In a significant legal development, the Delhi High Court has granted a stay in the case involving IOLN and HTM regarding an authority dispute. The court’s decision has implications for the ongoing proceedings and sheds light on the complexities of the issue at hand. Stay tuned to learn more about the details of this case and its potential impact. #LegalCase #DelhiHighCourt
Facts
- The authority of the signatories on behalf of IOLN and HTM is not disputed in the present petitions.
- The principal ground upon which the award is assailed by the petitioners is that they have erroneously been held to be bound by the DSA.
- The award is for a sum of Rs. 7.5 crores, along with pre-award interest at the rate of 6% per annum, further interest at the rate of 7.5% per annum and costs of Rs. 20 lakhs.
- By way of I.A. 6812/2024 and I.A 6814/2024, the petitioners seek interim stay of the impugned award.
- The learned arbitrator has made an award in favor of HT Media Ltd., and against six entities, including the petitioners herein. It was signed by Dinesh Mittal – Vice President, Legal, Tax and Company Secretary – on behalf of HTM.
Arguments
- The petitioners, represented by Mr. Sandeep Sethi and Mr. Jaideep Gupta, argue that Mr. Siddhartha Srivastava (SS) had no authority to sign the DSA on behalf of the Promoters.
- They state that SS was neither an officer nor an employee of the petitioner-companies, and had no authorization to sign the DSA.
- The learned arbitrator’s decision holding the petitioners bound by the DSA due to SS’s ostensible authority is disputed by the petitioners.
- The petitioners assert that SS did not have any authority to represent them in signing the DSA.
- They highlight that no board resolutions were provided authorizing SS to sign on their behalf as required by the DSA.
- The petitioners argue that the findings of the arbitrator on SS’s authority are beyond the scope of HTM’s pleadings and are considered to be baseless and unsupported.
- Mr. Bahl argued that the predecessors-in-interest of the petitioners were promoters of IOLN, who received Rs. 7.5 crores from HTM for debenture subscription under the DSA.
- The learned arbitrator found that SS had authority to act on behalf of the Promoters based on a construction of the DSA and evidence before him.
- Mr. Bahl cited judgments from the Supreme Court, this Court, and the Bombay High Court to support his submission.
- Section 36(3) of the Act outlines the conditions for granting stay of the operation of an arbitral award, with specific considerations for money decrees.
- Mr. Bahl contended that in cases other than money decrees, the Court must require security or a deposit for granting stay.
Analysis
- An appeal against a decree for payment of money requires the appellant to deposit the disputed amount or furnish security as directed by the Appellate Court within a specified time.
- The appeal itself does not automatically stay the execution of the decree, unless certain conditions are met.
- The Court can stay the execution of the decree if it is satisfied that substantial loss may occur, the application for stay is not unreasonably delayed, and security has been provided by the appellant.
- The Court may impose conditions for the grant of stay, especially if there is a prima facie case of fraud or corruption related to the arbitration agreement or award.
- The provision applies to all court cases related to arbitral proceedings, regardless of when they were initiated.
- The learned arbitrator found that SS had no actual authority to sign the DSA on behalf of the Promoters.
- The DSA note explicitly required board resolutions supporting SS’s authorization to sign on behalf of the Promoters.
- Discretion in calling for a deposit of the awarded amount should be based on the facts of the case.
- Legal judgments cited did not contradict the findings.
- Factual basis of the arbitrator’s conclusion was not discerned.
- SS’s lack of authority to sign the DSA was pleaded by the petitioners and challenged in court.
- The appellate court can grant an unconditional stay in rare cases of strong prima facie errors.
- HTM’s reliance on indoor management doctrine was rejected by the arbitrator.
- The statement of claims lacked details or factual foundation regarding SS’s authority.
- The arbitrator based SS’s authority on agency and estoppel principles, although estoppel was not initially raised.
- The Division Bench judgment of the Bombay High Court in Ecopack allows the Court to retain discretion even under Section 36(3) of the Act.
- Italian Thai Development case did not grant unconditional stay but acknowledged the decision in the judgment of the Bombay High Court in Balmer Lawrie.
- The petitioners have established a strong prima facie case regarding the findings of the arbitrator on the authority issue
- The postal ballot only mentions IOLN entering into the DSA without referencing liability for the promoters
- The question of authority for entering into the DSA on behalf of the Promoters is crucial to HTM’s claims against them
Decision
- The applications I.A. 6812/2024 and I.A. 6814/2024 have been disposed of with the decision to grant a stay of enforcement of the impugned award.
- To secure the stay, the petitioners are required to deposit Rs. 3.75 crores, which is 50% of the principal amount claimed, into the Court or provide a bank guarantee for the same amount to the satisfaction of the Registrar General.
- The petitioners must complete the deposit or bank guarantee process within six weeks from the current date.
- In addition to the deposit or guarantee, the petitioners must submit letters of undertaking, signed by their directors and supported by resolutions of their respective Boards, agreeing to pay the balance amount if their petitions under Section 34 are unsuccessful.
Case Title: AURUM VENTURES PVT. LTD Vs. HT MEDIA LTD & ORS. (2024:DHC:4334)
Case Number: O.M.P. (COMM)-136/2024
