Disputes arising from the share purchase agreement were referred to arbitration with the parties’ consent.

The petitioner and Respondent No. 2, Mr. Jyoti Prakash Mishra, executed a Share Purchase Agreement dated 27 January 2025, under which the petitioner sold 500 equity shares, representing 5% of the paid-up share capital of Respondent No. 1, Deep Algorithms Pvt. Ltd., to Respondent No. 2 at ₹7,400 per share, for a total consideration of ₹37 lakh.

Clause 7.2 required Respondent No. 2 to pay the petitioner the difference if, within 18 months of the agreement, he sold, transferred, disposed of, or acquired shares at a price higher than ₹7,400 per share.

The petitioner alleged that Respondent No. 2 had sold shares at a higher price but had failed to pay the differential amount, claimed at ₹4,92,25,000, despite legal notices.

The agreement contained an arbitration clause providing for reference of disputes to a mutually appointed sole arbitrator or one appointed by a competent court, with New Delhi as the seat and venue.

The petitioner accordingly filed the present petition under Section 11(6) of the Arbitration and Conciliation Act, 1996, seeking appointment of an arbitrator.

Respondent No. 1 contended that it was not a party to the agreement, while Respondent No. 2 disputed any breach but expressed no objection to reference of the dispute to arbitration, without prejudice to his rights and contentions.

Whether the disputes arising between the petitioner and Respondent No. 2 under the Share Purchase Agreement dated 27 January 2025 should be referred to arbitration under Section 11(6) of the Arbitration and Conciliation Act, 1996?

Whether a sole arbitrator should be appointed to adjudicate the petitioner’s claim concerning the alleged differential amount payable under Clause 7.2 of the agreement?

The Court applied Section 11(6) of the Arbitration and Conciliation Act, 1996, which empowers the competent court to appoint an arbitrator where the agreed appointment procedure has not resulted in constitution of the arbitral tribunal.

It gave effect to Clause 12.3 of the Share Purchase Agreement, which provided for arbitration of disputes arising out of or connected with the agreement, appointment of a sole arbitrator, and New Delhi as the seat and venue of arbitration.

The Court also directed the appointed arbitrator to furnish the disclosure or declaration contemplated by Section 12 of the Act before entering upon the reference.

The merits of the alleged breach and the parties’ substantive rights were left open for determination by the arbitrator.

The Court found that the petitioner’s claim concerning the alleged higher-priced sale of shares arose directly from Clause 7.2 of the Share Purchase Agreement and was covered by the broadly worded arbitration clause in Clause 12.3.

Although Respondent No. 2 denied any breach and asserted that the shareholding remained unchanged, he stated that he had no objection to arbitration while reserving all rights and contentions.

In view of the parties’ consent to reference and the existence of an arbitration agreement, the Court referred the disputes between the petitioner and Respondent No. 2 to arbitration without adjudicating the disputed factual or monetary claims.

Respondent No. 1’s contention that it was not a party to the agreement was effectively preserved by limiting the reference to the petitioner and Respondent No. 2.

The disputes between the petitioner and Respondent No. 2 arising out of the Share Purchase Agreement dated 27 January 2025 were referred to arbitration.

Mr. G.P. Mittal, former Judge of the Delhi High Court, was appointed as the sole arbitrator.

The arbitration was directed to be conducted under the aegis of the Delhi International Arbitration Centre, New Delhi, in accordance with the DIAC Rules.

The arbitrator was directed to furnish the declaration under Section 12 of the Act, all rights and contentions were expressly left open, and the parties were directed to approach DIAC within two weeks.