SHREE SADUL TEXTILES LTD Vs. RAZA TEXTILES LTD

JUDGEMENT

(1.) THIS is an appeal under sec. 18 of the Rajasthan High Court Ordinance against the judgment of the Company Judge dated December 7, 1971, and has arisen in the following circumstances - M/s Raza Textiles Limited and M/s J P. Srivastava & Sons Private Limited who are respondents Nos. 1 and 2 respectively in this appeal (who shall hereinafter be referred to as the petitioners), submitted a petition under secs 397 and 398 of the Companies Act (I of 1956) hereinafter referred to as the Act) impleading the appellants (who shall hereinafter be referred to as the main contesting respondents) and respondents 2, 3, 6 to 9 and 16 (who shall hereinafter be referred to as the proforma respondents) for appropriate orders. After reply by the respondents and rejoinder, the application came up before the learned Company Judge on February 24, 1971. The Official Liquidator, it is agreed, made an oral request for time to file a representation on behalf of the Central Government and the learned Judge agreed to grant time The application was heard by the learned Judge on February 24, 25 and 26, 1971. On February 26, 1971, a joint application by the petitioners and two of the proforma respondents J. K. Srivastava and H. K. . Srivastava on the one hand and main contesting respondent 4, 5 & 10, 15 on the other, was filed. In that application it was stated that it had been agreed between them that a long term solution of the differences/disputes between them lay in one of those groups selling out its shares in the Company to the others. It was agreed between them that "the manner of sale and offer of the parties in this behalf should be referred to the arbitration of Shri M. C. Chagla" or, failing him, one of the other persons named in the application. It was stated that the arbitrator shall decide which of the two groups was to sell its share in the Company to the other and at what price. It was prayed that an order may be passed in terms of that application which contained some other details as well The learned counsel for the other parties had no objection if the arrangement stated in the application dated February 26, 1971, was given effect to. The Company Judge made an order as prayed by the parties in the application and incorporated the terms of the application in his order. Thereafter, some steps were taken to secure the award from Shri M. G. Chagla but he could not give any award and eventually, on April 12, 1971 Mr. Dang and Mr. Arora submitted an application before the Company Judge stating the facts and reporting that Mr. M C. Chagla had reached the conclusion that the arbitration had "proved abortive". When the case eventually came for consideration after a few adjournments on November 30, 1971. a preliminary objection was raised on behalf of the main contesting respondents that the petition could not be sustained and must be dismissed because the Court had granted that particular relief which was stated in its order dated February 26, 1971, and that the relief fell within the purview of sec. 402 (b) of the Act, and that the petitioners were themselves to blame if they did not avail of that relief. THIS application was opposed on behalf of the petitioners on the following grounds - 1. That the petition under secs. 397 and 398 of the Act could not be referred to arbitration and was not actually referred to the arbitration.

(2.) THAT the order dated February 26, 1971, merely referred to the dispute between the petitioner and the proforma respondents Nos. 2 and 3 on the one hand and the main contesting respondents on the other, for a long term solution of their differences/disputes, and it was therefore futile to contend that the petitioners should not be heard on their petition under secs. 397 and 398 of the Act merely because nothing ultimately came out of that attempt at a long term solution.