[Cites 12, Cited by 0]
Bombay High Court
Smt. Alka Chandewar vs Shamshul Ishrar Khan on 2 April, 2026
2026:BHC-AS:15662
Judgment-ARBP-19-2015-CP-102-F+.doc
IN THE HIGH COURT OF JUDICATURE AT BOMBAY
Digitally
signed by
CHAITANYA
CHAITANYA ASHOK
ORDINARY ORIGINAL CIVIL JURISDICTION
ASHOK JADHAV
JADHAV Date:
2026.04.02
18:35:26
+0530
COMMERCIAL ARBITRATION PETITION NO. 19 OF 2015
Shamshul Ishrar Khan ...Petitioner
Versus
Alka Chandewar ...Respondent
WITH
CONTEMPT PETITION NO. 102 OF 2015
(CIVIL APPELLATE JURISDICTION)
Alka Chandewar ...Petitioner
Versus
Shamshul Ishrar Khan ...Respondent
Mr. Harinder Toor a/w Mr. Sandeep Parikh, Ms. Sabreen
Siddiqui, Ms. Pooja Jaiswal i/b Mr. A. C. Mahimkar, for
Petitioner in CARBP No.19/2015 and for the Respondent in CP
No.102/2015.
Mr. J.P. Sen, Senior Advocate a/w Mr. Sameer Bhalekar,
for the Respondent in CARBP No.19/2015 and for the Petitioner
in CP No.102/2015.
CORAM : SOMASEKHAR SUNDARESAN, J.
RESERVED ON : MARCH 11, 2026
PRONOUNCED ON : APRIL 2, 2026.
JUDGEMENT :
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Context and Factual Background:
1. Commercial Arbitration Petition No. 19 of 2015 is a Petition
filed under Section 34 of the Arbitration and Conciliation Act, 1996
("the Act"), impugning an Arbitral Award dated March 7, 2015, passed
by the Learned Arbitral Tribunal ("Impugned Award"), holding that
the Respondent, Alka Chandewar ("Alka"), is a partner in a
partnership firm named M/s Saras Developers ("Saras Developers"),
with an 80% share in Saras Developers, and directing the Petitioner,
Shamshul Ishrar Khan ("Khan") to pay Alka a sum of Rs. 7,39,72,584,
which is an amount computed as Alka's share on dissolution of Saras
Developers, along with interest at the rate of 10% per annum, from the
date of filing of the reference till the date of the arbitral award and
thereafter until realisation.
2. Khan challenges the Impugned Award on two fundamental
grounds, namely; that Alka's claim was barred by limitation, and that
the quantification of Alka's share in the proceeds of dissolution of Saras
Developers is grossly incorrect to a degree that renders the Impugned
Award perverse.
3. The factual matrix that is relevant for the purpose of
adjudicating this Petition may be summarised thus :-
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A) Saras Developers was constituted under a
Partnership Deed dated May 15, 1990 ("Partnership
Deed"). The Partnership Deed was amended and restated
from time to time and the last available executed Partnership
Deed forming part of the record is dated October 22, 1997,
which would indicate that Alka and Khan were partners in
Saras Developers with Alka holding an 80% share and Khan
holding a 20% share;
B) Saras Developers was engaged in the business of
construction and land development. Land bearing CTS Nos.
558 and 558/1 to 558/18, admeasuring an aggregate of
approximately 3936 square metres, situated in Malad,
constituted Saras Developers' property. This property was
called "Gambers Estate".
C) Alka and her then husband Mr. Sovind Chandewar
("Sovind"), carried out business in the form of a
Partnership Firm called M/s Saraswati Developers
("Saraswati Developers"). The property of Saraswati
Developers was essentially another parcel of land, and the
building standing thereon, also situated in Malad, in which
the business of Hotel Kuber Palace was carried out;
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D) Various disputes arose between Alka and Sovind in
relation to Saraswati Developers, which are ancillary to the
disputes between Alka and Khan in relation to Saras
Developers, which forms subject matter of the captioned
proceedings;
E) Initially, on May 15, 1990, a Partnership Deed was
executed in relation to Saras Developers, among one Mr.
Sushil Kumar Chamaria ("Chamaria"), Alka, one Mr.
Ramesh Gopal Chandewar ("Ramesh"), one Mr.
Krushnarao Lahuji Nirwan ("Nirwan") and Khan. This
partnership intended to carry on the business of property
development in the name and form of Saras Developers.
Each partner had a 20% share. Nirwan was Alka's father,
while Ramesh was Alka's nephew, but from Sovind's side of
the family;
F) Saras Developers purchased the land known as
Gambers Estate, referred to above between April 10, 1991 and
October 12, 1993. On January 06, 1994, Alka, Nirwan and
Ramesh executed a power of attorney constituting Alka's
husband Sovind as an attorney to represent them in the day-
to-day conduct of business by Saras Developers;
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G) The Partnership Deed was modified from time to
time, and in particular on April 30, 1995, when Chamaria was
expelled from Saras Developers. Alka's share rose to 30%, the
share of Ramesh and Nirwan rose to 25% each, while Khan's
share remained at 20%;
H) Between 1994 and 1997, a building by the name
"Sarala Sadan," having seven storeys, was completed by Saras
Developers, and it is contended by Khan that most of the flats
in Sarala Sadan had been sold between 1994 and 2001;
I) On September 02, 1997, Nirwan passed away, and on
October 22, 1997, Ramesh retired as a partner of Saras
Developers. Consequently, another deed was executed among
the parties on October 22, 1997, and by this time the
partnership firm came to comprise only Alka, with a
partnership share of 80%, and Khan, with a partnership
share of 20%. Save and except for the modification of the
profit-sharing ratio, the existing terms of the earlier
Partnership Deed were continued without being disturbed;
J) It is contended by Khan that no further construction
or development on Gambers Estate was carried out by Saras
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Developers between 1997 and 2002. Meanwhile, sometime in
2000, discord emerged between Alka and Sovind;
K) On June 19, 2002 ("First 2002 Deed"), a new
partnership deed is purported to have been executed in
relation to Saras Developers, with Alka's share being diluted
to 75%; Khan remaining at 20% and one Mr. Siddharth
Vinod Bathia ("Bathia"), acquiring a share of 5%. Shortly
thereafter, on June 27, 2002, a Supplemental Deed of
Partnership ("Second 2002 Deed") was purportedly
executed between the parties by which the shares were
significantly restructured, with Alka's stake coming down to
34%, Khan's stake going up to 33% and Bathia's stake rising
to 33%. This Second 2002 Deed recorded the agreement of
the partners to acquire and utilize Transferable Development
Rights ("TDR") to further develop and construct buildings
on Gambers Estate;
L) On January 19, 2003, the Partnership Deed was
purported to have been further reconstituted ("2003
Deed"), this time around, Alka's stake falling to 25%; Khan's
stake rising to 33.33%; Bathia's stake increasing to 33.33%;
and Sovind acquiring a stake of 8.34%;
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M) On February 17, 2003, Saras Developers wrote to the
Registrar of Firms through one Mr. Haresh Shah, its
Chartered Accountant, seeking a change in the constitution
of Saras Developers. By this letter, the Registrar of Firms was
requested to note that Bathia had joined Saras Developers as
a new partner with effect from April 25, 2002;
N) Very shortly after the 2003 Deed, a Deed of
Retirement dated February 19, 2003 ("Retirement Deed"),
is purported to have been executed, by which Alka is said to
have retired from Saras Developers, with Khan, Bathia and
Sovind each having a one-third share, i.e. 33.33%, in Saras
Developers. It is claimed that a letter dated April 28, 2003
was issued by the same Mr. Haresh Shah to the Registrar of
Firms requesting it to note that Sovind had joined Saras
Developers as a new partner with effect from January 19,
2003, and that Alka had retired from Saras Developers with
effect from February 19, 2003;
O) The Registrar of Firms wrote to Saras Developers,
indicating a discrepancy in the address and signature of Alka
in the documents submitted on behalf of Saras Developers
through Mr. Haresh Shah. This was communicated by letters
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dated April 07, 2003 and June 19, 2003 - in reasonable
proximity to the 2003 Deed and the Retirement Deed;
P) About two years later, on May 03, 2005, Alka issued a
legal notice to Sovind, stating that the power of attorney
dated January 06, 1994, which had been executed in favour
of Sovind, stood revoked;
Q) Meanwhile, between 2003 and 2006, construction
took place on Gambers Estate, and a building named Dr.
Gambers Residency, comprising Wings "B" and "C," each
having seven floors, was completed. Most of the flats in this
building are claimed to have been sold by Saras Developers
between 2004 and 2006;
R) On November 30, 2005, Sovind filed a Divorce
Petition in the Family Court against Alka;
S) Between 2005 and 2009, further construction of Dr.
Gambers Residency, namely Wing "A" having ten storeys,
was also completed by Saras Developers. It is claimed by
Khan that most of the flats in this building, i.e. Wing "A," had
been booked for sale in advance by Saras Developers between
2005 and 2006;
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T) On April 24, 2008, Alka (who contends that she had
no notice of the deeds executed in 2002 and 2003 including
the Retirement Deed) issued a notice through her Advocates,
dissolving Saras Developers as a partnership firm
("Dissolution Notice") and invoking the arbitration clause
contained in the Partnership Deed dated May 15, 1990 and
the modified Partnership Deed dated April 30, 1995. Several
disputes that had arisen between the parties were sought to
be referred to arbitration;
U) By an order dated September 22, 2008, two
Arbitration Petitions filed by Alka seeking interim protection
pending arbitration under Section 9 of the Act, came to be
disposed of. Arbitration Petition No. 275 of 2008 filed by
Alka against Sovind in connection with Saraswati Developers
was dismissed, while Arbitration Petition No. 276 of 2008,
filed against Khan in connection with Saras Developers was
also disposed of;
V) On October 24, 2008, the Family Court dissolved the
marriage between Sovind and Alka by granting a decree of
divorce;
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W) On June 22, 2009, a Learned Division Bench of this
Court allowed the withdrawal of an appeal filed by Alka
against the dismissal of the Section 9 Petition but mediation
was recommended in the said order;
X) Thereafter, an Application under Section 11 was filed
by Alka for appointment of an Arbitral Tribunal and this led
to constitution of the Learned Arbitral Tribunal, which
eventually passed the Impugned Award.
4. In the arbitration proceedings, Alka had essentially sought a
declaration that the First 2002 Deed, the Second 2002 Deed, the 2003
Deed and the Retirement Deed were forged, fabricated, null and void
and not binding on Alka. It was also prayed that the Learned Arbitral
Tribunal declare that the partnership firm of Saras Developers stood
dissolved with effect from April 24, 2008, pursuant to the Dissolution
Notice. A further relief for payment of Rs.~28.39 crores, representing an
80% share in the profits of Saras Developers, along with interest at the
rate of 10% per annum from the date of filing of the claim until
realisation was also sought by Alka.
5. Pleadings were completed, issues were framed, and evidence
was led by Alka and Khan in the form of affidavits along with
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compilations of documents. On October 01, 2013, the Learned Sole
Arbitrator appointed by this Court recused himself in the arbitration
proceedings relating to Saraswati Developers, pursuant to a challenge to
his independence and impartiality filed by Sovind. The same arbitrator
had also been appointed as Sole Arbitrator in connection with disputes
and differences relating to Saras Developers. Khan too filed an
application on June 23, 2014 calling upon the Learned Sole Arbitrator to
recuse from the arbitration relating to disputes connected to Saras
Developers.
6. After filing such application, Khan refrained from attending
the arbitration proceedings any further. Khan's application seeking
recusal was dismissed by the Learned Sole Arbitrator approximately six
months later, on December 8, 2014. Considering that Khan simply went
missing and refrained from participating in the arbitration proceedings,
the Learned Sole Arbitrator had to deal with the proceedings and
consider the material before him without any assistance or participation
on the part of Khan to arrive at an assessment of the matter.
7. Alka obtained various documents utilizing her rights under
the provisions of Right to Information Act, 2005 ("RTI Act") and
referred to and relied on the Income Tax Returns filed by Saras
Developers obtained through such process. The Learned Sole Arbitrator,
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therefore, interpreted such documents, and these indicated that Alka
was a partner of Saras Developers until Assessment Year 2003-04.
8. While the Learned Arbitral Tribunal framed 13 points for
determination and dealt with the same, for purposes of adjudicating this
Section 34 Petition, the Petitioner presses into service his grievances on
three counts. These are the findings that Alka's claim was not barred by
limitation; that Alka continued to be a partner right until the date of the
Dissolution Notice; and that Alka was entitled to a sum of Rs.~7.39
crores, in view of her 80% share in the partnership of Saras Developers.
Hearing in the Matter:
9. It is in this context that I have heard Mr. Harinder Toor,
Learned Advocate on behalf of Khan, Mr. J. P. Sen, Learned Senior
Advocate on behalf of Alka. With their assistance, I have examined the
material on record.
10. The matter was heard last year. Owing to efflux of time, the
matter was released and listed afresh for further hearing on March 11,
2026. With the assistance of Learned Advocates, the submissions and
further clarifications provided by them were taken on board, and the
matter was reserved afresh for Judgement.
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Khan's Submissions:
11. Mr. Toor, Learned Advocate on behalf of Khan would
essentially attack the finding in the Impugned Award in respect of Alka's
continued partnership until the Dissolution Notice, and the amounts
held to be payable by Khan to Alka in respect of her share in Saras
Developers. Mr. Toor would point out that after examining the
annexures to the statement of claim and the particulars set out therein,
as indeed the documents procured pursuant to an application made
under the RTI Act, including the Income-tax returns, the Learned
Arbitral Tribunal has arrived at a view that the receipts of Saras
Developers from the sale of units developed by Saras Developers stood
admitted by Khan, inasmuch as Khan had stated in his Written
Statement dated August 30, 2010 that the receipts of Saras Developers
from sales is a matter of record.
12. Mr. Toor would point out that based on the aforesaid
conclusions, the Learned Arbitral Tribunal proceeded to compute Alka's
share of benefits from Saras Developers. Towards this end, the cost of
construction for Sarla Sadan and Gambers Residency Wings "B" and "C"
has been taken at 20%, while for Gambers Residency Wing "A," the cost
has been taken at 30%. The Learned Arbitral Tribunal thereafter
adopted a uniform deduction of 30% towards cost of construction in
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respect of all three buildings. The total sale consideration for the three
buildings, namely Sarla Sadan and Gambers Residency Wings "A," "B"
and "C," has been computed by the Learned Arbitral Tribunal at Rs.
13.20 crores, from which a 30% deduction towards cost has been
effected, bringing the figure to Rs. 9.24 crores, which has been assessed
as the profit earned by Saras Developers. On such profit, Alka's 80%
share has been computed at Rs. 7.39 crores, which is the amount
awarded, along with interest at the rate of 10% per annum from August
30, 2010until the date of the Award and thereafter until realisation at
the same rate.
13. Mr. Toor would submit that the aforesaid findings are
vitiated by patent illegality and perversity. He would submit that the
patent illegality is writ large on the face of the Impugned Award, while
the perversity is borne out by the ignoring vital evidence in arriving at
the aforesaid decision. To substantiate the aforesaid contentions, Mr.
Toor would submit that the Income Tax Returns of Saras Developers
had indeed been available to the Learned Arbitral Tribunal. These had
been procured by Alka through the RTI Act and had been brought on
record before the Learned Arbitral Tribunal.
14. Yet, Mr. Toor would contend, the vital evidence in the form of
the computation and settlement of accounts of the partnership firm as
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evidenced in the Income-tax returns, were not relied upon by the
Learned Arbitral Tribunal. The failure to rely on the data contained in
such Income-tax returns is assailed by Mr. Toor as being egregiously
perverse, despite being available as evidentiary material brought on
record by Alka herself.
15. The interpretation of Khan's Written Statement dated August
30, 2010 and the Additional Written Statement dated October 26, 2010
is also assailed by Mr. Toor on the premise that, while Khan had
categorically denied Alka's allegations as made in the Statement of
Claim, the Learned Arbitral Tribunal had ignored vital elements in both
the Written Statements filed by Khan. Pointing to the contents of Khan's
statements, Mr. Toor would submit that Khan had clarified that after
the financial year 1993-94, Saras Developers had regularly paid and
reflected the profit and remuneration to all the partners, including Alka,
as per the ratio of their respective shares. He would submit that such
payment of the respective shares would also be borne out by the Income
Tax Returns.
16. Mr. Toor would submit that Khan had explicitly reiterated
that Alka's allegation of being deprived of her share of profits was totally
incorrect and baseless. On the contrary, Khan is said to have clarified
that the books of Saras Developers had been destroyed during the
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unprecedented volume of rainfall on July 26, 2005 and July 27, 2005,
and that a police complaint had been lodged to this effect on August 03,
2005. This is presented as another facet of vital evidence having been
ignored.
17. Moreover, the other piece of vital evidence allegedly ignored
by the Learned Arbitral Tribunal is Clause 2 of the undisputed Deed of
Retirement dated October 22, 1997, documenting the retirement of
Ramesh, which stated that accounts of Saras Developers had been
mutually made up and settled by the parties until that date. Therefore,
he would submit that the ignoring of this vital piece of evidence too
would vitiate the Impugned Award.
18. Mr. Toor would contend that, when one examines the
dissolution of a partnership firm, one must apply the provisions of
Section 48 read with Section 11 of the Indian Partnership Act, 1932. The
failure and neglect to apply these provisions would indicate, according
to Mr. Toor, that the Impugned Award is in direct conflict with
applicable statutory provisions, which are mandatory and
indispensable, thereby rendering the Impugned Award utterly illegal
and incapable of being sustained.
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19. Mr. Toor would also point to an additional affidavit of Khan
filed on April 30, 2011, which indeed contained information on the
expenditure of Saras Developers incurred in the rehabilitation of
existing tenants and occupants, purchase of TDR, etc. Therefore, he
would submit that this vital evidentiary material, which would
demonstrate how the data contained in Exhibits TT, UU and VV could
not have been ignored, shows that the Impugned Award is perverse,
because it simply takes the total receipt of consideration from the
proceeds of sale of all three buildings. This, according to him, would
demonstrate that the computation is, on the face of it, contrary to these
very Exhibits and, therefore, the findings returned are not reasoned or
substantiated, thereby attracting the vice of patent illegality and
perversity.
20. Mr. Toor also finds fault with the Learned Arbitral Tribunal
having failed to factor in that Alka's share between December 03, 1992
and April 30, 1995 was only 20% and that her share between April 30,
1995 and October 22, 1997 was only 30%. These facets ought to have
been worked out in detail by the Learned Arbitral Tribunal, if it was
planning to work out the dissolution mechanism to ascertain the
benefits that were claimed by Alka and have been found to be payable to
her by the Learned Arbitral Tribunal.
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21. Finally, Mr. Toor would also submit that the Learned Arbitral
Tribunal blatantly disregarded the vital evidence that Alka was fully
aware of the conduct of the partnership business and that she had
appropriated the assets of the partnership business. The entries at Sr.
No. 27 and 33 in Exhibit TT, about allotment and transfer of flats 601
and 701 on December 16, 1999 in Sarala Sadan, would clearly show that
Alka was one of the signatories regarding the sale of the said flat. The
full cause title to the statement of claim filed by Alka describes Alka to
be residing at Flat No. 601 and 701 of Sarala Sadan. Therefore, failing to
factor in the value of flats 601 and 701 which had been appropriated by
Alka would also point to the Learned Arbitral Tribunal having blatantly
ignored vital evidence that would be necessary in the computation of
benefits that the Learned Arbitral Tribunal has chosen to make.
22. As regards the claim being barred by limitation, Mr. Toor
would submit that the findings in the Impugned Award are untenable
again on the count of being initiated by patent illegality and for ignoring
vital evidence. According to him, the Learned Arbitral Tribunal has
adjudicated the issue of limitation on the basis of the consent order
dated June 18, 2010 by which reference was made to arbitration rather
than by reference to substantive claims made by Alka as set out in
Exhibits TT, UU, VV and XX appended to the Statement of Claim. The
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provisions of Section 43 of the Act read with Section 3 of the Limitation
Act, according to Mr. Toor, ought to have been applied by the Learned
Arbitral Tribunal. In this context, he would submit that Khan had
categorically pleaded in the Written Statement that Alka's claim was
hopelessly barred by the law of limitation and this had in fact been
appreciated by the Order dated September 22, 2008 by which this Court
had dismissed the two Arbitration Petitions filed by Alka under Section
9 of the Act. This order, rejecting the Section 9 Petitions, had explicitly
noted that the Petitions were liable to be dismissed on the ground of
delay and laches.
23. Applying the contention of Alka's claims being barred by
limitation to the facts of the case, Mr. Toor would make a further
contention that the arbitration proceedings commenced on April 24,
2008, since arbitration was invoked on that date. Therefore, he would
submit that any claim that could be made as of that date and being
capable of being ruled upon by the Learned Arbitral Tribunal ought to
have been restricted to the three preceding years, namely April 24, 2005
to April 24, 2008. In sharp contrast, the contents of Exhibits TT and UU
would indicate that Alka has claimed a share in the purported sale
proceeds of flats sold and registered during the entire period ranging
from 1994 to 2005.
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Alka's Submissions:
24. In sharp contrast, Mr. J. P. Sen, Learned Senior Advocate
appearing on behalf of Alka, would submit that the Learned Arbitral
Tribunal has returned considered findings upon evaluating the evidence
available on record. By withdrawing from the arbitration proceedings
and simply refraining from participating therein, Khan had adopted a
"catch me if you can" approach, which would point to the basis of the
Learned Arbitral Tribunal drawing an adverse inference from the
conduct of Khan, which had substantially increased the burden upon the
Learned Arbitrator of interpreting the documentary material placed
before the Tribunal.
25. Mr. Sen would submit that the last admitted position in
relation to the constitution of the partnership was reflected in the
Partnership Deed dated October 22, 1997, which unequivocally recorded
Alka's 80% share in Saras Developers, and that this position has been
rightly held to have continued without being altered lawfully. He would
further submit that Alka and Sovind, between whom matrimonial
disputes arose around 2005, have themselves yielded contemporaneous
documentary material in the form of pleadings and correspondence
exchanged between them. In this regard, Mr. Sen would contend that
reliance was rightly placed on a letter dated May 16, 2005, addressed by
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Sovind to Alka, wherein it was asserted that Alka had retired from Saras
Developers, which, according to Mr. Sen, would itself demonstrate that
the question of Alka's alleged retirement was a matter of dispute and
could not be treated as an admitted or concluded position.
26. Mr. Sen would submit that Application under the RTI Act
was taken out primarily on July 4, 2005, which led to the Registrar of
Firms providing various documents pertaining to the composition and
ownership of Saras Developers. It is at this stage, Mr. Sen would
contend, that the alleged First 2002 Deed, the Second 2002 Deed, the
2003 Deed and the Retirement Deed came to her knowledge. While
these documents were purportedly filed with the Registrar of Firms,
evidently there was no entry in respect of such deeds found in the
Register of the Registrar of Firms. These deeds, purport to bear
signatures of Alka which were found to have been forged upon fair
appreciation of evidence.
27. Mr. Sen would submit that Alka took various steps in this
regard including the filing of police complaints and seeking
interlocutory relief under Section 9 of the Act. While the Arbitration
Petition came to be withdrawn on April 24, 2008, on the very same
date, Alka issued the Dissolution Notice, thereby dissolving Saras
Developers and also invoking the arbitration clause in the Partnership
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Deed dated October 22, 1997, which is the last admitted document in
respect of the ownership and charter of Saras Developers. Mr. Sen
would point out that the Learned Arbitral Tribunal came be constituted
by appointment of a retired High Court Judge as a Sole Arbitrator on
June 18, 2010. However, after participating in the proceedings for four
years, Khan suddenly demanded that the Learned Arbitral Tribunal
recuse from the matter. This was fairly and correctly rejected by the
Learned Arbitral Tribunal, Mr. Sen would contend, also pointing out
that immediately after filing the application seeking recusal, Khan
simply stayed away from the arbitration proceedings and refrained from
participating any further.
28. Such act of staying away, Mr. Sen would submit, was
deliberate and wilful to frustrate and make it very difficult for the
arbitration proceedings to be conducted, evidently hoping that such an
approach would lead to some errors or shortcomings, which could then
be used to challenge the final adjudication if the outcome were adverse
to Khan.
29. On the facet of limitation, Mr. Sen would submit that the very
contention is vague and ambiguous. It is contended that the claim is one
of dissolution of Saras Developers and for rendering of accounts of Saras
Developers. Such a claim is squarely governed by Article 5 of the
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Limitation Act, which provides for a period of limitation of three years
running from the Dissolution Date. Mr. Sen would submit that the
invocation of arbitration was well within time and related to rendering
of accounts and the financial statements including the balance sheet,
which are running accounts of the Saras Developers. Therefore, the
claim of limitation is unsustainable, he would contend, also pointing to
the grounds of challenge to the Impugned Award to contend that the
Learned Arbitral Tribunal has fairly and accurately returned findings of
forgery and fabrication of the intermittent Partnership Deeds after the
last admitted Partnership Deed alluded to by Alka.
30. The purported and fake dissipation of Alka's partnership
interests by diluting first to one third and below and eventually retiring
are untenable, Mr. Sen would contend, since evidently, she had not
executed any of these deeds. Therefore, Mr. Sen would contend that the
Learned Arbitral Tribunal has been reasonable in appreciating evidence
to hold that Alka had not retired, and owing to the wanton attempt at
frustration of the proceedings, the Learned Arbitral Tribunal made best
judgement assessment of Saras Developers' financials, from the material
available on record and applied itself to examination of the data relating
to the sales turnover, discounting it significantly by a factor of
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construction cost, to arrive at the conclusion as to what her share would
be.
31. Mr. Khan not having participated in the arbitration
proceedings, Mr. Sen would submit the Learned Arbitral Tribunal
justifiably addressed itself to the period between the commencement of
arbitration proceedings i.e. the invocation of arbitration and the date of
appointment of the Learned Arbitral Tribunal. No objection had been
raised in this regard and Khan ceased to participate after four years of
participation, and yet, the ambiguous and incoherent contention on the
ground of limitation has been squarely addressed in the Impugned
Award.
32. The other contention raised on behalf of Khan, namely that
the Learned Arbitral Tribunal could not have granted direction to
release any payment in respect of any amounts preceding the period
prior to three years before the Dissolution Date, Mr. Sen would point
out, was never urged before the Learned Arbitral Tribunal. Mr. Sen
would also point out that no such contention has been raised even in the
Section 34 Petition. Therefore, he would submit that this is an entirely
new objection that has been conjured up on the run on behalf of Khan
and that in any case the objection is devoid of merit.
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33. According to Mr. Sen, until Saras Developers is actually
dissolved and accounts are finalized, a partner in a partnership firm is
neither a creditor nor a debtor. On the contrary, he would submit the
partner is an owner of the partnership business and therefore, there is
no question of suing for any amounts during the subsistence of the
partnership prior to the Dissolution Date. On dissolution, Mr. Sen
would submit the partner is entitled to the amounts in his capital
account which should be dependent on the taking of accounts.
Therefore, in the absence of the accounts of the partnership being
presented to the Learned Arbitral Tribunal, the Learned Arbitral
Tribunal has had to simply factor in all the aggregate turnover, provide
for expenses however old they may be and has come up with a best
estimate and assessment of Alka's entitlement. Mr. Sen would submit
that Khan's absence has resulted in Alka being under-compensated.
34. Alka's assertion that no amounts had been received by her
ever from the business of Saras Developers has not even been
contradicted or even attempted to be disproved by Khan in the course of
the arbitral proceedings. Therefore, Mr. Sen would submit that the
Learned Arbitral Tribunal was duly entitled to take into account all the
sales effected by Saras Developers and linking Alka's entitlement to the
three years before the Dissolution Date is not at all reasonable.
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35. Addressing the contentions about the manner of
quantification of the claims, Mr. Sen would submit that the business of
Saras Developers comprised construction of units in three buildings and
the proceeds of sale from such units. These buildings namely Sarla
Sadan, Gambers Residency 'B' and 'C' wings, (one building) and
Gambers Residency 'A' wing bracket (another building) were duly
constructed and units in them were actually sold to realise actual
proceeds. Despite being directed to furnish for inspection and produce
the audited financial statements including the profit and loss account
and the balance sheets of Saras Developers, Khan singularly failed to do
so and in fact refrained from doing so. If Khan simply did not provide
the relevant material that would lead to adjudication of these
proceedings, Khan has forfeited the right to find fault with a best
judgement assessment being made by the Learned Arbitral Tribunal.
36. Mr. Sen would submit that the only material that the Learned
Arbitral Tribunal was constrained to deal with were the registered sale
deeds to the premises in the three buildings. At the time of filing of the
Statement of Claim the sale of units in Sarla Sadan and Gambers
Residency 'B' and 'C' Wings had been completed. Exhibits TT and UU
annexed to the Statement of Claim, specifically, summarise and record
the price disclosed in the registered agreements for sale entered into in
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respect of each of the premises in these buildings. Thereby, it is evident
that 34 flats in Sarla Sadan led to an aggregate value of Rs.~1.84 crores
and 33 flats in Gambers Residency 'B' and 'C' Wings put together
aggregated to Rs.~5.22 crores.
37. The sale of premises in Gambers Residency 'A' wing was still
in progress at the time of filing of the proceedings. Therefore, Mr. Sen
would submit, Alka was able to pursue only a fraction of the real
revenues of Saras Developers and owing to the non-cooperative and
subversive attitude adopted by Khan in the arbitral proceedings,
arguably, Alka has been under compensated by a wide margin, and
therefore the Section 34 Court ought not to pay much heed to the
submissions being made on behalf of Khan on the manner of
computation, which essentially seeks to question the appreciation of
evidence by the Learned Arbitral Tribunal.
38. In the course of the arbitration and pursuant to an order
dated October 7, 2010, passed by the Learned Arbitral Tribunal, Khan
had submitted a list disclosing consideration received in respect of
Gambers Residency 'A' wing. This disclosure admittedly indicated sale
consideration of Rs.~6.13 crores. It is precisely this amount presented
by none other than Khan that has been factored in by the Learned
Arbitral Tribunal to hold that a total consideration of Rs.~13.20 crores
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had been received from the sale of premises in that building. The
number of flats sold in Sarla Sadan (34) and in Gambers Residency
and C Wing (33) would indicate that the total flats sold were 67 in
number at the time of filing the Statement of Claim. Gambers Residency
A Wing had 29 flats. To contend that the sale of all these flats would
yield a mere Rs.~13 crores in revenues is an extraordinary
understatement, Mr. Sen would submit.
39. Mr. Sen would submit that even from such evidently
understated sales turnover, the Learned Arbitral Tribunal went on to
further reduce 30% towards cost of construction to arrive at a really
under-evaluated profit of Rs.~9.24 crores for the entire project in
question and on that, the Learned Arbitral Tribunal computed an 80%
share at Rs.~7.39 crores in Alka's favour. Mr. Sen would allude to
potential receipts of cash that may have been involved in disposal of
Saras Developer's assets, since it is entirely unlikely that 96 apartments
could have been sold for a meagre sum of Rs.~13.20 crores.
40. As regards interest, Mr. Sen would submit that a partner's
entitlement to payouts should ideally entail interest from the
Dissolution Date because that is the date on which the entitlements are
drawn up, with accounts being firmed up. Yet, the Learned Arbitral
Tribunal has been conservative even on this count and has proceeded to
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grant interest only from the date of reference to arbitration, which was
in 2010, even while the Dissolution Date was way back on April 24,
2008.
41. In these circumstances, it is contented by Mr. Sen that Khan,
who has deliberately withheld the full true and fair picture of the state of
affairs of Saras Developers; absented himself from the arbitration
proceedings; and has done his best to frustrate the effective conduct of
the arbitration proceedings, could never enjoy the credibility necessary
to invoke principles of fairness and equity to challenge the Impugned
Award, although ostensibly, the challenge to the Arbitral Award is
attempted to be fitted within the two fundamental facets of patent
illegality and ignoring of vital evidence.
Analysis and findings:
42. Having heard the parties and having examined the record, I
find that the matter is fairly straightforward. To begin with, the Learned
Arbitral Tribunal has well articulated how he has appreciated the
evidence before him and arrived at the finding that Alka had not retired
from Saras Developers. The very signatures on the disputed deeds had
been questioned by the Registrar of Firms and despite clarifications
having been sought, none were provided by Saras Developers. This led
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to the changes reported in the disputed deed i.e. the First 2002 Deed,
the Second 2002 Deed, the 2003 Deed and the Retirement Deed, not
being accepted by the Registrar of Firms. As a result, these changes did
not get into the Register. When this event took place, a notary was
approached and he obliged with a certification of the signature having
been made in his presence. This led to Alka proceeding against the
notary, which culminated in disciplinary action against the notary.
43. The Learned Arbitral Tribunal also examined other
contemporaneous evidence. The Income-tax Department confirmed
that there was no evidence of partnership deeds to support Alka's
cessation as partner as claimed by Saras Developers in its tax returns.
The Learned Arbitral Tribunal also examined the findings of the
Sessions Court in anticipatory bail applications of two individuals
connected with the allegation of fraud in preparing the disputed deeds,
which indicates that Alka's purported signatures on the deeds did not
tally with her signature on the power of attorney signed by Alka. This
finding was upheld by this Court.
44. Having seen the analysis of the evidence and how it has been
weighed and appreciated, no reasonable person could contend that the
findings of the Learned Arbitral Tribunal in relation to the disputed
deeds, are unreasonable, arbitrary or passed without proper
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appreciation of vital evidence. The Learned Arbitral Tribunal has done
a detailed analysis of the evidence before it, weighed it, and adjudicated
it fairly. It is not for this Court to second-guess the appreciation of
evidence and substitute findings as if it were an appellate Court.
45. Once it was found that Alka was indeed an 80% partner in
the firm and the purported dilution and subsequent retirement in a
series of steps between 2002 and 2003 was not credible at all, the
Learned Arbitral Tribunal's assessment had to move to discerning the
monetary claim. This was actively and positively frustrated by Khan
simply going missing from the arbitration. Evidently, the role of Sovind
and the marital discord between Alka and Sovind looms large over the
proceedings. However, what the Section 34 Court has to consider is
whether the Learned Arbitral Tribunal has done right in its approach to
the adjudication, and whether the grounds on which Khan would
challenge the Impugned Award, lend themselves for acceptance.
Reliance on Sales Turnover and not Tax Returns:
46. A core contention by Mr. Toor is that the Learned Arbitral
Tribunal ignored vital evidence in the form of contents of Income-tax
Returns, which according to him, undermines the adjudication that is
based on assessment of admitted sales turnover of Saras Developers.
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This may seem attractive but has to be stated to be rejected. Audited
financial statements and the underlying books of accounts of a
partnership firm are meant to present a true and fair view of the state of
affairs of the partnership firm. The tax returns are meant to draw from
such financial information, purely from the perspective of conformity
with tax laws, and determination of taxable income, and effecting of
permissible deductions from them.
47. As such, every business enterprise would have both sets of
financial information - the commercial and mercantile reality of the
business as discernible from the audited financial statements, and the
tax compliance and computation of tax payable being discernible from
the tax returns. The extensive reference to tax returns not having been
analysed in the Impugned Award, and that too by a party that was not
the party that produced the returns, is unacceptable. It would not lie in
the mouth of Khan, who undermined justice delivery in the matter by
refraining from producing the audited financial statements and books of
accounts (even the tax returns became available only from Alka's efforts
under the RTI Act) to try to pick holes in the approach would lead to a
party that has not come to Court with clean hands, who can be non-
suited if he were the one prosecuting the claim, being permitted to
undermine the findings in the adjudication that was sought to be
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crippled by the very party that came with unclean hands. The abject
refusal to provide the audited financial statements would enable
drawing of an adverse inference and the Learned Arbitral Tribunal has
meticulously analysed the information available to assess the position.
48. Mr. Sen is right that Khan's attempts at undermining the
conduct of the arbitration has led to what could be regarded as an
under-assessment of Alka's entitlements as an 80% partner in Saras
Developers. The very evidence of 97 flats being sold for a mere Rs.
13.20 crores; read with the steadfast refusal to provide the real audited
financial statements; seen along with Khan happily confirming that the
information about the sales being a matter of record; taken together
with the information on the sales figures having been extracted from the
publicly available registered conveyances, all point to the adjudication of
the monetary relief being a reasonable, logical and plausible one. It is
not for this Court to sit in judgement as if it were an appellate court.
On the contrary, all that the Section 34 Court must do is to see if the
grounds on which an arbitral award is challenged fits within the
parameters of challenge under Section 34 of the Act. If it does not so fit,
the arbitral award should be left undisturbed.
49. Seen from this prism, there is no basis to find fault with the
findings on monetary compensation. The Learned Arbitral Tribunal
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had to examine what was its assessment of the true and fair state of
affairs of Saras Developers, in which very logically and reasonably, Alka
was found to have been a partner with 80% share. It is no argument to
state that the computation of taxable income should inform this
exercise, and that too from the mouth of the party that withheld the
financial information and did not even choose to deal with the
information flowing from the tax returns. Besides, the assessment of
Alka's 80% share has been made on the basis of the sales turnover
confirmed by Khan to be a matter of record and on that, the Learned
Arbitral Tribunal has applied a significant margin of costs and reduced
it further to arrive at financial entitlement of an 80% partner. I see no
reason to interfere with this empirical and logical approach to effecting
a best judgement on the part of the Learned Arbitral Tribunal despite
the party assailing the Impugned Award having been the party that did
its best to frustrate the proceedings.
Varying Partnership Stakes:
50. The next issue is of the Learned Arbitral Tribunal allegedly
not having seen the varying partnership stakes between the 1990s and
the 2000s. Alka had not had an 80% share throughout the period of
sales and therefore, the Impugned Award is assailed by Mr. Toor on
Khan's behalf. This too does not lend itself to acceptance. When
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dissolution of a partnership firm is sought, the financial position of the
firm as of the date of dissolution is to be seen. The stakes as of that that
have to be examined. Accumulated profits and accumulated losses
accrue and get stated in the financial statements, which were kept
hidden by Khan.
51. It can be nobody's case that the Learned Arbitral Tribunal
believed that the only way to compute a partner's share and the
application of the provisions of the law governing determination of
partner shares can be given a go-by. If the Learned Arbitral Tribunal
had before it the requisite financial information that Khan was meant to
provide and yet deviated, it would be a completely different matter. The
Learned Arbitral Tribunal was doing its best as an arbitrator to conduct
a best judgement assessment of what the financial statements ought to
have contained, bracing against the subversive conduct of Khan and his
other purported partners including Sovind.
52. It is in that context that the Learned Arbitral Tribunal has
meticulously explained why it was taking the approach it did to arrive at
the monetary award. Therefore, the party that refrained from
explaining the varying stakes over a period of time, cannot be heard to
pick holes on the approach. It can also be nobody's case that Khan's
refusal to part with information rendered it a fair game for the Learned
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Arbitral Tribunal to come up with whatever method it chose to
arbitrarily compute the monetary award. The Learned Arbitral Tribunal
has not done that, and instead it has based its computation on
confirmed sales turnover of the entire project. The adjustments for
varying stakes over time is inherent in the method of a reasonable guess
work that the Learned Arbitral Tribunal was entitled to make. The
margin of 30% was applied and hypothetical costs were reduced, and
then the share was arrived at.
53. The Learned Arbitral Tribunal was inclined to make such
guess work and it has done so reasonably. I am unable to accept Khan's
contention that this is not accurate computation resulting in any
perversity. It is trite law that even any perversity complained of against
an arbitral award ought to be of such order and magnitude that cuts to
the root of the matter. The shoe is on the other foot in this case when it
comes to perversity in approach. It was Khan and his purported
partners who have been fairly held to have not been partners, who have
subverted justice delivery in the instant case and withheld information
necessary to adjudicate.
54. What is a pointer to Khan protesting too much is the
contention that all the records of Saras Developers were somehow
washed away in floods of Mumbai city. When floods wash away records,
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there should be no reason to file a police complaint but Khan contends
that such a complaint too had been filed. The contentions are simply
not worthy of acceptance - evidently, every possible and conceivable
step to frustrate the ascertainment of truth was adopted against Alka,
leaving the Learned Arbitral Tribunal with no option but to adopt a
reasonable best judgement assessment of what the financials of Saras
Developers would be.
55. For the same reason, the contention that Khan's additional
affidavit had information on costs incurred, purchase of TDR and the
like, and that these had not been considered, are self-serving
submissions. It is not for a party to throw at an Arbitral Tribunal
disparate information, and then refrain from participation in the
proceedings, only to then contend that whatever had been thrown at it
before abandonment of the proceedings ought to have been dealt with
by the Arbitral Tribunal. In fact, the Learned Arbitral Tribunal was
entitled to adopt the position that Khan was not pressing his
contentions in the additional affidavit. Yet, the Learned Arbitral
Tribunal has adopted a reasonable approach to estimation without
arbitrariness, instead of wringing its hands helplessly by Khan
undermining adjudication by the Learned Arbitral Tribunal.
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Limitation Contention:
56. The contention on limitation too has been dealt with by the
Learned Arbitral Tribunal reasonably and well. First, it noticed that
between 2008 and 2010 the parties had engaged in mediation on the
nudge of this Court. Participation in mediation under the Court's
directions cannot be counted as leading to time-barring of the claim.
57. That apart, as regards the arguments made before this Court
on the facet of limitation, I am unable to accept Khan's contention that
when a dispute over dissolution of a partnership firm arises, only the
activity of the past three years would fall within the zone of
consideration. This would be absurd - every year, every partner would
be considered to have lost the right to make any claims to accruals that
have earned for the period prior to the preceding three years.
Effectively this would be reset of entitlements every year losing anything
attributable to the period prior to the past three years.
58. On the contrary, it should be remembered that the profit and
loss account depicts the picture of the financial year in question (it
always relates to a period) and that culminates in depiction of the
balance sheet as of a particular date (it always depicts the position of a
business on a given date). Accumulated profits and losses, reserves and
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surpluses, balances in the capital account - all are generated and
accrued over the life of the partnership. When the firm is dissolved, the
balance sheet is broken down and the distribution of such accruals is
effected. If this basic first principle is borne in mind the abstruse and
complicated contentions about limitation would work themselves out.
59. Equally, when a partner retires, the firm moves forward with
remaining partners with the financial position being iterated for the
continuing partners. The contention that accounts were settled up in
1997 when Ramesh retired is also only to be stated to be rejected.
Accounts due to Ramesh would be settled but the accumulated earnings
would continue to enure to the benefit of the continuing partners with
the balances in the capital account.
60. Implicit in the Impugned Award is the fact that the Learned
Arbitral Tribunal was not at all wrong in handling the approach to the
dissolution of Saras Developers either in terms of assessment of value or
in terms of limitation. I am not impressed with the contentions in this
regard, and reject the same for the aforesaid reasons.
Other Facets:
61. The Learned Arbitral Tribunal has returned a finding that,
right until the Dissolution Date, Alka had an 80% share in the business
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and profits of Saras Developers, and that despite her entitlement, she
had neither received nor been paid anything towards such entitlement.
The claim by Khan that Alka had contributed nothing towards Saras
Developers was found not to form part of the case pleaded by Khan. The
Learned Arbitral Tribunal had placed reliance on Exhibits TT, UU and
VV to the Statement of Claim, the contents of which were held to have
been conceded by Khan.
62. It was also noted that Khan had not dealt with this facet of
the claim and had simply refrained from producing any evidence
whatsoever, including Statements of Accounts and Balance Sheets of
Saras Developers. The Learned Arbitral Tribunal held Alka to be an 80%
partner of Saras Developers and on appreciation of evidence found that
the First 2002 Deed, the Second 2002 Deed, the 2003 Deed and the
Retirement Deed were not proven and could not be believed. This
overall approach indicates a clear and cogent structure to the thinking
and reasoning by the Learned Arbitral Tribunal. The Impugned Award
is not worthy of interference.
63. It is not necessary to expend too much analysis on the
arguments of whether a partner is a debtor or a creditor. Suffice it to
say, a partner is a part owner and on dissolution becomes a creditor or
debtor. The Dissolution Notice is what led to termination of
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partnership. Until then, the business was running as a going concern
and the partners had their entitlements to the accumulated financial
position of the partnership firm as crystallised pursuant to the
dissolution.
64. The contention that Alka had slept over her rights and
contributed nothing also cannot be accepted. Alka trusted her partners
and was entitled to rely on the legal requirement of every partner having
to act in good faith towards other partners and the partnership firm.
Alka having been given two flats of the partnership too would be a
matter of keeping accounts, which were withheld by Khan from the
Learned Arbitral Tribunal. The computation of turnover and deemed
costs and resultant profits are all based on actuals as depicted from the
registered sale deeds. Therefore, on this count too, no interference is
called for. For the same reason, the contention that tax returns of each
partner and of the partnership indicating every year what the income of
the partner from the partnership firm was, is meaningless, coming as it
does from a litigant who has in his possession the financial statements
but withheld it from the adjudicatory process to subvert the outcome.
65. The Section 34 Petition is finally disposed of in these
terms, except on the facet of costs, which is deferred for consideration
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along with the Contempt Petition on the next date. Interim Applications
if any shall also stand disposed of.
66. Since costs have to follow the event, Alka shall submit an
affidavit on the costs incurred till date in the matter, along with
supporting documentation for further consideration of this aspect of the
matter. Such affidavit shall be filed within a period of two weeks from
today. Khan may file an affidavit dealing with such affidavit within a
period of two weeks thereafter.
Contempt Petition No. 102 for 2015:
67. This leads me to the Contempt Petition No. 102 for 2015
alleging contempt for wilful disobedience of directions of the Learned
Arbitral Tribunal under Section 17 of the Act. I have upheld the
Impugned Award above. However, it is quite clear that the
administration of justice has been undermined by Khan. Mr. Toor
would point to Khan's ailments to plead against sending him to jail.
68. What has transpired here is that despite explicit protective
orders of the Learned Arbitral Tribunal, and in the teeth of the power of
attorney being revoked by Alka, alienation of flats and properties of
Saras Developers was persisted with by Khan and Sovind.
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69. This Petition has had a chequered history with the Learned
Single Judge of this Court initially holding that the powers of contempt
could not be available under Section 27 of the Act in connection with
arbitration proceedings and that Section 27 is primarily for
administrative assistance of the Court for taking evidence. This view
came to be set aside by the Supreme Court, which held that the powers
under Section 27 would indeed cover wilful disobedience of directions of
Arbitral Tribunals, in particular, after the amendment of Section 17 of
the Act. Therefore, the Petition was sent back to this Court for
consideration of the same on merits and on facts.
70. In the course of Arbitration Proceedings, Alka filed an
Application under Section 17 of the Act seeking various protective reliefs
in the form of restrictions of alienation of assets and property and
disclosures of Bank Accounts, Statement of Accounts of Saras
Developers for ten years and accounts of income and profits made by
Saras Developers from the sale of flats in the buildings.
71. Khan too filed four Interim Applications seeking to restrain
Alka against filing any complaints to anyone claiming that she was a
partner of Saras Developers; an application seeking dismissal of the
Statement of Claim as being barred by limitation; an application seeking
a declaration that the primary prayer in the Statement of Claim was not
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within the jurisdiction of the Learned Arbitral Tribunal; and the order
declaring that Khan is entitled to register flats in the name of flat
purchasers.
72. On October 07, 2010, the Learned Arbitral Tribunal issued
directions essentially directing Khan to furnish particulars in respect of
disposal of flats within a week in the format stipulated and directing
that any further disposal of flats would only be after seeking leave of the
Learned Arbitral Tribunal and furnishing particulars to Alka's Advocate
well in advance of making application seeking such need.
73. However, immediately thereafter, on October 14, 2010, five
flats were actually transferred with the transfers being executed in
blatant violation of the order dated October 07, 2010. Neither was leave
of the Tribunal taken nor was Alka intimated about the same. This led to
Alka seeking a relief in the form of appointment of a Receiver to take
control of the assets and also seeking a direction that Khan's statement
of defence should be struck out.
74. All the applications filed by Khan and Alka were heard jointly
on March 26, 2012. Khan did not press the Application seeking a
restraint on Alka from filing any complaints claiming to be a partner.
The Interim Application containing contentions about jurisdiction was
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disposed of since the issues had already been framed in this regard. An
Interim Application seeking permission to register the flats on which
third party rights had already been created, was dismissed by the
Learned Arbitral Tribunal.
75. Specifically, for the financial year 2003-04, the Tribunal was
pleased to direct Khan to offer inspection of the books of accounts,
audited statements of income and expenditure, balance sheet and
income tax returns. Khan was also directed to disclose to Alka in writing
the details of the assets of Saras Developers and particulars of bank
accounts maintained by it. Full particulars of the flats that had been sold
and unsold was asked to be provided, all within a period of four weeks
from that date. The prohibition on alienation of assets was reiterated
and the need to ensure that prior notice is given to Alka and prior
approval of the Tribunal is taken for future disposals was also reiterated.
A bank guarantee was directed to be furnished in the sum of Rs.~1.25
crores to be kept alive pending conduct of the arbitration proceedings.
76. The order passed on March 26, 2012 was challenged under
Section 37 of the Act. No interim reliefs were granted on the challenge,
which in turn led to Khan filing a Special Leave Petition in the Supreme
Court, which issued notice and stayed further arbitration proceedings.
However, the Special Leave Petition was dismissed on September 02,
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2013 making it obligatory on Khan's part to comply with the interim
order dated October 07, 2010 and further directions issued on March
26, 2012. However, none of this was complied with and the gross
defiance of the measures continued.
77. Further non-compliance is also seen with Khan executing in
June 2014, Deeds of Confirmation, confirming the sale of the four flats,
the disposal of which had been explicitly refused by the Learned Arbitral
Tribunal on March 26, 2012. Having examined such conduct, it is clear
that the alleged contemnor has demonstrated utter disregard and
contempt for the justice delivery process in the arbitration proceedings.
There was wilful disobedience and breach of not just the directions
passed in the 2010 Interim Order but also 2012 Interim Order, a
challenge to which came to a nullity with no ability to justify non-
compliance with them. Inspection of records was not granted. No asset
disclosure was made. No bank guarantee was provided. Costs directed
to be paid was not paid, and a further Deed of Confirmation was
executed confirming the sale of the very same flats that had been sold in
utter violation of both the aforesaid Interim Orders.
78. It is in these circumstances that the Contempt Petition sought
punishment of a terms of imprisonment of six months and imposition of
fine of Rs.2,000/- in terms of the Contempt of Courts Act.
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79. Mr. Toor, on behalf of Mr. Khan would submit that there was
no intention on the part of Khan to commit any wilful disregard of the
directions issued by the Learned Arbitral Tribunal. Khan had
purportedly bona fide believed that the recusal by the Learned
Arbitrator from the proceedings between Alka and Sovind, would also
lead to his recusal from the arbitration in relation to Saras Developers.
Therefore, Khan is said to have tabled the request for recusal. This does
not inspire any confidence, since in any case, Khan simply played truant
with the Learned Arbitral Tribunal after such an application, leaving it
to the vagaries of litigation to evolve an outcome of its own, with a
potential for errors in the adjudication giving grounds to challenge the
outcome.
80. Mr. Toor also submits that in any case, the Learned Arbitral
Tribunal indeed had access to the relevant papers owing to the replies to
the queries under the RTI Act and that the Registrar of Firms and the
Income Tax Department had provided all material that would enable
adjudication of the proceedings and that indeed, the Arbitral Award
relies upon such records to return its findings. Therefore, he would
submit that lenient view may be taken inasmuch as there has been no
frustration of the adjudication process since in any case the material did
become available to the Learned Arbitral Tribunal.
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81. Mr. Toor would submit an unconditional apology on behalf of
Khan in the matter and submit that a lenient view may be taken, also
bearing in mind the age and the ailments that Khan is going through.
82. Mr. Sen on the other hand would submit that the conduct by
Khan has indeed been contumacious. Khan simply stayed away from
participating in the arbitration proceedings. He did not provide any
data. Specific directions under Section 17 of the Act directing him to
produce information were wilfully ignored. In particular, the order
dated October 7, 2010 was deliberately ignored and therefore in his
view, that Khan was contemptuous of justice delivery processes is
proven beyond reasonable doubt. Mr. Sen would leave it to the Court to
consider such action as considered appropriate by this Court.
83. Having examined the record, it appears that Khan was the
20% partner when Alka was the 80% partner. The disputed deeds (the
First 2002 Deed, the Second 2002 Deed, the 2003 Deed and the
Retirement Deed) would show a systematic fake dilution of Alka in
which Khan was not alone - Sovind has evidently played an out-sized
role in undermining Alka's entitlements and is not before this Court.
Since Alka only recognised the undisputed position as obtaining prior to
her dilution under the disputed deeds, the others were not parties to
these proceedings. Khan being the only other partner has alone been
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arraigned in the contempt proceedings, when the mastermind may be
elsewhere. The position Khan is in, is abject. However, Khan was not
alone, and he appears to have been one of the many players involved in
subverting the arbitral process. The disputes between Alka and Sovind
have not been heard by this Court. Therefore, this Court is constrained
to examine only Khan's role in these proceedings at this stage.
84. Considering the wanton and deliberate manner of conduct, it
would not be appropriate to let this off lightly. This is a fit case for
framing of charges for consideration of criminal consequences for such
conduct. Yet, taking into account Khan's purported ailments and the
sheer persuasiveness on the part of Mr. Toor, I consider it appropriate
to give Khan an opportunity to truly purge the contempt alleged.
85. In my opinion, the only way for Khan to purge the contempt
alleged is to deposit the entire awarded amount along with interest
computed until the date of pronouncement of this judgement with the
Registry of this Court within a period of six weeks from the
pronouncement of this judgement. This would be the only means of
truly indicating remorse on his part and to assure the Court that the
apology is not lip service. If such deposit is made, the Court would
consider whether the next stage for criminal contempt must be resorted
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to in terms of framing of charges. If no such deposit is made, the
matter shall be listed for framing of charges.
86. The Contempt Petition shall be listed for further
consideration and reporting compliance after six weeks.
87. As stated above, the assessment of costs for this round of
litigation including in the Section 34 Petition is deferred for further
consideration when the Contempt Petition would come up for
consideration on the next date.
88. All actions required to be taken pursuant to this order shall
be taken upon receipt of a downloaded copy as available on this Court's
website.
[ SOMASEKHAR SUNDARESAN, J.]
March 23, 2026
Chaitanya
