M/S Ht Media Ltd vs Mahdeva Mani & Ors
2018 Latest Caselaw 7475 Del

$~29
*      IN THE HIGH COURT OF DELHI AT NEW DELHI
                            Date of Decision: 18th December, 2018
+                    ARB.P. 27/2014
       M/S HT MEDIA LTD                                  ..... Petitioner
                     Through: Mr. Madhur Dhingra & Mr. Chander
                                Shekhar Rao, Advocates (M-
                                9810640303)
                     versus
       MAHDEVA MANI & ORS                          ..... Respondents
                     Through: Mr. Pramod B. Agarwala and Mr.
                               Aayush Agarwala, Advocates for Mr.
                               Siddhartha                      Srivastava.
                               (M:9999105064)
                                Mr. Neel Kamal Mishra, Proxy
                                counsel for Mr. Jatin Zaveri,
                                Advocate      for       R-2&3          (M-
                                9810156642)
       CORAM:
       JUSTICE PRATHIBA M. SINGH
Prathiba M. Singh, J. (Oral)

1. The present application under Section 11 of the Arbitration and Conciliation Act, 1996 has been filed by the Petitioner seeking the appointment of a Sole Arbitrator to adjudicate the disputes between the parties. The disputes have arisen under a Debenture Subscription Agreement dated 30th December, 2008. The said agreement was entered into between the Petitioner - M/s HT Media Ltd. on one hand, M/s IOL Netcom Pvt. Ltd. (hereinafter „M/s IOL Netcom‟) and its promoters, on the other hand. The promoters as listed in Exhibit 1 of the agreement are extracted herein below:

"1. Mahadeva Mani

2. Premier Millennium Marketing & Trading Pvt. Ltd.

3. Goodluck Millennium Trading & Marketing

4. Kohinoor Merchandise Pvt. Ltd.

5. Regal Millennium Marketing & Trading Pvt. Ltd.

6. Speed Online Broadband Pvt. Ltd.

7. Kingston Softel Pvt. Ltd.

8. Bandwidth Technology India Pvt. Ltd."

2. IOL Netcom is stated to have been wound up. Three of the promoters, namely, M/s Premier Millennium Marketing & Trading Pvt. Ltd., M/s Goodluck Millennium Trading & Marketing and M/s Kohinoor Merchandise Pvt. Ltd. have all been merged into a company called M/s Aurum Ventures Pvt. Ltd. This fact has been captured in the affidavit dated 5 th December, 2018 filed by one Mr. Saurabh Sangekar.

3. Currently, therefore, there are a total of six Respondents as per the memo of parties dated 24th December, 2016 which is as under:

"1. Mahdeva Mani Promoters of M/s IOL Netcom Ltd. acting through M/s Siddhartha Srivastava Authorized Representative of the aforesaid Promoter, 813, Raheja Centre, Nariman Point, Mumbai - 400021

2. Aurum Ventures Pvt. Ltd.

(Formerly known as Premier Millennium Marketing & Trading Ltd, Goodluch Millennium Trading & Marketing and Kohinoor Merchandise Pvt. Ltd. merged in to Respondent No.2 vide order dated 24.07.2009) Aurum Platz C.S. No.406, Malabar Hills Division, „D‟ Ward, B N Cross Lane, Pandita Ramabai Marg, Mumbai - 400007

3. IOL Telecom Pvt. Ltd.

(Formerly known as Regal Millennium Marketing & Trading Pvt. Ltd.)

Aurum Platz, C.S. No.406, Malabar Hills Division, „D‟ Ward, B N Cross Lane Pandita Ramabai Marg, Mumbai - 400007

4. Speed Online Broadband Pvt. Ltd. D- 175, C Floor, Abul Fazal Enclave, Jamia Nagar, New Delhi Delhi- 110025

5. Bandwith Technology India Pvt. Ltd. B-107, Puneet Apaitment, Vasundhra Enclave, Delhi- 110096

6. Kingston Softel Pvt. Ltd.

F - 196, Sarita Vihar, New Delhi - 110044"

4. The company M/s Regal Millennium Marketing &Trading Pvt. has now been named as M/s IOL Netcom Pvt. Ltd. This fact is also mentioned in the affidavit filed on behalf of Respondents No.2 and 3 by Mr. Saurabh Sangekar. This matter was heard from time to time on the main issue as to whether the promoters were signatories to the Debenture Subscription Agreement. The said agreement contains an arbitration clause which reads as under:

"11.13 Any dispute or difference arising out of or in connection with this Agreement, which cannot be amicably settled within 30 (thirty) days, shall be referred at the request in writing of the Party to binding arbitration by a panel of 3 (three) arbitrators, one arbitrator being jointly appointed by the Promoters and the Company and HTML appointing one arbitrator and the third arbitrator being appointed

in accordance with the Arbitration and Conciliation Act, 1996 or any amendment thereof. The language of arbitration shall be English and the venue of arbitration shall be New Delhi and the award shall be given at New Delhi.

11.14 Subject to the provisions of this Article 11 and for such matters which the Court may have jurisdiction under and in respect of any arbitration proceedings, and subject further to applicable laws in this regard, this Agreement shall be subject to the exclusive jurisdiction of the Courts in New Delhi"

5. The petition is resisted by the other respondents on whose behalf it is submitted that they are not a party to the Debenture Subscription Agreement and hence they ought not to be referred to arbitration. The main dispute has been raised as Mr. Siddhartha Srivastava, who had signed as President/CEO of M/s IOL Netcom had not placed on record any board resolution issued by any of the promoters which authorised him to sign on their behalf. While M/s IOL Netcom did not raise any dispute as to the existence of the agreement, on behalf of the promoter companies, Mr. Jatin Zaveri, Ld. Counsel had made the submission from time to time that Mr. Siddhartha Srivastava was not authorised, as the board resolution which was supposed to be filed by him, had never been filed or submitted to the Petitioner. Mr. Zaveri specifically relied upon the recital in the agreement which describes the promoters wherein the following note appeared below:

"...

The Promoters of the Company (hereinafter referred to as the "Promoters"), listed in Exhibit 1 to the Agreement, which expression shall, unless it be repugnant to the context or meaning thereof, be deemed to mean and include their heirs, executors, administrators and permitted assigns), acting through

authorised representative, Mr. Siddhartha Srivastava, of the THIRD PART.

[Note: If any of the Promoters is a company, a board resolution authorising the representative will be required. If an individual, a duly notarised power of attorney, authorising the signatory, to execute this Agreement, as a representative will be required.]"

6. He thus submitted that in the absence of the board resolution issued by the promoter companies, there exists no arbitration agreement between the Petitioner and the said promoter companies.

7. On 15th November, 2018, notice was issued to the three persons i.e. Mr. Siddhartha Srivastava who had signed the agreement, Mr. Mahadeva Main - Respondent No.1 and Mr. Saurbah Sangekar for being present in order to record their statements. This was necessary in order to ascertain as to in what capacity Mr. Srivastava had signed the agreement on behalf of the promoters. The notice to Mr. Mahdeva Mani remained unserved despite repeated attempts. The other two persons, namely, Mr. Siddhartha Srivastava and Mr. Saurabh Sangekar have appeared before the Court. Their statements have been recorded. The statements of Mr. Sangekar and Mr. Srivastava are set out herein below:

"Statement of Shri Saurabh Sangekar S/o Shri Ramesh Sangekar, R/o Sunder Sadan, 5th Floor, 63-A, Proctor Road, Mumbai-400004 (M:9821346603)

On S.A.

I am currently employed by a company called as Aurum Ventures Pvt. Ltd. which is the parent company of Aurum Platz Pvt. Ltd. I used to work in IOL Broadband Ltd. („IOL Broadband‟), which was promoted by Premier Millennium Marketing & Trading Pvt. Ltd. („Premier Millennium‟) and Goodluck Millennium Trading &

Marketing Pvt. Ltd. („Goodluck Millennium‟). The three companies, Premier Millennium, Goodluck Millennium, and Kohinoor Merchandise Pvt. Ltd. („Kohinoor Merchandise‟), all have merged with Aurum Ventures Pvt. Ltd. The main promoter of Aurum Ventures Pvt. Ltd. is Mr. Ashish Deora, who was also the promoter of IOL Telecom Pvt. Ltd. („IOL Telecom‟ - earlier known as Regal Millennium Marketing & Trading Pvt. Ltd.), Premier Millennium, Goodluck Millennium, and Kohinoor Merchandise.

There was no relationship between Premier Millennium and Goodluck Millennium with Mr. Mahdeva Mani. They were shareholders of IOL Netcom. Four companies i.e. Premier Millennium, Goodluck Millennium, Kohinoor Merchandise and Regal Millennium Marketing & Trading Pvt. Ltd. („Regal Millennium‟) were the promoters of IOL Netcom and held 1.85% in IOL Netcom, as of December, 2008. I was a technical person in IOL Netcom till 2004. It was earlier known as IOL Broadband. I was involved in fibre optic laying in IOL Broadband/IOL Netcom. The company IOL Netcom. was incorporated in 1985 and in 2008 there were around 6500 shareholders of this company. Premier Millennium, Goodluck Millennium, Kohinoor Merchandise and Regal Millennium were incorporated in 2000 and were promoters of IOL Broadband/IOL Netcom from 2000 to 2006.

I do not know who is Mr. Mahdeva Mani. I do not know as to who is currently running IOL Netcom. Mr. Ashish Deora was in control of IOL Netcom till June, 2006. The company IOL Netcom went out of the control of Mr. Ashish Deora in June, 2006 when he ceased to be a Director of IOL Netcom. The other directors of IOL Netcom were one Mr. Amarjeet Singh Oberoi, Mr. Sudhir Parekh and Mr. Jagtap. No family member of Mr. Ashish Deora is associated with IOL Netcom. Mr. Ashish Deora was not the promoter of Speed Online Broadband Pvt. Ltd. and Bandwidth Technology India Pvt. Ltd."

Mr. Siddhartha Srivastava, S/o Mr. Bholanath

Srivastava, R/o 1001 States Apartment, Drive-in Road, Ahmedabad

On S.A.

Presently, I am doing consultancy in the IT and telecom sectors. I am based out of Ahmedabad but I do travel to Mumbai regularly. I was working at M/s. IOL Netcom Ltd. till 2008-09 for a period of approximately five years. The promoters of M/s. IOL Netcom Ltd. were 5-6 companies. I cannot name all of them but they are listed in the agreement. I identify my signatures on the Debenture Subscription Agreement dated 30th December, 2008, at page 26. I was authorised by the Board of Directors of M/s IOL Netcom Ltd. The Board does not consist of the promoter companies.

Question - How did you sign this agreement on behalf of the promoters as well?

Answer - I was authorised by the Board to sign on behalf of the promoters as well. Normally, I used to sign agreements on behalf of the company and the promoters.

The resolutions on behalf of the promoters were to be produced later. I have read the statement of Mr. Saurabh Sangekar made on the last date, which my counsels had shown to me. I did not supply the Resolutions on behalf of the promoters to the Petitioner as I do not recall anyone following up on that issue. I do not have knowledge as to who was in control of the promoters‟ company. Mr. Ashish Deora was the promoter of one of the companies, the name of which I cannot recall. The name was stated by Mr. Sangekar on the last date.

I was authorised orally by the Company Secretary and the finance personnel to sign this agreement. The said authorisation was both on behalf of M/s IOL Netcom Pvt. Ltd. and on behalf of the promoters, who are listed in the agreement at page 27. One Mr. Rahul Dubey was the Company Secretary at that time as far as I remember. I do not recall who signed the agreement from the Petitioner‟s side.

I understand that when the word „promoter‟ is used, it means the companies that are listed at Exhibit 1. I had issued the letter dated 14th November, 2018. I have signed as President/ CEO of Global One which is an IT and Telecom company in which I am a Consultant and I signed as its President /CEO.

8. A perusal of the above two statements shows clearly that Mr. Srivastava was duly authorised to sign on behalf of the promoters of M/s IOL Netcom. He does admit that the resolutions were not submitted as there was no follow up by the Petitioner. Mr. Sangekar in his statement also admits that one Mr. Ashish Deora was in control of M/s IOL Netcom and many of the companies which were promoters of the said M/s IOL Netcom. Currently Mr.Deora is in control of the company called M/s.Aurum Ventures Pvt Ltd.

9. It is the settled position that the question as to whether there exists an arbitration agreement is to be determined by the Court before making a reference. For this purpose, the Court can direct any oral or documentary evidence to be lead in the matter. This is settled in the case of National Insurance Co. Ltd. v Boghara Polyfab (P) Ltd. (2009) 1 SCC 267 wherein the Supreme Court has observed as under:

"22. Where the intervention of the court is sought for appointment of an Arbitral Tribunal under Section 11, the duty of the Chief Justice or his designate is defined in SBP & Co. This Court identified and segregated the preliminary issues that may arise for consideration in an application under Section 11 of the Act into three categories, that is issues which the Chief Justice or his designate is bound to decide; (ii) issues which he can also decide, that is issues which he may choose to decide; and (iii) issues which should be left to the Arbitral Tribunal to decide.

22.1. The issues (first category) which the Chief Justice/his designate will have to decide are:

(a) Whether the party making the application has approached the appropriate High Court.

(b) Whether there is an arbitration agreement and whether the party who has applied under Section 11 of the Act, is a party to such an agreement."

Thus, the Court has to decide the question as to whether the arbitration agreement exists or not.

10. The Court has satisfied itself by recording the statements of Mr. Sangekar and Mr. Srivastava that the agreement was duly authorised/agreed to by not only M/s IOL Netcom but also by the promoter companies, the names of which appeared at Exhibit 1 of the agreement. All these companies are closely knit. In fact, three of the original promoters have merged and the company into which they have merged, namely, M/s Aurum Ventures Pvt. Ltd. is now before the Court. The amended memo of parties is on record. Mr. Ashish Deora was in control of M/s IOL Netcom, which was a signatory to the agreement and he is also now one of the promoters of M/s Aurum Ventures Pvt. Ltd. Thus, the arbitration agreement clearly binds not just M/s IOL Netcom but also the promoters listed at Exhibit 1, as also M/s Aurum Ventures Pvt. Ltd. in which three of the promoters have merged. Accordingly, following the dictum in National Insurance Co. Ltd. v. Bhoghara Polyfab (P) Ltd (2009) 1 SCC 267 as also in Vimal Kishor Shah v. Jayesh Dinesh Shah (2016) 8 SCC 788, this Court has no hesitation in holding that the arbitration clause applies not just to M/s IOL Netcom but also on all the promoter companies. The disputes between the following parties as per the amended memo of parties are referred to arbitration.

11. The promoters in this case have taken a dishonest and a false stand all

along. The present arbitration application has been pending for four years only because of the fact that the promoters tried to wriggle out of the agreement signed between the parties. The Court had to make enormous efforts to ensure the presence of Mr. Sangekar and Mr. Srivastava, who both revealed that the companies were under the common control. The stand of M/s Aurum Ventures Pvt. Ltd. was not clearly bona fide. In fact Mr. Ashish Deora ought to have disclosed to this Court at the first stage that he was the original promoter of M/s IOL Netcom and now the promoter of M/s Aurum Ventures Pvt. Ltd. and M/s IOL Netcom. This fact was not revealed to the Court until the statement of Mr. Sangekar was recorded on the last date.

12. It is held that the promoters and M/s IOL Netcom are bound by the arbitration clause. There exists an arbitration agreement between the parties. The arbitration clause is applicable and the disputes between the parties, under the Debenture Subscription Agreement dated 30th December 2008, are liable to be referred to arbitration. Petition is disposed of. Costs of Rs.25,000/- shall be paid by the Respondents to the Delhi High Court Advocates Welfare Fund.

13. The arbitration clause contemplates three Arbitrators. Counsels wish to seek instructions as to whether the parties would be agreeable for the appointment of a Sole Arbitrator. Parties to revert to the Court only on this particular issue.

14. List on 7th January, 2019 for directions.

PRATHIBA M. SINGH JUDGE DECEMBER 18, 2018/Rahul