Case Note & Summary
The matter arose from a Share Purchase Agreement (SPA) dated 10 December 2004 between Welspun Trading Limited (transferor) and Eupec PipeCoatings GmbH (transferee), later known as Mulheim Pipecoatings GmbH (the petitioner), for the purchase of equity shares of Welspun Gujarat Stahl Rohren Limited (WGSRL). The SPA contained an arbitration clause (Clause 11.13) providing for ICC arbitration in Dubai. In 2009, the petitioner sought to sell its entire shareholding and issued a Notice of Offer under the pre-emption clause to the first respondent, Welspun Fintrade Limited. The first respondent disputed the validity of the notice and subsequently filed Arbitration Petition No. 1022 of 2009 under Section 9 of the Arbitration and Conciliation Act, 1996, obtaining an ad interim injunction restraining the petitioner from creating third-party rights over the shares. On 17 March 2010, the parties entered into a Memorandum of Understanding (MOU) which, inter alia, provided that upon signing, the SPA would stand null and void and the first respondent would withdraw the Section 9 petition and its arbitration notice. Pursuant to the MOU, the first respondent withdrew the petition, and the petitioner partially performed the sale of shares. Disputes later arose regarding tax liability and the binding nature of the MOU, with the petitioner contending that the MOU was not a binding contract. The first respondent filed Suit (L) No. 2344 of 2011 in the Bombay High Court. The petitioner then filed the present Arbitration Petition No. 1070 of 2011 under Section 45 of the Arbitration and Conciliation Act, 1996, seeking reference of the first respondent to arbitration under Clause 11.13 of the SPA and dismissal of the suit. The judgment text provided ends abruptly after recording the factual background; the court’s analysis, findings, and final order are not included. Consequently, the legal outcome remains unknown.
Issue of Consideration
Whether the dispute between the parties should be referred to arbitration under clause 11.13 of the Share Purchase Agreement, and whether the suit filed by the first respondent should be dismissed given the subsequent Memorandum of Understanding and withdrawal of earlier proceedings.
Case Details
2012 LawText (BOM) (12) 83
Arbitration Petition No. 1070 of 2011 (in Suit (L) No. 2344 of 2011)
For petitioner: Mr. Iqbal Chagla, Sr. Advocate along with Mr. Riyaz Chagla along with Ms. Nandini Singh i/by M/s. Bharucha & Partners; For respondents: Mr. Virag Tulzapurkar, Sr. Advocate along with Mr. Cyrus Ardeshir along with Mr. Rahul Dwarkadas, Mr. Kingshuk Banerjee along with Ms. Prachi Dhanani i/by M/s. Wadia Ghandy & Co.
Mulheim Pipecoatings GmbH
Welspun Fintrade Limited, Welspun Corp. Limited
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Nature of Litigation
Petition under Section 45 of the Arbitration and Conciliation Act, 1996 for reference to arbitration and dismissal of a suit
Remedy Sought
The petitioner sought direction to refer respondent no. 1 to arbitration under clause 11.13 of the Share Purchase Agreement and dismissal of Suit (L) No. 2344 of 2011
Filing Reason
Dispute arose regarding sale of shares under the Share Purchase Agreement, pre-emption rights, and the binding effect of a Memorandum of Understanding; the first respondent filed a suit, and the petitioner sought enforcement of the arbitration agreement
Previous Decisions
Arbitration Petition No. 1022 of 2009: Ad interim injunction granted restraining petitioner from creating third-party rights over shares; later withdrawn. Securities and Exchange Board of India ex parte ad interim order dated 2 December 2010 restraining promoters from dealing with shares; appeal rejected as not maintainable
Issues
Whether the dispute should be referred to arbitration under clause 11.13 of the Share Purchase Agreement given the subsequent Memorandum of Understanding and withdrawal of earlier proceedings
Judgment Excerpts
Th Parties shall try and amicably resolve all claims, disputes, questions or controversies or claims arising out of or in connection with this agreement or the execution, interpretation, validity, performance, breach or termination hereof. All disputes arising out of or in connection with the present agreement shall be finally settled under the Rules of Arbitration of the International Chamber of Commerce (ICC) by one Arbitrator appointed in accordance with the said Rules. The Arbitration shall take place in Dhubai
Upon signing of this MoU, the Share Purchase Agreement dated 10th December, 2004 shall stand null and void and the petition filed by WTL in High Court, Mumbai shall be withdrawn by WTL. WTL shall also withdraw notice of Arbitration sent by WTL
Procedural History
10 December 2004: Share Purchase Agreement executed. 6 October 2009: Petitioner gave Notice of Offer under pre-emption clause. 21/27 October 2009: First respondent disputed validity of notice. 5 November 2009: Petitioner expressed intention to sell shares to third party. 20 November 2009: First respondent disputed validity and invoked arbitration. November 2009: First respondent filed Arbitration Petition No. 1022 of 2009 under Section 9; ad interim injunction granted on 21 November 2009. 17 March 2010: Memorandum of Understanding signed, providing that SPA is null and void, and Section 9 petition shall be withdrawn. 18 March 2010: Petitioner’s advocates called for withdrawal. 22 March 2010: First respondent withdrew Arbitration Petition No. 1022 of 2009. 2 December 2010: SEBI passed ex parte ad interim order restraining promoters from dealing in shares. 2011: First respondent filed Suit (L) No. 2344 of 2011; petitioner filed Arbitration Petition No. 1070 of 2011 seeking reference to arbitration. 20 December 2012: Oral judgment delivered (incomplete text).
Acts & Sections
- Arbitration and Conciliation Act, 1996: 45
- Companies Act, 1956:
