1980 (9) TMI 220 - HC - Companies Law

Summary

Issues Involved:
1. Whether a petition for winding-up could be admitted by the company court on the basis of an unfiled award for money payable to the award holder by the company.
2. The interpretation of the terms "debt" and "unable to pay its debts" under sections 433 and 434 of the Companies Act, 1956.
3. The effect of an unfiled arbitration award and its enforceability.
4. Whether section 32 of the Arbitration Act, 1940, bars the winding-up petition based on an unfiled award.
5. The nature and scope of winding-up proceedings in relation to the enforcement of arbitration awards.
6. The conduct of the parties in relation to the proceedings and their impact on the case.

Detailed Analysis:

1. Admissibility of Winding-Up Petition Based on Unfiled Award:
The primary issue was whether a winding-up petition could be admitted based on an unfiled arbitration award. The court examined whether the sum in the award was immediately payable by the company to the award holder even before the award was filed and a decree passed. The court concluded that an unfiled award has some legal force and effect and cannot be treated as a mere waste paper. The award creates rights and obligations between the parties, and the original claim merges into the award, making it the only enforceable document.

2. Interpretation of "Debt" and "Unable to Pay its Debts":
The court interpreted the terms "debt" and "unable to pay its debts" under sections 433 and 434 of the Companies Act, 1956. It referred to precedents such as In re: European Life Assurance Society and In re Bryant Investment Co. Ltd., which emphasized that debts must be presently payable. The court held that the expression "the sum so due" in section 434 suggests that the sum must be presently payable and not contingent on future events such as the passing of a decree.

3. Effect and Enforceability of Unfiled Arbitration Award:
The court referred to the Supreme Court's decision in Satish Kumar v. Surinder Kumar, which held that an unfiled award is not a mere waste paper and has some legal force. The award creates rights and obligations, and until set aside, it remains binding on the parties. The court concluded that an unfiled award could be relied upon as evidence of a debt in a winding-up petition.

4. Section 32 of the Arbitration Act, 1940:
The court examined whether section 32 of the Arbitration Act, 1940, which bars suits for enforcing awards, applied to winding-up petitions. It held that winding-up proceedings are not akin to suits and do not fall within the ambit of section 32. The court emphasized that winding-up petitions are representative actions based on public policy and are not intended to enforce individual claims.

5. Nature and Scope of Winding-Up Proceedings:
The court distinguished between winding-up proceedings and suits. It emphasized that winding-up petitions are not for the enforcement of individual claims but for the collective benefit of all creditors and contributories. The court can go behind the award to determine if the dispute is bona fide but does not enforce the award itself. The court concluded that winding-up proceedings based on an unfiled award do not violate section 32 of the Arbitration Act, 1940.

6. Conduct of the Parties:
The court noted the conduct of the appellant company, which had obtained an ex parte stay order in the City Civil Court to prevent the award holder from obtaining a judgment on the award. The court found that the appellant's actions indicated an intention to delay proceedings and avoid payment. The court held that the appellant's conduct did not demonstrate a bona fide dispute and upheld the order for winding-up.

Conclusion:
The court upheld the winding-up petition based on the unfiled arbitration award, concluding that the award created a presently payable debt, and the company's inability to pay this debt justified the winding-up order. The appeal was dismissed with costs.