Case Note & Summary
The present appeal arose from a challenge to an ICC arbitral award with its seat in New Delhi. The dispute originated from a Shareholders Agreement (SHA) and Share Subscription and Purchase Agreement (SSPA) dated 21.03.2008 between the Appellants (promoters) and Respondents No.1 and 2 for acquiring 50% shareholding in Respondent No.3 for developing a Special Economic Zone in NOIDA. The agreements were terminated, and the parties entered into Restated Agreements (RSHA and RSSPA) dated 02.07.2009, under which Respondents No.1 and 2 contributed Rs.45 crore by 17.12.2009. The Appellants terminated these agreements on the same day. Arbitration was invoked, and the ICC Tribunal (2:1) on 20.01.2015 allowed the claim, awarding Rs.45,00,27,747/- with simple interest at 18% p.a. from 31.10.2011, further interest at 15% p.a., and costs. The Appellants filed objections under Section 34 of the Arbitration and Conciliation Act, 1996 before the Delhi High Court, which were rejected by the Single Judge on 09.02.2017, and the appeal under Section 37 was dismissed by the Division Bench on 08.05.2017. The Supreme Court granted leave and heard the matter. During proceedings, the Court noted that the Appellants had deposited Rs.20 crore, part of which was released to Respondents. A buyer, M/s Good Living Infrastructure Pvt. Ltd. (Bhutani Group), offered Rs.99,44,55,000/- for the project land. The Court rejected the challenge to the award but modified the interest component by consent, directing a total payment of Rs.107.50 crores as full and final settlement. The payment was structured: Rs.21.53 crores already received, Rs.85.97 crores balance payable through sale proceeds and direct payment. The Bhutani Group agreed to pay Rs.99,44,55,000/- for the shares, out of which Rs.42,64,75,477/- would go to NOIDA for dues, and the balance deposited in Court for Respondents. The Appellants were to pay the remaining Rs.29,17,20,477/- within 3 months. Injunctions on certain properties were lifted to facilitate fund raising. An affidavit of undertaking was filed by Appellant No.1.
Headnote
A) Arbitration Law - Challenge to Arbitral Award under Section 37 - Scope of Interference - The Supreme Court rejected the challenge to the ICC award, holding that the findings of the arbitral tribunal were consistent with the terms of the agreement and that the Single Judge and Division Bench of the Delhi High Court had correctly dismissed the objections under Sections 34 and 37 of the Arbitration and Conciliation Act, 1996. (Paras 1-4) B) Arbitration Law - Modification of Award by Consent - Interest and Penal Interest - The Court, by consent of parties, modified the award regarding interest and penal interest, directing a total payment of Rs.107.50 crores as full and final settlement, with a structured payment plan involving sale of project land and deposit of proceeds. (Paras 4-6)
Issue of Consideration
Whether the challenge to the ICC arbitral award under Section 37 of the Arbitration and Conciliation Act, 1996 should be upheld.
Final Decision
The Supreme Court rejected the challenge to the ICC award. By consent of parties, the award was modified regarding interest and penal interest: Appellants to pay Rs.107.50 crores as full and final settlement. Payment to be made through sale of project land to Bhutani Group for Rs.99,44,55,000/-, with Rs.42,64,75,477/- paid to NOIDA and balance deposited in Court. Appellants to pay remaining Rs.29,17,20,477/- within 3 months. Injunctions on certain properties lifted.
Law Points
- Section 37 of the Arbitration and Conciliation Act
- 1996
- Section 34 of the Arbitration and Conciliation Act
- Scope of challenge to arbitral award under Section 37
- Modification of award by consent
