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TMI Blog2004 (2) TMI 723X X X X Extracts X X X X X X X X Extracts X X X X ..... Das Kapur). The family controls/manages a number of entities - both incorporated or otherwise, the companies including one M/s. Atlas Cycle Industries Limited, a listed company, in which the company holds substantial shares. Each group holds 1/3rd shares in the company and each group had equal representation on the Board. The members of Kapur family entered into a Memorandum of Understanding on 8th January, 1999 wherein it was agreed that various entities and also assets and properties jointly held by the family including properties and assets held through various companies, firms etc. shall be divided equally among the three groups of the family by means of lots and each unit shall thereafter manage business/properties coming under respective lot. One of the terms of the MOU is that till the draw of lot, no change will be made unilaterally in the practices being followed in different companies and status quo would be maintained. The MOU also contained an arbitration clause that any disputes arising out of the said MOU would be referred to Shri Justice Ahmedi, former Chief Justice of India. In pursuant to this clause, in view of certain disputes, arbitration proceedings have comme ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s drawn up and must be maintained. Since I do not see any substance in the objection raised in the reply and urged before me by the learned, counsel for Shri Arun Kapur, I think that in view of Shri Arun Kapur having disturbed the status quo by removing Shri Salil Kapur and Shri Gautam Kapur as directors without their consent and knowledge and having disturbed the shareholding by issuing new shares, the relief claimed in paragraph 15(a) and 15(b) deserves to be granted. I therefore give the directions sought in terms of the two paragraphs (a)(b) of paragraph 15 of the application under consideration . As a matter of fact, when this application was heard, the 2nd respondent contended that the application was not maintainable before the arbitrator as the grievances in the application had to be raised before the Company Law Board. However, the petitioners contended that the Company Law Board would not entertain these complaints as they were covered by the MOU and as such arbitrator had the jurisdiction. The learned arbitrator had observed in his order 28.12.2001 In the reply filed by Shri Arun Kapur, it is further stated that Company Law Board alone can have jurisdiction and that i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... relation to the breach of the terms of the MOU which is before the Arbitrator. Creation of a new majority and exclusion of a family members from management in a family company are grave acts of oppression which could be redressed only by the Company Law Board. Moreover, the company is not a party to the MOU and therefore, the arbitration clause in that MOU does not bind the company and the learned Arbitrator cannot, therefore pass any orders in respect of the company more so in respect of the prayer relating to investigation into the affaires of the company as sought for by the petitioners. Further the 5th and 6th petitioners and respondents 3 to 5 are also not parties to the arbitration agreement. The signatories to the Memorandum are only the members of the Kapur family and none of the companies in the group including M/S Limrose is party to the MOU. This Board has, in Magotteaux case, held that if parties are not common, then the matter cannot be referred to arbitration. Since the petitioners have exercised their statutory rights as members of the company to move the CLB on allegations of oppression, the statutory rights cannot be curbed by referring the matter to arbitration, r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er and has also recorded an undertaking from the respondents that status quo ante in respect of both the issues would be restored. Now the issue for my consideration is, when the subject matter being the same before me and the learned arbitrator, (irrespective of who has raised the same before the arbitrator) who has already ruled that he has jurisdiction and has also recorded an undertaking, whether I should continue with the petition on the grounds advanced by the petitioners or relegate the matter to the learned arbitrator in terms of Section 8 of the Arbitration and Conciliation Act. 9. Section 8 of Arbitration and Reconciliation Act, 1996 reads A judicial authority before which an action is brought in a matter which is the subject of an arbitration agreement shall, if the party so applies not later than when submitting his first statement on the substance of the dispute refer the parties to arbitration . In Gajapathi Raju's case, the Apex Court has elaborated this Section to state that for referring the parties to arbitration, the Court should be satisfied that (1) There is an arbitration agreement (2) A party to the agreement brings an action in the court agains ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt have been alleged is not a party to the arbitration agreement. Thus one of the requirements as enunciated by the Apex Court that there should be commonality of parties is not satisfied. This Board has held in Magotteaux case, that there should be commonality of parties failing which the application under Section 8 would not lie. The learned Counsel for the respondents contended that, in view of the decision of the Apex Court in Hindustan Petroleum case that once there is an arbitration agreement, the matter should be referred to Arbitration, I am of the view that the said judgment can apply only when there is commonality of parties. This very aspect has been considered by the Apex Court in Sukanya Holdings(P) Ltd V Jayesh Pandya (2003 3 CLJ 68 -SC) wherein the Court held Where, however, a suit is commenced -- as to a matter which lies outside the arbitration agreement and is also between some of the parties who are not parties to the arbitration agreement, there is no question of application of Section 8 (para 15). Since there is no commonality of the parties to the present proceeding and the arbitration agreement, the second requirement as per Apex Court judgment in Sukanya ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nts would indicate that the allegations in those petitions, even though were styled as acts of oppression/mismanagement, were directly arising out of the respective arbitration agreements and there were not really acts of oppression as generally held by various courts/CLB. In RBF Latex case, this Board retained those of the allegations which were not part of the agreement and relegated others to arbitration. (However, in Sukanya Holdings's case, the Apex Court has held that such bifurcation is not permissible and the entire matter has to be adjudicated by the judicial forum). In the present case, it is to be noted that the petitioners have alleged acts of oppression, independent of the terms of the MOU on the ground that in a family company, disturbance of directorship or shareholding would be an act of oppression. This Board has held in a number of cases that such disturbance in a family company could be held to be an act of oppression. These allegations, if established, could definitely be declared to be acts of oppression meriting grant of appropriate relief in terms of Section 402. Therefore, when such an allegation of oppression is made, I am of the view that the proper fo ..... X X X X Extracts X X X X X X X X Extracts X X X X
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