Arbitration Agreement: where admitted, courts must file the agreement and refer disputes to the named arbitrator, not decide merits.

Where an arbitration agreement is admitted, the court must permit filing of the agreement and refer the dispute to the agreed sole arbitrator rather than determine merits in interlocutory reference proceedings; the trial court erred by adjudicating forgery and payment issues. A subsequent winding-up does not automatically render pending proceedings infructuous because the liquidator, with court sanction, may prosecute or defend the company's suits and appeals. The High Court allowed the appeal, set aside the trial court order, directed filing of the arbitration agreement and referred the company's claim to the named arbitrator while recognising the official liquidator's authority to pursue the appeal.

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Issues: (i) Whether the appeal under section 20 of the Indian Arbitration Act, 1940 became infructuous by reason of the appellant-company having been wound up; (ii) Whether the trial court erred in deciding the merits of the company's claim in proceedings under section 20 and whether the agreement containing the arbitration clause should be filed and the matter referred to the named arbitrator.

Issue (i): Whether the appeal under section 20 became infructuous due to the winding up of the company.

Analysis: The Court examined the effect of a winding-up order on pending proceedings and the statutory powers of the liquidator. It relied on the provisions of the Companies Act which permit the court winding up the company to entertain and dispose of suits or proceedings by or against the company and which authorise the liquidator to institute or defend proceedings in the name of the company and to do all acts in the company's name with court sanction.

Conclusion: The appeal did not become infructuous by reason of the company being wound up; the winding-up order and appointment of a liquidator did not bar this Court from dealing with and disposing of the pending appeal.

Issue (ii): Whether the trial court had jurisdiction to decide the merits in an application under section 20 of the Indian Arbitration Act, 1940 and whether the arbitration clause should be acted upon by filing the agreement and referring the claim to the named arbitrator.

Analysis: The Court reviewed the scope of an application under section 20, noting that where an arbitration agreement is admitted and the claim for reference is properly made, the court should ordinarily allow the filing of the arbitration agreement and make the reference rather than adjudicate the merits. The trial court's inquiry into the merits and its finding on forgery and payment were thus beyond the proper scope of section 20 proceedings. The Court also considered the procedural position of representation by the official liquidator and the authority of the liquidator to prosecute the appeal.

Conclusion: The trial court erred in deciding the merits; the arbitration agreement should be filed in court and the claim referred to the sole arbitrator named in the agreement. The appeal is allowed and the matter is referred to arbitration.

Final Conclusion: The High Court allowed the appeal, set aside the trial court's order, directed filing of the arbitration agreement and referred the company's claim to the named sole arbitrator; the winding up of the company did not render the pending appeal infructuous and the official liquidator is authorised to prosecute the appeal.

Ratio Decidendi: Where an arbitration agreement admitted by the parties is the basis of a section 20 application, the court should not decide the merits in that interlocutory proceeding but should permit filing of the agreement and refer the dispute to the agreed arbitrator; a subsequent winding-up does not automatically abate or render infructuous pending proceedings which the liquidator, with court sanction, may prosecute or defend.

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