M/S Tara Logitech Private Ltd. vs M/S Religare Finvest Limited
2014 Latest Caselaw 7111 Del

*      IN THE HIGH COURT OF DELHI AT NEW DELHI

                                    Date of decision: 23rd December, 2014.

+             OMP No.1656/2014 & IA No.26202/2014 (for stay)

       M/S TARA LOGITECH PRIVATE LTD.              ..... Petitioner
                    Through: Mr. Atul Nanda, Sr. Adv. with Mr.
                             Sameer Nandwani, Mr. Rajat & Mr.
                             Priyadarshi Gopal, Advs.

                                   Versus

       M/S RELIGARE FINVEST LIMITED & ANR. ..... Respondents

Through: None.

AND + OMP No.1657/2014 & IA No.26204/2014 (for stay)

M/S TARA LOGITECH PRIVATE LTD. ..... Petitioner Through: Mr. Atul Nanda, Sr. Adv. with Mr. Sameer Nandwani, Mr. Rajat & Mr. Priyadarshi Gopal, Advs.

                                       Versus

    M/S RELIGARE FINVEST LIMITED                          ..... Respondent
                  Through: None.
CORAM:
HON'BLE MR. JUSTICE RAJIV SAHAI ENDLAW

I.A. No.26203/2014 in OMP No.1656/2014 & I.A. No.26205/2014 in OMP No.1657/2014 (both for exemption)

1. Allowed, subject to just exceptions.

2. The applications are disposed of.

OMP Nos.1656/2014 & 1657/2014

3. Both these petitions under Section 34 of the Arbitration and

Conciliation Act, 1996 are preferred with respect to the arbitral awards dated

7th August, 2013 of Sh. Nitin Chadha, Advocate in the claims of the

respondent M/s Religare Finvest Ltd. (RFL) against (i) Ashish Gupta, (ii)

Suresh Kumar Gupta, (iii) Sneh Gupta & (iv) Ruchi Gupta (hereinafter

called "Guptas"). While the arbitral award subject matter of OMP

No.1656/2014 is for recovery by RFL of Rs.2,78,68,302.5 with interest and

cost etc. from Guptas, the arbitral award subject matter of OMP

No.1657/2014 is for recovery by RFL of a sum of Rs.83,82,538.83 besides

interest and costs etc. from Guptas. Both arbitral awards also provide, that

sale proceeds of mortgaged property being house No.76, Harsh Vihar, Pitam

Pura, Delhi-110 034 would be adjusted towards the satisfaction of the

amount payable by Guptas under the arbitral awards.

4. Though the petitioner, in neither of the petitions has impleaded

Guptas as party thereto, but has in OMP No.1656/2014 impleaded the sole

arbitrator Nitin Chadha, Advocate as a party thereto. In my view, the

arbitrator is not required to be impleaded as a party to a petition under

Section 34 of the Arbitration Act. Accordingly, the name of Sh. Nitin

Chadha, Advocate as respondent No.2 in OMP No.1656/2014 is deleted.

5. The petitioner was admittedly not a party to the arbitration agreement

or the arbitral proceedings and the arbitral awards also are not against the

petitioner. These petitions have still been filed, pleading that :

(i) The petitioner had purchased property bearing No. 76, Harsh

Vihar, Pitam Pura, Delhi-110 034 aforesaid vide sale deed

dated 13th December, 2013 from M/s Bhatia Estates Pvt. Ltd. ,

Delhi vide a registered sale deed.

(ii) The petitioner immediately after purchasing the said property

started the work of construction thereon.

(iii) To the shock and surprise of the petitioner, the petitioner on

23rd August, 2014 received a notice from Sh. Sanjay Kumar,

Sub-Inspector, Police Station Rani Bagh, Delhi asking the

petitioner to stop construction as the property in question had

been directed to be attached by this Court vide order dated 13 th

August, 2014 in Execution Petition No.87/2014.

(iv) On enquiry by the petitioner, it transpired that the Guptas had

taken some loan from RFL and had mortgaged the said property

on the basis of certain documents by creating equitable

mortgage and had failed to repay the said loan and therefore the

property was ordered to be attached as aforesaid.

(v) The petitioner however learnt that RFL had also filed OMP

No.1212/2012 and vide order dated 21st December, 2012

wherein the Guptas were restrained from creating any third

party interest in the said property.

(vi) It has also come to the knowledge of the petitioner that another

Execution Petition bearing No.86/2014 is also pending before

this Court.

(vii) On further enquiry, it was learnt that the said property was

actually in the name of Sneh Lata Gupta who was mother of

Ashish Gupta and wife of Suresh Kumar Gupta who had

mortgaged the said property to avail credit facility from Punjab

and Sind Bank, Connaught Circus, New Delhi in the year 2008;

that the said property was sold to M/s Bhatia Estates Pvt. Ltd.

and Mr. Gulshan Kumar Ahuja vide sale deed dated 31 st March,

2012; that the original title deed was released by Punjab and

Sind Bank to Sneh Lata Gupta only after payment of the entire

balance consideration; that since the order of restraint aforesaid

was passed against the Guptas on 21st December, 2012 and sale

in favour of M/s Bhatia Estates Pvt. Ltd. and Mr. Gulshan

Kumar Ahuja had already taken place, the documents

mortgaged with RFL are forged documents and the original

documents were lying with Punjab and Sind Bank at the time

when credit facility was granted by RFL to the Guptas.

(viii) The arbitral awards subject matter of both these petitions are ex

parte.

(ix) The petitioner is the rightful owner of the property and the

order of the Arbitral Tribunal directing sale of the property is

void and without any basis.

6. I have enquired from the senior counsel for the petitioner as to how

these petitions under Section 34 of the Arbitration Act are maintainable and

whether not the remedy if any, in the facts aforesaid, of the petitioner is

under Order XXI Rules 58 and 98 to 104 of the Code of Civil Procedure,

1908.

7. The senior counsel for the petitioner has referred to paras No.50 and

57 of Booz Allen and Hamilton Inc. Vs. SBI Home Finance Ltd. (2011) 5

SCC 532 to contend that the enforcement of mortgage is not arbitrable and

the arbitral awards are thus contrary to law and public policy of India and

liable to be set aside.

8. The Supreme Court in Booz Allen and Hamilton Inc. (supra) was

concerned with the scope of Section 8 of the Arbitration Act. There, the SBI

Home Finance Ltd. had filed a mortgage suit in the High Court of Bombay

and in which suit an application under Section 8 was filed. The question

before the Supreme Court was whether the suit was to be disposed of under

Section 8 of the Arbitration Act by referring the parties to arbitration. The

said application was dismissed by the learned Single Judge of the Bombay

High Court inter alia on the ground of the appellant having subjected itself

in the preceding 20 months to the jurisdiction of the Court. The Supreme

Court held, i) that though the subject matter of the suit fell within the scope

of arbitration agreement, ii) that though the appellant could not in the facts

be said to have submitted itself to the jurisdiction of the Court, and, iii) that

the application under Section 8 having been filed before the filing of the

written statement, High Court was not justified in rejecting the same on the

ground of delay, but the subject matter of the suit was not arbitrable.

9. The position here is quite different. In the two arbitration proceedings

culminating in the arbitrable awards subject matter of these two petitions,

RFL had made a monetary claim against the Guptas along with a claim for a

direction to Guptas to hand over vacant physical possession of the property

with further directions for sale thereof for satisfaction of the monetary

claims. The arbitral awards allow the monetary claims of RFL and merely

observe that RFL shall be entitled to recover the claims awarded from the

sale proceeds of the property. From the narration in the petitions, it appears

that the property aforesaid has been attached in execution of the arbitral

awards insofar as allowing the said monetary claims.

10. The senior counsel for the petitioner agrees that the petitioner has no

grievance insofar as the arbitral awards allow the monetary claims of RFL

against Guptas. It is stated that the grievance of the petitioner is with respect

to the part of the awards which provide that the said monetary claims can be

satisfied from the sale proceeds of the said property and from the attachment

of the subject property in execution of the said arbitral awards.

11. The only question thus for adjudication at the instance of the

petitioner is whether the rights of the petitioner in the property are

unaffected by the aforesaid attachment of the property in execution

proceedings.

12. Section 36 of the Arbitration Act provides for the enforcement of the

arbitral award under the CPC, in the same manner as if it was a decree of the

Court. Order XXI of the CPC provides for execution of a decree of the

Court. Rule 30 thereunder provides for execution of a decree for payment of

money inter alia by attachment and sale of the property of the judgment

debtor. Rule 54 under Order XXI provides for attachment of immovable

property by prohibiting, the judgment debtor from transferring and charging

the property in any way and all persons from taking any benefit from such

transfer or charge. It appears that the order dated 13 th August, 2014 supra in

Execution Petition No.87/2014 has been made in exercise of such powers.

Rule 58 of Order XXI provides for preferring claim or objection to the

attachment of any property on the ground that the property is not liable to

such attachment and for adjudication of such claim. Such adjudication has a

force of a decree. Section 47 of the CPC provides that all questions relating

to execution, discharge or satisfaction of the decree shall be determined by

the Court executing the decree and not by a separate suit.

13. It thus follows that the question which the petitioner is seeking to be

adjudicated by filing these petitions under Section 34 is a question, the mode

for adjudication whereof is by filing objections as aforesaid in the execution

proceedings in which the attachment has been ordered and not by way of

filing these petitions under Section 34 of the Arbitration Act.

14. Even otherwise, it is the settled position in law that a non party to an

arbitration and arbitration proceedings cannot prefer objections under

Section 34 of the Arbitration Act. I had an occasion to deal with the said

aspect in Indus Ind Bank Ltd. Vs. Ram Laxman Hotels Ltd. 162 (2009)

DLT 332; on a conspectus of case law, it was held that a petition under

Section 34 can be preferred only by a party to the arbitration proceedings

and not by a third party. I find the High Court of Bombay also to have taken

the same view in Mukesh Nanji Gala Vs. Heritage Enterprises

MANU/MH/2202/2014. Even otherwise, there is no agreement for

arbitration of the dispute between RFL and the petitioner qua the aforesaid

property. Needless to state that merely because an arbitration award provides

that the monetary claims allowed thereunder would be recovered by sale of

some property, cannot entitle the claimant thereunder to enforce the right of

such sale against a non party to arbitration and if such claimant enforces the

award as a decree, such non party to the arbitration has to file objections in

accordance with the procedure provided hereinabove.

15. I may mention that the petitioner has also filed applications for stay

of the arbitral awards aforesaid and their execution. The execution as

aforesaid is pending before this Court. Though a proceeding under Section

34 of the Arbitration Act, strictly speaking, is not a suit but the principle

enshrined in Section 41 of the Specific Relief Act, 1963 is that no restraint

against any person from instituting or prosecuting any proceeding in a Court

not subordinate to that from which the injunction is sought can be granted.

For this reason also, these proceedings are not the remedy for the relief

sought by the petitioner.

16. The petitions are clearly misconceived and are dismissed.

No costs.

RAJIV SAHAI ENDLAW, J.

DECEMBER 23, 2014 „gsr‟ (corrected & released on January 06, 2015)