Gleneagles Development Pte. Limited v. Thota Gurunath Reddy

Rajeswara Rao Vittanala, J.M:— The Company Application bearing C.A No. 51/2016 in CP No. 19/241.HDB/2016 was filed by Gleneagles Development Pte. Limited (“GDPL”) against Thota Gurunath Reddy and others u/s. 45 of the Arbitration and Conciliation Act, 1996, by seeking a direction to refer the parties i.e the Respondents No. 1 to 3.Petitioners and the Petitioners/Respondent No. 2 to Arbitration in accordance with the Arbitration Agreement as set out in Share Holders Agreement (“SHA”) etc.

2. Before adverting to averments made in the present Company Application, it is necessary to refer material assertions made in main Company petition (parties are referred to as arrayed in CP):—

a) The CP No. 19 of 2016 is filed by Mr. Thota Gurunath Reddy and 2 others u/s. 241 to 244, 337 to 341 & other applicable Provisions of Companies Act, 2013 by seeking several reliefs basing on the ratio decided in case of Date and Carrington of Hon'ble Supreme Court of India.

b) Continental Hospital Private Limited (R1 Company) was incorporated under the provisions of the Companies Act, 1956 on 16 January, 2007 in the name and style of “Continental Hospitals Limited” and subsequently, it was converted into Private Limited vide fresh certificate of incorporation dated 21.07.2015 Registered office of the Company is at Plot No. 3, Road No. 2, IT & Financial District, Gachibowli, Hyderabad-500035 in the State of Telangana. And the Authorised share capital of the R1 Company is Rs. 150,00,00,000/- divided into 15,00,00,000 equity shares of Rs. 10/- each. The paid-up-capital of the R1 Company is Rs. 139,38,27,920/- divided into 13,93,82,792 equity shares of Rs. 10/-.

c) The 1 Petitioner of CP is a shareholder, Director and one of the Core Promoters of the R1 Company by holding its equity shares of 39.28% of the paid-up-capital. The 2 Petitioner is a shareholder, Director and one of the Core Promoters of the R1 Company by holding 3(three) equity shares of the R1 Company. The 3 Petitioner i.e Paradigm Corporation Private Limited is a shareholder holding equity shares of 8.60% of the paid-up-capital of the R1 Company. Thus all the petitioners together hold 47.88% of the total paid-up-capital of the R1 Company.

d) The 2 Respondent i.e Gleneagles Development Pte. Limited is a Company incorporated under the Laws of Singapore on 28.05.1951 and it is a shareholder holding 51% of the paid-up-capital of the R1 Company.

e) The 1 petitioner along with relatives who are having sufficient experience in Medial filed, have established R1 Company, and in a short span of 2 years, R1 Company was granted recognition of a Gold Seal Hospital by the National Accreditation Board of Hospitals in India and Joint Commission International, which is the primary accreditation body in the health care world.

f) The 2 Respondent approached the R1 Company and expressed its willingness to invest in the R1 Company and also to purchase shares from the existing shareholders of the R1 Company. Accordingly, petitioners and respondents of CP have entered into several agreement including the Share Purchase Agreement, Share Subscription Agreement and Share Holders Agreement, all dated 18.02.2015

g) In pursuant to the above agreement, Second Respondent purchased 2,26,97,798 equity shares of Rs. 10/- each for a consideration of Rs. 41.22 (Rupees Forty One and Twenty Two paise only) per share from the petitioners Group amounting to Rs. 170 Cores. Further, the R1 Company has allotted 4,83,87,426 equity shares of Rs. 10/- for a consideration of Rs. 38.92 (Rupees Thirty Eight and Ninety Two paise only) per share amounting to Rs. 123 Crores. So after said transaction, second Respondent holds 51 % where as the Petitioners and their associates hold 49%.

h) It was under stood that a sum of Rs. 145 Crores out of Rs. 170 Crores would be used to clear various liabilities and to strengthen the operation of the hospital. It is also understood to set up an Escrow Account to which a sum of Rs. 30 Crores would be deposited out of the sale consideration of Rs. 170 Crores.

i) The Petitioners alleged that 2 Respondent, after acquiring major shareholding in R1 Company, started acting against the interest of the R1 Company using the R1 Company as a vehicle to enrich its associate Companies viz. Parkway health Care India Private Limited and Parkway Holdings Limited. The 2 Respondent adopts a strategy to pay more Commission to their own group of Companies and used to show losses in the R1 Company so as to put pressure on petitioners to dilute their present shareholding by way of bringing more capital into R1 Company.

j) The Second Respondent Company is based in Singapore, so all its affairs being conducted from there only. They used to carry the management without taking into consideration of ground realities in the Hospital, and its requirements. The Respondents are also seeking a revision of understanding made between parties and thus pressurizing petitioners to permit to release of funds from the Escrow account.

k) The Respondents tried to hold meeting of the Board of Directors of the R1 Company to be held on 26.08.2016 for exploring the means and methods of raising Rs. 29 Crores towards working capital requirements for R1 Company. The petitioners objected to this proposal by pointing out various acts of mismanagement, which are contrary to the shareholders agreement. The petitioners also alleged that they have given personal guarantee for the loans availed by R1 Company. The 2 Respondent is siphoning off funds of the R1 Company by virtue of their brute majority.

l) The Respondents did not stop the acts of mismanagement and again called another Meeting of the Board of Directors to be held on 07.10.2016, which was later postponed to 25.10.2016 as the petitioners were not available at that meeting. In the meeting, issue of further shares was raised again and was opposed by the petitioners. The proposal was put to vote and the 1 and 2 petitioner were present and voted against the proposal. The nominee Director of the 2 Respondent was present physically and voted for the resolution. The Respondent Nos. 4, 6 & 7 were not physically present at meeting. The petitioners have further alleged that the Respondent No. 4, 6 and 7 cannot be treated as being present in the meeting and their votes cannot be counted as they did not comply with requirements of Rule 3 of the Companies (Meetings of Board and its Powers) Rules, 2014. They have conducted the said Meeting of the Board of Director on 28.10.2016 and took decisions as they have proposed, which are contrary to Share Holders Agreement.

m) In pursuant to the above decision, Respondents called another meeting on 23.11.2016 for considering consequential allotment of shares under garb of rights issue.

n) The Petitioners also alleges several violations with regard to all Internal auditors/SWOT Team coming in from Singapore are restricted to COO, VP Finance and Head Operations and no third person is introduced or any Head of Department opinion is sought, everything is stage managed by the Respondents.

o) The Petitioners, therefore, submits that the acts of the respondents are harsh, burdensome and oppressive and situation warrants the winding up of the R1 Company and it would unfairly prejudice the Petitioners and shareholders of R1 Company, who have invested their hard earned money, the same would not be in the interest of Petitioners and the R1 Company. Therefore, petitioner has sought several alternative reliefs such as to declare the acts of Respondents No. 2 to 7 are prejudicial to the interest of the R1 Company and are oppressive against the Petitioners. The petitioners further prayed that to direct action against the Respondents for acts of misfeasance and order recovery of sum due from them and prohibit them from interfering in the day-to-day affairs and management of the R1 Company etc.

3. The brief contentions/averments made in the C.A No. 51/2016, which are relevant for adjudication of the case, are as follows:—

(a) The Respondent No. 1 to 3 have filed Company Petition No. 19/2016, in order to agitate issues, which arises solely under the shareholders agreement (SHA) dated 18.02.2015 (SHA) which was entered into among applicant herein, Respondent No. 4 Company, and other shareholders of Respondent No. 1 Company.

(b) Article 9 of SHA set out procedure in the event of a dispute under the said agreement is as under:—

(i) Notice: In the event any party is in breach of any of the terms of this Agreement, the other party(ies) may serve written notice to require the party in breach to cure such breach within thirty (30) business days of the receipt of such written notice thereof provided that time period for cure of breach shall exclude the time required by a party to obtain any consent/approval from the Governmental Authority in relation to cure of such breach.

(ii) Amicable Resolution: In the case of any dispute or claim (“Dispute”) of whatever nature arising under, out of or between the parties, in connection with or relating to the enforcement, interpretation or performance of the terms and conditions of this Agreement, or any provision thereof, including any purported termination or invalidity hereof, or the breach (where such breach has not been cured by the party in breach within thirty (30) business days of a written notice thereof), the parties shall attempt to first resolve such dispute through good faith negotiation and discussions between the designated shareholder and parkway.

(iii) Arbitration: If the dispute is not resolved through such discussions within thirty (30) business days of the dispute having arisen, then such dispute shall be referred to and resolved in accordance with the Singapore International Arbitration Centre Rules (SIAC Rules) for the time being in force, at the request in writing of any Party to the dispute to binding arbitration by a panel of three (3) arbitrators be nominated by the parties to the dispute in accordance with the provisions of this section 19.3 In the event a dispute arises prior to the effective date, the existing shareholder(s) and the company shall jointly nominate one (1) arbitrator, Parkway shall nominate one (1) arbitrator and the two (2) arbitrators so nominated by the parties shall appoint the third arbitrator who (a) shall be of a nationality other than Indian or Singaporean; and (b) shall be the presiding arbitrator. In the event a dispute arises after the effective date, majority shareholders and the company shall jointly nominate one (1) arbitrator, the minority shareholder(s) shall nominate one (1) arbitrator and the two (2) arbitrators so nominated by the parties shall appoint the third arbitrator who (a) shall be of a nationality other than Indian or Singaporean; and (b) shall be the presiding arbitrator. In the event the three (3) arbitrators are not appointed (in the matter contemplated above) within a period of thirty (30) days from the date on which the aforesaid written request was received by a Party to the Dispute, a panel of three (3) arbitrators shall be appointed (the Arbitration Board) in accordance with the SIAC Rules. In the event there is a conflict between the aforementioned procedure and the SIAC Rules, necessary modification (to the extent of conflict) should be made to the aforementioned procedure to ensure that to the maximum extent commercial intent of the parties is implemented. All arbitration proceedings shall be conducted in the English language and the swat of arbitration shall be Singapore and venue of arbitration shall be Singapore. The governing Law specified in Article XVIII. Judgement upon any arbitral award rendered hereunder may be entered in any court having jurisdiction, or application may be made to such court for a judicial acceptance of the award and an order of enforcement, as the case may be.

(iv) Good Faith: Each party shall co-operate in good faith to expedite (to the maximum extent practicable) the conduct of any arbitral proceedings commenced under this agreement.

(v) Final and Binding: Subject to applicable law, any award made by the Arbitration Board shall be final and binding on each of the parties that were parties to the dispute.

(vi) Interim Relief: Nothing shall preclude a party from seeking interim or permanent equitable or injunctive relief, or both, from any court having jurisdiction to grant the same. The pursuit of equitable or injunctive relief shall not be a waiver of the duty of the parties to pursue any remedy for monetary damages through the arbitration described in this Article XIX.

c) In pursuant to the above SHA, Respondent No. 1 to 3 herein by invoking said dispute resolution clause sent a notice dated 11.11.2016 In the notice, the Respondent No. 1 alleged certain violation of SHA and contended that the proposed rights issue by the Respondent No. 4 is a violation of various clauses of SHA. It is also stated that within 30 days of that notice, the Applicant is called upon to meet the Petitioner of CP, so as to attempt to amicably resolve the dispute. However, without completion of the said 30 days period have not yet been expired and while the discussions were going on between the parties, the present company petitioner has been filed before this Tribunal.

d) The Applicant contends that the Petitioners of CP has suppressed the said notice and also SHA. It is contended that the Petitioner of CP have themselves recognised that the dispute in question in CP is covered by contractual dispute redressal mechanism as set out in SHA. So it is contended that issue can be referred to Arbitration. The Respondent herein is estopped from filing present CP after invoking Arbitration clause as mentioned above.

e) Before expiry of stipulated period of 30 days mentioned in the said notice, present CP is filed prematurely. It is alleged that the Respondent/Petitioners have acted in malafide and in a vexatious manner and sought to dress up the Petition so as to invoke the jurisdiction of this Tribunal.

f) There is a valid and subsisting Arbitration Agreement between the applicant and the Respondent herein and the Arbitratory Tribunal constituted under the Arbitration Agreement will be fully competent to adjudicate upon disputes that may be referred to it by the parties. Hence, they sought a direction to refer the parties to arbitration in accordance with the Arbitration agreement as set out in SHA.

4. Shri R. Raghunandan Rao, learned Senior Counsel for the Respondents No. 1 to 3.Petitioners, has filed a counter dated 08 December, 2016 followed by Written submission dated 20.02.2017, by inter-alia;:, contending as follows:—

(a) This Tribunal is constituted by expressly prohibiting jurisdiction of all Civil Court u/s. 430 of the Companies Act, 2013. So present petitioner is fully maintainable before this Tribunal and the jurisdiction of Arbitratory Tribunal is clearly barred. This Tribunal has only powers to pass any orders.

(b) This Tribunal has powers under section 337 to 341 of the Companies Act, 2013 to prosecute delinquent officers of a Company, to assess damages against delinquent directors to levy penalties for committing frauds and for not maintaining proper accounts etc. The powers conferred exclusively to this Tribunal in relation to an application/petition filed u/s. 241. This Tribunal is only empowered to protect the minority shareholders as against oppressive or prejudicial acts of majority shareholders. The Arbitrary Tribunal being creature of a contract has limited scope as specified in the arbitration. It is also contended that Section 45 of Arbitration and Conciliation Act, 1996 mandates a judicial authority to refer the parties to arbitration only in a matter in respect of which the parties have made an agreement. Though Arbitratory Tribunal can adjudicate the issues raised in the SHA, Page 10 of 30 but it is beyond the scope of the Arbitratory Tribunal the matters raised in the Company petition.

(c) R1 Company has contravened various Articles of Association, provisions of Companies Act, and also SHA dated 18.02.2015 It is not correct to say that notice dated 11.11.2016 is suppressed and present case is filed independent of contents of notice basing on various oppressive acts and mis-management being committed by Respondents CP and all these violations fall within jurisdictions of this Honble Tribunal.

(d) It is further contended issuance of notice does not amount to waiver of statutory right. It is denied that issues raised in Company petitioner is covered by the Shareholders Agreement and pointed several acts of oppression and managements, which are in any case, cannot be redressed by the Arbitral Tribunal.

(e) The learned Senior Counsel relied upon the following judgements in support of his case:—

1. N. Radhakrishnan v. Maestro Engineerings, (2010) 1 SCC 72-wherein it is inter alia held that the Civil Court can refuse to refer matter to arbitration if complicated question of fact or law is involved or where an allegation of fraud is made.

2. Booz Allen and Hamilton Inc v. SBI Home Finance Limited, (2011) 5 SCC 532-wherein, it is interalia held meaning of the term ‘arbitrability’ and the three facets to ‘arbitrability’.

3. Haryana Telecom Ltd. v. Sterlite Industries (India) Ltd.., (1999) 5 SCC 688-wherein it is interalia held as to what can be referred to arbitrators is only that dispute or matter which the arbitrator is competent or empowered to decide.

4. Sadbhav Infrastructure Project Limited v. Company Law Board, (2014) SCC Online GUJ 5398-wherein it is discussed the scope of jurisdiction of arbitrator vis-a-vis the special and exclusive jurisdiction conferred upon the CLB under Section 397/398 read with Section 402 of the Companies Act, 1956.

5. Surendra Kumar Dhawan v. R. Vir, (1974) SCC Online DEL 101-wherein it is stated that the jurisdiction of the Company Court under Section 397/398 and 433 of the Companies Act, 1956 cannot be ousted by an arbitration clause.

6. Rakesh Malhotra v. Rajinder Kumar Malhotra, (2015) 192 Comp Cas 516-wherein it is interalia held that the disputes in a petition property brought under Section 397 and 398 read with Section 402 are not capable of being referred to arbitration, having regard to the nature and source of the power invoked.

7. State Bank of Travancore v. Kingston Computers India Private Limited, (2011) 11 SCC 524-wherein it is stated that Suit filed by person not duly authorised by the company is not maintainable (in this case the application filed under Section 45 of the Arbitration and Conciliation Act, 1996).

f) The Learned Senior counsel has also filed a table showing as how the judgements relied upon by the Learned Senior Counsel are not applicable to the facts and circumstance of case.

5. Shri Rajeev Nayar, learned Sr. Counsel for the Applicants/Respondent No. 2, after arguing the case, has also filed his written submissions on 20.02.2017 The sum and substance of the written submissions are as follows:—

i) Article 19 of SHA has set out the procedure in the event of dispute arising out of SHA, and the above cause is typical example of dispute resolution clause of widest amplitude. Article 19.3 of SHA provides that parties will be referred to an Arbitral Tribunal seated in the Singapore and functioning under the auspices of Singapore International Arbitration Centre, being governed by the Rules of the Singapore International Arbitration Centre, 2016 (“SIAC Rules”). The Respondent/Petitioner has already adopted the above procedure by their election to arbitrate as communicated to the Applicant/R2, vide Notice of Dispute dated 11.11.2016 The Petitioners vide its response dated 09.02.2017 have reiterated their stand that arbitration agreement is operative and valid, and in fact has been acted upon by the bay way Notice of Dispute.

ii) The learned Senior Counsel has filed a table, wherein it is pointed out that all the allegations made by the Petitioners of the CP arise out of SHA only. And dispute raised in the present Company Petition must be referred to Arbitration u/s. Section 45 of Arbitration and Conciliation Act, 1996, which are extracted below:

“45. Power of judicial authority to refer parties to arbitration — Notwithstanding anything contained in Part I or in the Code of Civil procedure, 1908 (5 of 1908) a judicial authority, when seized of an action in a matter in respect of which the parties have made an agreement referred to in Section 44, shall at the request of one of the parties or any person claiming through or under him, refer the parties to arbitration, unless it finds that the said agreement is null and void, inoperative or incapable of being performed”.

Section 44 defines an agreement referred to in Section 45 as ‘an agreement in writing for arbitration to which the convention set, forth in the First Schedule applies’. This convention is known as the Convention on the Recognition and enforcement of foreign Arbitral Awards, 1958. The India is a signatory to this convention and has incorporated the convention in the First Schedule to the 1996 Act. Article II of the First Schedule sets out the requirement for an arbitration agreement:

“1. Each Contracting State shall recognise an agreement in writing under which the parties undertake to submit to arbitration all or any differences which have arisen or which may arise between them in respect of defined legal relationship, whether contractual or not, concerning a subject matter capable of settlement by arbitration.

2. The term ‘agreement in writing’ shall include an arbitral clause in a contract or an arbitration agreement, signed by the parties or contained in an exchange of letters or telegrams.

3. The Court of a Contracting State, when seized of an action in matter in respect of which the parties have made an agreement within the meaning of this article, shall, at the request of one of the parties, refer the parties to arbitration, unless it finds that the said agreement is null and void, inoperative and incapable of being performed”

iii) Therefore, the Learned Senior Counsel submit that there is an Article 19 in SHA in question where in arbitration agreement as referred to in Section 44 and Section 45 of the 1996 Act exists. And SHA is not in dispute between parties. In Sasan Power Limited v. North American Coal Corporation India Private Limited, the Hon'ble Supreme Court observed that—

“45[-] It can be seen from Section 45 that a judicial authority in this country when seized of an action in a matter in respect of which the parties have made an agreement referred to in Section 44 ‘shall refer the parties to arbitration’ at the request of one of the parties to the agreement. The agreement referred to in Section 45 is one contemplated in Section 44. Section 44 contemplates an arbitration agreement to which the New York Convention applies.

46. Section 45 permits an enquiry into the question whether the arbitration agreement is ‘null and void, inoperative and incapable of being performed’.

iv) The learned Counsel submits that only point for consideration is whether the Arbitration Agreement in question (SHA) is null and void, inoperative and incapable of being performed. It is contended that the Article 19 of SHA is not at all affected by any of these factors, as the notice of dispute in question will not have any doubt about those factors. When the Arbitration agreement was not in dispute, a Court/Judicial Authority is mandatorily required to refer parties to Arbitration. In this regard, the Learned Senior Counsel heavily relied upon the Sasan Power Limited.

v) The Learned Senior Counsel further contended that it is not correct to say that acts of oppression/mismanagement cannot be considered to be non-arbitrable. He has relied upon in A. Ayyasamy v. A. Paramasivam, (2016) 10 SCC 386-the Apex court held that—

“32. The Arbitration and Conciliation Act, 1996 does not in specific terms exclude any category of disputes-civil or commercial-from arbitr ability. Intrinsic legislative material is in fact to the contrary. Section 8 contains a mandate that where an action is brought before a judicial authority in a matter which is the subject of an arbitration agreement, parties shall be referred by it to arbitration, if a party to or a person claiming through a party to the arbitration agreement applies not later than the date of submitting the first statement on the substance of the dispute. The only exception is where the authority finds prima facie that there is no valid arbitration agreement. Section 8 contains a positive mandate and obligates the judicial authority to refer parties to arbitration in terms of the arbitration agreement.

35. Ordinarily every civil or commercial dispute whether based on contract or otherwise which is capable of being decided by a civil court is in principle capable of being adjudicated upon and resolved by arbitration “subject to the dispute of being governed but the arbitration agreement” unless the jurisdiction of the Arbitral Tribunal is excluded either expressly or by necessary implication. In Booz-Allen and Hamilton Inc. v. SBI Home P. Finance Ltd., this Court held that adjudication of certain categories of proceedings is reserved by the legislature exclusively for public fora as a matter of public policy. Certain other categories of cases, though not exclusively reserved for adjudication by courts and tribunals may be necessary implication stand excluded from the purview of private fora. […] This Court held that this class of actions operates in rem, which is a right exercisable against the world at allege as contrasted with a right in personam which is an interest protected against specified individuals. All disputes relating to rights in personam are considered to be amenable to arbitration while rights in rem are required to be adjudicated by courts and public tribunals”.

vi) In view of the above the learned Senior Counsel contended that the alleged acts of oppression and mismanagement in main CP are rights in personam and thus they are arbitrable as per the judgement of Hon'ble Supreme Court. The same ratio has been followed in Naveen Kedia v. Chennai Power Generation Ltd., wherein the Hon'ble Principal Bench of CLB has considered the issue of arbitrable of the issues raised under Section 397/398 of the CA 1956 and it is held as follows:

The CLB is a judicial authority and this fact is not controverted. It has been seized of a matter in which, as elaborated earlier, there is an agreement between the parties for arbitration. The petitioners did not advance any arguments to convince us that the agreement is null and void, inoperative or incapable of being performed. […] Thus, all the ingredients of Section 45 of the Arbitration and Conciliation Act, 1996, are present. Once it is so, we feel that there is no further scope for us to take into consideration the argument of Shri singh about the statutory rights of the shareholders to move the CLB, and that a specially constituted Tribunal cannot adjudicate is jurisdiction, etc. We have to do what the law mandates us to do. Section 45 required us to refer the parties to arbitration, and we have no discretion in this matter”.

vii) The learned Counsel further submits that Article 15 and Article 19.6 of SHS do not provide the Petitioner in CP with an option of avoiding duty to refer to Arbitration. The contention of the petition in that regard is not at all correct. Article 15 deals as under—

Article XV

Specific Performance

Each of the parties shall be entitled to an injunction, restraining over, right for recovery, shit for specific performance or such other equitable relief as a court of competent jurisdiction may deem necessary or appropriate to restrain the other parties from committing any violation or enforce the performance of the covenants, representations and obligations contained in this Agreement”.

The Petitioners seek to misinterpret Article 15 as providing another forum for raising disputes arising out of SHA. This is incorrect. Article 15 only sets out the kind/nature of remedy that parties to the SHA may obtain in relation to any action filed before the designated forum, i.e an arbitral tribunal seated in Singapore. This becomes clear on a bare reading of Article 14.2 which precedes Article 15—

14.2 Nothing contained in this Article XIV or elsewhere in this Agreement shall be construed as limiting a Non-Defaulting Party's right to seek remedies including damages or where damages are not adequate remedy, specific performance under the due process of law against a Defaulting Party”.

viii) It is contended that Arbitral Tribunal has power to grant equitable relief including relief or specific performance. In support of his contention, he has relied upon Olympus Superstructures Private Limited v. Meena Vijay Khetan-wherein the Apex Court held that—

“34. We are of the view that the right to specific performance of an agreement of sale deals with contractual rights and it is certainly open to the parties to agree-with a view to shorten litigation in regular courts-to refer the issues relating to specific performance to arbitration. There is no prohibition in the Specific Relief Act, 1963 that issues relating to specific performance of contract relating to immovable property cannot be referred to arbitration. Nor is there such a prohibition contained in the Arbitration and Conciliation Act, 1996 as contrasted with Section 15 of the English Arbitration Act, 1950 or Section 48(5)(b) of the English Arbitration Act, 1996 which contained a prohibition relating to specific performance of contracts concerning immovable property. […]

36. Further, as pointed out in the Calcutta case [Apo 498 of 1997 & Apo 449 of (401) dated 27.01.1998 (Cal).] merely because there is need for exercise of discretion in case of specific performance, it cannot be said that only the civil court can exercise such a discretion. In the above case, Ms. Ruma Pal J, observed:

“…merely because the sections of the Specific Relief Act confer discretion on courts to grant specific performance of a contract does not mean that parties cannot agree that the discretion will be exercised by a forum of their choice. If the converse were true, then whenever a relief is dependent upon the exercise of discretion of a court by statute e.g the grant of interest or costs, parties could be precluded from referring the dispute to arbitration.”

We agree with this reasoning. We hold on Point 3 that dispute relating to specific performance of a contract can be referred to arbitration and Section 34(2)(b)(i) is not attracted. We overrule the view of the Delhi High Court. Point 3 is decided in favour of the respondents”.

ix) The learned Counsel by referring SIAC Rules, submitted that the Arbitral Tribunal has power to award equitable relief including interim relief. He has cited rule 27, 30, 31.1 and 30.2, which reads as under:

Rule 27-Additional Powers of the Tribunal-Unless otherwise agreed by the parties, in addition to the other powers specified in these Rules, and except as prohibited by the mandatory rules of law applicable to the arbitration, the Tribunal shall have the power to: […]

(e) order the preservation, storage, sale or disposal of any property or tern which is or forms part of the subject matter of the dispute;

(i) direct any party to take or refrain from taking actions to ensure that any Award which may be made in the arbitration is not rendered ineffectual by the dissipation of assets by a party or otherwise. […]

(k) order any party to provide security for all or part of aby amount in dispute in the arbitration; […]

Rule 30-Interim and Emergency Interim Relief

Rule 30.1-The Tribunal may, at the request of a party, issue an order or an Award granting an injunction or any other interim reliefs it deems appropriate. The Tribunal may order the party requesting interim relief to provide appropriate security in connection with the relief sought.

Rule 30.2-a party that wishes to seek emergency interim relief prior to the constitution of the Tribunal may apply for such relief pursuant to the procedures set forth in Schedule 1

x) The learned Senior Counsel has filed an affidavit dated 17 February, 2017 and stated as follows:

i) GDPL has given undertaking vide letter dated 7 February, 2017 to respondent No. 1 to 3 herein declaring that GDPL would not claim dividend over: encumber or transfer over disputed allotment of shares of 38,07,106 in question (Rights issue shares), until an interim order in respect of DGPL Rights issue shares has been passed under SIAC Rules, 2016, however, subject to accepting to refer issue to Arbitration under SIAC by the petitioners of CP (respondents No. 1 to 3 herein).

ii) Continental Hospital Private Limited, has given a response dated 16 February, 2017 to GDPL by inter-alia stating that it has no objection to above undertaking, with a copy marked to respondent No. 1 to 3 herein.

iii) When GDPL did not receive any reply from respondent No. 1 to 3, they have sent emails dated 17 February, 2017 asking them whether they are willing or not for said undertaking.

iv) In the above circumstances, Allen & Gledhill have sent email dated 27 January 2017, on behalf of GDPL and Continental Hospital (claimants), to respondent No. 1 to 3 by giving a Notice of Arbitration to file their response with the Registrar of SIAC in accordance with Rule 4.1 of SIAC Rules, 2016. Allen & Gledhill have also sent email dated 27 January, 2017 to Registrar of Singapore International Arbitration Centre, situated in Singapore by enclosing claimants notice of Arbitration dated 27 January, 2017 and a cheque for S. $2,140.00 being claimants payment of filing fee.

v) In response to above Notice of Arbitration, a preliminary response dated 9 February, 2017 was filed in the Matter of the International Arbitration Act (CAP. 143A) Singapore by inter-alia contending and disputing several averments of claimants and also nominated its Arbitrator by name Honble Mr. Justice, R.V Raveendran Former Judgement of Supreme Court of India, under rule 4.1(h) read with Rule 28.3 and clause 19.3 of the SHA.

vi) Therefore, the Learned Senior Counsel has asserted that Arbitration proceedings have commenced in Singapore with both parties participating in the proceedings and thus prayed the Tribunal to dispose off the present application under Section 45 of Arbitration Act.

xi) The learned Senior Counsel has relied upon the following judgements by pointing relevant points in those judgements, relating to present case:—

i) On the point of that unless the Arbitration Agreement is null and void, inoperative or incapable of being performed, a judicial authority will mandatorily refer parties to arbitration under Section 45. In support of this proposition of law, the following judgements were relied upon:

a) Sasan Power Limited v. North American Coal Corporation India Private Limited-Civil Appeal No. 8299 of 2016-Judgment Dated 24.08.2016

b) Bhadresh Kantilal shah v. Magotteaux International, (2002) 111 Comp Cas 111

c) Chloro Controls India private Limited v. Severn Trent Water Purification inc., (2013) 1 SCC 641

ii) On the point of Scope of Section 45 vis-a-vis oppression/mismanagement actions before the CLB/NCLT, the following judgements were relied upon:

a) Chatterjee Petrochem (India) Private Limited v. Haldia Petrochemicals Limited, (2011) 10 SCC 466

b) Akshay Raheja v. Gopal Narang-C.A No. 233/2013 in C.P No. 89/2013 Judgment Date 25.11.2013 (CLB-Mumbai Bench)

c) Sidharth Gupta v. Getit Infoservices Private Limited and others-C.A No. 128.CII/2014 in CP 64(ND)/2014 Judgment Dated 23.02.2016 (CLB-New Delhi)

d) Demerara Distilleries Private Limited v. Demerara Distilleries Limited, (2015) 13 SCC 610

e) Demerara Distilleries Limited v. Demerara Distilleries Private Limited, Judgment Dated 09.12.2016 of NCLT Hyderabad Bench in C.A No. 163/2012 in C.P No. 83/2012.

iii) On the point that in the presence of alternative efficacious remedy such as arbitration, a court will not assume jurisdiction to hear the dispute, the following judgements are relied upon;

a) Empire Jute Company Limited v. Jute Corporation of India Limited, (2007) 14 SCC 680

b) Gail (India) Limited v. Gujarat State Petroleum Corporation Limited, (2014) 1 SCC 329

iv) On the point that a Clause in a contract providing for specific performance of certain obligations including a provision for injunction does not result in the ouster of an arbitration clause, the following judgements are relied upon:

a) Clearwater Capital Partners (Cyprus) Limited v. Satyajit Singh Majithia, (2012) 128 DRJ 478

b) Svenska Handelsbanken v. Indian Charge Chrome Limited, (1994) 2 SCC 155

c) Devinder Kumar Gupta, (Dr.)… v. Realogy Corporation & Anr.…., (2011) 125 DRJ 129 (DB)

d) A. Ayyasamy v. A. Paramasivam, (2016) 10 SCC 386

e) Roshan Lal Gupta v. Parasuram Holdings Private Limtied, (2009) 109 DRJ 101

f) Sundaram Finance Limited v. T. Thankam, (2015) 14 SCC 444

g) Arti Jethani v. Daehsan Trading (India) Private Limtied, (2011) VI ILR 319 (DEL)

v) On the point that once having elected to initiate arbitration, the petitioners are now estopped from approaching the NCLT for the same relief, the following judgements relied upon;

a) Mumbai International Airport Private Limited v. Golden Chariot Airport, (2010) 10 SCC 422

b) Akshay Raheja v. Gopal Narang, Judgment Dated 25.11.2013 in C.A No. 233/2013 in C.P No. 89/2013 [Stated above at (ii)(b)]

vi) On the point that the petition filed before the NCLT must stand on its own and subsequent events may not be considered at the state of maintainability of the petition: he relied upon following judgements;

a) Jer Rutton Kavasmaneck v. Gharda Chemicals, (2000) 2 Bom CR 56

b) P.P Zibi Jose v. Kalabhavan Studios, Judgment dated 16.12.2011, in C.P No. 32/2009 (CLB-Chennai Bench).

c) Karedia Suryanarayan v. Sri Ram Dass Motor Transport Private Limited, (1998) 92 Comp Cas 275 (CLB Principal Bench).

6. Mr. Rajeev Nayar, has summed up his arguments that the applicants fulfil all requisite conditions both in facts and law so as to refer to Arbitral Tribunal under SIAC rules, 2016. And the parties have also chosen it though respondent No. 1 to 3 have some reservation on the issue in question.

7. Mr. M. Ashwin Reddy, on behalf of Continental Hospitals Private Limited (respondent No. 4 herein) has filed a reply dated 8 December, 2016 signed by Mr. P. Murali, and thus contends that SHA in question was duly entered into among all parties and the same is binding on them. And Article 19 of SHA provides for a way of settling disputes between parties through an arbitration seated in Singapore under the Singapore International Arbitration Centre (SIAC) Rules. So he has supported the Application to refer the matter to arbitration.

8. In view of the above facts and circumstances of the case, the following main issues arise for consideration:—

a) Whether only this Tribunal alone, not arbitral Tribunal, has jurisdiction to adjudicate issues raised in the Company petition;

b) Whether issues in question arise mainly out of Share Holders Agreement dated 18 February, 2015 and what is binding nature of this agreement;

c) Whether the alleged acts of oppression and mismanagement as alleged by the petitioner are independent of violations of SHA in question;

d) Whether any prejudice would cause to any of parties, if parties are referred/advised to prosecute remedy of arbitration as available in SHA in question;

9. Before considering the above issues, it is necessary to advert to the brief history of the case as mentioned supra. The Continental Hospital Private Limited was incorporated under the provisions of Companies Act, 1956 on 16.01.2007 with main objects of establishing, construct, improve hospitals, dispensary and clinics etc. The 1 petitioner stated to have an illustrious medical career and the 2 Petitioner is having experience in food technology and thus established industry in Vijayawada. In order to set up a Hospital, the 1 Petitioner along with his family members has set up R1 Hospital with 300 bed capacity spreading over 18 floors in the year 2013. The Hospital got recognition very soon in the management of the Hospital in less than 2 years. In order to invite more investment in the hospital, the Petitioners have permitted the 2 Respondent to participate in the R1 Company by agreeing to allow a total 51% of the share capital of the R1 Company. Accordingly, the Petitioners, Continental Hospital and the second Respondent (GDPL) have entered into several agreements like SHA, Share Subscription Agreement, Shareholder Agreement all dated 18.02.2015 In accordance with the above agreements, the 2 respondent has purchased 2,26,97,798 equity shares of Rs. 10/- each for a consideration of Rs. 41.22 per share from petitioners group and another 4,83,87,426 equity shares of Rs. 10/- for a consideration of 38.92 per share. So the petitioners have permitted the Respondents No. 2 to participate.

10. In order to develop R1 Company, further agreements were entered into between parties. In order to run Hospital effectively and to overcome losses, the R1 Company thought it fit get more funds through permissible sources as per terms of agreements already entered into. It is decided that additional capital is required for acquisition of medical equipment for infrastructure development. In the Share Holders Agreement dated 18 February, 2015, there is a provision under Article VII (Future Funding-guiding Principles) Clause 7.1 and 7.3 are relevant for the issue, which are extracted below for instant reference, as it has major bearing on this issue in question:

“7.1 Pursuant to the share holders intention to cause the Company to become a financially independent entity, the shareholders understand and agree that in the even the Company requires funding after it has been capitalised in accordance with Article II (future funding) such Future Funding, shall be funded in the following order of priority…………………………..

“7.3 If the Board determines and demonstrates thorough documentary evidence or otherwise that despite having made best efforts, it is not possible for the Company to raise borrowings for funding expansion, upgrade plans approved by the Board or if any propose borrowing (or part thereof) will breach any of the Leveraging Guidelines, then the Board will be entitled to require the shareholders by providing a notice of not less than sixty(60) days to make a capital contribution in their respective shareholding proportions to fund such amounts and each of Shareholders hereby un-conditionally agree to approve and contribute towards any such proposed rights issuance in accordance with the Act and cause the Company pass such shareholders resolutions as will be required by the Act to give effect to the same. The pricing at which future capital contribution shall occur will be the Fair Market Value determined in accordance with Article XIII”

11. As stated supra, the Respondents 1 to 3.petitioners, have opposed the proposals of R1 Company to infuse capital by way of rights issue, on one pretext or other and started raising several issues and thus started several correspondence with R1 Company and others respondents. The Respondent No. 1 to 3 were bent upon not to associate the proposal of Company to issue Rights shares in question but also refused to Contribute its proportionate shares when the Company offered. While discussions between the parties were continuing, the present Company petition is filed by seeking several reliefs as mentioned supra by alleging several acts of oppression and mismanagement under various provisions of the Companies Act, 2013.

12. It is to be pointed here that the second respondent and their representatives came into picture only when the Respondent No. 1 to 3.Petitioners have invited and offered shares in the R1 Company by entering into several agreements like SHA, Share holders agreement etc. all dated 18 February, 2015. We have perused all agreements, and found they are very meticulous and comprehensive with respect to every issue as to how manage affairs of Company and how to resolve dispute(s) if arise in future. It is not in dispute that in pursuance to above agreements; the applicant/2 Respondent has invested so much money by way of direct purchase of shares and transfer of shares as explained above. However, within a short span of time, the Respondent No. 1 to 3.petitioners have started raising several issues, and majority of those issues are purely administrative in nature and prima facie appears to have been taken in order to run the Hospital effectively and in the best interest of the R1 company.

13. It is relevant to point out here that SHA in question is very relevant to the present issue. In both the SHA and SPA, there is an arbitration clause available to resolve future dispute(s) by way of negotiation/discussion failing which by way of Arbitration. It is not in dispute that the parties are in discussion and also involved in correspondence over the issues/disputes arises between them at the time of filing present Company petition. It is also not in dispute that there is an alternative mechanism available by way of Arbitration as a last resort among the parties themselves. It is also not in dispute that after the parties failed to come to amicable settlement through discussions, the Petitioners of CP have invoked arbitration clause by-issue of notice dated 11.11.2016 However, without pursuing that remedy, the Respondent No. 1 to 3.Petitioners have approached this Tribunal by mainly contending that this Tribunal alone can adjudicate issues raised in Company petition.

14. It is not in dispute that the NCLT is having jurisdiction to adjudicate all issues arises in and out of normal functioning of Companies basing on Memorandum, Articles of Association, agreements/covenants etc. validly entered into by respective Companies and that too subject various provisions of the Companies Act, 1956/2013. It is to be pointed out herein that respective Companies will set up their business in their own perspective and carry their business accordingly. Of course, the affairs of a Company are required to be carried on subject to various provisions made under Companies Act, 1956/2013. This Tribunal is constituted under the Provisions of Companies Act, 2013 to adjudicate all issues comes under its jurisdiction. And approaching this Tribunal like any other Court is ultimate legal remedy available to parties after they have failed to settle their disputes amicably by discussion/settlement/arbitration. In any case, approaching this Tribunal immediately after parties encounter a dispute, that too without resorting to resolving their dispute in accordance with their set of mechanism is not tenable and the Tribunal should not encourage such course of action by parties.

15. There is no dispute that this Tribunal is empowered to adjudicate issues raised in the present Company petitioner. But the point for consideration is whether this Tribunal can step into disputes in question by overlooking their own mechanism as set out in their mutually agreed and executed SHA in question wherein an effective and alternative mechanism is provided. As stated supra, it is not the case of Respondent No. 1 to 3.petitioners that all discussions to settle issues in question failed miserably leaving them only alternative to approach this Tribunal. As stated supra, both the parties have ultimately agreed to submit to jurisdiction of Arbitral Tribunal under SIAC Rules, 2016. As stated supra, the applicant/respondent No. 2 herein along with Continental Hospital Private Limited (Respondent No. 2 of CP) have filed their claim statements and the Respondent No. 1 to 3 have also filed their preliminary Response to the Notice of Arbitration before International Arbitration Act (CAP 143A) of Singapore in accordance with SIAC rules. However, the Respondent No. 1 to 3 have filed their statement without prejudice to rights available before this Tribunal. It is to be mentioned herein that the Tribunal has entertained the Company petition, and also passed interim order(s) so as to protect interest of both parties as this Tribunal is empowered by the Act to entertain this Company petition. Accordingly, this Tribunal has entertained the present CP by ordering notice and passing appropriate interim orders also. Now, both the parties have placed their respective pleadings and law in their support and thus Tribunal is under legal obligation to see whether this Tribunal itself has to adjudicate issues in question in the first instance or to refer parties to exhaust their own mechanism as provided in their SHA in question to resolve their issues.

16. We have considered all the issues raised by the petitioner in Company petition. The major issue raised in the Company petition by the petitioner is that the Respondents of Company petition are managing the affairs of Company from Singapore without taking into consideration of ground realities as available in the Hospital and thus the Company is suffering losses and to cover up their losses, they are proposing the rights shares issue in question with an intention to dilute further the share holding Respondent No. 1 to 3.petitioners. As stated supra, SHA is very clear as to how raise capital of Company to meet capital expenditure and its development. We have perused all proceedings of Continental Hospital Private Limited with regarding issue of rights issue of shares and consequential offer and correspondence. We are of prima facie view that the respondent No. 1 to 3.petitioners were offered reasonable opportunity in taking decisions of Company, and whether decisions taken is right or wrong, this Tribunal is hardly having any jurisdictions to decide it. The Board and its shareholders are best judges to take any decisions in their own interest and in the interest of Company as a whole. Moreover, if those decisions are in variance with the terms and conditions of SHA in question, as stated supra, there is an alternative remedy available by way of amicable settlement failing which, there is an Arbitration clause.

17. We agree with Sri R. Raghunanda Rao, the learned Senior Counsel for the petitioners that powers of any arbitral tribunal are not comparable with that of Courts, and Arbitral Tribunal cannot grant the relief(s) which civil courts are empowered to. But that does not mean that there cannot be an alternative mechanism to resolve dispute(s) of parties. The Arbitration and Conciliation Act, 1996 was promulgated with an avowed to consolidate and amend the law relating to domestic arbitration, international commercial arbitration and enforcement of foreign arbitral awards as also to define the law relating to conciliation and for matters connected therewith or incidental thereto, in consonance with Model Law on International Commercial Arbitration, which is adopted in 1985 by the United Nations Commission on International Trade Law (UNCITRAL). Moreover, it is generally recognised in the Country, arbitration, conciliation is one of mode of resolving disputes. Courts/Tribunals are required give due consideration to various agreements/covenants/contracts made between/among parties and to advise/refer them to exhaust their own remedies before coming to regular civil Court/Tribunals. The Tribunal/courts are ultimately final remedy available to the aggrieved parties, after they fail to settle their disputes amicably by conciliation and arbitration by themselves. The issue to be considered in the present case is whether this Tribunal can bypass the alternative mechanism provided by the parties themselves by way of SHA, and it can directly take up the issue at the instance of one party, on the ground that Tribunal is having ample and wide, to resolve all issues and most of these are purely administrative in nature taken in ordinary course of business of the Company.

18. The Companies Acts, 1956/2013 have not defined as to what constitute acts of oppression and mismanagement under Sections 397/398 of 1956 Act and Ss. 241 & 242 of the Companies Act, 2013. It depends on case to case basis. In any case, alleged acts of oppression and mismanagements can be inferred basing on several acts covering reasonable period of time. As stated supra, the applicant/Respondent No. 2 has entered into business with Petitioners of CP only in the year 2015 by entering into several agreements and investing huge money into Company. So coming to this Tribunal soon by making several allegations of acts of Oppression and mismanagement coupled with other allegations, and that too, while discussions are in progress, and arbitration clause is available in SHA in question, is not tenable and the Tribunal should not be a party to such type of litigation. It is not the object of new Companies Act that Tribunal should interfere in trivial and investigate every baseless allegation(s) made by parties, on the contrary, it should facilitate to case business of Companies with its minimum interference in affairs of a Company so that economy of the Country should progress.

19. We have also gone through the Arbitrational rules of SIAC Rules, 2016, which came into force from 01.08.2016 It is not in dispute that as per the SHA, SIAC is the competent arbitrating authority to resolve the issues rose out of the said SHA. As rightly stated by Mr. Rajiv Nayar, the Senior Counsel for the applicant/respondent No. 2, the Singapore Arbitration Tribunal is empowered to grant various reliefs subject to justification of the case by parties. And it is competent to decide the issues raised in the present Company petition, and all major issues arises only out of the alleged violations of various clauses of SHA and major issue is rights share issue in question, and the remaining are consequential/incidental or purely administrative in nature happen in every Company in its normal course of business.

20. So far as the various citations relied upon by the learned Senior Counsels for both the parties, it is more or less settled position of law that once when an undisputed, valid, enforceable agreement exist between/among the parties with regard to the arbitration, the issue has to be referred to Arbitration, however subject to issue raised in a suit or litigation is arbitrable. Whether the issue raised in a litigation is arbitrable or not, would depend upon the facts and circumstances of each case as analysed by competent Court of law. The proposition of law as made by both the learned Senior Counsels are not in dispute. The only point for consideration is whether the issues raised in the present company petition come under arbitration as per terms of SHA is in question. As stated above, the Respondent No. 2 has entered into the business of R1 Company very recently i.e in the year 2015, and it is not tenable to approach this Tribunal by raising various contentions, that too, without resorting to alternative mechanism of Arbitration available to them. As stated supra, it respondent No. 1 to 3.petitioners, who have invoked the arbitration clause by issuing a notice of arbitration. However, they chose to approach this Tribunal also by raising several issues clubbing main rights share issue in question. In commercial world, it is order of the day that every dispute has to be settled/resolved between/among the parties themselves, first by negotiations, discussions and failing which by Arbitration. The Arbitration and Conciliation Act, 1996 is also one of the basic principle to encourage Reconciliation and arbitration among the parties to resolve the disputes rather than encouraging them to approach Courts which is a lengthy procedure involving time.

21. It is not in dispute that the Respondent No. 1 to 3.petitioners offered proportionate shares of rights issue in question. However, they did not accept it for the reasons best known to them. We have also examined the resolution(s) passed by the R1 Company for enhancing the share capital by way of the rights issue, and consequential actions and found that those decisions are taken duly following principles of natural justice and relevant law and thus we are of prima facie view that those decisions were taken in accordance with law and in best interest of Company. In any case, the validity of those decisions will be adjudicated by Arbitral Tribunal in question. As stated supra, the Applicant/Respondent No. 2, along with Continental Hospital has filed an undertaking by stating that they would not claim any benefit out of the shares earmarked to them out of the shares originally offered to Respondent No. 1 to 3.Petitioners till a final award is given by Arbitral Tribunal under SIAC Rules.

22. It is also on record that the applicant/respondent No. 2 along with Continental Hospital has already accepted and invoked arbitration clause by requesting Singapore International Arbitration Centre through Allen & Glendill LLP issuing a notice of Arbitration dated 27 January, 2017 to refer their dispute with respondents as set out in the notice be referred to arbitration in Singapore under SIAC Rules. In pursuant to the above, the respondents No. 1 to 3.petitioners have filed a Preliminary Response to the Notice of Arbitration dated 9 February, 2017 by nominating Justice Mr. Ravindran, Former Judge, Supreme Court of India as their nominated arbitrator in compliance with rule 4.1(h) read with Rule 28.3 and clause 19.3 of SHA.

23. In view of the above facts and circumstances of the case and law as discussed above, we are of the considered view that the main issues raised in the Company petition arises primarily out of SHA dated 18 February, 2015 which contains a valid arbitration clause as discussed supra and all the remaining issues are either consequential/related/trivial issues, which are not required to be considered by this Tribunal and they would entirely depend upon adjudication of main issues arises out of alleged violations of clauses of SHA. As there is a valid, enforceable, undisputed SHA dated 18 February, 2015 un-disputably exist between the parties, where an arbitration clause is available, it is mandatory for this Tribunal to refer the parties to the Arbitration under SIAC Rules, and the parties are at liberty to file final claims/pleas before Singapore Arbitration Tribunal. Various decisions as discussed above, which are relied upon by the Learned Senior counsel for the applicant/respondent No. 2 are also support the above decisions.

24. In the result Company application bearing C.A No. 51/2016 in C.P No. 19/241.HDB/2016 is allowed by referring the parties to Arbitration as prayed for and consequently disposed of C.P No. 19/241.HDB/2016 as not maintainable. The undertaking dated 7 February, 2017 given by applicant/Respondent No. 2 will remain in force till further orders to be passed by Singapore Arbitration Tribunal. We also make it clear that we have not expressed any final opinion on any issue(s) raised in the main Company petition and our opinion(s) expressed in this order are only prima facie so as to decide issue raised in CA No. 51 of 2016 and final adjudication will be made by Singapore Arbitral Tribunal under SIAC Rules, 2016. No order as to costs.