Shri Rajender Kumar Sethi vs Shri Sushil Kumar Sethi & Anr.
2012 Latest Caselaw 6175 Del

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*     IN THE HIGH COURT OF DELHI AT NEW DELHI

                                      Date of Decision: 15.10.2012
+     CS(OS) 1577/2007

      SHRI RAJENDER KUMAR SETHI                                     ..... Plaintiff
                      Through Mr. S.C. Singhal, Adv.
               versus

    SHRI SUSHIL KUMAR SETHI & ANR.                   ..... Defendants
                  Through  Mr. Dalip Mehra, Adv. for D-I(a) along with
                           defendant in person.
CORAM:
HON'BLE MR. JUSTICE V.K.JAIN

                         JUDGMENT

V.K.JAIN, J. (ORAL)

IA 6448/2011(u/O.6 R.17 CPC filed by defendant No.1)

The plaintiff before this Court is the brother of Late Sh. S.K. Sethi, who died

during the pendency of the suit. The prayer made in the suit was for dissolution of

partnership firm of M/s. Tara Rubber Industries and rendition of accounts. The

written statement cum counter claim was filed by Late Sh. Sushil Kr. Sethi on

09.10.2007. Vide order dated 25.04.2008, this Court inter-alia directed as under:-

"5. From the above narrative, it is clear that the second defendant firm was constituted on 1.4.1997, through a deed. It took over the business and assets of the another firm M/s. Tara Rubber Industries which too was a family firm of the plaintiff and the defendant as well as their father. On the death of the father that earlier firm stood dissolved and consequently its assets were taken

over by the second defendant and formal terms were incorporated through the deed dated 1.4.1997. The pleadings also show that there is no dispute about the fact that the second defendant's firm stood dissolved at the end of the notice period i.e. 60 days pursuant to the letter dated 6.12.2006 issued by the Rajender Kumar Sethi. The only controversy raised by the defendant is that the plaintiff is liable to render accounts.

6. In view of the above fact that there is no dispute that the firm stands dissolved, the Court is of the opinion that a preliminary decree in terms of prayer (b) is to be drawn. The Court hereby appoints Ms. Anita Sahani, Advocate, 363, Lawyers Chambers, Delhi High Court, New Delhi (Ph. 23386822, 9810113256, 23386081, who had earlier sought to settle the disputes between the parties, as Local Commissioner on the suggestion of counsel, to draw and file a report in the Court within three weeks, also indicating the mode of dividing the properties including the immovable properties. The Local Commissioner's fee is fixed at Rs. 50,000/- to be shared equally by the plaintiff and the defendant within three weeks. The Local Commissioner shall ascertain the views of the plaintiff and the defendant, and also take such material as may be necessary including books of accounts etc. from the Chartered Accountant Sh. Vijay Verma, 14/10, West Patel Nagar, 1st Floor, New Delhi-110018."

The order dated 25.04.2008, was challenged by the defendant by way of

RFA (OS) No.95/2011 which came to be dismissed by the Division Bench of this

Court on 30.12.2011 with costs assessed at Rs.25,000/-.

The Local Commissioner filed her first report on 22.09.2008, second report

on 04.05.2009 and the third report on 08.09.2009.

Objections were filed to the reports of Local Commissioner and are stated to

be pending.

2. It appears from the record that the defendant was at one point of time

seeking to pay Rs. 5 crores to the plaintiff to buy his share in an industrial property

in Maya Puri, which was owned by the partnership firm. Vide order dated

09.09.2010, this Court, inter-alia, directed as under:-

"3. During the pendency of the suit, a preliminary decree was passed with regard to the immovable properties and a Local Commissioner was appointed for the purpose of inspecting the immovable property and suggesting the modes of partition of the property.

4. Pursuant to the said order, the Local Commissioner furnished his report and suggested that so far as the industrial plot at Mayapuri is concerned, it cannot be sub divided, and therefore, it will have to be sold and sale proceeds will have to be apportioned. The said plot of land was valued at Rs.10 crores and it was agreed that the defendant will furnish an undertaking to the effect that he will give Rs.5 crores, and the said amount shall be deposited by him within three months with the Learned Registrar General of this Court. The defendant furnished an undertaking on 28.5.2010 and pursuant to the said undertaking, the amount was to be deposited by 28.8.2010 by the defendant.

8. Ordinarily there would have been no difficulty in extending the time to deposit the money with the Registrar General of this Court if the defendant would have shown bonafides and seriousness in depositing the payment. These bonafides of the defendant could have been reflected, if he would have deposited some amount (even though it would have been a fraction of Rs.5 crores) with the Registrar General of this Court to indicate that he was willing to comply with the undertaking furnished by him in paying a sum of Rs.5 crores to the plaintiff but despite the fact that the plaintiff had been given sufficient time not even a single

penny has been deposited by him. After the stipulated period of three months has come to an end, the present application has been filed and it has been stated that the plaintiff has number of parties including relations available to him who are prepared to assist the defendant financially in depositing a sum of Rs.5 crores and too after the start of Navratras.

9. In my view, the plea as to whether Navratras are going to start or not is of no consequence as the defendant ought to have known all these facts at the time when the direction was being passed by the court. The superstition of a party in the matters of compliance of orders of the court has no place. It seems that the defendant is using this as a ploy to enlarge the time to deposit the money and indulge in speculation. Therefore, the non-deposit of even a single penny by the defendant in my view shows lack of bonafides on the part of the defendant apart from his incapacity to discharge his obligation of paying Rs.5 crores to the plaintiff. I, therefore, do not intend to allow the prayer of the defendant to enlarge the time for further deposit of Rs.5 crores to 17.10.2010 or any other date. The application is accordingly disallowed and the plaintiff will now have the right to pay the said amount of Rs.5 crores within three months from today to the defendant or alternately he can deposit the said amount with the Learned Registrar General."

Thus, the Court refused to grant further time to the defendant to deposit Rs.5

crores and rather gave three months to the plaintiff to deposit Rs.5 crores to buy

out his share in the aforesaid property. That amount has since been deposited by

the plaintiff and is lying in the Registry.

3. Vide order dated 26.05.2011, this Court, noticing that the plaintiff had

deposited a sum of Rs.5 crores on 04.12.2010 and also observing that the orders

dated 24.05.2008, 16.11.2009, 15.02.2010, 14.05.2010, 02.07.2010 and 09.09.2010

had become final having not been challenged and infact having been passed with

the consent of the parties held that the defendants were not justified in raising

objections to the aforesaid orders. This order had come to be passed and the

objections taken by the LRs of the defendant to the effect that the suit was not

maintainable for various reasons stated in the pending applications. The Registry

was directed to release the amount of Rs.5 crores deposited by the plaintiff, along

with interest which is accrued on that amount, to the defendants. It was further

directed that the plaintiff who was in joint possession of the property, would be

treated to be in sole possession thereof to the exclusion of the defendants, subject

to final outcome of the suit. The order dated 26.05.2011 was challenged before the

Division Bench of this Court by way of FAO (OS) No.399/2011, which came to be

dismissed on 12.12.2011 with costs of Rs.10,000/-.

The orders passed in FAO (OS) No.399/2011 and RFA (OS) No.95 /2011,

were challenged by the defendants before the Supreme Court and the Special

Leave Petition filed by them was dismissed.

IA No.6448/2011 has been filed under Order 6 Rule 17 CPC for amendment

of the written statement/counter claim.

The learned counsel for the defendants states that Late Sh. Sushil Kr. Sethi

had in his lifetime filed an application on 01.02.2010 seeking certain information

under RTI Act and in reply to that application he was supplied, inter-alia, copies of

three previous partnership deeds in respect of firm, M/s. Tara Rubber Industries.

Based upon the information provided under RTI Act, the defendants are now

seeking amendment of the written statement.

4. The following preliminary objections are sought to be added to the written

statement/counter claim.

"8. (i) Add preliminary objection after preliminary objection No.1 as under:-

"That the plaintiff has not disclosed the actual partnership deed which governed the relationship between the parties and only filed the amendment deed with clear mala-fide intention of misleading this Hon‟ble Court and abusing the process of this Court. The plaintiff deserves no relief in equity also and this suit is liable to be dismissed forthwith

(ii) Add a preliminary objection before preliminary objection No.3 as under:-

"That the suit under reply is barred and not maintainable in view of the Arbitration Clause in the partnership deeds dated 02.04.1973 and 24.02.1977 which was subsisting till dissolved by the notice dated 06.12.2006 issued by Mr. R.K. Sethi."

"The Arbitration clause is reproduced hereunder for ready reference and appreciation by this Hon‟ble Court:-

"Thus any dispute arising between the partners whether in respect of accounts or interpretations of this partnership deed shall be referred to arbitrator to be appointed with the mutual consent of the partners and his award shall be final as under the Arbitration Act enforced on that date."

The following preliminary submissions are sought to be inserted after

preliminary submission No.10:-

"11. That apart from signing on certain documents, like the partnership deeds, income tax returns, which was done by the applicant as and when called upon by Mr. R.K. Sethi to do so, the applicant had no control over the running, operation and documentation relating to the firm.

12. That in fact, even after putting his signatures on the documents and records the applicant was never given copies thereof by Mr. R.K. Sethi, who kept all the documents under his control and possession.

13. While the applicant was aware that the business in the name of defendant No.2 was being run as a partnership, the actual terms thereof were not known to the applicant.

14. Mr. R.K. Sethi had filed a partnership deed dated 01.04.1997 along with the plaint in the present suit seeking dissolution and rendition of account.

15. As the applicant was not in possession of any of the previous partnership deeds, he treated and believed the said deed of 1997 filed by Mr. R.K. Sethi as the only valid deed and filed his written statement-cum-counter claim accordingly.

16. That after the above statement and disclosures made by Mr. R.K. Sethi the applicant herein got copies of the partnership deeds of the previous years from the office of the Registrar of Firms at Udyog Sadan Plot No.419, Patpar Ganj Industrial Area, Delhi-92.

17. That on going through the contents thereof, the applicant was shocked at the manner in which Mr. R.K. Sethi had all along misled the applicant into

signing/executing wrong documents and declaration.

18. That on the mere reading of the partnership deed dated 2.4.1973 it is clear that the firm (Tara Rubber Industries TRI) could not have dissolved on the passing away of any of the partners, who at that time were Mr. T.C. Sethi (father of the original parties) and the original parties herein.

19. That apart from this fact, it is clearly mentioned in clause 13 of the partnership deed dated 2.4.1973 AND Clause 12 of 24.2.1977 deed that in case of any dispute regarding accounts between the partners no suit will lie for the rendition of accounts, but the matter would have to be referred for arbitration.

20. That, through not required, and in fact barred by the above partnership deed, on the passing away of Late Shri T.C. Sethi, the father of the parties, Mr. R.K. Sethi drew up a fresh partnership deed dated 24.02.1977.

21. That vide a fresh deed dated 1.4.1997, Mr. R.K. Sethi took the signatures of the applicant, causing certain changes in same of the clauses and terms of the partnership. The same were, once again neither explained nor supplied to the applicant."

Reply to para 1 of the plaint is sought to be amended so as to read as under:-

"(iv) Para 1 as stated is wrong and denied. It is denied that the parties had constituted the partnership firm defendant No.2 vide deed dated 01.04.1997, but the same was already in existence since 01.04.1964. It is pertinent to refer to the real partnership deed constituting the partnership as the same clearly lays down that any dispute pertaining to rendition of accounts between the partners will have to be resolved by Arbitration. Anything contrary to the above is denied and the plaintiff is put to strict proof thereof."

(v) Reply to para 8 to be amended to read as under:-

"Para 8 is wrong and denied. It was the defendant who had been requesting and demanding that the accounts be settled between then. It is submitted that once the partnership firm, which was a „partnership-at-will‟ was dissolved by the plaintiff issuing notice dated 6.12.2006, no suit lies therefore and this suit deserves to be dismissed. Reference is craved to the Arbitration Clause 13 of the partnership deed dated 2.4.1973 AND Clause 12 of 24.02.1977 partnership deed and the same is sought to be invoked and as such not suit is also maintainable for rendition of accounts. In any event, the plaintiff has stated that the present suit is a suit for partition of immoveable properties. The present suit as framed is, as such, not maintainable as a suit for partition."

The prayer clause is also sought to be amended by adding a prayer to

dismiss the suit as non maintainable in view of Arbitration clause contained in

partnership deeds dated 07.04.2003 and 04.02.1977.

Another prayer sought to be incorporated is to refer the dispute regarding

rendition of accounts to arbitration.

5. The proviso to Order 6 Rule 17 of the Code of Civil Procedure provides that

no application for amendment shall be allowed after the trial has commenced,

unless the Court comes to the conclusion that in spite of due diligence, the party

could not have raised the matter before the commencement of trial.

In Vidyabai vs. Padmalatha 2009 (2) SCC 409, referring to the proviso

added to Order VI Rule 17 of CPC by way Civil Procedure Code (Amendment)

Act, 2002, Supreme Court observed that the proviso is couched in a mandatory

form and held that the jurisdiction of the Court to allow an application for

amendment is taken away unless the conditions precedent therefor are satisfied viz.

it must come to a conclusion that in spite of due diligence the parties could not

have raised the matter before the commencement of the trial. The Court clearly

held that no application for amendment shall be allowed unless the Court is

satisfied that in spite of due diligence the matter could not be raised before the

commencement of trial. The Court was of the view that the proviso puts an

embargo on the exercise of jurisdiction by the Court and unless the jurisdiction fact

as envisaged in the proviso is found to be existing, the Court will have no

jurisdiction at all to allow the amendment of the plaint.

In Rajkumar Gurawara (Dead) through LRs. Vs. S.K. Sarwagi and Co.

Pvt. Ltd. and Anr. AIR 2008 SCC 2303, Supreme Court, referring to the aforesaid

proviso to Rule 17 of Order VI, inter alia, observed as under:-

"The said rule with proviso again substituted by Act 22 of 2002 with effect from 01.07.2002 makes it clear that after the commencement of the trial, no application for amendment shall be allowed. However, if the parties to the proceedings able to satisfy the court that in spite of due diligence could not raise the issue before the commencement of trial and the court satisfies their explanation, amendment can be allowed even after commencement of the trial. To put it clear, Order VI Rule 17 C.P.C. confers jurisdiction on the Court to allow either party to alter or amend his pleadings at any stage of the

proceedings on such terms as may be just. Such amendments seeking determination of the real question of the controversy between the parties shall be permitted to be made. Pre-trial amendments are to be allowed liberally than those which are sought to be made after the commencement of the trial. As rightly pointed out by the High Court in the former case, the opposite party is not prejudiced because he will have an opportunity of meeting the amendment sought to be made. In the latter case, namely, after the commencement of trial, particularly, after completion of the evidence, the question of prejudice to the opposite party may arise and in such event, it is incumbent on the part of the Court to satisfy the conditions prescribed in the proviso."

I had an occasion to consider aforesaid provision in Smt. Kailash Sharma

v. Sh. Jagdish Lal Sharma & Others 2010 (10) AD Del. 622, and the following

view was taken by me in this regard:-

"9. Before the proviso came to be added to Order VI Rule 17 of CPC, it was not uncommon for the unscrupulous litigants, who, for one reason or the other, were not interest in expeditious disposal of the case, to prolong the trial by seeking unnecessary and sometimes mala fide and frivolous amendments, in order to delay the progress of the trial. This mischief was sought to be remedied by the legislature by putting an embargo on the power of the Court to allow amendments, once the trial has begun. That precisely was the objective behind adding the aforesaid proviso to the statute book. The legislative intent, therefore, needs to be given a meaningful effect and, therefore, unless the amendment sought by a party squarely falls in the four corners of the legal provision, the Courts need to discourage such amendments. The legislative intent cannot be frustrated by the Courts by giving so liberal an interpretation as to allow the amendment even where they

find that the amendment now sought by the party could, on exercise of due diligence, have been conveniently sought before the trial began."

6. In the case before this Court, though no oral evidence has been recorded, a

preliminary decree in terms of prayer B in the plaint has already been passed by

this Court on 25.04.2008 after observing that there was no dispute that the firm had

been dissolved. Since the only prayer made in the suit was for dissolution of

partnership and rendition of account, the suit travelled beyond the stage of

commencement of trial when the Court passed a preliminary decree after holding

that the partnership firm had already been dissolved. Nothing was then left in the

suit except rendition of accounts before the Local Commissioner appointed by the

Court. Therefore, the amendment sought by way of present application is clearly

hit by the proviso to Order 6 Rule 17 CPC unless the applicants are able to show

that the amendment now sought to be made in the written statement/counter claim

could not, even on exercise on due diligence, been incorporated in the written

statement prior to filing of this application.

RTI Act came into force in the Year 2005. Therefore, the information which

is alleged to have come to the notice of the applicants pursuant to the application

filed under RTI in February, 2010 could certainly have been accessed and obtained

prior to filing the original written statement and in any case prior to order dated

25.04.2008 being passed by this Court. There is absolutely no explanation as to

why the information accessed under RTI Act was not sought by Late Sh. Sushil Kr.

Sethi before he filed written statement in October, 2007. Since there is absolutely

no explanation for not seeking this information under RTI Act before filing the

written statement, the application being hit by the proviso to Order 6 Rule 17 of the

CPC cannot be allowed.

7. Another important aspect with respect to this application is that as far as the

Arbitration clause stated to be contained in the partnership deeds dated 02.04.1973

and 24.02.1977 are concerned, they shall be of no consequence after filing of the

written statement since Section 8 of the Arbitration and Conciliation Act mandates

that an application for reference to arbitration shall be filed not later than

submitting first statement on the dispute.

I had an occasion to examine as to whether an application under Section 8 of

Arbitration & Conciliation Act is maintainable after filing of written statement

which refers to an arbitration agreement between the parties or not in, Arti Jethani

v. Daehsan Trading (India) Pvt Ltd & Ors. 2011 (4) AD DEL 668. The

following view was taken by me taking into consideration various decisions,

including the decision of Supreme Court in Sukanya Holdings Pvt. Ltd. vs.

Jayesh H. Pandya and Anr. AIR 2003 SC 2252:-

"3. A careful analysis of Section 8 of Arbitration and Conciliation Act, 1996 would show that the following conditions are required to be fulfilled before the Court can refer the matter to arbitration;

(a) the dispute between the parties should be subject matter of an arbitration agreement;

(b) one of the parties to the suit should apply for referring the parties to arbitration;

(c) the application should be filed on or before submitting first statement on the substance of the dispute and;

(d) the application should be accompanied by the original arbitration agreement or its certified copy.

4. In the case before this Court, the application under consideration having not been filed on or before filing of written statement, but having been filed about four weeks after the written statement had been filed and after 8 days of filing of replication, one of the pre-requisite conditions for referring the parties to arbitration under Section 8 of Arbitration and Conciliation Act does not stand fulfilled in this case.

5. In Sukanya Holdings (supra), Supreme Court, while interpreting Section 8 of the Act, inter alia, observed as under:

"Further, the matter is not required to be referred to the arbitral Tribunal, if-(1) the parties to the arbitration agreement have no filed any such application for referring the dispute to the arbitrator; (2) in a pending suit, such application is not filed before submitting first statement on the substance of the dispute; or (3) such application is not accompanied by the original arbitration agreement or duly certified copy thereof."

It is true that in the above-referred case, the application under Section 8 of Arbitration and Conciliation Act appears to have been filed before the written statement was filed and, therefore, the question

as to whether such an application can be filed after the written statement has already been filed, did not directly come up for consideration in this case, but, the above- referred observations made by the Court do support the view that such an application cannot be filed after the first statement on the substance of the dispute has been filed by the applicant.

6. The contention of the learned counsel for the applicant is that since the defendant had already pleaded in the written statement that there is an arbitration agreement between the parties and, therefore, this Court has no jurisdiction to adjudicate the instant suit, it is evident that the applicants did not submit to the jurisdiction of the Civil Court and, therefore, the application is maintainable even after filing of the written statement.

7. In my view, if the Court accepts the contention that an application under Section 8 of the Act can be filed even after the first statement on substance of the dispute between the parties has already been filed, this would not only be contrary to the express provisions of law but, would also defeat the very purpose behind stipulating that such an application needs to be filed not later than submitting the first statement on the substance of the dispute. If such an application is entertained after filing of the first statement, it would be possible for a party to the suit to first allow the trial to proceed by not filing the application by the stage stipulated in the Act and then come to the Court at a much later stage when the trial is substantially complete and seek reference of the dispute to arbitration. It is true that in the case before this Court the trial has not commenced as yet, but if the interpretation sought to be given by the learned Counsel for the applicants/defendants is accepted, it would be open to a party to the suit to file such an application even after the trial has commenced.

8. The question as to whether a defendant who pleads

arbitration agreement in the Written Statement, but does not file an application under Section 8 of the Act, on or before filing of the Written Statement has come up before other High Courts in some cases. In K.Jayakumaran Nai vs. Vertex Securities Ltd. AIR 2005 Ker. 294, the defendant filed Written Statement raising a contention that there was an arbitration agreement between the parties. After framing of issues he filed an application seeking reference of the dispute for arbitration. The High Court noted that Section 8 of the Act clearly provides that the application had to be made not later than submitting the first statement whereas the application before it had been filed after the issues were framed. The Court expressly rejected the contention that since the matter had been raised in the Written Statement that was enough. While doing so the Court noted that the Written Statement contained no prayer for referring the matter for arbitration.

In West Bengal State Electricity Board and Ors. Vs. Shanti Conductors Private Ltd. AIR 2004 Gau 70, the defendants filed Written Statement indicating that the dispute which had arisen between the parties and led to institution of the suit, was covered by arbitration clause. After submitting the Written Statement on 22.9.2000 the defendants filed an application under Section 8 of the Act on 7.11.2000 seeking reference of the dispute to the arbitration. The trial Court having rejected the application the matter was agitated by the defendant before the High Court and it was contended that in the plaint itself the plaintiff had admitted the existence of the arbitration clause and the Written Statement also indicated about its existence and therefore the Court below had taken a misconceived view of law as to its jurisdiction. Rejecting the contention, the High Court inter alia held as under:

"In the case at hand, the application under Section 8 was made by the defendants after the written statement stood submitted. Hence, this application was not maintainable.

The fact that the existence of the arbitration clause was admitted in the plaint or asserted in the written statement is immaterial inasmuch as the Court, under Section 8, can refer for arbitration a dispute pending in a civil suit only when the party or parties concerned make application for getting the dispute referred to arbitration. If despite existence of arbitration clause, the parties choose to contest the suit, the powers under Section 8 cannot be invoked."

In this case, the defendants have already filed their Written Statement and have thereby disclosed their entire defence and that has been done in the main proceedings itself, not in the supplemental proceedings. Of course, the application under Section 8 of the Act would be maintainable if the applicant has not filed his first statement on the substance of the dispute, but when the Written Statement is filed, it can hardly be disputed that the applicant has submitted not only the first but whole of his statement on the dispute between the parties. To hold such an application to be maintainable, even after filing of the Written Statement would be contrary to the provisions contained in Section 8 of the Act. Mere disclosure of arbitration agreement in the Written Statement and claiming that Civil Court has no jurisdiction to try the suit would be of no consequences unless the Written Statement itself contains a prayer for referring the dispute for arbitration. In the case before this Court, though the defendants claimed that there is arbitration agreement between the parties and Civil Court has no jurisdiction in the matter, no prayer was made in the Written Statement to refer the disputes between the parties for arbitration.

11. No one can dispute that a Civil Court has no jurisdiction to entertain the suit after application under Section 8 of the Act is filed but this would be subject to the application otherwise being in conformity with the requirements of the said Section. The jurisdiction of the Civil Court is not ousted on account of an arbitration

agreement between the parties. It is ousted because of an application filed under Section 8 of the Act provided it otherwise confirms to the requirements laid down in the Section."

In Sukanya Holdings Pvt. Ltd. (supra), Supreme Court clearly held that

Arbitration Act does not oust the jurisdiction of Civil Court to decide the dispute in

a case where parties to the Arbitration Agreement do not take appropriate steps as

contemplated under sub-Section (1) and (2) of Section 8 of the Act.

Since the written statement was filed on 09.10.2007, and no application for

referring the disputes between the parties to Arbitration was filed on or before that

date, it is not open to the applicant to seek reference of disputes to Arbitration at

this stage.

For the reasons stated above, the application under consideration, being

devoid of any merits, is dismissed with costs assessed at Rs.25,000/-.

CS(OS) 1577/2007

List for consideration of objections to the report of the Local Commissioner

on 15.01.2013.

V.K. JAIN, J

OCTOBER 15, 2012 rb/bg