Start-ups often grow faster than their paperwork. Disputes between founders, with investors and shareholders, with vendors and with employees tend to follow, and many of them turn on a founders’ agreement, a shareholders’ agreement or an offer letter that was never settled with care. These disputes are looked at from both sides: the company and its founders, and the employees and senior executives who find themselves under pressure.
Disputes commonly involved
- Disputes between co-founders over equity, vesting, roles, removal from the board and exit
- Oppression and mismanagement, deadlock and the removal of directors under the Companies Act, 2013
- Breach of a shareholders’ agreement, including reserved matters, transfer restrictions, drag and tag rights and valuation on exit
- Disputes over employee stock option plans, and over the assignment of intellectual property by founders and employees
- Non-payment and short payment to vendors, service providers and contractors, and claims by the start-up against them
- Employee and executive disputes: forced resignation, termination, withheld dues and enforcement of restraints, and the misuse of confidential information or funds by an employee
- Criminal complaints filed in the course of a commercial or employment dispute, and the defence to them
Founders and shareholders
Where relations between founders break down, the remedy depends on the documents and on the structure of the company. The agreements usually decide the forum, and many provide for arbitration. Petitions for oppression and mismanagement under Sections 241 and 242 of the Companies Act, 2013 lie before the National Company Law Tribunal and are generally treated as not arbitrable, even where a shareholders agreement contains an arbitration clause. Interim protection, such as restraining a transfer of shares or the allotment of new shares, is often the first question in the matter.
Vendors and service providers
A claim for unpaid dues is ordinarily a commercial suit or an arbitration. Where the vendor is a micro or small enterprise, the Micro, Small and Medium Enterprises Development Act, 2006 requires payment within the agreed period, subject to a maximum of 45 days from acceptance, and provides a statutory route to the Micro and Small Enterprises Facilitation Council under Section 18. A demand notice under the Insolvency and Bankruptcy Code, 2016 is a serious step for a company, and the courts have held that a genuine pre-existing dispute is a ground on which an application of this kind can be resisted. Dishonoured cheques raise a separate remedy under Section 138 of the Negotiable Instruments Act, 1881.
Employees and senior executives
A senior employee or executive may be pressed to resign, terminated without a proper process, denied full and final dues, held to a restraint that goes beyond what the law allows, or met with an FIR or a recovery claim after a dispute with the employer. A post-employment non-compete is generally void under Section 27 of the Indian Contract Act, 1872, although confidentiality, trade-secret protection and narrowly framed non-solicitation obligations may be enforceable. The remedies depend on the contract and the applicable labour law: a civil suit or arbitration for dues and damages, interim protection against an unlawful restraint, and, where criminal proceedings are started as pressure in a dispute, anticipatory bail before the Sessions Court or the High Court, or quashing of the FIR before the High Court under Section 528 BNSS.
The same questions arise from the employer’s side. Where an employee has misused confidential information, diverted business or misappropriated funds, the company may seek injunctive relief, recovery and, where an offence is disclosed, a criminal complaint.
Forum and procedure
- The Commercial Division of the Delhi High Court and the commercial courts hear commercial disputes of the specified value, presently ₹3 lakh or more, and a suit that does not contemplate urgent interim relief must be preceded by pre-institution mediation under Section 12A of the Commercial Courts Act, 2015
- Arbitration under the Arbitration and Conciliation Act, 1996 where the agreement provides for it, including interim relief under Section 9 and enforcement of awards
- The National Company Law Tribunal for company law disputes between shareholders and directors
- Criminal proceedings before the police and the criminal courts (the Economic Offences Wing acts only where the nature and value of the alleged offence bring it within its jurisdiction), and bail and quashing petitions before the High Court, including under Section 528 of the Bharatiya Nagarik Suraksha Sanhita, 2023
Civil disputes and criminal complaints
A dispute between founders, between a company and its vendor, or between an employer and an employee is frequently followed by an FIR alleging cheating or criminal breach of trust. Courts have repeatedly held that a breach of contract does not by itself amount to a criminal offence, and that the question is whether dishonest intention existed at the start or whether property was entrusted and then dishonestly misappropriated. Whether a complaint can be quashed, or defended on the merits, depends on the documents and the sequence of events.
This page is for general information only and is not legal advice.
Related practice areas
- Economic Offences and White-Collar Crime
- Delhi High Court and Supreme Court
- Criminal Defence
- Property and Land Disputes
- Civil and Commercial Matters
- Matrimonial and Family Law
Last reviewed: October 2026