RATNAM SUDESH IYER versus JACKIE KAKUBHAI SHROFF

Citation: [2021] 11 S.C.R. 97 · Decided: 10-11-2021 · Supreme Court of India · Bench: SANJAY KISHAN KAUL · Disposal: Dismissed

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Judgment (excerpt)

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RATNAM SUDESH IYER
v.
JACKIE KAKUBHAI SHROFF
(Civil Appeal No. 6112 of 2021)
NOVEMBER 10, 2021
[SANJAY KISHAN KAUL AND M. M. SUNDRESH, JJ.]
Arbitration and Conciliation Act, 1996: s. 34 – Setting aside
of arbitral award –Dispute between the appellant and respondent
as regards sale of share – Complaint by the respondent before the
police against the appellant – Parties entered into settlement deed
whereby the respondent had to withdraw all complaints against the
appellant and was forbidden from writing complaints to any person
about the Deed and in return was to be paid US$ 1.5 million held in
escrow till the withdrawal of complaints; and US$ 2 million was to
be paid to the respondent out of the proceeds from the sale of shares
of the company – Breach of settlement deed through e-mail sent by
respondent’s wife – Initiation of arbitration proceedings –Direction
to escrow agent not to hand over the cheque for US$ 1.5 million till
the direction of the arbitrator–Meanwhile execution of share
purchase agreement and the shares were sold – Final award passed
awarding liquidated damages of US$ 1.5 million in favour of the
appellant; and that the respondent would not be entitled to the second
cheque of US$ 2 million held in escrow – Petition u/s. 34 – Both the
Single Judge and the Division Bench set aside the award – On
appeal, held: Appellant is a party based in Singapore thus, the
arbitration though carried out within the country, would be an
international commercial arbitration – Pre-2015 legal position would
prevail since s.34 proceedings had already commenced when the
2015 Amendment Act came into effect – A generally worded clause,
Clause 9 of the Settlement Deed cannot be said to constitute an
agreement to change the course of law that the s.34 proceedings
were subject to – General phraseology of a clause which seeks to
include any amendment to the Act would not be able to be availed
of to expand the scope of scrutiny as it would appear to run contrary
to the legislative intent of s.26 of the Amendment Act – Necessary
conditions of the Deed of Settlement stood satisfied – Effect of the
[2021] 11 S.C.R. 97
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SUPREME COURT REPORTS
[2021] 11 S.C.R.
award would be to deprive the respondent of the due valuation of
the shares and what was paid to him to bring his complaints to an
end – Respondent cannot be denied his dues because of such
indiscreet e-mail by his wife, who was not even party to the
proceedings nor party to the Settlement Deed – Arbitrator’s
conclusions not in accordance with the fundamental policy of Indian
law, and can thus be set aside under the pre-2015 interpretation of
s.34 – Since the consequencesare so inappropriate, the both the
High Courts opined that whatever be the position that is applicable-
pre or post amendment, in these facts the award would not standand
the same is upheld – Arbitration and Conciliation (Amendment) Act,
2015.
Dismissing the appeal, the Court
HELD: 1.1 The admitted position is that the appellant is a
party based in Singapore and thus, in terms of the said definition
of “international commercial arbitration” u/s. 2(1)(f) of the
Arbitration and Conciliation Act, 1996, the arbitration although
carried out a within the country, would be an “international
commercial arbitration”. It is nobody’s case that the award in
question is a foreign award within the meaning of Part II Section
44 of the said Act. For domestic awards, Chapter 7 of the said
Act provides recourse against the arbitral award. Section 34 of
the said Chapter provides for application for setting aside an
arbitral award and specifies the ground available for the same.
The Arbitration and Conciliation (Amendment) Act, 2015
amended the said Act w.e.f. 23.10.2015; inter alia by inserting
Explanations to Section 34(2) of the said Act as well as by inserting
Sub-Section 2A to Section 34. There is no doubt that the scope of
interference by the Court became more restrictive with the
amendments coming into force. [Para 12][108-G-H; 109-A-C]
1.2 A distinction is sought to be carved out between a
domestic award arising from an international commercial
arbitration and a purely domestic award. The test for interference
was sought to be made more stringent by the amendment in
respect of a domestic award arising from an international
commercial arbitration. A distinction is sought to be made between
purely domestic awards and awards arising out of arbitrations
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other than interna

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