Raffles Education Investment (India) Pte Ltd v. Educomp Professional Education Limited

528. The Respondents are to pay the Claimants SGD 750,000.00 and USD 550,000.00 for their legal costs and expenses of this Arbitration, together with simple interest from the date of this Final Award until payment at 5.33%.

529. The Respondents are to bear the costs of the Tribunal, the Emergency Arbitrator and of SIAC in the amount of SGD 372,672.10 as determined by the Registrar. Any sum payable by the Respondents to the Claimants as a result of the Registrar's determination shall carry interest as under paragraph 528 above.

530. The Order of 14th January 2016 and the EA Award of 6th October 2015 in relation to interim measures are discharged.

531. Whilst respecting the principle of res judicata, this Final Award is without prejudice to any rights or claims of the Parties under the SPA being brought, or which may be brought, in any other arbitration or proceedings.‖

4. Before proceeding further, it would be pertinent to take note of the following essential facts.

JRRES was registered as a society under the SRA in 2004 as would be evident from its Memorandum of Association[9]. It was established to work essentially as a charitable educational society. The MoA specifically provides that all incomes, earnings, movable and immovable properties of the society would be utilised solely towards the promotion of its aims and objects and that no part thereof shall be paid or transferred directly or indirectly by way of dividends, profits or in any other manner. The MoA further stipulates that it shall not work with a profit making motive.

5. Mr. Shantanu Prakash, the promoter of Educomp Solutions Limited is stated to have become a member of JRRES in 2006 and its life member in 2008. The Greater Noida Industrial Development Authority10 is stated to have executed a Lease Deed in favour of the JRRES in 2006. The land parcel was leased to the society to enable it to develop and construct a college of higher learning. The land so allotted is held by JRRES on lease for a term of 99 years commencing from 18 October 2006.

6. The Arbitral Tribunal has in the Award noted that Mr. Shantanu Prakash upon coming to be involved with the affairs of JRRES learnt of an urgent need for infusion of funds in that society. This need is stated to have arisen on account of a bank loan which was taken by JRRES to meet its obligations flowing from the Lease Deed executed by the GNIDA. The aforesaid financial requirement of JRRES was met with Mr. Shantanu Prakash extending a loan to the society via Educomp Infrastructure Services Private Limited11.

7. The Arbitral Tribunal further records that thereafter, Mr. Shantanu Prakash also introduced certain ―colleagues‖ who became GNIDA Educomp Infrastructure O.M.P.(EFA)(COMM.) 6/2017 members of JRRES on 10 May 2008. Mr. Prakash as well as his father applied for and were granted life membership of JRRES towards the end of 2008. The Arbitral Tribunal has taken specific notice of the nominees of Mr. Shantanu Prakash becoming members of JRRES in the Award. However, the Court proposes to elaborate upon and deal with this aspect in the latter parts of this decision.

8. On 16 May 2008, Raffles entered into a Joint Venture Agreement12 with Educomp Solutions Limited, an Indian legal entity of Educomp. In terms of the JVA, both parties incorporated a special purpose vehicle being Educomp Raffles Higher Education Limited13. Raffles held 58.18% shares in ERHEL while Educomp held the balance 41.82% shares. Under the aforesaid JVA, the obligations of parties was described in the following terms: - ―2. OBLIGATIONS OF THE PARTIES IMMEDIATELY FOLLOWING EXECUTION 2.[1] The Parties shall following execution of this agreement, attend to the following matters:- 2.1.[1] Co-ordinate and liaise with each other in the development and formulation of the business plans and budgets (setting out amongst others, the proposed business, operational and implementation plans, projected capital expenditure and projected requirements for capitalisation and finance) for the purpose of the Joint Venture covering such financial periods as may be agreed between the Parties for each of the SPVs (the "Business Plan") and which Business Plan will also identify and detail: JVA 2.1.1.[1] Specifically the Raffles HEB Courses to be offered or taught by the relevant SPV to be established or incorporated in India, and 2.1.1.[2] Specifically the Educomp K12 Courses to be offered or taught by the relevant SPV to be established or incorporated in the PRC. The development and formulation of the Business Plan shall be completed within 90 days of the date of this agreement. 2.1.[2] appoint Ernst & Young or such other firm of international accountants agreed between the Parties to investigate and advise on the relevant jurisdiction in which Raffles Educomp Ventures Limited (or such other SPV to be established or incorporated pursuant to clause 3.1.4) is to be incorporated. 2.1.[3] in the case of SPVs to be incorporated or established in the PRC, Raffles shall as soon as practicable initiate all necessary preparatory steps and procedures (including the application for and obtaining of all relevant approvals from the Relevant Authorities) to facilitate the incorporation or establishment of such SPVs. 2.1.[4] in the case of SPVs to be incorporated or established in the India. Educomp shall as soon as practicable initiate all necessary preparatory steps and procedures (including the application for and obtaining of all relevant approvals from the Relevant Authorities) to facilitate the incorporation or establishment of such SPVs.‖

9. ERHEL proceeded to offer educational courses in Management and Design at various locations in India. The said Joint Venture entity thereafter proceeded to execute a Loan Agreement with JRRES on 01 July 2009. The college at Noida was already under construction at that time.

ERHEL also incorporated a subsidiary named Millennium Infradevelopers Limited14 with which it had entered into a contract on 17 February 2010 for providing construction services to the college at Noida. The said construction agreement was titled as one for ―Project Management and Construction Services‖ [PMC].

10. It appears that consequent to the infusion of capital and funds by Raffles, parties sought equal representation of their affiliates in JRRES. In light of the aforesaid, the rules of the society are stated to have been amended in 2014 providing for the creation of a post of a Chairman equivalent to that of the President as well as for reconstitution of the General Body and Governing Body of the society. As per the rules of JRRES, the General Body was to comprise of sixteen members while its Governing Body was to be of ten members. Mr. Chew Hua Seng, an affiliate of Raffles was at this time granted membership for life in JRRES and was also appointed as its Chairman on 26 April 2014. Simultaneously, six other members who were affiliates of Raffles also became members of the society. Upon reconstitution, the Governing Body and the General Body of JRRES became as follows: - ―List of Governing Body Members

┌──────────────────────────────────────────────────────────────────────────────────────────────────────┐
│                                            ―List of Governing Body Members                           │
│

┌─────────────────────────────────────────────────────────────────────────────────────────────┐
│                           Sl. Name              Address          Designation    State       │
│                           No.                                                               │
├─────────────────────────────────────────────────────────────────────────────────────────────┤
│                           1.   Sh.    Shantanu C-11/1, DLF City, President      Haryana     │
│                                Prakash         Phase-1, Gurgaon                             │
│                           2.   Sh. Hua Seng 32 K Nassim Road, Chairman          Singapore   │
│                                Chew         S (258417)                                      │
│                           3.   Sh.   Harpreet W-57 3rd Floor, Secretary         Delhi       │
│                                Singh          Greater Kailash-I,                            │
│                                               New Delhi-110048                              │
│                           4.   Sh. Keong Chee H 101, Ambience Treasure          Haryana     │
│                                Yam            Island, Gurgaon-                              │
│                                               122001                                        │
└─────────────────────────────────────────────────────────────────────────────────────────────┘

89. While emphasising the need to curb commercialisation of education, even the NEP 2020 speaks of surpluses which may be legitimately generated by institutions to be reinvested in the educational sector. This is evident from the following passages of the policy: - “Curbing Commercialization of Education

18.12. Multiple mechanisms with checks and balances will combat and stop the commercialization of higher education. This will be a key priority of the regulatory system. All education institutions will be held to similar standards of audit and disclosure as a 'not for profit' entity. Surpluses, if any, will be reinvested in the educational sector. There will be transparent public disclosure of all these financial matters with recourse to grievance-handling mechanisms to the general public. The accreditation system developed by NAC will provide a complementary check on this system, and NHERC will consider this as one of the key dimensions of its regulatory objective.

18.13. All HEIs public and private - shall be treated on par within this regulatory regime. The regulatory regime shall encourage private philanthropic efforts in education. There will be common national guidelines for all legislative Acts that will form private HEIs. These common minimal guidelines will enable all such Acts to establish private HEIS, thus enabling common standards for private and public HEIS. These common guidelines will cover Good Governance, Financial Stability & Security, Educational Outcomes, and Transparency of Disclosures.

18.14. Private HEIs having a philanthropic and public-spirited intent will be encouraged through a progressive regime of fees determination. Transparent mechanisms for fixing of fees with an upper limit, for different types of institutions depending on their accreditation, will be developed so that individual institutions are not adversely affected. This will empower private HEIS to set fees for their programmes independently, though within the laid-out norms and the broad applicable regulatory mechanism. Private HEIs will be encouraged to offer freeships and scholarships in significant numbers to their students. All fees and charges set by private HEIs will be transparently and fully disclosed, and there shall be no arbitrary increases in these fees/charges during the period of enrolment of any student. This fee determining mechanism will ensure reasonable recovery of cost while ensuring that HEIS discharge their social obligations.‖

90. In line with the NEP 2020 and in the present year itself the Union Government published a Press Note expressing its intent to create India as a Global Study Destination. The aforesaid Press Note dated 02 August 2022 is reproduced hereinbelow: - ― Internationalisation of Higher Education Posted On: 08 AUG 2022 4:57PM by PIB Delhi To promote India as global study destination and Internationalisation NEP 2020 stipulates various measures, which inter alia includes facilitating research/teaching collaborations and faculty /student exchange with high-quality foreign HEI and signing of relevant mutually beneficial MOUs with foreign countries; encouraging high performing Indian universities to set up campuses in other countries, selected universities e.g., those from among the top 100 universities in the world will be facilitated to operate in India; setting up of International Student Office at each HEI for welcoming and supporting students arriving from abroad; counting credits acquired in foreign universities, wherever appropriate as per requirement for each HEI; and courses and programmes in subjects, such as Indology, Indian Languages, AYUSH systems of medicines, yoga, arts etc. In line with the recommendations of National Education Policy (NEP), 2020, several measures have been initiated to strengthen Internationalization of the Higher Education, such as: i. Guidelines on Internationalization of Higher Education were notified by UGC in July, 2021 that includes provisions like setting up of Office for International Affairs and Alumni Connect Cell in the campus of Universities hosting foreign students. ii. 179 Universities have established Office for International Affairs and 158 Universities have set up Alumni Connect Cells. iii. In order to foster academic collaboration between Indian HEIs and foreign HEIs, "University Grants Commission (Academic Collaboration between Indian and Foreign Higher Educational Institutions to offer Twinning, Joint Degree and Dual Degree Programmes) Regulations, 2022" have been notified on 2nd May, 2022. iv. World-class foreign universities and institutions will be allowed in the GIFT City, Gujarat to offer courses in Financial Management, FinTech, Science, Technology, Engineering and Mathematics free from domestic regulations, except those by International Financial Services Centres Authority (IFSCA) to facilitate availability of high-end human resources for financial services and technology. v. UGC Institutions of Eminence Deemed to be Universities Regulations have been amended to allow Institutions of Eminence to set up Off-Shore campuses. The amendment to existing UGC institutions of Eminence Regulations delineates terms, conditions and approval process for establishment of Off-Shore campus by institutions of eminence (loEs) deemed to be universities. The information was given by the Minister of State for Education, Dr. Subhas Sarkar in a written reply in the Lok Sabha today.‖

91. The said Press Note was preceded by the University Grants Commission notifying the University Grants Commission (Promotion & Maintenance of Standards of Academic Collaboration between Indian and Foreign Educational Institutions) Regulations, 2022 and which envisages academic partnerships between Indian and Foreign Higher Educational Institutions. It would thus be wholly incorrect for this Court to accept the submission that the involvement of a foreign entity or a foreign national in the education sector is contrary to the fundamental policy of Indian law.

92. While closing the discussion on this aspect it may only be additionally noted that the Tribunal had also taken note of the conceded stand of the respondents who had accepted the existence of an educational institution set up by various participants in the oil and gas industrial sector of the country. The involvement of a corporate or any other for-profit entity in the field of education is one which is unambiguously recognised in Appendix 3.[4] of the AICTE Handbook. As is evident from the provisions made in that Appendix for a forprofit entity is entitled to establish an educational institution through a not-for profit entity. Appendix 3.[4] thus clearly indicates that as long as the for-profit entity is interspaced by a not-for profit body which manages and administer the educational institution, the same would clearly be permissible. This too clearly indicates that the involvement of a for-profit entity is not abhorrent to public policy.

93. The Court also finds itself unable to ignore the fact that Mr. Shantanu Prakash and his colleagues also came to hold positions in JRRES by virtue of the investment and aid provided by the for-profit entity with which they were directly connected. It was Educomp which invited Raffles to enter into a joint venture and develop educational institutions in the country. The appointment of Raffle‘s affiliates in JRRES was in accordance with amendments made in its Articles to which they were a party. Educomp cannot disavow those steps taken by the joint venturers merely to avoid enforcement. The Court is thus constrained to observe that the stand taken in these proceedings by Educomp clearly answers the dishonest defence aspect which was alluded to in Cruz City. On balance and bearing in mind the discretion that Section 48 confers with respect to enforcement, the Court would be inclined to recognise the Award and ensure its execution in accordance with law.

94. It appears to have been additionally urged before the Arbitral Tribunal that the SPA resulted in a trading of membership. The aforesaid contention is clearly misconceived since Educomp had failed to establish that any consideration had been paid to any of the members of the society or those who formed part of its Governing Body for the purposes of either appointment or resignation. This aspect in any case remains of little significance in light of the Tribunal having refused specific performance of the SPA.

95. The Court also finds itself unable to accept the contention relating to JRRES land forming subject matter of the SPA. It must and at the outset be noted that the SPA nowhere contemplates the sale or monetisation of the leasehold asset. As has been noticed by the Arbitral Tribunal the value of the leasehold assets of the JRRES appears to have been taken into consideration solely for the purposes of evaluating the share exchange price to be paid by Raffles. The value of the shares held in the JV appears to have been arrived at after taking into consideration the leasehold assets of JRRES. However, and undoubtedly, the SPA nowhere contemplates the sale of JRRES land or the proceeds thereof being distributed between Raffles and Educomp. This aspect has also been duly taken note of by the Arbitral Tribunal in Para 350 of the Award while dealing with the issue of monetisation. The sale of the leasehold assets is undisputedly subject to restrictions contained in the Lease Deed itself and which had made such a proposed disposition subject to prior permission and approval of GNIDA. The argument of monetisation was in any case misconceived since no sale of the land had been accomplished.

96. Insofar as the decisions which were cited by Ms. Trivedi are concerned, the Court deems it apposite to observe as follows. While it is true that PASL Wind Solutions alludes to public policy being an ever-evolving concept, the Court finds itself unable to find any observation or principle enunciated therein which may lead one to conclude that the Award is unenforceable on grounds as canvassed and noticed hereinabove. In fact the opening up of the educational sector and the winds of change which have been ushered in by the Union in terms of the NEP 2020 would clearly belie the submissions addressed at the behest of Educomp.

97. Insofar as Devas Multimedia is concerned, the Supreme Court in that decision had on facts come to a definitive conclusion that the winding up of the joint venture company was tainted by fraud. Fraud, as has been repeatedly observed, unravels the most solemn of transactions. Educomp did not even resist enforcement on the ground of fraud. Devas Multimedia thus fails to carry the case of Educomp any further. The judgment in NAFED is also clearly distinguishable for the following reasons. In NAFED the Supreme Court came to the conclusion that the Award was unenforceable since parties while entering into the contract for export had failed to factor in the necessity of appropriate export permission being granted by the Union Government. It was in the aforesaid context that the Supreme Court came to conclude that the contract was impossible to be performed and that Section 32 of the Contract Act, 1872 was attracted.

98. Accordingly and for all the aforesaid reasons, the Court rejects the objections raised by Educomp. The Award cannot be said to fall within the mischief of Section 48(2)(b)(ii) of the Act and is thus held to be enforceable in law.

99. The matter be now placed before the appropriate Roster Bench on 13 July 2023 for taking further steps upon the enforcement petition.

YASHWANT VARMA, J. JULY 07, 2023 bh/SU