Imagine two founders who agree that the owner of a technology business will transfer his shares to a larger group in exchange for newly issued shares in the group’s holding company. The agreement contains a clause sending “all disputes arising out of or in connection with” it to arbitration. A year later the transferor says that he was induced to enter the swap by a false projection of the group’s earnings, and that the group has since diluted his remaining stake and removed him from the board. He wants the swap undone, his old shares restored, and the dilution reversed. The group answers that every one of these complaints arises from the agreement and must go to an arbitrator. He answers that his complaint is one of oppression of a minority shareholder, which only the National Company Law Tribunal (NCLT) can hear. Who is right, and does the answer depend on how the complaint is drafted? This article examines the arbitrability of oppression and mismanagement petitions under Indian company law, the framework Indian courts and tribunals use to determine the jurisdiction of the NCLT and arbitral tribunals, and the questions on which judicial authority is still developing.

Two Jurisdictions, One Dispute

The difficulty arises because the same set of facts can be described in two legal vocabularies. In the vocabulary of contract, a party who was induced to contract by fraud or misrepresentation may treat the contract as voidable and ask for it to be rescinded, that is, undone, with the parties restored as far as possible to their earlier positions. Section 19 of the Indian Contract Act, 1872 makes a contract induced by coercion, undue influence, fraud or misrepresentation voidable at the option of the party whose consent was so caused, and section 19A makes the same provision for undue influence. Section 27 of the Specific Relief Act, 1963 permits a person interested to sue for rescission of a voidable contract, while sub-section (2) allows the court to refuse rescission where, among other things, the contract has been ratified, the parties cannot be substantially restored, or third parties have in good faith acquired rights for value (Specific Relief Act, 1963, s.27, as amended by the Specific Relief (Amendment) Act, 2018; the text of s.27 was checked against a published copy, and the amendment’s effect on that section was not separately confirmed). Where a contract is avoided, sections 64 and 65 of the Contract Act govern restitution of benefits received.

Under the Companies Act, 2013, the same complaint may be characterised as oppression and mismanagement, bringing into question the jurisdiction of the NCLT under Sections 241 and 242. Section 241 of the Companies Act, 2013 allows a member to apply to the NCLT if the company’s affairs are being conducted in a manner prejudicial to the public interest, or oppressive to a member, or prejudicial to the company, and section 242 empowers the Tribunal to make such orders as it thinks fit, including regulating the company’s conduct, setting aside transactions, and restructuring share capital. Section 430 of the same Act bars a civil court from entertaining a matter which the Tribunal is empowered to determine, a provision that the NCLT has treated as supporting its exclusive jurisdiction (Companies Act, 2013, ss.241, 242, 430; the full verbatim text of these sections was not re-fetched in this run, see the note on verification).

The Arbitration and Conciliation Act, 1996 pulls the other way. Section 8(1), in the form it has had since the Amendment Act of 2015 took effect on 23 October 2015, requires a judicial authority before which an action is brought in a matter that is the subject of an arbitration agreement to refer the parties to arbitration, if a party so applies not later than the date of submitting its first statement on the substance of the dispute, “notwithstanding any judgment, decree or order of the Supreme Court or any Court”, unless it finds that prima facie no valid arbitration agreement exists (Arbitration and Conciliation Act, 1996, s.8(1), as amended by the Arbitration and Conciliation (Amendment) Act, 2015). The tension is plain. The arbitration statute tells the forum to refer; the company statute reserves certain reliefs to a specialist tribunal.

The Foundation: Rights In Rem And Rights In Personam

The Supreme Court’s analysis starts from a distinction between rights in personam, which are enforced against a particular person, and rights in rem, which are enforced against the world at large. In Booz Allen and Hamilton Inc. v. SBI Home Finance Ltd. (2011) 5 SCC 532, a bench of two Judges decided on 15 April 2011 that disputes relating to rights in personam are arbitrable but those relating to rights in rem are, as a rule, to be decided by courts and public fora. The Court gave illustrative categories of non-arbitrable subjects, which commentators group as criminal offences, matrimonial disputes, guardianship, insolvency and winding up, testamentary matters, and eviction or tenancy under special statutes (the categories are consistently reported in secondary sources; the paragraph numbers were not confirmed).

The case most often cited for the winding-up category is Haryana Telecom Ltd. v. Sterlite Industries (India) Ltd. (1999) 5 SCC 688, decided on 13 July 1999, in which the Supreme Court dismissed a special leave petition against a High Court holding that a winding-up petition could not be referred to arbitration, because an arbitrator cannot order winding up and only the company court can. The reasoning is specific to winding up under the Companies Act, 1956. Its application to oppression petitions is therefore an extension by analogy and not a holding.

Vidya Drolia And The Four-Fold Test

The modern framework is the decision of a three-Judge Bench in Vidya Drolia v. Durga Trading Corporation (2021) 2 SCC 1, decided on 14 December 2020 (Civil Appeal No. 2402 of 2019; Ramana, Khanna and Murari JJ.). The Court expressed the question of non-arbitrability in a four-fold test. A subject matter is non-arbitrable when its cause of action and subject matter are actions in rem, with subordinate in personam rights arising from them carved out; when it affects third-party rights, has erga omnes effect, or requires centralised adjudication; when it relates to inalienable sovereign and public-interest functions of the State; or when it is expressly or by necessary implication non-arbitrable under a mandatory statute (the test is reported at para 76 of the SCC text in the secondary sources consulted; the Indian Kanoon copy numbers it differently, and a practitioner should confirm the paragraph in the authorised report). The Court added that the four tests dovetail and overlap and are not watertight compartments, and that they are to be applied with care.

Vidya Drolia also did several things that matter for the present topic. It overruled N. Radhakrishnan v. Maestro Engineers (2010) 1 SCC 72, which had treated allegations of fraud as non-arbitrable, and approved the narrower approach in Avitel Post Studioz Ltd. v. HSBC PI Holdings (Mauritius) Ltd., under which “serious fraud” is confined to cases where the arbitration agreement itself is impeached, or where arbitrary or mala fide State action calls for public-law adjudication; inter partes fraud without a public dimension remains arbitrable (the Avitel citation, reported as (2021) 4 SCC 713, was not seen directly in this run). It also took the view, through A. Ayyasamy v. A. Paramasivam (2016) 10 SCC 386 and Rashid Raza v. Sadaf Akhtar (2019) 8 SCC 710, that a court asks whether the plea permeates the whole contract and the arbitration agreement, and whether it has public-domain consequences. And it described the referral court’s review at the stage of section 8 and section 11 as limited to cases where the arbitration agreement is manifestly and ex facie non-existent or invalid (para 154.4 in the secondary sources).

For our founder, the first lesson from this line of authority is favourable to arbitration. A claim of fraudulent inducement of a share swap is, in its pure form, a private dispute between two contracting parties. After Vidya Drolia and Avitel, the label of fraud does not take it out of the arbitrator’s jurisdiction, and a prayer for rescission of the swap and restitution is, on that analysis, an in personam relief against the counterparty.

Where The Company Statute Intrudes

The second lesson is less favourable. The arbitrability of oppression and mismanagement proceedings under Sections 241 and 242 remains a distinct question. We have been unable to find any statement in Vidya Drolia that deals expressly with such petitions, and a commentator has cautioned that readings of the judgment on oppression are inferences rather than holdings. The law on that point instead rests mainly on decisions of the Bombay High Court and the company tribunals.

The leading decision is Rakesh Malhotra v. Rajinder Kumar Malhotra, a judgment of G.S. Patel J. of the Bombay High Court delivered on 20 August 2014 on appeals against an order of the Company Law Board, reported as 2014 SCC OnLine Bom 1146 and in several other series (the parallel citations differ across sources and should be checked against the report). The petitions were under sections 397, 398 and 402 of the Companies Act, 1956, the predecessors of sections 241 and 242. The Court held that a genuine oppression petition is not referable to arbitration, because the relief sought is in rem, flowing from the special statutory powers of the Company Law Board (now the NCLT) which an arbitral tribunal does not possess. It also held that a petition must be read as a whole, so that composite reliefs, some contractual and some statutory, cannot be split between forums. But the judgment carries a qualification that is part of its reasoning: a petition that is merely “dressed up” as oppression to avoid an arbitration clause, or that is vexatious or mala fide, may be referred. The decision was rendered under the 1956 Act and before Vidya Drolia.

The tribunals have since followed this approach in different directions depending on the facts. The NCLAT, in Indus Motor Co. v. T.P. Anilkumar, is reported to have upheld a refusal to refer where the reliefs, such as a forensic audit and the removal of directors, fell within sections 241 and 242 (reported from a secondary source as decided on 31 July 2023; the date and case number were not matched against the primary order). In Dhananjay Mishra v. Dynatron Services, CA (AT) No. 389 of 2018, the NCLAT is reported to have held that an arbitrator cannot grant relief under section 242, though contractual disputes between the same parties may be arbitrated if no such relief is sought (secondary sources only). The NCLT, Mumbai Bench, in Chaitra Gowdar Chidanand v. Get Simple Technologies (CA 67 of 2022 in CP 9(MB) of 2022) is reported to have treated itself as a “judicial authority” competent to refer and to have referred disputes under a shareholders’ agreement that it regarded as contractual (secondary source only).

The most recent order we have been able to verify from the primary text is USAR Commerce Technologies Pvt. Ltd. v. Utsav Soi, an order of the NCLT, Chandigarh Bench, dated 29 April 2026 in CA No. 201 of 2025 in CP No. 59/CHD/HRY/2025. A co-founder who was terminated under his employment agreement filed a petition under sections 241 and 242 complaining of a defective extraordinary general meeting, share dilution, a call option and a transfer of intellectual property. The company applied under section 8 to refer all disputes. The Tribunal dismissed the application, holding that the termination was only the trigger, that the later reliefs were statutory and in rem, that one respondent was a non-signatory to the arbitration agreement, and that the dispute could not be split. It referred to Booz Allen, Vidya Drolia, Rakesh Malhotra and Haryana Telecom. This is an order of a first-instance tribunal and no appellate treatment of it has been seen. It is useful as an illustration of the reasoning, not as binding authority.

The Issues That Decide The Outcome

Four questions tend to determine the arbitrability of oppression and mismanagement disputes and whether jurisdiction lies with the NCLT or an arbitral tribunal.

The first is the nature of the relief. If the transferor asks only for rescission of the swap, damages, or restitution, the case is in the in personam category on the Vidya Drolia test, and the arbitration clause will ordinarily be given effect. If he also asks for reliefs that only the Tribunal can give, such as regulating the conduct of the company’s affairs, removing directors, or reversing a dilution that affects other shareholders, the case moves towards the in rem side. Rectification of the register of members under the Companies Act is a statutory power of the Tribunal, and a prayer for it will weigh in the same direction (the text of section 59 of the Companies Act, 2013 was not re-fetched in this run).

The second is the presence of non-signatories. An arbitration agreement binds its parties. A company’s other directors and shareholders who did not sign the swap agreement cannot be compelled to arbitrate merely because the dispute concerns them. The Supreme Court’s Constitution Bench in Cox and Kings Ltd. v. SAP India Pvt. Ltd., decided on 6 December 2023 (neutral citation 2023 INSC 1051), retained the group of companies doctrine but rested it on the mutual intention of the parties, with a high threshold for binding a non-signatory, and left much to the arbitral tribunal at the referral stage in the follow-up decision reported as 2024 INSC 670. The presence of non-signatory respondents was a ground of decision in USAR, and it reinforces the objection to splitting a dispute among forums, a concern that Vidya Drolia itself noted in its discussion of the rule against bifurcation of causes of action and parties (citing Sukanya Holdings).

The third is the genuineness of the oppression claim. Rakesh Malhotra leaves room for a tribunal to look behind the pleading. A tribunal examining a section 8 application is not bound by the label of the petition, and where the real grievance is a commercial disagreement over price, valuation or breach of warranty, and the allegations of oppression are an afterthought, the “dressed up” exception allows reference. The converse risk is that a party may use the exception to defeat statutory jurisdiction, and the cases show tribunals weighing the pleaded acts of mismanagement against the contractual trigger.

The fourth is the standard of scrutiny at the referral stage. After the 2015 amendment to section 8, and after the Court’s statement in Vidya Drolia that the referral court should interfere only where the arbitration agreement is manifestly invalid or non-existent, the question of whether the subject matter is arbitrable is, in principle, for the arbitrator unless the answer is plain. Whether a section 8 applicant can use that principle to refer an oppression petition without first having the NCLT examine its own jurisdiction is the point on which tribunals differ. The competence of an arbitral tribunal to rule on its own jurisdiction under section 16 is a further source of argument, and the Kerala High Court, in Purushothaman Thitta v. Pothan Rajan (OP(C) 2308/2025, 1 June 2026), is reported to have held company restructuring and asset division non-arbitrable and within the Tribunal’s exclusive jurisdiction (summary from a news report only).

The Position By Period

An Unsettled Field

We have found no decision of the Supreme Court since Vidya Drolia that squarely decides whether a petition under sections 241 and 242 can be referred to arbitration under section 8, and the absence of one in our searches is not proof that none exists. The current position on the arbitrability of company law disputes therefore rests on High Court and tribunal authority applying the Vidya Drolia framework by analogy, and it is open to a larger bench to take a different view, whether that is a more pro-arbitration reading of the 2015 amendment or a firmer confirmation that statutory oppression reliefs are reserved to the NCLT. The draft Arbitration and Conciliation (Amendment) Bill, 2024, released for public comment on 18 October 2024, had on the available sources not been introduced in Parliament as of the latest check we could make, so the Arbitration Act remains as amended to 2021.

The fair summary is this. Those who favour arbitration say that the Act’s policy is to enforce the parties’ bargain, that a transferor’s claim to undo a share swap is a private contractual claim, and that tribunals should not allow a petition to carry a contract dispute out of arbitration by a change of vocabulary. Those who favour the Tribunal’s jurisdiction say that sections 241 and 242 confer remedies that operate on the company and on other members, that an arbitrator cannot grant them, and that splitting a single dispute between two forums invites inconsistent findings. For our founder, the safest working proposition is that a pure claim for rescission of the swap and restitution will most likely be referred, a petition that seeks reliefs operating on the company’s affairs will most likely stay with the NCLT, and a mixed petition will turn on the real character of the grievance.

Frequently Asked Questions

Can a claim that a share swap was induced by fraud be decided by an arbitrator? Yes, in the ordinary case. After Vidya Drolia overruled Radhakrishnan, fraud as between the parties does not by itself take a dispute out of arbitration, unless the fraud impeaches the arbitration agreement itself or involves public-law action of the State (Vidya Drolia (2021) 2 SCC 1; Avitel).

Can the NCLT Refer Oppression and Mismanagement Proceedings to Arbitration? The authorities are divided in emphasis. Rakesh Malhotra allows a reference where the petition is a dressed-up contractual claim, and refuses one where the petition is genuine and seeks reliefs under section 242. Tribunals have gone both ways on the facts.

Does it matter that some parties did not sign the arbitration agreement? Yes. A non-signatory cannot ordinarily be compelled to arbitrate, and the presence of non-signatory respondents has been a ground for keeping the whole dispute before the NCLT (Cox and Kings, 2023 INSC 1051; USAR, NCLT Chandigarh, 29 April 2026).

Sources & Citations

• Arbitration and Conciliation Act, 1996, s.8(1), as amended by the Arbitration and Conciliation (Amendment) Act, 2015 (in force 23 October 2015).
• Companies Act, 2013, ss.241, 242, 430; Indian Contract Act, 1872, ss.19, 19A, 64, 65; Specific Relief Act, 1963, s.27 (as amended in 2018).
• Vidya Drolia v. Durga Trading Corporation (2021) 2 SCC 1 (SC, 3 Judges, 14 December 2020).
• Booz Allen and Hamilton Inc. v. SBI Home Finance Ltd. (2011) 5 SCC 532 (SC, 15 April 2011).
• Haryana Telecom Ltd. v. Sterlite Industries (India) Ltd. (1999) 5 SCC 688 (SC, 13 July 1999).
• N. Radhakrishnan v. Maestro Engineers (2010) 1 SCC 72 (overruled in part by Vidya Drolia).
• A. Ayyasamy v. A. Paramasivam (2016) 10 SCC 386; Rashid Raza v. Sadaf Akhtar (2019) 8 SCC 710; Avitel Post Studioz Ltd. v. HSBC PI Holdings (Mauritius) Ltd. (2021) 4 SCC 713 (citation not independently seen).
• Rakesh Malhotra v. Rajinder Kumar Malhotra, 2014 SCC OnLine Bom 1146 (Bom, G.S. Patel J., 20 August 2014).
• Cox and Kings Ltd. v. SAP India Pvt. Ltd., 2023 INSC 1051 (SC, Constitution Bench, 6 December 2023); follow-up decision 2024 INSC 670 (9 September 2024).
• USAR Commerce Technologies Pvt. Ltd. v. Utsav Soi, CA No. 201 of 2025 in CP No. 59/CHD/HRY/2025 (NCLT Chandigarh, 29 April 2026).
• Indus Motor Co. v. T.P. Anilkumar (NCLAT); Dhananjay Mishra v. Dynatron Services, CA (AT) No. 389 of 2018 (NCLAT); Chaitra Gowdar Chidanand v. Get Simple Technologies (NCLT Mumbai); Purushothaman Thitta v. Pothan Rajan, OP(C) 2308/2025 (Ker, 1 June 2026) (secondary sources only).
• Draft Arbitration and Conciliation (Amendment) Bill, 2024 (Department of Legal Affairs, consultation draft of 18 October 2024).

Related Reading

• Interim Relief in Arbitration: Sections 9 and 17 of the Arbitration and Conciliation Act, 1996

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