Arbitration clause governs oppression claims where company petition is essentially contractual and cannot bypass agreed dispute resolution.

A company petition alleging oppression and mismanagement was treated as a contractual dispute because the pleaded rights and reliefs flowed from a memorandum of understanding and its addendums containing an arbitration clause. The Tribunal applied the principle that a proceeding cannot be split where the entire subject-matter is covered by the arbitration agreement, and held that claims for management control, share transfer, voting restraints, demerger-related directions and damages were referable to arbitration. It also noted that the wide powers under sections 397, 398, 402 and 403 of the Companies Act, 1956 do not bar refusal to entertain a petition that is, in substance, an attempt to avoid arbitration.

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Issues: Whether a company petition alleging oppression and mismanagement, but founded substantially on a memorandum of understanding and its addendums containing an arbitration clause, could be referred to arbitration under section 8 of the Arbitration and Conciliation Act, 1996.

Analysis: The petition, read as a whole, was found to be grounded in the rights and obligations created by the memorandum of understanding and the subsequent addendums. The reliefs sought for control of management, transfer of shares, restraint on voting rights, demerger-related directions, and damages all flowed from those agreements. Applying the principle that a judicial proceeding cannot be split and partly referred to arbitration where the entire subject-matter is covered by the arbitration agreement, the Tribunal held that the petition was essentially a dressed up attempt to avoid arbitration. It further held that the wide powers under sections 397, 398, 402 and 403 of the Companies Act, 1956 do not prevent refusal to entertain a petition which is in substance a contractual dispute with an arbitration clause.

Conclusion: The dispute was held referable to arbitration and the application under section 8 was allowed.

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