- (1.) This company petition has been filed under Section 439(1)(b) of the Companies Act, 1956 (hereinafter to be called the Act') with the prayer that the respondent Company may be wound up under the provisions of the Act. On July 22, 1991, the respondent moved an application under Section 34, Arbitration Act stating that there is an arbitration clause in the agreement (Annexure R-1) executed in between the parties for the construction of the administrative building of the white Cement Plant at Gotan )(Nagaur) and praying that the further proceedings in the case be stayed. In his reply, the petitioner admits the execution of the said agreement and denies the remaining averments of the application. It has further been averred in the reply that the provisions of Section 34, Arbitration Act are not applicable, the arbitration clause is also not attracted in this case as the dispite referred to in this arbitration clause and the dispute referred to in the Company petition are totally different and step in these proceedings have been taken by the respondent, It is rejoinder, the respondent Company has averred that just appearance of Mr. Ajay Mathur before the Court without any authority of the Company cannot be taken' as participation in the proceedings, it is clear from the Company petition itself that it has been filed by the petitioner for the recovery of the amount and it is not maintainable. The remaining everments of the reply have been denied. In the arguments the learned counsel for the petitioner and the learned counsel for the respondent have reiterated the averments made in their reply to the application, application and the rejoinder respectively. The learned counsel for the respondent Company has relied upon Food Corporation of India and another v. Yadav Engineer and Contractor, 1982 AIR(SC) 1302, during the arguments.
(2.) The arbitration clause of the agreement executed in between the parties runs as under: "In case of any dispute relating to construction it shall be referred to the Managing Director of the Company and his decision shall be final and binding." As already observed above, the above noted Company petition has been filed for wounding up of the respondent company on the ground that it is unable to pay its debts [clause (e) of Section 433 of the Act]. Under the above quoted arbitration clause, dispute "relating to construction"can only be referred to the Managing Director of the Company for arbitration. The dispute raised in the Company Petition does not relate to the construction. It relates to the non-payment of the bill of the petitioner-creditor attracting Clause (e) of Section 433 of the Act. The scope of the above quoted arbitration clause is very narrow one. It only confers jurisdiction on the Arbitrator on the question of construction and does not say that all disputes arising out of the agreement or in respect of it will be decided by arbitration. Questions relating to the non-payment or wounding up of the Company are out-side the reach of this clause. The Arbitrator has not been conferred with the power by this clause to pronounce on the issue that the respondent Company was justified in claiming that the time was the essence of the contract and the petitioner committed the breach of the contract by not completing the work within the stipulated period. It has been observed in Gaya Electric Supply Co. Ltd. v. State of Bihar, 1953 AIR(SC) 182at page 184 para 8, as follows : "The clause here in that if any difference or dispute arises between the parties over the payment of the balance which may be found due after valuation such dispute shall be submitted to the sole arbitration of a single arbitrator. The scheme of the agreement is that the Government was to make a valuation as laid down in the Indian Electricity Act within three months of taking over the undertaking and any balance of money found due to the Company as per Government valuation was to be paid by the Government, and in case of overpayment, the excess paid to the Company on account of the "on account payment" of rupees five lakhs mentioned in pans, I had to be refunded to Government. In the case of any difference between the parties over the valuation as arrived at by the Government and that arrived at by the Company, such difference or dispute, including the claim for additional compensation of twenty per cent had to be referred to arbitration. The scope of this arbitration clause is a very narrow one. It only confers jurisdiction on the arbitrator on the question of valuation of the undertaking pure and simple and does not 'say that all disputes arising out of the agreement or in respect of it will be decided by arbitration. Questions relating to the breach of contract or its rescission are outside the reach of this clause. The arbitrator has not been conferred the power by this clause to pronounce on the issue whether the plaintiff was justified in claiming that time was of the essence of the contract and whether the State Government committed a breach of the contract by not making a valuation within the time specified. This clause is, therefore, no answer to the company's querry "Show me that I have agreed to refer the subject-matter of the suit to an arbitrator." Besides this clause in the agreement, there is nothing else which can deprive the Court of its jurisdiction to decide the plaintiffs suit as brought."
(3.) Section 34 of the Arbitration Act runs as under: "34. Power to stay legal proceedings where there is an arbitration agreement.Where any party to an arbitration agreement or any person claiming under him commences any legal proceedings against any other party to the agreement or any person claiming under him in respect of any matter agreed to be referred, any party to such legal proceedings may, at any time before filing a written statement or taking any other steps in the proceedings, apply to the judicial authority before which the proceedings are pending to stay the proceedings; and if satisfied that there is no sufficient reason why the matter should not be referred in accordance with the arbitration agreement and that the applicant was, at the time when the proceedings were commenced, and still remains, ready and willing to do all things necessary to the proper conduct or arbitration. such authority may make an order staying the proceedings.;