Arun Kapur vs Vikram Kapur & Ors.
2009 Latest Caselaw 1760 Del

           * IN THE HIGH COURT OF DELHI AT NEW DELHI

                                                    Date of Reserve: 27.4.2009
                                                  Date of Order: 30th April, 2009

FAO No. 432/2002
%                                                                  30.04.2009

      Arun Kapur                                             ... Appellant
                          Through: Mr.Vibhu Bhakru with Ms. Priya
                          Bansal & Mr. Gaurav, Chauhan, Advocates

             Versus


      Vikram Kapur & Ors.                      ... Respondents
                    Through: Mr. Sudhir K. Makkar, Adv. for
                                 R- 4 to 7, 9 & 10.



JUSTICE SHIV NARAYAN DHINGRA

1. Whether reporters of local papers may be allowed to see the
judgment?

2. To be referred to the reporter or not?

3. Whether judgment should be reported in Digest?

JUDGMENT

This appeal has been preferred against order dated 31.5.2002

passed by the learned Sole Arbitrator whereby the learned Arbitrator dismissed

the objections of the appellant against the report of Ernst & Young, Chartered

Accountants and accepted the report, except in respect of item no.6 and found

that the amount as stated in the report (except sum of item no.6) was payable by

the appellant which he should make good within a period of three months, failing

which the order could be executed by the other group or groups as belonging to

the Malanpur unit.

2. Brief facts relevant for the purpose of deciding this appeal are that

the parties had entered into a Memorandum of Understanding (MoU) on 8.1.1999

whereby it was agreed between the parties that the business being managed and

controlled by the different family members and the various assets in the

individual names and in the names of different companies, private limited

companies, partnership firms, charitable trusts, joint properties & firms and other

personal assets owned by different persons be divided among the three family

groups in equal parts. The three family groups were mentioned in the MoU. The

three groups were headed by Mr. Bishamber Das Kapur, Mr. Jai Dev Kapur and

Mr. Jagdish Kapur. The appellant belonged to the first family group viz. group

headed by Mr. Bishamber Das Kapur consisting of Mr. Bishamber Das Kapur,

Mr. Arun Kapur, Mr. Vikram Kapur, Mr. Rajiv Kapur, Mr. Akshay Kapur, Mr.

Ashwath Kapur & Mr. Angad Kapur. Clause 6 of MoU provided that in case of

difference of opinion on any matter and if a settlement was not arrived at, the

matter would be referred to the arbitration of Shri A.M.Ahmadi, retired Chief

Justice of the Supreme Court of India, who was unanimously selected by the

three groups as the Sole Arbitrator. Since the parties could not mutually settle

the division of assets and properties, the matter was referred to Justice

A.M.Ahmadi (Retd.) for arbitration.

3. During pendency of the arbitration, a status quo order was passed

and later on it transpired that Mr. Arun Kapur, who was managing Malanpur plant

had siphoned off huge amounts from the unit. On an application by other family

member Mr. Arun Kapur was directed to restore the original position. The record

shows that Mr. Arun Kapur had siphoned off around 6 crores of rupees and later

on with great difficulty had restored this amount. During further progress of

arbitration proceedings, again it was brought to notice of the learned Arbitrator

that in Malanpur plant being managed by Mr. Arun Kapur, there were accounting

discrepancies worth crores of rupees and allegations of fictitious purchases and

other allegations were made, alleging that Mr. Arun Kapur had siphoned off huge

amounts. With the agreement of the parties, M/s Ernst and Young, Chartered

Accountants' firm was appointed to go into the accounts. Mr. Arun Kapur had

specifically contended that allegations were false and let M/s Ernst & Young

verify the accounts and give a report. M/s Ernst & Young went into the accounts

and gave a report about the allegations made by the other members of the group

in respect of Malanpur Unit. An objection was raised against the report on the

ground that M/s Ernst & Young themselves had not done the job and got this job

done through S.R. Batliboi & Co. These objections were found untenable since

S.R. Batliboi & Co. was a partner of M/s Ernst & Young, in India and the report

was found to be credible and that of Ernst & Young. Against the previous order

of learned Arbitrator regarding report of Ernst & Young, the present appellant

filed an FAO No. 450/2001, which was dismissed by this Court with costs. The

learned Arbitrator thereafter proceeded further to consider the report of Ernst &

Young. The learned Arbitrator after considering the report of Ernst & Young

came to the conclusion that the report was reliable and had been given by the

Chartered Accountants after following the proper procedure. Mr. Manoj Gupta

who was one of the team members and who carried out the review of the

accounts was also subjected to cross examination by the counsel for the

appellant before the learned Arbitrator and the learned Arbitrator found that Mr.

Manoj Gupta stood the cross examination well and dismissed all objections of the

appellant against the report. After accepting the report, the learned Arbitrator

passed the impugned order asking the appellant to make good the loss except

for item no.6 and in case it was not made good, this could be executed.

4. Learned Counsel for the appellant has submitted that the report

given by Ernst & Young was not a reliable report since Ernst & Young had not

made any enquiries from the appellant and did not seek any explanation from the

appellant. This argument was advanced before the learned Arbitrator also. The

learned Arbitrator, in fact immediately after receipt of the report had sent a copy

of the report to the appellant and asked his response. A detailed response was

given by the appellant, which was sent to the Chartered Accountants. Chartered

Accountants gave their explanation and thereafter Mr. Manoj Gupta one of the

team members of the S.R. Batliboi & Co., Chartered Accounts was subjected to

cross examination. It is also pertinent to note that the appellant was very well

aware of the team members going to Malanpur plant for looking into the accounts

of the company. He did not raise any objection against any of the team members

during the period when the members were going into the accounts and looking

into the aspect of siphoning off funds. He raised objections against involvement

of S.R. Batliboi & Co. only after the report went against him. The appellant thus

had full opportunity to raise objection or give response to the report before the

learned Arbitrator.

5. Another issue raised by the appellant is that the order of learned

Arbitrator was beyond the scope of arbitration clause. It is submitted that no

dispute inter se members of a group could be subject matter of arbitration and

learned Arbitrator on an application of appellant had refused to pass an order

against another company on the ground of jurisdiction. This argument does not

hold ground since appellant initially violated the status quo order and then made

siphoning off of money by falsification of accounts when the matter was being

considered by the Arbitrator. The appellant himself proposed appointment of M/s

Ernst & Young to go into the allegations and give a report. Thus, by consent, the

appellant and the respondent agreed to the arbitration by the learned Arbitrator in

this inter se matter and now this argument cannot be heard.

6. I find that the ground taken by the appellant that the report was not

by Ernst & Young and was by S.R. Batliboi & Co., whom the appellant had not

agreed to, is not tenable since S.R. Batliboi & Co. and Ernst & Young were

partners and work done by one partner has to be considered to be the work done

by the other partner. I find no force in the grounds raised in the appeal. The

appeal is hereby dismissed.

April 30, 2009                                 SHIV NARAYAN DHINGRA, J.
vn