TMI Blog2010 (7) TMI 1115X X X X Extracts X X X X X X X X Extracts X X X X ..... 009 it is not disputed that a valid SUA dated April 21, 2004, has been executed between ADM, TOL and Bhupinder Singh representing the Tinna group. It is also not in dispute that the Company Law Board is a judicial authority as contemplated under Section 45 of the Act. Admittedly, at the inception, petitioner No. 1 Vijay Sikhari was appointed as the managing director of respondent No. 1 company in both matters. Admittedly there is nothing in the said SUA dated April 21, 2004 or February 28, 1998, which renders it null and void, inoperative and incapable of being performed. It is also not in dispute that in both the matters the SUA contains an arbitration clause as under: Arbitration : Any dispute or difference arising under or in connection with this agreement or any breach thereof which cannot be settled by friendly negotiation and agreement between the parties shall be finally settled by arbitration conducted in accordance with the Rules of Conciliation and Arbitration of the International Chamber of Commerce, by one or more arbitrators designated in conformity with those Rules. The arbitration proceedings shall be held in London, England and shall be conducted in the English l ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... which respondent No. 2 has acted contrary to the SHA is oppressive to the petitioners. (6) In C. A. Nos. 466 of 2009 and 468 of 2009 the respondents/applicants contend that the substratum of the disputes in C. P. Nos. 78/ND of 2009 and 79/ND of 2009 arises out of and in connection with the alleged breach of the SHA dated April 21, 2004 and February 28, 1998, which contains an arbitration clause. The respondents have therefore prayed that the disputes and differences arising in C. P. Nos. 78/ND of 2009 and 79/ND of 2009 should be referred to arbitration in terms of clauses 20.12 and 21.12 of the SHA referred above. On the other hand the petitioners have opposed the application on the following grounds: (1) The respondents have, by making a statement before the Company Law Board offering to buy out the petitioners, submitted to the jurisdiction of the Company Law Board and could not, therefore, be allowed to invoke Section 45 of the Arbitration Act. (2) There is no valid application under Section 45 of the Act as the application under Section 45 of the Act is not signed by all the respondents or by an authorised signatory. (3) All the parties to the lis have not signed t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to the SHA which contains an arbitration clause. (c) A party to the SHA should apply to the judicial authority. (d) Such application should be made not later than when submitting its first statement on the substances of the dispute. (9) I shall now deal with the grounds mentioned in paragraph 9 seriatim. The respondents have, in both cases filed the application under Section 45 of the Act before submitting their first statement on the substance of the dispute. It is true that on September 3, 2009, counsel for the respondents had, on first appearance before the Company Law Board, made a statement that the respondents were willing to buy out the petitioners on fair valuation. However making such a statement before the Company Law Board does not, in my considered opinion, amount to submitting their first statement on the substance of the dispute. The view taken by me is in conformity with the view taken by the Supreme Court of India in Rashtriya Ispat Nigam Ltd. v. Verma Transport Co. : [2006] 7 SCC 275. The above statement made by the respondents at first appearance in the company petition can also not be regarded as such a step in aid of the proceedings under Chapter VI for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... A, the members in respondent No. 1 company. Other petitioners have, along with petitioner No. 1 and petitioner No. 2 filed the company petition placing explicit reliance on the SHA and have claimed relief for breach thereof. In the petition paragraph IIA it is averred that the shareholdings in respondent No. 1 company has vested in petitioners Nos. 3 to 8 as per direction of Company Law Board dated June 9, 2009. (11) An arbitration agreement is a contract. The obligation to arbitrate a dispute is rooted in the contract. But this obligation is not always limited to the parties who signed the contract. Under certain circumstances, principles of contract law may bind a non signatory to an arbitration agreement. Thus, general principles of contract law which bind non signatories to a contract will apply to determine whether an arbitration clause extends to and binds a third party non -signatory to an arbitration proceeding. Arbitration agreements may also be enforced against non -signatories when the interests of such non -signatories are directly related to, if not congruent with, those of a signatory. When a signatory admits that a non -signatory is not a party to a contract but h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 4 Scale 294 : [2008] 16 SCC 774, the Supreme Court of India noted that the decision in Sukanya Holdings Ltd. : AIR 2003 SC 2252, came to be distinguished in a subsequent decision in Rashtriya Jspat Nigam Ltd. v. Verma Transport Co. : AIR 2006 SC 2800. In order to pinpoint the distinction drawn, it is necessary to extract paragraphs 23, 45 and 47 of the judgment, which are as under , [2008] 16 SCC 782 : 23. ...Once the conditions precedent contained in the said proceedings are satisfied, the judicial authority is statutorily mandated to refer the matter to arbitration. What is necessary to be looked into therefor, inter alia, would be as to whether the subject -matter of the dispute is covered by the arbitration agreement or not... 45. Reliance placed by learned Counsel on Sukanya Holdings Ltd. v. Jayesh H. Pandya : [2003] 5 SCC 531 : AIR 2003 SC 2252, is misplaced. Therein, not only a suit for dissolution of the firm was filed, but a different cause of action had arisen in relation whereto apart from the parties to the arbitration agreement, other parties had also been impleaded. In the aforementioned fact situation, this Court held (SCC page 535, paragraph 13): that there ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ri, petitioner No. 1 and the appointment of Prakasha Shenoy in his place as the managing director of respondent No. 1 company. As already stated above the covenants of the SHA provide for the powers of ADM relating to appointment or removal of the managing director of respondent No. 1 company. The petitioners have filed a copy of the e -mail sent by Vijay Sekhri, petitioner No. 1 to Dr. Klaus Peter Hopp of respondent No. 2 which shows that the petitioners had consented to the appointment of Shri Prakasha Shenoy as the managing director of the company. It is for the arbitrator to consider whether an inference that the removal of Vijay Sekhri as the managing director of respondent No. 1 company was not opposed could be drawn. In any case this dispute is squarely covered under the SHA. ( 14. ) A perusal of the averments in both petitions shows that the substratum of the disputes raised therein are fully covered under the covenants of the SHA and in both petitions the petitioners have placed explicit reliance on the shareholders' agreement and claimed relief for breach thereof. So far as the question of arbitrability of the disputes arising between the parties and the jurisdi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , hold that the disputes raised in Company Petitions Nos. 78/ND of 2009 and 79/ND of 2009 are the subject -matter of the SHA dated April 21, 2010 and February 28, 1998, which contains an arbitration clause. ( 16. ) Lastly , learned Counsel for the petitioner placed reliance on Bennet Coleman and Co. v. Union of India : [1977] 47 Comp Cas 92 (Bom), Debi Jhora Tea Co. Ltd. v. Barendra Krishna Bhowmick : [1980] 50 Comp Cas 771 (Cal), Cosmosteels Ltd. v. Jairam Das Gupta : [1978] 48 Comp Cas 312 (SC), Surendra Kumar Dhawan v. R. Vir, [1977] 47 Comp Cas 276 (Delhi), O. P. Gupta v. Shiv General Finance P. Ltd. : [1977] 47 Comp Cas 279 (Delhi) and Manavendra Chitnis v. Leela Chitnis Studios P. Ltd. : [1985] 58 Comp Cas 113 (Bom), in support of the following propositions: (a) The scope, jurisdiction and power under Section 397/398 of the Companies Act, 1956, cannot be exercised by an arbitrator. (b) Parties cannot, by entering into an agreement containing an arbitration clause and confirming jurisdiction on an arbitrator take away the jurisdiction and extraordinary powers of the Company Law Board under Section 402 of the Companies Act, 1956. (c) A dispute covered under Section ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Companies Act. Mr. Singh relied on a number of cases, which we have already indicated earlier, to state that, matters under Section 397/398 cannot be matters for arbitration. In all these cases, the issue that arose was whether a proceeding under Section 397/398 or proceedings for winding up could be stayed on account of either an agreement between the shareholders for referring the disputes to arbitration or by virtue of the provisions of the articles of association to that effect. It is well known that, to stay or not to stay the proceedings under Section 34 of the Arbitration Act, when a plea of arbitration is taken, was solely within the discretion of the court before which such a plea was taken. While in the cases cited by Shri Singh, the courts had refused to exercise their discretion to stay the proceedings, in the cases cited by Shri Sarkar, the courts exercised the discretion to stay the proceedings. However, after the coming into force of Arbitration and Conciliation Act, 1996, the legal position has changed, more particularly with reference to foreign arbitration. Now it is mandatory, by virtue of Section 45 of this Act, that a judicial body will have to refer the part ..... X X X X Extracts X X X X X X X X Extracts X X X X
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