The main legal point established in the judgment is that a company must be a party to an arbitration agreement for Section 8 of the Arbitration and Conciliation Act to apply. Additionally, clear authority is required to sign contracts on behalf of the company.

1. Thepetitioners 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. Mr. S.V. Jayaraman, learned counsel appearing for the respondent submitted that the suit was not bona fide. He referred to Ex-A2, the award and pointed out that the pleading were contrary to it. He submitted that the alleged Managing Director of the Company, who had filed the suit and the second plaintiff, who is the second petitioner herein were both signatories of the agreement and they had also been appointed as the Managing Director and Chairman only by the agreement arrived at before the arbitrators/ the Panchayatars. Having obtained the benefit under the award, they cannot now go back upon it. He also submitted that the agreement itself is only in relation to the manner in which the company should be managed and the persons, who should be put in charge, that, therefore, it will not be proper to say that the agreement does not bind the Company. He referred to Section 16 of the Arbitration Act and submitted that the effect of award was as binding on the parties as a decree and that a party, who benefited by an award cannot thereafter challenge it. He further submitted that the appointment of the Directors was made by the Board passing the necessary resolutions, which approved of all the recommendations of the arbitrators. He relied on the following decisions:

(1) Kvaerner Cementation India Ltd. v. Bajranglal Agarwal & Anr., 2001 (6) S