SKF INDIA LIMITED Vs. MGP ASSOCIATES PVT LTD

JUDGEMENT

(1.) THIS petition has been filed challenging the award dated 16.05.2007 passed by the respondents 3 to 5/ Arbitrators, under Sec.34 of the Arbitration and Conciliation Act 1996.

(2.) THE facts which are necessary for disposing of the above Original petition are as under:THE first respondent company was engaged in the business of Engineering Consultancy of the Predictive Maintenance Services, including Vibration Analysis, Machine Dynamics and Dynamic Balancing. THE respondents 1 and 2 conducted Seminars and are involved in the development of Computer based Training. THE petitioner, before this court, is a Multi National company having its Principal office in Swedan. THEy are mainly manufacturing Bearings. During the end of December 2002, the petitioner company deputed its officers to the respondents 1 and 2 expressing their interest in the services offered by the first respondent. Discussions were carried out and ultimately, the petitioner showed interest in acquiring the assistance of the first respondent to strengthen their newly launched Reliability System and to eliminate competition in the field. With the above objective in mind, the petitioner carried various diligent checks on the functioning of the first respondent. On 30.6.2003, a Confidentiality Agreement was entered into between the parties. THE investigation made by the petitioner comprised of technical due diligence, Accounting due diligence and Legal due diligence. According to the respondents 1 and 2, after being thoroughly satisfied about the working of the first respondent, the petitioner informed the respondents 1 and 2 that they would keep the due diligent reports confidential and therefore, copies of the same were not given to them. By letter dated 12.03.2004, the petitioner offered to purchase the assets of the first respondent excluding debts, liabilities receivables (or) obligations of the first respondent. All the assets to be purchased by the petitioner were valued by their own valuation team. THE petitioner offered Rs.115 Million as price for the purchase of assets. THE purchase price was offered in two parts namely one lumpsum of Rs.85 millions and another deferred payment of Rs.30 millions. Out of the lumpsum payment of Rs.85 millions, the petitioner reserved their right to deposit Rs.20 millions in an interest bearing Escrow Account for a period of two years as security for the due compliance of the terms and Employment Agreement with the second respondent. So far the second part of the purchase price of Rs.30 millions called "Earnout" which was based on average annual earnings before interest and tax for a period of two years from the date of assets purchased. THE petitioner also offered a commission of 10% on the net sales value of the Computer Based Training (CBT) for a period of five years. On 6.04.2004, An Asset Transfer Agreement was entered into between the first respondent and the petitioner and the same was duly confirmed by the second respondent. Simultaneously, the first respondent, the petitioner and one M/s.Mullah and Mullah, an Advocate firm, represented by its partner entered into an Escrow Agreement as per the Assets Transfer Agreement and a sum of Rs.20 millions was deposited with the said Mullah and Mullah, who had been appointed as Escrow agent by the first respondent and the petitioner. THE said amount was held by the Escrow agent in Trust for the first respondent as per the terms of the Escrow agreement.

(3.) THE respondents 1 and 2 sought to recover the balance purchase price under the Assets Transfer Agreement, claiming damages for wrongful termination. THE respondents also sought for 10% commission under clause 3.4 of the Assets Transfer Agreement. THE following are the reliefs sought for by the respondents 1 and 2 in the Claim petition before the Arbitral Tribunal consisting of the respondents 3 to 5:(a) To pay the first claimant a sum of Rs.50,000,000/- (Fifty million only)(b) To pay interest accumulated on Rs.20,000,000/- (Rupees twenty million only) lying in Escrow with the Escrow Agent, Mulla and Mulla, Mumbai from 06.04.2004 till date of repayment.(c) To furnish quarterly accounts on the sale of CBT packages and to direct the payment of 10% of the sales commission on the sales as per clause 3.4 of the Asset Transfer Agreement to the First Claimant.(d) To pay the second claimant a sum of Rs.15 Millions for wrongful termination of the employment contract.(e) To relieve the second Claimant from all and any obligations of whatsoever as envisaged in Asset Transfer Escrow and Employment Contract including any Non Complete obligations.(f) Direct the respondents to provide the Claimants with the TDS Certificates for the Tax deducted towards the payments effected by them to the Claimants and to return all the documents belonging to the Claimants such as Statutory records etc., currently in the custody of the respondent.(g) Prohibit by an order of Permanent injunction restraining the respondents, their men, agents, servants from in any manner using the e-mail id mgpec@vsnl.com(h) Exemplary costs for unnecessary dragging the Claimants to arbitration.(i) Such other reliefs in the interest of justice.