J.M. Panchal, J. - (1.) By filing the instant application under Section 11(6) of the Arbitration and Conciliation Act, 1996, the applicant Company has prayed to appoint Mr. Justice D.R. Dhanuka (a retired Judge of Bombay High Court) as Sole Arbitrator for adjudicating the disputes that have arisen between the applicant and the respondent Company under the Share Subscription and Shareholders Agreement dated December 1, 2005.
(2.) The facts emerging from the record of the case are as under: The applicant, i.e., Geo-Group Communications, Inc., is a company incorporated under the laws of Delaware USA, having its principal office at USA. It is engaged in business of providing telecommunication services. The respondent, i.e., IOL Broadband Limited is a company registered under the Companies Act, 1956. It is a commercial Metro Ethernet Fiber Network Infrastructure company and is engaged in delivery of broadcast-quality television/video signals to subscribers over a broadband connection using the Internet Protocol (IPTV). The applicant entered into a Share Subscription and Shareholders Agreement (for short 'SHA') dated December 1, 2005 with Exatt Technologies Private Limited (for short 'Exatt'), which was a Company registered under the provisions of the Companies Act, 1956. Under the terms of SHA dated December 1, 2005 the applicant agreed to supply certain CI SC O equipments to Exatt equivalent to US$ 400,000. It was further provided under the said Agreement that in lieu of supply of CI SC O equipments, Exatt would issue equity shares to the applicant aggregating to 6.50% of the then paid-up equity share capital of Exatt on terms and conditions set out in the said Agreement. Pursuant to the said Agreement, the applicant Company supplied CI SC O equipments, delivery of which was acknowledged by Exatt without any demur as to quantity or quality. As per the arrangements made between the parties under the Agreement, the Exatt should have issued 6920 equity shares of Rs. 10/- each to the applicant. But Exatt issued a Xerox copy of Share Certificate bearing No. 6 dated December 31, 2006. The applicant has produced Xerox copy of the Share Certificate at Annexure A-2 to the application, which indicates that the applicant Company was treated as the registered holder of 6920 equity shares of Rs. 10/- each numbered from 1,00,001 to 1,07,000 both inclusive in Exatt subject to provisions of Memorandum and Articles of Association and a sum of Rs. 3,600/- had been paid up upon each of the said shares. However, the record does not indicate that original Share Certificate allotting 6920 equity shares of Rs. 10/- each was issued by Exatt to the applicant Company. Therefore, the name of the applicant Company was not mentioned as one of the members in the Register of Members maintained by Exatt. In the year 2007, Exatt entered into a Scheme of Amalgamation (for short 'Scheme') with the respondent Company, which was previously known as IOL Broadband Limited. The previously known Company was listed on the Bombay Stock Exchange and National Stock Exchange. The Scheme of Amalgamation was approved by the High Court bf Judicature at Bombay. vide order dated November 23, 2007. A copy of the Scheme is produced by the applicant at Annexure A-3 to the application. The applicant has claimed that it being a body corporate based in USA was not aware of the Amalgamation of Exatt with the respondent Company pursuant to order dated November 23, 2007 passed by the Bombay High Court. On perusal of some of the provisions of the Scheme, it becomes evident that in terms of Clause 1.8(b) all the debts, liabilities, contingent liabilities, duties, obligations and guarantees of the Exatt Company stood transferred to the respondent Company. Thus the liabilities, duties, obligations and guarantees of the Exatt Company under SHA dated December 1, 2005 stood transferred to the respondent Company and this is not disputed by the respondent Company at all. Clause 9 of the Scheme further provided that the shareholders of Exatt shall be entitled to equity shares of the respondent Company in the ratio of 25:1, i.e., 25 equity shares of face value of Rs. 10/- each of the respondent Company for every one equity share held in Exatt. The applicant claims that on the sanction of the Scheme, it was entitled to be allotted 1,73,000 equity shares of the respondent Company as a shareholder of Exatt. The Scheme came into effect on January 15, 2008. However, the shares to which the applicant was entitled to, were never issued or allotted to it by the respondent Company. The applicant Company claims that it made various requests and representations to the respondent Company but the shares of the respondent Company were never issued. What is claimed by the applicant is that after sanction of the claim the prices of the shares of the respondent Company skyrocketed on the stock exchanges and each share was quoted at Rs. 510/-. The grievance made by the applicant is that if the shares of the respondent Company had been duly issued, the applicant Company would have the opportunity to sell them at the price quoted on the stock exchanges and Would have received price of Rs. 8,82,30,000/- (1,73,000 IOL shares x Rs. 510/- per share) equivalent to US$ 21,00,715. The applicant has, therefore, asserted that the respondent Company, being the transferee/successor of Exatt is bound and liable to pay an amount of Rs. 8,82,30,000/-to the applicant Company. The record would indicate that the applicant Company called upon the respondent on various occasions to honour the terms of SHA dated December 1, 2005 as a transferee Company of Exatt. It is claimed by the applicant that various meetings took place between the representatives of the applicant and the respondent through their advocates for an amicable settlement of the disputes that have arisen under SHA dated December 1, 2005, but no amicable resolution of the disputes could be arrived at. Under the circumstances the applicant, by its advocates' notice dated July 31, 2008 invoked arbitration clause No: 11.7, contained in the SHA dated December 1, 2005, and called upon the respondent Company to resolve the disputes by concurring in the appointment of Sole Arbitrator. The applicant nominated Mr. Justice D.R. Dhanuka (retired Judge of Bombay High Court) as its Sole Arbitrator and Mumbai was specified as venue. The notice dated July 31, 2008 was duly received by the respondent Company. The advocate of the applicant Company received letters dated August 29, 2008 and September 8, 2008 respectively from the advocate of the respondent Company stating that the claims of the applicant did not arise out of the SHA dated December 1, 2005 and, therefore, disputes could not be referred to arbitrator under Clause 11.7 of the SHA. As the respondent Company disputed the claim of the applicant and did not concur in the appointment of the Sole Arbitrator, the applicant has filed the instant application and claimed the relief referred to above.
(3.) The application was placed for preliminary hearing and after hearing the learned Counsel for the applicant, notice was ordered to be issued to the respondent. On service of notice the respondent has filed reply controverting the averments made in the application. In the reply it is mentioned that the respondent Company has, in compliance with the Scheme of Amalgamation and the orders of High Courts of Bombay and Bangalore, allotted shares to those members of the Exatt whose names were borne in the register of members of the said Exatt and the question of allotting shares to the applicant did not arise at all as the name of the applicant was not borne in the register of members of the Exatt. What is stated in the reply is that the alleged claim of the applicant that the respondent Company did not allot 1,73,000 shares of the Company to the applicant pursuant to the Scheme of Amalgamation is a subject-matter of the said Scheme, which is governed by the provisions of Companies Act, 1956. According to the respondent, the claim advanced by the applicant does not arise out of the purported SHA dated December 1, 2005 and any issue arising out of the Scheme of Amalgamation has to be addressed to the Company Court that has sanctioned the Scheme of Amalgamation. It is mentioned in the reply that the arbitration clause relied upon by the applicant is one contained in the purported agreement between the applicant and the Exatt and brings within its ambit only those transactions which are contemplated in the purported agreement and as 6920 equity shares were allotted to the applicant by Exatt under SHA dated December 1, 2005, the said Agreement was fully performed by the parties and, therefore, there is no scope for any dispute under the purported agreement to be referred to Sole Arbitrator for adjudication. According to the respondent the purported Share Subscription and Shareholders Agreement dated December 1, 2005, relied upon by the applicant, is a document which is described at' the foot of the said document as "preliminary and tentative draft for discussion purpose only", but thereafter no further and/or other document was executed between the applicant and Exatt and, therefore, the said Agreement is not enforceable at law. It is also claimed by the respondent that the document dated December 1, 2005 is unstamped and is, therefore, devoid of legal effect. What is asserted in the reply is that to be eligible for allotment of shares of respondent Company as per the Scheme a member must be registered member of Exatt and his name should be entered in the register of members of Exatt, but the applicant was not a member of Exatt as borne out by the register of members of the said Company and, therefore, question of allotment of shares under the Scheme of Amalgamation does not arise at all. It is further mentioned in the reply that SHA document dated December 1, 2005 defines "closing" to mean consummation of the transactions contemplated in the agreement and "closing date" means the date on which the closing of transaction occurs, which shall be in no event later than 1st September, 2005, which is a date preceding the date of document, i.e., December 1, 2005 and is incapable of implementation as well as void. It is further mentioned in the reply that as per Article 2 of SHA subscription to shares by the applicant and issue thereof by the Exatt is subject to the applicant obtaining an approval from appropriate regulatory and statutory authorities including approval of FIPB for subscription of shares before the closing date and the applicant providing certified copy of such approval to Exatt as well as satisfying Exatt that the applicant is permitted to subscribe, but Article 2 of the SHA is not complied with by the applicant and, therefore, the instant application deserves to be dismissed.;