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IN THE HIGH COURT OF KARNATAKA
B. VEERAPPA, J.
Mr. Mallanagouda B. Patil – Appellant
Versus
Shri A. Srinivasan and Others – Respondents
CMP No. 153 of 2018
Decided On : 16-08-2019
Stamp Act, 1957 - Article 5(e)(i) and (ii) - Arbitration and Conciliation Act 1996 - Sections 11(5), 7(5), sub-section 6-A and (6) - sought for payment for purchase of shares at exit - Subscribing to the equity shares of the company - Shareholders Agreement - Whether there is an arbitration agreement is next question - Whether an arbitration agreement exists -nothing more, nothing less - Petitioner filed the present civil miscellaneous petition under the provisions of Section 11(5) and (6) of Arbitration and Conciliation Act 1996 (hereinafter referred to as the Act for brevity) to appoint Arbitral Tribunal to adjudicate the dispute in terms of clause 13 of the Share Subscription and Shareholders Agreement entered into between parties - Petitioner that he is a share holder and promoter of respondent No.2-Company - Respondent No.1 is presently one of directors of Company - Company has been incorporated, inter-alia, for business of manufacture and distribution of sugar and related products - Petitioner represented himself and other share holders in Company and they are collectively referred to as 'promoter group'. Respondent No.1 and his associates are collectively referred to as 'investor group' - Contended investor group represented by respondent No. 1 were desirous of investing in share capital of Company and for subscribing to the equity shares of company - Investor group represented by respondent No.1 herein and the promoter group represented by petitioner entered into a Share Subscription and Shareholders Agreement for transfer of shares from the promoter group to the investor group as per the terms and conditions of agreement – Held, Oral arguments advanced by the learned counsel for the respondents with regard to payment of stamp duty in respect of Share Subscription and Shareholders Agreement in view of the Articles 5(e)(i) and 20 of the Stamp Act, 1957 cannot be entertained, as respondent has not raised any objection on legal notice issued dated 21.2.2018 or in the statement of objections with regard to stamp duty - Court cannot venture to conclude to direct petitioner to pay the stamp duty in the absence of any objection being raised on legal notice or in statement of objections to main petition - If sufficient stamp duty is not paid, it can always be raised by respondents before learned Arbitrator and it is for learned Arbitrator to adjudicate same if it is inadmissible in evidence - Contention cannot be accepted in present civil miscellaneous petition for first time - Respondents fairly submits he has no objection to appoint a sole arbitrator, though Clause -13.2 depicts Arbitral Tribunal - parties and petitioner having complied provisions of Section 7(5) of Act by issuing legal notice, there is no impediment to appoint a sole arbitrator in view of admitted facts and fair submissions made by learned counsel for the petitioner and the learned counsel for the respondents - Civil Miscellaneous Petition is allowed
ORDER :
1. The petitioner filed the present civil miscellaneous petition under the provisions of Section 11(5) and (6) of Arbitration and Conciliation Act 1996 (hereinafter referred to as the Act for brevity) to appoint Arbitral Tribunal to adjudicate the dispute in terms of clause 13 of the Share Subscription and Shareholders Agreement dated 14.9.2010 entered into between the parties.
2. It is the case of the petitioner that he is a share holder and promoter of respondent No.2-Company. Respondent No.1 is presently one of the directors of the Company. The Company has been incorporated, inter-alia, for the business of manufacture and distribution of sugar and related products. The petitioner represented himself and other share holders in the Company and they are collectively referred to as 'promoter group'. Respondent No.1 and his associates are collectively referred to as 'investor group'.
3. It is further contended that the investor group represented by respondent No. 1 were desirous of investing in the share capital of the Company and for subscribing to the equity shares of the company. Therefore, the investor group represented by respondent No.1 herein and the promoter group represented by the petitioner entered into a Share Subscription and Shareholders Agreement (hereinafter referred to as the 'agreement') dated 14.9.2010 for transfer of shares from the promoter group to the investor group as per the terms and conditions of the agreement.
4. It is further contended that the promoter group under the said agreement dated 14.9.2010 had the option to exit by exercising 'put option' of their shares as per clause 7.2.2. which reads as under:-
| S. No. | Purchase Period | Exit Value |
| 1 | From June 30, 2012 to June 29, 2013 | Rs. 23,00,00,000/- |
| 2 | From June 30, 2013 to June 29, 2014 | Rs. 26,00,00,000/- |
| 3 | From June 30, 2014 to June 29, 2015 | Rs. 30,00,00,000/- |
| 4 | From June 30, 2015 to June 29, 2016 | Rs. 40,00,00,000/- |
| 5 | From June 30, 2016 to June 29, 2017 | Rs. 52,00,00,000/- |
| 6 | From June 30, 2017 to June 29, 2018 | Rs. 64,00,00,000/- |
| 7 | From June 30, 2018 to June 29, 2019 | Rs. 74,00,00,000/- |
| 8 | From June 30, 2019 to June 29, 2020 | Rs. 85,00,00,000/- |
5. It is further contended that respondent No.1 and his investor group as per the agreement dated 14.9.2010 had 180 days to complete the purchase of the said shares from the petitioner and the promoter group. However, since respondent No.1 and his investor group failed to respond to the letter dated 3.8.2013 sent by the petitioner, the petitioner sent a reminder letter dated 7.1.2014 to the respondents and the investor group to adhere to the terms and conditions of the agreement dated 14.9.2010 and accordingly, notified the details of the purchase of shares in view of exercising 'put option' by the petitioner, as stated supra.
6. It is the further case of the petitioner that respondent No.1 replied to the letter dated 29.1.2014 seeking for extension of time limit of 180 days for making purchase of the shares in furtherance to exercise of 'put option' made by the petitioner in view of delay in commissioning the project and lack of funds. Respondent No.1 also undertook to purchase the shares from the promoter group by 30.6.2015. The petitioner having no other alternative and after mutual discussion agreed for the requests made by respondent No.1 on behalf of the investor group vide letter dated 21.4.2014, as per th
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