Arbitration; Raffles Design International India Pvt. Ltd. Vs. Educomp Professional Education Ltd. [Delhi High Court, 07-10-2016]

Arbitration and Conciliation Act, 1996 – Section 27 – A person guilty of not following the interim orders of the arbitral proceedings held outside India cannot be proceeded for the contempt under Section 27 of the Act.


IN THE HIGH COURT OF DELHI AT NEW DELHI

CORAM HON’BLE MR JUSTICE VIBHU BAKHRU

Judgment delivered on: 07.10.2016

O.M.P.(I) (COMM.) 23/2015 & CCP(O) 59/2016, IA Nos.25949/2015 & 2179/2016

RAFFLES DESIGN INTERNATIONAL INDIA PRIVATE LIMITED & ANR. ….. Petitioners

Versus

EDUCOMP PROFESSIONAL EDUCATION LIMITED &ORS. ….. Respondents

Advocates who appeared in this case: For the Petitioners : Mr Abhinav Vashist and Mr Arun Kathpalia, Senior Advocates with Mr Prashant Mishra, Mr Piyush Prasad, Mr Shalin Arthwan and Ms Jamal Joy and Mr Samaksh Goyal. For the Respondents : Mr Suhail Dutt, Senior Advocate with Mr M.A. Niyazi, Mr Achint Singh Gyani and Ms Prabjot Kaur Chhabra. Mr Sunil Mund, Mr Sanjiv Joshi and Ms Badeshree for R-3.

JUDGMENT

VIBHU BAKHRU, J

1. The petitioners have filed the present petition under

Section 9 of the Arbitration and Conciliation Act, 1996

(hereinafter the ‘Act’), inter alia, praying as under:

“(a) Direct that the Respondents through their directors (including but not limited to Mr Shantanu Prakash), officers, agents, representatives and employees (including but not limited to the Respondent No.3) to cease and desist forthwith from taking any actions that have the effect of depriving the Petitioners and their representatives of the exercise of their rights pursuant to clause 3.1.2 of the Share Purchase Agreement dated 12 March 2015 viz. to have an absolute say on the hiring and dismissal of employees of the Society;

(b) Direct that the Respondents through their directors (including but not limited to Mr Shantanu Prakash), officers, agents, representatives and employees (including but not limited to the Respondent No.3) cease and desist from interfering with any aspect of the hiring and dismissal rights of the Petitioners pursuant to clause 3.1.2 of the Share Purchase Agreement dated 12 March 2015, including interfering in any manner whatsoever with prompt payments to employees hired and/or dismissed by the Society.

(c) Direct the Respondent No. 3 (or any other person appointed in his capacity) to forthwith take steps to effect the payment of salaries to Dr. C.S. Sharma and/or take necessary steps to effect prompt payments of salaries to any other employees hired by the Society.

(d) Restrain the Respondents No. 1 and 2 including through their affiliates, related parties, directors, officers, agents, representatives and employees (including but not limited to the Respondent No.3) from taking any steps whatsoever in contravention of clause 3.1.2 of the Share Purchase Agreement dated 12 March 2015;”

2. At the outset, the respondents have taken a preliminary objection as to the maintainability of the present petition. The respondents contend that the present petition under Section 9 of the Act is not maintainable principally on the ground that Part-I of the Act is inapplicable to arbitral proceedings held outside India – in this case Singapore – and the parties have impliedly agreed to exclude the applicability of Section 9 of the Act. The respondents also contend that the

Arbitration and Conciliation (Amendment) Act, 2015

(hereafter ‗the Amendment Act’) is inapplicable to the present proceedings as the arbitral proceedings had commenced prior to 23.10.2015. The petitioners contend otherwise.

3. At this stage, the limited controversy that arises for consideration is whether the petition filed by the petitioners is maintainable.

4. Briefly stated, the facts necessary to address the aforesaid controversy are as under:-

4.1 Raffles Education Corporation Limited (hereafter ‘Raffles’), being parent company of the petitioners’ and Educomp Solutions Limited (hereafter ‘Educomp’), being parent company of the respondents’ entered into a Master Joint Venture Agreement(Master JVA) dated 16.05.2008. Pursuant to the Master JVA, Educomp Raffles Higher Education Limited(hereafter ‘ERHEL’) was incorporated as a joint venture company for providing educational courses in management and designing at various locations in India. Shares of ERHEL were held by Raffles and Educomp in equal proportion.

4.2 ERHEL took control over the management of a Society namely, Jai Radha Raman Education Society (hereafter ‘the Society’) to establish a college in NOIDA (hereafter the ‘Noida College’). Subsequently, Raffles increased its stake in ERHEL to 58.18%.

4.3 On 12.03.2015, the petitioners and the respondents entered into a Share Purchase Agreement (hereafter ‘the Agreement’) whereby, on fulfilling the conditions set out in the Agreement, shares of respondents in ERHEL were to be acquired by the Petitioners. The relevant clause of the Agreement reads as under:

“3.1.2. On deposit of the 10% of the Purchase Price by the Purchasers to the Escrow Agent referred to in clause 3.1.1, the Sellers shall allow the Purchasers (i) to take control of the Company and JRRES, limited to the extent that the Purchasers shall have absolute say on the hiring and dismissal of employees (including existing employees); and (ii) to take charge of JRRES’ application to the Government of Uttar Pradesh, India for becoming a deemed university. For clarification, upon the Execution Date, funding of the operations of the Company, JRRES, MIDL and MSB shall be the exclusive responsibility of the Purchasers, details of which shall be shared with the Sellers from time to time till closing. In the event the Closing does not take place as envisaged in this Agreement and this Agreement is terminated, the Sellers shall within 30 (Thirty) days, introduce an amount equivalent to the total funding contributed by the Purchasers in JRRES for the operations of JRRES in this period as working capital.”

4.4 Certain disputes arose between the parties in relation to the Agreement. Clause 15 of the Agreement provides that the Agreement would be governed and construed in accordance with the laws of Singapore. Further the Arbitration would be held in Singapore under the Arbitration Rules of the Singapore International Arbitration Centre (hereafter ‘SIAC Rules’).

4.5 On 15.09.2015, the petitioners invoked the arbitration clause by filing a Notice of Arbitration with the Singapore International Arbitration Centre (hereafter ‘SIAC’) with a copy thereof to the respondents. Pursuant to Rule 26.2 of the SIAC Rules, a request for appointment of an Emergency Arbitrator was made by the petitioners to SIAC on 25.09.2015, which was opposed by the respondents. The respondents by a notice dated 25.09.2015, terminated the Agreement alleging that Petitioners were in repudiatory breach of the Agreement. Thereafter, on 28.09.2015, the Vice President of the Court of Arbitration, SIAC appointed Mr Michael Lee as the Emergency Arbitrator to consider the Emergency Application filed by the claimants (petitioners herein).

4.6 The Emergency Arbitrator passed an Interim Emergency Award dated 06.10.2015 (hereafter ‘ the Emergency Award’) wherein the Interim relief sought by the claimants was granted and respondents were restrained from taking any action that deprived the rights of the claimants in the Agreement in respect of (a) hiring and dismissal of employees of the Society; (b) functioning and management of the society. The respondents were also restrained from instigating the terminated employees of the Society, including Professor Mahesh Gandhi, to act contrary to their respective termination letters and/or to indulge in any forcible entry into the premises of the Society or the Noida College.

4.7 Thereafter, the petitioners filed an application being Case No 929/2015 before the High Court of the Republic of Singapore (hereafter ‘Singapore High Court’) under Section 12 of the International Arbitration Act (hereafter ‘IAA’) seeking enforcement of the Emergency Award against respondent no 2. It is stated by the respondents that petitioners have secured an enforcement order dated 04.02.2016 against respondent no 2.

4.8 The respondents filed an application under paragraph 7 of schedule 1 of SIAC Rules praying for setting aside of the Emergency Award. However, on 14.01.2016, a consent order was passed by the sole arbitrator, Mr Andrew Jeffries, wherein the operative first two paragraphs of the Emergency Award were reiterated but the parties also agreed that the said paragraphs of the Emergency award: (1) are negative or prohibitory in nature and not positive or mandatory in nature; and (2) do not require any member of the Society to act in breach of their fiduciary duty to the Society.

5. It is stated by the petitioners that despite passing of the Emergency Award, the respondents are acting in contravention of the rights of the petitioners under the Agreement inasmuch as respondents have refused to accept the appointment of Dr C.S Sharma, who was appointed by the petitioners to replace Professor Gandhi and further, respondent no 3 has also refused to sign the cheques for payment of salary to Dr Sharma. It is further stated the respondents are illegally and malafidely disrupting the functioning of the Society and the Noida College. It is under these circumstances, the petitioners have filed the present petition under Section 9 of the Act.