1998 (6) TMI 575 - Board - Companies Law

Summary

Issues Involved:
1. Allegations of oppression and mismanagement u/s 397/398 of the Companies Act.
2. Application for interim reliefs.
3. Application for referring the matter to arbitration under the Arbitration and Conciliation Act, 1996.

Summary:

1. Allegations of Oppression and Mismanagement u/s 397/398 of the Companies Act:
The petitioners filed a petition u/s 397/398 of the Companies Act alleging acts of oppression and mismanagement in the affairs of Chennai Power Corporation Ltd. They sought interim reliefs and the respondents filed an application under the Arbitration and Conciliation Act, 1996, seeking to refer the matter to arbitration based on an agreement containing an arbitration clause.

2. Application for Interim Reliefs:
The respondents argued that the disputes in the petition are private disputes between two shareholders' groups and not related to the affairs of the company to invoke u/s 397/398. They contended that the disputes arose from an agreement dated October 14, 1996, which included an arbitration clause under the rules of the London Court of International Arbitration. They cited Section 45 of the Arbitration and Conciliation Act, 1996, which mandates referring the parties to arbitration if there is an arbitration agreement.

3. Application for Referring the Matter to Arbitration:
The petitioners argued that the Company Law Board (CLB) has exclusive jurisdiction in matters of oppression and mismanagement and that these issues cannot be referred to arbitration. They contended that the supplemental agreement dated July 7, 1997, which does not contain an arbitration clause, has resulted in the novation of the principal agreement. They also argued that the reliefs sought under Section 397/398 cannot be granted by an arbitrator.

Judgment:
The CLB examined whether the arbitration clause in the principal agreement still exists and whether the disputes arising from the supplemental agreement can be subject to arbitration. The CLB concluded that the supplemental agreement is an amendment to the principal agreement and not a substitution. Therefore, the arbitration clause in the principal agreement still applies. The CLB held that the disputes in the petition arise out of and in connection with the agreements and that the arbitration clause covers these disputes.

The CLB referred to Section 45 of the Arbitration and Conciliation Act, 1996, which mandates referring the parties to arbitration if there is an arbitration agreement, unless it is null and void, inoperative, or incapable of being performed. The CLB found that the arbitration agreement is valid and enforceable. Consequently, the CLB referred the parties to the London Court of International Arbitration in accordance with the arbitration clause in the principal agreement dated October 14, 1996.

Conclusion:
The CLB disposed of the application by referring the parties to arbitration and no order as to costs was made.