2020 (2) TMI 806 - SC - Indian Laws

Validity of Arbitral Award - waiver of penal interest on land rent and interest - sub-lease of project land - termination of various agreements - Section 37 of the Arbitration and Conciliation Act, 1996 - HELD THAT - With respect to the amount awarded towards Interest and Penal Interest under the award, the same has been modified by consent of parties, as a prudent commercial decision - The Appellants were directed to file an Affidavit of Undertaking before this Court, with respect to the obligations to be discharged as per the Consent Terms set out hereinabove. In the event of any default in payment of the amounts by Appellants, the entire amount awarded as per the award dated 20.01.2015, would become enforceable. However, prior to enforcement, a window of 2 months would be granted to the Appellants to make provision for compliance. On the expiry of the aforesaid period of 2 months, the entire decree would become executable forthwith. M/s Good Living Infrastructure Pvt. Ltd. is bound by the unconditional undertaking submitted on Affidavit before this Court. Any default by M/s Good Living Infrastructure Pvt. Ltd. would be treated as a breach of the undertaking submitted to this Court. Appeal disposed off.

Issues Involved:
1. Challenge to ICC arbitration award.
2. Termination of Shareholders Agreement (SHA) and Share Subscription and Purchase Agreement (SSPA).
3. Financial contributions and obligations under the Restated Shareholders Agreement (RSHA) and Restated Share Subscription and Purchase Agreement (RSSPA).
4. Tribunal award details and subsequent legal costs.
5. Objections under Section 34 of the Arbitration and Conciliation Act, 1996.
6. Appeal under Section 37 of the Arbitration and Conciliation Act, 1996.
7. Interim orders and financial deposits.
8. Sale of Project Land and involvement of NOIDA.
9. Settlement terms and final payment arrangements.
10. Affidavits of undertaking by the Appellants and M/s Good Living Infrastructure Pvt. Ltd.

Detailed Analysis:

1. Challenge to ICC Arbitration Award:
The Appellants challenged the ICC arbitration award dated 20.01.2015, which was passed in favor of Respondents No. 1 and 2. The award included a payment of ?45,00,27,747/- with simple interest and additional costs.

2. Termination of SHA and SSPA:
The Appellants and Respondents entered into SHA and SSPA on 21.03.2008, which were later terminated. Subsequently, RSHA and RSSPA were executed on 02.07.2009. The Appellants terminated these agreements on 17.12.2009, leading to the arbitration invoked by Respondents No. 1 and 2.

3. Financial Contributions and Obligations under RSHA and RSSPA:
Under RSHA and RSSPA, Respondents No. 1 and 2 were required to contribute ?45 crore for shares in Respondent No. 3. This amount was brought in by 17.12.2009. The Tribunal found that the Appellants terminated the agreements immediately after the funds were brought in.

4. Tribunal Award Details and Subsequent Legal Costs:
The Tribunal's award included:
- Payment of ?45,00,27,747/- with 18% simple interest from 31.10.2011 to the award date.
- Simple interest @ 15% p.a. on all sums awarded until payment.
- Appellants were directed to pay arbitration costs, including legal fees of ?2,39,08,082/-, hearing venue costs of ?6,57,635/-, and other expenses of ?1,274,931/-.

5. Objections under Section 34 of the Arbitration and Conciliation Act, 1996:
The Appellants filed objections under Section 34, which were rejected by the Delhi High Court on 09.02.2017. The Court upheld the Tribunal's findings as consistent with the agreement terms.

6. Appeal under Section 37 of the Arbitration and Conciliation Act, 1996:
The Appellants' appeal under Section 37 was rejected by the Delhi High Court on 08.05.2017. The appeal was deemed devoid of merit.

7. Interim Orders and Financial Deposits:
The Supreme Court, via interim orders, directed the Appellants to deposit ?20 crore and restrained them from alienating the Project Land. Subsequent orders allowed partial withdrawal of the deposited amount and directed the sale of the Project Land under court supervision.

8. Sale of Project Land and Involvement of NOIDA:
The Appellants identified M/s Good Living Infrastructure Pvt. Ltd. as a buyer for the Project Land for ?99,44,55,000/-. NOIDA's dues were crystallized at ?42,64,75,477/-. The sale proceeds were to be deposited in the Court Registry.

9. Settlement Terms and Final Payment Arrangements:
The settlement included:
- Total payment of ?107.50 crores to Respondents No. 1 and 2.
- ?21.53 crores already received by Respondents from interim orders.
- Balance of ?85.97 crores to be paid by the Appellants.
- M/s Good Living Infrastructure Pvt. Ltd. to pay ?99,44,55,000/- for shares in Respondent No. 3.
- ?42,64,75,477/- to be paid directly to NOIDA.
- Remaining ?56,79,79,523/- to be deposited in the Court Registry.

10. Affidavits of Undertaking by the Appellants and M/s Good Living Infrastructure Pvt. Ltd.:
The Appellants and M/s Good Living Infrastructure Pvt. Ltd. filed affidavits of undertaking to comply with the settlement terms. The Appellants undertook to deposit the shortfall amount within three months, and M/s Good Living Infrastructure Pvt. Ltd. committed to the payment schedule.

Conclusion:
The Supreme Court rejected the challenge to the ICC award and modified the interest and penal interest terms by consent. The Appellants and M/s Good Living Infrastructure Pvt. Ltd. were directed to comply with the settlement terms, and the appeal was disposed of accordingly.

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