TaxTMI 
TaxTMI 
2017 (12) TMI 1450
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....nterim application, are that on or about 17/3/2017, respondent No. l filed a company petition U/S. Sec. 241, 242 and 244 of the Companies Act, 2013 before this Tribunal which was numbered as CP No. 149/2017. In the said company petition, petitioner has stated that applicant is a company incorporated under the laws of Mauritius having its registered office at 1st Floor, Wing a, Cyber Tower I, Cybercity, Ebene, Mauritius. 3. It is also stated that the applicant currently held 35% of the paid-up share capital in the respondent No. 2. The respondent No. 2 is a part of SPvEI Group of Companies carrying on business at Plot No. X-1, 2 and 3, Block - EP, Sector - V, Salt Lake City, Kolkata - 700091. The applicant has stated that in the company petition respondent No. l has alleged that the applicant has committed through its nominee directors on the board of the respondent No. 2, alleged acts of mismanagement in the respondent No. 2 which are allegedly prejudicial to the respondent No. 2 and oppressive to the respondent No. l. 4. Applicant has further stated that he has invested approximately Rs. 80 crore in the respondent No. 2 under the terms of the Share Subscription and SHA dated....
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....uding application for interim reliefs by the applicant to which the respondents have filed a detailed response as also filed its statement of claim and the respondents are due to file their statement of defence. 8. Both the respondents have participated in the arbitration and have not sought any dismissal or stay of the same. In the light of valid and binding arbitration clause in each of the SHA and the Articles, this Tribunal ought to refer the parties to continue with the arbitration and not entertain the present petition. 9. Applicant has further contended that the CP is mala fide, oppressive, vexatious and an attempt at dressing up the CP solely to obfuscate the dispute resolution provisions of the SHA and the Articles. Despite being in knowledge of and control of the day to day operations of the respondent No. 2, the respondent No. l has made false and malicious allegations in a blatant attempt to disguise pure contractual disputes into an act of oppression and mismanagement. The subject matter agitated in the CP is governed by their respective contracts being the PMA and the transaction document and the Articles. 10. Applicant has further contended that the arbitrat....
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..... 15. It is further contended that so far as the original respondents No. 3 to 7 are concerned, not being signatories to the SSHA, therefore, no arbitration agreement is in existence at all and, as such, these parties cannot be referred to arbitration, whether under the SSHA or otherwise. 16. It is further contended that in any event, the issues and matters covered by Sec. 241 of the Companies Act, 2013 in relation to oppression and mismanagement of a company, are not amenable to arbitration and, therefore, can never be the subject matter of any arbitration agreement. 17. Ld. Advocate further contended that it is settled law that issues of oppression and mismanagement are not amenable to arbitration and are not arbitrable. It is further contended that Rishima admits that the petitioner has attempted to make out a case related to mismanagement and oppression by the applicant to try and sustain the plea of non-arbitrability of the disputes and it defeats the mandatory applicability of Sec. 45 of the Arbitration Act. 18. It is contended by the respondent that for determination of Sec. 45 it is irrelevant whether or not the oppression/mismanagement occurred. Their issues go....
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.... explicit agreement to resolve any dispute, controversy, claim or disagreement through arbitration. 25. The respondent/applicant has further contended that moreover, the applicant invoked arbitration as far back as 11.02.2016 but no objection as to the subject matter of the arbitration was raised by SIDCL or SHPL at that stage, it was only over a year later that SIDCL belatedly and with malafide intend filed the C.P. in March 2017 with the allegation ranging as far back as 2013 and 2014. Therefore, it is evident that the filing of the C.P. is an afterthought and a malaise attempt to disrupt/undermine the delay the arbitration whereas the arbitration commenced much before the filing of the C.P. and the respondents have actively participated in the arbitration proceedings to date including by filing a detailed statement of defence. Thus, it is abundantly clear that the arbitration has been going on for almost year and a half and the petitioners of this C.P. have consistently and actively participating therein. The applicant also contends that C.P. is a dressed-up petition only to defeat the arbitration agreement. 26. The main issues involved in the application is that: ....
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..../Affirmative Vote Item reguiring Rishima's affirmative vote including for: 7. Appointment/change of auditors of Company (from among Big Four Firm) 9. Adopting/approving annual accounts of Company. 27. Entering into any debt/financing transaction/amendment/modification/termination of loan agreement Article 112 Clause 9 Company to be managed by the Promoter Directors Article 113 Clause 10 Business Plan Article 114 Clause 14 Investor Exit 14.2 Investor's right to exit Company during Exit Put Option Period if Company does not undertake an IPO. Article 110 Clausel5.2 (b) Statutory auditors of SHPL would be any of the Big 4 Firms or any other reputed chartered accountant firm as mutually agreed by the parties. Article 117 (2.2) Clause 17.2 Consequences of default under SHA Default Promoter (including failure to finish construction of Project by December 2011) entitles Rishima to sell its shares to be Promoters of the investment amount plus 25 % IRR. Article 119 Clause 24 of SHA which is incorporated in Article 122 of AOA provides the dispute resolution process arising o....
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....e of auditor from amongst big four firms adopting or approving only account of the company and entering into in debt financial transaction/amendment modification or termination of the loan agreement. The above term of SHA as also been incorporated in Article 108 of the Articles of Association of the Company. Clause 15.2(b) of the SHA deals with the provision regarding the statutory auditors, and it provides that statutory auditors of SHPL would be from among the big four firms or any other reputed chartered account firm mutually agreed upon by both the parties. The said condition of SHA has also been incorporated in Article 117/2.2 of AOA. 32. It is also important to point out that Clause 24 of the SHA deals with the provision relating to dispute resolution and it provides that the dispute in connection with or arising out of SHA (includes regarding the existence of validity or termination) or being finally resolved by arbitration. The arbitration is to be conducted under ICC Rules and the seat of arbitration in Singapore. This is also incorporated in Article 122 of the Articles of Association of the company. Therefore, on the basis of SHA and Articles of the Company, it is clea....
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....ngapore is also given in SHA. 35. It is clear that main relief sought in CP is regarding deletion of Article 112 of Articles of Association which is relating to the affirmative voting right given to the respondent No. 2 Rishima. Other reliefs which have been claimed in CP are included simply cover up or dress up the petition under the provision of under Sec. 241 of the Companies Act, 2013. In fact, all issues which have been raised in CP are fully covered by SHA. It is pertinent to mention that the petitioner and respondent No. 2 are not denying the validity and existence of the Arbitration Clause in the SHA between them and R-2, i.e. Rishima has invoked the Arbitration Clause. It is also undisputed that Arbitration proceeding was pending at the time of presentation of CP and both the parties are participating in that. The SHA and AOA provide disputes redressal mechanism for those matters which has arisen on account of SHA. The relief which has been sought in CP and if granted will directly affect the AOA and SHA whereas parties themselves have agreed to resolve such disputes which have arisen on account of AFFIRMATIVE VOTING RIGHT given through SHA by Arbitration. 36. There ....
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....dopting/approval of the only accounts of SHPL. However, if there is any dispute relating to this, a dispute redressal mechanism is provided under Articles of Association which is fully covered by the arbitration clause. Another point which has been raised in the CP is relating to the appointment of auditor. Clause 15,2(b) and Article 117.2.2 of AOA provides that Statutory Auditor of SHPL is to be from among the four big firms or a reputed chartered account mutually agreed by the parties. Undoubtedly Rishima has affirmative voting right regarding appointment or change of statutory auditor of SHPL. Therefore, if Rishima did not consent change of any auditor, and the dispute has arisen regarding the selection of the statutory auditor, then it can only be resolved by the dispute redressal mechanism as given in the SHA as well as Articles of Association. 41. Hon'ble Supreme Court in the case of Chloro Controls India (P.) Ltd. v. Severn Trent Water Purification Inc. [2013] 1 SCC 641: at page 679, has given the Interpretation of Section 45 of the 1996 Act and has held that: 'In order to invoke the jurisdiction of the court under Section 45, the applicant should satisfy the prerequis....
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....vely valid? 4. Is there a dispute, does it arise out of a defined legal relationship, whether contractual or not, and did the parties intend to have this particular dispute settled by arbitration? 5. Is the arbitration agreement binding on the parties to the dispute that is before the court? 6. Is this dispute arbitrable?" According to this Guide, if these guestions are answered in the affirmative, then the parties must be referred to arbitration. Of course, in addition to the above, the court will have to adjudicate any plea, if taken by a non-applicant that the arbitration agreement is null and void, inoperative or incapable of being performed. In these three situations, if the court answers such plea in favour of the non-applicant, the guestion of making a reference to arbitration would not arise and that would put the matter at rest. The provisions of Section 45 of the 1996 Act are to prevail over the provisions of CPC and when the court is satisfied that an agreement is enforceable, operative and is not null and void, it is obligatory upon the court to make a reference to arbitration and pass appropriate orders in relati....
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....of the parties had disputed the validity of this arbitration agreement before the Arbitral Tribunal. The dispute which has been raised in the CP by the petitioner is mainly related to the Article 112 of the AOA of the Company and affirmative voting right given to Rishima by SHA and by Articles of Association. All other reliefs which have been claimed in the CP are only connected with the above mentioned two reliefs, and as per SHA and Article 112 of the Articles of Association itself, it is clear that for redressal of the dispute arising out of SHA, dispute resolution mechanism is provided under the said AOA and SHA. Clause 24 of SHA specifically provides that dispute in connection with are arising out of SHA regarding its existence validity are to be finally resolved by arbitration which is to be conducted under the ICC Rules with the seat of arbitration in Singapore. 43. So, it is clear that the case is fully covered by a contractual agreement between the parties, i.e. the petitioner and respondent No. 2 and as per the agreement, the dispute resolution mechanism is provided to resolve such type of disputes. Only by filing a petition under Sec. 241/242 of the Companies Act, 201....
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....onial disputes relating to divorce, judicial separation, restitution of conjugal rights and child custody; (iii) matters of guardianship; (iv) insolvency and winding up; (v) testamentary matters, such as the grant of probate, letters of administration and succession certificates; and (vi) eviction or tenancy matters governed by special statutes where a tenant enjoys special protection against eviction and specific courts are conferred with the exclusive jurisdiction to deal with the dispute. This Court held that this class of actions operates in rem, which is a right exercisable against the world at large as contrasted with a right in person am which is an interest protected against specified individuals. All disputes relating to rights in personam are considered to be amenable to arbitration while rights in rem are required to be adjudicated by courts and public tribunals. The enforcement of a mortgage has been held to be a right in rem for which proceedings in arbitration would not be maintainable............ Hence, in addition to various classes of disputes which are generally considered by the courts as appropriate for decis....
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....arbitration agreement is under a positive obligation to refer parties to arbitration by enforcing the terms of the contract. There is no element of discretion left in the court or judicial authority to obviate the legislative mandate of compelling parties to seek recourse to arbitration........ 45.2 Allegations of fraud are not alien to ordinary civil courts. Generations of judges have dealt with such allegations in the context of civil and commercial disputes. If an allegation of fraud can be adjudicated upon in the course of a trial before an ordinary civil court there is no reason or justification to exclude such disputes from the ambit and purview of a claim in arbitration. The parties who enter into commercial dealings and agree to a resolution of disputes by an arbitral forum exercise an option and express a choice of a preferred mode for the resolution of their disputes. The parties in choosing arbitration place priority upon the speed, flexibility and expertise inherent in arbitral adjudication. Once parties have agreed to refer disputes to arbitration, the court must plainly discourage and discountenance litigative strategies designed to avoid recourse to arbitrat....
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....ir disputes through a private tribunal. The intent of the parties is expressed in the terms of their agreement. Where commercial entities and persons of business enter into such dealings, they do so with a knowledge of the efficacy of the arbitral process. The commercial understanding is reflected in the terms of the agreement between the parties. The duty of the court is to impart to that commercial understanding a sense of business efficacy. 53. The Arbitration and Conciliation Act, 1996, should in my view be interpreted so as to bring in line the principles underlying its interpretation in a manner that is consistent with prevailing approaches in the common law world. Jurisprudence in India must evolve towards strengthening the institutional efficacy of arbitration. Deference to a forum chosen by parties as a complete remedy for resolving all their claims is but part of that evolution. Minimising the intervention of courts is again a recognition of the same principle. 57. For the above reasons, I agree with the eloguent judgment of my learned Brother in coming to the conclusion that a mere allegation of fraud in the present case was not sufficient to detract fr....
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....n the law laid down by Hon'ble Supreme Court in the case of A Ayyasamy (supra) specifically at page 38 of the said judgment which provides that: "Hence, in addition to various classes of disputes which are considered by the courts as appropriate for decision by public fora, there are classes of disputes which fall within the exclusive domain of special fora under legislation which confers exclusive jurisdiction to the exclusion of an ordinary civil court. That such disputes are not arbitrable dovetails with the general principle that a dispute which is capable of adjudication by an ordinary civil court is also capable of being resolved by arbitration. However, if the jurisdiction of an ordinary civil court is excluded by the conferment of exclusive jurisdiction on a specified court or tribunal as a matter of public policy such a dispute would not then be capable of resolution by arbitration." 48. Ld. Counsel for the Respondent/Petitioner in C.P. has emphasised Section 430 of the Companies Act, 2013. It provides that: "No civil court shall have jurisdiction to entertain any suit or proceeding empowered to determine by or under this Act or any other law for the time be....
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....DCL and Lord Collins appointed two arbitrators, and the parties have made various filings and submissions before the arbitral tribunal. 52. Therefore, it is clear that Rishima has invoked arbitration clause and respondent/petitioner in C.P. has also participated in the arbitration, and arbitration proceeding is pending between the parties and the dispute raised in the CP and arbitration proceedings is almost the same. 53. Ld. Counsel for the Respondent/Petitioner in C.P. has relied on the order of the Hon'ble Supreme Court in the case of Booz Allen Hamilton v. SBI Home Finance Ltd. [2011] 5 SCC 532 wherein it has been held that: "Certain disputes have been left to the exclusive jurisdiction of 'public fora' as they relate to 'rights in rem' and cannot be left to adjudication by Arbitral Tribunal being "unsuited for private arbitration." 54. It is to be made clear that in the present case main dispute is relating to the affirmative voting right and amendment of Article 112 of the Articles of Association which has been incorporated in AOA on the basis of SHA and as per SHA, if any dispute arising out of SHA then special forum is provided under Articles of Associatio....
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....at respondents No. 3 to 7 of the CP is not signatory to SHA. Therefore, no arbitration agreement is in existence between the respondents No. 3 to 7. In fact, respondents No. 3 and 4 are the nominees of respondent No. 2 on the Board of Directors of SHPL and respondents No. 5, 6 and 7 are nominee directors of another party. These nominee directors have no concern with SHA or AOA. They are only nominee directors, and they have made a party in the CP simply to drag this case this Tribunal. The law laid down by Hon'ble Supreme Court in the case of Chloro Controls India (P.) Ltd. (supra) is at this point. 60. In the above-mentioned case Hon'ble Supreme Court has held that: "Section 45 is a provision falling under Chapter I of Part II of the 1996 Act which is a self-contained code. The expression "person claiming through or under" would mean and take within its ambit multiple and multi-party agreements, though in exceptional case. Even non-signatory parties to some of the agreements can pray and be referred to arbitration provided they satisfy the prerequisites under Sections 44 and 45 read with Schedule I. Reference of non-signatory parties is neither unknown to arbitration j....