1999 (6) TMI 485 - Board - Companies Law

Summary

Issues:
1. Maintainability of the petition under Sections 397/398 of the Companies Act, 1956 due to objections raised based on Sections 5 and 8 of the Arbitration and Conciliation Act, 1996.

Detailed Analysis:
1. The petition was filed under Sections 397/398 of the Companies Act, 1956, alleging oppression and mismanagement in the affairs of the company. The respondents objected to the maintainability of the petition citing Sections 5 and 8 of the Arbitration and Conciliation Act, 1996.
2. The acts complained of in the petition included illegal diversion of funds, contravention of investment provisions, failure to implement agreements, violation of meeting notice requirements, withholding information from shareholders, failure to appoint a nominated director, and misuse of funds.
3. The petitioners sought various reliefs, including share buyback, director appointment, inspection of registers, information disclosure, independent audit, among others.
4. The respondents argued that the petitioners should have resorted to arbitration as per a sponsorship agreement, and the Company Law Board should refer the parties to arbitration based on the arbitration clause in the agreement.
5. The petitioners contended that while some allegations related to the sponsorship agreement, others involved oppression and mismanagement under the Companies Act, which should be addressed by the Company Law Board.
6. The Board considered the arbitration clause in the sponsorship agreement and the provisions of the Arbitration and Conciliation Act. It found that some allegations were independent of the agreement and should be examined by the Board, not referred to arbitration.
7. The Board rejected the respondents' request to refer the parties to arbitration, instructing them to file replies to the petition's allegations by a specified date for further proceedings.

This detailed analysis covers the maintainability of the petition under Sections 397/398 of the Companies Act, 1956 in light of objections raised based on Sections 5 and 8 of the Arbitration and Conciliation Act, 1996. The judgment clarifies the interplay between the sponsorship agreement, allegations of oppression and mismanagement, and the arbitration clause, providing a comprehensive understanding of the legal issues involved.