2016 (7) TMI 853 - Board - Companies Law

Court dismisses Company Petition, refers to arbitration per Shareholders' Agreement. No oppression found.

SIDHARTH GUPTA AND ORS. Versus M/s. GETIT INFOSERVICES PRIVATE LIMITED AND ORS.

SIDHARTH GUPTA AND ORS. Versus M/s. GETIT INFOSERVICES PRIVATE LIMITED AND ORS. - TMI Issues Involved:1. Whether the dispute raised in the Company Petition should be referred to arbitration under Section 45 of the Arbitration & Conciliation Act, 1996.2. Whether the Company Petition falls within the jurisdiction of Sections 397, 398, 402, and 403 of the Companies Act, 1956, or within the ambit of the arbitration clause in the SSHA.3. Validity of the valuation of shares and the conduct of the respondents in managing the affairs of the company.4. Whether the arbitration clause in the SSHA is binding on all parties involved in the Company Petition.Issue-Wise Detailed Analysis:1. Referral to Arbitration:The respondents filed an application under Section 45 of the Arbitration & Conciliation Act, 1996, seeking to refer the dispute to arbitration as per Clause 23 of the SSHA. The SSHA and its amendments, along with the Memorandum of Agreement, included an arbitration clause mandating the resolution of disputes through arbitration at the Singapore International Arbitration Centre (SIAC). The petitioners opposed this application, arguing that not all parties to the Company Petition were bound by the SSHA and its arbitration clause.2. Jurisdiction under Sections 397, 398, 402, and 403:The petitioners argued that the Company Petition raised issues of oppression and mismanagement, which fall under the jurisdiction of Sections 397 and 398 of the Companies Act, 1956. They contended that the reliefs sought, such as the regulation of the affairs of the company and the composition of the Board of Directors, could only be granted under Sections 402 and 403 of the Companies Act and not by an arbitral tribunal.3. Validity of Share Valuation and Conduct of Respondents:The petitioners claimed that the respondents acted prejudicially by not disclosing information to their nominee director, undervaluing the shares, and issuing shares at an unfair price, thereby diluting the petitioners' shareholding. They also alleged that the valuation report by M/s. Sanjeev Sapra was not authorized and did not follow the methodology set out in the Articles of Association. The respondents countered that the valuation was fair and supported by another valuation from Deloitte, and that the petitioners were offered the rights issue on a pro-rata basis, which they declined.4. Binding Nature of Arbitration Clause:The petitioners contended that the arbitration clause in the SSHA was not binding on respondents 4 to 13, who were not parties to the SSHA. They argued that the arbitration clause should be limited to disputes between the shareholders and not the company itself. The respondents maintained that the company was a party to the SSHA and that the arbitration clause covered disputes arising from the SSHA, including those involving the company.Judgment:The judgment concluded that the issues raised in the Company Petition were covered by the arbitration clause in the SSHA. It was noted that the petitioners' grievances were primarily related to the terms of the SSHA and the Articles of Association, which were incorporated into the SSHA. The court held that mere violations of the Articles of Association or provisions of law do not automatically constitute oppression or mismanagement under Sections 397 and 398. The court found no malice in the conduct of the respondents and determined that the valuation of shares by M/s. Sanjeev Sapra was reasonable and corroborated by Deloitte's valuation.The court dismissed the Company Petition, referring the matter to arbitration as per the arbitration clause in the SSHA. The interim order, if any, was vacated, and CA 128/2014 was allowed.