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Issues: (i) Whether the party seeking arbitration had abandoned its right to invoke the arbitration clause and failed to satisfy the requirements of Section 8 of the Arbitration and Conciliation Act, 1996 by submitting its first statement on the substance of the dispute before seeking reference to arbitration. (ii) Whether disputes relating to oppression and mismanagement under Sections 397, 398, 402 and 403 of the Companies Act, 1956 were capable of being referred to arbitration under the contractual arbitration clauses.
Issue (i): Whether the party seeking arbitration had abandoned its right to invoke the arbitration clause and failed to satisfy the requirements of Section 8 of the Arbitration and Conciliation Act, 1996 by submitting its first statement on the substance of the dispute before seeking reference to arbitration.
Analysis: Section 8 requires a party to apply for reference to arbitration not later than the filing of its first statement on the substance of the dispute, and the application must be accompanied by the arbitration agreement or a duly certified copy. On the facts, the party had filed multiple replies and applications before the Company Law Board dealing with the substance of the controversy, and only later moved a formal Section 8 application. The conduct and pleadings showed submission to the Board's jurisdiction and no effective reservation of the arbitration plea at the required stage. The application was also defective for want of the arbitration agreement.
Conclusion: The right to seek reference to arbitration had been abandoned and, in any event, the statutory requirements for a Section 8 reference were not satisfied, against the appellant.
Issue (ii): Whether disputes relating to oppression and mismanagement under Sections 397, 398, 402 and 403 of the Companies Act, 1956 were capable of being referred to arbitration under the contractual arbitration clauses.
Analysis: The reliefs under Sections 397, 398, 402 and 403 are statutory remedies vested in the Company Law Board and include powers regulating company affairs, altering agreements, and granting interim and consequential orders. Such jurisdiction affects not only the contracting shareholders but also the company and minority shareholders who were not parties to the arbitration agreement. A contractual clause cannot oust a statutory forum or deprive parties of statutory appellate remedies, and an arbitrator cannot grant the reliefs contemplated by these provisions. The arbitration clauses in the agreements were also enabling in nature and did not create a mandatory obligation to arbitrate all disputes.
Conclusion: Disputes under Sections 397, 398, 402 and 403 of the Companies Act, 1956 were not referable to arbitration, against the appellant.
Final Conclusion: The appeal failed because the arbitration plea was both procedurally unavailable and substantively inapplicable to the statutory oppression and mismanagement proceedings.
Ratio Decidendi: A party seeking reference under Section 8 of the Arbitration and Conciliation Act, 1996 must apply before its first statement on the substance of the dispute and comply with the statutory filing requirements, and statutory proceedings for oppression and mismanagement under the Companies Act, 1956 cannot be ousted by a contractual arbitration clause.
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