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2016 (12) TMI 1841 - Tri - Companies LawTransfer of shares - Reference of CP to arbitration for the parties - dispute resolution scheme - sum and substance of the petition is that the petitioner needs reinstatement of her as director of the company and for setting aside the impugned sale of the property - role of petitioner - in the company after execution of the SPA dated 2nd November, 2015 - termination of the SPA by the petitioner - applicability of section 8 of Arbitration Act - scope of section 241 of the Companies Act, 2013 - HELD THAT - On perusal of the SPA, it is evident that there is a clause for shifting of the registered office, accordingly the registered office has been shifted, the petitioner also resigned from the company on 2nd May, 2015. There is also a clause 4.3 of the SPA with an undertaking that the petitioner is no longer associated with day-to-day business of the company, she shall not be responsible to any business decision except to the liability due to her shareholding. The petitioner is bound by the SPA reciting that she would not be associated with the day-to-day business of the company from 1st October, 2015 and she is not responsible to any of the decisions of the company since 1st October, 2015 except to the extent of the liability due to her shareholding. The respondents already tendered to make payment towards first tranche of payment and for transfer of first tranche of sale shares before first transaction closing date, i.e., 1st October, 2016, through the letter dated 26th September, 2016 along with Xerox copy of DD for an amount towards first tranche purchase on price - For the petitioner herself agreed to be away from the affairs of the company on execution of SPA, then, she could not now ask for her re-entering into the company on the ground that the SPA between them has been terminated. When the termination clause has been envisaging to be invoked on mutual consent, the petitioner would not get any occasion to terminate the agreement unless default has been committed by the respondents side as mentioned in the agreement. Therefore, it cannot be said that the petitioner could have been permitted to have participatory role in R1-company after 2nd November, 2015 basing on the shareholding of her. Accordingly, there could not be any merit in the argument that the petitioner was left in dark in relation to the affairs of the company. It appears that the petitioner felt that she is aggrieved for the Bank loan has not been paid and financial statements not provided. Other aspects of allegation of scrap agreement, they are nowhere present in the SPA, therefore, this allegation of understanding in regard to the scrap can't be said as part of the SPA, and, hence, it could not become a cause for termination of the SPA. As to payment of 37 crore, it is no where covenanted that R2 shall pay off the loan before first tranche of payment, no collateral asset security has been given by the petitioner to the loan pending, moreover some loan liability brought over along with the company remaining loan liability has been accrued upon the company in the tenure of the petitioner in the management from 19th January, 2012 - 25th May, 2015, thereafter the petitioner brother continued as nominee director until November 2015 - Since the respondents timely sent a letter for transfer of her first tranche of transfer of shares along with the photo copy of DD towards first payment of consideration, she on her own could not have terminated the agreement, therefore, termination of agreement by petitioner herself is not valid. It is a fact that the company already laden with debt burden, therefore, to clear the same, the company transferred the property to the third party long before execution of share purchase agreement, therefore, the acts of the respondents could not be considered, which the petitioner painted as conduct oppressive to the interest of the petitioner. If at all such alienation is invalid for short of any compliance, this forum is not the place to decide the issue that is on face not indicative of any conduct falling within the ambit of section 241 of the Companies Act, 2013 - If the petitioner has any grievance over proposal of transfer of shareholding basing on share purchase agreement, a remedy is carved out in the same agreement under arbitration clause, therefore, the petitioner has to go before arbitration but not come before this Bench by inventing pleadings and reliefs not supported by the facts existing in the case. Assuming the termination made by the petitioner is valid, then also she is bound by the arbitration clause because the proposition is well settled that arbitration clause will remain in force even if the agreement constituting arbitration is terminated for any reason. Therefore, the arbitration clause in such agreement is still binding upon the party. This Bench is of the view that this dispute is covered by section 8 Arbitration and Conciliation Act, 1996, because the company, the petitioner and R2 being parties to the SPA, and the issues in it being decided not falling within the ambit of section 241 of the Companies Act, 2013, it has to be construed that this dispute has to be referred to arbitration not to be decided before this Bench - Petition dismissed.
Issues Involved:
1. Role of the petitioner in the company after execution of the SPA dated 2nd November, 2015. 2. Validity of the termination of the SPA by the petitioner. 3. Applicability of section 8 of the Arbitration and Conciliation Act, 1996. 4. Whether the dispute raised by the petitioner falls within the ambit of section 241 of the Companies Act, 2013. Detailed Analysis: 1. Role of the Petitioner in the Company After Execution of the SPA: The tribunal noted that the petitioner agreed to sell her shares to R2 and undertook to dissociate from the company's day-to-day affairs post-1st October 2015. The SPA explicitly stated that the petitioner would not be responsible for any business transactions except for liabilities due to her shareholding. The respondents had tendered payment for the first tranche as per the SPA. Therefore, the petitioner could not claim a participatory role in the company's affairs post-execution of the SPA. The tribunal concluded that the petitioner’s argument of being left in the dark regarding company affairs lacked merit. 2. Validity of the Termination of the SPA by the Petitioner: The petitioner issued a termination notice on 4th October 2016, citing non-compliance with statutory requirements and non-provision of financial statements by R2. The tribunal found that the SPA did not mandate R2 to pay off the company’s loan before the first tranche payment. The petitioner’s resignation and subsequent termination of the SPA were not justified as there was no material adverse effect or breach by R2. The tribunal held that the termination by the petitioner was invalid. 3. Applicability of Section 8 of the Arbitration and Conciliation Act, 1996: The tribunal observed that the SPA contained a valid arbitration clause, which remained in force even after the termination of the agreement. The disputes raised by the petitioner, including the sale of the company’s property, were covered under the arbitration clause. The tribunal emphasized that arbitration was the appropriate forum for resolving these disputes, as mandated by section 8 of the Arbitration and Conciliation Act, 1996. 4. Whether the Dispute Falls Within the Ambit of Section 241 of the Companies Act, 2013: The tribunal determined that the petitioner’s grievances did not amount to oppression or prejudice under section 241 of the Companies Act, 2013. The petitioner voluntarily resigned and entered into the SPA, thus her non-participation in company affairs could not be construed as oppressive conduct. The sale of the company’s property was executed in furtherance of an agreement made while the petitioner was still a director, and the tribunal found no evidence of mala fide intention by R2. Consequently, the tribunal concluded that the dispute did not fall within the ambit of section 241 and should be referred to arbitration. Conclusion: The tribunal dismissed the company petition and referred the matter to arbitration, emphasizing that the disputes raised were covered by the arbitration clause in the SPA and did not constitute oppressive conduct under section 241 of the Companies Act, 2013.
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