TMI Blog1999 (6) TMI 485X X X X Extracts X X X X X X X X Extracts X X X X ..... the petition in terms of Sections 5 and 8 of the Arbitration and Conciliation Act, 1996. 2. The acts complained of in the petition relate to the following : (a) The company has illegally and in contravention of the provisions of Section 370 of the Act diverted funds to the tune of ₹ 100 lakhs for expansion of its production facility to one Maya Spinners Limited, which is a company under the same management and control as the respondent-company. (b) The company has illegally, in contravention of Section 370 of the Act invested in shares of a company under the same management and control to the extent of ₹ 225 crores. (c) The company has failed to implement the expansion plan as contemplated under the sponsored agreem ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 99, submitted that the first petitioner entered into a sponsorship agreement with the company in terms of which certain obligations has been cast on the first petitioner. In view of its failure to comply with the terms of the sponsorship agreement, certain obligations on the part of the company were not fulfilled. Aggrieved by this, the petitioners have filed this petition without taking recourse to arbitration as provided in Clause 19 of the sponsorship agreement dated October 20, 1994. As per Section 8 of the Arbitration and Conciliation Act, the Company Law Board, being a judicial body, is bound to refer the parties to arbitration when there is an agreement to refer the disputes to arbitration. In other words, according to him, the first ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... He submitted that these allegations mostly relate to non-compliance with the provisions of the Act resulting in mismanagement and oppression. While conceding that those allegations relating to the sponsorship agreement cannot be a subject-matter of this petition in view of the arbitration clause in the said agreement, he urged that those allegations which are not arising out of the sponsorship agreement should be examined by the Company Law Board. Referring to Escorts Finance Ltd. v. G.R. Solvents and Allied Industries Ltd. [1999] 96 Comp Cas 323 (CLB), he submitted that in that case, practically every allegation and the reliefs sought for fell within the purview of the sponsorship agreement and as such the Company Law Board declined to ent ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... than the allegations in sub-paras. (c) and (f) of para. 2 above, other allegations do not arise out of the sponsorship agreement. In other words, this is the petition in which matters which arise out of the sponsorship agreement as well as those which are independent of the said agreement have been covered. A strict interpretation of the provisions of Section 8 df the Arbitration Act would indicate that only when the subject-matter before the judicial body is the same as covered in an arbitration agreement, then, such judicial body would be bound to refer the parties to arbitration. Since in this case, there are allegations which are independent of the sponsorship agreement, we are of the view that these allegations have to be examined by ..... X X X X Extracts X X X X X X X X Extracts X X X X
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