Delhi High Court
Astonfield Renewables Pvt. Ltd. & ... vs Ravinder Raina on 15 January, 2018
* IN THE HIGH COURT OF DELHI AT NEW DELHI
+ OMP 388/2015
Reserved on: 5th December, 2017
Date of decision:15thJanuary, 2018
ASTONFIELD RENEWABLES PVT. LTD. & ANR...... Petitioner
Through: Mr.Atul Chitale, Sr. Adv. with
Ms. Raveena Rai, Mr. Akash
Jindal, Ms.Tanvi and Mr.Gurjyot
Sethi, Advs.
versus
RAVINDER RAINA ..... Respondent
Through: Mr. Samar Singh with Mr. Amit
Sharma, Advs.
CORAM:
HON'BLE MR. JUSTICE NAVIN CHAWLA
1. The present petition has been filed under Section 34 of the
Arbitration and Conciliation Act, 1996 (hereinafter referred to as the
'Act') challenging the award dated 16.03.2015 passed by the Sole
Arbitrator appointed by the Indian Council of Arbitration.
2. The disputes between the parties arise out of two agreements, the
first one is Appointment & Employment Agreement (hereinafter referred
to as the 'Appointment Agreement') dated 17.09.2008 and the second
one being Stock Issuance Agreement (hereinafter referred to as the
'SIA') dated 01.12.2008.
3. The respondent was appointed as the President of Petitioner No.1
Company under Letter of Appointment & Employment dated 17.09.2008.
The letter inter-alia provided as under:
OMP No.388/2015 Page 1
"The terms and conditions of the said employment are
annexed hereto and also in the accompanying Stock
Issuance Agreement to be entered between you and our
parent company Astonfield Renewable Resources
Limited."
It is important to note here that the so-called 'Appointment
Agreement' was, in fact, an Annexure to this letter.
4. Clause 1.4 of the Appointment Agreement further provides that the
respondent shall be eligible to participate in the Employee Stock Auction
Plan/Scheme of the petitioner no.1 or its parent company i.e. petitioner
no.2.
5. Clause 7 of the Agreement provides for termination of the
employment and is reproduced herein below:
"7. Termination of Employment
7.1 Either you or the Company may terminate your
employment without cause, upon written notice to the
other Party. The termination would be effective after 3
(three) months from the date of the receipt (by the other
Party) of such notice (hereinafter referred to as the
'Notice Period'). Alternatively, the Company may
terminate your employment with immediate effect, upon
giving you three month's remuneration as per Clause 1 of
this agreement in lieu of notice or pro-rated
remuneration for the balance Notice Period in case you
have been permitted to work during the Notice Period.
7.2 The Company may terminate this employment
agreement for Cause (hereinafter defined) with
immediate effect without any severance pay, provided
that notice of Cause has been served by the Company and
you do not rectify, where capable of rectification, the
breach/problem within 30 (thirty) days from receipt of the
notice: provided, however, that no notice or thirty day
OMP No.388/2015 Page 2
cure period shall be required with respect to matters set
forth in sub (ii) of the definition of Cause below.
For the purposes of this clause
"Cause"shall mean (i) the negligence or misconduct by
you in complying with your duties, responsibilities,
obligations and/or covenants or undertakings, which are
either incapable of remedy or otherwise not remedied by
you within 30 (thirty) days of a written notice being
serviced on you by the Company stating the breach or (ii)
your gross misconduct, theft from the Company,
commission of any crime or breach of the Company's
confidence."
6. Clause 11 of the Appointment Agreement restrained the
respondent from engaging in any other employment or business activity
during the term of the employment. The same is reproduced herein
below:
"11. Conflicting Employment
You will devote your full time to the Company.
During the term of your employment with the Company,
you shall not engage in any other employment,
occupation, consulting or other business activity, nor will
you engage in any other activities that conflict with your
obligations to the Company."
7. Clause 23 of the Appointment Agreement provides for dispute
resolution through arbitration. The said clause specifically provided that
if a dispute arose under the said Agreement, as well as under the Stock
Issuance Agreement entered into between the respondent and the
petitioner no.2, the same shall be referred to and be heard by the same
Arbitral Tribunal. The said Clause is reproduced herein below:
OMP No.388/2015 Page 3
"23. Dispute Resolution
23.1 You shall discharge all your obligations in utmost
good faith. You will, at all times, act in good faith and
make all attempts to resolve all differences howsoever
arising out of or in connection with your employment by
discussion. If within 21 days of the commencement of the
discussions the dispute is not resolved the dispute shall be
referred to arbitration, provided that:
(a) Arbitration shall be conducted in accordance with the
provisions of the (Indian) Arbitration and Conciliation
Act, 1996: In accordance with the Rules of Arbitration of
the Indian council of Arbitration.
(b) There shall be one arbitrator.
(c) All hearings shall be held in Mumbai or Delhi and the
language of the arbitration shall be in English.
(d) If a dispute arises under this Agreement as well as
under the Stock Issuance Agreement entered into between
you and Astonfield Renewable Resources Limited the
same shall be referred to and heard by the same Arbitral
Tribunal. In accordance with rules of Arbitration of the
Indian Council of Arbitration.
23.2 Notwithstanding the aforesaid provisions, in the
event of any breach or apprehened breach by you of the
provisions hereof, we shall be entitled, in addition to all
other remedies, to an injunction, whether interlocutory or
preliminary and particularly relating to Confidential
Information and Intellectual Property, restraining any
such breach, without recourse to arbitration as
aforesaid."
(emphasis supplied)
OMP No.388/2015 Page 4
8. Clause 24 of the Appointment Agreement provides that the
Appointment & Employment Agreement shall be governed by the laws
of India.
9. The Stock Issuance Agreement was executed between the
respondent and petitioner no.2. Clause 1(f) of the Agreement defines
"Discounted Fare Market Value" and is reproduced herein below:
"Clause 1(f)
"Discounted Fair Market Value" of a share means the
value of Common Stock on any day as shall be
determined in good faith by the Board of Directors on the
basis of such considerations as the Board of Directors
deems appropriate from time to time, including, but not
limited to, such factors as the last sale price, the average
of the high bid and low asked prices, the average of the
high and low sales price or the average of the closing bid
and asked prices for a share of Common Stock, on such
day (or, if such day is not a trading day, on the next
preceding trading day) as reported on NASDAQ or, if not
reported on NASDAQ, as quoted by the National
Quotation Bureau Incorporated, or if the Common Stock
is listed on an exchange, on the principal exchange on
which the Common Stock is listed, in any such event,
discounted by twenty percent(20%)."
10. Clause 1(j) of the SIA defines the term "Termination Event" as
under:
"1(j) "Termination Event" shall mean the termination of
Raina's Employment Agreement, or termination of
employment for any reason whatsoever. In case of any
dispute concerning whether and/or when a "Termination
Event" has occurred, the Board of Directors shall have
discretion to determine the effective date of such
Termination Event."
OMP No.388/2015 Page 5
11. Clause 2(a) of SIA provides for issuance of shares of petitioner
no.2 in favour of the respondent, on the completion of two years, three
years, four years and five years from the Employment Date. It further
provides that in case the Employment Agreement is terminated for any
reason whatsoever prior to the aforesaid periods, the respondent shall be
entitled to fractional value of the shares on the basis of number of days of
completed service. The said Clause is reproduced herein below:
"2. Issuance of Shares
(a) Anniversary Issuance. Subject to and in reliance upon
the representations, warranties, terms and conditions of
this Agreement and the Employment Agreement, the
Company agrees to issue to you, on each of the dates
which are two (2) years, (3) years, four (4) years and five
(5) years respectively from your Employment Date one
share of the Company's Common Stock, up to an
aggregate total of four (4) such shares of the Company's
Common Stock (each, a share, and together with any
other shares issued pursuant to this Agreement,
collectively, the "Shares"), if any and only if you are, and
have been, continuously employed by the Company (or
one of its affiliates) from the date of this Agreement
through such date. Provided however if your Employment
Agreement is terminated for any reason whatsoever prior
to the aforesaid periods you shall be entitled to fractional
value of the shares on the basis of number of days of
completed service."
(emphasis supplied)
12. Clause 5 of the SIA prescribed for restriction on transfer of shares.
13. Clause 7 of the SIA provides for re-purchase of the shares by
petitioner no.2 upon the happening of a 'Termination Event'. The said
Clause is reproduced herein below:
OMP No.388/2015 Page 6
"7. Repurchase Option. Following a Termination Event
the Company shall have the right and the obligation to
purchase and Holder shall have the right and the
obligation to sell the first and/or the second Share as
vested in you at the time of sale pursuant to clause 2(a)
The pre-agreed value of the first and second share is
USD 275,000 per share. The value of subsequent shares
shall depend upon the fair market value. If either the
Company or the Holder elect to exercise this Section 7, it
shall notify the other party in writing of such election
within ninety (90) days after the Termination Event. The
holder shall deliver the Shares to the Company within ten
(10) days of such notice and payment shall be made by
certified check or wire transfer within sixty (60) days of
the election to purchase."
14. Clause 12(f) of SIA provides that the SIA will be interpreted,
construed and governed by the laws of the Republic of Malta.
15. Clause 12(g) of SIA provides for dispute resolution through
arbitration of a Sole Arbitrator in accordance with the Rules of
Arbitration of Indian Council of Arbitration.
16. On 02.01.2013, the respondent tendered his resignation, which was
immediately accepted by the petitioners by return email of the same date.
17. Vide email dated 05.01.2013, the Co-Chairman & Director of
Astonfield Group of Companies informed the respondent that he had
asked the legal counsel to review the terms of respondent's Employment
Contract and Stock Agreement to ensure his preparedness to plan
respondent's exit in a comfortable and smooth manner. This email is
important as it shows that both Appointment Agreement and SIA were
considered part of same transaction.
OMP No.388/2015 Page 7
18. The respondent, vide its letter dated 11.01.2013, called upon the
petitioner to settle his accounts, inter-alia claiming that he is entitled to
3.08 shares of petitioner no. 2 valued at USD 275,000 per shares as part
of his compensation.
19. On 25.01.2013 the petitioners sent an alleged full and final
settlement which was payable to the respondent. The respondent,
however, did not sign the same and called upon the petitioners to clear all
his dues.
20. On 22.04.2013, the petitioners informed the respondent that they
are under financial constraints and of their inability to clear the dues of
the respondent forthwith.
21. It is only at this stage, that vide legal notice dated 01.08.2013, the
petitioners alleged certain breaches of the Agreement against the
respondent and raised a claim against the respondent.
22. The respondent vide its letter dated 08.08.2013 addressed to Indian
Council of Arbitration invoked the Arbitration Agreement under the
Appointment Agreement as also the SIA and requested the Indian
Council of Arbitration to initiate the arbitration proceedings and appoint
an arbitrator for adjudication of the disputes.
23. The respondent also filed a petition under Section 9 of the Act,
being OMP No.777/2013 before this Court, which was disposed of vide
order dated 10.12.2013 inter-alia directing that the petition be placed
before the Arbitrator appointed by the Indian Council of Arbitration, who
may treat the same as an application under Section 17 of the Act.
24. The arbitration resulted in the impugned award holding the
respondent to be entitled to 2.43 shares of petitioner no.2 valued at USD
OMP No.388/2015 Page 8
275,000 per share and the salary amount of Rs.27.20 lacs, which had
been directed to be deposited with the Registrar of this Court in terms of
the order dated 10.12.2013 passed by this Court in OMP 777/2013 and
also interest @ 12% p.a. from the date of respondent's resignation till the
date of award and further interest @ 18% till the date of payment.
25. The present petition has been filed challenging the said impugned
award.
26. It is firstly contended by the learned senior counsel for the
petitioners that the disputes raised by the respondent related to two
different agreements; one being the payment under Employment
Agreement, while the other being entitlement to share value under SIA;
both having separate Arbitration Agreement(s) and one being governed
by the laws of India while the other being governed by laws of Malta.
The learned senior counsel submits that, therefore, a common arbitration
was not maintainable. Reliance in this regard was placed on the judgment
of Supreme Court in Duro Felguera S.A. v. Gangavaram Port Limited,
(2017) 9 SCC 729.
27. On the other hand, learned counsel for the respondent submits that
the two agreements form part of the same transaction. He further submits
that Clause 23.1 (d) of the Appointment Agreement clearly provided that
in case a dispute arises in relation to the said Agreement and the SIA, the
said disputes were to be referred to and heard by the same Arbitral
Tribunal. He submits that the objection of the petitioners on a common
arbitration was therefore, rightly rejected by the Arbitral Tribunal vide its
order dated 02.04.2014. He further placed reliance of the judgment of
Supreme Court in P.R.Shah, Shares and Stock Brokers Private Limited
OMP No.388/2015 Page 9
v. B.H.H. Securities Private Limited and Others,(2012) 1 SCC 594 to
submit that in the circumstances like the present, a common and single
arbitration was held to be maintainable and no fault can be found in the
award on this count.
28. In my opinion, the objection raised by the petitioners has no merit.
29. Clause 23.1(d) of the Appointment Agreement expressly provides
that in the case of disputes arising under the said Agreement as well as
the SIA, the same shall be referred to and heard by the same Arbitral
Tribunal. Further, the Employment Letter also provides that the terms
and conditions of the employment are contained in the annexure (so
called Appointment & Employment Agreement) and also in the
accompanying "Stock Issuance Agreement". The two Agreements
therefore form part of one transaction and contain the terms and
conditions of the employment of the respondent. The disputes having
arisen in relation to the employment, were rightly referred to a common
Arbitration by the Indian Council of Arbitration.
30. In P.R. Shah (supra) Supreme Court had explained the
circumstances where there can be joint arbitration, even where there are
separate agreements between the parties. The present is one of such a
case. I may only quote paragraph 19 of the said judgment:
"19. If A had a claim against B and C, and there was an
arbitration agreement between A and B but there was no
arbitration agreement between A and C, it might not be
possible to have a joint arbitration against B and C. A
cannot make a claim against C in an arbitration against B,
on the ground that the claim was being made jointly against
B and C, as C was not a party to the arbitration agreement.
OMP No.388/2015 Page 10
But if A had a claim against B and C and if A had an
arbitration agreement with B and A also had a separate
arbitration agreement with C, there is no reason why A
cannot have a joint arbitration against B & C. Obviously,
having an arbitration between A and B and another
arbitration between A and C in regard to the same claim
would lead to conflicting decisions. In such a case, to deny
the benefit of a single arbitration against B and C on the
ground that the arbitration agreements against B and C are
different, would lead to multiplicity of proceedings,
conflicting decisions and cause injustice. It would be proper
and just to say that when A has a claim jointly against B and
C, and when there are provisions for arbitration in respect
of both B and C, there can be a single arbitration."
31. In Chloro Controls India (P) Ltd. v. Severn Trent Water
Purification Inc. (2013) 1 SCC 641, the Supreme Court held as under:-
"70. Normally, arbitration takes place between the
persons who have, from the outset, been parties to both the
arbitration agreement as well as the substantive contract
underlining (sic underlying) that agreement. But, it does
occasionally happen that the claim is made against or by
someone who is not originally named as a party. These
may create some difficult situations, but certainly, they are
not absolute obstructions to law/the arbitration agreement.
Arbitration, thus, could be possible between a signatory to
an arbitration agreement and a third party. Of course,
heavy onus lies on that party to show that, in fact and in
law, it is claiming "through" or "under" the signatory
party as contemplated under Section 45 of the 1996 Act.
Just to deal with such situations illustratively, reference
can be made to the following examples in Law and
Practice of Commercial Arbitration in England(2nd Edn.)
by Sir Michael J. Mustill:
OMP No.388/2015 Page 11
"1. The claimant was in reality always a party
to the contract, although not named in it.
2. The claimant has succeeded by operation of
law to the rights of the named party.
3. The claimant has become a party to the
contract in substitution for the named party by
virtue of a statutory or consensual novation.
4. The original party has assigned to the
claimant either the underlying contract,
together with the agreement to arbitrate which
it incorporates, or the benefit of a claim which
has already come into existence."
71. Though the scope of an arbitration agreement is
limited to the parties who entered into it and those
claiming under or through them, the courts under the
English law have, in certain cases, also applied the
"group of companies doctrine". This doctrine has
developed in the international context, whereby an
arbitration agreement entered into by a company, being
one within a group of companies, can bind its non-
signatory affiliates or sister or parent concerns, if the
circumstances demonstrate that the mutual intention of all
the parties was to bind both the signatories and the non-
signatory affiliates. This theory has been applied in a
number of arbitrations so as to justify a tribunal taking
jurisdiction over a party who is not a signatory to the
contract containing the arbitration agreement. [Russell on
Arbitration (23rd Edn.)]
72. This evolves the principle that a non-signatory party
could be subjected to arbitration provided these
transactions were with group of companies and there was
a clear intention of the parties to bind both, the signatory
as well as the non-signatory parties. In other words,
OMP No.388/2015 Page 12
"intention of the parties" is a very significant feature
which must be established before the scope of arbitration
can be said to include the signatory as well as the non-
signatory parties.
73. A non-signatory or third party could be subjected to
arbitration without their prior consent, but this would only
be in exceptional cases. The court will examine these
exceptions from the touchstone of direct relationship to the
party signatory to the arbitration agreement, direct
commonality of the subject-matter and the agreement
between the parties being a composite transaction. The
transaction should be of a composite nature where
performance of the mother agreement may not be feasible
without aid, execution and performance of the
supplementary or ancillary agreements, for achieving the
common object and collectively having bearing on the
dispute. Besides all this, the court would have to examine
whether a composite reference of such parties would serve
the ends of justice. Once this exercise is completed and the
court answers the same in the affirmative, the reference of
even non-signatory parties would fall within the exception
afore-discussed.
74. In a case like the present one, where origin and end of
all is with the mother or the principal agreement, the fact
that a party was non-signatory to one or other agreement
may not be of much significance. The performance of any
one of such agreements may be quite irrelevant without the
performance and fulfilment of the principal or the mother
agreement. Besides designing the corporate management
to successfully complete the joint ventures, where the
parties execute different agreements but all with one
primary object in mind, the court would normally hold the
OMP No.388/2015 Page 13
parties to the bargain of arbitration and not encourage its
avoidance. In cases involving execution of such multiple
agreements, two essential features exist; firstly, all
ancillary agreements are relatable to the mother
agreement and secondly, performance of one is so
intrinsically interlinked with the other agreements that
they are incapable of being beneficially performed without
performance of the others or severed from the rest. The
intention of the parties to refer all the disputes between all
the parties to the Arbitral Tribunal is one of the
determinative factors.
75. We may notice that this doctrine does not have
universal acceptance. Some jurisdictions, for example,
Switzerland, have refused to recognise the doctrine, while
others have been equivocal. The doctrine has found
favourable consideration in the United States and French
jurisdictions. The US Supreme Court in Ruhrgas
AG v. Marathon Oil Co. [143 L Ed 2d 760 : 526 US 574
(1999)] discussed this doctrine at some length and relied
on more traditional principles, such as, the non-signatory
being an alter ego, estoppel, agency and third-party
beneficiaries to find jurisdiction over the non-signatories.
76. The Court will have to examine such pleas with greater
caution and by definite reference to the language of the
contract and intention of the parties. In the case of
composite transactions and multiple agreements, it may
again be possible to invoke such principle in accepting the
pleas of non-signatory parties for reference to arbitration.
Where the agreements are consequential and in the nature
of a follow-up to the principal or mother agreement, the
latter containing the arbitration agreement and such
agreements being so intrinsically intermingled or
OMP No.388/2015 Page 14
interdependent that it is their composite performance
which shall discharge the parties of their respective
mutual obligations and performances, this would be a
sufficient indicator of intent of the parties to refer
signatory as well as non-signatory parties to arbitration.
The principle of "composite performance" would have to
be gathered from the conjoint reading of the principal and
supplementary agreements on the one hand and the
explicit intention of the parties and the attendant
circumstances on the other.
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105. We have already discussed that under the group of
companies doctrine, an arbitration agreement entered into
by a company within a group of companies can bind its
non-signatory affiliates, if the circumstances demonstrate
that the mutual intention of the parties was to bind both
the signatory as well as the non-signatory parties.
xxxxxxxxxxx
108. In the present case, the corporate structure of the
respondent companies as well as that of the appellant
companies clearly demonstrates a legal relationship which
not only is inter-legal relationship but also intra-legal
relationship between the parties to the lis or persons
claiming under them. They have contractual relationship
which arises out of the various contracts that spell out the
terms, obligations and roles of the respective parties which
they were expected to perform for attaining the object of
successful completion of the joint venture agreement. This
joint venture project was not dependent on any single
agreement but was capable of being achieved only upon
fulfilment of all these agreements. If one floats a joint
OMP No.388/2015 Page 15
venture company, one must essentially know how to
manage it and what shall be the methodology adopted for
its management. If one manages it well, one must know
what goods the said company is to produce and with what
technical know-how. Even if these requisites are satisfied,
then also one is required to know how to create market,
distribute and export such goods. It is nothing but one
single chain consisting of different components. The
parties may choose to sign different agreements to
effectively implement various aforementioned facets right
from managing to making profits in a joint venture
company. A party may not be signatory to an agreement
but its execution may directly be relatable to the main
contract even though he claims through or under one of
the main parties to the agreement. In such situations, the
parties would aim at achieving the object of making their
bargain successful by execution of various agreements like
in the present case.
The present case, in my opinion, is fully covered by the above
judgment.
32. The judgment in Duro Felguera S.A.(supra) cannot be of much
assistance to the petitioners as it was dealing with a case under Section 11
of the Act and was decided taking into account the amendment to the Act
by way of incorporation of Section 11(6A) to the Act. Paragraph 22 of
the judgment is important to note this distinction:
"22. On behalf of GPL, it was repeatedly urged that the
works are intrinsically connected, inseparable, integrated,
interlinked and that they are one composite contract and that
they were split up only on the request and representations
given by Duro Felguera and FGI. As discussed earlier, as
per amended provision Section 11 (6A), the power of the
Supreme Court or the High Court is only to examine the
OMP No.388/2015 Page 16
existence of an arbitration agreement. From the record, all
that we could see are five separate Letters of Award; five
separate Contracts; separate subject matters; separate and
distinct work; each containing separate arbitration clause
signed by the respective parties to the contract."
33. The Supreme Court had further distinguished the case of Chloro
Controls India (P)Ltd. (supra) as under:
"42. The learned Senior Counsel for GPL relied
upon Chloro Controls India (P) Ltd. (supra), to contend
that where various agreements constitute a composite
transaction, court can refer disputes to arbitration if all
ancillary agreements are relatable to principal
agreement and performance of one agreement is so
intrinsically interlinked with other agreements. Even
though Chloro Controls has considered the doctrine of
"composite reference", "composite performance" etc.,
ratio of Chloro Controls may not be applicable to the
case in hand. In Chloro Controls, the arbitration clause
in the principal agreement i.e. clause (30) required that
any dispute or difference arising under or in connection
with the principal (mother) agreement, which could not
be settled by friendly negotiation and agreement between
the parties, would be finally settled by arbitration
conducted in accordance with Rules of ICC. The words
thereon "under and in connection with" in the principal
agreement was very wide to make it more comprehensive.
In that background, the performance of all other
agreements by respective parties including third
parties/non-signatories had to fall in line with the
principal agreement. In such factual background, it was
held that all agreements pertaining to the entire disputes
are to be settled by a "composite reference". The case in
hand stands entirely on different footing. As discussed
earlier, all five different Packages as well as the
Corporate Guarantee have separate arbitration clauses
OMP No.388/2015 Page 17
and they do not depend on the terms and conditions of
the Original Package No.4 TD nor on the MoU, which is
intended to have clarity in execution of the work."
34. In the present case, however, the judgment of Supreme Court in
Chloro Controls India (P) Ltd (supra) will squarely apply.
35. It is also worth noting that even in Duro Felguera (supra), as far
as the package 6,7,8 and 9 were concerned, Supreme Court appointed the
Arbitral Tribunal consisting of same arbitrators, though, these were
ordered to be separately constituted domestic Arbitral Tribunals. The
present is a case where the parties have travelled beyond Section 11 of
the Act. The Arbitrator has also considered the effect of the two different
agreements and the two different Arbitration Agreements and has
concluded that a common arbitration shall lie. It is not even the case of
the petitioners that any prejudice was caused to them due to a common
arbitration. I find no infirmity in the said finding of the Arbitrator and
therefore, the objection against the Award on this issue is rejected.
36. As far as the application of laws of Malta in relation to the SIA is
concerned, it is not shown by the petitioners how the application of the
said laws of Malta would, in any manner, make the Impugned Award in
conflict with the said laws. The objection in this regard is, therefore,
fallacious and is rejected.
37. Learned senior counsel for the petitioners next contended that the
arbitration proceedings themselves were not properly initiated/ invoked.
He submitted that no notice invoking arbitration agreement had been
received by the petitioners.
OMP No.388/2015 Page 18
38. I find no merit in the said objection. It is not disputed before me
that before appointment of an Arbitrator, a notice was duly served by the
Indian Council of Arbitration on the petitioners. The Arbitration clause,
in either of the two above mentioned agreements, does not provide for
any pre-condition of notice being served by the party claiming
arbitration on the other before a reference for appointment of an arbitrator
is made to the Indian Council of Arbitration. The existence of disputes
between the parties is not denied by the petitioners. It is also rightly
contended by the learned counsel for the respondent that before the
Arbitrator the only objection of jurisdiction taken was with respect to the
common arbitration in relation to the two agreements and not with
respect to non receipt of notice of invocation of arbitration by the
petitioners. Non-receipt of the notice is a question of fact and cannot be
allowed to be raised for the first time in a petition under Section 34 of the
Act. Though, there is no merit in the objection raised by the petitioners,
even otherwise, Section 4 of the Act would operate as a waiver of said
objection on the part of the petitioners. Section 4 of the Act is
reproduced herein below:
Section 4 of the Act
"4. Waiver of right to object.--A party who knows that--
(a) any provision of this Part from which the parties
may derogate, or
(b) any requirement under the arbitration agreement,
has not been complied with and yet proceeds with the
arbitration without stating his objection to such non-
compliance without undue delay or, if a time limit is
provided for stating that objection, within that period of
time, shall be deemed to have waived his right to so object."
OMP No.388/2015 Page 19
39. The next contention raised by learned senior counsel for the
petitioners is that the arbitrator has erred in finding the respondent not
guilty of breach of Clause 4 of the Appointment Agreement. Reliance in
this regard was made to the emails dated 22.01.2010, 02.05.2012,
13.07.2012, 31.07.2012 and 31.10.2012.
40. Clause 4 of the Appointment Agreement is reproduced herein
below:
"Clause 4. Duties
Subject to overall superintendence, control and directions
of the Board of Director, you shall devote all your
working time, attention and abilities to the business of the
Company, confirm to and comply with the directions
given by the Board of Directors, work faithfully and
diligently in the best interests of the Company and use
best endeavors to promote the interest of the Company.
You shall have the duties, responsibilities and authority
customarily accorded to the president of an organization,
including running the day to day operations of the
Company subject always to the authority of the Board of
Directors. You shall be responsible for the following
matters relating to the Company and shall report to
Ameet Shah, Sourabh Sen and/or Aparna Doshi or other
person(s) as per the Board of Directors of the Company;
In addition you shall be responsible for such duties as
may be assigned to you in or in relation to the Affiliates
of the Company operating in India (namely, subsidiary/
SPV of the Company's parent company; (Astonfield
Renewable. Resources Limited.)
I. GENERAL ROLES AND RESPONSIBILITIES
A. BE A LEADER
OMP No.388/2015 Page 20
Develop Aston field Renewable Resources Limited
into the leading Indian renewable energy company
and establish a dominant market share in South Asia
-Advise the Board
-Advocate and promote the Company's mission to
develop renewable energy projects
· Support and motivate employees to build a world
class organization
B. BE A VISIONARY AND PROVIOE
INFORMATION
. Ensure that the staff and Board have sufficient and
up-to-date information
· Look to the future for change opportunities and
leverage your experience of 25 years in the power
industry.
· Serve as the interface between the Board and
employees
·Serve as the interfaces between the Company and
community
C. BE A DECISION MAKER
· Formulate policies, strategic plans, establish
operating plans, implement processes for project
management and implementation of power projects
and submit these recommendations to the Board
Decide or guide courses of action In operations by
staff
D. BE A MANAGER
· Oversee operations of the Company in India
· Implement plans approved by the Executive
Committee
· Manage human resources of the Company
· Manage financial and physical resources
OMP No.388/2015 Page 21
E. ASSIST IN BOARD DEVELOPMENT
· Assist in the selection and evaluation of potential
board members
· Makes recommendation and support the Board
during orientation and self-evaluation
II. SPECIFIC RESPONSIBILITIES·
In addition to any· specific duties assigned to you by
the Board from time to time, you shall also have the
following responsibilities:
A. Leverage your relationships and experience with
Investors and lenders alike to secure financing for
ARRL's projects in India.- You have been
thoroughly debriefed on the financing strategy for
ARRL and it will require significant Input from you
as the Head of the Company's operations In India.
You will oversee the operations of the company's'
projects from accounting, financial tax and
compliance point· of view and working with the core
corporate finance team to achieve departmental and
organizational goals. You will coordinate with
banking institutions on various matters to. Include
project financing, creating, reviewing and updating
business models.
B. Project Development, Implementation and
Commissioning Oversee business development on a
nationwide basis, expand technical partnerships,
implement project management capabilities and
ensure timely delivery and commissioning of power
project.
C. Financial, Tax, Risk and Facilities Management-
Recommend yearly budget for Board approval and
prudently manage the Company's resources within
OMP No.388/2015 Page 22
those budget guidelines according to current laws
and regulations
D. Human Resource Management-Effectively
manage the human resources of the Company
according to authorized personnel policies and
procedures that fully conform to current laws and
regulations. Develop the core management team for
the Company to oversee its power projects in first 6
months of tenure as discussed with Executive
Committee. You will run the day-to-day operations
of the Company, implementing the business plan and
hire the support team.
E. Raise Market Capitalization of the Company
through successful execution of its operating plan to
develop 300MW's of renewable energy projects in 3-
4 years. Build a sustainable and profitable business
model that will lead to wealth creation for all
stakeholders, employees, shareholders and
founders.
F. Community and Public Relations Assure the
Company and its mission, programs, products and
services are consistently presented in strong,
positive image to relevant stakeholders.
G. Any other duty which may be assigned to him
from the Board of Directors from time to time."
41. The Arbitrator has examined the above mentioned emails and has
concluded as under:
"2.16 The Respondents' contention regarding non
performance centres on the Claimant's alleged inability to
OMP No.388/2015 Page 23
deliver on this target, resulting in reduced income streams
and alleged losses for them which are the basis of their
counter claim. In support of this contention, the
Respondents cite email correspondence from Shri Ameet
Shah to the Claimant on 22 January 2010 (Annexure"C" in
Documents referred to in Respondents' Written
Submissions), 2 May 2012 (Annexure "D"), 13 July 2012
(Annexure "E"), 31 July 2012 (Annexure "F") to buttress
their claim that they were dissatisfied with the Claimant's
performance. While an examination of this correspondence
reflects· the unsatisfactory performance of the Company, it
cannot be said to unequivocally demonstrate that the
Claimant was solely or directly responsible for this. On the
contrary a paragraph of the email dated 22 January 2010
cited above appears to support the Claimant's contention
that the entitlement to shares under Clause 2(a) was not
linked to performance. The paragraph reads:
"Your put option to the Company for 100 shares
at USD275K needs to be linked to a minimum of
50 MW of capacity being commissioned in the
Company. As it stands - the Company is liable to
pay you a cash fee of USD, 753 per day
amounting to USD 275K for the year 2010. This is
simply not a viable option for the Company for
2010 and a source for cash savings for the
Company this year which is being demanded by
the investors. This restructure does not mean the
put option is being taken away, it simply aligns it
with the Company's operations generating cash."
xxxx
2.20 Taken together, these elements do not in any way
establish the Respondents' contentions that the Claimant
was guilty of poor performance. On the contrary, the fact
that the Respondents were still considering a role for
Claimant subsequent to his resignation would seem to
OMP No.388/2015 Page 24
suggest that they valued his services. The reference to
"your shareholding" in Shri Shah's message quoted above
also points to an acknowledgement of the Claimant's
entitlements. The Respondents have argued that the above
correspondence took place before the Claimant's alleged
violations of Clauses 9 and 11 of the Employment
Agreement came to their notice. Be that as it may, that
cannot wash away the fact that there was neither a
suggestion of poor performance nor of any lack of
entitlement to the shares under Clause 2(a) of the SIA in
the contemporaneous correspondence.
xxxx
3.9 The Employment Agreement does not contain any
penal provisions for non achievement of any of the
deliverables in Clause 4.II. Moreover, it is the burden of
the Respondents to establish that the non-achievement of
the above target was due to the lapses of the Claimant. The
Respondents have cited the correspondence listed in
paragraph 2.16 above to show that the Claimant was
repeatedly cautioned about his poor performance.
However, none of these messages invokes or refers to the
contractual provisions of Clause 4. None of these
messages reflects the Respondents' view that the poor
performance was solely or substantially due to the lapses
of the Claimant.
xxxxxxx
Conclusion- It is not for the undersigned to conduct a
forensic examination of the causes of non-achievement of
targets by the Company. The brief question which is
required to be answered here is whether the Respondents
have demonstrated a clear nexus between the contractual
responsibilities of the Claimant and the performance of the
Company. In view of the factual and evidentiary Matrix
laid out above, the only conclusion which can be drawn is
OMP No.388/2015 Page 25
that the Respondents have not demonstrated such a nexus.
Therefore, it is concluded that the Respondents have not
established their counter claim."
42. The Arbitrator having examined the emails and come to the
conclusion, which is neither found to be arbitrary nor unreasonable,
cannot be interfered with in exercise of limited jurisdiction of this Court
under Section 34 of the Act.
43. It is further contended by the learned senior counsel for the
petitioners that the Arbitrator having found the respondent guilty of
violation of Clause 11 of the Appointment Agreement, he could not have
proceeded to grant pro-rata shares in favour of the respondent. He
submits that in terms of Clause 2(a) of SIA, future allotment of shares in
favour of the respondent was subject to his fulfillment of the
representation and warranty under the Appointment Agreement. Once
the respondent was held to be in breach of the agreement, he was
disentitled to any future allotment of shares. It is contended that the
Arbitrator, while awarding the pro-rata shares in favour of the
respondent, has travelled beyond the terms of the contract.
44. I am unable to accept the above submission of learned senior
counsel for the petitioner.
45. Clause 2(a) of the SIA has been reproduced above. It specifically
states that where the Employment Agreement is terminated "for any
reason whatsoever prior to the aforesaid periods" i.e. two years, three
years, four years and five years respectively from the Employment Date,
the respondent shall be entitled to fractional value of the shares on the
basis of number of days of completed service. The Employment
OMP No.388/2015 Page 26
Agreement was terminated only on 02.01.2013 on the acceptance of
resignation letter, therefore, the respondent may have been entitled to
pro-rata shares till that date. The Arbitrator has, however, held
respondent entitled to pro-rata shares only till 07.5.2012 i.e. the date on
which the respondent committed breach of Clause 11 of the Appointment
Agreement as per the Sole Arbitrator.
46. In any case, the Arbitrator interpreted Clause 2(a) of SIA, in my
opinion little more favourable of the petitioners as under:
"2.13 It is clear that Clause 2(a) could have been
drafted with greater clarity. While on the one hand it
would be unusual for the issue of performance linkage to
figure in both Clause 2(a) as well as 2(b), it would be
equally anomalous for the proviso in the second sentence
of Clause 2(a) to completely override the stipulations in
the first sentence.
Conclusion -After having examined the text of Clause
2(a) and considered the arguments of the Parties, the
undersigned is of the view that the stipulations in the first
part of the first sentence of Clause 2(a)(" Subject to and
in reliance upon the representations, warranties, terms
and conditions of this Agreement and the Employment
Agreement, the Company agrees to issue to you, ....... ")
are a precondition for the Claimant's entitlement of
shares ·and cannot be overridden by the proviso in the
second sentence."
47. The Arbitrator further discusses the impact of breach of Clause 11
of the Appointment & Employment Agreement on the rights of the
respondent as under:
OMP No.388/2015 Page 27
"2.35 The key issue to be decided is whether on
satisfaction of the stipulations in the first sentence of
Clause 2(a), the shares vested in the Claimant or whether
his entitlements were further subject to the procedural
requirements listed in Clauses 3, 4 and 8(b)(vi) of the
SIA.
2.36 It is important to distinguish the substantive from
the procedural issues. The substantive issue is that on
satisfaction of the stipulations in Clause 2(a), an
entitlement or interest was created in favour of the
Claimant.(How the violation of Clause 9 of the
Employment Agreement by the Claimant affects this
entitlement is dealt with separately). Whether or not the
shares were delivered physically is a subsidiary issue
which does not detract from the fact that the entitlement
was created. An examination of the correspondence
referred to by the Claimant makes it clear that this
interest or entitlement in favour of the Claimant was not
disputed by the Respondents at that time.
Conclusion- Whether or not the events envisaged in
Clauses 3, 4 and 8 of the SIA took place is not relevant
for determining whether an interest was created in favour
of the Claimant by the provisions of Clause 2(a). The
creation of the interest was subject to the provisions of
Clause 2(a) alone. Once the interest was created, the
Claimant was entitled to the repurchase option under
Clause 7 of the SIA.
48. A reading of the above would show that the present is not a case
where the Arbitrator has acted in ignorance of the terms of the
Agreement, but is a case where the Arbitrator has interpreted the terms of
the Agreement to reach a particular conclusion. This distinction is very
relevant as construction of the terms of the contract is primarily for an
OMP No.388/2015 Page 28
Arbitrator to decide unless the Arbitrator construed the contract in such a
way that it could be said to be something that no fair minded or
reasonable person could do.
49. In this regard, the Supreme Court in the case of Associate Builders
v. Delhi Development Authority, (2015) 3 SCC 49 reiterated as under:
"42.3. (c) Equally, the third subhead of patent illegality is
really a contravention of Section 28(3) of the Arbitration
Act, which reads as under:
"28.Rules applicable to substance of dispute.--(1)-
(2)***
(3) In all cases, the Arbitral Tribunal shall decide
in accordance with the terms of the contract and
shall take into account the usages of the trade
applicable to the transaction."
This last contravention must be understood with a caveat.
An Arbitral Tribunal must decide in accordance with the
terms of the contract, but if an arbitrator construes a
term of the contract in a reasonable manner, it will not
mean that the award can be set aside on this ground.
Construction of the terms of a contract is primarily for an
arbitrator to decide unless the arbitrator construes the
contract in such a way that it could be said to be
something that no fair-minded or reasonable person
could do.
43. In McDermott International Inc. v. Burn Standard Co.
Ltd. [McDermott International Inc. v. Burn Standard Co.
OMP No.388/2015 Page 29
Ltd., (2006) 11 SCC 181] , this Court held as under:
(SCC pp. 225-26, paras 112-13)
"112. It is trite that the terms of the contract can
be express or implied. The conduct of the parties
would also be a relevant factor in the matter of
construction of a contract. The construction of the
contract agreement is within the jurisdiction of
the arbitrators having regard to the wide nature,
scope and ambit of the arbitration agreement and
they cannot be said to have misdirected
themselves in passing the award by taking into
consideration the conduct of the parties. It is also
trite that correspondences exchanged by the
parties are required to be taken into consideration
for the purpose of construction of a contract.
Interpretation of a contract is a matter for the
arbitrator to determine, even if it gives rise to
determination of a question of law.
113. Once, thus, it is held that the arbitrator
had the jurisdiction, no further question shall be
raised and the court will not exercise its
jurisdiction unless it is found that there exists any
bar on the face of the award."
44. In MSK Projects (I) (JV) Ltd. v. State of
Rajasthan [(2011) 10 SCC 573 (SCC pp. 581-82, para
17)
"17. If the arbitrator commits an error in the
construction of the contract, that is an error
within his jurisdiction. But if he wanders outside
the contract and deals with matters not allotted to
him, he commits a jurisdictional error. Extrinsic
evidence is admissible in such cases because the
dispute is not something which arises under or in
relation to the contract or dependent on the
construction of the contract or to be determined
within the award. The ambiguity of the award
OMP No.388/2015 Page 30
can, in such cases, be resolved by admitting
extrinsic evidence. The rationale of this rule is
that the nature of the dispute is something which
has to be determined outside and independent of
what appears in the award. Such a jurisdictional
error needs to be proved by evidence extrinsic to
the award."
45. In Rashtriya Ispat Nigam Ltd. v. Dewan Chand Ram
Saran [(2012) 5 SCC 306], the Court held: (SCC pp. 320-
21, paras 43-45)
"43. In any case, assuming that Clause 9.3 was
capable of two interpretations, the view taken by
the arbitrator was clearly a possible if not a
plausible one. It is not possible to say that the
arbitrator had travelled outside his jurisdiction,
or that the view taken by him was against the
terms of contract. That being the position, the
High Court had no reason to interfere with the
award and substitute its view in place of the
interpretation accepted by the arbitrator.
44. The legal position in this behalf has been
summarised in para 18 of the judgment of this
Court in SAIL v. Gupta Brother Steel Tubes
Ltd.(2009) 10 SCC 63 and which has been
referred to above. Similar view has been taken
later in Sumitomo Heavy Industries Ltd. v. ONGC
Ltd.(2010) 11 SCC 296 to which one of us
(Gokhale, J.) was a party. The observations in
para 43 thereof are instructive in this behalf.
45. This para 43 reads as follows: (Sumitomo
case [(2010) 11 SCC 296, SCC p. 313)
OMP No.388/2015 Page 31
'43. ... The umpire has considered the fact
situation and placed a construction on the
clauses of the agreement which according to
him was the correct one. One may at the
highest say that one would have preferred
another construction of Clause 17.3 but that
cannot make the award in any way perverse.
Nor can one substitute one's own view in such a
situation, in place of the one taken by the
umpire, which would amount to sitting in
appeal. As held by this Court in Kwality Mfg.
Corpn. v. Central Warehousing Corpn. (2009)
5 SCC 142 the Court while considering
challenge to arbitral award does not sit in
appeal over the findings and decision of the
arbitrator, which is what the High Court has
practically done in this matter. The umpire is
legitimately entitled to take the view which he
holds to be the correct one after considering
the material before him and after interpreting
the provisions of the agreement. If he does so,
the decision of the umpire has to be accepted as
final and binding."
50. In the present case, the interpretation given to the Clause 2(a) of
the Appointment Agreement is most reasonable and cannot be faulted.
51. It is then contended by learned senior counsel for the petitioners
that the Arbitrator has proceeded to award in excess of even what was
claimed by the respondent. In this regard he drew my attention to the
prayer made by the respondent in its Statement of Claim wherein the
respondent had claimed only the value of 1.08 shares. He submits that
the Arbitrator, in the Impugned Award, granted 2.43 shares in favour of
the respondent i.e. much beyond the claim made by the respondent
himself.
OMP No.388/2015 Page 32
52. Prayer A in the Statement of Claim filed by the respondent is
reproduced herein below:
"A. USD 1,144,000 being the value of the 1.08 Shares to
which Claimant is entitled and in respect of which
payment must be made by the Respondents to the
Claimant. The total amount receivable by the Claimant,
under this head as per the current exchange rate amounts
to Rs.6,87,65,840/- (Rs.Six Crores, Eighty Seven Lakhs,
Sixty Five Thousand, Eight Hundred and Forty Only)."
53. On the other hand, learned counsel for the respondent, in my
opinion rightly so, submits that the plea taken by the petitioners is not
only fallacious but is also mala fide as the petitioners are trying to take
advantage of an inadvertent typographical error in the prayer clause of
the Statement of Claim. In this regard he draws my attention to
paragraph 8 of the Statement of Claim which clearly shows that the
respondent had claimed an amount of Rs.6,87,65,842/- as the current
value of 3.08 shares, which is the same amount being claimed in prayer A
quoted above. Learned counsel for the respondent further draws attention
of this Court to the issues framed by the Arbitrator wherein the first issue
is as to "whether the claimant is entitled to recover from the respondents,
the value of 3.08 shares, as claimed".
54. From the above, it is clear that the objection raised by the
petitioners is merely trying to take advantage of a typographical error in
the Statement of Claim, which caused no prejudice to the petitioners
inasmuch as the petitioners were at all time aware that the respondent's
claim was to 3.08 shares and not 1.08 shares.
OMP No.388/2015 Page 33
55. It is then contended by the learned senior counsel for the
petitioners that the Arbitrator has wrongly valued the shares in the
Impugned Award. It is submitted that while the respondent had failed to
give fair value of the shares, the petitioners had tendered in evidence the
valuation thereof in form of a certificate from Chartered Accountant,
which showed the value of the shares as only USD 24.68 as on
31.03.2013. He therefore, submits that the Arbitrator has wrongly
applied the value of USD 275,000 per share to the 0.43 shares to which
the respondent was held entitled to in the Award.
56. On the other hand, learned counsel for the respondent submits that
the alleged certificate issued by the Chartered Accountant had not been
proved on record by the petitioners as the author of the said certificate
was not produced as a witness. He further submits that the fair value of
the shares was within the knowledge of the petitioners and could have
been derived only from the books of account of the petitioner no.2; the
same were not produced before the Arbitrator. He further submits that on
the other hand, the respondent had led evidence of one Mr.Sunil
M.Buckshee (CW-1), Chartered Accountant and Cost Accountant, who
had deposed that in his opinion the value of the shares would be higher
than the base value of USD 275,000. Learned counsel for the respondent
submits that though 47 questions were put to the said witness, there was
no question put to him challenging his opinion on the valuation of the
shares. It is lastly contended by learned counsel for the respondent that a
reading of the email dated 01.02.2013 from Co-Chairman and Director of
the petitioners would show that even the petitioners were of the opinion
that the valuation of the shares would be much more than USD 275,000.
OMP No.388/2015 Page 34
57. I have considered the submissions made by the counsels for the
parties. Clause 7 of the SIA provides that the pre-agreed value of the first
and second share was USD 275,000 per share. Therefore, there can be no
dispute on the same. The value of the subsequent shares was to be
determined on the fair market value. In the present case, the Arbitrator
has taken the fair market value to be USD 275,000. He has held as under:
III: The parties have not produced any basis for
calculating the "fair market value" of the share entitlement
beyond the first 2 shares as required under Clause 2(a) of the SIA.
It is therefore decided that the value of these shares will be the
same as for the first 2 shares, i.e. US$275,000 per share. The
value of 0.43 shares therefore works out to US$119,041 (one lakh
nineteen thousand and forty one).
In absence of evidence, the arbitrator has taken the value of the
first two shares to be also applicable for the next 0.43 shares. The same
is a reasonable approach and I do not find any infirmity with the same.
58. It is next contended by the learned senior counsel for the
petitioners that the Arbitrator has erred in granting interest @ 12% p.a. in
favour of the respondent. I find no merit in the said submission. Grant of
interest @ 12% p.a. cannot be said to be so unreasonable so as to warrant
interference by this Court in exercise of its power under Section 34 of the
Act. Award of interest is at the discretion of the Arbitrator and until and
unless it is shown that said discretion is exercised in a perverse manner,
the same cannot be interfered with by the Court in exercise of its power
under Section 34 of the Act. Section 31(8) of the Act, prior to its
amendment in 2015, in fact, prescribed that unless the award otherwise
OMP No.388/2015 Page 35
directed, the sum awarded by the arbitrator shall carry interest @18% p.a.
Therefore, challenge to award of interest @12% p.a. cannot be sustained.
59. It is lastly submitted by learned senior counsel for the petitioners
that the Impugned Award makes both the petitioners jointly and severely
liable for the payment of the awarded amount where this liability could
only have been of petitioner no.2, who was the party of the SIA. It is
seen from the correspondence that the petitioners were dealing jointly
with the respondent in connection with the employment. The Arbitrator
has also held that the two agreements form part of the same transaction.
The petitioner no.2 is the parent company of petitioner no.1. In my view,
therefore, the petitioners cannot take benefit of corporate veil to deny
their joint and several liability under the Award.
60. In view of the above, I find no merit in the present petition and
same is accordingly dismissed with cost, quantified at Rs.50,000/-.
NAVIN CHAWLA, J
JANUARY 15, 2018/Arya
OMP No.388/2015 Page 36
