BELL SOUTH INTERNATIONAL Vs. CROMPTON GREAVES LIMITED

JUDGEMENT

(1.) ORIGINAL Application No. 103 of 2000, filed under Order 14, rule 8 of the ORIGINAL Side Rules read with section 9 of the Arbitration and Conciliation Act, 1996, to issue an order of injunction restraining the first respondent from effecting any transfer of shares owned by it in the fourth respondent-company in favour of Bharti Tele-Ventures Limited and its affiliates under its control and also an order of injunction restraining the fourth respondent from recording the transfer of shares in favour of Bharti Tele-Ventures Limited pending final adjudication by the Arbitral Tribunal. ORIGINAL Application No. 104 of 2000 has been filed, claiming ex parte order of injunction.

(2.) THE case in brief for the disposal of both the applications is as follows : THE petitioner and respondents Nos. 1 to 4 entered into a joint venture agreement dated August 12, 1992, consequent upon which, they agreed upon the mode, method and manner of control, management and business of a joint venture company bearing the name and style Skycell Communications Private Limited, incorporated under the Companies Act, 1956. This company applied for and obtained a cellular licence to operate and maintain cellular services in the metropolitan city of Madras. THE shareholding pattern in the joint venture company is the first respondent 40. 5 per cent., the second respondent 10. 5 per cent., the petitioner and the third respondent 24. 5 per cent. each. Clause 3. 6 in the joint venture agreement provides that notwithstanding any other provision of this agreement, no person or entity shall be invited to participate or shall participate in Skycell (whether by way of subscription for or purchase of any shares) without the prior written consent of all the shareholders. Similarly, clause No. 7. 4 also says that no person or entity shall be invited to participate in Skycell without the prior written consent of all the shareholders. THE spirit and understanding amongst the parties to the joint venture agreement was also substantially incorporated in the memorandum and articles of association of the company as clauses Nos. 10 and 11(a). If an existing shareholder is desirous of disposing of its equity shareholding in the company, then it can do so only in the manner prescribed in the agreement as well as the articles of association and in no other manner.THE first respondent issued a transfer notice dated October 11, 1999, in accordance with section 7. 2 of the joint venture agreement informing all the parties that they proposed to sell their entire 40. 5 per cent. shares in the company and requested consent of the other parties in accordance with the provisions of sections 3. 6 and 7. 4 of the agreement. THE first respondent informed the parties that they proposed to sell their shareholding to Bharti Tele-Ventures Limited and its affiliates under its control. THE offer letter was received from the fourth respondent on October 12, 1999. THE second respondent also issued a transfer notice dated October 28, 1999, informing all the parties that they were proposing to sell their 10. 5 Per cent. shares to Bharti Tele-Ventures Limited. Respondents Nos. 1 and 2 also sent further letters requesting for an earlier response to the transfer notice from the petitioner. Various correspondence was exchanged between the parties. THE petitioner finally wrote letters to the first respondent as well as others and informed them that unless the petitioner has all the background information pertaining to telecommunication ventures in which Bharti Tele-Ventures Limited is currently involved, it may not be in a position to accord its approval for the transfer of shares sought to be effected by respondents Nos. 1 and 2. THE petitioner has been handed over copies of the memorandum of understanding dated October 5, 1999, and supplementary memorandum of understanding dated November 1, 1999, executed by and between respondents Nos. 1 and 2 and Bharti Tele-Ventures Limited. THE first respondent has not obtained the prior written consent of the petitioner. THE proposed transfer of shares is in violation of the agreement as well as articles of association. THE petitioner apprehends that the first respondent in collusion with the fourth respondent-company is likely to complete the transaction for transfer of shares by violating with impunity the terms and conditions of the joint venture agreement and thereby create third party rights which would lead to unnecessary complications. In such a case, the interest of the petitioner will suffer and the business and operation of the joint venture agreement would be seriously prejudiced. THE petitioner has made out a prima facie case and the balance of convenience is also in its favour. No pre-judice will be caused to the respondents if an order of injunction is granted pending final adjudication. Hence, these petitions.THE first respondent filed a detailed counter, denying the various allegations. THE application does not satisfy the condition precedent relating to the arbitration mechanism set out in the joint venture agreement between the parties, in that, there was no attempt at amicable resolution for the reason that no arbitrable dispute had at all been precipitated which might have resulted in a cause of action for the petitions. THEse applications suffer from both statutory as well as contractual bar. THE parties are to first attempt through discussions, an amicable resolution of any dispute arising out of or in connection with the negotiation, execution, interpretation, performance or non-performance of the agreement. Only if they fail to resolve such controversy or claim within 30 days by amicable agreement and compromise, the aggrieved party may seek arbitration as set forth in the agreement. In this case, there was no dispute that had arisen prior to the filing of the above application. Even assuming that there were any differences between the parties, no attempt at amicable resolution was even undertaken by the petitioner before resorting to the court. THE joint venture agreement as well as the memorandum of understanding were entered into between the parties. THE provisions regarding the restrictions on transfer of shares and other provisions regarding the management of the company as envisaged in the joint venture agreement, were however not transplanted or incorporated in the articles of association of the company. Over these years, the fourth respondent has built a customer base of over 20, 000 users. THE company has been suffering losses right from the inception and from the last three years, the total loss comes to about Rs. 92, 39, 40, 000. It is finding it extremely difficult to meet its financial and other obligations.

(3.) THE petitioner also filed an additional affidavit in rejoinder that the biographics of the officers as well as documents relating to the business plan in respect of M/s. Bharti Tele-Ventures Limited was not made available. A meeting of the partners of the fourth respondent is also scheduled to be held on March 23, 2000, at London and it is likely that this meeting may result in the petitioner being provided the necessary information which they had sought for from the buyers. THE first respondent has not thought it fit to disclose the fact that on November 25, 1999, it had executed a share purchase agreement with M/s. Bharti Tele-Ventures Limited, which on the face of it appears to have expired on January 31, 2000. THE first respondent has gone beyond the MoU already on the record of this court. THEse facts would clearly show that the apprehension expressed by the petitioner for grant of interim injunction is proper. Heard learned counsel of both sides.