Rajeswara Rao Vittanala, Member - (1.) The Company Application bearing C.A. No. 51/2016 in CP No. 19/241/HDB/2016 was filed by Gleneagles Development Pte. Limited ("GDPL") against Thota Gurunath Reddy and others U/s. 45 of The Arbitration and Conciliation Act, 1996, by seeking a direction to refer the parties i.e. the Respondents No. 1 to 3/Petitioners and the Petitioners/Respondent No. 2 to Arbitration in accordance with the Arbitration Agreement as set out in Share Holders Agreement ("SHA") etc.
(2.) Before adverting to averments made in the present Company Application, it is necessary to refer material assertions made in main Company petition(parties are referred to as arrayed in CP):- a) The CP No. 19 of 2016 is filed by Mr. Thota Gurunath Reddy and 2 others U/s. 241 to 244, 337 to 341 & other applicable provisions of Companies Act, 2013 by seeking several reliefs basing on the ratio decided in case of Dale and Carrington of Hon'ble Supreme Court of India. b) Continental Hospital Private Limited (R1 Company) was incorporated under the provisions of the Companies Act, 1956 on 16th January, 2007 in the name and style of "Continental Hospitals Limited" and subsequently, it was converted into Private Limited vide fresh certificate of incorporation dated 21.07.2015. Registered office of the Company is at Plot No. 3, Road No. 2, IT & Financial District, Gachibowli, Hyderabad - 500 035 in the State of Telangana. And the Authorised share capital of the R1 Company is Rs. 150,00,00,000/- divided into 15,00,00,000 equity shares of Rs. 10/- each. The paid-up-capital of the R1 Company is Rs. 139,38,27,920/- divided into 13,93,82,792 equity shares of Rs. 10/-. c) The 1st Petitioner of CP is a shareholder, Director and one of the Core Promoters of the R1 Company by holding its equity shares of 39.28% of the paid-up-capital. The 2nd Petitioner is a shareholder, Director and one of the Core Promoters of the R1 Company by holding 3 (three) equity shares of the R1 Company. The 3rd Petitioner i.e. Paradigm Corporation Private Limited is a shareholder holding equity shares of 8.60% of the paid-up-capital of the R1 Company. Thus all the petitioners together hold 47.88% of the total paid-up-capital of the R1 Company. d) The 2nd Respondent i.e. Gleneagles Development Pte Limited is a Company incorporated under the Laws of Singapore on 28.05.1951 and it is a shareholder holding 51% of the paid-up-capital of the R1 Company. e) The 1st petitioner along with relatives who are having sufficient experience in Medial filed, have established R1 Company, and in a short span of 2 years, R1 Company was granted recognition of a Gold Seal Hospital by the National Accreditation Board of Hospitals in India and Joint Commission International, which is the primary accreditation body in the health care world. f) The 2nd Respondent approached the R1 Company and expressed its willingness to invest in the R1 Company and also to purchase shares from the existing shareholders of the R1 Company. Accordingly, petitioners and respondents of CP have entered into several agreement including the Share Purchase Agreement, Share Subscription Agreement and Share Holders Agreement, all dated 18.02.2015. g) In pursuant to the above agreement, Second Respondent purchased 2,26,97,798 equity shares of Rs. 10/- each for a consideration of Rs. 41.22 (Rupees Forty One and Twenty Two paise only) per share from the petitioners Group amounting to Rs. 170 Cores. Further, the R1 Company has allotted 4, 83,87,426 equity shares of Rs. 10/- for a consideration of Rs. 38.92 (Rupees Thirty Eight and Ninety Two paise only) per share amounting to Rs. 123 Crores. So after said transaction, second Respondent holds 51 % where as the Petitioners and their associates hold 49%. h) It was under stood that a sum of Rs. 145 Crores out of Rs. 170 Crores would be used to clear various liabilities and to strengthen the operation of the hospital. It is also understood to set up an Escrow Account to which a sum of Rs. 30 Crores would be deposited out of the sale consideration of Rs. 170 Crores. i) The Petitioners alleged that 2nd Respondent, after acquiring major shareholding in R1 Company, started acting against the interest of the R1 Company using the R1 Company as a vehicle to enrich its associate Companies viz. Parkway health Care India Private Limited and Parkway Holdings Limited. The 2nd Respondent adopts a strategy to pay more Commission to their own group of Companies and used to show losses in the R1 Company so as to put pressure on petitioners to dilute their present shareholding by way of bringing more capital into R1 Company. j) The Second Respondent Company is based in Singapore, so all its affairs being conducted from there only. They used to carry the management without taking into consideration of ground realities in the Hospital, and its requirements. The Respondents are also seeking a revision of understanding made between parties and thus pressurizing petitioners to permit to release of funds from the Escrow account. k) The Respondents tried to hold meeting of the Board of Directors of the R1 Company to be held on 26.08.2016 for exploring the means and methods of raising Rs. 29 Crores towards working capital requirements for R1 Company. The petitioners objected to this proposal by pointing out various acts of mismanagement, which are contrary to the shareholders agreement. The petitioners also alleged that they have given personal guarantee for the loans availed by R1 Company. The 2nd Respondent is siphoning off funds of the R1 Company by virtue of their brute majority. l) The Respondents did not stop the acts of mismanagement and again called another Meeting of the Board of Directors to be held on 07.10.2016, which was later postponed to 25.10.2016 as the petitioners were not available at that meeting. In the meeting, issue of further shares was raised again and was opposed by the petitioners. The proposal was put to vote and the 1st and 2nd petitioner were present and voted against the proposal. The nominee Director of the 2nd Respondent was present physically and voted for the resolution. The Respondent Nos. 4, 6 & 7 were not physically present at meeting. The petitioners have further alleged that the Respondent No. 4, 6 and 7 cannot be treated as being present in the meeting and their votes cannot be counted as they did not comply with requirements of Rule 3 of the Companies (Meetings of Board and its Powers) Rules, 2014. They have conducted the said Meeting of the Board of Director on 28.10.2016 and took decisions as they have proposed, which are contrary to Share Holders Agreement. m) In pursuant to the above decision, Respondents called another meeting on 23.11.2016 for considering consequential allotment of shares under garb of rights issue. n) The Petitioners also alleges several violations with regard to all Internal auditors/SWOT Team coming in from Singapore are restricted to COO, VP Finance and Head Operations and no third person is introduced or any Head of Department opinion is sought, everything is stage managed by the Respondents. o) The Petitioners, therefore, submits that the acts of the respondents are harsh, burdensome and oppressive and situation warrants the winding up of the R1 Company and it would unfairly prejudice the Petitioners and shareholders of R1 Company, who have invested their hard earned money, the same would not be in the interest of Petitioners and the R1 Company. Therefore, petitioner has sought several alternative reliefs such as to declare the acts of Respondents No. 2 to 7 are prejudicial to the interest of the R1 Company and are oppressive against the Petitioners. The petitioners further prayed that to direct action against the Respondents for acts of misfeasance and order recovery of sum due from them and prohibit them from interfering in the day-to-day affairs and management of the R1 Company etc.
(3.) The brief contentions/averments made in the C.A. No. 51/2016, which are relevant for adjudication of the case, are as follows:- (a) The Respondent No. 1 to 3 have filed Company Petition No. 19/2016, in order to agitate issues, which arises solely under the shareholders agreement (SHA) dated 18.02.2015 (SHA) which was entered into among applicant herein, Respondent No. 4 Company, and other shareholders of Respondent No. 1 Company. (b) Article 9 of SHA set out procedure in the event of a dispute under the said agreement is as under:- (i) Notice: In the event any party is in breach of any of the terms of this Agreement, the other party(ies) may serve written notice to require the party in breach to cure such breach within thirty (30) business days of the receipt of such written notice thereof provided that time period for cure of breach shall exclude the time required by a party to obtain any consent/approval from the Governmental Authority in relation to cure of such breach. (ii) Amicable Resolution: In the case of any dispute or claim ("Dispute") of whatever nature arising under, out of or between the parties, in connection with or relating to the enforcement, interpretation or performance of the terms and conditions of this Agreement, or any provision thereof, including any purported termination or invalidity hereof, or the breach (where such breach has not been cured by the party in breach within thirty (30) business days of a written notice thereof), the parties shall attempt to first resolve such dispute through good faith negotiation and discussions between the designated shareholder and parkway. (iii) Arbitration: If the dispute is. not resolved through such discussions within thirty (30) business days of the dispute having arisen, then such dispute shall be referred to and resolved in accordance with the Singapore International Arbitration Centre Rules (SIAC Rules) for the time being in force, at the request in writing of any Party to the dispute to binding arbitration by a panel of three (3) arbitrators be nominated by the parties to the dispute in accordance with the provisions of this section 19.3. In the event a dispute arises prior to the effective date, the existing shareholder(s) and the company shall jointly nominate one (1) arbitrator, Parkway shall nominate one (1) arbitrator and the two (2) arbitrators so nominated by the parties shall appoint the third arbitrator who (a) shall be of a nationality other than Indian or Singaporean; and (b) shall be the presiding arbitrator. In the event a dispute arises after the effective date, majority shareholders and the company shall jointly nominate one (1) arbitrator, the minority shareholder(s) shall nominate one (1) arbitrator and the two (2) arbitrators so nominated by the parties shall appoint the third arbitrator who (a) shall be of a nationality other than Indian or Singaporean; and (b) shall be the presiding arbitrator. In the event the three (3) arbitrators are not appointed (in the matter contemplated above) within a period of thirty (30) days from the date on which the aforesaid written request was received by a Party to the Dispute, a panel of three (3) arbitrators shall be appointed (the Arbitration Board) in accordance with the SIAC Rules. In the event there is a conflict between the aforementioned procedure and the SIAC Rules, necessary modification (to the extent of conflict) should be made to the aforementioned procedure to ensure that to the maximum extent commercial intent of the parties is implemented. All arbitration proceedings shall be conducted in the English language and the swat of arbitration shall be Singapore and venue of arbitration shall be Singapore. The governing Law specified in Article XVIII. Judgement upon any arbitral award rendered hereunder may be entered in any court having jurisdiction, or application may be made to such court for a judicial acceptance of the award and an order of enforcement, as the case may be. (iv) Good Faith: Each party shall co-operate in good faith to expedite (to the maximum extent practicable) the conduct of any arbitral proceedings commenced under this agreement. (v) Final and Binding: Subject to applicable law, any award made by the Arbitration Board shall be final and binding on each of the parties that were parties to the dispute. (vi) Interim Relief: Nothing shall preclude a party from seeking interim or permanent equitable or injunctive relief, or both, from any court having jurisdiction to grant the same. The pursuit of equitable or injunctive relief shall not be a waiver of the duty of the parties to pursue any remedy for monetary damages through the arbitration described in this Article XIX. c) In pursuant to the above SHA, Respondent No. 1 to 3 herein by invoking said dispute resolution clause sent a notice dated 11.11.2016. In the notice, the Respondent No. l alleged certain violation of SHA and contended that that the proposed rights issue by the Respondent No. 4 is a violation of various clauses of SHA. It is also stated that within 30 days of that notice, the Applicant is called upon to meet the Petitioner of CP, so as to attempt to amicably resolve the dispute. However, without completion of the said 30 days period have not yet been expired and while the discussions were going on between the parties, the present company petitioner has been filed before this Tribunal. d) The Applicant contends that the Petitioners of CP has suppressed the said notice and also SHA. It is contended that the Petitioner of CP have themselves recognised that the dispute in question in CP is covered by contractual dispute redressal mechanism as set out in SHA. So it is contended that issue can be referred to Arbitration. The Respondent herein is estopped from filing present CP after invoking Arbitration clause as mentioned above. e) Before expiry of stipulated period of 30 days mentioned in the said notice, present CP is filed prematurely. It is alleged that the Respondent/Petitioners have acted in malafide and in a vexatious manner and sought to dress up the Petition so as to invoke the jurisdiction of this Tribunal. f) There is a valid and subsisting Arbitration Agreement between the applicant and the Respondent herein and the Arbitratory Tribunal constituted under the Arbitration Agreement will be fully competent to adjudicate upon disputes that may be referred to it by the parties. Hence, they sought a direction to refer the parties to arbitration in accordance with the Arbitration agreement as set out in SHA.;