2012 (5) TMI 813 - Board - Companies Law

Summary

Issues Involved:
1. Jurisdiction of the Company Law Board to entertain the petition.
2. Applicability of arbitration clause u/s 8 of the Arbitration and Conciliation Act, 1996.
3. Allegations of oppression and mismanagement.
4. Validity of the termination of the joint venture agreement.

Summary:

1. Jurisdiction of the Company Law Board:
The applicant argued that the petition is misconceived and not maintainable as the Company Law Board has no jurisdiction to entertain and hear the petition. It was contended that the disputes arising from the joint venture agreement should be referred to arbitration as per clause 20 of the agreement, which was also incorporated as article 59 of the previous articles of association of respondent No. 4. The applicant emphasized that the Board does not have the jurisdiction to entertain the question of the validity of the termination of the joint venture agreement.

2. Applicability of Arbitration Clause u/s 8 of the Arbitration and Conciliation Act, 1996:
The Board noted that the joint venture agreement contained an arbitration clause (Clause 20) which mandated that disputes should be resolved by arbitration. The Board referred to section 8 of the Arbitration and Conciliation Act, 1996, which requires judicial authorities to refer parties to arbitration if the matter is subject to an arbitration agreement. The Board concluded that it is bound to refer the matter to arbitration as the dispute arises from the joint venture agreement which includes an arbitration clause.

3. Allegations of Oppression and Mismanagement:
The respondents argued that the reliefs claimed in the company petition under sections 397 and 398 of the Companies Act, 1956, cannot be granted by an arbitrator and can only be granted by the Company Law Board. They contended that the illegal acts of the applicant, including amending the articles of association, removing directors, and attempting to transfer shares, amounted to oppression and mismanagement. However, the Board found that the core disputes relate to the joint venture agreement, which contains an arbitration clause, and thus should be referred to arbitration.

4. Validity of the Termination of the Joint Venture Agreement:
The main allegation of the petitioner was the contravention and violation of the joint venture agreement and articles of association of the company. The Board noted that the petitioners did not challenge the termination of the joint venture agreement but challenged the actions initiated by the company after the termination. The Board concluded that the issue of the validity of the termination of the joint venture agreement should be decided by arbitration as per clause 20 of the joint venture agreement.

Conclusion:
The Company Law Board allowed the application filed by the applicant (respondent No. 5) and referred the matter to arbitration as per clause 20 of the joint venture agreement. Consequently, C.P. No. 48 of 2011 was dismissed, and all interim orders were vacated. The Board emphasized that it has no discretion in this matter and must refer the parties to arbitration as mandated by section 8 of the Arbitration and Conciliation Act, 1996.