2017 (12) TMI 1450 - Tri - Companies Law

Arbitration proceedings - whether the dispute is arbitrable and as per SHA the same should be referred to Arbitration? - exists valid arbitration agreement between the parties? - Whether dispute cannot be referred to arbitration even though some of the respondents are not a party to SHA? - Oppression and mismanagement - Held that - It is clear that even a non-signatory parties to some agreements can pray and be referred to Arbitration provided they satisfy the prerequisites under sec 44 and 45 of the Arbitration Act 1996. Therefore, it cannot be said that the matter cannot be referred to arbitration because respondents No. 3 to 7 in the CP were not a party to SHA. Since the respondents, No. 3 and 4 are the nominee directors of Rishima, the respondent No. 2 and R-5 to R-7 are also nominee directors. Therefore, on account of non-party to the arbitration agreement, it cannot be said that matter cannot be referred to arbitration. On the above basis, it is clear that the alleged dispute is relating to affirmative voting right and Article 112 of the AOA which is covered by SHA and dispute redressal mechanism is provided in SHA and under Article 122 of the AOA. Therefore, there exists valid arbitration agreement between the parties and respondents No. 3 to 7 are only nominee directors. Thus, they are not a necessary party in the case, and their non-party to SHA will not in any way affect the reference to arbitration. It is also clear from the above that petition under Sec. 241 and 242 is only dressed up a petition with a purpose to bypass the arbitration agreement. So, the issues No. l, 2 and 4 are decided in the affirmative in favour of the petitioner. Regarding the issue No. 3, it is decided that the dispute is arbitrable and should be referred to arbitration and only on the ground of that some of the respondents are not a party to SHA, application for referring the matter to arbitration cannot be refused.On the above basis, it is clear that the interim application filed by the applicant deserves to be allowed.

Issues Involved:
1. Whether the dispute is arbitrable and as per SHA the same should be referred to Arbitration?
2. Whether there exists a valid arbitration agreement between the parties?
3. Whether the dispute cannot be referred to arbitration even though some of the respondents are not a party to SHA?
4. Whether the allegation of oppression and mismanagement is only a dressed-up petition with a purpose to bypass the Arbitration agreement?

Issue-wise Detailed Analysis:

1. Whether the dispute is arbitrable and as per SHA the same should be referred to Arbitration?

The Tribunal examined whether the dispute between the parties should be referred to arbitration as per the Shareholder's Agreement (SHA). The SHA and the Articles of Association (AOA) of the company contained specific provisions for resolving disputes through arbitration under the ICC Rules, with the seat of arbitration in Singapore. The Tribunal noted that the main relief sought in the Company Petition (CP) was related to the deletion of Article 112 of the AOA, which was connected to the affirmative voting rights granted to the respondent through the SHA. The Tribunal found that the SHA and AOA provided a clear dispute resolution mechanism for such matters, and the arbitration agreement was binding on both parties. The Tribunal concluded that the dispute was fully covered by the SHA and AOA and was thus arbitrable.

2. Whether there exists a valid arbitration agreement between the parties?

The Tribunal confirmed the existence of a valid arbitration agreement between the parties, as evidenced by the SHA and Article 112 of the AOA. The arbitration clause in the SHA specified that disputes arising out of the SHA, including its existence, validity, or termination, were to be resolved through arbitration under ICC Rules. The Tribunal noted that the arbitration proceedings had already been initiated by the respondent and were ongoing, with both parties participating. The Tribunal found no dispute over the validity of the arbitration agreement, and it was clear that the agreement was enforceable and operative.

3. Whether the dispute cannot be referred to arbitration even though some of the respondents are not a party to SHA?

The Tribunal addressed the issue of whether the dispute could be referred to arbitration despite some respondents not being parties to the SHA. The Tribunal referred to the Supreme Court's judgment in Chloro Controls India (P.) Ltd., which held that even non-signatory parties to some agreements could be referred to arbitration if they satisfied the prerequisites under Sections 44 and 45 of the Arbitration Act. The Tribunal found that respondents No. 3 to 7, who were nominee directors, were not necessary parties to the proceedings and their non-party status to the SHA did not affect the reference to arbitration. The Tribunal concluded that the matter could be referred to arbitration despite some respondents not being parties to the SHA.

4. Whether the allegation of oppression and mismanagement is only a dressed-up petition with a purpose to bypass the Arbitration agreement?

The Tribunal scrutinized the reliefs claimed in the CP and found that the petition was primarily aimed at amending Article 112 of the AOA and challenging the affirmative voting rights granted to the respondent under the SHA. The Tribunal observed that the CP was filed after the arbitration proceedings had been initiated and was an attempt to bypass the arbitration process. The Tribunal concluded that the petition under Sections 241 and 242 of the Companies Act was a dressed-up petition to avoid arbitration and that the dispute was arbitrable as per the SHA and AOA.

Order:

The Tribunal allowed the interim application filed by the applicant, referring the matter to arbitration and adjourning the proceedings of the Company Petition No. 149/2017 sine die, with liberty to mention by either party as the matter was already pending before the Arbitral Tribunal. The parties were ordered to bear their own costs.

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