RAJIB SAHA Vs. PAUL BERKOWITZ

JUDGEMENT

(1.) BY this petition under Section 34 of the Arbitration and Conciliation act, 1996 (for short, "the Act"), the petitioners have filed objections against the award dated 7th November 2008 given by the learned Arbitral Tribunal in favour of respondent awarding the respondent a sum of Rs. 2,11,52,000/ -.

(2.) BRIEF facts relevant for the purpose of deciding this petition are that respondent Mr. Paul Berkowitz was working as a salaried Director with the petitioner No. 2 M/s. GISIL Designs Private Limited. Petitioner No 1 was one of the shareholders of petitioner No. 2 Company. The petitioner No. 1 entered into a share purchase agreement with respondent on 8th August 2006 and petitioner No. 2 was a party to the agreement. In terms of this share purchase agreement, petitioner No. 1 had agreed for sale of his 16,27,043 shares of petitioner No. 2 company at a rate of Rs. 2. 90 per share. The face value of a share was Rs. (1) one. It was agreed that total consideration of Rs. 47, 18,424. 70 shall be paid by respondent through foreign remittance to fulfill his part of obligation and on receipt of this remittance in US dollars from the bank abroad into the designated bank account of petitioner No. 1, the petitioner No. 1 shall obtain all approvals that may be required from government authorities for the purpose of implementation of the agreement. The necessary approvals were treated as conditions precedent. The respondent was also to be furnished a copy of shareholder agreement and Articles of Association of the Company. The obligations had to be performed on or before the closing date. The closing date was defined as five business days subsequent to the receipt of the last of the condition satisfaction notice. Vide another agreement dated 9th august 2006, the respondent had agreed to abide by the original shareholder agreement which contained an undertaking that the shareholder would not carry on an activity competitive in nature to the business of the company i. e. petitioner No. 2. Thus, the respondent had undertaken not to carry on any business that would be adverse to the interests of the petitioner No. 2 company.

(3.) IT is not disputed that the petitioner No. 1 received the amount as stated in the agreement through foreign remittance from respondent on 10th april 2007 and the parties executed necessary documents as contemplated by the share transfer agreement. Necessary permissions were applied by petitioner No. 1 and were obtained by 15th September 2007. Despite getting requisite permissions for transfer of shares to foreign national (respondent)and despite receiving the consideration, petitioner No. 1, who was to present to petitioner No. 2 the necessary share transfer forms duly filed up and signed by the parties accompanied by necessary permissions, did not fulfill his part of the obligations of getting the shares transferred in the name of the respondent so as to enable him to be a shareholder of petitioner No. 2 company. The petitioner No. 2 company, therefore, did not recognize the transfer and did not correct the register of shareholders as petitioner No. 1 did not do necessary last act of submitting share transfer form with the petitioner No. 2. He did not even inform the claimant/respondent about the formalities having been completed. On finding that the petitioners were not fulfilling their part of obligations under the agreement, respondent invoked the arbitration clause and the impugned award was passed by the learned Arbitral Tribunal.