1947 (2) TMI 14 - HC - Companies Law

Summary

Issues Involved:

1. Whether a liquidator in a voluntary winding-up can refer any matter to arbitration.

Issue-wise Detailed Analysis:

1. Whether a liquidator in a voluntary winding-up can refer any matter to arbitration:

The primary question in this appeal was whether a liquidator in a voluntary winding-up has the authority to refer disputes to arbitration. The initial decision by Mr. Justice Achhru Ram, which was negative, relied on the case of Dehra Dun Mussoorie Electric Tramway Co., In re [1928] ILR 50 All. 867. The appellant challenged this decision, citing observations from Sitaram Balmukand v. Punjab National Bank Ltd. [1936] 6 Comp. Cas. 337, which was later criticized in other High Court decisions.

The Full Bench of the High Court of Lahore, consisting of five judges, reviewed the matter. The facts revealed that Messrs. Narain Das and Company Limited went into voluntary liquidation, and a dispute with Messrs. Duni Chand and Company was referred to arbitration by the liquidator, R.B. Narain Das. The arbitrator, Seth Jetha Nand, made an award, but the validity of this arbitration was challenged on the grounds that the liquidator had no power to refer the dispute to arbitration.

The courts below, including the trial court, the District Judge, and a learned single Judge of the High Court, held that the liquidator had no such power. The decision was based on the precedent set by the Allahabad High Court in Dehra Dun Mussoorie Electric Tramway Co., which interpreted section 179 of the Companies Act, 1913, as not including the power of arbitration among the liquidator's powers.

The appellant's counsel argued that sections 152, 179, 205, and 207 of the Companies Act should be interpreted to confer such power on the liquidator. However, the Full Bench found that none of these sections explicitly or implicitly granted the liquidator the authority to refer disputes to arbitration. The liquidator's powers were limited to winding up the company's affairs and did not include arbitration, which was considered a corporate power reserved for the company itself.

The Full Bench emphasized that the liquidator is an agent for winding up the company's business and can only exercise powers conferred by the statute. The Act clearly delineated the liquidator's powers and reserved certain corporate powers, including arbitration, for the company. The liquidator's power to sanction the exercise of corporate powers by the directors did not imply that he possessed those powers himself.

The argument that arbitration is an incidental power necessary for winding up was also rejected. The Full Bench noted that the power to compromise claims, which involves making concessions, required explicit sanction from the company, and arbitration, being a form of compromise, similarly required such sanction.

The Full Bench concluded that the liquidator had no inherent or incidental power to refer disputes to arbitration. The award made by the arbitrator was thus without effect, as the reference was made by a person without authority.

The appeal was dismissed, and it was held that the parties should bear their own costs. The judgment was concurred by all the judges on the bench, with additional remarks emphasizing that a liquidator cannot bind the company to arbitration without express authority.

In summary, the High Court of Lahore reaffirmed that a liquidator in a voluntary winding-up does not have the power to refer disputes to arbitration, and any such reference made without proper authority is void.