K.K. Balu, Member
1. This is an application filed by M/s PPN Power Generating Company Ltd., ("the Company") under Regulation 44 of the Company Law Board Regulations, 1991, seeking directions of this Bench, in exercise of the inherent power, to grant an order of interim injunction restraining M/s PPN (Mauritius) Company and M/s PSEG PPN Energy Company Limited ("the petitioners") from further proceeding with ICC Case No. 13218/MS pending before the ICC International Court of Arbitration, Paris ("ICC Arbitral Tribunal") and further restraining the petitioners from initiating any derivative action on behalf of the Company against Tamil Nadu Electricity Board ("TNEB") for the alleged breaches of the Power Purchase Agreement dated 03.01.1997 ("the PPA") entered into between TNEB and the Company.
2. The facts leading to the present application are: The Company is engaged in the business of power generation. The authorised capital of the Company is Rs. 500 crores divided into Rs. 5 crores equity shares of Rs. 100/-The present paid-up share capital of the Company is Rs. 490.20 crores. The petitioners are holding 46 per cent and the respondents 2 & 3, 54 per cent of the paid-up capital of the Company. The fourth respondent is the Managing Director of the Company, nominated by the second respondent. The respondents 5 to 7 are directors of the Company nominated by the second respondent. The respondents 8 & 10 are directors nominated by the third respondent. Thus, the respondents 2 & 3 hold the controlling interest in the Company and have majority on the Board of directors of the Company. The Company had entered into the PPA with TNEB, the sole customer of the Company, for supply of electricity generated for a period of 30 years. The grievances of the petitioners on account of the respondents in the conduct of the affairs of the Company relate to -
(i) Failure to take any remedial measure and concrete action in terms of the PPA against TNEB for -
(a) recovery of the huge outstandings of over Rs. 450 crores;
(b) not opening a letter of credit;
(c) not crediting TNEB's receivables in the Escrow account; and
(d) not invoking the guarantee issued by the Government of Tamil Nadu.
(ii) Appointment of a liaison agent to recover money from TNEB, thereby incurring wasteful expenditure and causing financial burden on the Company.
(iii) Furnishing incorrect projections to the lenders in regard to use of industrial gas as fuel with the object of securing loans, thereby exposing the Company and its directors to civil and criminal liabilities.
(iv) Providing false projections to the lenders for the purpose of securing higher loans.
(v) Creating charges in favour of working capital lenders in excess of that ceded by the Industrial Development Bank of India ("IDBI"), exposing the Company and its directors for civil and criminal liabilities.
The petitioners, being minority shareholders and minority on the Board of directors of the Company, aggrieved by the various alleged acts of omission and commission on the part of the respondents have filed the company petition, with a view to bring to an end the matters complained of by seeking the following reliefs: -
a) to supercede the present Board of the Company and appoint an Administrator to exercise the following among other powers:
(i) to carry on the entire management of the Company for ensuring its smooth and proper functioning;
(ii) to initiate and continue proceedings qua TNEB and Government of Tamil Nadu for and on behalf of the Company with respect to the Company's rights under the PPA and government Guarantee;
(iii) to operate the ESCROW Account as envisaged under the PPA;
(iv) to co-opt one representative each of the Petitioners to the Administrator's Board to assist him in management of the Company;
(v) to act for and on behalf of the Company and represent the Company qua Lenders of the Company;
(vi) to act for and on behalf of the Company and represent the Company qua all Counter Parties to current or future contracts and agreements including but not limited to Fuel Contracts; Spares Contract; O & M Contracts;
(vii) to act for and on behalf of the Company in respect of all or any claims or disputes that arise qua any other parties including but not limited to disputes under the EPC Contracts;
(viii) to operate all Bank Accounts of the Company and issue appropriate directions to its Bankers.
b) to frame a scheme of management for the Company and inter-alia order that the Company be managed by a professional Manager under the guidance of the Administrator and aided by a Consultative Committee;
c) to amend, alter and/or modify Article 34A and Article 74A of the Articles of Association of the Company to the extent that the suspension of Veto/Affirmative Vote right contemplated in Articles 34A and 74A stand activated in favour of and in so far as the Petitioners and their nominees as the case may be, are concerned;
d) to direct the amendment and/or deletion and/or alteration of the other Articles of Association of the Company apart from Article 34A and Article 74A above so as to best address the issues raised in this company petition including but not limited to Article 53 to the extent that it provides that Chairman of the Company be from amongst the Directors of the second respondent; and Article 87 to the extent that Managing Director shall be recommended by the Second Respondent;
e) to direct the majority shareholders to reimburse and pay to the Company jointly and severally the amounts paid out by way of interest on working capital together with interest;
f) to order the majority shareholders to reimburse money paid by the Group Company of the third respondent towards the remuneration of the MD of the Company in excess of the statutory limit of Schedule XIV to the Companies Act, 1956 together with interest;
g) to set aside the contract entered into with the Liaisoning Agency namely Red Phoenix and order the majority shareholder to reimburse the payments made to Red Phoenix together with such interest;
h) to direct the majority shareholders to recompensate and pay to the Company jointly and severally damages suffered on account of, inter-alia, the following acts of the majority shareholders:
(i) amounts paid by the company by way of MAT;
(ii)amounts lost to the Company by way of financial mismanagement; etc.
i) direct that the unlimited guarantee given by the second respondent to the Lenders be continued as per the terms of the Loan documents; and
j) declare that the affairs of the Company ought to be investigated and direct such investigation into the affairs of the Company.
Having regard to the urgency involved in the matter, the petitioners have prayed for in the company petition the following interim reliefs:
a) To appoint an Administrator authorizing him to inter-alia:-
(i) to invoke the alternate dispute resolution remedy clause under the PPA dated 3.1.1997 for and on behalf of the Company and to forthwith initiate the proceedings as contemplated thereunder;
(ii) to invoke the GOTN Guarantee for and on behalf of the Company;
(iii) to pursue all outstanding issues with TNEB;
(iv) to pursue and finalise Gas Supply & Transportation Agreement for and on behalf of the Company by entering into negotiations and dialogues with, the parties concerned;
b) to appoint an observer to attend all Board Meetings of the Company during the pendency of the proceedings or till further orders;
c) to authorise the Observer appointed in terms of prayer (b) above to sign and verify the Board Minutes of the Board Meetings along with the Petitioners' counter signatures;
d) to restrain the Respondents from in any manner renewing the contract of the Liaisoning Agency, namely Red Phoenix whose contract is coming to an end on 31^st March, 2004;
e) to order henceforth payments to the MD in accordance with law by the Company;
f) Pass an order directing that:
(i) The Agenda for the Board Meetings, including the resolutions intended to be passed at the Board Meetings be circulated 14 days in advance to any Board Meeting, as per the mandate of Articles 76 & 77 of the Articles of Association;
(ii) All Minutes of the Board Meetings be signed by the nominees of the Petitioners.
g) to pass an order directing that any negotiations or contract entered into for and on behalf of the Company by the Management shall be jointly so done by one nominee each, of the Petitioner together with the MD subject to the approval of the Board; and
h) to pass an order directing that the 2004-07 business plan be prepared for and on behalf of the Company by the Management in joint consultation with one nominee each of the Petitioner.
Shri Sudipto Sarkar, learned Senior Counsel, while moving the company petition on 08.03.2004 urged for the following interim reliefs: -
(a) to appoint an administrator for the Company to initiate appropriate proceedings against the TNEB as contemplated in the Power Purchase Agreement dated 03.01.1997 and invoke the guarantee given by Government of Tamil Nadu in favour of the Company;
(b) to appoint an observer at the Board Meeting of the Company proposed to be held on 20.03.2004; and
(c) to restrain the Company from renewing the contract of the liaisoning agency, viz., Red Phoenix, which is likely to expire on 31.03.2004.
Shri Arvind P. Datar, learned Senior Counsel opposed the move for any interim reliefs on the premises that any delay in recovery of the outstanding dues from TNEB by the Company cannot amount to mismanagement in the affairs of the Company. TNEB is making payments, though, not regularly, but from time to time, leaving only a balance of Rs. 430 crores to be paid towards supply of electricity by the Company. The default and non-adherence of the terms of the PPA by the TNEB are not within the control of the Company. However, if coercive steps are taken against TNEB, not being a private party and the State government guarantee is invoked, such measures may be counterproductive. TNEB being the sole purchaser of power may perhaps be forced not to purchase power generated by the Company, in which case, the Company would meet the same situation met by Dabhol Power Company in Maharashtra. Having regard to the current economic background and ground realities in India, the respondents group took a conscious decision not to enforce the PPA against TNEB, which is in the absolute interest of the shareholders as well as the Company. This Bench, after hearing both the sides, declined the interim reliefs as claimed by the petitioners. When the obligations of TNEB under the PPA in respect of the letter of credit and Escrow Account were to expire according to the legal opinions obtained by the petitioners on 26.03.2004, their nominee directors demanded the respondents group at the Board meeting held on 20.03.2004 to invoke the legal rights of the Company against TNEB, the respondents refused to invoke the legal remedies against TNEB on basis of the legal opinions separately obtained by them showing validity of the claim under the PPA till 10.11.2004. At this point of time, the petitioners pleaded for the intervention of this Bench through an application in CA No. 38/2004 by authorizing Mr. Jensen and Mr. Sirsi, directors of the Company, being the nominees of the petitioners to forthwith institute and prosecute the dispute resolution mechanism under the PPA on behalf of the Company against TNEB in order to save the limitation of the claim on 26.03.2004, which was stoutly opposed by the respondents group on the grounds that the claim under PPA would not be barred by limitation on 26.03.2004 and that any action against TNEB would ruin the running of the Company and adversely affect the working relationship of the Company with TNEB, with discontinuation of the power purchase under the PPA by TNEB. This Bench had declined to interfere with the business judgment taken with collective wisdom of the majority directors in not having taken any action against TNEB. Accordingly, the prayer for authorizing the nominee directors of the petitioners to institute and prosecute the dispute resolution mechanism under the PPA on behalf of the Company against TNEB was not granted by an order dated 25.03.2004 of this Bench. In the meanwhile, the petitioners, being minority shareholders, have initiated a "derivative action" against TNEB invoking the arbitration clause contained in the PPA by filing a request dated 25.03.2004 for arbitration before ICC Arbitral Tribunal, Paris in the name of the Company without any authorization, appointing Mr. John Uff as the Company's nominated arbitrator. Hence, the application.
3. Shri Datar, learned Senior Counsel pressed for an order of interim injunction restraining the petitioners from further proceeding with the arbitration proceedings against TNEB in the ICC Arbitral Tribunal for the following reasons: -
The powers of shareholders as well as directors are distinctly defined in the Act. Section 291 provides that except where express provision is made that the powers of a company in respect of any particular matter are to be exercised by the company in general meeting, in all other cases, the Board of directors are empowered to exercise all its powers. The Board can exercise its powers, as envisaged and specified in Section 293, with the consent of the general body. The shareholders can neither derive or usurp powers of the Board, nor can exercise powers of the Board, save when the directors act malafide or improperly and against the interest of the Company, in which case the shareholders by way of a derivative action can enforce the legal rights by themselves, impleading the Company as a proforma party to such a proceeding. The petitioners have investment aggregating Rs. 225 crores and the respondents group Rs. 264 crores. The financial institutions have lent to the tune of nearly Rs. 1050 crores. The respondents group and the financial institutions having a total stake of over Rs. 1300 crores were firmly of the view that their interest would better be protected by not initiating any legal action against TNEB for breaches of the PPA. The decision taken by the respondents group on commercial consideration cannot be interfered by the CLB. TNEB has been making payments from time to time and settled 90% - 95% of the outstanding dues. In spite of the Company's efforts, they could not successfully obtain the letter of credit from TNEB and ensure that TNEB operationalizes the escrow account. There are five companies in the state of Tamilnadu including the first respondent-Company generating power, out of which, one company alone could obtain a letter of credit from TNEB and the same could not be invoked in spite of the default committed by TNEB. Any action against TNEB would have dangerous consequences, which would result in closure of the Company, as in the case of Dabhol Power Company. Moreover, the respondents have not acted for their personal aggrandizement. The remedy, if any, by initiating any action against TNEB would be worse than the disease. The petitioners being minority shareholders must respect the corporate democracy and yield to the business decision of the majority shareholders.
The petitioners aggrieved by the act of the respondents in not initiating any legal action against TNEB for breaches of the PPA have categorically prayed for appointment of an Administrator to enforce the obligations under the PPA against TNEB and by way of interim relief urged that the Administrator must be authorised to invoke the alternate dispute resolution clause under the PPA for and on behalf of the Company. This Bench declined any such interim relief, upon which the petitioners came out with the company application 38/2004 seeking the intervention of this Bench by authorising Mr. Jensen and Mr. Sirse, directors of the Company to represent the Company and initiate and prosecute the dispute resolution mechanism under the PPA on behalf the Company against TNEB. This prayer of the petitioners as minority shareholders to invoke the dispute resolution mechanism under the PPA was again refused by this Bench on 25.03.2004. Though the petitioners have preferred an appeal against this order, no stay has been granted against the operation of the said order. The action of the petitioners in having initiated a "derivative action" against TNEB invoking the arbitration clause contained in the PPA by filing the request on 25.03.2004, being the date of order of CLB, for arbitration before the ICC Arbitral Tribunal in the name of the Company, without any authorization, is in gross violation and disobedience of the order dated 25.03.2004 of this Bench and the petitioners must be restrained by way of anti-suit injunction from further proceeding with the arbitration proceedings pending on the file of the ICC Arbitral Tribunal, in support of which, Shri Datar, learned Senior Counsel, relied upon the following decisions:
Modi Entertainment Network v. W.S.G. Cricket Pte. Ltd., (2003) 4 SCC 341, -to show that the essence of an anti-suit injunction is to ensure the ends of justice or to protect the jurisdiction of the court or to prevent oppressive or vexatious conduct of the parties. The principles of grant of injunction will cover an anti-suit injunction. It is a species of injunction. The courts in India have powers to issue anti-suit injunction to a party over whom they have personal jurisdiction in an appropriate case, but its effect may cause interference in the exercise of jurisdiction by another court. It will be granted sparingly having regard to the rule of comity. Anti-suit injunction can be granted by a natural forum and need not necessarily only by a natural forum. When more forums are available, the court in exercise of its discretion to grant anti-suit injunction will examine as to which is the appropriate forum and may grant anti-suit injunction in regard to the proceedings which are oppressive or vexatious in a forum which is not the appropriate forum. The Supreme Court incidentally held that there was no ground to grant anti-suit injunction in that case when there were no strong reasons to disregard the contractual obligations of the parties. While, the jurisdiction clause is a relevant factor, but not determinative at the time of granting anti-suit injunction, on the facts and circumstances each case.
SNI Aerospatiale v. Lee Kui Jak, All England Law Reports 1936 -ALL ER 1987 Vol. 3 510 - to show that it is not possible to draw a circle which encompasses all possible circumstances when an anti-suit injunction can be granted. Such injunctions can be granted wherever there is vexation and oppression and to prevent administration of justice being perverted for an unjust end.
CSR Ltd v. Cigna Insurance Australia Ltd - 1997 Aust Highct Lexis 41, BC 9703378 - to show that the courts have inherent powers to grant anti-suit injunction, which cannot be confined to specific cases. The inherent powers shall be exercised when the administration of justice demands or in the context of the court's own proceedings or processes. The court may further make orders in restraint of unconscionable conduct or the unconscientious exercise of legal rights.
Hans A. Quaak Et Al. v. Klynveld Peat Marwick Goerdeler Bedrijfsrevisoren (United States Court of Appeals for the first circuit) - to show that there are no precise rules governing the appropriateness of anti-suit injunction. A court in every case should examine the totality of the circumstances in deciding whether a particular case warrants the issuance of an international anti-suit injunction. If after giving due regard to the circumstances (including the salient interest in international comity), a court supportably finds that equitable considerations preponderate in favour of relief, it may issue an international anti-suit injunction. Anti-suit injunction can be granted to protect or preserve the jurisdiction of the court or safeguarding of important national policies.
Laker Airways Limited v. Sabena, Belgian World Airlines (United States Court of Appeals for the District of Columbia Circuit)- to show that the equitable circumstances surrounding each request for an injunction must be carefully examined and injunctions are most often necessary to protect the jurisdiction of the enjoining court, or to prevent the litigant's evasion of the important public policies of the forum or to prevent an irreparable miscarriage of justice. These situations may arise either before or after a judgment has been rendered. Anti-suit injunction must readily be granted after a judgment is rendered by the court. However, before a judgment has been granted, the test for granting anti-suit injunction will be more rigorous. A court may freely protect the integrity of its judgments by preventing their evasion through vexatious or oppressive relitigation.
Forum Insurance Company v. Bristol-Myers Squibb Company And Medical Engineering Corporation (Court of Appeals of Texas, Ninth District, Beaumont) - to show that an anti-suit injunction is appropriate in the following circumstances:
1. to address a threat to the court's jurisdiction;
2. to prevent the evasion of important public policy;
3. to prevent a multiplicity of suits; or
4. to protect a party from vexatious or harassing litigation.
The Company Law Board in exercise of the inherent powers under Regulation 44 of the Company Law Board Regulations, 1991, which is analogous to Section 151 of the Code of Civil procedure, 1908 is empowered to grant an anti-suit injunction against the ICC Arbitral Tribunal, to meet the ends of justice and prevent abuse of the legal process by the minority shareholders. In Union of India v. Dabhol Power Company, the High Court of Delhi by an order dated 05.05.2004 made in LA. No. 6663/2003 in Suit No. 1268/2003, after considering the facts and circumstances of that case, in exercise of the inherent powers, stayed the arbitration proceedings before the Arbitral Tribunal in London, which is however under challenge before a Division Bench of the High Court of Delhi. Anti-suit injunction, in the present case, is not sought either against the ICC Arbitral Tribunal or TNEB but only against the petitioners from proceedings with the arbitration in view of the order dated 25.03.2004 of the CLB, refusing permission in their favour for any such action. The CLB exercises the same powers which were exercised by the High Court under Sections 397 & 398 of the Act. Section 403 enjoins upon the Company Law Board to grant appropriate interim reliefs for regulating the conduct of affairs of the Company.
Though the petitioners claim in the company petition that the dispute resolution procedure envisaged in the PPA is very detailed, time consuming and two-tier procedure, yet they have filed a request for arbitration before the ICC Arbitral Tribunal in gross violation of the order dated 25.03.2004 of this Bench, without disclosing before the CLB about the initiation of the arbitration proceedings. The petitioners can be punished for violation of the said order of the CLB, for which reference has been made to Tayabbhai M. Bagasarwalla v. Hind Rubber Industries Pvt. Ltd. - AIR 1997 SC 1240 to show that if a party willfully flouts an order of the court then such party can expect no equitable relief from the court. Such a party must be made to bear the consequences of his action. Otherwise all parties will ignore or flout orders of courts. The petitioners while pursing the proceedings before the CLB, simultaneously were preparing to make the claim before ICC Arbitral Tribunal, without disclosing the CLB proceedings, thereby suppressing the duplicative proceedings before each of the fora. At the same time, the petitioners have elected to file an appeal under Section 10F against the order of the CLB. Unless the order dated 25.03.2004 of the CLB is stayed or set aside in a manner known to law, the order of CLB is binding on all parties. The conduct of the petitioners is vexatious and oppressive, amounting to the administration of justice being perverted. While the petitioners' solicitors in their communication dated 13.05.2004 have complained that the Indian proceedings are very complex, the petitioners in the company petition categorically contended the arbitration procedure envisaged by the PPA is very detailed and lengthy. The petitioners are threatening the CLB jurisdiction and is frustrating the policy of this forum.
The ICC Arbitral Tribunal would exercise jurisdiction only when any dispute arises out of the PPA, between the Company and TNEB. Whereas, the proceedings before the ICC Arbitral Tribunal initiated by the petitioners are illegal and unauthorized for want of authority by the Board of Directors of the Company. Moreover, Clause 14.3 of the Shareholders Agreement dated 24.11.1998 specifically prohibits any shareholder from acting on behalf of any other shareholder. The CLB must issue anti-suit injunction to protect its own jurisdiction and to prevent abuse of process.
The working results of the Company for the period ended April 30, 2004 shows the profits of Rs. 337.77 lakhs, indicating the financial position of the Company. Whereas the petitioners are not interested in their operations in the territory of India, as borne by the press report appeared in the financial daily newspaper.
4. Dr. Abhishek Singhvi, learned Senior Counsel, opposed the application, on the following grounds:-
The petitioners' nominee directors by their letters dated 23.02.2004 and 25.02.2004 had requested the Company to initiate action against TNEB for breaches of the terms of the PPA. Thereafter, they had proposed two resolutions at the Board meeting held on 20.03.2004, to the effect that the Company would invoke the clause under the PPA and that the Managing Director would initiate the arbitration proceedings, which were defeated at the behest of the respondents, driving the petitioners to seek the intervention of the CLB by authorising their nominee directors, to initiate arbitration proceedings against TNEB before the ICC Arbitral Tribunal, on behalf of the Company, but not for taking a derivative action, as minority shareholders in the name of the Company before the ICC Arbitral Tribunal. This leave, when declined by an order dated 25.03.2004 of this Bench, the petitioners approached the ICC Arbitral Tribunal as minority shareholders initiating the claim by way of a derivative action. The petitioners' ICC Arbitration is a natural corollary pursuant to their earlier futile attempts and could have come only after disposal of the company application 38/2004, which is not a subsisting operative prohibitive injunction against the petitioners and therefore, invocation of the ICC arbitration at their instance is not barred. The issue in regard to the role of minority shareholders is not covered by the company application 38/2004. The decision in Tayabbhai M. Bagasarwalla v. Hind Rubber Industries Pvt. Ltd. (Supra) holding that a party who acted in gross violation of the order of injunction of a court must be punished has no application to the present case, in view of the fact that there is no such prohibitory injunction of any kind operating against the petitioners. In the event of any prohibitory injunction against the petitioners, the respondents were to file an application for contempt of court and in such event there would be no basis for the applicant to come out with the present company application (CA 62 of 2004). The company application 38/2004 is in relation to the procedural matter seeking directions against the Company to proceed against TNEB. Whereas, the ICC Arbitration is a substantial action against the TNEB for substantive monitory and other contractual claims.
An anti-suit injunction can be granted - (a) if the injuncting court is the natural forum for the adjudication of the disputes in question; (b) if the injuncting court is seized of the same issue which is before the foreign court and can give the same relief as the foreign court; and (c) if the Indian court is satisfied that the foreign proceedings are oppressive, vexatious and wholly illegal as held in Modi Entertainment Network v. WSG Cricket Pte Ltd - (2003) 4 SCC 341 and SNI Aerospatiale v. Lee Kui Jak -  3 All ER 510.
The CLB cannot be a natural forum or forum of concurrent jurisdiction to enforce the terms of the PPA against TNEB, which is the exclusive domain of the ICC Arbitral Tribunal. Anti-suit injunction is granted only by a natural forum, against either an unnatural forum or forum with concurrent jurisdiction. In the present case, anti-suit injunction is sought against the natural forum, being the ICC Arbitral Tribunal, the sole and exclusive forum contracted by the parties to resolve the disputes arising out of the PPA and not from the natural forum. There is no judicial precedent in the globe to show that such anti-suit injunction could be issued against a natural forum. All the cases cited by the applicant do not even remotely justify the issuance of such anti-suit injunction. Anti-suit injunction can be granted at the instance of a party who will be prejudiced by the foreign arbitration proceedings and not at the instance of a party who will be benefited by such proceedings. The applicant who will be the ultimate beneficiary of such proceedings cannot seek any prohibitory order.
Anti-suit injunction would arise only when the parties before the CLB and the ICC Arbitral Tribunal are same. Admittedly, TNEB not being a party before the CLB nor could either be before the CLB is arrayed as a party before the ICC Arbitral Tribunal. In the absence of commonality of parties in both the proceedings, the question of granting anti-suit injunction by the CLB could never be conceived. All the decisions cited on behalf of the respondents are independent substantial suits, wherein most cases anti-suit injunction was rejected.
The proceedings before the CLB are under Section 398 seeking remedial measures, with a view to bring to an end the various acts of mismanagement complained of in the company petition. The interests of the company are of paramount importance in Section 397/398 proceedings, which should not be conceived as a mere dispute between individuals as held in Syed Mahomed Ali v. R. Sundaramoorthy - AIR 1958 Madras 587. The dispute before the ICC Arbitral Tribunal is in relation to enforcement of the legal rights of the Company under the PPA against TNEB. Any relief against TNEB under the PPA can be made only in the ICC Arbitral Tribunal. No compensation or damages can ever be awarded against TNEB by the CLB. The nature of proceedings and the reliefs claimed at the ICC Arbitral Tribunal are mutually exclusive and distinct from those made in the CLB, as different as "Chalk" and "Cheese". The only defence taken in the application is that the foreign arbitration has been invoked without proper authority. This does not make the proceeding oppressive, vexatious or wholly illegal, in the light of the fact that the existence of the arbitration clause is admitted and that TNEB has breached the PPA. Moreover, the minority shareholders will not personally gain from the Arbitration.
The parties have exclusively entrusted the jurisdiction contractually under Article 16 of the PPA in favour of the ICC Arbitral Tribunal, excluding the jurisdiction of all Indian courts deliberately and categorically. The arbitration clause specifically excludes the Indian Arbitration law. In view of the exclusive jurisdiction of the ICC Arbitral Tribunal. Indian courts do not have jurisdiction to grant anti-suit injunctions in respect of foreign arbitral proceedings, especially those where the Arbitration & Conciliation Act, 1996 is inapplicable as held in the following decisions: -
Bhadresh Kantilal Shah v. Magotteaux International and Ors., (2000) 2 Comp LJ 323
Dresser Rand SA v. Bindal Agro Chemicals Ltd (CA Nos. 1455-1456 of 1994-Supreme Court)
Centrotrade Minerals & Metals Inc v. Hindustan Copper Ltd, in SLP (C) No. 10818 of 2000 (Supreme Court).
Even if the Indian Arbitration Law were to apply, Section 5 of Arbitration & Conciliation Act, 1996 precludes the courts from ordinarily interfering in the arbitral process and the court's intervention must be minimal as held in P. Anand Gajapathi Raju v. PVG Raju - (2000) 4 SCC 539. No Judicial Authority shall intervene in the arbitration proceedings except whereso provided in the Arbitration & Conciliation Act as held in Brawn Laboratories Limited v. Fittydent International GmbH, (2000) LXXXV DLT 204. Section 16 of the Arbitration and Conciliation Act provides that the arbitral tribunal may rule on its own jurisdiction and the authority of the Arbitral Tribunal goes to the root of its jurisdiction and not just its extent as held in Konkan Railway Corporation Ltd. v. Rani Construction Pvt. Ltd. - (2002) 2 SCC 388. TNEB has nominated its arbitrator and questioned the jurisdiction of the ICC Arbitral Tribunal in adjudicating the issue, which is being considered as a preliminary issue by the ICC Arbitral Tribunal. The right of the petitioners, as minority shareholders to take a derivative action in the name of the Company against TNEB has to be adjudicated only by the ICC Arbitral Tribunal.
A subordinate court is precluded both under Section 41(b) of the Specific Relief Act, 1963 and under the inherent powers under Section 151 of CPC from granting an injunction restraining any person from instituting or prosecuting any proceeding in a court of coordinate or superior jurisdiction, as held in Cotton Corporation of India Limited v. United Industrial Bank Limited - (1983) 4 SCC
625. In the present case, the ICC Arbitral Tribunal cannot be termed as a court subordinate to the CLB, in terms of Section 41(b). Section 41(b) is a specific bar against an order of injunction against the ICC Arbitral Tribunal and any interim injunction restraining the petitioners from further proceeding with arbitration proceedings at the ICC Arbitral Tribunal being contrary to law should not be granted.
The SHA and the PPA are separate agreements. It is only the PPA, being the subject matter of the ICC Arbitration, is sought to be injuncted by way of anti-suit injunction. Article 14.3 of the SHA is intended to deal with the law of agency to prevent suppliers, Sellers and other officers of the Company from acting on behalf of the Company. This clause does not deal with the issue of minority shareholders filing a derivative action on behalf of the Company, in the interest of the Company, by the Company and for the Company. Furthermore, Article 14.3 cannot displace the established common law relating to minority actions as derivative action under the Common Law Rule of exception to Foss. v. Harbottle.
By virtue of regulation 44 of the Company Law Board Regulations, 1991, it is true that this Bench has the inherent powers to pass such orders as may be necessary to meet the ends of justice. Nevertheless, the CLB shall be guided by the principles of natural justice and act in its discretion as enunciated in Sub-section (5) of Section 10E of the Act and further according to the rules of reason, justice and law, without any violation of the provisions of the Act and the discretion has to be regulated according to the known rules of law, as held in Cannanore Whole Body Scan v. Saibunnisa- (1998) Vol. 93 CC 99. No inherent powers could either be exercised against the contractual obligations, which, however, can be granted by the ICC Arbitral Tribunal. Inherent powers should not be used against the interest of the Company and must be just and equitable regulating the conduct of the affairs of the Company. The exercise of inherent powers is circumscribed by various restrictions and conditionalities and one such restriction is that the inherent power cannot be invoked, if it would conflict with any specific provision of law which prohibits such a remedy, as held in Shree Cement Ltd v. Power Grid Corporation Ltd. - (1998) Vol. 93 CC 854. Inherent powers must be exercised subject to statutory provisions, as held in Cotton Corporation of India v. United Industrial Bank Limited -(1983) 4 SCC 625.
The Supreme Court held in Dresser Rand SA v. Bindal Agro Chem Ltd. that any relief in the domestic courts staying the proceedings in respect of an international arbitration regulated by the provisions of the Foreign Awards (Recognition and Enforcement) Act, 1961, being a serious error is not permissible. This decision has been reaffirmed again by the Supreme Court in Centrotrade Minerals & Metals Inc. v. Hindustran Copper Limited. The question of staying the proceedings before the ICC does not arise as observed by the CLB in Bhadresh K. Shaw v. Magotteaux International - (2000) C Comp LJ
The liability of TNEB and breach of the terms of the PPA by TNEB stand admitted. Out of the total debts owed by TNEB, 77% is owed in favour of the Company, which cannot be equated to the other minor puny creditors. The reasons given by the respondents for not initiating any action against TNEB are illusory and irrelevant. The respondents constituting majority, deliberately failed to proceed against TNEB in total abduction of their fiduciary duties, forcing the petitioners to vindicate the rights of the Company under the rule of exception to Foss v. Harbottle, which is being stopped by the respondents, being the guardians of the Company by obtaining anti-suit injunction, which would adversely affect the paramount interest of the Company recognized by the principles of the Company Law. Thus, the respondents have been acting contrary to the interest of the Company, which is virtually "resipsa loquitur". TNEB is sought to be elevated to the status of a Demi God and an omnipotent figure. Such subservience concern for the interest of a debtor at the cost of the Company is an unprecedented act on the part of the applicant. The apprehension that the Company would go the "Dabhol way" is imaginary. The Dabhol went into bankruptcy mainly on account of variation in tariff rates and non-purchase of power on that account. In the present case, it involves recovery of the huge outstandings from TNEB, which would strengthen the financial health of the Company, but in no way result in its bankruptcy. The recovery effected through the arbitration proceedings before the ICC Arbitral Tribunal will go to reduction of the dues of financial institutions, which is in the greater interest of the Company. The Company has not pointed out the prejudice it would suffer if the Arbitration is allowed to proceed. The Company will be the sole beneficiary of the arbitration when any Arbitral Award is made. The remedy under the PPA can never be assailed as prejudicial to interest of the Company despite the bankruptcy situation in Dabhol as held by the CLB in The Maharashtra Power Development Corporation Limited v. Dabhol Power Company,  117 Comp Cas 467 (CLB) and affirmed by the Bombay High Court in Company Appeal No. 1067 of 2003 vide judgment dated 31 March 2004, wherein it has been held that exercise of contractual rights could never be considered to be oppressive or against public interest. It is an unknown proposition that any proceeding against a government is an act of oppression and that no contractual rights could be enforced against a government on the ground that it is against public interest. The recovery of money by way of compensation or damages through the arbitration proceedings is for the benefit of the company and of its creditors as well as members. When the guardians, themselves, namely, the respondents failed to act in the interest of the Company, the petitioners being minority shareholders are entitled to invoke the derivative action in the name of the Company before the ICC Arbitral Tribunal against TNEB for breaches of the PPA. It was not expected of the Managing Director to forward in favour of TNEB a copy of the draft minutes of the meeting of the Board of directors of the Company held on 20.03.2004 defeating the proposal of initiating any action against TNEB, the debtor of the Company before the ICC Arbitral Tribunal, in gross violation of their fiduciary duties, which shows the conduct of the Managing Director.
The interim relief being equitable and discretionary must satisfy three fold tests viz., existence of prima facie case, balance of convenience in favour of the applicant claiming interim relief and irreversible prejudice shown in the event of non-grant of any injunctive relief. The applicant suppressed the vital correspondence between the parties in dispute at the relevant point of time disentitling them for any equitable relief as held in Udai Chand v. Shankar Lal - AIR 1978 SC 765 and Hari Narain v. Badri Das - AIR 1963 SC 1558, wherein the Supreme Court had revoked the special leave earlier granted to file appeal as the same was obtained by making serious misstatements of material facts which were of decisive importance in the case. No irreversible prejudice has been demonstrated, especially when the ICC Arbitration would result in a decree in favour of the Company against TNEB. In any event, the Company would loose nothing, if the arbitration is lost at the ICC Arbitral Tribunal.
The reference to profits of the Company is mere book profits, which would accrue only when receivables are realized, for which the petitioners are fighting against TNEB. The reference to a press report of Business Standard of, as early as, July 2002 suggesting that the petitioners are on the verge of exiting from Indian operations is belied by their continued involvement in the affairs of the Company. This shows the great concern of the petitioners on account of non-payment of tariff and non-enforcement of the contractual obligation by TNEB, more so when none of the parties is operating for charity. When the actual outstandings from TNEB amount to Rs. 450 crores, the Company has under-stated the figures at Rs. 129 crores by making provision for around Rs. 225 crores.
Learned Senior Counsel for the applicant, in the course of his oral submissions categorically admitted many of the key points made on behalf of the respondents and therefore the application 62/2004 is liable to be dismissed.
5. Shri Datar, learned Senior Counsel in his rejoinder submitted: -
Section 41(b) the Specific Relief Act, 1963, would not come in the way of granting anti-suit injunction in view of the non-obstante clause contained in Section 3 of that Act as well as Clause 14.3 of the SHA prohibiting any shareholder from enforcing the contractual rights under the PPA, on behalf any other shareholder. Anti-suit injunctions are an exception to the provisions of Section 41(b). This provision can neither be a bar, when the leave sought by the petitioners in the application 38/2004 not being a procedural but substantive one was categorically refused by the CLB. As the petitioners proceeded to invoke the arbitration clause in defiance of the order of the CLB, anti-suit injunction should be granted against the petitioners. Nonetheless, the claim filed in the name of the Company would amount to willful disobedience of the order of the CLB or "Civil Contempt" within the meaning of the Contempt of Courts Act, 1971. The arguments that the proceedings before the CLB and the ICC Arbitral Tribunal are as different as "Chalk and Cheese" is devoid of merit.
While it is true that the question of jurisdiction has to adjudicated, in terms of Section 16 of the Arbitration and Conciliation Act, 1996, by the Arbitral Tribunal, provided that the arbitration proceedings are validly initiated, which is completely lacking in the present case for want of authority from the Board of directors of the Company. The scope of Section 5 & 16 is not the subject matter of the application 62/2004. The principles of non-interference of courts are not applicable in arbitration proceedings.
The maxim "res ipsa loquitur" is inapplicable to the facts of the company petition, dealing with the commercial justification of the petitioners to invoke the arbitration clause in the name of the Company, but does apply in actions by negligence in accident cases.
While the interest of the Company is undoubtedly paramount, the terms of the contract are being given paramount importance by irrational enforcement of the obligations under the PPA by the petitioners.
The CLB would decline any discretionary remedy only when "material facts" are suppressed and untrue and misleading statements are by the applicant and therefore the decision of the apex court is Udai Chand v. Shankar Lal (Supra) is not applicable to the facts of this case, more so when the written request made before the ICC Arbitral Tribunal invoking the arbitration clause under the PPA, is already produced before the CLB. The correspondence which was said to be suppressed were already made available at the time of hearing. The applicant cannot be declined any discretionary relief, in the absence of any untrue and misleading statement made by them.
6. I have considered the broad arguments advanced by learned Senior Counsel. On the pleadings of the parties and arguments of their learned Senior Counsel the following issues do arise for my consideration:
(i) Whether the order dated 25.03.2004 of this Bench made in the company application 38/2004 is a bar against the petitioners from taking a derivative action in the name of the Company invoking the arbitration clause under the PPA before the ICC Arbitral Tribunal against TNEB for the alleged breaches of the PPA;
(i) If not, whether this Bench shall restrain the petitioners from further proceeding with ICC Case No. 13218/MS pending on the file of the ICC Arbitral Tribunal against TNEB.
ISSUE No. (i):
It is on record that while the petitioners moved the company petition on 08.03.2004 urged for the following interim reliefs: -
(a) to appoint an administrator for the Company to initiate appropriate proceedings against the TNEB as contemplated in the Power Purchase Agreement dated 03.01.1997 and invoke the guarantee given by Government of Tamil Nadu in favour of the Company;
(b) to appoint an observer at the Board Meeting of the Company proposed to be held on 20.03.2004; and
(c) to restrain the Company from renewing the contract of the liaisoning agency, viz., Red Phoenix, which is likely to expire on 31.03.2004.
This Bench was not inclined to grant any of these reliefs, without affording an opportunity of being heard to the respondents on several of the contentious issues and accordingly, without considering merits of the claim of the petitioners, by an order dated 09.03.2004 declined the interim reliefs sought by them.
When TNEB defaulted to pay the tariff for purchase of power and failed to meet its obligations under the PPA in respect of the Letter of Credit and Escrow Account, which according to the petitioners, were in imminent danger of getting time-barred on 26.03.2004, Mr. Vijay Sirse, a nominee director of the first petitioner by a letter dated 23.02.2004 (page 370 of company petition) sought to know from the Company as to the steps taken by the Company against TNEB for establishment of the Letter of Credit and operationalisation of the Escrow Account and further the Company's plan to invoke the dispute resolution mechanism as envisaged in Clause 16 of the PPA before the obligations of TNEB being barred by limitation. Similarly, Mr. John C. Jensen, a nominee director of the second petitioner by a letter dated 25.02.2004 (page 368 of company petition) took up with the respondents for timely invocation of the dispute resolution mechanism. The Company in response to these communications, while assuring the petitioners' nominee directors that the matter of Letter of Credit and operationalisation of Escrow Account is receiving their attention, have conveyed the legal opinion obtained on the question of the period of limitation in regard to the obligations of TNEB under the PPA expiring on 10.11.2004 and further advised them that the issue regarding enforcement of the contractual obligations against TNEB under the PPA would be placed before the meeting of the Board of Directors for further deliberations and directions in this behalf. Thereafter, the petitioners' nominee directors at the Board meeting held on 20.03.2004 proposed the following resolutions: -
"Resolved that the Company do hereby invoke the Alternate Dispute Resolution provisions under the PPA dated 3.1.1997 for and on behalf of the Company and issue the invocation letter on or before March 26, 2004 with respect to the issuance of the Letter of Credit, the implementation of the Escrow Account and all unpaid amounts owned by TNEB under the PPA;
Resolved further that the Managing Director be and are hereby authorised and directed to forthwith initiate the proceedings as contemplated thereunder."
At the Board meeting the respondents' nominee directors, constituting majority on the Board voted against the above proposals. Consequently, these resolutions were not passed by the Board of the Company. Against this background, the petitioners sought the, intervention of this Bench by permitting the petitioners' nominee directors to represent the Company and institute the dispute resolution mechanism under the PPA on behalf of the Company against TNEB and accordingly moved the company application 38/2004 with the following among other prayers: -
"Authorise Mr. Jensen and Mr. Sirse, directors of the Company sufficiently within the period of limitation expiring on 26/3/04 as stated hereinabove, to represent the Company and forthwith initiate, institute and prosecute the dispute resolution mechanism under the PPA on behalf of the Company against TNEB seeking redressal and remedies for all breaches of the PPA by TNEB;"
The respondents opposed the company application 38/2004 on the following grounds: -
This Bench had declined on 09.03.2004 to grant the interlocutory relief appointing an administrator for the Company to initiate appropriate proceedings against TNEB as contemplated in the PPA and invoke the guarantee given by the Government of Tamil Nadu in favour of the Company. The same issue can never be reagitated, in the absence of any new event having occurred in the interregnum. This application constitutes an abuse of the process of this Bench.
The contractual obligations of TNEB under the PPA would not be barred by limitation on 26.03.2004, in view of the unequivocal commitment made by TNEB by a letter dated 10.09.2001 (Annexure-"T" - page 578 of petition). The contractual obligations of TNEB under the PPA would be in force till 09.09.2004. Moreover, the respondents rely on the legal opinions obtained by the Company and deny that limitation would end on 26.03.2004.
TNEB has been making payments from time to time and would settle the overdue amount over a period of time. TNEB has released on 08.03.2004 an ad-hoc payment of Rs. 50 crores on account of the Company's efforts. The net outstanding over due as on 24.03.2004 from TNEB is a sum of Rs. 129.01 crores, A sum of Rs. 224.90 crores has been provisioned till February, 2004 for items billed without approval from TNEB, discounts etc., which is authorised by the Board of the Company, including the nominee directors of the petitioners. These provisions are not written off in the books of the Company.
The decision of the Board of directors of the Company not to enforce the obligations of TNEB under the PPA was taken after due participation and considerable discussion of the nominees of the lenders, being the assignees under the PPA, exceeding Rs. 1,000 crores who have enormous interest in the project and further deliberated the adverse consequences of any action against TNEB.
The proposal of the petitioners is extreme and irreversible and would irreparably damage the very viability of and prospects of the Company, which would end the working relationship of the Company with TNEB, with discontinuation of the power purchase under the PPA. As a result, it would be impossible to get third party purchaser for 330 MW of power generated by the Company. This would necessarily result in closure of the operations of the Company, as in the case of Dabhol.
There should not be any judicial interference with commercial decision of Board of directors of the Company.
The application is barred by Section 41(b) of the Specific Relief Act, 1963 which bars any proceeding for specific performance to enforce a contract to refer disputes for arbitration.
In spite of the efforts of the Company, the obligations under the PPA could not be enforced, in view of the "unequal bargaining power" of the Government. The invocation of the Government guarantee would have disastrous effects on the Company.
The petitioners are exiting from the country and they do not have the long-term perspective of the PPA and their objectives are limited.
This Bench after hearing the learned Senior Counsel by an order dated 25.03.2004 did not permit the petitioners' nominees to represent the Company and institute the dispute resolution mechanism under the PPA on behalf of the Company against TNEB, as claimed in the application 38/2004 for the following reasons: -
"It must be borne in mind that the petitioners are aggrieved on account of the refusal on the part of the majority directors and also of their decision taken at the Board meeting held on 20.03.2004 not to initiate any action against TNEB. Such a decision of the majority directors is a commercial decision taken with collective wisdom of the majority Directors. The courts time and again declined to interfere with the business judgment and decisions of directors unless there is evidence that they acted in bad faith or that no sensible Board of Directors would reasonably have come to the decision which the Directors reached. The petitioners are complaining of violation of the contractual obligations and admittedly not of any statutory requirements. Above all, it is to be seen as to whether the majority Directors of the Company have committed breach of fiduciary duties in taking the decision not to initiate any legal proceedings against TNEB. Admittedly none of the directors has any interest in TNEB, in which case, the present decision of the majority directors cannot be in breach of their fiduciary obligations towards the Company or its shareholders. Moreover, the petitioners are not questioning the bonafides of the majority Directors. The decision of the majority of directors not to bring proceedings in the Company's name to enforce the obligations of TNEB in favour of the Company is not attributed to the directors' inaction on account of malafide reasons. In these the CLB will not interfere with the director's decisions unless the decision is perverse or in bad faith, as held in number of decisions. As pointed out by Shri Sarkar, the learned Senior Counsel, it is not for the CLB to interpret the validity period of the PPA with reference to the law of limitation. TNEB is neither bound by any such interpretation. There is no need to go into the other claim and counter-claim of either of the parties. For these reasons, I am not inclined to grant any interim relief as sought by the applicants. With these directions, the application is disposed of."
A careful analysis of sequence of the events clearly shows that the petitioners have never raised their right as minority shareholders to initiate a derivative action in the name of the Company before the ICC Arbitral Tribunal against TNEB for the alleged breaches of the PPA invoking the arbitration clause in the PPA in their correspondence made with the respondents. The role of minority shareholders to take a derivative action for the Company before the ICC Arbitral Tribunal was neither argued nor considered by the Bench before declining the interim reliefs on 09.03.2004. The respondents did not even whisper about the petitioners' right of any derivative action on behalf of the Company, as borne out by the counter statement and notes on submissions dated 25.03.2004 filed on their behalf in the company application 38/2004. The respondents opposed the company application 38/2004 mainly on the ground that any legal action by the Company against TNEB enforcing the terms of the PPA would result in disastrous and irreparable effect on the Company, but not on account of any derivative action of the petitioners in the name of the Company. It shall be borne in mind that this Bench did not interfere with the business judgment of the Board of directors of the Company in not authorizing the Company to invoke the Alternate Dispute Resolution Provisions under the PPA for and on behalf of the Company through its Managing Director. Accordingly the prayer of the petitioners in the company application 38/2004 to institute the dispute resolution mechanism under the PPA through their nominees, being directors, on behalf of the Company against TNEB was declined. At this juncture it would not be irrelevant to observe that this Bench either before declining the interim reliefs on 09.03.2004 or while making the order on 25.03.2004 on the company application 38/2004 had no occasion to consider the petitioners' right to take any derivative action on behalf of the Company before ICC Arbitral Tribunal against TNEB for the alleged breaches of the PPA. In other words, this Bench neither considered nor prohibited the petitioners, being minority shareholders from initiating any "derivative action" on behalf of the Company against TNEB before the ICC Arbitral Tribunal, invoking the arbitration clause under the PPA. The petitioners, in my view, cannot be said to have acted in gross violation of the order dated 25.03.2004 of this Bench by making a reference to the ICC Arbitral Tribunal, by way of derivative action against TNEB, invoking the arbitration clause contained in the PPA, in the absence of any subsisting prohibitive injunction against them and therefore, the decision in Tayabhai Bagasarwalla v. Hind Rubber Industries Pvt. Ltd., cited supra, has no application, in the facts of the present case. Therefore, this issue is answered in the negative.
ISSUE No. (ii):
The cardinal principles governing grant of injunction by a court will also govern grant of anti-suit injunction which is but a species of injunction. Therefore, a court granting injunction or anti-suit injunction must necessarily, in my considered view, have jurisdiction, while exercising such power, without which, it would be contrary to law. The Supreme Court while considering the issue of the anti-suit injunction, which arose for consideration in Modi's case (supra), before dealing with merits of that case, observed that "it involves examination of the principles governing grant of an anti-suit injunction by a court of natural jurisdiction against a party to a suit before it restraining him from instituting and/or prosecuting the suit, between the same parties, if instituted, in a foreign court of choice of the parties". This categorical observation of the Supreme Court shows that an anti-suit injunction can be granted by a court of natural jurisdiction and that the parties must be the same both before the court of natural jurisdiction and the foreign court of choice of "parties. In this connection, beneficial reference is invited to the observations of the House of Lords, in Airbus Industrie GIE v. Patel - (1993) 1 Lloyd's Rep 368 according to which as a general rule, before an anti-suit injunction could be granted by an English court to restrain a person from pursuing proceedings in a foreign jurisdiction, comity required that the English forum should have a sufficient interest in, or connection with, the matter in question to justify the indirect interference with the foreign court which such an injunction entailed, the fact of which has been recognized by the Supreme Court in Modi's case. It is not under dispute that the CLB has no interest or connection with the dispute in relation to the PPA, to justify any interference with the ICC Arbitral Tribunal. Consequently, there cannot be any threat to the CLB's jurisdiction. Furthermore, the parties before the CLB and the ICC Arbitral Tribunal are different. While TNEB is not before the CLB, TNEB is arrayed as a party before the ICC Arbitral Tribunal. Thus, there is neither comity nor commonality of parties in these proceedings.
Article 16 of the PPA provides that any dispute, controversy or claim arising out of or relating to the PPA, or breach or termination or validity thereafter shall be finally settled by arbitration in accordance with the Rules of Conciliation and Arbitration of the International Chamber of Commerce. The Indian Arbitration Act (Act No. X)(10) of 1940/the Arbitration and Conciliation Act, 1996 shall not be applicable to the arbitration proceedings or award, which may be rendered. Thus, the parties in dispute have exclusively entrusted the jurisdiction, in relation to any dispute arising out of the PPA, in favour of the ICC Arbitral Tribunal explicitly excluding the jurisdiction of the Indian courts as well as the Indian Arbitration law. Any dispute in relation to the PPA has been undoubtedly kept outside the purview of the CLB. However, the grievance of the respondents is that the petitioners, being minority shareholders have already initiated a "derivative action" against TNEB invoking the arbitration clause by filing a request dated 25.03.2004 before the ICC Arbitral Tribunal in the name of the Company without any authorization of the Company, appointing Mr. John Uff as the Company's nominated director. It shall be borne in mind that the authority of the Arbitral Tribunal, as laid in Konkan Railway Corporation v. Rani Construction (supra), is not confined to the width of its jurisdiction, but goes to every root of its jurisdiction. The Arbitral Tribunal may rule on its own jurisdiction, as reiterated in Sayed Mohammed Ali v. Sundaramurthy (supra). It is on record that TNEB has raised a preliminary objection on the ground that the petitioners do not have any right to initiate a derivative action in the name of the Company invoking the arbitration clause, which is supported by the respondents, as borne out by the various correspondence exchanged among the petitioners, respondents, Mr. John Uff, TNEB and the ICC Arbitral Tribunal. The ICC Arbitral Tribunal is in the process of determining the rights of the petitioners, as minority shareholders to maintain any derivative action in the name of the Company against TNEB for the breaches of the PPA as a preliminary issue. Therefore, while the exclusive jurisdiction of the ICC Arbitral Tribunal to adjudicate any dispute in relation to the PPA, including the issue as to whether the petitioners, as minority shareholders, are entitled to invoke any derivative action in the name of the Company against TNEB is far from doubt, the CLB can have no domain or concurrent jurisdiction over resolution of any dispute arising out of the PPA. In the words of the Supreme Court in Modi's case "A court of natural jurisdiction will not normally grant anti-suit injunction against a defendant before it where parties have agreed to submit to the exclusive jurisdiction of a court including a foreign court, a forum of their choice in regard to the commencement or continuance of proceedings in the court of choice, save in an exceptional case for good and sufficient reasons, with a view to prevent injustice..." The respondents in the present case have not shown reasons justifying disregard of the contractual obligations of the parties under the PPA to refer the parties for arbitration before the ICC Arbitral Tribunal, being the exclusive forum contractually agreed between the parties. Section 41(b) of the Specific Relief Act 1963, in my view, does not in any way strengthen the applicant's case, especially when the ICC Arbitral Tribunal has been contractually agreed between the parties to be the sole Dispute Resolution Forum. The plea that the SHA precludes the petitioners from taking a derivative action in the name of the Company must be considered in the light of Clause 14.3, which reads as under: -
"14.3. It is understood that the Parties are independent entities engaged in the conduct of their own business. Except as expressly provided for herein, this Agreement shall not constitute any Party as the legal representative or agent of any other party for any purpose whatsoever, and no Party shall have the right or authority to assume, create, or incur any liability or obligation of any kind, express or implied, in the name of or on behalf of any other Party. If any Party provides services or supplies products or technology to the Company or to the any Party, such Party does so as an independent contractor engaged in its own business."
A plain reading of Clause 14.3 shows that the prohibition sought to be enforced among the shareholders is only in relation to the conduct of their own business. This clause, as rightly pointed out by Dr. Singhvi, learned Senior Counsel cannot override the established common law relating to minority actions as derivative action under the Common Law Rule of exception to Foss v. Harbottle.
The CLB not being vested with the natural jurisdiction can neither exercise the inherent powers under Regulation 44 of the Company Law Board Regulations, 1991 nor powers vested under Section 403 to grant any anti-suit injunction, especially when the discretion has to be exercised according to the rules of reason, justice and law, without any violation of the provisions of the Act, as held in Cannanore Whole Body C.T. Scan and Research Centre Pvt. Ltd. v. Mrs. Saibunnisa S.V. (supra) and the exercise of the inherent powers is circumscribed by various restrictions and conditionalities, as held in Shree Cement Ltd. and Power Grid Corporation Ltd. (supra). Moreover, the relief of granting anti-suit injunction against the foreign Arbitral Tribunal is not permissible in the light of the decisions of the Supreme Court in Dressey Rand v. Bindal Agro Chem Ltd. and Controtrade Minerals & Metals Inc. v. Hindustan Copper Limited (supra). In this connection, the decision of the CLB in Bhadresh K. Shaw v. Magotteaux International (supra) is relevant, wherein it is held that the question of staying the proceedings before the ICC does not arise. Such an injunction sought against the petitioners, in effect causes interference in the exercise of jurisdiction by the ICC Arbitral Tribunal, as observed by the Supreme Court in Modi Entertainment Network v. W.S.G. Cricket Pte. Ltd. In view of this, there is no need to go into various decisions of the different foreign courts cited by Shri Datar, learned Senior Counsel, laying down the rules governing the appropriateness of anti-suit injunction. It would not be out of context to observe that these decisions are independent substantial suits and in none of these cases, proceedings of any arbitral tribunal are involved.
The grievances of the petitioners before the CLB are several of the acts of mismanagement on the part of the respondents which shall include their non-action for initiating any concrete steps against TNEB for the alleged breaches of the PPA. The petitioners are seeking various reliefs in the company petition under Section 398 with a view to bring to an end the acts of mismanagement complained of by them. Whereas, the dispute raised before the ICC Arbitral Tribunal is in relation to the enforcement of the terms of the PPA against TNEB. The CLB in exercise of its powers under Section 397 and 398 are empowered to pass orders regulating the conduct of the affairs of the Company but cannot award damages or compensation against TNEB. Whereas the ICC Arbitral Tribunal would adjudicate the disputes arising out of the PPA and enforce the contractual obligations inclusive of awarding compensation against TNEB. While the reliefs under Sections 397 and 398 are statutory reliefs, the reliefs which may be granted by the ICC Arbitral Tribunal are pursuant to the contractual obligations between the parties. Thus the nature of proceedings and the reliefs claimed at the CLB are distinct from those made before the ICC Arbitral Tribunal.
In the light of the aforesaid discussions and the legal position, I am unable to appreciate and accept the contentions of Shri Datar, learned Senior Counsel for granting an order of anti-suit injunction against the petitioners from further pursuing with the arbitration proceedings before the ICC Arbitral Tribunal. Moreover, the present facts and circumstances, neither show that there is any prima-facie case or balance of convenience in favour of the applicant nor establish any irreversible prejudice that may be suffered by the applicant in the event of non-grant of any such injunction. Therefore, the claim of the applicant for anti-suit injunction must fail. The remaining contentious issues argued before me are not germane to the dispute. Accordingly, the application is dismissed. The restraint order passed on 18.05.2004 stands vacated.