A call option enables the right-holder to call upon another shareholder to compulsorily sell their

shares to the right-holder. Often majority stake holders or promoters prefer to retain a call option

so that in a downside, they can retain control of the JV Co by buying out other JV partners.

Pet: iled an application under Section 45 of the Arbitration and Conciliation Act, 1996 being CA

No. 94/2013 before the Board praying that the proceedings of the company petition be stopped

and the parties be referred to have the disputes adjudicated through arbitration as there was a

clause in the JVA to have the disputes/differences between the parties i.e. the plaintiff No. 1 and

the defendant No. 1 resolved through the London Court of International Arbitration (LCIA)

Vikram Bakshi vs. MC Donald's India Pvt. Ltd. (22.12.2014 - DELHC) : MANU/DE/3483/2014

Mr. Salve contended that the present suit is not maintainable as the suit challenging the validity

of an arbitration agreement is barred under Section 5 of the Arbitration and Conciliation Act,

1996. It was contended that one of the main objectives of the Act is to minimize the supervisory

roles of courts in the arbitral proceedings and since Section 5 of the Arbitration and Conciliation

Act, 1996 is applicable to Part II of the Act also, therefore, the civil court's jurisdiction is barred.

Reliance in this regard was placed on Chatterjee Petrochem (Mauritius) Co. and Anr. vs. Haldia

Petrochemicals Ltd. MANU/SC/1258/2013 : 2013(4) Arb. L.R. 456 (SC). So far as the

judgments relied upon by the learned counsel for the plaintiffs are concerned, they were sought

to be distinguished.

Vikram Bakshi vs. MC Donald's India Pvt. Ltd. (22.12.2014 - DELHC) : MANU/DE/3483/2014

http://www.mca.gov.in/Ministry/reportonexpertcommitte/chapter4.html

While corporate governance may comprise of both legal and behavioral norms, no written set of rules or laws can

contemplate every situation that a director or the board collectively may find itself in. Besides, existence of written
norms in itself cannot prevent a director from abusing his position while going through the motions of proper

deliberation prescribed by written norms. Therefore behavioural norms that include informed and deliberative decision

making, division of authority, monitoring of management and even handed performance of duties owed to the

company as well as the shareholders are equally important.

Companies need to adopt remuneration policies that attract and maintain talented and motivated directors and

employees so as to encourage enhanced performance of the company. Decision on how to remunerate directors

should be left to the Company. However this should be transparent and based on principles that ensure fairness,

reasonableness and accountability. 13.2 It is important that there should be a clear relationship between

responsibility and performance vis-à-vis remuneration, and that the policy underlying Directors’ remuneration be

articulated, disclosed and understood by investors/ stakeholders.

he appointment and removal of the key managerial personnel should be by the Board of Directors

203(2) Every whole-time key managerial personnel of a company shall be appointed by means of

a resolution of the Board containing the terms and conditions of the appointment including the

remuneration.

COMPANIES ACT, 2013 : 12340

Rakesh Malhotra vs. Rojinder Mathota & Ors.

Dunar Foods Limited and Ors. vs. IL and FS Trust Co. Ltd. and Ors. (13.05.2015 - CLB) :

MANU/CL/0015/2015

Mr. Madon is correct, generally speaking, in saying that a draughts person's acuity cannot

permit a party to slither out of a binding arbitration agreement. But just as a petition

cannot be 'dressed up' to evade an arbitration agreement, a bona fide petition, not one that
is vexatious, oppressive or mala fide, and genuinely seeks broader reliefs to prevent acts of

oppression and mismanagement cannot be, as it were, defrocked, its thesis unseated and its

constituent elements so parsed, dissected and carved up as to drag it into an arbitral

dispute only because there happens to be an arbitration agreement. The mistake, I believe,

is in seeing every arbitration agreement as some catch all, encyclopaedic repository for the

entirety of the universe of disputes between parties. It is not necessarily so. Conceptually,

too, a petition under Sections 397 and 398 of the Companies Act is not necessarily or

always relatable to an arbitration agreement. It may speak to a pattern of conduct of

clandestine non-contractual actions that result in the mismanagement of the company's

affairs or in the oppression of the minority shareholders, or both. In such a petition, even if

there is an arbitration agreement, it does not necessarily follow that every single act

complained of must, ipso facto, relate to that arbitration agreement. Merely because an

arbitration agreement exists does not always or necessarily imply that all disputes relate

only to it, or that all parties' rights and remedies are circumscribed by that agreement.

Dunar Foods Limited and Ors. vs. IL and FS Trust Co. Ltd. and Ors. (13.05.2015 - CLB) :

MANU/CL/0015/2015

Similarly, no arbitration agreement can vest an arbitral tribunal with the powers to grant

the kind of reliefs against oppression and mismanagement that the CLB might. Mr.

Madon's submission that it matters not what the arbitral panel does with the dispute so

long as the dispute is referred seems to me to strain at the boundaries of the intent of

arbitration law. The idea cannot possibly be to shunt parties off the main tracks of a
properly brought litigation to some siding with no destination and no way forward. It must

be to provide them with an effective, quick and reasonable dispute resolution alternative.

Dunar Foods Limited and Ors. vs. IL and FS Trust Co. Ltd. and Ors. (13.05.2015 - CLB) :

MANU/CL/0015/2015

In assessing an allegation of 'dressing up', the Section 397/398 petition must be read as a

whole, including Its grounds and the reliefs sought. It cannot be carved up and

deconstructed so as to bring some matters within the arbitration clause and leave other

matters out Where there are reliefs that are not arbitrable because they fall within Section

402 of the Companies Act, 1956, there is no question of a dismissal of the petition on the

ground that there exists an arbitration clause. In Sukanya Holdings (P) Ltd. v. Jayesh H.

Pandyato Supreme Court inter alia said

Dunar Foods Limited and Ors. vs. IL and FS Trust Co. Ltd. and Ors. (13.05.2015 - CLB) :

MANU/CL/0015/2015

The true consequence of my finding on Mr. Chinoy's submission regarding the non- arbitrability

of disputes validity brought under sections 397-398 read with Section 402 of the Companies Act,

1956 is that it is not enough for an applicant seeking a reference to arbitration merely to show

that there exists an arbitration agreement. He must, in addition, establish before the CLB that the

petition is mala fide, vexatious and 'dressed up' and that the reliefs sought are such as can be

resolved by a private arbitral tribunal. To hold otherwise would be to say that even a dressed up
petition cannot be referred to arbitration. I see no reason why the CLB should be denuded of its

powers in that situation, it is, after all a "Judicial Authority" within the meaning of the

Arbitration Act. The Jurisdictional exclusion of Section 402 cannot be extrapolated to

mischievous and 'dressed up' petition. That would be wholly contrary to Swiss Timing, Pinkcity,

Fuerst Day Lawson and others. The injustice in such a case is manifest. It must follow, therefore,

that the CLB always retains the power to refer the disputes in a petition that is mischievous,

vexatious, mala fide and 'dressed up' to arbitration.

Dunar Foods Limited and Ors. vs. IL and FS Trust Co. Ltd. and Ors. (13.05.2015 - CLB) :

MANU/CL/0015/2015

As per the decision in the case of V.V. Ranga Raj Vs v. B. Gopalkrishnan [1991] 6 CLA 211 SC,

the Articles are binding inter se Company and its shareholders members.

Dunar Foods Limited and Ors. vs. IL and FS Trust Co. Ltd. and Ors. (13.05.2015 - CLB) :

MANU/CL/0015/2015

According to the Ld. Counsel, in view of various judgments passed by the Hon'ble Supreme

Court, the well recognized examples of non-arbitrable disputes are: (i) disputes relating to rights

and liabilities which give rise to or arise out of criminal offences; (ii) matrimonial disputes

relating to divorce, judicial separation, restitution of conjugal rights, child custody; (iii)

guardianship matters; (iv) insolvency and winding up matters; (v) testamentary matters (grant of

probate, letters of administration and succession certificate); and (vi) eviction or tenancy matters
governed by special statutes where the tenant enjoys statutory protection against eviction and

only the specified courts are conferred jurisdiction to grant eviction or decide the disputes.

Dunar Foods Limited and Ors. vs. IL and FS Trust Co. Ltd. and Ors. (13.05.2015 - CLB) :

MANU/CL/0015/2015

It is further submitted that as the parties have already agreed to the dispute resolution in

mechanism, the present proceedings are not maintainable and, therefore, Board may graciously

be pleased to refer the parties before the Arbitral Tribunal as agreed by the parties.

Dunar Foods Limited and Ors. vs. IL and FS Trust Co. Ltd. and Ors. (13.05.2015 - CLB) :

MANU/CL/0015/2015

In addition to the above, Mr. Mehta relying upon the decision in the case of M/s. Emgee Housing

Pvt. Ltd. & Ors. MANU/CL/0065/2012, to contend that the right of the shareholders under

Section 397 or 398 is a statutory right which by Section 8 of the Arbitration and Conciliation

Act, 1996 cannot be ousted by a provision in the Articles of Association of the Company and or

an arbitration clause in the Agreements

Dunar Foods Limited and Ors. vs. IL and FS Trust Co. Ltd. and Ors. (13.05.2015 - CLB) :

MANU/CL/0015/2015
he foregoing facts clearly demonstrate that the affairs of the Company are being conducted in a

harsh, oppressive and burdensome manner, and also prejudicially to the Petitioner being, a

shareholder of the Company and to the interests of the Company; there is complete lack of

probity and fair dealing and mis-management of the Company's affairs

Dunar Foods Limited and Ors. vs. IL and FS Trust Co. Ltd. and Ors. (13.05.2015 - CLB) :

MANU/CL/0015/2015

In my view, an arbitrator is not capable to grant reliefs sought by the petitioner in the petition

and the CLB is the only competent forum to grant such reliefs in exercise of Its rights and

powers conferred upon it by virtue of the provisions contained in Section 402 of the Act.

Dunar Foods Limited and Ors. vs. IL and FS Trust Co. Ltd. and Ors. (13.05.2015 - CLB) :

MANU/CL/0015/2015

The court dismissed the action on the ground that, as the acts of the directors were capable of

confirmation by the majority of members, the court should not interfere. it was thus left to the

majority to decide what was for the benefit of the company. This rule has been applied in several

cases later, vide MacDougall v. Gardiner [1875] 1 Ch 13.

Rajeev Saumitra vs. Neetu Singh and Ors. (27.01.2016 - DELHC) : MANU/DE/0201/2016

S 166(4) and (5) of companies act

The word oppression in common parlance refers to a situation or an act or instance of
oppressing or subjecting to cruel or unjust impositions or restraints.
According to Lord Keith,” Oppression means, lack of morality and fair dealings in
the affairs of the company which may be prejudicial to some members of the
company
The term mismanagement refers to the process or practise of managing ineptly,
incompetently, or dishonestly.
However it is to be noted that the terms are not defined under the companies act and is
left to the discretion of the court to decide on the facts of the case whether there is
oppression or mismanagement of minority or not.
Instances which can be termed as mismanagement
1. Preventing directors from functioning
There is no dispute that in interpreting a contract, and the Articles are nothing if not that, the

conduct of parties is relevant. It shows how they understood it. As the Supreme Court said in The

Godhra Electricity Co Ltd. & Anr. v The State of Gujarat & Anr. MANU/SC/0282/1974 : (1975)

1 SCC 199

"11. In the process of interpretation of the terms of a contract, the court can frequently get great

assistance from the interpreting statements made by the parties themselves or from their conduct

in rendering or in receiving performance under it. Parties can, by mutual agreement, make their

own contracts; they can also, by mutual agreement, remake them. The process of practical

interpretation and application, however, is not regarded by the parties as a remaking of the

contract; nor do the courts so regard it. Instead, it is merely a further expression by the parties of

the meaning that they give and have given to the terms of their contract previously made. There

is no good reason why the courts should not give great weight to these further expressions by the

parties, in view of the fact that they still have the same freedom of contract that they had

originally. The American Courts receive subsequent actions as admissible guides in

 interpretation. It is true that one party cannot build up his case by making an interpretation in his

own favour. It is the concurrence therein that such a party can use against the other party. This

concurrence may be evidenced by the other party's express assent thereto, by his acting in

accordance with it, by his receipt without objection of performances that indicate it, or by saying

nothing when he knows that the first party is acting on reliance upon the interpretation (see

Corbin on contracts, Vol. 3, pp. 249 and 254-55)."

Madhu Ashok Kapur and Ors. vs. Rana Kapoor and Ors. (04.06.2015 - BOMHC) :

MANU/MH/1038/2015

Custom and practice is one of various ways that terms may become
implied into an employment contract. In order for a term to become
implied by custom and practice it must be,
"reasonable, notorious and certain".
In other words the term must be:
 fair and not capricious,
 well established over a period of time,
 known to employees,
 clear and unambiguous.
The fact that a benefit has been granted by an employer for a number of
years will not necessarily mean it has become a binding entitlement.
Firstly, this is because the term must be known to the workforce so that
employees have a reasonable expectation of receiving the benefit. For
example, if details of the benefit are published in an easily accessible
document such as a staff handbook this might point towards an implied
term. However, if information about the benefit is set out in a restricted
policy document available only to a small group of management or HR,
this would point away from the benefit having become an implied term.
Secondly, the employer must have behaved in such a way which
suggests it felt a sense of legal obligation to provide the benefit.
Ultimately, the question a tribunal or Court will ask is whether the
circumstances demonstrate that the parties intended the term to form
part of their contract? In other words, can they be taken to have
accepted that the practice has attained contractual status?
In the recent case of Park Cakes v Shumba & Ors, which concerned a
disputed entitlement to an enhanced redundancy payment, the Court of
Appeal stressed that the crucial task for a tribunal was to assess
objectively whether the employer's conduct evidenced an intention to be
bound by the term:
". the essential question.. Must be whether, by his conduct in making available a particular
benefit to employees over a period, in the context of all the surrounding circumstances, the
employer has evidenced to the relevant employees an intention that they should enjoy that
benefit as of right?"