Walldorf Integration Solutions Limited (Formerly Known As Citixsys Technologies Limited) v. S Chand and Company Pvt. Ltd. & Ors

NAVIN CHAWLA, J SEPTEMBER 25 , 2018/Arya/RN

O.M.P.(COMM.) 318 & 319/2018 Page 1 * IN THE HIGH COURT OF DELHI AT NEW DELHI + O.M.P. (COMM) 318/2018 & I.A. No.9851/2018 (Stay) + O.M.P. (COMM) 319/2018 & I.A. No.9852/2018 (Stay) Reserved on: 20th August, 2018 Date of decision: 25th September, 2018 KAMAL KARMAKAR ..... Petitioner WALLDORF INTEGRATION SOLUTIONS LIMITED (FORMERLY KNOWN AS CITIXSYS TECHNOLOGIES LIMITED) ..... Petitioner Through Mr.Rajiv Nayar, Sr. Adv. with Mr.Nikhil Singhvi, Mr.Kanak Bose and Ms.Nikita Pandey, Advs. versus S CHAND AND COMPANY LIMITED & ORS. .....Respondents Through Ms.Ranjana Roy Gawai, Mr.Krishna Keshav and Ms.Monica Saini, Advs. for R-1. CORAM: HON'BLE MR. JUSTICE NAVIN CHAWLA 1. These petitions have been filed under Section 34 of the Arbitration and Conciliation Act, 1996 (hereinafter referred to as the "Act") challenging the Arbitral Award dated 28.03.2018 passed by the Arbitral Tribunal consisting of three Arbitrators. The Arbitral Tribunal, by its Impugned Award has held that Walldorf Integration Solutions Limited (formerly known as Citixsys Technologies Limited), the petitioner in OMP (COMM) 319/2018 (hereinafter referred to as the "Company") had O.M.P.(COMM.) 318 & 319/2018 Page 2 committed breach of the terms of the Debenture Conversion Agreement dated 03.03.2009 (hereinafter referred to as "DCA") in not redeeming the Optionally Convertible/ Redeemable Preference Shares (OCPS) issued in favour of the respondent no.1. The Arbitral Tribunal has further held that the respondent no.1/claimant in the arbitration proceedings, though was entitled to Specific Performance of the DCA, since the company would not be able to redeem the OCPS on account of inadequacy of the distributable profits as on 31.03.2016, would be entitled to damages equivalent to the redemption amount along with interest. The Arbitral Tribunal has awarded in favour of the respondent no.1 a sum of Rs.6,40,62,500/-, the redemption amount as per Clause 4 (III) of the DCA, as damages along with interest @ 8% p.a. from 03.07.2011, being the date on which the OCPS became due for redemption as per redemption notice issued by the respondent no.1, till 10.01.2015, being the date of notice invoking the arbitration, and pendent lite and future interest at the same rate. 2. Before adverting to the submissions made by the learned senior counsels for the petitioners, a few facts leading to the arbitration proceedings need to be noticed. 3. The petitioners and the respondent no.1 had entered into a Debenture Subscription Agreement (DSA) dated 14.07.2007, in terms whereof, the respondent no.1 invested a sum of Rs.4.1 crores in Optionally Convertible/Redeemable Debentures of the face value of Rs.1 lac each in the petitioner company. 4. The parties, that is, the company and Mr.Kamal Karmakar (petitioner in OMP (COMM) 318/2018), as the Principal Shareholder of O.M.P.(COMM.) 318 & 319/2018 Page 3 the Company, entered into the DCA on 03.03.2009 with the respondent no.1 by which the debentures were to be converted into 5,12,500 OCPS at conversion price of Rs.80/- with face value of Rs.10/- each on a premium of Rs.70/-per share. Some of the relevant terms of DCA are quoted hereinbelow: "2. Terms & conditions of the Conversion: 1) Conversion Price: The parties hereto have agreed to covert the optionally convertible redeemable Debenture subscribed at Rs. 1,00,000/- (Rupees One Lakh only) per Debenture by the Investor at a conversion price of Rs. 80/- (Rupees Eighty only) per Optionally Convertible or Redeemable Preference shares with face value of Rs. 10/- each and a premium of Rs. 70/- per share. Accordingly, the Company shall issue total 5,12,500 (Five Lac Twelve Thousand Five Hundred Only) numbers of Optionally Convertible or Redeemable Preference shares to the Investor. xxxx 4. Post Conversion Rights of Investors xxx II. Following the conversion of present Debentures in to Preference shares in pursuance of this agreement, the Investor will have the option to convert the such Optionally Conver