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TMI Blog2008 (2) TMI 942X X X X Extracts X X X X X X X X Extracts X X X X ..... eged that the parties had sometime in 1991 joined together with equal shareholding in respondent No. 26 company. It is further averred that to resolve disputes, which had arisen sometime in 1995-96 between the two groups, an arbitration agreement had been entered into between both the parties. Apart from agreeing to refer disputes for settlement through arbitration, the parties further agreed that the respondent group would bid ₹ 78 per share and that the said price was accepted by the petitioner group. According to the agreement, in the event of non-payment, the respondent group's shareholding was to be forfeited. 3. The petition alleges that the respondent, disregarding the terms of the agreement, filed a suit before the Calcutta High Court being Suit No. 269 of 1996 in which the petitioners and respondents Nos. 26-34 (for the sake of convenience hereafter referred to as the AKD group ) were impleaded as defendants. It is further alleged that on September 19, 1996, a single judge of the Calcutta High Court directed that the shares, which had been by then referred for arbitration, belonging to the second respondent, ought to be deposited for safe custody with o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... The disputes included the affairs and management of the company. It is also alleged that the Company Law Board completely ignored that respondents Nos. 2 to 25 indulged in multiplicity of litigation by first filing proceedings before the Company Law Board and later withdrawing the suit before the Calcutta High Court ex parte, and without notice to them in contravention of provisions of Order 23, Rule 1 of the CPC. 7. In the return filed on behalf of respondents Nos. 2 to 25, it is alleged that sometime in 1996, the writ petitioner had indulged in misappropriation of company funds by not reflecting the products sold in the books. It is also alleged that sale proceeds secured were higher than what were disclosed in the books of account by the writ petitioner. The affidavit also adverts to disputes and differences having arisen between the writ petitioner and respondent No. 2 sometime in 1996 and that in August 1996, the former suggested to the second respondent that both should not continue in the company. The respondents also alleged that the petitioners cannot seek enforcement of the arbitration Clause since Shri Kothari, the nominated counsel, was only empowered to act a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ard was in truth and reality investigation into the affairs of the companies on allegations of mismanagement. A close analysis of the nature of the relief sought by the respondents before the Company Law Board revealed that they concern the same issues which were the subject-matter of the agreement, which contained an arbitration clause. In these circumstances, the Company Law Board, therefore, ought to have given due weightage to the intent of the parties and refer the disputes to arbitration. By not doing so, it failed to exercise jurisdiction, which it was lawfully bound to. Learned Counsel relied upon the judgment of the Supreme Court in Smt. Kalpana Kothari v. Smt. Sudha Yadav AIR2002SC404 and submitted that every judicial authority before which an action has been brought in respect of a matter which is the subject-matter of an arbitration agreement is under a duty to refer such a dispute to the mechanism agreed upon by the parties. The emphasis is on the parties to the arbitration agreement, and not the dispute. If the true spirit and intention of Section 8 were to be given effect to, the parties to the arbitration were none other than the parties in the Company Law Board tha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion agreement between the petitioners and the second respondents could at the highest bind only the signatories. However, the proceedings before the Company Law Board included a number of other parties who had no privity of the contract to the arbitration agreement. Therefore, the disputes before the Company Law Board could not be referred to arbitration. In support of this submission, learned Counsel relied upon the judgment reported as Sukanya Holdings P. Ltd. v. Jayesh H. Pandya [2003]3SCR558 . He also relied upon a judgment reported as Alankar Global P. Ltd. v. Dinesh Kumar Mathur 137(2007)DLT164 . 12. Learned Counsel lastly contended that the disputes that are subject-matter of proceedings under Section 397 of the Companies Act before the Company Law Board are incapable of arbitration as many of the reliefs sought from the Company Law Board cannot be granted by the arbitrator. 13. From the above discussion, two questions arise for decision in these proceedings. One, whether the petitioner lost his right to seek a reference under Section 8 of the Act, for the reason of having submitted to the merits of the dispute before the Company Law Board and thus foreclo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hat taking part in interlocutory or supplemental proceedings by itself would not amount to disclosing the first statement in relation to the substance of the dispute. In this case, all that the petitioner did, was to object to maintainability of proceedings under Section 397. No doubt, it invited an adverse ruling. Yet that preliminary object cannot be characterised as entering into the substance of the dispute, and in my opinion, does not amount to waiver of his right to seek reference under Section 8. 16. The second question needing determination is the correctness of the Company Law Board's impugned order. The narrative regarding history of disputes between the parties only serves as a backdrop for a decision on this issue; it cannot in the opinion of the court influence the legality or otherwise of the impugned order. One of the basic objections of the second respondent to the proceedings, voiced by it before the Company Law Board and taken in its counter affidavit and also advanced during the hearing was that, a reference of the disputes pending before the Company Law Board to arbitration is not possible because there is no identity of parties in the proceedings w ..... X X X X Extracts X X X X X X X X Extracts X X X X
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