2009 Supreme(Bom) 1268

High Court of Judicature at Bombay
THE HONOURABLE MR. JUSTICE ANOOP V. MOHTA
Unity Realty and Developers Ltd.
Versus
BW Highway Star Pvt. Ltd. & Others
Arbitration Petition No.423 of 2009
Decided on : 24-09-2009

Headnote:Arbitration & Conciliation Act, 1996 - See Arbitration Act, 1940, Sections 8 and 20.

       [H. Candolkar and Sons, (M/s.) v. Union of India, 2010 (1) Goa LR 301 (Bom)(PB)].

       Sections 7 and 9 - Arbitration petition - Joint venture partners in a project - Form a company with specified Articles of association - Rights of transferee of shares of one of joint venture partners - Article of association clearly provide that transfer of share-holdings of - Joint venture partners without consent of all joint venture partners is of no effect - Directors appointed on basis of that transfer cannot act - Prayers in terms of petition allowed. - The effect of 49% holding of shares and its transfer unilaterally by respondent No. 3 to respondent No. 2 has changed the shareholding of the company substantially respondent No. 2 became the majority share holders of the company and the petitioner and respondent No. 4 became minority share-holders. The word "competitor" so defined under the Articles itself make the position clear read with the other provisions of transfer of shares that any JV Partner who interested into different and separate contract and/or want to purchase and/or CCPL wants to transfer the shares will be competitors for others. It is more clear that admittedly CCPL has not transferred the shares to its Affiliate. Respondent No. 2 is not CCPL’s affiliate. Respondent No. 2 therefore need to be treated as ’person’ for the purposes of these articles who is other than a JV Partner. Having once purchased such equity shares without prior consent of remaining JV Partners respondent No. 2 also becomes ’competitor’ and a person or third person/party and therefore transfer of such shares to such person/competitor without prior consent and permission of the other JV Partners and all subsequent action arising out of the same is in contravention of above articles and therefore in view of Articles 17 and 19 itself such transfer is null and void and not binding on the company, but the Court under Section 9 of the Act cannot declare and decide the validity of such transactions finally. It is a matter of detail inquiry and the trial before the Tribunal. The transfer of CCPL’s shares in favour of respondent No. 2 if not legal and valid, it creates no rights or interest to appoint two additional nominee Directors as is done in the present case. CCPL goes as a 49% share-holders being financer, existence clause of CCPL get invoked automatically. The transfer of shares in favour of respondent No. 2 is no way gives/confers the right KHIL to appoint or nominate more Directors on the Board of the company. It was privilege of CCPL only, but once CCPL existed in view of 49% sale of shares, there is no question of two representatives of the CCP through KHIL, being subsequent purchaser of the shares. There is no such clause or provision made in the contract/Article which empowers to nominate two Directors being subsequent purchaser of CCPL’s share. The Articles are binding on the parties Any action in breach therefore is challengeable by others. Whether in minority or in majority loses its importance. If the case is made out based upon the material, the Court/Tribunal is entitled to declare such illegal action arising out of the same null and void. If the action is ultra vires, it cannot bind even by the majority share-holders. There is no question of rectification to such ultra vires /void action. As noted the disputes and conflict so raised, arising out of the contracts between the parties in question though it relates to the affairs of the company but basically it is a dispute between the parties i.e. the partners affecting the company. Having once agreed to resolve their commercial disputes through the arbitration, they are bound by the same. Therefore, the dispute so raised cover and referable to the Arbitral Tribunal. The petitioner as well as respondent No.2 KHIL have already submitted their say and nominated/suggested their Arbitrator as per the SICA Rules. In view of above facts Sumitomo Corpn., being distinct and distinguishable is not applicable except the law. Therefore, considering the scope and purpose of the Act and even if disputes are pending between the parties and/or various aspects of the company matters need to be dealt with as per the provisions of the Companies Act like Sections 260 to 262, 284, 319, 330 including the facts of alleged resignations collusion, fraud, need detail trial. If action is within law then only question of rectification under the provision of the Companies Act and not otherwise.

       The meeting is of 21.5.2009. The resolutions were passed accordingly. The respondents have acted based upon the same and corrected the various records. The petitioner has invoked Section 9 of the Act and filed the present petition on 1.6.2009. The statement recorded on 3.6.2009 has been in force and continued since then till this date. Respondent No. 1 filed written notes on 2/11.9.2009, respondent No. 2 on 2.9.2009 and respondent No. 3 on 9.9.2009 and the petitioner on 4.9.2009. No written notes are filed by respondent No. 4. It is made clear that this order should not affect the statutory liabilities and the payment of the company and/or other dues including regular payments of the employees staff et. Any major decision if taken based upon resolutions (Exh. J) dated 21.5.2009 which is in dispute and challenged by the petitioner will be subject to the final order of the Arbitral Tribunal. The project and the day to day affairs of the company need not be stopped.