In a recent judgment delivered by the Delhi Court (Apex FRP Chemicals Private Limited vs. Om Prakash Gupta and Others), it has been held that an Arbitration Clause in the Articles of Association) of a Company is not attracted in a Winding Up Petition. In the case at hand, the writ petition had been filed challenging order passed by Company Law Board (CLB) whereby petitioners’ application under Section 8 of Arbitration and Conciliation Act, 1996 was dismissed. Counsel for the petitioners stated that Articles of Association of petitioner No. 1-Company clearly provide that all disputes pertaining to the affairs of the petitioner No. 1-Company shall be referred to arbitration. He further submitted that if an Arbitrator could settle the disputes, then the matter under Sections 397 and 398 of the Companies Act should be referred to arbitration.
However, the Court was of the view that here petitioner is invoking a statutory remedy which is in addition to the contractual remedy. Moreover, under Section 397(2)(b) of the Companies Act, 1956, Company Law Board has to come to a conclusion that a case for winding up is made out, prior to granting any relief. In Haryana Telecom Ltd. v. Sterlite Industries (India) Ltd., (1999) 5 SCC 688, the Supreme Court has already remarked that arbitration Clause is not attracted to winding up proceedings.
It is also settled law that under Sections 397 and 398 of the Companies Act, relief can be granted even contrary to any Articles of Association, which an Arbitrator cannot do as he is a creature of the contract i.e. Articles of Association.
Consequently, the present writ petition being bereft of merit was dismissed along with the applications.
