Ravinder Kaur vs Gagandeep Singh
2016 Latest Caselaw 2896 Del

*      IN THE HIGH COURT OF DELHI AT NEW DELHI

                                                    Reserved on: 06.04.2016
                                                  Pronounced on: 22.04.2016

+      RFA (OS) 16/2016, C.M. APPL.6799-6801/2016
       RAVINDER KAUR                          ............Appellant
                       Through: Sh. P.V. Kapur, Sr. Advocate with Sh.
                       J.S. Bhasin, Ms. Rashmi Priya, Ms. Divya Kapur,
                       Sh. Nishant Shokeen and Sh. Indrajit Singh,
                       Advocates.
               Versus

       GAGANDEEP SINGH                            ........Respondent

Through: Sh. Jagjit Singh with Sh. Bhagat Singh, Advocates.

CORAM:

HON'BLE MR. JUSTICE S. RAVINDRA BHAT HON'BLE MS. JUSTICE DEEPA SHARMA

MR. JUSTICE S. RAVINDRA BHAT

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1. The defendant in a suit on the file of this Court, appeals a final decree made by the learned Single Judge, on 14.01.2016. The appellant urges in essence that the partition suit - which was decreed finally- was not maintainable, by reason of pending arbitration proceedings. The appeal is thus premised on Section 5 of the Arbitration and Conciliation Act, 1996 ("Arbitration Act").

2. The plaintiff and defendant entered into a partnership agreement for carrying out business under the style of "Nu-Nischal's Klick Selection" from property No. 15A/26, (basement), WEA, Karol Bagh, New Delhi (hereafter

RFA (OS) 16/2016 Page 1 "suit property"). The suit property is owned and possessed jointly by the plaintiff and the defendant. In the partnership, however, the plaintiff has 50% share while defendant has 25% share. The balance 25% share is with Sahib Singh, s/o Late Amarjeet Singh, the plaintiff's brother. The partners of the firm thus are closely related. The firm apparently did not succeed and the partners mutually settled to work separately from December 2007. Both started carrying their businesses independently. The plaintiff independently started his business from the ground floor 15A/16, WEA, Ajmal Khan Road Karol Bagh, New Delhi. The disputes between parties was referred to the sole Arbitrator appointed by this Court by its order dated 09.04.2008 in OMP No. 192/2008 and OMP No 193/2008 with consent of parties.

3. On 24.04.2008 this Court made an ad-interim order, which was to bind the parties (in OMP 192/2008 and OMP 193/2008). The said order is extracted below:

"Vide order dated 9.04.2008, an Arbitrator was appointed with the consent of the parties to adjudicate the disputes inter se the parties. The parties were directed to appear before the learned Arbitrator on 28.04.2008. Counsels for the parties state that in the interregnum, during the period when the Local Commissioners were directed to complete the proceedings of commissions in terms of the orders dated 9.04.2008 and 11.04.2008, further disputes have arisen between the parties and that each of them feels threatened by the other, thus hindering the smooth transaction of business at the two shops, subject matter of the present OMPs. Both the parties express an apprehension that the other party may obstruct their ingress and egress into the said shops and create hindrances in the peaceful running of the business from the premises, during the pendency of the arbitration proceedings. However, neither of the parties disputes the fact that the partnership deed executed between the

RFA (OS) 16/2016 Page 2 parties could be dissolved in accordance with the terms and conditions contained therein. While counsel for the petitioner submits that the partnership stands dissolved in view of his notice dated 31.3.2008, counsel for the respondent objects to the modality of the termination. Needless to state that the said issues may be raised before the learned Arbitrator appointed in the case, who shall decide the same.

To allay the apprehensions expressed by the parties and at the same time ensure that the business being conducted from the premises is not brought to a stand still during the pendency of the arbitration proceedings, the following orders are passed: - i. The petitioner shall deposit the keys of the premises no. 15A/2 (basement) Ajmal Khan Road, New Delhi-110005 with the Arbitrator on 28.04.2008. Similarly, the respondents shall deposit the keys of the premises no. 15A/16 (ground floor) Ajmal Khan Road, NewDelhi 110005 with the Arbitrator on the same day. Both the set of keys handed over to the Arbitrator shall be retained by him, till the disposal of the arbitration proceedings and be returned thereafter as deemed fit in terms of the award passed.

ii. During the pendency of the arbitration proceedings, the petitioner, Mr. Gagandeep Singh is appointed as a Receiver in respect of premises No.15A/16 (ground floor), Ajmal Khan Road, NewDelhi-110005. Similarly, the respondents in OMP No.192/2008, Ms. Ravinder Kaur and Mr.Sahib Singh are appointed as Receivers, in respect of the premises no.15A/26 (basement), Ajmal Khan Road, New Delhi-110005. Both the parties shall maintain the accounts in respect of the goods of the partnership firm in the premises in their respective occupation, till the Arbitrator passes an award.

iii. Neither party shall operate any independent account in respect of the goods of the partnership firm. The petitioner, Mr.Gagandeep Singh, confirms that an account opened by him with Bank of Baroda, as a Sole Proprietor shall not be operated by him till the arbitration proceedings are over.

RFA (OS) 16/2016 Page 3 With the consent of the respondent, keys of the two side shutters of premises no. 15A/16 Ajmal Khan Road, New Delhi- 110005 are handed over by the Local Commissioner to the petitioner, through counsel.

It is left open to both the parties to approach the Arbitrator to seek permission to make withdrawals from the three bank accounts of the two partnership firms, out of which, two are maintained with the Bank of Baroda, Karol Bagh branch and one with the HDFC bank, Rajinder Nagar branch, for conducting day-to-day business.

Both the petitions as also the pending applications are disposed of with the above orders. Needless to state that in case either of the parties needs any further interim measures in respect of the shop premises or the conduct of the business during the pendency of the arbitration proceedings, they shall be at liberty to approach the Arbitrator, as per law."

4. After the matter was referred to learned Sole Arbitrator, Justice J.P. Singh (Retd.), disputes arose between the parties regarding smooth running of business from the suit premises. Accordingly, the plaintiff moved an application under Section 17 of the Arbitration Act filed before the Arbitral Tribunal, which inspected the two premises (including the suit property). The Tribunal prepared an inspection note on 30.08.2008 and thereafter directed parties to maintain status quo in respect of both the properties, by orders dated 12.11.2008 and 25.02.2009 on the basis of undertakings given by the parties.

5. When disputes pertaining to the dissolution of the firm and issues of accounts of the partnership business were pending before the Tribunal, the plaintiff filed CS (OS) 1573/2012, in May, 2012, on the file of this Court, claiming the partition of the suit property. The plaintiff disclosed the pending

RFA (OS) 16/2016 Page 4 arbitration proceedings before the Tribunal, the order dated 24.04.2008 (of status quo and receivership) etc, in the suit. In the written statement filed by the Defendant/appellant, it was urged that the suit constituted an abuse of process of Court, since the parties were bound by the earlier status quo order of the Court in pursuance to the arbitration applications made before the Court. It was also stated that the partition of property during pendency of disputes pertaining to the partnership business was not feasible.

6. On 26.02.2014, in the light of submissions and statement on behalf of the parties, the learned Single Judge made the following order, in the suit:

"1. The learned counsel for the defendant has stated that so far as the plaintiff is concerned, he has 50 per cent interest in the shop in question and accordingly, there is no dispute regarding the shares of both the plaintiff and the defendant. However, it is submitted by him that as the defendant has been appointed as a receiver of the shop in question and the matter is pending before the learned arbitrator, the final decree to that effect may not be passed.

2. I have considered the submission made by the learned counsel for the defendant as well as the learned counsel for the plaintiff. The case which has been set up by the plaintiff in the plaint is that on 12.10.1998 he had purchased 50 per cent share in the basement of property No. 15A/26 WEA. Ajmal Khan Road. Karol Bagh, New Delhi which is situated on a plot of land measuring 267 square yards. The defendant in his written statement has not denied this averment made by the plaintiff.

3. In the light of the fact that there is no denial by the defendant in the written statement and the statement is made by the learned counsel at the bar, 1 feel this court can pass a preliminary decree of 50 per cent each of shares of the plaintiff and the defendant in respect of the suit property.

4. Accordingly, a preliminary decree for 50 per cent of the

RFA (OS) 16/2016 Page 5 property in respect of the suit basement is passed in favour of the plaintiff."

The learned Single Judge also directed appointment of a Local Commissioner to inspect the suit property and report to the Court, to facilitate a division of the property, so that a final decree could be drawn.

7. After considering the Local Commissioner's report and hearing counsel for the parties, the learned single judge made the following order:

6. Accordingly, a final decree is passed by giving physical possession of the 50% area of the basement of the shop no.15A/26, WEA, Ajmal Khan Road, Karol Bagh, New Delhi to each of the parties. The portion which is called as the back portion by the Local Commissioner is given to the defendant and the front portion as stated by the Local Commissioner is given to the plaintiff. Giving of these portions will however be done with a slight variation in view of the existing position as to possession, because, the back portion and the front portion are divided by a wall which is not exactly at the middle of the shop, The total length of the shop is 6r3" and the uniform breadth 33'9". Due to the existing wall, the portion which falls to the share of the defendant has a length of 33 ft. and the portion which falls to the share of the plaintiff has a lesser length of 28'3". Since each of the party has to have an equal length of 30 ft. 7-1/2 inches, therefore, the existing wall will have to be demolished and a fresh wall will have to be constructed exactly at the centre point of 61'3" i.e 30 ft7-1/2 inches. This new portion wall will be of 14 inches thick, and 7 inches of this wall will fall in the portion which is earmarked to the plaintiff and 7 inches of this wall will fall in the portion which will be earmarked to the defendant, and to the best possible approximation at the site position."

The order further appointed another counsel as a Local Commissioner to oversee the demolition of the wall and issued consequential directions. By the second order dated 03.02.2016, the learned Single Judge clarified that the

RFA (OS) 16/2016 Page 6 rear portion of the suit property so described was really the front portion as it abutted the road.

8. The appellant alleges - and her learned senior counsel, Mr. P.V. Kapoor, argues- that the impugned orders (i.e the preliminary decree dated 26.02.2014, the order dated 14.01.2016 and the subsequent order of 03.02.2016 are erroneous and unsustainable in law. It is argued that the learned Single Judge completely overlooked the circumstance that the arbitration application led to an unopposed order, especially the one dated 24.04.2008 which constituted both parties as receivers of the properties in their possession, pending adjudication before the arbitral tribunal. Learned senior counsel submitted that there being no dispute that the arbitration proceedings have not culminated in a final decision, it was an undisputed fact that the said interim orders bound the parties. The decree of partition was consequently drawn directly in the teeth of the said orders requiring maintenance of status quo, pending award. Learned counsel also relied on the subsequent orders and minutes of arbitration proceedings, as well as other orders made by the Court in the arbitration matter, to say that the parties understanding always was that disputes had to be finally resolved in arbitration. The interdiction by the civil court thus resulted in more fractious situations and prejudiced the valuable rights of the parties.

9. Mr. Kapoor relied on Section 5 of the Arbitration Act to say that since the disputes inter se were referred to arbitration- even though they pertained to the question of partnership business, the Court should have desisted from making a decree. It was highlighted that the right to possession of the entire suit property, as opposed to the right to the property was a subject matter of

RFA (OS) 16/2016 Page 7 arbitration proceedings. Both issues were, therefore, linked and the Court should have desisted from making a decree which was likely to finally determine the rights of the parties. Counsel submitted that the bar to Section 5 of the Arbitration Act had the effect of invalidating the decree, as the civil court's jurisdiction was ousted. He relied on the decision of the Supreme Court in Kiran Singh and Others v. Chaman Paswan and others, AIR 1954 S.C. 340 and urged that the decree is a nullity and, therefore, unenforceable. In this regard, the order of the Arbitral Tribunal, dated 18.01.2011 to the following effect, is highlighted:

"On finalization of accounts, what shall be the consequential distribution/shares in terms of share capital and proportion contained in the partnership Deed and what other directives are necessary to wind up the partnership firm in totality and effective date thereof"

It is urged that in the circumstances the Arbitrator will decide the issue of dissolution of partnership business as also the question of possession of premises at the time of making the Award.

10. Mr. Jagjit Singh, learned counsel for the plaintiff, urges that the present appeal is not maintainable. He relies on Section 97 of the Code of Civil Procedure (CPC) and argues that once the defendant chose not to impugn the preliminary decree, he is foreclosed from challenging it at the stage of drawing of final decree. He argues that the subject matter of the arbitration is entirely different and highlights that the defendant never stated that the subject matter of the suit was covered by the reference, or was subject to arbitration. Furthermore, the defendant also did not deny that the plaintiff was owner of the suit property to the extent of 50%. In such event,

RFA (OS) 16/2016 Page 8 decree had to follow. Counsel denied that Section 5 of the Arbitration Act applied to the facts of this case.

Analysis and conclusions

11. Section 97 of the CPC, which, the plaintiff insists, constitutes a bar to the maintainability of the present appeal, reads as follows:

"97. Appeal from final decree where no appeal from preliminary decree - Where any party aggrieved by a preliminary decree passed after the commencement of this Code does not appeal from such decree, he shall be precluded from disputing its correctness in any appeal which may be preferred from the final decree."

The Supreme Court had occasion to deal with the finality statutorily imputed by reason of Section 97 in a number of judgments. In Mool Chand v Dy. Director Consolidation 1995 (5) SCC 631, it held as follows:

"Thus, if an appeal is not filed against the preliminary decree and its correctness is not challenged, it becomes final and the party aggrieved thereby will not be permitted to challenge its correctness in an appeal against final decree. The Privy Council in Ahmed Musaji Saleji & Ors v Hashim Ebrahim Saleji & Ors, AIR (1915) PC 116, held that failure to appeal against a preliminary decree would operate as a bar to raising any objection to it in an appeal filed against final decree. Thus Court in Venkata Reddy v Pothi Reddy [1963] Supp. 2 SCR 616 = AIR (1963) SC 992, 993 has held that the impact of Section 97 is that the preliminary decree, so far as the matters covered by it are concerned, is regarded as embodying the final decision of the Court passing that decree. It observed as under:

"A preliminary decree passed, whether it is in a mortgage suit or a partition suit, is not a tentative decree but must, in so far as the matters dealt with by it

RFA (OS) 16/2016 Page 9 are concerned, be regarded as embodying the final decision of the Court passing that decree,.........................".

This decision was relied upon in Gyarsi Bai & Ors v Dhansukh Lal & Ors AIR (1965) SC 1055 in which it was observed as under:

"It is true that a preliminary decree is final in respect of the matters to be decided before it is made. It is indisputable that in a mortgage suit there will be two decrees, namely preliminary decree and final decree, and that ordinarily the preliminary decree settles the rights of the parties and the final decree works out those rights."

12. The only argument, which the appellant/defendant urged in reply to the plaintiff's reliance on Section 97, was that the provision does not preclude a challenge to a preliminary decree after a final decree is made, if the former is a nullity. Now, that, in the Court's opinion is begging consideration. Besides urging Section 5 of the Arbitration Act, the defendant has nothing to show how the suit properly lay, because there is no dispute that the parties own equal share in the suit property. It has not been pleaded or proved that there exists an arbitration agreement, which precludes the disputes that were urged in the partition suit, from the jurisdiction of the civil court; nor was there any document to show that the Court's jurisdiction in the given facts of the case, was ousted. Besides a bland assertion of nullity, there is no explanation why the preliminary decree was never challenged before the final decree. The mere reliance on the interim orders, which in essence worked out the equities of the parties, to arrive at a working solution pendente lite, as it were, did not displace the undoubted jurisdiction of civil courts over partition claims. Therefore, the explanation of the appellant is

RFA (OS) 16/2016 Page 10 without merit. The appeal is consequently not maintainable.

13. Section 8 (1) of the Arbitration Act requires a judicial authority before which an action is brought in a matter which is the subject of an arbitration agreement, "if a party so applies not later than when submitting his first statement on the substance of the dispute", to refer the parties to arbitration. The other precondition to the said power is Section 8 (2), which provides that the application under sub-section (1) shall not be entertained unless it is accompanied by the original Arbitration Agreement or a duly certified copy thereof. Rashtriya Ispat Nigam Ltd. Vs. Verma Transport Co (2006) 7 SCC 275 held that the application under Section 8 of the Act filed after the filing of the written statement was not maintainable. It was also observed that 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 consequence unless the written statement itself contains a prayer for referring the disputes for arbitration. Both the two preconditions were not satisfied in the present case: the written statement filed by the appellant nowhere stated that the dispute pertaining to partition was precluded, as it was arbitrable; furthermore, no arbitration agreement to this effect was ever disclosed. Most importantly the defendant appellant never sought the relief of reference of the disputes pertaining to partition, under Section 8. Such being the case, there was no impediment to the civil court from proceeding to pass the preliminary or final decree. Even otherwise, the Court is satisfied that the disputes before the arbitral tribunal covers an entirely different set of facts and involve the resolution of other entitlements, i.e. the accounts and other matters pertaining to business of the firm. That the plaintiff was 50%

RFA (OS) 16/2016 Page 11 owner of the suit property was never in dispute.

14. Having regard to the above findings, this Court holds that this appeal is meritless; it is, therefore, dismissed. No costs.

S. RAVINDRA BHAT (JUDGE)

DEEPA SHARMA (JUDGE) APRIL 22, 2016

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