TaxTMI 
TaxTMI 
2004 (6) TMI 330
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....e of Andhra Pradesh having its Registered Office at Mittapalem in Chittoor District. The authorized share capital of the respondent as on 31-3-1999 is Rs. 30,00,000 (Rupees thirty lakhs only) divided into, 2,97,000 equity shares of Rs. 10 (Rupees ten only) each, and 3,000 cumulative shares of Rs. 10 (Rupees ten only) each. The company was incorporated with the object of manufacturing and marketing all kinds of ceramic goods. It is the case of the petitioner-company that respondent has taken SACMI make spray dryer on lease from the petitioner and executed lease agreement. The period of lease is sixty months commencing from 10-8-1995 and the respondent has to pay a monthly rent of Rs. 5,50,000 (Rupees five lakhs fifty thousand only). As per the terms, the interest at 3% per month is chargeable. 3. It is stated that on 28-10-1998 the respondent approached the petitioner for restructuring lease rentals on the ground that rentals are on the high side. The request of the respondent was considered and the lease rentals were accordingly re-structured at the rate of Rs. 4,00,000 (Rupees four lakhs only) from 10-9-1998 to 10-11-1999, Rs. 5,50,000 (Rupees five lakhs and fifty thousand only....
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....ssed an ex parte award on 17-2-2002 and that questioning the award the respondent filed an application before the Court of District Judge, Chittoor, which is pending. As the petitioner has invoked arbitration clause under the lease agreement, Company Petition for winding up is not maintainable. As the award is challenged under section 34 of the Arbitration and Conciliation Act, 1996 (for short, Arbitration Act), award as is not enforceable and, therefore, no finality can be attached to the same. Due to unenforceability of the arbitration award, as per section 36 of the Arbitration Act the Company Petition is not maintainable. The petition for winding up cannot be treated as an alternative to the suit or legal process of law. 6. Learned counsel for the petitioner submits that there is no bar for the petitioner to file this petition for winding up even after obtaining Award of the Arbitrator. He placed reliance on judgment of Calcutta High Court in S.M. Enterprises (P.) Ltd. v. Sanpaolo Hambro Nicco Finance Ltd. [1999] 96 Comp. Cas. 691. He also submits that like a decree passed by Civil Court, an award of the arbitrator under the Arbitration Act is also enforceable the moment the....
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....ained finality and enforceability, especially when the same is challenged in the Civil Court. 10. The decision in S.M. Enterprises (P.) Ltd.'s case (supra) relied on by the learned counsel for the petitioner does not really decide the issue before this Court. In the said case, in a winding up petition, the respondent moved an application under section 34 of the Arbitration Act, 1940 for stay of the winding up of the proceedings alleging that having regard to arbitration clause, Company Petition would not be maintainable. The creditor company, however, did not dispute the amount claimed. A learned Single Judge of Calcutta High Court rejected the application under section 34 of the Arbitration Act, 1940 observing as under: "An application under section 34 of the Arbitration Act for stay of proceedings in a suit must disclose the existence of a dispute between the parties which would oblige the parties under the arbitration clause in an agreement to refer the matter to arbitration. In the absence of such an allegation, an application for stay of the proceedings is not maintainable. This is the settled view of law. Reference may be made in this connection also to the decisions in....
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....f India is the complete defence of the respondent company at this stage. Furthermore, the objections relate to the very validity and legality of the impugned award. One of the grounds raised is that the arbitrator could not have passed an order of eviction in relation to the disputed property. It is not for this Court to comment upon the merits or otherwise of this dispute, but at least prima facie these disputes cannot be termed to be mala fide or totally unfair or unreasonable. In the case of M/s. Madhusudan Gordhandas & Co. v. Madhu Woollen Industries (P.) Ltd. AIR 1971 SC 2600, the Hon'ble Court enunciated the principle which will regulate the fate of the winding up petition response to which a bona fide or a valid dispute has been raised. Passing any order for winding up or even ordering the admission of this petition at this stage would apparently affect the proceedings before Hon'ble High Court of Delhi and would foreclose the merits of the objections filed by the respondent company before that Court, which are to be decided on merits by that Court in furtherance to the orders of the Hon'ble Apex Court." [Emphasis supplied] 12. In Indo French Time Industries' case (sup....
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....hat the winding up proceedings cannot be resorted to by a creditor for recovery of a debt which is bona fide disputed. The respondents have disputed the said claim even prior to the filing of the petition in reply to the statutory notice. The petitioners have resorted to arbitration remedy which according to me, is the legitimate remedy available to them to resolve the differences and disputes which admittedly have arisen between the parties. There is no doubt in my mind that the petitioners want to be coercive and oppressive against the respondent-company with ulterior motives to pressurize the company to surrender to the dictates of the petitioners. The petitioners have also unlawfully taken away the property of the respondent-company worth Rs. 8 lakhs and have kept the same with it. Such a conduct of the petitioner-company has to be seriously viewed and deprecated. On top of everything the petitioners want this Court to pass an order of winding up of the respondent-company without any further material and evidence in respect of the financial position of the company. I have no doubt in my mind that the petitioners have abused the process of law and the court by filing this petiti....