AI OCR 
TaxTMI 
TaxTMI 
TaxTMI 
2002 (10) TMI 695
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....olve the dispute according to the agreement had expired and due to the alleged wilful failure of the Respondent to provide necessary basic services, the entire plan got dislocated and disrupted, thereby frustrating the project itself. The agreement contained the following Arbitration clause, which has generated considerable argument :- "Any dispute which may arise during the course of this, OA (within 12 months from the date of signing of this MOA) efforts will be made to resolve it amicably by having meeting between Mr. Gopal Ansal and Mr. Mohammed Mansoor. However, in the event the amicable resolution is not arrived at the dispute shall be referable to Arbitration as per Indian Arbitration and Reconciliation Act, 1996. The jurisdiction of the Arbitration and/or the Court of law shall be at New Delhi." 2. In its reply in opposition to the petition, it has been disclosed that the respondent had already moved the Civil Court for interim orders under section 9 of the Arbitration and Conciliation Act, 1996 and for the appointment of an Arbitrator or for settlement of disputes before such an appointment. It has been further pleaded that payment of certain cheques in favour of the Res....
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....The presence of an arbitration clause was found not to preclude the jurisdiction of the Company Court, it being statutory relief. This is not to say that in every case the Company Judge will proceed to adjudicate, till the very end, the disputes brought before him, even though on further reflection and cogitation, it appears to him to be apposite and expedient to refer the parties to arbitration, where the issues would be considered threadbare. 4. Reliance has also been placed on Tirlok Chand Jain v. Swastika Strips (P.) Ltd. [1991] 70 Comp. Cas. 197 (Punj. & Har.), in which the Company had filed an application for stay of proceedings and for reference of the disputes to arbitration. A Single Judge of the Punjab and Haryana High Court dismissed the application holding that the proceedings under section 434 read with section 439 of the Companies Act operate in a completely different sphere and jurisdiction from that under which relief can be sought in arbitration. The Court observed that winding-up proceedings are not for the recovery of any amount and that none of the disputes referred to in the arbitration clause could be co-related to the relief of the Company Petition. These ob....
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....so as to be referred to arbitration, and since under section 34 of the 1940 Act, only proceedings in respect of any matter agreed to be referred can be stayed, a winding-up petition cannot be stayed; Wimco Ltd. v. Sidvink Properties (P.) Ltd. [1996] 86 Comp. Cas. 610 (Delhi); and Kare (P.) Ltd., In re [1977] 47 Comp. Cas. 276 (Delhi) in which D.K. Kapur J. held that the Court will not stay a petition under section 397 or 398 on an application under section 34 of the 1940 Act, predicated on the arbitration clause. 6. Counsel for the Respondents have cited Smt. Kalpana Kothari v. Sudha Yadav (Smt.) [2002] 1 SCC 203 which was decided without reference to the decision of the coordinate bench of the Apex Court in Haryana Telecom Ltd.'s case (supra). Paragraph 8 of the later case has been relied upon by the Learned Counsel for the Respondents to highlight the difference between the old and the present arbitration statute and to contend that the Court must now perforce halt proceeding and refer the parties to arbitration. "8. The first respondent herein has filed the civil suit for dissolution of the partnership and for accounts and also filed applications for the appointment of Receive....
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....nd that was left to be taken care of under sections 8 and 20 of the 1940 Act. In striking contrast to the said scheme underling the provisions of the 1940 Act, in the new 1996 Act, there is no provision corresponding to section 34 of the old Act and section 8 of the 1996 Act mandates that the judicial authority before which an action has been brought in respect of a matter, which is the subject-matter of an arbitration agreement, shall refer the parties to arbitration if a party to such an agreement applies not later than when submitting his first statement. The provisions of the 1996 Act do not envisage the specific obtaining of any stay as under the 1940 Act, for the reason that not only the direction to make reference is mandatory but notwithstanding the pendency of the proceedings before the judicial authority or the making of an application under section 8(1) of the 1996 Act, the arbitration proceedings are enabled, under section 8(3) of the 1996 Act to be commenced or continued and an arbitral award also made unhampered by such pendency. We have to rest the order under appeal on this basis." (p. 208) 7. Learned Counsel for the respondent has also sought support from the deci....
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....aving regard to all the circumstances, it is a fit case in which the petition should be adjourned sine die, as it is, with liberty to the German company to seek its revival, and to the company to seek its dismissal, on the outcome of the proceedings in arbitration between the parties. I direct accordingly." (p. 695) This very approach was also favoured by Justice R.J. Kolchar in Manipal Finance Corpn. Ltd. v. Cre Carrier Ltd. [2001] 107 Comp. Cas. 288 (Bom.), decided on 11-7-2001. The winding up petition was rejected inter alia for the reasons that it appeared to be a pressure tactic and that there was sufficient security for the debts even if the award in the pending arbitration would be in favour of the petitioning creditor. The Learned Judge was of the view that the verdict in Haryana Telecom Ltd.'s case (supra) was of no assistance to the petitioner. 8. Learned counsel for the respondents have also placed reliance on K.S. Satyanarayana v. V.R. Narayana Rao AIR 1999 SC 2544; Trans World Finance & Real Estate Co. (P.) Ltd. v. Union of India [2002] 97 DLT 767 to buttress the contention that reference to arbitration is now mandatory in view of section 8 of the Arbitration and Con....
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....r proceedings to continue. If there is insufficient material in favour of the petitioners, such disputes can be properly adjudicated in a regular civil suit. It is extremely helpful to draw upon the analogy of a summary suit under order XXXVII of the Code of Civil Procedure. If the Company Court reaches the conclusion that, had it been exercising ordinary original civil jurisdiction it would have granted unconditional leave to defend, it must dismiss the winding-up petition. 10. It is my understanding that the present disputes have to be resolved by the application of the dicta in the Pradeshiya Industrial & Investment Corpn. of Uttar Pradesh's case (supra ) and in the Haryana Telecom Ltd.'s case (supra). It must be keep in mind that the decision in the case of Kalpana Kothari (supra ) was not given in the context of the Companies Act, otherwise the Hon'ble Court would have referred to its earlier decision. The judgment prescribes that section 8 of the Current Arbitration Act demands mandatory adherence, so much so that even if a previous application has been withdrawn, a subsequent supplication on similar lines must be allowed. Owing to the brevity of the judgment in the Haryana ....
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.... is no merit or substance in the submission that, as in the case of a civil court, as soon as the arbitration clause is shown to him, the Company Judge must dismiss or adjourn sine die the action before him. 11. I cannot also appreciate the argument that a drastic change has been brought about by section 8 of the Arbitration and Conciliation Act in respect of the jurisdiction of the Company Judge. The Apex Court perceived no change in the legal position in the Haryana Telecom Ltd.'s case (supra). There is no gainsaying that the Companies Act is the earlier statute and would therefore be regulated by the new Arbitration statute. It will nonetheless also have to be borne in mind that the general legal provisions must give way to special enactments, in case of inconsistency between them. The Apex Court have been quick to clarify that the winding-up powers are not akin to recovery proceedings since an arbitration agreement cannot confer the right to seeking winding-up, as the arbitaral authority does not possess this statutory power. The later Arbitration and Conciliation Act, 1996 ought to have made a specific reference to the Companies Act by the convenient and easy use of a non obs....
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....Petitioner because of the former's expertise in real estate development; that the Respondent had undertaken various activities immediately after the execution of the Agreement, including Artwork; had engaged specialists and incurred expenses in this regard; made preparations for a Press Conference which was delayed because of the Petitioner; the Petitioner's cheques were dishonoured; that the sum of Rs. 10 lakhs was to be adjusted after final accounts were settled and that as and when this exercise is completed, amounts would be found due to the respondent company; that the Petitioner had breached the Agreement and had terminated it on 2-5-2001, within four months of its execution whereas the Project was for a period of twelve months; and that no response was made to the statutory notice because the Respondent had already initiated steps under the Arbitration and Conciliation Act, 1996 by way of OMP 137/2001. 13. Substantial defences have been raised as narrated in paragraph 2 above, and it is not possible to view them as moonshine or as lacking bona fide. These defences can be properly adjudicated upon in regular and not summery proceedings. In these premises, it would be inappro....
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....999. A Supplementary Lease Agreement, stated to be forming part of the Lease Agreement dated 23-11-1994, was thereafter executed between the parties on 25-8-1997. The salient features were that the Respondent firstly admitted, confirmed and acknowledged that a sum of Rs. 8,50,51,452 (Rupees eight crore fifty lakhs fifty-one thousand four hundred fifty-two only) was then due and outstanding to the Petitioner, which would be immediately payable in the event that the revised Repayment Schedule was not adhered to by the Respondent Company. Interest at the rate of 36 per cent per annum with effect from 1-7-1997 was also expressly agreed to. This Agreement further recorded that although the Respondent had paid the first six quarterly lease rental, thereafter, "due to bad market conditions and liquidity problems, the lessee was unable to make timely payment of Lease rentals to the Lessor and the account had fallen into arrears." A Demand Promissory Note for the aforementioned sum of Rs. 8,50,51,452 was jointly executed in favour of the Petitioner by Mesco Airlines Ltd. as well as Mideast (India) Limited, which was styled as the co-lessee. 4. In its letter dated 2nd April, 1998 the Respon....
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....to give us a supporting hand as you have always done in the past and allow us relief for two months, i.e., for April and May 98 at the rate of 10 lakhs per month. We would continue the payment from June 98 onwards and will make up for this intervening period in the subsequent months. We hope you understand our financial position at this point of time. We therefore, most humbly request you to grant us this relief. It would be in our mutual interest to resume flying as soon as possible so as to continue generating revenue and achieve customer satisfaction with our client ONGC. I understand from your local Delhi office that you will be visiting Delhi sometime next week. The undersigned is planning to be in Mumbai on 23rd and 24th of April. I would appreciate if you could give me some time either in Mumbai or in Delhi next week at your convenience, so that in person I can explain to you in greater detail the above mentioned facts. We look forward to hearing from you on the above matter. Thanking you in anticipation. Best regards. Yours sincerely, Sd/- Natasha Singh, Managing Director." 5. By letter dated 16th January, 1999 the Respondent expressed its hope and trust that "afte....
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....is wrong and are liable to be set aside on account of the serious mistake committed by both the parties and that the Lease is also liable to be nullified. It has also been asserted that the Respondent is entitled to a credit of over Rs. 5,88,37,981; the helicopters were imported at Rs. 10,67,65,995 out of which the Respondent was entitled to a credit of Rs. 2,17,65,995 since only a sum of Rs. 8,50,00,000 was to be paid to the Petitioner. It has also been pleaded that a sum of Rs. 4,00,00,000 has not been taken into account and, accordingly, a total credit of Rs. 6,17,65,995 has mistakenly not been credited. It has also been averred that Rs. 1,02,49,736 has been paid by the Respondent on account of insurance, which is the liability of the Petitioner. It has been further pleaded that the Respondent incurred a sum of Rs. 2,68,22,250 for replacement of parts caused on account of ordinary wear and tear of the equipment which the Petitioner was liable to receive. During the period when the equipment book was to be released, the Respondent was unable to use the helicopters and, therefore, suffered loss and damage amounting to Rs. 3,00,00,000. In these circumstances, it has been pleaded th....
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....sible in any way for the non-performance, if any, of the Equipment and further that the Lessee shall look solely to the Manufacturer/Supplier or its selling agents for the performance of guarantees and warrantees with respect to the equipment. In the letters mentioned hereinabove, the Respondent has itself admitted that the helicopter had been put to unusual use which caused its breakdown. Therefore, the petitioner is not bound either contractually or equitably for any loss which may have been caused to the Respondent during the alleged breakdown period. Clause 7.3 is important inasmuch as it records the Respondent's liability to punctually pay for all servicing of and repair and other work done to the Equipment and for spare parts and accessories thereof and keep the Equipment free from distress, execution or any other legal process and further to replace all missing, damaged or broken parts with parts of equal quality and value. The use of the phrase 'fair wear and tear expected' does not dilute this liability. In addition to these Clauses, the Lessee is also bound to indemnify the Petitioner against any loss or damage which may result from the negligence or for causes beyond the....