Firm Matters

Khaitan & Co successfully advised and represented senior management of a prominent hospitality group ("Clients") in a petition filed under Section 9 of the Arbitration & Conciliation Act, 1996 (“Section 9 Petition”). 

The Section 9 Petition was filed seeking reliefs against the Clients pursuant to an article contained in the Articles of Association (“AoA”) of a private company in which both Clients serve as directors and are shareholders. On behalf of the Clients, it was, inter alia, contended that: (i) the Section 9 Petition is founded on an article contained in the AoA which merely provides for an internal, quasi-administrative mechanism and does not constitute a valid arbitration agreement; and (ii) the said article does not reflect any intention of the parties to provide for a final, binding, and conclusive adjudicatory mechanism, which is a sine qua non for a valid arbitration agreement. Further, in any event, (i) the AoA is a contract between the members and the company, the petitioner being a director cannot rely on the same; (ii) the AoA is not signed by the petitioner and (iii) disputes arising out of, or in relation to, oppression, mismanagement, and issues of internal corporate governance are not arbitrable, and therefore the petition is not maintainable. It was also submitted that moreover the article in the AoA relied upon as the purported arbitration agreement, fell within the larger ambit of indemnity and did not apply to disputes in general. The Hon’ble Court accepted the submissions advanced on behalf of the Clients and dismissed the Section 9 Petition.

The firm was responsible for formulation of strategy, case assessment, drafting and filing of written submissions on behalf of the Clients as well as arguments before the Hon'ble High Court of Delhi. 

Unique feature:

The case involved a nuanced analysis of the interface and interplay between the Articles of Association and the Companies Act, 2013 as also the Arbitration and Conciliation Act, 1996, particularly in circumstances where ambiguities arose from overlapping governance frameworks. A key issue concerned the interpretation of a clause described as an “arbitration” provision in the AoA, and whether it constituted a valid and enforceable arbitration agreement under applicable law. Additional issues included the scope of powers of a court dealing with petitions under Section 9 of the Arbitration and Conciliation Act, 1996, as well as the arbitrability of disputes relating to corporate governance, oppression, and mismanagement.