Shajas Developers Pvt Ltd & Ors. vs Moniveda Consultants LLP & Ors.

JUSTICE YOGESH KHANNA, MEMBER (JUDICIAL)

This appeal is filed against an order dated 11.01.2024 passed by the Ld. NCLT, Mumbai, wherein while dismissing the Company Application under Section 8 of the Arbitration and Conciliation Act, 1996 the Ld. NCLT had observed the original petitioners/Respondents herein hold 4000 shares in the Appellant No.1 company, thereby allegedly exceeding its jurisdiction under Section 8 of the Arbitration and Conciliation Act.

It is argued the Ld. NCLT had no powers to grant reliefs sought in main company petition at this stage and that too in an application under Section 8 of the Arbitration and Conciliation Act, 1996 as in such an application the court is only to see if there exists a valid arbitration agreement between the parties and if disputes are covered therein.

Admittedly an application was moved under Section 8 of the Act by the Appellants in Company Petition No.159/2021 to refer the parties to arbitration in accordance with the Clause 9.5.2 of the Securities Purchase Agreement (SPA) dated 06.05.2016. In fact the Respondent No.1 herein had earlier filed Commercial Arbitration Petition No.8887/2021 before the Bombay High Court, prior to filing of Company Petition No.159/2021, which it subsequently withdrew.

The Respondent No.1 then by way of Company Petition No.159/2021 filed before the Ld. NCLT had sought a declaration that it is the rightful owner of 4000 shares in the appellant No.1 company as per SPA. The prayer clause (ii) of Company Petition is as under:-

It was alleged the petition was though filed by Respondent No.1 and 2 for enforcement of SPA but was in the guise of a Petition under section 241, 242, 244 and 59 of the Companies Act, 2013. It is alleged the Respondent No.1 is not a member or a shareholder of appellant company No.1 and though the transaction of purchase of shares in the appellant No.1 company was divided in two tranches which are referred to as closing dates; the first closing date was to occur within 5 business days from 06.05.2016 and the second closing date was to take place not later than 5 business days from the release of the personal guarantees by the India Infoline Limited to any of its associates including IDBI trusteeship Services Ltd. Further it is the submission till date no consideration has been received by Appellants No.2 and 3 in relation to the SPA read with the side letter along with such SPA. Even the Company Petition filed by the Respondent No.1 and 2 does not contain a whisper of an allegation that Respondent no.1 company made any payment towards the purchase of shares of the company. It was argued the Respondent No.1 company had failed to perform any of its obligations under the SPA or the Side Letter, both of which stood terminated by efflux of time as provided under clause 9.12 of the SPA, is as under:-

It was further alleged the shares certificates produced by the Appellant No.2 and 3 clearly show the shares were never transferred in the name of Respondent No.1 and it continued to remain in their names. It is also alleged the share certificates produced clearly state the fact that no transfer was recorded in the section of Memorandum of Transfers in favour of the Respondents No.1 and 2. It is alleged these shares certificates were suppressed by the Respondent No.1 and 2 before the Ld. NCLT. Even the income tax returns for the period 2017 to 2023 do not show any record pertaining to the transfer of shares in the name of Respondent No.1 and merely because the Respondent No.1 was inadvertently mentioned as a shareholder in the erroneous Form No.MGT 7 dated 27.1.2021; Board Report dated 05.09.2019 and independent auditor’s report dated 05.09.2019 it does not constitute valid compliance of Section 56 of the Companies Act, 2013

Heard.

All the above contentions show the main dispute was if the respondents are the rightful owners of 4000 shares. Various litigations are pending between the parties and the matter even went to the Hon’ble Supreme Court.

In a contempt case 02/2022 in Company appeal (AT) No.104/2021, the respondent No.1 herein had sought various reliefs including, status quo in respect of shareholding of R1 and R2 as existed on January 27, 2021, however, this Tribunal remanded the matter to the Ld. NCLT for final consideration of the issues and to pass a reasoned order as the Ld. NCLT had not commented on maintainability which in fact was a primary issue raised and also did not specify the reasons for not granting interim orders. This Tribunal further in sub para (vi) of para 17 of order dated 11.10.2022 directed the parties not to take perceptive steps in the subject matter for a period not exceeding one month from the date of the said order.

This order was challenged before Hon’ble Supreme Court in Civil Appeal No.9052-9053 of 2022 whereby vide order dated 16.12.2022 the Hon’ble Supreme Court had observed there shall be interim relief in terms of clause (vi) of para 17 of the impugned order wherein the NCLT was directed to proceed further as there being no stay in the proceedings and the parties were directed not to take perceptive steps in the subject matter.

Thus it is clear the issue of ownership of 4000 shares is pending since long and such finding in the impugned order would certainly affect the pending cases interse the parties.

We have gone through the impugned order. Language of Section 8 of the Arbitration and Conciliation Act has inherent restrictions. The Section puts a bar on the courts not to go outside the contours of Section 8 and the Court can only exercise jurisdiction to see if there is a valid clause and whether the dispute is arbitrable. Thus to give a finding at this stage to the effect R1 and R2 are owners of 4000 shares, which in fact is the main relief claimed in the Company Petition, the Ld. NCLT certainly had travelled beyond its jurisdiction. There was no occasion for Ld. NCLT to delve into the issue of ownership of 4000 shares in an application under Section 8 (Supra) and the said question would arise only when the maintainability of the main case would be decided.

Thus though the appellant forego their claim to challenge dismissal of its application under Section 8 of the Arbitration and Conciliation Act but the observations in the impugned order so far as it relate to the declaring of the ownership of 4000 shares was never warranted at this stage and is set aside. This issue needs to be decided by the Ld. Tribunal at an appropriate stage and this order be not construed as an expression/opinion on merits upon the ownership of shares which fact shall be now decided by the Ld. NCLT on facts and law.

With the above observations the appeal stands disposed off.

Pending applications also stand disposed of.