S. Balasubramanian (Vice-Chairman) - (1.) THE petitioner hereinabove, holding 49 per cent, shares in AIA Magotteaux Ltd. ("the company"), has filed this petition under Section 397/402 and Section 403 of the Companies Act, 1956 ("the Act"), alleging oppression in the affairs of the company. Along with the petition, he also filed C. A. No. 237 of 1999 seeking certain interim reliefs. Both the petition and the application were mentioned on September 17, 1999. Directions were issued to the respondents to file their replies to the application and hearing of the application was fixed on October 4, 1999. In the meanwhile, the first respondent filed an application C. A. No. 248 of 1999 in terms of the provisions of Section 45 of the Arbitration and Conciliation Act, 1996 (hereinafter referred to as "the Arbitration Act"), on the ground that the disputes raised in the petition arise out of and in connection with certain agreements entered into between the parties in which there is an arbitration Clause for arbitration by the International Chambers of Commerce ("ICC") and as such the petition should be dismissed and the parties be referred to arbitration. In the meanwhile, the second respondent had invoked the jurisdiction of the ICC in terms of the arbitration Clause in the joint venture agreement. In view of this, the petitioner filed C. A. No. 254 of 1999 seeking for staying the arbitration proceedings before the ICC. Accordingly, both these applications were taken up for hearing.
(2.) Before we deal with the arguments of counsel, we shall narrate certain factual aspects. A joint venture and shareholders' agreement ("the JVA") was entered into between the petitioner and the first respondent on June 28, 1991, consequent to which the company was incorporated. The company is not a party to this agreement. On the same day, three other agreements --technical and financial collaboration agreement, trade mark licence agreement--both between the first respondent and the company and a sole distributor agreement between the second respondent and the company were entered into and were annexed to the JVA. Later, a non-competition agreement was entered into between the first respondent, the tenth respondent and the petitioner. A technical collaboration agreement was entered into on July 1, 1994, between the first respondent and the ninth respondent. Another technical collaboration agreement was entered into on November 22, 1996, between the first respondent and the eighth respondent. As per the JVA, the first respondent was to have 51 per cent. and the petitioner 49 per cent. shares in the company. The JVA also provided for the appointment of the petitione? as the managing director and his continuance as such up to the age of 65. It also provided for affirmative votes by both the groups on certain matters. Some of the terms of the JVA were to be incorporated in the articles of the company. All these agreements, except the non-competition agreement, provided for arbitration more or less in the following terms : "Notwithstanding Clause . .. . any dispute, controversy claim arising out of or relating to this agreement or the breach, termination or invalidity thereof shall be settled with arbitration, pursuant to the Rules of Conciliation and Arbitration of the International Chamber of Commerce in the City of London. The decision by arbitrators shall be final and conclusive and binding upon the parties. Judgment upon any award rendered may be entered in any court having jurisdiction thereof or application may be made to such court for a judicial acceptance of the award and an order of enforcement as the case may be". The JVA also provided for termination of the agreement in the case of default of one of the parties of its obligations under the agreement, in which case, the non-defaulting party would have the option to purchase the shares held by the defaulting party at the fair market value. In accordance with the terms of the JVA, the present holding of the petitioner is 49 per cent. and that of the first respondent 51 per cent. shares in the company. The petitioner was appointed as the managing director and the terms of the Articles were amended to incorporate the terms of the agreement as at annexure C to the JVA. Certain disputes seemed to have arisen between the parties in the conduct of the affairs of the company culminating in the filing of this petition. We have, in this order, considered the arguments of counsel in three parts. The first part--on the scope of Section 45 of the Arbitration Act, the second part--on C. A. No. 248 of 1999 filed by the first respondent (hereinafter referred to as the respondent) seeking for referring the matter to arbitration and the third--on C. A. No. 254 of 1999 filed by the petitioner seeking for staying the proceedings before ICC/restraining the first respondent from further prosecuting the arbitration proceedings.
(3.) WE shall first deal with, without reference to the facts of this case, the scope of the provisions of Section 45 of the Arbitration Act and its applicability to the proceedings under Section 397/398 of the Companies Act as that is the issue that has arisen on the application filed by the respondent. Before we deal with the arguments of counsel in detail on this issue, we may sum up their arguments in a nutshell, noting the fact that the respondent has already initiated proceedings before the ICC in terms of the arbitration Clause contained in the JVA. According to Shri Diwan, senior counsel for the respondent, since the entire allegations in the petition arise out of and in connection with various agreements entered into between the parties, all of which provide for arbitration in the ICC, the Company Law Board is bound to refer the parties to arbitration in terms of Section 45 of the Arbitration Act. According to Shri Chagla, senior counsel for the petitioner, the question of referring the matter to arbitration does not arise for three main reasons : that invoking the jurisdiction of the Company Law Board in the case of oppression is a statutory right which cannot be taken out by the provisions of any other law, that the Company Law Board is vested with exclusive powers to deal with matters of oppression which cannot be delegated to a private forum and that the powers exercisable by the Company Law Board under Section 402 of the Act are so wide and comprehensive that these reliefs cannot be granted by an arbitrator and as such the question of referring the parties to arbitration does not arise. In short, his contention is that Section 45 of the Arbitration Act is not applicable to Section 397/398 proceedings. Both counsel relied on a number of authorities to substantiate their stand.;