GPI TEXTILES LIMITED Vs. PRAMOD MITTAL

JUDGEMENT

(1.) This appeal has been preferred against the judgement and order dated 26.02.2010 passed by learned Additional District Judge, Alipore, 24 Pgs(S) in Title Suit No. 3605 of 2009 in an application under section 9 of Arbitration and Conciliation Act, 1996.

(2.) The case of the respondent Nos.1 & 2 in the petition under section 9 of the Arbitration and Conciliation Act, 1996 in short is that Pramod Mittal and Vinod Kumar Mittal who are respondent Nos. 1 & 2 in this appeal are promoters of GPI Textiles Limited, the appellant of this appeal. The company, is engaged in manufacturing cotton yarn, polyester and blended yarns. Its registered office is located at Solan, Himachal Pradesh and is still running its business in Kolkata at P.O. Pailan, Diamond Harbour Road, 24 Pgs(S), West Bengal. Since 1998, the company has its textile business. In 2007, the promoters namely respondent Nos. 1 & 2 entered into one time settlement agreement with the respondent No.3 in order to augment fresh fund. Therefore, a tripartite share subscription and shareholders agreement was entered into between respondent Nos.1 and 2 and the respondent No.3, GL Asia Mauritius-II Limited. It is the foreign company and the company agreed to infuse more fund. The said agreement took place on 22.03.2007 at Mittal House, 24, Alipore Road, Kolkata-700027, P.S. Alipore. At the time of agreement, the promoters i.e. respondent Nos.1 & 2 were major shareholders of this company holding 48.9 per cent of share. From 2000-2007, the company was managed and controlled by the respondent Nos. 1 & 2 who invested a huge amount in the company. In order to infuse or augment fresh fund and to maintain stable source of income of the company, respondent Nos. 1 & 2 entered into agreement with the foreign company namely respondent No.3. According to the agreement, the promoters reduced their share from 48.9 per cent to 37.6 per cent and thereby allowed the respondent No.3 to hold majority of the share.

(3.) According to the agreement, the respondent No.3 will procure Rs.130 crores as a loan from ICICI Bank and the respondent No.3 as a investor will provide security of the said loan in the form of irrecoverable standby letter of credit (S.B.L.C.) for the amount covering 100 per cent outstanding principal+ interest and the said standby letter of credit (S.B.L.C.) would be valid throughout the period of the facility till the year 2014. Accordingly, the ICICI Bank issued a standby letter of credit to the respondent No.3, GL Asia Mauritius-II Limited. The said loan agreement dated 28th March, 2007 entered into between the company and ICICI Bank provides that the repayment to be made by equal installment for 5 years starting from 2009 and continued throughout 2014. Subsequently, ICICI Bank loan was swapped with HSBC loan on 8th April, 2009. Terms of said HSBC loan are similar to that of ICICI bank with security of a standby letter of credit provided by the respondent no.3, but the repayment of HSBC loan was to be made at one payment i.e. after 5 years i.e. 2014. In the loan period only interest of payment was to be made. Thus, the role of the respondent No.3 is to procure and maintain loan vide non-disposal undertaking given to HSBC dated 8th April, 2009 and the respondent no.3 was thus prevented from disposing of its share during the loan period. Therefore, respondent no.3 was to give interest till 2014. The purpose of swapping to HSBC from ICICI is to reduce the earlier burden of payment of principal amount by installment, so that the fund can be utilised towards working capital of the company. Respondent No.3, therefore, acquired majority of directors of the board of company and controlled the management and the running of the company. The respondent No.3, on the strength of majority number of directors passed a resolution on 20.10.2009 whereby it was held that company required Rs.470 million on urgent basis and the said money was to be funded by offering equity share on right basis. The right offer is to remain open till 5th December, 2009,