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HDFC Ventures vs Urban Infra: SC seeks responses

The Supreme Court has sought response from Anand Jain-led Urban Infrastructure Trustees Ltd (UITL), Chennai-based Ozone Projects and its two promoters, and others in an investors inter se dispute over sale of the HDFC Ventures Trustee Company’s 25% shareholding in Ozone Projects to Ozone Holdings. Jain is a close associate of Mukesh Ambani.

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The arbitration clause did not contemplate any adjudication/reference of disputes inter-se between the investors under the SHA, it added.

The Supreme Court has sought response from Anand Jain-led Urban Infrastructure Trustees Ltd (UITL), Chennai-based Ozone Projects and its two promoters, and others in an investors inter se dispute over sale of the HDFC Ventures Trustee Company’s 25% shareholding in Ozone Projects to Ozone Holdings. Jain is a close associate of Mukesh Ambani.

A bench led by Justice Indira Bannerjee has issued notice to UITL, two promoters – S Vasudevan and CP Bothra – and others on an appeal by HDFC Ventures (acting on behalf of HDFC Property Scheme HIREF) challenging the “legality, validity and propriety” of the Madras High Court’s February 3 decision appointing a sole arbitrator to resolve the disputes between the investors when allegedly no valid arbitration agreement existed between HDFC and UITL as per the share holders agreement (SHA) of March 2, 2006.

Upon a decision by HDFC to sell its shares in Ozone Projects to Ozone Holdings, a dispute arose between UITL and HDFC on whether former was entitled to exercise tag along rights under the SHA. However, UITL had invoked its tag along rights in respect of the shares held by it in Ozone Projects, HDFC objected, saying the infra company was only entitled to RoFR.

Therefore, UITL called upon all the other parties to consent to the appointment of the sole arbitrator proposed by it. However, the Ozone group and promoters had objected, saying the SHA envisaged the constitution of a three member arbitral tribunal.Therefore, UTIL should have appointed a common arbitrator for the investors and also provided an opportunity to the others including promoters to appoint the second arbitrator. This prompted UITL to move the HC for appointment of a sole arbitrator.

SHA executed by and between Ozone group, four investors – HDFC Ventures, Reliance Land, Dharti Investments and Holdings, Ruchi Infrastructure – and the two promoters conferred Rights of First Refusal (RoFR), Tag along Rights and Drag along Rights on investors in case other investors exit. HDFC has alleged that the HC had acted “mechanically” in appointing former Punjab and Haryana HC judge K Kannan as the sole the arbitrator on the UITL’s plea. “The court(s) are obliged to apply their mind to the core preliminary issues, albeit, within the framework of Section 11 of the Arbitration Act. Therefore, even when an arbitration agreement exists, it would not prevent the court to decline a prayer for reference if the dispute does not correlate to the arbitration agreement,” senior counsel Mukul Rohatgi, appearing for HDFC, argued.

The HC erred in appreciating that since the purchase of shares by Ozone Holding had concluded in 2016, no order can be passed against the purchaser in the arbitration proceedings who is neither a party to the SHA nor is governed by the arbitration clause therein, it added.The HC having arrived at a conclusion that there exists no arbitration clause to adjudicate the disputes between investors ie HDFC and UITL, but could not have held that UITL’s plea for appointment of a sole arbitrator cannot be rejected merely because the procedure prescribed for the constitution of the arbitral tribunal is “unworkable,” HDFC said in its appeal filed through counsel R Gopalakrishnan.

HDFC argued that the arbitration clause in the SHA was for resolving disputes between the investors therein on one hand and the Ozone group and the promoters on the other side. The arbitration clause did not contemplate any adjudication/reference of disputes inter-se between the investors under the SHA, it added. The Ozone Group is represented by JSA Advocates and solicitors through Dheeraj Nair and Kumar Kislay.

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