joint venture agreement

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Arbitration and Conciliation Act, 1996: Part I – Applicability of – Held: Would apply to all arbitrations including international commercial arbitrations and to all proceedings relating thereto – Where such arbitration is held in India, the provisions would compulsorily apply – Would also apply in case of international commercial arbitrations held out of India, unless parties by agreement, express or implied, exclude all or any of its provisions – International Commercial Arbitration. ss.34 and 48 – Arbitral award – Foreign award – Setting aside of – Right of judgment-debtor – Held: Judgment-debtor cannot be deprived of his right to invoke the public policy of India to set aside the award passed by a foreign court – Respondent no.1 in enforcing award in US Court instead of Indian court was motivated by intention of evading the legal and regulatory scrutiny to which such transaction would be subjected to had it been enforced in India – Intention of respondent no.1 was to avoid enforcement of award under s.48 of the Act which would have given the appellant benefit of the public policy Rule and for avoiding jurisdiction of Courts of India though award had an intimate and close nexus in India – Hence suit for declaration filed in Indian court to set aside the award passed by the foreign court maintainable. The appellant-company and respondent No.1 a registered company having its office in India entered into a Joint Venture Agreement to constitute respondent no.2 company (SVES) in which both the appellant and respondent no.1 had 50% equity shareholding. Another agreement was executed between the same parties on the same day being the Shareholders Agreement (SHA) which contained arbitration clause. Disputes arose between the parties. Respondent No.1 exercised its option to purchase the appellant-company’s shares in SVES at its book value on the allegation that the appellant had committed an event of default under the SHA owing to several venture companies becoming insolvent. Respondent No.1 filed a request for arbitration with the London Court of International Arbitration whereby a sole arbitrator was appointed. The sole arbitrator passed an award directing the appellant company to transfer the shares to respondent No.1. Respondent No.1 filed a petition for seeking enforcement of the award before the Eastern District Court of Michigan (US Court). The appellant entered appearance to defend this proceeding before the US Court by filing a cross petition. Thereafter, the appellant filed a suit in Indian Court for declaration to set aside the award and permanent injunction on the transfer of shares under the Award. The District Court passed an ad-interim ex parte order of injunction, restraining respondent No.1 from effecting the transfer of shares. Respondent no.1 appealed before the High Court. The High Court admitted the appeal and directed interim suspension of the order of the District Court but made it clear that respondent No.1 would not effect the transfer of shares until further orders. In response to the summons, respondent No.1 appeared in the Court and filed a petition under Order VII Rule 11 CPC for rejection of the plaint. The trial Court, allowed the said application and rejected the plaint of the appellant. The High Court dismissed the appeal holding that the award cannot be challenged even if it is against public policy and in contravention of statutory provisions. Hence the appeal. -Allowing the appeal, the Court HELD: 1. The provisions of Part I of the Arbitration and Conciliation Act , 1996 would apply to all arbitrations including international commercial arbitrations and to all proceedings relating thereto. Where such arbitration is held in India, the provisions of Part-I would compulsorily apply and parties are free to deviate to the extent permitted by the provisions of Part-I. Even in the case of international commercial arbitrations held out of India provisions of Part-I would apply unless the parties by agreement, express or implied, exclude all or any of its provisions. Such an interpretation does not lead to any conflict between any of the provisions of the Act and there is no lacuna as such. [Para 17] [521-E, F] Bhatia International v. Bulk Trading S.A. & Anr. (2002) 4 SCC 105 – relied on. Pratabmull Rameshwar v. K.C. Sethia Ltd. AIR 1960 Calcutta 702; Nirma Ltd. v. Lurgi Energie Und Entsorgung GMBH, Germany AIR 2003 Gujarat 145; Bombay Gas Company Limited v. Mark Victor Mascarenhas & Ors. 1998 1 LJ 977; Inventa Fischer Gmbh & Co., K.G. v. Polygenta Technologies Ltd. 2005 (2) Bom C.R. 364; Trusuns Chemical Industry Ltd. v. Tata International Ltd. AIR 2004 Gujarat. 274; Bharat Aluminium Co. Ltd. v. Kaiser Aluminium Technical Services AIR 2005 Chhatisgarh 21; Bulk Trading SA v. Dalmia Cement (Bharat) Limited (2006) 1 Arb.LR 38(Delhi) – referred to. International Standard Electric Corp. v. Bridas Sociedad nonima Petrolera, Industrial Y Commercial 745 F.supp.172; M & C Corporation v. ERWIN BEHR GmbH & Co., KG, a foreign corporation 87 F.3d 844; Yusuf Ahmed Alghanim & Sons v. Toys “R” US. INC. Thr. (HK) Ltd. 126 F.3d 15; Karaha Bodas Co. L.L.C. v. Perusahaan Pertambangan Minyakdan Gas Bumi Negara 364 F.3d 274; C v. D (2007) EWHC 1541- referred to. 2. To apply s.34 to foreign international awards would not be inconsistent with s.48 of the Act, or any other provision of Part II as a situation may arise, where, even in respect of properties situate in India and where an award would be invalid if opposed to public policy of India, merely because the judgment-debtor resides abroad, the award can be enforced against properties in India through personal compliance of the judgment-debtor and by holding out the threat of contempt as is being sought to be done in the present case. In such an event, the judgment-debtor cannot be deprived of his right under s.34 to invoke the public policy of India, to set aside the award. The public policy of India includes – (a) the fundamental policy of India; or (b) the interests of India; or (c) justice or morality; or (d) in addition, if it is patently illegal. This extended definition of public policy can be by-passed by taking the award to a foreign country for enforcement. Respondent No.1, in enforcing the Award in the US District Court instead of Indian Courts was motivated by the intention of evading the legal and regulatory scrutiny to which this transaction would have been subject to had it been enforced in India. The effort of respondent No.1 was to avoid enforcement of the Award under s.48 of the 1996 Act which would have given the appellant the benefit of the Indian Public Policy rule and for avoiding the jurisdiction of the Courts in India though the award had an intimate and close nexus to India in view of the fact that, (a) the company was situated in India; (b) the transfer of the `ownership interests’ shall be made in India under the laws of India ; (c) all the steps necessary have to be taken in India before the ownership interests stood transferred. If, therefore, respondent No.1 was not prepared to enforce the Award in spite of this intimate and close nexus to India and its laws, the appellant would certainly not be deprived of the right to challenge the award in Indian Courts. [Paras 19-21] [522-G, H; 523-A, B; 524-B-F] Oil & Natural Gas Corporation Ltd. v. Saw Pipes Ltd. (2003) 5 SCC 705 – relied on. 3. Clause (c) of Section 11.05 of the Shareholders Agreement declared that, notwithstanding that the proper law or the governing law of the contract is the law of the State of Michigan, their shareholders would at all times act in accordance with the Companies Act and other applicable Acts/Rules being in force in India at any time. The said section excluded respondent No.1 approaching the US Courts in regard to the enforcement of the Award. The non-obstante clause would override the entirety of the agreement including sub-section (b) which deals with settlement of the dispute by arbitration and therefore s.3 would apply to the enforcement of the award. Necessarily, enforcement has to be in India, as declared by this very section which overrides every other section in the Shareholders Agreement. Respondent No.1, therefore, totally violated the agreement between the parties by seeking enforcement of the transfer of the shares in the Indian company by approaching the District Courts in the United States. [Paras 26, 27] [528-A-G] Sameer Barar and Ors. v. Ratan Bhushan Jain & Ors. (2006) 1 SCC 419; Ajay Bansal v. Anup Mehta & Ors. (2007) 2 SCC 275 – referred to. 4. The specific clause in the Shareholders Agreement (SHA), conduct of the parties have not been properly adverted to and considered by the trial Court as well as the High Court. Accordingly, both the orders passed by the City Civil Court and of the High Court are set aside. [Para 28] [528-H; 529-A] 5. It is for the concerned court to decide the issue on merits and this Court has not expressed anything on the same. If it is found that the Court in which the appellant has filed a petition challenging the Award is not competent and having jurisdiction, the same shall be transferred to the appropriate Court. Since from the inception of ordering notice in the special leave petition both parties were directed to maintain status quo with regard to transfer of shares in issue, the same shall be maintained till the disposal of the suit. Considering the nature of dispute which relates to an arbitration Award, the concerned Court is requested to dispose of the suit on merits within a period of six months from the receipt of copy of this Judgment. [Paras 22, 29] [525-A; 529-B, C, D] K.K. Venugopal, Vinay Kumar Misra, Rajat Tamni and B. Parthasarathi for the Appellant. R.F. Nariman, Subhash Chandra Birla and Subrat Birla for the Respondents. -2008 AIR 1061, 2008(1 )SCR501 , 2008(4 )SCC190 , 2008(1 )SCALE214 , 2008(1 )JT468

CASE NO.: Appeal (civil) 309 of 2008 PETITIONER:Venture Global Engineering RESPONDENT:Satyam Computer Services Ltd. & Anr. DATE OF JUDGMENT: 10/01/2008 BENCH:Tarun Chatterjee & P. Sathasivam JUDGMENT:JUDGMENT (Arising out of SLP (C) No.8491 OF 2007) P. Sathasivam, J.1) Leave granted. 2) Appellant – Venture Global Engineering (in short VGE), a company incorporated in the United States … Continue reading

Contract Act, 1872 – s. 230 – Booking of car pursuant to advertisement by Car manufacturing company – On non-allotment of car, refund of booking amount sought – On failure thereof, claim before MRTP Commission – Dealer of the company making application that it was not liable to refund being only an agent of the Company – Dismissal of application – On appeal held: Agent is not liable for the acts of a disclosed principal subject to contract to the contrary – On facts, no contract to the contrary pleaded – Hence, dealer company not liable to refund the booking amount – Monopolies and Restrictive Trade Practices Act, 1969 – s. 12-B. An international car manufacturing company entered into agreement for manufacture and sale of a particular model of a car with an Indian Car manufacturing company. Appellant company was the dealer/agent of the Indian Company. In pursuance of an advertisement by the contracting companies, respondent No.1 applied for allotment of a car with the booking amount. On non- delivery of the car, respondent No. 1 sough refund of the amount. On failure thereof, he filed a petition u/s. 12-B of Monopolies and Restrictive Trade Practices Act, 1969. Appellant-company filed application before MRTP Commission on the plea that, it being only an agent/dealer was not liable to refund the amount. Application was dismissed. Hence the present appeal. =Allowing the appeal, the Court HELD: Section 230 of the Contract Act categorically makes it clear that an agent is not liable for the acts of a disclosed principal, subject to a contract of the contrary. No such contract to the contrary has been pleaded. Appellant-company was dealer of the Indian Company, with whom the International Company had entered into an agreement. The appellant had nothing to do with the advertisement, in response to which the individuals had applied for the said car. The cheque submitted by the individual person, whoever was interested in purchasing the said car was given in the name of the Indian Car manufacturing Company and the appellant Company had no other role except to send the same to the Indian Company. [Paras 3 and 4] [48-A; 48-E; 47-C; 47-H] Marine Contained Services South Pvt. Ltd. vs. Go Go Garments AIR 1999 (SC) 80 – relied on. Case Law Reference : AIR 1999 (SC) 80 Relied on. Para 4 Irshad Ahmad for the Appellant. P.N. Puri, Dhiraj, Sanjeev Sharma and Reeta Dewan Puri for the Respondent. =, , , 2008(14 )SCALE226 , 2008(12 )JT307

REPORTABLE IN THE SUPREME COURT OF INDIA CIVIL APPELLATE JURISDICTION CIVIL APPEAL NO. OF 2008 (Arising out of SLP (C) No.19515 of 2004) Prem Nath Motors Ltd. ….Appellant Versus Anurag Mittal ….Respondent JUDGMENT Dr. ARIJIT PASAYAT, J. 1. Leave granted. 2. Challenge in this appeal is to the order passed by Monopolies Restrictive Trade Practices … Continue reading

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