(a) Restrain by an order of permanent injunction the Defendant No. 1 (Amazon), their officers, servants, agents, assigns, affiliates, representatives, or any person claiming through or under them, jointly and severally, from interfering in any manner with the Disputed Transaction, including by way of injuncting the initiation or continuation by the Defendant No. 1 (Amazon), their officers, servants, agents, assigns, affiliates, representatives, or any person claiming through or under them, jointly and severally, of proceedings before any court, arbitral tribunal, regulator, statutory authority or otherwise seeking to stay, injunct or in any other manner interdict consideration of Disputed Transaction by the jurisdictional authorities in accordance with law.
(b) Restrain by an order of permanent injunction the Defendant No. 1 (Amazon), their officers, servants, agents, assigns, affiliates, representatives, or any person claiming through or under them, jointly and severally, from taking any steps that would constitute an interference with the steps being taken by the plaintiff to secure the requisite sanctions and permissions for giving effect to the scheme of arrangement and honouring its contractual rights on its contract with Defendant Nos. 14 and 15 including steps by way of relying upon/acting in furtherance of the purported Interim Order dated October 25, 2020 passed by the Emergency Arbitrator;
(c) Restrain by an order of permanent injunction the Defendant No. 1 (Amazon), their officers, servants, agents, assigns, affiliates, representatives, or any person claiming through or under them, jointly and severally, from in any manner seeking any relief or remedy from any court, arbitral tribunal, regulator, statutory authority or otherwise, on the basis that the FCPL SHA, FCPL SSA and the FRL SHA constitute a single integrated agreement/composite transaction;
(d) Pass an order for damages against Defendant No. 1, in addition to the above, to the extent of ₹ 100 crores for drawing the Plaintiff (FRL) into unnecessary, frivolous and oppressive litigation alongwith pendente lite and future interest at the rate of 18% per annum;
(e) An order for costs of the suit and the proceedings;
(f) Pass such other orders in favour of the Plaintiff and against the Defendant, which this Hon'ble Court may deem fit and proper in the facts and circumstance of the case and in the interest of justice, equity and good conscience.
285. In the result, I award, direct, and order as follows:
(a) the Respondents are injuncted from taking any steps in furtherance or in aid of the Board Resolution made by the Board of Directors of FRL on 29 August 2020 in relation to the Disputed Transaction, including but not limited to filing or pursuing any application before any person, including regulatory bodies or agencies in India, or requesting for approval at any company meeting;
(b) the Respondents are injuncted from taking any steps to complete the Disputed Transaction with entities that are part of the MDA Group;
(c) without prejudice to the rights of any current Promoter Lenders, the Respondents are injuncted from directly or indirectly taking any steps to transfer/ dispose/ alienate/encumber FRL's Retail Assets or the shares held in FRL by the Promoters in any manner without the prior written consent of the Claimant;
(d) the Respondents are injuncted from issuing securities of FRL or obtaining/securing any financing, directly or indirectly, from any Restricted Person that will be in any manner contrary to Section 13.3.1 of the FCPL SHA;
(e) the orders in (a) to (d) above are to take effect immediately and will remain in place until further order from the Tribunal, when constituted;
(i) Shareholders agreement dated 12th August, 2019 executed between FCPL, FRL and persons listed in Schedule-I, being Biyanis, FCRPL and AEFPL (in short FRL SHA).
(ii) Letter dated 12th August, 2018 by FRL to Stock Exchange informing Stock Exchanges that FRL has entered into a FRL SHA dated 12th August, 2019 in terms of Regulation 30 of SEBI, (Listing Obligations and Disclosure Requirements) Regulation, 2015;
(iii) Shareholders agreement dated 22nd August, 2019 between Amazon, FCPL and persons listed in Schedule-I, that is, Biyanis, FCRPL and AEFPL (in short FCPL SHA).
(iv) Share subscription agreement dated 22nd August, 2019 executed between Amazon, FCPL and persons listed in Schedule-I being Biyanis, FCRPL and AEFPL (in short FCPL SSA);
(v) Letter dated 22nd August, 2019 by FRL to the Stock Exchanges in relation to execution of FCPL SHA and FCPL SSA;.
(vi) An application dated 23rd September, 2019 filed before the Competition Commission of India (in short 'CCI') by Amazon (investor) for obtaining the approval of CCI for proposed acquisition of 34,02,713 Class-A voting equity shares and 63,71,678 Class-B non-voting equity shares aggregating to 49% of the total voting and non-voting equity share capital in FCPL, (a wholly owned subsidiary of FCRPL; FCPL and FCRPL being owned and controlled by the promoter group, 'that is, Biyanis);
(vii) Letter dated 19th December 2019 by FCPL to FRL in relation to the FRL SHA dated 12th August, 2019 notifying the "effective date" for the purposes of the FRL SHA to be the date of the said letter and that the list of restricted persons was as set out in the Annexure - I of the letter;
(viii) E-mails dated 12th March, 2020; 15th March, 2020; 19th March, 2020 and 25th March, 2020 received from FCRPL intimating Amazon about the various notices received from the banks and the financial institutions and informing about consequences of an event of default;
(ix) Letter dated 29th August, 2020 from FRL to stock exchanges intimating the outcome of the Board meeting held on 29th August, 2020 approving the proposed amalgamation of FRL along with other transferor companies;
(x) Default notices dated 3rd October, 2020 by Amazon to FCPL, FCRPL and defendant No.3.
(xi) Three separate letters dated 3 October, 2020 by Amazon to the stock exchanges, SEBI and FRL;
(xii) Notice of arbitration dated 5th October, 2020 by Amazon invoking emergency arbitration under the SIAC Rules and on the same date filing an application for emergency interim relief;
(xiii) Interim order passed by the Emergency Arbitrator dated 25th October, 2020.
(A) That the proposed combination required to be notified before the Commission comprises of three transactions:
(i) Proposed Transaction I relates to the issue of 91,83,754 Class A voting equity shares of FCPL to FCRPL;
(ii) Proposed Transaction II relates to the transfer of 1,36,66,287 shares of FCPL held by FCRPL (representing 2.52% of the issued subscribed and paid up equity share capital of FRL, on a fully diluted basis) to FCPL. It was also pointed out that FCPL shall be a wholly owned subsidiary of FCRPL at the time of, and immediately post the transfer of the said shares;
(iii) Proposed Transaction III relates to the acquisition of the Subscription Shares representing 49% of the total issued, subscribed and paid-up equity share capital of FCPL (on a fully diluted basis) by Amazon, by way of a preferential allotment. The remaining 1,01,83,754 Class A voting equity shares, representing 51% of the issued, subscribed and paid-up equity share capital of FCPL will be held by FCRPL.
(B) Amazon notified under Section 5 of the Competition Act to the CCI as under:
(i) It is submitted that neither Proposed Transaction I nor Proposed Transaction II, on a standalone basis, is notifiable to the Hon'ble Commission, as both Proposed Transaction I and Proposed Transaction II are contemplated between a parent and its subsidiary.
(ii) It is also submitted that even Proposed Transaction III, on a standalone basis, benefits from the Target Exemption because the value of the assets and turnover of FCL (as of March 31, 2019) (which is the target for the purposes of Proposed Transaction Ill) are below the thresholds provided in the Target Exemption.
(iii) Accordingly, it is submitted that each of the constituent transactions of the Proposed Combination, on a standalone basis, are not notifiable to the Hon'ble Commission.
(iv) Without prejudice to the foregoing, should the Hon'ble Commission consider the Proposed Combination to be a notifiable combination, the Amazon is notifying the Proposed Combination in terms of Section 6(2) of the Competition Act read with Sub-regulation (4) of Regulation 9 of the Combination Regulations.
5.1.3. Right(s) acquired or arising out of or in connection with the transaction(s) referred to at 5.1.1 and 5.1.2 above.
(v) It is clarified that the Amazon is not acquiring control over FCPL in any manner pursuant to the Proposed Transaction III. The Amazon submits that the rights to be acquired by the Amazon pursuant to the consummation of the Proposed Transaction III are mere investor protection rights, which are typically granted to minority investors with a view to protect the investment made by such investor and do not confer control.
(vi) The rights that will be acquired by the Amazon pursuant to the consummation of the Proposed Transaction III will be exclusively governed by the terms of the SHA. In this regard, it is also clarified that the Proposed Transaction I and Proposed Transaction II will not vest any rights on the Amazon."
(C) The rights proposed to be acquired by Amazon in terms of the SHA to protect its investment were described as:
(i) Two directors were to be nominated and appointed by Amazon as Investor Directors as long as Amazon held 49% of the equity share capital of FCPL.
(ii) Amazon may request to appoint an Investor Director as an observer on the board of the Material Entities who may attend but without voting rights in board proceedings.
(iii) Items identified in Schedule IX and Schedule X have a direct bearing on the investment of Amazon in FCPL. Items identified in Schedule IX can be considered by FCPL’s Board only alter procuring a prior written consent from Amazon and items identified in Schedule X can be considered by the FCPL’s Board or shareholders with a prior notice of at least 15 business days to be served on Amazon and the Investor Directors.
(iv) Section 13 and 14 which are material to the present case in the FCPL SHA were, notified by Amazon before CCI as under:
Section 13: Consent and compliance in relation to Material Entity matters Prior written consent from the Amazon would be required before: (a) FCPL decides on or implements’ any matter under the FRL SHA which requires FCPL's consent; (b) FCPL decides to decline, recuse itself, or not subscribe to its pro-rata entitlement in relation to issuance of securities by a Material Entity; (c) Any updates to the list of "Restricted Persons" and its communication to FRL under the FRL SHA; and (d) Assignment of the rights and obligations of FCPL and the Promoters (as defined in the SHA) under the FRL SHA.
Section 14 : Transfer of Retail Assets (as defined in the SHA) : FCPL and the promoters have agreed not to undertake any sale, divestment, transfer, disposal, etc. of retail outlets across various formats operated by FRL (which is an integral part of the business conducted by FRL) except as mutually agreed (in writing) between the Promoters and the Investor, or contained in the FRL SHA or any commercial agreement between a Material Entity (as defined in the SHA) and an affiliate of the Amazon. FCPL and the Promoters have also agreed not to transfer, encumber, divest or dispose of these Retail Assets (as defined in the SHA), directly or indirectly, in favour of a mutually agreed list of Restricted Persons (as defined in the SHA).
(D) In Para 29 Amazon notified that the rationale of FCPL was that the Promoters have invited Amazon to invest in FCPL with a view to strengthen and augment the business of FCPL. FCPL believes that the Proposed Combination will provide an opportunity to FCPL to learn global trends in digital payments solutions and launch new products and usage of in-built payment mechanisms can lead to acquisition of customers' base and increased loyalty.
(E) In Para 30 Amazon notified the rationale for Amazon as it believes that FCPL holds a potential for long term value creation and providing returns on its investment. Amazon has decided to invest in FCPL with a view to strengthen and augment the business of FCPL (including the marketing and distribution of loyalty cards, corporate gift cards and reward cards to corporate customers) and unlock the value in the company.
2. Pursuant to Clause 2 of the FRL SHA, we hereby designate that the ‘Effective Date' for the purposes of the FRL SHA shall be the date of this letter.
3. We also hereby inform you that the list of 'Restricted Persons' shall be as set out in Annexure 1 of this letter.
4. Reference is also made to Clause 6.2.1 of the FRL SHA pursuant to which the Existing Shareholders (and the Existing Shareholder Affiliates), and FCL have agreed that that they shall not, Transfer or Encumber any of the Securities of the Company held by it to any Person or create any Encumbrance over the Securities of the Company held by it except pursuant to mutual written consent of FCL and the Existing Shareholders. Accordingly, FCL hereby provide its consent for any Transfer or Encumbrance over Securities of the Company, if such Transfer or Encumbrance is in accordance with the provisions of the FCL SHA. For the purposes of this paragraph 4, the term 'FCL SHA' shall mean the shareholders' agreement dated August 22, 2019 entered into between FCL, the Existing Shareholders and Amazon.com NV Investment Holdings LLC (as may be amended, modified or supplemented from time to time). Further, by executing, and returning a copy of this letter, the Existing Shareholders shall be deemed to have provided their irrevocable, and unconditional consent for any Transfer or Encumbrance over Securities of the Company held by FCL, if such Transfer or Encumbrance is in accordance with the provisions of the FCL SHA.
I. Whether the present suit is prima facie maintainable?
II. Whether the Emergency Arbitrator lacks legal status under Part I of the A&C Act and thus coram non judice?
III. Whether the Resolution dated 29th August, 2020 of FRL is void or contrary to any statutory provision?
IV. Whether by conflation of the FRL SHA, FCPL SHA and FCPL SSA, Amazon seeks to exercise 'Control' on FRL which is forbidden under the FEMA FDI Rules?
V. Whether prima facie a case for tortious interference is made out by FRL?
VI. Whether FRL is entitled to an interim injunction?
"28. One of the basic principles of law is that every right has a remedy. Ubi jus ibi remediem is the well-know maxim. Every civil suit is cognizable unless it is barred, "there is an inherent right in every person to bring a suit of a civil nature and unless the suit is barred by statute one may, at one's peril, bring a suit of one's choice. It is no answer to a suit, howsoever frivolous the claim, that the law confers no such right to sue"
25. GOVERNING LAW AND DISPUTE RESOLUTION
25.1. Governing Law :
This Agreement shall be governed by and construed in accordance with Laws of India. Subject to the provisions of Section 25.2 (Dispute Resolution), the courts at New Delhi, India shall have exclusive jurisdiction over any matters or Dispute (hereinafter defined) relating or arising out of this Agreement.
25.2. Dispute Resolution
Any dispute, controversy, claim or disagreement of any kind whatsoever between or among the Parties in connection with or arising out of this Agreement or the breach, termination or invalidity thereof (hereinafter referred to as a "Dispute"), failing amicable resolution through negotiations, shall be referred to and finally resolved by arbitration irrespective of the amount in Dispute or whether such Dispute would otherwise be considered justifiable or ripe for resolution by any court. The Parties agree that they shall attempt to resolve through good faith consultation, any such Dispute between any of the Parties and such consultation shall begin promptly after a Party has delivered to another Party a written request for such consultation. In the event the Dispute is not resolved by means of negotiations within a period of 30 (thirty) days or such different period mutually agreed between the parties, such Dispute shall be referred to and finally resolved by arbitration in accordance with the arbitration rules of the Singapore International Arbitration Centre ("SIAC"), and such rules (the "Rules") as may be modified by the provisions of this Section 25 (Governing Law and Dispute Resolution). This Agreement and the rights and obligations of the parties shall remain in full force and effect pending the award in such arbitration proceeding, which award, if appropriate, shall determine whether and when any termination shall become effective.
25.2.2. Seat and Venue of Arbitration.
The seat and venue of the arbitration shall be at New Delhi unless otherwise, agreed between the Parties to the Dispute and the arbitration shall be conducted under and in accordance with this, Section 25 (Governing Law and Dispute Resolution). This choice of jurisdiction and venue shall not prevent either Party from seeking injunctive reliefs in any appropriate jurisdiction."
"2. Definitions. (1) In this Part, unless the context otherwise requires,-
(a) xx xx xx
(b) xx xx xx
(d) "arbitral tribunal" means a sole arbitrator or a panel of arbitrators;
(2) This Part shall apply where the place of arbitration is in India:
[Provided that subject to an agreement to the contrary, the provisions of sections 9, 27 and clause (a) of sub-section (1) and sub-section (3) of section 37 shall also apply to international commercial arbitration, even if the place of arbitration is outside India, and an arbitral award made or to be made in such place is enforceable and recognised under the provisions of Part II of this Act.]
(6) Where this Part, except section 28, leaves the parties free to determine a certain issue, that freedom shall include the right of the parties to authorise any person including an institution, to determine that issue.
(8) Where this Part—
(a) refers to the fact that the parties have agreed or that they may agree, or
(b) in any other way refers to an agreement of the parties,
that agreement shall include any arbitration rules referred to in that agreement."
(9) Interim measures, etc, by Court.—[(1)]A party may, before or during arbitral proceedings or at any time after the making of the arbitral award but before it is enforced in accordance with section 36, apply to a court—
(ii) for an interim measure of protection in respect of any of the following matters, namely:—
(a) the preservation, interim custody or sale of any goods which are the subject-matter of the arbitration agreement;
(b) securing the amount in dispute in the arbitration;
(c) the detention, preservation or inspection of any property or thing which is the subject matter of the dispute in arbitration, or as to which any question may arise therein and authorizing for any of the aforesaid purposes any person to enter upon any land or building in the possession of any party, or authorising any samples to be taken or any observation to be made, or experiment to be tried, which may be necessary or expedient for the purpose of obtaining full information or evidence;
(d) interim injunction or the appointment of a receiver;
(e) such other interim measure of protection as may appear to the Court to be just and convenient,
and the Court shall have the same power for making orders as it has for the purpose of, and in relation to, any proceedings before it.
(2) Where, before the commencement of the arbitral proceedings, a Court passes an order for any interim measure of protection under sub-section (1), the arbitral proceedings shall be commenced within a period of ninety days from the date of such order or within such further time as the Court may determine.
(3) Once the arbitral tribunal has been constituted, the Court shall not entertain an application under sub-section (1), unless the Court finds that circumstances exist which may not render the remedy provided under section 17 efficacious.
(17) Interim measures ordered by arbitral tribunal.—(1) A party may, during the arbitral proceedings 2***, apply to the arbitral tribunal—
(ii) for an interim measure of protection in respect of any of the following matters, namely:—
(a) the preservation, interim custody or sale of any goods which are the subject-matter of the arbitration agreement;
(b) securing the amount in dispute in the arbitration;
(c) the detention, preservation or inspection of any property or thing which is the subject matter of the dispute in arbitration, or as to which any question may arise therein and authorizing for any of the aforesaid purposes any person to enter upon any land or building in the possession of any party, or authorising any samples to be taken, or any observation to be made, or experiment to be tried, which may be necessary or expedient for the purpose of obtaining full information or evidence;
(d) interim injunction or the appointment of a receiver;
(e) such other interim measure of protection as may appear to the arbitral tribunal to be just and convenient,
and the arbitral tribunal shall have the same power for making orders, as the court has for the purpose of, and in relation to, any proceedings before it.
(2) Subject to any orders passed in an appeal under section 37, any order issued by the arbitral tribunal under this section shall be deemed to be an order of the Court for all purposes and shall be enforceable under the Code of Civil Procedure,1908 (5 of 1908), in the same manner as if it were an order of the Court.
1. Scope of Application and Interpretation
1.1 Where the parties have agreed to refer their disputes to SIAC for arbitration or to arbitration in accordance with the SIAC Rules, the parties shall be deemed to have agreed that the arbitration shall be conducted pursuant to and administered by SIAC in accordance with these Rules.
1.3 In these Rules:
"Award" includes a partial, interim or final award and an award of an Emergency Arbitrator;
"Emergency Arbitrator" means an arbitrator appointed in accordance with paragraph 3 of Schedule 1;
"Rules" means the Arbitration Rules of the Singapore International Arbitration Centre (6th Edition, 1 August 2016);
"SIAC" means the Singapore International Arbitration Centre; and
"Tribunal" includes a sole arbitrator or all the arbitrators where more than one arbitrator is appointed....
30. Interim and Emergency Interim Relief
30.1 The Tribunal may, at the request of a party, issue an order or an Award granting an injunction or any other interim relief it deems appropriate. The Tribunal may order the party requesting interim relief to provide appropriate security in connection with the relief sought.
30.2 A party that wishes to seek emergency interim relief prior to the constitution of the Tribunal may apply for such relief pursuant to the procedures set forth in Schedule 1.
30.3 A request for interim relief made by a party to a judicial authority prior to the constitution of the Tribunal, or in exceptional circumstances thereafter, is not incompatible with these Rules.
1. A party that wishes to seek emergency interim relief may, concurrent with or following the filing of a Notice of Arbitration but prior to the constitution of the Tribunal, file an application for emergency interim relief with the Registrar. The party shall, at the same time as it files the application for emergency interim relief, send a copy of the application to all other parties. The application for emergency interim relief shall include:
a. the nature of the relief sought;
b. the reasons why the party is entitled to such relief; and
c. a statement certifying that all other parties have been provided with a copy of the application or, if not, an explanation of the steps taken in good faith to provide a copy or notification to all other parties.
6. An Emergency Arbitrator may not act as an arbitrator in any future arbitration relating to the dispute, unless otherwise agreed by the parties.
8. The Emergency Arbitrator shall have the power to order or award any interim relief that he deems necessary, including preliminary orders that may be made pending any hearing, telephone or videoconference or written submissions by the parties. The Emergency Arbitrator shall give summary reasons for his decision in writing. The Emergency Arbitrator may modify or vacate the preliminary order, the interim order or Award for good cause.
11. Any interim order or Award by the Emergency Arbitrator maybe conditioned on provision by the party seeking such relief of appropriate security.
12. The parties agree that an order or Award by an Emergency Arbitrator pursuant to this Schedule 1 shall be binding on the parties from the date it is made, and undertake to carry out the interim order or Award immediately and without delay. The parties also irrevocably waive their rights to any form of appeal, review or recourse to any State court or other judicial authority with respect to such Award insofar as such waiver may be validly made.
26. Whereas, as stated above, the proper law of arbitration (i.e., the substantive law governing arbitration) determines the validity, effect and interpretation of the arbitration agreement, the arbitration proceedings are conducted, in the absence of any agreement to the contrary, in accordance with the law of the country in which the arbitration is held. On the other hand, if the parties have specifically chosen the law governing the conduct and procedure of arbitration, the arbitration proceedings will be conducted in accordance with that law so long as it is not contrary to the public policy or the mandatory requirements of the law of the country in which the arbitration is held. If no such choice has been made by the parties, expressly or by necessary implication, the procedural aspect of the conduct of arbitration (as distinguished from the substantive agreement to arbitrate) will be determined by the law of the place or seat of arbitration. Where, however, the parties have, as in the instant case, stipulated that the arbitration between them will be conducted in accordance with the ICC Rules, those rules, being in many respects self-contained or self-regulating and constituting a contractual code of procedure, will govern the conduct of the arbitration, except insofar as they conflict with the mandatory requirements of the proper law of arbitration, or of the procedural law of the seat of arbitration. [See the observation of Kerr, LJ. in Bank Mellat v. HellinikiTechniki SA [(1983) 3 All ER 428 (CA)]. See also Craig, Park and Paulsson, International Chamber of Commerce Arbitration, 2nd edn. (1990).] To such an extent the appropriate courts of the seat of arbitration, which in the present case are the competent English courts, will have jurisdiction in respect of procedural matters concerning the conduct of arbitration. But the overriding principle is that the courts of the country whose substantive laws govern the arbitration agreement are the competent courts in respect of all matters arising under the arbitration agreement, and the jurisdiction exercised by the courts of the seat of arbitration is merely concurrent and not exclusive and strictly limited to matters of procedure. All other matters in respect of the arbitration agreement fall within the exclusive competence of the courts of the country whose laws govern the arbitration agreement. [See Mustil& Boyd, Commercial Arbitration, 2nd edn.; Allen Redfern and Martin Hunter, Law & Practice of International Commercial Arbitration, 1986; Russel on Arbitration, 20th edn. (1982); Cheshire & North's Private International Law, 11th edn. (1987).]
27. The proper law of the contract in the present case being expressly stipulated to be the laws in force in India and the exclusive jurisdiction of the courts in Delhi in all matters arising under the contract having been specifically accepted, and the parties not having chosen expressly or by implication a law different from the Indian law in regard to the agreement contained in the arbitration clause, the proper law governing the arbitration agreement is indeed the law in force in India, and the competent courts of this country must necessarily have jurisdiction over all matters concerning arbitration. Neither the rules of procedure for the conduct of arbitration contractually chosen by the parties (the ICC Rules) nor the mandatory requirements of the procedure followed in the courts of the country in which the arbitration is held can in any manner supersede the overriding jurisdiction and control of the Indian law and the Indian courts.
28. This means, questions such as the jurisdiction of the arbitrator to decide a particular issue or the continuance of an arbitration or the frustration of the arbitration agreement, its validity, effect and interpretation are determined exclusively by the proper law of the arbitration agreement, which, in the present case, is Indian law. The procedural powers and duties of the arbitrators, as for example, whether they must hear oral evidence, whether the evidence of one party should be recorded necessarily in the presence of the other party, whether there is a right of cross-examination of witnesses, the special requirements of notice, the remedies available to a party in respect of security for costs or for discovery etc. are matters regulated in accordance with the rules chosen by the parties to the extent that those rules are applicable and sufficient and are not repugnant to the requirements of the procedural law and practice of the seat of arbitration. The concept of party autonomy in international contracts is respected by all systems of law so far as it is not incompatible with the proper law of the contract or the mandatory procedural rules of the place where the arbitration is agreed to be conducted or any overriding public policy.
48. It is true that the procedural law of the place of arbitration and the courts of that place cannot be altogether excluded, particularly in respect of matters affecting public policy and other mandatory requirements of the legal system of that place. But in a proceeding such as the present which is intended to be controlled by a set of contractual rules which are self-sufficient and designed to cover every step of the proceeding, the need to have recourse to the municipal system of law and the courts of the place of arbitration is reduced to the minimum and the courts of that place are unlikely to interfere with the arbitral proceedings except in cases which shock the judicial conscience. (See the observations of Kerr, LJ. in Bank Mellat v. HellinikiTechniki SA [(1983) 3 All ER 428 (CA)].)
49. Courts would give effect to the choice of a procedural law other than the proper law of the contract only where the parties had agreed that matters of procedure should be governed by a different system of law. If the parties had agreed that the proper law of the contract should be the law in force in India, but had also provided for arbitration in a foreign country, the laws of India would undoubtedly govern the validity, interpretation and effect of all clauses including the arbitration clause in the contract as well as the scope of the arbitrators' jurisdiction. It is Indian law which governs the contract, including the arbitration clause, although in certain respects regarding the conduct of the arbitration proceedings the foreign procedural law and the competent courts of that country may have a certain measure of control. (See the principle stated by Lord Denning, M.R. in International Tank and Pipe SAK v. Kuwait Aviation Fuelling Co. KSC [(1975) 1 All ER 242 (CA)].)
51. In sum, it may be stated that the law expressly chosen by the parties in respect of all matters arising under their contract, which must necessarily include the agreement contained in the arbitration clause, being Indian law and the exclusive jurisdiction of the courts in Delhi having been expressly recognised by the parties to the contract in all matters arising under it, and the contract being most intimately associated with India, the proper law of arbitration and the competent courts are both exclusively Indian, while matters of procedure connected with the conduct of arbitration are left to be regulated by the contractually chosen rules of the ICC to the extent that such rules are not in conflict with the public 'policy and the mandatory requirements of the proper law and of the law of the place of arbitration. The Foreign Awards Act, 1961 has no application to the award in question which has been made on an arbitration agreement governed by the law of India. (emphasis supplied)
10. In the Law and Practice of Commercial Arbitration in England, 2nd Edn. by Mustill and Boyd, there is a chapter on "The Applicable Law and the Jurisdiction of the Court". Under the sub-title "Laws Governing the Arbitration", it is said, "An agreed reference to arbitration involves two groups of obligations. The first concerns the mutual obligations of the parties to submit future disputes, or an existing dispute to arbitration, and to abide by the award of a tribunal constituted in accordance with the agreement. It is now firmly established that the arbitration agreement which creates these obligations is a separate contract, distinct from the substantive agreement in which it is usually embedded, capable of surviving the termination of the substantive agreement and susceptible of premature termination by express or implied consent, or by repudiation or frustration, in much the same manner as in more ordinary forms of contract. Since this agreement has a distinct life of its own, it may in principle be governed by a proper law of its own, which need not be the same as the law governing the substantive contract.
The second group of obligations, consisting of what is generally referred to as the ‘curial law’ of the arbitration, concerns the manner in which the parties and the arbitrator are required to conduct the reference of a particular dispute. According to the English theory of arbitration, these rules are to be ascertained by reference to the express or implied terms of the agreement to arbitrate. This being so, it will be found in the great majority of cases that the curial law, i.e., the law governing the conduct of the reference, is the same as the law governing the obligation to arbitrate. It is, however, open to the parties to submit, expressly or by implication, the conduct of the reference to a different law from the one governing the underlying arbitration agreement. In such a case, the court looks first at the arbitration agreement to see whether the dispute is one which should be arbitrated, and which has validly been made the subject of the reference, it then looks to the curial law to see how that reference should be conducted and then returns to the first law in order to give effect to the resulting award.
It may therefore be seen that problems arising out of an arbitration may, at least in theory, call for the application of any one or more of the following laws —
1. The proper law of the contract, i.e., the law governing the contract which creates the substantive rights of the parties, in respect of which the dispute has arisen.
2. The proper law of the arbitration agreement, i.e., the law governing the obligation of the parties to submit the disputes to arbitration, and to honour an award.
3. The curial law, i.e., the law governing the conduct of the individual reference.
1. The proper law of the arbitration agreement governs the validity of the arbitration agreement, the question whether a dispute lies within the scope of the arbitration agreement; the validity of the notice of arbitration; the constitution of the tribunal; the question whether an award lies within the jurisdiction of the arbitrator; the formal validity of the award; the question whether the parties have been discharged from any obligation to arbitrate future disputes.
2. The curial law governs the manner in which the reference is to be conducted; the procedural powers and duties of the arbitrator; questions of evidence; the determination of the proper law of the contract.
3. The proper law of the reference governs the question whether the parties have been discharged from their obligation to continue with the reference of the individual dispute.
In the absence of express agreement, there is a strong prima facie presumption that the parties intend the curial law to be the law of the ‘seat’ of the arbitration, i.e., the place at which the arbitration is to be conducted, on the ground that that is the country most closely connected with the proceedings. So in order to determine the curial law in the absence of an express choice by the parties it is first necessary to determine the seat of the arbitration, by construing the agreement to arbitrate." 15. We think that our conclusion that the curial law does not apply to the filing of an award in court must, accordingly, hold good. We find support for the conclusion in the extracts from Mustill and Boyd which we have quoted earlier. Where the law governing the conduct of the reference is different from the law governing the underlying arbitration agreement, the court looks to the arbitration agreement to see if the dispute is arbitrable, then to the curial law to see how the reference should be conducted, "and then returns to the first law in order to give effect to the resulting award". (Emphasis supplied)
"38. Party autonomy is virtually the backbone of arbitrations. This Court has expressed this view in quite a few decisions. In two significant passages in Bharat Aluminium Co. v. Kaiser Aluminium Technical Services Inc. [Bharat Aluminium Co. v. Kaiser Aluminium Technical Services Inc., (2016) 4 SCC 126 : (2016) 2 SCC (Civ) 580, Hon'ble Judges/Coram: Anil R. Dave, Kurian Joseph and Amitava Roy, JJ.] this Court dealt with party autonomy from the point of view of the contracting parties and its importance in commercial contracts. In para 5 of the Report, it was observed: (SCC p. 130)
"5. Party autonomy being the brooding and guiding spirit in arbitration, the parties are free to agree on application of three different laws governing their entire contract— (1) proper law of contract, (2) proper law of arbitration agreement, and (3) proper law of the conduct of arbitration, which is popularly and in legal parlance known as "curial law". The interplay and application of these different laws to an arbitration has been succinctly explained by this Court in Sumitomo Heavy Industries Ltd. v. ONGC Ltd, [Sumitomo Heavy Industries Ltd. v. ONGC Ltd., (1998) 1 SCC 305] which is one of the earliest decisions in that direction and which has been consistently followed in all the subsequent decisions including the recent Reliance Industries Ltd. v. Union of India [Reliance Industries Ltd. v. Union of India, (2014) 7 SCC 603 : (2014) 3 SCC (Civ) 737]."(Emphasis supplied)
46.For the present we are concerned only with the fundamental or public policy of India. Even assuming the broad delineation of the fundamental policy of India as stated in Associate Builders [Associate Builders v. DDA, (2015) 3 SCC 49 : (2015) 2 SCC (Civ) 204] we do not find anything fundamentally objectionable in the parties preferring and accepting the two-tier arbitration system. The parties to the contract have not by-passed any mandatory provision of the A&C Act and were aware, or at least ought to have been aware that they could have agreed upon the finality of an award given by the arbitration panel of the Indian Council of Arbitration in accordance with the Rules of Arbitration of the Indian Council of Arbitration. Yet they voluntarily and deliberately chose to agree upon a second or appellate arbitration in London, UK in accordance with the Rules of Conciliation and Arbitration of the International Chamber of Commerce. There is nothing in the A&C Act that prohibits the contracting parties from agreeing upon a second instance or appellate arbitration — either explicitly or implicitly. No such prohibition or mandate can be read into the A&C Act except by an unreasonable and awkward misconstruction and by straining its language to a vanishing point. We are not concerned with the reason why the parties (including HCL) agreed to a second instance arbitration — the fact is that they did and are bound by the agreement entered into by them. HCL cannot wriggle out of a solemn commitment made by it voluntarily, deliberately and with eyes wide open." (Emphasis supplied)
"34. "Force majeure" is governed by the Contract Act, 1872. Insofar as it is relatable to an express or implied clause in a contract, such as the PPAs before us, it is governed by Chapter III dealing with the contingent contracts, and more particularly, Section 32 thereof. Insofar as a force majeure event occurs dehors the contract, it is dealt with by a rule of positive law under Section 56 of the Contract Act. Sections 32 and 56 are set out herein:
"32. Enforcement of contracts contingent on an event happening.—Contingent contracts to do or not to do anything if an uncertain future event happens, cannot be enforced by law unless and until that event has happened.
If the event becomes impossible, such contracts become void.
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56. Agreement to do impossible act.—An agreement to do an act impossible in itself is void.
Contract to do act afterwards becoming impossible or unlawful.—A contract to do an act which, after the contract is made, becomes impossible, or, by reason of some event which the promisor could not prevent, unlawful, becomes void when the Act becomes impossible or unlawful.
Compensation for loss through non-performance of act known to be impossible or unlawful.—Where one person has promised to do something which he knew, or, with reasonable diligence, might have known, and which the promisee did not know, to be impossible or unlawful, such promisor must make compensation to such promisee for any loss which such promisee sustains through the non-performance of the promise."
35. Prior to the decision in Taylor v. Caldwell [Taylor v. Caldwell, (1863) 3 B & S 826 :122 ER 309 : (1861-73) All ER Rep 24], the law in England was extremely rigid. A contract had to be performed, notwithstanding the fact that it had become impossible of performance, owing to some unforeseen event, after it was made, which was not the fault of either of the parties to the contract. This rigidity of the Common law in which the absolute sanctity of contract was upheld was loosened somewhat by the decision in Taylor v. Caldwell [Taylor v. Caldwell, (1863) 3 B&S 826 : 122 ER 309 : (1861-73) All ER Rep 24] in which it was held that if some unforeseen event occurs during the performance of a contract which makes it impossible of performance, in the sense that the fundamental basis of the contract goes, it need not be further performed, as insisting upon such performance would be unjust.
36. The law in India has been laid down in the seminal decision of Satyabrata Ghose v. Mugneeram Bangur & Co. [Satyabrata Ghose v. Mugneeram Bangur & Co., 1954 SCR 310 : AIR 1954 SC 44] The second paragraph of Section 56 has been adverted to, and it was stated that this is exhaustive of the law as it stands in India. What was held was that the word "impossible" has not been used in the section in the sense of physical or literal impossibility. The performance of an act may not be literally impossible but it may be impracticable and useless from the point of view of the object and purpose of the parties. If an untoward event or change of circumstance totally upsets the very foundation upon which the parties entered their agreement, it can be said that the promisor finds it impossible to do the Act which he had promised to do. It was further held that where the Court finds that the contract itself either impliedly or expressly contains a term, according to which performance would stand discharged under certain circumstances, the dissolution of the contract would take place under the terms of the contract itself and such cases would be dealt with under Section 32 of the Act. If, however, frustration is to take place dehors the contract, it will be governed by Section 56.
37. In Alopi Parshad & Sons Ltd. v. Union of India [Alopi Parshad & Sons Ltd. v. Union of India, (1960) 2 SCR 793 : AIR 1960 SC 588], this Court, after setting out Section 56 of the Contract Act, held that the Act does not enable a party to a contract to ignore the express covenants thereof and to claim payment of consideration, for performance of the contract at rates different from the stipulated rates, on a vague plea of equity. Parties to an executable contract are often faced, in the course of carrying it out, with a turn of events which they did not at all anticipate, for example, a wholly abnormal rise or fall in prices which is an unexpected obstacle to execution. This does not in itself get rid of the bargain they have made. It is only when a consideration of the terms of the contract, in the light of the circumstances existing when it was made, showed that they never agreed to be bound in a fundamentally different situation which had unexpectedly emerged, that the contract ceases to bind. It was further held that the performance of a contract is never discharged merely because it may become onerous to one of the parties.
38. Similarly, in Naihati Jute Mills Ltd. v. Khyaliram Jagannath [Naihati Jute Mills Ltd. v. Khyaliram Jagannath, (1968) 1 SCR 821 : AIR 1968 SC 522], this Court went into the English law on frustration in some detail, and then cited the celebrated judgment of Satyabrata Ghose v. Mugneeram Bangur & Co. [Satyabrata Ghose v. Mugneeram Bangur & Co, 1954 SCR 310 : AIR 1954 SC 44] Ultimately, this Court concluded that a contract is not frustrated merely because the circumstances in which it was made are altered. The courts have no general power to absolve a party from the performance of its part of the contract merely because its performance has become onerous on account of an unforeseen turn of events.
39. It has also been held that applying the doctrine of frustration must always be within narrow limits. In an instructive English judgment, namely, Tsakiroglou & Co. Ltd. v. Noblee Thorl GmbH [Tsakiroglou & Co. Ltd. v. Noblee Thorl GmbH, 1962 AC 93 : (1961) 2 WLR 633 : (1961) 2 All ER 179 (HL)], despite the closure of the Suez Canal, and despite the fact that the customary route for shipping the goods was only through the Suez Canal, it was held that the contract of sale of groundnuts in that case was not frustrated, even though it would have to be performed by an alternative mode of performance which was much more expensive, namely, that the ship would now have to go around the Cape of Good Hope, which is three times the distance from Hamburg to Port Sudan. The freight for such journey was also double. Despite this, the House of Lords held that even though the contract had become more onerous to perform, it was not fundamentally altered. Where performance is otherwise possible, it is clear that a mere rise in freight price would not allow one of the parties to say that the contract was discharged by impossibility of performance.
40. This view of the law has been echoed in Chitty on Contracts, 31st Edn. In Para 14-151 a rise in cost or expense has been stated not to frustrate a contract. Similarly, in Treitel on Frustration and Force Majeure, 3rd Edn., the learned author has opined, at Para 12-034, that the cases provide many illustrations of the principle that a force majeure clause will not normally be construed to apply where the contract provides for an alternative mode of performance. It is clear that a more onerous method of performance by itself would not amount to a frustrating event. The same learned author also states that a mere rise in price rendering the contract more expensive to perform does not constitute frustration. (See Para 15-158.)
41. Indeed, in England, in the celebrated Sea Angel case [Edwinton Commercial Corpn. v. Tsavliris Russ (Worldwide Salvage & Towage) Ltd. (The Sea Angel), 2007 EWCA Civ 547 : (2007) 2 Lloyd's Rep 517 (CA)], the modern approach to frustration is well put, and the same reads as under:
"111. In my judgment, the application of the doctrine of frustration requires a multi-factorial approach. Among the factors which have to be considered are the terms of the contract itself, its matrix or context, the parties' knowledge, expectations, assumptions and contemplations, in particular as to risk, as at the time of the contract, at any rate so far as these can be ascribed mutually and objectively, and then the nature of the supervening event, and the parties' reasonable and objectively ascertainable calculations as to the possibilities of future performance in the new circumstances. Since the subject-matter of the doctrine of frustration is contract, and contracts are about the allocation of risk, and since the allocation and assumption of risk is not simply a matter of express or implied provision but may also depend on less easily defined matters such as "the contemplation of the parties", the application of the doctrine can often be a difficult one. In such circumstances, the test of "radically different" is important: it tells us that the doctrine is not to be lightly invoked; that mere incidence of expense or delay or onerousness is not sufficient; and that there has to be as it were a break in identity between the contract as provided for and contemplated and its performance in the new circumstances." (Emphasis supplied)
"166. Duties of directors
(1) Subject to the provisions of this Act, a director of a company shall act in accordance with the articles of the company.
(2) A director of a company shall act in good faith in order to promote the objects of the company for the benefit of its members as a whole, and in the best interests of the company, its employees, the shareholders, the community and for the protection of environment.
(3) A director of a company shall exercise his duties with due and reasonable care, skill and diligence and shall exercise independent judgment."
"41. It is well established that directors of a company are in a fiduciary position vis-a-vis the company and must exercise their power for the benefit of the company. If the power to issue further shares is exercised by the directors not for the benefit of the company but simply and solely for their personal aggrandisement and to the detriment of the company, the Court will interfere and prevent the directors from doing so. The very basis of the Court's interference in such a case is the existence of the relationship of a trustee and of cestui que trust as between the directors and the company."
"The short answer is that it was the policy of the society that the affairs of the company should be so conducted and the minority shareholders were content that it should be so. They relied—how unwisely the event proved—upon the good faith of the society, and, in any case, they were impotent to impose their own views. It is just because the society could not only use the ordinary and legitimate weapons of commercial warfare but could also control from within the operations of the company that it is illegitimate to regard the conduct of the company's affairs as a matter for which they had no responsibility. After much consideration of this question, I do not think that my own views could be stated better than in the late Lord President Cooper's words on the first hearing of this case. "In my view," he said, "the section warrants the court in looking at the business "realities of a situation and does not confine them to a narrow "legalistic view. The truth is that, whenever a subsidiary is "formed as in this case with an independent minority of share-"holders, the parent company must, if it is engaged in the same "class of business, accept as a result of having formed such a "subsidiary an obligation so to conduct what are in a sense its "own affairs as to deal fairly with its subsidiary." At the opposite, pole to this standard may be put the conduct of a parent company which says: "Our subsidiary company has served its "purpose, which is our purpose. Therefore let it die," and, having thus pronounced sentence, is able to enforce it and does enforce it not only by attack from without but also by support from within. If this section is inept to cover such a case, it will be a dead letter indeed. I have expressed myself strongly in this case because, on the contrary, it appears to me to be a glaring example of precisely the evil which Parliament intended to remedy."
"Lastly, on the facts, it is to be noted that while the society's directors of the company, who were also directors of the society, knew all that was happening within the society, Dr. Meyer and Mr. Lucas knew nothing apart from what they could infer from the communications, verbal and written, which they had received, with reference to the alignment of the shareholding and the taking over of shares from the petitioners, and the general attitude of the society's directors on the company's board. On the vital matters affecting the company's prosperity known to the nominee directors these directors remained silent, concealed the facts from the petitioners and took no action and gave no advice helpful to the company. As Lord Sorn put it, their conduct as directors was a negative one to "let the company drift towards "the rocks."
My Lords, if the society could be regarded as an organization independent of the company and in competition with it, no legal objection could be taken to the actions and policy of the society. Lord Carmont pointed this out in the Court of Session. But that is not the position. In law the society and the company were, it is true, separate legal entities. But they were in the relation of parent and subsidiary companies, the company being formed to run a business for the society which the society could not at the outset have done for itself, unless they could have persuaded Dr. Meyer and Mr. Lucas to become servants of the society. This the petitioners were not prepared to do. The company, through, the knowledge, the experience, the connections, the business ability and the energies of the petitioners, had built up a valuable goodwill in which the society shared and which there is no reason to think would, not have been maintained, if not increased, with the co-operation of the society. The company was in substance, though not in law, a partnership consisting of the society, Dr. Meyer and Mr. Lucas. Whatever may be the other different legal consequences following on one or other of these forms of combination one result, in my opinion, followed in the present case from the method adopted, which is common to partnership, that there should be the utmost good faith between the constituent members. In partnership the position is clear. As stated in Lindley on Partnership, 11th ed., p. 401: "A partner cannot, without the consent of his co-"partners lawfully carry on for his own benefit, either openly or "secretly, any business in rivalry with the firm to which he "belongs." It may not be possible for the legal remedies that would follow in the case of a partnership to follow here, but the principle has, I think, valuable application to the circumstances of this case."
"(ii) Counting of indirect foreign investment
(a) The foreign investment through the investing Indian company/LLP would not be considered for calculation of the indirect foreign investment in case of Indian companies/LLPs which are ‘owned and controlled’ by resident Indian citizens and/or Indian Companies/LLPs which are owned and controlled by resident Indian citizens.
To illustrate, if the indirect foreign investment is being calculated for Company X which has investment through an investing Company Y having foreign investment, the following would be the method of calculation:
(A) where Company Y has foreign investment less than 50%-Company X would not be taken as having any indirect foreign investment through Company Y."
"2(r) "FDI" or "Foreign Direct Investment" means investment through equity instruments by a person resident outside India in an unlisted Indian company; or in ten per cent or more of the post issue paid-up equity capital on a fully diluted basis of a listed Indian company;
2 (t) "foreign portfolio investment" means any investment made by a person resident outside India through equity instruments where such investment is less than ten per cent of the post issue paid-up share capital on a fully diluted basis of a listed Indian company or less than ten per cent of the paid-up value of each series of equity instrument of a listed Indian company;
2(u) "FPI" or "Foreign Portfolio Investor" means a person registered in accordance with the provisions of the Securities and Exchange Board of India (Foreign Portfolio Investors) Regulations, 2014
3. Restriction on investment in India by a person resident outside India.- Save as otherwise provided in the Act or rules or regulations made thereunder, no person resident outside India shall make any investment in India :
Provided that an investment made in accordance with the Act or the rules or the regulations made thereunder and held on the date of commencement of these rules shall be deemed to have been made under these rules and shall accordingly be governed by these rules:
Provided further that the Reserve Bank may, on an application made to it and for sufficient reasons and in consultation with the Central Government, permit a person resident outside India to make any investment in India subject to such conditions as may be considered necessary.
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6. Investments by person resident outside India: - A person resident outside India may make investment as under:-
(a) may subscribe, purchase or sell equity instruments of an Indian company in the manner and subject to the terms and conditions specified in Schedule I:
Provided that a person who is a citizen of Bangladesh or Pakistan or is an entity incorporated in Bangladesh or Pakistan cannot purchase equity instruments without the prior government approval:
Provided further that a citizen of Pakistan or an entity incorporated in Pakistan cannot invest in defence, space, atomic energy and sectors or activities prohibited for foreign investment even through the government route.
Note: Issue or transfer of "participating interest or right" in oil fields by Indian companies to a person resident outside India would be treated as foreign investment and shall comply with the conditions laid down in Schedule I.
(b) A person resident outside India, other than a citizen of Bangladesh or Pakistan or an entity incorporated in Bangladesh or Pakistan, may invest either by way of capital contribution or by way of acquisition or transfer of profit shares of an LLP, in the manner and subject to the terms and conditions specified in Schedule VI.
(c) A person resident outside India, other than a citizen of Bangladesh or Pakistan or an entity incorporated in Bangladesh or Pakistan, may invest in units of an investment vehicle, in the manner and subject to the terms and conditions specified in Schedule VIII.
(d) A person resident outside India may invest in the depository receipts (DRs) issued by foreign depositories against eligible securities in the manner and subject to the terms and conditions specified in Schedule IX.
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10. Investment by FPI - A FPI may make investments as under:-
(1) A FPI may purchase or sell equity instruments of an Indian company which is listed or to be listed on a recognised stock exchange in India, and/or may purchase or sell securities other than equity instruments, in the manner and subject to the terms and conditions specified in Schedule II.
Note - A FPI may trade or invest in all exchange traded derivative contracts approved by Securities and Exchange Board of India from time to time subject to the limits specified by the Securities and Exchange Board of India and the conditions prescribed in Schedule
(2) A FPI may purchase, hold, or sell Indian Depository Receipts (IDRs) of companies resident outside India and issued in the Indian capital market, in the manner and subject to the terms and conditions as prescribed in Schedule X.
23. Downstream investment -
(1) Indian entity which has received indirect foreign investment shall comply with the entry route, sectoral caps, pricing guidelines and other attendant conditions as applicable for foreign investment. Explanation: Downstream investment by an LLP not owned and not controlled by resident Indian citizens or owned or controlled by persons resident outside India is allowed in an Indian company operating in sectors where foreign investment up to one hundred percent is permitted under automatic route and there are no FDI linked performance conditions.
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Explanation.- For the purposes of this rule,-
(a) "ownership of an Indian company" shall mean beneficial holding of more than fifty percent of the equity instruments of such company and "ownership of an LLP" shall mean contribution of more than fifty percent in its capital and having majority profit share;
(b) "company owned by resident Indian citizens" shall mean an Indian company where ownership is vested in resident Indian citizens and/ or Indian companies, which are ultimately owned and controlled by resident Indian citizens and "LLP owned by resident Indian citizens" shall mean an LLP where ownership is vested in resident Indian citizens and/ or Indian entities, which are ultimately owned and controlled by resident Indian citizens;
(c) "company owned by persons resident outside India" shall mean an Indian company that is owned by persons resident outside India and "LLP owned by persons resident outside India" shall mean an LLP that is owned by persons resident outside India;
(d) "control" shall mean the right to appoint majority of the directors or to control the management or policy decisions including by virtue of their shareholding or management rights or shareholders agreement or voting agreement and for the purpose of LLP, "control" shall mean the right to appoint majority of the designated partners, where such designated partners, with specific exclusion to others, have control over all the policies of an LLP;
(e) "company controlled by resident Indian citizens" means an Indian company, the control of which is vested in resident Indian citizens and/ or Indian companies which are ultimately owned and controlled by resident Indian citizens and "LLP controlled by resident Indian citizens" shall mean an LLP, the control of which is vested in resident Indian citizens and/ or Indian entities, which are ultimately owned and controlled by resident Indian citizens;
(f) xx xx xx;
(g) xx xx xx
(i) "indirect foreign investment" means downstream investment received by an Indian entity from,-
(A) another Indian entity (IE) which has received foreign investment and (i) the IE is not owned and not controlled by resident Indian citizens or (ii) is owned or controlled by persons resident outside India; or
(B) an investment vehicle whose sponsor or manager or investment manager (i) is not owned and not controlled by resident Indian citizens or (ii) is owned or controlled by persons resident outside India : Provided that no person resident in India other than an Indian entity can receive Indirect Foreign Investment;
(j) "total foreign investment" means the total of foreign investment and indirect foreign investment and the same will be reckoned on a fully diluted basis"
b. In any sector/activity, where Government approval is required for foreign investment and in cases where there are any inter-se agreements between/amongst shareholders which have an effect on the appointment of the Board of Directors or on the exercise of voting rights or of creating voting rights disproportionate to shareholding or any incidental matter thereof, such agreements will have to be informed to the approving authority. The approving authority will consider such interse agreements for determining ownership and control when considering the case for approval of foreign investment."
"(3) Permitted sectors, entry routes and sectoral caps for total foreign investment Unless otherwise specified in these Rules or the Schedules, the entry routes and sectoral caps for the total foreign investment in an Indian entity shall be as follows, namely:-
(i) "automatic route" means the entry route through which investment by a person resident outside India does not require the prior approval of the Reserve Bank or the Central Government;
(ii) "government route" means the entry route through which investment by a person resident outside India requires prior Government approval and foreign investment received under this route shall be in accordance with the conditions stipulated by the Government in its approval;
(iii) Aggregate foreign portfolio investment up to forty-nine percent of the paid-up capital on a fully diluted basis or the sectoral or statutory cap, whichever is lower, shall not require Government approval or compliance of sectoral conditions as the case may be, if such investment does not result in transfer of ownership and control of the resident Indian company from resident Indian citizens or transfer of ownership or control to persons resident outside India and other investments by a person resident outside India shall be subject to the conditions of Government approval and compliance of sectoral conditions as laid down in these rules."
"2 In this Act, unless the context otherwise requires,—
"control" shall include the right to appoint majority of the directors or to control the management or policy decisions exercisable by a person or persons acting individually or in concert, directly or indirectly, including by virtue of their shareholding or management rights or shareholders agreements or voting agreements or in any other manner"
49. The expression "control" is defined in Section 2(27) of the Companies Act, 2013 as follows:
"2. (27) "control" shall include the right to appoint majority of the Directors or to control the management or policy decisions exercisable by a person or persons acting individually or in concert, directly or indirectly, including by virtue of their shareholding or management rights or shareholders agreements or voting agreements or in any other manner;"
50. The expression "control" is therefore defined in two parts. The first part refers to de jure control, which includes the right to appoint a majority of the Directors of a company. The second part refers to de facto control. So long as a person or persons acting in concert, directly or indirectly, can positively influence, in any manner, management or policy decisions, they could be said to be "in control". A management decision is a decision to be taken as to how the corporate body is to be run in its day-to-day affairs. A policy decision would be a decision that would be beyond running day-to-day affairs i.e. long-term decisions. So long as management or policy decisions can be, or are in fact, taken by virtue of shareholding, management rights, shareholders agreements, voting agreements or otherwise, control can be said to exist.
51. Thus, the expression "control", in Section 29-A(c), denotes only positive control, which means that the mere power to block special resolutions of a company cannot amount to control. "Control" here, as contrasted with "management", means de facto control of actual management or policy decisions that can be or are in fact taken. A judgment of the Securities Appellate Tribunal in Subhkam Ventures (I) (P) Ltd. v. SEBI [Subhkam Ventures (I) (P) Ltd. v. SEBI, 2010 SCC OnLine SAT 35], made the following observations qua "control" under the SEBI (Substantial Acquisition of Shares and Takeover) Regulations, 1997, wherein "control" is defined in Regulation 2(1)(e) in similar terms as in Section 2(27) of the Companies Act, 2013. The Securities Appellate Tribunal held: (SCC OnLine SAT para 6)
"6.... The term control has been defined in Regulation 2(1)(c) of the Takeover Code to "include the right to appoint majority of the Directors or to control the management or policy decisions exercisable by a person or persons acting individually or in concert, directly or indirectly, including by virtue of their shareholding or management rights or shareholders agreements or voting agreements or in any other manner". This definition is an inclusive one and not exhaustive and it has two distinct and separate features: (i) the right to appoint majority of Directors or, (ii) the ability to control the management or policy decisions by various means referred to in the definition. This control of management or policy decisions could be by virtue of shareholding or management rights or shareholders agreement or voting agreements or in any other manner. This definition appears to be similar to the one as given in Black's Law Dictionary (Eighth Edn.) at p. 353 where this term has been defined as under:
‘Control—The direct or indirect power to direct the management and policies of a person or entity, whether through ownership of voting securities, by contract, or otherwise; the power or authority to manage, direct, or oversee.’
Control, according to the definition, is a proactive and not a reactive power. It is a power by which an acquirer can command the target company to do what he wants it to do. Control really means creating or controlling a situation by taking the initiative. Power by which an acquirer can only prevent a company from doing what the latter wants to do is by itself not control. In that event, the acquirer is only reacting rather than taking the initiative. It is a positive power and not a negative power. In a board managed company, it is the board of Directors that is in control. If an acquirer were to have power to appoint majority of Directors, it is obvious that he would be in control of the company but that is not the only way to be in control. If an acquirer were to control the management or policy decisions of a company, he would be in control. This could happen by virtue of his shareholding or management rights or by reason of shareholders agreements or voting agreements or in any other manner. The test really is whether the acquirer is in the driving seat. To extend the metaphor further, the question would be whether he controls the steering, accelerator, the gears and the brakes. If the answer to these questions is in the affirmative, then alone would he be in control of the company. In other words, the question to be asked in each case would be whether the acquirer is the driving force behind the company and whether he is the one providing motion to the organization. If yes, he is in control but not otherwise. In short control means effective control." (Emphasis supplied)
"22. A pooling agreement may be utilised in connection with the election of Directors and shareholders' Resolutions where shareholders have a right to vote. However, a pooling agreement cannot be used to supersede the statutory rights given to the Board of Directors to manage the company, the underlying reason being that the shareholders cannot achieve by pooling agreement that which is prohibited to them, if they are voting individually. Therefore, the power of shareholders to unite is not extended to contracts, whereby restrictions are placed on the powers of Directors to manage the business of the Corporation. It is for this reason that a pooling agreement cannot be between Directors regarding their powers as Directors. There is vast difference in principle between the case of a shareholder binding himself by such a contract and the Director of the Company undertaking such an obligation by compromising his fiduciary status. The shareholder is dealing with his own property. He is entitled to consider his own interests, without regard to interests of other shareholders. However, Directors are fiduciaries of the Company and the shareholders. It is their duty to do what they consider best in the interests of the Company. They cannot abdicate their independent judgment by entering into pooling agreements. The Company works through two main organs, viz. the shareholders and the Board of Directors." (Emphasis Supplied)
4. COMMITMENT OF THE PARTIES
4.1. The Promoters hereby agree, covenant and undertake:
(i) to perform and observe and also cause the Company to perform all of the provisions of this Agreement and the Organizational Documents;
(ii) that in their capacity as Shareholders they will exercise any power to vote or cause the power to vote to be exercised, at any meeting of the Shareholders of the Company so as to enable the approval of any and every resolution of the Company necessary or desirable to give full effect to this Agreement and the FRL SHA and likewise so as to ensure that no resolution of the Company is passed which is not in accordance with this Agreement and, or, the FRL SHA;
(iii) that they will cause any Person appointed by them as their nominee Director on the Board to exercise any power to vote or cause the power to vote to be exercised, at any meeting of the Board of the Company (or any committee thereof) so as to enable the approval of any and every resolution necessary or desirable to give full effect to this Agreement and the FRL SHA, and likewise so as to ensure that no resolution is passed which is not in accordance with this Agreement and, or, the FRL SHA;
(iv) that they will exercise any power to vote or cause the power to vote, on behalf of themselves and the Company, to be exercised, at any meeting of the shareholders of the Material Entities so as to enable the approval of any and every resolution necessary or desirable to give full effect to this Agreement and the FRL SHA, and the likewise so as to ensure that no resolution of any Material Entity is passed which is not in accordance with this Agreement and, or, the FRL SHA, as the case may be; and
(v) to cause its Affiliates, to comply with the provisions of paragraph (i), paragraph (ii), paragraph (iii), and paragraph (iv) of this Section 4.1.
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8.1. Notwithstanding anything contained in this Agreement, the Promoters and the Company hereby agree, covenant and undertake that the matters set out in Schedule IX (Investor Protective Matters) ("Investor Protective Matters") shall not be taken-up, decided, acted upon or implemented by the Company; nor the Investor Protective matter be placed for a vote thereon at a Shareholders’ meeting of the Company; nor any decision be taken by the Shareholders or Board or any committee of the Board; nor the Company be bound/committed to any resolutions/transactions pertaining to the Investor Protective matters, unless the Investor Protective Matter has been, first approved in the affirmative, in writing, by the Investor. Without limiting the generality of the foregoing, in the event that the Company proposes to take up, or decide any Investor Protective matters, in (a) any meeting of the Board, or any committee thereof, such matter shall be taken-up only if the written consent of the Investor has been obtained prior to such meeting, or if at least 1(one) Investor Nominee Director is present in such meeting, and such Investor Nominee Director votes in favour of such matter, or (b) any meeting of the Shareholders of the Company, such matter shall be taken-up only if the written consent of the Investor has been obtained prior to such meeting, or if an authorized representative of the Investor is present in such meeting, and such representative votes in favor of such matter.
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10.1 Ownership and Control of the Promoters and Promoter Affiliates.
10.1.1.The Promoters hereby agree, covenant and undertake that they shall, and shall undertake and ensure that, any promoter Affiliate, holding Company Securities (in accordance with this Agreement) shall, at all times till it holds any Company Securities, (i) (if it is a body corporate) be wholly Controlled, to the exclusion of others, by the Ultimate Controlling Person, and his Immediate Relative, and the Ultimate Controlling Person and his Immediate Relative shall hold (directly and or indirectly) at least 76% (seventy six percent) of the legal and beneficial ownership and voting interests, on a fully diluted basis of such Promoter and, or, Promoter Affiliate; (ii) (if it is a body corporate), undertake and ensure that no Restricted Person shall hold any ownership interest, voting interests or share capital or Control in, or over such Promoter, or such Promoter Affiliates, and (iii) qualify as a ‘resident Indian citizen as defined under the FEMA Regulations, and where such Promoter or such Promoter Affiliate is a Person other than a natural Person, it shall be ultimately owned and Controlled by Persons who are resident Indian citizens under the FEMA Regulations.
10.1.2.It is hereby agreed that the provisions of Section 10.1.1(ii) shall apply mutatis mutandis to any Person (not being a natural Person) which holds securities, ownership or voting interests, whether directly, and, or indirectly in the Promoters which hold Company Securities, or Promoter Affiliates which hold Company Securities. The Promoters shall cause and ensure compliance by such Person as referred to in this Section 10.1.2 with Section 10.1.1(ii).
10.2. Restrictions on Transfer
10.2.1.Except where the prior written consent of the Investor has been obtained in accordance with Section 8 (Investor Protective Matters and Investor Protective Notice Matters) or Section 10.2.2, or as expressly permitted by this Agreement in Section 10.3 (Transfer to Promoter Affiliates and Promoter Trust), Section 10.4 (Transfer by the Investor), Section 11 (Exit of the Investor) and Section 15 (FRL Call Option and Associated matters), the Shareholders agree, covenant and undertake that no Shareholder shall Transfer, or Encumber any Company Securities to another Person, without the prior written consent of the other Shareholder, which consent may be provided or withheld in such Shareholder’s sole and absolute discretion.
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13.1 Consent of the investor, and the Promoters.
13.1.1.Notwithstanding anything to the contrary contained in this Agreement, the Parties hereby agree, covenant and undertake that the Promoters and the Company shall, and shall cause a Material Entity to, not (i) take-up, decide, act upon or implement the matters set out in the FRL SHA which require the consent of the Company, or (ii) place such matters for a vote thereon at the board of shareholders meeting of the material Entity, or (iii) take any decision or cause any decision to be taken by the shareholders or the board or any committee of the board of the Material Entity on such matters, or (iv) be bound/committed to any resolutions/transactions pertaining to such matters; unless a prior written consent of the Investor and the Promoters has been obtained by the Company; provided however, that for a matter which pertain to issuance of Securities by a Material Entity and where the Company intends to or proposes to decline, or recuse itself from participating in such issuance, or not subscribing to its entire pro-rata entitlement required to maintain the Company’s shareholding in the Material Entity (on a fully diluted basis) as on the date immediately prior to such issuance by the Material Entity, a written consent shall be required to be obtained only from the Investor prior to the Company declining, recusing itself, or not subscribing to its pro-rata entitlement in the Material Entity.
13.1.2. The Company and the Promoters agree, covenant and undertake that any updates to the list of Restricted Persons and its communication to FRL under FRL SHA shall be undertaken only after a prior written consent of the Investor has been obtained.
13.1.3. The Company and the Promoters agree, covenant and undertake that any assignment of the rights and obligations of the Company or the Promoters under the FRL SHA shall be undertaken only after a prior written consent of the Investor has been obtained.
13.2. FRL SHA
13.2.1. The Promoters and the Company agree, covenant and undertake to comply with the provisions of the FRL SHA at all times. If any provision of the FRL SHA is breached or likely to be breached ("FRL SHA Breach"), the Promoters and the Company shall be obligated to undertake all actions necessary to ensure that such a breach is duly addressed and, or rectified and the rights and, or, interests of the Company under the FRL SHA are not violated and shall promptly, notify the Investor in writing in relation to such FRL SHA Breach.
13.2.2. Upon the occurrence of a FRL SHA Breach, the Company, and, or, the Promoters shall promptly issue a notice to the Investor, specifying in such notice, details with respect to the FRL SHA Breach, and the remedial actions proposed to be undertaken by the parties thereto. Without prejudice to the foregoing, the Investor shall have the right to issue a written notice to the Company specifying the details of the FRL SHA Breach to the extent the details of the breach are available with it, along with the remedial measures and steps that it is of the opinion that the Company should undertake in respect of such FRL SHA Breach to enforce and protect the rights of the Company (the notice issued by the Investor pursuant to this Section 13.2 (FRL SHA) hereinafter, the "FRL SHA Breach Notice")
13.2.3.Within 10 (ten) days of receipt of the FRL SHA Breach Notice, the Company shall and the Promoters shall cause the Company to take all such actions as may be necessary and, or, as may be suggested by the Investor under the FRL SHA Breach Notice for rectifying the concerned breach of the FRL SHA and ensuring that the terms of the FRL SHA are strictly complied with.
13.2.4.In the event the Company and, or, the promoters fail to take appropriate and adequate steps and actions to protect and enforce the rights and entitlements of the Company under the FRL SHA and the applicable Laws, pursuant to such FRL SHA Breach, within a period of 15 (fifteen) Business Days or such other extended period as may be approved in writing by the Investor, or in the event the Promoters and the Company fail to get the FRL SHA Breach rectified or abandon the conduct of the remedial measures initiated, at any point in time, for rectification or resolution of the FRL SHA Breach, to the satisfaction of the Investor, the Company and the Promoters agree and acknowledge that the Investor shall be deemed to be the Company's duly appointed attorney with the full power, rights and authority to take such actions and steps as it deems fit on behalf of the Company and in the name of the Company in order to protect and enforce the rights, entitlements and interests of the Company. In this regard, the Company hereby grants the authority and the power to the Investor and its advisors, authorized representatives, officers and agents, to act as the legal representative/nominee/attorney of the Company and exercise, as the Investor deems fit on behalf of the Company, all such rights and powers that may be available to the Company under the FRL SHA and as a shareholder of FRL, including but not limited to the right to vote, attend shareholders' meetings (for and on behalf of the Company), initiate any legal proceedings against FRL and, or, the Promoters, for the purposes of ensuring that the FRL SHA is strictly complied with and the Company’s rights under the FRL SHA are adequately safeguarded.
13.2.5.The company and the Promoters hereby agree that any action or decision that may be undertaken pursuant to Section 13.2 (FRL SHA) above is being undertaken in the best interest of the Company and to safeguard rights and entitlements of the Company.
4.1. The Existing Shareholders hereby agree, covenant, and undertake:
(i) To perform and observe all of the provisions of this Agreement, the Memorandum of Association, and the Articles of Association.
(ii) To ensure and procure that every Person for the time being representing it in its capacity as a Shareholder will exercise any power to vote or cause the power to vote to be exercised, at any meeting of the Shareholders so as to enable the approval of any and every resolution necessary or desirable to give full effect to this Agreement, and likewise so as to ensure that no resolution is passed which is not in accordance with this Agreement; and
(iii) To cause its Affiliates, to comply with the provisions of paragraph (i) and (ii) of this Section 4.1.
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6. TRANSFER OF SECURITIES.
6.1. Ownership and Control of the Existing Shareholders and Existing Shareholder Affiliates.
6.1.1. The Existing Shareholders hereby represent and warrant that the shareholding/ownership pattern of the Existing Shareholders listed in Part B of Schedule I (Existing Shareholders) as on the Execution Date is, and as on the Effective Date shall be, as set forth in Schedule V (Shareholding Patten of Existing Shareholders) and that as on the Execution Date, and the Effective Date, the Ultimate Controlling Person wholly owns and shall own, directly and through his Immediate Relatives, and Controls, and shall Control, each of the Existing Shareholders listed in Part B of Schedule I (Existing Shareholders).
6.1.2. Each Existing Shareholder (including any Existing Shareholder and, or, Existing Shareholder Trust) which acquires Securities pursuant to Section 6.2.4 (Transfer to Affiliates) hereof, or any Affiliate or person forming part of the Promoter Group (as defined in the SEBI (ICDR) Regulations) of the Company who acquires further Securities of the Company (and each such Person, the "Existing Shareholder Affiliate"), which is a body corporate, hereby agrees, covenants, and undertakes that as long as it holds any Securities of the Company, the Ultimate Controlling Person and his Immediate Relatives, shall Control such Existing Shareholder, Existing Shareholder Trust or Existing Shareholder Affiliate (to the exclusion of other Persons), and own and hold at least 76% (seventy six percent) of the legal and beneficial ownership (and voting interests) on a fully diluted basis of such Existing Shareholder, Existing Shareholder Trust and, or Existing Shareholder Affiliate.
6.2. Restrictions on Transfer of or Encumbrances over Existing Shareholder Securities.
6.2.1. Each of the Existing Shareholders hereby covenant, undertake and agree that it shall not, and shall ensure that the Existing Shareholder Affiliates shall not and FCL hereby agrees, covenants, and undertakes that it shall not, Transfer or Encumber any of the Securities of the Company held by it to any Person or create any Encumbrance over the Securities of the Company held by it except pursuant to mutual written consent of FCL and the Existing Shareholders. All Transfer of Securities permitted by this Agreement may only be made in compliance with requirements of Law.
6.2.2. Encumbrances over Existing Shareholder Securities : In the event there is a breach, or event of default, or any other event or occurrence, under any agreement, or arrangement relating to any loan, and, or debt taken or raised by the Company with a Lender whereby the Lender makes or is entitled to make a claim of any interests over the Existing Shareholders Securities (such event, the "Existing Shareholders Event of Default"), including any right of alienation, disposal etc., the Existing Shareholders shall immediately, and no later than 1(one) day from the occurrence of such event, notify FCL, in writing, of such event and in such case, the Company shall, if requested by the Existing Shareholders, and the FCL, undertake all such actions as may be required to replace the Lenders of the Company with such other Persons as may be nominated by the Existing Shareholders, and FCL.
6.2.3. The Company shall not assume any share transfer restrictions (including without limitation any lock-in, right of first refusal, right of first offer, tag-along rights) on the Existing Shareholder Securities in favour of any Person, without the prior consent in writing of FCL (which consent may be provided, or denied by FCL, in its sole and absolute discretion). Any request for FCL's consent pursuant to this Section 6.2.3 by the Company shall be made in writing and shall be accompanied with adequate details of the exact nature of rights proposed to be granted, the third party to whom the rights are proposed to be granted, the tenure of these rights, and true and accurate copies of any agreements proposed to be executed with such third party.
6.2.4. Transfer to Affiliates.
(i) Notwithstanding anything to the contrary contained in this Agreement, any Existing Shareholder may Transfer Existing Shareholder Securities:
(a) to its Affiliate (provided such Affiliate satisfies the requirement of Section 6.1 (Ownership and Control of the Existing Shareholders and Existing Shareholder Affiliates) and the Existing Shareholder has obtained an executed Deed of Adherence from such Affiliate, and delivered the same to the Company and FCL) or to another Existing Shareholder; or
(b) to a trust whose only trustees and only ultimate beneficiaries are such Existing Shareholder's Immediate Relatives, and if such Existing Shareholder is not a natural Person, then to a trust whose only trustees and only ultimate beneficiaries are the Ultimate Controlling Person, or his Immediate Relatives ("Existing Shareholder Trust"), as part of a bona fide succession-planning exercise, provided that the Existing Shareholders have obtained an executed Deed of Adherence from such trust, and its trustees, and delivered the same to the Company and FCL; or
(ii) If, after any Transfer pursuant to Section 6.2.4(i)(a), or Section 6.2.4(i)(b), the applicable Affiliate ceases to be an Affiliate (or ceases to satisfy the requirement of Section 6.1). or the trust ceases to be Existing Shareholder Trust, then the Existing Shareholder that made the Transfer (the "Transferring Party") shall, procure that such Person shall immediately Transfer such Existing Shareholder Securities to the Transferring Party or to another Affiliate, or Existing Shareholder Trust of the Transferring Party in accordance with the terms of this Section 6.2.4 and the Transferring Party shall immediately give notice to the Company, and FCL that such Transfer has occurred.
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9. RESERVED MATTERS AND OTHER MATTERS.
9.1. Notwithstanding anything to the contrary, the Existing Shareholders, and the Company hereby agree and undertake that the matters set forth below shall not be taken-up, decided, acted upon or implemented by the Company ("Reserved Matters"); nor the Reserved Matters be placed for a vote thereon at a Shareholders' meeting of the Company; nor any decision be taken by the Shareholders or Board or any committee of the Board; nor the Company be bound/ committed to any resolutions/ transactions pertaining to the Reserved Matters, unless the Reserved Matter has been, first approved in the affirmative, in writing, by FCL. Without limiting the generality of the foregoing, in the event that the Company proposes to take up, or decide any Reserved Matters, in (a) any meeting of the Board, or any committee thereof, such matter shall be taken up only if the written consent of FCL has been obtained prior to such meeting, or (b) any meeting of the Shareholders of the Company, such matter shall be taken-up only if the written consent of FCL has been obtained prior to such meeting.
(i) except as otherwise provided in Section 92 (Permitted Transactions), any transfer or license of all or substantially all of the Assets of the Company (including all, or substantially all Intellectual Property), including without limitation a Restricted Transfer;
(ii) any Restricted Transfer to an Affiliate, or a 'related party' of the Company, or the Existing Shareholders;
(iii) any amendment to the Articles of Association which is in conflict with the rights of FCL under this Agreement: and
(iv) any issuance of Securities to a Proposed Investor not in accordance with Section 7 (Further Issue of Capital).
i) Any transfer or license of all or substantially all of the Assets of FRL (including all, or substantially all Intellectual Property), including without limitation a Restricted Transfer;
ii) Any Restricted Transfer to an Affiliate or a ‘related party’ of FRL or the Existing Shareholders.
iii) Any amendment to the Articles of FRL which is in conflict with the rights of FCPL under the FRL SHA; and
iv) Any issuance of securities to a Proposed Investor not in accordance with Section 7 of the FRL SHA (relating to further issue of capital).
i) Take up, decide, act upon or implement the matters set out in the FRL SHA which require the consent of FCPL, or
ii) Place such matters which require the consent of FCPL for a vote thereon at the board of directors meeting or shareholders meeting of FRL, or
iii) Take any decision or cause any decision to be taken by the shareholders of the board of directors or any committee of the board of FRL on matters requiring consent of FCPL or
iv) Be bound or committed to any resolutions or transactions pertaining to such matters which require the consent of FCPL;
"For the avoidance of doubt, Parties hereby expressly record their undertaking that the Promoters and the Investor have no agreement or understanding whatsoever in relation to the acquisition of shares or voting rights in, or exercising control over, FRL and that the Company, the Promoters and the Investors otherwise do not intend to act in concert with each other in any way whatsoever."
"139...... In particular the House is called upon to consider the ingredients of the tort of interference with a business by unlawful means and the tort of inducing breach of contract. These are much vexed subjects. Nearly 350 reported decisions and academic writings were placed before the House. There are many areas of uncertainty. Judicial observations are not always consistent, and academic consensus is noticeably absent. In the words of one commentator, the law is in a ‘terrible mess ’. So the House faces a daunting task.
28. I will not dwell on the unfortunate state of the common law in relation to the unlawful means tort. As I noted earlier, there is not even consensus about what it ought to be called. One leading scholar simply observed that "[t]he economic torts [of which the unlawful means tort is one] are in a mess": H. Carty, "Intentional Violation of Economic Interests: The Limits of Common Law Liability" (1988), 104 Law Q. Rev. 250, at p. 278. Careful review of the development of the unlawful means tort reveals confusion, overlap and inconsistency: see, e.g., Carty, An Analysis of the Economic Torts (2nd ed.), at pp. 73-78; P. Burns, "Tort Injury to Economic Interests: Some Facets of Legal Response" (1980), 58 Can. Bar Rev. 103, at pp. 145-48; T. Weir, Economic Torts (1997), at pp. 36-43; L.L. Stevens, "Interference With Economic Relations — Some Aspects of the Turmoil in the Intentional Torts" (1974), 12 Osgoode Hall L.J. 595, at pp. 617-19. At its core, however, the tort has two key ingredients: intention and unlawfulness. The gist of the tort is the intentional infliction of economic harm by unlawful means.
"194. It may be helpful to pause and take an overall look at where this leaves the law. The effect of the views expressed above is to draw a sharp distinction between two economic torts. One tort imposes primary liability for intentional and unlawful interference with economic interests. The other tort imposes accessory liability for inducing a third party to commit an actionable wrong, notably a breach of contract, but possibly some other actionable civil wrongs as well."
"45. The most important question concerning this tort is what should count as unlawful means. It will be recalled that in Allen v Flood  AC 1, 96, Lord Watson described the tort thus-when the act induced is within the right of the immediate actor, and is therefore not wrongful in so far as he is concerned, it may yet be to the detriment of a third party; and in that case... the inducer may be held liable if he can be shown to have procured his object by the use of illegal means directed against that third party."
46. The rationale of the tort was described by Lord Lindley in Quinn v Leathem  AC 495, 534-535: "a person’s liberty or right to deal with others is nugatory, unless they are at liberty to deal with him if they choose to do so. Any interference with their liberty to deal with him affects him. If such interference is justifiable in point of law, he has no redress. Again, if such interference is wrongful, the only person who can sue in respect of it is, as a rule, the person immediately affected by it; another who suffers by it has usually no redress; the damage to him is too remote, and it would be obviously practically impossible and highly inconvenient to give legal redress to all who suffer from such wrongs. But if the interference is wrongful and is intended to damage a third person, and he is damaged in fact - in other words, if he is wrongfully and intentionally struck at through others, and is thereby damnified - the whole aspect of the case is changed: the wrong done to others reaches him, his rights are infringed although indirectly, and damage to him is not remote or unforeseen, but is the direct consequence of what has been done." (Emphasis Supplied)
"47. The essence of the tort therefore appears to be (a) a wrongful interference with the actions of a third party in which the claimant has an economic interest and (b) an intention thereby to cause loss to the claimant. The old cases of interference with potential customers by threats of unlawful acts clearly fell within this description. So, for the reasons I have given, did GWK Ltd v Dunlop Rubber Co Ltd 42 TLR 376. Recent cases in which the tort has been discussed have also concerned wrongful threats or actions against employers with the intention of causing loss to an employee, as in Rookes v Barnard  AC 1129, or another employer, as in J T Stratford & Son Ltd v Lindley  AC 269. In the former case, the defendants conspired to threaten the employer that unless the employee was dismissed, there would be an unlawful strike. In the latter, the union committed the Lumley v Gye tort of inducing breaches of the contracts of the employees of barge hirers to prevent them from hiring the plaintiff's barges.
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51. Unlawful means therefore consists of acts intended to cause loss to the claimant by interfering with the freedom of a third party in a way which is unlawful as against that third party and which is intended to cause loss to the claimant. It does not in my opinion include acts which may be unlawful against a third party but which do not affect his freedom to deal with the claimant."
(i) use by the defendant of unlawful means.
(ii) interfering with the action of a third party in relation to the claimant.
(iii) intention to cause loss to the complainant.
"73. The indeterminate ambit of "unlawful means" thus remains one of the principal causes of uncertainty as to the potential scope of liability under this tort. The issue has been the subject of some judicial deliberation in other common law jurisdictions. In Scotland, in McLeod v. Rooney, Lord Glennie concluded from an extensive review of the speeches in OBG Ltd. v. Allan that "the essential aspect [of the tort] is that the loss is caused to the claimant through a third party on whom the defender has unlawfully acted. That is the control mechanism. The inquiry focuses on the nature of the disruption caused as between the third party and the claimant rather than on the directness of the causative link between the defender's wrong and the claimant's loss." ( CSOH 158; 2010 S.L.T. 499 at 18)
74. A party must be shown to have known that they were inducing a breach of contract. It is not enough that a defendant knows that he is procuring an act which, as a matter of law or construction of the contract, is a breach, nor that he ought reasonably to have known that it is a breach. (See OBG v. Allan per Lord Hoffman at Paragraph 39; British Industrial Plastics Ltd. v. Ferguson (1940) 1 All E.R. 479).
75. In East England Schools CIC (t/a 4MySchools) v. Palmer (2013) EWHC 4138 (QB); (2014) I.R.L.R. 191, it was held that the second defendant knew that it was likely that the first defendant was subject to some form of restrictive covenant, but had failed to take reasonable steps to make himself aware of the precise nature of those restrictions. Further, the second defendant knew that his instructions could well require the first defendant to act in breach (and in fact they did). As such, the second defendant was liable for procuring the first defendant's breach. (See Clerk & Lindsell on Torts, 21st Edition)
76. In Quinn v. Leathem Lord Macnaghten (1901) A.C. 495 at 510) it is said that "a violation of a legal right committed knowingly is a cause of action, and... It is a violation of legal right to interfere with contractual relations recognized by law if there be no sufficient justification for the interference."
77. Interference with the performance of a contract is an actionable wrong unless there be justification for interfering with the legal right. This tort is committed when A either persuades B to break his contract with C or by showing some unlawful acts he indirectly prevents B to perform contract. The origin of this tort is traced to Lumley v. Gye as mentioned earlier.
78. The principles that emerged from the discussions made above are that interference with the subsisting contract may arise in three different ways. It is not restricted simply to procuring a breach of contract but covers interference with the performance of the contract as well, that is to say, preventing or hindering one party from performing his contract even though it may not be a breach of the contract. Direct intervention by the persuasion whether by himself or his agents by words or other acts of communication if are intended to influence to break the contract with C would constitute a cause of action.
79. The second category consists of cases where the intervener does some unlawful acts on the person or property of B which disables him in performing his contract with C.
80. The third category covers cases where intervener persuades the third party to do some unlawful acts which interferes in B's due performance of his contract with C as was intended.
81. In Greig v. Insole, (1978) 3 All ER 449, five conditions have laid down that are required to be fulfilled by the plaintiff in a suit for interference with a subsisting contract. First, there must be either (a) ‘direct’ interference with performance of the contract or (b) indirect interference with performance coupled with the use of unlawful means. Secondly, the defendant must be shown to have knowledge of the relevant contract; but it is not necessary that he should have known its precise terms. (Emerald Construction Co. Ltd. v. Lawthien, (1966) 1 WLR 691). Thirdly, he must be shown to have had the intent to interfere with it. Fourthly, the plaintiff must show that he has suffered special damage, that is, more than nominal damage. Fifthly, so far as is necessary, the plaintiff must successfully rebut any defence based on justification which the defendant may put forward.
82. At this stage, however, the Court is only required to find out if the necessary ingredients of such "economic tort" constituting the cause of action are present in the plaint and not to assess the evidentiary value of such averments."
149. Although the need for ‘unlawful means’ is well established, the same cannot be said about the content of this expression. There is some controversy about the scope of this expression in this context.
150. One view is that this concept comprises, quite simply, all acts which a person is not permitted to do. The distinction is between ‘doing what you have a legal right to do and doing what you have no legal right to do’: Lord Reid in Rookes v Barnard  AC 1129, 1168-1169 . So understood, the concept of ‘unlawful means’ stretches far and wide. It covers common law torts, statutory torts, crimes, breaches of contract, breaches of trust and equitable obligations, breaches of confidence, and so on.
151. Another view is that in this context ‘unlawful means’ comprise only civil wrongs. Thus in Allen v Flood itself Lord Watson described illegal means as ‘means which in themselves are in the nature of civil wrongs’ :  AC 1, 97-98. A variant on this view is even more restricted in its scope: ‘unlawful means’ are limited to torts and breaches of contract.
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