Case Note & Summary
The appellant, M/s. Corporate Ispat Alloys Ltd., filed a winding up petition under Section 439 of the Companies Act, 1956 against the respondent, M/s. Jayaswal Neco Industries Ltd., claiming that the respondent was unable to pay a debt of Rs.102,26,78,728/-. The learned Company Court, by order dated 15.10.2015, postponed consideration of the petition to 27.01.2016 on the ground that arbitration proceedings were pending between the parties and the same amount was subject matter of the claim before the Arbitrator. The appellant challenged this order before the High Court. The High Court admitted the appeal on 02.12.2015 and heard the matter on 12.01.2016. The respondent argued that there was no urgency and that the Company Court had taken adequate precaution to protect the appellant's interests. The appellant contended that arbitration proceedings cannot operate as a bar to winding up proceedings. The High Court held that winding up proceedings under Section 439 of the Companies Act, 1956 are not barred by the pendency of arbitration proceedings. The Court observed that the Company Court had not decided the winding up petition on its merits but had merely postponed it due to the arbitration. The High Court set aside the order dated 15.10.2015 and directed the Company Court to proceed with the winding up petition in accordance with law, without being influenced by the pendency of the arbitration proceedings. The Court clarified that Section 8 of the Arbitration and Conciliation Act, 1996 does not apply to winding up proceedings as they are not proceedings in respect of a matter which is the subject of an arbitration agreement.
Headnote
A) Company Law - Winding Up - Section 439 Companies Act, 1956 - Arbitration Proceedings - The issue was whether the Company Court could postpone hearing of a winding up petition on the ground that the same debt was subject matter of arbitration proceedings. The Court held that winding up proceedings are not barred by the pendency of arbitration, as they are independent remedies. The Company Court must proceed with the winding up petition on its own merits and not postpone it indefinitely. (Paras 1-5)
B) Arbitration and Conciliation Act, 1996 - Section 8 - Winding Up - The Court clarified that Section 8 of the Arbitration Act does not apply to winding up proceedings, as they are not proceedings in respect of a matter which is the subject of an arbitration agreement. The winding up petition is a statutory remedy for inability to pay debts, not a contractual dispute. (Para 5)
Issue of Consideration
Whether the pendency of arbitration proceedings between the parties can be a ground for the Company Court to postpone consideration of a winding up petition under Section 439 of the Companies Act, 1956.
Final Decision
The High Court allowed the appeal, set aside the order dated 15.10.2015, and directed the Company Court to proceed with the winding up petition in accordance with law, without being influenced by the pendency of the arbitration proceedings.
Law Points
- Winding up proceedings under Section 439 of Companies Act
- 1956 are not barred by pendency of arbitration proceedings
- Arbitration proceedings and winding up proceedings are independent remedies
- Company Court must consider winding up petition on its own merits without postponing it indefinitely due to arbitration
Case Details
2016 LawText (BOM) (01) 138
Company Appeal No. 2/2015
B. P. Dharmadhikari, V.M. Deshpande
Mr. Balbir Singh, Senior Advocate with Shri D.V. Chauhan for the Appellant; Mr. S.V. Manohar, Senior Advocate with Shri Rahul Pande for the Respondent
M/s. Corporate Ispat Alloys Ltd.
M/s. Jayaswal Neco Industries Ltd.
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Nature of Litigation
Appeal against order of Company Court postponing winding up petition due to pending arbitration proceedings.
Remedy Sought
The appellant sought to set aside the order dated 15.10.2015 and to direct the Company Court to proceed with the winding up petition.
Filing Reason
The appellant claimed that the respondent company was unable to pay a debt of Rs.102,26,78,728/- and filed a winding up petition under Section 439 of the Companies Act, 1956.
Previous Decisions
The Company Court by order dated 15.10.2015 postponed consideration of the winding up petition to 27.01.2016 on the ground that arbitration proceedings were pending and the same amount was subject matter of claim before the Arbitrator.
Issues
Whether the pendency of arbitration proceedings can be a ground for the Company Court to postpone consideration of a winding up petition under Section 439 of the Companies Act, 1956.
Submissions/Arguments
The appellant argued that arbitration proceedings cannot operate as a bar to winding up proceedings, and the Company Court should not have postponed the matter.
The respondent argued that there was no urgency and the Company Court had taken adequate precaution to protect the appellant's interests.
Ratio Decidendi
Winding up proceedings under Section 439 of the Companies Act, 1956 are not barred by the pendency of arbitration proceedings. The Company Court must consider the winding up petition on its own merits and cannot postpone it indefinitely on the ground that the same debt is subject matter of arbitration. Section 8 of the Arbitration and Conciliation Act, 1996 does not apply to winding up proceedings as they are not proceedings in respect of a matter which is the subject of an arbitration agreement.
Judgment Excerpts
In this appeal, the appellant/petitioner in an Application under Section 439 of the Companies Act, 1956 challenges order dated 15.10.2015, passed by the learned Company Court in Company Petition No.11/2015.
Learned Company Court has by an order dated 15.10.2015, postponed consideration of the matter to 27.01.2016, on the ground that some Arbitration proceedings are pending and the same amount is also subject matter of claim before the Arbitrator.
Shri Balbir Singh learned Senior Counsel has invited our attention to certain judgments to urge that arbitration proceedings cannot operate as a bar to the proceedings for winding up, and hence, in absence of a comment on the merits, the Company Court ought to have proceeded with the matter.
Procedural History
The appellant filed Company Petition No.11/2015 under Section 439 of the Companies Act, 1956 seeking winding up of the respondent company. The Company Court by order dated 15.10.2015 postponed consideration to 27.01.2016 due to pending arbitration. The appellant filed Company Appeal No.2/2015 before the High Court, which was admitted on 02.12.2015 and heard on 12.01.2016. Judgment was pronounced on 29.01.2016.
Acts & Sections
- Companies Act, 1956: Section 439
- Arbitration and Conciliation Act, 1996: Section 8
