CICO Technologies Ltd. and Another vs FRC Composites Ltd. and Another

Rajiv Sahai Endlaw, J.—The plaintiffs have sued for specific performance of an agreement by the defendant No. 1 of sale of 40% shares of the plaintiff No. 2 company held by the defendant No. 1 in favour of the plaintiff No. 1 for a sale consideration of Canadian $ 25,000. The plaintiffs have claimed the alternative relief of recovery of compensation/damages with interest. The plaintiffs have also claimed the relief of permanent injunction restraining the defendants from interfering in the working of the plaintiff companies and of restraining the defendants from carrying on business in India under the name FRC Composites Ltd and from selling goods under the trade name "TAPECRETE" and/or entering into any business transactions with any other person or company with respect to the business conducted by the plaintiff No. 2.

The counsel for the defendants appeared on the very first date when the suit was listed. It appears that there were some other connected litigations also pending and the present suit was ordered to be listed in the same court where the said other litigations were pending. The defendants filed an application u/s 8 of the Arbitration and Conciliation Act, 1996. The said application remained pending for long. None appeared for the defendants on 16th January, 2007 and the application u/s 8 was dismissed in default. The defendants had not filed the written statement. The defendants were proceeded against ex parte and remain ex parte. The plaintiffs have led their ex parte evidence.

It is the uncontroverted evidence of plaintiffs that the plaintiff No. 2 company, namely, M/s FRC Composites India Pvt Ltd was set up by the plaintiff No. 1 in collaboration with the defendant No. 1, a Canadian Company. It is further the case of the plaintiffs that in accordance with the said collaboration agreement, the defendant No. 1 came to hold 40% shares of the plaintiff No. 2 company; that though the collaboration came to an end but the defendant No. 1 continued to hold the said share holding in the plaintiff No. 2 company; that ultimately defendant No. 1 offered to sell its said 40% share holding in the plaintiff No. 2 company to the plaintiff No. 1 for a consideration Canadian $25,000. Correspondence/communications of the year 1999 in this regard have been proved as Exhibit PW1/5 to Exhibit PW1/8. The plaintiff in pursuance to the said agreement is also proved to have applied for and obtained the permission of the Reserve Bank of India for remitting Canadian $25,000 to the defendant No. 1. The transaction is, however, stated to have been held up owing to the demise of Mr Ergo Karuks, President of the defendant No. 1; defendant No. 2 being daughter of the said Mr Ergo Karuks and who is stated to have come into control of the defendant No. 1 on the demise of her father is also stated to have initially promised to abide by the aforesaid agreement but is stated to have subsequently wriggled out of the same. Hence this suit.

The plaintiffs besides examining their Chairman and Managing Director Mr Amit Gupta have also examined the Deputy General Manager of the plaintiff No. 1 to prove the readiness and willingness and ability of the plaintiffs to make the payment aforesaid to the defendants. The defendants having chosen not to contest the suit, the evidence of the plaintiff remains unrebutted. Though the plaintiffs have in the plaint, besides the relief of specific performance, also claimed the relief of injunction, as aforesaid, but no evidence in that regard has been led. Considering that the plaintiff No. 2 company was a collaboration of the plaintiff No. 1 and the defendant No. 1 and further considering that the plaintiff No. 2 is otherwise a closely held company, a suit for specific performance of agreement of sale of shares thereof is found to be maintainable. The shares of the plaintiff No. 2 company are found to be such, for which there can be no substitute in money and which if not acquired by the plaintiff No. 1 can cause irreparable injury to the plaintiffs. The defendants having been proved to have agreed to sell the said shares to the plaintiff No. 1, if sell the said shares to some other person, considering the large percentage of the shares, such third person can cause irreparable injury to the management of the plaintiff No. 2.

The suit of the plaintiffs for the relief of specific performance of the agreement of sale of shares of the plaintiff No. 2 company held by the defendant No. 1 for consideration of Canadian $25000 is decreed. The suit for the other reliefs is, however, dismissed. Upon the failure of the defendants to transfer the said shares in pursuance to this decree, the plaintiff shall be entitled to have the said shares transferred through process of the court after paying Canadian $25000/- to the defendant No. 1. The decree sheet be drawn up. However, since the defendants have ultimately not contested the suit, no order as to costs.