Holding

The Court held that a live arbitrable issue existed and the arbitration clause remained enforceable, warranting the appointment of arbitrators under Section 11(6).

Summary

Tata Industries Ltd. and its subsidiary Apex Investments (Mauritius) sought appointment of arbitrators under Section 11(6) of the Arbitration and Conciliation Act, 1996, alleging breach of a Shareholders Agreement with Grasim Industries Ltd. The dispute centred on termination notices alleging breach of non‑competition and confidentiality clauses, and subsequent Share Purchase Agreements that contained a "without prejudice" clause. The respondents argued that the Share Purchase Agreements extinguished the arbitration dispute and that the applicants had fallen below the 15% shareholding threshold, thereby losing any rights under the agreement. The Supreme Court held that the arbitration clause in the Shareholders Agreement remained autonomous and enforceable, that the breach allegations constituted a live arbitrable issue, and that the application for appointment of arbitrators was proper. Consequently, the Court appointed three senior judges as arbitrators and allowed the application.

Issues considered

Whether the arbitration clause in the Shareholders Agreement survives termination and remains enforceable.
Whether a live arbitrable issue exists despite the execution of Share Purchase Agreements containing a "without prejudice" clause.
Whether the respondents' argument that the applicants' shareholding fell below the threshold bars their right to arbitrate.
Whether Apex Investments (Mauritius) is a party to the Shareholders Agreement and thus bound by its arbitration clause.
Whether the jurisdiction to appoint arbitrators lies with the Chief Justice of India under Section 11(12)(a) of the Arbitration Act.

Legislation cited

Arbitration and Conciliation Act, 1996s. 11(12)(a), s. 11(6)

Subjects

ArbitrationLive arbitrable issueShareholders AgreementConfidentiality clauseTermination noticeWithout prejudice clauseSection 11(6) Arbitration ActInternational commercial arbitrationPrivity of contractThreshold shareholding

Judgment

[2008] 10 S.C.R. 496

A TATA INDUSTRIES LTD. & ANR. '
v.
GRASIM INDUSTRIES LTD.
(Arbitration Petition No. 5 of 2007)
JULY 9, 2008
B
[V.S. SIRPURKAR, J]

·A,rbitration and Conciliation Act, 1996:
ss.11(6) and (12)(a) - International Commercial Arbitra-
c tion - Appointment of arbitrators - Live arbitrable issue -
Shareholders Agreement between parties - Applicants invok-
ing arbitration clause for alleged breach of terms of agree-
ment- Subsequently respondent agreeing to purchase shares
of applicants - Share Purchase Agreement containing "with-
D out prejudice" clause - HELD: Issue whether there was breach
of Shareholders Agreement, continued to be in existence and
was never given up by applicants - 'Without pmjudice' clause
in the subsequent Share Purchase Agreement clearly indi-
cated live arbitrable issue between the parties -- Arbitral tribu-
E nal appointed - Whether there was breach of Shareholders
Agreement and what would be its effect would be matter in the
realm of arbitration.
Applicant no. 1 (TIL), acting on its behalf and on be-
half of TATA Group, .the respondent acting. on its behalf
F and on behalf of A.V. Birla Group, and a foreign based
,.
company, namely, AT&T Wireless Services Inc. which was
the holding company of AT&T Cellular Pvt. Ltd. (Mauritius)
incorporated under the laws of Mauritius, agreed to pro-
vide CTMS service through a single entity, and to merge
G themselves to form IDEA Cellular Limited (l[)EA). A Share-
1

holders Agreement came into existence cin 15.12.2000.
AT&T Cellular Pvt. Ltd. (Mauritius) was subsequently re-
named as Apex Investment (Mauritius) Ltd. (applicant no.
2). Applicant no. 1 served notices dated 31.1.2006 and
H 496
•

TATA INDUSTRIES LTD. & ANR. v. GRASIM 497
INDUSTRIES LTD.
)

27.2.2006 upon the respondent alleging violation of non- A
competition and confidential clauses of the Sharehold-
ers Agreement. The respondent by its letters dated
28.2.2006 and 1.3.2006 disputed and denied the allega-
tions. In the meantime, consequent upon an offer of pur-
., chase, applicant no. 1, on its behalf and on behalf of ap- s
plicant no. 2, sent a notice offering sale of their shares in
IDEA to the respondent, which accepted the offer. The
parties, made it clear that the offer of purchase and ac-
ceptance thereof was without prejudice to their rival con-
tentions with regard to Termination Notices dated C
31.1.2006 and 27.2.2006. In response to applicants' no-
tice dated 24.4.2006 to commence process of consulta-
tion, the respondent, on 27.4.2006, replied that there was
no arbitral dispute surviving between the parties and,
therefore, there was no longer a basis for arbitration re-
0
garding the issues set forth in the two Termination No-
tices. On 5.5.2006, the applicants issued a formal arbitra-
tion notice. Thereafter two Share Purchase Agreements
were entered into between the parties on 1.6.2006. A spe-
cific reference was made to the claim of arbitration made on
behalf of applicant no. 1 stipulating that execution and con- E
summation of the transaction contemplated by the Share
Purchase Agreements would not prejudice or affect the pen-
dency or continuation of the arbitration proceedings be-
tween TIL and A.V. Birla Group arising out of the breach of
• Shareholders Agreement. The applicants ultimately filed an F
application u/s 11 (6) of the Arbitration and Conciliation Act,
1996, before the High Court. The application was resisted
by the respondent contending that it would amount to an
international commercial arbitration and, therefore, the Chief
Justice of India alone would have powers to constitute the G
Arbitral Tribunal. The applicants withdrew the said applica-
tion and filed the instant application.
It was contenderf for the applicants that there was a
clear incurable breach of the Shareholders Agreement as
H
498 SUPREME COURT REPORTS [2008] 10 S.C.R.

A mentioned in the Termination Notices dated 31.1.2006 and
27.2.2006 which was disputed by the respondent in its
replies dated 28.2.2006 and 1.3.2006 and, therefore, the
dispute clearly fell within the arbitration clause and was a
live issue between the parties. On behalf of the respon-
. B dents it was contended that by virtue of the Share Pur-
chase Agreements the applicants had made an exit from
the company and they were left with no rights under the
Shareholders Agreement and, as such, there was no live
issue pending between the parties.
C Allowing the application, the Court
HELD: .1. The parties are ad idem that the jurisdiction
to appoint the arbitrator lies with the Chief Justice of India
· or, as the case may be, his nominee. There is no dispute
that there is an arbitration agreement between the parties
0
as contained in Clause 12.04 of the Shareholders Agreement
dated 15.12.2000 and Clause 9 of the Share Purchase Agree-
ment dated 1.6.2006. The parties are also ad idem that the
claims are within limitation. [para 1-3] [502-F,G and H; 503-A]
E 2.1 As regards the live arbitrable issue, it is clear that
the issue whether there was a breach of confidentiality
clause of the Shareholders Agreement on the part of the
respondent and what were its effects continued to be in
existence and was never given up by the applicants. By
- F letter dated 6.4.2006, the respondent, while communicat-
ing its acceptance of offer of purchase, made it clear that
its offer was without prejudice to its contentions that No-
tices of Termination referred to in the Offer Notice were
not tenable. Similar reiteration was made on 10.4.2006.
G The respondent, by letter dated 24.4.2006, again showed
its readiness to purchase the shares. However, the ear-
lier position was reiterated that the stand taken by Tata
'
·1
Group was not correct. On 24.4.2006, the applicants
clearly reiterated that a dispute had arisen between the
applicants and the respondent in connection with the
H
TATA INDUSTRIES LTD. & ANR. v. GRASIM 499
INDUSTRIES LTD. .
..
terms of ShareholGlers Agreement and that for that pur- A
pose, they were ready to start the process of consolida-
tion as an initial step. It was also conveyed that in case
the respondent was ·not interested in the process of eon-.
solidation, the applicants would like to proceed with the ,
arbitral proceedings straight away. [para 13,28 and 35] B
[537-C,D, 513-C,D & F; 533-G,H; 534- A & B]
2.2 It was only in the letter dated 27.4.2006 that the ,
respondent, for the first time, took the stand that the Share-
holders Agreement was concluded between the parties
consequent to the offer of purchase notice and the ac- C
ceptance notice and the effect of the further steps taken ·
by both would be that there was no arbitrable dispute '
surviving pursuant to the notices. It is here for the first ·
time, that a stand was shifted by the respondent from its
earlier stand. Earlier, its contention was that there was no , D
breach of confidentiality clause. The shifted stand was that
because of the subsequent Agreement, the earlier issue
was already obliterated. It is on this background that ulti-
mately the formal Agreements dated 1.6.2006 came to be
entered into by the parties. But before that, a notice for the E
Arbitration had already been issued by the applicants by
their letter dated 5.5.2006. [para 28-29] [534-8,C,D and E]
2.3 In fact, if the stand taken by the respondent was
that there was no arbitrable issue because the offer con-
cluded the sale, there was no question of any such "with- 'F
out prejudice" clause being inserted in the Agreement
dated 1.6.2006. It is significant to note that on the date
when the formal Agreements were signed on 1.S.2006, the
respondent was already facing an arbitral notice and yet
the two clauses, viz., 2(0) and 2.3 came to be inserted. All G
this would suggest that there indeed was an issue and a
live one in between the parties till then. It is incorrect to
say that the cause of action arose only from the offer dated
5.4.2006. The live issue was clearly there, much before
the notice was given on 5.4.2006 and the second agree- H
500 SUPREME COURT REPORTS [2008] 10 S.C.R.

A ment was even contemplated. [para 29 and 35] [534-G,H;
535-A; 537-8 & C]
Chairman and MD, NTPC Ltd. Vs. Reshmi Construe-
tions, Builders & Contractors 2004 2 SCC 663 - relied on.

B Sargent and ASL Developments Limited (1974) 4 Aus-
tralian Law Reports (A.L.R.) 257 - held inapplicable.
Jai Narain Parasrampuria (Dead) and others Vs. Pushpa
Devi Saraf and others, 2006 (7) SCC 756; National Insurance
Company Limited Vs. Mastan and another 2006 (2) SCC 641
c - distinguished.
Shree Ram Mills Ltd. v. Utility Premises (P) Ltd. (2007) 4
SCC 599; and SBP Co. Vs. Patel Engineering Ltd. and.Another
2005 (4) Supp. SCR 688=2005 8 SCC 618 - referred to.
•
D Heyman & Anr. v. Darwins Ltd. (1942) 1 All E.R. 337-
~:...
referred to.
3.1 It is incorrect to say that since shares of appli-
cant no. 1 in IDEA have fallen below 15% it, in view of
clauses 7.01(a), 7.01(b) and 7.02(b), had no right under
E
the Shareholder~ Agreement. The Arbitration Agreement
under clause 12.04 would be clearly autonomous of the
Shareholders Agreement. Law is settled on this point that
even if the whole Agreement is terminated, the Arbitration
Agreement would still remain. Assuming that clause 7.01 -1
F (b) operates as a complete bar on the exercise by the ap- ~

plicants of their substantive right to seek a buy-out, that
is only an eventuality subsequent to the crystallization of
the live issue between the parties for which the arbitra-
tion clause would come handy to the applicants. [para
G 31] [535-G,H; 536-A,B & C]

Chairman and MD, NTPC Ltd. Vs. Reshmi Construe- ·f.
tions, Builders & Contractors 2004 (2) SCC 663 - relied on
3.2 The issue cannot be held to be dead for the simple
H reason that even in the subsequent Agreements (Shares
TATA INDUSTRIES LTD. & ANR. v. GRASIM 501
INDUSTRIES LTD.

Purchase Agreements), there is a "without prejudice" A
clause and that too despite the vehement claims and re-
fusals of those claims on the part of the parties. [para 32]
.· [536-D & E]
4. Whether there was a breach of Confidentiality
clause and whether the applicants were entitled to any dam- B
ages on account of that clause in favour of the applicants,
would be a matter in the realm of arbitration and this Court
would not go into that question. [para 33] [536-E & F]
5.1 It is incorrect to say that applicant no. 2 was not a c.
' '

party to the Shareholders Agreement and, therefore, there
could not be a privity of contract between it and the re-
spondent. It must be seen that after the offer was received
from Global Communications, both TIL on its behalf and
' t on behalf of the applicant no. 2 offered to sell their entire
D.
~
shareholding in IDEA in terms of the right of first refusal,
which offer tias been accepted by the respondent. Appli-
cant rio. 2 is now a part and parcel of the Tata Group and
is its subsidiary. Further, its interests are bound to be af-
fected. [para 36] [537-D & E, 539-A,B & C]
E
5.2 The respondent having raised an objection be-
fore the High Court that applicant no. 2 was a foreign com-
pany and, therefore, could not have filed an application
.,.
before the High Court cannot now turn around and say
• that applicant no. 2 was not a party to the Arbitration Agree- F
ment. That will not be permissible. The argument should ·
have been addressed to the High Court, at least in the
alternative fotm. If in the affidavit before the High Court .
the respondent had raised the issue and still chose not
to go into the issue whether appellant no. 2 was or was
G
not a party to the Shareholders Agreement, that will not
be permitted to be raised before this Court. In fact, in re-
stricting to the jurisdictional issue. and in not perusing the
issue of applicant no. 2 not being a party to the Sharehold-
ers Agreement before the High Court, the respondent aban-
H
r
~

.......
502 SUPREME COURT REPORTS [2008] 10 S.C.R. t=
!Ii

A doned that issue. [para 36] [539-C,D,E & F; 540-C,D & El
CIVIL ORIGINAL JURISDICTION: Arbitration Petition No.
5 of 2007
l:larish N. Salve, R.F. Nariman, Mukul Rohtagi, Gopal Jain,
Ruby Singh Ahuja, Meenakshi Grover, Kamaldeep Dayal, -;
B
Pragya Singh Baghel, Manu Agarwal and Manik Karanjawala '
for the Appellants.
K.K. Venugopal, Shyam Diwan, Dr. Abhishek Manu
Singhvi, Bharat Sangal, Gaurav Pachananda, Ankur Talwar,
c Sanjeev Adhalakha and Narhari Singh for the Respondent.
The Judgment of the Court was delivered by
I-
'-
V.S. SIRPURKAR, J. 1. Two companies, first being M/
s.Tata Industries Ltd., and the second being M/s. Apex rnvest- {_
• I
D ments (Mauritius) Holding Private Limited (hereinafter referred 1
to Applicant Nos.1 and 2 respectively) have approached this
Court under Section 11 (6) of the Arbitration and Concitiation
Act, 1996 (hereinafter referred to as "the Act") for appointment
of the Arbitrator in a commercial dispute which has arisen be-
E tween them and Grasim Industries Limited (hereinafter referred
to as "the non-applicant"). Initially the applicants had approached
Bombay High Court by way of an application under Section
11 (6) of the Act, however, a stand was taken by the non-appli-

F
cant that this would amount to an international commercial arbi-
tration and, therefore, it would bathe Chief Justice of India alone
.
who would have the powers to constitute the Arbitral Tribunal -··
under Section 11 (12) of the A':t. It is, therefore, that the matter
has come before this Court. The parties are ad idem on this
jurisdictional issue that the j·..Jrisdiction to appoint the Arbitrator
lies with the Chief Justice of India or as the case may be,. his
G
nominee. I '
r
2. There is no dispufi.3 between the parties that there1 is an
arbitration agreemenfbE.tween the parties vide Clause· 12.04
of the Shareholders Agraement dated 15.12.2000 and Clause
H 9 of the Share Transfer Agreement dated 1.6.2006. That issue
TATA INDUSTRIES LTD. & ANR. v. GRASIM 503
INDUSTRIES LTD. [V.S. SIRPURKAR, J.]

need not, therefore, be dilated upon. A
3. The parties are also ad idem that the claims are within
- I-imitation.
4. The only question to be decided, on which the parties
have extensively argued, is whether there is a live arbitrable B
issue.
5. Following background facts would help to understand
the controversy between the parties.
6. Mis.Tata Industries Limited (hereinafter referred to as c
"TIL") is a company incorporated under the Indian Companies
Act, 1956 (Applicant No.1) while Apex Investments (Mauritius)
Holding Private Limited (Applicant No.2) is a company incor-
porated under the Laws of Mauritius. The Applicant No.2 has
its registered office at Mauritius while non-applicant Mis.Grasim D
is also a company incorporated under the Indian Companies
Act, 1956.
7. Tata Cellular Limited (hereinafter called the "TCL") had
obtained a CMTS licence for Andhra Pradesh Circle on
19.12.2005. Similarly, Birla AT & T Communications Ltd. (here- E
inafter referred to as "BACL") which was a joint venture under-
taking of A.V. Birla Group andAT&TWireless Group held CMTS
licences for Maharashtra and Gujarat Circles since 15.12.1995.
Tata Teleservices Limited (hereinafter referred to as "TTSL")
l
was granted a basic service licence for Andhra Pradesh Circle F
•
on 4.11.1997. A Memorandum of Understanding was arrived
at between AT&T Wireless Inc., AV Birla Group and Tata Indus-
tries Limited on 1st March, 2000 whereby they agreed to pro-
vide CMTS service through a single entity. As per this Memo-
randum of Understanding AT&T Wireless Inc., AV Birla Group G
and TIL agreed to provide services through a single entity or an
alliance of entities and agreed to merge themselves to form
IDEA Cellular Limited (hereinafter referred to as "IDEA"). The
Memorandum of Understanding was entered into on 13.11.2000
by merging TCL with BACL.
H
504 SUPREME COURT REPORTS [2008] 10 S.C.R.

A 8. A Shareholders Agreement came into existence on
15.12.2000 between AT&T Wireless Inc., AV Birla Group
(through Grasim Industries Limited) and Tata Group through TIL.
In this Agreement respective rights and obligations of the. par-
ties for the merger/amalgamation of the TCL into BACL and
B modalities and functions of merged entities were recorded. ~- ;
Under that Agreement, the applicants, the non-applicant and "
AT&TWireless Services Inc., were to hold 44,72,35, 136 shares
being one-third of the subscribed and paid up Equity Share
Capital of the merged entity, i.e., IDEA. . Article 3.04(b) of the
c Shareholders Agreement provides as under:
"Each founder covenants and agrees that except as set
out in Section 3.04(c) and Section 3.04(d), it will not engage
in, either directly or indirectly though an affiliate, (i) any
activity that would co.nstitute the business of the merged
D company within the territorial telecom circles GOVered by· t
the licences; or (ii) any opportunity outside the territorial
telecom circles covered by. the licences that would
constitute the business or the merged company in India
and the neighbouring territories unless the opportunity has
E beeff first offered to the merged company to undertake
such new business by placing the same before the Board
of Directors of the merged company. The Board of
Directors shall deliberate, without the participation of the
India placing the opportunity before the Board (the
1
F Opportunity Shareholder") on whether to avail of such an _J_
opportunity. If the Board decides not to avail itself of such
opportunity or does not convey the decision in respect
thereto within a period of 120 days (or such shorter period
as may be necessary in the context of the nature of the
opportunity) from the date of receipt of such offer by the
G
merged company then; ·
(i) the Opportunity Shareholder shall invite the other
Founders for discussions on whether a joint venture
for availing the opportunity may be undertaken;
H
TATA INDUSTRIES LTD. & ANR. v. GRASIM 505
INDUSTRIES LTD. [V.S. SIRPURKAR, J.]

(ii) If the other Founders do not wish to participate in a A
joint venture the Opportunity Shareholder shall be
free to avail of the opportunity on its own."
Article 8 is the Confidentiality Clause which reads as
under:
B
"8.01 Confidential Information Defined:
For the purposes of this Agreement, "confidential
information" shall mean all oral, written and/or tangible
information created by the merged company or disclosed
by a Founder (in either case "owner") to the receiving C
Founder ("Recipient") which is confidential, proprietary
~nd/or not generally available to the public, including but
not limited to information relating in whole or in part to
present and future products, services, business plans and
strategies, marketing ideas and concepts, especially with D
respect of unannounced products and services, present
and future product plans, pricing, volume estimates,
financial data, product enhancement information, business
plans, marketin§ plans, sales strategies, customer
information (including customer's applications and E
environment), market testing information, development
plans, specifications, customer requirements,
configurations, designs, plans, drawings, apparatus,
sketches, software, hardware data, prototypes or other
technical and business information. Notwithstanding the F
foregoing, information shall not be deemed confidential
and Recipient shall have no obligation with respect to any
such information which:
(a) is already known to Recipient, or
G
(b) is or becomes publicly known, through any means
including publication, inspection of a product, or
1 otherwise, and through no negligence or other
wrongful act of Recipient, or

(c) is received by recipient from a third party without H
506 SUPREME COURT REPORTS [2008] 10 S.C.R.

A similar restriction and without breach of this
Agreement, or
(d) is independently develop by Recipient, or
(e) is furnished to a third party by owner with0ut a similar
8 restriction on the third party's rights.
8.02 Treatment of Confidential Information

From the execution of this Agreement until three (3) years
after the Recipient ceases to be a shareholder, Recipient
c shall, and shall cause its affiliates to, keep confidential
and will not disclose, and will cause its affiliates not to
disclose, to third parties, the confidential information
receive from, or made available by owner in the course of
the transactions contemplated hereby and will use and
cause its affiliates to use, the same level of care with
D
respect to the confidential information as Recipient
employees with respect to its ·own proprietary and
confidential information of like importance, and will not
use and will cause its affiliates not to use such confidential
information for any purpose other than the performance of
E its obligations under this Agreement. Promptly upon the
· Recipient ceasing to be a shareholder, written confidential
information. will be returned to Owner or destroyed
immetHately upon the request of owner, and no copies,
extracts or other reproductions shall be retained by the ·f
F Recipient All documents memoranda, notes and other ....t
writings wh;:itsoever prepared by recipient which contain
the confidential information shall be returned to owner or
destroyed at owner's request. Confidential information
provided by·owner shall remain the property of owner. For
G the avoidance of doubt,: the merged conipany shall not be
deemed to be·~ Recipient for purposes of this Section.
· 8.03 Notice prior tc;> disc_losure:. .
If Recipient (or its affiliate) is requested or required (by
H or.al questions, interrog'3tories, requests for information
TATA INDUSTRIES LTD. & ANR. v. GRASIM 507
INDUSTRIES LTD. [V.S. SIRPURKAR, J.]

or documents, subpoena, civil investigative demand or A
similar process) to disclose any confidential information,
Recipient will promptly notify owner of such request or
requirement so .that owner may seek an appropriate
protective order or waive compliance with the provisions
of this Section 8.03. If, in the absence of a protective B
order or the receipt of a w~iver hereunder, Recipient (or
any of its affiliates) is in the written opinion of Recipient's
counsel compelled to disclose the confidentiar information
or else stand liable for contempt or suffer other censure or
significant penalty, Recipient (or its affiliates) may disclose c
only so much of the confidential information to the party
compelling disclosure as is required by law. Recipient
will exercise (and will cause its affiliate to exercise)
reasonable efforts to obtain. a protective order or other
reliable assurance and confidential treatment will be D
accorded to confidential information."
Article 9 of the Agreement deals with the effectiveness and
termination. Article 9.02 relates to right to terminate for cause:
It specifically provides that in the event of occurrence of a mate-
rial breach on the part of the Defaulting Founder, each Founder E
shall have right to make the election as provided in Clause
9.02(b). However, for that purpose the electioning Founder
should have given written notice of the alleged breach to De-
faulting Founder and in terms of that not~ce the Defaulting
Founder has not cured, within 60 days, the said breach, if the F
said breach is capable of being cured within such period, or
the Defaulting Founder has not taken substantial and appropri-
ate steps to cure the breach. The "material breach" is defined
in this Clause as:
(i) a breach of confidentiality provisions set forth in Article G
VI 11 of the Agreement;
(ii) breach of the provisions of Section 3.04(b) relating
to non-competition;

(iii) the failure to contribute capital as required under H
~-

508 SUPREME COURT REPORTS [2008] 10 S.C.R.

~
A Section 2.04(a);
(iv) a breach of provisions relating to election of Directors,
filling of Board vacancies, removal of Directors and
election of Chairman of the Board;
~

B (v) a breach of the provisions under Article 10 relating ~
•/

to transfer of equity,. capital or voting interest;
(vi) · a breach by a party of the provisions under Section
6.02.

c Article 10.06 provides that if any party receives from or
otherwise negotiates with third parties a b9nafide offer to pur-
chase any of the equity capital owned or held by such party and
intends to make sale of its shares to such third party, such
founder mustnotify the other two parties of the Shareholders
Agreement by way of a notice mentioning offer price, the third
D ...
parties making the offer and the number of shares that such
third party wants to purchase on which the offeree would have
option to purchase such amount of shares at the offer price within
45 days of the offer notice.

E 9. The Arbitration clause worded in Article 12.04 and Ar-
ticle 12.04(a), (b), (c), (d) and (e) are as under:
"12.04 Governing law and consent to Jurisdiction: Arbi-
tration:

F (a) This Agreement and all questions of its interpretation
shall be construed in accordance with the laws of the ·-'
Republic of India without regard to its principles of
conflict of laws.
(b) The parties agree that they shall attempt to resole
G through good faith consultation in their behalf,
disputes arising in connection with this Agreement _,..
and such consultation shall begin promptly after a )II
,_
party has delivered to another party a written request
for such consultation.
H
TATA INDUSTRIES ·LTD. & ANR. v. GRASIM 509
INDUSTRIES LTD. [V.S. SIRPURKAR, J.]

(c) in the event that, after exhausting the efforts for A
resolution of dispute described in paragraph (b), the
parties have been unable to resolve a dispute, and
if the dispute is one which relates to an alleged
breach of any rep(esentation, warranty, covenant or
_., agreement under or the validity or termination of, B
covenant or agreement under or the validity of
termination of this agreements, such dispute shall
be finally settled according to the procedure set forth
in paragraph (d).
(d) A dispute subject to resolution under this paragraph c
(d) shall be finally settled by binding arbitration in
Mumbai, India before and pursuant to the Indian
Arbitration and Conciliation Act, 1996. Each party
shall select an arbitrator within fifteen (15) days from
-\ the initial arbitration request. D
Promptly upon their selection, such arbitrators shall
agree upon and select a third arbitrator from the panel
of arbitrators UNCITRAL. The parties shall agree in
advance as to manner in which the arbitration panel
shall promptly hear witnesses and arguments, review E
documents and otherwise conduct the arbitration
proceedings. Should the parties fail to reach an
agreement as to the conduct of the arbitration
1 proceeding within twenty (20) days from the selection
~- of the third arbitrator, the arbitration panel shall F
· formulate its own procedural rules and promptly
commence the arbitration proceedings. The
arbitration proceedings shall be conducted as
expeditiously as possible with due consideration for
the complexity of the dispute in question. The G
,. arbitration panel shall issue its decision in writing
within thirty (30) days from the hearing of final
arguments by the parties. The parties agree that the
arbitrators will have the power to rule on questions of
·its own jurisdiction over any dispute, to award H
510 SUPREME COURT REPORTS [2008] 10 S.C.R.

A damages and, in appropriate circumstances, to
award equitable relief but shall not be authorized to
award punitive or exemplary damages to any party.
The parties specifically agree to 'be bound by the
decisions rendered by the arbitration panel provided
B for herein and agree not to submit a dispute subject
to this Section 12.04 (d) to any federal, State or local
court or arbitration association except as may be
necessary to enforce the procedures of this Section
12.04(d) or to enforce the decision rendered by the
c arbitrators. The parties to any dispute submitted to
arbitration hereunder shall share equally the costs of
the arbitral panel and shall each bear their own
attorneys' fees and other expenses incurred in
connection with any arbitration proceedings. If court
proceedings to stay litigation or compel arbitration
D
are necessary, the party who unsuccessfully opposes
such proceedings shall pay all associated costs,
expenses and attorneys' fees which are reasonably
incurred by the other party.

E (e) During the pendency of a dispute/arbitration
proceedings the parties shall be bound by the terms
of this Agreement."
The parties point out that in 2004 AT & T Wireless Services
Inc., which was the holding company of AT&T Cellular Private
F Limited (Mauritius), merged with New Cingular Wireless Ser-
vices Inc. (hereinafter referred to as "NCW") pursuant to a glo-
bal restructure cum merger. Subsequently in September, 2005
Tl.L acquired the entire shareholding of AT&T Cellular Pvt. Ltd.
from NCW and the Birla Group acting thro1:1ghAditya Birla Nuvo
G Ltd. (hereinafter referred to as "ABNL") acquired 16.45% shares
in IDEA from AT&T Cellular Private Limited. AT&T Cellular Pri-
vate Limited was subsequently renamed as Apex Investments
(Mauritius) Limited. As a result of this, the shareholding of Birla
Group in IDEA increased to 50.14% while TIL continued to have
H 31.69% of the issued share capital. The balance 1.70% of IDEA
TATA INDUSTRIES LTD. & ANR. v. GRASIM 511
INDUSTRIES LTD. [V.S. SIRPURKAR, J.]
r
was held by AIG (Mauritius) LLC. A
10. On 31.1.2006, the Applicant No.1 served a notice on
the non-applicant under Article 9.02 of the Shareholders Agree-
ment in which it was stated that pursuant to an e-mail comm uni-
..... cation received by it from one Mr.Sanjeev Aga, it was clear that
Aditya Birla Telecom Limited (hereinafter referr~d to "ABTL"), B
a subsidiary of ABNL had applied to the Department of Tele-
communication for grant of UAS license for the Mumbai Metro
Circle. It was further stated in that notice that vide Board Circu-
lar dated 29.7.2005, the Board of Directors of IDEA had ac-
cepted proposal to apply for UAS licence for the Mumbai Metro c
Circle and consequently the said application was filed on
3.8.2005. The Applicant No.1 thus asserted that the filing of the
application for UAS licence by ABTL for the Mumbai circle was
in clear violation of Article 3.04(b) of the Shareholders Agree-
-.\" ment and amounting to a material breach by Aditya Birla Group D
under Article 9.02 of the Shareholders Agreement and accord-
ingly it was requested to cure the said material breach within
60 days of the receipt of the said letter by withdrawing the said
application made by ABTL for grant of UAS licence for Mumbai
Circle. E
11. On 27.2.2006, Applicant No.1 sent the Termination
Notice under Article 9.02 (b) of the Shareholders Agreement
thatABNL, which was an affiliate company of Aditya Birla Group,
~ for the purposes of Shareholders Agreement had displayed
'- confidential financial data of IDEA including particulars of rev- F
enue, PBDIT, OPM%, PBIT, Net profit/loss, capital employed,
ROCE (annualized)% and projections, on its website. It was
asserted that this information displayed on the website was
confidential information within the meaning assigned to the said
term in Article 8.01 of Shareholders Agreement. Since such G
confidential information was not in the public domain and since
'\'
none of the exceptions to the protection of confidential informa-
tion contained in Section 8.01 of the Shareholders Agreement
were available to AB~!!..., the disclosure of confidential informa-
tion was a clear breach of Article 8.02 of the Shareholders Agree- H
512 SUPREME COURT REPORTS [2008] 10 S.C.R.

A ment. It was also asserted that such material breach was not
capable of being cured and, therefore, the said letter was to be
treated as the Termination Notice in accordance with Ar:tiGle 9 I-
I
of the Shareholders Agraement and the Applicant No.J was pro-
ceeding to purchase the shareholding of AV Birla Group within
B 90 days of the receipt of the said notice. A copy of the notice
was also endorsed to IDEA in'order to take steps to facilitate
access to an international firm of auditors appointed by Appli-
cant No~ 1 for computing the fair market value of the IDEA shares. '·

12. These letters dated 20.2.2006 and 1.3.2006 were dis-
c puted by letters dated 31.1.2006 and 27.2.2006 respectively
wherein a clear cut denial was asserted to the effect that there
was no violation of the provisions of the Shareholders Agree-
ment relating to non-competition and confidentiality. Then vide
the subsequent correspondences dated 16.3.2006 and j
D 27.3.2006, Applicant No.1 reaffirmed all its stand and its en- -1-
titlement to purchase the entire equity share capital of the non-
applicant in IDEA in accordance with the provisions of Share-
holders Agreement. There was a further denial on the part of
the non-applicant by its letters dated 17 .3.2006 and 3.4.2006.
E 13. However, in the meantime, the applicant received an
offer for purchasing its stake as well as the stake of M/s. Apex
Investments (Mauritius) Holding Private Limited in IDEA from
Global Communication Services Holding Limited. In such an
eventuality, in terms of Clause 10.06, the applicants were bound
F to offer the shares at the same price to the non-applicant. Ac-
cordingly, a notice dated 5.4.2006 came to be served by Appli-
cant No. 1 on its behalf and on behalf of its subsidiary Mis. Apex
Investments (Mauritius) Holding Private Limited, offering the said
shares to the non-applicant. In this notice, the material terms
G and _conditions of the offer were specified vide para .3. It was
stated:
"By this letter, TIL and Apex are intimating the AV Birla
Group of their having received a bonafide offer for
purchase of the Sale Shares and of TIL and Apex having
H
TATA INDUSTRIES LTD. &ANR. v. GRASIM 513
INDUSTRIES LTD. [V.S. SIRPURKAR, J.]
~

accepted the offer made to them, subject to this prior offer A
being made to the AV Birla Group. Without prejudice to
the notices of termination dated January 31, 2005 and
February 27, 2006 issued by TIL to the AV Birla Group, TIL
and Apex are hereby making the first offer for purchase of
.... the Sale Shares to the AV Birla Group at the price and on B
the material terms and conditions mentioned above. This
Offer Notice shall remain irrevocable for a period of 45
days after the Notice Date (i.e., 45 days after the receipt
of this Offer Notice by yourselves).
On the very next day of this Offer, the non-applicant vide its c
communication dated 6.4.2006 accepted the Offer of Purchase.
However, it was specified in that reply that their acceptance of
the Offer was without prejudice to their contentions that the no-
tices of termination referred to in the said Offer Notice were not
t
.f
tenable. The applicant TIL on the very next day, i.e. 7.4.2006, D
conveyed that they would be shortly forwarding two Draft Share
Purchase Agreements for the sale of IDEA shares held by Tata
Industries Limited and Apex Investments (Mauritius) Holding
Private Limited. However, in the second para of this Notice, it
was reiterated as under: E
"We reiterate that our offer and your acceptance thereof,
is without prejudice to the notices of termination dated
January 31, 2006 and February 27, 2006 issued by us,
and your rival contentions which we have not accepted."
~ F
14. On 10.4.2006, the letter dated 7.4.2006 was replied
to. There again, it was reiterated:
"As regards our position regarding the notices of
termination, we wish to reiterate your position already
~ G
communicated."
y On 19.4.2006, by the even dated letter, the applicant reit-
erated that the non-applicant had breached the Confidentiality
Clause and that the claim of the non-applicant that the data dis-
played on the website was not confidential under the Share-
H
,.
.
514 SUPREME COURT REPORTS [2008] 10 S.C.R.
:!
A holders Agreement, is misplaced. It was asserted in para 6 of
the letter that non-applicant No. 1 was making contradictory
statements. It was lastly asserted:
"As already explained above, since the AV Birla Group is
in violation of the provisions of the Shareholders .
B Aweement, the First Notice and the Second Notice issued
-j._
.'>
by us cannot be withdrawn. Since you have. failed in
agreeing upon the narrJe of the international firm of auditors
we shall therefore proceed in accordance with the
Shareholders Agreemen·t to do the needful in connection ~
c with determining the Fair Market Value of IDEA shares."
.'Im
Again on 19.4.2C06 by the letter of even date, the appli- '
~-
cants reaffirmed the contents of Notices of Termination dated
31.1.2006 and 27.2.2006.
~
D i
15. On 24.4.2006 the Non-applicant replied to the letter }-
dated 19.4.2006 and intimated the applicants their readiness
to make full and final payment against the delivery of shares by
TIL and the Apex. On 24.4.2006 the applicants issued a notice
requesting to commence the process of consultation with re-
E spect to the dispute which had arisen between the parties and ~

which was more particularly highlighted in their earlier notices.
In that notice it was said:
"We note that vide your letters dated February 28, 2006,
)-
March 1, 2006, March 17, 2006, April 3, 2006 and April ~
F 24, 2006, you have disputed the contents of the said ~
,,
Notices and have also disputed the fact of commitment of ~
"material breaches" of Section 3.04 and 9 of the
Shareholders Agreement by you.
It is, therefore, apparent that a dispute has arisen between f=
G
us in connection with the terms of the Shareholders
Agreement." y

A further reference was given to Clause 12.04 (b) of the
Shareholders Agreement which provided for consultation and,
I-
H therefore, by the same notice the process of consultation was
TATA INDUSTRIES LTD. & ANR. v. GRASIM 515
INDUSTRIES LTD. [V.S. SIRPURKAR, J.]
~
called upon by the applicants. Lastly it was straightaway sug- A
gested that:
"In case you are not interested in exploring the process of
consultation as aforesaid, and would like to proceed with
arbitral proceedings straight away, we would be agreeable
~
to that procedure also." B

On 27.4.2006 the non-applicant responded to the appli-
cants consultation notice and asserted that there was no arbi-
tral dispute surviving between the parties and, therefore, there
was no longer a basis for arbitration regarding the issues set c
forth in the termination notices. The non-applicant also requested
the applicants to withdraw the consultation notice. It was, there-
fore, pointed out through the notice dated 5.5.2006 by the ap-
plicants that the termination of the agreement on their part was
~
made without prejudice to the pendency of the dispute and/or
0
~ arbitration proceedings and the position was clarified from time
to time. On 5.5.2006 the applicants formally served a letter by
way of formal notice for arbitration. This notice was contested
by the non-applicant by its letter dated 17.5.2006 again reiter-
ating its position that there was no arbitrable dispute surviving
between the parties. Hence on 19.5.2006, the applicants com- E
municated to the non-applicant that they had appointed their
nominee Arbitrator under Clause 12.04 (d) of the Shareholders
Agreement.

(
·~ 16. So far so good. Thereafter two share purchase agree- F
)--
ments were entered into between the applicants and the non-
applicant. There was a specific reference made to the claim of
arbitration made on behalf of the TIL in Clause (d) which runs as
under:
"In relation to the notices dated January 31, 2006 and G
February 27, 2006 issued by TIL (as a founder under the
~ Shareholders Agreement as hereinafter defined) to the
AV Birla Group, TIL has pending arbitration disputes with
the AV Birla Group, TIL has not accepted the rival
contentions of the AV Birla Group in respect of the said... H
516 SUPREME COURT REPORTS · [2008] 10 S.C.R.
.Jc

A notices nor has the AV Birla Group accepted,. Tit's claim
pending Arbitration. As such, the execution of and
'·consummation 'of the transaction contemplated by this
Agreement shall not prejudice or affect ttie pendency of
continuation of the arbitrationproceedings betWeen TIL
"j...
·s and AV Birla Group." \.--
I
t

· In Clause 2.3 if was·fu'rttier specified in this Agreement
that: · · · ·. · · ' · · . .· \
• - j ~
~
" I

"TIL for itself and Apex has·iss~edthe Termination Notices.
c The offer,made -by Tit to the AV Birla Groupa ,pursuant to
·the offer notice, was made. without prejudice Jo he said
Termination Notices, Grasim Industries Limited, as.part of
the AV Birla Group- has refuted the Termination Notices.
Further, in order to enforce the rights accrued to TIL and
Ape~ on account of the Termination Notices, TIL, for itself
D ¥-
and Apex. has pur$uant to clause 12.04(d). of the
Shareholders Agreement on May 5, 2006-issued a notice
to arbitrate to the AV airla Group. Accordingly, this
Agreement is being execL1ted without-prejudice tothe rival
· contentions of either party with reference.to the Termination
E Notices and the -legal rights w!Jich have accrued to ea~h
· party (including Apex acting through Tl Las founder:) under
the Shareholders Agreement."
In pursuance. of this an application was filed before the
Bombay High· Court-and: as has been stated earlier, the said r
F ~
application came to be withdrawn and a fresh application came
to be made before this Court for. the appointment of Arbitrator.
17. Mr.Harish N. Salve, Mr.RF. Nariman and Mr.Mukul
Rohtagi,·Senior Counsel on behalf of the applicant~ painstak-
G ingly took the court through the Shareholders Agreement-as well
as the Share Purchase Agreement The Court was· taken y
through the whole history along with necessary documents and
it was reiterated-that the appointment ofArbitral Tribunal was a
must for resolving the live issues between the parties. Learned
H counsel firstly urged that there was no dispute about there be-
TATA INDUSTRIES LTD. &ANR. v. GRASIM 517
INDUSTRIES LTD. [V.S. SIRPURKAR, J.]

ing Shareholders Agreement to which contesting entities were 'A
the parties and further that the applicants held shares in IDEA
subject to discipline of Shareholders Agreement. Learned coun-
sel thereafter relied upon the Notice dated 31.1.2006 whereby
a material breach was alleged on the part of the non-applicant,
i.e., to secure the licences which would necessarily involve busi- , B
ness in competition with IDEA. The attention of the Court was
also drawn to the second notice dated 27.2.2006 by which the
confidentiality clause was alleged to have been breached, which 1

breach was an incurable breach. Thus the applicants asserted
that under the terms of the Shareholders Agreement, the appli- c
cants were entitled to purchase the shares of the non-applicant '
in the event of the breach at a price that was heavily discounted
price, i.e., at 25% less than the market price as per clause ,
9.02(b)&(c) of the Shareholders Agreement. It was, therefore,
.. urged that the dispute had arisen which has been shown in the D
1( Termination Notices dated 31.1.2006 and 27.2.2006, which has ,
been disputed by the non-applicant's reply dated 28.2.2006 and
1.3.2006. It was, therefore, urged that such dispute clearly fell
within the Arbitration Clause.
18. It was further urged that there was a live issue between E
the parties and that there was a difference between a live issue ,
and a live claim. It was urged that whether the claim had any
merit or not was a matter which could be considered at the stage
of appointing an Arbitrator and an issue which has never been
closed or treated to have been closed remains a live issue. F
Heavy reliance was placed on the judgment of this Court re-
ported in Shree Ram Mills Ltd. v. Utility Premises (P) Ltd.
[(2007) 4 sec 599 at p. 607). It was, therefore, urged that as
per the principles laid down, the initial notices of termination
were disputed by the non-applicant; that on 27th March, 2006 ' G
an international firm of auditors was appointed by the applicants
to determine the fair value of shares; that on 5th April, 2006, the .
applicant had received an offer for selling these shares to a
third party and on that very date the applicant had raised the
dispute although the arbitration proceedings had by then not, H
518 SUPREME COURT REPORTS [2008] 10 S.C.R.

A yet commenced. It was pointed out by the learned counsel that
the non-applicant in its reply dated 28.2.2006 had very clearly
understood this position and has reiterated therein as under:
"Your Second Notice is wrongful, illegal; malafide,. non est
factum and designed to take advantage of your own
B wrongs. The Shareholders Agreement continues to subsist
under law and contract, despite the second notice. Such
notice is of no consequence under the Shareholders
Agreement or in the eyes of law. You are not entitled to
rely upon or take any advantage based upon the Second
c Notice."
Learned counsel poin!ed out that in the first notice there
was no termination of contract but it was a notice to correct the
material breach while the second notice purported to terminate
the Agreement. Learned counsel also pointed out that in the
D
reply dated 28.2.2006 there was a tacit agreement that the
'!-
Shareholders Agreement remained in existence inasmuch as
it was stated in its notice that:
Any breach by you of the provisions of the Shareholders
E Agreement relating to transfer of share~ will result in an
invalid and illegal transfer, which will not be binding on
either Idea or the Birla Group. Also, such breach will be a
material breach under Section 9.02 of the Shareholders
Agreement. Please be advised that the Birla Group is
F committed to asserting its rights in respect of any 1

attempted breach in accordance with law. Please also rl
note that any third party participating in any sale of the
shares of Idea held or controlled by the Tata Group· will
also be liable to the Birla Group. We also hereby put all
such third parties on notice of your obligations towards
G
the Birla Group, and the Birla Group's potential daims
against them for inducing the breach of the Shareholders
~
Agreement."
Learned counsel further argues that the offer which was
H made on 5th April, 2006 was a "without prejudice" offer which
TATA INDUSTRIES LTD. & ANR. v. GRASIM 519
INDUSTRIES LTD. [V.S. SIRPURKAR, J.]

was accepted by non-applicant on "without prejudice" basis on A
6th April, 2006 and therefore, when on 24th April, 2006 the non
applicant informed the applicants that they were ready to make
full and final payment on the same day, the applicants requested
to commence the process of consultation to resolve the dispute
which had arisen. Learned counsel also pointed out that sub- s
sequently when the Share Purchase Agreement was executed
on 1st June, 2006, it contained clauses which made it clear that
the disputes were being kept outside this arrangement and they
would be resolved separately and thus the live issue remained
to be alive. c
19. It was further argued that though the non-applicant had
contested the notices of termination suggesting that there was
no arbitrable issue, still an agreement was entered into on 1st
June, 2006 wherein there was clear reference to the clauses
keeping the disputes arising out of the live issues alive. Learned D
counsel relied upon the following observations made in Heyman
& Anr. v. Darwins Ltd. [(1942) 1 All ER. 337]:
"Repudiation, then, in the sense of a refusal by one of the
parties to a contract to perform his applications,
thereunder, does not of itself abrogate the contract. The E
contract is not rescinded. It obviously cannot be rescinded
by the action of one of the parties alone. Even if the so-
called repudiation is acquiesced in or accepted by the
other party, that does not end the contract. The wronged
party has still his right of action for damages under the F
contract which has been broken, and the contract provides
the measures of those damages. It is inaccurate to speak
in such cases of repudiation of the contract. The contract
stands, but one of the parties has declined to fulfil his part
of it. There has been what is called a total breach or a G
breach going to the root of the contract, and this relieves
the other party of any further obligation to perform what he ·
for his part has undertaken."
"I am accordingly of opinion that what is commonly called H
520 SUPREME COURT REPORTS [2008] 10 S.C.R.

A repudiation or total breach of a contract, whether
acquiesced in by the other party or not, does not abrogate
a contract, though it may relieve the injured party of the
duty of further fulfilling the obligations which he has by a
contract undertaken to the repudiating party. The contract
B is not put out of existence, though all further performance
of the obligations undertaken by each party in favour of
the other may cease. It survives for the purpose of
measuring the claims arising out of the breach, and the
arbitration clause survives for determining the mode. of
c their settlement. The purpose of the contract have failed,
but the. arbitration clause is not one of the purposes of the
contract."
Similarly other observations by House of Lords reported
in the above case were also heavily relied upon to the effect:
D
"To say that the contract is rescinded or has come to an
end or ceased to exit may in individual cases convey the
truth with sufficient accuracy, but the fuller expression that
the injured party is thereby absolved from future
performance of his obligations under the contract is a
E more exact description of the position. Strictly speaking,
to say that, upon acceptance of the renunciation of a
contract, the contract is rescinded is incorrect. In such a
case the injured party may accept the renunciation as a
breach going to the root of the whole of the consideration.
F By that acceptance he is discharged from further
performance and may bring an action for damages, but
the contract itself is not rescinded.
The injured party may therefore rely upon the contract and
apply to have the action stayed if he desires to do so."
G
"The same observations as apply to accepted repudiation
apply, I think to frustration. The phrase 'frustration of the
contract' is as inaccurate in expression as is the phrase
'rescission of the contract by repudiation'. The contract is
H not frustrated. Its future performance or the adventure is
TATA INDUSTRIES LTD. & ANR. v. GRASIM 521
INDUSTRIES LTD. [V.S. SIRPURKAR, J.]
~
frustrated. The damages are still at large and so is the A
question whether, having regard to the terms of the contract
express or implied, there has been frustration or not. This
appears to have been recognized in Scott & Sons v. Del
Se/ {(1923) S. C. (H.L.) 37) which though a Scottish case
...,.. was decided on the same principles as apply in English B
~
law, and is binding upon your Lordships' House. So far as
the case of Hirji Mulji [(1926) AC 497); which is not binding,
lays down a different principle, I do not think it should be
followed, despite the authority which is undoubtedly
-.... possesses." c
Shortly stated the claim of the applicants is for the profits
they had become entitled tO by the breach of confidentiality
clause on the part of the non-applicant which profit was on ac-
count of applicant's entitlement to purchase the shares of non-
applicant at the rate 25% less than the market price. Its reitera- D
tion is that though subsequently it agreed to sell all its shares to
the non-applicant on 'account of the offer having been made to it
by Global Com'munication Services and though subsequently
the Share. Purchase Agreement dated 1.6.2006 was executed
between the applicants and the non-applicant, since the said E
agreement was subject to the disputes raised earlier and with-
out prejudice to its rights it could still lay its hand on its claim.
20. As against this Shri K.K. Venugopal, Dr. Abhishek Manu
Singhvi and Shri Shyam Diwan, learned senior counsel for the
...• Non-applicant opposed the appointment of Arbitral Tribunal on F
various grounds and basically on the ground that there was no
live issue remaining pending between the parties. The major
contention is that by Share Purchase Agreement, the applicants
had. made an exit from the company and, therefore, they were
left with no rights under the Shareholders Agreement. A very G
heavy relicuice was placed by Shri Venugopal on Clauses 7.01
\. (a) and (b) which are as under:

'7.01 (a) For a :founder to exercise its rigl:lts under this
Agreement, the Founder must hold 15% of the .issued,
H'
522 SUPREME COURT REPORTS [2008] 10 S.C.R.
~k

A subscribed and paid up Equity Capital (the "Threshold ?
Limit").
(b) Should the shareholding of any Founder fall below the
Threshold Limit;
i) Such Founder shall not be entitled to exercise any "f--
B
rights under this Agreement;
ii) Such Founder shall comply with all obligations set
forth in this Agreement;

c iii) Such Founder shall act in accordance with the
instructions of the other founders;
iv) · any disposal by such Founder of any shares held by
it shall be in accordance with Article X."
Heavily relying on this clause, the learned Senior Counsel
D
argued that once by a Share Purchase Agreement, the appli-
cants agreed to sell their shares to the non-applicant and due
to such act once the shareholding of the applicants fell below
15%, it had no right to assert more particularly under the Share-
holders Agreement. Learned counsel argues that there were
E
two options to the applicants when they received an offer from
Global Communications Services, a third party, for the sale of
their shares if the applicant had accepted the offer. First option
was to sell the entire shareholding to Global Communications
and exit IDEA in which case the non-applicant could also choose I
F to sell its entire shareholding in IDEA to Global Communica- ,...(

tions by giving a Special Disposal Notice and once the Tata
Group allowed the Birla Group to sell all its shares to Global
Communications, it could no longer require the Birla Group to
then sell the same shares to the Tata Group for the reason that
G Birla· Group would no longer have those shares. The second
option, according to the learned counsel was to sell the entire ..,<.
shareholding in IDEA to the non-applicant and exit IDEA. Ac-
cording to the learned counsel in both these cases on accep-
tance of the offer by the applicants from Global Communica-
H tions, there would be an inevitable result of voluntary efface-
TATA INDUSTRIES LTD. & ANR. v. GRASIM 523
INDUSTRIES LTD. [V.S. S!RPURKAR, J.]

ment of all rights that the applicants claim on the Birla Group A

- shareholding in IDEA. It was pointed out that the applicants
had accepted this offer from the Global Communications much
before it attempted to reserve any rights against the non-appli-
cant and, therefore, had irrevocably elected to exit IDEA, elect-
ing for second option. It was, therefore, urged that there was a B
concluded contract between Global Communications and the
applicants even before a letter dated 5.4.2006 was sent by the
applicants to Birla Group to purchase their shareholding in IDEA
and hence the applicants had elected to exit IDEA themselves.
In support of this proposition, the learned counsel relied on three c
cases:
(i) Sargent and ASL Developments Limited, reported
at (1974) 4 Australian Law Reports (A.L.R.) 257.
(ii) Jai Narain Parasrampuria (Dead) and others Vs. D
Pushpa Devi Saraf and others, reported at 2006
7 sec 756.
(iii) National Insurance Company Limited Vs. Mastan
and another, reported at 2006 2 sec 641.
21. In short, it was contended that by accepting the offer of . E
Global Communications the claim made by the applicants un-
der Termination Notices for purchase of Birla Group
share~olding i[l IDEA at a defaulting price got necessarily ef-
faced with the subsequent option given in the offer notice to
1 Birla Group to sell their entire shareholding to Global Commu- F
nications. It was further urged that with the offer of sale to Global
Communications, the applicants recognized and acquiesced
that the Birla Group's shareholding in IDEA was not subject to
any encumbrance or reservations and the applicants, therefore,
necessarily abandoned all purported claims for the purchase of G
Birla Group's shareholding and there was nothing left with the
applicants to reserve in the offer notice or any documents ex-
ecuted thereafter. It is pointed out that the Agreement to Sell to
Global Communications took place without any notice to the
Birla Group and contrary to the alleged right of applicants to H
524 SUPREME COURT REPORTS [2008] 10 S.C.R.

A buy out Birla Group and remain invested in IDEA with increa·sed
shareholding, the applicants themselves exited IDEA by selling
.their sha·res to Birla Group companies and thereby reducing ....
\
the Tata Group's shareholding in IDEA to Nil. It is accordingly
suggested that as a result all rights of Tata Group pursuant lo
B Termination Notices were effaced and there was no arbitrable ~
dispute surviving between the parties. It is pointed out that there
was no claim for damages in the Termination Notice and in fact
such ·a claim was not even possible because it was excluded
by the decision to seek a buy out under Section 9.02 of the
c Shareholders Agreement. It was then stated that the claim by
the applicants was frivolous and unsustainable because of the
)

alleged loss of an opportunity to buy out Birla Group's
'
shareholding in IDEA was not caused by any breach of contract
by any B.irla Group company but it was by applicants' own vol-
untary decision to exit the company and thereby lost the right to .;
D
acquire Birla Group's shareholding in IDEA. It is-pointed that "r
the purported rights of the applicants under the Termination
Notice is not possible in law also particularly because the Tata
Group's electi.on to exit IDEA and to let Birla Group remain in-
vested in I.DEA and as such all their claims were erased.
E Learned counsel also relied on Clause 7.01 (b)(i) of the Share-
holders Agreement which is as under:
i) Such Founder shall not be entitled to exercise. any
rights under this Agreement;
~
F It was suggested that even if the Arbitration clause remains ·~
inspite of the termination of the Shareholders Agreement, be-
cause of the above mentioned clause, there is complete bar
created on the exercise by the applicants of the substantive right
to seek a buy out. A live procedural mechanism of dispute reso-
G lutions through arbitration cannot be set in motion to enforce a
dead claim and, therefore, there would be no question of start~
~
ing an arbitration proceeding.
22. As fo what should be the approach of the Court in ·an
application under Section 1l (6) was explained by this Court in
H
""""
TATA INDUSTRIES LTD. & ANR. v. GRASIM 525
INDUSTRIES LTD. [V.S. SIRPURKAR, J.]
~

SBP Co. Vs. Patel Engineering Ltd. and Another reported in A
2005 8 SCC 618. This was a decision to resolve as to whether
the Chief Justice of India or his nominee, while dealing with the
matters under Section 11 (6) acts in his administrative capacity
or his judicial capacity. The Court ultimately, held that the Chief
"*' Justice of India acts in his judicial capacity. Hon. P.K.
Balasubramanyan, J., who authored the judgment on behalf of
a
the majority, in his conclusions, pointed out clearly in point iv
(points i, ii and iii not relevant) that:-
"(iv) The Chief Justice or the designated Judge will have
the right to decide the preliminary aspects as c
indicated in the earlier part of this judgment. These
will be his own jurisdiction to entertain the request,
the existence of a valid arbitration agreement, the
existence or otherwise of a live claim, the existence
''( of the condition for the exercise of his power and on D
the qualifications of the arbitrator or arbitrators
........................... "
The law, thus, stands crystalised by this judgment indicat-
ing the exact scope of the Judge in dealing with an application
under Section 11 (6) of the Act. The judgment was thereafter E
considered in number of cases. In Shree Ram Mills Ltd. Vs.
Utility Premises (P) Ltd. reported in 2007 4 SCC 599, it was
observed relying on observations made in paragraph 39 of SBP
i Co. Vs. Patel Engineering Ltd. and Another reported in 2005
,l F
8 sec 618 (cited supra):
"A glance on this para would suggest the scope of the
order under Section 11 to be passed by the Chief Justice
or his designate. Insofar as the issues regarding territorial
jurisdiction and the existence of the arbitration agreement
G
are concerned, the Chief Justice or his designate has to
decide those issues because otherwise the arbitration
can never proceed. Thus, the Chief Justice has to decide
about the territorial jurisdiction and also whether there
exists an arbitration agreement between the parties and
H
,(

526 SUPREME COURT REPORTS [2008] 10 S.C.R.
~

A whether such party has approached the court for
appointment of the arbitrator. The Chief Justice has to
examine as to whether the claim is a dead one qr in the .
sense .whether the parties have already concluded the
transaction and have recorded satisfaction of their mutual
"!-
B rights and obligations or whether the parties concerned
have recorded their satisfaction regarding the financial
claims. In examining this if the parties have recorded their
satisfaction regarding the financial claims, there will be no
· question of any issue remaining. It is in this sense that the
c Chief Justice has to examine as to whether there remains
anything to be decided between the parties in respect of
the agreement and whether the parties are still at issue on
any such matter. If the chief Justice does not, in the strict
sense, decide the issue, in that event it is for him to locate
1
such issue and record his satisfaction that such issue }'
D
exists between the parties. It is only in that sense that the
finding on a live issue is given. Even at the cost of repetition
we must state that it is only for the purpose of finding out
whether the arbitral procedure has to be started that the
Chief Justice has to record satisfaction that there remains
E a live issue in between the parties ........ "
"It is for this reason that it was pointed out in the above
para that it would be appropriate sometimes to leave the
question regarding the live claim to be decided by the
Arbitral Tribunal. All that he has to do is to record his -l
F
satisfaction that the parties have not closed their rights
and the matter has not been barred by limitation."
In the wake of above decision, it will be now necessary to
see whether a live claim or a live issue exists in between
G the parties.
~
23. As has already been clarified in the earlier part of the
judgment that there is jurisdiction in this Court to decide the
application, secondly, there is arbitration agreement between
the parties, and thirdly, the claim is not barred by limitation, the
H
TATA INDUSTRIES LTD. &ANR. v. GRASIM 527
INDUSTRIES LTD. [V.S. SIRPURKAR, J.]

only issue which has to be decided is whether there is a live A
issue in the sense as to whether the parties have already con-
cluded or recorded their satisfaction regarding the issues or
whether the parties are still in contest regarding certain issues.
24. In the backdrop of what has been asserted by the ap-
-i- plicant and the stands taken by the non-applicant, it would be B
first better to note certain dates, which are of extreme impor-
tance. It will be seen there as below:
15.12.2000: A Shareholders Agreement (SHA) came into
effect between AT&T Group, Birla Group and c
Tata Group.
9.11.2005: The name of AT&T Cellular Pvt. Ltd., Mauritius
was changed to Mis. Apex Investments
(Mauritius) Holding Private Limited (APEX).
D
31.1.2006: The first termination notice was served by the
applicant on the non-applicant, alleging breach
of Shareholders Agreement on account of the
non-applicant Company having applied for
Unified Access Service Licenses (UAS
Licenses), enabling license holder to provide E
any kind of telecommunication service for
Mumbai Metro circle and thereby committing
breach of Article 3.04 (b) of the Shareholders
Agreement and asking the non-applicant to
remedy the breach within 60 days. F
27.2.2006: A second termination notice was sent by the
applicant to the non-applicant claiming that
there was a breach of confidentiality clause
committed by the non-applicant and since this G
breach was incapable of being cured, the
applicant demanded to purchase the
shareholding of the Birla Group within 90 days
of the said notice at a default price.
28.2.2006: The non-applicant disputed the first termination H
528 SUPREME COURT REPORTS 0[2008) 10 S.C.R.

A notice dated 3.1.1.2006, while on 1.3.2006, the
non-applicant replied to the second termination
notice dated 27.2.2006.
16.3.2006: The applicants reiterated both the termination
notices.
B
17.3~2006: The non-applicant wrote a letter observing
therein:
" ..... Based upon your above-referenced two
letters, we conclude the Shareholders
c Agreement continued to remain valid,
subsisting and enforceable."
27.3:2006: The applicants reiterated the second notice of
termination insisting that they were entitled to
acquire. shares and shown their readiness to
D
appoint international firm of auditors to
determine the fair market value of the shares to
be purchased by them.
3.4.2006:- The non~applicant refused the claim once again.
.E
5.4.2006: The applicant received the offer from Global
Communication Services for purchasing its
stake in IDEA and hence, it makes offer for the
sale of its shareholding under clause 10.06 to
·the non-applicant. This offer notice was
F expressly "without prejudice" to both the .~
termination noti~es.
6.4,2006: This offer was accepted by the non-applicant.
· However, it was clarified that the acceptance of
G this offer was without prejudice to the contention
that the notices of termination were not tenable.
7:4.2006: . The applicant sent the letter stating therein that ~
it would be shortly forwarding two Draft Share
Pµrchase Agreement for the sale of IDEA
H shares held by it and Mis. Apex Investments
I

TATA INDUSTRIES LTD. & ANR. v. GRASIM 529
...._ INDUSTRIES LTD. [V.S. SIRPURKAR, J.]

(Mauritius) Holding Private Limited. There was A
again a reiteration that the offer made by it and
the acceptance thereof was without prejudice
to the termination notices dt. 31.1.2006 and
27.2.2006.
--*' B
10.4.2006: . The non-applicant submitted the particulars of
the Birla Group Companies, which would be
purchasing the shares of the applicant and M/
s. Apex Investments (Mauritius) Holding Private
Limited under the two Share Purchase
Agreements with the percentage of shares to c
be purchased by such companies.
19.4.2006: The applicant reaffirmed its termination notices
dt. 31.1.2006 and 27.2.2006 and also informed
~ that it would proceed to appoint an international
D
i firm of auditors for determining the fair market
value of IDEA shares.
24.4.2006: The non-applicant replied and informed that they
were ready to make full and final payment
against the delivery of shares held by TIL and E
Mis. Apex Investments (Mauritius) Holding
Private Limited in IDEA Cellular Ltd.
24.4.2006: The applicant made a request to commence the
'I process of consultation with respect to disputes
~ which have arisen between the parties on F
account of breach of Shareholders Agreement.
27.4.2006: A letter was sent by the non-applicant that in
view of the agreement between the parties for
purchase of the shares of applicant by the non-
G
applicant and the further stands having been
taken by the parties, there was no arbitrable
dispute survived between the parties and
reque·sted the applicants to withdraw the
consultation notice.
H
530 SUPREME COURT REPORTS [2008] 10 S.C.R.

A 5.5.2006: A formal notice was issued for arbitration.
17.5.2006: The non-applicant reiterated that there was no
arbitrable dispute survived.
19.5.2006: The applicant conveyed the appointment of ,;·
.B nominee arbitrator under Clause 12.04(d) .
1.6.2006: Two formal Share Purchase Agreements came
into existence. A clause 2(0) was inserted:
"2(D)-ln relation to the notices dated January
31, 2006 and February 27, 2006 issued by TIL
c (as a founder under the Shareholders
Agreement as hereinafter defined) to the A.V.
Birla Group, TIL has pending arbitration
disputes with the AV Birla Group, TIL has not
accepted the rival contentions of the AV Birla
D Group in respect of the said notices nor has the f •

AV Birla Group accepted, TIL's claims pending r-
arbitration. As such, the execution of and •
I

l
consummation of the transaction contemplated· i

by this Agreement shall not prejudice or affect
E the pendency or continuation of the arbitration
proceeding between TIL and the AV Birla
Group."
Another Clause 2.3 was inserted:
"2.3 TIL, for itself and Apex has issued the
F
Termination Notices. The offer made by TIL to I
'
the AV Birla Group pursuant to the Offer Notice, ~

was made without prejudice to the said
Termination Notices, Grasim Industries Limited,
as part of the AV Birla Group has refuted the
G Termination Notices. Further, in order to enforce
the rights accrued to TIL and Apex on account
of the Termination Notices, TIL, for itself and
Apex has pursuant to clause 12.04(d) of the
Shareholders Agreement on May 5, 2006
H issued a notice to arbitrate to the AV Birla Group.
TATA INDUSTRIES LTD. & ANR. v. GRASIM 531
INDUSTRIES LTD. [V.S. SIRPURKAR, J.]

Accordingly, this Agreement is being executed A
without prejudice to the rival contentions of
either party with reference to the Termination
Notices and the legal rights which have accrued
to each party (including Apex acting through TIL
as founder) under the Shareholders
8
Agreement."
25. A glance on these dates would clearly suggest that the
first salvo was fired by the applicant when it first sent the notice
dated 31.1.2006. In this way, the only complaint made was that
ABTL, which was a subsidiary of ABNL, had made an applica- C
tion on 3.1.2006 to the Department of Telecommunication for
grant of Unified Access Services License (UASL) for Mumbai
Metro circle. It was complained that this amounted to the breach
of clause 3.04(b) of the Shareholders Agreement as the Aditya
Birla Group could not be permitted to engage in, directly or in-
0
directly through an Affiliate, (i) any activity that would constitute
the Business of the IDEA Cellular Ltd. without complying with
the provisions of Clause 3.04(b). Noticee then was to remedy
the breach within 60 .days as per the Shareholders Agreement.
It is only to that extent that the dispute arose.
E
It would be remembered that there is a provision in the
Shareholders Agreement, by which even if the breach is com-
mitted by one party, the other party could ask for remedying the
same within 60 days. This was not a termination of the Agree-
ment. However, the second salvo came to be fired on 27.2.2006,
which was on account of the breach of the Confidentiality clause. F
A position was taken that this breach was not such as could be
remedied and on that account, the applicants claimed all the
shareholding of Birla Group at the price, which would be 25%
less than the fair market price of the shares. In the subsequent
correspondences, they also offered to appoint a firm of Char- G
tered Accountants for assessing the fair market value of the
shares.

26. The non-applicant was not to be left behind in disput-
ing this claim by its reply dated 1.3.2006. In this reply, it was
H

-,
/

532 SUPREME COURT REPORTS [2008] 10 S.C.R.

~-
A suggested that the termination notice was only by way of a
counter action to the Birla Group's recent letters to the Depart-
ment of Telecommunications, Ministry of Communication and
Information & Technology (DoT), complaining against Tata .
Group's continuing breach of the relevant telecom licenses. It ;

B was thereafter denied that the investor presentations made by 'j-
ABNL, and the further presentation dated 12.9.2005 posted on
the website of ABNL could constitute a breach on the part of .
l
Birla Group of the restrictions.contained in Section 8.01 of the I
Shareholders Agreement. -It was further reiterated that the said !-
presentation could not be deemed to be confidential under the
c Shareholders Agreement, and that information conveyed in
those presentations was not confidential information at all. A
further stand was taken that since ABNL was a publicly listed
company, any consolidated accounts prepared by ABNL had to
be disclosed to the investors, which was consistent with its dis- t
D closure obligations and a good corporate governance practice, 'I

and that the Tata Group was fully aware that ABNL would be ,t-
disclosing such information to the investors and the analysts. It
was further reiterated that .since the information was received
from IDEA regarding consolidation and disclosure, such infor-
E mation was used for that purpose and there was no impropriety
or breach of Shareholders Agreement by these disclosures, and
that information was not at all confidential. An allegation was
made that the Tata Group was trying to sell its shares to the
third party and that it could not do so unless the obligations in
favour of Birla Group, as contemplated in the Shareholders
F Agr~ement, were not met. --'..

27. In short, till this reply was given, the only defense that
was raised by the non-applicant was that there was no breach
of the Confidentiality clause, as the information itself was not
G confidential. There was probably an inkling to the non-appli-
cant that the Tata Group was interested in disposing of its
shareholding in favour of some third party and, therefore, it
¥
merely asserted it rights in case such sale to the third party of
the shareholding materializes. Therefore, at least up to this date,
there was a live issue as to whether there had been a breach of
H
TATA INDUSTRIES LTD. & ANR. v. GRASIM 533
INDUSTRIES LTD. [V.S. SIRPURKAR, J.]
_.,._
Confidentiality clause on the part of the non-applicant. A
28. However, that is not where the things stopped as merely
a few weeks thereafter, the applicants having received the offer
from Global Communication Services, offered their own
shareholding to the non-applicant on 5.4.2006, reiterating
~ therein, that this offer was without prejudice to the dispute which B
has arisen between the parties. The offer so made, was ac-
cepted by the non-applicant, however, with a caveat in the fol-
lowing words:
"This is without prejudice to our contentions that the notices
of termination referred to in the said Offer Notice, are not
c
tenable."
Therefore, even at this point of time, when the offer was
accepted, the issue was very much there as to whether there
was a breach of Confidentiality clause on the part of the non-
• applicant. On 7.4.2006, the applicants offered to send two Draft
D
~
Share Purchase Agreements for the sale and again reiterated
that the offer and the acceptance by the non-applicant was with-
out prejudice to the notices of termination dated 31.1.2006 and
27.2.2006. On 10.4.2006, again the non-applicant wrote back
giving the details regarding the shares and the percentages, 6
where again they disputed the question of termination. There
was a further reiteration on 19.4.2006, of its stand, in details,
and it was specifically reiterated in the letter dated 19.4.2006:
"As already explained above, since the AV Birla Group is
..
;... in violation of the provisions of the Shareholders
F'
Agreement, the First Notice and the Second Notice issued
by us cannot be withdrawn. Since you have failed in
agreeing upon the name of the international firm of auditors
we shall therefore proceed in accordance with the
Shareholders Agreement to do the needful in connection G
with determining the Fair Market Value of Idea Shares."
By their letter dated 24.4.2006, the applicants again
showed their readiness to purchase the shares. However, the
earlier position was reiterated by them to the effect that the stand
H
.,

r-
\.--

534 SUPREME COURT REPORTS [2008] 10 S.C.R

A taken by Tata Group was not correct. On 24.4.2006, the appli-
cants clearly reiterated that a dispute had arisen between the
*
applicants and the non-applicant in connection with the terms
of Shareholders Agreement and that for that purpose, they were
ready to start the process of consolidation as an initial step. It
B was also conveyed that in case the non-applicant was not inter-
ested in process of consolidation, the applicants would_ like to "'f-
proceed with the arbitral proceedin_gs straight away. Lastly, the
non-applitant wrote a letter dated 27.4.2006 in which for the
first time, the position was taken that the Agreement which was
. concluded between the parties consequent to the offer notice
c and acceptance notice, and the further steps·taken by both would
be that there was no arbitrable dispute surviving pursuant to the
notices. ,..
29. ·It is here for the first time, that a .stand was shifted by
the non-applicant from its earlier stand. Earlier, the contention
D •
was that there was no breach of Confidentiality clause. The
}-
shifted stand was that because of the subsequent Agreement,
the earlier issue was already obliterated. It is on this background
that ultimately the formal Agreements dated 1.6.2006 came to
be entered into by the parties. But before that, a notice for the
E Arbitration was already issued by the applicants by their letter
dated 5.5.2006. Even on this backdrop, .the only position taken
by the non-applicant by its letter dated 17 :5.2006 was that .Tata
Group was estopped from asserting its alleged claims against
the Birla Group. In view of the election made by Tata Group by
F giving the offer notice dated 5.4.2006 to the Birla Group and
the acceptance by Birla Group dated 6.4.2006. Therefore, it ~

was concluded that there was no arbitrable dispute surviving
and yet in the Agreement dated 1.6.2006, the non-applicant
again allowed to insert the clauses regarding the Agreements
being without prejudice to the earlier rights. In fact, if the stand
G
taken was that there was no arbitrable issue because the offer
concluded sale, there was no question of any such "without preju-
dice" clause being inserted in the Agreement dated 1.6.2006. >(
It must be remembered that on the date when the formal Agree-
ments were signed on 1.6.2006, the non-applicant was already
H
-'.i

TATA INDUSTRIES LTD. & ANR. v. GRASIM 535
INDUSTRIES LTD. [VS. SIRPURKAR, J.]

facing an arbitral notice and yet the two clauses, viz., 2(D) and A
2.3 (which we have mentioned earlier in this judgment), came
to be inserted. All this would suggest that there indeed was an
issue and a live one in between the parties till then as described
in (See Chairman and MD, NTPC Ltd. Vs. Reshmi Construe-
~
tions, Builders & Contractors reported in 2004 2 SCC 663 8
(Paras 35 and 36).
30. On the other hand, Shri Venugopal, learned counsel
invited my ·attention to a decision of High Court of Australia in
Sargent and ASL Developments Limited, reported at (197 4)
4Australian Law Reports (A.L.R.) 257 (cited supra). The deci- c
sion of the Australian High Court is on the question of Doctrine
of election. In my opinion, the decision is not applicable to the
present controversy as there was no question of election on the
.. part of the applicant herein. It is merely basing its claim on ac-
count of the alleged clear breach of Shareholders Agreement
~ D
in respect of the Confidentiality clause. Even the second deci-
sion in Jai Narain Parasrampuria (Dead) and others Vs. Pushpa
Devi Saraf and others, reported in 2006 7 sec 756(cited SU-
pra) has no application. That is a case where this Court ex-
plained the principles of estoppel and waiver and whether a
party could be permitted to take a different stand and the duty E
of the court in such matters. No such questions arise in the
present matter. The third decision in National Insurance Com-
pany Limited Vs. Mastan and another, reported in 2006 2 SCC
... 641, is again on the question of Doctrine of election, where this
)
Court has observed that the Doctrine of election postulates that F
when two remedies are available for the same relief, the ag-
grieved party has an option to elect either of them, but not both.
The fact situation is not like that in the present case. This case,
therefore, has no application.
31. The other major limb of the argument was, however, G
..., that this issue could not arise and became a dead issue at least
after the applicants sold out all their shares and their
shareholding fell below 15%. The aforementioned clause on
which Shri Venugopal, Dr. Singhvi and Shri Shyam Diwan, Ad-
vacates for the non-applicant heavily relied, being clause No. H
536 SUPREME COURT REPORTS [2008] 10 S.C.R.

A 7.01(a) and 7.01(b), as also 7.02 (b) provided that in case the
shareholding falls below 15%, and in this case it has actually
fallen below 15%, such party would not have any rights left with
it under the Agreement (Shareholders Agreement}. The argu-
ment is obviously incorrect, as the Arbitration Agreement under
8 clause 12.04 would be clearly autonomous of the Shareholders
Agreement. Law is settled on this point that even if the whole
Agreement is terminated, the Arbitration Agreement would still
remain (See Chairman and MD, NTPC Ltd. Vs. Reshmi Con-
structions, Builders & Contractors reported in 2004 2 SCC 663
(Para 39). It was argued that clause 7.01 (b) operates as a com-
e plete bar on the exercise by t_he applicants of the substantive
right to seek a buy-out. That may be so, however, that is only an
eventuality subsequent to the crystalisation of the live issue be-
tween the parties for which the arbitration clause would come
handy to the applicants.
D
32. The learned counsels for the non-applicant very vehe-
mently argued that the issue had become dead. The issue can-
not be held to be dead for the simple reason that even in the
subsequentAgreements (Shares Purchase Agreements), there
is a "without prejudice" clause and that too despite the vehe-
E ment claims and refusals of those claims on the part of the par-
ties.
33. Whether there was a breach of Confidentiality clause
and whether the applicants were entitled to any damages on
account of that clause in favour of the applicants, would be a
F matter in the helm of arbitration and this Court would not go into
that question.
34. It was tried to be argued that the cause of action for
the arbitration was based entirely on the offer notice, which was
G given by the :applicants to the non-applicant on account of the
applicants having received the offer from Global Communica-
tion Services. It is, therefore, argued by the learned counsel that
since the cause of action was on the offer notice and since the
Share Purchase Agreements were concluded on account of that
offer notice, any disputes arising would be solved in accordance
H
TATA INDUSTRIES LTD. &ANR. v. GRASIM 537
.....,_ INDUSTRIES LTD. [VS. SIRPURKAR, J.]

with the Share Purchase Agreement and not with the Share- A
holders Agreement and, therefore, they would be resolved un-
der English Law and LC IA Arbitration Rules. These clauses are
to be found at pages 286-288 as also on pages 328-332 of th~
main Paper Book vide clauses 9.1, 9.4 and 9.5 in the FirstAgree-r
~ ment dated 31.1.2006, as also 9.2.1 to 9.2.5 on pages 330. B
and 331 of the main Paper Book.
35. The contention is clearly incorrect, as the present dis-
pute is not based on the notice of offer dated 5.4.2006. The
contention raised by the learned counsels that the cause of ac-
tion arose only from that notice, is obviously incorrect, as has c
been shown in the earlier parts of the judgment. The live issue
was clearly there, much before the notice was given on 05-04-
2006 and the second agreement was even contemplated. That
was the issue whether there was a breach of Confidentiality
;,,
clause on the part of the non-applicant and what are the effects
~ D
thereof. That issue continued to be in existence and was never
given up by the applicants. Therefore, that contention is rejected.
36. By way of last argument, it was argued that M/s. Apex
Investments (Mauritius) Holding Private Limited was never a
party to the Shareholders Agreement. It was suggested that M/
f=
s. Apex Investments (Mauritius) Holding Private Limited was
originally a member of theAT&T Wireless Group and held 32.9%
shares in IDEA. It was then known as AT&T Cellular Pvt. Ltd. It
was then argued that it was required under Article 4.01 (a) of the
'"'
,.4
Shareholders Agreement to execute a Deed of Adherence as
provided in "Annex C" to the Shareholders Agreement in order· F
to (i) designate AT&T Inc. as its representative to exercise all
rights and perform all obligations under the Shareholders Agree-
ment; (ii) agree to be bound by all the provisions of the Share-
holders Agreement; (iii) agree not to revoke the designation of
the representative without prior written consent of the AV Birla G
Group and the Tata Group. It was also required that the counter-
part of the executed Deed of Adherence should have been de-
livered to Grasim Industries Ltd. and TIL. It was then pointed
out that after TIL acquired AT&T Cellular Pvt. Ltd. itself which
held the remaining 16.45% shares in IDEA, M/s. Apex Invest- H
\

538 SUPREME COURT REPORTS [2008] 10 S.'c. R.

A ments (Mauritius) Holding Private Limited became a wholly
owned subsidiary of TIL. It was then pointed out that on
28.09.2005, AT&T Cellular Pvt. Ltd., New Cingular Wireless
Service Inc. (successor-in-interest to AT&T Inc.) entered into a
Sale and Purchase Agreement with Indian Rayon and lndus-
B tries Ltd. (now called ABNL), whereby the Shareholders Agree-
ment was specifically terminated as between the Birla Group
and the AT&T Wireless Group and all pre-existing rights/liabili-
ties, if any, were specifically extinguished and waived. So also
on the same date, the AT&T Wireless Group (of which AT&T
Cellular Pvt. Ltd. was a part), executed a similar Sale and Pur-
e chase Agreement with the Tata Group, whereby the Sharehold-
ers Agreement was terminated between the Tata Group and
the AT&T Wireless Group, and thus the Apex Investments
(Mauritius) Holding Private Limited (which is a fall out from the
AT&T Cellular Pvt. Ltd.) had terminated the ShareholdersAgree-
0 ment and extinguishec;tand waived all accrued rights and obli-
gations against the Birla Group and, therefore, Apex Investments
(Mauritius) Holding Private Limited ceases to be a party to the
Shareholders Agreement and to any arbitration clause con-
tained therein. Apex Investments (Mauritius) Holding Private
E Limited, therefore, could no longer have any claim for arbitra-
tion or assert any rights or liabilities under the Shareholders
Agreement. It was further pointed out that on 15.12.2000, when
the Shareholders Agreement was executed, there were only
three parties, viz., (i) AT&T Inc., which was acting on behalf of
itself and AT&T Wireless Group; (ii) Grasim, acting on behalf of
F itself and the Birla Group (iii) TIL, acting on behalf of itself and
the Tata Group. The argument, therefore, is that since Apex
Investments (Mauritius) Holding Private Limited was not a party
then, there could be no privity of contract between Apex Invest-
ments (Mauritius) Holding Private Limited and the non-appli-
G cant Birla Group. It was pointed out that since the modality
drafted by clause 4.02 of Shareholders Agreement was not fol-
lowed, Apex Investments (Mauritius) Holding Private Limited
could not join the Shareholders Agreement and as such, Apex
Investments (Mauritius) Holding Private Limited not being a party
H to the Shareholders Agreement, it cannot demand an arbitra-
TATA INDUSTRIES LTD. & ANR. v. GRASIM 539
INDUSTRIES LTD. [V.S. SIRPURKAR, J.]

tion through the arbitration clause. This argument is obviously A
incorrect for the following reasons:

..
~~·
(i) It must be seen that after the offer was received from
Global Communications, both TIL on its behalf and
on behalf of the Apex Investments (Mauritius) Holding
Private Limited, offered to sell their entire B
shareholding in IDEA in terms of the right of first
refusal, which offer has been accepted by the non-
applicant.
(ii) Apex Investments (Mauritius) Holding Private Limited C
is now a part and parcel of the Tata Group and is its
subsidiary. Further, its interests are bound to be
affected.
(iii) In raising this issue, the non-applicant is making a
complete volte face, inasmuch as, when the D
application had been filed before the Bombay High
Court, an objection was taken by the non-applicant
that Apex Investments (Mauritius) Holding Private
Limited being a foreign company and claiming an
arbitration along with Tata Group, the Bombay High
Court had no jurisdiction to entertain the application E
under Section 11 (6). It was in pursuance of that
objection only that the Bombay High Court did not
proceed further to decide the application under
Section 11 (6). The learned counsel argues that this
objection regarding the Apex Investments (Mauritius) F
Holding Private Limited being foreign party, arose
on the face of it, but the merits of the case did not fall
for consideration in Bombay High Court.and as such
the issue of Apex Investments (Mauritius) Holding
Private Ltd. not being a party to shareholder G
agreement can still be raised. The contention is not
correct. The non-applicant having raised an objection
on the ground that the applicant Apex Investments
(Mauritius) Holding Private Limited was a foreign
company, and, therefore, could not have filed an
H
540 SUPREME COURT REPORTS [2008] 10 S.C.R.

A application before Bombay High Court, cannot now
turn around and say that Apex Investments (Mauritius)
Holding Private Limited was not a party to the
Arbitration Agreement. That will not be permissible.
The learned counsel points out that this objection
B was raised without prejudice, would also be of no
consequence, as having succeeded in stalling the
decision of the application under Section 11 (6), it
cannot now raise the argument before this Court that
Apex Investments (Mauritius) Holding Private Limited
was never a party. This argument should have been
c addressed to the Bombay High Court, at least in the
alternative form. If in the affidavit before the Bombay
High Court filed on their behalf of the non-applicant
had raised the issue and still chose not to go into the
issue whether Apex Investments (Mauritius) Holding
D Private Limited was or was not a party to the
Shareholders Agreement, that will not be permitted
to be raised before this Court. In fact, in restricting
to the jurisdictional issue and in not perusing the
issue of Apex Investments (Mauritius) Holding Private
E Limited not being a party to the Shareholders
Agreement before Bombay High Court, the non-
applicant abandoned that issue. The argument is,
therefore, rejected.
37. Ultimately, considering the overall situation, it is held
F that the application under Section 11 (6) is liable to be allowed ..
In that view, the following order is passed:
Hon'ble Dr. Justice A.S. Anand, former Chief Justice of
India, Hon'ble Mr. Justice Arun Kumar and Hon'ble Mr. Justice
P.K. Balasubramanyan, former Judges of the Supreme Court
G of India are appointed as the Arbitrators. Their terms shall be
decided by themselves.
R.P. Application allowed.

H