Full Judgment Text
* IN THE HIGH COURT OF DELHI AT NEW DELHI
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% Judgment pronounced on: 29 June , 2015
+ I.A. Nos.7292/2014 & 24002/2014 in CS(OS) No.1121/2014
ALSTOM T AND D INDIA LTD. ..... Plaintiff
Through Mr.Sandeep Sethi, Sr. Adv. with
Mr.Sunil Dalal, Mr.Sanjeev Narula
& Ms.Sanjana Sharma, Advs.
versus
SCHNEIDER ELECTRIC INFRASTRUCTURE LTD.
..... Defendant
Through Mr.A.S. Chandhiok, Sr. Adv. with
Mr.Rishi Kapoor, Adv. with
Mr.Parijat Kishore, Ms.Harleen
Singh, Mr.Ranjit Pandey and
Mr.Parminder Singh, Advs.
CORAM:
HON'BLE MR.JUSTICE MANMOHAN SINGH
MANMOHAN SINGH, J.
1. The plaintiff has filed the above mentioned suit, inter alia,
praying for declaration, decree of recovery of Rs.3,87,18,000/- along
with interest and costs, and also a decree of permanent injunction
against the defendant.
2. Along with the plaint the plaintiff has filed an application being
I.A. No. 7292/2014 under Order XXXIX Rule 1 and 2 CPC read with
Section 151 of the Code of Civil Procedure, 1908 praying, inter alia,
for restraining the defendant from making any claim regarding the
CS(OS) No.1121/2014 Page 1 of 34
capability of manufacturing and servicing the products and systems
including the SAS System which are operating on voltage above 52
KV, for the period prior to coming into effect of the scheme of
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demerger, i.e. the ‘appointed date’ (1 April, 2011) and also to
restrain from using any property of the plaintiff/ erstwhile Areva T & D
Ltd. in respect of “Remaining Business”, as per the scheme of
Demerger, particularly the Performance Certificates in respect of the
work done by Areva T & D India Ltd. with respect to the “Remaining
Business”.
3. Brief facts of the case as per plaint are that: a) the plaintiff is a
part of the ALSTOM group of companies, which is engaged in
manufacturing of power transmission instruments business globally
and the defendant is a part of the Schneider group of companies and
is engaged in the electricity distribution business.
b) M/s Areva SA, a French public multinational industrial
conglomerate, was involved in the business of transmission and
distribution of electricity. Areva SA conducted a competitive open
bidding process for the transfer of its global electricity transmission
and distribution electrical business. For participating in the bid
process, the ALSTOM and Schneider groups of companies entered
inter alia
into a consortium. The consortium agreement provided for
the separation of the global business of Areva SA, such that the
transmission business was to be allocated to the ALSTOM group and
the distribution business was to be allocated to the Schneider group.
c) Consequent to the global acquisition pursuant to the
consortium agreement and in line with agreement between the
CS(OS) No.1121/2014 Page 2 of 34
parties, an open offer was made to the public shareholders of the
Areva T&D India Ltd. The open offer documents provided that
transmission and distribution business of Areva T&D India Ltd., was
to be separated such that the transmission business would be
allocated to the ALSTOM group and the distribution business would
be allocated to the Schneider group.
d) The plaintiff and the defendant created a special purpose
vehicle (SPV) which was incorporated by the name of Alstom Sextant
5 for the purpose of acquisition of Areva SA globally, the terms and
bindings of that vehicle are no longer in operation as alleged.
e) The demerger of the plaintiff was actually the distribution of the
acquired business of the Areva T&D India Ltd. whereby the
transmission business (system operating above 66 kv/52 kv) was
allocated to the ALSTOM group and the distribution business (system
operating below 66 kv/52 kv) was allocated to Schneider group.
There was a clear cut demarcation of division of business between
the Transferor and the Transferee.
f) A scheme of arrangement of demerger of Areva T&D India Ltd.
was proposed. Under this scheme of arrangement of demerger, the
distribution business of Areva T&D was given to the defendant, while
the remaining business, i.e. the transmission business was given to
the plaintiff.
g) It was agreed in the scheme of demerger under Clause 1.2.1
(c) and (d) that:
"(c) all permits, licenses, permissions, approvals,
consents, benefits, registrations, rights, entitlements,
CS(OS) No.1121/2014 Page 3 of 34
certificates, allotments, quotas, no-objection
certificates, exemptions, concessions, liberties and
advantages including those relating to privileges,
powers, facilities of every kind and description of
whatsoever nature and the benefits thereto (collectively
"Licenses") that pertain exclusively to the Demerged
Undertaking……
(d) all contracts, agreements, purchase orders, export
orders memoranda of understanding, memoranda of
undertakings, memoranda of agreements, memoranda
of agreed points, bids, tenders, expression of interest,
letters of intent, hire and purchase arrangement, other
arrangements, understanding, deeds, and other
instruments of whatsoever nature and description,
whether written, oral or otherwise "
h) The scheme defined the business that was to be transferred or
demerged as the "Demerged Undertaking". As per well established
industry standards, the "Distribution Business" is understood to be
one dealing with products and systems operating at a low or medium
voltage, usually lower than 66 kv/ 52 kv. The "Transmission
Business" is understood to be one dealing with products and
systems, which operate on voltage higher than 66 kv/ 52 kv.
Consequently, even the scheme of demerger defined the "Demerged
Undertaking" on the lines of voltage, as the business dealing with
products and systems operating at a voltage lower than or equal to
52kv.
i) This scheme of demerger was sanctioned by this Court and by
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the High Court of Gujarat through order dated 24 October, 2011.
CS(OS) No.1121/2014 Page 4 of 34
j) As per the demerger agreement at clause 1.1.6.the defendant
was originally known as "Smartgrid Automation Distribution and
Switchgear Ltd." (hereinafter referred to as "Smartgrid"), a company
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incorporated on 12 March, 2011, under the Companies Act, having
its registered office at Milestone 87, Vadodara, Halol Highway,
Village, Kotambi, Post Office Jarod, Vadodara, 391510, Gujarat. It is
thus evident from Clause 1.1.6 that the defendant having
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incorporated on 12 March, 2011 can't possess an experience of 7
years. And thus was unable to fulfill "Essential Qualifications Criteria"
as required by Notice Inviting Tender ("NIT") bearing number:
IRCON/ ELECT/ 5020/ DMRC.CE-6 LOT-l/CRP&SAS/14 of IRCON
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International Limited on 13 February, 2013. That the instant
Application under reply is liable to be dismissed on this ground alone.
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k) On 13 February, 2013 IRCON International Limited issued a
NIT for the supply, testing and commissioning of substation
automation system (SAS). The NIT stipulated certain eligibility criteria
which required inter alia , that the bidder must have relevant
experience of operation on 220kv system or higher. The bidders were
required to submit performance certificates from clients having
successfully completed the work in the last seven years.
l) In order to meet the criteria stated in the NIT, the defendant
submitted a performance letter issued by Jindal Power Limited dated
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4 December, 2009 and a letter by L&T Construction dated 19
June, 2013. These letters indicated that an SAS & CRP Package for
400/220kv switchyard project was successfully executed by AREVA.
These letters are the goodwill/property of the plaintiff and the
CS(OS) No.1121/2014 Page 5 of 34
defendant has falsely claimed to have experience of operation on
220KV system or higher. The determination was wrongly used for
certificates with regard to transmission business which forms part of
the transmission business and the defendant is not entitled to use
them as alleged by the plaintiff.
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m) The plaintiff wrote a letter dated 10 October, 2013 and brought
to the notice of the defendant that in terms of the scheme of
arrangement of demerger between AREVA T&D India Ltd. and
Smartgrid, the boundary limits for the business operations of the
demerged entity, were clearly defined as less than 52 kv segment
(Distribution Segment only) and in any case it could not use the
Property/Certificate pertaining to the experience of the Plaintiff .The
plaintiff accordingly called upon the defendant to immediately
withdraw the documents submitted to IRCON.
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n) In reply to plaintiff’s notice dated 10 October, 2013, the
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defendant replied through a letter dated 24 October, 2013
misinterpreting the provisions of the demerger scheme and alleged
that the 52 KV qualification as mentioned in the definition of
"demerged undertaking" (under Clause 2.1 at page 13 of the
Demerger Scheme) is limited and applicable to SDS, PDS and DTR
only. The defendant mischievously and wrongly stressed on the use
of punctuation, "semi colon (;)" and contended that the punctuation
disjoined the provision associated with SDS, PDS and DTR from the
provision associated with SAS; alleging that 52kv qualifications
associated with SDS, PDS and DTR did not spill over to SAS.
CS(OS) No.1121/2014 Page 6 of 34
o) It is averred in the plaint that the defendant does not dispute
the plaintiff’s contention with respect to rationale of the scheme and
the understanding between the parties with respect to the
division/demarcation of the "Transmission Business" and "Distribution
Business" of AREVA T&D, being based and linked with the voltage,
i.e. 52 kv. This is further borne out of Clause 1.1.7 of the Scheme
which unequivocally and explicitly states that "Transferor Company
proposes to transfer its distribution business to Transferee
Company". "Distribution Business" intended to be transferred is
mentioned in Clause 1.1.4(b) which includes only "Medium and low
voltage protection relays and electricity distribution and automation
system". There is no ambiguity that "High Voltage relays and power
system automation equipment" was kept out of the business
transferred to the defendant. Further, the objective of the Demerger is
further evident from Clause 1.1.7 (b), which provides that the
demerger shall be in the larger interest of both companies and is to
"Enable the transferor company and transferee company to focus
and Enhance their respective core business operations, which is
"Transmission Business" and Distribution Business" respectively. The
defendant in its reply has not disputed the above, but has merely
raised misconceived objection. Besides, the only other objection is
with respect to the certificates being that of Noida Unit, which
property forms part of "Demerged Undertaking". The said reliance is
also misplaced as alleged by the plaintiff. Even otherwise, the suit of
the plaintiff is not confined only to the two certificates in question, but
is in respect of any property of the plaintiff/erstwhile AREVA T&D in
CS(OS) No.1121/2014 Page 7 of 34
respect of the "Remaining Business". With respect to the Experience
Certificate pertaining to the capabilities of the factory situated at
Sector 57, Noida, it is stated that even if the property at Noida did
come to the share of the defendant as part of the "Demerged
Undertaking" it does not mean that the experience certificates in
question are the property of the defendant. The facility at Noida had
nothing to do with the right of the parties in respect of their individual
businesses. It is totally misconceived to allege that the experience
certificates are of the defendant merely because they are in respect
of the Noida unit. The experience certificates are in respect of the
supplies pertaining to the projects of Transmission Business prior to
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1 April, 2011. Besides, the plaintiff’s relief is not confined to the two
experience certificates. Such certificates can be in respect of any
facility, but the essential factor is the nature of business, for which the
certificate is issued. Any supplies, references, credentials, predating
appointed date are the property of the plaintiff, if they were a system
above 52 Kv and therefore, the defendant’s contention is completely
against the sanctioned scheme of Demerger.
p) The two certificates, which the plaintiff could lay its hands on,
inter-alia being the subject matter of challenge in the present suit, are
evidently in respect of the period, when the demerged undertaking
did not even exist. The defendant has unlawfully procured such
certificates in its name and misused the same for participating in the
tender. The defendant would have otherwise be ineligible to
participate in the tender and therefore it is the defendant who is guilty
of unlawful conduct. The defendant has misused the properties of the
CS(OS) No.1121/2014 Page 8 of 34
plaintiff, which in the nature of the experience certificates pertaining
to transmission business, which belong exclusively to the plaintiff,
being part of the 'Remaining Business'.
4. In a nut-shell the case of the defendant is that :
i) The plaintiff admits that the “transfer of the assets including the
properties, assignment of contracts etc. continues to be done
smoothly between the plaintiff and the defendant.” Once
implementation of the demerger scheme is admitted, jurisdiction of
the Company Court gets attracted for, in terms of mandate of law,
Company Courts alone have the jurisdiction to oversee the
implementation and in the event of any dispute between the parties in
relation thereto, the Company Courts alone will have the jurisdiction
to entertain and try such an application, if at all the same is
maintainable.
ii) The plaintiff, for the first time after the orders of 2011, placed an
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order on the defendant for equipment ranging beyond 52 KV on 6
September, 2013, to which the defendant had sent a detailed
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response on 24 October, 2013. There was a complete silence on
the part of the plaintiff thereafter till filing of the present suit in April,
2014. This itself disentitled the plaintiff from seeking any interim
order.
iii) In terms of the Scheme, not only the said factory stood vested
into the defendant, but the contracts assigned to it as well, which was
within the knowledge of the plaintiff. The purchase order with respect
to Control of Relay Panel of 220 KV also stood vested into the
CS(OS) No.1121/2014 Page 9 of 34
defendant and the remaining part of the purchase order was
completed by the defendant and items delivered, after the said order
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was amended on 19 May, 2011.
iv) After the orders of the Company Courts the said factory, all
certificates, contracts assigned to it etc., stood vested into the
defendant. The plaintiff itself accepted the fact that the said factory
stood vested into the defendant with all pending contracts, services
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and placed order on the defendant on 24 November, 2012, with
respect to manufacturing and delivery of CRP 132 KV Feeder Panels
and Control and Relay Panels of 132 KV. Similarly orders were
placed for products which could be manufactured by the defendant
alone, at its Noida factory which were successfully performed by the
defendant in whole and in part. Orders were continued to be placed
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by the plaintiff on the defendant and even as late as on 21 October,
2013, it had placed an order on the defendant.
v) The certificates to which the plaintiff claims right have been
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issued by Jindal Power Limited dated 4 December, 2009 and by
L&T Constructions based on facilities, experience and capacities of
the above factory and the work carried out therein. Once there is no
dispute that the said factory stood vested into the defendant, then
nothing can be claimed to the contrary. As admittedly, the said unit
stood vested into the defendant, the said certificates which formed
integral part of the NOIDA unit, would also stand vested into the
defendant to the exclusion of anyone else, including the plaintiff who
is vested with any right to use or rely upon the said certificate dated
CS(OS) No.1121/2014 Page 10 of 34
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4 December, 2009 and the communication dated 9 June, 2013.
There is no agreement between the parties to show that the plaintiff
can claim exclusive right in respect of past experience and capacities
and facilities vested with the plaintiff alone.
vi) It is alleged by the defendant that the plaintiff has, inter alia , got
many orders and successfully performed many of them, from Power
Grid Satna, Essar Mahan, JSPL Angul, Malwa, GMR Emco, Essar
Oil, GETCO, Essar Steel, WBSETCL Pkg 6, WBSETCL Pkg 7,
WBSETCL BANGAN. The defendant carried out tests in relations to
the main server of Essar Steel. Thereafter, a joint meeting took place
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on 3 October, 2012, in which the representatives of Essar Steel, the
plaintiff and the defendant deliberated upon the products and it was
agreed that if Essar Steel was to face any issue then the defendant
alone will assist them within thirty days thereof. The present suit has
been filed just to harass the defendant.
vii) The plaintiff has deliberately omitted to mention that automation
equipment is independent of voltage class as it works on secondary
voltage. An electricity transformer transforms the voltage level. The
side that carries electricity at lower voltage is said to be on secondary
voltage. For purpose of automation, electricity is passed through a
voltage transformer, which reduces voltage to 100 volts and a current
transformer which changes current from 1 Ampere to 5 Ampere. The
electricity signal is then fed to the panel. In this manner, there is a
proportionate correlation/equation between the voltage class of the
sub-station and the electricity being fed into the panel. This
CS(OS) No.1121/2014 Page 11 of 34
correlation is then used to measure electricity passing through the
sub-station.
viii) Sub station automation consists of the following components :
a. Panels;
b. Relays;
c. Human Machine Interface (HMI). This is the display that gives
readings.
These components are then integrated by an embedded
software. The software has pre-defined protocols and parameters,
which activates safety tripping on the grid, depending on the signals
received through the panels and relays, which are arrayed on the
secondary voltage as described above. It is this automated feature,
that is the crux of sub station automation.
ix) There is no clause which restricts the demerged undertaking,
viz., the defendant from utilising its services and capacities. The
plaintiff itself admits that it has no objection if the defendant
manufactures equipment for over 52 KV, but alleges it cannot use or
take benefit of certificates issued to its predecessor, viz., AREVA,
pertaining to the factory at Noida.
5. When the suit along with injunction application was listed
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before Court for first time on 23 April, 2014, the following order was
passed:
CS(OS) No.1121/2014 Page 12 of 34
“6. It is the case of the plaintiff that under a scheme of
demerger of Areva T and D India Ltd., part of the
business of Areva T and D India Ltd. came to the plaintiff
and the plaintiff is entitled to the benefit of the experience
of the works done by the said Areva T and D India Ltd.;
how the defendant, to whom/in which the other
businesses of Areva T and D India Ltd. stand transferred
and/or stand vested in, is illegally taking benefit of the said
experience and which the defendant under the scheme of
arrangements sanctioned by this Court and by the High
Court of Gujarat is not entitled.
7. It has been enquired from the senior counsel for the
plaintiff whether not the same will involve the
interpretation of the scheme/arrangement and whether not
the jurisdiction to deal with the said aspect is of the
Company Court only under Section 392(1) of the
Companies Act, 1956; it may be mentioned that Section
392(2) further provides for the consequences of the
scheme of compromise or arrangement sanctioned being
unworkable and it will not be possible for the Civil Courts
to review as provided under Section 392(2); thus it
appears that the exclusive jurisdiction in this respect is of
the Company Court only.
8. The senior counsel for the plaintiff has argued that
the plaintiff, besides the declaration to the said effect, has
also claimed the relief of recovery of monies equivalent
to the benefit already enjoyed by the defendant of
wrongfully relying upon the said Experience Certificate
and the relief of injunction restraining the defendant from
in future availing the benefit of the said experience.
9. Though prima facie it appears that the reliefs
aforesaid claimed are also within the domain of the
Company Court, as the language of Section 392(1)(b) is
found to be all pervasive, but it is deemed expedient to
CS(OS) No.1121/2014 Page 13 of 34
give an opportunity to the plaintiff to address on this
aspect, after notice has been issued to the defendant.
10. Issue summons of the suit and notice of the
application to the defendant by all modes including dasti
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and through electronic mode, returnable on 29 April,
2014.
11. The senior counsel for the plaintiff states that date
for opening of the technical bids made by the plaintiff as
well as the defendant for other contracts are falling due on
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30 April, 2014 and soon thereafter.
12. The claim if any by the defendant in the said bids on
the basis of aforesaid experience certificates shall be
subject to further orders in this suit. However, the plaintiff
to not communicate this order to any of the parties, who
have invited the bids.”
6. It is submitted on behalf of the plaintiff that Section 392 of the
Companies Act (hereinafter referred to as the ‘Act’), does not bar the
filing of the present suit or effect the maintainability. The scheme of
Demerger, sanctioned by this Court, is absolutely clear and there is
no ambiguity. The plaintiff is not required to seek any modification in
the scheme of Demerger. The understanding between the parties
with respect to scheme of Demerger, is unambiguous and the various
clauses in the scheme of Demerger and the subsequent action taken
by the parties to give effect to the terms of the scheme of Demerger,
leaves no room for doubt. The scheme of Demerger as sanctioned by
this Court, takes care of all eventualities and also provides for the
rights vested in the parties to the present suit in respect of the
property of AREVA T&D relating to the "Demerged Undertaking" as
CS(OS) No.1121/2014 Page 14 of 34
well as "Remaining Business". The scheme of Demerger is also
detailed enough to consider the various contracts entered into
between AREVA T&D and the third parties. It also categorically
provides that in case of "mixed contracts", the predominance of the
contracts would be the deciding factor for either party to be vested
with the rights arising out of such contracts. In case a mixed contract
pertains to both transmission business as well as the distribution
business, then the predominant aspect of such a contract would
decide as to whether the rights vested in such a contract would be a
part of the "Demerged undertaking" or the "Remaining Business".
7. It is also submitted by the plaintiff that Section 392(1) of the Act
deals with the power of the Court to supervise the carrying out of the
compromise or an arrangement and is limited to giving directions with
regard to any matter connecting therewith or make modifications in
the compromise or arrangement for its proper working. Further the
scope of Section 392 (2) of the Act, is limited and deals with the
power of the Court to make an order winding up the company, in the
event the Court is satisfied that the compromise or an arrangement
sanctioned under Section 391 cannot be worked satisfactorily with or
without modifications. The aforesaid provisions do not deal with the
subject matter of the present suit which is specifically in respect of
the enforcement of the right of the plaintiff to prevent the misuse of its
property by the defendant and to recover the damages caused on
account of such misuse. The case of the plaintiff is that the defendant
is wrongly and unlawfully misusing the properties of the plaintiff which
pertains to "Transmission Business”/ “Remaining Business" and that
CS(OS) No.1121/2014 Page 15 of 34
the defendant, to sustain such misuse, is wrongly misinterpreting the
definition of "Demerged Undertaking". Therefore it is wrong to say
that the plaintiff admits that the disputes relate to the rights of
Demerged Undertaking or that the present suit is regarding the rights
of the parties under the implementation of the scheme of Demerger.
8. The plaintiff has no cause to seek any modification in the
scheme of Demerger. The scheme of Demerger and the definition of
"Demerged Undertaking" and "Remaining Business" are clear and
unambiguous. The rights of the parties are also well provided for. In
clause 3.8 regarding the conduct of business, it is provided that all
the assets, liability and obligations pertaining to the remaining
business, arising prior to, on or after appointed date, shall continue to
belong to, be vested in and be managed by the transferor company.
The experience certificates are part of the assets of the Remaining
Business and the same belong exclusively to the plaintiff.
9. Therefore, the objection raised by the defendant has no
application in the facts and circumstances of the present case and
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even observation made in the order dated 23 April, 2014 have no
consequence.
10. The case of the plaintiff is that the defendant had used the
inter-alia
goodwill/ properties of the plaintiff being the certificates
referred above and had falsely claimed to have experience of
operation on 220KV system or higher and to have successfully
completed the works in last seven years. The defendant falsely
claimed to be having the requisite qualifications to satisfy the
eligibility criteria under the NIT referred above. The certificates
CS(OS) No.1121/2014 Page 16 of 34
wrongly used by the defendant are related to the transmission
business which forms part of the "Remaining Business" and not
"Demerged Undertaking" that stood transferred to the defendant.
11. It is argued by Mr.A.S.Chandhiok, Senior counsel appearing on
behalf of the defendant that the certificates to which the plaintiff
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claims right have been issued by Jindal Power Limited dated 4
December, 2009 and by L & T Constructions based on facilities,
experience and capacities of the above factory and the work carried
out therein. Once there is no dispute that the said factory stood
vested into the defendant, then nothing can be claimed to the
contrary. As admitted in the plaint that the said unit stood vested into
the defendant, the said certificates which formed integral part of the
Noida unit, would also stand vested into the defendant to the
exclusion of anyone else, including the plaintiff.
12. As far as objection of the defendant with regard to jurisdiction
with the Company Court under Section 392 is concerned, this Court
is inclined to decide these two pending applications as it is felt that
the said issue is a subject matter of disputed fact. The same can be
postponed and may be considered at the time of framing of issues.
With regard to injunction sought by the plaintiff, it is to be decided as
to whether as per facts of this matter, the plaintiff is entitled for
injunction as prayed or not.
13. As per the terms of Section 14 (a) of the Specific Relief Act,
1963 there are cases where compensation is an adequate relief,
Section 14 (b) are those cases where contracts run into minute
details or is dependent on personal qualifications of parties, and
CS(OS) No.1121/2014 Page 17 of 34
Section 14 (d) are cases wherein performance of continuous duty is
required. Under the provisions of Section 16 of the Specific Relief
Act, specific performance of a contract cannot be enforced in cases
where the party is not ready and willing to perform essential terms of
the contract.
14. It is rightly observed in the case of Lalbhai Dalpatbhai & Co.
vs. Chittaranjan Chandulal Pandya, AIR 1966 Guj 189 as under:
“The Court has a discretion whether or not to enforce the
negative stipulation by grant of an injunction that
discretion is declared in no uncertain terms by
Section 36 and is further emphasized by Section 38.
Sub-sections (1) and (2). The language of Section 42
also shows that the discretion of the Court is not
intended to be taken away by anything stated in the
section. The words used are "the circumstance that the
Court is unable to compel specific performance of the
affirmative agreement shall not preclude it from granting
an injunction" so that Section 41, Clause (e) shall not
stand in the way of the Court in granting an injunction;
but the Court would still have to consider whether in the
exercise of its discretion it should grant the injunction or
not.”
x x x x
“If this principle is to be applied, it is clear that two
conditions must be fulfilled before a restraint imposed by
a negative covenant can be held enforceable by an
injunction in the first place if must be reasonable in
reference to the interest of the contracting parties and
secondly it must be reasonable in reference to the
interest of the public. In the case of each condition the
lest of reasonableness must be satisfied. To be
reasonable in reference to the interest of the contracting
parties the restraint must afford no more than adequate
CS(OS) No.1121/2014 Page 18 of 34
protection to the party in whose favour it is imposed. To
be reasonable in reference to the interest of the public, it
must be in no way injurious to the public”.
15. The defendant does not dispute the understanding between the
parties with respect to the division/demarcation of the "Transmission
Business" and "Distribution Business" of AREVA T&D.
16. It is not denied by the plaintiff that IRCON International Ltd.,
had placed an order on the defendant as the defendant succeeded in
the open bid for the same. The entire material was examined by
IRCON International and on being satisfied about the capacity quality
and delivery, the order was placed.
17. It is also admitted in the plaint that the plaintiff also participated
in the bidding process. However, the defendant was declared as L1,
while the plaintiff was declared as L2. The tender was allotted to the
defendant, despite it not being qualified to bid in the tender process,
as the defendant could not use the Certificate of past experience of
Areva.
18. The plaintiff has admitted the fact that the said factory stood
vested into the defendant with all pending contracts, services and
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placed order on the defendant on 24 November, 2012 with respect
to manufacturing and delivery of CRP 132 KV Feeder Panels and
Control and Relay Panels of 132 KV. Similarly orders were placed
for products which could be manufactured by the defendant alone, at
its Noida factory which were successfully performed by the defendant
in whole and in part. Orders were continued to be placed by the
CS(OS) No.1121/2014 Page 19 of 34
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plaintiff on the defendant and even as late as on 21 October, 2013,
it had placed an order on the defendant.
19. There is no clause which restricts the demerged undertaking,
viz., the defendant from utilising its services and capacities. The
plaintiff itself admits that it has no objection if the defendant
manufactures equipment for over 52KV, but alleges it cannot use or
take benefit of certificates issued to its predecessor, viz., AREVA,
pertaining to the factory at Noida. Even Mr. Sandeep Sethi, learned
Senior counsel appearing on behalf of plaintiff has confirmed the
same. He even informed the Court on behalf of his client that it is
open to both parties to contact any company, government authority
in order to offer manufacturing equipment of any kind and the plaintiff
has no objection if deals with the equipment far beyond 52KV.
However his objection that the defendant is not entitled to use the
experience certificate for the past seven years as claimed in the
tender process, the statement was made therein. The said statement
is false within its knowledge as the defendant came into the picture of
said activities in the year 2011. The said act of the defendant would
definitely harm the business of the plaintiff and such claim of seven
years experience made by the defendant is contrary to the spirit of
demerged undertaking despite no specific prohibition in this respect.
As far as the claim of past experience of seven years is
concerned, there is a force in the submission of the learned Senior
counsel for the defendant that at this stage the plaintiff cannot
conclude by himself that the defendant has no experience of seven
years as the defendant is in its business for many years and
CS(OS) No.1121/2014 Page 20 of 34
therefore the defendant is entitled to take the advantage of
experience prior to 2011 also. In view of rival two versions, at the
present stage, no final conclusion can be drawn as to whether the
defendant has past experience of seven years or not. As it is a
disputed question of fact and the same has to be considered after
trial.
20. It is the admitted position that there is no negative covenant
and the defendant cannot work on commissioning of systems working
on high voltage or cannot venture into the transmission business,
however, the only embargo/restriction on the defendant is that it
cannot use the past experience of the plaintiff qua transmission
business working on high voltage >52KV. The only condition of the
demerger scheme must not be flouted by the defendant whereby the
past experience of commissioning the systems working on high
voltage >52 KV rests only with the plaintiff. The power Grid
Corporation of India Ltd. grated approval to the defendant company
st
on 31 May, 2012, regarding manufacturing and quality plan of the
defendant in relation to a contract for Control and Relay Panel, which
are to the knowledge of the plaintiff.
21. Therefore, the plaintiff is not entitled to get any benefit to
enforce the contract under the exception clause. At the best, the
plaintiff may be entitled to compensation, damages and interest
thereon. No injunction can be granted by the Court to prevent its
breach as such a contract is not specifically enforceable as it is
settled law that even where a contract has been breached, the
aggrieved party would be able to claim damages.
CS(OS) No.1121/2014 Page 21 of 34
22. In case the plaintiff in trial would be able to establish that the
defendant has violated the understanding and undertaking with
respect to the division and demarcation of the transmission business
and distribution business of Areva T & D, the plaintiff may be entitled
for damages as the plaintiff itself at present has filed suit for recovery
of Rs.3,87,18,000/- along with interest suffered by them on the date
of filing the suit. The plaintiff is also entitled to enhance the damages
if so required. The plaintiff at present is not able to establish its case
on fact to the exception of Section 14 and 41 of the Specific Relief
Act.
23. There is no thumb rule that injunction must or must not be
granted rather each case depends upon its own facts and
circumstances. Prima facie, in the present case, facts and
circumstances do not call for passing the interim order as prayed for
rather, it is directed to the defendant to maintain the accounts
particularly to the business carried out on the basis of past
experience certificate and they shall file copy of statement of account
every six months before Court. The first statement would be filed
from the date of suit till the date of order within four weeks. The view
taken by this Court is prima facie , which shall have no bearing when
the suit is finally decided on merit after recording the evidence of the
parties.
24. I.A. No.7292/2014 under Order 39 Rule 1 and 2 CPC is
disposed of accordingly.
CS(OS) No.1121/2014 Page 22 of 34
25. Let me now consider another application filed by the defendant
during the course of hearing being I.A. No. 24002/2014 under Order
12 Rule 6 CPC. Relevant clause of the Consortium Agreement reads
as under :
"Article 23.1: This Agreement is governed by the provisions of
French Law.
Article 23.2: The parties undertake to seek an out of court
settlement in case of any disagreement or dispute
arising from this agreement particularly with regards
to its validity, interpretation, performance or
cancellation. Failing that any disagreement or dispute
arising after or at the time of this agreement shall be
resolved by Arbitration according to French Arbitration
Association (association Francaise d'Arbitrage) which
parties declared to accept. Arbitration shall be
conducted in French and Arbitration shall take place
in Paris.”
26. Mr. A.S. Chandhiok, learned Senior counsel appearing on
behalf of defendant submits that it is admitted position that :
th
a) Existence of consortium agreement dated 9 November,
2009 and amendments to the agreement.;
b) Plaintiff and defendant form part of Alstom and Schneider
th
group, and are part of the Consortium Agreement dated 9
November, 2009;
c) Scheme of demerger is in pursuance to the Consortium
Agreement; and
d) Disputes and differences arise out of the Consortium
Agreement.
27. It is submitted by him that admittedly, the demerger was the
outcome of the consortium agreement with its amendments.
CS(OS) No.1121/2014 Page 23 of 34
Therefore, the demerger scheme on the admission of the plaintiff, is
incorporated by reference and forms an integral part of the consortium
agreement.
28. In para 9 of the application, defendant has stated as under,
which is also not rebutted:
“it is pertinent to state herein that the amendment dated
17.05.2010 was qua the Indian acquisition, in other words any
dispute of differences necessarily have to arise within the
ambit of the said agreement as amended and is subject to the
same arbitration clause. The amendment agreement sought
to modify or vary the terms of the consortium agreement
solely to the extent that they relate to the Indian companies. It
is submitted that the amendment agreement for part of the
consortium agreement. It was further agreed in between the
parties that in case of dispute arising out from the amendment
agreement particularly with regards to its validity,
interpretation, performance or cancellation the parties
undertook to seek out of court settlement. Failing that any
disagreement or dispute arising after or at the time from this
agreement shall be resolved by arbitration according to the
rules of the French arbitration association (association
Francaise d'Arbitrage) which parties declared to accept. It was
further agreed that the arbitration shall be conducted in
French. Arbitration shall take place in Paris. Consequently the
parties agreed that the Hon'ble Court in Paris alone will
conduct the arbitration proceedings or give the award.”
29. It is argued on behalf of defendant that once disputes or
differences are covered by the Arbitration Agreement, the clause
therefore, ousts the jurisdiction of the Court; both Territorial and the
subject matter, the governing laws being French law and the venue
of arbitration being Paris.
30. The following decisions are referred by Mr. Chandhiok,
CS(OS) No.1121/2014 Page 24 of 34
learned Senior counsel for the defendant :
i) In the matter of Bhushan Steel Ltd. vs. Singapore
International Arbitration Centre and Anr., ILR (2010) VI Delhi 295
it was held that the parties by agreement have expressly and
impliedly excluded the provisions of the Arbitration and Conciliation
Act, 1996. Thus, the suit is not maintainable and has observed as
under:
"42. The governing law, in the case at hand, is clearly
submitted to be 'international law' the meaning of which has
been discussed above at length. The place or venue of the
arbitral proceedings is also clearly mentioned to be the SIAC
which is at Singapore.
43. It is evident from above that the arbitration clause in
the sales contract clearly provides the governing law as well
as the place of arbitration in case of disputes between the
parties. The 'International Law' which is stated to be
applicable to the dispute clearly excludes this Court's
jurisdiction in the present matter.
44. In the case of Citation Infowares Ltd. v. Equinex
Corporation (2009) 7 SCC 220 in paragraph 25 of the
judgment, it is stated that the law of arbitration is normally the
same as the proper law of the contract and it is only in
exceptional cases that it is not so, even where the proper law
of contract is expressly chosen by the parties; it was further
held that there is a presumption that the law of the country
where the arbitration is agreed to be held is the proper law of
arbitration.
47. In the present case, it is evident that the parties by
agreement have expressly and impliedly excluded the
provisions of the Arbitration and Conciliation Act, 1996. Thus,
the suit is not maintainable."
CS(OS) No.1121/2014 Page 25 of 34
ii) In the case of Ultra Home Construction (P) Ltd vs Choice
Hotels International Inc. & Ors., 194 (2012) DLT it was held as
under:
"28. It is well settled principle of law that once it has been
established that all the necessary pre-requisites enshrined
under Section 8 of the Act are fulfilled and there is no dispute
regarding the validity of the Arbitration Agreement, then in
such circumstances, the judicial authority ceases to exercise
jurisdiction and the dispute is to be adjudicated upon by the
learned Arbitrator as Section 8 of the Act is mandatory in
nature."
43. In view of the facts in the present case and for the
aforesaid reasons given in earlier paras of, my order, it is
clear that the suit filed by the plaintiff is merely to circumvent
the arbitration proceedings..."
iii) In the case of Bharat Aluminium Company and Ors. vs.
Kaiser Aluminium Technical Service, Inc. , 2012 (9) SCC 552, it
was held that a suit is barred and not maintainable which reads as
under:
"175. In our view, such a suit would not be maintainable,
because an interlocutory injunction can only be granted
during the pendency of a civil suit claiming a relief which
is likely to result in a final decision upon the subject in
dispute. The suit would be maintainable only on the
existence of a cause of action, which would entitle the
Plaintiff for the substantive relief claimed in the suit. The
interim injunction itself must be a part of the substantive
relief to which the Plaintiffs cause of action entitled him.
In our opinion, most of the aforesaid ingredients are
missing in a suit claiming injunction restraining a party
from dealing with the assets during the pendency of
CS(OS) No.1121/2014 Page 26 of 34
arbitration proceedings outside India. Since the dispute is
to be decided by the Arbitrator, no substantive relief
concerning the merits of the arbitration could be claimed
in the suit. The only relief that could be asked for would
be to safeguard the property which the Plaintiff may or
may not be entitled to proceed against.
179. In matters pertaining to arbitration, the suit would
also be barred Under Section 14(2) of the Specific Relief
Act. Although the provision exists in Section 37of the
Specific Relief Act, 1963, for grant of temporary/perpetual
injunction, but the existence of cause of action would be
essential under this provision also. Similar would be the
position under Section 38 of the Specific Relief Act."
31. The contention of Mr. Sandeep Sethi, learned Senior counsel
for the plaintiff is that the suit is maintainable as consortium has
worked itself out. There is no dispute of any nature about consortium
being left out. On the other hand counsel for the defendant has
referred para 16 of the plaint wherein the following averments was
made :
"that the transfer of the assets including the
properties, assignment of contracts etc. was done,
and continues to be done smoothly between the
plaintiff and the defendant " (Emphasis supplied)
32. It is submitted by Mr. Sethi that it was agreed between the
parties that all assets will jointly be owned by the parties and the
dispute in relation to distribution of the assets is governed by the
Consortium Agreement. Thus, the matter relating to the assets will be
governed by the Arbitration. Therefore, on these admissions the suit
must be dismissed.
CS(OS) No.1121/2014 Page 27 of 34
33. It appears from the pleadings and documents filed by the
parties that they entered into a consortium only for participating in the
bid of taking over the gobal business of Areva SA and the separation
of the T and D business, thereof. The relevant para of the consortium
states as under:
“Article 17 Entry into force - Duration
17.1 This Agreement shall be effective as from the date of
its signature by the Parties, and shall remain in force
under the conditions set forth under the conditions set
forth below:
(b) In the event of acceptance of the Offer, this Agreement
shall remain in force until the latest of the following
dates:
fulfilment by the Seller of all the obligations deriving
from all documents relating to the Acquisition,
including the guarantees granted by the latter in
respect of the Acquisition;
the full and final settlement of all accounts and
settlement of all disputes relating to the Acquisition,
Separation and transactions provided for in this
Agreement, both between the Parties and the Seller
and between the Parties themselves; "
34. There is no arbitration agreement between the plaintiff and the
defendant. The defendant company -'Schneider Electric Infrastructure
Ltd.' is a company under the Companies Act and has a separate legal
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personality. The defendant company was incorporated only on 12
March, 2011, while the Consortium Agreement was entered into on
th th
9 November, 2009 and was amended inter alia on 17 May, 2010.
CS(OS) No.1121/2014 Page 28 of 34
Thus, the defendant company was not even in existence when the
Consortium Agreement was entered into.
35. Section 7 of the Arbitration and Conciliation Act, 1996 requires
an arbitration agreement to be in writing. Section 7 states:
“...
(3) An arbitration agreement shall be in writing.
(4) An arbitration agreement is in writing if it is
contained in—
(a) a document signed by the parties;
...”
36. There is no document signed by the parties to the present suit
which contains an arbitration clause.
37. The alleged Arbitration clause in the Consortium Agreement
has not been incorporated by reference in any agreement between
the parties at all as alleged. The contention of the defendant that the
th
amendment agreement dated 17 May, 2010 which was qua the
Indian acquisition would lead to incorporation by reference is
completely baseless. It is rightly submitted by the plaintiff that an
arbitration clause can only be incorporated by reference when the
reference is such so as to make the arbitration clause part of the
contract. Such reference has to be clear and specific. Reliance is
placed on M.R. Engineers and Contractors P. Ltd. Vs. Som Datt
Builders Ltd., (2009) 7 SCC 696. In the Demerger Scheme there is
no reference, either express or implied, to the arbitration clause of the
Consortium Agreement.
CS(OS) No.1121/2014 Page 29 of 34
38. It is trite law that reference can only be made if the subject
matter of the dispute is covered by the arbitration agreement. Section
8 of the Arbitration and Conciliation Act, 1996 expressly states that
reference to arbitration is to be made where "an action is brought in a
matter which is the subject of an arbitration agreement." Section 45 of
the Arbitration and Conciliation Act expressly states that reference is
to be made "when seized of an action in a matter in respect of which
the parties have made an agreement referred to in section 44..."
(emphasis supplied). Reference can only be made if the subject
matter of the dispute is covered by the arbitration agreement.
39. In the present case, the dispute arises from the Scheme of
Demerger and not the Consortium Agreement. The Consortium
Agreement primarily deals with the acquisition of Areva T & D
globally and matters incidental thereto. It also lays down broad
principles for the subsequent segregation of T Business and D
Business. The properties which were separated have been specified
only in the Scheme of Demerger. The plea of the defendant that the
property at Noida was allocated to it arises solely from the Scheme of
Demerger and not from the Consortium Agreement. Thus the dispute
between the parties arises entirely from the Scheme of Demerger.
40. The alleged arbitration clause of the Consortium states that "in
case of disagreement or dispute arising from this Agreement ..."
(emphasis supplied). However as shown above, the dispute between
the parties arises only from the Scheme of Demerger. Thus, the
CS(OS) No.1121/2014 Page 30 of 34
defendant's contention that the present dispute has to be settled by
arbitration is devoid of any merits.
41. Even the defendant has waived his right to invoke the
Arbitration in the present case by filing a reply to the plaintiff's suit.
According to Section 8 of the Arbitration and Conciliation Act 1966
"(1) A judicial authority before which an action is brought in a matter
which is the subject of an arbitration agreement shall, if a party so
applies not later than when submitting his first statement on the
substance of the dispute, refer the parties to arbitration."
"A right once waived by a party in respect of the course to
be adopted for settlement of a dispute between himself
and the other side is lost forever and that followed such
waiver of the right to specific course to which he was
entitled to as a matter of right. This is so because when a
party to an arbitration agreement gives up his right to
refer the dispute to arbitration, a right comes to vest in the
other party take recourse to the other remedies that are
open to him in law and when such a recourse is resorted
to by other party, the party who had waived his right to
settle the dispute in an arbitration cannot be permitted to
turn round and say that he is entitled to the remedy of
arbitration and the recourse to the suit by the other party
is bad in law."
(reliance upon Ramakrishna Theatre
Ltd. V General Investments & Commercial Corp. Ltd. ,
AIR 2003 Kant 502: 2004(1) Kant Lj 611).
42. The defendant has not prayed for the suit to be referred to
Arbitration, merely raising an objection that there is an arbitration
clause will not automatically make the court refer the matter to
Arbitration. In the case of Bharat Sanchar Nigam limited & Ors. V.
CS(OS) No.1121/2014 Page 31 of 34
BMW Industries Limited & Ors. AIR 2007 (NOC) 1715 CAL (DB), it
was held that in order to take advantage of provisions of Sec.8 the
respondent has to apply formally enclosing arbitration agreement and
with a specific prayer for referring the disputes to arbitration. Mere
taking of the point as a matter of objection is not good enough and
one must demonstrate its readiness and willingness by conducting
himself positively to go to arbitration meaning thereby one has to
make application before disclosing its defence in the subject-matter
and furthermore it has to take steps for appointment of arbitrator if it
has power to do so.
43. The defendant's plea that suit be dismissed, merely because
there is an arbitration clause in the agreement is devoid of merits. The
Supreme Court in the case of Sukanya Holdings Pvt. Ltd. V Jayesh
H. Pandya and Anr., (2003) 5 SCC 531 has held as under:
"This would, therefore, mean that Arbitration Act does not
oust the jurisdiction of the Civil Court to decide the dispute
in a case where parties to the Arbitration Agreement do
not take appropriate steps as contemplated under Sub-
sections (1) & (2) of Section 8 of the Act."
44. This Court in the case of Roshan Lal Gupta vs Parasram
Holdings Pvt. Ltd. , 157 (2009) DLT 712 has held as under:
"A civil court cannot dismiss a suit instituted before it,
even though found to be subject matter of an arbitration
agreement, at the threshold It is always open to the
defendant to the suit to waive, give up and abandon the
plea of arbitration and if that were to happen then the suit
CS(OS) No.1121/2014 Page 32 of 34
will continue before the civil court. The manner in which
the defendant in a suit which is the subject matter of an
arbitration agreement is to setup the plea of arbitration
has been prescribed in Section 8 of the Act. Such a plea
has to be raised not later than when submitting the first
statement on the substance of the dispute. If such a plea
is not raised while submitting the first statement on OMP
205/1997 & RSA 131/2002 Page 9 of 25 the substance of
the dispute, the defendant is thereafter barred from raising
such a plea and if that be the position then it cannot be
argued that even though the plea is not raised in the
manner prescribed in Section 8 of the Act, it is open to the
defendant thereafter also to contend that the suit is barred
by virtue of section 5 of the Act." .
45. It is the admitted position that there is no Arbitration clause in
the Demerger Agreement. The Consortium Agreement is not in
operation anymore, its sole objective is described in Article 1 as
under:
The Article 1.1 of the Consortium Agreement reads as under:
"1.1 Principles of the Consortium
The parties acknowledge that the key principles
governing this Agreement are as follows:
The objective of the Parties is to complete
the Acquisition with a view to the Separation
of the T Business and D Business as soon as
possible:
The consortium set up under the terms
hereof is the instrument for achieving this
objective.”
CS(OS) No.1121/2014 Page 33 of 34
46. It is evident from the perusal of clause 1.1 that the sole purpose
of the consortium agreement was acquisition and separation
(demerger) of the acquired business.
47. There is no logic to raise such plea which is apparently would
show that it is an afterthought as the defendant in his reply to the
plaintiff's application under Order 39 Rule 1 and 2 CPC in paragraph
5 to 11 has challenged the jurisdiction of this Court. The defendant
has alleged that this Court has no jurisdiction to entertain this suit as
the subject matter of the dispute between the parties can only be
adjudicated upon by the Company Courts.
48. In the light of the reasons mentioned above, the present
application under Order 12 Rule 6 CPC filed by the defendant is not
maintainable and the same is dismissed.
CS(OS) No.1121/2014
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List the matter before Joint Registrar on 14 September, 2015
for admission/denial of documents.
(MANMOHAN SINGH)
JUNE 29, 2015 JUDGE
CS(OS) No.1121/2014 Page 34 of 34