1. Dispute over shareholding and management of a company – Allegations of oppression and mismanagement – Petition under Sections 241-242 of Companies Act, 2013 – Application under Section 8 of Arbitration Act to refer to arbitration. (Para 1 , 2 , 3 , 4 , 5 , 6 , 7 , 8 , 9 , 10 )
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2026 Supreme(Online)(NCLT) 2524
NATIONAL COMPANY LAW TRIBUNAL
Prabhat Kumar, Member (Technical), Sushil Mahadeorao Kochey, Member (Judicial)
Eros International Media Ltd. – Appellant
Versus
Colour Yellow Productions Private Limited – Respondent
C.A. No. 244 (MB) 2025 | C.P. No. 121 (MB) 2025
Advocates:
For the Appellants/Petitioners: Gaurav Joshi, Akash Loya, Zeeshan Farooqui, Arpit Choudhary, Krunal Mehta, Disha Mehta
For the Respondents: Prachi Wazalwar, Nausher Kohli, Shawn Fernandes
For the Appellants/Petitioners: Gaurav Joshi, Akash Loya, Zeeshan Farooqui, Arpit Choudhary, Krunal Mehta, Disha Mehta
For the Respondents: Prachi Wazalwar, Nausher Kohli, Shawn Fernandes
A company petition under Sections 241 and 242 of the Companies Act, 2013, is a dressed-up petition to avoid an arbitration clause where the substratum of the dispute is a breach of contractual obligations arising from the agreement containing the arbitration clause.
Headnote:(A) Arbitration and Conciliation Act, 1996 - Section 8 - Companies Act, 2013 - Sections 241 and 242 - Reference to arbitration - Dressed-up petition - Where the substratum of a company petition under Sections 241 and 242 is a breach of contractual obligations arising from a Term Sheet containing an arbitration clause, and the reliefs sought are essentially to enforce the contract, the petition is a dressed-up one and must be referred to arbitration under Section 8 of the Arbitration and Conciliation Act, 1996. (Paras 47, 49, 51)
(B) Arbitration and Conciliation Act, 1996 - Section 8 - Limitation - Abandonment - The right to invoke arbitration is not abandoned merely because a party did not pursue the appointment of an arbitrator after issuing a notice of arbitration, especially where the parties subsequently settled the dispute and executed a fresh agreement containing a fresh arbitration clause. The period of limitation for filing an application under Section 8 runs from the date of filing of the judicial proceedings sought to be referred to arbitration, not from the date of the notice of arbitration. (Paras 23, 25, 26, 28)
(C) Arbitration and Conciliation Act, 1996 - Section 8 - Dressed-up petition - Test - In determining whether a petition is dressed-up to avoid arbitration, the court must read the petition as a whole, including its grounds and the reliefs sought. If the essential allegations and the substratum of the dispute are contractual and arise from a breach of the arbitration agreement, the petition is dressed-up and must be referred to arbitration, even if certain statutory or in rem reliefs are sought. (Paras 17, 33, 39, 49)
(D) Companies Act, 2013 - Sections 241 and 242 - Jurisdiction - Oppression and mismanagement - The jurisdiction of the Tribunal under Sections 241 and 242 is not ousted merely because a contract exists between the parties. However, where the petition is, in substance, for the enforcement of contractual rights and not for the vindication of statutory shareholder rights, the petition is dressed-up and must be referred to arbitration. (Paras 37, 38, 39, 49)
Facts of the case:
The Petitioner (Eros International Media Ltd.) filed a company petition alleging oppression and mismanagement against the Respondents (Colour Yellow Productions Pvt. Ltd., its promoters and directors). The Petitioner claimed that under a Term Sheet dated 22.01.2014, it acquired 50% shareholding and certain management rights. Disputes arose, an arbitration clause was invoked by the Respondents in 2021, but the parties settled those disputes by a fresh agreement dated 23.08.2023, which also contained an arbitration clause. Subsequently, the Petitioner filed the company petition alleging oppression and mismanagement, primarily based on breaches of the Term Sheet. The Respondents applied under Section 8 of the Arbitration and Conciliation Act, 1996, to refer the dispute to arbitration, contending the petition was dressed-up to avoid the agreed arbitration clause.
Findings of Court:
The Tribunal held that the essential allegations in the petition, including misappropriation, mismanagement of funds, revenue sharing, non-disclosure of projects, failure to convene meetings, and related party transactions, all arose from the terms of the Term Sheet. The reliefs sought, such as appointment of an administrator and forensic audit, were in the nature of enforcing the contract. The petition was, therefore, a dressed-up petition instituted to circumvent the arbitration clause. The Tribunal further held that the Respondents had not abandoned their right to arbitrate, as the 2021 disputes were settled by the 2023 agreement, and the application under Section 8 was filed promptly upon the filing of the company petition. The petition was accordingly referred to arbitration.
Issues: The main issues were whether the company petition under Sections 241 and 242 of the Companies Act, 2013, was a dressed-up petition to avoid the arbitration clause in the Term Sheet, and whether the right to invoke arbitration had been abandoned or was barred by limitation.
Ratio Decidendi: The court ruled that where the substratum of a petition is a breach of contractual obligations arising from an agreement containing an arbitration clause, and the reliefs sought are essentially to enforce that contract, the petition is dressed-up and must be referred to arbitration under Section 8 of the Arbitration and Conciliation Act, 1996. The right to invoke arbitration is not abandoned merely by failure to pursue arbitration after a settlement and fresh agreement.
Result: Application allowed. Company Petition disposed of. Parties referred to arbitration.
Legal Category Hierarchy
- arbitration
- company law
Table of Contents
2. Petitioner alleged oppression and mismanagement under Companies Act; Respondent sought reference to arbitration under Section 8, claiming disputes arise from contractual breaches. (Para 11 , 12 , 13 , 14 , 15 , 16 , 17 , 18 , 19 , 20 , 21 )
3. Application under Section 8 allowed – Dispute referred to arbitration – Company petition disposed of as dressed-up. (Para 49 , 50 , 51 , 52 )
4. When is a company petition under Sections 241-242 considered a dressed-up petition referable to arbitration?
If the substratum of the dispute is breach of contractual obligations and the reliefs sought are contractual in nature, the petition is dressed-up and must be referred to arbitration under Section 8. (Para 29 , 42 , 43 , 44 , 47 , 48 , 49 , 50 )
5. Does inaction in appointing an arbitrator after invoking arbitration constitute abandonment of the right to arbitrate?
No, if parties later settle the dispute and execute a fresh agreement containing an arbitration clause, the right to arbitrate is not abandoned. (Para 25 , 26 , 28 )
6. What is the scope of judicial inquiry under Section 8 of the Arbitration and Conciliation Act, 1996?
The court is only required to determine whether a valid arbitration agreement exists; it must then refer the parties to arbitration without examining the merits. (Para 32 , 34 , 51 )
7. Are allegations of related party transactions under Section 188 of the Companies Act arbitrable?
Yes, if the allegations are essentially breaches of contractual obligations contained in a shareholder agreement, they are arbitrable despite being dressed as statutory violations. (Para 44 , 45 , 47 )
ORDER
1. The Petitioner, Eros International Media Limited, filed the main Company Petition bearing CP No. 121 of 2025, contending that pursuant to the term sheet dated 22.01.2014 executed between Eros International Media Limited and Aanand L. Rai (Applicant/Original Respondent No. 2) and Yogita Rai (Original Respondent No. 3), the Petitioner acquired an aggregate 50% shareholding, held by Original Respondent Nos. 2 and 3, in Colour Yellow Productions Pvt. Ltd. (Company/Original Respondent No. 1).
2. Under the Term Sheet, it was agreed between the Parties that exclusive control over the creative aspect of films was vested with the Original Respondent No. 2. The Petitioner was conferred the authority to decide on the budget, star-cast, and other production-related aspects of Cinematograph Films and Teleserials. The Original Respondent No. 2 was prohibited from undertaking any business competing with that of Original Respondent No. 1 and was further required to render creative services for the cinematograph films and Teleserials of Original Respondent No. 1.
3. Under the Term Sheet, Original Respondent No. 1 could collaborate with Third Parties only if the Petitioner declined to fund a particular project. Original Respondent No. 2 was entitled to monthly remuneration, to be set-off against his profit share and/or fees payable in his capacity as Creative Director or Director of films. In furtherance of the Term Sheet, the Petitioner appointed Mr. Sunil Lulla as Chairman and Director on the Board of Original Respondent No. 1, alongside Original Respondent Nos. 2 and 3. The Petitioner financed multiple films produced under this collaboration over a period of time. However, disputes and differences arose between the Petitioner and Original Respondent No. 2 during the years 2019–2020.
4. A Board meeting was convened on 29.11.2019 in an attempt to sort out the differences; however, the differences only magnified. A notice was thereafter issued by the Petitioner bringing to the notice of Original Respondent No. 2 several acts of mismanagement of the affairs of the Company, specifically alleging that Original Respondent No. 2 was utilising Original Respondent No. 1 as a conduit to advance personal interests at the expense of the Company.
5. By letter dated 16.11.2021, Original Respondent No. 2 invoked the termination of the Term Sheet and also invoked the arbitration clause thereunder for adjudication of the disputes between the parties. The Petitioner, by its letter dated 30.11.2021, objected to the wrongful and unilateral termination of the Term Sheet by Original Respondent No. 2.
6. Thereafter, multiple rounds of meetings were held between the parties, and ultimately another agreement was executed between the Parties on 23.08.2023, by which the disputes, particularly regarding assignments undertaken by Original Respondent No. 2 with Third Parties, were resolved and the arbitration clause was renewed afresh. Needless to mention, the Term Sheet contained a specific clause of arbitration in the case of differences or disputes between the parties.
7. The Petitioner had engaged an independent Chartered Accountant, M/s A.P. Rajagopalan & Co., to conduct a scrutiny of the Financial Statements of Original Respondent No. 1 Company. Upon examination, the Chartered Accountant submitted a report highlighting various instances of related party transactions undertaken by Original Respondent Nos. 2 and 3, and further identified non-compliance with the provisions governing related party transactions under Section 188 of the Companies Act, 2013.
8. It is contended that Original Respondent Nos. 2 and 3, subsequent to the execution of the Term Sheet, continued to hold and exercise majority control over the Board of Original Respondent No. 1. The day-to-day operations and finances of Original Respondent No. 1 were managed exclusively by Original Respondent Nos. 2 and 3, and despite repeated requests, the Petitioner was not furnished with the relevant information
