2013 (9) TMI 728 - HC - Companies Law

Applicability of Section 8(1) of the Arbitration and Conciliation Act - Oppression and Mismanagement u/s 397 and 398 of Companies Act Held that - There was absolutely no merit in the appeal - The appellant, as pointed by the CLB, had undertook and agreed before the CLB that it would bear the entire fees payable to JLL who were appointed by the CLB to carry out the work of valuation of the land. There were cross-petitions before the CLB containing mutual allegations of oppression and mismanagement - It was in one of those petitions that the CLB, in an attempt to ascertain the fair price of the shares of the Indian company, appointed JLL as the valuer for valuing the land as part of the process of valuing the shares - Thus the mater which was the subject of an arbitration agreement between the appellant and JLL was not the action which was brought before the CLB - The order passed by the CLB was an order seeking an expert opinion regarding the fair price of the shares of the Indian Company which was to be determined keeping in view of the possibility of resolving the disputes between the parties amicably - Therefore, section 8(1) of the Arbitration and Conciliation Act, 1996 was not attracted to the dispute between the appellant and JLL. Moreover, it was the appellant which approached the CLB with an application seeking refund of the first instalment of the fee of Rs.16 paid to JLL and also seeking directions from the CLB appointing another valuer, other than JLL - After approaching the CLB with the application and having lost it, it now contended that the CLB had no jurisdiction to pass the impugned order - Its stand was contradictory. The appellant had sent a communication to JLL requesting for appointment of an arbitrator and that this amounted to commencement of arbitral proceedings under section 21 of the Arbitration and Conciliation Act and therefore from this date the CLB lost jurisdiction to adjudicate upon the matter - I have already discussed how section 8(1) of the aforesaid Act was not attracted to the dispute between appellant and JLL. Therefore, the CLB was well within its jurisdiction to have decided. The provisions of section 8(1) of the Arbitration and Conciliation Act, 1996 were not attracted to the dispute between the appellant and JLL I do not think it necessary to consider the other subsidiary arguments advanced on behalf of both the sides Decided against Petitioner.

Summary

Issues Involved:

1. Allegations of oppression and mismanagement.
2. Appointment of JLL as a valuer and the fee dispute.
3. Applicability of arbitration under Clause 17 of the CSA.
4. Jurisdiction of the CLB under Section 8 of the Arbitration and Conciliation Act, 1996.

Detailed Analysis:

1. Allegations of Oppression and Mismanagement:

The appellant filed CP 58(ND)/2008 before the Company Law Board (CLB) under sections 397 and 398 of the Companies Act, complaining against acts of oppression by the Belgium company. Conversely, the Belgium company filed CP 63(ND)/2008 alleging oppression and mismanagement by the appellant. These cross-petitions led to the CLB's involvement in resolving the disputes, including determining the fair price of the shares of the Indian company.

2. Appointment of JLL as a Valuer and the Fee Dispute:

During the proceedings, both parties agreed to have the share price determined, leading to the appointment of M/s Ernst and Young and JLL by the CLB. JLL was tasked with valuing the land, and a fee of Rs.32 lakhs was quoted. Despite initial agreement by the appellant to bear the entire fee, disputes arose regarding the payment and the quality of JLL's valuation work. The appellant alleged that JLL did not consider relevant inputs and failed to fulfill its obligations under the Consulting Services Agreement (CSA), leading to an application for refund and reappointment of a new valuer.

3. Applicability of Arbitration Under Clause 17 of the CSA:

The appellant contended that the fee dispute should be referred to arbitration as per Clause 17 of the CSA, which provided for arbitration in case of disputes. JLL opposed this, arguing that the valuation report and fee payment were not subject to arbitration under the CSA. The CLB rejected the appellant's application, emphasizing that the appellant had agreed to bear the fees and was bound to pay the balance upon submission of the report.

4. Jurisdiction of the CLB Under Section 8 of the Arbitration and Conciliation Act, 1996:

The appellant argued that the CLB should have referred the matter to arbitration under Section 8 of the Arbitration and Conciliation Act. However, the court noted that the main petitions before the CLB were under sections 397 and 398 of the Companies Act, involving allegations of oppression and mismanagement, not directly related to the arbitration agreement between the appellant and JLL. The court held that Section 8(1) was not applicable as the dispute before the CLB was not the subject of an arbitration agreement. The court also dismissed the appellant's claim that the commencement of arbitral proceedings under Section 21 of the Arbitration and Conciliation Act deprived the CLB of jurisdiction.

Conclusion:

The court found no merit in the appeal, confirming the CLB's order. The appellant was bound to pay JLL the balance fee as agreed. The court held that the CLB was within its jurisdiction to decide the application, and Section 8(1) of the Arbitration and Conciliation Act did not apply to the dispute between the appellant and JLL. The appeal and all connected applications were dismissed with no order as to costs.