# TATA INDUSTRIES LTD. & ANR v. GRASIM INDUSTRIES LTD

- **Citation:** [2008] 10 S.C.R. 496
- **Court:** Supreme Court of India
- **Decided:** 2008-07-09
- **Case number:** Arbitration Petition No. 5 of 2007
- **Bench:** V.S. Sirpurkar
- **Source:** https://unisonlegal.in/judgment/supreme-court-of-india/tata-industries-ltd-anr-v-grasim-industries-ltd-23472
- **Pages:** 45

## Headnote

· A,rbitration and Conciliation Act, 1996:
ss.11(6) and (12)(a) - International Commercial Arbitrac tion - Appointment of arbitrators - Live arbitrable issue -
Shareholders Agreement between parties - Applicants invoking arbitration clause for alleged breach of terms of agreement- Subsequently respondent agreeing to purchase shares
of applicants - Share Purchase Agreement containing "withD out prejudice" clause - HELD: Issue whether there was breach
of Shareholders Agreement, continued to be in existence and
was never given up by applicants - 'Without pmjudice' clause
in the subsequent Share Purchase Agreement clearly indicated live arbitrable issue between the parties -- Arbitral tribuE nal appointed - Whether there was breach of Shareholders
Agreement and what would be its effect would be matter in the
realm of arbitration.
Applicant no. 1 (TIL), acting on its behalf and on beF
half of TATA Group, .the respondent acting. on its behalf ,.
and on behalf of A.V. Birla Group, and a foreign based
company, namely, AT&T Wireless Services Inc. which was
the holding company of AT&T Cellular Pvt. Ltd. (Mauritius)
incorporated under the laws of Mauritius, agreed to provide CTMS service through a single entity, and to merge
G themselves to form IDEA Cellular Limited (l[
1)EA). A Shareholders Agreement came into existence cin 15.12.2000.
AT&T Cellular Pvt. Ltd. (Mauritius) was subsequently renamed as Apex Investment (Mauritius) Ltd. (applicant no.
2). Applicant no. 1 served notices dated 31.1.2006 and
H
496
)
.,
•
•
TATA INDUSTRIES LTD. & ANR. v. GRASIM
497
INDUSTRIES LTD.
27.2.2006 upon the respondent alleging violation of nonA
competition and confidential clauses of the Shareholders Agreement. The respondent by its letters dated
28.2.2006 and 1.3.2006 disputed and denied the allegations. In the meantime, consequent upon an offer of purchase, applicant no. 1, on its behalf and on behalf of ap- s
plicant no. 2, sent a notice offering sale of their shares in
IDEA to the respondent, which accepted the offer. The
parties, made it clear that the offer of purchase and acceptance thereof was without prejudice to their rival contentions with regard to Termination Notices dated C
31.1.2006 and 27.2.2006. In response to applicants' notice dated 24.4.2006 to commence process of consultation, the respondent, on 27.4.2006, replied that there was
no arbitral dispute surviving between the parties and,
therefore, there was no longer a basis for arbitration re0
garding the issues set forth in the two Termination Notices. On 5.5.2006, the applicants issued a formal arbitration notice. Thereafter two Share Purchase Agreements
were entered into between the parties on 1.6.2006. A specific reference was made to the claim of arbitration made on
behalf of applicant no. 1 stipulating that execution and conE
summation of the transaction contemplated by the Share
Purchase Agreements would not prejudice or affect the pendency or continuation of the arbitration proceedings between TIL and A.V. Birla Group arising out of the breach of
Shareholders Agreement. The applicants ultimately filed an
F
application u/s 11 (6) of the Arbitration and Conciliation Act,
1996, before the High Court. The application was resisted
by the respondent contending that it would amount to an
international commercial arbitration and, therefore, the Chief
Justice of India alone would have powers to constitute the G
Arbitral Tribunal. The applicants withdrew the said application and filed the instant application.
It was contenderf for the applicants that there was a
clear incurable breach of the Shareholders Agreement as
H
498
SUPREME COURT REPORTS
[2008] 10 S.C.R.
A mentioned in the Termination Notices dated 31.1.2006 and
27.2.2006 which was disputed by the respondent in its
replies dated 28.2.2006 and 1.3.2006 and, therefore, the
dispute clearly fell within the arbitration clause and was a
live issue between the parties. On behalf of the respon-
. B dents it was contended that by virtue o

## Text

_Characters 0–39,881 of 90,745. This is a partial read: ask again with offset=39881 for what follows._

[2008] 10 S.C.R. 496
'
A
TATA INDUSTRIES LTD. & ANR.
v.
GRASIM INDUSTRIES LTD.
(Arbitration Petition No. 5 of 2007)
B
JULY 9, 2008
[V.S. SIRPURKAR, J]
· A,rbitration and Conciliation Act, 1996:
ss.11(6) and (12)(a) - International Commercial Arbitrac tion - Appointment of arbitrators - Live arbitrable issue -
Shareholders Agreement between parties - Applicants invoking arbitration clause for alleged breach of terms of agreement- Subsequently respondent agreeing to purchase shares
of applicants - Share Purchase Agreement containing "withD out prejudice" clause - HELD: Issue whether there was breach
of Shareholders Agreement, continued to be in existence and
was never given up by applicants - 'Without pmjudice' clause
in the subsequent Share Purchase Agreement clearly indicated live arbitrable issue between the parties -- Arbitral tribuE nal appointed - Whether there was breach of Shareholders
Agreement and what would be its effect would be matter in the
realm of arbitration.
Applicant no. 1 (TIL), acting on its behalf and on beF
half of TATA Group, .the respondent acting. on its behalf ,.
and on behalf of A.V. Birla Group, and a foreign based
company, namely, AT&T Wireless Services Inc. which was
the holding company of AT&T Cellular Pvt. Ltd. (Mauritius)
incorporated under the laws of Mauritius, agreed to provide CTMS service through a single entity, and to merge
G themselves to form IDEA Cellular Limited (l[
1)EA). A Shareholders Agreement came into existence cin 15.12.2000.
AT&T Cellular Pvt. Ltd. (Mauritius) was subsequently renamed as Apex Investment (Mauritius) Ltd. (applicant no.
2). Applicant no. 1 served notices dated 31.1.2006 and
H
496
)
.,
•
•
TATA INDUSTRIES LTD. & ANR. v. GRASIM
497
INDUSTRIES LTD.
27.2.2006 upon the respondent alleging violation of nonA
competition and confidential clauses of the Shareholders Agreement. The respondent by its letters dated
28.2.2006 and 1.3.2006 disputed and denied the allegations. In the meantime, consequent upon an offer of purchase, applicant no. 1, on its behalf and on behalf of ap- s
plicant no. 2, sent a notice offering sale of their shares in
IDEA to the respondent, which accepted the offer. The
parties, made it clear that the offer of purchase and acceptance thereof was without prejudice to their rival contentions with regard to Termination Notices dated C
31.1.2006 and 27.2.2006. In response to applicants' notice dated 24.4.2006 to commence process of consultation, the respondent, on 27.4.2006, replied that there was
no arbitral dispute surviving between the parties and,
therefore, there was no longer a basis for arbitration re0
garding the issues set forth in the two Termination Notices. On 5.5.2006, the applicants issued a formal arbitration notice. Thereafter two Share Purchase Agreements
were entered into between the parties on 1.6.2006. A specific reference was made to the claim of arbitration made on
behalf of applicant no. 1 stipulating that execution and conE
summation of the transaction contemplated by the Share
Purchase Agreements would not prejudice or affect the pendency or continuation of the arbitration proceedings between TIL and A.V. Birla Group arising out of the breach of
Shareholders Agreement. The applicants ultimately filed an
F
application u/s 11 (6) of the Arbitration and Conciliation Act,
1996, before the High Court. The application was resisted
by the respondent contending that it would amount to an
international commercial arbitration and, therefore, the Chief
Justice of India alone would have powers to constitute the G
Arbitral Tribunal. The applicants withdrew the said application and filed the instant application.
It was contenderf for the applicants that there was a
clear incurable breach of the Shareholders Agreement as
H
498
SUPREME COURT REPORTS
[2008] 10 S.C.R.
A mentioned in the Termination Notices dated 31.1.2006 and
27.2.2006 which was disputed by the respondent in its
replies dated 28.2.2006 and 1.3.2006 and, therefore, the
dispute clearly fell within the arbitration clause and was a
live issue between the parties. On behalf of the respon-
. B dents it was contended that by virtue of the Share Purchase Agreements the applicants had made an exit from
the company and they were left with no rights under the
Shareholders Agreement and, as such, there was no live
issue pending between the parties.
C
Allowing the application, the Court
HELD: .1. The parties are ad idem that the jurisdiction
to appoint the arbitrator lies with the Chief Justice of India
· or, as the case may be, his nominee. There is no dispute
0
that there is an arbitration agreement between the parties
as contained in Clause 12.04 of the Shareholders Agreement
dated 15.12.2000 and Clause 9 of the Share Purchase Agreement dated 1.6.2006. The parties are also ad idem that the
claims are within limitation. [para 1-3] [502-F,G and H; 503-A]
E
2.1 As regards the live arbitrable issue, it is clear that
the issue whether there was a breach of confidentiality
clause of the Shareholders Agreement on the part of the
respondent and what were its effects continued to be in
existence and was never given up by the applicants. By
- F letter dated 6.4.2006, the respondent, while communicating its acceptance of offer of purchase, made it clear that
its offer was without prejudice to its contentions that Notices of Termination referred to in the Offer Notice were
not tenable. Similar reiteration was made on 10.4.2006.
G The respondent, by letter dated 24.4.2006, again showed
its readiness to purchase the shares. However, the earlier position was reiterated that the stand taken by Tata
Group was not correct. On 24.4.2006, the applicants
clearly reiterated that a dispute had arisen between the
applicants and the respondent in connection with the
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·1
..
TATA INDUSTRIES LTD. & ANR. v. GRASIM
499
INDUSTRIES LTD.
.
terms of ShareholGlers Agreement and that for that purA
pose, they were ready to start the process of consolidation as an initial step. It was also conveyed that in case
the respondent was ·not interested in the process of eon-.
solidation, the applicants would like to proceed with the ,
arbitral proceedings straight away. [para 13,28 and 35]
B
[537-C,D, 513-C,D & F; 533-G,H; 534- A & B]
2.2 It was only in the letter dated 27.4.2006 that the ,
respondent, for the first time, took the stand that the Shareholders Agreement was concluded between the parties
consequent to the offer of purchase notice and the acC
ceptance notice and the effect of the further steps taken ·
by both would be that there was no arbitrable dispute '
surviving pursuant to the notices. It is here for the first ·
time, that a stand was shifted by the respondent from its
earlier stand. Earlier, its contention was that there was no , D
breach of confidentiality clause. The shifted stand was that
because of the subsequent Agreement, the earlier issue
was already obliterated. It is on this background that ultimately the formal Agreements dated 1.6.2006 came to be
entered into by the parties. But before that, a notice for the
E
Arbitration had already been issued by the applicants by
their letter dated 5.5.2006. [para 28-29] [534-8,C,D and E]
2.3 In fact, if the stand taken by the respondent was
that there was no arbitrable issue because the offer concluded the sale, there was no question of any such "with-
'F
out prejudice" clause being inserted in the Agreement
dated 1.6.2006. It is significant to note that on the date
when the formal Agreements were signed on 1.S.2006, the
respondent was already facing an arbitral notice and yet
the two clauses, viz., 2(0) and 2.3 came to be inserted. All G
this would suggest that there indeed was an issue and a
live one in between the parties till then. It is incorrect to
say that the cause of action arose only from the offer dated
5.4.2006. The live issue was clearly there, much before
the notice was given on 5.4.2006 and the second agreeH
500
SUPREME COURT REPORTS
[2008] 10 S.C.R.
A
ment was even contemplated. [para 29 and 35] [534-G,H;
535-A; 537-8 & C]
Chairman and MD, NTPC Ltd. Vs. Reshmi Construetions, Builders & Contractors 2004 2 SCC 663 - relied on.
B
Sargent and ASL Developments Limited (197 4) 4 Australian Law Reports (A.L.R.) 257 - held inapplicable.
Jai Narain Parasrampuria (Dead) and others Vs. Pushpa
Devi Saraf and others, 2006 (7) SCC 756; National Insurance
Company Limited Vs. Mastan and another 2006 (2) SCC 641
c - distinguished.
Shree Ram Mills Ltd. v. Utility Premises (P) Ltd. (2007) 4
SCC 599; and SBP Co. Vs. Patel Engineering Ltd. and.Another
2005 (4) Supp. SCR 688=2005 8 SCC 618 - referred to.
D
Heyman & Anr. v. Darwins Ltd. (1942) 1 All E.R. 337-
•
referred to.
~:...
3.1 It is incorrect to say that since shares of applicant no. 1 in IDEA have fallen below 15% it, in view of
E
clauses 7.01(a), 7.01(b) and 7.02(b), had no right under
the Shareholder~ Agreement. The Arbitration Agreement
under clause 12.04 would be clearly autonomous of the
Shareholders Agreement. Law is settled on this point that
even if the whole Agreement is terminated, the Arbitration
F
Agreement would still remain. Assuming that clause 7.01
-1
(b) operates as a complete bar on the exercise by the ap-
~
plicants of their substantive right to seek a buy-out, that
is only an eventuality subsequent to the crystallization of
the live issue between the parties for which the arbitration clause would come handy to the applicants. [para
G 31] [535-G,H; 536-A,B & C]
Chairman and MD, NTPC Ltd. Vs. Reshmi Construe-
·f.
tions, Builders & Contractors 2004 (2) SCC 663 - relied on
3.2 The issue cannot be held to be dead for the simple
H reason that even in the subsequent Agreements (Shares
TATA INDUSTRIES LTD. & ANR. v. GRASIM
501
INDUSTRIES LTD.
Purchase Agreements), there is a "without prejudice" A
clause and that too despite the vehement claims and refusals of those claims on the part of the parties. [para 32]
.· [536-D & E]
4. Whether there was a breach of Confidentiality B
clause and whether the applicants were entitled to any damages on account of that clause in favour of the applicants,
would be a matter in the realm of arbitration and this Court
would not go into that question. [para 33] [536-E & F]
5.1 It is incorrect to say that applicant no. 2 was not a
'
'
c.
party to the Shareholders Agreement and, therefore, there
could not be a privity of contract between it and the respondent. It must be seen that after the offer was received
from Global Communications, both TIL on its behalf and
'
t
on behalf of the applicant no. 2 offered to sell their entire
~
shareholding in IDEA in terms of the right of first refusal, D.
which offer tias been accepted by the respondent. Applicant rio. 2 is now a part and parcel of the Tata Group and
is its subsidiary. Further, its interests are bound to be affected. [para 36] [537-D & E, 539-A,B & C]
E
5.2 The respondent having raised an objection before the High Court that applicant no. 2 was a foreign company and, therefore, could not have filed an application
before the High Court cannot now turn around and say
.,.
that applicant no. 2 was not a party to the Arbitration Agree-
•
F
ment. That will not be permissible. The argument should ·
have been addressed to the High Court, at least in the
alternative fotm. If in the affidavit before the High Court .
the respondent had raised the issue and still chose not
to go into the issue whether appellant no. 2 was or was G
not a party to the Shareholders Agreement, that will not
be permitted to be raised before this Court. In fact, in restricting to the jurisdictional issue. and in not perusing the
issue of applicant no. 2 not being a party to the Shareholders Agreement before the High Court, the respondent abanH
r
~
.......
502
SUPREME COURT REPORTS
[2008] 10 S.C.R.
t=
!Ii
A
doned that issue. [para 36] [539-C,D,E & F; 540-C,D & El
CIVIL ORIGINAL JURISDICTION: Arbitration Petition No.
5 of 2007
l:larish N. Salve, R.F. Nariman, Mukul Rohtagi, Gopal Jain,
B Ruby Singh Ahuja, Meenakshi Grover, Kamaldeep Dayal,
-;
Pragya Singh Baghel, Manu Agarwal and Manik Karanjawala
'
for the Appellants.
K.K. Venugopal, Shyam Diwan, Dr. Abhishek Manu
Singhvi, Bharat Sangal, Gaurav Pachananda, Ankur Talwar,
c Sanjeev Adhalakha and Narhari Singh for the Respondent.
The Judgment of the Court was delivered by
IV.S. SIRPURKAR, J. 1. Two companies, first being M/
'-
s.Tata Industries Ltd., and the second being M/s. Apex rnvest-
•
{_
D ments (Mauritius) Holding Private Limited (hereinafter referred
I
1
to Applicant Nos.1 and 2 respectively) have approached this
Court under Section 11 (6) of the Arbitration and Concitiation
Act, 1996 (hereinafter referred to as "the Act") for appointment
of the Arbitrator in a commercial dispute which has arisen beE tween them and Grasim Industries Limited (hereinafter referred
to as "the non-applicant"). Initially the applicants had approached
Bombay High Court by way of an application under Section
11 (6) of the Act, however, a stand was taken by the non-applicant that this would amount to an international commercial arbitration and, therefore, it would bathe Chief Justice of India alone
.
F
-··
who would have the powers to constitute the Arbitral Tribunal
under Section 11 (12) of the A':t. It is, therefore, that the matter
has come before this Court. The parties are ad idem on this
jurisdictional issue that the j·..Jrisdiction to appoint the Arbitrator
G lies with the Chief Justice of India or as the case may be,. his
nominee.
'
I
2. There is no dispufi.3 between the parties that there1 is an
r
arbitration agreemenfbE.tween the parties vide Clause· 12.04
of the Shareholders Agraement dated 15.12.2000 and Clause
H 9 of the Share Transfer Agreement dated 1.6.2006. That issue
l
•
TATA INDUSTRIES LTD. & ANR. v. GRASIM
INDUSTRIES LTD. [V.S. SIRPURKAR, J.]
need not, therefore, be dilated upon.
503
3. The parties are also ad idem that the claims are within
-I-imitation.
A
4. The only question to be decided, on which the parties
have extensively argued, is whether there is a live arbitrable
B
issue.
5. Following background facts would help to understand
the controversy between the parties.
6. Mis.Tata Industries Limited (hereinafter referred to as c
"TIL") is a company incorporated under the Indian Companies
Act, 1956 (Applicant No.1) while Apex Investments (Mauritius)
Holding Private Limited (Applicant No.2) is a company incorporated under the Laws of Mauritius. The Applicant No.2 has
its registered office at Mauritius while non-applicant Mis.Grasim D
is also a company incorporated under the Indian Companies
Act, 1956.
7. Tata Cellular Limited (hereinafter called the "TCL") had
obtained a CMTS licence for Andhra Pradesh Circle on
19.12.2005. Similarly, Birla AT & T Communications Ltd. (hereE
inafter referred to as "BACL") which was a joint venture undertaking of A.V. Birla Group andAT&TWireless Group held CMTS
licences for Maharashtra and Gujarat Circles since 15.12.1995.
Tata Teleservices Limited (hereinafter referred to as "TTSL")
was granted a basic service licence for Andhra Pradesh Circle
F
on 4.11.1997. A Memorandum of Understanding was arrived
at between AT&T Wireless Inc., AV Birla Group and Tata Industries Limited on 1st March, 2000 whereby they agreed to provide CMTS service through a single entity. As per this Memorandum of Understanding AT&T Wireless Inc., AV Birla Group G
and TIL agreed to provide services through a single entity or an
alliance of entities and agreed to merge themselves to form
IDEA Cellular Limited (hereinafter referred to as "IDEA"). The
Memorandum of Understanding was entered into on 13.11.2000
by merging TCL with BACL.
H
504
SUPREME COURT REPORTS
[2008] 10 S.C.R.
A
8. A Shareholders Agreement came into existence on
15.12.2000 between AT&T Wireless Inc., AV Birla Group
(through Grasim Industries Limited) and Tata Group through TIL.
In this Agreement respective rights and obligations of the. parties for the merger/amalgamation of the TCL into BACL and
B modalities and functions of merged entities were recorded.
Under that Agreement, the applicants, the non-applicant and
AT&TWireless Services Inc., were to hold 44,72,35, 136 shares
being one-third of the subscribed and paid up Equity Share
Capital of the merged entity, i.e., IDEA. . Article 3.04(b) of the
c Shareholders Agreement provides as under:
D
E
F
G
H
"Each founder covenants and agrees that except as set
out in Section 3.04(c) and Section 3.04(d), it will not engage
in, either directly or indirectly though an affiliate, (i) any
activity that would co.nstitute the business of the merged
company within the territorial telecom circles GOVered by·
the licences; or (ii) any opportunity outside the territorial
telecom circles covered by. the licences that would
constitute the business or the merged company in India
and the neighbouring territories unless the opportunity has
beeff first offered to the merged company to undertake
such new business by placing the same before the Board
of Directors of the merged company.
The Board of
Directors shall deliberate, without the participation of the
India placing the opportunity before the Board (the
Opportunity Shareholder") on whether to avail of such an
opportunity. If the Board decides not to avail itself of such
opportunity or does not convey the decision in respect
thereto within a period of 120 days (or such shorter period
as may be necessary in the context of the nature of the
opportunity) from the date of receipt of such offer by the
merged company then; ·
(i)
the Opportunity Shareholder shall invite the other
Founders for discussions on whether a joint venture
for availing the opportunity may be undertaken;
~- ;
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1
TATA INDUSTRIES LTD. & ANR. v. GRASIM
505
INDUSTRIES LTD. [V.S. SIRPURKAR, J.]
(ii)
If the other Founders do not wish to participate in a
A
joint venture the Opportunity Shareholder shall be
free to avail of the opportunity on its own."
Article 8 is the Confidentiality Clause which reads as
under:
"8.01 Confidential Information Defined:
For the purposes of this Agreement, "confidential
information" shall mean all oral, written and/or tangible
information created by the merged company or disclosed
B
by a Founder (in either case "owner") to the receiving
C
Founder ("Recipient") which is confidential, proprietary
~nd/or not generally available to the public, including but
not limited to information relating in whole or in part to
present and future products, services, business plans and
strategies, marketing ideas and concepts, especially with
D
respect of unannounced products and services, present
and future product plans, pricing, volume estimates,
financial data, product enhancement information, business
plans, marketin§ plans, sales strategies, customer
information (including customer's applications and
E
environment), market testing information, development
plans, specifications, customer requirements,
configurations, designs, plans, drawings, apparatus,
sketches, software, hardware data, prototypes or other
technical and business information. Notwithstanding the
F
foregoing, information shall not be deemed confidential
and Recipient shall have no obligation with respect to any
such information which:
(a)
is already known to Recipient, or
(b)
is or becomes publicly known, through any means
including publication, inspection of a product, or
otherwise, and through no negligence or other
wrongful act of Recipient, or
G
(c)
is received by recipient from a third party without
H
506
A
8
c
D
E
F
G
H
SUPREME COURT REPORTS
[2008] 10 S.C.R.
similar restriction and without breach of this
Agreement, or
(d)
is independently develop by Recipient, or
( e)
is furnished to a third party by owner with0ut a similar
restriction on the third party's rights.
8.02 Treatment of Confidential Information
From the execution of this Agreement until three (3) years
after the Recipient ceases to be a shareholder, Recipient
shall, and shall cause its affiliates to, keep confidential
and will not disclose, and will cause its affiliates not to
disclose, to third parties, the confidential information
receive from, or made available by owner in the course of
the transactions contemplated hereby and will use and
cause its affiliates to use, the same level of care with
respect to the confidential information as Recipient
employees with respect to its ·own proprietary and
confidential information of like importance, and will not
use and will cause its affiliates not to use such confidential
information for any purpose other than the performance of
its obligations under this Agreement. Promptly upon the
· Recipient ceasing to be a shareholder, written confidential
information. will be returned to Owner or destroyed
immetHately upon the request of owner, and no copies,
extracts or other reproductions shall be retained by the
Recipient All documents memoranda, notes and other
writings wh;:itsoever prepared by recipient which contain
the confidential information shall be returned to owner or
destroyed at owner's request. Confidential information
provided by·owner shall remain the property of owner. For
the avoidance of doubt,: the merged conipany shall not be
deemed to be·~ Recipient for purposes of this Section.
· 8.03 Notice prior tc;> disc_losure: ..
If Recipient (or its affiliate) is requested or required (by
or.al questions, interrog'3tories, requests for information
·f
....t
TATA INDUSTRIES LTD. & ANR. v. GRASIM
507
INDUSTRIES LTD. [V.S. SIRPURKAR, J.]
or documents, subpoena, civil investigative demand or A
similar process) to disclose any confidential information,
Recipient will promptly notify owner of such request or
requirement so .that owner may seek an appropriate
protective order or waive compliance with the provisions
of this Section 8.03. If, in the absence of a protective
B
order or the receipt of a w~iver hereunder, Recipient (or
any of its affiliates) is in the written opinion of Recipient's
counsel compelled to disclose the confidentiar information
or else stand liable for contempt or suffer other censure or
significant penalty, Recipient (or its affiliates) may disclose c
only so much of the confidential information to the party
compelling disclosure as is required by law. Recipient
will exercise (and will cause its affiliate to exercise)
reasonable efforts to obtain. a protective order or other
reliable assurance and confidential treatment will be D
accorded to confidential information."
Article 9 of the Agreement deals with the effectiveness and
termination. Article 9.02 relates to right to terminate for cause:
It specifically provides that in the event of occurrence of a material breach on the part of the Defaulting Founder, each Founder E
shall have right to make the election as provided in Clause
9.02(b). However, for that purpose the electioning Founder
should have given written notice of the alleged breach to Defaulting Founder and in terms of that not~ce the Defaulting
Founder has not cured, within 60 days, the said breach, if the
F
said breach is capable of being cured within such period, or
the Defaulting Founder has not taken substantial and appropriate steps to cure the breach. The "material breach" is defined
in this Clause as:
(i)
a breach of confidentiality provisions set forth in Article G
VI 11 of the Agreement;
(ii)
breach of the provisions of Section 3.04(b) relating
to non-competition;
(iii) the failure to contribute capital as required under H
~-
508
SUPREME COURT REPORTS
[2008] 10 S.C.R.
~
A
Section 2.04(a);
(iv)
a breach of provisions relating to election of Directors,
filling of Board vacancies, removal of Directors and
election of Chairman of the Board;
B
(v)
a breach of the provisions under Article 10 relating
~
~
•/
to transfer of equity,. capital or voting interest;
(vi) · a breach by a party of the provisions under Section
6.02.
c
Article 10.06 provides that if any party receives from or
otherwise negotiates with third parties a b9nafide offer to purchase any of the equity capital owned or held by such party and
intends to make sale of its shares to such third party, such
founder mustnotify the other two parties of the Shareholders
D Agreement by way of a notice mentioning offer price, the third
parties making the offer and the number of shares that such
...
third party wants to purchase on which the offeree would have
option to purchase such amount of shares at the offer price within
45 days of the offer notice.
E
9. The Arbitration clause worded in Article 12.04 and Article 12.04(a), (b), (c), (d) and (e) are as under:
"12.04 Governing law and consent to Jurisdiction: Arbitration:
F
(a)
This Agreement and all questions of its interpretation
·-'
shall be construed in accordance with the laws of the
Republic of India without regard to its principles of
conflict of laws.
(b)
The parties agree that they shall attempt to resole
G
through good faith consultation in their behalf,
disputes arising in connection with this Agreement
and such consultation shall begin promptly after a
_,..
)II
party has delivered to another party a written request
,_
for such consultation.
H
TATA INDUSTRIES ·LTD. & ANR. v. GRASIM
509
INDUSTRIES LTD. [V.S. SIRPURKAR, J.]
(c)
in the event that, after exhausting the efforts for A
resolution of dispute described in paragraph (b), the
parties have been unable to resolve a dispute, and
if the dispute is one which relates to an alleged
breach of any rep(esentation, warranty, covenant or
_.,
agreement under or the validity or termination of,
B
covenant or agreement under or the validity of
termination of this agreements, such dispute shall
be finally settled according to the procedure set forth
in paragraph (d).
(d)
A dispute subject to resolution under this paragraph c
(d) shall be finally settled by binding arbitration in
Mumbai, India before and pursuant to the Indian
Arbitration and Conciliation Act, 1996. Each party
shall select an arbitrator within fifteen (15) days from
-\
the initial arbitration request.
D
Promptly upon their selection, such arbitrators shall
agree upon and select a third arbitrator from the panel
of arbitrators UNCITRAL. The parties shall agree in
advance as to manner in which the arbitration panel
E
shall promptly hear witnesses and arguments, review
documents and otherwise conduct the arbitration
proceedings. Should the parties fail to reach an
agreement as to the conduct of the arbitration
1
proceeding within twenty (20) days from the selection
~-
of the third arbitrator, the arbitration panel shall F
· formulate its own procedural rules and promptly
commence the arbitration proceedings. The
arbitration proceedings shall be conducted as
expeditiously as possible with due consideration for
the complexity of the dispute in question. The G
,.
arbitration panel shall issue its decision in writing
within thirty (30) days from the hearing of final
arguments by the parties. The parties agree that the
arbitrators will have the power to rule on questions of
·its own jurisdiction over any dispute, to award
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A
B
c
D
E
F
G
H
510
(e)
SUPREME COURT REPORTS
[2008] 10 S.C.R.
damages and, in appropriate circumstances, to
award equitable relief but shall not be authorized to
award punitive or exemplary damages to any party.
The parties specifically agree to 'be bound by the
decisions rendered by the arbitration panel provided
for herein and agree not to submit a dispute subject
to this Section 12.04 (d) to any federal, State or local
court or arbitration association except as may be
necessary to enforce the procedures of this Section
12.04(d) or to enforce the decision rendered by the
arbitrators. The parties to any dispute submitted to
arbitration hereunder shall share equally the costs of
the arbitral panel and shall each bear their own
attorneys' fees and other expenses incurred in
connection with any arbitration proceedings. If court
proceedings to stay litigation or compel arbitration
are necessary, the party who unsuccessfully opposes
such proceedings shall pay all associated costs,
expenses and attorneys' fees which are reasonably
incurred by the other party.
During the pendency of a dispute/arbitration
proceedings the parties shall be bound by the terms
of this Agreement."
The parties point out that in 2004 AT & T Wireless Services
Inc., which was the holding company of AT&T Cellular Private
Limited (Mauritius), merged with New Cingular Wireless Services Inc. (hereinafter referred to as "NCW") pursuant to a global restructure cum merger. Subsequently in September, 2005
Tl.L acquired the entire shareholding of AT&T Cellular Pvt. Ltd.
from NCW and the Birla Group acting thro1:1ghAditya Birla Nuvo
Ltd. (hereinafter referred to as "ABNL") acquired 16.45% shares
in IDEA from AT&T Cellular Private Limited. AT&T Cellular Private Limited was subsequently renamed as Apex Investments
(Mauritius) Limited. As a result of this, the shareholding of Birla
Group in IDEA increased to 50.14% while TIL continued to have
31.69% of the issued share capital. The balance 1.70% of IDEA
TATA INDUSTRIES LTD. & ANR. v. GRASIM
511
r
INDUSTRIES LTD. [V.S. SIRPURKAR, J.]
was held by AIG (Mauritius) LLC.
A
10. On 31.1.2006, the Applicant No.1 served a notice on
the non-applicant under Article 9.02 of the Shareholders Agreement in which it was stated that pursuant to an e-mail comm uni-
.....
cation received by it from one Mr.Sanjeev Aga, it was clear that
B
Aditya Birla Telecom Limited (hereinafter referr~d to "ABTL"),
a subsidiary of ABNL had applied to the Department of Telecommunication for grant of UAS license for the Mumbai Metro
Circle. It was further stated in that notice that vide Board Circular dated 29.7.2005, the Board of Directors of IDEA had accepted proposal to apply for UAS licence for the Mumbai Metro c
Circle and consequently the said application was filed on
3.8.2005. The Applicant No.1 thus asserted that the filing of the
application for UAS licence by ABTL for the Mumbai circle was
in clear violation of Article 3.04(b) of the Shareholders Agree-
-.\"
ment and amounting to a material breach by Aditya Birla Group D
under Article 9.02 of the Shareholders Agreement and accordingly it was requested to cure the said material breach within
60 days of the receipt of the said letter by withdrawing the said
application made by ABTL for grant of UAS licence for Mumbai
Circle.
E
11. On 27.2.2006, Applicant No.1 sent the Termination
Notice under Article 9.02 (b) of the Shareholders Agreement
thatABNL, which was an affiliate company of Aditya Birla Group,
~
for the purposes of Shareholders Agreement had displayed
'-
confidential financial data of IDEA including particulars of revF
enue, PBDIT, OPM%, PBIT, Net profit/loss, capital employed,
ROCE (annualized)% and projections, on its website. It was
asserted that this information displayed on the website was
confidential information within the meaning assigned to the said
term in Article 8.01 of Shareholders Agreement. Since such G
'\'
confidential information was not in the public domain and since
none of the exceptions to the protection of confidential information contained in Section 8.01 of the Shareholders Agreement
were available to AB~!!..., the disclosure of confidential information was a clear breach of Article 8.02 of the Shareholders AgreeH
512
SUPREME COURT REPORTS
[2008] 10 S.C.R.
A ment. It was also asserted that such material breach was not
capable of being cured and, therefore, the said letter was to be
treated as the Termination Notice in accordance with Ar:tiGle 9
of the Shareholders Agraement and the Applicant No.J was proceeding to purchase the shareholding of AV Birla Group within
B 90 days of the receipt of the said notice. A copy of the notice
was also endorsed to IDEA in'order to take steps to facilitate
access to an international firm of auditors appointed by Applicant No~ 1 for computing the fair market value of the IDEA shares.
12. These letters dated 20.2.2006 and 1.3.2006 were disc puted by letters dated 31.1.2006 and 27.2.2006 respectively
wherein a clear cut denial was asserted to the effect that there
was no violation of the provisions of the Shareholders Agreement relating to non-competition and confidentiality. Then vide
the subsequent correspondences dated 16.3.2006 and
D 27.3.2006, Applicant No.1 reaffirmed all its stand and its entitlement to purchase the entire equity share capital of the nonapplicant in IDEA in accordance with the provisions of Shareholders Agreement. There was a further denial on the part of
the non-applicant by its letters dated 17 .3.2006 and 3.4.2006.
E
13. However, in the meantime, the applicant received an
offer for purchasing its stake as well as the stake of M/s. Apex
Investments (Mauritius) Holding Private Limited in IDEA from
Global Communication Services Holding Limited. In such an
eventuality, in terms of Clause 10.06, the applicants were bound
F to offer the shares at the same price to the non-applicant. Accordingly, a notice dated 5.4.2006 came to be served by Applicant No. 1 on its behalf and on behalf of its subsidiary Mis. Apex
Investments (Mauritius) Holding Private Limited, offering the said
shares to the non-applicant. In this notice, the material terms
G and _conditions of the offer were specified vide para .3. It was
stated:
H
"By this letter, TIL and Apex are intimating the AV Birla
Group of their having received a bonafide offer for
purchase of the Sale Shares and of TIL and Apex having
j
-1I-
I
'·
TATA INDUSTRIES LTD. &ANR. v. GRASIM
513
~
INDUSTRIES LTD. [V.S. SIRPURKAR, J.]
accepted the offer made to them, subject to this prior offer A
being made to the AV Birla Group. Without prejudice to
the notices of termination dated January 31, 2005 and
February 27, 2006 issued by TIL to the AV Birla Group, TIL
and Apex are hereby making the first offer for purchase of
....
the Sale Shares to the AV Birla Group at the price and on
B
the material terms and conditions mentioned above. This
Offer Notice shall remain irrevocable for a period of 45
days after the Notice Date (i.e., 45 days after the receipt
of this Offer Notice by yourselves).
On the very next day of this Offer, the non-applicant vide its c
communication dated 6.4.2006 accepted the Offer of Purchase.
However, it was specified in that reply that their acceptance of
the Offer was without prejudice to their contentions that the notices of termination referred to in the said Offer Notice were not
t
tenable. The applicant TIL on the very next day, i.e. 7.4.2006, D
.f
conveyed that they would be shortly forwarding two Draft Share
Purchase Agreements for the sale of IDEA shares held by Tata
Industries Limited and Apex Investments (Mauritius) Holding
Private Limited. However, in the second para of this Notice, it
was reiterated as under:
E
"We reiterate that our offer and your acceptance thereof,
is without prejudice to the notices of termination dated
January 31, 2006 and February 27, 2006 issued by us,
and your rival contentions which we have not accepted."
~
F
14. On 10.4.2006, the letter dated 7.4.2006 was replied
to. There again, it was reiterated:
"As regards our position regarding the notices of
~
termination, we wish to reiterate your position already
communicated."
G
y
On 19.4.2006, by the even dated letter, the applicant reiterated that the non-applicant had breached the Confidentiality
Clause and that the claim of the non-applicant that the data displayed on the website was not confidential under the ShareH
,. .
514
SUPREME COURT REPORTS
[2008] 10 S.C.R.
:!
A
holders Agreement, is misplaced. It was asserted in para 6 of
the letter that non-applicant No. 1 was making contradictory
statements. It was lastly asserted:
"As already explained above, since the AV Birla Group is
in violation of the provisions of the Shareholders .
-j._
>
B
'
Aweement, the First Notice and the Second Notice issued
.
by us cannot be withdrawn. Since you have. failed in
agreeing upon the narrJe of the international firm of auditors
we shall therefore proceed in accordance with the
Shareholders Agreemen·t to do the needful in connection
~
c
with determining the Fair Market Value of IDEA shares."
.'Im
Again on 19.4.2C06 by the letter of even date, the appli-
'
cants reaffirmed the contents of Notices of Termination dated
~-
31.1.2006 and 27.2.2006.
D
15. On 24.4.2006 the Non-applicant replied to the letter
~
i
}-
dated 19.4.2006 and intimated the applicants their readiness
to make full and final payment against the delivery of shares by
TIL and the Apex. On 24.4.2006 the applicants issued a notice
requesting to commence the process of consultation with reE spect to the dispute which had arisen between the parties and
~
which was more particularly highlighted in their earlier notices.
In that notice it was said:
"We note that vide your letters dated February 28, 2006,
March 1, 2006, March 17, 2006, April 3, 2006 and April
)-
F
~
24, 2006, you have disputed the contents of the said
~
,,
Notices and have also disputed the fact of commitment of
~
"material breaches" of Section 3.04 and 9 of the
Shareholders Agreement by you.
G
It is, therefore, apparent that a dispute has arisen between
f=
us in connection with the terms of the Shareholders
Agreement."
y
A further reference was given to Clause 12.04 (b) of the
Shareholders Agreement which provided for consultation and,
H therefore, by the same notice the process of consultation was
I-
TATA INDUSTRIES LTD. & ANR. v. GRASIM
515
INDUSTRIES LTD. [V.S. SIRPURKAR, J.]
~
called upon by the applicants. Lastly it was straightaway sugA
gested that:
"In case you are not interested in exploring the process of
consultation as aforesaid, and would like to proceed with
arbitral proceedings straight away, we would be agreeable B
~
to that procedure also."
On 27.4.2006 the non-applicant responded to the applicants consultation notice and asserted that there was no arbitral dispute surviving between the parties and, therefore, there
was no longer a basis for arbitration regarding the issues set c
forth in the termination notices. The non-applicant also requested
the applicants to withdraw the consultation notice. It was, therefore, pointed out through the notice dated 5.5.2006 by the applicants that the termination of the agreement on their part was
~
made without prejudice to the pendency of the dispute and/or 0
~
arbitration proceedings and the position was clarified from time
to time. On 5.5.2006 the applicants formally served a letter by
way of formal notice for arbitration. This notice was contested
by the non-applicant by its letter dated 17.5.2006 again reiterating its position that there was no arbitrable dispute surviving
E
between the parties. Hence on 19.5.2006, the applicants communicated to the non-applicant that they had appointed their
nominee Arbitrator under Clause 12.04 (d) of the Shareholders
Agreement.
·~
16. So far so good. Thereafter two share purchase agreeF
(
)--
ments were entered into between the applicants and the nonapplicant. There was a specific reference made to the claim of
arbitration made on behalf of the TIL in Clause (d) which runs as
under:
"In relation to the notices dated January 31, 2006 and G
February 27, 2006 issued by TIL (as a founder under the
~
Shareholders Agreement as hereinafter defined) to the
AV Birla Group, TIL has pending arbitration disputes with
the AV Birla Group, TIL has not accepted the rival
contentions of the AV Birla Group in respect of the said
...
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516
SUPREME COURT REPORTS ·
[2008] 10 S.C.R.
.Jc
A
notices nor has the AV Birla Group accepted,. Tit's claim
pending Arbitration. As such, the execution of and
'·consummation 'of the transaction contemplated by this
Agreement shall not prejudice or affect ttie pendency of
continuation of the arbitrationproceedings betWeen TIL
"j...
·s
and AV Birla Group."
\.-
I
· In Clause 2.3 if was·fu'rttier specified in this Agreement
t
that: ·
· · ·.