TMI Blog2008 (3) TMI 735X X X X Extracts X X X X X X X X Extracts X X X X ..... rma, Mr. Prateek Verma and Mr. Sanjay Gupta from the directorship of the respondent company with effect from the dates of their resignation letters; (iii) to direct the respondents that in case they are willing to avail the technical expertise and skills of the petitioner in the setting up and running of the sugar mill, they should hand over full operational and financial control of the sugar mill to the petitioner with representation on the Board of Directors of the respondent company as per the Agreement dated 24.11.2004, because it is only thereafter that the petitioner will be able to provide technical solution as well as management solution to the respondent company, and (iv) to terminate the Agreement dated 24.11.2004 in case the respondents are not willing to handover full operational and financial control of the sugar mill to the petitioner with representation on the Board of Directors of the respondent company. 2. The undisputed facts of the case are Shree Saibaba Sugars Ltd. and Anr. (R-1) was incorporated on 9.3.2000 having its registered office at 17-A. Asha Villa, 134, Garudia Nagar, Ghatkopar (E), Mumbai, 400077. The authorized share capital of the company is ͅ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the reference to the arbitrator in case of dispute and it is settled law that memorandum of Association is binding on all the members of the company and so it binds the petitioner also as petitioner is member of the Respondent company. Reliance was placed on the reported judgment of Hon'ble Apex Court reported at in the case of V.B. Rangaraj v. V.B. Gopal Krishnan and Ors.; (h) member cannot be allowed to act contrary to the memorandum of Association as the said memo is nothing but the constitution of the company, so the petitioner ought not to go contrary to the Constitutional Provisions and its basic spirit; (i) any act, contrary to the memo of Association by the member as well as the company also will be unconstitutional from the angel of the company and the law, in view of the above referred ratio reported in and so the very basic act of the petitioner to invoke the jurisdiction of this Hon'ble Court by the petitioner without invoking the jurisdiction of the Arbitration, itself is highly invalid and objectionable; (j) nowhere it is alleged that the Clause H from agreement dated 24.11.04 is either unlawful or involuntary and so act of the petitioner contrary to this cla ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... it falls outside the scope of Arbitration agreement, then for this little clause, the jurisdiction of the agreement cannot be revoked or avoided by the party to the agreement; (iii) If some part of the dispute filed before the court deserves to be referred to the Arbitrator then not that part only but the entire case must be referred to the Arbitrator. Reliance was placed on para E(41)(46) of the judgment of the Hon'ble Apex Court from the case of Rashtriya Ispat Nigam Limited and Anr. v. Verma Transport Co. Reported in; (iv) The concept of the half reference is highly unlawful as well as inconvenient as per the above laid ratio; (v) If there are two cause of actins and if one is falling within the ambit of Arbitration clause, the entire case has to be referred as half cannot be ought not to be referred as per ratio laid down as above. Further, it was argued that if the ratio laid down by the Hon'ble Apex Court in the case of Agrigold Exims Ltd. v. Sri Lakshmi Knife Woven and Ors. Reported in is seen it is very specifically observed by their Lordships that The term dispute must be given its general meaning under the 1996 Act. The arbitration agreement entered into by a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is delivered by the Respondents till filing of this application; (ii)As both the petitioner and Respondents were trying to settle the matter and that too on the request of the petitioner; (iii) Breach of statutory compliance is also basically related to the contents of the agreement; (iv) written statement is filed by the Respondents after filing of this application and so filing of written statement cannot be the point of hurdle for this Respondents; and (v) The Respondents have not waived the objection of jurisdiction. 7. Shri Anil K. Aggarwal Counsel for the petitioner argued that the respondents have filed Application under Section 8 of the Arbitration Act with an Ulterior and Oblique motive. This Hon'ble Board, vide its Order dated 18.7.2007 had granted interim reliefs to the petitioner as per prayers at Para 9 (i) to (iii) of the petition. Since the respondents did not comply with the Order, this Hon'ble Board vide its Order dated 7.9.2007 again directed the respondents to comply with the CLB's orders dated 18.7.2007. As per these orders, the respondents were required, inter alia, to provide to the petitioner monthly statements of receipts and expenditures, mi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 24.11.2004 and are, therefore, not arbitrable. It was argued that an application under Section 8 is maintainable only if the subject matter of the dispute pending before the court (in this case pending before this Hon'ble Board) is wholly covered under the Arbitration Agreement, since it is not so in the present case. My attention was drawn to the various allegations of Oppression and Mismanagement, contained in the specific paragraphs of the petition-Non-issue of share certificates (Para 6.15); Non-issue of Board Meeting notices (Para 6.20); Non-issue of General Meeting notices (Para 6.21); Non-issue of Balance Sheet (Para 6.21); Non-filing of annual accounts and annual return with ROC (Para 6.22); Non-maintenance of Statutory records (Para 6.23). It was argued that the allegations of Oppression and Mismanagement can be adjudicated by this Hon'ble Board without reference to the terms of the Arbitration Agreement. In several cases, the Hon'ble Board has dismissed the application under Section 8 of 1996 Act for referring the dispute to arbitration. Further, my attention was drawn to the decision in the case of Sporting Pastime India Limited v. Kasturi Sons Limited (200 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... itration agreement, then the same cannot be referred to arbitration; Gautam Kapur and Ors. v. Limrose Engineering and Ors. [2007] 137 CC 513 (CLB) - If the allegations of oppression and mismanagement can be adjudicated without reference to the terms of the arbitration agreement, then the question of refereeing the matter to arbitration does not arise even if the agreement covers the same matter; Akshay Kapur v. Rishav Kapur 2003 (2) Arbitration Law Report 508 (Delhi) - The Court took the view that the subject matter of an agreement is different from the question raised in the suit, Section 8 would have no application; Altek Lammertz Needles Ltd. v. Lammertz Industrienadel Gmbh [2006] 129 CC 108 (CLB) - The Hon'ble Company Law Board held that the test to determine, as to whether the matter in a petition under Section 397/398 is to be relegated to arbitration is to examine as to whether the allegations of oppression and mismanagement contained therein can be adjudicated without reference to the terms of the arbitration agreement. 9. Further, the counsel for the petitioner argued that the respondents have filed their written statement to the petition on 3.8.2007 in reply to the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e arbitration clause contained in the agreement, if the pleadings and prayers related to or based on the contents of the agreement dated 24.11.2004 are struck down or kept apart, then nothing remains in the petition which is triable by the Company Law Board; even otherwise if a very little part, to be specific, some irregularities fall outside the scope of Arbitration Agreement, then for this little cause, the jurisdiction of the agreement cannot be avoided by the petitioner because if some part of the dispute filed before the Court deserves to be referred to the arbitrator then not only that part but the entire case must be referred to the arbitrator, the concept of the half reference is highly unlawful as well as inconvenient; breach of statutory compliance is also basically related to the contents of the agreement; application for reference to arbitration has been filed on 17.7.2007 and the written statement was filed only subsequently on 3.8.2007 without prejudice to the pending application and subject to the outcome of the application, in any case no first statement is delivered by the Respondents till filing of this application, the applicants have not waived the objection of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rity before which an action is brought in a matter which is the subject of an arbitration agreement shall, if a party so applies not later than when submitting his first statement on the substance of the dispute, refer the parties to arbitration. Therefore, for application of Section 8, it is absolutely essential that there should be an arbitration agreement between the parties. Sub-section (2) of Section 8 of 1996 Act provides that the application referred to in Sub-section (1) shall not be entertained unless it is accompanied by the original arbitration agreement or a duly certified copy thereof. 14. Timing of application under Section 8 of the Arbitration Act is an essential pre requisite to be considered for maintainability of such an application. The C.A. No. 366/07 under Section 8 of the Arbitration Act in the present case was filed on 17.7.2007. The requisite pre condition of Sub-section (1) of Section 8 has been satisfied as the application has been filed prior to filing of the written submission on 3.8.2007 and that too without prejudice to the pending application and subject to the outcome of the application, the reply to CP has been filed in compliance with the CLB ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... relation to or arising out of this Agreement, shall be referred to Arbitration by a sole Arbitrator mutually agreed upon and in case there is no agreement in this behalf both the parties shall appoint one Arbitrator each. The award of the Arbitrator or the Arbitrators as the case may be, shall be final and binding on both the parties. The Arbitrators so appointed shall, before entering upon the dispute, appoint an empire. The arbitration shall be governed by the Indian Arbitration and Adjudication of Disputes Act, 1996 or any modification or re-enactment thereof for the time being in force. The applicants have rightly pointed out that in the present case there is an arbitration agreement signed by the parties. The applicants' further contention that the allegations of 'oppression' and 'mismanagement' are arbitrable and cannot be adjudicated upon without reference to the arbitration agreement is found to be correct. It is noticed that the reliefs sought in this CP are nothing but the seeking of compliance of the Arbitration Agreement dated 24.11.2004. There is no way that these reliefs can be granted without reference to the Arbitration Agreement. A few more ..... X X X X Extracts X X X X X X X X Extracts X X X X
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