Oppression and mismanagement petitions are not arbitrable when statutory reliefs go beyond an arbitral tribunal's powers.

A bona fide petition under Sections 397, 398 and 402 of the Companies Act, 1956 is a statutory oppression and mismanagement proceeding, not a private contractual dispute, and its wide reliefs cannot be fully granted by an arbitral tribunal; such matters are therefore not referable to arbitration unless the petition is a disguised attempt to avoid an arbitration clause. A foreign judgment directly deciding arbitrability was held binding and conclusive because it did not fall within any Section 13 CPC exception. Cross-objections and cross-appeals were maintainable to support the impugned order and challenge adverse findings, while the observer-cum-facilitator appointment was unsustainable as an impermissible delegation.

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Issues: (i) Whether disputes raised in petitions under Sections 397, 398 and 402 of the Companies Act, 1956 are capable of reference to arbitration; (ii) whether the foreign judgment on arbitrability bound the Company Law Board under Section 13 of the Code of Civil Procedure, 1908; (iii) whether the cross-objections/cross-appeals were maintainable; and (iv) whether the appointment of an observer-cum-facilitator was justified.

Issue (i): Whether disputes raised in petitions under Sections 397, 398 and 402 of the Companies Act, 1956 are capable of reference to arbitration.

Analysis: A petition properly invoking the statutory jurisdiction for relief against oppression and mismanagement is not a mere private contractual dispute. The reliefs under Section 402 are of wide amplitude and may include regulation of future conduct, alteration of corporate management, termination or modification of agreements, and other consequential directions that an arbitral tribunal cannot grant. The Court distinguished the position of an ordinary civil suit, which may still lie despite the statutory remedy, from the nature of the CLB proceedings themselves. It held that where the petition is bona fide and truly falls within Chapter VI of the Companies Act, the matter is not severable into arbitrable and non-arbitrable parts. Only where the petition is merely a disguised attempt to evade an arbitration clause can a reference issue arise.

Conclusion: Disputes properly brought under Sections 397, 398 and 402 are not referable to arbitration, save in the case of a mala fide or dressed-up petition.

Issue (ii): Whether the foreign judgment on arbitrability bound the Company Law Board under Section 13 of the Code of Civil Procedure, 1908.

Analysis: The foreign court had directly adjudicated the question whether the disputes in the company petitions fell within the arbitration clause. That determination was on merits and was not shown to fall within any exception in Section 13. The CLB's assumption that it was free to disregard the foreign judgment was held to be legally incorrect. The Court also found that the foreign judgment was not contrary to Chloro Controls and that the basis of the foreign decision was the nature of the disputes, not merely dissimilarity of parties.

Conclusion: The foreign judgment was conclusive and binding on the CLB.

Issue (iii): Whether the cross-objections/cross-appeals were maintainable.

Analysis: The objection that no appeal lay against refusal of reference to arbitration did not defeat the respondents' right to support the impugned order and challenge adverse findings by way of cross-objections. Since the impugned order contained mutually inconsistent findings and the controversy remained live on the correctness of the arbitration ruling and the ancillary directions, the cross-appeals/cross-objections were competent.

Conclusion: The cross-objections/cross-appeals were maintainable.

Issue (iv): Whether the appointment of an observer-cum-facilitator was justified.

Analysis: While the CLB had power to appoint an observer in an appropriate case, the direction in question went beyond supervision and effectively delegated to the observer a function of sorting out the parties' disputes. That was not a permissible judicial delegation, and in any event the appointment served no useful purpose once the restructuring had already been completed.

Conclusion: The appointment of the observer-cum-facilitator was unsustainable.

Final Conclusion: The appeals filed by the applicant failed, while the respondents succeeded to the limited extent of having the observer-cum-facilitator direction set aside. The matter was directed to proceed before the Company Law Board on the substantive company petitions.

Ratio Decidendi: A bona fide petition under Sections 397, 398 and 402 of the Companies Act, 1956 raises a statutory controversy involving reliefs that an arbitral tribunal cannot grant, and such disputes are not referable to arbitration; a foreign judgment directly deciding that question is binding unless it falls within Section 13 of the Code of Civil Procedure, 1908.

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