C & E Limited and Others v. Feather Touch Limited and Others

Learned senior counsel for the appellants controverts the reliance of the respondents on the Achutan Report of the Take Over Regulations Advisory Committee dated July 29, 2010, in terms of which 25% shareholding by the promoter is enough for a deemed presumption of positive control. Rule 13 of the Competition (Criteria for Exemption of Combination) of Competition Rules has also been cited by the respondents to show that an affiliate is an enterprise having 10% or more of the shareholding or voting rights of the enterprise. The appellants argue that reliance on the said documents is misplaced, since the said provisions concern special legislations in the field of acquisition of shares of a target company and combinations to prevent appreciable adverse effects to competition in the relevant market, respectively.

It is contended by the appellants that the Notification dated July 17, 2008 issued by the Petroleum and Natural Gas Regulatory Board, also relied on by the respondents, is also not relevant, as the definition of „affiliate‟ therein is in a completely different context. Thus, it is argued that even if the 2024 IBA Guidelines were to be made applicable, it cannot be said that BDB has a controlling influence, let alone controlling interest, over M/s. SSSMIL, for which the learned Arbitrator 9 appeared on eleven occasions in an unrelated matter during a hiatus between the conclusion of the hearing in the arbitral proceeding and the delivery of the award.

Learned senior counsel appearing for the appellants further submits that BDB was not an affiliate of M/s. SSSMIL, since an affiliate is to be considered qua a party to the arbitration agreement. The Entries of the Fifth and Seventh Schedules of the 1996 Act, it is contended, support such submission. Thus, it is submitted that it was not proper for the learned Single Judge to conclude that BDB, either as an individual or through his group of family members, would qualify as an affiliate. In fact, the question was wrongly formulated, as an individual can have no affiliate. Further, it is nobody‟s case that M/s. SSSMIL controls BDB or any of his family members are controlled by M/s. SSSMIL. Thus, BDB cannot be an affiliate of M/s. SSSMIL.

It is also argued that C & E Limited and M/s. SSSMIL are not affiliates, since there is no cross-holding of shares between the two.

The respondents seek to refer to factual documents in a bid to establish control of BDB and C & E Limited over M/s. SSSMIL and to demonstrate how the two companies operate within an alleged group of companies. However, it is argued, such ground has not been substantiated by the respondents.

Learned senior counsel for the appellants then argues that Entry 2 of the Fifth and the Seventh Schedules cannot apply in any event since the Arbitrator did not currently represent an affiliate. „Current 10 representation‟ means a continuous engagement to act for a party or its affiliate, and not appearance in one matter. „Legal representation‟ is not covered by Entry 2, as Entry 11 of the Fifth and Seventh Schedules of the 1996 Act relates to the same. It is submitted that „legal representation‟ is confined to only a party and not its affiliate. As such, Entry 2 cannot cover a case of an arbitrator representing an affiliate in a litigation, which is already covered by Entry 11.

Relying on HRD Corporation (supra)1, the appellants contend that the term “currently represents” has to connote some degree of regularity. It was held in the said judgment that the term “currently” requires something more, which is an element of being connected in an advisory capacity with the party.

Entry 8 of the Seventh Schedule is also not applicable, as the same deals with a scenario where the Arbitrator „regularly‟ advised either the appointing party or an affiliate thereof, none of which applies here. Moreover, this Entry envisages a scenario where the appointment of the Arbitrator is made consensually by the parties. In the present case, however, the learned Arbitrator was appointed pursuant to an order of the Court.

Again, Entry 15 of the Fifth and Seventh Schedules cannot apply, because it is nobody‟s case that any advice or opinion had been given by the Arbitrator “in the dispute”. 1 HRD Corporation (Marcus Oil and Chemical Division). v. GAIL (India) Limited (formerly Gas Authority of India Limited), reported at (2018) 12 SCC 471 11

Entry 20 of the Fifth Schedule is not attracted as it envisages a situation where the Arbitrator had previously advised an affiliate of a party making the appointment in an unrelated matter within the past three years but there is no ongoing relationship. The Arbitrator, in the present case, had no past relationship with the alleged affiliate (M/s. SSSMIL) to invoke the said Entry.

The judgments cited by the respondents regarding the continuous duty of disclosure of the Arbitrator are also not applicable, since the impartiality of Arbitrators in a curated panel by public sector undertakings or in private-public contracts, as opposed to the present case, was considered in such cases.

Moving on to his next contention, learned senior counsel for the appellants submits that several findings of the learned Single Judge in the impugned judgment under Section 34 of the 1996 Act are without any basis at all.

By way of example, the learned Single Judge held that BDB has overall control and management of M/s. SSSMIL and that the Managers, Directors and employees are accustomed to act as per the sole wish and dictate of BDB. It was further held that BDB would have attended most of the conferences at the time of the appearance of the Arbitrator for M/s. SSSMIL in connection with APD No. 252 of 2015.

All the above findings, it is submitted, are without any basis whatsoever. 12

The learned Single Judge, after having held that he was hesitant to hold that M/s. SSSMIL is an affiliate of C & E, went on to observe that an individual, group of persons or a family in control and management of a company can qualify as an affiliate. Such finding, it is argued, is contrary to the statutory framework.

Learned senior counsel appearing for the appellants next submits that the respondents cannot rely on documents which were not referred to or relied on upon by the learned Single Judge. A Convenience Compilation, comprised of 77 volumes of paper books, were filed before the learned Single Judge, as recorded in the order dated March 14,

2023. Extracts of some affidavits/petitions/evidence were furnished to establish that BDB controlled M/s. SSSMIL, formerly known as Chemcrown India Private Limited. These documents, however, were not part of the petitions under Section 34 of the 1996 Act. Thus, those cannot be looked into by this Court. Moreover, neither such affidavits/petitions nor the evidence was relied on by the respondents in the Section 34 petitions to constitute grounds of challenge to the award.

Learned senior counsel relies on Mica Export Promotion Council and Others v. G.C.L. Joneja & Ors., reported at 72 C.W.N. 117, for the proposition that parties cannot rely on materials which were not placed in the body of petitions or applications.

Thus, it is argued that the Arbitrator‟s conduct does not fall foul of the mandate under Section 12 of the 1996 Act, read with Entries 2, 11, 15 13 and 20 of the Fifth Schedule and Entries 2, 8 and 15 of the Seventh Schedule, for which the appeals deserve to be allowed by setting aside the impugned judgments.

Learned counsel appearing for the respondents in both the appeals, on the other hand, while controverting the contentions of the appellants, reiterates that the learned Arbitrator represented M/s. SSSMIL as counsel on as many as eleven occasions between June, 5, 2018 and July 19, 2018 in connection with APD No. 252 of 2015.

The hearing in the arbitration proceedings stood concluded in the 124th sitting of the Arbitral Tribunal on December 9, 2017 and the award was reserved by the learned Arbitrator. On January 3, 2019, another sitting was held, where the learned Arbitrator apprised the parties that the draft award was ready and it would take a few days to do the proof- reading of the same as well as to make necessary corrections of typographical mistakes and he expected the final copy of the award to be ready very soon. However, the award was ultimately passed on February 29, 2020. In the interregnum, the appearances of the learned Arbitrator for M/s. SSSMIL took place.

While highlighting the relation between M/s. SSSMIL with BDB and C & E Limited, learned counsel points out that admittedly M/s. SSSMIL (former name, “Chemcrown India Private Ltd.”) was incorporated by BDB in the year 1973 and he was an initial subscriber to the Memorandum and Articles of Association of the said company. BDB, simultaneously, was the promoter and largest shareholder of M/s. 14 SSSMIL, which was a listed company, through B.G. Chemicals Private Limited, which is a company of BDB. The shareholding pattern of M/s. SSSMIL reflects the promoter and promoter group holding 35.42% of the total paid-up capital, whereas the balance 64.58% is held by public. Out of such 35.42%, B.G. Chemicals Private Limited holds 25.68%. The balance promoter and promoter group shareholding, it is alleged, is held by around 105 individuals, who are all family members of BDB.

Learned counsel for the respondents relies on Regulation 2(1)(e) of the Securities and Exchange Board of India (Substantial Acquisition of Shares and Takeovers) Regulations, 2011 (for short, “the SEBI Takeover Code”), which defines “control” to include the right to appoint majority of the directors or to control the management or policy decisions exercisable by a person or persons acting individually or in concert. Regulation 2(1)(q) thereof defines “persons acting in concert” and provides in Regulation 2(1)(q)(2)(iv) that promoters and members of the promoter group shall be deemed to be acting in concert, unless the contrary is established. Thus, a rebuttable presumption is created that a promoter and promoter group constitute one single block in exercising control over the affairs of a company.

The report of the “Takeover Regulation Advisory Committee” under the Chairmanship of Mr. C. Achutan dated July 19, 2010 concluded that since a holding level of 25% permits the exercise of de facto control over a company, this could be fixed as the appropriate open offer trigger threshold in the Indian context. The Committee felt that 25% 15 shareholding would be an appropriate level at which a new incumbent shareholder could reasonably expect positive control in the current environment.

Such recommendation was ultimately accepted and Regulation 3 of the SEBI Takeover Code provides 25% as the threshold at which an acquirer is required to make an open offer.

Further arguing on the alleged nexus between the appellants and M/s. SSSMIL, learned counsel for the respondents submits that BDB‟s e- mail address is “[REDACTED]”, which is on the domain name of C & E Limited. In the shareholding structure of M/s. SSSMIL, individuals comprising the Bagri Group (respondents) were holding a nominal share capital in the public category up to Rs. 2 lakh only.

From the MCA Master Data of M/s. SSSMIL, it is evident that Renu Bhatter, the daughter of BDB, and Mukund Bhatter, his son-in-law, were Directors of M/s. SSSMIL since February 14, 2018.

Again, Mr. Rajiv Issar, an employee of C & E Limited, which is under the control of BDB and his family and where BDB was the Executive Chairman, was another Director of M/s. SSSMIL.

Furthermore, the registered office of M/s. SSSMIL, that is, 95, Park Street, Kolkata, is the same as that of C & E Limited.

Even the e-mail address of M/s. SSSMIL provided to the Ministry of Corporate Affairs used the domain name of C & E Limited, that is “@cel.co.in”. 16

One Mr. Arindam Halder, the legal head/law officer of C & E Limited, while appearing for the claimants in the arbitration, it is submitted, had instructed the learned Arbitrator on the M/s. SSSMIL in APD No. 252 of 2015, which indicates deep operational and structural inter- connectedness between the companies, evidencing the structure of “group of companies”. This is sought to be established by the respondents on the basis of a purported screenshot of the LinkedIn profile of Mr. Halder and the evidence of Mr. Vijay Kumar Bagri, the third witness of the claimant in the arbitration proceedings.

BDB‟s son Manoj Kumar Bhaiya, it is alleged, was the authorised signatory of M/s. SSSMIL in WPA No. 46471 of 2006 filed before the Madras High Court. He was also appointed as the CEO of C & E Limited on August 18, 2011.

The appellants, in their pleadings, have also admitted that M/s. SSSMIL and C & E Limited were group companies and that BDB had overarching control over the affairs of M/s. SSSMIL. In support of such submission, learned counsel for the respondents relies on BDB‟s reply to CP No. 180 of 2013 affirmed on January 17, 2014 and on Case No. C/12072 of 2012, filed by C & E Limited against two persons before the court of the Chief Metropolitan Magistrate at Calcutta in June, 2012, as well as the cross-examination of BDB before the learned Arbitrator on December 15, 2015.

It is submitted that the general public, which holds around 64.58% shares of M/s. SSSMIL, can never be said to have or exercise any 17 control over the company, as opposed to the 35.42% shares owned by the promoter BDB and the promoter‟s group.

It is contended that the documents referred to above were filed along with the Section 34 applications before the learned Single Judge and, as such, ought to be taken into consideration by this Court as well, being a part of the records.

Those are not new materials but admitted documents, there being no controversy regarding the veracity of those. Given the nature of the objection to the arbitral award in the present case, there cannot be any bar, it is argued, for this Court to consider the said documents.

Learned counsel for the respondents also places reliance on the language of Section 34(2)(b) of the 1996 Act, where the expression “the court finds that” is used, as well as on State of Chhattisgarh and another v. SAL Udyog Private Limited, reported at (2022) 2 SCC 275, to argue that the court, acting on its own while deciding a petition under Section 34 of the 1996 Act, exercises powers which would also be available in an appeal preferred against a judgment passed under such provision, within the contemplation of Section 37 of the 1996 Act.

The above proposition laid down in SAL Udyog Private Limited (supra)2 was followed by the Hon‟ble Bombay High Court in a decision dated November 19, 2025 in the case of Shri. Ravi Raghunath Khanjode & Ors. v. Harashiddh Corporation. 2 State of Chhattisgarh and another v. SAL Udyog Private Limited, reported at (2022) 2 SCC 275 18

Mica Export Promotion Council (supra)3, relied on by the appellants, is not applicable, it is contended, since the same was rendered in relation to a suit in respect of the election of the committee members of Mica Export Promotion Council and a question of suppression of material facts was raised, which was sought to be met on the ground that there was no suppression since the documents were annexed to the petition. The court did not accept such defence and held that in the facts of that case it was not enough and the petitioners therein should have clearly stated these facts in the body of the petition. Such factual matrix, it is argued, is different from the present case.

Moreover, in view of the expression “the court finds that” used in Section 34(2)(b) of the 1996 Act, which did not come up for consideration in Mica Export Promotion Council (supra)3, the decision is not relevant in the context.

Learned counsel for the respondents next argues that it is common ground between the parties that if Entry 2, which is common to the Fifth and Seventh Schedules of the 1996 Act, applies, then the arbitral award dated February 29, 2020 would be in violation of Section 12(5) of the said Act and also in violation of the fundamental policy of Indian law under Explanation 1 of Section 34(2)(b)(ii) of the 1996 Act.

Arguing on the interpretation of the Entries in the Fifth and Seventh Schedules of the 1996 Act, learned counsel argues that four principles 3 Mica Export Promotion Council and Others v. G.C.L. Joneja & Ors., reported at 72 C.W.N. 117 19 have to be kept in mind while interpreting the various items in the said Schedules, which are as follows: (i) (ii) Entries should be construed in the light of General Standards contained in the IBA Guidelines; A broad commonsensical approach of the Entries has to be taken; (iii) Entries must be construed purposively keeping in mind the objective behind the amendment to the Arbitration Act; (iv) The construction of the Entries should be elastic and flexible.

Learned counsel relies on HRD Corporation (supra)4 and ArcelorMittal India Private Limited (supra)5, in support of the above contentions. It is contended that HRD Corporation (supra)4 was also referred with approval in Central Organisation For Railway Electrification v. ECI SPIC SMO MCML (JV), reported at (2025) 4 SCC 641.

Entry 2 of the Fifth and Seventh Schedules of the 1996 Act, it is submitted, does not use the expression “counsel” or “legal representative”, although “counsel” is used in Entry 3. However, this is because the said expression is used in Entry 3 to denote the Arbitrator‟s representation of the lawyer or the law firm which is acting as counsel for one of the parties. Entry 3 of the Seventh Schedule, therefore, does not cover cases where the Arbitrator is acting as counsel for one of the parties.