M/s. Rolab Potymers (P) Ltd. vs M/s. Subhadra Enterprises

A.R. Lakshmanan, J.—The respondent in the main Company Petition is the applicant herein. The present application has been filed under

Order 14 Rule 8 of Original Side Rules read with Rules 9 and 11 of the Company Court Rules to stay the Company Petition till the dispute is

resolved through Arbitration u/s 34 of the Arbitration Act. The respondent herein, who is the petitioner in the main Company Petition, filed the

Company Petition u/s 433(e), 434(i)(a) and (f) and 439(i)(b) of the Companies Act, 1956, for an order of winding up of the petitioner company

herein and for other reliefs. Their case is that on 19.8.1988 an agreement was entered into between the parties at Calcutta in and by which the

petitioner company herein appointed the respondent as its consignee, storing and forwarding agent in the Eastern Region on the terms and

conditions contained in the said agreement dated 19.8.1988. A copy of the said agreement has been filed as Document No. 1. The said agreement

was modified and/or supplemented by the petitioner company (respondent in the Company Petition) through their letter dated 22.8.1988 and the

various terms and conditions contained in the said letter were accepted by the respondent herein. The petitioner herein sent a letter dated

22.9.1990 enclosing a statement of account to the respondent herein, which is filed as Document No. 8. Since the statement of account sent

suffered from various irregularities, the respondent herein sent a letter dated 1.12.1990 enclosing a revised statement of account to the petitioner

herein. As per the revised statement, the petitioner herein had to pay a sum of Rs. 5,64,470-25 as on 30.11.1990 to the respondent, which

includes trade deposit and interest. Since the petitioner company has failed and neglected to pay the sum towards trade deposit and interest, the

respondent caused a legal notice dated 16.8.1991 to be addressed to the petitioner u/s 434 of the Act, calling upon the petitioner to pay to the

respondent the said sum, etc. However, the petitioner company attempted to build up a story of oral agreement, etc., which is an after thought to

delay the course of action. According to the respondent, the petitioner is unable to pay its debts and hence it is just and equitable that the petitioner

company should be wound up since the petitioner company must be deemed to be commercially insolvent and unable to pay its debts.

I admitted the main Company Petition filed by the respondent and ordered notice to the petitioner herein on 9.1.1992. On receipt of notice, the

petitioner has filed the above Company Application to stay the main Company Petition till the dispute is resolved through Arbitration u/s 34 of the

Arbitration Act.

According to the petitioner, Clause 22 of the agreement provides for the resolution of all disputes only by resort to Arbitration and hence the

respondent herein should only seek their remedy, if any, by Arbitration and hence, the Company Petition has, therefore, to be stayed pending

adjudication under the Arbitration Act.

The respondent herein filed a detailed counter affidavit. According to them, this petition is not maintainable and that there is no dispute in

repayment of the balance of trade deposit and no details have been given about the alleged dispute between the parties. It is useful to extract

paragraph 9 of the counter affidavit to understand what exactly is the contention of the respondent herein:

I submit that the respondent herein has filed the above Company Petition against the applicant herein to wind up the applicant company under the

provisions of the Companies Act, since the applicant company is unable to pay their admitted debts. Inasmuch as the applicant company has

admitted their liability to repay the balance of trade deposit by their letters dated 21.3.1991, and 8.3.1992 and the applicant herein did not raise

any bona fide dispute with regard to the repayment of the balance of trade deposit to the respondent herein, there is no question of the respondent

herein settling any dispute by arbitration in accordance with law. The allegations that all the disputes arising between the petitioners and the

respondents have to be resolved only by resort to Arbitration and that instead, the respondents herein have filed this Company Petition No. 112 of

1991 is absolutely meaningless and unsustainable. As already stated, inasmuch as the applicant company has admitted their liability to repay the

balance of trade deposit by their letters dated 21.3.1991 and 8.3.1992 and did not raise any dispute, the respondent herein has rightly approached

this Hon''ble Court.

It is beneficial at this stage to refer to Clause 22 of the agreement. The said clause reads as follows:

All disputes arising between the parties including interpretation hereof will be settled by arbitration in accordance with law. The venue of the

Arbitration shall be at Coimbatore.

The petitioner herein has taken out this application stating that under the above clause, all disputes arising out of the contract will be settled by

Arbitration in accordance with law. It is, therefore, contended by Mr. P.K. Jamal Mohammed, Learned Counsel appearing for the petitioner, that

the Company Petition filed for winding up of the petitioner company should be stayed.

Per contra, Mr. Chandramouleeswaran, Learned Counsel for the respondent, contends that the matter arising for decision in the Company

Petition is not one that arises under the contract and that therefore, the Company Petition is not liable to be stayed. The relevant clause has already

been extracted above.

The question is, whether the institution of the petition for winding up is a proceeding that would come up under the above arbitration clause. No

doubt, the language employed in Clause 22 of the agreement is wide enough to cover any dispute that may arise out of the contract.

The question for my decision in this Company Petition is not a matter that arises under the contract or out of the contract. The allegations made

by the respondent company in the main Company Petition are relevant and important to be noticed in this context. The respondent company has

filed this Company Petition on the allegations that the petitioner company has admitted its liability for a particular amount. There are specific

averments in the main Company Petition and in the counter affidavit filed by the respondent herein to the said effect. The petitioner has admitted

their liability to repay the balance of trade deposit to the respondent by their letters dated 21.3.1991 and 8.3.1992 and even in their balance sheet

upto 31.3.1991. According to the respondent herein, there is no dispute in repayment of the balance of trade deposit to the respondent herein.

That apart, the present application is bereft of particulars, in that, the petitioner herein has not even mentioned in the affidavit that there is a disputes

in regard to the repayment of the balance amount due to the respondent herein. The petitioner has not given any details about the alleged dispute

between the parties. The respondent has filed the Company Petition to wind up the petitioner company under the provisions of the Companies Act

since according to the respondent, the petitioner herein is unable to pay their admitted debts. Inasmuch as the petitioner herein did not raise any

bone fide dispute with regard to repayment of the balance of trade deposit to the respondent herein, there is, in my opinion, no question of the

settling of any dispute by Arbitration. The respondent herein in my opinion, has rightly approached this Court under the provisions of the

Companies Act and hence, the arbitration clause provided in the agreement cannot be invoked. There is no dispute to be decided by the Arbitrator

and hence there is no question of any stay being granted pending adjudication under the Arbitration Act. However I do not wish to express any

opinion on the question viz., whether the petitioner company is unable to pay the debt. If the debt itself is disputed, it would be a matter for

consideration in the Company Petition whether an enquiry into that controversy is permissible under the provisions of the Companies Act. Suffice

to notice that so far as the relief claimed in the Company Petition is concerned, I do not think that it can be said to arise out of the agreement

referred to supra, and I am of the view that the right to apply for winding up is a creature of statute and not of a contract. u/s 34 of the Arbitration

Act, if any party to an arbitration agreement or any person claiming under him commences any legal proceedings against any other party to the

agreement or any person claiming under him in respect of any matter agreed to be referred, any party to such legal proceedings may apply therein

for stay of the proceedings. It would be seen from the above provision that the legal proceeding which can be stayed should be a proceeding in

respect of any matter agreed to be referred. The expression ""any matter agreed to be referred"" makes it clear that, unless the matter has been

agreed to be referred, the proceeding cannot be stayed, even though it may incidentally have a bearing upon the contract providing for arbitration.

In the instant case, it cannot, by any stretch of reason, be said that the parties contemplated that any reference to arbitration for winding up the

applicant-company was possible or could be done by an arbitrator. In that view, I think, the company petition is not liable to be stayed. The

application is accordingly dismissed. No order as to costs.