Arbitration clause prevails where oppression and mismanagement claims arise from an inseparable shareholder agreement dispute.

A company petition alleging oppression and mismanagement under sections 397 and 398 of the Companies Act, 1956 was referable to arbitration because the dispute was inseparable from an agreement containing a valid arbitration clause. The arbitration request was filed before the respondents' first substantive statement, so the application under section 8 of the Arbitration and Conciliation Act, 1996 was maintainable. Allegations of statutory non-compliance were insufficient to exclude arbitration where the reliefs effectively sought enforcement of the agreement. The Board therefore declined to retain the petition for adjudication and directed reference to arbitration.

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Issues: Whether the company petition alleging oppression and mismanagement under sections 397 and 398 of the Companies Act, 1956 was liable to be referred to arbitration under section 8 of the Arbitration and Conciliation Act, 1996.

Analysis: The arbitration application was found to be maintainable as it was filed before the respondents' first substantive statement and the jurisdictional objection had been raised at the earliest opportunity. The dispute was held to arise from and be inseparable from the agreement dated 24.11.2004, which contained a valid arbitration clause covering differences and disputes between the parties relating to or arising out of the agreement. The reliefs sought in the company petition were treated as seeking enforcement of that agreement, and the presence of some allegations of statutory non-compliance was held insufficient to remove the matter from arbitration. The Board also held that the statutory jurisdiction under sections 397 and 398 could not be displaced where the grievance could not be adjudicated without reference to the arbitration agreement.

Conclusion: The matter was required to be referred to arbitration and the company petition was not to be retained for adjudication by the Board.

Ratio Decidendi: Where oppression and mismanagement allegations are founded on and inseparable from an agreement containing a valid arbitration clause, and the arbitration request is made before the first substantive statement, the dispute must be referred to arbitration under section 8 of the Arbitration and Conciliation Act, 1996.

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