1 IN THE HIGH COURT OF JUDICATURE AT BOMBAY ORDINARY ORIGINAL CIVIL JURISDICTION ARBITRATION PETITON NO.337 OF 2008 Prakash Kamat ..... Petitioner. V/s Tokheim Kaizen Private Limited (formerly known as Kaizen Innovative Products Private Limited) and Ors. ...... Respondents. ----- Mr. S.U. Kamdar with Mr. P.A. Savant i/b Mr. Aditya Chitale for the Petitioner. Ms. Kumkumsen with Mehul Shah for respondent No.1. Mr. T.N. Subramaniyam i/b ANS Law for respondent No.2. Mr. D.J. Khambata i/b M/s Gautam Ankhad & S. Kalambi i/b M/s Federal and Rashmikant for respondent Nos. 3 to to 7. ---- CORAM: V.M. KANADE, J. DATE : 2nd September , 2008 P.C.: 1. Petitioner is a Director and share holder of respondent No.1 – Company, holding 12.25% shares of the 1st 2 respondent's paid-up equity share capital. Respondent No.1 is a joint venture company incorporated under the Companies Act, 1956 and is engaged in the business of designing, manufacturing and servicing dispensers for gasoline, diesel, LPG etc. The 2nd respondent is the shareholder of the 1st respondent, holding 51% of the total paid-up share capital of the 1st respondent. The 3rd respondent is also a shareholder of the 1st respondent, holding 36.75% of the total paid-up share capital of the 1st respondent. The 4th, 5th, 6th and 7th respondents were shareholders of the 1st respondent and have transferred their shares to the 3rd respondent. 2. Petitioner has filed this Petition under section 9 of the Arbitration and Conciliation Act, 1996 (hereinafter referred to as “the said Act”), seeking the following reliefs:- “(a) the Respondent Nos. 1 and 2 by themselves, their officers, servants and agents be restrained by an order and injunction of this Hon'ble Court from giving effect to, acting in furtherance of and/or pursuant to the resolutions purported to be have been passed unilaterally by the nominees of the 2nd Respondent on the board of the 3 1st Respondent inspite of the objections of the Petitioner, at the board meeting held on June 9, 2008 except those at items 7 and 8 of the minutes of the said meeting. (b) the Respondent Nos. 1 and 2 by themselves, their officers, servants and agents be restrained by an order and injunction of this Hon'ble Court from acting contrary to the provisions of the Shareholders Agreement and the Articles of Association including in the guise of rights under clause 9.8(iv) of the Shareholders Agreement and/or on the basis of unilateral decisions taken by the nominees of the 2nd Respondent on the board of the 1st Respondent; (c ) the Respondent Nos. 1, 2 and 3 by themselves, their officers, servants and agents be restrained by an order and injunction of this Hon'ble Court from giving effect to and/or acting in furtherance of and/or pursuant to the resolutions purported to be have been passed unilaterally by the nominees of the 2nd Respondent on the board of the 1st Respondent at the June 9, 2008 board meeting inspite of the objections of the Petitioner relating to any purported transfer of shares of the 3rd Respondent in the 1st Respondent to the 2nd Respondent. (d) the Respondent Nos. 1 and 2 by themselves, their officers, servants and agents be restrained by an order and injunction of this Hon'ble 4 Court from giving effect to, acting in furtherance of and/or pursuant to the resolutions purported to be have been passed at the purported EGM on July, 12, 2008. (e) for ad-interim reliefs in terms of prayers above; (f) For the costs of this Petition; and (g) For such further and other reliefs as the nature and circumstances of the case may require.” 3. Perusal of the said reliefs claimed by the petitioner clearly reveals that, in essence, the petitioner is seeking an order of injunction, restraining the respondents from giving effect to the Resolutions which were passed in the board meeting held on 9/6/2008 except those at item Nos. 7 and 8 of the minutes of the said meeting. The meeting is scheduled to be held on 5th September, 2008 The petitioner, therefore, has moved this Petition, alleging that if the ad-interim reliefs claimed by the petitioner are not granted before the meeting is held on 5th September, 2008 the Petition would become infructuous. 4. Under these circumstances, I have heard the learned 5 Counsel for the petitioner and the learned Counsel for the respondents for the purpose of finally deciding the Petition. 5. Brief facts which are relevant for the purpose of deciding this Petition are as under:- 6. The 1st respondent was incorporated on 23/3/2004 as a Private Limited Company under the Companies Act, 1956 under the name of Kaizen Innovative Products Private Limited. The 1st respondent procured various approvals from ATEX – an European Certification Agency and from Chief Controller of Explosive India for safety standards relating to products manufactured by the 1st respondent. The 1st respondent also procured orders from various reputed oil companies such as Hindustan Petroleum Corporation Limited and Essar Oil etc. The 1st respondent also had a strategic alliance arrangement with NCR – a company for automation for functioning fuel stations. 7. Thereafter, on 27/10/2005, the other respondents and the petitioner entered into Shareholders Agreement. Thereafter, the name of the 1st respondent was changed on 3/2/2006 to 6 Tokheim Kaizen Private Limited and by virtue of the said transfer the 2nd respondent became a party to the Shareholders Agreement. It is the case of the petitioner that the respondents had committed breach of the Shareholders Agreement and the Articles of Association and that the shares of respondent Nos. 3 to 7 have been transferred illegally in favour of the 1st respondent in the meetings held on 9/6/2008 and 12/7/2008. 8. The learned Counsel appearing on behalf of the Petitioner submitted that in the meeting which was to be held on 5th September, 2008 the Resolutions which were passed in the meetings dated 9/6/2008 and 12/7/2008 were going to be implemented and that these Resolutions were passed in breach of the Shareholders Agreement and the Articles of Association and, therefore, it was necessary to issue an order of injunction, restraining the respondents from giving effect to the Resolutions which were passed in the aforesaid meetings. He invited my attention to the various clauses of the Shareholders Agreement and the Articles of Association and submitted that in view of the said provisions in the Shareholders Agreement and the Articles of Association, these Resolutions could not have been passed by 7 the respondents in the said meetings. He relied upon the judgment of this Court in the case of CDS Financial Services (Mauritius)Limited v. BPL Communications Limited and Others (Bom.) reported in [2004] Company Cases [Vol.121], page 374. He also relied upon the judgment of the learned Single Judge of the Calcutta High Court in the case of Pradip Kumar Sarkar and Others v. Luxmi Tea Co. Ltd. and Others (Cal) reported in [1990] Company Cases [Vol.67], page 491. He submitted that the Civil Court has a right to issue appropriate directions in cases of oppression and mismanagement and that the jurisdiction of the Civil Court is not excluded, expressly or by necessary implication by sections 397 and 398 of the Companies Act. He also relied upon the judgment of the Company Law Board in the matter of Shri Ramesh Narang v. Narang International Hotels Private Ltd & Ors dated 10th April 2008 in CP No.47 of 2008, wherein it was held that in order to bring about the consensus among the Directors on matters which are urgent and essential, a Facilitator could be appointed to ensure that the business of the Company is carried on smoothly and, in case, compromise was not possible, he could take a final decision which would be binding on the Directors of the 8 Company. 9. The learned Counsel appearing on behalf of the respondents, on the other hand, submitted, firstly, that the present Petition under section 9 of the Act is not maintainable since the reliefs which are claimed by the petitioner are in the nature of final reliefs which could be granted in arbitration proceedings. He then secondly submitted that, in the earlier Petition, the petitioner had not specifically challenged the transfer of shares of respondent Nos. 3 to 7 and had specifically made a statement that he had no objection for transfer of these shares and, therefore, it was not open for the petitioner to now make a grievance about the transfer of these shares. Thirdly, he submitted that the financial position of the company was very weak and certain steps were being taken by respondent Nos. 1 and 2 to strengthen the financial condition of the company. However, the petitioner had not cooperated with respondent Nos. 1 and 2 and was bent upon stalling the financial recovery of the company. Fourthly, he submitted that in the earlier meeting, when the shares of respondent Nos. 3 to 7 were offered for sale, no bid was offered by the petitioner herein and, therefore, it was 9 not open now for the petitioner to make a grievance about the same. 10. In my view, at this stage, no interim relief can be granted as prayed by the petitioner herein. It is an admitted position that the matter is already referred to arbitration and arbitration proceedings are likely to be over in September, 2008. It is also an admitted position that the petitioner had not challenged the transfer of these shares in the earlier Petition which was filed by the petitioner in this Court under section 9 of the said Act. Further, from the affidavit-in-reply filed by the respondents, it is apparent that the respondents have already given effect to the Resolutions which were passed on 9/6/2008 and 12/7/2008. In the earlier Arbitration Petition No.202 of 2008, the respondent No.3 in his affidavit-in-reply, has reproduced the relevant portion of para 6(iv) of the said Petition which reads as under:- 10 “6(iv) The other Shareholders of the First Respondent decided to sell their shares to the 2nd Respondent and are not joined as party Respondents to this petition as no reliefs are sought against them and the Petitioners have no grievance against those shareholders.” 11. There cannot be any dispute regarding the ratio of the judgments on which the reliance is placed by the learned Counsel appearing on behalf of the Petitioner and it is true that Civil Court does have jurisdiction to try and decide the cases in respect of the operation and mismanagement under certain circumstances. However, the question as to whether the interim relief should be granted or not, depends upon the facts and circumstances of each case. In the present case, no prima facie case is made out by the petitioner for grant of reliefs claimed by him in this Petition. The judgments on which reliance is placed by the petitioner, therefore, are of no assistance to him. So far as the third judgment of the Company Law Board in the case of Ramesh Sarang (supra) is concerned, the said judgment is not binding on this Court. Apart from that, the question of appointment of Facilitator in this case does not arise and also is not advisable since the arbitral tribunal is seized of the matter 11 and the Resolutions which are passed in the meetings dated 9/6/2008 and 12/7/2008 depend on the final out come of the arbitral proceedings. There is, therefore, no substance in the submissions made by the learned Counsel appearing on behalf of the Petitioner. Petition is rejected. (V.M. KANADE, J.)