The Tax Publishers 2018 TaxPub(CL) 0630 (Del-HC)

 

Getamber Anand & Anr. v. Anil Kumar Saha

 

ARBITRATION AND CONCILIATION ACT, 1996,

--Violation of MOU--Transfer of shares contingent upon arrangement of investorsNon-realization of exit amount --Contravention of section 297 --Where it was incumbent upon petitioners to procure the transfer of shares in favour of respondent, then, the contention of petitioners that they could not be held responsible for non-realization of exit amount by the respondent was unsustainable.--Petitioners and respondent mutually decided to carry on the business of real estate development. However, disputes arose between the parties and the respondent agreed to exit from all the companies promoted and incorporated by the parties for a net realized amount of Rs. 150 crores. The parties entered into Memorandum of Understanding (MOU) wherein petitioners agreed to transfer three crore shares of concerned companies in favour of respondent. On the same day, respondent also entered into Share Purchase Agreement (SPA) with the concerned companies. It was agreed that petitioners would procure appropriate investors for purchase of such shares in order to enable the respondent to realize the exit amount of Rs. 150 crores. Petitioners arranged investors to acquire 90 lakh shares, however, they failed to arrange investors for purchasing the balance 2.1 crore shares as contemplated under MOU. Therefore, respondent invoked arbitration clause under the MOU and the award was passed in favour of respondent. Being aggrieved, petitioners filed petition under section 34 challenging the award on the ground that the petitioners were only obliged to make their best efforts for realization of exit amount, thus, they could not be held responsible for non-realization of exit amount by the respondent. Further that, SPA entered into by the respondent with the concerned companies was contrary to the provisions of section 297. Held: Since petitioners had failed to make the necessary efforts to perform their obligations under the MOU. Further, the transfer of shares was within the control of petitioners, however, they had failed to procure such transfer. Further that, respondent entered into SPA with the concerned companies in individual capacity and not in the capacity of director, therefore, the question of applicability of section 297 did not arise. Hence, the petition was dismissed.

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