Madras High Court
This Application Has Been Filed To ... vs Mahesh S.Mehta And Another (2010(1) ...
O.A.Nos.138 of 2010, A.Nos.694 of 2010 and 694 of 2011 VINOD K.SHARMA, J.
This order shall dispose of O.A.Nos.138 of 2010, A.Nos.694 of 2010 and A.No.694 of 2011 filed under Sec.9 of the Arbitration & Conciliation Act by M/s.Kasturi & Sons Ltd.
2 The prayer made in all these applications is as under:
O.A.No.138 of 2010:
This application has been filed to grant an order of injunction restraining the respondents 1, 3, 4, 5 and 6 from transferring, alienating, encumbering or creating interest of any kind whatsoever in respect of 2,43,00,000 shares of the second respondent, morefully described in the shedule to the Judge's summons.
A.No.694 of 2010:
This application has been filed to direct the respondents 1, 3, 4, 5 and 6 to deposit the share certificates in respect of 2,43,00,000 shares of the second respondent, morefully described in the schedule to the Judge's Summons.
A.No.694 of 2011:
This application has been filed to direct the third respondent or any other person who may claim through the third respondent, to deposit all the original title deeds of the properties belonging to the second respondent company and the fourth respondent before this Court, morefully described in the schedule to the Judge's Summons pending enforcement of award.
3 The facts leading to the filing of all these applications, are that the applicant along with M/s.Hindcorp Resorts Pvt. Ltd. (HRPL) and M/s.Sporting Pastime India Ltd. (SPIL), entered into an agreement with Sri K.C.Palaniswami on 19.07.2004 regarding take over of Sporting Pastime India Ltd., a company registered under the Companies Act. M/s.Sporting Pastime India Ltd. was incorporated on 2.5.1995 on 02.05.1995 as subsidiary company of M/s.Kasturi & Sons Ltd. which held 100% shares in the company.
4 In compliance with the terms of the agreement dated 19.07.2004, two hundred and forty three lakh equity shares of the face value of Rs.10/- each were agreed to have been transferred by the applicant, in favour of Sri K.C.Palaniswami or his nominees. These shares represented 90% of the issued and paid up capital of M/s.Sporting Pastime India Ltd. and the balance twenty seven lakh equity shares of Rs.10/- each were retained by the applicant.
5 All the nominees of the applicant on the Board of M/s.Sporting Pastime India Ltd. resigned their directorships, and three directors along with Sri.K.C.Palaniswami were inducted on 18.08.2004. The directors nominated by Sri.K.C.Palaniswami were 1) Mr.Athappan Ramasamy and (3) Mr.Chandran Ratnasamy. Thus control of M/s. Sporting Pastime India Ltd. was transferred to Sri.K.C.Palaniswami.
6 The shareholding in the second respondent after 18.08.2004 is as under:
No. Name Share Cert.No. Distinctive Nos.
No. of Shares 1 Cheran Properties Ltd 013 014 015 016 017 021 019 041, 051, 061, 071, 002-010 012-020 022-030 032-040 042-050 052-060 062-070 072-080 270081- 3000000 3000001- 27000000 2,42,99,996 2 Cheran Holdings Pvt Ltd 010, 011, 1 3 KCP Associates Holdings Pvt. Ltd.
011, 021, 1 4 CG Holdings Pvt. Ltd.
009, 001, 1 5 K.C.Palaniswamy 012, 031, 1 6 Kastrui & Sons Ltd.
020,
081- 2700080
27,00,000
Total
2,70,00,000
7 The issued and paid up capital of M/s.Sporting Pastime India Ltd. was unauthorisedly increased to Rs.52 crores on 28.10.2004 by the nominees of the K.C.Palaniswami by subscribing to the additional capital of Rs.25 crores. The applicant challenged the action of Sporting Pastime India Ltd. in increasing its capital, vide C.P.No.50 of 2005 before the Company Law Board, Chennai. The company Law Board declare the enhancement of paid up capital of M/s.Sporting Pastime India Ltd. to be illegal and void, and further directed the Central Government to appoint Inspectors to investigate the affairs of the company vide order dated 9.10.2006.
8 It is the case of the applicant that the Inspectors appointed have observed several irregularities including invalidation of the appointment of one of the director, not having registered office as per the requirements of the Companies Act, 1956 etc. In pursuance thereto, show cause notice has been issued, and the investigation is still pending. The order of the Company Law Board has attained finality for want of challenge by the respondents.
9 The case of the applicant is that in the petition filed before the Company Law Board, fraud played on the applicant by Sri.K.C.Palaniswami is fully disclosed. The applicant claimed that it was aware of various fraud and illegal activities and transaction of Sri.K.C.Palaniswami. The criminal proceedings have also been initiated against Sri.K.C.Palaniswami.
10 M/s.Hindcorp Resorts Pvt. Ltd., one of the parties to the agreement was incorporated on 30.12.1995 with an authorised capital of Rs.5 Crores.
11 This company along with M/s.Sporting Pastime India Ltd. acquired land along with East Coast Road, Chennai for promotion and development of a golf course-cum- beach resort. The land acquired by Sporting Pastime India Ltd. was to the extent of 343.85 acres of patta land in Mudaliarkuppam village, Nainiyarkuppam village and Odhiyur village, whereas M/s. Hindcorp Resorts Pvt. Ltd. acquired 8.39 acres in the same village. Both lands were interspersed and formed an aggregate for an international golf course.
12 M/s.Sporting Pastime India Ltd. had also right to enjoy lands to the extent of nearly 83.80 acres since 1996 and paying fees regularly to the State Government every year, i.e. poromboke land situated between patta lands owned by M/s. Hindcorp Resorts Pvt. Ltd. The total land aggregating to over 435 acres was for golf course-cum- beach resort, for which all necessary statutory permission has been obtained by the applicant, before entering into the agreement referred to above.
13 The control of the second respondent and the land belonging to M/s.Hindcorp Resorts Pvt. Ltd. was agreed to be transferred for setting up of a golf course and beach resorts. Sri. K.C.Palaniswami was also to take over the liability standing in the books of M/s.Hindcorp Resorts Pvt. Ltd. The lands of both the companies are incapable of being separated. The title deeds of the property were also handed over to Sri.K.C.Palaniswami by the applicant along with 90% shares which were subsequently registered in the name of the respondents 1, 3, 4, 5 and 6 on being nominated by Sri.K.C.Palaniswami.
14 The statutory records and registers maintained under the Companies Act, 1956 were also handed over, which put Sri.K.C.Palaniswami in control of M/s.Sporting Pastime India Ltd. Sri.K.C.Palaniswami also agreed to relieve the applicant of the guarantee obligations amounting to Rs.27 Crores. The agreement contains arbitration clause. The Arbitral Tribunal was to consist of three Arbitrators.
15 The case of the applicant is that Sri.K.C.Palaniswami failed to discharge its liability under the agreement with regard to the liabilities taken over, especially the ones guaranteed by the applicant, which resulted in the applicant paying Rs.27 Crores to the creditors along with the interest.
16 The matter was referred to arbitration, and the claim petition was filed by the applicant along with M/s.Hindcorp Resorts Pvt. Ltd. The claim of Rs.31,74,15,150/- (Rupees thirty one crores seventy four lakhs fifteen thousand one hundred and fifty only) was raised before the Arbitral Tribunal on 26.12.2005, along with claim of damages amounting to Rs.5,00,00,000/- (Rupees five crores only). Supplementary claim of Rs.1,24,00,970/- (Rupees one crore twenty four lakhs nine hundred and seventy only) was also raised by M/s.Hindcorp Resorts Pvt. Ltd. as expenditure incurred pending arbitration.
17 The alternative prayer was made that in the event of the first respondent being unable to make payment, the first respondent should be directed to hand over the share certificates of all the shares originally transferred by the applicant to Sri.K.C.Palaniswami and his nominees as also all original title deeds and related documents, papers etc., thereby restoring the status quo ante, as on 18.08.2004, i.e. prior to take over.
18 Along with the statement of claim, interim relief was claimed before the Arbitral Tribunal, to direct the first respondent to deposit share certificates and original title deeds of the property described in the schedule to the agreement dated 19.7.2004, with the arbitral Tribunal pending the resolution of the disputes by the Arbitral tribunal.
19 In response to the application, representatives of the applicant were allowed to inspect the documents at Cheran Towers in Coimbatore and Sri.K.C.Palaniswami also filed an undertaking in the form of an affidavit on 12.12.2005 before the Arbitral Tribunal, undertaking to hold the documents (share certificates and title deeds) at Cheran Towers, Coimbatore until further orders from the Tribunal. The said undertaking is still in force.
20 On 09.04.2007, the Arbitral Tribunal passed an interim consent award vide which Sri.K.C.Palaniswami was directed to pay to the applicant, a sum of Rs.31,17,65,150/- (Rupees thirty one crores seventeen lakhs sixty five thousand one hundred and fifty only) and a sum of Rs.56,50,000/- (Rupees fifty six lakhs and fifty thousand only) to M/s.Hindcorp Resorts Pvt. Ltd. along with interest @ 12% from 30.09.2005 till the date of payment. The time for payment was granted to the first respondent till 30.09.2007, failing which the Arbitral Tribunal was to consider the alternative prayer of restitution.
21 The first respondent failed to pay the awarded amount as per the consent award, therefore the applicant was left with no alternative to seek the return of the company and the valuable assets including the original title deeds and share certificates, being the subject matter of arbitration.
22 The first respondent instead of making payment challenged the consent award by filing application under Sec.34 of the Arbitration and Conciliation Act. The petition under Sec.34 of the Act was filed on behalf of Sri.K.C.Palaniswami and M/s.Sporting Pastime India Ltd. on the ground that these respondents never consented for interim award nor their counsel was authorised to give consent before the Arbitral Tribunal.
23 On notice, the applicant and M/s.Hindcorp Resorts Pvt. Ltd., the respondents 1 and 2 in O.P.No.672 of 2007, filed under Sec.34 of the Arbitration and Conciliation Act, moved an application to implead Mr.Karthik Seshadri, with regard to the stand taken by the respondents 1 and 2. The respondents 1 and 2 thereafter withdrew O.P.No.672 of 2007.
24 The case of the applicant is that it has become necessary for the applicant to seek protection of original title deeds and share certificates by deposit in the Court.
25 By way of interim measures, this Court was pleased to order an interim injunction restraining the first respondent or any other company of the first respondent or agent claiming under him from disposing, alienating or encumbering lands to the extent of 343.85 acres of patta land in belonging to M/s.Sporting Pastime India Ltd.
26 On 01.04.2005, this Court appointed Mr.S.Kuppuswamy Company Secretary of the applicant as interim Receiver to take charge of the second respondent company.
27 The applicant filed O.A.No.849 of 2005 requiring the first respondent to deposit original title deeds which is subject matter of arbitration was withdrawn by the applicant, in view of the undertaking given by the respondent before the Arbitral Tribunal.
28 Thereafter, the applicant filed O.A.No.1100 of 2005 and A.No.5261 of 2005 for restraining the respondents 1 and 2 from operating, withdrawing, closing or in any other way dealing with the term deposit of Rs.25,00,00,000/- (Rupees twenty five crores only) held in the State Bank of India that could come into the hands of the respondents 1 and 2 during the pendency of the arbitral proceedings.
29 The prayer was also made for deposit of the original title deeds which is subject matter of the Arbitral Tribunal. Both the applications were dismissed by this Court vide order dated 25.01.2006.
30 The applicant under the change in circumstances, filed A.No.2734 of 2008 before this Court for protection of subject matter of arbitration and for an order by this Court requiring the first respondent to deposit the share certificates of M/s.Sporting Pastime India Ltd. and the title deeds of the properties belonging to M/s.Sporting Pastime India Ltd. and M/s.Hindcorp Resorts Pvt. Ltd. with the custody of this Court.
31 This Court vide order dated 12.08.2008, directed the first respondent to deposit title deeds relating to the relevant properties with the Registrar General of this Court. However, the relief with regard to the share certificates was not granted. Till date, there is no interim order to protect the share certificate of the second respondent.
32 It is the case of the applicant that in addition to the order passed by this court, Sri.K.C.Palaniswami also gave an undertaking that he would bring title deeds pertaining to the relevant properties to Chennai for the inspection of the Advocate Commissioner on two separate occasions.
33 Sri.K.C.Palaniswami challenged the order passed by this Court by filing O.S.A.No.309 of 2008. The appeal was dismissed by observing as under:
"......... from the past conduct of the first appellant, we find that he is habitual of retracting from his statement by filing affidavit with such plea that undertaking was not given by him or his lawyers, which at the time of determination was withdrawn in the earlier case, we reject the ground taken by the appellant that such undertaking on his behalf was not given by learned senior counsel."
34 The SLP No.5737 of 2009 filed against the order passed in appeal was also dismissed by the Hon'ble Supreme Court in limine.
35 On 09.07.2009 the applicant filed contempt petition No.39 of 2009 in A.No.2734 of 2008 for punishing Sri.K.C.Palaniswami for committing contempt of this Court, wherein counter affidvits were filed by Sri.K.C.Palaniswami. However, orders on the contempt petition was reserved.
36 On 16.12.2009 final award was passed directing the respondents 1 and 2 to return the documents of title and share certificates relating to the shares of the second respondent company, i.e. M/s.Sporting Pastime India Ltd. in the following manner:
"The documents of title pertaining to the applicant and the share certificates pertaining to 2,43,00,000 shares of the second respondent company, Sporting Pastime India Ltd. to be handed over to the applicant contemporaneously with the applicant paying/ tendering the sum of Rs.3,58,11,000/- to the first respondent with interest @ 12% p.a. on Rs.2,55,00,000/- from the date of award until 17/01/2010 or earlier payment/tender, and thereafter @ 18% p.a. on Rs.2,55,00,000/- till date of payment/tendering of the amount of Rs.3,58,11,000/-"
37 The applicant claims that in view of the fact stated above, the applicant has a strong prima facie case for appointment of an Administrator, as in view of the final award, the status of the second respondent has been restored status quo ante as on 18.08.2004.
38 The applicant also filed C.P.No.50 of 2005 under Sec.397, 398, 402, 407 of Companies Act before the Company Law Board on the ground that the affairs of M/s.Sporting Pastime India Ltd. was not conducted as per the law since taken over by the first respondent in which investigation has been ordered by the Central Government. Wherein the applicant also challenged appointment of directors of M/s.Sporting Pastime India Ltd. and not holding of Annual General meeting, therefore prayed that Administrator be appointed to manage the affairs of the company on a day to day basis.
39 The case of the applicant was that in case the Administrator is not appointed, it will not be possible for the applicant to reap fruit of the award. The applicant also seek an order of this Court to protect and preserve the subject matter of arbitration that 90% shares in the paid up capital of M/s.Sporting Pastime India Ltd. which have been ordered to be returned to the applicant.
40 The applicant claims that balance of convenience is also in favour of the applicant as in view of the affidavit filed by the first respondent on 12.12.2005 before the Arbitral Tribunal to hold the shares in his custody till the conclusion of the arbitral proceedings.
41 It is also the case of the applicant that direction to deposit shares certificates by this Court would cause no hardship to the respondent. The prayer is also made for restraining the respondent from exercising any voting right, in respect of the shares in the second respondent.
42 The applicant also prays for deposit of all original title deeds of the property in possession of the first respondent. The applicant is also apprehensive that the first respondent or his nominees may alter the shareholding of the second respondent, and to deal with the shares in a manner to defeat the right of the applicant in the award.
43 Therefore, injunction is prayed for restraining the respondents 1, 3, 4, 5 and 6 from transferring, alienating, encumbering or creating interest or whatsoever in respect of 2,43,00,000 shares of the second respondent as detailed in the Judges Summons.
44 The applications were opposed by the respondents by filing counter affidavits. The second respondent in his counter challenged the maintainability of this application, on the ground that it is an abuse of process of court as the applicant has filed an application for the same relief before the Company Law Board, Chennai and other forums.
45 The factual position is not disputed. The stand taken by the respondent is that award dt.16.12.2009 was passed in violation of well settled principle of law, as the second respondent was directed to hand over the title deeds belonging to it without any basis.
46 It pleaded that the applicant has no right over the properties or title deeds of the respondent, as the applicant is only shareholders of the respondent, therefore, the applicant have no right over the properties of the company.
47 It is also the case in the counter, that the Arbitrator failed to appreciate the case of the respondent. Under the agreement, only shares held by applicant were transferred to the respondents 1, 3, 4, 5 and 6 in the manner as stated therein. Therefore, the Arbitral Tribunal acted contrary to law directing the owner of the property to hand over the document of title to the applicant, which was not subject matter of dispute.
48 It is also the stand taken by the second respondent that the Arbitral Tribunal wrongly issued directions in the nature of mandatory injunction, though main relief was essentially, a claim for money against the first respondent, which was already agreed to in the consent award dated 09.04.2007. The award had rendered the Arbitral Tribunal 'functus officio'.
49 It is also the stand taken in the counter that in view of the consent award, the Arbitral Tribunal therefore could not take contrary view and direct the second respondent to hand over the title deeds of the immovable properties to the applicant.
50 The award is contrary to the Specific Relief Act 1963, as the specific performance cannot be ordered with respect to a contract, where compensation is an adequate remedy.
51 The stand of the second respondent is that it has filed a petition under Sec.34 of the Arbitration & Conciliation Act for setting aside of the award.
52 It is also the case of the second respondent that there is no necessity and urgency to appoint Administrator to run the affairs of the second respondent. It is also the stand of the second respondent that the applicant cannot take advantage of its own misdeeds and complain now that the affairs of the respondent company have not been conducted as per law, as he voluntarily handed over the management of the respondent company in the meeting held on 17.08.2008.
53 The applicant has unnecessarily engaged the respondent No.2 company in litigation, which prevented its progression, development and obstructed the day to day management of the company.
54 As already referred to above, the stand is also taken that the applicant has filed C.P.No.36 of 2010 in the Company Law Board, Chennai claiming same relief. The stand of the second respondent is that the applicant is only a minority shareholder who has failed to get any interim relief from Company Law Board. Therefore, the applicant is guilty of 'forum shopping'.
55 It is also claimed that the arbitration award, does not give any right to the applicant, to seek any of the relief as sought for in the present applications, as the subject matter of arbitration is not connected with the interim relief.
56 The third respondent by way of counter has challenged the maintainability of the application on admitted facts. The case of the third respondent, in the counter is that the application is totally devoid of merit and deserves to be dismissed with exemplary penal cost, being abuse of process of law.
57 The stand taken by the third respondent is that the applicant is indulging in forum shopping, as it has filed company petition before the Company Law Board, Chennai seeking similar relief.
58 The stand of the third respondent is also that the application under Sec.9 of the Arbitration & Conciliation Act is maintainable only if there exist an arbitration agreement between the parties to the application, and where as no arbitration agreement, between the applicant and the third respondent. Therefore, the applications deserves to be dismissed on this short ground.
59 The case of the third respondent is that it had paid a sum of Rs.2,43,00,000/- (Rupees two crores and forty three lakhs only) which was received by the applicant without demur. It also accepted the share transfer, in favour of the third respondent. It is pleaded that it is an independent transaction, not covered by any arbitration.
60 It is also the case of the third respondent that the transfer of shares in favour of the third respondent has no bearing, as far as the award is concerned, as admitted by the learned Senior counsel for the applicant, before the Arbitral Tribunal.
61 The case of the third respondent further is that an attempt is being made to get back M/s.Sporting Pastime India Ltd. though the shares were validly and voluntarily transferred, for consideration to the third respondent. The stand of the third respondent is that it has no concern with any arbitration much less the arbitration award.
62 It is also the case of the third respondent that the application under Sec.9 of the Arbitration & Conciliation Act, being in the nature of execution, the third respondent has been unnecessarily dragged into the litigation, though not party to arbitral proceedings.
63 That all the steps are being taken so that M/s.Sporting Pastime India Ltd. is not able to function in accordance with law. The application under Sec.9 of the Arbitration & Conciliation Act is also not maintainable against the third respondent, as it relates to shares alone.
64 It is claimed that the total sale consideration of Rs.243 lakhs, stands paid and the share transferred in favour of the third respondent. The third respondent claims that it was on the representation made by the applicant, that it acquired 90% of the paid up capital of M/s.Sporting Pastime India Ltd. in the following manner:
a. C.G. Holdings (P) Limited ... 1 b. Cheran Holdings Private Ltd. ... 1 c. KCP Associates Holdings P. Ltd. ... 1 d. Mr.K.C. Palanisamy ... 1 e. Cheran Properties Limited ... 242,99,994 instance of the applicant by this Court pending the arbitration.
65 The case of the third respondent is that after transferring the shares, now the applicant is using the device of this Court to grab the property. The applicant is therefore not entitled to injunction on the strength of non binding award.
66 It is the case of the third respondent that even C.P.No.50 of 2005, the transaction between the third respondent and the applicant was not disputed, nor there were any allegation against the third respondent in the said pleadings.
67 It is also the case of the third respondent that the share transfer deeds were duly executed by the applicant on 17.08.2004 in favour of the following persons:
Sl.No. Name No of Shares 1 Charan Properties Limited 2,42,99,996 2 Cheran Holdings Pvt. Ltd.1 3
KCP Associates Holdings Pvt. Ltd.1 4
C.G. Holdings Pvt. Ltd.1 5
K.C. Palanisamy 1
68 In nutshell, the stand of the third respondent, is that the private arrangements of the applicant with the first respondent resulted in disputes inter se between them, which cannot be a ground for filing the applications under Sec.9 of the Arbitration & Conciliation Act against the respondent, as the applicant holds only 10% of the shares, and thus, cannot claim right over 90% shareholders. The applications are not competent against the third respondent, which deserves to be dismissed.
69 The respondents 4 and 5, have also filed separate counter. The stand taken in the counter is that the reading of the Arbitral Award would show that it cannot be enforced against answering respondent being not binding on them. Even the Arbitral Tribunal, did not find it deserves to pass any orders against the respondents 4 and 5.
70 It is also the stand of the respondents 4 and 5, that it is not the case where the concept of "lifting the corporate veil" can be invoked, in the absence of any allegations of fraud. The plea of "forum hunting" is also taken.
71 In nutshell, the stand taken by the respondents 4 and 5 is, that even if award is to be implemented as directed by the Arbitral Tribunal, it has no connection with the prayer made in the application. The applications under Sec.9 of the Act therefore is not competent, as no interim order can be passed beyond the jurisdiction of the Arbitral Tribunal. It is prayed that the applications be dismissed.
72 The sixth respondent also filed a separate counter. The stand taken by the sixth respondent is also that the applictions are abuse of process of Court. The stand is also taken that agreement dated 19.7.2007, is between the applicant and the respondents 1 and 2. Therefore, the relief claimed can be claimed against respondents 1 and 2 only, which cannot be exended to the sixth respondent, being not a party to the agreement.
73 The stand of the respondent 6 is also that already proceedings are pending before this Court and the Company Law Board. In C.P.No.36 of 2010 the same relief is claimed. Therefore, the present applications under Sec.9 of the Act are not competent. The stand further is that under Sec.9 of the Arbitration & Conciliation Act, interim measure of protection can be granted by the Court, only to the extent, it is necessary for enforcement of Arbitral Award.
74 The Award passed by the Arbitral Tribunal cannot bind the respondent 6 being not a party to the arbitration proceedings. Therefore, the application for restraining the respondent 6 from alienating, encumbering or creating interest in the share of the second respondent, is not maintainable.
75 In the nutshell, the stand of the respondent 6 is also that being the third party cannot be subjected to the jurisdiction under Sec.9 of the Act, nor the enforcement of the Arbitral Award can bind respondent 6 being not a party in the proceedings. It is the case set up that the applicant had already moved the Company Law Board, the applications under Sec.9 of the Act therefore deserves to be dismissed.
76 In view of the respective pleadings of the parties, the questions which araise for consideration by this Court are:
"1) Whether an order of interim injunction can be passed against the respondents who are not party/parties to the arbitration agreement or arbitration proceedings ?
2) Whether the respondents 3 to 6 can be said to be the nominees of Sri.K.C.Palaniswami so as to be bound by the Arbitral Award, for passing interim direction against them ?
77 Mr.Arvid Datar, learned Senior counsel for the applicant, in support of the application moved for interim direction, referred to the agreement executed between the applicant Mr.K.C.Palaniswami, M/s.Sporting Pastime India Ltd. and M/s.Hindcorp Resorts Pvt. Ltd.
78 Wherein, it is mentioned that Mr.K.C.Palaniswamy has offered to acquire the share holding, controlling management, interest in M/s.Sporting Pastime India Ltd. on the terms and conditions mentioned in the agreement.
79 In the agreement, it was stipulated that M/s.Sporting Pastime India Ltd. will allot 243 lakhs equity shares of Rs.10/- each fully paid on par to Sri.K.C.Palaniswami, against book debts due by M/s.Sporting Pastime India Ltd. to M/s.Kasturi & Sons Ltd.
80 The applicant offered to sell 243 lakh equity shares of Rs.10/- of paid up capital of M/s.Sporting Pastime India Ltd. to Sri.K.C.Palaniswami, for a lumsum consideration of Rs.2,31,50,000/- (Rupees two crores thirty one lakhs and fifty thousand only) which will be purchased in his name or his nominees.
81 The intention of the parties as per the agreement was that Sri.K.C.Palaniswami will take over the business, assets (detailed in schedule of the agreement), liabilities of M/s.Sporting Pastime India Ltd. and discharge its liabilities, as listed in schedule 2 and 3, as outstanding on the date of agreement.
82 The liabilities guaranteed by the applicant listed in schedule 2, was also to be taken over by Sri.K.C.Palaniswami as also liabilities shown in schedule 3. The liabilities which were not disclosed in the agreement were to be met by the applicant.
83 Under Clause 14, the applicant recognised the right of Sri.K.C.Palaniswami or his nominees to sell or transfer the holdings in M/s.Sporting Pastime India Ltd., to any other person of his choice provided the proposed transferee accepted the terms and conditions mentioned in the agreement for the management of M/s.Sporting Pastime India Ltd. and related financial aspects covered by this agreement. The applicant also agreed to indemnify against all losses, damages, claims.
84 The learned counsel for the applicant referred to the letter dated 17.8.2004 from M/s.Cheran Properties Ltd. Vide which list of seven share Transfer deeds duly executed were sent to the applicant for execution and lodging with M/s.Sporting Pastime India Ltd. together with the share certificates, for registering the transfers in the following names:-
"1. C.G.Holdings (P) Ltd. 1
2. Cheran Holdings P. Ltd. 1
3. KCP Associates Holdings P.Ltd 1
4. Mr.K.C.Palaniswami 1
5. Cheran Properties Ltd. 1
6. Cheran Properties Ltd. 242,99,994
7. Cheran Properties Ltd. 1 Total 243,00,000
85 The demand draft for a sum of Rs.2,43,00,000/- was also enclosed therein. The reference was made that this was under the share purchase agreement dated 19.7.2004.
86 The contention of the learned Senior counsel for the applicant, therefore, was that the respondents herein in whose favour shares were transferred were nominees of the first respondent, under the agrement dated 19.07.2004 and the shares transferred in their name constitute subject matter of arbitration. The application under Sec.9 of the Act, is competent not only against the parties to the arbitration agreement, but also to the third parties with respect to subject matter of arbitration.
87 In support of this contention, the learned Senior counsel for the applicant placed reliance on Sec.9 of the Arbitration & Conciliation Act 1996 which reads as under:
"S.9 Interim measures by Court:- A party may, before or during arbitral proceedings or at any time after the making of the abritral award but before it is enforced in accordance with section 36, apply to a Court:-
(i) for the appointment of a guardian for a minor or person of unsound mind for the purposes of arbitral proceedings; or
(ii) for an interim measure of protection in resepect of any of the following matters, namely:-
(a) the preservation, interim custdoy or sale of any goods which are the subject matter of the arbitration agreement;
(b) securing the amount in dispute in the arbitration;
(c) the detention, preservation or inspection of any property or thing which is the subject matter of the dispute in arbitration, or as to which any question may arise therein and authorising for any of the aforesaid purposes any person to enter upon any land or building in the possession of any party, or authorising any samples to be taken or any observation to be made, or experiment to be tried, which may be necessary or expedient for the purpose of obtaining full information or evidence;
(d) interim injunction or the appointment of a Receiver;
(e) such other interim measure of protection as may appear to the Court to be just and convenient, and the Court shall have the same power for making orders as it has for the purpose of, and in relation to, any proceedings before it."
88 The contention of the learned Senior counsel was that reading of Sec.9(ii) (a) of the Arbitration & Conciliation Act, shows that, the Court can pass interim measure for preservation interim custody or sale of any goods which are subject matter of arbitration agreement.
89 The shares being goods, under the Sale of goods Act as well as of Companies Act, are covered under the provisions of Sec.9 of the Arbitration & Conciliation Act, and this Court can issue injunction against the persons in possession of the goods which are subject matter of arbitration proceedings, even if they were not the parties.
90 In support of this contention, the learned Senior counsel for the applicant placed reliance on the judgment of the Hon'ble Bombay High Court in the case of Girish Mulchand Mehta and Durga Jaishankar Mehta Vs Mahesh S.Mehta and another (2010(1) BomCR 31) wherein the Hon'ble Bombay High Court was pleased to lay down, as under;
"17. The respondents have also placed reliance on the decision of the Delhi High Court in the case of Value Advisory Services v.ZTE Corporation and others in OMP No.65/2009 decided on 15th July 2009. One of the issue considered in this decision is whether in exercise of powers under Sec.9 of the Act, the Court can make an order against or with respect to any party other than a party to the arbitration agreement. The Court observed that no general principle of maintainability/ applicability or non-maintainability/ non-applicability can be laid down. It will have to be determined by the court in the facts of each case whether for the purpose of interim measure of protection, preservation, sale of any goods, securing the amount in dispute and order affecting the third party can be made or not. Similar view can be discerned from another decision of the Delhi High Court in the case of Arun Kapur V. Vikram Kapur MANU/DE/1266/2001: 2002-DLT-95-42. The Court was considering the distinction between the scope of application under Section 9 and Sec.17 of the Act. It observed that it is settled that Section 9 is attracted only if the nature of dispute is subject matter of Arbitration proceedings or agreement. It does not contemplate any such relief which does not stem from the Arbitration Proceedings or the disputes referred to in arbitration for adjudication. It observed that Sec.9 is distinct from Sec.17 in as much as petition under Sec.17 is moved before the Arbitrator for an order against a party to the proceedings, whereas Section 9 vests remedy to a party to arbitration proceedings to seek interim measure of protection against a person who need not be either party to the arbitration agreement or to the arbitration proceedings."
91 The contention of the learned Senior counsel was also that reading of the letter of the third respondent for transfer of shares, shows that it was acting as a nominee under the agreement, as request was made for transfer of shares, in terms of the agreement dated 19.7.2004.
92 The learned Senior counsel for the applicant also referred to the award passed by the Arbitral Tribunal, wherein issue No.12, 13 framed by the Arbitral Tribunal reads as under:
"12 Whether the first respondent is liable to handover to the first claimant the share certificates and the necessary transfer deeds for retransfer in the first claimant's name of all the shares that were originally transferred by the first claimant to the first respondent and his nominees in the event of the first respondent being unable to make payments of the amounts mentioned in issues 2, 3, 4, 6, 7 & 19 ?
13 Whether the first respondent is liable to handover all the original title deeds and the related documents, papers, handed over by the first claimant to the first respondent pertaining to the lands owned by the second respondent company and the second claimant, in the event of the first respondent being unable to make payments of the amounts mentioned in issues 2, 3, 4, 6, 7 & 19 ?"
93 The contention of the learned Senior counsel for the applicant is that these issues were decided in favour of the applicant. The learned Senior counsel also referred to the finding recorded by the learned Arbitral Tribunal, on an application for interim relief which reads as under:
"9.01 The claimants had sought interim relief under section 9 of the Arbitration and Conciliation Act, 1996 before the Hon'ble High Court at Chennai.
9.02 At the hearing held on 14.10.2005 arguments regarding interim relief were heard. Mr.Arvind P.Data learned Senior counsel submitted that it would be absolutely imperative to have the original documents of title and the share certificates produced for depositing the same with the Arbitral Tribunal pending resolution of the disputes. He further stated that since the obligations under the agreement had not been fulfilled, and, as a consquence, the claimants had to make necessary payments to third parties, the deposit of title deeds would be necessary.
9.03 To this Mr.R.Krishnaswami, learned Senior counsel for the respondents, first submitted without prejudice to the contention, that the Arbitral Tribunal had no jurisdiction, since an application was pending for the same relief in the Hon'ble High Court in Chennai, the Arbitrators should not now go into the question. To this, Mr.Arvind P.Datar, Senior counsel, gave an undertaking that he would be withdrawing the application for the same relief before the Hon'ble High Court in Chennai.
9.04 Mr.R.Krishnaswami learned Senior counsel for the respondents stated that already an undertaking had been given before the Hon'ble High Court to the effect that the respondents would not sell or dispose of the land and the shares of Sporting Pastime India Ltd. Further, in para 4 o the counter filed before this Tribunal it has been mentioned that the allegation that the original title deeds to the lands belonging to the second respondent company are not with the first respondent in incorrect.
9.05 He furher stated that he would have no objection to producing the original title deeds for inspection by any two duly authorized representatives on behalf of the claimants to inspect at the venue on the date to be given by the respondents. The modalities and the manner of inspection would be agreed upon by the parties. Thereafter, on such inspection, the original title deeds would be kept by the respondents in a place to be specified by Mr.K.C.Palaniswami in an affidavit to be filed by him before the Tribunal on or before 19.11.2005 and they shall be retained there until further instructions from the Arbitral Tribunal.
9.06 The Arbitral Tribunal therefore duly recorded the undertaking given in para 9 of the counter affidavit filed in the Hon'ble High Court in O.A.No.179 of 2005 by Mr.K.C.Palaniswami to the effect that he would not sell or dispose of the property or the shares in question. Mr.R.Krishnaswami, learned Senior counsel stated that it held good before the Arbitrators also.
9.07 An affidavit of the first respondent Mr.K.C.Palaniswami was filed before the Arbitral Tribunal on 12.12.2005 upon inspection of the original title deeds and share certificates on 03.11.2005 by the Claimants' learned counsel, Mr.Feroz Ali and representative Mr.S.Kuppuswamy. The said affidavit contains an undertaking by the first respondent to hold the said documents of title and share certificates in his custody at his office at Cheran Towers, Coimbatore, until conclusion of the Arbitration proceedings."
94 The contention of the learned Senior counsel, for the applicant therefore was that the applicant is entitled to interim relief claimed for, especially in view of the specific order passed by the Arbitral Tribunal, directing the first respondent to re-transfer share certificate, under the terms of the agreement and to return the title deeds.
95 It is also the contention of the learned Senior counsel for the applicant, that the price paid for transfer of shares by the third respondent was on behalf of Sri.K.C.Palaniswami, as in the letter referrence was made to agreement dated 19.7.2004. It was sale consideration for transfer of 90% shares, therefore shares constitute the subject matter of arbitration, as alternative relief, was that of restoration of status quo ante, before transfer of shares.
96 The learned Senior counsel Mr.Karthik Seshadri appearing on behalf of the first respondent, contested the applications on the ground that the applications under Sec.9 of the Act are not competent as prerequiste to maintain application under Sec.9 of the Act, is that there should exist an arbitration agreement.
97 The contention of the learned Senior counsel is that in the present case in hand arbitral Award, already stand passed, wherein, the respondents 3 to 6 are not parties, therefore, no interim measures can be directed against the respondents 3 to 6, as the award passed cannot be executed against these respondents.
98 The learned Senior counsel further contended that the applications are based on the assumption, the respondents 3 to 6 are nominees of the first respondent, thus, bound by the Arbitral Award, but in order to bind the nominees, it was necessary for the applicant, to have impleaded the respondents 3 to 6, as nominees before the Arbitral proceedings. Having failed to do so, it is not now open to the applicant to claim any relief against them.
99 In support of this contention the learned Senior counsel for the first respondent placed reliance on the judgment in the case of Baytur SA v. Finagro Holding SA ([1991]4 All England Law Reports) wherein it was held as under:
"I would decide the present case on this simple ground. An assignee does not automatically become a party to a pending arbitration on the assignment taking effect in equity. Something more is required. He must atleast give notice to the other side, and submit to the jurisdiction of the Arbitrator. Since this was never done, I would answer the first question in favour of the plaintiffs."
The question which was answered reads as under:
(1) By English law the benefit of the contract of sale, including the arbitration clause, could be and was validly assigned to the defendants on 15 December 1986; see Shayler V. Woolf(1946)2 All ER 54, (1946)Ch 320, and Montedipe SpA V. JTP-RO Jygotanker, The Jordan Nicolov (1990)2 Lloyd's Rep.11"
100 The learned Senior counsel for the first respondent thereafter referred to clause 19.19 of the Arbitral Award wherein the Arbitral Tribunal while dealing with the definition of "'party' to an arbitration Agreement" recorded the following finding:
"19.19 In response Mr.Arvind P.Datar learned Senior counsel for the claimants referred to the Agreement dated 19/07/2004 between the parties in which Mr.K.C.Palaniswami had been described in the first page to be referred to as "KCP which term is stated to include his legal heirs, successors in interest and assigns. The contention of the learned Senior counsel was that if rifhts flowed to Mr.K.C.Palaniswami under this Agreement dated 19/07/2004 and he in turn, assigned those rights or made other parties successors in interest, those third parties would also be covered by the agreement having been specifically included therein. In this matter it has always been understood that if the relief of restitution could be granted, it would only be restitution in so far as it is legally and factually sustainable in the facts and circumstances of the case. The learned Senior counsel for the claimants fairly stated that if the Arbitral Tribunal would consider the relief of restitution such as being legally capable of being granted, then it would follow that it must be for such directions as could be legally sustained against parties who are actually before the Arbitral Tribunal. We do not therefore propose to go into the question of whether any direction can be issued to persons who are not parties to the question of whether any direction can be issued to persons who are not parties to the Agreement or to the present proceedings. It is clear from the first respondent's affidavit dated 12/12/2005, filed before us that he has control and custody of the documents of title as well as the share certificates and shall continue to do so till the conclusion of the arbitration proceedings. In the light of our decision that restitution can and must be granted to the claimants on the facts andlaw governing the matter, this Tribunal holds that the first respondent is bound to restore status quo ante with regard to the share certificates in respect of the shares of the second respondent company and the documents of title relating to the property which are admittedly in his custody. Such custody has been admitted in the affidavit, filed by the first respondent both before the Hon'ble High Court Madras and before the Arbitral Tribunal which is neither withdrawn nor modified by him. This view is further fortified by the admission made by the first respondent before the Company Law Board in his affidavit dated13/7/2006, which runs as follows "I am part to the agreement datd 19/07/04 due to which I came to be holding 90% of the capital of first respondent through companies in Cheran". This categorical assertion of holding and control is sufficient and has not been denied at any stage by the first respondent.
19.20 As for the right of restitution it has to be granted not merely in our discretion but automatically once unjust enrichment has been found to have taken place. This Arbitral Tribunal is of the view that status quo ante cannot be restored in totality because everything that has happened in the interim is not capable of being set aside nor can the second respondent company be given set aside nor can the second respondent company be given back on a clean slate. Therefore, only to the extent possible, status quo can be restored. The Arbitral Tribunal makes it clear that all the title deeds and share certificates that were handed over to respondent No.1 should be returned to the claimants. The first claimant will also have to tender, or refund Rs.2,43,00,000/- & Rs.12,00,000/- with interest. The other aspects of restitution are not being considered by this Arbitral Tribunal and it is open to the claimants to seek relief elsewhere. Thus, issues 12, 13 & 16 regarding restitution are answered accordingly in favour of the claimants."
101 The contention of the learned Senior counsel for the respondent therefore was that the Arbitral Tribunal recorded the positive finding that other aspects of restitution are not being considered by this Arbitral Tribunal, as it will be open to the applicant to seek relief elsewhere.
102 However, issues 12, 13 reproduced above were decided in favour of the applicant.
103 The contention of the learned Senior counsel for the first respondent was, that once Arbitral Tribunal recorded positive finding that the remedy with the applicant was somewhere else. It will not open to the applicant now to move applications under Sec.9 of the Act, against the respondents 3 to 6.
104 The learned counsel for the first respondent also placed reliance on the judgment of the Hon'ble Supreme Court in the case of S.N.Prasad, Hitex Industries (Bihar) Limited Vs. Monnet Finance Limited and others ((2011)1 SCC 320) wherein the Hon'ble Supreme Court was pleased to lay down, that there can be reference to arbitration only if there is arbitration agreement between the parties. If there is a dispute between the parties to the Arbitration agreement with third parties who are not parties to the arbitration agreement, thus, the reference to arbitration or appointment of Arbitrator can only be with respect to the parties to the Arbitration Agreement and not the non-parties.
105 In the said case, the Hon'ble Supreme Court dealing with the question with regard to enforcement of guarantee where there is no arbitration agreement and it was treated to be an independent contract.
106 The learned counsel for the respondent also contended, that the applicant has already approached the Company Law Board with the similar relief where the matter is pending. Therefore, it is not open to the applicant to maintain the applications under Sec.9 of the Arbitration & Conciliation Act.
107 The contention of the learned counsel for the respondent in the nutshell therefore was that the applications moved by the applicant are not maintainable for the following reasons:
(i) That the respondents 3 to 6 are neither parties to the arbitration agreement or arbitration proceedings, therefore no application under Sec.9 of the Act is competent against these respondents.
(ii) Even if they are said to be the nominees of the first respondent, still want of notice and joining in arbitration proceedings, it is not open to the applicant, now to invoke the provisions of Sec.9 of the Act to claim any interim relief.
(iii) That the applicant having availed remedy before the Company Law Board by claiming the same relief, it is not open for the applicant now to maintain application under Sec.9 of the Act.
108 Mr.V.Lakshminarayanan, learned counsel for the respondents 3, also questioned the maintainability of the application under Sec.9 of the Act, by contending that the third respondent is not party to the arbitration agreement, therefore the Arbitration & Conciliation Act has no applicability to attract section 9 of the Act.
109 The contention of the learned counsel for the third respondent, was that shares were purchased by the third respondent in pursuance to the letter dated 17.8.2004, which shows that it was independent contract, under which the third respondent purchased shares by payment of Rs.243,00,000/- (Rupees two crores and forty three lakhs only) and therefore no restraint order can be passed against the respondent in dealing with the goods, being absolute owner being duly registered shareholder of the company.
110 The contention of the learned counsel for the respondent 3 further was, that it was stipulated that supplementary agreement would have to be entered to reflect, altered consideration, where the third respondent would also have to sign all the annexures to the agreement. It had furhter undertaken to relieve the applicant of the guarantees in accordance with the agreement.
111 Mr.Lakshminarayanan, the learned counsel for the third respondent thereafter referred to minutes of the meeting of the directors of M/s.Sporting Pastime India Ltd. Held on 18.8.2004 at 11.00 a.m. to contend that the company approved the transfer of 243,00,000 equity shares, to contend that independent contract was executed. In the absence of the third respondent being party to the Arbitration agreement, no interim injunction can be asked against it.
112 In support of this contention that third party cannot be party to the proceedings under Sec.9 of the Arbitration Act. Reliance was placed on the judgment of the Hon'ble Supreme Court in the case of S.N.Prasad, Hitex Industries (Bihar) Limited Vs. Monnet Finance Limited and others (supra).
113 The learned counsel for the third respondent also referred to the para 22.06 of the award which reads as under:
"22.06 The above judgment of the Madras High Court i Chennai Container Terminal Pvt. Ltd. Vs. Union of India & others was also relied on to show that the judgment of the Supreme Court in Sukanya Holdings pvt. Ltd.'s case (AIR 2003 SC 2252) has been considered by the Madras high Court and that as long as there is relief granted against third parties, the jurisdiction of the tribunal stands ousted. On the contrary the decision only lays down the proposition that as long as no relief is granted against the third parties, the tribunal's jurisdiction would not be ousted; and that if any relief is sought against third parties, the Tribunal would not have jurisdiction. However, we have already clarified that no relief is granted against any third party who is not before this Tribunal and that question does not arise at all in this case."
114 The contention of the learned counsel was, that the reading of the finding in the award itself shows, that there was no jurisdiction with the Arbitral Tribunal to give relief against third party. Once under the award, no relief was granted against the third respondent, no interim relief can be granted, as interim relief is always subject to final relief.
115 It was also vehmently contended by the learned counsel for the third respondent that shares are the goods under the Sales of Goods Act, and when the title has already passed, to the third respondent. Therefore, no injunction can be granted restraining the respondent from using the goods belonging to it.
116 It was also contended by the learned counsel for the third respondent that as the applicant has already filed C.P.No.36 of 2010 before the Company Law Board, claiming the same relief, this application is nothing but misuse of process of the Court.
117 It was finally contended by the learned counsel for the third respondent that the immovable property, is the property of M/s.Sporting Pastime India Ltd., the applicant even if considered to be shareholder, has no right to claim title deeds of the property, as the company is an independent of its shareholders.
118 The learned counsel for the third respondent, placed reliance on the judgment of the Hon'ble Kerala High Court in the case of Shoney Sanil V. M/s.Coastal Foundations (P) Ltd. and others (AIR 2006 KERALA 206) wherein the Kerala High Court was pleased to lay down as under:
"The interim measures which are conceived by the Legislature while enacting S.9 are those interim measures which relate to the arbitration agreement between the parteis and being interim, they are to confine to the matters relating to the arbitration agreement between the parties. This intention is explict from the opening words of S.9, which provides for the party to apply for interim measure. On a plain reading of S.9 and going by the scheme of the said Act, there is no room to hold that by an interim measures under S.9, the rights of third party, holding possesison on the basis of a Court sale could be interferred with, injuncted or subjected to proceedings under S.9. Section 9 contemplates issuance of interim neasures by the Court only at the instance of a party to an arbitration agreement with regard to the subject matter of the arbitration agreement. This can be only as against the party to an arbitration agreement, or, at best, against any person claiming under him. The petitioner is a third party auction purchaser in whose favour is a sale certificate, followed by delivery of possession. He cannot therefore, be subjected to proceedings under S.9, initiated on the basis of an alleged arbitral agreement between the respondents.
119 The learned counsel for the third respondent also placed reliance on the judgment of the Hon'ble Delhi High Court in the case of Impex Trading Gmbh Vs. Anunay Fab. Ltd. and others (2008(1) ARBLR 50 (Delhi), to contend that no interim measure can be granted against a party who is not a party to the arbitration agreement or proceedings.
120 Mr.Sankaranarayanan, learned counsel for the respondents 4 & 5 adopted the arguments advanced by the learned counsel for the third respondent by contending that the respondents 4 & 5 were not party to the arbitration agreement or arbitration proceedings, and therefore, no interim measure can be granted against them.
121 Mr.V.Prakash, learned Senior counsel for the respondent 6 by adopting the arguments of others, respondent also contended that the respondent, cannot be said to be the nominees of the first respondent, as he purchased the share in their his own right therefore, being third party no interim measures can be ordered against them.
122 On consideration, I find that an order of injunction can be passed against third party who is not a party to arbitration agreement or arbitration proceedings, but to the limited extent of preservation or interim custody of subject matter of arbitration.
123 The reading of Sec.9 clearly shows that the word 'party' in Sec.9 is used for the petitioner/applicant whereas in clause 9(ii)(a) of the Act, the preservation/interim custody can be sought with regard to subject matter of arbitration agreement, which cannot be restricted to the party to the arbitration agreement/proceedings. If such an interpretation is given, then the object of Section, itself would be defeated as a party to the arbitration agreement, in order to defeat the right of the claimant can always deliver the goods, to the third party.
124 This Court agrees with the decision of the Hon'ble Bombay High Court in the case of Girish Mulchand Mehta and Durga Jaishankar Mehta Vs Mahesh S.Mehta and another (supra).
125 The Hon'ble Kerala High Court has not considered the question in the light of the dispute with regard to property which is subject matter of arbitration proceedings as in the said case, it was an independent role in Court auction, not by an act of party to arbitration proceedings.
126 The contention of the learned counsel for the third respondent, that matter before the Hon'ble High Court of Bombay was, that on becoming a member of the Co-operative society, a person looses independent right, cannot be accepted, as in the ratio of the judgment, positive finding was recorded that under Sec.9 of the Act, the party to the arbitration proceedings, can seek interim measure of protection against person who need not either party to the arbitration agreement or arbitration proceedings.
127 The contention of the learned Senior counsel appearing on behalf of the respondent, that application under Sec.9 would not be competent, as the applicant had failed to implead the respondents 3 to 6 as parties being nominees also cannot be accepted as in granting interim measure under Sec.9 of the Act, this Court is only to pass the order to protect the goods which are subject matter of arbitration proceedings, irrespective of the fact, whether party in possession of the goods is with party to the arbitration agreement/ proceedings or with the third party.
128 The judgment in the case of Baytur SA v. Finagro Holding SA (supra) is no help to the first respondent as in the present case, it is not a case of assignment, but with regard to nominees acting under the agreement itself. In the said case, provisions of Sec.9 of the Arbitration & Conciliation Act were not in dispute. Once a right is given under statute, it can be enforced, irrespective of the fact whether the assignment is invalid or not enforceable.
129. The judgment of the Hon'ble Supreme Court in the case of S.N.Prasad, Hitex Industries (Bihar) Limited Vs. Monnet Finance Limited and others (supra) on which reliance was placed also cannot advance the case of the first respondent, to hold that this Court has no jurisdiction under Sec.9 of the Act to protect the subject matter of arbitration proceedings, as in the said case, the deed of guarantee was interpreted, to be an independent contract between the guarantor and the beneficiary. It was in view of the fact that there was independent contract that the Hon'ble Supreme Court held that no interim messure can be ordered, in view of a dispute under agreement which was independent of the contract of guarantee.
130 The reading of the letter isued by the third respondent seeking transfer and registration of shares shown that reference was made to the agreement dated 19.7.2004 which was in dispute before the Arbitration Tribunal. Nothing has been produced on record to show, if any fresh agreement was executed as suggested in the letter, seeking transfer of shares in favour of the person mentioned in the letter written by the third respondent, nor any documents have been placed on record to show as to whether the respondent took over the liabilities, which were met by the applicant, and finally held to be binding on first respondent.
131 In the absence of execution of new agreement, no other conclusion then the one that the transaction was in terms of the agreement, entered into between the parties to arbitration can be arrived at.
132 The contention of the learned Senior counsel that the applicant having availed remedy before the Company Law Board, was not entitled to maintain application under 9 of the Act, can also not accepted as right under Sec.9 is only by way of interim measure and that too to protect the subject matter of arbitration. The relief basically is claimed against the first respondent, who had authorised the respondents 3 to 6 to have the shares purchased as his nominees. At the sake of repetition, it may be mentioned that the reading of the letter dated 18.8.2004 on which reliance was placed by the third respondent shows that clear reference was made to the agreement dated 19.7.2004 entered into between the applicant and the first respondent.
133 The contention of Mr.V.Lakshminarayanan, learned counsel for the third respondent, that no injunction be granted against the third respondent, in dealing with the shares being absolute owner is not sustainable, as admittedly, no new contract was entered into and the shares were transferred in pursuance to the agreement constituting the subject matter of arbitration.
134 This finding also finds support from the fact that admittedly though proposed, no fresh agreement has been executed between the parties nor any materials has been placed on record, to show that the liabilities which were undertaken by the first respondent were undertaken or discharged by the third respondent. It cannot be believed that any prudent man would agree to dispose the controlling interest in the company, for total consideration of Rs.2,43,00,000/- (Rupees two crores and forty three lakhs only) and would meet the liabilities to the tune of Rs.27 Crores.
135 It was also the contention of the learned counsel for the third respondent, that reading of the arbitral award itself shows that no order is passed against the respondents 3 to 6. Therefore, once final relief is not available, the interim relief cannot be granted.
136 This contention of the learned counsel for the third respondent though looks attractive on the face of it, but when seeing in the facts and circumstances of the case in hand, cannot be sustained as the interim relief sought for is to restrain the respondents 3 to 6 from alienating the shares and to protect the properties being subject matter of the arbitration.
137 This contention cannot be accepted also for the reason that the first respondent has filed an undertaking before the Arbitral Tribunal to protect the property, i.e. shares as well as title deeds which were subject matter of arbitration dispute.
138 It was finally contended by the learned counsel for the third respondent that the applicant has no right to seek the delivery of title deeds, as being a shareholder is not entitled to hold title deeds which belongs to the the company, which is independent of its shareholders. This contention cannot be disputed, but in A.No.2734 of 2008, this Court vide order dated 12.08.2008, directed the deposit of title deeds. The order has been upheld in appeal by the Hon'ble Division Bench. On account of the disobedience of the order, contempt petition is also pending in this court.
139 The judgment of the Hon'ble Kerala High Court in the case of Shoney Sanil V. M/s.Coastal Foundations (P) Ltd. and others (supra) also can be of no help to the third respondent for the reason that this Court agrees with the law laid down by the Bombay High Court in the case of Girish Mulchand Mehta and Durga Jaishankar Mehta Vs Mahesh S.Mehta and another (supra).
140 Even the Hon'ble Kerala High Court was pleased to hold that a party under Sec.9 of the Act means party to the arbitration agreement, meaning thereby that application under Sec.9 of the Act can only be maintained by the party to the arbitration agreement. This has no concern for grant of injunction, with regard to the property which is subject matter of arbitration proceedings.
141 The Hon'ble Kerala High Court, further held that the application is maintainable against the party to the arbitration agreement, or at best, against any person claiming under him. The respondents 3 to 6 have purchased the shares, as nominees of the first respondent and not as of independent right. No material other than the agreement dated 19.7.2004 has been placed on record to show that the respondents 3 to 6 exercises their independent right to purchase the shares.
142 M/s.Sporting Pastime India Ltd. is a party to the arbitration agreement and therefore in any case would be bound by the arbitral award if not set aside.
143 The reliance on the judgment of the Delhi High Court in the case of Impex Trading Gmbh Vs. Anunay Fab. Ltd. and others (2008(1) ARBLR 50 (Delhi), also cannot advance the case of the respondents 4 and 5, as the Hon'ble Delhi High Court has not dealt with the question whether the injunction can be granted against a party with regard to the subject matter of arbitral dispute and also that the party sought to be injuncted being a nominee of the party to the arbitration.
144 The contention of Mr.V.Prakash, learned Senior counsel that the respondents 4 to 6 cannot be treated as nominees of the first respondent cannot be sustained, as shares were transferred, in pursuance to the letter dated 18.8.2004 addressed by the third respondent, for registration of the transfer deed by referring to the agreement dated 19.7.2004. Thus, the second question is also answered by holding that the respondents 2 to 6 purchased the shares, as the nominees of the first respondent.
145 The specific stand taken by the learned Senior counsel for the applicant that for want of application before the Arbitral Tribunal, the award cannot be executed against the respondents 3 to 6 does not call for any finding, as the learned Arbitral Tribunal itself held that it would be open to the applicant, to move against the respondents 3 to 6 independently, by taking out appropriate proceedings. This cannot come in the way to protect the property which is subject matter of arbitration proceedings. In this clear case where respondent No.1 has played fraud, with the applicant, it is well settled that fraud vitiates everything.
146 In view of the finding recorded above and also keeping in view of the admitted fact, now it has been seen, as to whether the relief claimed can be granted to the applicant.
147 The prayer made in O.A.No.138 of 2010 to restrain the respondents 1, 3, 4, 5 and 6 from transferring, alienating, encumbering or creating interest of any kind whatsoever in respect of 2,43,00,000 shares of the second respondent. As the shares are the subject matter of arbitral dispute, as also arbitral award, which is yet to become enforceable, due to pendency of the petition under Sec.34 of the Arbitration & Conciliation Act, this application is ordered.
148 In A.No.694 of 2010, the prayer has been made to direct the respondents 1, 3, 4, 5 and 6 to deposit share certificates of the second respondent. Till the finalisation of the dispute and the award become enforceable, no such direction can be issued. This application is dismissed.
149 In A.No.694 of 2011, the prayer has been made for directing the third respondent to deposit all the title deeds of the property belonging to the second respondent company and fourth respondent before this Court. In A.No.2734 of 2008, the prayer made by the applicant was allowed. It was always open to the applicant at that stage to have impleaded other parties. Once an application filed on a subject matter has attained finality, even though by way of interim direction, though will not operate as res judicata, still it is not open to the applicant to file a second application on the same relief, by alleging change of circumstances, whereas there is no change of circumstances, as the applicant is claiming right under the agreement dated 19.7.2004. Therefore, this application is also dismissed.
150 However, before parting with the judgment, it is necessary that this matter be placed before the Hon'ble Chief Justice for framing of the rules regulating the procedure for filing and dealing with the application under the Arbitration and Conciliation Act 1996, as in the absence of rules regulating the procuedure under section 84 of the Act, repeated applications filed on the same cause of action. In this case, the applicant had filed O.A.No.849 of 2005 for directing deposit of title deeds which was subsequently withdrawn, in view of the undertaking filed by the first respondent.
151 Inspite of the order, O.A.No.1100 of 2005 and A.No.5261 of 2005 were filed with regard to the amount of Rs.25 Crores wherein, again request was made for deposit of title deeds, both applications were dismissed.
152 The applicant thereafter filed A.No.2734 of 2008 claiming relief that under change of circumstances, directions are required to be issued, for deposit of title deeds and share certificates.
153 This Court directed the first respondent to deposit title deeds, but no relief with regard to shares certificate was granted. The order being as interim measure, does not operate as res judicata, but still under the normal circumstances, the application cannot have been filed, claiming same relief again and again.
154 The Hon'ble Chief Justice is requested to refer this matter to the Rules Committee/High Court for drafting of Rules to regulate the proceedings under the Arbitration & Conciliation Act. No cost.
29.04.2011 Index: Yes/No Internet Yes/No vaan VINOD K.SHARMA, J. vaan Pre-Delivery Order in O.A.Nos.138 of 2010, A.Nos.694 of 2010 and 694 of 2011 29.04.2011