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2016 (12) TMI 1773 - Tri - Companies LawOppression and mismanagement - non-implementation of the MOU dated 18.03.2009 and two addendums attached with it dated 13.03.2010 and 26.03.2010 - whether in the facts and circumstances of this case the dispute raised in the company petition filed u/s. 397 398 402 and 403 of the Companies Act could be referred to arbitration on the basis of identical reliefs having been claimed? HELD THAT - The law on the subject is fairly well settled - In the case of Sukanya Holdings Pvt. Ltd. v. Jayesh H. Pandya 2003 (4) TMI 435 - SUPREME COURT Hon ble the Supreme Court has inter alia observed that The Court has to apply its mind to the condition contemplated under section 89 CPC and even if application under section 8 of the Act is rejected the Court is required to follow the procedure prescribed under the said section. The company petition is nothing else but a dressed up petition and is not covered by the provision of chapter 6 of the Companies Act 1956. Merely by modifying the prayer or using different expression in various paras of the petition prefacing it with the allegations of oppression and mismanagement a petition would not assume the character of a petition u/s. 397 398 and 402 of the Companies Act - The arbitration proceedings are pending before the arbitrator and the matters concerning all the allegations based on MOU and the two addendums. The reliefs which have been claimed in the petition can be claimed and granted by the Arbitrator. On the excuse and pretext of oppression and mismanagement the petitioner cannot be given a colour of a dispute of oppression and mismanagement . Therefore we do not find any substance in the arguments of the counsel for the non applicant-petitioner that the company petition is aimed at only preventing the oppression and mismanagement .
Issues Involved:
1. Whether the dispute raised in the company petition under sections 397, 398, 402, and 403 of the Companies Act could be referred to arbitration based on the MOU and addendums. 2. Whether the petition is a genuine case of oppression and mismanagement or a dressed-up petition to avoid arbitration. 3. The Tribunal's jurisdiction and powers under sections 397, 398, 402, and 403 of the Companies Act in the context of an arbitration agreement. Issue-wise Detailed Analysis: 1. Referral to Arbitration: The application under section 8 of the Arbitration and Conciliation Act, 1996 was filed by Respondent No. 2, seeking to refer the dispute to arbitration as per clause 7 of the MOU dated 18.03.2009. The applicant argued that the petitioner's claims of oppression and mismanagement were fundamentally based on the non-implementation of the MOU and its addendums dated 13.03.2010 and 26.03.2010. The MOU included a mandatory arbitration clause for resolving disputes. 2. Genuine Case of Oppression and Mismanagement: The petitioner opposed the application, asserting that the MOU and addendums were not incorporated into the Articles of Association of the company. The petitioner argued that the reliefs sought were outside the scope of arbitration and pertained to statutory duties of the Tribunal to adjudicate cases of oppression and mismanagement. The petitioner denied allegations that the company petition was filed due to the non-implementation of the MOU and addendums. 3. Tribunal's Jurisdiction and Powers: The Tribunal examined whether the dispute could be referred to arbitration despite the claims of oppression and mismanagement. The Tribunal referred to the Supreme Court's judgment in Sukanya Holdings Pvt. Ltd. v. Jayesh H. Pandya, which established that if the subject matter of a suit includes issues outside the arbitration agreement, the matter cannot be referred to arbitration. The Tribunal also considered the Bombay High Court's decision in Rakesh Malhotra v. Rajinder Kumar Malhotra, which held that a petition merely dressed up to oust an arbitration clause cannot succeed. Detailed Examination of Petition: The Tribunal closely examined the petition's averments and reliefs sought. The petition was found to be fundamentally based on the MOU and addendums, with allegations of oppression and mismanagement intertwined with the non-implementation of these agreements. Specific prayers, such as directing the respondent not to interfere in company affairs, removing the respondent as a director, and appointing a nominee director, were all linked to the MOU and addendums. Conclusion: The Tribunal concluded that the company petition was a dressed-up petition aimed at avoiding arbitration. The reliefs sought could be granted by the Arbitrator, and the petition did not genuinely pertain to oppression and mismanagement under the Companies Act. The Tribunal emphasized that wide powers under sections 397, 398, 402, and 403 do not preclude it from refusing to entertain a petition based on a breach of contract with an arbitration clause. Order: The application under section 8 of the Arbitration and Conciliation Act was accepted, and the company petition was disposed of. All other applications and the company petition were also disposed of accordingly. Summary: The Tribunal determined that the dispute, fundamentally based on the MOU and addendums, should be referred to arbitration. The company petition was deemed a dressed-up petition to avoid arbitration, and the reliefs sought could be addressed by the Arbitrator. Consequently, the Tribunal disposed of the company petition and related applications.
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