2009 (10) TMI 526 - HC - Companies Law

Winding up petition - whether this company petition filed before this court for winding up of the respondent-company for non-payment of the alleged debt of ₹ 1,37,68,025.73 is maintainable when the petitioner has already filed application seeking appointment of an arbitrator under section 11 of the Arbitration and Conciliation Act, 1996, for determining the very same claim ? Held that - Having regard to the undisputed fact that the petitioner has already filed application under section 11 of the Arbitration and Conciliation Act, 1996, for appointment of an arbitrator to resolve the dispute arising out of bill dated February 22, 2008, it is of the view that the company petition filed for winding up of the respondent-company is not maintainable.

Summary

Issues Involved:
1. Maintainability of the winding-up petition.
2. Existence of bona fide dispute regarding the debt.
3. Commencement and impact of arbitration proceedings.
4. Judicial precedents on winding-up petitions and arbitration.

Issue-wise Detailed Analysis:

1. Maintainability of the Winding-up Petition:
The primary issue for consideration was whether the company petition for winding up the respondent-company is maintainable when the petitioner has already filed an application under Section 11 of the Arbitration and Conciliation Act, 1996, for appointment of an arbitrator to resolve the same claim. The court noted that the petitioner had sought arbitration, indicating a dispute regarding the debt, and hence, the winding-up petition was not maintainable.

2. Existence of Bona Fide Dispute Regarding the Debt:
The petitioner claimed that the respondent owed Rs. 1,37,68,025.73 for additional construction work, which was disputed by the respondent. The respondent argued that no additional construction was agreed upon and that the entire amount payable under the construction agreement had already been paid. The court acknowledged the existence of a genuine dispute regarding the debt, emphasizing that the debt must be determined or definite, and the defense raised by the respondent was substantial and bona fide.

3. Commencement and Impact of Arbitration Proceedings:
The court highlighted that the arbitration proceedings had already commenced as per Section 21 of the Arbitration and Conciliation Act, 1996, when the petitioner requested the appointment of an arbitrator. The Supreme Court's decisions in Milkfood Ltd. v. GMC Ice Cream (P.) Ltd. and H. P. State Sugar Corporation Ltd. v. Jain Construction Co. were cited to affirm that the arbitration proceedings commence upon the request for arbitration being received by the respondent. The court held that since arbitration was already in progress, the winding-up petition could not be maintained.

4. Judicial Precedents on Winding-up Petitions and Arbitration:
The court referred to several judicial precedents to support its decision:
- In Pradeshiya Industrial and Investment Corporation of Uttar Pradesh v. North India Petro Chemical Ltd., the Supreme Court held that a winding-up petition is not maintainable when there is a bona fide dispute and the matter is referred to arbitration.
- The Division Bench of the Madras High Court in Rediffusion-Dentsu, Young and Rubicam (P.) Ltd. v. Solidaire India Ltd. emphasized that a winding-up petition cannot be used as a device to pressurize the respondent for payment when a substantial defense exists.
- The Supreme Court in Mediquip Systems (P.) Ltd. v. Proxima Medicals System GmbH reiterated that if the debt is bona fide disputed and the defense is substantial, the court will not order winding up.

The court concluded that the petitioner's application for arbitration demonstrated a dispute that needed resolution through arbitration, not through winding-up proceedings. Consequently, the company petition for winding up was dismissed, and the connected application was also dismissed.