2009 (11) TMI 991 - SC - Indian Laws

Summary

Issues Involved:
1. Appointment of Arbitrator u/s 11(6) of the Arbitration and Conciliation Act, 1996.
2. Validity and enforceability of the Share Subscription and Shareholders Agreement (SHA) dated December 1, 2005.
3. Dispute regarding non-issuance of shares under the Scheme of Amalgamation.
4. Applicability of arbitration clause in the SHA to the respondent company.

Summary:

1. Appointment of Arbitrator u/s 11(6) of the Arbitration and Conciliation Act, 1996:
The applicant Company filed an application u/s 11(6) of the Arbitration and Conciliation Act, 1996, seeking the appointment of Mr. Justice D.R. Dhanuka as Sole Arbitrator to adjudicate disputes arising under the Share Subscription and Shareholders Agreement (SHA) dated December 1, 2005. The respondent Company opposed the application, arguing that the disputes did not arise out of the SHA and thus could not be referred to arbitration.

2. Validity and enforceability of the Share Subscription and Shareholders Agreement (SHA) dated December 1, 2005:
The applicant claimed that under the SHA, it supplied CISCO equipment worth US$ 400,000 to Exatt Technologies Private Limited (Exatt), which acknowledged the delivery. The applicant was to receive 6920 equity shares of Rs. 10/- each in Exatt, but only received a Xerox copy of the share certificate, not the original. The respondent contended that the SHA was a preliminary and tentative draft and not enforceable. The Court found that the SHA was acted upon and signed by both parties, and thus enforceable.

3. Dispute regarding non-issuance of shares under the Scheme of Amalgamation:
The applicant argued that under the Scheme of Amalgamation approved by the High Court of Bombay, it was entitled to 1,73,000 equity shares of the respondent Company, which were never issued. The respondent countered that the applicant was not listed in the register of members of Exatt and thus not entitled to shares. The Court held that the dispute regarding the non-issuance of shares under the SHA and the Scheme of Amalgamation was arbitrable.

4. Applicability of arbitration clause in the SHA to the respondent company:
The Court found that Clause 11.7 of the SHA, which contains the arbitration agreement, was applicable to the respondent Company as the successor-in-interest of Exatt. The respondent's failure to act under the agreed procedure for appointing an arbitrator justified the applicant's approach to the Court. The Court concluded that the conditions for exercising power u/s 11(6) were fulfilled.

Conclusion:
The application was allowed, and Mr. Justice D.R. Dhanuka was appointed as Sole Arbitrator to adjudicate the disputes under the SHA dated December 1, 2005. The Arbitrator was requested to enter upon the reference and determine his own fees. The Court clarified that no part of the dispute was decided on merits, leaving all questions, including arbitrability, to be decided by the Arbitrator. No order as to costs was made.