EDELWEISS ASSET RECONSTRUCTION COMPANY LIMITED, ACTING IN ITS CAPACITY AS TRUSTEE OF THE EARC TRUST v. GTL INFRASTRUCTURE LIMITED AND ANR.

Court: High Court of Delhi

Bench: HON'BLE MR. JUSTICE C.HARI SHANKAR

Judgment date: 2020-11-18

Case summary

High Court of Delhi judgment dated 2020-11-18. EDELWEISS ASSET RECONSTRUCTION COMPANY LIMITED, ACTING IN ITS CAPACITY AS TRUSTEE OF THE EARC TRUST v. GTL...

Judgment text

$~ * IN THE HIGH COURT OF DELHI AT NEW DELHI th Reserved on: 20 July, 2020 th Pronounced on: 18 November, 2020 + ARB. A. (COMM) 13/2020 & I. A. 4322/2020 EDELWEISS ASSET RECONSTRUCTION COMPANY LIMITED, ACTING IN ITS CAPACITY AS TRUSTEE OF THE EARC TRUSTS SC-338,343,366 AND 389 ..... Petitioner Through: Mr. Sandeep Sethi, Sr. Adv. with Ms. Misha, Ms. Mahima Sareen and Ms. Moulshree Shukla, Advs. versus GTL INFRASTRUCTURE LIMITED AND ANR. ..... Respondents Through: Mr. Parag Tripathi, Sr. Adv. with Mr. D. N. Ray, Mr. Rohan Rajyadhaksha, Mr. Prasad Lotlikar, Mr. Suresh Gadre, Mr. Vinod Bhadang, Mr. Lokesh Choudhary and Ms. Sumita Ray, Advs. for the Respondent No. 1 Mr. Rajiv Nayar, Sr. Adv. with Mr. Saket Sikri, Mr. Amit Mahajan, Mr. Essaji Vahanvati, Mr. Vikalp Mudgal and Mr. Ajay Pal Singh Kullar, Advs. for R-2 CORAM: HON'BLE MR. JUSTICE C. HARI SHANKAR Signature Not Verified Digitally Signed By:SUNIL SINGH NEGI ARB. A. (COMM) 13/2020 Page 1 of 95 Signing Date:19. 11.

2020 19:26:23 % J U D G M E N T 1. Edelweiss Asset Reconstruction Company Ltd. (abbreviated, hereinafter, to “Edelweiss”) invokes Section 37 of the Arbitration and Conciliation Act, 1996 (hereinafter referred to as “the 1996 Act”) to th challenge order, dated 17 December, 2019, passed by the learned Arbitral Tribunal, which directed M/s. GTL Infrastructure Ltd. (hereinafter referred to as “GIL”) to pay ₹ 240 crores to M/s. GTL Ltd. (hereinafter referred to as “GTL”) and to deposit ₹ 200 crores in an Escrow account, to be maintained by GIL. 2. GTL and GIL were the claimant and respondent, before the learned Arbitral Tribunal, respectively. The operative paragraphs of the impugned Order, with which Edelweiss claims to be aggrieved, reads thus: “37. It is accordingly ordered that: (i) The Respondent will pay a sum of Rs. 40 crores th to the Claimant before or by 27 December, 2019 towards Security Deposit as contemplated under th Clause 4. 5 of the Suspension Agreement dated 8 March, 2018.

(hereinafter referred to as the “Suspension Agreement”) (ii) The Respondent shall pay Rs. 400 crores in accordance with the below mentioned schedule: th 80 Crores to be paid directly Before or by 27 to the Claimant December, 2019 th 80 Crores to be deposited in Before or by 27 an Escrow Account to be January, 2020 maintained by the Signature Not Verified Digitally Signed By:SUNIL SINGH NEGI ARB. A. (COMM) 13/2020 Page 2 of 95 Signing Date:19. 11.

2020 19:26:23 Respondent th 80 Crores to be paid directly Before of by 27 to the Claimant February, 2020 th 80 Crores to be deposited in Before or by 27 an Escrow Account to be March, 2020 maintained by the Respondent th 40 Crores to be paid to the Before or by 27 Claimant directly April, 2020 th 40 Crores to be deposited in Before or by 27 an Escrow Account to be April, 2020 maintained by the Respondent (iii) The Claimant shall provide uninterrupted services to the Respondent subject to the terms of payment contained in the two foregoing sub-clauses. 38. The Respondent has agreed to furnish the details of the Escrow Account with the Tribunal as well as the Claimant on th or before 27 December, 2019. It is made clear that in the eventuality of any default in adhering to the schedule mentioned above, the Respondent shall become immediately liable for payment of the entire sum of Rs. 400 crores less the unpaid/remaining sum to the Claimant. 39.

It is clarified that the present order shall await the Final Award and shall be subject to adjustments in order to conform to the Final Award. ” 3. Edelweiss was not a party before the learned Arbitral Tribunal, but claims to be vitally affected by the impugned directions. In fact, it is claimed, by Edelweiss, that GIL and GTL are in collusion, and that they misled the learned Arbitral Tribunal into passing the impugned Order, suppressing the fact that Edelweiss had a first charge over the monies which GIL has been directed to pay to GTL, or to deposit in the Escrow account. Signature Not Verified Digitally Signed By:SUNIL SINGH NEGI ARB. A. (COMM) 13/2020 Page 3 of 95 Signing Date:19. 11. 2020 19:26:23 4. Before appreciating the grievance of Edelweiss, it would be necessary to briefly capitulate the facts and the justification, cited in the impugned Order, for issuing the above directions. The Impugned Order 5. M/s. Chennai Network Infrastructure Ltd .

(hereinafter referred to as “CNIL”) and the Aircel group of Companies (hereinafter referred to as “Aircel”) entered into an Existing Site Agreement th (hereinafter referred to as “ESA”) dated 14 January, 2010, whereunder Aircel agreed to provide CNIL sites and land on ownership/tenancy basis, to be developed by CNIL, so as to enable Aircel to set up, on such sites/land, Active Equipment/infrastructure, using which Aircel could provide telecommunication services. 6. Under Clause 6 of the ESA, a tripartite Energy Management th Agreement (hereinafter referred to as “EMA”) was executed, on 14 January, 2010 itself, between CNIL, Aircel and GTL. Clause 3. 1 of the EMA obligated CNIL to oversee the management of electricity and diesel consumption at the above sites, and payment therefor, whereas Clause 3. 2 allowed CNIL to outsource these responsibilities to GTL. th 7. On the same day, i. e.

14 January, 2010, a third, New Site Agreement (hereinafter referred to as “NSA”) was executed between CNIL and Aircel. Clause 2. 1 of the NSA required Aircel to grant CNIL the Right of First refusal, in respect of all the requirements for Signature Not Verified Digitally Signed By:SUNIL SINGH NEGI ARB. A. (COMM) 13/2020 Page 4 of 95 Signing Date:19. 11. 2020 19:26:23 sites, of Aircel (other than certain excluded sites), by way of a written proposal, for a period of three years. Each such site was required, by Clause 2. 5, to be developed by CNIL, for use by Aircel to install and maintain its Active Equipment, for providing telecommunication services. Clause 2. 6 obligated Aircel to submit 20,000 proposals, to CNIL, during this three-year proposal period, which was referred to as the “Minimum Commitment”. Of these, at least 4000 proposals (the “Annual Commitment”) were required to be submitted each year. th 8.

CNIL, vide letter dated 18 January, 2010, requested GTL to be its implementation partner. The request was accepted by GTL, vide nd response dated 22 January, 2010. CNIL and GTL, thereupon, th entered into a TSPI Agreement dated 28 January, 2010, whereunder GTL agreed to procure necessary materials for establishing Passive Telecom Infrastructure on the sites provided by Aircel to CNIL, and to convert them into completely built-up telecom sites, by carrying out requisite civil and electrical work thereon, on behalf of CNIL. th 9. On 5 February, 2010, CNIL issued a Purchase Order, to GTL, th for ₹ 4350 crores, which was accepted by GTL vide letter dated 8 February, 2010.

As GTL was incurring huge expenses, towards establishing Passive Telecom Infrastructure on the sites, and converting them to telecom sites, to be used by Aircel for providing telecommunication services to its customers, it became necessary to indemnify GTL, in the event of default, by Aircel, in adhering to the “Minimum Commitment” visualised by Clause 2. 6 of the NSA. th Accordingly, the TSPI Agreement dated 28 January, 2010 was Signature Not Verified Digitally Signed By:SUNIL SINGH NEGI ARB. A. (COMM) 13/2020 Page 5 of 95 Signing Date:19. 11. 2020 19:26:23 th modified by an Addendum dated 9 February, 2010, whereby CNIL agreed to indemnify GTL against direct losses, liabilities, damages, demands etc. , suffered by it, or by parties indemnified by GTL, on account of default, on the part of Aircel/CNIL to provide the minimum commitment of 20,000 new sites, or on account of any other breach of the terms and conditions of the Purchase Orders.

CNIL also undertook and agreed, vide the said Addendum, to make all efforts to recover monies from Aircel and make payments to GTL, or to the suppliers of GTL. 10. Predicated on this Addendum, GTL proceeded to source th requisite material, as envisaged in the Purchase Order dated 5 February, 2010 issued by CNIL. GTL alleged, before the learned Arbitral Tribunal, that, despite such procurement of materials having been effected by it, CNIL failed to provide details of the sites where the material were to be delivered, resulting in considerable financial prejudice to GTL. This fact was brought, by GTL, to the notice of th CNIL, vide letter dated 12 February, 2013, in response to which th CNIL replied, on 20 May, 2013, informing GTL that, as Aircel had completely stopped site orders, CNIL was not able to provide such orders, or details thereof, to GTL.

Expressing chagrin at this th development, GTL wrote back, to CNIL, on 10 June, 2013, informing CNIL that, based on the assurances held out by CNIL and Aircel under the TSPI Agreement, GTL had placed bulk orders for material, which was ready for being delivered and commissioned. The failure, on the part of CNIL, in providing site details, it was asserted, had seriously prejudiced GTL, as it had made huge advance Signature Not Verified Digitally Signed By:SUNIL SINGH NEGI ARB. A. (COMM) 13/2020 Page 6 of 95 Signing Date:19. 11. 2020 19:26:23 payments to the vendors from whom it had procured the material, for making which it had also availed considerable borrowings from banks. th 11. Ultimately, on 24 May, 2014, a Settlement Agreement was executed, between CNIL, Aircel and GTL, whereunder, against the claim, of GTL, of ₹ 2450 crores, ₹ 1800 crores was “settled”. 12. The remaining ₹ 650 crores constitutes subject matter of the arbitral proceedings, wherefrom the present appeal emanates.

13. As the efforts of GTL, to recover the remaining ₹ 650 crores, were proving abortive, a learned retired Judge of the High Court of Bombay, Hon’ble Mr. Justice D. G. Deshpande, was requested to act as Conciliator, to resolve the impasse. Before the learned Conciliator, th CNIL and GTL agreed – as reflected in Order dated 13 February, 2015 issued by the learned Conciliator – to enter into a long-term Energy Management Agreement and Operations and Maintenance Agreement, to remain alive till 2030, which would guarantee GTL recovery of the amounts claimed by it, as well as generate reasonable revenues to enable GTL to repay its lenders. It was further agreed that breach, by CNIL, of its commitments under the said Agreements, would result in reinstatement of the claim of GTL. Pursuant thereto, st on 31 March, 2015, CNIL and GTL executed, inter se, an Energy Management Agreement (EMA) and an Operations and Maintenance Agreement (OMA).

Signature Not Verified Digitally Signed By:SUNIL SINGH NEGI ARB. A. (COMM) 13/2020 Page 7 of 95 Signing Date:19. 11. 2020 19:26:23 nd 14. At this stage, vide order dated 22 December, 2017 issued under Section 232 of the Companies Act, 2013, the learned National Company Law Tribunal (hereinafter referred to as “the learned NCLT”), transferred all liabilities of CNIL to GIL. GIL, thereby, stepped into the shoes of CNIL, in the dispute with GTL. th th th 15. On 6 January, 2018, 10 January, 2018 and 15 January, 2018, three more communications were addressed by GIL to GTL which resulted, effectively, in the exacerbation of the financial distress of GTL. By these communications, GIL intimated GTL that Aircel had surrendered their Unified Access Services Licences for 6 service areas and had requested CNIL (later GIL) to stop billing of all st types of charges to Aircel w. e. f. 1 February, 2018, for the Passive Infrastructure provided at all sites in the said six circles.

This, it was stated, had resulted in a loss of 1,994 tenancies for Aircel. In these circumstances, it was stated that it was not possible for GIL to adhere st to its obligations under the EMA dated 31 March, 2015. 16. GIL and GTL attempted, as it were, to pour some oil on the troubled waters by entering into yet another agreement, titled the th “Suspension Agreement” on 8 March, 2018. By this Agreement, GTL agreed to suspend, without prejudice, various Clauses of the st EMA dated 31 March, 2015, and other Agreements, whereunder GTL could otherwise have initiated legal proceedings against GIL, albeit without prejudice, in order to enable GIL to attempt to restructure its debts and stabilise its operations. The suspension Signature Not Verified Digitally Signed By:SUNIL SINGH NEGI ARB. A. (COMM) 13/2020 Page 8 of 95 Signing Date:19. 11. 2020 19:26:23 st st period, which was originally till 31 June, 2018, was extended till 31 st March, 2019 and, thereafter, till 31 August, 2019. 17.

Alleging that, despite all these efforts, GIL had failed to disgorge the amounts remaining to be paid to GTL, GTL issued a th Legal Notice, dated 29 August, 2019, to GIL, calling on GIL to pay, forthwith, to GTL, the amounts outstanding, being ₹ 40 crores as per Clause 4. 5 of the Suspension Agreement as a refundable deposit and ₹ 650 crores, being the outstanding amount payable under the TSPI Agreement, along with interest. 18. On receiving this missive, GIL requested for a meeting of the Joint Steering Committee of GTL and GIL which, accordingly, was th held on 5 September, 2019. In the said meeting, GIL denied breach of any obligation, towards GTL, on its part, and contended that all obligations stood discharged. The demand for payment of ₹ 40 crores, in terms of Clause 4. 5 of the Suspension Agreement, was also refuted, on the ground that the Suspension Agreement had expired. 19.

The impasse having thus proved incapable of an amicable resolution, it was decided that the disputes be referred to arbitration. Thus, came to be constituted the learned Arbitral Tribunal, which th passed the impugned Order on 17 December, 2019. 20. We are not concerned with the main dispute between GIL and GTL, with which the learned Arbitral Tribunal continues to remain in seisin. The impugned Order came to be passed on an application, Signature Not Verified Digitally Signed By:SUNIL SINGH NEGI ARB. A. (COMM) 13/2020 Page 9 of 95 Signing Date:19. 11. 2020 19:26:23 th dated 24 September, 2019, filed by GTL, containing the following prayers (as reproduced in para 1 of the Impugned Order): “(a) Pass an order directing the Respondent to pay to the Applicant/Claimant an admitted sum of Rs 650,00,00,000 (Rupees Six Hundred Fifty Crores Only) and the Rs. 40,00,00,000/- (Rupees Forty Crores Only), totalling Rs.

690,00,00,000/- (Rupees Six Hundred Ninety Crores Only), along with interest @ 21% p. a. or at such rate as the Hon’ble Tribunal may deem fit and proper from the due date till the date of realization. (b) In an alternative to prayer clause (a) Pass an order directing the Respondent to furnish security in the sum of Rs Rs 650,00,00,000 (Rupees Six Hundred Fifty Crores Only) and Rs. 40,00,00,000/- (Rupees Forty Crores Only) totalling to Rs. 690,00,00,000/- (Rupees Six Hundred Ninety Crores Only) along with interest @ 21% p. a. or at such rate as the Hon’ble Tribunal may deem fit and proper from the due date till the date of realization, in the form of deposit of the same before this Hon’ble Tribunal to secure the claim in the Claimant in the arbitration proceedings; (c) Pending the hearing and final disposal of the Claim by this Hon’ble Tribunal, the Respondent be directed to pay to the Claimant a sum of Rs.

40,00,00,000/- (Rupees Forty Crores Only) in order to enable the Claimant to keep the network of the Respondent keep going or such other amount as this Hon’ble Tribunal may deem fit and proper; (d) Pass an order directing that pending the furnishings/deposit of security in terms of prayer (a), Respondent is restrained from proceeding further with the sale of any of its assets including its real estate assets and tower assets as proposed; (e) Pass an order directing the Respondent from transferring, encumbering, alienating or in any other manner dealing with the shares of Respondent; (f) Pending furnishing of security in the form of (a) above, pass an order of injunction restraining the Respondent, whether directly or indirectly, from selling, disposing or creating any third party interest in all of any of its movable or Signature Not Verified Digitally Signed By:SUNIL SINGH NEGI ARB. A. (COMM) 13/2020 Page 10 of 95 Signing Date:19. 11.

2020 19:26:23 immovable assets including cash reserves in bank accounts and the active infrastructure equipment installed at the sides of the Claimant; (g) Issue an ad-interim and interim order and/or direction in terms of prayer (a) to (f) above; (h) Grant costs of this petition; and (i) Pass such other/further order(s) as this Hon’ble Court deem fit and proper in the facts and circumstances of the case. ” 21. After arguments were heard and orders were reserved, by the learned Arbitral Tribunal on the application, of GTL, under Section 17, “clarificatory submissions”, opposing the application, were tendered by GIL.

It was contended, therein, that, as the application of GTL was premised on the advisability of securing the claim amount, so as to obviate the possibility of the eventual award, if any, being rendered a mere paper decree, no direction for payment of any amount, by GIL to GTL, was necessary, and that the apprehension of GTL would be sufficiently allayed if deposit, in an Escrow account, were directed. Any direction, for payment of the claimed amount, by GIL to GTL would, it was submitted, result in the following “irreversible consequences” for GIL (the respondent before the learned Arbitral Tribunal): “(A) The Respondent’s net worth will erode to a point where it will be definitely pushed into insolvency. Whereas, if the moneys are parked in an escrow, till the pendency of the present proceedings, the Respondent will still be able to (at least on paper) lay a potential claim to the funds.

This might be all the edge the Respondent requires in its balance sheet to stay afloat which will also be crucial to the Claimant’s interests. Therefore also, the balance of convenience lies with a direction for escrow. Signature Not Verified Digitally Signed By:SUNIL SINGH NEGI ARB. A. (COMM) 13/2020 Page 11 of 95 Signing Date:19. 11. 2020 19:26:23 (B) In a situation where outright payment is ordered to be made to the Claimant, they will be every possibility that other creditors of the Respondent will immediately file similar proceedings and pray for similar reliefs, thereby eroding the substratum of the Respondent, which, to say the least, will jeopardize even the Claimant’s ability to recover any amount from the Respondent. Further, the Respondent’s accounts are in CDR (corporate debt restructuring) with banks who may advise the Respondent or independently challenge the payment direction in appeal. Either way, the balance of convenience lies in a direction to deposit in escrow.

” Apropos the claim of ₹ 40 crores, under the Suspension Agreement, GIL assented to a direction to pay the said amount to GTL, but prayed that the payment be made subject to the outcome of the arbitral proceedings. 22. While opposing, on principle, the aforesaid “Clarificatory Submissions” tendered by GIL on the ground, inter alia, that the liability of ₹ 400 crores, as payable to GTL, had been admitted by GIL since long, GTL, in its response to the said submissions of GIL, tentatively agreed to the deposit of the said amount of ₹ 400 crores in an escrow account, to be maintained by GTL or any other mutually agreed Escrow Agent. 23. During arguments before the learned Arbitral Tribunal, GTL contended that there was no dispute, by GIL, to its liability to pay ₹ 650 crores to GTL, in its Statement of Defence. Accordingly, it was submitted that GIL was liable to suffer an Interim Award/Partial Decree, for the said amount, even at that stage.

In opposition, GIL argued that an amount of ₹ 200 to 250 crores, in terms of the EMA Signature Not Verified Digitally Signed By:SUNIL SINGH NEGI ARB. A. (COMM) 13/2020 Page 12 of 95 Signing Date:19. 11. 2020 19:26:23 st and OMA dated 31 March, 2015, already stood recovered by GTL and that, therefore, GTL could no longer lay a claim to ₹ 650 crores. Had the interim arrangements, as contemplated by the EMA and OMA been allowed to continue, it was submitted that GIL would have been able to liquidate the entire ₹ 650 crores. There was no justification, it was contended, for the Interim Arrangements, contemplated by the said Agreements, not being allowed to continue. 24. During arguments before the learned Tribunal, GIL, while reasserting the fact that ₹ 250 crores already stood recovered, by GTL, in terms of the EMA and OMA, was unable to dispute the remaining claim of ₹ 400 crores, or to establish that the said amount stood liquidated.

All that was submitted, in this regard, was that, had the EMA and OMA been allowed to continue, the entire debt of ₹ 650 crores would stand liquidated. Reasoning and Findings of the learned Arbitral Tribunal 25. The learned Tribunal, on these facts, held that there was no denial, by GIL, of its liability to pay ₹ 400 crores to GTL which, therefore, was “not a sum presently in dispute” within the meaning of Order VIII Rules 3, 4 and 5 of the Code of Civil Procedure, 1908 (CPC). Qua the remaining ₹ 250 crores, the learned Tribunal recorded the fair statement, of GTL, that adjudication, of the liability of GIL, was necessary. Signature Not Verified Digitally Signed By:SUNIL SINGH NEGI ARB. A. (COMM) 13/2020 Page 13 of 95 Signing Date:19. 11. 2020 19:26:23 26. After referring to the judgement of the Supreme Court in Uttam 1 Singh Duggal v. United Bank of India Ltd and of the Division Bench of this Court in Numero Uno International Ltd v.

Prasar 2 Bharti , the impugned Order concludes thus (before issuing the impugned directions in para 37): nd “33. On 22 October, 2019, Mr. Ray, Learned Counsel Ld. for the Respondent on instructions received from the Authorised representatives present before the Tribunal stated, by way of an Interim arrangement, the Respondent would make payment of Rs 400 crores in five tranches of Rs 80 crores each, along with a Security Deposit of the Rs 40 crores, in terms of Clause 4. 5 of the Suspension Agreement. This arrangement was not opposed by Ld. Counsel for the Claimant. 34. However, as noted in paragraph 19 above, the Respondent thereafter pressed for depositing the aforesaid amount in escrow, which prayer was not resisted by the Claimant in its response thereto. However, Ld Counsel for the Claimant may have vehemently opposed this proposed th arrangement during the oral arguments on 26 November, 2019 and indeed pressed for the passing of an Interim Award. 35.

In these circumstances, though the Claimant has moved its Application under Section 17, Mr. Wadhwa has urged the Tribunal to treated under Section 31(6) of the A & C Act and pass an Interim Award/Partial Decree against the Respondent and in favour of the Claimant qua the undisputed sum of Rs 400 crores. In the SOC there is a claim of over Rs 890 crores. In reply to which the Respondent has pleaded in the SOD that approximately Rs 200-250 crores has been recovered from adjustments made by inter party transactions from 2015 to 2019. The Tribunal finds that the Claimant is justified in its contention that there being no categorical denial to the Respondent’s liability for the sum of Rs 400 (2000) 7 SCC 120 150 (2008) DLT 688 Signature Not Verified Digitally Signed By:SUNIL SINGH NEGI ARB. A. (COMM) 13/2020 Page 14 of 95 Signing Date:19. 11. 2020 19:26:23 crores, the Tribunal must deduce that there is a tacit admission by the Respondent. 36.

The Tribunal is further mindful of the financial situation of the parties herein, as submitted by Ld Counsel on both sides. Ld Senior Counsel for the Claimant has emphasized that it has continued till date to perform its contractual obligations for maintenance of the Passive Telecom Infrastructure even in the absence of payment of 10- 15% towards ‘Interim Service Fee’ as postulated in the Suspension Agreement. On the other hand, Learned Counsel for the Respondent had stated that it is in the interest of both the parties that inter-se agreements should run their course and tenure till 2030 to enable the recoupment of the Respondent’s dues to the Claimant. ” The impugned directions, as reproduced in para 2 supra, follow. Subsequent proceedings 27. The impugned Order has formed subject matter of three judicial proceedings, prior to the institution of the present appeal, viz. (i) Arb. A. (COMM) 7/2020 (GTL Infrastructure Ltd v.

GTL Ltd), filed by GIL under Section 37(2)(b) of the 1996 Act before this Court, (ii) OMP (ENF) (COMM) 23/2020 (GTL Ltd v. GTL Infrastructure Ltd), preferred by GTL under Section 36 of the 1996 Act, before this Court and (iii) Suit LD-VC No 55/2020 (Edelweiss Asset Reconstruction Co. Ltd v. GTL Infrastructure Ltd & ors. ), filed by the appellant Edelweiss against GIL and GTL before the High Court of Bombay. Edelweiss was not a party, either in Arb. A. (COMM) 7/2020 or in OMP (ENF) (COMM) 23/2020. 28. Arb. A. (COMM) 7/2020 Signature Not Verified Digitally Signed By:SUNIL SINGH NEGI ARB. A. (COMM) 13/2020 Page 15 of 95 Signing Date:19. 11. 2020 19:26:23 28. 1 By this appeal, under Section 37(2)(b) of the 1996 Act, GIL th challenged the presently impugned Order dated 17 December, 2019. 28.

2 Holding the reliance, by the learned Arbitral Tribunal, on 1 2 Uttam Singh Duggal and Numero Uno International Ltd to be justified, a learned Single Judge of this Court, vide judgement dated th 4 March, 2020, dismissed Arb A (COMM) 7/2020, observing and finding, in paras 31 and 34 of the judgement, thus: “31. This Court finds no error or infirmity in this finding of the Tribunal. Once any part of the liability is admitted, law does not envisage that the admitted payments should be postponed till the disputed amounts are adjudicated and finalized. Even today before this Court while learned counsel for the appellant has argued that there was no tacit admission of liability, but the fact of the matter is that on being confronted with the observations of the Tribunal, regarding the admission of liability, it could not be pointed out that these findings were incorrect.

Learned counsel has also not been able to point out any material or document from which it could be gathered that the finding of the Tribunal of admitted liability is erroneous. In fact, the admission of liability by the appellant is further fortified by the fact that the appellant itself on 22. 10. 2019 had agreed to an interim arrangement whereby it undertook to make the payments in five tranches of Rs 80 crores each. Relevant para of the Order is extracted in the earlier part of the judgement. Since the appellant itself offered to clear the outstanding liability in five tranches, the Tribunal accepted the offer and directed accordingly. The Schedule that has been drawn out by the Tribunal regarding the modalities of payment in para 37 of its Order is only in terms of the offer, voluntarily made by the appellant.

Learned senior counsel for the respondent is thus right in its contention that having offered to clear the liability in instalments, the appellant cannot even assail the impugned order. ***** Signature Not Verified Digitally Signed By:SUNIL SINGH NEGI ARB. A. (COMM) 13/2020 Page 16 of 95 Signing Date:19. 11. 2020 19:26:23 34. Thus in my view, on account of the admission and offer of the appellant to clear its liability and the law that if an amount is admitted by a party, the same should be released to the opposite party in the earliest, without waiting for adjudication of the remaining disputes, no infirmity can be found with the impugned order, calling for any interference by this Court in the present proceedings. The appeal has no merits and is accordingly dismissed. ” 29. OMP (ENF. ) (COMM) 23/2020 29. 1 These proceedings have been initiated by GTL, for enforcement of the impugned Order. Notice stands issued thereon. Edelweiss has applied for impleadment therein. 30.

Suit LD-VC No 55/2020 30. 1 Alleging that the payments made by GIL to GTL, including the amounts paid as a consequence of the impugned Order, amounted to illegal diversion of monies secured in favour of Edelweiss, this suit, filed before the High Court of Bombay, prayed, inter alia, for a permanent injunction, restraining GIL “from transferring, alienating and/or conveying the amount of ₹ 440 crores (the amount of the Arbitral Order) or any other amount in favour of (GTL) including ₹ 320 crores, prior to fully discharging the outstanding dues of (Edelweiss)”. In the event any such transfer had already taken place, the suit prayed for a decree of mandatory injunction, directing GIL to reconvey the amounts. Ad interim ex parte injunction, against GIL, “restraining it from transferring, alienating and/or conveying the Signature Not Verified Digitally Signed By:SUNIL SINGH NEGI ARB. A. (COMM) 13/2020 Page 17 of 95 Signing Date:19. 11.

2020 19:26:23 amount of ₹ 440 crores (the amount of the Arbitral Order) or any other amount in favour of (GTL)” was also sought. 30. 2 This suit came up for hearing before the High Court of Bombay th on 5 May, 2020. On the said date, GIL submitted, the High Court, that the Demand Drafts for ₹ 320 crores, drawn in favour of GTL, had been returned to GIL, and stood deposited in the TRA (Trust and Retention Agreement) Account of GIL. The statement was accepted as an undertaking given to the High Court. In view thereof, the High Court opined that it was not necessary to grant the urgent ad interim relief sought by Edelweiss. Apropos the interim prayer for restraining the amounts covered by the impugned Order of the learned Arbitral Tribunal being transferred by GIL to GTL, Edelweiss did not press the said relief at that stage. Liberty was granted, by the High Court, to Edelweiss to apply for this relief at a later stage, when the merits of the matter would be examined.

The appellant’s case 31. The case set up by the appellant may be best understood by paraphrasing it, thus: (i) The appellant is an asset reconstruction company, in terms of Section 3 of the Securitisation and Reconstruction of Financial Assets and Enforcement of Financial Securities Interests (SARFAESI) Act, 2002. Signature Not Verified Digitally Signed By:SUNIL SINGH NEGI ARB. A. (COMM) 13/2020 Page 18 of 95 Signing Date:19. 11. 2020 19:26:23 (ii) In 2007-2008, CNIL and GTL availed loans from various banks and financial institutions, for financing of installation of telecom towers. Default, in liquidating the loans, however, occurred, resulting in GTL and CNIL requesting the consortium of lenders for corporate debt restructuring (CDR). Accordingly, st the case of GTL and CNIL were referred to the CDR Cell on 1 July, 2011, and the existing loans were restructured.

st (iii) On 31 December, 2011, two separate Master Restructuring Agreements (MRAs) was executed between the CDR lenders and GIL, and between the CDR lenders and CNIL, containing the terms for restructuring of the debt. th (iv) On 25 June, 2013, a Trust and Retention Account (TRA) Agreement was executed between the Union Bank of India (which acted as the Monitoring Institution as well as the Account Bank for the MRA) and the IDBI Trusteeship Services Ltd (acting as a Security Trustee) and GIL, whereunder, consequent to the agreement of the CDR Lenders to restructure the debts of GIL, all receivables of GIL from its operations and businesses, duly charged to its secured financial creditors, were to flow to various accounts set up in the ‘Account Bank’. Any outflow, from the said account, could be made only in the manner envisaged by the TRA Agreement. (v) As the account of GIL was performing unsatisfactorily, it st was declared a Non-Performing Asset (NPA), w. e. f. 31 June, 2000.

Consequent thereupon, the CDR Lenders, in a meeting Signature Not Verified Digitally Signed By:SUNIL SINGH NEGI ARB. A. (COMM) 13/2020 Page 19 of 95 Signing Date:19. 11. 2020 19:26:23 th held on 26 September, 2016, invoked the Strategic Debt Restructuring Scheme (SDR Scheme), in accordance with the guidelines of the Reserve Bank of India (RBI), agreeing, inter alia, to conversion of part of the debt into equity, and to the merger of CNIL with GIL. As a result of conversion of part of the debt of GIL into equity, the CDR Lenders came to hold about 63. 16% of the share capital of GIL. (vi) The SDR Scheme, however, also failed to take off. The st account of GIL was again declared NPA w. e. f. 1 July 2011. (vii) As a result, the CDR Lenders decided to sell the financial assets of GIL to an asset reconstruction company. Edelweiss, along with Bank of America Merrill Lynch, bid for acquisition of the entire financial asset sale of GIL.

The offer of Edelweiss, for ₹ 2400 crores, was accepted by the Monitoring Institution, th i. e. the Union Bank of India, on 13 July, 2018. Thereafter, a majority of the CDR Lenders assigned their loans, advanced to GIL, in favour of Edelweiss, by way of various Assignment Agreements. As a result, Edelweiss stepped into the shoes of the Assignor Banks of GIL. Under one such Assignment Agreement dated 28 August, 2018, Edelweiss was also assigned the role of ‘Monitoring Institution’, in place of Union Bank of India, under the TRA Agreement. As such, Edelweiss controlled and supervised the TRA capital, which, naturally, would include all outgos therefrom. Resultantly, Edelweiss has acquired 79. 36% of the secured rupee debt of GIL. The Assignor Banks also assigned their rights, title and interest Signature Not Verified Digitally Signed By:SUNIL SINGH NEGI ARB. A. (COMM) 13/2020 Page 20 of 95 Signing Date:19. 11.

2020 19:26:23 under the MRA and TRA Agreement in favour of Edelweiss, and all covenants of the said agreements, therefore, constitute binding obligations between Edelweiss and GIL.

(viii) Under the MRA, (a) GIL was prohibited from creating, or allowing the subsistence of, any security interest, or any type of preferential arrangement, on any of its assets, as well as from creating an escrow on its future cash flows or any charge, lien or interest thereon, (b) GIL was to provide full disclosure, to the CDR Lenders, including Edelweiss, at the first instance, as to initiation, or threatened initiation, of any litigation, investigation or proceedings, judicial, quasi-judicial or administrative, before any arbitrator or government entity or other legal proceedings, which would result in a material adverse effect on the ability, of GIL, to discharge its obligations under the financing documents, including its obligation to repay the debts, (c) GIL was also required to apprise Edelweiss of the occurrence of any event which had a material adverse effect on its business or financial condition or upon discharge of its obligations under the financing agreements, (d) GIL was also required to notify the CDR Lenders, including Edelweiss, of any event which had a material impact on the debt servicing capacity of GIL, and Signature Not Verified Digitally Signed By:SUNIL SINGH NEGI ARB.

A. (COMM) 13/2020 Page 21 of 95 Signing Date:19. 11. 2020 19:26:23 (e) GIL was required to establish a trust and retention account (TRA) with the Account Bank in terms of the TRA Agreement, close all its other accounts and transfer the amounts contained in such other accounts to the TRA. (ix) Under the TRA Agreement, (a) GIL was required to open a series of accounts with the Account Bank, debits from, and credits into, which, could only be carried out under the supervision of the Monitoring Institution, i. e. Edelweiss, (b) all business proceeds of GIL were to flow into the said accounts, under Clause 2. 9 of the TRA Agreement, (c) GIL was obligated to provide monthly reports and details of proposed debits from the said accounts, and (d) in the event of default, the Account Bank was required, in accordance with the instructions of Edelweiss and taking over of the operation of the TRA Account by Edelweiss.

(x) The MRA and TRA secured the loans and facilities granted by Edelweiss to GIL by hypothecation over all the movable assets of GIL and a charge on the TRA, which included reserves and bank accounts, present and future, of GIL, wherever maintained. Signature Not Verified Digitally Signed By:SUNIL SINGH NEGI ARB. A. (COMM) 13/2020 Page 22 of 95 Signing Date:19. 11. 2020 19:26:23 (xi) The joint effect of the aforesaid agreements was, therefore, that GIL could not have paid any amount to anyone, including GTL, in priority to Edelweiss and its other secured financial creditors. (xii) As there was consistent default, of GIL, in servicing its debt obligations, under the MRA and TRA, Edelweiss issued a th formal notice of default, to GIL on 24 January, 2020.

(xiii) In this scenario, GIL and GTL instituted collusive arbitration proceedings, solely with a view to divert the funds of GIL, secured in favour of Edelweiss and other secured creditors, to GTL, which was a related entity, in violation of the superior priority rights of Edelweiss and other secured creditors. (xiv) Edelweiss was never made aware of the said proceedings. th It was only vide letter dated 8 January, 2020, received by th Edelweiss on 9 January, 2020, that GIL informed Edelweiss of the impugned Order. (xv) In the backdrop of the aforesaid facts, GIL could not have proposed a schedule of payments to be made to GTL, which led to the passing of the impugned Order. Any such payment could have been made only after all outstanding dues of Edelweiss and other secured financial creditors of GIL, had been liquidated.

Prior thereto, creation of such a liability, without prior consent and approval of Edelweiss and other Signature Not Verified Digitally Signed By:SUNIL SINGH NEGI ARB. A. (COMM) 13/2020 Page 23 of 95 Signing Date:19. 11. 2020 19:26:23 secured financial creditors was illegal and wrongful. GIL had, thereby, committed culpable breach of the terms of the MRA and the TRA, by defeating the superior priority rights of its secured financial lenders. The impugned Order, which results in according a seal of approval to the said breach is also, therefore, unsustainable in law. (xvi) Had the learned Arbitral Tribunal been apprised of the MRA and the TRA, and the covenants thereof, the impugned Order would not have been passed. The learned Arbitral Tribunal would, thereupon, have become aware of the fact that the amounts, which GIL consented to pay to GTL, were not GIL’s, to fritter away.

It is also pointed out, in this context, that, till the conversion of the debt of GIL into equity, under the SDR Scheme, GTL was the controlling and holding company of GIL. (xvii) Edelweiss was a stranger to Arb. A. (COMM) 7/2020. th The judgement, dated 4 March, 2020, had come to be passed, by the coordinate Bench of this Court, in the said appeal, owing to any lack of a serious challenge, on the part of GTL, or substantive contest by GIL. (xviii) OMP (ENF. ) (COMM) 23/2020, too, had not resulted in any direction to GIL to remit any amounts to GTL. Edelweiss had moved an application, seeking intervention in the said proceedings. Signature Not Verified Digitally Signed By:SUNIL SINGH NEGI ARB. A. (COMM) 13/2020 Page 24 of 95 Signing Date:19. 11. 2020 19:26:23 (xix) Edelweiss addressed a number of communications to GIL, directing it not to make any unilateral payments to GTL without prior consent of Edelweiss.

Despite such th th communications, on 13 and 14 March, 2020, GIL and GTL issued disclosures under Regulation 30 of the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015, affirming the fact of payments having to be made in terms of the impugned Order of the learned Arbitral Tribunal. th (xx) On 26 March, 2020, Edelweiss addressed an email, to GIL, precluding GIL from making any payments, towards the impugned Order without its prior consent, enforcing, thereby, Clauses 2. 12 and Clause 5 of the TRA Agreement, as GIL had failed to cure its default for more than 30 days after notice of th event of default, issued to GIL, by Edelweiss, on 24 January, 2020. rd (xxi) In a Joint Lenders’ Meeting held on 23 April, 2020, GIL intimated the fact that, pursuant to a settlement between GIL and GTL, consequent on the passing of the impugned Order, ₹ 320 crores had been paid by GIL to GTL. This was done without any prior intimation to Edelweiss.

It was sought to be submitted, by GIL, that the said amount had been paid, to GTL, by way of Demand Drafts, which were yet to be encashed. th Edelweiss, therefore, directed GIL, vide return email dated 24 April, 2020, to obtain a return of the said Demand Drafts and Signature Not Verified Digitally Signed By:SUNIL SINGH NEGI ARB. A. (COMM) 13/2020 Page 25 of 95 Signing Date:19. 11. 2020 19:26:23 deposit the said amount in the TRA Account, as per the th covenants of the MRA and TRA Agreements, on or before 27 April, 2020. (xxii) It was in these circumstances that Edelweiss moved the High Court of Bombay, vide Suit LD-VC No 55 of 2020. In th view of the order, dated 5 May, 2020, passed by the High Court of Bombay (to which I have already alluded, hereinabove), the amount of ₹ 320 crores, sought to be paid by GIL to GTL in compliance with the impugned Order of the learned Arbitral Tribunal, was required to be retained in the TRA.

In fact, in its counter-affidavit, filed before the High Court of Bombay, GIL had admitted the preferential priority rights of Edelweiss, over the said amount. 32. Premised on the above facts and contentions, Edelweiss has sought, by the present appeal, quashing of the impugned Order dated th 17 December, 2019, passed by the learned Arbitral Tribunal. Rival submissions 33. Detailed arguments were advanced at the bar, by Mr. Sandeep Sethi, learned Senior Counsel appearing on behalf of Edelweiss, Mr. Rajiv Nayar, learned Senior Counsel on behalf of GTL and Mr. Mukul Rohatgi, learned Senior Counsel on behalf of GIL. Written submissions were also filed, both during and after the conclusion of proceedings, and learned Counsel consented, at the Bar, to disposal of Signature Not Verified Digitally Signed By:SUNIL SINGH NEGI ARB. A. (COMM) 13/2020 Page 26 of 95 Signing Date:19. 11.

2020 19:26:23 the present petition, on the basis of the oral arguments advanced in written submissions filed, without requiring exchange of pleadings. 34. I proceed to deal with the issues arising for consideration, seriatim. 35. Re. Preliminary objection to maintainability of the appeal, under Section 37, on the ground that it is an “interim award”: 35. 1 GTL contends that the present appeal is not maintainable, as the impugned Order is an “interim award” within the meaning of Section 31(6) of the 1996 Act, read with the judgement of the Supreme Court 3 in Indian Farmers Fertiliser Cooperative Ltd v. Bhadra Products 4 and of this Court in ONGC Petro Additions Ltd v. Tecnimont S. P. A. Before proceeding to the contentions of GTL, in this regard, it would be appropriate, first, to examine these decisions. 35. 2 Before that, however, it is necessary to reproduce Section 37, thus: “37. Appealable orders.

– (1) Notwithstanding anything contained in any other law for the time being in force, an appeal shall lie from the following orders (and from no others) to the Court authorised by law to hear appeals from original decrees of the Court passing the order, namely: – (a) refusing to refer the parties to arbitration under section 8; (2018) 2 SCC 534 2019 SCC OnLine Del 8976 Signature Not Verified Digitally Signed By:SUNIL SINGH NEGI ARB. A. (COMM) 13/2020 Page 27 of 95 Signing Date:19. 11. 2020 19:26:23 (b) granting or refusing to grant any measure under section 9; (c) setting aside or refusing to set aside an arbitral award under section 34. (2) An appeal shall also lie to a Court from an order of the arbitral tribunal – (a) accepting the plea referred to in sub-section (2) or sub- section (3) of section 16; or (b) granting or refusing to grant an interim measure under section 17.

(3) No second appeal shall lie from an order passed in appeal under this section, but nothing in this section shall affect or take away any right to appeal to the Supreme Court. ” Quite obviously, appeals from orders passed by arbitral tribunals would be confined to sub-section (2) of Section 37, as sub-section (1) refers to appeals against orders passed by the Court. Mr. Nayar has, while opposing the maintainability of the present appeal, emphasised the words “and from no others”, figuring in Section 37. This emphasis is, however, misguided, as these words occur in Section 37 (1), and not in Section 37 (2).

In any event, these words appear to be a legislative superfluity – a rare aberration from the sanctified principle that the legislature does not indulge in tautology – as, even if the words were absent, once the categories of cases, in which appeals would lie, stand specifically enumerated in the provision providing for appeal, the obvious corollary is that appeals would not lie in any other case. Signature Not Verified Digitally Signed By:SUNIL SINGH NEGI ARB. A. (COMM) 13/2020 Page 28 of 95 Signing Date:19. 11. 2020 19:26:23 35. 3 Appeals, therefore, lie, under Section 37 (2), from orders of the arbitral tribunal, passed either under sub-sections (2) or (3) of Section 16, or under Section 17. 35. 4 It is nobody’s case that the impugned Order has been passed by the learned Arbitral Tribunal under Section 16. Mr. Sethi, for the appellant, would contend that the Order has been passed under Section 17. Mr.

Nayar, for the respondent would, per contra, asserted that the order has been passed under Section 31(6). 35. 5 Section 31(6) reads thus: “31. Form and contents of arbitral award. – (1) – (5) ***** (6) The arbitral Tribunal may, at any time during the arbitral proceedings, make an interim arbitral award on any matter with respect to which it may make a final arbitral award. ” As against this, Section 17 reads as under: “17. Interim measures ordered by arbitral tribunal. – (1) A party may during the arbitral proceedings, or at any time after the making of the arbitral award but before it is enforced in accordance with section 36, apply to the arbitral tribunal – (i) for the appointment of a Guardian for a minor or person of unsound mind for the purposes of arbitral proceedings; or (ii) for an interim measure of protection in respect of any of the following matters, namely : – Signature Not Verified Digitally Signed By:SUNIL SINGH NEGI ARB. A.

(COMM) 13/2020 Page 29 of 95 Signing Date:19. 11.

2020 19:26:23 (a) the preservation, interim custody or sale of any goods which are the subject matter of the arbitration agreement; (b) securing the amount in dispute in the arbitration; (c) the detention, preservation or inspection of any property or a thing which is the subject matter of the dispute in arbitration, or as to which any question may arise therein and authorising for any of the aforesaid purposes any person to enter upon any land or building in the possession of any party, or authorising any samples to be taken, or any observation to be made, or experiment to be tried, which may be necessary or expedient for the purpose of obtaining full information or evidence; (d) interim injunction or the appointment of a receiver; (e) such other interim measure of protection as may appear to the arbitral tribunal to be just and convenient, and the arbitral tribunal shall have the same power for making orders, as the court has for the purpose of, and in relation to, any proceedings before it.

(2) Subject to any orders passed in appeal under section 37, any the order issued by the arbitral tribunal under this section shall be deemed to be an order of the Court for all purposes and shall be enforceable under the Code of Civil Procedure, 1908 (5 of 1908), in the same manner as if it were an order of the Court. ” Signature Not Verified Digitally Signed By:SUNIL SINGH NEGI ARB. A. (COMM) 13/2020 Page 30 of 95 Signing Date:19. 11. 2020 19:26:23 35. 6 There is no gainsaying the position, apparent from the statute, that appeals lie, only against the orders passed by the arbitral tribunal under Section 17. By implication, therefore, “interim awards”, rendered by the arbitral Tribunal under Section 31(6), are not 5 amenable to appeal under Section 37. 35. 7 “Interim award” is not, however, defined in the 1996 Act.

Consequently, the exact scope of Section 37(2)(b), and whether the order under challenge was actually relatable to Section 17, or was an “interim award” under Section 31(6), was never really examined, till 3 IFFCO . The actual dispute in that case need not concern us. Suffice it to state that a plea of limitation, advanced by the respondent IFFCO before the learned sole arbitrator in that case, was taken up initially, and was decided in favour of the claimant Bhadra Products, This decision was challenged, by IFFCO, by way of a petition under Section 34, before the learned District Judge. The learned District Judge dismissed the Section 34 petition, stating that the decision of the learned Sole Arbitrator could not be regarded as an “interim award” and could not, therefore, be assailed under Section 34. IFFCO appealed, against the decision of the learned District Judge, to the High Court, which dismissed the appeal. IFFCO appealed, further, to the Supreme Court. 35.

8 IFFCO contended, before the Supreme Court, that, as the rd learned Sole arbitrator had, by his order dated 23 July, 2015, finally 5 Refer the maxim expressio unius est exclusio alterius, of especial application while construing jurisdiction clauses – Ref. Swastik Gases (P) Ltd v. Indian Oil Corporation Ltd, (2013) 9 SCC 32; EXL Careers v. Frankfinn Aviation Services Pvt Ltd, AIR 2020 SC 3670 Signature Not Verified Digitally Signed By:SUNIL SINGH NEGI ARB. A. (COMM) 13/2020 Page 31 of 95 Signing Date:19. 11. 2020 19:26:23 adjudicated the issue of limitation against IFFCO, the order was an “interim award” within the meaning of Section 31(6) and was, therefore, amenable to challenge under Section 34, of the 1996 Act. rd As against this, Bhadra contended that the order, dated 23 July, 2015, was passed under Section 16 of the 1996 Act (which empowered the arbitral tribunal to rule on its own jurisdiction) and could not, therefore, be related to Section 31(6).

Pointing out that an appeal against an order passed under Section 16 lay, under Section 37(2)(a), only where the order accepted the plea of limitation, and not where it rejected the plea, it was submitted, by Bhadra, that, as the rd order dated 23 July, 2015 rejected the plea of limitation advanced by IFFCO, the order was not appealable either. 35. 9 The Supreme Court, therefore, delineated the issues arising before it for consideration as “whether an award on the issue of limitation can first be said to be an interim award and, second, as to whether a decision on a point of limitation would go to jurisdiction and, therefore, be covered by Section 16 of the Act”. Relying on its earlier decision in McDermott International Inc. v. Burn Standard 6 Co Ltd , it was held that “an interim award or partial award is a final award on matters covered therein made at any intermediate stage of the arbitral proceedings”.

Tested on this principle, it was held that rd the order dated 23 July, 2015, of the learned Sole arbitrator in that case, was an ‘interim award’, as the learned Sole arbitrator had, by the said award, disposed of the issue of limitation finally. (2006) 11 SCC 181 Signature Not Verified Digitally Signed By:SUNIL SINGH NEGI ARB. A. (COMM) 13/2020 Page 32 of 95 Signing Date:19. 11. 2020 19:26:23 35. 10 The two indicia which distinguish interim awards, as postulated 3 in IFFCO are, therefore, that (i) the award, or order, is made at an intermediate stage of the arbitral proceedings, and (ii) the award finally disposes of the matter covered therein. 35. 11 Mr. Nayar also chose to place reliance on the judgement, of a 4 coordinate Single Bench of this Court in ONGC Petro Additions Ltd , and drew particular attention to para 13 of the said decision. The reliance is, in my view, misdirected.

Para 13 observed, inter alia, thus: “In order to ascertain whether an order is an interim award or partial award, the two most important factors that would weigh upon the Court are the concept of “finality” and “issue”. If the nature of the order is “final” in a sense that it conclusively decides an issue in the arbitration proceedings, the order would qualify to be an interim award. ” (Emphasis supplied) 35. 12 I am entirely in agreement with the above enunciation of the 4 law, as contained in ONGC Petro Additions Ltd . I also agree with Mr. Nayar that, in deciding whether an order, by the arbitral tribunal, is an “interim award”, or not, the essential test is whether the order decides an issue conclusively and finally. How, then, is one to ascertain whether the order, under challenge, decides an issue conclusively and finally?

In my view, the decision, in this regard, has either to flow from an overall reading of the order itself, giving due – but not undue – importance to the words used therein. I say “due, but not undue” because there may, conceivably, be cases in which the order itself may claim to be an “interim award” order and to determine, finally, the issue between the parties, but such a recital Signature Not Verified Digitally Signed By:SUNIL SINGH NEGI ARB. A. (COMM) 13/2020 Page 33 of 95 Signing Date:19. 11. 2020 19:26:23 cannot be treated as the end of the matter. The Court would have to take an informed decision as to whether, in fact, the order conclusively and finally decides the issue between the parties. In 3 other words, to borrow the felicitous expression used in IFFCO , there must be a “final determination” of an issue “at the interim stage”.

Whether there is, or is not, such a “final determination” has to be essentially gleaned from the order itself, seen in the backdrop of the circumstances and considerations that governed its passing. 35. 13 The circumstances, which Mr. Nayar stresses, to impress, on the Court, that the impugned order is, in fact, in the nature of an “interim award”, within the meaning of Section 31(6), may be examined thus: (i) Mr. Nayar points out that, in para 22 of the Impugned Order, the learned Arbitral Tribunal notes the contention, of GTL, that GIL was liable to suffer an interim award/partial decree at that stage itself. For ready reference, para 22 may be reproduced thus: “Mr. Wadhwa, Ld. Senior Counsel on behalf of the Claimant has urged before us, that the Respondent has all throughout admitted its liability of Rs. 650 crores towards the Claimant. Ld.

Senior Counsel has drawn the attention of the Tribunal to several clauses of the Suspension Agreement (reproduced above) to contend that it was only an Interim Arrangement arrived at by the parties to enable the Respondent, to restructure its debt to enable it to perform its obligations under the st EMA dated 31 March, 2015 and other agreements entered into between the parties. Mr. Wadhwa has further submitted that the Respondent has not disputed the claim of Rs. 650 crores in its Statement of Defence Signature Not Verified Digitally Signed By:SUNIL SINGH NEGI ARB. A. (COMM) 13/2020 Page 34 of 95 Signing Date:19. 11. 2020 19:26:23 and thus the Respondent is liable to suffer an Interim Award/Partial Decree at this stage itself. Furthermore, it has been urged that the Respondent had failed to deposit Rs. 40 crores in terms of Clause 4. 5 of the Suspension Agreement towards Refundable Deposit. ” (Emphasis supplied) This passage, in my view, cannot help Mr. Nayar.

The reference to the liability, of GIL, to suffer an Interim Award/Partial Decree, at that stage itself, is merely in the nature of a recording of the submission advanced, before the learned Arbitral Tribunal, by learned Senior Counsel appearing on behalf of GTL. Mr. Sethi, learned Senior Counsel for the petitioner, has pointed out, correctly, that there is, beyond this, no finding or observation, of the learned Arbitral Tribunal, evincing its acceptance of the aforesaid submission advanced by Mr. Wadhwa. The recording, by the learned Arbitral Tribunal, of the submission of Mr. Wadhwa cannot, therefore, assist in determining whether the impugned order is, or is not, in the nature of an “interim award”. (ii) It is next contended, by Mr.

Nayar, that the reliance, by the learned Arbitral Tribunal, on Order VIII Rules 3 to 5 of the Code of Civil Procedure, 1908 (CPC), in para 28 of the impugned Order, and the accompanying observations of the learned Arbitral Tribunal, “ex facie show that the Tribunal was undertaking a final adjudication to the extent of ₹ 400 crores on the basis that liability could not be denied by Respondent No. 1”. Here, again, para 28 of the impugned Order would, if Signature Not Verified Digitally Signed By:SUNIL SINGH NEGI ARB. A. (COMM) 13/2020 Page 35 of 95 Signing Date:19. 11. 2020 19:26:23 properly read, militates against the submission of Mr. Nayar. The para reads thus: “A holistic reading of Order VIII and Rules 3, 4 and 5 thereof, of the CPC make it clear that if every allegation stated in the Plaint is not denied specifically or by necessary implication, the said allegation or assertion shall be taken to have been admitted.

In this conspectus, it is held at this stage of the proceedings that the sum of Rs. 400 crores is not a sum presently in dispute but is a liability not specifically denied at this stage by the Respondent. As regards the remaining sum of Rs. 250 crores, Ld. Counsel for the Claimant has fairly stated that the same would require adjudication by this Arbitral Tribunal. ” (Emphasis supplied) It would be a complete misadventure for a Court to interpret an Order, or an Award, passed by an Arbitral Tribunal, in a manner different from the clear intent emanating from the order or award, as is apparent from the words used therein. The learned Arbitral Tribunal has, in a single sentence in para 28 of the impugned Order, used the expressions “at this stage of the proceedings”, “presently in dispute” and “at this stage”. The intent is apparent.

It is clear that the learned Arbitral Tribunal is not conclusively determining the liability of GIL, or the corresponding entitlement of GTL, even to the extent of ₹ 400 crores. The findings that follow are, clearly, therefore, ad hoc in nature, entered at that stage of the proceedings, based on the non-denial, by GIL, of its liability, at that stage. The reliance, by the learned Arbitral Tribunal, on Order VIII Rules 3 to 5 of the CPC, is totally irrelevant, in my view, as these provisions deal with the requirement of denial, by the defendant in a suit, of the pleadings of the plaintiff, to be specific, and the Signature Not Verified Digitally Signed By:SUNIL SINGH NEGI ARB. A. (COMM) 13/2020 Page 36 of 95 Signing Date:19. 11. 2020 19:26:23 consequences that follow in the alternative. They cannot, therefore, seriously impact the issue of whether the impugned Order is in the nature of an “interim award”, or is merely interlocutory in nature. (iii) Mr.

Nayar draws attention, next, to the reference, by the learned Arbitral Tribunal, in para 31 of the impugned Order, to 1 the judgement of the Supreme Court in Uttam Singh Duggal . It is emphasised that the said decision concerns Order XII Rule 6 of the CPC, which provides for judgement on admissions. It is not necessary to extract para 31, as a bare reading thereof makes it clear that the learned Arbitral Tribunal has merely 1 relied on a passage from Uttam Singh Duggal , to observe that, where the claim is admitted, a Court has jurisdiction to enter a judgement for the plaintiff and pass a decree on the admitted claim. The rationale, reflected in the said para has been relied upon, by the learned Arbitral Tribunal as “fortifying” its decision. This, by itself, in my view, cannot convert the impugned Order into an “interim award”, contrary to all that is reflected from the express wordings contained in other paras thereof. (iv) For the same reason, the reliance, by Mr.

Nayar, on the reference, by the learned Arbitral Tribunal, on the judgement of 2 this Court in Numero Uno International Ltd , fails to impress. 2 The passage, in Numero Uno International Ltd , on which the learned Arbitral Tribunal placed reliance, reads thus: Signature Not Verified Digitally Signed By:SUNIL SINGH NEGI ARB. A. (COMM) 13/2020 Page 37 of 95 Signing Date:19. 11. 2020 19:26:23 “8. The issue can be viewed from yet another angle. The making of the interim award ensures to the party in whose favour the same is made the payment of an amount which is an admitted position payable to it. There is no reason why the payment of what is admittedly due should await the determination of other disputes which may take years before they are finally resolved.

If at the conclusion of the arbitral proceedings, the defendant were to succeed in his claim, either wholly or partially, and if after adjustment of the amounts found payable to the plaintiff, any amount is eventually held payable to one or the other party, the arbitrator can undoubtedly make such an adjustment and direct payment of the amount to one or the other party, as the case may be. The final award would in any such case also take into consideration the payments, if any, made under the interim award. Suffice it to say that the making of the interim award in no way prevents the arbitrator from making adjustments of the amount in the final award and doing complete justice between the parties. By that logic even if we assume that the Prasar Bharti was to fail in substantiating its further claims which are disputed and the appellant were to succeed wholly in the counter claim that it has made, all that it would result in is an award in favour of the appellant.

There is, therefore, no inherent illegality or perversity in the making of the interim award by the arbitrator so as to call for interference by this Court under Section 34 of the Act. ” There is no denying the fact that the afore-extracted passage, 2 from Numero Uno , does refer to the passing of an “interim award”. This passage was, however, a full decade prior to the 3 enunciation of the law in IFFCO . The legal position, regarding the ingredients and indicia of an “interim award”, within the meaning of Section 31(6), can no longer be regarded as in a state of flux, after IFFCO . Moreover, a proper reading Signature Not Verified Digitally Signed By:SUNIL SINGH NEGI ARB. A. (COMM) 13/2020 Page 38 of 95 Signing Date:19. 11.

2020 19:26:23 2 of the passage, from Numero Uno International Ltd , on which the learned Arbitral Tribunal relies, discloses that it essentially underscores the authority, of the Arbitral Tribunal, to direct payment of admitted amounts at the interlocutory stage in arbitral proceedings, and does not, expressly or by necessary implication, delineate the scope and contours of the expression “interim award”. In the present case, para 28 of the impugned Order is clear and categorical in observing that the direction for payment of ₹ 400 crores was being made only because, at that stage of the proceedings, there was no denial, by GIL, of its liability. The learned Arbitral Tribunal has, in the said para, left the field wide open for contest, even at any later, or the final, stage, of the liability of GTL in that regard.

In view of the said para, the submission, specifically so made in the written submissions tendered by GTL, that the learned Arbitral Tribunal was, by the impugned Order, “undertaking a final adjudication to the extent of Rs. 400 crores”, cannot be accepted, being directly contrary to para 28 thereof. (v) Attention has also been invited, by Mr. Nayar, to the recording, in para 35 of the impugned Order, of the request, advanced by Mr. Wadhwa, learned Senior Counsel before the learned arbitral Tribunal, to treat the Section 17 application of GTL as having been preferred under Section 31(6), and to pass an interim award thereon. As Mr. Sethi has correctly pointed out, this submission is, no doubt, recorded; there is, however, no acceptance, by the learned Arbitral Tribunal, thereof. Signature Not Verified Digitally Signed By:SUNIL SINGH NEGI ARB. A. (COMM) 13/2020 Page 39 of 95 Signing Date:19. 11.

2020 19:26:23 Indeed, one is unable to find, in the entire impugned Order, any specific observation, by the learned Arbitral Tribunal, that the impugned Order was in the nature of an interim award, finally adjudicating the liability of GTL, to GIL, to the extent of ₹ 400 crores, or, for that matter, any other amount. The recording of the submission of Mr. Wadhwa, by the learned Arbitral Tribunal cannot, therefore, suffice to constitute an acknowledgement, to the effect that the impugned Order was in the nature of an interim award. 35. 14 As against this, Mr. Sethi has pointed out, correctly, that the concluding para of the impugned Order clearly states that “the present order shall await the Final Award and shall be subject to adjustments in order to conform to the Final Award”. This caveat, obviously consciously entered, seen in juxtaposition with para 28 of the impugned Order, completely defeats the submission, of Mr.

Nayar, that the impugned Order is in the nature of an “interim award” and is, therefore, not amenable to challenge under Section 37. 35. 15 Reference may once again be made, in this context, to para 14 3 of the judgment in IFFCO , which reproduces paras 68 to 70 of the 6 earlier decision of the Supreme Court in McDermott International . 6 Para 68 of McDermott International reads thus: “68. The 1996 Act does not use the expression “partial award”. It uses interim award or final award. An award has been defined under Section 2(c) to include an interim award. Sub-section (6) of Section 31 contemplates an interim award. An interim award in terms of the said provision is not one in respect of which a final award can be made, but it may be a Signature Not Verified Digitally Signed By:SUNIL SINGH NEGI ARB. A. (COMM) 13/2020 Page 40 of 95 Signing Date:19. 11. 2020 19:26:23 final award on the matters covered thereby, but made at an interim stage.

” (Emphasis supplied) An interim award, for the purpose of Section 31(6) has, therefore, to be a final award on the matters covered thereby made at an interim stage. Even while directing GIL to pay ₹ 400 crore to GTL, the impugned order makes it clear that the direction was ad hoc in nature, made at that of point of time in view of the situation emanating from the pleadings till then. In my view, it cannot be said that the learned Arbitral Tribunal has finally pronounced on the liability of GIL, to pay ₹ 400 crores to GTL, so as to render the present appeal incompetent. 35. 16 Interestingly, Arb. A. (COMM) 7/2020 was preferred, by GIL, before this Court, under Section 37(2)(b) of the 1996 Act, as is noted th in the very first sentence of the judgement, dated 4 March, 2020, rendered thereon. Having itself chosen to invoke Section 37(2)(b), to challenge the impugned Order, I am in agreement with Mr.

Sethi that it cannot lie in the mouth of GIL to oppose the maintainability of the appeal of Edelweiss, on the ground that Section 37(2)(b) would not apply. What is sauce for the goose, axiomatically, is sauce for the gander. The only response of GIL, to this submission of Edelweiss, is that this aspect escaped scrutiny, as no such objection was raised, to challenge the maintainability of the appeal preferred by it. To say the very least, such an argument is completely unconscionable, and does not even merit a cursory consideration. Having itself chosen to avail the remedy of appeal, under Section 37(2)(b) of the 1996 Act, to th challenge the impugned Order dated 17 December, 2019, of the Signature Not Verified Digitally Signed By:SUNIL SINGH NEGI ARB. A. (COMM) 13/2020 Page 41 of 95 Signing Date:19. 11. 2020 19:26:23 learned Arbitral Tribunal, GIL cannot, in my view, legitimately seek to contest the right of Edelweiss to do so. 35.

17 There is yet another, and more empirical, reason why this submission, of Mr. Nayar, cannot succeed. Admittedly, the impugned Order was passed on an application, preferred by GTL under Section 17 of the 1996 Act. The suggestion, of Mr. Wadhwa, that the application could be treated as one under Section 31(6), though noted, cannot be said to have been accepted by the learned Arbitral Tribunal, either expressly or by necessary implication. The impugned Order does not state that the application, preferred by GTL under Section 17, was being converted into one under Section 31(6), or being treated as an application under the said sub-section. The directions contained in the impugned Order do not purport to have been issued under Section 31(6). They have, therefore, necessarily to be regarded as having been issued under Section 17, while adjudicating an application preferred under that provision.

I have already opined, hereinabove, that a holistic appreciation of the impugned Order, particularly para 28 thereof, indicates that the direction for the payment of ₹ 400 crores, by GIL to GTL, was merely being issued “at that stage of the proceedings”, and by way of an interim arrangement. There was, therefore, no final adjudication of the entitlement, of GTL, to the said amount. The said direction was modifiable, by adjustment, at the stage of passing of the Final Award. Any order, granting an interim measure under Section 17 is, statutorily, appealable under Section 37(2)(b). Even on this ground, therefore, the appeal of Edelweiss is maintainable. Signature Not Verified Digitally Signed By:SUNIL SINGH NEGI ARB. A. (COMM) 13/2020 Page 42 of 95 Signing Date:19. 11. 2020 19:26:23 35. 18 I am, therefore, of the view that the submission, of Mr.

Nayar, that the impugned Order is an “interim award” and is, therefore, not amenable to appeal under Section 37 of the 1996 Act, is misconceived. It is accordingly rejected. 36. Re. Preliminary objection to maintainability of the appeal, under Section 37, on the ground that the impugned order has merged th with the judgement, dated 4 March, 2020, in Arb. A (COMM) 7/2020 36. 1 Mr. Nayar predicates his submission, regarding the merger of th the impugned order, with the judgment, dated 4 March, 2020 in Arb. A. (COMM) 7/2020 on the well known decision in Kunhayammed v. 7 State of Kerala . Juxtaposed therewith, Mr. Nayar also relies on the acknowledgement, in para 31 of the appeal, that GIL had filed Arb. A. (COMM) 7/2020, at the instance of Edelweiss. It is sought to be contended that, having thus taken a chance at challenging the th impugned order, dated 17 December, 2019, of the learned Arbitral Tribunal, by way of Arb. A.

(COMM) 7/2020, though by proxy, and failed, the appellant could not now seek challenge the same order by its own substantive appeal. th 36. 2 In response Mr. Sethi submits that the order, dated 4 March, 2020, of this Court in Arb. A. (COMM) 7/2020, was obtained by fraud, as this Court as well as the learned Arbitral Tribunal, were kept in the dark, again regarding the prior charge of Edelweiss, over the (2000) 6 SCC 359 Signature Not Verified Digitally Signed By:SUNIL SINGH NEGI ARB. A. (COMM) 13/2020 Page 43 of 95 Signing Date:19. 11. 2020 19:26:23 funds and assets of GIL. Relying on the judgments of the Supreme 8 Court in A. V. Papayya Sastry v. Government of A. P. , and U. O. I. 9 India v. Ramesh Gandhi , it is contended that judgment obtained by fraud is a nullity and that, therefore, such a judgment cannot restrain Edelweiss from prosecuting the present appeal. 36.

3 Before examining the applicability of the decision in 7 Kunhayammed to the facts of the present case, it merits mention that 7 Kunhayammed was explained, subsequently, by R. C. Lahoti, J. (as 7 the then was) – who had authored Kunhayammed – in S. 10 Shanmugavel Nadar v. State of Tamil Nadu , to which reference would be made, in somewhat greater detail, hereinafter. 7 36. 4 Kunhayammed related to a dispute, initiated by a family, in respect of 1020 acres of land, before the Forest Tribunal, Kozhikode. The Forest Tribunal held that the land did not vest in the Government. The appeal preferred by the State of Kerala was dismissed by the High th Court on 17 December, 1982, by a detailed judgment. SLP (C) 8098/1983 was preferred, thereagainst, by the State of Kerala, before th the Supreme Court. By order, dated 18 July, 1983, the SLP was “dismissed on merits”, without stating anything more. 36.

5 In January, 1984, the State of Kerala filed an application, for th review of the judgment, dated 17 December, 1982, before the High Court. Kunhayammed opposed the maintainability of the review 8 2007 (4) SSC 221 (2012) 1 SCC 476 2002 (8) SCC 361 Signature Not Verified Digitally Signed By:SUNIL SINGH NEGI ARB. A. (COMM) 13/2020 Page 44 of 95 Signing Date:19. 11. 2020 19:26:23 petition on the ground of dismissal of SLP (C) 8098/1983. The High Court overruled the objection and directed that the review petition be listed for hearing on merits. Aggrieved thereby, Kunhaymmed approached the Supreme Court. 36. 6 Before the Supreme Court, the State of Kerala contended that th the order, dated 17 December, 1982, of the High Court had merged th with the order, dated 18 July, 1983, whereby the SLP, against the said order, was dismissed by the Supreme Court. No application for review, it was contended, could lie before the High Court thereafter.

Another ground, which was interlinked with the first, was that the th order, dated 18 July, 1983, of the Supreme Court, affirmed the order, th dated 17 December, 1982, of the High Court, thereby disabling the High Court from reviewing its order. In para 12 of its judgment, the Supreme Court observed thus:- “12. The logic underlying the doctrine of merger is that there cannot be more than one decree or operative orders governing the same subject-matter at a given point of time. When a decree or order passed by an inferior court, tribunal or authority was subjected to a remedy available under the law before a superior forum then, though the decree or order under challenge continues to be effective and binding, nevertheless its finality is put in jeopardy.

Once the superior court has disposed of the lis before it either way — whether the decree or order under appeal is set aside or modified or simply confirmed, it is the decree or order of the superior court, tribunal or authority which is the final, binding and operative decree or order wherein merges the decree or order passed by the court, tribunal or the authority below. However, the doctrine is not of universal or unlimited application. The nature of jurisdiction exercised by the superior forum and the content or subject-matter of challenge laid or which could have been laid shall have to be kept in view. ” Signature Not Verified Digitally Signed By:SUNIL SINGH NEGI ARB. A. (COMM) 13/2020 Page 45 of 95 Signing Date:19. 11. 2020 19:26:23 36. 7 The Supreme Court went on to notice that its earlier decision in 11 Shankar Ramchandra Abhyankar v.

Krishnaji Dattatreya Bapat , had emphasized three pre-conditions for the doctrine of merger to be attracted, viz that (i) the jurisdiction exercised by the higher court should have been appellate or revisional in nature, (ii) the jurisdiction should have been exercised after issuance of notice and (iii) the judgment should have been rendered after a full hearing had been granted to the parties. Satisfaction of these three criteria, it was held, resulted in merger of the judgment of the lower court with that of the higher court. These principles, it was held, were useful in resolving the issue before the Supreme Court. 7 36.

8 Though the decision, in Kunhayammed , centrally dealt with the question of merger in the case of dismissal of an SLP, with which we are not concerned, the Supreme Court summed up its conclusion in para 44 of the report, thus: “(i) Where an appeal or revision is provided against an order passed by a court, tribunal or any other authority before superior forum and such superior forum modifies, reverses or affirms the decision put in issue before it, the decision by the subordinate forum merges in the decision by the superior forum and it is the latter which subsists, remains operative and is capable of enforcement in the eye of law. (ii) The jurisdiction conferred by Article 136 of the Constitution is divisible into two stages. The first stage is upto the disposal of prayer for special leave to file an appeal. The second stage commences if and when the leave to appeal is granted and the special leave petition is converted into an appeal.

(1969) 2 SCC 74 Signature Not Verified Digitally Signed By:SUNIL SINGH NEGI ARB. A. (COMM) 13/2020 Page 46 of 95 Signing Date:19. 11. 2020 19:26:23 (iii) The doctrine of merger is not a doctrine of universal or unlimited application. It will depend on the nature of jurisdiction exercised by the superior forum and the content or subject-matter of challenge laid or capable of being laid shall be determinative of the applicability of merger. The superior jurisdiction should be capable of reversing, modifying or affirming the order put in issue before it. Under Article 136 of the Constitution the Supreme Court may reverse, modify or affirm the judgment-decree or order appealed against while exercising its appellate jurisdiction and not while exercising the discretionary jurisdiction disposing of petition for special leave to appeal. The doctrine of merger can therefore be applied to the former and not to the latter.

(iv) An order refusing special leave to appeal may be a non-speaking order or a speaking one. In either case it does not attract the doctrine of merger. An order refusing special leave to appeal does not stand substituted in place of the order under challenge. All that it means is that the Court was not inclined to exercise its discretion so as to allow the appeal being filed. (v) If the order refusing leave to appeal is a speaking order, i. e. , gives reasons for refusing the grant of leave, then the order has two implications. Firstly, the statement of law contained in the order is a declaration of law by the Supreme Court within the meaning of Article 141 of the Constitution.

Secondly, other than the declaration of law, whatever is stated in the order are the findings recorded by the Supreme Court which would bind the parties thereto and also the court, tribunal or authority in any proceedings subsequent thereto by way of judicial discipline, the Supreme Court being the Apex Court of the country. But, this does not amount to saying that the order of the court, tribunal or authority below has stood merged in the order of the Supreme Court rejecting the special leave petition or that the order of the Supreme Court is the only order binding as res judicata in subsequent proceedings between the parties. (vi) Once leave to appeal has been granted and appellate jurisdiction of Supreme Court has been invoked the order passed in appeal would attract the doctrine of merger; the order may be of reversal, modification or merely affirmation. Signature Not Verified Digitally Signed By:SUNIL SINGH NEGI ARB. A. (COMM) 13/2020 Page 47 of 95 Signing Date:19. 11.

2020 19:26:23 (vii) On an appeal having been preferred or a petition seeking leave to appeal having been converted into an appeal before the Supreme Court the jurisdiction of High Court to entertain a review petition is lost thereafter as provided by sub-rule (1) of Rule 1 of Order 47 CPC. ” 7 36. 9 A holistic reading of Kunhayammed reveals that the doctrine of merger cannot be blindly applied, wherever a higher court decides a challenge to the decision of a lower court. It depends on the nature of jurisdiction exercised by the superior court and the content of the subject matter of challenge laid or capable of being laid before the superior court. Additionally, the decision of the superior court would have to be a decision rendered after issuance of notice to, and after fully hearing, the parties. Fundamentally, therefore, the decision of the superior court can

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