DLV and another v DLX and others

The claimants, DLV and DLW, founded an Indian company and are referred to as the Promoters. The defendants are four private equity funds (the Investors). In a Share Acquisition & Shareholders' Agreement of 10 October 2014, cl 19 set out the Investors' exit routes if no qualified IPO occurred by 31 March 2016, including a Secondary Sale under cl 19.1, in which the company and the Promoters were to find a buyer at or above the Exit Price, and a buy-back by the company under cl 19.2. Cl 29.5 provided that no forbearance or indulgence would waive any right unless waived in writing.

Some Investors gave notices in 2016 but no sale took place. After further letters in September 2020 and January 2021, the Investors issued notices of Material Breach in April 2022 and began a consolidated arbitration. The Promoters argued that cl 19.1 imposed no absolute obligation, that the letters were not valid notices, and that the Investors had waived their rights or were estopped by agreeing to a split sale of the company's two main businesses. By an award dated 5 July 2024, the three-member tribunal held that cl 19.1 imposed an absolute obligation and that valid notice had been given, and ordered the company and the Promoters jointly and severally to pay damages equal to the Exit Price as at 18 September 2020, reduced by net proceeds of any Strategic Sale, with the Investors to surrender their shares if paid. In Originating Application No 1033 of 2024, the Promoters applied to the General Division of the High Court to set aside the award under s 24(b) of the International Arbitration Act 1994.

1. Whether the tribunal breached the fair hearing rule by failing to consider the Promoters' Waiver Defence.
2. Whether the tribunal breached the fair hearing rule by failing to consider the Promoters' Buy-back Defence, both on the interpretation of cl 19.1 and on whether the relief amounted to a buy-back prohibited by Indian law.
3. Whether any such breach prejudiced the Promoters.

The court accepted that the Waiver Defence was an essential issue, but held that a tribunal may resolve an issue implicitly, and may leave an issue unaddressed because it thinks it unnecessary; setting aside requires a clear and virtually inescapable inference that the tribunal failed to apply its mind. Here, the tribunal's findings that there was not one contemporaneous document showing anything other than a unified resolve to bring about a Secondary Sale, and that all parties, including through the appointment of Credit Suisse, acted towards furthering one, negated the factual basis of the defence. Any misreading of Credit Suisse's proposals would be an error of fact, not a breach of natural justice. The tribunal's view that cl 29.5 required waivers to be in writing was also a complete answer to a defence based on conduct. Its accurate summary of the defence within the relevant section of the award made it unlikely the defence had been overlooked. In any case, the Promoters showed no real chance that considering the defence would have changed the result.

On the Buy-back Defence, the court held that the second limb depended on the first: the argument that the relief was an unlawful buy-back rested on the same premise as the argument that an absolute obligation would turn cl 19.1 into a buy-back. The tribunal expressly preferred the Investors' construction after considering extensive submissions and treated damages under cl 19.1 as an alternative remedy distinct from a buy-back under cl 19.2, thereby rejecting the premise. The challenge was in substance an attack on the merits. Having summarised the unenforceability argument, the tribunal likely considered it unnecessary to address separately. The court did not accept that counsel had made the concession the Investors claimed, and observed that the unenforceability argument could have been raised earlier than reply closing submissions.

The High Court dismissed the application to set aside the award. Unless the parties agreed costs, they were to file written submissions on costs within two weeks.