TMI Blog2014 (6) TMI 1046X X X X Extracts X X X X X X X X Extracts X X X X ..... ctors on the Board of Directors of the Company - directing the Respondents to provide to Deloitte all information, books and records, including but not limited to the Tally server of the Company for the last two years - directing the Respondents jointly and/or severally to provide to the Petitioners all information as sought for by them in respect of the activities of the Company and to provide the Petitioner with all the necessary cooperation and information to ascertain the working of the affairs of the Company. HELD THAT:- The Respondents all along avoided to accept service of documents. It is further apparent from their conduct that they did not extend any cooperation to Deloitte who was undertaking the impact assessment exercise on the basis of the consent order. The Respondents caused delay in their exercise of carrying out an impact assessment on one ground or the other. I have also carefully gone through various orders passed by the Committee headed by Mr. Mehta prescribing the mechanism whereby the Company was directed to provide its comments on the documents that were handed over by EY to Deloitte. However, it appears from the perusal of the record, that the Respon ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... usion that looking into the nature of the disputes raised in the petition and the reliefs sought for are not capable of being arbitrated by an Arbitrator nor as an Arbitrator empowered to grant such reliefs which the CLB enjoys by virtue of Section 402 of the Act. Having regard to the facts and circumstances of the case, as well as the law propounded by various courts, granting of such reliefs would amount to granting of final prayers at the interim stage which is impermissible under law. I, therefore, keeping in mind the paramount interest of the Company and balancing the equities between the parties, allow the prayers for further interim reliefs. The Respondent No. 1 shall not raise any new debt or issue any guarantee(s) without prior approval of this Board - The Respondent No. 1 Company shall not alienate, encumber, or dispose off any of its movable and/or immovable assets, save and except it is required in the usual course of business and with prior information to the Petitioners and this Bench - Application disposed off. - C.A. Nos. 271 of 2013, 113 and 114 of 2014 in C.P. No. 103 of 2013 - - - Dated:- 27-6-2014 - Ashok Kumar Tripathi, Member (J) For Appellant: Jan ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pass an order thereby restraining R-2 to R-8 from holding any meeting of the Board of Directors or shareholders of the Company and/or passing any resolution/s without the consent of this Hon'ble Board. g. To pass an order thereby restraining R-2 to R-8, from appointing any other persons as Directors on the Board of Directors of the Company. h. To pass an order thereby directing the Respondents to provide to Deloitte all information, books and records, including but not limited to the Tally server of the Company for the last two years. i. To pass an order thereby directing the Respondents jointly and/or severally to provide to the Petitioners all information as sought for by them in respect of the activities of the Company and to provide the Petitioner with all the necessary cooperation and information to ascertain the working of the affairs of the Company. 4. In C.A. No. 114 of 2014, the Respondents/Applicants have sought for the following orders; a. To pass an order thereby modifying the order dated 17th December 2013 and set aside the appointment of Deloitte Touche Tohmahtsu India Private Limited and appointing an independent Chartered Accountant to do an impac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... td. V/s. Montecarlo Ltd. it was held by me that as per law propounding in these cases, the CLB has no option but to consider the application under Section 45 of the Arbitration Act filed on behalf of the Respondents, before consideration of the application for ad-interim reliefs. Accordingly, the CLB vide this order dated 29/10/2013 declined the prayer made by the Ld. Sr. Counsel appearing for the Petitioners for hearing in respect of ad-interim reliefs pending applications under Section 45 of the Arbitration Act. 5.4 Being aggrieved, the Petitioners approached the Hon'ble High Court by way of filing an Appeal being Appeal (L) No. 95 of 2013 under Section 10-F of the Act, assailing the said order. The Hon'ble High Court of Bombay dismissed the Appeal being Appeal (L) No. 95 of 2013 filed by the Petitioners and refused to grant the interim reliefs vide its order dated 20/11/2013. 5.5 Against the said Order dated 20/11/2013 passed by Hon'ble High Court of Bombay, the Petitioners preferred an SLP bearing SLP No. 36327/2013 before the Hon'ble Apex Court. The Hon'ble Apex Court after hearing the Parties Counsel passed the following order:- Issue notice. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... de the following, which will enable the Company to respond to the points raised by BSR Company: Coverage Years: FY 2013-2014 FY 2012-2013 Scope: Revenues/costs - essentially all P L items Asset purchases Asset inventory verification All balance sheet items Bank balances/accounts Overseas transactions and operations Related parties transactions Compliance vi. It is clarified that nothing stated in this order is an adverse reflection on or casts any aspersions on the conduct or appointment of Ernst Young LLP (E Y). It is further clarified that the above clarification is itself without prejudice to the respective rights and contentions of the parties in Suit (Lodg.) No. 1013 of 2013 is pending in the Bombay High Court. vii. It is further clarified that BSR Company shall continue as statutory auditors of the Company. Further, the pendency of the present Company Petition does not prevent BSR Company from completing its statutory audit for the Financial Year 2012-2013. viii. In addition to the above, a committee is hereby appointed, consisting of the following: (i) Mr. Shyam Mehta, Senior Advocate-Chairman (ii) Mr. Alok M ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hat the extraordinary general meeting requisitioned on January 2, 2014, hereby stands adjourned to January 8, 2014. xvii. Liberty to the parties to apply to the Company Law Board for further clarification orders, including for vacating, continuing or granting further orders. 5.7 Pursuant to the aforesaid directions, M/s. Deloitte Touche Tohmatsu India Pvt. Ltd. (hereinafter Deloitte in short) has submitted its interim report. 5.8 On the basis of the report submitted by the Deloitte, the Petitioners have filed an application being C.A. No. 113 of 2014 for grant of further interim reliefs mentioned hereinabove in terms of direction No. (xvii) as contained in the Consent Order dated 17/12/2013. 5.9 On the other hand, feeling aggrieved by the said report, the Respondents have preferred a Company Application being C.A. No. 114 of 2014 seeking orders mentioned herein above. 6. Pleadings have been exchanged by the Parties in respect of all the above Applications. Arguments were advanced at length by the Ld. Counsel appearing for the respective Parties. They have also filed various citations to support their respective contentions. Firstly, I proceed to deal with the Compa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ies are cumulative and are in addition to any other rights and remedies the Parties may have at Applicable law or in equity, including a right for damages and/or indemnification. 32.5 Arbitration. a. The Parties agree to negotiate in good faith to resolve any dispute between them relating to this Shareholders Agreement; b. Upon the Parties being unable to resolve the dispute as aforesaid, within a period of 30 (Thirty) days the disputes or differences shall be submitted to final and binding arbitration at the request of either of the disputing Parties upon written notice to that effect to the other In the event of such arbitration: (i) The arbitration shall be settled by arbitration in Singapore under the Rules of the Singapore International Arbitration Centre; (ii) All proceedings of such arbitration shall be in the English language. (iii) The Existing Investor and the Investor shall each have right to appoint one arbitrator, and the Company and all Promoters shall jointly appoint one arbitrator. It is clarified that if there are 2 parties to a dispute, each Party shall have right to appoint one arbitrator and the two such arbitrators shall appoint the third. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d Conciliation Act, 1996. 12. From the bare reading the aforesaid clause Nos. 32.5 of the SHA and Article 148 of the AOA of the Company, it is thus clear that SHA contains valid arbitration agreement between the Parties for the purpose of resolution in case of any disputes and difference. However, there is also an alternative provision thereby giving option to the parties to seek redressal of their grievance as contained in clause 30 of the SHA read with Article 149 of the AOA of the Company referred to above. 13. Now, I proceed to deal with the contentions advanced by the Ld. Sr. Counsel appearing for the rival parties. 14. Mr. Seervai, Ld. Sr. Counsel appearing for the Respondents submitted that keeping in view the law laid down by the Hon'ble Apex Court in the cases of [1] World Sport Group (Mauritius Ltd. V/s. MSM Satellite (Singapore) Pte. Ltd. Civil Appeal No. 895 of 2014 arising out of SLP (C) No. 34978 of 2010. [2] Chloro Controls India Pvt. Ltd. V/s. Severn Trent Water Purification Inc. Ors. [2013] 1 SCC 641, [3] Swiss Timing Ltd. V/s. Organising Committee, Commonwealth Games 2010, Delhi [28/05/2014], [4] Escorts Finance Ltd. V/s. G.R. Solvents and Allied In ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... therefore contended that the prayer made in the application deserves to be allowed and the parties may be relegated to resolve their disputes through arbitration and company petition therefore, may be dismissed on this ground alone. 18. On the other hand, Mr. Janak Dwarkadas, Ld. Sr. Advocate appearing for the Petitioners submitted that irrespective of the existence of any arbitration clause, in view of the statutory remedy available to a party by virtue of the provisions contained in Section 397/398 read with section 402 of the Act, the parties cannot be relegated to arbitration, if the nature of the disputes and reliefs sought for are not arbitrable. In other words, it was contended that merely because there is an arbitration clause, the CLB's jurisdiction under Section 397/398 of the Act, cannot stand fettered as an arbitrator has no powers such as are conferred on the CLB by virtue of provisions contained in Section 402 of the Act. 19. Mr. Janak Dwarkadas has also relied upon the decisions of Chloro Control India (Supra) to support his contention. He cited para No. 63 of the said Judgment extracted hereinabove. According to him, when the Court is seized with a challen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rs. [2011] 5 SCC 532. 20. I have carefully considered the rival submissions. I have also gone through the record and examined the decisions cited by Ld. Sr. Counsel appearing for the respective parties. For the sake of convenience, I may like to reproduce the relevant extract of the following decisions:- a. In the case of World Sport Group (Supra), the Hon'ble Apex Court has held that the provision of section 45 of the Act, mandates that in case of Arbitration Agreements covered by New York Convention, the court which is seized of the matter will refer the parties to arbitration unless the arbitration agreement is null and void, inoperative or incapable of being performed. The Hon'ble Apex Court has further interpreted the meaning of the words inoperative or incapable of being performed , which is as follows:- The words inoperative or incapable of being performed in Section 45 of the Act have been taken from Article II (3) of the New York Convention as set out in para 22 of this judgment. Redfern and Hunter on International Arbitration (Fifth Edition) published by the Oxford University Press has explained the meaning of these words inoperative or incapable o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es where arbitration agreements were held to be (or not inoperative or incapable of being performed. The terms inoperative refers to the cases where the arbitration agreement has ceased to have effect by the time the court is asked to refer the parties to arbitration. For example, the arbitration agreement ceases to have effect if there has already been awarded or a court decision with res-judicata effect concerning the same subject matter and parties. However, the mere existence of multiple proceedings is not sufficient to render the arbitration agreement inoperative. Additionally, the arbitration agreement can cease to have effect if the time limit for initiating the arbitration or rendering the award has expired, provided that it was the parties' intent no longer to be bound by the arbitration agreement due to the expiration of this time limit. Finally, several authorities have held that the arbitration agreement ceases to have effect if the Parties waive arbitration. There are many possible ways of waiving a right to arbitrate. Most commonly, a party will waive the rights to arbitrate if, in a court proceedings, it fails to property invoke the arbitration agreement of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rther, the Protocol on Arbitration Clauses (for short the Geneva Convention ) was also incorporated as part of Chapter II of Part II. 63. For proper interpretation and application of Chapter I of Part II, It necessary that the provisions are read in conjunction with Schedule I of the Act. To examine the provisions of Section 45 without the aid of Schedule I would not be appropriate as that is the very foundation of Section 45 of the Act. The International Council for Commercial Arbitration prepared a Guide to the Interpretation of the 1958 New York Convention, which lays/contains the road map to article II. Section 45 is enacted materially on the lines of Article II of this Convention, When the court is seized with a challenge to the validity of an arbitration agreement, it would be desirable to examine the following aspects: 1. Does the arbitration agreement fall under the scope of the Convention? 2. Is the arbitration agreement evidenced in writing? 3. Does the arbitration agreement exist and is it substantively valid? 4. Is there a dispute, does it arise out of a defined legal relationship, whether contractual or not, and did the parties intend to have this parti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by someone who is not originally named as a party. These may create some difficult situations, but certainly, they are not absolute obstructions to law/the arbitration agreement. Arbitration, thus, could be possible between a signatory to an arbitration agreement and a third party. Of course, heavy onus lies on that party to show that, in fact and in law, it is claiming through or under the signatory party as contemplated under Section 45 of the 1996 Act. Just to deal with such situations illustratively, reference can be made to the following examples in Law and Practice of Commercial Arbitration in England (In Edn.) by Sir Michael J. Mustill: 1. The claimant was in reality always a party to the contract, although not named in it. 2. The claimant has succeeded by operation of law to the rights of the named party. 3. The Claimant has become a party to the contract in substitution for the named party by virtue of a statutory or consensual novation. 4. The original party has assigned to the claimant either the underlying contract, together with the agreement to arbitrate which it incorporates, or the benefit of a claim which has already come into existence. 71. Th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he reliefs is based on the terms covered in the Sponsorship agreement. On when the disputes arising out of the sponsorship agreement are adjudicated, the question of grant of relief would arise. In view of the arbitration agreement, it is the arbitrator who has to adjudicate on the disputes arising out of this sponsorship agreement and not the Company Law Board in view of the provisions of section 8 of the Arbitration Act which makes it obligatory or a Judicial authority to refer such disputes to arbitration, unlike the Arbitration Act, 1940, according to which a judicial authority had the discretion to either refer the matter to arbitration or not. Therefore we are of the view that the present disputes before us, being disputes arising out of or in connection with the sponsorship agreement which provides for arbitration at clause 11.4, have to be referred to arbitration in terms of section 8 of the Arbitration Act and accordingly we do so and thus dispose of this petition noting that the petitioner has already initiated arbitration proceedings. e. In the case of Bhadresh Kanitlal Shah V/s. Magotteaux International Ors. [2002] 111 Comp Cas 220 CLB. It was held by CLB as follow ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... x parameters and held that before referring the Parties to arbitration, it is necessary to examine these six parameters which are as follows:- 1. Does the arbitration agreement fall under the scope of the Convention? 2. Is the arbitration agreement evidenced in writing? 3. Does the arbitration agreement exist and is it substantively valid? 4. Is there a dispute, does it arise out of a defined legal relationship, whether contractual or not, and did the parties intend to have this particular dispute settled by arbitration? 5. Is the arbitration agreement binding on the parties to the dispute that is before the court? 6. Is this dispute arbitrable? 22. In subsequent paras, the Hon'ble Apex Court has made it clear that if, these questions are answered in affirmative then the parties must be referred to an arbitration. Thereafter, their Lordships further clarified that in addition to examination of the said parameters, the Court will have to adjudicate also as to whether the arbitration agreement is null and void, inoperative or incapable of being performed, if such pleas are raised by a party. 23. Thus, it is amply clear that apart from examination of six qu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... arbitrable in nature and therefore the suit for injunction was dismissed and arbitration proceedings were allowed to continue. On this ground also, the decision in the case of World Sports Group (Supra) is not applicable to the facts of the present case. 28. Further, from perusal of the Article II of the New York Convention which is extracted in para No. 22 of the judgment in the case of World Sports Group (Supra), it can be inferred that the issue as to whether the disputes are capable of settlement by arbitration is required to be examined according to the provision of this Convention itself. For the sake of clarity, I would like to reproduce the Article II here as under:- 1. Each Contracting State shall recognize an agreement in writing under which the Parties undertake to submit to arbitration all or any differences which have arisen or which may arise between them in respect of defined legal relationship, whether contractual or not concerning a subject matter capable of settlement by arbitration. (Emphasis supplied) 2. The terms Agreement in writing shall include an arbitral clause in contract or an arbitration agreement, signed by the Parties or contained in an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n arbitration clause in the AOA of the Company, without applying judicial mind by a court to the facts of the given case. 31. For these reasons, I am not inclined to accept the contention raised by the Ld. Sr. Counsel Mr. Seervai that keeping in view of the law propounded in the case of World Sports Group (Supra), the CLB is not at all required to consider as to whether the dispute is arbitrable in an application filed under Section 45 of the Arbitration Act. 32. I, therefore, hold that it is incumbent upon a judicial authority, before whom an application under section 45 of the Act is filed, to necessarily examine the issue as to whether the disputes raised in the present case are arbitrable in nature. In view of this, it is now not necessary to deal with the other cases. The said question, however, shall be discussed and decided in the later part of my order, while considering the application being C.A. No. 113 of 2014 for further interim reliefs filed on behalf of the Petitioners based on the observations and findings of the interim report by Deloitte pursuant to Clause No. 3(xvii) of the Consent Order. 33. In so far as the Petitioners' other contention that the Par ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rom the Respondent No. 1 Company and not that which E Y secured from external sources. It was further provided that upon receiving the data, documents and information, Deloitte would provide copies thereof to the Petitioners as well as to the Respondents and they could submit their comments on the data, documents and information to Deloitte in writing within 48 hours of receiving the same. 39. Pointing out a series of letters exchanged between the Respondents and its statutory auditors, it was further submitted that the Respondents had not authorized its Statutory Auditors to hand over any data, documents and information relating to the Respondent No. 1 Company to E Y and the same was confirmed by the Statutory Auditors of the Respondent No. 1 Company. 40. Mr. Seervai the Ld. Sr. Counsel further pointed out that on 23/01/2014, the Chairman of the Committee passed another order, inter alia, directing E Y to hand over to Deloitte, all the data, information and documents in their possession in respect of Respondent No. 1 Company, whether the same was secured by E Y from the Respondent No. 1 or its bankers and/or statutory auditors; that E Y to indicate the source of ea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion to Deloitte. According to him, although the Deloitte's official attended the office of the Respondent No. 1 Company for over 40 days and obtained data consistently from 27/01/2014 till 13/03/2014, the Deloitte's personnel preferred not to discuss with the executives of the Respondent No. 1 Company the content of any data or deficiency therein that was provided by the Respondent No. 1 Company. Therefore, it was argued that the behavior of the official of the Deloitte was not in spirit of the order passed by this Board on 17/12/2013. 44. Taking me through the interim report submitted by Deloitte, Mr. Seervai further pointed out that the report states that the data that has been provided by E Y to Deloitte has been procured by E Y directly from the Respondent Company or from the bankers/statutory auditors of the respondent company for the limited purpose of complying with the order dated 23/01/2014 passed by the Chairman of the Committee... and also that the ...Company is challenging that some of the data provided by EY to Deloitte has not been provided by the Company to its bankers and/or Statutory auditors to EY. According to the Ld. Sr. Counsel, inspite of su ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n the regular course of audit on raw data. According to Mr. Seervai, the financial figures of the Respondent No. 1 Company for the year 2012-13 were neither finalized by the Company nor had the management signed any final figures for the said financial years and the BSR letters contained observations only on the 'Tally' financial data of the Respondent No. 1 Company. He pointed out that the Internal Audit Report of M/s. Grant Thornton appointed by the Petitioners for the period April 2012 to December 2012 did not highlight any of the issues raised in the letters addressed by BSR to the Respondent No. 1 Company. He added that the Respondent No. 1 Company, on its own, and with the help of few external consultants addressed the issues highlighted/queries raised by BSR and the company executives were able to modify the 'Tally' data pertaining to FY 2012-13 based on the issues observed by BSR during the process of Audit for the Year 2012-13 which were part of the letters addressed by BSR. According to Mr. Seervai, the fact of modification of the accounting data for the Financial Year 2012-13 was informed by the concerned executive of the Company to Deloitte personnel, bu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t that they did not extend any cooperation to Deloitte who was undertaking the impact assessment exercise on the basis of the consent order. The Respondents caused delay in their exercise of carrying out an impact assessment on one ground or the other. 51. I have also carefully gone through various orders passed by the Committee headed by Mr. Mehta prescribing the mechanism whereby the Company was directed to provide its comments on the documents that were handed over by EY to Deloitte. However, it appears from the perusal of the record, that the Respondents avoided to accept the documents and despite an opportunity being afforded to them to raise any objections, in a timely manner, they did not do so. However, it appears that to deflect attention from the findings of the interim report, the Respondents have resorted to raise unfair allegations against Deloitte on the pretext that Deloitte did not get the documents authenticated from the Company. 52. Having given my serious thoughts to the aforesaid objections raised on behalf of the Respondents, I do not see any reason to disregard the interim report submitted by Deloitte. I am also not inclined to accept the contentions of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Company which are prejudicial to its interest as well as to the interest of its stakeholders/shareholders as defined in Section 397/398 of the Act. 56. To prove the aforesaid allegations made by the Petitioners, the Ld. Counsel appearing for the Petitioners has invited my attention to various documents and material available on record. He submitted that not only Deliotte who was appointed as an independent auditors for the purpose of impact assessment as recorded in the consent order dated 17/12/2013 passed by the CLB, the statutory auditors of the company namely M/s. BSR had raised several queries in the course of their audit of the company. The Ld. Counsel has summarized such queries here as under. a. Differences identified in connection with balance confirmation circularized and received from certain customers. In respect of four of the six customers of the Company, the closing balances as per the confirmations received by BSR directly from the customers were different from the balances per the records of the Company. In the remaining two cases, the customers had not confirmed the balances. b. Differences identified in connection with balance confirmation circularized r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Deloitte on the basis of FAR as of March 31, 2013 received from the EY has noted following discrepancies:- a. There are 538 unique identification numbers (UIN) of the containers in ICICI Container List that were not found in the EY FAR. b. There are 26 containers in the EY FAR that had duplicate container names. c. There are 1223 UINs of containers in EY FAR with container numbers which appear to have incorrect check digit (mathematically generated identification numbers). There are 40 UINs of containers in ICICI Container List that appears to have an incorrect check digit based on online verification which imply that the container numbers would be incorrect. 60. In addition to the above, it was also noticed that the Company has made payments for purchase of containers while the amount has been recorded as addition to fixed assets as of March 31, 2013, Deloitte has received verbal confirmation from Kundan Gupta that the Company has not received containers for this amount. The said amount includes payment of INR 28 crores by SREI Equipment Finance Limited ( SREI ) for onward remittance to CXIC group ( CXIC ). Further the Company has not provided to Deloitte any docume ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... such has now been rectified and a revised confirmation has been obtained. However as per the balance confirmation certificate, dated December 31, 2013, provided to Deloitte this account is still categorized under 'FIEPL' and has a balance of INR 11.07 lakhs. Further, the transactions in this account have not been provided to Deloitte by the Company. 65. In light of the above, the Ld. Counsel submitted that the financial records of the Company have been tampered with by the Respondents is prima facie proved. Further, the findings enunciated by Deloitte in their report amply justify the apprehensions of the Petitioners and throw further light on the manner in which the financial and commercial operations of the Company are being mis-managed by the Promoter Group of the Company. 66. In addition to the above, the Ld. Counsel has also pointed out innumerous infirmities, contradictory figures in the accounts maintained by the company which is set out in detail in the Company Application No. 114 of 2014. 67. Answering all these allegations it was submitted by the Ld. Counsel for the Respondents that the alleged variations in the Fixed Assets is absolutely incorrect. Accor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... agement in the affairs of the Company by the Petitioners seems to prevent leakage of funds of the Company and restoration of the amount allegedly siphoned off from the Company by the Respondent Group. It is further seen that the Petitioners have shown their interest to run the Company in a transparent and fair manner, for which they have prayed for re-constitution of its Board of Directors etc. I, therefore, re-iterate that such reliefs cannot be granted by an Arbitrator in the Arbitration proceedings, in view of his limited powers under the Arbitration Act. 70. I am further of the view that in case, the CLB after giving an opportunity to the Parties to lead their evidence finally comes to a final conclusion that the Respondents have diverted the funds of the company to their own entities and/or there are related party transaction, the CLB is competent to pass an order to recover such amounts from the third parties who have been benefited by the Respondents by way of diversion of funds. In my considered view, an arbitrator is incapable to pass such orders. I have therefore come to the conclusion that looking into the nature of the disputes raised in the petition and the reliefs ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... reliefs as contained in their application. 74. It was specifically argued by Mr. Janak Dwarkadas that having come to know the serious financial irregularities being committed in the company, the nominee directors of the petitioners have already resigned and there is nobody to look after to watch and protect the interest of the Petitioners who have already invested by way of equity approx. 650 crores in the company. He, therefore, prayed that it would be just, appropriate and proper to appoint an independent committee for management and/or administrator to efficiently manage the affairs of the company and to prevent the leakage of funds as well as to allow the other interim reliefs as contained in the Application. 75. I think considering the question relating to balance of convenience and irreparable loss, an order for appointment of a committee for management of the Company and/or administrator by superseding its Board of Directors at an interim stage will be a very harsh decision. Furthermore, having regard to the facts and circumstances of the case, as well as the law propounded by various courts, in my opinion, granting of such reliefs would amount to granting of final pr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Petitioners may take such steps as may be necessary in terms of relevant Articles of the AOA of the Company and the provisions of the Companies Act for appointment of their nominee Directors on Board of the Company in place of the Directors who have resigned. In that case, the Respondents shall take appropriate steps in making compliance thereof. h. Mr. K.J. Partwar Former Presiding Officer DRT, Mumbai (Mob: 9322909779) is hereby appointed as an Independent Observer. It shall be the duty of the Respondents to serve 3 days advance notice upon Mr. Partwar in respect of the BOM/AGM/EOGM of the Company to be held in future. Subject to payment of ₹ 25,000/- per meeting by the Petitioners in advance to Mr. Partwar, he shall remain present in such meeting(s). The minutes of the meeting(s) shall be provided to him within a period of 48 hours and another copy will be forwarded to the Petitioners. Until copy of the minutes are furnished to the Observer, the resolution(s) passed, if any, shall not be implemented by the Respondents. The Petitioners will be at liberty to mention the C.P. by moving appropriate application in case they feel aggrieved by a decision taken in such meeting ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... them before the next date fixed. The Respondents shall extend their co-operation to comply with this order. f. Upon receipt of 3 days advance notice indicating date, time and details of the documents sought to be inspected, the Petitioners shall be allowed inspection of all such documents at the registered office of the Company, to which they are entitled to in the capacity of shareholders of the Company. g. The Petitioners may take such steps as may be necessary in terms of relevant Articles of the AOA of the Company and the provisions of the Companies Act for appointment of their nominee Directors on Board of the Company in place of the Directors who have resigned. In that case, the Respondents shall take appropriate steps in making compliance thereof. h. Mr. K.J. Partwar Former Presiding Officer DRT, Mumbai (Mob: 9322909779) is hereby appointed as an Independent Observer. It shall be the duty of the Respondents to serve 3 days advance notice upon Mr. Partwar in respect of the BOM/AGM/EOGM of the Company to be held in future. Subject to payment of ₹ 25,000/- per meeting by the Petitioners in advance to Mr. Partwar, he shall remain present in such meeting(s). The m ..... X X X X Extracts X X X X X X X X Extracts X X X X
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