Delhi High Court
Mst. Shahnaz Begum vs Mohd. Naseem & Ors. on 15 January, 2019
$~
* IN THE HIGH COURT OF DELHI AT NEW DELHI
Reserved on : 13th December, 2018
Date of decision :15th January, 2019
+ O.M.P. 1405/2014
MST. SHAHNAZ BEGUM ..... Petitioner
Through: Mr. Anil K. Khaware & Mr. Virendra
Singh, Advocates (M-9810027839)
versus
MOHD. NASEEM & ORS. ..... Respondents
Through: Mr. Rahul Sharma, Ms. Jyoti Dutt
Sharma, Mr. C.K. Bhatt & Mr. Bilal
Ali, Advocates for R-1, 6, 7 to 9, 11,
18, 19, 20, 24 & 25 (M-9811555971).
Mr. Vishnu Mehra & Mr. Garva
Dhyani, Advocates for R-2 to 5, 10,
12, 22 & 23 (M-9811059674)
Mr. Anand Jha, Advocate for R-13 to
17 (M-98101476840).
CORAM:
JUSTICE PRATHIBA M. SINGH
JUDGMENT
Prathiba M. Singh, J.
1. The present petition by Mst. Shahnaz Begum has been preferred
under Section 14 of the Arbitration and Conciliation Act, 1996 for
termination of the mandate of the Sole Arbitrator, Sh. L.N. Malik, Chartered
Accountant, and seeks substitution of the said Arbitrator. The prayers sought
in the present petition are as under:-
"In the light of the above this hon‟ble court may be
pleased to:-
(i) terminate the mandate of sole Arbitrator Shri L.N.
Malik, Chartered Accountant as no fair hearing is
accorded to the petitioner and no procedure is being
followed, no materials/documents and no arbitral
records are made available to petitioner, no inspection
are granted and the hearings are conducted in secrecy
and clandestine manner and serious detriment is being
caused to the petitioner and as such the ld arbitrator
cannot be allowed to proceed in this manner and the
conduct of the arbitrator has rendered the ld
Arbitrator de jure and de facto incapable of conducting
the arbitral proceedings and substituted arbitrator may
be appointed in his place.
(ii) hold that the ld Sole Arbitrator has rendered himself de
jure incapable of conducting the arbitral proceedings
and hence termination of mandate of sole arbitrator is
necessary and it be held accordingly.
(iii) this hon‟ble court may also be pleased to direct that ld
arbitrator and other respondents to render the
complete accounts to the petitioner in respect of the
firm B.Shahbuddin & Co. since 1997 i.e at the time of
reconstitution of firm and subsequent dissolution of
firm till date depicting the shares and distribution with
specifics and complete particulars with existing assets
and current assets and the details of disposal of assets
and disbursement on the partners/legal heirs and
discharge of liability as debt of the firm, transfer and
exchange of assets between partners of the firm or to
any other entity and flow of fund in this regard, and
(iv) pass such other order as may be deemed necessary and
expedient in the interest of justice."
2. The background of the disputes that arise in the present application
are that one M/s. Baba Shahabuddin & Co. was established in the year 1949
by Late Mr. Babu Shahabuddin, who had four sons namely, Sheikh Noor
Mohammad, Sheikh Dost Mohammad, Sheikh Ghosh Mohammad and
Sheikh Faiz Mohammad. The partnership firm thus consisted of five
partners. The firm was reconstituted from time to time due to the
demise/retirement of various partners and as on 22nd December, 1997, the
following were the partners:-
S.N Name Percentage
1. Sheikh Dost Mohammad 15%
2. Sheikh Faiz Mohammad 10%
3. Mohd Shakeel 10%
4. Mohd Gulzar 17.5%*
5. Sheikh Ghosh Mohd 15%
6. Mohd Shakir 10%
7. Mohd Shain 7%
8. Mohd Naseem 15.5%*
(* indicated devolving of share of Late Sheikh Noor
Mohammad as devolved equally on the legal heirs of
Late Sheikh Noor Mohammad)
The firm was constituted upto 31st March, 1999.
3. The Petitioner belongs to the branch of Sheikh Noor Mohammad and
has signed the Family settlement. After his demise, his branch was
represented by Sheikh Mohd Gulzar. Thereafter this branch was represented
by Mohd. Iqbal. After the demise of Mohd. Iqbal in 2014, Mohd. Naseem
started to represent this branch. The Petitioner has an objection to Mohd.
Naseem's representation of the branch of Late Sheikh Noor Mohammad.
4. Disputes had arisen between the parties who formed part of the firm
and CS(OS) No. 1702/1999 came to be filed before this Court. A
preliminary decree dated 27th August, 2003 was passed for dissolution of the
partnership firm with effect from 1st April, 1999. Even after the preliminary
decree was passed, disputes arose in respect of distribution of the assets
amongst the various members, constituting different branches of the firm. A
settlement took place in October 2006 which was drawn up as a
Memorandum of Family Settlement dated 18th October, 2006.
5. The said Settlement records the various heirs of the original partners,
i.e. sons of Shahabuddin. It also records the various assets that are to fall in
the share of each of the parties. Distribution of the immovable assets was
also agreed to. Clause 10 of the Memorandum is relevant and is set out
herein below: -
"10. In respect of the following moveable and
immovable assets of the firm, B.Shahabuddin & Co.,
the Parties agreed as follows:
(i) Factory, Land and Building at D-33, TTC
Industrial Area, Turbe Telephone Exchange Road,
Navi Mumbai.
(ii) Office at 56, World Trade Centre, Cuffe Parade
Colaba, Mumbai.
(iii) Godown at Champasarai Mor, Siliguri.
shall be sold and all proceeds of the sale would be
credited to the account of B.Shahabuddin & Co. for (a)
discharge of all known third party liabilities of the
firm; and thereafter (b) for distribution amongst
partners and legal heirs of deceased partners in
accordance to their shares in their respective capital
accounts in B. Shahabuddin & Co. The Parties agreed
that the sale of all the assets would be made by mutual
consent of the four families represented respectively by
Mohd. Shahid, Mohd. Faisel, Mohd. Gulzar and Sheikh
Ghos Mohd. If the Parties cannot mutually agree, the
sale to a particular purchaser, the Parties would
advertise and call for bids and the same will be sold to
the highest bidder."
6. The said Family Settlement had an arbitration clause, which reads as
under: -
"ARBITRATION
23. The Parties agreed and hereby agree that in
the event of any dispute or difference in relation to or
arising out of the Family Settlement including this
Memorandum, all such disputes and differences shall
be referred to the sole arbitration of Mr. L.N. Malik,
Chartered Accountant having his office presently at
18/13, Western Extension Area, Karol Bagh, Delhi.
The venue of arbitration shall be New Delhi. The
award of the sole arbitrator shall be final and binding
between the Parties. The Parties further agreed that
more than one reference may be made to the sole
arbitrator as may be necessary. The arbitration shall
be governed by the Arbitration & Conciliation Act,
1996. The Parties or each of them shall be entitled to
seek specific performance of the Family Settlement as
recorded in this Memorandum. The sole arbitrator
shall be entitled to decide his own procedure and it
shall not be necessary for him to give any reason for
his award but any award must be consistent with the
spirit of the Family Settlement as recorded in this
Memorandum."
7. Pursuant to the Memorandum of Family Settlement, a decree was
passed after recording the same on 2nd November, 2006, in the pending suit.
8. According to the Petitioner, after the execution of the Family
Settlement, there has been no fair sale and distribution of assets and
accounts in respect of the sale and distribution have not been fully rendered.
The Petitioner has received some share but the same is not in any manner
proportionate to the large amount of assets which the firm, B.Shahabuddin
& Co. owned. The Petitioner, sometime in 2014 came to know that the
named Arbitrator, Sh. L.N. Malik, who was also the Chartered Accountant
of the firm, had started holding various proceedings and passing orders in
respect of the said proceedings. It is the Petitioner's case that not all the
wings of the family were duly represented before Mr. Malik. Moreover,
when Mohammad Gulzar expired on 23rd June, 2010, arbitration was
invoked in April 2014, and none of the notices were properly served upon
the Petitioner. The Petitioner raised repeated protests against Mohd.
Naseem being nominated as the representative of the family of Late Sheikh
Noor Mohammad. The Petitioner issued a notice to the learned Arbitrator
on 3rd June, 2014 which reads as under:
"To
Shri L.N MALIK,
SOLE ARBITRATOR
18/13, WEA, KAROL BAGH
NEW DELHI-110 005
Dear Sir,
We are concerned about our clients Shahnaj Begum
and Mehajabeen Begum (S.N 6 and 10 respectively)
as per purported letter of invocation of Arbitration
captioned as Mohd Naseem and Mst Shaheen Begum
& Ors. It appears from a purported letter of invocation
of alleged arbitration that the same is invoked by Mohd
Naseem and a letter to that effect was issued by Mohd
Naseem and also from your goodself on 10th May
2014.The date of arbitration was communicated as 12 th
May 2014. Though the time fixed was 11 AM, however,
it was taken up at 5 PM.
It is pertinent to mention that on the date of hearing i.e
12th May 2014 our associate counsels appeared before
you on behalf of aforesaid clients and filed
vakalatnama on behalf of our clients. Interim
application seeking the details were also filed and it
was also emphasized that no authority is being
bestowed on any person or persons by our clients in
respect of their claim. However, whereas vakalatnama
and the application was taken on record still no order
sheet was prepared and it was stated by ld Arbitrator
that vakalatnama shall have to contain further details.
Let it be stated that vakalatnama on behalf of our
clients is filed based on the letter of invocation by
Mohd Naseem and as per the names of our clients
shown in the list of the parties and in accordance with
the serial numbers. It is thus stated that the
vakalatnama is perfectly in order and there is no need
or occasion for filing any other vakalatnama. We are
authorized by our clients above- named in terms of
letter of invocation of arbitration and that is adequate.
In fact on that day itself i.e on May 12th 2014, after
conclusion of hearing, E Mail was
sent to your goodself on your ID
[email protected] which has not been
responded to by you so far. A copy of the print out of
the mail testifying the attached application and the
message is enclosed
herewith for ready reference as ANNEXURE A.
To maintain probity in the proceedings we request
your goodself to do the following:-
(i) Provide certified copy of complete arbitral
record as on today containing each and every
notices/references/pleadings, agreement
containing arbitration clause, high court records
which may have been in the record of this
tribunal including applications, replies,
documents, orders etc. and cost toward that may
be intimated to us for remittance.
(ii) Simultaneous to providing complete arbitral
record please also communicate the next date of
hearing
(iii) Permit inspection of entire arbitral record by us
The perusal of entire arbitral records are must as our
clients are not aware of any details in this regard other
than the letter of invocation without any documents
and only pursuant thereto our clients had caused
appearance through counsels on 12th May 2014.
Our client has already filed an interim application
raising some preliminary issues and seeking
documents and specifically emphasizing that it is to be
ascertained as to whether the arbitral tribunal is
properly constituted and in sync with purported
agreement. Our clients are not aware of terms of
agreement in this regard as the same has never been
provided to our clients and our clients are never made
aware about any such agreement or arbitral
proceedings. Upon receipt of the terms of agreement
and complete arbitral record, comprehensive
application and objections if necessary shall be filed,
since our client has no idea about arbitration and the
record of it. If the arbitral proceedings are ongoing
even on the date before the present invocation, then,
the present invocation by Mohd Naseem may be
untenable as thre cannot be multiple invocation of
arbitration in ongoing arbitration and if the invocation
by Mohd Naseem is the only invocation and there is no
arbitration proceedings initiated before, then too
arbitral record need perusal before adverting to the
issues raised therein. However, in the interim our
client has vide an application and the same was filed
on 12th May 2014 has already categorically stated that
no authority on their behalf are being conferred on any
one else.
It is also stated that the minutes of the proceedings be
recorded in the presence of counsels and signatures of
respective counsels or parties in person may be
obtained on the minute with a view to maintain probity
and fair play. It is no res integra that arbitrator is
creature of the agreement and therefore, terms and
tenor of it has to meticulously examined and necessary
issues as a corollary whereof the objections and
submissions of the parties can be raised and
adjudicated.
In the light of aforesaid we call upon your goodself to
communicate to us in relation to (i)(ii) and (iii) above
so as to enable us to take the issue raised herein to
logical conclusion by raising all such issues on behalf
of our clients which may be necessary for just disposal
of the matter.
A copy of this communication is retained in our office
for record purpose.
Thanking You
Your‟s Sincerely
Anil K Khaware
M/s. Anil K Khaware & Associates
ADVOCATES‟"
9. The Arbitrator replied vide email dated 19th June 2014 in the
following manner: -
"Dear Mr. Anil K. Khaware
Please refer to your notice dated 03rd June, 2014 sent
to me as the Arbitrator of M/s. B. Shahabuddin & Co.,
Delhi.
I have noted the contents of the said notice.
Since I was away from Delhi and likely to go again out
of Delhi, I would request you to keep the matter in
abeyance for ten days.
In the meanwhile, I assure you that justification shall
be done by this office to every body.
(L.N MALIK)
ARBITRATOR"
10. In the said notice, the Petitioner had asked for a certified copy of the
complete arbitral record, permission for inspection of the record and sought
that notice should be issued for the next proceedings. The Arbitrator was
also requested to record minutes of proceedings in front of the parties. The
Arbitrator merely sent a cryptic reply to the said notice, as extracted above.
Thereafter, further orders were passed by the Arbitrator, including on 16 th
July, 2014 and 2nd August 2014. The Petitioner has raised various
grievances against the said orders in e-mail dated 20th September, 2014. The
said e-mail reads as under:-
"This is in reference to my mail to you on 12th May
2014 and notice dated 3rd June 2014 and the
hearing dated 2nd August 2014 before yourself. This
is on behalf of and under instructions from my
below named clients.
It is to be stated that Application on behalf of our
clients Shahnaj Begum and Mehajbeen Begum was
filed before yourself inter alia for seeking details of
record, rendition of accounts and raising various
issues. The copy of the application was handed over
to all the parties present in the course of
proceedings on 2nd August 2014. However, I am yet
to receive the order sheet or any decision on the
application. The order sheet is not prepared at the
time of hearing despite my raiisng objection to the
said effect. Even no inspection of record is
provided, in spite of my written request. It is also
requested by me that certified copy of entire record
be supplied to me but no avail. More than four
months have elapsed since my request but nothing
is done in this regard. The applications dated 12th
May 2014 is also in limbo.
The arbitration is not being conducted in fair
manner and in fact the proceedings are just an eye
wash and the other respondents and vested interests
are using the proceedings as a camouflage to
perpetuate their misdeeds. Our clients are never
taken into confidence or was made to join
proceedings before 12.05.2014 and since then the
manipulations are evident. You are therefore
requested to act upon the application moved on
behalf of our client on 12th May 2014 and 2nd
August 2014 without delay.
Thanking you
Your‟s Sincerely
Anil K Khaware
ADVOCATE
Counsel for Shahnaj Begum and Meajbeen Begum"
11. Thus, the allegation of the Petitioner is that the arbitration is being
conducted with a veil of secrecy and without maintaining any proper
procedures and systems. The Arbitrator, who is also the Chartered
Accountant of the firm, B. Shahabuddin & Co. was also not informing any
of the parties as to the status of the accounts of the firm as also the amounts
received after the disposal of various assets of the firm. The Petitioner
severely apprehends that she may not be given her fair share in the assets of
the firm and accordingly seeks substitution of the learned Arbitrator.
12. On behalf of the Respondents, Mr. Vishnu Mehra, Mr. Rahul Sharma
and Mr. Anand Jha have been heard. They represent the heirs of Sheikh
Dost Mohammad, Sheikh Ghosh Mohammad and Mohd. Naseem. The
counsel for the Respondents submits that there is, in fact, no dispute
between the other members of the family and the entire dispute is only
amongst the family members constituting the branch of Late Sheikh Noor
Mohammad. Since the disputes are only between the said family members
inter se, the Respondents should not be made to participate in any arbitration
proceedings. Further, it is submitted that Mr. L.N. Malik is not an Arbitrator
but merely a facilitator, who is helping the parties. He is only functioning as
per the wishes of the parties.
13. Initially, when this petition was filed, notice was issued to the parties.
Vide order dated 26th October, 2016, the petition was dismissed. The said
order came to be challenged and vide order dated 2nd December, 2016, the
matter was remitted back to this Court. On 20th January, 2017 notice was
issued to Sh. L.N. Malik requiring the production of the entire arbitral record
and the orders passed by him from time to time. On 13 th July, 2018,
arguments were heard in part. Mr. L.N. Malik entered appearance and the
following orders were passed: -
"Arguments have been heard in part. The petition
seeks termination of proceedings before Mr. L.N.
Malik, Chartered Accountant who is the sole arbitrator
arbitrating the disputes between the parties. The
record, which has been placed on behalf of the
Arbitrator, has been supplied to all the parties. It is
directed that till the next date of hearing, none of the
assets of M/s B.Shahabuddin & Company shall be
dealt with and no third party interest shall be created
thereon.
Parties are directed to obtain exact pagination
of the court record and to file a written synopsis of
their submissions. The original arbitral record shall
be produced in the Court on the next date. Mr. Ajay
Verma, Advocate may make a copy of the arbitral
record and hand over the same to the Court Master.
List on 16th August, 2018."
14. Thereafter, the arbitral record has been filed in the form of a
compilation running into 253 pages. A perusal of the same shows that
primarily the Arbitrator has commenced the proceedings pursuant to the
invocation of arbitration by various members of the family. One order, for
example, dated 15th February, 2012 records as under: -
"Award:
15. The undersigned accordingly passed the following
arbitral award based on the agreement arrived at
between the parties:
(i) The following legal heirs of deceased Mohammad
Gulzar shall substitute him as parties to the
Memorandum of Family Settlement dated
18.10.2006:
(a) Iqbal Begum,
(b) Gulnaz Sheikh,
(c) Sarfraz Mohammad Sheikh,
(d) Mohammad Siraj and
(e) Sheikh Mohammad Salim
(ii) The said legal heirs of deceased Mohammad
Gulzar who substitute him as aforesaid shall step into
the shoes of late Mohammad Gulzar for all intents and
purposes and shall be entitled to do all acts, deeds and
things that may be required to give effect to and
conclude the family settlement arrived at on
18.10.2006 and subsequently reduced into writing by
way of the said Memorandum of Family Settlement.
In so far as the representation of the immediate family
of late Mohd. Gulzar is concerned there is consensus
amongst the legal heirs of late Mohd. Gulzar that they
will be represented by Mohd. Siraj. Ordered
accordingly.
(iii) In the said Memorandum of Family
Settlement, Mohammad Gulzar was the agreed
representative signatory on behalf of the family of Late
Sheikh Noor Mohammad. The parties consent and
agree that after the demise of Mohammad Gulzar, his
brother Mohammad Iqbal shall now be the
representative signatory of the family of Late Sheikh
Noor Mohammad and shall do all, acts deeds and
things that Mohammad Gulzar was required to do as
the representative signatory of the family of late Sheikh
Noor Mohammad to give effect to and conclude the
said family settlement. All the parties have appeared
before me and unanimously agreed to the appointment
of Sh. Mohd. Iqbal as joint signatory alongwith Sheikh
Ghos Mohammad, Mohammad Shahid and Mohammad
Faisal in terms of clause 10 of the family settlement.
The award is corrected /substituted therein above.
(iv) The parties have agreed that the word
„execution‟ be also added in paragraph 10 of the said
Memorandum of Family Settlement after the word
„sale‟ occurring in the said paragraph. Paragraph 10
of the said Memorandum of family Settlement stands
modified accordingly.
(v) The parties by overwhelming consensus were
of the opinion that a six months‟ time frame be given to
the signatories to complete the sale of all assets as
envisaged by the family settlement. However, since the
Hon‟ble High Court has already decreed the suit in
terms of the said family settlement, the addition on the
said time stipulation shall, according to the opinion of
the undersigned, not be within the domain of the
undersigned. However, parties are directed to make
earnest efforts to effectuate the sale of the assets within
six months and keep the undersigned informed of the
progress by filing monthly progress reports."
15. In the above `Award' Mr. Malik records as to who would be
representing the various branches of the family of partners of M/s. B.
Shahabuddin & Co. The records reveal that various orders have been passed
by the Arbitrator from time to time and the firm has also received notices
from the Income Tax Department. The record, though claimed to be
complete, does not show any systematic conduct of the arbitral proceedings.
The assets of the firm are being dealt with by the parties. It is not disputed
that Mr. Malik is also acting as the Chartered Accountant for the firm itself.
The Petitioner has clearly written repeatedly to the Arbitrator seeking copies
of the entire arbitral record, which the Petitioner states has not been
provided to her. Without making any comments on the Arbitrator's mandate
and whether he was, in fact, acting as Arbitrator, owing to the fact that he is
also the Chartered Accountant for the firm and is also known to the family
members, it is clear that the Petitioner and other Respondents have also
expressed lack of confidence in the Arbitrator. One such reply filed on
behalf of Respondents 13 to 17 is also perused by the Court. Clearly several
members of the family do not feel that the named Arbitrator is conducting
the proceeding impartially. The existence of the Memorandum of Family
Settlement is not in dispute. The existence of the Arbitration Clause is also
not in dispute. The Arbitrator clearly has an advisory or business
relationship with the firm and has been advising several branches of the
family. Under these circumstances, the grievance of the Petitioner appears
to be justified. The mandate of the Arbitrator is not clear nor is the scope of
the disputes raised. It is also unclear if any assets of the Firm were sold and
whether the accounts for the same have been fully rendered to all the
partners and their legal heirs.
16. The facts and circumstances in this case clearly show that the Ld.
Arbitrator Mr. Malik ought not to be permitted to continue as an arbitrator. The
Petitioner wrote several letters including letter dated 19 th December 2017
raising objections as to the impartiality of the Arbitrator as also clearly
informing the Ld. Arbitrator that she has not authorised anyone to represent
her. The said letter concludes by saying that the grounds raised therein ought to
be treated as objections under Section 12 and 13 of the Act. Despite these
objections, the Ld. Arbitrator continues to act in the matter. This is clearly
contrary to the provisions of the Act which require the Arbitrator to decide the
objections. An arbitration proceeding can clearly not proceed in this manner.
17. For the reasons stated above, the mandate of Mr. L.N. Malik, is
terminated. This Court appoints Justice Badar Durrez Ahmed (Retd), 14
Friends Colony West, Mathura Road, New Delhi - 110065,
([email protected]; M:07042205786), as sole Arbitrator to
adjudicate the disputes amongst all the parties. The Petitioner, and any other
party who wishes to raise any claims, is permitted to file its claims before the
learned Arbitrator, who shall proceed in accordance with law. The Ld.
Arbitrator is free to fix his own fee, in consultation with the parties.
18. List before the learned Arbitrator on 4th February 2019. Registry to
communicate a copy of this order to the Ld. Arbitrator. The OMP is
accordingly disposed of.
PRATHIBA M. SINGH
JUDGE
JANUARY 15, 2019
Sindhu/Agastya
