2010 (7) TMI 1115 - Board - Companies Law

Summary

Issues Involved:
1. Removal and appointment of managing director.
2. Shifting of corporate and registered office.
3. Appointment of alternate director.
4. Transfer of shares by respondent No. 2 to its affiliates.
5. Validity and applicability of the shareholders' agreements (SHA) containing arbitration clauses.
6. Jurisdiction of the Company Law Board versus arbitration.
7. Non-signatories to the SHA and their binding to arbitration.
8. Bifurcation of disputes under the SHA and non-SHA matters.
9. Arbitrability of disputes under Section 397/398 of the Companies Act, 1956.

Detailed Analysis:

1. Removal and Appointment of Managing Director:
The petitioners challenged the removal of Vijay Sekhri and the appointment of Prakasha Shenoy as managing director. The court noted that the SHA explicitly provides for the appointment and removal of the managing director, and the petitioners had consented to Shenoy's appointment. This issue falls under the SHA and is thus subject to arbitration.

2. Shifting of Corporate and Registered Office:
The petitioners opposed resolutions for shifting the corporate office to Gurgaon and the registered office within New Delhi. These resolutions are claimed to be in breach of the SHA and the articles of association, making them arbitrable disputes.

3. Appointment of Alternate Director:
The petitioners contested the appointment of an alternate director through resolution by circulation, asserting it violated the SHA. This issue is also covered under the SHA and is subject to arbitration.

4. Transfer of Shares by Respondent No. 2 to Its Affiliates:
The petitioners argued that the transfer of shares by ADM to its affiliates was against the SHA. This dispute is directly related to the SHA and thus falls within the scope of arbitration.

5. Validity and Applicability of the SHA Containing Arbitration Clauses:
The court confirmed the existence of valid SHAs dated April 21, 2004, and February 28, 1998, which contain arbitration clauses. There is no evidence to suggest these agreements are null, void, inoperative, or incapable of being performed. Therefore, disputes arising from these SHAs should be referred to arbitration.

6. Jurisdiction of the Company Law Board Versus Arbitration:
The petitioners argued that the Company Law Board has jurisdiction and that the respondents submitted to it by offering to buy out the petitioners. However, the court held that making a buy-out offer does not constitute submitting a first statement on the substance of the dispute. The court, therefore, mandated arbitration as per Section 45 of the Arbitration and Conciliation Act, 1996.

7. Non-Signatories to the SHA and Their Binding to Arbitration:
The court addressed whether non-signatories to the SHA (petitioners Nos. 3 to 8) are bound by the arbitration clause. It concluded that non-signatories can be bound by arbitration agreements under certain circumstances, especially when their interests are directly related to those of signatories. In this case, the non-signatories' claims were intertwined with those of the signatories, making bifurcation impractical and binding them to arbitration.

8. Bifurcation of Disputes Under the SHA and Non-SHA Matters:
The petitioners contended that some disputes do not emanate from the SHA, and bifurcation is not permissible. The court referred to precedents distinguishing this case from Sukanya Holdings Ltd., noting that all disputes in these petitions are covered by the SHA, making bifurcation unnecessary.

9. Arbitrability of Disputes Under Section 397/398 of the Companies Act, 1956:
The petitioners argued that disputes under Section 397/398 are not arbitrable. The court disagreed, citing that the foundation for seeking relief is the breach of the SHA, which contains an arbitration clause. The court emphasized that under Section 45 of the Act, it is mandatory to refer such disputes to arbitration.

Conclusion:
The court allowed C. A. No. 466 of 2009 and C. A. No. 468 of 2009, referring the parties to arbitration as per the rules of the International Chamber of Commerce in London. The Company Law Board's jurisdiction is overridden by the mandatory arbitration clause in the SHA, and all disputes arising from the SHA are to be resolved through arbitration. Both petitions, C. P. No. 78/ND of 2009 and C. P. No. 79/ND of 2009, were disposed of accordingly.