BRITISH INDIA CORPORATION LIMITED KANPUR Vs. STAR SPIN AND TWIST MACHINERY LIMITEDIN LIQUIDATION BANGALORE

JUDGEMENT

(1.) IN this application filed under Section 446 (1) of the Companies Act, 1956 (hereinafter referred to as "the act"), the applicant has prayed for leave to proceed with the arbitration proceedings pending before the arbitrator.

(2.) FEW facts which may be relevant for the disposal of this application, may be stated as hereunder: (a) the applicant, in this application, is a company registered under the Provisions of the act and it claims that it is engaged in the manufacture and production of pure and blended woollen fabrics. According to the assertion made in the application, the applicant-company had placed orders with the respondent-company on 12th June, 1986 and 2nd December, 1987 for supply of 32 numbers of tfo twister machines; and towards the value of the said 32 twisted machines, the applicant-company had paid an advance of Rs. 11,60,808-00 on 31st July, 1986 and another sum of Rs. 24,89,448-00 on 3rd December, 1987. It is the further case of the applicant that out of the orders placed for supply of 32 machines in respect of which the amounts were advanced, as stated earlier, the respondent-company had supplied only 28 tfo (two for one) twister machines valued at Rs. 33,44,067-65. It is also the case of the applicant that the respondent had made a demand for increased payment for supply of 4 machines on the ground of escalation of price; and since, as per the terms of the contract, the applicant-company was not liable to pay the escalated price, the applicant-company refused to pay the price; and consequently, the applicant-company was constrained to cancel the orders for 4 machines and demanded refund a sum of Rs. 3,06,188-00 from the respondent-company with interest at 24 per cent, which was paid to the respondent-company as advance; and since the respondent-company refused to refund the said amount and the dispute having arisen between the parties, in terms of the contract dated 2nd December, 1987 entered into between the parties, the dispute was referred by the applicant-company to upper India chamber of commerce, kanpur, and Sri b. r. mansingh, ll. m. (london), barrister-at-law, 15/96, civil lines, kanpur, was appointed as the sole arbitrator; and the proceedings are now pending before the arbitrator. Therefore, it is the case of the applicant-company that the applicant has made a claim in all for Rs. 11,88,890-00 along with interest at 24 per cent before the sole arbitrator; and since the proceedings are pending before the arbitrator and has made substantial progress, it would be in the interest of Justice to permit the applicant to proceed with the arbitration proceedings pending before the arbitrator. (b) however, the prayer made by the applicant to grant leave to the applicant to proceed with the arbitration proceedings, is resisted by the official liquidator. It is the case of the official liquidator that the applicant is an ordinary unsecured creditor and it is required to file its claim with the official liquidator as provided under Section 528 of the act read with rules 148 to 179 of the companies (court) rules, 1959 (hereinafter referred to as "the rules"); and for any reason, if the official liquidator disallows the claim of the applicant, the applicant has a right of appeal provided under Rule 164 of the rules; and therefore there is absolutely no justification to allow the application.

(3.) SRI krishnamurthy, learned counsel appearing for the applicant, submitted that having regard to the facts and circumstances of the case, a lawyer, who is a barrister-at-law possessing a post-graduation qualification, has already been appointed as an arbitrator in terms of the arbitration clause provided in the contract entered into between the applicant and the respondent-company; and the respondent-company has already filed its objections, it would be in the interest of Justice to permit the applicant to proceed with the arbitration proceedings. He pointed out that if the arbitration proceedings are allowed to be pro- ceeded with, no prejudice or injustice will be caused to the respondent and any one who is interested in the affairs of the respondent-company. In support of his contention that in a matter like this, the proceedings should be allowed to be proceeded with before the arbitrator, he relied upon a decision of the Allahabad High Court in the case of hazi raunak all khan v uco bank limited and another. Sri krishnamurthy further submitted that since the claim made by the applicant against the respondent-company has not yet been crystallised, it would be more appropriate that the dispute now pending before the arbitrator should be allowed to be completed by him and thereafter, the applicant may be permitted to make its claim before the official liquidator in the light of the award that may be passed by the arbitrator.