In a recent court decision, the Bombay High Court ruled that the arbitration process between Master Drilling India Private Limited and Sarel Drill & Engineering Equipment India Private Limited can continue, even though there were questions about whether Sarel Drill's Board of Directors was properly set up when arbitration started.
The conflict comes from a Business Transfer Agreement dated September 3, 2018. Master Drilling bought business assets from Sarel Drill. However, Sarel Drill claimed the agreement failed because Master Drilling didn’t meet certain conditions, causing losses. They sought compensation, return of machinery, and rental payments through arbitration.
Master Drilling argued that Sarel Drill couldn't legally start arbitration. They claimed Sarel Drill didn’t have a valid Board of Directors when arbitration began, as one director had quit and another passed away, leaving only one director, which is not enough for making decisions.
"Without a Board of Directors of more than one Director, Sarel Drill could never have given instructions to lawyers; or started arbitration..."
The group handling the arbitration dismissed Master Drilling's objections, saying these issues could be dealt with later in the process. They decided it wasn’t necessary to stop arbitration completely.
Justice Somasekhar Sundaresan looked into whether the Tribunal's decision was a final decision that could be challenged. He concluded it wasn’t, as it didn’t finally decide any issue; it just allowed the process to continue.
"The first look at the situation by the group handling the arbitration is validly made as a temporary assessment..."
The court emphasized the idea that companies should be able to keep working even if there are technical issues with their board, to avoid stopping business operations. The court also noted that small mistakes in procedure shouldn’t stop a fair cause from being heard.
The court dismissed Master Drilling’s complaint and ordered them to pay Rs. 2 Lakhs for delaying the arbitration process. The decision highlights the flexibility in arbitration proceedings and the importance of addressing procedural issues without stopping justice.
