TMI Blog1999 (1) TMI 534X X X X Extracts X X X X X X X X Extracts X X X X ..... mpany and that the said agreement provides for arbitration in respect of any claim, dispute or differences between the parties in relation to the terms of the agreement and as such in terms of Section 8 of the said Act the Company Law Board should refer the parties to arbitration and should not proceed with the petition. 2. In view of the preliminary objection raised by the respondents, it was decided to hear this application first before considering the petition. Shri U.K. Chowdhary, advocate for the petitioner, taking us through the allegations in the petition submitted that the very foundation of the petition is on account of certain differences that have arisen in the implementation of the sponsorship agreement dated April 4, 1995, bet ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t of or in relation to or under or in any manner connected with this agreement shall be referred to and decided by arbitration as provided in the rules, bye laws and regulations of the OTCEI. According to Shri Chowdhary, in para. 15 of the petition, the allegation is that the company has failed to amend the articles to conform to the partnership agreement, in para. 16, it is about failure to appoint the petitioners' nominee as a director in the company, in para. 20, it is about failure to provide requisite information. These three allegations directly arise out of the terms of the sponsorship agreement which is covered by the arbitration clause. Further, even the allegation relating to siphoning off of funds at paras 21 to 26, relates t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y had itself already initiated various actions in the matter like complaining to the Department of Company Affairs, SEBI, CBI. etc. Under these circumstances, he pleaded that this petition should be dismissed. Relying on the decision of the Company Law Board in Naveen Kedia v. Chennai Power Generation Ltd. [1998] 31 CLA 1 (CLB); [1999] 95 Comp Cas 640 he submitted that in a similar situation, the Company Law Board had referred the parties to arbitration and, therefore, the Company Law Board cannot decide this matter in any manner other than referring the parties to arbitration. 4. Shri Haksar, senior advocate, for the petitioner submitted that his client being a shareholder holding the requisite number of shares in terms of Section 399 has ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... various reliefs which would put an end to the matters complained of in the petition are incapable of being granted by an arbitrator. He also relied on Kare P. Ltd., In re [1977] 47 Comp Cas 276 (Delhi) wherein it was held that the statutory right to file a petition under Section 397/398 for relief against mismanagement and oppression cannot be taken away by a provision in the articles that differences between the company and any person should be referred to arbitration and stated that in the same way the mere provision for reference to arbitration as contained in the sponsorship agreement cannot take away the rights of the petitioner-company as a shareholder to move this petition. 5. We have considered the arguments of counsel. At the out ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... petitioners on the board of the company, failure to provide requisite information as contained in the petition directly arise out of the sponsorship agreement. Even the allegations relating to siphoning off of funds are based on the actual performance of the company from what was projected at the time of entering into the sponsorship agreement and as such the petitioners' allegation that the deviation from the projection and the actuals is an indication of siphoning off of funds and mismanagement in the affairs of the company has also to be viewed as arising out of the sponsorship agreement. Other than these allegations which are all arising out of the sponsorship agreement, no other substantial acts of oppression or mismanagement have ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... application referred to in Sub-section (1) shall not be entertained unless it is accompanied by the original arbitration agreement or a duly certified copy thereof; . . .". 9. In the present case, the existence of the arbitration clause in the sponsorship agreement is not disputed and as a matter of fact, the petitioner has already invoked that clause. It itself has enclosed a copy of the sponsorship agreement along with the petition. Section 8 enjoins a judicial authority, which admittedly the Company Law Board is, to refer disputes which the parties have agreed for referring to arbitration to refer the same to arbitration. Even though Shri Haksar submitted that the reliefs sought for in the petition cannot be granted by an arbitrato ..... X X X X Extracts X X X X X X X X Extracts X X X X
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