TMI Blog1992 (2) TMI 303X X X X Extracts X X X X X X X X Extracts X X X X ..... the petitioner being the total sum of rentals for the said equipment for the period of five years commencing from June 17, 1986, and ending on May 16, 1991, in equal monthly instalments of Rs. 91,459. Each monthly instalment towards the monthly rent was to be paid by the 17th day of each month as specified in the lease summary schedule annexed to the agreement dated June 20, 1986 ; it was also agreed that the respondent shall pay on demand as late charge an amount equal to 2 per cent, per month of each instalment of lease rent or part thereof that remain unpaid. In terms of clause 16 of the agreement dated June 20, 1986, an event of default shall occur if the respondent fails to pay any of the lease rentals or part thereof or other payments liable to be paid as per the agreement when due and such failure continues for a period of 14 days after a written notice is sent to the respondent ; it has further been alleged in the petition that since the year 1987, the respondent-company had been committing intermittent defaults in the payment of lease rentals to the petitioner ; that despite the petitioners' oral and written requests to pay the outstanding amounts, the respondent-company ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd and obliged to make the payment to the petitioner ; that the respondent-company is unable to pay its debt and, therefore, liable to be wound up under section 433( e ) of the Act. Section 434 of the Act, defines as to when a company would be deemed to unable to pay its debt and the same reads as under : "434. Company when deemed unable to pay its debts. ( 1 ) A company shall be deemed to be unable to pay its debts ( a ) if a creditor, by assignment or otherwise, to whom the company is indebted in a sum exceeding five hundred rupees then due, has served on the company, by causing it to be delivered at its registered office, by registered post or otherwise, a demand under his hand requiring the company to pay the sum so due and the company has for three weeks thereafter neglected to pay the sum, or to secure or compound for it to the reasonable satisfaction of the creditor.;..". The petitioner claimed that a notice was caused to be delivered to the respondent-company and in response to the said notice, the respondent-company has failed to pay the sum due to the petitioner and, therefore, neglected to pay the sum and as such it be deemed that the respondent-company is unabl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... their mutual agreement nor can the arbitrator order the winding up. In view of the discussion made above, it emerges that the arbitration agreement between the parties to the company petition under sections 433, 434 and 439 continues to bind the parties and the party against whom the company petition is filed can raise the objection that in view of the arbitration clause further proceedings in the company petition be stayed. But the right to raise an objection would not mechanically result in stay of the winding-up proceedings because of the arbitration clause. It is for the court, keeping in view the peculiar facts and circumstances of the case in any dispute, the questions raised, the bona fides of the parties, the expediency of the case, the conduct of the parties, the bona fide defence raised, the problem which necessitates reference, the language of the arbitration clause, the purpose sought to be served by referring the matter to the arbitrator, the advantage and disadvantage of the reference to the other persons interested in the company, etc., to determine what order should be passed in terms of section 443 of the Companies Act, i.e., dismissal of the winding up petit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fide defence which has been raised by the applicant or whether the matter can be referred to the arbitrator in view of the facts and circumstances of the case. What emerges from the order of the Division Bench is that the relief claimed under sections 433, 434 and 439 of the Act, cannot be diverted to the arbitrator by the company court or by the parties by their mutual agreement nor can the arbitrator order winding up but a bona fide objection to the winding up including a prayer for stay of winding up proceedings can be raised and if the court is satisfied that there is a valid agreement and in that agreement there is an arbitration clause regarding the settlement of disputes by arbitration and a prima facie bona fide defence is available to the applicant which requires consideration by the arbitrator then and only then the company judge may, in his discretion, pass a suitable order staying the proceedings for winding up and referring the matter to be settled in the arbitration proceedings or dismiss the application under section 34 of the Arbitration Act keeping in view the peculiar facts and circumstances of each case, (emphasis supplied). Mr. Vajinder Jain, senior advocat ..... X X X X Extracts X X X X X X X X Extracts X X X X
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