Bombay HC upholds arbitration award in favour of Matrix Partners

The Bombay High Court has indicated that foreign investments in India are well protected by the courts. A single judge bench of Justice BP Colabawalla has upheld an arbitral tribunal order in favour of Matrix Partners, which required one of its investee companies to deposit Rs. 190 crore, or to provide a bank guarantee till a final order was passed..Matrix Partners had invested a sum of Rs. 190 crore in Maharana Infrastructure and Professional Services Pvt. Ltd. (MIPS) Ltd. for 41.37% equity. As per the terms of the Shareholders Agreement (SHA), if MIPS’ Initial Public Offer (IPO) did not fructify, Matrix would be allowed to exit from its investment in MIPS at a pre-determined price..Despite the IPO not having fructified, Matrix was not allowed to exit. At the same time, there were several other allegations against the conduct of the MIPS and others, including allegations that monies were being diverted from MIPS to another entity. These allegations were further substantiated by a forensic audit report by PricewaterhouseCoopers..Since disputes arising from the SHA were subject to arbitration, an arbitral tribunal passed an interim order under Section 17 of the Arbitration and Conciliation Act, 1996 requiring the MIPS and other accused, to deposit a sum of Rs. 190 crore, or in the alternative, provide a bank guarantee. The tribunal further passed orders of injunction from creating third party rights or alienating any properties. MIPS challenged this order of the tribunal at the Bombay High Court..While the appeal was pending , Matrix was able to get a chamber summons for execution of the award passed by the tribunal. This summons was also challenged before a bench of Justice BP Dharmadhikari and Justice Colabawalla. The Division Bench upheld the summons and ruled that such an order was not appealable under provisions of the Commercial Courts Act, 2015. However, this order will be subject to the final outcome of the arbitration proceedings, the Court held..In the (present) appeal against the interim relief granted by the tribunal, since one of the allegations pertained to siphoning of funds, an important question with respect to impleading of parties to arbitration proceedings was answered. While MIPS and two others were signatories to the arbitration agreement, the entity to which the monies (and some others) were siphoned, were not signatories to the arbitration agreement. The High Court found that the arbitral tribunal was correct in granting injunctive reliefs against the parties who were not signatories to the arbitration agreement..MIPS further argued that the injunction granted was excessive and that the relief at an interim stage should be limited only to the deposit of Rs. 190 crore. The Court took note of the pleadings made by Matrix and the order passed by the tribunal to rule that the relief granted was not excessive, and dismissed the appeal..“I do not think that the Tribunal was in any way unjustified in granting the injunction order against the Respondents restraining them from disposing of any of their properties. Without disclosing the value of their properties, I do not see how the Respondents can contend that the injunction granted is excessive.“.Sharan Jagtiani appeared for Matrix; he was briefed by Partner Nitesh Jain of Shardul Amarchand Mangaldas. Senior Counsel SU Kamdar and Counsel Zal Andhyarujina, briefed by Jayakar and Partners, appeared for the MIPS..Read the judgment: