This article has been published by the ET Legal World at Roger Shashoua: Delhi High Court Ruling Strengthens Arbitration for Shareholder Disputes, ETLegalWorld

The Delhi High Court has reinforced India’s credentials as an arbitration-friendly jurisdiction, through its judgment in Roger Shashoua & Ors. v. Mukesh Sharma & Ors^[1]. In this case, the Court upheld the enforcement of a foreign arbitral award that directed a complete buy-out of a shareholder’s stake in a deadlocked joint venture. The judgment affirms that arbitral tribunals possess the authority to grant robust and equitable remedies traditionally associated with the exclusive domain of company law boards/ National Company Law Tribunal (NCLT). By endorsing a commercially pragmatic solution to a bitter shareholder dispute, the ruling sends a positive message to foreign and domestic investors: Indian courts will honor contractual bargains and enforce arbitral awards that provide effective and business-oriented relief.

Background

The dispute arose from a classic joint venture fallout between foreign investor Mr. Roger Shashoua and his Indian partner, Mr. Mukesh Sharma, who were equal partners in ITE India Private Limited (“ITEL”/ “Company”). Their Shareholders’ Agreement (SHA) provided for joint management of the Company and contained a deadlock resolution mechanism referring unresolved disputes to arbitration under the Rules of International Chamber of Commerce (“ICC Arbitration”). Over time, the relationship between the JV partners deteriorated, with allegations of oppressive conduct, including diluting the foreign investor’s stake, diverting funds, and ousting his nominees from management, effectively hijacking the management of the Company.

Aggrieved by several actions of the respondents, the foreign investor initiated the ICC Arbitration. The arbitral tribunal, after a series of hearings, issued a final award that was both creative and decisive. Instead of awarding damages alone, which may have resulted in a mere ‘paper award’, the tribunal ordered a remedy akin to one sought in a minority oppression action under the provisions of Companies Act, 1956/ 2013. It directed the Indian partner and his affiliates to sell their entire shareholding in the Company to the foreign investor group at a determined price. This compelled buy-out was designed to break the deadlock, redress the harm caused by the oppressive conduct, and allow the business to survive under the control of the wronged partner. The central question before the Delhi High Court was whether such a far-reaching remedy, which fundamentally altered the Company’s ownership structure, was within the power of arbitral tribunal and enforceable under Indian law.

The Delhi High Court’s Judgment

The respondents vehemently challenged the enforcement of the foreign award, arguing that the arbitral tribunal had exceeded its jurisdiction and that the buy-out order violated Indian public policy. The Delhi High Court, in a meticulously reasoned judgment, rejected these objections, and addressed them on the following grounds:

(a) Arbitrability: Stemming from the SHA, Not Statutory Oppression

The primary challenge by the respondents was that the dispute was, in substance, a case of oppression and mismanagement, relief for which lies exclusively with the NCLT. It was argued that ordering a share transfer tantamount to corporate restructuring, a power reserved for NCLTs. The Delhi High Court disagreed and held that the arbitral tribunal’s authority was firmly rooted in the SHA, to which the Company itself was a party. The deadlock resolution clause was the key provision, and the relief granted was not an equitable intervention but a solution ‘in terms of the SHA’ to resolve a ‘deadlock’. In essence, the Court reasoned that the parties had contractually agreed to have an arbitrator resolve such a deadlock. Upholding the award was therefore an act of respecting party autonomy, not an encroachment on the NCLT’s statutory turf.

(b) Public Policy: Preserving Business Over Winding-Up

The respondents contended that being forced to sell their shares was contrary to public policy. The Court dismissed this argument as untenable given respondent’s own conduct which had paralyzed the Company. In a significant pronouncement, the judgment emphasized that Indian public policy is geared towards promoting the ease of doing business and preserving investments, not facilitating the winding-up of viable enterprises. The arbitral award, by providing a clean exit to ensure the continuity of the business, was found to be perfectly aligned with this policy. It advanced commercial morality rather than violating it.

(c ) The Efficacy of Arbitration: Beyond ‘Paper Awards’

Perhaps most importantly, the judgment champions the need for arbitral tribunals to fashion effective and meaningful remedies. The Court recognized that in complex commercial deadlocks, a simple monetary award is often inadequate. It appreciated the tribunal’s approach for addressing the core of the problem, ownership and control, and crafting a solution that accounted for ‘market realities’. The Court rightly observed that if arbitrators were constrained from granting such practical, equitable relief, the efficacy of arbitration as a genuine alternative to litigation would be severely undermined. This judicial endorsement of business-oriented arbitral awards is a vital development for commercial dispute resolution in India.

Navigating the Jurisprudence: From Non-Arbitrability to a Nuanced Approach

The Shashoua ruling is particularly remarkable when viewed against the historical backdrop of Indian jurisprudence, which has traditionally treated shareholder oppression claims as non-arbitrable. Courts in cases like Rakesh Malhotra v. Rajinder Kumar Malhotra^[2] held that such disputes involve rights that affect all shareholders and require statutory remedies beyond an arbitrator’s mandate.

The Delhi High Court in Shashoua does not erase this distinction but navigates it with finesse. It demonstrates that while a pure statutory oppression claims under the provisions of applicable Companies Act, 1956/ 2013 may remain non-arbitrable, a dispute arising from breaches of a shareholders’ agreement, even if the facts mirror oppressive conduct, can be resolved through arbitration. The key is framing the claim contractually. The award in Shashoua stayed within this contractual paradigm; it did not cancel shares or alter the Company’s articles on its own authority but instead directed one contracting party to sell its shares to the other, an act grounded in the parties’ prior consent via the arbitration agreement.

Conclusion

For foreign and institutional investors, the ruling is a significant confidence booster. It signals that Indian courts will protect their contractual rights and will not permit use of the ‘public policy’ or ‘non-arbitrability’ arguments as a shield to evade obligations in a derailed joint venture. The decision also underscores the critical importance of meticulously drafted SHAs. Robust clauses on deadlock resolution, exit mechanisms, and dispute resolution are no longer just boilerplate; they are enforceable tools that can provide real remedies.

While the NCLT retains its exclusive jurisdiction over a wide array of statutory remedies, investors can now more confidently use arbitration to resolve disputes that can be framed as breaches of contract, knowing that creative and effective remedies like buy-outs will be enforced. This judgment also affirms judiciary’s broader commitment to fostering a commercially viable and enforcement-friendly legal framework.

While the matter may eventually be tested before the Supreme Court, the Shashoua ruling presently stands as a strong affirmation of India’s maturing arbitration jurisprudence – one that aligns procedural law with commercial realities and party autonomy.

Endnotes:

[1] O.M.P. (Comm) 88/ 2020, order pronounced on September 01, 2025.

[2] Rakesh Malhotra and Ors. vs. Rajinder Kumar Malhotra and Ors. (MANU/MH/1309/2014)