Delhi High Court: In a case wherein the petition under Section 34 of the Arbitration and Conciliation Act, 1996 (‘Act') had been filed on behalf of SpiceJet Ltd., the petitioner in O.M.P. (COMM) 42 of 2019 and Ajay Singh, the petitioner in O.M.P. (COMM) 43 of 2019 (collectively ‘the petitioners') who were aggrieved by the Arbitral Award passed on 20-7-2018, (‘impugned Award'), in the arbitration proceedings between the petitioners and the respondents, Chandra Dhari Singh, J.*, held that there was nothing in the impugned Award, even to the aspect of interest, which would lead this Court to take the view that there was any gross illegality which goes to the root of the matter or error apparent on the face of the record which would render the impugned Award patently illegal. Further, the conclusions drawn, and findings given were not of the nature that would shock the conscience of this Court. The Court thus held that it did not find any reason to interfere in the impugned Award dated 20-07-2018 passed by the Arbitral Tribunal (‘Tribunal') in the arbitration proceedings initiated between the parties before this Court.
The respondents were the promoters and majority shareholders, constituting about 58.46% of the share capital of SpiceJet. During the relevant time period of such shareholding, i.e., from November 2010 to February 2015, SpiceJet had run into severe financial crisis leading to closing of its operation and extensive and substantial debts in its name. At this financially critical phase, when SpiceJet was at the verge of shutting down, the respondents issued an offer letter dated 13-01-2015 and approached Ajay Singh, who was holding a small shareholding in SpiceJet to take over the shares held by the respondents for a nominal consideration of Rs. 2. Accordingly, the parties executed a Share Sale and Purchase Agreement (‘the Agreement') on 29-01-2015 with the knowledge that Ajay Singh would be saddled with liabilities of Rs. 2200,00,00,000 and with the consent that the respondents would infuse an additional sum of Rs. 450,00,00,000 in SpiceJet for its revival.
Disputes arose between the parties pertaining to the Agreement regarding the financial obligation of the parties and for the adjudication and resolution of the same, the respondents invoked the arbitration clause stipulated in the Agreement. Consequently, the Tribunal was constituted. The arbitration proceedings were initiated with the filing of the Statement of Claim, and the hearing was concluded by the Tribunal and finally, the impugned Award was passed. The petitioners, being aggrieved by the findings of the Tribunal, prayed before this Court to set aside the impugned Award to the extent it allowed the refund of Rs. 270,86,99,209 to the respondents.
Analysis, Law, and Decision
The Court relied on Anand Brothers (P) Ltd. v. Union of India, (2014) 9 SCC 212 and opined that “the extent to which a Court might exercise supervisory powers was limited to examining whether the Award and the conclusion drawn therein were supported by findings and not whether the findings themselves were erroneous or sound”. The Court further relied on NHAI v. M. Hakeem, (2021) 9 SCC 1, wherein it was observed that “the powers of Court under Section 34 of the Act to set aside award did not include power to modify such an award”. The Court also relied on State of Jharkhand v. HSS Integrated DSN, (2019) 9 SCC 798, wherein it was held that “even when there were more than one plausible view and the Arbitrator, in his wisdom, adopts one of them, having given reasons for his findings, the Courts shall not interfere with such an Award”. Thus, this Court opined that it shall also limit itself to the impugned Award in question and not re-appreciate evidence and all materials before the Arbitrator.
The Court observed that the Tribunal categorically dealt with the fact that the failure to obtain in- principle approval by SpiceJet and Ajay Singh would not amount to a breach of the Agreement even though the issuance of Warrants was pursued by the petitioners. The Tribunal observed that the issuance of Warrants as part of obligations were conditional upon the approval by the BSE but the same could not be granted by the BSE as granting in- principle approval would have resulted in breach of ICDR Regulations. However, the Tribunal also observed that the parties were to act in accordance with Section 65 of the Contract Act, 1872, which the petitioners failed to, and accordingly, the petitioners were to pay back and refund the consideration of Warrants to Respondent 1, Kal Airways (P) Ltd. The Court observed that the Tribunal considered the objections of both the parties and extensively recorded the facts, circumstances, and the material on record before giving the observations and thus, awarded the sum of refund in the favour of the respondents.
Further, the Court noted that Respondent 1 was to be issued 2,00,293 Cumulative Redeemable Preference Shares (‘CRPS') and Respondent 2, Kalanathi Maran was to be issued 30,08,406 CRPS of the face value of Rs. 1000. Further, it was also agreed under the Agreement that Ajay Singh would issue Tranche-2 CRPS to Respondent 2 upon the receipt of Rs. 50,00,00,000. However, such CRPS were never issued by the petitioners and hence, the respondents were entitled to the refund of the same.
The Court noted that in accordance with the Agreement, the respondents were to make a fixed deposit of Rs. 100 Crores. However, it was observed that the said amount was never found to be deposited in the designated bank account in terms of the agreed mutual terms of the Agreement between the parties. The Counterclaim pertaining to the said amount was, hence, decided in the favour of the petitioners and was deducted from their liability towards the respondents amounting to Rs. 370,86,99,209. Thus, the Court opined that it was evident that the Tribunal had provided adequate reasoning as to the issue of refund of Rs. 270,86,99,209.
The Court opined that “the course of procedure taken by the Tribunal and the findings were evidently not in contravention of any of the provisions under the Act or even any substantive law. There was nothing in the observations in the impugned Award to suggest that the Tribunal contravened or went beyond the terms of the Agreement executed between the parties. The Tribunal provided reasons for the findings delivered, and there was no perversity apparent on the face of the record or which goes to the root of the matter. Therefore, the impugned Award could not be said to be patently illegal ”.
The Court further opined that in view of the findings of the Tribunal with respect to the claims raised against refund of the amount, there was nothing perverse in the impugned Award to say that it was against the fundamental policy of law. Further, there was no deviation from the fair and just principles of morality, equity, objectivity in the impugned Award or even the course taken by the Tribunal in conducting and concluding the proceedings. Hence, the Court also opined that the impugned Award was not against the public policy of the Country. The Court held that none of the ingredients under Section 34 of the Act were made out against the impugned Award at hand.
The Court observed that the discretionary power of awarding interest was exercised by the Tribunal and the award of interest was made while keeping in view that there was a default on the part of the petitioners and thus, the Tribunal allowed an award of interest @12% per annum, as opposed to the original claim of 18% raised on behalf of the respondents. The Court opined that this observation of the Tribunal also did not invite the vigours of the principles set out above that warrant an intervention under Section 34 of the Act.
The Court held that there was nothing in the impugned Award, even to the aspect of interest, which would lead this Court to take the view that there was any gross illegality which goes to the root of the matter or error apparent on the face of the record which would render the impugned Award patently illegal. Further, the conclusions drawn, and findings given were not of the nature that would shock the conscience of this Court.
The Court thus held that it did not find any cogent reason to interfere in the impugned Award dated 20-07-2018 passed by the Tribunal in the arbitration proceedings initiated between the parties before this Court. Accordingly, the petition was dismissed.
[SpiceJet Ltd. v. Kal Airways (P) Ltd., 2023 SCC OnLine Del 4557, decided on 31-7-2023]
Advocates who appeared in this case :
For the Petitioners: Abhinav Vashisht, Senior Advocate; Atul Sharma, Abhinav Sharma, Gaurav Arora, Akshita Sachdeva, Advocates
For the Respondents: Maninder Singh, Sathanarayanan, Senior Advocates; Nandini Gore, Sonia Nigam, Yash Dubey, Yashwant Gaggar, Vimal, Indira, Advocates
*Judgment authored by: Justice Chandra Dhari Singh