Jagatjit Jaiswal & Anr. vs Karamjit Singh Jaiswal & Anr.
2012 Latest Caselaw 2427 Del

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*     IN THE HIGH COURT OF DELHI AT NEW DELHI

%                            Judgment Reserved on : April 12, 2012
                           Judgment Pronounced on: April 16, 2012

+                           FAO(OS) 500/2007

      JAGATJIT JAISWAL & ANR.                  ..... Appellants
           Represented by: Mr.Ravi Shankar Prasad,
                          Sr.Advocate instructed by
                          Mr.Ashim Vachher, Ms.Achal
                          Gupta and Mr.Abhilash,
                          Advocates.
                 versus

      KARAMJIT SINGH JAISWAL & ANR.        ..... Respondents
          Represented by: Mr.Harish Nikunj Salve, Sr.Advocate,
                          Mr.S.Ganesh, Sr.Advocate and
                          Mr.Sandeep Sethi, Sr.Advocate
                          instructed by Ms.Malini Sud,
                          Mr.Deepak Khurana and
                          Ms.Aditi Sharma, Advocates.

       CORAM:
       HON'BLE MR. JUSTICE PRADEEP NANDRAJOG
       HON'BLE MR. JUSTICE SIDDHARTH MRIDUL

PRADEEP NANDRAJOG, J.

1. Jagatjit Jaiswal and Karamjit S.Jaiswal are real brothers. They are the sons of late Ladli Prashad Jaiswal and his wife Surjit Jaiswal. On March 03, 2000, Jagatjit Jaiswal and his wife as one group and Karamjit S.Jaiswal and his wife as the other group executed a Memorandum of Family Settlement.

2. The memorandum records that the family of late Ladli Prashad Jaiswal has substantial wealth and assets including direct and indirect holdings in public and private companies and in respect of distribution of the family wealth an oral settlement was arrived in the previous year. The

written memorandum further records that a further oral agreement was arrived at between the parties on March 02, 2000, the object whereof was to avoid disputes and litigation amongst the two brothers and their wives so that peace, harmony and goodwill could be maintained. The memorandum records that the executants desired to reduce the terms of the oral settlement into a writing as an aid to memory.

3. The written memorandum has 12 clauses which read as under:-

"1. The parties have acknowledged that they were party to an oral settlement within the LPJ family and in terms of which the Companies scheduled herewith have fallen to their share (hereafter referred to as "the Companies");

2. The parties acknowledge their inter se settlement dated 2.3.2000 whereby they agreed and undertook to hold equal shares in the Companies. Accordingly Parties have agreed and shall at all times hold equal number of shares in the Companies whether held directly or indirectly. In the event of either Party acquiring any shares in the Companies, the same shall be held subject to the agreed terms as recorded herein and for the equal benefit of the Parties.

3. The Parties agreed to jointly manage the Companies and enjoy equal benefits, rights and privileges. No Party will exclude the other directly or indirectly from such joint management or equal benefits.

4. The Parties agreed to manage the public limited Companies with the assistance of professional managers. Professionals are to be appointed as mutually agreed to between JJ and KSJ. Duties and authorities of professional managers will be assigned on terms agreed to between JJ and KSJ. On appointment of

professionals JJ and KSJ have agreed to constitute an Audit Committee of which they are members to jointly supervise and control the management of these Companies.

5. The Parties agreed to be entitled to equal representation on the Board of Directors of the Companies. Any independent Director if appointed is to be as mutually agreed to and as acceptable to both JJ and KSJ.

6. The Parties agreed that in all matters relating to the two family groups, the decision of JJ and KSJ will be final and binding on their respective family members. In the event of the death of the JJ or KSJ, their respective spouses shall be the representative of the family group concerned for the purpose of the settlement.

7. The Parties agreed that no member of the family and no private company through which shares of the Companies are held, will mortgage, assign or dispose of shares of the Companies without the concurrence of JJ and KSJ. JJ and KSJ shall have absolute right to refuse permission to pledge, mortgage or encumber or transfer the shares.

8. The Parties agreed that neither party shall do any act of omission or commission as a result of which the equal control of JJ or KSJ groups is diluted or prejudiced (directly or indirectly) in the Companies.

9. The Parties agreed to nominate and constitute a committee hereinafter to be referred to as the Dispute Resolution Committee comprising of persons acceptable to them. It is agreed that the Parties shall be bound to refer all disputes between them relating to any matter or dealings between the Parties that have any connection to the affairs of any of the Companies or otherwise and the decision of the Committee shall be final and binding on the Parties. The Parties agreed and undertook to abide by all decisions of the Committee whether

the Committee chooses to act as arbitrator or as umpire or referee. Accordingly, the Parties have agreed not to take recourse to litigation to resolve disputes or differences between them.

10. In the event of a breakdown of relationship between the Parties representing the two family groups, it is agreed that all the Companies shall be equally divided between the Parties in a manner as agreed and finalized by the Dispute Resolution Committee. The decision of the Committee to divide the Companies equally between the Parties, either by reorganization of the Companies or such other manner as it deems fit, shall be binding on the Parties and it shall not be challenged in any Court of law or otherwise.

11. It is agreed that in the event of any dispute of the Parties with any third party and any other family member of the larger family, the same shall only be resolved pursuant to discussion held jointly by JJ and KSJ with such third person. Neither JJ nor KSJ shall hold independent discussions or arrive at any understanding with any third person or party without the prior concurrence and acceptance of the other Party.

12. The parties confirmed that they had entered into the above settlement with good intentions and will accordingly make all endeavours to conduct the affairs on the terms hereof. In the event of breakdown between the Parties representing the two family groups and in the event of they are unable to resolve their differences amicably, it is agreed that the Companies as also all assets and liabilities shall be split equally between the Parties. For facilitating such split the Parties agreed to be entitled to get independent valuations from two reputable firms of Chartered Accountants. The Parties agreed to be bound by the scheme of arrangement for split as determined by such experts. The decisions of the experts shall be

final and shall not be subject to being challenged in any form or manner."

4. The schedule referred to in clause-1 of the memorandum lists 14 companies as under:-

"1. Jagatjit Industries Limited.

2. Milkfood Limited.

3. L.P.Investments Limited.

4. Binnies Estates Limited.

5. L.P.Jaiswal & Sons Pvt. Ltd.

6. Double Durable Investments Limited.

7. Quick Return Investments Limited.

8. Snowwhite Holdings Pvt. Limited.

9. Hyderabad Distilleries & Winneries Limited.

10. Industrial Containers & Closures Limited.

11. Blue Skies Pvt. Limited.

12. J. Ice Cream Pvt. Ltd.

13. J & J Ice Cream Pvt. Ltd.

14. Pickwick Holdings Pvt. Ltd."

5. We are concerned in the instant appeal with clause- 9 of the memorandum and the vexed question debated by learned senior counsel for the parties is: Whether the clause amounts to an agreement between the parties to refer their disputes to arbitration? If yes, what would be the scope and ambit of the subject matter of arbitration?

6. The question arises on account of the learned Single Judge returning a finding that there being no agreement between the parties to refer their disputes to arbitration, application filed by the appellants under Section 9 of the Arbitration and Conciliation Act seeking interim directions was not maintainable.

7. In taking the said view, the learned Single Judge has noted that the memorandum in question was drawn up in the year 2000, much after the promulgation of the Arbitration and Conciliation Act 1996, which had no concept of an umpire or a referee, the two expressions used in clause-9 of the

memorandum, and thus it was apparent that the parties understood to mean experts (refer para 49 of the impugned decision) and thus has read the clause as an expression of the intention of the parties not contemplating reference of disputes to arbitration.

8. With reference to the decisions reported as (1998) 3 SCC 573 K.K.Modi v. K.N.Modi, AIR 1934 Sim 200 Hormusgi v. Local Board, Karachi, 1999 (2) SCC 166 Bharat Bhushan Bansal v. UP Small Industries Corpn. Ltd., AIR 1995 Delhi 111 M/s.Garg Builders & Engineers v. UP Rajkiya Nirman Nigam Ltd. & Ors ., and 56 LJQB 530 In Re.Wilingdon Associates Ltd., the learned Single Judge has opined that only where the parties intend and reflect the intention that the dispute would be submitted to a person who would hold an inquiry which is in the nature of a judicial inquiry i.e. would have pleadings before it, as also the evidence followed by a hearing given to the parties, would alone can it be said that the parties have agreed to refer their disputes to an arbitrator. In para 41 to 44, the learned Single Judge has examined clause-9 as under:-

"41. I may now examine clause 9 of the MOFS in the light of the context in which the parties inserted the said clause in the MOFS. The MOFS provided for the mechanism whereby both the groups agreed to hold equal shares and interest in the 14 listed companies, which they acknowledged had equally fallen to their share. This mechanism, inter alia, provided for the equal participation in the management and control of the 14 companies directly or indirectly. In the event of either party acquiring any shares in any of the companies, the same were to be held subject to the agreed terms as recorded in the MOFS and for the equal benefit of the parties. Clause 3 provided for joint management of the 14 companies and equal enjoyment of the benefits, rights and privileges by the parties. Neither party could exclude the other directly or indirectly

from joint management or equal benefits. Under Clause 4 the parties agreed to manage the public limited companies with the assistance of professional managers who were to be appointed by mutual agreement between petitioner No.1 and respondent No.1. The duties and authorities of the professional managers were also to be assigned on terms agreed to between petitioner No.1 and respondent No.1. Further, on appointment of the professional managers, an audit committee was to be constituted by petitioner No.1 and respondent No.1 of which they were to be members to jointly supervise and control the management of the companies. The parties agreed to be entitled to equal representation on the board of directors of the companies. Even the independent directors, if appointed, were to be with mutual consent. The parties also agreed that neither of them, and the groups they represent, could mortgage, assign or dispose of the shares of the said 14 companies without the concurrence of petitioner No.1 and respondent No.1 who had absolute right to refuse such permission. The parties agreed that neither of them shall do any act of omission or commission which would result in diluting the equal control of the two groups in the companies or otherwise pre- judicially effected their rights in the companies.

42. First and foremost, clause 9 is a part of a memorandum recording Family Settlement. This means, it is itself a culmination of the process of resolution of family disputes. One would therefore reasonably assume that the parties were looking to end existing disputes, and prevent future ones, and with that objective recording their terms of settlement in a memorandum.

43. Under the MOFS the parties agreed on fundamental issues i.e. their respective ownership, share and interests in the 14 listed companies. The mechanism drawn up under the MOFS appears to be a modality to recognize and put in to effect the aforesaid agreement of the parties. The parties provided the aforesaid mechanism to provide checks and balance in the implementation of the settlement contained in the MOFS and the DRC was constituted,

inter-alia, for the purpose of preventing disputes from arising rather than just settling disputes which have arisen.

44. The DRC was expected to iron out the differences in the implementation of the MOFS to provide for a smooth run for the 14 companies and the relationship of the parties. To me it appears that the DRC was thought of as a body which would be required to handle and decide upon issues relating to the 14 companies insofar as they touched upon, inter alia, the management of the companies, the enjoyment of benefit, rights and privileges of the two groups, the appointment of and discharge of duties by the professional managers, joint supervision and control of the management of the companies by the audit committee, right of equal representation on the board of directors of the companies etc. From the opening words of clause 9 it would appear that such like disputes and differences were foreseen by the parties, as arising from time to time, to be resolved by the DRC."

9. The learned Single Judge has also noted three letters exchanged between the parties and from the same has concluded that even the said letters would show that the parties never intended clause-9 to mean that the parties agreed to refer the dispute to an arbitrator. The discussion, with reference to the three letters exchanged is to be found in paragraphs 50 to 53 of the impugned decision which reads as under:-

"50. Since, the parties are now at loggerheads about the meaning of clause 9, it may also be worthwhile to analyse the communications exchanged between them on the subject to throw some light on the manner in which the parties understood the aforesaid Clause. The relevant extract of these communications starting from 30.9.2000 is, therefore, reproduced hereinbelow:

On 10th October 2000, the petitioner No.1 wrote to respondent No.1:

"We have agreed to joint management so that decisions are taken jointly. If we disagree then there is now a well- wishers committee of three persons above us formed to resolve the matter and give decisions.

There are two issues on which you say I have a proprietory attitude. Not at all. I have objected to calling people individually as that will not only weaken the authority of the MD but will lead to politics among the staff. Today it is one person, tomorrow others and you can well imagine what will happen to the organization.

You say it is your right to do so. You also say it is our joint management, then surely the two of us must agree. As we do not as in this case then this matter should be referred to the well- wishers committee formed by Rajive for a decision.

51. On the same day, respondent No.1 responded to the aforesaid communication, inter alia, stating:

"As regards `the well-wishers Committee', this Committee has been talked about but has not been formally put in motion nor has held any meetings so far. If the Committee had been formulated and had been redressing and resolving our differences, then all the disputes that have arisen, would not still be in abeyance.

Further I would like to point out that matters that have to be put up to the Committee, as and when it is formed,

agreed upon, and in motion, will be matters related to policy and other major issues. My asking for the Head of Accounts of Hamira to visit me is not a matter which needs to be decided by the so called Committee. If you choose to object/obstruct to any routine step that I may take in exercising my right to joint management as you appear to be doing, for reasons I can't understand, then according to your logic all these matters will have to go to the Committee. This is not why the Committee was conceived and you know it."

52. On 13th October, 2000, petitioner No.1 again wrote to respondent No.1 as follows:

"With regard to the Well-Wishers' Committee, this was agreed to by you in September at a meeting you had with Rajive and Sati and after that when Dhanu was here at a meeting with Rajive and him. Subsequently I met Rajive alongwith Sati and also gave my concurrence.

Therefore, as far as I am concerned it is in operation from then.

Earlier in March when the question of setting up a committee was discussed by Rajive and Sati at a joint meeting with us you had said that you were going to think about it. You have given your decision on the matter in September hence the delay in operations. There is of course the problem of Dhanu living in London which, you will appreciate, is an inconvenience in setting up frequent committee meetings. If you wish to consider some one from Delhi itself it will facilitate the matter.

The present dispute is not of a routine nature. It is a major policy matter pertaining to how two of us are going to exercise our rights of joint management of the Company. I do not agree with both of us exercising our rights independently giving separate sets of instructions to the Managing Director. I fail to understand how the Managing Director will operate with separate sets of instructions.

............

I again reiterate that we can meet and resolve our disputes, failing which the same may be referred to the Well wishers' Committee. This committee meeting would have to be scheduled at the convenience of the three members- Sati, Dhanu and Rajive."

53. From the aforesaid correspondence, it is evident that according to the petitioners, a "well wishers committee" as founded in terms of Clause 9 of the MOFS consisting of three persons, though the respondent does not share the same view. From the letters petitioner No.1 it appears that according to his understanding, issues of joint management which included even differences relating to the manner in which either petitioner No.1 or Respondent No. 1 may interact with the staff members of the companies were liable to be referred to the well-wishers i.e. DRC. According to him such like issues are major policy issues. Respondent No. 1 in his reply expressed his understanding that the Committee, as and when formed and put into motion, would decide on policy issues, and other trivial issues relating to management are not matters to be decided by the DRC."

10. The grievance of the appellants is that while deciding an application filed under Section 9 of the Arbitration and Conciliation Act 1996, the learned Single Judge has

returned a finding on merits that there is no arbitration agreement between the parties and for which it was urged by Sh.Ravi Shankar Prasad, learned senior counsel for the appellants that the learned Single Judge was not justified in considering the correspondence exchanged between the parties as evidence while considering an application seeking an interim measure by the Court. However, learned senior counsel conceded that if an objection is taken in opposition to an application filed under Section 9 of the Arbitration and Conciliation Act 1996 that the application is not maintainable because there exists no arbitration agreement between the parties, the Court would be bound to prima facie look into the issue and form a prima facie opinion upon the existence or otherwise of an arbitration agreement.

11. Indeed, the jurisdiction of a Court under Section 9 of the Arbitration and Conciliation Act 1996 is contingent upon there being an arbitration agreement between the parties for the reason the interim measures contemplated by said section are before or during arbitral proceedings and it would thus be trite that if there cannot be any arbitration proceedings, there would be no question of a stage before or during the arbitration proceedings.

12. The grievance of the appellant, that the learned Single Judge has conclusively opined upon the issue, appears to be misplaced, for the reason it appears, that the appellant invited a decision on the said issue, evidenced from para 21 and 22 of the impugned decision wherein the learned Single Judge has penned as under:-

"21. Before proceeding to deal with the issue pertaining to existence of arbitration agreement between the parties, it may be pointed out that

Mr. P. V. Kapur, learned senior counsel appearing for the petitioner had initially argued that this court while dealing with a petition under Section 9 of the Act cannot go into the question of existence/validity of the arbitration agreement. That determination can be made by the Court only while dealing with an application under Section 11 or Section 8 of the Act. Reliance had been placed upon para 12 of the judgment in SBP (supra) to contend that since the jurisdiction of the tribunal to rule on its jurisdiction and existence of arbitration clause under Section 16 is not taken away, except when the Tribunal has been constituted by intervention of the court, the court while dealing with a petition under Section 9 cannot go into these issues which are for the Tribunal to decide.

22. However, subsequently, this submission was not pressed and request was made to decide the preliminary issue on the premise that the court is so empowered."

13. A fact of relevance which has taken birth after the impugned order was passed needs to be noted and the same is an order dated March 12, 2009 passed by the Company Law Board in view of a settlement between the parties, terms whereof have been noted in paragraph 4 of the said order by the Company Law Board, which paragraph reads as under:-

"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) Petitioners Nos.4-5               NIL

iv) JJ and other members of JJ Group 300 shares (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 `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."

14. Since it would assume importance, with reference to the subsequent development of the appellants transferring their share holding in Jagatjit Industries Ltd. and LP Jaiswal & Sons Pvt. Ltd. to the respondents, the prayer made in the petition filed by the appellants under Section 9 of the Arbitration and Conciliation Act 1996 needs to be noted. It reads as under:-

"a. pass an appropriate order thereby restraining the respondents, their servants, agents, employees, representatives, assigns, etc. from discontinuing the salary, perks and benefits, as detailed herein below, which are being continuously received and enjoyed by the petitioners, that is:

i. Salary to the tune of `1,00,000.00 (Rupees one lakh only) per month;

ii. House Rent to the tune of `1,00,000.00 (Rupees one lakh only) per month;

iii. Salary to the Staff of around 25 working at office and residence (approximately `3.00 lakh) per month;

iv. Transport expenses, on actual, towards Cars, petrol, maintenance, etc.;

v. Electricity expenses for office and residence of the petitioners;

vi. Telephone expenses for office and residence and mobile phones used by the petitioners and the staff members;

vii. Entertainment expenses, including club memberships etc.

viii. Travel expenses;

ix. Repair and maintenance of the residence as well as office used by the petitioners;

x. Medical expenses;

xi. Use of cars.

b. Pass an appropriate order or direction thereby directing the respondents to exercise their powers, authority and rights in JIL so that the salary, perks and benefits as detailed herein below, and as received by the petitioners are not discontinued:

i. Salary to the tune of `1,00,000.00 (Rupees One lakh only per month;

ii. House rent to the tune of `1,00,000.00 (Rupees One lakh only per month;

iii. Salary to the staff of around 25 working at office and residence (approximately `3.00 lakh) per month;

iv. Transport expenses, on actuals, towards Cars, petrol, maintenance, etc.;

v. Electricity expenses for office and residence of the petitioners;

vi. Telephone expenses for office and residence and mobile phones used by the petitioners and the staff members;

vii. Entertainment expenses, including club memberships etc.;

          viii.    Travel expenses;

          ix.      Repair and maintenance of            the
          residence as well as office used by           the
          petitioners;

          x.       Medical expenses;

          xii.     Use of cars.


          c. Pass    an    appropriate   order   thereby

restraining the respondents, their servants, agents, employees, representatives, assigns etc. from transferring, pledging, creating any third party rights, parting with possession or from otherwise dealing with in any manner whatsoever the said shares as detailed in Annexure-34A, contrary to the interests of the petitioners; and d. Pass an appropriate order thereby restraining the respondents, their servants, agents, employees, representatives, assigns etc. from in any manner exercising voting rights or other rights or receiving corporate benefits arising from the shares as detailed in Annexure 34A, to which petitioners are entitled; e. pass an appropriate order or direction thereby appointing a Court Receiver with respect to 50% of the shares covered by the aforesaid bequest and gifts and which are detailed in Annexure 34A hereto, with all powers under Order 40 Rule 1 of the CPC, 1908, including the power to vote and exercise rights at the directions of the petitioners, with respect to the said shares; and f. pass an appropriate order thereby issuing an appropriate direction for the appointment of an Audit Committee, in terms of Clause-4 of the said family settlement deed dated 3.3.2000, of

which both the petitioner No.1 and respondent No.1 be the members and further issuing a direction for appointing two independent persons of integrity as members of the said Audit Committee and further directing the said Audit Committee to supervise and control the management of the following companies, covered under the said family settlement:

1. Jagatjit Industries Limited.

2. Milkfood Limited.

3. L.P.Investments Limited.

4. Binnies Estates Limited.

5. L.P.Jaiswal & Sons Pvt. Ltd.

6. Double Durable Investments Limited.

7. Quick Return Investments Limited.

8. Snowwhite Holdings Pvt. Limited.

9. Hyderabad Distilleries & Winneries Limited.

10. Industrial Containers & Closures Limited.

11. Blue Skies Pvt. Limited.

12. J. Ice Cream Pvt. Ltd.

13. J & J Ice Cream Pvt. Ltd.

14. Pickwick Holdings Pvt. Ltd.

g. pass an appropriate order or direction thereby directing the respondents to disclose on oath/affidavit their respective shareholding, directly or indirectly, in the following companies which are covered under the said family settlement:

             I.    Jagatjit Industries Limited.
            II.    Milkfood Limited.
           III.    L.P.Investments Limited.
          IV.      Binnies Estates Limited.
            V.     L.P.Jaiswal & Sons Pvt. Ltd.
          VI.      Double Durable Investments Limited.
          VII.     Quick Return Investments Limited.
         VIII.     Snowwhite Holdings Pvt. Limited.
          IX.      Hyderabad Distilleries & Winneries Limited.
            X.     Industrial Containers & Closures Limited.
          XI.      Blue Skies Pvt. Limited.
          XII.     J. Ice Cream Pvt. Ltd.
         XIII.     J & J Ice Cream Pvt. Ltd.
         XIV.      Pickwick Holdings Pvt. Ltd.

h. pass an appropriate order thereby restraining the respondents, their servants, agents,

employees, representatives, assigns etc. from appointment of any independent Director in and of the subject Companies, as detailed below, without first obtaining the affirmative consent of the petitioner No.1:

         XV.       Jagatjit Industries Limited.
        XVI.       Milkfood Limited.
        XVII.      L.P.Investments Limited.
       XVIII.      Binnies Estates Limited.
        XIX.       L.P.Jaiswal & Sons Pvt. Ltd.
         XX.       Double Durable Investments Limited.
        XXI.       Quick Return Investments Limited.
        XXII.      Snowwhite Holdings Pvt. Limited.
       XXIII.      Hyderabad Distilleries & Winneries Limited.
       XXIV.       Industrial Containers & Closures Limited.
       XXV.        Blue Skies Pvt. Limited.
       XXVI.       J. Ice Cream Pvt. Ltd.
      XXVII.       J & J Ice Cream Pvt. Ltd.
      XXVIII.      Pickwick Holdings Pvt. Ltd.

i. award costs of the petition in favour of the petitioners and against the respondents; and j. grant any other relief or relives in that behalf as may be deemed fit and proper in the facts and circumstances of the case."

15. A profile of the 14 companies listed in the schedule to the Memorandum of Family Settlement dated March 03, 2000 would reveal that except for Jagatjit Industries Ltd., Milk Food Ltd., Binnies Estates Ltd., Hyderabad Distilleries and Wineries Ltd., Industries, Containers and Closures Ltd., J Ice Cream Pvt. Ltd., J & J Ice Cream Pvt. Ltd., all other companies are investment companies and further, only Jagatjit Industries Ltd. and Milk Food Ltd. are listed companies i.e. their shares are traded on the stock exchange.

16. Now, the Memorandum of Family Settlement, vide clause 3 thereof, lists the purpose of the settlement, being the

management of the companies and equal enjoyment of the privileges and rights which would flow from the management of the companies. Clause 4 of the memorandum is a further reflection of the intention of the parties contained in Clause 3, and reflect the agreement of the parties to manage the public Limited companies with the assistance of professional managers.

17. Clause 9 of the agreement is a further expansion of the intention of the parties and records that if there is any dispute between the parties having a connection with the affairs of the companies or otherwise, the same shall be resolved by referring the dispute to the Dispute Resolution Committee.

18. It is thus apparent that under Clause 9, the parties envisage reference of a dispute having a connection with the affairs of the companies and not otherwise.

19. Clause 10 of the agreement contemplates a situation where there is breakdown of relationship between the parties and in such situation requires the parties to refer the dispute to the Dispute Resolution Committee for purposes of equal division of the companies.

20. Sh.Harish N. Salve, learned senior counsel for the respondents had urged, a contention with which we concur, that the shell companies i.e. the investment companies hardly require any management, joint or otherwise and thus it is apparent that the Memorandum of Family Settlement, with reference to Clause 3 read with Clause 9, envisages the reference of disputes pertaining to the management and affairs of the listed companies. It is Clause 10 which envisages the division of the companies.

21. A perusal of the pleadings made in the petition filed by the appellants under Section 9 of the Arbitration and Conciliation Act, 1996 would reveal that the case of the appellants is that they hold 5.58% equity in Jagatjit Industries Ltd. (refer para 3) and that it is the further case of the appellants that appellant No.1 could not be deprived the right to be the chairman of the company and enjoy the perks of the office. In para 8 of the petition there is a reference to LP Jaiswal & Sons Pvt. Ltd., the family holding company holding 15% shares of Jagatjit Industries Ltd. In para 14 of the petition, appellant No.1 refers to the benefits being received by him as the Chairman of Jagatjit Industries Ltd. It is thus apparent that prayer (a) relates to the interim measures sought by the appellants in relation to appellant No.1 being the Chairman of Jagatjit Industries Ltd. This is also the basis of prayer (b). The other prayers relate to all the 14 companies.

22. In the body of the petition no averments have been made relating to 12 out of the 14 companies i.e. other than Jagatjit Industries Ltd. and LP Jaiswal & Sons Pvt. Ltd. There is a complete mismatch between the prayers and the pleadings; suffice would it be to state that the prayers go and travel much beyond the pleadings. Only prayers (a) and (b) relate to Jagatjit Industries Ltd. and LP Jaiswal & Sons Pvt. Ltd. We hasten to clarify that the other prayers also relate to the said two companies, but additionally encompass the 12 other companies but with no corresponding pleadings in the main body of the petition as to what is the dispute pertaining to the said 12 companies.

23. Now, as regards the investment companies, there can hardly be any dispute qua the management thereof; in any case, none has been pleaded. Qua the non-listed

companies, there are no averments bringing out any dispute. The only dispute brought out is with reference to the two companies, Jagatjit Industries Ltd. and LP Jaiswal & Sons Pvt. Ltd.

24. Having sold their share holding in the two companies for a valuable consideration of `36 crores and 50 lakhs, in respect of each company to the respondents, the appellants cannot stake any claim qua the management and affairs of Jagatjit Industries Ltd. and LP Jaiswal & Sons Pvt. Ltd.

25. The contention of learned senior counsel for the appellants that this Court is concerned with the lis as per cause of action reflected in the pleadings and not the subsequent events, is noted and rejected for the reason it is the duty of every court of record to take cognizance of subsequent events which have a material bearing on the issue brought before the Court and which fact and event are not in dispute.

26. Needless to state, Jagatjit Industries Ltd. is a listed company and the Directors, Chairman or a Managing Director has to be elected by the share-holders at a General Body Meeting. Appellant No.1 and his wife, having sold their holding in the said company, an event which occurred post filing of the petition under Section 9 of the Arbitration and Conciliation Act, 1996, cannot continue with any appellate proceeding with respect to the affairs of Jagatjit Industries Ltd. and so would be the position regarding LP Jaiswal & Sons Pvt. Ltd.

27. That apart, even if we were to proceed on the situation as per the original lis, suffice it would be to state that the learned Single Judge, with reference to the decisions noted by us in paragraph 8 above, has correctly opined that Clause 9 of the agreement brings out the intention of the parties to

refer the dispute pertaining to the affairs of the companies to a Dispute Resolution Committee which may act as an umpire, referee or arbitrator. The learned Single Judge has correctly opined that the agreement being drawn up in the year 2000 had to be given a meaning with reference to the fact that the Arbitration and Conciliation Act, 1996 does not envisage an umpire and thus the reference to the words umpire and referee in Clause 9 of the agreement is to an expert. That apart, Clause 9 leaves it to the discretion of the Dispute Resolution Committee, to opt: Whether to act as an umpire or referee or arbitrator. Till the Dispute Resolution Committee so opts, it cannot be urged by any party that a reference is made or is contemplated to be made to a committee of arbitrators. We make it plain clear, that the clause does not empower any party to the agreement to clothe the Dispute Resolution Committee with any distinct character and it is for the committee to decide what character it would like to assume.

28. We concur with the conclusion as also the reasoning of the learned Single Judge and would thus dismiss the appeal, but would refrain from making any order as to costs.

(PRADEEP NANDRAJOG) JUDGE

(SIDDHARTH MRIDUL) JUDGE APRIL 16, 2012 dk/KA