Introduction

The Delhi High Court’s (‘DHC’) decision in Roger Shashoua and Others v. Mukesh Sharma and Others [1](‘Shashoua Ruling’) is a reaffirmation of India’s commitment to being a pro-arbitration jurisdiction and courts continued willingness to enforce commercially meaningful arbitral outcomes. DHC’s decision to uphold a foreign arbitral award directing a complete buyout of one shareholder’s stake in a joint venture marks a significant development in Indian arbitration law. The judgment reflects that Indian courts are now more open to enforcing practical and business-driven arbitral awards. It also confirms that disputes between shareholders can be arbitrated if they arise from a contract, even if they resemble cases of oppression or mismanagement.

Many founders see buyout or deadlock clauses in an agreement as something that will never really be used, more like a lawyer’s imagination than a practical tool. But when partnerships break down, these clauses often become the only way to keep the business going. The Shashoua Ruling shows this clearly. A clause that once seemed distant and theoretical ended up being the solution that helped the company move forward. The Delhi High Court’s decision highlights why clear exit rights in a shareholders’ agreement can make a big difference when things stop working.

Background

The dispute arose out of a joint venture between UK investor Roger Shashoua (‘RS’) and Indian investor Mukesh Sharma (‘MS’), who agreed under the shareholders’ agreement (‘SHA’) to jointly manage and control International Trade Expocentre Limited (‘ITEL’) with equal ownership and board representation. Their relationship was governed by the SHA that provided for ICC arbitration and contained a deadlock resolution clause. The deadlock resolution clause contemplated a mechanism under which either party could initiate a buyout at a pre-agreed valuation in the event of an unresolved deadlock.

Over time, the relationship between the parties deteriorated. Allegations emerged that MS had diverted funds, diluted RS’s shareholding, and excluded RS’s nominees from the management of the company, effectively seizing control of operations. Aggrieved, RS invoked arbitration under the ICC Rules. After detailed hearings and examination of evidence, the tribunal found that the joint venture had reached a functional deadlock and that RS had been subjected to conduct amounting to exclusion from management. Drawing upon the contractual deadlock resolution clause, the tribunal directed MS and his affiliates to sell their entire shareholding in the company to RS’s group at a determined price.

Following extensive proceedings and multiple challenges, RS approached the DHC seeking enforcement of the foreign arbitral award under Sections 47 to 49 of the Arbitration and Conciliation Act, 1996. MS opposed enforcement, contending that the arbitral tribunal had acted beyond its mandate and had granted a remedy that, in their view, fell exclusively within the jurisdiction of the NCLT.

Judgment

1. Arbitrability of dispute: The respondents argued that the arbitral tribunal had acted in excess of its jurisdiction by ordering the transfer of shares in ITEL. According to them, Clause 4.7 of the SHA merely empowered the shareholders and the board to resolve a deadlock internally and did not authorise the arbitral tribunal to impose a buyout remedy. They further contended that the nature of allegations against the respondents amounted to oppression and mismanagement and therefore, any relief affecting shareholding could only be granted by the Company Law Board or its successor, the National Company Law Tribunal (‘NCLT’), under Sections 397 and 398 of the Companies Act, 1956.

Indian courts have consistently recognised the principle that where a special statute creates a specific forum for adjudication of disputes, the jurisdiction of other forums stands impliedly excluded. In Skypack Couriers Ltd. v. Tata Chemicals Ltd.[2], National Seeds Corporation Ltd. v. M. Madhusudhan Reddy[3] and Rosedale Developers Pvt. Ltd. v. Aghore Bhattacharya[4], courts reiterated that disputes falling within the purview of specialised forums cannot be transferred to arbitral tribunals by means of a private agreement. Similarly, in Vimal Kishore Shah v. Jayesh Dinesh Shah[5], the Supreme Court held that since the Indian Trusts Act, 1882 provides an adequate and exclusive mechanism for resolving disputes relating to trusts, such matters are non-arbitrable by necessary implication. The National Consumer Disputes Redressal Commission later applied the same reasoning to reaffirm that parties cannot contract out of legislative mandates that reserve jurisdiction for specialised tribunals.

However, the DHC in the Shashoua Ruling adopted a more nuanced approach. It held that while disputes of a “purely statutory” nature, such as those invoking remedies under Sections 241 and 242 of the Companies Act, 2013, remain non-arbitrable, the present dispute arose not from statutory rights but from breaches of the SHA. The tribunal’s authority was therefore contractual, not statutory. The DHC noted that although the respondents disputed whether the deadlock clause empowered the tribunal to impose a buyout, the relief granted was grounded in the contractual framework read as a whole and supported by the broadly worded arbitration clause. The DHC clarified that contractual disputes that incidentally resemble oppression or mismanagement claims do not automatically become non-arbitrable, provided the relief flows from the agreement between the parties.

It is pertinent to note that the DHC also relied on Clause 14 of the SHA, which contained the arbitration agreement and was worded in broad terms. The clause provided that “any dispute, controversy or claim arising out of or in relation to this Agreement, including any question regarding its existence, validity or termination, shall be referred to and finally resolved by arbitration under the ICC Rules.” The DHC observed that this language conferred a wide ambit upon the arbitral tribunal’s jurisdiction, covering not only breaches of specific obligations but all disputes having a nexus with the SHA. Accordingly, once the deadlock and alleged oppressive conduct were found to stem from breaches of the SHA, the tribunal was well within its authority to grant relief flowing from that contract.

2. Public policy and enforcement of a foreign award: The respondents further argued that enforcing the arbitral award would be contrary to India’s public policy. They contended that the tribunal’s direction compelling them to sell their shares amounted to a forced transfer of ownership, a measure that could only be ordered by statutory authorities such as the Company Law Board or the National Company Law Tribunal. They further claimed that such an order disrupted the corporate structure of an Indian company and was therefore contrary to the foundational principles of Indian company law and public policy.

The DHC rejected these objections, holding that the award did not offend public policy but rather advanced it. It observed that Indian public policy has evolved to promote the ease of doing business and uphold commercial morality by preserving viable enterprises rather than pushing them toward dissolution. The buyout order, far from undermining public interest, was aimed at restoring effective management, protecting investment, and allowing the business to continue under the control of the aggrieved investor. The DHC emphasised that the tribunal’s remedy was not punitive but corrective - consistent with the broader objectives of fairness, contractual fidelity and economic pragmatism.

3. Efficacy of arbitration and meaningful remedies: The respondents also contended that the arbitral tribunal had exceeded its mandate by granting a remedy that went beyond the conventional scope of arbitral relief. They argued that the tribunal’s order compelling a share transfer was not an arbitral function but an exercise of equitable jurisdiction similar to that of the NCLT, which arbitrators lack. In their view, the tribunal should have confined itself to awarding damages, if at all, for breach of the shareholders’ agreement.

The DHC, however, took a pragmatic view. It held that the essence of arbitration lies in providing effective and enforceable resolutions to commercial disputes. In cases of shareholder deadlock, merely awarding damages would amount to a “paper remedy” incapable of resolving the underlying dysfunction. By crafting a buyout direction, the tribunal had effectively broken the deadlock and ensured the survival of the company. The DHC noted that such reliefs, when grounded in contractual provisions like the deadlock clause, are within the scope of arbitral power. This approach underscores a shift in Indian arbitration jurisprudence - from viewing arbitration as a procedural alternative to litigation, to recognising it as a forum capable of delivering substantive and business-oriented justice.

Conclusion

It can be argued that arbitration in India is no longer confined to routine commercial disputes. It can also address complex shareholder conflicts and exit mechanisms without forcing parties into the long corridors of the NCLT. The DHC’s approach in Shashua Ruling illustrates how contractual mechanisms in shareholder agreements can operate alongside, rather than in conflict with, statutory remedies.

From a drafting point of view, the Shashua Ruling focuses on two pertinent aspects: First, it shows why it is important to include clear and detailed terms for resolving deadlocks and exits in shareholders’ agreements. These should cover when such clauses can be used, how valuations will be done, and how the process will be carried out. This allows the arbitral tribunal to act within the limits of what the parties have agreed. Second, it shows the value of writing effective arbitration clauses that cover any dispute connected with the agreement. This ensures that all matters linked to the contract can be decided through arbitration without confusion about jurisdiction. The judgment also reminds drafters that such clauses are not mere boilerplate provisions but rather play a central role in determining how effectively disputes can be resolved and awards enforced.

For investors, the decision builds confidence that their commercial deals will be protected and that Indian courts will support arbitral awards which offer practical business solutions such as buyouts or share transfers. The judgment shows that the courts now focus more on keeping businesses running, protecting fairness and respecting what the parties agreed upon, rather than getting caught up in technical objections.

Written by – Nidhi Arora (Partner) and Amiya Krishna Upadhyay (Associate)

[1] O.M.P. (Comm) 88/ 2020

[2] AIR 2000 SC 2008

[3] (2012) 2 SCC 506

[4] (2015) 1 WBLR 385 (SC)

[5] (2016) 8 SCC 788

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Delhi High Court Upholds Buy-Out Remedy In Shareholder Feud Bolstering Investor Rights

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