1. The petitioners herein above, have filed this petition under section 397/ 398 of the Companies Act, 1956 ('the Act') alleging acts of oppression and mismanagement in the affairs of Chennai Power Corpn. Ltd. (the compa-ny). They also filed an application for interim reliefs. When the application was taken up for hearing on 13-4-1998, the respondents filed an appli-cation under the Arbitration and Conciliation Act, 1996, praying for referring the matter to arbitration on the ground that the substantial matter covered in the petition arise out of an agreement between the parties in which there is a provision for settling the disputes between the parties through arbitration under the rules of the London Court of International Arbitration.

2. Since the matter of arbitration was raised, we thought it fit first to hear the application of the respondents. Shri Sarkar, the Senior Advocate appearing for the respondents, initiating his arguments submitted that, the disputes raised in the petition are private disputes between two shareholders group and not in any way related to the affairs of the company to invoke the provisions of section 397/398. According to him, the disputes between the parties have arisen out of and in connection with an agreement dated 14-10-1996 (Principal agreement) as modified by a supplemental agreement dated 7-7-1997. The principal agreement very specifically provides in clause 26 that any dispute arising out of or in connection with the agreement shall be finally resolved by arbitration under the rules of London Court of International Arbitration. Since the main allegation relates to alleged breach of contractual terms, recourse to arbitration alone is permissible and cannot be enforced through a petition under section 397/398. He pointed out to section 45 of the Arbitration and Conciliation Act, according to which a judicial authority shall have to, at the request of one of the parties, refer the parties to arbitration when such a judicial authority is seized of an action in a matter in respect of which the parties have made an agreement for an arbitration. According to him the foundation of the petition, is that the respondents 2 and 3 have not provided to the company certain funds as agreed to between the parties as per the principal and supplemental agreements. The main relief sought also relates to a direction being given to the respondent 2 and 3 to forthwith fulfill their obligation of providing the funds, more particularly of US$ 14 million as agreed to be advanced as per the principal agreement. Therefore, according to him, since the CLB is seized of a matter on which there is an arbitration agreement between the parties, the CLB is bound to refer the matter to arbitration as per section 45. In this connection, he referred to the decision of the Supreme Court in—[1994] 2 SCC 155 in which the court held, with reference to the Foreign Awards (Recognition and Enforcement) Act, 1961, that right to foreign arbitration is an indefea-sible right in which the court does not have any discretion.

3. He further submitted that the stand taken by the respondents in the reply to the application that the supplementary agreement dated 7-7-1997 which does not contain an arbitration clause is a substitution of the principal agreement is not correct. The agreement dated 7-7-1997 was only a modification of the principal agreement and, therefore, the arbitra-tion clause is squarely applicable for all disputes arising out of or in connection with both the agreements. Even the question as to whether the second supplemental agreement has resulted in extinguishing the princi- pal agreement has to be decided in the arbitration as explicitly provided in clause 26.1 and 26.6 of the Arbitration clause in the original agreement. On this proposition he relied on Renusagar Power Co. Ltd. v. General Electric Co. AIR 1985 SC 1156. He referred to Jaggilal Kamlapat v. N.V. Internationale Crediet-En Handels Vereeninging 'Rottendram