Prem Garg And Ors vs Glencore Grain Rotterdam B.V.
2010 Latest Caselaw 2982 Del

*     IN THE HIGH COURT OF DELHI AT NEW DELHI

+     EFA(OS) No.15/2010

Prem Garg and Ors                      .....Appellant through
                                       Mr. Mukul Rohtagi, Sr. Adv.
                                       with Mr.Anshuj Dhingra,
                                       Adv.
                      versus

Glencore Grain Rotterdam B.V.          ..... Respondent through
                                       Mr.Rajiv Nayar, Sr.Adv.
                                       with Ms.Niti Dixit &
                                       Mr.Vidur Bhatia, Advs.

                                 AND

+     EFA(OS) No.16/2010

Ms/Shivnath Rai Harnarain              .....Appellant through
                                       Mr.Amit Chadha, Sr. Adv.
                                       with Mr.Mahendra Rana,
                                       Adv.
                      versus

Glencore Grain Rotterdam B.V.          ..... Respondent through
                                       Mr.Rajiv Nayar, Sr.Adv.
                                       with Ms.Niti Dixit &
                                       Mr.Vidur Bhatia, Advs.

%                          Date of Hearing: June 04, 2010

                           Date of Decision: June 11, 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




EFA(OS)15 & 16/2010                                      Page 1 of 15
 VIKRAMAJIT SEN, J.

1. These Appeals assail the Order of the Learned Single

Judge passed on 19th April, 2010, directing the sale of the

shares of Judgment Debtors Nos.2 & 3 held by them in

Judgment Debtor No.5. The amounts so realized were to be

kept by the State Bank of India in Suspense Account awaiting

the orders of the Court. Secondly the Learned Single Judge

had disallowed argument on behalf of Judgment Debtors

Nos.1 and 4 owing to their failure to make compliance with

the orders of the Hon‟ble Supreme Court by depositing fifty

per cent of the decreetal amount. Thirdly, the Learned Single

Judge had declined to hear objections pertaining to fraud so

far as the Judgment Debtors No.2 and 3 are concerned.

2. M/s.Shivnath Rai Harnarain (India) Company (a

dissolved firm) is Judgment Debtor No.1; Mr.Prem Chand

Garg (partner of Judgment Debtor No.1) is Judgment Debtor

No.2; Mrs.Anita Garg wife of Mr. Prem Chand Garg (partner

of Judgment Debtor No.1) is Judgment Debtor No.3; Mr.Brij

Mohan Gupta (partner of Judgment Debtor No.1) is Judgment

Debtor No.4; and Shri Lal Mahal Limited (a Company

incorporated under the Companies Act, 1956 which has

allegedly succeeded Shivnath Rai Harnarain (India) Limted)

is Judgment Debtor No.5.

3. Execution Petition No.72/2009 which is under sundry

Rules of Order XXI of the CPC read with Section 49 of the

Arbitration and Conciliation Act, 1996, seeks enforcement of

the Judgment dated 27th November, 2008 passed in CS(OS)

No.541/1998. The Decree Holder specifically avers in

paragraph 23 thereof that Mr.Prem Garg, Mrs.Anita Garg and

Mr.Brij Mohan Gupta are partners of Judgment Debtor No.1;

this assertion of fact has not been traversed or controverted

in any Reply or Application filed by any of the Judgment

Debtors. It is only in the Rejoinder to EA 303/2009 that

Judgment Debtor Nos.2 and 3 have denied that they "are

admittedly partners of the said concern".

4. EA.No.95/2009 is an application raising Objections on

behalf of Judgment Debtors No.1 and 4 under Section 47 and

Order VII Rule 11 read with Section 151 of the Code of Civil

Procedure (CPC). It is dated 28.7.2009 and has been filed on

that day itself; it has been signed by Mr.Ram Lal, son of

Mr.Rikhi Ram, as the authorized signatory of Judgment

Debtors No.1 and 4.

5. Three separate Replies have been filed by the Judgment

Debtors against EA.No.303/2009 by which the Decree Holder

had prayed for attachment of the assets of Judgment Debtors

Nos.2 to 5. Judgment Debtors No.1 and 4 i.e. M/s.Shivnath

Rai Harnarain (India) Company and Mr.Brij Mohan Gupta

have together filed one Reply; Judgment Debtors No.2 and 3

namely Mr.Prem Chand Garg and Mrs.Anita Garg have filed

one Reply; and Judgment Debtor No.5 has filed its Reply

separately. We have perused the records of Suit No.541/1998

since it had been submitted that Judgment Debtor No.2 has,

as an affiant, acknowledged that he was a partner of

Judgment Debtor No.1. Judgment Debtor No.2 has deposed

that he "had been one of the partners in the defendant since

the deponent had been dealing with the matter personally,

therefore, deponent is swearing in this affidavit in that

regard. The deponent is, therefore, conversant with the facts

of the case and is competent to swear this affidavit".

6. The Objection by Judgment Debtors No.1 and 4 in their

Reply filed on 13th August, 2009 is three fold viz., (i) that the

Decree Holder has not placed on record the Award which the

Decree Holder seeks to execute nor has the Decree Holder

placed on record a certified copy of the Award, copy of the

award on record is only, "copy of the copy"; (ii) the Award has

not been stamped in accordance with the Indian Stamp Act,

1899 and, therefore, cannot be executed under Section 35 of

the Stamp Act; and (iii) under Section 49 of the Arbitration

and Conciliation Act, 1996, which mandates that if the Court

is satisfied the foreign Award is enforceable the Award shall

be deemed to be a decree of the Court, the word "that Court"

refers to the Court in whose jurisdiction the foreign award

was passed. An independent objection taken by Judgment

Debtor No.4 is that he was neither a party to the arbitration

nor to the suit and no Award or Judgment or Decree has been

passed against him. Judgment Debtors No.2 and 3 have

adopted and relied on the objections already filed on behalf of

Judgment Debtors No.1 and 4, which does not contain any

pleadings alleging fraud. Reply filed on behalf of Judgment

Debtor No.5 raises Objections regarding the validity of the

Arbitration Agreement and that the Arbitration proceedings

that were held were vitiated by fraud.

7. On the very same day on which Judgment Debtor No.5

had filed its Reply i.e. 18th August, 2009, a „Short Reply‟ also

came to be filed on behalf of Judgment Debtor Nos.2 & 3,

praying, inter alia, that time be granted to them for filing

detailed Objections to Execution Petition No.72/2009. There

is no Order extending or granting them such accommodation.

8. On 23rd September, 2009, additional Objections on

behalf of Judgment Debtors No.1 and 4 vide EA.No.522/2009

came to be filed in which various grounds were pleaded in an

effort to show that the Award suffers from fraud and that

there was noncompliance of the Conditions envisaged by

Section 47 of the A&C Act.

9. A perusal of the record of the Executing Court discloses

that a Rejoinder has been filed on behalf of Judgment Debtors

Nos.2 & 3. It was in this context that Mr.Mukul Rohtagi,

Learned Senior Counsel appearing for the

Appellant/Judgment Debtors No.2 and 3, has argued that the

Learned Single Judge committed an error in disallowing his

clients from canvassing the aspect of fraud. He sought to rely

on the statement made in the „Short Reply‟ filed on behalf of

Judgment Debtors Nos.2 & 3, which states that "without

prejudice, the answering Judgment Debtors adopt and rely on

the objections already filed on behalf of Judgment Debtor

Nos.1 and 4 as part of this reply, however, answering

Judgment Debtors reserve their right to file a

detailed/parawise reply to the present application after the

adjudication of their objections."

10. To put the record right, the Objections asserting that

the Award had been procured by fraud have been taken by

Judgment Debtors Nos.1 & 4 on 23rd September, 2009. It

would thus amount to an anachronism to hold that an

Objection raised subsequently could be adopted by another

party in its Reply already filed anterior thereto. In these

premises, the Learned Single Judge did not commit any error

in refusing to permit Judgment Debtors Nos.2 & 3 to attack

the Award on the ground of fraud. We fail to appreciate any

reason why this ground could not have been directly taken by

Judgment Debtors Nos.2 & 3 at any time prior to the passing

of the impugned Order. No effort whatsoever has been

undertaken by Judgment Debtors Nos.2 & 3 even to file a

detailed Reply. There is no room therefore for the Appellate

Court to find fault with and set aside the view of the

Execution Court on this score. We are of the opinion that this

issue is meritless and deserve to be dismissed and is hereby

dismissed.

11. We shall now consider the second ground in which

Section 47 of the CPC had been invoked in the pleadings, and

Order XXI Rule 50 of the CPC has additionally been pressed

in the course of the vehement arguments articulated by

Learned Senior Counsel for the Appellant. Section 47

mandates that any question relating to the execution,

discharge or satisfaction of a decree shall be raised in

execution proceedings and not by way of a separate suit. It is

trite that the Executing Court is not permitted to go behind

the decree and, therefore, the scope of inquiry before it is

„microscopic and lies in a narrow compass‟ as has been

opined in Dhurander Prasad -vs-Jai Prakash University,

(2001) 6 SCC 534.

12. Sub-Section (3) of Section 47 of the CPC contemplates

that where a question arises whether any person is or is not

representative of the relevant party such question shall, for

the purposes of this Section, be determined by the Court. The

word "Court" has not been defined in the CPC although

"Foreign Court" finds mention in Section 2 thereof and

"Court which passed a Decree" has been defined in Section

37 of the CPC. Mr.Mukul Rohtagi had endeavoured to

persuade us that questions revolving around the legal status

of Judgment Debtors Nos.2 & 3 viz., whether they were

partners of Judgment Debtor No.1 at the appropriate time,

would have to be raised either before the Arbitral Tribunal

which held its proceedings and pronounced its Award in

London, or in the appropriate Court in London. It seems to us

that there is no basis for raising the controversy regarding

jurisdiction of this Court since Section 49 of the Arbitration

and Conciliation Act, 1996 enunciates that once the Court is

satisfied that the Foreign Award is enforceable then the

Award shall be deemed to be a Decree of that Court. In other

words, it is beyond cavil that on the dismissal of the

Objections by the Learned Single Judge in terms of Order

dated 27th November, 2008, it is the Original Side of this

Court that would hold sway over this controversy. We may,

however, record in this regard that we accept the arguments

of Mr.Mukul Rohtagi, that the Appellants would have had to

had anticipate the dismissal of their Objections if they were to

be expected to raise the grounds of attack predicated on

Section 47 and Order XXI Rule 50 of the CPC before the

learned Single Judge who was to rule on the Objections to the

Award. Consequently, we agree that the grounds emanating

from these provisions could correctly have been raised only in

Execution proceedings. As already mentioned, an Affidavit of

Shri Prem Garg, Judgment Debtor No.2 and Appellant No.1

before us was filed as evidence by way of Affidavit by the

Appellant in Suit No. 541 of 1998. In Paragraph 1 of the

Affidavit the Deponent has stated on oath and by way of

affirmation that "the Deponent had been one of the Partners

in the Defendant. Since the Deponent has been dealing with

the matter personally, therefore, the Deponent is swearing in

this Affidavit in that regard." Judgment Debtor No.2 cannot

controvert that he was a partner of Judgment Debtor No.1.

13. The Deed of Dissolution of Judgment Debtor No.1 dated

31st March, 1998 clearly records the name of the four

Partners, viz. Prem Chand Garg, Smt. Ram Bai, Smt. Anita

Garg and Shri Brij Mohan Gupta and appears to be signed by

all four of them. In light of the depositions made in the said

Affidavit and the Dissolution Deed there is no manner of

doubt that the Appellant 1 and 2 were the Partners of the

Firm at the relevant time.

14. The Respondent has also relied extensively on Gambhir

Mal Pandiya -vs- J.K. Jute Mills Co., AIR 1963 SC 243 to

buttress its argument that an execution can be carried out

against the partners of a Judgment Debtor Firm even if they

were not parties to the Suit as partners or not even

summoned during the suit as Partners. Order XXI Rule 50

further makes it clear that the partner of a firm can raise

limited objections against the execution sought against him,

and the grounds would include fraud or that they were not

the partners at the relevant point in time and that is why they

are not liable.

15. We are of the view that the scope of enquiry under Rule

50 Order XXI of the CPC is limited to the fact as to whether

the person against whom the execution is sought was a

partner when the cause of action accrued against the firm

and against the Decree Holder, but the person may question

the decree on the ground of collusion, fraud or the like but

not have a fresh adjudication on the question of liability. In

this case the argument of fraud is for the first time

articulated by the Judgment Debtors Nos. 2 and 3 in the

Appeal. We cannot appreciate why this argument could not

have been raised before the learned Execution Court which

was the appropriate forum to adjudicate and pronounce on

this issue.

16. As regards the second argument which is also raised

orally for the first time before us that the Appellants were not

the Partners of the firm and therefore not liable also deserves

to be rejected outrightly. There is not even a smattering of

this plea ever taken in any of the pleadings filed by the

Appellants. Moreover, it is totally contrary to their own

Affidavit filed before the Court and the Dissolution Deed of

the firm.

17. In light of these facts, we find no infirmity with the

Order of the learned Singe Judge in debarring the Judgment

Debtors Nos. 2 & 3 from raising the plea of fraud.

Unfortunately, apart from the en passant denial of their

status as partners of Judgment Debtor No.1 firm in the

Rejoinder of Judgment Debtors Nos.2 & 3, a perusal of the

impugned Judgment discloses that this ground had not been

urged before the Execution Court and it runs counter to the

contents of the affidavit of Judgment Debtor No.2 in Suit

No.541/1998. It is essentially a mixed question of law and fact

raised for the first time in the Appeal before us. Regretfully,

and fatally for the Appellants, this controversy has not even

been articulated in the Memorandum of Appeal before us.

Normally, we would be loathe to take too severe or technical

and procedural approach had it been palpably clear to us that

justice would become the casualty. Procedure is a

handmaiden of justice and if this plea is countenanced by us

at the appellate stage, we would only be obstructing the

execution of a decree. The cynic quips that it is invariably

easier to win a decree than it is to execute it. This trend

needs to be reversed otherwise procedural punctilio shall

indubitably emasculate justice. No other argument has been

raised before us. We may very briefly deal with one aspect of

the case which was fleetingly mentioned and that is the

allegation that Judgment Debtor No.5 had succeeded

Judgment Debtor No.1. The legal position is that a firm is only

a compendium of its partners who remain liable even to the

extent of all their personal assets till the time all the creditors

are satisfied.

18. Owing to this legal position Order XXX of the CPC

enables the filing of a suit or lis in the name of the firm,

which otherwise could become fraught with jural irregularity.

That very Order, however, empowers a party to seek a

disclosure of the details of the partners of the firm. It is a

wise lawyer, endowed with foresight, who ensures that all

details pertaining to partners of the embattled firm have

already been clarified in the Trial itself. Otherwise, the

prudence that finds expression in Order XXI Rule 50 will

rightly delay the execution of the decree that may have come

to be passed. There is incalculable mischief that can be

orchestrated by a cunning Decree Holder by attaching and

selling assets of persons who, at the relevant time, were not

partners of the Judgment Debtor firm. If the Execution Court

harbours serious and well founded doubts on this issue, it

would be discharging its judicial obligations by clearing the

grounds. We think it inconceivable that a person against

whom execution proceedings have been initiated on the

platform of his/her being a partner in the Judgment Debtor

firm would not, at the very threshold, bring this fact to the

attention of the Court. Having said all this, so far as the case

in hand goes, we find that the position is not shrouded with

any uncertainty as to the factum of Judgment Debtors Nos.2

& 3 being partners of Judgment Debtor No.1. Allowing a

formal invocation of Order XXI Rule 50 at this belated stage

of the litigation would tantamount to our being privy to

sacrificing justice at the purposeless and pedantic prompting

of procedure. The dissolution or metamorphism of the firm

into a corporate company does not alter/dilute/diminish or

extinguish the rights of creditors to proceed against the

personal assets of any or all of the erstwhile partners.

19. It is for these manifold reasons that we find the Appeals

to be devoid of merit. They are calculated only to delay the

Decree Holder from enjoying the fruits of the Decree. In the

circumstances of the case, however, we decline from passing

any orders as to costs.

                                        ( VIKRAMAJIT SEN )
                                             JUDGE




                                        ( A.K. PATHAK )
June 11, 2010                                 JUDGE
AKA/TP