MALAVIKA SIDDHARTHA HEGDE Vs. NARESH NAGPAL

JUDGEMENT

(1.) The present appeal under Sec. 37(2)(b) of the Arbitration and Conciliation Act, 1996 [the Act] impugns the order dtd. 17/8/2022 passed by the Arbitral Tribunal restraining the appellants from selling, alienating or transferring all their assets received by them on the demise of Late Mr. V.G. Siddhartha [VGS]. The dispute arises out of a Memorandum of Understanding [MOU] entered into between VGS and the first Respondent who was the claimant before the Arbitral Tribunal. The MOU relates to a purported decision taken by the first Respondent to invest in the equity shares of one SICAL LOGISTICS Ltd [Investee Company]. to the extent of Rs.20.00 crores. The Investee Company is undoubtedly listed on the Stock Exchange.

(2.) The MOU essentially entails the Respondent Claimant investing a sum of Rs.20.00 crores in the Investee Company and VGS promising to pay interest @ 16% p.a. accrued and compounded on a quarterly basis. In terms of the provisions contained in that MOU, the Respondent Claimant was to purchase shares equivalent to the value of Rs.20.00 crores from the open market and in consideration whereof VGS had promised a fixed return on investment at 16% p.a. VGS as security also calls the Pledger as identified in the MOU to hand over as security 2 lakh equity share of the Investee Company by way of transfer into the DEMAT account of the Security Holder. VGS further undertook to acquire all the shares held by the first respondent in the Investee Company either on his own or through his nominee after 12 months but not later than 18 months from the date of commencement. The MOU further stipulated that VGS would reacquire the shares at a price such that Respondent No. 1 is able to recoup the entire investment together with interest for the entire period calculated @ 16%. It was further provided that if there by any shortfall upon sale of all the shares that were to be acquired by Respondent No. 1, the same shall be made good by VGS within one week thereof and if Respondent No. 1 obtains any amount in excess, the same would be paid back by Respondent No. 1 to VGS.

(3.) The arbitral proceedings appear to have commenced consequent to a failure on the part of VGS to repay the amounts by 6/4/2018 and which was extendable up to 6/10/2018. On the failure of VGS to adhere to the terms of the MOU, Respondent No. 1 initiated proceedings for arbitration on coming to learn that some of the pledged shares were sold and an amount of Rs.7,38,61,589.00 recovered.