Oppression & Mismanagement Petition Rejected Due to Dispute Being Purely Contractual & Arbitrable

Eros International Media Ltd. Vs Colour Yellow Productions Private Limited & Ors. (NCLT Mumbai)

The matter before the National Company Law Tribunal (NCLT), Mumbai, arose from a company petition alleging oppression and mismanagement under Sections 241–242 of the Companies Act, 2013. The petitioner, having acquired 50% shareholding in the respondent company under a Term Sheet dated 22 January 2014, alleged that the respondents had breached contractual obligations, mismanaged company affairs, diverted funds, undertaken related party transactions without approval, and excluded the petitioner from management decisions. The petitioner relied on a Chartered Accountant’s report highlighting instances of related party transactions and alleged non-compliance with statutory provisions. It also sought reliefs including declarations of oppression, removal of directors, and appointment of an administrator.

The respondents contended that all disputes arose from alleged breaches of the Term Sheet and subsequent agreement dated 23 August 2023, both of which contained arbitration clauses. They argued that the petition was a “dressed-up” attempt to avoid arbitration and that the reliefs claimed stemmed from contractual rights rather than independent shareholder rights. It was further submitted that disputes relating to financial management, related party transactions, and information disclosure were governed by contractual obligations. The respondents also pointed out that the petitioner’s nominee director had signed financial statements up to 2024, and that earlier disputes had been settled and followed by a renewed agreement containing an arbitration clause.

The petitioner argued that the issues involved statutory violations, fiduciary breaches, and non-arbitrable reliefs under the Companies Act, including matters relating to governance, board meetings, and shareholder rights. It also contended that the respondents had abandoned their right to arbitration.

The Tribunal examined whether the petition was genuinely based on oppression and mismanagement or merely contractual disputes. It observed that the petitioner’s own pleadings and communications repeatedly relied on the Term Sheet, and that the allegations of misappropriation, related party transactions, non-disclosure, and exclusion from management all arose from contractual obligations. The Tribunal noted that the petitioner’s rights and claims were rooted in the Term Sheet and not independent of it.

The Tribunal further held that the arbitration clause remained valid and enforceable, and that the subsequent agreement reinforced the parties’ intention to resolve disputes through arbitration. It rejected the contention of abandonment of arbitration, noting that earlier disputes had been settled and a fresh agreement executed.

On a holistic reading, the Tribunal concluded that the petition was a “dressed-up” attempt to avoid arbitration and that the substratum of the dispute was contractual. Accordingly, applying Section 8 of the Arbitration and Conciliation Act, 1996, the Tribunal referred the parties to arbitration and dismissed the company petition.

FULL TEXT OF THE NCLT JUDGMENT/ORDER

1. The Petitioner, Eros International Media Limited, filed the main Company Petition bearing CP No. 121 of 2025, contending that pursuant to the term sheet dated 22.01.2014 executed between Eros International Media Limited and Aanand L. Rai (Applicant/Original Respondent No. 2) and Yogita Rai (Original Respondent No. 3), the Petitioner acquired an aggregate 50% shareholding, held by Original Respondent Nos. 2 and 3, in Colour Yellow Productions Pvt. Ltd. (Company/Original Respondent No. 1).

2. Under the Term Sheet, it was agreed between the Parties that exclusive control over the creative aspect of films was vested with the Original Respondent No. 2. The Petitioner was conferred the authority to decide on the budget, star-cast, and other production-related aspects of Cinematograph Films and Teleserials. The Original Respondent No. 2 was prohibited from undertaking any business competing with that of Original Respondent No. 1 and was further required to render creative services for the cinematograph films and Teleserials of Original Respondent No. 1.

3. Under the Term Sheet, Original Respondent No. 1 could collaborate with Third Parties only if the Petitioner declined to fund a particular project. Original Respondent No. 2 was entitled to monthly remuneration, to be set-off against his profit share and/or fees payable in his capacity as Creative Director or Director of films. In furtherance of the Term Sheet, the Petitioner appointed Mr. Sunil Lulla as Chairman and Director on the Board of Original Respondent No. 1, alongside Original Respondent Nos. 2 and 3. The Petitioner financed multiple films produced under this collaboration over a period of time. However, disputes and differences arose between the Petitioner and Original Respondent No. 2 during the years 2019–2020.

4. A Board meeting was convened on 29.11.2019 in an attempt to sort out the differences; however, the differences only magnified. A notice was thereafter issued by the Petitioner bringing to the notice of Original Respondent No. 2 several acts of mismanagement of the affairs of the Company, specifically alleging that Original Respondent No. 2 was utilising Original Respondent No. 1 as a conduit to advance personal interests at the expense of the Company.

5. By letter dated 16.11.2021, Original Respondent No. 2 invoked the termination of the Term Sheet and also invoked the arbitration clause thereunder for adjudication of the disputes between the parties. The Petitioner, by its letter dated 30.11.2021, objected to the wrongful and unilateral termination of the Term Sheet by Original Respondent No. 2.

6. Thereafter, multiple rounds of meetings were held between the parties, and ultimately another agreement was executed between the Parties on 23.08.2023, by which the disputes, particularly regarding assignments undertaken by Original Respondent No. 2 with Third Parties, were resolved and the arbitration clause was renewed afresh. Needless to mention, the Term Sheet contained a specific clause of arbitration in the case of differences or disputes between the parties.

7. The Petitioner had engaged an independent Chartered Accountant, M/s A.P. Rajagopalan & Co., to conduct a scrutiny of the Financial Statements of Original Respondent No. 1 Company. Upon examination, the Chartered Accountant submitted a report highlighting various instances of related party transactions undertaken by Original Respondent Nos. 2 and 3, and further identified non-compliance with the provisions governing related party transactions under Section 188 of the Companies Act, 2013.

8.It is contended that Original Respondent Nos. 2 and 3, subsequent to the execution of the Term Sheet, continued to hold and exercise majority control over the Board of Original Respondent No. 1. The day-to-day operations and finances of Original Respondent No. 1 were managed exclusively by Original Respondent Nos. 2 and 3, and despite repeated requests, the Petitioner was not furnished with the relevant information pertaining to the affairs of the Company. The Petitioners were excluded from the management of Original Respondent No. 1, and the Original Respondents have been conducting the affairs of the Company as their personal fiefdom.

9. It is alleged by the Petitioner that the Original Respondents have misappropriated the Company’s funds; it is further alleged that the Petitioner has been seeking a statement of accounts, financial disclosures, and Board approvals since 2020, which were not supplied despite repeated demands, and that Original Respondent No. 2, in breach of the Term Sheet, has repeatedly entered into Third Party Agreements without the approval of the Board of Directors. Original Respondent No. 2, without obtaining the consent of the Petitioner as mandated under the Term Sheet, accepted directorial assignments for the films “Gorkha” and “Rakshabandhan”, both of which were produced by Original Respondent No. 1 in collaboration with Third Party entities, in contravention of the exclusivity and consent provisions of the Term Sheet. It is therefore alleged that the Petitioner, having acquired a 50% shareholding in Original Respondent No. 1, is entitled to an equitable share in the profits of the Company and to meaningful participation in its management decisions.

10. Thus, it is alleged that original Respondent Nos. 2 and 3 have acted in breach of the Term Sheet and the agreed terms between the parties, and have been mismanaging the affairs of the Company and siphoning off funds of Original Respondent No. 1 for their personal gains; therefore, the Company Petition has been filed alleging commission of aforesaid acts of oppression and mismanagement by the Original Respondents.

11. Original Respondent No. 2, having appeared, filed the present Application invoking Section 8 of the Arbitration and Conciliation Act, 1996, contending that the entire allegations of the Petitioner in the Company Petition stemmed from the alleged breach of various clauses of the Term Sheet dated 22.01.2014 and the subsequent agreement dated 23.08.2023 between the Parties. Therefore, as per the arbitration clause in the Term Sheet, the dispute ought to be referred to Arbitration. It is contended that the entire Petition under Section 241-242 of the Companies Act, 2013 is dressed up so as to avoid the agreed forum of arbitration between the parties. It is further contended that the Petitioner purportedly seeks non-arbitrable reliefs under Section 242 in the Company Petition so as to circumvent the arbitral clause. It is contended that Clause 12 of the Term Sheet dated 22.01.2014 and Clause 5 of the agreement dated 23.08.2023 specifically require the disputing parties to refer the dispute to an arbitrator.

12. It is further submitted by Original Respondent No. 2/Applicant that the allegations made in the Company Petition are in the nature of alleging a breach of agreed terms under the Term Sheet and therefore, in view of the specific arbitration clause thereunder, the dispute is required to be referred to arbitration, as the present Petition is dressed-up so as to avoid reference to the arbitration. It is contended by the Applicant that the entire Petition fails to demonstrate how the allegations of misappropriation, mismanagement of funds, revenue sharing, and non-disclosure of projects amount to anything other than a breach of specific obligations outlined in the Term Sheet of 2014 and the subsequent agreement of 2023.

13. It is also submitted by the applicant that the dispute as alleged by the Petitioner also pertains to the infringement of the Trademark “Colour Yellow”, and the disputes pertaining to intellectual property rights do not fall within the exclusive jurisdiction of this Tribunal, as laid down by the Hon’ble Supreme Court in the case of Gloster Ltd. v. Gloster Cables Ltd. and Ors. (2026) in 43 SC. Further, the financial statements with respect to which allegations of mismanagement and misappropriation are raised, were approved and signed by the Petitioner’s own representative Director, Mr. Sunil Lulla, who also served as Chairman of Original Respondent No. 1. All accounts were signed by Mr. Lulla till 2024 and were published by the Petitioner in its annual accounts as subsidiary accounts without qualification, including on recognised stock exchanges. Mr. Lulla, as the Petitioner’s representative, serves as both Chairman of the Board and a Whole-time Director, and, unlike an independent director, holds a fiduciary responsibility under law for the oversight and management of the Company. Having appointed Mr. Lulla as a Director, the Petitioner is estopped from raising allegations of mismanagement, given that Mr. Lulla has signed the financial statements of the Company for 2023–2024. Having officially endorsed these financials, the Petitioner cannot now assail the very operations it had validated.

14. It is contended by the Applicant that the allegations pertaining to the failure to convene requisite Board meetings and Annual General Meetings of Original Respondent No. 1 are unsustainable, as, first, the Petitioner’s own representative, Mr. Lulla, is a serving Director of Original Respondent No. 1 and stands equally responsible for any such failure; and second, none of these allegations were raised by the Petitioner prior to the filing of the Petition.

15. It is contended by the Applicant that the Petitioner has sought relief in the Petition not in its capacity as a shareholder of Original Respondent No. 1, but as entitlements perceived to flow under the Term Sheet. Absent the Term Sheet, these entitlements would not otherwise be available to the Petitioner as a shareholder of Respondent No. 1. This is further reinforced by the fact that the provisions of the Term Sheet have not been incorporated into the Articles of Association of Respondent No. 1. It is therefore contended that, in sum and substance, the Petition filed by the Petitioner invoking Section 241-242 of the Companies Act, 2013 is nothing but an allegation of breach of contractual obligations between the parties emanating from the Term Sheets and that the entire Petition is accordingly dressed up.

16. Accordingly, it is submitted by the Applicant that, in view of Clauses 12 and 5 of the Term Sheet and the Agreement respectively, the present dispute, having emerged from allegations of breach of contractual terms between the parties, is required to be referred to arbitration as per the provisions of Section 8 of the Arbitration and Conciliation Act, 1996.

17. The Petitioner/Non-Applicant in the present Application filed its Reply, contending that, in assessing an allegation of ‘dressing up’, it is imperative that the Petition must be read as a whole, including its grounds and the reliefs sought, and that it cannot be carved up and deconstructed so as to bring some matters within the arbitration clause and leave other matters out. It is pertinent to note that the reliefs sought by the Petitioner in the Petition are not arbitrable and fall solely within the ambit and jurisdiction of this Tribunal under the provisions of Section 241-242 of the Companies Act, 2013. It is further submitted that the reliefs prayed for in the Petition are in rem and hence not arbitrable, and that an Arbitral Tribunal cannot exercise any power or pass any order under Sections 241 and 242 of the Companies Act, 2013. The Petitioner seeks reliefs in respect of the appointment of an administrator and directions for conducting a forensic audit of the affairs of Original Respondent No. 1, which cannot possibly be granted by a private Arbitral Tribunal, and in respect of which only this Tribunal has jurisdiction. It is further submitted that the issues raised in the Petition do not merely pertain to breaches of contractual rights under the Term Sheet and the Agreement of 2023, but also involve breaches of fiduciary duties of Original Respondent Nos. 2 and 3 as Directors of Original Respondent No. 1 towards the Petitioner, and that the Petitioner seeks to enforce and protect its shareholders’ rights. Moreover, the instances of mismanagement, including the failure to convene Board meetings since 2023 and to issue notices for convening Annual General Meetings of Original Respondent No. 1, do not amount to a breach of the Term Sheet and are beyond the purview of any Arbitration proceedings.

18. It is also contended that the Original Respondents have abandoned their right of referring the dispute to arbitration, inasmuch as, pursuant to the notice issued by Original Respondent No. 2 invoking arbitration, no steps were taken towards the constitution of the Arbitral Tribunal or the commencement of arbitration proceedings. The Petitioner further submits that the Applicant’s reliance on the Agreement dated 23.08.2023 is misplaced, as the said Agreement was executed solely for the limited purpose of authorising Original Respondent No. 2 to carry out a third-party funded project under the name and style ‘Colour Yellow’ through a new/separate entity. It is therefore contended that the present Section 8 Application is a mala fide attempt on the part of the Respondents to avail of a remedy that is barred by limitation. It is further contended that there is a conceptual difference between ’cause of action’ and ’cause of arbitration’, the latter arising once a notice of arbitration is issued under Section 21 of the Arbitration and Conciliation Act, 1996. The right to avail the remedy of arbitration is barred by limitation if the party fails to take steps for the constitution of the Arbitral Tribunal within three years from the issuance of such notice; and the Agreement of 2023 does not give rise to a new starting point of limitation for referring the disputes to arbitration, inasmuch as the Term Sheet continued to remain enforceable even after the Agreement of 2023. It is therefore contended that the right of invoking arbitration stood abandoned by reason of the Respondents’ conduct.

19. The Ld. Counsel for the Petitioner has relied upon the decisions in Dani Wooltex Corporation v. Sheil Properties Pvt. Ltd., (2024) 7 SCC 1, and Arif Azim Co. v. Aptech Limited, (2024) 5 SCC 313, to substantiate that the Application under Section 8 is barred by limitation.

20. It is further contended that the Application under Section 8 is misconceived, is not maintainable in law, and is liable to be dismissed.

21. Considering the rival contentions of both the parties, the only point that arises for determination in the present Application is whether the Petition as filed by the Petitioner is a dressed-up Petition and whether, in view of the arbitral clause under the Term Sheet and the subsequent Agreement, the parties are required to be referred to arbitration.

Analysis & Findings:

22. It is submitted by the Ld. Counsel for the Applicant that, subsequent to the disputes that arose in 2021, the parties entered into a fresh and comprehensive Agreement dated 23.08.2023, and therefore, there was no occasion for the Applicant to proceed with the 2021 arbitration proceedings. The subsequent execution of the Agreement between the parties subsumed all prior disputes arising from the original Term Sheet, which contains its own arbitration clause; and the right to arbitrate has, therefore, never been relinquished. It is further submitted that the Petitioner, after the invocation of arbitration, sought to settle the disputes and, vide an e-mail dated 19.04.2023, recorded that both parties agreed to carry forward their business in terms of their past Agreements and an agreed future action plan.

23. It is further contended that an Application under Section 8 of the Act can be filed not later than the date of submitting the first statement on the substance of the dispute. In the present case, it was only upon the filing of the Company Petition by the Petitioner, under the garb of oppression and mismanagement- that the Applicant was occasioned to file the present Application under Section 8, which is therefore within limitation and not barred as alleged by the Petitioner. Having filed the present Application under Section 8, there is no occasion to file an Application under Section 11 of the Arbitration and Conciliation Act, 1996. It is further submitted that a bare perusal of the Petition and the correspondence(s) demonstrate that identical disputes were raised by the Petitioner in its letter dated 25.10.2021, to which Original Respondent No. 2 responded by proposing arbitration pursuant to the arbitration clause in the Term Sheet. The arbitration clause, being a separate and independent agreement, survives even the termination of the main contract; and therefore, the disputes arising under the Term Sheet are liable to be referred to arbitration.

24. It is undisputed that the Petitioner and the Respondents have entered into a Term Sheet, which is in the nature of a contract between the parties by virtue of which the Petitioner acquired shareholding in Original Respondent No. 1, entitling it to nominate a representative on the Board and to appoint Directors. Accordingly, although the Petitioner acquired a 50% shareholding in the Company and its nominee became Director, all parties are governed by the terms of the contract between them, i.e., the Term Sheet dated 22.01.2014. Undisputedly, Clause 12 of the Term Sheet contains an arbitration clause, which reads as under:

“In case of any dispute or difference arising out of or in connection with this Agreement, the same shall initially be referred to and resolved by mutual consultation between the parties hereto, failing which the same shall be referred to the arbitration of a Sole Arbitrator appointed mutually by the Transferors and Eros, failing which the Sole Arbitrator will be appointed vide application to the Bombay High Court under Section 11 of the Arbitration and Conciliation Act, 1996, with the arbitration governed by the provisions of the Arbitration and Conciliation Act, 1996. The Arbitration proceedings shall be in English and held in Mumbai, and the courts in Mumbai alone shall have jurisdiction.”

25. It is also an undisputed fact that until 2021, the affairs of Original Respondent No. 1 were conducted as per the terms of the contract between the parties. However, disputes arose, notices were exchanged, and ultimately the Respondents, by their letter dated 16.11.2021, invoked the arbitration clause. It is contended by the Respondents that the Petitioner failed to respond to this letter, as a result of which the further course of appointment of an arbitrator could not be pursued. Thereafter, settlement talks were held between the parties, and ultimately both parties amicably resolved their disputes by executing the Agreement dated 23.08.2023. The disputes essentially pertained to Original Respondent No. 2 having taken up third-party assignments without the consent of the Petitioner, thereby accruing commercial gains and depriving the Petitioner of its rights under the Term Sheet. These differences were resolved through the Agreement dated 23.08.2023, which itself contains an arbitration clause under Clause 5. Therefore, considering that the entire disputes between the parties arose from allegations of breach of the Term Sheet, and that both parties had amicably settled those disputes and resolved to carry on the affairs of the Company, as substantiated by the email dated 19.04.2023 of the Petitioner, the question of further invoking arbitration pursuant to the letter dated 16.11.2021 would no longer arise. Accordingly, the plea of abandonment of the arbitral clause due to the Respondents’ inaction in appointing an arbitrator pursuant to their invocation letter does not survive.

26. It is pertinent to note that the Petitioners filed the Petition alleging oppression and mismanagement in the year 2025. Prior to the filing of the Petition, there is nothing on record to establish that the Petitioners invoked any arbitration clause by issuing a letter to that effect. Further, it is only upon the filing of the Petition that the Respondents were occasioned to file this Application; therefore, the contention of the Ld. Counsel for the Petitioner that the present Application is barred by limitation is wholly misplaced. Accordingly, the authority relied upon by the Ld. Counsel for the Petitioner in Arif Azim Co. v. Aptech Limited (supra) would not be of assistance to the Petitioner, as the facts and circumstances of the present case are entirely different.

27. The Ld. Counsel for the Petitioner also relied upon the authority of the Hon’ble Supreme Court in Dani Wooltex (supra), wherein it was observed that:

“25.4. The abandonment of the claim by a claimant can be a ground to invoke clause (c) of sub-section (2) of Section 32. The abandonment of the claim can be either express or implied. The abandonment cannot be readily inferred. There is an implied abandonment when admitted or proved facts are so clinching that the only inference which can be drawn is of the abandonment. Only if the established conduct of a claimant is such that it leads only to one conclusion that the claimant has given up his/her claim can an inference of abandonment be drawn. Even if it is to be implied, there must be convincing circumstances on record which lead to an inevitable inference about the abandonment. Only because a claimant, after filing his statement of claim, does not move the Arbitral Tribunal to fix a date for the hearing, the failure of the claimant, per se, will not amount to the abandonment of the claim.”

28. It is therefore contended by the Petitioner that the Respondents, by their conduct in failing to take steps for the appointment of an arbitrator pursuant to the invocation of the arbitral clause, have abandoned their right, and the present Application is accordingly misconceived. However, this authority does not advance the Petitioner’s case, as the situation here is distinguishable- the parties here exchanged emails, settled their disputes, and executed a fresh Agreement dated 23.08.2023. Therefore, the inaction of the parties in appointing an arbitrator pursuant to the 2021 invocation letter would not amount to abandonment of the right to invoke the arbitration clause for disputes subsequently arising between the parties, those disputes having been settled vide the Agreement dated 23.082023.

29. It is submitted by the Ld. Counsel for the Applicant that the Petition is nothing but a dressed-up one, filed to circumvent the arbitral proceedings. It is contended that all the allegations of oppression and mismanagement are in the nature of a breach of the contractual terms between the parties under the Term Sheet, and that all the allegations demonstrably arise from the contractual agreements entered into between the parties. Specifically: the Petitioner has made allegations with respect to non-provision of relevant information and the exclusion of Mr. Lulla from the management of Original Respondent No. 1; the Petitioner has referred to the Term Sheet to claim breach of agreement in support of its core allegations concerning utilisation of funds and the entering into of third-party agreements; and the Petitioner has contended that the Term Sheet continued to remain valid and enforceable amongst the parties with respect to all matters mentioned therein. The main prayers concern the vacation of office by the Applicant and Original Respondent No. 3, and restraining them from negotiating, disposing, encumbering, alienating, or transferring the assets and properties of Original Respondent No. 1 or utilising its funds in any manner- all of which squarely fall within the scope of the Term Sheet dated 22.01.2014.

30. It is further submitted by the Applicant that where the substratum of a dispute is contractual, the existence of an arbitration clause mandates a reference to arbitration, notwithstanding that certain consequential statutory reliefs may not be grantable by the Arbitrator, as the Arbitrator retains the power to grant all declaratory, mandatory, and compensatory reliefs flowing from the breach of contract.

31. The Ld. Counsel for the Applicant relied upon the authority of the Hon’ble Supreme Court in Mangaykarasi & Anr. v. N.J. Sundaresan & Anr., (2025) 8 SCC 299, wherein the Court upheld the judgment of the Hon’ble High Court, holding that mere allegations of fraud arising from contractual disputes and not involving any public element are not sufficient to oust the jurisdiction of the Arbitral Tribunal, and that once the judicial authority is satisfied of the existence of a valid arbitration agreement, it must mandatorily refer the parties to arbitration.

32. It is further submitted that the Hon’ble Bombay High Court in Rakesh Malhotra v. Rajindar Kumar Malhotra, 2014 SCC OnLine Bombay 1146, Company Appeal (L) No. 10 of 2013, decided on 20.08.2014, held that where a vexatious and dressed-up Petition is filed alleging oppression and mismanagement with the sole intention of evading a valid arbitration clause, such proceedings are required to be referred to arbitration under Section 8 of the Arbitration and Conciliation Act, 1996. Reliance is also placed on M/s Fullerton India Credit Company Limited v. Ms. Manju Khati, (2024) SCC OnLine Calcutta 3215, wherein it was held that, in an application under Section 8 of the Arbitration and Conciliation Act, 1996, the Court is required only to ascertain whether a valid arbitration agreement exists before referring the parties to arbitration. Further reliance is placed on the decisions of various Benches of the National Company Law Tribunal on the same issue.

33. It is further submitted by the Ld. Counsel for the Applicant that the allegations now raised in the present Company Petition, including those relating to the conduct of the Company’s affairs, were already part of the inter-party disputes raised in the letters dated 25.10.2024; and that, having once succeeded in evading arbitration, the Petitioner is seeking to do so again through this dressed-up Company Petition. It is further submitted that the Trademark disputes are arbitrable and can be dealt with by an arbitrator. As regards Mr. Lulla, the Petitioner’s representative and Chairman and Whole-time Director of the Company, he has signed all the financial statements and owed a fiduciary duty to scrutinise the financials, and not merely to sign them in blind faith. Accordingly, Mr. Sunil Lulla stands equally responsible for any alleged failure to convene meetings, and notably, none of these allegations were raised by the Petitioner prior to the filing of the Petition, which is evidently dressed up.

34. It is submitted by the Applicant that the Arbitration Act specifically empowers the Arbitral Tribunal to rule on its own jurisdiction. If this Tribunal were to assume jurisdiction simply because the Petitioner has added prayers for statutory remedies, despite the substratum of the complaint being a contractual breach of the Term Sheet, it would directly contradict the mandate of the Arbitration Act. Such a ruling would create a dangerous precedent, allowing any party intent on escaping arbitration to file a dressed-up Petition through a superficial exercise in draftsmanship, thereby defeating the commercial intent of the parties encapsulated in the arbitration clause. The duty of this Tribunal is therefore confined to determining the existence of a valid arbitration agreement and referring the parties to arbitration.

35. The Ld. Counsel for the Petitioner submitted that upon perusal of the allegations made in the Petition, it is evident that they pertain to financial discrepancies, non-service of notice of meetings, and other matters concerning the affairs of Original Respondent No. 1, which are governed by the Companies Act, 2013; and hence, the dispute is not arbitrable. The averments in the Petition specifically pertain to the following:

35.1. Exclusion of the Petitioner and its nominee from the management of Original Respondent No. 1 and the running of Original Respondent No. 1 as a personal fiefdom;

35.2. Acts of mismanagement of the affairs of Original Respondent No. 1, as highlighted by the letter dated 25.03.2021;

35.3. Failure to disclose financial information, thereby keeping the Petitioner in the dark about malpractices undertaken by Original Respondent Nos. 2 and 3;

35.4. The examination report of the Chartered Accountant highlighting several instances of related party transactions by the Applicants (Original Respondent Nos. 2 and 3) without the approval of the Board of Directors, as well as non-compliance with the provisions governing related party transactions;

35.5. The Petitioners being kept in the dark about the related party transactions and being asked to sign the financial statements and the minutes book without being provided the relevant documents or details of the transactions;

35.6. Mismanagement of the affairs of Original Respondent No. 1, in that no Board Meetings have been convened since 2023 and no notice for convening an Annual General Meeting (AGM) has been issued;

35.7. Disqualification of the Applicants (Respondent Nos. 2 and 3) under Section 167 of the Companies Act, 2013, on account of their breach of Section 184 of the Companies Act, 2013;

35.8. Denial of an equitable share in the profits and of participation in management decisions, amounting to oppression; and

35.9. The conduct of the affairs of Original Respondent No. 1 by Original Respondent Nos. 2 and 3 necessitating winding up of Original Respondent No. 1, however, winding up would unfairly prejudice the Petitioner.

1. 36. It is further submitted by the Petitioner that the following reliefs sought by the Petitioner cannot be granted by an Arbitrator:

36.1. A declaration that the acts of Original Respondent Nos. 2 and 3 constitute oppression and mismanagement;

36.2. A declaration that Original Respondent Nos. 2 and 3 have vacated their offices in Original Respondent No. 1;

36.3. Framing of a scheme for the management and administration of Original Respondent No. 1;

36.4. Directions to the banks to restrict withdrawals by Original Respondent Nos. 2 and 3 from the accounts of Original Respondent No. 1;

36.5. Authorisation of Mr. Lulla to preside over the Board Meetings of Original Respondent No. 1; and

36.6. Appointment of, or authorisation for, two representatives of the Petitioners to attend the Board Meetings of Original Respondent No. 1.

1. 37. The Ld. Counsel for the Petitioner relied upon the following authorities:

37.1. Calcom Cement India Ltd. v. Binod Kumar Bawri, (2016) 196 Comp. Cas. 130

37.2. Sadhbhav Infrastructure Project Ltd. v. Company Law Board, 2014 SCC OnLine Guj. 9159

37.3. Sporting Pastime India Ltd. v. Kasturi Sons Ltd., 2006 SCC OnLine Mad. 551

37.4. Ravindranath GE Medical Association v. Ravindranath Kancherla, 2022 SCC OnLine NCLT 43273

37.5. Gautam Kapur v. Limbrose Engineering, 2007 13 Comp. Cas. 513 (CLB)

37.6. Akkadian Housing and Infrastructure Pvt. Ltd. v. Patheon Infrastructure Ltd., 2006 74 SLA 68

37.7. M/s Emgee Housing Pvt. Ltd., 2012 SCC OnLine CLB 98

37.8. Khandala Securities v. Kowa Spinning, 1999 97 Comp. Cas. 632 (CLB)

38. On the basis of the aforesaid authorities, it is contended that if the allegations of oppression and mismanagement can be adjudicated without reference to the terms of the arbitration agreement, a Petition under Section 241 of the Companies Act, 2013 is maintainable even if the underlying contract covers the same subject matter.

39. Placing reliance on Rakesh Malhotra v. Rajindar Kumar Malhotra, Company Appeal (L) No. 10 of 2013, decided on 20.08.2014, it is submitted that while dressed-up Petitions are not maintainable and ought to be referred to an Arbitrator, a bona fide Petition seeking broader reliefs to prevent acts of oppression and mismanagement ought to be entertained without such reference to arbitration. It is further submitted that in assessing whether a Petition is dressed up, its grounds and reliefs are required to be examined in their entirety. It is further submitted that issues regarding non-service of notices of meetings, financial discrepancies, and the appointment of a forensic auditor are matters governed by the Companies Act and are hence not arbitrable. In support thereof, reliance is placed on Emgee Housing Pvt. Ltd. v. ELS Developers, 2016 SCC OnLine Bom. 2391.

40. It is further noted that by letters dated 25.10.2021 addressed to Original Respondent No. 2, the Petitioner, through its erstwhile advocates, alleged mismanagement of the affairs of the Company by Respondent No. 2, contending that he was utilising Respondent No. 1 as a conduit to further his personal interests. The said letter opened with the following words:

“We write to you for and on behalf of our client, Eros International Media Ltd. (“Eros”), to bring to your attention a gross breach and contravention on your part of the provisions of the Term Sheet dated 22nd January 2014 (“Term Sheet”), and to thereby, call upon you to put an end to, and rectify these breaches with immediate effect, failing which Eros may be compelled to initiate appropriate proceedings under the law.”

41. Having gone through the contents, it is observed by this Tribunal that the entirety of the said letter was predicated upon alleged violations of the Term Sheet.

42. Further we find that, the Petitioner’s grievances including but not limited to allegations of related party transactions, non-provision of relevant information, misutilization of funds, execution of third-party agreements without consent, denial of an equitable share in profits, and exclusion from participation in management decisions, all arise from the Term Sheet dated 22.01.2014. This is evident from the Petitioner’s own email communications and pleadings, wherein the Petitioner has repeatedly acknowledged the rights of the parties as flowing from the Term Sheet, employing expressions such as “Based on the terms of the Term Sheet…” and “Breach of Term Sheet dated 22.01.2014…”

43. There are numerous instances in the Petition and in the communications exchanged between the parties where the Petitioner itself has expressly relied upon the Term Sheet. With respect to the allegation of related party transactions, the Petitioner’s e-mail dated 09.06.2025 addressed to the Applicant stated as follows:

“12. At no point were these transactions placed before the Board of Directors for approval, nor was Eros, a 50% shareholder, ever apprised or consulted in its capacity as a promoter-investor. These acts were done without the knowledge, consent, or ratification by the Board or shareholders and in complete contravention of the resolutions passed in the Minutes of Meeting dated 29^th November 2019. The transactions are not only ultra vires to the Term Sheet, but are also in blatant violation of the mandatory statutory requirements under Section 188.”

44. Furthermore, the Petitioner in paragraphs 9.33 and 12.4 of its Petition has stated as follows:

“9.33: The facts and circumstances leading to mismanagement of funds with regards to Moonlit Entertainment are as follows:

(b). The suspicious nature of the Moonlit Transaction is evident from the fact that no approval whatsoever was obtained with regard to Moonlit transaction. That the Respondent No.2 and 3 confirm unilaterally remitted the company’s funds to another entity controlled by him. That the term sheet clearly mentions that the Respondent No. 2 will be paid only the directorial fees and that also is an advance towards the future assignment and projects. The said fees were also subject to agreements being executed in this regard. However, the Respondent No. 2 and 3 diverted huge amounts of Company’s profit to Moonlit. It is a matter of record that Mis Moonlit Entertainment Services LLP, is a separate legal entity, and Respondent No.2 and 3 cannot remit any funds to it without the confirmation of the board or the Petitioner. This brazen payment is utmost oppressive and intended only to defraud Respondent No.1 and the Petitioner.

…

12.4. The Petitioner submits that these transactions are ex-facie in breach of fiduciary responsibilities, and statutory provisions under the Companies Act, 2013 and represent a pattern of conduct aimed at bypassing the Petitioner’s knowledge in the management and decision-making processes of Respondent No. 1, in derogation of the Petitioner’s rights under the Term Sheet and several board meetings of Respondent No. 1.“

45. The Petitioner relies upon an examination report submitted by an independent chartered accountant, which identifies potential contraventions concerning Related Party Transactions. The report concludes that certain transactions, specifically involving director fees, were executed in violation of Section 188(3) of the Companies Act, 2013. Although board approval was eventually obtained, such ratification occurred post-facto and beyond the mandated three-month statutory period. Furthermore, the report identifies additional transactions as related party dealings for which requisite board minutes evidencing approval are unavailable. The CA in his report further mentions that “The Board minutes state that the related party transactions were in the ordinary course of Company’s business and at arm’s length. There is no reference in the resolutions approving any of the transactions that these are at arm’s length as defined in Explanation (b) to section 188 of the Companies Act, 2013 and nor do the minutes provide any fact indicating their arm’s length nature.”

46. Further, with respect to the allegation of non-provision of relevant information, it is noted that Clause 7 of the Term Sheet obligated Respondent No. 1 to submit monthly and/or quarterly reports to the Petitioner in respect of expenses incurred in the day-to-day operations of Respondent No. 1. The said obligation being contractual in nature, any alleged breach thereof would fall within the ambit of the arbitration clause contained in the Term Sheet.

47. In view of the foregoing, it is held that the contentions raised by the Petitioner arise out of breaches of the contractual covenants between the parties. The allegations of misappropriation, mismanagement of funds, revenue sharing, and non-disclosure of projects are, in essence, breaches of obligations outlined in the Term Sheet of 2014.

48. The threshold question is whether the substratum of the Petition is the breach of contractual obligations by Original Respondent Nos. 2 and 3. It is pertinent to note that the Term Sheet specifically prescribes the functions of the Petitioner and the Respondents in managing the affairs of the Company. The Petitioner was required to fund the projects and to decide on the budget, star-cast, and other production-related aspects of Cinematograph Films and Teleserials; and Original Respondent No. 2 was required to direct the films and was entitled to a monthly remuneration. The ultimate benefit accruing to the Petitioner under the Term Sheet was monetary, in the form of a share in the profits of the Company. It is also pertinent to note that the Petitioner, pursuant to the agreed terms under the Term Sheet, had nominated its representative, Mr. Sunil Lulla, as Managing Director and Whole-time Director of the Company. Therefore, the allegations that the financial statements of the Company were not made available, or that Board Meetings or Annual General Meetings were not conducted, fall short of establishing the contentions raised by the Petitioner, as it is not the Petitioner’s case that Mr. Lulla was ousted from the affairs of the Company. In fact, it is admitted that Mr. Lulla has signed the financials of the Company up to 2024, and it cannot therefore be said that the Petitioner was unaware of the management of Original Respondent No. 1.

49. It is pertinent to note that Mr. Lulla, the Petitioner’s representative, was and continues to be on the Board of Original Respondent No. 1. The differences between the parties concerning Original Respondent No. 2 having taken up third-party assignments without the consent of the Petitioner stand settled by virtue of the subsequent Agreement. It is also pertinent to note that, under the terms of the Agreement, in the event the Petitioner failed to fund a project, Original Respondent No. 2 could, with the Petitioner’s consent, seek funding from Third Parties- a term which is itself monetary in nature. Therefore, the reliefs sought in the Petition are, in their entirety, in the nature of enforcing the contract between the parties. The contentions of exclusion of the Petitioner’s nominees, mismanagement of affairs, failure to furnish financial information, and irregular related party transactions are all matters contained within the Term Sheet and constitute alleged breaches of contractual obligations. Accordingly, although the Petitioner has claimed certain reliefs by way of declaration and injunction under the garb of alleged oppression and mismanagement, a holistic reading of the Petition- its pleadings and the reliefs sought, points to it being a dressed-up Petition.

50. The Petitioners evaded the arbitration invoked by the Respondents in 2021, thereafter settled the dispute, and consciously executed a further Agreement prescribing reference to arbitration in the event of any future dispute between the parties. In sum and substance, the Petition is nothing but an attempt to circumvent the agreed arbitration clause under the Term Sheet, and may also amount to an effort to oust the Respondents, who are the original promoters of the Company.

51. Accordingly, we are of the considered opinion that the Petition is a dressed-up Petition instituted with the sole intent of circumventing the arbitration contractually agreed upon by the parties, and is therefore vexatious in nature. There being no dispute as to the validity of the Term Sheet or the arbitral clause contained thereunder, and as per the mandate of Section 8 of the Arbitration and Conciliation Act, 1996, the present dispute is required to be referred to arbitration.

52. In view of the above, the C.A. No. 244 (MB) 2025, is allowed and disposed of. Consequently, the Company Petition bearing C.P. No. 121 (MB) 2025, stands disposed of.