2003 (12) TMI 336 - HC - Companies Law

Summary

Issues:
1. Interpretation of arbitration clause in Hire Purchase Agreement under Arbitration and Conciliation Act, 1996.
2. Application of Sick Industrial Companies (Special Provisions) Act, 1985 to the case.
3. Ownership rights and repossession of machinery under the Hire Purchase Agreement.
4. Legal proceedings against a sick industry under section 22(1) of the Act.

Analysis:

1. The appellant filed an application under section 9 of the Arbitration and Conciliation Act, 1996, seeking payment of hire charges and finance charges from the respondent under a Hire Purchase Agreement. The agreement contained an arbitration clause stating that disputes shall be settled through arbitration. The court upheld the appellant's right to approach the single Judge for arbitration proceedings based on the agreement's terms, establishing the appellant as the "Owner" and the respondent as the "Hirer" of the machinery.

2. The respondent argued that being declared a sick industry under the Sick Industrial Companies (Special Provisions) Act, 1985, protected them from legal proceedings. However, the court found that the ownership of the machinery had not transferred to the respondent until full payment, allowing the appellant to seek repossession under the Hire Purchase Agreement. The court distinguished the case from the protection provided under section 22(1) of the Act, emphasizing the ownership status of the machinery.

3. The court referenced previous judgments to support the interpretation that ownership of hired machinery remains with the finance company until full payment by the hirer. This ownership status allowed the appellant to pursue repossession despite the respondent being a sick industry under the Act. The court highlighted that the protection under section 22(1) of the Act applies only to the company and its properties, not to hired machinery.

4. The respondent cited legal precedents to argue the applicability of section 22(1) of the Act to the case. However, the court rejected this argument, stating that the cited cases were not relevant to the repossession of hired machineries. Ultimately, the court set aside the previous order, allowing the appeal and closing the connected CMPs without costs.