1983 (12) TMI 213 - HC - Companies Law

Summary

Issues Involved:
1. Stay of proceedings in Company Petition No. 577 of 1983 u/s 34 of the Indian Arbitration Act, 1940.
2. Applicability of section 10 read with sections 141 and 151 of the CPC, 1908.
3. Jurisdiction of the court under sections 397 and 398 of the Companies Act in the presence of an arbitration award.

Summary:

1. Stay of proceedings u/s 34 of the Indian Arbitration Act, 1940:
The applicants sought to stay further proceedings in Company Petition No. 577 of 1983 u/s 34 of the Indian Arbitration Act, 1940. The disputes between the Chitnis group and the Srivastava group were referred to arbitration, resulting in an award directing the Srivastava group to transfer their shares to the Chitnis group. The award was challenged by Sudha Srivastava, and the petition was pending. The court noted that Mr. Zaiwalla, counsel for the applicants, conceded that section 34 of the Indian Arbitration Act was irrelevant to this matter.

2. Applicability of section 10 read with sections 141 and 151 of the CPC, 1908:
Mr. Zaiwalla argued for a stay of the proceedings based on section 10 read with sections 141 and 151 of the CPC, 1908, to avoid conflicting decisions. Mr. Bhatt, counsel for respondent No. 2, contended that section 10, CPC, pertains to the stay of suits pending in a court of competent jurisdiction, and no such pending suits existed. He further argued that the court's powers under sections 397, 398, and 402 of the Companies Act are wide and cannot be restricted by arbitration clauses. The court agreed, stating that sections 397 and 398 deal with extraordinary circumstances requiring court intervention, which cannot be subject to arbitration.

3. Jurisdiction of the court under sections 397 and 398 of the Companies Act:
Mr. Bhatt argued that matters under sections 397 and 398 cannot be left to arbitration, as the court has exclusive jurisdiction to address issues of oppression and mismanagement. He cited cases like Surendra Kumar Dhawan v. R. Vir and Gupta v. Shiv General Finance (P.) Ltd., which held that arbitration clauses cannot debar the court's jurisdiction under sections 397 and 398. The court concurred, emphasizing that the scope of inquiries under sections 397 and 398 is different from that of setting aside an arbitration award. The court's jurisdiction under these sections remains unfettered by arbitration proceedings or awards.

Conclusion:
The court dismissed the company application, stating that section 10, CPC, read with section 141, and the powers under section 151, CPC, were inapplicable. The court's jurisdiction under sections 397 and 398 of the Companies Act could not be restricted by arbitration clauses or awards. The costs of the application were to be costs in the cause.