Soon after calling off the merger, Japan’s Sony invoked the arbitration clause in the contract and sought $90 million from Zee for breach of merger agreement. Parallelly, Zee approached the National Company Law Tribunal seeking an order to Sony to merge as approved by the Tribunal.
Also Read: SIAC to begin hearing in Sony-Zee arbitration matter on January 31
These actions by the disputing parties are creating more complexities to an already vexed deal. But the developments can lay the grounds for a more solid legal framework for dispute settlement.
Can the NCLT, which approved the merger, order Sony to complete the deal?
Can there be parallel legal proceedings – especially in a domestic court and at an international arbitration centre – over a broken contract?What if the two pronounce conflicting orders?Any significant corporate action must follow the procedure of taking approvals from the NCLT to ensure it complies with the provisions of the Companies Act and in the interests of minority shareholders if it is a listed company. While the approvals are necessary, can the NCLT order mandatory implementation of its approval when the underlying contract itself is dead?
In what appears to be a test case, an international arbitration is dealing with the basic issues of the performance of the contractual obligations, while the NCLT is being asked to deal with it from a different position.
Here comes the role of the arbitration law. This legislation, The Arbitration and Conciliation Act, 1996, is an act derived from Model Law on International Commercial Arbitration of the United Nations Commission on International Trade Law (UNCITRAL). It aims to provide a fair and efficient arbitral procedure, while also minimising the role of judicial authority.
The evolution of jurisprudence in this segment is interesting from the time when domestic courts declared that they have the power to overrule international arbitral awards in the case of Bhatia International Vs Bulk Trading SA.
But it took a turn in the case of Enercon Vs Enercon GmBh, where the court recognised the minimal role for judicial intervention.
“It is a well-recognized principle of arbitration jurisprudence in almost all the jurisdictions, especially those following the UNCITRAL Model Law, that the Courts play a supportive role in encouraging the arbitration to proceed rather than letting it come to a grinding halt,’’ the Supreme Court said in the Enercon case. “Another equally important principle recognized in almost all jurisdictions is the least intervention by the courts.’’
The role of the local judicial authority over arbitration proceedings in a foreign country was further clarified with amendments in 2015 after the Supreme Court ruling in the Balco Vs Kaiser Aluminium case in 2012. “In a foreign seated international commercial arbitration, no application for interim relief would be maintainable under Section 9 or any other provision,’’ the Supreme Court ruled.
Subsequent to the Balco ruling, the court declined to exercise jurisdiction in Reliance Industries Ltd Vs Union of India over a London-seated arbitration.
With the Zee – Sony dispute playing out in multiple geographic jurisdictions and under multiple laws, developments over the years indicate that it may pay to have close watch over the arbitral proceedings in Singapore.
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