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2012 Supreme(Bom) 1773
High Court of Judicature at Bombay
MOHIT S. SHAH & N.M. JAMDAR
Godrej Industries Limited & Others
Versus
Colin Mario Rebello & Others
Appeal No. 331 of 2012 In Arbitration Petition (L) No. 398 of 2012 With Appeal No. 332 of 2012 In Arbitration Petition No. 444 of 2012 With Appeal (Lodging) No. 497 of 2012 In Arbitration Petition No. 444 of 2012 With Appeal (Lodging) No.498 of 2012 In Arbitration Petition (Lodging) No. 398 of 2012 With Arbitration Application No. 220 of 2012 With Arbitration Application No. 219 of 2012
Decided on: 18-09-2012
For the Appellant:Anil Divan, Senior Advocate, V. Dhond Senior Advocate & Anil Jamsandekar i/b. Little & Co., Anil Divan, Senior Advocate with V. Dhond, Senior Advocate & Anil Jamsandekar i/b. Little & Co., Pravin Samdani, Senior Advocate, Snehal Shah a/w Shriraj Dhruv, Khyati Ghevaria & Manish Acharya i/by Dhru & Co., Advocates.
For the Respondents:R2 & R3, Rohit Kapadia, Senior Advocate, Pravin Samdani, Senior Advocate with Snehal Shah, Shriraj Dhruv, Khyati Pandit & Manish Acharya i/b. Dhru & Co., R6, Simil Purohit i/b. Mustafa Kachwala, R.M. Kadam, Senior Advocate with Ankita Singhania i/b. D.H. Law Associates, Saurabh Gadkari with Ranjit Shetty i/b. Juris Corp., Rohit Kapadia, Senior Advocate, Pravin Samdani, Senior Advocate with Snehal Shah, Shriraj Dhruv, Khyati Pandit & Manish Acharya i/b. Dhru & Co., R.M. Kadam, Senior Advocate with Ankita Singhania i/b. D.H. Law Associates, Saurabh Gadkari with Ranjit Shetty i/b. Juris Corp., Venkatesh Dhond, Senior advocate i/b Little & Co., Advocates.
The negative covenant in the MoU, which prohibited the parties from dealing with the shares until the Company was listed on a recognized Stock Exchange, applied to Godrej as well.
Headnote:
The Court held that the negative covenant in the MoU, which prohibited the parties from dealing with the shares until the Company was listed on a recognized Stock Exchange, applied to Godrej as well. The Court found that the petitioners had made out a strong prima facie case and that the balance of convenience was in their favor. The Court also found that there was an arbitration agreement between the Minority Shareholders interse and that the learned single Judge had rightly granted the injunction.
Fact of the Case:
The petitioners, Jer Rutton Kavasmaneck and Darius Rutton Kavasmaneck, along with Colin Rebello and Conrad Rebello, filed Arbitration Petitions against Godrej Industries and Aban and Percy Kavasmaneck. The petitioners alleged that Godrej and the Kavasmanecks had colluded to dislodge the petitioners from the company and had committed a breach of the Memorandum of Understanding (MoU) entered into between the parties. The MoU stipulated that the parties would not sell or dispose of the shares held by them till the shares of the Company are listed on any recognized Stock Exchange. Godrej opposed the petition contending that the petitioners had failed to repay the loan and had committed several breaches of the MoU. Percy and Aban Kavasmaneck contended that there was no arbitration agreement amongst the Minority shareholders and, therefore, there was no question of granting any relief under Section 9 of the Arbitration Act.
Finding of the Court:
The Court found that the negative covenant in the MoU, which prohibited the parties from dealing with the shares until the Company was listed on a recognized Stock Exchange, applied to Godrej as well. The Court also found that the petitioners had made out a strong prima facie case and that the balance of convenience was in their favor. The Court further found that there was an arbitration agreement between the Minority Shareholders interse and that the learned single Judge had rightly granted the injunction.
Issues: Whether the negative covenant in the MoU applied to Godrej; Whether the petitioners had made out a strong prima facie case; Whether the balance of convenience was in favor of the petitioners; Whether there was an arbitration agreement between the Minority Shareholders interse.
Ratio Decidendi: The Court held that the negative covenant in the MoU, which prohibited the parties from dealing with the shares until the Company was listed on a recognized Stock Exchange, applied to Godrej as well. The Court found that the petitioners had made out a strong prima facie case and that the balance of convenience was in their favor. The Court also found that there was an arbitration agreement between the Minority Shareholders interse and that the learned single Judge had rightly granted the injunction.
Final Decision: The Court dismissed all the appeals filed by Godrej, Aban and Percy Kavasmaneck. The Court also allowed the arbitration applications filed by the petitioners under Section 11 of the Arbitration Act for appointment of Arbitrator.
M. Jamdar, J.
1. These four appeals arise from the orders passed in two Arbitration Petitions, which were heard together by the learned single Judge. By the impugned order dated 11 May 2012, the learned single Judge has allowed the arbitration petitions and has restrained the appellants from in any manner dealing with certain shares of Gharda Chemicals Ltd. The issues raised in these appeals being common, they are heard together and disposed of by this common judgment.
2. Arbitration Petition No.444 of 2012 was filed by Jer Rutton Kavasmaneck and Darius Rutton Kavasmaneck. Arbitration Petition (L) No.398 of 2012 was filed by Colin Rebello. Godrej Industries and Aban and Percy Kavasmaneck were contesting respondents in the petitions. These two sets of respondents in the arbitration petitions have filed the present four appeals. Along with the appeals we have also taken up two Arbitration Applications filed by Jer and Darius Kavasmanecks, and Colin Rebello under section 11 of the Arbitration & Conciliation Act, 1996 (the Act) for appointment of arbitrator.
3. Some of the parties are related. Jer is the mother of Darius and Percy. Percy and Aban are husband and wife. Maharukh is the sister of Darius and Percy. Colin and Conrad Rebello are not part of the Kavasmaneck family and they are espousing their cause alongside Jer and Darius. When five parties viz. Jer, Darius, Percy, Aban and Maharukh are together they are referred to as 'Kavasmanecks'. Colin and Conrad Rebellos together are referred to as 'Rebellos'. When Kavasmaneks and Rebellos were together, they are referred to as 'minority shareholders'. The parties who filed the arbitration petitions are referred to as 'petitioners'. Godrej Industries is referred to as 'Godrej'. Gharda Chemicals Ltd. is referred to as 'the Company'.
4. In the dispute before us, Godrej, Aban and Percy Kavasmaneck are together on one side. Jer and Darius Kavasmaneck, Colin and Conrad Rebello together on the other Mlns11 Appeal 331/12 & connected matters. side. Maharukh Oomarigar has neither appeared nor filed a say, in the petitions.
5. The shareholding pattern of the parties is of importance. The following table will show the approximate shareholdings of the parties.
Sr.No. 1 2 3 Name Number of shares Jerand Darius Kavesmaneck 10516 Percy, Aban Kavasmaneck andMaharukhOomarigar 8115 Colin and Conrad Rebello 2640 Total : Percentage(approx) 17% 13% 4% 34% (approx)
Minority shareholders together hold about 34% equity share capital of the Company. Majority share holding is owned and controlled by Dr.Keki Hormusji Gharda. Thus, Kavasmanecks and Rebellos together constitute a sizable minority in the Company.
6. Gharda Chemicals Limited is a closely held Company belonging to Gharda and Kavasmaneck families. The Company was formed by taking over family partnership of M/s Gharda Chemicals Industries. The Company was incorporated as a Private Company, which later became a deemed public Company, by virtue of its turnover, under Section 43A of the Companies Act, 1956. On 24 August 1989, Dr. Gharda issued a circular, informing the share holders that he has decided to transfer his share in the Company to Gharda Research Foundation. It was a Company incorporated under Section 25, held and controlled by Dr Gharda. The Circular requested other shareholders to donate their shares to the foundation. This move was opposed by the Kavasmanecks. On 15 February 1990, Dr Gharda convened an Extraordinary General Meeting proposing a special resolution for deleting Article 57 of the Association of the Company which provided for pre-emptive rights in respect of the shares. The minority share holders filed Company Petition No.77 of 1990 in this Court, and this Court by its order dated 14 February 1990 restrained the Company from implementing the resolution, if any, passed in the Extraordinary General Meeting.
7. In view of these developments within the Company, the minority shareholders sought financial assistance from
