INSOTEX INDIA LTD Vs. AEG NGEF LTD

JUDGEMENT

(1.) THE petitioner is a company which purchased 13,600 shares in the respondent-company from AEG-AG Germany, a non-resident company, under an agreement between them dated September 1, 1989, for a total consideration of Rs. 13,60,000. THE petitioner-company lodged duly executed transfer instruments together with the share certificates with the respondent-company on September 4, 1989. Since the transaction involved transfer of shares by a non-resident company, the permission of the Reserve Bank of India was obtained subject to certain terms and conditions stipulated by the Reserve Bank of India. THE time granted by the Reserve Bank was extended from time to time up to September 5, 1989. According to the petitioner, they also handed over to AEG-AG Germany a cheque dated September 4, 1989, for the consideration amount and also paid the relevant tax on the same. It is the contention of the petitioner that they had completed all the formalities regarding the transfer of shares by the stipulated date, i.e., September 4, 1989. According to them, they also received a communication from the respondent-company through a copy of the letter addressed by the company to the Reserve Bank of India and endorsed to the petitioner that the transfer had been effected in the books of the company on May 17, 1991. However, immediately thereafter they were surprised to receive a copy of the letter dated July 31, 1991, addressed by the company to the Reserve Bank of India intimating that the board of directors of the respondent-company, had, in their board meeting held on July 24, 1991, rescinded the resolution passed on May 17, 1991, and consequently the petitioner's name has been removed from the register of members. THE petitioner's grievance is that no notice of the proposed removal of the name from the register of members was given to him. Under the circumstances, the petitioner has presented this petition for rectification of register of members and thereby to include the name of the petitioner as holder of 13,600 shares in the respondent-company. This petition was taken up for hearing on September 4, 1992, and at the suggestion of learned counsel for the respondent and agreed to by learned counsel for the petitioner, we issued a direction that AEG-AG Germany should also be impleaded as a party and a copy of the petition should be served on them.

(2.) At the hearing on March 26, 19-93, the petitioner filed an interlocutory application seeking directions from this Bench to restrain the company from issuing any further shares during the pendency of the petition. AEG-AG Germany also filed an application under Section 34 of the Arbitration Act read with Regulation 1-7 of the Company Law Board Regulations, 1991, praying for staying the proceedings before the Company Law Board in view of a provision for arbitration in the agreement between AEG-AG Germany and the petitioner. The application by the applicant regarding restraining the first respondent-company, viz., AEG-NGEF Limited from issuing rights shares was taken up first for hearing. It was objected to by learned counsel for the first respondent-company on the grounds that there was no basis for the application and as a matter of fact the company had no intention of issuing any rights shares. In view of the assertion by the respondent-company, the petitioner decided not to press for any orders on the application.

(3.) IT has been stated in the application that there is a serious dispute in existence between the petitioner and the applicant as to the validity of the contract entered into between them for sale/purchase of 13,600 shares in respondent No. 1 company. This dispute warrants adjudication on the validity of the contract. As per clause No. 7 of the agreement dated September 1,4, 1989, between the petitioner and the applicant, any dispute arising out of the agreement should be settled by arbitration and as such the petitioner being the aggrieved party ought to have invoked the arbitration clause for settlement of the above dispute. If he had done so, the applicant would, at all times, have been and was even now ready and willing to accept the arbitration and do everything necessary for the proper conduct of the same. IT is, therefore, necessary, as has been averred in the application, that the proceedings before this Bench should be stayed as per Section 34 of the Arbitration Act.