Karnataka High Court
M. Vinoda Rao And Ors. vs M. Janardhana Rao And Ors. on 8 April, 1988
Equivalent citations: [1988]63COMPCAS437(KAR), 1988(1)KARLJ573
JUDGMENT
1. This is an application filed by three of the respondents in Company Petition No. 1 of 1988. The prayer in the application is to stay further proceedings in the company petition on the ground that the petitioner cannot maintain this petition under section 582 of the Companies Act for the winding up of the firm as an unregistered company and as they have not exhausted the remedy of arbitration to resolve the dispute between the parties as required by section 34 of the Arbitration Act. In support of the latter contention, learned counsel for the applicant relied upon the decision of the Supreme Court in the case of Food Corporation of India v. Yadav Engineer and Contractor, AIR 1982 SC 1302.
2. I have perused the decision. In my opinion, the said decision has no application whatsoever to the facts of this case. What their Lordships of Supreme Court laid down in that case was that section 34 of the Arbitration Act would be a bar to maintain a suit for relief against one of the parties to the agreement which provided for arbitration if the dispute related to the agreement itself and was required to get the dispute resolved by arbitration. In that context, it was held that the approach of a civil court should be such that the suit should be stayed in order to give effect to the provisions in the agreement to those who seek resolution of their disputes. On that principle, they held that entitlement of parties to get the civil dispute adjudicated under section 9, Civil Procedure Code, would stand barred by section 34 of the Arbitration Act.
3. But it is not the case here. Here, there is no relief sought by one partner against another partner; nor is any dispute required to be settled between the partners. What is sought is the dissolution of the body of persons which answers to the description of an unregistered company within the meaning of section 582 of the Companies Act. Winding-up proceedings commenced in that behalf is not a civil suit. Nor is the company court a civil court. It is a proceeding of special nature and character which provides for winding up of not only companies incorporated under the Act but also any other body of persons which will answer to the description of an unregistered company.
4. What is being decided in this proceeding is whether an unregistered company should or should not be wound up. In that view of the matter, section 34 of the Arbitration Act which expressly refers to "any legal proceeding against any other party to the agreement' cannot be construed to have any application to a proceeding which in its very nature is a proceeding which will result in an order in rem and not in personal.
5. Therefore, Application No. 319 of 1988 if rejected.