Case: M/S. Corporate Ispat Alloys Limited Vs. M/S. Jayaswal Neco Industries Limited

any individual claims of family members against each other and hence, arbitration proceedings do not have any impact on winding up petition. Without considering this aspect and settled law pressed into service, the Company Court could not have subjected winding up proceedings to arbitration matter only because the amount is found to be the same amount.9. Shri Manohar, learned Senior Counsel has invited our attention to the order to urge that it does not decide the winding up petition finally and it has been only adjourned to enable the arbitrator to take a decision regarding that amount. He also states that though all arguments are reflected in the said order of Company Court, the Company Judge rightly did not record any finding on it, as it was found necessary to await for the decision of pending arbitration matter. He also places strong reliance upon arrangement made by the Company Judge in the said order to protect the interest of the appellant Company.10. With the assistance of respective learned Senior Counsel we have perused the impugned order as also the records. It is apparent that the Company Court has found it appropriate not to expedite the proceedings of winding up till the arbitrator takes decision regarding claim of amount of Rs.102,26,78,728/- in respect of which an interim award is sought for under Section 31[6] of the Arbitration and Conciliation Act.11. This order, therefore, postpones consideration of winding up petition till the interim award of arbitrator on the said claim. Hence, indirectly, the claim in winding up petition is subjected to said consideration by the arbitrator. However, there is no finding as to why this course of action is necessary.12. These judgments relied upon before us by Shri Singh learned Senior Counsel were also pressed into service before the Company Court. (1999) 5 SCC 688 (Harayana Telecom Ltd. .vrs. Sterlite Industries (India) Ltd), shows that there the Punjab and Haryana High Court considered application under Section 8 of the Arbitration and Conciliation Act, 1996 moved in winding up petition. The Company Court dismissed that application. Division Bench of that High Court upheld the adjudication. The Honble Apex Court has in paragraph no.5 pointed out that the claim in a petition for winding up is not for money, while dismissing the Special Leave Petition in limine by a reasoned order. (2011) 5 SCC 532 (Booz Allen and Hamilton Inc. vrs. SBI. Home Finance Ltd. and others), is the judgment of Honble Apex Court which in paragraph no.36 points out well recognized examples of non arbitrable disputes. Insolvency and winding up matters, is one of them. Learned Single Judge of Andhra Pradesh High Court in judgment reported at 2012 SC Online AP 83 (M/s. Integrated Broadcasting Company Pvt. Ltd. Hyderabad .vrs. M/s. Nettlinx Ltd., Hyderabad), has also noted that the Directors or Members of a Family who form a incorporated Company, do not pass on their status or their personality to that Company. It is a settled proposition that a Company incorporated under the Companies Act is a distinct legal entity entitled to hold and dispose of the property. We are not inclined to make any comments on relevance of any of these judgments on merits of dispute in this appeal.13. The Indenture of Family Settlement dated 31.07.2008 is between individuals. Person at Sr.No.3 Manoj Kumar Jayaswal, appears to be connected with the appellant / applicant Company, while the others therein are connected with the respondent Company. The issue of merger and demerger in so far as Strip Mill with which we are concerned in the present matter, is dealt with in its paragraph no.7 [l]. There documents on record which show that merger and demerger have taken place in accordance with the provisions contained in Companies Act dealing with amalgamation, reconstitution, merger etc. Again it is not necessary for us to delve more into this aspect at this stage. Prima facie it appears that the private individuals have while settlement of their disputes, reconstituted, created or given birth to certain artificial persons, and the legality or validity thereof is approved by the competent Courts in accordance with law. Such merger/demerger having already taken place and in place, the individuals cease to have any control over them. The identity of an individual family member has no bearing on such personality of an artificial person. The disputes, if any, between individuals therefore may not be available to kill the artificial persons so born or to defeat the arrangement through which they are born. Various other persons and instrumentalities like Investors, Bankers and Financers may have altered their positions after such merger and demerger. This situation cannot be lost sight of.14. When prima facie an arbitration clause or a pending arbitration may not be an answer to the winding up petition, similarity of claim made by one individual family member against others and by a legal entity (artificial person), against other legal entity, therefore, may not have any bearing in the eyes of law, on each other. The Company Court has noted rival contentions and thereafter only because of conclusion that the same amount is subject matter of claim before the Arbitrator, impugned order has been passed. Though the amount may be the same in figures, legality of demand or its nature varies. A Company cannot demand the amount due and payable to its Directors in his private and personal capacity. Similarly, a family member who happens to be the Director cannot demand money due to his Company from other company, from other family members. As attention of learned Company Court was not invited to all these niceties, and there is no finding upon it, we do not record a conclusive and binding finding in this regard.15. We find that only because of pending arbitration proceedings between individual family members, the winding up petition could not have been made to wait till its adjudication. The defences available in winding up petition are well known and in absence of such defences, the petition must be prosecuted further.

Decision (1 = appeal accepted, 0 = rejected): 1

Explanation:
1[ds]14. When prima facie an arbitration clause or a pending arbitration may not be an answer to the winding up petition, similarity of claim made by one individual family member against others and by a legal entity (artificial person), against other legal entity, therefore, may not have any bearing in the eyes of law, on each other. The Company Court has noted rival contentions and thereafter only because of conclusion that the same amount is subject matter of claim before the Arbitrator, impugned order has been passed. Though the amount may be the same in figures, legality of demand or its nature varies. A Company cannot demand the amount due and payable to its Directors in his private and personal capacity. Similarly, a family member who happens to be the Director cannot demand money due to his Company from other company, from other family members. As attention of learned Company Court was not invited to all these niceties, and there is no finding upon it, we do not record a conclusive and binding finding in this regard.15. We find that only because of pending arbitration proceedings between individual family members, the winding up petition could not have been made to wait till its adjudication. The defences available in winding up petition are well known and in absence of such defences, the petition must be prosecuted further.