Arbitration clause prevails in company disputes where oppression claims arise wholly from a share-sale agreement.

A company petition alleging oppression and mismanagement was treated as referable to arbitration because the reliefs arose entirely from a share-sale agreement containing an arbitration clause. The disputed matters included alleged non-performance of the employment arrangement, instalment payments, transfer of shares, challenge to resignation, and restraint on board changes, all of which were contractual controversies covered by the clause. The breadth of section 402 of the Companies Act, 1956, was not treated as overriding section 8 of the Arbitration and Conciliation Act, 1996 where the dispute was bona fide and contractual. As the respondents applied before their first substantive statement, the statutory requirement to refer the parties to arbitration was satisfied.

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Issues: Whether the petition under sections 397 and 398 of the Companies Act, 1956, founded on disputes arising from a share-sale agreement containing an arbitration clause, was required to be referred to arbitration under section 8 of the Arbitration and Conciliation Act, 1996.

Analysis: The reliefs in the petition were held to arise entirely from the agreement dated 15-1-2001, including alleged non-performance of the employment arrangement, payment of instalments, transfer of shares, challenge to resignation, and restraint against changes in the board. The dispute notice issued by the petitioner himself covered the same contractual controversies, showing that the controversies were referable to the arbitration clause. The existence of wide powers under section 402 of the Companies Act, 1956, was not treated as excluding section 8 where the issues were bona fide contractual disputes covered by an arbitration agreement. Since the respondents applied before filing their first statement on the substance of the dispute, and the matter was found to be the subject of the arbitration agreement, the statutory mandate to refer the parties to arbitration applied.

Conclusion: The petition was held to be referable to arbitration and could not be examined on merits by the Company Law Board.

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