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Team Code

:
BEFORE THE

THE HON’BLE COMPANY LAW BOARD
BETWEEN

X LIMITED………………………………………..PETITIONER

V.

Y LIMITED…………………………………..…RESPONDENT

UNDER THE SECTION 397,398, 402, 403 OF THE COMPANIES
ACT, 1956

MEMORANDUM ON BEHALF OF THE RESPONDENT
TABLE OF CONTENTS

LIST OF ABBREVIATIONS………………………………………………03

INDEX OF AUTHORITIES………………………………………………..04

STATEMENT OF JURISDICTION………………………………………...05

STATEMENT OF FACTS………………………………………………….07

ISSUES INVOLVED……………………………………………………….10

SUMMARY OF ARGUMENTS…………………………………………....11

ARGUMENTS ADVANCED………………………………………………13

PRAYER……………………………………………………………………14
LIST OF ABBREVIATIONS

AIR All India Reporter

AOA Articles of Association

BOD Board of Directors

CLB Company Law Board

FICC Federation of Indian Chamber of

Commerce

ICA Indian Council of Arbitration

JVC Joint Venture Company

JVA Joint Venture Agreement

MD Managing Director

SC Supreme Court
INDEX OF AUTHORITIES

1. CASES CITED
1. Chloro Controls India (P) Ltd. v. Severn Trent Water Purification Inc., (2013)
1 SCC 641.
2. World Sport Group(Mauritius) v. MSM Satellite(Singapore)pvt.ltd

2. BOOKS AND TREATISES
1. The Companies Act, 2013.

2. Singh, Avtar, Introduction to Company Law, Eastern Book Company, 8th

Edition, 1998.

3. Grewal, T.S., Double Entry Book Keeping for Partnership Firms and

Companies, Sultan Chand & Sons., Revised Edition, 2015.

3. DICTIONARIES AND LAW LEXICONS
1. Black’s Law Dictionary

4. LEGAL DATABASES
1. Judis.nic.in
2. SCC Online
3. Indinkanoon.com
STATEMENT OF JURISDICTION

The case has been brought to the notice of the Hon’ble Company Law Board for hearing by

X Limited under the Sections 397/398, 402 and 403 of the Companies Act, 1956.

Though Section 8 of the Arbitration and Conciliation Act, 1996 is also considered in the

course of the case.

Section 397,398 of the Companies Act, 1956 states that:

Any members of a company who complain that the affairs of the company are being

conducted in a manner prejudicial to public interest or] in a manner oppressive to any

member or members (including any one or more of themselves) may apply to the

Company Law board] for an order under this section, provided such members have a

right so to apply in virtue of section 3991.

Section 403 of the Companies Act, 1956 states that:

Interim order by Company Law Board: Pending the making by it of a final order

under section 397 or 398, as the case may be, Company Law Board] may, on the

application of any party to the proceeding, make any interim order which it thinks fit

for regulating the conduct of the company' s affairs, upon such terms and conditions

as appear to it to be just and equitable.

1
Section 399 of the Companies Act, 1956
Section 8 of the Arbitration and Conciliation Act, 1996 states that:

Power to refer parties to arbitration where there is an arbitration agreement.—

(1) A judicial authority before which an action is brought in a matter which is the

subject of an arbitration agreement shall, if a party so applies not later than when

submitting his first statement on the substance of the dispute, refer the parties to

arbitration.

(2) The application referred to in sub-section (1) shall not be entertained unless it is

accompanied by the original arbitration agreement or a duly certified copy thereof.

(3) Notwithstanding that an application has been made under sub-section (1) and that
the issue is pending before the judicial authority, an arbitration may be commenced or
continued and an arbitral award made.

STATEMENT OF FACTS
I

ABC Ltd. is a public limited company which is a Joint Venture Company operating under

a Joint Venture Agreement between X Limited (a foreign company) and Y Limited (an

Indian Company).

II

X and Y are equal shareholders in ABC each holding 30 per cent. Of the issued, paid up

and subscribed capital of ABC. The remaining 40 per cent of the shares in ABC is with

financial institutions and public at large.

III

Under the provisions of the Joint Venture Agreement X had the right to nominate 4 Directors

on the Board of Directors and one of his nominee Directors as the Managing Director of ABC

Ltd. Y too had the right to nominate 4 Directors on the Board of Directors and one of his

nominee Directors as the Chairperson of the company. The JVA also contained an arbitration

clause for settlement of any dispute that may arise out of the JVA between the parties to

which ABC Ltd. is also a party to the JVA. The clause in the JVA provided for arbitration to

be conducted by ICA, FICC at New Delhi.

IV

The Articles of Association recognized the JVA between X and Y including their respective

rights under the agreement by incorporating specific clauses. The AOA did not, however

incorporate any arbitration clause.

V

Y with the support of few other shareholders which gave Y the majority of the voting rights at

the shareholders’ meeting removed two of X’s nominee directors of X from the BOD and

appointed two other people for the post. He also removed and replaced the MD of the

company.
VI

X with a few other shareholders not parties to the JVA filed for Oppression and

Mismanagement under Sections 397 and 398 of the Companies Act, 1956, before the

Company Law Board for his actions. X also applied for interim orders in terms of Section

403 of the Companies Act, 1956 for restoration of the Directors and MD appointed by him.

VII

Y in his defense put forward the Joint Venture Agreement containing the arbitration clause

that disputes have to be resolved by the ICA and is followed to require the mandate under

Section 8 of the Arbitration and Conciliation Act, 1996. Y claimed that CLB cannot pass any

interim orders which can be passed under Sections 9 and 16 of the Arbitration and

Conciliation Act, 1956 and that the Act does not provide any other provision other than

stating the case ‘shall’ pass on to Arbitration.

VIII

X on the other hand claimed that no arbitrator has the power to grant the relief that the CLB

can grant under Sections 397, 398, 402, 403 etc. of the Companies Act and the CLB has

special jurisdiction to deal with the affairs of the company in case of oppression and

mismanagement. Even the Arbitration and Conciliation Act, 1996 under Section 2 (3)

recognizes that certain disputes may not be submitted to arbitration by virtue of the

provisions contained in any other statute.

XI
On the question of interim relief, X claims that the CLB has the jurisdiction under Section

403 to give the interim relief and even the Section 9 of the Arbitration and Conciliation Act,

1996 does not oust the jurisdiction of the CLB.
ISSUES INVOLVED

The issues that arise for consideration in this case are:

1. Whether the Company Law Board is bound to refer the matters raised by X in the

petition filed under Sections 397, 398 etc. of the Companies Act, 1956 to the Indian

Council of Arbitration as per the arbitration clause contained in the JVA as provided

under Section 8 of the Arbitration and Conciliation Act, 1996?

2. Whether the Company Law Board has the jurisdiction and power to grant any interim

orders to X after Y had filed the application under Section 8 of the Arbitration and

Conciliation Act, 1996 pending the decision on the application for arbitration?

3. Whether relief will be provided to X or Y’s claim will hold right under the jurisdiction

decided on?
SUMMARY OF ARGUMENTS

The arguments put forward in favor of the Respondent Y Limited. first of all comes down to

the basic fact that the Company ;ABC’ are operating under the JVA which sets out the

respective rights and duties of the X and Y company in the ABC ltd. The JVA says that the

company Y has the majority of the voting rights at the shareholders. The incorporated

organization must have and work by. As they are working under the JVA, they must follow

the guidelines provided in the JVA. And as according to the JVA the arbitration regarding any

dispute shall be conducted by the ICA and FICC , New Delhi only. The JVA clearly defines

the roles and responsibilities of Directors, and the AOA of the company doesn’t make any

sense as it misses the entire guidelines of the JVA which has to be mentioned in the AOA,

Hence the AOA of the company is not valid considering the JVA. the. X Limited has filed the

petition in before the Company Law Board and also sough reliefs including that a scheme be

evolved for the management of ABC ltd consistent with the JVA and the articles and also seek

restoration of the position of the X nominees on the board. X has also applied for the interim

orders but all in the terms of Section: 403 of the ‘Companies Act, 1956’. As there is no

guideline mentioned about the Company Law Board in the JVA and it is clearly mentioned

that only ICA and FCCI are taken in granted for the Arbitration regarding any Dispute both

the companies X and Y simply are bounded by the arbitration clause of the company

mentioned in the JVA. Hence, X can’t go for a petition before the Company Law Board and if

it happens the petition will not be accepted according to the JVA of the company. Therefore,

X is completely wrong in approaching the Company Law Board and should not be granted

the relief he deserves.
ARGUMENTS ADVANCED

The following arguments have been advanced in favor of Y Limited:

1. Both the companies ‘X’ and ‘Y’ are operating as a ‘JVC’ and both are following the

JVA. So, first of all it is important to have an arbitration clause in the Company. And

the AOA must contain all rules and regulations and measures of control and methods

of settling disputes in the internal organization of the company. It is not just essential

but mandatory as well. If the arbitration clause is not mentioned in the AOA it means

that the AOA is not valid as it doesn’t cover all the rules and guidelines of the JVA

including the arbitration clause of the JVA whether it is by a mistake or something

else. So, the AOA should not be taken in as granted. The JVA should be given the first

and prime priority as it is the base of the AOA of the company. And according to the

JVA between the company X is bound to go to the ICA and FCCI only because there

is a arbitration clause incorporated by the company ABC as according to the JVA. X

Ltd. is not supposed to file his petition and seek relief from any other court of his

choice.

2. According to the section: 8 of the arbitration clause, the company law board does not

have the authority to decide the case. Only ICA and FCCI can decide the arbitration

case. Now that the jurisdiction has been determined let us see that X’s claims are not

maintainable. As X Ltd. has filed Oppression and Mismanagement against Y Ltd. in

the CLB under the Sections 397/398 of the Companies Act 1956. He has also filed his

case under Sections 402 and 403 which allows the CLB to not only pass an interim

order but also to replace the changed directors and the Managing Director selected by

X. But there is no existence of the CLB in the arbitration clause of the JVA. So, X

can’t get reliefs on the basis of the petition filed before CLB/
3. Since Y has the majority of the shareholders in the Company, Y has then the right to

replace the Directors and the Managing Director selected by X. This is a not consider

as the breach of agreement. Y and X must follow the JVA otherwise then it will be a

breach of the agreement between them because all these agreements and their specific

clauses have been accepted and incorporated into the JVA and not in the AOA. The

JVA should be given the prime priority. Hence, X in real has indulged in breach of

contract by filing the petition in the court other than what mentioned in the agreement,

not the Y. So, Y must be granted as innocent. The relevant case Law in the favor of

respondent is ‘Chloro Controls India (P) Ltd. v. Severn Trent Water Purification Inc.,

(2013) 1 SCC 641’ and in World Sport Group(Mauritius) v. MSM

Satellite(Singapore)pvt.ltd
PRAYER

Wherefore in the light of issues involved, arguments advanced, reasons given and the

authorities cited, I humbly pray this Hon’ble Court may be pleased to:

Declare that the case is not maintainable.

Declare the Respondent innocent and Pass the judgment the favor of the company Y .

Along with relief the Respondent requests the Court to terminate the petition filed by X.

AND/OR

Pass any other relief which this Hon’ble court may be pleased to grant in the interests of

Justice, Equity and Good Conscience. All of which is respectfully submitted.

For This Act of Kindness, the Respondent Shall Duty Bound Forever Pray.

Sd/-

(Counsels for the Respondent)