2004 (5) TMI 595 - Board - Indian Laws

Summary

Issues Involved:
1. Allegations of oppression and mismanagement.
2. Arbitration clause applicability and jurisdiction.
3. Commonality of parties in agreements.
4. Interim relief pending arbitration.
5. Exclusion of the Arbitration & Conciliation Act, 1996.

Detailed Analysis:

Allegations of Oppression and Mismanagement:
The petitioner, holding 2.52% shares in M/S Fiat India Private Ltd., alleged acts of oppression and mismanagement in the company's affairs. Initially, the petitioner held 49% shares, which reduced to 2.52% after further share issues to the 10th respondent's group. The complaints included holding Board Meetings without notice to the petitioner's nominees, removal of the 9th respondent as Chairman and director, amendment of Article 40 of the AOA, and a proposal to remove the 6th respondent as a director. The petitioner sought supersession of the Board, appointment of an administrator, reinstatement of the 9th respondent as a director, and restraint on removing the 6th respondent.

Arbitration Clause Applicability and Jurisdiction:
The 10th respondent filed an application under Section 45 of the Arbitration and Conciliation Act, 1996, seeking to refer the disputes to international arbitration as per the arbitration clauses in the Shareholders' Agreement (SHA), Joint Venture Agreement (JVA), and Escrow Agreement (EA). The petitioner had previously invoked arbitration clauses but contended that the disputes raised were not covered under the agreements and there was no commonality of parties in these agreements.

Commonality of Parties in Agreements:
The petitioner argued there was no commonality of parties across the SHA, JVA, and EA. The company was not a party to the SHA and JVA, and the main complaints related to the removal of the petitioner's nominees from the Board, which was not covered under the EA. The petitioner cited judgments indicating that if a company is not a party to the arbitration agreement, disputes cannot be referred to arbitration. The Board agreed, noting that the company could not be added as a party to arbitration proceedings, and certain allegations could be examined without reference to the agreements.

Interim Relief Pending Arbitration:
The petitioner sought interim relief from the Company Law Board, which the respondents opposed, arguing that the Board lacked jurisdiction to grant such relief pending arbitration. The Board noted that the petitioner had sought interim relief from the Bombay High Court, which was refused on the ground that the company was not a party to the arbitration agreement.

Exclusion of the Arbitration & Conciliation Act, 1996:
The arbitration clauses in all agreements specified that the Arbitration and Conciliation Act, 1996, would not apply except for enforcing foreign awards. The Board highlighted this exclusion, indicating that none of the parties could invoke the jurisdiction of the court under the Act, including Section 45, for intervention by the court except for enforcing foreign awards. Consequently, the application under Section 45 was deemed not maintainable.

Conclusion:
The application to refer the disputes to arbitration was dismissed on multiple grounds: the company was not a party to the relevant agreements containing the arbitration clause, it could not be added as a party, certain allegations were not covered under the arbitration agreements, bifurcation of matters was not permissible, and the application was contrary to the arbitration clause excluding the Arbitration & Conciliation Act, 1996. The respondents were directed to file their replies, and the petition was scheduled for further hearing.