TaxTMI 
TaxTMI 
2016 (5) TMI 910
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....ing the judgment and order dated 27/07/2015 passed by the learned Company Law Board, Calcutta Bench in C.P. No. 143/2015 by means of which an ad-interim order has been passed directing the parties to maintain status quo as regards the share holding of the Company and the composition of the Board of Directors besides restraining both the rival groups from creating further third party interest over the fixed assets of the company without the leave of the Company Law Board ( Here-in- after referred to as CLB). 3. The appeal was admitted by this Court to be heard on the following questions of law :- "1. Whether the learned company law board was justified in the eye of law in passing an interim order without recording any reasons thereof and without recording any findings as regards existence of prima facie case, balance of convenience or question of irreparable loss ? 2. Whether the impugned order passed by the learned Company Law Board is without jurisdiction and hence, a nullity in the eye of law?" 4. The Revision Petition has been filed by the appellants in the Company Appeal as petitioners with a grievance that without deciding the application filed by the p....
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....e appellant No. 2. 6. According to the "Bawri Group", despite having the necessary expertise in the cement industry and notwithstanding the share holders agreement dated 16/01/2012, the appellant No.2 had refused to release the required funds as per the terms of the shareholders agreement and on the contrary, had started indulging in various malafide activities which were injurious to the interest of the company and its share holders. Since the appellant No. 2 did not honour its commitment under the shareholders agreements, and instead demanded that the respondent Nos 1 to 9 were liable to sell their share holding in the Company to the appellant No 2 for Rs. 1/- under the default clause due to alleged non-fulfillment of the project conditions, the "Bawri Group" had to approach the Delhi High Court by filing an application under Section 9 of the Arbitration and Conciliation Act, 1996 (hereinafter referred to as the Act of 1996), numbered and registered as OMP(I) No. 279/2015 seeking certain interim measures of protection against the appellant No. 2 whereby, the Delhi High Court had passed an order dated 29/08/2015 recording an undertaking given on behalf of the appellant No.2 to ....
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....ment of Article 92(j). Having indulged in such illegal activities, Article 62(a) had been inserted only to legitimize such collusive transactions made at the instance of the appellant No. 2 with its associate companies for their mutual benefits at the cost of the company. The respondent Nos. 1 to 15 have, therefore, alleged that the acts of the appellants are harsh, burdensome and oppressive to the respondent Nos. 1 to 15 and is highly prejudicial to the interest of the company and its share holders. The aforesaid respondents have also stated in the company petition that on account of such illegalities indulged in by the appellant No 2, the said petitioners have lost faith and confidence on the appellants and have several reasons to believe that the appellants would further alter or manipulate the records of the company and by following such approaches would siphon off the assets of the company so as to diminish the value of the company by bringing it to a state of insolvency. 8. Upon receipt of notice in connection with the CP No. 143/2015, the appellant Nos 1 and 2 , had appeared and filed an application bearing No. CA 907/2015 under Section 8 of the Act of 1996 invoking the a....
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....d Company Law Board, primarily on the ground that by issuing the impugned order dated 27/07/2015 without first deciding CA No. 907/2015, the learned Company Law Board had committed manifest illegality and erred in exercise of its jurisdiction vested by law. 12. By referring to the impugned order dated 27/07/2015, Mr. Banerjee, learned senior counsel appearing for the appellants submits that a bare reading of the said order would go to show that no reason, whatsoever has been recorded by the learned CLB before passing an order of injunction putting undue fetters in the authority of the appellants to run and manage the affairs of the Company. Mr. Banerjee submits that his clients i.e. the Dalmia Group has already invested more than 500 crores in the appellant No. 1 company and as such, being the majority shareholders in the Company, is entitled to manage the affairs of the said company in the manner it chooses. However, in view of the impugned order dated 27/07/2015 passed by the CLB, the right and freedom of his client to manage the company had been severely curtailed. 13. By referring to a decision of the Hon'ble Supreme Court rendered in the case of (2010) 3 SCC 732 (Secreta....
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....am Finance Ltd. and another Vs. T Thankam reported in (2015) SCC Online 147. The learned senior counsel, therefore, submits that the impugned order dated 27/07/2015 having been passed by the learned CLB by ignoring the Section 8 application filed by the appellants, the same is an order without jurisdiction and hence, unsustainable in the eye of law. 16. Resisting the arguments made by and on behalf of the appellants, Mr. P.C. Chatterjee, learned senior counsel appearing for respondent Nos. 1 to 15 has argued that from the text of the order dated 27/07/2015 it would be clear that the same is an ad-interim order passed by the learned CLB in exercise of its discretionary powers conferred under Section 402 of the Companies act, 1956. The very fact that three weeks time had been granted to the appellants to file their counter affidavit and two weeks' time to the present respondents to file their reply affidavit in CA No. 907/2015, clearly goes to show that learned Company Law Board had not disposed of the prayer of interim order made in the CP No. 143/2015 or the objection raised under Section 8 of the Act of 1996 in CA No. 907/2015. Therefore, submits Mr. Chatterjee, the observation....
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....n and mismanagement under Section 397 and 398 has been statutorily vested upon the Company Law Board and the said jurisdiction cannot be assumed by the arbitrator nor can the Company Law Board abdicate its jurisdiction to decide the disputes raised within the ambit of Section 397 and 398 of the Companies Act once a bonafide complaint is brought before it. In support of the aforesaid argument, Mr. Chattarjee has relied upon a decision of the Hon'ble Supreme Court in the case of Booz Allen and Hamilton Inc Vs. SBI Home Finance Ltd. & Ors reported in AIR 2001 SC 2007 ; Claude-Lila Parulekar (Smt) Vs. Sakal Papers (P) Ltd. & others reported n (2005) 11 SCC 73 as well as another decision of the Bombay High Court in the case of Rakesh Malhotra Vs. Rajinder Kumar Malhotra reported in (2014) SCC Online Bom 1146. 19. Defending the observations made by the CLB in the impugned order dated 27/07/2015 to the effect that respondent Nos. 10 to 15 not being parties to the Arbitration agreement, there was no scope for referring the dispute to arbitration, Mr. Chattarjee submits that in the instant case there is no commonality of parties and hence, the learned Company Law Board had rightly assume....
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....ed upon by the learned counsel for the respondent throw any light on the core question involved in these proceedings as to whether the jurisdiction of the Company law Board would be ousted upon filing of the application under section 8 of the Arbitration and Concilliation Act, 1996. Mr. Banerjee has , however, argued that the submissions advanced by the Bawri Group are premature since the application filed under section 8 has not been finally been decided by the CLB. 21. Referring to the decision of the Punjab & Haryana High Court in the case of Sudarshan Chopra (supra)cited by the respondents, Mr Banerjee submits that in the said decision, on facts it was held that there was no arbitration agreement covering the entire dispute and there were 2.4% independent shareholders who would be prejudiced if the matter was referred to Arbitration. He submits that the aforesaid decision is distinguishable on facts and the same does not lay down any proposition of law of universal application. 22.The learned senior counsel has further made an attempt to distinguish the decisions relied upon by the respondents in the case Booz Allen and Hamilton Inc (Supra) and Sukanya Holdings Pvt Ltd (s....
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....be exercised by the Arbitrator. Thus, without going into the merits as to the arbitration proceedings and also, the allegations levelled in the present Company Petition, I am of the considered view that there is no jurisdictional bar of this Hon'ble Board to deal with the alleged acts of oppression and mismanagement despite the pending proceedings under Section 9 of the Arbitration and Conciliation Act, 1996. Therefore, in the interest of justice, I hereby direct the Respondents to maintain status quo as to the shareholding and composition of the Board of Directors of the Respondent No.1 company. In addition, both the rival groups are also directed not to create further third party interest over the fixed assets of the Respondent No. 1 Company without the leave of this Bench. The petitioners as well as the Respondents are also directed to explore the possibilities of amicable settlement in the matter and report the outcome thereof on the next date of hearing." 25. From a perusal of the above observations made by the learned CLB, it is apparent that the impugned order dated 27/07/2015 has been passed after discussing the brief factual background of the case, whereby the Board had....
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....n 403 is just and equitable would depend on the facts and circumstances of each case. 28. As has been alluded here-in-before, while issuing the order dated 27/07/201, the learned CLB has not only recorded its satisfaction regarding the existence of a prima facie case but has also dealt with the objection raised under Section 8 of the Act of 1996 by recording a prima facie satisfaction on the point of its jurisdiction to pass an ad-interim order in the matter. The basic allegation of the complainants in C.P. 143/ 2015, reduced to its essence, is that the appellant No 2 is diverting the resources of the company to its sister concerns in violation of the Articles of Association with a view to diminish the value of the company. Any act on the part of the majority shareholders which is harsh , burdensome or wrongful can be said to be oppressive to the interest of the minority share holders. 29. There can be no quarrel with the proposition advanced by Mr. Banerjee that a judicial order bereft of any reason would be per se illegal. However, as has been indicated hereinbefore, this is not a case where the learned CLB has passed the order dated 27/07/2015 without recording any reason ....
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....aw the attention of this court to any prejudice being suffered by them on account of the interim directions contained in the order dated 27/07/2015. 31. From the materials on record it further appears that the appellants themselves delayed the hearing of the C.A. 907 /2015 pending before the CLB. In view of the above, the arguments advanced by Mr. Banerjee contending that the order dated 27/07/2015 passed by the CLB being devoid of any reason is liable to declared as a nullity does not merit acceptance by this court. 32. Before attempting an answer to the next question of law, it would be pertinent to mention herein that there is no dispute at the bar that the CA No. 907/2015 filed by the appellants raising an objection under section 8 of the Arbitration and Concilliation Act, 1996 has not yet been finally disposed off and the same is still pending adjudication before the learned CLB. Learned counsels appearing for both the parties have fairly submitted that the adjudication of the said application (CA 907/2015) would warrant detailed factual enquiry by the CLB for the purpose of recording its satisfaction as to whether the disputes involved in the C.P.143/2015 requires to be....
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.... 1996 further provides that the application referred to in subsection(1) shall not be entertained unless it is accompanied by the original arbitration agreement or a duly certified copy thereof. Law is well settled that once an application is filed by a party satisfying the conditions contained in section 8(2) of the Act of 1996, the judicial authority would be under a statutory obligation to refer the parties to arbitration. The question, however, arising for consideration of this court in the present case is that once an application under section 8 is filed by any party, would it ipse jure amount to ouster of jurisdiction of the concerned court or the judicial authority debarring it from passing any order in the main proceeding ? 35. In the case of case of Agri Gold Exims Ltd. v Sri Lakshmi Knits & Wovens, (2007)3 SCC 686 the Hon'ble Supreme Court has held that section 8 of the Act of 1996 is preemptory in nature. In a case where there is an arbitration agreement, the court is under an obligation to refer the parties to arbitration in terms of the arbitration agreement. Again in the case of Yogi Agarwal v Inspiration clothes & U in (2009) 1 SCC 372, the Apex court has held tha....
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....t? In our view, it would be difficult to give an interpretation to Section 8 under which bifurcation of the cause of action that is to say the subject matter of the suit or in some cases bifurcation of the suit between parties who are parties to the arbitration agreement and others is possible. This would be laying down a totally new procedure not contemplated under the Act. If bifurcation of the subject matter of a suit was contemplated, the legislature would have used appropriate language to permit such a course. Since there is no such indication in the language, it follows that bifurcation of the subject matter of an action brought before a judicial authority is not allowed. 17. Secondly, such bifurcation of suit in two parts, one to be decided by the arbitral tribunal and other to be decided by the civil court would inevitably delay the proceedings. The whole purpose of speedy disposal of dispute and decreasing the cost of litigation would be frustrated by such procedure. It would also increase the cost of litigation and harassment to the parties and on occasions there is possibility of conflicting judgments and orders by two different forums." 37. In the case of Ch....
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....nts would not only be liable to show that the entire gamut of the dispute falls within the purview of the arbitration agreement but also the fact that company petition is a sham and mischievous one which has been decked up deliberately so as to gainfully sustain the plea of non-arbitrability of such dispute. There would also be a heavy burden cast upon the appellants to show that the arbitration agreement would bind the non-signatory respondent No 10-15. In a case involving such complex questions of law and facts determination of the aforesaid aspect may call for deeper examination of the matter by the CLB. As such, the CLB cannot be found fault with for non-disposal of the C.A.907/2015 on the date of issuing the order dated 27/07/2015. 40. Coming to the argument made by Mr Banerjee that due to the pendency of the C.A. No 907 /2015, the CLB did not have any jurisdiction to pass the order dated 27/07/2015 it may be mentioned here-in that there is nothing in the Act of 1996 that supports such a conclusion. In the absence of any express provision contained in the statute, ouster of jurisdiction of the CLB cannot be readily inferred by this court. 41. There can be no doubt about ....