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Issues involved: Application u/s 34 of the Arbitration Act, 1940 for staying a petition u/s 397 and 398 of the Companies Act, 1956 pending in court due to an arbitration agreement in the company's articles.
Judgment Details: 1. The judge referred to a previous case where a similar application for stay was overruled. The court held that the Companies Act overrides company articles, and matters under sections 397 and 398 cannot be referred to arbitration. 2. The judge dismissed the relevance of cited judgments like Hickman v. Kent and Star Trading Corporation v. Rajratna Naranbhai Mills Company Ltd. as they did not apply to the present case of staying proceedings under sections 397 and 398. 3. The judge emphasized that matters under sections 397 and 398 are exclusively within the court's jurisdiction as per the Companies Act, and strong circumstances are needed to stay such proceedings or refer them to arbitration. 4. The judge rejected the applicant's argument to refer questions to an arbitrator, stating that the Arbitration Act only allows for staying legal proceedings for full reference to arbitration, not partial references. Referring to Dwarka Nath Kaput v. Rameshwar Nath, the judge highlighted that arbitrators cannot provide relief under sections 397 and 398. 5. Referring to section 9(b) of the Companies Act, the judge held that any provision conflicting with the Act is void. The judge found the arbitration article in the company's articles repugnant to sections 397 and 398, thus rejecting the application for stay with costs.
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