2001 (2) TMI 962 - HC - Companies Law

Summary

Issues:
1. Whether proceedings under section 11 of the Arbitration and Conciliation Act, 1996 can be stayed due to the respondent being declared a sick company under section 22 of the Sick Industrial Companies (Special Provisions) Act, 1985.

Analysis:
The judgment in the present case revolves around the question of whether proceedings under section 11 of the Arbitration and Conciliation Act, 1996 can be stayed when the respondent has been declared a sick company under section 22 of the Sick Industrial Companies (Special Provisions) Act, 1985 (SICA), and the revival scheme for the company is pending with the Board for Industrial and Financial Reconstruction (BIFR). The respondent argued that any action for money recovery against them should be stayed under SICA. The court referred to a previous case, Lloyd Insulations (India) Ltd. v. Cement Corpn. of India, where it was observed that proceedings for money recovery against a sick company should be stayed under SICA. However, the court distinguished the facts of the previous case, emphasizing that the nature of the proceedings must be considered to determine if it falls under money recovery.

The court analyzed Section 22 of SICA, which provides for the suspension of legal proceedings and contracts in case of a sick company. The court highlighted that the key issue is whether the proceedings under section 11 of the Arbitration and Conciliation Act, 1996 can continue if a company has been declared sick under SICA. The court referred to the Supreme Court's decision in Agio Countertrade (P.) Ltd. v. Punjab Iron & Steel Co. Ltd., where it was held that proceedings for the appointment of arbitration under the 1996 Act are not covered by SICA. The court emphasized that even if an arbitrator is appointed under section 11, the proceedings can continue despite the respondent company being declared sick under SICA. Therefore, the court dismissed the respondent's application to discontinue the proceedings under section 11.

In conclusion, the court ruled that the proceedings under section 11 of the Arbitration and Conciliation Act, 1996 can continue even if the respondent company has been declared a sick company under section 22 of the Sick Industrial Companies (Special Provisions) Act, 1985. The court relied on the interpretation provided by the Supreme Court in a similar case and emphasized that the appointment of an arbitrator under section 11 does not warrant a stay in proceedings, as they fall outside the scope of SICA.