Mere Filing Of Company Petition In NCLT Does Not Bar Interim Relief Under Arbitration Act: Bombay High Court

The Bombay High Court has recently held that the mere filing of a company petition before the National Company Law Tribunal does not bar a shareholder from seeking interim relief under the Arbitration and Conciliation Act.

This applies where the relief sought concerns rights arising from a Shareholders' Agreement containing an arbitration clause.

Justice Amit Borkar, while partly allowing a petition filed by a 33% shareholder and Director of Farma Hub Overseas Pvt Ltd, rejected the objection based on the pending NCLT proceedings.

The court observed, “In view of the aforesaid discussion, I do not find any merit in the preliminary objection raised by the Respondents that mere filing of Company Petition before the National Company Law Tribunal creates a bar against the present proceedings under Section 9 of the Arbitration and Conciliation Act. The objection, therefore, deserves to be rejected.”

Shiv Keshrimal Agrawal was appointed as a director of Farma Hub Overseas on February 15, 2024 and holds 33% of its shares.

After Director and shareholder Ashish Virmani issued a notice dated April 14, 2026 proposing his removal as Director, Agrawal approached the high court under the Arbitration Act on April 18.

Agrawal alleged breaches of the Shareholders' Agreements, including unilateral financial decisions, related party transactions and denial of access to company records. He also alleged that he was being excluded from the company's management.

Ashish Virmani and Mansi Virmani, the other two directors and shareholders, opposed the petition, pointing to their combined 67% shareholding. They argued that Agrawal had already approached the NCLT under the oppression and mismanagement petition over substantially the same issues.

They also argued that Section 430 of the Companies Act barred the high court from entertaining the petition. The court rejected the objection, holding that the NCLT proceedings concerned statutory rights, while the Section 9 petition sought protection of contractual rights under the Shareholders' Agreements.

The court observed, “Section 430 bars jurisdiction of Civil Courts only in respect of matters which the National Company Law Tribunal is empowered to determine under the Companies Act. The present Petition is not instituted under the Companies Act. It is instituted under Section 9 of the Arbitration and Conciliation Act seeking interim protection of rights arising from an arbitration agreement. Therefore, merely because some issues may arise before the Tribunal, it cannot follow that jurisdiction under Section 9 stands excluded. It also requires to be remembered that the Arbitration and Conciliation Act is a special enactment. Section 9 expressly empowers the Court to grant interim protection before commencement of arbitral proceedings. If every shareholder dispute is excluded from Section 9 only because proceedings under Sections 241 and 242 have also been filed, then in many situations the arbitration clause would become ineffective.”

The court also held that it had jurisdiction under Section 2(1)(e) of the Arbitration Act to entertain the petition. However, it stopped short of conclusively holding that Mumbai was the juridical seat of arbitration. The court said that question could be considered by the arbitral tribunal under Section 20 or at another appropriate stage.

On the interim relief, the court found that Agrawal had made out a prima facie dispute requiring adjudication through arbitration. It noted that several provisions of the Shareholders' Agreements indicated that important decisions required unanimous approval rather than a majority decision.

The court partly allowed the petition and restrained the respondents from giving effect to, acting upon or implementing any resolution removing Agrawal as director. The protection will operate pending commencement of arbitral proceedings and until the arbitral tribunal considers his application under Section 17, or for 90 days from the order, whichever is earlier.

The respondent-shareholders were also restrained from creating third-party rights in, transferring, alienating, encumbering, mortgaging, or otherwise dealing with specified properties in Haridwar in a manner that prejudices Agrawal's rights under the Shareholders' Agreements.

The court also directed preservation of the company's financial and other records and ordered read-only access to specified records, financial statements, and official digital platforms within two weeks.

The respondents remained free to conduct the company's day-to-day business and hold board and shareholder meetings. The court, however, rejected the wider prayers seeking restraint on day-to-day management and operation of the company's bank accounts.

For Petitioner: Vyom Shah with Bindu Parikh i/by Khare Legal Chambers

For Respondents: Akash Shah with Dhanvanti Kharva