1994 (4) TMI 265 - HC - Companies Law

Issues Involved:

1. Appointment and authority of the arbitrator.
2. Validity and scope of the arbitration award.
3. Alleged misconduct and procedural fairness of the arbitration process.
4. Allocation and ownership of shares.
5. Validity of a will and its impact on share distribution.
6. Ownership and control of company properties.
7. Future management and directorship of the company.
8. Workability and operational feasibility of the arbitration award.
9. Registration and enforceability of the arbitration award.

Detailed Analysis:

1. Appointment and Authority of the Arbitrator:

The arbitrator was appointed based on applications filed by both parties under Rule 9 of the Companies (Court) Rules, 1959, and Order 23, Rule 3 of the Civil Procedure Code. The court order stated that the arbitrator would decide disputes regarding Raghbir Cycles Pvt. Ltd. and Overseas Cycles Company. The arbitrator's appointment was within the provisions of the Arbitration Act, specifically Section 21, which allows for reference to arbitration in ongoing suits with the agreement of all parties.

2. Validity and Scope of the Arbitration Award:

The arbitrator's award addressed various disputes, including share ownership, property rights, and the validity of a will. The court held that the scope of the arbitration included all disputes between the parties, not just those explicitly mentioned in the company petitions. The award was comprehensive and aimed at reconciling all issues to avoid liquidation of the company.

3. Alleged Misconduct and Procedural Fairness:

The objectors claimed that the arbitrator conducted separate meetings with the parties, violating natural justice principles. However, the court found that the arbitrator's actions were aimed at reconciliation and were within the scope of his duties. The arbitrator's process was deemed fair, as both parties had agreed to the procedure and had the opportunity to present their cases.

4. Allocation and Ownership of Shares:

The arbitrator reallocated shares to maintain a 60:40 ratio between Raghbir Singh's and Gurcharan Singh's families. The court upheld this decision, noting that the arbitrator aimed to rectify alleged manipulations in share allotments and ensure fair distribution.

5. Validity of a Will and Its Impact on Share Distribution:

The arbitrator declared a will executed by Smt. Chanan Devi invalid, affecting the distribution of 1,500 shares. The court supported this decision, stating that the arbitrator had the authority to address all disputes, including those related to the will, as part of the comprehensive arbitration agreement.

6. Ownership and Control of Company Properties:

The arbitrator awarded certain properties to Gurcharan Singh and his family, including a house at 319, Model Town, Ludhiana. The court found this within the arbitrator's authority, as the order of reference allowed him to decide on properties acquired through company funds.

7. Future Management and Directorship of the Company:

The arbitrator directed that Raghbir Cycles Pvt. Ltd. would have only two directors, Gurcharan Singh and Raghbir Singh, or their nominees, maintaining parity between the families. The court upheld this arrangement, emphasizing that it aimed to ensure balanced management and prevent future disputes.

8. Workability and Operational Feasibility of the Arbitration Award:

The objectors argued that the award would create operational difficulties, particularly regarding the management of Arora Palace Cinema. The court dismissed these concerns, stating that the arbitrator's decision was practical and aimed at ensuring smooth operation and management of company assets.

9. Registration and Enforceability of the Arbitration Award:

The objectors contended that the award required registration under Section 17(1)(e) of the Registration Act. The court rejected this argument, noting that the award was filed in court and would form part of the decree, thus not requiring separate registration.

Conclusion:

The court found no merit in the objections raised by the respondents. The arbitrator had acted within his authority, and the award was fair and comprehensive. The objections were rejected, and the award was made the rule of the court, with a decree to be drawn up accordingly. The respondents were ordered to pay costs of Rs. 5,000.

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