Full Judgment Text
NONREPORTABLE
IN THE SUPREME COURT OF INDIA
CIVIL APPELLATE JURISDICTION
CIVIL APPEAL NO. 6679 OF 2022
VGP Marine Kingdom Pvt Ltd & Anr. …Appellant(s)
Versus
Kay Ellen Arnold …Respondent(s)
J U D G M E N T
M.R. SHAH, J.
1. Feeling aggrieved and dissatisfied with the impugned
judgment and order dated 05.08.2021 passed by the High
Court of Judicature at Madras in O.P. No. 304/2019, by
which, the High Court has dismissed the said application
under Section 11(6) of the Arbitration and Conciliation Act,
1996 (hereinafter referred to as the Act, 1996) and has
refused to appoint an arbitrator and refer the dispute to
Signature Not Verified
Digitally signed by
NIRMALA NEGI
Date: 2022.11.04
16:23:52 IST
Reason:
the arbitrator, original applicant has preferred the present
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appeal.
2. That the appellants herein approached the High Court
under Section 11(6) of the Act, 1996 by way of O.P. No.
304/2019 to appoint an arbitrator so that the arbitral
tribunal can be constituted in terms of clause 17.1.2 of the
Share Subscription and Shareholders Agreement entered
into between the appellants and the respondent at Chennai
on 27.04.2016. By the impugned judgment and order the
High Court has dismissed the said application and refused
to appoint an arbitrator mainly on the grounds that at the
time when the application under Section 11(6) of the Act,
1996 was filed in the year 2019, the matter was already
referred to the arbitral tribunal with respect to agreement
dated 27.04.2016, subsequent amendment agreement
dated 06.12.2017 and addendum agreement dated
28.05.2018 and also on the ground that the proceedings
were pending before the National Company Law Tribunal
(NCLT) initiated by the respondent for various acts of
oppression and mismanagement as a minority shareholder.
3. Shri K.V. Viswanathan, learned Senior Advocate appearing
on behalf of the appellants has submitted that in the
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present case there is a different Share Subscription and
Shareholders Agreement dated 27.04.2016 which contains
the arbitration clause in case of any dispute between the
parties (clause 17.1.2 of the Share Subscription and
Shareholders Agreement). It is further submitted that in
view of the dispute between the parties the appellants
issued notice of termination of the Second SHA
(Shareholders Agreement). It is submitted that thereafter
the appellants served a notice upon the respondent
invoking the arbitration clause 17.1.2. However, there was
a failure on the part of the respondent to nominate an
arbitrator which compelled and/or constrained the
appellants approaching the High Court for appointment of
an arbitrator under Section 11(6) of the Act, 1996. It is
vehemently submitted by Shri K.V. Viswanathan, learned
Senior Advocate appearing on behalf of the appellants that
the dispute between the parties is with respect to a
separate shareholders agreement and the said dispute was
the subject matter of another arbitral proceedings. It is
submitted that even the appellant was not a party to the
earlier arbitral proceedings.
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3.1 Now so far as the proceedings pending before the NCLT
initiated by the respondent with respect to the oppression
and mismanagement as a minority shareholder is
concerned, pendency of such proceedings cannot be a
ground to not to refer the dispute between the parties and
appoint an arbitrator.
3.2 Making the above submissions and relying upon the
decision of this Court in the case of Vidya Drolia and Ors.
Vs. Durga Trading Corporation; (2021) 2 SCC 1
(paragraphs 147.9, 147.11 and 225), it is prayed to allow
the present appeal.
4. Learned counsel appearing on behalf of the respondent
relying upon the decisions of this Court in the cases of
Booz Allen & Hamilton Inc. Vs. SBI Home Finance Ltd.,
(2011) 5 SCC 532, Chloro Controls India Private
Limited Vs. Severn Trent Water Purification Inc. and
and (supra) and by
Ors., (2013) 1 SCC 641 Vidya Drolia
supporting the impugned judgment and order passed by
the High Court and even relying upon some of the
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observations made by this Court in the case of Vidya
Drolia (supra) has prayed to dismiss the present appeal.
4.1 It is submitted that all the three agreements are/were
interlinked and therefore, in view of earlier award with
respect to other two agreements the present dispute with
respect to the third agreement shall not be maintainable.
4.2 Making the above submissions it is prayed to dismiss the
present appeal.
5. Having heard learned counsel appearing on behalf of the
respective parties and considering the fact that Share
Subscription and Shareholders Agreement dated
27.04.2016 entered into between the appellants and the
respondent contains the arbitration clause in case of
dispute between the parties arising out of the said
agreement, we are of the opinion that the High Court
ought to have allowed the application under Section 11(6)
of the Act, 1996 and ought to have left the issue on
arbitrability of dispute between the parties to the
arbitrator.
5.1 Clause 17 of the Agreement which contains the dispute
resolution process/arbitration clause reads as under:
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“17. DISPUTE RESOLUTION
17.1. Dispute Resolution, Jurisdiction and
Governing Law
17.1.1 The Parties agree that this Agreement
shall be governed by and construed in
accordance with the laws of India. If any
question, dispute, controversy or claim
shall at any time arise between the Parties
inter se or between a Party(ies) and the
Company, with respect to the validity,
interpretation, implementation or alleged
material breach of any provision of this
Agreement or the rights or obligations of
the Parties and the Company hereunder,
or regarding any question including the
question as to whether the termination of
this Agreement by either Party has been
legitimate, (collectively, "Dispute") then the
Parties shall attempt to settle . such
Dispute amicably between them by
reference to the management of the
Parties. In case of KEA, such management
shall be represented by a Director, and in
case of VGP, such management shall be
represented by a Director.
17.l.2 In the event that such management
representatives have not agreed upon a
decision within thirty (30) Business Days
after reference of the matter to them, then
either Party may within thirty (30)
Business Days after the first thirty (30)
Business Days referenced above, give to
the other Party, a notice of intention to
submit the Dispute to arbitration under
this Clause 17.
17.1.3 Upon issuance of such notice, the Dispute
shall be referred to a board of three (3)
arbitrators. Each Party shall be entitled to
appoint one (1) arbitrator and the two (2)
arbitrators so appointed by the Parties
shall appoint the third arbitrator. The
award of the arbitrators shall be final and
binding on the Parties and the Company.
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17.1.4 The seat of arbitration shall be Chennai
and the language to be used in the arbitral
proceedings in all instances shall be
English.
17.I.5 The arbitration shall be governed by the
provisions of the Indian Arbitration and
Conciliation Act, 1996 (as amended from
time to time and any statutory re
enactment governing arbitrations).
17.I.6 The fees of the arbitrators shall be borne
equally by the Parties. All other costs and
expenses of the arbitration shall be borne
by the Parties as the arbitrator may
award.
17.l.7 Subject to Clauses 17.1.1 to 17.1.6, each
Party submits to the exclusive jurisdiction
of the courts of Chennai. Provided that ,
the Parties agree to submit to the
exclusive jurisdiction of the competent
courts as may be necessary for the
enforcement of an arbitral award obtained
in accordance with this Clause 17.
17.1.8 Notwithstanding any other provision of
this Agreement, the rights and obligations
of the Parties under this Clause shall
survive termination of this Agreement.”
5.2 As observed hereinabove and from the impugned judgment
and order passed by the High Court it appears that the
High Court has refused to appoint an arbitrator, interalia,
on the ground that at the time when the application was
filed there were already arbitral proceedings pending
between the parties and the award was passed and also on
the ground that the proceedings were pending before the
NCLT at the instance of the respondent on the allegation of
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mismanagement and oppression which was filed by the
respondent as minority shareholder.
5.3 So far as the first ground is concerned, at the outset it is
required to be noted that according to the appellant,
appellant was not a party to the said proceedings and the
present Share Subscription and Shareholders Agreement
dated 27.04.2016 is an independent agreement and it is
the case on behalf of the respondent that all the three
agreements are interlinked and therefore, in view of the
above declared award with respect to the other two
agreements the present application shall not be
maintainable. As per the decision of this Court in the case
of Vidya Drolia (supra) unless on the facet it is found that
the dispute is not arbitrable and if it requires
further/deeper consideration, the dispute with respect to
the arbitrability should be left to the arbitrator. The
decision of this Court in the case of Vidya Drolia (supra) is
a three judges’ bench subsequent decision in which the
entire law on the scope and ambit of the Court at the stage
of application under Section 11(6) of the Act, 1996 has
been dealt with and considered by the Court.
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5.4 So far as the second ground on which the High Court has
refused to refer the dispute between the parties and
appoint an arbitrator, namely that the proceedings at the
instance of the respondent as minority shareholder for
oppression and mismanagement is pending before the
NCLT is concerned, on the pendency of such proceedings
the application under Section 11(6) of the Act, 1996
cannot be dismissed. It should be left to the arbitrator to
consider the entire aspect. The dispute is with respect to
the Share Subscription and Shareholders Agreement
which is altogether different from the allegations of
mismanagement and oppression at the instance of
minority shareholder initiated by the respondent.
6. In view of the above and for the reasons stated above the
High Court has erred in dismissing the application under
Section 11(6) of the Act, 1996 and has erred in refusing to
appoint an arbitrator with respect to the dispute between
the parties with respect to the Share Subscription and
Shareholders Agreement dated 27.04.2016. The impugned
judgment and order passed by the High Court is set aside
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and the application submitted by the appellants under
Section 11(6) of the Act, 1996 is hereby allowed. Shri
Justice K. Ravichandrabaabu Former Judge, Madras High
Court is hereby appointed as an Arbitrator to resolve the
dispute between the parties arising out of the Share
Subscription and Shareholders Agreement dated
27.04.2016. The issue with respect to the arbitrability of
the dispute is left to be decided by the learned Arbitrator.
The fees of the Arbitrator shall be decided by the learned
Arbitrator with the consent of the respective parties as per
the Schedule to the Act, 1996 as amended from time to
time. The present appeal is allowed accordingly.
………………………………….J.
[M.R. SHAH]
NEW DELHI; ………………………………….J.
NOVEMBER 04, 2022 [KRISHNA MURARI]
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