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1999 (12) TMI 784 - HC - Companies Law

Issues:
1. Validity of the hire purchase agreement and jurisdiction of the court
2. Application under section 22 of the Sick Industrial Companies Act
3. Suspension of proceedings in the suit
4. Referral of dispute to arbitration

Analysis:
1. Validity of Hire Purchase Agreement and Jurisdiction of the Court:
The plaintiff filed a suit claiming ownership of machineries under a hire purchase agreement, while the defendant argued it was a loan transaction. The defendant invoked section 8 of the Arbitration Act, stating the matter should be referred to arbitration as per the agreement's clause. The plaintiff, however, contended that the defendant disputed the existence of the arbitration clause and hire purchase agreement, leading to the suit filing. The court noted the presence of an arbitration agreement and held that the matter should be referred for arbitration, dismissing the suit.

2. Application under Section 22 of the Sick Industrial Companies Act:
The defendant, a sick industry under the Act, sought suspension of legal proceedings as per section 22 to facilitate its revival without hindrance. The plaintiff opposed, alleging the defendant's intention was to delay payments. The court emphasized that section 22 did not apply to the facts of the case, ruling against suspending proceedings in the suit.

3. Suspension of Proceedings in the Suit:
The plaintiff's main relief in the suit was for ownership and possession of leased equipment, not prohibited by the Act. The court clarified that section 22 only pertained to specific proceedings against the industrial company, hence rejecting the suspension of all proceedings in the suit.

4. Referral of Dispute to Arbitration:
The court considered the provisions of the Arbitration Act, emphasizing the mandatory nature of referring parties to arbitration when an agreement exists. Despite the defendant's participation in some proceedings, the court held that the plaintiff should have referred the matter to arbitration, directing the plaintiff to resort to arbitration proceedings and dismissing the suit accordingly.

In conclusion, the court ordered the plaintiff to pursue arbitration as per the agreement, rendering the suit not maintainable. The defendant's application under section 22 was dismissed, and the court highlighted the mandatory nature of arbitration referral when an agreement exists, leading to the dismissal of the suit.

 

 

 

 

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