MAYTAS SUBHASH vs IRCON INTERNATIONAL LIMITED
$~65
* IN THE HIGH COURT OF DELHI AT NEW DELHI
+ OMP (ENF.) (COMM.) 37/2021
MAYTAS SUBHASH …..Decree Holder
Through: Mr. Sayan Ray, Mr. Siddhant Jaiswal and Mr. Sourav Dutta, Advs.
Versus
IRCON INTERNATIONAL LIMITED ….Judgment Debtor
Through: Mr. Chandan Kumar, Adv.
CORAM:
HON’BLE MR. JUSTICE C.HARI SHANKAR
JUDGMENT (ORAL)
% 07.08.2024
EX.APPL.(OS) 636/2021 (Section 47 CPC)
1. OMP (Enf) (Comm) 37/2021 seeks execution and enforcement of an arbitral award dated 6 June 2016. The claimant in the arbitration was M/s Maytas-Subhash JV1 and the contesting respondent before this Court was IRCON International Ltd. The arbitrator awarded an amount of ? 9,44,09,629/- in favour of the JV and against the respondent.
2. The present petition has been filed on behalf of Maytas Subash, one of the members of the JV, seeking execution of the aforesaid award. Clause 3 of the Joint Venture Agreement dated 12 January 2001, whereby the JV was constituted, read as under:
3. LEAD PARTNER:
SUBHASH shall act as Lead partner representing the joint venture and shall be responsible for successful execution of the Contract and due discharge of all liabilities, commitments & obligations in respect of the Contract and for this purpose, is authorised to correspond, receive payments and instructions for and on behalf of the Joint Venture for due execution of the Contract. SUBHASH is authorised to name the person to act as the authorised representative of this Joint Venture from time to time. Mr. A.V.L. Narasimham, Senior Manager Marketing, Subhash Projects & Marketing Ltd., shall be authorised representative as of now.
The petitioner is an employee of Subhash Projects & Marketing Ltd (SPML) on behalf of Maytas-Subash.
3. Mr. Chandan Kumar, learned Counsel for the respondent questions the authority of SPML to represent the JV. He submits that the JV is, in fact, no longer in existence as all the shares of Maytas-Subhash have been purchased by M/s. IL&FS Engineering and Construction Co Ltd2 and, therefore, no JV remains. He also sought to submit that, as per the covenants of the Joint Venture Agreement, the JV would come to an end on the execution of the project.
4. My attention has, however, not been drawn to any covenant of the JV Agreement which brings the JV to come to an end on completion of the project. This submission of Mr Chandan Kumar cannot, therefore, be accepted.
5. Mr. Ray, learned Counsel for the petitioner submits that SPML is merely Subhash Projects & Marketing Ltd rechristened. Mr Chandan Kumar does not dispute this fact.
6. Clause 3 of the JV Agreement specifically empowers Subhash Projects & Marketing Ltd to name the person who would act as an authorised representative of the JV. Thus, SPML is authorised to represent the JV, through a person named by it.
7. Mr Chandan Kumars submission that the JV has ceased to exist is based on certain pleadings of the petitioner in a proceeding initiated by the respondent under Section 34 of the 1996 Act before the Commercial Court at Noida, challenging the arbitral award. Mr. Chandan has drawn my attention to para 3 of the petitioners reply to the respondents Section 34 petition, which reads thus:
3. SPML Infra Ltd. (erstwhile Subhash Projects & Marketing Ltd.) has unquestionable authority to institute claims before the Ld. Arbitrator. The Applicant has assailed the authority of SPML Infra Ltd. (erstwhile Subhash Projects & Marketing Ltd.) to contest the claim filed before the Ld. Arbitrator. There cannot be any quarrel as to the settled fact that the claims before the Ld. Arbitrator emanate from the work executed by Maytas-Subhash JV and SPML Infra Ltd. (erstwhile Subhash Projects & Marketing Ltd.) represents the Maytas-Subhash JV. As a representative of Maytas-Subhash JV, SPML Infra Ltd. (erstwhile Subhash Projects & Marketing Ltd.) has unquestionable authority to institute claims in respect of the work executed by Maytas-Subhash JV and also to defend all claims arising out of the contract, even after such JV has ceased to exist. Regard may be had to Clause 3 of the Joint Venture Agreement dated 12.01.2001 between M/s. Maytas Infra Ltd. and M/s Subhash Projects and Marketing Ltd. (“Joint Venture Agreement”) which explicitly confers SPML Infra Ltd. (erstwhile Subhash Projects & Marketing Ltd.) the authority to represent the Maytas-Subhash JV as a lead partner:
3. LEAD PARTNER
SUBHASH shall act as Lead Partner representing the joint venture and shall be responsible for successful execution of the Contract and due discharge of all liabilities, commitments & obligations in respect of the contract and for this purpose, is authorised to correspond, receive payments and instructions for and on behalf of the Joint Venture for due execution of the live contract. SUBHASH is authorized to name the person to act as the authorised representative of this Joint Venture from time to time. Mr. A.V.L Narasimham, Senior Manager-Marketing. Subhash Projects & Marketing Ltd, shall be authorized representative as of now.
In light of the authority derived by SPML Infra Ltd from clause 3 of the Joint Venture Agreement to represent the Maytas-Subhasl? JV, the question of assigning any interest in the said JV does not arise.
8. Mr. Chandan Kumars submission is that, in para 34 of the reply filed by the petitioner to the respondents Section 34 petition, there is an admission of fact that the JV has ceased to exist. If the JV has ceased to exist, he submits, that present petition cannot be maintained at all.
9. Mr. Ray submits, per contra, that, in so asserting, Mr Chandan is reading para 3 of the reply filed by the petitioner to the Section 34 petition of the respondent in a truncated fashion. He submits that the petitioner had only contended that even if the JV were to cease to exist, SPML would continue to be vested with the authority to enforce the arbitral award, which was in favour of the JV.
10. This contention of Mr. Chandan had also been noted by this Court, in order dated 27 March 2023 passed in the present proceedings. Though the contention was not examined on merits, this Court noted thus:
8. Insofar as the applicability of the power which is otherwise recognized to inhere in an executing court by virtue of Section 47 of the Code is concerned, this Court in Hindustan Zinc Ltd. vs. National Research Development Corporation3 had held as follows:-
“21. It would be pertinent to note that Order XXI of the Code compendiously deals with the subject relating to execution of decrees. Those provisions extend from attachment of properties to sale and auction thereof. It also envisages the trial of questions that may arise in the course of execution as would be evident from the various provisions contained in that chapter such as Order XXI Rule 46C as well as Rules 58 to 63 and 101. As this Court reads those provisions, they clearly appear to be restricted to questions that would be indelibly connected with actions and steps that may be taken by a court in the course of execution of a decree. Even those provisions cannot possibly be construed as extending to a challenge to the validity or correctness of the original judgment and decree that may be rendered. While it may be open the Court to draw sustenance and guidance from the principles underlying the provisions contained in Order XXI in the course of enforcement of an arbitral award, it would be wholly incorrect to understand or interpret Section 36 as envisaging the adoption of its various provisions. The principles which inform the various provisions of Order XXI can at best only act as a guide for the trial of various questions that may arise in the span of enforcement of an arbitral award.
22. In summation, it must be held that a challenge to an award on the ground that it is a “nullity” or is otherwise illegal can be addressed only in proceedings that may be initiated in accordance with Section 34 of the Act. The grounds on which an award can possibly be assailed are comprehensively set out in Section 34(2). A challenge mounted on those lines in proceedings duly instituted under Section 34 alone can be recognised to be the remedy available to a judgment debtor. The Act neither envisages nor sanctions a dual or independent challenge to an award based on the, various facets of nullity as legally recognised being laid in enforcement proceedings. The conclusion of the Court in this respect stands fortified from a conjoint reading of Sections 5, 35 and 36 of the Act as well as the precedents noticed hereinabove. The aforesaid statement of the law would necessarily be subject to the caveat which is liable to be entered in respect of foreign awards and which are governed by Part II of the Act. Insofar as enforcement proceedings are concerned, while the Court would be obliged to deal with all questions that may relate to or arise out of steps that may be taken in the course of execution, it would be wholly incorrect to understand the scope of those proceedings as extending to the trial of questions touching upon the merits of the award.”
9. However, learned counsel for the respondent would contend that the Division Bench of our Court in Union of India vs. Jagat Ram Trehan & Anr.4 had held as follows:-
“21. That question is whether a plea that the award is void can be raised in execution proceedings. On this question respondent contended that the award must have been objected to under Sections 17, 30 and 33 or by appeal against the order rejecting objections and if that was not done, it was not open to raise the question in execution proceedings. This contention, in our view, is not correct. That Section 47 applies to execution proceedings taken pursuant to a decree making an award a rule of Court cannot be doubted. The decided cases, referred to below, also hold it is open to the executing court under Section 47 to declare that the award is passed without jurisdiction and that therefore the decree passed thereupon is also null and void and not executable. (See in this connection: Ran Singh v. G.A. Coop Service Society5; Sabawwa Vanmappa v. Basappa Andanappa6; E.D. Sasson and Co. Ltd. – Shivji Ram Devi Das – Judgment-debtors7; Gopi Ram Jaithu Ram v. Rami Das Sri Kishan8 and Donald Graham & Co. v. Kewalram and others9. We have therefore no hesitation in holding that this EA is maintainable under Section 47 to declare the award and the consequent decree as nullities.
11. Thus, it was noted in the order dated 27 March 2023 that, while a Single Bench of this Court in Hindustan Zinc had opined that the plea that award is a nullity cannot be raised in execution proceedings, but has to be reserved for challenge under Section 34, a Division Bench of this Court, albeit in the context of the erstwhile 1940 Arbitration Act, had ruled to the contrary in Jagat Ram Trehan.
12. Even if it were to be assumed, for the sake of argument, that the plea that the award is a nullity, which is itself predicated on the premise that the JV was no longer in existence and that SPML could not have represented the JV, can be raised by the respondent, the contention, in my view, is not sustainable on merits. The contention was specifically raised before the learned arbitrator and has been thus addressed by him:
8.1 Preliminary Objections:
a) SPML Infra Limited has no authority to lodge the claims
The Respondent No.1 as a part of their written submissions and the arguments put forth before the Sole Arbitrator have raised this issue and has contended that the Contract was awarded to Maytas-Subhash JV. Maytas is a public Limited Company registered under the Companies Act and Subhash Projects & Marketing Limited is also a public Limited Company registered under the Companies Act. The Respondent has contended that SPML Infra Limited who has filed the claims is a new party and therefore not authorized to file the claims and therefore the claims are liable to be rejected outright. The Claimant has argued that there is no basis in this preliminary objection and needs to be rejected.
I have considered the matter. While dealing with the issue, I rely on the Joint Venture Agreement signed and executed by and between Subhash Projects & Marketing Limited and Maytas Infra Limited on 12th January 2001 (Annexure C/1, Page 60 to 62). The Joint Venture Agreement is signed by Mr. Sushil Sethi, Managing Director of Subhash Projects & Marketing Limited and Mr. C.S. Raju, General Manager of Maytas Infra Limited, Hyderabad. Clause 3 of the said Joint Venture Agreement nominates Subhash Projects & Marketing Limited as the lead partner to represent the Joint Venture. The Clause says that the lead partner shall be responsible for successful execution of the Contract and due discharge of all liabilities, commitments and obligations in respect of the Contract and for this purpose is authorized to correspond, receive payments and instructions for and on behalf of the Joint Venture for due execution of the Contract. The said Clause 3 further mentions that Subhash Projects and Marketing Limited is authorized to name the person to act as authorized representative of the Joint Venture from time to time. Clause 4 deals with the financial participation ratio of each party i.e. Subhash 90% and Maytas 10%. Clause 5 says that the entire work of the contract shall be executed by Subhash with the guidance of Maytas. Clause 6 of the Joint Venture defines the roles and responsibilities of the Joint Venture partners. It says that Subhash as a lead partner will coordinate, liase and correspond with IRCON (Respondent No. 1) on behalf of JV and undertake Project construction and will be responsible for the execution of the Contract. Maytas will provide technical knowhow and assistance in Project supervision. Clause 8 of the JV Agreement says that all necessary working capital required for execution of the Contract and all Bank Guarantees to be given to IRCON shall be furnished by M/s. Subhash on behalf of the JV. This JV Agreement amply provides and makes it clear that SPML Infra Ltd.(formerly Subhash Projects and Marketing Ltd.) is the lead partner with 90% financial stake and has the authority from the Joint Venture to execute the Project, to take actions related to the Project and also correspond with Respondents. A lead partner, therefore, based on the authority derived from the Joint Venture between the two members has the authority to make claims, file suits etc. for and on behalf of the JV.
The name of Subhash Projects & Marketing Limited, was changed to SPML Infra Limited w.e.f. 12th Day of April 2010. The Claimant has filed the Fresh Certificate of Incorporation bearing No. L40106DL1981PLCO12228 issued by the Registrar of Companies National Capital Territory of Delhi and Haryana (Annexure C/2, Page 63 of SOC, Vol. II). This Certificate clearly and unambiguously states that the name of the Company i.e. Subhash Projects & Marketing Limited has been changed to SPML Infra Limited under Section 21 of the Companies Act and this Certificate is issued pursuant to Section 23 (1) of the said Act. Thus, the contention raised by the Respondent No. 1 that SPML Infra Limited is a new party and has no authority to file the claim, has no validity in the eye of the law as the Claimant Company is the same, who was a lead member of the JV to whom the contract was awarded, and the only change that has taken place is the change of name to SPML Infra Limited after following the due procedure under the Companies Act. SPML Infra Limited, cannot be construed as a new Company or a new Party not authorized to file the Claims. Prior to the change of name, Mr. Sushil Sethi, who had signed the JV Agreement was the Managing Director of the Company. He continued to be the Managing Director after the change of name and at the time when the claims were filed as a part of the Arbitration Proceedings.
The Clause 3 of the JV Agreement authorizes Subhash Projects and Marketing Ltd. (now SPML Infra Limited) to name the person to act as the authorized representative of the Joint Venture from time to time. SPML Infra Limited through the Minutes of the Meeting of the Committee of Directors of SPML Infra Limited held on 31/10/2012 at Gurgaon has authorized through a Resolution Mr. Manoj Kumar Gangwal, Manager (Accounts & Finance) to do the following acts, deeds and things as may be required for dealing with legal affairs for and on behalf of the Company.
1) To engage Advocate(s) and to sign Vakalatnam(s) for this purpose.
2) To receive summons, notices etc. and to sign, submit and verify various statements, petitions, plaints, written statements, rejoinders, applications, counters, replies affidavits, evidences, declarations, undertakings, forms, returns and other requisite documents whatsoever and file them in any court, tribunal and authority in all the states across India.
3) And generally to do and execute all such acts, deeds or things as the Attorney may think fit or necessary and / or incidental to the above purposes including any legal proceedings.
The minuted Resolution (Annexure C/3, Page 64, SOC, Vol. II) cited herein above is signed and certified by the Chairman of SPML Infra Limited.
On my consideration of the facts and the evidences on record as cited herein above, I hold that there is no legal substance in the contention raised by the Respondent No. 1 that SPML Infra Limited is a new Company not authorized to file the claims and also Mr. Manoj Gangwal has no authority to sign and submit the documents as a part of the Arbitration Proceedings including the “Statement of Claim”.
I, therefore, reject this preliminary objection and conclude that SPML Infra Limited has the legal and contractual authority to file the claims through their authorized representative Mr. Manoj Gangwal. I also conclude that the claims cannot be outright rejected as contended by the Respondent No 1.
13. Inasmuch as
(i) SPML, in its earlier Subhash Projects & Marketing Ltd avatar, was a member of the JV,
(ii) IL&FS has purchased all the shares of Maytas, and
(iii) Clause 3 of the JV Agreement specifically empowers Subhash Projects & Marketing Ltd to act as the lead partner of the JV to represent it, ensure discharge of all its liabilities and to act as its authorised representative at all points of time,
I am of the considered opinion that the present petition cannot, prima facie, be regarded as having been incompetently instituted. Nor, prima facie can it be said that the impugned award is a nullity.
14. This is, however, without prejudice to the respondents rights to contest the findings of the learned Arbitral Tribunal in para 8.1 of the impugned award in the Section 34 proceedings, which are presently in seisin before the Noida court.
15. Ex. Appl. (OS) 636/2021 stands disposed of accordingly.
16. It is clarified, to prevent any prejudice to the respondent, that the observations contained in this order are solely for the purpose of ascertaining the maintainability of the present petition. They should not be treated as an expression of opinion regarding the correctness of any part of the arbitral award.
OMP (ENF.) (COMM.) 37/2021
17. The amount awarded by the arbitrator stands deposited by the respondent in the present execution proceedings. The petitioner seeks release of the said amount.
18. As the Section 34 challenge to the award is still pending, and no orders have been passed by the Section 34 Court either on the main petition or on the stay application filed in the Section 34 proceedings, I am of the opinion that unconditional release of the deposited amount in favour of the petitioner cannot be granted. Accordingly, subject to the petitioner furnishing an irrevocable and unconditional bank guarantee drawn on a nationalized bank for the amount deposited by the respondent, within a period of four weeks from today, the Registry of this Court is directed to release the said amount to the petitioner along with any interest that may have accrued thereon.
19. The release of the amount shall, however, remain subject to the outcome of these proceedings. A copy of the bank guarantee would also be provided to learned Counsel for the respondent.
EX.APPL.(OS) 1179/2023 (for unconditional withdrawal of the amount already deposited by the judgment debtor)
20. In view of the order passed in Ex. Appl. (OS) 636/2021, this application stands disposed of.
OMP (ENF.) (COMM.) 37/2021 and EX.APPL.(OS) 213/2021 (Direction)
21. List on 24 October 2024.
C.HARI SHANKAR, J
AUGUST 7, 2024
rb
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1 the JV hereinafter
2 IL&FS hereinafter
3 2023 SCC OnLine Del 330
4 1996 SCC OnLine Del 20
5 AIR 1976 P & H 94 (FB)
6 ILR 1955 Bom 386
7 AIR 1929 Lah 228
8 AIR 1934 Lah 49
9 AIR 1921 Sind 132
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