Arbitration clause governs company law disputes when the petition mainly arises from contractual breaches and related reliefs.

A company law petition under Sections 397 and 398 was treated as referable to arbitration because the substantive grievances arose from a sponsorship agreement containing an arbitration clause. The disputes concerned alleged breaches of that agreement, including failure to amend articles, appoint a nominee director, furnish information, and issues linked to alleged siphoning of funds. As the reliefs sought depended on deciding those contractual disputes, Section 8 of the Arbitration and Conciliation Act, 1996 required reference to arbitration and prevented the Company Law Board from proceeding with the petition.

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Issues: Whether the disputes raised in a petition under Sections 397 and 398 of the Companies Act, 1956, were covered by the arbitration clause in the sponsorship agreement so as to require reference to arbitration under Section 8 of the Arbitration and Conciliation Act, 1996.

Analysis: The petition was founded substantially on alleged breaches and consequences arising from the sponsorship agreement, including failure to amend the articles, failure to appoint the nominee director, failure to furnish information, and allegations of siphoning of funds based on projected and actual performance under the agreement. The existence of the arbitration clause was not disputed. Section 8 required the judicial authority to refer the parties to arbitration where the action was brought in a matter that is the subject of an arbitration agreement, provided the application was made in time. Since the core disputes arose out of or in connection with the sponsorship agreement, and the reliefs claimed depended upon adjudication of those contractual disputes, the matter fell within the arbitration clause.

Conclusion: The disputes were referable to arbitration under Section 8, and the petition could not be proceeded with by the Company Law Board.

Final Conclusion: The proceedings were terminated in favour of arbitration, and the company law petition stood sent to the arbitral forum for determination of the underlying disputes.

Ratio Decidendi: Where a company law petition is substantially founded on disputes arising out of an agreement containing an arbitration clause, Section 8 of the Arbitration and Conciliation Act, 1996 makes reference to arbitration mandatory and the judicial authority must decline to proceed on those disputes.

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