2018 (7) TMI 1232 - HC - Companies Law

Insolvency disputes deemed non-arbitrable; Official Liquidator appointed as Provisional Liquidator.

The court dismissed the respondent's arguments, holding that disputes related to insolvency and winding up are non-arbitrable. The court admitted the ... Winding up petition - Held that:- On the contrary, it categorically states that where the issue relates to right in rem the same are not arbitrable. Hence, there is no merit in the said plea of the respondent regarding the existence of an arbitration clause as it cannot oust the jurisdiction of this court to adjudicate the winding up petition. The next plea of the respondent is that the laws of Sweden applies and it is possible that the claim may not be maintainable under the laws of Sweden. This plea is vague and bereft of any details. Merely stating that it is possible that under the law of Sweden this claim of the petitioner may be barred by limitation or there may be any other impediments in the case of the petitioner to recover this amount, is a vague plea, which cannot be permitted to be raised whatsoever. The respondent has not been able to point out as to under which applicable law of Sweden, the claims of the petitioner are not maintainable. There is no merit in the contention raised by the petitioner. The plea lacks bonafide and cannot be accepted. Accordingly, the petition is admitted and the Official Liquidator attached to this Court is appointed as the Provisional Liquidator. He is directed to take over all the assets, books of accounts and records of the respondent-company forthwith. The citations be published in the Delhi editions of the newspapers ‘Statesman’ (English) and ‘Veer Arjun’ (Hindi), as well as in the Delhi Gazette, at least 14 days prior to the next date of hearing. The cost of publication is to be borne by the petitioner who shall deposit a sum ₹ 75,000/- with the Official Liquidator within 2 weeks, subject to any further amounts that may be called for by the liquidator for this purpose, if required. List on 30.10.2018. Issues:1. Petition seeking winding up of respondent company under Companies Act, 1956.2. Failure of respondent to pay debt leading to termination notice and issuance of winding up notice.3. Respondent's defense based on arbitration agreement and application of Swedish law.4. Court's analysis of insurance payment, arbitration clause, and application of Swedish law.5. Decision on admission of petition and appointment of Provisional Liquidator.Analysis:1. The petitioner filed a petition under Companies Act, 1956 seeking winding up of the respondent company due to default in repayment of debt related to a contract. The respondent failed to pay instalments leading to termination notice and issuance of winding up notice citing unpaid dues.2. Respondent's defense primarily relied on an arbitration agreement between the parties and the application of Swedish law, arguing that the winding up petition was not maintainable. The respondent failed to make payments despite rescheduling of instalments, leading to the present petition.3. The court considered the respondent's arguments regarding insurance payment, arbitration clause, and application of Swedish law. The respondent claimed a dispute regarding dues due to insurance payment and invoked the arbitration clause based on the laws of Sweden.4. The court dismissed the respondent's arguments, citing precedents that disputes related to insolvency and winding up are non-arbitrable. The court emphasized that claims for money against borrowers are not 'right in rem' and cannot be arbitrated. The court also rejected the argument that Swedish law may bar the claim without specific details or evidence.5. Consequently, the court admitted the petition, appointing the Official Liquidator as the Provisional Liquidator to take over assets and records of the respondent company. The court directed the publication of citations and instructed the Official Liquidator to safeguard assets and seek police assistance if necessary, setting the next hearing date.This detailed analysis highlights the legal proceedings, the court's assessment of the respondent's defenses, and the ultimate decision to admit the winding up petition and appoint a Provisional Liquidator.