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SUPREME COURT OF INDIA
DIPAK MISRA, CJI., A.M. KHANWILKAR, D.Y. CHANDRACHUD, JJ.
CHERAN PROPERTIES LIMITED – Appellant
VERSUS
KASTURI AND SONS LIMITED AND ORS – Respondents
CIVIL APPEAL NOS 10025-10026 OF 2017
Decided on : 24-04-2018
(2013) 1 SCC 641 – Relied upon
(2011) 1 SCC 320; (2017) 9 SCC 729 – Referred
(2010) 5 SCC 306 – Distinguished
(b) Arbitration and Conciliation Act, 1996 – Section 36 r//w section 111, Companies Act, 1956 –
Arbitral award having character of a decree of a civil court capable of being enforced as a decree – Held, KSL was entitled to seek rectification before the NCLT – Section 111 – Held, NCLT had jurisdiction to pass appropriate order directing rectification of the register. (Para 27)
(c) Arbitration and Conciliation Act, 1996 – Section 42 and 35 r/w section 111, Companies Act, 1956 – Award enforceable by court of law – Instantly award directing return of share certificates meaning thereby transfer of share certificates – Requiring rectification in register of shares – Could be done only by direction from NCLT – Held NCLT had jurisdiction – Section 42 not applicable. (Para 28, 29, 34)
(1969) 2 SCR 244; Civil Appeal No 162 of 1962 – Referred
(d) Arbitration and Conciliation Act, 1996 – Section 42 – Dealing with jurisdiction issue in respect of arbitral proceedings – Arbitral proceedings terminate on making final award – Thereafter section 42 would have no application. (Para 31)
(e) Arbitration and Conciliation Act, 1996 – Section 35 – Arbitral award can be enforced/executed anywhere – No requirement of obtaining a transfer of the decree from the Court which would have jurisdiction over the arbitral proceedings. (Para 31)
Facts of the case:
The respondent Sporting Pastime India Limited [SPIL] was incorporated on 2 May 1994, as a fully owned subsidiary of the first respondent, Kasturi & Sons Limited [KSL]. On 19 July 2004 an agreement was entered into between KC Palanisamy[KCP] (the third respondent), KSL (the first respondent) and SPIL and a company by the name of Hindcorp Resorts Pvt. Ltd. (Hindcorp). Under the agreement SPIL was to allot 240 lakh equity shares of Rs 10 each, fully paid up at par to KSL against the book debts due by SPIL to KSL. KSL offered to sell to KCP or his nominees 243 lakh equity shares representing 90 per cent of the total paid up share capital for a lumpsum consideration of Rs 2,31,50,000. An amount of Rs 2.5 crores was paid by KCP as against a total consideration of Rs 30 crores. Ninety per cent of the shares were transferred by KSL to KCP and to his nominees.
Since the transaction was not completed by KCP, disputes arose between the parties resulting in the commencement of arbitral proceedings.
KSL initiated proceedings, inter alia, under Section 111 of the Companies Act, 1956 read with Sections 397, 398, 402 and 403, among other things, for rectification of the register of SPIL. NCLT allowed the petition. The decision of the NCLT was affirmed by NCLAT.
Finding of the Court:
The direction of the NCLT, which has been affirmed by the NCLAT does not warrant interference.
Result: Appeal dismissed.
JUDGMENT :
Dr. D.Y. CHANDRACHUD, J
1. The appeals in the present case arise under Section 423 of the Companies Act, 2013 against a judgment and order of the National Company Law Appellate Tribunal [NCLAT] dated 18 July 2017. The NCLAT has dismissed an appeal filed against an order dated 6 March 2017 of the National Company Law Tribunal [NCLT] at its Chennai Bench.
2. The second respondent is a company by the name of Sporting Pastime India Limited [SPIL]. It was incorporated on 2 May 1994, as a fully owned subsidiary of the first respondent, Kasturi & Sons Limited [KSL]. On 19 July 2004 an agreement was entered into between KC Palanisamy[KCP] (the third respondent), KSL (the first respondent) and SPIL and a company by the name of Hindcorp Resorts Pvt. Ltd. (Hindcorp). Under the agreement SPIL was to allot 240 lakh equity shares of Rs 10 each, fully paid up at par to KSL against the book debts due by SPIL to KSL. KSL offered to sell to KCP or his nominees 243 lakh equity shares representing 90 per cent of the total paid up share capital for a lumpsum consideration of Rs 2,31,50,000. The intention of the parties, as reflected in the agreement, was that KCP would take over the business, shares and liabilities of SPIL and would discharge the liabilities set out in Schedules 2 and 3 of the agreement which were outstanding on the date of the agreement. KCP agreed to discharge the Schedule 2 liabilities within 180 days from the date on which he took over management of SPIL. Clause 14 of the agreement was to the following effect:
“KSL hereby recognise the right of KCP and/or his nominees to sell or transfer their holding in SPIL to any other person of their choice, provided the proposed transferees accept the terms and conditions mentioned in this agreement for the management of SPIL and related financial aspects covered by this agreement.”
The agreement contained the following provision for resolution of disputes by arbitration:
“In the unlikely case of dispute arising out of this agreement relating to claims and counter claims, the parties hereto agree that the same shall be referred to Arbitration under he Indian Arbitration Law. The arbitration shall be by three arbitrators. KCP shall be entitled to appoint one arbitrator. KSL shall be entitled to appoint one arbitrator. The two arbitrators so appointed shall elect the third arbitrator.”
An amount of Rs 2.5 crores was paid by KCP as against a total consideration of Rs 30 crores. Ninety per cent of the shares were transferred by KSL to KCP and to his nominees in the following manner:
• One share to KCP
• Ninety five per cent shares to Cheran Properties Limited, the appellant
• One share each to Cheran Enterprises Pvt.Ltd., KCP Associates Holdings P. Ltd., CG Holdings (P) Ltd. and Cheran Holdings P. Ltd.
On 17 August 2004, a letter was addressed by KCP acting as the authorized signatory of the appellant to KSL. The letter specifically contained a reference to the share purchase agreement dated 19 July 2004. The text of the letter is extracted below:
“Re: SHARE PURCHASE AGREEMENT DT.19.7.04
In pursuance of the above Agreement, you have agreed to sell and our Group Companies, by themselves and/or by their nominees have agreed to purchase shares in Sporting Pastime India Limited of a face value of Rs. 2,430 lakhs, for a sum of Rs. 243.00 lakhs.
Accordingly we send herewith seven Share Transfer Deeds duly executed by us and we request you to execute the same and lodge them with Sporting Pastime India Limited together with relevant Share Certificates for registering the transfers in the Following names :
1.
C G Holdings (P) Ltd.
2.
Cheran Holdings P Ltd.
3.
KCP Associates Holdings P. Ltd
4.
Mr K C Palanisomi
5.
Cheraan Properties Limited
6.
Cherraan Properties Limited
242,99.994
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