*1* cp.217.09.27.sxw kps IN THE HIGH COURT OF JUDICATURE AT BOMBAY ORDINARY ORIGINAL CIVIL JURISDICTION COMPANY PETITION NO.217 OF 2009 KLIRAK Sh. P.K. ..Petitioner -Versus- M/s A VI Shipping Pvt.Ltd.. ..Respondents .......... Mrs.Usha Srivastava i/b Consulta Juris, for the Petitioner. Mr.S.K.Jain i/b Siddharth Murarka, for the Respondents. .......... CORAM : S.C.DHARMADHIKARI, J. DATE : 13th January, 2011. P.C.: 1 This petition seeks to invoke this Court’s power under Section 433(e) r/w 434 of the Companies Act, 1956 to wind up the Respondent Company. 2 It is stated in the petition by the Petitioner that pursuant to a Charter-Party Agreement, the vessel of Petitioner was chartered out to the Respondent for carriage of contractual quantity of 6500 MT of fly ash from Kolkata Port to Doha Qatar Port at Charterers’ option. It is stated that in pursuance of this contract the Petitioner sent its vessel at the aforesaid port for loading at the contractual time where the vessel faced major delay in fully loading the Cargo in accordance with the Charter-Party, due to unavailability of the cargo. As a result, considerable amount of demurrage charges were incurred by the Petitioner, which was agreed between the parties to be quantified and settled after completion of discharge. At the time of discharge, further amount of demurrage was paid. In these circumstances, the disputes and differences arose between the Petitioner and the Respondent and the matter was referred to Arbitration pursuant to the Arbitration clause in the Charter-Party. The *2* cp.217.09.27.sxw disputes were referred to arbitration in London and both sides participated in the arbitration proceedings and on 14.09.2007 the Sole Arbitrator made a Final Award by which an amount of US$ 189463.01 together with compounded interest thereon as computed under the award became due and payable by the Respondent to the Petitioner. In these circumstances, this Foreign Award dated 14.09.2007 became binding on the Respondent. The Petitioner repeatedly called upon the Respondent to pay the amount under the said Foreign Award but they failed and neglected to pay the same. Therefore, a notice was issued, which was to be treated as a demand under Section 434 of the Companies Act, 1956 and within a period of three weeks from the date of receipt of the same, the Respondent was called upon to pay the sum or secure it to the satisfaction of the Petitioner. That legal notice was duly received but even thereafter, the Respondent has failed and neglected to pay the sum. It is in these circumstances that Section 433(e) will come into play and by virtue of the fact that Section 434(1) creates a legal fiction, it can be safely said that this petition for winding up based on the binding foreign award is maintainable and this Court should proceed to admit the same because of the mandate of Section 434(1) and (2) of the Companies Act, 1956. 3 On the other hand, it is contended by Mr.Jain, learned counsel appearing on behalf of the Respondent Company, that this petition for winding up is not maintainable. The Petitioner is seeking to recover a sum under the foreign award. However, unless the award is enforceable in the manner set out by Sections 47 and 48 of the Arbitration and Conciliation Act, 1996, it cannot be presumed that the Respondent is unable to pay its debts. The jurisdiction under Section 433(e) r/w 434 of the Companies Act, 1956 is not available because this foreign award is yet *3* cp.217.09.27.sxw not enforceable and executable. Further assuming that it is enforceable and is binding, yet, the Petitioners have not taken steps to enforce it against the Respondents in India within a period of three years from the date on which it was published and pronounced and that having admittedly not been done, there is bonafide dispute as to whether the amount due under the said award is payable or not. For all these reasons, there is a bonafide defence to the claim and this Company Petition is not maintainable and deserves to be dismissed. 4 Ms.Srivastava, learned counsel appearing on behalf of the Petitioner, has relied upon Sections 433 and 434 of the Companies Act, 1956, so also, Section 46 of the Arbitration and Conciliation Act, 1996. 5 With the assistance of the learned counsel appearing for the parties, I have perused the petition and annexures thereto, so also, the reply. 6 In paragraph Nos.6 and 8 of this Company Petition, this is what is stated:- “6. The Petitioner further submits that under the circumstances, disputes and differences arose between the Petitioner and the Respondent and the parties referred the matter to Arbitration pursuant to the Arbitration Clause contained in the Charterparty. The disputes were referred to Arbitration in London. The Petitioner and the Respondent participated in the Arbitration Proceedings. On 14th day of September 2007, London Arbitration Tribunal, consisting of a sole arbitrator Mr.John Schofield, having heard the arguments from both the sides, issued its Final Arbitration Award, by which an amount of USD 189,463.01 together with compounded interest thereon with three monthly rests at the rate of 7.25% per annum calculated from 16.05.2006 till date of payment, was awarded to the Petitioner as against demurrage due under the material Charterparty. Hereto annexed and marked Exhibit “B” is a copy of the said Final Arbitration Award dated 14.09.2007. *4* cp.217.09.27.sxw 8. The Petitioner submits that, the Petitioner has repeatedly requested and demanded the payment of the dues from the Respondent, who has been avoiding payment due to the Petitioner. Since no amoount was forthcoming from the Respondent, the Petitioner issued a legal notice dated 17.09.2008, through its advocates, which was also specifically described to be treated as a Demand Notice under Section 433(e) read with Section 434 of the Companies Act, 1956. The said notice was sent by Registered Post with Acknowledgment Due and the same was duly received by the Respondent as evidenced by the acknowledgment card, given by the postal authorities. Hereto annexed and marked Exhibits C1 and C2 are copies of the said legal notice dated 17.09.2008 and the acknowledgment card. Even after receipt of the said legal notice, the Respondent has failed and neglected to pay its dues.” 7 Thus, the demand notice which is stated to be statutory notice contemplated by Section 434(2) of the Companies Act, 1956, calls upon the Respondent to pay the sum with compounded interest as computed and determined by the foreign award. That is stated to be the “debt due”. Reliance is placed on Sections 433(e) and 434(1) of the Companies Act, 1956 and it is submitted that the Respondent Company shall be deemed to be unable to pay its debts if a creditor by assignment or otherwise to whom the Company is indebted in a sum exceeding Rs. 50,000/- (unamended) then due, has served on the Company at its registered office by registered post, a demand requiring the Company to pay the sum so due and the Company has for three weeks thereafter, neglected to pay the sum or to secure or compound for it to the reasonable satisfaction of the creditor. Reliance is placed on Section 46 of the Arbitration and Conciliation Act, 1996 which reads thus:- “46. When foreign award binding:- Any foreign award which would be enforceable under this Chapter shall be treated *5* cp.217.09.27.sxw as binding for all purposes on the persons as between whom it was made, and may accordingly be relied on by any of those persons by way of defence, set off or otherwise in any legal proceedings in India and any references in this Chapter to enforcing a foreign award shall be construed as including references to relying on an award.” 8 A perusal of Section 46 indicates that any foreign award which would be enforceable under Part-II Chapter-I of the Arbitration and Conciliation Act, 1996 shall be treated as binding for all purposes on the persons as between whom it was made and may be relied on by any of those persons by way of defence, set off or otherwise in any legal proceedings in India. Ms.Srivastava urges me to look at the later part of Section 46 and would submit that the foreign award can be relied on by any of the persons by way of defence, set off or otherwise in any legal proceedings in India. Ms.Srivastava submits that the term “legal proceedings in India” would include the proceedings under the Companies Act, 1956 for winding up. However, her argument overlooks the vital part of Section 46 of the Arbitration and Conciliation Act, 1996 which has been rightly pressed into service by Mr.Jain. The foreign award is treated as binding for all purposes on the persons between whom it was made, if it would be enforceable under Chapter-I Part-II of the Arbitration and Conciliation Act, 1996. Chapter-I Part-II contains Section 47 which though titled as “Evidence” enables the party applying for enforcement of the foreign award to make an application to the Court, which is specified in explanation to Section 47, for enforcement of a foreign award. Section 48 sets out the conditions for enforcement of a foreign award. Then, comes Section 49 which states that where the Court is satisfied that the foreign award is enforceable under this Chapter-I, the award shall be deemed to *6* cp.217.09.27.sxw be a decree of that Court. Therefore, on the basis of Section 46 of the Arbitration and Conciliation Act, 1996 the presumption that is required to be drawn under Section 433(e) of the Companies Act, 1956 could have been drawn if the foreign award is enforceable under Chapter-I Part-II of the Arbitration and Conciliation Act, 1996. It has not been pointed out to me that any application was made within the meaning of Chapter-I and more particularly Section 47 of the Arbitration and Conciliation Act, 1996 for enforcement of the subject foreign award in India. Prima facie, therefore, the defence of the Company that the foreign award cannot be held to be enforceable is a bonafide defence and cannot be brushed aside. The winding up petition cannot be said to be maintainable once such is the nature of the defence raised by the Company. Further, the plea that the foreign award is dated 14.09.2007 and although the statutory notice is dated 17.09.2008 and is stated to have been received in 2008 itself, this Company Petition is presented on 22.01.2009, but nothing has been stated as to how the foreign award has become enforceable. No steps have been taken to enforce the foreign award till date, therefore, whether such steps can be taken now or not is also a plea which cannot be said to be lacking in bonafides. 9 Once I have concluded that there is a bonafide defence raised by the Company insofar as the demand made on it, then, it cannot be said that the Company Petition for winding up is maintainable. The nature of pleas raised enables me to conclude that this Company Petition is not the remedy for the Petitioner to recover the sum under the subject foreign award. The Company Petition is, therefore, dismissed. However, there will be no order as to costs. (S.C. Dharmadhikari, J)