KUMAR NARAYANAN Vs. R. KEERTHANA AND ORS.

JUDGEMENT

(1.) THE present application is filed by the applicant/the second respondent under regulation 44 of the Company Law Board Regulations, 1991, read with Section 8 of the Arbitration and Conciliation Act, 1996, seeking directions from this Bench to dismiss the C.P. No. 12 of 2008 and direct the respondent/petitioner to refer the disputes to the arbitral tribunal to be constituted as per the agreement dated November 25, 2007. Shri P.H. Arvindh Pandian, learned Counsel, for the applicant/respondent submitted that the first respondent/first petitioner is the daughter of (late) Mr. R. Rajalingam and the second petitioner in CP is the wife of (late) Mr. R. Rajalingam. Learned Counsel submitted that the applicant/respondent No. 2 is one of the parties to the agreement dated November 25, 2007 and titled as memorandum of understanding -cum -share transfer agreement signed by the applicant/respondent and the shareholders of the third respondent -company herein represented by (late) Mr. R. Rajalingam. The agreement dated November 25, 2007, provides exhaustively and an in -depth detailed particulars regarding the issue, allotment, and transfer of shares to the applicant/respondent for financial consideration, loans to be provided to the third respondent herein and based on other parameters depending on the financial performance of the third respondent -company and also the manner in which the third respondent -company should be managed. The agreement dated November 25, 2007, is very much in force and the said agreement also contains an arbitration clause. Learned Counsel further submitted that the company petition filed by the first and second respondents herein reveals that the alleged complaints relate to the issue/transfer of shares to the applicant/respondent. He submitted that it is an undisputed fact that any disputes and differences between the members/directors are to be resolved only through the arbitration as per the arbitration clauses provided in the agreement dated November 25, 2007 and that the respondents/petitioners are parties to the aforesaid agreement dated November 25, 2007, along with all other shareholders of the third respondent -company herein. Each of the shareholder apart, from (late) Mr. Rajalingam have all signed letters of authority and deeds of adherence to the aforementioned agreement dated November 25, 2007. The respondents/petitioners have approached this Bench for various reliefs allegedly under Section 397/398 of the Companies Act, 1956, and the entire petition is based on the rights and obligations under the agreement dated November 25, 2007. Learned Counsel submitted that the disputes can be resolved only by a properly constituted arbitral tribunal under the relevant clauses of the agreement. In support of his contention learned Counsel relied upon the judgment reported in : AIR 2003 SC 2881 in the matter of Hindustan Petroleum Corporation Ltd. v. Pinkcity Midway Petroleums. It is held at paragraph 14 : "This Court in the case of P. Anand Gajapathi Raju v. P.V.G. Raju : [2000] 4 SCC 539, has held that the language of Section 8 is pre -emptory in nature. Therefore, in cases where there is an arbitration clause in the agreement, it is obligatory for the court to refer the parties to arbitration in terms of their arbitration agreement and nothing remains to be decided in the original action after such an application is made except to refer the dispute to an arbitrator". In the very same judgment learned Counsel for the applicant relied upon paragraph 24 wherein it is held : "We have come to the conclusion that the civil court had no jurisdiction to entertain a suit after an application under Section 8 of the Act is made for arbitration". In view of the above, learned Counsel prayed this Bench to dismiss the CP and sought direction to the respondents/petitioners to refer the disputes to the arbitral tribunal to be constituted as per the relevant clauses of the agreement dated November 25, 2007.

(2.) SHRI R. Murari, learned Counsel, for the respondents/petitioners filed a detailed counter and submitted that the application is misconceived and not maintainable and requested this Bench to reject the same. Learned Counsel submitted that for referring the matter to the arbitral tribunal the parties must be commonality to agreement. Any application for a reference of disputes to arbitration is required to be filed under Section 8 of the Arbitration and Conciliation Act, 1996, and such an application will be maintainable only if the subject -matter of the company petition are one and the same and required commonality of parties. In the present case, the third respondent -company herein and respondents Nos. 3 to 11 in the main CP are not parties to the memorandum of understanding dated November 25, 2007. Therefore, the applicant cannot purport to enforce an arbitration agreement. In the said arbitration agreement entered by (late) Mr. R. Raja -lingam and the applicant herein, are only the parties to the agreement and company is not a party to the agreement. In support of this contention learned Counsel relied upon the decision of this Bench reported in, [2008] 143 Comp Cas 687 :, [2008] 3 Comp. LJ 266 in the matter of Enercon GmbH v. Enercon (India) Ltd., paragraph 9.1. (page 695 of 143 Comp Cas): "It is evident from the provisions of Section 8 that if the subject -matter brought before this Board is the subject -matter of arbitration agreement, the Board is bound to refer the parties to arbitration". Therefore, commonality of the subject -matter is a prerequisite to the applicability of the provisions of Section 8. Learned Counsel also relied upon paragraph 9.2 of the judgment which reads as (page 695 of 143 Comp Cas) : "Likewise, a reading of Section 7(1) read with Section 2(1)(h) would indicate that the parties before the judicial proceedings should be parties to the arbitration agreement to refer the disputes between them arising out of the defined relationship. This would indicate that there should be a commonality of parties also". Learned Counsel also relied upon paragraph 9.4 and 10 of the very same judgment.

(3.) LEARNED Counsel further submitted that the company petition was moved on May 13, 2008 and the applicant herein had all along been seeking time to file counter statement and has preferred this application after lapse of six months. Such conduct of the applicant would show that the applicant is not interested in contesting the above company petition, in view of the facts and legal position as explained above, the application is devoid of merits and sought for dismissal of the same.