Order
1. Leave granted. The present appeal has been filed to challenge an award passed in an ICC arbitration with its seat in New Delhi. The appellant has challenged the judgment dated 8-5-2017 2017 SCC OnLine Del 8294 passed under Section 37 of the Arbitration and Conciliation Act, 1996 (the Act), whereby a Division Bench of the Delhi High Court rejected the appeal.
2. The factual background in which the present appeal has been filed is as follows:
2.1. The appellant Promoters entered into a shareholders agreement (SHA) and a share subscription and purchase agreement (SSPA) with Respondents 1 and 2 both dated 21-3-2008 to acquire 50% shareholding in Respondent 3 for the development of a special economic zone for information technology and information technology enabled services. The project was to be developed on a plot of land admeasuring approx. 45,202 sq m in Noida (the project land) which was allotted to one M/s Sarv Mangal Real Tech (P) Ltd. (M/s Sarv Mangal). The project land was sub-leased by M/s Sarv Mangal to Respondent 3.
2.2. SHA and SSPA were terminated. The parties entered into a restated shareholders agreement (RSHA) and a restated share subscription and purchase agreement (Rsspa) both dated 2-7-2009. As per Clauses 3.3 and 3.4 Rsspa, Respondents 1 and 2 were required to contribute Rs 45 crores to purchase and subscribe the shares in Respondent 3, which was brought in by 17-12-2009.
2.3. The appellants terminated both the agreements on 17-12-2009. Respondents 1 and 2 invoked arbitration, and submitted the request for arbitration to the ICC Court under RSHA and Rsspa.
2.4. The Tribunal vide its award (2 : 1) dated 20-1-2015 allowed the claim of Respondents 1 and 2, and awarded the following:
2.4.1. Payment of Rs 45,00,27,747 together with simple interest @ 18% p.a. from 31-10-2011 to the date of the award.
2.4.2. Payment of simple interest @ 15% p.a. on all sums awarded to the claimants in the award, till the date of payment.
2.4.3. The appellants were not entitled to repayment of lease rental paid to Noida from Respondents 1 and 2, and the respondent claimants were under no obligation to share future lease rental.
2.4.4. The appellant promoters were directed to pay costs of the arbitration comprising of:
(i) fees and expenses of the Arbitral Tribunal and the ICC administrative expenses fixed by the ICC Court for the total amount of USD 9,00,000;
(ii) Rs 2,39,08,082 towards the legal fees of the respondent claimants;
(iii) costs of the hearing venue in the amount of Rs 6,57,635;
(iv) a sum of Rs 1,274,931 in respect of other costs and expenses of the respondent claimants.
2.5. The appellants filed objections under Section 34 of the 1996 Act before the Delhi High Court. The learned Single Judge vide order dated 9-2-2017 2017 SCC OnLine Del 6894 rejected the challenge on merits, and held that it was an undisputed fact that Respondents 1 and 2 had brought in a sum of Rs 45,00,27,747 for the project. The appellants had terminated RSHA and RSHA soon after the funds were brought in by Respondents 1 and 2. The Court found the findings of the Arbitral Tribunal to be consistent with the terms of the agreement.
2.6. Aggrieved, the appellants preferred an appeal under Section 37 of the Act before the Division Bench of the Delhi High Court. The Division Bench vide the judgment and order dated 8-5-2017 2017 SCC OnLine Del 8294 rejected the appeal as being devoid of any merit.
3. The appellants have challenged the order passed under Section 37 of the 1996 Act by way of the present special leave petition.
3.1. This Court vide the interim order dated 15-9-2017 2017 SCC OnLine SC 1954 directed the appellants to deposit an amount of Rs 20,00,00,000 (Rupees twenty crores) in the Registry of this Court, which was directed to be invested in a short-term fixed deposit account with a nationalised bank. The appellants were injuncted from alienating the project land, so that in the ultimate eventuality, if the award was sustained by this Court, it could be realised from the sale of the project land.
3.2. By a subsequent order dated 1-5-2018 2018 SCC OnLine SC 3544, Respondent 1 was permitted to withdraw an amount of Rs 10 crores unconditionally, from the amount lying deposited in this Court.
3.3. By a further order dated 14-11-2019 2019 SCC OnLine SC 1791, the Senior Counsel for the appellants requested for time to find a suitable buyer for the project land. It was made clear that the sale would be under the auspices of a public authority or a court officer, and the entire sale consideration would be deposited in the Registry of this Court. It was further directed that the balance amount of Rs 10 crores along with the accrued interest, which was lying deposited in the Registry of this Court, would be released to Respondent 1. The counsel for the appellants made a request to join Noida as a party to the present proceedings, since the project land was leased out by Noida. Consequently, notice was issued 2019 SCC OnLine SC 1793 to implead Noida in the proceedings.
3.4. The appellants filed an affidavit dated 5-12-2019 stating that the project land was free from any and all encumbrances, and was not subject to any pre-existing mortgage or charge. It was further submitted that the appellants were able to identify a party which was interested to acquire the sub-lease of the project land viz. M/s Good Living Infrastructure (P) Ltd. (the Bhutani Group). The Bhutani Group had submitted their expression of interest to acquire the sub-lease of the project land from Noida by acquisition of shares of Respondent 3 for a total consideration of Rs 99,44,55,000. The Bhutani Group was willing to deposit the sale consideration in the Registry of this Court, after deducting the dues payable to Noida. A copy of the expression of interest dated 26-11-2019 was placed on the record of this Court. The appellants further submitted that the balance amount would be raised by mortgaging the property situated at Industrial Plots Nos. 4 and 5, Block A, Sector 16, Noida, owned by Appellant 4, which is being used as the corporate office. CEO of M/s Good Living Infrastructure (P) Ltd. who was present in Court confirmed that his company stands by the offer of Rs 99,44,55,000 made by him before the Court. M/s Good Living Infrastructure (P) Ltd. was directed to file a board resolution along with an affidavit to confirm the offer before the next date of hearing.
3.5. M/s Good Living Infrastructure (P) Ltd. through its CEO/Additional Director, duly authorised by a Board Resolution dated 20-12-2019, filed an affidavit dated 6-1-2020 before this Court to place on record its interest to acquire the sub-lease of the property bearing Plot No. 001B situated in Sector 140-A in Noida, District Gautam Budh Nagar, U.P. admeasuring 45,202.50 sq m held by M/s IT Infrastructure Park Ltd. (Respondent 3) for a consideration of Rs 99,44,55,000. This would be effectuated by acquisition of shares of Respondent 3 which holds the aforesaid property under a sub-lease executed between Noida, the lessor, M/s Sarv Mangal Real Tech (P) Ltd., the lessee, and Respondent 3 the sub-lessee under sub-lease dated 21-10-2009. In the said affidavit, the Bhutani Group stated that it is aware of the pending litigation before this Court, and is willing to deposit the entire sale consideration with the Registry of this Court, including the dues payable to Noida.
3.6. With respect to the dues of Noida, we requested the counsel for Noida to ascertain whether penal interest on land rent and interest could be waived.
3.7. During the course of hearing on 22-1-2020, the dues payable to Noida were crystallised as follows:
(i)
Pending instalment amounts with simple interest @ 14% p.a.
Rs 23,21,00,000
(ii)
Lease rent dues with simple interest @ 14% p.a.
Rs 11,93,00,000
(iii)
Time extension charges
Rs 6,57,38,900
(iv)
Additional amount payable to landowners as compensation @ 64.7%
Rs 93,36,577
Total
Rs 42,64,75,477
4. After having heard the counsel appearing for all the parties, the challenge to the ICC award is hereby rejected. With respect to the amount awarded towards interest and penal interest under the award, the same has been modified by consent of parties, as a prudent commercial decision, in the following terms:
4.1. The appellants agree to make a total payment of Rs 107.50 crores (Rupees one hundred and seven crores and fifty lakhs) to Respondents 1 and 2 as full and final settlement of their dues under the award dated 20-1-2005.
4.2. Out of the total amount of Rs 107.50 crores, Respondents 1 and 2 have already received an amount of Rs 21,53,00,000 (Rupees twenty-one crores fifty-three lakhs) pursuant to the interim orders dated 1-5-2018 2018 SCC OnLine SC 3544 and 14-11-2019 2019 SCC OnLine SC 1791 passed by this Court. The balance amount payable to Respondents 1 and 2 would be Rs 85,97,00,000 (Rupees eighty-five crores ninety-seven lakhs).
4.3. M/s Good Living Infrastructure (P) Ltd. of the Bhutani Group agreed and undertook to pay Rs 99,44,55,000 for the purchase of the entire shareholding of Respondent 3 IT Infrastructure Park (P) Ltd. from the appellants and Respondents 1 and 2. Out of this amount, Rs 42,64,75,477 would be paid directly towards the dues of Noida. The Bhutani Group would be at liberty to make a representation to Noida within one week for reschedulement as per its prevailing policy, which would be decided within a further period of one week.
4.4. The balance sale consideration of Rs 56,79,79,523 (Rs 99,44,55,000 minus Rs 42,64,75,477) would be deposited by M/s Good Living Infrastructure in the Registry of this Court. The deposit by M/s Good Living Infrastructure would be made in 2 tranches:
Rs 10,00,00,000
Upfront payment to be deposited within 10 days of the passing of this order.
Rs 56,79,79,523
To be deposited within 6 months from the date of this order.
The aforesaid amounts would be made over to Respondents 1 and 2 towards payment of the balance sale consideration.
4.5. The balance amount of Rs 29,17,20,477 payable by the appellants to Respondents 1 and 2 would be carried out within a period of 3 months from the passing of this order.
4.6. The orders of injunction dated 24-3-2017 2017 SCC OnLine Del 12794 and 17-8-2017 2017 SCC OnLine Del 12795 passed by the Delhi High Court restraining the appellants from alienating Industrial Plots Nos. 4 and 5, Block A, Sector 16, Noida is hereby lifted, to enable the appellants to raise funds for payment of the balance amount as stated in para 4.2 hereinabove.
5. The appellants were directed to file an affidavit of undertaking before this Court, with respect to the obligations to be discharged as per the consent terms set out hereinabove.
6. Appellant 1 Mr Shakti Nath has filed an affidavit of undertaking dated 10-2-2020 on behalf of all the appellants, stating that:
“1. I am Petitioner 1 in the abovementioned petition and am filling this affidavit on behalf of all the petitioners. Petitioners 2 and 3 are my wife and son, respectively, and Petitioner 4 is a private limited company of which I am the Managing Director and 96.26% shareholder while the remaining shareholding is held by Petitioners 2 and 3, respectively.
2. Under the kind supervision of this Hon'ble Court, the parties have agreed to settle the dispute forming part of the present petition at a total settlement amount of Rs 107,50,00,000 (Rupees one hundred seven crores fifty lakhs only). It has further been agreed that Respondent 3 will be purchased by way of purchase of its entire shareholding from the petitioners and Respondents 1 and 2 by Good Living Infrastructure (P) Ltd. (GLI), for Rs 99,44,55,000 (Rupees ninety-nine crores forty-four lakhs fifty-five thousand only), out of which an amount of Rs 42,64,75,477 (Rupees forty-two crores sixty-four lakhs seventy-five thousand four hundred seventy-seven only) or thereabouts shall be paid to Noida directly by GLI towards payments of dues to Noida as determined by this Hon'ble Court. The balance amount of Rs 56,79,79,523 (Rupees fifty-six crores seventy-nine lakhs seventy-nine thousand five hundred twenty-three only) shall be deposited by GLI with this Hon'ble Court for payment to Respondents 1 and 2.
3. Of the total settlement amount of Rs 107.50 crores, the respondents have already received an amount of Rs 21.53 crores from the Registry of this Hon'ble Court, which comprises the amount of Rs 20 crores deposited by the petitioners pursuant to the order dated 15-9-2017 2017 SCC OnLine SC 1954 of this Hon'ble Court, along with the interest accrued thereon. Thus, the total amount now payable to Respondents 1 and 2 comes to Rs 85.97 crores. Since, Respondents 1 and 2 will receive an amount of Rs 56,79,79,523 from GLI, there will be a shortfall of Rs 29,17,20,477 (Rupees twenty-nine crores seventeen lakhs twenty thousand four hundred seventy-seven only) approximately, which will be deposited by the petitioners with this Hon'ble Court.
4. The petitioners undertake to deposit the abovementioned shortfall of Rs 29,17,20,477 or thereabouts within 3 months of the lifting of the status quo upon their immovable properties, which has been ordered by the Hon'ble Delhi High Court by its orders dated 24-3-2017 2017 SCC OnLine Del 12794 and 17-8-2017 2017 SCC OnLine Del 12795 passed in execution petition bearing OMP (ENF) (COMM) No. 45 of 2017. The said status quo is required to be lifted in order to enable the petitioners to raise loan against the said immovable properties so as to enable them to deposit the shortfall amount with this Hon'ble Court.
5. The petitioners hereby undertake that till such time that the entire settlement amount is paid to Respondents 1 and 2, the petitioners shall not create any third-party rights or interest over the abovementioned immovable properties for the purpose of raising loans to deposit with this Hon'ble Court the amounts payable to Respondents 1 and 2 as per the settlement reached between the parties.”
7. M/s Good Living Infrastructure (P) Ltd. (GLI) has also filed an affidavit of undertaking dated 10-2-2020 stating that:
“1. I am the CEO/Additional Director of M/s Good Living Infrastructure (P) Ltd. (GLI) and have been duly authorised by GLI vide resolution of the Board of Directors dated 20-12-2019 to give the present undertaking on its behalf.
2. That, GLI undertakes to pay a sum of Rs 99,44,55,000 towards the purchase of entire shareholding of IT Infrastructure Park (P) Ltd. (Respondent 3) from the petitioners and Alpha Tiger Cyprus Investment No. 2 Ltd. and Alpha Tiger Cyprus Investment No. 3 Ltd. in order to acquire the sub-lease of the property bearing Plot No. 001B situated at Sector 140-A in Noida, District Gautam Budh Nagar, Uttar Pradesh.
3. That, out of total sum of Rs 99,44,55000, GLI undertakes to pay the dues payable to Noida, amounting to Rs 42,64,75,477, directly to Noida. In this regard, GLI seeks liberty from this Hon'ble Court to approach Noida for reschedulement of payment of the abovementioned sum. GLI undertakes to make the appropriate representation/application to Noida for such reschedulement within one week of the receipt of the order passed by this Hon'ble Court granting the liberty sought herein.
4. That, GLI undertakes to deposit the balance purchase price after deducting the Noida dues therefrom with the Hon'ble Court i.e. an amount of Rs 56,79,79,523, in the following manner:
Rs 10,00,00,000
Upfront deposit to be made with the Court within 10 days of the signing of the share purchase agreement between all the parties, which shall also be deposited in the custody of the Hon'ble Court.
Rs 46,79,79,523
To be deposited within a period of four months with an additional grace period of two months after the passing of the final order by the Hon'ble Court.
5. It is prayed that the balance amount of Rs 46,79,79,523 be distributed to Alpha Tiger Cyprus Investment No. 2 Ltd. and Alpha Tiger Cyprus Investment No. 3 Ltd. by this Hon'ble Court after the transfer of the entire shareholding of Respondent 3 to GLI.
6. I say that the abovementioned undertaking is voluntary and unconditional.”
8. In the event of any default in payment of the amounts by the appellants, the entire amount awarded as per the award dated 20-1-2015, would become enforceable. However, prior to enforcement, a window of 2 months would be granted to the appellants to make provision for compliance. On the expiry of the aforesaid period of 2 months, the entire decree would become executable forthwith.
9. M/s Good Living Infrastructure (P) Ltd. is bound by the unconditional undertaking submitted on affidavit before this Court. Any default by M/s Good Living Infrastructure (P) Ltd. would be treated as a breach of the undertaking submitted to this Court.
10. The present appeal is accordingly disposed of as per the aforesaid consent terms. Pending applications, if any, stand disposed of.