IBC - ASSIGNMENT 1

CASE BRIEFS

1. Booz Allen & Hamilton v. SBI Home Finance Ltd., (2011) 5 SCC 532.

Court: Supreme Court of India

Year: 2011

Key Issues:

1. Whether mortgage suits are arbitrable

Facts: SBI Home Finance filed a mortgage suit against Capstone Investment and others for
recovery of dues. Booz Allen, a licensee of the mortgaged property, sought referral to arbitration
based on an arbitration clause in a related agreement.

Judgment: The Supreme Court held that the mortgage suit was not arbitrable and dismissed the
appeal.

Key Points:

1. Generally, disputes relating to rights in personam are arbitrable, while those relating to
rights in rem are not.
2. Mortgage suits involve rights in rem and are intended to be decided by public fora
(courts), not private fora (arbitral tribunals).
3. Mortgage suits require safeguarding interests of multiple parties, which arbitral tribunals
cannot effectively do.
4. The procedural framework for mortgage suits in the Transfer of Property Act and Civil
Procedure Code implies they should be decided by courts.
5. Arbitral tribunals lack powers granted to courts in mortgage suits, such as passing
preliminary/final decrees and protecting third-party interests.
6. Mortgage suits cannot be bifurcated between arbitrable and non-arbitrable issues.

Significance: This judgment clarified the scope of arbitrability in Indian law, particularly
regarding property rights and mortgage disputes. It established that actions involving rights in
rem, including mortgage enforcement, are generally not arbitrable.
 2. Haryana Telecom v. Sterlite Industries (India) Ltd., (1999) 5 SCC 688.

Court: Supreme Court of India

Year: 1999

Key Issue: Whether a petition for winding up of a company can be referred to arbitration under
Section 8 of the Arbitration and Conciliation Act, 1996.

Facts: Sterlite Industries filed a petition for winding up Haryana Telecom in the High Court.
Haryana Telecom sought to refer the matter to arbitration based on an arbitration clause in their
agreement.

Judgment: The Supreme Court held that a winding-up petition cannot be referred to arbitration.

Key Points:

1. Section 8 of the Arbitration Act allows referral to arbitration only for matters that an
arbitrator is competent to decide.
2. A winding-up petition is not a claim for money but a plea that the company has become
commercially insolvent and should be wound up.
3. The power to order winding up of a company is statutorily conferred on the court under
the Companies Act.
4. An arbitrator, despite any agreement between parties, has no jurisdiction to order the
winding up of a company.
5. The court distinguished between the underlying dispute that may lead to a winding-up
petition and the actual process of winding up.
6. While the underlying dispute might be arbitrable, the winding-up process itself is not.

Reasoning: The court emphasized that certain matters, due to their nature and the involvement of
public interest, are exclusively reserved for courts. Winding up of a company is one such matter
that affects the rights of various stakeholders and the public at large.

Significance: This judgment clarified the limits of arbitrability in Indian law, particularly in
matters involving statutory powers of courts and public interest. It established that while
commercial disputes between parties may generally be arbitrable, certain remedies like winding
up of a company remain within the exclusive jurisdiction of courts.

3. Shalby v. Dr. Pranav Shah, 2018 SCC OnLine NCLT 137, (NCLT Ahmedabad
Bench)
Court: National Company Law Tribunal (NCLT), Ahmedabad Bench

Year: 2018

Key Issue: Whether a dispute regarding oppression and mismanagement under Sections 241
and 242 of the Companies Act, 2013 can be referred to arbitration.

Facts: Dr. Pranav Shah filed a petition before the NCLT alleging oppression and
mismanagement by Shalby Limited. Shalby filed an application seeking referral of the dispute to
arbitration based on an arbitration clause in the shareholders' agreement.

Judgment: The NCLT held that disputes related to oppression and mismanagement cannot be
referred to arbitration.

Key Points:

1. The NCLT has exclusive jurisdiction to deal with matters of oppression and
mismanagement under Sections 241 and 242 of the Companies Act, 2013.
2. These provisions are intended to protect the interests of shareholders and the company
against unfair conduct of the majority.
3. The remedies available under these sections are of a specific nature and can only be
granted by the NCLT.
4. Arbitrators do not have the power to grant relief such as regulation of the company's
affairs, purchase of shares, or termination/modification of agreements.
5. The nature of oppression and mismanagement disputes involves rights in rem (rights
against the world at large) rather than merely rights in personam (rights against specific
individuals).
6. The NCLT distinguished between contractual disputes that may be arbitrable and
statutory remedies under the Companies Act that are not arbitrable.

Reasoning: The NCLT emphasized that the legislative intent behind Sections 241 and 242 was
to provide a specialized forum for addressing oppression and mismanagement. These matters
often involve the larger interests of the company and its stakeholders, which go beyond the
private interests of the parties to an arbitration agreement.

Significance: This decision clarified the limits of arbitrability in corporate disputes, particularly
those involving statutory remedies under the Companies Act. It reinforced the exclusive
jurisdiction of the NCLT in matters of oppression and mismanagement.