2024 (3) TMI 1351 - HC - Indian Laws

Seeking appointment of a sole arbitrator to adjudicate the disputes between itself and PNB Housing Finance Limited - HELD THAT - The scope of inquiry by a referral court in a petition under Section 11 of the A C Act is confined to examination of the existence of an arbitration agreement. The referral proceedings are preliminary and summary and not in the nature of a mini-trial. Rarely as a demurrer, the referral court may decline reference when there is not even a vestige of doubt that the claim is non-arbitrable. If there is a slightest doubt, the rule is to refer the dispute/s to arbitration. It can be seen that the arbitration clause is widely worded and any dispute arising out of or in connection with or the performance of the SPA is to be referred to arbitration thereunder. Given the width of the arbitration agreement, it cannot be said that the various facets with regard to which DLF has sought to raise disputes are unconnected with the SPA. This Court is not required to conduct an in-depth inquiry as to whether the disputes sought to be raised by the petitioner/DLF afford any valid cause of action to the petitioner on the basis of the provision of SPA or not. This is an aspect which necessarily requires an in-depth examination on merits and necessarily required to be gone into by a duly constituted arbitral tribunal. The existence of a valid arbitration agreement, of sufficient width and amplitude, is not in doubt - As held in Interplay between Arbitration Agreements under the Arbitration Conciliation Act, 1996 the Indian Stamp Act, 1899, In re, 2023 (12) TMI 897 - SUPREME COURT (LB) the scope of examination under Section 11(6A) should be confined to the existence of an arbitration agreement on the basis of Section 7. Similarly, the validity of an arbitration agreement, in view of Section 7, should be restricted to the requirement of formal validity such as the requirement that the agreement be in writing. Signatories to Arbitration Agreement - HELD THAT - Prima facie, despite assignment of the SPA to Omkara, PNBHFL would be a necessary party as regards pre-assignment disputes, including dispute/s relating to non-acceptance of the offer of DLF and/or dispute/s concerning purported irregularities in the assignment of debt - in case of an assignment of a contract, unlike novation, the assignor is not discharged of its obligation under the contract assigned. Therefore, prima-facie, it cannot be said that PNBHFL is not a necessary party in the proposed arbitration proceedings. Impleadment/joinder of assignee/Omkara in the proposed arbitration proceedings - HELD THAT - The law is also well settled that where there is an assignment of a contract containing an arbitration agreement, the assignee will be bound by the arbitration agreement. The assignee would take both the benefit and burden of the arbitration agreement i.e., the assignee can invoke the arbitration agreement to pursue a claim and can be compelled to arbitrate a dispute raised by another party. Impleadment/joinder of the non-signatories in the proposed arbitration proceedings - HELD THAT - The ambit of non-consensual theories like alter ego , estoppel , or single economic entity is materially different from the ambit of consent-based theories. The non-consensual theories place emphasis on the overriding considerations of good faith and equity to bind non-signatories to an arbitration agreement, whereas consent-based theories place emphasis on mutual intent of the parties to arbitrate a dispute - in a given case non-signatories may be bound with the arbitration agreement on the basis of both the consensual and non-consensual theories. After piercing the corporate veil of a company, it may be found that the shareholder or parent corporation had in fact impliedly consented to the arbitration agreement. The decision to join a non-signatory oft rests on more than one factor. This Court is inclined to refer respondent Nos. 6 and 7 to arbitration, however, granting liberty to the said respondents to raise appropriate jurisdictional objections as regards substantive existence of the arbitration agreement qua the said respondents. All contentions of the said respondents in this regard shall be duly considered by the arbitral tribunal. There is no impediment in appointing an independent sole arbitrator to adjudicate the disputes between the parties - Petition allowed.

Summary

Issues Involved:
1. Appointment of a sole arbitrator.
2. Legal effect of DLF's acceptance of PNBHFL's proposal.
3. Legal effect of PNBHFL's actions.
4. Legal validity of Omkara's sale of pledged shares.
5. Alleged collusion between parties.
6. Declarations, injunctions, losses, and damages claimed by DLF.
7. Joinder of non-signatories in arbitration.

Issue-wise Detailed Analysis:

1. Appointment of a Sole Arbitrator:
The court appointed Mr. Justice (Retd.) V. Ramasubramanian as the sole arbitrator to adjudicate the disputes between the parties. The appointment is in line with Perkins Eastman Architects DPC v. HSCC (India) Ltd., ensuring an independent arbitrator. The arbitrator is to fix his fees in consultation with the parties, and the parties will share the arbitrator's fee and arbitral costs equally.

2. Legal Effect of DLF's Acceptance of PNBHFL's Proposal:
DLF's acceptance of PNBHFL's proposal to purchase 100% shares of JHL was a central issue. The court noted that the arbitration clause in the SPA is widely worded, covering disputes "arising out of" or "in connection with" the agreement. The court did not conduct an in-depth inquiry into the validity of DLF's acceptance, leaving this to be examined by the arbitral tribunal.

3. Legal Effect of PNBHFL's Actions:
PNBHFL's invocation of the pledge and assignment of debt without responding to DLF's acceptance was questioned. The court found that these actions are related to the SPA and should be examined by the arbitral tribunal. The court rejected the contention that PNBHFL could no longer be a party to the arbitration post-assignment, stating that PNBHFL remains a necessary party for pre-assignment disputes.

4. Legal Validity of Omkara's Sale of Pledged Shares:
Omkara's sale of 75% of the pledged shares was challenged by DLF. The court noted that Omkara, as an assignee of PNBHFL, is bound by the arbitration agreement in the SPA. The court found no impediment to Omkara's joinder in the arbitration proceedings, emphasizing that the assignee takes both the benefit and burden of the arbitration agreement.

5. Alleged Collusion Between Parties:
DLF alleged collusion between PNBHFL, Omkara, Hubtown, Twenty-Five South, and Akruti to defeat its rights. The court acknowledged these allegations but did not make a conclusive finding, leaving the matter to be determined by the arbitral tribunal. The court noted that such allegations require an intricate factual inquiry.

6. Declarations, Injunctions, Losses, and Damages Claimed by DLF:
DLF's claims for declarations, injunctions, losses, and damages were recognized as part of the disputes to be referred to arbitration. The court did not delve into the merits of these claims, leaving their adjudication to the arbitral tribunal.

7. Joinder of Non-Signatories in Arbitration:
The court addressed the joinder of non-signatories, including Twenty-Five South and Akruti, in the arbitration proceedings. It noted that non-signatories could be bound by the arbitration agreement under various legal theories, such as "alter ego," "direct benefits estoppel," and "intertwined estoppel." The court found a prima facie case for their joinder but left the final determination to the arbitral tribunal.

Conclusion:
The court allowed the petition, appointed a sole arbitrator, and referred the disputes to arbitration. The respondents were granted liberty to raise preliminary objections regarding jurisdiction and arbitrability before the arbitrator. All rights and contentions of the parties were kept open for adjudication by the arbitrator, and nothing in the court's order was to be construed as an expression on the merits of the case.