Mecamidi S.A v. Flovel Mg Holdings Private Limited & Anr

NAVIN CHAWLA, J JULY 30, 2019/rv

Page 1 * IN THE HIGH COURT OF DELHI AT NEW DELHI + O.M.P. (COMM) 228/2017 & I.A.No.10190/2018 Reserved on: 12.04.2019 Date of Decision : 30.07.2019 MECAMIDI S.A ..... Petitioner Through: Ms.Ramni Taneja, Adv. versus FLOVEL MG HOLDINGS PRIVATE LIMITED & ANR. ..... Respondents Through: Mr.H.L.Tiku, Sr.Adv. with Ms.Yashmeet Kaur, Adv. CORAM: HON'BLE MR. JUSTICE NAVIN CHAWLA 1. This petition has been filed under Section 34 of the Arbitration and Conciliation Act, 1996 (hereinafter referred to as the "Act") challenging the Arbitral Award dated 22nd December 2016 passed by the Arbitral Tribunal (hereinafter referred to as the "Impugned Award"). 2. The Impugned Award, holding the petitioner liable for breach of the Joint Venture Shareholders Agreement executed between the parties as well as the Articles of Association of the respondent no. 2 Company, has awarded damages of Rs.1,50,00,000/- to the respondents alongwith interest @ 12% p.a. The Award further dismissed the counter claims filed by the petitioner. Page 2 3. The disputes between the parties arose out of the alleged non- compliance of the terms of the Joint Venture and Shareholders Agreement and the Addendum thereto dated 22.03.2007 (hereinafter referred to as "JVSA") and the Supplementary Agreement dated 28.05.2007 by the petitioner and the alleged non-compliance of four further Agreements dated 22.09.2007 by the respondents. Some facts relevant to understand the disputes between the parties are given as under. 4. The respondent no.2 was incorporated on 14.11.2006 by one Mr. Maharaj Kar and his son Mr. Gautam Kar under the name of "Flovel Energy Private Limited", with issued share capital of 10,000 equity shares of Rs.10/- each, totaling Rs.1,00,000/-, held equally by Mr. Maharaj Kar and Mr. Gautam Kar. Thereafter, on incorporation of respondent no. 1 company on 16.03.2007, the shares held by Mr. Maharaj Kar and Mr. Gautam Kar in Flovel Energy Private Limited/respondent no.2 were transferred to "Flovel MG Holdings Private Limited"/respondent no. 1. 5. On 22.03.2007, the respondents entered into the JVSA with the petitioner, a global supplier for Electro-Mechanical equipment for small and average Hydro Power Plants, so as to enable the respondent no. 2, as a Joint Venture Company, to market, design, manufacture, install and service hydropower equipment. The parties further incorporated the terms of the JVSA (as amended) into the Articles of Association of the respondent no.2 company. The JVSA envisaged equity participation in respondent no. 2 by the petitioner and respondent no. 1 in the ratio of Page 3 50% each. The JVSA also provided for change of respondent no. 2"s name to "Flovel Mecamidi Energy Private Limited" upon subscription of requisite number of shares by the petitioner in the respondent no. 2 Company, which was eventually so changed on 16.07.2007. 6. As per the JVSA, the parties agreed for fixing the authorized and paid-up capital of the respondent no. 2 Company at Rs.5,00,00,000/-. The JVSA further, in Clause 2 provided for the mechanism for and stages of amounts of subscription of shares by the petitioner and the respondent no. 1 to attain the final ratio of 50:50 shareholding. The said Clause is reproduced hereinunder: "2. Share Subscription 2.1 Post subscription under this clause by Mecamidi and MG, the paid-up capital of the JV Company shall be Rs.44,000,000/- (Indian Rupees forty four million only) divided into 4,400,000 (four million four hundred thousand ) equity shares of Rs.10/- each of the JV Company to be shared between the Mecamidi and MG in the following ratio: 2.1.1 Mecamidi: Subject to Clause 27 below, Mecamidi shall, within 15 [fifteen] working days from the date of the execution of this Agreement remit Rs.11,000,000/- (Indian Rupees eleven million only) towards subscription of 1,100,000 (one million one hundred thousand) equity shares of the JV Company, equal to 25.00% of the paid- up capital of the JV Company; 2.1.2 MG: Subject to Clause 2.7 be