TaxTMI 
TaxTMI 
2017 (1) TMI 1662
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....Ltd. ('the company') would also be referred to hereinafter as the applicant No. 1 and applicant No. 2, respectively. The shareholder's agreements dated 16th January, 2012 and in the shareholder, agreement dated 30th November, 2012 would be referred to hereinafter as SHA-I and SHA-II, respectively. 2. I have heard Dr. U.K. Chaudhary, learned senior counsel for the applicant No. 2, assisted by learned counsel Mr. Atul Sood, Mr. Soumitra Saikia, Mr. Raktim Gogoi, Mr. Himanshu Vij, Mr. Pabitra Saikia. I have also heard Mr. D Baruah and Miss Nirmala Upadhya, learned counsel for applicant No. 1. 3. Also heard Mr. S.N. Mukherjee, Mr. S. Dutta, learned senior counsel, appearing for the non-applicants/petitioner Nos. 1-9 assisted by Mr. S. Mitra, advocate, Ms. S. Dalmia, advocate. I have also heard Mr. P. Chatterjee, learned senior counsel appearing for non-applicants/petitioner Nos. 10-15, assisted by counsel, Mr. O. Chatterjee, and Ms. N. Modi. 4. Before proceeding further, I find it necessary to recount briefly the facts and circumstances, so narrated in the petition under section 397/398 of the Companies Act, 1956, ('the Act of 1956') which are found necessary for....
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.... under the SHA-I and was ultimately compelled to handover the management of the company to Dalmia group. 9. In order to facilitate such changes in the management, several agreements including SHA-II were also executed by and between Bawri group and Dalmia group on 30th November, 2012 laying down terms and conditions agreed to by the parties and the AoA of the company was once again suitably amended so as to incorporate therein the terms and conditions in SHA-II. In view of the aforesaid agreements, the control and management of the company stood transferred to Dalmia group. 10. Under the SHA-II too, it was agreed upon between the parties that the maximum number of the directors of the company shall be 12 but out of total number of 12 directors, Dalmia group shall nominate 5, Bawri group shall nominate 3 and AIDC shall have right to nominate one director. It has also been agreed upon between the parties that there shall be no independent directors in the Board, vide clause No. 3.6 of the SHA-II. 11. Very unfortunately, despite aforesaid agreements between the parties aforementioned, Dalmia group started indulging in several malpractices of extremely enormous proportion which quit....
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....onsent of Bawri group. (ii) Non-resolution of 2 deadlock events in accordance with requirement of article 92. The company was not given an opportunity to exercise its right of first refusal to invest in R19 up to a maximum of 25 per cent of its full diluted share capital. (iii) Dalmia group has not caused the company to assign the Brand names in favour of Bawri group or its nominee for Re. 1. (iv) Dalmia group has wrongfully withheld the project information flow and did not hold any review meetings for project and operations. (v) Dalmia group caused the company to change the scope of concurrent audit contrary to the manner specified in AoA. (vi) Company and Dalmia group failed to complete the said plants by 31st March, 2014. (vii) Article 66(a) was introduced in AoA which declares that all the disputes relating to conflict of interest of Dalmia group vis-a-vis R-19 shall be untenable and would be deemed to have settled. (viii) Dalmia group has violated article 66(d) of the AoA. (ix) Dalmia group has failed to appoint a managing director of the company in accordance with prescription of AoA. (x) Dalmia group entered into a contract with related parties in violation....
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.... decided by the CLB, Kolkatta. 20. Dr. U.K. Chaudhary, the learned senior counsel appearing for Dalmia group, now, submits that though the disputes in company petition are basically commercial disputes which reportedly occurred for alleged violations of various clauses in the agreements and, therefore, only the 'arbitrator', and not the 'CLB', has necessary jurisdiction to adjudicate such disputes, yet, the petitioners drafted the company petition in such a way that it creates a false impression that the allegations in the company petition constitute what is contemplated in section 397/398 of the Act as "mismanagement and oppression". 21. In simple words, according to the learned counsel for Dalmia group, the company petition is nothing but a dressed up petition which is designed to avoid the resolution of disputes through the mechanism of arbitration, so incorporated in the agreement itself. Mr. D Baruah, counsel, appearing for applicant No. 1 too supported the contention, advanced by the learned counsel for the applicant No. 2. In support of their various claims, the counsel for the applicants has relied on the following decisions: 1. P. Anand Gajapathi Raju v....
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....s 7 and 8 of the Act of 1996 are as follows: (i) A valid arbitration agreement between the parties is required to be in existence. (ii) The "subject-matter" of the proceedings which are sought to be referred to arbitration by way of the section 8 application has to be the same subject-matter covered by the arbitration agreement in question. (iii) There has to be commonality of parties. This means that all the parties to the proceeding which are sought to be referred to arbitration by way of the section 8 applications have to be 'parties' to the arbitration agreement in question. (iv) The mandatory provisions of section 7(2) of the said Act which provides that the arbitration agreement must not only be in writing but it must be signed by all the parties to the agreement are to be met. (v) The mandatory provisions of section 8(2) of the said Act which provides that "every application under section 8(1) of the said Act shall be accompanied by the original arbitration agreement or a duly certified copy thereof, has also be complied with". (vi) The arbitral tribunal must be in a position to grant all the reliefs, sought for, in the company petition. 25. Anything sho....
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....123 CLA 1 (SC) : [2015] 1 SCC 3 25. Cellfone Ltd. v. RPG Cellular Investments & Holdings (P.) Ltd. (order of Madras High Court) 26. Needle Industries (India) Ltd. v. Needle Industries Newey (India) Holding Ltd. [1981] 3 SCC 333 27. Ajay Kirti Dalmia v. Company Law Board [2009] 91 CLA 351 (Del.) : [2009] 148 Comp Cas 742 28. Premier Automobiles Ltd. v. Fiat India (P.) Ltd. [2006] 74 CLA 214 (CLB) : [2007] 137 Comp Cas 737 29. Keshav Mimani v. Indu Kocher [2012] 4 CHN 157 30. Vodafone International Holdings BV v. Union of India [2012] 107 CLA 63 (SC) : [2012] 6 SCC 613 26. In Sukanya Holdings (P.) Ltd. (supra), it has been held that one of the fundamental conditions for referring the parties before the judicial authority to the arbitral tribunal is that the subject-matter in the proceeding before the CLB and subject-matter in the arbitration agreement must be one and same. Without such a condition being met, the CLB cannot refer the parties to the arbitral tribunal. 27. Where the judicial authority has come to a conclusion that one part of the matter before it is triable by such authority and other part is triable by arbitral tribunal, in that event, judicial authority ....
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....(supra). It has also been contended that if the allegations of oppression and mismanagement can be adjudicated upon by a Tribunal without any reference to the arbitration agreement, then, there is no question of referring the parties to the arbitral tribunal even if the arbitration agreement covers the same issue before the CLB. 34. Referring to the decision in Sangramsinh P. Gaekward (supra), it has been submitted that there are certain matters, such as, transfer of shares in violation of AoA and Companies Act, increase in capital to gain control over the company, removal of directors, amendment of articles violating the statutory right, and not permitting the existing shareholders to exercise rights are the violation of statutory rights of the shareholders of the company and same cannot be relegated to arbitral tribunal for adjudication. 35. Certain matters such as matter relating to trust, trustees and beneficiaries arising out of trust deed and the Trusts Act, 1882 are not capable of being decided by the arbitrator and as such, such matter cannot be referred to arbitrator despite there being arbitration clause vide decision in Vimal Kishore Shah (supra). HR Harmer Ltd. (supra....
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....s of law, there cannot be any escape from the conclusion that the parties to the company petition are to be referred to the arbitration, more so, when both SHA-I and SHA-II had in them a valid arbitration clause requiring the parties thereto to settle any dispute arising out or in connection with the implementation of such agreement only by arbitrator and by no other authority - argues the counsel for the applicant No. 2. 41. Repeating the arguments, advanced by the counsel for the applicant No. 2, Mr. D Baruah, learned counsel for applicant No. 1, further submits that when the applicant No. 2 was allowed to join the company as a strategic partner, the company was in a morbid and moribund condition. In such a scenario, the applicant No. 2 was invited to join the company as strategic partner with the high hope that such joining of the applicant No. 2 would revamp the company. Truly to such expectation, with the arrival of the applicant No. 2 in the scene, the company gets new momentum. Such revelations argues Mr. D. Baruah only show the falsity of the various pleas which the petitioners took in the proceeding under section 397/398 of the Act of 1956 which, in turn, requires the cou....
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....notice such party(ies) shall provide particulars of the circumstances and nature of such Dispute and of its claim(s) in relation thereto. 17.3 Any Dispute between the Parties under this agreement shall be referred for negotiation and discussion between Mr. Binod Kumar Bawri on behalf of the promoter group and Mr. Y.H. Dalmia on behalf of the Dalmia group (together hereinafter referred as 'Representatives') who shall meet as soon as practicable and attempt to resolve the Dispute. 17.4 Any dispute between the parties, which cannot be settled by such negotiations and discussions within 30 days of the first meeting of representatives ("Consultation Period") shall, unless the parties otherwise agree in writing be resolved exclusively by arbitration and either party may refer the dispute, for settlement by arbitration in accordance with the provisions of the Arbitration and Conciliation Act, 1956 ('Arbitration Act'). 17.5 Within 10 days of a party referring a dispute for settlement by arbitration, the parties shall jointly appoint Mr. S. Gurumoorthy who shall be the Presiding Arbitrator. Failing any such appointment of an arbitrator, due to non-availability or other....
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....an exercise, I have found that admittedly, the petitioners had annexed copies of said SHAs along with the company petition. There is nothing on record to suggest, even remotely that arbitration agreements in the SHAs are not valid for any reason whatsoever. 47. On further perusal of the relevant materials on record, it is found that the petitioners annexed the copies of those agreements, not only for the purpose of elucidating their case properly but they did so to lay the foundation of their case in the company petition as well. Being so, I have no hesitation in holding that the existence of valid arbitration agreements has been proved beyond any shadow of doubt. Point No. (II) Whether subject-matter in arbitration and company petition are one and same 48. Here, the parties to this proceeding took diametrically opposite stances and argued at length to support their respective stand. We have already found that the learned counsel for the non-applicants/petitioners keeps on arguing that the allegations, made in the petition under section 397/398 of the Act per se disclose mismanagement in running the affairs of the company and so also oppression, having been perpetuated by Dalmi....
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....rpetuating oppression not only on the members of Bawri group but on some other entities as well. 53. Situation being such, according to the applicants, the disputes, which were projected through the company petition, being commercial/contractual disputes, cannot be adjudicated by the CLB inasmuch as same is meant for purposes different altogether and, therefore, the disputing parties are required to be sent to the arbitral tribunal for settlement of their disputes in accordance with the mechanism, so prescribed in those agreements. 54. Above being claims and counter-claims, let us consider whose claim stands to reason. However, before we could answer the above query, we need to address some other contentious issues which are projected from the side of the petitioners. It may be stated here that these claims from the side of the petitioners, on their own, may not pronounce the final verdict on the matters under consideration in the proceeding in hand. 55. But then, the decisions on such issues, together with some other proved fact or facts would certainly help the court in deciding the truth or otherwise of various other issues involved in the section 8 proceeding. In other words....
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....SHA-II, more particularly, the recitals in italic letters, undoubtedly show that the SHA-II was entered into by the parties out of their free will without they being coerced and compelled by any party/authority, whatsoever. Such revelations overwhelmingly demonstrate that the very claim of the petitioners that they had to hand over the management of the company to Dalmia group under compulsion is found to be wholly without any substance. 59. This apart, section 92 of the Evidence Act is the stumbling block in accepting aforesaid claim of the petitioners. Section 92 of the Evidence Act says that when terms of a contract are reduced to writing, no oral agreement can be put in place to repudiate the terms and conditions incorporated in the written contract, unless the statements, incorporated in the written contract are found ambiguous. 60. We have found that terms and conditions, incorporated in SHA-II, vis-avis the circumstances leading to amendment of SHA-I are found to be absolutely free from any ambiguity, whatsoever and such averments, clearly show that Bawri group handed over the management of the company to Dalmia group willingly and also entered into SHA-II voluntarily. In ....
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....A - above shows that the various allegations in the company petition, which were shown in serial Nos. 1 to 12 of the Chart A - above, match with clause 3.16 of SHA-II, (clause 3.19 and clause 4.9 of SHA-II), clause 21.1 of SHA-II, clause 11 of SHA-II, clause 3.4 of SHA-II, (clause 4.8 and 4.9 of SHA-II), clause 4.9 of SHA-II, clause 4.11 of SHA-II, clause 3.7 of SHA-II, (clause 3.9, clause 3.26 and clause 3.27) and clause 3rd December, 1.3 of SHA-I), respectively. 66. Similarly, the Chart B - above shows that the some other allegations in the company petition, which were shown in serial Nos. 1 to 6 of the Chart B, above, match with the (clause 3.7 of SHA-II read with clause 3.12 of SHA-I), (clause 3.7 of SHA-II read with clause 3.1 of SHA-I), (clause 3.7 of SHA-II read with clause 3.1 of SHA-I), (clause 3.7 of SHA-II read with clause 3.1 of SHA-I), clause 4.11 of SHA-II and clause 4.11 of SHA-II, respectively. 67. Likewise, the Chart B - above shows that the allegations in the company petition, which were shown in serial Nos. 7 to 11 of the Chart B, above, are relatable to clause 3.7 of SHA-II read with clause 3.1 of SHA-I, -(clause 3.9 of SHA-II read with clause 3.26 of SHA-II),....
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....es under such agreements with unfailing dedication since the success or otherwise of various schemes, in the agreements, is dependent on meticulous execution of those schemes. 72. The project conditions, so incorporated in the SHA-I, were said to be one of such sets of very vital and very fundamental clauses in the agreements. Project conditions are incorporated in clause 9.1 of the SHA-I. Evidently and admittedly too, the task of completing such project conditions under the SHA-I was originally entrusted to Bawri group alone and none else. For ready reference, clause 9.1 is reproduced below: '9. Project conditions 9.1 The Bawri group undertakes to complete or ensure the completion of the following conditions: ("project conditions") to the reasonable satisfaction of the Dalmia group on or before 30th June, 2013): (a) The company shall have obtained necessary clearance and renewals, as the case may be, from the Ministry of Environment and Forests with respect to its operations and use of land at: (i) Grinder Plant in Lanka, District Nagaon, Assam; (ii) Clinker Plant at Jamunanagar, Umrangshu, Assam for 0.75 mtpa; and (iii) cement grade limestone mining unit at New Umran....
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....tating that the project conditions have been completed. Within 10 days, the Dalmia group shall issue a notice ("Project CP Satisfaction Notice") to the Bawri group, indicating that (i) all the project conditions have been completed to its satisfaction; or (ii) the project conditions which have not been completed to the reasonable satisfaction of the Dalmia group and giving the Bawri group a time period of 10 Business Days to complete such project conditions. If within the aforesaid period of 10 Business Days, Bawri group are unable to complete such project conditions to the reasonable satisfaction of the Dalmia group, the Dalmia group shall have the right, at its sole discretion, to exercise the rights set out in clause 9.2.' 73. More importantly, what would be the consequences for failure to complete such project conditions within the specified time had also been stipulated in the SHA-I itself, vide clause 9.2 of the SHA-I. For ready reference, clause 9.2 is also reproduced below: '9.2 The parties agree that upon the happening of any of the following events: (a) the Bawri group are unable to complete the project conditions in accordance with clause 9.1 above. (b) th....
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....ing with respect to the amended project conditions.' 75. Unfortunately, according to Dr. U.K. Chaudhary, learned senior advocate, appearing for the applicant No. 2, once again, Bawri group could not complete such project conditions even within the extended time for which Dalmia group invoked the default clause and issued notice dated 15th May, 2015 requiring Bawri group to sell its remaining 21 per cent shareholding in the company, number of the same being 7,26,62,742 to Dalmia group for Re. 1 in terms of clause 9.2 of the SHA-I. However, instead of complying with the request in the letter dated 15th May, 2015, Bawri group sent the letter dated 18th May, 2015 disputing such claim and also hurling the allegations of mismanagement and oppression against Dalmia group and also invoked Mediation as per SHA-I-I/SHA-II. 76. But the matter did not end there. Soon thereafter, Bawri group rushed to Delhi High Court by way of an application under section 9 of the Act of 1996 invoking the arbitration clause in agreements and prayed for several reliefs including a relief in the form of a direction prohibiting Dalmia group from alienating in any manner its remaining shares in the company. ....
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....ault with Bawri group for its not completing the project conditions aforesaid within the time specified in agreements. 81. I have considered such submissions having regard to the materials on record and found that there was no dispute over the fact that the responsibility of completion of the project conditions within the stipulated time to the satisfaction of Dalmia group was originally entrusted with Bawri group. There was also no dispute whatsoever over the fact that the project conditions could not be completed within the original stipulated period-nay-even in the extended period of time. 82. It is also not in dispute that for the alleged non-completion of the project conditions within the stipulated time, Dalmia group invoked default clause in agreements and served notice dated 15th May, 2015 on Bawri group asking the later to sell its remaining shareholding in the company to Dalmia group for Re. 1 in terms of clause 9.2 of the SHA-I. The materials on record further show that following service of notice on it, Bawri group responded with knee-jerk reaction and started knocking the doors of several judicial/quasi-judicial bodies leveling various serious allegations against Dal....
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.... all such claims are afterthought and invented just to get rid of quagmire which the Bawri group was in following its inability to perform the conditions, stated in clause 9.1 of the SHA-I. 88. In order to ascertain the veracity of rival pleas, I have carefully perused various clauses in the agreements including the clause 3.20 in SHA-II. However, a suave and dispassionate reading of the aforesaid clauses no way gives us any impression that there was an understanding between the parties to the effect that following changes in management of the company, Bawri group would be relieved off the liability of completing the project conditions which, in turn, clearly demonstrates that aforesaid contention too, falls flatten on its face. 89. Even otherwise, the claim of the petitioners that there was an understanding between the parties to amend the clause 3.20 in SHA-II so as to relieve the petitioners of the liability of completing project conditions cannot be accepted for the prohibition of section 92 of the Evidence Act since section 92 of the Evidence Act ordains that when the terms of contract/grant, etc., are reduced to writing, no oral agreement could be allowed to operate to repu....
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....re importantly, those revelations also establish that the petitioners had employed every possible measure to colour some commercial disputes as management disputes. 94. We have already found that following the service of the notice dated 15th May, 2015 on Bawri group by Dalmia group on the invocation of default clause in the SHAs, Bawri group too invoked the arbitration clause and rushed to hon'ble Delhi High Court by way of application under section 9 of the Act of 1996 seeking various reliefs. It is also not in dispute that Dalmia group too approached the hon'ble Delhi High Court preferring a section 9 application seeking various reliefs. 95. The rushing of the parties to hon'ble Delhi High Court by way of section 9 of the Act of 1996 invoking arbitration clause in the SHAs, and that too, soon after the service of notice dated 15th May, 2015 coupled with the subsequent events which led to filing of the company petition, in my opinion, lends more credence to our finding that the alleged breaches of the various clauses in the SHAs form the very foundation of the allegations in the company petition. 96. The net effect of all the revelations, which have emerged from ou....
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.... in question, the petitioner Nos. 10 to 15 were duly represented by Bawri group. In support of such contention, it has been contended that there are umpteen numbers of clauses and sub-clauses in SHA-I and SHA-II which unquestionably show that the petitioner Nos. 10 to 15 are integral part of Bawri group. Some of the clauses, so referred to, are clause 1.2(x), clause 1.2(xi)(b), clause 6.2.B, clause 6.5.1, clause 6.7.1 and clause 8.3 of SHA-I. 101. Secondly, according to the counsel for the applicants, the post-agreements conducts of the petitioner Nos. 10 to 15, express, implied or constructive, are so tell taleing and so significant that such conducts, in no uncertain term, show that they are part and parcel of Bawri group. In that connection, they referred to various clauses in the SHA-I and SHA-II, more particularly, clauses 8.4 and 5.4 in the SHA-I, SHA-II, respectively. 102. It was next contended that R-3 to R-25 too are the integral part of the R-2 since they do not have separate existences insofar as the matters, covered by agreements aforesaid are concerned. That being the position, R-2 duly represented them in the agreements in question. In that view of the matter, the p....
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.... obligation, to acquire all shareholdings of Bawri group/promoter group in the company. Similarly, after a certain period, in view of clause 6.7.1 Bawri group/promoter group shall have the right, but not the obligation to sell their entire shareholding in the company to Dalmia group or to its nominees, etc. 107. But then, clause 6.5.1 or for that matter, clause 6.7.1 could hardly show that petitioner Nos. 10 to 15 are the part of Bawri group. The fact that Dalmia group has been authorised under the agreements to acquire the shareholding only of Bawri group, so specified in Schedule I to the SHA-I and not the shareholding of entities in Schedule - XII of the SHA-I and the fact that Bawri group was authorised under said agreement to sell their shares only, and not the shares of entities in Scheduled-XII makes it more than clear that the petitioner Nos. 10 to 15 are entities different from Bawri group. 108. In regard to clause 6.2B, it has been stated that it is true that clause 6.2B specifically forbids Dalmia group from acquiring any share, held by the persons/entities, mentioned in the Schedule XII which included the petitioner Nos. 10 to 15. It is also true that subject to certa....
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....group. Rather they are different identities altogether and they have been arraigned as respondents in the company petition inasmuch as they too took very active part in the mismanagement of company and also responsible in ways more than one in oppressing the petitioners over a long period of time. 113. Since neither the petitioner Nos. 10 to 15 nor the respondent Nos. 3 to 25 are parties to the agreements, under consideration, one of the fundamental conditions necessary for referring the parties to the arbitrator was found conspicuously absent in the proceeding under section 8 of the Act of 1996 and on this count also, this court requires to reject the application seeking reference of the parties to the arbitrator. 114. I have very carefully considered the arguments advanced from the sides of the parties. However, before taking up the case of the petitioners, I find it necessary to focus my attention on the claims of the applicants and for that purposes, I have very carefully perused the various clauses, referred to by the learned counsel for the applicants, which, the applicants claim, support the contention that petitioner Nos. 10 to 15 are integral part of Bawri group. For re....
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....mpany ("promoter Put Option Shares") to the Dalmia group or its Affiliates or any person nominated by the Dalmia group (the "Put Option Purchaser"), as applicable at the promoter group Put Option Price, on the terms and conditions contained in this Agreement (the "promoter group Put Option"). Such Put Notice shall only be issued by the promoter group after the accounts for the previous financial year has been approved by the Board. Such Put Notice shall specify the date on which such Transfer shall take place ("Put Date"), which shall not be less than 180 days from the issuance of the Put Notice. 6.7.1 At any time after 31st July, 2017 and for a period up to 31st July, 2020 (the "Call Option Period"), the Dalmia group shall have the right to but the obligation to issue a notice ("Call Notice") to the promoter group, to sell to the Dalmia group or any nominee or affiliate of the Dalmia group ("Call Option Purchaser"), at its sole discretion, either (i) all, and not less than all, of the equity shares held by the promoter group in the company; or (ii) the entire shareholding of the promoter group in the company on a Fully Diluted Basis less 5 per cent of the shareholding of the pro....
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....ter group, shall have the right to sell their shareholding in the company to Dalmia group, but, not the shareholding of the petitioner Nos. 10 to 15, make such conclusion inevitable. 118. Coming to the contention of the counsel for the petitioners that clause 6.2B hardly establishes that the petitioner Nos. 10 to 15 are the part of Bawri group, I have found that such a contention too is entirely based on sound reason and logic and as such, such a contention, in my considered view, needs approval of this court. Resultantly, I have no difficulty in concluding that clause 6.2B too does not establish that the petitioner Nos. 10 to 15 are part of Bawri group. 119. On my further perusal of the record, I have also found that the contention of the learned counsel for the petitioners that clause 8.4 of the SHA-I (which is pari materia to clause 5.4 SHA-II), never serves to show that the petitioner Nos. 10 to 15 are the part of Bawri group, is also found to be based on strong logic and reason. This is because of the fact that had the petitioner Nos. 10 to 15 been the part of Bawri group, there would not have been any necessity for incorporating clause 8.4 in SHA-I (or clause 5.4 in SHA-II)....
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....ition may be possible only by the way of amendment to such clause which is agreed to by the parties which is, however, no body's case. 124. The various revelations which I have catalogued herein above, in their combined effect very firmly evince that the petitioner Nos. 10 to 15 are not the part and parcel of Bawri group. Rather, they are independent entities and, therefore, those petitioners could not be held responsible for the omission/commission of any act done by Bawri group under the agreements aforesaid, of course, they would certainly fall or fly for their own deeds or misdeeds which they may have done in their individual capacities in relation to other matters pertaining to administration of the company concerned. 125. This brings me to a yet another important controversy where I am to see if the respondent Nos. 3 to 25 are the part and parcel of Dalmia group. Dalmia group steadfastly claims that those respondents do not have any independent existence. Rather, their existences stand merged with the R-2 for all purposes and it, in turns, makes them the very integral part of Dalmia group at least in so far matters covered by agreements are concerned. In that connection....
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....t and parcel of Dalmia group at least insofar as the matters covered by the SHA-I and SHA-II are concerned. 130. It is worth noting here that while discussing point No. (ii), we have already found that the various disputes in the proceeding under section 397/398 of the Companies Act are nothing but contractual disputes and all such disputes are well covered by the arbitration agreements aforementioned and in such disputes, only Bawri group, on one side and Dalmia group, on the other side, are the parties. What is, however, immensely important to note is that in such disputes, none of the petitioners, who are arraigned in serial Nos. 10 to 15 of the petition, not being the part of Bawri group, are the parties. 131. One may note here that Mr. P. Chatterjee, learned senior advocate appearing for the petitioner Nos. 10 to 15 contends that though their shareholding in company was as little as 003 per cent of the paid-up capital, yet, number-wise, they constitute more than one-tenth of total shareholders of the company and in that capacity, they, on their own, can maintain the proceeding under section 397/398, even if, it is found the case, projected by the petitioner Nos. 1 to 9, is u....
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....mia group respectively. Being so, the petitioner Nos. 10 to 15, who are evidently not the part and parcel of Bawri group, are ranked outsiders and have no role, whatsoever, to play in the determination of disputes therein. 137. In other words, only Bawri group and Dalmia group are the necessary parties in the disputes in the company petition. Viewing from that angle, one would invariably find that the parties in the company petition and the parties in the arbitration agreements are quite identical and, therefore, the proceeding under section 8 of the Act of 1996 cannot be rejected on the ground of lack of commonality of the parties in the proceeding aforesaid, as contended for by the counsel for the petitioners. In the result, this point is also answered in affirmative and in favour of the applicants. Point No. (IV) Whether there is violation of section 7(3) and 7(4) of the Act of 1996 138. The counsel for the petitioners further submits that the application under consideration is liable to be rejected since the application fails to satisfy the requirement of section 7(3) and 7(4) of the Act of 1996. For ready reference, section 7(3) and 7(4) are reproduced below: "(3) An arb....
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....es, the petitioner Nos. 10 to are strangers or outsiders. 142. Since the petitioner Nos. 10 to 15 are not the integral part of the Bawri group and since they are ranked outsiders to the agreements aforesaid, the question of their signing the said agreements do not arise at all. In that view of the matter, the agreements, under consideration, in no way infringe the mandate of section 7(3) and 7(4) of the Act 1996 as alleged by the petitioners. The question in this point is accordingly answered. Point No. (V) (Whether there is violation of section 8(2) of the Act of 1996) 143. Here, we are to decide whether the section 8 application is required to be rejected for not being filed in accordance with the prescription of section 8(2) of the Act. We have already found that Mr. Chatterjee, learned senior counsel for the petitioner Nos. 1-9, argues that application is bad for it being preferred in violation of prescription in section 8(2) of the Act of 1996. In support of his contention, it is being pointed out that section 8 of the Act, amongst other things, mandates that while presenting an application under section 8, the applicant needs to file, along with the application, the origi....
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.... any time before the application is taken up for entertainment. In support of such contention, the decision of the Apex Court in Ananthesh Bhakta v. Nayana Bhakta decided on 15th November, 2016 was relied on. 150. It is also the case of the applicants that the argument that copies of the arbitration agreements were not duly certified as required under the law is also equally erroneous and without any substance. The counsel for the applicant contends that the terms "duly certified", so used in section 8(2) of the Act of 1996, do not mean the certification of copy of the original agreement by the statutory authorities only. Rather, the words "duly certified" needs to be read in context of the nature of the document required to be certified, viz., whether the document to be certified is private or public document. 151. When the document in question is a public document, its certification needs to be done in accordance with the prescription of section 76 of the Evidence Act. But when the document to be certified is a private document, it needs to be certified, not by public servant, but, by a person who is authorised under the law to do so or by a person who is supposed to be the nat....
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....icer who, by the ordinary course of official duty, is authorised to deliver such copies, shall be deemed to have the custody of such documents within the meaning of this section." 156. Section 76 of the Evidence Act, therefore, clearly shows that only the public documents are to be certified by public servants. But section 76 further shows only certain classes of the public servants, as indicated in that section itself, are allowed to do the job. An essential corollary to such a proposition is that a public servant, in his capacity as public servant, cannot certify a document which is private one. 157. Above conclusion of mine has also been reinforced by rule 9 of the National Company Law Tribunal Rules, 2016 - which speaks about certification of copy of a document. The term 'certified' has been defined in rule 9 as follows: '(9) "certified" means in relation to a copy of a document as hereunder: (a) certified as provided in section 76 of the Indian Evidence Act, 1872; or (b) certified as provided in section 6 of Information Technology Act, 2000; or (c) certified copy issued by the Registrar of Companies under the Act.' 158. Then, the question is who is t....
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....is reproduced below: '18. The word "entertained" has specific meaning in P. Ramanatha Aiyar's Advanced Law Lexicon word "entertained" has been defined as: "1. To bear in mind of consider, esp. to give judicial consideration to the court then entertained motions for continuance). 2. To amuse or please, 3. To receive (a person) as a guest or provide hospitability to (a person). The expression "entertain" means to admit a thing for consideration and when a suit or proceeding is not thrown out in limine but the court receives it for consideration and disposal according to law it must be regarded was entertaining the suit or proceeding, no matter whatever the ultimate decision might be," The Black's Law Dictionary also defines this word "entertain" as follows: "To bear in mind or consider, esp., to give judicial consideration to the court then entertained motions for continuance." 19. in Hindustan Commercial Bank Ltd. v. Punnu Sahu (Dead) through Legal Representatives [1971] 3 SCC 124, the word "entertained" came for consideration as occurring to order 21, rule 90, proviso of Civil Procedure Code, para 2 of the judgment notices the amended proviso which was t....
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....on and as such we are unable to accept the contention of the appellant that clause (b) of the proviso did not apply to the present proceedings." 20. Another relevant judgment is [1998] 1 SCC 732, Martin and Harris Ltd. v. Additional District Judge and others. In the above case section 21(f) provision of UP Urban Buildings (Regulation of Letting, Rent and Eviction) Act, 1972 (13 of 1972) word "entertained" came for consideration. The proviso to section 21(f) was to the following effect. "8. Provided that where the building was in the occupation of a tenant since before its purchase by the landlord, such purchase being made after the commencement of the Act, no application shall be entertained on the grounds, mentioned in clause (a) unless a period of three years has elapsed since the date of such purchase and the landlord has given a notice in that behalf to the tenant not less than six months before such application, and such notice may be given even before the expiration of the aforesaid period of three years." In the above case, the application under section 21(1) was filed by the landlord before expiry of period of three years from the date of purchase. It was held by this....
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....398 of the Act of 1956. In such factual scenario, hon'ble Rajasthan High Court in Dhamu Builders & Developers (supra), held as follows: "As already noticed hereinbefore, in the present case, the plaintiff itself has produced copy of the agreement which contains the arbitration clause and, thus, copy of such agreement continues to be part of the record for having been produced with the plaint and both the parties has relied on the said agreement for their rival claims; the existence of the agreement dated 13th March, 2013 has not been question by any of the parties and, therefore, seeking defendant to again file the original agreement dated 13th March, 2013 or certified copy thereof would be technical approach on the part of the court to hold it against the defendant and same would be wholly against the spirit of the Act". 169. Hon'ble Rajasthan High Court in Dhamu Builders & Developers (supra), appears to have correctly interpreted the law laid down in section 8 of the Act of 1996 since such interpretation appears to be completely in tune of law laid down in section 8(2) of the Act of 1996 and same, therefore, in my opinion, needs to be followed. 170. The decision of ho....
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....s allegedly taken out of the normal and natural course by Dalmia group, by committing illegalities of various norms and forms could be brought back on its original track. 177. However, such contentions were assailed by the counsel appearing for applicants arguing that the CLB cannot grant any of the reliefs, so mentioned in the petition since those disputes are manifestly commercial disputes having their roots in the SHAs and, therefore, arbitrator, and not the CLB, has the necessary jurisdiction to try such disputes. 178. In regard to the contention, structured on para 9(a) of the petition, the counsel for the applicants, refereeing to the clause 4.11 in of the SHA-II, submitted that the article 66(a) in the AoA of the company was pari materia to the clause 4.11 in of the SHA-II and said clause was incorporated in the AoA with the consent of the parties to the agreements. Since clause 4.11 in of the SHA-II was incorporated in the AoA as article 66(a), and that too, with the consent of both the parties, it does, now, not lie in the mouth of the petitioners to say incorporation of the article 66(a) in the AoA was illegal and void. 179. I have considered such submission in the lig....
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....has now established that all the disputes, projected through the company petition, are nothing but all alleged breaches of various clauses in the SHAs which are all contractual in nature. In other words, such disputes appear to be pure and chaste commercial disputes. Since those disputes are commercial disputes, the arbitral tribunal is well competent to grant adequate reliefs in accordance with prescription of law holding the field. (A) Whether the petition in question is a dressed up petition 185. We have already found that the applicants quite arduously contend that the company petition under consideration is nothing but a dressed up one. Does such contention bear any truth. In order to get an answer to such query, I re-appreciate the arguments, advanced from the side of the parties, having regard to the materials on record as well as the discussion which I have indulged hereinbefore. 186. A careful reappraisal of our foregoing discussion vividly shows that there were some genuine but serious commercial disputes between Bawri group and Dalmia group over the alleged breach of clause 9.1 of SHA-I by Bawri group which entails enormously serious consequences for defaulting party....
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....s and their claim that Bawri group had to sign the SHA-II only being coerced by Dalmia group appear to be totally unfounded since the materials on record show that Bawri group and Dalmia group had voluntarily entered into SHA-II and the former quite willingly handed over the management of the company to Dalmia group. Such unsubstantiated plea, over a very vital point, speaks loud and clear that the petition under consideration is a dressed up one. 191. Again, the petitioners claim that only some of the clauses in the SHA-I and SHA-II were incorporated in the articles of association of the company. But then, record vividly discloses that the SHA-I and SHA-II were incorporated in the AoA of the company in toto. The denial of such indisputable facts, in my considered view, only advances the claim of the applicant that everything was not hunky dory in their presenting the company petition before the CLB. 192. But list of pleas from the sides of the petitioners which remained unsubstantiated does not end there. More and more are still found in the queue, for, we have found that according to the petitioners, there was an understanding between the parties that Bawri group would be relie....
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....paragraphs, there cannot be any escape from the conclusion that the petition under section 397/398 of the Act of 1956 is a dressed up petition and same is presented before the CLB, Kolkata with the sole object of frustrating the arbitration agreements in SHA-I and SHA-II. (B) Whether it is permissible under the law to refer the parties before the judicial authority to the arbitrator when it is found the breaches, alleged in the company petition, appear to be the violations of the AoA of the company as well 198. We have already found that the various allegations, made in the company petition, are nothing but the alleged violations of various clauses in the SHAs. We have also found that the AoA of the company is the replica of the SHAs. In simple words, the allegations in the company petition appear to be the breaches of the AoA too. H.R. Harmer Ltd. (supra), it has been held that violation of AoA is an act of oppression and, therefore, the aggrieved party is entitled to seek statutory relief(s) under the Companies Act. 199. It may be stated here that in a very similar situation in Airtouch, the CLB, Chennai was pleased to refer the parties to the arbitrator and the CLB did so, ....
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.... there are more compelling reasons for referring the parties here to the arbitration. The discussions, made herein before unequivocally show that the company petition is nothing but a dressed up petition which is designed only to hide the actual colour of the disputes before the CLB and tried to paint such disputes as management disputes. Then the natural question is what would be the fate of such a dressed up petition. The answer to this query can be found in the decision, rendered in Rakesh Malhotra (supra). 205. In Rakesh Malhotra (supra), hon'ble Bombay High Court, after surveying various decisions holding the field has concluded that that dispute in a petition "properly brought" under section 397/398 read with section 402 of the Act of 1956 cannot be referred to arbitration, subject to a caveat, i.e., that where the company petition is mala fide, vexatious or oppressive and one that is merely "dressed up" to avoid an arbitration clause, the matter can be referred to arbitration. 206. In Ramnish Kumar Sharm (supra) the CLB, New Delhi held that a dressed up petition which seeks to avoid resolution of disputes arising out of an agreement in accordance with the prescription ....