1999 (6) TMI 484 - Board - Companies Law

Issues Involved:
1. Failure to amend articles of association to conform to the sponsorship agreement.
2. Delayed payment of dividend.
3. Default in lease payment to the petitioner.
4. Irregularities in rights issue.
5. Irregularities in respect of board meetings.
6. Fabrication of the minutes of board meetings.
7. Second expansion project/fabrication of company records.
8. Obtaining loan from IDBI in violation of the sponsorship agreement.
9. Siphoning off of funds and non-disclosure of interest.
10. Failure to co-operate with the auditors.

Detailed Analysis:

1. Failure to Amend Articles of Association to Conform to the Sponsorship Agreement:
The respondents argued that the petitioner should be referred to arbitration based on the sponsorship agreement, which included an arbitration clause. The petitioner contended that the statutory rights under Sections 397/398 of the Companies Act override any arbitration agreement. The Board concluded that the failure to amend the articles directly relates to the sponsorship agreement and should be referred to arbitration.

2. Delayed Payment of Dividend:
The petitioner sought interest on delayed dividend payments, arguing that this issue reflects mismanagement. The respondents did not specifically address this in terms of arbitration, and the Board did not find it directly connected to the sponsorship agreement, thus retaining jurisdiction over this matter.

3. Default in Lease Payment to the Petitioner:
Similar to the dividend issue, the default in lease payment was considered an act of mismanagement. The Board retained jurisdiction over this issue as it was not directly connected to the sponsorship agreement.

4. Irregularities in Rights Issue:
The respondents claimed that the rights issue was governed by the sponsorship agreement and should be arbitrated. The Board agreed, noting that the rights issue is directly related to the sponsorship agreement, thus referring this matter to arbitration.

5. Irregularities in Respect of Board Meetings:
The petitioner alleged irregularities in board meetings, including non-issuance of notices. The Board found these allegations to be independent of the sponsorship agreement and retained jurisdiction to examine these claims.

6. Fabrication of the Minutes of Board Meetings:
This issue, similar to the irregularities in board meetings, was considered an act of mismanagement. The Board retained jurisdiction over this matter as it was not directly connected to the sponsorship agreement.

7. Second Expansion Project/Fabrication of Company Records:
The respondents argued that the second expansion project was part of the sponsorship agreement. The Board agreed, referring this matter to arbitration as it directly related to the sponsorship agreement.

8. Obtaining Loan from IDBI in Violation of the Sponsorship Agreement:
The petitioner claimed that obtaining a loan from IDBI violated the sponsorship agreement. The Board found this issue to be directly related to the sponsorship agreement and referred it to arbitration.

9. Siphoning Off of Funds and Non-Disclosure of Interest:
The petitioner alleged siphoning off of funds and non-disclosure of interest, which were considered acts of oppression and mismanagement. The Board retained jurisdiction over these allegations as they were independent of the sponsorship agreement.

10. Failure to Co-operate with the Auditors:
The respondents argued that the failure to cooperate with auditors was related to the sponsorship agreement. The Board agreed, referring this matter to arbitration as it directly related to the sponsorship agreement.

Conclusion:
The Board concluded that issues directly related to the sponsorship agreement (failure to amend articles, rights issue, second expansion project, loan from IDBI, and failure to cooperate with auditors) should be referred to arbitration. Other issues (delayed dividend payment, lease payment default, irregularities in board meetings, fabrication of board meeting minutes, and siphoning off funds) were retained by the Board for examination. The respondents were directed to file replies on the retained issues by August 1, 1999, with the hearing scheduled for November 1, 1999.

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