High Court of Bombay Hears Arbitration Petition Under Section 34 of the Arbitration and Conciliation Act, 1996. Award of 14 January 2006 on Share Valuation Under Clause 7 of Protocol Agreement Challenged on Grounds of Jurisdiction and Legality of the Agreement.

Petition under Section 34 of the Arbitration and Conciliation Act, 1996 seeking to set aside an arbitral award

Setting aside of the arbitral award dated 14 January 2006 passed by the sole Arbitrator

Petitioner alleged that the arbitral award suffered from jurisdictional errors, illegality of the underlying agreement, and absence of a concluded contract for sale of shares

Sole Arbitrator Mr. Justice A.V. Savant passed the arbitral award on 14 January 2006; earlier, on 21 July 2004, the Arbitrator rejected the petitioner's challenge to his jurisdiction

Whether the arbitral award dated 14 January 2006 is liable to be set aside under Section 34 of the Arbitration and Conciliation Act, 1996 Whether the Protocol Agreement dated 2 October 1974 was illegal and void under the Securities Contract Regulation Act and Companies Act, 1956 Whether a concluded contract for sale of shares existed between the parties Whether the joint reference to arbitration dated 29 December 2003 was valid Whether the Arbitrator had jurisdiction to determine the rate of shares

Petitioner contended that the Protocol Agreement was a forward contract prohibited by the Securities Contract Regulation Act and contained restrictions on transfer of shares violative of sections 111A and 9 of the Companies Act, 1956; hence the agreement and the arbitration reference were void. Petitioner argued that no concluded contract for sale of shares existed as there was no agreement on price, and the joint reference presupposed a contract which was non-existent. Respondent submitted that its letter dated 3 May 2003 constituted acceptance of the offer to sell shares, only the price remained to be determined through arbitration as per clause 7, and therefore a concluded contract existed. Respondent asserted that the Protocol Agreement was legal and binding, and the Arbitrator had full jurisdiction.

The challenge in these proceedings under Section 34 of the Arbitration and Conciliation Act, 1996 is to an arbitral award dated 14th January 2006 of a sole Arbitrator, Mr. Justice A.V. Savant. If either party desires to part with or transfer its shareholding or any part thereof in the equity share capital of Maharashtra Scooters Limited, such party shall give first option to the other party for the purchase of such shares at such rates as may be agreed to between the parties or decided upon by arbitration.

On 2 October 1974, a Protocol Agreement was entered into between the petitioner and respondent leading to incorporation of Maharashtra Scooters Ltd. (MSL). From 1986 to 2003, the respondent repeatedly requested the petitioner to divest its shareholding. By letter dated 9 April 2003, the petitioner offered to sell its 27% stake at Rs.232.20 per share. The respondent, by letter dated 3 May 2003, confirmed its willingness to purchase but did not accept the price. Counter-offer of Rs.75 per share made on 6 June 2003. On 31 July 2003, the respondent proposed arbitration. By letter dated 27 October 2003, the petitioner confirmed appointment of Mr. Justice A.V. Savant as sole Arbitrator. On 29 December 2003, a joint reference to arbitration was made. At the first meeting on 10 January 2004, pleadings were directed. On 6 April 2004, the petitioner filed an application challenging the Arbitrator's jurisdiction. The Arbitrator rejected the challenge on 21 July 2004. The arbitral award was passed on 14 January 2006. The petitioner then filed Arbitration Petition No. 174 of 2006 under Section 34 before the High Court. The High Court heard the matter and delivered judgment on 15 February 2010.

• Arbitration and Conciliation Act, 1996: 34
• Companies Act, 1956: 111A, 9
• Securities Contract Regulation Act: