TMI Blog1971 (2) TMI 62X X X X Extracts X X X X X X X X Extracts X X X X ..... the following circumstances. The first respondent, prior to its winding-up, entered into two contracts with the appellant for purchase of certain items of textile machinery and under the contracts the first respondent paid an aggregate sum of Rs. 39,852 to the appellant. The appellant was ready and willing to deliver the contracted items of textile machinery to the first respondent against payment of the balance of the purchase price but the first respondent failed to take delivery owing to its difficult financial circumstances and the appellant, therefore, forfeited the sum of Rs. 39,852 on the basis that it represented earnest money paid by the first respondent to the appellant. The first respondent contested the claim of the appellant to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e other was the first respondent by its official liquidator. On service of the writ of summons, the appellant immediately made an application to this court for stay of the suit under section 34 of the Arbitration Act, 1940, on the ground that the dispute which formed the subject-matter of the suit was liable to be referred to arbitration in accordance with the arbitration agreement contained in each of the two contracts between the parties and the appellant was, at the time when the suit commenced, and still remained, ready and willing to do all things necessary to the proper conduct of the arbitration. The first respondent through its official liquidator opposed the application for stay mainly on the ground that on a proper interpretation ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng up the company shall, notwithstanding anything contained in any other law for the time being in force, have jurisdiction to entertain, or dispose of ( a )any suit or proceeding by or against the company ; ( b )any claim made by or against the company (including claims by or against any of its branches in India); ( c )any application made under section 391 by or in respect of the company; ( d )any question of priorities or any other question whatsoever,2 whether of law or fact, which may relate to or arise in course of he winding up of the company : Whether such suit or proceeding has been instituted or is instituted, or such claim or question has arisen or arises or such application has been made or is made before or after the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... all not prevail and the High Court shall have jurisdiction to entertain and dispose of the claim made by or against the company. The question is whether this provision excludes an arbitration agreement between a third party and the company so that once winding-up intervenes, such arbitration agreement cannot be enforced by a third party against the company. Now one thing is clear that, when a company is ordered to be wound up, the arbitration agreement to which the company was a party is not superseded : it does not cease to be operative. The arbitration agreement continues to bind the company subsequent to the order of winding-up as it did before. It is obvious that this should be so because when a company is ordered to be wound up, it d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eement on the jurisdiction of the High Court under section 446, sub-section (2)? Does it in any way impinge upon that jurisdiction or detract from it ? Is the enforcement of the arbitration agreement inconsistent with the conferment of jurisdiction on the High Court under section 446, sub-section (2)? The answer must clearly be in the negative. An arbitration agreement does not in any way oust the jurisdiction of the court which is otherwise competent to entertain and decide the dispute. It is a well-settled principle of jurisprudence that parties cannot by consent confer jurisdiction on the court or oust it. An arbitration agreement is merely a contract between the parties that the dispute between them shall be decided by the private forum ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e, if the company files a suit for enforcing a claim against a third party, it would have to be filed in the High Court. But if the suit is filed in breach of an arbitration agreement which continues to be binding on the company despite the making of the order of winding-up, the High Court can, certainly, in the exercise of its discretion under section 34 of the Arbitration Act, on proper application made to it on behalf of the third party, stay the suit with a view to enforcing the arbitration agreement. The High Court would not in such a case be disowning its jurisdiction. It would, on the contrary, be exercising its jurisdiction by saying that, though it has jurisdiction to entertain and dispose of the suit, it would hold the parties to ..... X X X X Extracts X X X X X X X X Extracts X X X X
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