a valid modification of the RSHA, agreed upon by both parties. The court emphasized that the parties are bound by what they agreed to, and the Petitioners could not now challenge the validity of the SA after having benefitted from it. 4. Exercise of Put Option Rights: The Petitioners argued that the Respondents were attempting to enforce the put option rights under Clause 5.2 of the RSHA. The court clarified that the Respondents were not exercising the put option but were seeking damages for breach of contract under Section 73 of the Indian Contract Act. The AT's directions did not involve the exercise of the put option but were focused on awarding damages for the Petitioners' breach of the Galaxia Agreements. 5. Compliance with RBI/FEMA Guidelines: The Petitioners claimed that the impugned Award violated RBI Circular No. 4 of 2014 and FEMA guidelines regarding the transfer of shares and enforcement of put options. The court found no merit in this contention, as the Respondents were not enforcing the put option but seeking damages for breach of contract. Therefore, the question of violation of RBI/FEMA guidelines did not arise. 6. Award of Interest and Costs: The court found that the award of interest was in consonance with the RSHA and the Act. Given the prolonged litigation and the Petitioners' attempts to frustrate the arbitration proceedings, the AT's decision to award costs was justified. The court upheld the majority Award, finding no legal infirmity attracting Section 34 of the Act. Conclusion: The impugned Award was upheld, and the petition was dismissed with costs of ?50,000 to be paid by the Petitioner to the Respondents within four weeks. The court emphasized the high threshold for a successful challenge to an Award under Section 34 of the Act and found that none of the grounds for such a challenge were met in this case.
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