Calcutta High Court Vinayak Oil And Fats Private Ltd. vs Andre (Cayman Islands) Trading Co. Ltd. on 23 July, 2004 Equivalent citations: 2005(2)ARBLR551(CAL), (2004)3CALLT380(HC), 2005(2)CHN29, [2005]64SCL277(CAL) JUDGMENT A.K. Banerjee, J. 1. Can a foreign award be made a subject matter of a winding up petition under the present laws of the land? 2. One says It is while other says it is not. But none of them could cite a precedent on the point in issue or nearer to it except a single bench decision of Delhi High Court. 3. Let me now try to resolve the controversy with my understanding of law as discussed hereinafter: 4. Facts of the case: The petitioning creditor entered into an agreement with the company for sale of 3000MT of oil. Accordingly the oil was transmitted through ship for the purpose of delivery at Calcutta. The company was to open a Letter of Credit. The company failed to do so. When the goods arrived the company could not get those released by opening Letter of Credit thereby petitioner suffered loss and damages. Petitioner invoked the arbitration clause and ultimately obtained an award from London. On the other hand the company filed a suit in the Court involving the petitioner. 4.1. The petitioner filed the instant winding up proceeding as according to them there is just debt due and payable as per the award which the company filed to pay despite statutory notice of demand. The company filed affidavit questioning the maintainability of the winding up proceeding. Principal Controversy: 5. I heard the parties. To my understanding this winding up petition is principally to enforce the foreign award. Now question is whether it is permissible or not under the present laws of the land. Basic Concept of a Winding up Proceeding Brought by Creditors 6. Under section 433 a creditor can bring an action under sub section (e) provided he has just debt payable by the company and the company failed and neglected to pay and/or secured such claim despite statutory notice of demand. Hence, if an action is brought by a creditor for winding up of a company on account of non payment of debt and defense is taken by the company the Court is only to prima facie examine the defense of the company and if the Court feels that the said defense is bona fide and there is even a possibility of success in case the dispute is relegated to a regular trial winding up is refused. Whether the defense can be sustained or not the winding up Court is only to examine the same prima facie. Neither the winding up Court is competent to finally adjudicate the rights of the parties on account of the claim nor does it have authority in law. If a creditor has claim against the debtor the law has prescribed its remedy. Those remedies are complete code by themselves. Merely because the debtor is a corporate entity the creditor cannot enforce hid debt as a matter of a right in a winding up proceeding. It can only ask for winding up of the debtor and he becomes successful if the defense taken by the company, according to the Court, prima facie not sustainable. Arbitration Law Laws before: 7. Before 1996 the Indian Law of Arbitration was governed by Arbitration Act, 1940 (hereinafter referred to as the "said Act, 1940"). If a domestic award was made under this law it could be given effect to after a judgment in terms of the award was passed under section 17 of the Act and thereafter the award could be executed as decree passed in terms of the award by Court. In short, a domestic award could be enforced after it was made a rule of Court. This situation was however, diluted by various judgments of this Court in various winding up proceeding. In case of Dalhousie Jute (supra) this Court observed that an unfilled award before it could be made a rule of Court was a good piece of evidence of a claim and a just due and could be made a subject matter of a winding up proceeding. 7.1. In case of a foreign award the Arbitration (Protocol and Convention) Act, 1937 and Foreign Awards (Recognition & Enforce) Act, 1961 were holding the fields. Under section 4 of the Act, 1937 a foreign award was enforceable in India as if it were an award made on a matter referred to arbitration in India. Under section 5 the person interested in a foreign award could apply to Court for having rule of Court on the said award. Under sections 7 and 8 conditions of enfacement of foreign award had been prescribed. 7.2. The 1961 Act was brought into force repealing the 1937 Act. Here also any person interested in a foreign award could apply to Court for having a rule of Court on the said award as also for its enforcement. Section 7 prescribed conditions for enforcement of the foreign award. Law at Present 8. In 1996 the Arbitration and Conciliation Act, 1996 came into force by which the domestic award as well as foreign award were brought under one Act by repealing the 1940 Act a