PASUPATI FABRICS LTD Vs. NIRMAL

JUDGEMENT

(1.) This is a petition filed under the provisions of Section 11(6)(c) of the Arbitration & Conciliation Act, 1996 seeking appointment of an independent Arbitrator as respondent has failed to adhere to the terms of agreement and also Delhi Stock Exchange has refused to entertain arbitration proceedings. Facts as set out in the petition are as under:-

(2.) That in the year 1996 the petitioner decided to come out with a public issue of 3,53,90,000 equity shares of Rs.10/- each for cash at par aggregating Rs.35,39,00,000/-. Negotiations thereafter took place between the petitioner and the respondent at Delhi regarding the appointment of the respondent as one of the underwriters to the said issue and finally an agreement dated 11.3.1996 was executed between the petitioner and the respondent whereby the respondent agreed to underwrite 50,000 shares of Rs.10/- each at par, aggregating to Rs.500000/-.

(3.) Petition further speaks about the manner and mode of computation of the underwriters obligation provided in Clause 10 and 11 of the agreement and also procedure for effecting discharge of underwriting obligation that the public issue of the petitioner opened on 6.6.1996 and closed on 15.6.1996. The issue, however, was not fully subscribed and the parties were duly informed about the under subscription of the issue and this being so, the respondent became liable to fulfill its underwriting commitments as mentioned in Clause 1 of the agreement dated 11.3.1996. It is further stated in the petition that though, respondent was reportedly reminded to make the payment of the underwriting amount in terms of their obligation but the respondent failed to discharge their underwriting obligation and did not subscribe to the subscription of the shares agreed to be underwritten. In view of the non-compliance by the respondent of its underwriting obligations, the petitioner again sent a reminder dated 28.10.1996 requesting him to discharge their obligations but without any response and thus, according to the petitioner, the respondent committed default in their obligations thus, necessitating the petitioner to ensure minimum subscription of 90% of the issued amount and to proceed with allotment of shares and enlistment of the same with the Delhi Stock Exchange, Bombay Stock Exchange, National Stock Exchange and UP Stock Exchange and also made arrangements with certain companies under Clause 11 (d) of the Underwriting Agreement to subscribe its shares. The said companies subscribed to the said shares at the request of the petitioner and were holding the shares in trust for and on behalf of the underwriters to whom th shares were ultimately transmitted.