Arbitration Survives Company Governance Gaps : Bombay HC
The arbitral proceedings arose out of the Business Transfer Agreement dated 3.9.2018 and claims for damages, return of machinery and rental payments.
The initiation of arbitration with section 21 notice dated 12.8.2021 is purported to be backed by the Board Resolution of 29.7.2021.
The High Court appointed the Sole Arbitrator in section 11 petition vide order dated 19.11.2022.
On 28.2.2023, petitioner filed section 32(2)(c) application for termination of arbitral proceedings on the ground that its continuation is rendered impossible.
On 4.8.2023, Respondent inducted additional Director to the Board of Directors and on 28.8.2023, he was authorized to undertake all actions in respect of arbitral proceedings.
On 21.9.2023, the respondent passed shareholders resolution and regularized the appointment of additional director with ratifying all earlier actions.
Without a Board of Directors of more than one Director, it was contended that no decision to initiate arbitration or file section 11 petition or file statement of claim could validly be taken by or on behalf of Sarel Drill.
In other words, the contention that the Board of Directors of Sarel Drill was denuded of any power at the time of initiation of arbitration except to take any decision except to appoint another Director.
A company without more than one Director would cease to have any capacity to act in any manner whatsoever and also to initiate arbitration.
It is necessary to show that the impugned order rejection section 32(2)© application is a final adjudication of at least a part of the cause action before it, to constitute, at least, a partial or interim award or a final adjudication of the entire cause of action before, it constitute a final award.
Doctrine of Necessity –
Judgment 12.11.2025 dated of the High Court of Bombay in Commercial Arbitration Petition No.777 of 2024 with Interim Application No.3682 of 2024 of Master Drilling India Private Limited Vs. Sarel Drill & Engineering Equipment India Private Limited.
