Shri Jai Bhagwan Garg vs Shri Ram Kumar Gupta And Anr.
2007 Latest Caselaw 449 Del

JUDGMENT

Sanjay Kishan Kaul, J.

IA No. 2370/2007

1. Costs are stated to have been deposited. There is no reason to vary the order dated 13.2.2007.

2. Dismissed.

IA No. 6534/1994 (Under Section 30 and 33 of the Arbitration Act, 1940)

3. A partnership firm known as M/s. Devendra and Company was constituted in which there were four partners. Mr. Jai Bhagwan, Mr. Ram Kumar Gupta, Mr. Devender Lal Gupta and Ms. Payal Gupta. Ms. Payal Gupta is the daughter-in-law of Mr. Devender Lal Gupta. Some disputes apparently arose in the running of the business of the firm and in terms of a writing, all pending disputes were referred to the sole arbitration of Lala Kanwar Bhan whose decision was agreed to be final and binding between the partners. It may however be noticed that this writing is not signed by Ms. Payal Gupta.

4. The arbitrator thereafter entered upon reference and gave a non-speaking award dated 16.3.1990. The award reads as under:

1. That the partners Sh. R.K. Gupta and Sh. Jai Bhagwan Garg will retire from the firm with immediate effect and the two continuing partners Sh. Devender Lal Gupta and Mrs. Payal Gupta W/o Sh. Praveen Gupta will run the firm and all assets and liabilities will be of the continuing partners.

2. That all deposits, with the company, stocks, goodwill are to the account of the continuing partners. All liabilities as to creditors as well as to sales tax and income tax are also to the account of continuing partners.

3. The books of accounts will remain with the continuing partners as they will get the cases of income tax and sales tax assessed. All sorts of dues and payments are also to be cleared/recovered by the continuing partners and retiring partners will not be responsible for any such things.

4. That in full and final settlement of account the continuing partners have to pay a sum of Rs. 5,00,000/- (Rupees Five Lakh Only) to Sh. Ram Kumar Gupta/his family members and a sum of Rs. 4,00,000/- (Rupees Four Lakh Only) to Sh. Jai Bhagwan or his family members/nominees. The payment will be made by post dated account payee's cheques, payable in 5 cheques (monthly) of Rs. 1,00,000/- each to Sh. R.K. Gupta and 4 cheques (monthly) of Rs. 1,00,000/- each to Sh. Jai Bhagwan. The cheques will be handed over to the honourable arbitrator Sh. Kanwar Bhan Ji.

5. Mr. Ram Kumar Gupta called upon the arbitrator requesting him that the award should be filed in Court. Unfortunately the arbitrator passed away in February 1991. The son of the arbitrator thereafter filed the award in Court.

6. Respondent No. 2 Mr. Devender Lal Gupta aggrieved by the award filed objections under Sections 30 and 33 of the Arbitration Act, 1940 (hereinafter referred to as the said Act). It is these objections which have to be examined. Mr. Devender Lal Gupta has since passed away and at present his legal heirs are prosecuting the objections.

7. The award is a non-speaking award. The reference was made to a person known to the family members and the object was apparent, which was to reconcile the disputes between the parties. An arbitrator is a judge chosen by the parties and thus the settled legal position is that a court does not interfere with the award unless there is a patent error. It is trite to say that it is not the function of the court to sit as a court of appeal or reappraise evidence. Merely because the court would come to a different conclusion on the same set of facts is also no reason for the Court to interfere with the award.

8. The principal contention advanced by learned Counsel for respondent No. 2/objector is arising from the plea of there being no valid reference to the arbitrator. This is so since Ms. Payal Gupta is not a signatory to the reference though she has not come before the Court to file any objections. It is also the plea of the learned Counsel that the award was never meant to be acted upon and in fact was not so acted upon. In support of this plea learned Counsel seeks to contend that there were even suits filed by respondent No. 1 for recovery of the amount forming subject matter of the award. A plea of fraud is also sought to be raised that there were sales tax liabilities amounting to Rs. 35,00,000/- which were never disclosed to late respondent No. 2.

9. It is the aforesaid pleas raised by learned Counsel for respondent No. 2 which have to be examined.

10. Learned Counsel for respondent No. 2 has relied upon the judgment of a Division Bench of the Patna High Court in Deep Narain Singh and Ors. v. Mt Dhaneshwari and Ors. to contend that if all persons interested in the matter in dispute are not made parties to the arbitration agreement, the agreement itself is void and the Court has, in fact, powers to suo motto nullify the award on the ground of an invalid reference even where no objections are filed. Learned Counsel also referred to the judgment of the learned single Judge of the Bombay High Court in Yakub Ibrahim v. Gulamabbas Mohamdelai and six others heirs of the deceased Vohra Mahomedali Haiderali AIR 1958 Bombay 51. It was held that in a suit by one of the partners filed against others for accounts, unless all the parties were imp leaded, would be barred and not maintainable and that there is no estoppel in that behalf. Learned Counsel further made a reference to the judgment of the Apex Court in Ramagya Prasad Gupta and Ors. v. Murli Prasad Gupta and Ors. to advance the proposition that in a suit for settlement of accounts between the partners on dissolution of partnership, persons claiming some rights under one partner are necessary parties to the suit and the failure to bring on record such persons can be fatal.

11. Learned Counsel for the claimant and respondent No. 1, on the other hand, has referred to the Division Bench judgment in Krishan Kumar v. Knitting Industries and Ors. . The matter related to a reference of a dispute to arbitration by one of the partners of the firm against a third party. While dealing with the aspect of the liability of the other partners it was held that the award did not bind the other partners but insofar as the executants of the agreement were concerned, the award was binding and the result was that the partner who had made the reference was held to be bound by the award.

12. Learned Counsel for the claimant and respondent No. 1 contends that the undisputed position is that in pursuance to the award the business was taken over by Mr. Devender Lal Gupta and in fact that was the award. Payments were to be made to the claimants and respondent No. 1 for which cheques were drawn and the same were handed over to the arbitrator. These cheques were to be returned on payment of amount. Neither payment was made nor the cheques honoured. Learned Counsel, thus, contends that the absence of any objections at any stage by Ms. Payal Gupta coupled with the fact that her father-in-law Mr. Devender Lal Gupta took over the business of the firm and assets in pursuance to the award and runs the same itself shows the ratification of the award by Ms. Payal Gupta. The plea of the claimant and respondent No. 1 is that, in fact, it is a matter of family running of business where Mr. Devender Lal Gupta took over the running of the business. The present objections are being prosecuted by the husband of Ms. Payal Gupta and son of Mr. Devender Lal Gupta. Learned Counsel, thus, submits that the observations of the Division Bench of this Court in Miss Mohinder Kaur Kochhar v. Punjab National Bank Limited, New Delhi AIR 1981 Delhi 106 to the effect that in a reference to arbitration in case of a partnership firm there can be ratification by non-signatory partner by implication from the conduct of such partner are applicable in the present case. Learned Counsel has also referred to the Division Bench judgment of the Calcutta High Court in J. Thomas and Co. v. Bengal Jute Baling Co. AIR 1979 Calcutta 28 where while dealing with the objections under Sections 30 and 33 of the said Act it was held that a person who gains a benefit by obtaining an advantage of money under an award accepts such award and cannot thereafter challenge it.

13. In order to appreciate the rival submissions of the learned Counsels, the nature of the award itself would have to be seen. The award envisages the retirement of two partners Mr. R.P. Gupta and Mr. Jai Bhagwan and the continuation of the business by Mr. Devender Lal Gupta and Ms. Payal Gupta. All the assets and liabilities were to remain with the continuing partners. This portion of the award as per paragraph 1 was implemented since undisputedly the two retiring partners retired while the remaining two continued the business. The award also envisages that all deposits of the company, stocks, goodwill, etc. are to remain with the continuing partners as also all the liabilities to creditors and to sales tax and income tax departments. This is in pursuance to the taking over of the business by the remaining two partners. This again so occurred. The award envisages the books of accounts to remain with the continuing partners to get the cases of income tax and sales tax assessed. All sorts of dues and payments are to be cleared and received by the continuing partners. This again stands implemented in some sort. The real non- implementation is only in respect of paragraph 4 of the award where the retiring partners and claimant were to be paid amounts as envisaged in the said award of Rs. 5.00 lakh and Rs. 4.00 lakh respectively. The payment had to be made by post dated account payee cheques and handed over to the arbitrator. The only difference is that the cheques were made out on 'self' and handed over to the arbitrator and it is a plea advanced that the said cheques were to be realised on payment of cash. In my considered view, on an analysis of the award it is obvious that the award stands implemented except to the extent that the retiring partners had to get the benefit of the money. The result is that the continuing partners have taken over the business, run the business and refused to pay their liability under the award while enjoying what they are entitled to under the award to the exclusion of the retiring partners.

14. In my considered view, it is, thus, not open to respondent No. 2 (or his legal heirs) to claim that the award should not be made a rule of the Court. In fact, the said respondent is really precluded from challenging the award in view of the observations made in J. Thomas Co. case (supra). It cannot be that the gains under the award are to the benefit of respondent No. 2 while he is absolved of the liabilities under the award.

15. The conduct of Ms. Payal Gupta also becomes important in this behalf. Ms. Payal Gupta has never filed any proceedings or come before any court challenging the award. In fact, the plea of the learned Counsel for respondent No. 2 is that it is Mr. Devender Lal Gupta who is really running the business. This is certainly the case where the implied conduct of the partners would amount to ratification even though she was not a signatory in terms of ratio of Miss Mohinder Kaur Kochhar v. Punjab National Bank Limited, New Delhi case (supra). Mr. Devender Lal Gupta and Ms. Payal Gupta are father-in-law and daughter-in-law and were really one unit who were held entitled to run the partnership business and were running the business.

16. The aforesaid matter can also be looked from another perspective. Respondent No. 2 in any case cannot be permitted to challenge the award being a signatory to the same in view of what has been stated in Krishan Kumar case (supra). I am unable to accept the plea of the learned Counsel for respondent No. 2 that this plea would only apply in case of third party and one of the partners and not inter se partners.

17. There can be little dispute over the proposition that normally a reference has to be made by all the partners. It is in this context that learned Counsel for respondent No. 2 has referred to the judgment in Deep Narain Singh and Ors. case (supra) as also in Yakub Ibrahim case (supra). It may also be noticed that the present case is not one of dissolution and rendition of accounts but a reference being made to arbitration of all the disputes. In the process of resolution of disputes by the arbitrator it was deemed appropriate that the business should be continued by one set of the family consisting of two partners while the other two partners retired. For the same reason the judgment in Ramagya Prasad Gupta and Ors. case (supra) would not apply in the present case.

18. In my considered view, the present objection in this regard are a dishonest endeavor by respondent No. 2 to escape the liabilities under the award after having availed of the benefit of running the business thereafter. There is no question of the award not being meant to be acted upon when respondent No. 2 and Ms. Payal Gupta took over the business to the exclusion of the claimant and respondent No. 1 in pursuance to the award.

19. I am also unable to accept the plea of the learned Counsel that the award suffers from a patent error or fraud. This is so as the issue of sales tax has been specifically dealt with in the award. There can be thus no question of late Mr. Devender Lal Gupta being unaware of the implications of the sales tax liability.

20. Insofar as the aspect of filing of recovery proceedings is concerned the same is by respondent No. 1 alone and not by the petitioner. Be that as it may what is sought to be recovered under the award is the investment made but for that really the award has to be made rule of the court.

21. Respondent No. 2 has also filed certain affidavits to bring on record what is claimed to be subsequent facts. Such an affidavit, without the leave of the Court cannot be taken on record. In my considered view, the objections have to be considered on the basis of the award rendered. There cannot be supplemental objections in this form. If the object is to show that there are certain payments made to the claimant and respondent No. 1, that is a matter of execution proceedings since naturally if some payments have been made under the award they are liable to be adjusted while seeking recovery under the award. Thus this plea also cannot be accepted.

22. It may be noticed that the counsel for the claimant and respondent No. 1 also referred to the judgment of the learned single Judge of this Court (as he then was) in Virender Singh v. Delhi Development Authority and Ors. AIR 1988 Delhi 189 to advance the plea that the filing of the award is a ministerial act especially where no dispute has been raised about the validity of the award. This judgment also deals with the fact where the award was not filed by the arbitrator. Here again there is no doubt that the award is not nullified because the arbitrator happens to have passed away and the award having been subsequently filed in this Court, the same has to be examined on merits for consideration as to whether the award is liable to be made rule of the court.

23. No other objection is pressed. I find no merit in the objections and the same are dismissed.

CS (OS) No. 2114/1993

23. The award dated 16.3.1990 of the sole arbitrator Lala Kanwar Bhan is made rule of the court. The claimant and respondent No. 1 shall also be entitled to interest from the date of the award till the date of recovery @ 15 per cent per annum simple interest on the principal amount. The claimant and respondent No. 1 are also held entitled to costs quantified at Rs. 10,000/-.

24. The suit stands decreed.

25. Decree sheet be drawn up accordingly.