TMI Blog2021 (2) TMI 932X X X X Extracts X X X X X X X X Extracts X X X X ..... te. There would also be a heavy burden cast upon the applicants to show that the Arbitration Agreement would bind the non-signatory respondents. In a case involving such complex question of law and facts, determination of the aforesaid aspect may call for deeper examination of the matter by this Tribunal. However, the applicant herein could not show that the entire gamut of he dispute falls within the purview of Arbitration Agreement. In the matter of a winding up petition, the petitioner therein M/s Haryana Telecon Limited filed an application under Section 8 of the Arbitration and Conciliation Act, 1996, inter alia, contending that the High Court should refer the matter to arbitration. The Division Bench of the Hon ble High Court dismissed the plea of the appellants stating that the question regarding the winding up of a company could not be referred to an arbitrator - In this case, the CP is filed for oppression and mismanagement in the Company. In addition to that serious fraud has also been alleged by the petitioners. Since those questions cannot be considered by an Arbitral Tribunal, the relief prayed for reference to an Arbitral Tribunal cannot be accepted. It would be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ong with an interest calculated thereon at the rate of 12% (twelve percent), as a consequence of the fraudulent, unlawful and wrongful acts or omission of the Majority Shareholders, under Section 242 (2) of the Companies Act, 2013; v. In alternative, order reduction in the share capital of the Company to the extent of the shareholding of the Majority Shareholders; vi. Disqualification of Majority Shareholders as promoters of the Company and/or from voting in the Company as shareholders of the Company; vii. Direct recovery of undue gains made by the executive Management of the Company, including the management paid to the Executive Management of the along with an interest calculated thereon at the rate of 12%% (Twelve percent) and payment thereof to the Company under Section 242 (2) (Gi) of the Companies Act,2013; viii. Remove Majority Shareholders as director of the Company under Section 242 (2) (h) of the Companies Act, 2013, ix. Direct the Respondent No. 2 to offer the 6.4% shares of the Company not purchased by Mr. P.A: Hamza and currently in the custody of Respondent No. 2 to be purchased by the other shareholders of the Company at the exercise price ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rs to seek relief before an Arbitral Tribunal in terms of the arbitration agreement contained in Clause 18 of the Memorandum of Understanding (MoU) dated March 31, 2007; and ii. dismiss the present company petition in limine. 3. It is submitted in the IA that the 2007 MoU was entered into between the existing shareholders of Respondent No. 1 company and covers various aspects in connection with the company's share capital, shareholders' funds, accumulated earnings/losses, shareholders liabilities towards the company, company's liability towards shareholders viz. interest, dividends and all other expenses payable and advances/loans received by the company from shareholders. 4. It is further submitted that the Respondent No. 2 in the 2007 MoU has represented that he was authorized by the other Respondents (all legal heirs of Late Mr. T. Madhavan Nair), that applicant No. 2 i.e. majority shareholder of Respondent No. 1 company is also a party to the 2007 MoU and was authorized to represent shareholders from his family including Applicant No. 8. That the shareholding of Applicant Nos.3 to 6 in the company flows from Applicant No. 2. The other parties to the 20 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nagement action before the NCLT, the matter invokes NCLTs statutory powers under Section 241 and 242 and not exercisable by a Civil Court. Therefore, disputes in oppression and mis-management cases are those such that demand the exercise by this Tribunal of its wide powers under Section 241 and 242 and not those that can be exercised by a civil court. In order to fortify the above contention the respondent of this application relied on the judgment of the Hon'ble Supreme Court in the case of Haryana Telecom Ltd. vs. Sterlite Industries India) Ltd., reported in 1999 (3) SCR 861, in which it is held that no arbitration agreement can vest an arbitral tribunal with the powers to grant the kind of reliefs against oppression and mismanagement that the CLB might provide . III. Every arbitration agreement cannot be seen as some catch all encyclopaedic, repository for the entirety of the universe of the disputes between the parties. Therefore, an arbitration agreement exists does not always or necessarily imply that all disputes relate only to it or that all parties rights and remedies are circumscribed by that agreement and that without prejudice to the generality of the power ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... portionate to their shareholding. Consequently, the governance and management structure of Applicant No. 1 company includes all its stakeholders including the Respondents as agreed between the parties. Thus, the contention of the Respondents that the company is not a party to the MoU cannot be accepted. In order to substantiate the above contention, they have relied on the decision of the Hon'ble Supreme Court in Chloro Controls () P. Ltd. Vs. Severn,Trent Water Purification Inc. And Ors., (2013) 1 CompLJ 19 (SC), in which it was held that it becomes abundantly clear that reference of even non-signatory parties to arbitration agreement can be made. It may be the result of implied or specific consent or judicial determination. Normally, the parties to the arbitration agreement calling for arbitral reference should be the same as those to the action. But this general concept is subject to exceptions which are that when a third party, i.e. non-signatory party, is claiming or is sued as being directly affected through a party to the arbitration agreement. They have also cited the decision in the case of Sundaram Brake Linings Ltd. Vs. Kotak Mahindra Bank Ltd. And Ors. (2010) 4 Comp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sions referred to in the counter filed by the Respondents operate in the light of facts of respective cases. Further the decision in Haryana Telecom was specifically in relation to a winding up matter. Even if the allegations contained in the Company Petition are considered at their face value, it will be clear that notwithstanding they are time barred, there is nothing substantial except their exaggerated allegations relating to misappropriation which is a matter subject to evidence to prove their allegation. 13. It is also stated that a careful perusal of the law contained in the Arbitration and Conciliation Act, 1996 and the plethora of decisions operating in this field will conclusively establish that Courts must yield to the mode of dispute resolution agreed and chosen by the parties and that a contract providing for arbitration is a commercial document between the parties and must be interpreted in a manner so as to give efficacy by adopting a common sense approach rather than pedantic or legalistic interpretation. 14. Their further submission is that there is a provision introduced under the Companies Act, 2013, with specific impetus for resolving disputes through medi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the IA, counter, rejoinder and the various decisions referred to by both parties. 17. Learned Counsel for the applicants vehemently argued that the Memorandum of Understanding ( MoU ) dated 31st March 2007 ( 2007 MoU ) executed by and between all shareholders namely (i) PV Abdul Wahab; (ii) PA Ibrahim Haji: (iii) Ajit Nair and (iv) P.A. Hamza) of Indus Motor Company Private Limited Ajit Nair; (Company ) (at Pg. No. 871 of the Company Petition) will sufficiently establish the fact that the entire MoU pertains to the operations and management of the affairs of the company. The parties to the 2007 MoU had agreed that all disputes arising out of the said MoU shall be settled by arbitration, and the arbitration agreement is contained in Clause 18 of the MoU. 18. Section 8(1) of the Arbitration and Conciliation Act, 1996 provides that the judicial authority, before which an action is brought in a matter which is the subject of an arbitration agreement shall, notwithstanding any judgment, decree or order of the Supreme Court or any Court, refer the parties to arbitration unless it finds that prima facie no valid arbitration agreement exists. 19. He has further argued that the 199 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... harges. Such reliefs as prayed by the Respondents in no way can be seen as a matter that cannot be Arbitrable. In fact, it will not only protect the party autonomy but also aid avoiding multiplicity of proceedings and the issues with regard to severing of matters arbitrable and others. 23. There are other decisions such as the one in the cases of KIMS Bellrose Institute of Medical Sciences Private Limited v Jubey M. Devasia and Ors. (05.09.2018 NCLT Chennai): MANU/ND/1553/2018, Rehana Praveen Chaudhary v Poonam Drums Containers (P.) Lid. and Ors., [2017]136 CLA Ors. 294, Ramnish Kumar Sharm V D.R.Johns Lab Pvt. Ltd. and Ors.MANU/NC/0112/2016, Binod Kr. Bawari and others v D.R. Johns Lab Pvt. Ltd., and Ors. [2017] 136 CLA 227 which would establish that there is no rule of law that whenever a petition is presented in the garb of oppression, Section 8 will not be allowed. Any loss allegedly caused to the Company as a result of investing money in the Initial Public Offer and breach of rights relating to Trademarks are also contractual matters and everything has been replied to detail in the reply to notices issued by the Applicants/Respondents. 24. It is further argued by the l ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ration and (c) all parties to the suit are parties to the arbitration agreement. 29. Considering the aforesaid aspect, the learned senior counsel stated that the subject matter of CP/02/KOB/2020 does not fall within the scope of arbitration clause under the MoU, the reliefs sought in CP/02/KOB/2020 are those that cannot be adjudicated and granted in an arbitration and that when a special statute gives a right and also provides tor a forum to adjudication of such rights and remedies, the remedy has to be sought only under the provisions of that act and the common law court has no jurisdiction. In the present petition, the relief for oppression and mismanagement and the forum where such reliefs can be claimed are specifically provided in the Companies Act, 2013 and, therefore, an Arbitral Tribunal would not be vested with the powers to adjudicate such issues revolving around oppression and mismanagement as the remedy is provided specifically in the Companies Act, 2013. The petitioners Nos. 1 - 4 are seeking certain specific prayers which can be granted only under Section 242(2) of the 2013 Act. 30. He has referred to a decision of the Hon ble High Court of Bombay in the case ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eported in (2003) 5 SCC 531, in which the Hon'ble Supreme Court held that where a suit contains matters which are beyond the scope of the arbitration agreement and is also between parties who are not parties to the arbitration agreement, then such suits cannot be referred to arbitration. 34. He has concluded his arguments stating that present C.P is not a contractual dispute between the parties, so as to be referred to arbitration, as the reliefs against oppression and mismanagement, which is essentially a statutory relief shall lie only before the NCLT, as per the Companies Act, 2013. 35 It appears from the record that Respondents of the CP, filed the above IA 44/KOB/2020 for referring the matter to the Arbitral Tribunal under Section 8 of the Arbitration and Conciliation Act. The Company Petition was filed under Section 241-242, 244 read with Section 337, 341 of the Companies Act, 2013 alleging oppression and mismanagement against the respondents (applicants in the IA). The case projected in the aforesaid CP in a nutshell is that the petitioner 1 to 4 in the CP (respondents in IA) collectively as the minority shareholders hold qualifying shares are represented by Specia ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Company (iv) Collaterals to be provided by the parties to the Memorandum of Understanding and availing of banking facility (v) Management fee to the Respondent No. 2 (R2) for the day to day management of the Company 40. It also appears that the facts and circumstances of the most of the cases cited by the Learned Senior Company Secretary for the applicant is not similar to the facts and circumstances to the present Company Petition. Besides that, in the Company Petition, there is an allegation of severe fraud which cannot be referred to Arbitration, as the Arbitral Tribunal is not equipped to investigate into the matters of fraud. 41. In the case of Sukanya Holdings (supra), the Hon ble Apex Court on being confronted with a similar question, had held that in a suit where the subject matter falls within the arbitration agreement which involves parties other than some of whom are not the signatories to the arbitration agreement, the provisions of Section 8 of the Act of 1996 is not attracted. In the said decision, the Apex Court had also held that the bifurcation of a subject matter of the proceeding in such cases is also not allowed. As has been indicated herein above t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... not be accepted. 44. In my opinion, 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 CP or in some cases bifurcation of the CP between the 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 the judicial authority is not allowed. Such bifurcation of a suit in two parts, one to be decided by the Arbitral Tribunal and the other to be decided by this Tribunal would inevitably delay the proceedings. The whole purpose of speedy disposal of the dispute and decreasing the cost of litigation would be frustrated by such procedure. It would also increase the cost of litigation and harassment to the parties and on occasions there is possibility of conflicting judgments and orders by two different forums. 45. For the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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