Arbitration clause does not bar winding-up jurisdiction when no bona fide substantial dispute is shown.

An arbitration clause does not oust the Company Court's jurisdiction over a statutory winding-up petition, because winding up remains a special remedy under the Companies Act and section 8 of the Arbitration and Conciliation Act, 1996 does not impliedly displace that power. The Court may still examine whether the defence is bona fide and whether the petition should proceed. Where the respondent's correspondence shows repeated admissions of liability and later objections appear as afterthoughts, the defence is treated as false, mala fide and not a substantial dispute. In that situation, the winding-up petition may be admitted and protective deposit conditions may be imposed.

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Issues: (i) Whether the existence of an arbitration clause ousted the Company Court's jurisdiction in a winding-up petition; (ii) Whether the respondent had raised a bona fide and substantial dispute so as to make the petition not maintainable.

Issue (i): Whether the existence of an arbitration clause ousted the Company Court's jurisdiction in a winding-up petition.

Analysis: The arbitration agreement did not confer on the arbitrator the statutory power to order winding up, and the remedy of winding up remained a special statutory relief under the Companies Act. Section 8 of the Arbitration and Conciliation Act, 1996 did not by implication displace that jurisdiction. The Company Court could still decide whether the defence was bona fide and whether the petition should proceed or be rejected.

Conclusion: The arbitration clause did not oust the Company Court's jurisdiction.

Issue (ii): Whether the respondent had raised a bona fide and substantial dispute so as to make the petition not maintainable.

Analysis: The respondent's own correspondence showed repeated admissions of liability and requests for accommodation, while the later objections regarding credits, insurance, repairs, and alleged counterclaims were treated as afterthoughts. The defence was found to be false, mala fide, and not a substantial dispute requiring relegation to arbitration or civil suit. In such circumstances, a winding-up petition could be admitted and appropriate protective conditions could be imposed.

Conclusion: The respondent had not established a bona fide defence, and the petition was admitted with a direction to deposit Rs. 2 crores.

Final Conclusion: The winding-up petition was entertained rather than being shut out by arbitration, and the respondent was required to secure part of the admitted liability, leaving the matter to proceed further before the Company Court.

Ratio Decidendi: A statutory winding-up remedy is not displaced by an arbitration clause, but the Company Court will refuse to entertain the petition only where a bona fide and substantial dispute exists; a dishonest or moonshine defence justifies admission of the petition notwithstanding arbitration.

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