Calcutta High Court
Rajeev Maheshwari And Ors vs Indu Kochar And Ors on 7 November, 2014
Author: Arijit Banerjee
Bench: Arijit Banerjee
In The High Court At Calcutta
Ordinary Original Civil Jurisdiction
Original Side
GA 2826 of 2013
CS 328 of 2013
Rajeev Maheshwari and Ors.
Vs.
Indu Kochar and Ors.
Present : The Hon'ble Justice Mr. Arijit Banerjee
For the petitioners : Mr. Hirak Mitra, Sr. Adv.
Mr. Sakya Sen, Adv.
Mr. Saunak Mitra, Adv.
Ms. Noelle Banerjee, Adv.
Ms. Debjani Chatterjee, Adv.
For the respondents : Mr. Ranjan Deb, Sr. Adv.
Mr. Jishnu Saha, Adv.
Mr. Pratik Ghosh, Adv.
Mr. Sayak Mitra, Adv.
Heard on : 08/08/2014 and 20/08/2014
Judgment on : 07/11/2014
Arijit Banerjee, J.
(1) By way of this application the petitioners seek to restrain the respondents from proceeding with the arbitration initiated by the respondents against the petitioners which is pending before the Arbitral Tribunal. Both the petitioners and respondents agree that the result of this application will depend on a true and proper construction of three orders passed by this Court on December 23, 2011, March 13, 2012 and October 11, 2012. Before coming to the said orders, it will be necessary to note the factual matrix of the case in brief. (2) One Mohon Lal Maheshwari and one Mohan Lal Kochar carried on business in co-partnership under the name and style of Bharat Industries and Commercial Corporation (in short 'BICC'), in terms of a partnership deed dated 23rd December, 1972.
(3) Mohan Lal Maheshwari died in 1984 and as a result the partnership stood dissolved ipso facto.
(4) Mohan Lal Kochar died in 1992. In 1995 the heirs of Mohan Lal Kochar filed an application under Section 20 of the Arbitration Act, 1940 against the heirs of Maheshwari to refer certain disputes to arbitration. (5) Prior to his death, Mohan Lal Kochar had assigned his one-half share in the assets and liabilities of the dissolved firm by an agreement for sale dated 26th December, 1990 in favour of one Om Prakash. The said Om Prakash transferred his beneficial interest acquired from the said Mohan Lal Kochar in favour of one Kishan Mimani by a deed of transfer in May, 1991. The said Kishan Mimani filed a suit for specific performance of the said agreement for sale in this Court being CS No. 510 of 1993. The said suit is still pending.
(6) By an order dated 5th September, 2007, Sanjib Banerjee, J. allowed the Section 20 application being Special Suit No. 9 of 1995 filed by the heirs of Mohan Lan Kochar and directed filing of arbitration agreement contained in the said partnership deed in respect of disputes between the parties covered by the arbitration agreement.
(7) According to the Maheshwaris, the properties of the firm were only one, namely, land being Premises No. 8 B.T. Road, Calcutta. There were two other tenancies, one at Tower House being office premises and Premises No. 46 Park St. a residential property exclusively used by the Maheshwari family. (8) The Maheshwaris filed a suit in 2010 being CS No. 195 of 2010 in which they claimed that the right of the Kochars in respect of the partnership firm stood extinguished under Section 27 of the Limitation Act. In the said suit, the Maheshwaris claimed a declaration that the defendants (which include Kishan Mimani) did not have any right title or interest in respect of the dissolved partnership firm BICC including its assets and permanent injunction restraining the defendants from claiming any right, title or interest in the properties of the said firm.
(9) The Kochars took out an application under Section 8 of the Arbitration and Conciliation Act, 1996 for reference of the disputes in CS No. 195 of 2010 to arbitration. By a judgment and order dated May 6, 2011, Sanjib Banerjee, J. allowed the said application and referred the disputes in the suit to arbitration in accordance with the arbitration clause contained in the deed of partnership dated December 23, 1972.
(10) The Maheshwaris and Kishan Mimani filed separate appeals against the judgment and order dated May 2, 2011. By a judgement and order dated 23rd December, 2011 the Division Bench allowed the appeals and set aside the judgment and order of the Ld. Trial Judge. The operative portion of the judgment and order of the Division Bench is set out hereunder:-
"Under those circumstances we are unable to accept the judgment and order of the Ld. Trial Judge.
It appears that Mimani has also filed a suit for specific performance. The court is to consider the balance of convenience also while passing order of reference. While doing so in this case we hold that it is not a case where domestic forum would be appropriate as one of the parties to this suit would be deprived of having access to justice, but in the court in this suit all parties are free to approach whatever way they like the Court for justice. In view of discussion as above we are unable to sustain the judgment and order of the Ld. Trial Judge passed under Section 8 of the Act. Accordingly we allow this appeal and set aside the judgment and order of the Ld. Trial Judge. We think that this suit as well as the suit filed by Mimani for specific performance of the agreement for sale ought to be heard analogously."
(11) From the judgment and order dated 5th September, 2007 passed by Sanjib Banerjee, J. allowing the application of the Kochars under Section 20 of the Arbitration Act, 1940, an appeal was preferred by the Maheshwaris which was disposed of by the Division Bench by its judgment and order dated March 13, 2012. The operative portion of the said judgment and order is set out hereunder:
"In view of the aforesaid discussion we think that Ld. Trial Judge has rightly held that the disputes in the petition between the parties are referable to Arbitration. Thus we are unable to accept the argument of the Ld. Counsel for the appellants on any of the points urged on this issue.
We, therefore, uphold the judgment and order except the portion we modify that dispute in relation to the agreement for sale of 50% of the rights of the Kochar in favour of Kishan Mimani being the assignee cannot be the subject-matter of the Arbitration since two separate suits are pending for adjudication of their disputes. This court by earlier judgment and order held reversing the order of the Ld. Trial Judge, that those disputes are to be decided in the suit itself. However, parties are given liberty, if they think that the suit filed by the creditors and the suit in relation to this agreement for sale are required to be resolved first and thereafter their disputes should be resolved, they are at liberty to take steps in accordance with law. Thus the appeal fails and the same is dismissed, however, with little modification of the judgment and order of the Ld. Trial Judge as aforesaid."
(12) In the year 2012, the Kochars took out an application under Section 20(4) of the Arbitration Act, 1940 being AP No. 493 of 2012 for appointment of an arbitrator for and on behalf of Maheshwaris. The said application was allowed by Sanjib Banerjee, J. by a judgment and order dated 11th October, 2012, the operative portion whereof is set out hereunder:-
"The arbitral reference that can now take place will be limited in its scope in view of the appellate order of March 13, 2012. The arbitral reference can no longer accommodate all the disputes that may have been covered by the arbitration agreement, since certain matters have been excepted from the reference by the appellate order. Since there is no appeal from the appellate order of March 13, 2012, it has become binding on the parties herein. The binding effect of the order cuts both ways. It permits the petitioners herein to carry on arbitral reference, but it precludes the petitioners herein to include the matters that have been expressly excepted by the appellate order to be taken to the reference.
The present petition has to be viewed in such light. The present petition is not in aid of all the disputes which are covered by the arbitration agreement, but only in aid of such of the disputes covered by the arbitration agreement that can be made the subject-matter of the arbitral reference pursuant to the appellate order of March 13, 2012. Though Chapter III of the 1940 Act relates to arbitration with the intervention of the Court where there is no suit pending, the present petition is to be seen in aid of the reference wherein the matters covered by the pending suit or suits cannot be carried. It is, thus, that the present petition is found to be maintainable in aid of the truncated arbitral reference that can now be had in view of the appellate order of March 13, 2012.
Since the respondents have failed to avail of the opportunity afforded to them by the order dated September 5, 2007 to name a nominee on the arbitral tribunal, Mr. Pradosh Kr. Mallick, Sr. Adv., is now named the other member of the arbitral tribunal. The petitioners' nominee and the other arbitrator named herein will decide, within a fortnight from the date of service of an authenticated copy of this order on them, on the umpire and will keep in mind the directions in such regard contained in the order dated September 5, 2007. The arbitral Tribunal should conclude the reference within the time indicated. The remuneration to be paid to both the arbitrators will be Rs. 1.5 lakh each consolidated for the entire reference. The two arbitrations along with the impure will decide on the consolidated remuneration of the umpire."
(13) It is in the aforesaid factual matrix that the present suit has been filed and the instant application has been taken out therein.
(14) Contention of the petitioners:
Appearing on behalf of the petitioners, Mr. Hirak Mitra, Ld. Senior Advocate contended as follows:-
(i) Out of three orders passed by this Court, the principal order is one dated December 23, 2011 and the same should determine and decide whether it is now open to the respondents to continue with the arbitral proceeding.
The Division Bench expressly directed that the suit filed by the Maheshwaris as also by Mimani must proceed and two suits ought to be heard analogously.
(ii) The order dated December 23, 2011 could not have been modified or altered in any way by the two subsequent orders. The court hearing the application under Section 20 of the Arbitration Act, 1940 or the application under Section 20(4) of the said Act had no authority or power or jurisdiction to modify the order dated December 23, 2011. The orders dated March 13, 2012 and October 11, 2012 were passed in independent and different proceedings. The Courts hearing the two applications on which the said two orders were passed could not in any way affect or touch the order dated December 23, 2011. In this connection, reliance was placed on a decision of the Hon'ble Supreme Court in the case of Official Trustee, West Bengal-vs.-Sachindranath Chatterjee reported in AIR 1969 SC 823.
(iii) If the arbitration is allowed to continue there is every possibility of conflict between the order of the Arbitral Tribunal and the judgment that this Court may render. Reliance, in this connection, was placed on the case of Taunton Collings-vs.-Cromie and Anr. reported in (1964) 2 All ER 332.
(iv) Balance of convenience lies wholly in favour of passing an order of injunction as prayed for. In this connection, reliance was placed on the case of Films Rover International Ltd.-vs.-Cannon Films Sales Ltd. reported in (1986) 3 All ER 772.
(15) Contention of the Respondents:
(i) The order dated September 5, 2007 passed by Sanjib Banerjee, J. was challenged by the Maheshwaris in appeal. The said appeal was disposed of by an order dated March 13, 2012 upholding the judgment and order of the Ld. Trial Judge, thereby accepting that the arbitration agreement must be filed and the disputes by and between the Maheshwaris and Kochars must be proceeded with.
The modification of the order dated September 5, 2007 referred to in the judgment and order of the Division Bench to the effect that the dispute in relation to the agreement for sale of 50 per cent of the rights of the Kochars in favour of the Kishan Mimani cannot be the subject matter of arbitration, is, in fact, no modification at all since the order dated September 5, 2007 clearly provided that it is only the disputes and differences between the Kochars and Maheshwaris in respect of the partnership firm BICC, which would be referred. The Kochars have never sought reference to arbitration of any dispute with Kishan Mimani and as such no order for referring such dispute to arbitration was made by the order dated September 5, 2007. It is clear from the judgment and order of the Division Bench that only the dispute between Kishan Mimani and the Kochars were directed to be decided in the suit and the disputes between the Kochars and Maheshwaris were to be decided in the arbitration. Any other interpretation or construction of the order dated March 13, 2012 will rob the order of all meaning and purpose and will amount to making a mockery of the same.
(ii) It will appear from the order dated September 05, 2007 that the same was passed upon consideration the contention of the Maheshwaris that 'since there are suits pertaining to the matter covered by the arbitration agreement and such matters which formed the subject matter of the suits have been required by the appellate order of March 13, 2012 to be kept out of the arbitral reference, the present petition under Section 20 of the 1940 Act is not maintainable' and that 'the arbitral reference cannot be proceeded with in view of Section 35 of the 1940 Act.' Upon discussing such contention of the Maheshwaris, by the order dated October 11, 2012 this court held that the Division Bench order dated March 13, 2012 permitted the Kochars to carry on arbitral reference but precluded them from including in such reference the matter expressly excepted by the Appellate Court order i.e. the claim of Kishan Mimani to the Kochar's share in BICC. It is, thus, clear that while appointing the nominee arbitrator for the Maheshwaris, the order dated October 11, 2012 clearly provided that the arbitration may go on and only the claim of Kishan Mimani cannot be the subject matter of such arbitration, which in any event, was not sought to be referred to arbitration by the Kochars and was, in fact, not referred to arbitration by the order dated September 5, 2007.
(iii) The order dated October 11, 2012 was challenged in appeal by both the Maheshwaris and Kishan Mimani. Both appeals were dismissed by a Division Bench of this Court by a common judgment and order dated December 11, 2012. A special leave petition was filed by Kishan Mimani agsinst the judgment and order dated December 11, 2012 but was later withdrawn by him. Thus, even the Division Bench of this Court clearly intended that the disputes between the Kochars and Maheshwaris should be arbitrated.
(iv) The judgment and order dated December 23, 2011 was passed by the Division Bench only on the ground that Kishan Mimani was a party to the suit but was not a party to the arbitration proceedings and as such in view of the law laid down in Sukayana Holdings Case reported in (2003) 5 SCC 531, the order of the Ld. Single Judge could not be sustained. The said order dated December 23, 2011 can have no bearing on the arbitration of the disputes between the Kochars and Maheshwaris merely by reason of the fact that CS No. 195 of 2010 also refereed to the fact that the disputes and differences had arisen between the Kochars and Maheshwaris in respect of the Kochars' share in BICC.
(v) Although, the Kochars' application under Section 20 of the Arbitration Act, 1940 had been filed in the year 1995, CS No. 195 of 2010 had been filed by the Maheshwaris only in the year 2010. Therefore, there can be no question of Section 35 of the Arbitration Act, 1940 being available to the Maheshwaris for staying the arbitration. The Arbitration Act, 1940 stood repealed in the year 2010. The suit filed after the repeal of the Arbitration Act, 1940 cannot form the basis of arresting an arbitration under the provisions of Section 35 of the 1940 Act. If the same is permitted, every application for making a reference to arbitration filed under the Act of 1940 could have been frustrated by the other party by filing a subsequent suit, whether during the regime of 1940 Act or thereafter.
(vi) Section 35 of the Arbitration Act, 1940 was urged as a ground for not appointing the nominee arbitrator of the Maheshwaris and for not directing the reference to be commenced. Such contention was rejected by the Ld. Single Judge by the order dated October 11, 2012 and also by the Division Bench by its judgment and order dated December 11, 2012 in appeal from the order of the Ld. Single Judge. Thus, it is no longer open to the Maheshwaris to seek to arrest the arbitration on the basis of Section 35 of the Arbitration Act, 1940 inasmuch as the said question is now barred by the principle of res judicata and/or constructive res judicata under Section 11 of the Code of Civil Procedure.
(vii) Section 85 of the Arbitration and Conciliation Act, 1996 provides that notwithstanding the repeal of, inter alia, the Arbitration Act, 1940 the provisions of the said Act shall apply in relation to arbitration proceedings commenced before the Act of 1996, came into force. In the instant case, the arbitral proceeding was commenced only after the Tribunal was constituted by this Court by appointing the nominee arbitrator of the Maheshwaris by the judgment and order dated October 11, 2012. In the premises, the arbitration is governed by the provisions of the 1996 Act and consequently Section 35 of the 1940 Act in any event cannot have any application. Furthermore, Section 35 applies only when the entire subject matter of the arbitration and the suit are identical. On a meaningful reading of the plaint filed in CS No. 195 of 2010 and the statement of claim filed by the Kochars in the reference it will be evident that the subject matter of the arbitration and the suit are not identical.
(viii) The present application is mala fide and should be dismissed. (16) Court's View:
(i) I have considered the rival contention of the parties. The result of this application will depend on a true and proper construction of the three orders passed by this Court namely orders dated December 23, 2011, March 13, 2012 and October 11, 2012. So far as possible, the three orders should be construed harmoniously so that each of the orders can be given a meaningful effect.
(ii) Kishan Mimani filed his suit for specific performance of the agreement to sell the 50 per cent share of the Kochars to him in BICC, in 1993. In 1995 the Kochars filed the special suit under Section 20 of the Arbitration Act, 1940 which was disposed of by Sanjib Banerjee, J. by a judgment and order dated 5th September, 2007 directing filing of the arbitration agreement between the Maheshwaris and the Kochars as contained in the partnership deed and referring the disputes to arbitration. In 2010 the Maheshwaris filed CS No. 195 of 2010 against the Kochars as also Mimani claiming a declaration that the defendants do not have any right title or interest in respect of the dissolved partnership firm BICC including its assets and permanent injunction restraining the defendants from claiming any right, title or interest in the properties of the dissolved partnership firm. The Kochars filed an application under Section 8 of the Arbitration and Conciliation Act 1996 for referring the disputes involved in the said suit to arbitration. The Section 8 application was filed on the basis of the arbitration clause contained in the partnership deed of BICC. By its judgment and order dated May 6, 2011 this Court allowed the Section 8 application. The said judgment and order was upset and set aside on appeal by the Division Bench by its judgment and order dated 13th December, 2011. The primary ground on which the Division Bench set aside the Trial Court's order was that Mimani was a party defendant to the suit but not a party to the arbitration agreement. Relying on the decision of the Hon'ble Supreme Court in the case of Sukayana Holding Pvt. Ltd., the Division Bench set aside the order of the Ld. Trial Judge. The other ground on which the Ld. Trial Judge's judgment was set aside was that the Kochars did not file along with its Section 8 application, the original arbitration agreement or a certified copy thereof as required under Section 8 of the 1996 Act. Having set aside the reference of disputes involved in the said suit to arbitration, the Division Bench held that the said suit as well as Mimani's suit should be heard analogously.
(iii) The order dated September 5, 2007 passed by Sanjib Banerjee, J. allowing the special suit filed by the Kochars under Section 20 of the Arbitration Act, 1940, was carried in appeal. By a judgment and order dated 13th March, 2012, the Division Bench upheld the Ld. Trial Judge's order with the modification that the disputes in relation to the agreement for sale of 50 per cent rights of the Kochars in the said partnership firm in favour of Kishan Mimani cannot be the subject matter of arbitration since two separate suits are pending for adjudication of their disputes. The Division Bench further held that by its earlier judgment and order it had held reversing the order of the Ld. Trial Judge that THOSE disputes are to be decided in the suit itself. Those disputes, thus, clearly mean the disputes to which Mimani was a party. The import of the Division Bench order dated 13th March, 2012, in my view, is that the arbitration agreement between the Kochars and Maheshwaris was allowed to be filed and the disputes between the Kochars and the Maheshwaris were allowed to be resolved by way of arbitration. In my view, there is no inconsistency between the orders dated 23rd December, 2011 and 13th March, 2012. If, at all, the subsequent order dated 13th March, 2012 clarified the earlier order dated 23rd December, 2011. The question of modification of the earlier order by the subsequent order does not arise as sought to be urgrd by the petitioners.
(iv) The position is further clarified by the judgment and order dated October 11, 2012 passed by Sanjib Banerjee, J. on the application of the Kochars under Section 20(4) of the Arbitration Act, 1940. The Ld. Judge clarified, and in my respectful view rightly, that the arbitration should continue keeping out of its purview the matters excepted by the Division Bench. The Ld. Judge held that it was a truncated reference and with respect I agree.
(v) In my view the arbitral reference should proceed but has to keep outside its ambit the disputes which also involved Kishan Mimani. To that extent, the jurisdiction of the Arbitral Tribunal has been curtailed and restricted by the Division Bench. In other words, the subject matter of the reference would exclude the subject matters of the two pending suits i.e. the suit filed by Mimani and the suit filed by the Maheshwaris. If that be so, the question of conflict of decisions, as sought to be urged by the petitioners, would not arise. Keeping in mind the orders passed by this Court the Arbitral Tribunal will decide all the disputes between the Maheshwaris and the Kochars that it may entertain.
(vi) I have considered the decisions cited on behalf of the petitioners but do not find the same to be of much relevance. The decision reported in (1953) 2 Ll.R. holds that the arbitrators are entitled to enquire into the question as to whether or not they have jurisdiction and if they come to a clear finding that they have no jurisdiction they might terminate the proceeding. In the decision reported in (1964) 2 ALL. ER 332, the court of appeal held that two proceedings before two different Tribunals who might reach inconsistent finding are not desirable and, accordingly, one of the proceedings was stayed. I have indicated above why in the instant case there is no possibility of conflicting decisions. The decision reported in AIR 1969 SC 823 lays down general propositions of law regarding the jurisdiction of the arbitrator.
(vii) It is also pertinent to note that the judgment and order dated October 11, 2012 passed by Sanjib Banerjee, J. was carried in appeal by both the Maheshwaris and Mimani but both the appeals were dismissed by the Division Bench by its judgment and order dated December 11, 2012. A special leave petition that was filed by Mimani against the judgment and order dated December 11, 2012 was later withdrawn by him. Thus, both the Division Benches passing the orders dated 13th March, 2012 and 11th December, 2012 intended that the disputes between the Maheshwaris and the Kochars should be resolved through arbitration. Both the said judgments and orders were passed upon due consideration of the earlier Division Bench order dated 23rd December, 2011.
(viii) In view of the aforesaid, I am of the view that no ground has been made out for restraining the respondents from proceeding with the arbitral reference except in respect of the matters indicated by the Division Bench. This application, accordingly, fails and is dismissed. There will, however, be no order as to costs.
(Arijit Banerjee, J.)