Hindu Mercantile Corporation Pte. Ltd. v. J.H. Rayner & Co. Ltd.

(Delivered by Palaniswamy J.)

This Judge's Summons has been taken by the Hindu Mercantile Corporation Pte. Ltd., under S. 34 of the Arbitration Act for stay of further proceedings in Company Petition No. 47 of 1969. The respondent-company is Rayne and Co., Ltd., a company incorporated In the Unised Kingdom. The respondent-company, among ether things, carries on business as buyers and sellers of Indian groundant extractions. The appellant and the respondent were having dealings with each other and the terms of the contract are regulated by an agreement dated 13th June 1966. Alleging that in respect of the transactions the applicant company is indebted to the respondent-company to the tune of Rs. 1,49,312-72 and that the applicant-company though it admits Its liability was suable to pay the debts, the respondent company has filed the company petition and prayed for an order of winding up the applicant company. The applicant company has taken out this application stating that under the terms of the contract there is a clause providing for arbitration, that under the said clause all disputes arising out of or under the contract should be first settled by arbitration as provided therein, and that the existence of an award is a condition precedent for any of the parties to the contract to initiate legal proceedings. It is therefore contended that the company petition filed for winding up the applicant-company should be stayed. The respondent company contends that the matter arising for decision in the company petition is not one that arises under the contract and that, therefore, the company petition It not liable to be stayed.

2. The relevant clause in the agreement providing for arbitration is clause 26. Sub-clause (a) of that clause inter alia states that all disputes from time to time arising out of or under the contract shall be settled by arbitration in London in accordance with the Roles and Regulations of the Cattle Food Trade Association incorporated which are deemed to form part of the contract. Sub-clause (b) of that clause states inter alia that in respect of any such dispute neither party thereto shall bring any action or other legal proceeding until such dispute shall first have been beard and deter mined by the arbitrator and that the obtaining of an award from the arbitrator shall be a condition precedent to the right of either party to bring any action or ether legal proceedings against the other in respect of any inch dispute. The question is whether the Institution of the petition under S. 433(c) of the Companies Act is a proceeding that would come under the arbitration clause. No doubt, the language employed in clause 26 of the contract is wide to cover any dispute that may arise out of or under the contract. The question for decision in the company petition is not a matter that arises out of or under the contract. The respondent company has filed the company petition on the allegation that the applicant has admitted Its liability for a particular amount, No relief Is sought as regards any matter that arises out of or under the contract. The point for decision in the company petition is whether the applicant-company is unable to pay the debt. If the debt Itself is disputed, it would be a matter for consideration in the company petition whether an enquiry into that controversy is permissible under the provisions of the Companies Act. I do not wish to express any opinion on that question at this stage. Suffice it to note that so for as the relief claimed in the company petition Is concerned, I do not think that it can be said to arise out of or under the contract. Under S. 34 of the Arbitration Act, where any patty 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 the such legal proceedings, may apply therein for stay of the proceedings. It would be seen from the above prevision that the legal proceeding which can be stayed should be a proceeding in respect of any matter agreed to be referred. The expression “any matter agreed to be referred” makes it clear that unless the matter has been agreed to be referred, the proceeding cannot be stayed, even though it may incidentally have a bearing upon the contract providing for arbitration. In the instant case, it cannot by any stretch of reason be said that the parties contemplated that any reference to arbitration for winding up the applicant-company was possible or could be done by an arbitrator. In that view, I think the company petition is not liable to be stayed. The application is accordingly dismissed. No order as to costs.

V.C.S