G TECH STONE LIMITED Vs. BFIL FINANCE LIMITED

JUDGEMENT

(1.) THE facts that are material for deciding this petition are that the petitioner is a public limited company, having its registered office at Chennai, engaged in the business of manufacture and export of granite slabs. The respondent is also a public limited company having its registered office at Bombay, carrying on business in finance and investments.

(2.) ON 22nd February, 1995 the parties have entered into an agreement for the placement with the respondent of 540000 secured optionally fully convertible debentures issued by the petitioner at the rate of Rs. 95/- per Debenture, carrying interest at the rate of 9. 5% per annum. The recitals in the petition show that the petitioner proposed to increase the paid up equity capital to a minimum of 300 lakhs and a maximum depending upon the conversion price and get the equity shares of the company listed on all of the recognised Stock Exchanges, or failing listing on the recognized Stock Exchanges in the over the Counter Exchange of India.

(3.) THE petitioner allotted to the respondent 54 lakhs OFCDs on 7th February, 1994. On 14th August, 1995 the respondent addressed a letter to the petitioner stating that in view of the on going discussion related to the proposed off loading of shares, the matter was likely to take some time before the action plan was drawn and requested to the respondent to extend the dead line date of 31st August, 1995 under Clause 2. 7 of Article II of the agreement by one more month to 30th September, 1995. The said extension was granted by the petitioner on 16th August, 1995. The respondent thereafter addressed another letter dated 14th September, 1995 to the petitioner in terms similar to the earlier letter dated 14th August, 1995 and requested the petitioner for a further extension of the said dead line to 30th October, 1995. The petitioner agreed to the said extension also. However, one week thereafter the respondent by its letter dated 21st September, 1995 addressed to the petitioner referring to the placement of 54 lakhs secured OFCDs and offered the OFCDs to the petitioner for redemption, in terms of Clause 2. 7 of Article II of the said agreement. The petitioner by its letter dated 4th October, 1995 addressed to the respondent expressed surprise at the respondents letter and alleged that the respondent has chosen to get out of the agreement, because of some extraneous reasons. The petitioner requested the respondent to withdraw its offer for redemption of the OFCDs. The respondent by its letter dated 26th October, 1995 addressed to the petitioner, regretted its inability to accept the request of the petitioner not to press for redemption and stated that if the dues of the claim were not received by it within 15 days from the date of the said letter the respondent claimed over the charges of 3% p. m. as per normal condition. The petitioner by its letter dated 1st November, 1995 stated that the petitioner had converted the OFCDs into equity shares as per the provisions of paragraph 2, 3 (v) of the agreement. The respondent by their Advocates letter dated 8th May, 1996, set out what was transpired and contended that the respondent had exercised its option under Clause 2. 7 of the agreement not to go for public issue and alleged that the respondent has failed to act in accordance with the Article II of the agreement, and by the above act of not redeeming the OFCDs, the respondent has right to terminate the said agreement as per Clause 6. 1 (xi) of the said agreement. The said Advocates letter states that the said agreement stands terminated from the date of the said letter and the petitioner was bound to purchase all the outstanding OFCDs at a price of Rs. 150/- per OFCD and to pay interest at the rate of 2% per month on the amount due from the date of demand of the amount being the date of the said letter. The petitioner by their letter dated 29th May, 1996 denied that they were bound to convert the OFCDs under Clause 2. 6 and 2. 7 of Article II of the said agreement. The petitioner further alleged that the notice given by the respondent in exercise of the alleged option was not proper. In the correspondence which ensued between the parties thereafter, the parties have stated their respective stands.