TaxTMI 
TaxTMI 
2018 (2) TMI 26
X X X X Extracts X X X X
X X X X Extracts X X X X
....ating the rival contentions raised by the learned Advocates for the parties may be stated as under:- Date Facts 26.7.2010 Respondent no.1 company held Board Meeting and resolved to i) issue equity shares, on preferential basis, to the Respondent No.16 - Finquest and the Respondent no.17 - Minal Patel, (aggregating to 18,00,000 equity shares) and Nirma Chemicals Works Private Limited (12,00,000 equity shares). ii) to execute shareholders' agreement with Respondent no.16 and Respondent no.17 for allotment of 18,00,000 shares. 24.8.2010 The respondent company in its Extraordinary General Meeting passed special resolution with regard to allotment of 18,00,000 shares to Respondent no.16 and Respondent no.17 and 12,00,000 shares to Nirma Chemicals Works Private Limited. 7.9.2010 The Board of Directors of R-1 company resolved to allot 18,00,000 shares in favour of R-16 and R-17 pursuant to the decision of the EGM held on 24.8.2010. By the said resolution, the officials of company were authorised to execute necessary documents. 14.9.2010 A Shareholders Agreement (SHA) came to be executed between Respondent no.16 on one hand, and Respondent No.1 company a....
X X X X Extracts X X X X
X X X X Extracts X X X X
....14 of 2015 (Civil Appeal Nos. 2935 36 of 2015) before Supreme Court. 17.3.2015 The Supreme Court allowed the Civil Appeals and set aside the order dated 19.2.2015 passed by High Court. The Appeal From Order No.548 of 2014 is pending before the High Court and the Special Civil Suit no.652 of 2014 is pending before the Trial Court. 15.4.2015 PAT Financial Consultants Private Limited, issued a letter to Respondent company making disclosure about sale of subject shares as per Regulation 29(2) of the SEBI (Substantial Acquisition of Shares and Takeovers) Regulations, 1997. Petitioner nos.1 and 4 purchased shares in question from PAT Financial Consultants Private Limited, and Respondent no.16. Accordingly, petitioner no. 1 purchased 8,12,432 (4.74%) and petitioner no.4 purchased 4,42,528 (2.58%) shares from JHP Securities Private limited. The petitioner no.1 and 4 hold 7.25% shares through this process. 25.4.2015 The Respondent Company published caution Notice in the local dailies viz. 'Economic Times', English daily and 'Gujarat Samachar', Gujarati daily. 28.8.2015 The Court allowed Arbitration Petition No.16 of 2015 filed by respondent company and respo....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... objection against its jurisdiction under Section 16 of the Arbitration Act. 20.8.2016 The respondent No.18 rejected the said application under Section 16 of the Arbitration Act. 3. It appears that on 2.2.2016, the present petitioners filed Company Petition being No.8 of 2016 before the NCLT under Sections 397 and 398 read with Sections 402, 403 and 408 of the Companies Act, 1956 and under Section 210 of the Companies Act, 2013, seeking following reliefs:- a. To declare that the adjournment of 70th AGM held on 22.9.2014 after the resolution for approval of audited annual accounts for the year ended 31.3.2014 was rejected - is illegal and non est, as no business remained pending to be transacted in the said 70th AGM. b. If assuming that the 70th AGM was properly adjourned, to declare that without convening the adjourned 70th AGM and transacting the pending items in the agenda including the adoption of annual accounts for the year ended 31.3.2014 for approval by the shareholders, it was not permissible to convene the 71th Annual General Meeting for inter alia, considering the Annual Accounts for the year ended 31.3 .2015. c. To declare that the all....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... "B", "F", "G" and "H", "J" and "K" is postponed till the decision of Arbitral Tribunal. (c) petitioners are at liberty to approach the Arbitral Tribunal and contend in respect of reliefs "C", "D", "E" and "I" prayed in this petition. 5. Being aggrieved by the said order dated 13.7.2017, the petitioners have preferred the present petition, seeking following prayers:- "A. Your Lordships be pleased to issue a writ of or in the nature of mandamus or a writ of or in the nature of certiorari or any other writ, order or direction: i. Quashing and setting aside the order dated 13.7.2017 passed by the National Company Law Tribunal, Ahmedabad Bench in TP No. 117/397-398/NCLT/AHM/2016(NEW) - CP No.8/397-398/CLB/MB/2016/(OLD) with IA No.4/2017 with TP No.117-A/2016(NEW) - CA No. 33/2016(OLD) at Annexure L hereto. ii. Directing the National Company Law Tribunal, Ahmedabad Bench to hear and decide the TP No.1l7/397-398/NCLT/AHM/2016(NEW) - CP No.8/397-398/CLB/MB/2016/(OLD) finally on merits in accordance with law and independent of the arbitration proceedings pending before the respondent no. 18 or the outcome thereof. B. Your Lordships be pleased....
X X X X Extracts X X X X
X X X X Extracts X X X X
....or from assuming the jurisdiction not vested in it under any law, inasmuch as the said tribunal has no jurisdiction to adjudicate upon the subject matter, which is likely to affect the rights of third party namely the petitioner Nos.1 and 4 in respect of the shares in question. The petitioner Nos.1 and 4 were neither the parties to the shareholders' agreement containing arbitration clause sought to be relied upon, nor are the parties to the said arbitration proceedings. They being not the parties to the said proceedings could not even challenge the award, if made against the said petitioners, under Section 34 of the Arbitration Act. Under the circumstances, runs the submission of Mr.Thakore, the NCLT could not have made the decision on the reliefs claimed by the petitioners, dependent on the findings of the Arbitration proceedings. Mr.Thakore also made elaborate submissions on the merits of the case in the light of the documents on record and the provisions contained in the Companies Act to buttress his submissions that there is no provision in the Companies Act, 1956 or Companies Act, 2013, which would authorise the NCLT to stay or put in abeyance the proceedings filed under Secti....
X X X X Extracts X X X X
X X X X Extracts X X X X
....eement and in selling out the shares in question to the petitioner Nos.1 and 4 in collusion with the PAT Financial Consultants Pvt. Ltd., allegedly owned by the relative of the respondent No.17. According to them, since the dispute with regard to the shares in question and the termination of the shareholders' agreement at the instance of the respondent No.16 are pending with the Arbitral Tribunal appointed by the Court, the NCLT had rightly postponed its decision till pendency of the said arbitration proceedings. He also relied upon the decision in case of CDC Financial Services (Mauritius) Ltd. Vs. BPL Communications Ltd. and Ors., reported in (2003) 12 SCC 140 to submit that in view of the mandate contained in Section 5 of the Arbitration Act, this Court should not interfere with the arbitration proceedings. 8. At the outset, it may be stated that the Court had granted both the parties time to explore the possibility of settlement as Mr.Trivedi had fairly submitted that the respondent Nos.1 and 2 have no objection if the petitioner Nos.1 and 4 are impleaded as the party respondents in the arbitration proceedings pending before the Arbitral Tribunal. He had also suggested that ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....tion, error of law apparent on record as distinguished from a mere mistake of law, arbitrary or capricious exercise of authority or discretion, a patent error in procedure, arriving at a finding which is perverse or based on no material, or resulting in manifest injustice." 11. In case of Union of India and Ors. Vs. Major General Shri Kant Sharma (supra) also the Supreme Court, while recognizing that the power of judicial review vested in the High Court under Article 226 of the Constitution is one of the basic essential features of the Constitution and no legislation can override or curtail the jurisdiction of the High Court under Article 226 of the Constitution, summarized the ratio of earlier judgements in paragraph 36 as under:- "36. The aforesaid decisions rendered by this Court can be summarised as follows: (i) The power of judicial review vested in the High Court under Article 226 is one of the basic essential features of the Constitution and any legislation including Armed Forces Act, 2007 cannot override or curtail jurisdiction of the High Court under Article 226 of the Constitution of India. (Refer: L. Chandra and S.N. Mukherjee). (ii) The jur....
X X X X Extracts X X X X
X X X X Extracts X X X X
....itioners. Though much reliance has been placed by the learned Sr. Advocate Mr.Trivedi for the respondent No.2 on the decision of the Supreme Court in case of Thirumala Tirupati Devasthanams and Anr. Vs. Thallappaka Ananthacharyulu and Ors., reported in (2003) 8 SCC 134, in which it has been observed inter alia that the writ of prohibition should be issued only in rarest of rare cases and under the circumstances mentioned therein, this Court is of the prima facie opinion that the respondent No.18 Arbitral Tribunal would not have the jurisdiction to deal with the issue in respect of the alleged right or interest of the concerned petitioners, who are not the parties to the arbitration agreement and who are not the parties in the said proceedings pending before it. The Court, at this juncture is not required to decide as to whether the shareholders' agreement executed between the respondent Nos.1 and 2 on one hand and the respondent No.16 on the other hand, containing the arbitration clause could be construed as an agreement with the petitioners also or not, or whether the concerned petitioners should have been impleaded as the party - respondents in the said arbitration proceedings pe....