SUPREME COURT OF
Sumitomo
Corporation
v.
CDC
Financial Services (
Tarun
Chatterjee and P. Sathasivam, JJ.
Civil
Appeal No. 1496 of 2008
February
22, 2008
Section 10F,
read with section 10 of the Companies Act, 1956 and section 50 of the
Arbitration & Conciliation Act, 1996 - Company Law Board - Appeal against
orders of - Whether while exercise of original jurisdiction, as provided in
section 47 and other similar sections of 1996 Act, should be by Court within
jurisdiction of which suit would have been filed, forum to hear
appeal against original order is to be tested with reference to appropriate law
governing authority or forum which passed original order -
Held, yes - Whether since in view of provisions of section 10F, read with section
10(1)(a), proper forum to hear appeal from orders of CLB is High Court within
jurisdiction of which registered office of company in issue is situated, appeal
against any order of CLB, including an order passed refusing reference to
arbitration, shall lie to High Court within jurisdiction of which registered
office of company in issue is situated - Held, yes
Words and Phrases:
‘Authorised
by law to hear the appeal’ occurring in section 50 of the Arbitration and
Conciliation Act, 1996.
A Joint Venture Agreement (JVA) was entered into between the appellant, respondent and ‘SML’ (company in issue) comprehensively specifying the respective rights and obligations of the parties including the management control of the affairs of the company. The said agreement also contained an arbitration agreement. Subsequently, the respondent filed a company petition under sections 397, 398 and 402, alleging oppression and mismanagement on the appellant’s part in the affairs of the company. In the said petition, the appellant filed an application seeking reference to arbitration under section 45 of the 1996 Act. The CLB, however, refused to refer the parties to arbitration. On appeal, the High Court dismissed the same not on merits but for lack of territorial jurisdiction holding that section 10(1)(a) would take precedence over section 50 of the 1996 Act. In the instant appeal, the appellant contended, inter alia, that the 1996 Act has been held to be a complete code as regards the law of arbitration and the same being a special statute has overriding effect on the 1956 Act in the light of the language used in section 50 of the 1996 Act.
Section 2(h) of the 1996 Act mentions that the ‘party’ means a party to
an arbitration agreement. To put it clear, the party to the judicial proceeding
should be a party to the arbitration agreement. As rightly observed by the CLB,
the proceeding under section 397/398 always relates to the affairs of the
company. Insofar as the
arbitration clause in the JVA was concerned, to bind the company, it had to be
a party to the arbitration agreement. However, the CLB had concluded that there
was no commonalities of parties and considering all the relevant aspects
arrived at a conclusion that the application seeking reference to arbitration deserved
to be dismissed on the main ground that the company in the affairs of which
application had been filed, was not a party to the arbitration agreement in the
JVA. [
The provisions of section 50 of the 1996 Act and sections 10 and 10F of the 1956 Act make it clear that the forum shall be the Court authorized by law to hear the appeals from such order. Unlike the explanation to section 47 of the 1996 Act, section 50 uses the expression ‘Court’ not simpliciter but qualified by the wording ‘authorized by law to hear appeals from such order.’ It is not the Court having jurisdiction if the subject-matter is a suit where jurisdiction is determined in accordance with the provisions of sections 16-20 of the Code of Civil Procedure. On the other hand, section 50 of the 1996 Act specifically uses the word ‘authorized by law’ and not the ‘Civil Procedure Code’ or ‘suit’.
If there is no bar in any statute, no difficulty would arise in filing a
suit. On the other hand in the case of appeals, for its maintainability there
must be a specific provision/clear authority of law. In view of the same, while
exercise of original jurisdiction, as provided in section 47 and other similar
sections of the 1996 Act, should be by the Court within the jurisdiction of
which the suit would have been filed, the appeal shall always be to the
appellate forum which hears appeals from the order of the forum which passes
the order. It is also clear from section 37 of the 1996 Act dealing with
appeals. Here also the appeal is to the Court which hears the appeal and not
the court which exercises original jurisdiction if the subject-matter has been
a suit as provided in the explanation to section 47 or section 2(c) of the 1996
Act. The reading of section 50 clearly suggests that an appeal shall lie from
the order of the CLB to the Court authorized by law to hear the appeals from
such order of the CLB. To make it clear that in the event the order under
section 45 is passed by the CLB, the forum which is provided under law for
hearing the appeal from the order of the CLB, will be the appellate forum. In
other words, while section 50 of the 1996 Act provides for the orders which can
be made the subject-matter of the appeal, the forum to hear the appeal against
original order is to be tested with reference to the appropriate law governing
the authority or forum which passed the original order, that was, in the
instant case, the CLB. Section 10F, read with section 10(1)(a) of the
1956 Act, provides for such forum to hear the appeal from the orders of the CLB
as the High Court within the jurisdiction of which the registered office of the
company in issue is situated. [
An appeal against any order of the CLB including an order passed refusing
reference to arbitration shall lie to the High Court within the jurisdiction of
which the registered office of the company is situated. That is the reason that
section 50 of the 1996 Act purposively uses the expression ‘authorized by law
to hear the appeal’. An order passed by the CLB cannot become appealable to a
civil court or a court exercising civil jurisdiction when Parliament has chosen
to provide for a specific appellate forum which should hear the appeal from the
orders of the CLB. [
The appellant had wrongly based its arguments on matters such as ouster
of jurisdiction, overriding effect of special statue over general statute,
overriding effect of subsequent statute, etc. Ouster of jurisdiction arises
only in regard to original jurisdiction and it cannot have any application to
appellate jurisdiction as the one provided in section 50 of 1996 Act. The
appeal is a statutory remedy and it can lie only to the specified forum. The appellate
forum cannot be decided on the basis of cause of action as applicable to
original proceedings such as suit which could be filed in any Court where part
of cause of action arises. [
In view of aforesaid, impugned order of the High Court was to be
sustained. Consequently, the appeal would fail as devoid of any merit and the
same was to be dismissed. [
CASE REVIEW:
Stridewell Leathers (P.) Ltd. v. Bhankerpur Simbhaoli Beverages (P.) Ltd. [1994] 1 SCC 34 - followed.