GOWRI SPINNING MILLS LTD Vs. ADIMOOLAM

JUDGEMENT

(1.) THE petitioners are the plaintiffs who filed O.S.No.262 of 2000. THE cause title in the plaint shows that the first petitioner, who is the first plaintiff is a company represented by the Managing Director and the second petitioner is the Chairman. . THE suit has been filed for injunction restraining the respondents from interfering with the administration and management of the first petitioner-company. THE respondents filed an application under Section 8 of the Arbitration and Conciliation Act, 1996 (hereinafter referred to as 'the Act') claiming that there was an arbitration agreement on 15.6.2000, which bound the parties, .and therefore, the matter should be referred to arbitration. THE Court below ordered the application and therefore, the revision.

(2.) MR. M.S. Krishnan, learned counsel for the petitioners would submit that the agreement dated 15.6.2000 did not bind the first petitioner. He submitted that though the so called agreement was supposed to bind all the members of the company, it was in fact signed only by 14 members, the company is a separate entity and the company has not signed the agreement, the suit filed by the company cannot be stayed. He also made a reference to the agreement, in which the disputes that were arbitrable were, and which bears the signatures of 15 members. Therefore, according to him, the disputes of the members cannot be equated to the disputes relating to the company. He read out Section 7 of the Act and pointed out that the words used are 'by the parties' and therefore, the company is not the party, and Section 8 of the Act will not apply. He also referred to Section 26,34,36 and 255(2) of the companies Act and submitted that the effect of all these provisions is that there cannot be any by-passing of the Memorandum and Articles of Association by devising a mode of appointment of Chairman or Managing Director contrary to the provisions of the Companies Act. He also made clear that the provisions of the Companies Act takes care of the manner in which Managing Directors, Directors or Chairman can be removed or appointed. There are enough safeguards in the Company Law itself. He relied on several decisions: (1) V.B.Rangarajv. V.B. Gopalakrishnan and others, 1992Comp.Cas201; (2) S.S. Rajakumar v. Perfect Castings Private Ltd., 1968 Comp.Cas 187; (3) Sudhir Kumar Saha and others v. J.N. Chemicals Private Ltd. and others, AIR 1985 Cal. 454; (4) Turner Morrison & Co. Ltd. v. Hungerford Investment Trust Ltd., AIR 1969 Cal. 238 (5) Shanti PrasadJain v. Kalinga Tubes, AIR 1965 SC 1535 (6) Shiv Omkar Maheshwari v. Bansidhar Jagannath, 1956 Bom. 459

(3.) IN the affidavit filed in support of the application under Section 8 of the Act it is no doubt stated that there is a valid, lawful and binding agreement of arbitration between the respondents and the petitioners and that the petitioners had also agreed to accept and obey the said award. Neither in the agreement nor in the affidavit is there any material to show that the agreement dated 15.6.2000 was executed on behalf of the company. IN fact, the agreement, dated 15.6.2000, refers not only to the petitioner-company but also to the Jayagowri Spinning Mill. Therefore, on the face of the agreement it is difficult to come to the conclusion that the agreement was signed on behalf of the company. The learned counsel for the petitioner submitted that not all the shareholders have signed the agreement, dated 15.6.2000 and therefore, some of the shareholders cannot arbitrarily bind the company to the course of action, which is acceded to by the other shareholders. Even otherwise, the agreement does not show which of the signatories to the award had the authority express or implied to sign on behalf of the company, if in fact somebody did so. From a reading of the agreement, what emerges is that some of the shareholders had agreed to resolve their dispute by resorting to arbitration. When the company is not a party to the arbitration agreement, Section 8 of the Act will not apply.