2008 (2) TMI 627 - SC - Companies Law

Territorial Jurisdiction Ruling: Appeal Dismissed, Time Excluded for Limitation

The Supreme Court affirmed the High Court's decision that the appeal should be filed in the High Court of Punjab and Haryana due to territorial ... Whether the order dated 26-9-2006 of the CLB refusing to refer parties to arbitration under section 45 of the Arbitration Act was liable to be challenged to the forum under section 50 of the Arbitration Act or to the forum under section 10(1)(a) of the Companies Act? Held that:- Appeal dismissed. We are satisfied that the appellant has wrongly based its arguments on matters such as ouster of jurisdiction, overriding effect of special statute over general statute, overriding effect of subsequent statute etc. Since they have no application whatsoever to the matter in issue, there is no need to refer various decisions in those aspects. Ouster of jurisdiction arises only in regard to original jurisdiction and it cannot have any application to appellate jurisdiction as the one provided in section 50 of the Arbitration Act. The appeal is a statutory remedy and it can lie only to the specified forum. The appellate forum cannot be decided on the basis of cause of action as applicable to original proceedings such as suit which could be filed in any court where part of cause of action arises. Thus unable to accept the lengthy arguments advanced on the above-mentioned subject by the appellant. Likewise, the submission of the appellant, namely, the Arbitration Act being a special and subsequent statute has no relevance to the present case. Issues Involved:1. Territorial jurisdiction of the High Court.2. Precedence of Section 10(1)(a) of the Companies Act, 1956 over Section 50 of the Arbitration and Conciliation Act, 1996.3. Applicability of arbitration clauses in the Joint Venture Agreement (JVA) and Share Purchase Agreement (SPA).4. Jurisdiction of the Company Law Board (CLB) under Sections 397, 398, and 402 of the Companies Act, 1956.5. Interpretation and application of Section 45 and Section 50 of the Arbitration and Conciliation Act, 1996.6. Interpretation of Section 10(1)(a) and Section 10F of the Companies Act, 1956.Detailed Analysis:1. Territorial Jurisdiction of the High Court:The Supreme Court examined whether the High Court of Delhi had territorial jurisdiction to hear the appeal filed by the appellant under Section 50 of the Arbitration and Conciliation Act, 1996. The High Court of Delhi dismissed the appeal on the grounds of lack of territorial jurisdiction, holding that Section 10(1)(a) of the Companies Act, 1956 takes precedence. The Supreme Court upheld this view, emphasizing that the appeal should be filed in the High Court within whose jurisdiction the registered office of the company is situated, which in this case is the High Court of Punjab and Haryana.2. Precedence of Section 10(1)(a) of the Companies Act, 1956 over Section 50 of the Arbitration and Conciliation Act, 1996:The Court analyzed the precedence of Section 10(1)(a) of the Companies Act, 1956 over Section 50 of the Arbitration and Conciliation Act, 1996. It concluded that Section 50 of the Arbitration Act specifies that an appeal shall lie to the court authorized by law to hear appeals from such orders, which is determined by Section 10(1)(a) of the Companies Act. Therefore, the High Court of Punjab and Haryana is the appropriate forum.3. Applicability of Arbitration Clauses in the JVA and SPA:The Court examined the arbitration clauses in the Joint Venture Agreement (JVA) and Share Purchase Agreement (SPA). It was found that the arbitration clause in the JVA did not cover disputes between the company and the shareholders or among the shareholders themselves. The Court noted that the arbitration agreement must explicitly include the parties involved in the dispute, which was not the case here.4. Jurisdiction of the Company Law Board (CLB) under Sections 397, 398, and 402 of the Companies Act, 1956:The Court reviewed the jurisdiction of the CLB under Sections 397, 398, and 402 of the Companies Act, 1956, which pertain to oppression and mismanagement. It was determined that the CLB has the authority to address disputes related to the affairs of the company, and the arbitration clause in the JVA did not oust this jurisdiction.5. Interpretation and Application of Section 45 and Section 50 of the Arbitration and Conciliation Act, 1996:The Court interpreted Section 45 of the Arbitration Act, which mandates that judicial authorities must refer parties to arbitration if there is a valid arbitration agreement. However, it was noted that the CLB had correctly refused to refer the parties to arbitration as the arbitration agreement did not encompass all the parties involved in the dispute. Section 50 of the Arbitration Act, which deals with appealable orders, was also analyzed, and it was concluded that the appeal should be heard by the court authorized by law, as specified under Section 10(1)(a) of the Companies Act.6. Interpretation of Section 10(1)(a) and Section 10F of the Companies Act, 1956:The Court elucidated Section 10(1)(a) and Section 10F of the Companies Act, 1956. Section 10(1)(a) specifies that the High Court having jurisdiction over the location of the company's registered office is the appropriate forum for hearing appeals. Section 10F allows appeals against the orders of the CLB to be filed in the High Court within sixty days. The Court concluded that the High Court of Punjab and Haryana is the correct appellate forum for this case.Conclusion:The Supreme Court upheld the decision of the High Court of Delhi, affirming that the appeal should be filed in the High Court of Punjab and Haryana, as per Section 10(1)(a) of the Companies Act, 1956. The appeal was dismissed, and the time taken by the appellant in pursuing the appeal in the Delhi High Court and the Supreme Court was excluded for the purpose of limitation.