Bombay High Court
Act vs Bw Highway Star Pvt. Ltd on 24 September, 2009
Author: Anoop V. Mohta
Bench: Anoop V. Mohta
This Order is modified/corrected by Speaking to Minutes Order
1
IN THE HIGH COURT OF JUDICATURE AT BOMBAY
ORDINARY ORIGINAL CIVIL JURISDICTION
ARBITRATION PETITION NO. 423 OF 2009
Unity Realty and Developers Ltd.,
A company incorporated under the Companies
Act, 1956 having its registered office at K.K.
Tower G.D.Ambedkar Marg,Parel Tank Road,
Parel, Mumbai 400 012. ...Petitioner.
Vs.
1 BW Highway Star Pvt. Ltd.
K.K.Tower, Parel Tank Road,
G.D.Ambedkar Marg,
Mumbai 400 012.
2 Kamat Hotels (India) Limited
70/C, Nehru Road,
Adjacent to Domestic Airport,
Vile Parle (East),
Mumbai 400099.
3 Clearwater Capital Partners(Cyprus) Limited
12 Esperidon Street, 4th floor, 1087,
Nicolsia, Cyprus,
And
201, 2nd floor, Central plaza, 166 CST Road,
Kalina, Mumbai,
And
4, Battery Street, Bank of China Building,
Singapore.
4 BSEL Infrastructure Reality Limited,
BSEL Tech Park, Sector 30-A, Plot
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This Order is modified/corrected by Speaking to Minutes Order
2
No.3915, 3915A, Vashi, Navi Mumbai 400705. ...Respondents.
Mr. Navroj Seervai, Sr. Counsel a/w Chetan Kapadia, Mr. Manish Desai, Mr. Amit
Jajoo, Mr. Saket Mone, Ms. Nidhi Singh i/by M/s. Paras Kuhad & Associates for
the Petitioner.
Mr. C.U. Singh, Sr. Counsel a/w Mrs. Soma Singh i/by Mr. T.R. Yadav for
Respondent No.1.
Mr. Rajendra Pai with Mr. Alokik Pai i/by Ms. Bina Pai for Respondent No.1.
Mr. T. Subramaniam, Sr. Counsel i/by Ms. Suvarna Joshi for Respondent No.2.
Mr. Anand Desai with Ms. Raksha Kothari with Mr. Munaf Virjee i/by M/s. DSK
Legal for Respondent No.3.
Mr. P.A.Kabadi with Mr. Shrikant Doijode i/by M/s. Doijode Associates for
Respondent No. 4.
CORAM :- ANOOP V. MOHTA, J.
DATED :- 24th September, 2009.
JUDGMENT:
The parties have no objection if this Bench heard this matter finally.
Accordingly, heard the parties.
2 The Government of Maharashtra (The GOM),some time in November, 2006 invited a tender for development and construction of a Hotel and Mall Project (The project) on Built, Operate and Transfer (BOT) basis at Balewadi, Pune. The project was for a period of 60 years to build hotels with all amenities and facilities for participants of the 3rd Commonwealth Games which were to be ::: Downloaded on - 09/06/2013 15:06:56 ::: This Order is modified/corrected by Speaking to Minutes Order 3 held in Pune in October, 2008. The time was of essence for the project.
3 The Unity Infrastructure Projects Ltd., (UIL) and Respondent no.4- BSEL Infrastructure Reality Limited (BSEL) were the joint successful bidders. A Letter of Acceptance dated 02.01.2007 (LOA) was issued in favour of the Unity Infrastructure Projects Ltd. (UIL) which is 100% holding company of the petitioner (URDL).
4 On 31.01.2007 a Joint Venture Agreement (JVA) entered into between UIL, BSEL and respondent no.2-Kamat Hotels (India) Limited (KHIL).
5The parties proceeded accordingly, held various meetings and took various decisions including to raise finance for the project.
6 On 21.04.2007, respondent no.1-BW, (the company) was incorporated with equal promoters subscription by URDL, KHIL and BSEL. Mr. Kishore K. Avarsekar became first Director and Chairman of the Company under the Articles of Association.
7 The Articles of Association of the company (the Articles) provides an Arbitration clause which is reproduced as under:
"71 Any dispute, controversy, claim or disagreement of any kind whatsoever between or among the Company and/or the Shareholders in connection with or arising out of these Articles or any inter se arrangement between them shall be referred to and finally resolved by arbitration in accordance with the Rules of the Singapore International Arbitration Centre held at Mumbai, irrespective of the amount in dispute or whether such dispute would otherwise be considered justifiable or ripe for resolution by any court, and the arbitration award shall be final and binding on both the Company and the Shareholders."
The other arbitration clause 18.5 of SHA is as under:
::: Downloaded on - 09/06/2013 15:06:56 :::This Order is modified/corrected by Speaking to Minutes Order 4 "Any Disputes and differences whatsoever arising under or in connection with this Agreement which could not be settled by parties through negotiations, after the period of 30 (thirty) days from the service of the Notice of Dispute, shall be finally settled by arbitration in accordance with the Rules of the Singapore International Arbitration Centre:
(a) All proceedings shall be conducted in English;
(b) The arbitral tribunal would comprise of 3 (three)
arbitrators. 1(one) arbitrator shall be appointed by Clearwater, one arbitrator shall be appointed jointly by the company and the JV Partners and the two arbitrators so appointed, would jointly appoint the third; and
(c) The venue of arbitration shall be in Mumbai."8
The company entrusted the construction of the hotel project to UIL by contract dated 01.05.2007. The execution of the project was under the supervision of KHIL. Therefore, at its instance, various plans, the scope and the specification of hotel designs of the projects were revised. That escalated the total project cost also.
9 A Power of Attorney was given to Mr.V.S.Kamat to represent respondent no.
1 through a Resolution dated 28.06.2007 of the company.
10 On 16.07.2007 a Concession Agreement executed by the company with the GOM as per the LOA.
11 The Company thereafter availed further loan of Rs.100 crores from ICICI Bank between July to August 2007. The same was increased upto Rs.150 crores which was secured by Corporate Guarantees of UIL, the holding company of URDL. URDL contributed a sum of Rs.20 crores as unsecured loan to the company. These funds are alleged to have been misappropriated by the ::: Downloaded on - 09/06/2013 15:06:56 ::: This Order is modified/corrected by Speaking to Minutes Order 5 petitioner and UIL under the direction and control of Mr.Kishore Avarsekar and Mr.V.S.Kamat.
12 On 1st October, 2007, Mr.Avarsekar resigned as Director of the company and Mr.V.S.Kamat was appointed as an Additional Director of the company.
13 On 15.11.2007 the Company entered into a "Hotel Operating Agreement"
with KHIL.
14 As cost was escalated because of revision, it was decided to allow respondent no.3-Clearwater Capital Partners(Cyprus) Limited (CCPL) or (Clearwater) to invest Rs.48.51 crores in exchange of 57,64,706 Class "A" Equity shares of the company. Clearwater which holds 3.90% Equity capital of KHIL agreed to participate as investor shareholders in the company. In this background, two mutual (the definitive documents) co-existing Agreements dated 1.11.2007 were executed recording the agreed terms between the parties called as "Share Subscription Agreement" (SSA), and a "Shareholders Holding Agreement" (SHA) between CCPL, URDL, KHIL, BSEL and the company.
15 The Company, some time in June, 2008, secured further loan of Rs.50 crores from ICICI Bank. There are allegations & counter allegations of the defaults and the misappropriation of the funds.
16 Respondent no.2-KHIL, some time in August, 2008, acquires 9% of the shares of Respondent no.4-BSEL.The petitioner agrees to acquire 8% of the shares of respondent no.4-BSEL. However, the petitioner acquired only 2% of the shares as defaulted in the payments thereof. Since August 2008, Respondent no.2 held 26% and the petitioner 19.35% shareholding. The petitioner did not object to the ::: Downloaded on - 09/06/2013 15:06:56 ::: This Order is modified/corrected by Speaking to Minutes Order 6 permitted interse-transfer between respondent no.2-KHIL and respondent no.4- BSEL.
17 It is alleged that Mr. Avarsekar and Mr. V.S.Kamat, some time in September, 2008, procured Certificates from the Architect Mr.Upasani Design Cell for an amount of Rs.275 crores which includes Rs.9 crores towards working capital, which is also alleged to have been misappropriated by the petitioner and UIL.
18 In this process, as alleged, the project was in incomplete stage and not ready for the desired commercial use. Therefore, some time in October, 2008, respondent no.2-KHIL took possession of incomplete and unfurnished hotel held by the company in terms of Management and Operation Agreement. They are compelled to improve the condition of the hotel for the purpose of achieving the object for which it was developed and constructed. All the representatives and Directors of respondent no.1-the company, in view of various commissions and omissions on the part of the petitioner and UIL, protested in the Board meetings and recorded accordingly in the Minutes of the company dated 5.12.2008 and 12.12.2008 which were prepared by Mr.Mahesh Kondoi, who was authorised to draft the same.
19 Between January, 2009 to April, 2009 various Board Meetings were held to discuss issues including change of address of Registered Office. These Minutes were forwarded to Mr.V.S.Kamat for signing. However, he alleged to have refused to sign these Minutes.
20 Another Board meeting was called by Mr. V.S. Kamat by Notice dated 18.05.2009. The meeting was scheduled to be held on 21.05.2009. The ::: Downloaded on - 09/06/2013 15:06:56 ::: This Order is modified/corrected by Speaking to Minutes Order 7 provisional agenda was also circulated. On 18.05.2009 Clearwater sold 49% shares to KHIL, without prior consent/notice/intimation to other JVA Partners.
21 On the same day, Clearwater appointed Mr.Vithal Kamat and Mr.Vikram Kamat as its nominee and Directors in exercise of the power conferred upon it under Articles 44 and 46. The letter was communicated to all the representatives of the company, including Mr.V.S.Kamat.
22 On 19.05.2009, a representative Director of respondent no.2-KHIL on the Board of the company gave his conditional consent for holding Board Meeting on 21.05.2009, subject to inclusion of additional items of agenda.
22-A The first Resolution dated 21.05.2009 was of the company (Ex.I).
23 On 21.05.2009 the Board meeting of the company was duly convened as per the respondents, which is recorded in the Minutes at Exhibit J. There are two disputed minutes of the Board meetings of respondent no.1 on the record.
The second set of resolutions (Exh. J) was circulated by a letter dated 22/05/2009 under the signature of Dinkar Jadhav as a Director of respondent no.
1. 24 The petitioner received on 21.05.2009 a Winding Up Notice issued by UIL by e-mail through its Advocate. KHIL resisted and replied the same.
25 As per letter dated 22.05.2009, KHIL as transferee of Clearwater adopted and accepted Mr.Vithal Kamat and Mr.Vikram Kamat as its nominee Directors on the Board of the company dated 21.05.2009 (Ex. J) and proceeded and passed resolution accordingly. It is also stated that on & from 21.05.2009, respondent no.1 has became a subsidiary of respondent no.2.
::: Downloaded on - 09/06/2013 15:06:56 :::This Order is modified/corrected by Speaking to Minutes Order 8 26 On 01.06.2009, the petitioner has filed the present petition under Section 9 of the Arbitration and Conciliation Act, 1996 (for short, the Act) for various interim injunctions and measures and protections.
27 The existence of arbitration clause and the subject matter of the dispute arising out of the same, in the present case, need to be judged from the two arbitration clauses i.e. Article 71 and clause 18.5 of the SHA. There is no dispute with regard to the above clauses of the written agreement between the parties.
Considering the above facts/events, I am not inclined to accept that the present dispute is primarily between the petitioner and respondent no.2. I am also not accepting the submission that other respondents have no right or claim or dispute with regard to the allegations and/or averments and right so claimed by the petitioner. The whole action or inaction of the parties in the present case are interlinked and interconnected. They cannot be separated only for the purposes of settling their dispute through Article 71 or clause 18.5 of the SHA. The submission, therefore, that clause 18.5 of the SHA deals with and provides a dispute between respondent no.3 and respondents 1, 2 and 4 only is unacceptable. Both these clauses of arbitration provides resolution of disputes in accordance with the Arbitration Rules of the Singapore International Arbitration Centre, in Mumbai, (SIAC Rules), therefore, at this prima facie stage, I am convinced that there exists an arbitration clause between the parties and the dispute so raised need to be adjudicated as per the SIAC Rules.
28 Articles 19 and 71, therefore, just cannot be read to accept that there exists interse dispute only between the shareholders. The fact that there exists written arbitration clauses between the parties but which should prevail, as contended, ::: Downloaded on - 09/06/2013 15:06:56 ::: This Order is modified/corrected by Speaking to Minutes Order 9 in my view, in the present case, is a matter of detail trial and interpretation of the documents. It is difficult to dissect and decide as contended by the counsel for the respondents that the dispute in question is not arbitrable for the purposes of Sections 7 and 9 of the Act. Article 71 constitutes an arbitration agreement/clause between the parties which is a binding contract. In Claude Leela Parulekar (Smt.) vs. Sakal Papers (P) Ltd. & ors., (2005) 11 SCC 73, it is held that the Articles constitute a contract not merely between the shareholders of the company, but between individual shareholders also. The modality and/or the procedure, even if is different (clause 18.5 of the SHA and Article 71), but this itself means the existence of basic arbitration agreements between the parties.
29 In view of this, the reliance on Sumitomo Corporation vs. CDC Financial Services (Mauritius) Ltd., (2008) 4 SCC 91, by the respondents with regard to the arbitrability of the dispute and coverage of the said dispute and that the Company Law Board (CLB) would have only jurisdiction is also not acceptable.
The facts and circumstances in Sumitomo (supra) are distinct and distinguishable.
30 Having once held that there exists arbitration clauses and the arbitral dispute and as there is no bar of any kind and as all ingredients of Sections 7 and 9 of the Act are present and as parties have agreed to settle their dispute through the SIAC Rules, the present proceedings cannot be said to be not maintainable.
On the contrary, if there exists such arbitration clause, it is necessary for the Court to pass appropriate orders under Section 9 of the Act.
31 Apart from above, the petitioner has already approached the Singapore ::: Downloaded on - 09/06/2013 15:06:56 ::: This Order is modified/corrected by Speaking to Minutes Order 10 International Arbitration Centre (SIAC) and has taken steps for constitution of the Arbitral Tribunal of Mr.Manoj Thakar. The notice dated 04.08.2009 and the statement of dispute as required under clause 3 of the SIAC Rules has been submitted to SIAC along with filing fees. The Advocate for KHIL by letter dated 6.6.2009 addressed to the petitioner's Advocate to place on record the procedure to be followed for invoking arbitration clause. The petitioner addressed to suggest the names of Arbitrators for the purposes of constitution of the Arbitral Tribunal.
In this background also, it is sufficient to hold that there exists arbitration clause and dispute falls within the ambit of Articles i.e. Article 71.
32Respondent no.4-BSEL, though part of Consortium with UIL who got the project and who decided to have experience of respondent no.2-KHIL and, accordingly, formed respondent no.1-the Company has not denied the averments made by the petitioner in any way. No submission or written submission made on their behalf also. Respondent no.4 is also party to the arbitration clause along with respondent no.2-KHIL. Therefore, there is no objection of any kind raised by respondent no.4 about the existence of arbitration clause and the arbitrability of the issue. The presumption is that respondent no.4 is also supporting the petitioner in all respects.
33 Respondent no.1-the company has been represented by two Counsel. Mr.Pai, the learned Counsel has represented Mr.Vithal Kamat and Mr.Vikram Kamat, who alleged to have conducted the meeting after the first Board meeting dated 21.05.2009 (Ex.J.). Mr. C. U. Singh, the learned Senior Counsel appeared on behalf of Mr. V. S. Kamat, who called upon the Board meeting by notice dated 18.05.2009 and circulated the agenda for 21.05.2009 ::: Downloaded on - 09/06/2013 15:06:56 ::: This Order is modified/corrected by Speaking to Minutes Order 11 and as recorded in Ex. I. The Court has allowed the learned Counsel to make submissions so as to give opportunity to all, to submit their respective cases and based upon the events prior to 21.05.2009's Board meeting and the events thereafter. As of today Mr.Vikram Kamat and Vithal Kamat, as recorded, are the elected Chairman/Director of respondent no.1-company, but their nomination/election, based upon the various resolution, Exhibit "J" which are under challenge. The resolution, Exhibit "I" was passed by the Board Meeting, based upon the Chairman/Director/Authorised person Mr.V.S.Kamat who circulated the agenda/notice dated 18.05.2009.
34The rival submissions are made by the parties revolving around these resolutions i.e. Exhibit "I" and Exhibit "J". It is, therefore, very clear that the company which is involved needs to resolve the disputes raised and/or cropped up between the shareholders. The transfer of shares of respondent no.3- Clearwater, to respondent no.2, has drastically changed shareholding of the company. Whether such transfer is validly made or not and whether such transfer is permissible or not and whether notices before such transfer ought to have been given or not to other JV Partners and whether the meeting of the company was conducted in accordance with the Rules and clauses of the company and all related aspects further show that all the issues are inter-linked and inter-connected. It is difficult to accept that there is a dispute only between the two JV Partners. The basic requirement is the existence of arbitration clause between the parties. Admittedly, all the parties in the present petition are the parties to the said arbitration clauses. Though, respondent no.1-company formed in 2007 and two definitive documents (SSA and SHA) have been ::: Downloaded on - 09/06/2013 15:06:56 ::: This Order is modified/corrected by Speaking to Minutes Order 12 executed by all the parties, yet on 29.11.2007 the company's Articles of Association were amended. Therefore, as of today, prima facie, all these parties are bound to resolve their dispute through Arbitration clause 71 of the Articles of Association. I am not accepting the submissions that all the parties are not governed by these arbitration clauses.
35 Now, the issue is whether a case is made out by the petitioner for the interim reliefs as prayed. Those prayer clauses are as under:
"a. Pending hearing and final disposal of the Arbitration proceedings, the Respondent Nos. 2 and 3 be restrained from exercising any rights including rights of transfer and or voting rights in respect of and in relation to the 57,64,706 (Fifty seven lakhs sixty four thousand seven hundred and six only) equity shares of the respondent no.1 being distinctive nos. from 60,00,001 to 1,17,64,706 transferred by respondent No.3 to respondent no.2.
b. That pending the hearing and final disposal of the Arbitration proceedings Respondent No.2 it servants, nominees agents be restrained from and in any manner participating on the Board of Respondent No.1 except through one Nominee director as provided in the Articles of Respondent No.1;
c. That pending the hearing and final disposal of the Arbitration proceedings the Respondent No.3, its servants, agents, nominees be restrained from and in any manner participating on the board of the Respondent No.1;::: Downloaded on - 09/06/2013 15:06:56 :::
This Order is modified/corrected by Speaking to Minutes Order 13 d. That pending the hearing and final disposal of the arbitration proceedings and the implementation of the Award therein, the Respondents, their assignees, representatives be restrained by an Order and Injunction of this Hon'ble Court from and in any manner acting upon the purported resolutions copi9es of which are annexed at Exhibit J;
e. That pending the hearing and final disposal of the arbitration proceedings and the implementation of the Award therein, the Respondent No.1 Company be restrained by Order and Injunction of this Hon'ble Court from modifying or amending the register of shares held by each shareholder or in any other manner transferring the shares of Respondent No.3 in favour of Respondent No.2 or amending the Memorandum of Association or Articles of Respondent No.2;
f. That pending the hearing and final disposal of this petition, the respondent Nos. 2 and 3 be directed to disclose the price and the terms and conditions and other details upon which the Respondent No.3 has illegally transferred its 49% share holding in the Respondent No.1 to the Respondent No.2;
g. ad-interim reliefs in terms of prayers (a) to (f) above;
h. that, such other incidental relief as this Hon'ble Court may deem fit and proper;::: Downloaded on - 09/06/2013 15:06:56 :::
This Order is modified/corrected by Speaking to Minutes Order 14 i. that costs of this petition be provided for."
36 The relevant clauses of the articles which the parties have made submissions are as under:
Some of the definitions are as under :
" "Competitor" shall mean any person whose primary business is of owning and operating hotels or malls in India.
"Hotel Operating Agreement" shall mean the hotel operating agreement entered into between the Company and KHIL.
"JV Partners" shall refer to URDL, KHIL and BSEL collectively and "JV Partner" shall refer to any of them individually.
"Person" shall mean and include an individual, an association, a firm, a corporation, a partnership, a joint venture, a trust, an unincorporated organisation, a joint stock company, governmental or statutory authority, including a government or political sub-division, or agency or instrumentality thereof or other entity or organisation.
"Proposed Transferee" shall have the meaning ascribed to it in Article 23(a).
"Reserved Board Matters" shall mean the matters which require the affirmative vote of any one Clearwater Director and any one of the JV Partner Directors as set out in Article 56.
"Shareholders" shall mean and collectively refers to the JV ::: Downloaded on - 09/06/2013 15:06:56 ::: This Order is modified/corrected by Speaking to Minutes Order 15 Partners and Clearwater and any person who becomes a shareholder of the Company pursuant to the terms of these Articles.
"Transfer" shall mean (i) any transfer or other disposition of the Equity Shares or voting interests or any interest therein, including, without limitation, by operation of law by court order, by judicial process, or by foreclosure, levy or attachment; (ii) any sale, assignment, gift, donation, redemption, conversion or other disposition of such Equity Shares or any interest therein, pursuant to an agreement, arrangement, instrument or understanding by which legal title to or beneficial ownership of such Equity Shares or any interest therein passes from one person to another person or to the same person in a different legal capacity, whether or not for value;
(iii) the granting of any security interest, lien, pledge, mortgage, hypothecation or charge in or extending or attaching to such Equity Shares or any interest therein; the term "Transferred" shall be construed accordingly."
"17 The Board may decline to register any Transfer of any certificates representing Shares or issue any certificates in lieu thereof unless the Transfer is in compliance with all the provisions of these Articles of Association. A purported Transfer that is not in accordance with the Articles of Association shall be void.
18 Without prejudice to the generality of the aforesaid power but subject to the provisions of these Articles, the Board may refuse to register any Transfer of Shares:::: Downloaded on - 09/06/2013 15:06:56 :::
This Order is modified/corrected by Speaking to Minutes Order 16
(a) where the Company has lien on a Share, or
(b) in case of Shares not fully paid up, where it is not proved to their satisfaction that the proposed transferee is a responsible person, or ( c ) where the Directors are of the opinion that the proposed transferee (not being already a member) is not a desirable person to admit to membership, or ( d) where the result of such registration would be to make the number of members exceed the limit fixed by Article 4.
19 The Shareholder(s) shall not, directly or indirectly, Transfer all or any of the Shares held by them except in accordance with these Articles. Any Transfer in breach of these Articles, including this Article 19, shall be null and void, and shall not be binding on the Company.
Notwithstanding any restrictions stated herein, the Equity Shares may be transferred in accordance with Article 20 (Transfer of Shares by JV Partners), Article 21 (Transfer to Affiliates), Article 22 (Permitted Transfers), Article 23 (JV Partners' Right of First Refusal) Article 24 and 25 (Tag Along Rights) and Article 31 (Drag Along Rights) hereinafter.
20 No JV Partner ("Transferring JV Partner") shall transfer any of the Class B Equity Shares held by it to any person other than the JV Partners till such time as Clearwater continues to hold any ::: Downloaded on - 09/06/2013 15:06:56 ::: This Order is modified/corrected by Speaking to Minutes Order 17 Class A Equity Shares of the Company, without the prior consent of the remaining JV Partners. The terms of such Transfer by the Transferring JV Partner shall be decided by mutual consent between all 3 (three) Partners.
21 Clearwater may Transfer its Shares to an Affiliate without attracting the provisions of Article 22 (Permitted Transfer).
22 (a) Clearwater may Transfer its Shares to any person, subject to Article 23 (JV Partners Right of First Refusal).
Article 24 (JV Partners Tag Along Right), Article 28 (Joint Exit), Article 29 (Purchasing Shareholder Offer), Article 30 (Clearwater Exit) and Article 31 (Drag Along Right). Any Transfer of Shares by Clearwater shall, other that as specified in Article 24(d), be along with all rights pertaining to such Shares.
(b) No JV Partner shall Transfer the Shares held by it for a period of 18 (eighteen) months from the date on which the construction of the Hotels is completed and a completion certificate (in the form and manner envisaged in the Concession Agreement) is issued by the engineer-in-charge appointed pursuant to the Concession Agreement.
(c ) Notwithstanding the provisions of Article 22(b) above, the JV Partners shall be allowed to inter-se Transfer Shares held by them, without the written consent of Clearwater, provided that:
( i ) the aggregate shareholding of KHIL and URDL in the ::: Downloaded on - 09/06/2013 15:06:56 ::: This Order is modified/corrected by Speaking to Minutes Order 18 Company shall be at least 34% (thirty four percent); and (ii ) the Transfer does not result in the Company becoming a public company or a subsidiary of a public company under Indian law.
23 (a) Subject to the provisions of these Articles, if Clearwater (the "Transferring Party") desires to sell any or all of its Shares ("Offered Shares") in the Company to any person(s) not being an Affiliate of Clearwater ("Proposed Transferee"), it shall first by written notice (the "Transfer Notice") disclose to the JV Partners the identity of the proposed Transferee as well as the price and all other terms and conditions on which it proposes to Transfer the Offered Shares to the proposed Transferee and give the JV Partners a right of first refusal to the Offered Shares on the same price, terms and conditions as offered to such Proposed Transferee (the "JV Partners" ROFR").
(b ) Any of the JV Partners shall have the right, within a period of 15 (fifteen) days from the date of receipt of the Transfer Notice (the "Offer Period"), to agree to purchase all (but not less than ll) of the Offered Shares at the same price and on the same terms and conditions as offered to such Proposed Transferee. In the event that any of the JV Partners choose to purchase all (but not less than all) of the Offered Shares pursuant to this Article 23 (b), the JV Partners shall convey acceptance of the Offered Shares to Clearwater by way of a written notice (the 'JVP Acceptance Letter") and the ::: Downloaded on - 09/06/2013 15:06:56 ::: This Order is modified/corrected by Speaking to Minutes Order 19 Shareholders and the Company shall take all steps to cause the Transfer of the Offered Shares to the JV Partners on the terms mentioned in the Transfer Notice and in accordance with the JVP Acceptance Letter within a period of 30 (thirty) days following the date of receipt by Clearwater of the JVP Acceptance letter. The time required for Approvals or for compliance with any requirements of Applicable Law shall be excluded in calculating the foregoing period of 30 (thirty) days. The Shareholders and the Company shall make all requisite applications to obtain such Approvals in a prompt and timely manner for giving effect to the provisions of this Article.
(c ) If JV Partners are unable or unwilling to purchase the Offered Shares, subject to the provisions of Article 24 (JV Partners Tag Along Right) below, Clearwater may Transfer the Offered Shares to the Proposed Transferee at a price and on terms no more favourable than those mentioned in the Transfer Notice.
24 (a) If the Proposed Transferee is a Competitor, the JV Partners shall have a tag along right that may be exercised by any or all of them in accordance with the terms and conditions contained herein for all or part of the Shares held by the JV Partners.
(b ) If any of the JV Partners choose to exercise their tag along right pursuant to this Article, such JV Partner shall send a notice ("Tag Along Notice") to Clearwater within a period of 15 ::: Downloaded on - 09/06/2013 15:06:56 ::: This Order is modified/corrected by Speaking to Minutes Order 20 (fifteen) days from the date of receipt of the Transfer Notice, specifying the number of Shares sought to be Transferred by the relevant JV Partner ("JVP Tag Shares"). If such JV Partner serves the Tag Along Notice on Clearwater, Clearwater shall ensure that the Proposed Transferee purchases the JVP Tag Shares at a price per Share and on terms that are no less favourable than the price and the terms offered by the Proposed Transferee to Clearwater.
(c ) If any or all the JV Partners do not or are unable to send a Tag Along Notice to Clearwater within a period of 15 (fifteen) days from the date of receipt of the Transfer Notice, such JV Partner shall be de4emed to have waived its tag along rights under this Article.
(d ) In the event the Transfer of Shares by Clearwater is in favour of a Competitor and is completed on or prior to 31 March 2012, the rights of Clearwater under these Articles (Including rights attaching to the Class A Equity Shares) shall not be transferred along with the Offered Shares. If the Transfer of Shares is in favour of a Competitor and is completed subsequent to 31 March 2012 or is in favour of a person who is not a Competitor, all the rights of Clearwater under these Articles (including rights attaching to the Class A Equity Shares) shall be transferred along with the Offered Shares.
25 (a) If the JV Partners ("JVP Transferring Parties"), acting jointly, desire to sell all of their Shares ("JVP Offered Shares") ::: Downloaded on - 09/06/2013 15:06:56 ::: This Order is modified/corrected by Speaking to Minutes Order 21 in the Company to any Person (s) ("JVP Proposed Transferee"), the JV Partners shall first by written notice (the "JVP Transfer Notice") disclose to Clearwater the identity of the JVP Proposed Transferee as well as the price and all other terms and conditions on which the JVP Transferring Parties propose to Transfer the JVP Offered Shares to the JVP Proposed Transferee.
(b ) Clearwater shall have the right (the "Clearwater Tag Along Right"), within a period of 21 (twenty one) days from the date of receipt of the JVP Transfer Notice (the "JVP Offer Period") to notify the JVP Transferring Parties of Clearwater's intention to exercise its tag along rights in terms of Article 25 (c) below ("JVP Tag Along Notice") for up to all the Shares held by its.
(c ) If Clearwater chooses to exercise the Clearwater Tag Along Right, Clearwater shall send the Clearwater tag along notice ("Clearwater Tag Along Notice") to the JVP Transferring Parties within a period of 15 (fifteen) days from the date of receipt of the JVP Transfer Notice, specifying the number of Shares sought to be Transferred by Clearwater ("Clearwater Tag Shares"). Clearwater Tag Shares may be all or part of the Shares held by Clearwater and need not be pro rata to the shareholding of Clearwater in the Company. If Clearwater serves the Clearwater Tag Along Notice on the JVP Transferring Parties, the JVP Transferring Parties shall ensure that the JVP Proposed Transferee purchases the Clearwater Tag Shares at a price per share and on terms that are no less favourable ::: Downloaded on - 09/06/2013 15:06:56 ::: This Order is modified/corrected by Speaking to Minutes Order 22 than the price and the terms offered by the JVP Proposed Transferee to the JVP Transferring Parties."
"41 (a) The Board shall consist of a maximum of 5 (five) Directors.
(b ) Subject to the provisions of the Act, the Shareholders may vary the strength of the Board and the number of Directors that shall be nominated by each Shareholder.
44 (a) Clearwater shall nominate 2 (two) Directors ("Clearwater Directors") on the Board till such time as Clearwater holds at least 10% of the Equity Shares of the Company. Each of the JV Partners shall have the right to nominate at least 1 (one) Director ("JV Partner Directors").
(b ) The Clearwater Director and/or the JV Partner
Directors shall not be liable to retire by rotation.
(c ) Notwithstanding any Transfer of Shares by the JV
Partners to any Person (s), all the JV Partners and the transferee (s) of the Shares of the JV Partners put together, shall not be entitled to nominate more than 3 (three) Directors.
(d ) If the Shareholding of any JV Partner ("Selling JV Partner") is reduced to less than 10% (ten percent) of the total paid-
up Share Capital of the Company, such JV Partner shall cease to have the right to nominate a Director on the Board. The other JV Partner(s) who acquired the Shares from the Selling JV Partner shall ::: Downloaded on - 09/06/2013 15:06:56 ::: This Order is modified/corrected by Speaking to Minutes Order 23 secure the right to nominate an additional Director on the Board of the Company. If more than 1 (one) JV Partner has purchased the Shares of the Selling JV Partner, the Director shall be appointed by mutual consent between such JV Partners."
"51 (a ) The quorum for each Board meeting shall be 2 (two) Directors provided always that the presence of a Clearwater Director and a JV Partner Director shall be required at every meeting of the Board to constitute a quorum, unless Clearwater and/or the JV Partners, as the case may be, waive such requirement in writing in respect of any specific meeting of the Board.
(b ) In the event that the Clearwater Director (s) or the JV Partner Director (s) are unable to attend a meeting of the Board despite having been provided requisite notice, such meeting shall be adjourned to the same day of the next calendar week at the same time and venue as the adjourned meeting.
(c ) If a meeting of the Board is adjourned twice for the want of quorum as a result of the absence of a Clearwater Director and/or a JV Partner Director, the Directors present at the second adjourned meeting of the Board shall be deemed to constitute quorum.
52 A meeting of the Board of Directors shall be duly called upon the giving of at least fifteen (15) Business Days' prior written notice to all the Directors; Provided that a meeting of the Board of ::: Downloaded on - 09/06/2013 15:06:56 ::: This Order is modified/corrected by Speaking to Minutes Order 24 Directors shall be duly called notwithstanding that notice of the meeting shall have been given for less than fifteen (15) Business Days' but not less than forty eight (48) hours if it is so unanimously agreed by the Directors. Each notice of a meeting of the Board of Directors shall contain inter alia, an agenda specifying in reasonable detail the matters to be discussed at the relevant meeting and shall be ac companied by all necessary written information. No matter which is Reserved Board Matter shall be introduced for discussion or resolution in a meeting of the Board unless such matter is set out in the agenda for the meeting and notice thereof has been given to each of the Directors."
"54 (a ) Each Director (or his alternate) present at each Board meeting shall be entitled to cast 1 (one) vote on each issue put to vote.
(b ) The decisions of the Board shall be taken, to the extent possible, on an unanimous basis, provided however that, in the event the members of the Board fail to agree on a particular issue after due deliberation and effort, the matter shall be decided by a simple majority of the Board.
(c ) The Shareholders and th Company shall procure that no action shall be taken or resolution be passed by the Board except with the affirmative vote of at least 1 (one) Clearwater Director and any 1 (one) of the JV Partner Director, in respect of the Reserved Board Matters including decisions by circular resolution.::: Downloaded on - 09/06/2013 15:06:56 :::
This Order is modified/corrected by Speaking to Minutes Order 25 (d ) A Director nominated by a Shareholder shall not be entitled to vote on any matter connected with the exercise of rights (legal or contractual) of the Company against the Shareholder who has nominated such Director, or against an Affiliate of such Shareholder (including in connection with exercise of the rights of the Company as mutually agreed between the Shareholders and the Company in inter-se agreements between the Shareholders and the Company)."
"56 Reserved Board Matters shall include :
(a ) Acquisition of shares, assets (other than as part of regular course of business or as agreed in the Business Plan), business, business organization or division of any other person, creation of legal entities, joint ventures or strategic alliances or partnerships, mergers, de-mergers, spin-offs, consolidations, re-
organization or any scheme of arrangement under Sections 391 to 394 of the Act in relation to the Company;
(e ) Approving or registering transfer of Shares other than in accordance with procedure as mutually agreed between the Shareholders and the Company.
(m ) Commencing any new business or undertaking any new project or expansion of any facility or the Project or sale of any undertaking or substantial assets of the Company or its subsidiaries;
(p ) Appointing, removing or determining the terms of ::: Downloaded on - 09/06/2013 15:06:56 ::: This Order is modified/corrected by Speaking to Minutes Order 26 employment, including compensation, of key managerial personnel including any significant changes in the terms of their employment agreements;
(r ) Delegating the powers, duties and responsibilities by the Board to a Director (s) or to a committee of the Board or modification, restriction or revocation of powers delegated or duties and responsibilities fixed;
(u ) Change of the registered office of the Company.
57
The Directors shall cause minutes to be made, in books
provided for that purpose, of:
(a ) All appointments of officers made by the Directors;
(b ) All the names of the Directors present at each meeting
of the Directors and of any committee of the Directors; and (c ) All resolutions and proceedings at all meetings of the Company, and of the Directors, and of committees of Directors.
Such minutes shall be signed by the Chairman of that meeting or of the meeting at which, they are approved."
37 Admittedly, respondent no.2 was brought in to utilise its experience in hotel management and, therefore, on 21.04.2007, the petitioner-URDL, respondent no.4-BSEL and respondent no.2-KHIL resolved and decided to form respondent no.1-company. UIL was not in the picture and not even party to the ::: Downloaded on - 09/06/2013 15:06:56 ::: This Order is modified/corrected by Speaking to Minutes Order 27 JVC. Therefore, at the relevant time, there were only three shareholders of respondent no.1-company. The construction work was entrusted to UIL on 01.05.2007. On 16.07.2007, 60 years concession contract was awarded by the GOM to the company. Respondent no.2 was to supervise the project. The estimated cost increased. Respondent no.3 who was having 3.90% equity capital of respondent no.2-KHIL agreed to participate as an investor. On 03.07.2007 Power of Attorney was given to Mr.V.S.Kamat in the Board meeting on 28.06.2007, based upon which he was managing the affairs of the company. As noted on 01.11.2007 both these definitive documents have been signed by all the parties, knowing fully the contents, purpose, object of the project and the Company's Articles of Association.
38 On 15.11.2007, respondent no.1-company executed a "Hotel Operating Agreement" to manage and operate the hotels/project. Admittedly, respondent no.2 since then have been managing and operating the same accordingly.
Therefore, respondent no.1-company treated respondent no.2-KHIL as a separate entity and, accordingly, executed the Hotel Operating Agreement. Therefore, for all the purposes, the experience and the purpose of bringing in KHIL, knowing fully its business allowed it to be a JV Partner/shareholder of the company. They also executed Hotel Operating Agreement separately. The meaning of "Competitor" as per Articles of Association means, any person whose primary business is of owning and operating hotels or malls in India.
39 As per clause of "shareholders collectively" means the JV partners and Clearwater which includes the petitioner and respondents. As per clause 19, they shall not directly or indirectly transfer all or any of the shares held by them ::: Downloaded on - 09/06/2013 15:06:56 ::: This Order is modified/corrected by Speaking to Minutes Order 28 except in accordance with these Rules. Any transfer in breach of these Articles, shall be null and void and shall not be binding on the company. However, it is permitted them to transfer in accordance with Article 20 (Transfer of Shares by JV partner), Article 21 (Transfer to Affiliates), Article 22 (Permitted Transfer), Article 23 (JV Partners Right of First Refusal), Articles 24 and 25 (Tag Along Rights) and Article 31 (Drag Along Rights). There are specific provisions made for respondent no.3 (Clearwater) to transfer its shares in Clauses 21 to 26.
40 Clause 23 provides that if Clearwater (the transferring party) desires to sell any or all of its other shares in the company to any persons not being an affiliate of Clearwater (Proposed Transferee). It shall first be written notice (the Transfer Notice) disclose to the JV Partners, the identity of the proposed transferee as well as the price and all other terms and conditions on which it proposed to transfer the offered shares to the proposed transferee and given the JV partners right of first refusal to the offered shares on the same price, terms and conditions as offered to such proposed transferee. It also provides 15 days time for the JV partners to act upon the same and if intimated or if it sends a Acceptance Letter within a period of 30 days need to be sent by the JV partners and the parties accordingly take steps of approval etc. If JV Partners are unable or unwilling to purchase the offered shares subject to provisions of Article 24 (JV Partners Tag Along Rights), Clearwater may transfer the shares to the proposed transferee at a price on terms no more favourable than those mentioned in the transfer notice.
41 As per clause 24(a) of the Articles of Association, if the proposed transferee is a competitor the JV Partners shall have the Tag Along Right that may ::: Downloaded on - 09/06/2013 15:06:56 ::: This Order is modified/corrected by Speaking to Minutes Order 29 be exercised by any or all of them in accordance with the terms and conditions contained herein for all or part of the shares held by the JV Partners. If any of the JV Partners exercise their Tag Along Rights need to send a notice within a period of 15 days to Clearwater specifying details. If JV partners serves the Tag Along Notice on Clearwater, it shall ensure that the Proposed Transferee purchases the JVP Tag Shares at a price per share. If there is no Tag Along Notice to Clearwater within 15 days from the date of receipt of the Transfer Notice, such JV Partners shall be deemed to have waived its Tag Along Notice under the Articles.
42 In the present case, respondent no.3 as admittedly, transferred the shares on 18.05.2008 and recorded accordingly officially on 21.05.2008, to respondent no.2-KHIL treating it as a "JV Partner" and not a "competitor" and, therefore, no prior notice/intimation/consent of whatsoever nature to other JV Partners or the company was given or obtained.
43 The Company formed by the parties to complete the project jointly and effectively. The parties are fully aware of their respective roles. These being commercial transactions and documents, the parties have entered into these various clauses/agreements. The interest and the investment of the respective parties in the company is also clear and well defined. The parties have agreed and put various conditions and restrictions through these Articles to deal with the aspect of Board meeting notices, time period, dispensing the notice period, the transfer of shares, JV Partner's Right of First Refusal, Tag/Drag Along Rights, the meaning of Competitor, Person, Affiliate, Right of First Refusal (ROFR), the proposed transferee as defined and contemplated under Articles 22, 24. It is specifically provided in Articles 17 and 19 that transfer of shares in violation of ::: Downloaded on - 09/06/2013 15:06:56 ::: This Order is modified/corrected by Speaking to Minutes Order 30 Articles of the Company shall be void. In view of above admitted position, the whole transactions and transfer is in contravention of the Articles. KHIL cannot be termed as only JV Partner when it purchased CCPL's shares secretly. It became "competitor", "third person", for the purposes of company's business and the project with regard to these shares and right arising out of the same.
44 The Apex Court recently in Vimal Chand Ghevarchand Jain & ors. vs. Ramakant Eknath Jajoo, 2009 (5) SCALE 59 has observed while dealing with the construction of a commercial contract as under :
"A document, as is well known, must be construed in its entirety"
45 In Bishwanath Prasad Singh v. Rajendra Prasad & Anr. (2006) 4 SCC 432, the Apex Court has observed as under:
"16. A deed as is well known must be construed having regard to the language used therein."
46 The Bombay High Court in Mumbai Metropolitan Region Development Authority vs. Unity Infraproject Ltd., 2008 (5) Bom.C.R. 196, in para 11 observed as under:
"11 Contracts represent business understandings between the parties. Commercial dealings between persons who are well versed in the transaction business are regulated by contract which parties opt to govern themselves. ... The law is not divorced from business realities nor can the vision of the Judge who interprets the law be disjointed from the modern necessities to make business sense to business dealings."
47 I have observed in Reliance Natural Resources Ltd. v. Reliance Industries Limited, 2007 (Supp.) Bom. C.R.925 as under:
::: Downloaded on - 09/06/2013 15:06:56 :::This Order is modified/corrected by Speaking to Minutes Order 31 "93 Apart from that the following extracts from Chitty on Contracts (27th Edition), 1994 in para 12.053 is also useful:
"Every contract is to be construed with reference to its object and the whole of its terms, and accordingly, the whole context must be considered in endeavouring to collect the intention of the parties, even though the immediate object of inquiry is the meaning of an isolated word or clause."
48 The parties have made their respective interpretation of these various terms and clauses from their points of view in support of their respective submissions. The Court need to take into consideration all but within the frame of law. The contract/agreements need to be read as a whole considering the nature & the purpose of the business. The clause and the contract as a whole even if is clear and unambiguous the court needs to consider the same in the facts and circumstances of the case. It is necessary to see relationship between words; sentences; clauses; chapters and the whole document. It cannot be read in isolation. The faith, trust, fiduciary relationship and understanding between the parties, just cannot be overlooked, before interpreting any such private commercial documents.
49 The combined & the conjoined reading of these clauses 20 to 26 read with the whole documents, it is clear that the intention was to work and complete the project jointly by the JVA partners. The parties have formed the company, based upon their mutual trust, faith, understanding and respective roles and the experience. All the JV Partners, therefore, are bound to work together in all respects. CCPL though joined to finance the company, yet treated separately than JV Partners. Basically there is a restriction on JV Partners from transferring its shares to any Person. However, it could be done subject to due notice and as per ::: Downloaded on - 09/06/2013 15:06:56 ::: This Order is modified/corrected by Speaking to Minutes Order 32 the Articles, CCPL is also permitted to transfer its share, but subject to the various compliances and conditions as contemplated under Articles 22 to 31. The shares were transferred/sold to respondent no.2 by respondent no.3 by treating respondent no.2 not as a "competitor" as contemplated under Article 24 and but by treating respondent no.2 as a JV Partner and thereby interpreted and read the provisions to the effect that no notice whatsoever is necessary to be given, before transferring its shares, to other JV Partners like the petitioner and respondent no.
4-BSEL. The action of respondents 2 and 3 is incorrect. It is in breach of the clauses. It has destroyed the basic purpose and object of the association and formation of the company for the project.
50 Respondent no.2 was brought in because of its experience in the hotel management field. Admittedly, the hotel management/operation agreement was entered into by the company with respondent no.2. CCPL and JV Partners.
These are two different entities. The plain reading of these clauses show that any transfer of shares by CCPL other than to an Affiliate was subject to the restrictions/procedures and conditions to be complied with. Having once provided with such clauses of the Right of Refusal to JV Partners and/or Tag/Drag Along Rights with due notice to all such partners and awaiting their response/refusal before transferring to other than JV Partners to any Person or Competitors itself means that each and every JV Partners have right of due and proper written notice, if CCPL wants to transfer shares.
51 The vital facet, two shareholders rights were provided to CCPL because of its financial assistance to the project. The two votes therefore treated as separate for all the purposes. Such rights, therefore, governed by the Clearwater existing ::: Downloaded on - 09/06/2013 15:06:56 ::: This Order is modified/corrected by Speaking to Minutes Order 33 clause 30 also, as finance support goes so also the rights flow from it. This also means due and proper notice to all JV Partners before transfer of the shares by CCPL.
52 All JV partners, considering the scope and purpose of the project, entered into and have formed the company-respondent no.1. Thereafter jointly executed definitive documents (SSA, SHA). Therefore, for all the purposes JV partners entity and its role and involvement to take decisions jointly, collectively and definitely not as an individual has been recognised. This was also well within the knowledge of CCPL. The submission that the transfer of shares by CCPL to respondent no.2 only, without giving notice and/or any rights to petitioner and respondent no.4-BSEL is impermissible. The documents no-where provides and authorises to treat one JV Partner as a common entity for the purposes of entering into any kind of such business without the notice. There is nothing on record to show that all other JV Partners like the petitioner and respondent no.4-BSEL, have refused and consented or permitted the transfer of shares by CCPL to respondent no.2-KHIL.
53 Respondent no.2 though brought in because of its experience in hotel operation and/or management and they, accordingly, formed the company, but the company awarded the hotel management operation contract to respondent no.2, it was treated as a different entity. The company has awarded the construction contract to UIL treating it to be separate entity. Therefore, the whole intention and object was as it is clear from the documents itself that the petitioner, respondents 2 and 3 are JV Partners for the purposes of as a single unit/entity for the project, but when the separate agreements or contracts are ::: Downloaded on - 09/06/2013 15:06:56 ::: This Order is modified/corrected by Speaking to Minutes Order 34 entered into by the company with them and in the present case, definitely with respondent no.2 for hotel operation contract, it is treated as two different entities. There is no dispute that respondent no.2-KHIL owns and operates several restaurants and hotels and related activities. It falls within the definition of the "competitors". It also deals with the business of real properties. It was not mutual distributions of the shares between JV Partners.
54 The sale or transfer of shares by CCPL to JV Partners as a unit could not have been questioned, but CCPL when transferred its shares individually to respondent no.2, needs to be treated differently and separately for the purposes of transfer of shares. Respondent no.2 definitely not purchased or accepted the shares on behalf of other JV Partners like the petitioner and respondent no.4.
55 The effect of 49% holding of shares and its transfer unilaterally by respondent no.3 to respondent no.2 has changed the shareholding of the company substantially. Respondent no.2 became the majority shareholders of the company and the petitioner and respondent no.4 became minority shareholders.
The word "competitor" so defined under the Articles itself make the position clear read with the other provisions of transfer of shares that any JV Partner who entered into different and separate contract and/or want to purchase and/or CCPL wants to transfer the shares will be competitors for others.
56 It is more clear that admittedly, CCPL has not transferred the shares to its Affiliate. Respondent no.2 is not CCPL's affiliate. Respondent no.2, therefore, need to be treated as "Person" for the purposes of these Articles who is other than a JV Partner. Having once purchased such equity shares without prior consent of remaining JV Partners, respondent no.2, in my view, also becomes ::: Downloaded on - 09/06/2013 15:06:56 ::: This Order is modified/corrected by Speaking to Minutes Order 35 "competitor" and a "Person" or "third person/party" and, therefore, transfer of such shares to such Person/Competitor without prior consent and permission of the other JV Partners and all subsequent actions arising out of the same is in contravention of above Articles and, therefore, in view of Articles 17 and 19 itself, such transfer is null and void and not binding on the company, but the Court under Section 9 of the Act cannot declare and decide the validity of such transactions finally. It is a matter of detail inquiry and the trial before the Tribunal.
57 The transfer of CCPL's shares in favour of respondent no.2, if not legal and valid, it creates no rights or interest to appoint two additional nominee Directors as is done in the present case. CCPL goes as a 49% shareholders being financer, existence clause of CCPL get invoked automatically. The transfer of shares in favour of respondent no.2 is no-way gives/confers the right on KHIL to appoint or nominate more Directors on the Board of the company. It was privilege of CCPL only, but once CCPL existed in view of 49% sale of shares, there is no question of two representatives of the CCP through KHIL, being subsequent purchaser of the shares. There is no such clause or provision made in the contract/Article which empowers to nominate two Directors being subsequent purchaser of CCPL's shares.
58 Respondent no.3, as noted, invested Rs.48.5 crores in respondent no.1 by subscribing to Class "A" shares comprise of 49% of the equity capital of respondent no.1. Those shares were issued to respondent no.3 on 29.11.2007 after executing the definitive documents. The petitioner, respondent nos. 2 and 4 held Class "B" shares comprising 51% of the equity capital (17% each initially) of ::: Downloaded on - 09/06/2013 15:06:56 ::: This Order is modified/corrected by Speaking to Minutes Order 36 respondent no.1. After 6.8.2008, respondent no.2 has held 26% shareholding and the petitioner has held 19.35% shareholding. The submission with regard to the various defaults committed by JV Partners and the company, even if any, that is a matter of full trial before the Arbitral Tribunal. That itself cannot be the reason to overlook the mandate of above clauses. Admittedly, on 21.05.2009 respondent no.3 sold all its shares in respondent no.1 to respondent no.2 and has repatriated the sale proceeds in accordance with law. The transfer is also reflected in the record of respondent no.1. The issue is not only to the completed action, but the way in which it was proceeded by the respondents. The submission of respondent no.3 that the JV Partners were one group and treated them accordingly, is unacceptable basically in view of above clauses of which respondent no.3 has full knowledge all the time specially after entering into the agreements between the parties. The submission, therefore, based upon definitive documents by ignoring the Articles of Association of respondent no.1 and the clauses referred above is also therefore unacceptable. The special rights, even if given to respondent no.3 to protect its investments and to facilitate and exit at a profit still it is subject to various riders as contemplated in clauses of the Articles 20 to 32, in my view, the clauses of SHA or SSA cannot be read in isolation by overlooking the clauses of Articles of Association of respondent no.1- company. The plain reading of these Articles itself made provisions with regard to transfer of shares and notices of the Board meetings which, in the present case, as contended by the respondents, just cannot be overlooked with reference to the clauses of SHA or SSA independently. All are intermixed, inter-linked and interconnected. At this prima facie stage, therefore, considering the purpose and ::: Downloaded on - 09/06/2013 15:06:56 ::: This Order is modified/corrected by Speaking to Minutes Order 37 intention behind this document read with whole documents, I am not inclined to accept the submission to read definitive document's clauses independently and/or separately from the Articles of the company.
59 I am not inclined to accept the submission that there was no ROFR notice required to be given by respondent no.3 for the sale to a JV Partner who is not a "Third Party". There is no clauses pointed out that no notice is required to be given to other partners when respondent no.3 wants to transfer the shares to only one partner. In the absence of specific provision like this and considering the clauses/Articles from 20 to 24 as a whole, in my view, prima facie, a notice to all the partners is a must. JV partners, if it is a one entity consisting of three partners and other two partners, if have not given any consent or any permission and/or any authorisation to one partner to deal with or enter into such transaction or to purchase such shares from respondent no.3, the contention that no notice of any kind is necessary to be given by respondent no.3 is also incorrect.
Admittedly, there is nothing on record to show that other partners have allowed respondent no.2 to buy the shares on their behalf and/or individually. A partner, who purchased the property without the consent and/or permission of the other JV Partners, is, therefore, definitely acted in contravention of the Rules. I am also not accepting the case of the respondents that as the proposed Transferee was a JV Partner, ROFR notice was not necessary.
60 Any JV Partner can exercise the ROFR provided others must give consent or no objection or permit such partners to proceed on behalf of others. Because the purchase of shares by respondent no.2 without the consent of other JV Partners cannot be said to be in the interest of respondent no.1-company, but it is ::: Downloaded on - 09/06/2013 15:06:56 ::: This Order is modified/corrected by Speaking to Minutes Order 38 definitely in the interest of respondent no.2 alone. The act of respondents 2 and 3 was therefore not in accordance with agreed contracts. Admittedly, no ROFR notice of whatsoever nature was given. There is no denial to the rights of respondent no.3 to sell and/or transfer the shares. There is no also denial to the respective JV Partners to purchase or acquire those shares but as admittedly it was subject to due and proper notice enable them to exercise their individual and/or separate rights, if any, which, admittedly, in the present case is absent and denied. The right of respondent no.3 to exit is also subject to various riders as elaborated above. Therefore, merely because breaches were committed by the company or JV Partners and/or various defaults and as these are not the grounds or reason enumerated in any of the Articles and/or clauses of SHA and as the specific clauses provides specific procedure and conditions to be complied with by all the parties, such transaction/transfer of shares without giving due and proper notice to others and the subsequent actions, based upon the same basically of respondents 2 and 3, are illegal and void as per these agreed clauses itself.
61 It is also necessary now to consider the Notices dated 18.04.2009, 19.04.2009 and Board Meeting dated 21.04.2009 and the Resolution at Exhibit "I" and the Resolution at Exhibit "L". On 18.05.2009 (Exh. G) Mr.V.S. Kamat, the Chairman of the Company, circulated the agenda along with the notice for the Board meeting on 21.05.2009 at 3p.m. There was no objection received from any of the Directors including to the items contained therein.
62 On 19.05.2009 the letter was addressed by Mr.Dinkar, a nominee Director of KHIL to Mr.V.S.Kamat, thereby gave consent to the agenda of 18.05.2009, but also requested for two additional items [ (a) cancellation of Power of Attorney ::: Downloaded on - 09/06/2013 15:06:56 ::: This Order is modified/corrected by Speaking to Minutes Order 39 and other authority and (b) change of Registered Office). As per Article 52, a minimum 48 hours notice is a must. Therefore, these additional items were never circulated with proper & sufficient notice to all the Directors of the Company.
63 On 21.05.2009, the meeting was chaired by Mr. V. S. Kamat. The other co-
Directors of the company except Mr.Karthik, a nominee of CCPL (Mr.Ashvini Sahu) were present. A resignation letter dated 18.05.2009 signed by Mr.Karthik was also tendered which is also in dispute. Mr. Vithal Kamat and Mr.Vikram Kamat have been nominated by CCPL as its Directors. This development/letters were not within the knowledge of the company and other shareholders. This was not even the part of the agenda. The chairman Mr. V. S. Kamat objected on both counts and requested to submit the copy of resolution passed at the meeting of CCPL, if any, thereby also hinted to consider the appointment of nominees in the next Board meetings of the company by following due procedure of law as these matters fall within the ambit of reserved Board matters under the Articles.
64 As per the Articles, a maximum of three Directors need to be appointed by the JV Partners and that has nothing to do with the nominees of CCPL. Those nominees of CCPL cannot be considered to be Directors of the JV Partners. Both the entities are distinct and different which is clear from the provisions of the Articles referred above. The resignation followed by nomination of Mr.Vithal Kamat and Mr.Vikram Kamat, in view of above, cannot be treated as nominees/Directors appointed by the JV partners which should not be more than three. If KHIL is the same entity and/or one of the JV Partners then the appointment of Mr.Vithal Kamat and Mr.Vikram Kamat, cannot be treated as additional Directors of JV Partners or Directors appointed by JV Partners. CCPL ::: Downloaded on - 09/06/2013 15:06:56 ::: This Order is modified/corrected by Speaking to Minutes Order 40 and KHIL cannot treat themselves separate entities for the purpose of transfer of CCPL's shares only. Having once purchased the CCPL's shares by KHIL for all other purposes, these two nominees of CCPL cannot be treated as Directors appointed by JV partners specially when as per the plain reading of the Articles, maximum of three Directors can be appointed in all. Once the resignation of Mr.Ashwini Sahu was not accepted and informed them to consider in the next meeting and the proceedings were accordingly recorded under the Chairmanship of Mr.V.S.Kamat and as it was based upon the basic notice and agenda, prima facie the same is a correct noting of a valid meeting. (Ex. I).
65Having once not accepted the resignation and the nomination, the agenda or the basic notice, nowhere refers and deals with the power and authority of Mr.Vikram Kamat and Mr.Vithal Kamat, based upon the alleged transfer of shares by CCPL to KHIL. The due notice and the statutory period prescribed under the Articles unless waived specifically and/or recorded as in the present case, the basic notice/agenda of 18.05.2009 nowhere provided the same and as added agenda was not accepted, including the resignation and the nomination as sought to be done and as admittedly, none of the matters contained in Exhibit "J", were part of the agenda as recorded in Exhibit "I", there was no question of discussion of any resolution in the Board meeting of 21.05.2009 as rec ordered in Exhibit "J", specially when it was not in conformity with Article 52. There is no material or justification on record to show that what compelled the parties to take such steps without due notice to other JV Partners of transferring CCPL's shares, the resignation and nomination of two Directors on behalf of CCPL. Now having sold the same to KHIL and as permitted pursuance to the exit clause, there ::: Downloaded on - 09/06/2013 15:06:56 ::: This Order is modified/corrected by Speaking to Minutes Order 41 was no question of substitution of any other Directors by subsequent purchaser of shares from CCPL because there was no financial support remained in the company of CCPL once the shares were sold to KHIL. The CCPL, therefore, exits and looses the entity even to nominate any person. Two nominees as sought to be introduced in such hurried fashion and as noted in breach of provisions of the Articles, therefore, the whole action is null and void in view of Articles 18/19 of the Articles of Association. The self created provision as agreed by the parties is binding on all the parties. Such permissible agreement between the parties itself, in my view, in the present case, is sufficient to accept the case of the petitioner that such transfer, their nomination and all actions taken thereafter including the meeting and the agendas (Exh. J) are also null and void and ineffective.
Therefore, no right whatsoever can be said to be created in favour of the respondents, based upon such illegal and void action. The express mention of one thing implies the exclusion of another unless proved by material or otherise.
66 Those two Directors appointed/nominated by respondent no.3 (CCPL) on 18.05.2009 prior even to the Board meeting dated 21.05.2009. Such appointment/nomination, therefore, admittedly not part of the basic agreement and such action was never adopted to other JV Partners except bringing those letters first time in the meeting of 21.05.2009. The mechanism so followed to nominate/appoint two Directors by tendering resignation letters and nomination letters together and treated themselves as Directors of one of the JV Partners KHIL by exceeding the maximum of three. [Articles 41, 44 (a), 44(c) and 46(c)] in such fashion and treating KHIL for this nomination purpose as separate entity in addition to the already appointed Directors by each JV Partners is not provided ::: Downloaded on - 09/06/2013 15:06:56 ::: This Order is modified/corrected by Speaking to Minutes Order 42 under the Articles.
67 Furthermore, it is made very clear that there can be no restriction on the transfer of shares in dematerialised form or physical form, but it need to be subject to Articles. The transfer of shares is regulated by the Articles. [V. B. Rangraj vs. V. B. Gopalkrishnan & ors, (1992) 1 SCC 160] The transfer of shares means the transfer of rights. In view of this, the submission based upon Sections, 83, 108(3) of the Companies Act read with Sections 10 and 11 of the Depository Act, 1996, is unacceptable. The transfer of the shares and its effect is important disputable and arbitrable issue in the present matter at this stage itself. But the finality can only be given by the Arbitral Tribunal. The transfer of shares by respondent no.3 to respondent no.2 is in violation of Articles 17 and 19 itself.
This self incorporated remedy need to be respected. Therefore, transfer of shares, if it is in contravention of Articles 22, 23 and 24 then the action from its inception is impermissible, null, void and invalid.
68 The Articles are binding on the parties. Any action in breach, therefore is challengeable by others. Whether in minority or in majority looses its importance. If the case is made out, based upon the material, the Court/Tribunal is entitled to declare such illegal action arising out of the same null and void. If the action is ultravires, it cannot bind even by the majority shareholders. There is no question of rectification to such ultravires/void action. [ Dr.A. Lakshmanaswami Mudaliar & ors. v. Life Insurance Corporation of India & anr., 1962 (2) SCR 887 ]. [ Dale & Carrington Invt.(P) Ltd. & anr. vs. P.K.Prathapan & ors. , (2005) 1 SCC 212 ] 69 Therefore, it follows that all subsequent actions, resolutions Exhibit J, ::: Downloaded on - 09/06/2013 15:06:56 ::: This Order is modified/corrected by Speaking to Minutes Order 43 Forms 18, 32, subsequent correspondence to the Authorities, letters dated 27.05.2009, 28.05.2009 and 30.05.2009 and all actions arising out of the same.
The transfer of shares including resolutions (Exh. J) as relied by the respondents, in view of above, need detail trial and inquiry. The submission, therefore, based upon on behalf of respondents 2 and 3 and partly on behalf of Mr.Vikram Kamat and Mr.Vithal Kamat are not acceptable.
70 Having once observed above and found that the petitioner has made out a case to grant ad-interim relief/protection pending the main Arbitral proceedings for trial and as, considering the balance of convenience, irreparable injury and conduct of the parties, in view of following observation of Supreme Court, I am inclined to grant ad-interim reliefs/protections.
71 The Supreme Court in Adhunik Steels Ltd. vs. Orissa Manganese and Minerals (P) Ltd. (2007) 7 SCC 125 has observed as under:
"Moreover, when a party is given a right to approach an ordinary court of the country without providing a special procedure or a special set of rules in that behalf, the ordinary rules followed by that court would govern the exercise of power conferred by the Act.
On that basis also, it is not possible to keep out the concept of balance of convenience, prima facie case, irreparable injury and the concept of just and convenient while passing interim measures under Section 9 of the Act."
Similarly so expressed in Arvind Constructions Co.;(P) Ltd. v. Kalinga Mining Corporation & ors., (2007) 6 SCC 798.
72 The Apex Court in Kishorsinh Ratansinh Jadeja v. Maruti Corp. & ors., JT 2009 (5) SC 180, before passing or refusing any interim injunction/reliefs, has observed in the following words:
::: Downloaded on - 09/06/2013 15:06:56 :::This Order is modified/corrected by Speaking to Minutes Order 44 "12 In addition to the above, Mr.Ranjit Kumar also referred to the decision of this Court in Mandali Ranganna & others v. T. Ramchandra [2008 (11) SCC 1] wherein an additional principle was sought to be enunciated relating to grant of injunction by way of an equitable relief. This Court held that in addition to the three basic principles, a Court while granting injunction must also take into consideration the conduct of the parties. It was observed that a person who had kept quiet for a long time and allowed others to deal with the property exclusively would not be entitled to an order of injunction. The Court should not interfere only because the property is a very valuable one. Grant or refusal of injunction has serious consequences depending upon the nature thereof and in dealing with such matters the Court must make all endeavours to protect the interest of the parties."
The respective conduct of the parties and the related circumstances are also relevant factors which goes in favour of the petitioner.
73 The concept of lifting the corporate veil needs to be invoked & utilised only on certain facts and circumstances of the case. (State of U.P. And ors. v.
Renusagar Power Co. & ors., 1991 Company Cases 127 (S.C.). [ Karnataka State Financial Corporation vs. N.Narasimahaiah & ors., 2008(5) SCC 176 ] 74 Having once observed that there is a valid arbitration agreement between the parties whereby parties have decided/agreed to resolve their dispute arising out of the agreements and which, in my view, in the present case, there exists an arbitration agreement between the parties to resolve the disputes and the SHA and SSA are also inter-linked and inter-connected with the agreements as provided in the Articles of the company. [National Agricultural Co-op.
Marketing Federation India Ltd. v. Gains Trading Ltd., reported in (2007) 5 SCC 692 ].
75 The SIAC Rules will govern the arbitration proceedings as agreed. The ::: Downloaded on - 09/06/2013 15:06:56 ::: This Order is modified/corrected by Speaking to Minutes Order 45 Tribunal has also power to decide on its jurisdiction, objection to the existence, termination or validity of the arbitration agreement unless agreed otherwise. The International Arbitration Act (Chapter 143A) will be the governing law.
76 The allegations, claims/counter claims so raised on various factual aspects covering misappropriation, fraud, defaults need detail trial before the Tribunal. I am not dealing with those claims and counter claims under Section 9 of the Act specially in view of above reasonings, which are sufficient foundation to pass interim order/measures in the present case.
77In the present case, there is no challenge to the agreements/contract between the parties, as well as, the existence of the said written agreements.
The submission is that the disputes as raised is not arbitrable which in view of above is also unacceptable. The Apex Court's decision in SBP & Co. vs. Patel Engineering Ltd. & anr., (2005) 8 SCC 618, as relied, needs no elaboration. The ratio speaks for itself. There is no power or jurisdiction to the Court under Section 9 of the Act to declare such action or inaction, void or illegal, on merits.
It is a matter of trial before the Tribunal. Therefore also no finality can be given to the interim protective order under Section 9 of the Act. There is nothing expressed accordingly in SBP (supra). Throughout the judgment (SBP) Supra there is nothing to mention that the Court is empowered to declare any such documents/actions/deed as illegal or void, at this prima facie stage of the proceedings, when the party has invoked Section 9 of the Act only for interim protection or interim relief. There is no point to introject such submission at this stage.
78 As noted, the disputes and conflict so raised, in my view, arising out of the ::: Downloaded on - 09/06/2013 15:06:56 ::: This Order is modified/corrected by Speaking to Minutes Order 46 contracts between the parties in question, though it relates to the affairs of the company, but basically it is a dispute between the parties i.e.the partners affecting the company. Having once agreed to resolve their commercial disputes through the arbitration, they are bound by the same., Therefore, the dispute so raised cover and referable to the Arbitral Tribunal. The petitioner as well as respondent no.2-KHIL have already submitted their say and nominated/suggested their Arbitrator as per the SICA Rules. In view of above facts, Sumitomo Corpn.
(supra), being distinct and distinguishable is not applicable except the law.
Therefore, considering the scope and purpose of the Act and even if disputes are pending between the parties and/or various aspects of the company matters need to be dealt with as per the provisions of the Companies Act like Sections 260 to 262, 284, 319, 330 including the facets of alleged resignations, collusion, fraud, need detail trial. If action is within law then only question of rectification under the provisions of the Companies Act, and not otherwise.
79 The meeting is of 21.05.2009. The resolutions were passed accordingly.
The respondents have acted based upon the same and corrected the various record. The petitioner has invoked Section 9 of the Act and filed the present Petition on 01.06.2009. The statement recorded on 03.06.2009 has been in force and continued since then till this date. Respondent no.1 filed written notes on 02/11.09.2009, Respondent no.2 on 02.09.2009 and respondent no.3 on 09.09.2009 and the petitioner on 04.09.2009. No written notes are filed by respondent no.4. It is made clear that this order should not affect the statutory liabilities and the payment of the company and/or other dues including regular payments of the employees/staff etc. Any major decision, if taken, based upon ::: Downloaded on - 09/06/2013 15:06:56 ::: This Order is modified/corrected by Speaking to Minutes Order 47 Resolutions (Exh. J) dated 21.05.2009 which is in dispute and challenged by the petitioner will be subject to the final order of the Arbitral Tribunal. The project and the day to day affairs of the company need not be stopped.
Order 80 For the above reasons, I am inclined to pass the following order.
Resultantly, the Petition is allowed only in terms of prayers (a), (b), (c) and (d).
No other prayers are pressed.
81 However, it is made clear that the day to day affairs of the company including the liability and/or payment of dues of the employees as well as the Government or Statutory bodies should not be halted by this order. However, that is also subject to accounts.
82 I do not deny the right of the respondents to raise appropriate plea or defence before the Arbitral Tribunal, if so constituted. They are at liberty to file application for appropriate reliefs/orders. It is made clear that the observation/reasoning so given is a prima facie and not final.
83 No order as to costs.
84 At this stage, the learned counsel for respondent no.3 submits that prayer
(c) has become infructuous. However, considering the reasoning already given, at this stage, I am inclined to retain the same also. It is made clear that the shares as contended and recorded stood transferred. However, in view of the present order and as already mentioned, it will be subject to the final decision of the Arbitral Tribunal, including all actions arising out of the same.
(ANOOP V. MOHTA, J.) Pursuance to the order dated 9th October, 2009 all the actual typographical ::: Downloaded on - 09/06/2013 15:06:56 ::: This Order is modified/corrected by Speaking to Minutes Order 48 corrections are made in this Judgment.
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