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TMI Blog2016 (12) TMI 1841X X X X Extracts X X X X X X X X Extracts X X X X ..... 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, t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d 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. - C.P. No. 37/241-242/NCLT/MAH/2016 - - - Dated:- 21-12-2016 - B.S.V. Prakash Kumar, Member (J) And V. Nallasenapathy, Member (T) For the Appellant : Onkar Chandurkar For the Respondent : Sanjay Dubey ORDER 1. The respondents filed CA No. 149/2016 under section 8 of Arbitration and Conciliation Act, 1996, for dismissal and reference of this CP to arbitration for the parties and the subject-matter in this CP are governed by arbitration clause 10.12 of share purchase agreement ('SPA') dated 2nd November, 2015 executed in between Poonam ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the arbitrator shall be born equally by parties to the dispute. 10.12.7 The language of the arbitration shall be English and place of arbitration shall be Mumbai. Before going into merits of this CA under section 8, the petitioner case is summarised as below: R1-company was incorporated on 14th October, 1983 for manufacturing, producing, processing, making, fabricating dealing and distributing all types of drums, barrels, containers of different sizes made from mild steel. The authorised share capital, as on the date of filing this company petition is ₹ 6,00,00,000 divided into 6,00,000 equity shares of ₹ 100 each with a paid up capital of 5.2 crore divided into 5.2 lakh equity shares of ₹ 100, wherein the petitioners and her family members held 50.95 per cent shareholding. As against this, the answering respondents held the remaining shareholding in the company. The petitioner continued as director of the company since 19th January, 2012 until 25th February, 2015. 2. According to the petitioner, R2 approached the petitioner in 1983 and then started this business together starting as directors of the company. The company has factory at Khopoli (in Mahar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... these, the petitioner submits, since the company has not made statutory filings and payments, the petitioner filed this company petition primarily asking two reliefs: (2) to direct the company to convene EGM to appoint the petitioner or her nominee as director of the company, and (2) to declare the purported sale of property belonging to R1 at Plot 209/210, Panoli Industrial Estate, GIDC, Village Sanjali, Gujarat as null and void. 4. To say that the acts of answering respondents are within the ambit of section 241 of the Companies Act, 2013, she submits that the conduct of the answering respondents is devoid of probity and fair dealing, and their act of not letting the petitioner to share the financial and business deals and selling the property of the company causing prejudice to the petitioner and the company is harsh and burdensome, therefore, the petitioner has sought the reliefs as mentioned above. 5. The 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 aforementioned. 6. Looking at the petition filed by the petitioner, R1 to R3 filed this CA No. 49/20 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... osing date. The agreement shall continue in full force and effect until terminated in writing by the purchaser, the company and the sellers by mutual consent at any time prior to the first tranche closing date. 9 . 2 The termination by seller after the first closing date and before the completion of the transaction. The agreement shall continue in full force and effect until terminated at the option of the sellers, in the event of any of the following occurring after the first closing date. 9.2.1 Occurrence of a material adverse effect after to the first closing date; or 9.2.2 Breach or default by the company and/or the purchaser in the performance of any of its/their obligation under the agreement. 9.3 Consequences upon termination post first closing date or any tranche closing date. In the event, the agreement is terminated by the sellers post of the first closing date or any tranche closing date then the sellers may, at its sole discretion purchase entire tranche sale shares transferred to the purchaser in accordance with the terms of the agreement at the minimum consideration. In addition to the above, the purchaser shall be liable to pay, on demand an amount which ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iven by her is the shares that she agreed to sell to R2 through the SPA, those shares anyway ultimately comes to R2 basing on the said SPA. 10. Basing on the above points, the respondents submit that if at all the petitioner has any kind of grievance in respect to payment, the only recourse available to her is to raise before arbitrator and envisaged in the share purchase agreement not by filing, this company petition under section 241 of the Companies Act, 2013. 11. On seeing the pleadings and submissions of either side, the points for consideration are as follows: 1. Whether the petitioner will have any role in the company after execution of the SPA dated 2nd November, 2015 2. Whether the termination of the SPA by the petitioner is valid. 3. Whether this matter is governed by section 8 of Arbitration Act. 4. Whether the dispute raised by the petitioner falls within the ambit of section 241 of the Companies Act, 2013. 12. 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he SPA. 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. 13. As stated above, the petitioner caused the termination notice issued to R2 on 4th October, 2016 primarily saying that R2 not complying with the statutory requirements, hence, the petitioner was constrained to resign from the directorship; that R2 proposed to purchase her shares on assuring that the petitioner would be adequately compensated for her efforts to introduce purchaser for scrap material to the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ld cheque power, the petitioner is answerable to many issues R2 raised in the notice dated 14th September 2016. As to financials, the petitioner raised this point only in the termination notice given by her without indicating any material adverse effect to the petitioner, therefore, the petitioner could not terminate for no material adverse effect has occurred after to the first closing date, and for no breach or default by the company or R2 in the performance of the SPA, thereby the termination by the petitioner is devoid of cause of action, Moreover, the company already sought extension on 30th September, 2016 for three months to hold AGM for the year 2015- 16. 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. 15. On the point of referring of this dispute to arbitration, the Bench observes that the subject-matter of the petition and the reliefs therein cannot be construed as conduct oppressive or prejudicial to the petitioner. It is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... use 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. It is also settled proposition of law when acts complained are indicative of oppression and prejudicial towards the persons complained of, then such acts will certainly fall within the ambit of section 241, here no fact is reflective of mala fide intention on the part of R2, therefore, the disputed issues will have to be taken before the appropriate forum, that is arbitration. 17. In view of the reason above-mentioned, 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. 18. The counsel appearing on R2 behalf relied upon Anand Gajapathi Raju v. P.V.G. Raju [2000] SCC 539 to say that when the subject-m ..... X X X X Extracts X X X X X X X X Extracts X X X X
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