Madras High Court
M/S.Galaxy Properties Private Limited vs Puravankara Projects Limited on 20 December, 2012
Author: R.Banumathi
Bench: R.Banumathi, K.K.Sasidharan
IN THE HIGH COURT OF JUDICATURE AT MADRAS DATED : 20.12.2012 CORAM : THE HONOURABLE Mrs.JUSTICE R.BANUMATHI and THE HONOURABLE Mr.JUSTICE K.K.SASIDHARAN Original Side Appeal No.283 of 2012 M/s.Galaxy Properties Private Limited, rep. by its Director Mr.M.Mohamed Ibrahim having their office at No.8, Old No.49, Radha Mohan street, Velachery, Chennai-600 042. ... Appellant. Vs. Puravankara Projects Limited, rep. by its Joint Managing Director Mr.Ashish Puravankara having their registered office at No.130/1, Ulsoor Road, Bangalore 560 042. ... Respondent. Original Side Appeal is filed under Order XXXVI Rule 1 of the Original Side Rules read with Clause 15 of the Letters Patent against the common order dated 25.07.2012 made in O.A.No.598 of 2011 on the file of this Court. For Appellant : Mr.T.V.Ramanujam Senior Counsel for Mr.C.Jagadish For Respondent : Mr.T.R.Rajagopalan Senior Counsel for M/s.Paul and Paul JUDGMENT
R.BANUMATHI,J and K.K.SASIDHARAN,J Introductory:- Whether the Share Purchase Agreement entered into between the Appellant, along with its subsidiary companies, with the Respondent, on the basis of the original as well as modified Memorandum of Understanding (MOU) for the purpose of acquiring the property purchased by the Appellant in the name of its subsidiaries viz., Nile and Vaigai, by way of share transfer, instead of executing sale deeds and registering them before the Registration Department (with a view to avoid stamp duty) are linked and interconnected, so as to enable the Appellant to make use of the provision for arbitration incorporated in the MOU and to approach the Court for interim measure of protection under Section 9 of the Arbitration and Conciliation Act is the core issue that arises for our consideration in this intra- court appeal.
2. Brief facts:- The Respondent-Puravankara Projects Limited and Appellant-Galaxy Properties Private Limited entered into a Memorandum of Understanding dated 22.11.2006 (MOU) for a project of acquiring 1000 acres of lands from Appellant Company. Under the MOU, Respondent agreed to acquire 1000 acres from the Appellant or from their subsidiaries/associates at Rs.38 lakhs per acre for the first 450 acres and at the rate of Rs.35 lakhs per acre for the remaining 550 acres. Thereafter, Appellant and Respondent entered into an amended MOU dated 22.11.2007 fixing the rate at Rs.50 lakhs per acre for the entire 1000 acres.
3. The Case of Appellant is that as per MOU dated 22.11.2006, Appellant and their subsidiaries/associates started acquiring lands in the name of their subsidiaries viz., Nile Developers (P) Limited (for short Nile); Vaigai Developers (P) Limited (for short Vaigai); Money Worth Estates Private Limited and Peacock Finvest (P) Limited. Under various sale deeds Nile acquired an extent of 23.7134 acres in Selvazhimangalam village at the rate of Rs.83 lakhs per acre. Vaigai purchased an extent of 19.08 acres under various sale deeds in Vittavidagai village, Part of Pappankuli village at the rate of Rs.81 lakhs per acre. Believing that Respondent will acquire 1000 acres of land and will not leave half way through and having trust in the Respondent, Appellant transferred the shares of its subsidiaries - Nile and Vaigai to the Respondent by Share Purchase Agreement dated 22.11.2007 and the consideration was worked out at Rs.50 lakhs per acre only. This has resulted in a loss of Rs.11.92 crores to the Appellant. Appellant advanced monies to acquire lands in the name of subsidiaries Nile and Vaigai and they have shown the loss of Rs.11.92 crores in the books of accounts as loss on sale of shares as per the two Share Purchase Agreements dated 22.11.2007. Loss of Rs.11.92 crores is shown in the balance sheet of Nile and Vaigai.
4. In June 2009, Respondent represented that they were not in a position to proceed with the project as there was a crunch in the real estate market due to global recession and that the monies are blocked in some other project. It was mutually agreed between the Appellant and Respondent not to proceed with the transaction and as per the mutual agreement, Appellant returned back Rs.10 crores. According to the Appellant, Respondent agreed to reconvey the shares of Nile and Vaigai infavour of Appellant or their nominees and that Appellant has to refund the consideration received out of share transfer agreements of Nile and Vaigai. After receiving back the advance of Rs.10.00 crores along with interest totalling Rs.14.08 crores from the Appellant, Respondent has not kept up their promise on coming forward to reconvey the shares of Nile and Vaigai and this caused great hardship to the Appellant. In response to the e-mail sent by the Appellant dated 01.4.2011, Respondent sent letter on 02.4.2011 stating that they have taken steps to launch the project and that they would build a compound wall and the Appellant is not to disturb their possession. The case of Appellant is that Respondent having committed fundamental breach by not acquiring 1000 acres and having received back Rs.10 crores together with interest totalling of Rs.14.08 crores, Respondent cannot take advantage of their own wrong and claim right over the shares of Nile and Vaigai and the stand of Respondent in their letter dated 02.4.2011 is an act of breach of trust. The Appellant contended that they purchasedlands for Rs.81 lakhs and Rs.83 lakhs respectively per acre in the name of Nile and Vaigai and Respondent cannot snatch those lands for Rs.50 lakhs per acre causing them huge loss. Share Purchase Agreements dated 22.11.2007 form integral part of MOU dated 22.11.2006 and amended MOU dated 22.11.2007. According to the Appellant, even though, shares of Nile and Vaigai has been transferred infavour of Respondent, Appellant is in possession of the lands and that Appellant has always been ready and willing to refund the amount received in the Share Purchase Agreements dated 22.11.2007 with interest at the rate of 12% per annum. Clause 12 of MOU (22.11.2006) contains arbitration clause and after issuing notice dated 18.7.2011 and stating that Respondent is trying to alienate the properties and that they have a prima facie case and balance of convenience is infavour of them, Appellant filed application under Section 9 of Arbitration and Conciliation Act seeking interim injunction restraining the Respondent, their men, agents, servants and everyone claiming under them or acting on their behalf from in any way alienating or encumbering the lands mentioned in the Petition schedule.
5. Case of Respondent:- Share Purchase Agreements were executed on the same date (22.11.2007) when amended MOU was executed between the parties. Share Purchase Agreements are independent transactions and not in any way connected with MOU and amended MOU. When the parties executed amended MOU under Share Purchase Agreements, Respondent acquired total shareholding from Nile and Vaigai and that the Respondent is in continuous possession and enjoyment of those properties. Respondent was taking steps to develop the properties owned by Nile and Vaigai and Appellant vide e-mail dated 01.4.2011 requested the Respondent to reconvey the lands and Respondent by letter dated 02.04.2011 categorically stated that there was no offer from the Respondent regarding the lands belonging to Nile and Vaigai and informed the Appellant that they had taken steps to launch one of the project in the land. Appellant having cancelled the MOU (22.11.2006) and after having refunded the amounts acknowledged by it in the receipts along with the interest has no manner of right or authority to put any condition with regard to utilisation of the said lands by Nile and Vaigai as the said lands belonged to the said companies. According to Respondent, it has paid all unsecured loans of the said companies i.e. Nile and Vaigai when they purchased the shares in the said companies for valuable consideration. The Respondent categorically denied the claim that they have agreed to reconvey its shares in Nile and Vaigai. According to Respondent, the companies viz., Nile and Vaigai are in possession of the properties which are the subject matter of the application and the statement that Appellant has appointed security to safeguard the properties is false and baseless. Appellant has neither made out a prima facie case nor balance of convenience is in their favour. The properties belonging to two different entities who are not parties to the arbitration agreement and while so, Appellant cannot maintain the Petition under Section 9 of Arbitration and Conciliation Act and seek for interim injunction.
6. The Appellant filed a rejoinder and Respondent also filed a reply to the rejoinder further elaborating their contentions.
7. Finding of learned single Judge:- Upon consideration of rival contentions and holding that Appellant has not made out a prima facie case, learned single Judge dismissed the application interalia on the following findings:-
i)Nile and Vaigai are two independent entities and under two Share Purchase Agreements (22.11.2007), the shareholdings of two companies was transferred to Respondent.
ii)Consideration was paid for transfer of shares and Respondent company got control over Nile and Vaigai.
iii)No proof was produced by the Appellant regarding understanding/agreement between Appellant and Respondent in respect of transfer of shares of Nile and Vaigai.
iv)Appellant failed to establish any right to claim ownership over the lands in the name of Nile and Vaigai.
v)Appellant was not able to make out a prima facie case and even in the event of getting an award from the Arbitral Tribunal, it is always open to the Appellant to claim value of the properties from the Respondent.
8. Contentions:- Mr.T.V.Ramanujam, learned Senior Counsel for Appellant contended that as per the MOU (22.11.2006) and amended MOU (22.11.2007) the Respondent agreed to purchase 1000 acres of lands. Share Purchase Agreements (22.11.2007) under which the shares of Nile and Vaigai were transferred to the Respondent form integral part of MOU and amended MOU and while so, the learned single Judge erred in holding that Share Purchase Agreements are independent transactions. According to the learned Senior Counsel, Respondent having committed fundamental breach by not acquiring 1000 acres and having received back Rs.10 crores together with interest amounting to Rs.14.08 crores, cannot take advantage of their own wrong and Respondent cannot have any right to retain the shares of Nile and Vaigai. Learned Senior Counsel submitted that Appellant's subsidiaries Nile and Vaigai have acquired the lands for Rs.83 and Rs.81 lakhs per acre respectively and taking advantage of their own wrong, Respondent cannot snatch the lands for Rs.50 lakhs per acre and thereby causing huge loss of Rs.11.92 crores to the Appellant. Learned Senior Counsel further submitted that notwithstanding the Share Purchase Agreements, Appellant is in possession of the lands standing in the name of their subsidiaries viz., Nile and Vaigai and Appellant has appointed the security personnel and Respondent is making attempt to interfere with Appellant's possession of the lands.
9. According to the learned Senior Counsel for Appellant, there are serious questions to be resolved by Arbitral Tribunal viz., (i) whether there was an agreement to retransfer the properties of Nile and Vaigai to the Appellant; (ii) Respondent committed fundamental breach in not acquiring 1000 acres and Respondent cannot be allowed to take advantage of their own wrong and (iii) the effect of e-mail dated 28.8.2010. Learned Senior Counsel contended that Appellant had also filed application under Section 11 of Arbitration and Conciliation Act for appointment of an Arbitrator and the learned single Judge did not properly appreciate the prima facie case and balance of convenience made out by the Appellant and prayed for allowing the appeal.
10. Mr.T.R.Rajagopalan, learned Senior Counsel for Respondent submitted that the shareholdings of Nile and Vaigai were transferred to the Respondent on payment of consideration and Respondent paid all unsecured loans in the said companies when they bought over the shares in the said companies for valuable consideration and Appellant has no right over the shares of those two different entities. Learned Senior Counsel further submitted that the Share Purchase Agreements are independent transactions and that there was no agreement between the parties to reconvey/retransfer the shares. In the absence of any such agreement, Appellant cannot seek to restrain the Respondent from alienating the properties. Learned Senior Counsel contended that when MOU was cancelled by the parties, the Appellant cannot take advantage of the arbitration clause in the agreement. The Share Purchase Agreements and MOU are two different transactions and in the absence of any arbitration clause in the Share Purchase Agreements, the Appellant is not entitled to invoke the arbitration clause in the MOU which was admittedly cancelled.
11. Discussion:
MOU (22.11.2006) and amended MOU (22.11.2007) and Cancellation Deeds (22.10.2010) - The parties herein originally entered into MOU" (22.11.2006), whereby and whereunder the Appellant has agreed to procure 1000 acres of property in various villages, in Sriperumbudur, so as to enable the Respondent to develop the property. The Respondent agreed to pay the land value at the rate of Rs.38 lakhs for 450 acres abutting the Chennai- Bangalore National Highway and Rs.35 lakhs for 550 acres situated behind the front portion. They entered into an amended MOU dated 22.11.2007 under which rate was fixed at Rs.50 lakhs per acre for the entire 1000 acres. The Appellant received a sum of Rs.10 crores towards advance. The agreement was valid for a period of five to six months.
12. Clause 12 of MOU (22.11.2006) entered into between the Appellant and the Respondent contains arbitration clause which reads as under:-
"12. In the event of there being any dispute with regards to or, arising out of, this agreement or interpretation of any of the terms of this agreement, the same shall be referred to the arbitration of a sole arbitrator appointed by the parties hereto. The arbitrator shall proceed as per the provisions of the Arbitration and Conciliation Act, 1996. The seat of arbitration shall be at Chennai. The Courts in Chennai alone shall have jurisdiction. The arbitration proceedings shall be conducted in English language."
13. The MOU was amended and modified on 22.11.2007, and the validity period was extended up to 31.08.2008. Clause No.2 of the amended MOU reads as under:-
"The price to be paid by M/s. Puravankara Projects Limited (PPL) for the lands to be purchased under this agreement is revised to Rs.50 lakhs per acre. However for the land already acquired through Galaxy Properties Private Limited or the associate companies of Galaxy Properties Private Limited, PPL would be reimbursing the stamp duty and land registration charges over and above the amount agreed above to be calculated on a sum not exceeding Rs.50 lakhs per acre. The acquisition of these companies would be subject to due diligence."
On the same date, when the amended MOU came to be executed, Respondent vide Share Purchase Agreements acquired total share holdings from the shareholders of both Nile and Vaigai.
14. When MOU (22.11.2006) did not fructify, parties cancelled the transactions covered by three receipts in respect of which advances had been paid under Memorandum of Understanding as amended. The details of cancellation are as under:-
(i)Cancellation deed (22.10.2010) between the Respondent and Greenland Estates Pvt. Ltd. evidencing return of Rs.300 lakhs referred to in clause 4 of the amended MOU;
(ii)Cancellation deed (22.10.2010) between the Respondent and Appellant (Galaxy) evidencing return of Rs.500 lakhs referred to in clause 4 of the amended MOU;
(iii)Cancellation deed (22.10.2010) between the Respondent and Money Worth Estates Pvt. Ltd. evidencing return of Rs.400 lakhs referred to in clause 4 of amended MOU.
15. Learned Senior Counsel for Appellant contended that under the above said cancellation deeds what was cancelled were only receipts and therefore, notwithstanding the cancellation of those receipts in pursuance to the mother MOU, shares of Nile and Vaigai are to be re-transferred.
16. The learned Senior Counsel for Respondent contended that cancellation deeds contained specific recitals that after discussion parties have mutually decided not to proceed with the transaction and parties have also specifically agreed that neither party will have any claim against other and when the parties have agreed that they have no claim against other, based on MOU, Appellant cannot seek for re-transfer of shares of Nile and Vaigai. In support of his contention, the learned Senior Counsel for Respondent placed reliance on the recitals in the cancellation deeds.
17. The cancellation deeds (22.10.2010) contain the following recitals relied upon by the Respondent:-
.... after discussion had mutually decided not to proceed with the transaction and the parties have mutually agreed to cancel the transaction contemplated in the aforesaid receipt and Greenland Estates Private Limited agreed to refund the advance of Rs.300/- lakhs (Rupees Three Hundred Lakhs only) along with simple interest @ 12% per annum All three cancellation deeds also contains the recitals -
.... it is mutually agreed between the parties that the transaction envisaged under the receipt executed by Greenland Estates Private Limited is hereby cancelled and all the obligations and rights of both parties arising out of said receipt cease with immediate effect and neither party will have any claim against the other on the transaction referred to in aforesaid receipt.
18. Similar recitals are found in the cancellation deeds with Galaxy Properties and Money Worth Estates. By a careful reading of cancellation deeds (22.10.2010), it is clear that parties have mutually agreed to cancel the transaction contemplated in the aforesaid receipt(s). Prima facie it appears that the transactions covered under three receipts alone were cancelled.
19. Share Purchase Agreements whether form integral part of MOU (22.11.2006) and whether the dispute regarding Nile and Vaigai would fall within the purview of arbitration clause - The Appellant, M/s. Galaxy properties Private Limited along with Nile Developers Private Ltd., and its two Directors entered into a Share Purchase Agreement with the Respondent on 22.11.2007, whereby and whereunder, the Appellant has agreed to purchase the shares of Nile. The consideration for take over was calculated on the basis of the value of land acquired by the Appellant in the name of Nile. The take over was nothing but an arrangement to purchase the property without paying stamp duty to the Government of Tamil Nadu. The Share Purchase Agreement clearly shows that the Appellant has purchased 23.7134 acres of property in Selvazhimangalam through its subsidiary Company - Nile. The Appellant was given the responsibility to convert the land for non-agricultural purpose. Clause 2.3 of Share Purchase Agreement reads as follows:
"2.3 The total consideration for the transfer of entire shareholding of the company is agreed based on the total land holding of the company which is informed to be 23.7134 acres and accordingly, the total amount agreed to be paid by PPL to the shareholders for the transfer of entire shareholding is Rs.12,93,42,800 (equivalent to Rs.50 lakhs per acre of land owned by the company plus reimbursement of stamp duty and registration charges computed on a sum of Rs.50 lakhs per acre).
20. Similarly another Share Purchase Agreement was entered into by the Appellant, its subsidiary Vaigai and its Directors with the Respondent. In the said Share Purchase Agreement, it was mentioned that the Appellant has already purchased 19.08 acres of land in Vittavidagai through their subsidiary company Vaigai. The provisions as contained in the Share Purchase Agreement with Nile was also incorporated in the Share Purchase Agreement with Vaigai. The consideration for take over was estimated at Rs.10,41,03,000/- being the value of 19.08 acres of land.
21. The modus operandi adopted for purchase of land (without paying stamp duty) by taking over the subsidiary companies of the Appellant is clear from the e-mail sent by the official of the Respondent on 20 June 2008, enclosed in page 77 of the typed set of papers. The said e-mail dated 20.06.2008 reads as under:-
"Dear Kiran, As you are aware, in TN, we are buying certain lands which are held by some private limited companies. We would be buying the shares of these companies instead of buying the land, whereby, PPL becomes the holding company.
We have already bought two companies Nile and Vaighai from this group and now, third company seems to be ready for buying. ...."
22. The case of Appellant is that only in pursuance of MOU (22.11.2006) and amended MOU (22.11.2007), Nile and Vaigai have purchased the properties in Selvazhimangalam village and Vittavidagai village, Sriperumbudur Taluk. In both the Share Purchase Agreements, there is reference to mother MOU (22.11.2006) and amended MOU (22.11.2007). In this regard, we may usefully refer to Clauses 3(a) and 3(b) of Share Purchase Agreement in respect of Nile which reads as follows:-
"3 (a). PPL had entered into an MOU with Galaxy Properties Private Limited ...... on 22nd November 2006 and modified on 22.11.2007.
(b). Galaxy has now purchased land to the extent of 23.7134 acres through their subsidiary company M/s.Nile Developers Private Limited. The details and extent of land held by the Company is as per Annexure 1. The site-map of the land is as per Annexure 2."
23. Similar clauses are found in the Share Purchase Agreement of Vaigai. Clauses 3(a) and 3(b) in respect of Vaigai reads as under:-
3 (a) PPL had entered into an MOU with Galaxy Properties Private Limited ........ on 22nd November 2006 and modified on 22.11.2007.
3 (b) Galaxy has now purchased land to the extent of 19.08 acres through their subsidiary company M/s.Vaigai Developers Private Limited. The details and extent of land held by the Company is as per Annexure 1. The site-map of the land is as per Annexure 2.
24. The recitals in Clause 3(a) and 3(b) of both Share Purchase Agreements of Nile and Vaigai indicate that Nile and Vaigai have purchased properties of 23.71 acres in Selvazhimangalam and 19.08 acres in Vittavidagai, Sriperumbudur Taluk respectively in furtherance to MOU (22.11.2006) and amended MOU (22.11.2007) entered into between the Appellant and the Respondent. It is therefore clear that the Share Purchase Agreements are interlinked with MOU and amended MOU.
25. It was repeatedly contended that properties were purchased in the name of their subsidiaries Nile and Vaigai at the rate of Rs.83 lakhs and Rs.81 lakhs per acre respectively and under Share Purchase Agreements properties were transferred for consideration at Rs.50 lakhs per acre only which resulted in loss of Rs.11.92 crores to the Appellant. According to Appellant, they have advanced monies to acquire lands in the name of subsidiaries Nile and Vaigai and that they have shown the loss of Rs.11.92 crores in the books of accounts as loss on sale of shares as per two Share Purchase Agreements. Case of Appellant is that believing the Respondent's representation that they will acquire 1000 acres of land, the properties in the name of its subsidiaries Nile and Vaigai were transferred at a low price of Rs.50 lakhs per acre incurring huge loss of Rs11.92 crores. If MOU had not been there, the properties standing in the name of Nile and Vaigai would not have been transferred for less consideration of Rs.50 lakhs per acre. This again shows that Share Purchase Agreements (22.11.2007) are interlinked with MOU (22.11.2006).
26. Appellant puts forth MOU (22.11.2006) as an agreement signed by the parties containing arbitration agreement to contend that Nile and Vaigai being subsidiaries of Appellant, the Share Purchase Agreements also fall within the ambit of arbitration clause. The said MOU is signed by the Appellant and Respondent and not by Nile and Vaigai. There can be appointment of an Arbitrator, if there was any dispute between Appellant and Respondent. The question is when Nile and Vaigai are not signatories of MOU dated 22.11.2006, whether they could be considered as "party" to arbitration agreement.
27. Drawing our attention to the Share Purchase Agreements and also the claims and conduct of parties, learned Senior Counsel for Appellant contended that from the clauses in the Share Purchase Agreements and from several acts of parties, an inference has to be drawn that parties were acting in terms of MOU (22.11.2006) and retransfer of shares of Nile and Vaigai are integral part of MOU (22.11.2006) and therefore, dispute in respect of Nile and Vaigai are to be resolved only by the Arbitrator and pending arbitration status quo should be preserved.
28. Learned Senior Counsel for Respondent submitted that in the Share Purchase Agreement, there is no arbitration clause and in the absence of existence of arbitration agreement and that Nile and Vaigai are two different entities, no claim against Nile and Vaigai could be the subject matter of reference to an Arbitrator. In support of his contention, learned Senior Counsel placed reliance upon (2010) 5 SCC 306 [Indowind Energy Limited v. Wescare (India) Limited and another].
29. Learned Senior Counsel for Respondent submitted that Share Purchase Agreements are independent transactions and as per Clause 6 agreement cannot be terminated after execution. As pointed out earlier, Clauses 3(a) and 3(b) of Share Purchase Agreement refers to MOU that Appellant has purchased the land to an extent of 23.71 acres in Selvazhimangalam village in the name of Nile and 19.08 acres in Vittavidagai village in the name of Vaigai. When Appellant has made purchase in the name of its subsidiaries company and when Share Purchase Agreements were in pursuance to the MOU entered into between the Appellant and Respondent, Clause 6 has to be interpreted only in the light of MOU. If MOU (22.11.2006) was not there, shares of Nile and Vaigai would not have been transferred at all. Therefore, the effect of Clause 6 and Clause 8.9 in the Share Purchase Agreement are to be seen only when parties adduce oral and documentary evidence.
30. The MOU contains a provision for arbitration. In case the subsequent Share Purchase Agreements with Nile and Vagai were in pursuance of the original MOU, the Appellant would be justified in its contention that the dispute should be referred to arbitration and the status quo of the land should be preserved in the meantime.
31. A combined reading of MOU (22.06.2006) and Share Purchase Agreements (22.11.2007), it is seen that purchase of properties by Nile and Vaigai appear to be in furtherance of MOU. Purchase of shares of companies Nile and Vaigai are only to enable the Respondent to acquire lands purchased by Galaxy (Appellant) in the name of its subsidiary companies. The MOU and Share Purchase Agreements appear to be interconnected and the same is evident from the recitals of the Share Purchase Agreements and the subsequent correspondence by e-mail.
32. The Share Purchase Agreements in respect of Nile and Vaigai refers to the original MOU and also the amended MOU. The Share Purchase Agreements also contain a clear statement that Appellant has purchased the land through the subsidiary companies viz., Nile and Vaigai. Even after the purchase of shares by the Respondent, the responsibility to convert the land standing in the name of Nile and Vaigai was given only to the Appellant. In case the agreement with Nile and Vaigai were separate transactions unconnected with the MOU, there was no need to mention the MOU and amended MOU, as well as the acquisition of lands by Appellant in the name of its subsidiaries (Vaigai and Nile) and the responsibility on the Appellant to obtain conversion of land for non-agricultural purposes in the Share Purchase Agreements.
33. We are now concerned only with the prima facie case, balance of convenience and irreparable injury.
34. The Appellant contended that on account of the withdrawal of the Respondent from the land deal, the property purchased from its subsidiaries should be returned on payment of sale consideration paid by the Respondent by way of purchase of shares.
35. The request made by the Appellant to return the land on payment of consideration is evident from the subsequent conduct and exchange of e-mails. Placing reliance upon e-mail dated 28.8.2010, learned Senior Counsel for Appellant submitted that Respondent has agreed to retransfer the shares of Nile and Vaigai.
36. The E-mail dated 28.08.2010 sent by the Respondent reads thus:
"Dear Mr. Vijayamadhav As per our books, we have made the following payments:
Peacock as per JDA-4.37 Crs as per the statement;
Other three companies Rs.10 Crs as per the statement.
I have calculated the interest on the advance of Rs.10 Crs, which has to be adjusted in the price. Similarly, for the return of Vaighai and Nile Companies back to you, kindly prepare a table showing the amount paid and apply 16% interest and work out the total amount payable so that we all have full figures in hand. You may prepare the statement and copy to all here so that we can verify the same and confirm. In case of any clarifications, pl. copy to all of us. Thanks Vishnu."
From the above said e-mail dated 28.8.2010, it is clear that Respondent asked the Appellant to send statements to enable them to reconvey the shares/land holdings of Nile and Vagai.
37. It is true that there is no written agreement to re-deliver the land. The subsequent e-mail sent by the Appellant shows that the Appellant has been buying time to repay the purchase amount to the Respondent with interest. The e-mails referred to by the learned Senior Counsel for the Respondent dated 27.12.2010; 1.12.2011 and 31.3.2011 all refers to the steps taken by the Appellant to refund the money and to take back the land from the Respondent.
38. There is nothing on record to show that the MOU was cancelled. The transactions covered by three receipts alone were cancelled. The transactions referred to in those three receipts were only on the basis of the MOU. The MOU being the mother agreement, was not cancelled. Therefore, it cannot be said that there is no subsisting agreement between the parties containing a provision for arbitration.
39. The Respondent has placed reliance on a letter dated 18.06.2010 alleged to have written by the Appellant, informing that it is difficult to acquire land on account of the proposal for acquisition by the Government. The Respondent has developed a defense that the cancellation letter dated 22.10.2010 was executed only on the basis of this letter. The said contention was refuted by the Appellant by placing reliance upon the letter sent along with the letter dated 18.06.2010. According to the Appellant, the letter dated 18.06.2010 was a pre-dated letter given at the instance of the Respondent. The correctness of the contention of the Appellant and the Respondent in this regard cannot be decided in the present proceedings, where we are concerned only with the prima facie case.
40. In the application filed under Section 9 of Arbitration and Conciliation Act, the Court is mainly concerned with prima facie case and balance of convenience. In the application filed under Section 9 of Arbitration and Conciliation Act by the Appellant, the point falling for consideration is whether there is an arbitration agreement between the parties and whether the Appellant has shown prima facie case that Respondent is bound to reconvey/retransfer the shares of Nile and Vaigai to them and that the Appellant has established prima facie case for grant of interim injunction.
41. Granting injunction under Section 9 of Arbitration and Conciliation Act is governed by the principles:- (i) whether a person seeking temporary injunction has made out a prima facie case; (ii) whether balance of convenience is in his favour; (iii) whether a person seeking temporary injunction would suffer irreparable injury. The power to grant interim injunction under Section 9 of Arbitration and Conciliation Act is given to the Court as a measure of protection.
42. The scope of a proceeding under Section 9 is very limited. The Court should be satisfied that there is a subsisting agreement between the parties containing a provision for arbitration and that one party has called upon the other to refer the matter to arbitration. The Court considering the application for interim protection is not the designated Court for appointment of Arbitrator.
43. Admittedly the parties have entered into an agreement. The agreement contains a provision for arbitration. The subsequent Share Purchase Agreements with the Respondent was executed by the Appellant and the other Directors of Nile and Vaigai. The Share Purchase Agreement also contains a recital that it was only the Appellant who has purchased the land in the name of its subsidiaries (Vaigai and Nile). The provisions of those two Share Purchase Agreements and the reference made about the MOU in the Share Purchase Agreements would prima facie show that all transactions are inter-connected. The mother agreement remain the same for all the subsequent transactions, whether it be the transaction covered by those two receipts or the two Share Purchase Agreements. Merely because shares were transferred and that the two companies (Nile and Vaigai) are separate entities, it cannot be said that Share Purchase Agreements have nothing to do with the original MOU. The Respondent is bound by the recitals in the Share Purchase Agreements with regard to the acquisition of property by the Appellant in the name of Vaigai and Nile. Therefore, a prima facie case is made out that the transactions covered by the Share Purchase Agreements were in pursuance of the MOU and as such the Appellant was justified in its request to preserve the status quo pending arbitral proceedings.
44. According to the Respondent the land was neither transferred nor developed on account of the pending proceedings. In case the land is transferred or encumbered pending arbitral proceedings, third party interest would crept in. Therefore, we are of the considered view that status quo shall be maintained pending arbitral proceedings.
45. Result:- For the foregoing reasons, the order of learned Single Judge in O.A.No.598 of 2011 (25.7.2012) is set aside and the Original Side Appeal is partly allowed. The Respondent is directed to maintain status quo as on date with respect to the properties covered by the Share Purchase Agreements of Nile and Vaigai pending arbitral proceedings. Consequently, the connected Miscellaneous Petitions are closed. No costs.
bbr Copy to:
The Sub Assistant Registrar, Original Side, High Court, Madras B/o mmi