2004 (10) TMI 346 - HC - Companies Law

Summary

Issues:
Company Petition filed under sections 433(e) and 434 of the Companies Act for winding up due to non-payment of an award.

Detailed Analysis:

Issue 1: Company Petition for Winding Up
The Company Petition was filed under sections 433(e) and 434 of the Companies Act by National Research Development Corporation against Electro Flux (P.) Ltd. The petitioner sought winding up of the respondent due to non-payment of an award amounting to Rs. 2,40,912, which was passed by an Arbitrator and later made the rule of the Court.

Issue 2: Background and Agreement
The petitioner, a Government of India enterprise, provided "know-how" for manufacturing submerged Arc Welding Flux to the respondent under an agreement. The agreement required the respondent to pay royalty and licence fees, but the respondent defaulted in paying the royalty despite utilizing the "know-how" and making profits.

Issue 3: Arbitration and Award
Disputes arose between the parties regarding non-payment of royalty, leading to arbitration as per the agreement. The Arbitrator passed an award of Rs. 2,40,912 in favor of the petitioner, which the respondent failed to pay even after receiving a legal notice.

Issue 4: Commercial Insolvency and Winding Up
The key question was whether a Company Petition for winding up, based on non-payment of an award amount that became a decree of the Court, is maintainable on the grounds of commercial insolvency. The Court analyzed sections 433 and 434 of the Companies Act to determine the company's inability to pay its debts and the circumstances for winding up.

Issue 5: Discretionary Relief and Alternative Remedies
The Court held that the relief under sections 433 and 434 for winding up is discretionary and should be granted when a company is unable to pay its debts due to commercial insolvency. In this case, the petitioner did not pursue execution proceedings to recover the award amount, indicating the availability of an alternative remedy. As the petitioner failed to demonstrate non-satisfaction of the award through execution, the Court dismissed the Company Petition as misconceived.

Conclusion:
The Court dismissed the Company Petition at the admission stage, emphasizing that the petitioner should execute the award in a competent Civil Court instead of invoking the jurisdiction of the Company Court for winding up. This decision does not prevent the petitioner from pursuing the award against the respondent in a Court with jurisdiction.