2019 (5) TMI 607 - AT - Companies Law

Oppression and mismanagement - whether the issues raised in the Company Petition qua allegations of oppression and mismanagement are arbitrable? HELD THAT - The Tribunal, empowered under Section 242 (2) of Companies Act, 2013 may, with a view to bring to an end the matters complained of, make such order as it thinks fit - On a plain reading of Section 242, it is manifestly clear that the facts should justify the making of a winding up order on just and equitable grounds. Admittedly, Arbitrator would have no jurisdiction to pass a winding up order on the ground that it is just and equitable which falls within the exclusive domain of the Tribunal under Section 271(e). That apart acts of non-service of notice of meetings, financial discrepancies and non-appointment of Directors being matters specifically dealt with under Companies Act and falling within the domain of the Tribunal to consider grant of relief under Section 242 of Companies Act render the dispute non-arbitrable though it cannot be disputed as a broad proposition that the dispute arising out of breach of contractual obligations referable to the MOUs or otherwise would be arbitrable. It is also indisputable that the statutory powers and plenary jurisdiction vested in the Tribunal renders it the appropriate forum to deliver result oriented justice. Admittedly, the statutory jurisdiction vested in the Tribunal cannot be exercised by the Arbitrator. Given the nature of allegations in the Company Petition in the context of reliefs that survive for consideration there is no escape from the conclusion that the dispute raised in the Company Petition and sought to be referred for arbitration is non-arbitrable. Impugned order upheld - appeal dismissed.

Summary

Issues Involved:
1. Whether the Petition is barred under law in view of the Application filed under Section 17 of the Arbitration and Conciliation Act before the Sole Arbitrator and the Petitioner voluntarily submitting himself to the jurisdiction of the Arbitral Tribunal.
2. Whether the acts complained of in the Petition can be adjudicated by the Sole Arbitrator while adjudicating issues before him.
3. Whether the Petition is dressed up to suit the requirements under Sections 241 and 242 of the Companies Act, 2013.
4. Whether the issues raised in the Company Petition regarding allegations of oppression and mismanagement are arbitrable.

Issue-wise Detailed Analysis:

1. Bar under Law due to Application under Section 17 of the Arbitration and Conciliation Act:
The Tribunal found that the grounds urged in the application under Section 17 of the Arbitration and Conciliation Act and the issues raised in the Company Petition are separate. Therefore, the application under Section 17 does not preclude the Petitioner - 'Dynatron Services Private Limited' from agitating its grievance of oppression and mismanagement in the petition. The Tribunal concluded that the reliefs sought in the Company Petition did not arise out of any contractual obligation and could not be adjudicated upon by the Sole Arbitrator.

2. Adjudication of Complained Acts by Sole Arbitrator:
The Tribunal opined that the powers available to the National Company Law Tribunal to adjudicate upon issues of oppression and mismanagement, financial irregularities, appointment of Directors, etc., could not be exercised by the Sole Arbitrator. Therefore, the acts complained of in the Company Petition could not be adjudicated by the Sole Arbitrator.

3. Petition as a Dressed-Up Suit:
The Tribunal rejected the contention that the Company Petition was a 'dressed up petition' to avoid the arbitration clause contained in the two MOUs. It was noted that the Company Petition seeks to enforce the statutory rights of Respondent No. 1 as a shareholder and the reliefs claimed are aimed at bringing an end to acts of oppression and mismanagement, which fall under the exclusive jurisdiction of the NCLT.

4. Arbitrability of Issues Raised in the Company Petition:
The Tribunal referred to the distinction in law between disputes capable of arbitral resolution and those that are not, as elucidated by the Hon’ble Apex Court in 'Booz Allen & Hamilton Inc. vs. SBI Home Finance Ltd.' It was emphasized that disputes relating to rights in rem, such as those involving oppression and mismanagement, are non-arbitrable. The Tribunal concluded that the statutory powers and plenary jurisdiction vested in it render it the appropriate forum to deliver result-oriented justice. Consequently, the dispute raised in the Company Petition and sought to be referred for arbitration was deemed non-arbitrable.

Conclusion:
The Tribunal's impugned order was upheld, finding no legal infirmity. The Tribunal correctly dealt with the issues, and the appeal was dismissed with no orders as to costs.