Delhi High Court
Flexing It Services Private Limited & … vs Colvyn James Harris on 6 April, 2026
$~
* IN THE HIGH COURT OF DELHI AT NEW DELHI
% Judgment reserved on: 19.03.2026
Judgment pronounced on: 06.04.2026
+ O.M.P. (COMM) 111/2025, I.A. 5890/2025 (For Exemption) &
I.A. 5891/2025 (For Stay)
FLEXING IT SERVICES PRIVATE LIMITED & ANR.
.....Petitioners
Through: Mr. Essenese Obhan, Ms.
Ashima Obhan and Ms. Anjuri
Saxena, Advocates.
versus
COLVYN JAMES HARRIS .....Respondent
Through: Mr. Tishampati Sen, Ms.
Riddhi Sancheti and Mr.
Anurag Anand,
Advocates.
+ OMP (ENF.) (COMM.) 101/2025 & EX.APPL.(OS) 751/2025
(For Disclosure of assets by the JD No. 01 on affidavit)
COLVYN JAMES HARRIS .....Decree Holder
Through: Mr. Tishampati Sen, Ms.
Riddhi Sancheti and Mr.
Anurag Anand,
Advocates.
versus
FLEXING IT SERVICES PRIVATE LIMITED & ANR.
.....Judgement Debtors
Through: Mr. Essenese Obhan, Ms.
Ashima Obhan and Ms. Anjuri
Saxena, Advocates.
CORAM:
HON'BLE MR. JUSTICE HARISH VAIDYANATHAN
SHANKAR
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JUDGMENT
HARISH VAIDYANATHAN SHANKAR, J.
1. The Objection Petition, being OMP. (COMM.) 111/20251,
has been preferred under Section 34 of the Arbitration and
Conciliation Act, 19962, by the Petitioners herein, assailing the
Arbitral Award dated 18.12.20243 rendered by the learned three-
member Arbitral Tribunal4, in the matter titled as Colvyn James
Harris v. Flexing It Services Private Limited & Anr., to the limited
extent of the findings contained in Paragraph Nos. 131(i) and 131(ii)
thereof, whereby the claims of the Respondent have been held to be
within limitation, and the Petitioners have been directed to convert the
Respondent‟s Compulsorily Convertible Debentures5 into equity
shares equivalent to 2% of the paid-up capital of Petitioner No. 1 as
on 31.01.2017.
2. The Enforcement Petition, being OMP (ENF.) (COMM.)
101/20256, has been filed by the Decree Holder/ Respondent in the
Objection Petition, under Section 36 of the A&C Act, read with Order
XXI Rules 10 and 11, and Section 151 of the Code of Civil
Procedure, 19087, seeking execution and enforcement of the
aforesaid Impugned Award passed in its favour.
3. For the sake of clarity and uniformity, the parties hereinafter
shall be referred to, in the same rank and nomenclature as adopted in
the Objection Petition.
1
Objection Petition
2
A&C Act
3
Impugned Award
4
AT
5
CCDs
6
Enforcement Petition
7
CPC
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4. It is clarified that the Enforcement Petition is subject to the
outcome of the Objection Petition, and in the event the Objection
Petition is allowed, the Enforcement Petition shall consequently fail,
to the extent the objections are allowed.
BRIEF FACTS:
5. Petitioner No. 1 is a private limited company engaged in
providing a technology-driven platform enabling organisations to
access independent consultants and domain experts on demand.
Petitioner No. 2 is the Founder and Chief Executive Officer of
Petitioner No. 1.
6. The Respondent is an investor who had subscribed to securities
issued by Petitioner No. 1.
7. The disputes between the parties arise out of a Debenture
Subscription Agreement dated 16.07.20158, executed between the
parties, pursuant to which the Respondent invested a sum of
₹31,50,000/- in Petitioner No. 1 and was allotted 31,500 CCDs having
a par value of ₹100 each.
8. In terms of clause 6.1 of the Agreement, the CCDs were to
mandatorily convert into equity shares either upon the occurrence of a
“Qualified Financing” or upon expiry of a period of 1.5 years from the
date of issuance, i.e., on or before 31.01.2017, whichever was earlier.
The Agreement further contemplated that in the event no Qualified
Financing occurred within the stipulated period, the CCDs would
convert into equity shares in the manner provided therein.
9. It is not in dispute that no Qualified Financing occurred within
the aforesaid period. It is also not disputed that the CCDs held by the
8
Agreement
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Respondent were not converted into equity shares as on 31.01.2017 in
terms of the Agreement.
10. Disputes thereafter arose between the parties in relation to the
conversion of the CCDs, including the manner and timing of such
conversion. The record further indicates that the parties continued to
engage in correspondence subsequent to 31.01.2017 with respect to
the terms and modalities of such conversion.
11. It is also relevant to note that prior to the constitution of the
learned AT, the Respondent, who was the Petitioner therein, had
approached this Court under Section 9 of the A&C Act, seeking
interim measures. Vide Order dated 18.04.2023, this Court, while
dealing with the said petition, made certain prima facie observations
to the effect that the correspondence between the parties indicated that
they had not insisted upon strict enforcement of the contractual
provision relating to conversion and were negotiating the terms of
conversion based on valuation and discount. The said Section 9
Petition was dismissed, leaving it open to the parties to avail
appropriate remedies in accordance with law, and clarifying that the
observations made therein were prima facie in nature and that the
learned AT would be at liberty to consider the issues independently.
12. Thereafter, the Respondent invoked the arbitration in terms of
the Agreement and filed a Statement of Claim, inter alia, seeking
specific performance of the Agreement by directing the Petitioners to
convert the CCDs into equity shareholding equivalent to 2% of
Petitioner No. 1.
13. The Petitioners contested the claims, inter alia, on the ground
that the same were barred by limitation and that the Respondent had,
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by his conduct, waived his contractual rights and/or acquiesced by
conduct, to a waiver of the terms of the Agreement.
14. Upon completion of pleadings, evidence and hearing the
parties, the learned AT rendered the Impugned Award, whereby it
held that the Respondent‟s claims were not barred by limitation and
directed the Petitioners to convert the CCDs into equity shares
equivalent to 2% of the paid-up capital of Petitioner No. 1 as on
31.01.2017, subject to compliance with applicable law.
15. Aggrieved by the aforesaid findings, the Petitioners have
preferred the present Petition under Section 34 of the A&C Act,
impugning the findings contained in Paragraph Nos. 131(i) and 131(ii)
of the Impugned Award.
16. In the interregnum, the Respondent in the Objection Petition,
being the Decree Holder, has initiated execution proceedings for the
enforcement of the Impugned Award by way of OMP(ENF.)(COMM.)
101/2025.
CONTENTIONS ON BEHALF OF THE PETITIONERS:
17. Learned counsel appearing on behalf of the Petitioners would
submit that the Impugned Award is liable to be set aside to the limited
extent of the findings contained in Paragraph Nos. 131(i) and 131(ii),
as the same are patently illegal, perverse, and contrary to the public
policy of India.
18. It would be submitted that the learned AT has erred in holding
that the claims of the Respondent were within limitation. According to
the Petitioners, the cause of action arose, at the latest, on 31.01.2017,
when the CCDs were not converted in terms of the Agreement, and
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the arbitration having been invoked several years thereafter, the claims
were ex facie barred by limitation.
19. Learned counsel for the Petitioner would submit that the
findings on limitation are vitiated by failure to consider material
evidence on record, including the contemporaneous correspondence
exchanged between the parties, which, according to the Petitioners,
clearly establishes that the Respondent was aware of the alleged
breach and had asserted his rights as early as in the year 2016-2017.
20. It would further be submitted that the learned AT has erred in
failing to appreciate that the correspondence exchanged between the
parties was de hors the Agreement. It would be the Petitioners‟ case
that the said correspondence pertained to negotiations on an alternate
mechanism of conversion based on valuation and discount, which was
outside the scope of the contractual framework, and could not have
been relied upon to determine the rights and obligations of the parties
under the Agreement or to extend the period of limitation.
21. Learned counsel for the Petitioner would submit that the finding
of the learned AT that the limitation stood extended on account of
alleged acknowledgements under Section 18 of the Limitation Act,
19639, is unsustainable, inasmuch as there was no acknowledgement
of liability in terms of the Agreement, particularly under the relevant
contractual provision governing conversion.
22. Learned counsel would further submit that the Respondent, by
his conduct, had waived his contractual rights and/or acquiesced by
conduct to a waiver of the terms of the Agreement. It would be
contended that the Respondent, instead of seeking enforcement of
9
Limitation Act
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conversion in terms of the Agreement, engaged in negotiations on
different terms, thereby abandoning his purported rights under the
relevant contractual provision.
23. It would also be contended that the learned AT has failed to
consider this alternative defence of waiver and acquiescence, despite
the same being specifically pleaded and supported by material on
record, thereby rendering the Impugned Award perverse.
24. Learned counsel would further submit that the Impugned
Award is patently illegal inasmuch as the learned AT has
misconstrued the nature and scope of Clause 6.2.5 of the Agreement.
It would be submitted that a plain reading of the contractual
framework demonstrates a distinction between clauses governing
valuation-based conversion and those providing for conversion in
terms of shareholding.
25. It would be submitted that Clauses 6.2.1 to 6.2.4 operate within
a valuation-based framework, whereas Clause 6.2.5 does not
contemplate any valuation exercise and provides for conversion on a
shareholding basis. The learned AT, however, has relied upon
correspondence pertaining to valuation and discount to interpret
Clause 6.2.5, thereby travelling beyond the contractual framework and
applying considerations not borne out from the Agreement.
26. It would further be submitted that Clause 6.2.5 was not an open-
ended provision and did not operate beyond 31.01.2017. Any reliance
placed upon the said clause thereafter, according to the Petitioners, is
contrary to the express terms of the Agreement and amounts to
rewriting the contract.
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27. Learned counsel for the Petitioners would place reliance on the
decisions of the Hon‟ble Supreme Court in Associate Builders v.
DDA10 and PSA Sical Terminals Pvt. Ltd. v. V.O. Chidambaranar
Port Trust11, as well as decisions of this Court in Cruz City 1
Mauritius Holdings v. Unitech Ltd.12, Shiel Trade Venture Pvt. Ltd.
v. Samsung India Electronics Pvt. Ltd.13, and Value Advisory
Services v. ZTE Corporation14, to contend that an arbitral award
which ignores the terms of the contract, travels beyond the contractual
framework, or disregards material evidence would be liable to be set
aside on the ground of patent illegality and perversity.
28. Learned counsel for the Petitioner would further submit that the
direction of the learned AT to convert the Respondent‟s CCDs into
equity equivalent to 2% of the paid-up capital of Petitioner No. 1 is
contrary to the terms of the Agreement. It would be contended that the
Agreement contemplated conversion in terms of shareholding on a
fully diluted basis, and not with reference to paid-up capital.
29. It would further be submitted that the substitution of the
contractual expression of “shareholding” with “paid-up capital”
materially alters the rights of the parties and amounts to rewriting the
terms of the Agreement, which is impermissible in law.
30. Reliance would also be placed by the learned Counsel for the
Petitioners on certain foreign judgments, including AQZ v. ARA15 and
10
(2015) 3 SCC 49
11
(2023) 15 SCC 781
12
2017 SCC OnLine Del 7810
13
2019 SCC OnLine Del 9142
14
2017 SCC OnLine Del 8933
15
(2015) SGHC 49
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CNA v. CNB16, to submit that an arbitral tribunal cannot rewrite the
terms of the contract under the guise of interpretation.
31. It would also be contended that the learned AT has failed to
consider relevant material, including prior proceedings initiated by the
Respondent under Section 9 of the A&C Act, wherein this Court had,
prima facie, observed that the parties were negotiating terms outside
the strict framework of the Agreement.
32. On the aforesaid grounds, it would be submitted that the
findings returned by the learned AT in Paragraph Nos. 131(i) and
131(ii) of the Impugned Award are unsustainable and liable to be set
aside.
CONTENTIONS ON BEHALF OF THE RESPONDENT:
33. Learned counsel appearing on behalf of the Respondent would
submit that the present Petition is devoid of merit and is liable to be
dismissed.
34. It would be submitted that the learned AT has, upon detailed
consideration of the material on record, rightly held that the claims of
the Respondent were not barred by limitation. It would be contended
that the various communications exchanged between the parties were
duly examined by the learned AT and were found to constitute
acknowledgements of liability within the meaning of Section 18 of the
Limitation Act.
35. Learned counsel would further submit that the issue of
limitation, in the facts of the present case, is a mixed question of law
and fact, and the findings rendered by the learned AT are based on an
appreciation of evidence, including correspondence and contractual
16
(2023) SGHC (1) 6
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terms, which cannot be re-examined by this Court in proceedings
under Section 34 of the A&C Act.
36. It would further be submitted that once the learned AT has
returned findings on limitation upon appreciation of evidence, the
same are not amenable to interference under Section 34 of the A&C
Act.
37. Learned counsel for the Respondent would submit that the
issue of limitation, being a mixed question of law and fact, cannot be
re-adjudicated by re-appreciating evidence in proceedings under
Section 34 of the A&C Act. In this regard, reliance would be placed
on the decision of this Court in Oriental Insurance Company Limited
v. April USA Assistance Inc.17, as well as the decision of the Bombay
High Court in Thomas Cook (India) Ltd. v. Red Apple Chandrarat
Travel.18, to contend that a challenge to an arbitral award on the
ground of limitation, which entails a re-evaluation of factual aspects,
would amount to a review on merits and is impermissible in law.
38. It would further be submitted that the Hon‟ble Supreme Court
in OPG Power Generation Private Limited v. Enexio Power Cooling
Solutions India Private Limited & Anr.19, has held that the arbitrator
is the ultimate master of the quality and quantity of evidence, and a
possible view taken by the arbitrator cannot be interfered with unless
the same is perverse. It would be contended that no perversity or
patent illegality has been demonstrated by the Petitioners in the
Impugned Award.
17
2021 SCC OnLine Del 4843
18
(2023) SCC OnLine Bom 97
19
(2025) 2 SCC 417
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39. Learned counsel for the Respondent would further rely upon the
decision of the Hon‟ble Supreme Court in Delhi Airport Metro
Express (P) Ltd. v. DMRC20, to submit that patent illegality must go
to the root of the matter, and that re-appreciation of evidence is
impermissible under Section 34 of the A&C Act.
40. On merits, it would be submitted that the consistent case of the
Respondent has been that the CCDs held by the Respondent were
liable to be converted into 2% of the equity shareholding of Petitioner
No. 1 as on 31.01.2017, in terms of Clause 6.2.5 of the Agreement. It
would be contended that the learned AT has accepted this position and
has rightly held that the Respondent is entitled to such conversion.
41. Learned counsel for the Respondent would submit that the
findings of the learned AT, including those contained in Paragraph
No. 102 of the Award, clearly indicate that the entitlement of the
Respondent was to 2% of the shareholding, being 1/10th of the 20%
shareholding envisaged under Clause 6.2.5 of the Agreement.
42. It would further be submitted that the expression used in
Paragraph No. 131(ii) of the Impugned Award ought not to be read in
isolation, but must be construed in the context of the findings and
reasoning of the learned AT.
43. At this stage, it is noted that learned counsel for the
Respondent, during the hearing before this Court, on instructions,
submitted that the Respondent has no objection if the said expression
is clarified to read as “2% of the shareholding of Petitioner No. 1 as
on 31.01.2017”.
20
(2022) 1 SCC 131
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44. In view of the aforesaid submissions, it would be contended by
the learned counsel for the Respondent that no ground is made out for
interference under Section 34 of the A&C Act, and the present
Petition is liable to be dismissed and the Impugned Award be upheld
and enforced, and would further seek continuation and culmination of
the execution proceedings in terms of the Impugned Award.
ANALYSIS:
45. This Court has carefully considered the submissions advanced
on behalf of both sides and, with their able assistance, has perused the
Impugned Award and the material placed before this Court.
46. At the outset, it is apposite to note that this Court remains
conscious of the limited scope of its jurisdiction while examining an
objection petition under Section 34 of the A&C Act. There is a
consistent and evolving line of precedents whereby the Hon‟ble
Supreme Court has authoritatively delineated and settled the contours
of judicial intervention in such proceedings.
47. In this regard, a 3-Judge Bench of the Hon‟ble Supreme Court,
after an exhaustive consideration of a catena of earlier judgments, in
OPG Power (supra), while dealing with the grounds of conflict with
the public policy of India perversity and patent illegality, grounds
which have also been urged in the present case, made certain pertinent
observations, which are reproduced hereunder:
“Relevant legal principles governing a challenge to an arbitral
award
30. Before we delve into the issue/sub-issues culled out above, it
would be useful to have a look at the relevant legal principles
governing a challenge to an arbitral award. Recourse to a court
against an arbitral award may be made through an application for
setting aside such award in accordance with sub-sections (2), (2-A)
and (3) of Section 34 of the 1996 Act. Sub-section (2) of Section
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34 has two clauses, (a) and (b). Clause (a) has five sub-clauses
which are not relevant to the issues raised before us. Insofar as
clause (b) is concerned, it has two sub-clauses, namely, (i) and (ii).
Sub-clause (i) of clause (b) is not relevant to the controversy in
hand. Sub-clause (ii) of clause (b) provides that if the Court finds
that the arbitral award is in conflict with the public policy of India,
it may set aside the award.
Public policy
31. “Public policy” is a concept not statutorily defined, though it
has been used in statutes, rules, notification, etc. since long, and is
also a part of common law. Section 23 of the Contract Act, 1872
uses the expression by stating that the consideration or object of an
agreement is lawful, unless, inter alia, opposed to public policy.
That is, a contract which is opposed to public policy is void.
*****
37. What is clear from above is that for an award to be against
public policy of India a mere infraction of the municipal laws of
India is not enough. There must be, inter alia, infraction of
fundamental policy of Indian law including a law meant to serve
public interest or public good.
*****
The 2015 Amendment in Sections 34 and 48
42. The aforementioned judicial pronouncements were all prior to
the 2015 Amendment. Notably, prior to the 2015 Amendment the
expression “in contravention with the fundamental policy of Indian
law” was not used by the legislature in either Section 34(2)(b)(ii) or
Section 48(2)(b). The pre-amended Section 34(2)(b)(ii) and its
Explanation read:
*****
44. By the 2015 Amendment, in place of the old Explanation to
Section 34(2)(b)(ii), Explanations 1 and 2 were added to remove
any doubt as to when an arbitral award is in conflict with the public
policy of India.
45. At this stage, it would be pertinent to note that we are dealing
with a case where the application under Section 34 of the 1996 Act
was filed after the 2015 Amendment, therefore the newly
substituted/added Explanations would apply [Ssangyong Engg. &
Construction Co. Ltd. v. NHAI, (2019) 15 SCC 131].
46. The 2015 Amendment adds two Explanations to each of the
two sections, namely, Section 34(2)(b)(ii) and Section 48(2)(b), in
place of the earlier Explanation. The significance of the newly
inserted Explanation 1 in both the sections is two-fold. First, it does
away with the use of words : (a) “without prejudice to the
generality of sub-clause (ii)” in the opening part of the pre-
amended Explanation to Section 34(2)(b)(ii); and (b) “without
prejudice to the generality of clause (b) of this section” in the
opening part of the pre-amended Explanation to Section 48(2)(b);
secondly, it limits the expanse of public policy of India to the three
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specified categories by using the words “only if”.
Whereas, Explanation 2 lays down the standard for adjudging
whether there is a contravention with the fundamental policy of
Indian law by providing that a review on merits of the dispute shall
not be done. This limits the scope of the enquiry on an application
under either Section 34(2)(b)(ii) or Section 48(2)(b) of the 1996
Act.
47. The 2015 Amendment by inserting sub-section (2-A) in Section
34, carves out an additional ground for annulment of an arbitral
award arising out of arbitrations other than international
commercial arbitrations. Sub-section (2-A) provides that the Court
may also set aside an award if that is vitiated by patent illegality
appearing on the face of the award. This power of the Court is,
however, circumscribed by the proviso, which states that an award
shall not be set aside merely on the ground of an erroneous
application of the law or by reappreciation of evidence.
48. Explanation 1 to Section 34(2)(b)(ii), specifies that an arbitral
award is in conflict with the public policy of India, only if:
(i) the making of the award was induced or affected by fraud or
corruption or was in violation of Section 75 or Section 81; or
(ii) it is in contravention with the fundamental policy of Indian law;
or
(iii) it is in conflict with the most basic notions of morality or
justice.
49. In the instant case, there is no allegation that the making of the
award was induced or affected by fraud or corruption, or was in
violation of Section 75 or Section 81. Therefore, we shall confine
our exercise in assessing as to whether the arbitral award is in
contravention with the fundamental policy of Indian law, and/or
whether it conflicts with the most basic notions of morality or
justice. Additionally, in the light of the provisions of sub-section
(2-A) of Section 34, we shall examine whether there is any patent
illegality on the face of the award.
50. Before undertaking the aforesaid exercise, it would be apposite
to consider as to how the expressions:
(a) “in contravention with the fundamental policy of Indian law”;
(b) “in conflict with the most basic notions of morality or justice”;
and
(c) “patent illegality” have been construed.
In contravention with the fundamental policy of Indian law
51. As discussed above, till the 2015 Amendment the expression
“in contravention with the fundamental policy of Indian law” was
not found in the 1996 Act. Yet, in Renusagar Power Co.
Ltd. v. General Electric Co., 1994 Supp (1) SCC 644, in the
context of enforcement of a foreign award, while construing the
phrase “contrary to the public policy”, this Court held that for a
foreign award to be contrary to public policy mere contravention of
law would not be enough rather it should be contrary to:
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(a) the fundamental policy of Indian law; and/or
(b) the interest of India; and/or
(c) justice or morality.
*****
55. The legal position which emerges from the aforesaid discussion
is that after “the 2015 Amendments” in Section 34(2)(b)(ii) and
Section 48(2)(b) of the 1996 Act, the phrase “in conflict with the
public policy of India” must be accorded a restricted meaning in
terms of Explanation 1. The expression “in contravention with the
fundamental policy of Indian law” by use of the word
“fundamental” before the phrase “policy of Indian law” makes the
expression narrower in its application than the phrase “in
contravention with the policy of Indian law”, which means mere
contravention of law is not enough to make an award vulnerable.
To bring the contravention within the fold of fundamental policy of
Indian law, the award must contravene all or any of such
fundamental principles that provide a basis for administration of
justice and enforcement of law in this country.
56. Without intending to exhaustively enumerate instances of such
contravention, by way of illustration, it could be said that:
(a) violation of the principles of natural justice;
(b) disregarding orders of superior courts in India or the binding
effect of the judgment of a superior court; and
(c) violating law of India linked to public good or public interest,
are considered contravention of the fundamental policy of Indian
law.
However, while assessing whether there has been a contravention
of the fundamental policy of Indian law, the extent of judicial
scrutiny must not exceed the limit as set out in Explanation 2 to
Section 34(2)(b)(ii).
*****
Patent illegality
65. Sub-section (2-A) of Section 34 of the 1996 Act, which was
inserted by the 2015 Amendment, provides that an arbitral award
not arising out of international commercial arbitrations, may also
be set aside by the Court, if the Court finds that the award is visited
by patent illegality appearing on the face of the award. The proviso
to sub-section (2-A) states that an award shall not be set aside
merely on the ground of an erroneous application of the law or by
reappreciation of evidence.
66. In ONGC Ltd. v. Saw Pipes Ltd., (2003) 5 SCC 705, while
dealing with the phrase “public policy of India” as used in Section
34, this Court took the view that the concept of public policy
connotes some matter which concerns public good and public
interest. If the award, on the face of it, patently violates statutory
provisions, it cannot be said to be in public interest. Thus, an award
could also be set aside if it is patently illegal. It was, however,
clarified that illegality must go to the root of the matter and if the
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illegality is of trivial nature, it cannot be held that award is against
public policy.
67. In Associate Builders v. DDA, (2015) 3 SCC 49, this Court
held that an award would be patently illegal, if it is contrary to:
(a) substantive provisions of law of India;
(b) provisions of the 1996 Act; and
(c) terms of the contract [See also three-Judge Bench decision of
this Court in State of Chhattisgarh v. SAL Udyog (P) Ltd., (2022)
2 SCC 275].
The Court clarified that if an award is contrary to the substantive
provisions of law of India, in effect, it is in contravention of
Section 28(1)(a) of the 1996 Act. Similarly, violating terms of the
contract, in effect, is in contravention of Section 28(3) of the 1996
Act.
68. In Ssangyong Engg. & Construction Co. Ltd. v. NHAI, (2019)
15 SCC 131 this Court specifically dealt with the 2015
Amendment which inserted sub-section (2-A) in Section 34 of the
1996 Act. It was held that “patent illegality appearing on the face
of the award” refers to such illegality as goes to the root of matter,
but which does not amount to mere erroneous application of law. It
was also clarified that what is not subsumed within “the
fundamental policy of Indian law”, namely, the contravention of a
statute not linked to “public policy” or “public interest”, cannot be
brought in by the backdoor when it comes to setting aside an award
on the ground of patent illegality [ See Ssangyong Engg. &
Construction Co. Ltd. v. NHAI, (2019) 15 SCC 131]. Further, it
was observed, reappreciation of evidence is not permissible under
this category of challenge to an arbitral award [See Ssangyong
Engg. & Construction Co. Ltd. v. NHAI, (2019) 15 SCC 131].
Perversity as a ground of challenge
69. Perversity as a ground for setting aside an arbitral award was
recognised in ONGC Ltd. v. Western Geco International Ltd.,
(2014) 9 SCC 263. Therein it was observed that an arbitral
decision must not be perverse or so irrational that no reasonable
person would have arrived at the same. It was observed that if an
award is perverse, it would be against the public policy of India.
70. In Associate Builders v. DDA, (2015) 3 SCC 49 certain tests
were laid down to determine whether a decision of an Arbitral
Tribunal could be considered perverse. In this context, it was
observed that where:
(i) a finding is based on no evidence; or
(ii) an Arbitral Tribunal takes into account something irrelevant to
the decision which it arrives at; or
(iii) ignores vital evidence in arriving at its decision, such decision
would necessarily be perverse.
However, by way of a note of caution, it was observed that when a
court applies these tests it does not act as a court of appeal and,
consequently, errors of fact cannot be corrected. Though, a possible
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view by the arbitrator on facts has necessarily to pass muster as the
arbitrator is the ultimate master of the quantity and quality of
evidence to be relied upon. It was also observed that an award
based on little evidence or on evidence which does not measure up
in quality to a trained legal mind would not be held to be invalid on
that score.
71. In Ssangyong Engg. & Construction Co. Ltd. v. NHAI, (2019)
15 SCC 131, which dealt with the legal position post the 2015
Amendment in Section 34 of the 1996 Act, it was observed that a
decision which is perverse, while no longer being a ground for
challenge under “public policy of India”, would certainly amount
to a patent illegality appearing on the face of the award. It was
pointed out that an award based on no evidence, or which ignores
vital evidence, would be perverse and thus patently illegal. It was
also observed that a finding based on documents taken behind the
back of the parties by the arbitrator would also qualify as a decision
based on no evidence inasmuch as such decision is not based on
evidence led by the parties, and therefore, would also have to be
characterised as perverse [ See Ssangyong Engg. & Construction
Co. Ltd. v. NHAI, (2019) 15 SCC 131].
72. The tests laid down in Associate Builders v. DDA, (2015) 3
SCC 49 to determine perversity were followed in Ssangyong
Engg. & Construction Co. Ltd. v. NHAI, (2019) 15 SCC 131 and
later approved by a three-Judge Bench of this Court in Patel Engg.
Ltd. v. North Eastern Electric Power Corpn. Ltd., (2020) 7 SCC
167.
73. In a recent three-Judge Bench decision of this Court in DMRC
Ltd. v. Delhi Airport Metro Express (P) Ltd., (2024) 6 SCC 357,
the ground of patent illegality/perversity was delineated in the
following terms: (SCC p. 376, para 39)
“39. In essence, the ground of patent illegality is available
for setting aside a domestic award, if the decision of the
arbitrator is found to be perverse, or so irrational that no
reasonable person would have arrived at it; or the
construction of the contract is such that no fair or
reasonable person would take; or, that the view of the
arbitrator is not even a possible view. A finding based on
no evidence at all or an award which ignores vital
evidence in arriving at its decision would be perverse and
liable to be set aside under the head of “patent illegality”.
An award without reasons would suffer from patent
illegality. The arbitrator commits a patent illegality by
deciding a matter not within its jurisdiction or violating a
fundamental principle of natural justice.”
Scope of interference with an arbitral award
74. The aforesaid judicial precedents make it clear that while
exercising power under Section 34 of the 1996 Act the Court does
not sit in appeal over the arbitral award. Interference with an
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arbitral award is only on limited grounds as set out in Section 34 of
the 1996 Act. A possible view by the arbitrator on facts is to be
respected as the arbitrator is the ultimate master of the quantity and
quality of evidence to be relied upon. It is only when an arbitral
award could be categorised as perverse, that on an error of fact an
arbitral award may be set aside. Further, a mere erroneous
application of the law or wrong appreciation of evidence by itself is
not a ground to set aside an award as is clear from the provisions of
sub-section (2-A) of Section 34 of the 1996 Act.
75. In Dyna Technologies (P) Ltd. v. Crompton Greaves Ltd.,
(2019) 20 SCC 1, paras 27-43, a three-Judge Bench of this Court
held that courts need to be cognizant of the fact that arbitral awards
are not to be interfered with in a casual and cavalier manner, unless
the court concludes that the perversity of the award goes to the root
of the matter and there is no possibility of an alternative
interpretation that may sustain the arbitral award. It was observed
that jurisdiction under Section 34 cannot be equated with the
normal appellate jurisdiction. Rather, the approach ought to be to
respect the finality of the arbitral award as well as party’s autonomy
to get their dispute adjudicated by an alternative forum as provided
under the law.”
48. In the backdrop of the aforesaid settled position of law, this
Court now proceeds to examine whether the findings returned by the
learned AT in Paragraph Nos. 131(i) and 131(ii) of the Impugned
Award warrant interference within the limited scope of jurisdiction
under Section 34 of the A&C Act. The said findings made by the
learned AT are extracted herein below:
“131. Having considered all the evidence and submissions placed
before the Tribunal and for the reasons set out above, the Tribunal;
hereby Declares, Determines and Awards as follows:
i) The Claimant‟s claim seeking conversion of his CCDs into equity
shareholding of the 1st Respondent Company in accordance with the
Debenture Subscription Agreement dated 16 July 2015 is not barred
by limitation;
ii) The Respondents are directed to convert the CCDs of the
Claimant into equity shareholding of the 1st Respondent Company
and issue to the Claimant, subject to compliance with applicable law,
equity shares equivalent to 2% of the paid-up capital of the 1st
Respondent Company as on 31 January 2017;……..”
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49. The primary challenge raised by the Petitioners pertains to the
finding of the learned AT that the claims of the Respondent are within
the limitation. According to the Petitioners, the cause of action arose
on 31.01.2017, and the claims having been invoked thereafter are
barred by limitation. The relevant findings of the learned AT are
reproduced herein below:
“Tribunal’s Analysis
72. In its decision dated 18 April 2023 in O.M.P(I)(COMM.)
119.2023, the Hon‟ble High Court of Delhi noted that many years
had passed from the stipulated period for conversion of the CCDs
and it would therefore have to be considered by the Arbitral
Tribunal whether the Claimant could still place reliance on Clause
6.2.5 of the Agreement. However, the Hon‟ble Court clarified that
its observations “would not prejudice either party before the
Arbitral Tribunal.”
73. On 6 November 2023, the Tribunal issued an order on the
Respondents‟ application to dismiss the claims for being barred on
account of limitation. The said Order noted as follows:
“6. Having heard extensive arguments on behalf of the
Claimant and the Respondents, we are of the view it would
be appropriate in the facts and circumstances of the case
that the issues of inter alia (a) whether the date fixed for
performance of conversion of CCDs into equity was
extended and set at-large; or (b) when the conversion of
CCDs into equity under section 6.2.5 was refused, and (c)
when the cause of action in respect of alleged breach of
Clauses 5.1 and 5.2 arose be determined after trial. This is
so because the findings on the issues referred to above are
dependent not only on a reading of the Agreement and the
pleadings of the parties, but require appreciation of the
correspondence exchanged, documents on record and oral
evidence to be led. As such, we are of the view that
whether the claims are barred by limitation (which is a
mixed question of fact and law) should not be decided at
the threshold as a preliminary issue in the facts and
circumstances of this case.
7. In the circumstances, we deem it fit to decide the issue
of limitation along with the other issues at trial.
Accordingly, IA No. 1 is kept pending for consideration
after trial, alongside the final award.”
74. Clause 6 of the Agreement provided the mechanism for
conversion of the CCDs into equity shares. Clause 6.1 envisaged
that the CCDs shall be mandatorily converted into fully paid-up
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equity shares of the 1st Respondent Company on the occurrence of
the earlier of (i) qualified financing, or (ii) at the expiry of; 1.5
years from the date of issuance of the CCDs (i.e., 31 January 2017).
75. Furthermore, Clause 6.2.4 provided that in the event of a
qualified financing takes place, the CCDs would convert into such
number of equity shares as set out in the formula set forth therein
which provided a 25% discount to the price at which equity shares
were issued in the qualified financing. Clause 6.2.5 of the
Debenture Subscription Agreement provides that where the
Company was unable to secure qualified financing within a period
of 1.5 years from the date of issuance of the CCDs, such CCDs
“will convert to such number of equity shares that collectively
amount to 20% (twenty percent) of the Shareholding of the
Company on a fully diluted basis” (or 2% of shareholding of the
Company in the case of the Claimant, the Claimant having made
l/10th of the investment.)
76. From the evidence on record, it is clear that the 1st Respondent
Company was not able to convert the CCDs of the Claimant into
equity shares by 31 January 2017 as mandated by the Agreement.
This is also accepted by both parties. Failure to convert the CCDs
within the specified timeframe constitutes breach of contract and
entitled the Claimant to seek remedies available to him in law.
77. The limitation to seek such remedies would have expired by 30
January 2020, as, in this formulation, the cause of action arose on
31 January 2017. However, if there was an acknowledgment in
writing of the liability before 30 January 2020, then in terms of
Section 18 of the Limitation Act, this would have the effect of
extending the period of limitation for a further period of three years
from the date of such acknowledgment.
78. Section 18 of the Limitation Act provides that:
“Effect of acknowledgment in writing.–(1) Where,
before the expiration of the prescribed period for a suit or
application in respect of any property or right, an
acknowledgment of liability in respect of such property or
right has been made in writing signed bv the party against
whom such property or right is claimed, or by any person
through whom he derives his title or liability, a fresh
period of limitation shall be computed from the time when
the acknowledgment was so signed. ” (emphasis supplied).
79. It is the Claimant‟s case that the 2nd Respondent (on behalf of
the 1st Respondent) acknowledged and undertook to convert the
CCDs on multiple occasions and “in light of the undertaking of the
Respondents that the CCDs of the Claimant would certainly be
converted to equity in March 2018, the Claimant chose to wait, and
restrained himself from initiating arbitration at that staged
(paragraphs 19, 27 and 33 of the Statement of Claim)
80. The Tribunal has reviewed the evidence on record and
concludes that the following key correspondences (amongst others)
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constitute acknowledgments in writing of the liability of the
Respondent to convert the CCDs into equity shares under the
Agreement. These acknowledgments had the effect of extending
the period of limitation from time to time:
i) ‟On 31 March 2018, the 2nd Respondent sent an email (Exhibit
C16) in which she said:
” A quick update- our discussions for Series A financing
are proceeding well and we are in very active discussions
with several VCs who are interested in the space and
quality of business Flexing It is building. We are confident
that we will close the CCDs fundraise in the next 1-2
quarters and have a solid partner to help us scale the
business further.
As a quick reminder, the amended conversion date of your
original CCD investment was planned to be March 31st,
2018 and I wanted to reach out with this update and to
communicate that the conversion while extended will
occur in the next few months (outer window being
September 30, 2018) to ensure we can complete the series
A process.” (emphasis added)
This email (which is to be read along with the email of 10
November 2016 (Exhibit C6, R2/Exhibit CW1/6) where the 31
January 2017 date under the Subscription Agreement was sought to
be extended to 31 March 2018) constitutes a clear and unequivocal
acknowledgement of the 1st Respondent Company‟s liability to
convert the Claimant‟s CCDs under the Subscription Agreement-
and has the effect of extending the period of limitation until 30
March 2021.
ii) On 9 October 2018 (Exhibit R17), the 2nd Respondent, on
behalf of the 1st Respondent company, sent an email to the
Claimant stating:
“Given that this is a longer hold to conversion of your
investment into equity, we would like to extend an
additional discount of 10% to the series A price at the time
of conversion on your original investment into Flexing It.
So the total discount on your investment would be as
follows:
Original investment – 35% + an additional 10% (Total
discount to series A of 45%)
I know that our Series A has been delayed beyond what
was originally planned, but this has given us the
opportunity to build a solid and sustainable business in a
frugal manner.”
This was an acknowledgment of Respondent No.l‟s obligation to
convert the CCDs under the Subscription Agreement and an
acknowledgment that it was delayed in performing this obligation.
It further made a promise of an additional discount to compensate
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for the delay in performance of its obligation. This email had the
effect of extending the limitation until 8 October 2021.
iii) Similarly the email sent by the 2nd Respondent on 12 March
2019 (Exhibit R19) was a clear acknowledgment of the 1st
Respondent‟s liability to convert the CCDs under the Subscription
Agreement, and a further promise of additional discounts. It stated:
“In terms of your investment, as you are aware it is structured as a
CCD which converts to equity at Series A with the angel investors
converting at a discounted price. The original discount on your.
CCD offered was 25% and we then increased that by 10% each in
two tranches to get a total discount on your investment of 45%.
This was driven by the fact that our early investors were having to
wait longer for conversion, and we therefore wanted to offer
additional return to them. At this discount, your investment of INR
31..5L should convert into equity worth approx. INR 57.3L when
we raise financing in the next several months. We will definitely
consider adding onto the discount for our early investors in the
event we see the fundraise closure getting delayed beyond a few
months”. This was a clear acknowledgment of the underlying
liability of the 1st Respondent and its obligation to convert the
CCDs under the Agreement. This email had the effect of extending
the period of limitation until 11 March 2022.
iv) Again on 3 February 2020 (Exhibit R19), the 2nd Respondent
sent a mail acknowledging its liability to convert the CCDs stating:
“A quick update re the conversion- We are in active conversations
with several VCs over the last couple of months regards our
fundraise We should have a better sense by the end of February,
but we are targeting to close the raise and convert the original
CCDs within the next few months.” This had the effect of extending
the limitation until 2 February 2023.
v) On 10 June 2021, the 2nd Respondent sent an email (Exhibit
Cl8) to the Claimant in which she said: “As we had discussed a few
months ago, we are committed to get a conversion for our early
investors this FY and are aiming to make that happen.” Again, on
7 July 2021, the 2nd Respondent sent an email (Exhibit Cl8) to the
Claimant in which she stated:
“As indicated a little while ago, we are committed to get a
conversion for our early investors this FY and are aiming
to make that happen – We should definitely see a
conversion of CCDs to shares this financial year.”
Similarly, on 4 October 2021 and 14 December 2021 (Exhibit
C18), the 2nd Respondent again reiterated their obligation to
convert “As I mentioned a couple of months earlier, we are
committed to making the conversion for our early investors happen
this FY. For me, this is top priority in addition to keeping up the
growth momentum for the company and we will make this happen
this year.” And “As mentioned a couple of months earlier, we are
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committed to making the conversion for our early investors happen
this FY i.e. by March 2022
These correspondences had the effect of extending limitation until
October and December 2024 respectively.
vi) On 14 March 2022, the 2nd Respondent in her email (Exhibit
C20) to the Claimant stated:
“”I understand that the conversion timelines planned
initially have been delayed keeping in mind that we have
given\the early investors additional discounts on the
CCDs held so that their returns are protected You will
recall that in 2017, you and I engaged in discussions on
me buying out your CCDs under the Subscription
Agreement, but unfortunately we were not able to agree on
the valuation. At this time, I am focusing on a conversion
for all investors and hope to have an update soon.”
This constituted yet another acknowledgement of the 1st
Respondent Company‟s obligation to convert the Claimant‟s CCDs
and had the effect of extending limitation until 13 March 2025.
vii) On 20 February 2023 (Exhibit C20/Exhibit CW 1/19), the
2nd Respondent sent the following email “To quickly recap, your
investment into FI came in the form of CCDs, which were to
convert into shares at a discounted price when we raised Series
A……….. For the longer hold period, as you are aware, we have
given all of our equity investors additional discounts to
compensate”. This also constitutes an acknowledgment of the
Respondent‟s obligation to convert the Claimant‟s CCDs under the
Agreement and had the effect of extending the limitation until 19
February 2026.
viii) The 2nd Respondent‟s email of 17 March 2023 (Exhibit R28)
is a clear and unequivocal acknowledgment of the liability of the
Respondent company to convert the CCDs under the Agreement
within 1.5 years. It states “On the timing, the original CCD
agreement did have a 1.5 years timeline for conversion as you
mention. However, as has been communicated over the years in my
updates to you and all other investors, we have not raised
institutional funding relying on revenues and profits to drive
growth. The delay in conversion was intimated to all investors by
email at several occasions including formally on November 10,
2016 and then again over July- September 2018 and at each time
an additional 10% discount was added to the original discount on
the CCD (25% in your case) to compensate for this. This email had
the effect of extending the limitation until 16 March 2026.
81. What emerges on a plain reading of the above emails is that
there were numerous acknowledgments of the 2nd Respondent
Company‟s obligations to convert the Claimant‟s CCDs under the
Agreement- such acknowledgments were provided in 2016, 2017,
2018, 2019, 2020, 2021, 2022 and 2023. These communications
clearly acknowledged the Claimant‟s entitlement to a conversion of
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his CCDs and extended the period of limitation. It is well
established that an acknowledgement of liability in respect of a
property or right made before the expiration of the period
prescribed for filing of legal proceedings in respect of such
property or right would have the effect of giving rise to a fresh
period of limitation from the date of each such acknowledgement.
The emails referred to hereinabove, sent by the 2nd Respondent on
behalf of the 1st Respondent Company, clearly show repeated
acknowledgements of the 1st Respondent‟s obligation to convert
the Claimant‟s CCDs in accordance with the provision of the
Agreement. As such, a fresh period of limitation would be deemed
to have commenced from the date of each such acknowledgement.
In these circumstances, the commencement of arbitration (as
evidenced by the Notice of Arbitration dated 3 April 2024, Exhibit
C25) cannot be said to be time barred.
82. In State of Kerala v T.M. Chacko (2000) 9 S.CC 722, the
Hon‟ble Supreme Court has laid down the test for applying Section
18 of the Limitation Act in circumstances where a party has
acknowledged its liability towards any right or property:
“From a perusal of Sub-section (1) of Section 18 it is
evident that to invoke this provision:
(1) there must be an acknowledgement of liability in
respect of property or right;
(2) the acknowledgement must be in writing signed by the
party against whom such right or property is claimed (or
by any person) through whom he derives his title or
liability;
(3) the acknowledgement must be made before the
expiration of the period prescribed for a suit or
application (other than application for the execution of a
decree) in respect of such property or right. The effect of
such an acknowledgement is that a fresh period of
limitation has to be computed from the time when the
acknowledgement was so signed.” (emphasis supplied).
83. In Sudarshan Cargo Pvt Ltd v Techvac Engineering Pvt Ltd,
2013 SCC Online Kar 5063, it was noted that acknowledgments of
liability by email are valid and would constitute proper
acknowledgements of liability for the purposes of section 18 of the
Limitation Act 1963.
84. In Lakshmirattan Cotton Mills v Aluminium Corpn of India,
(1971) 1 SCC 67, it was held:
“The statement need not indicate the exact nature or the
specific character of the liability. The words used in the
statement in question, however, must relate to a present
subsisting liability and indicate the existence of jural
relationship between the parties such as, for, instance,
that of a debtor and a creditor and the intention to admit
such a jural relationship. Such an intention need not be in
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express terms and can be inferred by implication or the
nature of the admission and the surrounding
circumstances. Generally speaking, a liberal construction
of the statement in question should be given” (emphasis
added)
85. Applying these principles, it can clearly be inferred from the
emails summarised above that the 1st and 2nd Respondents
acknowledged their contractual liability to convert the CCDs of the
Claimant. Based on such acknowledgment, the parties discussed
various options to resolve the issue which proved to be
unsuccessful and ultimately led to the commencement of these
arbitration proceedings.
86. At no point in time between 2016 and 2022 did the
Respondents disavow their obligation to convert the Claimant‟s
CCDs. The first time when the Respondents refused to convert the
Claimant‟s CCDs was only on 20 March 2023 (Exhibit C22)
shortly after which the Claimant commenced arbitration by sending
a Notice of Arbitration on 3 April 2023.
87. The Respondents have made two arguments to contend that
these correspondences do not constitute an acknowledgment of
liability under Section 18 of the Limitation Act:
A. One, they have argued that the communications between
the parties were de hors the understanding contained in the
Agreement and therefore were not acknowledgments of
liability under the Agreement, and
B. Two, they have relied on an admission in the cross-
examination of the Claimant that there was no specific email
by the Respondents that the CCDs would be converted to
equity shares at 2% after the default took place.
88. The Tribunal will deal with both these submissions.
A. Were the Correspondences de hors the Agreement?
i) The Tribunal has reviewed the communications between the
parties and concludes that the correspondences were not de
hors the Agreement but were in fact clearly with reference to
the obligation of the Respondents to convert the CCDs under
the Agreement. This obligation was repeatedly acknowledged
and admitted in all the correspondences set out above. The
reference in the communications to the timelines for
conversion and the discount to the Series A price were all
references to Clause 6 of the Agreement and not de hors it.
ii) What is further clear on a careful consideration of the
correspondence between the parties is that even the settlement
discussions were premised on the admitted obligation of the
1st Respondent Company to convert the Claimant‟s CCDs into
equity shares and its admitted failure or inability to perform
such obligation. The emails from the 2nd Respondent (on her
own behalf and as the promoter of the 1st Respondent
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Company) proposing or exploring options for resolving the
issue is predicated on a breach of the 1st Respondent
Company‟s obligation to convert the Claimant‟s CCDs into
equity shares- and in that sense, these emails acknowledge and
admit breach of contract and the liability to convert the CCDs.
Further, it is apparent that the offers for settlement were
rejected by the Claimant, and the Claimant insisted that the
CCDs be converted in terms of the Agreement. The
correspondence is clear that the Respondent continued to
assure the Claimant that the CCDs would be converted in
terms of the Agreement, but sought an extended timeframe to
enable it to complete a Qualified Financing, and promised an
additional discount to the Qualified Financing equity share
price.
iii) It is instructive, in particular, to consider the: following
communications exchanged between the parties:
• On 10 November 2016, the 2nd Respondent sent an email
(Exhibit C6) to the Claimant. In the email, she proposed that
the date of conversion be extended to March 2018 instead of
the 31 January 2017 timeline prescribed in the Agreement. To
compensate investors including the Claimant for the “slightly
longer wait” for conversion, she proposed a total discount of
35% (an additional discount of 10% to the discount promised
in the Subscription Agreement) for the conversion to happen.
She asked the Claimant if such a proposal would be acceptable
to him and if yes, she would send a “short addendum to the
investment agreement […] so that all the paper-work is sorted
too?’ This was, therefore, in the nature of a proposal to amend
the Agreement, and the proposal was predicated on the
inability of the 1st Respondent Company to convert the
Claimant‟s CCDs by 31 January 2017.
• In response, the Claimant made it clear vide his email dated
21 November 2016 (Exhibit C7) that he preferred the original
terms of the Agreement to adhered to.
• On 28 December 2016 (Exhibit C9), the 2nd Respondent
referred to a consensus amongst the remaining investors to
extend the CCD period to March 2018. However, since the
Claimant had clearly expressed his preference to convert to
equity in terms of the Agreement, she made the following
proposal: „7 as promoter and primary shareholder buy your
CCDs in return for a certain amount of equity in the company
from my shareholding. […] I look forward to resolving this
such that the answer works for both Flexing It and yourself’.
• This proposal- that the 2nd Respondent buy out the
Claimant‟s CCDs and provide him equity from her
shareholding in the 1st Respondent as consideration for the
buyout- proceeded on the basis of an acknowledgment that the
2nd Respondent was unable to perform its contractual
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obligation to convert the Claimant‟s CCDs by end-January
2017. The proposal was, in this context, an attempt to resolve
the situation arising out of the 1st Respondent‟s acknowledged
breach of contract.
• This proposal was taken further by the 2nd Respondent who
proposed, in her email of 14 February 2017 (Exhibit C9), that
she would issue 0.39% of the 1st Respondent Company‟s
shares from her own shareholding in the Company to the
Claimant.
• The Claimant disagreed with the valuation methodology on
the basis of which the 2nd Respondent had proposed transfer
of 0.39% of the shares of the 1st Respondent from her
shareholding in the Company. In his email dated 17 April 2017
(Exhibit C13), he said:”Flexing It has defaulted in its
representation ref the CCDs, the tenure and timelines, and
needs to arrive at an amicable resolution to resolve my issue,
and not a unilateral arbitrary valuation.”
• In response, the 2nd Respondent reiterated her keenness as
also that of her fellow Directors and investors to settle the
issue amicably. In her letter dated 21 April 2017 (Exhibit
C14), she stated as follows:
“We have always tried to work towards an amicable
resolution that gives you a fair solution and at the
same time is not detrimental to the company and/or
the other investors. Keeping this principle in mind, I
have previously suggested 3 constructive
approaches to move forward:
1. Your accepting the tenure extension and
additional discount as all other CCD holders have
done;
2. Flexing It returning the money you have invested,
even though we are under no obligation to do so as
it represented venture investment; or
3. My buying your CCDs and in consideration
issuing you equity out of my shareholding.
However, you have refused all suggestions
previously made by me. In response to my
suggestion of us returning your investment amount
(that we discussed in our call), your response was
that you would consider it if it offered a substantial
return. Your counter-suggestion has been that you
receive 3.75% of the company’s equity- a proposal
that the board of the company cannot even consider
given that it is detrimental to the company and our
other investors and will meaningfully impact the
ability to raise further capital. You have disregarded
my suggestions and have instead only sent me
contentious emails. Your way of amicably resolving
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this seems to be through the arbitration route. Given
your stated desire for me to focus on business
growth, it is difficult to understand how an
arbitration process would be constructive or
consistent with this aim. […] You have also
mentioned that you have not been provided with any
data or documents. You will appreciate that the
company can only share limited information with
debenture holders dash the investment agreement
also clearly provides for this and we have given you
all documents and information that we are required
to provide.”
• All options for an amicable resolution discussed in this letter
flow from an acknowledged inability or failure of the
Company to convert the Claimant‟s CCDs.
• It was also clear that the proposals were not accepted by the
Claimant.
iv) It is further instructive to note the emails from the
Respondent dated 31 March 2018, 9 October 2018, 12 March
2019, 3 February 2020, 7 July 2021, 4 October 2021, 14
December 2021, 14 March 2022, 20 March 2023 and 17
March 2023, all of which (extracted above) came after the
settlement talks had failed and clearly and equivocally refer to
the obligation of the Respondent to convert the CCDs under
the Agreement.
v) Finally, the argument of the Respondent that the
acknowledgments of the obligation to convert the CCDs were
de hors the Agreement cannot also be accepted as it is
common ground between the parties that there was no
amendment of the contract.
The Agreement provides for a specific procedure for
amendment. Clause 15.6 of the Agreement provides as
follows:
“15.6 Amendments
No modification, alteration or amendment of this
Agreement or any of its terms or provisions shall be
valid or legally binding on the Parties unless made
in writing and duly executed by or on behalf of all
the Parties.”
vi) It is an admitted position of both parties that no such
amendment was ever executed in writing between the parties.
Whilst various proposals and counter proposals were
exchanged at different points in time, there was no consensus
that could be reached between the parties and hence there was
no agreement to move away from the provisions of the
Agreement. In the absence of any amendment to the
Agreement, the parties remain bound by the provisions of the
Agreement.
Signature Not Verified
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Signing Date:08.04.2026 Page 28 of 38
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B. Admission in Cross Examination
i) The second ground raised by the Respondents that the
Claimants have admitted in cross-examination that there was
ho specific email by the Respondents assuring or
acknowledging that the CCDs would be converted to equity
shares at 2% after the default took place.
ii) It is the Tribunal‟s view that the question, and therefore, the
answer was very narrow as to whether there was a specific
mail containing an acknowledgment of conversion into “2%”
equity shares. Even if there wa§ no such mail, it cannot be read
to mean that the witness stated that there was no
acknowledgment of the liability of the Respondent to convert
the CCDs in terms of the Agreement. The law is clear that
communications for the purpose of Section 18 of the
Limitation Act need not indicate the exact nature or the
specific character of the liability.
Moreover, Section 18(2) of the Limitation Act prohibits oral
evidence of the contents of the acknowledgment and therefore
no reliance can be placed on the oral evidence of the Claimant.
Furthermore, any understanding of the Claimant who is not a
lawyer- as to whether or not there was an acknowledgement of
liability is not binding on the Tribunal and the Tribunal is
obliged to arrive at an objective determination of the issue
based on the evidence on record.
iii) The Tribunal has also considered the argument of the
Respondent that there must be a specific acknowledgment of a
right under Clause 6.2.5 and acknowledgment of the right
under Clause 6 is not sufficient as that was a completely
different mechanism based on valuation add additional
discounting. The Tribunal disagrees with this reading of
Clause 6. As already stated above, Clause 6 was a composite
clause providing for the conversion into equity shares in both
scenarios, one, if a qualified financing took place, and second,
if a qualified financing does not take place, by 31 January
2017, Further, the Tribunal notes the reference to the date of
31 January 2017, or 1.5 years, or indeed to any time frame, is
found only in Clause 6.2.5. Therefore, the acknowledgments
referred in paragraph 76 above, which refer to time lines, 1.5
years and dates of conversion, do, in fact, specifically relate to
Clause 6.2.5.
iv) Since the Tribunal has concluded that the Respondents had
acknowledged their liability to convert the Claimant‟s CCDs
on numerous occasions which had the effect of extending the
period of limitation, it is not necessary for the Tribunal to
address in detail the alternative arguments pressed into service
by the Claimant that the Claimant‟s forbearance to sue based
on express representations by the Respondents had the effect
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of extending the time for performance by virtue of the second
part of Article 54 of the Limitation Act 1963 and the judgment
of the Hon‟ble Supreme Court in S Brahmanand v. KR
Muthugopal (2005)12 SCC 764. Similarly, the Tribunal has
not considered the arguments on continuing cause of action or
the judgments in this regard relied upon by both parties.
v) The correspondence on record also does not indicate that the
Claimant in any manner slept over his rights on this aspect of
the dispute, which would have resulted in his claims being
time barred. On the other hand, the evidence on record
indicates that the Claimant made repeated attempts to resolve
issues through a dialogue with Respondents. It was only when
such discussions failed to achieve amicable resolution did the
Claimant commence these proceeding. The case relied upon by
the Respondent Bharat Barrel and Drum Mfg co Ltd, (1971)
2 SCC 860 thus has no application.
vi) Similarly, the cases of Bombay Dyeing v State of Bombay,
1957 SCC Online SC 7; Bharat Barrel and Drum Mfg Co
Ltd, (1971) 2 SCC 860; N Balakrishnan v M Krishnamurthy,
(1998) 7 SCC 123; DDA v Durga Construction Co, 2013 SCC
Online Del 4451; India Tourism Development Corporation v
Bajaj Electricals, 2023 SCC Online Del 158 and Raj Kumar
Gupta v Narang Constructions & Financiers, 2023 SCC
Online Del 40 relied upon by the Respondent to contend the
trite proposition that limitation does not extinguish rights but
only remedies have no application in the facts of the present
case.
vii) For all these reasons, the Tribunal holds that the
Claimant‟s claims in the present arbitration are not barred by
limitation.”
(emphasis supplied)
50. A perusal of the afore-extracted findings indicates that the
learned AT has undertaken a detailed examination of multiple
communications exchanged between the parties and has found that the
same reflect a continuing acknowledgement of the obligation to
convert the CCDs, including assurances in relation thereto. The
learned AT has further held that such correspondence constitutes an
acknowledgement of liability within the meaning of Section 18 of the
Limitation Act, thereby resulting in an extension of the limitation
period.
Signature Not Verified
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51. It is also noted that the issue of limitation, in the facts of the
present case, is not a pure question of law but is inextricably linked
with the appreciation of evidence, including the correspondence
exchanged between the parties and the surrounding factual matrix.
52. The contention of the Petitioners that the said correspondence
was de hors the Agreement and could not have been relied upon, in
substance, invites this Court to re-evaluate the evidentiary material
and substitute its own view in place of that taken by the learned AT.
53. The judgments relied upon by the Petitioners, including
Associate Builders (supra), PSA Sical Terminals Pvt. Ltd. (supra),
Cruz City 1 Mauritius Holdings (supra), as well as the foreign
decisions, lay down the settled principles governing interference with
arbitral awards under Section 34 of the A&C Act, including the
grounds of patent illegality, perversity, and the requirement that an
arbitral tribunal must act in accordance with the terms of the contract.
54. There can be no quarrel with the aforesaid propositions.
However, the applicability of the said principles depends upon the
facts of each case. In the present case, this Court does not find that the
Impugned Award suffers from any patent illegality, perversity, or
jurisdictional error so as to warrant interference. The findings of the
learned AT are based on a detailed appreciation of the material on
record and constitute a plausible view, which cannot be interfered
with in proceedings under Section 34 of the A&C Act.
55. Insofar as the reliance placed on Cruz City 1 Mauritius
Holdings (supra) is concerned, the said decision does not advance the
case of the Petitioners inasmuch as the issue of limitation in the
present case arises out of the appreciation of evidence and does not
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involve a pure question of jurisdiction warranting de novo
consideration by this Court.
56. In the considered opinion of this Court, and in light of the ruling
of the Hon‟ble Supreme Court in OPG Power (supra), any such
exercise would necessarily entail a re-appreciation of evidence, which
lies beyond the permissible scope of interference under Section 34 of
the A&C Act.
57. In the absence of any perversity, patent illegality, or disregard
of vital evidence, this Court finds no ground to interfere with the
findings of the learned AT on the issue of limitation.
58. Moving further, insofar as the challenge on the waiver/
acquiescence, based on the correspondence as exchanged between the
parties, the same are clearly articulated and well-reasoned, and this
Court finds no reason to interfere with the learned AT‟s conclusions.
59. It is contended that while Clause 6.2.5 deals with the
conversion of CCDs, the subsequent correspondence between the
parties concerned negotiations on valuation and discount, which
departed from the contractual provision. The Petitioners have
submitted that by engaging in these negotiations, the Respondent
waived their rights under Clause 6.2.5, and the learned Arbitrator
failed to appreciate this correspondence, which effectively constituted
a waiver and, in substance, created a new arrangement between the
parties.
60. The aforesaid challenge, again, is a pure exercise in re-
appreciation of the evidence and the contents of the various emails
thereof. As discussed earlier, the Court, in exercise of its jurisdiction
under Section 34 of the A&C Act, would not interfere with findings of
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fact unless it is demonstrated that the same is patently illegal, contrary
to the terms of the contract, or one which no reasonable person could
have arrived at. In this backdrop, it would be apposite to reproduce the
relevant findings of the learned AT on the interpretation of Clause
6.2.5 of the Agreement, which reads as under:
“Tribunal’s analysis
92. Clause 6.1 of the Debenture Subscription Agreement provides
that:
“6.1 Automatic Conversion
Each Investor CCD shall stand mandatorily converted
into fully paid-up Equity Shares on the occurrence of the
earlier of:
(i) Upon the occurrence of the Qualified Financing
(defined hereinafter); or
(ii) At the expiry of 1.5 (one and a half) years from the
date of issuance of the Investor CCD, in the manner set
forth below
whichever is earlier”’
93. Clause 6.2.5 further provides that:
“In the event of non-occurrence of a Qualified Financing
(amounting to a minimum of USD Million) within a period
of 1.5 (one and a half) years from the date of issuance of
the Investor CCDs, the Investor CCDs will convert to such
number of Equity Shares that collectively amount to 20%
(twenty percent) of the Shareholding of the Company on a
fully diluted basis.”
94. A plain reading of Clauses 6 and 6.2.5 of the Agreement
indicates that the intention of the parties was to convert the CCDs
issued to the Claimant into equity shareholding at the expiry of the
1.5 years period contained in Clause 6.1(ii). However, for
commercial reasons which have been detailed by the 2nd
Respondent in paragraphs 42 to 48 of her Witness Statement, the
Respondents did not convert the CCDs issued to their early
investors (including the Claimant) into equity shareholding, and
instead informed all investors that the time period for converting
the CCDs was being extended. This was done for commercial
reasons, chiefly to obtain higher revenues and higher valuations
from new investors.
95. The Tribunal notes that according to the Respondents, all other
early investors apart from the Claimant had agreed to such an
extension, and were content with availing them discount offered by
the Respondents in lieu of the CCDs not being converted into
equity shareholding. However, pertinently, the Claimant had
indicated his intention to abide by the original terms of the
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O.M.P. (COMM) 111/2025 & OMP (ENF.) (COMM.) 101/2025
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Agreement, and followed up with the Respondents subsequently on
numerous occasions to check the status of the conversion. The
Claimant‟s email dated 21 November 2016, which was issued in
response to the 2nd Respondent‟s email informing him of an
extension in the conversion of the CCDs till 31 March 2018, is
relevant:
“As an Initial Investor. I would prefer if the original terms
of the Agreement is adhered to, and completed, before any
further fresh investments.
In my own planning I had factored in a conversion to
equity by Aug 2016, exactly as we had discussed and
agreed to, and now it has anyway unilaterally been
extended to the last possible date period i.e. Jan 31st 2017
as per the Agreement.
The March 2018 is far too long a wait for me, with too
many unknowns, hence the conversion to equity now”
96. The Claimant was therefore keen to abide by the original terms
of the Agreement, and did not agree to or provide his consent to
any extension of the original time period for conversion, as had
been sought by the 2nd Respondent in her email dated 10
November 2016 (Exhibit C6). This is also borne out by the
Claimant‟s subsequent emails to the 2nd Respondent in January
2017, and 1 February 2017 (Exhibit CIO), seeking an update from
the Respondents on the conversion of his CCDs into equity
shareholding as per the terms of the Agreement.
97. The correspondences issued by the Claimant are particularly
relevant, since the Respondents have now relied on the counter-
offers and proposals exchanged between the parties after the expiry
of the conversion period to claim that the Claimant had waived his
rights under the Agreement, and had acquiesced to the non-
conversion of his CCDs into equity shareholding by the
Respondents. However, the Tribunal finds that the Claimant‟s
correspondence with the 2nd Respondent, both before and after the
expiry of the conversion period under the Agreement, were
premised on breach of the obligation to convert the CCDs under
clause 6 of the Agreement and explore various options to resolve
the situation that had arisen as a result of this breach. It cannot,
therefore, be reasonably contended that the parties through their
negotiations had “moved away” from Clause 6.2.5 of the
Agreement through their discussions. The breach of Clause 6.2.5
was the fundamental basis for these discussions and the purpose of
the discussions were to find a resolution of the issue to remedy the
breach.
98. Based on a review of the correspondence between the parties as
summarised above in paragraphs 80 -88 herein, the Tribunal cannot
accept the submission of the Respondents that the Claimant had
waived his right to claim conversion as per Clause 6.2.5 of the
Agreement, and had instead acquiesced to the non-conversion of
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the CCDs in terms of the Agreement by the Respondents. In our
view, the Claimant made consistent efforts to indicate to the
Respondents (i) his intention to seek conversion only in terms of
the Agreement, and on the original date, irrespective of the
decisions of the other investors, and (ii) his displeasure with the
Respondents‟ decision to unilaterally change the date for
conversion, and failure to convert the Claimant‟s CCDs without his
approval or consent. Whilst various other options may have been
discussed, this was predicated on a breach of Clause 6.2.5 of the
Agreement. Ultimately, none of the options proposed were
mutually agreed to and no amendment of the Agreement was
executed. As such, the parties remain bound by their obligations
under the Agreement.
99. In the Tribunal‟s view, the Respondents have breached their
obligation to ensure the prompt conversion of the Claimant‟s CCDs
in terms of Clause 6.2.5 of the Agreement. Having failed to
complete a conversion of the CCDs in terms of the Agreement,
which the 2nd Respondent has justified on commercial grounds in
her Witness Statement, the Respondents cannot rely on the doctrine
of waiver, or any acquiescence on the part of the Claimant,
particularly when the Claimant had, on numerous occasions
through email, sought the conversion of the CCDs as per Clause
6.2.5 of the Agreement.
100. The Claimant is entitled to conversion of the CCDs issued to
him. The 1st Respondent‟s failure to convert the CCDs in terms of
the Agreement and the subsequent express refusal to convert the
CCDs (as articulated in the 2nd Respondent‟s email dated 20
March 2023, Exhibit C22) constitutes a breach of the Agreement.
101. Clause 15.12 of the Agreement specifically envisages specific
performance of the obligations contained in the Agreement and
provides as follows:
“15.12 Specific Performance of Obligations.
The Parties agree that their rights and obligations under
this Agreement shall be subject to the right of specific
performance and may be specifically enforced against a
defaulting person.”
102.Therefore, in the Tribunal‟s view, the Claimant is entitled to
conversion of his CCDs. Whilst Clause 6.2.5 of the Agreement
envisaged conversion of all the Investor CCDs, only the Claimant
is before the Tribunal and the scope of the Tribunal‟s jurisdiction is
limited to adjudicating the Claimant‟s claims. Admittedly, the
Claimant subscribed to l/10th of the Investor CCDs and is entitled
to be issued shares amounting to 2%, i.e., l/10th of the 20%
shareholding envisaged by Clause 6.2.5, of the 1st Respondent
Company‟s shareholding. Since the obligation of the Company was
to issue shares in respect of the Claimant‟s CCDs as on 31 January
2017, the 1st Respondent Company shall issue shares to the
Claimant reflecting 2% of the paid-up share capital of the Company
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as on that date. This is also because the 1st Respondent Company
seems to have issued further CCDs/shares after this date in which
rounds of’ fundraising the Claimant chose not to participate (as
discussed below in respect of Issue III). Hence, the Claimant
cannot reasonably claim to be issued shares equivalent to 2% of the
1st Respondent Company‟s paid-up capital as on the date of the
Award.”
61. A careful perusal of the findings in the Impugned Award
indicates that the learned AT has interpreted the contractual provisions
in the context of the overall scheme of the Agreement as well as the
conduct of the parties, including their post-contractual dealings.
62. The learned AT has also taken into account the Petitioners‟
failure to effect conversion of the CCDs within the stipulated period
under the Agreement, which formed part of the factual matrix
considered by the learned AT, and has consequently upheld the
Respondent‟s entitlement to conversion of the CCDs in accordance
with the terms of the Agreement.
63. The submission of the Petitioners that Clause 6.2.5 did not
contemplate any valuation exercise and could not have been applied
beyond 31.01.2017, in effect, seeks a re-interpretation of the
contractual terms, which is impermissible under Section 34 of the
A&C Act. The learned AT has, upon a consideration of the
correspondence exchanged between the parties, treated the same as
reflective of the parties‟ understanding of their obligations under the
Agreement and, in that context, has determined the rights and
obligations of the parties under the Agreement. In such circumstances,
the Petitioners‟ contention that Clause 6.2.5 of the Agreement is
inapplicable on the ground that it does not contemplate valuation is
clearly misconceived and is liable to be rejected.
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64. Consequently, this Court does not find the interpretation
adopted by the learned AT to be unreasonable or perverse as to
warrant interference. The view taken by the learned AT, at the very
least, constitutes a possible and plausible interpretation of the
contractual framework.
65. The Petitioners have further contended that the direction
contained in Paragraph No. 131(ii) of the Impugned Award, referring
to “2% of the paid-up capital”, is contrary to the Agreement, which
envisaged conversion in terms of shareholding.
66. In this regard, this Court notes the submission made by learned
counsel for the Respondent that the said expression may be clarified to
read as “2% of the shareholding of Petitioner No. 1 as on
31.01.2017”.
67. Having regard to the findings of the learned AT, including those
contained in Paragraph No. 102 of the Impugned Award, this Court is
of the view that the aforesaid clarification would be in consonance
with the reasoning of the learned AT and would not alter the
substantive findings of the Impugned Award and the same is well
permissible in view of the Judgment of the Constitution Bench of the
Hon‟ble Supreme Court in Gayatri Balasamy v. M/s ISG Novasoft
Technologies Limited21.
68. Accordingly, the expression in Paragraph No. 131(ii) of the
Impugned Award is liable to be understood in the aforesaid terms.
CONCLUSION:
(i). O.M.P. (COMM) 111/2025 21 2025 SCC OnLine SC 986 Signature Not Verified Digitally Signed By:NEERU
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69. In view of the foregoing discussion and bearing in mind the
limited scope of interference under Section 34 of the A&C Act, this
Court finds no ground to interfere with the findings returned by the
learned AT in Paragraph No. 131(i) of the Impugned Award.
70. Insofar as the findings contained in Paragraph No. 131(ii) of the
Impugned Award are concerned, this Court is of the considered view
that the same do not warrant interference on merits. However, in light
of the submission made on behalf of the Respondent, and to bring
clarity in line with the reasoning of the learned AT, it is clarified that
the direction for conversion shall be read as “2% of the shareholding
of Petitioner No. 1 as on 31.01.2017”.
71. Subject to the aforesaid clarification, the Objection Petition is
dismissed, and the Impugned Award, as clarified hereinabove, stands
upheld.
72. The pending application(s), if any, also stand disposed of.
73. No order as to costs.
(ii). OMP (ENF.) (COMM.) 101/2025
74. In view of the dismissal of the Objection Petition, being O.M.P.
(COMM) 111/2025, in the aforesaid terms, the Enforcement Petition,
being O.M.P. (ENF.) (COMM) 111/2025, under Section 36 of the
A&C Act, read with Order XXI Rules 10 and 11, and Section 151 of
the CPC shall proceed in accordance with law.
75. Accordingly, list the matter on 21.04.2026 for further
proceedings.
HARISH VAIDYANATHAN SHANKAR, J.
APRIL 6, 2026/jk
Signature Not Verified
Digitally Signed
By:NEERU
O.M.P. (COMM) 111/2025 & OMP (ENF.) (COMM.) 101/2025
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