Court sets aside arbitration award due to fraud, orders submission of accounts to liquidator.

The court set aside the arbitration award obtained by fraud and collusion, ruling that subsequent execution proceedings were void without court leave. The second respondent was directed to submit accounts and assets details to the official liquidator. Benefits derived from company assets were to be adjudicated by the official liquidator. All further proceedings based on the arbitration award were declared void, and the second respondent could not benefit from it. The official liquidator was granted control over the company's assets, and any claims against the company had to be made to the official liquidator.

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Issues Involved:
1. Setting aside the arbitration award dated June 21, 2000, on grounds of fraud and collusion.
2. Direction to the second respondent to submit the statement of accounts and accounts of the assets of the company in liquidation.
3. Direction to the second respondent to make good the benefits derived from the use of the factory and assets of the company in liquidation.

Issue-wise Detailed Analysis:

1. Setting Aside the Arbitration Award:
The applicant sought to set aside the arbitration award dated June 21, 2000, claiming it was obtained by fraud and collusion and that the company in liquidation and the second respondent were not entitled to subject themselves to arbitration during the pending winding-up proceedings. The court examined whether the arbitration award and the consequential execution proceedings were hit by sections 441(2) and 446(1) of the Companies Act, 1956. It was determined that the winding-up of the company commenced from the date of the presentation of the petition for winding up (June 14, 1999), and not from the date of the winding-up order (December 7, 2000). The court found that the arbitration proceedings were initiated and the award was passed before the winding-up order, thus no leave of the court was necessary for those proceedings. However, the court held that any further proceedings pursuant to the award, including execution proceedings, required leave of the court, which was not obtained, rendering those proceedings void.

2. Submission of Statement of Accounts:
The applicant requested a direction for the second respondent to submit a statement of accounts and accounts of the assets of the company in liquidation from March 1, 1999, to August 17, 2001. The court directed the second respondent to file the statement of accounts and accounts of the assets of the company for the specified period to the official liquidator within four weeks. The official liquidator was instructed to adjudicate the said claim.

3. Making Good the Benefits Derived:
The applicant sought a direction for the second respondent to make good the benefits derived from the use of the factory and assets of the company in liquidation. The court held that the relief sought would be subject to the adjudication by the official liquidator based on the statement of accounts filed by the second respondent.

Conclusion:
The court allowed the application to the extent that all further proceedings pursuant to the arbitration award were declared void and could not be continued. The second respondent was not entitled to the benefit of the award by executing the same. The official liquidator was entitled to take charge of the entire assets of the company in liquidation, and the second respondent's claim against the company could be made only to the official liquidator, potentially based on the arbitration award.

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