*1* arbap.222.07.sxw kps I N THE HIGH COURT OF JUDICATURE AT BOMBAY ORDINARY ORIGINAL CIVIL JURISDICTION ARBITRATION APPLICATION NO.222 OF 2007 B.D.Rao. ..Applicant -VERSUS- Pioneer Distilleries Limited. ..Respondent. .... Mr.Sandip Parikh i/b Deven Dwarkadas and Partners, for the Applicant. Mr.D.B. Savant a/w Mr.Santosh Patil, for the Respondent. .... CORAM : S.J. VAZIFDAR, J. DATE : 30th July, 2010. P.C. 1 This is an application under Section 11 of the Arbitration and Conciliation Act, 1996 for appointment of the Arbitrator. 2 There is no dispute that the parties had executed a Memorandum of Understanding (MoU) dated 21st July, 1999 under which the Applicant had agreed to invest a sum of Rs.1 crore in the Respondent. In consideration thereof, the Applicant was to be issued equity shares of the said value. Clause-6 of the Memorandum of Understanding is an arbitration agreement. 3 Equity shares of the value of Rs.50 lacs were issued. By an agreement dated 24th August, 2001, the balance amount of Rs.50 lacs was treated by the parties as an unsecured loan. The agreement *2* arbap.222.07.sxw recorded that out of this amount, Rs.23 lacs had been paid leaving Rs.27 lacs as the balance due. The amount is to be paid with interest @ 18.92% per annum from 18th August, 1999 till payment. The agreement was, thus, in variation of the Memorandum of Understanding dated 21st July, 1999. 4 As the Respondent failed to make payment despite a demand, the Applicant after serving a statutory notice under Sections 433/434 of the Companies Act, 1956 filed a petition for winding up the Respondent. The said petition was disposed of by an order dated 11th April, 2007. The learned Judge held inter alia that there was no bona-fide defence and passed the following order:- “Hence, the following order: (i) Within a period of 8 weeks from today, the Respondent shall deposit with the Prothonotary and Senior Master, an amount of Rs.17 lakhs towards the claim of the Petitioner for interest in pursuance of the agreement dated 24th August 2001; (ii) An intimation of the deposit shall be furnished by Counsel for the Respondent to Counsel for the Petitioner; (iii) Upon intimation of deposit in terms of clause (ii), the Petitioner would be at liberty to file a suit for recovery of its dues on account of interest. The amount so deposited in terms of clause (i) shall lie to the credit of the suit and shall abide by the final decree that would be passed in the suit; (iv) Pending disposal of the suit, the Prothonotary and Senior Master, shall invest the amount in a fixed deposit of a Nationalised Bank to be renewed periodically; (v) In the event that the Respondent fails to deposit the amount within the period of 8 weeks as stipulated earlier, the Company Petition to stand admitted and shall thereupon be advertised in two local newspapers, namely, “Free Press Journal”, “Navshakti” and in the Maharashtra Government Gazette. The Petitioner shall deposit an amount of Rs.10,000/- with the Prothonotary & Senior *3* arbap.222.07.sxw Master towards the publication charges, within three weeks of the Petition standing admitted with intimation to the Company Registrar, failing which the Petition shall stand dismissed for non- prosecution; (vi) In the event that the Petitioner fails to institute a suit and furnish intimation thereof to the Advocate for the Respondent within a period of four months from the date of deposit, the Respondent would be at liberty to apply in these proceedings for the discharge of the security.” 5 The only defence to this Application is that the learned Judge had granted the Applicant, liberty to file a suit for recovery of the amounts towards interest. A balance amount of Rs.27 lacs had also been repaid. It was contended that in view of the order the Applicant cannot now invoke the arbitration clause. 6 The submission is not well founded. The learned Judge in winding up petition was not concerned with the arbitrability of dispute. This issue was not raised before the learned Judge and could not have been raised in a winding up petition. Therefore, the learned Judge did not even consider this issue. The Applicant was granted liberty to file a suit for recovery of the said amount. The Applicant was not bound to take recourse to that remedy namely the remedy of filing of the suit. The Applicant’s right to invoke the arbitration clause is not affected by the said order. It would always be open to the Applicant to seek modification or suitable directions regarding the amounts which have been deposited pursuant to the said order dated 11th April, 2007 by having the same transferred to the credit of the arbitration proceedings. That is an altogether different matter. *4* arbap.222.07.sxw 7 In the circumstances, the Applicant’s invocation of the arbitration clause by the letter dated 05th September, 2007 was in accordance with law. 8 The Arbitration Application is, therefore, allowed as prayed. There is no objection to the Arbitrator named in the letter of invocation. Mr.M.P.S. Rao, Senior Advocate of this Court is appointed as the Sole Arbitrator. The costs of this application shall be costs in the arbitration proceedings. -