INTRODUCTION
The Arbitration and Conciliation Act, 1996 represents a significant milestone in the revamping of arbitration and conciliation procedure in India. Enacted with the objective of harmonizing Indian arbitration law with international best practices, the Act modernized and consolidated the pre-existing, fragmented legal framework governing arbitration and conciliation. Drawing heavily from the UNCITRAL Model Law on International Commercial Arbitration and the UNCITRAL Conciliation Rules, the Act provides a comprehensive, uniform, and efficient mechanism for resolving disputes outside the traditional court system. It ensures that agreements to arbitrate the existing as well as future disputes are legally binding and enforceable, thereby fostering commercial certainty and predictability. At its core, the Act reinforces the principle of party autonomy, the consensual nature of arbitration, and the finality and enforceability of arbitral awards. The legislation also emphasizes impartial decision-making, procedural flexibility and privacy, values that are central to maintaining confidence in the arbitral process.
The scheme of the Arbitration and Conciliation Act, 1996 is fundamentally premised on the existence of a valid arbitration agreement between the parties. Such an agreement forms the very foundation of the arbitral process, reflecting the intention of the parties to submit disputes, present or future, to private adjudication rather than to the courts. This agreement allows parties to tailor the dispute resolution process to their specific needs, ensuring a streamlined, flexible and convenient mode for resolution. When arbitration is chosen as the mechanism for adjudicating commercial disputes within a legal relationship, it is presumed that the parties seek to refer their dispute to a forum knowledgeable in the practices and terminology of the trade, capable of conducting the proceedings efficiently and without undue delay. Furthermore, it is expected that the forum chosen by the parties will be able to evaluate the merits of a controversy without tripping over more restrictive rules of evidence and procedure prescribed for the usual adjudicatory mechanisms, rendering the dispute resolution process a speedy one.
The Act envisages that once parties have voluntarily and validly entered into an arbitration agreement, satisfying the requirements under the Act, they are, as a general rule, bound to adhere to that commitment.1 Consequently, when a dispute arises in respect of a matter covered by the agreement, the parties will ordinarily be referred to arbitration, either through the intervention of a judicial authority under Section 8,2 which mandates reference to arbitration when an action is brought before any judicial authority, or through an application under Section 11,3 which empowers the court or designated authority to appoint an arbitrator when the parties fail to do so as per their agreed procedure. This framework underscores the legislative intent to uphold party autonomy and minimize judicial intervention, ensuring that the arbitral forum remains the primary avenue for dispute resolution where a valid arbitration agreement exists.
ARBITRATION AGREEMENT
The Act makes it mandatory to have a valid arbitration agreement to resolve a dispute by means of arbitration. Section 2(1) b defines ‘an arbitration agreement means an agreement referred to in Section 7 of the Arbitration and Conciliation Act, thereby establishing the statutory foundation for its validity and enforceability.4 Section 7 further delineates the essential requirements for a valid arbitration agreement.5
As per the definition given under Section 7, an arbitration agreement means ‘a written agreement to submit present or future differences to arbitration, whether an arbitrator is named therein or not. What constitutes an arbitration agreement in writing is well explained under Section 7 as any document signed by the parties; an exchange of letters, telex, telegrams or other means of communication which provide a record of the agreement; or an agreement shall be deemed to be in existence if one party alleges its existence and the other party does not deny it.6 Sub-section (2), in line with the UNCITRAL Model Law, recognizes arbitration agreements regardless of whether they appear as a clause within a contract or as a stand-alone agreement. Further, sub-section (4) incorporates a deeming provision, clarifying the circumstances in which the statutory requirement of writing will be considered satisfied, thereby broadening the scope of what may constitute a valid arbitration agreement. Primarily, the most important aspect of an arbitration agreement is that it should disclose the intention of the parties to refer the existing dispute or the dispute that may arise in the future for arbitration, which must have arisen out of a legal relationship, whether contractual or not. This makes it clear that the agreement to go for arbitration can be concluded between the parties at any time, irrespective of the occurrence of the dispute. Therefore, every arbitration procedure, except for the Court annexed one and statutory arbitration, commences from an agreement by which the parties agree to refer the dispute, either an existing one or a future one, to one or more persons voluntarily chosen by them.
On the lines of the provisions of the UNCITRAL Model Law, most jurisdictions recognize only arbitration agreements that are reduced to writing. When a challenge as to the existence of the arbitration agreement is made, what is required to be ascertained is whether the parties have intended to refer the dispute to arbitration, as and when it arises between them in respect of the subject matter of the contract. If so, such an agreement would spell out an arbitration agreement.7
The Supreme Court in Nimet Resources Inc. v. Essar Steel Ltd 8 reiterating the contents of an arbitration agreement as provided under Section 7, held that an arbitration agreement could be in different forms – by way of an arbitration clause in a contract or in the form of a separate agreement, but the condition is that it should be in writing. When an arbitration agreement as such is not made in writing, the same should be construed by reference to (a) a document signed by the parties; (b) exchange of letters, telex, telegram, or other means of communication which provides a record of the agreement, or (c) exchange of statement of claim and defence in which the existence of the agreement is alleged by one and not denied by the other.
The requirement of writing is well explained by Justice Mukherjee in Babaji Automotive v. Indian Oil Corporation Ltd 9 in the following words;
“My reading of Section 7 of the Arbitration and Conciliation Act is that under sub–Section (3) of Section 7 of the said Act, it is imperative that an arbitration agreement must be in writing. Sub-Section 4) and (5) of Section 7 explain when an arbitration agreement is considered to be in writing. Written agreement means an agreement in which the terms agreed by the parties are reduced to writing. It is therefore not necessary that the agreement must be signed by both parties.”
An agreement shall be deemed to be in writing if “there is reference in a contract to a document containing an arbitration clause and the reference is such as to make that arbitration clause part of the contract.10 In M.R. Engineers and Contractors Pvt. Ltd. v. Som Datt Builders Ltd.,11 the Court held that an arbitration clause from a document can be incorporated into another by reference, but only if the reference is explicit and demonstrates a clear intention to adopt the arbitration clause. A court cannot create or impose a contract between parties; its authority is ordinarily confined to the interpretation and enforcement of the terms mutually agreed upon by them. This case highlighted the principle of incorporation by reference and the requirement for express consent. It applies equally to the establishment of an arbitration clause.12 Irrespective of the form in which the agreement is entered, the validity of the agreement must be assured.13
There is no statutory mandate for the signature of the parties. The requirement of the signature of the parties to the agreement came up for consideration by the Supreme Court in Smita Conductors Ltd v. Euro Alloys Ltd.14 The Court considered the occasions under which the validity of or effect of an arbitration agreement is to be ascertained by the Court, i.e., (1) before the commencement of arbitration proceedings, (2) during the pendency of the proceeding, and (3) after the award is made and filed in the Court. The Court observed that where the conduct of the parties demonstrates consensus ad idem regarding the terms of the contract, it may be inferred that they have consented to arbitration, notwithstanding the absence of their signatures on the document. In this case, the Apex Court, in its effort to promote arbitration concluded the existence of the arbitration agreement between the parties by invoking the force majeure15clause in the two contracts, which was formed among them and also relying upon the subsequent conduct of the parties.
“If the agreement is written, it may be included in a particular contract by reference or implication. The agreement between the parties may incorporate arbitration provisions which are set out in some other document, but in order to be binding, the arbitration provisions must be brought to the notice of both parties. It is inherent in the case of incorporation by reference that the parties are concerned not with one document alone but with at least two, one of which contains an arbitration clause and the other which does not. In some other cases, the one document may constitute a contract between the parties. A common case is where the two documents concerned are a charter party and a bill of lading. If the relevant contract between the relevant parties is contained in the document that does not contain the arbitration clause, no question of incorporation arises. Where this is not the case, the question whether the document containing the arbitration clause is incorporated in the relevant contract between the parties is as always, a question of construction.”16 The basic concept of arbitration is that the parties must agree to repose trust and confidence in each other and also in a neutral third person or a group of persons, and must agree to accept and abide by the decision given by such person in respect of the disputes which have been referred to him.
The presence of a defined legal relationship between the parties is a must to submit their disputes to arbitration.17 The expression ‘defined legal relationship’ is followed by the words ‘whether contractual or not’ refers to the underlying connection or bond between the parties that give rise to potential disputes subject to arbitration which makes it clear that the legislative intention is to promote and encourage arbitration as a dispute resolution mechanism for all kinds of disputes including those arising beyond a relationship established by an agreement, as in the case of infringement of trademark or other unfair competition. Thus, non-contractual matters can also be referred to arbitration, provided that they arise out of a defined legal relationship. These non-contractual relationships arise from specific laws or regulations that create rights and obligations between the parties or through actions and interactions between parties, even without a formal agreement. In other words, there should be a dispute to go for arbitration, and a dispute implies disagreement between the parties concerning some legal claim or disability.18
The existence of a “dispute” between the parties constitutes a defining feature that distinguishes arbitration from processes such as valuation. The term “dispute” is to be understood in its ordinary sense, encompassing any claim asserted by one party and not admitted by the other. It is generally appropriate to commence arbitration proceedings only after a dispute has actually arisen, a principle reflected in the language of most arbitration agreements, which specifically refer to “disputes” or “differences” being submitted to arbitration. Accordingly, an arbitral tribunal lacks jurisdiction until such a dispute or difference materializes. From a practical perspective, it would be inappropriate to initiate arbitral proceedings before the respondent has been allowed to admit liability or comply with the claimant’s demand, save in circumstances where an imminent limitation bar compels the claimant to commence arbitration to preserve its rights.
Thus, prima facie, an arbitration clause in a contract is concerned only with the disputes that arose pursuant to the non-performance or inadequacy of those particular contractual obligations, and also with disputes that arose after the arbitration agreement is formed. However, express or implied provision can be made in the arbitration agreement, or the arbitration clause, which empowers the arbitrators to decide on disputes arising even after the submission. Where the agreement provides for reference of disputes that may arise in the future, then actual reference cannot be made until such differences have arisen and are still subsisting.
The objective of the Act is to promote dispute resolution through arbitration. The insistence on formalities such as stamps, seals, and signatures often operates as procedural red tape, which must be dispensed with if parties are to attain the true objective of arbitration—an efficient, effective, and cost-conscious resolution of dispute.19The Supreme Court considered the requirement of technicalities in great detail in this case, and it was held that the present Act also follows the autonomie de la volonti doctrine – one that the Court expressly referred to as enshrined in the policy objectives of the Model Law on Arbitration. Further, it was observed that not implementing this doctrine adds to the cost of arbitration and introduces into the agreement technicalities that the parties never intended to incorporate. This view, expressed by the apex Court, is a carefully reasoned judgment and therefore, likely to continue as the law for the arbitration process.
It is settled that getting a resolution of a dispute by arbitration is a matter of contract between the parties, and so long as the contract does not vitiate any provision of the Act, there is nothing in law to prevent the arbitration agreement between the parties from being given effect in full.20 Therefore, an arbitration agreement is a contractual undertaking by two or more parties to resolve disputes by the process of arbitration, even if the disputes themselves are not based on contractual obligations.21Therefore, in a matter where there has been some transaction between the parties and the existence of the arbitration agreement is in challenge, the proper course for the parties is to thrash out such a question under Section 1622 of the Act.
ARBITRABILITY OF DISPUTES
To examine the validity of the arbitration agreement, the following questions are to be answered in the affirmative:23(a) whether the arbitration agreement was in writing? (b) Whether the arbitration agreement was contained in exchange of letters, telex, telecommunications, etc. (c) Whether the core contractual ingredients of the arbitration agreement were fulfilled? (d) Whether the subject matter of the dispute arbitrable?
Any dispute which has arisen between the parties or which may arise between them in respect of a defined legal relationship, whether contractual or not, can be a subject matter of an arbitration agreement and therefore capable of settlement by arbitration.24The Arbitration and Conciliation Act 1996, as amended, does not specifically exclude any category of civil or commercial disputes from arbitrability. Hence, every civil and commercial dispute is capable of being adjudicated by arbitration unless the jurisdiction of the arbitral Tribunal is barred.
The term arbitrability refers to whether a particular subject matter is capable of being resolved by arbitration under applicable law. Even if the parties have consented to arbitration, some disputes are held to be non‐arbitrable, often because they involve sovereign functions, matters of public policy, or rights which are considered so fundamental that tribunals or private parties cannot decide them.
Key legal issues in arbitrability include:
• What categories of disputes are deemed non-arbitrable under statutory provisions or judicial pronouncements?
• At what stage and by whom, the court or the arbitral Tribunal, should the issues of arbitrability or the validity of the arbitration agreement be determined?
• What is the impact of special statutes that confer exclusive jurisdiction upon specific courts or forum?
• Do formal defects such as stamping or registration render an arbitration clause void or do, they merely affect its admissibility or enforceability?
Section 34 (2) (b)25make it clear that an award delivered in a case where “the subject matter of the dispute is not capable of settlement by arbitration under the law for the time being in force” will be set aside by the Court. Moreover, if the choice of arbitration as a dispute resolution mechanism is barred by some other laws, then such disputes cannot be referred for arbitration even if the parties’ consent to that. Thus, even where a dispute is otherwise arbitrable under the Act, arbitration is excluded if a statutory authority has been established and vested with exclusive jurisdiction to adjudicate upon such matters.
The arbitrability of disputes is a contested issue and has been left for the Courts to decide on a case-by-case basis. However, in Booz Allen & Hamilton Inc. v. SBI Home Finance Ltd.,26the Supreme Court held a gamut of disputes to be non-arbitrable. “The well-recognized examples of non-arbitrable disputes are:
i) Disputes relating to rights and liabilities which give rise to or arise out of criminal offences.
ii) Matrimonial disputes relating to divorce, judicial separation, restitution of conjugal rights, and child custody.
iii) Guardianship matters.
iv) Insolvency and winding up matters.
v) Testamentary matters (grant of probate, letters of administration, and succession
Certificate)
vi) Eviction or tenancy matters governed by special statutes, where the tenant enjoys
statutory protection against eviction and only the specified Courts are conferred jurisdiction to grant eviction or decide the disputes.”
One common characteristic of the above-mentioned categories of disputes is that they relate to actions in rem. A right in rem is a right exercisable against the world at large, as contrasted with a right in personam, which is an interest protected solely against specific individuals. The Apex Court in this case ruled that disputes concerning rights in personam may be decided by a private forum, such as an arbitral Tribunal, but those concerning rights in rem may be decided by a public Court. However, this is not a rigid or inflexible rule, as disputes relating to subordinate rights in personam arising from rights in rem have always been considered to be arbitrable.
Thus, it can be concluded that the term arbitrability assumes its meaning from the contexts in which it is used. The three facets of arbitrability of any dispute in relation to the jurisdiction of the arbitral Tribunal are as follows: (1) whether the disputes are capable of adjudication and settlement by arbitration? That is, whether the disputes, having regard to their nature, could be resolved by a private forum chosen by the parties – the arbitral Tribunal, or whether they would exclusively fall within the domain of public fora -the Courts. (2) Whether the parties have referred the disputes to arbitration? That is, whether the dispute falls within the scope of submission to the arbitral Tribunal, or whether they do not arise out of the statement of claim and counterclaim filed before the arbitral Tribunal. A dispute, even if capable of being decided by arbitration and falling within the scope of an arbitration agreement, will not be “arbitrable” if it is not enumerated in the joint list of disputes referred to arbitration, or in the absence of such a joint list of disputes, does not form part of the disputes raised in the pleadings before the arbitral Tribunal. (3) Whether the disputes are covered by an arbitration agreement? i.e., whether the disputes are enumerated in the arbitration agreement as matters to be decided by arbitration or whether the disputes fall under the “excepted matters” excluded from the purview of the arbitration agreement.27 This evolving jurisprudence reflects a balanced approach—promoting arbitration as the preferred mode for commercial disputes while preserving the court’s exclusive authority over matters of public significance and statutory protection.
REFERENCE TO ARBITRATION BY THE JUDICIAL AUTHORITY UNDER SECTION 8
It is not uncommon that any of the parties may initiate legal proceedings against the other without invoking the arbitration agreement concluded between them. To address such occasions, and to enforce the arbitration agreement that has already been concluded between the parties, power is conferred on the judicial authority to refer the parties to arbitration. For this end, Section 828 confers power on the judicial authority before which an action is brought, to refer the parties to arbitration when there is an arbitration agreement, notwithstanding any judgment, decree, or order of any Court; unless it finds that there is no prima facie arbitration agreement between them. The section embodies the legislative intent of ensuring minimal judicial interference at the pre-reference to arbitration, even though an arbitration agreement under Section 7 is a sine qua non for making a reference.
Sub-section (1) provides that if a party to an arbitration agreement initiates a civil proceeding before a judicial authority, the opposing party may request to refer the matter to arbitration in consonance with the agreement already executed. Upon such application being made, and provided it is filed not later than the submission of the first statement on the substance of the dispute, the judicial authority is bound to refer the matter to arbitration, unless it finds that no valid arbitration agreement exists. Sub-section (2) reinforces the procedural safeguard by requiring the applicant to produce the original arbitration agreement or a duly certified copy, thereby ensuring the authenticity of the claim. The combined effect of these provisions is to make referral mandatory if two conditions are satisfied: first, that an arbitration agreement exists, and second, that the subject matter falls within its scope and the same is raised before filing the first statement. The only exception lies where the court, on a prima facie basis, finds that the arbitration agreement is void, inoperative, or incapable of being performed.
This power of reference to arbitration can be exercised by the judicial authority only on an application by one of the parties to the arbitration agreement. However, when an application for reference to arbitration is made by a party at the first instance by producing the original or the duly certified copy of the arbitration agreement, it is the duty of the judicial authority to see whether there is a defined ‘legal relationship’ between the parties which warrants the existence of a valid arbitration agreement. However, while exercising its jurisdiction, the judicial authority should adopt a wide interpretation for the expression ‘defined legal relationship’ to cover all non-contractual commercial cases occurring in practice.
By virtue of the 2015 Amendment to the Act, a proviso has been provided to sub-Section (2) of section 829 to the effect that, where one party does not have the original arbitration agreement or a certified copy thereof, the said party while preferring an application under this Section has to make a separate application for issuance of directions to the other party for producing the original arbitration agreement or a certified copy thereof, before the Court. Such an amendment was introduced because it was found that Courts had been rejecting the applications unaccompanied by the original or the duly certified copy. If the judicial authority passes an order of reference under Section 8 without examining and satisfying itself of the compliance of the requirements specified in Section 7, it could be said that the judicial authority has failed to exercise the jurisdiction which is vested in it and has abdicated its judicial functions to that extent.30
The power of reference conferred on the judicial authority is different under Indian Law and English Law. Under Indian law, reference to arbitration is permitted only upon fulfillment of specified conditions. In contrast, English law recognizes the right of a party to approach the Court, which is then required to stay the proceedings unless it finds the arbitration agreement to be null and void. Consequently, the discretion vested in English Courts is broader than the corresponding authority available to Indian Courts.
ARBITRABILITY OF CORPORATE DISPUTES
The arbitrability of corporate disputes is a highly controversial area as they comprise of multi-lateral relationships and may involve interests of third parties who are not parties to the arbitration agreement. A key objection to the arbitrability of corporate disputes concerns the enforcement and binding effect of arbitral awards on non-signatories. In a body corporate, the interests of the company, the Board of Directors and its shareholders, are deeply intertwined. While arbitration is premised on consensus among the parties to the agreement, disputes over the validity of corporate resolutions inevitably affect stakeholders who have not expressly agreed to arbitrate. This raises a doctrinal tension between the consensual foundation of arbitration and the collective nature of corporate decision-making.31 Closely related to this is the concern regarding the deprivation of participatory rights. Arbitration, being a private and party autonomous mechanism, exclude individuals or entities whose legal or economic interests are directly impacted by the outcome for the reason that they are not party to the agreement. In the context of resolution disputes, where the consequences extend to the corporate structure as a whole, the inability of affected stakeholders to participate in proceedings presents a serious challenge to procedural fairness.32 This arises from the absence of an ‘Erga omnes’ effect in arbitral awards, particularly when contrasted with judicial determinations concerning corporate resolutions. The complexity of represented interests further complicates arbitrability, as the scope of disputes that may be referred to arbitration emerges from a careful balance between private interests and considerations of public policy.
Typically, a resolution is challenged by an individual shareholder, while the defence is undertaken by the company, often represented by its Board of Directors. However, the substantive interest in upholding the resolution frequently lies with the majority shareholders who supported it, yet they are not direct parties to the proceedings. The situation becomes even more intricate where members of management or supervisory bodies themselves initiate challenges against shareholder resolutions, thereby blurring the lines of representation and interest alignment.33
Finally, concerns have been raised regarding the potential for abuse. The private and flexible nature of arbitration, while advantageous in commercial disputes, may be ill-suited for disputes with multilateral and quasi-public implications where transparency, consistency, and the protection of third-party interests assume greater significance.34 Permitting arbitral tribunals to invalidate corporate resolutions that may affect a wide body of stakeholders creates a risk of decisions being rendered without adequate representation or scrutiny. Such outcomes could have far-reaching consequences for corporate governance and stakeholder protection, thereby reinforcing scepticism toward the arbitrability of these disputes.35
JURISDICTION OF NCLT TO ADJUDICATE MATTERS PERTAINING TO OPPRESSION AND MISMANAGEMENT
The statute vests the National Company Law Tribunal (NCLT) with extensive authority to ensure that corporate entities function in accordance with legal requirements and safeguard the interests of all stakeholders. Its mandate differs fundamentally from that of an arbitral tribunal. Whereas arbitration is grounded in party autonomy and the enforcement of contractual rights, the NCLT performs a quasi-judicial role that extends to supervising compliance with statutory duties and standards of sound corporate governance. Accordingly, its function assumes a regulatory character, aimed at monitoring corporate conduct, curbing majority overreach, and protecting the rights of minority shareholders. Under the Companies Act, 2013, disputes relating to the validity of resolutions, especially in cases of oppression and mismanagement are adjudicated by the National Company Law Tribunal. Orders passed by the NCLT, such as setting aside or modifying a resolution, are binding on the company, its shareholders, and its management, thereby operating in a manner akin to Erga omnes within the corporate framework.36
This creates a structural tension with arbitration, which is fundamentally premised on mutual consent and produces awards that are binding only inter partes. The Booz Allen and Hamilton Inc v SBI Home Finance Ltd 37 authoritatively clarified that disputes involving rights in rem, which have implications beyond the immediate parties, are generally non-arbitrable. Corporate resolution disputes, particularly those affecting the validity of decisions taken in general meetings, often transcend bilateral interests and impact the company as a whole, thereby falling within this category.
Further, the Vidya Drolia v Durga Trading Corporation reaffirmed and refined the test of arbitrability, emphasizing that disputes involving centralized adjudication, public interest, or third-party rights are unsuitable for arbitration.38 The Supreme Court propounded a fourfold test to determine the arbitrability of disputes which are not watertight compartments and requires a holistic and pragmatic approach. Applying this reasoning, it becomes difficult to reconcile the principle of uniformity inherent in corporate governance with the limited binding scope of arbitral awards. An arbitral tribunal cannot effectively render a decision that partially invalidates a corporate resolution only for certain parties, while the same resolution continues to bind others within the company. Moreover, the absence of general binding force in arbitration raises the risk of inconsistent or contradictory outcomes. While the NCLT may invalidate a resolution with binding effect across the corporate body, an arbitral award confined to the disputing parties could lead to parallel and conflicting legal positions within the same company. Such fragmentation undermines legal certainty, disrupts internal corporate coherence, and weakens the predictability essential for corporate governance.
TESTS TO DETERMINE THE ARBITRABILITY OF CORPORATE DISPUTES
Indian jurisprudence has developed a structured approach to assess whether corporate disputes, particularly those involving oppression and mismanagement, can be referred to arbitration. The foundational distinction was laid down in Booz Allen & Hamilton Inc. v. SBI Home Finance Ltd., where the Supreme Court held that disputes concerning rights in rem are non-arbitrable, whereas those involving rights in personam may be resolved through arbitration.39 This principle has since guided courts in identifying categories of disputes that fall outside arbitral jurisdiction, especially where statutory rights, public interest, or third-party effects are involved.
Subsequent decisions, including N.N. Global Mercantile (P) Ltd. v. Indo Unique Flame Ltd., reaffirm that disputes relating to criminal liability, matrimonial status, insolvency, testamentary succession, and corporate governance (including oppression and mismanagement) are generally non-arbitrable due to their public or statutory character.40 The position was further reinforced in Tata Consultancy Services Ltd. v. Cyrus Investments Pvt. Ltd., where the Court emphasized that oppression and mismanagement claims are rooted in statutory rights affecting shareholders collectively and are therefore unsuitable for private adjudication.41 Against this doctrinal backdrop, courts have evolved specific tests to determine arbitrability in corporate disputes:
1. Necessary Parties Test
This test examines whether all parties essential for an effective and binding adjudication are subject to the arbitration agreement. In Sidharth Gupta v. Getit Info Services Pvt. Ltd., the court held that arbitration is inappropriate where key stakeholders, such as non-signatory shareholders or directors, are involved, and their absence would prevent complete resolution of the dispute.42 If an effective remedy cannot be granted without such parties, the matter remains within the jurisdiction of the NCLT.
2. Remedies Test
The remedies test focuses on the nature and scope of relief sought. In Jugnar Processors Pvt. Ltd. v. Rohtas Jugal Kishore Gupta, it was held that arbitral tribunals, being creatures of contract, lack the authority to grant wide-ranging statutory remedies such as restructuring corporate governance, cancelling share allotments, or regulating company affairs.43 Since such powers are exclusively vested in the NCLT under company law, disputes requiring these remedies are considered non-arbitrable.
3. Totality or “Dressed-Up Petition” Test
This test addresses attempts to evade arbitration by artificially framing contractual disputes as statutory claims. In Rakesh Malhotra v. Rajinder Kumar Malhotra, the court held that if a petition alleging oppression and mismanagement is merely a façade to bypass an arbitration clause, courts must look at the substance over form.44 Where the dispute is essentially contractual and does not genuinely invoke statutory jurisdiction, it should be referred to arbitration. Collectively, these tests ensure a balanced approach, preserving arbitration for genuinely private disputes while safeguarding the statutory and public dimensions of corporate governance under the NCLT’s jurisdiction. They prevent both the overreach of arbitration into regulatory domains and the misuse of statutory remedies to circumvent valid arbitration agreements.
A balanced approach to the jurisdiction of the National Company Law Tribunal and arbitral tribunals in matters of oppression and mismanagement requires a nuanced appreciation of both statutory mandate and party autonomy. While sections 241–242 of the Act confer exclusive jurisdiction upon the NCLT to grant wide-ranging, quasi-public remedies such as regulation of company affairs, protection of minority shareholders, and orders binding on all stakeholders, this does not automatically render every dispute involving allegations of oppression non-arbitrable. In line with the principles articulated in Vidya Drolia v. Durga Trading Corporation, disputes that are essentially contractual in nature, arising out of shareholder agreements and involving rights in personam, may be validly referred to arbitration, even if they are framed within a broader oppression narrative. However, where the relief sought transcends inter se rights and implicates corporate governance in a manner affecting third parties or the public interest, the jurisdiction of the NCLT prevails. Thus, a harmonious construction suggests that arbitral tribunals may adjudicate the underlying private disputes, while the NCLT retains residual authority to grant statutory remedies of a representative and binding character, ensuring that neither forum unduly encroaches upon the core functions of the other.
*****
Footnotes
1. The Arbitration and Conciliation Act, 1996 (Act 26 of 1996), s.7.Arbitration agreement.
2. The Arbitration and Conciliation Act, 1996 (Act 26 of 1996), s. 8.Power to refer parties to arbitration where there is an arbitration agreement – (1) A judicial authority before which an action is brought in a matter which is the subject of an arbitration agreement shall, if a party so applies not later than when submitting his first statement on the substance of the dispute, refer the parties to arbitration.
3. The Arbitration and Conciliation Act, 1996 (Act 26 of 1996), s. 11. Appointment of Arbitrators
4. The Arbitration and Conciliation Act, 1996 (Act 26 of 1996), s. 2(1) (b). “arbitration agreement means an agreement referred to in Section7.
5. The Arbitration and Conciliation Act, 1996 (Act 26 of 1996), s.7.Arbitration agreement. (1) In this Part “arbitration agreement” means an agreement by the parties to submit to arbitration all or certain disputes which have arisen or which may arise between them in respect of a defined legal relationship, whether contractual or not. In this part “arbitration agreement means an agreement by the parties to submit to arbitration all or certain disputes which have arisen or which may arise between them in respect of defined legal relationship, whether contractual or not. An arbitration agreement may be in the form of an arbitration clause in a contract or in the form of separate agreement. An arbitration agreement shall be in writing. An arbitration agreement is in writing if (b) an exchange of letters, telex, telegrams or other means of telecommunication [including communication through electronic means} which provide a record of agreement; (c) an exchange of statements of claim and defence in which the existence of the agreement is alleged by one party and not denied by the other. (5) The reference in a contract to a document containing an arbitration clause constitutes the Arbitration agreement if the contract is in writing.
6. The Arbitration and Conciliation Act, 1996 (Act 26 of 1996), s.7 (4) An arbitration agreement is in writing. (a) a document signed by the parties; (b) an exchange of letters, telex, telegrams or other means of communication [including communication through electronic means] which provide a record of the agreement; or (c) an exchange of statements of claim and defence in which the existence of the agreement is alleged by one party and not denied by the other.
7. Rukmini Bhai Gupta v. The Collector, Jabalpur AIR 1981 SC 479.
8. AIR 2000 SC 3107.
9. (2006) 1 Arb LR 566 (Cal).
10. The Arbitration and Conciliation Act, 1996 (Act 26 of 1996), s. 7 (5). Z Jafrey v. Modern Industrial enterprises, AIR 2006 MP 56.
11. (2009) 7 SCC 696.
12. Russell on Arbitration, (Sweet & Maxwell, London, 23rd edn/2007).
13. Harita Finance Ltd v. ATV Projects India Ltd, 2003 (2) Arb LR 376 (Mad).
14. AIR 2001 SC 3730.
15. Black’s Law Dictionary defines the term” force majeure” an event or effect that can neither be anticipated nor be controlled. Section 32 of the Indian Contract Act provides for the circumstances, when the contemplated event becomes impossible to perform and the contract becomes void.
16. Atlas Export Industries v. Kotak & Co, AIR 1999 SC 3286.
17. Chemical Sales Agencies v. Naraini Newar. (2005) 1 Arb LR 193.
18. Salecha Cables v.H.P.S.E.Board (1995) 1 Arb. LR 422 (MP)
19. Great Offshore Ltd.v. Iranian Offshore Engineering & Construction Co., (2008)3 Arb LR375.
20. C. M. C. Ltd v. Unit Trust of India, AIR 2007 SC 92.
21. Russell on Arbitration, (Sweet & Maxwell, London, 23rd edn/2007).
22. The Arbitration and Conciliation Act, 1996 (Act 26 of 1996), s.16.Competence of arbitral Tribunal to rule on its jurisdiction
23. Vidya Drolia v. Durga Trading Corpn, (2021) 2 SCC 1.
24. The Arbitration and Conciliation Act, 1996 (Act 26 of 1996), s.7
25. An arbitral award may be set aside by the Court only if— (b) the Court finds that– (i) the subject-matter of the dispute is not capable of settlement by arbitration under the law for the time being in force, or (ii) the arbitral award is in conflict with the public policy of India.
26. (2011) 5 SCC 532.
27. Swantantra Properties Pvt Ltd v. Airplaza Retail Holdings Pvt. Ltd, 2021 (1) Raj 371 (All).
28. The Arbitration and Conciliation Act, 1996 (Act 26 of 1996), s.8. Power to refer the parties to arbitration where there is an arbitration agreement. (1) A judicial authority, before which an action is brought in a matter which is the subject of an arbitration agreement shall, if a party to the arbitration agreement or any person claiming through or under him, so applies not later than the date of submitting his first statement on the substance of the dispute, then, notwithstanding any judgment, decree, or order of the Supreme Court or any Court, refer the parties to arbitration unless it finds that prima facie no valid arbitration agreement.
29. (2) The application referred to in sub-section (1) shall not be entertained unless it is accompanied by the original arbitration agreement or a duly certified copy thereof: 2[Provided that where the original arbitration agreement or a certified copy thereof is not available with the party applying for reference to arbitration under sub-section (1), and the said agreement or certified copy is retained by the other party to that agreement, then, the party so applying shall file such application along with a copy of the arbitration agreement and a petition praying the Court to call upon the other party to produce the original arbitration agreement or its duly certified copy before that Court.]
30. Chemical Sales Agenciesv.NarainiNewar. (2005) 1 Arb. L R.193,201 (Del)
31. Gary B Born, International Commercial Arbitration (3rd edn, Kluwer Law International 2021) 1067–1072.
32. Julian DM Lew, Loukas A Mistelis and Stefan M Kröll, Comparative International Commercial Arbitration (Kluwer Law International 2003) 183–185.
33. Klaus J Hopt, ‘Corporate Governance and Arbitration’ (2011) 12 European Business Organization Law Review 1, 15–18.
34. Gary B. Born, International Commercial Arbitration (Kluwer Law International, 2nd edn., 2014) 1050–1055.
35. Stavros L Brekoulakis, ‘On Arbitrability: Persisting Misconceptions and New Areas of Concern’ in Loukas A Mistelis and Stavros Brekoulakis (eds), Arbitrability: International and Comparative Perspectives (Kluwer Law International 2009) 20–23.
36. Companies Act 2013, ss 241–242; see also Tata Consultancy Services Ltd v Cyrus Investments Pvt Ltd (2021) 9 SCC 449.
37. Booz Allen and Hamilton Inc v SBI Home Finance Ltd (2011) 5 SCC 532.
38. Vidya Drolia v Durga Trading Corporation (2021) 2 SCC 1.
39. Booz Allen & Hamilton Inc. v. SBI Home Finance Ltd., (2011) 5 SCC 532
40. N.N. Global Mercantile (P) Ltd. v. Indo Unique Flame Ltd., (2023) 7 SCC 1.
41. Tata Consultancy Services Ltd. v. Cyrus Investments Pvt. Ltd., (2021) 9 SCC 449.
42. Sidharth Gupta v. Getit Info Services Pvt. Ltd., 2016 SCC OnLine Del 476.
43. Jugnar Processors Pvt. Ltd. v. Rohtas Jugalkishore Gupta, (2006) 134 Comp Cas 689 (CLB).
44. Rakesh Malhotra v. Rajinder Kumar Malhotra, 2014 SCC OnLine Bom 1146.