9911796707
TMI Blog2012 (8) TMI 349X X X X Extracts X X X X X X X X Extracts X X X X ..... Company. Admittedly, the Company is a Joint Venture between the Applicants and Telenor. 3. The above-mentioned applicants (ISP) are also the Petitioners No. 1 to 4 in CP No. 110 (ND) of 2011 filed u/s 397 & 398 of the Companies Act 1956 against the Company, its Managing Director and three nominee Directors and Telenor Asia PTE Ltd. and Telenor ASA, which is pending adjudication before the member, CLB, New Delhi Bench. An Application u/s 45 of the Act of 1996 has been filed in CP No. 110 (ND)/2011 by Telenor, R-6. 4. Another Company Petition CP No. 33 of 2012 under section 397, 398 of the Companies Act, 1996 has been filed an 7-3-2012 by the present applicants (ISP) against the same Respondents as in CP No. 110 (ND)/2011, as mentioned above. 5. "Telenor" is a company incorporated under the laws of Singapore and has its Registered Office at 51, Gold Hill Plaza, # 21-07, Singapore 308990 and is a wholly owned subsidiary of Telenor Asia. 6. Unitech Wireless (Tamil Nadu) Pvt. Ltd. is a company incorporated under the Companies Act, 1956 having its Registered Office at Basement, 6, Community Centre, Saket, New Delhi. "Uninor" is the brand name under which it operates. 7. Facts in br ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ers and the Licensee Companies are companies duly organized and validly existing under the laws of India and have all requisitie power and authority to own its properties and assets and to carry on the business, as now conducted. 3. The execution, delivery and performance by the Indian Strategic Partner, the Indian nominee Partners and each Licensee Company of this Agreement and the compliance by them with and in accordance with the terms and provisions hereof do not and will not (i) contravene any provisions of any law to which they are subjects. (ii) breach the relevant exchange control laws including the foreign direct investment limit applicable to the Licensee Companies. 5.3 Each Licenses Company is entitled to issue the Subscription Shares to the Foreign Strategic Partner on the terms set out in this Agreement. 7.2 Each Licensee Company is conducting and has at all times conducted its business in all material respects in accordance with all applicable laws and regulations of India. 7.3 Each of the Indian Strategic Partner, the Indian nominee Partners and the Licensee Companies have not contravened any Law which would have a material adverse effect on i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Companies and entered into a Shareholders Agreement (SHA) on 20/03/2009 with the Indian Strategic Partners and the licensee Companies and made an equity investment of INR 6135.62 crores in the erstwhile licensee companies. Additionally Telenor ASA ( an affiliate of the FSP) also provided guarantee support to the tune of INR 8700 crores to secure the debt facilities of the Company. (v) On 11th October 2011 the applicants herein filed CP No. 110 (ND) 2011 in the Company Law Board against Unitech Wireless (Tamil Nadu) Pvt. Ltd. its Managing Director and three other Directors and also against Telenor Asia PTE Ltd. and Telenor ASA under section 397, 398 and other provisions of the Companies Act 1956 being aggrieved inter alia by (i) the failure of the Company in seeking approval of DoT, Ministry of Tele-Communications, Government of India for the merger of its seven affiliate Companies (Licensee Companies) with it and the consequent transfer of UASL from the said Licensee Companies to the Company, (ii) the failure of the Company to obtain project finance for the Company in accordance with with mandate of the Articles of Association (AOA) (iii) having failed to obtain project fi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rect Unitech to sell its shares in Uninor to Telenor Asia at the Default Price of INR 33 per share; [Emphasis supplied] (d) award of costs of arbitration under Article 31 of the SIAC Rules for Arbitration and award of legal and all other costs under Article 33 of the SIAC Rules for Arbitration borne by Telenor Asia and Telenor Mobile arising out of the present arbitral proceedings; and (e) such other reliefs as the Tribunal considers appropriate. (ix) On 18/11/2011 Telenor Asia PTE Ltd. (R-6 in CP 110) filed an Application CA No. 528/2011 u/s. 45 of the Act of 1996 in CP No. 110. On the same date, a similar Application CA 585/2011 was filed by the Company in CP No. 110. In its Application CA No. 528/2011 Telenor Asia PTE Ltd. categorically admitted that the Arbitration Agreement contained in the SHA is valid and subsisting was neither null and void nor inoperative or incapable of being performed and prayed that since the issues raised in CP No. 110 by the Applicants herein have also been raised by them not only in the proceedings u/s. 9 of the Arbitration and Conciliation Act but also before the Arbitral Tribunal the Petitioners/Applicants herein be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h Wireless (Tamil Nadu) Private Limited) were modified to ensure that such Articles are not in conflict with the SHA. Pursuant to such modifications of the Articles, the Indian Strategic partners enjoy certain special rights in respect of decisions on matters concerning Unitech Wireless (Tamil Nadu) Private Limited that are more favourable than those ordinarily available to 32.75% shareholder under the Indian Companies Act, 1956. These special rights that were provided to the Indian Strategic Partners pursuant to Section 2.5 of the SHA that now stands prospectively rescinded and nullified on account of the fraud and/or misrepresentations. The said special rights were bodily lifted and incorporated from the SHA vide board and shareholder resolutions dated 20 March, 2009. Given that the consent of the Foreign Strategic Partner to enter into the SHA was induced by fraud and/or misrepresentation and that the SHA now stands prospectively rescinded and is a nullity, there is no basis for the Indian Strategic Partner to continue to enjoy the benefit of the special rights under the SHA. Accordingly, the said amendments to the Articles, made pursuant to the said board and shareholder reso ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he Company by Mr. Anil Rustagi of the Telenor Group. The Agenda sought approval of the Board of the Company to transfer its business to a Telenor affiliate entity at a fair market value to be determined by an independent valuer. The Board Meeting was postponed to 21/02/2012 as per convenience of the ISP Nominee Directors of the Company. However, the ISP Nominee Directors of the Company exercised its veto and did not approve of the circular resolutions as a result of which the Circular Resolutions could not be considered. (xiii) This prompted Telenor Asia PTE Ltd. to file CP No. 32/ND/2012 before the Company Law Board on 6.3.2012. The applicants also filed CP No. 33/ND/2012 on 7.3.2012. It is in the above scenario that CA No. 149 was filed by the Applicant/Respondents No. 2 to 5 u/s. 45 of the Arbitration and Conciliation Act, 1996 praying for referring Telenor Asia PTE Ltd. to Arbitration concerning matters relating to SSA in view of Arbitration already invoked by them in terms of the Arbitration Agreement contained in the SHA. (xiv) The following reliefs were claimed by Telenor Asia PTE Limited in CP No. 32. (a) The Respondents No. 2 to 5 (The Applicant herein ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tionships, whether contractual or not, considered as commercial under the law in force in India, made on or after the 11th day of October, 1960, (a) In pursuance of an agreement in writing for arbitration to which the convention set forth in the First Schedule applies, and (b) In one of such territories as the Central Government, being satisfied that reciprocal provisions have been made may, by notification in the Official Gazette, declare to be territories to which the said Convention applies." Section 45 of the Act of 1996 is also reproduced below: "45. Power of judicial authority to refer parties to arbitration - Notwithstanding anything contained in Part-I or in the Code of Civil Procedure 1908 (5 of 1908), a judicial authority which seized of an action in a matter in respect of which the parties have made an agreement referred to in section 44, shall at the request of one of the parties or any person claiming through or under him, refer the parties to arbitration, unless it finds that the said agreement is null and void, inoperative or incapable of being performed". 11. A reading of the above shows that before a judicial authority would refer the p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ent of discussions as stated above, if referred to by any Party to the Dispute, shall finally be resolved by arbitration irrespective of the amount in Dispute or whether such Dispute would otherwise be considered justifiable or ripe for resolution by any court. This Agreement and the rights and obligations of the Parties shall remain in full force and effect pending the award in such arbitration proceeding which award, if appropriate, shall determine whether and when any termination shall become effective [Emphasis supplied]. 13.2.3 Venue, Rules and Language of Arbitration: The seat of the arbitration shall be Singapore and shall be conducted under, and in accordance with, in accordance with the Arbitration Rules of the Singapore International Arbitration Centre ("SIAC Rules") for the time being in force which rules are deemed to be incorporated by reference into this Section 13. The language of the arbitration shall be English. 13.2.4 Number and Appointment of Arbitrators: The arbitration panel shall consist of 3(three) arbitrators, each of whom shall be fluent in English and have experience in the telecommunications sector 1(one) arbitrator shall be appointed by each Party to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of Telenor the majority shareholder, to hold a Board Meeting to resolve transfer of the business of the Company to a Telenor. Affiliate entity at a fair market value to be determined by an independent valuer were frustrated by the Applicants (ISP) by refusing to exercise its affirmative vote for holding a Board Meeting to consider such a resolution which related to a reserved matter. The main reliefs (a) to (d) claimed by Telenor in CP 32 lead to the irresistible conclusion that they fall directly under the SSA and SHA and the notice dated 21.02.2012 for rescission of SHA, a contract between the joint venture parties and would not flow unless a finding is recorded during Arbitration which is the mechanism agreed by the parties for dispute resolution under Article 13 of the SSA as also the SHA that due to the breach of representations and warranties by the applicants in the SSA, Telenor's notice dated 21.02.2012 rescinded the SHA and rendered it a nullity and therefore the applicants had ceased to enjoy the special privileges under the SHA and the amended AOA. Other reliefs claimed in the petition are consequential reliefs and would flow only if the main reliefs were granted. 14. T ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... entire business to a Telenor affiliate entity at a fair market value to be determined by an independent values. It also assumed that due to the fraud the AOA of the Company is also restored to the situation existing prior to 20.3.2009 and being the majority shareholder Telenor could dictate terms and get a resolution passed at the Board Meeting to the above effect and the special privilege of an affirmative vote in relation to a reserved matter enjoyed by the ISP under the amended AOA stood abrogated. It therefore approached the Company Law Board u/s. 397 and 398 of the Companies Act hoping to seek an injunction against the Applicants not to exercise their affirmative vote to ensure the exit of the Company itself giving way to a Telenor affiliate entity. The question arises whether the existing AOA of the Company could be given a complete go bye and in injunction granted against the Applicants without a finding being recorded that the SSA and SHA were vitiated due to the representations and warranties known to be false and made by the Applicants (ISP), and as a result the AOA stood restored to its pre 20-3-2009 position thereby obliterating the special privilege of an affirmative v ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n application CA 149 requesting for referral to Arbitration which satisfies the second limb of section 45. 17. The question that remains to be answered is whether the Arbitration Agreement contained in the SSA is or has been rendered null and void, inoperative or incapable of being performed. Shri Mookherjee, ld. Senior counsel for the Petitioners vehemently argued that by filing CP No. 33 of 2012 u/s. 397 and 398 of the Companies Act and by specifically invoking the jursdiction of the Company Law Board to adjudicate the dispute arising therein the applicants/respondents 2 to 5 must be held to have abandoned the right to Arbitration thereby rendering the Arbitration Agreement inoperative. To buttress the above point ld. Sr. counsel read paras 3 and 4 of the Petition CP No. 33 filed by the Applicants in extenso. The same is reproduced below:- "3. The Petitioners are, however, compelled to file the present petition because of the several successive and continuing acts of oppression and mismanagement by the Respondents which give rise to a fresh cause of action. Those acts, it is submitted, will demonstrate that the oppression being meted out to the petitioners apart from being cont ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... was placed on Magma Leasing Ltd. v. NEPC Micon Ltd. AIR 1998 Cal. 94 and Ramasamy Athappan v. Secretariat of the Court, International Chamber of Commerce, France [2009] 3 MLJ 84. The facts contained in Magma Leasing Ltd. are clearly distinguishable as it deals with the provision of section 8 of the Arbitration and Conciliation Act and not with section 45. The provision contained in section 8 is time-bound and not really substance-bound whereas the exercise of the right to seek arbitration u/s. 45 is actually substance-bound and not time-bound, as was held in Ramasmy Athappan (supra). 19. The law relating to an arbitration agreement becoming inoperative due to abandonment has been succintly dealt with in Ramasmy Athappan (supra) and is reproduced below : "Section 45 of the Act, enables the Judicial authority to refuse to make a reference not only when the Arbitration Agreement is null and void or incapable of being performed, but also when the Agreement is inoperative". The word "inoperative" is defined in P. Ramanatha Iyer's. The law Lexicon to mean "without the practical force." BLACK'S LAW DICTIONARY' defines the word "inoperative" us "having no force or effect." ............. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ment by forcing the parties to resort to the forum of their choice as set out in the arbitration agreement. Interestingly, the Supreme Court did not merely look at the filing of the written statement as an act simplicitor, disentitling the defendant to seek arbitration in terms of Section 34, without anything more. In other words, the Supreme Court did not just think that the filing of the written statement by the defendant resulted in the forfeiture of a right to seek arbitration. The filing of the written statement was considered by the Apex Court, as an abandonment of the right itself. A similar rider as found in Section 34 of the 1940 Act, is found in Section 8 of the 1996 Act. Under Section 8 of the 1996 Act, a defendant is required to file an application for referring the parties to arbitration, "not later than when submitting his first statement on the substance of the dispute." Therefore, the principle enunciated by the Supreme Court, in FCI v. Yadav Engineer and Contractor (supra) and General Electric Co. v. Renusagar Power Co. (supra) would apply even to a case covered by the 1996 Act, if the defendant does not apply under Section 8, before submitting his first statemen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the contract was agreed to be abandoned sub silentio.......... A second type of waiver is "waiver by estoppel". It arises when the innocent party so conducts himself as to lead the party in default to believe that he will not exercise that right This type of waiver is actually an application of the principle of equitable estoppel". 20. In my considered opinion, in the present case to constitute abandonment and to render an agreement containing an arbitration clause inoperative there must not only be an unequivocal intention to accept the forum of the Company Law Board for resolution of the dispute arising between the parties but also an express waiver of its right to get the dispute resolved by a forum contemplated by the Arbitration Agreement. It must also be shown that the invocation of jurisdiction of the Company Law Board by the Applicants by filing Company Petition No. 33 must have been understood by the Petitioners (Telenor) in Company Petition No.32 to be an express waiver or abandonment by the Applicants of its right to seek Arbitration for resolution of disputes arising in the petition. 21. Section 45 of the Act of 1996 presupposes that a judicial authority is seized of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n. 22. Another factor which merits consideration is the conduct of the Applicants after filing of CP No. 33 by them. Despite filing C.P. No. 33 on 07/03/2012 the Applicants moved an application u/s. 45 of the Act of 1996 in CP No. 32 on 23/03/2012, i.e., soon after the notice of arbitration dated 29/03/2012 by Telenor for resolution of the dispute in relation to the SSA by referral to Arbitration. 23. A different situation would have arisen if after filing CP No. 33 the applicants were refused any interim relief by the Company Law Board. It could then be said that having invoked the jurisdiction of the Company Law Board by filing Company Petition No. 33 and after refusal by the board to grant interim relief the applicants had filed the application u/s. 45 of the Act of 1996 in CP. No. 32 and therefore the applicants were forum shopping and filing of CP No. 33 would amount to a waiver or abandonment of its right to seek resolution of dispute through Arbitration. No such situation exists in the present case. The Applicants have already invoked the Arbitration clause in relation to the SHA by giving a notice of Arbitration to the SIAC, the Arbitral Tribunal had already been constitu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t showed that the party in question no longer intended to be bound to arbitrate. It was also agreed that such an intention could not lightly be inferred and could only be inferred from conduct which was clear and unequivocal. If there was some other reason for the breaching of proceedings it would be hard to infer that the party bringing them intended to renounce its obligation to arbitrate." 26. I therefore, hold that in the facts and circumstances of the case, the simultaneous filing of Company Petition No. 33 by the Applicants does not in any manner constitute abandonment of their right to seek Arbitration of the dispute in relation to the SSA and does not render the Agreement inoperative. The conduct of the applicants consequent to the filing of CP No. 33 does not manifest an unequivocal intention of abandonment of the right to seek Arbitration. As held in FCI v. Yadav Engineer Contractor AIR 1982 SC 1302 the right to have the dispute settled by Arbitrration cannot be allowed to be defeated on technical grounds. As already elaborated above the SSA is neither rendered null or void nor incapable of being performed unless as contemplated by article 13.2.2 of the SSA a finding is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r market value. At another place it is stated that the continued presence of Unitech in the Company (Uninor) is oppressive of Telenor and prejudicial to public interest. Thus the alleged breach of SSA and SHA is attributed only to a contracting party, i.e., the ISP and not to the Company. It is not alleged that on account of any representations or warranties made by the Company that Telenor was induced to participate in the joint Venture(SSA) or the SHA. The alleged breach is rooted in contract and is in the nature of a breach between two members of the Company, i.e. Telenor (FSP) and the ISP (the applicants) and not the Company itself. Therefore, the Company Petition, in my considered opinion squarely falls, within the domain of the agreed dispute resolution mechanism agreed by the contracting parties, i.e., Telenor and ISP to the SSA and SHA, i.e. through Arbitration. There would thus be no occasion for the Company Law Board to make an order either under section 397, 398 or 402 of the Companies Act. I am fortified in the above view by the decision of the Supreme Court in Chatterjee Petrochem (I) (P.) Ltd. v. Haldia Petrochemcials (P.) (P.) Ltd. [2011] 110 SCL 107/14 taxmann.com 1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or were not parties either to the SSA or SHA can also not be sustained as in Company Petition No. 110 the Petitioners herein had categorically taken a plea that by joining its nominee Directors as party Respondents No. 2 to 5 and 7 who were not a party to the SHA the Applicant herein were attempting to frustrate the Arbitral Agreement. 31. The question whether the SSA and SHA are vitiated by fraud is a complicated question of law and fact and ought not to be tried by the Company Law Board in a summary jurisdiction under sections 397 and 398 of the Companies Act and must be left to be adjudicated by the Arbitral Tribunal especially when the contracting parties have not only agreed to a dispute resolution mechanism through Arbitration and have taken steps in furtherance thereof but Arbitration has also commenced in relation to the SHA between the parties by the Arbitral Tribunal already constituted. 32. Having held that all the three limbs of section 45 of the Act on 1996 are satisfied the only question which remains to be answered is whether I am bound to refer the parties to foreign arbitration. It was argued by the learned senior counsel for the Petitioner that as a specially co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... atterjee Petrochem (I) (P.) Ltd. (supra) the breach of SSA and SHA by the Applicants herein being rooted in contract and there being no allegation against the Company in this regard there would be no occasion for the Company Law Board to make an order either under section 397, 898 or 402 of the Companies Act. 33. The case of Sudarshan Chopra v. Company Law Board 2004 (2) ARBLR 241 (Punj. & Har.) (DB) relied on by Shri S.N. Mookherjee is distinguishable on facts as in that case abandonment of the claim to Arbitration was being considered in the light of section 8 of the Act of 1996. In the facts and circumstances of that case the filing of applications and a civil suit, by Group-A were held to be an abandonment of its claim to Arbitration. Here as I have held, section 45 of the Act of 1996 contemplates that after invoking the jurisdiction of a judicial authority a request may be made by either party for referring the parties to Arbitration. The Applicants who are the Petitioners in C.P. No. 33, soon after filing of C.P. No. 33, did make a request by filing CA. No. 149 u/s. 45 of the Act of 1996 in C.P. No. 32. I have further held that filing Company Petition No. 33 was not understo ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
