NCLT Mumbai Refers Eros–Aanand L. Rai Dispute Over Colour Yellow Productions To Arbitration

The National Company Law Tribunal (NCLT) at Mumbai on Tuesday recently referred to arbitration a dispute between Eros International Media Ltd and filmmaker Aanand L. Rai arising from their investment and contractual arrangements in Colour Yellow Productions Pvt. Ltd.

It held that Eros' company petition was a dressed-up attempt to bypass arbitration.

A bench of Judicial Member Sushil Mahadeorao Kochey and Technical Member Prabhat Kumar was hearing a petition by Eros alleging fund diversion and unauthorised related party transactions, along with a Section 8 application filed by Rai seeking reference to arbitration.

“Accordingly, we are of the considered opinion that the Petition is a dressed-up Petition instituted with the sole intent of circumventing the arbitration contractually agreed upon by the parties, and is therefore vexatious in nature. There being no dispute as to the validity of the Term Sheet or the arbitral clause contained thereunder, and as per the mandate of Section 8 of the Arbitration and Conciliation Act, 1996, the present dispute is required to be referred to arbitration.” the tribunal observed.

Eros had acquired a 50% stake in Colour Yellow under a term sheet dated January 22, 2014 with Rai and others. Disputes arose around 2019 and 2020 over alleged mismanagement, fund diversion, and exclusion from management.

Rai invoked the arbitration clause in November 2021 while terminating the term sheet, and the parties later entered into a fresh agreement on August 23, 2023. Eros filed the company petition in 2025 alleging oppression and mismanagement.

Rai argued that the claims arose from alleged breaches of the term sheet and related agreements and were therefore arbitrable, while Eros contended that the dispute involved oppression and mismanagement beyond contractual terms.

Accepting Rai's submissions, the tribunal said Eros' rights under the term sheet were primarily monetary, including a share in profits. It noted that Eros' representative, Sunil Lulla, who served as Chairman and Whole-time Director, had participated in management and signed the company's financial statements up to 2024. The tribunal held that the allegations of lack of information and exclusion from management fell short of establishing the claims.

“The ultimate benefit accruing to the Petitioner under the Term Sheet was monetary, in the form of a share in the profits of the Company. It is also pertinent to note that the Petitioner, pursuant to the agreed terms under the Term Sheet, had nominated its representative, Mr. Sunil Lulla, as Managing Director and Whole-time Director of the Company. Therefore, the allegations that the financial statements of the Company were not made available, or that Board Meetings or Annual General Meetings were not conducted, fall short of establishing the contentions raised by the Petitioner.”

On mismanagement, the tribunal held that allegations relating to exclusion from management, related party transactions and non-disclosure of financials arose from the term sheet and amounted to alleged contractual breaches.

“The contentions of exclusion of the Petitioner's nominees, mismanagement of affairs, failure to furnish financial information, and irregular related party transactions are all matters contained within the Term Sheet and constitute alleged breaches of contractual obligations. Accordingly, although the Petitioner has claimed certain reliefs by way of declaration and injunction under the garb of alleged oppression and mismanagement, a holistic reading of the Petition, its pleadings and the reliefs sought, points to it being a dressed-up Petition.”

The tribunal held that there was no dispute over the validity of the term sheet or arbitration clause and directed the parties to resolve the dispute through arbitration.