2019 (8) TMI 371 - HC - Companies Law

Ex-parte arbitration award void, debtor rights upheld.

The court held that the ex-parte award obtained without giving the official liquidator a chance to defend it was not enforceable against the judgment ... Validity of Ex-parte award after appointing official liquidator for winding up the company - principal objection taken on behalf of the judgment debtor i.e. Mercantile Ventures Ltd. is that the arbitration proceedings were continued against it while winding up proceedings were ensuing without obtaining leave of the court, as was required under Section 446 of the Companies Act, 1956 - HELD THAT:- What cannot be disputed, to my mind, by Mr. Sachdeva, is the fact that after the Madras High Court had appointed a liquidator qua the judgment debtor company, the arbitration could have only proceeded further with the permission of the concerned company court. In sum the liquidator had to be in seisin of the proceedings. The arbitration proceedings initiated by the decree holder commenced only on 14.03.2007 after this court appointed an arbitrator. The award which, as indicated above, was an ex-parte award, was passed on 23.05.2012 when the official liquidator, attached to the Madras High Court was still in seisin of the affairs of the judgment debtor company, albeit, under the supervision of the Madras High Court. The instant ex-parte award dated 23.05.2012 cannot be enforced against the judgment debtor. Accordingly, execution proceedings are closed Issues:1. Enforcement of an ex-parte award dated 23.05.2012 against the judgment debtor.2. Whether arbitration proceedings continued against the judgment debtor without obtaining leave of the court as required under Section 446 of the Companies Act, 1956.3. Dispute regarding the addresses mentioned in the notices published by the decree holder.4. Validity of the ex-parte award obtained without the official liquidator being given an opportunity to defend it.Analysis:Issue 1: Enforcement of ex-parte awardThe petition sought execution of an ex-parte award dated 23.05.2012. The decree holder, represented by Mr. Pavan Sachdeva, argued for enforcement of the award. The judgment debtor, represented by Mr. R.V. Prabhat, raised objections related to the arbitration proceedings and the winding up of the company.Issue 2: Compliance with Companies ActThe judgment debtor objected that the arbitration proceedings continued without obtaining leave of the court as required under Section 446 of the Companies Act, 1956. The court noted that after the winding up order was passed, the arbitration could only proceed with permission from the concerned company court.Issue 3: Dispute over noticesA dispute arose regarding the addresses mentioned in the notices published by the decree holder. The judgment debtor's counsel argued that the notices did not refer to the correct address as per the official liquidator's report. The decree holder's counsel explained the reasons behind the address discrepancy.Issue 4: Validity of the ex-parte awardThe court found that the ex-parte award obtained without the official liquidator being given an opportunity to defend it was not enforceable against the judgment debtor. The court emphasized that the arbitration should have proceeded with permission from the company court after the winding up order. Since no such application was made, the award was considered a nullity, and execution proceedings were closed. The decree holder was granted liberty to pursue its rights against the judgment debtor in accordance with the law.This detailed analysis of the judgment highlights the key issues involved and the court's reasoning behind its decision regarding the enforcement of the ex-parte award and compliance with legal procedures under the Companies Act.