Hari Om Maheshwari vs M/S. Ge Capital Transportation ...
2014 Latest Caselaw 1438 Del

*        IN THE HIGH COURT OF DELHI AT NEW DELHI

%                                        Date of Decision: March 19, 2014

+                           RFA (OS) 59/2014

         HARI OM MAHESHWARI                               ..... Appellant
                  Represented by:        Mr.Manish Vashisht, Advocate with
                                         Mr.Sameer Vashisht, Advocate

                                         versus

         M/S. GE CAPITAL TRANSPORTATION
         FINANICAL SERVICES LTD.                             ..... Respondent
                   Represented by: None

CORAM:
HON'BLE MR. JUSTICE PRADEEP NANDRAJOG
HON'BLE MR. JUSTICE JAYANT NATH

PRADEEP NANDRAJOG, J.

CM No.4577/2014 Allowed subject to just exceptions.

CM No.4578/2014 For the reasons stated in the application the same is allowed. RFA (OS) No.59/2014

1. Vide impugned decision dated December 19, 2013, CS(OS) No.1062/1997 filed by the appellant has been dismissed on the reasoning that the award dated August 22, 2003 which was inter-se the parties having been made a Rule of the Court by a learned Single Judge of this Court which decision was upheld by the Division Bench and the Supreme Court having declined to grant Special Leave to Appeal, had concluded the issue which

was raised in the suit.

2. Appellant filed a suit for recovery of `1,20,50,000/- (Rupees One Crore Twenty Lakhs Fifty Thousand only) against M/s.SRF Finance Ltd. now known as M/s. G.E.Transporation Financial Services Ltd. His case as pleaded was that he was a member of the Delhi Stock Exchange and held one membership share of the said exchange. It was pleaded that the defendant was a joint stock company and was interested in conducting business in shares and securities and vide agreement dated September 07, 1992 executed by him and the respondent, the respondent became his sub- broker. After sometime, respondent evinced interest to acquire his membership share of the Delhi Stock Exchange and accordingly a memorandum of understanding was executed between him and the respondent on April 20, 1994 under which respondent had agreed to purchase his membership share in the Delhi Stock Exchange for `1,12,50,000/- (Rupees One Crore Twelve Lakhs and Fifty Thousand only) and that outstanding dues payable by him to the respondent would be adjusted. He pleaded that the memorandum of understanding was valid till April 30, 1994 or till when a formal agreement for transfer of the membership share was executed. He pleaded that there was breach of the term of the MOU pertaining to a bank guarantee to be provided to him in his favour in sum of `94,00,000/- (Rupees Ninety Four Lakhs only). He pleaded that another MOU was executed on April 30, 1994 extending validity of the previous MOU till May 08, 1994. He pleaded that the respondent did not fulfil its obligations under the MOU as per the extended time. He terminated the same on May 09, 1994. He forfeited `18,50,000/- (Rupees Eighteen Lakhs and Fifty Thousand only) payable by him to the

respondent. He pleaded that the value of the membership share of Delhi Stock Exchange started falling. He pleaded that on August 07, 1995 he sold the membership share for `25,00,000/- (Rupees Twenty Five Lakhs only). He further pleaded that the respondent had initiated arbitration proceedings claiming `26,33,375/- (Rupees Twenty Six Lakhs Thirty Three Thousand Three Hundred and Seventy Five only) against him. He claimed difference in the price of the share as per the MOU and the price at which he sold plus damages.

3. Relevant would it be to highlight that in the plaint it was the case of the appellant that towards loss statedly suffered by him due to breach of the MOU he had forfeited `18,50,000/- (Rupees Eighteen Lakhs and Fifty Thousand only) payable by him to the respondent under the Sub Broker Agreement dated September 07, 1992. He further admitted that the respondent had invoked an arbitration claim against him pleading that the respondent had to receive `26,33,375/- (Rupees Twenty Six Lakhs Thirty Three Thousand Three Hundred and Seventy Five only) from him.

4. It would be apparent to the reader of our opinion that in the arbitration proceedings initiated by the respondent to recover the dues which respondent claim were payable by the appellant under the Sub Broker Agreement dated September 07, 1992, apart from other defences, one defence of the appellant was that he had appropriated `18,50,000/- (Rupees Eighteen Lakhs and Fifty Thousand only) payable by him to the respondent since respondent had caused loss to him by breaching the MOU dated April 20, 1994; and that said amount was the only sum payable by him to the respondent.

5. As per the award, the Arbitral Tribunal, dealing with appellant's claim

of being entitled to forfeit/adjust `18,50,000/- (Rupees Eighteen Lakhs and Fifty Thousand only), held as under:-

"What needs to be observed in the MOU is that at no stage of MOU, the Claimant has expressly agreed to purchase membership of the Respondent. It is Respondent only agreeing to sell his membership to the Claimant. By Clause number 5 (Five) of MOU the Respondent bound himself unilaterally to the Claimant till the expiry of the MOU, (valid upto 30.4.1994), the expiry later on extended upto 8th May, 1994. From the contents of the MOU, it is clear that the Respondent was free to negotiate or finalise the sale of his membership with any other party after the expiry of the validity period.

Clause number 2 (two) of the MOU allows the Claimant to adjust the liability of the Respondent to the Claimant while making payment for purchase and transfer of membership. It does not authorize the Respondent to adjust the liability in case of MOU is not put through in the shape of a formal agreement.

Instead the clauses 8 (eight) and 5 (five) clearly lay down the expiry date of MOU and give free hand to the Respondent for sale of Membership to any other party.

XXXXX

Now comes the question of lawfulness of the act of the Respondent in having appropriated his liability to the Claimant by cancellation of MOU dated 20.04.1994 vide his letter dated 09.05.1994.

On a very careful reading of MOU dated 20.04.1994, I opine that this is a case which falls within section 35 of Contract Act i.e. a contingent contract. The Claimant and Respondent to the MOU had fixed time for the subsequent certain event, namely signing of a formal agreement for sale of membership by 30.04.1994, and is extended upto 08.05.1994, failing which the MOU stood expired, and thereafter the Respondent stood free

to sell his membership to another party. Upon the said event not happening i.e. non-signing of a formal agreement for sale of membership, within the time fixed, the MOU became void. The words and language of the MOU is clear and unequivocal. It admits only of one interpretation and that is the intention of the parties was the understanding was operative upto 30.04.1994 and as extended upto 08.05.1994 and that the understanding was to lapse and exhaust itself in the event of the signing of formal agreement for sale of membership not taking place.

The law in such cases is clearly laid down in the matter of Maharaj Krishan v. Iqbal Krishan by Hon‟ble Delhi High Court [1991 DLT 693]. I, therefore opine and hold that the act of the Respondent in having appropriated the money due by him to the Claimant is unjustified and unlawful."

6. The learned Single Judge has held that the award having attained finality, the finding returned by the Arbitral Tribunal that the MOU dated April 22, 1994 was a contingent contract and even by the extended dated i.e. May 08, 1994 the contingency referred therein not being fulfilled, the appellant was free to sell the membership to another party and further that the intention of the parties was that if by May 08, 1994 they did not give effect to their intention by formalizing the sale of the membership, the obligations would lapse, would bind the parties in subsequent litigation.

7. During argument of the appeal on March 12, 2014, learned counsel for the appellant urged that a plea of res-judicata or issue estoppel has to be raised in a written statement and an issue settled, and unless the same was done, no claim could be decided with reference to previous litigation. Learned counsel cited the decisions on the subject commencing from the decision of the Bombay High Court reported as AIR 1937 Bom. 326

Govindbhai Lallubhai Patel Vs. Dahyabhai Nathabhai Patel & Ors. which held that a plea of estoppel must be specifically pleaded and strictly proved. Learned counsel also cited the decision of the Supreme Court reported as (2010) 10 SCC 141 Alka Gupta Vs. Narender Kumar Gupta as to how a plea of res-judicata must be raised; to highlight that specific pleadings with respect to the previous litigation, the issue which was decided therein must be disclosed and then brought out with reference to the pleadings in the current litigation and the issues raised, that the previous decision would operate as res-judicata.

8. The contention of learned counsel was that in the written statement filed no such plea was raised by the respondent with respect to the award.

9. Now, we have already noted hereinabove that in the plaint itself the appellant had pleaded that he was liable to pay `18,50,000/- (Rupees Eighteen Lakhs and Fifty Thousand only) to the respondent under the Sub Broker Agreement dated September 07, 1992. He had himself pleaded that he had forfeited/adjusted said amount when respondent breached the MOU dated April 20, 1994. He himself pleaded that the respondent had proceeded to an arbitration claim against him pleading that he owned respondent `26,33,375/- (Rupees Twenty Six Lakhs Thirty Three Thousand Three Hundred and Seventy Five only).

10. At the stage when parties presented their respective pleadings the award had not seen the light of the day. Thus, it was not possible for anybody to plead res-judicata with reference to a decision by the Arbitral Tribunal. But when this happened and the matter attained finality till the Supreme Court, the respondent filed, albeit belatedly, an application under Order 6 Rule 17 of the Code of Civil Procedure which was registered as IA

No.3276/2009 praying that it be permitted to amend the written statement incorporating the pleas of res-judicata with reference to the award.

11. Vide order dated October 22, 2009 IA No.3276/2009 was disposed of by the learned Single Judge, reasoning as under:-

"This application has been made under Order 6 Rule 17 CPC by the defendant to amend the WS. It is submitted by counsel for the defendant that the WS was filed in 1998 and award was passed on a dispute between the parties touching the same issues on 22nd August, 2003. Although, objections have been filed against this award which are pending adjudication, defendant wants to amend the WS and wants to bring the fact of passing of award on record.

I consider that passing of award by Arbitrator on another dispute between the parties cannot be a ground for amendment of the WS. The award, if is upheld and has any implications, can be considered by the Court at the time of argument itself. Since objections against award are already pending whatever the final outcome is, the same shall be considered by the Court as and when the objections are decided. Unless the objections are decided, the award is not executable. However, as and when the objections are disposed of, the same shall become a judgment of the Court and the Court can consider the effect of this judgment on the present suit.

The application is therefore not maintainable and is hereby dismissed."

12. Thus, there is no force in the contention urged that in the absence of any pleadings pertaining to the award, on the applicability of res-judicata, the learned Single Judge could not have dismissed appellant's suit.

13. Order dated October 22, 2009 which has attained finality clearly records that if the award was upheld its impact would be considered in the present suit.

14. The purpose of pleadings and settlement of issues is that principles of fairness and justice require the parties to know what case of the other side they have to meet. It helps the Court in focusing its attention to the issues of law and fact which have to be decided by the Court. It may be true that as a general rule of law, pleas of estoppel and res-judicata have to be raised by specific and clear pleadings, but in a case of the kind where the first instituted proceedings have not attained finality and a second proceeding is initiated, subject to the parties being made aware at some stage of the subsequent proceedings that upon attaining finality the previous proceedings with reference to the issues decided inter-se the parties would be looked into by the Court, no prejudice being caused to either party, no grievance on account of any deficiency in pleadings can be raised.

15. In the instant case, the matter can be looked at from a commonsense point of view. In the respondent's claim against him before the Arbitral Tribunal, the appellant specifically pleaded entitlement to adjust `18,50,000/- (Rupees Eighteen Lakhs and Fifty Thousand only) which he admitted payable to the respondent under the Sub Broker Agreement dated September 07, 1992 by alleging breach of the MOU dated April 20, 1994. As regards the respondent, it pleaded that the appellant had no right to effect any adjustment as claimed because the MOU was a contingent contract and the contingencies referred to never came into existence and hence no claim could be enforced under the MOU.

16. It is apparent that an issue squarely arose before the Arbitral Tribunal concerning the MOU dated April 20, 1994 and thus we not only have the decision of the Arbitral Tribunal on the MOU in question but even reasons thereof, which we have noted in paragraph 5 above.

17. The view taken by the learned Single Judge cannot be faulted and we agree with the same.

18. No case is made out to issue notice in the appeal to the respondent. Noting that at the hearing held on March 12, 2014 the record of the suit had been summoned and had been perused, we dismiss the appeal in limine but without any order as to costs.

(PRADEEP NANDRAJOG) JUDGE

(JAYANT NATH) JUDGE MARCH 19, 2014 mamta