9911796707
TMI Blog2006 (10) TMI 232X X X X Extracts X X X X X X X X Extracts X X X X ..... statutory body set up under the Securities and Exchange Board of India Act, 1992 (hereinafter called SEBI Act, 1992) who failed to fulfil and perform its legal and statutory duties as enshrined under the SEBI Act, 1992. Mr. Rohtagi has further contended that the learned Single Judge lost sight of the fact that there was an arbitration clause between the petitioner and respondent No. 4 and the disputes arising on account of alleged breaches on the part of respondent No. 4, although having been referred to arbitration, the sale and transfer of shares by others cannot be subject-matter of such an arbitration clause. The learned counsel appearing for the appellant thus contended that the learned Single Judge ought to have exercised jurisdiction under Article 226 of the Constitution of India as the writ petition was filed by the appellant against Securities and Exchange Board of India, inter alia , praying for issuance of a direction to ensure that no transfer or variation of any shareholdings of respondent No. 3 takes place until final adjudication of the matter in arbitration. 2. We have given our careful consideration to the arguments advanced by learned counsel for the appella ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o. 3 and in the said petition the court had passed an order in respect of respondents 3 and 4 and had directed to maintain status quo . When in the absence of an arbitration clause, the appellant had chosen to make respondent No. 3 as a party, the respondent could have made SEBI also as a party for appropriate directions. It was for that court to decide at that stage whether in the absence of an arbitration clause, the transfer of shares pursuant to an agreement by respondent No. 4 in spite of a memorandum of understanding with appellant, the appellant could seek any restraint order against SEBI. As a matter of fact, by filing another writ petition, impleading SEBI as a party, the appellant has tried to initiate two Parallel proceedings for getting the same relief. 3.2 Nothing said hereinabove would constitute an expression of opinion on the merit of the controversy if agitated before the court hearing the appellant s petition under section 9 of Arbitration and Conciliation Act or appellant s taking out any proceedings before SEBI. 3.3 Therefore, based on above discussion, we do not find any merit in this appeal. The same is dismissed. APPENDIX HIGH COURT OF D ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Indo Gulf Industries Ltd. These pleas, as detailed hereinabove, have been raised categorically by the petitioner in ground A, I and M of the present petition. 4. To comprehend the controversies properly, some of the relevant facts are that the petitioner entered into a memorandum of understanding dated 14-8-2005 with respondent No. 4 in respect of shareholding and the control of respondent No. 3. Under the memorandum of understanding, the respondent No. 4 undertook to arrange acquisition and transfer of shareholding of respondent No. 3 to petitioner. Respondent No. 4 also agreed to arrange and transfer the shareholding of its associates and/or nominees which included shareholding of respondent No. 4 and his family members comprising of 17,15,620 fully paid up and 33,97,650 partly paid up share. 5. The memorandum of understanding dated 14-8-2005 also contemplated transfer of shareholding of respondent No. 4 and his other relatives and associates comprising of 4,71,547 fully paid up and 4,97,950 partly paid up shares and holding of HB Portfolio and its associates comprising of 17,60,219 fully paid up and 6,91,148 partly paid up shares. 6. Under the said understanding the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ers made by the petitioner in the petition under section 9 of Arbitration and Conciliation Act, 1996 are as under : "( i )Restraining the respondent No. 1 (respondent No. 4 in this petition), his servants, agents, successors and officers, from selling and/or entering into any agreement and/or implementing any agreement for the sale of equity shares, the details of which are given in para 8 hereinabove in favour of any other party except to the petitioner or his nominee; or ( ii )In case an agreement has already been entered into, restraining the respondent Nos. 1 and 2 (respondent Nos. 3 and 4 in this petition) both from further executing share transfer deed and/or taking any action steps or measures for securing the transfer of the equity shares, the details of which are given in para 8 hereinabove; and ( iii )Restraining the respondent No. 2 (respondent No. 3 in this petitioner) from registering transfer of shares, the details of which are given in para 8 hereinabove in the name of any other person, company, body corporate, trust or society, firm; ( iv )Any other order or orders or relief or reliefs as this Hon ble Court deem fit and proper, under the circumstances of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n of an agreement for acquisition of shares and control and management of respondent No. 3 which was to be entered after following the milestones to be achieved by the parties and acquisition of shareholding and control and management of respondent No. 3 had to commence after execution of detailed formal agreement between the parties. 13. According to respondent No. 4 after entering into a memorandum of understanding dated 14-8-2005 nothing was done by the petitioner and the letter dated 14-11-2005 stipulating that a cheque No. 855871 for Rs. 25 lakhs drawn on ICICI Bank Ltd. towards token advance is also a manipulation. According to him, the said cheque has not been encashed either by the respondent No. 4 or any of his friends and associates as contemplated under the MoU dated 14-8-2005. It was further contended that this court should not exercise its jurisdiction under Article 226 of Constitution of India since complicated disputed questions of fact are involved the petition and even the complaints with respondent No. 1 are lying pending. It was also asserted that the agreement dated 14-8-2005 is not specifically enforceable and the remedy available to the petitioner is to cl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the order dated 6-9-2006 of the learned Single judge will not be permissible and appropriate in a petition under Article 226 of the Constitution of India. 15. The memorandum of understanding executed between the petitioner and the respondent No. 4 has also been challenged on the ground that the detailed list of shareholders was not provided within one week and no agreement has been executed as contemplated under clause 3 of said memorandum of understanding. There has been no completion of milestones as contemplated under clause 7 nor there has been any mention of price at which the shares had to be purchased. 16. I have heard the counsels for the parties at length though the show-cause notice was not issued. The respondent Nos. 4 and 5 had also filed counter affidavit without any show-cause notice being issued. Considering the memorandum of understanding on the basis of which the petitioner is claiming rights it is apparent that the memorandum of understanding contemplates execution of another agreement for the purpose of acquisition of shares and control and management of respondent No. 3. The memorandum of understanding does not stipulate the price at which the shares are ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sed to the petitioner rather than seeking specific performance for transfer of shares though feeble plea has been raised for transfer of shares in the said notice also. 18. Though the memorandum of understanding does not specifically stipulate that the same is determinable by either of the parties or on the happening of any event specified therein, however, from the very nature of this memorandum of understanding it is apparent that it is a private commercial transaction and consequently the same could be terminated. If it could be terminated and ultimately if it is found that the termination was not valid by respondent No. 4 or such termination is contrary to the terms of the agreement between the petitioner or respondent No. 4 or for any other reason the appropriate remedy of the petitioner is recovery of compensation but not a claim for specific performance of memorandum of understanding which itself contemplates execution of another agreement for formal transfer of shares and taking control of respondent No. 3. Reliance can be placed on Rajasthan Breweries v. Stroh Brewery Company AIR 2000 Delhi 450 where a Division Bench had held that all revocable dues and voidable co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... inct and dependent cause of action to the petitioner to claim enforcement of those rights or protection of those rights under Article 226 of the Constitution of India. In Lotus Construction v. Government of Andhra Pradesh AIR 1997 AP 200 the Apex Court had held that the relief of specific performance on account of contractual obligation between the private parties cannot be enforced and should not be granted in exercise of jurisdiction under Article 226 of the Constitution of India. The observations of the Supreme Court are as under : "Be that as it may, the petitioner is virtually asking for the relief of specific performance of a contract and such relief cannot be granted by this court in exercise of its jurisdiction under Article 226 of the Constitution of India. Rights if any accrued in favour of the petitioners are nebulous in nature and cannot form the basis of foundation for issuing a writ in the nature of mandamus. If the petitioner is complaining breach of an agreement/contract the forum is elsewhere." 20. What is also relevant is that the memorandum of understanding was executed on 14-8-2005 and the petitioner thereafter did not do anything nor has pleaded about ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... distinction regarding regulation 10 and regulation 12 of SEBI (Substantial Acquisition of Shares and Takeovers) Regulation, 1997. According to him since the respondent No. 5 is taking control over a company, the regulation 12 is to be invoked and not regulation 10 which is only for acquisition of 15 per cent or more of the shares or voting rights of any company. However, even on this ground the petitioner is not entitled to invoke the jurisdiction of thus Court under Article 226 of the Constitution of India for implementation of rights or petitioner pursuant to order dated 6-9-2006 or any of the rights which have accrued to the petitioner under the memorandum of understanding dated 14-8-2005. Considering the pleas and contentions of the petitioner in the facts and circumstances it is not appropriate to exercise jurisdiction under Article 226 of the Constitution of India. There is no illegality, arbitrariness or procedural unreasonableness in the actions of the respondent Nos. 1 and 2. Therefore, for the reasons stated hereinabove I am not inclined to exercise the jurisdiction under Article 226 of the Constitution of India. Writ petition is, therefore, dismissed in limini . 23. ..... X X X X Extracts X X X X X X X X Extracts X X X X
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