Dismissed

Nel Holdings Limited v. Vijay Nirman Company Private Limited

Karnataka HC3 Mar 2020WP/4844/2020

Case brief

AI extract

What is this about?

The Karnataka High Court dismissed a writ petition filed to quash an arbitral tribunal order relating to the impleadment of a proposed respondent. The Court held that the proposed respondent was a necessary party due to the composite nature of the transaction and its active conduct, reserving the petitioner's liberty to challenge the award under Section 37.

What did the court decide?

Writ petition dismissed; liberty reserved to petitioner to challenge any adverse award under Section 37 of the Arbitration Act.

Nel Holdings Limited Vs Vijay Nirman Company Private… — Company and Corporate | Karnataka HC (2020)

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IN THE HIGH COURT OF KARNATAKA AT BENGALURU

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DATED THIS THE 3^RD DAY OF MARCH, 2020

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PRESENT

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THE HON’BLE MR. JUSTICE ARAVIND KUMAR

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AND

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THE HON’BLE MR. JUSTICE HEMANT CHANDANGOUDAR

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W.P. NO.4844/2020 (GM-RES)

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BETWEEN:

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NEL HOLDINGS LIMITED A COMAPANY INCORPORATED UNDER THE COMPANIES ACT 1956 HAVING IT’S OFFICE AT NITESH TIMES SQUARE, 7^TH FLOOR NO.8, M.G. ROAD BENGAURU – 560 001 REPRSENTED BY ITS AUTHORIZED SIGNATORY, MR. K.B. SWAMY.

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...PETITIONER

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(BY SRI. MAHESH A.S, ADVOCATE FOR SRI. ANAND MUTTALLI, ADVOCATE)

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AND:

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1 . VIJAY NIRMAN COMPANY PRIVATE LIMITED A COMPANY INCORPORETED UNDER THE COMPANIES ACT 1956 HAVING ITS OFFICE AT NO.105 4^TH CROSS, 7^TH MAIN, MLA LAYOUT RMV LAYOUT, 2^ND STAGE BENGALURU – 560 094 REPRESENED BY ITS DIRECTOR.

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2 . NITESH HOUSING DEVELOPERS PRIVATE LIMITED A COMPANY INCORPORATED UNDER

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THE COMPANIES ACT 1956 HAVING ITS KOFFICE AT ‘NITESH TIMES SQUARE, 7^TH FLOOR, NO.8 M.G. ROAD, BENGALURU – 560 001 REPRESENTED BY ITS AUTHORIZED SIGNATORY.

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…RESPONDENTS

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THIS WRIT PETITION IS FILED UNDER ARTICLES 226 AND 227 OF CONSTITUTION OF INDIA PRAYING TO QUASH THE IMPUGNED ORDER DATED:07.02.2020 ANNX-A PASSED BY THE SOLE ARBITRATOR IN A.C.NO.112/2019 PENDING BEFORE THE ARBITRATION AND CONCILIATION CENTRE BENGALURU.

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THIS PETITION COMING ON FOR PRELIMINARY HEARING THIS DAY, ARAVIND KUMAR J, MADE THE FOLLOWING:

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O R D E R

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Heard Sri. Mahesh.A.S., learned counsel appearing

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on behalf of Sri.Anand Muttalli for petitioner. Perused the case papers.

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Petitioner was sought to be impleaded as respondent No.2 in the arbitral proceedings pending before the arbitral tribunal in the matter of A.C.No.112/2019 and said proceedings has been initiated by the first respondent herein raising a claim of Rs.50 Crores along with interest, contending interalia that it had entered into an agreement with second respondent herein on 05.04.2013 to build 75 villas out of

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113 independent villas under name and style of “Napa Valley Project” and second agreement on 12.07.2013 construct remaining 58 villas for a total consideration of Rs.108,99,69,942/- and first respondent herein had encashed both mobilization advance, bank guarantee and performance guarantee aggregating to Rs.11,58,19,945/- notwithstanding its default and had illegally terminated the contract and such termination of contract is void ab-initio in law.

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In the said arbitral proceedings an application came to be filed to implead the petitioner herein on the ground that respondent No.1 herein has entered into a Joint Development Agreement with NEL Holdings Limited and Garden City Reality Pvt. Ltd. i.e., proposed respondent No.2 for executing three projects including “Napa Valley Project” for which the claimant had bid and had an agreement with the first respondent.

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It was further alleged that first respondent and proposed respondent No.1-NEL Holding Limited are part of the same group and as per the official website of both BSE and NSE first respondent has issued a letter

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dated 30.05.2012 as part of its corporate announcement, the launch of its project worth Rs.425 Crores approximately was published officially and contending proposed second respondent is a holding company and first respondent is wholly owned subsidiary company of the proposed respondent as per the financial statements for year 2015-16, 2016-17 and 2017-18. Hence, proposed respondent was sought to be impleaded. It was further stated that by virtue of proposed respondent entering into Joint Development Agreement with proposed respondent No.2, said proposed respondent No.2 would also become necessary party.

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On service of notice proposed respondent No.2 appeared and filed its statement of objections through counsel and contended it is not a party to the contract entered into between claimant and first respondent and as such it was contended that it is neither a proper party nor necessary party to the dispute between claimant and respondent.

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Arbitral tribunal by impugned order after

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having referred to the judgment of the Apex Court in the

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matter of MAHANAGAR TELEPHONE NIGAM LIMITED vs. CANARA BANK AND OTHERS reported in 2019 SCC

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ONLINE SC 995 and also the judgments reflected in paragraph 43, has arrived at a conclusion that even non signatories or third parties to the arbitration proceedings would become necessary party having regard to the direct relation i.e., commonality of the subject matter and composite nature of transaction within the parties wherein they are interlinked and conduct of the parties to bind themselves by the terms of the contract in the matter of adjudication of the dispute. Hence, it came to be held that non signatory or third party would also be bound by the contract. In other words, it came to be held that subsequent parties who enter into contract would be stepping into the shoes of earlier contracting parties. In this background, on facts arbitral tribunal has noticed that proposed respondent was not only active and effective participant but had conducted itself as though it is a party to the contract. It has been further held that proposed respondent which launched “Napa Valley Project”, had negotiated the contract, participated in the execution of the project as well as

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financial commitment for the same till its termination and even post termination. Hence, arbitral tribunal has rightly arrived at a conclusion that proposed respondent is a necessary and proper party and rejected the prayer for proposed respondent No.2 being made party to the arbitral proceedings. Said finding recorded by the tribunal would not call for interference at this stage, since in the event of petitioner being visited with an award adverse to its interest, it would be at liberty to challenge the same by filing an appeal under Section 37 and as such reserving liberty to the petitioner to challenge the award, if any, passed against it, writ petition stands dismissed. No opinion is expressed on

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merits and all contention of both parties are kept open.

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SD/JUDGE

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SD/JUDGE

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Nel Holdings Limited v. Vijay Nirman Company Private Limited

Case brief

What is this about?

What did the court decide?

Nel Holdings Limited v. Vijay Nirman Company Private Limited

Case brief

What is this about?

What did the court decide?

What the court decided

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