In a dispute between the two founders of fintech startup Simpl, the National Company Law Tribunal has ruled in favour of Chaitra Chidanand, dismissing an application by Nityanand Sharma, seeking to refer the disputes before the NCLT to arbitration.
A bench led by Justices Kishore Vemulapalli and Prabhat Kumar said the NCLT cannot refer their disputes to arbitration as requested by Sharma.
In this matter, Chidanand, who left in 2020 to co-found SALT, filed a petition under sections 241-242 of the Companies Act against Sharma, alleging oppression and mismanagement in the affairs of Get Simple Technologies, the parent of Simpl.
Sharma’s advocates sought dismissal of the company petition filed by Chidanand claiming it is dressed up, mala fide, oppressive, and vexatious, to evade the arbitration clause.
Opposing Sharma’s plea, Chidanand’s counsel Nausher Kohli argued that the essence of Chidanand’s dispute were allegations of oppression and mismanagement, that can only be adjudicated upon by NCLT and not an arbitral tribunal.
Besides, he said, all the parties to the NCLT petition are not parties to the arbitration agreement and, therefore, no reference can be made to arbitration.
The tribunal said the crux of Chidanand’s grievance was non-adherence to the understanding that the shareholding of Get Simpl Technologies Pvt. Ltd will be mirrored in a company that will be incorporated in Delaware, US.
After considering the arguments of both sides, the tribunal observed that Chidanand’s petition appears to raise contractual disputes as opposed to disputes of oppression or mismanagement.
However, it also said an arbitrator cannot direct the parties who are not signatories to the arbitration agreement to have shares allotted to Chidanand.
Accordingly, the NCLT dismissed Sharma’s application for referring disputes to arbitration.
Sharma was represented by Amol Jhunjhunwala of Khaitan & Co. Chidanand was represented by Sushmita Gandhi and Sanaya Patel of IndusLaw.
