Dismissed

M/s. Meenakshi Solar Power Pvt. Ltd. v. M/s. Abhyudaya Green Economic Zones Pvt. Ltd.

Telangana HC12 Feb 2021ARBAPPL/55/2020

Case brief

AI extract

What is this about?

Petitioners sought appointment of an arbitrator under Section 11(6) of the Arbitration and Conciliation Act, 1996 invoking the arbitration clause in a Share Purchase Agreement. The court held that the SPA was novated by a subsequent tripartite agreement containing no arbitration clause, so the arbitration clause perished with it; the application was dismissed.

What the court decided

AI extract

M/s. Meenakshi Solar Power Pvt. Ltd. Vs M/s. Abhyudaya Green… — Arbitration | Telangana HC (2021)

¶1

IN THE HIGH COURT FOR^{THE STATEOF TELANGANA AT HYDERABAD}

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FRIDAY ,THE TWELFTH DAY OF^FEBRUARY TWO THOUSAND AND TWENTY^ONE

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PRESENT

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THE HONOURABLE SRI JUSTICE^{A.RAJASHEKERREDDY}

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ARBITRATION APPLICATIO N NO:^{55 OF 2020}

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Between:

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1 Ir,4/s. tvleenakshi Solar Power^{Pvt. Ltd,registered office at 1'19'Road No. '10,} Jubilee Hills, Hyderabad^{5OOO33 Rep.by ifs Autho-risedSignatory Mr'P Venkata} Prasad Sio. [,iadhusudhan^{Rao aqed about 56 years, address as above,} empowered under Board^{Resolution dated16-05-2020.}

¶8

2 M/s. Meenakshi Power Pvt.^{Ltd, registeredofficeat 119, RoadNo 10, Jubilee} Hitis, nyaeraUad 500033 Rep.^{by its-Authorised Signatory Mr. P.VenkataPrasad} Slo. tvlSdhusudhan'Rao^{ageda'Oout56 years, address as above, empowered} under Board Resolution^{dated16-05-2020.}

¶9

(Petitioner No.2 Proforma PartY)

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...PETITIONERS

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AND

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1 . lvl/s. Abhyudaya Green^{EconomicZones Pvt. Ltd,registered office. at 3rd f loor,} Ffoi f1fo.z'sz, irashasan^{Nagar, Road No.72,Jubilee Hills' Hyderabad 500096'} rep. by lr/anaging Director^{Dr. Vijay Kumar Kolaventy.}

¶13

Dr. Vijay Kumar Kolaventy,^{S/o. M.r Rushya Rao KolaventyAg-edabout} !!^Vears' - [aving iOOress at 2nd Fl6or' Plot No. 257, Prashasan Nagar, Road No 72' Jubilee Hills, HYderabad.

¶14

Ir/r. Vikram Kumar^{Kathula. S/o. ShyamalaRao Kathula} fged^{about 41 years,} havino address al 10-05-24,^{FlatN6.101, cannaBlock, GardenTowers,N4asab} Tank,-Asif Nagar, Humayunnagar,^{Hyderabad 500028'}

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(Respondent No.2 and 3 are^{proformaparties)}

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...RESPONDENTS

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Arbitration Application^{under Section11 (6) of the Arbitration and conciliatton} Act, 1g96 praying for the^{reasonsstatedin the accompanying affidavitfiled} theiewith, tne ifon'Ote^{Court may be pleased to appoint an arbitratorof its choice} on behalf of the^{Respondents iuchthat the two arbitratorswill appoint a third} arbitrator and the^{constituted Arbitral Tribunal would adjudicate the disputesand} differences between^{the Petitionerand the Respondentand pass the awardin the} interest of^justice.

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Counsel for the Petitioners:SRl.^{S V S GHOWDARY}

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Counsel forthe Respondent^{No.1: SRI D NARENDAR NAIK}

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The Court made the^{following:ORDER}

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THE HON'BLE SRI JUSTICE A.RAJASHEKER REDDY

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ARB.APPL No.55 of 2O2O

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OI?DtrR

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This arbitration application is filed by M/s Meenakshi Solar Power Ltd. and another (hereinafter referred as 'MSPI-') under Section 11(6) of the Arbitration and Conciliation Act, 1996 (Act' for short) with the following relief:

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"It is therefore praAed that this Court maA be pleased to appoint an arbitrotor of its choice on behalf of tle Respondents such that the tuto arbitrators tuill appoint a third arbitrator and the constituted Arbitral Tibunal uould adjudicate the disputes and differences betueen the petitioner and the Respondent and pass the auard in the interest of^justice.. ..."

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Prologue

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The applicants arc in the business ol producing power throurgh running and opcratjng thermal/ solar/ hydro power plants. The respondent No. 1 Comp:rny is the orvner r>1' 4. I 28 MW Soiar PV power Project, located in 20 acres at Kummera Village, Chevella Mandal, Ranga Reddy District, Telangana, promoted by the Respondents No.2 & 3 who are the 100% shareholders of the Company. The said power project is generating power and has a 20 year Power Purchase Agreement with Telangana State Southern Power Distribution Company Limited (TSSPDCL). That the said power project of the respondent No.1 was part financed by Corporation Bank, Film Nagar Branch, Hyderabad in the lorm ol' Term l-oan vide Account No. 56082 1000017646 and^part financcd M/ s. IFCI Vcnture Capital Irr-tncls^{Lrmited (hereinaftcrreferrcd} to ars "ll,'CI Vcnture Oapital') ir-r thc form of^{14,68,0O0 Optionaill'} (l()nvcrtiblc i)c'l.rct'rLttrcs (t)CDsl oi Ils, 1OO/ - ci-rclt i.tL par aggroli.lLrng to

!rl

t-L

Rs. 14,68,00,0O0/- (Rupees Fourteen Crore Sixty Eight Lakhs Only)

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under venture capital fund for Schedule Castes (VCFSC). That it became difficult for the respondent No. l-Company to service the debt availed from the said financial institutions and the respondents No.2 & 3 decided to sell the said pou,er project by way of 100% equity share transfer to interested purchasers. Since the applicants had shown interest in acquiring thc said pou,cr pro.1cct, they entcred into a Sharc Purchase Agreement (hereir-rafter, SPA) dated 24-09 2OI8 where under, the respondents No. 2& 3 agreed to sell 1007o ownership of the respondent No. 1-Company comprising of all of its assets including thc land, buildings, plant, equipment along with the continuity of the Pou,er Purchase Agreement signed with TSSPDCL as a going business entity, for an irrevocably frozen Furchase Price of Rs 29 Crores (Rupees Twenty Nine Crores Only), the purchase ol which was agreed by the applicants by way of purchasing 100% ol the Equity Shares and 100% Preference Shares of the Company by way of taking over the loans of the respondent No. 1-Company and the petitioners paying the balance amoLlnt to the sellers i.e. the respondents No. 2 and 3 towards net equity value. Clause 5 of the SPA provides the closing date of the agreement and states that 10m November, 2Ol8 shall be considered as the closing date subject to the fulfillment of all the conditions. Clause 8,2 provides for the termination of the agreement and reads that agreement shall be terminated on iOth of November, 2018 or the Execution date whichever is earlier.

¶34

On 03-04-20 19, the applicanr No. 1 enrered into a tripartite agreement through its affiliate i.e. the applicant No.2, recording the execution of the sPA dated 24-09-2018 and payment of Rs.50 lacs to the respondents 2 and 3 in terms of the said SpA. The parties to the tripartite agreement were: the IFCI venture capital Funds Limited as the first part, respondents 2 & 3 herein as second part and the applicant 2 as the third part. The tripartite agreement recorded the payment of Rs.50 lacs by the applicant towards the respondents/ promoters on 24th September,2Ol8.

¶35

An addendum to the SpA was also signed dated 10_04_2019 in between the applicant no.2 and the respondent no. 1, whereunder, applicant agreed to remit an amount of Rs.1.65 crores to facilitate the respondents 1 to 3 to regularize the loan accounts with the corporation Bank and lacilitate the transler of the project company. 05. Disputes arose as the respondents lailed to supply the Due Diligence Documents (hereinafter referred as 'DDD') as provicred in the SPA. The tripartite agreement in the meanu.hile lapsed.

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The applicants, moved an application before the Commercial Court, City Civil Court, Hyderabad vide COp No.27 l2O2O, under Section 9 of the Arbitration Act, 1996, seeking to restrain the respondents from alienating their shares in the Company, and got the injunction therein. 07. The applicants on, 22-06-2020 invoked arbitration clause 1o of the Share Purchase Agreement invoking arbitration by appointing Dr. p V Amarnadha Prasad and requested the respondents to appoint their nominee arbitrator for the formation of the Arbitrar rribunar. However, as there was no response from the respondents, hence, this Arbitration Application.

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A detailed counrer affidavit has been fired on behalf of the respondenrs inter-alia srating that due to the [airure of applicant no.1 to raise the required lunds within the SpA deaclline of lorh November 20lg as per the terms and conditions of SpA, the SpA got terminated and since the SPA lapsed, subsequent transactions of thc, respondents are of no con\ern to the applicants. 'l'hat it was the Applicant No.1 through its letter ldated 11.03.2019 requested the respondents to enter into a tripartite agreement between its sister concern i.e., the applicant No. 2, IFCI vcFL and the respondents, as the applicant No.1 failed to raise the required total payment amount under the SpA. That the applicant No.1,s sister company M/s Meenakshi power pvt. Ltd., requested for a Tripartite

¶38

Agreement vide their letter dated the March f 1th 2019. In good faith and in maintaining good business ethics, the Respondents No.2 & 3 have obliged to the requests of the applicants even though the SPA has got lapsed and terminated due to the applicant No. 1's non-performance. That pursuant to the lapse and termination of the SPA because of applicant No.1's failure to arrange for the funds and upon the applicant No. 1's requests and based on the original offer letter date 24th September 2O18 and the subsequent request letter from the applicant No.2, a fresh Tripartite Agreement dated 03.04.2019 was entered into between the respondents and the applicant No.2 only to facilitate and ensure timely payments to the lenders and the respondents and to ensure smooth transfer of lOOok of equity and preference shares to the applicant No.2. That the Tripartite Agreement dared 03.04.2019 superseded the Share Purchase Agreemcnt. That even in the lresh Tripartite Agreement there is not even a mention of any dispute about the non-submission of the fictional Due Diligence Documents' that the applicant have alleged to be the main reason for their failure to make payment under the original Share Purchase Agreement. That the applicant filed an application under Section 9 of the Arbitration and Conciliation Act 1996 and secured an interim order against the Respondents and the IFCI VCFL who is the Respondent No. 4 in the above-mentioned Section 9 application by issuing a fraudulent undertaking before Commercial Court, City Civil Court, Hyderabad. That the respondents submitted an affidavit agreeing to honour the sale of their equity shares provided that the appiicants make full payment. However, the applicants again faiied to make the payment and with the intention of stalling and harassing the Respondents, have filed the present Application. That the applicant reproduced that clause 9 of the lapsed and terminated SPA. However, ,h. l"p*d "nd terminated SpA was already superseded by the lapsed and terminated Tripartite Agreement and the lapscd and terminated Tripartite Agreement had no such provision to go for Arbitration for dispute resolution by an1. party. That in the present case, the applicant No.1 was replaced by the applicant No.2, IFCI VCFL and there was no reference of the SpA in the Tripartite Agreement, all in all the Tripartite Agreement novated the SpA. An additional counter aflidavit lr,as also filed with the mostlv thc same averments in the counter aflidavit.

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09, Heard the learned counsel Sri. S.V.S. Chowdhary for the applicants

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and the learned counsel Sri. D. Narendar Naik for the respondents.

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Arguments of the learned counsel for the parties:: 10. Learned Counsel for the applicants contended that arbitration

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clause is a collateral term in the contract pertaining to the disputes and survives even if the performance in a contract comes to an end on account of frustration, breach of contract, repudiation and that the arbitration clause would survive to resolve the dispute in connection the contract or any other dispute arising under the contract. In detailed affidavit filed on behalf of the applicants, the artention of this Court has been drawn towards the clause dealing with the dispute resolution mechanism and it has been vehemently argued that termination of the SPA would not affect the arbitration clause like wise subsequently tripartite agreement has not novated SPA. It has also been argued that in a situation where a subsequent agreement is silent on the issue of arbitration or dispute, reference to the earlier agreement has to be drawn and both the agreements must be read harmoniously to make the intention of the parties more clear and removing the ambiguities and arbitration clause does not automatically perish irrespective of validity of matln agreement

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Per contra, learned cournsel for the respondents submitted that the arbitration clause in SPA dated 18-09-2018 cnrered into between the parties on 24-09-2019 can not be invoked since the SPA has been supersgded, novated and abrogated by virtue of tripartite agreement

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dated O3-O9-2O19. It is also^{contended that the tripartite agreementis}

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silent on arbitration and^does not^{provide for any disputeredressal}

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mechanism and thereforc the arbitration^{clauseprovided in SPA can not} be invoked as the same as has been^{subsequently novated with the} substitution of the parties by^{the later tripartite agreement and when} once the conditions of the agreement are^{modifiedinsubsequent} agreement, containing comprehensive terms^{and conditions which} admittedly, does replace the applicant^{No.1 with applicant No 2 and does} not contain an arbitration clause, refuge to that^{supersededagreement} u,hich has been so novatcd is bad in^lar.r' and^{therefore the arguments ol} the applicants must be rejccted on this^{ground alone}

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:: The^p oint for consideration::

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t2 The point that arises lor consideration in this case^is:- Whether the arbit.rotion clause in SPA is superseded bg^the

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tripartite agreement? If so, uhether the arbitration^agreemenl suruiues?

¶51

For ready reference, the arbitration clause in SPA^{reads as under:-}

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-1O, C'oVERNING LAW AND DISPWE RESOLWION

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1O.1 The parties shall make endeauours to settle bg^{nutualconsultation} ang claim, dispute, difference or controuersA^{(Dispute") arising out of, or} relating to or under this Agreement, inctuding but not^{limited to ang} Dispute with respect to the existence or ualiditg of this^{Agreement,the} interpretatlon hereof, the performance of the obligations hereunder,^{or the} breoch of the agreemen.t or any pari thereof.

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10.2 Any Dispute uth.ich can not be resolued through such^{cor"tsultation} utthin 15 (ftfteen) dags or .srtch extended peiod as the^{Parties mall} mutuattg agree, shall be .finallg settled by arbitration in accordance^utith prouisions of the Arbitration an.d Conciliation Act, 1996 or anA statutory modtfi.cation or re-enactment thereof.^"

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L4, It is to be seen that the SPA dated: 18-09-2019^{was signed in}

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between Abhyudaya Green Econom ic Zone which is Respondent No. 1 and Meenakshi Solar power pvt. Ltd. which is Applicant No 1. The tripartite agreement dated: o3-o4-201g was signed amongst IFCI venture Capital Funds as part first, Shri Vijay Kumar Kolaventy and Shri Vikram Kumar Kathula (Respondents No 2 and 3) and Meenakshi power private Limited, Applicant No 2. The addendum to SpA clated 10_04-2019 was signed in between Abhyudaya (Respondent no. l) and Meenakshi power Private Limited (applicant no 2). The relevant terms and conditions ol the three documents viz; SpA, tripartite agreement and addendum to SpA have been extracted here in tabular form lor the ready reference:

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Terms oI rhe SPA dated 18-09-2018 Terms of the tripartite agreement Terms oI the add endum added to dated 03-04-20l9 SPA dated 10-04-2019 Tenns of SPA as follow Term.s as follow Terms As Jbllou.t A. That on the d.ate of signing the SpA, 1. The PronLoters haue offered. to sell 1. The Company and the promoters the Petitioner No.1 shau remit an 10Oot6 of their equitg shares held. in confirmed to fuUilt all the amount of Rs. 50,O0,OOO lRupees fi,fty AGEZPL along Luith the 4 MW solar requirements of the Shete purchase lacs onlgl as initial paAment amoutTt, power project and all the @ssers oJa Agreement and the Acquirer has betng part of the Purchase pice, to the AGEZPL to MP?L, and MppL has conflmed to fuw its requtrenents llespotdents No. 2 & 3 ecceptecl the oJfer uide Letter dated accordinglg . 24 Septenber 2o1tj J'or the total sole B 'l'lktL ctgai$I pLlAn&rt aJ'tlte sQkl considerotiotl oI Rs.29 Crores 2. Tle Aapirer is rcquu.ed ta rettLlr eiLotl t oJ Rs.50,OO,A0A-OO tli: (Rupees TwetiA N0e Crores Onlg). etl otrDunt d_,Rs. I6.5 .ror(,s lo /?e-s/roldentr^ ,ryo. 2&3 s/rcr/l JaciLitale lhe^proieters atrcl tlte 'nt,tst;'t phrlqe I u.OO.OOA tiqut,tt 2. 'lo Ji(iLitate the sc (l sale of Companll to regttLerize tlrc laLot -S/r.u?s of tlle Con)anV li.ee ol ACI ZPL- b ifipt)l, ttKt loLk)tuLig tetn.s ctccount wilh Corporetion |lank u.ncl lircunLltratrces arrd l_iert tn fctuour of. arrrl corrclrlions hQL| bee (greed fecilitate^the transfer of rlk proJed/ tlte Petircrler No.1 , betweet tlte PAt?TIt:.5. canpdnv.

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2.1 MPPL l:6.s agreed to pall to C. Tlnt cts e conditian _for suclL ttte Tenn Loan accoL[Lt oJ ACEZZL 3 lt is^qgreed that ttLe balence sele remittance, stmultaneousLA along Lutth uide Ac. No. 560821OOOO 176446 consideration shall be reiti\ed. signilg the said S'p/, the Conlpeng heLd wtth Corporatio\ Bank, F,itm within tineltrc as per tlLe tern$ and and the Respondents No. 2 & 3 shall Nagar branch, HAderabad the total conditions of the tripqrtlte prouide the Petitioner No,l with the outstanding principal loan amount agreement d.q,ted 3"d Aprll 2019. original signed SH 4 (share trarlsfer along wtth anA accn)ed. interest form)ⁱⁿ fauour of the^petttioner No.l u.)ithin 7 working d.ays from the date 4. Constdering the intermed.iate along wtth ttle oiginal certiJied true of signtrlg this agreem.ent on the remilTance dnd. the mutual copy of the board resolutton aptprouing responsibilttg of the promoters that understandings, of the gross the exeqnion of the SpA and transler theg will erLsure to get all the charyes reuenues, the Compang and the of the said Equitg Shares to the and. rights of the Corporation Bank Promoters confi.rmed to sltare with Petitbner No.1. released ouer AGEZ.pl,, assets of the Acquirer gross reuenue against AOEZPL, and ouer sh1res in AGEZqL total sale constderation oJ Rs. 29

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D, That from the dag of the signing the ) 2 II;CI VDNTIIRE keepin.g the crores on a proporltonate bas SPA, the Respond.ents No, 2 & 3.shall spl.rt af V.FSC :(4tq fot pranatmg aLL lhe retnittonces nrrrrlc i-Ir t|,' giue pior intimation to the Petitroners enl rcprenel trsh4), hes aqreed la Acql t ire r l)1 t I e.ffecl t 1,. fra t,,4^{I ]} ?⁽ I t^t t, about anA paAment made fron ang of tloit- llrc penol^,|itcresl charges ot1 af renlillance ?f Rs 1^t.,'. .,o,'i.! ',.'r the bank accounts of the CompanA: !t t lott,t ott.,'t,t!,l \e,L.Z|'L !tbject lhe /.qltiet to lht lle't^t i't-antott r.. and also as one of the Conditio/ts lo t1)aiuer oI p<:ttctl charges l>g lhe Luhicll sl]alL co,rlti.lt(. iti 11te, *trttr Precedent for paging the Purchose Carparet'ton Bank ond MPPI, ogrced hrLes .for lnlanr:e ranrrlla|rces r/,rirr Pnce, the Compamg shall approue t,, taut lo JFCI I l Yf/ F[ \idc 4.. .'o. lhe fitnl aDcl .o/r]/)/.l. rr.,r'sl;, ,,' '- changing t.he existitlg euthonze.l .t,i,;.1 1( )90451 tlt( tt)toL olttsl(o1doi(J 'he 1tr.1.'' tt,t I t1, t-" l,: t signatoies of all of it-s Bank accoun.t.s anoutll tauards Lhe redentptton of Acqutret. Jrom^{that of theRespondetlts No, 2 &} 14,68,440 Optiorlally Conuerttble 3. Debentures alortg with the acctuedacctued 5. It is;ftLrther olieed olieed tlto't tlitli interest as per per the term.s of sanctionsanction amounts of the aboue aboue reueire sltat r E, That That th,e Respondents No, 2 & 3No, 2 & 32 & 33 and as on the d.ate as on the d.ate the d.ate d.ate of pagmentpagment will be rernitted bA the Catnpan be rernitted bA the Catnpan rernitted bA the Catnpan bA the Catnpan the Catnpan Catnpan u sl'L.rLl utiliz,e ttLe initial utiliz,e ttLe initial ttLe initial initial paVment LDithin 45 working dags from the45 working dags from theworking dags from thefrom thethe and. the Promoters onlu uport rece+)lrece+)l amount onlV Ior onlV Ior Ior th.e purpose purpose of pavngpavng date of signing signing thi,s agreenent.agreenent. of the the same from TSSPDCL agaitlsl

¶62

Debentures alortg with the acctuedacctued 5. It is;ftLrther olieed olieed tlto't tlitli interest as per per the term.s of sanctionsanction amounts of the aboue aboue reueire sltat r E, That That th,e Respondents No, 2 & 3No, 2 & 32 & 33 and as on the d.ate as on the d.ate the d.ate d.ate of pagmentpagment will be rernitted bA the Catnpan be rernitted bA the Catnpan rernitted bA the Catnpan bA the Catnpan the Catnpan Catnpan u sl'L.rLl utiliz,e ttLe initial utiliz,e ttLe initial ttLe initial initial paVment LDithin 45 working dags from the45 working dags from theworking dags from thefrom thethe and. the Promoters onlu uport rece+)lrece+)l amount onlV Ior onlV Ior Ior th.e purpose purpose of pavngpavng date of signing signing thi,s agreenent.agreenent. of the the same from TSSPDCL agaitlsl the outstandirlg loan installment uith 2.3 Unless otherluise mub)allg inoices submitted with effect from Corporatton Bonk. agreed bA all Parties and. extend.ed. 22nd May 2019 on^'as and when for^a further^{peiod,the ualiditgof} receiued' basi-s from lhe amaurl F. That bg th.e Exeqttion Date and. as this Agreement shall expire after 45 after meetirLg monthlll operattl(t an obligation under Conditions uotking daAs from the date oJ this expenses, tf ang, artd a.fler any loott Precedent (Clause No.4 of SPA), the agreement. In case the ualidity of seruicutg usecl by rhc Ll1nk. litI Compang and the Respondents No. 2 tlis agreemenl is mtiuaLlA extended unshafed oulsland t!) arrroir,rl. :/ & 3, as a joint responsibilit!1, shall and MPPL does not clear the dues of a,tU. os !',t tltt rlot,^, :t,^{'t ,:'} ; ; submit the documents lhercntafter IFC Venture uithil such extended t o,ttth', ',t,t.,t,^t re.ferred t.o as Dtte. Dil(pnrP l)eno(l,^{then Ml,lrl,sha pallpe,nol} Pro.F\ shall l).^{,ltllt1\lt,ti} t tllr/^l DocunetTl.s') trilh the stolus os at the a]tarqps h 2n; p-a aucr and olto e, 't ntt tt: "),,^1'. ,t lr) , date of SPA and ako as ot1 tlrc dele of tltc oJtplrcable coupon rdte o,t lhe b,tlrtt. , :tt1, rn,s,/, ' .'. the Execution Date. oulsletlditlg dues of IFCI Venhte bll tLte 1\cq11irer aller .onv)letian oI 45 uorking daAs G. ThaL bg the Executio,l Date oll the from^{the date olstgning} oJ^this 6. The Companlt onal li1" l)ronott't: conditions under the^{"Condittor:-s} agreement for the delayed peiod. funltcr^{cott/irn. that,r,\1,t.,'" ,.:.} Precedent (Clause-4 of SPA) should 2.4 Upon receipt oJ the Acquirel sha/i l)e con.side,'crl haue been complied uith. In the outstanding pnncipaL loan amount toluards adjusl.meTrl fl..(rirr-sl ri.rr, cotltert of the conditions precedent. il along wil.h accnted interest thereon, consrderalictn u)helhcr th(ltt ett' would be perTinent to twte that Clause IFCI VENTURE shall releose oll of its receiued in to the acaototts of tll 4.2 speclicallg prouides thot^.From charges, pledge on shares and any CompanA, lenders oJ LIE Cor4)an]t, the date of this Agreement, uithout other rights on AGEZPL in fauour of or the Promoters. the pior written consent of the MPPL and/ or lender/ s of MPPL as Acquirer, ang receipts of the Compang reqtired- bg MPPL to Jacilitote a clear including those from receiuables or and complete title transler of AOEZPL reimbursem.ents shall not be spent for and the 4MW solar pouer ploject to ang purpo s e whatsoe uef . MPPL. Simultaneouslg, IFCI VENTURE shall also release the personal/ corpordte guarantees of the PROMOTERS & other guarantors, collaleral secuities dnd ang other ltetls of the PROMOTERS/ AGEZPL held by IFCI VENTURD.

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.l llPPL has aqrecd 10 pay to the P/.'O.lra)71rRS the balarce atnotott afler rcl/r,|./ ilre loat.s af llC. VIiNIURL and ('.rl,r1ttton Ba'lk t11tltot .)0 rlctys t4ton rh. /rro,role/s ful.fillttq all af then'

¶64

¶65

¶66

responsibilities touar	d.sMPPL. Funher,
uponMPPL clean	ngthe loansoJ
Corporation Bankand	lFClVENTURE,the
proJectshaLLbehatld	edouer byAGEZPL
at^jilsPronlolerslo	NIPPL. For auoidittg
co,rirsio4, giuei	tlt.: totdl saie
cofrs(ler.(tiorrrennl
cror"s,i\lPPl,iLtil p	etProirctersthe
bLtl(ttLcQrrtOLttLtti!1!	:t ,t:Io:uig.tfter
sylllltLg l:Lr?orLit(rt	lr
VLNll.llllaapanlratl	^t,atporoonBcirk
atrcLIlCtVENTURE,	u,tltutd allathet
I.r]btLutespiortothe	dateoltronsferof
ACEZI>LbMPPLshul	l be tatleaccount
4.lrLcaseoJ aortJulf	Llneofongofthe
aboue conditiotts,IFCI	VeilureshaLlbeat
libengbreuoke thisa	greenent.
5.ThetefiLinationoft	hisagreementslloll
beuilhoutprejudice	toIFCIVenture's
ight/interestu^de	r theInuestment
Agreementdated 10	'Noeember2015
exeattedbettaee
Promoterc&AGEZPL.

¶67

15, The entire edifice of the case of the respondents stands on the point that the applicant l and Respondents are parties to the SpA but not to the tripartite agreement where applicant 2 and Respondents 2 and 3 have replaced the parties in the tripartitc zrgreement. Applicant 1is also not a party to the addendum. Horn,ever, rcspondent I is a signatory t here.

¶68

16, Mr. Naik, counsel lor the Respondents has vehemently argued that since the parties in the SPA and Tripartite Agreement are not one and the same and entire terms and conditions changed, the SPA stood novated, as the law related to contract has unambiguously provided for it

¶69

L7. A perusal of the above mentioned terms of the three documents

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signr:d atnongst the partles would shoiv that there has been surbstantial

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qh,

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change in the terms of SPA and tripartite agreement apart from change in the parties. The condition pertaining to supply of Due Dilgence Documents under SPA scems to have been u'aived off in the triparlitc agreement. What is also important to note is the clause 3 of the addendum. Though the document has been styled as the addendum to SPA, nowhere in its clauses a reference to SPA has been made. In-[act, clause three of the addendum provides that it has been agreed betu,een the parties that the balance sale consideration shall be remitted within timeline as per the terms and conditions of tb.e tripartite agreement dated 3'd Apil 201 9. The reference to tripartite agreement evinces that the terms and conditions of the SPA have been abrogated and novated and it also unambiguously shorvs Lhe intention of the parties as they departed from the SPA to tripartite agreement

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It would now be apposite to refer to Section 62 of the Contract Act of 1872 to bring home tl-rc poir-rt which the learned counsel lor thc respondents has argued.

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Section 62 of Contract Act reads as: Effect of novation, rescission and alteration of the coutract

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--if the parties to a contract agree to substitute a new contract for it, or to rescind or alter it, the original contract need not be performed.

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Novation::

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The word novation, as has been discussed by Mulla in his Indian Contract Act, has been thus defined: that, there being a contract in existence, some neu, contract is substituted for it either between the sa me parties (for that might be) or betu'een different partics, the

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consideration^{mutually being the dischargeof the old contract lt is well} settled that the^{parties to an original contractcan,by mutualagreement'} enter into a^{new conLract in substitution of the old one} Novation can onlybedonewiththeagreementofboththepartiestocontract.Boththe parties have to agree^{to substilute the original contractwith a new} contract or to rescind^{or to alter it. Itcannotbe done unilaterally} Novation is a substitution^{of the contract and not mere variation of some} of its terms. It should^{rescind orextinguish the previous contract.} Novation under^{s 62 is brought about by}

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(a) Introduction of^new Parties;^or (b) By alteration between^{the same parties by introductionof new terms'} See (CI?I Bank^{N,A' u. StondardChartered Bank,(2OO4l1 SCC 12} Rormdagal v. Maii^{Deudiji, 1954SCC Online Raj 6a)}

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2C.. lt is t-rot^{rl'r <lisputcthal thc Applicernl I u'ho u':ts parw to the SPA} tvas rcplaccd^{b1' Applictlnt2 illthe Lripartitt' :rgrcementarnd also tn} adclcnclum. Similarl1',^{Re sponde nt No 1' a p:rrl1' tn SPA u'as replaccd b1'} Respondents² &^{3 in thc tripartlte agrcemcrll lt is also not in clispute} that the applicant^{1 $'as nol una\-are of thc rriparrrte agreemcnl in} bets,een the^{Applicant2 and Respondents 2 and 3 and he had knowledge} of the agreement^{being entered into ln-fact, at Para 14 of affidavitthe} Applicants^{have submitt-ed that the Applicant No 1 had enteredinto the} said tnpartite^{agreementdated03-04-2019 through its affiliate i ethe} Applicant No.^{2 herern}

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o1 A picture that^{has clearly emergedout liom this discussionis that} lor ibvation i:I ll agreement^{must be substituted by the parties to the}

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agreement^{mutually' An agreement will be novated with the introduction} of new^{partiesto the substitutedagreementreplacing the old one'} Therefore,^{a SPA was novated with the introductionof the newparties in} the tripartite^{agreement' A refuge under a substitutedagreementby the} applicants^{can not be claimedfor invokingarbitrationclause as there} has been an^{ample discussion and plethora of judgments by various} Courts including^{this Court on this issue where it has been held that an} arbitration clause^{sinkswith an agreement that is Substituted or} superseded^{by the later agreement lt would' thereforebe apposile to} discussthefewofthejudgments,asrelieduponbytheparties.

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Reliance^{has been placed on various judgments by the Apex courts} and Delhi^{High Court and this court' The judgments cited in supportof} the contentions^{ofthe respondents are:- UIVION OF INDIA us'} KISH)RILALGUPTA&BRos'(1960)1SCR493;cHLoRocoNTRoLs 0^{P. Ltd us. SEVERN?RENT WATER PURIFICATION INC' (2013)1} SCC 641;^{YOUNG ACHIEVERSus' IMS LEARMNGRESOURCES PvT'} LTD. (2013)^{IO Scc 535; M' B' S' IMPEKPRIuATELIMITEDVS'} MINERALS^{ANDMETALSTRADING CORPORATIONLIMITED 2O2O(5)} ALD I85; and^{sANJIyPRAI<ASH vS'SEEMA KUKREJA} MANU/DE/1911/2O2O.

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23, The Supreme^{Courtin KishoriLal (supra) discussedthis elaborately}

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and it was^held Per^{majoritYthat:}

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"10, The foltouing^{prtnciples releuantto the presentcase emerge} from^{the aforesaid di'scussion:(1) An arbitration clauseis a collateral}

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term of a contract^{as disainguished} from^{its substantiue terms; but} nonetheless it is^{ant integratpaft of it; (2) hotueuer comprehensiuethe} terms of an arbitration^{clausemag be, the existenceof the contract is} a necessary condition for^{its operatton; it penshesutiththe contract;} (3) the contract may be^{nort est in tLLe sensethot it neuer came} tegollg into^{existence or it uas uoid ab initio;(4) though the contract} was ualidly exealted,^{the partiesmaA put an end to it as if it had} neuerexistedandsubstitllteanelDcontractforitsoletggouetning their nghts and^{liobilitiesthereunder;(5) in the former case' if tLte} oiginal contract^{has no legalexistence,ttrc arbitration clause also} cannot operate, for^{along with t?e oiginalcontract,it is also uoid; in} the latter case, as the oiginal^{contract is extinguished bg the} substituted one, the arbitration^{clause of the oiginal contract} peishes u)ith it; and^{(6) betu)eenthe tLDo} falts^{mang categoies of} connection uith a^contract, such as the question of disputes in those cases i, is^the repudiation, frustration,^{breachetc. In} performance of the contract^{that has come to an end, but tle controct} is still in existence for^{certainpurposesin respect of disputes aising} under it or in connection^{u-tith tt. As the contractsubsists for certain} purposes, the arbitration^{clause operatesinrespect of these} purposes."

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Supreme Courl^{oI Inclia in Young Achiuers (supra)has again}

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considered this^{issue and held thus;}

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The eit^{paper uLouldclearly indicate that it is a mutually} agreed doanment^{containingcomprehensiueterms ond conditions} which admittedlg^{does not containan arbitration clause' We are of} the uiett-t that the^{HighCourt is ight in taking the uieut that the case} on hand, is not a^{case inuoluing assertion bg the respondentof} accord a satisfaction^{in respect of the earlier contracts dated1-4'} 2007 and 1-4-2010.^{Ifthat be so, it coutd haue reknedto the} arbitrator in^{terms of those two agreements going by the dictumin} Unton of India^{u. Kishontal Gupta and Bros'IAIR 1959 SC 1362]} This Court irt^{Kishoilal Gupta case} IAIR^{1959 SC 1362] examined} the questton^{u.thetheran arbitration clause can be inuoked bt the} case of a^{disputeund'ercL sttpersedecl controctT'he pinciple latd} doutn ts that^{if the contrcLctts supersedecl bg another' the arbitration} clause, being^{a componentpart of the earlier contract' falls utith it'} - Buhlhere the dispute is rt-'hether sLch contract ls uoid ab intio'^the

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arbitration clause cannot^{operateon those disputes,} for^{its operatiue} force^{depends upon the exbtence of the contract and its ualidity.The} uaious other obseruations were made^{bg this Court inthe} abouementioned^judgment in respect of^" settlement of^disputes aising under the oiginal contract, including the dispute^{as to the} breach of the contract and its consequences.' The^{pnnciple laid} down bg the House of Lords in Hegman^{u. Daruins Ltd,} [1942^AC 356: (19a2) 1 All ER 337^(HL)l was also^{reliedon bg thisCourt} for^its conclusion. The collectiue bargaining^{pinciple laid dotun by the US} Supreme Court in Nolde Bros. case [51^{L Ed} 2d^{3OO: 430 US 243} (1977)l u.tould not apply^(.o the facts of the present case.

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This Court in a M, B, S, Impex^{(supra) has held that:}

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"24. In YOUNG ACHIEVERS^(supra) it^{utas held that an arbitration} clause in an agreement cannot suruiue uthen the original^{agreement itself} is superseded/ nouated by ottother agreement^{cLnd if agreementcontaining} arbitration clause is bg superseded/ nouated, then^{the subsequent} agreement uitl preuoil and all tLte clauses in^the oiginal^{agreement(a\ong} with the arbitration clause) will^perish and does^{not suruiue.In LARSEN &} TOUBRO (supra) same ratio is loid dou.n that arbitrator^{agreementstonds} modified bg the supplementary agreement uhen^{the terms of the} supplementary agreement changed the entire edifice of^{the principal} arbitration agreement, there could be^{no arbitration betueenthe parties} for the claims raised bg the appellant and the^apptication filed for^{sucha relief} utortld thus be misconceiued. "

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26, The Delhi High Court in Scnjiu^{Prakash (supra)held that u'henan} agreement containing arbitration clause,^{relied upon} by^{the applicant,} stands superseded / nova tcd then the arbitration^{clausedoesn I survive} High Court of Delhi u,as scizcdⁿ ith the^{question whether al the stageol'} considering the request of the petitioner lor the^{appointmentof an} Arbitrator, it is only the existence of an Arbitration^{Agreement that needs} to be seen, leaving it to the Arbitrator to decide the^{issue of validity of the} Agreement, including the plea of novation of agreement^{which contained} the arbitration clause. The Court rejected the argument^{that novation of}

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r--r;rL_

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the contract, to determine existence^{of arbitration agreement,could not} be looked by the Court into at the stage^{of S. 11 due to limited scope of} enquiry u/s 11(64) and further^{rejected the reliance placed on pleaof} doctrine of^{'kompetenz-kompetenz'by petitioner to pleadthat the issue} must be left to the arbitrator to decide. The^{Courtheld that an} arbitration agreement being a creation ol an^{agreement maybe destroyed} by agreement and if the contract is^superseded by another,^the arbitration clause, being a component/^{part of the earlier contract,falls} with it or if the original contract in entirety is^put to an^{end, the} arbitration clause, which is a^part of it, also^{perishes along with it.}

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27, I have considered the^judgment in^{Chloro ControlsIndia (P) Ltd} (supra)but the same is not applicable to the lacts of the case on^hand

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:: Omeqa ::

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28, A cogent analysis of the matter makes it^{clearthat the law relating} to the effect of novation of contract containing^{anarbitration} .I agreement/ clause is well-settled. An arbitration^{agreementbeing} creation of an agreement may be destroyed^{by agreementThat is to say,} if the contract is superseded by another, the^{arbitration clause,beinga} component/part of the earlier contract,^{falls u'ith itor if the original} contract in entirety is put to an^{end, the arbitration clause, which is a} part o1 it, also perishes along rn'ith it. Hence,^{the arbitrationclause of the} SPA being Clause iO, having^{perished with t.he SPA, owingto novatlon,} the invocation of arbitration under lhe^{SPA is not justilied.}

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In view of my above disc'ussion, it^{is held that, this petitionfiledby}

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the applicants invoking the SPA for appointment of arbitrator^{is not}

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maintainable. The application is liable to be dismissed and it is

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accordingly dismissed. Miscellaneous applications if any pending in the

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arbitration application shall stand disposed of. No order as to costs.

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//TRUE COPY//

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Sd/.K.SREENIVASA^RAO JOINT REGISTRAR T ,\ .__ \ SECTION]5FFICER^</sup>

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To,

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[//s. Abhyudaya Green^{Economic ZonesPvt. Ltd, registered office at 3rd Floor,} Fioi r.ro.z's7 drashasan^{N;g;;, ti"rd no.zz, .tuoiteduills' Hvderabad 500096'} rep. by Managing^{DirectorDr. Vijay Kumar Kolaventy'}

¶119

Dr. Viiav Kumar Kolaventy,^{S/o.Ir,4r. Rushya Rao KolaventyAg-edabout} !l^Vears' - ['r"i'"ilidoiesiui)no rr,jor, Ptot No 257, Prashasan Nagar' Road No 72' Jubilee Hills,^HYderabad.

¶120

3,Mr.VikramKumarKathula.S/o.shyamalaRaoKathulaAgedab_out4lyearS'," f''rruing;Otess at 10-05-24 Flat N6-101 Canna Blgck, Garden Towers' Masab iant<,"eslt Nagar, Humayunnagar,^{Hyderabad 500028'}

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