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TMI Blog1998 (1) TMI 476X X X X Extracts X X X X X X X X Extracts X X X X ..... mants who had filed arbitration petition before this court and in the said petition Mr. Justice Jhunjhunwala (retired judge of this court) was appointed sole arbitrator by order dated June 13, 1997, passed by the Hon'ble Chief Justice of this court. By an agreement of sale entered into between the petitioner-company and the respondents on March 9, 1994, hereinafter referred to as "the main agreement", the petitioners agreed to sell to the respondents and the respondents agreed to purchase from the petitioners two flats bearing Nos. 301 and 302 in the building known as Wembley which was then under construction on the plot of land bearing final plot No. 300 under Town Planning Scheme II, Vile Parle (First Variation) (Final), situate at Playground Road off Nehru Road, Vile Parle (East), Mumbai-400 057 along with parking space for the consideration of Rs. 76 lakhs. Likewise, an agreement was entered into between the petitioner-company and the respondents in Arbitration Petition No. 282 of 1997 on March 9, 1994. The petitioners agreed to sell to the respondents and the respondents agreed to purchase from the petitioners two flats bearing Nos. 201 and 202 in the same building for Rs. 72 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... filed Arbitration Petition No. 225 of 1996 under section 9 of the Arbitration and Conciliation Act, 1996, for ad interim reliefs. On August 13, 1996, this court granted ad interim injunction in terms of prayer clause ( a ). This order was passed by consent. The respondents waived service. It was also directed that the matter be placed on board on September 18, 1996. On September 30, 1996, Justice Jhunjhunwala admitted the said petition. Notice was issued to the petitioners and made returnable for November 4, 1996. Ad interim order passed on the basis of the consent of the parties dated August 13, 1996, was directed to continue till the hearing and final disposal of the petition. Since the parties were unable to agree on the arbitrator, the respondents filed Arbitration Petitions Nos. 9 and 10 of 1997. By an order dated June 13, 1997, Justice Jhunjhunwala was appointed as the sole arbitrator on the basis of the consent minutes of the order. In pursuance of these arbitration proceedings, the impugned award has been made on November 13, 1997. Parekh, learned counsel appearing for the petitioners, has submitted that the impugned award is liable to be set aside on three grounds. It ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by August 18, 1997. Rejoinder, if any, was to be filed by September 1, 1997. Compilation of copies of the agreed documents was also to be filed by September 1, 1997. Date for hearing was fixed on September 9, 1997, at 3 p.m. Notice of the hearing was waived by counsel for the parties. On September 23, 1997, Bhaskar, advocate, again appeared for the petitioners. The statement of claim has duly been filed. No written statement had been filed by the petitioners. Bhaskar appearing for the petitioner applied for adjournment of the hearing on the ground that the director of the petitioner was feeling unwell. By consent and by way of last chance to enable the petitioners to file the written statement, the hearing was adjourned to October 3, 1997. On October 3, 1997, the respondents filed three compilations of documents along with synopsis and date of events which were taken on record. Copies of the same were furnished to the advocates for the petitioner. The director of the petitioner again applied for further time to enable them to file the written statement. This application was opposed by the respondents on the ground that sufficient indulgence had already been granted to the petitione ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... application of the petitioners. The arbitrator, however, rejected the application by giving cogent reasons. A perusal of the proceedings of October 16, 1997, shows that the order dated October 9, 1997, had been duly communicated and received by the petitioners on October 10, 1997. It is observed that the petitioner had sufficient time to take appropriate proceedings to challenge the same if so intended, which the petitioners did not do. It is also noticed that earlier Bhaskar and Company were appearing for the petitioners and have been appearing since July 14, 1997. It is noticed that the petitioners had failed to file the written statement by August 18, 1997. It is also noticed that the said written statement had not been filed till that date. Thus the application for adjournment was rejected. Examination-in-chief of the witnesses of the respondent was conducted. Saraogi partly cross-examined the witness on behalf of the petitioners. After part cross-examination of the witness Saraogi again applied for adjournment of the hearing till October 21, 1997, to enable him to prepare for further cross-examination. Again the arbitrator showing indulgence adjourned the consolidated hearing ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Companies Act, 1956, appears in Chapter II in Part VII of the Companies Act, 1956, which deals with 'winding up' of the companies. As per section 446, when a winding up order is made or the official liquidator has been appointed as provisional liquidator, no suit or other legal proceedings shall be commenced, or if pending at the date of the winding up order shall be proceeded with against the company, except by leave of the court and subject to such terms as the court may impose. Hence, section 446, visualizes a situation where the winding up order has been made or the official liquidator has been appointed as provisional liquidator, before it is applicable. In the arbitration reference pending before me, it is an admitted position that no winding up order of the respondents-company has so far been made though the said company petition for winding up of the respondents-company is still pending. There is no jurisdiction, under this section to order stay in respect of suits or other legal proceedings pending against the company unless a winding up order is made. Though there is a controversy as to whether the official liquidator has or has not stood appointed as provisional l ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he appointment of the provisional liquidator. This application has again been refused after taking into consideration all the necessary facts and circumstances as narrated above. Thereafter, the counsel for the petitioner applied to withdraw his appearance as also the appearance of Saraogi. It was stated that they have no instructions to proceed with further cross-examination of the respondents. It was also pointed out to the counsel and the advocate that further proceedings shall continue even if they are permitted to withdraw their appearance. At that stage Shah and Saraogi left the venue of arbitration. It was in these circumstances that the arbitrator was left with absolutely no option but to proceed in the absence of the petitioners. The evidence of the respondents was closed. There were no cross-examinations as none was present on behalf of the petitioner. Thereafter the hearing of the remaining part of the reference was kept on October 27, 1997. On that date none was again present on behalf of the petitioners. Due notice had been given to the petitioners. Thus the reference came to be closed. Thereafter the award has been given on November 13, 1997. A perusal of the facts ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tember 30, 1996, Justice Jhunjhunwala had continued the order. No appeal was filed against the order of confirmation of the ad interim order. It has also been brought to my notice by Thakkar, learned counsel appearing for the respondents, that in fact on that day the petitioners had already created third party rights by way of mortgage. This fact was not brought to the notice of Justice Jhunjhunwala. Consequently they were constrained to take out proceedings for criminal contempt of court. After hearing the counsel for the parties, the Division Bench of this court on January 31, 1997, restrained the petitioners from creating any third party rights of any nature whatsoever in respect of the disputed flat. On objection being taken by the petitioners that the contempt petitions ought to be heard on the original side, the matter was reheard on March 10, 1997. Again the injunction as earlier granted was given. The order in fact shows that the ad interim injunction in terms of paragraphs 3 and 4 of the order dated January 3, 1997, was granted. The appointment of Justice Jhunjhunwala as arbitrator was made by the consent of parties in a petition filed by the respondents. A perusal of this ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ovisional liquidator passed by Justice Variava reads as follows : "Accordingly, I direct that if the respondent-company pays to the petitioners the amount of Rs. 1,20,00,000 with interest at 15 per cent. per annum from September 11, 1995, till payment in 12 equal monthly installments, then there will be no ad interim order. The first of such installments to be paid on or before June 15, 1997. Each and every subsequent installment to be paid on or before 15th day of each subsequent month. In the event of any two defaults the official liquidator will stand appointed as provisional liquidator of all the assets of the respondent-company. The provisional liquidator to take possession of all assets including the mortgaged premises". Against this order, an appeal was filed before the Division Bench being Appeal No. 501 of 1997. This appeal was dismissed on October 7, 1997, by a speaking order. Against the aforesaid order, SLP was filed in the Supreme Court which was disposed of on December 15, 1997. In paragraph 6 of the said order it is observed as follows: "6. The orders of the High Court dated April 30, 1997, directing the provisional liquidator to take possession of the property ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Ltd. [1960] 30 Comp. Cas. 162 , 166, Raman Nayar J. held: 'On the wording of section 446(1) of the Companies Act, 1956, which, in this respect, makes a significant departure from the language of section 171 of the Act of 1913, the appointment of the provisional liquidator does not affect the continuance of a pending proceeding and leave of the winding up court is required only for commencing a new proceeding. But, once a winding up order is made, even the continuance of a pending proceeding can only be by leave of the court and subject to such terms as the court may impose.' In this case, the winding up order is kept in abeyance. No doubt there is a 'provisional liquidator'. Even so, I am of the view that the fourth respondent was not obliged to obtain the leave of this court to continue the execution proceedings in O.S. No. 1 of 1982 when he brought the property to sale. Section 446(1) of the Act is not attracted to the instant case. This follows from the decision in B.V. John v. Coir Yarn and Textiles Ltd. [1960] 30 Comp. Cas. 162 , 166. In this view of the matter, there is no infirmity in the execution proceedings taken in O.S. No. 1 of 1972 and O.S. No. 349 of 1979 of ..... X X X X Extracts X X X X X X X X Extracts X X X X
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