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2021 (3) TMI 903 - HC - Indian LawsMaintainability of enforcement petition - Emergency Arbitrator - Arbitrator within the meaning of Section 2(1)(d) of the Arbitration and Conciliation Act, or not - interim order dated 25th October, 2020 an order under Section 17(1) of Arbitration and Conciliation Act, or not - Misapplication of concept of Group of Companies doctrine to implead respondent - arbitration agreement between the petitioner and respondent No.2 and combining/ treating all the agreements as a Single Integrated Transaction - HELD THAT - The Emergency Arbitrator is an Arbitrator for all intents and purposes; order of the Emergency Arbitrator is an order under Section 17(1) and enforceable as an order of this Court under Section 17(2) of the Arbitration and Conciliation Act. The respondents have raised a vague plea of Nullity without substantiating the same. The interim order of the Emergency Arbitrator is not a Nullity as alleged by respondent No.2 - Combining/treating all the agreements as a single integrated transaction does not amount to control of the petitioner over FRL and therefore, the petitioner s investment does not violate any law. All the objections raised by the respondents are hereby rejected with cost of ₹ 20,00,000/- to be deposited by the respondents with the Prime Minister Relief Fund for being used for providing COVID vaccination to the Below Poverty Line (BPL) category - senior citizens of Delhi. The cost be deposited within a period of two weeks and the receipt be placed on record within one week of the deposit. The respondents have deliberately and willfully violated the interim order dated 25th October, 2020 and are liable for the consequences enumerated in Order XXXIX Rule 2A of the Code of Civil Procedure - In exercise of power under Order XXXIX Rule 2A(1) of the Code of Civil Procedure, the assets of respondents No.1 to 13 are hereby attached. Respondents No.1 to 13 are directed to file an affidavit of their assets as on today in Form 16A, Appendix E under Order XXI Rule 41(2) of the Code of Civil Procedure within 30 days. Respondent No.1, 2, 12 and 13 are directed to file an additional affidavit in the format of Annexure B-1 and respondents No.3 to 11 are directed to file an additional affidavit in the format of Annexure A-1. Show cause notice is hereby issued to respondents No.3 to 13 to show cause why they be not detained in civil prison for a term not exceeding three months under Order XXXIX Rule 2A(1) of the Code of Civil Procedure for violation of the order dated 25th October, 2020. Reply to the show cause notice be filed within two weeks. Rejoinder within two weeks thereafter - respondents are directed not to take any further action in violation of the interim order dated 25th October, 2020. List for reporting compliance as a part-heard matter on 28th April, 2021.
Issues Involved:
1. Legal status of an Emergency Arbitrator. 2. Applicability of the Group of Companies doctrine. 3. Whether the interim order of the Emergency Arbitrator is a nullity. Detailed Analysis: 1. Legal Status of an Emergency Arbitrator: The petitioner filed a petition under Section 17(2) of the Arbitration and Conciliation Act, 1996 for enforcement of the interim order dated 25th October, 2020 passed by the Emergency Arbitrator. The respondents objected, arguing that an Emergency Arbitrator is not an arbitrator within the meaning of Section 2(1)(d) of the Act. They contended that the interim order is not enforceable under Section 17(2) of the Act. The Court held that the Emergency Arbitrator is an arbitrator for all intents and purposes, as defined under Section 2(1)(d) of the Act. It noted that Section 2(6) and 2(8) of the Act give parties the freedom to authorize any person, including an institution, to determine disputes. The Court emphasized that Section 17(2) provides that an interim order passed by an arbitral tribunal shall be enforceable as an order of the Court. The Court concluded that the Emergency Arbitrator's order is enforceable under Section 17(2) of the Act. 2. Applicability of the Group of Companies Doctrine: Respondent No.2 argued that the Group of Companies doctrine applies only to proceedings under Section 8 of the Arbitration and Conciliation Act. The Court rejected this argument, referring to the Supreme Court's judgments in Chloro Controls India Private Limited v. Severn Trent Water Purification Inc., Cheran Properties Limited v. Kasturi and Sons Limited, and MTNL v. Canara Bank. The Court noted that the doctrine binds non-signatory entities where there is a clear intention to bind both signatory and non-signatory entities within the same group. The Emergency Arbitrator applied the doctrine, finding that the agreements were intrinsically intermingled and that FRL was actively involved in their negotiation, performance, and was the ultimate beneficiary. The Court agreed with the Emergency Arbitrator's findings, emphasizing that the Group of Companies doctrine applies to the present case, making respondent No.2 a proper party to the arbitration proceedings. 3. Whether the Interim Order of the Emergency Arbitrator is a Nullity: Respondent No.2 argued that the interim order is a nullity, claiming that treating all agreements as a single integrated transaction would result in the petitioner acquiring control over respondent No.2, violating the Foreign Exchange Management Act, 1999 and the Foreign Exchange Management (Non Debt Instruments) Rules, 2019. The Emergency Arbitrator rejected this argument, noting that the agreements do not confer control over FRL to the petitioner and that the investment is in accordance with Indian law. The Court agreed with the Emergency Arbitrator, stating that the protective rights do not amount to control over FRL and do not violate any law. The Court held that the interim order is not a nullity and is enforceable as an order of the Court. Conclusion: The Court concluded that the Emergency Arbitrator's order is enforceable under Section 17(2) of the Arbitration and Conciliation Act. It rejected the respondents' objections, including the argument that the Group of Companies doctrine applies only to Section 8 proceedings and the claim that the interim order is a nullity. The Court directed the respondents to comply with the Emergency Arbitrator's order and imposed costs on the respondents for their conduct.
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