Kiran Raj

The High Court of Delhi, Single Bench of Justice Manoj Kumar Ohri, has dismissed an appeal challenging an arbitral tribunal’s interim order restraining the appellants from alienating their shareholding in a company pending arbitration. The single-judge bench upheld the tribunal’s decision under Section 17 of the Arbitration & Conciliation Act, 1996, stating minimal judicial interference in arbitration proceedings.

The case concerns a dispute between Bluefire Infotax Consultancy Pvt Ltd and ANS Infratech Pvt Ltd arising from a Share Purchase Agreement (SPA) executed on April 16, 2024. The appellants, who held 99% and 1% of the shares in Bluefire Infotax Consultancy Pvt Ltd, had entered into this agreement to transfer their entire shareholding to the respondent.

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The SPA was structured around the acquisition of a residential plot measuring 20,071 square meters, with a partially built structure located at Gh-P4, Sector 25, Jaypee Green Sports City, within the Yamuna Express Industrial Development Authority Area in Gautam Budh Nagar, Uttar Pradesh. This property was previously owned by VGA Developers Pvt Ltd, a company undergoing liquidation proceedings before the National Company Law Tribunal (NCLT), Delhi.

As part of the transaction, the appellants had deposited an earnest money amount of Rs. 3,49,10,000 with the Official Liquidator (OL) overseeing VGA Developers’ liquidation. The total sale consideration for the plot was Rs. 34,91,00,000. The SPA required the respondent to pay a total consideration of Rs. 40,66,90,000, divided into payments towards the share purchase and the acquisition of the plot.

However, before the consummation of the transaction, the appellants terminated the SPA, alleging that the respondent had failed to make necessary payments as stipulated under Clause 1(iv)(d) and Clause 8(iv) of the agreement. Following this, the appellants entered into a fresh agreement with M/s Radha Rani Infra Projects for the sale of their shareholding in Bluefire Infotax Consultancy Pvt Ltd.

The respondent disputed this termination, contending that it was not given the opportunity to fulfil its obligations under the SPA. It also argued that the appellants had failed to take the necessary steps before the NCLT to secure the property’s acquisition, which led to delays and an increased financial burden. The matter was referred to arbitration, where the respondent sought interim relief under Section 17 of the Arbitration & Conciliation Act, 1996, to prevent the appellants from selling their shares to a third party. The arbitral tribunal granted this request, issuing an injunction on November 14, 2024.

The High Court observed that appellate interference in arbitration matters should be minimal. Justice Ohri noted:

"An appellate court will ordinarily not interfere with the discretion exercised by the arbitral tribunal unless the said discretion is proved to have been exercised arbitrarily, capriciously, perversely, or ignoring the settled principles of law regulating grant or refusal of interlocutory injunctions."

The appellants argued that the SPA was a contingent contract and inherently determinable, making it incapable of enforcement under Section 14(d) and Section 41(e) of the Specific Relief Act. They cited previous judicial decisions, including Indian Oil Corpn. Ltd. v. Amritsar Gas Service and Rajasthan Breweries Ltd. v. Stroh Brewery Co., to support their contention that an agreement of this nature cannot be specifically enforced. However, the arbitral tribunal rejected this argument, and the High Court upheld the decision, stating that the SPA was structured to effectuate the sale of the underlying plot through share transfer.

The court also took note of the respondent’s actions post-termination. The respondent had deposited Rs. 79,45,000 in the form of an FDR after the passing of the interim order, bringing its total payments to Rs. 1,29,45,000. This was cited as evidence of the respondent’s readiness and willingness to perform its obligations under the SPA.

The appellants contended that the respondent had not sought specific performance of the SPA before the arbitral tribunal and had only sought a declaration that the termination was null and void. They argued that granting an interim injunction in this context effectively amounted to enforcing the SPA, which the respondent had not explicitly requested. The High Court dismissed this argument, stating that:

"The Respondent by seeking to get the termination of SPA declared as null and void is in effect claiming that the SPA is valid and subsisting and binding on it. This shows Respondent’s willingness to conclude the sale by making the payments payable under the SPA and pending the conclusion of sale it sought to preserve the shares from being sold to a third party, for which consequential relief of injunction was sought."

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The court also observed that while the SPA did not contain an explicit termination clause, its terms required a final adjudication on whether the agreement could be terminated unilaterally. It further noted that the appellants’ agreement with M/s Radha Rani Infra Projects appeared to be an attempt to circumvent the SPA, especially since the payment instruments in that agreement were dated prior to the termination notice issued to the respondent.

After examining the case facts and the arbitral tribunal’s reasoning, the High Court held that the tribunal had not exercised its discretion arbitrarily or in violation of established legal principles. The court stated that judicial intervention in arbitration proceedings should be minimal and dismissed the appeal. The tribunal’s injunction restraining the appellants from alienating their shareholding remains in effect until the conclusion of arbitration.

Advocates Representing the Parties

For the Petitioners: Mr. Praveen Kumar, Mr. Sarthak Gupta, Mr. Amolak Singh, Ms. Chahat Gupta, and Mr. Nishil Kaushik, Advocates

For the Respondent: Mr. Sandeep Agarwal (Senior Advocate), Mr. Sushil Aggarwal, Mr. Siddhant Jain, and Ms. Tanya Chanda, Advocates

Case Title: Bluefire Infotax Consultancy Pvt Ltd & Ors. v. ANS Infratech Pvt Ltd

Neutral Citation: 2025: DHC:1571

Case Number: ARB. A. (COMM.) 67/2024

Bench: Justice Manoj Kumar Ohri

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