TMI Blog2018 (2) TMI 26X X X X Extracts X X X X X X X X Extracts X X X X ..... e concerned respondents for resolving the disputes in respect of the shares in question, and the petitioners being not the party to the arbitration proceedings pending before the respondent No.18, the NCLT could not have passed the impugned order holding that the decision on the reliefs “C” “D” E” and “I” shall depend upon the findings of arbitral tribunal regarding the restrictions contemplated on the transfer of shares in SHA and its binding nature, and that the decision on reliefs relating to “A” “B” “F” “G” “H” “J” and “K” is postponed till the decision of the arbitral tribunal. The Court is at loss to understand as to how the findings recorded in the arbitration proceedings pending between the respondents inter se could be made binding to the petitioners who are the strangers to the arbitration agreement and the proceedings. The NCLT is bound to decide the issues raised in the company petition independently and in accordance with law. By passing the impugned order, the NCLT has clearly abdicated its statutory duty cast on it and has refused to exercise the jurisdiction vested in it under the Companies Act. - Special Civil Application No. 14572 of 2017 - - - Dated:- 29-1-2018 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... equity shares by way of preferential allotment to Respondent no.16 and Respondent no.17, subject to the terms and conditions of the SHA. 17.3.2014 Respondent No.16 terminated SHA unilaterally. 18.4.2014/ 12.6.2014 Respondent Company issued notice for referring the disputes to arbitration by invoking the arbitration agreement contained in the SHA. Respondent no.16 refused to agree. Respondent nos. 1 and 2 filed Arbitration Petition No.34 of 2014 before the High Court u/s 11 of the Arbitration Act seeking appointment of arbitrator. 22.9.2014 70th AGM was convened. However, the same was adjourned sine die . 23.9.2014 Respondent Company informed the status ofthe AGM to the BSE. 10.11.2014 The Board of Directors of the respondent company considering the termination of SHA by Respondent no.16, resolved inter alia that all the rights, entitlements and privileges arising from SHA shall stand terminated and consequently, all the rights attached to 18,00,000 shares cease to exist; and that the nominees o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... HP Securities Private limited. The petitioner no.1 and 4 hold 7.25% shares through this process. 25.4.2015 The Respondent Company published caution Notice in the local dailies viz. Economic Times , English daily and Gujarat Samachar , Gujarati daily. 28.8.2015 The Court allowed Arbitration Petition No.16 of 2015 filed by respondent company and respondent No.2 for appointment of arbitrator, by appointing Mr.Justice C.K. Buch (Former Judge of High Court) as the sole arbitrator. 7.10.2015 Notice given for 71st AGM of respondent Company to be held on 10.12.2015. The notice provided for E-Voting during the period from 7.12.2015 to 9.12.2015. The said notice was received by the petitioners and the petitioners cast their votes by E-Voting. 11.12.2015 The respondent No.13, who was appointed as scrutinizer of AGM issued a report, stating inter alia that the respondent No.1 had addressed a letter dated 4.12.2015 to him informing about the termination of the SHA and cessation of voting rights of 18,00,000 (eighteen lacs) equity ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... audited annual accounts for the year ended 31.3.2014 was rejected - is illegal and non est, as no business remained pending to be transacted in the said 70th AGM. b. If assuming that the 70th AGM was properly adjourned, to declare that without convening the adjourned 70th AGM and transacting the pending items in the agenda including the adoption of annual accounts for the year ended 31.3.2014 for approval by the shareholders, it was not permissible to convene the 71th Annual General Meeting for inter alia, considering the Annual Accounts for the year ended 31.3 .2015. c. To declare that the alleged action by the Board of the Company for Cessation of voting rights in respect of 18,00,000 equity shares is against the provisions of Companies Act and Articles of Association of the Company and therefore is illegal, invalid and non est in law. d. To declare that the non consideration of votes cast by some shareholders including the Petitioner No.4 at the 71st AGM on the basis of cessation of voting rights in respect of the said shares in respect of all resolutions is invalid, illegal and non est in law and vitiates the outcome of the 71st AGM held on 10.12.2015. e. To decl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... al, Ahmedabad Bench in TP No. 117/397-398/NCLT/AHM/2016(NEW) - CP No.8/397-398/CLB/MB/2016/(OLD) with IA No.4/2017 with TP No.117-A/2016(NEW) - CA No. 33/2016(OLD) at Annexure L hereto. ii. Directing the National Company Law Tribunal, Ahmedabad Bench to hear and decide the TP No.1l7/397-398/NCLT/AHM/2016(NEW) - CP No.8/397-398/CLB/MB/2016/(OLD) finally on merits in accordance with law and independent of the arbitration proceedings pending before the respondent no. 18 or the outcome thereof. B. Your Lordships be pleased to issue a writ of or in the nature of prohibition or a writ of or in the nature of certiorari or any other writ, order or direction : i. Holding and declaring that the respondent no.18 has no jurisdiction to entertain and decide any matter or issue in regard to any right, title or interest of the petitioners herein or to grant any relief which may affect the right, title or interest of the petitioners herein. ii. Restraining the respondent no.18 from hearing or deciding any matter or passing any orders or granting any relief which may affect the right, title or interest of the petitioners herein. C. Pending admission, hearing and final di ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ubmission of Mr.Thakore, the NCLT could not have made the decision on the reliefs claimed by the petitioners, dependent on the findings of the Arbitration proceedings. Mr.Thakore also made elaborate submissions on the merits of the case in the light of the documents on record and the provisions contained in the Companies Act to buttress his submissions that there is no provision in the Companies Act, 1956 or Companies Act, 2013, which would authorise the NCLT to stay or put in abeyance the proceedings filed under Sections 397 and 398 of the Companies Act, 1956 merely on account of the pendency of the arbitration proceedings pending between the respondents inter se. Mr.Thakore has also submitted that in view of the peculiar facts and circumstances of the case, alternative remedy of filing appeal under Section 421 of the Companies Act 2013 could not be said to be an efficacious alternative remedy. He has relied upon various decisions of the Supreme Court in support of his submission that the existence of alternative remedy could not be construed as a bar against entertaining the petition under Article 226 of the Constitution of India, especially when the authority/tribunal has refu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 140 to submit that in view of the mandate contained in Section 5 of the Arbitration Act, this Court should not interfere with the arbitration proceedings. 8. At the outset, it may be stated that the Court had granted both the parties time to explore the possibility of settlement as Mr.Trivedi had fairly submitted that the respondent Nos.1 and 2 have no objection if the petitioner Nos.1 and 4 are impleaded as the party respondents in the arbitration proceedings pending before the Arbitral Tribunal. He had also suggested that the respondent Nos.1 and 2 have no objection to purchase the shares in question at the prevailing market price. However, the settlement somehow could not take place. 9. Having regard to the rival contentions raised by the learned Advocates for the parties, the Court is of the opinion that the law is quite well settled on the power of judicial review vested in High Court under Article 226 of the Constitution of India. It has been held by the Supreme Court in catena of decisions that when the statute provides for an aggrieved person a particular remedy to be sought in a particular forum, in a particular way it must be sought in that forum and in that manner ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nstitution, summarized the ratio of earlier judgements in paragraph 36 as under:- 36. The aforesaid decisions rendered by this Court can be summarised as follows: ( i) The power of judicial review vested in the High Court under Article 226 is one of the basic essential features of the Constitution and any legislation including Armed Forces Act, 2007 cannot override or curtail jurisdiction of the High Court under Article 226 of the Constitution of India. (Refer: L. Chandra and S.N. Mukherjee). ( ii) The jurisdiction of the High Court under Article 226 and this Court under Article 32 though cannot be circumscribed by the provisions of any enactment, they will certainly have due regard to the legislative intent evidenced by the provisions of the Acts and would exercise their jurisdiction consistent with the provisions of the Act. (Refer: Mafatlal Industries Ltd.). ( iii) When a statutory forum is created by law for redressal of grievances, a writ petition should not be entertained ignoring the statutory dispensation. (Refer: Nivedita Sharma). ( iv) The High Court will not entertain a petition under Article 226 of the Constitution if an effective alte ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the parties to the arbitration agreement and who are not the parties in the said proceedings pending before it. The Court, at this juncture is not required to decide as to whether the shareholders agreement executed between the respondent Nos.1 and 2 on one hand and the respondent No.16 on the other hand, containing the arbitration clause could be construed as an agreement with the petitioners also or not, or whether the concerned petitioners should have been impleaded as the party respondents in the said arbitration proceedings pending before the respondent No.18 or not. Such issues as and when arise would be or could be decided by the concerned competent Court/Forum. Suffice is to say that prima facie there being no arbitration agreement existing between the concerned petitioners and the concerned respondents for resolving the disputes in respect of the shares in question, and the petitioners being not the party to the arbitration proceedings pending before the respondent No.18, the NCLT could not have passed the impugned order holding that the decision on the reliefs C D E and I shall depend upon the findings of arbitral tribunal regarding the restrictions contemplat ..... X X X X Extracts X X X X X X X X Extracts X X X X
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