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R Prasad Ltd v Prasad [2006] FJHC 28; HBC0178J.2004S (27 January 2006)

IN THE HIGH COURT OF FIJI
AT SUVA
CIVIL JURISDICTION

CIVIL ACTION NO. HBC0178J OF 2004S

BETWEEN:

R. PRASAD LIMITED AND
LAMI INVESTMENTS LIMITED
1ST PLAINTIFF

RATTAN DEO
2ND PLAINTIFF

AND:

RUDRA PRASAD and PRATITA PRASAD
1ST DEFENDANT

ANIL PRASAD
2ND DEFENDANT

Counsel for the Plaintiff: C. Young: Young & Associates
Counsel for the 1st Defendant: H. Nagin: Sherani & Co.

Date of Judgment: 27.01.2006
Time of Judgment: 9.30 a.m.

JUDGMENT

On 19 May 2004 the Plaintiffs obtained through ex parte application an injunction preventing the First Defendant from advertising a Petition for Winding Up against the Plaintiffs, on the ground that the debt was disputed.

In his affidavit in support, the 2^nd Plaintiff and also Managing Director of the 1^st Plaintiff stated that on 12 March 2002, he and the 2^nd Defendant, by a Deed of Settlement, agreed to purchase the shares of the 1^st Defendant’s, in both the 1^st Plaintiff Companies. The valuation of the shares in both Companies was to be made by one Shyam Narayan with the proviso that each party would not accept the valuation in the first instance as final, and therefore are free to make further submissions with assistance of experts, to Mr Narayan. Should however, there remained unresolved issues then the dispute was to be referred to an Arbitrator. The Arbitrator’s recommendation together with the submissions by the parties will be considered by Mr Narayan before he declared the final Valuation. The Deed specifically stipulated that the final valuation of the shares

“shall be final and binding on all the parties and shall not be subject to any challenge in any Court of law.”

The final valuation of the shares in both Companies was not expected until 30^th September, 2002 at the latest. However, Clause 6 of the Deed specified that based on the Shyam Narayan Valuation of 28 February 2002, the 2^nd Plaintiff and 2^nd Defendant were to pay the 1^st Defendants the sum of $130,785.20 being the value of their shares in the Companies. In reply the 1^st Defendants were to execute their shares in the Companies and the transfers to be delivered to Mr Narayan to hold in escrow pending final valuation. There were other considerations which are not relevant to the present proceedings.

The sum of $130,785.20 was paid to the 1^st Defendants by the 2^nd Plaintiff and 2^nd Defendant. According to the 2^nd Plaintiff there is yet to be a final valuation of the shares by Shyam Narayan. An interim valuation of 29 August 2003 was withdrawn and the valuation report of 13 April 2004, stated that the sum of $1,486,628.61 represented the values of the 1^st Defendants’ shares and which is payable by the 2^nd Plaintiff and 2^nd Defendant. There were however 11 outstanding issues, which according to the 2^nd Plaintiff remained outstanding and yet to be resolved. It is in respect of the amount of $1,486,628.61 which the 1^st Defendants demanded to be paid to them, that the Winding Up Notices had been issued, the Petition to follow.

This is the 1^st Defendants’ motion to dissolve the injunction. The essence of their argument for dissolution is that there is no dispute that the 2^nd Plaintiff and the 2^nd Defendants owed the money to them. The sum of $1,486,628.61 represented the final valuation made by Shyam Narayan in accordance with Clause 4 (e) of the Deed. The remaining outstanding issues, according to the 1^st Defendants, do not materially affect the figures arrived at by Mr Narayan in his final evaluation, but are matters that should be referred to arbitration.

In addition, the 1^st Defendants argued that the 2^nd Plaintiff and 2^nd Defendant have not disclosed material facts to the Court in their ex parte application. There is also the argument that they will suffer irreparable harm to their business with the continuation of the injunction.

Whatever the arguments advanced by the parties in their support, there can be no question of the fact that the 1^st Defendants are owed money by the 2^nd Plaintiff and 2^nd Defendant pursuant to the terms of the Deed. The difficulty the 1^st Defendants faces, I suggest is that the debt remains to be quantified. While the 11 outstanding issues would not, in the 1^st Defendants’ Counsel’s estimation substantially affect the global sum initially arrived at by Mr Narayan, the fact remains that there is no agreed amount of the money owing to the 1^st Defendant. The process envisaged under the Deed before the final evaluation arrived at by Shyam Narayan is, according to the Plaintiffs, still to run its course, namely, the reference to an Arbitrator in case of disputes between the parties. This notwithstanding that the 13^th April 2004 Shyam Narayan report specifically stated that was “final”.

It would seem to the Court that the scheme that is set out in details under paragraph 4 of the Deed is very clear. First, Shyam Narayan’s valuation (already done) be put before the parties. Second, it is accepted that all the parties do not agree to the valuation. Thirdly, under the circumstances, each party was entitled with assistance of experts if necessary, to make further submissions, to Mr Narayan. Should the report that ensued be still not acceptable to any of the parties, then Mr Narayan may refer the matter to an Arbitrator, who shall be appointed by Mr Narayan and Mr Ramesh Patel. The Arbitrator will then make his/her recommendations back to Mr Narayan who will consider it along with all the parties submissions, before declaring the final valuation which “shall be final and binding on all the parties.”

If indeed the latter part of this process is still to be complied with, then the Court is of the view that there is yet to be a final report under paragraph 4 (e) of the Deed. In this regard, the Court notes with concern the inability of the parties to agree to the appointment of an Arbitrator. While the 1^st Defendants have named theirs, the other parties have not. Given the substantial amount of money and the nature of business involved, it is imperative that the issue be quickly resolved. The fact is, the 1^st Defendants are being derived the use of a substantial sum of money from the sale of their shares owing to the inability of the parties to agree to an Arbitrator. Alternatively, the provisions of paragraph 4 (f) should not be enforced.

It is plain from the above, that the Court is minded not to interfere with the injunction order it made on 19 May 2004. There clearly is a dispute as to the amount of debt owing and the provisions of S.221 of the Companies Act are inappropriate for the time being for the 1^st Defendants to go to.

There is however the question of whether, under the special circumstances of this case, the Court should consider some payment of money into Court by the Plaintiffs, to protect the position of the 1^st Defendants. It is true that the Plaintiffs have made undertaking as to damages. The Defendants however submitted that the 2^nd Plaintiff is gradually stripping away and selling the assets of the 1^st Plaintiffs Company, although there is no evidence provided to the Court to substantiate it. Nevertheless, the invidious position the 1^st Defendants finds themselves in, of being denied and deprived of the returns from the sales of their shares, for more than 4 years, with still no end in sight, makes it, I believe appropriate that the Plaintiff’s fortify their undertaking by payment of the sum of $750,000.00 into Court.

In the end, the Court finds the Plaintiffs. The 1^st Defendants’ application is dismissed. However, an Order of payment by the Plaintiffs of the sum of $750,000 into Court, such payment to be made within 21 days.

Each party to bear its own costs.

F. Jitoko
JUDGE

At Suva
27 January 2006