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Interpretation of section 446(2) of the Companies Act, 1956 regarding the exclusion of arbitration agreement in a winding-up scenario. Detailed Analysis: The judgment dealt with an appeal concerning the construction of section 446(2) of the Companies Act, 1956, in the context of an arbitration agreement between parties involved in a winding-up situation. The dispute arose from contracts between the appellant and the first respondent, leading to a disagreement over the payment of a sum of money. The first respondent, under winding-up, initiated a suit against the appellant in court instead of following the arbitration clause in the contracts. The appellant sought a stay of the suit under section 34 of the Arbitration Act, 1940, while the first respondent argued that the court alone had jurisdiction due to section 446(2) of the Companies Act, excluding the arbitration agreement. The key question was whether the arbitration agreement was excluded by section 446(2) of the Companies Act, 1956. The court analyzed subsections (1), (2), and (3) of section 446, emphasizing that the High Court retains jurisdiction over claims involving a company in winding-up, notwithstanding any other law. The judgment clarified that the arbitration agreement remains valid post-winding-up, as the company's legal entity persists. The court highlighted that an arbitration agreement does not diminish the court's jurisdiction but provides parties with a private forum for dispute resolution. The judgment emphasized that the High Court, under section 446(2), can entertain claims involving a company in liquidation. However, if a suit is filed in violation of a binding arbitration agreement, the court can exercise its discretion under the Arbitration Act to stay the suit and enforce the arbitration agreement. The court rejected the argument that section 446(3) allows the High Court to proceed with a suit despite an arbitration agreement, clarifying that the provision only deals with the transfer of suits from other courts to the High Court. In conclusion, the court set aside the previous order rejecting the application for a stay of the suit and remanded it for further consideration. The judgment emphasized that the High Court can enforce arbitration agreements even in winding-up scenarios, ensuring parties adhere to their contractual obligations. The costs of the appeal were to be borne by the respondents.
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