Delhi High Court
Vijay Sekhri & Ors. vs Union Of India & Ors. on 29 November, 2010
Author: S. Muralidhar
IN THE HIGH COURT OF DELHI AT NEW DELHI
Reserved on: November 24, 2010
Decision on: November 29, 2010
W.P.(C) No. 7558 of 2010 CM No. 19670 of 2010
VIJAY SEKHRI & ORS. ..... Petitioners
Through: Mr. Gaurav Duggal with
Mr. Rakesh Sharma, Advocate.
versus
UNION OF INDIA & ORS. ..... Respondents
Through: Mr. Jatan Singh, CGSC for UOI.
Mr. Amit Chadha, Senior Advocate with
Mr. Ramesh Singh, Mr. A.T. Patra and
Ms. Roopa Dayal, Advocates for R-3 & R-4.
AND
W.P.(C) No. 7559 of 2010 CM No. 19672 of 2010
VIJAY SEKHRI & ORS. ..... Petitioners
Through: Mr. Gaurav Duggal with
Mr. Rakesh Sharma, Advocate.
versus
UNION OF INDIA & ORS. ..... Respondents
Through: Mr. Jatan Singh, CGSC for UOI.
Mr. Amit Chadha, Senior Advocate with
Mr. Ramesh Singh, Mr. A.T. Patra and
Ms. Roopa Dayal, Advocates for R-3 & R-4.
CORAM: JUSTICE S. MURALIDHAR
1. Whether reporters of the local news papers
be allowed to see the judgment? No
2. To be referred to the Reporter or not? Yes
3. Whether the judgment should be reported in the Digest? Yes
JUDGMENT
29.11.2010
1. The challenge in these two writ petitions is to a common order passed on
20th July 2010 by the Company Law Board („CLB‟) in CA No. 469 of 2009
in CP No. 78/ND/2009 (Vijay Sekhri & Ors. v. Tinna Agro Industries Ltd
& Anr.) and CA No. 468 of 2009 in CP No. 79/ND/2009 (Vijay Sekhri &
Ors. v. Tinna Oils and Chemicals Ltd. & Anr.). By the impugned order
common to both petitions, the CLB allowed the applications filed by the
Respondents under Section 45 of the Arbitration & Conciliation Act, 1996
(„AC Act‟) in the above matters and referred the disputes arising out of both
CP Nos. 78 and 79 of 2009 for arbitration as contemplated by the share
holders agreements („SHAs‟) dated 21st April 2004 and 28th February 1998
respectively.
2. In this Court while Writ Petition (C) No. 7558 of 2010 corresponds to CP
No. 79/ND/2009 concerning Tinna Oils and Chemicals Ltd. („TOCL‟), Writ
Petition (C) No. 7559 of 2010 corresponds to CP No. 78/ND/2009 and
concerns Tinna Agro Industries Ltd. („TAIL‟).
3. TAIL is a joint venture between ADM Interoceanic Ltd. („ADM‟),
Respondent No. 4 in Writ Petition (C) No. 7559 of 2010, and Tinna
Overseas Ltd. („TOL‟), Respondent No. 5 in Writ Petition (C) No. 7559 of
2010. TOCL is a joint venture between ADM and Tinna Finex Ltd. („TFL‟),
Petitioner No. 3 in Writ Petition (C) No. 7558 of 2010.
4. On 28th February 1998, an SHA was executed between ADM, TFL and
Bhupinder Kumar who was the principal promoter and share holder of
TOCL as well as TFL. In terms of the said SHA, ADM subscribed to and
acquired 60% equity shares of restructured TOCL subject to certain
conditions specified in the SHA. The signatories to the SHA were ADM,
TFL, Bhupinder Kumar, the Tinna Group and the TOL. Clause 13 of the
SHA dealt with transfer of shares and Clause 13.6 stated as under:
"13.6 It shall be an express condition of any sale or
transfer of the shares that the transferee shall undertake in
writing to adhere to and be bound by the terms and
conditions of this Agreement. No shares shall be
transferred to any person who is directly or indirectly
engaged in the business of processing oil seeds, refining
of oils or sale of edible oils."
5. As far as the petition concerning TAIL, an SHA was entered into on 21 st
April 2004 between ADM, TOL, TAIL and Bhupinder Kumar whereby
ADM acquired 75% of the total enhanced capital of TAIL and TOL was to
hold the remaining 25%. Clause 13.6 of this SHA was identically worded as
the SHA of 28th February 1998. This SHA dated 21st April 2004 was signed
by ADM and TOL represented by its two Directors Vijay Kumar Sekhari
and Anil Kumar Sekhari, the Tinna Group and Bhupinder Kumar.
6. The aforementioned two Company Petitions, i.e. CP No. 78 of 2009 and
CP No. 79 of 2009, were filed by the Petitioners in Writ Petition (C) No.
7559 of 2010 and Writ Petition (C) No. 7558 of 2010 respectively before the
CLB under Sections 397, 398, 402 and 409 of the Companies Act, 1956
(„Act‟) complaining of several actions of the ADM which according to them
were in derogation of the covenants of the SHA. It was averred that the
covenants of the SHA had been incorporated in the Memorandum of
Association and Articles of Association of the respective companies, i.e.,
TOCL and TAIL but certain resolutions were passed contrary to those
documents. In the said petitions, ADM filed applications under Section 45
of the AC Act seeking reference of the disputes to arbitration.
7. Several objections were raised by the Petitioner herein to the
aforementioned applications seeking reference of the disputes to arbitration.
One was that the applications themselves were not signed by any of the
Respondents in the two Company Petitions or by any authorised signatory.
Secondly, it was submitted that all the parties to the disputes, i.e., parties to
the two Company Petitions were not signatories to the SHAs that contained
the arbitration clause. Thirdly, some of the disputes did not emanate from
the SHAs and therefore reference to arbitration was not permissible.
Fourthly, it was submitted that disputes under Section 397 and 398 of the
Act was not per se arbitrable as the Arbitrator has no jurisdiction to exercise
powers conferred to the CLB under Section 402 of the Act.
8. By the impugned order, the CLB discussed the provisions of Sections 8
and 45 of the AC Act and correctly concluded that the essential
requirements of reference of a dispute to arbitration was that the action
should be brought before the judicial authority which CLB undoubtedly was.
Secondly, the two SHAs had to contain an arbitration clause which, in fact,
they did. One of the parties to the SHAs in each matter had applied to the
CLB and these applications were made even before submitting a first
statement on the merits of the disputes to the CLB.
9. As regards parties to the SHAs, the CLB analysed who the signatories
were and concluded that the non-signatories were all related to the
signatories to the SHAs. On the date of the respective SHAs, the non-
signatories were not share holders in the respective companies and,
therefore, could not be signatories to the SHAs. Further, the evidence and
allegations presented both by the signatories and non-signatories could not
be separated. Lastly, the Petitioners themselves had claimed that the
Respondents had committed a breach of the respective SHAs and, therefore,
accepted the binding nature of the SHAs. The respective arbitration clauses
formed an integral part of SHAs and, therefore, the disputes could be validly
referred to arbitration. The CLB also placed reliance upon the decision of the
Supreme Court in Everest Holding Ltd. v. Shyam Kumar Shrivastava
(2008) 16 SCC 774.
10. Mr. Gaurav Duggal, learned counsel appearing for the Petitioners
reiterated the submissions made before the CLB. He submitted that some of
the Petitioners before the CLB were not parties to the respective SHAs and,
therefore, the disputes arising between them and the Respondents cannot
possibly be referred to arbitration. Mr. Amit Chadha, learned Senior counsel
appearing for the Respondents while adopting the submissions made before
the CLB pointed out that in addition to the SHA in each of the cases, the
parties had entered into a further amendment agreement on 26 th June 2009
which was signed by ADM and the respective companies incorporating a
recital that "the parties have decided that their mutual rights and obligations
and the operation, administration management of the Company with effect
from the Execution Date shall be governed by the Shareholders Agreement
as amended/agreed by this Agreement."
11. It is pointed out by Mr.Chadha that the objection that the companies
themselves were not party to the SHAs and, therefore, the disputes in
relation to them could not be referred to arbitration is no longer valid in view
of the subsequent amendment agreements. In this context, Mr. Duggal
referred to e-mail dated 13th August 2009 from Petitioner No.1 in both the
writ petitions protesting against the amendment to the SHAs and retracting
them although admitting that they had been duly signed by him during his
visit to Geneva on 30th June 2009.
12. Be that as it may, it appears to this Court that those who were not
signatories to the SHAs at the time when the SHAs were executed, became
share holders subsequent to the SHAs and were bound by Clause 13.6 in
each of the SHAs. The terms and conditions in both SHAs were integral to
the nature of the shares and in terms of Clause 13.6 bound the subsequent
transferees. With a majority in each company controlled by ADM itself, the
question of the disputes involving the companies not being referable to
arbitration does not arise as the stand of the companies would be no different
from that of ADM. In fact, as long as the Petitioners are bound by the SHAs
and Clause 13.6 thereof, they cannot possibly object to the disputes
involving TAIL and TOCL being referred to arbitration.
13. Mr. Duggal then submitted that the Arbitrator could not possibly
exercise the powers of the CLB under Section 402 of the Act. A complete
answer to this submission is in the decision of the Supreme Court in Everest
Holding Ltd. In para 27 of the decision it was observed as under:
"27. It is true that the arbitrator would have no power to
order for winding up of the company as such power is
conferred on and vested with a court as envisaged under
the Companies Act in view of the decision of this Court
in Haryana Telecom Ltd. v. Sterlite Industries (India)
Ltd. But in terms of the arbitration agreement, the
arbitrator can always find out and adjudicate as to
whether or not a company is functional and if it was not
functional, in that event he could always find out the
nature and status of its assets and can also issue direction
and pass orders regarding dues and liabilities and also for
taking recourse to appropriate remedy."
14. The other submissions of Mr. Duggal were only a reiteration of the
submissions already made before the CLB. In regard to these submissions as
well, this Court finds no reason to differ from the reasoning and conclusions
arrived at by the CLB in its detailed impugned order.
15. These petitions are without merit and are dismissed as such with no
order as to costs. The interim order stands vacated. The applications are
disposed of.
S. MURALIDHAR, J
NOVEMBER 29, 2010
dn
