Chahat Gupta v. ANS INFRATECH PVT LTD

Judgment

1. The present appeal filed under Section 37(2)(b) of the Arbitration & Conciliation Act, 1996 (hereafter, “A&C Act”), read with Section 13 of the Commercial Courts Act, 2015, impugns order dated 14.11.2024 passed by the Arbitral Tribunal (hereafter, “AT”) allowing application filed under Section 17 of the A&C Act by the Respondent/Claimant.

2. Appellant No 1 is a Company of which Appellant Nos. 2 and 3 are shareholders, holding 99 % and 1% equity shares therein, respectively. Signature Not Verified Digitally Signed By:GAUTAM ASWAL Signing Date:10.03.2025 18:00:32 ARB. A. (COMM.) 67/2024 Page 1 of 13

3. Apparently, the disputes pertain to a Share Purchase Agreement dated

16.04.2024 (hereafter, „SPA‟) executed by the Appellants and Respondent, whereby Appellant Nos. 2 and 3 had agreed to sell their entire (100%) shareholding in the Appellant No.1 Company to the Respondent. 4 Appellant Nos. 2 and 3 terminated the SPA, before the consummation

of the sale of shares in favour of the Respondent, which was challenged by the Respondent by invoking arbitration. In the interim, the Respondent moved court, under Section 9 of the A&C Act, seeking interim protection restraining the Appellant Nos. 2 and 3 from selling their shares to any third party pending arbitration.

5. By way of an order dated 24.07.2024, passed in O.M.P. (I) Comm. No.233/2024, the court referred the disputes to the Arbitrator appointed by the court with the consent of the parties, and enabled them to approach the Learned Arbitrator under Section 17, to seek interim protection sought for from the court under Section 9 of the A&C Act.

6. Subsequently, the AT, vide impugned order dated 14.11.2024, restrained the Appellant Nos. 2 and 3 from alienating their shareholding in Appellant No.1, pending conclusion of arbitration.

8. Aggrieved by the AT‟s order, the present appeal has been preferred. In order to appreciate the circumstances under which the interim order was passed by the AT, it is necessary to examine the nature of transaction that the parties undertook under the SPA.

9. As the facts reveal, Appellant No 1 was in the process of acquisition of a residential plot measuring 20,071 square meters with a partially built building located at Gh-P4 situated at Sector 25, Jaypee Green Sports City, Signature Not Verified Digitally Signed By:GAUTAM ASWAL Signing Date:10.03.2025 18:00:32 ARB. A. (COMM.) 67/2024 Page 2 of 13 SDZ, Yamuna Express Industrial Development Authority Area, District Gautam Budh Nagar, Uttar Pradesh, owned by one M/s VGA Developers Pvt. Ltd, a company under liquidation, undertaken by NCLT, Delhi.

10. Official Liquidator (OL) appointed by the NCLT in the insolvency proceedings against the VGA Developers, took control of the assets of VGA, including the aforesaid Plot, and had put up the said Plot for sale and issued a Sale Notice against which the Appellant No.1 is trying to purchase the plot.

11. The Appellant No 1 deposited a sum of Rs 3,49,10,000/- with the OL, as Earnest Money Deposit (EMD). It appears, the total sale consideration payable for the plot was Rs 34,91,00,000/-.

12. Pending conclusion of sale, the Appellant No 1 agreed to sell the Plot to the Respondent, towards which the SPA was executed. In effect-and intent, the SPA was not a simpliciter agreement to sell shares, but an agreement to sell the Plot, styled as an SPA. By acquiring the entire shareholding from the Appellant No 2 and 3, the Respondent would acquire the only asset owned by Appellant No 1 i.e., the Plot.

13. The way the SPA was structured, it clearly indicated the intent of the parties. The total sale consideration of Rs. 40,66,90,000/-, payable under the SPA, was divided in three parts. Out of the said consideration a sum of Rs. 8,63,00,000/- was payable to the Appellants in the manner provided in Clause 1 (iii)(A) of the SPA towards the sale consideration for the purchase of shares and a sum of Rs. 31,41,90,000/-, alongwith any interest on the balance amount subject to a maximum Rs. 62 lacs, was payable towards the sale consideration for the Plot to the OL. Signature Not Verified Digitally Signed By:GAUTAM ASWAL Signing Date:10.03.2025 18:00:32 ARB. A. (COMM.) 67/2024 Page 3 of 13

14. The SPA further provided that the Respondent would pay the next instalment of the sale consideration for the share purchase, after the sale of Plot was approved by the NCLT in favour of Appellant no.1 and a demand letter was issued by the Official Liquidator („OL‟) for payment of balance 90% of the auction value. In other words, the amount to be paid by the Respondent was to be used for paying the balance 90% of the auction value of the Plot to the OL.

15. Appellants have alleged breach of Clause 1(iv)(d) and Clause 8 (iv) of the SPA by the Respondent, by failing to pay the balance sale consideration, which constrained the Appellant Nos. 2 and 3 to issue a termination notice dated 05.07.2024 consequent upon which they entered upon an agreement dated 15.07.2024 with one M/s Radha Rani Infra Projects for the sale of its shareholding in the Appellant No. 1.

16. Respondent have disputed the termination and denied having received any communication from the Appellants for making the balance payment. Respondent has claimed it has always been ready and willing to perform its part of the bargain in the SPA by paying the remaining sale consideration, both for the shares and the Plot.

17. Appellants disputed the Respondent‟s ability to seek specific performance of the SPA on the ground that SPA is a contingent contract. Appellant‟s obligation to transfer shares and the Plot was contingent upon it acquiring the Plot in its name with the confirmation of sale by the OL, which could not be achieved. In the absence of occurrence of contingent event, there cannot be a specific performance of the SPA.

18. It is further contended by the Appellant, that the SPA was Signature Not Verified Digitally Signed By:GAUTAM ASWAL Signing Date:10.03.2025 18:00:32 ARB. A. (COMM.) 67/2024 Page 4 of 13 determinable in nature hence not capable of being enforced by virtue of Section 41(e) of the Specific Relief Act. Appellants have drawn on the decisions in Indian Oil Corpn. Ltd. v. Amritsar Gas Service,1 and Rajasthan Breweries Ltd. v. Stroh Brewery Co.2 in support of this contention.

19. Learned counsel for the Respondent submits that the dispute arose as the Appellant had failed to take steps in proceedings before NCLT. In this context, reference is also made to proceedings dated 16.06.2023 before the NCLT vide which the NCLT had directed the OL to complete the liquidation process and the time for which was extended from 01.09.2022 to

01.09.2023. It is submitted that Appellant‟s failure to take steps had adverse impact on the interest component which is to be discharged only by Appellant as in terms of Clause 8 (4) of SPA, the Respondent‟s exposure is confined to maximum of Rs.62,00,000/-. It is also submitted that the claimant has always shown his readiness and willingness to complete the transaction subject to appellants bearing the interest burden. Insofar as Appellants entering into an agreement with M/s Radha Rani Infra Projects is concerned, it is contended that the same was only to overcome the present SPA as M/s Radha Rani Infra Projects is appellant‟s own concern. Further, the pay orders mentioned in the Agreement with M/s Radha Rani Infra Projects are even prior to the issuance of the termination notice in the present case.

20. Appellants have further contended that the Respondent has not sought specific performance of the SPA before the AT, which disentitles it from seeking interim relief pertaining to the SPA. Respondent has sought a 1 Indian Oil Corpn. Ltd. v. Amritsar Gas Service, reported as (1991) 1 SCC 533 Signature Not Verified Digitally Signed By:GAUTAM ASWAL Signing Date:10.03.2025 18:00:32 ARB. A. (COMM.) 67/2024 Page 5 of 13 declaration to declare the termination of SPA as null and void, which is not the same as seeking specific performance of the SPA. In support, the Appellant has relied upon Padhiyar Prahladji Chenaji v. Maniben Jagmalbhai.3

21. Appellant has contended that the AT erred in ignoring the fact that the SPA being a contingent contract, could not have been enforced by way of an injunctive relief staying the termination of the SPA by the Respondent. By passing the impugned order, AT failed to follow the parameters to be kept in mind while hearing an application for grant of injunctions, as enumerated in Colgate Palmolive (India) Ltd. v. Hindustan Lever Ltd.4

22. I have heard learned counsel for the parties and gone through the records.

23. This Court while dealing with an appeal under Section 37(2) of the A&C Act, especially one arising from discretionary orders passed at an interlocutory stage, has to be circumspect in its approach, keeping in view the principle of least intervention. The A&C Act is intended to provide an alternative avenue for dispute resolution and any interpretation of the act which tends to multiply disputes must be avoided. An appellate court will ordinarily not interfere with the discretion exercised by the AT in the first instance, unless the said discretion is proved to have been exercised arbitrarily, capriciously, perversely or ignoring the settled principles of law regulating grant or refusal of interlocutory injunctions. It is also pertinent to note that Section 5 of the A&C Act crystallizes the legislative philosophy