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2007 (10) TMI 609 - Board - Companies LawArbitration Proceedings - Application filed u/s 8 - seeking for referring the parties to the proceeding to Arbitration in terms of arbitration agreements - financial mismanagement - removal as MD and WTD - breach of right of pre-emption - HELD THAT:- In the present case, the petitioner has relied on the Article 58(a) of the Articles of Association of the company in regard to the allegation of depriving the petitioner of its pre-emption rights and likewise the petitioner has sought for amendment to the Articles regarding directorship. Both these matters can be decided independent of the terms of SHA. In Limrose case [2005 (6) TMI 565 - COMPANY LAW BOARD NEW DELHI] this Board has held that if the allegations could be examined without reference to the terms of the agreements containing arbitration clause, then the parties need not be referred to arbitration even if the subject mater is covered in the arbitration agreement. Even otherwise, as rightly pointed out by Shri Sarkar, allegation of financial management cannot be traced to any of the terms of SHA. Even otherwise, in view of the judgment in Sukanya Holdings [2003 (4) TMI 435 - SUPREME COURT], there is no possibility of bifurcation of the subject matter between the CLB and the Arbitrator. Whether, there is a breach of right of pre-emption, whether the Mehra group is guilty of financial mismanagement meriting their removal as MD and WTD and whether Articles relating to directorship is to be amended etc. would all depend on the merits of the case and need not be gone into while dealing with the instant petition under Section 8 of the Act. Considering the fact that the company is not a party to SHA and that some of the allegations cannot be traced to the terms of the SHA, even assuming that pre-emption rights and directorship are covered under the terms of SHA, the application is not maintainable and is accordingly dismissed. Grant of interim reliefs - maintenance of status quo with regard to the shares - stoppage of supplies - If the shares are sold by Mehra Group to ILFS during the pendency of the proceeding challenging such a sale, irreparable damage would be caused to the petitioner and therefore, the balance of convenience is definitely in its favour. Accordingly, I direct both the sides to maintain status quo with regard to their shareholdings, till the petition is disposed of. Considering the nature of the business of the company, Public interest is also likely to be affected. It is on record that Mehra group itself, realizing the necessity that the supplies should be resumed urgently, have filed a suit seeking for directions to the petitioner to resume supplies. Therefore, when the petitioner, on its own, is willing to resume supplies, I do not find any justification in the opposition of Mehra Group on grant of the said relief. Perhaps, their objection is that the said offer has come with a rider that the nominee of the petitioner should be appointed as the Joint MD. In the present case, the petitioner has been given the right, in terms of Article 171(1), to appoint its nominee as the Joint MD, even though, it has not exercised the said right so far. When such an appointment would be in the interests of the company, I am inclined to grant the said prayer, taking into consideration that in terms of Section 403 of the Act, this Board has the power to regulate the conduct of the company during the pendency of the proceeding. However, with the view to protect the interests of Mehra Group also will be with checks and balances. Accordingly, I authorize the petitioner to appoint one of its nominees as the Joint MD subject to: 1. The petitioner should first resume supply. 2. The appointment will be made in a Board meeting to be convened within a week of first shipment of the components/materials to the company. 3. The Joint MD will work together with the MDall major decisions will be taken jointly 4. He shall not gather materials/evidence/probe into the past affairs of the company. 5. Status quo with regard to all the issues pending in the proceeding should be maintained and no action in relation to the same shall be taken. 6. No changes shall be brought about in the managerial set up and their responsibilities. The parties will appear before me to react to my suggestion, directions for either valuation or for completion of pleadings will be given. Both the sides may also keep a list of reputed valuers for deciding the name of the valuer if the suggestion for valuation, is acceptable to both the sides.
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