SBS Logistics Singapore Pte Ltd v. SBS Transpole Logistics Private Limited

(ix) SGD 2,25,000 towards legal costs incurred by SBS Singapore.

6. The record shows that SBS Singapore had approached the High Court of Hong Kong Special Administrative Region Court of First Instance (Hong Kong HC) for enforcement of the final award under the relevant provisions of the law. 6.[1] The Hong Kong HC vide order dated 06.02.2018 has directed Transpole HK and Transpole India to jointly and severally pay the amounts awarded in favour of SBS Singapore via the final award with the liberty to apply within 14 days to set aside the order. This order though, stipulated, that the final award would not be enforced for the defined period of 14 days and if Transpole HK and Transpole India were to apply within the defined period the enforcement of the final award would remain in suspension till the application was disposed of. It is not known, however, if Transpole HK and Transpole India made any such application before the Hong Kong HC. 6.[2] SBS Singapore, though, in this Court has made an assertion that it has not received any notice of proceedings taken out in terms of Section 3 of the (Singapore) International Arbitration Act, 1994 read with Article 34 of the O.M.P.(EFA)(COMM.) 4/2018 Pg. 9 of 32 UNCITRAL Model Law, to lay challenge against the final award within the prescribed period of three (3) months which expired on 25.01.2018 or thereafter. 6.[3] Furthermore, SBS Singapore has also asserted before this Court that Transpole India has not made any payment to SBS Singapore under the final award.

7. It is in this backdrop that SBS Singapore has approached this Court for enforcement of the final award against Transpole India. Notice in this petition was issued on 04.07.2018. On that date, Transpole India entered appearance via its advocates. While granting four (4) weeks to Transpole India’s counsel to file a reply to the petition, the following interim directions were issued. “… 4. In the meanwhile, the respondent is restrained from dealing with immovable assets referred to in schedule I i.e., serial numbers 1 to 3, which would include investments in shares of the companies whose names are reflected in the table below serial no. 4. 4.[1] Furthermore, the respondent will also disclose by way of an affidavit its assets which would include immovable and movable assets as well as the current balances in its various bank accounts held by it de-hors the information given in schedule II. …”

8. The record shows that Transpole India had moved an application being I.A. No. 15843/2018 whereby a direction was sought that its creditor-bank i.e. State Bank of India (SBI) should be restrained from auctioning the property referred to in prayer clause (b) of the said application till the disposal of the execution petition. 8.[1] However, vide order dated 20.11.2018, the aforementioned application was dismissed, albeit, on the sole ground that interim order dated 04.07.2018 only restrained Transpole India from dealing with its assets. It was obvious that Transpole India was seeking to take advantage of the order of injunction issued by this Court to impede the rights of a third party i.e. its creditor-bank. O.M.P.(EFA)(COMM.) 4/2018 Pg. 10 of 32 8.[2] Thereafter on 27.11.2018 and 20.12.2018, certain directions were issued qua the amounts spent by Transpole India between May 2016 and the date of the final award and details of assets sold and purchased between 31.03.2017 – 31.03.2018. Furthermore, directions were also issued with regard to amounts available with Transpole India by way of bank deposits. In this context, it was noted in the order dated 20.12.2018, that the information made available to the Court showed that Transpole India had a credit balance in its bank account amounting to of Rs. 1,24,17,435/- as on 31.03.2018. Since the current balance was not shown, a direction was issued in that behalf. Also, an order of injunction was issued to the effect that if any investments are made in the past, which are available, the same will not be dealt with, without the permission of the Court. 8.[3] Notably, on that date, arguments commenced in the main petition. It may also be relevant to note that information which has been furnished, as sought by this Court by way of various affidavits in consonance with the liberty given, have been put in a sealed cover. 8.[4] After hearing arguments advanced by both sides on various dates on the objections raised on behalf of Transpole India concerning the enforcement of the final award, judgment on the objections so advanced was reserved. Submissions of the Counsel:

9. In support of the objections preferred by Transpole India, arguments were advanced by Mr. Nakul Dewan, Senior Advocate, while in support of the execution petition, submissions were made by Mr. Gautam Narayan, Advocate.

10. Mr. Nakul Dewan’s arguments can be, broadly, paraphrased as follows:

(i) The denial of adjournment by the arbitral tribunal in the facts and circumstances of this case violated the principles of natural justice. O.M.P.(EFA)(COMM.) 4/2018 Pg. 11 of 32 In this behalf, reference was made to the fact that counsel representing Transpole HK and Transpole India had communicated their recusal from the matter on 18.05.2017 and 22.05.2017 which propelled Transpole HK and Transpole India to seek an adjournment of the hearing which was to commence on 12.06.2017 via a communication dated 06.06.2017. The arbitral tribunal while rendering a decision on the request made for adjournment vide order dated 08.06.2017 unfairly made it conditional upon payment of unpaid cost in the sum of SGD 4,44,641.54 and wasted cost solely at the behest of SBS Singapore despite Transpole HK and Transpole India seeking a variation of this part of the order on account of its poor financial condition vide its email dated 09.06.2017. The arbitral tribunal, however, did not relent and proceeded to decide the matter ex-parte. The procedure, thus, adopted by the arbitral tribunal was unreasonable, harsh and contrary to the import of the SIAC Rules which required the procedure to be fair. Furthermore, the SIAC Rules which governed the arbitration proceedings required the arbitral tribunal to consider if a party which failed to appear at the hearing had sufficient cause for non-appearance before proceeding ex-parte against the delinquent party. These actions of the arbitral tribunal being in gross violation of the principle of natural justice had rendered the final award unenforceable under the provisions of Section 48(1)(b) and Section 48(2)(b) of the 1996 Act.

(ii) The arbitral tribunal by making the adjournment order dated

08.06.2017 conditional had sought to enforce the interim award dated 19.05.2017, passed for unpaid cost and thus, in effect, had curtailed Transpole HK and Transpole India’s right to challenge the interim award. The procedure adopted by the arbitral tribunal was not only contrary to the agreement obtaining between the parties but O.M.P.(EFA)(COMM.) 4/2018 Pg. 12 of 32 was also in derogation of both the Singaporean law and the Indian law. In this behalf, reference was made to Section 48(1)(c), Section 48(1)(d), Section 48(2)(b) of the 1996 Act and Section 12 of the International Arbitration Act (“Singapore Act”). In support of this contention, reliance was also placed on the judgment of the Kerala High Court dated 16.03.2016, passed in W.P.(C) 38725/2015, in the matter of Pradeep K.N. vs. The SHO, Perumbavoor and Ors. Besides this, it was submitted that under the SIAC Rules where a party fails to pay costs, all that the arbitral tribunal was empowered to do was to either suspend the hearing or direct the payment of cost by the party who was interested in continuing with the arbitration proceedings. The arbitral tribunal failed to take recourse to any of the two avenues open to it. Furthermore, there is no provision under the SIAC Rules which empowered the arbitral tribunal to direct the reimbursement of the cost paid by one party.

(iii) The final award was violative of public policy of India. In this behalf, it was contended that the final award was not only induced and/or affected by fraud but was also contrary to the most basic notions of morality and justice. It was contended that the arbitral tribunal has failed to consider crucial facts obtaining in the case and especially the relationship subsisting amongst the parties which included third parties and, in particular, the events occurring between 29.02.2016 and 13.05.2016 when a related party loan was converted into an unrelated third-party loan through deceitful means. The arbitral tribunal’s reasoning that the loan agreement was part of a larger transaction was flawed and, in a sense, too simplistic as it failed to delve into the aspect that the shareholders’ agreement defined the loan agreement as a transaction document. In other O.M.P.(EFA)(COMM.) 4/2018 Pg. 13 of 32 words, the contention was that the loan agreement was a precondition to the shareholders’ agreement.

(iv) The enforcement of the award would be in conflict with the public policy of India as the loan agreement was violative of The Foreign Exchange Management Act, 1999 (in short ‘FEMA’) and regulations framed thereunder. In this behalf, reliance was placed on the report of the expert witness sought to be presented on behalf of Transpole HK and Transpole India. In this context, it was emphasized that the arbitral tribunal while dealing with this issue had failed to render a finding as to whether Transpole HK was involved in bonafide business activity. The argument was that Transpole HK was not involved in bonafide business activity and therefore the loan agreement violated provisions of FEMA and regulations framed thereunder. In support of this submission, reliance was placed on the judgment of the Supreme Court in Renusagar Power Co. Ltd. vs. General Electric Co., 1994 Suppl (1) SCC 644. (Renusagar case).

(v) Lastly, the arbitral tribunal did not have the necessary jurisdiction to enter upon reference as SBS Singapore had failed to take mandatory pre-arbitral steps before triggering the arbitration agreement. In this behalf, it was contended that Clause 15(2) of the loan agreement which incorporated the dispute resolution mechanism had a multitier dispute resolution construct which mandatorily obliged parties to engage in pre-arbitration negotiations and discussions. In this context, it was pointed out that SBS Singapore had issued a prearbitration notice on 07.04.2016 and therefore the mandatory 30 days available for negotiations and discussions which would have ordinarily expired only on 07.05.2016 was truncated. Though negotiations were attempted by parties, albeit, via video conference O.M.P.(EFA)(COMM.) 4/2018 Pg. 14 of 32 on 28.04.2016, SBS Singapore was surprisingly represented by its legal counsel. Despite objections, no further steps were taken to take the process further. The request made for amicable settlement by Transpole India on 03.05.2016, which was a date that fell well within 30 days, was not entertained by SBS Singapore. In this behalf, reference was made to SBS Singapore’s communication dated 09.05.2016 wherein it stated that it was no longer required to engage in further discussions.

(vi) The arbitral tribunal’s decision on this aspect of the matter rendered on 05.09.2016 was flawed and was hit by the provisions of Section 48(1)(b) of the 1996 Act.

(vii) In support of the submission that triggering of an unambiguous and a specific pre-arbitration mechanism incorporated in the agreement obtaining between parties before the commencement of arbitration proceedings was mandatory and strictly enforceable, reliance was placed on the following judgments: a) International Research Corp PLC vs. Lufthansa Systems, (2014) 1 SLR 130. b) PT Selecta Bestama vs. Sin Haut Huant Marine Transportation Pte. Ltd., (2015) SGHCR 16.

(viii) Furthermore, it was submitted that Singaporean law mandated that where arbitration agreement contained a provision requiring parties to endeavour to resolve its disputes, it imposes an obligation on parties to do everything in good faith to take this exercise forward. For this proposition, reliance was placed on the following judgements: a) Travista Development Pte Ltd. vs. Tan Kim Swee Augustine and Others, (2008) 2 SLR (R) 474. O.M.P.(EFA)(COMM.) 4/2018 Pg. 15 of 32 b) HSBS Institutional Trust Services (Singapore) Ltd. (trustee of Starhill Global Real Estate Investment Trust) vs. Toshin Development Singapore Pte Ltd., (2012) SGCA 48.

11. Mr. Narayan on the other hand relied upon Rule 24(h) and Rule 30.[6] of the SIAC Rules to demonstrate that the arbitral tribunal was empowered to pass an interim award for payment of unpaid cost upon an application being moved in that behalf. 11.[1] The learned counsel contended that the arbitral tribunal was empowered under Rule 16.[1] of the SIAC Rules to conduct the arbitration proceedings in a manner it thought appropriate which included the power to grant an adjournment of evidentiary hearing subject to fulfilment of conditions that it deemed fit to impose. According to the learned counsel, imposition of conditions for grant of adjournment is a matter of procedure and hence falls within the domain of the arbitral tribunal. 11.[2] In this context, it was emphasised that since the conditions imposed were neither onerous nor arbitrary, and, thus contrary to the stand taken by Transpole India, did not have the effect of denuding it of its right to defend itself in the arbitration proceedings. 11.[3] In support of his submission that the arbitral tribunal had the discretion to determine its procedure and that the courts would be slow in interdicting the same, reliance was placed on the following judgements:

(i) ADG & Anr. vs. ADI and another matter, (2014) 3 SLR 481.

(ii) PT Central Investindo vs. Franciscus Wango & Ors. and another matter, (2014) SGHC 190. 11.[4] It was further submitted that the basic case management powers were within the remit of the arbitral tribunal including the imposition of O.M.P.(EFA)(COMM.) 4/2018 Pg. 16 of 32 condition for grant of adjournment and therefore objection taken on this ground to impede enforcement of the final award was unsustainable. 11.[5] It was also argued, albeit, in the alternative that assuming without admitting that the arbitral tribunal had committed an error in rendering a conditional decision qua adjournment, such a direction would not impact the enforcement of the final award as the action fell within the exclusive domain of the arbitral tribunal. 11.[6] The contention advanced on behalf of Transpole India that the conditional adjournment order had deprived Transpole India of its right to challenge the interim award qua costs was flawed. According to the learned counsel, Section 2 of the International Arbitration Act defines award to mean a decision on the substance of the dispute. Thus, the mere use of the expression interim award by the arbitral tribunal vis-à-vis its decision dated 19.05.2017 would not render it amenable to challenge under the Singapore Act. For this proposition, reliance was placed on PT Asuransi Jasa Indonesia (Persero) vs. Dexia Bank SA, (2007) 1 SLR (R)

597. 11.[7] The contention was that the interim award related to a procedural matter and since it did not involve a determination of substantive issues, it was not an award which could be challenged under the Singapore Act. Thus, the contention advanced on behalf of Transpole India that the conditional adjournment order dated 08.06.2017 had prevented it from challenging the interim award was misconceived and unsustainable. 11.[8] In any event, though the adjournment was made conditional on payment of sums stipulated therein, no prejudice was caused as alleged or at all to Transpole India as a result of the conditions stipulated therein. Transpole India at its peril had chosen not to appear at the hearings fixed by the arbitral tribunal and likewise had taken a call to not make its O.M.P.(EFA)(COMM.) 4/2018 Pg. 17 of 32 witnesses available for cross-examination despite an opportunity been given in that behalf. It was also pointed out that Transpole India had not responded to arbitral tribunal’s email dated 04.09.2017 whereby it had called upon parties to confirm as to whether or not they wished to place before it any further evidence or submissions for consideration. 11.[9] The arbitral tribunal had rightly disregarded the witness statement of the sole factual witness filed on behalf of Transpole India on account of the witness not making himself available for cross-examination despite a direction being issued in that behalf. In support of this submission, reference was made to Article 4.7, IBA Rules on the Taking of Evidence in International Commercial Arbitration (29 May 2010 edition) [in short ‘IBA Rules’]. The emphasis was that though every opportunity was given to Transpole India to present its defence, it chose at its peril not to defend its position and therefore cannot now impede the enforcement of the final award on the ground of violation of principles of natural justice. In support of this submission, reliance was placed on the following judgments:

(i) Rakhna Arakshaka Lanka Ltd. vs. Avant Garde Maritime Services

(ii) Triulzi Cesare SRL vs. Xinyi Group (Glass) Co Ltd., (2015) 1 SLR

114.

(iii) China Machine New Energy Corp vs. Jaguar Energy

12. Besides the aforesaid judgments cited by the learned counsel, reference was also made to the judgment rendered by the Singapore Court in TMM Division Maritima SA de CV vs. Pacific Richfield Marine Pte Ltd., (2013) SGHC 186 which was cited on behalf of Transpole India. As regard the submission made on behalf of Transpole India that the final O.M.P.(EFA)(COMM.) 4/2018 Pg. 18 of 32 award was in conflict of public policy of India as it violated FEMA and the regulations framed thereunder, learned counsel submitted that this contention ought to be rejected at the very threshold as all along representations were made and warranties were issued by Transpole India at the time of execution of the loan agreement that both the loan transaction as well the related transactions did not violate the provisions of FEMA and/or regulations framed thereunder. In other words, Transpole India had represented all along that the loan transaction and related transactions complied with all laws obtaining in India. In this behalf, my attention was drawn to Clause 7 of the loan agreement. 12.[1] Furthermore, it was argued that the arbitral tribunal after looking at the expert testimony had rightly ruled that the loan agreement was not in violation of the Indian law and therefore was enforceable. It was also sought to be highlighted by the learned counsel that FEMA and regulations framed under it put in place a permissive regime and with that objective, in mind, permitted irregularities, if any, to not only be compounded but also allowed the delinquent to seek ex post facto permission and/or approval. Given this state of the law, the learned counsel submitted that the alleged violation of FEMA and/or regulations framed under it did not fall within the ambit of the purported breach of the fundamental policy of Indian law or interests of India to warrant the refusal of enforcement of the final award. In support of this submission, reliance was placed on the following judgements:

(i) Shri Lal Mahal Limited vs. ProgettoGrano Spa, (2014) 2 SCC

433.

(ii) City Cruz 1 Mauritius Holdings vs. Unitech Ltd., (2017) SCC

13. I have heard the learned counsel for the parties and perused the record. To my mind, the objections raised by Transpole India fall under three broad distinct heads: -

(i) Violation of principles of natural justice.

(ii) Enforcement of the final award would result in a violation of the public policy of India.

(iii) The absence of jurisdiction in the arbitral tribunal to pass the final award. Objection no. (i): -

14. Insofar as the first issue is concerned, in this context the following broad facts are required to be noticed: 14.[1] The arbitral tribunal had issued a procedural order on 22.09.2016 fixing the hearing of the matter. At that juncture, the period blocked for hearing commenced from 05.06.2017 and ended on 16.06.2017. 14.[2] Three weeks before the commencement of the final hearing in the matter, the solicitors of the borrower (i.e. Transpole HK) and the guarantor (i.e. Transpole India) vide communication dated 18.05.2017 and 22.05.2017 respectively wrote to the arbitral tribunal that they no longer represented their clients. 14.[3] The Transpole group represented by one Mr. Vivek Shukla did not move in the matter till 06.06.2017 whereby an adjournment was sought on the ground that a new set of counsel had to be engaged in the matter who would require time for making an effective representation before the arbitral tribunal. O.M.P.(EFA)(COMM.) 4/2018 Pg. 20 of 32 14.[4] Notably, in the interregnum the arbitral tribunal based on an agreement between the parties truncated the days given for evidentiary hearing from 12 to 5 days. 14.[5] Thereupon, vide order dated 02.06.2017, the arbitral tribunal indicated to the parties the venue and the time and the fact that evidentiary hearings would commence from 12.06.2017 and end on 16.06.2017 unless terminated earlier. 14.[6] Curiously, Mr. Vivek Shukla’s mail dated 06.06.2017 was not marked to the SBS Singapore’s Solicitors. Given this situation, the arbitral tribunal forwarded the copy to SBS Singapore’s Solicitors and sought its reply by 5 P.M. the same day. As directed the solicitors of SBS Singapore reverted with their response at about 5:30 PM the same day, wherein, they brought to fore the fact that dates for evidentiary hearing had been fixed eight (8) months ago and that despite the recusal by the solicitors representing Transpole HK and Transpole India as far back as on 18.05.2017 and 22.05.2017, there had been no movement in the matter up until 06.06.2017. In this behalf, reference was also made by SBS Singapore to communications dated 24.05.2017 and 26.05.2017 sent to Transpole HK and Transpole India. The emphasis was laid in the response on the aspect that despite several opportunities, no steps were taken to move the arbitral tribunal at an earlier point in time. It is in this background that SBS Singapore’s Solicitors agreed to a short adjournment, albeit, on the condition that unpaid advance cost and wasted cost would be paid. 14.[7] The arbitral tribunal considered the pros and cons of the matter and having considered the same concluded that there was no merit in the grounds advanced for seeking an adjournment of the arbitration proceedings. However, the arbitral tribunal as a matter of pure indulgence agreed to have the arbitration proceedings stood over till August 2017 on the condition that O.M.P.(EFA)(COMM.) 4/2018 Pg. 21 of 32 unpaid cost and wasted cost were paid by Transpole HK and Transpole India before 12.06.2017. The fact that variation of the conditional order dated 08.06.2017 was sought and rejected (an aspect I have adverted to hereinabove) would not have me conclude that there was any breach of the principles of natural justice. 14.[8] The reason why I say so is as follows:

(i) Clearly, despite being obliged to pay their share of the costs of arbitration in advance as per Rule 24(h) and 30.[6] of the SIAC Rules, Transpole HK and Transpole India had failed to make the requisite deposit. This led SBS Singapore to move an application before the arbitral tribunal to enter an interim award in the matter. The arbitral tribunal rendered an interim award in that behalf on 19.05.2017. Transpole HK and Transpole India, admittedly, took no steps to challenge the interim award though the latter vociferously via its counsel claims that it could have done so under the Singapore Act and because a conditional adjournment order was passed by the arbitral tribunal it was denuded of its right to challenge the interim award. (i)(a) This submission, in my view, fails to appreciate the scope and ambit of the conditional adjournment order. There is nothing in conditional adjournment order which in any manner prevented Transpole India from challenging the interim award if it otherwise was amenable to challenge under the Singaporean law. What the conditional adjournment order did was to put the borrower (i.e. Transpole HK) and the guarantor (i.e. Transpole India) to notice that if it wanted an accommodation (which could only be given keeping in mind the difficulty caused to the opposite party (i.e. SBS Singapore), it would have to pay its share of the unpaid costs, the burden for which had been unfairly borne by SBS Singapore. (i)(b) Thus, the impact of the order was that if for some reason it had taken the position that it should not pay the unpaid cost which formed the subject O.M.P.(EFA)(COMM.) 4/2018 Pg. 22 of 32 matter of the interim award, it should make its witnesses available for the evidentiary hearings commencing from 12.06.2017. Both the borrower (i.e. Transpole HK) and the guarantor (i.e. Transpole India) chose not to present its witnesses. There is no dispute that neither the expert witness nor the factual witness appeared on the dates of hearing fixed for cross-examination despite which the arbitral tribunal in the final award had taken into account the report of expert witness cited on behalf of Transpole HK and Transpole India. Besides this, the arbitral tribunal vide email dated 04.09.2017, gave further opportunities to parties which included Transpole HK and Transpole India to file additional evidence and/or submissions in the matter.

(ii) Given the aforesaid circumstance, there was no breach of principles of natural justice. If a party is allowed to defend its position and it chooses not to avail the same, the steps that the adjudicatory authority takes thereafter including rendering the final decision cannot fall foul of the principles of natural justice.

(iii) The arbitral tribunal, in my view, was also right both under Article 4.[7] of the IBA Rules as also the law prevailing in India that a witness statement which is not subject to cross-examination where cross-examination of witnesses is envisaged is no testimony in the eyes of law and hence can be discarded.

(iv) I am also in agreement with Mr. Narayan’s submission that whether or not adjournments are to be granted and the conditions that are to be stipulated for the grant of adjournment unless they are outrageous and completely unconscionable cannot be the reason for impeding the enforcement of a foreign award under the provisions of the 1996 Act. 14.[9] Therefore, the argument that by passing a conditional order the arbitral tribunal had sought to enforce its interim award is a submission which is completely untenable and hence is completely rejected. O.M.P.(EFA)(COMM.) 4/2018 Pg. 23 of 32 Objection no. (ii): -

15. This objection encompasses broadly two facets:

(i) First, that the award is vitiated by fraud as a loan agreement was a transactional document which formed part of a larger transaction involving consolidated subsidiaries of the SBS group of companies. In other words, the loan agreement camouflaged the investment strategy of the ultimate holding company i.e. SBS Holdings Inc., Japan (in short ‘SBS Japan’). The SBS group according to Transpole India had violated its obligation towards it as envisaged in other transactional documents and when Transpole India sought redressal of these issues SBS group fraudulently distanced itself from Transpole India. According to Transpole India, this was brought about in the following manner: a) Firstly, the nominee-directors of the SBS group which were on the board of Transpole India were suddenly asked to resign on 29.02.2016 which paralysed the board of directors. b) Secondly, the assignment of the loan agreement was triggered via the DOA at the behest of the SBS group. c) Thirdly and finally, SBS Japan sold off its stake in the original lender company i.e. the assignor to a shell company known as Global International Network on 15.03.2016. The argument was that the SBS group by taking these steps had crippled the functioning of Transpole India as it could not take decisions on “reserved matters” in the absence of the SBS nominees on its board. Therefore, given this background, the arbitral tribunal ought to have unravelled the fraud and not treated the dispute between the parties as one simply arising out of a loan agreement. O.M.P.(EFA)(COMM.) 4/2018 Pg. 24 of 32

(ii) Second, the loan transaction resulted in a violation of FEMA and regulations framed thereunder. Insofar as the charge of violation of the provisions of FEMA and the regulations under it is concerned, it is pivoted on the argument that the arbitral tribunal failed to return a finding of fact as to whether Transpole HK was involved in bonafide business activity.

16. A perusal of the record, particularly the final award, shows that both these objections have been dealt with by the arbitral tribunal in great detail. In sum, the argument advanced by Transpole India was suggestive of the fact that the loan agreement executed between SBS Holdings Singapore i.e. the original lender and Transpole HK as the borrower with Transpole India as the guarantor was a facade and that in fact, it was an investment strategy of the ultimate holding company i.e. SBS Japan. The evidence which was led and placed on record was suggestive of the fact that Share Purchase Agreement dated 07.07.2014 (in short ‘Transpole India SPA’) had been executed which entailed acquisition of 627386 shares in Transpole India by SBS Holdings Singapore and that in this agreement reference was made to the fact that the loan agreement in the form agreed between the parties would be a condition precedent. Evidence also brought to fore the fact that the loan agreement was negotiated and finally executed with Transpole HK as the borrower and Transpole India as the guarantor. The evidence was, thus, suggestive of the fact that the loan agreement was a debt investment by SBS Holdings Singapore in the Transpole group which resulted in the execution of the loan agreement. It is in this background, that the arbitral tribunal made the following observations in the final award.

FINDINGS OF THE TRIBUNAL

116. On the basis of the oral evidence of the Claimant's witnesses; the Tribunal finds that the following factual position has been established. There is no dispute that the Loan Agreement originated from the Transpole India SPA, and under the Transpole India SPA the parties were O.M.P.(EFA)(COMM.) 4/2018 Pg. 25 of 32 obligated to enter into the Loan Agreement and it was duly executed by SLHS as the Lender, Transpole HK as the Borrower and Transpole lndia as the Guarantor at the closing of the Transpole India SPA. In that sense it may be said that the Loan Agreement was part of a "composite agreement" but the Transpole India SPA does not govern, regulate or restrict the operation of the Loan Agreement. Nor was the Loan Agreement subject to any term of the Transpole India SPA. The Loan Agreement operated as a standalone agreement.

117. For the reasons given by the Claimant in [77] and [78] above with which the Tribunal agrees, the Loan Agreement is not a sham. There was no dispute that the Loan of JPY[2],500,000,000.00 was duly disbursed under the Loan Agreement by SLHS to Transpole HK; that Transpole HK had paid interest on the Loan in accordance with the Loan Agreement until March 2016; and that on 1 March 2016 Transpole HK defaulted in payment of the interest due. Prior to that date, Transpole HK had always conducted itself in accordance with the terms of the Loan Agreement. Default interest at 14.6% per annum was accordingly payable on the Loan.

118. Under Clause 12 of the Loan Agreement SLHS was entitled to assign all its rights benefits and remedies absolutely to any person at any time without the prior written consent of the Borrower or the Guarantor. Pursuant to Clause 12 of the Loan Agreement, SLHS on 11 March 2016 assigned all its rights, benefits and remedies under the Loan Agreement to the Claimant absolutely and notice of such assignment was duly given to Transpole HK, the Borrower and Transpole India, the Guarantor. The Respondents deny in their Defence that the assignment of the Loan Agreement was effective under Singapore Law. They have contended in their pleadings that the Loan Agreement and also the assignment are not effective or enforceable against Transpole India under Indian law. The Tribunal dismisses as baseless the Respondents' contention that the assignment of the loan Agreement contravenes the laws of India with respect to the Claimant's rights against the Guarantor and was therefore ineffective. It is telling that the Respondents' own expert did not lend any support to the Respondents' contention, and rightly so.

119. On 22 March 2016, Mr Sugino on behalf of the Claimant sent the Acceleration Notice to both the Respondents demanding immediate payment of the principal amount of the Loan in the sum of JPY 2,500,000,000.00 as well as the interest instalment in the sum of JPY 24,931,507.00 which was due and payable as of 1 March 2016 with default interest calculated at the rate of 14.6% per annum. In exercise of its rights under the Loan Agreement the Claimant charged the Respondents default interest at the rate of 14.6% per annum, and accelerated the payment of the Loan and interest thereon. It is not in dispute that neither Transpole HK nor Transpole India has made any payment of the said sums or any part thereof. O.M.P.(EFA)(COMM.) 4/2018 Pg. 26 of 32

120. As noted earlier, it was claimed by the Respondents that Loan Agreement adduced by the Claimant is not the true and correct version of the Loan Agreement and that the true and correct version contains the Additional Sentence in Clause 6 of the Loan Agreement. This allegation was demonstrated by the Claimant's witnesses, Mr Sugino, Mr Endo and Mr Sanyal to be false and unsustainable: see their respective evidence in [101], [104-105], and [106-110] above. The Tribunal is satisfied on the evidence that there was no Additional Sentence discussed or agreed between the Parties and that Mr Chaudhary's allegation of the presence of the Additional Sentence in Clause 6 was false.

OTHER ISSUES RAISED BY THE RESPONDENTS

XXX XXX XXX

122. There was absolutely no evidence to show that the Loan Agreement was in any way a sham. It was executed as a loan agreement and pursuant to the Loan Agreement the Loan of JYP 2,500,000,000.00 was disbursed on 1 September 2014 to Transpole HK and no less than 4 interest payments were made by Transpole HK. The parties regarded it and acted on it as a Loan Agreement. It is significant to note that in his email to Mr Sugino dated 11 April 2016, Mr Chaudhary himself expressly acknowledged the "reality" of the loan stating that "[a]t no time has [Transpole HK] refused to make repayment in terms of the Loan Agreement". This admission was repeated in the amicable settlement video conference on 28 April 2016 by Mr Chaudhary who repeatedly told Mr Sugino that there was no refusal to make repayment.” 16.[1] A perusal of the aforementioned extracts would should that the arbitral tribunal after appreciating the material on record concluded that while the Transpole India SPA was part of a composite agreement, that is, it obliged parties to enter into a loan agreement, the former i.e. Transpole India SPA did not govern, regulate, restrict the operation of the loan agreement. The loan agreement operated as a standalone agreement. The arbitral tribunal also rejected the contention advanced before it that the assignment of the loan agreement in favour of SBS Singapore did not violate any laws of India. 16.[2] Furthermore, and more importantly, it rejected the contention advanced on behalf of Transpole HK and Transpole India that the version of the loan agreement appended to the NOA was not the correct version. In other words, the additional sentence[1] said to be included in Clause 6 which according to "The Parties agree that the liabilities of the Guarantor shall subsist only till such time that SBS Holdings Inc Japan is the ultimate parent/holding company of each of the Lender, the Borrower and the Guarantor." O.M.P.(EFA)(COMM.) 4/2018 Pg. 27 of 32 Transpole India provided that its liability would subsist only till such time SBS Japan continued to remain the ultimate parent/holding company of SBS Holdings Singapore, Transpole HK and Transpole India was found to be without substance. 16.[3] Lastly, it also rejected the contention that the loan agreement was a sham document. This finding was returned on the basis that no evidence in that behalf was produced before it and, in particular, the fact that the borrower (i.e. Transpole HK) had paid interests over four quarters under the very same loan agreement put at rest the allegation that it was a loan agreement. 16.[4] As to the other aspect that the loan agreement violated the FEMA and the regulations framed thereunder was also rejected by the arbitral tribunal after examining the reports filed by experts on both sides. After examining the testimony of the two experts, the arbitral tribunal ruled that it was satisfied with the opinion rendered by one Mr. Sunderasan who not only gave an expert report but was also examined by the arbitral tribunal on the aspect as to whether the loan agreement was in conflict with or in violation of any provision of Indian law. The expert testified categorically that neither circumstances obtained in the instant case. 16.[5] In particular, the arbitral tribunal appears to have been impressed by the following parts of Mr. Sunderasan’s opinion whereby he articulated that before it could be said that the borrower (i.e. Transpole HK) was in breach of the bonafide activity requirement, it would be necessary to demonstrate with necessary proof that the borrower (i.e. Transpole HK) was not engaged in bonafide activity in its home jurisdiction i.e. Hong Kong. Furthermore, the expert opined that in order to taint the loan transaction as illegal, it would also have to be demonstrated that the lender had the knowledge of the illegal conduct of the borrower (i.e. Transpole HK), assuming that the activity O.M.P.(EFA)(COMM.) 4/2018 Pg. 28 of 32 carried out by it in the home jurisdiction namely Hong Kong was indeed illegal. 16.[6] As regards the allegation that the funds borrowed from outside India by Transpole HK had been remitted to Transpole India to be used as working capital and would, therefore, constitute violation of the RBI Circular dated 25.11.2014, according to the expert would not by itself result in the activity carried out by Transpole HK being categorized as one which was not bonafide. The usage of funds contrary to the aforementioned circular would result in levy of a penalty on the guarantor (i.e. Transpole India) but would not render the guarantee illegal; opined the expert. 16.[7] Given the fact that the arbitral tribunal has weighed pros and cons of the expert testimony on both sides and thereafter reached a definitive conclusion that there were no violation of FEMA and/or the regulations framed thereunder or of any of the RBI guidelines, in the enforcement proceedings, I am not persuaded to hold that the subject loan transaction resulted in violation of any Indian law, in particular, the provisions of FEMA and/or regulations framed thereunder it. No provision of FEMA or the regulations framed thereunder it was adverted to on behalf of Transpole India to have me conclude to the contrary. 16.[8] On the specific issue that the arbitral tribunal had failed to return a finding of fact whether Transpole HK was involved in bonafide business activity, I may only indicate that the onus concerning this aspect of the matter was on Transpole HK and Transpole India. It is these entities who had raised this defence and therefore in law were required to show that the former was not carrying out bonafide activity in its home jurisdiction i.e. Hong Kong and furthermore that the lender had knowledge of any such illegal activity. The arbitral tribunal without the relevant material could not have ruled on this aspect of the matter. In this behalf, the reference to the judgment in O.M.P.(EFA)(COMM.) 4/2018 Pg. 29 of 32 Renusagar case is misconceived. The ratio of that case is not applicable to the facts obtaining in the instant case. Objection no. (iii)

17. The answer to this objection veers around Clause 15 of the loan agreement obtaining between the parties which is extracted hereinabove. “15.

GOVERNING LAW AND JURISDICTION 15.[1] This Agreement shall be construed only in accordance with the laws of Singapore. Subject to the provisions under Clauses 15.[2] below, the competent courts at Singapore shall have exclusive jurisdiction in relation to all Disputes in connection with or in relation to this Agreement. 15.[2] The Parties shall use their reasonable efforts to amicably settle any Claim, dispute or controversy among or between any of the Parties arising out of, in connection with or relating to this Agreement, or the breach, termination or Invalidity hereof ("Dispute") in the following manner: (a) The Party raising the dispute ("First Party'') shall address to the other Parties ("Other Parties") a notice requesting for an amicable settlement of the Dispute. (b) The Dispute shall be referred for negotiation and discussions between the Parties (where such Parties are natural person) and/or the chairman of each Party to the Dispute or its respective successors ("Disputing Parties"). The Disputing Parties shall endeavor to resolve the Dispute and agree upon and document the agreed course of action within a period of 30 (thirty) days.

(c) Any Dispute that cannot be resolved among the Disputing Parties within 30

(thirty) days from the date that such Dispute arose, or such extended period as such Disputing Parties may agree, shall be referred at the written request of any Disputing Party ("Arbitration Notice Date"} to binding arbitration in accordance with the rules ("SIAC Rules") of the Singapore International Arbitration Centre ("SIAC"}, as may be amended from time to time, which rules are deemed to be incorporated herein by reference.

(d) The Parties agree that the arbitral panel shall comprise of a panel of three arbitrators (the "Arbitration Board"), one arbitrator to be appointed jointly by the Borrower and the Guarantor (acting as one Party) and the other by the Lender. The two arbitrators so appointed shall mutually appoint the third or the presiding arbitrator, in accordance with the SIAC Rules. In the event any appointments are not made as specified herein within 14 (fourteen) days of notification by either the Lender or the Borrower and the Guarantor (acting as one Party), such appointments shall be made in accordance with the SIAC Rules. (e) The venue and the seat for the arbitration shall be Singapore and the arbitration shall be conducted in the English language. (f) The award of the Arbitration Board shall be in writing and shall contain reasons for the decision. The decision of the Arbitration Board shall be final and binding on each of the Disputing Parties and shall be enforceable in any competent court of Law. Judgment upon any arbitral award rendered O.M.P.(EFA)(COMM.) 4/2018 Pg. 30 of 32 hereunder may be entered in any court having jurisdiction, or application may be made to such court for a judicial acceptance of the award and an order of enforcement, as the case may be. (g) The Arbitrator Board shall have the power to award interest on any sum awarded pursuant to the arbitration proceedings and such sum shall carry Interest, if awarded, until the actual payment of such amounts. Each Disputing Party shall bear the costs of the arbitration proceedings. (h) Neither the existence of any Dispute nor the fact that any arbitration Is pending hereunder shall relieve any of the Disputing Parties of their respective obligations under this Agreement. The pendency of Dispute in any arbitration proceeding shall not affect the performance of the obligations under this Agreement.

18. Undoubtedly, a close perusal of the clause would show that parties were required to engage in pre-arbitration negotiations to attempt to resolve amicably the disputes obtaining between the parties.

19. The record shows, something that I have already adverted to above, that after Transpole HK and Transpole India had defaulted in making payments as required under the loan agreement and those that were demanded under notice of acceleration dated 22.03.2016 that a notice for amicable settlement dated 07.04.2016 was served by SBS Singapore on Transpole HK and Transpole India. Furthermore, on the same date, an email was sent by the director of SBS Singapore to one Mr. Anant Kumar Chaudhary who was on the board of both Transpole HK and Transpole India, requesting him to join in the conference which was convened to find an amicable resolution of the dispute obtaining between the parties. 19.[1] In pursuance of this request made on behalf of SBS Singapore, a conference was held on 28.04.2016 to attempt a resolution of the disputes obtaining between the parties. It is only thereafter that on 13.05.2016, the NOA was issued by SBS Singapore triggering the arbitration agreement. As would be evident, the NOA was issued well after the expiry of 30 days from the date when the dispute arose between the parties. The dispute, to my mind, arose, if not earlier, surely when demand for immediate payment for principal and interest in terms of Clause 8.[2] of the loan agreement was served on O.M.P.(EFA)(COMM.) 4/2018 Pg. 31 of 32 Transpole HK and Transpole India. Therefore, the period of 30 days in terms of Clause 15.[2] would end in and about 22.04.2016. As alluded to hereinabove, the notice for amicable settlement was issued on 07.04.2016. On the same date, request for video conferencing was made which was slated for 20.04.2016. This aspect was communicated by Mr. Anant Kumar Chaudhary on behalf of Transpole HK and Transpole India vide mail dated 11.04.2016. Via a return mail dated 13.04.2016, the representative of SBS Singapore confirmed that video conference shall be held on 20.04.2016. However, at the request of Mr. Anant Kumar Chaudhary, the video conference was postponed to 28.04.2016 which was in consonance with the leeway granted in Clause 15.2(c) for extension of time by 30 days period. The parties admittedly failed to resolve their disputes in the conference held on 28.04.2016. 19.[2] Therefore, the argument that the Transpole India’s request which was made vide email dated 03.05.2016 was within 30 days does not appear to be correct. 19.[3] Even assuming that this contention made on behalf of Transpole India is correct, the clause cannot be construed in a fashion that it keeps one party engaged in negotiations and thus delays the arbitration process if it is found in the earlier confabulations between the representatives of disputants that there is no common meeting ground for the resolution of inter se disputes. 19.[4] One cannot but agree with the proposition that where there are clear wordings in the agreement obtaining between parties that pre-arbitration steps are required to be taken before triggering the arbitration mechanism, a recalcitrant party cannot wriggle out of such obligation by treating such a provision as directory – it, however, does not follow that the clause would act as a noose around the neck of the party forcing it to remain engaged in negotiations even though there is no meeting ground for resolution of disputes. If such an objection is raised, the concerned tribunal is required to O.M.P.(EFA)(COMM.) 4/2018 Pg. 32 of 32 ascertain whether steps in that behalf were taken. In this case, an objection was taken qua which a decision was rendered by the arbitral tribunal on 05.09.2016. 19.[5] The final award which subsumes the decision rendered by the arbitral tribunal on 05.09.2016 has not been challenged before the concerned supervisory court. The attempt to challenge this aspect of the matter which, to my mind, involves assessment of intent of parties as to whether bonafide steps had been taken to resolve inter se disputes cannot be made a subject matter of challenge in the instant proceedings in the garb of categorizing the same as a jurisdictional issue. The argument that the decision of the arbitral tribunal (based on the provisions of Section 48(1)(b) which allows the executing court to put breaks on enforcement proceedings if a party is unable to present its case) is without jurisdiction is completely flawed. The rejection of the plea that pre-arbitral steps were not taken by SBS Singapore before triggering the arbitration agreement, in my opinion, did not disable Transpole HK and Transpole India from presenting its case.

20. Thus, for the foregoing reasons, I am unable to sustain any of the objections raised on behalf of Transpole India. Objections raised are, accordingly, rejected. Consequently, the execution proceedings will proceed further.

21. Accordingly, E.A.Nos.2223/2019 and 6932/2019, which are the applications for exemption, are allowed, subject to just exceptions. The remaining applications, i.e. E.A.Nos.8440/2018, 17606/2018, 2222/2019 and 6931/2019, along with the main petition, will be listed before the Roster Bench for further proceedings on 23.09.2019.

JUDGE SEPTEMBER 16, 2019