SUDHANSU JYOTI MUKHOPADHAYA, J. This appeal has been preferred by Appellant against order dated 6th March 2017 passed by National Company Law Tribunal, Chennai Bench (hereinafter referred to as Tribunal) in a petition under Section
11 1A read with Section 397, 398, 402 and 403 of the Companies Act, 1956, directing the Appellants & Ors., to implement the Award dated 16th December 2009 in its letter and spirit by making rectification in the Register of Members of 2nd Respondent company, - M/s. Sporting Pastime India Limited (hereinafter referred to as SPIL) incorporating the name of 1st Respondent/ Petitioner - M/s. Kasturi & Sons Limited (hereinafter referred to as KSL). The Appellant has also been directed to pay the consideration as has been mentioned in the Award to the concerned person.
2. The case of the Appellant is that the 1st Respondent, KSL, had instituted a frivolous dressed-up Company Petition under Sections 111, 397, 398, 402 and 403 of the Companies Act, 1956 against 2nd Respondent, SPIL, predominantly seeking implementation of Award dated 16.12.2009 passed by the Arbitral Tribunal. It was submitted that no case of 'oppression and mismanagement' or 'rectification of register of members' has been made out. On the other hand, as apparent from paragraph 2 of the impugned order, the very purpose of filing of the petition was to get the Award implemented. Ld. Counsel for the Appellant submitted that the Tribunal is not the appropriate authority to execute an Arbitral Award or its objection which is beyond the scope of the companies act, 1956/2013 and barred by section 42 of the arbitration & conciliation act, 1996.
3. It was further contended that the Arbitral Award dated 16th December 2009 is not binding on the Appellant as the Appellant was not a party to the agreement dated 19.7.20 14 and the arbitration proceeding. The agreement dated 19.7.20 14 was reached between 1St Respondent (KSL) and 2nd Respondent (SPIL). Only the disputes between the parties can be the subject matter of arbitration and Arbitral Award proceeding and is binding only on the parties to the arbitral proceeding and is not binding on Appellant, being not a party to the arbitration proceeding. Therefore, no claim against the Appellant can be subject matter of reference before an Arbitrator, as the Arbitral Award is not binding on the Appellant.
4. Next, it was further contended that non-binding nature of the Award the Appellant envisage that he Appellant has not been directed to transfer the share certificates and therefore share certificates cannot be transferred to or handed over to any person.
5. It was further contended that even seeking rectification of Register of Members is not permissible when the shares have not been transferred by the Appellant, which are in its possession in view of Section 56 of the Companies Act, 2013.
6. According to the Appellant, it acquired 2,42,99,996 equity shares of Rs. 10 each from 1St Respondent, KSL as a separate legal independent entity, which has been mis-represented by the 1St Respondent, KSL, to suit its own case. The Appellant is an independent shareholder as shown in the Annual Returns filed by the company and does not hold shares on behalf of one Mr K.C. Palanisamy, as his nominee.
7. Ld. Counsel for the Respondents, contended that 1st Respondent (KSL) is a promoter and holding company of 2'' Respondent (SPIL) and runs National Newspapers ('The Hindu" and "The Business Line") and magazines such as "Frontline" and "Sports Star". The 1st Respondent (KSL) incorporated the 2nd Respondent (SPIL) as a 100% subsidiary company of the 1st Respondent company (KSL), established, inter-alia, for the sole purpose of establishing and running of golf course and beach resorts. For the said purpose, loans were acquired for the project by the 1st Respondent (KSL) through 2' Respondent (SPIL). Further, the case of the 1st Respondent (KSL) is that the 1st Respondent (KSL) entered into an agreement on 19.7.20 14 with 3rd Respondent, Mr. K C Palanisamy. Mr. K.C. Palanisamy agreed to acquire 2d Respondent company (SPIL) from the 1st Respondent (KSL) by agreement dated 19.7.2004. In exchange, Mr. K.0 Palanisamy undertook to repay loans incurred by 2' Respondent (SPIL). Pursuant to such agreement, 90% of the shareholding of the 2d Respondent (SPIL) was transferred to Mr. K.C. Palanisamy and the companies nominated by him, namely Cheran Group of companies, including the Appellant.
8. Pursuant to said agreement, Mr. K.C. Palanisamy, ditched the agreement and as a result the 1st Respondent (KSL) was constrained to repay the loans incurred by 2' Respondent (SPIL) for initiating arbitration proceeding against Mr. K.C. Palanisamy in terms of the arbitration clause of the agreement.
9. The 1st Respondent (KSL) filed certain interim application before the Madras High Court to safeguard and protect its interest on account of breach of agreement by Mr. K.C. Palanisamy (3rd Respondent). In one of such application No. 179 of 2005 dated 22.2.2005, the Hon'ble High Court passed an order injuncting 3rd Respondent (K.C. Palanisamy), 2nd Respondent (SPIL) and the Appellant from transferring, encumber, alienate or sell the properties of 2nd Respondent (SPIL). The Hon'ble High Court also passed an order on 1.4.2005 in Application No. 298 of 2005 appointing the Company Secretary of the 1st Respondent company (KSL) namely, Shri S. Kuppuswamy as Interim Receiver of M/s. Sporting Pastime India Limited (SPIL).
10. On 16th December 2009 the Arbitral Tribunal passed an Award holding that the Agreement dated 19.7.2004 stands restored and thereby 100% shareholding to the 1St Respondent (KSL) was restored in the 2d Respondent (M/ s. Sporting Pastime India Limited) company. In the light of the said Arbitral Award, the 2nd Respondent (SPIL) and Mr. K.C. Palanisamy as Mg. Director of the 2nd Respondent company, (SPIL), were under obligation to implement the Award and to make rectification in the Register of Members of 2nd Respondent company (SPIL) restoring 100% shareholding to 1st Respondent (KSL).
11. As the Appellant who is holding share of Mr. K. C. Palanisamy as his nominee and 2nd Respondent company (SPIL) failed to hand over the relevant documents and carry out directions as per Arbitral Award, the 1st Respondent (KSL) issued the letter dated 18th December 2009 along with photocopy of banker's cheque for Rs.3,58, 11,000/ (Rupees three crores fifty-eight lakh eleven thousand only) to Mr. K.C. Palanisamy 3rd Respondent) with a copy to the 2' Respondent (SPIL) requesting them to comply with the Award. However, no action has been taken. Thereafter the 1st Respondent (KSL) was constrained to exercise its remedy under Section 111, 397, 398, 402 and 403 of Companies Act, 1956 and filed a petition before erstwhile Company Law Board for seeking various reliefs, including cancellation and rectification of the transfer of 2,43,00,000 shares issued in the name of the Appellant, 2nd 8th and 9th Respondents in the share capital of SPIL and restoration of the name of the 1st Respondent (KSL) as holder of such shares in the share capital of 2nd Respondent company (SPIL).
12. Ld. Counsel for the Appellant relied on the decision of Hon'ble Supreme Court in "S.N. Prasad v. Monnet Finance Limited & Ors (2011)
1 SCC 320". In the said case, referring to the provisions of Arbitration & Reconciliation Act, 1996, the Hon'ble Apex Court observed - "Act makes it clear that the Arbitrator can be appointed under the Act and at the instance of a party to an 'arbitration agreement' only in respect of disputes with anot her party to the arbitration agreement'. If there is a dispute between a party to an 'arbitration agreement' with other parties to the arbitration agreement' as also non-parties to the arbitration agreement, reference to arbitration or appointment of arbitrator can be only with respect to the parties to the arbitration agreement and not the non-parties."
13. From the record we find that Mr. K.C. Palanisamy, 3rd Respondent and 2nd Respondent (SPIL), challenged the Arbitral Award in O.P. No. 98 and 272 of 2012 before the Madras High Court. Both the petitions were dismissed on merit on 30.4.2015 with adverse remarks against Mr. K.C. Palanisamy, the 3d Respondent. Against the said order, appeals were preferred by the 2nd and 3rd Respondents beyond the period of limitation. The Hon'ble Madras High Court, vide order dated 24th January 2017 in CMP Nos. 18929 and 18930 of 2016 in USA Nos. 51833 and 51848 of 2015 refused to condone the delay in preferring the appeal and both the appeals were dismissed. The 2nd and 3rd Respondents thereafter filed Special Leave Petition before the Hon'ble Supreme Court and which were also dismissed. According to Respondents, after dismissal of SLP, Arbitral Award dated 16th December 2009 has become final restoring 100% shareholding of 1St Respondent (Kasturi & Sons Limited) in the 2nd Respondent company (M/ s. Sporting Pastime India Limited).
14. The Respondents have placed reliance on decision dated 29th April 2011 passed by Madras High Court in "O.A No.138 of 2010 - Kasturi & Sons Limited v. K.C. Palanisamy". In the said case, the Hon'ble Madras High Court formulated the following questions for consideration: - (1) Whether an order of interim injunction can be passed against the responds who are not party (s) to the arbitration agreement or arbitration proceedings? (2) Whether the respondents 3 to 6 can be said to be nominees of Sri. K.C. Palanisamy so as to be bound by the Arbitral Award, for passing interim direction against them? In the said judgement at para 82, the Hon'ble High Court observed and held as follows: - "82. Clause Clause 14, the applicant recognised the right of Sri K.C. Palanisamy or his nominees to sell or transfer the holdings in M/s. Sporting Pastime India Limited to any other person of his choice provided the proposed transferee accepted the terms and conditions mentioned in the agreement for the management of M/s. Sporting Pastime India Limited and related financial aspects covered by this agreement. The applicant also agreed to indemnify against all losses, damages, claims."
15. At paragraph 141 of the said judgement, the Madras High Court noticed the Kerala High Court decision and observed: - "141. The Hon'ble Kerala High Court, further held that the application is maintainable against the party to the arbitration agreement, or at best, against any person claiming under him. The respondents 3 to 6 have purchased the shares as nominees of the 1st respondent and not as of independent right. No material other than the agreement dated 19.7.2004 has been placed on record to show that respondents
3 to 6 exercises their independent right to purchase the shares."
16. From the aforesaid finding of the Hon'ble Madras High Court which is final and binding between the parties, it is clear that 1st Respondents (KSL) recognised rights of Mr. K.C. Palanisamy or his nominees to sell or transfer the holdings of M/s. Sporting Pastime India Limited to any other person of his choice provided the proposed transferee accepted the terms and conditions mentioned in the Agreement for the management of M/s. Sporting Pastime India Limited and related financial aspects covered by the said agreement.
17. Mr K C Palanisamy and some others preferred different civil appeals before the Hon'ble Supreme Court reported as "Chandran Ratnaswamy v. K.C. Palanisamy", (2013) 6 SCC 740. The Hon'ble Supreme Court while noticed in the judgement dated 9th May 2013 and observed: "malaJide intention was attracting a civil matter arising out of company dispute having attained finality into a criminal court held that such criminal cases are not maintainable". The appeal preferred by Mr. K.C. Palanisamy was dismissed.
18. From the aforesaid facts, it is clear that the Appellant. Cheran Properties Limited, is a nominee of Mr K. C. Palanisamy and in fact holding the shares of Mr K. C. Palanisamy on his behalf. In the aforesaid background it was always open to the Tribunal to pass order under Section 111 of the Companies Act, 1956 without answering the question of 'oppression and mismanagement' even though such allegations were raised. We find no merit in this appeal. It is accordingly dismissed. However, in the facts and circumstances there shall be no order as to cost. (Mr. Balvinder Singh) (Justice S.J. Mukhopadhaya) Member (Technical) Chairperson NEW DELHI 5th JULY, 2017