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TMI Blog2012 (11) TMI 737X X X X Extracts X X X X X X X X Extracts X X X X ..... ted under the Laws of Cayman Islands, the predecessor in- interest of Amaprop, acquired 47.5% shareholding in Indiabulls Finance Company Private Limited (India) ('IFCPL') an unlisted company registered under the Indian Companies Act, 1956. The agreement gave a right to Amaprop to cause IFSL to purchase the aforementioned stake of Amaprop in IFCPL (the 'Put Right') at the price to be calculated in terms of the Agreement (the 'Put Price') subject to mandatory approvals under the Indian laws. 3. According to IFSL, both IFCPL and IFSL are subject to foreign exchange regulatory controls, and any transfer of their respective shares is subject to Indian laws. In the present proceedings, IFCPL has been arrayed as proforma Respondent No. 2. 4. It is stated that on 6th June 2005 an Amendment Agreement was entered into between IFSL, Amaranth LLC, Amaprop and IFCPL so as to replace Amaranth LLC with Amaprop as a party to the Agreement. On 26th June 2005, a Second Amendment Agreement was entered into between IFCPL, IFSL and Amaprop for further amendment in respect of "Key Man" under Section 13.1 of the Agreement; "Officer in Default" under Section 5 of the Agreement; Section 8.1 concerning "I ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that IFSL was under a contractual obligation to pay the Put Price and that the Tribunal could 'craft' its Award to achieve the contractual intent. The Tribunal then relied on the Valuation Report of KPMG, a firm of Chartered Accountants engaged by IFSL to undertake the valuation of the equity shares of IFCPL which gave the valuation of the Put Shares at Rs. 368 per share. The Tribunal observed that in terms of the RBI Circular No. 49 IFSL could purchase the Put Shares at that value without permission of the RBI. In para 152 of the impugned Award it observed that if the parties indeed prepared and presented a new application to the RBI for permission at the Put Price of Rs. 593.75 per share, RBI could reject such an application or authorize a price anywhere between Rs. 368 to Rs. 593.75 per share, and if RBI authorized the sale of Put Shares at a price higher than Rs. 368 per share, then the Tribunal's 'dispositive conclusions' would be adjusted pro tanto. 9. The Tribunal then divided the operative 'dispositive conclusions' into six segments. In para 175 the Tribunal explained that it was doing so "anticipating that the one enunciated in Para 217 may not be enforceable in India" a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... application considering that the RBI had already rejected the application of IFSL valuing the share price at Rs. 593.75 per share. The Court felt that IFSL should approach the RBI seeking approval on the value determined by the Tribunal which was Rs. 368 per share which was likely to be accepted by the RBI as it was in compliance with the Circular No. 49 dated 4th May 2010. The Senior Counsel appearing for IFSL agreed to the said suggestion and stated that IFSL would approach the RBI in seeking aforementioned terms and within thirty days also filed a compliance affidavit. 12. This Court was informed at the subsequent hearing on 23rd May 2011 that pursuant to the order dated 19th April 2011 of the Court an application had been filed by IFSL with the RBI on 21st April 2011. In the said letter addressed by IFSL to the RBI it was stated that in the event RBI was not inclined to permit the transfer of shares in terms of the application dated 13th April 2011 then in the alternative, permission could be granted to IFSL to purchase the shares of IFCPL from Amaprop at Rs. 368 per share, which was the figure arrived at by KPMG following the Net Asset Value ('NAV') method for valuation of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s in the New York Court in the following terms: "1. The Respondent (IFSL) shall not take any further action in the Indian Injunctive Action now pending in the New Delhi Court, except that it shall permanently withdraw that action at the next regularly scheduled sitting of the New Delhi Court, which is July 4, 2011, at which point the Indian Injunctive Action will be terminated, and no relief may be granted thereon. 2. The Respondent, together with its officers, agents, servants, employees and attorneys, and all other persons who are in active concert or participation with the Respondent or any of its officers, agents, servants, employees or attorneys, are permanently restrained and enjoined from commencing or prosecuting any action or proceeding in the Republic of India; (a) that seeks to prevent, enjoin, restrain or interfere with the prosecution of the Confirmation Proceeding by Petitioner (Amaprop); or (b) that seeks to enjoin, annul, vacate, modify or otherwise affect, in any manner whatsoever, the recognition, enforcement or confirmation of the Award in any jurisdiction other than the Republic of India. 3. By their signature below, the attorneys for the Respondent confirm ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bmitted that under Sections 12.10 and 12.11 of the Agreement, the parties had agreed to the jurisdiction of the New York Court and thus had excluded the application of the Indian law not only on the substance of the dispute but also on the conduct of arbitration. Moreover, the venue of the arbitration was also outside India. It is submitted that IFSL's right to get the Award, which was agreed to be final and binding on the parties, modified or vacated should be made before the New York Court. It is further submitted that in terms of the consent order between the parties, all disputes arising thereunder or in relation to the Agreement had to be resolved only through arbitration at New York. By an order dated 9th September 2011 passed by the New York Court, the Award stood confirmed and a judgment was also entered in the said terms in favour of Amaprop. The said consent order contemplated a possible action by Amaprop to seek enforcement of the Award in India and the question of IFSL raising an objection as to the Award being opposed to the public policy of India under Section 48 of the Act would if at all arise only at that stage and not earlier. 21. Mr. Rajiv Nayar, learned Senio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... blic policy of India. It is contended that the Tribunal in para 131 of the impugned Award virtually compelled IFSL to transgress the applicable Indian law. 23. Countering the above contentions, Mr. T.R. Andhyarujina, learned Senior counsel for Amaprop, submitted that there was an implied exclusion of the Indian Courts. The proper law of the contract was the law of New York. The words "non-exclusive jurisdiction" in Sections 12.10 and 12.11 of the Agreement did not relate to the arbitral proceedings as such but to the Agreement. He referred to the decision in Highland Crusader Offshore Partners v. Deutsche Bank AG [2009] EWCA Civ 725 and submitted that there was no clause in the Agreement which conferred any jurisdiction on Indian Courts. The parties had acted on the consent terms agreed between them in the New York Court pursuant to which IFSL had withdrawn its suit i.e. CS(OS) No. 899 of 2011. Applicability of Part I of the Act to foreign Awards 24. The preliminary issue that requires to be decided is whether the present petition under Section 34 of the Act challenging the impugned foreign Award dated 21st March 2011 of the Tribunal is maintainable as such. 25. The question of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rations and to all proceedings relating thereto. Where such arbitration is held in India the provisions of Part I would compulsorily apply and parties are free to deviate only to the extent permitted by the derogable provisions of Part I. In cases of international commercial arbitrations held out of India provisions of Part I would apply unless the parties by agreement, express or implied, exclude all or any of its provisions. In that case the laws or rules chosen by the parties would prevail. Any provision, in Part I, which is contrary to or excluded by that law or rules will not apply." 26. The facts in Bhatia International required the Court to consider specifically whether a petition under Section 9 is maintainable. The question of maintainability of a petition under Section 34 did not arise. The Supreme Court observed that under Article 23 of the ICC Rules even before the file is transmitted to the Arbitral Tribunal, and in appropriate circumstances even thereafter, "the parties may apply to any competent judicial authority for interim or conservatory measures". Consequently, it was concluded in (SCC para 34) that "in such cases an application can be made under Section 9 of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ment 28. Turning to the case on hand, it is necessary to examine whether the relevant clauses of the Agreement envisage any express or implied exclusion of the jurisdiction of Indian courts. Sections 12.10 and 12.11 of the Agreement read as under:- "Section 12.10: Governing Law; Jurisdiction; Waiver of Jury Trial (a) This Agreement shall be governed by and construed in accordance with the laws of the State of New York, United States of America, without regard to the conflicts of law principles of such State. (b) Each of the Company, Parent and each Investor hereby (i) agrees that any Action with respect to this Agreement or any Transaction Document may be brought in the courts of the State of New York located in New York, (ii) accepts for itself and in respect of its property, generally and unconditionally, the nonexclusive jurisdiction of such courts, (iii) irrevocably waives any objection, including, without limitation, any objection to the laying of venue or based on the grounds of forum non conveniens, which it may now or hereafter have to the bringing of any Action in those jurisdiction, and (iv) irrevocably consents to the service of process of any of the courts refer ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng Party and the Responding Party are unable to agree on a Qualified Individual within the 15-day period referred to above , then, the Requesting Party and the Responding party shall each appoint a Qualified Individual as an arbitrator and the arbitrators so appointed will select and appoint a third Qualified Person as an arbitrator. (iii) The presentations of the Requesting Party and the Responding Party in the arbitration proceeding shall be commenced and completed within sixty (60) days after the selection of the arbitrator pursuant to this clause (b) above, and the arbitrator shall render its decision in writing within thirty (30) days after the completion of such presentations. (c) Binding Character. Any decision rendered by the arbitrator pursuant to this Section 12.11 shall be final and binding on the parties thereto, and judgment thereon may be entered by any state or federal court of competent jurisdiction." 29. Section 12.10 (a) makes it clear that the Agreement was to be governed by the laws of the State of New York (USA), "without regard to the conflicts of law principles of such State". Any action in respect of the Agreement had to be brought in the courts of the St ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oppression. Moreover, the nature of the jurisdiction clause may be such that, although not exclusive, it does not contemplate parallel proceedings and pursuing proceedings abroad would be vexatious and oppressive. Normally, though, a non-exclusive jurisdiction agreement will contemplate the possibility of simultaneous trials in England and abroad and, if trial is pursed abroad, there will not only be no breach of agreement but also no vexatious or oppressive conduct." " (emphasis supplied) 31. Consequently, the use of the words 'non-exclusive jurisdiction' in Section 12.10 would not ipso facto imply that the parties have agreed to submit to the jurisdiction of Indian courts. The absence of an express exclusion of the jurisdiction of Indian courts is apparent. The question whether there is an implied exclusion has to be discerned from a collective reading of Section 12.10 and 12.11. Section 12.11 (c) which is titled "Binding Character" states that the Award shall be final and binding and "the judgment thereon may be entered by any state or federal court of competent jurisdiction." Given the context of the place of arbitration being New York and the jurisdiction of the courts in Ne ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... out to the New York Court in the confirmation proceedings that recognition ought not to be granted since the Award was opposed to the public policy of India. IFSL did not avail of such opportunity. It was noted by the New York Court in the order dated 9th September 2011 confirming the Award that: "As of today's date, Indiabulls has filed no opposition papers. Accordingly, the Court will treat the petition as unopposed." This therefore meant that IFSL had an opportunity to question the Award which it did not avail of. The said order of the New York Court became final and judgment was entered by the New York Court on 14th September 2011. Thereafter the question of there being parallel proceedings in this Court under Section 34 of the Act to challenge the Award did not arise. Going by the interpretation of the expression "nonexclusive jurisdiction" in Highland Crusader Offshore Partners v. Deutsche Bank as well as the discussion in Cheshire North and Fawcett on Private International Law (14th Ed, 2008), it appears that the parties understood that there ought not be parallel proceedings to challenge the Award as that could be 'vexatious and oppressive'. The other interpretation, as s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l law. Two trends in modern arbitration law have led to a convergence between party autonomy and state control. The first has been an acceptance in many modern arbitration laws of a much wider scope for the operation of party autonomy to choose the procedures applicable to an international commercial arbitration. This trend is exemplified by the Model Law, and is reflected in the 1996 Act. The second element has been a renewed explicit acceptance of the rule set out in Rule 57(2), namely that it is the law of the seat of the arbitration which governs the arbitral procedure. Where, as in the case of the 1996 Act (or other Commonwealth legislation giving effect to the Model Law), the law of the seat in fact accords considerable freedom to the parties to choose their procedure and imposes few mandatory provisions upon it, the control of the law of the seat will be in practice limited, and its provisions are unlikely to be brought into conflict with arbitration procedures chosen by the parties. Nevertheless, the law of the seat will still perform vital functions: in supplementing the procedural rules chosen by the parties where these are incomplete; in supporting the arbitral procedur ..... X X X X Extracts X X X X X X X X Extracts X X X X
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