2002 (10) TMI 695 - HC - Companies Law

Summary

Issues Involved:
1. Existence of an Arbitration Clause and its impact on the jurisdiction of the Company Court.
2. Bona fide disputes and defenses in winding-up petitions.
3. The application of section 8 of the Arbitration and Conciliation Act, 1996.
4. The relationship between the Companies Act and the Arbitration and Conciliation Act, 1996.

Summary:

1. Existence of an Arbitration Clause and its impact on the jurisdiction of the Company Court:
The primary issue was whether the existence of an arbitration clause would invariably close the doors of the Company Court to the petitioner. The Court referred to the Supreme Court's decision in *Haryana Telecom Ltd. v. Sterlite Industries (India) Ltd.*, which clarified that the presence of an arbitration clause does not preclude the jurisdiction of the Company Court, as the power to order winding-up is statutory and cannot be exercised by an arbitrator. The Court emphasized that the Company Judge retains jurisdiction regardless of such a clause but may refer parties to arbitration if deemed expedient.

2. Bona fide disputes and defenses in winding-up petitions:
The Court examined whether there was a bona fide dispute and substantial defense raised by the respondent. It was noted that winding-up proceedings should not be used as a means of realizing debts. The Court cited several cases, including *Pradeshiya Industrial & Investment Corpn. of Uttar Pradesh v. North India Petro-Chemical Ltd.*, which outlined that if there is a bona fide dispute and substantial defense, the Court will not wind-up the company. The Court found that the respondent had raised substantial defenses, indicating that the disputes should be adjudicated in regular proceedings rather than summary ones.

3. The application of section 8 of the Arbitration and Conciliation Act, 1996:
The Court discussed the mandatory nature of section 8 of the Arbitration and Conciliation Act, 1996, which requires judicial authorities to refer parties to arbitration if a valid arbitration agreement exists. However, it was clarified that this does not automatically oust the jurisdiction of the Company Court in winding-up matters. The Court referred to the decision in *Smt. Kalpana Kothari v. Sudha Yadav (Smt.)*, which highlighted the differences between the old and new arbitration statutes but did not specifically address the Companies Act context.

4. The relationship between the Companies Act and the Arbitration and Conciliation Act, 1996:
The Court emphasized that the Companies Act is a special enactment, and its provisions regarding winding-up cannot be overridden by the general provisions of the Arbitration and Conciliation Act, 1996. It was noted that the statutory relief of winding-up is not intended to be available solely to contracting parties but also considers the interests of the general public. The Court concluded that the existence of an arbitration clause does not oust the jurisdiction of the Company Court, but the Court may refer parties to arbitration if a bona fide defense is shown to exist.

Conclusion:
The Court held that the disputes between the parties should be resolved through arbitration as agreed upon in their contract. The winding-up petition was dismissed, and the parties were directed to seek their remedy in arbitration. The Court reiterated that the existence of an arbitration clause does not automatically oust the jurisdiction of the Company Court, but the Court may refer parties to arbitration if a bona fide defense is shown to exist.