TMI Blog2016 (12) TMI 1773X X X X Extracts X X X X X X X X Extracts X X X X ..... paras of the petition prefacing it with the allegations of 'oppression and mismanagement' a petition would not assume the character of a petition u/s. 397, 398 and 402 of the Companies Act - The arbitration proceedings are pending before the arbitrator and the matters concerning all the allegations based on MOU and the two addendums. The reliefs which have been claimed in the petition can be claimed and granted by the Arbitrator. On the excuse and pretext of 'oppression and mismanagement' the petitioner cannot be given a colour of a dispute of 'oppression and mismanagement'. Therefore we do not find any substance in the arguments of the counsel for the non applicant-petitioner that the company petition is aimed at only preventing the 'oppression and mismanagement'. - C.P. No. 46(ND)/2011 - - - Dated:- 6-12-2016 - M.M. Kumar and S.K. Mohapatra, JJ. ORDER 1. The instant application (C.A. No. 366/2011) under section 8 of the Arbitration and Conciliation Act, 1996 (for brevity 'Arbitration Act') has been filed by Respondent No. 2 in a pending company Petition (C.P. No. 46(ND)/2011) which has been preferred under sec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ther for adjudication by the Tribunal. It has also been pleaded that neither the MOU nor the addendums have been incorporated in the Articles of Association of Respondent No. 1-company. The petitioner has denied the allegation that it is on account of non implementation of the MOU and the addendums appended thereto that the company petition has been filed. The petitioner has also denied all other allegations. 3. Learned counsel for the applicant -Respondent No. 2 has vehemently argued that a glance on the prayer made in the petition and the averments made therein would not leave an iota of doubt that the grievance raised in the petition is based on non implementation of the MOU dated 18.2.2009 and the addendums dated 13.03.2010 and 26.03.2010. Learned counsel has drawn our attention to the averments made in paras 8, 9, 15, 16, 17, 18, 19, 20, 21, 22, 23, 24, 25, 26, 30, 32 and various reliefs claimed in paras 55 and 56 of the company petition. According to the learned counsel the case is fully covered by the Judgment of Delhi High court in 20TH Century Finance Corporation Ltd. v. Union of India and others (2011) 161 Comp Cas 247 (Delhi). Learned counsel has emphasised that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the parties who are not parties to the arbitration agreement, there is no question of application of Section 8. The words a matter indicate that the entire subject-matter of the suit should be subject to arbitration agreement. (Emphasis added) 16. The next question which requires consideration is even if there is no provision for partly referring the dispute to arbitration, whether such a course is possible under Section 8 of the Act. In our view, it would be difficult to give an interpretation to Section 8 under which bifurcation of the cause of action, that is to say, the subject-matter of the suit or in some cases bifurcation of the suit between parties who are parties to the arbitration agreement and others is possible. This would be laying down a totally new procedure not contemplated under the Act. If bifurcation of the subject-matter of a suit was contemplated, the legislature would have used appropriate language to permit such a course. Since there is no such indication in the language, it follows that bifurcation of the subject-matter of an action brought before a judicial authority is not allowed. 6. The aforesaid observations of Hon' ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t respondent No. 2 would exit on the agreed terms and manufacturing unit will continue with the Respondent No. 1-company and MOU dated 18.3.2009 was executed and Respondent No. 1-company continued to own the manufacturing unit. The following conditions were provided:- (a) 50% of the value of the factory shall be payable by the petitioner to the Respondent No. 2 in five years on a half yearly basis. The Petitioner agreed to issue 2% convertible, redeemable preference share of D.R. John's Lab Pharma Private Limited on half yearly basis equivalent to the amount payable to the Respondent No. 2 in respect of 50% of the value of the factory. (b) It was agreed that all fixed assets other than the manufacturing unit, in the form of financial equipments, electronics items or any other items invested for sale promotion having book value shall be divided as per exclusive territories division. (c) The petitioner and the Respondent No. 1 agreed to sell and market the brands which were manufactured by the company as well as the brands which were outsourced or manufactured by the third parties marketed by the Respondent No. 1, in the respective territories ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he entire shares held by respondent No. 2 in the Respondent No. 1-company to secure immediate exit of respondent No. 2 from the company. In that regard an agreement to transfer shares was executed in the form of an addendum dated 13.3.2010 to the MOU (P11). In the recital it is clearly recorded that parties desire to clarify some ambiguity in the MOU dated 18.3.2009 which shows that it was a clarification addendum which also included an arbitration clause. Accordingly the parties agreed that a payment of ₹ 30,70,000/- each was to be made on 27 March, September 2010, 2011, 2012, 2013 and 27 March, 2014. In lieu thereof Respondent No. 2 was to transfer his 24895 shares to the petitioner for each tranche paid to respondent No. 2. A reference has also been made to a draft scheme of demerger/acquisition on 11.3.2010 (P.12). However one more addendum dated 26.3.2010 was entered into between the petitioner and Respondent No. 2 to further clarify certain other ambiguities in the MOU dated 18.3.2009 and to amend the MOU to that extent (P. 13). The party therein had agreed as follow: (i) Both the parties are free to launch (start the sales marketing) the products in other P ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of following reliefs:- (i) Draw up a scheme for management of the affairs of Respondent No. 1 (ii) Direct the Respondent No. 2 not to interfere in any affairs or management of the Respondent No. 1 (iii) Remove the Respondent No. 2 as a Director of the Respondent No. 1 company. (iv) Direct a scheme for regulation of the conduct of company's affairs in future which would ensure protection against the interference and obstruction by the Respondent No. 2. (v) Appoint a director to be the nominee of the petitioner on the Board of Director of the Respondent No. 1 (vi) Director the Respondent No. 2 not to exercise any voting rights in respect of abovesaid shares yet to be transferred in favour of petitioner. (vii) Direct the Respondent No. 2 to close the bank accounts in the name of Respondent No. 1 which are operated and managed by the Respondent No. 2. (viii) Direct the Respondent No. 1 to record in the register of members the change in ownership of 49790 share (10% of shareholding) in favour of the petitioner. (ix) Direct the sale of the shares (including execution of transfer forms and handing over s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l are necessarily based on the aforesaid three documents namely MOU and two addendums. The prayer for appointment of nominee director of a petitioner on the Board of Director of Respondent No. 1-company and direction to Respondent No. 2 not to exercise any voting rights are necessarily emerging from clauses of MOU. Likewise the prayers made in paras (vii) (viii) (ix) (xi) (xii) (xiii), (xiv) (xv) (xvi) also emerge from various clauses of MOU and two addendums. 16. In our considered view the company petition is nothing else but a dressed up petition and is not covered by the provision of chapter 6 of the Companies Act, 1956. Merely by modifying the prayer or using different expression in various paras of the petition prefacing it with the allegations of 'oppression and mismanagement' a petition would not assume the character of a petition u/s. 397, 398 and 402 of the Companies Act. The arbitration proceedings are pending before the arbitrator and the matters concerning all the allegations based on MOU and the two addendums. The reliefs which have been claimed in the petition can be claimed and granted by the Arbitrator. Therefore we find that the application filed ..... X X X X Extracts X X X X X X X X Extracts X X X X
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