1992 (9) TMI 308 - HC - Companies Law

Summary

Issues:
- Dismissal of Company Petition under section 433 of the Companies Act, 1956
- Dispute regarding the erection of a sulphuric acid plant and non-payment of dues
- Allegations of defects in the plant and failure to rectify them
- Arbitration proceedings and objections filed under the Arbitration Act

Dismissal of Company Petition:
The appellant filed a petition under section 433 of the Companies Act, 1956, seeking winding up of the respondent-company due to non-payment of dues. The respondent-company failed to release payments for the plant erection as per the agreed schedule, leading to a total due amount of Rs. 16,70,630. The respondent contested the petition, claiming defects in the plant's construction and commissioning, leading to continuous losses. The learned company judge concluded that the dispute required resolution in a civil court, not under section 433 of the Act, as the respondent's defense was substantial.

Alleged Defects in the Plant:
The respondent alleged defects in the plant's construction and commissioning, leading to continuous losses and claimed liquidated damages for excess sulphur consumption. The respondent pointed out defects before the warranty period's expiry, with the petitioner acknowledging and promising to rectify them. However, the petitioner failed to rectify the defects despite earlier commitments. The learned company judge found the respondent's defense substantial and likely to succeed in law based on the evidence presented.

Arbitration Proceedings:
Subsequent to the judgment, the petitioner resorted to arbitration as per the agreement dated September 26, 1979, which allowed for disputes to be referred to an arbitrator. The Delhi High Court appointed an arbitrator, who rendered an award, with both parties filing objections under the Arbitration Act. The objections were pending adjudication, indicating a legal recourse already taken by the petitioner. Considering these developments and the ongoing arbitration process, the court declined to interfere with the learned company judge's decision, ultimately dismissing the appeal with no costs imposed.

Conclusion:
The judgment upheld the dismissal of the Company Petition under section 433 of the Companies Act, 1956, due to the substantial defense raised by the respondent regarding alleged defects in the plant's construction. The ongoing arbitration proceedings, initiated by the petitioner as per the agreement, were considered by the court, leading to the appeal's dismissal without costs. The detailed analysis of the issues highlighted the complexities of the dispute and the legal avenues pursued by the parties for resolution.