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2020 Supreme(Del) 719
IN THE HIGH COURT OF DELHI AT NEW DELHI
Jyoti Singh, J.
Shon Randhawa - Appellant
Versus
Ramesh Vangal & Ors. - Respondent
Original Miscellaneous Petition No. 1255 of 2014
Decided On : 27-05-2020
Gopal Jain, Advocate, Manik Dogra, Advocate, Dhruv Pande, Advocate, Jayant Mehta, Advocate, Anand Varma, Advocate, Shwetank Singh, Advocate, Dhairya Madan, Advocate, Drishti Harpalani, Advocate
The discretion of the court in granting specific performance is not arbitrary but is guided by settled judicial principles and is capable of correction by a court of appeal.
Headnote:
ARBITRATION - SPECIFIC PERFORMANCE - SPA - SECTION 12 OF THE SPECIFIC RELIEF ACT, 1963 - DISCRETION OF THE COURT - PUBLIC POLICY OF INDIA - PATENT ILLEGALITY - JUDICIAL REVIEW - SCOPE OF - ARBITRATION AND CONCILIATION ACT, 1996 - SECTION 34.
Fact of the Case:
Petitioner and Respondent Nos. 1 and 2 entered into a Share Purchase Agreement (SPA) for the purchase of 30,000 equity shares of a company. The SPA was subject to certain conditions precedent, including the settlement of a writ petition and the company having a clear and marketable title to the plot. The conditions precedent were not met within the stipulated time period, and the Petitioner filed an application under Section 9 of the Arbitration and Conciliation Act, 1996, seeking to set aside the arbitral award dated 09.10.2014.
Finding of the Court:
The Tribunal found that the SPA, the Loan Facility Letter, the Guarantee, and the Share Pledge were part of the same transaction and that the loan amount of Rs. 3 crores was to be set off against the payment of the sale consideration. The Tribunal also found that there was a concluded contract between the parties and that the e-mail dated 21.05.2007 was a tampered document. The Tribunal further found that the claims were not barred under Section 54 of the Limitation Act and that the Contract was not Frustrated. The Tribunal also found that there was no termination of the SPA and that the Purchasers were ready and willing to perform their part of the Bargain. The Tribunal, however, declined to grant the relief of Specific Performance, holding that it was not a fit case for such relief.
Issues: 1. Whether the SPA was duly executed, concluded, valid, and enforceable? 2. Whether the SPA, the Loan Facility Letter, the Guarantee, the Share Pledge, and the Novation Agreement constituted a part of the same transaction? 3. Whether the loan amount of Rs.3.00 crores was to be set off against the payment of sale consideration in terms of Clause 4 of the Loan Facility dated 26.09.2006? 4. Whether the Claimant was at all times ready and willing to perform and did perform her part of the Share Purchase Agreement? 5. Whether the Respondent Nos. 1 to 3 committed a breach of Article 4 of the Share Purchase Agreement? 6. Whether the conditions precedent set in Article 6.1 of the Share Purchase Agreement were satisfied only on or after 24.04.2010? 7. Whether the Claimant and Respondent No.4 had the right to extend the nine months period for satisfaction of the conditions precedent? 8. Whether the Claimant is entitled to specific performance of the Share Purchase Agreement? 9. Whether the claim is barred by law of limitation or principles of delay and laches? 10.Whether the contingency stipulated in the Share Purchase Agreement has not occurred for the Respondent Nos.1 to 3 to transfer the share of Respondent No.3? 11.Whether the Share Purchase Agreement has been terminated by the Claimant? 12.Whether the Arbitral Tribunal has no jurisdiction to entertain and adjudicate the claim of the Claimant if the Share Purchase Agreement containing arbitration clause is held to be not duly executed and concluded? 13. Cost of arbitration? 14. Relief?
Ratio Decidendi: 1. The SPA was duly executed, concluded, valid, and enforceable. 2. The SPA, the Loan Facility Letter, the Guarantee, the Share Pledge, and the Novation Agreement constituted a part of the same transaction. 3. The loan amount of Rs.3.00 crores was to be set off against the payment of sale consideration in terms of Clause 4 of the Loan Facility dated 26.09.2006. 4. The Claimant was at all times ready and willing to perform and did perform her part of the Share Purchase Agreement. 5. The Respondent Nos. 1 to 3 committed a breach of Article 4 of the Share Purchase Agreement. 6. The conditions precedent set in Article 6.1 of the Share Purchase Agreement were satisfied only on or after 24.04.2010. 7. The Claimant and Respondent No.4 had the right to extend the nine months period for satisfaction of the conditions precedent. 8. The Claimant is not entitled to specific performance of the Share Purchase Agreement. 9. The claim is not barred by law of limitation or principles of delay and laches. 10.The contingency stipulated in the Share Purchase Agreement has not occurred for the Respondent Nos.1 to 3 to transfer the share of Respondent No.3. 11.The Share Purchase Agreement has not been terminated by the Claimant. 12.The Arbitral Tribunal has jurisdiction to entertain and adjudicate the claim of the Claimant if the Share Purchase Agreement containing arbitration clause is held to be not duly executed and concluded. 13. Costs of arbitration shall be borne by the Respondent Nos. 1 to 3.
Final Decision: The petition is dismissed.
JUDGMENT
Jyoti Singh, J. - Present petition has been filed under Section 34 of the Arbitration and Conciliation Act, 1996 (hereinafter referred to as the ''Act'') seeking setting aside of the Award of the Arbitral Tribunal dated 09.10.2014.
Factual narration as culled out from the Award.
2. In 2006, Respondent No. 3 (hereinafter referred to as the ''Company'') was allotted a piece of land No. 445, Phase-V, Udyog Vihar, Gurgaon, Haryana. Subsequently, the Lease was cancelled by HSIIDC and aggrieved therefrom, Company filed a Writ Petition before the High Court of Punjab and Haryana.
3. Respondent Nos. 1 and 2 (collectively referred to as ''Vendors'') approached the Petitioner and Respondent No. 4 (collectively referred to as ''Purchasers'') seeking investment in the Company and in return purchasing 50% equity shares of the Company and after negotiations, a Term Sheet dated 21.08.2006, was drawn up.
4. Vendors and Purchasers entered into a Share Purchase Agreement (hereinafter referred to as ''SPA'') dated 26.09.2006 whereby Purchasers agreed to purchase 30,000 equity shares of the Company for an aggregate consideration of Rs. 10 crores and the Agreement records that the 30,000 shares would constitute 50% of the entire issued, subscribed and voting, equity share capital of the Company, as well as the rights and obligations of the parties. On the same day, an Associate Company of the Petitioner, Classic Fincap Pvt. Ltd. advanced loan of Rs. 3 crores to Respondent No. 2 in accordance with the Secured Loan Facility Letter dated 26.09.2006 (hereinafter referred to as ''Facility Letter''). Facility Letter provided that Loan was to be available after Respondent No. 1 executed a Guarantee and Respondent No. 2 was required to pledge 30,000 shares of the Company, along with Share Certificates and blank executed Share Transfer Forms to the lender. Respondent No. 1 also executed a Guarantee, in the event of default by Respondent No. 2.
5. On 27.03.2007, Facility Agreement was novated in favour of Global Emerging Markets India, another Associate Company of the Petitioner, in which the family members are Directors.
6. Thereafter it appears that there were some settlement talks between Respondent Nos. 1 to 3 and the HSIIDC for restoration of the plot and Respondent No. 1 wrote to the Purchasers for payment of Rs. 6.5 crores, as part consideration towards purchase of Company''s shares. Correspondence was also exchanged between the parties with respect to each other''s obligations under the SPA. On 04.02.2008, Writ Petition pending before High Court of Punjab and Haryana, wherein a challenge was laid to Lease cancellation, was withdrawn.
7. On 28.02.2008, Respondent No. 1 wrote to the husband of the Petitioner that he was in a financial crisis and their entitlement may be cancelled, if they did not pay Rs. 5 crores. After some discussions, it was decided that the Project may be sold to a Third Party for Rs. 30 crores and the Vendors and Purchasers would be entitled to Rs. 8 crores and Rs. 9 crores respectively. On 01.10.2008, Respondent No. 1 informed the Petitioner that Sale to the third party was concluded, and, therefore, payments should be released by the Purchasers. Negotiations were exchanged between the parties with regard to the change of the share percentage, and simultaneously, the Company pursued its request with HSIIDC for increase in Floor Area Ratio upto 2.5. Without informing the Purchasers, the Company executed an Agreement with HSIIDC and the Vendors encouraged the Purchasers to take the refund of Rs. 3 crores, given as advance payment, along with interest.
8. On 20.04.2010, HSIIDC executed a Conveyance Deed in favour of the Company. On 04.08.2010, husband of a Petitioner sought the status of the land, whereupon Respondent No. 2 asked him to send a proposal for liquidation of the Loan. Meetings to resolve the issues having failed, Petitioner filed an Application under Section 9 of the Act before this Court and on 06.10.2010, an
