Reliable Finance Corporation ... vs Ajoy Pal Singh And Ors.
1987 Latest Caselaw 360 Del

JUDGMENT

C.L. Chaudhry, J.

(1) This is an application under Order Rule 10(2), Order 6 Rule 17 and Section 151 of the Code of Civil Procedure read with Section 47 of the Arbitration Act for adding M/s. J. R. Traders & Financiers (applicant herein) as respondent No. 4 in the suit and allowing them to contest the suit. M/s. Reliable . Finance Corporation (P) Ltd. (petitioner herein) has filed the petition under Section 20 of the Arbitration Act being suit No. 529-A/83. The allegations made in this petition are that the petitioner is engaged in the trade of hire purchase of motor vehicles. On 20-4-1981, the petitioner being the owner of vehicle bearing registration No. Hro 5883 hired out the same to respondent No. l,Shr Ajay Pal Singh, on the terms and conditions incorporated in the agreement. Defendants 2 and 3 stood surety for the faithful performance of the hire-purchase agreement. It is further stated that the vehicle was originally purchased and registered in respondent No.1 brought the same to Delhi in May, 1981 and its registration number was changed from Hro 5883 to DHL. 5733. The engine number 692 Doi 727731 and chassis No. 344 073 remained the same. It was the same vehicle. It is further averred that the respondent were irregular in the payment of the hire money and a sum of Rs. 1,57,826.05 is due from them on account of arrears of hire money which they have not paid inspite of repeated demands. The plaint further proceeds that because of the above disputes, namely, the defaults in the payment of the hire money and the non-surrender of the vehicle the defendants were asked to refer the disputes to Arbitration as was agreed between the parties vide agreement dated 20-4-1981, which contained an arbitration clause. Not-withstanding the request of the plaintiff, the defendant has refused to join in the reference leaving no alternative for the petitioner but to move the present application. It is stated that the agreement dated 20-4-1981 be ordered to be filed and dispute namely the default in the payment of hire money and the return of the vehicle be referred to the Arbitration in terms of the arbitration clause. This petition is being contested on behalf of the defendant.

(2) The applicant has filed the present application under Order 1 Rule 10 seeking a direction that the petitioner he directed to add the applicant as respondent No. 4 in this Suit. It is stated in the application that the applicant has been carrying on the business of financing the purchase of trucks on hire purchase basis. Mr. Gurnam Singh, respondent No. 2 in the suit entered into a hire purchase agreement dated 11-2-1981 in respect of a track bearing No.-692 Do 1727731 and Chassis No. 344073726411. The applicant financed the purchase of the truck from M/s. Standard Motors. Gangashaher Road, Bikaner for Rs. 1,66,292.55 and the vehicle was got registered with the. Registering Authority Bikaner who assigned it the registration mark "RSF 1533" oh 7-3-81. The registration certificate contains a note making it clear that registration in the name of Gurnam Singh was being done subject to hire purchase agreement and subject to a hypothecation in favor of J.R. Traders & Financers. It is further stated that Shri Gurnam Singh appears to have applied and obtained a new registration No. DEG-3241 (new)/RSF-l533 (old) on 22-3-1983. It is further stated that it appears that M/s. Reliable Finance Corporation Ltd. who instituted a petition under Section 20 of the Arbitration Act entered into a fraudulent deal with Ajay Pal Singh, respondent No. 1 with the intent to cause wrongful loss to the applicant and wrongful gain to themselves. To effectuate their scheme they seem to have fabricated a registration certificate in respect of this very vehicle in the name of Ajay Pal Singh as owner. It is further asserted that the fraud came to the knowledge of the applicant when it inspected the record of the suit. The truck was involved in a road accident near Dudu, Rajasthan, resulting in the death of Gurnam Singh, a respondent No. 2. The police station of Duru registered an F.I.R. (No. 60 of 1985) under Section 279, 337 and 304-A of the Indiar. Penal Code arising out of the said accident. The truck was seized by the police and was later entrusted t o Shri Ramesh Anand on Superdari subject to his furnishing security in the amount of Rs. 2 lakhs. It is further stated that Shri Ramesh Anand, whose name appears as one of the attesting "witness on... the deed to hypothecation dated 20-4-81, was appointed. Receiver of the said truck by this Court. The applicant further asserts that after taking possession from the Court of the learned Magistrate on Superdari through the instrumentality of its agent Mr. Ramesh Anand, the petitioner moved an application before this Court for permission to sell the truck, which permission was granted by this Court vide order dated 16-1-1987. It is claimed that in case the truck is allowed to be sold, under the circumstances mentioned above, the applicant would suffer huge loss because the parties to the suit have played fraud and cheating on ail concerned. It is stated that the applicant, therefore, is a necessary party to the suit and ought to have been imp leaded as respondent No. 4.

(3) The application is being contested by the petitioner. In the reply, it is stated that the application is misconceived in. the present proceedings which are under Section 20 of the Arbitration Act for reference of disputes between the parties to the named Arbitrator under the agreement dated 20-4-1981. The applicant has no privity of contract with the petitioner, nor is there any arbitration agreement between the petitioner and the present applicant. The applicant, therefore, cannot be allowed to join these proceedings. On merits also, they have denied the claim of the applicant.

(4) I have heard the learned counsel for the parties. Dr. Sidhu appearing on behalf of the applicant contended that applicant is a necessary party to the suit, as the truck in question belongs to the applicant. The petitioner had entered into a fraudulent deal with Ajay Pal Singh, respondent No. 1, with the intention of causing wrongful loss to the applicant. It is further contended that in any case the presence of the applicant before this Court is necessary in order to enable the Court to effectually and completely adjudicate upon and settle all questions involved in the suit regarding ownership of the truck. On the other hand, K.K.Mehra appearing for the petitioner contended that the applicant Cannot be added as a party to this suit because the agreement dated, , between the petitioner and the respondent is the subject matter of the suit. If the application under Section 20 of the Arbitration Act is allowed, then the dispute would have to be referred to the Arbitrator in terms of the arbitration clause. The applicant is not a party to this agreement dated 20-4-1981 and cannot be allowed to urge anything in respect of this agreement. In my opinion, the contention of the learned counsel for the petitioner has force and the applicant cannot be imp leaded as a party to these proceedings. The subject-matter of the suit is the agreement dated 20-4-1981. The flowing issues have been friend in this suit :-

1. Whether there was arbitration agreement between the parties ?

2.Whether the petition has been filed by the duly authorised person ?

3.Whether the petition under action 20 of the Arbitration Act was not maintainable ?

4.Whether the dispute sought to be referred to the arbitration was covered by the arbitration agreement?

5.Whether defendant No. 1 was minor at the time of the execution of the said agreement ? If so, to what effect ?

6.Whether the named arbitrator was not an independent person ? If so, to what effect ?

7.Relief.

(5) This court while dealing with an application under Section 20 has to decide only whether there exists a valid and subsisting arbitration agreement which applies to the differences which has arisen between the patties. This Court under Section 20 cannot decide the claims of the parties on merits. The applicant is not a party to this agreement dated 20-4-1981 and he has not claimed any right under this, agreement. He is claiming independent right of ownership of the vehicle. His rights cannot be determined in these proceedings. If the application under Section 20 is allowed, then the matter could be referred to the Arbitrator for deciding the disputes between the parties to this agreement. The applicant not being a party to this agreement, his right cannot also be determined by the Arbitrator. The petitioner has not claimed any relief against the applicant. He is claiming the relief against the respondents arising out of the agreement dated 20-4.1981. Learned counsel for the applicant strongly relied upon . In my opinion that authority is of no avail to the applicant.

(6) In view-of the reasons stated above, it follows that the application is devoid of merit and is liable to be dismissed. Ordered accordingly