TMI Blog2016 (5) TMI 910X X X X Extracts X X X X X X X X Extracts X X X X ..... s determination of the aforesaid aspect may call for deeper examination of the matter by the CLB. As such, the CLB cannot be found fault with for non-disposal of the C.A.907/2015 on the date of issuing the order dated 27/07/2015. Coming to the argument made by Mr Banerjee that due to the pendency of the C.A. No 907 /2015, the CLB did not have any jurisdiction to pass the order dated 27/07/2015 it may be mentioned here-in that there is nothing in the Act of 1996 that supports such a conclusion. In the absence of any express provision contained in the statute, ouster of jurisdiction of the CLB cannot be readily inferred by this court. There can be no doubt about the fact that in the instant case an obligation was cast upon the CLB to decide the objection as to the question of jurisdiction raised under section 8 of the Act of 1996 at the earliest point of time. But a perusal of the impugned order also indicates the reasons that have been recorded by the CLB for issuing the said order despite the pendency of the section 8 application. As such, the submission of Mr. Banerjee to the effect that the CLB did not have any jurisdiction to pass the order dated 27/07/2015 pending disposa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as petitioners with a grievance that without deciding the application filed by the petitioners under section 8 of the Arbitration and Concilliation Act, 1996 ( in short the Act of 1996) numbered and registered as C.A. No 902 of 2015, the CLB proceeded to hear the Company Petition being C.P. No 143 of 2015 on the question of interim relief, thereby exceeding its jurisdiction in the matter. For a better understanding of the lis, it would be essential to briefly record the factual matrix of the case. 5. The appellant No.1 company, namely, M/s Calcom cement India Ltd. ( here-in-after referred to as the company ) was originally incorporated in the year 2004 under the provisions of Companies Act, 1956 with its registered office situated at Anil Plaza II, ABC, G.S. Road, Guwahati-781005, Assam. The respondent nos. 1 to 9 ( referred to as the Bawri Group ) were originally in control of the company which was engaged in the business of manufacturing and sale of cement, having two manufacturing units situated in the State of Assam. With a view to strengthen and expand the business activities of the company, the Bawri Group had taken a decision in the month of January, 2012 to induct ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rder dated 29/08/2015 recording an undertaking given on behalf of the appellant No.2 to the effect that until the next date fixed, there would be no transfer of share holding in the company which are being held in the in the Escrow account. 7. It further appears from the record that the respondent nos. 1 to 15 herein had filed Company Petition No. 143/2015 under Section 397, 398, 402, 403 and 406 of the Companies Act, 1956 alleging oppression and mismanagement against the appellant No.2. The case projected in the aforesaid company petition, in a nutshell, is that the respondent Nos. 1 to 15 i.e. the company petitioners have a share holding of 17.8% in the paid up share capital whereas the appellant No. 2 is currently holding 76% shares in the paid up capital of the company. The Bawri Group , who are in the minority share holding, have made substantial investment in the company. However, after the change of management of the company, the appellant No. 2 has been conducting the affairs of the company in violation of the Articles of Association, thereby indulging in activities causing loss and injury to the interest of the company and its share holders. The gist of the allegation ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... an application bearing No. CA 907/2015 under Section 8 of the Act of 1996 invoking the arbitration clauses contained in clause 17 and in the agreements dated 16-01-2012 and 30-11-2012 respectively, thereby requesting the learned CLB to refer the matter for arbitration. The appellant Nos. 1 and 2 had contended in the said application that the controversy projected in the company petition are essentially founded on the alleged breach of the terms and conditions of the share holders agreement dated 16/01/2012 and hence, the same would squarely fall within the purview of the arbitration clause contained therein. That apart, since the respondent Nos. 1 to 9 has already invoked the arbitration agreement by approaching the Delhi High Court by filing the application under Section 9 of the Act of 1996, the dispute raised in the company petition also deserved to be referred to settlement by means of Arbitration. 9. After hearing the learned counsel for the parties, the learned CLB had passed the interim order dated 27/07/2015 directing the parties to maintain status quo as regards the share holding and composition of the Board of Directors of the company with a further restraint order upo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... decision of the Hon ble Supreme Court rendered in the case of (2010) 3 SCC 732 (Secretary and Curator, Victoria Memorial Hall Vs. Howrah Ganatantrik Nagrik Samity and others), Mr. Banerjee submits that reasons are the heart beat of every conclusion. In the absence of any mention in the order as to the reasons for issuing the restraint order by the learned Company Law Board, the impugned order dated 27/07/2015 is a nullity in the eye of law and has become indefensible . In support of his aforesaid argument, Mr. Banerjee has also placed reliance on the decisions of the Calcutta High Court reported in (2007) 4 CHN 712 (Uniworth Resorts Ltd. Vs. Ashok Mittal Ors) ; Birla Corporation and others Vs. Rameshwara Jute Mills Ors (CP No 57/2004) ; Sadbhav Engineering Ltd. Vs. Montecarlo Ltd. reported in (2013) SCC Online Guj 4375, an unreported decision of the Calcutta High Court being order dated 14/09/2015 passed in APO No. 374/2015. 14. Arguing in support of the second question of law, Mr. Banerjee submits that law is well settled that once an application under Section 8 is filed before a court or a judicial authority it will be obligatory for the said authority to refer the disput ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the Act of 1996 in CA No. 907/2015. Therefore, submits Mr. Chatterjee, the observations recorded in the impugned order are for the limited purpose for passing an ad-interim order only and as such the learned CLB cannot be faulted for not recording elaborate reasons in the said order at the stage of passing an ad-interim order. 17. Mr. Chatterjee further submits that short of recording detailed reasons, the CLB has recorded sufficient reasons in the order 27/07/2015 disclosing its mind as to the factors that had led to the passing of the impugned order. The learned senior counsel submits that the interim order passed by the learned Company Law Board is aimed at granting minimum interim protection to the petitioners so as to ensure that the company petition is not rendered infructuous. He submits that the restraint order is equally applicable to both the parties and is merely aimed at maintaining status quo as regards the share holding pattern and the assets of the company pending fuller consideration of the contentious issues. In any events submits Mr. Chatterjee, in view of the discretionary power vested upon the learned Company Law Board under Section 402 of the Companies Act ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is no commonality of parties and hence, the learned Company Law Board had rightly assumed the jurisdiction in the matter by noticing the aforesaidsaid fact . He submits that in the case of Sukanya Holdings (P) Ltd. vs. Jayesh Pandya and another reported in (2003) 5 SCC 531 law has been settled by the Apex Court that a dispute can be referred to the arbitration only if all the parties are signatory to the arbitration agreement and the entire dispute is covered under the arbitration agreement. Contending that the respondent No 10 to 15 are not party to the agreement and have a common grievance of misuse of the companies resources by the appellant no 2, It would not be permissible to refer the disputes to arbitration if all the parties are not signatory to the arbitration agreement nor is it permissible to bifurcate the cause of action. In support of his aforesaid contention, Mr. Chatterjee has also referred to a decision of the Punjab and Haryana High Court rendered in the case of Sudarshan Chopra and others Vs. Company Law Board and others reported in (2004) SCC Online P H 128, to contend that the statutory jurisdiction of the Company Law Board under Section 397 and 398 read with ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nts in the case Booz Allen and Hamilton Inc (Supra) and Sukanya Holdings Pvt Ltd (supra ) by contending that disputes under section 397/398 are not included in the list of non-arbitrable disputes laid down by the Apex Court . Since the issue herein is as to whether the subject matter of a judicial proceeding is the subject matter of an arbitration proceeding or not hence, the law laid down in the case of Sukanya Holdings is not relevant in the facts of this case. Referring to the decision of Rakesh Malhotra ( supra) Mr Banerjee submits the said decision does not lay down that there would be an absolute bar in referring the disputes involved in a 397/398 petition for arbitration. 23. I have heard the elaborate arguments advanced by and on behalf of both the parties and have perused the materials available on record. 24. Coming to the first question of law framed by this Court , it would be apposite to refer to the observations made by the learned Company Law Board in paragraph 5.1 of the order disclosing the reasons for passing the impugned order dated 27/07/2015, which is quoted below :- 5.1. In the Company Petition, the allegations have been levelled as to the violation ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... discussing the brief factual background of the case, whereby the Board had gone on to observe that the issues raised in the company petition relates to non-adherence to the provisions of the Articles of Association and would constitute acts of oppression and mismanagement, which cannot be adjudicated by the arbitrator. It has also been observed that the power to deal with oppression and mismanagement under Section 397, 398 and 402 of the Companies Act cannot be exercised by the Arbitrator and that the respondent No. 10 to 15 herein not being signatories to the arbitration agreement, the disputes could not be referred to arbitration. By referring to the allegations leveled in the company petition the learned Board had also observed that such allegations make out a prima facie case of oppression and mismanagement. Such observation has been recorded after discussing the claims and counter claims made on behalf of the parties to the proceeding. The CLB had also taken due note of the objections taken under section 8 of the Act of 1996, whereby and whereunder reasons for not accepting such objections had also be recorded in the order. It cannot, therefore, be said that the impugned orde ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ned CLB has passed the order dated 27/07/2015 without recording any reason nor can it be said that the order dated 27/07/2015 is an unjust order causing serious prejudice to the interest of either party. Rather, from a reading of the order dated 27/07/2015 what can be seen is that the CLB has issued certain ad-interim order of protection pending fuller consideration of the contentious issues involved in the C.P. 143/2015. In a case of oppression and mismanagement under section 397 or 398 the quintessential proof of oppression would not be necessary for the CLB to pass an interim order under 403 of the Act. On an appreciation of the pleaded case of the complainant supported by materials on record once the CLB had arrived at a prima facie satisfaction as regards existence of a bonafide case it would be well within its jurisdiction and competence to pass such interim orders regulating the affairs of the company as may be deemed to be just and equitable. Having regard to the scheme of the Act visible from sections 397, 398, 402 and 403 of the Act of 1956, as long as the conditions contained in section 403 are met, an interim order cannot be set aside merely on the ground of inadequacy ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion as to whether the disputes involved in the C.P.143/2015 requires to be referred to arbitration or not. Hence, this Court would not be called upon at this stage to pass an order on the merit of the said application. In view of such candid submission made by the learned counsels for both the parties it would ordinarily not have been necessary for this Court to go into the second question of law at all. However, since the learned counsel for both the parties have advanced elaborate arguments addressing the Court on the principles of law that would govern a decision of the said application in the facts and circumstances of the case, it has become necessary for this court to deal with the arguments advanced by both the parties covering second question of law . 33. The existence of an arbitration agreement in the share holders agreement dated 16/01/2012 as well as 30/11/2012 is not in dispute. What has been disputed by the respondent Nos. 1 to 15 is that the matters complained of in CP No. 143/2015 alleging oppression and mismanagement, are matters exclusively falling within the domain of the CLB for an appropriate enquiry under Section 397, 398 read with Section 402 and 403 of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... v Inspiration clothes U in (2009) 1 SCC 372, the Apex court has held that the twin conditions precedent for invoking an arbitration agreement under section 8 are (i) it should be between the parties to the dispute and (ii) it should relate to or be applicable to the dispute. What, therefore, follows is that when an application under section 8 is filed a court or a judicial authority before which an action is pending has no option but to refer the matter to arbitration subject to fulfillment of the pre-conditions. Whether the pre-conditions are satisfied or not would depend on the facts of each court and the judicial authority will be required to arrive at a satisfaction in respect thereof on the basis of a proper enquiry in the matter. While making such enquiry the authority before whom the application is pending will have to determine as to whether, the disputes are covered under the arbitration agreement between the parties who are signatories of the agreement. 36. 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and orders by two different forums. 37. In the case of Chloro Controls India Private Ltd. Vs. Seven Trent Water Purification Inc and others reported in (2013) 1 SCC 641, the Apex Court had the occasion to deal with a similar issue but in the domain of Section 45 of the Act of 1996 whereby a submission was made at the bar that the law laid down in the case of Sukanya Holdings (Supra) did not set a correct exposition of law and hence, the same needs to be clarified by the Hon ble Supreme Court in the present case. The Hon ble Apex Court had rejected the said argument. However, while discussing the law in the context of Section 45 of the Act of 1996, the Apex Court had observed that while examining the said issue the Court is not to permit a party to avoid their bargain of arbitration by bringing civil action involving multifarious causes of action, parties and prayers. While dealing with the rights and obligations of non-signatory parties the apex court had further observed in the above case as follow:- 72 This evolves the principle that a non-signatory party could be subjected to arbitration provided these transactions were with the group of companies and there was a clea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... inferred by this court. 41. There can be no doubt about the fact that in the instant case an obligation was cast upon the CLB to decide the objection as to the question of jurisdiction raised under section 8 of the Act of 1996 at the earliest point of time. But a perusal of the impugned order also indicates the reasons that have been recorded by the CLB for issuing the said order despite the pendency of the section 8 application. As such, the submission of Mr. Banerjee to the effect that the CLB did not have any jurisdiction to pass the order dated 27/07/2015 pending disposal of the section 8 application is found to be wholly untenable and hence, does not commend acceptance by this court. 42. The decision in the case of Hindustan Petroleum v Pinkcity Midway ( supra) relied upon by the appellants does not lay down any binding proposition of law that the court or the judicial authority would cease to have jurisdiction to pass any order in the main proceeding once an application under section 8 of the Act of 1996 is filed. The decision of the Gujarat High Court in the case Sadbhav Engineering Limited (supra) is also of no assistance to the learned senior counsel since that was a ..... X X X X Extracts X X X X X X X X Extracts X X X X
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