Oppression and mismanagement proceedings are not stayed by arbitration; company court jurisdiction remains distinct from arbitral award challenges.

A company petition alleging oppression and mismanagement was not liable to be stayed merely because the parties' disputes had been referred to arbitration or an arbitral award had already been made. The Bombay High Court noted that proceedings under sections 397 and 398 of the Companies Act, 1956 involve a distinct inquiry from a challenge to the award, and that the wide remedial jurisdiction under section 402 is not displaced by an arbitration clause, arbitral proceedings, or the award itself. Section 10 of the Code of Civil Procedure, 1908 applied only to suits and had no application to the company petition; section 151 also afforded no basis for stay.

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Issues: Whether further proceedings in the company petition should be stayed on the basis of the arbitral award and the pending challenge to that award, either under section 34 of the Indian Arbitration Act, 1940 or under section 10 read with sections 141 and 151 of the Code of Civil Procedure, 1908.

Analysis: The arbitral award, though capable of creating rights and being treated with finality until successfully impeached, did not curtail the Company Court's jurisdiction under sections 397 and 398 of the Companies Act, 1956. The matters covered by a petition for relief against oppression and mismanagement are distinct from a proceeding challenging an award, and the scope of enquiry in the two proceedings is different. The jurisdiction conferred by sections 397, 398 and 402 is wide and is not fettered by an arbitration clause, an arbitral proceeding, or even an award. Section 10 of the Code of Civil Procedure, 1908 applied only to stay of suits and had no application to the pending company petition, and no occasion arose for invoking section 151.

Conclusion: The application for stay was rejected. The request for stay under section 34 of the Indian Arbitration Act, 1940 and under sections 10, 141 and 151 of the Code of Civil Procedure, 1908 failed.

Ratio Decidendi: A proceeding under sections 397 and 398 of the Companies Act, 1956 cannot be stayed merely because the parties' disputes have been referred to arbitration or an award has been made, since the Company Court's jurisdiction and remedial powers under section 402 are not displaced by arbitration.

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