TMI Blog2014 (9) TMI 1127X X X X Extracts X X X X X X X X Extracts X X X X ..... he reasons are; firstly, there is no commonality of the parties, secondly, the Respondent No.1 Company is not a party to the Agreement of Arbitration; thirdly, it is matter of record that there is no arbitration clause in the Articles of Association of the Company and it is well settled law that these are the Articles of Association of the Company which binds the members thereof to act according to its Regulations. The alleged Agreement for arbitration has been entered into during the trial of the case; and lastly reference for arbitration is with regard to distribution of assets between the two Groups, in which the Company is not a party. It is further an established law that any private arrangement between the shareholders/ members of the Company has no material bearing in a petition filed under Section 397/398 of the Act by such member/ shareholder having qualification under Section 399 of the Act. Thus, the necessary elements cited above are not made out for application of the provisions of Section 8 of the Act, and therefore, the prayer made by the Respondents to stay further proceedings of this Petition and/or dismissing the same on this ground, is liable to be rejected. T ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Officer and/or an Independent Committee of Management or such other body or person may be appointed to carry on the business and manage the affairs of the Respondent No.1 Company and all expenses in this regard be borne by the Respondent No.1 Company. The Petitioners have further prayed to modify the order dated 25/4/2014 to the extent of permitting the sale of the said properties after considering necessary audit and being satisfied of the necessity to sell the said properties. The Petitioners have further prayed that pending hearing and final disposal of the present application, a Special Auditor may be appointed to conduct audit of the Accounts of the Respondent No.1 Company at its all expenses, and as ad interim relief, the Petitioners have further prayed that pending hearing and final disposal of the present application the operation of the order dated 25/4/2014 may be stayed. 4. Pursuant to the Notice, the Respondents appeared. The Respondent Nos. 2 to 5/Applicants herein have filed an Company Application being C.A.No.231 of 2014 challenging the maintainability of the Company Petition itself and seeking its dismissal on the grounds stated therein. By way of interim relief ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he Respondent No.1 Company, in whose respect the present Petition under Section 397 and 398 of the Act is filed, is not a party to the agreement for reference to the arbitration. The Ld. Counsel further submitted that notwithstanding any agreement with respect to arbitration, the dispute under Section 397 and 398 of the Act cannot be adjudicated by the arbitration having regard to the nature of the dispute, as held in the decision of the Hon'ble High Court in the case of Rakesh Malhotra V/s Rajinder Kumar Malhotra MANU/MH/1309/2014. The Ld. Counsel for the Petitioners further submitted that necessary ingredients for making out a case under Section 8 of the Indian Arbitration Act are lacking in the present case, and therefore the present Petition cannot be dismissed by virtue of the provision contained in Section 8 of the Act as sought to be contended by the Respondents. 8. I have considered the rival submissions and perused the record. 9. At the outset, I would like reproduce Section 8 of the Arbitration Act and Conciliation Act, 1996, which reads thus: Section 8: Power to refer parties to arbitration when there is an arbitration agreement - A judicial authority befor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ction is same as subject matter of the Arbitration agreement. iv. Other Party moves the court for reference to arbitration before filing the written submission. v. The relief sought for in the petition can be adjudicated and granted by an arbitrator/ arbitral tribunal. 13. In the present case, the parties agreed to refer their disputes to arbitration in the course of the trial without bringing this fact to the notice of the Board and/or seeking its approval. In my view, from a plain reading of the provision contained in Section 8 of the Arbitration Act and looking into the ratio laid down in the decisions cited above, I have no hesitation to hold that Section 8 of the Act is not applicable having regard to the facts and circumstances of this case. The reasons are; firstly, there is no commonality of the parties, secondly, the Respondent No.1 Company is not a party to the Agreement of Arbitration; thirdly, it is matter of record that there is no arbitration clause in the Articles of Association of the Company and it is well settled law that these are the Articles of Association of the Company which binds the members thereof to act according to its Regulations as held in the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... challenging the maintainability of the Company Petition and seeking its dismissal, is hereby rejected being devoid of force. 15. Now, I proceed to consider the prayers made by the Petitioners in their Applications (C.A.Nos.225 and 226 of 2014). 16. I have heard the parties in respect of the prayers made in the Application, being C.A.No.225 of 2014. It goes without saying that the Ld. Observer-cum-Facilitator, appointed by this Board, is entitled to ensure that the sale proceeds received from the sale of the Company's assets are appropriated towards discharge of genuine liabilities of the Respondent No. 1 Company. However, the question of forensic audit, as prayed in the application, does not arise at this stage. The Company application is disposed of with the above said observation. 17. In so far as the prayers made in Application, being C.A.No.226 of 2014 are concerned, in my opinion, if these prayers are allowed, the same would tantamount disposal of the final reliefs sought in the petition. This is not permissible under law. Furthermore, interim relief cannot be sought for by the Petitioners in the piece meal. It is a matter of record that the Petitioners had presse ..... X X X X Extracts X X X X X X X X Extracts X X X X
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