Safiya Malik

The Calcutta High Court has addressed an application seeking interim relief in a commercial dispute over the transfer of shares under a Memorandum of Understanding (MOU) executed between the parties. The application, filed under Section 9 of the Arbitration and Conciliation Act, 1996, was dismissed, with the court stating that the claims were prima facie not maintainable due to subsequent developments and the lapse of time.

The dispute arose from an MOU dated March 17, 2013, executed between the parties, which laid down the framework for transferring 55,62,790 shares of a closely held family company, MBL Infrastructure Limited, for a total consideration of Rs. 28.50 crores. Under the agreement, the petitioner was obligated to ensure the release of personal guarantees of the respondents by July 31, 2013. If the petitioner failed to do so, the respondents were permitted to deal with their shares independently.

The petitioner contended that he had fulfilled his obligations under the MOU and made payments totalling Rs. 24,96,48,396/- against the transfer of 38,58,632 shares. Additionally, the petitioner asserted that the guarantees provided by the respondent for loans taken by AAP Infrastructure Limited were released on April 7, 2021, and August 4, 2021. Despite these developments, the petitioner alleged that the respondents refused to transfer the remaining shares, thereby violating the terms of the MOU.

The respondents countered these claims by arguing that the petitioner had failed to meet the agreed deadlines, leading to the automatic termination of the MOU as per its terms. They also stated that they had sold portions of the shares in the open market at prices ranging from Rs. 80.37 to Rs. 289.50 per share. Additionally, the respondents stated that a subsequent MOU dated October 30, 2013, had been executed, effectively replacing the previous agreement. They challenged the validity of any arbitral reference under the original MOU, citing limitation issues and alleging that the agreement had been abandoned.

The court examined the sequence of events and observed that the MOU stipulated a definitive cut-off date of July 31, 2013, by which the petitioner was required to fulfil his obligations. The court noted: "Admittedly, the petitioner failed to honour his obligations within the prescribed time period. In view of the subsequent events, it prima facie appears that post 31 July 2013, the MOU had for all purposes been abandoned by the parties and no steps were taken by either of them to extend the same."

The court further observed that a subsequent MOU dated October 30, 2013, was executed, which involved the sale of 17,00,000 shares at Rs. 63.75 per share. This development indicated a "contrary and conflicting intention not to be bound by the MOU and the terms and conditions of the same stood revised and re-negotiated." The court noted that the petitioner had not objected to the subsequent sale of shares by the respondents at higher market prices, indicating a lack of intent to enforce the original MOU.

Regarding the arbitration clause, the court recognized serious issues as to whether the MOU had been substituted by the later agreement, stating: "There are serious issues of maintainability of any arbitral reference under the MOU dated 17 March 2013 which negates any prima facie case on merits in favour of the petitioner."

On the issue of respondent no. 3, the court pointed out that "admittedly, the respondent no. 3 is neither a party nor a signatory to the MOU" and therefore, no relief could be claimed against them.

The court also examined the issue of limitation and recorded: "The correspondence exchanged between the parties also demonstrates that after a lapse of more than 10 years i.e. on 26 December 2022, did the petitioner attempt to revive the MOU."

The court observed that multiple communications were exchanged between the parties after the expiry of the cut-off date. Letters dated April 1, 2017, April 14, 2017, May 15, 2017, September 17, 2022, and December 26, 2022, were cited as attempts by the respondents to complete the share transfer process under the MOU dated October 30, 2013. However, the court noted that the petitioner failed to act on these requests. The petitioner had also withdrawn a civil suit (CS No. 54 of 2013) concerning the same shares without liberty, further indicating abandonment of claims under the original MOU.

The court dismissed the application, holding that the petitioner had failed to establish a prima facie case for interim relief. The court stated: "Any restraint on the sale of the shares is an unreasonable interference with the rights of the respondents qua shareholders." Consequently, the interim order dated June 20, 2023, was vacated. Further, the petition for the appointment of a receiver was also dismissed.

The court stated that "the petitioner cannot seek any restraint orders without performing their reciprocal obligations i.e. securing the entire consideration amount for the remaining shares which are fluctuating in nature." The respondents disputed the petitioner's claim of having paid Rs. 24.96 crores, arguing that only Rs. 3.38 crores had been received through open market sales after July 31, 2013.

In view of these findings, the court dismissed the application and vacated the previous interim relief granted in favor of the petitioner. The court concluded that the reliefs sought by the petitioner were not maintainable due to the significant lapse of time, subsequent contractual developments, and issues regarding the applicability of arbitration under the disputed MOU.

Case Title: Anjanee Kumar Lakhotia v. Shri Maruti Maheshwari and Ors.
Case Number: AP-COM/300/2024, IA NO: GA/1/2023, GA/2/2023, GA-COM/3/2024
Bench: Justice Ravi Krishan Kapur

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