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2019 (8) TMI 79

..... r Company - distinct entity - recovery of misappropriated funds of the Company which comprised of the hard earned money of the innocent agriculturist members - HELD THAT:- The provisions of Sections 241-242 of the Companies Act, 2013 cannot be invoked for settlement of disputes regarding oppression and mismanagement of a ‘Producer Company’. Such disputes would continue to be resolved through conciliation or arbitration. The Tribunal appears to have narrowed down the definition of ‘dispute’ for purpose of Section 581ZO by misinterpreting the explanation which only seeks to include certain types of disputes within the ambit of ‘dispute’ as defined in the aforesaid provision. The explanation cannot be read in a manner so as to restrict the meaning of ‘dispute’ as contemplated under the Section in the context of objects of the Producer Company and its being treated as a class apart. Also taking notice of the fact that the Tribunal has proceeded to return a finding that the dispute alleged in the Company Petition does not fall under the explanation of ‘dispute’ thereby usurping the jurisdiction vested in the ‘Arbitrator&r .....

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..... e Tribunal for seeking an order for an investigation under Section 213 of the Companies Act, 2013 rests upon the allegations of fraud, misfeasance and misconduct against management towards the Company and its affairs with further directions to recover the misappropriated funds of the Company which comprised of the hard earned money of the innocent agriculturist members. From record of the Tribunal it emerges that the Appellant No.1 was registered as a Producer Company under Part IX-A of the Act. In the Company Petition allegations were made regarding misappropriation, oppression, mismanagement and fabrication of record. The Tribunal was of the view that the allegations constituted mixed questions of law and facts and therefore cannot be subject matter in a proceeding under the Arbitration and Conciliation Act, 1996. It was further of the view that the matter alleged in the Company Petition do not fall within the ambit of dispute contemplated under Section 581-ZO of the Act. Holding that the Company Petition was maintainable before the Tribunal, I.A. 209/2018 was rejected in terms of the impugned order assailed in the instant appeal. 4. We have gone through the record and given a pa .....

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..... the formation, management or business of a Producer Company arising inter-se the members, former and existing, between a member and the Producer Company, Board of Directors, office bearers, etc. which were provided to be settled through conciliation or by arbitration under the Arbitration and Conciliation Act, 1996 . From the scheme of legislation, as laid bare by the provisions incorporated in Chapter IX-A of the Act, there is no room for doubt that Producer Companies were treated as a class apart and provisions were made to cover every conceivable situation commencing from the formation of the Producer Company till its dissolution. This conclusion emerging from a holistic view of the aforestated provisions and in essence not refuted is further reinforced by the relevant portion of the provisions of Section 465 of the Companies Act, 2013 which provides as under:- 465. Repeal of certain enactments and savings (1) The Companies Act, 1956 and the Registration of Companies (Sikkim) Act, 1961 (hereafter in this section referred to as the repealed enactments) shall stand repealed: Provided that the provisions of Part IX A of the Companies Act, 1956 shall be applicable mutatis mutandis t .....

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..... ter Act brings in the idea of adaptation but so far only as it is necessary for the purpose, making a change without altering the essential nature of the thing changed, subject of course to express provisions made in the later Act. The dictum of law propounded by the Hon ble Apex Court is loud and clear. Adaptation is required where provisions of the earlier Act are extended to a later Act as the very extension of earlier Act mutatis mutandis to a later Act would necessarily involve necessary changes in points of detail. However, this would not permit alteration of the essential nature of the changes effected and would be subject to express provisions of the later Act. In the instant case, Companies Act, 2013 (later Act), expressly provides for keeping intact provisions of Part IX-A of the Act (earlier Act) saving it from repeal and further providing for its retention on the Statute Book until a new legislation is enacted in regard to Producer Companies . Admittedly, Companies Act, 2013 does not make provisions for formation of Producer Company, its registration, management, merger, amalgamation, etc. which continue to be governed by Part IX-A of the Act. Thus, the question of adap .....

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..... former Members or persons claiming to be Members or nominees of deceased Members ; or (b) between a Member, former Member or a person claiming to be a Member, or nominee of deceased Member and the Producer Company, its Board of directors, office-bearers, or liquidator, past or present ; or (c) between the Producer Company or its Board, and any director, office bearer or any former director, or the nominee, heir or legal representative of any deceased director of the Producer Company, such dispute shall be settled by conciliation or by arbitration as provided under the Arbitration and Conciliation Act, 1996 (26 of 1996) as if the parties to the dispute have consented in writing for determination of such disputes by conciliation or by arbitration and the provisions of the said Act shall apply accordingly. Explanation. - For the purposes of this section, a dispute shall include - (a) a claim for any debt or other amount due ; (b) a claim by surety against the principal debtor, where the Producer Company has recovered from the surety amount in respect of any debtor or other amount due to it from the principal debtor as a result of the default of the principal debtor whether such debt o .....

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..... de to the Arbitrator and the decision taken by Arbitrator thereon is final. It is manifest that question relating to the dispute being a management dispute is necessarily referable to the Arbitrator, whose decision is regarded as final. This clearly ousts the jurisdiction of other authorities, be it the Tribunal or a Civil Court, to decide whether the dispute raised is in regard to management of the company. Therefore, we are of the considered opinion that apart from the acts resulting in mismanagement and oppression being essentially integral and proximate to management, jurisdiction to decide the question relating to the dispute being with regard to management falls within the domain of Arbitrator with finality being attached to his decision. Viewed in the aforesaid background, we are of the firm view that provisions of Sections 241-242 of the Companies Act, 2013 cannot be invoked for settlement of disputes regarding oppression and mismanagement of a Producer Company . Such disputes would continue to be resolved through conciliation or arbitration. The Tribunal appears to have narrowed down the definition of dispute for purpose of Section 581ZO by misinterpreting the explanation .....

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