Bombay High Court
Philip Mammen vs Joseph Thomas on 13 March, 2024
Author: Bharati Dangre
Bench: Bharati Dangre
2024:BHC-OS:5225
1 CARBPL 20182-23 J.doc
IN THE HIGH COURT OF JUDICATURE AT BOMBAY
ORDINARY ORIGINAL CIVIL JURISDICTION
COMMERCIAL ARBITRATION PETITION (L) NO. 20182
OF 2023
Philip Mammen .. Petitioner
Versus
Joseph Thomas .. Respondent
...
Mr. Chetan Kapadia, Sr. Advocate with Sumit Rai, Dipesh Jain,
Stebin Mathew i/b A.V. Jain Associates for the petitioner.
Mr.Prathamesh Kamat i/b Apurva Mehta and Pohonerkar for the
respondent.
CORAM: BHARATI DANGRE, J.
RESERVED : 5th MARCH, 2024
PRONOUNCED : 13th MARCH, 2024
JUDGMENT:-
1 The present petition filed under section 37 of the Arbitration and Conciliation Act, 1996, being aggrieved by the order dated 5/7/2023 passed by the Sole Arbitrator, specifically raise a challenge to the direction to the respondent to deposit a sum of Rs.91,65,000/- (Rupees Ninety One Lakhs Sixty Five thousand) in a Fixed Deposit Account and the challenge is based on the ground, that the direction is based on erroneous finding, both in fact and in law.
Tilak ::: Uploaded on - 27/03/2024 ::: Downloaded on - 30/03/2024 11:49:11 ::: 2 CARBPL 20182-23 J.doc 2 I have heard learned Senior counsel Mr.Chetan Kapadia representing Philip Mammen (the respondent before the Arbitrator) and learned counsel Mr.Prathamesh Kamat representing Mr.Joseph Thomas, the claimant.
In order to understand the impact and effect of the direction issued by the Tribunal, it is necessary to briefly refer to the background facts.
Mr.Joseph Thomas (hereinafter referred to as 'Joseph' and Philip Mammen (hereinafter referred to as 'Philip') were friends, who indulged themselves into a joint business through the Albatross Shipping Agency (India) Pvt Ltd (for short 'the Company' and M/s.Albatross Marine Services, a registered partnership firm (for short 'the firm'). Joseph and Philip Mammen, each held 50% shares in the Company and both were equal partners in the firm.
Though they ventured into the business of Shipping and shipping related services together since 2008, sometime in late 2019, due to increase in difference of opinion amongst themselves on various issues, they fell apart and decided to split their existing joint business endeavours, to avoid any future disputes and to pursuing their independent enterprises, peacefully thereafter.
After extensive discussions and negotiations, parties entered into the Memorandum of Understanding, essentially to outline the modality for dividing their existing business and also Tilak ::: Uploaded on - 27/03/2024 ::: Downloaded on - 30/03/2024 11:49:11 ::: 3 CARBPL 20182-23 J.doc their own assets as well as the assets held by the two entities, and a Memorandum of Understanding (MOU) dated 6/2/2020 recorded the same.
3 The broad understanding in MOU inter alia, recorded that 'the Company' was to be entirely transferred to Joseph, whereas 'the firm' would be retained by Philip. The MOU also recorded the arrangements with respect to the ongoing business, operation of bank accounts, manner of dealing with specific tax liabilities and ongoing bank guarantees as well as the division of the assets and partnership. To achieve a near equal division of assets based on its value, as perceived by the parties, apportionment of assets was specifically agreed. The clause on "Division of Assets of the firm and the Company" of the MOU, categorically set out the entitlement of each of them and the Division was carved out in the following manner:-
Entitlement of Joseph Thomas or his nominees was set out to be the following Sr.No Name of the Asset/Property 1 2nd Floor, New Harileela House, Mint Road, Opp.G.P.O Mumbai 400001.
2 1D, Santhi Thottekatt Estate, Chittoor Road, Ernakulam, South, Kochi, Kerala 682 016.
3 M.V. Albatross 01 - Offshore Supply Vessel 4 M.V. Albatross 07 - Offshore Supply Vessel Whereas Philip or his nominee were held entitled to own, possess, operate and liable to hold the following properties Sr.No Name of the Asset/Property 1 7th Floor, New Harileela House, Mint Road, Opp.G.P.O Mumbai 400001.
Tilak ::: Uploaded on - 27/03/2024 ::: Downloaded on - 30/03/2024 11:49:11 ::: 4 CARBPL 20182-23 J.doc 2 3D, K.G. Oxford Business Center, Sreekandath Road, Ravipuram, Kochi, Kochi-6822015.
3 M.V. Albatross 5 - DP1 - AHTS 4 Both the parties accepted and agreed to render all/any necessary cooperation, help, assistance and information required to execute the conveyance in favour of the other party as agreed hereinabove.
In addition, it was agreed that the property identified as '2nd floor, New Harileela House, Mumbai', which has been mortgaged with Citizen Credit Co-operative Bank Limited, for the purpose of purchasing M.V. Albatross-5 will be cleared of all/any liabilities, loan mortgage, etc by 30/6/2020. 5 Disputes arose between the parties after the execution of this MOU, as a result Joseph filed CARBP 47/2022 which was disposed off by this Court on 1/3/2023, by nominating the Sole Arbitrator to decide the disputes and differences that had arisen under the MOU, and that is how Joseph filed his claim before the Arbitrator and Philip filed his Statement of Defence and Counter Claim along with his compilation, which was to be decided with the claim.
6 Joseph filed an application, requesting the Arbitrator to pass necessary directions pending the arbitration proceedings. By way of interim measures and the following reliefs were sought:-
Tilak ::: Uploaded on - 27/03/2024 ::: Downloaded on - 30/03/2024 11:49:11 ::: 5 CARBPL 20182-23 J.doc
(a) Pending hearing and final disposal of the present Arbitration, the respondent be restrained from selling, assigning, transferring, alienating or creating any third party rights in any form whatsoever in respect of the property situated at Unit no.7, 7th floor, New Harileela House, Plot no.239, Mind Road, 34/38, GPO, Fort, Mumbai 400001.
(b) Pending hearing and final disposal of the present Arbitration, the respondent be ordered and directed to deposit the sum of Rs.91,65,000/- along with interest amount of Rs.17,47,627/- (as on 15 th April 2023) in an interest bearing account;
(c) Pending hearing and final disposal of the present Arbitration, to Order an direct the respondent to disclose on oath all subsisting charges, encumbrances, mortgages in respect of their office at 7 th floor, New Harileela from the date of the MOU (6 th February 2020) till date of the Order.
(d) Pending hearing and final disposal of the present Arbitration, the respondent be directed to disclose on oath details of receivables/liabilities as set out in Clause B(v) of the Memorandum of Understanding dated 6th February 2020 as per Schedule A hereto.
(e) For such other reliefs as the Hon'ble Tribunal may award
(f) For costs of this Application, 7 It is on this application the Arbitrator passed the impugned order, the operative portion of which is to the following effect:-
"(a) The respondent is directed to deposit a sum of Rs.91,65,000/- in a fixed deposit account to be made in a nationalized bank. This Fixed Deposit shall be made within 3 weeks of this Order.
(b) Pending hearing and final disposal of this Arbitration, the respondent is restrained from encumbering, alienating and/or in any way dealing with the said Fixed Deposit of Rs.91,65,000/- in any manner whatsoever.
(c) The respondent through its Advocate shall notify the Chairman's advocates of the creation of the Fixed Deposit. A copy of the Fixed Deposit receipt will also be furnished to the Chairman's Advocate for their record. This must be done within a week of creation of the Fixed Deposit.
(d) A copy of this Order shall be served upon the Bank, apprising it that this Fixed Deposit has been created under this Order and is to the Tilak ::: Uploaded on - 27/03/2024 ::: Downloaded on - 30/03/2024 11:49:11 ::: 6 CARBPL 20182-23 J.doc credit of this arbitration. The Bank must also be apprised of the injunction restraining the respondent from encumbering, alienating and/ or in any way dealing with the Fixed Deposit in question. Both parties shall apprise the Bank and serve a copy of this order.
(e) The respondent shall intimate the Tribunal of the creation of the Fixed Deposit within an week of it being made.
(f) The respondent shall file an affidavit and disclose on oath, the details of the receivables/liabilities of the registered partnership firm Albatross Marine Services Ltd. The details shall be furnished in terms of Schedule A of the Section 17 Application. This disclosure shall be made within a period of two weeks from today."
Out of the aforesaid reliefs granted, the present petition, however, is focused upon the direction to deposit the amount as the consideration of the sale deed, though, it is informed that in good faith and without prejudice, a direction to file disclosure affidavit is complied.
8 According to learned counsel Mr.Kapadia representing Philip, the MOU recorded the understanding between the parties and the exchange agreed, and the terms of MOU form the respective consideration for each of the party, and none of the consequential transfers were reciprocated with monetary consideration, from one party to another. According to him, MOU on its terms, is expressly based on division of assets and liabilities basis without any flow of monetary consideration from one party to another and upon the transfer of assets in the firm, it was final and binding and no further consideration was left to be agreed, since the MOU recorded that the part of first part and second part, accept and agree to render necessary co-
Tilak ::: Uploaded on - 27/03/2024 ::: Downloaded on - 30/03/2024 11:49:11 ::: 7 CARBPL 20182-23 J.doc operation, assistance to execute the conveyance in favour of the other party, as agreed.
The learned Senior counsel has invited attention to the transfers, as contemplated by the MOU, and he would submit that in pursuance thereof, the second floor of New Harileela House, was assigned to Joseph and the transfer was affected without payment of any consideration and similar is the case of the property Santhi Thottekatt Estate, Chittor, which was also assigned to Joseph without any consideration.
On the similar lines, the 7th floor, New Harileela House accrues to the share of Philip, which was agreed to be transferred by a sale deed and though the document mention the consideration, the understanding was, while assigning the rights in 2nd floor, Harileela House, though the share certificate mention the consideration of Rs.24,37,500/-, no consideration was in fact to be paid. Similarly, another property in Kerala in form of K.G. Oxford Business Center is assigned in favour of Philip, in the wake of execution of the admission-cum-retirement deed dated 6/2/2022.
9 As regards transfer of business, the learned senior counsel would submit that the transfer of shares in name of Philip and Alex Mammen, in the Company in favour of Joseph by the Share Transfer Form also reflected the consideration of Rs.24,37,500/-, but no consideration was actually received by Philip.
Tilak ::: Uploaded on - 27/03/2024 ::: Downloaded on - 30/03/2024 11:49:11 ::: 8 CARBPL 20182-23 J.doc Similarly, when Philip acquired the rights, interest and claim in the business of the firm from Joseph, based on the admission-cum-retirement deed dated 6/2/2022, it was also sans consideration.
10 It is therefore contended on behalf of Philip that the second floor office which belong to the Company, and which was to go in favour of Joseph, did not require any conveyance to be signed by Philip, since the Company itself was transferred to Joseph/his nominee, whereas the 7th floor office which was assigned in MOU to Philip, being in the individual name of the parties, required appropriate documentation of transfer, to complete the transaction and the parties contemplated two options; first being either a Release Deed or Sale Deed for 50% of the share or Joseph to be transferred to Philip.
In furtherance thereof, on 19/10/2020, Philip by email forwarded draft of the proposed sale deed for discussion and he also sent another email, attaching a draft of release deed, mentioning that both options were open.
The Sale Deed left the blanks for consideration value to be inserted, but the Release Deed expressly mentioned that the transfer would be without any monetary consideration and the relevant clause included read thus:
"and now, whereas the releasor/transferor herein, without any monetary consideration wishes to release and transfer".
Tilak ::: Uploaded on - 27/03/2024 ::: Downloaded on - 30/03/2024 11:49:11 ::: 9 CARBPL 20182-23 J.doc This was followed on 12/11/2020 by another email from Philip mentioning that sale deed would entail 2% of stamp duty, whereas release deed would incur 5% stamp duty and he was ready for either. However, there was an exemption/ concession on account of the Covid on the stamp duty on sale deed and therefore, it was agreed between the parties that the transfer should be effected through sale deed, and since the market value of 50% of the share at the relevant time as per ready reckoner, was estimated to be Rs.91,52,005.5 and therefore, sale consideration of Rs.91,65,000/- was mentioned in the deed for the purpose of stamp duty. The sale deed expressly recorded that the entire consideration was already paid and it was accompanied with a full and final receipt signed by Joseph.
According to Mr.Kapadia, this was in tune with the arrangement between the parties, as recorded in the MOU, which required no additional consideration, to be paid while the exchange takes place between the parties, since they had decided to split the running business.
11 It is thus the case of the petitioner, that no consideration was demanded, nor paid by the other side in the wake of the understanding between themselves. Immediately, after the sale deed, the vessel M.V. Albatross 5 was also transferred in name of Philips, in compliance of the MOU, and this happened without any grievance on account of non payment of any kind. However, on account of some disputes in relation to Tilak ::: Uploaded on - 27/03/2024 ::: Downloaded on - 30/03/2024 11:49:11 ::: 10 CARBPL 20182-23 J.doc ONGC contract, Joseph changed the track and for the first time, on 11/2/2021, claimed that he was entitled for the consideration in the sale deed and it had not been paid.
As per Mr.Kapadia, the issue was raised for the first time in Arbitration notice dated 8/1/2022 which was responded at the end of Philip, by clearly reminding, that there was never an agreement or understanding regarding the amount, and the demand was a result of wild imagination to wreck up concocted claim of such colossal amount.
12 Contradicting him, Mr.Kamath representing the claimant Joseph, in whose favour the Tribunal has issued directions, would lay his emphasis on the sale deed executed, and he would submit that it has clearly recorded that the purchaser/transferee has agreed to accept all rights, title and interest of the vendor/ transferor, and clause 2 and 3 specifically record as under.
"2 The PURCHASER/TRANSFEREE has agreed to accept all the rights, titles and interests of the VENDOR/TRANSFEROR in respect of his 50% Undivided Share in the said Unit with all its benefits and entitlements. The VENDOR/TRANSFEROR shall transfer and assign to the PURCHASER/TRANSFEE all his 50% Undivided Share in the said Unit with its rights, titles, interests, claims, demands and benefits in respect of the said Unit for a total consideration of Rs.91,65,000/- (Rupees Ninety One Lakhs Sixty Five Thousand only), subject to the deduction of the necessary Tax Deduction at Source (TDS) payable as per Income Tax Act.
3 The PURCHASER/TRANSFEREE has paid the entire sale consideration amount of Rs.91,65,000/- (Rupees Ninety One lakhs Sixty Five Thousand only), subject to the deduction of the necessary Tax Deduction at Source (TDS) payable as per Income Tax Act, to the party of the first part i.e. the VENDOR/ TRANSFEROR."
Tilak ::: Uploaded on - 27/03/2024 ::: Downloaded on - 30/03/2024 11:49:11 ::: 11 CARBPL 20182-23 J.doc Reading the aforesaid clauses along with clause 18, recording that the registration charges, stamp duty and other government charges in respect of the sale deed, shall be paid by the purchaser alone and a clear recording, to the effect that any earlier liability outstanding relating to the 50% undivided share in the unit shall be cleared by the vendor, Mr.Kamat would refer to the receipt annexed along with the sale deed, to submit that it reflects that the purchaser was obliged to pay the consideration of Rs.91,65,000/- as full and final sale consideration price of the 50% undivided share. According to him, even the draft sale deed, which was sent by Philip mention the consideration and therefore, according to him, to suggest that it was not liable to pay the amount, is absurd, so is the stand taken that the sale deed was in lieu of the release deed, as reading of the sale deed, it indicate otherwise.
13 According to Mr.Kamath, this aspect was carefully examined by the Arbitrator, by recording that the respondent is not relying on any contractual provision in the sale deed, which relieves him from paying the sale consideration and there is no clause in the MOU that is inconsistent with the stated contractual obligation, to pay the sale price under the sale deed, and other than the bare pleading of affidavit, there is no indication of the same to the contrary. Hence, the Arbitral Tribunal and rightly according to Mr.Kamat, recorded the balance of convenience in favour of claimant's favour by directing the amount to be Tilak ::: Uploaded on - 27/03/2024 ::: Downloaded on - 30/03/2024 11:49:11 ::: 12 CARBPL 20182-23 J.doc deposited, and to be invested in a Fixed Deposit. According to him, this direction in no way, prejudice Philip, as the Tribunal did not in fact direct the amount to be paid to the claimant. 14 Apart from the above, Mr.Kamath has laid his emphasis on the scope of interference by this Court in a petition u/s.37 of the Act of 1996 and he would submit that while dealing a challenge u/s.34, the Court is expected to go into the facts and law on every aspect and substitute its opinion in place of the one recorded by the Arbitral Tribunal, but the only thing the Court need to see whether the order passed by the Tribunal is plausible, and once it is found to be so, the Court shall not interfere with the discretion exercised by the Arbitrator.
He would place reliance upon the decision of Apex Court in case of Wander Ltd. And Anr. vs Antox India P. Ltd ,1 as well as the decision in case of Raymond Ltd Vs. Akshaypat Singhania and Anr,2 and Karan Kirti Thakkar and Anr Vs Badri Narayan Baldawa and ors in CARBPL 4730/2023.
Yet another point on which Mr.Kamat would focus his attention is the test of Order 38 Rule 5, and he would submit that this Test has no application in a petition under section 9 or section 17, and he has relied upon the following decisions:-
(i) Jagdish Ahuja & Anr Vs. Cupino Limited (2020 SCC Online Bom 849) (Paras 6 to 8) 1 1990 Supp SC 727, 2 2019 SCC online 227 Tilak ::: Uploaded on - 27/03/2024 ::: Downloaded on - 30/03/2024 11:49:11 ::: 13 CARBPL 20182-23 J.doc
(ii) Essar House Private Limited Vs. Arcellor Mittal Nippon Steel India Ltd (2022 SCC Online SC 1219) (Paras 30, 40 to 50)
(iii) J.P. Parekh & Anr Vs. Naseem Qureshi and Anr (2022 SCC Online Bom 6716 (Paras 55 to 68, para 68)
(iv) Karanja Terminal & Logistics Pvt Ltd Vs. Sahara Dredging Ltd (2023 SCC Online Bom 594) (Para 6.2, 6.3, 7.1, 7.2, 7.4 and paras 14-15) He would thus submit that the Tribunal is not bound by the rigors of Order 38 Rule 5 in passing the order under section 17, as the principles enumerated in the Code of Civil Procedure can only provide guidance to the Tribunal, but definitely not create fetter on discharge of its discretion.
15 In the wake of the aforesaid, when the impugned order is looked at, what is worth to note is, the respondent, Philip before the Tribunal confined to one defence i.e. that the MOU does not contemplate and/or stipulate that any monetary consideration is payable to the claimant to give effect to the transfer of the property, or to give effect to any other clauses thereto. The Tribunal also focused upon the arguments advanced for exercise of the power under Order 38 Rule 5 and arrived at a conclusion that the claimant made out a prima facie case for issuance of directions to deposit the amount as set out in the sale deed, and for this, it reasoned as under:
"30 The Sale Deed has been voluntarily signed and executed by the parties. It stipulates a price for the transfer of the Claimant's share. Since this document is undisputed, it carried a strong presumption that it correctly and accurately captures the bargain struck between the parties.
Tilak ::: Uploaded on - 27/03/2024 ::: Downloaded on - 30/03/2024 11:49:11 ::: 14 CARBPL 20182-23 J.doc 31 I find it difficult to accept the respondent's contention that the same was not intended to be acted upon. The pre- contract correspondence to my mind has little bearing since parties ultimately executed a Sale Deed with a price. Pertinently having examining the draft Sale Deed and especially the draft receipt attached thereof forwarded by the respondent to the Claimant, the same has blanks for inserting the Cheque numbers. This in fact bolsters the Claimant's case that this Deed was for monetary consideration since it suggests that the Respondent (from whom the draft emanated) too was of the view that consideration (via cheques) was payable. The entreaties to consider a release deed appear to have emanated from the respondent along with no response from the Claimant. Other than the respondent's bare pleading and unilateral correspondence, there is no material to suggest that the Claimant had agreed that the price in the Sale Deed was not to be paid but was only to be recorded for stampy duty purposes."
16 Dealing with the contention of the respondent before it, that the MOU does not expressly speak of any monetary consideration for transfer of 7th floor, was not accepted, by recording that it does not preclude it either and in fact, it expected conveyance to be executed in furtherance of the understanding, and this is why the sale deed is executed which mention consideration and therefore, the stand of the respondent that the sale deed was only recorded for the purpose of assessing stamp duty and no monetary consideration is payable, was not accepted.
Amongst the decision cited before it, and particularly in the decision of J.P.Parekh & Son & Anr Vs. Naseem Qureshi and ors (supra), the learned Arbitrator referred to the decision in case of Essar House Private Limited Vs. Arcellor Mittal Nippon Tilak ::: Uploaded on - 27/03/2024 ::: Downloaded on - 30/03/2024 11:49:11 ::: 15 CARBPL 20182-23 J.doc Steel India Limited,3 and felt bound by it and issued the necessary direction of deposit.
17 It is no doubt true that the scope of interference in an Appeal under Section 37 is limited, and if the view of the Tribunal is a plausible view and does not suffer from any perversity, requiring interference, then the Court shall not assert its jurisdiction and it is based on the underlying principle of minimal interference by the Court, which is obvious from Section 5 of the Arbitration Act. Undisputedly, the scope available to the Court is to look into as to whether the order passed by the Tribunal, was a possible view, based on facts and once this test is satisfied, it shall not interfere with the discretion exercised by the Tribunal.
However, on examining the impugned order passed by the Tribunal, I have arrived at a conclusion that the outcome derived by the Tribunal is not the plausible view and in fact, it suffers from perversion, as it travels beyond the understanding between the parties, which is reflected from the MOU.
The sale deed is a document which the Tribunal ought to have read along with the MOU, since it followed the understanding recorded in the former. The Memorandum of Understanding is executed in the backdrop that two families were doing business together and they decided to part their ways and executed the document for giving effect to this separation.
3 2022 SCC Onlie SC 1219 Tilak ::: Uploaded on - 27/03/2024 ::: Downloaded on - 30/03/2024 11:49:11 ::: 16 CARBPL 20182-23 J.doc By virtue of this, the Company i.e. Albatross Shipping India Pvt Ltd, was agreed to be transferred to Joseph, whereas the firm accrued to the share of Philip. The MOU also recorded the understanding, as regards the other important aspects like ongoing business, operation of bank accounts, tax liabilities, ongoing bank guarantees and also division of the assets of the Company and the partnership.
From reading of the MOU, it is evident that Joseph owed huge amounts to the Firm, and when he agreed to transfer the share in favour of Joseph, he did not receive any consideration and it is in this course of understanding, the second floor, Harileela House was agreed to be transferred in favour of Joseph by transfer of Share Transfer Form, along with the Albatross Offshore Supply Vessel, where the consideration in the document was mentioned to the tune of Rs.24,37,500/-, but in fact, never paid and therefore, when the 7th floor, in the Harileela House, as per the MOU, is transferred in favour of Philip, and this property in the name of the individuals, Joseph agreed to transfer his 50% share in favour of Philip, to enjoy its 100% ownership, and the consideration was formally mentioned in the document with intention to pay.
18 In the Interim Application filed before the Tribunal by the claimant, with a pleading that a sum of Rs.91,65,000/- has not been paid as his outstanding as receivables from the respondent, in paragraph no.4, he pleaded that 7 th floor, New Tilak ::: Uploaded on - 27/03/2024 ::: Downloaded on - 30/03/2024 11:49:11 ::: 17 CARBPL 20182-23 J.doc Harileela House was jointly in the ownership of the claimant and respondent, in their personal capacity and therefore, a sale deed was executed on 26/11/2020 for transfer of the claimant's share and as provided in the sale deed, a consideration of Rs.91,65,000/- and he pleaded that the consideration was agreed to be paid once the claimant executed documents for relinquishing its rights in M.V. Albatross 5, which was again jointly owned by the parties, but despite occurrence of this event, the consideration was not paid and he was pressurized to sign and execute the sale deed, and what is pleaded in the application is very relevant and must be reproduced:-
"Claimant was in dire need of funds at the relevant time and therefore, had no option but to accept respondent's representation but to accept respondent's representation that payment would indeed by made, however, only after the execution and registration of the sale deed. The claimant later realized that the respondent had fraudulently obtained his signature on the receipt of consideration of Rs.91,65,000/-"
It is also pleaded that he filed a grievance complaint with Joint Sub-Registrar, Mumbai City on 11/2/2021, calling for cancellation of the deed and also lodged a complaint with MRA Marg police station on 15/2/2021. The aforesaid allegation is responded to, by Philip in his detail reply before the Tribunal, when he specifically pleaded that the claimant is guilty of suppresio veri and suggestio falsi, as he had made incorrect and false statements, knowing fully well that it was false and bogus and suppressed the relevant facts and documents, which are relevant.
Tilak ::: Uploaded on - 27/03/2024 ::: Downloaded on - 30/03/2024 11:49:11 ::: 18 CARBPL 20182-23 J.doc The reply specifically pleaded as below:-
(a) The Claimant retired from M/s.Albatross Marine Services ("the Firm" with effect from 06/02/2020 and his capital account as per the books of accounts of the Firm as on 6th February 2020 was in the negative of Rs.76,19,699.38. The said amount of Rs.76,19,699.38 was to be payable by the Claimant to the Firm. Hereto annexed and marked as Exhibit A collectively are the copies of the Balance Sheet and Profit and Loss Account of the Firm for the financial years, 2016-17, 2017-
18, 2018-19, and Exhibit B is the copy of the Ledger account of the Claimant's Current Account in the books of the Firm.
(b) At the request of the Claimant and under the terms of the MOU, the respondent transferred his shares in the Albatross Shipping Agencies (India) Private Limited ('the Company') in respect of corresponding Share Certificate No.3 in favour of Mrs.Sharlet Joseph for consideration of Rs.24,37,500/- and corresponding Share Certificate Nos.3 in favour of Ms.Jeslin Joseph for consideration of Rs.24,37,500/-, both of whom have been nominated by the Claimant in terms of clause B(ii) of the said MOU. Hereto annexed and marked as Exhibit 'C' and 'D' are the copies of the respective Forms SH4 (Securities Transfer Forms). The respondent has till date not received the said consideration of Rs.48,75,000/- (Rupees Forty Eight Lac Seventy Five Thousand only) either from Ms.Jeslin Joseph, Mrs.Sharlet Joseph or the Claimant."
19 An email addressed to the claimant Joseph on 19/10/2020 is necessary to be taken note of and it reads to the following :-
"Dear Sir, Please find herewith Sale deed of 7th floor.
Please advise any change.
Albatross 5 withdrawal is already submitted to MMD. Need to come to MMD for signature.
Thanks Regards."
The same was accompanied with a draft of sale deed, and worth it to note that the consideration amount in the said Tilak ::: Uploaded on - 27/03/2024 ::: Downloaded on - 30/03/2024 11:49:11 ::: 19 CARBPL 20182-23 J.doc document is not mentioned and the column is left blank. Another email address to Joseph/claimant on 19/10/2020, gave an option to either execute the sale deed or the release deed, and the draft of the same was also forwarded, which clearly record that the releasor/transferor is transferring his 50% undivided share by the release deed, as he is absolute owner and in possession of the same.
The reply thereto is also accompanied with another email dated 3/11/2020 at the end of Philip to Joseph and Jasline, reminding of execution of necessary document for transfer of 7th floor, either by release deed or sale deed as release deed, invited 4% stamp duty and sale deed invited 2% stamp duty, though it was indicated that he was comfortable with both.
However, it appear from the subsequent communications that the claimant was dragging his feet, but ultimately, the sale deed was executed on 26/11/2020, for which Philip paid the stamp duty for Rs.Six lakhs, and there is also a receipt accompanied with the said document, which is signed by Joseph, acknowledging receipt of Rs.91,65,000/- towards full and final sale consideration price of the 50% undivided share in Unit No.7, New Harileela House.
20 After the execution of this sale deed and receipt having been signed, as an after-thought, the claimant turned around and alleged that he never received the amount.
Tilak ::: Uploaded on - 27/03/2024 ::: Downloaded on - 30/03/2024 11:49:11 ::: 20 CARBPL 20182-23 J.doc The Tribunal ought to have questioned him as to without receipt of the consideration, how did he signed the receipt.
An attempt is made on behalf of the claimant to plead coercion, and if the claimant wants to stick up to his plea of coercion, then the agreement itself would be rendered void and not capable of being performed. However, the Sole Arbitrator has chosen to accept this plea of coercion and directed enforcement of a contract in form of sale deed, by directing payment of sale consideration, in ignorance of the fact that the sale deed is executed in furtherance of MOU and therefore, the correspondence exchanged between the parties, must be reflected upon.
Here, the Sole Arbitrator has fallen short of the requirements and rendered perverse finding, merely referring to the Application filed by the claimant, but without looking into the correspondence exchanged between the parties, which is clearly reflective of the intention and the understanding between them. If the sale deed is in furtherance of the MOU, and it prima facie appear to be so, since several other properties are transferred in favour of the claimant without any consideration, in that case, it was imperative for the Sole Arbitrator to give effect to the understanding between the parties. If not, then there is already a receipt signed where the claimant has acknowledged the receipt of sale consideration and therefore, at this stage, directing the Tilak ::: Uploaded on - 27/03/2024 ::: Downloaded on - 30/03/2024 11:49:11 ::: 21 CARBPL 20182-23 J.doc deposit of the amount, though in a fixed deposit, does not serve the rightful purpose of the claim staked before the Tribunal, that the sale consideration was never received. Ultimately, this aspect in discerning the real intention between the parties, shall await a matter of trial.
21 Essar House Pvt Ltd (supra), no doubt has held that Section 9 of the Arbitration and Conciliation Act, 1996, confers wide power on the Court to pass order, securing the amount in dispute in arbitration whether before commencement during the arbitral proceedings, or at time after making the award, but before its enforcement, and all that the Court is required to see whether the applicant, for interim measures has a good prima facie case, whether the balance of convenience is in favour of the interim relief, as prayed for, and whether the applicant has approached the Court with reasonable expedition. It is specifically held that if a strong prima facie case is made out and if the balance of convenience is in favour of the interim relief being granted, the Court exercising the power u/s.9 shall withheld the relief on the mere technicality of absence of averments, incorporating the grounds for attachment before judgment under Order 38 Rule 5 and the proof of actual attempts to deal with, remove or dispose off the property, with a view to defeat or delay the realization of impending arbitral award is not imperative for grant of relief u/s.9, but a strong possibility of diminution of assets would suffice.
Tilak ::: Uploaded on - 27/03/2024 ::: Downloaded on - 30/03/2024 11:49:11 ::: 22 CARBPL 20182-23 J.doc What is also importantly recorded in the very same judgment is, "to assess the balance of convenience". The Court is required to examine and weigh the consequences of refusal of interim relief in favour of the applicant in case of success in the proceedings, against the consequences of grant of interim relief in favour, in case the proceedings should ultimately fail. 22 Relying upon the earlier precedents on the subject, in case of J.P.Parekh and Sons and Anr, a decision delivered by me in CARBP 629/2021, it was specifically observed as under:
"25 The position of law thus stands crystallized in the above manner and the inference which could be gainfully drawn from the authoritative pronouncement, is that the provisions as contained in Section 9 and 17 of the Arbitration Act, 1996 are meant for protecting the subject matter of the dispute till the arbitration proceedings culminate into an Award. The court is also entitled to consider whether denial of such order would result in great prejudice to the parties seeking such protective order. The obstructive conduct of the party against whom such direction is sought, is also to be recorded as material consideration, apart from the most important element whether there is practically no defence to the payibility of the amount, and therefore, it is only in the interest of justice to secure the amount, which forms part of the subject matter of the proposed arbitration reference and in such case, it is certainly, within the power of the Court to order suitable interim measures for its protection.
The apprehension expressed in Para 51, based on the correspondence, exchanged by respondent nos.1 and 2, is sufficient to secure the claim of the petitioners by invoking Order XXXVIII Rule 5 of CPC, particularly in absence of specific denial of the claim and since now the MCGM has granted substitution of the petitioner firm by another Architect."
23 In any case, without recourse to the necessary elements contemplated under the Code of Civil Procedure, while exercising order under Order 38 Rule 5, definitely the Arbitrator ought to have considered prima facie case, balance of convenience and irreparable loss elements before it issued the direction to Tilak ::: Uploaded on - 27/03/2024 ::: Downloaded on - 30/03/2024 11:49:11 ::: 23 CARBPL 20182-23 J.doc deposit the amount, though admitted that Order 38 Rule 5 may not strictly apply in the context of arbitration, definitely the underlying principles would govern the exercise of discretion in granting interim order and therefore, it was imperative for the Tribunal to consider the necessity of the order, directing deposit of the claim amount. Admittedly, neither any apprehension nor any accusation was placed before the Arbitral Tribunal to demonstrate that the respondent before it, has in the past, done anything to obstruct or delay execution of any potential award or that in future, it may do so.
However, as a routine matter, the Tribunal directed to deposit the amount. An order of deposit was thus passed without supporting material, when the understanding between the parties was required to be discerned, and which was in fact, placed before it in form of the correspondence exchanged, but the Tribunal has completely ignored the same, or selectively read it to misapply. The Tribunal has completely ignored the context of the MOU, the expressful and final receipt of the sale deed, and abruptly came to a finding and recorded " Prima facie, there is practically no substantial defence to the application for this relief". 24 The above finding runs contrary to the material on record and is unsustainable, in the background facts that the understanding between the parties was clearly recorded in the Memorandum of Understanding and the sale deed was executed in pursuance thereof, the Tribunal has misapplied itself, in Tilak ::: Uploaded on - 27/03/2024 ::: Downloaded on - 30/03/2024 11:49:11 ::: 24 CARBPL 20182-23 J.doc reading the sale deed in utter isolation, and in ignorance of the background i.e. the understanding between the parties recorded in the MOU which provided for a crafted division of assets, without any monetary consideration, as agreed between the parties, and instead of considering whether the MOU permits additional consideration to be demanded to give effect to it, the Tribunal has posed a question whether the MOU expressly prohibits it and by posing an erroneous question, it has no doubt answered it accordingly.
The Tribunal has failed to consider that the subject sale deed is not an independent document, it follows the MOU and though at the time of it's execution, the claimant did not raise any disputes about non-receipt of the sale consideration, but it was raised as an after-thought. The said plea is raised in ignorance of the correspondence between the parties after execution of the MOU leading to the signature of the sale deed, and this aspect definitely deserve appreciation during the course of the trial.
Hence, since I am of the opinion that the Tribunal has misguided itself on facts as well as on law, in issuing the direction of deposit, and the conclusion drawn being perverse, not based on the relevant material which was placed before it, the order definitely warrants interference in exercise of power u/s.37 and therefore, the impugned order cannot be sustained and it is set aside.
Tilak ::: Uploaded on - 27/03/2024 ::: Downloaded on - 30/03/2024 11:49:11 ::: 25 CARBPL 20182-23 J.doc CARBPL No. 20182 of 2023 is allowed.
( SMT. BHARATI DANGRE, J.) Tilak ::: Uploaded on - 27/03/2024 ::: Downloaded on - 30/03/2024 11:49:11 :::