Oppression and mismanagement claims under company law were held non-arbitrable despite a related arbitration agreement.

Allegations of oppression and mismanagement concerning share allotment, share capital changes, defective notices, board composition, removal of nominee directors, and non-maintenance of corporate records were treated as statutory and corporate governance claims under the Companies Act, 1956 and the articles of association. The Company Law Board held that such grievances could be determined independently of the joint venture agreement, even though the agreement contained arbitration clauses on related matters. Because the reliefs sought were those available only under the special statutory regime for oppression and mismanagement, the statutory jurisdiction of the Board was not displaced by arbitration. The application under Section 8 of the Arbitration and Conciliation Act, 1996 was rejected and the disputes were not referred to arbitration.

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Issues: Whether allegations of oppression and mismanagement in a company petition under Sections 397 and 398 of the Companies Act, 1956 could be referred to arbitration under Section 8 of the Arbitration and Conciliation Act, 1996 on the basis of the joint venture agreement.

Analysis: The grievances pleaded in the company petition concerned further issue and allotment of shares, reduction and increase of share capital, non-issue of statutory notices, defective notices for general meetings, improper constitution and functioning of the board, removal of nominee directors, and non-maintenance of corporate records. These allegations were treated as asserting statutory rights of shareholders and members under the Companies Act, 1956 and the articles of association, and not merely contractual claims arising under the joint venture agreement. The agreement undoubtedly contained arbitration clauses regulating shareholding, board composition, notices, transfer of shares, and allied rights, but the decisive question was whether the oppression and mismanagement allegations could be adjudicated without reference to the agreement. On that test, the claims were found capable of determination by the Company Law Board on their own footing. The reliefs sought were also of the kind available only under Sections 397, 398, 402 and 403, and the statutory jurisdiction of the Company Law Board could not be displaced by the arbitration clause.

Conclusion: The disputes were not referred to arbitration and the application under Section 8 of the Arbitration and Conciliation Act, 1996 was rejected.

Ratio Decidendi: A petition alleging oppression and mismanagement based on statutory and corporate governance violations is not referable to arbitration merely because the parties are also bound by an arbitration agreement, where the allegations can be decided independently of that agreement and the reliefs lie within the special statutory jurisdiction of the Company Law Board.

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