Mixed oppression and arbitration disputes: only claims covered by the arbitration clause may be referred, while independent statutory allegations remain before the forum.

A mixed company petition under sections 397 and 398 of the Companies Act, 1956 was held not to be wholly referable to arbitration merely because one set of grievances arose from a sponsorship agreement containing an arbitration clause. Section 8 of the Arbitration and Conciliation Act, 1996 applies only where the subject-matter before the forum is the same as the subject-matter covered by the arbitration agreement and the reference is sought before the first statement on the substance of the dispute. Allegations of independent oppression, mismanagement, and Companies Act non-compliance remained justiciable before the Board, while only agreement-based disputes could fall within arbitration.

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Issues: Whether the petition 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 because of an arbitration clause in the sponsorship agreement, and whether the petition could proceed in respect of allegations independent of that agreement.

Analysis: Clause 19 of the sponsorship agreement required disputes arising under that agreement to be referred to arbitration. The statutory bar under section 8 applies only when the subject-matter before the judicial authority is the same as the subject-matter covered by the arbitration agreement, and the request for reference was made before the first statement on the substance of the dispute. On the pleadings, only some allegations related to the sponsorship agreement, while the remaining allegations concerned independent acts of oppression and mismanagement and non-compliance with the Companies Act. Those independent allegations could not be sent to arbitration merely because the petition also contained agreement-based grievances. The limited enquiry under section 8 did not permit examination of the merits of the allegations at that stage.

Conclusion: The request to refer the parties to arbitration and dismiss the petition was rejected, and the petition was permitted to proceed on the allegations not arising out of the sponsorship agreement.

Final Conclusion: A mixed petition containing both agreement-based and independent corporate oppression allegations is not wholly referable to arbitration; only the disputes actually covered by the arbitration clause may be excluded from adjudication.

Ratio Decidendi: Section 8 of the Arbitration and Conciliation Act, 1996 mandates reference to arbitration only when the dispute before the judicial authority is wholly covered by the arbitration agreement, and independent statutory allegations remain justiciable before the forum seised of the petition.

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