Civicons Engineers and Contractors vs Aurofood Limited

R. Jayasimha Babu, J.—Counsel contends that the arbitral award is executable even though there is no decree in terms of the award. That is

no doubt correct. However, the executability is dependent upon the time for filing an application u/s 34 of the Arbitration and Conciliation Act,

1996 (""the Act"") to set aside the award having expired and in the event of that application having been filed within that time allowed under the law

for setting aside the award, such application having been disposed of by the court by refusing to set aside the award.

Admittedly the respondent-company has applied for setting aside the award. Until that proceeding is over, and the court makes an order

refusing to set aside the award, the award will not be enforceable as provided u/s 36 of the Act.

The proceeding for winding up of a company has been initiated on the ground that the respondent-company is unable to pay its debts. Though

prima facie that claim is substantiated by the existence of the award, the award being enforceable is dependent upon the result of the proceeding

now pending for setting aside the award. In the event, the court sets aside the award, there will be nothing for the petitioner to enforce. The

company cannot be wound up when the very basis of the allegation of its inability to pay the debts is subject to the contingency of the award

obtained by the claimants being upheld and there exists the possibility of the award being set aside.

It is therefore prudent to await the outcome of the original petition filed for setting aside the award. The company court will be slow in winding

up companies which have legal personalities by virtue of the registration under the Companies Act, 1956, which are incorporated with the object

of carrying on business and employ persons who depend upon those companies for their employment and livelihood. It is only in clear cases that

the extreme step of winding up of the company should be resorted to and not in cases where the very foundation of the petitioner''s claim as unpaid

creditor is still to be finally established in proceedings which are pending in court.

The company court has discretionary power to wind up or not to wind up a company and it will be a sound exercise of discretion in matters like

this to await the outcome of the petition filed under the Arbitration Act for setting aside the award, placing reliance on which the petitioner has

come to court with a prayer to wind up the company.

Winding up petition is therefore adjourned till such time as O. P. No. 212 of 1998 for setting aside the award is finally disposed of.