M. P. CHANDRAKANTARAJ, J. ( 1 ) THIS PETITION under Section 433 (e) of the COMPANIES ACT, 1913 (hereinafter referred to as 'the Act') is made by the petitioner-Company which is duly incorporated under the Act, praying for an order of this Court winding up the respondent vikrant Tyres Limited, also a Company incorporated under the aforementioned act. ( 2 ) THE ground for winding up is that the respondent-Company is unable to pay its debts in as much as the respondent- company has not paid a sum of Rs. 5,47,443. 03 being the principal amount due under the contract together with interest at the prevailing Bank rates from march, 1980 till 31. 3. 1982 and interest from 1st May, 1982 to 1st November, 1982 at the same rate. The petitioner- company issued a statutory notice demanding the above amount dated 20th may, 1982. Despite that, the respondent- company did not pay the amount but instead issued a reply dated August 10, 1982 obviously far beyond the time specified in the statutory notice stating that the respondent-Company has counterclaims against the petitioner-Company and therefore, the question of payment does not arise to the respondent-Company. But nevertheless they have stated in the same reply that a full and adequate reply will be given within three weeks time. Both the notice and the reply thereto are issued through their respective Solicitors. The amount demanded in the statutory notice has not been paid and therefore, on 12. 11. 1982 the petition was presented in this Court. ( 3 ) AFTER notice to respondents on 17. 12. 1982, the respondent-Company entered appearance and filed its objections. Before stating the salient points raised in the objections, it is useful to briefly mention the manner in which the amount has become due to the petitioner- company in regard to which there is no dispute. ( 4 ) BY letter dated 12th February, 1975 the respondent-Company placed an order with the petitioner-Company for supply of roll Mills required by them of certain specifications and of agreed sizes which are enumerated in the letter itself. A true copy of that letter placing the order is at annexure-B to the petition Pursuant to the placement of the order, the petitioner- company supplied the Mills. The Mills were installed by the Petitioner-Company in terms of the Contract at the premises of the respondent-Company. A true copy of that letter placing the order is at annexure-B to the petition Pursuant to the placement of the order, the petitioner- company supplied the Mills. The Mills were installed by the Petitioner-Company in terms of the Contract at the premises of the respondent-Company. Some time thereafter, the mills appear to have developed. some trouble regarding functioning of some of its part like motor, gear, etc. In that behalf there has been considerable correspondence between the respondent-Company and the petitioner- company. While the petitioner-Company claims that it had set right all the defects pointed out in time and within the time of warranty agreed, it appears to have taken the stand that it has no further obligations under the terms of the contract to meet the repeated demands of breach of warranty. There have been meetings between the representatives of the two Companies on more than one occasion to which I will advert to a little later in the course of this order. On the other hand, the stand taken by the respondent-Company was that one of the mills supplied was defective and had stopped functioning and caused considerable damage to the respondent-Company and therefore, on close examination of all factors discussed at the mee'tings of the representatives, the amount of money the respondent-Company may realise by way of damages was far in excess of the amount claimed to be due by the respondent-Company to the petitioner-Company. ( 5 ) ANNEXURE-B to the petition is the document which is relied upon by the petitioners to pin-point their claim, that is, 'confirmation of Balance' issued by the respondent-Company bearing the date 6. 5. 1981 wherein it is admitted that it owes to the petitioner-Company the sum of Rs. 3,37,395. 16 as on 31. 3. 1981. That was sent in duplicate requiring the petitioner-Company to confirm the same. Whether that has been so confirmed or the duplicate sent back to the respondent- company is not clear. But, from the Bar it is stated that it is safe to assume that it has been done. Therefore, in regard to the claim to an extent of Rs. 3,37,395. 16 there is no dispute in regard to the quantum. The dispute is only raised in the statement of objections in regard to the claim of interest in two different sums for two different periods in the sum of Rs. 1,61,414. 00 and Rs. Therefore, in regard to the claim to an extent of Rs. 3,37,395. 16 there is no dispute in regard to the quantum. The dispute is only raised in the statement of objections in regard to the claim of interest in two different sums for two different periods in the sum of Rs. 1,61,414. 00 and Rs. 48,633. 81. The respondent-Company contends that it is not liable to pay interest as there is no agreement in that behalf to do so. The petitioner-Company on the other hand contends that it is entitled to interest under the provisions of the Interest Act read with the Sale of Goods Act. ( 6 ) WHEN this matter had been heard for some time, in the light of the objections raised, the Court was appraised by the petitioner-Company that the respondent-Company was in a bad state financially and had showed liabilities in excess of rupees eight crores in its balance-sheet for the period ending 31 3. 1981 and therefore, this Court should reasonably infer that the Company was unable to pay its debts and therefore, was liable to be wound-up as prayed for in the petition. ( 7 ) AS against that submission, learned counsel for the respondent-Company submitted that the respondent-Company is a viable unit; that the liability as shown in the Balance-sheet was normal liability shown in the normal course of business and the Company could not be said to be unable to pay its debts merely because the Balance-sheet shows a large sum as its liability. The liability should be seen along-side the assets and the ability of the company or the financial ability of the company should be viewed from that angle and not from the liability shown in the Balance-Sheet. He has further submitted that it is entitled to recover damages for the loss sustained by it for the supply of faulty materials under the contract as per annexure-B to the petition, and in that respect the respondent-Company had counter-claims to make. ( 8 ) IN that circumstances, it was pointed out to the - respondent-Company that under Sec. 433 of the Act the cause of action for counter-claim is not permissible and the respondent-Company may file a suit for damages for what is claimed to be due it. ( 8 ) IN that circumstances, it was pointed out to the - respondent-Company that under Sec. 433 of the Act the cause of action for counter-claim is not permissible and the respondent-Company may file a suit for damages for what is claimed to be due it. Having regard to the submission made in regard to the admitted liability of the respondent-Company, the court permitted the respondent-Company to deposit the amount as per annexure-D to the petition in Court to demonstrate its solvency position. Accordingly, a sum of Rs. 3,37,395. 16 was deposited in the court and an application was also made by the respondent-Company in respect of which the office had raised objection regarding maintainability. It is alleged that in that application the respondent-Company had prayed that this Court may not allow the petitioner-Company to withdraw the amount until the counter-claim of the respondent-Company was duly adjudicated, failing which, the respondent-Company would not be in a position to recover whatever may be adjudicated in its favour on account of the very poor financial position of the petitioner-Company. After the deposit was made, the petitioner-Company also made on application in C. A. 240/1983 praying for an order of this Court permitting the petitioner to with draw the amount deposited without prejudice to its right to claim interest. ( 9 ) IT is necessary to state the dates of the applications. The application by the respondent-Company was made on 4th july 1983 while the application by the petitioner-Company for withdrawal of the amount was made on 27th July, 1983. Before these two applications could be disposed of by this Court, strangely enough, the respondent-Company approached the Court of the Civil Judge, mysore, under the provisions of the arbitration Act and obtained an ad- interim exparte injunction against the petitioner-Company restraining it from withdrawing the deposit made earlier pursuant to the directions of this Court. This has, indeed, complicated the issues in this case considerably and I propose to deal with it first before I decide the merits of the claim and counter-claim of the petitioner and respondent Companies. ( 10 ) A certified copy of the ad-interim order passed by the I Additional Civil judge, Mysore in O. S. 349/1983 has been made available to me by the Counsel for the respondent. ( 10 ) A certified copy of the ad-interim order passed by the I Additional Civil judge, Mysore in O. S. 349/1983 has been made available to me by the Counsel for the respondent. From that I see that an order is made under Order 39 rule 2 of the Civil Procedure Code restraining the petitioner-Company from withdrawing the money deposited in this Court as per the direction of this Court. The operative portion of the order reads as follows:"heard Sri M. A. S, Since Sri M. A. S submits that if the defendants withdrew the amounts deposited in High Court the plaintiff would be put to hardship as the matter is still to be referred to arbitration. This is a fit case when exparte orders are to be passed. Hence issue ad- interim injunction as prayed pending disposal of this I. A. Issue summons and notice on this I. A. I to defendant by 5. 12. 83". ( 11 ) THE above order, in my opinion, has definitely obstructed the course of justice in this Court. An identical prayer made by the respondent-Company was pending adjudication as on 24. 10. 1983 the date on which the interim order was passed by the Civil Judge, Mysore. The application made by the petitioner-Company was also pending in this Court when that order came to be made. This Court took strong exception to it and questioned the Counsel for respondent the propriety of making an application before the Civil judge and why proceedings should not be taken for contempt both against the respondent and the Civil Judge. The counsel stated from the Bar that he mistook the observations made by this Court on an earlier date of hearing in regard to counter-claim which had to be adjudicated in a Civil Court and therefore, according to the terms contained in the contract between the petitioner-Company and the respondent- company, as per Annexure-B to the petition, he was forced to move the Court of the Civil Judge, Mysore, for reference to arbitration, the dispute between the petitioner-Company and the respondent- company in regard to the claim and counter-claim as a matter arising out of obligations under the contract, and that he had no intention of showing any disrespect or disregard to this Court by doing so. ( 12 ) IT is possible that the Counsel made such a mistake in not understanding the true mind of the Court when the observations were made regarding the adjudication ot claim and counter-claim in a civil Court. In that view of the matter, the Court has no hesitation to come to the conclusion that the Counsel had no intention to show disrespect to this Court or abuse the process of this Court. That leaves the question of dealing with the learned Civil Judge who purports to have acted under Section 41 r/w Entry ii and IV of the II Schedule of the arbitration Act. ( 13 ) THE learned Counsel for the respondent-Company has submitted that he was present before the learned Civil Judge when the local Counsel made his submissions to that Court and he has stated from the Bar that all facts in regard to the pendency of the matter before this court were indeed brought to the notice of the learned Civil Judge, and it was only thereafter he came to pass the order. ( 14 ) SECTION 41 of the Arbitration Act merely provides for the application of the provisions of Code of Civil Procedure to all proceedings before the Court and to all appeals under the Arbitration Act. The II Schedule has five items, securing the difference of amount in dispute in the reference, is what item-II provides for and that remedy is available only under Order 38 rule 1, 2 and 5 of the C. P. C. Item iv provides for interim injunction or appointment of a Receiver and Order 39 rules 1 and 2 and Order 40 rule 1 of the C. P. C are also made applicable. From the above it is clear that a Civil Court entertaining proceedings under the Arbitration Act, can press into service the provisions of Order 39 or Order 38 as the case may be or even Order-40 provided the occasion arises to do so. ( 15 ) IN the instant case, the prayer before the Civil Court was for an injunction which has been granted which necessarily means that the order was passed under Order 39 of C. P. C. But, according to Mr. lyengar, learned Counsel for the respondent-Company the pleadings in the proceedings were in the nature of securing the payment of such damages the respondent-Company may establish before the arbitrator, on reference. lyengar, learned Counsel for the respondent-Company the pleadings in the proceedings were in the nature of securing the payment of such damages the respondent-Company may establish before the arbitrator, on reference. Therefore, it was a question of securing the amount in dispute in the reference if any. This Court has not the advantage of the pleadings before the learned Civil Judge. What can be secured is only the difference between the claim and counter-claim. If the claim ultimately adjudicated by the Arbitrator in favour of the plaintiff in the civil Court, is in excess of deposit in Court, the security would be inadequate to the extent of the short-fall. But what the Civil Judge has over-looked is that there was no claim for damages before him. Possibly the suit was an order for reference to the arbitrator of the alleged dispute under the contract without quantification of the damages awarded, how the learned Civil judge arrived at the amount of difference which was required to be secured is beyond my comprehension. If that is so, then he did not have jurisdiction under order 39 of C. P. C, at all. The injunction granted apparently had no relation to the main relief praved in the suit and therefore totally unwarranted and without jurisdiction. I can well understand if an order under Order 38 rule (1) had been made issuing prohibitary order against the respondent from withdrawing that amount if the suit itself was for damages. Even that would not be the proper order having regard to the fact that the amount in deposit in this Court was subject to the directions of this Court or a Court superior to this Court and none other. By passing an order under Order 39 granting exparte injunction what "the Civil Judge has done is, he has effectively prevented the petitioner-Company from even moving his application for withdrawal of the amount in deposit in this court. If he was appraised of all the facts, he ought not to have done it. I think this should be attributed to the callousness with which he has acted in utter ignorance of law and he was totally misguided by the counsel for the respondent-Company. If he was appraised of all the facts, he ought not to have done it. I think this should be attributed to the callousness with which he has acted in utter ignorance of law and he was totally misguided by the counsel for the respondent-Company. The effect of passing the order of injunction is a clear interference with the process of this Court in discharging its duties and functions under the COMPANIES ACT, 1913 even though the injunction is directed against the petitioner-Company. In these circumstances, this Court being a superior court would disregard the injunction issued against the petitioner-Company. But the learned Civil Judge concerned is hereby warned to exercise greater caution in dealing with matters which arise under special enactments and where complicated questions of law are before him. If that caution is not exercised, then God help those who seek justice before such judges. A copy of this order shall be communicated to the Civil Judge, Mysore, for his guidance and as a measure of admonition. The Registrar of this Court will also call for his explanation forthwith. ( 16 ) NOW coming back to the problem of the petitioner-Company and the respondent-Company, strenuous efforts have been made by both sides to sustain their respective stands to which I have briefly adverted to earlier. Undoubtedly Mr. lyengar does not dispute that a sum of rs. 3,37,395. 16 has been admittedly due as on 31. 3. 1981. It is also not in dispute that there has been lengthy correspondence and more than one meeting of the representatives of the two Companies held in order to reach a settlement. I need only refer to one document produced by the respondent-Company itself, that is, annexure-5 to the statement of objections. It purports to be the proceedings of discussion held between the petitioner and the respondent-Company's representatives. The last three paragraphs of that proceeding are as follows:"under these circumstances, there is sufficient ground in the opinion of VTL that vtl should claim damages from OMCE which are much more than the dues claimed by OMCC. Mr. Chandra maintained that the warranty period is over long back. However, it was pointed out to him by VTL that for heavy capital equipment a reputable - company normally does not rely on this formal warrantly periods, under the circumstances which have been explained above. "mr. Mr. Chandra maintained that the warranty period is over long back. However, it was pointed out to him by VTL that for heavy capital equipment a reputable - company normally does not rely on this formal warrantly periods, under the circumstances which have been explained above. "mr. Chandra was informed that we shall consider the points which are raised by him in the light of the points raised by us and revert back within about 15 days". ( 17 ) FROM the above, it is seen that the respondent-Company continued to maintained that in its opinion, it had sufficient grounds to claim damages. But as on date, that is, June 21, 1982, it had not made any claim for damages against the petitioner-Company. On the other-hand, as evidenced by paragraph-2 extracted above, the petitioner-Company has denied its liability to meet any obligation under the contract beyond the period of warranty. Nothing has been placed before this Court which is indicative of the date on which the warranty had or had not expired. The order was placed as far back as 1975 and delivery appears to have been effected some-where between 1976 and 1977 and it is only in the correspondence of 1979 that something is seen of the complaint made by the respondent-Company. Therefore the stand taken by Respdt.-Company on June 21, 1982 was more an attempt at avoidance of payment of dues and not with any serious intention of claiming - damages. Normally a Company like the respondent-Company with competent legal advice available at all times would have enforced its claim for damages for the faulty goods supplied as soon as goods were found to be faulty. It cannot on one hand admit its liability and on the otherhand claim that is will not meet its liability because it proposes to claim a counter-claim or damages. ( 18 ) THEREFORE, at an earlier stage of hearing, the Court expressed that such a defence would not be bonafide or tenable and therefore, this Court would have jurisdiction to entertain proceedings and proceed with it. ( 19 ) NOTHING seems to have happened after June 21, 1982 despite what is contained in para-3 of the minutes extracted above except the reply issued to the statutory notice by the respondent-Company. In these circumstances, I do not think it proper to treat the objection put forward as either bonafide or tenable. ( 19 ) NOTHING seems to have happened after June 21, 1982 despite what is contained in para-3 of the minutes extracted above except the reply issued to the statutory notice by the respondent-Company. In these circumstances, I do not think it proper to treat the objection put forward as either bonafide or tenable. No doubt, some decisions have been cited by mr. Iyengar to which I will make a brief reference. 17. 4. 1984. ( 20 ) THE dictation of this order was interrupted at the request of the Counsel for the respondent-Company. The matter thereafter could not be taken up for further dictation. To-day, the matter being posted for completing the order, a memo has been filed by the Counsel for respondent-Company stating that in view of the decision of the Supreme Court in COTTON CORPORATION OF INDIA LTD. Vs. UNITED INDUSTRIAL BANK LTD; and OTHERS (1984) 55 Company Cases 423,) the respondent-Company has no objection for this Court to pass appropriate orders in regard to the amount deposited by the respondent in these proceedings without taking into consideration the order of injunction passed by the learned Additional Civil Judge, Mysore, in o. S. No. 349/1983. The respondent-Company has further undertaken to take steps to move the Civil Judge at Mysore to recall his order in question. ( 21 ) IN the light of the memo filed, I do not think I need proceed further to examine the case put forward by the respondent-Company. There is already c. A. No. 240/1983 pending in which the petitioner has sought permission to withdraw the amount in deposit in Court. If i allow that application, then there will be no cause of action subsisting in favour of the petitioner. The other application made by the respondent-Company is for directing the petitioner-Company to furnish security for withdrawing the amount. When the debt has been admitted and the defence putforward is not accepted by this Court as already stated it would be inappropriate to put the petitioner on such restraint as prayed by the respondent-Company. In the result, C. A. No. 240/1983 should be allowed without imposing any condition. If that is allowed and the amount is withdrawn, as already observed, there is no cause of action subsisting which necessitates this Court for proceeding further in the matter of winding up the respondent-Company. In the result, C. A. No. 240/1983 should be allowed without imposing any condition. If that is allowed and the amount is withdrawn, as already observed, there is no cause of action subsisting which necessitates this Court for proceeding further in the matter of winding up the respondent-Company. ( 22 ) WHATEVER claims the petitioners may have in regard to interest as well as damages claimed by the respondent-Company, are matters left open to be agitated before the appropriate forum and decided there. In the result, C. A. No. 240/1983 is allowed and the petitioner is allowed to withdraw the amount in deposit. In the result, this petition is liable to be closed, as the debt claimed is discharged subject to the observation made in regard to interest claimed. ( 23 ) BEFORE parting with the case I must repeat that no inferior Court may pass an order of any kind that will have the effect of interfering with matters which are already in issue before a Superior court. It is alien and unknown to our country's legal system. Such an order, apart from being an order without jurisdiction amounts to contempt of the superior Court, more so when the inferior court is appraised of the issues before the Superior Court. For the reasons given above, this Company Petition is closed as well as the other Company applications which are not disposed of specifically by this Order. --- *** --- .