JUDGMENT
R.C. Chopra, J.
1. This petition under Section 9 of the Arbitration and Conciliation Act, 1996 (hereinafter referred to as ”the Act” only) seeks an injunction against the respondents, their associates and subsidiaries from competing directly or indirectly with the petitioner in the business of supply of industrial gases in India and to restrain the nominees and directors of respondent No. 1 from participating and interfering in the business and affairs of petitioner company. The immediate cause for moving the Court was the tenders floated by Steel Authority of India Ltd. (SAIL) in September, 2004 In the meeting held on 10.9.2004 between SAIL and the suppliers of industrial gases in India, the petitioner company as well as respondent No. 3 were found to be bidders. The petitioner alleges that business interests of all the three respondents are common and they are acting against the interests of petitioner. According to the averments made in the petition, the petitioner company controlled by ””Goyal Group”” was approached by respondent No. 1 and various other foreign parties who were looking at the prospects of entering the Indian Market. After discussions and deliberations, a Share Purchase and Cooperation Agreement was entered into between petitioner and respondent No. 1 on 12.5.1995, which was amended in November, 1996, as a result of which, 51% share holding of the petitioner company remained with the ”Goyal Group” whereas 49% share holding went to ”MGG”, now respondent No. 1. Clause 9 was specifically introduced in this agreement which is a ”non- competition clause” and provides that the ”Goyal Group” or ”MGG” (now respondent No. 1) would not enter into any new business of gas in India without offering opportunity to participate to the other group. This non-competition clause was aimed at preventing competition between the two groups as well as association of any other competitor with the two groups i the business of gas supply without affording the group associate the ”right of first refusal”. Clause 11 was also introduced in SPC Agreement to ensure secrecy of the affairs of the petitioner company and its subsidiaries. This secrecy clause was to endure even after termination of the SPC agreement between the parties.
2. The ””Goyal Group”” through whom this petition has been filed against respondent No. 1(MGG) and its holding Company respondent No. 2 as well as its subsidiary respondent No. 3, complains that respondent No. 1 in violation of Clause 6 of the SPC Agreement an Article 44-A of the Articles is transferring its 49% share holding to third parties without first offering the same to the ””Goyal Group””. The controversy in regard to the transfer of shares by respondent No. 1 is pending consideration before this Court in CS(OS) No. 582/2004 The ”Goyal Group” alleges that the respondent No. 1 by endeavoring to transfer its share holding to respondent No. 2 without first offering it to the ”Goyal Group” is not only violating the SPC Agreement and Articles of Association but is also indirectly bringing petitioner’s competitors into the petitioner company. It is pointed out that respondent No. 3 which is a subsidiary of respondent No. 2 is already in competition with the petitioner and respondent No. 1 by transferring its shares to respondent No. 2 is bringing the nominees of respondents No. 2 and 3 on the Board of Directors of the petitioner company. Averments have been made in para 21 of the petition to plead that the respondents No. 1 and 2 have illegally put themselves in a position in which they have interest in respondent No. 3 also which is a rival company. It is stated to be in breach of the letter and spirit of the SPC Agreement as well as Articles of Association of the petitioner. It is submitted that the respondent No. 2 is acquiring the entire share holding of respondent No. 1 and is already a 100% holding company of respondent No. 3. It is stated that this combination of the respondents would completely ruin the petitioner’s business in India inasmuch as the petitioner’s competitors will be on the Board of Directors of the petitioner Company. The petitioner also pleads that “secrecy clause” contained in clause 11 of the SPC is also threatened to be violated by bringing on the Board of petitioner the nominees o respondent No. 2 who may be more loyal to respondent No. 3 being a subsidiary of respondent No. 2. The respondents have disputed the petitioner’s allegations and have pleaded that there is no violation of any clause of SPC Agreement including clauses 9 and 11 thereof. It is stated that since 2001, the ”Goyal Group” is refusing to appoint or take on he Board of the petitioner company the Directors nominated by respondent No. 1. It is pleaded that the ”Goyal Group” is not willing to purchase the share holding of respondent No. 1 on a price on which the respondent No. 1 is willing to purchase the share holding of ”Goyal Group”. The respondent No. 1 has already filed a petition for oppression and mis-management before the Company Law Board pointing out various instances of oppression, mis-management, stalemate and deadlock which has occurred on account of the actions of the ”Goyal Group”. It is pleaded that in the course of restructuring by MGG Group, which is holding 49% shares in the petitioner company, the respondent No. 1 has become a subsidiary of respondent No. 2. It is also submitted that the hare transfer being within the group is not hit by Clause 6 of the SPC or Article 44-A (i) of the Articles of Association of the petitioner. It is pleaded that this share transfer has been injuncted by an ex-parte order of 25.5.2004 in suit No. 582/2004 filed by Mrs. Ritu Aggarwal, daughter of Mr. Suresh Goyal of ”Goyal Group”. Giving details of the transfers within the group of respondent No. 1, it is stated that in case ex-parte injunction had not been obtained and the 49% share holding of respondent No. 1 would have been permitted to be transferred, the shares would have been with Messers Group, which is not a competitor but a group company to which the transfer of the shares is permissible under SPC as well as Articles of Association. The respondents have also pointed out that with a view to amicably resolve the controversy and without prejudice to its pleas, the MGG group, respondent No. 1 had made an offer to ”Goyal Group” to purchase its shares @ 234 per share which was lower than t e average price of Rs. 294.70 p. paid by MGG group to ”Goyal Group” while acquiring these shares in the year 1995-96. In Court also, learned counsel for the respondents made an offer to purchase the shares of ”Goyal Group” at a price five times more at which the ”Goyal Group” is offering to purchase the shares with respondent No. 1. The respondents have also pleaded that respondents No. 2 and 3 not being party to arbitration agreement with petitioner company cannot be injuncted by an order under Section 9 of the Act. It is also pleaded that respondent No. 3, which is an existing competitor of the petitioner company and already in field cannot be restrained from going ahead with its business merely on account of the fact that respondent No. 2 is the holding company of respondent No. 1 as well as respondent No. 3. It is pleaded that the non-competition clause has to be strictly interpreted and can operate between the parties to agreement only and not against third parties. It is stated that this Clause relates to a new business only by respondent No. 1 and does not cover the existing business in regard to the supply of industrial gases.
3. Learned counsel for respondent No. 1 vehemently argues that the respondent No. 1 is trying to go strictly by SPC agreement for transferring its shares to a group company but the ex-parte injunction obtained at the behest of the ”Goyal Group” is standing in its way. He argues that the design of the ”Goyal Group” is to compel the respondent No. 1 to sell its share holding to them at an abysmally low price. It is stated that about 8 years ago, the respondent No. 1 had paid about Rs. 138 crores for acquiring the 49% share holding but now in spite of an offer to sell its share holding at a lesser price, the ”Goyal Group” is offering only about Rs. 19 crores to respondent No. 1 for its share holding, which is nothing but an arm twisting tactic. He repeats his offer to purchase the shares held by ”Goyal Group” on a price five times higher than the price being offered by the ”Goyal Group” for the shares held by respondent No. 1. It is submitted that by not allowing the Directors of the respondent No. 1 to sit on the board of the petitioner Company and now by not allowing the transfer of share holding because of re-structuring in the group, the ”Goyal Group” is trying to oust all the respondents from the market including respondent No. 3, which is already in field. At the outset, it may be stated that the question as to whether the transfer of the 49% share holding in the petitioner company by respondent No. 1 to respondent No. 2 is permissible or not in view of Clause 6 of the SPC and the Articles of Association is waiting adjudication in CS(OS) No. 582/2004 pending before this Court. This Court, therefore, need not go into this question in this petition under Section 9 of the Act which has a limited scope and covers only interim measures required to be taken. The present petition is not an appropriate proceeding for adjudication of this controversy, which is pending disposal in a civil suit. This Court, for the present, would be confining itself to the interim measures only that may be taken to protect and safe guard the interests of the parties till the disputes between the parties are settled through arbitral proceedings. The plea of respondents No. 2 and 3 that they being not party to arbitration agreement cannot be injuncted by invoking Section 9 of the Act cannot be sustained for the reason that while passing a restraint order or taking interim measures for protecting he subject matter or interests of the parties to the arbitration agreement, directions sometimes may be required to be issued to third parties even to ensure that no violation takes place pending adjudication of disputes arising out of arbitration agreement. Moreover, when third parties are shown to have joined hands or acquired interest in the subject matter or a common identity hidden behind a corporate veil, directions may be issued to them also to ensure effective implementation and enforcement of t e orders to protect the subject matter of dispute. In CIT v. Meenakshi Mills Ltd. reported in (1967) 63 ITR page-609, the Supreme Court had categorically held that may be from the juristic point of view. the company is a legal personality entirely distinct from its members and the company is capable of enjoying rights and being subjected to duties but in exceptional cases, the court is entitled to lift the veil of corporate entity and pay regard to the economic realities behind the legal facade. Again in State of U.P. and Ors. v. Renusagar Power Company it was held, in para 66, that in the expanding horizon of modern jurisprudence, lifting of corporate veil is permissible. Its frontiers are unlimited. It was observed that the aim of the legislation is to do justice to all the parties and the doctrine of lifting of corporate veil is expanding. Therefore, in all those cases where group companies constitute one economic entity the Court may instead of going by the separate legal entities of the companies look at the common economic entity of the group to which they belong. Regarding interim orders also under Section 9 of the Act against those who are not party to arbitration agreement, a learned Single Judge of this Court in CREF Finance Ltd. v. Puri Construction Ltd. and Ors. reported in 2000 VI AD (Delhi) P-509 examined t e issue and came to the conclusion that this plea cannot come in the way of the Court in granting an equitable relief when the circumstances call for it. This Court is also of the view that where there is commonality of interest between parties to arbitration agreement and some others, who are actively engaged in frustrating the legal rights of a party to the arbitration agreement, the interim measures under Section 9 of the Act may cover even non parties to the agreement with a view to ensure complete justice between the parties.
4. A perusal of the averments made in the petition and the replies filed by the parties shows that ”Goyal Group” through whom the present petition has been filed was running the petitioner company for the last about three decades and was involved in the bus ness of manufacture and supply of industrial gases. In the year 1995, MGG group (now respondent No. 1) entered into a Share Purchase and Cooperation Agreement and in 1996, its share holding in the petitioner company rose to 49%. ”Goyal Group” remained with 51% share holding in petitioner company. In the SPA aforesaid, a non competition clause was introduced, which reads as under : ”GGL and all Goyal Group companies will cooperate in the Indian market with right to first refusal basis with MGG and will not for the duration of this cooperation support in any way – directly or indirectly – the activities of Mug’s competitors with regard to gas business. MGG will give written information to GGL about every business opportunity it plans to take in the Indian market in regard to industrial gases and related business and GGL may decide if it wants to participate in it (right of first refusal). In case GGL does not within a period of two months after receiving Mug’s notice declare in writing that it is willing and able to participate in the planned business, MGG is free to proceed with this business on its own. However MGG will give due consideration to the interest of GGL being its group company. Such new business which MGG undertakes should be business of gas supply to few major dedicated customers only and not to general market supply” A plain reading of this Clause shows that ”Goyal Group” as well as ”MGG Group”, now respondent No. 1, which were the two stake holders in the petitioner company agreed that they will cooperate in exploiting in the Indian market business of supply of industrial gases. It was also agreed that they would not support directly or indirectly any competitor in gas business. The respondent No. 1 (MGG) was required to give written intimation to petitioner company about every business opportunity it planned to be in Indian Market in regard to the industrial gases and related business so that in case the petitioner wanted to exercise the option of joining, it could join it within a period of two months of the receipt of the notice in writing. Even after the refusal of the petitioner company to join MGG in new operations, the obligation was still upon MGG to give due consideration to the interests of the petitioner company as it was its associate company. It cannot be held that this Clause pertained to some business other than the business of gas supply in India. Last para of the aforesaid clause makes it clear. Therefore, it has to be held that the respondent No. 1 having 49% share holding in petitioner company is not permitted to join hands with a competition of the petitioner in India for the supply of the industrial gases as it directly affects the business interests of the petitioner company. Clause 11 of the SPA relating to ”secrecy” which is also to be abided by the parties is not only during the duration of the agreement. Even after the termination of the agreement without limit in point of time the parties are required to maintain secrecy . It is aimed at safeguarding the business interests of the petitioner company. Therefore, in case the respondent No. 1 directly or indirectly facilitates the disclosure of the affairs, finances or accounts of the petitioner company to a competitor it would be an infringement of the secrecy clause. It is shown on record that the respondent No. 3, which is a 100% subsidiary of respondent No. 2 is a competitor of the petitioner company in India. In case through respondent No. 2, which holds respondent No. as well as respondent No. 3, the secrets of petitioner company are divulged to respondent No. 3, the results may be devastating for the petitioner company. The petitioner has detailed its apprehensions about its participation in the tenders floated by SA L as the presence of the Directors of respondent No. 1 on the Board of the petitioner company, who may be the nominees of respondent No. 2 and having connections with respondent No. 3, may jeopardize the petitioner’s participation in the tenders. Therefore , in case secrecy is not maintained, respondent No. 3, which is a competitor of petitioner may steal a march over the petitioner in the matter of tenders for gas supply in view of the relationship between it and respondent No. 1 through their holding company-respondent No. 2.
5. A Division Bench of this Court had passed an order on 23.10.1998 in FAO(OS) No. 251/1998 between the petitioner and respondent No. 1 in which Clause 9 of SPC was upheld. This order was upheld by the Supreme Court also and ultimately a consent Award was passed between the parties. Therefore, the non-competition clause contained in Section 9 of the SPC has to be effectively enforced to safeguard the economic and commercial interests of the petitioner company. The respondent No. 1 cannot be permitted to wrangle out of it and be in competition with the petitioner directly or indirectly. To safeguard the business interests of the petitioner and give effect to the secrecy clause which is likely to be violated in view of the emerging relationship between the here respondents, this Court is of the considered view that there are good and sufficient grounds for providing protection to the petitioner in the matter of participation in tenders for the supply of industrial gases in India. The respondent No. 1 cannot enter into any competition with petitioner. Respondent No. 2 also cannot compete with petitioner as it is acquiring the shareholding of petitioner through respondent No. 1. However, respondent No. 3 being in the same business and already in competition with petitioner cannot be deprived of its ongoing business activities. Possibility cannot be ruled out that in case the Directors nominated by respondent No. 1 continue to attend the Board meetings of petitioner company when the tenders to be filed by petitioner are discussed and approved, some vital information may be passed on to respondent No. 3, which in turn, may steal a march over the petitioner in the business of supply of gas. The interests of the petitioner company, therefore, have to be safeguard d by restraining the Directors nominated by respondent No. 1 from participating in those meetings in which any matter relating to the filing of tenders by the petitioner company is to be discussed or approved. The nominees of respondent No. 1 cannot be re trained from acting as Directors in the petitioner company altogether as prayed. So long they are having 49% share holding in the petitioner company, they can exercise their voting and other rights in accordance with Articles of Association and SPC. Accordingly, the petition stands disposed of by restraining the respondents No. 1 and 2 from entering into competition with the petitioner company in the matter of the sale/supply of industrial gases in India. The Directors, officers and nominees of respondent No. 1 stand restrained from attending or participating in those meetings of the petitioner company in which any matter pertaining to the filing of the tenders by the petitioner company is scheduled to be discussed. This would ensure the secrecy of the petitioner’s tenders. These orders will remain in force till the disputes between the petitioner and respondent No. 1 are adjudicated by an Arbitrator by Arbitral Tribunal in terms of their agreement. In case there is any change in the circumstances, these orders may be modified by this Court or the Arbitral Tribunal. No further directions are required to be issued. The petition stands disposed of.