TMI Blog2011 (6) TMI 926X X X X Extracts X X X X X X X X Extracts X X X X ..... stered office is located at Solan, Himachal Pradesh and is still running its business in Kolkata at P.O. Pailan, Diamond Harbour Road, 24 Pgs(S), West Bengal. Since 1998, the company has its textile business. In 2007, the promoters namely respondent nos. 1 2 entered into one time settlement agreement with the respondent no.3 in order to augment fresh fund. Therefore, a tripartite share subscription and shareholders agreement was entered into between respondent nos.1 and 2 and the respondent no.3, GL Asia Mauritius-II Limited. It is the foreign company and the company agreed to infuse more fund. The said agreement took place on 22.03.2007 at Mittal House, 24, Alipore Road, Kolkata-700027, P.S. Alipore. At the time of agreement, the promoters i.e. respondent nos,1 2 were major shareholders of this company holding 48.9 per cent of share. From 2000-2007, the company was managed and controlled by the respondent nos.1 2 who invested a huge amount in the company. In order to infuse or augment fresh fund and to maintain stable source of income of the company, respondent nos.1 2 entered into agreement with the foreign company namely respondent no.3. According to the agreement, the p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y way of discharging the loan obligation of 130 crores which is valid up to 2014 as per tripartite agreement dated 22.03.2007. They have, however, no objection in using the proceed of right offer in the matter of payment of interest and day-to-day working of the company. If the respondent no.3 is allowed to discharge its loan obligation from the proceeds of right issue the financial condition of the company will be in a precarious position and the company will be rendered into starvation endangering the future of 10,000 employees. The tripartite agreement allowed the company to offer right issue and use the fund from right issue to pay monthly interest of loan received from HSBC, but the respondent no.3 intends to discharge its loan obligation from the proceed of the right issue. Respondent no.3 having control over the company and its board has a mala fide intention to make repayment of principal amount of loan which is not to be repaid till 2014. Hence, the respondent nos.1 2 filed a petition under Section 9 of the Arbitration and Conciliation Act praying for an order in the form of interim injunction so that respondent no.3 and the appellant are prevented from redeeming the sec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng the materials on record allowed the petition by issuing interim temporary injunction against the appellant and respondent no.3 restraining them including the directors, employees, men and agents from using the proceeds of the rights issue directly or indirectly or any manner whatsoever to discharge and/or redeem the security of the principal amount of ₹ 130 crores given/submitted by the respondent no.3 investor till the disposal/conclusion of the arbitrary proceeding. Being aggrieved by and dissatisfied with the judgement and order passed by learned Trial Court, this appeal have been preferred. Now, the only points for consideration are 1) Whether learned court below has jurisdiction to entertain the application under Section 9 of Arbitration and Conciliation Act, 1996 ? 2) Whether the respondent nos.1 2 have any prima facie case to get any order of injunction as an interim measure of protection under Section 9 of the Arbitration and Conciliation Act, 1996 ? 3) Whether learned trial court was justified in allowing the application under Section 9 of the Arbitration and Conciliation Act by way of issuing interim temporary injunction restraining respondent no. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the registered office is at Solan, Himachal Pradesh, learned Additional District Judge acted beyond its jurisdiction. Moreover, there is no cause of action or any prima facie case to file application under Section 9 of Arbitration and Conciliation Act. Following decisions have been cited from the end of appellant :- 1) S.P. Chengalvaraya Naidu (dead) by Lrs. Vs. Jagannath (dead) by Lrs. and Ors. reported in (1994)1 SCC 1. 2) Tata Finance Limited vs. Pragati Paribahan reported in 2000 (2) CHN 72. 3) Morgan Stanley Mutual Fund vs. Kartick Das with Dr. Arvind Gupta vs. Securities and Exchange Board of India and Ors. reported in (1994) 4 SCC 225. 4) J.P.Srivastava Sons (P) Ltd. and Ors. vs. Gwalior Sugar Co. Ltd. and Ors. reported in (2005) 1 SCC 172. 5) Firm Ashok Traders and Another vs. Gurumukh Das Saluja and Ors. reported in (2004) 3 SCC 155. 6) Castron Mining Limited vs. Parameshwar Kumar Agarwalla Ors. in FMAT No. 2642 of 2005 of this Court. 7) Sundaram Finance Limited vs. NEPC India Limited reported in 1999 (2) SCC 479. 8) Needle Industries (India) Limited and Ors. vs. Needle Industries Newey (India) Holdings Limited and Ors. reported in (1981) 3 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ers agreement was executed at Kolkata giving rise to the cause of action and territorial jurisdiction. Moreover, it is not at all denied that the stamp papers on which the agreement was executed were purchased in Kolkata giving rise to strong presumption of fact that the agreement was executed in Kolkata. Furthermore, the invocation of arbitration proceeding was initiated at Kolkata within the territorial jurisdiction of the learned Alipore Court. The letters issued by them on 15th May, 2010 were received by the respondent no.3 who replied to the address of respondent nos.1 2 at Kolkata. The correspondence between the parties as well as the purchase of stamp paper on which the agreement was executed clearly denote that those were done at Kolkata. Therefore, a presumption has to be drawn that a document on a stamp paper has been executed in the said place from where stamp papers have been purchased. Reliance be placed on the decision reported in 2005 (1) Arb. LR 431 (Delhi) (Ansal Buildwell Limited vs. North Eastern Indira Gandhi Institute of Health and Medical Science and Ors.). This decision relates to the point of territorial jurisdiction of application under Section 9 of Arbit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rthermore, invocation of arbitration proceeding through letter issued by respondent nos.1 2 accompanied the address at Kolkata as it appears from the written note of argument filed on behalf of respondent nos.1 2. Considering all the facts and circumstances and having regard to the decision of law cited above we are of considered view that the learned court has territorial jurisdiction to entertain the petition under Section 9 of Arbitration and Conciliation Act, 1996. Next point raised from the end of appellant is that application under Section 9 contemplates arbitral proceeding. Clause 23 of the shareholders agreement contains arbitration clause providing 30 days period of consultation before holding of arbitration. Therefore, in terms of shareholders agreement, consultation period is essential for identifying dispute between the parties. The respondent nos.1 2 issued notice inviting arbitration clause to settle the dispute by letter date 11th January, 2010. This appears from page 886 of Paper Book Volume II Part II. It is true that they should have issued such letter long before filing of the application. The contents of the said letter Annexure A dated 11th Januar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ity agreement only reveals the payment of interest. The payment of the principal amount of loan may be made at the end of 4th year up to the extent of 50 per cent. From the resolution of the board emphasizing debt obligation the motive of the respondent no.3 in discharging the security of the loan amount which is valid up to 2014 is apparent. Therefore, the apprehension of the respondent nos.1 2 in the matter of using proceeds of right issue by respondent no.3 towards the discharge of the security of the loan cannot be ruled out. The respondent nos.1 2 apprehend the use of the proceed of the right issue towards discharge of the security obligation of the principal amount by respondent no.3. This is why they approached the learned court for interim measure for the protection of property under Section 9 of the Arbitration and Conciliation Act. Respondent nos.1 2 have no objection in the matter of payment of interest on the principal amount of loan and the use of the fund of the right issue for other day-to-day business. The intention of the circular resolution dated 20th October, 2009 reveals that the purpose of the letter of offer of right issue is debt obligation inter alia d ..... X X X X Extracts X X X X X X X X Extracts X X X X
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