VIJAY KARIA Vs. PRYSMIAN CAVI E SISTEMI SRL
LAWS(SC)-2020-2-42
SUPREME COURT OF INDIA
Decided on February 13,2020

Vijay Karia Appellant
VERSUS
Prysmian Cavi E Sistemi Srl Respondents


Referred Judgements :-

HEBEI IMPORT AND EXPORT CORPORATION V. POLYTEK ENGINEERING COMPANY LTD [REFERRED TO]
GBANGBOLA V. SMITH AND SHERIFF [REFERRED TO]
SUI SOUTHERN GAS CO. LTD. V. HABIBULLAH COASTAL POWER CO [REFERRED TO]
DALLAH REAL ESTATE AND TOURISM HOLDING CO. V. THE MINISTRY OF RELIGIOUS AFFAIRS [REFERRED TO]
MINMETALS GERMANY GMBH V. FERCO STEEL LTD [REFERRED TO]
SOH BENG TEE AND CO. V. FAIRMOUNT DEVELOPMENT PTE LTD [REFERRED TO]
JVL AGRO INDUSTRIES LTD V. AGRITRADE INTERNATIONAL PTE LTD [REFERRED TO]
ZEBRA INDUSTRIES V. WAH TONG PAPER PRODUCTS GROUP LTD [REFERRED TO]
BAZ V. BBA [REFERRED TO]
OFFICIAL LIQUIDATOR VS. DHARTI DHAN PRIVATE LIMITED [REFERRED TO]
RENUSAGAR POWER CO LIMITED GENERAL ELECTRIC CO VS. GENERAL ELECTRIC CO :RENUSAGAR POWER COMPANY LIMITED [REFERRED TO]
OIL AND NATURAL GAS COMMISSION VS. SAW PIPES LIMITED [REFERRED TO]
SOHAN LAL GUPTA VS. ASHA DEVI GUPTA [REFERRED TO]
PHULCHAND EXPORTS LTD VS. OOO PATRIOT [REFERRED TO]
DROPTI DEVI VS. UNION OF INDIA [REFERRED TO]
LAL MAHAL LTD VS. PROGETTO GRANO SPA [REFERRED TO]
CRUZ CITY 1 MAURITIUS HOLDINGS VS. UNITECH LIMITED [REFERRED TO]
LMJ INTERNATIONAL LTD. VS. SLEEPWELL INDUSTRIES CO. LTD. [REFERRED TO]
CAMPOS BROTHERS FARMS VS. MATRU BHUMI SUPPLY CHAIN PVT LIMITED & ORS [REFERRED TO]





JUDGEMENT

R.F.NARIMAN,J. - (1.)Leave granted.
(2.)The present appeals are filed against the judgment of a Single Judge of the Bombay High Court dated 07.01.2019, by which four final awards made by a sole arbitrator in London under the London Court of International Arbitration Rules (2014) (hereinafter referred to as the "LCIA Rules") were held to be enforceable against the Appellants in
(3.)The brief facts of this case are as follows. The Appellants, i.e. Appellant No.1 Shri Vijay Karia, and Appellants No.2 to 39 (who are represented by Appellant No.1) are individual, non-corporate shareholders of Ravin Cables Limited (hereinafter referred to as "Ravin"). On 19.01.2010, the Appellants and Ravin entered into a Joint Venture Agreement (hereinafter referred to as "JVA") with Respondent No.1, i.e. Prysmian Cavi E Sistemi SRL ­ a company registered under the laws of Italy. By this JVA, Respondent No.1 acquired a majority shareholding (51%) of Ravin's share capital. The material clauses of the JVA are set out hereinbelow:
"8. Purpose and Objectives

8.1 Purpose of the Company and Scope of the Agreement Subsequent to Closing, the Company shall be a joint venture between Prysmian and the Existing Shareholders for the purposes of undertaking and conducting the business of the company, or for such other activities as may be determined by the Shareholders from time to time, subject to the applicable law. The business of the company shall be conducted in the best interests of the Company, and in accordance with sound professional and commercial principles."

"12.6. Chairman and Managing Director

12.6.1 Mr. Karia shall be the Chairman of the Board as well as the Managing Director of the Company until: (i) Expiry of seven (7) years from the Agreement Date; or

(ii) The date of which the Existing Shareholders cease to hold in the aggregate at least ten percent (10%) of the share capital of the Company: Whichever occurs earlier. It is hereby agreed that Mr. Karia shall not, during such term, be entitled to be removed as a Chairman and Managing Director by the passing of an ordinary resolution at a general meeting of the Company..."

"12.6.4. Without prejudice to the aforesaid clause 12.6.3, the Managing Director shall continue to remain responsible for the day to day management of the Company in accordance with the Interim Period Policy adopted by the Board on the Closing Date, until the appointment of the CEO of the Company ("Interim Period")"

"12.6.5 As soon as practicable after the efflux of the Interim Period, a Board shall be convened to resolve upon a new policy, applicable for a period of 6 (six) months thereafter (the "Integration Period"), for the delegation of the powers to the managers of the Company (the "Delegation of Powers Policy") all powers not delegated to the managers of the Company pursuant to such Delegation of Powers Policy, shall be delegated jointly to the CEO and the Managing Director..."

"12.6.6 Provided however, that subject to the overall supervision of the Board, after the efflux of the Integration Period, the Managing Director shall be directly responsible solely for managing the internal audit as well as the strategy and business development of the Company and present to the Board his findings and analysis for final determination by the Board. Accordingly all the powers which are not delegated to the managers of the Company pursuant to the Delegation of Powers Policy, as may be amended by the Board from time to time, shall be delegated to the Managing Director to the extent such powers fall within his duties as aforesaid.

12.6.7 After the Integration Period, the Managing Director may appoint an internal auditor to assist the Managing Director in his responsibility towards the internal audit of the company. This internal auditor shall report directly to the Managing Director and functionally report to the internal audit department of Prysmian S.P.A."

"12.7 Chief Executive Officer

12.7.1 The CEO shall be appointed by and shall directly report to the Board.

12.7.2 Without prejudice to the aforesaid Clause 12.7.1, the CEO shall from the date of its appointment till the efflux of the Integration Period, be responsible for the day to day management of the Company jointly with the Managing Director.

12.7.3 Provided however, that subject to the overall supervision of the Board, after the efflux of the Integration Period, the CEO shall be responsible for the day to day management of the Company excluding solely the internal audit and the strategy and business development of the Company for which the Managing Director shall be responsible. Accordingly all the powers which are not delegated to the managers of the Company pursuant to the Delegation of Powers Policy, as may be amended by the Board from time to time, shall be delegated to the CEO to the extent such powers fall within his duties as aforesaid."

"17. PROCEDURE FOR FAIR MARKET VALUATION

17.1 Notwithstanding anything contained in this Agreement, all references in this Agreement to Fair Market Value shall be the fair market value as determined, applying the definition of EBITDA, Net Financial Indebtedness (NFI) and Net Working Capital (NWC) set forth under Schedule X, by any one of the following four accounting firms settled in India:

(a) KPMG

(b) Ernst and Young;

(c) PriceWaterhouseCoopers;

(d) Deloitte

17.2 The accounting firm shall be chosen from among those indicated under clause 17.1 above by the Party that, according to clauses 23 and 24, is called by the other Party to sell, in whole or in part its share participation in the Company to the other Party; or by the Party that, according to Clauses 11.5 (iv), 16 and 23, calls the other Party to buy, in whole or in part, its share participation in the Company (in either case the "Exiting Party"). If the Exiting Party fails to choose the accounting firm within thirty (30) calendar days from (i) the receipt of the notice by which the other Party has intimated it to sell, in whole or in part, its share participation in the Company to the other Party; or (ii) from the serving of notice to the other Party to buy, in whole or in part, its share participation in the Company, then the accounting firm shall be chosen by the Party (the "Non-Exiting Party") that called the other Party to sell, in whole or in part, its share participation in the Company to the other Party or was called by the Exiting Party to buy, in whole or in part, the Exiting Party's share participation in the Company."

"20. Mutual Covenants and Undertakings

xxx xxx xxx

20.1.2 The Parties further agree to cooperate and act in good faith, fairness and equity as between themselves."

"21. Business in India

21.1 The Parties agree that neither Prysmian nor Mr. Karia, whether directly or through their Affiliates, shall invest, acquire or participate in the Cable Business in India, save and except through the Company in accordance with this agreement."

"21.5 Further, it is agreed that, within March 31,2011, the Promoters shall either stop or cease to have any interest in any activity they are currently or will be conducting in India, directly or indirectly through any Affiliates, which is in competition with the business of the Company. Such ceased activities shall then not be offered by Mr. Karia to the Company, pursuant to Clause 21.2 for a period of three years from the date of such cessation.

For the sake of clarity, it is agreed that this Clause 21.4 shall apply, without being limited, to the activities carried out by (i) Vijay Industrial Electricals, a company incorporated under the laws of India and having its registered office at 302, Akruti Trade Centre, Third Floor, Road n. 7, MIDC, Marol, Andheri(east) Mumbai-400093 (ii) Special Cable Industries, a company incorporated under the laws of India and having its registered office at A-1/404 GIDC Estate, Ankleshwar 393002."

"23. Event of Default

23.1 If any party(" Defaulting Party") is in material breach of any provisions, obligations, covenants, conditions and undertakings under this Agreement , or in the event of insolvency or bankruptcy of the Defaulting Party or if the substantial undertaking or assets of the Defaulting Party is under receivership or any other equivalent status, it shall be considered as an event of default ("Event of Default").

23.2 In such an event, the other party ("Non Defaulting Party") may give notice of the same ("Determination Notice") to the Defaulting Party.

23.3 The Defaulting Party shall have a period of 60(sixty) calendar days from the receipt of the Determination Notice (or Such further period as the Non Defaulting Party may agree in writing) to rectify the Event of Default(" Rectification Period"). It is hereby clarified that this clause 23.3 is not applicable if the Event of Default is represented by the insolvency or bankruptcy of the defaulting Party in which case the Non Defaulting Party may forthwith serve the EOD Notice to the Defaulting Party.

23.4 If upon expiry of the Rectification Period, the Event of Default has not been so rectified the Non Defaulting Party may require the Defaulting Party by written notice("EOD Notice") to either (i) sell to the Non Defaulting Party or such other Person as may be nominated by the Non Defaulting Party, all , but not less than all, the Shares held by the Defaulting Party ("Defaulting Party Shares") at the 10% (ten percent) discount to the Fair Market Value(" Discounted Price") or (ii) buy from the Non Defaulting Party all, but not less than all, the Shares held by the Non Defaulting Party at 10% (ten percent) over the Fair Market Value("Premium Price"). The Defaulting Party shall be then under the obligation to either (I) sell all, but not less than all, its Shares in the Company within 30 (thirty) calendar days of the EOD Notice or (II) buy all, but not less than all, the Non Defaulting Party Shares in the Company within 30(thirty) calendar days of the EOD Notice, as the case may be. 23.5 It is hereby agreed that:

23.5.1 If Prysmian is the Defaulting Party, then Mr. Karia only( and not the Existing Shareholders) will be entitled to either(a) buy all(but not less than all) Prysmian Shares at the Discounted Price or (b) sell to Prysmian all (but not less than all its own shares) and those of the Existing Shareholders at the Premium Price.

23.5.2 If Mr. Karia or any of the Existing Shareholders is the Defaulting Party, then Prysmian will be entitled to either (a) buy all ( but not less than all) the Shares held by Mr. Karia and Existing Shareholders at the Discounted Price or (b) sell to Mr. Karia all ( but not less than all) its own shares at the Premium Price. For sake of clarity, the Parties agree that for the purpose of this Clause 23.5 any reference to Mr. Karia Shares, Prysmian Shares and Existing Shareholders Share shall be deemed to include any Shares transferred to any or their respective Affiliates pursuant to the provisions of Clause 10.4 above."

"27. ARBITRATION

27.1 Dispute Resolution

27.1.1 The Parties agree to use all reasonable efforts to resolve any dispute under, or in relation to this Agreement quickly and amicably to achieve timely and full performance of the terms of this Agreement.

27.1.2 Any dispute, controversy or claim arising out of or relating to or in connection with this Agreement including a dispute as to the validity or existence of the Agreement or the arbitration agreement, or any breach or alleged breach thereof, shall be settled exclusively by arbitration under the Rules of Arbitration of the London Court of International Arbitration ("LCIA") as amended from time to time.

27.1.3 The arbitral tribunal ("Tribunal") shall consist of one (1) arbitrator, to be appointed by the LCIA. The arbitrator shall be from a neutral nationality, i.e. from a nationality and origin other than any of the Parties.

27.1.4 The seat of the arbitration shall be London, United Kingdom.

27.1.5 The language to be used in the arbitration shall be English.

27.1.6 The law applicable and governing the arbitration agreement (proper law of the arbitration agreement) and in all respects including the conduct of the proceedings shall be English Law. If the Institution above named ceases to exist or is unable for any reason to administer the arbitration proceedings then the arbitration shall be conducted in accordance with the (English) Arbitration ACT 1996 as amended from time to time or any statute that may replace the said Act.

27.1.7 Parties expressly agree that Part I of the (Indian) Arbitration and Conciliation Act, 1996 (as amended from time to time and any statutory enactment thereof) shall have no application to the arbitration agreement or the conduct of arbitration or to the setting aside of any award made there under, and the provisions of Part I ) including the provisions of section 9 of the Arbitration and Conciliation Act, 1996 is hereby expressly excluded....

27.1.9 The arbitration award (the "Award") shall be final and binding on the Parties.

27.1.10 The courts of London (United Kingdom) shall have exclusive jurisdiction in respect of all matters arising in connection with the arbitration and Existing Shareholders submits to the jurisdiction of the said courts. Provided however that the Award may be enforced in any appropriate jurisdiction. If to be enforced in India the Award shall be a foreign award to which the legislative provisions incorporated in the applicable Indian Act to give effect to the New York Convention on foreign arbitral awards 1958 ( the New York Convention) shall apply(currently Part II of the (Indian) Arbitration and Conciliation Act 1996)..."

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