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William Jacks and Company (India) Limited Vs. Saraswati Industrial Syndicate Limited - Court Judgment

LegalCrystal Citation
SubjectCompany
CourtPunjab and Haryana High Court
Decided On
Case NumberCompany Application No. 54 of 1983 in Company Petition No. 4 of 1983
Judge
Reported in[1986]59CompCas876(P& H)
ActsCompanies Act, 1956 - Sections 433; Arbitration Act, 1940 - Sections 34
AppellantWilliam Jacks and Company (India) Limited
RespondentSaraswati Industrial Syndicate Limited
Appellant Advocate Bhagirath Das, Senior Adv. and; Ramesh Kumar, Adv.
Respondent Advocate N.K. Khaitan,; R.N. Narula,; M. Sud and;
DispositionApplication dismissed
Cases ReferredSalig Ram v. New Suraj Financiers
Excerpt:
.....the right to do so would clearly be unjust to the opposite party whichcould have rightfully objected to the adjournment, had there been any indication that the prayer was not being made on instructions from the state government. an oral request is as good as a request in writing. hira lal sud [1978] plr 239, wherein it was held that an oral request for adjournment for filing a written statement is as good as a written request. therefore, the court has necessarily to look both at the arbitration clause as well as the particular dispute or difference which are specified in the application under section 34, in view of the above observations, the application under section 34 was dismissed holding that neither the dispute nor difference nor the reason for the matter being referred to..........advocate, appeared on behalf of the respondent and made a request for time to enable him to file a written statement. at his request, the case was adjourned to april 7, 1983. two days before the date of hearing, that is, on april, 5, 1983, an application (c.a. no. 54 of 1983) was filed on behalf of the syndicate under section 34 of the arbitration act, 1940 (hereinafter called 'the act'), for staying the proceedings on the ground that the agreement between the parties contained an arbitration clause. the application has been contested on behalf of the company.2. the first contention of mr. bhagirath das is that there is an arbitration clause in the agreement between the parties according to which all the disputes are to be referred to an arbitrator to be appointed by the parties by.....
Judgment:

Rajendra Nath Mittal, J.

1. Briefly, the facts are that M/s. William Jacks and Co, (India) Ltd. (hereinafter referred to as 'the company'), filed a petition under Section 439 read with Sections 433 and 434 of theCompanies Act, 1956, against Saraswati Industrial Syndicate Ltd. (hereinafter referred to as 'the Syndicate'). stating that an amount of Rs. 5 lakhs odd was due from it which it failed to pay in spite of acknowledging that the above said amount was due from it. Notice in the petition was ordered to be issued by this court on January 13, 1983, for March 3, 1983. The notice was despatched on behalf of the company by Mr. R. N. Narula, advocate to the Syndicate, on January 18, 1983, which must have been received within one week thereafter. On March 3, 1983, Mr. A.K. Jaiswal advocate, appeared on behalf of the respondent and made a request for time to enable him to file a written statement. At his request, the case was adjourned to April 7, 1983. Two days before the date of hearing, that is, on April, 5, 1983, an application (C.A. No. 54 of 1983) was filed on behalf of the Syndicate under Section 34 of the Arbitration Act, 1940 (hereinafter called 'the Act'), for staying the proceedings on the ground that the agreement between the parties contained an arbitration clause. The application has been contested on behalf of the company.

2. The first contention of Mr. Bhagirath Das is that there is an arbitration clause in the agreement between the parties according to which all the disputes are to be referred to an arbitrator to be appointed by the parties by mutual agreement and in the event of the parties failing to agree, the reference would be to a nominee of the Federation of Indian Chambers of Commerce and Industry, Delhi, at the instance of the party first applying to him. He submits that, therefore, the proceedings are liable to be stayed under Section 34 of the Act.

3. On the other hand, Mr. Khaitan has argued that the Syndicate took steps in the proceedings as a request was made on its behalf to file a written statement. In the circumstances, he submits, that the proceedings cannot be stayed.

4. I have duly considered the arguments of the learned counsel. It is not disputed that the service of the petition was ordered to be effected on the Syndicate in the second week of January, 1983. It is also not disputed that the notice must have been served upon the Syndicate within a week from January 18, 1983, the date of its issuance. A request was made by Mr. A. K. Jaiswal to adjourn the case for enabling him to file the written statement on March 3, 1983, that is, more than a month, after having received notice by the Syndicate. In that situation, the inference is that the Syndicate knew the contents of the petition and it wanted to defend the same on merits. Section 34 of the Arbitration Act, inter alia, provides that where any party to an arbitration agreement commences any legal proceedings in respect of any matter agreed to be referred, any party to such legal proceedings may at any time before filing a written statement ortaking any other steps in the proceedings, apply to the judicial authority before which the proceedings are pending to stay the proceedings.

5. The question that arises for determination is whether the statement of Mr. Jaiswal amounts to taking a step in the proceedings. A similar question arose before the Supreme Court in State of Uttar Pradesh v. Janki Saran Kailash Chandra, AIR 1973 SC 2071. In that case, a suit was instituted for recovery of some amount by way of damages against the State of U.P. The summonses of the case were served on the District Government counsel who filed an appearance slip in the court and an application praying for one month's time for the purpose of filing a written statement. The prayer was granted. Before the next date, he moved an application under Section 34 of the Act stating that there was an arbitration clause in the agreement between the parties to the suit and, therefore, the suit should be stayed. The trial court accepted the application and stayed the suit. On appeal, the High Court held that the action of the Government Pleader in applying for time to file the written statement amounted to taking a step in the proceedings within the meaning of Section 34 of the Act. Consequently, the appeal was accepted and the application under Section 34 was dismissed. The State went up in appeal before the Supreme Court. Dua J., while speaking for the court, after taking into consideration various cases, observed that there was no serious infirmity in the impugned judgment of the High Court. The District Government counsel in that case was empowered to appear and act for and on behalf of the Government and also to make applications on its behalf. If the counsel wanted time for the purpose of having fuller instructions, he could have asked for it specifically, for, he was not a layman ignorant about the legal position but a professional lawyer retained by the Government for the purpose of acting and pleading on behalf of the Government as a recognised agent. He, however, chose instead to ask for time specifically for filing a written statement and this act he purported to do on behalf of the State Government which he was fully empowered to do. The State took the benefit of his appearance and his successful prayer for adjournment of the case by one month for the purpose of filing the written statement. In those circumstances, it was hardly open to the State Government to plead that the District Government counsel was not authorised to seek adjournment on its behalf for that purpose. If he wanted time for further consultations, he could and should have specifically made a prayer to that effect. It was further observed that it would be somewhat irrational and perhaps incongruous to permit the State, after having taken the benefit of that adjournment, to plead that the application for adjournment was not made on instructions and was unauthorised. To accede to the State Government the right to do so would clearly be unjust to the opposite party whichcould have rightfully objected to the adjournment, had there been any indication that the prayer was not being made on instructions from the State Government. The above observations are fully applicable to the facts of the present case.

6. Mr. Bhagirath Das sought to distinguish the case on the ground that Mr. Jaiswal did not file any memorandum of appearance on behalf of the Syndicate nor did he move any application as was done in the above-referred case. I am not impressed with the alleged distinction. It is presumed that when a lawyer puts in appearance, he does so on the instructions of his client. It is not necessary that he must put in a memorandum of appearance. It is also not necessary that a request should always be made in writing. An oral request is as good as a request in writing. In this view, I am fortified by the observations of this court in Union of India v. Hira Lal Sud [1978] PLR 239, wherein it was held that an oral request for adjournment for filing a written statement is as good as a written request. It was further held that if a written request seeking adjournment to file a written statement amounts to taking a step in the proceedings, there is no reason why an oral request to the same effect would not amount to taking such a step. That decision was followed in Segat Brothers v. Food Corporation of India [1983] CLJ (C&Cr;) 24, wherein similar observations were made.

7. Mr. Bhagirath Das made a reference to Harbans Lal v. National Fire and General Insurance Co. Ltd., AIR 1955 NUC (Punj) 4017, and Punjab State v. Moji Ram, AIR 1957 Punj 223, to show that a request for adjournment in some circumstances does not amount to a step in the proceedings. In Harbans Lal's case, AIR 1955 NUC Punj 4917, the summonses were served on the branch office of the defendant and it was necessary to obtain instructions from the head office of the company. Consequently, an adjournment was given on an oral request. In Moti Ram's case, AIR 1957 Punj 223, the Government Pleader appeared voluntarily without any authority from the Government to represent it and asked for adjournment for filing the written statement on the assumption that in due course he would receive instructions from the Government. Therefore, it was held that the request would not amount to a step in the proceedings. From the above facts, it is clear that both the cases are distinguishable.

8. After taking into consideration all the aforesaid facts and the case-law, I am of the view that the request for an adjournment for filing a written statement on behalf of the Syndicate amounts to a step in the proceedings. Consequently, it is not entitled to the benefit of Section 34 of the Act.

9. Mr. Khaitan raised some more points. Though in view of the above observations, they are of academic interest only, yet I deem it proper to deal with them.

10. Mr. Khaitan argues that in the application, material particulars of the dispute have not been given and, therefore, it is liable to be dismissed on this short ground, I find substance in this submission too. It is evident from the language of Section 34 of the Act that the existence of a dispute is a condition precedent for referring the matter to the arbitrator. Therefore, the defendant, in an application under the said section, should bring all the material before the court so that it may be able to record a finding that the subject-matter of dispute was agreed to be referred to the arbitrator. If such material is not provided, the application is liable to be dismissed on this ground. Reference in this regard may be made to my decision in Daman Anand v. Him Lal, AIR 1974 P&H; 232, wherein it was held that 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. Similar view was taken by the Delhi High Court in Pearl Hosiery Mills v. Union of India, AIR 1979 Delhi 64. It was held therein that in an application under Section 34, the court has to see as to what is the dispute and what is the difference and then look at the arbitration clause to find out if it falls within its scope. Therefore, the court has necessarily to look both at the arbitration clause as well as the particular dispute or difference which are specified in the application under Section 34, In view of the above observations, the application under Section 34 was dismissed holding that neither the dispute nor difference nor the reason for the matter being referred to arbitration was set out in the application for stay.

11. Adverting to the facts of the present case, it will be seen that the allegation of the Syndicate-applicant, is that on account of non-compliance of the obligations enjoined upon the company, it has suffered losses and hardship. No particulars as to what were the obligations of the company which were not complied with have been given. It has also not been made clear as to what losses have been suffered by it. Therefore, I am of the view that the details of the dispute are lacking. In the circumstances, it can also be inferred that the application has been made mala fide to delay the proceedings.

12. The last submission of Mr. Khaitan is that an application under Section 34 of the Arbitration Act is not maintainable in a winding-up petition. In support of his contention, he places reliance on a decision of this court in Salig Ram v. New Suraj Financiers & Chit Fund Company (C.A. No. 8 of 1979 in C.P. No. 147 of 1978, decided on July 12, 1979). I also find substance in this submission. The jurisdiction for ordering winding-up of a company is a special jurisdiction which has been conferred on the High Courts. The object of passing such an order is that the assets of the company should be realised and debts paid expeditiously. The passing of such an order against the company has a serious consequence and, therefore, the jurisdiction has been conferred on the High Courts. The order of winding-up can be passed on the grounds mentioned in Section 433 of the Companies Act. It does not appear to be the intention of the Legislature that such a power can be conferred on an arbitrator. The petition for winding-up cannot be treated as one for recovery of an amount of debt from the company. Therefore, I am of the opinion that an application under Section 34 is not maintainable in a winding-up petition. In the above view, I am fortified by the following observations of B. S. Dhillon J. in Salig Rain's case:

' The application is wholly misconceived. The proceedings under the provisions of Sections 433 and 434 read with Section 439 of the Companies Act, 1956, are completely a different jurisdiction than the one regarding which remedy can be sought by way of arbitration under the clause in question. It is fallacious to conceive that the proceedings for winding up under the provisions of Sections 433, 434 and 439 of the Companies Act, are by way of recovery of amount touching the various provisions of the scheme. Under the provisions of Section 433 of the Companies Act, the Legislature codified the circumstances/grounds on which a company may be ordered to be wound up by the court. Section 434 provides as to under what circumstances a company may be deemed to be unable to pay its debts, whereas Section 439 makes provision as to an application for winding up. It goes without saying that in case the petitioner is unable to satisfy the conditions precedent as laid down in Sections 433 and 434 of the Companies Act, the petition for winding up is bound to be dismissed. The said petition cannot be taken to be the proceedings for the recovery of the disputed debts or proceedings regarding the settlement of the disputes arising out of the rights and liabilities or the conditions of the scheme. Therefore, the petition for staying the proceedings is misconceived.'

13. For the aforesaid reasons, I do not find any merit in the application and dismiss the same. The case is adjourned to November 17, 1983, for written statement.


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