Ajay Makhija vs M/S. Dollarmine Exports Pvt. Ltd. ...
2009 Latest Caselaw 3260 Del

     *IN THE HIGH COURT OF DELHI AT NEW DELHI

+     OMP No.472/2009 (U/s.9 of the Arbitration Act,
      1996) & Caveat No.77/2009

%                       Date of decision:19th August, 2009

Ajay Makhija                                         ....Petitioner
                        Through: Mr. A.P.S. Gambhir, Advocate

                               Versus

M/s. Dollarmine Exports Pvt. Ltd. & Ors ..Respondents
                        Through: Mr. Sanjeev Puri, Sr. Advocate with Mr.
                        Anshul Tyagi and Mr. Sonal Sinha, Advocates


CORAM :-
HON'BLE MR. JUSTICE RAJIV SAHAI ENDLAW

1.    Whether reporters of Local papers may
      be allowed to see the judgment?                 No

2.    To be referred to the reporter or not?          No

3.    Whether the judgment should be reported         No
      in the Digest?


RAJIV SAHAI ENDLAW, J.

1 The counsel for the Caveator has appeared. The caveat stands

discharged.

2 Interim measures are sought before the commencement of the

arbitration proceedings arising out of a partnership deed dated 2nd

October, 2005 between the petitioner and the respondent No.1. The

petitioner has also impleaded as respondent No.2 M/s. Picadilly

Properties Pvt. Ltd. which is stated to be a company controlled by

the same persons who are controlling the respondent No.1 company.

The reason for impleading the respondent No.2 appears to be the

case of the petitioner, of the corporate veil of the respondents No.1

and 2 being liable to be pierced.

3 I have brought to the notice of the counsel for the petitioner

the recent judgment of a Single Judge of this court in Kanta Vashist

Vs. Ashwini Khurana MANU/DE/0380/2008 wherein it has been

held that in a Section 9 petition no reliefs can be given against the

companies controlled by the family members who are parties to the

arbitration when which companies are not parties to the arbitration.

Even though I have subsequently in Value Advisory Services Vs.

M/s. ZTE Corporation MANU/DE/1032/2009 held that no hard and

fast rule can be laid down as to the issuance of interim orders qua

third parties and the same depends on the facts of each case but I do

not find the facts of the present case to be such in which it can be

said that orders under Section 9 can be passed against the

respondent No.2.

4 Another reason for impleadment of respondent No.2 given in

the petition is that the respondent No.2 is the owner of the property

from which the business of the partnership was being carried on.

The respondent No.2 has given a notice to the firm as well as to the

petitioner and the respondent No.1 seeking their removal/ ejectment

from the premises. However the same also does not call for any

interim order against the respondent No.2 in as much as in Clause

No.4 of the partnership deed it is expressly provided that the

petitioner shall have no right to the said premises and on dissolution

of the firm, which the petitioner admits to have happened, the

authority / right of the firm to use the said premises shall come to an

end. No interim relief restraining the respondent No.2 from

interfering with use of its premises by the erstwhile firm's partners

can thus be granted.

5 The name of the respondent No.2 is thus struck off from the

array of respondents.

6 The counsel for the petitioner has contended and it is also his

case in the pleadings that the petitioner was only rendering technical

services in the partnership firm and the entire operations and

accounts were being looked after by the respondent No.1 through its

Directors. The petitioner as such states that he is not aware of the

accounts of the firm since the very beginning and seeks the interim

measure of directing the respondent to furnish accounts to the

petitioner. It is contended that such accounts are also necessary for

the petitioner to prefer its claim against the respondent in the

arbitration proceedings.

7 Per contra the senior counsel for the respondent has in the

court handed over the balance sheet of the partnership firm as on

31st March, 2008 and which is shown to be signed by the petitioner.

He has further contended that the averments made in the petition

are of a period prior thereto. It is thus argued that the case set out

by the petitioner of not being aware of the accounts is falsified from

the said balance sheet. The counsel for the petitioner states that the

petitioner is not present in the court and he is unable to state

whether the signatures as appearing on the photocopy of the balance

sheet supplied to him also are of the petitioner or not.

8 Be that as it may be, prima facie the statement of the

petitioner in the pleadings of being unaware of the accounts is

falsified from the documents handed over in the court.

9 Even otherwise I am of the opinion that the relief as sought of

furnishing accounts cannot be granted as an interim measure under

Section 9 of the Act. The liability to furnish accounts is itself a

question which may require adjudication and more so when the case

of the respondent is of the petitioner having himself signed the

balance sheet. Thus even if the case of the petitioner remains that it

is not in possession of the accounts, the relief of rendition of

accounts is a substantive relief to be claimed before the arbitrator

and this court cannot usurp to itself in exercise of powers U/s.9, the

jurisdiction of the arbitrator and the same is also barred under

Section 5 of the Act.

10 As far as the contention of the counsel for the petitioner of the

accounts being required by the petitioner for the purposes of

preferring claims is concerned, the same is also not a correct

proposition in law. The claims for accounts is coupled with the relief

for recovery of amounts found due on accounts being taken. The

said matters are for adjudication in the arbitration proceedings.

11 The counsel for the petitioner has also claimed the relief of

restraining the respondents from dealing with the movable and

immovable assets of the partnership. Save for stating that the assets

of the partnership comprise of stocks of silks imported by the firm no

other assets of the firm have been pleaded. Even today on inquiry

the counsel states that he is unaware of what are the other assets of

the firm. Per contra the senior counsel for the respondent on

instructions has made a statement in the court that there are no

immovable assets of the firm and no immovable assets have been

shown as property of the firm in the balance sheets of the firm also

filed from time to time.

12 The senior counsel for the respondent admits that the stocks of

imported silk exists in the firm and the same as per the business of

the firm were being sold and the sale proceeds thereof are being

remitted in the bank account of the firm which is lying frozen at the

instance of the petitioner. He states that no stocks have been sold

after the notice of dissolution and at the moment the stocks of value

of Rs.8 lacs only are existing in the firm.

13 It has been put to the counsel for the petitioner that either the

respondent can be permitted to sell the said stocks or the said stock

can be handed over to the petitioner subject to the petitioner

remitting Rs.8 lacs in the account of the firm. The counsel has opted

for the respondent to sell the said stocks subject to the remittance of

Rs.8 lacs in the account of the firm. Accordingly, the respondent is

permitted to sell the said stocks subject to the deposit of the sale

proceeds in the account of the firm.

14 It may however be recorded that the counsel for the petitioner

states that the stocks worth more than Rs.8 lacs are in existence.

However in the absence of any particular no vague interim orders

incapable of enforcement can be made and it will be open to the

petitioner to plead/prone during the arbitration proceedings that the

stocks were more and to claim accounts with respect thereto.

15 The counsel for the petitioner has contended that the

petitioner should also be permitted to be involved at the time of sale

of the aforesaid stocks by the respondent. However the same is not

found practical especially when the petitioner is not willing to take

the responsibility of sale itself even though it is the argument that

the goods are marked and there can be no dispute as to their identity

and also that the goods are of perishable nature and the value

thereof is bound to depreciate with the passage of time. If the

parties are ordered to jointly sell the stocks, the sale is likely to be

delayed and would result in depreciation in the value and the said

sum of Rs.8 lacs also is unlikely come in the hands of the firm.

16 The petitioner has also sought the interim measures of

restraining the respondent, its Directors, Agents, nominees,

employees from trading in the stocks held by them or from utilizing

the monies which according to the petitioner have been siphoned off

by the respondent out of the firm's account in its own accounts. The

petitioner in fact wants a restraining order against the respondent

from carrying on any business whatsoever.

17 Such order cannot be granted especially when there is no

material for the corporate veil to be lifted at this interim stage. All

that can be said at this stage is that the ingredients which the

Supreme Court in Singer India Ltd. Vs. Chander Mohan Chadha

(2004) 7 SCC 1 has laid down for lifting the corporate veil have not

been pleaded. This is more so in the light of the senior counsel for

the respondent having handed over in the court the photocopy of the

balance sheet at 31st March, 2008 signed by the petitioner. Even

otherwise such an order would be in the nature of a final order and

not an interim order.

18 The counsel for the petitioner has also sought the interim

measure of directing the respondent to deposit the bank slips and

cheque books of the account of the partnership firm in this court. It

is admitted by both the counsels that the firm had only one bank

account which is frozen at the instance of the petitioner. In the

circumstances no case is made out for this interim relief also as the

same is subject matter of accounts to be gone into before the

arbitrator. The senior counsel for the respondent also points out

that presently there is a negative balance of approximately Rs.1.2

Crores in the said account.

19 The last interim measure claimed is of restraining Union Bank

of India with which the firm had a bank account from releasing the

securities of the respondent and on the strength whereof advances

had been made by the said bank to the firm. Union Bank of India is

not party to the arbitration agreement or to these proceedings.

However in my view, irrespective of the same, the petitioner is not

entitled to such interim relief. The counsel for the petitioner admits

that the petitioner is also liable for his share of the loans advanced

by the said bank. The petitioner has not furnished any securities for

the same, which have been furnished by the respondent only. The

counsel for the petitioner states that if the respondent withdraws the

said securities, the bank would take steps for recovery of the

amounts due from the petitioner also. Though the petitioner admits

liability for the same but contends that since the petitioner has

claims against the respondent, the bank ought not to realise the dues

from the petitioner and should realise the dues from the securities

furnished by the respondent only.

20 It is pointed out by the respondent that capital of the petitioner

in the firm is approximately 1/10th of the capital contributed by the

respondent. Firstly it is unlikely that the bank would release the

securities without settlement of its dues and even otherwise in these

proceedings this court ought not to interfere with the transaction of

the bank and the order if any made in this court is capable of being

misused against the bank.

21 The petitioner is thus not found entitled to the said interim

measures also.

22 The petition is accordingly disposed of. However in the

circumstances, parties are left to bear their own costs.

23 It is needless to state that nothing contained herein shall be

deemed to be an expression of opinion on the rights and contentions

of the parties or on the merits to be adjudicated by the arbitrator.

RAJIV SAHAI ENDLAW (JUDGE) August 19, 2009 J