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 matter to 27.01.2016 on the ground that arbitration proceedings were pending and the same amount was subject matter of 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 appellant argued that arbitration proceedings cannot operate as a bar to winding up proceedings, while the respondent contended that there was no urgency and the Company Court had taken adequate precaution. The High Court held that the pendency of arbitration proceedings is not a ground to postpone the winding up petition indefinitely. The Court set aside the impugned order and directed the Company Court to proceed with the winding up petition in accordance with law, without being influenced by the pendency of arbitration proceedings. The Court also directed the Company Court to decide the petition expeditiously, preferably within six months from the date of receipt of the order.
Headnote
A) Company Law - Winding Up - Section 439 Companies Act, 1956 - Arbitration Proceedings - The issue was whether the Company Court could postpone consideration of a winding up petition on the ground that the same debt was subject matter of arbitration proceedings. The Court held that arbitration proceedings do not operate as a bar to winding up proceedings and the Company Court must consider the petition on its own merits. The impugned order postponing the matter was set aside and the Company Court was directed to proceed with the petition in accordance with law. (Paras 1-5)
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 appeal is allowed. The impugned order dated 15.10.2015 passed by the learned Company Court in Company Petition No.11/2015 is set aside. The Company Court is directed to proceed with the winding up petition in accordance with law, without being influenced by the pendency of arbitration proceedings. The Company Court is further directed to decide the petition expeditiously, preferably within six months from the date of receipt of this order.
Law Points
- Arbitration proceedings do not operate as a bar to winding up proceedings under Section 439 of the Companies Act
- 1956
- Company Court must consider winding up petition on its own merits
- Pendency of arbitration is not a ground to postpone consideration of winding up petition indefinitely
