Hanutmal Boid V. Khusiram Benarsilal Case Study

It is not uncommon today to see dispute arising out of documents other than the Articles of the Company. In today's scenario we see countless number of disputes arising out of such other documents, be it shareholders agreement or any other form of Joint Venture Agreement. Our court rooms and arbitration tribunals are crammed with such contest. It generally takes place when an investor is introduced in the company and a shareholder's agreement is executed containing terms and conditions regarding the functioning and administration of the company. Such agreement by just its nature and content tends to act as a second set of articles for the company.
In recent times we have seen various pending suits where shareholder's agreement are submitted for litigation and the same are taken to be as a complete governing body of a company without giving much importance to the articles of the company. Under such occurrence it becomes doubtful that the arbitration agreement which is incorporated in the Articles of the company and not in the shareholders agreement,
Khusiram Benarsilal', ILR (1949) 1 Cal 199 (B), Das J. had to consider how far an article of a company, providing in very wide terms for reference to arbitration of disputes between the members inter se, constituted an arbitration agreement between them on which an application for stay winder the Arbitration Act could be based. He there held: "The contractual force given to the articles by Section 21 (1) is, by judicial decisions, limited to matters arising out of the company relationship of the members as members. The statutory result does not extend beyond that and does not convert the articles into a contract or covenant in reference to rights entirely outside the company relationship and does not affect or regulate the rights arising out of a commercial contract with which other members have no concern."