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2014 (9) TMI 1183 - Board - Companies LawReference to arbitration - dispute relating to and is in connection with the company - dispute revolves around the alleged allotment of shares, alleged removal of directors etc which are covered in the shareholders' agreement - whether the applicant has made out any case to refer the subject matter of the company petition to arbitration? - Section 8 of the Arbitration and Conciliation Act. Whether there is an arbitration agreement among the parties - Held that:- The SHA dated 30.07.2008 having described the promoters as those persons who are listed out in Schedule I numbering into 12 individuals, in the absence of the signature of the entire parties in the capacity as promoters, the said document cannot be titled as agreement either under the Contract Act or under the Arbitration and Conciliation Act. Hence this criteria is not satisfied. Commonality of parties - Held that:- The parties to the S.H.A are different from the parties to the Company petition and hence one of the ingredients of the requirements to be satisfied under section 8 has not been fulfilled in the facts of the matter herein and hence the question of referring the said matter to arbitration does not arise. Subject matter of dispute vis-a-vis agreement - Held that:- The subject matter of the petition relates to rights of members and relief in pursuance of statutory provisions as provided for in sections 397 to 403 of the Companies Act, 1956 and the same cannot be construed as matters covered by scope of arbitration agreement. However the scope of the said section as laid down by various courts makes clear the distinction between the statutory power and terms of any mutual arrangement by an agreement. It is well settled law that parties by mutual concern cannot be permitted to override the statutory provisions. Hence both factually and legally the subject matter of the company petition would not fall within the scope of arbitration agreement. Whether the applicant had filed the said application before submitting the 1st statement on the substance of the dispute? - Held that:- This Bench is of the view that having issued a purported legal notice in February 2013, by the said applicant as per Exhibit R3 no plausible explanation was offered for their action of filing section 8 Application in November 2013 and the applicants have not approached this Bench with clean hands. Therefore the action of not filing counter not having been explained, the filing of application u/s.8 cannot be taken as bonafide one is nothing but to cover up the unexplained delay in filing 1st statement to the petition. Hence the applicant cannot be said to have acted bonafidely on this aspect. Whether the reliefs sought in the petition are those that can be adjudicated and granted in Arbitration proceedings? - Held that:- The relief sought in the petition cannot be adjudicated and cannot be granted through arbitration in view of the Mandatory Provisions Empowering Exclusive Jurisdiction to CLB for deciding such issues. The main point of the applicant is that the reliefs sought for in the CP are arbitrable in terms of SHA and the arbitration clause in the AOA. In this aspect it is well settled law that in a matter of oppression and mismanagement any arbitration clause in the articles of association a company shall not have any legal force and validity of enforcement in view of the provisions of section 9 of the Companies Act, 1956 - In view of the mandatory provisions of the Act the question of relying upon the clauses of the AOA and making any reference to arbitrator in view of existence of arbitration clause for answering the disputes raised by members touching upon oppression and mismanagement does not arise at all. The arbitration clause even if it forms part of Articles of Association, but is violation of section 9 of the Act, the same cannot be enforced by law. However, it is clarified that an arbitration clause in an agreement between the parties, and any disputes between the parties on subject matter covered within the terms of agreement, shall fall within the jurisdiction of any arbitrator subject to certain statutory provisions. The core issue namely whether the applicant has made out any case to refer the subject matter of the CP to arbitration need to be answered in negative - application dismissed.
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