1993 (2) TMI 268 - HC - Companies Law

Court denies stay application, dismisses case as dispute not subject to arbitration clause.

Rolab Polymers (P.) Ltd. Versus Subhadra Enterprises

The court dismissed the application to stay the company petition pending arbitration, ruling that the dispute did not fall under the arbitration clause of ... Circumstances in which a company may be wound up Issues:1. Application filed under Order 14, rule 8 of the Original Side Rules read with rules 9 and 11 of the Companies (Court) Rules, 1959, to stay the company petition till the dispute is resolved through arbitration under section 34 of the Arbitration Act, 1940.2. Company petition filed under sections 433(e), 434(1)(a) and (f ) and 439(1)(b) of the Companies Act, 1956, for winding up of the petitioner-company and other reliefs.3. Interpretation of clause 22 of the agreement regarding arbitration for dispute resolution.4. Whether the company petition should be stayed pending arbitration under the Arbitration Act.Analysis:The respondent filed a company petition seeking winding up of the petitioner-company due to alleged non-payment of debts. The petitioner sought a stay of the company petition, invoking clause 22 of the agreement that mandated arbitration for dispute resolution. The respondent contended that the company petition was not maintainable as there was no dispute regarding repayment of the balance of trade deposit. The court analyzed clause 22 of the agreement, which stipulated arbitration for settling disputes, and examined whether the company petition fell under the purview of the arbitration clause. The court noted that the allegations in the company petition were not contractual in nature but pertained to the admitted liability of the petitioner for a specific amount. The court emphasized that the right to apply for winding up is statutory and not contractual, and the relief sought did not arise directly from the agreement. The court clarified that for a proceeding to be stayed under the Arbitration Act, the matter must be agreed to be referred to arbitration, which was not the case here. As there was no dispute to be decided by an arbitrator, the court dismissed the application for stay, ruling that the company petition was not liable to be stayed pending arbitration. The court highlighted the distinction between matters agreed to be referred to arbitration and those falling under statutory provisions for winding up, ultimately denying the stay application and dismissing the case without costs.