Arbitration reference under section 20 cannot be refused on merits; liquidation does not make the appeal infructuous.

Proceedings under section 20 of the Indian Arbitration Act, 1940 are confined to examining the arbitration agreement and the making of a reference; the court cannot decide disputed issues on liability, such as alleged forgery of an acknowledgment or full payment of the debt, because those matters are for arbitration. The pendency of winding-up proceedings does not make an application under section 20, or an appeal from it, infructuous, as such proceedings remain within the scope of sections 446 and 457 of the Companies Act, 1956. The order refusing reference was therefore unsustainable, and the dispute was directed to arbitration before the named sole arbitrator.

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Issues: (i) Whether the trial court had jurisdiction under section 20 of the Indian Arbitration Act, 1940 to enter into the merits of the underlying claim and refuse reference to arbitration on that basis. (ii) Whether the appeal had become infructuous because the appellant company had gone into liquidation.

Issue (i): Whether the trial court had jurisdiction under section 20 of the Indian Arbitration Act, 1940 to enter into the merits of the underlying claim and refuse reference to arbitration on that basis.

Analysis: An application under section 20 is confined to the existence and enforceability of the arbitration agreement and the making of a reference. The trial court was not competent to decide disputed questions on the merits of liability, including whether the acknowledgment was forged or whether the debt had been fully paid, because those matters were reserved for arbitration.

Conclusion: The trial court lacked jurisdiction to dismiss the application on the merits of the claim, and the refusal to refer the dispute to arbitration was unsustainable.

Issue (ii): Whether the appeal had become infructuous because the appellant company had gone into liquidation.

Analysis: The pendency of winding-up proceedings did not extinguish the appeal. An application under section 20 of the Indian Arbitration Act, 1940 and an appeal therefrom are legal proceedings within the ambit of sections 446 and 457 of the Companies Act, 1956. The winding-up order did not cause abatement or render the appeal infructuous, and the High Court was competent to dispose of the pending appeal.

Conclusion: The appeal was not infructuous and remained maintainable despite the company's liquidation.

Final Conclusion: The order of the trial court was set aside, the arbitration agreement was ordered to be filed, and the dispute was referred to the named sole arbitrator for decision in accordance with law.

Ratio Decidendi: In proceedings under section 20 of the Indian Arbitration Act, 1940, the court is confined to the arbitration agreement and cannot adjudicate the merits of the underlying dispute; further, a pending proceeding of this nature does not abate or become infructuous merely because the company is later ordered to be wound up.

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