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2016 (6) TMI 1338

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..... ge, Gautam Budh Nagar, UP in Misc. Case No. 33 of 2010, under Section 34 of the Act of 1996, initially filed before the High Court of Judicature, Allahabad but later on transferred by the Supreme Court vide its order dated September 15, 2015 in SLP Civil No. 22318/2010). The OMP 255/2010 is an Enforcement Petition under Section 47 and 49 of the Act of 1996 filed by Roger Shashoua and two others seeking enforcement of final Award dated January 5, 2010. The parties in this petition shall be referred to, not by their status in different petitions but by their names. Facts:-- 2. Facts which are relevant for the purpose of the issues need to be decided by this order are that, on October 20, 1997, ITECL was allotted a property located at A-II, Sector-62, Noida for a sum of Rs. 1.5 Crores paid as allotment money. Mukesh Sharma, Roger Shashoua and the International Trade Expo. Centre Ltd. signed a Shareholders Agreement on July 1, 1998 whereby ITCEL was restructured as a Joint Venture Company. The paid up share capital of ITCEL was Rs. 3 Crores, divided into 30 lakh shares. Mukesh Sharma and Roger Shashoua equally held 15 lakh shares each in the ITECL. It is the case of ITECL that in a B .....

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..... ess Note No. 18 and Pres Note No. 1 whereby it was decided that Foreign Financial Corporation/Technical Collaborators with tie up in India cannot operate themselves or through subsidiary in India in the same field without the consent of the Joint Venture partner. In the said suit, Roger Shashoua filed an application under Section 8 of the Arbitration & Conciliation Act, inter-alia on the ground that there was an arbitration clause in the Shareholder Agreement executed between Mukesh Sharma and Roger Shashoua that all matters concerning the scope of the said suit had to be referred to the Arbitration. The Civil Judge, vide its order dated April 25, 2005 allowed the application under Section 8 and referred the parties to Arbitration. The ITECL challenged the order of the Civil Judge dated April 25, 2005, by filing first appeal before the High Court at Allahabad which was dismissed on May 9, 2008 by holding inter-alia that the Court is not concerned whether the order of injunction could be granted by the Civil Court on merits. The Court is only concerned whether Civil Court rightly returned the proceedings for arbitration or not. The Court held when the petitioners have principally ag .....

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..... r Shashoua and two others. Accordingly, the Arbitral Tribunal communicated the terms of reference on February 27, 2006. On February 12, 2007, the Arbitral Tribunal passed Jurisdiction Award and further passed Cost Award on November 17, 2007. Thereafter, the matter was reserved for final order/Award in May, 2008. 5. The ITE filed RFA(OS) No. 9/2006 against the judgment dated December 20, 2005 of the learned Single Judge in CS(OS) 926/2005. On February 21, 2006, an interim order was granted by the Division Bench in RFA(OS) 9/2006 thereby restraining the arbitration proceedings against ITE. It appears that on February 27, 2006 when the terms of reference were signed by Roger Shashoua and two others and Mukesh Sharma in accordance with ICC Rules, the ITE did not sign the same. As stated above, on February 12, 2007 the Arbitral Tribunal rendered the partial Award on jurisdiction. It appears that with regard to ITE, it was held by the Tribunal that in the light of the injunction of this Court in favour of ITE, a separate Award would be passed at a later stage, upon giving an opportunity to make submissions. 6. Insofar as ITECL is concerned, the Tribunal held that the said company is bo .....

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..... aising specific objections on the ground of jurisdiction, as well as delay in filing the petition under Section 34 of the Act. On July 6, 2011, the Ld. District Judge at Noida returned the objections filed by ITECL under Section 34 of the Act for want of jurisdiction. An appeal was filed under Section 37 of the Arbitration & Conciliation Act being FAO No. 1304(D)/2011 by the ITECL against the order dated July 6, 2011 before the Allahabad High Court on August 1, 2011. In the meantime, Final Award dated August 5, 2011 was passed by the Tribunal incorporating directions qua the ITE. The ITE filed OMP 914/2011 seeking setting aside under Section 34 of the Act of the Awards of the Arbitral Tribunal dated February 27, 2007, November 17, 2007, January 19, 2010 (should be January 5, 2010) and Award dated August 5, 2011. 8. On March 13, 2013, an appeal filed by ITECL was dismissed by the Allahabad High Court for non prosecution, which was subsequently restored on August 28, 2013. On April 2, 2014, the Allahabad High Court dismissed FAO No. 1304(D)/2011 as being non-maintainable under Section 37 of the Arbitration & Conciliation Act on the ground that the District Court's order dated Ju .....

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..... uested to nominate a Judge who will hear the writ petition as well as the application preferred under Section 34 of the Act. The nominated judge, we request, should to dispose both the matters by the end of November 2015. Let the matter be listed for further hearing on 08.12.2015." 9. Noting the facts, Mr. Vashist appearing for ITECL in Writ Petition(C) No. 10954/2015 would attack the order passed by the learned District Judge, Gautam Budh Nagar dated July 6, 2011 in Misc. Case No. 33/2010, which is a petition filed under Section 34 of the Arbitration & Conciliation Act by stating that the Ld. District Judge, Gautam Budh Nagar, U.P erroneously held that an application for enforcement of the arbitral award confers exclusive jurisdiction on this Court by virtue of Section 42 of the Act of 1996. According to him, it is a settled law that execution/enforcement applications are not applications within the meaning of Section 42 of the Act of 1996 and therefore do not confer jurisdiction. In this regard he would rely upon the judgment of S.K. Brothers v. Delhi Development Authority ILR (2009) 1 Delhi 305. He would state, that in view of the above settled position of law, the order of t .....

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..... t disputed that Delhi Courts also had jurisdiction. However, the ITECL being dominus litis was entitled to choose which court to approach. (ix) The Roger Shashoua in the said suit filed an application under Section 8 of the Act for referring the disputes to arbitration as per the arbitration clause contained in the alleged arbitration agreement. (x) Significantly, Roger Shashoua took no objection to the territorial jurisdiction of the Noida Court in the Section 8 application. (xi) That the Civil Judge, Gautam Budh Nagar, allowed the said application under section 8 of the Act vide order dated April 25, 2005 and referred the disputes to arbitration. (xii) Thus, arbitration proceedings between the parties were initiated pursuant to the order of the Civil Judge, Gautam Budh Nagar on the application filed by the Roger Shashoua in the Civil Suit which culminated in passing of various arbitral awards, impugned in the Section 34 petitions, which has also been admitted by the Roger Shashoua in the arbitration proceedings at various instances including request for arbitration and the reply to application dated 20th July, 2005. (xiii) Accordingly, as the First Application under Par .....

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..... esent writ petition is allowed, all the subsequent objections and applications filed by the parties are to be transferred to the Gautam Budh Nagar Court, being the Principal Civil Court exercising exclusive jurisdiction in terms of Section 42 of the Act of 1996. 13. On the other hand, Mr. Dayan Krishnan, learned Senior Counsel appearing for Roger Shashoua and two others would take preliminary objection to the maintainability of petitions under Section 34 of the Act of 1996 being OMP No. 914/2011, OMP 4/2008 and Misc. Case No. 33/2010, whose order is in challenge in W.P. No. 10954/2015 to contend that the contract providing that the arbitral proceedings shall be governed by ICC Rules with venue of arbitration at London, which means that the procedural aspects thereof are governed by the English Law, it necessarily implies that Part 1 of Arbitration &Conciliation Act, 1996 stands impliedly excluded and therefore, the petitions under Section 34 of the Act of 1996 be dismissed. He would rely upon the following judgment in support of his contention:-- "(i) UOI v. Reliance Industries Ltd-C.A No. 11396/2015; (ii) Videocon Industries Ltd. v. Union of India (2011) 6 SCC 161; (iii) DO .....

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..... hat an application before a court under Section 8 merely brings to the court's notice that the subject-matter of the action before it is the subject-matter of an arbitration agreement. This would not be such an application as contemplated under Section 42 of the Act as the court trying the action may or may not have had jurisdiction to try the suit to start with or be the competent court within the meaning of Section 2(e) of the new Act. Furthermore, in view of the aforesaid pronouncements, the judgment of this Court in Hertz (supra) is per-incuriam. 16. On the other hand, on maintainability of objections under Section 34 of the Act, it is the submission of Mr. Abhinav Vashist, learned Senior Counsel for ITECL, which is without prejudice to the stand of the ITECL, that the Court of District Judge, Gautam Budh Nagar is the Principal Civil Court, which has the jurisdiction and also of Mr. Sandeep Sethi, learned Senior Counsel appearing for ITE that the Award passed in the present case is under an alleged agreement executed on July 1, 1998 and the Awards have been passed in January 2010 and in August, 2011. Admittedly, the awards are governed as per the law laid down in Bhatia In .....

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..... pany can only be executed in India under the laws of India and nowhere else in the world. (x) It may also be noted that there is no connection of either the award or the parties with London except it being a neutral venue for holding arbitration sittings. (xi) The respondent No. 3 is a French citizen and the respondent Nos. 4 and 5 companies are companies incorporated in Cyprus and have nothing to do with London whatsoever." 17. They would state, that London was simply a neutral venue for conduct of arbitration proceedings. The parties under the agreement have not expressly mentioned the seat of arbitration. Keeping in mind the close nexus to the disputes with India and the settled law, the seat of Arbitration is India and not London. For determining the seat of arbitration the Court would have to determine the territory that will have the closes and most intimate connection with the arbitration. In the present case, the substantive law of the Contract is Indian Law, the proper law of the Arbitration Agreement is Indian Law, the enforcement of the award is to be done under the Indian Law, the Joint Venture Agreement between the parties is to be acted upon in India and the rele .....

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..... face of the proceedings to be contrary to the law applicable in such cases in India. 19. They would further submit that in BSES Ltd. v. Fenner India Ltd. (2006) 2 SCC 728 it was held that whatever may be the law (of bank guarantees in that case) in other jurisdictions, when the law in India is clear, settled and without any deviation whatsoever, there is no occasion to rely upon foreign case law. They would further submit that Roger Shashoua filed an application under Section 8 of the Act for referring the disputes to arbitration in the suit for injunction filed by the ITECL before the Civil Judge, Gautam Budh Nagar, Noida in the year 2005 being Suit No. 257/2005. Even in the High Court of Allahabad, the Roger Shashoua has relied upon Section 8 and Section 16 of the Act, which are in Part 1 of the Act. Evidently, it was always the intention of the parties to apply Part 1 of the Arbitration & Conciliation Act to the Arbitration Agreement. Further, the High Court of Allahabad in the aforestated judgment in para 12 has held that it is open for the parties to challenge the award and further have a right to appeal in case the setting aside proceedings goes against them. The High Court .....

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..... act to be Korean law. In the present case, the proper law of contract is Indian Laws and therefore, there can be no presumption of exclusion of Indian laws (Part 1 of the Act) by the parties. 21. Mr. Abhinav Hansaria, learned counsel appearing for Mukesh Sharma adopts the arguments advanced by Mr. Abhinav Vashist and Mr. Sandeep Sethi. Additionally, he relies upon the judgment reported as 1998) 1 SCC 305 Sumitomo Heavy Industries Ltd. v. ONGC Ltd. to contend that the Supreme Court has time and again applied the test of closest and most real connection for determining the proper Law of Arbitration of a contract. He would state that in Venture Global Engineering v. Satyam Computer Services Ltd. and Anr (2008) 4 SCC 190, the Apex Court has held that the award has an intimate and close connection to India, in view of the following facts:-- "(a) The company was situated in India (b) The transfer of "ownership interest" were to be made in India under the laws of India. (c) All the steps necessary have to be taken in India before the ownership stood transferred." The said facts squarely apply to the facts of the present case. 22. Having heard the learned counsel for the parties, .....

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..... dia Ltd. & Anr." 24. A perusal of the aforesaid paragraph would show, the Supreme Court has held that the Court in several judgments has held that Part I is excluded by necessary implication, if it is found that on the facts of a case, either the juridical seat of the arbitration is outside India or the law governing the arbitration agreement, is a law other than Indian law. While holding so, the Supreme Court referred to its judgments in Videocon Industries Ltd. (supra), Dozco India (P) Ltd. (supra), Yograj Infrastructure Ltd. v. Ssang Yong Engg. and Construction Co. Ltd. (2011) 9 SCC 735, Reliance Industries Ltd. (supra) and Harmony Innovation Shipping Ltd. v. Gupta Coal India Ltd. (2015) 9 SCC 172. In fact, some of the judgments, as referred to above, have been relied by Mr. Krishnan as well. 25. Insofar as the judgments relied upon by Mr. Dayan Krishnan in support of his submissions are concerned, in Videocon Industries Ltd. (supra), the Supreme Court was concerned with Article 34.12, referred to the same in para 3, and is reproduced as under:-- "..... 34.12. Venue and law of arbitration agreement.--The venue of sole expert, conciliation or arbitration proceedings pursuant .....

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..... le 23.1 suggests that the law governing the arbitration will be Korean law and the seat of arbitration will be Seoul in Korea, there will be no question of applicability of Section 11(6) of the Act and the appointment of Arbitrator in terms of that provision." 28. The reliance placed by Mr. Dayan Krishnan, on Union of India v. Reliance Industries Ltd.(supra), is concerned, the Supreme Court has extensively referred to its earlier judgment dated May 28, 2014 (Reliance Industries Ltd. v. Union of India (2014) 6 SCC 603). In para 2, it referred to the following clauses of the Agreement between the parties:-- "ARTICLE 32: APPLICABLE LAW AND LANGUAGE OF THE CONTRACT 32.1 Subject to the provisions of Article 33.12, this Contract shall be governed and interpreted in accordance with the laws of India. 32.2 Nothing in this Contract shall entitle the Government or the Contractor to exercise the rights, privileges and powers conferred upon it by this Contract in a manner which will contravene the laws of India. ARTICLE 33: SOLE EXPERT, CONCILIATION AND ARBITRATION 33.9 Arbitration proceedings shall be conducted in accordance with the arbitration rules of the United Nations Commissi .....

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..... een excluded, it would be necessary to discover the intention of the parties. Beyond this parties are not agreed on any issue. 38. We are also of the opinion that since the ratio of law laid down in Balco [Balco v. Kaiser Aluminium Technical Services Inc. has been made prospective in operation by the Constitution Bench itself, we are bound by the decision rendered in Bhatia International. Therefore, at the outset, it would be appropriate to reproduce the relevant ratio of Bhatia International in para 32 which is as under: "32. To conclude, we hold that the provisions of Part I would apply to all arbitrations 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 .....

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..... at the Arbitration Act, 1996 shall apply to the arbitration proceedings, Article 33.5 should have provided that in default of a party appointing its arbitrator, such arbitrator may, at the request of the first party be appointed by the Chief Justice of India or any person or institution designated by him. Thus, the Permanent Court of Arbitration at The Hague can be approached for the appointment of the arbitrator, in case of default by any of the parties. This, in our opinion, is a strong indication that applicability of the Arbitration Act, 1996 was excluded by the parties by consensus. Further, the arbitration proceedings are to be conducted in accordance with the Uncitral Rules, 1976 (Article 33.9). It is specifically provided that the right to arbitrate disputes and claims under this contract shall survive the termination of this contract (Article 33.10). 41. The article which provides the basis of the controversy herein is Article 33.12 which provides that venue of the arbitration shall be London and that the arbitration agreement shall be governed by the laws of England. It appears, as observed earlier, that by a final partial consent award, the parties have agreed that the .....

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..... noticed earlier that the parties by agreement have provided that the juridical seat of the arbitration shall be in London. Necessary amendment has also been made in the PSCs, as recorded by the final partial consent award dated 14-9-2011. It is noteworthy that the Arbitration Act, 1996 does not define or mention juridical seat. The term "juridical seat" on the other hand is specifically defined in Section 3 of the English Arbitration Act. Therefore, this would clearly indicate that the parties understood that the arbitration law of England would be applicable to the arbitration agreement. 75. In view of the aforesaid, we are unable to uphold the conclusion arrived at by the Delhi High Court that the applicability of the Arbitration Act, 1996 to the arbitration agreement in the present case has not been excluded. 76. In view of the above, we hold that: 76.1 The petition filed by respondents under Section 34 of the Arbitration Act, 1996 in the Delhi High Court is not maintainable. 76.2 We further overrule and set aside the conclusion of the High Court that, even though the arbitration agreement would be governed by the laws of England and that the juridical seat of arbitratio .....

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..... udgment dated 28.5.2014, this application under Section 14 deserves to be dismissed. It is also an abuse of the process of the Court as has rightly been argued by Dr. Singhvi. It is only after moving under the UNCITRAL Arbitration Rules and getting an adverse judgment from the Permanent Court of Arbitration dated 10.06.2013 that the present application was filed under Section 14 of the Arbitration Act two days later i.e. on 12.6.2013." 32. In Yograj Infrastructure Ltd.(supra), the Supreme Court was dealing with clause 27 of the Agreement, which is reproduced as under:-- "27. Arbitration. 27.1 All disputes, differences arising out of or in connection with the Agreement shall be referred to arbitration. The arbitration proceedings shall be conducted in English in Singapore in accordance with the Singapore International Arbitration Centre (SIAC) Rules as in force at the time of signing of this Agreement. The arbitration shall be final and binding. 27.2 The arbitration shall take place in Singapore and be conducted in English language. 27.3 None of the Party shall be entitled to suspend the performance of the Agreement merely by reason of a dispute and/or a dispute referred to .....

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..... he proper law is the law which governs the agreement itself, in the absence of any other stipulation in the arbitration clause as to which law would apply in respect of the arbitral proceedings, it is now well-settled that it is the law governing the contract which would also be the law applicable to the Arbitral Tribunal itself. Clause 27.1 makes it quite clear that the Curial law which regulates the procedure to be adopted in conducting the arbitration would be the SIAC Rules. There is, therefore, no ambiguity that the SIAC Rules would be the Curial law of the arbitration proceedings. It also happens that the parties had agreed to make Singapore the seat of arbitration. Clause 27.1 indicates that the arbitration proceedings are to be conducted in accordance with the SIAC Rules. 52. The immediate question which, therefore, arises is whether in such a case the provisions of Section 2(2), which indicates that Part I of the above Act would apply, where the place of arbitration is in India, would be a bar to the invocation of the provisions of Sections 34 and 37 of the Act, as far as the present arbitral proceedings, which are being conducted in Singapore, are concerned. 53. In Bh .....

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..... , there is no other stipulation relating to applicability of any law to the Agreement. That apart, Supreme Court also noted that if the dispute is for an amount of less $ 50000 then the arbitration should be conducted in accordance with small claims, procedure of London Maritime Arbitration Association. The Supreme Court also held that if the stipulations are noted by it are read and appreciated in the contextual perspective, "the presumed intention" of the parties is clear as crystal that the juridical seat of arbitration would be London. 35. Noting the facts of each case as relied upon by Mr. Krishnan and referred to above, it is clear, the clauses in the agreement in the cases are at variance with the clauses in this case. In those cases, the Supreme Court on the reading of the clauses, held, that Part-I shall not be applicable. 36. In the present case, the arbitration clause stipulates that the arbitration shall be, in accordance with the Rules of conciliation and arbitration of International Chamber of Commerce, Paris. The contract shall be governed by the Indian laws. The Agreement does not stipulate the law which shall govern the arbitration agreement. The case of Mr. Kris .....

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..... n the case of Carzonrent India Pvt. Ltd. (supra), this Court has interpreted identical provisions of the Agreement, wherein the parties chose Singapore as the venue of arbitration, held that there is nothing in clause 14, which indicates that there is any implied exclusion of the applicability of Indian law. On the other hand, the clause begins by stating that the agreement is being negotiated by the parties with a view towards its interpretation under the law of the jurisdiction in which the licensed business shall be conducted in India. This reflects the close connection of Indian law to the arbitration agreement as well since it forms part of the Contract. (Emphasis supplied). 40. I agree with the submissions of Mr. Abhinav Vashist and Mr. Sandeep Sethi that ITECL is a company incorporated under the Companies Act having registered office in India; the SHA has been executed by the parties in India; the Agreement between the parties is to be governed by the laws of India. 41. That apart, what is also a relevant factor is that it is the understanding of Roger Shashoua and two others about the applicability of Act of 1996 to the agreement, inasmuch as they have filed a petition u .....

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..... l throughout made it plain that Roger Shashoua and two others did object to the jurisdiction of the Court to determine the matters, which Mukesh Sharma wished to put it before it. 45. In para 48, the High Court has held as under:-- "48. On both these matters there is a large body of factual evidence which is seriously in dispute. There are conflicting statements from Indian lawyers as to what actually took place in the Indian courts. There are also conflicting statements from 2 former Chief Justices of India on the law of India and the effect of what was and was not done in the Indian courts. Disputes on Indian law and practice constitute matters of fact for this court and it is therefore clear to me that I cannot decide either primary issues of fact or issues of Indian law and practice on the basis of the statements put before me. This inevitably means that a mini trial is required for determination of these points with oral evidence. Although it was contended that the burden of proof of submission to the jurisdiction lay upon the defendant and only went to the matter of this court's discretion in the context of the granting of the anti suit injunction, where the issues of .....

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..... less forceful point for the defendant than a full blown submission to the jurisdiction of the Delhi High Court, which would be recognised anywhere in the world as being a voluntary acceptance of that court's jurisdiction to act at the behest of the defendant to do all the things which the claimant now says it should not do. Whether there was a submission, the form which that submission took, the ambit of it and the nature of it are all matters which might well affect the decision of this court." 49. From the above, it is noted that the Court was conscious of the fact that the effect of submitting to the jurisdiction of this court by filing an application under Section 9 cannot be decided without hearing full evidence about what took place and effect of it from the perspective of both Indian Law and the principles of English conflict of laws. No doubt, the High Court has held that England is the seat of arbitration and on the principle akin to exclusive jurisdiction clause, it held, as a matter of principle, the foreign Court should not decide matters, which are for that Court to decide in the context of an anti suit injunction. In fact, in para 55 of the judgment, the Court d .....

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..... end when the time for making an application to set aside the arbitral award expires and the execution application is an enforcement of the award. Thus the place of filing of the execution application need not be the place of the filing of the application under Section 34 of the Act for the reason of Section 42 of the Act." 52. Admittedly, the petition filed by Roger Shashoua and others, is under Section 47 and 49 of the Act, so the bar of Section 42 would not be applicable to the petition under Section 34 of the Act filed by ITECL before the District Judge, Gautam Budh Nagar. 53. But the question that would arise, is, whether the order of the learned District Judge, on being set aside, the case needs to be remanded back to the concerned Court for a decision on merit including the maintainability. Mr. Vashist had relied upon the judgment of the Supreme Court in the case of Hari Vishnu Kamath (supra), the said proposition is well settled that a High Court exercising jurisdiction under Article 226 in certiorari proceedings would only rectify the errors and would not re-appreciate the facts. But I note, extensive submissions have been made by Mr. Vashist in support of his stand that .....

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..... d October 29, 2003 and other reliefs relatable to transfer of shares etc, which need to be seen from the perspective of the registered office of the ITECL which is in Delhi. 55. Noting the impugned order of the District Judge is erroneous and not legally tenable but no purpose would be achieved by remanding the case back to the District Judge, Gautam Budh Nagar, as it is clear that on the ground that a petition under Section 9 of the Act of 1996, being OMP 186/2005 was initially filed by Roger Shashoua and others in this Court, the same would trigger the bar of Section 42 of the Act of 1996 making the petition under Section 34 as not maintainable before the District Judge, Gautam Budh Nagar, the writ petition being W.P.(C) No. 10954/2015 needs to be dismissed. It is ordered accordingly. 56. Insofar as the submission of Mr. Dayan Krishnan on the non-maintainability of petitions under Section 34 of the Act of 1996 is concerned, the said plea is rejected in view of my discussion made above. 57. Having decided the aforesaid two issues in terms of this order, the petitioner ITECL shall file the petition under Section 34, which was directed to be returned back in terms of the order of .....

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