Delhi High Court

Virender Singal & Ors vs Delh Express Travels Pvt Ltd on 24 January, 2012

Author: Indermeet Kaur

*      IN THE HIGH COURT OF DELHI AT NEW DELHI

%                            Date of Judgment: 24.01.2012

+      C.R.P. 9/2012 and CM Nos. 1005-1007/2012

VIRENDER SINGAL & ORS                                ..... Petitioners
                  Through          Mr. Sandeep Sethi, Sr. Adv. with
                                   Mr. Diwakar, Mr. Ajay Bhargava
                                   and Ms. Preeti Gupta, Adv.
                  Versus


DELH EXPRESS TRAVELS PVT LTD                ..... Respondent
                 Through   Mr. Ashok Chhabra, Mr. Amit
                           Saxena and Mr. Pawan Kumar,
                           Adv.

CORAM:
HON'BLE MS. JUSTICE INDERMEET KAUR

INDERMEET KAUR, J. (Oral)

Caveat No.

Respondent has put in appearance. Caveat has become

infructuous. Dismissed.

C.R.P. 9/2012 and CM Nos. 1005-1007/2012

1. The order impugned is the order dated 19.12.2011 whereby

application under Section 8 of the Arbitration and Conciliation Act,

1996 (hereinafter referred to as „the Act‟) filed by the

petitioner/defendant no. 1 seeking a stay of the present suit has been

dismissed.

2. Record shows that the plaintiff (M/s Delhi Express Travels Pvt.

Ltd.) had filed a suit for declaration, possession, permanent injunction

and mesne profits against the four defendants of whom defendant no. 1

is M/s. Dex Aviation Pvt. Ltd., Virender Kumar Singal and Varun

Singal have been described as defendant Nos. 2 and 3 and M/s. Swan

Travels Pvt. Ltd. is defendant no. 4. Suit premises are premises bearing

No. 105, First Floor, Local Shopping Center-cum-Office Complex,

Safdarjung Rresidential Scheme, Aurbindo Place, Aurbindo Marg,

Hauz Khas, New Delhi. Averments made in the plaint are that the

plaintiff had entered into an agreement to sell, general power of

attorneys (3) and other related documents all dated 6.7.2007; this was

pursuant to a fraud played upon the plaintiff under which the plaintiff

had executed these documents; said documents are bogus and have no

legality; accordingly, prayer for declaration, declaring the said

documents to be declared null and void has been prayed for. A decree

of possession of the suit premises has also been prayed for; contention

of the plaintiff being that he had in fact never agreed to sell this property

to defendant no.1.

3. In the course of these proceedings, an application under Section 8

of the Arbitration Act had been filed by the defendant no. 1. His

contention is that the subject matter of the present suit is the subject

matter of disputes which are pending between the parties before the sole

Arbitrator Shri Satpal, Retired Judge of the High Court who had been

appointed by the orders of this court dated 11.5.2005. He has

accordingly prayed for a stay of the present suit.

4. Record shows that the family tree of the parties comprise of three

brothers namely Vipin Kumar Singal, Virender Kumar Singal and Viney

Kumar Singal; plaintiff in the present suit is Vipin Kumar Singal who is

the Director of the Company M/s Delhi Express Travels Pvt. Ltd.,

defendant No.2 is Virender Kumar Sehgal who is the Managing Director

of defendant No.1 i.e. M/s Dex Aviation Pvt. Ltd.; third brother Viney

Kumar Singal is not a party in the present suit.

5. The contents of the plaint disclose that a transaction had been

entered into between the defendant No.1 whereby the plaintiff pursuant

to an alleged fraud having been played upon him by the defendant No.1

had entered into certain documents of sale deed dated 6.7.2007 in favour

of his brother (defendant No.2) which as per the contents in the plaint

being a fraudulent transaction were sham and illegal documents;

accordingly, the prayer in the plaint seeks a cancellation of the said

documents.

6. On 22.7.2004, a Memorandum of Understanding had been entered

into between the three brothers whereby they had agreed to get their

assets evaluated by their respective evaluators and thereafter to refer

their disputes to an Arbitrator. Clause 5 contains an arbitration clause; it

is not in dispute that the subject matter of the present suit (the property

bearing No. 105, First Floor, Local Shopping Center-cum-Office

Complex, Safdarjung Rresidential Scheme, Aurbindo Place, Aurbindo

Marg, Hauz Khas, New Delhi) was also the subject matter of this

interim family arrangement dated 22.7.2004.

7. A Section 9 petition was filed by the present petitioner in the year

2005 seeking certain interim reliefs wherein it had been contended that

the family of defendant No.1 is a joint family group known as JKS

Group; the details of the family assets had been enclosed alongwith this

application which admittedly make a reference to the suit property. On

28.1.2005, a Bench of this court had passed orders on this application

directing the parties to maintain status quo; on 11.5.2005, the disputes

between the parties had been referred to the sole Arbitrator, Justice Sat

Pal, a retired Judge of this Court. Admittedly, the proceedings before

the Arbitral Tribunal are yet pending where in the hotchpotch of the

joint family properties the present suit property also forms a part.

8. Record further shows that two petitions under Section 17 of the

said Act have been filed before the Arbitral Tribunal by the third brother

(not a party in the present suit) (Viney Kumar Singal) to which a reply

had been filed by the present petitioner; that reply is relevant. Petitioner

in the said reply has stated that M/s. Dex Aviation Pvt. Ltd. (defendant

no. 1) is not created out of the joint family funds; contention being that

it has no concern or nexus with the family owned companies; further

contention being that the plaintiff (M/s. Delhi Express Travels Pvt. Ltd.)

is no longer the owner of the present suit property as the said suit

property has been transferred by the plaintiff in favour of the defendant

no.1 by way of a legal transaction; contention being that an MOU dated

29.11.2006 had been executed between Vipin Singal (plaintiff) and

Virender Kumar Singal (defendant No. 2) as also his sons pursuant to

which the ownership of the said premises transferred to defendant no.1.

9. It is in this background that the application under Section 8 of the

Arbitration Act has to be considered.

10. The averments made in the plaint as also the prayer sought for

have been considered. The test for dealing with an application under

Section 8 of the Arbitration Act essentially is to see as to whether the

subject matter of the present suit is the subject matter of a dispute

pending before the Arbitrator and if the subject matter between the two

is identical then the proceedings in the suit shall be stayed; the other

essential ingredient being that there must be an arbitration clause

between the parties.

11. Record shows that on the first count, the application under

Section 8 of the said Act must fail. The subject matter of the disputes

pending before the Arbitrator is the hotchpotch of the joint family

properties of the three brothers of the JKS Group namely Vipin Kumar

Singal, Viney Kumar Singal and Virender Kumar Singal of which

admittedly the present suit property is also a part. This was in terms of

the MOU entered into between the brothers dated 22.07.2004. Relevant

would it be to extract this MOU dated 22.07.2004 entered into between

the three brothers and the Arbitration Clause contained in clause 5:-

"INTERIM FAMILY AGREEMENT (IFA)

Whereas families of Mr. Vipin K Singal, Mr. Viney K. Singal and Mr. Virender Singal (herein referred as VKS1, VKS2 and VKS3) have been carrying on joint family business popularly known as JKS group. Due to disputes/dissentions, certain differences have been arisen because of which VKS2 has requested the other two (VKS1 and VKS2( to divide/distribute the share of VKS3 to him and his family in the joint businesses/properties/other assets adjusting/clearing the liabilities.

After deliberations and due to intervention of family friend Mr. Somnath, VKS1, VKS2 and VKS3 have agreed to an interim arrangement, pending a final family settlements/distribution of business/assets on the following broad terms and conditions.

1. VKS1, VKS2 and VKS3 have expressed their desire to takeover and handle joint family running businesses of airlines ticketing i.e. the

1) wholesale (IATA) being done in Delhi Express Travels Private Limited and Dex Travels Private Limited, 2) Corporate (IATA)-being done in Trans World Travels proprietor G.B. Morisson Travels Private Limited and 3) GSA-being done in Maharani Tours Private Limited respectively. It is therefore agreed that the above settlement will not alter this broad principle.

2. The evaluation of assets/liabilities/business shall be carried out by Mr. Arun K. Gupta for and on behalf of VKS1.

3. The evaluation of assets/liabilities business shall be carried out by Mr. Y.K. Sharma for and on behalf of VKS2.

4. Similarly Mr. Amod Aggarwal shall carry the evaluation of assets/liabilities/business for an on behalf of VKS3.

5. Upon completion of evaluation the matter shall be referred to a panel of arbitrators, that is one arbitrator each on behalf of VKS1 and VKS2, and on arbitrator will be nominated by VKS3.

6. Mr. Somnath shall be the Chairman of this panel of arbitration.

7. VKS3 will shift his own office during the interim period to the family owned commercial building situated at 42, community centre, Zamrudhpur form 11 community centre, East of Kailash.

8. VKS1, VKS2 and VKS3 and their family members shall maintain status quo on running of the joint family business activities as well as other assets of the family.

9. No major financial transaction other than in the ordinary course of joint business activity shall be carried out. In case of any deviation, warranted by business requirements, the same shall only be with consent in writing from Mr. Som Nath, who is responsible for protecting interest of all parties.

10. The process of evaluation, arbitration and final settlement will be completed by 31st August, 2004. This date can be extended if the need arises by mutual consent or as per approval of Mr. Som Nath.

11. All parties shall maintain harmony, cordiality during this interim period.

12. This has been signed in New Delhi, on July 22nd, 2004."

12 Pursuant thereto on 11.05.2005 the sole Arbitrator had been

appointed to decide the disputes in terms of its arbitration clause. These

proceedings are admittedly pending. However, the averments made in

the plaint disclose that the case of the plaintiff is that a fraud has been

played upon him and pursuant thereto he was made to sign certain

documents dated 6.7.2007 whereby he had entered into a sham

transaction for the sale of the suit property to defendant No.1;

cancellation of the aforenoted documents is the first prayer made by

him. In these circumstances, an issue on the question of fraud will

essentially have to be framed to decide this contention between the

parties. The Arbitrator in terms of the arbitration clause contained in the

MOU dated 22.07.2004 had only clothed the Arbitrator to deal with the

hotchpotch of the joint family properties of the three brothers after their

evaluation; no doubt the suit property was also thrown into this

hotchpotch but the question of the alleged fraudulent sale of this

property by the plaintiff in favour of defendant No. 1 on 06.07.2007 was

a question which could not be within the jurisdiction of the Arbitrator;

in fact this transaction is after the appointment of the Arbitrator. This

question of a fraud which would require a detailed examination of the

allegations which if found true would vitiate the entire alleged

transaction of 06.07.2009 could not have been gone into by the

Arbitrator. Stand of defendant No. 2 (as is clear from his reply to the

petition under Section 17 of the said Act) had relied upon an MOU

dated 29.11.2006 purportedly entered into between the plaintiff,

defendant No. 2 and his sons; this document is also a document entered

into after the date of the appointment of the Arbitrator; that apart to

decide the validity of this transaction the allegations of fraud and its

counter allegations would have to be examined. This power was not

vested with the Arbitrator. In these circumstances, the trial court

declining the prayer made by the petitioner for reference of the disputes

to the Arbitrator does not in any manner suffer from an infirmity.

13. Section 8 of the said Act contains the words: "in a matter which

is the subject matter of an arbitration agreement" which are relevant;

the suit should be in respect of the same subject matter which the

parties have agreed to refer to Arbitrator and which comes within the

ambit of the arbitration clause contained in the Arbitration Agreement.

However, a dispute which is distinct from the subject matter of the

disputes pending in reference before the Arbitrator would not lead to

the applicability of Section 8. There is no dispute to the factum that

where all the ingredients of Section 8 have been fulfilled only then there

is a mandate upon the court to make a reference of the disputes to

arbitration and suit proceedings filed qua the same subject matter are

liable to be stayed.

14. In AIR 200 Supreme Court 1886 titled as P. Anand Gajapathi

Raju & Ors. Vs. P.V.G. Raju (Died ) & Ors, the Apex Court has noted

the conditions which are required to be satisfied under Sub -Sections 1

and 2 of the Section 8 of the Arbitration Act before the Court can

exercise its power to refer parties to arbitration are:-

"(1) there is an arbitration agreement' (2) a party to the agreement brings an action in the Court against the other party; (3) subject matter of the action is same as the subject matter of the arbitration agreement (4) the other party moves the Court for referring the parties to arbitration before it submits his first statement on the substance of the dispute. The last provision creates a right in the person bringing the action to have the dispute adjudicated by Court, once the other party has submitted his first statement."

15. The Apex Court in (2010) 1 SCC 72 N. Radhakrishnan Vs.

Maestro Engineers and others has held as under:-

"The learned Counsel for the respondents on the other hand argued that when a case involves substantial questions relating to facts where detailed material evidence (both documentary and oral) needed to be produced by either parties, and serious allegations pertaining to fraud and malpractices were raised, then the matter must be tried in court and the Arbitrator could not be competent to deal with such matters which involved an elaborate production of evidence to establish the claims relating to fraud and criminal misappropriation.

In our opinion, the contention of the respondents relating to the jurisdiction of the Arbitrator to decide a dispute pertaining to a matter of this proportion should be upheld, in view of the facts and circumstances of the case. The High Court in its impugned judgment has rightly held that since the case relates to allegations of fraud and serious malpractices on the part of the respondents, such a situation can only be settled in court through furtherance of detailed evidence by either parties and such a situation can not be properly gone into by the Arbitrator".

16 The Apex Court in (2007) 5 SCC 510 India Household and

Healthcare Ltd. Vs. LG. Household and Healthcare Ltd. has held as

under:-

"It is also no doubt true that where existence of an arbitration agreement can be found, apart from the existence of the original agreement, the Courts would construe the agreement in such a manner so as to uphold the arbitration agreement. However, when a question of fraud is raised, the same has to be considered differently. Fraud, as is well known, vitiates all solemn acts. A contract would mean a valid contract; an arbitration agreement would mean an agreement which is enforceable in law."

17 Furthermore the plaintiff in the present case has sought the

following reliefs:-

a) Pass a decree of declaration declaring the agreement to sell, power of attorney and 3 power of attorneys, all dated 06.07.2010 as null and void;

b) Pass a decree of Possession directing the defendant No. 1 to 3 to handover the possession of the suit property bearing No. 105, First Floor, Local Shopping Center cum office complex, at Safdarjung Residential Scheme,

Aurobindo Place, Aurobindo Marg, Hauz Khas, New Delhi ad -measuring 241.60 sq. meters to the plaintiff;

c) Pass a decree of permanent injunction, restraining/prohibiting the defendant Nos. 1 to 3, their agents, representatives, servants, nominees, attorneys, assignees etc. from in any manner dealing with the suit property;