Oppression, Mismanagement Disputes Cannot Be Referred To Arbitration: NCLT Chandigarh

The National Company Law Tribunal (NCLT) at Chandigarh has held that oppression and mismanagement disputes of the nature raised before it cannot be referred to arbitration as such matters fall within the tribunal's exclusive statutory jurisdiction and cannot be privately adjudicated.

A bench of Judicial Mmeber Khetrabasi Biswal and Technical Member Shishir Agarwal held, "We are of the view that disputes of the nature raised in the present Petition under Sections 241-242 of the Companies Act, 2013 would fall squarely within the categories of proceedings that are, by necessary implication, reserved for adjudication by public fora and stand excluded from the purview of arbitration.”

The bench further held, “These are the powers conferred exclusively upon this Tribunal by statute and cannot be exercised by any other forum.”

Holding that the dispute could not be split between arbitral and tribunal proceedings, the bench ruled, "The cause of action here is composite and cannot be split as some reliefs/disputes are clearly non-arbitrable and the Respondent No. 3, Shri Manas Goel against whom a specific relief is sought, is not a party to any arbitration agreement.”

USAR Commerce Technologies Pvt Ltd had moved the tribunal seeking reference of its dispute with co-founder Utsav Soi to arbitration, contending that the disputes arose from contractual arrangements under the Employment Agreement, Shareholders' Agreement and Share Subscription Agreement, all of which contained arbitration clauses.

The company also argued that Soi had himself earlier invoked arbitration and moved the Punjab and Haryana High Court for appointment of an arbitrator, contending that this showed he had acknowledged the arbitrable nature of the dispute.

Rejecting this contention, the bench held that the petition could not be dismissed as a “dressed-up” contractual dispute merely because the controversy was triggered by Soi's termination as Chief Product and Technology Officer.

“The termination of employment on 17.06.2025 was by itself not the only substance of the oppression; it was merely its trigger,” the bench held.

“None of these acts are the contractual consequence of a termination without cause under Clause 9.3 of the EA dated 03.08.2024. They ex facie are independent statutory violations, each capable of standing on its own as a ground of oppression, and more so when viewed cumulatively.,” the bench ruled.

The tribunal noted that Soi was not merely an employee but also a co-founder, 35% promoter-shareholder and founding director, whose rights existed independently of his employment relationship.

It recorded allegations that his directorship was vacated without following statutory procedure, an allegedly invalid EGM was convened to appoint Manas Goel as a non-executive director, Form DIR-12 was filed recording his cessation, his stake was diluted from 35% to around 24% through issuance of CCPS, and a call option was invoked to acquire his stake allegedly worth around Rs 28.8 crore for Rs 50,000.

The tribunal also took note of allegations that “Shoppin Commerce Inc.” was incorporated in Delaware shortly after Soi's termination to allegedly divert the company's intellectual property, technology, source code, customer data and business goodwill.

Rejecting the estoppel argument based on Soi's earlier invocation of arbitration, the bench held, “The jurisdiction of this Tribunal under Sections 241-242 is a special statutory jurisdiction that cannot be waived or elected away by invoking a contractual arbitration clause.”

For the Applicant: Advocate Atul V. Sood, Advocate

For the Respondents: Advocates Aalok Jagga, Advocate, Sushant Kareer, Suriti Chaudhary, Sahil Lohan, Arushi Manu, Aryaman Jagga, Madhav Singhal, APS Madaan,