Oppression and Mismanagement Claims: Limits of Arbitrability under the Companies Act, 2013
The decision of the National Company Law Tribunal (NCLT), Chandigarh in USAR Commerce Technologies Pvt. Ltd. v. Utsav Soi & Ors. (29 April 2026) reaffirms the settled principle that disputes involving oppression and mismanagement under Sections 241 and 242 of the Companies Act, 2013 are generally non-arbitrable, notwithstanding the existence of valid arbitration agreements between the parties.
The central issue before the Tribunal was whether disputes raised in a petition alleging oppression and mismanagement could be referred to arbitration under Section 8 of the Arbitration and Conciliation Act, 1996, when the relevant contractual documents contained arbitration clauses. The Tribunal answered this question in the negative.
The ruling is significant because it highlights the distinction between contractual disputes and statutory corporate governance disputes. While arbitration is founded on party autonomy and consent, proceedings under Sections 241 and 242 invoke a special statutory jurisdiction vested exclusively in the NCLT. Such jurisdiction is intended to protect not merely private contractual rights but also broader corporate and stakeholder interests. Consequently, parties cannot contractually oust the Tribunal’s jurisdiction through arbitration clauses.
The Tribunal relied upon the doctrine of non-arbitrability as explained by the Supreme Court in Vidya Drolia v. Durga Trading Corporation. The judgment recognizes that disputes reserved by statute for adjudication by public fora are excluded from arbitration. Applying this principle, the NCLT observed that oppression and mismanagement proceedings involve remedies of a public character and therefore fall outside the domain of private adjudication.
Particular emphasis was also placed on Section 430 of the Companies Act, 2013, which bars civil courts from entertaining matters that the NCLT or NCLAT is empowered to determine. Since an arbitral tribunal functions as a substitute for a civil forum and derives authority solely from party consent, it cannot assume jurisdiction over matters that the legislature has specifically entrusted to specialized statutory tribunals.
The Tribunal further drew support from the Bombay High Court’s decision in Rakesh Malhotra v. Rajinder Malhotra, which held that oppression and mismanagement petitions involve a mixture of rights in rem and rights in personam. These rights are often inseparable, making it impracticable to bifurcate the dispute and refer only certain aspects to arbitration. The decision also aligns with the NCLAT’s reasoning in Indus Motor Co. (P) Ltd. v. T.P. Anil Kumar.
Conclusion
The judgment reinforces that allegations of oppression and mismanagement are not merely contractual disputes but statutory corporate governance matters. Even where shareholders and promoters have agreed to arbitrate disputes, the NCLT retains exclusive jurisdiction over claims seeking relief under Sections 241 and 242 of the Companies Act, 2013. The decision therefore strengthens the jurisprudential boundary between private dispute resolution through arbitration and the public law functions performed by specialized corporate tribunals.
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