TaxTMI 
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2014 (8) TMI 1120
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....mpany Petition No. 78 of 2013 before the CLB for the following reliefs prayed in para 8 thereof:- (i) That this Hon'ble Board may be pleased to hold and declare that the Memorandum of Understanding dated 9.7.2010 is neither binding on the Company nor on the petitioners; (ii) That this Hon'ble Board may be pleased to direct the respondent no. 2(SEL) along with the respondent nos. 3 to 8 to refund the amount of Rs. 200 crores, siphoned away under the EPC contract dated 10.3.2010, to the Company, along with interest on the aforesaid amount at such rate as this Hon'ble Board may deem fit and expedient; (iii) That this Hon'ble Board may be pleased to direct the respondent no. 2(SEL) along with the respondent nos. 3 to 8 to refund the amount of Rs. 91.50 crores, siphoned away as bonus under the EPC contract dated 10.3.2010, to the Company, along with interest on the aforesaid amount at such rate as this Hon'ble Board may deem fit and expedient; (iv) That this Hon'ble Board may be pleased to quash and set aside the Service Agreement dated 1.3.2010, executed between the Company and the respondent no. 3(SIPL); (v) That this Hon'ble Board may be pleased ....
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....nual Report of the Company as on 31.3.2012 passed in the board meeting of the company held on 19.5.2012 and in AGM held on 20.8.2012 is neither binding on the Company nor on the petitioners; (xiii) That this Hon'ble Board may be pleased to quash and set aside the resolutions passed in the board meeting of the Company held on 29.12.2012; (xiv) That this Hon'ble Board may be pleased to quash and set aside the resolutions passed in the board meeting of the Company held on 30.3.2013; (xv) That this Hon'ble Board may be pleased to quash and set aside the resolutions passed in the board meeting of the Company held on 22.5.2013; (xvi) That this Hon'ble Board may be pleased to quash and set aside the resolutions passed by circular resolution pursuant to the letter dated 25.5.2013 addressed by the Company; (xvii) That this Hon'ble Board may be pleased to direct the Company to return the amount of Rs. 16,91,88,000/- deposited by ML, under protest, vide its letter dated 7.6.2013; (xviii) That this Hon'ble Board may be pleased to quash and set aside the resolutions passed by the shareholders of the Company in their Extra-O....
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....vice agreement was executed between SIPL and the company for rendering the project development and financial advisory services to ensure that the project achieves speedy financial closure and disbursement from the lenders. 3.4. On 9.3.2010, concession agreement was executed between NHAI and the company for execution of the project, whereunder, exclusive rights, license and authority to construct, operate and maintain the project for a period of 20 years are given on the terms and conditions set out in the agreement. 3.5. On 10.3.2010, EPC contract, i.e. Engineering and Procurement Construction contract, was executed between the company and the SEL, whereunder the company agreed to pay Rs. 1025 crore as contract price to the SEL. In this agreement, there is also a clause enabling the SEL to subcontract whole or any part of the work without prior approval of the company while remaining fully responsible for the performance of all the works in accordance with this agreement. 3.6. Then on 30.4.2010, another EPC contract was executed between the company, SEL and KNR Construction Limited, whereunder the SEL appointed the KNR Construction Limited (referred as EPC Contractor in....
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....ove, the dispute shall be referred to a sole arbitrator appointed by the common consensus of the Promoters, failing which both of the Shareholders group shall have right to appoint one arbitrator each of their own choice. The two Arbitrators so appointed shall appoint an Umpire, whose decision shall be binding on both the Arbitrator and the Shareholders Group. The seat of arbitration shall be at Ahmedabad, India, and the arbitration shall be conducted in accordance with the Indian Arbitration and Conciliation Act, 1996. 36.2. All arbitration proceedings conducted pursuant to this Clause 36 shall be conducted in the English Language. 3.7. The MoU does not contain any arbitration clause. However, the MoU contains the following terms: 1. Parties agree and withdraw all the Correspondence entered into by them including but not restricted to details mentioned in Schedule-'A' and accordingly all the allegations, claims or denial to such allegations and claims shall stand withdrawn by the respective Parties. (hereinafter collectively referred to as 'Correspondence') 2. None of the Parties would accordingly rely upon, claim or any right or re-raise t....
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.... this Court in this petition. The petitioner No. 1 and the other respondents also filed different company applications being Nos. 183 to 189 of 2013 to dismiss the company petition inter alia on the ground of mis-joinder of the parties. With Company Application No. 178 of 2013, the other applications were dismissed by common order, however, the order dismissing the other applications is not under challenge. 5. The CLB has observed that for referring the parties to arbitration under Section 8 of the Arbitration Act, following five tests are required to be met:- (i) Existence of a valid and subsisting agreement between the parties; (ii) Parties to the arbitration agreement and parties to the petition are common; (iii) Subject matter of action is same as the subject matter of arbitration agreement; (iv) Other party applies the Court for reference to arbitration before filing the written statement; (v) The relief sought for in the petition can be adjudicated and granted by the arbitrator/arbitral Tribunal. 6. The CLB has held that first test is satisfied, second test is not met as the parties to the company petition and the parties to the arbit....
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....red the parties to arbitration. Mr. Trivedi submitted that the MoU and SHA are contemporaneous agreements and cannot be read in isolation and since the grievances made in the company petition are alleged breach of the agreements, there is no bar in referring the parties of the company petition to arbitration. 9. Mr. Trivedi submitted that the reliefs prayed in the company petition are on hollow allegations of oppressive and conduct of majority and mismanagement of company and it is nothing but artful drafting of the company petition which cannot take away the jurisdiction of the arbitrator. Mr. Trivedi submitted that in respect of the matter brought before the CLB in company petition under Sections 397, 398, 399 and 402 of the Act, the jurisdiction of the Civil Court is not barred and in respect of such matter, the arbitrator is competent to decide the dispute when there is valid arbitration agreement between the parties to resolve the dispute by arbitration. Mr. Trivedi submitted that even otherwise, bar against Civil Court's jurisdiction is not to be inferred for any matter of a civil dispute unless it is expressly and impliedly barred. Mr. Trivedi submitted that reading the....
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....n the case of Agri Gold Exims Ltd. Vs. Sri Lakshmi Knits & Wovens and others reported in (2007) 3 SCC 686; [10] In the case of Raja Ram Kumar Bhagrava (Dead) By LRs. Vs. Union of India reported in (1988) 1 SCC 681; [11] In the case of CDS Financial Services (Mauritius) Vs. BPL Communications Ltd. and others reported in 2004 (121) Company Cases 374; [12] In the case of Incable Net (Andhra) Limited and others Vs. Apaksh Broadband Limited and others reported in reported in (2010) 6 SCC 719; [13] In the Chloro Controls India (P) Ltd. Vs. Severn Trent Water Purification Inc. reported in (2013) 1 SCC 641; [14] In the case of Everest Holdings Limited Vs. Shyam Kumar Shrivastava and others reported in (2008) 16 SCC 774; [15] In the case of Virender Yadav Vs. Aerosvit Airlines and Others reported in 2008 (3) ALR 445 (Delhi); [16] In the case of Swiss Timing Limited Vs. Organising Committee, Commonwealth Games 2010, Delhi reported in 2014 (2) ALR 460 (SC); [17] In the case of Airtouch International (Mauritius) Ltd. Vs. RPG Cellular Investments and Holdings P. Ltd. reported in 2004 ALR 647; [18] In the case of Bialetti In....
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....pany and thus referable to arbitration under the agreement. Mr. Shelat submitted that the law developed internationally is that even non-signatory parties to the arbitration agreement, if found intrinsically connected with main agreement, can be referred to arbitration and this Court can judicially determine by reading down the SHA that there is implied consent by non-parties for arbitration. Referring to Rusell on arbitration and the extract from Mulla, Mr. Shelat submitted that the question about reference to arbitration is to be decided by applying commercial wisdom. Mr. Shelat submitted that applying such commercial wisdom, when non-contractual claims if found intimately connected with contract, the arbitration clause even if designed primarily for contractual claims, can be extended to cover non-contractual claims. Mr. Shelat submitted that the arbitration cannot be defeated at the instance of one of the parties by contending that some parties to the judicial proceedings are not parties to the arbitration agreement. Mr. Shelat submitted that if the Court finds that non-parties to the arbitration agreement could be bound by the arbitration in view of their connectivity with the....
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.... In fact, it would be always beneficial for the parties to first allow the arbitrator to dwell into the dispute between the parties to find out solution to the dispute and during proceeding of arbitration, if it is found by the arbitrator that the matter could be dealt with only by statutory forum, the parties could be made entitled to have recourse to the statutory remedy. 14. Mr. Shelat relied on following decisions:- [1] In the case of Tapan Kumar Paul Vs. Krishna Kanta Paul and others reported in: AIR 1980 Calcutta 28; [2] In the case of Fulham Football Ltd. Vs. Richards and Anr. reported in: [2012] 2 WLR 1008; [3] In the case of 20th Century Finance Corporation Ltd. Vs. Union of India and others reported in (2011) 161 Company Cases 247; [4] In the case of Olympus Superstructures Pvt. Ltd. Vs. Meena Vijay Khetan and others reported in AIR 1999 SC 2102; 15. Learned senior advocate Mr. Mihir Thakore appearing with M/s. Singhi & Company, Advocates for respondent No. 2, submitted that Sections 397 and 398 of the Act confer exclusive jurisdiction upon CLB to decide the matter covered thereunder and in respect of the petition filed under such provisi....
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....tion is filed complaining about oppression or mismanagement against the majority group, it is for CLB to find out whether the case is made out on the basis of evidence. If CLB finds that it is nothing but a breach or for enforcement of agreements between the parties, the CLB may not exercise the powers under the Act and may leave it to the parties to take appropriate remedies under the ordinary law, but the matter could not be referred to arbitration to first examine and find out whether the dispute is simply concerning breach or enforcement of the agreements between the parties. Mr. Thakore submitted that if such a course is permitted to be adopted and if the arbitrator finds that the matter brought before him is to be dealt with by public fora, the same would create irreversible situation, as once the parties are referred to arbitration under Section 8 of the Arbitration Act, no proceedings would remain before the Court or statutory authority. Dealing with the case of Fulham (supra), Mr. Thakore submitted that Singapore Court in recent decision in the case of Silica Investors Limited Vs. Tomolungen Holdings Limited and Others reported in (2014) SGHC 101 has not approved the cours....
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.... not available to them. Mr. Thakore submitted that if the submission as regards the issue Estoppel is not accepted by this Court, then also, majority directors are necessary parties not only on account of their fiduciary relationship with the company and but in the context of the nature of allegations in the company petition and the reliefs prayed therein. Mr. Thakore submitted that even by consent of such majority directors, they cannot be referred to the arbitration for the matter in dispute as for reference to arbitration, there has to be an agreement between the parties. By their consent, they do not become parties to the agreement. Mr. Thakore submitted that in whatever capacity, either as nominee director or otherwise, the directors are bound to discharge their duties towards the company. They cannot act on behalf of a particular group of shareholders. Therefore, since they are necessary parties to the company petition and not parties to the arbitration agreement, they cannot be referred to arbitration. 17. Mr. Thakore submitted that the company is not a party to the arbitration agreement. Mr. Thakore submitted that though large number of provisions of SHA were incorporated ....
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....fore the CLB under a statutory right conferred on a member to be dealt with only by under Sections 397 and 398 of the Act, cannot be scuttled by arbitration agreement between the parties. Mr. Joshi submitted that for the nature of reliefs prayed, dissimilarities in parties, nature of agreement in SHA for reference to arbitration and nature of allegations made in the company petition would collectively disentitle the petitioners to have reference to the arbitration and dissuade the Court from referring the parties to the arbitration. Mr. Joshi submitted that the right to bring complaint as regards conduct of oppressiveness and mismanagement of the company is statutorily recognized under Section 399 of the Act and the powers to be exercised by the CLB under Sections 397 and 398 read with Section 402 of the Act are special and exclusive akin to the powers of winding up of the company. Mr. Joshi submitted that on examining the material, the CLB may not find a case for winding up but the matter would still remain large before the CLB to pass appropriate order under Sections 397 and 398 of the Act or take measures under Section 402 of the Act as exigencies may demand. Mr. Joshi submitted....
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....followed for many reasons discussed by the Singapore Court. Mr. Joshi submitted that since CLB has correctly followed the law on the issue of referring the parties to arbitration under Section 8 of the Arbitration Act, this Court may not interfere with the order of the CLB. 22. Mr. Joshi relied on following decisions: [1] In the case of Union of India and others Vs. Sicom Limited and Another reported in (2009)2 SCC 121; [2] In the case of Cosmosteels Private Ltd. and others Vs. Jairam Das Gupta and others, reported in (1978)1 SCC 215; [3] In the case of Rajasthan State Road Transport Corporation and Another Vs. Krishna Kant and others reported in (1995)5 SCC 75; [4] In the case of Haryana Telecom Ltd. Vs. Sterlite Industries (India) Ltd. reported in (1999)5 SCC 688; [5] In the case of Management Committee of Montfort Senior Secondary School Vs. Vijay Kumar and others reported in (2005)7 SCC 472; [6] In the case of Kamal Kumar Dutta and Another Vs. Ruby General Hospital Ltd. and Others reported in (2006)7 SCC 613; [7] In the case of M.S.D.C. Radharamanan Vs. M.S.D. Chandrasekara Raja and Another reported in (2008)6 SCC 750; ....
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....ted, it must yield to statutory provision as held by Hon'ble Supreme Court in the case of Sicom Limited (supra). 25. It appears that on the basis of the recommendation of the Company Law Commission, amendment was brought in by the Indian Companies (Amendment) Act, 1951 (L II of 1951) in 1913 Act. Amongst other provisions, powers were conferred on the Courts by Section 7 thereof, based on the provisions of Section 210 of the English Companies Act, 1948. Section 210 of the English Act reads as under:- 210. Alternative remedy to winding up in cases of oppression (1) Any member of a company who complains that the affairs of the company are being conducted in a manner oppressive to some part of the members (including himself) or, in a case falling within subsection (3) of section one hundred and sixty-nine of this Act, the Board of Trade, may make an application to the court by petition for an order under this section. (2) If on any such petition the court is of opinion-- (a) that the company's affairs are being conducted as aforesaid; and (b) that to wind up the company would unfairly prejudice that part of the members, but otherwise the....
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....ng himself) may make an application to the Court for an order under this section. (2) An application under sub-section (1) may also be made by the Central Government if it is satisfied that the affairs of the company are being conducted as aforesaid. (3) No application under sub-section (i) shall be made by any member unless- (a) in the case of a company having a share capital, the member complaining- (i) has obtained the consent in writing of not less than one hundred in number of the members of the company or not less than one-tenth in number of the members, whichever, is less or (ii) holds not less than one-tenth of the issued share capital of the company upon which all calls and other sums due have been paid; and (b) in the case of a company not having a share capital the member complaining has obtained the consent in writing of not less than one-fifth in number of the members, and where there are several persons having the same interest in any such application and the condition specified in clause (a) or clause (b) of this sub-section is satisfied with reference to one or more of such persons, any one or more of them may, with the....
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....es any alteration, in or addition to, the memorandum or articles of any company, then notwithstanding anything contained in any other provision of this Act, but subject to the provisions of the order, the company concerned shall not have power without the leave of the Court to make any further alteration in, or addition to, the memorandum or articles inconsistent with the provisions of the order, but subject to the foregoing provisions of this sub-section the alterations or additions made by the order shall have the same effect as if duly made by a resolution of the company, and the provisions of this Act shall apply to the memorandum or articles as to altered or added to accordingly. (7) A certified copy of every order under this section, altering or adding to, or giving leave to alter or add to, the memorandum or articles of any company shall, within fifteen days after the making thereof, be delivered by the company to the registrar for registration, and if a company makes default in complying with the provisions of this sub-section, the company and every officer of the company who is in default shall be punishable with fine which may extend to five thousand rupees. &nb....
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....398 read with Section 402 of the Act. 29. Ordinarily, the remedies available before the civil court in general are action in tort, action to enforce agreement, to seek redressal for the relief for breach of the agreement, to seek redressal for the relief as regards property rights. The other remedies are as regards the religious rights, the specific matters covered under the Code of Civil Procedure, like suits for public nuisance under Section 91, for public charities under Section 92 and other supplementary proceedings covered under Sections 94 and 95. It is required to be noted that the Civil Court is also empowered to refer the possible terms of settlement under Section 89 of Part-V of the Code to 'Arbitration for 'Settlement of disputes outside the Court' in respect of the proceedings pending before it. 30. It is well settled principle of law that exclusion of jurisdiction of Civil Court in respect of a dispute of civil nature is not to be readily inferred unless it is found expressly or impliedly barred by the statute. There is no express bar contained in the Act excluding the jurisdiction of the civil court for the matters covered by Sections 397, 398 read with ....
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....t being outvoted on some issue of domestic policy. The phrase "oppressive to some part of the members" suggests that the conduct complained of "should at the lowest involve a visible departure from the standards of fair dealing, and a violation of the conditions of fair play on which every share-holder who entrusts his money to a company is entitled to rely..... But, apart from this, the question of absence of mutual confidence per se between partners, or between two sets of share-holders, however, relevant to a winding up seems to have no direct relevance to the remedy granted by S. 210. It is oppression of some part of the share-holders by the manner in which the affairs of the company are being conducted that must be averred and proved. Mere loss of confidence or pure deadlock does not come within S. 210. It is not lack of confidence between share-holders per se that brings S. 210 into play, but lack of confidence springing from oppression of a minority by a majority in the management of the company's affairs, and oppression involved at least an element of lack of probity or fair dealing to a member in the matter of his proprietary rights as a shareholders. [2] In the....
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.... the extent of the power of the Court under Section 397 or 398. Does the power of the Court extend to the making of an order, setting aside or interfering with past and concluded transactions between a Company and a third party which are no longer continuing wrongs or is the power of the Court confined to the making of an order preventing future oppression or mismanagement? Mr. S.B. Vakil, learned advocate appearing on behalf of the petitioners, pleaded for former construction on the ground that such construction would enlarge the power of the Court rather than limit it and in support of this plea he relied on the well-known rule of interpretation that in the case of provisions of a remedial nature, which Sections 397 and 398 undoubtedly were, the construction to be made should be such as will suppress the mischief and advance the remedy and add force and life to the cure and remedy according to the true intent of the makers of the Act, pro bono publico. Now Mr. S.B. Vakil is certainly right in his submission that Sections 397 and 398 being designed to suppress an acknowledged mischief, they should receive liberal interpretation and the Court should give such construction as will a....
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....urse of conduct on the part of controlling shareholders in the management of the affairs of the Company which is oppressive to any shareholder or share-holders or prejudicial to the interests of the Company it is clear that an order can be made under these Sections only for the purpose of bringing to an end such course of oppressive or prejudicial conduct, that is, for the purpose of putting an end to oppression or mismanagement on the part of controlling shareholders so that there may not be in future such oppression or mismanagement. The language of Sections 397 and 398 leaves no doubt as to the true intendment of the Legislature and it is transparent that the remedy provided by these Sections is of a preventive nature so as to bring to an end oppression or mismanagement on the part of controlling shareholders and not to allow its continuance to the detriment of the aggrieved shareholders or the Company, The remedy is not; intended to enable the aggrieved shareholders to set at naught what has already been done by controlling shareholders in the management of the affairs of the Company. If such were the intention of the Legislature, which as I will presently show it could never h....
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....irs of the Company. [3] In the case of Marikar (Motors) (supra), the Kerala High Court has held and observed on page 369 to 371 as under:- Tested in the above background, the reliefs claimed in the case on hand in so far as they relate to the validity of the 37th and 38th annual general meetings and the co-option of defendants Nos. (3) to (6) appear to be within the scope of a representative action recognised as an exception to the rule in Foss v. Harbottle [1843] 2 Hare 461. So too would be the complaint regarding oppression and mismanagement. Gower catalogues five classes of cases where a suit by a shareholder instead of by the company is considered permissible (pp. 644, 645): (i) When it is complained that the company is acting or proposing to act ultra vires, (ii) When the act complained of, though not ultra vires the company, could be effective only if resolved upon by more than a simple majority vote, i.e., where a special or extraordinary resolution is required and (it is alleged) has not been validly passed, (iii) Where it is alleged that the personal rights of the plaintiff shareholder have been infringed or are about to be infringed a....
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....right can be exercised only by the required number of shareholders joining together. The true question, it appears to me, is whether the scope of Chap. VI is only to provide a convenient remedy for the minority shareholders under certain conditions, or whether the provisions therein are intended to exclude all other remedies; and in order to incline to the latter view, I would require much more than a bare reference to a rule of construction about the creation of new jurisdictions. Suits by minority shareholders against oppression and mismanagement have been, as noticed earlier, a time-honoured exception to the rule in Foss v. Harbottle [1843] 2 Hare 461 and in the absence of words expressly or clearly barring them, it is not possible to hold that Sections 397, 398 and 408 of the Companies Act exclude the jurisdiction of the ordinary courts. [4] In the case of Pradip Kumar Sarkar (supra), the Calcutta High has held and observed on page 511 to 512 as under:- In this interlocutory application, the court is concerned with the broad question as to whether there are reasonable grounds to come to a prima facie finding as to the manipulation of the transfer of shares which would ....
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.... same subject-matter and where shareholders complain of mismanagement or oppression and of acts prejudicial to the interest of the company or prejudicial to public interest, the civil court may entertain a suit by shareholders and grant appropriate reliefs. On a construction of the provisions of Section 2(11) and Section 10 of the Companies Act, 1956, it has been held by the Division Bench of this court in Asansol Electric Supply Co. v. Chunnilal Das, [1972] 75 CWN 704, that the Companies Act does not exclude the jurisdiction of the civil court. Moreover, unless a statute, by express provision or by necessary implication, ousts the jurisdiction of the civil court, the civil court will have jurisdiction to try all suits of a civil nature. The ouster of jurisdiction of the civil court shall not be readily inferred. Sections 397 and 398 of the Act do not exclude, either expressly or by necessary intendment, the jurisdiction of the civil court. [5] In the case of Cosmosteels Private Ltd. (supra), the Hon'ble Supreme Court has held and observed in para 8 and 10 as under:- 8. Sections 397 and 398 enable the minority shareholders to move the Court for relief against opp....
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.... from the Court under Ss. 397 and 398 and the Court in a petition of this nature considers it fair and just to direct the Company to purchase the shares of the minority shareholders to relieve oppression, if the procedure prescribed by Ss. 100 to 104 is required to be followed, the resolution will have to be first adopted by the members of the Company but that would be well nigh impossible because the very majority against whom relief is sought would be able to veto it at the threshold and the power conferred on the Court would be frustrated. That could never have been the intention of the Legislature. Therefore, it is not conceivable that when a direction for purchase of shares is given by the Court under S. 402 and consequent reduction in share capital is to be effected, the procedure prescribed for reduction of share capital in Ss. 100 to 104 should be required to be followed in order to make the direction effective. [6] In the case of Kamal Kumar Dutta (supra), Hon'ble Supreme Court has held and observed in para 21 as under:- 21. But after the amendment the power which was being exercised under Sections 397 and 398 of the Act by learned Single Judge of the Hig....
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....hich really constituted one proceeding. Such a right could be taken away only by a subsequent enactment either expressly or by necessary intendment. [7] In the case of Krishna Kant (supra), the Hon'ble Supreme Court has held and observed in para 35 as under:- 35. We may now summarise the principles flowing from the above discussion: (1) Where the dispute arises from general law of contract, i.e., where reliefs are claimed on the basis of the general law of contract, a suit filed in civil court cannot be said to be not maintainable, even though such a dispute may also constitute an "industrial dispute" within the meaning of Section 2(k) or Section 2-A of the Industrial Disputes Act, 1947. (2) Where, however, the dispute involves recognition, observance or enforcement of any of the rights or obligations created by the Industrial Disputes Act, the only remedy is to approach the forums created by the said Act. (3) Similarly, where the dispute involves the recognition, observance or enforcement of rights and obligations created by enactments like Industrial Employment (Standing Orders) Act, 1946-which can be called 'sister enactments' t....
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....on mechanism to the workmen, a mechanism which is speedy, inexpensive, informal and un-encumbered by the plethora of procedural laws and appeals upon appeals and revisions applicable to civil courts. Indeed, the powers of the Courts and Tribunals under the Industrial Disputes Act are far more extensive in the sense that they can grant such relief as they think appropriate in the circumstances for putting an end to an industrial dispute. [8] In the case of Bal Mukund Bairwa (supra), resolving the conflict between Krishna Kant case and Khadarmal Case (2006)1 SCC 59], Hon'ble Supreme Court has held and observed in para 12, 13, 14, 33, 36 and 49 as under:- 12. Section 9 of the Code is in enforcement of the fundamental principles of law laid down in the maxim Ubi jus ibi remedium. A litigant, thus, having a grievance of a civil nature has a right to institute a civil suit in a competent civil court unless its cognizance is either expressly or impliedly barred by any statute. Ex facie, in terms of Section 9 of the Code, civil courts can try all suits, unless barred by statute, either expressly or by necessary implication. 13. The civil court, furthermore, being a court of p....
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....e Civil Court will have no jurisdiction. This aspect of the matter has recently been considered by this Court in Rajasthan State Road Transport Corporation and Ors. vs. Mohar Singh (2008) 5 SCC 542]. The question as to whether the civil court's jurisdiction is barred or not must be determined having regard to the fact of each case. 49. An assumption on the part of this Court that all such cases would fall only under the Industrial Disputes Act or sister laws and, thus, the jurisdiction of the civil court would be barred, in our opinion, may not be the correct interpretation of Premier Automobiles Ltd. (supra) which being a three-Judge Bench judgment and having followed Dhulabhai (supra), which is a Constitution Bench judgment, is binding on us. 32. Sections 2(11), 2(14) and 10 of the Act reads as under:- 2(11) " the Court " means, (a) with respect to any matter relating to a company (other than any offence against this Act), the Court having jurisdiction under this Act with respect to that matter relating to that company, as provided in section 10; (b) with respect to any offence against this Act, the Court of a Magistrate of the First Class or, ....
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....e amendment, the CLB has been conferred the exclusive powers to deal with the matters under Sections 397 to 405 of the Act. The CLB is having all trapping of the Court and exercising the judicial powers as held by the Hon'ble Supreme Court in the case of Canara Bank Vs. Nuclear Power Corporation of India Ltd. and others reported in 1995 (Suppl.) 3 SCC 81. 35. In the case of Ammonia Supplies Corporation (P) Ltd. (supra), the Hon'ble Supreme Court while interpreting the word 'Court' used in Section 2(11) read with Section 10 of the Act in the context of Section 155 of the Act to determine whether jurisdiction of civil court is barred, has held and observed in para 31 and 32 as under:- 31. Sub-section (1)(a) of Section 155 refers to a case where the name of any person without sufficient cause entered or omitted in the Register of Members of a company. The word 'sufficient cause' is to be tested in relation to the Act and the Rules. Without sufficient cause entered or omitted to be entered means done or omitted to do in contradiction of the Act and the Rules or what ought to have been done under the Act and the Rules but not done. Reading of this sub-cl....
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.... not have directed for seeking permission to file suit only because a party for dispute sake states that the dispute raised is complicated question of facts including fraud to be adjudicated. The Court should have examined itself to see whether even prima facie what is said is complicated question or not. Even dispute of fraud, if by bare perusal of the document or what is apparent on the face of it on comparison of any disputed signature with that of the admitted signature the Court is able to conclude no fraud, then it should proceed to decide the matter and not reject it only because fraud is stated. Further on the other hand learned Counsel for the respondent totally denies any share having been purchased by the appellant-Company or any amount paid to it. No transfer of any such share was ever approved by the Board of Director. It is urged the money even if advanced to Sri V.K. Bhargava by the appellant-Company, if at all was a private transaction between the two to which respondent-Company has no concern. So we find there is total denial by the respondent. 32. We have gone through the judgment of the High Court. It has rightly held the law pertaining to the jurisdictio....
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.... the Official Gazette and subject to such restrictions, limitations and conditions as it thinks fit, empower and District Court to exercise all or any of the jurisdiction conferred by this Act upon the Court, not being the jurisdiction conferred- (a) in respect of companies generally, by Sections 237, 391, 394, 395 and 397 to 407, both inclusive; (b) in respect of companies with a paid-up share capital of not less than one lakh of rupees, by Part VII (Sections 425 to 560) and the other provisions of this Act relating to the winding up of companies. (3) For the purposes of jurisdiction to wind up companies, the expression "registered office" means the place which has longest been the registered office of the company during the six months immediately preceding the presentation of the petition for winding up. 19. A bare perusal of the aforementioned provisions leaves no manner of doubt that thereby the jurisdiction of the civil Court has not been ousted. The civil Court, in the instant case, was concerned with the rival claims of the parties as to whether one party has illegally been dispossessed by the other or not. Such a suit, apart from the general law, wo....
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....37, 397, 425, etc. In other words, the conferment of jurisdiction on "the Court" is not under S. 10, but by other provisions of the Act like those enumerated above. If, on the other hand, Sections 2(11) and 10 are construed as not only nominating the Courts, but also conferring exclusive jurisdiction on them, the specific provisions in the other sections conferring jurisdiction on the Court to deal with the matters covered by them will become redundant. It may be that where the Act specifies the Company Court as the Forum for complaint in respect of a particular matter, the jurisdiction of the civil Court would stand ousted to that extent. This depends, as already noticed, on the language of the particular provisions (like Sections 107, 155, 397 and others) and not on Sections 2(11) and 10...... 37. As held and observed in para 22 of above decision, if the dispute between the parties is eminently a civil dispute, like the one in the said case, Civil Court has jurisdiction to decide such dispute. 38. Therefore, in light of above, it can be reasonably concluded that except the matters for which the Act has specified the Company Court or the CLB as the forum, the Civil Court has jur....
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.... companies such as registered office, registers of members and debenture-holders, annual returns, meetings and proceedings, accounts, audit, investigation, etc.; Chapter II, which includes section 255, deals with directors, their qualification, disqualification and remuneration, meetings of the board, board's powers, procedure where directors are interested, etc.; Chapter III deals with managing agents, their appointment, remuneration, restrictions on their powers, etc.; Chapter IV deals with secretaries and treasurers; Chapter IV-A deals with powers of the Central Government to remove managerial personnel from office on the recommendation of the Tribunal; Chapter V deals with arbitration, compromises, arrangements and reconstructions; Chapter VI, which includes sections 397 to 409, deals with prevention of oppression and mismanagement; Chapter VII deals with constitution and powers of advisory committee and Chapter VIII contains miscellaneous provisions. It will thus be seen that section 255 on which substantially the entire argument of Mr. Sen is based is to be found in Chapter II which deals with directors and the constitution of the board, through which agency the corporate....
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....ppression or mismanagement complained of and to prevent further oppression or mismanagement in future or to see that the affairs of the company are not being conducted in a manner prejudicial to public interest. In other words, whenever the legislature wanted to do so it has made a distinction between powers conferred on the Government (vide section 408) and powers conferred on the court (vide section 402) while dealing with similar emergent situations or extraordinary circumstances arising in the management of a company and in the case of the Government it has placed restrictions or limitations on the Government's powers but no restrictions or limitations of anything have been prescribed on the court's powers; if the legislature had desired that the court's powers while acting under section 397 or 398 read with section 402 should be exercised subject to or in consonance with the other provisions of the Act it would have said so. Moreover, the topics or subjects dealt with by sections 397 and 398 are such that it becomes impossible to read any such restriction or limitation on the powers of the court acting under section 402. Under section 397 read with section 402 powe....
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....the order that may be passed thereunder the object sought to be achieved by these sections and beyond this limitation which arises by necessary implication it is difficult to read any other restriction or limitation on the exercise of the court's power. We are, therefore, unable to accept Mr. Sen's contention that the court's powers under section 398 read with section 402 should be read as subject to the other provision of the Act dealing with normal corporate management or that the court's orders and directions issued thereunder must be in consonance with the other provisions of the Act. There is another aspect of sections 397, 398 and 402 which also shows that no such limitation as is sought to be suggested by Mr. Sen can be read on the court's power while acting under the sections. Section 397 clearly suggests that the court must come to the conclusion that the company's affairs are being conducted in a manner prejudicial to public interest or in a manner oppressive to any member or members of the company and that to wind up the company would unfairly prejudice such member or members, but that otherwise the facts would justify the making of a windi....
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....imple reason that if as a result of corporate management that has been allowed to run for a certain period oppression or mismanagement has resulted, the court should have power to substitute the entire corporate management by some form of non-corporate management and while doing so the court cannot obviously have any regard or be subject to the other provisions dealing with the corporate form of management. But what was urged by Mr. Sen was that if while acting under section 398 read with section 402 the court thought fit to have recourse to a mode of corporate type of management, for example, if the court felt proper to have a board of directors for future management, then such corporate mode of management to be provide by the court should conform to other provisions of the Act dealing with corporate management. It is not possible to accept this contention of Mr. Sen for two reasons. In the first place, if the court's power under these sections is wide enough to have the corporate management supplanted wholly or completely, it is difficult to understand why the court should not have power to make a partial inroad or encroachment and have a truncated form of corporate managemen....
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....of section 397 and section 398 read with section 402 and the provisions of section 255 of the Act and, therefore, the non-obstante clause must not have been used while enacting the relevant sections. By the very nature the provisions contained in sections 397 and 398 read with section 402 have been enacted to meet emergent situations and extraordinary circumstances while section 255 contains provisions which would operate when the normal corporate management of a company is being run. Normally, the two sets of circumstances in which the two sets of provisions would operate be mutually exclusive. Therefore, there is no question of a conflict necessarily arising between these two provisions and this, in our view, sufficiently explains the absence of a non-obstante clause in sections 397, 398 and 402 of the Act. It is true that while conferring powers on the Central Government to prevent oppression or mismanagement under section 408 a non-obstante clause has been used. But, indisputably, there is substantial difference between the powers conferred upon the court under section 397 or 398 read with section 402 and the powers conferred upon the Central Government under section 408, inasm....
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....y of the other provisions of the Act, there is a choice available to the court and having regard to the manifest purpose of the legislation, it will be difficult to accept the contention of Mr. Sen that the narrower construction of these sections leading to curtailment of owners conferred upon the court should be adopted simply because the provisions do not contain any non-obstante clause; instead we are inclined to adopt a broader construction, inasmuch as such construction would have the effect of achieving the desired result. 40. The ambit, intent and object of Sections 397, 398 and 402 of the Act considered and explained by Bombay High Court go to show that the powers under Sections 397, 398 and 402 are special and exclusive which are presently available to the CLB and they are not at all intended to be exercised by ordinary civil Court. 40.1. In the case of Incable Net (Andhra) Limited (supra), Hon'ble Supreme Court in the facts of the case held that the complaint was as regards breach of the contract and the party alleging oppression and mismanagement was party to the contract. The said decision shall have no application to the facts of the present case. 41. Then the q....
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....eration yet again before a three judge Bench of this Court in Needle Industries (India) Ltd. vs. Needle Industries Newey (India) Holding Ltd. (1981) 3 SCC 333 wherein Chandrachud, C.J. upon considering a large number of decisions of this Court as also the English Courts including S.P. Jain and Harmer Ltd. (supra) categorically held:- 172. Even though the company petition fails and the appeals succeed on the finding that the Holding Company has failed to make out a case of oppression, the court is not powerless to do substantial justice between the parties and place them, as nearly as it may, in the same position in which they would have been, if the meeting of May 2 were held in accordance with law. 22. The provisions of the Act vis-a-vis the jurisdiction of the Company Law Board must be considered having regard to the complex situation(s) which may arise in the cases before it. No hard and fast rule can be laid down. There cannot be any doubt whatsoever that the acts of omission and commission on the part of a member of a company should be qua the management of the company, but it is difficult to accept the proposition that the just and equitable test, which should b....
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....pon strong reliance has been placed by Mr. Sundaram as also in Re: Yenidje Tobacco Co. Ltd.: (1916) 2 Ch 412 amongst others. What is important is not the interest of the applicant but the interest of the shareholders of the company as a whole. If such a principle is applied in a case of winding up of a company, we do not see any reason not to invoke the said principle in a case under Section 397 of the Act, subject of course to the applicability of the well known judicial safeguards. The above powers are available only with the CLB and not with the arbitrator. 43. However, learned senior advocate Mr. Shelat submitted that if the arbitration agreement falls within Section 7 of the Arbitration Act, there is no bar in referring the parties to the arbitration if it is found that the matter before the CLB is the subject of arbitration agreement and the parties are treated as common. Section 7 of the Arbitration Act reads as under:- 7. Arbitration agreement. 1. In this Part, 'arbitration agreement' means an agreement by the parties to submit to arbitration all or certain disputes which have arisen or which may arise between them in respect of a defined legal relat....
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....trator, notwithstanding any agreement between the parties, would have no jurisdiction to order winding up of a company. The matter which is pending before the High Court in which the application was filed by the petitioner herein was relating to winding up of the company. That could obviously not be referred to the arbitration and, therefore, the High Court, in our opinion was right in rejecting the application. 44.2. In the case of Hindustan Petroleum Corpon. Ltd. (supra), the Hon'ble Supreme Court has held that in cases where there is an arbitration clause in agreement, it is obligatory for the Court to refer the parties to arbitration in terms of their arbitration agreement and nothing remains to be decided in the original action after such an application is made except to refer to the dispute to an arbitrator. The Court further observed that once existence of arbitration clause is admitted, it is mandatory for the civil court to refer the dispute to the arbitrator. However, in this very judgment, the Hon'ble Supreme Court found from the facts of the case that neither the petitioner, i.e. Hindustan Petroleum Corporation Ltd. was exercising the power of search and seizu....
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....leums (2003) 6 SCC 503 and Rashtriya Ispat Nigam Limited (supra)). No issue, therefore, would remain to be decided in a suit. Existence of arbitration agreement is not disputed. The High Court, therefore, in our opinion, was right in referring the dispute between the parties to arbitration. 44.5. In the case of Branch Manager, Magma Leasing and Finance Limited and Another (supra), the Hon'ble Supreme Court has held and observed in para 18 that Section 8 of the Arbitration Act is in the form of legislative command to the court and once prerequisite conditions of Section 8 are satisfied, the Court must refer the parties to arbitration. It is further observed that as a matter of fact, on fulfillment of the conditions, no option is left to the court and the court has to refer the parties to arbitration. In the said case, the question was as to whether the arbitration agreement survived for the purpose of resolution of the disputes arising under or in connection with the contract even if its performance had come to an end on account of termination due to breach. In the facts of the case, the Hon'ble Supreme Court found that Clause 22 of the hire purchase agreement that provides....
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....omp Case 279 (Delhi). I am unable to accept the contention of learned counsel. The decisions cited by him do not lay down directly the wide proposition that disputes arising in proceedings under section 397 and section 398 cannot be referred to arbitration though there are observations which can be read out of context to suggest that they do. As pointed out by counsel for the petitioner, these were cases under section 34 of the Arbitration Act and all that the court did was to refuse stay of the proceedings in a section 397 and 398 petition sought for on the ground that the articles of the company provided for reference of disputes to arbitration. The power to stay court proceedings because of the existence of an arbitration clause which has been, or can be, invoked or, for that matter of the existence of an award, is a matter of judicial discretion. The court may well refuse to grant stay of the petition under sections 397 and 398 which the parties have sought, and the court can grant much wider and more appropriate relief. But this is not the same as saying that when a court is seized of proceedings under sections 397 and 398, its powers to not extend to the reference of some or ....
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..... 32. The nature and scope of issues arising for consideration in an application under section 11 of the Act for appointment of arbitrators, are far narrower than those arising in an application under section 8 of the Act, seeking reference of the parties to a suit to arbitration. While considering an application under section 11 of the Act, the Chief Justice or his designate would not embark upon an examination of the issue of 'arbitrability' or appropriateness of adjudication by a private forum, once he finds that there was an arbitration agreement between or among the parties, and would leave the issue of arbitrability for the decision of the arbitral Tribunal. If the arbitrator wrongly holds that the dispute is arbitrable, the aggrieved party will have to challenge the award by filing an application under section 34 of the Act, relying upon sub-section 2(b)(i) of that section. 33. But where the issue of 'arbitrability' arises in the context of an application under section 8 of the Act in a pending suit, all aspects of arbitrability have to be decided by the court seized of the suit, and cannot be left to the decision of the Arbitrator. Even if th....
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.... are required to be adjudicated by courts and public tribunals, being unsuited for private arbitration. This is not however a rigid or inflexible rule. Disputes relating to sub-ordinate rights in personam arising from rights in rem have always been considered to be arbitrable. 45. Thus, the court/judicial authority should satisfy itself on the aspects narrated in para 19 of the above judgment before referring the parties to arbitration under Section 8 of the Arbitration Act. If the dispute which is the subject matter of suit or proceedings before the judicial authority, does not fall within the scope of the arbitration agreement and if the reliefs sought in such proceedings cannot be adjudicated or granted in the arbitration proceedings, the parties cannot be referred to arbitration even if there exists an arbitration agreement between the parties. The Hon'ble Supreme Court has observed that the Arbitral Tribunal is a private fora chosen voluntarily by the parties to the dispute in place of courts and the tribunals are public fora constituted under the laws of the country. Therefore, every civil or commercial dispute, either contractual or non-contractual which can be decided ....
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....eyond the purview of arbitration. The arbitration is forum chosen by the parties to resolve the dispute when arise between them under or in connection with the agreement. Therefore, the arbitrator is to exercise his jurisdiction within the terms of reference in respect of the dispute arisen out of or in connection with the agreement between the parties and not competent to decide anything beyond and de hors the reference and it will render the legislative intention nugatory if one reads the powers under Sections 397, 398 and 402 of the Act within the competence of the arbitrator. 45.1. In the case of State of Goa Vs. Praveen Enterprises reported in (2012)12 SCC 581, the Hon'ble Supreme Court while explaining the scope of Sections 8 and 11 of the Arbitration Act as well as Section 89 of the Code of Civil Procedure has held and observed in para 13 and 39 as under:- 13. 'Reference to arbitration' can be in respect of reference of disputes between the parties to arbitration, or may simply mean referring the parties to arbitration. Section 8 of the Act is an example of referring the parties to arbitration. While section 11 contemplates appointment of arbitrator [vid....
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.... the dispute being ascertained, it having been held to fall within the terms of the arbitration clause, and the clause having been found to be still effective, there remains for the court the question whether there is any sufficient reason why the matter in dispute should not be referred to arbitration. 46. It is a different matter that even when a party has a complaint about conducting the affairs of the company in a manner oppressive to him or prejudicial to the interest of the company, he may not take recourse to the proceedings under Sections 397 and 398 of the Act and may choose to ventilate his grievance to recoup his personal loss by resorting to civil remedy before the civil court because ultimately he is the dominus litis and he can select his remedy. However, simply because a party selects to go before the civil court with a prayer to compensate his loss cannot be a ground to suggest that the civil court or the arbitrator has jurisdiction to decide the matter which squarely falls within the domain of CLB under Sections 397 and 398 of the Act. In the case Vijay Kumar (supra), the Hon'ble Supreme Court has held and observed in para 10 and 11 as under:- 10.....T....
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.... is no answer to a suit, howsoever frivolous the claim, that the law confers no such right to sue. A suit for its maintainability requires no authority of law and it is enough that no statute bars the suit. 47. Having thus considered the widths and scope of jurisdiction of arbitrator vis-a-vis the special and exclusive jurisdiction conferred upon the CLB under Sections 397, 398 read with Section 402 of the Act, the matter in the company petition now needs to be glanced at to deal with the other contentions. 48. Though it may appear that there were disputes and differences only between two brothers, i.e. respondent No. 3 who happens to be the Managing Director of respondent No. 2(MCL) and the respondent No. 7 who happens to be the Chairman of respondent No. 6(SEL) and such disputes were put to rest by MoU dated 9.7.2000, which is stated to have rectified the earlier EPC contracts and other agreements, however the allegations in the company petition as a whole are as regards the manner of majority directors conducting the affairs of the company oppressive to the minority group, prejudicial to the interest of the company and the public interest. The allegations in respect of such co....
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....at the controversy could not have been decided by CLB under Sections 397 and 398 of the Act. This judgment will have no application to the facts of the case. 51. However, it was submitted by learned senior advocate Mr. Shelat that in view of the arbitration clause contained in SHA, which is inter-se connected with other agreements between the parties, the arbitrator should be first allowed to examine whether the matter before the CLB could be resolved in terms of the agreement or not. Mr. Shelat submitted that even part of the matter where it concerns about breach of the promises, assurances and agreements between the parties could be referred to the arbitrator in terms of the arbitration agreement. Such contention is raised on the basis of Fulham's case (supra). 52. In Fulham's case, the petition was filed by Fulham Football Club Limited (Fulham), a member of the Football Association Premier League Limited (FAPL) (the company) alleging that its Chairman acted as an unauthorized agent in breach of Football Agents Regulation which unfairly prejudiced the interest of Fulham. The petition was filed under Section 994 of the English Companies Act, 2006, seeking relief of injun....
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....ation to the transfer of a Premier League player. It was observed that the Court was not concerned with the possible winding-up of the company and there was nothing in the scheme of these provisions which made the resolution of the underlying dispute inherently unsuitable for determination by arbitration on grounds of public policy. The only restriction placed upon the arbitrator was in respect of the kind of relief which could be granted. It was observed that the agreement could not arrogate to the arbitrator the question of whether a winding-up order should be made. That would remain a matter for the court in any subsequent proceedings. But the arbitrator could legitimately decide whether the complaint of unfair prejudice was made out and whether it would be appropriate for winding-up proceedings to take place or whether the complainant should be limited to some lesser remedy. It would only be in circumstances where the arbitrator concluded that winding-up proceedings would be justified that a shareholder would then be entitled to present a petition under Section 122(1)(g). 53. However, Singapore Court while dealing with Silica Investors (supra) held that the view in Fulham was ....
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....ersons and on such terms as the Court may direct; (d) provide for the purchase of the shares or debentures of the company by other members or holders of debentures of the company or by the company itself; (e) in the case of a purchase of shares by the company provide for a reduction accordingly of the company's capital; or (f) provide that the company be wound up. Following are the observations made and difficulties pointed out by Singapore Court for expressing inability to agree with the view expressed in Fulham in para 128 to 134 and 138 to 142, which read as under:- 128. One of the key difficulties surrounding the arbitrability of minority oppression claims is the non-availability of winding up and the other remedies that only a Court can make. This has been highlighted by academic commentators. In Michael J Duffy, "Shareholders Agreements and Shareholders' Remedies: Contract Versus Statute?" (2008) 20 Bond Law Review 1, the author, having examined both Skyer and ACD Tridon, noted (at p. 11) that: ...commercial arbitration will be allowable for inter parties relief though it may become problematic when the relief involves winding....
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....support of the view that minority oppression claims should be arbitrable. In Byron Shaw, "The Arbitrability of Oppression Claims" (2011) 69 The Advocate 21, the author argued (at p. 26) that: Where all parties to the oppression claim are privy to the arbitration agreement and the dispute falls within the scope of the arbitration clause, the agreement to arbitrate should be enforced... Requiring parties to adjudicate the 'non-oppression' aspects of their dispute and to return to court seems unnecessary and inconsistent with the principle that a multiplicity of proceedings should be avoided at all costs. There is no apparent reason why an arbitrator should lack competence to make findings of oppression or to award a statutory equitable remedy under the BCA [Business Corporations Act]. 131. A similar, albeit more balanced view, was expressed in Rebecca Huang, "Shareholder Dispute: Arbitrator's Power to Grant Statutory Oppression Remedy" (2010) 36 The Advocates' Quarterly 457 at p. 468: ...an arbitrator should have as broad as possible of a power to remedy shareholder disputes as long as such disputes are arbitrable and the parties have not expre....
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....he other shareholders would refuse to do so for tactical reasons (I hasten to emphasise that I make no such finding or nor take such a view on the facts of this case but raise this as a general hypothetical possibility). I doubt if these parties can be compelled to attend as witnesses, be asked to state their case, give their evidence (both documentary and oral) and thereafter be bound by the arbitral award. The arbitration may well proceed with only hearing the parties to the arbitration agreement and on that evidence, the arbitral tribunal has to reach a view and make its award. In the meantime, the Court may wish to exercise its inherent powers of case management and stay proceedings until the arbitral award is made (see Shanghai Construction (Group) General Co. Singapore Branch v. Tan Poo Seng [2012] SGHCR 10, citing Reichhold Norway ASA and another v. Goldman Sachs International [1999] CLC 486, upheld on appeal, [2000] 1 WLR 173). With the benefit of the award, the Court then proceeds to hear the rest of the parties and the full panoply of evidence. What if, on hearing all the witnesses and evidence, some of which was not placed before the arbitral tribunal, the Court comes to....
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....ng. However, the arbitral tribunal will not have the general power to vary any transaction or resolution under s. 216(2)(a) of the CA, a fortiori where it involves third parties, including shareholders who are not party to the arbitration agreement. Also, under s. 216(2)(d) of the CA, absent any conferment of jurisdiction or power by the consent of the parties under the terms of reference or by a provision within the arbitration agreement or the articles of association or other agreement between the parties, or some other power by the law of the seat or the governing law, I do not think that an arbitral tribunal has the general power to order one shareholder-party to buy out the other shareholder-party on specific terms. A fortiori if there are other shareholders in the company who are not parties to the arbitration agreement and are therefore not bound by the arbitral award. Similar difficulties can be envisaged in the remedy contemplated by s. 216(2)(b) of the CA in making an order regulating the future conduct of the affairs of the company or in s. 216(2)(e) of the CA which includes the consequential order of providing a reduction in the company's capital after a compulsory ....
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....pression claim. Unlike statutory provision of Section 994 of the English Act and Section 216 of the Companies Act (Singapore), the legislature has conferred powers to safeguard the interest of company itself in Section 398 and for public interest in Section 397 as also in Section 398 of the Act and has given wide powers to CLB in Section 402. Having regard to the nature of the matter in the Company Petition before CLB, there is no question of adopting the course of action suggested in Fulham as it is not just oppressive complaint but a derivative action too. 56. When the law has much developed in our country in almost all the subjects in the form of statute, we should be rather guided by our own law. It is only in absence of a provision in our statute on a particular subject, we might seek guidance from the law on the subject developed in other countries. 57. Now, the question is whether the matter before CLB is the same subject of arbitration agreement or as to whether there is commonality of parties. It appears that essentially, what is contemplated by the arbitration agreement in Clause 36 is to resolve the disputes between the parties in connection with the agreement, i.e. SH....
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....earned advocate Mr. Trivedi and Mr. Shelat have cited different judgments to point out that the phrase 'IN CONNECTION WITH THE AGREEMENT' is wide enough to cover any dispute arising under, out of and in relation to the agreement and also to point out that such nature of arbitration clause would apply to incidental agreements, however such judgments are not required to be dealt with as the Court is of the view that the matter before the CLB is not of the same subject to the arbitration agreement. 59. As regards commonality of the parties, the CLB has come to the conclusion that neither the company nor the majority directors are parties common to arbitration agreement. The company is a signatory to SHA and reading Clause 36.1.1, one might say that the company is also intended to be included as party to the arbitration agreement as it is provided therein that if the promoters do not reach a solution within a period of 30 (thirty) days from the date of issuing notice of consultations and negotiations, any Party, who is involved in the dispute, may treat the same as an arbitrable dispute by giving notice to the company and the other parties. But, in the next clause, i.e. clause....
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....ity directors are already held to be necessary parties. In such derivative action, if the reliefs are claimed to hold the directors personally liable for their alleged prejudicial conduct against the interest of the company, they are joined in the company petition for their fiduciary relationship as directors with company and such reliefs cannot be granted in their absence. Since they are not parties to the arbitration agreement, they cannot be referred to arbitration. They therefore, cannot be bound by the result of the arbitration. The Court is, therefore, of the view that the CLB has not committed any error in holding that neither the company nor the respondent Nos. 4 to 8 of the company petition are parties common to the arbitration agreement. In view of such conclusion, the arguments raised by both the sides and the judgments relied on the question of issue Estoppel, on the question that since other agreements are connected with joint venture and therefore, the parties to such agreements could be referred to arbitration or they could be said to be claiming through parties to arbitration agreement, are not required to be considered. Similarly, the question about the intention o....
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....sp;16. The next question which requires consideration is-even if there is no provision for partly referring the dispute to arbitration, whether such a course is possible under Section 8 of the Act? 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. The above-said judgment in the case of Sukanya Holdings (supra) was considered by the Hon'ble Supreme Court in the later decision in the case of Chloro Controls India (P) Ltd. (supra). In the said decision, Hon'ble Supreme Court while examining the correctness of law in Sukanya Holdings (supra), has held and....