Calcutta High Court
Anjanee Kumar Lakhotia vs Shri Maruti Maheshwari And Ors on 19 September, 2025
Author: Shampa Sarkar
Bench: Shampa Sarkar
2025:CHC-OS:186
IN THE HIGH COURT AT CALCUTTA
COMMERCIAL JURISDICTION
ORIGINAL SIDE
Present: Hon'ble Justice Shampa Sarkar
AP (COM) 352 of 2024
[OLD CASE NO. AP/486/2024]
ANJANEE KUMAR LAKHOTIA
VS
SHRI MARUTI MAHESHWARI AND ORS.
For the petitioner : Mr. Abhrajit Mitra, Sr. Adv.
Mr. Satadeep Bhattacharya, Adv.
Ms. Sriparna Mitra, Adv.
Ms. P. Basu, Adv.
Ms. Nairanjana Ghosh, Adv.
Mr. Debartha Chakraborty, Adv.
Ms. Jaita Ghosh, Adv.
For the respondents : Mr. Sabyasachi Chowdhury, Sr. Adv.
Mr. Anuj Singh, Adv.
M. Aman Agarwal, Adv.
Ms. Ankita Baid, Adv.
Ms. Trinisha De, Adv.
Ms. Rupal Singh, Adv.
Ms. Ritika De, Adv.
Hearing concluded on : 28.08.2025
Judgment on : 19.09.2025
Shampa Sarkar, J.:-
1. This is an application under Section 11(6) of the Arbitration and
Conciliation Act, 1996 (hereinafter referred to as the said Act). The petitioner
prays for appointment of an arbitral tribunal under clause 13.2 of the
Memorandum of Understanding dated March 17, 2013. According to the
petitioner, a Memorandum of Understanding dated March 17, 2013
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(hereinafter referred to as the said MOU) was executed between the
petitioner and another entity M/s MBL A CAPITAL LTD, (described as Group
2) and Ram Gopal Maheswari(since deceased) and his sons, Aditya
Maheshwari, Maruti Maheswari the respondent No. 1, Anuj Maheshwari the
respondent No. 2 and M/s. Prabhu International Vyapaar Pvt. Ltd., the
respondent No. 3 (described as Group- I). In terms thereof, the entire
shareholding of the members of Group-I in MBL Infrastructure Limited
(hereinafter referred to as the said company or MBL) along with rights
thereunder including bonus shares, dividends etc., of each of the
persons/entities forming part of Group-I, were to be transferred to the
petitioner or to the companies nominated by the petitioner for an inclusive
consideration of Rs. 28.50 crores.
2. Mr. Abhrajit Mitra, learned Senior Advocate representing the
petitioner, referred to clauses 1, 1.4, 1.5, 1.6, 2, and 5.2 of the MOU to
demonstrate what the petitioner was to get under the said MOU and urged
that the MOU was substantially performed.
3. Mr. Mitra, further contended that, the respondent No. 3 was a
necessary and proper party in the proceeding, as the directors of the
respondent no. 3/ Company, who had controlling shares had signed the
MOU on behalf of the company. Moreover, Ram Gopal Maheshwari and
Aditya Maheshwari, who were the directors of the respondent No. 3, had
substantially performed their obligation under the said MOU. Three out of
the four directors, being the respondent No. 1, 2 and Late Ram Gopal, had
also signed the said MOU, and by specific covenants had bound the
respondent No.3 to the terms of the said MOU. All the shares of the
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respondent No. 3 were held by the said persons and/or their nominees and
relatives. Thus, the respondents and other signatories to the said MOU, had
always intended to make the MOU binding on the respondent No. 3 and the
respondent No. 3 was bound by the terms of the said MOU, including the
arbitration clause.
4. It was contended that, against the agreed consideration of Rs. 28.50
crores, various obligations were to be discharged by the members of Group-
I. Insofar as, Aditya Maheshwari was concerned, he had transferred all his
shares held in the said Company in favour of the petitioner. In terms of the
said MOU, the petitioner had discharged all his obligations. Sri Ram Gopal
Maheshwari(since deceased)ceased to be a Director of the said company with
effect from August 4, 2012.The petitioner had caused his personal
guarantees to be released from all banks at his own cost. Subsequently, late
Ram Gopal Maheshwari gifted his shares, to the petitioner in terms of the
said MOU.
5. Mr. Mitra referred to a statement showing the various dates of release
of the personal guarantees of Ram Gopal Maheshwari and the respondent
No. 1, in the said company (Annexure D to this application). The petitioner
submitted to have paid an aggregate sum of Rs. 24.96 crores to the
members of the Group-I. Particulars of the payments were demonstrated in
the form of a schedule (Annexure E to the application).Likewise, Aditya
Maheshwari, one of the members of the Group-I, had transferred all his
shares in the said company in terms of the said MOU in favour of the
petitioner and received payment in full and final satisfaction of the due. The
dispute arose when, the respondents failed to hand over all records,
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documents, papers of the said company and did not relinquish, transfer,
surrender all their rights, entitlements, authorities, interests, powers, etc.,
in relation to the said company, and/or its subsidiaries and/or its
associates in Joint Venture companies, in favour of the petitioner. The
allegation was that in spite of receiving Rs. 24,96,48,396/-, as would be
evident from the particulars annexed to this application, the respondents
had jointly and severally acted in breach of the terms of the said MOU, by
failing to hand over the laptops, vehicles, documents, etc., which were in
their possession and formed part of the assets of the company.
6. Mr. Mitra submitted that in terms of the said MOU, the respondents
had transferred shares held in the said company, in favour of the petitioner
until June 6, 2014 and received payment. The respondent No. 1 resigned
from the Board of Directors of AAP Infrastructure Limited, a subsidiary of
the said company and by a letter dated September 15, 2017, requested for
release of the personal guarantee furnished by the respondent No. 1 in
respect of AAP Infrastructure. Apart from resigning from the Board of
Directors of AAP Infrastructure, the respondent No. 1 also resigned from
directorship of the said company on June 14, 2014, with effect from July 1,
2014. The personal guarantee of the respondent No. 1 in AAP infrastructure
was released in terms of the said MOU at the petitioner's cost, as recorded
in the order of the Debt Recovery Tribunal-II Delhi dated April 7, 2021, in
OA No. 1232 of 2017. The respondent No. 1 was a party to the said
proceeding.
7. Further, the respondent No. 2 also resigned as vice-president from the
said company on October 7, 2013. Some of the terms of the said MOU were
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performed by the parties beyond the time stipulated therein. Both the
parties had given a go-by to the time stipulated for performance of the said
MOU i.e. July 31, 2013. Allegations were that, the respondents failed and
neglected to vacate and handover physical and vacant possession of the
office space along with furniture, fixtures, computer, assets, records and
documents which were available in room No. 14, 3rd floor, at 23A Netaji
Subhas Road, Kolkata- 700001, that is in the office of the said company.
The respondents also failed to handover and surrender and or relinquish the
assets such as laptop, vehicles, etc. When the petitioner filed an application
under Section 9 of the said Act for interim protection, the respondent relied
upon a MOU dated October 30, 2013, entered between MBL A Capital
Limited (MBL A) and the respondent No. 3, to contend that the subject MOU
had been superseded by the subsequent MOU of October 30, 2013.
8. According to Mr. Mitra, the MOU of October 30, 2013, neither
modified nor superseded the subject MOU. The parties were different. The
MOU dated October 30, 2013, was allowed to expire by non-performance
thereof. Rather, the respondent No. 3 had, in fact, acted as per the MOU
dated March 17, 2013, by transferring certain shares upon receipt of
consideration. Disputes cropped up when the respondents continued to be
in possession of the property and assets of the said company. It was
submitted that 38, 58, 632 numbers of equity shares of the said company
held by the respondents, had been transferred either in favour of the
petitioner or his nominee. On such transfer, the respondents received
payment of Rs. 24.96 crores. On the date of the filing of this application,
17,04,158 shares of the said company, which were held by the respondent
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No. 3, were due for transfer against the balance consideration of Rs.3.58
crores under the MOU. On July 15, 2015, the management of the said
company allotted bonus shares in the ratio of 1:1 to all the shareholders,
including the petitioner. In terms of clause 5.2 of the MOU, 17,04,158,
bonus shares issued in the ratio of 1:1 against the remaining 17,04,158
shares of the said company, held by respondent No. 3, were also required to
be transferred in favour of the petitioner. Therefore, a total number of
34,08,316 equity shares of the company held by the respondent No. 3, were
still to be transferred to the petitioner in terms of the MOU, against the
balance consideration. The personal guarantee of the respondent No. 1
having been released sometime in 2021, there could not be any impediment
in transferring the balance shares in favour of the petitioner in terms of the
said MOU. All the respondents were bound by the MOU. There could not be
any objection to transfer the equity shares. The petitioner claimed to be
ready and willing to make payment of the balance consideration of Rs. 3.54
crores
9. Further contention of Mr. Mitra was that, the respondents were
required to de-pledge 5 lakh equity shares held in the said company, which
were pledged without the petitioner's approval, although a sum of Rs.
24,96,48,394/- had been received. The petitioner was all along willing to
settle the dispute amicably. By a letter dated December 26, 2022, the
petitioner requested the respondents for settlement. The respondent Nos.1
and 2, jointly and the respondent No. 3 individually, by letters dated
January 12, 2023, refused to act in terms of the said MOU, and denied the
existence of any dispute between the parties. Rather, various allegations
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were made against the petitioner in those letters. Mr. Mitra contended that
the reference to the MOU dated October 30, 2013, by the respondent No. 3
was totally misplaced. The MOU was between MBL A, and the respondent
No. 3, in relation to certain shares of the said company. The same did not
have any connection with the MOU dated March 17, 2013. MBL A, had filed
a separate suit, being CS number 54 of 2015, in the High Court at Calcutta,
in respect of the MOU dated October 30, 2013, which was subsequently
withdrawn.
10. By the stand taken by the respondents in the aforementioned letters,
there was no possibility for an amicable settlement. Hence, the petitioner
invoked arbitration by a letter dated March 28, 2023, and an addendum
dated April 3, 2023, which were issued in terms of clause 13.2 of the MOU,
read with section 21 of the Arbitration and Conciliation Act, 1996. The
petitioner had nominated Mr. Abhijit Chatterjee, learned Senior Advocate, to
act as the arbitrator on his behalf, and called upon the respondent to
nominate their arbitrator, so that the nominee arbitrators, in terms of the
arbitration clause, could nominate the third arbitrator, and an arbitral
tribunal could be constituted.
11. The respondents did not take any steps, and as such, the mechanism
provided under clause 13.2 of the MOU, failed. According to Mr. Mitra, the
respondent No. 3 was named in the agreement, and the agreement was
signed by the directors and principal shareholders of the respondent No. 3.
The absence of the official stamp of the respondent No. 3,should not be a
reason for the referral court to hold at this stage, that the respondent No. 3
was neither a necessary nor a proper party to the proceeding.
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12. The MOU dated March 17, 2013, was executed between two groups.
The petitioner's group consisted of two named entities/persons, and the
respondent's group consisted of five named persons/entities, including the
respondent No. 3. The petitioner signed on behalf of the petitioner's group
and the respondent No. 1, 2, Aditya, as also their late father, signed on
behalf of the respondent's group.
13. Reference was made to a letter dated October 7, 2013, in support of
the contention that, the respondent No. 2 had admitted that the respondent
No. 3 was a party to the MOU dated March 17, 2013. Further contention
was that the respondent No. 2 had sufficiently performed the MOU by
transferring 14,56,132 number of shares to the petitioner company. Not a
single share had been transferred by the respondent No. 3 in terms of the
MOU dated October 30, 2013 and at the rate mentioned therein. Thus, the
respondent No. 3, which was a part of the group 1, was intrinsically
connected with the performance of the obligations under the said MOU and
the terms and conditions thereof.
14. Mr. Mitra relied on the following decisions in support of his contention
that, the question whether a non-signatory could be referred to arbitration,
must be decided by the tribunal and the referral court should only rule,
prima facie, whether the non-signatory was a veritable party to the
arbitration agreement, or was intrinsically connected with the underlying
performance of the agreement.
(a) Ajay Madhusudan Patel and Ors. vsJyotindra S. Patel and Ors.
reported in 2024 SCC Online SC 2597,
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(b) Cox and Kings Ltd. vs SAP India (P) Ltd. reported in (2024) 4 SCC
1,
(c) KKH Finvest Private Limited and Anr. vs Jonas Haggard and ors.
reported in 2024 SCC Online Del 7254
(d) Niranjan Lal Todi and Anr. vsNand Lal Todi and Ors. reported in
2011 (1) CHN 762
(e) ASF Buildtech Private Limited vs ShapoorjiPalonji and Company
Private Limited reported in 2025 SCC Online SC 1016
15. Mr. Mitra, contended that, the question whether the MOU of October
30, 2013 had either been superseded or modified the subject MOU of March
17, 2013, must also be decided by the Arbitral Tribunal. Reference was
made to the decision of Sanjeev Prakash Vs. Seema Kukreja and Ors.
reported in (2021) 9 SCC 732. Reference was further made to Indian Oil
Corporation Limited (through its senior manager) vs Shree Ganesh
Petroleum Rajgurunagar (through its proprietor Laxman DagduThite)
reported in 2022 4 SCC 463.
16. It was also contended that in CS 54 of 2015 between MBL A Vs.
Prabhu International, the specific contention of the respondents was that,
the MOU dated October 30, 2013 was hit by the Securities Contracts
Regulation Act, 1956, as it was unstamped, inadmissible in evidence and
therefore, unenforceable.
17. Thus, it was alleged that, the respondents could not approbate and
reprobate. Reliance was placed on the decision of Karam Kapahi and Ors.
vs Lal Chand Public Charitable Trust and Anr. reported in (2010) 4 SCC
753 and Sushil Kumar Vs. Rakesh Kumar reported in (2003) 8 SCC 673.
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18. On the issue of limitation, it was contended that even though the said
MOU was to be performed within July 31, 2013, it was a matter of record
that the MOU was performed at the behest of the parties even as late as on
August 4, 2021.Thus, the parties had given a go-by to the original timeline
and continued to perform the obligations under the MOU. Mr. Mitra urged
the referral court not conduct an intricate evidentiary enquiry into the
question of limitation and submitted that the issue of limitation should be
left to the adjudication of the arbitral tribunal. Reference was made to
decisions of:-
(a) SBI General Insurance Co. Ltd. vs Krish Spinning reported in
2024 SCC Online SC 1754
(b) Bharat Sanchar Nigam Limited and Anr. vs Nortel Networks
India Private Limited reported in (2021) 5 SCC 738,
(c) Aslam Ismail Khan Deshmukh v. ASAP Fluids (P) Ltd. and
Anr.,reported in(2025) 1 SCC 502,
19. On the limited scope of enquiry by the referral court, Mr. Mitra
referred to Goqi Technologies Private Limited vs Sokrati Technologies
Private Limited reported in 2024 SCC Online SC 3189, SBI General
Insurance Co. Ltd. versus Krish Spinning reported in 2024 SCC Online
SC 1754and the Interplay Between Arbitration Agreements under
Arbitration and Conciliation Act, 1996 & Stamp Act, 1899, In re,
(2024) 6 SCC 1.
20. Mr. Sabyasachi Choudhury, learned senior Advocate for the
respondents, submitted that the application should be dismissed on various
grounds, namely, suppression of material facts, limitation and novation of
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the MOU dated March 17, 2013. It was contended by Mr. Choudhury that,
the dispute should not be referred to arbitration as the claim was deadwood.
The learned Advocate submitted that, the referral court was empowered to
weed out dead and non-arbitrable claims. The petitioner had notice of
refusal by the respondents to perform the obligations under the said MOU,
as soon as the respondents started selling their shares in MBL
Infrastructure Limited in the open market, at higher rates than what was
stipulated in the MOU. The petitioner failed and neglected to initiate any
arbitral proceeding within three years from the date of such notice. As the
petitioner was claiming specific performance of the said MOU, Article 54 of
the Limitation Act would be applicable in computing the period of limitation.
21. As per law, the period of limitation for specific performance was three
years from the date fixed for performance, or, if no such date was fixed,
three years from the notice of refusal to perform. The clauses of the MOU,
i.e, 1, 1.1, 1.2, 1.3, 5.1 and 5.2, would indicate that the respondents along
with Ram Gopal Maheshwari (since deceased), Aditya Maheshwari and
Sweta Maheshwari, were obliged to transfer their entire shareholding in the
said company in favour of the petitioner and MBL A (referred to as the
Group 2), within July 31, 2013. The said Group 2 was obligated to release
the personal guarantees given by Group 1 within June 2013 or within 60
days of resignation from MBL Infrastructures Limited, whichever was
earlier. Therefore, the date of performance of the MOU was fixed up to July
31, 2013. Under such circumstances, if the first limb of Article 54 of the
Limitation Act was applied, the period of three years should be calculated
from the date fixed for performance.
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22. Therefore, the arbitral proceeding should have begun within three
years from July 31, 2013 and the period of limitation expired on July 31,
2016. Although, the specific case of the petitioner was that the parties had
given a go-by to the timeline contained in the MOU by making inter-
promoter transfers and gifts beyond July 31, 2013 and by releasing the
personal guarantee on April 2021, those transfers and release of guarantee
were not in compliance of the obligations arising out of the MOU.
23. On many occasions during 2013 and 2014, the members of the Group
- I had begun selling their shares in the said company in the open market at
the prevailing market rate to third parties and to members of Group 2,
through the stock exchange at higher rates than what was stipulated under
clause 1.2 of the MOU. The respondents had not sold any share pursuant to
the purported MOU.
24. The statutory disclosures made under the Regulations 10 (1)(a) 5, 6
and 7 of SEBI (Substantial Acquisition of Shares And Takeovers)
Regulations 2011, enclosed by the petitioner in the affidavit in reply to the
affidavit in opposition of the respondents 1 and 2, clearly indicated that the
petitioner had accepted inter-promoter transfer of shares at higher rates.
From the statutory disclosures, it was clear that between 2013 and 2014,
Group 1 had sold 4,43,655 shares of the said company (MBL) in the open
market to third parties as well, for a total consideration of Rs 3,37,65,347/-.
The total shares purchased by the petitioner and MBL A from the
respondents and members of the Group 1 as per the chart, came to
34,14,977. The said figure was confirmed by MBL A, in the application being
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GA 845 of 2015, which was filed in CS 54 of 2015. Both the groups had
acted contrary to the MOU dated March 17, 2013, since September 2013.
Thus, even if the first limb of Article 54 of the Limitation Act was not
applied, the second limb of Article 54 would have to be applied in view of the
refusal to perform and limitation would be calculated from 2013, when
shares were transferred to third parties. The petitioner failed to bring any
action against the respondents within the period of limitation. Reference was
made to the decision of Sabbir (Dead) through LRs. Vs Anjuman (since
deceased) through LRs reported in2023 SCC Online SC 1292.
25. It was next contended that, the respondent No. 3 had a total of
31,60,290 shares in the said Company. As the MOU had become
infructuous due to non-performance and non-compliance by the parties,
another MOU was executed on October 30, 2013 between MBL A and
Respondent No. 3. Under the October 2013 MOU, the respondent No. 3
agreed to transfer 17,00,000 shares held in the said Company (MBL
Infrastructures Limited) at the rate of Rs. 63.75 per share. Under the
October MOU, MBL A also had an option of acquiring further shares at
market rate under clause 3.4 thereof. The petitioner had signed the said
MOU in his capacity as the director of MBL A and since execution of the said
MOU, the petitioner had written several letters to the respondent No. 3,
calling upon the respondent No. 3 to act in terms thereof.
26. As disputes arose between the parties and MBL A filed a suit being
C.S. 54 of 2015 along with an interlocutory application being G.A. 845 of
2015, before the High Court. By orders dated March 23, 2015, and May 6,
2015, the High Court was pleased to allow the prayer made in the said
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application, restraining the respondent No. 3 from dealing with the
aforementioned 17,00,000 lakh shares of the said company (MBL).The said
order of injunction continued up to March, 2023, and on March 28, 2023,
the suit was withdrawn at the instance of MBL A. Upon withdrawal of the
suit, the petitioner filed the present application for reference of the dispute,
because the petitioner was conscious that the reliefs claimed in the suit
would not be effective and efficacious. The petitioner was actually
misleading the court into believing that the said MOU, which had outlived
its utility and validity, was still alive. The facts narrated were inaccurate
representation of what had actually transpired between the parties.
Moreover, the respondent No. 3 was not a signatory to the said MOU dated
March 17, 2013 and the proceeding was not maintainable against the
respondent No. 3. Reference was made to Ajay Mudhusudhan (supra), and
Cox and Kings (supra). According to Mr. Choudhury, participation of a
non-signatory in the performance of the contract was a determining factor
for the referral court. This court would not find a single document which
would demonstrate that the respondent No. 3 was either a veritable party or
was intrinsically connected with the said MOU of March 17, 2013. The
petitioner had willfully entered into the MOU of October 30, 2013, with the
respondent No. 3, not only in his capacity as a director of MBL A, but also
for himself and the said agreement was for acquisition of 17,00,000 shares
held by the respondent No. 3 in MBL, at the rate of 63.75/- per share. Thus,
as soon as the respondent No. 3 entered into the MOU of October 30, 2013,
and agreed to transfer 17,00,000 shares held by it in the said company
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(MBL), the respondent No. 3 and or its directors in effect, reneged from the
MOU of March 17, 2013.
27. Moreover, the respondent No. 3 had pledged 5,00,000 shares in
September 2013. Such action was contrary to the terms of the said MOU of
March 2013, and thus a notice of refusal to perform. By September 2013,
the petitioner was aware of such action. At best, the period of limitation
would run from September 2013. The petitioner had erroneously relied upon
a letter dated September 15, 2017, by which the respondent No. 1 had
asked for the personal guarantee given by the said respondent, to the
banker of AAP Infrastructure Limited to be released, to demonstrate that the
parties were continuing to perform their obligations under the MOU of
March 2013. However, as per clauses 1.1 and 1.2 of the MOU of March 17,
2013, the petitioner and MBL A, were to get the personal guarantees,
including those given to the banker of AAP Limited released within or before
June 2013, or within 60 days from the respondents' resignation from the
said company. Here, the release was much later and not as a fulfillment of
the obligation under the said MOU.
28. It was stipulated that the petitioner and MBL A, would keep the
respondents indemnified in respect of the personal guarantees given by
them. It was submitted that, by two separate letters dated September 22,
2017, petitioner in his personal capacity and as the director of MBL A
Capital Limited, denied the contents of the letter dated September 15, 2017
and also denied the existence of the said MOU. Petitioner refused to perform
its obligation to release the personal guarantee and indemnify the said
respondents. The contents of the letters dated September 22, 2017, were
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refusal on the part of the petitioner to comply with the MOU dated March
17, 2013 and an indication that the said MOU had no further life. Reference
was made to the decision of Re: Interplay (supra) in support of the
contention that, the referral court could weed out non-arbitrable and
deadwood claims.
29. Mr. Choudhury contended that CS 54 of 2015, was withdrawn in
order to avoid the consequences inasmuch as, a decree in favour of the
plaintiff therein would potentially oblige MBL A Capital Limited, to purchase
the shareholding of the respondent No. 3 in the said company at the
contractual rate as per MOU dated October 30, 2013. That would not be
beneficial. The invocation was thus, malafide and an afterthought and
harassive.
30. Considered the rival contentions of the parties. The issue is whether
in the aforementioned background and upon considering the rival
contentions of the parties, the referral court should exercise jurisdiction
under section 11(6) of the Arbitration and Conciliation Act, 1996. The MOU
of March 2013, admittedly contains an arbitration clause. The petitioner has
also invoked such clause by issuing a proper notice. The clause is set out
hereunder:-
"...13.2 The Parties shall endeavour to settle any dispute arising in
connection with the interpretation or performance of these presents,
or otherwise in connection with these presents, through friendly
consultations and negotiations. If no settlement can be reached
through consultations between the parties within 15 days of one party
delivering a written notice of the dispute to the other parties, then
such matter shall be finally settled by binding arbitration in India in
accordance with the Arbitration Act, 1996. The arbitration shall be
conducted by three (3) arbitrators. The parties of Group - 1 and the
Group- 2 shall nominate one arbitrator each and the Two
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(2) arbitrators shall nominate a third arbitrator. The language to be
used in the arbitral proceedings shall be English."
31. The objections of the respondent are taken up one by one.
32. The first objection was that the respondent No.3 was not a signatory
to the said MOU, and as such, the application was bad for mis-joinder. The
proceeding was not maintainable against the respondent no. 3. To answer
this question, certain provisions of the MOU are required to be discussed.
33. The respondent No. 3 was the fifth party in the MOU and member of
Group-I. Sri Ram Gopal Maheshwari, (since deceased), Maruti Maheshwari,
Aditya Maheshwari, Anuj Maheshwari and M/s. Prabhu International
Vyapar Private Limited were collectively referred to as Group-I. The relevant
portion of the MOU is quoted below:-
"MEMORANDUM OF UNDERSTANDING (MOU)
THIS MEMORANDUM OF UNDERSTANDING (MOU) (hereinafter
referred to as "these presents") dated this Seventeenth Day of March
2013 made;
BY AND BETWEEN
1) SHRI RAM GOPAL MAHESHWARI, son of Late Shri Rameshwar Lal
Lakhotia, aged about 66 years, resident of 8/10, Alipore Park Road,
4th Floor, Flat No. 4A, Kolkata - 700027, hereinafter referred to as the
"First party of Group-1";
2) SHRI MARUTI MAHESHWARI, son of Shiri Ram Gopal Maheshwari,
aged about 37 years, resident of 8/10, Alipore Park Road, 4th Floor,
Flat No. 4A, Kolkata - 700027, hereinafter referred to as the "Second
Party of Group-1";
3) SHRI ADITYA MAHESHWARI, son of Shri Ram Gopal Maheshwari,
aged about 35 years, resident of 8/10, Alipore Park Road, 4th Floor,
Flat No. 4A, Kolkata - 700027, hereinafter referred to as the "Third
Party of Group-1";
4) SHRI ANUJ MAHESHWARI, son of Shri Ram Gopal Maheshwari,
aged about 33 years, resident of 8/10, Alipore Park Road, 4th Floor,
Flat No. 4A, Kolkata -700027, hereinafter referred to as the "Fourth
Party of Group-1";
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5) M/S PRABHU INTERNATIONAL VYAPAR PVT LTD, a company
incorporated under Companies Act, 1956 and having its registered
office at 8/10 Alipore Park Road, 4th Floor, Flat No. 4A, Kolkata -
700027, hereinafter referred to as the "Fifth Party of Group-1";
hereinafter collectively referred to as the "Group-1" (which expression
shall unless repugnant to the context or meaning thereof be deemed
to mean their respective heirs, executors, administrators,
representatives, successors and/or assigns) OF THE FIRST PART.
AND
6) SHRI ANJANEE KUMAR LAKHOTTA, son of Late Shri Rameshwar
Lal Lakhotia, aged about 49 years, and resident of B-37, Soami Nagar,
1st floor, New Delhi - 110017, hereinafter referred to as the "First Party
of Group-2";
7) M/S MBL A CAPITAL LTD (Formerly SMH CAPITAL LIMITED), a
company incorporated under Companies Act, 1956 and having its
registered office at [•], hereinafter referred to as the "Second Party of
Group-2"; "
34. It had been mentioned specifically in the said MOU that, the fifth
party of Group - I was a closely held company of the first party of Group- I
and his family members. It had been further provided that, the fifth party of
the Group- I, i.e. respondent number 3, was the legal and beneficial owner
of 31,60,290 numbers of equity shares of Rs. 10/- each, fully paid up, of
MBL, representing 18.04% of the issued equity and voting capital held in the
Demat Account No.- IN30210510334829. The relevant portion is set out
below:-
"The Fifth Party of Group-1 is the legal and beneficial owner of
31,60,290 nos. of equity shares of Rs. 10/- each fully paid up of MBL
representing 18.04% of its issued equity and voting capital held in the
Demat Account No. IN30210510334829."
35. The Group- I was desirous to exit from said the company by way of
transfer of their shares in the said company to Group 2, in accordance with
the terms and conditions stated in the MOU, for such consideration and in
the manner stated below.
19
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Name Number of Shares
Mr. Ram Gopal Maheshwari 22,48,750
Mr. MarutiMaheshwari 24,500
Mr. Aditya Maheshwari 50,000
Mr. Anuj Maheshwari 50,000
Mrs. SwetaMaheshwari 29,250
M/s. Prabhu International Vyapar 31,60,290
Private Limited.
TOTAL 55,62,790
36. It, prima facie, appears that, the respondent No. 3, being a closely
held company of Ram Gopal Maheshwari and his family members, was
intrinsically connected with all the transactions contemplated under the
said MOU. Ram Gopal Maheshwari and his family members also signed the
MOU.
37. The MOU segregated the parties/signatories into two Groups, Group 1
and Group 2. The respondent No. 3 was an integral part of Group 1. The
respondent No. 2 and their late father, signed the MOU. Only because the
rubber stamp of the respondent No. 3 was missing, it would not be proper
for the referral court to hold that the respondent No. 3 was neither a
necessary nor a proper party to the proceeding, and had been wrongly
impleaded. Reference is made to the following decisions of the Apex Court in
this regard.
38. In the decision of Ajay Madhusudhan (supra), the Hon'ble Apex
Court held as follows:-
"64. The relevant observations are extracted hereinbelow :
(DuroFelguera, S.A. case [DuroFelguera, S.A. v. Gangavaram Port
Ltd., (2017) 9 SCC 729 : (2017) 4 SCC (Civ) 764] , SCC pp. 759 &
765, paras 48 & 59)
"48. ... From a reading of Section 11(6-A), the intention of the
legislature is crystal clear i.e. the court should and need only
look into one aspect--the existence of an arbitration agreement.
What are the factors for deciding as to whether there is an
arbitration agreement is the next question. The resolution to
20
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that is simple--it needs to be seen if the agreement contains a
clause which provides for arbitration pertaining to the disputes
which have arisen between the parties to the agreement.
***
59. The scope of the power under Section 11(6) of the 1996 Act
was considerably wide in view of the decisions in SBP &
Co. [SBP & Co. v. Patel Engg. Ltd., (2005) 8 SCC 618 : (2005)
128 Comp Cas 465] and Boghara Polyfab [National Insurance
Co. Ltd. v. Boghara Polyfab (P) Ltd., (2009) 1 SCC 267 : (2009) 1
SCC (Civ) 117] . This position continued till the amendment
brought about in 2015. After the amendment, all that the courts
need to see is whether an arbitration agreement exists--nothing
more, nothing less. The legislative policy and purpose is
essentially to minimise the Court's intervention at the stage of
appointing the arbitrator and this intention as incorporated in
Section 11(6-A) ought to be respected."
(emphasis supplied)
***
***
68.Vidya Drolia [Vidya Drolia v. Durga Trading Corpn., (2021) 2 SCC
1 : (2021) 1 SCC (Civ) 549] while speaking in the context of Section 8
also pointed out that jurisdictional issues like whether certain
parties are bound by the arbitration agreement must be left to the
Arbitral Tribunal since they involve complicated factual questions
and observed as thus : (Vidya Drolia case [Vidya Drolia v. Durga
Trading Corpn., (2021) 2 SCC 1 : (2021) 1 SCC (Civ) 549] , SCC p.
161, para 239)
"239. ... Jurisdictional issues concerning whether certain
parties are bound by a particular arbitration, under group-
company doctrine or good faith, etc. in a multi-party arbitration
raises complicated factual questions, which are best left for the
tribunal to handle."
(emphasis supplied)
***
***
80. The relevant observations made in Cox & Kings [Cox & Kings
Ltd. v. SAP India (P) Ltd., (2024) 4 SCC 1 : (2024) 2 SCC (Civ) 1 :
(2024) 251 Comp Cas 680] are extracted hereinbelow : (SCC pp. 60-
61 & 90-91, paras 83-84 & 170)
"83. Reading Section 7 of the Arbitration Act in view of the
above discussion gives rise to the following conclusions : first,
arbitration agreements arise out of a legal relationship between
or among persons or entities which may be contractual or
otherwise; second, in situations where the legal relationship is
contractual in nature, the nature of relationship can be
determined on the basis of general contract law
principles; third, it is not necessary for the persons or entities to
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be signatories to the arbitration agreement to be bound by it;
fourth, in case of non-signatory parties, the important
determination for the Courts is whether the persons or entities
intended or consented to be bound by the arbitration agreement
or the underlying contract containing the arbitration agreement
through their acts or conduct; fifth, the requirement of a written
arbitration agreement has to be adhered to strictly, but the form
in which such agreement is recorded is irrelevant; sixth, the
requirement of a written arbitration agreement does not exclude
the possibility of binding non-signatory parties if there is a
defined legal relationship between the signatory and non-
signatory parties; and seventh, once the validity of an
arbitration agreement is established, the court or tribunal can
determine the issue of which parties are bound by such
agreement.
84. It is presumed that the formal signatories to an arbitration
agreement are parties who will be bound by it. However, in
exceptional cases persons or entities who have not signed or
formally assented to a written arbitration agreement or the
underlying contract containing the arbitration agreement may
be held to be bound by such agreement. As mentioned in the
preceding paragraphs, the doctrine of privity limits the
imposition of rights and liabilities on third parties to a contract.
Generally, only the parties to an arbitration agreement can be
subject to the full effects of the agreement in terms of the reliefs
and remedies because they consented to be bound by the
arbitration agreement. Therefore, the decisive question before
the courts or tribunals is whether a non-signatory consented to
be bound by the arbitration agreement. To determine whether a
non-signatory is bound by an arbitration agreement, the courts
and tribunals apply typical principles of contract law and
corporate law. The legal doctrines provide a framework for
evaluating the specific contractual language and the factual
settings to determine the intentions of the parties to be bound
by the arbitration agreement. [ Gary Born, International
Arbitration Law and Practice, (3rd Edn., 2021) at p. 1531.]
***
170. In view of the discussion above, we arrive at the following
conclusions:
170.1. The definition of "parties" under Section 2(1)(h) read with
Section 7 of the Arbitration Act includes both the signatory as
well as non-signatory parties;
170.2. Conduct of the non-signatory parties could be an
indicator of their consent to be bound by the arbitration
agreement;
170.3. The requirement of a written arbitration agreement
under Section 7 does not exclude the possibility of binding non-
signatory parties;"
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(emphasis supplied)
39. In the decision of Cox and Kings (supra), the Hon'ble Apex Court
held as follows:-
"96. An arbitration agreement encapsulates the commercial
understanding of business entities as regards to the mode and manner
of settlement of disputes that may arise between them in respect of
their legal relationship. In most situations, the language of the contract
is only suggestive of the intention of the signatories to such contract
and not the non-signatories. However, there may arise situations where
a person or entity may not sign an arbitration agreement, yet give the
appearance of being a veritable party to such arbitration agreement due
to their legal relationship with the signatory parties and involvement in
the performance of the underlying contract. Especially in cases
involving complex transactions involving multiple parties and contracts,
a non-signatory may be substantially involved in the negotiation or
performance of the contractual obligations without formally consenting
to be bound by the ensuing burdens, including arbitration.
***
***
123. The participation of the non-signatory in the performance of the
underlying contract is the most important factor to be considered by
the Courts and tribunals. The conduct of the non-signatory parties is
an indicator of the intention of the non-signatory to be bound by the
arbitration agreement. The intention of the parties to be bound by an
arbitration agreement can be gauged from the circumstances that
surround the participation of the non-signatory party in the
negotiation, performance, and termination of the underlying contract
containing such agreement. The Unidroit Principle of International
Commercial Contract, 2016 [Unidroit Principles of International
Commercial Contracts, 2016, Article 4.3.] provides that the subjective
intention of the parties could be ascertained by having regard to the
following circumstances:
(a) preliminary negotiations between the parties;
(b) practices which the parties have established between themselves;
(c) the conduct of the parties subsequent to the conclusion of the
contract;
(d) the nature and purpose of the contract;
(e) the meaning commonly given to terms and expressions in the trade
concerned; and
(f) usages.
(v) Threshold standard
***
***
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127. In Cox & Kings [Cox & Kings Ltd. v. SAP India (P) Ltd., (2022) 8
SCC 1 : (2022) 4 SCC (Civ) 45] , Surya Kant, J. observed that Reckitt
Benckiser [Reckitt Benckiser (India) (P) Ltd. v. Reynders Label Printing
(India) (P) Ltd., (2019) 7 SCC 62 : (2019) 3 SCC (Civ) 453] fixed a higher
threshold of evidence for the application of the Group of Companies
doctrine as compared to earlier decisions of this Court. This Court's
approach is Reckitt Benckiser [Reckitt Benckiser (India) (P)
Ltd. v. Reynders Label Printing (India) (P) Ltd., (2019) 7 SCC 62 : (2019)
3 SCC (Civ) 453] is indicative of the fact that the mere presence of a
group of companies is not the sole or determinative factor to bind a
non-signatory to an arbitration agreement. Rather, the Courts or
tribunals should closely evaluate the overall conduct and involvement
of the non-signatory party in the performance of the contract. The
nature or standard of involvement of the non-signatory in the
performance of the contract should be such that the non-signatory has
actively assumed obligations or performance upon itself under the
contract. In other words, the test is to determine whether the non-
signatory has a positive, direct, and substantial involvement in the
negotiation, performance, or termination of the contract. Mere
incidental involvement in the negotiation or performance of the contract
is not sufficient to infer the consent of the non-signatory to be bound
by the underlying contract or its arbitration agreement. The burden is
on the party seeking joinder of the non-signatory to the arbitration
agreement to prove a conscious and deliberate conduct of involvement
of the non-signatory based on objective evidence.
***
***
132. We are of the opinion that there is a need to seek a balance
between the consensual nature of arbitration and the modern
commercial reality where a non-signatory becomes implicated in a
commercial transaction in a number of different ways. Such a balance
can be adequately achieved if the factors laid down under Discovery
Enterprises [ONGC Ltd. v. Discovery Enterprises (P) Ltd., (2022) 8 SCC
42 : (2022) 4 SCC (Civ) 80] are applied holistically. For instance, the
involvement of the non-signatory in the performance of the underlying
contract in a manner that suggests that it intended to be bound by the
contract containing the arbitration agreement is an important aspect.
Other factors such as the composite nature of transaction and
commonality of subject-matter would suggest that the claims against
the non-signatory were strongly interlinked with the subject-matter of
the tribunal's jurisdiction. Looking at the factors holistically, it could be
inferred that the non-signatories, by virtue of their relationship with the
signatory parties and active involvement in the performance of
commercial obligations which are intricately linked to the subject-
matter, are not actually strangers to the dispute between the signatory
parties.
***
***
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40. The law is well settled. In the event the contract disclosed that a non-
signatory was either connected with the signatory parties or was involved in
either the execution or the fulfilment of the obligations under the contract,
or was linked with the transactions in some manner, the said non-signatory
would be bound by the arbitration clause. The issue of mis-joinder and/or
non-joinder of a party to an arbitration proceeding, should be best left for a
decision by the learned arbitrator. It was urged that, the respondent No. 3
had also performed the obligations under the MOU, by transferring
14,56,132 number of shares to the petitioner's group. The respondent No. 3
had performed part of its obligations under the contract, as, is prima facie,
available from the records. The conduct of the non-signatory party is an
indicator of its willingness to be bound by the arbitration agreement.
41. In the decision of ASF Buildtech (supra),the Hon'ble Apex Court held
as follows:-
"112. However, with the advent of Cox and Kings (I) (supra), the legal
foundation for the application of the 'Group of Companies' doctrine, or
any analogous principles designed to determine mutual consent was
clarified to exist in the definition of "party" under Section 2(1)(h) read
with the meaning of "arbitration agreement" under Section 7 of the
Act, 1996. Unlike Section(s) 8 and 45 of the Act, 1996, the provisions
of Section(s) 2(1)(h) and 7 are not confined in their applicability to only
judicial forums or courts, and rather extend equally to both courts
and arbitral tribunals, as these provisions form the bedrock of the
framework of arbitration under the Act, 1996. The logical sequitur of
this is that arbitral tribunals, too, are vested with the requisite
authority to engage with and apply principles, such as the 'Group of
Companies' doctrine, when determining whether a non-signatory may
be bound by an arbitration agreement.
113. It is well within the jurisdiction of the Arbitral Tribunal to decide
the issue of joinder and non-joinder of parties and to assess the
applicability of the Group of Companies Doctrine. Neither in Cox and
Kings (I) (supra) nor in Ajay Madhusudhan (supra), this Court has
said that it is only the reference courts that are empowered to
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determine whether a non-signatory should be referred to arbitration.
The law which has developed over a period of time is that both 'courts
and tribunals' are fully empowered to decide the issues of
impleadment of a non-signatory and Arbitral Tribunals have been held
to be preferred forum for the adjudication of the same.
***
***
115. The case of Ajay Madhusudhan (supra) also recognizes that the
legal relationship between the signatory and non-signatory assumes
significance in determining whether the non-signatory can be taken to
be bound by the Arbitration Agreement. This Court also issued a
caveat that the 'courts and tribunals should not adopt a conservative
approach to exclude all persons or entities who are otherwise bound
by the underlying contract containing the arbitration agreement
through their conduct and their relationship with the signatory
parties. The mutual intent of the parties, relationship of a non-
signatory with a signatory, commonality of the subject matter, the
composite nature of the transactions and performance of the contract
are all factors that signify the intention of the non-signatory to be
bound by the arbitration agreement'."
42. The first objection is decided against the respondents, leaving it open
to be raised before the learned tribunal.
43. The next objection was that the MOU of March 17, 2013 had lost its
force, upon the execution of another MOU dated October 30, 2013. The
petitioner had relied upon several documents to show that shares were
transferred between September 16, 2013 and June 6, 2014, in terms of
clause 1.2 of the MOU dated March 17, 2013, by a mix of inter-promoter
sale of shares and gift of shares. As per Annexure E, altogether 38,58,632
numbers of shares out of 55,62,790 shares in the said company (MBL), had
been transferred on different dates. The relevant clauses of the MOU
indicate that those transfers which were beyond July 31, 2013, could have
well been in continuation of the said MOU, and beyond the period within
which the MOU was supposed to be performed. Clause 1.2 is quoted below:-
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"1.2 The Group-2 shall arrange for (i) release of the personal
guarantees of parties of Group- 1 by or before June 2013 or within
60 days of resignation from MBL whichever is later, (ii) pay and/or
cause to be paid to the Group-1 and all inclusive consideration of Rs.
28.50 Crores for the shares as set out in clause 1 above.
The parties of Group-1 shall ensure necessary transfer of shares by
way of deeds, documents including transfer deed/gift deed etc., to
ensure that the total shares as per clause no.1 are transferred for a
total consideration of Rs. 28.50 Crores.
The consideration may be shared/distributed between parties of
Group- 1 proportionately or otherwise as mutually agreed, subject
however that the net aggregate consideration amount shall not be
higher or lower than Rs. 28.50 crores.
Group-2 shall keep Group-1 indemnified by MBL so that no liability
shall accrue or arise to the First and Second Parties of Group-1 for
the personal guarantees given by them."
44. The second clause, hereinabove indicates that, transfer of shares by
gift deeds was permitted in the said MOU, in order to ensure that the total
consideration of Rs. 28. 50 cores was maintained. Although, it had been
contended by the respondents that those transfers were made in the open
market and the declarations in the required forms were only in compliance
with the regulations of SEBI, it is not possible for this court to hold at this
stage that, such gift deeds had not been executed in furtherance to the said
MOU of March 17, 2013. Clause 2, which is quoted below provided that the
second party of the Group- I shall resign as director from MBL and MSP
infrastructures Limited. Clause 2 & 3 is quoted below:-
"2. The Second Party of Group-1 shall resign as director from MBL
and MSP Infrastructure Limited - an associate Company of MBL
immediately upon receipt of Rs.15.00 Crores out of the total
consideration of Rs. 28.50 Crores as recorded in Clause 1.2
3. The Third and Fourth Party of Group-1 shall resign as Vice-
President (s) of the Company MBL immediately upon receipt of Rs.
15.00 Crores out of the total consideration of Rs. 28.50 Crores as
recorded in Clause 1.2"
45. The third clause provided that, the third and the fourth party would
resign as vice-president of the said company (MBL) immediately upon
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receipt of 15 crores out of the total consideration of 28.50 crores. The
specific contentions of the petitioner were that, the respondents and their
father had substantially discharged their obligations under the MOU and
Aditya Maheshwari had transferred all his shares held by him in the said
Company, in favour of the petitioner.
46. The averments are that, the petitioner got the personal guarantees
released from the banks, at his own cost. The petitioner had paid an
aggregate amount of Rs. 24.96 crores to the members of the Group- I
company, particulars of which have been annexed in the form of a schedule
and marked with the letter E to the application. The respondent No. 1
resigned from the Board of Directors of AAP infrastructure limited. The
respondent No. 1 resigned as a director of the said company (MBL), on June
14, 2014 with effect from July 1, 2014. The respondent No. 2 resigned as
vice-president of the said company on October 7, 2013. The personal
guarantee of the respondent No. 1 in APP infrastructure limited was released
at the petitioner's cost which was recorded in the order of the Debts
Recovery Tribunal II, Delhi, dated April 7, 2021, in O.A. No. 1232 of 2017.
The respondent No. 1 was a party to the said proceeding. Copy of the order
has been annexed to the application with the letter I. Such acts appear to be
in consonance with clauses 1.1 and 1.2 of the said MOU, which is quoted
below :-
"1.1The members of Group-2 agrees and acknowledges that the
First and Second Party of Group-1 have given the following personal
guarantees:
(a) The Consortium of Banker of the Company for securing the fund
based and non-fund based working capital facilities; and
(b) To the banker of AAP Infrastructure Limited, a subsidiary of the
Company for an amount of Rs. 50 Crores.
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1.2 The Group-2 shall arrange for (i) release of the personal
guarantees of Parties of Group - 1 by or before June, 2013 or within
60 days of resignation from MBL whichever is later, (ii) pay and/or
cause to be paid to the Group -1 an all inclusive consideration of
Rs. 28.50 Crores for the shares as set out in clause 1 above.
The parties of Group -1 shall ensure necessary transfer of share by
way of deeds, documents including transfer deed/gift deed etc to
ensure that the total shares as per clause no. 1 are transferred for a
total consideration of Rs. 28.50 Crores.
The consideration may be shared/distributed between parties of
Group-1 proportionately or otherwise as mutually agreed, subject
however that the net aggregate consideration amount shall not be
higher or lower than Rs. 28.50 cores.
Group 2 shall keep Group -1 indemnified by MBL so that no liability
shall accrue or arise to the First and Second Parties of Group 1 for
the personal guarantees given by them."
47. Under such circumstances, this court is of the view that, there are
adequate averments and documents, which, prima facie, show that the MOU
of March 2017, had been acted upon beyond July 31, 2013 and the
transactions which took place do not primarily appear to be in compliance of
the obligations arising out of the MOU of October 30, 2013, which was
executed between Prabhu International Vyapar Private Limited and MBL A
Capital Limited. Some of the terms and conditions of the MOU of October
30, 2013, are set out below for convenience:-
"(a) Seller is the owner of 17,00,000 fully paid up shares of M/s MBL
Infrastructures Limited (herein referred to as 'MBL'), a listed company.
(b)Of the said 17,00,000 shares of MBL, 5,0,000 shares have been
pledged by the Intending Seller to Central Bank of India, Bhowanipore
Branch, Kolkata.
c) This MOU is subject to the terms and conditions contained herein.
2.Conditions for sale of Sale Shares
2.1 Seller hereby offers to sell and the Buyer hereby agrees to purchase
the Sale Shares including the Pledged Shares after release from pledge.
2.2 Buyer shall require and Seller shall give to the Buyer proof of
satisfaction of the pledge of Pledged Shares.
2.3 Subsequent to sale of the Sale Shares, the Seller shall cause to
deliver the share certificates together with the duly signed share
transfer deeds in the name of the Buyer and / or transfer the
dematerialized shares in the name of the Buyer.
3. Consideration
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3.1seller agrees to sell and Buyer agrees to purchase the Sale Shares at
the prevailing market price as on the date of signing of this MOU i.e. at
Rs 63.75 per share.
3.2 The consideration for the deal is the price as per para 3.1 and
release of personal guarantees of the directors of Prabhu International
Vyapar(P) Ltd for the fund based and non fund based working capital
facilities of MBL Infrastructures Ltd which the Seller considers very
essential for smooth running of its business.
3.3 The consideration for sale shall become payable by the Buyer at or
before the Seller delivering the share certificates together with the duly
signed share transfer deeds in the name of the Buyer and / or
transferring the dematerialized shares in the name of the Buyer.
However the Seller shall have the right to demand the consideration in
advance from the Buyer when it is in a reasonable position to deliver
the Sale Shares.
3.4 Subject to the availability with the Seller, in case the Buyer wants
to purchase additional shares of MBL from the Seller, the price of such
additional shares shall be the market price as on the date of actual sale
of such additional shares.
4.Validity Period of this MOU
4.1This MOU shall remain valid upto 18 months from the date of
entering into this MOU."
48. It does not appear that any of the shares of the respondent No. 3 had
been transferred at the rate mentioned in the MOU of October 2013. The
MOU of October 2013, does not indicate that the intention of the parties was
to either supersede or modify, or negate the said MOU. At this stage, without
trial, it cannot be construed that the MOU of March 17, 2013, was either
novated, superseded or modified by the MOU of October, 2013.
Interpretation of the terms of the contract and determination of the issue of
supersession or novation etc. are within the domain of the learned arbitral
tribunal.
49. Reference is made to the decision of Sanjiv Prakash vs Seema
Kukreja and Ors. reported in (2021) 9 SCC 732. The relevant paragraph is
quoted below :-
"22. Judged by the aforesaid tests, it is obvious that whether the MoU
has been novated by the SHA dated 12-4-1996 requires a detailed
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consideration of the clauses of the two agreements, together with the
surrounding circumstances in which these agreements were entered
into, and a full consideration of the law on the subject. None of this can
be done given the limited jurisdiction of a court under Section 11 of the
1996 Act. As has been held in para 148 of Vidya Drolia [Vidya
Drolia v. Durga Trading Corpn., (2021) 2 SCC 1 : (2021) 1 SCC (Civ)
549] , detailed arguments on whether an agreement which contains an
arbitration clause has or has not been novated cannot possibly be
decided in exercise of a limited prima facie review as to whether an
arbitration agreement exists between the parties. Also, this case does
not fall within the category of cases which ousts arbitration altogether,
such as matters which are in rem proceedings or cases which, without
doubt, concern minors, lunatics or other persons incompetent to
contract. There is nothing vexatious or frivolous in the plea taken by
the appellant. On the contrary, a Section 11 court would refer the
matter when contentions relating to non-arbitrability are plainly
arguable, or when facts are contested. The court cannot, at this stage,
enter into a mini trial or elaborate review of the facts and law which
would usurp the jurisdiction of the Arbitral Tribunal."
50. With regard to the next objection of Mr. Choudhury that the disputes
and claims sought to be referred to were deadwood and barred by the laws
of limitation, reference is made to Article 54 of The limitation Act, which is
quoted below:-
Description of suit Period of Limitation Time from which period
begins to run
54. For specific Three years. The date fixed for the
performance of a performance, or, if no such
contract. date is fixed, when the
plaintiff has notice that
performance is refused.
51. According to learned Senior Advocate, the period of limitation for
specific performance of the MOU dated March 17, 2013 would be three years
from the date fixed for performance.
52. The date for performance according to Mr. Choudhury was July 31,
2013. He submitted that, even assuming that the timeline was given a go-
by, the first refusal towards performance of the clauses by Group-1 would
be when the Group-1 started selling their shares to third parties. The case
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made out by Mr. Choudhury before this court was that, the chart disclosed
under Annexure E to this application, would show that the respondents had
sold their respective shares in the said company, i.e., MBL Infrastructures
Limited in the open market to third parties, at the prevailing market rate,
and not at the rate as per the said MOU.
53. According to Mr. Choudhury, Group-1 had sold 4,43,655 shares of
MBL Infrastructures Limited in the open market to third parties for a total
consideration of 3,37,65,347 and those transfers were not in favour of the
petitioner. The total shares purchased by the petitioner and MBL A Capital
Limited from the members of the Group-1 was 34,14,977. Such figure would
be available in the application of MBL A, being GA 845 of 2015, filed in CS
54 of 2015. Thus, even if, the dates of the transfer of the shares to the third
parties in the year 2014, were taken into account for the purpose of
computation of the period of limitation, the period of three years from the
date of refusal would expire sometime in 2017, but under no circumstances,
the letter dated January 12, 2023 could be taken as the date of refusal to
perform the obligation under the MOU of March 17, 2013. Moreover, the
pledge of 5,00,000 shares was also a breach of the alleged MOU of March
17, 2013 and also indicative of refusal to perform.
54. Per contra, to demonstrate that the dispute was not barred the
petitioner relied upon a letter dated September 15, 2017, by which the
respondent No. 1 had requested the petitioner to release the personal
guarantee given to the banker of AAP Infrastructures. As per clauses 1.1
and 1.2 of the MOU, the Group-1 company was to get the personal
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guarantees released on or before June 2013 or within 60 days from
resignation from MBL Infrastructure Limited.
55. By two letters, both dated September 22, 2017, the petitioner denied
the obligation under the MOU of March 17, 2013, but several documents
have been produced before this court which indicate that the guarantees
given by the respondent No. 1 to the banker of AAP Infrastructure Limited
for a sum of 50 crores was released on April 7, 2021, upon a request in
writing on September 15, 2017. Clauses 1.1 and 1.2 of the MOU dated
March 17, 2013 is quoted below:-
"1.1The members of Group-2 agrees and acknowledges that the
First and Second Party of Group-1 have given the following personal
guarantees:
(a) The Consortium of Banker of the Company for securing the
fund based and non-fund based working capital facilities;
and"
(b) To the banker of AAP Infrastructure Limited, a subsidiary of
the Company for an amount of Rs. 50 Crores.
1.2 The Group-2 shall arrange for (i) release of the personal
guarantees of Parties of Group - 1 by or before June, 2013 or
within 60 days of resignation from MBL whichever is later, (ii) pay
and/or cause to be paid to the Group -1 an all inclusive
consideration of Rs. 28.50 Crores for the shares as set out in
clause 1 above.
The parties of Group -1 shall ensure necessary transfer of share
by way of deeds, documents including transfer deed/gift deed etc
to ensure that the total shares as per clause no. 1 are transferred
for a total consideration of Rs. 28.50 Crores.
The consideration may be shared/distributed between parties of
Group-1 proportionately or otherwise as mutually agreed, subject
however that the net aggregate consideration amount shall not be
higher or lower than Rs. 28.50 cores.
Group 2 shall keep Group -1 indemnified by MBL so that no
liability shall accrue or arise to the First and Second Parties of
Group 1 for the personal guarantees given by them."
56. The order of the DRT is quoted below :-
"This hearing has been held through video conferencing.
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The ld counsels for the borrower/defendant submit that the
matter has been settled and No Due Certificate issued by the
applicant bank.
The Ld counsel for the applicant bank submits that matter is
settled.
In view of the statement made by the ld counsel for both the
parties, the present OA is disposed of as settled and withdrawn.
Registry is directed to return the court fee as per rules and
return the original title deed/documents, if it is on record of the
Tribunal within a week from today, on substitution.
All the pending IAs stand disposed of.
File be consigned to records."
57. It, prima facie, appears that the release was in compliance of the
above quoted clauses. The title deeds of the respondent No. 1, which were
mortgaged, were released on August 4, 2021. Other guarantees given by the
respondent No. 1 and late Ram Gopal Maheshwari to secure loans, had been
released on different dates between 2013 and 2014.
58. Thus, it is not possible for this court to convincingly hold that the
claims and/or disputes are deadwood, when the documents of release of the
personal guarantees are available in the records. For the court to arrive at a
conclusion that the release of guarantee in 2021 was not connected to the
performance of the MOU dated March 17, 2013, an evidential enquiry will be
required. This is not permitted in law.
59. The issues whether the court should accept such action of release of
the personal guarantee as a discharge of obligation of the petitioner under
the MOU of March 17, 2013 or whether the same should be considered as a
part of a separate transaction, independent of MOU of 2013, are triable
issues.
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60. The denial of the petitioner's obligation by letter dated September 22,
2017, cannot be held to be concrete proof of the fact that, the personal
guarantee was not released as a part of the obligation under the MOU of
March 2013. Maruti Maheshwari received the title deeds and other security
documents sometime on August 4, 2021, as per the document annexed to
the convenience compilation, i.e., the letter of the Bank of Baroda dated
August 4, 2021, the letter of Prakash Sharma, Director for AAP
Infrastructures dated April 14, 2021, addressed to the Assistant General
Manager, Zonal Office Stressed Assets Recovery Branch, Bank of Baroda,
'no due certificate' dated January 12, 2021 issued by the Bank of Baroda
etc. It cannot be conclusively held that the above mentioned documents
which have been referred to were part of any other transaction or agreement
and not in discharge and satisfaction of the obligations of the petitioner in
the MOU of March 17, 2013.
61. It also appears that the other guarantees which are quoted below,
were released after July 31, 2013.
"
Lender Bank Name of Date of release Amount (Rs.
Guarantor of Guarantees In Crores)
Yes Bank Mr. Ram Gopal 10.12.2013 30.00
Limited, Maheshwari
Nyaya Marg,
Chanakyapuri
Branch, New
Delhi.
Punjab Mr. Ram Gopal 03.02.2014 67.50
National Maheshwari
Bank, Mid Mr.
Corporate MarutiMaheshwari
Branch,
Noida
State Bank of Mr. Ram Gopal 24.02.2014 42.50
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Bikaner & Maheshwari
Jaipur, Mr.
Barakhamba MarutiMaheshwari
Road Branch,
New Delhi
State Bank of Mr. Ram Gopal 04.03.2014 105.00
Patiala Maheshwari
Commercial Mr.
Branch, MarutiMaheshwari
Janpath, New
Delhi
Oriental Bank Mr. Ram Gopal 26.05.2014 50.00
of Commerce, Maheshwari
Overseas Mr.
Branch, MarutiMaheshwari
Panchkulan
Branch, New
Delhi
Allahabad Mr. Ram Gopal 04.06.2014 115.00
Bank, Maheshwari
International Mr.
Branch, New MarutiMaheshwari
Delhi
Bank of India, Mr. Ram Gopal 22.12.2014 37.50
Kolkata Large Maheshwari
Corporate Mr.
Bank, (W.B.) MarutiMaheshwari
62. Under such circumstances, limitation is a mixed question of law and
fact, which has to be decided by the learned arbitral tribunal. In
Panchanan Dhara & Ors. Vs. Monmatha Nath Maity (dead) reported in
(2006) 5 SCC 340, the Hon'ble Apex Court held as follows:-
"22. A bare perusal of Article 54 of the Limitation Act would show that
the period of limitation begins to run from the date on which the
contract was to be specifically performed. In terms of Article 54 of the
Limitation Act, the period prescribed therein shall begin from the date
fixed for the performance of the contract. The contract is to be
performed by both the parties to the agreement.
In this case, the first respondent was to offer the balance amount to
Company, which would be subject to its showing that it had a perfect
title over the property. We have noticed hereinbefore that the courts
below arrived at a finding of fact that the period of performance of the
agreement has been extended. Extension of (sic time of performance of
a) contract is not necessarily to be inferred from written document. It
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could be implied also. The conduct of the parties in this behalf is
relevant. Once a finding of fact has been arrived at, that the time for
performance of the said contract had been extended by the parties,
the time to file a suit shall be deemed to start running only when the
plaintiff had notice that performance had been refused. Performance
of the said contract was refused by the Company only on 21-8-1985.
The suit was filed soon thereafter."
63. In SBI General Insurance (supra), the Hon'ble Apex Court held as
follows:-
"128. On the first issue, it was observed by us that the Limitation
Act, 1963 is applicable to the applications filed under Section 11(6) of
the Act, 1996. Further, we also held that it is the duty of the referral
court to examine that the application under Section 11(6) of the Act,
1996 is not barred by period of limitation as prescribed under Article
137 of the Limitation Act, 1963, i.e., 3 years from the date when the
right to apply accrues in favour of the applicant. To determine as to
when the right to apply would accrue, we had observed in paragraph
56 of the said decision that "the limitation period for filing a petition
under Section 11(6) of the Act, 1996 can only commence once a valid
notice invoking arbitration has been sent by the applicant to the
other party, and there has been a failure or refusal on part of that
other party in complying with the requirements mentioned in such
notice."
* **
***
133. Thus, we clarify that while determining the issue of limitation in
exercise of the powers under Section 11(6) of the Act, 1996, the
referral court should limit its enquiry to examining whether Section
11(6) application has been filed within the period of limitation of
three years or not. The date of commencement of limitation period for
this purpose shall have to be construed as per the decision in Arif
Azim (supra). As a natural corollary, it is further clarified that the
referral courts, at the stage of deciding an application for
appointment of arbitrator, must not conduct an intricate evidentiary
enquiry into the question whether the claims raised by the applicant
are time barred and should leave that question for determination by
the arbitrator. Such an approach gives true meaning to the legislative
intention underlying Section 11(6-A) of the Act, and also to the view
taken in In Re : Interplay (supra)."
64. In Bharat Sanchar Nigam Limited (supra),the Hon'ble Apex Court
held as follows:-
"38. Limitation is normally a mixed question of fact and law, and
would lie within the domain of the Arbitral Tribunal. There is,
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however, a distinction between jurisdictional and admissibility
issues. An issue of "jurisdiction" pertains to the power and authority
of the arbitrators to hear and decide a case. Jurisdictional issues
include objections to the competence of the arbitrator or tribunal to
hear a dispute, such as lack of consent, or a dispute falling outside
the scope of the arbitration agreement. Issues with respect to the
existence, scope and validity of the arbitration agreement are
invariably regarded as jurisdictional issues, since these issues
pertain to the jurisdiction of the tribunal.
***
***
44. The issue of limitation which concerns the "admissibility" of the
claim, must be decided by the Arbitral Tribunal either as a
preliminary issue, or at the final stage after evidence is led by the
parties.
***
***
47. It is only in the very limited category of cases, where there is not
even a vestige of doubt that the claim is ex facie time-barred, or that
the dispute is non-arbitrable, that the court may decline to make the
reference. However, if there is even the slightest doubt, the rule is to
refer the disputes to arbitration, otherwise it would encroach upon
what is essentially a matter to be determined by the tribunal."
65. In Aslam Ismail Khan (supra),the Hon'ble Apex Court held as
follows:-
"33. Having heard the learned counsel appearing for the parties
and having gone through the materials on record, the short
question that falls for our consideration is whether we should
decline to make a reference under Section 11(6) of the 1996 Act, by
examining whether the substantive claims of the petitioner are ex
facie and hopelessly time-barred?
34. A three-Judge Bench of this Court in Vidya Drolia v. Durga
Trading Corpn. [Vidya Drolia v. Durga Trading Corpn., (2021) 2 SCC
1 : (2021) 1 SCC (Civ) 549] while dealing with the scope of powers of
the referral Court under Sections 8 and 11, respectively, endorsed
the prima facie test and opined that courts at the referral stage can
interfere only in rare cases where it is manifest that the claims are
ex facie time-barred and dead, or there is no subsisting dispute.
Such a restricted and limited review was considered necessary to
check and protect parties from being forced to arbitrate when the
matter is demonstrably "non-arbitrable" and to cut off the
deadwood.
35. The relevant observations in Vidya Drolia [Vidya Drolia v. Durga
Trading Corpn., (2021) 2 SCC 1 : (2021) 1 SCC (Civ) 549] are
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reproduced herein below : (Vidya Drolia case [Vidya Drolia v. Durga
Trading Corpn., (2021) 2 SCC 1 : (2021) 1 SCC (Civ) 549] , SCC pp.
119 & 121, paras 148 & 154)
"148. Section 43(1) of the Arbitration Act states that the
Limitation Act, 1963 shall apply to arbitrations as it applies to
court proceedings. Sub-section (2) states that for the purposes
of the Arbitration Act and the Limitation Act, arbitration shall
be deemed to have commenced on the date referred to in
Section 21. Limitation law is procedural and normally disputes,
being factual, would be for the arbitrator to decide guided by the
facts found and the law applicable. The court at the referral
stage can interfere only when it is manifest that the claims are
ex facie time-barred and dead, or there is no subsisting dispute.
All other cases should be referred to the Arbitral Tribunal for
decision on merits. Similar would be the position in case of
disputed "no-claim certificate" or defence on the plea of novation
and "accord and satisfaction". As observed in Premium Nafta
Products Ltd. [Fili Shipping Co. Ltd. v. Premium Nafta Products
Ltd., 2007 UKHL 40 : 2007 Bus LR 1719 (HL)] , it is not to be
expected that commercial men while entering transactions inter
se would knowingly create a system which would require that
the court should first decide whether the contract should be
rectified or avoided or rescinded, as the case may be, and then if
the contract is held to be valid, it would require the arbitrator to
resolve the issues that have arisen.
***
154. ... 154.4. Rarely as a demurrer the court may interfere at
Section 8 or 11 stage when it is manifestly and ex facie certain
that the arbitration agreement is non-existent, invalid or the
disputes are non-arbitrable, though the nature and facet of non-
arbitrability would, to some extent, determine the level and
nature of judicial scrutiny. The restricted and limited review is
to check and protect parties from being forced to arbitrate when
the matter is demonstrably "non-arbitrable" and to cut off the
deadwood. The court by default would refer the matter when
contentions relating to non-arbitrability are plainly arguable;
when consideration in summary proceedings would be
insufficient and inconclusive; when facts are contested; when
the party opposing arbitration adopts delaying tactics or impairs
conduct of arbitration proceedings. This is not the stage for the
court to enter into a mini trial or elaborate review so as to usurp
the jurisdiction of the Arbitral Tribunal but to affirm and uphold
integrity and efficacy of arbitration as an alternative dispute
resolution mechanism."
(emphasis supplied)
***
***
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51. It is now well-settled law that, at the stage of Section 11
application, the referral Courts need only to examine whether the
arbitration agreement exists -- nothing more, nothing less. This
approach upholds the intention of the parties, at the time of
entering into the agreement, to refer all disputes arising between
themselves to arbitration. However, some parties might take undue
advantage of such a limited scope of judicial interference of the
referral Courts and force other parties to the agreement into
participating in a time-consuming and costly arbitration process.
This is especially possible in instances, including but not limited to,
where the claimant canvasses either ex facie time-barred claims or
claims which have been discharged through "accord and
satisfaction", or cases where the impleadment of a non-signatory to
the arbitration agreement is sought, etc.
52. In order to balance such a limited scope of judicial interference
with the interests of the parties who might be constrained to
participate in the arbitration proceedings, the Arbitral Tribunal may
direct that the costs of the arbitration shall be borne by the party
which the Tribunal ultimately finds to have abused the process of
law and caused unnecessary harassment to the other party to the
arbitration."
66. In the Re: Interplay (supra),the Hon'ble Apex Court held as follows:-
"134. In Iffco Ltd. v. Bhadra Products [Iffco Ltd. v. Bhadra Products,
(2018) 2 SCC 534 : (2018) 2 SCC (Civ) 208] , one of the issues before
this Court was whether a decision on the issue of limitation would go
to the root of the jurisdiction of the Arbitral Tribunal, and therefore be
covered by Section 16 of the Arbitration Act. This Court referred to
Section 16(1) to observe that : (SCC p. 547, para 18)
"18. ... the Arbitral Tribunal may rule on its own jurisdiction, which
makes it clear that it refers to whether the Arbitral Tribunal may
embark upon an inquiry into the issues raised by the parties to the
dispute."
(emphasis in original)
In Bhadra Products [Iffco Ltd. v. Bhadra Products, (2018) 2 SCC 534 :
(2018) 2 SCC (Civ) 208] , it was held that the issue of limitation
concerns the jurisdiction of the tribunal which tries the proceedings.
135. In Uttarakhand Purv Sainik Kalyan Nigam Ltd. v. Northern Coal
Field Ltd. [UttarakhandPurvSainikKalyan Nigam Ltd. v. Northern Coal
Field Ltd., (2020) 2 SCC 455 : (2020) 1 SCC (Civ) 570] the issue before
this Court was whether a Referral Court at the stage of appointment of
arbitrators would be required to decide the issue of limitation or leave
it to the Arbitral Tribunal. A Bench of two Judges of this Court held
that the doctrine of competence-competence is "intended to minimise
judicial intervention, so that the arbitral process is not thwarted at the
threshold, when a preliminary objection is raised by one of the
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parties." Moreover, this Court held that Section 16 is an inclusive
provision of very wide ambit : (SCC p. 462, para 7)
"7. ... 7.13. In view of the provisions of Section 16, and the legislative
policy to restrict judicial intervention at the pre-reference stage, the
issue of limitation would require to be decided by the arbitrator. Sub-
section (1) of Section 16 provides that the Arbitral Tribunal may rule
on its own jurisdiction, "including any objections" with respect to the
existence or validity of the arbitration agreement. Section 16 is an
inclusive provision, which would comprehend all preliminary issues
touching upon the jurisdiction of the Arbitral Tribunal. The issue of
limitation is a jurisdictional issue, which would be required to be
decided by the arbitrator under Section 16, and not the High Court at
the pre-reference stage under Section 11 of the Act. Once the
existence of the arbitration agreement is not disputed, all issues,
including jurisdictional objections are to be decided by the arbitrator."
67. Having discussed the facts involved and the judicial authorities cited
by the parties, I am of the view that refusal to refer the dispute will cause
injustice to the petitioner. The facts do not warrant dismissal of the
application for reference at the very threshold. Frivolity in the claim can also
be decided by the learned tribunal and the learned tribunal also has the
jurisdiction to award costs by compensating the party who in its opinion
had been unnecessarily dragged into a prolonged and malafide litigation.
68. Thus, when the respondents can be compensated by award of costs, if
it is found by the tribunal that they had been unnecessarily embroiled into a
time-consuming and mala fide litigation, justice demands that the reference
of the dispute for adjudication by the appropriate forum should be allowed.
The claim of the petitioner should not be denied even before the petitioner
has a chance to put forward his case. When the referral court is in doubt,
the dispute must be referred.
69. The case and counter case of the parties with regard to inter-promoter
transfer and the purport of the declarations given under the Regulations of
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SEBI, will require this court to delve deeper into the facts. This will entail a
mini-trial, which is beyond the jurisdiction of the referral court.
70. Under such circumstances, the application is allowed, leaving the
objections raised by Mr. Choudhury, including the questions of limitation,
arbitrability, jurisdiction of the learned tribunal, novation of the MOU, etc.
open for decision by the tribunal. The observations made in this order are,
prima facie and not on the merits of the claims.
71. Accordingly, Mr. Abhijit Chatterjee, learned senior Advocate shall act
as the nominee of the petitioner. Mr. Surajit Nath Mitra, learned senior
Advocate shall act as the nominee of the respondents and Hon'ble Justice
Subhro Kamal Mukherjee, former Chief Justice of Karnataka High Court,
will act as the presiding Arbitrator.
72. This order is subject to compliance of section 12 of the Arbitration and
Conciliation Act, 1996.
73. The learned Tribunal shall fix the remuneration as per the Schedule of
the Act.
74. No order is passed as to costs.
75. Urgent Photostat certified copies of this judgment, if applied for, be
supplied to the respective parties upon fulfilment of requisite formalities.
(Shampa Sarkar, J.)
