Delhi High Court

Sanjay Gambhir & Ors. vs Beekman Helix India Consulting ... on 22 May, 2015

Author: V. Kameswar Rao

*       IN THE HIGH COURT OF DELHI AT NEW DELHI
                                       Judgment reserved on April 20, 2015
                                       Judgment delivered on May 22, 2015
+       ARB.P. 113/2012

        SANJAY GAMBHIR & ORS.

                                                             ..... Petitioners
                           Through:     Mr.K.Datta, Adv.with Mr.Diggaj
                                        Pathak, Advocate

                           versus

        BEEKMAN HELIX INDIA CONSULTING PVT LTD.

                                                             ..... Respondent
                           Through:     Mr.Divjyot Singh, Advocate with
                                        Ms.Avsi Malik, Adv. for R-1
                                        Mr.Manish Sharma, Adv. with
                                        Ms.Chandni Mehra, Mr.Pranay Raj
                                        Singh, Advs. for R-2 and R-3

CORAM:
HON'BLE MR. JUSTICE V.KAMESWAR RAO
V.KAMESWAR RAO, J.

1. The present petition has been filed by the four petitioners namely

Sanjay Gambhir, Karan Gambhir, Kanish Raaj Gambhir and M/s D.D.

Global Capital Ltd. under Section 11 of the Arbitration & Conciliation Act,

1996 („Act‟ in short).

2. The facts as noted are that the petitioner Nos.1 and 2 are the former

shareholders and founding promoter and director and petitioner Nos.3 and

4 are the former shareholders of the D.D Housing Ltd. (Subsequently

known as New Age Town Planners Ltd, and now known as BPTP Parkland

Pvt. Ltd) which was incorporated by the petitioners in the year 2006, set up

primarily for the purpose of undertaking development of an integrated

township project comprising residential plots, group housing, commercial,

community facilities etc spread over, approximately 160 acres of land in

Sector 77, Faridabad.

Petitioner's case

3. It is the case of the petitioners that the respondent represented itself

as an investment advisory company which assists Indian developers in

obtaining investments in the form of debt, quasi debt and equity for their

real estate projects. The respondent offered to provide the petitioners

advisory services for raising funds for the integrated township project

initiated by the petitioners.

4. Thereafter, the respondent started negotiating with the petitioners on

behalf of foreign investor and requested the petitioners to sign a Mandate

Agreement with the respondent. According to the petitioners, the

petitioner No.1 entered into a Mandate Agreement on behalf of D.D

Housing Ltd. on August 23, 2006 with the respondent. Vide Mandate

Letter dated August 23, 2006, it was agreed that the respondent and the

promoters of the D.D Housing Ltd. including the petitioners shall execute a

Call Option Agreement under which the respondent can require the

promoters to sell all of their shares on terms and conditions contained

therein. It is the case of the petitioners that the said Mandate Letter was

signed by the promoters and subsequent to the signing of the Mandate

Letter on August 23, 2006, the D.D Housing Ltd. was incorporated on

September 05, 2006 on the direction of the respondent. It was represented

by the respondent that Call Option Agreements with regard to shareholding

of the petitioners in favour of the respondent and the Deed of Pledge and

Power of Attorney in favour of the respondent with regard to the said

shares was only for the purpose of securing the investment made by the

foreign investor in the project of the D.D Housing Ltd. and towards the

mental satisfaction of the investor. The Mandate Letter dated August 23,

2006 was executed for the purpose of same transaction under which the

foreign direct investment was received later by D.D Housing Ltd. for

which specific agreements were entered into between the petitioners and

the foreign investor namely Debenture Subscription Agreement and the

Shareholders Agreement.

5. According to the petitioners, the respondent introduced TMW

ASPFI Cyprus Holding Co. Ltd. to invest in the integrated township

project of the D.D Housing Ltd. at Sector-77, Faridabad and the

respondent continued to negotiate with the petitioners with regard to the

investment to be made by TMW in D.D Housing Ltd. It was agreed that

TMW would subscribe to 2,25,000 fully and mandatory convertable

debentures of Rs.5,000/- each of the D.D Housing Ltd., equivalent to

1,12,50,00,000 with a coupon rate of 4% p.a on the terms and conditions

contained in the Debenture Subscription Agreement dated October 16,

2006 entered between TMW and D.D Housing Ltd.

6. The TMW also entered into Shareholders Agreement dated October

16, 2006 with the petitioners and the other promoters of D.D Housing Ltd.

7. The Shareholders Agreement dated October 16, 2006 incorporated

in itself put option clause which was available to TMW in case TMW

sought an exit from the project. The option price was fixed at the rate of

total value of foreign investment along with interest @ 18% p.a

compounded half yearly on such subscription consideration less any

interest, dividend paid for the period from the date of subscription of the

FCD‟s by the investor till the date of payment of the option price. That

after the execution of the Debenture Subscription Agreement and the

Shareholders Agreement both dated October 16, 2006 the respondent again

requested the petitioners to execute the Call Option Agreement, deed of

pledge and power of attorney in favour of the respondent and again

represented that the said documents will not be acted upon by the

respondent as the same are a mere formality to be done for the release of

first transche of investment in favour of D.D Housing Ltd. and for the

mental satisfaction of the foreign investor. It is also the case of the

petitioners that the petitioners and the other promoters of D.D Housing

Ltd. in terms of the Mandate Letter dated August 23, 2006 and on the

representation of the respondent executed Call Option Agreements dated

October 18/19, 2006 in favour of the respondent. Share Pledge Agreements

and Irrevocable Power of Attorneys dated October 19, 2006 were also

executed in favour of the respondent by the petitioners and other promoters

of D.D Housing Ltd. The investment of the TMW was received by D.D

Housing Ltd. on March 03, 2007. The D.D Housing Ltd. and TMW ASPFI

Cyprus Holding Co. Ltd. entered into a supplementary debenture

subscription agreement dated August 07, 2008 vide which TMW invested

additional funds amounting to Rs.11,82,00,000/-.

8. It is the case of the petitioners that the call option price under Call

Option Agreements dated October 18/19, 2006 between the petitioners and

respondent was to be determined by a qualified chartered accountant,

however, the respondent with mala fide intent to cheat the petitioners of

their stakes in D.D Housing Ltd. in view of arranging the additional

funding for the project made the petitioners to sign the amendments to the

Call Option Agreements dated April 16, 2009 to bring the call option price

to negligible amount of Rs.100/-. It is also the case of the petitioners that

the respondent by amending the Call Option Agreements inserted the

provision of determination of the call option price by valuation equivalent

to 0.335% of the (average valuation of the company less total cost of the

foreign holding in the company) or Rs.100/-., whichever is higher.

However, the respondent forced upon the petitioners to execute re-stated

Call Option Agreements dated June 18, 2009 in order to reduce the call

option price to Rs.100 only. According to the petitioners, the respondent

forced upon the petitioners the restated Call Option Agreements and the

amended agreements with the assurance that the same was mere formality

towards the additional funding received for integrated township project. It

was the case of the petitioners that the Call Option Agreements @ Rs.100/-

cannot be acted upon as the same was against CCI guidelines.

9. A Second Amendment Agreement dated August 20, 2009 was

executed between DD Housing Limited and TMW ASPF I CYPRUS

HOLDING COMPANY LIMITED / Investor for extension of date of

conversion of the FCDs by a period of 3 months. The new date for

conversion of FCDs in case of non-exercise of option by the Investor was

November 20, 2009.

10. On January 29, 2010 TMW ASPF I CYPRUS HOLDING

COMPANY PRIVATE LIMITED through Beekman Helix India

Consulting Pvt. Ltd. issued a legal notice calling upon for compliance of

the provisions of Shareholders Agreements and Debenture Subscription

Agreement and alleging non-compliance.

11. It is also averred by the petitioners that the call option was used by

the respondent for fraudulently acquiring the shares of the petitioners by

way of Share Purchase Agreement dated February 15, 2010 even though

the call option was given to the respondent for the limited purpose of

securing the investment made by the foreign investor TMW and in effect

the respondent took all the stakes of the petitioners in D.D Housing Ltd.

for mere Rs.400/-. The respondent further acting fraudulently on the basis

of revoked power of attorneys which were earlier issued by the land

owning companies of the petitioners in favour of D.D Housing Ltd. got the

title of the lands transferred in the name of New Age Town Planners Ltd.

(formerly known as D.D Housing Ltd.). The petitioners in the petition have

also contested the rationale of the petitioners using any call option against

the petitioners as the investor TMW always had the option of converting

its FCD‟s into 74.99% of the share capital of D.D Housing. However, the

respondent had no right to take away the hundred per cent shares of the

petitioners in D.D Housing Ltd. That even if the FCD‟s of TMW are

converted into fully paid up share equity the petitioners and the other

promoters of D.D Housing Ltd. (later New Age Town Planner Ltd, now

BPTP Parkland Pvt. Ltd) were entitled to 25.1% of the total stakes of the

D.D Housing Ltd. and neither TMW or the respondent had any right over

the share equity being held by the petitioners and the other promoters.

12. According to the petitioners, in their synopsis, the respondent had

got four letters signed from Mr. Sanjay Gambhir, petitioner no. 1 on March

02, 2010, which allegedly confirmed the said illegal transfer of shares. It

was averred that the documents were signed by petitioner No.2 under

severe compulsion, and coercion. On March 02, 2010 the respondent

allegedly gave the option to Sanjay Gambhir to buyback the respondent's

14,88,100 shares of DD Housing Ltd. upon mutually accepted terms. The

buyback option was kept open till August 31, 2010. The petitioners

handed over accounts files, documents and cheque books relating to DD

Housing Ltd. to the respondent. It is the case of the petitioners that the

aforesaid documents have been signed by the Promoters on the

representation that the said documents would be returned upon the grant of

license by DTCP. It was alleged that the petitioners were never supplied

with the documents and that they were not aware of the said alleged buy

back option. The petitioners claimed that the respondent has malafidely put

up a false case by relying on the said documents.

13. It is also averred by the petitioners that some amount of money was

received towards the provisional booking of units/plots/flats from

customers/investors at the early stage of development of township project;

however, M/s Rose Infracon Ltd. and New Age Town Planners Ltd.

acknowledged the liability of the investors and undertook to pay the

liability of the said customers/investors along with interest. They requested

the petitioners to participate in the refund of money by identifying the

investors and make payments for New Age Town Planners Ltd.

Subsequently, an agreement dated February 16, 2011 was entered with the

petitioners.

14. The case of the petitioners is that the respondent with mala fide and

fraudulent intention had sought to take over the project of the petitioners

under the garb of foreign direct investment. The respondent has cheated the

petitioners and has fraudulently taken over the 100% shares of the

petitioners in D.D Housing Ltd. In view of the alleged fraudulent

transaction, certain disputes arose between the parties which required

resolution through arbitration. The petitioners in the petition have referred

to clause 14 of the Mandate Letter dated August 23, 2006, pursuant to

which Call Option Agreements dated October 18/19, 2006 and the

amendments thereafter were executed between the petitioners and the

respondent, which incorporated an arbitration clause.

15. The petitioners have averred that on December 19, 2011, a notice for

arbitration was served upon the respondent for the appointment of

arbitrator to adjudicate the disputes which arose between the parties; out of

the Mandate Letter dated August 23, 2006. However, the respondent vide

its reply dated February 03, 2012 has refused to honour its obligation under

the Mandate Letter dated August 23, 2006 and has refused to appoint an

Arbitrator.

Respondent's case

16. A Mandate Letter dated August 23, 2006 was executed between M/s

DD Housing Limited (now known as BPTP Parkland Pride Pvt. Ltd.)

('Company') and the respondent in terms of which the respondent was to

identify potential investors to invest in the Company which was set up for

the purposes of development of an integrated township project in

Faridabad. The scope of services to be provided by the respondent and the

consideration for the services was detailed in the Mandate Letter. Clause

14 of the Mandate Letter contains the arbitration clause which is allegedly

being invoked by the petitioners.

17. In terms of Clause 1.1 of the Mandate Letter the petitioners executed

Call Option Agreements dated October 18/19, 2006 in favour of the

respondent. The call option was provided to the respondent in

consideration of a call option fee which was admittedly paid by the

respondent. In terms of the Call Option Agreements, the respondent could

call upon or require the petitioners by way of a written notice to sell,

transfer and assign all their rights, title and interest in the shares of the

Company upon occurrence of a call option event at a call option price

specified in the call option notice.

18. Further in terms of Clause 1.2 of the Mandate Letter and Clause 2.3

of the Call Option Agreements the petitioners executed Deeds of Pledge

dated October 19, 2006 pursuant to which the petitioners pledged their

shares in the Company in favour of the respondent to secure the

performance and discharge of their obligations under the Call Option

Agreements.

19. Further in terms of the Deeds of Pledge, the petitioners executed

Irrevocable Power of Attorneys dated October 19, 2006 in favour of the

respondent. The Power of Attorneys inter alia conferred the power on the

respondent to exercise all rights in relation to the shares; to transfer or

alienate the shares in favour of third person(s) and/or to transfer, sell or

otherwise dispose of or deal with the pledged securities or any of them and

to receive all consideration consequent on any sale, transfer or disposition

of the shares and to give proper receipts and valid and effectual discharges

for the same.

20. Subsequently an Amendment to Call Option Agreements dated

16.04.2009 and a Restated Call Option Agreements dated June 18, 2009

were executed between the parties pursuant to which inter alia the call

option price was re-defined. As a consequence to the execution of the

Restated Call Option Agreements dated June 18, 2009, amendments to the

Deeds of Pledge and Power of Attorneys were executed on June 18, 2009.

21. The Company failed to fulfil its obligations under the agreements

with third parties including those with the investor introduced by the

respondent. Despite repeated assurances the company failed to honour its

commitments. One of the material events of default was the failure to

obtain the license for the integrated township project over and above 14

months from the date of commitment. The events of default constrained the

respondent to issue a Call Option Notice dated February 06, 2010 to the

petitioners calling upon them to sell, transfer their shares in Company on

February 15, 2010.

22. Thereafter the respondent on the basis of the Power of Attorneys

dated October 19, 2006 and the Amended Power of Attorneys dated June

18, 2009 executed Share Purchase Agreements dated February 15, 2010

pursuant to which all the shares of the petitioners in the Company were

transferred to the respondent. Since the Company reflected a negative

valuation at the relevant time, the shares were transferred for Rs 100/-

under each of the Share Purchase Agreement. The respondent thereafter

sent letters dated February 15, 2010 along with a copy of the said Share

Purchase Agreements and the demand draft of the consideration to the

petitioners to intimate them of the transaction.

23. Thereafter the petitioners executed undertakings dated March 02,

2010 pursuant to which they inter alia confirmed:

(i) that the execution of the Share Purchase Agreements and other

documents for the transfer of shares and receipt of consideration by the

respondent was a valid, lawful and binding discharge of the powers vested

in the respondent vide Amended Power of Attorneys dated June 18, 2009;

(ii) that the transfer of shares under the Share Purchase Agreements is

valid, enforceable and binding and receipt of the consideration discharges

all obligations of the respondent under the Share Purchase Agreements;

(iii) that the petitioners do not have any rights or claims in respect of the

Company, shares or assets of the Company and the respondent has the

right to sell, pledge or alienate the shares freely and without encumbrances.

24. The respondent vide letter dated March 02, 2010 addressed to

petitioner No.1, granted the option to the petitioners to buy-back 14,88,100

shares of the Company on the price, terms and conditions mutually

acceptable to the parties. The buy-back option was valid till August 31,

2010.

25. On March 04, 2010 the petitioners handed over the entire original

records of the Company including but not limited to the ROC documents,

cheque books, vouchers and bank statements, income tax files, original

IDS files to the respondent against proper receipts. The petitioner No.1

and his wife Ms. Reena Gambhir vide undertakings dated March 02, 2010

resigned from the Board of Directors of the Company with effect from

February 01, 2010 and undertook to indemnify the Company, its

shareholders, directors etc. against losses, liabilities incurred, claims etc.

26. Thereafter the respondent sold, transferred the shares held by it in

the Company to M/s Rose Infracon Pvt. Ltd. vide a Share Subscription and

Transfer Agreement dated September 27, 2010 for a total consideration of

Rs. 2,23,21,410/- (Rupees Two Crores Twenty Three Lakhs Twenty One

Thousand Four Hundred and Ten Only).

27. The petitioners vide undertaking dated February 16, 2011 inter alia

confirmed and acknowledged that;

(i) the petitioners do not have any rights, title, interest, liabilities or

options of any nature whatsoever with respect to the securities of the

Company;

(ii) without prejudice to clause (i) above the petitioners irrevocably

agreed and confirmed that they shall not seek to exercise any call

option/buy back/purchase rights with respect to the securities of the

Company under the Shareholders Agreement dated October 16, 2006 or

the letter dated March 02, 2010;

(iii) the securities of the Company can be freely transferred and the

petitioners do not have and shall not raise in future any

objection/claim/hindrance with regard to the securities of the Company or

the sale/disposal/transfer of securities of the Company to any person;

(iv) the 14,88,094 equity shares of the Company were validly sold and

transferred by the respondent to M/s Rose Infracon Pvt. Ltd and M/s Rose

Infracon Pvt. Ltd is a legal and beneficial owner of those shares.

(v) the petitioners do not have any rights, interest, title, entitlements or

options of any nature in the shares held by M/s Rose Infracon Pvt. Ltd in

the Company.

28. The petitioners vide another and separate undertakings dated

February 16, 2011 inter alia confirmed that the shares were validly

transferred to the respondent under the Share Purchase Agreement and

acknowledged the receipt and adequacy of the consideration.

29. An Agreement dated February 16, 2011 was executed inter alia

between the respondent, Company, M/s Rose Infracon Pvt. Ltd. and the

petitioners, pursuant to which the documents listed in Schedule I of the

Agreement were terminated with effect from the date of the Agreement.

The petitioners further confirmed inter alia that the transfer of the

14,88,100 shares of the Company is valid and binding; the petitioners do

not have any right, title or interest in the said shares; and they shall not

create hindrance/objections in the sale, transfer, disposal of the said shares.

30. A Non Compete Agreement dated February 16, 2011 was also

executed between M/s Rose Infracon Pvt. Ltd., the Company and the

petitioners wherein the petitioners have acknowledged and confirmed that

the petitioners have sold certain shareholding of the Company to the

respondent and the respondent has further sold the shareholding to M/s

Rose Infracon Pvt. Ltd.

31. The petitioners sent a Legal Notice dated December 19, 2011 to the

respondent invoking the arbitration clause in the Mandate Letter and

seeking constitution of an Arbitral Tribunal. The respondent replied to the

said notice vide reply dated February 03, 2012 refuting the allegations of

the petitioners and denying the existence of an arbitration agreement or any

arbitrable disputes between the parties.

32. Learned counsel for the petitioners would submit that the Call

Option Agreements dated October 18/19, 2006 and the subsequent

agreements are the related documents to the Mandate Letter dated August

23, 2006. He has also drawn my attention to clause 1.1 and 1.2 of the

Mandate Letter which refers to execution of Call Option Agreement under

which the respondent would require the promoters i.e the petitioners to sell

all their shares in S.P.V on terms and conditions contained therein. He

would state that the Call Option Agreements have been entered into, in

view of the statement in the Mandate Letter. The arbitration clause which

is very wide also governs the disputes arising out of Call Option

Agreements dated October 18/19, 2006. He would rely upon the judgment

of Supreme Court reported in 2013 (1) SCC 641 Chloro Controls (I)

Private Limited Vs Severn Trent Water Purification Inc. & Others in

support of his contention.

33. On the other hand, Ld. Counsel for the respondent would submit that

the respondent is resisting the Arbitration Petition of the petitioners on the

following two grounds:

There is no arbitration agreement between the petitioners and the

respondent.

He would state, the petitioners have relied on the arbitration clause in the

Mandate Letter dated August 23, 2006 which was executed between the

respondent and the Company, yet to be registered. The petitioners were

not party to the Mandate Letter. Admittedly there is no arbitration clause in

the Call Option Agreements dated October 18/19, 2006, Amendment to

Call Option Agreements dated April 16, 2009 or the Restated Call Option

Agreements dated June 18, 2009. He would rely on Section 2 (h) and

Section 7 of the Act in support of his contentions.

34. He would further submit that there is no arbitration agreement

between the parties as contemplated by Section 7 of the Act and rely on the

judgment of Supreme Court in the case of M.R. Engineers and

Contractors Pvt. Ltd. v. Som Datt and Builders Ltd. reported as 2009 (3)

R.A.J. 448 (SC), wherein it was held that an arbitration clause in an

independent document would be incorporated in the contract between the

parties if the contract makes a clear reference to the document which

indicates an intention to incorporate the arbitration clause. A general

reference to the independent document would not have the effect of

incorporating the arbitration clause in the contract. There should be a

specific reference to the arbitration clause.

35. Accordingly, in the present case the only reference of the Mandate

Letter in the Call Option Agreements and the Restated Call Option

Agreements is in recital which is reproduced herein below:

"BHIC has been given a mandate vide letter dated 14th August, 2006 ("Mandate Letter") by the Promoters to search for strategic investors for investing into the Company. Pursuant to the Mandate Letter, BHIC has introduced the Promoters to TMW ASPF I Cyprus Holding Company Limited, a Cyprus based Company incorporated for the purposes of making investments in India including in the development of real estate, hospitality and other infrastructure projects, as permitted under the extant regulatory regime and has expressed its keenness to invest into the proposed Company."

36. Clearly, the Call Option Agreements/Restated Call Option

Agreements make a general reference to the Mandate Letter. The former

do not incorporate the Mandate Letter in its entirety nor there is a specific

reference to the arbitration clause in the Mandate Letter. The parties had no

intention to incorporate the arbitration clause from the Mandate Letter to

the Call Option Agreements. In the absence of an arbitration agreement,

the parties cannot be referred to arbitration.

37. He also relies upon the decision of the Supreme Court in the case of

Indowind Energy Ltd. v. Wescare (I) Ltd. & Anr. reported as 2010 (4)

R.A.J. 1 (SC). According to him, in the said case an agreement was signed

between the respondent No.1 and respondent No.2 which contained an

arbitration clause. The agreement described the respondent No.2 as a

promoter of the Appellant. When disputes arose between the parties,

respondent No.1 filed a petition against the appellant and respondent No.2

for appointment of arbitrator. The Court while considering the question

when the Appellant is not a signatory to the agreement containing the

arbitration clause can it be considered to be a 'party' to the arbitration

agreement, held that an arbitration agreement can come into existence only

in the manner contemplated in Section 7 of the Act. In the absence of an

arbitration agreement in terms of Section 7 of the Act between the

respondent No.1 and the appellant in that case, no claim against or dispute

with the appellant can be the subject-matter of reference to an arbitrator.

Full and Final discharge of obligations.

38. He would also highlight, the petitioners have acknowledged and

confirmed that the transfer/sale of 14,88,100 shares of the Company vide

the Share Purchase Agreements is valid and binding and the petitioners

have no right, title or interest in the said shares. According to him, the

petitioners have also acknowledged and confirmed the adequacy of the

consideration and that the receipt of the same discharged the respondent of

its obligations under the Share Purchase Agreements. The petitioners have

confirmed in writing vide undertakings dated March 02, 2010,

undertakings dated February 16, 2011 and agreements dated February 16,

2011 that they have received the payment in full and final satisfaction of

all claims and they have no outstanding claims. Therefore, there are no

arbitrable disputes between the parties which can be referred to arbitration.

He would rely on the judgment of the Hon'ble Supreme Court in the

case of National Insurance Co. Ltd. v, Boghara Polyfab Pvt. Ltd.

reported as 2008 (4) R.A.J. 557 (SC).

39. He would state, the stand of the petitioners that the documents were

signed by them under misrepresentation and coercion, apart from a bald

statement the petitioners have nowhere in their petition disclosed the

details of the aforesaid documents wherein they had confirmed and

acknowledged the discharge of the obligations of the parties. The

petitioners had fraudulently concealed the details of the said documents

and have alleged that the documents were signed under coercion and

misrepresentation only as an after-thought. The petitioners have even failed

to explain the acknowledgment of the sale of shares to the respondent in

the Non-Compete Agreement dated February 16, 2011 executed by them

with M/s Rose Infracon Pvt. Ltd. The petitioners have only made oral, bald

statements in their pleadings that the documents were signed under

misrepresentation and coercion and there is nothing on record to prove the

same.

40. He would also rely on Union of India and Ors.V. Master

Construction Company reported as 2011 (3) R.A.J. 487 (SC) wherein it

was held, bald plea of coercion, fraud, duress or undue influence is not

enough and the party who sets up the plea must establish it prima facie by

placing materials before the Court, where the dispute raised by the party

regarding the validity of the discharge voucher' or a 'no-claim certificate'

prima facie lacks credibility there may be no need to refer the parties to

arbitration at all.

41. He would also submit that the judgment of the Supreme Court in

Chloro Controls (I) Pvt. Ltd. (Supra) relied upon by learned counsel for

the petitioner is not applicable to the facts of the case.

42. Before I deal with the submissions made by counsel for the parties, I

would like to state that the petitioners have also filed a petition under

Section 9 of the Act being O.M.P No. 946 of 2011 seeking some interim

reliefs wherein an I.A NO. 2868 of 2013 was filed by the petitioners

seeking Impleadment of M/s Rose Infracon Pvt Ltd and M/s BPTP Parks

Land Pride Pvt. Ltd. The said petition is pending consideration.

43. Having heard, learned counsel for the parties, the issue which would

primarily arise for the consideration of this Court is whether the arbitration

clause in the Mandate Letter dated August 23, 2006 would govern the

parties herein.

44. There is no dispute that the Mandate Letter dated August 23, 2006

was signed and accepted by Mr. Sanjay Gambhir, petitioner no. 1 on behalf

of DD Housing Ltd on August 23, 2006 itself. On the said date, the DD

Housing Ltd, S.P.V, was not in existence as it was not incorporated under

the Companies Act. It was registered under the Companies Act only on

September 5, 2006. Mr. Sanjay Gambhir could not have signed/accepted

the contents of the Mandate Letter on behalf of an entity which was not in

existence. It is an undisputed fact that the other petitioners herein have not

put their signatures in token of acceptance of the conditions of the Mandate

Letter. A reading of sections 2 (h), 2 (b) and 7 would reveal that an

arbitration agreement will be considered to be in writing if it is contained

in (a) a document signed by the parties or; (b) an exchange of letters, telex,

telegrams or other means of telecommunication which provide a record of

the agreement or; (c) an exchange of statement of claim and defence in

which the existence of the agreement is alleged by one party and not

denied by the other; (d) a contract between the parties making a reference

to another document containing an arbitration clause indicating a mutual

intention to incorporate the arbitration clause from such other document

into the contract.

45. As has been held by the Supreme Court in Yogi Agarwal Vs.

Inspiration Clothes and U and ors 2009 (1) SCC 372, to constitute an

arbitration agreement for the purpose of section 7, the following two

conditions need to be satisfied; (i) it should be between the parties to the

dispute and; (ii) it should relate to or be applicable to the dispute. It is not

the case of at least petitioner Nos. 2, 3 and 4 that they have signed the

Mandate Letter in acceptance of the terms and conditions therein nor it is

the case of the said petitioners that an exchange of letters, telex, telegrams

or other means of telecommunication which provided a record of the

agreement nor it is their case of exchange of statements of claim and

defence in which the existence of the agreement is alleged by them and not

denied by the respondent. Suffice to state, there is no agreement to refer to

arbitration in the eventuality of dispute between them and the respondent.

So, the Mandate Letter dated August 23, 2006 would not bind the

respondent qua petitioner Nos. 2, 3 and 4. Even though, the Mandate

Letter stipulates execution of Call Option Agreement which in fact has

been executed. The Call Option Agreement does not have the arbitration

clause.

46. In so far as the petitioner No. 1 is concerned, it is not in dispute that

he had signed in acceptance of all the conditions of the Mandate Letter,

even though as Director of DD Housing Ltd, a non-existent company,

would still bind the respondent. This is because, if his signatures as

Director of DD Housing Ltd are of no consequence, his signatures on the

Mandate Letter as one of the promoters need to be recognized and cannot

be brushed aside. It is also not in dispute that Mr. Sanjay Gambhir and the

respondent did execute a Call Option Agreement on October 18/19, 2006

and there is no doubt that it relates to the Mandate Letter dated August 23,

2006. The clause 14 of the Mandate Letter states that any dispute,

controversy or claim arising out of, or relating to this Mandate Letter or

any related agreement or other document (emphasis supplied) or the valid

interpretation, breach of termination thereof shall be resolved and finally

settled in accordance with the act. The disputes between the petitioner

No.1 and the respondent are arbitrable. The reliance placed by learned

counsel for the respondent on the judgment of Supreme Court in M.R.

Engineers & Contractors Pvt Ltd (supra) is concerned, there the Supreme

Court was primarily concerned with an issue as to whether an arbitration

clause contained in a main contract would stand incorporated by reference

in a sub-contract, where the sub-contract provided that it shall be carried

out on the terms and conditions as applicable to the main contract. The

facts of the said case are that the appellant before the Supreme Court was a

sub-contractor of the respondent and was entrusted a part of the work by

the PW Department in terms of work order dated May 4, 1994. The

relevant portion of the work order is extracted as under;

"With reference to your offer and subsequent discussions, we are pleased to accept your offer for the construction of the office building at the unit, firm and fixed price of Rs. 3150/- (Rupees Three Thousand One Hundred Fifty Only) per square metre. The construction shall be carried out as per the tender specifications and drawings issued for construction by the client.

The square metre rate includes cost of all materials, labour, equivalent etc., required for the completion of building work but excludes the furniture required for the same. No escalation shall be payable on the above contracted price. The work shall be carried out as per the drawings furnished by the Department. This sub- contract shall be carried out on the terms and conditions as applicable to main contract unless otherwise mentioned in this order letter.

In case there are any change in the foundation design from the tender drawing, suitable variation claim shall be submitted to the client by us and the amount approved and

paid shall be payable to you after deducting twenty percent amount.

xxx

The approximate cost of this order comes to Rs. 33,07,500/-

(emphasis supplied)"

47. It was the case of the appellant in the said case that it executed

certain extra items and excess quantities of agreed items on the instructions

of the PW Department and requested the respondent to make a claim on

the PW Department in that behalf. Necessary claims in that behalf were

made on the PW Department. The Arbitrator made an award on August

18, 1999 whereby the Arbitrator awarded certain amounts in regard to its

claims put through the respondent and in terms of the arrangement between

the respondent and the appellant, the respondent was liable to pay to the

appellant, eighty percent of the amounts awarded for such claims, i.e Rs.

37,55,893/-, along with Rs. 1,55,807/- towards pre- reference interest upto

December 4, 1996 and compensation at 18% per annum for non-payment

of the said amount from December 5, 1996. As the claim was not settled,

the appellant sent a letter dated December 6, 2000 seeking reference of the

dispute by arbitration. As the respondent failed to comply, the appellant

filed an application under Section 11 of the Act. According to the

appellant, clause 67.3 of the General Conditions of Contract forming part

of the contract between the PW department and the respondent providing

for arbitration was imported into the sub-contract between the respondent

and the appellant. The appellant relied upon the term in the work order

dated May 4, 1994 that the "sub-contract shall be carried out on the terms

and conditions as applicable to main contract" to contend that the entire

contract between the department and the respondent including clause 67.3

relating to arbitration became a part and parcel of the contract between the

parties. It was the case of the appellant that the arbitration clause

contained in the main contract between the PW department and the

respondent constituted an arbitration agreement between the respondent

and appellant on account of the incorporation thereof by reference in the

contract between the appellant and respondent. The Supreme Court in para

13 of the judgment has laid down the scope and intent of Section 7 (5) of

the Act which is as under;

(i) An arbitration clause in another document, would get incorporated into a contract by reference, if the following conditions are fulfilled : (i) The contract should contain a clear reference to the documents containing arbitration clause, (ii) the reference to the other document should clearly indicate an intention to incorporate the arbitration clause into the contract, (iii) The arbitration clause should be

appropriate, that is capable of application in respect of disputes under the contract and should not be repugnant to any term of the contract.

(ii) When the parties enter into a contract, making a general reference to another contract, such general reference would not have the effect of incorporating the arbitration clause from the referred document into the contract between the parties. The arbitration clause from another contract can be incorporated into the contract (where such reference is made), only by a specific reference to arbitration clause.

(iii) Where a contract between the parties provides that the execution or performance of that contract shall be in terms of another contract (which contains the terms and conditions relating to performance and a provision for settlement of disputes by arbitration), then, the terms of the referred contract in regard to execution/performance alone will apply, and not the arbitration agreement in the referred contract, unless there is special reference to the arbitration clause also.

(iv) Where the contract provides that the standard form of terms and conditions of an independent Trade or Professional Institution (as for example the Standard Terms & Conditions of a Trade Association or Architects

Association) will bind them or apply to the contract, such standard form of terms and conditions including any provision for arbitration in such standard terms and conditions, shall be deemed to be incorporated by reference. Sometimes the contract may also say that the parties are familiar with those terms and conditions or that the parties have read and understood the said terms and conditions.

(v) Where the contract between the parties stipulates that the Conditions of Contract of one of the parties to the contract shall form a part of their contract (as for example the General Conditions of Contract of the Government where Government is a party), the arbitration clause forming part of such General Conditions of contract will apply to the contract between the parties.

48. The Supreme Court has finally held that the work order (sub-

contract) would show that the intention of the parties was not to

incorporate the main contract in entirety in sub-contract. The Supreme

Court was of the view that the words "this sub-contract shall be carried

out on the terms and conditions as applicable to main contract" in the

work order would indicate an intention that only the terms and conditions

in the main contract relating to execution of the work were adopted as part

of the sub-contract between the respondent and appellant and not the parts

of the main contract which did not relate to execution of the work. The

Supreme Court was also of the view that the wording of the arbitration

clause in the main contract between PW department and the Contractor

makes it clear that it cannot be applied to sub-contract between the

Contractor and the sub-contractor. Suffice to state, the facts in the case

before the Supreme Court were totally different from the facts of the case

in hand. In the case in hand, the arbitration clause would cover dispute,

controversy or claim arising out or relating to this Mandate Letter or any

related agreement or other document (emphasis supplied). There is no

dispute that clause 1.1 of the Mandate Letter stipulates execution of a Call

Option Agreement and it is pursuant to this provision that the Call Option

Agreement has been executed, if that be so then the Call Option

Agreement dated October 18/19, 2006 was a related agreement. But a

further question/issue would arise in view of the facts pleaded by the

respondent, whether any dispute exist as on date between the petitioner no.

1 and the respondent to be arbitrated. The said facts are;

(i) on March 4, 2010 the petitioners including petitioner no. 1 handed

over the entire original records of the company including but not limited to

the ROC documents, cheque books, vouchers and bank statements, income

tax files, original IDS files to the respondent against proper receipts;

(ii) the petitioner no. 1 vide undertaking dated March 2, 2010 resigned

from the Board of Directors of the Company with effect from February 01,

2010 and undertook to indemnify the Company, its shareholders, directors

etc. against losses, liabilities incurred, claims etc.;

(iii) vide share subscription and transfer agreement dated September 27,

2010, the respondent sold, transferred the shares held by it in the company

to M/s Rose INfracon Pvt. Ltd;

(iv) on February 16, 2011, the petitioner No.1 acknowledged that he did

not have any right title, interest, liabilities or options of any nature

whatsoever with respect to the securities of the Company;

(v) the petitioner No.1 irrevocably agreed and confirmed that he shall

not seek to exercise any call option/buy back/purchase rights with respect

to the securities of the Company under the Shareholders Agreement dated

October 16, 2006 or the letter dated March 02, 2010;

(vi) the securities of the Company can be freely transferred and the

petitioner No.1 do not have and shall not raise in future any

objection/claim/hindrance with regard to the securities of the Company or

the sale/disposal/transfer of securities of the Company to any person;

(vii) the 14,88,094 equity shares of the Company including his 20,100

shares were validly sold and transferred by the respondent to M/s Rose

Infracon Pvt. Ltd and M/s Rose Infracon Pvt. Ltd is a legal and beneficial

owner of those shares;

(viii) the petitioner No.1 do not have any right, interest, title, entitlement

or option of any nature in the shares held by M/s Rose Infracon Pvt. Ltd in

the Company;

(ix) the petitioner no. 1 gave an undertaking dated February 16, 2011

inter-alia confirmed that the shares were validly transferred to the

respondent under the Share Purchase Agreement and acknowledged the

receipt and adequacy of the consideration.

49. An Agreement dated February 16, 2011 was executed inter alia

between the respondent, Company, M/s Rose Infracon Pvt. Ltd. and the

petitioners including the petitioner No.1, pursuant to which the documents

listed in Schedule I of the Agreement were terminated with effect from the

date of the Agreement. The petitioners including petitioner no.1 confirmed

inter alia that the transfer of the 14,88,100 shares of the Company is valid

and binding; the petitioners do not have any right, title or interest in the

said shares; and they shall not create hindrance/objections in the sale,

transfer, disposal of the said shares.

50. A Non Compete Agreement dated February 16, 2011 was also

executed between M/s Rose Infracon Pvt. Ltd., the Company and the

petitioners including petitioner No.1, wherein the petitioners including

petitioner No.1 have acknowledged and confirmed that the petitioners

including petitioner No.1 have sold certain shareholding of the Company

to the respondent and the respondent has further sold the shareholding to

M/s Rose Infracon Pvt. Ltd.

51. From the perusal of the aforesaid facts, it is clear that the petitioner

No.1 had given up his claims with regard to the transfer of 20,100 shares

held by him. It is not only one document but several documents were

executed by the petitioner No.1 to forego his claim and not to challenge the

transfer of the shares on any account. He has rather acknowledged the

selling of shares by the respondent to M/s Rose Infracon Pvt. Ltd.

52. I agree with the learned counsel for the respondent that the petitioner

No.1 having confirmed in writing of having received the payment in full

and final satisfaction of all the claims, he has no outstanding claims and as

such there are no arbitrable dispute(s) between the petitioner No.1 and

respondent, which can be referred to arbitration. Insofar as the plea of

coercion, fraud, duress and undue influence pleaded by the petitioner No.1,

suffice to state that the petitioner No.1 had not even referred to the

aforesaid agreements/undertakings in the notice dated December 19, 2011,

which was got issued after almost 10 months after non-compete agreement

dated February 16, 2011 was executed. Even I note in the petition that

there are no pleadings with regard to coercion, fraud, duress and undue

influence except stating mala fide, fraudulent intention and cheating.

Surely in the given facts, the petitioner No.1 was required to set up a case

of fraud, coercion, duress or undue influence resulting in the execution of

the agreements and the undertakings. A reference, for the first time, was

given by the petitioner No.1 in the written synopsis, wherein pressure and

coercion are pleaded. I only note, for benefit, the following observation of

Supreme Court in Union of India Vs. Master Construction Company

(Supra). The relevant portion of the work order is extracted as under;

"In our opinion, there is no rule of the absolute kind. In a case where the claimant contends that a discharge voucher or no-claim certificate has been obtained by fraud, coercion, duress or undue influence and the other side contests the correctness thereof, the Chief Justice/his designate must look into this aspect to find out at least, prima facie, whether or not the dispute is bona fide and genuine. Where the dispute raised by the claimant with regard to validity of the discharge voucher or no-claim certificate or settlement agreement, prima facie, appears to be lacking in credibility, there may not be necessity to refer the dispute for arbitration at all. It cannot be overlooked that the cost of arbitration is quite huge - most of the time, it runs in six and seven figures. It may not be proper to burden a party, who contends that the dispute is not arbitrable on account of discharge of contract, with huge cost of arbitration merely because plea of fraud, coercion, duress or undue influence

has been taken by the claimant. A bald plea of fraud, coercion, duress or undue influence is not enough and the party who sets up such plea must prima facie establish the same by placing material before the Chief Justice/his designate. If the Chief Justice/his designate finds some merit in the allegation of fraud, coercion, duress or undue influence, he may decide the same or leave it to be decided by the Arbitral Tribunal. On the other hand, if such plea is found to be an after-thought, make-believe or lacking in credibility, the matter must be set at rest then and there."

53. I agree with the submissions of Mr. Divjyot Singh, learned counsel

for the respondent that the judgment of the Supreme Court in Chloro

Controls (I) Private Limited (Supra) relied upon by learned counsel for

the petitioner, would not be applicable to the facts of the case, inasmuch as

in that case the Supreme Court dealt with the ambit and scope of Section

45 of the Act. The language of Section 45 of the Act is at substantial

variance to the language of Section 8/11 of the Act. Section 45 uses the

expression 'one of the parties or any person claiming through or under him'

whereas Section 8/11 only uses the words 'parties'. The language of

Section 45 has a wider import. The Court can refer the parties to arbitration

under Section 45 if the applicant establishes that he claims through or

under the signatory party. However the same is not the case when an