WELLINGTON ASSOCIATES LIMITED Vs. KIRIT MEHTA

JUDGEMENT

(1.) This is an application filed under sub-clauses (2), (6), (10) and (12) of S. 11 of the Arbitration and Conciliation Act, 1996 (hereinafter called the Act). The application is made to the Chief Justice of India and after due nomination, has been placed before me.

(2.) The brief facts as set out in the petition, to the extent necessary for the purpose of this application, are as follows. The petitioner is a company with its registered office at Les Cascades, Port Luis, Republic of Mauritius. The respondent is the promoter and Managing Director of M/s. C.M.M. Ltd., Mumbai. The petitioner entered into two agreements both dated 15-8-1995 with the respondent under which it was stated that the petitioner had agreed to subscribe to a private placement of two lots of 85,000 equity shares (each agreement comprising one lot of 85,000 equity shares, thereby aggregating to 1,70,000 shares) of C.M.M. Ltd. The shares were having face value of Rs. 10/- per share. They were agreed to be acquired by the petitioners at a premium of Rs. 20/- per share. The cumulative value amounted to Rs. 51 lakhs (1.70 lakhs x Rs. 30 per share). The shares were to be held by the petitioner for a period of one year from the date of subscription. It was stated that the respondent agreed and undertook to compulsorily purchase back from the petitioners the said shares after the expiry of the said period in the following manner:(i) under the 1st agreement, 85,000 with an assured return at the rate of 35% p.a. and (ii) under the 2nd agreement, 85,000 with an assured return at the rate of 29% p.a. It was stated that the respondent agreed that upon default by the respondent, the respondent would be liable to pay penal interest at 3% p.a. from the date of subscription till actual date of payment. Pursuant to the above agreements, a "subscription agreement" was later entered into on 25-9-1995 between the petitioner (the subscriber), the respondent-promoter and the C.M.M. company.

(3.) On 26-9-1995, Sigma Credit and Capital Services Pvt. Ltd., wrote to the petitioner stating that it had taken up the deal of C.M.M. Ltd. and that it would ensure the petitioner that the terms of the agreement between the prospective investor (petitioner) and C.M.M. Ltd. for the subscription and assured buy-back, especially regarding the assured return and the confirmed buy-back - would be complied with by both the parties. The said company further undertook to buy-back the 85,000 NRI shares of C.M.M. Ltd., at the end of 12 months from the date of investment, at the rate of 25% p.a. in case the respondent failed to meet the commitment of buy-back. The petitioner paid Rs. 51 lakhs to the respondent on 9-10-1995 pursuant to the above agreements and 1,70,000 shares were allotted to the petitioner. By 8-10-1996, the respondent did not buy-back the shares. Nor did Sigma buy-back the shares.