REPORTABLE JUDGEMENT PHHC
IN THE HIGH COURT OF PUNJAB AND HARYANA AT
CHANDIGARH
Neutral Citation No. 2024:PHHC:003777 -DB
FAO-CARB-1-2024 (O&M)
Decided on : 09.01.2024
Anshul Siroya ....Appellant(s)
Versus
Phillips India Ltd. & others .... Respondent(s)
CORAM : HON'BLE MR.JUSTICE G.S. SANDHAWALIA
HON'BLE MS.JUSTICE LAPITA BANERJI
Present: Mr.Sumit Ahula, Advocate
and Mr.B.K.Kaundal, Advocate, for the appellant(s).
G.S. Sandhawalia, J. :-
1. Challenge in the present appeal by one of the partners of M/s
A.A. Associates-respondent No.2 herein is to the order dated 13.10.2023
passed by the Commercial Court, Gurugram wherein the award passed on
27.04.2017 (Annexure A-1) in favour of respondent No.1-claimant has
been upheld while dismissing the petition filed under Section 34 of the
Arbitration & Conciliation Act, 1996 (for short, the ‘Act’).
2. The Arbitrator had awarded a sum of Rs.1,95,25,885/- against
the initial claim of Rs.4,91,61,916.03. The contractual rate of interest was
16.5% per annum from 01.03.2015 was also allowed. The claimant was
also held entitled to encash and appropriate the fixed deposit of the
amount of Rs.2,75,00,000/- which was received pursuant to the sale of the
equipment along with interest which had accrued thereon apart from the
amount of Rs.5,55,000/- towards cost of arbitration which were never paid
by the appellant or the partnership concern. Additional cost of Rs.30,000/-
was also imposed upon the appellant during the proceedings which were
also granted in favour of respondent No.1 while pronouncing the award.
The reasoning given by the Commercial Court to uphold the award was
that the Court had limited supervisory jurisdiction to interfere with the
award of the Arbitral Tribunal which it had found to be a plausible oneNeutral Citation No:=2024:PHHC:003777-DB
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CHANDIGARH
Neutral Citation No. 2024:PHHC:003777 -DB
FAO-CARB-1-2024 (O&M)
Decided on : 09.01.2024
Anshul Siroya ....Appellant(s)
Versus
Phillips India Ltd. & others .... Respondent(s)
CORAM : HON'BLE MR.JUSTICE G.S. SANDHAWALIA
HON'BLE MS.JUSTICE LAPITA BANERJI
Present: Mr.Sumit Ahula, Advocate
and Mr.B.K.Kaundal, Advocate, for the appellant(s).
G.S. Sandhawalia, J. :-
1. Challenge in the present appeal by one of the partners of M/s
A.A. Associates-respondent No.2 herein is to the order dated 13.10.2023
passed by the Commercial Court, Gurugram wherein the award passed on
27.04.2017 (Annexure A-1) in favour of respondent No.1-claimant has
been upheld while dismissing the petition filed under Section 34 of the
Arbitration & Conciliation Act, 1996 (for short, the ‘Act’).
2. The Arbitrator had awarded a sum of Rs.1,95,25,885/- against
the initial claim of Rs.4,91,61,916.03. The contractual rate of interest was
16.5% per annum from 01.03.2015 was also allowed. The claimant was
also held entitled to encash and appropriate the fixed deposit of the
amount of Rs.2,75,00,000/- which was received pursuant to the sale of the
equipment along with interest which had accrued thereon apart from the
amount of Rs.5,55,000/- towards cost of arbitration which were never paid
by the appellant or the partnership concern. Additional cost of Rs.30,000/-
was also imposed upon the appellant during the proceedings which were
also granted in favour of respondent No.1 while pronouncing the award.
The reasoning given by the Commercial Court to uphold the award was
that the Court had limited supervisory jurisdiction to interfere with the
award of the Arbitral Tribunal which it had found to be a plausible oneNeutral Citation No:=2024:PHHC:003777-DB
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and there was no material irregularity or illegality or perversity in the
award which could shock the conscious of the Court to interfere in the
same.
3. The argument that 3 machines had not been supplied by the
respondent-claimant and that there was misreading of the documents was
rejected by noticing that the appellant and the partnership concern was
required to pay a sum of Rs.66,45,000/- as down-payment out of the total
consideration but only a part-payment had been made. Therefore if the 2
machines had not been supplied but the main CT Machine was supplied
and therefore, having not paid the full advance amount, the said defence
was not tenable while referring to various clauses of the Hypothecation
and Deferred Payment Agreement dated 27.09.2012 (Annexure A-3). It
was noticed that failure to make payment entitled the claimant to take
possession of the hypothecated equipments and stop the support and
maintenance service/equipment and therefore, the conditions were
applicable if the claimant had defaulted in making the payment. It was
also noticed that there was default in making the deferred payments and
therefore, the claimant-company was within its right not to provide
services in the absence of the full margin money and there was no such
liability of the claimant to supply the other 2 machines. The factum of the
appellant residing abroad and having terminated the partnership with M/s
A.A. Associates was kept in mind that he had only joined the proceedings
before the Arbitrator and filed his statement of defence and also contested
the proceedings and therefore could not now hold out that any prejudice
had been caused to him.
4. The dismissal of the counter-claim by the Arbitrator and the
fact that the Arbitrator had been appointed at the behest of the claimantsNeutral Citation No:=2024:PHHC:003777-DB
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and there was no material irregularity or illegality or perversity in the
award which could shock the conscious of the Court to interfere in the
same.
3. The argument that 3 machines had not been supplied by the
respondent-claimant and that there was misreading of the documents was
rejected by noticing that the appellant and the partnership concern was
required to pay a sum of Rs.66,45,000/- as down-payment out of the total
consideration but only a part-payment had been made. Therefore if the 2
machines had not been supplied but the main CT Machine was supplied
and therefore, having not paid the full advance amount, the said defence
was not tenable while referring to various clauses of the Hypothecation
and Deferred Payment Agreement dated 27.09.2012 (Annexure A-3). It
was noticed that failure to make payment entitled the claimant to take
possession of the hypothecated equipments and stop the support and
maintenance service/equipment and therefore, the conditions were
applicable if the claimant had defaulted in making the payment. It was
also noticed that there was default in making the deferred payments and
therefore, the claimant-company was within its right not to provide
services in the absence of the full margin money and there was no such
liability of the claimant to supply the other 2 machines. The factum of the
appellant residing abroad and having terminated the partnership with M/s
A.A. Associates was kept in mind that he had only joined the proceedings
before the Arbitrator and filed his statement of defence and also contested
the proceedings and therefore could not now hold out that any prejudice
had been caused to him.
4. The dismissal of the counter-claim by the Arbitrator and the
fact that the Arbitrator had been appointed at the behest of the claimantsNeutral Citation No:=2024:PHHC:003777-DB
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was also rejected by noticing that the other persons had not come forward
to examine themselves as witnesses and only the appellant/partner had
challenged the impugned award which had held the claimants to claim the
amount jointly and severally from M/s A.A. Associates and others. The
judgment in Perkins Eastman Architects DPC & another Vs. HSCC
(India) Ltd., 2020 AIR (SC) 59 was distinguished on the ground that it
was delivered on 26.11.2019 after the award of the Arbitrator on
27.04.2017 and no objection had ever been raised regarding the
appointment of the Arbitrator and only time had been sought for payment.
The objection had not been raised by the partnership firm and the
judgment relied upon was thus distinguished.
5. It is not disputed that the purchase order dated 22.09.2012
had been given to the claimant-company for purchase of 128 slice CT
machine, color doppler and PACS, the cost of which were
Rs.4,43,00,000/- which was in pursuance of the quotation given by the
company on 26.08.2012. The hypothecation and the deferred payment
agreement was then entered into dated 27.09.2012 wherein the above-said
total consideration had been mentioned and Rs.66,45,000/- was to be
advanced to the company. The balance amount of Rs.3,76,55,000/- was
payable along with 13.25% interest plus 3% for defaults. The partnership
firm apparently paid only Rs.37,00,000/- towards the advance amount and
resultantly, communication was sent to pay the balance amount and
indications were also given for appointment of the Sole Arbitrator. The
matter having been failed to be resolved, notice dated 31.07.2014 was
issued recalling the deferred payment facility and asking the persons to
pay the outstanding amount along with interest. The arbitral proceedings
were then initiated on 30.10.2014 and an application was also filed underNeutral Citation No:=2024:PHHC:003777-DB
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was also rejected by noticing that the other persons had not come forward
to examine themselves as witnesses and only the appellant/partner had
challenged the impugned award which had held the claimants to claim the
amount jointly and severally from M/s A.A. Associates and others. The
judgment in Perkins Eastman Architects DPC & another Vs. HSCC
(India) Ltd., 2020 AIR (SC) 59 was distinguished on the ground that it
was delivered on 26.11.2019 after the award of the Arbitrator on
27.04.2017 and no objection had ever been raised regarding the
appointment of the Arbitrator and only time had been sought for payment.
The objection had not been raised by the partnership firm and the
judgment relied upon was thus distinguished.
5. It is not disputed that the purchase order dated 22.09.2012
had been given to the claimant-company for purchase of 128 slice CT
machine, color doppler and PACS, the cost of which were
Rs.4,43,00,000/- which was in pursuance of the quotation given by the
company on 26.08.2012. The hypothecation and the deferred payment
agreement was then entered into dated 27.09.2012 wherein the above-said
total consideration had been mentioned and Rs.66,45,000/- was to be
advanced to the company. The balance amount of Rs.3,76,55,000/- was
payable along with 13.25% interest plus 3% for defaults. The partnership
firm apparently paid only Rs.37,00,000/- towards the advance amount and
resultantly, communication was sent to pay the balance amount and
indications were also given for appointment of the Sole Arbitrator. The
matter having been failed to be resolved, notice dated 31.07.2014 was
issued recalling the deferred payment facility and asking the persons to
pay the outstanding amount along with interest. The arbitral proceedings
were then initiated on 30.10.2014 and an application was also filed underNeutral Citation No:=2024:PHHC:003777-DB
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Section 9 of the Act for re-possession of the equipments wherein the
Appropriate Court at Gurugram had passed the order on 08.09.2014 and
the equipments were re-possessed from Jodhpur on 24.02.2015.
Permission was taken from the Arbitrator to sell the equipments vide order
dated 11.04.2015 and directions had been issued to keep the money in
Fixed Deport Receipt. Resultantly, the sale price of Rs.2,66,00,000/-
along with interest had been allowed to be adjusted which was to the tune
of Rs.2,75,00,000/-. In such circumstances, the claim has been allowed of
Rs.1,95,25,885/- along with interest @ 16.5% which was as per the agreed
interest as per Clauses 2A & 2B of the IIIrd Schedule of the agreement.
6. A perusal of the claim petition filed before the Arbitrator
would go on to show that the post-dated cheques issued for repayment of
the deferred payment in the schedule mentioned had also been
dishonoured and respondent No.1-Company was compelled to file
complaints regarding the cheques issued in the months of May, June, July,
August and November, 2013 under Section 138 of the Negotiable
Instruments Act, 1881 against the partnership concern and its partners. It
had been specifically averred that there were 3 complaints which were
pending and which were transferred to the Jodhpur Bench from the Court
at New Delhi in view of the judgment passed by the Apex Court. The
notice dated 05.06.2014 had also been issued to the appellant along with
the partners of the company in question wherein the outstanding demand
of Rs.96,26,481/- were also raised and also for the invocation of the
arbitration agreement and accordingly the Arbitrator was duly appointed
by the company in pursuance of Clause 17 which reads as under:
“17. ARBITRATIONNeutral Citation No:=2024:PHHC:003777-DB
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Section 9 of the Act for re-possession of the equipments wherein the
Appropriate Court at Gurugram had passed the order on 08.09.2014 and
the equipments were re-possessed from Jodhpur on 24.02.2015.
Permission was taken from the Arbitrator to sell the equipments vide order
dated 11.04.2015 and directions had been issued to keep the money in
Fixed Deport Receipt. Resultantly, the sale price of Rs.2,66,00,000/-
along with interest had been allowed to be adjusted which was to the tune
of Rs.2,75,00,000/-. In such circumstances, the claim has been allowed of
Rs.1,95,25,885/- along with interest @ 16.5% which was as per the agreed
interest as per Clauses 2A & 2B of the IIIrd Schedule of the agreement.
6. A perusal of the claim petition filed before the Arbitrator
would go on to show that the post-dated cheques issued for repayment of
the deferred payment in the schedule mentioned had also been
dishonoured and respondent No.1-Company was compelled to file
complaints regarding the cheques issued in the months of May, June, July,
August and November, 2013 under Section 138 of the Negotiable
Instruments Act, 1881 against the partnership concern and its partners. It
had been specifically averred that there were 3 complaints which were
pending and which were transferred to the Jodhpur Bench from the Court
at New Delhi in view of the judgment passed by the Apex Court. The
notice dated 05.06.2014 had also been issued to the appellant along with
the partners of the company in question wherein the outstanding demand
of Rs.96,26,481/- were also raised and also for the invocation of the
arbitration agreement and accordingly the Arbitrator was duly appointed
by the company in pursuance of Clause 17 which reads as under:
“17. ARBITRATIONNeutral Citation No:=2024:PHHC:003777-DB
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If any dispute arises between the Parties out of or in connection
with this Agreement whether in the nature of interpretation or
meaning of any term hereof or as to any claim by one against the
other, or otherwise the same shall be referred to sole arbitrator to
be appointed by Phillps and the arbitration shall be governed by
the Arbitration and Conciliation Act, 1996. The seat or legal place
of arbitration shall be New Delhi. The language to be used in the
arbitral proceedings shall be English. The award given by the
arbitrator upon such references shall be final and binding upon the
parties, and each party shall bear its own expenses in relation to
such arbitration. Unless otherwise awarded by the arbitrator, the
arbitration fees shall be shared equally by the Parties.”
7. The partnership concern apparently took no steps to challenge
the said appointment at that stage and neither filed any application for
removal of the Arbitrator and for appointment of neutral Arbitrator at any
point of time. The only efforts which were made was to delay the
adjudication process by sending a letter dated 18.06.2014 wherein time
was sought to settle the dispute. Having failed to negotiate or make any
payment, a fresh notice was issued on 31.07.2014 by the company. Reply
dated 28.08.2014 was then served upon the claimants and in the meantime,
order dated 08.09.2014 was passed by the Addl.District Judge, Gurugram
for repossession of the machines in question. It is pertinent to notice that
the partnership concern never contested the proceedings before the
Arbitrator though it had raised challenge before this Court against the
repossession of the machines and therefore, we are of the opinion that the
company and its partners are playing a game of hide and seek with the
claimant company which would be laid out as we propose to discuss the
manner in which the litigation proceeded.
8. The defence of the appellant was that the Arbitral Tribunal
has got no jurisdiction and unilateral appointment was in breach of theNeutral Citation No:=2024:PHHC:003777-DB
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If any dispute arises between the Parties out of or in connection
with this Agreement whether in the nature of interpretation or
meaning of any term hereof or as to any claim by one against the
other, or otherwise the same shall be referred to sole arbitrator to
be appointed by Phillps and the arbitration shall be governed by
the Arbitration and Conciliation Act, 1996. The seat or legal place
of arbitration shall be New Delhi. The language to be used in the
arbitral proceedings shall be English. The award given by the
arbitrator upon such references shall be final and binding upon the
parties, and each party shall bear its own expenses in relation to
such arbitration. Unless otherwise awarded by the arbitrator, the
arbitration fees shall be shared equally by the Parties.”
7. The partnership concern apparently took no steps to challenge
the said appointment at that stage and neither filed any application for
removal of the Arbitrator and for appointment of neutral Arbitrator at any
point of time. The only efforts which were made was to delay the
adjudication process by sending a letter dated 18.06.2014 wherein time
was sought to settle the dispute. Having failed to negotiate or make any
payment, a fresh notice was issued on 31.07.2014 by the company. Reply
dated 28.08.2014 was then served upon the claimants and in the meantime,
order dated 08.09.2014 was passed by the Addl.District Judge, Gurugram
for repossession of the machines in question. It is pertinent to notice that
the partnership concern never contested the proceedings before the
Arbitrator though it had raised challenge before this Court against the
repossession of the machines and therefore, we are of the opinion that the
company and its partners are playing a game of hide and seek with the
claimant company which would be laid out as we propose to discuss the
manner in which the litigation proceeded.
8. The defence of the appellant was that the Arbitral Tribunal
has got no jurisdiction and unilateral appointment was in breach of theNeutral Citation No:=2024:PHHC:003777-DB
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terms of the Act. The Arbitrator who was an Advocate was supposed to
be closely associated with the company and therefore there was conflict of
interest. The appellant had retired on 21.08.2013 from the partnership and
vide subsequent notice dated 24.02.2014, dissolved the partnership firm
and notice had been served upon the remaining 2 partners and therefore,
impleading him in the claim petition was stated to be illegal and
unjustified. He being a sleeping partner was not managing any activity
and was permanent resident of Dubai and the notice dated 05.06.2014
invoking the arbitration had never been received by him in Mumbai. The
factum of the filing of appeal before this Court was denied wherein
challenge had been raised to the order dated 08.09.2014 in FAO-8141-
2014 titled A.A.Associates & another Vs. Phillps India Ltd. & others by
the partnership concern wherein directions had also been issued to pay a
sum of Rs.44 lakhs on or before 12.08.2014 and a conditional stay had
been granted.
9. Counsel for the appellant has thus argued 2 issues before us:
(i) That the nomination of the Arbitrator at the sole instance of the
Company was not liable to be approved and an independent
Arbitrator should have been appointed through the process of the
Court.
(ii) That the counter claim had not been permitted to be filed by
the Arbitrator and therefore, serious prejudice has been caused to
the appellant.
10. It is to be noticed that the specific case of the present
appellant was that he had resigned on 21.08.2013 from the partnership
concern and the same had been dissolved on 24.02.2014. Notice of
dissolution had been duly served upon the remaining partners. The saidNeutral Citation No:=2024:PHHC:003777-DB
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terms of the Act. The Arbitrator who was an Advocate was supposed to
be closely associated with the company and therefore there was conflict of
interest. The appellant had retired on 21.08.2013 from the partnership and
vide subsequent notice dated 24.02.2014, dissolved the partnership firm
and notice had been served upon the remaining 2 partners and therefore,
impleading him in the claim petition was stated to be illegal and
unjustified. He being a sleeping partner was not managing any activity
and was permanent resident of Dubai and the notice dated 05.06.2014
invoking the arbitration had never been received by him in Mumbai. The
factum of the filing of appeal before this Court was denied wherein
challenge had been raised to the order dated 08.09.2014 in FAO-8141-
2014 titled A.A.Associates & another Vs. Phillps India Ltd. & others by
the partnership concern wherein directions had also been issued to pay a
sum of Rs.44 lakhs on or before 12.08.2014 and a conditional stay had
been granted.
9. Counsel for the appellant has thus argued 2 issues before us:
(i) That the nomination of the Arbitrator at the sole instance of the
Company was not liable to be approved and an independent
Arbitrator should have been appointed through the process of the
Court.
(ii) That the counter claim had not been permitted to be filed by
the Arbitrator and therefore, serious prejudice has been caused to
the appellant.
10. It is to be noticed that the specific case of the present
appellant was that he had resigned on 21.08.2013 from the partnership
concern and the same had been dissolved on 24.02.2014. Notice of
dissolution had been duly served upon the remaining partners. The saidNeutral Citation No:=2024:PHHC:003777-DB
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stand has been already rejected by both the Arbitrator and the Court below
while rejecting the petition under Section 34 of the Act while noticing that
the appellant had never intimated the claim before his retirement from the
respondent-firm and in view of Section 32(2) of the Partnership Act, 1932
was not liable to be accepted as no agreement was brought on record. It
was noticed that the partnership-firm was not contesting whereas the
partner who resigned was putting in appearance and objecting to the
proceedings. The said objection was accordingly rejected by placing
reliance upon the Apex Court judgment in Syndicate Bank Vs. RSR
Engineering Works and others, (2003) 6 SCC 265 by going on to hold
that no prejudice had been caused to the appellant. The relevant part of
the observations of the Apex Court read as under:
“8. In the instant case, at the time when the partners entered into
the agreement for overdraft facility, they were the members of the
partnership firm; so also defendants 2 and 4 jointly executed an
agreement and obtained loan from the bank. Subsequent
retirement of defendants 2 and 3 is of no consequence unless there
is a subsequent contract between these members of the partnership
firm and the plaintiff. The law on this aspect is succinctly made
clear in the celebrated book "Lindley & Banks on Partnership"
(Sixteenth Edition) and at page 358, it is stated as under :
"It is perhaps self evident that a creditor's rights will not
normally be prejudiced by an agreement transferring an
accrued liability from one partner to another unless the
creditor is made a party to the agreement or assents to its
operation. Otherwise the agreement will, as regards him, be
strictly res inter alios acta. Lord Lindley illustrated this
proposition for the following example: - let it be supposed
that a firm of three members, A, B and C, is indebted to D;
that A retires, and B and C either alone, or together with a
new partner, E, take upon themselves the liabilities of the
old firm. D's right to obtain payment from A, B and C is
not affected by the above arrangement, and A does notNeutral Citation No:=2024:PHHC:003777-DB
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stand has been already rejected by both the Arbitrator and the Court below
while rejecting the petition under Section 34 of the Act while noticing that
the appellant had never intimated the claim before his retirement from the
respondent-firm and in view of Section 32(2) of the Partnership Act, 1932
was not liable to be accepted as no agreement was brought on record. It
was noticed that the partnership-firm was not contesting whereas the
partner who resigned was putting in appearance and objecting to the
proceedings. The said objection was accordingly rejected by placing
reliance upon the Apex Court judgment in Syndicate Bank Vs. RSR
Engineering Works and others, (2003) 6 SCC 265 by going on to hold
that no prejudice had been caused to the appellant. The relevant part of
the observations of the Apex Court read as under:
“8. In the instant case, at the time when the partners entered into
the agreement for overdraft facility, they were the members of the
partnership firm; so also defendants 2 and 4 jointly executed an
agreement and obtained loan from the bank. Subsequent
retirement of defendants 2 and 3 is of no consequence unless there
is a subsequent contract between these members of the partnership
firm and the plaintiff. The law on this aspect is succinctly made
clear in the celebrated book "Lindley & Banks on Partnership"
(Sixteenth Edition) and at page 358, it is stated as under :
"It is perhaps self evident that a creditor's rights will not
normally be prejudiced by an agreement transferring an
accrued liability from one partner to another unless the
creditor is made a party to the agreement or assents to its
operation. Otherwise the agreement will, as regards him, be
strictly res inter alios acta. Lord Lindley illustrated this
proposition for the following example: - let it be supposed
that a firm of three members, A, B and C, is indebted to D;
that A retires, and B and C either alone, or together with a
new partner, E, take upon themselves the liabilities of the
old firm. D's right to obtain payment from A, B and C is
not affected by the above arrangement, and A does notNeutral Citation No:=2024:PHHC:003777-DB
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cease to be liable to him for the debt in question. But if,
after A's retirement, D accepts as his sole debtors B and C,
or B, C, and E (if E enters the firm), then A's liability will
have ceased, and D must look for payment to B and C, or to
B, C and E, as the case may be."
9. There is no a priori presumption to the effect that the creditors
of a firm do, on the retirement of a partner, enter into an
agreement to discharge him from liability. An adoption by the
creditor of the new firm as his debtor does not by any means
necessarily deprive him or his rights against the old firm
especially when the creditor is not a party to the arrangement and
then there is no fresh agreement between the creditor and the
newly constituted firm. After the creditor has taken a new security
for a debt from a continuing partner, it may be a strong evidence
of an intention to look only the continuing partner for the payment
due from the firm.”
11. The record of FAO-8141-2014 when perused would go on to
show that the appeal was filed by the partnership concern and one partner,
Dr.G.L.Purohit (respondent No.3 herein) and the present appellant was
arrayed as respondent No.2 in the said appeal. In the said FAO there was
no such averment made by the partners that the said person had retired
from the firm which had been dissolved as it would have been fatal to the
maintainability of the appeal. The services of other respondents apart
from the claimants had been got dispensed with vide order dated
26.03.2015 in the said FAO. Even in the said proceedings, vide order
dated 05.12.2014, after interim order having been passed in its favour,
statement was made that a compromise had been arrived at and the first
part of the payment would be made by 09.12.2014. Thereafter, on no
payment having been made, the claimant company pressed for vacation of
the interim stay. On 05.01.2015, directions were issued to pay a sum of
Rs.40 lakhs by 05.02.2015 failing which the stay would be vacated. This
Court inspite of the non-payment granted extension on 10.02.2015 to theNeutral Citation No:=2024:PHHC:003777-DB
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cease to be liable to him for the debt in question. But if,
after A's retirement, D accepts as his sole debtors B and C,
or B, C, and E (if E enters the firm), then A's liability will
have ceased, and D must look for payment to B and C, or to
B, C and E, as the case may be."
9. There is no a priori presumption to the effect that the creditors
of a firm do, on the retirement of a partner, enter into an
agreement to discharge him from liability. An adoption by the
creditor of the new firm as his debtor does not by any means
necessarily deprive him or his rights against the old firm
especially when the creditor is not a party to the arrangement and
then there is no fresh agreement between the creditor and the
newly constituted firm. After the creditor has taken a new security
for a debt from a continuing partner, it may be a strong evidence
of an intention to look only the continuing partner for the payment
due from the firm.”
11. The record of FAO-8141-2014 when perused would go on to
show that the appeal was filed by the partnership concern and one partner,
Dr.G.L.Purohit (respondent No.3 herein) and the present appellant was
arrayed as respondent No.2 in the said appeal. In the said FAO there was
no such averment made by the partners that the said person had retired
from the firm which had been dissolved as it would have been fatal to the
maintainability of the appeal. The services of other respondents apart
from the claimants had been got dispensed with vide order dated
26.03.2015 in the said FAO. Even in the said proceedings, vide order
dated 05.12.2014, after interim order having been passed in its favour,
statement was made that a compromise had been arrived at and the first
part of the payment would be made by 09.12.2014. Thereafter, on no
payment having been made, the claimant company pressed for vacation of
the interim stay. On 05.01.2015, directions were issued to pay a sum of
Rs.40 lakhs by 05.02.2015 failing which the stay would be vacated. This
Court inspite of the non-payment granted extension on 10.02.2015 to theNeutral Citation No:=2024:PHHC:003777-DB
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extent that a sum of Rs.50 lakhs be deposited by 20.02.2015 failing which
the partnership concern would not be entitle to file an application for
extension of time or file any application and the interim order would be
vacated without further reference. Eventually the appeal was decided on
18.09.2015 upholding the jurisdiction of the Court at Gurugram to pass the
said order and the fact that the arbitration proceedings had continued at
New Delhi by noticing Clause 16 of the agreement in question which
provided situs of the arbitration by noticing that the Arbitrator had already
entered into the reference. Clause 16 reads as under:
“16. GOVERNING LAW AND JURISDICTION.
The rights and obligations of the Parties under this Agreement
shall be governed by the laws of India, without effect to principles
of conflict of laws thereof, and shall be subject to the exclusive
jurisdiction of courts at Gurgaon, Haryana.”
12. Thus, it is to be seen that the issue regarding the appointment
of the Arbitrator and challenge raised to the situs of arbitration proceedings
has already been upheld by the Learned Single Judge of this Court which
has further been not challenged by the partnership concern. Not being
satisfied, in the meantime, during the pendency of the proceedings, an
application was pressed by the present appellant contesting the
appointment of the Arbitrator once hearing was held on 21.09.2014 before
the Arbitrator. Apparently notice dated 09.10.2014 was received asking
for recusal of the said Arbitrator on account of the fact that it was done
unilaterally. While placing reliance upon the provisions of Clause 17 of
the agreement, the said claim was rejected on 13.10.2014 by a specific
declaration that the Arbitrator did not have any interest in the subject
matter and therefore no circumstances were available for justifiable doubts
as to the independence and impartiality of the Arbitral Tribunal.Neutral Citation No:=2024:PHHC:003777-DB
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extent that a sum of Rs.50 lakhs be deposited by 20.02.2015 failing which
the partnership concern would not be entitle to file an application for
extension of time or file any application and the interim order would be
vacated without further reference. Eventually the appeal was decided on
18.09.2015 upholding the jurisdiction of the Court at Gurugram to pass the
said order and the fact that the arbitration proceedings had continued at
New Delhi by noticing Clause 16 of the agreement in question which
provided situs of the arbitration by noticing that the Arbitrator had already
entered into the reference. Clause 16 reads as under:
“16. GOVERNING LAW AND JURISDICTION.
The rights and obligations of the Parties under this Agreement
shall be governed by the laws of India, without effect to principles
of conflict of laws thereof, and shall be subject to the exclusive
jurisdiction of courts at Gurgaon, Haryana.”
12. Thus, it is to be seen that the issue regarding the appointment
of the Arbitrator and challenge raised to the situs of arbitration proceedings
has already been upheld by the Learned Single Judge of this Court which
has further been not challenged by the partnership concern. Not being
satisfied, in the meantime, during the pendency of the proceedings, an
application was pressed by the present appellant contesting the
appointment of the Arbitrator once hearing was held on 21.09.2014 before
the Arbitrator. Apparently notice dated 09.10.2014 was received asking
for recusal of the said Arbitrator on account of the fact that it was done
unilaterally. While placing reliance upon the provisions of Clause 17 of
the agreement, the said claim was rejected on 13.10.2014 by a specific
declaration that the Arbitrator did not have any interest in the subject
matter and therefore no circumstances were available for justifiable doubts
as to the independence and impartiality of the Arbitral Tribunal.Neutral Citation No:=2024:PHHC:003777-DB
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13. Still not satisfied with this, another application was filed
under Section 16 which was then dismissed on 11.04.2015 by noticing the
earlier order. It has been held by the Apex Court in M/s Gas Authority of
India Ltd. & another Vs. M/s Keti Construction (I) Ltd. & others,
2007 (5) SCC 38 that the plea of jurisdiction should be taken before the
Arbitral Tribunal immediately and not at a later stage when the defence is
filed. The appellant having filed its reply to statement of claim on
10.04.2015 would only go on to show that he was only trying to delay the
proceedings through one of the partners of the firm and therefore we are of
the considered opinion that the conduct of the appellant and the main
partnership concern disentitles them for any such relief. The Arbitrator
while passing the first order dated 13.10.2014 specified regarding the
impartiality and that he was not connected with the company and therefore
had satisfied the necessary requirements under the Act and therefore there
would be no ground under Section 12(5) of the Act and he could not be
held to be ineligible to be appointed as Arbitrator as has now been
contended. The partnership concern on one hand was contesting the
jurisdiction of the proceedings at Delhi before the Arbitrator and has been
unsuccessful in the said challenge before the Court. It had an option at
that stage also to ask for a neutral Arbitrator but chose not to do so and
thus, cannot now at this stage be permitted to contest so on the principle of
waiver/estoppel.
14. Regarding the issue of counter-claim also, it is to be noticed
that on 10.10.2015, the Arbitrator noticed that none was putting in
appearance and four adjournments had been taken on account of talks of
settlement. On an earlier occasion on 12.03.2015, the parties had been
directed to file reply to the statement of claim as well as the counter-claim,Neutral Citation No:=2024:PHHC:003777-DB
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13. Still not satisfied with this, another application was filed
under Section 16 which was then dismissed on 11.04.2015 by noticing the
earlier order. It has been held by the Apex Court in M/s Gas Authority of
India Ltd. & another Vs. M/s Keti Construction (I) Ltd. & others,
2007 (5) SCC 38 that the plea of jurisdiction should be taken before the
Arbitral Tribunal immediately and not at a later stage when the defence is
filed. The appellant having filed its reply to statement of claim on
10.04.2015 would only go on to show that he was only trying to delay the
proceedings through one of the partners of the firm and therefore we are of
the considered opinion that the conduct of the appellant and the main
partnership concern disentitles them for any such relief. The Arbitrator
while passing the first order dated 13.10.2014 specified regarding the
impartiality and that he was not connected with the company and therefore
had satisfied the necessary requirements under the Act and therefore there
would be no ground under Section 12(5) of the Act and he could not be
held to be ineligible to be appointed as Arbitrator as has now been
contended. The partnership concern on one hand was contesting the
jurisdiction of the proceedings at Delhi before the Arbitrator and has been
unsuccessful in the said challenge before the Court. It had an option at
that stage also to ask for a neutral Arbitrator but chose not to do so and
thus, cannot now at this stage be permitted to contest so on the principle of
waiver/estoppel.
14. Regarding the issue of counter-claim also, it is to be noticed
that on 10.10.2015, the Arbitrator noticed that none was putting in
appearance and four adjournments had been taken on account of talks of
settlement. On an earlier occasion on 12.03.2015, the parties had been
directed to file reply to the statement of claim as well as the counter-claim,Neutral Citation No:=2024:PHHC:003777-DB
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if any within a period of 4 weeks. The claimant had been given 2 weeks to
file the rejoinder and reply to the counter-claim and another 2 weeks had
been granted to the respondents to file their rejoinder in the counter-claim.
It was noticed that a period of almost one year has lapsed but the pleadings
were not complete. Accordingly, one last opportunity was granted to
complete the pleadings and the needful was to be done within 2 weeks
along with the counter-claim. On the next date of hearing on 28.11.2015,
only a proxy counsel had put in appearance on behalf of the appellant and
again an effort was made to delay proceedings that the appellant could not
attend the arbitration proceedings due to his medical conditions.
Resultantly the request for filing the counter-claim was rejected by
noticing that the reply had already been filed on 11.04.2015 though
reference was made to the provisions of Order 7 Rule 6A CPC. It was
also noticed that the appellant was not footing his share of the fees and the
burden had shifted upon the claimant-company and directions were
accordingly issued to pay the fees. The said order was sought to be
reviewed which was rejected on the ground that it was not maintainable
and it was also noticed that the claimant-company had agreed that the
order be reviewed provided the cost of arbitration be shared which counsel
for the appellant had failed to do and therefore, the application for review
was rejected vide order dated 10.02.2016.
15. The above sequence of events would thus go on to show that
the appellant is refusing even to pay the costs of arbitration and had not
filing the counter-claim within the prescribed period and therefore shutting
out his claim had rightly been done by the Arbitrator as it was a blatant
attempt to delay the proceedings by one way or the other as has been
already noticed by approaching different forums through different persons.Neutral Citation No:=2024:PHHC:003777-DB
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if any within a period of 4 weeks. The claimant had been given 2 weeks to
file the rejoinder and reply to the counter-claim and another 2 weeks had
been granted to the respondents to file their rejoinder in the counter-claim.
It was noticed that a period of almost one year has lapsed but the pleadings
were not complete. Accordingly, one last opportunity was granted to
complete the pleadings and the needful was to be done within 2 weeks
along with the counter-claim. On the next date of hearing on 28.11.2015,
only a proxy counsel had put in appearance on behalf of the appellant and
again an effort was made to delay proceedings that the appellant could not
attend the arbitration proceedings due to his medical conditions.
Resultantly the request for filing the counter-claim was rejected by
noticing that the reply had already been filed on 11.04.2015 though
reference was made to the provisions of Order 7 Rule 6A CPC. It was
also noticed that the appellant was not footing his share of the fees and the
burden had shifted upon the claimant-company and directions were
accordingly issued to pay the fees. The said order was sought to be
reviewed which was rejected on the ground that it was not maintainable
and it was also noticed that the claimant-company had agreed that the
order be reviewed provided the cost of arbitration be shared which counsel
for the appellant had failed to do and therefore, the application for review
was rejected vide order dated 10.02.2016.
15. The above sequence of events would thus go on to show that
the appellant is refusing even to pay the costs of arbitration and had not
filing the counter-claim within the prescribed period and therefore shutting
out his claim had rightly been done by the Arbitrator as it was a blatant
attempt to delay the proceedings by one way or the other as has been
already noticed by approaching different forums through different persons.Neutral Citation No:=2024:PHHC:003777-DB
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Keeping in view the above background, we are of the considered opinion
that the order passed by the Addl.District Judge declining to interfere in
the award passed by the Arbitrator is well justified in the facts and
circumstances. Apparently the amounts were due for the usage of the
machine and the partnership-firm was bound by the agreement and they
had obtained the machines by paying a paltry sum of Rs.37 lakhs and
defaulted in the payment of the other amounts which also led to criminal
litigation under Section 138 proceedings. In such circumstances, we are of
the considered opinion that keeping in view the limited jurisdiction the
Commercial Court was exercising over the award in question we do not
feel that any case was made out before the Court concerned which would
fall within the provisions of Section 34(2) of the Act. The Arbitrator has
dealt with the dispute as contemplated under the Act and the appellant was
given proper opportunity of hearing. The Arbitrator had adjudicated on
that part of the award which was subject matter of consideration and the
appellant cannot show that there was any incapacity that forced it not to
adhere to the terms and conditions of the hypothecation agreement in
question which he was duly bound as such.
16. Keeping in view the above, we do not find any ground to
interfere in the well reasoned order passed by the Commercial Court.
Resultantly, the present appeal is hereby dismissed in limine. All pending
misc. applications accordingly stand disposed of.
(G.S. SANDHAWALIA)
JUDGE
(LAPITA BANERJI)
January 9th, 2024 JUDGE
Sailesh
Whether speaking/reasoned : Yes
Whether Reportable : YesNeutral Citation No:=2024:PHHC:003777-DB
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Keeping in view the above background, we are of the considered opinion
that the order passed by the Addl.District Judge declining to interfere in
the award passed by the Arbitrator is well justified in the facts and
circumstances. Apparently the amounts were due for the usage of the
machine and the partnership-firm was bound by the agreement and they
had obtained the machines by paying a paltry sum of Rs.37 lakhs and
defaulted in the payment of the other amounts which also led to criminal
litigation under Section 138 proceedings. In such circumstances, we are of
the considered opinion that keeping in view the limited jurisdiction the
Commercial Court was exercising over the award in question we do not
feel that any case was made out before the Court concerned which would
fall within the provisions of Section 34(2) of the Act. The Arbitrator has
dealt with the dispute as contemplated under the Act and the appellant was
given proper opportunity of hearing. The Arbitrator had adjudicated on
that part of the award which was subject matter of consideration and the
appellant cannot show that there was any incapacity that forced it not to
adhere to the terms and conditions of the hypothecation agreement in
question which he was duly bound as such.
16. Keeping in view the above, we do not find any ground to
interfere in the well reasoned order passed by the Commercial Court.
Resultantly, the present appeal is hereby dismissed in limine. All pending
misc. applications accordingly stand disposed of.
(G.S. SANDHAWALIA)
JUDGE
(LAPITA BANERJI)
January 9th, 2024 JUDGE
Sailesh
Whether speaking/reasoned : Yes
Whether Reportable : YesNeutral Citation No:=2024:PHHC:003777-DB
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