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1974 (5) TMI 56 - HC - Companies LawOppression and Mismanagement Right to apply under section 397 and 398 Winding up Application for
Issues:
1. Jurisdiction of the court in a petition under sections 397 and 398 of the Companies Act, 1956 when there is an arbitration clause in the articles of the company. Analysis: The judgment delivered by Justice D.K. Kapur addresses the issue of whether an arbitration clause in the articles of a company can debar the court's jurisdiction in a petition under sections 397 and 398 of the Companies Act, 1956. The court examined Article 38 of M/s. Kare Private Limited, which mandates arbitration for resolving disputes between the company, its directors, members, or any other party. Justice Kapur emphasized that the court's jurisdiction under sections 397 and 398, or section 433 for winding up, is statutory and cannot be ousted by an arbitration clause. The judge highlighted that the provisions of the Companies Act, specifically Section 9, override any conflicting provisions in the memorandum, articles, agreements, or resolutions of a company. This statutory provision ensures that the Act remains effective even if the articles attempt to limit the court's jurisdiction. Furthermore, the judgment clarifies that the right of a member to file a winding-up petition under section 433 or shareholders to file a petition under sections 397 or 398 is a statutory right that cannot be overridden by the company's articles. Justice Kapur emphasized that the statutory rights provided by the Companies Act prevail over any provisions in the articles of a company. The judge rejected the argument that the articles are binding on the members, reiterating that the statutory jurisdiction of the court cannot be ousted by contractual clauses. The judgment concludes that the provisions of Section 9 of the Companies Act serve as a complete answer to the issue raised, and therefore, the court declined to stay the petition. The judge noted that the question presented was novel, and hence, no order as to costs was made in this matter.
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