2003 (3) TMI 543 - HC - Companies Law

Summary

Issues Involved:
1. Validity of the arbitration agreement.
2. Interpretation of "first statement on the substance of the dispute".
3. Jurisdiction and powers of the Company Law Board (C.L.B.).
4. Waiver and abandonment of arbitration rights.
5. Judicial review under Article 226/227 of the Constitution of India.

Detailed Analysis:

1. Validity of the Arbitration Agreement:
The petitioners contended that the arbitration clause in the family settlement and subsequent agreements should mandate arbitration for disputes between the parties. They argued that Section 7 of the Arbitration and Conciliation Act, 1996, supports their claim, emphasizing that a formal agreement is unnecessary if there's an existing arbitration clause. However, the C.L.B. found no valid and binding arbitration agreement, interpreting the use of the word "may" in the relevant clauses as non-compulsory.

2. Interpretation of "First Statement on the Substance of the Dispute":
The petitioners argued that the C.L.B. misinterpreted this expression, asserting that contesting an interlocutory application should not constitute a "first statement". They maintained that their intention to arbitrate was clear from the outset. The court, however, upheld the C.L.B.'s interpretation, noting that the petitioners had engaged substantively with the dispute through various applications and replies, thus constituting a "first statement".

3. Jurisdiction and Powers of the Company Law Board (C.L.B.):
The petitioners challenged the C.L.B.'s jurisdiction, arguing that the disputes should have been referred to arbitration under Section 8 of the 1996 Act. The respondents countered that the petitioners had abandoned their arbitration rights by engaging with the C.L.B. proceedings. The court found that the C.L.B. acted within its jurisdiction, emphasizing that the petitioners' conduct indicated a waiver of their arbitration rights.

4. Waiver and Abandonment of Arbitration Rights:
The court noted that the petitioners had multiple opportunities to invoke arbitration but chose to engage with the C.L.B. and subsequently filed a civil suit. This conduct indicated a clear abandonment of their arbitration rights. The court referenced several judgments to support the view that engaging substantively with the dispute before a judicial authority constitutes a waiver of arbitration rights.

5. Judicial Review under Article 226/227 of the Constitution of India:
The respondents argued that the writ petition should be dismissed as the court's powers of judicial review are limited. The court agreed, stating that the C.L.B.'s order was well-reasoned and based on evidence. The court emphasized that it could not act as an appellate body and found no miscarriage of justice in the C.L.B.'s decision.

Conclusion:
The court dismissed the writ petition, affirming the C.L.B.'s decision. It held that the petitioners had waived their arbitration rights by engaging substantively with the C.L.B. and filing a civil suit. The court also found that the C.L.B. acted within its jurisdiction and that the impugned order was well-reasoned and based on evidence. The court emphasized that judicial review under Article 226/227 is limited and found no grounds to interfere with the C.L.B.'s order.