Summary
The Supreme Court upheld rectification of a company’s share register to effectuate a final arbitral award. The appellant acquired shares as a nominee under the agreement containing the arbitration clause and accepted its terms. Section 35 bound it as a person claiming under a party despite its absence from the arbitration. Resort to the NCLT under section 111 of the Companies Act, 1956 was the proper means of completing the transmission; section 42 did not bar that remedy.
Issues
- Whether the final award bound the non-signatory nominee shareholder as a person claiming under a party.
- Whether rectification before the NCLT could effectuate the award.
- Whether Arbitration Act section 42 excluded that statutory remedy.
Provisions considered
- Section 35, Arbitration and Conciliation Act, 1996The final award binds parties and persons claiming under them. The Court examined the source of the appellant’s shareholding and held that its position derived from the party through whom it claimed. (¶¶ 20, 21, 22, 23, 24)
- Section 42, Arbitration and Conciliation Act, 1996The restriction concerning applications under Part I did not defeat the statutory share-register rectification needed to give effect to the final award. (¶¶ 28, 30, 31, 32)
Held
- Section 35 extends beyond the parties to arbitration to persons whose capacity or position derives from a party and is the same as that party’s. Non-joinder in the arbitral proceedings did not by itself answer whether this nominee was bound at the enforcement stage. (¶¶ 20, 21, 22)
- The nominee’s acquisition expressly proceeded under the parent share-purchase agreement, which conditioned transfer on acceptance of its terms. Its authorised correspondence acknowledged that agreement; no contemplated supplementary agreement was executed. It could not accept the other terms while disclaiming the arbitration provision. (¶¶ 23, 24, 26)
- In its discussion of Chloro Controls, the Court emphasised mutual intention, the relationship between entities, commonality of subject matter and the composite transaction. Mere corporate affiliation was not stated to bind every non-signatory automatically. The decision addressed post-award enforcement against the particular nominee claiming under a party. (¶¶ 14, 16, 17, 19, 20, 25)
- The award required return and transmission of the shares against the stipulated payment or tender. Handing over physical certificates alone would not complete implementation: rectification of the company’s register under section 111 was appropriate and necessary, and the NCLT had jurisdiction to order it. (¶¶ 27, 28, 29, 32)
- Section 42 did not prevent the rectification remedy. The Court distinguished applications governed by Part I from enforcement of a final award and applied the principle that execution need not first be commenced in the court supervising the arbitration. (¶¶ 28, 30, 31, 32)
- Earlier, unchallenged findings in section 9 proceedings also established that the appellant purchased as a nominee under the parent agreement rather than by an independent right. The final award and its resulting rights could be given effect through the competent statutory remedy. (¶¶ 33, 34)
Result
Appeals dismissed; NCLAT’s affirmance of NCLT’s share-register rectification sustained.