2002 (7) TMI 742 - HC - Companies Law

Issues Involved:
1. Refund or security for Rs. 25 crores under Section 9 of the Arbitration and Conciliation Act, 1996.
2. Delivery of shares by the respondents.
3. Jurisdiction of the court under the Special Court (Trial of Offences Relating to Transactions in Securities) Act, 1992.
4. Applicability of Section 42 of the Arbitration and Conciliation Act, 1996.
5. Interpretation of Section 9B of the Special Courts Act.
6. Legislative scheme and the overriding effect of the Special Courts Act.

Detailed Analysis:

1. Refund or Security for Rs. 25 Crores under Section 9 of the Arbitration and Conciliation Act, 1996:
The petitioner, Ganjam Trading Co. Pvt. Ltd., sought a direction for the respondents, Panther Investrade Ltd. (PIL) and Ketan Parekh, to refund or furnish security for Rs. 25 crores paid for the purchase of shares under an agreement dated January 19, 2001. The agreement contained an arbitration clause, and the petitioner intended to invoke it for dispute resolution while seeking interim protection.

2. Delivery of Shares by the Respondents:
The petitioner claimed that the respondents had not delivered the shares as agreed. The respondents relied on a letter dated March 29, 2001, claiming delivery of shares worth Rs. 25 crores, evidenced by a receipt with initials. However, the petitioner strongly denied this, and the court found the respondents' assertion of delivery doubtful. Consequently, the court inclined to direct PIL to secure the petitioner's claim if arbitration was initiated within a month.

3. Jurisdiction of the Court under the Special Court (Trial of Offences Relating to Transactions in Securities) Act, 1992:
Ketan Parekh, a notified party under the Special Courts Act, contended that he could not be proceeded against under the Arbitration and Conciliation Act, 1996, due to the special jurisdiction conferred by Section 9B of the Special Courts Act. The court examined the legislative scheme, noting that the Special Courts Act was enacted to address irregularities and malpractices in securities transactions, establishing a special court with exclusive jurisdiction over such matters.

4. Applicability of Section 42 of the Arbitration and Conciliation Act, 1996:
The petitioner argued that Section 42 of the Arbitration and Conciliation Act, 1996, conferred jurisdiction on the court over arbitral proceedings. Section 42 states that once an application is made in a court regarding an arbitration agreement, that court alone has jurisdiction over subsequent applications and proceedings. However, the court found that this provision did not override the special jurisdiction conferred by the Special Courts Act.

5. Interpretation of Section 9B of the Special Courts Act:
Section 9B of the Special Courts Act gives the special court jurisdiction and powers under the Arbitration Act, 1940, to decide questions related to matters or claims mentioned in Section 9A. The court held that this jurisdiction extended to the re-enacted Arbitration and Conciliation Act, 1996, due to Section 8 of the General Clauses Act, 1897, which ensures references to repealed enactments are construed as references to the re-enacted provisions unless a different intention appears.

6. Legislative Scheme and the Overriding Effect of the Special Courts Act:
The court noted that the Special Courts Act is a self-contained code with an overriding effect over other laws, as stated in Section 13. This section ensures that the provisions of the Special Courts Act prevail over any inconsistent laws. Therefore, the court concluded that it lacked jurisdiction to entertain arbitration proceedings involving a notified person under the Special Courts Act, despite the Arbitration and Conciliation Act, 1996.

Conclusion:
The petition was allowed against respondent No. 1 (PIL) to the extent of securing the petitioner's claim and dismissed against respondent No. 2 (Ketan Parekh) due to the special jurisdiction conferred by the Special Courts Act. The court clarified that this judgment would not affect the rights of other financial institutions involved.

← Previous Next →