Vishrutha Dhruva Vs Air Works UK Engineering Limited (NCLT Bengaluru)
The National Company Law Tribunal (NCLT), Bengaluru Bench, dismissed an application seeking reference of proceedings to arbitration under Section 45 of the Arbitration and Conciliation Act, 1996, holding that the mere existence of an arbitration clause in a Shareholders’ Agreement (SHA) does not automatically require disputes to be referred to arbitration.
The applicants contended that the main petition filed under Section 213 of the Companies Act, 2013 was essentially based on alleged breaches of the Shareholders’ Agreement dated 5 March 2015 and that the disputes concerning shareholders’ rights, governance, board composition, affirmative voting rights, management, and contractual obligations arose out of the SHA. They argued that the agreement contained a valid arbitration clause, that the respondent had earlier acknowledged the binding nature of arbitration in related correspondence, and that referring the matter to arbitration would avoid multiplicity of proceedings and conflicting decisions. They also submitted that allegations of fraud did not render the disputes non-arbitrable since the allegations did not affect the existence of the arbitration agreement itself.
The respondent opposed the application, asserting that the petition sought statutory relief under Section 213(b) of the Companies Act for investigation into the affairs of the company, including allegations of fraud, misfeasance, misconduct, and financial irregularities. According to the respondent, such relief could only be granted by the NCLT and not by a private arbitral tribunal. The respondent further argued that the proceedings concerned statutory and fiduciary duties under company law, corporate governance issues, and public interest considerations that extended beyond the scope of the Shareholders’ Agreement. It also submitted that the application for arbitration was a delaying tactic intended to obstruct adjudication of the investigation petition.
