Tuesday 29 September 2009

Ice breakers - Management Games

Ice breakers - Management Games
Alphabetic Introductions

Each participant is asked to choose a letter of the alphabet. Duplicate letters are permitted. They are then given five minutes in which to describe themselves using single words beginning only with that letter. You could award a small prize for the person with the most number of words.

A further optional stage is to ask participants to write down their chosen words on a sheet of paper with their name at the top and display it on the wall for the duration of the event. Others could be asked later on in the event as to whether the words accurately describe the individual.

Anagrams

Make up anagrams of the participants' names and either: display as pairs on a flip chart (for finding pre-allocated partners), or use them on name plates (for pre-arranged seating).

Back-to-Back

Ask participants to find a partner and sit on the floor (or on chairs) back-to-back with that person. Now ask them to take turns telling the other person about an event in their life which is particularly significant for them. The partner may respond non-verbally, but not verbally. Allow at least five minutes for each partner. At the end of the activity ask them to
turn and face each other and discuss the activity for five minutes.

Catch Ball

Instead of going round the class in order when making introductions etc, throw a ball (preferably a soft one) at one of the students who then does the first introduction. This student then throws the ball to someone else. Challenge the class to complete the introductions without throwing the ball to the same person twice. It's probably a good idea to clear the coffee
cups before starting this exercise.

Change

This simple exercise makes people aware of the impact of change and how they feel about it. Ask the participants to fold their arms. Then ask them to fold their arms the other way round. Wait in silence for a few moments before asking them to unfold their arms. Debrief by asking: how difficult it was to fold their arms the other way; what it feels like with their arms folded the other way round; and did they have an urge to unfold or re-fold their arms.

Chinese Whispers

The traditional version of Chinese Whispers is to whisper a sentence to the first person in the class, who whispers it to the next person and so on until the last person repeats the message out loud to the rest of the class.

Typical of the kind of distortion you can get is the classic where: 'Send reinforcements, we're going to advance,' becomes: 'Send three-and-fourpence, we're going to a dance.'

Debrief the exercise by asking:

Where did the message get distorted?

How can we help the communication process? • Big picture • Key points •
Headline • A bit at a time • Look for meaning and connections

Circulate

Have the group form two concentric circles with the same number of participants in each circle - the people in inner circle facing outwards and the people in the outer circle facing inwards. The inner circle remains stationary and the outer circle moves one person anticlockwise every 30 seconds. The aim is for everyone to introduce themselves in the shortest
possible time.

Count the F's

Hand out copies of the following quote:

FEATURE FILMS ARE THE RESULT OF YEARS OF SCIENTIFIC STUDY COMBINED WITHTHE EXPERIENCE OF YEARS.

Ask people to count the number of F's there are in the passage. Very few people will identify all 6 at the first attempt.

Crash Test

The objective of this exercise is to design and construct a device that will protect a raw egg from cracking or breaking when it is dropped from a height of 10m or more. The group is given 30 minutes to plan and 15 minutes to construct the device using only the following materials:

• 12 drinking straws • 2m of masking tape • 1m of string • 1 000 cm2 of tissue paper

Delegation

This is an exercise which demonstrates the difficulty of delegating. Just before lunch or the evening meal, divide the group into pairs and ask that everyone delegate the task of getting or ordering their meal to their partner.

No further communication is allowed between the pair once the task has been set.

Debrief by asking if anyone got a meal that was close to what theywanted. Ask how the situation might have been improved.

This exercise works best with a self-service cafeteria and before the group gets used to the cafeteria's layout and menu. This makes the task more complex and involves the 'delgatee' in showing initiative.

Variations include preventing the use of note taking.

Describe it!

This is an exercise which demonstrates the importance of feedback in communication.

Ask a volunteer to sit with back to class and to describe a drawing that has a number of touching rectangles.

The class attempts to draw the arrangement of rectangles without giving any feedback or asking any questions.

Repeat the exercise with another drawing. This time the class is allowed to ask questions and to give feedback.

Discuss feelings, emotions, results and effects.

DIY Quiz

This is a good exercise for warming up a group when you are part way through a course. It's also great for revising course content. Divide the group into two teams. Give the teams a pile of blank cards and challenge them to write as many questions (and answers) as they can, in 15 minutes which cover the course content to date.

The trainer alternately selects a 'valid' question from one team and directs the question to the other team. The process continues until all 'valid' questions written by both teams have been asked.

The teams score one point for every question they answer correctly and another point for every one of their questions which is selected as 'valid'by the trainer.

Floating Cane

This is an excellent exercise for developing teamwork. First obtain a long bamboo cane or other long, light, small-diameter pole for each group. Line the groups up so that people face each other, then ask one side to take a step sideways to the left so that their eyes are in line with the gap between the shoulders of two opposite participants. Ask them all to put out
their hands palm up and at the same height (about elbow height). When all people have their palms out and lined up, place the cane along their hands.
Let them know that they should keep their hands in contact with the cane, but they shouldn't grasp it. Now ask them to lower the cane down to the ground. The cane always rises. Repeat the exercise until they can achieve the task.


Flying Eggs

Stand the members of the group in a circle, spaced 2m away apart. The objective is for each participant to each throw a raw egg to the next participant until a the egg makes a complete circuit without being dropped.

Once a circuit has been completed successfully, the participants should move three paces away from the center of the circle and try again. The process is repeated until the group runs out of time or they find it impossible to throw the egg around the circle. 20 points are awarded every time the egg is thrown round an enlarged circle.

Get Knotted!

This exercise is best done in a large area - preferably outdoors. Get the group to space themselves along a rope. Say that they should grip the rope tightly and, without removing their hands, tie the rope into a reef knot.
If anyone asks, a reef knot is 'left over right and under; right over left and under'.

Hangman

The children's game of hangman can be used as a diversion during a course and for reinforcing terminology that has just been learnt. At its simplest, the trainer selects a word from a list of words that are related to the subject and, on a overhead transparency, draws a number of dashes equal to the number of letters in the word. The participants guess a letter that
might be part of the word. If the letter is part of the word, it is written above the dash or dashes where it occurs. If the guess is incorrect, an element of the hangman diagram is drawn on the transparency. The exercise continues until either the word is guessed or the hangman diagram is completed.

Magic Carpet

Provide a length of stair carpet for each group and get the group to stand on it. The objective is to turn the carpet over without any group member touching the floor. 50cm per person in the group should be more than long enough, but you can always use shorter lengths to make the exercise more interesting.

Mug Shot

Ask the students to bring either a passport photograph or their identity badges to the course. Display the photographs on the wall along with an identifying letter (the identity badges should have the names taped over). Supply each student with a copy of the course list which has had the names substituted with the identifying letters. The objective of the exercise is
to write the names of the other students against their identifying letters on the course list. This involves matching the people in the room with the photographs on the wall. When approached, people should only give their
name.

They should not say which photograph is theirs. The worse the photographs,the better this exercise works.

Paired Interviews

Some people do not like talking about themselves in front of the class. In this type of introduction the students pair-up with the person they know the least and interview each other. After about 15 minutes each person reports back with a brief biography of their partner.

Saturday 26 September 2009

Debt Recovery Systems In India

Most of us and the companies approach Banks and Financial Institutions for loans. The reason for the loan may differ from person to person and company to company. All Banks should function in accordance with the guidelines/norms issued by the Banker’s Bank ‘The Reserve Bank of India’. Subject to the lending norms of Reserve Bank of India, the banks and financial institutions sanction loans for different purposes. Though, the Banks and Financial Institutions can lend money even without security, normally, the Banks and Financial Institutions insist for security for the repayment of loan. The fixed assets, receivables etc. can be securities acceptable to the Banks and Financial Institutions for sanctioning the loans. The loan entitlements, the procedure for sanctioning the loan, the security issues etc., are exclusively governed by the guidelines/norms issued by the Reserve Bank of India. Again, loan, being an agreement or understanding between the Bank and the borrower, the general laws like Law of Contract, Transfer of Property Act, Specific Relief Act, Specific Performance etc., are applicable to all banking transactions depending upon the nature of transaction. The prime objective of Bank is to receive deposits and use those deposits efficiently so as to make money. The Banks will also render certain specific services on behalf of its customers. The Reserve Bank of India will issue guidelines and norms considering the policy of the Government too. Exercising control over flow of money from Banks and Financial Institutions, the Reserve Bank of India promotes the balanced growth. The Reserve Bank of India can contain inflation through certain measures and it is a financial measure to contain inflation as everybody knows.
When a borrower fails to repay the money to the Bank, what the Bank can do for recovering the loan is to file a civil suit earlier. We all know the issue of delay in rendering justice in traditional civil courts and with the inevitable delay, the Banks could not recover its dues effectively and it resulted in liquidity problems. Bank pays interest to the deposit holders; however, the Banks could not make money by using the deposits as the recovery gets delayed frequently. This led the government to appoint various committees for financial sector reforms. The concentration was on effective recovery by the Banks and Financial Institutions apart from other things.
Thus, a need has arisen to constitute special tribunals for recovery of debts by the Banks and Financial Institutions. The Government has enacted a law called “The Recovery of Debts Due to Banks and Financial Institutions Act, 1993” under which Debt Recovery Tribunals were constituted to recover dues by the specified Banks and Financial Institutions. The RDDBI Act, 1993 provides Banks and Financial Institutions to approach the Debt Recovery Tribunal by filing an application for recovering its due. Only when the amount of due qualifies under the Act, the Banks and Financial Institutions could approach the Debt Recovery Tribunals under RDDBI Act, 1993. When the Bank approaches the Tribunal for recovery, then, the Tribunal will look into the claim made by the Bank in accordance with the procedure prescribed under RDDBI Act, 1993 and finally passes an award. The award can be executed by the Bank.
Despite constituting special Tribunals like Debt Recovery Tribunals under RDDBI Act, 1993, the Banks could not recover its dues to the extent expected. This led to further reforms in the process and curtailing the delay in adjudication.
In furtherance of financial reforms and extending the object of RDDBI Act, 1993, the Government has enacted “The Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002”. The SARFAESI Act, 2002 is to curtail the delay in the process of adjudication between the Banks and its borrowers. The question of recovery by the Banks and Financial Institutions will arise when the borrowers commit default in repaying the debt. When there is default, then, the Banks will categorize the account as “Non-performing Asset” in accordance with the norms prescribed by the Reserve Bank of India.
The main difference between RDDBI Act, 1993 and SARFAESI Act, 2002 is as follows:
1. The RDDBI Act, 1993 enables the Bank to approach the Tribunals when the debt exceeds the prescribed limit.
2. Under RDDBI Act, 1993, the Debt Recovery Tribunal will adjudicate the amount due and passes the final award.
3. The SAFAESI Act, 2002 provides a procedure wherein the Bank or Public Financial Institution itself will adjudicate the debt. Only after adjudication by the Bank, the borrower is given right to prefer an appeal to the Tribunal under SARFAESI Act, 2002.
4. The Banks or Financial Institutions can invoke the provisions of SAFAESI Act, 2002 only in respect of secured assets and not all.
Thus, under SARFAESI Act, 2002, the Banks are given powers under section 13 to carryout the adjudication exercise. The procedure is as follows:
a. The Bank or Financial Institution gives a notice under section 13 (2) to the defaulting borrower whose account was categorized as “NPA”.
b. The borrower who receives the notice under section 13 (2), can send his objections to the Bank’s claim within the time limit.
c. The Bank shall consider the objections and however, it need not pass any order after considering the objections. This enables the Bank to correct itself if it is wrong in the process of adjudication. When the Bank feels that the objections are not tenable, then, the Bank can take possession of the secured asset by issuing a notice under section 13 (4). When it comes to taking possession of the property, there are two things like taking symbolic possession and taking actual possession.
d. Steps under section 13 (4), gives the borrower a right to file an appeal to the Debt Recovery Tribunal under section 17 and further appeal to the Debt Recovery Appeal Tribunal under section 18.
e. Not only the borrower, any person who is aggrieved by the action taken by the Bank under section 13 of the Act, can approach the Tribunal in accordance with the procedure.
f. Initially, the SARFAESI Act, 2002 mandates to deposit certain amount before filing an appeal. The SARFAESI Act, 2002 and its validity was under challenge before the Supreme Court and the Hon’ble Supreme Court has upheld the validity of the Act, however, reduced the amount of deposit to be made before filing an Appeal under section 17.
g. The Bank will sell the secured asset if it is not prevented by any order by the Debt Recovery Tribunal or any competent court.
While it all appears to be simple, there is lot of criticism on this SARFAESI Act, 2002. The criticism is that it is being misused by the Banks and Financial Institutions. In the course, we had to consider the following aspects:
a) Whether a borrower can approach the High Court challenging the action taken by the Bank or Financial Institutions under SARFAESI Act, 2002.
b) Whether it is right to say that the provisions are being misused.
c) Whether the Borrowers’ right to protect the wrong doing is secured and effective remedy is provided.
Answering the first issue is very difficult. The High Court exercises extraordinary power under Article 226 of Constitution of India. Again, the courts say that as the alternative remedy is available under the Act itself, the High Court will not have jurisdiction under Article 226 in respect of SARFAESI proceedings. But, it all depends upon the facts and circumstances of the Act and there can’t be any straight answer as to whether the High Court can be approached questioning the action taken by the Banks or the Financial Institutions under SARFAESI Act, 2002.
I have seen many cases and at times, it appears to me that the Act is being misused. But, it can’t be a justification to say that the Act oppresses the borrowers. It’s a special and balancing Act with very good objective and it is to be implemented well. In view of many transactions and issues, the Banks and Financial Institutions may commit some mistakes in the course and it gives rise to the Borrower to approach the Tribunal seeking stay of proceedings etc. What happens normally is that, the borrower gives a request to the Bank seeking to allow him to settle the account under “One Time Settlement Scheme”. Depending upon the norms prescribed by the RBI, the Banks may accept for “One Time Settlement Scheme” or may not.
In many cases, the borrower ignores the Bank notice under section 13 (2) and then, approaches the Tribunal when the Bank takes steps to take possession of the Property and takes step to sell the same. It is not right. When the notice under section 13 (2) is received, then, the borrower has to make detailed objections if any, as otherwise, his appeal under section 17 of the Act may not sustain normally.

Thus, the borrowers are to be careful when the Bank exercises its powers under SARFAESI Act, 2002 and with the expert guidance and assistance; they can protect their rights effectively.

Importance of Drafting

In order to reduce the delay in courts and in the process of traditional adjudication mechanism, the Alternative Disposal Mechanism (ADR) was mooted. The dispute resolution through Conciliation, Arbitration and Mediation etc., is regarded as alternative mechanism to resolve the disputes between or among the parties in a defined legal relationship. The dispute resolution through Arbitration has occupied great significance in India in the recent past though it was successfully practiced in the developed nations like United States etc. The Arbitration and Conciliation Act, 1996 replacing the earlier act of 1940, governs the issue of dispute resolution through Arbitration. Any dispute arising out of a defined legal relationship can be resolved through Arbitration. In Arbitration Mechanism, the parties themselves will choose the Arbitrator; agree to the procedure for appointment of Arbitrator, the procedure to be followed by Arbitration, the place of Arbitration proceedings etc. It is all meant to provide the parties to resolve their dispute effectively and speedily without burdening the traditional courts.
Now-a-day, in all transactions and the pursuant documents, the Arbitration clause is incorporated mechanically. Admittedly, the Arbitration mechanism is useful for resolving the disputes and it is costly. In commercial transactions, where there is a genuine dispute and where the stakes are very high, the Arbitration mechanism is useful. But, the common man may not benefit much from the Arbitration mechanism as it is costly.
Section 7 of Arbitration and Conciliation Act, 1996 deal with the “Arbitration Agreement” and the same is extracted below:
“7.Arbitration Agreement. – (1) In this Part, “arbitration agreement” means an agreement by the parties to submit to arbitration all or certain disputes which have arisen or which may arise between them in respect of a defined legal relationship, whether contractual or not.
(2) An arbitration agreement may be in the form of an arbitration clause in a contract or in the form of a separate agreement.
(3) An Arbitration agreement shall be in writing.
(4) An arbitration agreement is in writing if it is contained in –
(a) a document signed by the parties;
(b) an exchange of letters, telex, telegrams, or other means of telecommunications which provide a record of the agreement; or
(c) an exchange of statements of a claim and defence in which the existence of the agreement is alleged by one party and not denied by the other.
(5) The reference in a contract to a document containing an arbitration clause constitutes an arbitration agreement if the contract is in writing and the reference is such as to make that arbitration clause part of the contract.”
Whether an Arbitration clause will oust the jurisdiction of Company Law Board/Tribunal and the Company Court?
When there was a dispute between the company and other, between the company and its shareholder and between two companies, then, the issue will be complicated and stakes will be huge very often. The parties in a company dispute may require immediate orders having the binding nature. Generally speaking, there is no bar on referring a company dispute to an Arbitrator, but, the question is as to whether the Arbitration clause will oust the jurisdiction of Company Law Board/National Company Law Tribunal or the Company Court. This issue is to be carefully considered as otherwise, the dispute resolution process may get unnecessarily delayed on the basic question of legal sanctity of an Arbitration Clause in Company documents. This is very very significant issue. Company Law is very very complicated by its very nature and the question as to whether an Arbitration Clause will oust the jurisdiction of Company Law Board or the Company Court, is really interesting to consider.
Normally, unless there is a specific bar on the party concerned in providing an arbitration clause, the parties concerned may have an arbitration clause with regard to the contractual relation between or among them or otherwise. But, the arbitration clause may not come in the way of Company Law Board/Tribunal or Company Court in passing various orders exercising powers under the Companies Act, 1956. Because, the process of winding-up a company cannot be handled by Arbitrator. Again, even by agreement, the procedure prescribed for sanctioning a scheme of amalgamation or compromise can not be ignored and it can only be done by the Company Court as provided under the Act. Thus, the question very often comes is as to whether the Arbitration clause in a document or a company document will oust the jurisdiction of Company Law Board or the Company Court. Referring the issue of providing a arbitration clause between the company and members whatsoever and connecting the same to the right of the member/s to file an application under section 397/398 of the Act, the High Court of Delhi, in In the matter of Surendara Kumar Dhawan and another Vs. R.Vir and others, (1977) 47 Com Cases 277, was pleased to observe that “the shareholders of a company have a right to file a petition under section 397 or section 398 of the Companies Act, 1956, for relief against mismanagement or oppression, if the provisions of section 399 are satisfied. Their right is a statutory right which, by section 9, can not be ousted by a provision in the articles of association of the company. Any article providing that a difference between the company and its directors or between the directors themselves or between any members of the company or between the company and any person shall be referred to arbitration can not debar the jurisdiction of the court in the matter of a petition under section 397 or 398. The court will not stay a petition under section 397 and 398 on an application under section 397 or 398 on an application under section 34 of the Arbitration Act, 1940, based on the arbitration clause”. On the same lines, the High Court of Delhi, inO.P.Gupta Vs. Shiv General Fianance (P.) Ltd. and others, (1977) 47 Com Cases 279, was pleased to observe that“merely because there is an article in the articles of association of the company to the effect that any dispute between the company on the one hand and its members on the other will be referred to arbitration, the court will not stay a petition under section 397 and 398 of the Companies Act, 1956, for relief against mismanagement or oppression in the affairs of a company. Such an article can not be called into play for the purpose of staying proceedings under section 397 or section 398. The provisions of sections 397 and 398 and of section 434 give exclusive jurisdiction to the court and the matters dealt with thereby can not be referred to arbitration. No arbitrator can possibly give relief to the petitioner under sections 397 and 398 or pass any order under section 402 or section 403”. Again, on the same lines, it was reiterated by the Bombay High Court, in Manavendra Ckhitnis and another Vs. Leela Chitnis Studios P.Ltd. and others, (1985) 58 Com Cases 113,wherein the court was pleased to observe that “merely because there is an arbitration clause or an arbitration proceeding, or for that matter an award, the court’s jurisdiction under ss.397 and 398 of the Companies Act, 1956, can not stand fettered. On the other hand, the matter which can form the subject-matter of a petition under ss.397 and 398 cannot be the subject-matter of arbitration, for an arbitrator can have no powers such as are conferred on the court by sections such as s.402.”
The reason assigned by the courts as can perceived for saying that the Arbitration Clause will not oust the jurisdiction of Company Court is the requirement of “expertise”. This is very interesting to dealwith. Even in other matters, where there is a special set-up or law, can that subject matter be referred to Arbitration? For example, the Rent Control Law provides for depositing the rent in court, how can that issue be handled by an Arbitrator if the lease agreement between the landlord and the tenant contains an Arbitration Clause and the dispute is referred to arbitrator. These are all the problems we very often encounter when it comes to invoking the law of Arbitration for resolving the disputes. The issue is to be carefully looked into and we need clarity in this regard.

Arbitration

In order to reduce the delay in courts and in the process of traditional adjudication mechanism, the Alternative Disposal Mechanism (ADR) was mooted. The dispute resolution through Conciliation, Arbitration and Mediation etc., is regarded as alternative mechanism to resolve the disputes between or among the parties in a defined legal relationship. The dispute resolution through Arbitration has occupied great significance in India in the recent past though it was successfully practiced in the developed nations like United States etc. The Arbitration and Conciliation Act, 1996 replacing the earlier act of 1940, governs the issue of dispute resolution through Arbitration. Any dispute arising out of a defined legal relationship can be resolved through Arbitration. In Arbitration Mechanism, the parties themselves will choose the Arbitrator; agree to the procedure for appointment of Arbitrator, the procedure to be followed by Arbitration, the place of Arbitration proceedings etc. It is all meant to provide the parties to resolve their dispute effectively and speedily without burdening the traditional courts.
Now-a-day, in all transactions and the pursuant documents, the Arbitration clause is incorporated mechanically. Admittedly, the Arbitration mechanism is useful for resolving the disputes and it is costly. In commercial transactions, where there is a genuine dispute and where the stakes are very high, the Arbitration mechanism is useful. But, the common man may not benefit much from the Arbitration mechanism as it is costly.
Section 7 of Arbitration and Conciliation Act, 1996 deal with the “Arbitration Agreement” and the same is extracted below:
“7.Arbitration Agreement. – (1) In this Part, “arbitration agreement” means an agreement by the parties to submit to arbitration all or certain disputes which have arisen or which may arise between them in respect of a defined legal relationship, whether contractual or not.
(2) An arbitration agreement may be in the form of an arbitration clause in a contract or in the form of a separate agreement.
(3) An Arbitration agreement shall be in writing.
(4) An arbitration agreement is in writing if it is contained in –
(a) a document signed by the parties;
(b) an exchange of letters, telex, telegrams, or other means of telecommunications which provide a record of the agreement; or
(c) an exchange of statements of a claim and defence in which the existence of the agreement is alleged by one party and not denied by the other.
(5) The reference in a contract to a document containing an arbitration clause constitutes an arbitration agreement if the contract is in writing and the reference is such as to make that arbitration clause part of the contract.”
Whether an Arbitration clause will oust the jurisdiction of Company Law Board/Tribunal and the Company Court?
When there was a dispute between the company and other, between the company and its shareholder and between two companies, then, the issue will be complicated and stakes will be huge very often. The parties in a company dispute may require immediate orders having the binding nature. Generally speaking, there is no bar on referring a company dispute to an Arbitrator, but, the question is as to whether the Arbitration clause will oust the jurisdiction of Company Law Board/National Company Law Tribunal or the Company Court. This issue is to be carefully considered as otherwise, the dispute resolution process may get unnecessarily delayed on the basic question of legal sanctity of an Arbitration Clause in Company documents. This is very very significant issue. Company Law is very very complicated by its very nature and the question as to whether an Arbitration Clause will oust the jurisdiction of Company Law Board or the Company Court, is really interesting to consider.
Normally, unless there is a specific bar on the party concerned in providing an arbitration clause, the parties concerned may have an arbitration clause with regard to the contractual relation between or among them or otherwise. But, the arbitration clause may not come in the way of Company Law Board/Tribunal or Company Court in passing various orders exercising powers under the Companies Act, 1956. Because, the process of winding-up a company cannot be handled by Arbitrator. Again, even by agreement, the procedure prescribed for sanctioning a scheme of amalgamation or compromise can not be ignored and it can only be done by the Company Court as provided under the Act. Thus, the question very often comes is as to whether the Arbitration clause in a document or a company document will oust the jurisdiction of Company Law Board or the Company Court. Referring the issue of providing a arbitration clause between the company and members whatsoever and connecting the same to the right of the member/s to file an application under section 397/398 of the Act, the High Court of Delhi, in In the matter of Surendara Kumar Dhawan and another Vs. R.Vir and others, (1977) 47 Com Cases 277, was pleased to observe that “the shareholders of a company have a right to file a petition under section 397 or section 398 of the Companies Act, 1956, for relief against mismanagement or oppression, if the provisions of section 399 are satisfied. Their right is a statutory right which, by section 9, can not be ousted by a provision in the articles of association of the company. Any article providing that a difference between the company and its directors or between the directors themselves or between any members of the company or between the company and any person shall be referred to arbitration can not debar the jurisdiction of the court in the matter of a petition under section 397 or 398. The court will not stay a petition under section 397 and 398 on an application under section 397 or 398 on an application under section 34 of the Arbitration Act, 1940, based on the arbitration clause”. On the same lines, the High Court of Delhi, inO.P.Gupta Vs. Shiv General Fianance (P.) Ltd. and others, (1977) 47 Com Cases 279, was pleased to observe that“merely because there is an article in the articles of association of the company to the effect that any dispute between the company on the one hand and its members on the other will be referred to arbitration, the court will not stay a petition under section 397 and 398 of the Companies Act, 1956, for relief against mismanagement or oppression in the affairs of a company. Such an article can not be called into play for the purpose of staying proceedings under section 397 or section 398. The provisions of sections 397 and 398 and of section 434 give exclusive jurisdiction to the court and the matters dealt with thereby can not be referred to arbitration. No arbitrator can possibly give relief to the petitioner under sections 397 and 398 or pass any order under section 402 or section 403”. Again, on the same lines, it was reiterated by the Bombay High Court, in Manavendra Ckhitnis and another Vs. Leela Chitnis Studios P.Ltd. and others, (1985) 58 Com Cases 113,wherein the court was pleased to observe that “merely because there is an arbitration clause or an arbitration proceeding, or for that matter an award, the court’s jurisdiction under ss.397 and 398 of the Companies Act, 1956, can not stand fettered. On the other hand, the matter which can form the subject-matter of a petition under ss.397 and 398 cannot be the subject-matter of arbitration, for an arbitrator can have no powers such as are conferred on the court by sections such as s.402.”
The reason assigned by the courts as can perceived for saying that the Arbitration Clause will not oust the jurisdiction of Company Court is the requirement of “expertise”. This is very interesting to dealwith. Even in other matters, where there is a special set-up or law, can that subject matter be referred to Arbitration? For example, the Rent Control Law provides for depositing the rent in court, how can that issue be handled by an Arbitrator if the lease agreement between the landlord and the tenant contains an Arbitration Clause and the dispute is referred to arbitrator. These are all the problems we very often encounter when it comes to invoking the law of Arbitration for resolving the disputes. The issue is to be carefully looked into and we need clarity in this regard.