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 and 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
Facts
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.
Held
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 words ‘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. A 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. [
In view of the decision in Stridewell Leathers (P.) Ltd. v. Bhankerpur Simbhaoli Beverages (P.) Ltd.
[1994] 1 SCC 34, the appeal under section 50 of the 1996 Act from an order
passed by the CLB on matters concerning the company whose registered office was
in Punjab was maintainable in the High Court of Punjab and Haryana and not to
the High Court of Delhi. [
The appellant had wrongly based its
arguments on matters such as ouster of jurisdiction, overriding effect of
special statute 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. [Papa 12]
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.
Cases referred to
nn