Sh. Ravinder Prakash Punj vs Sh. Nilender Prakash Punj
2009 Latest Caselaw 2891 Del

$~19
*    IN THE HIGH COURT OF DELHI AT NEW DELHI

                                                                         Decided on: 29.07.2010.

+                              EX.P. 174/2009
                               EX.APPL. (OS) 388/2009
                               & 730/2009

       SH. RAVINDER PRAKASH PUNJ                                   ..... Decree Holder
                       Through: Mr. Amarendra Sharan, Sr. Advocate
                       with Mr. Raman Gandhi, Advocate.

                      versus

       SH. NILENDER PRAKASH PUNJ                                 ..... Judgment Debtors
                       Through: Mr. A.S. Chandhiok, Sr. Advocate
                       with Mr. Naresh Thanai and Ms. Vibha Dhawan,
                       Advocates.

       CORAM:
       MR. JUSTICE S. RAVINDRA BHAT

1.

     Whether the Reporters of local papers        YES
       may be allowed to see the judgment?

2.     To be referred to Reporter or not?           YES

3.     Whether the judgment should be               YES
       reported in the Digest?

MR. JUSTICE S.RAVINDRA BHAT (OPEN COURT)

%

1. In the present execution proceedings, the decree holder seeks execution of an Award

dated 15.11.1989 which was directed to be made rule of the Court by judgment and order dated

30.5.1997. It is an undisputed fact that decree in terms of the said judgment was drawn

subsequently. Although, the Court initially expressed reservations as to the maintainability since

the verification in this case was executed on 21.7.2009, yet having considered the fact that the

decree holder's affidavit supporting the present proceedings is of 23.5.2009 when the petition

EX. PET. 174/2009, EX. APPL. 388/2009 & 730/2009 Page 1 was filed, the same is not of much consequence, as, on that date, the petition was within the

prescribed period of limitation.

2. It is argued that the present execution is confined to the enforcement of the following

portions of the Award: -

"3.4

1. This company is awarded to Shri R.P. Punj and Shri N.P. Punj in equal ratio e.g. 40% each (Balance of 20% is with other individuals/companies)."

3. The petitioner's learned senior counsel submits that having regard to the surrounding

circumstances particularly the finding of the Arbitrator (which was endorsed by the Court) that

the corporate veil had to be lifted which resulted in the concerned shareholders/Directors being

in effect partners, the decree holder became entitled, upon the Court pronouncing the Award to

be rule to the Court, to meaningful participation in the affairs of the said company i.e. Lloyd

Insulation India Pvt. Ltd. It was argued that all these years, the judgment debtors have been

paying lip service to the decree and paying annual amount of Rs.28 Lakhs (to the petitioner)

which is contrary to the letter and spirit of the decree directed to be drawn by the Court. Learned

senior counsel argued that the decree in effect requires that the judgment debtors should be held

to account not only in respect of the decisions taken over the years but also compelled to allow

his effective participation in the company's affairs as its 40% owner.

4. The judgment Debtor No.1 objects to the maintainability of the present proceedings and

has preferred objections, i.e. E.A. 703/2009. It is submitted that the concerned award - which

this Court affirmed as a decree is to be read in the context and that a fair construction would lead

to the conclusion that while the principle of ownership was affirmed in paragraph-1 of clause 3.4

(of the Award), the mechanics of its implementation were indicated in para 3.4(2). It is

EX. PET. 174/2009, EX. APPL. 388/2009 & 730/2009 Page 2 submitted that the decree holder has withheld material information to the effect that in fact shares

had been transferred to him as far back as in 1989 itself soon after the Award when the

concerned parties without waiting for the same being affirmed as a rule of the Court. It is also

argued that the decree holder sought to enforce his right under the Award by filing several

proceedings including three suits as well as proceedings before the Company Law Board under

the provisions of the Companies Act. It is stated that there is nothing left for execution as the

directions in the Award - which are sought to be enforced through the present proceedings stood

implemented.

5 It is evident from the above discussion that narrow question which this Court is to

address itself to is as to the construction of the clause 3.4 of the Award. For the sake of facility,

the entire relevant portion is extracted below: -

"3.4

1. This company is awarded to Shri R.P. Punj and Shri N.P. Punj in equal ratio e.g. 40% each (Balance of 20% is with other individuals/companies)."

2. Shareholdings in LII:

Shri V.P. Punj:

Investment companies under the control of Shri V.P. Punj namely Capree Investments (P) Ltd., Cornelia Investments (P) Limited and Asal Investments Private Limited, jointly hold 6491 equity shares of L.I.I. They shall transfer their shareholding to Shri R.P. Punj/M.P. Punj in equal ratio.

Shri S.N.P. Punj:

Investment companies under the control of Shri S.N.P. Punj viz. Shubhvir Investment Private Limited, Sanat Investments Private Limited and Sugat Investments Private Limited jointly hold 7163 equity shares of LII. The above total equity shares 13654 (6491+7163) should be transferred to Shri R.P. Punj and Shri N.P. Punj or their nominees in equal ratio for a consideration of Rs.100/- each as per family settlement."

6. It is undoubtedly a reality that the Arbitrator by his award deemed that the company in

EX. PET. 174/2009, EX. APPL. 388/2009 & 730/2009 Page 3 question i.e. Lloyd Insulation India Pvt. Ltd. was a closely held entity and had to be treated as a

partnership. In other words, the findings in the Award that the corporate veil had to be lifted had

become final; the judgment debtor cannot advisably question that. In the circumstances, the

Court has to see the feasibility of the decree holder's contention that the 40% ownership means

in truth and reality 40% in the effective control of the company and not merely as a shareholder

entitled to certain dividends or in respect of certain benefits.

7. A complete reading of paragraph 3.4 of the Award, in the opinion of the Court, would

indicate that the document created rights in favour of the concerned parties i.e. R.P. Punj (the

decree holder herein) and N.P. Punj (the judgment debtor No.1). This was in relation to the

judgment debtor No.2 - Lloyd Insulation India Pvt. Ltd. The emphasis by the decree holder on

the terms "This company is awarded to R.P. Punj and N.P. Punj in equal ratio e.g. 40 % each",

appears to be facially attractive. However, this Court cannot read this condition in isolation; it

has to be read in context. Clause (1), therefore, prescribes the principle, i.e., transmission of

40% ownership (of the shares in the company) to the parties to the present proceedings in 40%

partnership to R.P. Punj and N.P. Punj. A company is a juristic entity; ownership of such

corporate personality is figurative. It has to mean ownership of the shares, and as a consequence

of such ownership, the exercise of rights conferred by the company's instruments and provisions

of law, as and when asserted by the shareholder. The method of transmission of such ownership

is indicated in Clause-2 which in turn provides that the existing shareholders were to divest

themselves in favour of the said two individuals i.e R.P. Punj and N.P. Punj. It is urged and

averred by the judgment debtor No.1 that such divestment took place in 1989. The decree holder

did correctly contest this aspect.

8. As far as the argument that the Court should ensure effective or meaningful participation

EX. PET. 174/2009, EX. APPL. 388/2009 & 730/2009 Page 4 in the company's affairs is concerned, this Court is of the opinion that the plea has to be noticed

to be rejected. If the decree holder is (or was at any stage) aggrieved about being kept away

from the company, either in its decision making processes or in relation to the benefits derived

by him as 40% owner, that awarded him separate cause or causes of action at such point of time.

He cannot seek refuge under paragraph-3.4 sub-para (i), as is sought to be done and prefer this

execution proceedings. In other words, each incident by which the decree holder was denied

control either in participation in the Board of Directors' meeting (of the judgment debtor No.2)

or denial of economic benefits, as 40% shareholder i.e. his entitlement to shares or his

entitlement to seek accounts from the company afforded him an independent cause of action.

Such cause or causes of action had to be pursued, and claims asserted within the time prescribed,

and in the manner known to law by independent proceedings, and not in the present "catch all"

residual execution (or, closer home "Kamadhenu" variety) of pendency. The Award embodied

in the subsequent decree, in the opinion of the Court, stood satisfied when the shares were

divested from the original shareholders Mr.V.P. Punj and Mr. S.N.P. Punj in 1989, consequent to

which the said shares vested in the decree holder and judgment debtor No.1.

9. The Award having thus stood satisfied in 1989, the present execution petition is not

maintainable; it is accordingly rejected.

                                                                          S. RAVINDRA BHAT
                                                                                    (JUDGE)
       JULY 29, 2010
       /dh/




EX. PET. 174/2009, EX. APPL. 388/2009 & 730/2009                                            Page 5