2004 (6) TMI 632 - Board - Companies Law

Issues Involved:
1. Allegations of oppression and mismanagement.
2. Application for referring parties to arbitration under Section 8 of the Arbitration & Conciliation Act, 1996.
3. Applicability of arbitration clause in the Share Purchase and Cooperation Agreement.
4. Jurisdiction of the Company Law Board (CLB) versus arbitration tribunal.
5. Examination of allegations under Sections 397/398 of the Companies Act.

Detailed Analysis:

1. Allegations of Oppression and Mismanagement:
The petitioner, holding 49% shares in Goel MG Gasses Private Limited, alleged acts of oppression and mismanagement by the respondents. Specific allegations included refusal to purchase shares at a fair price, non-appointment of nominees as directors, improper utilization of funds, deadlock in board and shareholders' meetings, non-provision of minutes/financial information, implementation of rejected projects, refusal to get accounts examined, and non-provision of meeting agendas in a timely manner.

2. Application for Referring Parties to Arbitration:
The respondents filed an application under Section 8 of the Arbitration & Conciliation Act, 1996, seeking to refer the parties to arbitration based on an arbitration clause in the Share Purchase and Cooperation Agreement. The argument was that the allegations in the petition were covered under the arbitration agreement, which provided for arbitration under the rules of the International Chamber of Commerce (ICC).

3. Applicability of Arbitration Clause:
The respondents argued that the arbitration clause in the Share Purchase and Cooperation Agreement continued to prevail despite the incorporation of most terms into the Articles of Association. They cited various precedents, including Hindustan Petroleum Corporation Ltd. v. Pinkcity Midway Petroleums and P. Anand Gajapathi Raju v. P.V.G Raju, to support the mandatory nature of arbitration when an agreement exists. They also mentioned that the parties had already invoked ICC arbitration.

4. Jurisdiction of the Company Law Board (CLB) versus Arbitration Tribunal:
The petitioner contended that not all allegations were covered by the arbitration agreement. They argued that certain allegations, such as abuse of majority powers and siphoning of funds, were outside the scope of the arbitration agreement and related to violations of the Articles and statutory provisions. They cited Sukanya Holding Pvt. Ltd. v. Jayesh H. Pandeya to argue that if all allegations are not covered by the arbitration agreement, the parties cannot be referred to arbitration. The petitioner also emphasized that the relationship between the parties was governed by the Articles, which did not include an arbitration clause.

5. Examination of Allegations under Sections 397/398 of the Companies Act:
The CLB noted that while some allegations were covered under the arbitration agreement, others were not. The main thrust of the petition was the misuse of majority strength by the respondents, leading to oppression. The CLB emphasized that under Section 8 of the Arbitration & Conciliation Act, it is mandatory to refer parties to arbitration if the dispute is covered by an arbitration agreement. However, in this case, the allegations included violations of the Articles and statutory provisions, which fell under the jurisdiction of the CLB. The CLB referenced the Limrose case, where it was held that allegations of oppression/mismanagement could be examined without referring to the arbitration agreement.

Conclusion:
The CLB concluded that since some allegations were not covered by the arbitration agreement and related to violations of the Articles and statutory provisions, the parties could not be referred to arbitration. The application under Section 8 was dismissed, and the respondents were directed to file their replies to the petition. The petition was scheduled for hearing on 17th August at 2.30 p.m. Additionally, a separate application regarding the maintainability of the petition, based on the alleged sale of shares by the petitioner, was to be heard on a notified date.

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