Arbitration agreement survives winding up; liquidation does not extinguish contractual arbitration rights, and stay of suit remains available.

An arbitration agreement survives the winding up of a company, because section 446(2) of the Companies Act, 1956 gives the winding-up court concurrent jurisdiction over claims against the company but does not terminate or supersede pre-existing contractual obligations. A company in liquidation remains a legal entity bound by its arbitration clause, and section 446(1) also contemplates continuation of arbitration with leave of the court. The arbitration clause may therefore still be enforced by seeking a stay of suit under section 34 of the Arbitration Act, 1940 if the statutory conditions are satisfied. On that basis, refusal of the stay application was erroneous.

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Issues: Whether an arbitration agreement continued to bind a company in liquidation and whether section 446(2) of the Companies Act, 1956 excluded the enforcement of that agreement so as to prevent a stay of the suit under section 34 of the Arbitration Act, 1940.

Analysis: Section 446(2) confers jurisdiction on the winding-up court to entertain and dispose of claims by or against the company notwithstanding anything in any other law, but it does not terminate or supersede an existing arbitration agreement. A company ordered to be wound up continues as a legal entity and remains bound by its pre-existing contracts, including an agreement to arbitrate. An arbitration agreement does not oust the court's jurisdiction; it merely provides a contractual forum and may be enforced by staying a suit where the statutory conditions are satisfied. Section 446(1) also proceeds on the basis that arbitration may continue with leave of the court, which supports the continued operation of the arbitration clause. Section 446(3) is consequential and does not authorise disregard of the arbitration agreement.

Conclusion: The arbitration agreement was not excluded by section 446(2), and the suit could be considered for stay under section 34 of the Arbitration Act, 1940. The rejection of the stay application was therefore erroneous.

Ratio Decidendi: A winding-up court's jurisdiction under section 446(2) of the Companies Act, 1956 is concurrent with, and not destructive of, a binding arbitration agreement; such an agreement survives winding up and may be enforced by stay of a suit under section 34 of the Arbitration Act, 1940 where the statutory conditions are met.

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