Madhukar Goel vs M.S.Goel
2009 Latest Caselaw 2972 Del

*           IN THE HIGH COURT OF DELHI AT NEW DELHI


                                                Date of Reserve: July 16, 2009
                                                 Date of Order: August 03, 2009

+CS(OS) 1321/1993
%                                                            03.08.2009
     Madhukar Goel                                    ...Petitioner
     Through: Mr. Ravi Gupta with Mr. Gaurav Gupta, Advocates

       Versus

       MS Goel                                            ...Respondent
       Through: Mr. J.K. Seth with Mr. Chetanya Siddharth, Advocates


       JUSTICE SHIV NARAYAN DHINGRA

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

2.     To be referred to the reporter or not?                                  Yes.

3.     Whether judgment should be reported in Digest?                          Yes.


       JUDGMENT

1. This petition has been filed by the petitioner under Section 14(2) of the

Arbitration Act, 1940 for making the award dated 9th May 1993 as rule of the

Court. The award is given by Mr. V.G. Baliga whereby he gave a chart of

different properties with his decision as to which property will go to whom

and also stated that M.S. Goel shall pay Rs.80 lac to petitioner.

2. The petitioner in this case is Mr. Madhukar Goel while respondent were

Mr. M.S. Goel, Mr. Vipul Goel and Mr. V.G. Baliga. Mr. Vipul Goel is the son of

Mr. M.S. Goel. Mr. M.S. Goel died during the proceedings. The objections were

filed against the award by Mr. Vipul Goel and Mr. M.S. Goel under Section 30,

33 of Indian Arbitration Act stating therein that the award rendered by Mr.

V.G. Baliga was not a valid award. Mr. Baliga was appointed only as a

mediator to mediate the disputes between Mr. Madhukar Goel and Mr. M.S.

CS(OS) 1321/93 Madhukar Goel v.MS Goel Page 1 Of 13 Goel as he was close to the family. Mr. Baliga's award was not an arbitration

award, even if it was named as arbitration award. It was actually a mediation

award, therefore, not a valid and enforceable arbitration award under

Arbitration Act, 1940 It is also submitted by the objections that even as per

the arbitrator/mediator, the reference was done to two arbitrators viz. one Mr.

Baliga and other Mr. Mahinder Khanna of M/s K.C. Khanna and Company of

Chartered Account. The award was passed only by one arbitrator and not by

two arbitrators, as appointed by the parties. The other objection taken is that

supposing Mr. Baliga was asked to arbitrate between Mr. Madhukar Goel and

Mr. M.S. Goel, he had no jurisdiction to give an award in respect of properties

of those persons who were not even parties to the mediation/ arbitration and

Mr. Baliga had no jurisdiction or authority to decide or to make an award with

respect to the interest, ownership and title of entire body of shareholders of

the company Leatheroids Plastic Private Limited ("the company", for short) as

has been done by him. It is also submitted that Mr. Baliga had no jurisdiction

to adjudicate upon the ownership of various properties, movable or

immovable, which did not belong to Mr. Madhukar Goel and Mr. M.S. Goel or

to decide about the shares and securities of shareholders, wives, sons of Mr.

Madhukar Goel and Mr. M.S. Goel, as has been done by him. The award was,

therefore, liable to be set aside.

3. Similar are the objections of Mr. Vipul Goel and one Mr. P.C. Malik, who

was one of the shareholders in the company and was having 2000 shares and

Mr. Baliga had given an award in respect of his shares also.

4. During pendency of proceedings, an objection was taken about the

award being an unregistered award. This Court observed that since the award

CS(OS) 1321/93 Madhukar Goel v.MS Goel Page 2 Of 13 has been given in respect of immovable properties, the award required

registration. This Court, therefore, considered that before it could be made a

rule of Court, it should be registered and directed for registration of the

award.

5. On the basis of objections, this Court framed following issue:

"Whether the award dated 9th May 1997 is liable to be set aside

on the ground disclosed in the objection petition?."

6. It is argued by learned counsel for the objectors that the award on the

face of it is not an award passed by an arbitrator but is an award given by a

mediator. There was no reference made to the alleged arbitrator in this case

of any specific dispute between the parties. Mr. Baliga was only asked to

mediate between Mr. Madhukar Goel and Mr. M.S. Goel since Mr. Baliga was a

person known and trusted by both persons. There were some disputes

between Mr. Madhukar Goel and Mr. M.S.Goel and they wanted Mr. Baliga to

mediate and therefore asked him to do so. During this process of mediation,

no specific dispute was referred to Mr. Baliga and Mr. Madhukar Goel and Mr.

M.S.Goel wanted Mr. Baliga to make division of their joint businesses. Their

businesses involved in large unaccounted money and since Mr. Baliga was a

trusted person, they had no fear of any repercussions on disclosing to him

about the unaccounted money. It is further submitted that neither Mr. M.S.

Goel nor Mr. Madhukar Goel had any authority to ask the mediator to decide

about the properties belonging to other persons who had not submitted to

mediation of Mr. Baliga. Even if it is assumed that Mr. Baliga was appointed

an arbitrator, the reference letter clearly shows that the reference was made

by Mr. Madhukar Goel and Mr. M.S.Goel alone qua their disputes but the

CS(OS) 1321/93 Madhukar Goel v.MS Goel Page 3 Of 13 award shows that the learned arbitrator had by this award adjudicated upon

the properties of several persons who were not even the parties before him

and had not referred their disputes to him. Thus, the award was liable to be

set aside being contrary to the terms of reference, not being an arbitration

award but being a mediation award.

7. Counsel for the petitioner on the other hand argued that Mr. Madhukar

Goel and Mr. M.S. Goel represented their respective branch of family in the

business/businesses being conducted by two families jointly. The different

family members and other persons, having shares in the company, were

either nominees of Mr. Madhukar Goel or Mr. M.S. Goel or were their family

members holding shares on behalf of Mr. Madhukar Goel or Mr. M.S. Goel. He

submitted that a perusal of proceedings would show that Mr. Vipul Goel had

participated in the proceedings. One Mr. N.K. Goel had also participated in the

proceedings and during the proceedings Mr. Madhukar Goel had clearly

authorized Mr. Baliga to go into the issues of the properties about which the

award has been passed. Though the properties may have been standing in

the names of different persons but those persons were the nominees of Mr.

Madhukar Goel and Mr. M.S. Goel, therefore, the two had authority to bring

those properties, movable or immovable, within the fold of arbitration. He

submitted that Mr. Vipul Goel, son of M.S. Goel was an effective party and he

had been appearing before Mr.Baliga as was evident from the proceedings.

He cannot now take a stand that he was not a party to the arbitral

proceedings. It is further submitted that the award has been acted upon by

the parties and only one part of the award i.e. payment of Rs.80 lac by

respondent/objector to the petitioner remained unexecuted/unimplemented

otherwise all other properties have been divided in terms of the award and

CS(OS) 1321/93 Madhukar Goel v.MS Goel Page 4 Of 13 therefore it does not lie in the mouth of respondent to say that the award was

invalid because of any of the shareholders not being the party or the award

being given beyond jurisdiction.

It is submitted that since this Court allowed registration of the award, the

award given by the Arbitrator was not a mediation award but in fact was an

arbitration award.

8. Mr. Baliga was appointed by letter dated 7th April 1993 signed by Mr.

Madhukar Goel and Mr. M.S. Goel both. The said letter reads as under:-

"To Shri V.G. Baliga Camped at New Delhi-110025

We hereby appoint you as a mediator in the matter and

disputes arisen amongst us. You are requested to look into this. The

information you require in this regard will be furnished by us. Your

decision will be binding on us.

                        New Delhi-85               sd/-         sd/-

                        7th April, 1993            M.S. Goel    Madhukar Goel"

9. From this letter, it is apparent that Mr. Baliga was appointed as a

mediator for adjudicating the disputes between Mr. Madhukar Goel and Mr.

M.S. Goel. There is another undated letter written to Mr. Baliga and Mr.

Mahinder Khanna by Mr. Madhukar Goel and Mr. M.S. Goel which reads as

under:-

"To Shri V.G. Baliga Shri Mohinder Khanna Camped at H-96 C.P.

New Delhi-110025 New Delhi 110001

I M.S. Goel r/o 85, Sukhdev Vihar, New Delhi 110025 had been

carrying business in the name of M/s Leatheroid Plastics (P) Ltd., along

CS(OS) 1321/93 Madhukar Goel v.MS Goel Page 5 Of 13 with Shri Madhukar Goel r/o 172 Sukhdev Vihar New Delhi 110025, on

equal sharing basis. A good part of our transactions has been

unrecorded for various reasons, therefore, differences has been arisen

off-late.

You are requested to look into this aspect and advise us for

amicable settlement between us. Your decision shall be acceptable and

binding on us.

The data required by you in the meeting held on 12.3.1993 at

Room, Chelmsford Club, New Delhi are being furnished to you

separate."

10. One more letter dated 24th April 1993 was addressed by M.S. Goel to

Mr. Baliga and Mr. M.M. Khanna. The first paragraph of the letter reads as

under:-

"We are enclosing all details you had asked us on 18 th April

1993 in the matter of arbitration between Shri M.S. Goel and us.

Sir, with the details we are furnishing to you, the following notes

be considered."

11. Mr. Baliga had also written a letter to Mr. Madhukar Goel and Mr. M.S.

Goel on 3rd May, 1993. He only asked for certain records pertaining to Mr.

Madhukar Goel and Mr. M.S. Goel and in the end of the letter he noted as

under:-

"The compliance of above be written to Mr.M.M. Khanna of M/s KC Company of Chartered Accountants and who is a co- arbitrator, under invoice to me."

12. From these letters, it appears that initially Mr. Baliga was entrusted

with the responsibility to resolve the disputes between M.S. Goel and

CS(OS) 1321/93 Madhukar Goel v.MS Goel Page 6 Of 13 Madhukar Goel by an amicable method and later on Mr. M.M. Khanna was

also associated with him in this task. This becomes clear from the

proceedings which had taken placed and brought on record by the petitioner.

In the gist of proceedings accompanying award dated 9th January 1995 sent to

the High Court by Mr. Baliga, Mr. Baliga has written that in view of the

complexity of matter, he with the consent of both the parties, availed the

services of Mr. Mohinder Khanna, a professional Chartered Accountant who

acted as a coordinator. He also recorded that he conducted the joint meetings

of all the parties in presence of Mr. Mohinder Khanna at Chelmsford Club. The

brief synopsis of proceedings filed by Mr. Baliga shows that the proceedings

were conducted at the office of Mr. Mohinder Khanna as well and secretarial

services were availed from M/s Company of Chartered Accountants of Mr.

Mohinder Khanna.

13. The award filed by learned arbitrator in the very beginning states that a

dispute had arisen between Mr. Madhukar Goel, Mr. M.S. Goel and Mr. Vipul

Goel. However, reference made to Mr. Baliga was only by Mr. Madhukar Goel

and Mr. M.S. Goel. At no point of time, Mr. Vipul Goel had made a reference to

Mr.Baliga. In the next paragraph, Mr. Baliga records that disputes and

differences between the parties relate to the businesses carried out under the

name and style of the company located at Badarpur and Okhla Industrial Area

and as regards businesses, assets and liabilities relating thereto and certain

other matters. The award passed by Mr. Baliga shows that he gave an award

in respect of farm land at Noida jointly owned by Mr. Madhukar Goel, Mr. M.S.

Goel, Mr. Narender Goel and Mr. Atul Goel. Neither Mr. Narender Goel nor Mr.

Atul Goel were parties before Mr. Baliga or had made reference to him. He

also passed award in respect of property viz. a godown located at Kalkaji,

CS(OS) 1321/93 Madhukar Goel v.MS Goel Page 7 Of 13 New Delhi which stood in the name of M/s Amar Jyoti Traders. M/s Amar Jyoti

Traders was a partnership firm being run by the wives of M.S. Goel and

Madhukar Goel as partners. He also passed award in respect of godowns at

Baghichi Alauddin. The said godowns belonged to Mr. Vipul Goel, Ms. Sudha

Goel and M/s. Surender Sales Corporation. He passed the award in respect of

a Nisan Truck which stood in the name of one Mr. S.P. Aggarwal and he also

passed award in respect of Surjapur land measuring 3.5 acres which stood in

the name of Serva Plastics Industries Private Limited having different

shareholders. He also passed award about the entire shareholding of

Leatheroids Plastic Private Limited and vested the same in Mr. M.S. Goel or

his family members/ nominees although there were 40 shareholders of the

company and apart from Mr. Madhukar Goel, Mr. M.S. Goel no one else was a

party before the learned Arbitrator. He awarded Badarpur and Okhla

Industrial Area units of Mr. M.S. Goel to Mr. Madhukar Goel. Both these units

were being run by Leatheroids Plastic Private Limited, which company had

around 40 shareholders and one Mr. P.C. Malik was having more shares than

Mr. M.S. Goel and the company was not a party to Arbitration proceedings. He

also passed the award that shares of the company (LPPL) held in escrow

account would stand transferred to Mr. M.S., Goel to such an extent as may

be decided by Mr. Baliga based on outstanding liabilities of Mr. M.S. Goel and

Mr. Madhukar Goel.

14. It is apparent from the proceedings of Mr. Baliga and from the award

that Mr. Baliga was not adjudicating any specific dispute between Mr. M.S.

Goel and Mr. Madhukar Goel and he was laying down a settlement between

two contenders taking into consideration that all business assets and

properties are to be divided in two families headed by M.S. Goel and

CS(OS) 1321/93 Madhukar Goel v.MS Goel Page 8 Of 13 Madhukar Goel. This settlement could not only be done by mediator Mr.

Baliga and not by Arbitrator Mr. Baliga. An Arbitrator has to act within the four

walls of reference and had to decide the disputes referred to him. An

arbitrator cannot decide about the properties of other persons who are not

parties before him. However, a mediator can act on the authority of family

heads to arrive at a settlement between the two families. But that is not so in

case of an arbitrator. For an arbitrator to decide the disputes between the

parties, each party must be a party to the arbitration agreement and must be

a party to the reference irrespective of the fact whether he is a family

member or not. The properties standing in the names of wife, sons or other

persons who were either Benami or nominees or actual holders cannot be

considered as a part of disputes by the arbitrator, unless such a person has

given an authority to the arbitrator to adjudicate upon the disputes involving

his properties.

15. The basic requirement of an award to be a valid award is that there

must be an arbitration agreement between the parties. It is not disputed that

there was no arbitration agreement between different shareholders, different

persons, and nominees to appoint Mr.Baliga as an arbitrator. Only Mr. M.S.

Goel and Mr. Madhukar Goel together had agreed to get their disputes sorted

out through mediation of Mr.Baliga and that is why the letter reproduced

above was written to Mr. Baliga in this regard. The other letters of Mr. M.S.

Goel and Mr. Madhukar Goel and letters written by Mr. Baliga also shows that

Mr. Mohinder Khanna was associated with Mr. Baliga for settlement of

disputes. Mr. M.S. Goel and Mr. Madhukar Goel had indulged in transactions

which were not shown in books of accounts during tenure of their business

and the disputes had arisen between the two because of the transactions not

CS(OS) 1321/93 Madhukar Goel v.MS Goel Page 9 Of 13 shown in the account books. Mr. Baliga was aware of this situation very well

and his proceedings reflect that he had personal knowledge of many things

and he was permitted to resolve the disputes on the basis of his closeness to

the parties and personal knowledge both. In proceedings dated 12th April

1993 Mr. Baliga recorded that, "I have been asked to be the sole arbitrator/

mediator as both the families are well known to me and have confirmed faith

in me." He refers to letter dated 7th April 1993 to assume this power of

mediation/arbitration.

16. In the proceedings dated 18th April 1993, he again records, "I have

been asked to be the sole arbitrator /mediator by both the families". He

further records that he had told the parties that he would be needing help of

a professional and he suggested the name of Mr. Mohinder Khanna. In the

proceedings, he records, "Whatever I have been given to understand is that

Mr. Madhukar Goel (MS), aggrieved by non rendering of cash account by Mr.

M.S. Goel(MSG) and then counter allegation is that the cash generated from

the business is not properly tendered or accounted by Mr. Madhukar Goel.

The parties have wanted my mediation to reconcile the personal differences

and give my decision and award which will be final and binding on both the

parties". Thus, it is clear that both Mr. M.S. Goel and Mr. Madhukar Goel were

involved in a number of black money transactions and that is why they

wanted help of Mr. Baliga to resolve their disputes through the process of

mediation.

17. In the proceedings dated 19th April 1993, he recorded that neither the

parties wanted the traditional method of arriving at a conclusion nor in the

circumstances it was possible to decide the issues, disputes and difference

CS(OS) 1321/93 Madhukar Goel v.MS Goel Page 10 Of 13 because of large segment of financial transactions were not reflected in the

books of account of the company.

18. Mr. Baliga also used his personal knowledge and information about the

parties' business and in the proceedings dated 18th April, 1993 he records

that, "The parties who know me well and have faith, have no objection if I

confirm my plea on certain matters independently from my own source

including from other family members". This is also because he was close to

other family members and had earlier given an award as a mediator in 1984

also to resolve disputes.

19. From all these proceedings of Mr. Baliga and from the letters written to

him by Mr. M.S. Goel and Mr. Madhukar Goel, I consider that Mr. Baliga was in

fact appointed as a mediator by Mr. M.S. Goel and Mr. Madhukar Goel so as to

resolve the disputes relating to unaccounted money and business about

which proper books of accounts were not being maintained and parties were

making allegations and counter allegations against each other. During

proceedings, however, Mr. M.S. Goel and Mr. Madhukar Goel desired that their

business should be separated and Mr. Baliga then considered the entire

family business of Mr. M.S. Goel and Mr. Madhukar Goel without involving

different shareholders of the company, partners of firms in whose names the

properties stood and without any specific reference about the properties gave

his award that the parties should separate their businesses and all the

properties should be separated between two families. He, therefore, divided

their business and properties specifying what should go to each branch of

family, how the shares would go and how much money should be paid to one

family by the other. I consider that this award cannot be considered as

CS(OS) 1321/93 Madhukar Goel v.MS Goel Page 11 Of 13 an arbitration award. This award is passed by a mediator and not by an

arbitrator under Arbitration Act, 1940. Even if it was assumed that this was an

award of an arbitrator, the award is liable to be set aside since none of other

shareholders and owners of properties were parties to the arbitration

agreement and none of the partner of business whose properties were

included in the hotchpotch of award rendered by Mr. Baliga were parties to

the arbitration and only Mr. M.S. Goel and Mr. Madhukar Goel were the parties

to the arbitration agreement. Mr. Vipul Goel though seemed to have appeared

before the Arbitrator, but mere appearance of Mr. Vipul Goel before Mr. Baliga

would not have made him a party to the arbitration proceedings, since no

reference was made by Mr. Vipul Goel in respect of his properties, his

businesses, assets of business in the name of his wife or other companies or

the partnership firm. Mr. Baliga could not have presumed that Mr. M.S. Goel

had authority to represent each and every shareholder of Leatheroids Plastics

Private Limited and each and every partner of other firms whose properties

was included neither the proceedings shows that any such authority was

produced before Mr. Baliga. Thus, I consider that since all those persons

whose properties were included in the award were not even before Mr. Baliga

nor they were heard and hence the award is not tenable in the eyes of law.

20. It is submitted by counsel for petitioner that all the properties belonged

either to Mr. M.S. Goel or his nominees and Madhukar Goel and his nominees.

The nominees were either friends or family members and since the actual

owners were Mr. M.S. Goel and Madhukar Goel, they could represent their

family members and nominees. In my view, the law is not in support of this

contention. A person who is recorded and registered owner of a property

cannot be said to be a nominee of any other person without there being a

CS(OS) 1321/93 Madhukar Goel v.MS Goel Page 12 Of 13 record in this regard. There was no record before Mr. Baliga that the different

shareholders were the nominees of Mr. M.S. Goel or they were Benami

shareholders or Benami property holders. Even if they were Benami property

holders or Benami shareholders in view of the prohibition on Benami

transactions made by Benami Transactions (Prohibition) Act, 1988. Mr. M.S.

Goel could not have been considered as owner of the properties standing in

the name of different persons.

21. I, therefore, consider that this award is not tenable in the eyes of law. It

is a mediation award and not an arbitration award in terms of Arbitration Act,

1940. The award cannot be made as a rule of the Court. This petition made

by petitioner under Section 14 of the Arbitration Act, 1940 is hereby

dismissed. The objections filed by the objector are hereby upheld.

22. The petition stands disposed of. No orders as to costs.

August 03, 2009                                  SHIV NARAYAN DHINGRA J.
rd




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