Jagatjit Jaiswal & Anr. vs Karamjit Singh Jaswal & Anr
2010 Latest Caselaw 3904 Del

*     IN THE HIGH COURT OF DELHI AT NEW DELHI

+     CM Nos. 17175/07(stay) & 9432/09 (vacation of stay)
      in FAO(OS) No.500/2007

JAGATJIT JAISWAL & ANR.           .....Appellant through
                                  Mr. P.V. Kapur, Sr. Adv. with
                                  Mr. Ashim Vachher &
                                  Mr. Achal Gupta, Advs.
                  versus

KARAMJIT SINGH JASWAL & ANR .....Respondent through
                            Dr. A.M. Singhvi, Sr. Adv.
                            with Ms. Malini Sood, Adv.

%                            Date of Hearing: July 23, 2010

                             Date of Decision: August 20, 2010

      CORAM:
*     HON'BLE MR. JUSTICE VIKRAMAJIT SEN
      HON'BLE MR. JUSTICE A.K. PATHAK
      1. Whether reporters of local papers may be
         allowed to see the Judgment?               No
      2. To be referred to the Reporter or not?     Yes
      3. Whether the Judgment should be reported
         in the Digest?                             Yes

VIKRAMAJIT SEN, J.

1. By these Orders, we shall dispose of CM No.l7175/2007

dated 12.12.2007 filed by the Appellants for appropriate orders,

inter alia, restraining the Respondents from discontinuing their

salary, perks and benefits; and for restraining the Respondents

from transferring, pledging, creating any third party rights,

parting with possession or otherwise dealing with in any manner

whatsoever the shares detailed in the Annexure. On the first

date of hearing, that is, 14.12.2007, the following Order was

passed:

Issue notice. Learned counsel for the respondents may file their Objections within six weeks. In the meantime order dated 25.8.2006 passed by the learned Single Judge shall continue to remain in operation subject to the appellants filing undertaking in this court that in case the appeal is eventually dismissed, the amount received by them towards, salary, perquisites and other benefits during the intervening period shall be refunded to the company.

Hearing of this application has been deferred from time to time.

2. CM No.9432/2009 was filed on 13.7.2009 by the

Respondents seeking vacation of the aforementioned Order

dated 14.12.2007. The gravamen of the application is that the

substratum of the Appellants‟ case has vanished because their

entire shareholding in Jagatjit Industries Limited as well as L.P.

Jaiswal & Son Private Limited have been sold by them for a

consideration of ` 36,50,00,000/-. The argument is that interim

payment of salary and perks, passed on 14.12.2007, was

predicated on the Appellants‟ status as shareholder as well as

their erstwhile position in the Management of Jagatjit Industries

Limited.

3. It is beyond the pale of the controversy that the sum of

` 36,50,00,000/- has been received by the Appellants and as a

consequence thereof, the Appellants do not hold any shares in

Jagatjit Industries Limited or L.P. Jaiswal & Son Private Limited.

This Arrangement was arrived at before the Company Law

Board (CLB), Principal Bench, New Delhi on 12.3.2009. The

CLB, in its Order dated 12.3.2009, recorded the compromise

between the parties as follows:-

4. In terms of the settlement, the Petition is dismissed with the directions that

1. The Respondents will buy the entire shareholding of the Petitioners in JIL and L.P. Jaiswal & Sons Pvt. Ltd., which as per the company‟s record is as follows:

Jagatjit Industries Limited

i) Petitioner Nos.1-3 28,95,524 shares

ii) Petitioner Nos.4-5 28,98,588 shares (and other members of JJ Group) L.P. Jaiswal & Sons Pvt. Ltd.

       i)    Petitioner No.1              300 shares
       ii)   Petitioner Nos.2 & 3         NIL
       iii) Petitioner Nos.4-5            NIL
       iv) JJ and other members of        300 shares
             JJ Group
             (Jagatjit Jaiswal)

The above shares will be purchased on the following mutually agreed terms and conditions:

2. The above shares of APJ Group and JJ Group will be purchased at a value of Rs.36,50,00,000/- (Rupees thirty six crores fifty lacs) each.

3. The Respondent No.1 Company will pay for shares of Petitioners only by buyback of shares in cash and consequently the equity share capital of the Company will stand reduced to that extent. Payment will be made within 3 months from the date of the order of CLB.

4. All allegations of oppression and mismanagement and challenges to the preferential allotment both before this Hon‟ble Board and before SEBI are withdrawn unconditionally by the Petitioners and JJ and the issue of shares with DVR are upheld as valid by the Company Law Board as being in accordance with the Articles of Association of the Company and provisions of the Companies Act. This direction and consent will take effect on the date of payment by the Respondent to the Petitioners in terms hereof.

5. All interim orders passed are vacated, and the Respondent will be entitled to sell/transfer/mortgage any immovable assets as it deems fit from the list annexed hereto as Annexure A. The proceeds thus realized will be deposited in a separate account and utilized for any other purpose only after the above payments are first made to the Petitioners. Also annexed hereto as Annexure B is a list of the properties which the Company does not propose to sell presently.

6. All parties will file an Affidavit of compliance of this order within 10 days.

7. It is agreed that this order will not affect any other pending proceedings between the parties except that

the allegations of oppression and mismanagement and challenges to the preferential allotment will not be raised by the Petitioners and JJ before any other Court/Forum.

4. It is worthwhile to emphasize that the aforementioned

Settlement has occurred after the Admission of the present

Appeal and the passing of the interim Orders dated 14.12.2007.

Failure to specifically mention the effect of the Settlement on

these interim Orders is conspicuous by its absence. The

controversy would not have arisen had the Consent Terms dated

28.2.2009 (duly signed by the parties) clarified this conundrum.

If the understanding was that the salary, perquisites etc. that

were being received and enjoyed by the Appellants till March,

2009 were to continue, this ought to have been so spelt out by

the Appellants. Conversely, the Respondents should have taken

care to clarify that consequent upon the receipt of the said

sum of ` 36,50,00,000/- by the Appellants, the Order dated

14.12.2007 would become ineffectual.

5. The situation is worse confounded because Clause 7 of the

Consent Terms, which received the imprimatur of the CLB by

way of paragraph 8 of the said Order, articulates the Agreement

that -"the orders, presumably of the CLB, would not affect any

other pending proceedings between the parties except that the

allegation of oppression and mismanagement and challenges to

the preferential allotment will not be raised by the Petitioners

and JJ (Appellant) before any other court".

6. In the Order impugned in the Appeal, the learned Single

Judge has comprehensively discussed the rival contentions of

the parties with regard to Appellants‟ Petition under Section 9

of the Arbitration & Conciliation Act, 1996 (A&C Act for short).

The issue was whether Clause 9 of the Memorandum of Family

Settlement (MOFS), dated 30.3.2000, amounted to an

Arbitration Agreement. The conclusion of the learned Single

Judge was that there was no binding or enforceable arbitration

agreement between the parties and hence the Petition itself was

not maintainable. In such a situation the question of granting

the interim relief prayed for by the Appellants/Petitioners

obviously did not arise. The Prayers contained in CM

No.17175/2007 are in pari materia with the Prayers contained

in the Petition under Section 9 of the A&C Act.

7. There can be no gainsaying that where the Respondents

deny the existence of an Arbitration Clause, it will undeniably be

open to the Petitioners to initiate appropriate legal proceedings

in a Civil Court. There is always an awkward ambivalence felt by

the Plaintiffs who may have filed a suit for injunction etc. as any

favourable orders may be set to naught in the event the

Respondents assert the existence of an Arbitration Agreement.

This is not the situation before us. If any doubt had existed, it

was set at rest by the impugned Order of the learned Single

Judge which accepted the Respondents‟ version that no

Arbitration Clause existed. The learned Single Judge was

concerned with the existence or absence of an Arbitration

Clause and, therefore, was not called upon to discuss and decide

whether the Appellants/Petitioners had made out a good case

for the grant of the interim relief which is the same in the

Petition under Section 9 of the A&C Act as well as in the Appeal

before us. We are, therefore, principally concerned with the

nodus whether the Petition under Section 9 of the A&C Act was

maintainable and that was entirely dependent on whether an

Arbitration Clause/Agreement existed between the parties. At

the highest, if the decision in the Appeal were to be in the

favour of the Appellants, the matter would be remanded to the

learned Single Judge for taking a decision as to whether the

injunction prayed for in the Petition under Section 9 of the A&C

Act ought to be granted or refused.

8. In these circumstances, the interim Order passed on

14.12.2007, in our opinion, travels far beyond the contours of

the Appeal before us. We cannot lose sight of this fact because,

as we have already noted above, there was no impediment for

the Appellants to have initiated civil proceedings seeking the

very same relief that they had prayed for in the subject Petition.

9. Having said that, we feel duty-bound to return a prima

facie finding on the merits of the interim prayers made before

us. The interim Order was passed much before the compromise

between the parties. At this stage of the proceedings, it is

preponderantly evident that the injunctive relief was predicated

on the factum of the Appellants being principal/equal

shareholders in L.P. Jaiswal & Son Private Limited and a

substantial shareholder in Jagatjit Industries Limited. By

arriving at the settlement before the CLB, they have sold their

shareholding for a valuable consideration of ` 36,50,00,000/-.

The effect of the sale is that the position prevailing on

14.12.2007 and thereafter till March, 2009 has altered

altogether. Clause 7 mentioned above, no doubt, poses a

problem because of ambiguous and ill-advised wordings. It

seems to us that had the Appellants retained any part of their

shareholdings in Jagatjit Industries Limited or L.P. Jaiswal &

Son Private Limited, it was arguable that these Consent Terms

would not impact upon the present litigation because of the use

of the words „oppression and mismanagement and challenges to

the preferential allotment in the Consent Terms‟. With the sale

of the entire shareholding, the Appellants have been denuded

not only of rights flowing therefrom, but also of any perceived

rights for salary, perquisites etc.

10. There is substantial substance and weight in the argument

put forward on behalf of the Respondents that since Jagatjit

Industries Limited is a public company, payments made

pursuant to private compacts between the parties would not be

rendered illegal. Judicial decisions should steer clear from

ordaining a situation which runs contrary to law.

11. For these reasons, we recall the Order dated 14.12.2007.

We dismiss CM No.17175/2007 and allow CM No.9432/2009.

We make no order as to costs. We also note that the Appellants

have furnished an Undertaking that they shall reimburse all

payments received and perquisites enjoyed as a consequence of

the Orders dated 14.12.2007. We, however, leave the issue open

for decision when the Appeal is itself taken for Final Disposal.

                                          ( VIKRAMAJIT SEN )
                                                JUDGE




                                          ( A.K. PATHAK )
August 20, 2010                                  JUDGE
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