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2018 (4) TMI 549 - HC - Companies LawBreach of MOU - transfer of shares of ATS Estate Pvt. Ltd. - bar on contracts - Held that:- Arbitral Tribunal noted that petitioner no.1, in his crossexamination, had stated that the shares of ATS Estate Pvt. Ltd would have been transferred to the respondent whenever a buyer for the same was found. However, the MOU did not stipulate that transfer of shares of ATS Estate Pvt. Ltd. to the respondent would be contingent upon the investor(s) being located in advance. Clause 3 mentions that the petitioners would ensure on best effort basis that the respondent realizes with the net exit amount of ₹150 crores, the obligations to procure transfer of shares of ATS Estate Pvt. Ltd. to the petitioner is unqualified. Clause 4 of the MOU further provided that in the event the respondent is unable to realize the minimum amount of ₹150 crores as further enhanced, the petitioners would also ensure that additional shares of ATS Estate Pvt. Ltd. are transferred to the petitioners. Further, in terms of Clause 6 of the MOU, in the event the petitioners were unable to locate investors before the specified date, the respondent would be entitled to sell the shares of ATS Estate Pvt. Ltd. Thus, the MOU also provided for the eventuality, where despite best efforts, the petitioners were unable to ensure realization of the exit amount on or before 31.05.2008. In view of the above, this Court finds no infirmity with the Arbitral Tribunal’s finding that the petitioners had breached the MOU. In terms of Section 297(1) of the Companies Act, 1956, a Director of a company is, inter alia, prohibited from entering into a contract with the company in which he is a director for sale, purchase or supply of any goods, materials or services except with the consent of the Board of Directors of the said company. In certain cases, prior approval of the Central Government is also required. It is, thus, apparent that there is no absolute bar on such contracts and it merely requires the consent of the Board of Directors of the company. Further, in terms of the proviso to Section 297(1) of the Companies Act, 1956, prior approval of the Central Government may also be required. MOU was between individuals and required the petitioners to procure the transfer of shares of ATS Estate Pvt. Ltd. by ATS Infrastructure Ltd. to the respondent. In the event, the respondent or the concerned companies were required to ensure any regulatory compliance, it is obvious that the petitioners were also required to ensure the same. Arbitral Tribunal also noted that ATS Infrastructure Ltd. had transferred the first tranche of 90,00,000 shares of ATS Estate Pvt. Ltd. and none of the parties had challenged the said transaction. Thus, the contention that the MOU is void or that the impugned award is unsustainable, is unmerited. Petition dismissed.
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