Cheran Propertiees Limited vs Kasturi And Sons Limited

Dr D Y CHANDRACHUD, J 1 The appeals in the present case arise under Section 423 of the Companies Act, 2013 against a judgment and order of the National Company Law Appellate Tribunal1 dated 18 July 2017. The NCLAT has dismissed an appeal filed against an order dated 6 March 2017 of the National Company Law Tribunal2 at its Chennai Bench.

1 NCLAT 2 NCLT 2 2 The second respondent is a company by the name of Sporting Pastime India Limited3. It was incorporated on 2 May 1994, as a fully owned subsidiary of the first respondent, Kasturi & Sons Limited4. On 19 July 2004 an agreement was entered into between KC Palanisamy5 (the third respondent), KSL (the first respondent) and SPIL and a company by the name of Hindcorp Resorts Pvt. Ltd. (Hindcorp). Under the agreement SPIL was to allot 240 lakh equity shares of Rs 10 each, fully paid up at par to KSL against the book debts due by SPIL to KSL. KSL offered to sell to KCP or his nominees 243 lakh equity shares representing 90 per cent of the total paid up share capital for a lumpsum consideration of Rs 2,31,50,000. The intention of the parties, as reflected in the agreement, was that KCP would take over the business, shares and liabilities of SPIL and would discharge the liabilities set out in Schedules 2 and 3 of the agreement which were outstanding on the date of the agreement. KCP agreed to discharge the Schedule 2 liabilities within 180 days from the date on which he took over management of SPIL. Clause 14 of the agreement was to the following effect:

There are certain outstanding guarantees issued by you, to the parties listed in Schedule 2 to the above Agreement. You are requested to keep your guarantees in good standing in accordance with the terms of the Agreement. We shall relieve your guarantees in accordance with the Agreement”.

(Iv) Directing the respondents to bear their own costs in both the claim and the counter-claim.” Under the terms of the award, a direction was issued under which KCP and SPIL were required to return documents of title and share certificates relating to 2.43 crore shares contemporaneously with KSL paying an amount of Rs 3,58,11,000 together with interest at 12% p.a. on a sum of Rs 2.55 crores. 4 KCP challenged the award of the arbitral tribunal under Section 34 of the Arbitration and Conciliation Act, 1996. The challenge was repelled by a learned Single Judge of the Madras High Court by a judgment and order dated 30 April 2015. The appeal filed by KCP was dismissed by the Division Bench of the High Court on 24 January 2017. This Court dismissed the Special Leave 6 Petition challenging the judgment of the Division Bench on 10 February 2017. The award has attained finality.

5 KSL initiated proceedings, inter alia, under Section 111 of the Companies Act, 1956 read with Sections 397, 398, 402 and 403, among other things, for rectification of the register of SPIL. NCLT allowed the petition by its order dated 6 March 2017. The decision of the NCLT was affirmed by NCLAT on 3 May 2017.

(iii) Directing the respondents to bear the costs of the proceedings in a sum of Rs. 60,15,000/- the claimants being entitled to the same in para 23.09 hereinabove and the same having been set-off in the manner stated in para 26.01 hereinabove.

32 In the present case, the arbitral award, in essence, postulates the transmission of shares from the appellant to the claimant. The only remedy available for effectuating the transmission is that which was provided in Section 111 for seeking a rectification of the register. There is, therefore, no merit in the challenge addressed by the appellant.

35 For the above reasons, we are of the view that the appeals are lacking in merit. The appeals shall stand dismissed.

...........................................CJI [DIPAK MISRA] ...........................................J [A M KHANWILKAR] ...........................................J [Dr D Y CHANDRACHUD] New Delhi;

April 24, 2018