Durga Devi vs Bhag Chand Lohia
1995 Latest Caselaw 965 Del

JUDGMENT

S.K. Mahajan, J.

(1) The parties to the suit were stated to be partners under a written deed of partnership and were running the business under the name and style of Cloth Services of India, Mysore with offices in Delhi and Coimbatore. Certain disputes are stated to have arisen amongst the partners which in terms of an arbitration agreement existing between the parties were allegedly liable to be referred to arbitration. The plaintiff, therefore, had filed the present petition under Section 20 of the Arbitration Act for reference of such disputes to an arbitrator.

(2) The defendants have objected to the reference of disputes on various grounds and one of the grounds is that this Court has no jurisdiction to try this suit inasmuch as the registered office of the partnership firm was at Mysore, there was no branch office of the firm at Delhi, all transactions pertaining to even the depot at Delhi were rendered at the registered office at Mysore, all the books of accounts were being maintained at Mysore and the firm was also assessed to income tax at Mysore. No part of the cause of action is stated to have arisen within the jurisdiction of this Court and it was, therefore, stated that this Court could not try and entertain the petition.

(3) On 28th January, 1994, defendants filed an application being I.A.No.939/94 under Section 41(b) read with para 4 of the 2nd Schedule to the Arbitration Act alleging, inter alia, that the firm in which the parties to the suit were partners had inherited a site bearing No.AM-87, Shalimar Bagh, Delhi under a deed of partnership dated 16th February, 1983 from the previous partnership and the previous partnership had acquired this property from out of the funds of the firm in the name of Smt.Durga Devi Marodia, one of the partners of the firm, for a consideration of Rs.3,10,000.00 . It is stated that the payment at site at the time of auction on 22.6.1981 was made by the firm in the name of on

I have transferred the possession of plot AM-87, Shalimar Bagh, Delhi for a consideration of Rs.3 lakhs to one Shri Anil Lila. I have already received a part of the consideration to the tune of Rs.1,50,000.00 . I handed over the possession over the said plot in September, 1986. Since the Dda people were harassing me, so I transferred the possession. The Dda people wanted me either to sell or dispose of the said property or to rise the construction thereon. I did not have any money for construction. No agreement in writing was entered into with Mr. Anil Lila.

(4) By the present application, plaintiff wanted the Court to appoint a receiver of the property until the award of the arbitrator was made, and also to direct the receiver to dispossess the alleged illegal occupant, Shri Anil Lila, and his family from the occupancy of the said property.

(5) On 27th April, 1994, the applicants, namely, Smt. Sona Devi, Shri Anil Lila, Sh.Mahesh Lila and Smt.Krishna Lila, filed an application being I.A.No.3918/94 under Order 39 Rule 4 for vacating the interim orders passed by the Court about restraint on the property. The application was filed on the ground that the plaintiff No.1 had sold the property to the applicants and had executed a general power of attorney, agreement to sell, affidavit and Will on 10th October, 1986 and right from October 10, 1986, the applicants are in exclusive possession of the property. It is further stated that the entire sale consideration had been paid to plaintiff No.1, who, with a view to avoid all possible apprehensions and disputes, had also executed a Will on 10th October, 1986 which was duly registered with the office of the Sub-Registrar, Delhi. Property has been mutated in the name of the applicants and in the records of the Municipal Corporation of Delhi. The plan was sanctioned on 22.2.1988 and the construction was completed within six to seven months. According to the applicants, no orders can be passed in respect of the said property restraining them from transferring, alienating or selling the same. According to the applicants, only about ten days before filing of the application the servant of the applicants was handed over a letter dated 16th February, 1994 sent by M/s Cloth Services of Mysore and it was only thereafter that they became aware of the litigation pending between the parties.

(6) By still another application being I.A.No.10595/94, the defendant No.1 wanted the applicants in I.A.3918/94 to be imploded as parties to the suit as defendants.

(7) The question of impleading a party to the suit can be decided only in accordance with the provisions of Order 1 Rule 10 CPC. Under the said provision, the Court has the power, at any stage of the suit, to direct any person to be substituted or added as a party to the suit, provided the presence of such person is necessary in order to enable the Court to effectually and completely adjudicate upon and settle all the questions involved in the suit. A party which ought to have been joined but has not been joined and whose presence is necessary for deciding all the points in the suit can be said to be a necessary party. The court would not normally add a person whose presence is not necessary for deciding the matters in controversy between the parties. Defendants had filed this application after they had come to know that the property in suit had been transferred by plaintiff No.1 to the persons who are now sought to be imploded. The question, however, is whether merely on account of the property having been transferred by plaintiff No.1 to the said persons, they are necessary parties to the suit. The present petition is under Section 20 of the Arbitration Act. Arbitration can be invoked by any party to the suit for deciding the matter in controversy between the parties to the arbitration agreement and an outsider who is not a party to the arbitration agreement cannot be compelled to be party before the arbitrator. The suit is for reference of certain disputes which had arisen between the parties to the suit while they were partners of the firm M/s Cloth Services of India Mysore. In my opinion, the persons who are now sought to be imploded by defendant cannot, by any stretch of imagination, be said to be persons whose presence is necessary for deciding the matters in controversy between the parties to the suit in relation to the firm M/s Cloth Services of India, Mysore. Moreover, as already mentioned above, the said persons being not parties to the arbitration agreement, cannot be parties to any disputes which may be existing between the plaintiffs and the defendants. The said persons cannot be compelled to participate in arbitration proceedings. In my opinion, therefore, there is no case made out by the defendants for impleading the aforesaid four persons as defendants in the suit and the application cannot be allowed.

(8) I, accordingly, dismiss I.A.No.10595/94.

(9) Coming now to the question as to whether the defendants are entitled to any order against the subsequent purchasers of plot No.AM-87, Shalimar Bagh, Delhi and as to whether the interim orders passed, in relation to the said property, earlier by the Court are liable to be vacated in so far as the same affect the rights of the said persons. The contention of Mr.Pramod Aggarwal, learned counsel for the defendant is that plaintiff No.1 had concealed the fact of filing of the suit at the time of sale of the property to the applicants of I.A.No.3918/94 and the said persons have got the property transferred in their names clandestinely from the Delhi Development Authority. It is also the contention of defendants that the said purchasers are only the agents of plaintiff No.1 and they cannot have better right in the property than the said plaintiff.

(10) To appreciate the contention of the parties, it will be useful to mention certain dates. On 5th March, 1981, the partnership came into existence. On 22nd June, 1981, the plot in question was auctioned by the Dda and on 14th August, 1981, the letter was sent by the Dda for possession. Some payments have been made on 4th December, 1981 and 15th January, 1982, and possession of the plot was delivered on 5th April, 1982. On 30th August, 1982, a letter was written by the Delhi Development Authority for execution of the lease deed and the lease deed was, accordingly, executed on 18th January, 1983. All this has been done in the name of the plaintiff No.1. In view of these documents with plaintiff No.1, could it be said that the applicants of I.A.3918/94, that is, the subsequent purchasers, had any reason to know that the property, in fact, belonged to the partnership and not to plaintiff No.1 alone? It is also not the case of the defendant that they had at any time given notice to the general public informing them that the plot in question was the property of the firm and not the individual property of plaintiff No.1. Plaintiff No.1 had been asserting her right to be the absolute owner of the said property repeatedly. As early as on 28th July, 1986, the said plaintiff had written a letter to one of the defendants that she was the absolute owner of the said plot with which no other person had any concern and that the defendants were trying all sorts of tactics to deprive her of the said plot. It cannot, therefore, be said that plaintiff No.1 had for the first time in reply to IA.No.1776/88 challenged the ownership of the said plot in the name of the firm. The plaintiff has also placed on record the order of the Wealth Tax Officer for the assessment year 1982-83 and 1983-84, wherein it has been stated that plaintiff No.1 had withdrawn Rs.3,11,170.00 from the partnership firm of M/s Cloth Services of India, Mysore for making payment to the Delhi Development Authority for the residential plot No.AM-87, Shalimar Bagh, Delhi which she purchased in open auction and the said amount was to be adjusted against her capital and current account with the said partnership firm. Though I am not presently deciding the question as to whether it was firm or plaintiff No.1 in her individual capacity alone who was the owner of the plot in question, however, prima facie, it appears that as the plot was registered in the name of the plaintiff No.1 and she had also disclosed the same in her wealth tax returns, there was no impediment against her to transfer the said plot in 1986 to the applicants in I.A.3918/94. The agreement to sell has been executed on 10th October, 1986 when a sum of Rs.3,50,000.00 is stated to have been paid by the subsequent purchasers to plaintiff No.1 and a will was also registered on the same date. As there is a registered will of 10th October, 1986 executed by plaintiff No.1 in favor of the subsequent purchasers, I have no reason to doubt the authenticity of the same. The property has already been mutated in the name of the said persons who had also submitted the application for sanction of the plan for construction of this property.

(11) I am, therefore, prima facie, of the opinion that the aforesaid purchasers who are the applicants in I.A.3918/94 are bonafide purchasers without notice of either the suit or any disputes between the parties. In my view, therefore, there cannot be any order of restraint against the said persons in dealing with the property, which stands mutated in their favor.

(12) I, accordingly, allow I.A.No.3918/94 and dismiss I.As.939/94 and 10594/94 in so far as the same relate to the property AM-87, Shalimar Bagh, Delhi. Interim orders passed earlier in so far as they affect the rights of applicants in IA.3918/94 are vacated.

(13) Nothing observed in this order will affect the merits of the case either in this Court or before the arbitrator.