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TMI Blog2004 (6) TMI 632X X X X Extracts X X X X X X X X Extracts X X X X ..... ons of the parties and also matters relating to the management of the company have been incorporated. This agreement provides for arbitration in case of disputes arising in connection with the said agreement under the rules of International Chamber of Commerce. Even though most of the terms of the agreement have been incorporated in the Articles of Association of the company as stipulated in the shareholders' agreement, yet, the arbitration clause in the agreement continues to prevail. Therefore, if the allegations in the petition relate to matters covered in the agreement, then, in terms of Section 8 of the Arbitration Conciliation Act, the parties have to be referred to arbitration. 3. He, submitted: All the major allegations in the petition like the refusal of Goel Group to purchase 49% shares held by the petitioner at a fair price, non appointment of petitioner's nominees as directors, the manner of utilization of funds, alleged deadlock in the Board and shareholders' meetings, non provision of minutes/financial information required by the petitioner, implementation of projects by Goel Group which had been rejected by the petitioner, refusal to get the accounts ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 87), the Supreme Court has held that it is mandatory for a judicial authority to refer the parties to arbitration if there is an agreement to that effect. In Olympus Super Structures Private Ltd. v. Meena Vijay Khaitan (1989 5 SCC 651), the Supreme Court has held that all matters connected with the arbitration agreement can be gone into by the arbitral tribunal. In a number of cases, the Company Law Board itself has referred the parties to arbitration wherever it found that the disputes raised in the petitions related to matters covered under arbitration agreement (Navin Kedia v. Chennai Power Corporation - 1995 CC 640: Shri Pinaki Das Gupta v. (SIC) Advertising Pvt. Ltd. -CP No. 47 of 2001: Bhadresh Kantilal Shah - 2000 2 CLJ 323: 20th Century Finance Corporation v. R.F.B. Latex Ltd. - 97 CC 636: Escorts Finance Ltd. v. G.R. Solven Allied Industries Ltd. - 96 CC 323). 4. The learned counsel further submitted: The parties have already invoked ICC Arbitration. The arbitration was invoked on 20.10.2003, the respondents appointed their arbitrator on 24.11.2003 and the petitioner appointed its arbitrator on 2.12.2003. In terms of Rule 6 of International Court of Arbitration Rule ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he shareholders to arbitration. It has been held by Supreme Court in Union of India v. Kishori Lal Gupta (AIR 1959 SC 1363) that once a new contract without arbitration clause is entered into, no recourse can be had on the arbitration clause in the original contract. The Company Law Board has also, in EIL Limited v. Mashobra Resorts Limited (2003 53 CLA 155) held that once terms of an agreement containing arbitration clause have been incorporated in the Articles of a company, then, the terms of the Articles would prevail over the agreement. Therefore once the terms of the shareholders' agreement have been incorporated in the articles with the omission of arbitration clause, that clause has no validity. Further, the Punjab Haryana High Court has categorically held in Sudershan Chopra v. CLB that matters covered under Sections 397/398 cannot be referred to arbitration. Most of the cases cited by Dr. Singhvi relate to the interpretation of Section 11 of the Arbitration Conciliation Act and in matters of partnership agreement or Contractual Agreements and none related to a petition under Sections 397/398 of the Act. It is to be noted that the respondents invoked the arbitration ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... placed a number of documents which relate to the merits of the case which cannot be considered at this stage. 8. I have considered the pleadings and arguments of the counsel. The admitted position is that the parties have entered into a Share Purchase and Cooperation Agreement in which there is an arbitration clause providing for ICC arbitration to be held in Delhi. A perusal of the various allegations in the petition shows that while there are certain allegations, as pointed out by Dr. Singhvi, on matters that are covered in the arbitration agreement, and there are also certain allegations as pointed out by Shri Mukherjee, which are not on matters covered under the arbitration agreement. Main thrust of the allegations of the petitioners is that the respondents, by misusing their majority strength are oppressing the petitioner. At this stage, it is not permissible to look into the merits of any of these allegations other than examining whether these allegations are on matters covered under the arbitration agreement and whether the parties should be referred to arbitration. Section 8 of the Act is mandatory and a judicial body is bound to refer the parties to Arbitration if the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bserved In other words the jurisdiction and scope of powers of this Board and that of the Arbitrator are different and both can adjudicate the matter before them. Because of the difference in the nature of powers, there is hardly any scope for conflict in their decisions . Further, none of the cases cited by the learned counsel for the respondents on the provisions of Section 8 or Section 16 relate to matters pertaining to a petition under Sections 397/398. As a matter of fact, except this Board and Punjab Haryana High Court, no other court has decided the applicability of Section 8 in a proceeding under Sections 397/398. In some cases, as cited by Dr Singhvi, this Board has held that if the allegations relate only to the terms of an agreement containing an arbitration clause, then the parties have to be referred to arbitration and in some cases where this Board found that the allegations could be examined without reference to the arbitration agreement, the applications under Section 8 were rejected. However, in Hind Samachar case, the Punjab and Haryana High court has held that the matters in a petition under Section 397/398 cannot be referred to arbitration. Thus, examining the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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