2019 (5) TMI 603 - Tri - Companies Law

Maintainability of petition before NCLT - oppression and mismanagement - section 8 of the Arbitration and Conciliation Act, 1996 - Jurisdiction - 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 arbitral tribunal? - Whether the acts complained of in the petition can be adjudicated by the sole arbitrator while adjudicating issues before him? - HELD THAT - The contentions with which the application under section 17 of the Arbitration and Conciliation Act is filed and the contentions raised in the main company petition are separate. Hence the application filed under section 17 of the Arbitration and Conciliation Act does not preclude the petitioner herein to agitate their grievance of oppression and mismanagement in the petition. Apart from that the acts complained of, as said above, cannot be adjudicated by the sole arbitrator since the powers available to this Tribunal cannot be exercised by him and the reliefs as sought in the petition are not arising out of any contractual obligation - Issues settled in favor of petitioner. Whether the petition is dressed up to suit the requirements under sections 241 and 242 of the Companies Act, 2013? - HELD THAT - The facts stated in the petition relate to financial discrepancies, non-service of notice of the extraordinary general meeting/annual general meeting and appointment of directors, etc. The said contentions are such that the National Company Law Tribunal alone can hear and decide the said issues. Hence, the contention of the applicant that the main company petition is dressed up to suit the requirements under sections 240 and 241 of the Companies Act is not acceptable - the issue settled in favour of the petitioner in the main company petition. The company petition is maintainable - List the matter for final hearing on October 4, 2018.

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 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.

Issue-wise Detailed Analysis:

Issue 1: Barred by Arbitration Application
The Tribunal considered whether the petition is barred due to the application under section 17 of the Arbitration and Conciliation Act. The Tribunal noted that the grievances in the main petition and some prayers in the section 17 application are the same. However, the petitioner had voluntarily dropped certain prayers from the arbitration application, which are now pursued in the main company petition. The Tribunal highlighted that the issues of non-service of meeting notices, financial discrepancies, and non-appointment of directors fall under the exclusive jurisdiction of the National Company Law Tribunal (NCLT) as per the Companies Act. These issues cannot be adjudicated by the sole arbitrator, as the NCLT has expansive powers to grant relief based on equity and law, which the arbitrator does not possess. Therefore, the Tribunal held that the application under section 17 of the Arbitration and Conciliation Act does not preclude the petitioner from pursuing the oppression and mismanagement claims in the main petition.

Issue 2: Adjudication by Sole Arbitrator
The Tribunal examined whether the acts complained of in the petition could be adjudicated by the sole arbitrator. It was determined that the contentions in the arbitration proceedings are purely contractual, arising from the memorandum of understanding between the parties. In contrast, the main petition deals with statutory rights and obligations under the Companies Act, such as non-service of notices, financial mismanagement, and shareholder rights. The Tribunal emphasized that these issues are within the NCLT's jurisdiction and cannot be resolved by the arbitrator. The Tribunal also noted that the petitioner had dropped certain prayers from the arbitration application, which are now pursued in the main petition, indicating that the issues are distinct and not subject to arbitration. Therefore, the Tribunal held that the acts complained of in the petition cannot be adjudicated by the sole arbitrator, and the NCLT has the authority to hear these matters.

Issue 3: Dressed Up Petition
The Tribunal considered whether the petition is a dressed-up suit to meet the requirements of sections 241 and 242 of the Companies Act. The Tribunal found that the petition's contentions, such as financial discrepancies, non-service of meeting notices, and non-appointment of directors, are genuine issues of oppression and mismanagement that fall under the NCLT's jurisdiction. The Tribunal rejected the applicant's argument that the petition is a mala fide attempt to evade the arbitration clause. The Tribunal referred to case law, including Ramnish Kumar Sharma v. D. R. Johns Lab P. Ltd. and Binod Kumar Bawri v. Calcom Cement Ltd., to support the conclusion that the issues raised in the petition are not purely contractual and cannot be resolved through arbitration. Therefore, the Tribunal held that the petition is not dressed up and is maintainable under sections 241 and 242 of the Companies Act.

Conclusion:
The Tribunal concluded that the Company Petition No. 1151 of 2018 is maintainable and dismissed the Miscellaneous Application No. 552 of 2018. The respondent was directed to file a reply to the main company petition within 15 days, and the matter was listed for final hearing on October 4, 2018.