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TMI Blog1996 (6) TMI 351X X X X Extracts X X X X X X X X Extracts X X X X ..... date of institution of the winding up petition a sum of ₹ 5,46,545.42 was due and payable by the company to the petitioner. 6. In acknowledgment and part payment of its liability to the petitioner, the said company issued diverse cheques to the petitioner which upon presentation were however, dishonoured for non-payment. 7. The winding up petition was filed in July, 1994. On July 28, 1994, Baboo lall Jain J. gave directions for exchange of affidavits. The company from time to time obtained extension of time to file its affidavit-in-opposition and ultimately filed such affidavit-in-opposition on November 25, 1994. 8. The fact that the amount claimed is due and payable has not been disputed in the affidavit-in-opposition filed on behalf of the company in the winding up petition except that it was contended by the company that the Union Bank of India had filed a suit against it and a receiver was appointed in respect of a tea estate purchased by the company. Due to the appointment of the said receiver the lease rentals could not be paid by the company. 9. On or about March 29, 1995, that is almost four months after filing its affidavit-in-opposition to the winding up ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fact that there is no dispute that the learned advocate has argued that it must be shown that the party who has invoked the arbitration clause must be ready and willing to proceed with the arbitration and must make the application for stay of proceeding at the earliest stage. The learned advocate has relied upon the judgment and decision in State of Punjab v. Geeta Iron and Brass Works Ltd.,: [1978]1SCR746 . 17. It has further been submitted that the company has not shown its readiness and willingness to proceed with the arbitration. In fact, the application under Section 34 was made almost nine months after the institution of the winding up proceeding. 18. To appreciate the contentions of the parties it is necessary to consider the scope of Section 34 of the Arbitration Act, 1940. Section 34 provides as follows : Where any party to an arbitration agreement or any person claiming under him commences any legal proceedings against any other party to the agreement or any person claiming under him in respect of any matter agreed to be referred, any party to such legal proceedings may, at any time before filing a written statement or taking any other steps, in the proceedi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... be referred to arbitration . The Supreme Court held that the arbitration clause conferred jurisdiction on the arbitrator to decide disputes arising on the valuation of the undertaking and not all disputes arising out of the agreement or in respect of it. Therefore, the question relating to the breach of the contract or its rescission is beyond the scope of the arbitration clause. The Supreme Court have observed that the arbitration clause is a written submission agreed to by the parties in a contract and like every written submission to arbitration must be considered according to its language and in the light of the circumstances in which it is made, when deciding whether the dispute in question is covered thereby. Where the arbitration agreement is broad and comprehensive and embraces any dispute between the parties in respect of the agreement or in respect of any provision in the agreement or in respect of anything arising out of it and any of the parties seeks to avoid the contract, the dispute is referable to arbitration . if the avoidance of the contract arises out of the terms of the contract itself. But, where the party seeks to avoid the contract for reasons de hors it, th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ) the petition must be made to the judicial authority by a party to the arbitration agreement or some person claiming under him at the earliest stage of the proceeding, i.e., before the filing of the written statement or taking any other step in the proceeding. The judicial authority may, if these conditions exist, grant stay, if it is satisfied that the party applying is and has also been at all material times before the proceedings were commenced ready and willing to do all things necessary for the proper conduct of the arbitration and there is no sufficient reason for not referring the matter in accordance with the arbitration agreement. The evidence recorded by the trial court discloses that there was no dispute between the company and the Union arising under the contract on which the suit was filed, the Union accepted liability to pay the amount claimed by the company in the suit. The Union still declined to pay the amount asserting that an amount was due from the company to the Union under a distinct contract. This amount was not sought to be set off under any term of the contract under which the company made the claim. The dispute raised by the Union was, therefore, n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ay. 28. In the instant case, the company has acknowledged its liability, made part payment and there is practically no scope for raising any dispute. 29. The principles laid down by A. N. Ray J. on February 2, 1994, in an unreported decision in Subrata Sasmal and Co. Pvt. Ltd. v. Ram Kumar Radhey Shyam Dedia-- Company Petition No. 191 of 1993, do not apply to the facts and circumstances in the instant case. 30. An application under Section 34 of the Arbitration Act for stay of proceedings in a suit must disclose the existence of a dispute between the parties which would oblige the parties under the arbitration clause in an agreement, to refer the matter to arbitration. In the absence of such an allegation, an application for stay of the proceedings is not maintainable. 31. This is the settled view of law. Reference may be made in this connection also to the decisions in Daman Anand v. Hira Lal, , and Hoisery Mills v. Union of India, AIR1979Delhi64 . 32. The judgment and decision in William Jacks and Co. (India) Ltd. v. Saraswati Industrial Syndicate Ltd. [1986] 59 Comp Cas 876 (P H) has been relied upon by the learned advocate on behalf of the petitioner and the sa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d that the disputes among the partners relating to accounts, profits and losses of the business, or the rights and liabilities of the partners under the deed of dissolution or winding up of the business or any other matter relating to the firm shall be referred to arbitration. The company having failed to honour its commitments upon dissolution of the firm and take over of its business the partners filed a petition for winding up and the company filed an application for stay of proceedings on the petition and for reference of the matter to arbitration in terms of Clause 15 of the partnership deed : It was held, dismissing the application, that proceedings under Sections 433/434 read with Section 439 of the Companies Act, are in a completely different jurisdiction from that under which relief can be sought by way of arbitration, Proceedings for winding up under Sections 433/434 of the Companies Act are in no way proceedings for the recovery of any amount. None of the disputes referred to in Clause 15 of the partnership could be co-related to the relief in the company petition. The proceedings on the petition, therefore, could not be stayed. 36. The judgment and decision in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... I do not think that it can be said to arise out of or under the contract. Under Section 34 of the Arbitration Act, if any party to an arbitration agreement or any person claiming under him commences any legal proceedings against any other party to the agreement or any person claiming under him in respect of any matter agreed to be referred, any party to such legal proceedings may apply therein for stay of the proceedings. It would be seen from the above provision that the legal proceeding which can be stayed should be a proceeding in respect of any matter agreed to be referred. The expression 'any matter agreed to be referred' makes it clear that, unless the matter has been agreed to be referred, the proceeding cannot be stayed, even though it may incidentally have a bearing upon the contract providing for arbitration. In the instant case, it cannot, by any stretch of reason, be said that the parties contemplated that any reference to arbitration for winding up of the applicant-company was possible or could be done by an arbitrator. In that view, I think, the company petition is not liable to be stayed. The application is accordingly dismissed. 38. I respectfully agree ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and by actually filing such affidavit-in-opposition has displayed an unequivocal intention to proceed with the winding up petition. 41. He has further submitted that in the present case in the winding up proceeding affidavit-in-opposition was filed on November 25, 1994, while the application under Section 34 was made on or about March 29, 1995. It is the contention of the learned advocate for the petitioning creditor that since an application is required to be filed before filing of the written statement, the affidavit-in-opposition to the winding up petition also should not have been filed actually before filing of the petition for stay under Section 34. In my view, the submission of the learned advocate for the petitioning creditor cannot be said to be without any substance. 42. It is quite true that unless a clear case to the contrary is made out, the approach of the court should be to hold the parties to their bargain provided necessary conditions for invoking Section 34 are satisfied. 43. One of the conditions, however, to be satisfied before an order under Section 34 can be obtained is that the party to the legal proceeding has at any time before filing a written sta ..... X X X X Extracts X X X X X X X X Extracts X X X X
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