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



Punita Khatter v/s Explorers Travels & Tours Private Limited

    C.A. No. 49/C-1/2016 in C.P. No. 03/ND/2016

    Decided On, 21 November 2016

    At, National Company Law Tribunal New Delhi

    By, THE HONOURABLE MR. MAHARAJ KRISHAN HANJURA
    By, JUDICIAL MEMBER & THE HONOURABLE MR. R. VARADHARAJAN
    By, JUDICIAL MEMBER

    For the Appellant: Megha Agarwal, Advocate. For the Respondent: R1, Vivek Malik, R2 to R4, Nitin Gupta, Advocates.



Judgment Text

1. On 01.10.2015 Ms. Punita Khattar, the petitioner filed the instant company petition before the Company Law Board New Delhi under section 397, 398, 402, 403 and 237 of the Companies Act 1956 read with sections 241 and 242 of the Companies Act, 2013. Respondent No. 1 is the Company bearing the name M/s. Explorers Travels and Tours Pvt. Ltd. and ors. During the pendency of the company petition Respondent Nos. 2 and 3 filed an application under section 8 of the Arbitration and Conciliation Act 1996. Notice of the application was issued to the petitioner and the petitioner filed the reply to the said application. The respondents filed their rejoinder where after the application was posted for arguments.

2. Heard and Considered.

3. The background facts germane to the decision of the application for referring the dispute between the parties for arbitration in terms of section 8 of the Act are that the company petition is a dressed up petition and the consideration of the subject matter of the dispute between the parties is within the exclusive domain and power of the Arbitrator on the strength of Article 87 of the Articles of Association of the respondent company. The Petitioner is misusing this forum by making disputes inter-se the parties or disputes which are in personam as issues of management and oppression with a mala fide intention to avoid the arbitration proceedings initiated by the Respondent Nos. 2-4 in terms of a legal notice dated 25.09.2015 and, therefore, this forum may direct that the dispute be referred to arbitration on the face of the Arbitration Agreement entered into between the parties as stipulated under Article 87 of the Articles of Association of the respondent company. The respondent company is a closely held company where the principles of partnership had to be applied between the petitioner and the respondent Nos. 2, 3 and 4 and now the trust between them is completely lost. The arbitration clause renders the petition filed under section 397 and 398 as not maintainable. It has been filed with a mala fide intention. It is vexatious and has been devised to avoid the arbitration between the parties. In the premises the indulgence of the Board (as it then was) has been craved to refer the parties to arbitration and to pass such order/orders as are just and expedient in the facts and of the case.

4. In her reply the petitioner has resisted and controverted the petition of the respondents inter alia on the grounds that the respondents have concealed material facts from this forum in order to portray the disputes as having arisen between the parties as disputes in personam so that the same are made amenable to arbitration. The nature of disputes that arose between the parties has necessitated the filing of the company petition. These are not capable of adjudication by any arbitral tribunal as they are disputes in rem which are beyond the scope of arbitration as has been held in a catena of judgments. The present petition relates to oppression and mismanagement by the majority shareholders vis-a-vis the affairs of the respondent No. 1 company and have a direct bearing on the rights and/or interests of the shareholders including the petitioner in the capacity as the members of the respondent No. 1 company. The majority shareholders are acting in concert and deliberately creating the to oppress and harass the petitioner, being a minority shareholder, and making it difficult for the petitioner to perform her obligations as the managing director of the respondent No. 1 company. The mere existence of an arbitration agreement between the parties per-se is not sufficient to attract the provisions section 8 of the Arbitration and Conciliation Act of 1996. In view of section 9 of the Companies Act 1956(corresponding to Section 6 of the Companies Act 2013) Section 397/398 of the companies Act 1956 which cover the present dispute between the parties shall have an overriding effect on Article 87 of Articles of Association relied upon by the applicants. The entire edifice of the present application is demolished on the strength of the above provision of law. The petitioner has further pleaded that she has highlighted some specific instances of oppression and mismanagement on the part of the majority shareholders in the main petition. In the end the petitioner has sought the dismissal of the application by imposing costs against the respondents.

5. In their rejoinder the respondents have vehemently pleaded and reiterated that the disputes between the parties are disputes in personam and the petitioner is misusing this forum by projecting the issues raised in the petition as acts of mismanagement and oppression. The dispute between the parties is amenable to arbitration as is apparent from the nature of the relief claimed by the petitioner in the petition. In view of the arbitration clause contained in Article of Association of the respondent No. 1 company the present petition is not maintainable. The purpose of filing the present application is to seek direction from this Hon'ble Tribunal to refer dispute to arbitration. It has been further pleaded that it is denied that the issues concerning the respondent No. 1 company that were raised by the petitioner in her legal notice dated 27.09.2015 were side-lined and the sole focus of the reply dated 25.09.2015 was making extremely personal and baseless allegation against the petitioner in order to intimidate her into submission. The petitioner was not inclined to resolve the dispute through arbitrator does not mean that involving of arbitration clause was incorrect. It has been added that it is denied that no arbitration agreement can vest an arbitral tribunal with the powers to grant the kind of reliefs against oppression and mismanagement that this Hon'ble Board might provide as alleged. The process of winding up of a company in accordance with the provision of the Companies Act, 1956 is different and it cannot be equated with the provisions of 397/398. The Hon'ble Supreme Court in the case ofHaryana Telecom Ltd. v. Sterlite Industries (India) Ltd. 1993 (3) SCR 861was not dealing with the case where the issue was whether the arbitrator could decide upon a matter where the parties agreed to case an arbitration agreement in the Articles of Association of the Company. The dispute raised by a minority shareholder, seeking to enforce certain rights which are personal in nature could be referred to arbitration.

6. It is denied that the provisions of the Arbitration and Conciliation Act, 1996 are not applicable in the present case as alleged or that the disputes as have arisen between the parties relate to oppression and mismanagement as alleged or at all. The order passed by the Hon'ble Delhi High Court in the case ofO.P. Gupta v. SGF (Pvt.) Ltd. (1977) 47 Comp Cas 297 (Del)is not applicable in the present case. The disputes here are the disputes in personam and not in rem. The said judgment of the Hon'ble High Court of Delhi is per incuriam as it did not consider the fact that if 'subject matter' before the Hon'ble Company Law Board would be arbitrable then in such case Hon'ble Company Law Board would be duty bound to refer the matter for arbitration. Pursuant to invocation of arbitration clause, the answering respondents have initiated proceedings under Section 9 of the Arbitration and Conciliation Act, 1996 to safeguard their interest and have also preferred an application under the provisions of Section 11 on account of failure of the petitioner to appoint her nominee arbitrator. The steps taken by the answering respondents clearly demonstrate that they are ready and willing to get the disputes adjudicated through the process of arbitration.

7. The crux of the arguments advanced by the learned counsel for the Respondents is that the petition of the petitioner is not maintainable for the simple reason that in terms of article 87 of the Article of Association any dispute between the parties had to be referred to the arbitrator. In view of this arbitration clause the petition is mala fide and vexatious and cannot proceed in this forum. The petition of the petitioner is a dressed up petition. The dispute between the parties is basically related to distribution and sharing of assets of Respondent No. 1 Company. The right of the petitioner is a right in personam and not a right in rem so on and so forth. The learned counsel for the petitioner has on the other hand contended that the arguments of the learned counsel for Res No. 2 and 3 are suspicious ones. They are devoid of merit and do not have any substance in them. He has further argued that the NCLT is vested with an amplitude of powers and it is the NCLT only which has the domain and power to hear and determine the company petition. He has proceeded to argue that the instances as quoted by him in his petition are clear acts of oppression and mismanagement which can be tried by the tribunal only and not by the arbitrator.

8. The moot question that arises for determination herein this application filed under section 8 of Arbitration and Conciliation Act 1996 is whether the dispute raised in the company petition filed under sections 397, 398, 402 and 403 of the Company Act can be referred to arbitration in accordance with the agreement between the parties. In order to find out an answer to this question it will be imperative to reproduce article 87 of the Articles of Association of the Respondent company verbatim et literatim:

"All disputes respecting the interpretation to these Articles or among the shareholders inter-se or the shareholder vis--vis the Director or the Managing Director shall be referred to Arbitrators, one to be nominated by each disputant and their decision shall be binding on the parties concerned. In case the arbitrator are unable to decide amongst themselves on the point or points referred to them they shall refer them to any umpire under the Indian Arbitration Act, 1940."

9. Learned counsel for the parties have placed reliance on a number of judgments to canvass their respective contentions. Almost all these judgments have been cited in the law laid down by the Hon'ble Chairman, Company Law Board, New Delhi inC.A. bearing No. 170/C.1/2014 filed in CP No. 109(ND)/2014 titled as Mr. Christianus Muller and Ors v. M/s. A and B. Braid And Rope Company Pvt. Ltd. and ors.Therefore, it will be profitable to extract the relevant excerpts of the said order that have a direct bearing and nexus on the matter under consideration and these are as under:

13. "A short question of law which emerges for determination in this application filed under section 8 of the Arbitration Act is:

'Whether the dispute raised in a properly filed petition under sections 397, 398, 402, and 403 of the Companies Act can be referred to arbitration in accordance with the agreement between the parties'

The proposition of law raised in this case is no longer res-integra. It would however be profitable to peruse sections 397, 398, 402 and 403 of the Companies Act so as to understand the nature of power enjoyed by the Company Law Board and the same is as follows:-

397. Application to Company Law Board for relief in cases of oppression:- (1) Any members of a company who complain that the affairs of the company are being conducted in a manner prejudicial to public interest or in a manner oppressive to any member or members (including any one or more of themselves) may apply to the Company Law Board for an order under this section, provided such members have a right so to apply in virtue of section 399.

(2) If on any application under sub-section (1), the court is of opinion-

(a) that the company's affairs are being conducted in a manner prejudicial to public interest or in a manner oppressive to any member or members; and

(b) that to wind up the company would unfairly prejudice such member or members, but that otherwise the facts would justify and making of a winding-up order on the ground that it was just and equitable that the company should be would up; the Company Law Board may, with a view to bringing to an end the matters complained of, make such order as it thinks fit.

398. Application to Company Law Board for relief in cases of mismanagement :- (1) Any members of a company who complain-

(a) that the affairs of the company are being conducted in a manner prejudicial to public interest or in a manner prejudicial to the interests of the company; or

(b) that a material change not being a change brought about by, or in the interests of, any creditors including debentures holders, or any class of shareholders, of the company has taken place in the management or control of the company, whether by an alteration in its Board of directors, or of its managing agent or secretaries and treasurers or manager, or in the constitution or control of the firm or body corporate acting as its managing agent or secretaries and treasurers, or in the ownership of the company's shares, or if it has no share capital, in its membership, or in any other manner whatsoever, and that by reason of such change, it is likely that the affairs of the company will be conducted in a manner prejudicial to public interest or in a manner prejudicial to the interests of the company; may apply to the Company Law Board for an order under this section, provided such members have a right so to apply in virtue of section 399.

(2) If, on any application under sub-section (1), the Company Law Board is of opinion that the affairs of the company are being conducted as aforesaid or that by reason of any material change as aforesaid in the management or control of the company, it is likely that the affairs of the company will be conducted as aforesaid, the Company Law Board may, with view to bringing to an end or preventing the matters complained or apprehended, make such order as it thinks fit.

402. Powers of Company Law Board on application under section 397 or 398. - Without prejudice to the generality of the powers of the Company Law Board under section 397 or 398, any order under either section may provide for-

(a) The regulation of the conduct of the company's affairs in future;

(b) the purchase of the shares or interests of any members of the company by other members thereof or by the company;

(c) in the case of a purchase of its shares by the company as aforesaid, the consequent reduction of its share capital;

(d) the termination, setting aside or modification of any agreement, howsoever arrived at, between the company on the one hand, and any of the following persons, on the other, namely:-

I. the managing director,

II. any other director,

III. the managing agent,

IV. the secretaries and treasurers, and

V. the manager, upon such terms and conditions as may, in the opinion of the Company Law Board be just and equitable in all the of the case;

(e) the termination, setting aside or modification of any agreement between the company and any person not referred to in clause (d), provided that no such agreement shall be terminated, set aside or modified except after due notice to the party concerned and provided further that no such agreement shall be modified except after obtaining the consent of the party concerned;

(f) the setting aside of any transfer, delivery of goods, payment, execution or other act relating to property made or done by or against the company within three months before the date of the application under section 397 or 398, which would, if made or done by or against an individual, be deemed in his insolvency to be a fraudulent preference;

(g) any other matter for which in the opinion of the Company Law Board it is just and equitable that provision should be made.

403. Interim order by Company Law Board. - Pending the making by it of a final order under section 397 or 398, as the case may be, Company Law Board may, on the application of any party to the proceeding, make any interim order which it thinks fir for regulating the conduct of the company's affairs, upon such terms and conditions as appear to it to be just and equitable.

14. A bare perusal of aforesaid provision would reveal that Company Law Board enjoys wide powers to adopt correctional mechanism where the affairs of the company are being conducted in a manner prejudicial to interest of the General Public or in a manner oppressive to any Member(s) and/or shareholders of the company. A close scrutiny of section 402 would show that Company Law Board is clothed with wide powers for regulating the affairs of the company and it is competent to terminate, set-aside or modify any agreement arrive at between the company on the one hand and any of the person like Managing Director and the other Director or the Manager on the other on such terms and conditions as may appear to be just and equitable in the of that case. It has also wide power to issue interim order. It is thus evident that the nature of powers enjoyed by the Company Law Board is alien to the powers of a Arbitrator.

15. Their lordship of the Hon'ble Supreme Court has held in categorical terms in the case ofCosmosteels Private Ltd. v. Jairam Das Gupta and Ors (1978) 48 Comp Case 312that the scheme of section 397, 398 and 402 constitute a complete code in itself which is aimed at granting relief to a complainant who is a victim of 'mismanagement' or 'oppression' including minority shareholders. It has further been held by Hon'ble Supreme Court in the case of Haryana Telecom Ltd. (Supra) that the relief or winding up would not be covered by section 8 of Arbitration Act and an Arbitrator appointed by the consent of the parties for that purpose would not be competent to do so. Some pertinent observations made by Hon'ble Supreme Court reads as under:-

"The claim in a petition for winding up is not for money. The petition filed under the Companies Act would be to the effect, in a matter like this that the company has become commercially insolvent and, therefore, should be wound up. The power to order winding up of a company is contained under the companies Act and is conferred on the court. An arbitrator, notwithstanding any agreement between the parties would have no jurisdiction to order winding up of a company. The matter which is pending before the High Court in which the application was filed by the petitioner herein was relating to winding up of the company. That could obviously not be referred A to the arbitration and, therefore, the High Court, in our opinion was right in rejecting the application. "

16. Similar view has been expressed by Delhi High Court in the case ofO.P. Gupta v. Sffly General Finance (P) Ltd. and ors. (1977) 47 Comp case 279.It has been held that no Arbitrator can possibly give relief to an aggrieved party which is postulated by section 397 and 398 and he would be unable to pass any order under section 402 and 403 of the Companies Act. It has further been held in the context of section 9(b) of the Companies Act that any provision in any memorandum, article or agreement to the extent of repugnancy to the Companies Act would be void. In the present case learned counsel for the applicant-respondent placed reliance on Article 18 of the JV Agreement which appears to be repugnant to the provision of section 397 and 398 of the Companies Act when the ratio of the judgment is applied to the facts of the case in hand. The Delhi High Court went on to observe that such an article providing for arbitration would be void. It has been suggested that a repugnancy of such a nature can be resolved by holding that such an article is wholly void when tested on the touch stone of section 9(b) of the Companies Act or that by declaring that the articles does not apply when the proceedings under sections 397 and 398 are initiated before the Company Law Board. In any case article 18 cannot operate for the purpose of staying the proceedings in a properly instituted petition under section 397 and 398 read with 402 and 103 of the Companies Act. Similar view has been expressed in the case ofSurindra Kumar Dhawan v. R. Vir and Ors. (1977) 47 Comp case 276andManavendra Chitnis and Another v. Leela Chitnis Studios P. Ltd., (1985) 58 Comp case 113.

17. The aforesaid judgments rendered by Hon'ble Supreme Court and Delhi High Court have been followed and applied by a Division Bench of the Punjab and Haryana High Court in the case ofSudarshan Chopra And Ors. v. Company Law Board And Ors. 2004 52 SCL 429 Punj Har.The view of the Division Bench stands concluded in the following para which reads thus:-

"61. As already noted above, the relief that has been sought by Group B cannot be granted by an Arbitrator and is available only under the provisions of Sections 397 and 398 read with Sections 402 and 403 from the Company Law Board. Moreover, the statutory jurisdiction of the Company Law Board and the right of appeal against its orders cannot be ousted even by consent of parties. In this view of the matter, Mr. Aggarwal 's argument based on the analogy of the Specific Relief Act and the Partnership Act and the judgments relied upon by him can have absolutely no applicability".

18. An elaborate and comprehensive analysis of the aforesaid provisions has been made by Bombay High Court in the case ofRakesh Malhotra v. Rajinder Kumar Malhotra (2015) 192 Comp Cas 516 (Bom)taking on the view taken by Hon'ble Supreme Court in case ofBooz-Allen and Hamilton Inc v. SBI Home Finance Ltd. and Ors (2011) 5 SCC 532, the question examined by the learned single judge of Bombay High Court is whether the disputes are capable of settlement by arbitration or by their nature fall within the domain of a public forum. A distinction has thus been drawn opining that an arbitrator is a private person to settle the disputes whereas courts like Company Law Board are a public forum. Another aspect highlighted by the Bombay High Court again based on the judgment rendered in the case of Booz Allen and Hamilton Inc. (Supra) is distinction in law between right in rem and the right in personam. The following pertinent paras from the judgment of Hon'ble Supreme Court have direct bearing on the issue before this Board which are as under:-

"The Arbitral Tribunals are private for-a chosen voluntarily by the parties to the dispute, to adjudicate their disputes in place of courts and tribunals which are public for a constituted under the laws of the country. Every civil or commercial dispute, either contractual or non-contractual, which can be decided by a court, is in principle capable of being adjudicated and resolved by arbitration unless the jurisdiction of the Arbitral Tribunals is excluded either expressly or by necessary implication. Adjudication of certain categories of proceedings are reserved by the legislature exclusively for public for a as a matter of public policy. Certain other categories of cases, though not expressly reserved for adjudication by public for a (courts and tribunals), may be necessary implication stand excluded from the purview of private for a. Consequently, where the cause/dispute are in arbitrable, the court where a suit is pending, will refuse to refer the parties to arbitration, under Section 8 of the Act, even if the parties might have agreed upon arbitration as the forum for settlement of such disputes.

The well-recognised examples of non-arbitrable disputes are: (i) disputes relating to rights and liabilities which give rise to or arise out of criminal offences; (ii) matrimonial disputes relating to divorce, judicial separation, restitution of conjugal rights, child custody; (iii) guardianship matters; (iv) insolvency and winding-up matters; (v) testamentary matters (grant of probate, letters of administration and succession certificate); and (vi) eviction or tenancy matters governed by special statutes where the tenant enjoys statutory protection against eviction and only the specified courts are conferred jurisdiction to grant eviction or decide the disputes.

It may be noticed that the cases referred to above relate to actions in rem. A right in rem is a right exercisable against the world at large, as contrasted from a right in personam which is an interest protected solely against specific individuals: Actions in personam refer to actions determining the rights and interests of the parties themselves in the subject-matter of the case, whereas actions in rem refer to actions determining the title to property and the rights of the parties, not merely among themselves but also against all persons at any time claiming an interest in that property. Correspondingly, a judgment in personam refers to a judgment against a person as distinguished from a judgment against a thing, right or status and a judgment in rem refers to a judgment that determines the status or condition of property which operates directly on the property itself. (Vide Black's Law Dictionary.)

Generally and traditionally all disputes relating to rights in personam are considered to be amenable to arbitration; and all disputes relating to rights in rem are required to be adjudicated by courts and public tribunals, being unsuited for private arbitration. This is not however a rigid or inflexible rule. Disputes relating to subordinate rights in personam arising from rights in rem have always been considered to be arbitrable.

The Act does not specifically exclude any category of disputes as being not arbitrable. Sections 34(2)(b) and 48(2) of the Act however make it clear that an arbitral award will be set aside if the court finds that " the subject-matter of the dispute is not capable of settlement by arbitration under the law for the time being in force ".

Russell on Arbitration (22nd Edn.) observed thus (p. 28, Para 2.007):

"Not all matters are capable of being referred to arbitration. As a matter of English law certain matters are reserved for the court alone and if a tribunal purports to deal with them the resulting award will be unenforceable. These include matters where the type of remedy required is not one which an Arbitral Tribunal is empowered to give. "

The subsequent edition of Russell (23rd Edn., p. 470 Para 8.043) merely observes that English law does recognize that there are matters which cannot be decided by means of arbitration. Mustill and Boyd in their Law and Practices of Commercial Arbitration in England (2nd Edn., 1989), have observed thus:

"In practise therefore, the question has not been whether a particular dispute is capable of settlement by arbitration, but whether, it ought to be referred to arbitration or whether it has given rise to an enforceable award. No doubt for this reason, English law has never arrived at a general theory for distinguishing those disputes which may be settled by arbitration from those which may not...."

19. Thus Bombay High Court followed the rationale of public and private for a apparently, keeping in view the nature of rights involved for adjudication in a petition filed under section 397 and 398 of the Companies Act. Such disputes touch upon the larger public interest and status of a company. The right are determined by the judicial forum which results into a judgment in rem. These factors bring the disputes out of the purview of arbitrability.

20. The High Court further held that the types of reliefs which an Arbitrator can award are limited by consideration of public policy and by the fact that he is appointed by the parties and not by the State. For example an Arbitrator cannot impose a fine or a term of imprisonment, convict a person for contempt or issue a writ of subpoena. It cannot also make an award which is binding on third party or affects the public at large. An Arbitrator would not enjoy any jurisdiction to bind anyone else by a decision on whether a patent is valid, for no one else has mandated him to make such a decision.

21. The Bombay High Court also placed reliance on its earlier judgment rendered in the case ofBennet Coleman and Co. v. Union of India and Ors. (1977) 47 cas 92.With regard to the jurisdiction of the Company Law Board for issuing various orders under section 402 it has been held that under section 402 the powers of the Company Law Board are wide enough to resort to non-corporate management and to supplant corporate management in a whole or in part. The Company Law Board is clothed with the powers for the regulation of the company's future affairs keeping in view the previous oppression and mismanagement. The Hon'ble Supreme Court has concluded that no purpose would be served by making reference to Arbitrator because it was difficult to see that a narrowly tailored arbitral proceedings would be sufficient in face of Company Law Board plenary and expansive powers which are sufficient to redress and grant the far-reaching relieves under section 397 and 398.

22. The other proposition on law culled out from the judgment of the Hon'ble Supreme Court inSukanya Holdings (P) Ltd. v. Jayesh H. Pandya (2003) 5 SSC 531by the Bombay High Court is to affirm that a bifurcation of a cause of action is impermissible procedure beyond the contemplation of the Arbitration Act. Accordingly it has been held that where the petition under section 397 and 398 of the Companies Act has been filed by seeking reliefs some of which invite a judgment in rem and other are in personam then it is not possible or permissible to sever one from the other and disassemble such a petition. The basic rationale has been accepted by Bombay High Court in para 124(a) which is as under:-

"(a) As to whether the disputes in a petition properly brought under sections 397 and 398 read with Section 402 of the Companies Act, 1956 can be referred to arbitration, the answer is no, subject to the caveat that I have noted regarding a mala fide, vexatious or oppressive petition and one that is merely 'dressing up' to avoid an arbitration clause. "

23. It is pertinent to mention that against the judgment of Bombay High Court in the case of Rakesh Malhotra (Supra) a special leave to appeal bearing No. (c) 2457224579/2014 has been filed. Leave has been granted by Hon'ble Supreme Court on 10.9.2014 and it has expressly been stated that Wostay. The matter may proceed before the Company Law Board in accordance with law.'

24. In view of the overwhelming authority of Punjab and Haryana High Court, Delhi High Court and the Bombay High Court it is not possible to accept the submission made by Ld. Counsel Applicant seeking reference of dispute raised in the company petition to Arbitrator by acting on article 18 of the JV agreement dated 18.9.2001.

25. I may nevertheless refer to the submissions made by Ld. Counsel for the applicant in support of the application for reference under section 8 of the Arbitration Act. Learned counsel has argued that the whole case of non-applicant-petitioner is founded on the breach of JV Agreement and therefore the dispute becomes arbitrable as per the ratio of the judgment in Vijay Sikhri's case. The arguments look attractive at the first blush but when examined closely I find that it lacks substance. A perusal of para 22 of the petition which contains prayer for various relict reliefs would show that the petitioners have prayer for restoration of the shareholding of the petitioner, reinstatement of the Petitioners as directors and staying diversion of business/clients of respondent No. 1 company to a related party Respondent No. 5 - Ayushman Ropes and Tapes Pvt. Ltd. All such relief would fall within the jurisdiction of the Company Law Board and are founded on 'oppression and mismanagement'. It has flavour of public interest and the rights of parties are not right in personam. In any case the jurisdiction of Company Law Board cannot be excluded by a clause in an agreement between the parties including provision of arbitration.

26. The other argument advanced by Ld. Counsel equally lacks merit. It emerges from para 18 of the judgment of Hon'ble Supreme Court rendered in the case ofM/S. Everest Holding Ltd. v. Shyam Kumar Shrivastava and Ors. (2008) 16 SCC 774In para 18 of the judgment Hon'ble Supreme Court has observed that Arbitrator can find out and adjudicate as to whether or not a company is functional and if it was not functional then he could always find out the nature and status of its assets and can also issue directions and pass orders regarding dues and liabilities and also for taking recourse to appropriate remedy. The aforesaid observations were made in the teeth of the view taken by Hon'ble Supreme Court in the case of Haryana Telecom Ltd. (Supra) that Arbitrator would have no power to order for winding up of a company for which a sole for a has been provided by the Companies Act. I do not think that para 18 of the judgment of the Supreme Court advances the case of applicant-petitioner. It cannot be concluded that arbitrator enjoys all those powers which are vested in a CLB under section 397, 398, 402 and 403 of the Companies Act. I don't feel the necessity of referring to various other judgments of Company Law Board on which reliance has been placed by Ld. Counsel. "

10. The order fits to a 'T' to the facts and of the application in hand. It applies to it in all the fours. How we say so is that sections 397, 398 and 402 of the Companies Act constitute a complete code by themselves. The aim and object of this legislation is to give succour to a person duped by the acts of mismanagement or oppression including the minority shareholders. The order brings it to the bare that the National Company Law Tribunal is vested with powers for regulating the affairs of the company and it has the authority/competence to terminate, set aside or modify any agreement entered into between the company on the one hand and any of the persons like managing director and the other director or the manager on the other on the terms and conditions as may appear to be just, equitable and expedient in the facts and circumstance of a given case. This order shaped, moulded and chiselled on various judgments brings it to the fruition that the power to order winding up of a company is provided under the Companies Act and is conferred on the court and an arbitrator even on the face of an agreement between the parties would have no jurisdiction to order winding up of the company. The order further provides that no arbitrator can possibly give relief to an aggrieved party which is provided under Section 397 and 398 and he would be incompetent to pass any order under Section 402 and 403 of the Companies Act. It also states that in the context of the section 9B of the companies Act any provision in any memorandum, article or agreement to the extent of repugnancy to the Companies Act would be void. The contention of the learned counsel for the respondent that Article 87 of the Articles of Association is as sacred as a command for the parties and that they cannot resile from it but have to follow it both in vigour and rigour appears to be misplaced when tested on the strength of the reason, the logic and the law. The ratio of law laid down by the Delhi High Court in the case ofO.P. Gupta v. Sffly General Finance Pvt. Ltd. and othersmakes it amply clear that any article of Association repugnant to the provisions of section 397 and 398 of the Companies Act is wholly void when tested on the touch stone of section 9 of the Companies Act.

11. The Division Bench of the Punjab and Haryana High Court in the case of Sudarshan Chopra (Supra) has been of the view that the statutory jurisdiction of the Company Law Board and the right of appeal against its orders cannot be ousted even by the consent of the parties. This has been made emphatically clear by the Bombay High court in the case of Rakesh Malhotra (supra) after taking a view from the law laid down by the apex court of the country in the case ofBooz-Allen and Hamilton Inc v. SBI Homes Finance Ltd.reproduced here in before. The Bombay High Court has drawn a distinction in the disputes that are capable of settlement by arbitration or capable of being adjudicated by a public fora. It has held that an arbitrator is a private person entrusted with the job of settling the disputes whereas the courts like this Tribunal are a public forum. Another aspect that has been taken into consideration is the distinction in law between right in rem and the right in personam. It has been held that a right in rem is a right exercisable against the world at large, as contrasted from a right in personam which is an interest protected solely against specific individuals: Actions in personam refer to actions determining the rights and interests of the parties themselves in the subject-matter of the case, whereas actions in rem refer to actions determining the title to property and the rights of the parties, not merely among themselves but also against all persons at any time claiming an interest in that property. Correspondingly, a judgment in personam refers to a judgment against a person as distinguished from a judgment against a thing, right or status and a judgment in rem refers to a judgment that determines the status or condition of property which operates directly on the property itself. (Vide Black's Law Dictionary.) It has been further laid down that generally and traditionally all disputes relating to rights in personam are considered to be amenable to arbitration; and all disputes relating to rights in rem are required to be adjudicated by courts and public tribunals, being unsuited for private arbitration. This is not, however, a rigid or inflexible rule. Disputes relating to subordinate rights in personam arising from rights in rem have always been considered to be arbitrable. The Act does not specifically exclude any category of disputes as being not arbitrable. Sections 34(2)(b) and 48(2) of the Act however make it clear that an arbitral award will be set aside if the court finds that " the subject-matter of the dispute is not capable of settlement by arbitration under the law for the time being in force".

The High Court further held that the types of reliefs which an Arbitrator can award are limited by consideration of public policy and by the fact that he is appointed by the parties and not by the State. For example an Arbitrator cannot impose a fine or a term of imprisonment, convict a person for contempt or issue a writ of subpoena. It cannot also make an award which is binding on third party or affects the public at large. An Arbitrator would not enjoy any jurisdiction to bind anyone else by a decision on whether a patent is valid, for no one else has mandated him to make such a decision.

12. The Bombay High Court also placed reliance on its earlier judgment rendered in the case ofBennet Coleman and Co. v. Union of India and Ors. (1977) 47 cas 92.With regard to the jurisdiction of the Company Law Board for issuing various orders under section 402 (section 242 of Companies Act, 2013) it has been held that under section 402 the powers of the Company Law Board are wide enough. The Company Law Board is clothed with the powers for the regulation of the company's future affairs keeping in view the previous oppression and mismanagement. The Hon'ble Supreme Court has concluded that no purpose would be served by making reference to Arbitrator because it was difficult to see that a narrowly tailored arbitral proceeding would be sufficient in face of Company Law Board plenary and expansive powers which are sufficient to redress and grant the far-reaching reliefs under section 397 and 398.

13. The other proportion on law culled out from the judgment of the Hon'ble Supreme Court inSukanya Holdings (P) Ltd. v. Jayesh H. Pandya (2003) 5 SSC 531by the Bombay High Court is to affirm that a bifurcation of a cause of action is impermissible procedure beyond the contemplation of the Arbitration Act. Accordingly it has been held that where the petition under section 397 and 398 of the Companies Act has been filed by seeking reliefs some of which invite a judgment in rem and other are in personam then it is not possible or permissible to sever one from the other and disassemble such a petition. The rationale of law laid down by the Bombay High court in the para 124A of the judgment cited also is that the disputes in a petition properly brought under section 397/398 read with 402 of the Companies Act 1956 cannot be referred to arbitration subject to the caveat regarding a mala fide vexatious or oppressive petition and one that is merely dressed up to avoid an arbitration clause.

14. Applying these tests to the application under consideration and to find an answer to the question whether the petition in hand is a mala fide and vexatious one or an oppressive petition it will be of essence to state that in her petition the petitioner has claimed the following reliefs:

"(a) The audit of the Company has not been completed by 30th September, 2015 and that the statutory auditor appointed by the Respondent No. 3 vide Form GNL 2 has been delaying the said filing of the annual return on some pretext or the other.

(b) That the statutory records of the Company are not available at the registered office of the company even though along with filing of the last year's annual return, there was a compliance certificate of one M/s. SR Sharma and Associates, Company Secretary (Which had been filed apparently at the request of either the Statutory Auditor or the Respondent No. 3 and Respondent No. 4, since no invoice was raised by the said Company Secretary on the Respondent No. 1 Company). As per the Compliance Certificate dated 01.09.2014 the Company has kept and maintained all registers as stated in Annexure A to the said certificate as per the provisions and rules and all entries therein had been duly recorded. The said compliance certificate was filed along with Form 66 with the Registrar of companies by using the digital signature of the Respondent No. 3.

(c) That the quarterly Board Meetings of the Respondent No. 1 Company are either not being held, or held without the knowledge of the Petitioner

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, since she has neither received the agenda for any Board Meeting nor signed any attendance sheet to the Minute Books. Apparently, since the Respondent No. 3 is the Chairperson of the Respondent No. 1 Company and thus responsible for signing the Minute Books and the Resolutions, would have the same in her custody. (d) The Director representing the Respondent No. 3, Ms Jenny Quek was sought to be replaced by appointment of an Alternate Director Mr. Arjun Mehta who has been the confidante of the Respondent No. 3 and 4 with the intent of usurping the Board Meeting of the Respondent No. 1 Company with the nominees of Respondent No. 3 and 4 being placed on the Board. It is also pertinent to mention that the said Mr. Arjun Mehta is already a Director in various group companies of Respondents No. 3 and 4. (e) That the Respondent Nos. 3 and 4 have till date neither issued the share certificates to the tune of 27% for the investment made by the Company in the Project at Pebble Brooks, Goa for a sum of Rs. 1,75,50,000/- nor returned the money taken on the pretext of the said investment made despite the fact that a categorical assurance was given that the Company shall be a shareholder in the said Pebble Brooks Project, amongst others. (f) the Respondent No. 3 and Respondent No. 4 have been using the properties of the Company for their personal use without paying any rental to the Company for the same, including the Mumbai property which amounts to causing loss to the Company by using the resources of the Company and thus amounts to criminal misappropriation. (g) The Respondent No. 3 and Respondent No. 4 have been seeking to issue air tickets for their various expensive travels abroad on the pretext of "business travels" although the said travel has been personal travels and had no connection with the business of the Company. The Respondent Nos. 3 and 4, have frequently instructed various travel related bookings to be done for them as well as their friends and associates on the account of the Company. The expenses amounting to Rs. 16,37,252/- incurred on the travel tickets etc. have still not been reimbursed to the company despite several requests and reminders being sent on the Company's behalf. (h) the statutory Auditor acting in the hands of the respondent Nos. 3 and 4." From a bare glimpse of the reliefs claimed in the main petition what can emphatically be said is that the present petition does not appears to be a dressed up petition. It is a properly drafted petition under the provisions of section 397/398 read with section 402 of the Companies Act. The pleadings allege various acts of oppression and mismanagement the determination of which is the sole jurisdiction of this fora. These do not fall within the domain and power of the arbitrator. To quote some instance it has been averred that the board meetings have not been held which is an infraction of the provisions of Section 173 of the Companies Act. Siphoning of the funds as alleged can be said to be a conduct prejudicial to the interest of the company and the violation of Sections 184 and 188 of the Companies Act. The share certificates having not been issued, the statutory documents alleged to have been filed under the digital signatures and not the genuine ones of the petitioner, the exclusion of the petitioner from the business, the statutory documents having not been provided to her (which is contrary to Article 90 of the Articles of Association) speak of the acts of oppression and mismanagement and to cap it all the pleadings of the petitioner have not been rebutted by the respondents, as they have not filed the reply to the main petition so far. On the basis of the allegations concerning mismanagement and oppression of the petitioner as already detailed here in before the bifurcation of the cause of action is impermissible. Therefore, in a case filed under sections 397/398 of the Companies Act incorporating various reliefs the seeking of some of which invite judgment in rem and some other which invite judgment in personam would not permit the severance of one cause of action from the other and to come apart into the smaller pieces of such petition. 15. The cumulative effect of all that has been said and done above is that the application of the respondent filed under section 8 of the Arbitration and Conciliation Act, 1996 entails dismissal and is accordingly dismissed. This order along with the application shall form a part of the main file which shall come up on 11.01.2017. The Ld. Counsel for the respondent shall file the reply within a period of four weeks and rejoinder, if any, shall be filed within a period of two weeks thereafter.
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