Myen Pte Ltd. v. Rahul Narang

1. By this order, I propose to dispose off the Company Application, being C.A No. 277 of 2014 filed in the above captioned Company Petition, under Section 45 of the Indian Arbitration and Reconciliation Act, 1996 (hereinafter referred to as “the Arbitration Act” in short) by the Respondent No. 2 praying therein to pass an order thereby referring the parties to arbitration in accordance with clause No. 28 of the Shareholders Agreement dated 16/7/2010 (hereinafter referred to as “SHA” in short) on the grounds stated in the Application.

2. Before dealing with the present application, I would like to mention facts in brief leading to filing of the present Company Petition.

3. The Petitioner has approached this Board by invoking the provisions contained in Sections 397, 398 read with Sections 402 and 403 of the Act complaining certain acts of oppression and mismanagement purportedly committed by the Respondents No. 2 to 4 in the conduct of the affairs of the Company and have sought various orders in terms of the prayers as contained in the Petition.

4. According to the Petition, the Respondent No. 1 Danone Narang Beverages Private Limited (hereinafter referred to as “the Company” in short) is a private limited company incorporated on 24/08/2007 under the provisions of the Companies Act, 1956.

5. It is a joint venture Company between the Petitioner and the Respondent No. 2. It appears that after negotiations in July 2010, the Respondent No. 2 agreed to invest Rs. 31,73,81,399/- to acquire 51% equity stake in the Company, Consequently, a Share Subscription Agreement dated July 15, 2010 (hereinafter “SHA”) came to be executed between the Petitioner, on one hand, and the Respondent No. 2, on the other hand, the Respondent No. 2 holds 10,921 shares constituting 51% of the issued, subscribed and paid up capital of the Company. The Petitioner holds the remaining shares 11,450 constituting 49% of the total equity shares. The another entity, namely, Narang Buzz Services Pvt. Ltd. holds 7 Shares of the Company.

6. The Company has been carrying on the business of producing, through contract manufacturing, and selling two branded products, viz. (i) mineral water bottled and marketed under the branch “Qua” and (ii) flavoured water bottled and marketed under the brand “Blue”. The Respondent No. 2 is an entity belonging to the Danone Group. The Respondent Nos. 3 and 4 are the Directors on the Board of Company nominated by the Respondent No. 2.Danone Group. The Respondent No. 3 is also the General Manager at Danone Waters, Asia, based in Indonesia and the Respondent No. 4 is also the Vice President, Finance Corporate at Danone Waters Asia, baseo in Singapore. Thus, both the Respondent Nos. 3 and 4 are the employees of Danone Group.

7. It seems, that the Company was doing well. However, certain disputes and differences arose between the two groups relating to conduct of the affairs of the Respondent No. 1 Company. Being aggrieved by the acts of the Respondents, the Petitioner approached the CLB for redressal of its grievances. The Petitioner has alleged various acts of oppression and mismanagement committed by the Respondent Nos. 2 and 3 in the conduct of affairs of the Company, which, in the nutshell, may be described as under:—

(i) Failure to meet the budget and strategic plan, and shortfall of funds only because of mismanagement by the Respondent Nos. 2 to 4.Danone Group in the conduct of affairs of the Respondent No. 1 Company.

(ii) Non performance of the CEO appointed by the Respondent No. 2.

(iii) Wrongful acts of the finance manager appointed by the Respondent No. 2.

(iv) Wrongful registration of brand ‘Blue’ by Danone Group to usurp and misappropriate the Company's assets,

(v) Deliberately not registering intellectual property rights of the brand “Qua” In the name of the Company and wrongful registration of brand “Qua” by Danone Group to usurp and misappropriate the Company's assets.

(vi) Unilateral termination of the Distribution Agreement.

(vii) Unilateral stoppage of production of “Blue” and “Qua”,

(viii) Acts of the Respondent No. 2 leading to losses in NDA, wherein the Petitioner holds 70.01% equity stake.

(ix) Proposal to buy out the Petitioner's stake at a highly reduced value.

8. Based on the above complaints, the Petitioner has sought various reliefs as contained in the petition.

9. Pursuant to advance notice served upon the Respondents, they appealed and the Respondent No. 2 filed the above captioned application under Section 45 of the Arbitration Act challenging the jurisdiction of the Company Law Board and seeking dismissal of the Petition inter alia on the grounds that the alleged claims and the purported grievances contained in the Petition are made on the basis of the contractual obligations of the parties, as contained in the SHA; that the Petitioner has deliberately cloaked the reliefs with the veneer of the petition under Section 397/398 of the Act for oppression and mismanagement only to dodge the terms and conditions contained in Clauses 27 and 28 of the Arbitration Act, which deal with the governing law and arbitration; that the Petition has been filed with mala fide intent by dressing up in a form of present petition to avoid adjudication of disputes by arbitration as agreed between the parties; that the disputes raised by the Petitioner, being contractual disputes, which fall within the scope of Clause No. 28 of the SHA, and therefore, the Petition deserves to be dismissed and the parties are required to be relegated to the arbitration in terms of the said Clause.

10. To the present Company Application, the Petitioner filed his Reply, whereby he denied the allegations that the Petition is a dressed up petition as alleged by the Respondent No. 2.Applicant herein. The Petitioner has also denied the allegation of filing the present Petition to coerce or unduly pressurize: the Respondent No. 2 with a mala fide or vexatious intent by dressing up in form of the present petition for oppression and mismanagement to avoid adjudication of the disputed by arbitration as agreed between the parties.

11. It is the case of the Petitioner that the Memorandum of Association and Articles of Association of a company are the charter documents that govern a company. According to the Petitioner, he and the Respondent No. 2 had entered into the SHA dated 16/7/2010 in order to form the Respondent No. 1 Company; that upon execution of the aforesaid agreement, the Articles of Association of the Respondent No. 1 Company were amended, pursuant to a special resolution passed in the EOGM held on 17/7/2010, inter alia incorporating the various provisions pursuant to the said Agreement. It of further stated by the Petitioner that the disputes between the partes hereto have arisen on account of the breaches committed by the Respondents of the provisions of the Articles of Association of the Company. It is further stated by the Petitioner that in addition to these breaches, the Respondents have also committed acts of oppression and mismanagement in the conduct of the affairs of the Company, which have compelled the Petitioner to approach Board for its redressal. It has been further averred that these acts are beyond the purview of the Articles of Association or the Shareholders Agreement, and therefore, the Petition Tiled by the Petitioner is maintainable in law and the provisions contained in Section 45 of the Arbitration Act has no application in so far as the instant Company Petition is concerned. It has been further alleged that this application has been filed maliciously by the Respondent No. 2 only to delay the hearing of the main petition, and therefore, the application deserves to be dismissed, and that since the Petitioner has a prima facie case in his favour, and the question of balance of convenience lies in his favour, he is entitled to ad-interim orders in term of the prayers contained in the Petition.

12. I have heard the Ld Counsels appearing on behalf of the parties and perused the record.

13. Mr. Janak Dwarkadas, Ld. Senior Counsel, appearing on behalf of the Respondent No. 2, submitted that the provisions contained in Section 45 of the Arbitration Act enjoin a judicial authority to refer the parties to arbitration, in case the requirements provided therein are satisfied. Referring the said provisions, the Ld. Sr. Counsel argued that if a judicial authority is seized of an action in a matter, in respect of which the parties have made an Agreement referred to in Section 44, such judicial authority shall, at the request of one of the parties or a 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. The Ld. Sr. Counse submitted that looking to the mandatory language of Section 45 of the Arbitration Act, it is mandatory for a judicial authority to refer the contractual disputes to arbitration once the necessary ingredients u/s. 45 of the Act are established. According to Ld. Sr. Counsel, as per the settled law, the parties cannot be permitted to avoid/evade an arbitration by approaching the CLB with a mala fide petition under Section 397/398 of the Companies Act that raises purely contractual issues and is merely a dressed up petition for oppression and mismanagement. In order to establish the essential ingredients of Section 45 of the Arbitration Act, the Ld. Sr. Counsel invited my attention to Clauses 27 and 23 of the Shareholders Agreement, which deal with the governing law and arbitration. Thereafter, the Ld. Sr. Counsel took me to the averments made in the Agreement to make out a case that the disputes raised are contractual in nature.

14. In order to substantiate the case of the Respondents, the Ld. Sr. Counsel contended that the Petitioner has alleged the issues relating to the failure to meet the budget, strategic plan/shortfall of funds, intellectual property of the brands “Qua” and “Blue” for seeking reliefs, which, according to him, are based on the allegations which are purely arising out of the terms and conditions of the Shareholders Agreement.

15. The Ld. Sr. Counsel appearing for the Respondent No. 2, then took me to the Shareholders Agreement, filed as Exhibit “A” along with the Petition, and submitted that the Clause 9 thereof captions “Management and Conduct of business”, Clauses 9.35 thereof stipulates appointment of nominees on the Board, Clause 11 captions “Strategic Plan and Budget”. Clauses 9.26 of the SMA postulates the management of the Company, which, according to the Ld. Sr. Counsel, comprehensively encompasses all the allegations made by the Petitioner in the Petition.

16. The Ld. Sr. Counsel next contended that the Respondents have not taken any steps to remove the CEO dispute the Petitioner's insistence therefor. On this aspect, the Ld. Sr. Counsel contended that sub-clause 11.8 of the SHA clearly stipulates that the Board will consider removal of the CEO in case of net sales being less than 80% of the sales provided for in the Budget or Interim Budget, as applicable. He, therefore, contended that the issue or removal of the CEO is purely a contractual dispute, furthermore, according to the Ld. Counsel, the dispute as to the appointment and performance of the CEO in another Company, namely, Narang Danone Access Private Limited, cannot be agitated in the present petition.

17. The Ld. Sr. Counsel then attracted my attention to Clauses 9.27 to 9.30 of the SHA to say that any grievances regarding the Finance Manager in terms of failure to perform his duty has to be decided on the basis of the expressed terms of the SHA contained therein.

18. The Ld. Counsel then submitted that the issue of ownership of the intellectual property rights of the Company also falls squarely within the Clause 6.4 of the SHA, which provides that only the trademark “Qua” is to be owned by the Company and Che same has already been assigned in favour of the Company vice a Deed of Assignment dated 16/7/2010.

19. The next answering the allegation with respect to the unauthorized registration of “Qua’ in the jurisdiction like Saudi Arabia, it was argued by the Ld. Sr. Counsel appearing for the Respondent No. 2 that the said registration was obtained in 2010 and the Petitioner was well aware of the existence of the registration even prior to entering into the joint venture, as is evident From the E-mail dated 31/5/2010 filed as Exhibit “RR” to the Petition. It was further contended that the allegation with respect of using the trademark was not only within the knowledge of the Petitioner, but also has been raised after prolonged period of 4 years, and no explanation has been given for making this complaint after such delayed period. Moreover, the issue of ownership of rights of “Qua” in all jurisdiction has to be decided solely in terms of SHA, which falls within the arbitration clause 28 of the SHA. It was further argued that in so far as the brand “Blue” is concerned, there is no contractual provision provided that the same should be owned by the Company. Still, if there is an issue who owns the trademark, the same has to be decided in the context of the contractual obligation, mutual rights and covenants agreed upon by the parties in terms of the SHA, for which this Board is not an appropriate forum.

20. It was further submitted that the alleged issue about I.P ownership of “Qua’ “B'lue” is mere an eyewash as the Petitioner has no concern whatsoever in the I.P ownership of “Qua” “B'lue” of the group companies.

21. Pointing out another accusation made by the Petitioner against the Respondents that the exclusive distributorship under the Distribution Agreement between Narang Beverages Pvt. Ltd. and Narang Access Pvt. Ltd. has been terminated without taking the affirmative vote of the Petitioner, it was contended that the issue of whether the affirmative vote is required or not, Involves an interpretation of the contractual terms only and the matter squarely falls within the scope of a dispute that can be referred to the Arbitration. According to the Id, Counsel, furthermore, Clause 21 of the Distribution Agreement Itself contains an arbitration clause under which any dispute between the parties thereto has to be referred to a sole arbitrator and such proceedings are to be governed by the Arbitrator. Act, and therefore the ??? of validity of termination can therefore be agitated by the parties to the Distribution Agreement under the Arbitration Clause contained in that Agreement.

22. Dealing with the next complaint made by the Petitioner that the Company is responsible for losses sustained by the NOA, which is a separate legal entity, it was contended by the Ld. Sr. Counsel that the Petitioner has no locus to make a claim regarding losses suffered by such an entity. Moreover, whether under the HAS the Company had any obligations towards IMDA is strictly to be construed in terms of the SHA and the Distribution Agreement alone. According to the Ld. Sr. Counsel, these are purely contractual issues that fall within the scope of the Arbitration Clause contained in Clause 28 of the SHA, over which this forum has no jurisdiction.

23. The Ld. Sr. Counsel then pointed out the next allegation made by the Petitioner in the Petition that the production of both the brands “B'lue” and “Qua” has been stopped unilaterally by the Company. Replying to the allegation of the Petitioner, it was argued by the Ld. Sr. Counsel that the Petitioners well aware of the precarious financial position of the Company and negative cash flows owing to the Petitioner's refusal to infuse funds in the Company to meet costs of marketing the products in India and the Petitioner's insistence that the Company not to undertake any further debt to meet its cash flow requirements, and poor performance of NDA represented by NDA's failure to meet liabilities of DNB on time, and the present outstanding liability Peng INR 5.4 Crores. In this connection, the Ld. Sr. Counsel has invited my attention to Clause 5 of the SHA to contend that the parties had always envisaged that there may be a requirement for further funding and capitalization of the Company as provided in Clause 5 of the SHA, to which the Petitioner failed to fulfill his part of obligations. Summing up his arguments, the Ld. Sr. Counsel submitted that the disputes raised by the Petitioner in the Company Petition should be referred to Arbitration pursuant to Clause 28 of the SHA and the Petition may be dismissed.

24. The Ld. Sr. Counsel has also invited my attention to the various correspondences available on record in this, according to the Ld. Sr. Counsel appearing for the Respondent No. 2, the Petitioner has himself relied upon various provisions of the Clauses of the SHA. It was, therefore, argued that it is evident from the close ??? petition as a whole that the pleadings and the documents that form the subject matter of the controversy between the parties is covered entirely by the Clauses of the SHA. The Ld. Sr. Counsel has placed heavy reliance in the decisions rendered by the Hon'ble High Court of Bombay in the cases of (i) Rakesh Malhotra v. Rajinder Malhota and (ii) Bharat Kantilal Shah.

25. Mr. Sudipto Sarkar, Ld. Counsel representing the Petitioner, replying to the contentions raised by the Respondent No. 2's Counsel, argued that the Memorandum of Association (MQA) and Articles of Association (AOA) of the Company are charter documents that govern the Company. The Ld. Counsel submitted that the SHA was entered on 16/07/2010 inter alia between the Petitioner and the Respondent No. 2. The Ld. Counsel pointed out that upon execution of the aforesaid documents, the AOA of the Company were amended pursuant to the Special Resolution passed in the EOGM held on 17/7/2010 inter alia incorporating various provisions of Arbitration Agreement without Arbitration Clause. According to the Ld. Counsel, majority of the disputes had arisen on account of breaches committed by the Respondent Nos. 2 to 4 of the provisions of the AOA of the Company. In addition to the above, the Respondent Nos. 2 to 4 have also committed certain acts that have compelled the Petitioner to approach this Board and these acts, according to the Ld. Counsel, are beyond the purview of the AOA of the Company and the SHA, and tent amount to “oppression” and “mismanagement” as defined in Section 397/398 of the Act. The Ld. Counsel further contends that the word “matter” which appears in Section 45 of the Act must be one in respect of which there is an Arbitration Agreement, whereas in an action under oppression and mismanagement, the “matter is the one that lies under Sections 397 and 398 of the Companies Act, 1956 and invokes the CLB's powers conferred under the said provisions. As held in the case of Rakesh Malhota. The Ld. Counsel further contended that no arbitral tribunal can exercise powers to grant any of the reliefs as provided in Section 402(a) to (g) of the Act. Taking me through the reliefs sought for in the Petition, Ld. Counsel Mr. Sarkar submitted that a bare perusal of the reliefs sought for in the Petition, it is evident that the same can be granted by this Board.

26. Refuting the contentions of the Respondents' Counsel that the Petition is a dressed up petition, the Ld. Counsel appearing for the Petitioner submitted that a petition filed under ??? 397 and 398 of the Act must be read as a whole including its grounds and all the reliefs that are sought therein, and the same cannot be carved up or deconstructed so as to bring some matters within the Arbitration Agreement and leave other matters out. Referring the decision in the case of Rashtriya Ispat Nigam Ltd. v. Verma Transport Co., it was argued by the Ld. Counsel that for an application under Section 45 of the Act to succeed, the CLB ought to consider whether disputes raised in the Petition flied under Section 397/398 are capable of Doing adjudicated by an Arbitrator.

27. The Ld. Counsel representing the Petitioner further submitted that the Respondents, in order to pressurize the Petitioner, by their notice dated 29/10/2014, have invoked the arbitration clause before SIAC during the pendency of the captioned petition. Me attracted my attention to the Arbitration Notice dated 29/10/2014 and submitted that upon a bare perusal of the said notice it becomes evident that all the disputes raised are squarely cover in the captioned petition and the same are pending before this Board. The Ld. Counsel further submitted that the Respondents despite being well aware that this CLB is fully seized of all the disputes between the parties, the Respondent No. 2 has deliberately moved to the Arbitration with the sole intent of misleading the SIAC. According to the Ld. Counsel, this clearly shows the mala fide and ulterior motives of the Respondents However, the Ld. Counsel submitted that the matter is still pending before the SIAC for appointment of an Emergency Arbitrator. The Ld. Counsel then look me to various clauses of the AOA of the Company and submitted that the Respondent Nos. 2 to 4 have not only breached various terms of AOA of the Company taking advantage of the fact of being a majority of the shareholding of the Company, out also violated the I.P rights thereby mismanaging the affairs of the Company leading huge losses to the Petitioner and the Company. In this regard, the Ld. Counsel drew my attention to the unilateral stoppage of production of “Qua” and “Blue” and submitted that.

28. During the course of arguments, I felt that there was some confusion as to Whether pending an application under Section 8/45 of the Arbitration Act, urgent ad-interim reliefs may be considered or not. Therefore, this controversy requires to rest, before I proceed to consider the rival submissions on the merits.

29. It is to be noted here that the instant C.P was mentioned on 14/10/2014 by the Ld. Counsel representing the Petitioner and he pressed for consideration of ad-interim prayers stating the grounds for urgent hearing. However, the Ld. Sr. Counsel representing the Respondent No. 2 sought time to enable the Respondents to file their reply before consideration of the interim prayers. He further stated that the Respondent No. 2 wishes to file an application under Section 45 of the Arbitration Act in view of the Arbitration Clause contained in the SHA filed along with the Petition. The Board allowed his request and granted time to file a short reply opposing ad-interim prayers and to file an application under Section 45 if the Respondent No. 2 is so advised. Accordingly, the C.P was fixed on 14/10/2014 for hearing in respect of the interim reliefs.

30. On the said date, the Ld. Counsel for the Respondent No. 2 appeared and filed an application u/s. 45 of the Arbitration Act, along with a short Reply opposing the interim prayers sought by the Petitioner. On the said date, once again the Ld. Counsel Mr. Sarkar pressed for consideration of ad-interim prayers stating the grounds for urgent hearing. He further submitted that the Board is not powerless to consider the ad-interim prayers pending the said application under Section 45 of the Act.

31. Replying to the above submissions, the Ld. Sr. Counsel Mr. Janak Dwarkadas appearing for the Respondent No. 2, invited my attention to the Board's own order dated 29/10/2013 passed in the C.P No. 103/2013 (General Atlantic Singapore Fund Pvt. Ltd. v. Fourcee Infrastructure Equipments Pvt. Ltd.) and referring the said order, he contended that the Board should not and cannot have two different views on the similar question/issue. In order to justify his stand, Ld. Sr. Counsel not only emphasised his arguments through legal and factual points, but it also seemed like a subtle admonition to the Bench. His arguments resonated with the thought that the Bench is prejudiced against his party. I heard his arguments very patiently, cautiously and calmly, albeit with pain. However, after the conclusion of his arguments, the Ld. Senior Counsel himself realized that the manner in which he advanced his arguments could have been avoided. It is said that self realization of an aberration is divine. However, I feel that the Bench has been bestowed with more responsibility of delivering this order by which it should appear that justice has been done to the parties.

32. At the outset, it seems useful co-refer the background in which a common order dated 29/10/2013 in C.P No. 103/2013 (General Atlantic Singapore Fund Pvt. v. Fourcee Infrastructure Equipments Pvt. Ltd.) and C.P No. 114/2013 (India Infrastructure Fund v. Hanjer Biotech Energies Pvt. Ltd.) referred to above by the Ld. Counsel for the Respondent No. 2 came to be passed. The said two Petitions were filed by the respective Petitioner Companies under Sections 237, 397, 398 read with Sections 402, 403 and 400 of the Companies Act, 1956 alleging therein certain acts of oppression and mismanagement purportedly committed by the Respondents in the affairs of the Companies. Both the petitions were filed almost during the same period. In both the matters, a question came up for consideration as to whether pending an application under Section 8/45 of the Arbitration Act, ad-interim reliefs can be considered by the CLB. The matters were heard at length on this point. Mr. Janak Dwarkadas, Ld. Sr. Counsel, who appeared in both the petitions for the Petitioners, cited a decision of the Hon'ble Supreme Court in the case of Taybbhai M. Bagasarwalla v. Hind rubber Industries Pvt. Ltd. [1997] 3 SCC 443), to contend that even it there is a challenge as to the jurisdiction of the Court, the urgent ad-interim prayers can be considered by the Court pending such issue.

33. On the contrary, the other side had contended that where an application under Section 8/45 of the Arbitration Act is moved, the judicial authority is bound to decide such application first, and in case the application is not found favour, only then the Board may proceed to decide the ad-interim prayers.

34. It may be mentioned here that few days back, a similar question had come for consideration before the Hon'ble Gujarat High Court in an Appeal filed u/s. 10F of the Act by the Respondents against an order passed by the CLB, Mumbai in the CP. No. 78 of 2013 titled as Montecarlo Ltd. v. Bijapur Hungund Tollway Private Ltd.. In the impugned order, the CLB Ignoring the Application filed u/s. 8 of the Arbitration Act had granted ad-interim prayers. The Hon'ble Gujarat High Court vide its order dated 29/10/2013 set aside the impugned order passed by the CLB and remanded back the matter to it with direction co-decide the application under Section 8 of the Arbitration Act and prayer for ad-interim reliefs together and further directed the CLB that in ??? order it will record its reasons as to whether conditions mentioned in the Section 8 of the Arbitrat or Act are satisfied or not and then only it can proceed to pass interim order. For the sake of convenience, I reproduce the said order dated 29/10/2013, passed by the Hon'ble High Court which is as under:—

“The question that arises for consideration is 35 to whether the Company Law Board could have proceeded to grant interim order without deciding the application under Second 8 of the Arbitration Act or at least giving reasons as to why it is granting interim order irrespective of the fact that the application under Section 8 of the Arbitration Act, has been filed in view of the law laid down by the Apex Court in Hindustan Petroleum Corpn. Ltd. v. Pinkcity Midway Petroleums. reported in (2003) 6 SCC 503, wherein paragraph 14, the Hon'ble Apex Court has held that where there is an arbitration clause in the agreement, it is obligatory for the court to refer the parties to arbitration in terms of their arbitration agreement and nothing remains to be decided in the original action after such an application is made except to refer the dispute to an arbitrator. The Apex Court further in Branch Manager, Magma Leasing and Finance limited v. Potluri Madhavilata reported in (2009) 10 SCC 103 in paragraph 18 has held that the legislative mandate of Section 3 is the command to the Court that once the prerequisite conditions of Section 8 are satisfied, the court must refer the parties to arbitration on fulfillment of the conditions of Section 8 and no option is left to the court but to refer the parties to arbitration. The Apex Court further observed that there was nothing on the record that prerequisite conditions of Section 8 are not fully satisfied in the case before the Apex Court, therefore, the matter ought to have been referred to arbitration as per the clause of the agreement.

On the strength of above decisions Mr. Nanavati, learned Senior Counsel has urged that the company law board could not pass any interim order without examining section 8 application and without considering section 8 application as to whether the conditions of Section 8 of the Arbitration Act are satisfied or not and that the conditions of section 8 were fully satisfied, it had no option but to refer the matter to an arbitrator and could not grant, any interim relief.

On the Other hand, Mr. Mihir Joshi, learned Senior Counsel and Mr. S.N Soparkar learned Senior Counsel have vehemently urged that it wan open to the company law be 3rd to pass an interim order to protect the petitioners/original respondents and decision on section 8 application would required some time as their affidavits were required to be exchanged. Therefore, according to them, the court below did not commit any illegality and the case relied upon by the Apex Court in Jehal Tanti v. Nageshwar Singh (D) thr. LRs. reported in AIR 2013 SC 2235 in paragraph 10, wherein it has been fluid by the Apex Court that while deciding a civil dispute where the objection about the jurisdiction of the Court is raised, it is open to the court to grant an interim relief and thereafter decide the injunction application.

In our opinion, in view of the two Supreme Court decisions mentioned above, the law appears to be clear that once an application under Section 8 of the Arbitration Act is tiled, it is obligatory and mandatory for the company law board to decide or prima facie find out as to whether the conditions mentioned in Section 8 of the Act and fulfilled or not and once it comes to the conclusion that the conditions under section 8 are satisfied, then the company law board had no option but to refer the parties to an arbitration.

Learned counsel for the caveators/respondents have also raised objections that since the company has not filed this Appeal, therefore, this appeal would not be maintainable. On 29.7.2013, the company law board has issued direction to all the respondents, therefore, the appellants are well within rights to file this OJ. Appeal and challenge the order dated 29.7.2013 and it cannot be said that the appeal would not be maintainable since the company has not filed this appeal. The appellants would have locus standi to challenge the order passed by the company law board and decision relied by the learned counsel for the caveators in Sukanya Holdings (P) Ltd. v. Jayesh H. Pondya reported in (2003) 5 SCC 531 would nor apply to the facts of the instant case.

The learned counsel for the respondents argued that there are some parties outside the agreement and therefore, Sukanya Holdings Private Ltd. is not required to be considered at this stage because it as open to the company law board to examine aft the questions of objections raised by the learned counsel for the parties.

Therefore, we do not fit it proper to express any opinion on this question. We leave it open to the company law board to decide the objection after it decides the applicability of Section 8 of the Arbitration Act.

Learned counsel for the respondents has also urged that the order passed by the company law board and proceedings before the law board were in rem and not in persona.

We do not go into this question which has been raised by the learned counsel for the caveator before the Company Law Board, therefore, we are of the considered opinion that since no reasons has been assigned while granting interim order nor the application under Section 8 has been examined by the Company Law Board to arrive 11 a prima facie satisfaction as to whether the condition of Section 8 has been fulfilled or not. Therefore, we have no option to set aside the order passed by the company law board dated 29/07/2013 and remand the matter back to the company law board with a direction to decide the application under Section 8 and the prayer for interim relief together and the company law board in passing interim order is directed to record its reasons as to whether conditions mentioned in Section 8 of the Arbitration Act is satisfied or not and then only it can proceed to pass an interim order. It is open to the company law board to decide the aforesaid questions either recording its prima facie satisfaction on Section 8 of the Arbitration Act for passing Interim order or finally.

35. Upon hearing the Ld. Counsels appearing for both the sides, laying emphasis on the importance of quick and speedy disposal of the interim players in the Company Petitions filed under Section 397/398 of the Act, I observed that on account of delay it has been oftenly found that serious prejudice is caused to the public at large, and irreparable loss to Company's shareholders. Therefore, considering the grey area on this legal issue, as to whether pending application under Section 8/45 of the Arbitration Act, subject to making out a case, interim protection can be granted to the party applying for it, the law needs to be settled. However, in both the matters, placing reliance upon the decision of the Hon'ble High Court of Gujarat, I declined to consider the ad-interim prayers for two-fold reasons, firstly, because the CLB is bound to follow the law laid down by the Hon'ble High Court and Supreme Court to hear such application first, and secondly because that the Ld. Sr. Counsel appearing for the Petitioners in those matters did not choose to argue that prime facie provisions contained in Section 8/45 of the Arbitration Act are not applicable in the facts and circumstances in the given cases. For the sake of convenience, I would like to reproduce the relevant para of the said order which is as follows:—

“22. In view of my aforesaid observations, a question may be asked as to why I have declined the prayer to consider the interim reliefs, if I agree with the contentions advanced by the Ld. Counsel for the Petitioners. There an two fold reasons for arriving at the said conclusion contrary to my views. The first reason is that the decisions of the Hon'ble Apex Court and various Hon'ble High Court referred to above hind me to take up any application for consideration first filed under Section 8/45 of the Arbitration Act as the case may be, prior to, I proceed further in the C.P keeping in tow of the principle of judicial discipline, propriety and the rules governing the law of precedence which dearly stipulate that the decisions of the Hon'ble. Apex Court are binding on the subordinate courts. The second reason is that Mr. Janak Dwarkadas did not prefer to argue the application and the interim reliefs sought for simultaneously and therefore, it was not possible for me to take prima facie view as to whether the provisions contained in Section 8/45 of the Arbitration Act would be applicable or not”.

36. It will not be out of place to mention here, that being aggrieved by the said order, the Petitioners in the case of Fourcee Infrastructure Equipments Pvt. Ltd. approached the Hon'ble High Court of Bombay by way filing an Appeal under Section 10F of the Companies Act, but they failed to get any interim protection in this Appeal. Thereafter, they approached the Hon'ble Supreme Court by way of filing a SLP. In the Hon'ble Supreme Court, an order came to be passed on the basis of the consent given by the Counsels that the CLB shall cansrdo ad-interim reliefs firstly and thereafter, the application under Section 45 of the Arbitration Act may be heard. Accordingly, the Parties were heard in respect of interim reliefs and the protection was granted to the Petitioners. The matter is still pending.

37. In the case of “Hanjer Biotech Energies Pvt. Ltd.”, the Petitioners, however, did not prefer any Appeal. When the said C.P came up for hearing, citing the order passed in the case of “Fourcee Infrastructure Equipments Pvt. Ltd., the Ld. Sr. Advocate submitted that keeping in view the order passed by the Hon'ble Supreme Court, the Petitioner is entitled to be heard in respect of interim reliefs pending application under Section 8 of the Arbitration Act. Considering the principles governing the law of parity, I heard the interim reliefs and granted an interim relief in favour of the Petitioner Company, against which an appeal was prefer red by one of the Respondents before the Hon'ble High Court. In the said Appeal, the Impugned order passed by the CLB was set-side holding that the principle of parity do not apply and secondly no prima facie case was made out for grant of ad-interim order. Now, the matter is pending before the Hon'ble Supreme Court.

38. In backdrop of the above, I now proceed to consider the question as to whether pending application Under Section 45 of the Arbitration Act, ad interim prayers sought by the Petitioner may be considered or not.

39. Having given my serious thoughts to the said question, I have come to the conclusion that an application under Section 8/45 of the Arbitration Act, is filed by a party challenging the maintainability of the petition under Section 397/398 of the Act, on account of existence of an Arbitration Agreement between the Parties, the Board is not precluded from hearing urgent reliefs sought in the company petition. However, it must examine prima facie as to whether the application filed under Section 8/45 of the Arbitration Act is itself maintainable or not. After hearing both the sides, if the Bench comes to the conclusion that the application filed under Section 8/45 of the Arbitration Act is itself prima facie not maintainable and has been filed maliciously to stall the further proceedings of the Petition and/or the urgent hearing of the ad-interim prayers, the Board will consider and pass an appropriate order with respect to ad-interim prayers.

40. Having examined the facts of the case in hand and the material available on record, as well as the submissions advanced by the Ld. Counsels appearing for the respective parties, I have no hesitation to say that the Company Application filed under Section 45 of the Arbitration Act by the Respondent No. 2 is not maintainable for the reason described in the preceding paras.

41. As is seen from perusal of the SHA and Articles of Association of the Company, it is apparent that the clauses of the SHA were adopted and incorporated in the Articles of Association of the Company in an Extra Ordinary General Meeting held by the Company. However, it appears that the parties to the “SHA” consciously did not ??? the arbitration clause in the Articles of Association of the Company. It is a well settled law that where the arbitration clause in the Articles of Association of the Company does not exists, the provisions of Section 8/45 of the Arbitration Act, will not application. In this regard, I would like to rely on the decisions in the cases of (i) Umesh kumar Baveja v. IL & FS Transportation Network Ltd. [2014] 182 Comp Cas 309 (Delhi) and (ii) Sumitomo Corporation v. CDC Financial Services (Mauritius) Ltd. [2008] 4 SCC 8:

(a) In the case of Umesh Kumar Baveja (supra) it has been held as follows:—

“It is not correct to say that no objection bused on section 8 of the Arbitration and Conciliation Act was filed before the Company Law Board. The objection was raised and was also adverted to by the Company Law Board in its order. However, the contention of learned counsel for the respondent that it is the articles of association that governs the relationship between the parties and that since they did not contain any provision for arbitration, section 8 of the Arbitration and Conciliation Act, 1996, is not applicable, merits acceptance. The memorandum and articles of association of the SPV were originally subscribed to on November 23, 2009. The subscribers to these documents were Umesh Kumar Baveja (appellant No. 1) who took 49,994 equity shares and six other persons who took one? share ech. These persons are: Gaurav Jam, Sachin Sapra, Vishal Rai, Ms. Rukmini Das Gupta, Piyush Thakur and Kulbhushan Parashart The articles of association were amended on November 16, 2011 and it is common ground that the amended articles did not have an arbitration clause. It was the SSA which contained a provision for arbitration in clause 16 thereof, but at the amended articles of association, the arbitration clause in the SSA, or even the SSA itself, can have no effect. In work Phone India P. Ltd. v. WPI Ground Inc. USA [2013] 178 Comp. Cas 173 (Delhi), a learned single judge of this Court (Dr. S. Murtidhar, J.) opined that the relationship between the shareholders of an company and what they can do has to be ascertained with reference to the articles of association and any earlier arrangement or agreement between the parties inconsistent with the articles of association cannot be said to govern such relationship. In that case, there was a joint venture agreement entered into between the parties in 1999; this agreement provided for the exercise of an affirmative note. In the articles of association, no amendment was carried out to incorporate the provision in the joint venture agreement providing for the exercise of the affirmative note. It was held by the learned single judge that unless the articles of association were amended to provide for the exercise of the affirmative vote, that right can not be insisted upon by a party to the joint venture agreement. In support of this conclusion, reliance was placed on the judgment of the Supreme Court in V.P Rangaraj v. V.B Gopalakrishna [1992] 73 Comp Cas 201 (SC). Quoating Palmer's Company Law, 24th Edition, dealing with the transfer of shares and referring of a judgment of the Bombay High Court in IL and FS Trust Co. Ltd. v. Birla Perucchini Ltd. [2004] 121 Comp Cas 335 (Bom), the learned single judge of this court held that the existence of an affirmative vote provided for in the joint venture agreement cannot be recognized without a corresponding amendment of the articles of association. In my humble opinion, this judgment concludes the issue in favour of the respondent so for as the argument based on section 8 of the Arbitration and Conciliation Act, 1996 is concerned”.

(b) In the case of Sumitomo Corporation (Supra), the Hon'ble Apex Court has held as follows:—

“21. As rightly observed by CLB, the proceeding under Sections 397/398 of the Companies Act always relates to the affairs of the company. In so far as the arbitration clause in JVA is concerned, to bind the Company it has to be a party to the arbitration agreement.”

42. In addition to the above, admittedly, in the SHA, referred to and relied upon by the Respondent No. 2 in support of his Application under consideration, the Company i.e the Respondent No. 1 is not a party to it. It is further a settled law that a private arrangement between two parties, in which the Company is not a party, has no bearing on a petition relating to oppression and mismanagement in the affairs of the Company as defined in Section 397/398 of the Act. This view is confirmed by the decision rendered by the Hon'ble Calcutta High Court in the Petition, being No. T. 18 of 2010 in the case of Krishna Kumar Bangur v. Purushottam Das Bangur dated 1/7/2010, wherein it has boon held as under:—

“I am of the opinion that such an arbitration clause does not cover the above disputes.

First; because, the company is not a party and reliefs have to be passed against or binding the company. As a company is a legal person, quite apart from its shareholders, no relief can be claimed against, the company in an arbitration proceeding, where the company is not a party to such an agreement. It is true that the company is a family concern and Other persons may be its alterego. But to bind any party by an order in an arbitration proceeding, that party must be a party in that agreement. Such formality has to be maintained, otherwise, the order would be a nullity.

The substance of the said agreement has been incorporated in the Articles of the company, by amendment. The internal affairs of a company, which are to be conducted in accordance with the articles and the Companies Act, 1956 cannot be the subject matter of an arbitration agreement. That would plainly be against the Companies Act 1956, which provides a detailed procedure for administration of a company and remedies for its breach. Such procedure and remedy Ordinarily cannot be by pass by an arbitration agreement. For the reasons alone, these provisions in the articles at association or the said agreement have to be enforced by the ordinary remedy. More so, because disputes between shareholders and the company, which involve the management of the company, and alleged acts of misfeasance of those in control of the company cannot be resolved by arbitration as third parties a re likely to be affected. There is also a provision for resolution of such dispute in the Companies Act itself, e.g Section 397, 398 etc. so, apart from ordinary civil proceedings.

43. Apart from the above, this CLB also vide its order dated 8/1/2014 passed in C.P No. 78/2013, retying upon the said decision had dismissed the Company Application filed u/s. 8 of the Arbitration Act.

44. Keeping in view the above said settled proposition of law, I am of the considered view that the instant Company Application filed under Section 45 of the Arbitration Act deserves to be dismissed being not maintainable.

45. I must clarify here that the aforesaid decisions were not cited at Bar. However, I believe that where a question of law is involved, the decisions of the court of Record, being the binding law on the subordinate Court, even if not referred to by the parties concerned, the Court may refer such decisions having regards to the facts of a given case.

46. Although, I have held herein above that the Application under Section 45 of the Arbitration Act is not maintainable, yet I proceed to consider the application on merits as well assuming that the application is maintainable. Having examined the AOA, it is noted that the averments made in the Petition and the reliefs sought for on the basis such averments, have apparently arisen on account of violate on of the provisions contained in the AOA of the Company. Admittedly, operations of the Company are closed. It is a trite law that in a petition filed under Section 397 and 398 of the Act, the paramount interest of the Company is to be taken care of by the CLB while adjudicating the petition. The Company not being a party to the SHA, an Arbitrator will not be entitled to adjudication and grant any relief in respect of the Respondent No. 1 Company.

47. I have also considered the submissions advanced by the Ld. Senior Counsel representing the Respondent No. 2 that the disputes raised in this petition are covered by the clauses as contained in the SHA and hence the parties are required to be relegated to Arbitration as agreed between them in the SHA. In this regard, it is to be kept in mind that all the clauses of the SHA have been adopted and Incorporated in the Articles of Association of the Company. Furthermore, the petition reveals that the purported acts of oppression and mismanagement are related to violation of various clauses of AOA of the Company. Therefore, the petition being filed with respect to the Respondent No. 1 Company's affairs is maintainable. Having regard to the nature of the controversy involved in the petition and the reliefs sought for, I am of the view that the disputes are not capable of being arbitrated by an arbitrator. It is, therefore, held that the present application under Section 45 of the Arbitration Act is also without any substance and thus deserves to be dismissed on this ground as well.

48. Further, upon examination of the entire averments as contained in the Petition, it is seen that the reliefs sought for by the Petitioner are also against the Group Companies of the Respondent No. 2. Similarly, the reliefs sought for in respect of the products of the Company and intellectual properties, termination/cancellation of the Distribution Agreement are also of such nature which cannot be decided by an Arbitrator in the Arbitration proceedings. I am, therefore, inclined to accept the contentions of the Ld. Counsel appearing for the Petitioner that the present petition containing the allegations of acts of oppression and mismanagement can only be decided by the CLB, having regard to its wide powers conferred upon it by virtue of Section 4O2 of the Companies Act, 1956 and not in the Arbitration proceedings who has no right to pass any order against the third-parties.

49. In addition to the above, from a close scrutiny of the averments made in the company petition it appears that this is a bonafide petition filed under Section 397/398 of the Companies Act, and it is wrong to contend that this is a dressed up, vexatious and mala fide petition. Whether the Petition it is or succeeds, it depends upon the evidence to be produced by the Petitioner with respect to his allegations made in relation to the alleged acts of oppression and mismanagement against the Respondents, but it cannot be said that instant petition is a vexatious or malafide petition.

50. The Company Application is, therefore, dismissed with the following observations:—

(i) In case, a party prefers an Application under Section 8/45 of the Arbitration Act for reference of disputes to an Arbitrator in terms of the Arbitration Agreement in a Petition filed under Section 397/398 of the Companies Act, but if the Respondent Company, in whose respect the Petition under Section 397/398 of the Act is filed, is not a party to such an Arbitration Agreement, the application filed under Section 8/45 of the Arbitration Act, is not maintainable.

(ii) In case, a party prefers an application under Section 8/45 of the Arbitration Act in a Petition filed under Section 397/398 of the Companies Act but in the Articles of Association of such Company, in whose respect the petition is filed, no arbitration clause exists therein, the Application is not maintainable.

(iii) Where there is an arbitration clause in the Articles of Association of the Company and an application filed under Section 8/45 of the Arbitration Act is filed in a Petition under Section 397/393 of the Companies Act, the Court will consider the following elements to ascertain as to whether they are met out in the facts of given case, and if the answer is Yes, in that case, the parties may be relegated to an Arbitrator for redressal of their grievances through arbitration

(a) Existence of a valid and subsisting agreement between the parties.

(b) Parties to the Arbitration Agreement and the parties to the Petition are common.

(c) Subject matter of the action is name as the subject matter of the Arbitration Agreement.

(d) Other party moves the court for reference to arbitration before filing the written submission.

(e) The relief sought for in the petition can be adjudicated and granted by an arbitrator/arbitral tribunal. For this purpose, the CLB will carefully consider as to whether the Petition is bonafide or it is malafide, vexatious and dressed up to avoid the Arbitration Clause.

51. It is further made clear that the CLB may consider the Application filed under Section 8/45 of the Arbitration Act, without inviting reply to the application under Section 8/45 and it may proceed on the basis of averments made in such Application as well as in the Company Petition. In case, the Application is allowed, the Company Petition wilt stand dismissed, otherwise the CLB will proceed to consider the ad-interim reliefs simultaneously.

52. C.A No. 277/2014 is disposed off in the above terms.

53. Having held that the application is not maintainable, now I proceed to consider the interim reliefs pressed by the Petitioner, which are as follows:—

a. To pass an order restraining the Respondent Nos. 2 to A from in any manner amending the MOA and the AOA of AOA Company and from altering the legal structure or shareholding or debt of the Company without leave of this Hon'ble Board in any manner whatsoever.

b. To pass an order restraining the Respondent Nos. 2 to 4 and group companies of Respondent No. 2, its/their servants and agents from dealing with, negotiating, disposing, encumbering, alienating or transferring any assets and properties (movable and immovable) of the Company in any manner whatsoever.

c. To pass an order directing Respondent No. 2 to continue production of “Qua” and “B'lue” immediately, as per the business plan of the Company, by infusing funds as may be required without any liability on the Company or Petitioner, or on a cash neutral basis as proposed by the Petitioner and described in paragraph 7.11(VII)(d) of the Petition.

d. To pass an order restraining the Company from giving effect to the purported termination/cancellation of the Distribution Agreement and directing the Respondents to continue distribution of the Company's products through NDA as was being done prior to July 2014.

54. It was argued by the Ld. Senior Counsel appearing on behalf of the Petitioner that the Petitioner has on a timely basis pointed out various problems faced by the Respondent No. 1 Company on account of mismanagement by the Respondent Nos. 2 to 4 and has also suggested various solutions in order to resolve the same. The Ld. Counsel submitted that the Petitioner by his e-mail dated 28/03/2014, had in no uncertain terms, stated that the Respondent Nos. 2 to 4 have been running the Company in such a manner that has led the Company to severe losses. According to the Ld. Counsel, instead of suggesting amicable solution, Respondent No. 3, by his email dated 1/4/2014 stated that the Company should consider developing its own route to market. He, therefore, submits that this itself spells out the intent of the Respondent Nos, 2 to 4 of shutting down the business of the Company. The Ld. Counsel then drew my attention to the Petitioner's email dated 23/04/2014 and submitted that the Petitioner once again addressed various issues faced by the Company and suggested certain solution which would work in the interest of the Company but all went in vain.

55. The Ld. Sr. Counsel then invited my attention to e-mail dated 10/09/2014 and submitted that the allegation of the Respondent Nos. 2 to 4 that the Petitioner has no regards fair the Company's interest, is totally false and baseless. The Ld. Counsel contended that the Petitioner has always worked towards the best interest of the Company and has always suggested measures for its smooth functioning. According to him, taking advantage of the fact of being in control of the management of Company, the Respondent Group unilaterally slopped production of “Qua” and “B'lue’ which caused and continues to cause tremendous loss to the Company. The Petitioner's Counsel further submitted that the production need not be stopped by them and they should have suggested the possibility of continuing production of both “B'lue” and “Qua” on a “cash neutral model” by getting a credit extension from the contract manufacturers and also managing inventories as well as payment terms with suppliers and distributors/customers. According to the Ld. Counsel, the “cash neutral model” does not affect DNA's business in any manner whatsoever as it continues to distribute the products “Quan” and “B'lue” as before.

56. It was next submitted that infact “Cash Neutral Model” was proposed by the Respondent Group and it was agreed by all parties. The Ld. Counsel added that this includes cutting surplus overheads wherever possible, the intent bring to keep the brand in the market and the business going as a going concern. The Ld. Counsel appearing for the Petitioner on his behalf stated that if the business can be run in this manner, the Petitioner has no difficulty in agreeing to Company taking a loan as there will be a clear cash flow enabling servicing of the loan over a period of time. Further, according to him, any pending liability could be dealt with in the regular course of business.

57. In continuation of his arguments, the Ld. Senior Counsel, for the Petitioner, denied the allegation of the Respondents that the “cash neutral model” will not benefit the Company but will only reduce its value. Accord no to him, “Cash Neutral Model” in respect of both the brands were drawn up by one Senior Officer of the Company, Mr. Somnath Sarkar, and agreed by all parties. According to him, the model includes the point that the Company will discuss with the co-packers and other raw material and packing material suppliers to increase the payment terms. The Petitioner's Counsel submitted that the “cash neutral model”, in no uncertain terms, suggest that, the business of the Company can be continued without causing any loss to it. The Ld. Counsel submitted that NDA (majority shareholding being with the Petitioner) undertakes to provide all the financial support required to smoothly, run the “cash neutral model”. The Ld. Counsel pointed out that by an email dated 8/08/2014, the Respondent No. 3 himself had agreed to the cash neutral model.

58. Elaborating the mechanism and benefit of the ‘cash credit model’ the Ld. Counsel for the Petitioner submitted that by the said mode, a margin of about 20% will be earned by DNB. By this profit, the statutory liabilities can be paid and the commitment of company to the trade gets satisfied to reduce the potential of future liabilities of the product. According to the Petitioner, the outstanding from the co-packer will also progressively reduce, which is in the interest of the company and the co-packer and the vendors and suppliers can get pard, thus reducing the liabilities of company. The Ld. Counsel pointed out that this fact is also evident from an email of the co-packer stating that if the production is not started, then the copacker will be forced to lay-off employees. According to the Ld. Counsel, the said model was prepared and circulated by the company's Finance Controller.

59. Dealing with the Respondent Nos. 2 to 4's allegation, it was alleged in the course of the arguments that the whole intent of Respondent Nos. 2 to 4 is to take the working capital loan, repay the past liabilities and shut down the business of the Company. According to the Ld. Senior Counsel, these past liabilities are high as the management team of the Company under the ??? of Danone has spent huge sums of money on account of marketing expenses and other overheads. He contended that if Respondent Nos. 2 to 4 became successful in their endeavor, then in such to case, the bark's loan will never be repaid by the Company. This, therefore, according to the Petitioner, can never be in the best interests of the Company.

60. It was next argued that as per settled law the jurisdiction of the Hon'ble Company Law Board while deciding a petition filed under Section 397 and 398 is to save the company from shutting down as the same is not only in the best interests of shareholders, employees, creditors etc., but also in the general interest of public. The Petitioner's Counsel submitted that the cash neutral model can work even without taking the working capital loan from Citibank, as NDA undertakes to provide the financial support required for the smooth functioning of the Company as per the cash neutral model. The Petitioner's Counsel also submitted that the Petitioner agreed to the Citibank loan only if funds obtained from Citibank were to be utilized for commencement of business as by doing so, the Citibank loan could be easily repaid and the Company would continue functioning. Pointing out the emails dated 11/08/2014 and 15/08/2014 to the Respondent No. 4, it was submitted that the Petitioner sought details regarding (i) where the funds will be channeled and (ii) which creditors are to be paid with the said funds and (ii) want rs the status on recasting the accounts to correctly reflect the various matters. However, according to the Ld. Senior Counsel, the Respondent No. 4 failed to provide any details and thus the discussions remained inconclusive. Subsequently, by another letter dated 27/08/2014 addressed to Board of Directors of the Company, the Petitioner refused to grant approval from availing the Joan from Citibank due to various acts of oppression and mismanagement on part of the Respondent Nos. 2 to 4. It was, therefore, contended that the allegation of the Respondents that the Petitioner unjustifiably refused to approve the Citibank loan which has resulted in losses to Respondent No. 1 Company is totally false and baseless.

61. Next point argued on behalf of the Petitioner is that the brand Qua and B'lue both belong to the Company and the whole contention of Respondent No. 2 that Qua and B'lue belong to CGD is totally false and baseless. The Ld. Senior Counsel contended that the Danone group did not have the rights to produce and sell Mizone, it was agreed between the Petitioner and Danone group that Respondent No. 1 Company would develop and market its own packaged flavored water product, which eventually came to be known as B'lue. B'lue was referred to by the parties at the planning stage as Project Zen and the same is evident from the fact that the AOA of the Company defines Zen Platform as sports or fortified water based beverages included in the 1st strategic plan. The Ld. Counsel submits that B'lue was wholly owned by the Company is evident by various Monthly Operational reports of the Company which shows that branding, marketing, taste profile, packaging, visuals, labels, research for the product Blue and production of the product “B'lue” was done entirely by the company itself, or as works for hire by Professional developers/experts engaged by the Company.

62. On behalf of the Petitioner, it was further argued by his Counsel that Qua was launched in India by one of Petitioners group entities, NHSPL in May 2008. Despite knowing the aforesaid facts, on 9/07/2007, the Respondent No. 2.Danone group unilaterally made an application for registration of the brand name “Qua” and the “Qua iogo” in the name of one of their entities Compagnie Gervale Danone (CGD). On coming to know of the application made by the CGD, the Petitioner confronted the ??? of the Danone Group who accepted and agreed that they had wrongfully registered the brand name “Qua” and the “Qua” logo and agreed to the assignment of the same for a nominal consideration of Euro 1, as was advised by their lawyers. In furtherance to the aforesaid, by his email dated 15/11/2008 addressed to one Mr. Alfons Trabal, the Petitioner stated that he be handed over the signed document transferring the rights of Qua in India and China to the Narang group, in India for registration. Apprehending that the Respondent No. 2 had gotten Qua regstered even in other countries, the Petitioner also suggested that fresh deed of assignment be entered into with Danone, under which the trademark “Qua” would be assigned to the Narang group for entire world. In response to the aforesaid email, Mr. Trabai by his email dated 27/11/2008 addressed to the Petitioner stated that regarding “Qua” trademark, transfer for all the rights that Danone had (India and China) had already been done and by another email dated 27/11/2008 addressed by one Ms. Caroltta to the Petitioner, a draft deed of assignment assigning Qua for India and China was attached. They specifically mentioned India and China as CGO had already made applications for registering the brand name “Qua” and the “Qua” logo in India and China. As per clause 5 of the said assignment agreement Petitioner was desirous of registering the agreement with the trademark registry in India, for which the Petitioner approached Respondent No. 2.Danone group for further certain assistance. However, since the talks for the joint venture arrangement were in progress Respondent No. 2.Danone group asked Petitioner to wait for the registration and assured him that they would complete it. Considering the high level of professionalism, their extensive experience and the credibility of the Danone group Petitioner believed them, which in hindsight turned out to be a, conspiracy to usurp an asset, which rightfully belonged to the Company. To support his contentions, the Ld. Counsel has taken me through the material available on record.

63. Dealing with the first alleged complaint made by Petitioner against the Respondents with respect to unilateral stoppage of production of both the products of the Company namely Qua and B'lue and the suggestion put forth by him, the Respondent No. 1 should resume production under the “cash neutral plan”, the Ld. Sr. Counsel for the Respondents submitted that the “cash neutral plan” insisted by the Petitioner requires firstly that the Company's suppliers and service providers to provide tines of credit, despite Company's significant outstanding payables owed to them; Secondly, the Company to provide its product to NDA for sale and distribution and lastly, NDA to pay to the Company the amount within the period of credit extended by suppliers and service providers so that it remains “cash neutral”.

64. The Ld. Sr. Counsel submitted that the company is not in a position to negotiate lines of credit with its Vendors, suppliers and Co-packers until it settles significant outstanding liabilities owned to them, which are approx. In the sum of Rs. 5 crores by now, According to the Ld. Sr. Counsel, the cash neutral plan, therefore, cannot be implemented until the Company obtains urgent funding to settle the existing liabilities first. Whereas, the Petitioner has not suggested any feasible means to address these payments despite having admitted the liabilities owed by the Company to its Vendors, Suppliers and Co-packers, Further, according to him, the Petitioner is consistently objecting to raising debt or equity funding plan presented by Respondent No. 2 for the settlement of these claims. The Petitioner has even objected to Respondent No. 2's offer to bear the risk of the additional borrowings by providing a parent guarantee. He submits that had the Petitioner not raised this objection and allowed to avail the debt or equity funding, such funds could have been used to pay off creditors' amount and interruptions in Company's production could have been avoided.

65. Taking me through their pleadings, the Ld. Sr. Counsel appearing on behalf of Respondent No. 2 further submitted that the Petitioner's insistence to resume production under the “cash neutral plan” is unjustified, especially because the Petitioner has adopted a destructive and self-serving approach by unreasonably blocking all proposals made by the Respondent No. 2 to raise the funds as is seen from the fetter dated 3/06/2014 issued by the Respondent No. 2 giving comfort that it is willing to invest in the Company. He added that the Petitioner continued to reject any infusion of funds for the company despite that the Company's deteriorating financial status. The Ld. Counsel next submitted that the Respondent No. 2 alternatively proposed to increase Company's working capital limit with Citibank so that the Company could meet outstanding dues. However, the Petitioner vide his letter dated 27/08/2014, although the Petitioner once having agreed for such extension vide email dated 15/08/2014, rejected the increase in the Working capital by the Citibank.

66. In continuation of his aforesaid submissions, the Ld. Counsel for the Respondents submitted Chat the contention of the Petitioner that the Company can resume production without meeting its past liabilities is completely misconceived in light of creditors' pressing demands for payment. The Petitioner's suggestion that he can manage the line of credit from its vendors without making any payments to settle outstanding is without substance and is not supported by any document. The Ld. Counsel submitted that assuming for the sake of arguments, that Petitioner could “manage” the co-packer, it is unclear how the Company's production could re-start without crucial input from Vendors such as raw and packaging material or transportation services. According to the Ld. Counsel, they will not accept additional purchase or service orders without such payables being settled first. It was also argued that the “cash neutral plan” as suggested by the Petitioner was already Implemented from August 2014 but it failed miserably, owing non-payment of outstanding by the NDA to the Company's product supplied to it amounting to Rs. 3.3 crores. The Ld. Counsel further submitted that the Company did not receive any payment from NDA during the implementation of the “cash neutral plan”. The Ld. Counsel attracted my attention to email dated Email dated 6 October 2014 from NDA shows that NDA owes Rs. 5.4 Crores to the Company. However, mosi of these amounts have been unilaterally and unreasonably set off by NDA and NDA instead, is now claiming that the Company owes money to NDA, According to the Ld. Counsel, the NDA's set offs are nor only unilateral and unreasonable but also in direct breach of the parties' agreed “cash neutral plan”. The Ld. Counsel further submitted that the “cash neutral plan” has created a situation where the Company supplies products to NDA but receives no payments in return. Instead, it receives additional liabilities, both from suppliers and from MDA by NDA's arbitrary with holdings the amounts and claiming set offs. It was, therefore, argued that the Petitioner's actions with regard to the implementation of the “cash neutral plan” is in complete disregard to Company's interests as it has already caused Company's further value destruction.

67. The Ld. Counsel further pointed that the Petitioner has also misconducted by not complying with the condition for the Company to continue the exclusive distribution with NDA i.e increasing the shareholding of Respondent No. 2 in NDA to 51% in terms of Clause 2.1.2 of the Distribution Agreement.

68. Summoning up the arguments, on this issue, it was argued that the Petitioner is not entitled to any equitable reliefs for two fold reason Firstly the cash neutral plan was implemented in August 2014 but the Petitioner failed to make any payment to the Company under the said plan. Instead, the Petitioner directed NDA in which he holds a 70% stake to unilaterally and unreasonably withheld and adjusted the amount against the pay ables owed to the Company, Secondly, the cash neutral plan as insisted by Petitioner is completely unworkable unless and until the Company receives critical funding to meet creditors' claims, employees' salaries, and statutory dues. According to the Ld. Counsel the creditors will not agree to provide extended credit lines until they are paid. This undermines the very first assumption of the Petitioner's “cash neutral plan”. Moreover, the Company has insufficient funds to meet employees' salaries and statutory dues and therefore Ld. cannot continue operations without meeting these dues. Based on the above submissions, it was argued that the above exclusive distribution agreement between the company and the NDA has been rightly terminated and the Petitioner is not entitled to any order.

69. It was further argued by the Ld. Counsel appearing for the Respondents that the Petitioner has raised sham disputes regarding ownership of the brand B'lue and Qua only to extort a higher price for his shares of the Company. He submits that at an interim stage, the CLB is not required to give its Ending as to whether the Company has the right to use the brand “Qua” and B'lue so as to bring the Respondent No. 2's business to a grinding halt.

70. Inviting my attention to the email dated 10 September 2014 the Ld. Sr. Counsel submitted that the said communication clearly reveals that the Petitioner's “alleged claims” In relation to the brand B'lue have been a natter of discussion between Petitioner and the Compagnie Gervais Danone (CGD) for some time. The Ld. Counsel then took me to the reply dated 23/09/2014 to the said e-mail and submitted that the Respondent No. 2 has provided adequate explanation to each of the disputes raised by Petitioner on Intellectual Properly Rights and explained that the claims of the Petitioner are unreasonable.

71. In this regard, it was further submitted that the debit notes relating to NDA referred to by the Petitioner's Counsel do not support ownership of brands by the Company, According to the Ld. Counsel these debt notes only show that these products were supplied to NDA by the Company under the distribution Agreement and they are absolutely irrelevant to question of ownership of related intellectual property rights.

72. Replying to the point raised by the Petitioner that the registration of “Qua” is prior to the execution of the JVA, it was argued that prior to 2010, since there was no joint venture between the Petitioner and Respondent No. 2 therefore, these acts can neither constitute oppression nor mismanagement. It was also argued by the Ld. Sr. Counsel that the requests made to the Respondent Group for protecting “Qua” in other jurisdiction do not anywhere state that the trademark registrations were to be made in the name of the Company. According to the Ld. Sr. Counsel neither the Petitioner nor the Company sought, at any time, to register the mark “Qua” In its own name in any other Country, and rather requested the Respondent Group to do so, which supports the position that the said trade marks in all other countries were intended to be owned by the Respondent Group and not the Company. He added that why would Petitioner ask, or expect the Respondents to bear the expenses of such registrations in other countries, if it did not a so intend for Danone to own such registrations?

73. Dealing with the trademark B'lue it was submitted that this mark is developed by the Respondent Group together with its external agencies, not with the Company and the: majority of fees relating to the trademark and logo design for “B'lue” were paid by the Respondent Group and not by the Company.

74. According to the Ld. Counsel, all trade mark searches for the trademark “B'lue” on a worldwide level were conducted by and at the cost of the Respondent Group, Further, the applications for the trademark in India was filed on 28/07/2011, within the knowledge of Petitioner that the Indian trademark for B'lue was applied for in the name of Respondent Group and therefore, any claim with respect to the intellectual property right made by the Petitioner in this regard is without any substance at this stage and no relief can be granted.

75. Further, in any event, DNB Shareholders' Agreement specifics that the Business of the Company is restricted only to the Territory of India. Therefore, any claim of “B'lue’ and “Qua” ownership outside India has to be disregarded.

76. Lastly, it was argued by the Ld. Sr. Counsel for the Respondents that the Petitioner is raising the disputes to extract inflated valuation for his shares of the Company at the cost of continuity of its business for his personal benefits, According to the Ld. Counsel. It may be noted from the Project Sky Report 13 January 2014 prepared for the Petitioner and Respondent No. 2 by a third party recording therein the restructuring negotiations that include the discussion relating to exit of Petitioner from the Company and further an email dated 11/07/2014, from the Petitioner to Respondent No. 2 proposing a sale of its shares, that the Petitioner Group was only interested to sell his shares and therefore, argued that the Petitioner is not entitled to the interim relief prayed for by the Petitioner for ownership of the brand “Qua” and “B'lue”.

77. Having carefully examined the rival submissions and upon a critical analysis of the material and documents available on record, it is evident that the Respondent No. 2 has attributed three following reasons for the alleged unilateral stoppage of production of “Qua” and “B'lue” brands. Firstly, because the Petitioner's entity “NDA”, in which the Petitioner holds 70% shareholdings, is not making timely payment towards the amount due to the Respondent No. 1 Company under the Distribution Agreement; secondly, that they are claiming set off certain amounts unilaterally and arbitrarily against the dues; and lastly, that “cash neutral model” suggested by the Petitioner, having been applied once, did not succeed, I have considered all these grounds. It is a settled proposition that the CLB is not entitled to interfere with any commercial decision taken by the management of a Company. Therefore, if the company's management after due consideration has thought it fit that the “cash neutral model” is not successful, I believe that the CLB should refrain it from imposing upon the management of the Company this kind of model as sought by the Petitioner. Further, the explanations given by the Respondents in their reply with respect to the “cash neutral model” seem to be not convincing, it is a matter of record and not disputed by the Petitioner, that the entity, namely “NDA”, in which the Petitioner holds 70% stake in the shareholding, is not making payment timely and as on date a sum of Rs. 3.3 Crores (approximately) is due and payable by it to the Respondent No. 1 Company against the supplies made to “NDA” under the Distribution Agreement. This dearly proves the misconduct on the part or the Petitioner, as contended by the Respondents' Counsel. Withholding such a huge amount for no cogent and convincing reason and further arbitrarily claiming set off against the dues payable to the Respondent No. 1 Company against its supplies has no valid justification. I, therefore, find enough force in the reasons shown by the Respondent No. 2 for stopping the productions of the Company's above referred brands.

78. I have considered another argument advanced on behalf of the Respondent No. 2 that when the Company sought to avail working capital loan from the Citibank, the Petitioner raised frivolous grounds and objected to raise such loan. The Petitioner's stand that the loan can be availed only to clear future liabilities and nor the past liabilities owed by the Company, also does not seem a justifiable and reasonable. No convincing reason has been put forth by the Petitioner as to why the past liabilities should not be cleared. The mechanism/suggestions given by the Petitioner to adopt the “cash neutral model”, to say that the past liabilities can be and off if such mode is accented, in my opinion, do not inspire confidence. As held above, the Company cannot be forced to adopt such model on the strength of an ad-interim order.

79. In so far as the dispute raised by the Petitioner with respect to trademarks is concerned, it has not been controverted by the Petitioner that it was the Respondent No. 2's entity who made all the expenditure and undertook all other formalities for registration of the impugned trademarks. Therefore, in my view no prima facie case is made out, in favour of the Petitioner, on this charge.

80. In the course of arguments, the Ld. Counsel appearing on behalf of the respective parties pointed out the allegations and counter allegations made by the parties against each others' conduct. According to the Petitioner, the Respondents have closed down the operation of the Company to put undue pressure on the Petitioner to sell the shares held by him in the Company at an unreasonable lower price. On the other side, the Respondents have alleged that the Petitioner has filed the petition with ulterior objections and a motive to put under pressure on the Respondents to extract higher prices of the shares held by him in the Company. To my mind, these questions are not relevant at this stage, Bath the parties have not shown any willingness to sell the shares held by them in the Respondent: No. 1 Company. They might have negotiated prior to filing of the Petition, but, in my view, such negotiations do not preclude the Petitioner from filing this petition and seek appropriate reliefs under Section 397/393 read with Section 402 of the Companies Act. However, this question can Reconsidered in the final order to be passed in the Petition.

81. However, the fact still remains as to whether, is it in the interest of the Company to continue its operation closed or is it equitable, just and proper to direct the Company to restart its productions keeping in mind its paramount interest on certain terms and conditions. Admittedly, the Company is a profit making Company. In my view, considering the larger public interest and taking into account the prime interest or the Company Mud its shareholders, it would be appropriate, just and proper to direct the Company to re-start its production upon compliance being made by the Petitioner of the terms and conditions as laid down in this order. I, therefore, balancing the equities between the parties and to do substantial justice, dispose off ad-interim prayers in the following manner:—

(i) Pending hearing and final disposal of the Petition, the Respondent No. 1 Company is directed to maintain its shareholding pattern as it exists today.

(ii) Pending hearing and final disposal of the Petition, the Respondent No. 1 Company is restrained from dealing with, disposing off, alienating or transferring any of its immovable assets, save and except it is necessary to do so, in the interest of the Company. In that case, the Company shall serve an advance notice upon the Petitioner giving details thereof.

(iii) Notwithstanding anything contained in the Distribution Agreement of the “NDA” and in its the Articles of Association, subject to making payment of Rs. 3.3 Crores by the, “NDA”, in which the Petitioner holds 70% of the total shareholding, within a period of 30 days hereof, and further filing an Affidavit on behalf of the NDA through an Authorized person thereby giving an undertaking that the NDA shall regularly keep on paying the amount due and payable within 30 days to the Respondent No. 1 Company from the date of receipt of the bills raised in respect of the goods supplied under the Distributor Agreement, the Respondent No. 1 Company shall re-start the production of its products, namely “Qua” and “B'lue” within 7 days w.e.f the date of receipt of the amount stated above and Tiling of an undertaking. The affidavit cum undertaking may also be filed within 30 days hereof. It is made clear that in the event the Petitioner fails to make payment as directed above within the stipulated time and/or to file an undertaking as referred to above, the aforesaid direction shall automatically cease to have effect and the Company shall be at liberty to close ts production, without seeking any further clarification from the CLB.

82. Interim reliefs disposed of in the above manner.

83. The Respondents shall file their re ply (s) within 4 weeks, to which the Petitioner-nay file a rejoinder, if any within another 4 weeks.

84. List the C.P on January 29, 2015 at 11.00 a.m for final hearing.

85. Copy of the order be issued to the parties.

At the time of pronouncement of the order, Mr. Janak Dwarkadas appeared on behalf of the Respondent No. 2 and placed a copy of the order dated 19/11/2014 passed by the Emergency Arbitrator in the pending Arbitration proceedings. Copy of the order be placed on record.