August 11, 2021, 9:19 AM

The Supreme Court of India

The Supreme Court of India

The Supreme Court of India on Tuesday asked Nagpur businessman Arun Upadhyaya and his company Gemini Bay Transcription Pvt Ltd (GBT) to pay Rs 100 crore to Hong-Kong based company Integrated Sales Service Limited (ISS). The apex court was hearing a civil appeal filed by GBT seeking to dismiss an order passed by the Division Court of the High Court on January 4, 2017.

THE ENTIRE CASE

On September 18, 2000, ISS and DMC Consultants Ltd – a company registered in India, having principal business address at Nagpur and involved in medical transcription business – entered into an agreement. As part of the agreement, ISS was to assist DMC sell its goods and services to prospective customers and was to receive a commission for the same.

As per ISS, the agreement was signed by Rattan Pathak (MD, DMC) and Upadhyaya. After nine years, dispute arose between the parties, as a result of which, a notice of arbitration was sent by ISS to Upadhyaya on June 22, 2009.

Subsequently, a statement of claim was filed before the arbitrator naming Upadhyaya, DMC, DMC Global (company registered in Mauritius), Gemini Bay Consulting Limited (company registered in British Virgin Islands) and GBT as respondents. ISS alleged that the companies are all owned by Upadhyaya and were used to divert funds from ISS and get out of the deal with ISS. The Hong King-based company claimed to have suffered loss due to violation of agreement by Upadhyaya and his companies.

On March 28, 2010, the sole arbitrator, International Arbitration Tribunal in Kansas, Missouri, upheld roughly $8 million award in arbitral dispute against Upadhyaya. ISS then filed case in Nagpur under Indian Arbitration and Conciliation Act, 1996, Chapter 1, for the execution of US court orders in April 10, 2010.

During legal proceedings in sessions and HC in Nagpur, Upadhyaya argued that he was not a signatory to agreement and hence the award was not binding on him. However, during a ruling on January 4, 2017, Division Court of the High Court held that the award was binding and asked Upadhyaya to pay ISS.

The SC on Tuesday upheld the HC’s order and the decree by US arbitrator. On the basis of alter ego doctrine (based on assumption that the corporation as well as the shareholders and the managing directors are the alter egos of each other), the apex court asked Upadhyaya to pay Rs 100 crore (original award adjusted in Indian rupees as per 2021) to ISS. The case filed in April 2010 for execution of the award, however, is still pending in Nagpur HC.

While Senior advocate KV Vishwanathan, Adv Kuber Dewan, Adv Sharath Sampath, Adv Manikya Khanna, Adv Apoorva Singhal, Adv Pratyaksh Sharma, Adv Aditya Krishna, Adv Harish Salve, Adv Anuradha Dutt, Adv B Vijayalakshmi Menon, Adv Wilson Mathew, Adv Suman Yadav and Adv Trisha Raychaudhari appeared for the appellants Upadhyaya and GBT, Adv Arif Bookwala, Adv Gagan Sanghi, Adv Devendra Chauhan, Adv M Bharath and Adv Rameshwar Prasad Goyal appeared for the respondent ISS. 

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