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2021 (2) TMI 1157 - HC - Insolvency and BankruptcyTerritorial Jurisdiction to entertain the petition - Seeking enforcement and execution of partial Award - Foreign Award or not - Jurisdiction of Courts where the Award-debtor resides or where the assets, which are subject-matter of the Award are situated - Whether this Court has territorial jurisdiction to entertain the present petition? - HELD THAT - The term subject-matter of the arbitration cannot be confused with subject-matter of the suit . The term subject-matter in Section 2(1)(e) is confined to Part I. It has a reference and connection with the process of dispute resolution. Its purpose is to identify the courts having supervisory control over the arbitration proceedings. Hence, it refers to a court which would essentially be a court of the seat of the arbitration process. In our opinion, the provision in Section 2(1)(e) has to be construed keeping in view the provisions in Section 20 which give recognition to party autonomy. Accepting the narrow construction as projected by the learned counsel for the appellants would, in fact, render Section 20 nugatory. In our view, the legislature has intentionally given jurisdiction to two courts i.e. the court which would have jurisdiction where the cause of action is located and the courts where the arbitration takes place. This was necessary as on many occasions the agreement may provide for a seat of arbitration at a place which would be neutral to both the parties. Therefore, the courts where the arbitration takes place would be required to exercise supervisory control over the arbitral process. Issue of territorial jurisdiction of a Court in the context of Sections 47 and 48 of the Act again came up for consideration before the Bombay High Court in WIRELESS DEVELOPERS INC VERSUS INDIAGAMES LTD 2012 (1) TMI 391 - BOMBAY HIGH COURT . Relying on the judgment in case of TATA INTERNATIONAL LTD., MUMBAI VERSUS TRISUNS CHEMICAL INDUSTRY LTD. 2001 (10) TMI 1187 - BOMBAY HIGH COURT , the Court in clear words observed that at the stage of arbitration the subject-matter would be a contract and therefore factors such as place where the contract was entered into and related issues would become material to decide the territorial jurisdiction. However, once the arbitration concludes, and enforcement is sought, the only question that needs determination is the subject-matter of the Award as the disputes inter se the parties translated into Arbitration proceedings and have culminated into an Award. Therefore, it is with reference to the Award that the jurisdiction of the Court would have to be seen and decided. By virtue of the Amendment, the definition of Court under Section 2(1)(e) of the Act stood amended in relation to International Commercial Arbitration and a Proviso was inserted to Section 2(2) making the provisions of Sections 9, 27 and 37(3) and 37(1) (a) of the Act applicable to International Commercial Arbitrations even if the place of arbitration is outside India and the Arbitral Award is enforceable under Part II of the Act. Significantly, the definition of Court as contained in Explanation to Section 47 of the Act was also amended to confer jurisdiction on the High Court to decide the questions forming the subject-matter of the Award. The object behind the Amendments were evidently to provide an efficacious remedy to a party seeking interim relief against the other party whose assets are located in India and there is a likelihood that the other party may dissipate its assets in the near future - it is clear from a reading of the provisions of Explanation to Section 47 of the Act and the various judgments referred to above that Court as defined in under Section 47 of the Act is a Court distinct from a Court defined under Section 2(1)(e) of the Act. The position of law in this respect, in my view, is unchanged post the 2015 Amendment to the Act. The Court while enforcing the Foreign Award is concerned, post the Amendment, with the questions forming subject-matter of the Award which can only be construed to mean and connote the Relief given by the Award and can be a direction to pay money or a direction of specific performance etc. Subject-matter of the Award in question in the present case - HELD THAT - The subject-matter of the Award would determine the territorial jurisdiction of this Court in as much as in case the relief is in the nature of a money Award, the place of location of assets of the judgment debtor would give jurisdiction to the Court, while in case it is in the nature of specific performance then the considerations of the situs of the shares, registered office of the judgment debtor, etc. as argued by Respondent No.1 would be the relevant factors. Counsel for Respondent No.1 has conceded fairly during the course of arguments that in case the Award is a money Award, this Court would have jurisdiction as then the place of location of the assets of the Judgement Debtor shall be the determinative criterion for the territorial jurisdiction of the Court. The learned Senior Counsel for the Petitioner is right in its argument that the Award in question is a money Award and not an Award for specific performance. The two Clauses referred to above are clearly in the nature of exit clauses which entitled the Petitioner to sell shares in the event of default by the Respondents. This was not dependent on any corresponding / reciprocal obligation on the part of the Respondents and in fact the Respondents were bound by the terms of the clauses to buy back the shares and pay the money to the Petitioner of a value equivalent to the fair market value of the shares plus 25% IRR. The direction to the Petitioner to return the title documents, was only a consequential direction once the shares were sold to Respondent No.1 and the money was received by the Petitioner. It is evident from a reading of the affidavit that at this stage the Petitioner is not proceeding against Respondent No.2. Although it may be completely irrelevant at this stage, however, the Court prima facie finds merit in the contention of the Petitioner that the shareholding of the Petitioner in Respondent No.2 is an asset of the Petitioner and Section 18 of the IBC, inter alia, applies to assets over which the Corporate Debtor has ownership rights, besides the fact that the NCLAT order has directed that Respondent No.2 is to continue functioning as a going concern and the Petitioner s shares in any case are dematerialized and not in a physical form and thus do not require an instrument of transfer / share transfer form. Since this Court has held that this Court has Territorial jurisdiction to entertain the petition, the petition be now listed before the Roster Bench for further proceedings on 15.03.2021, subject to orders of Hon ble the Chief Justice.
Issues Involved:
1. Territorial jurisdiction of the Delhi High Court to entertain the petition. 2. Nature of the relief granted by the Arbitral Tribunal (money award vs. specific performance). 3. Impact of the moratorium imposed by the NCLT on the enforcement proceedings. Issue-wise Analysis: 1. Territorial Jurisdiction of the Delhi High Court: The primary issue was whether the Delhi High Court had the territorial jurisdiction to entertain the petition for the enforcement of the partial Award dated 30.04.2019. The Respondents argued that the subject-matter of the partial Award was specific performance of Clauses 14.2 and 17.2 of the SSHA, which pertained to Put Options. They contended that the competent court for specific performance could only be the court at Kolkata, where the registered offices of the Respondents and the situs of the shares were located. The Petitioner argued that Respondent No.1 held assets within the jurisdiction of the Delhi High Court, including shares in a subsidiary with a registered office in Delhi, an office in Delhi, and a bank account in Delhi. The court concluded that the definition of 'Court' under Section 47 of the Act is distinct from Section 2(1)(e) of the Act. The court held that the relief granted by the Award was a money award, and thus, the location of the assets of Respondent No.1 in Delhi gave the Delhi High Court the territorial jurisdiction to entertain the petition. 2. Nature of the Relief Granted by the Arbitral Tribunal: The court examined whether the relief granted by the Arbitral Tribunal was a money award or specific performance. The Petitioner claimed the relief was a direction to pay money, while the Respondents argued it was specific performance. The court analyzed Clauses 14.2 and 17.2 of the SSHA, which were exit clauses entitling the Petitioner to sell shares in the event of default by the Respondents. The Tribunal had directed Respondent No.1 to pay a quantified sum under Clause 17.2 along with 25% IRR and upon payment, the Petitioner was to deliver executed transfers and title documents relating to its shares. The court concluded that the Award was a money award, as the direction to return the title documents was only consequential upon the receipt of money by the Petitioner. 3. Impact of the Moratorium Imposed by the NCLT: During the pendency of the petition, the NCLT, Kolkata Bench, admitted a petition seeking commencement of insolvency proceedings against Respondent No.2 and declared a moratorium. The Petitioner filed an additional affidavit stating it would not pursue the petition against Respondent No.2 pending the moratorium, without prejudice to its rights. The Respondents argued that the enforcement petition could not proceed due to the moratorium. The court noted that it had only decided the territorial jurisdiction and that the moratorium or the absence of Sarga (represented by Resolution Professional) was irrelevant at this stage. The court took on record the additional affidavit filed by the Petitioner, confirming that the Petitioner was not proceeding against Respondent No.2 at this stage. Conclusion: The Delhi High Court held that it had the territorial jurisdiction to entertain the petition for the enforcement of the partial Award as it was a money award and the assets of Respondent No.1 were located in Delhi. The court directed Respondent No.1 to file an affidavit of its assets in Form 16-A, Appendix-E of the Code of Civil Procedure, 1908 within four weeks. The petition was listed for further proceedings before the Roster Bench.
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