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Lindsay International Private Limited & Others v/s Laxmi Niwas Mittal & Others

Company & Directors' Information:- S P MITTAL AND CO PVT LTD [Strike Off] CIN = U45202PB1974PTC003402

Company & Directors' Information:- MITTAL PRIVATE LIMITED [Strike Off] CIN = U18101OR1992PTC003005

Company & Directors' Information:- INTERNATIONAL CO PRIVATE LIMITED [Strike Off] CIN = U51109UR1935PTC000663

    GA No. 820 of 2020 & CS No. 2 of 2017

    Decided On, 05 June 2020

    At, High Court of Judicature at Calcutta


    For the Appellant: S.N. Mookherjee, Sr. Advcate, Shib Ratan Kakrania, Rudraman Bose, Tanuj Kakrania, Advocates. For the Respondents: Siddhartha Mitra, Sr. Advocate, Sakabda Roy, Surabhi Binani, Advocates.

Judgment Text

1. The instant application has been filed by the plaintiff in the suit seeking to restrain defendant no. 3 from taking any further step that will amount to commencement of arbitration proceedings on the basis of the arbitration agreement contained in the Share Holders' Agreement dated 21st January, 2010 (Share Holders' Agreement) to be read with along with an amendment thereto dated 29th February, 2016.

2. A Share Holders' Agreement was entered into by the plaintiff nos. 1,2 and 3 inter alia with the defendant no. 3. Prima facie it appears to this Court that the person in control and management of the defendant nos. 2 to 32 is the defendant no.1.

3. Disputes and differences arose between the parties in respect of their rights and liabilities under the aforesaid Share Holders' Agreement.

4. Invoking the arbitration clause a proceeding under Section 9 of the Arbitration and Conciliation Act was initiated by the defendants before this Court. In the said proceeding the plaintiff contended that the arbitration agreement should be terminated and is no longer valid. Mr. Mitra, learned Senior Counsel appearing for the defendant no. 3, however, also points out some portions of the affidavit-in-opposition to the said application under Section 9 where the plaintiffs asserted the arbitration agreement itself.

5. Thereafter the plaintiffs filed the instant suit on 5th January, 2017, inter alia, praying for a decree for specific performance of the said shareholders' agreement and other reliefs under the Specific Relief Act, 1963.

6. The defendant no. 3 in the suit filed a written statement some time in April, 2017. In the written statement at paragraph 4, the defendants contended as follows:

"4. The Plaintiffs and the Defendant No.3 are parties to a Shareholders' Agreement dated January 21, 2010 ("SHA") read with Amendment No.1 dated February 29, 2016. The SHA stands terminated prior to institution of the present Suit by the plaintiffs. The said SHA contains an arbitration clause at Clause 34. All disputes between the Plaintiffs and the Defendant No. 3 which arise out, connected to and in relation to the terms of the SHA, have to be referred to arbitration by the party claiming the same. Hence, valid legal proceedings for adjudication of any dispute in terms of the SHA, including any dispute with regard to its termination (if the Plaintiffs so elect to challenge the same), can only be adjudicated before the appropriate arbitral forum constituted in terms of Clause 34. The Plaintiffs have at the time of filing of this Written Statement chosen not to dispute the termination of the SHA before an appropriate arbitral tribunal constituted in accordance with Clause 34 of the SHA. The Plaintiffs having accepted the termination of the SHA, no cause of action or decree for specific performance of the SHA can be a subject of adjudication in this Suit. The matters raised in this Suit pertains to terms/agreement/contracts which do not exist. The Defendant No.3 is filing the Written Statement in this Suit, reserving its right in terms of Clause 34 of the SHA, in the event the Plaintiff elects to dispute in accordance with law, the termination of the SHA. In the event, the Plaintiffs seek any adjudication on any matter claiming any relief in relation to SHA in this Suit proceedings, then the same may be deemed to be objected to by the Defendant No.3 in view of the arbitration clause in the SHA read with the Arbitration and Conciliation Act, 1996 ("Arbitration Act").

7. The suit is pending before this Court.

8. Some time in March, 2020 the defendant no. 3 made a request to the International Court of Arbitration for reference of a number of disputes between the parties that is admittedly subject matter of the instant suit and sent a communication to the plaintiffs herein enclosing thereof the substance thereof.

9. The plaintiffs in response to the same sought time on three occasions from the ICC to give a suitable response to the request of appointment of arbitration and such time was granted. The principal ground for extension is the current pandemic and lack of access to appropriate legal advice.

10. The instant application for stay of the arbitration proceedings has been filed on 19th May, 2020. The main contentions of the plaintiffs as put forward by Mr. S.N. Mookherjee, Sr. Advocate are as follows:

a) since after filing of the original application under Section 9 for settlement of disputes under the shareholders' agreement, the same was not taken to its logical conclusion by the defendants and hence abandoned.

b) The defendant by filing a written statement in March, 2017 has in fact waived all its rights for having the disputes under the shareholders' agreement decided by way of arbitration.

c) Mentioning at paragraph 4 of the written statement of the existence of the arbitration agreement does not constitute compliance of mandate under Section 8 of the Arbitration and Conciliation Act, 1996 as amended.

d) The proceedings before the ICC initiated by the defendants are, therefore, without jurisdiction and are required to be stayed.

11. Learned Senior Counsel for the defendant no. 3, Mr. Siddhartha Mitra would contend before this Court that

a) a plain reading of paragraph 4 of the written statement would indicate that not only has the arbitration clause under the Share Holders' Agreement been highlighted and relied upon, but something more than a deemed request has been made.

b) There is substantial compliance of Section 8 of the Arbitration and Conciliation Act and hence the defendant no. 3 has not waived its rights of arbitration under the said shareholders' agreement.

c) It is further argued that by reference to a decision of a Single Bench of Delhi High Court reported in 2018 SCC Online 6573 that the paragraph of the written statement set out hereinabove constitutes compliance of Section 8 of the Act.

d) By reason of seeking three several extensions before the ICC to respond to the request for arbitration, the plaintiffs have submitted to the jurisdiction of the arbitration process of the ICC and cannot be allowed to resile therefrom.

e) That Section 16 of the Arbitration and Conciliation Act mandates that any dispute as regards the authority jurisdiction of the Arbitral Tribunal must be raised essentially before the Arbitral Tribunal and not before a civil forum.

12. I have carefully considered the rival contentions of the partie

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s for the purpose of the prayers made at the ad interim stage. The issues require appropriate adjudication and hence the application being GA No. 820 of 2020 is admitted. The proceedings before the ICC which arose pursuant to the request made by the defendants for reference to arbitration under the Share Holders' Agreement dated 21st January, 2010 shall remain stayed for a period of four weeks from date. 13. Let affidavit-in-opposition be filed by the defendant no. 3 within a period of one week from date; reply, thereto, if any, within one week thereafter. Liberty to mention since the issue has substantial urgency and huge commercial stakes are involved. 14. Parties are to act on a website copy of this order.