TaxTMI 
TaxTMI 
2021 (2) TMI 932
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....ement of the Company have mismanaged the affairs of the Respondent No. 1 Company in a manner prejudicial to public interest and interests of the Company and have acted oppressively; iv. Direct Majority Shareholders to recompense the Company for all losses suffered by the Company along with an interest calculated thereon at the rate of 12% (twelve percent), as a consequence of the fraudulent, unlawful and wrongful acts or omission of the Majority Shareholders, under Section 242 (2) of the Companies Act, 2013; v. In alternative, order reduction in the share capital of the Company to the extent of the shareholding of the Majority Shareholders; vi. Disqualification of Majority Shareholders as promoters of the Company and/or from voting in the Company as shareholders of the Company; vii. Direct recovery of undue gains made by the executive Management of the Company, including the management paid to the Executive Management of the along with an interest calculated thereon at the rate of 12%% (Twelve percent) and payment thereof to the Company under Section 242 (2) (Gi) of the Companies Act,2013; viii. Remove Majority Shareholders as director of the Company under Section 242 ....
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....(IA/44/KOB/2020) under Section 8 (1) of the Arbitration and Conciliation Act, 1996, seeking the following reliefs: - i allow the present application under section 8(1) of the Arbitration and Conciliation Act, 1996 and direct the petitioners to seek relief before an Arbitral Tribunal in terms of the arbitration agreement contained in Clause 18 of the Memorandum of Understanding (MoU) dated March 31, 2007; and ii. dismiss the present company petition in limine. 3. It is submitted in the IA that the 2007 MoU was entered into between the existing shareholders of Respondent No. 1 company and covers various aspects in connection with the company's share capital, shareholders' funds, accumulated earnings/losses, shareholders liabilities towards the company, company's liability towards shareholders viz. interest, dividends and all other expenses payable and advances/loans received by the company from shareholders. 4. It is further submitted that the Respondent No. 2 in the 2007 MoU has represented that he was authorized by the other Respondents (all legal heirs of Late Mr. T. Madhavan Nair), that applicant No. 2 i.e. majority shareholder of Respondent No. 1 company is a....
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....Section 241 read with Section 242 of the Companies Act, 2013 or Sections 397 and 398 read with of the Companies Act, 1956, would not be affected by the existence of an arbitration clause. II. An oppression and mismanagement "action" before the NCLT, the "matter" invokes NCLTs statutory powers under Section 241 and 242 and not exercisable by a Civil Court. Therefore, disputes in oppression and mis-management cases are those such that demand the exercise by this Tribunal of its wide powers under Section 241 and 242 and not those that can be exercised by a civil court. In order to fortify the above contention the respondent of this application relied on the judgment of the Hon'ble Supreme Court in the case of Haryana Telecom Ltd. vs. Sterlite Industries India) Ltd., reported in 1999 (3) SCR 861, in which it is held that "no arbitration agreement can vest an arbitral tribunal with the powers to grant the kind of reliefs against oppression and mismanagement that the CLB might provide". III. Every arbitration agreement cannot be seen as some catch all encyclopaedic, repository for the entirety of the universe of the disputes between the parties. Therefore, an arbitration agreemen....
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....p which is not a party to the present proceedings before this Tribunal and that the MoU provides for one directorship for every 10% of shareholding, which in effect provides representation to every group proportionate to their shareholding. Consequently, the governance and management structure of Applicant No. 1 company includes all its stakeholders including the Respondents as agreed between the parties. Thus, the contention of the Respondents that the company is not a party to the MoU cannot be accepted. In order to substantiate the above contention, they have relied on the decision of the Hon'ble Supreme Court in Chloro Controls () P. Ltd. Vs. Severn,Trent Water Purification Inc. And Ors., (2013) 1 CompLJ 19 (SC), in which it was held that it becomes abundantly clear that reference of even non-signatory parties to arbitration agreement can be made. It may be the result of implied or specific consent or judicial determination. Normally, the parties to the arbitration agreement calling for arbitral reference should be the same as those to the action. But this general concept is subject to exceptions which are that when a third party, i.e. non-signatory party, is claiming or is....
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....at the board meeting held on 08.05.2018, the Applicants/Respondents had requested inter alia the Petitioners to comply with the aforesaid terms of the MoU. 12. They have also stated that the decisions referred to in the counter filed by the Respondents operate in the light of facts of respective cases. Further the decision in Haryana Telecom was specifically in relation to a winding up matter. Even if the allegations contained in the Company Petition are considered at their face value, it will be clear that notwithstanding they are time barred, there is nothing substantial except their exaggerated allegations relating to misappropriation which is a matter subject to evidence to prove their allegation. 13. It is also stated that a careful perusal of the law contained in the Arbitration and Conciliation Act, 1996 and the plethora of decisions operating in this field will conclusively establish that Courts must yield to the mode of dispute resolution agreed and chosen by the parties and that a contract providing for arbitration is a commercial document between the parties and must be interpreted in a manner so as to give efficacy by adopting a common sense approach rather than pedan....
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....r the Applicants and the learned senior counsel for the Respondents. I have also thoroughly perused the averments made in the IA, counter, rejoinder and the various decisions referred to by both parties. 17. Learned Counsel for the applicants vehemently argued that the Memorandum of Understanding ("MoU") dated 31st March 2007 ("2007 MoU") executed by and between all shareholders namely (i) PV Abdul Wahab; (ii) PA Ibrahim Haji: (iii) Ajit Nair and (iv) P.A. Hamza) of Indus Motor Company Private Limited Ajit Nair; (Company") (at Pg. No. 871 of the Company Petition) will sufficiently establish the fact that the entire MoU pertains to the operations and management of the affairs of the company. The parties to the 2007 MoU had agreed that all disputes arising out of the said MoU shall be settled by arbitration, and the arbitration agreement is contained in Clause 18 of the MoU. 18. Section 8(1) of the Arbitration and Conciliation Act, 1996 provides that the judicial authority, before which an action is brought in a matter which is the subject of an arbitration agreement shall, notwithstanding any judgment, decree or order of the Supreme Court or any Court, refer the parties to arbitra....
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....agement and seeks only for reliefs that are in the nature of monetary compensations, indemnifications and surcharges. Such reliefs as prayed by the Respondents in no way can be seen as a matter that cannot be Arbitrable. In fact, it will not only protect the party autonomy but also aid avoiding multiplicity of proceedings and the issues with regard to severing of matters arbitrable and others. 23. There are other decisions such as the one in the cases of KIMS Bellrose Institute of Medical Sciences Private Limited v Jubey M. Devasia and Ors. (05.09.2018 NCLT Chennai): MANU/ND/1553/2018, Rehana Praveen Chaudhary v Poonam Drums & Containers (P.) Lid. and Ors., [2017]136 CLA Ors. 294, Ramnish Kumar Sharm V D.R.Johns Lab Pvt. Ltd. and Ors.MANU/NC/0112/2016, Binod Kr. Bawari and others v D.R. Johns Lab Pvt. Ltd., and Ors. [2017] 136 CLA 227 which would establish that there is no rule of law that whenever a petition is presented in the garb of oppression, Section 8 will not be allowed. Any loss allegedly caused to the Company as a result of investing money in the Initial Public Offer and breach of rights relating to Trademarks are also contractual matters and everything has been replied ....
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....; (b) the reliefs sought in the suit are those that can be adjudicated and granted in an arbitration and (c) all parties to the suit are parties to the arbitration agreement. 29. Considering the aforesaid aspect, the learned senior counsel stated that the subject matter of CP/02/KOB/2020 does not fall within the scope of arbitration clause under the MoU, the reliefs sought in CP/02/KOB/2020 are those that cannot be adjudicated and granted in an arbitration and that when a special statute gives a right and also provides tor a forum to adjudication of such rights and remedies, the remedy has to be sought only under the provisions of that act and the common law court has no jurisdiction. In the present petition, the relief for oppression and mismanagement and the forum where such reliefs can be claimed are specifically provided in the Companies Act, 2013 and, therefore, an Arbitral Tribunal would not be vested with the powers to adjudicate such issues revolving around oppression and mismanagement as the remedy is provided specifically in the Companies Act, 2013. The petitioners Nos. 1 - 4 are seeking certain specific prayers which can be granted only under Section 242(2) of the 2....
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....mpany. 33. He has also referred to the case of Sukanya Holdings Pvt. Ltd. vs. Jayesh H. Pandya, reported in (2003) 5 SCC 531, in which the Hon'ble Supreme Court held that where a suit contains matters which are beyond the scope of the arbitration agreement and is also between parties who are not parties to the arbitration agreement, then such suits cannot be referred to arbitration. 34. He has concluded his arguments stating that present C.P is not a contractual dispute between the parties, so as to be referred to arbitration, as the reliefs against oppression and mismanagement, which is essentially a statutory relief shall lie only before the NCLT, as per the Companies Act, 2013. 35 It appears from the record that Respondents of the CP, filed the above IA 44/KOB/2020 for referring the matter to the Arbitral Tribunal under Section 8 of the Arbitration and Conciliation Act. The Company Petition was filed under Section 241-242, 244 read with Section 337, 341 of the Companies Act, 2013 alleging oppression and mismanagement against the respondents (applicants in the IA). The case projected in the aforesaid CP in a nutshell is that the petitioner 1 to 4 in the CP (respondents in ....
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....ndum of Understanding. (iii) Proportionate representation of the Board of the Company (iv) Collaterals to be provided by the parties to the Memorandum of Understanding and availing of banking facility (v) Management fee to the Respondent No. 2 (R2) for the day to day management of the Company 40. It also appears that the facts and circumstances of the most of the cases cited by the Learned Senior Company Secretary for the applicant is not similar to the facts and circumstances to the present Company Petition. Besides that, in the Company Petition, there is an allegation of severe fraud which cannot be referred to Arbitration, as the Arbitral Tribunal is not equipped to investigate into the matters of fraud. 41. In the case of Sukanya Holdings (supra), the Hon'ble Apex Court on being confronted with a similar question, had held that in a suit where the subject matter falls within the arbitration agreement which involves parties other than some of whom are not the signatories to the arbitration agreement, the provisions of Section 8 of the Act of 1996 is not attracted. In the said decision, the Apex Court had also held that the bifurcation of a subject matter of the proceedin....