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PUNJAB & HARYANA HIGH COURT
Mehtab S.Gill, J.
Sudershan Chopra
Versus
Company Law Board, Principal Bench
Civil Writ Petition No. 10671 of 2002,
Decided On : MARCH 14, 2003
Arbitration - Company Law - Arbitration and Conciliation Act, 1996, Section 7, Section 8, Section 34 - The judgment discusses the interpretation and application of Section 7, Section 8, and Section 34 of the Arbitration and Conciliation Act, 1996 in the context of a dispute between the parties and the Company Law Board. The court examines the concept of 'first statement on the substance of the dispute' and the requirements for referring a matter to arbitration. It also considers the abandonment of rights to arbitration, waiver, and estoppel in the context of the arbitration agreement.
Fact of the Case:
The petitioners sought a writ to quash an order by the Company Law Board (CLB) and argued that the CLB erred in rejecting their application under Section 8 of the Arbitration and Conciliation Act, 1996. The respondents contended that the petitioners abandoned their rights to arbitration and were disentitled for any relief due to their conduct before the CLB.
Finding of the Court:
The court found that the petitioners had abandoned their claim for arbitration and waived their rights under the arbitration agreement. It held that the conditions of Section 8 of the 1996 Act were not fulfilled by the petitioners and that they had acquiesced in the proceedings before the CLB. The court also noted that the company, which was not a party to the arbitration agreement, could not be referred to arbitration.
Issues: The issues included the interpretation of 'first statement on the substance of the dispute', abandonment of rights to arbitration, waiver, and estoppel in the context of the arbitration agreement, and the fulfillment of conditions under Section 8 of the Arbitration and Conciliation Act, 1996.
Ratio Decidendi: The court held that the petitioners had abandoned their claim for arbitration, waived their rights under the arbitration agreement, and submitted themselves to the jurisdiction of the CLB and the civil court. It also found that the company, not being a party to the arbitration agreement, could not be referred to arbitration.
Final Decision: The writ petition was dismissed by the court.
Mehtab S.Gill, J.
1. The petitioners have prayed for issuing a writ in the nature of mandamus quashing order dated December 8, 2000 (Annexure P-1).
2. The petitioners have averred that the rights of the petitioners have been affected by not relegating the parties to arbitration. It has been further averred that Section 7 of the Arbitration and Conciliation Act, 1996 (hereinafter called the "1996 Act"), postulates a contract between the parties and if there is an agreement for arbitration, the parties should be relegated to the jurisdiction of an arbitrator. A contract between a party having an arbitration agreement, a formal agreement is not necessary. It has been further averred that the meaning of expression "First statement on the substance of the dispute", has wrongly been interpreted by the Company Law Board. It has been further averred that, contesting an interlocutory application, would amount to acquiescence and it would be a step in the direction of the first statement. The "Hind Samachar Limited" was incorporated by the Indian Companies Act, 1930 with an authorised capital of Rs. 35 lacs. The main objects of the company are publishing of Newspapers, Journals, Magazines etc. This Company was formed to take over Hind Samachar, the Urdu Daily Newspaper. Late Shri Jagat Narain was the father-in-law of petitioner No. 1 and grand-father of petitioner Nos. 2 and 3. He was assassinated in September 1981. After his death, Shri Ramesh Chander, husband of petitioner No. 1 and father of petitioner Nos. 2 and 3, took over as Chief Executive of the Company. Shri Ramesh Chander was assassinated on May 12, 1984. Petitioner Nos. 1 to 3 are/were Directors of the Company. Petitioner No. 1 is the widow of Shri Ramesh Chander. Petitioner Nos. 3 and 4 are the sons of petitioner No. 1. Petitioner Nos. 4 to 6 are HUF of petitioner Nos. 1 to 3. Respondent No. 2 Shri Vijay Kumar Chopra son of late Shri Jagat Narain, is a shareholder of the Company. He is the Chairman-cum-Managing Director of the Company. Respondent No. 2 is brother-in-law of petitioner No. 1. Respondent No. 3 is the wife of respondent No. 2. Respondent Nos. 4 and 5 are the sons of respondent No. 2. It has further been averred that the petitioners are represented as Group "A" and respondent Nos. 2 to 6 are represented as Group B" in the Company. Petitioner No. 1, in the interest of long term future of the Company and also that no bickering arose, agreed to surrender her familys shares in favour of respondent Nos. 2 to 6 (Group B) so that, both Group A and Group B had equal shares in the Company. The petitioners and the respondents entered into a family settlement. In the family settlement, arbitration Clause (30) was introduced which states that in case of any dispute Sarvshri S.L. Batra and S.R. Suri will arbitrate between the two families. Memorandum of family settlement and Articles of Association of the company is annexed with the petition as Annexure P-2. The petitioners and the respondents also entered into a family agreement dated May 6, 1996 (Annexure P-3). Clause 16 of this agreement had an arbitration clause. It was stated therein that all misunderstanding shall be resolved by mutual discussion, if required, then appointing an arbitrator. It has been further averred that respondent No. 2 persuaded the petitioners to relinquish majority share in favour of Group B and share holders agreement was signed on February 8, 1997 (Annexure P-4). The share holders agreement was adopted and incorporated in the Memorandum and Articles of Association of the Company dated August 9, 1949 (Annexure P-5). Respondent Nos. 2 to 6 (Group B), instead of appreciating what the petitioners have done for the congenial and harmonious working of the company, with mala fide intention, took over control of the Company. They kept the petitioners out of the management and control of the Company. After having taken control of the Company, respondent Nos. 2 to 6 filed a petition under Section
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