1999 JTR(SC) 694
1999 AIR(SC) 2354 ; 1999 AIR(SCW) 2456 ; 1999 5 ALD(SC) 31 ; 2001 1 AllCJ 845 ; 1999 37 AllLR 99 ; 1999 2 ArbLR 685 ; 1999 3 AWC 2436 ; 1999 4 BomCR(SC) 245 ; 1999 4 CivLJ 912 ; 1999 3 CLT(SC) 181 ; 1999 97 CompCas 683 ; 1999 3 CompLJ 161 ; 2000 DNJ 117 ; 1999 4 JT 545 ; 1999 3 PLR(SC) 613 ; 1999 3 RAJ 132 ; 1999 3 RCR(Civ) 619 ; 1999 4 Scale 85 ; 1999 5 SCC 688 ; 1999 22 SCL 156 ; 1999 3 SCR 861 ; 1999 2 UJ 1272 ; 1999 2 UJ 1279 ; 1999 KHC 1230 ; 1999 6 Supreme 66
1999(6) Supreme 66
Supreme Court of India
(From Punjab and Haryana High Court)
B.N. Kirpal and S. Rajendra Babu, JJ.
Haryana Telecom Ltd. -Petitioner
versus
Sterlite Industries (India) Ltd. -Respondent
Special Leave Petition No. 3695 of 1999
Decided on 13-7-1999
Counsel for the Parties :
For the Petitioner : Arun Jaitley, Sr. Advocate, Pradeep K. Bakshi, Peyush Kalra, Advocates.
For the Respondent : Bharat Sangal, Advocate (N.P.).
Important point
Question regarding winding up of a company cannot be referred to an arbitrator under Section 8 of Arbitration and Conciliation Act.
Act Referred :ARBITRATION AND CONCILIATION ACT : S.8
(A) Section 8 of the Arbitration and Conciliation Act, 1996, provides that where an action is brought in a matter that is subject to an arbitration agreement, the judicial authority must refer the parties to arbitration upon application, subject to conditions. However, this power to refer is constrained by the nature of the dispute itself, as an arbitrators jurisdiction is limited to the matters the parties agreed to submit and cannot extend to matters outside their contractual scope.
(B) The core legal principle is that a petition for winding up a company is a matter of judicial authority under the Companies Act, concerning commercial insolvency and court-ordered dissolution, which cannot be arbitrated as it exceeds the scope of any arbitration agreement and the statutory powers of an arbitrator.
Facts of the case:
A winding up petition was filed by the respondent before the High Court. The petitioner moved an application under Section 8 of the Arbitration and Conciliation Act, 1996, seeking referral of the matter to arbitration. The Single Judge and the Division Bench dismissed the application, upholding the view that matters related to winding up of a company cannot be referred to arbitration, citing consistent High Court precedents on the issue.
Findings of Court:
The High Court correctly rejected the application. Section 8 of the 1996 Act mandates referral to arbitration only for disputes within the arbitrators competence, but a petition for winding up is not for monetary claims and pertains to a companys insolvency, which is a matter for the court under the Companies Act. An arbitrator has no jurisdiction to order winding up of a company, and thus the matter cannot be referred to arbitration.
Issues:
Whether a petition for winding up of a company, filed in a High Court, is subject to referral to arbitration under Section 8 of the Arbitration and Conciliation Act, 1996, when an arbitration agreement exists between the parties.
Ratio Decidendi:
The jurisdiction of an arbitrator is confined to the disputes agreed upon by the parties; as winding up a company is a statutory judicial function under the Companies Act and not a matter for private resolution, it cannot be referred to arbitration, and the High Court was correct in declining the referral.
Result:
The petition for leave to appeal is dismissed in limine, upholding the High Courts decision not to refer the winding up matter to arbitration.
(A) Section 8 of the Arbitration and Conciliation Act, 1996, provides that where an action is brought in a matter that is subject to an arbitration agreement, the judicial authority must refer the parties to arbitration upon application, subject to conditions. However, this power to refer is constrained by the nature of the dispute itself, as an arbitrators jurisdiction is limited to the matters the parties agreed to submit and cannot extend to matters outside their contractual scope.
(B) The core legal principle is that a petition for winding up a company is a matter of judicial authority under the Companies Act, concerning commercial insolvency and court-ordered dissolution, which cannot be arbitrated as it exceeds the scope of any arbitration agreement and the statutory powers of an arbitrator.
Facts of the case:
A winding up petition was filed by the respondent before the High Court. The petitioner moved an application under Section 8 of the Arbitration and Conciliation Act, 1996, seeking referral of the matter to arbitration. The Single Judge and the Division Bench dismissed the application, upholding the view that matters related to winding up of a company cannot be referred to arbitration, citing consistent High Court precedents on the issue.
Findings of Court:
The High Court correctly rejected the application. Section 8 of the 1996 Act mandates referral to arbitration only for disputes within the arbitrators competence, but a petition for winding up is not for monetary claims and pertains to a companys insolvency, which is a matter for the court under the Companies Act. An arbitrator has no jurisdiction to order winding up of a company, and thus the matter cannot be referred to arbitration.
Issues:
Whether a petition for winding up of a company, filed in a High Court, is subject to referral to arbitration under Section 8 of the Arbitration and Conciliation Act, 1996, when an arbitration agreement exists between the parties.
Ratio Decidendi:
The jurisdiction of an arbitrator is confined to the disputes agreed upon by the parties; as winding up a company is a statutory judicial function under the Companies Act and not a matter for private resolution, it cannot be referred to arbitration, and the High Court was correct in declining the referral.
Result:
The petition for leave to appeal is dismissed in limine, upholding the High Courts decision not to refer the winding up matter to arbitration.
Order
On a winding up petition having been filed by the respondent before the High Court, the petitioner herein moved an application under Section 8 of the Arbitration and Conciliation Act, 1996, inter alia, contending that the High Court should refer the matter to arbitration.
2. The Single Judge dismissed the application and the same was upheld by the Division Bench. While dismissing the appeal the High Court referred to similar cases relating to applications which have been filed under the provisions of the Indian Arbitration Act, 1940 where the consistent view of the High Courts was that the question regarding the winding up of a company could not be referred to an arbitrator.
3. It is submitted by learned counsel for the petitioner that the language of Section 8 of the 1996 Act is different. Mr. Jaitley, submits that according to Section 8(1) the Judicial Authority is bound to refer that matter to the arbitration when an arbitration agreement exists between the parties.
Section 8 of the 1996 Act reads as under :
“Power to refer parties to arbitration where there is an arbitration agreement-
(1) A judicial authority before which an action is brought in a matter which is the subject matter of an arbitration agreement shall, if a party so applies not later than when submitting his first statement on the substance of the dispute, refer the parties to arbitration.
(2) The application referred to in sub-section (1) shall not be entertained unless it is accompanied by the original arbitration agreement or a duly certified copy thereof.
(3) Notwithstanding that an application has been made under sub-section (1) and that the issue is pending before the judicial authority, an arbitration may be commenced or continued and an arbitral award made.”
4. Sub-section (1) of Section 8 provides that where the judicial authority before whom an action is brought in a matter, will refer the parties to arbitration the said matter in accordance with the arbitration agreement. This, however, postulates, in our opinion, that what can be referred to the arbitrator is only that dispute or matter which the arbitrator is competent or empowered to decide.
5. The claim in a petition for winding up is not for money. The petition filed under the Companies Act would be to the effect, in a matter like this, that the company has become commercially insolvent and, therefore, should be wound up. The power to order winding up of a company is contained under the Companies Act and is conferred on the court. An arbitrator, notwithstanding any agreement between the parties, would have no jurisdiction to order winding up of a company. The matter which is pending before the High Court in which the application was filed by the petitioner herein was relating to winding up of the company. That could obviously not be referred to the arbitration and, therefore, the High Court, in our opinion was right in rejecting the application.
6. For the aforesaid reasons this petition is dismissed in limine.
(C.R.) SLP dismissed.
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