Oppression and mismanagement disputes cannot be stayed by private arbitration clauses where statute reserves court jurisdiction.

Proceedings for oppression and mismanagement under sections 397 and 398 of the Companies Act, 1956 are not stayable under section 34 of the Arbitration Act, 1940 merely because the company's articles contain an arbitration clause. The court reasoned that these statutory proceedings invoke a special jurisdiction, with reliefs under sections 402 and 403 to be granted by the court itself. A private arbitration agreement cannot override that statutory scheme or displace the court's power to adjudicate the company petition. The arbitration clause was therefore treated as repugnant to the statutory remedy and incapable of preventing the proceedings.

---

---

Issues: Whether proceedings under sections 397 and 398 of the Companies Act, 1956 could be stayed under section 34 of the Arbitration Act, 1940 on the basis of an arbitration clause in the company's articles.

Analysis: The dispute concerned a petition for oppression and mismanagement, for which the Companies Act confers a special statutory jurisdiction on the court and empowers it to grant reliefs under sections 402 and 403. Section 34 of the Arbitration Act permits a stay of legal proceedings only where the subject matter can properly be referred to arbitration. A private arbitration clause in the articles cannot override the statutory scheme where the Act itself requires the court to adjudicate such matters. The clause was found repugnant to sections 397 and 398 and therefore incapable of being invoked to stop the pending company petition.

Conclusion: The application for stay was rejected, and the company petition under sections 397 and 398 was held not referable to arbitration.

Final Conclusion: Statutory proceedings for oppression and mismanagement under the Companies Act cannot be stifled by an arbitration clause where the court alone has jurisdiction to grant the substantive reliefs sought.

Ratio Decidendi: Where a statute confers exclusive jurisdiction on the court to decide a class of company-law disputes and to grant the consequential reliefs, a private arbitration agreement cannot displace that jurisdiction or justify a stay of the proceedings.

---