The Company Law Board (CLB), New Delhi Bench, in a case titled In Re: Valaya Clothing Pvt Ltd & Ors, interpreted the inconsistency that arises when section 8 of the Arbitration and Conciliation Act, 1996, is read with sections 397 and 398 of the Companies Act, 1956.
The petitioner had invested the sum of ₹25,575,000 (US$405,000) towards his shareholding in the respondent company under a belief that his money would not be misappropriated by the management for their own use. However, the respondents were not providing any information to the petitioner and the previously profit-making company started to incur losses.
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The dispute digest is compiled by Bhasin & Co, Advocates, a corporate law firm based in New Delhi. The authors can be contacted at lbhasin@bhasinco.in or lbhasin@gmail.com. Readers should not act on the basis of this information without seeking professional legal advice.
