TaxTMI 
TaxTMI 
2014 (8) TMI 1120
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.... 2. The respondent Nos. 2 to 4 have filed Company 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 r....
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....y is not binding on the Company; (xii) That this Hon'ble Board may be pleased to declare and hold that the Annual 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....
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....be referred as 'the Company') came to be formed to execute the above-said contract. Sadbhav Group holds 77% and the MCL holds 23% of equity share capital in the company. 3.3. On 1.3.2010, the service 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 acc....
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....arties, in which case the dispute shall be submitted to a final and binding arbitration in accordance with the provisions contained hereinafter. 36.1.2. If the dispute subsists between any two or more of the Promoters hereto pursuant to Clause 36.1) above, 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 accord....
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....the matter in the company petition is not subject to the arbitration agreement, that the reliefs claimed in the company petition do not fall within the domain of Arbitral Tribunal and that there is no commonality of the parties between the company petition and the arbitration agreement. This order of CLB is under challenge before 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;  ....
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....e the CLB is the subject of arbitration agreement. Referring to various clauses in the SHA, Mr. Trivedi submitted that any dispute in connection with any agreement between the parties is intended to be referred to arbitration and the matter involved in the company petition since could be said to be in connection with the agreements covered in SHA, the CLB could have referred 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, ....
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.... [6] In the case of Branch Manager, Magma Leasing and Finance Limited and Another Vs. Potluri Madhavlata and Another reported in (2009) 10 SCC 103; [7] In the case of Booz Allen and Hamilton Inc. Vs. SBI Home Finance Limited and others reported in (2011) 5 SCC 532; [8] In the case of Rashtriya Ispat Nigam Ltd. and Another Vs. Verma Transport Co., reported in (2006) 7 SCC 275; [9] In 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 ....
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.... representing the majority group, could be said to be claiming through the respondent Nos. 2 and 3 in the company petition. They can therefore, be said to be parties to the arbitration agreement in the context of Section 7 of the Arbitration Act. Mr. Shelat submitted that the pleadings of non-reasons can be part of determination by arbitrator provided, they fall under Sections 7 and 8 of the Arbitration Act. Referring to Clause 8 of SHA, Mr. Shelat submitted that the dispute in fact is in relation to the business of the company 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 foun....
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....hich are essential of contractual dispute and arbitrator can consider a proper solution to such dispute and it would be only in the circumstances where the arbitrator concludes that winding up proceeding or proceeding in connection with unfair prejudice affecting the interest of the company could be taken, the parties could be made entitled to present petition before the CLB. Mr. Shelat thus submitted that filing of petition under Sections 397 and 398 of the Act is not always a stone block to refer the parties to arbitration. 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; &nbs....
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.... be oppressive and the arbitrator lacks jurisdiction to decide whether such action is oppressive. Mr. Thakore submitted that the CLB has statutory powers under Sections 397 and 398 of the Act to pass any order to end the matters complained of in and such powers are not available with the arbitrator. 16. Mr. Thakore submitted that the matter brought in the company petition can neither be said to be a dispute arising out of or in any way connected with the agreements between the parties for the purpose of arbitration. Mr. Thakore submitted that once the petition 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 p....
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....o Clauses 15 and 19 of the SHA. Mr. Thakore submitted that the CLB has held that majority directors in the company petition are necessary parties and such decision is not challenged and it has become final inter-parties. Therefore, such issue cannot be permitted to be re-agitated on the principle of Issue Estoppel. Mr. Thakore submitted that since majority directors are found to be necessary parties by the CLB, the arguments advanced by Mr. Trivedi and Mr. Shelat that they are purposefully joined in the company petition to frustrate the arbitration clause are 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 a....
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....tractors Private Limited Vs. Som Datt Builders Limited reported in (2009)7 SCC 696; 19. Learned senior advocate Mr. Mihir Joshi appearing with M/s. Singhi & Company for respondent Nos. 3 and 4 submitted that though there existed no common law remedy for the kind of the matter in question, however even if existed, it cannot survive in view of statutory provision. Mr. Joshi submitted that for the matter brought under Sections 397 and 398 of the Act, only the CLB has exclusive jurisdiction and the arbitrator is not competent to decide such matter. The matter brought in the company petition before 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 regar....
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.... that even if such remedy was available in common law, the same was subsequently subsumed in statutory provision, therefore, the only recognized mode of availing such remedy is, as provided in the statute and cannot be allowed to be traced to common law. Mr. Joshi submitted that the course suggested in Fulham's case for first referring the matter to the arbitrator or making reference to the arbitration for part of the matter is rightly not found favoured with Singapore Court in the case of Silica Investors Limited (supra), as the line of action suggested in Fulham is very impracticable to be 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 t....
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....re no law on the subject is made by the legislative enactment. In England, it was a system of law followed by judges in cases before them and made known to be followed. Thus, it was a judge made law. In Indian Companies Act 1913, there was no provision to claim relief as regards oppression of minority. Therefore, it could be said that remedy in tort for oppressive conduct was available by way of common law remedy. However, same cannot be compared with statutory right available to a member to complain as regards oppressive and prejudicial conduct of the majority. Therefore, decision in case of Raja Ram Kumar (supra) will of no help to the petitioners. Even otherwise if any common law remedy pre-existed, 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 Ac....
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....section, the company and every officer of the company who is in default shall be liable to a default fine. (5) In relation to a petition under this section, section three hundred and sixty-five of this Act shall apply as it applies in relation to a winding-up petition... 26. By the said amendment, Section 153-C was introduced in the Act of 1913, which reads as under:- 153.C-(1) Without prejudice to any other action that may taken, whether in pursuance of this Act or any other law for the time being in force, any member of a company who complains that the affairs of the company are being conducted- (a) in a manner prejudicial to the interests of the company, or (b) in a manner oppressive to some part of the members (including 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 ....
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....een the company and its manager, managing agent, managing director or any of its other directors; (e) the termination or revision of any agreement entered into between the company and any person other than any of the persons referred to in clause (d), provided that no such agreement shall be terminated or revised except after due notice to the party concerned and, in the case of the revision of any such agreement, after obtaining the consent of the party concerned thereto; (f) the setting aside of any transfer, delivery of goods, payment, execution or other act relating to property made or done by or against the company within three months before the date of the application under sub-section (1), which would, if made or done by or against an individual, be deemed in his insolvency to be a fraudulent preference. (6) Where an order under this section makes 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 furt....
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....t thereof respectively with interest at such rate as the Court thinks just, or to contribute such sums to the assets of the company by way of compensation in respect of the misapplication, retainer, misfeasance or breach of trust as the court thinks just, and the provisions of sections 235 and 236 of this Act shall apply as they apply to a company in the course of being wound up. 27. The present provisions of Sections 397, 398 read with Section 402 of the Act are almost the same like the provision of Section 153-C of the 1913 Act except that, now the aspect as regard public interest is covered. The jurisdiction to deal with the application under Sections 397 and 398 of the Act was initially with the High Court. It was then conferred on CLB by Companies (Amendment) Act, 1988. 28. However, still the question arises whether the Civil Court's jurisdiction is preserved in respect of the matters falling under Sections 397, 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 a....
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.... 18. In Harmer's case, 1958-3 All ER 689, it was held that "the word 'oppressive' meant burdensome, harsh and wrongful". It was also held that "the Section does not purport to apply to every case in which the facts would justify the making of a winding up order under the just and equitable' rule, but only to those cases of that character which have in them the requisite element of oppression". It was also held that '"the result of applications under S. 210 in different cases must depend on the particular facts of each case, the circumstances in which oppression may arise being so infinitely various that it is impossible to define them with precision". The circumstances must be such as to warrant the inference that "there had been at least, an unfair abuse of powers and an impairment of confidence in the probity with which the company's affairs are being conducted, as distinguished from mere resentment on the part of a minority at 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 deali....
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....likely that the affairs of the Company will be conducted in a manner prejudicial to the interests of the Company, may apply to the Court and the Court may, if it is of the opinion that the affairs of the Company are being conducted as aforesaid or that by reason of any material change as aforesaid in the management or control of the Company, it is likely that the affairs of the Company will be conducted as aforesaid, make such order as it thinks fit with a view to bringing to an end or preventing the matters complained of or apprehended. It is obvious that this remedy provided by Section 398 is of a much wider nature than the remedy under Section 397, since unlike the remedy under Section 397, it is not limited by the requirement that the facts must be such as justify the making of the winding up order against the Company on the ground that it is just and equitable to do so. The question of construction which arises for determination on these provisions is as to what is 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 ....
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....ducted in a manner oppressive to a shareholder or shareholders and similarly the remedy under S. 398 can be invoked only when the affairs of the Company are being conducted in a manner prejudicial to the interests of the Company. Of course when I say this I am referring only to the first part of Section 398 and leaving out of consideration the second part to which I shall refer a little later. Sections 397 and 398 thus clearly postulate that there must be at the date of the application a continuing course of conduct of the affairs of the Company which is oppressive to any shareholder or share-holders or prejudicial to the interests of the Company and it is this course of oppressive or prejudicial conduct which would form the subject-matter of the complaint in the application. Now the purpose for which an order can be made under Sections 397 and 398 being to bring to an end the matters complained of and the matters complained of in an application under these Sections being a course 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....
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....udicial conduct. These then are the confines within which the remedy provided by Sections 397 and 398 operates. But it must be remembered that within these confines the remedy is a very potent and effective remedy, since the power it confers on the Court is extremely wide and the Court can pass such order as it thinks necessary for the purpose of putting an end to oppression or mismanagement on the part of controlling shareholders. The nature of the order would depend on the state of affairs prevailing in the Company and the nature of the restrictions required to put an end to such state of affairs. The necessity of interference under these Sections may arise in an infinite variety of circumstances and the Legislature has, therefore, left the discretion of the Court unfettered in the matter of making an appropriate order. Such power can, however, be exercised by the Court only for the purpose of bringing to an end oppressive or prejudicial conduct in the management of the affairs 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 ....
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....st be by a specified number of shareholders. If the argument on behalf of the defendants is that these statutory remedies exclude recourse to the ordinary courts, the short answer is that the plaintiffs here do not admittedly have the necessary voting strength to proceed under any of the three sections. Mr. Potti refers to the decision in Nava Samaj v. Civil fudge, AIR 1966 MP 286, wherein Dixit C.J. said thus (p. 290, Col. 2): Where a particular court is specified or a special tribunal is created, by or under the authority of an Act of Legislature, for the purpose of determining questions as to the rights which are the creation of the Act, then the jurisdiction of that court or tribunal is, unless otherwise provided, exclusive. Apart from the circumstance that the other learned judge on the Bench was not pre-pared to go to that extent, it is doubtful whether the right to complain against oppression is a new creation of the Companies Act. If at all, the right created by the Act is to move the company court, and that 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....
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....e company in support of the impugned transfers of 1,348 shares and having regard to the unsatisfactory evidence produced in respect of the transfers and/or transmissions of some of the shares, it cannot be said that the votes in respect of the said 1,348 shares or a part thereof, in favour of the present management, were validly cast. As a result, the support of the majority, claimed by the management, cannot be upheld. Hence, it is not possible to allow the defendants to give effect to the results of the said annual general meeting as claimed by them at this stage. In view of the aforesaid facts and circumstances, it is just and proper that the interest of the petitioners, their supporters and all other shareholders of the company should be protected. Sections 397 and 398 of the Companies Act, 1956, confer a right on the shareholders who have the requisite qualification under Section 399 of the said Act to apply to the court for appropriate reliefs. These sections do not oust the jurisdiction of the civil court to entertain suits on the same subject-matter and where shareholders complain of mismanagement or oppression and of acts prejudicial to the interest of the company or pr....
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.... permit such an interpretation in which the statutory power of the Court for its exercise depends upon the vote of the members of the Company. This would inevitably be the situation if reduction of share capital can only be brought about by resorting to the procedure prescribed in Ss. 100 to 104. Additionally, it would cause inordinate delay and the very purpose of granting relief against oppression would stand self defeated. Viewed from a slightly different angle, it would be impossible to carry out the directions given under S. 402 for reduction of share capital if the procedure under Ss. 100 to 104 is required to be followed. Under Ss. 100 to 104 the Company has to first adopt a special resolution for reduction of share capital if its articles so permit. After such a resolution is adopted which, of necessity must be passed by majority, and it being a special resolution, by a statutory majority, it will have to be submitted for confirmation to the Court. Now, when minority shareholders complain of oppression by majority and seek relief against oppression 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 Compan....
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.... and therefore, under clause 15 of the Letters Patent of the Calcutta High Court, the appellants have a statutory right to prefer appeal irrespective of the fact that no appeal has been provided against the order of the learned Single Judge under the Act. In this connection, learned counsel invited our attention to a decision of this Court in the case of Garikapatti Veeraya vs. N. Subbiah Choudhury reported in [1957] SCR 488 and in that it has been pointed out that the appeal is a vested right. The majority took the view that the appeal is a vested right. It was held as follows: ...that the contention of the applicant was well-founded, that he had a vested right of appeal to the Federal Court on and from the date of the suit and the application for special leave should be allowed. The vested right of appeal was a substantive right and, although it could be exercised only in case of an adverse decision, it was governed by the law prevailing at the time of commencement of the suit and comprised all successive rights of appeal from court to court, which really constituted one proceeding. Such a right could be taken away only by a subsequent enactment either expressly....
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....id, we commend to the Parliament and the State Legislatures to make a provision enabling a workman to approach the Labour Court/Industrial Tribunal directly-i.e., without the requirement of a reference by the Government-in case of industrial disputes covered by Section 2-A of the Industrial Disputes Act. This would go a long way in removing the misgivings with respect to the effectiveness of the remedies provided by the Industrial Disputes Act. (6) The certified Standing Orders framed under and in accordance with the Industrial Employment (Standings Orders) Act, 1946 are statutorily imposed conditions of service and are binding both upon the employers and employees, though they do not amount to "statutory provisions". Any violation of these Standing Orders entitles an employee to appropriate relief either before the forums created by the Industrial Disputes Act or the Civil Court where recourse to Civil Court is open according to the principles indicated herein. (7) The policy of law emerging from Industrial Disputes Act and its sister enactments is to provide an alternative dispute resolution mechanism to the workmen, a mechanism which is speedy, inex....
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....ight arising under the provisions of the Industrial Disputes Act or the sister laws and may relate to same or similar rights or different rights, or even may be based on common law right or contractual right. The question in regard to the jurisdiction of the civil court must, therefore, be addressed having regard to the fact as to which rights or obligations are sought to be enforced for the purpose of invoking or excluding the jurisdiction of a civil court. 36. If an employee intends to enforce his constitutional rights or a right under a statutory Regulation, the civil court will have the necessary jurisdiction to try a suit. If, however, he claims his right and corresponding obligations only in terms of the provisions of the Industrial Disputes Act or the sister laws so called, the civil court will have none. In this view of the matter, in our considered opinion, it would not be correct to contend that only because the employee concerned is also a workman within the meaning of the provisions of the 1947 Act or the conditions of his service are otherwise governed by the Standing Order certified under the 1946 Act ipso facto the Civil Court will have no jurisdiction. This....
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....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. From sub-section (2), it appears that only the High Court was having exclusive jurisdiction for matters covered by Sections 397 to 407 with other specified matters. 33. Subsequently, by virtue of Companies (Amendment) Act, 1988 brought in force with effect from 31.5.1991, the powers to deal with matters under Sections 397 to 405 are conferred upon the CLB and now such powers are conferred upon the Tribunal by Companies (Second Amendment) Act, 2002 which have still not been brought into force. 34. Thus, like the ex....
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....eady held above the jurisdiction of the 'court' under Sec. 155, to the extent it has exclusive, the jurisdiction of Civil Court is impliedly barred. For what is not covered as aforesaid the Civil Court would have jurisdiction. Similarly we find even under Sec. 446(1), its words itself indicate jurisdiction of Civil Court is not excluded. This sub-section states, '........ no suit or legal proceedings shall be commenced........ or proceeded with....... except by leave of the court'. The words 'except by leave of the court' itself indicate on leave being given the Civil Court would have jurisdiction to adjudicate one's right. Of course discretion to exercise such power is with the 'court'. Similarly under Sec. 446(2) 'court' is vested with powers to entertain or dispose of any suit or proceedings by or against the company. Once this discretion is exercised to have it decided by it, it by virtue of language therein excludes the jurisdiction of the Civil Court. So we conclude the principle of law as decided by the High Court that jurisdiction of Court under Section 155 is summary in nature cannot be faulted. Reverting to the second limb of su....
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....s of this Act shall have effect notwithstanding anything to the contrary contained in the memorandum or articles of a company, or in any agreement executed by it, or in any resolution passed by the company in general meeting or by its Board of Directors, whether the same be registered, executed or passed, as the case may be, before or after the commencement of this Act; and (b) any provision contained in the memorandum, articles, agreement or resolution aforesaid shall, to the extent to which it is repugnant to the provisions of this Act, become or be void, as the case may be. "Jurisdiction of Courts. 10. (1) The High Court having jurisdiction under this Act shall be- (a) the High Court having jurisdiction in relation to the place at which the registered office of the company concerned is situate, except to the extent to which jurisdiction has been conferred on any District Court or District Courts subordinate to that High Court in pursuance of sub-section (2); and (b) where jurisdiction has been so conferred, the District Court in regard to matters falling within the scope of the jurisdiction conferred, in ....
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....il Procedure confers jurisdiction upon the civil Courts to determine all disputes of civil nature unless the same is barred under a statute either expressly or by necessary implication. Bar of jurisdiction of a civil Court is not to be readily inferred. A provision seeking to bar jurisdiction of civil Court requires strict interpretation. The Court, it is well-settled, would normally lean in favour of construction, which would uphold retention of jurisdiction of the civil Court. The burden of proof in this behalf shall be on the party who asserts that the civil Court's jurisdiction is ousted. (See Sahebgouda (dead) by LRs. and others v. Ogeppa and others 2003(3) Supreme 13). Even otherwise, the civil Court's jurisdiction is not completely ousted under the Companies Act, 1956. 23. In R. Prakasam v. Sree Narayana Dharma Paripalana Yogam, 1980 (50) CC 611), it has been held that: ...... The purpose of S. 2(11) read with S. 10 is only to enable the shareholders to decide as to which Court they should approach for remedy, in respect of that particular matter. It is difficult to construe the definition clause as one conferring jurisdiction, exclusive or otherwis....
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....irectors of the type indicted in the impugned order could be reconstituted by the court or not and whether the court had power to frame an article inconsistent with the provisions of section 255 of the Act or not must in the ultimate analysis depend upon the true ambit of the powers of the court under section 397 or 398 read with section 402, for, if these sections confer upon the court jurisdiction and powers of the widest amplitude to pass appropriate orders which the circumstances of the case may require, it would be difficult to accept Mr. Sen's submissions that the impugned orders and directions are liable to be set aside on the basis that the reconstituted board or modified article 95 was not in consonance with section 255 of the Act. To correctly appreciate the ambit of the court's jurisdiction and the amplitude of the court's powers under section 397 and 398 read with section 402 of the Companies Act, 1956, it will be necessary to consider the entire scheme of the Act pertaining to corporate management of companies. At the outset, it may be stated that all these concerned provisions occur in Part VI of the Act which deals with the management and administration o....
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....udes sections 397, 398 and 402) should be read as subject to the provisions contained in the other chapters which deal with normal corporate management of a company and, in our view, in the context of this scheme having regard to the object that is sought to be achieved by sections 397 and 398 read with section 402, the powers of the court thereunder cannot be so read. Further, an analysis of the sections contained in Chapter VI of Part VI of the Act will also indicate that the powers of the court under section 397 or 398 read with section 402 cannot be read as being subject to the other provisions contained in sections dealing with usual corporate management of a company in normal circumstances. As stated earlier, Chapter VI deals with the prevention of oppression and mismanagement and the provisions therein have been divided under two heads-under head A powers have been conferred upon the court to deal with cases of oppression and mismanagement in a company falling under section 397 and 398 of the Act while under head B similar powers have been given to the Central Government to deal with cases of oppression and mismanagement in a company but it will be clear that some limitation....
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....l be conducted in a manner prejudicial to public interest or in a manner prejudicial to the interests of the company, "with a view to bringing to an end or preventing the matters complained of or apprehended". Both the wide nature of the power conferred on the court and the object or object sought to be achieved by the exercise of such power are clearly indicated in sections 397 and 398. Without prejudice to the generality of the powers conferred on the court under these sections, section 402 proceeds to indicate what type of orders the court could pass and clauses (a) to (g) are clearly illustrative and not exhaustive of the type of such orders. Clauses (a) and (g) indicate the widest amplitude of the court's power: under clause (a) the court's order may provide for the regulation of the conduct of the company's affairs in future and under clause (g) the court's order may provide for any other matter for which in the opinion of the court it is just and equitable that provision should be made. An examination of the aforesaid section clearly brings out two aspects, first, the very wide nature of the power conferred on the court, and, secondly, the object that is soug....
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.... shareholders from acts of oppression and mismanagement or preventing its affairs being conducted in a manner prejudicial to public interest and if that be the objective the court must have power to interfere with the normal corporate management of the company. If under section 398 read with section 402 the court is required by its order to provide for the regulation of the conduct of the company's affairs in future because of oppression or mismanagement that has occurred during the course of normal corporate management, the court must have the power to supplant the entire corporate management, or rather corporate mismanagement by resorting to non-corporate management which may take the form of appointing an administrator or a special officer or a committee of advisers, etc., who could be in charge of the affairs of the company. If the court were to have no such power the very object of the section would be defeated. We must observe in fairness to Mr. Sen that it was not disputed by him that the powers of the court under section 398 read with section 402 of the Companies Act were wide enough to enable the court to appoint an administrator or a special officer or a committee of ....
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....sonance with such provisions of the Act. Considerable emphasis was laid by Mr. Sen on the fact that there was absence of a non-obstante clause in any of the relevant sections, viz., section 397, 398 and 402. His contention was that whenever the legislature intended that any of the provisions of the Act should be overridden and the legislature has clearly expressed its intention by using appropriate language, namely, by user of a non-obstante clause and since there was no non-obstante clause in section 397 or section 398 read with section 402 of the Act, the court's powers thereunder could not override the other provisions of the Act but would be subject to such provisions. In the first place, like a deeming provision which is sometimes made with a view to make explicit what is obvious, a non-obstante clause is also used at times ex abundanti cautela to make explicit what is obvious and, therefore, the absence of that clause would not necessarily lead to an inference suggested by Mr. Sen. Secondly, normally, such non-obstante clause becomes necessary when the enacted provisions or enacted clause is necessarily going in conflict with the other provisions of the Act and i....
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....ed subject to any of the other provisions of the Act. In such a situation the ambit of the court's powers must be determined by the scheme of Part VI in which all the concerned sections appear, the language employed in these relevant sections and the object sought to be achieved by them and in this context it would be useful to refer to the rule of construction enunciated in Maxwell on the Interpretation of Statute, 12th edition, page 45, to which our attention was invited by Mr. Phadke. The relevnt rule of construction has been stated thus: If the choice is between two interpretations, the narrower of which would fail to achieve the manifest purpose of the legislation, we should avoid a construction which would reduce the legislation to futility and should rather accept the bolder construction based on the view that Parliament would legislate only for the purpose of bringing about an effective result. The above passage is based on the judgment of Viscount Simon L.C. in the case of Nokes v. Doncaster Amalgamated Collieries Ltd. [1940] AC 1014 (HL) and, in our view, the rule could be applied to the instant case. Having regard to the admitted position that there....
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....ublic interest or to the interest of company or to any other member, it is not powerless to pass appropriate orders and to take measures contemplated under Section 402 of the Act as held by Hon'ble Supreme Court in the case of M.S.D.C. Radharamanan (supra) in para 15, 20 to 23 and 41, which read as under:- 15. Ordinarily, therefore, in a case where a case of oppression has been made a ground for the purpose of invoking the jurisdiction of the Board in terms of Sections 397 and 398 of the Act, a finding of fact to that effect would be necessary to be arrived out. But, the jurisdiction of the Company Law Board to pass any other or further order in the interest of the company, if it is of the opinion, that the same would protect the interest of the company, it would not be powerless. The jurisdiction of the Company Law Board in that regard must be held to be existing having regard to the aforementioned provisions. 20. It is true that observations in Harmer's case was held to be applicable in a case falling within the purview of Section 397 of the Act but the statement of law that it was not enough that only a just and equitable case for winding up of the comp....
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....d 398 of the Act empower the Company Law Board to remove oppression and mismanagement. If the consequences of refusal to exercise jurisdiction would lead to a total chaos or mismanagement of the company, would still the Company Law Board be powerless to pass appropriate orders is the question. If a literal interpretation to the provisions of Section 397 or 398 is taken recourse to, may be that would be the consequence. But jurisdiction of the Company Law Board having been couched in wide terms and as diverse reliefs can be granted by it to keep the company functioning; is it not desirable to pass an order which for all intent and purport would be beneficial to the company itself and the majority of the members? A court of law can hardly satisfy all the litigants before it. This, however, by itself would not mean that the Company Law Board would refuse to exercise its jurisdiction, although the statute confers such a power on it. 41. This Court noticed that although the Indian Companies Act is modelled on the English Companies Act, the Indian Law is developing on its own lines. It was opined that the principle of 'just and equitable clause' is essentially equitable ....
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....agreement whereby the parties have agreed to submit to arbitration their disputes which have arisen or to arise between them in respect of define legal relationship whether the contractual or not, is an arbitration agreement. The question, however is whether arbitrator is competent to decide the dispute though arising out of legal relationship but has given rise to a matter, the jurisdiction to deal with and decide it is exclusively conferred upon a special forum especially a public forum under the Statute even if it is found that the parties are common. 44.1. In the case of Haryana Telecom Ltd. (supra), the Hon'ble Supreme Court has held and observed in para 4 and 5 as under:- 4. Sub-section (1) of Section 8 provides that where the judicial authority before whom an action is brought in a matter, will refer the parties to arbitration the said matter in accordance with the arbitration agreement. This, however, postulates, in our opinion, that what can be referred to the arbitrator is only that dispute or matter which the arbitrator is competent or empowered to decide. 5. The claim in a petition for winding up is not for money. The petition filed ....
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....e of the arbitrator to decide the matter in dispute. 44.3. In the case of Rashtriya Ispat Nigam Ltd. (supra), the Hon'ble Supreme Court has in the facts of the case found that the existence of a valid agreements stood admitted. There could not be any dispute that the matter relating to termination of contract would be a dispute arising out of a contract and arbitration agreement contained in Clause 44 of the contract would be squarely attracted. Once the condition precedents contained in the said proceedings were satisfied, the judicial authority was statutorily mandated to refer the matter to arbitration. It is further observed that what is necessary to be looked into would be as to whether the subject matter of dispute is covered by an arbitration agreement or not. The Hon'ble Supreme Court found in the facts of the case that the subject matter of the dispute was covered by arbitration agreement and distinguished the case of Sukanya Holdings (P) Ltd. Vs. Jasyesh H. Pandya reported in (2003)5 SCC 531 as not applicable to the facts of the case. 44.4. In the case of Agri Gold Exims Ltd. (supra), the Hon'ble Supreme Court has held and observed in para 22 as under:- ....
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....a 9 thereof, it is held that there is no bar in referring the dispute to the arbitration. However, as observed in the said paragraph, the Court agreed with the submission of learned counsel that the powers under Section 397 and allied sections of the Act were exclusively given to the court on the ground of public policy and could not be delegated to the private forum. But, while examining the award made by the arbitrator, the court in the facts of the case observed that the arbitrator did not seek to exercise that the Court enjoyed exclusive under the provisions of the Act. 44.7. In the case of Gurnir Singh Gill (supra), the Delhi High Court has held and observed on page 208 to 209 as under:- Shri Saharya, appearing for the respondents, next contended that, if Shri Deshpande had been appointed as an arbitrator by the order if May, 22, 1985, such appointment would be invalid as, according to him, disputes arising in a petition under sections 397 and 398 of the Companies Act cannot be referred to arbitration. He also submitted that the court's power to pass orders under sections 397, 398, 402 and 403 was very wide and plenary and cannot be fettered by the order ....
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....g therefrom can be referred to arbitration. Nor is there anything in the nature of the proceedings here that precludes a reference to arbitration: These are not proceedings in rem, like insolvency proceedings, nor do they involve public rights, as in the case of a suit under section 92 of the Code of Civil Procedure. The disputes raised are purely inter parties and do not affect the rights of strangers to the proceedings. 44.8. In the case of Booz Allen and Hamilton Inc. (supra), the Hon'ble Supreme Court while comparing the scope and extent of Section 8 with Section 11 has held and observed in para 19, 32, 33, 35, 36, 37 and 38 as under:- 19. Where a suit is filed by one of the parties to an arbitration agreement against the other parties to the arbitration agreement, and if the defendants file an application under section 8 stating that the parties should be referred to arbitration, the court (judicial authority) will have to decide: (i) whether there is an arbitration agreement among the parties; (ii) whether all parties to the suit are parties to the arbitration agreement; (iii) whether the disputes which are th....
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....e jurisdiction of arbitral tribunals is excluded either expressly or by necessary implication. Adjudication of certain categories of proceedings are reserved by the Legislature exclusively for public fora as a matter of public policy. Certain other categories of cases, though not expressly reserved for adjudication by a public fora (courts and Tribunals), may by necessary implication stand excluded from the purview of private fora. Consequently, where the cause/dispute is inarbitrable, the court where a suit is pending, will refuse to refer the parties to arbitration, under section 8 of the Act, even if the parties might have agreed upon arbitration as the forum for settlement of such disputes. 36. The well recognized examples of non-arbitrable disputes are: (i) disputes relating to rights and liabilities which give rise to or arise out of criminal offences; (ii) matrimonial disputes relating to divorce, judicial separation, restitution of conjugal rights, child custody; (iii) guardianship matters; (iv) insolvency and winding up matters; (v) testamentary matters (grant of probate, letters of administration and succession certificate); and (vi) eviction or tenancy mat....
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....ettlement of such disputes. The well recognized examples of non-arbitrable disputes are mentioned in para 36 of the judgment. However, this may not be taken as exhaustive list. Therefore, in respect of the matter brought before the court or the judicial authority, if it is found that the adjudication of such matter is reserved for public fora by legislature and excluded by necessary implication from the purview of private fora, the parties cannot be referred in respect of such dispute to arbitration under Section 8 of the Arbitration Act. It is required to be noted that the law mandates in Section 400 of the Act to give notice of every application made under Sections 397 and 398 of the Act to the Central Government and also mandates the CLB to take into consideration the representation if any made by the Central Government before passing any final order. Section 402 of the Act gives additional powers to the CLB which as stated in the section itself is without prejudice to the generality of the powers of the CLB under section 397 or 398, to make any order under either Section to provide for various measures stated therein. Such powers under Sections 397, 398 read with Section 402 of....
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...., parties may either agree upon an arbitrator and refer their disputes to him, or failing agreement, file an application under section 11 of the Act for appointment of an arbitrator. The judicial authority 'referring the parties to arbitration' under section 8 of the Act, has no power to appoint an arbitrator. It may, however, record the consent of parties to appoint an agreed arbitrator. 39. Reliance was placed upon certain observations in the decision of the House of Lords in Heyman v. Darwins Ltd. 1942 AC 356. We extract below the paragraph containing the relied upon observations: The law permits the parties to a contract to include in it as one of its terms an agreement to refer to arbitration disputes which may arise in connection with it, and the court of England enforce such a reference by staying legal proceedings in respect of any matter agreed to be referred "if satisfied that there is no sufficient reason why the matter should not be referred in accordance with the submission." Arbitration Act, 1889, section 4. Where proceedings at law are instituted by one of the parties to a contract containing an arbitration clause and the other p....
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....er IV. The Tribunal constituted under Section 11 is the forum provided for enforcing some of these rights. In Premier Automobiles Ltd. v. Kamlekar Shantaram Wadke of Bombay and Ors. 1976(1) SCC 496), it has been observed that if a statute confers a right and in the same breath provides for a remedy for enforcement of such right, the remedy provided by the statute is an exclusive one. If an employee seeks to enforce rights and obligations created under Chapter IV, a remedy is available to him to get an adjudication in the manner provided in Chapter IV by the prescribed forum i.e. the Tribunal. That being so, the Tribunal cannot and in fact has no power and jurisdiction to hear the appeal on merits and only way is to ask the parties to go for arbitration. 11. According to learned counsel for the appellant though there may be two remedies available to the dismissed employee, that is, one the appeal and the other before the arbitrator, his stand was that when one of the parties i.e. the employer wants a particular forum for adjudication there cannot be a compulsion for him to go before the forum chosen by the other party. This argument in our view is clearly without subs....
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.... alleged to have been siphoned away by Sadbhav Group, including their nominated directors, to quash the service agreement dated 1.3.2010 and to refund the amount of Rs. 17 crores to the company allegedly siphoned away under the service agreement, to quash the service agreement dated 22.9.2010, to refund the amount to the company received by Sadbhav Group, including majority directors, to refund Rs. 1.85 crores siphoned away under the management service agreement dated 21.5.2012, to quash the Board meetings and the resolution passed in the Board meeting dated 4.3.2010 for approving the execution and operation of maintenance contract, to quash EPC contract dated 30.4.2010 executed in favour of one KNR Construction Company, to quash the other Board meetings and resolutions passed in the meeting of the company and to direct the company to return the amount of Rs. 16,91,88,000/- deposited by MCL under protest vide its letter dated 7.6.2013 etc. 49. If above are the nature of reliefs prayed on the basis of above-referred allegations in the company petition, law even if internationally developed to favour and lean towards arbitration, referring the parties to arbitration under Section ....
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....this Part apply to a person who is not a member of a company but to whom shares in the company have been transferred or transmitted by operation of law as they apply to a member of a company. (3) In this section, and so far as applicable for the purposes of this section in the other provisions of this Part, "company" means-- (a) a company within the meaning of this Act, or (b) a company that is not such a company but is a statutory water company within the meaning of the Statutory Water Companies Act 1991 (c. 58). The Trial Court granted stay of proceeding, which the Appellate Court confirmed and the plaintiff unsuccessfully applied to further appeal. The question arose as to whether dispute could be referred to the arbitrator or not. Considering the nature of dispute, the Court observed that determination of whether there has been unfair prejudice consisting of the breach of an agreement or some other unconscionable behaviour is plainly capable of being decided by an arbitrator and it is common ground that an arbitral tribunal constituted under the FAPL or the FA Rules would have the power to grant the specific relief sought by Fulham in i....
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....a manner prejudicial to the interest of members like the minority oppression claim. Similarly, the Singapore Court examined the issue about the arbitrability of the dispute in the context of minority oppression claims under Section 216 of the Companies Act which read as under:- Personal remedies in cases of oppression or injustice 216.--(1) Any member or holder of a debenture of a company ... may apply to the Court for an order under this section on the ground-- (a) that the affairs of the company are being conducted or the powers of the directors are being exercised in a manner oppressive to one or more of the members or holders of debentures including himself or in disregard of his or their interests as members, shareholders or holders of debentures of the company; or (b) that some act of the company has been done or is threatened or that some resolution of the members, holders of debentures or any class of them has been passed or is proposed which unfairly discriminates against or is otherwise prejudicial to one or more of the members or holders of debentures (including himself). (2) If on such applicatio....
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....mon threads from the cases that addressed the arbitrability of minority oppression claims (at p. 324): First, where the rights asserted will directly affect third parties, i.e. persons who are not parties to the arbitration agreement, it may prove difficult to convince a court to stay proceedings before it in favour of arbitration. The courts in those circumstances seem to have a fairly strong ground upon which to base a holding that the matter is not capable of settlement by arbitration. Secondly, public shareholder claims are particularly susceptible to arguments that it is contrary to the public interest that matters be referred to arbitration. The interaction between large groups of shareholders, directors and companies is complex. Legal rules have been developed to confine and mould those relationships in fairly invasive respects, such as the process requirements associated with derivative and class actions. Courts will likely find it difficult to accept that informal arbitration procedures, which may rely heavily on ad hoc decisions by the arbitral tribunal, can satisfactorily handle these relationships. They are likely to be comforted greatly if....
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....l tribunal for it to make findings as to whether there was any oppression. This would be in keeping with the "generous" construction of arbitration clauses laid down by the Court of Appeal in Larsen Oil. In such an instance, the arbitral tribunal would leave the choice of the remedy or appropriate order to the Court. Even then, there is the problem of whether the arbitral tribunal should also recommend what remedy would, in its view, be most appropriate. As I have discussed earlier ([123] above), there is a possibility that the Court may disagree with the arbitral tribunal-can the Court then impose the remedy it considers appropriate with a view to bringing to an end or remedying the matters complained of? There might also be other difficulties, e.g., a possible impact or concern about the solvency of the company and the interests of creditors that was not surfaced at the arbitration proceedings. Even if these difficulties are put to one side, what exactly is being sought for the purpose of enforcement if the arbitral tribunal had only made recommendations? For the reasons set out above, I have my doubts if an arbitral tribunal can and should make a declaration that the claimant is....
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....nt. This will require the plaintiff to proceed on two fronts or coerce the other parties to join in the arbitration. None of these solutions are satisfactory and at an early stage, the Court is unlikely to be able to assess what each party's approach will be as the dispute unfolds and develops. 138. In the absence of an express statutory provision allowing me to make such orders, I would hesitate to do so. Further, in the absence of a contractual agreement to refer matters to adjudication by a tribunal other than a Court, the Plaintiff is entitled to avail itself of the Court's processes. Under Singapore law, the referral of matters to an arbitrator is a purely consensual process. There is no power for me to otherwise order that the parts of the dispute not caught by the arbitration clause and those against the other defendants not party to it to also be heard at an arbitration or by the arbitrator as part of the Court's process, as was done in ACD Tridon. 139. A practical solution in the present case will be for the Plaintiff and all of the defendants to agree to submit their disputes to arbitration. All parties will then be before one tri....
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....t will depend on all the facts and circumstances of the case. No single factor should be looked at alone. Nor should the remedy or relief asked for assume overriding importance, as that would enable litigants to manipulate the process and evade otherwise binding obligations to refer their disputes to arbitration. 142. That said, except for those cases where all the shareholders are bound by the arbitration agreement, or where there are unique facts like Fulham, and the Court is satisfied that, first, all the relevant parties (including third parties whose interests may be affected) are parties to the arbitration and, secondly, the remedy or relief sought is one that only affects the parties to the arbitration, many if not most of the minority oppression claims under s. 216 of the CA claims will be non-arbitrable. This will often be in cases where, e.g., there are other shareholders who are not parties to the arbitration, or the arbitral award will directly affect third parties or the general public, or some claims fall within the scope of the arbitration clause and some do not, or there are overtones of insolvency, or the remedy or relief that is sought is one that a....
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....any, conduct of the business of the company, dealing with shareholdings of the shareholders, financing the business of the company, provision as regards transfer of shares, procedure to be adopted in connection with default events taking place resulting into breach of obligation, agreements, declaration, undertaking, etc. provision to indemnify the damages or losses arising out or in connection with any wrong or false representation made by any party for breach of any of the covenants, agreements, declaration or undertaking made by any party to other parties in terms of the agreement. However, when it comes to referring the parties to arbitration, what is relevant is whether the matter in the nature of complaint before CLB as regards the conduct of majority group oppressive to minority and prejudicial to the interest of the company as also to the public interest could be said to be a matter of same subject covered by arbitration clause. It is required to be noted that the matter before the CLB is just not a kind of civil dispute concerning the rights of the parties flowing from the terms contained in the agreement but it is about unfair conduct of majority group of conducting the B....
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.... the arbitration agreement. Similarly, majority directors, i.e. respondent Nos. 4 to 8 found as necessary parties to the company petition but not the parties to the arbitration agreement as they are not the signatory to the SHA in their individual capacity as directors of the majority group. The dispute agreed to be referred to arbitration in SHA is between the promoters who are SEL, SIPL and MCL. Though relying on Clause 36.1.2, it was submitted by Mr. Trivedi that both of the shareholder group is given right to appoint one arbitrator on failure of promoters to appoint the sole arbitrator and since majority directors are covered by definition of shareholder group in the SHA and also covered in the definition of associate, the majority group directors, i.e. respondent Nos. 4 to 8 in the company petition, are to be construed as parties to the arbitration agreement and can be referred to arbitration. Such argument is not available to he petitioners in view of the fact that the respondent Nos. 4 to 8 though represent majority shareholder group on the board of the company, however they are in fiduciary relationship with the company and joined in the company petition in the capacity as ....
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....d on by Mr. Trivedi on commonality of subject matter and the parties. 61. Consequently, whether by incorporation, the arbitration clause from the main agreement could be read into other agreements is also not required to be considered on the basis of the judgment in the case of M.R. Engineers and Contractors Pvt. Ltd. (supra). 62. However, relying on the judgment in the case of Everest Holding Limited (supra), Mr. Trivedi submitted that in view of the joint venture agreement, reference of part of the matter to the arbitration would not amount to bifurcation of subject matter of the company petition. However, when the Court finds that entire matter before the CLB is not referable to the arbitration, even if the parties are taken to be bound by JVA, it is not permissible to bifurcate the matter and the cause of action for referring the matter to the arbitration. 63. In any case, in the context of Section 8 of the Arbitration Act, as held by the Hon'ble Supreme Court in the case Sukanya Holdings (P) Ltd. Vs. Jayesh H. Pandya and Another reported in MA: (2003)5 SCC 531, it is not permissible to make reference for part of the matter. In the said case, the Hon'ble Suprem....
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....rary, Mr. Nariman argued that this judgment states the correct law and, in fact, the principles stated should be applied to the present case. 133. The ambit and scope of Section 45 of the 1996 Act, we shall be discussing shortly but at this stage itself, we would make it clear that it is not necessary for us to examine the correctness or otherwise of the judgment in the case of Sukanya AIR 2003 SC 2252: 2003 AIR SCW 2209) (supra). This we say for varied reasons. 133.1. Firstly, Sukanya was a judgment of this Court in a case arising under Section 8 Part I of the 1996 Act while the present case relates to Section 45 Part II of the Act. As such that case may have no application to the present case. 133.2. Secondly, in that case the Court was concerned with the disputes of a partnership concern. A suit had been filed for dissolution of partnership firm and accounts also challenging the conveyance deed executed by the partnership firm in favour of one of the parties to the suit. The Court noticing the facts of the case emphasized that where the subject-matter of the suit includes subject-matter for arbitration agreement as well as other dispu....