TaxTMI 
TaxTMI 
2012 (8) TMI 629
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....mount the Petitioners were directed to surrender their 6830 + 350 shares in the Respondent No.1 company, deposit the original share scripts with the Registrar of this Court and execute transfer deeds in favour of the Respondents 2 to 5 and their nominees. 2. The background to the above Award was that the Petitioners and Respondent Nos.2 to 5 are closely related. On 27th February 1976 a partnership firm consisting of Dr. Sharad Rohatgi, Dr. Ramesh Rohatgi, Dr. Hemant Kumar Rohatgi and Dr. Jaideep Rohatgi was formed. The object of the partnership was to acquire land for the construction of a nursing home. The capital of the partnership firm was contributed by the four partners. It was stipulated in the partnership deed that the firm could be converted into a private limited company under the name and style of 'Doctors Cooperative Private Limited'. 3. On 2nd March 1976 a Commercial Plot No. 14 in the Commercial Centre, Kailash Colony Extension, New Delhi of land ad-measuring 218.5 sq. mtr. was sold by the Delhi Development Authority ('DDA') to the aforementioned partnership firm for a total consideration of Rs. 1,85,000. For the purchase of the aforementioned plot while Dr. Shar....
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....sh Rohatgi seeking a declaration and permanent injunction. The dispute forming the subject matter of the said suit was referred to the sole arbitration of Justice Avadh Behari Rohatgi by an order dated 5th June 1991. Justice Rohatgi passed an Award on 6th May 1992. He decided that since Dr. Sharad Rohatgi and Dr. Ramesh Rohatgi contributed Rs. 50,000 each as their share capital they should be paid Rs.5 lakhs each by Dr. Hemant Kumar Rohatgi Group and Dr. Jaideep Rohatgi Group. The said Award was accepted by the parties and a sum of Rs. 10 lakhs was paid to Dr. Sharad Rohatgi and Dr. Ramesh Rohatgi. Of these Rs.10 lakhs Rs. 6,66,000 was contributed by the Dr. Jaideep Rohatgi Group and Rs. 3,33,000 was contributed by the Dr. Hemant Kumar Rohatgi Group. With the payment of the aforementioned sum of Rs.10 lakhs both Dr. Sharad Rohatgi and Dr. Ramesh Rohatgi ceased to be the shareholders of the company. Thereafter, only two main groups of shareholders i.e. the Dr. Hemant Kumar Rohatgi Group (Petitioners) and the Dr. Jaideep Rohatgi Group (Respondent Nos. 2 to 5) remained. While the former got 7180 shares the latter got 14,200 shares in the Respondent No. 1 company. 8. The Petitioners....
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....s the house tax liability in respect of the property which was the only asset of Respondent No. 1 company. Respondent No. 1 being a private company, its shares were not listed in the stock exchange. Therefore, there were no buyers for its shares. On the above basis the learned Arbitrator proceeded to determine the reasonable value that could be placed on the shares of Respondent No. 1. In the process he referred to the treatise 'Lindley on Partnership'. Reference was made to the decision of this Court in Kidarsons Industries (P.)Ltd. v. Hansa Industries (P.) Ltd. 1993 (26) DRJ 43 which was upheld by the Division Bench in Hansa Industries (P.) Ltd. v. Kidarsons Industries (P.) Ltd. 1998 (3) AD (Delhi) 27. Thus, a fair market value had to be determined. 12. Before the learned Arbitrator the Dr. Hemant Kumar Rohatgi Group submitted that in their estimation the cost of land was Rs. 1,22,36,000 (Rs. 56,000 x 218.5 sq.m) and the cost of construction was Rs. 30,86,845. On the other hand, the Dr. Jaideep Rohatgi Group estimated the cost of land as Rs. 92,86,250 (Rs. 42,500 x 218.5 sq.m.) and the cost of construction as Rs. 32,40,435. The learned Arbitrator took the average of both value....
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....ing regard to the facts and circumstances of this case." 14. Thereafter, the learned Arbitrator issued certain consequential directions. 15. Mr. Kailash Vasdev, learned Senior Counsel appearing for the Petitioners, first submitted that this Court had referred to the learned Arbitrator "all the disputes between the parties regarding the shareholding of the company". This pertained to the changed shareholding pattern of Respondent No. 1 company whereby as against the intended 50% shareholding of each group, the Dr. Jaideep Rohatgi Group ended up holding 66.41% shares whereas the Dr. Hemant Rohatgi Group held only 33.59%. However, the learned Arbitrator failed to decide this dispute. The learned Arbitrator, according to Mr. Vasdev, confined the Award only to the second aspect i.e. the consideration for which the Petitioners were required to transfer their shares to the Dr. Jaideep Rohatgi Group. 16. Secondly it was submitted by Mr. Vasdev that in the reply filed to the present petition the Respondents had stated that they had no intention of ousting the Petitioners and that the Petitioners were welcome to continue in the company as shareholders. He therefore submitted that th....
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....nterpretation placed by Mr. Vasdev on a statement made by the Respondents in their reply to the effect that the Petitioners could continue in the company. He pointed out that the Petitioners were never willing to invest any further sums to convert the building into a nursing home whereas, it was the Respondents who were interested in doing so and were in fact looking after the upkeep and maintenance of the building even now. 20. Mr. Ganju pointed out that the report of M/s. Kumar Narang & Co., Chartered Accountants was unreliable and in fact unrealistic. Referring to the decision of Kidarsons Industries (P.) Ltd. (supra), Mr. Ganju pointed out that the method adopted by the learned Arbitrator did not call for interference. Lastly, relying on the decision in Mallikarjun v. Gulbarga University [2004] 1 SCC 372, Narayan Prasad Lohia v. Nikunj Kumar Lohia [2002] 38 SCL 625 (SC) and Lucky Home Co-operative Group Housing Society Ltd. v. Shanti Developers & Promoters AIR 1996 Delhi 148 Mr. Ganju submitted that the scope of interference by this Court with the Award of the learned Arbitrator was limited. The impugned Award did not suffer from any apparent error or any patent illegality t....