1999 (5) TMI 611 - HC - Companies Law

Summary

Issues Involved:

1. Lease Agreement and Obligations
2. Arbitration and Award
3. Execution of Award and Objections
4. Maintainability of Winding Up Petition
5. Bona Fide Dispute and Legal Proceedings

Issue-wise Detailed Analysis:

1. Lease Agreement and Obligations:
The petitioner company, M/s. Talwar Brothers (P) Limited, entered into a lease agreement with the respondent company, Punjab State Industrial Development Corporation Limited, on 28.10.1993, leasing the second floor of its premises. The lease was for three years starting from 1.11.1993. The lease agreement stipulated that if no fresh lease deed was executed, the respondent company was obliged to hand over vacant possession to the petitioner. The respondent company was liable to pay market rent decided by a government-approved valuer if it failed to vacate, with disputes to be resolved by arbitration.

2. Arbitration and Award:
When the respondent company did not vacate the premises on 31.10.1996, the petitioner invoked the arbitration clause. The arbitrator awarded damages at Rs. 97,410 per month from 1.11.1996 and directed eviction of the respondent company. The arbitrator's award was served on the respondent company, but the respondent neither paid the awarded amount nor vacated the premises. The petitioner then issued notices under section 434 of the Companies Act, which the respondent contested, claiming the award was unenforceable.

3. Execution of Award and Objections:
The petitioner filed an execution petition before the Delhi High Court. The respondent contested this, arguing the award was a nullity and the arbitrator lacked jurisdiction to decree eviction. The High Court allowed the respondent to file objections, which were pending. The Supreme Court, in its order dated 4.1.1999, allowed the respondent to file objections and stayed the execution of the award, directing the High Court to consider these objections.

4. Maintainability of Winding Up Petition:
The petitioner filed a winding-up petition based on the respondent's failure to comply with the arbitrator's award. The respondent argued the petition was not maintainable due to ongoing legal proceedings and bona fide disputes. The court noted that winding-up petitions should not be used as a debt recovery tool, especially when bona fide disputes exist. The pending proceedings in the Delhi High Court and the Supreme Court's stay order were significant factors.

5. Bona Fide Dispute and Legal Proceedings:
The court acknowledged the respondent's bona fide dispute regarding the award's validity and the arbitrator's jurisdiction. The Supreme Court's interim orders and the pending objections in the Delhi High Court indicated that the dispute was genuine and needed resolution in the appropriate legal forum. The court emphasized that winding-up petitions should not preempt ongoing legal proceedings.

Conclusion:
The court concluded that admitting the winding-up petition would interfere with the pending legal proceedings and the Supreme Court's orders. Therefore, the petition was disposed of, granting the petitioner liberty to file a fresh petition after the resolution of objections in the Delhi High Court. There was no order as to costs.