w w w . L a w y e r S e r v i c e s . i n



Airtouch International (Mauritius) Ltd. v/s RPG Cellular Investments & Holdings (P.) Ltd.


Company & Directors' Information:- RPG CELLULAR INVESTMENTS & HOLDINGS PRIVATE LIMITED [Amalgamated] CIN = U65993MH2000PTC219686

Company & Directors' Information:- P K S HOLDINGS & INVESTMENTS PRIVATE LIMITED [Active] CIN = U65993TN2008PTC068202

Company & Directors' Information:- R J HOLDINGS AND INVESTMENTS (INDIA) LIMITED [Strike Off] CIN = U65993KA2006PLC039849

Company & Directors' Information:- INTERNATIONAL HOLDINGS LIMITED [Strike Off] CIN = U65993KA1983PLC005670

Company & Directors' Information:- K R S HOLDINGS & INVESTMENTS PVT LTD [Strike Off] CIN = U67120WB1991PTC053572

    C.A. NO. 64 OF 2003 AND C.P. NO. 31 OF 2003

    Decided On, 19 August 2003

    At, Company Law Board Southern Region Bench Chennai

    By, K.K. BALU
    By, MEMBER

    Janak Dwarkadas, Zal Andhirujina, J. Shivanandaraj, Abhijit Joshi, Rajendra Barot, Smt. Chitra Narayanan, Sudipto Sarkar, S.N. Mookherjee, Rabindra Jhunjhunuaia, Ms. Aarthi Lakshminarayanan, Arvind P. Datar, K. Ramasamy, C.N. Niranjan and V.T. Narendiran for the Appearing Party.



Judgment Text

1. In this company petition filed by M/s RPG Cellular Investments & Holdings (P.) Ltd. (?the petitioner?) under sections 397, 398, 402, 403 and 406 of the Companies Act (?the Act?) alleging acts of oppression and mismanagement in the affairs of M/s RPG Cellular Services Limited (?the Company?), the second respondent has filed an application under sections 8 and 45 of the Arbitration and Conciliation Act, 1996 (?the Act, 1996?) to refer the parties for arbitration on the ground that the disputes raised in the company petition arise out of or in connection with the Shareholders Agreement dated 19-8-1995 (?the SHA?), clause 23.1 of which provides for resolving the disputes by arbitration in accordance with the Rules of Arbitration of the International Chamber of Commerce.


2. The facts, in brief, leading to the present application are that the company having been incorporated in February 1992 is presently engaged, inter alia in the business of providing cellular Mobile Telephone Services in the local area served by Madras Telephone District, with the petitioner holding 68.65 per cent of the equity shares and the respondents 2, 9 and 10 holding 20.76 per cent and 10.41 per cent and 0.18 per cent respectively. The petitioner and the tenth respondent are controlled by the RPG Group. The third respondent is holding company of the second respondent. The second and third respondents are under the control of the fourth and fifth respondents, constituting the Vodafone Group. The seventh and eighth respondents are directors of the Company. Later, the RPG Group, second respondent belonging to the Vodafone Group and the ninth respondent had entered into the SHA on 19-8-1995 (Annexure A-2) stipulating elaborate terms and conditions for the management and operation of the business of the Company. The terms of the SHA were supplemented by means of the Agreements dated 10-12-1997, 3-7-2001 and 31-7-2001 (Annexures A-3, A-4, A-5). Pursuant to the SHA as well as the Supplementary Agreements, the Memorandum and Articles of Association of the Company were suitably amended from time to time. Clauses 17.2, 18.2-3, 18.3-1, 18.8, 22 and 23.1 of the SHA assume relevance for purposes of this application. By virtue of clause 17(2), corresponding to Article 50(2), any shareholder desirous of transferring its shares in the company shall first make a written offer to the other shareholders. If they fail to accept the offer made by any shareholder within 90 days, then the offering shareholder shall have the right to sell such shares to any third party. Clauses 18.2-3 and 18.3-1 incorporated as Article 164(1)(c) and Article 164(2)(a) respectively provide that any shareholder of the company is no longer effectively controlled by the person ultimately controlling such shareholder as at 19-8-1995, but is controlled by a person who carries on competing business, such a shareholder, being defaulting party, shall give notice to the company and other shareholders, upon which they are entitled to have the option to purchase the shares of such defaulting party in the company within the stipulated time at par value. Clause 18.8 stipulates that no shareholder shall sell all its shares in the company to any person who owns any business, which is similar to that of the company. Clause 22 enjoins upon the shareholders to give the company at least 30 days? prior written notice of any proposed change in the effective control of such shareholder or of any other proposed restructuring of such shareholder. Clause 23 provides that any dispute arising out of the SHA must be referred to and finally resolved by arbitration. Against this background, the action of the Vodafone Group, according to Shri Sudipto Sarkar, Senior Counsel for the petitioner in having entered into a Sale and Purchase Agreement for sale of the Vodafone Group shareholding in the second respondent in favour of the sixth respondent, engaged in the business which competes with the business of the company is in violation of clauses 17.2, 18.2-3 and 18.8 of the SHA. Any agreement for sale of the Vodafone Group shareholding in the second respondent or the holding of the second respondent in the company or change of control of the second respondent in favour of the sixth respondent would be oppressive to the petitioner and deprives the petitioner as well as the other shareholders to exercise their rights under clauses 18.2-3 and 18.3-1. Thus, the main grievance of the petitioner is that the Vodafone Group has not offered the shareholding of the second respondent in the company to the petitioner contrary to the SHA and the Articles of Association of the company as amended from time to time.


3. According to Shri Janak Dwarkadas, Senior Counsel appearing for the second respondent, the proposal of the Vodafone Group for sale of its shareholding in the second respondent in favour of the sixth respondent is well within the knowledge of the petitioner and does not in any way violate clause 18.2-3 of the SHA, especially when the sixth respondent is not engaged in any business which competes with the business of the company. Shri Dwarkadas pointed out that clause 18.2-3 does not prohibit any such change in favour of a non-competitor. Consequently no event of default has occurred as contemplated in clause 18.2-3, requiring the Vodafone Group to give notice to the company and the other shareholders for exercising their option to purchase the shareholding of the Vodafone Group in the company at par value. Accordingly, the Vodafone Group has not issued any notice pursuant to clause 18.2-3 of the SHA. Shri Dwarkadas further emphasized that clauses 17.2 and 18.8 of the SHA do not apply to sale of shares of and in the second respondent and only apply to sale of shares of and in the company. Thus the Vodafone Group has not contravened any of the terms of the SHA. Moreover, any dispute as to whether the Vodafone Group is acting in breach of the SHA must be referred to arbitration in accordance with clause 23.1 of the SHA, of which no mention has been deliberately made in the company petition. Shri Dwarkadas, while elaborating the terms of the SHA and the alleged acts of oppression in the affairs of the company has asserted that the subject matter of the company petition is the same as the subject matter of the SHA. Section 45 read with section 8 of the Act, 1996, mandatorily requires a judicial authority when seized of an action covered by an arbitration agreement referred to in section 44, to refer the parties to arbitration, as held by the Apex Court in P. Anand Gajapathi Raju v. PVG Raja [2000] 4 SCC 539, Kalpana Kothari v. Sudha Yadav [2002] 1 SCC 203. The CLB in similar circumstances relegated the parties for arbitration, in support of which reference has been made to the following cases :


Naveen Kedia v. Chennai Power Generation Ltd. [1999] 95 Comp. Cas. 640 (CLB)

Escorts Finance Ltd. v. G.R. Solvents & Allied Industries Ltd. [1999] 96 Comp. Cas. 3231 (CLB-New Delhi)

Bhadresh Kantilal Shah v. Magotteaux International [2002] 111 Comp. Cas. 220 (CLB)


The disputes raised in the company petition revolving around the interpretation of clauses 17.2, 18.2-3 and 18.8 of the SHA are purely contractual matters governed by the arbitration agreement and must necessarily be referred to arbitration. If the relevant clauses of the SHA are found to be breached, the arbitrator would provide remedies to the petitioner and the other non-defaulting shareholders, which are expressly provided in the SHA. The disputes involving violation of certain terms of the SHA, thereby the Articles of Association can be decided only by the arbitral form, having exclusive jurisdiction in the matter. Shri Dwarkadas pointed out that clause 23.1 prohibits the shareholders from commencing or maintaining any suit or legal proceedings concerning any matter agreed to be referred to in the SHA and further that the petitioner has filed the company petition in breach of the terms of the SHA. As the petitioner failed to act in good faith, it is not entitled for the reliefs claimed in the petition, in support of which learned Senior Counsel referred to Srikanta Datta Narasimharaja Wadiyar v. Sri Venkateswara Real Estate Enterprises (P.) Ltd. [1991] 72 Comp. Cas. 211 (Kar.). The construction of the SHA, which is the foundation of the rights of parties necessarily raises a question of law as held in Sir Chunilal V. Mehta & Sons Ltd. v. Century Spg. & Mfg. Co. Ltd. AIR 1962 SC 1314. The intention of the parties must be ascertained by giving effect to the bargain of the parties and from the words used in the contract, unless there is ambiguity, for which learned Senior Counsel referred to Central Bank of India Ltd. v. Hartford Fire Insurance Co. Ltd. AIR 1965 SC 1288. The SHA contained in clause 23.1 resolving any dispute arising out of the SHA by arbitration assumes the widest amplitude including without limitation any question as to the existence, validity or termination or scope of the arbitration agreement, for which he referred to Renusagar Power Co. Ltd. v. General Electric Co. AIR 1985 SC 1156. In the present case, clause 23.1 is unambiguous, according to which the disputes arising out of the SHA shall be resolved by arbitration and the governing law of the SHA as per clause 24.1 shall be the laws of India. The petitioner, second respondent and ninth respondent are parties to the SHA. The company need not be a party to the SHA, when the disputes are between the shareholders. The respondent No. 10 is made party to the company petition without claiming any remedy, for the mala fide purpose of attempting to avoid the arbitration agreement between inter alia the petitioner and second respondent. A party to an arbitration agreement cannot frustrate the agreement by merely joining third parties to the proceedings against whom no reliefs are claimed, as held in Cekop v. Asian Refractories Ltd. 73 CWN 192, Srivenkateswara Constructions v. Union of India AIR 1974 AP 278. The petitioner has adopted the ingenious devise of bringing in unnecessary parties including the sixth, seventh and eighth respondents, into the arena of dispute so as to defeat the SHA, which cannot change substance of the disputes before the CLB. In this connection, reference has been made to I.T.C. Ltd. v. Debts Recovery Appellate Tribunal [1998] 2 SCC 70 to show that mere clever drafting of the pleadings does not change substance of the dispute before the Court and Nagin Mansukhlal Dagli v. Haribhai Manibhai Patel AIR 1980 Bom. 123 to show that the Court must look at the real substance of the suit and not legal ingenuity in drafting the plaint, while determining the nature of the suit. In the present proceedings the disputes are between the shareholders, viz. the petitioner and second respondent and are in relation to the terms of the SHA. Therefore, the other respondents and reliefs claimed thereon are unnecessary which are made to frustrate the arbitration proceedings. Shri Dwarkadas, Senior Counsel, while concluding his arguments submitted that the interim order of this Bench made on a prima facie interpretation of the SHA is within the exclusive domain of the arbitrator and the CLB has no power to exercise its jurisdiction, but refer the parties to arbitration.


4. Shri Sarkar, Senior Counsel opposed the application on the following among other grounds :


(a) The company, respondent Nos. 3 to 8 and respondent No. 10, who are not parties to the SHA are parties to the proceedings before the CLB and reliefs have been claimed in relation to the affairs of the company against respondent Nos. 3 to 8 other than respondent No. 2, in which case the parties cannot be referred to arbitration. In this connection, reference is made to Sukanya Holdings (P.) Ltd. v. Jayesh H. Pandya [2003] 3 Comp. LJ. 681 (SC) and Bhadresh Kantilal Shah?s case (supra) to show that where the proceedings are commenced ?as to a matter? which lie outside the arbitration agreement, there is no question of application of section 8 of the Act, 1996 and further that the parties in both the legal proceedings and the arbitration agreement, should be common, which is one of the main requirements of section 45 of the Act, 1996.



(b) The entire subject matter of the company petition is not covered by the SHA. The petitioner has claimed reliefs against the various respondents, not being parties to the SHA, as they have acted in breach of the SHA and the Articles of Association of the Company. The respondent Nos. 6 to 8 have abetted acts with the object of depriving the petitioner of its rights under the SHA and the articles of association of the company, thereby acting in a manner oppressive to other shareholders of the company and causing prejudice to the interest of the company. There cannot be any bifurcation of the subject matter of an action before a judicial authority, as held by the Apex Court in Sukanya Holdings (P.) Ltd.?s case (supra).


(c) The CLB alone in exercise of its ample jurisdiction and very wide powers under section 402 can give appropriate directions under sections 397 and 398 for the regulation of the conduct of the company?s affairs, which confer statutory rights on shareholders. Section 397 is a special code by itself for granting relief to oppressed minority shareholders. The arbitrator is not vested with any jurisdiction to adjudicate the proceedings under sections 397 and 398 or to grant relief under section 402 or 403 of the Act. It would be against public policy for the proceedings under sections 397 and 398 to be referred to arbitration. By virtue of an agreement between the parties, it is not open for the parties to confer such powers to an arbitrator. Any dispute or matter which the arbitrator is competent or empowered to decide can only be referred to the arbitrator. Any function delegated to the court in terms of section 114 of the Transfer of Property Act cannot be allowed to be taken away by the arbitrator. Shri Sarkar to substantiate his claim, referred to the following decisions :


(i) Bennet Coleman & Co. v. Union of India [1977] 47 Comp. Cas. 92 (Bom.)

(ii) Debi Jhora Tea Co. Ltd. v. Barendra Krishna Bhowmick [1980] 50 Comp. Cas. 771 (Cal.)

(iii) Shankarlal Laxminarayan Rathi v. Udaysingh Dinkarrao Rajurkar AIR 1976 Bom. 237

(iv) Piyush Kanti Guha v. West Bengal Pharmaceutical & Phytochemical Development Corpn. Ltd. AIR 1982 Cal. 94

(v) Cosmosteels (P.) Ltd. v. Jairam Das Gupta AIR 1978 SC 375

(vi) Haryana Telecom Ltd. v. Sterlite Industries (India) Ltd. [1999] 5 SCC 688

(vii) Eastern Coils (P.) Ltd. v. Deb Prosad Ghosh [1999] 2 CLJ 349.

(d) The various decisions cited on behalf of the applicant are neither applicable to the facts and circumstances of the present case, nor support its claim and decisions of the CLB cited supra are no more good law in the light of the decision of the Apex Court in Sukanya Holdings (P.) Ltd.?s case (supra).


5. According to Shri Arvind P. Datar, Senior Counsel appearing for the ninth respondent supplemented by Counsel for respondent No. 10, the application is liable to be dismissed for the following reasons :


(a) The parties to the company petition are different from the parties to the SHA. As there is no commonality of parties, the disputes cannot be referred to arbitration as held in (i) Madras Refineries Ltd. v. Southern Petrochemicals Industries Corpn. Ltd. (Mad.) and (ii) H.G. Oomor Sait v. O. Aslam Sait 2001 (3) CTC 269 (Mad.).


(b) The dispute before the CLB in this case is the alleged breach of the SHA by the second respondent through respondent Nos. 3 to 5. This dispute cannot be adjudicated by the arbitral Tribunal, as the arbitrator has no power to pierce the corporate veil of respondent Nos. 3 to 5, as enunciated in Madras Refineries Ltd.?s case (supra).


(c) The entire subject matter of the company petition is not the subject of the SHA. Section 8 will apply only when the action brought in the matter and subject of the arbitration agreement are the same, in support of which reference has been made to the following decisions :


(i) Gaya Electric Supply Co. Ltd. v. State of Bihar AIR 1953 SC 182

(ii) Garden Finance Ltd. v. Prakash Industries Ltd. AIR 2002 Bom. 8

(iii) Bengal Jute Mill Co. Ltd. v. Lalchand Dugar AIR 1963 Cal. 405

(iv) Hind Mercantile Corpn. (P.) Ltd. v. J.H. Rayner & Co. Ltd. [1971] 41 Comp. Cas. 548 (Mad.)

(v) Sukanya Holdings (P.) Ltd.?s case (supra)

(d) The reliefs claimed in the company petition can only be granted by the CLB in exercise of its power under section 402 and not by the arbitral Tribunal.


6. I have considered the arguments both oral and written, of learned senior counsel for the petitioner and respondent Nos. 2, 9 and 10. The issues which arise for my consideration are :


(i) Whether the disputes raised in the company petition are arising out of or in connection with the SHA ?

(ii) Whether there is commonality of parties to the present proceedings and the SHA ?

(iii) Whether an arbitrator is capable of settling the disputes by appropriate reliefs ?


Before answering the issues before me, I think it fit, that certain material provisions of the Act, 1996 and relevant part of the SHA containing arbitration clause, in the light of which nature of the subject disputes has to be examined, must be borne in view. Section 8(1) provides that ?a judicial authority before which an action is brought in a matter which is the subject matter of an arbitration agreement shall, if a party so applies not later than when submitting his first statement on the substance of the dispute, refer the parties to arbitration.? A strict interpretation of the provisions of section 8(1) would indicate that only when the subject matter before a judicial authority is the same as covered in the agreement, then such judicial authority is bound to refer the parties to arbitration. Section 45 contemplates that a judicial authority must refer the parties to arbitration provided the following requirements are fulfilled :


(a) A judicial authority is seized of an action in the matter of which the parties have made an agreement for arbitration;

(b) One of the parties to the agreement makes a request for referring the parties to arbitration; and

(c) The judicial authority does not find that the arbitration agreement is null and void, inoperative or incapable of being performed.


The main acts of oppression alleged in the company petition are in relation to the violation of clauses 17.2, 18.2-3 and 18.8 of the SHA. Clause 23.1 containing provisions for resolving the disputes by arbitration reads as under :


?Any dispute arising out of or in connection with this Agreement including without limitation, any question regarding its existence, validity or termination which cannot be resolved pursuant to clause 16, shall be referred to and finally resolved by arbitration in accordance with the Rules of Arbitration of the International Chamber of Commerce which rules are deemed to be incorporated by reference to this clause. Each entitled shareholder may appoint an arbitrator at its choice and the arbitrators so appointed (?First Arbitrators?) shall then jointly appoint an arbitrator within 10 days of appointment of the First Arbitrators who shall arbitrate the dispute to the exclusion of the First Arbitrators. The venue of the arbitration shall be in London. This clause 23 and the arbitration agreement contained herein among the shareholders and the procedure of the arbitration will be governed by the laws of England and the awards passed by the arbitrator shall be enforceable as a foreign award under the Convention for Recognition and Enforcement of Foreign Arbitral Awards dated 10th June, 1958 (?the New York Convention?) and the Foreign Awards (Recognition and Enforcement) Act, 1961. An award passed by the arbitrator shall be final and binding and the Entitled Shareholders agree not to appeal to any Court against the award or to commence or entertain any suit or legal proceedings concerning any matter agreed to be referred to arbitration or in respect of the award except for the purpose of enforcement of the award.?


Having considered the relevant provisions, the acts of oppression raised in the company petition in a nutshell and the arbitration clause, I shall now



proceed to consider the contentious issues involved in the present application.

Issue No. (i) :


7. The main grievance of the petitioner as borne out by the company petition is that the Vodafone group has entered into a sale and purchase agreement for sale of the Vodafone group shareholding in the second respondent in favour of the sixth respondent, which is a competitor in business of the company, contrary to clauses 17.2, 18.2-3 and 18.8 of the SHA depriving the petitioner to exercise its option to purchase all the shares of the Vodafone group in the company at par value, pursuant to clause 18.3.1 of the SHA. The petition in entirety elaborates the terms of the SHA and the Articles of Association of the Company, relationship among the respondents, correspondence between the RPG Group and the Vodafone Group resulting in the proposal for sale of the Vodafone group shareholding in the second respondent in favour of the sixth respondent, said to be in violation of the SHA etc. Apart from these allegations, which were all directly arising out of the SHA, I do not find any other substantial acts of oppression and mismanagement alleged in the company petition save that respondent Nos. 7 and 8 have aided and abetted the Vodafone group and respondent No. 6 to act against the SHA. At this juncture, it is sufficient to refer to the averments of the petitioner made in paragraph 30 at page 45 of the petition to the effect that ?respondents 2 to 5 are acting in breach of the Shareholders Agreement of August 19, 1995, as amended from time to time and/or the Articles of Association of the Company as per particulars? . . . . stated through out the company petition thereon. In other words, the petitioner admits that the matters complained of in the company petition principally, arise out of the SHA. Therefore, there is no need for any bifurcation of the subject matter of the action before the CLB, in which case the decision in Sukanya Holdings (P.) Ltd.?s case (supra) does come to the aid of the petitioner. Thus, there is no doubt that the entire foundation of the petition is on the SHA and there is substance in the arguments of Shri Dwarkadas, learned Senior Counsel for the applicant that the matters agitated in the company petition are arising out of and in connection with the SHA. Accordingly, this issue is answered in the affirmative.


Issue No. (ii)


8. The SHA has been made among the second respondent, the petitioner and the ninth respondent. The Company is not a party to SHA. It is on record that the SHA was supplemented on three occasions, the last one being on 31-7-2001. By virtue of the Agreement dated 31-7-2001 (Annexure A-5), the second respondent, the ninth respondent, the petitioner and the company made amendments to certain terms of the SHA. Thus, even though the company is not a party initially to the SHA, yet, later through the Supplementary Agreement (Annexure A-5), the company adopted

the SHA and as such in my view the SHA is binding on the company. Moreover, pursuant to and in accordance with the SHA as amended and to give effect thereon, the memorandum and articles of the company were amended from time to time as borne by paragraphs 6 and 9 of the company petition. Also in the words of the respondent No. 2 at paragraph 10 of the written submissions, it is undoubtedly clear that ?. . . the Articles of Association merely verbatim, the clauses of the SHA?. Thus admittedly the terms of the SHA having been incorporated in the memorandum and articles of association of the company, would bind the company. Even though there are 10 parties before me, the main parties, are, the petitioner who has filed the company petition alleging oppression, the second respondent against which the acts of oppression are alleged and the company in the affairs of which the acts of oppression are alleged. It is on record that the petitioner, the second respondent and the ninth respondent are parties to the SHA. It is already found that the company is bound by the SHA. The respondent Nos. 3 to 5 belonging to the Vodafone group are parties to the company petition, which are in my view not formal parties, more so, when the second respondent forming part of the Vodafone group is a party to the company petition. Similarly, respondent Nos. 7 and 8, directors of the company, are made parties to the company petition on the ground that they have abetted the Vodafone group and the sixth respondent to act in the manner oppressive to the petitioner, but no prima face case has been made out against them either in the company petition or at the time of arguing the application. I do not find any reason for impleadment of respondent Nos. 9 and 10, being shareholders of the company as parties to the company petition, against whom no reliefs have been claimed. The petitioner cannot frustrate the SHA, as rightly pointed out by Shri Dwarkadas, by merely joining third parties, not being formal parties to the present proceedings as enunciated in H.G. Oomer Sait?s case (supra). The reliefs for the alleged acts of oppression and mismanagement, when established, can be granted even in the absence of the sixth respondent and therefore, the sixth respondent, in my view, is not a formal party to the company petition. In these circumstances, the main parties to the company petition are found to be the parties to the SHA. I, therefore, find commonality of the main parties to the present proceedings and the SHA.

Issue No. (iii)


9. In regard to the plea of Shri Sarkar that an arbitrator is not vested with any jurisdiction to adjudicate the proceedings under section 397/398 which confer statutory rights on shareholders or grant relief under section 402/403 of the Act, or any reference of the proceedings under section 397/398 to an arbitrator would be against public policy, it is no doubt that the CLB has very wide powers under section 402/403 of the Act to give appropriate directions regulating the conduct of the company?s affairs. Nevertheless, granting of remedies depends on the facts and circumstances of a particular case and no uniform yardstick can be prescribed. The CLB had on an earlier occasion considered these issues in Magotteaux International?s case (supra) and came to the conclusion by referring to the decision in Gurnir Singh Gill v. Saz International (P.) Ltd. [1987] 62 Comp. Cas. 197 (Delhi) that even in a section 397/398 proceeding, if the party applying for referring the disputes to arbitration is able to establish that there are bona fide disputes arising out of an arbitration agreement and that the arbitrator could settle the disputes by appropriate reliefs, then, the CLB will have to refer the parties to arbitration in terms of section 8 or section 45 of the Act, 1996, as the case may be. The main grievance of the petitioner is that the Vodafone group failed to offer the sharehodling of the second respondent in the company to the petitioner, in violation of clauses 17.2, 18.2.3 and 18.8 of the SHA. The SHA provided adequate safeguards and remedy in the event of breach of any of its terms. Therefore, the apprehension of the petitioner as well as the respondent Nos. 9 and 10 is baseless. In regard to the claim of Shri Sarkar that the provisions of section 397 being a special code by itself conferring statutory rights on shareholders cannot be delegated to an arbitrator, it is observed that the CLB in Naveen Kedia?s case (supra) and in Megotteaux International?s case (supra) taken a view, by making a reference to the decision of the Apex Court that merely because the CLB has been vested with exclusive jurisdiction under section 402, it does not mean that the provisions of section 45 of the Act, 1996 are not applicable to the proceedings before the CLB, provided the requirements of section 45 are met. In the present case, there is no doubt that the CLB is seized of a section 397/398 proceeding initiated by the petitioner in the affairs of the company, which arises out of the SHA containing arbitration clause to refer the parties to arb

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itration and that the second respondent being one of the parties to the SHA, has made this application for referring the parties to arbitration. It is not the case of either of the parties that the SHA is null and void, inoperative or incapable of being performed. I am, therefore, of the view that the requirements of section 45 of the Act, 1996 are found to be fulfilled. The contentions of Shri Sarkar and Shri Datar that the present disputes cannot be settled by the arbitral Tribunal as the arbitrator has no power to pierce the corporate veil of respondent Nos. 3 to 5 should be considered in the light of the specific averments contained in paragraph 13 at page 36 of the company petition, which runs as under : ?The respondent Nos. 2 to 5 constitute a single economic entity and are different limbs and/or divisions of one organization, viz., the Vodafone group. The respondent No. 2 is, at present, the investment vehicle of Vodafone group and/or the respondent Nos. 4 and 5 for the purpose of carrying on business of the company in accordance with the shareholders agreement. The respondent Nos. 2 and 3 are the alter ego of respondent Nos. 4 and 5 and the respondent No. 2, in reality, represents the investment and interest of Vodafone group in his company. . . .? It is, therefore, free from doubt that the third respondent is holding company of the second respondent. The respondents 2 and 3 are under the control of the respondents 4 and 5. In these circumstances, the question of piercing the corporate veil of respondents 3 to 5 does not arise and therefore, the decision in Madras Refineries Ltd.?s case (supra) relied on by Shri Datar is not applicable to the facts and circumstances of the present case. The argument of Shri Sarkar that various decisions of the CLB cited on behalf of the applicant are no more good law in the light of the decision in Sukanya Holdings (P.) Ltd.?s case (supra) does not hold good, in view of the law laid down by the Apex Court that there cannot be any bifurcation of the subject matter of an action before a judicial authority and, therefore, the said decision, in my view, has no application to the facts and circumstances of the present case. Against this background, it is beyond doubt that appropriate remedy can be granted to the petitioner and other non-defaulting shareholders which are expressly provided in the SHA, by an arbitrator provided the relevant terms of the SHA are found to be breached by the Vodafone group. This issue is answered accordingly. Having found all the three issues in the affirmative and the requirements of section 45 of the Act, 1996 are duly met, the CLB is obliged to proceed in accordance with the mandatory provisions of section 45 and refer the parties to arbitration, as held by the CLB in Naveen Kedia?s case (supra) and Magotteaux International?s case (supra). Accordingly, I am inclined to refer the parties to arbitration in accordance with the Rules of Arbitration of the International Chamber of Commerce as provided in clause 23.1 of the SHA. Ordered accordingly. In these circumstances, the interim orders made by this Bench stand vacated. The application is disposed of in these terms.
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