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TMI Blog2017 (2) TMI 78X X X X Extracts X X X X X X X X Extracts X X X X ..... -alia seeking a declaration that the acts of the respondent No. 2 & 3 are prejudicial to the interest of the Respondent No. 1 Company and are oppressive against the petitioners; to declare that the Respondent No. 2 and 3 have failed in their fiduciary duties towards the Respondent No. 1 Company and direct to reimburse the amounts siphoned by them to the Company etc. by following the ratio of the Apex court as laid in the case of Dale and Carrington. 3. The brief facts leading to filing of CP No. 83/2012 and, the present C.A. No. 163/2012 are as follows:- (a) Demerara Distillers Private Limited (CIN: U27106AP1996 PTC024798) (hereinafter referred to as DDPL for brevity), the first respondent in CP, was initially incorporated on 31.07.1996 as TMT Metallurgical Industries Limited, under the Companies Act, 1956, and the name was later changed to Demerara Distilleries Limited on 15.01.2001. Later, the Company was converted into Private Limited on 04th September, 2009. The main objects of the Company are to carry on business as manufacturers and repairers of and, dealers in export and import of all varieties of steel, carbon steel etc.; to manufacture, sell, deal in, distribute, import, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s. The Kanda (Applicant No. 2 herein) used to fund the company continuously from his own sources. It is further stated that Kanda & Associates presently consists of T.G. Veera Prasad (Applicant No. 3) herein; Mrs. T.G. Aruna and Mr. Naag Rohit, wife and son of Mr. T.G. Veera Prasad respectively. As such the business of DDPL has come to a standstill and, they are suffering unbearable hardship, loss of profits and severe financial crisis and mental agony. (f) The DDL-G has agreed to the proposal of terminating the JVA, in order to mitigate further losses and, to get amicable settlement and decided to work out an easy and expeditious way to wind up the affairs of DDPL vide their letter dated 18th January, 2012, addressed to the Board of Directors, DDPL. In pursuance to this letter, Kanda & Associates by accepting the said proposal of DDL-G, has addressed a letter dated 20th February, 2012 to DDLG and requested to convene Board meeting for giving effect to termination of JVA and, also stated that termination would be carried out in terms of JVA. Kanda and Associates rep by BS Kanda and TGV Prasad, have also addressed a letter dated 22nd February, 2012 to the Board of Directors, DDPL r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ypes of Alcoholic and other beverages through DDPL. It is one of the conditions that there shall be equal participation of both the parties and the DDLG agreed to import Technology, processing knowhow-and training to the staff of the DDPL. It is also agreed to provide marketing support and to allow usage of its patent rights, trade marks etc. 5. It is further averred in the application that with the active involvement of DDLG, DDLP has manufactured and marketed Rums under its brand name by having bottling arrangement initially with M/s. Kamal Wineries, Hyderabad and, thereafter with M/s. Kaptian Distilleries, Hyderabad and M/s. Bacchus Bottling Private Limited, Balasore. And the Company has invested in the equity of M/s. Bacchus Bottling Private Limited to the extent of Rs. 205 lakhs for acquiring 57% stake and another Rs. 65 lakhs for acquiring 50% stake in M/s. Glenmon Distilleries and Vintners Private Limited. They also stated that DDPL has entered into shareholders agreement with the local joint venture partners for investment in the said Bacchus Bottling Private Limited, Glenmon Distilleries and Vintners Private Limited and all these transactions were carried out with the con ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... was already mutually terminated and all the allegations made by the applicants are false and sought for dismissal of the application. 10. The applicants have filed Rejoinder dated 05.11.2013 by inter-alia contending that a detailed agreement dated 17-10-2002 was drawn up and, signed between M/s. Kanda & Associates, group of promoters led by Mr. T.G. Veera Prasad to fulfil the obligations of Indian promoters of the JVA with DDLG. During the execution of said agreement, a query was raised by the office of the Chairman of the DDLG as to the legal status of M/s. Kanda & Associates i.e. as to whether they are Limited Liability Company, a partnership or an aggregation of individuals and companies. On 29.10.2002, it was clarified to the Guyana by T.G. Prasad by stating that M/s. Kanda & Associates was only a group of people formed for giving birth to JV companies and that Mr. Kanda was an individual and his associates were Mr. T.G. Veera Prasad and members of their families. By accepting the explanation and clarification, the said JVA dated 17.10.2002 was duly executed and, it was totally false to state 'that the applicants herein are not a parties to the JVA. It is stated that first ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pplicants are not parties to terminate JVA and, they are trying to mislead the Tribunal. 15. Heard Shri Y. Suryanarayana, learned counsel for Applicants/Respondents and Shri S. Chidambaram, learned PCS for Respondent No. 1/Petitioner and, have carefully perused all the pleadings filed by both parties along with material documents filed in their support. 16. Shri Y. Suryanarayana, learned counsel for Applicants/Respondents, while reiterating the averments made in all pleadings made in CA No. 163 of 2012, has further submitted that it is not in dispute that JVA was executed on 17.10.2002 between DDLG & Kanda& Associates, a group of investors having their principal place of business at Nampally, Hyderabad and, their primary object to manufacture and marketing of various types of alcoholic beverages and produce fruit juice products. Accordingly, they have registered a new Joint Venture Company under the name and style of DDL and the same is not yet terminated and, in order to terminate/resolve the disputes between the parties is resorting to arbitration as per the Indian Arbitration &Conciliation Act, 1996, in terms of Clause 15 of JVA. He has further reiterated that Kanda & Associat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... timately raised the following issues for consideration: * R 1 Company (DDPL) is not a party at all to JVA and similarly R5 & R6 being independent corporate entities are also not parties to JVA. * Respondent No. 1 (Petitioner of CP) is not bound by JVA as same is not incorporated in the Articles of Association of R 1 company, * Statutory jurisdiction provided U/s. 397/398 of Companies Act, 1956 cannot be ousted by arbitration clause and powers of CLB are vast and the Arbitrator do not have such powers. * Apex court did not interfere in the present proceedings and simply appointed an Arbitrator to look into the disputes of parties to the litigation. Since R 1 Company, R 5 & R 6 companies are not parties to JVA, present CA No. 163 of 12 needs to be dismissed with costs. 19. By perusal of the entire issue raised in the present application, the following issues, in brief, are required to be considered; (i) Whether the Joint Venture Agreement (JVA) dated 17th October, 2002 was executed or not and, if executed, whether Kanda & Associates (a group of investors) consists of Mr. Bhim Shankaram Kanda, Mr. T.G. Veera Prasad, Mr. Naag Rohit (Applicants No. 2 to 4 herein) as contended and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... registration of JVC is to be reimbursed by Kanda &Associates? The above queries were answered by TGV Prasad, by his email dated 29th October, 2002 by saying as follows: As explained to you over phone, Kanda and Associates is only a group of people formed for giving birth to joint venture Company. Kanda is an individual and his associates are I and family etc. By reading of various documents filed in the case, there is not an iota of doubt about the execution of JVA by and between DDLG and Kanda &Associates and the formation of JVC. Kanda & Associates consists of Kanda himself and Mr. T.G.V Prasad, Executive Director, Mrs. TG Aruna Kumari and Mr. Naag Rohit Then the next question is whether JVA is terminated or still in force. As explained above, it is not in dispute that both the parties decided to terminate the JVA and in order to terminate it, DDPL proposed to invoke alternative mechanism in the name of Arbitration as provided in the JVA. It is cardinal principle of law that any agreement or contract made between the parties cannot be terminated unilaterally and, it should be done in accordance with law, duly following principles of natural justice and the terms and conditions ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... case by raising more or less all pleas now rising in the main Company petition. However, the Apex court did not agree with those contentions and thus appointed the Arbitrator. The Hon'ble Supreme court, in its order dated 24th November, 2014, under Para 5 has clearly repelled the contentions of the respondent/petitioner. It would be relevant to extract the same herein for better appreciation of the issue; "Of the various contentions advanced by the respondent/company resist the prayer for appointment of an Arbitrator under section 11(6) of the Act, the objections with regard the application being premature; and the proceedings pending before the Company Law Board, would not merit any serious consideration. The elaborate correspondence by and between the parties, as brought on record of the present proceedings, would indicate that any attempt, at this stage, to resolve the dispute by mutual discussions and mediation would be an empty formality. The proceedings before the Company Law Board at the instance of the present respondent and the prayer of the petitioners therein for reference to the Arbitration cannot logically and reasonably be construed to be a bar to the entertainm ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ement of disputes in question. In the meanwhile, there cannot be any adjudication by the Tribunal under section 397/398 etc of Companies Act, 1956. Moreover, all the issues raised in the present CP, are more or less the issues arise out of violations/non-implementation of JVA in question. 25. Now we will examine the law as cited by the parties to the litigation. Firstly, we will examine the relevancy of judgements relied upon by Sri Y. Suryanarayana, the learned counsel for the petitioners. He relied upon on following cases in support of his case: a. Everest Holding Ltd. Vs. Shyam Kumar Srivastava, MANU/SC/8182/2008 : In this case, the Hon'ble Supreme court, after considering the issue raise therein, inter alia held that as long as valid JVA is still in force, wherein arbitration clause provided for settlement of disputes arising out of or in relation to the subject matter of JVA, are required to be considered and decided through the process of arbitration as envisaged in JVA even such JVA have been terminated or cancelled. The decision of court in Haryana Telecom Ltd. Vs. Sterlite Industries (India) Ltd, Manu/SC/0401/1999,wherein, it is held that Arbitrator does not have po ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nce Ltd. [2011] 5 SCC 532; In this case, the ratio decidendi is 'Suit for sale, foreclosure or redemption of mortgaged property, should only be tried by public forum, and not by an arbitral tribunal: consequently, where mortgage suit is pending, court should not refer parties to arbitration. As stated above, Sole Arbitrator is already appointed by the Apex court in the instant case to decide all the disputes between the parties, hence, it is not applicable to the present case. (b) V B Rabga Raj Vs. V B Gopala Krishnan (1992 73 Comp Cases 201 SC) : The primary issue raised in the present case is whether the share holders can among themselves enter into an agreement, which is contrary to or inconsistent with the Articles of Association of the Company. This case has no application to the present for the reasons stated above. (c) World Phone India Pvt. Ltd. and Ors Vs. WPI Group Inc USA (2013) 178 Comp Cases 173 (Delhi) : In this case, appeal was filed against the order passed by CLB dated 16.11.2012 where in the prayer made in the application filed by the non-applicant/respondent had been allowed and it was held that the board meeting held by the company on 31,10.2012 and all ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tes supra and award still was not given. (g) SC Sukanya Holdings Pvt. Ltd. v. Jayesh Pandya 2003 44 SCL 146 (Para 14 & 15): In this case, the appeal by special leave was made against the judgement and order dated 18.09.2001 passed by the High court of Bombay in Arbitration petition No. 500 of 2001. The Hon'ble High court of Bombay has rejected the application under section 8 of Act. The court arrived at the conclusion that the in the suit apart from the relief of dissolution and accounts, plaintiff has prayed for other reliefs. All the defendants to the suit are not parties or partners in the partnership firm and the terms of partnership deed including the arbitration clause not binding to them. However, the Hon'ble Supreme court did not interfere in the matter and thus appeal dismissed. This case has too has no application to the present for the reasons stated supra. (h) Sudarshan Chopra and Other Vs. Company Law Board and Others 2004(2) Punjab and Haryana High Court (paras 9, 57 to 61): In this, the judgement of a learned single judge dated 14.3.2003, which dismissed the writ petition on challenging the order of CLB dated 8.12.2000, was under challenge. The CLB dismiss ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the present company petition as well. As stated supra, the Hon'ble Supreme Court in its order dated 24.11.2014 passed in Arbitration Case (Civil) No. 11 of 2013, has already referred all the disputes. So, the present company petition is not maintainable and the same is liable to be rejected for the reasons stated above. 30. It is to be mentioned here that the Companies would be formed basing on certain set of objects by framing Memorandum of Association, Articles of Association, Memorandum of Understanding, etc and those Companies would be registered under the Companies Act, 1956/2013 in order to have legal rights and obligation. Firstly, the Companies and its Members are bound by their own Memorandum and Articles. Secondly, all the agreements/Memorandum of Understanding duly executed by the Company are also binding on the parties. Approaching the Court/Tribunal cannot be resorted to in the first instance itself and, it should be made after exhausting available alternative remedies. In the instant case, as stated supra, alternative remedy by way of Arbitration is already in force and, thus it is not correct to say that the aggrieved parties are deprived of remedies available u ..... X X X X Extracts X X X X X X X X Extracts X X X X
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