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Shri Neelam Oswal Vs. Science India Com. Pvt. Ltd. and ors. - Court Judgment

LegalCrystal Citation
SubjectArbitration
CourtPunjab and Haryana High Court
Decided On
Judge
Reported in(2009)156PLR117
AppellantShri Neelam Oswal
RespondentScience India Com. Pvt. Ltd. and ors.
DispositionAppeal dismissed
Cases ReferredSukanya Holidays Pvt. Ltd v. Joyesh H. Pandya and Anr.
Excerpt:
- - vide agreement to sell dated 6.10.2005 neelam oswal, chairman of the company as well as various signatories, on behalf of the promoters of mukerian papers ltd. the agreement took place way back on 6.10.2005. everything went on well in the terms of agreement. now after three and a half years of execution of the agreement defendants are trying to interfere in the work of the company which is clearly tortuous act on their part and, certainly the provisions of specific relief act would work as an umbrella to protect the rights of the plaintiff......the said agreement, the shares were transferred in the following manner:date consideration no. of shares agreement signed on6.10.2005 rs. 50 lacs 1,70,000on or before 30.11.2005 rs. 1 crore 3,54,075on or before 31.12.2005 rs. 1 crore 2,86,920on or before 31.01.2006 rs. 2 crore 6,52,511on or before 28.02.2006 rs. 2 crore 6,46,500on or before 31.03.2006 rs. 3.5 crore 10,74,650__________________________ total rs. 10 crores 31,84,656___________________________4. it was also stipulated that the definitive agreement shall be signed after payment of full consideration and after fulfillment of all die terms of this agreement to sell by both the parties on or before 31st march 2007 subject to sanction of the scheme of rehabilitation by the bifr. there was clause 28 of the agreement regarding.....
Judgment:

A.N. Jindal, J.

1. This petition has arisen out of the order dated 6.4.2009 passed by Additional Civil Judge, Senior Division, Dasuya, whereby an application under Section 8 of the Arbitration and Conciliation Act, 1996 (hereinafter referred to as the 'Act') was dismissed.

2. Prime controversy involved in the petition is: 'whether the forcible action of die defendant-petitioner (herein referred as the 'petitioner') dismantling removal and carrying out the plant, machinery, furniture and fixtures and also interference into possession of the plaintiff-respondents (herein referred as the 'respondents') over the factory premises of M/s Mukerian Papers Ltd., situated at G.T Road Mukerian, is the subject matter of the arbitration agreement fit to be referred to the sole arbitrator, as mentioned in Clause 28 of the Arbitration Agreement dated 6.10.2005?'

3. A brief resume of facts in the background of the case is that M/s Mukerian Paper Ltd., is the public limited company in which the petitioner had 31,84,656 shares which were promoter shares and the balance shares to the tune of 68,30,231 of the company were held by various finance institutions, banks and the public at large. Vide agreement to sell dated 6.10.2005 Neelam Oswal, Chairman of the company as well as various signatories, on behalf of the promoters of Mukerian Papers Ltd., sold the promoter shares for a sum of Rs. 10 crores to the respondent along with all future liabilities. Vide the said agreement, the shares were transferred in the following manner:

Date Consideration No. of shares Agreement signed on6.10.2005 Rs. 50 lacs 1,70,000On or before 30.11.2005 Rs. 1 Crore 3,54,075On or before 31.12.2005 Rs. 1 Crore 2,86,920On or before 31.01.2006 Rs. 2 Crore 6,52,511On or before 28.02.2006 Rs. 2 Crore 6,46,500On or before 31.03.2006 Rs. 3.5 Crore 10,74,650__________________________ Total Rs. 10 Crores 31,84,656___________________________

4. It was also stipulated that the definitive agreement shall be signed after payment of full consideration and after fulfillment of all die terms of this Agreement to Sell by both the parties on or before 31st March 2007 subject to sanction of the Scheme of Rehabilitation by the BIFR. There was Clause 28 of the agreement regarding settlement of dispute, which reads as under:

Clause 28:- That if any dispute arises with regard to this Agreement to Sell then it shall be referred to Shri Ponty Chadha S/o Shri Kulwant Singh Chadha, R/o A-129, New Friends Colony, New Delhi and who shall be the sole arbitrator and a decision by him shall be final and binding upon both the parties.

Indemnity bond was also executed in terms of the agreement by the plaintiff in favour of all the defendants to indemnify later for any loss which he suffers on account of breach of contract. Now after four years of the agreement, the, plaintiff on a threat being given by the defendants to dismantle, remove and carry the plant and machinery lying in the factory premises and to dispossess him, has filed a suit on 14.2.2009 for permanent Injunction restraining Neelam Oswal, Ex-Chairman/Managing Director of M/s Mukarian Papers Ltd., and four others who were not a party to agreement, for restraining them from disturbing his possession and removing the plant and machinery after dismantling the same.

5. On being served a notice of the suit, the defendant moved an application under Section 8 of the Arbitration and Conciliation Act 1996 for referring the dispute to the sole arbitrator in the terms of Clause 28 of the agreement. The application was contested by the plaintiff stating that the subject matter of the suit is quite independent from the agreement to sell, which may be referred to the arbitration. No dispute has arisen between the parties regarding any clause of the agreement. Therefore, the same cannot be referred to the arbitrator. Cause of action arose only on account of the forcible action of the defendants. Agreement was only between the defendant No. 1 and the plaintiff whereas all the defendants were trying to forcibly dismantle and carrying away the plant and machinery. The application was ultimately dismissed by the trial Court.

On scanning of the pleadings so as the agreement the controversy stands narrowed down to the extent as to 'whether the cause shown by the plaintiff is the subject matter of the arbitration agreement or in other words whether the dispute, as contained in the suit, is arbitrable within the arbitration agreement clause.'

6. In this context it may first be observed that the application filed by the petitioner for referring the dispute to the arbitrator is silent qua dispute. Nothing has been mentioned in the entire application regarding the dispute except Para number 4 which is reproduced as under:

4. That a dispute had arisen between the plaintiff and defendant No. 1 regarding the terms and conditions of the agreement dated 6.10.2005.

Sine-qua-non, to determine if the matter is referable to the arbitrator, there must be the existence of the dispute subject to arbitration agreement. The defendant has not referred as to whether the dispute is of such nature which is the subject matter covered by the arbitration agreement. Actually the intention of the parties while entering into agreement to sell between the plaintiff and defendant No. l, was to relieve the defendant from all the liabilities after the transfer of the promoter's shares in favour of the plaintiff.

7. As per the agreement dated 6.10.2005, the plaintiff had taken over the charge and unrestricted physical possession of the factory premises. He could deal with the factory including making investments, repairs and renovation, transfer or alienation employing of the staff and deploying the security guards.

8. The defendant was concerned only with the consideration fixed for transfer of said shares. The defendant No. 1 was a share holder of M/s Mukerian Papers Ltd., and he had handed over all the share certificates along with transfer deeds to the plaintiff for a consideration of Rs. 10 Crore. It is not the case of the petitioner that consideration was not paid to him, regarding sale of shares. The plaintiff was at liberty to change directors. As such, the plaintiff is completely in-charge of the premises and he had safeguarded the rights of the defendants, in case of any damage, loss or harm by executing a guarantee deed and indemnity bond in favour of defendant No. 1. As per the Clause 22, upon signing of the agreement to sell the plaintiff was to appoint the Board of Directors of the said company. The agreement also gives liberty to the plaintiff to terminate all the employees appointed by the defendant No. 1 in connection with running of the premises, therefore, defendants No. 2 to 5 in the terms of aforesaid agreement cannot claim to be the employees of defendant No. 1 and they being not party to the agreement certainly could be sued against their forcible and illegal actions against the plaintiff. The agreement took place way back on 6.10.2005. Everything went on well in the terms of agreement.

Shares were transferred and payments were made. No dispute appears to be regarding the transfer of shares and payments of consideration regarding sale of shares. The subject matter of the agreement was only the transfer of shares and there was no such dispute with regard to delivery of the possession of any part of the premises by the (petitioner) defendant No. 1 to the plaintiff. Now after three and a half years of execution of the agreement defendants are trying to interfere in the work of the company which is clearly tortuous act on their part and, certainly the provisions of Specific Relief Act would work as an umbrella to protect the rights of the plaintiff. Irrespective of the claims and rights with regard to the sale to be settled by way of arbitration, in order to protect the property being wasted, damaged and he being dispossessed, the plaintiff could file a suit for permanent injunction.

9. After examining all the clauses of the agreement, I cannot lay my hands over a word which could invite the jurisdiction of the arbitrator. Word 'matter' in the Arbitration and Conciliation Act means that the entire subject matter should be subject to the arbitration agreement. This point was elaborately discussed by the Apex Court in case Sukanya Holidays Pvt. Ltd v. Joyesh H. Pandya and Anr. : A.I.R. 2003 Supreme Court 2252 which reads as under:

The relevant language used in Section 8 is: in the matter which is subject matter of an arbitration agreement.' Court is required to refer the parties to arbitration. Therefore, the suit should be in respect of 'a matter' which the parties have agreed to refer and which comes within the ambit of arbitration agreement. Where, however, a suit is commenced - 'as to a matter' which lies outside the arbitration agreement and is also between some of the parties who are not parties to the arbitration agreement there is no question of application of Section 8. The words 'a matter' indicates entire subject matter of the suit should be subject to arbitration agreement.

10. In this case neither the parties to the suit are the parties to the agreement nor any part of the subject matter of the suit is a part of the agreement referable to the arbitrator. On scrutiny of the impugned order, it transpires that the trial Court has rightly come to the conclusion that the matter was not referable to the arbitrator and the Civil Court could decide the same.

No grounds to interfere. Dismissed.


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