SANJIV PRAKASH Vs. SEEMA KUKREJA

JUDGEMENT

(1.) Civil Appeal No. 975 of 2021 : This appeal arises out of the dismissal of a petition under Section 11 of the Arbitration and Conciliation Act, 1996 ["1996 Act"] filed before the High Court of Delhi. The Appellant, Sanjiv Prakash, is a member of a family which also consists of his sister, Seema Kukreja (Respondent No.1 herein), his mother, Daya Prakash (Respondent No.2 herein), and his father, Prem Prakash (Respondent No.3 herein). The Appellant and Respondents are hereinafter collectively referred to as the "Prakash Family".

(2.) The facts, briefly stated, are as follows:

(3.) Shri K.V. Viswanathan, learned Senior Advocate appearing on behalf of the Appellant, relied strongly upon the MoU between the Prakash Family and stressed the fact that it was a family settlement or arrangement which raised a special equity between the parties and could not be treated as a mere contractual arrangement, having to be enforced in accordance with several judgments of this Court. For this purpose, he relied strongly upon the observations contained in paragraph 9 of Kale v. Deputy Director of Consolidation, (1976) 3 SCC 119 ["Kale"], as followed in Reliance Natural Resources Ltd. v. Reliance Industries Ltd., (2010) 7 SCC 1 (at paragraphs 49 and 50). In particular, he relied upon the fact that it was the Appellant who was responsible for the tremendous growth of the company, and it is by his efforts that Reuters infused a huge amount of capital by purchasing 49% of the share capital of the company. It is for this reason that the MoU made it clear vide clause 8 that in case any of the three Respondents wished to sell or bequeath their equity shares in the company, their shares may be offered/sold/bequeathed only to the Appellant or to his heirs and successors. The arbitration clause contained in the MoU would therefore be applicable, the 1996 Act being the Act under which the arbitration would have to be effected. He then read out various clauses of the SHA and relied strongly upon clause 12.1(a), in which it was agreed that if Reuters would have to divest any part of its shares in the company, it shall be entitled to require the other shareholders to purchase its holding of shares in such proportions as was "agreed between them or otherwise", thereby making it clear that the MoU between the Prakash Family was expressly referred to and preserved by the aforesaid clause. He also stressed upon the absurdity of disputes arising between members of a family residing and working only in India to have to be referred to arbitration in accordance with the rules of the London Court of International Arbitration, which would be the result if the SHA were to supersede the MoU. He was also at pains to point out that clause 28 of the SHA has to be read as a whole, and clause 28.1 made it clear that the entire agreement and understanding between the parties which was contained in the SHA, the SPA, and the ancillary agreements was only "with respect to the subject matter thereof", the subject matter of these Agreements being the relationship between the Prakash Family and Reuters, which was completely different from the subject matter of the MoU, which was only between the members of the Prakash Family, Reuters not being a party thereto. For this purpose, he relied strongly upon the judgments contained in Barclays Bank Plc v. Unicredit Bank Ag and Anor, [2014] EWCA Civ 302 (at paragraphs 27 and 28), The Federal Republic of Nigeria v. JP Morgan Chase Bank, NA, [2019] EWHC 347 (Comm) (at paragraph 37), and Kinsella and Anor v. Emasan AG and Anor, [2019] EWHC 3196 (Ch) (at paragraphs 64 to 71). A reading of these judgments would, according to the learned Senior Advocate, show that "entire agreement" clauses are to be construed strictly, the idea being to obviate having to refer to negotiations that had taken place between the parties pertaining to the subject matter of the agreement before the agreement was formally entered into. He then assailed the learned Single Judge's judgment dated 22.10.2020, arguing that the impugned judgment, instead of following Duro Felguera, S.A. v. Gangavaram Port Ltd., (2017) 9 SCC 729 ["Duro Felguera"] and Mayavati Trading (P) Ltd. v. Pradyuat Deb Burman, (2019) 8 SCC 714 ["Mayavati Trading"], was in the teeth of the principles laid down in the aforesaid two judgments. He also argued that whether ornot novation had taken place is, at the very least, an arguable point of considerable complexity which would depend upon a finding based upon various clauses of the MoU and the SHA, when construed in accordance with the surrounding circumstances. He also argued that what was missed by the learned Single Judge was the fact that a family settlement had been acted upon, resulting in an amendment of the Articles of Association of the company soon after the MoU was entered into. He also relied upon three recent judgments of this Court, which made it clear that unless an ex facie case had been made out that no arbitration agreement existed between the parties, a Section 11 court would be duty-bound to refer the parties to arbitration and leave complex questions of fact and law relating to novation of a contract under Section 62 of the Contract Act to be decided by an arbitral tribunal.