Virender Singal & Ors v. Delh Express Travels Pvt Ltd

INDERMEET KAUR, J. (Oral) Caveat No.

Respondent has put in appearance. Caveat has become infructuous. Dismissed. C.R.P. 9/2012 and CM Nos. 1005-1007/2012

¶1The order impugned is the order dated 19.12.2011 whereby application under Section 8 of the Arbitration and Conciliation Act, 1996 (hereinafter referred to as "the Act") filed by the

petitioner/defendant no. 1 seeking a stay of the present suit has been dismissed.

¶2Record shows that the plaintiff (M/s Delhi Express Travels Pvt. Ltd.) had filed a suit for declaration, possession, permanent injunction and mesne profits against the four defendants of whom defendant no. 1 is M/s. Dex Aviation Pvt. Ltd., Virender Kumar Singal and Varun Singal have been described as defendant Nos. 2 and 3 and M/s. Swan Travels Pvt. Ltd. is defendant no. 4. Suit premises are premises bearing No. 105, First Floor, Local Shopping Center–cum-Office Complex, Safdarjung Rresidential Scheme, Aurbindo Place, Aurbindo Marg, Hauz Khas, New Delhi. Averments made in the plaint are that the plaintiff had entered into an agreement to sell, general power of attorneys (3) and other related documents all dated 6.7.2007; this was pursuant to a fraud played upon the plaintiff under which the plaintiff had executed these documents; said documents are bogus and have no legality; accordingly, prayer for declaration, declaring the said documents to be declared null and void has been prayed for. A decree of possession of the suit premises has also been prayed for; contention of the plaintiff being that he had in fact never agreed to sell this property

to defendant no.1.

¶3In the course of these proceedings, an application under Section 8 of the Arbitration Act had been filed by the defendant no. 1. His contention is that the subject matter of the present suit is the subject matter of disputes which are pending between the parties before the sole Arbitrator Shri Satpal, Retired Judge of the High Court who had been appointed by the orders of this court dated 11.5.2005. He has accordingly prayed for a stay of the present suit.

¶4Record shows that the family tree of the parties comprise of three brothers namely Vipin Kumar Singal, Virender Kumar Singal and Viney Kumar Singal; plaintiff in the present suit is Vipin Kumar Singal who is the Director of the Company M/s Delhi Express Travels Pvt. Ltd., defendant No.2 is Virender Kumar Sehgal who is the Managing Director of defendant No.1 i.e. M/s Dex Aviation Pvt. Ltd.; third brother Viney Kumar Singal is not a party in the present suit.

¶5The contents of the plaint disclose that a transaction had been entered into between the defendant No.1 whereby the plaintiff pursuant to an alleged fraud having been played upon him by the defendant No.1 had entered into certain documents of sale deed dated 6.7.2007 in favour

of his brother (defendant No.2) which as per the contents in the plaint being a fraudulent transaction were sham and illegal documents; accordingly, the prayer in the plaint seeks a cancellation of the said documents.

¶6On 22.7.2004, a Memorandum of Understanding had been entered into between the three brothers whereby they had agreed to get their assets evaluated by their respective evaluators and thereafter to refer their disputes to an Arbitrator. Clause 5 contains an arbitration clause; it is not in dispute that the subject matter of the present suit (the property bearing No. 105, First Floor, Local Shopping Center–cum-Office Complex, Safdarjung Rresidential Scheme, Aurbindo Place, Aurbindo Marg, Hauz Khas, New Delhi) was also the subject matter of this interim family arrangement dated 22.7.2004.

¶7A Section 9 petition was filed by the present petitioner in the year 2005 seeking certain interim reliefs wherein it had been contended that the family of defendant No.1 is a joint family group known as JKS Group; the details of the family assets had been enclosed alongwith this application which admittedly make a reference to the suit property. On

28.1.2005, a Bench of this court had passed orders on this application

directing the parties to maintain status quo; on 11.5.2005, the disputes between the parties had been referred to the sole Arbitrator, Justice Sat Pal, a retired Judge of this Court. Admittedly, the proceedings before the Arbitral Tribunal are yet pending where in the hotchpotch of the joint family properties the present suit property also forms a part.

¶8Record further shows that two petitions under Section 17 of the said Act have been filed before the Arbitral Tribunal by the third brother (not a party in the present suit) (Viney Kumar Singal) to which a reply had been filed by the present petitioner; that reply is relevant. Petitioner in the said reply has stated that M/s. Dex Aviation Pvt. Ltd. (defendant no. 1) is not created out of the joint family funds; contention being that it has no concern or nexus with the family owned companies; further contention being that the plaintiff (M/s. Delhi Express Travels Pvt. Ltd.) is no longer the owner of the present suit property as the said suit property has been transferred by the plaintiff in favour of the defendant no.1 by way of a legal transaction; contention being that an MOU dated

29.11.2006 had been executed between Vipin Singal (plaintiff) and Virender Kumar Singal (defendant No. 2) as also his sons pursuant to which the ownership of the said premises transferred to defendant no.1.

¶9It is in this background that the application under Section 8 of the Arbitration Act has to be considered.

¶10The averments made in the plaint as also the prayer sought for have been considered. The test for dealing with an application under Section 8 of the Arbitration Act essentially is to see as to whether the subject matter of the present suit is the subject matter of a dispute pending before the Arbitrator and if the subject matter between the two is identical then the proceedings in the suit shall be stayed; the other essential ingredient being that there must be an arbitration clause between the parties.

¶11Record shows that on the first count, the application under Section 8 of the said Act must fail. The subject matter of the disputes pending before the Arbitrator is the hotchpotch of the joint family properties of the three brothers of the JKS Group namely Vipin Kumar Singal, Viney Kumar Singal and Virender Kumar Singal of which admittedly the present suit property is also a part. This was in terms of the MOU entered into between the brothers dated 22.07.2004. Relevant would it be to extract this MOU dated 22.07.2004 entered into between the three brothers and the Arbitration Clause contained in clause 5:-

"INTERIM FAMILY AGREEMENT (IFA)

Whereas families of Mr. Vipin K Singal, Mr. Viney K. Singal and Mr. Virender Singal (herein referred as VKS1, VKS2 and VKS3) have been carrying on joint family business popularly known as JKS group. Due to disputes/dissentions, certain differences have been arisen because of which VKS2 has requested the other two (VKS1 and VKS2( to divide/distribute the share of VKS3 to him and his family in the joint businesses/properties/other assets adjusting/clearing the liabilities.

After deliberations and due to intervention of family friend Mr. Somnath, VKS1, VKS2 and VKS3 have agreed to an interim arrangement, pending a final family settlements/distribution of business/assets on the following broad terms and conditions.

¶1VKS1, VKS2 and VKS3 have expressed their desire to takeover and handle joint family running businesses of airlines ticketing i.e. the 1) wholesale (IATA) being done in Delhi Express Travels Private Limited and Dex Travels Private Limited, 2) Corporate (IATA)-being done in Trans World Travels proprietor G.B. Morisson Travels Private Limited and 3) GSA-being done in Maharani Tours Private Limited respectively. It is therefore agreed that the above settlement will not alter this broad principle.

¶2The evaluation of assets/liabilities/business shall be carried out by Mr. Arun K. Gupta for and on behalf of VKS1.

¶3The evaluation of assets/liabilities business shall be carried out by Mr. Y.K. Sharma for and on behalf of VKS2.

¶4Similarly Mr. Amod Aggarwal shall carry the evaluation of assets/liabilities/business for an on behalf of VKS3.

¶5Upon completion of evaluation the matter shall be referred to a panel of arbitrators, that is one arbitrator each on behalf of VKS1 and VKS2, and on arbitrator will be nominated by VKS3.

¶6Mr. Somnath shall be the Chairman of this panel of arbitration.

¶7VKS3 will shift his own office during the interim period to the family owned commercial building situated at 42, community centre, Zamrudhpur form 11 community centre, East of Kailash.

¶8VKS1, VKS2 and VKS3 and their family members shall maintain status quo on running of the joint family business activities as well as other assets of the family.

¶9No major financial transaction other than in the ordinary course of joint business activity shall be carried out. In case of any deviation, warranted by business requirements, the same shall only be with consent in writing from Mr. Som Nath, who is responsible for protecting interest of all parties.

¶10The process of evaluation, arbitration and final settlement will be completed by 31st August, 2004. This date can be extended if the need arises by mutual consent or as per approval of Mr. Som Nath.

¶11All parties shall maintain harmony, cordiality during this interim period.

¶12This has been signed in New Delhi, on July 22nd, 2004."

Pursuant thereto on 11.05.2005 the sole Arbitrator had been appointed to decide the disputes in terms of its arbitration clause. These proceedings are admittedly pending. However, the averments made in the plaint disclose that the case of the plaintiff is that a fraud has been

played upon him and pursuant thereto he was made to sign certain documents dated 6.7.2007 whereby he had entered into a sham transaction for the sale of the suit property to defendant No.1; cancellation of the aforenoted documents is the first prayer made by him. In these circumstances, an issue on the question of fraud will essentially have to be framed to decide this contention between the parties. The Arbitrator in terms of the arbitration clause contained in the MOU dated 22.07.2004 had only clothed the Arbitrator to deal with the hotchpotch of the joint family properties of the three brothers after their evaluation; no doubt the suit property was also thrown into this hotchpotch but the question of the alleged fraudulent sale of this property by the plaintiff in favour of defendant No. 1 on 06.07.2007 was a question which could not be within the jurisdiction of the Arbitrator; in fact this transaction is after the appointment of the Arbitrator. This question of a fraud which would require a detailed examination of the allegations which if found true would vitiate the entire alleged transaction of 06.07.2009 could not have been gone into by the Arbitrator. Stand of defendant No. 2 (as is clear from his reply to the petition under Section 17 of the said Act) had relied upon an MOU

dated 29.11.2006 purportedly entered into between the plaintiff, defendant No. 2 and his sons; this document is also a document entered into after the date of the appointment of the Arbitrator; that apart to decide the validity of this transaction the allegations of fraud and its counter allegations would have to be examined. This power was not vested with the Arbitrator. In these circumstances, the trial court declining the prayer made by the petitioner for reference of the disputes to the Arbitrator does not in any manner suffer from an infirmity.

¶13Section 8 of the said Act contains the words: "in a matter which is the subject matter of an arbitration agreement" which are relevant; the suit should be in respect of the same subject matter which the parties have agreed to refer to Arbitrator and which comes within the ambit of the arbitration clause contained in the Arbitration Agreement. However, a dispute which is distinct from the subject matter of the disputes pending in reference before the Arbitrator would not lead to the applicability of Section 8. There is no dispute to the factum that where all the ingredients of Section 8 have been fulfilled only then there is a mandate upon the court to make a reference of the disputes to arbitration and suit proceedings filed qua the same subject matter are

liable to be stayed.

¶14In AIR 200 Supreme Court 1886 titled as P. Anand Gajapathi Raju & Ors. Vs. P.V.G. Raju (Died ) & Ors, the Apex Court has noted the conditions which are required to be satisfied under Sub -Sections 1 and 2 of the Section 8 of the Arbitration Act before the Court can exercise its power to refer parties to arbitration are:- "(1) there is an arbitration agreement' (2) a party to the agreement brings an action in the Court against the other party; (3) subject matter of the action is same as the subject matter of the arbitration agreement (4) the other party moves the Court for referring the parties to arbitration before it submits his first statement on the substance of the dispute. The last provision creates a right in the person bringing the action to have the dispute adjudicated by Court, once the other party has submitted his first statement."

¶15The Apex Court in (2010) 1 SCC 72 N. Radhakrishnan Vs. Maestro Engineers and others has held as under:- "The learned Counsel for the respondents on the other hand argued that when a case involves substantial questions relating to facts where detailed material evidence (both documentary and oral) needed to be produced by either parties, and serious allegations pertaining to fraud and malpractices were raised, then the matter must be tried in court and the Arbitrator could not be competent to deal with such matters which involved an elaborate production of evidence to establish the claims relating to fraud and criminal misappropriation.

In our opinion, the contention of the respondents relating to the jurisdiction of the Arbitrator to decide a dispute pertaining to a matter of this proportion should be upheld, in view of the facts and circumstances of the case. The High Court in its impugned judgment has rightly held that since the case relates to allegations of fraud and serious malpractices on the part of the respondents, such a situation can only be settled in court through furtherance of detailed evidence by either parties and such a situation can not be properly gone into by the Arbitrator". The Apex Court in (2007) 5 SCC 510 India Household and Healthcare Ltd. Vs. LG. Household and Healthcare Ltd. has held as under:- "It is also no doubt true that where existence of an arbitration agreement can be found, apart from the existence of the original agreement, the Courts would construe the agreement in such a manner so as to uphold the arbitration agreement. However, when a question of fraud is raised, the same has to be considered differently. Fraud, as is well known, vitiates all solemn acts. A contract would mean a valid contract; an arbitration agreement would mean an agreement which is enforceable in law." Furthermore the plaintiff in the present case has sought the following reliefs:- a) Pass a decree of declaration declaring the agreement to sell, power of attorney and 3 power of attorneys, all dated 06.07.2010 as null and void; b) Pass a decree of Possession directing the defendant No. 1 to 3 to handover the possession of the suit property bearing No. 105, First Floor, Local Shopping Center cum office complex, at Safdarjung Residential Scheme,

Aurobindo Place, Aurobindo Marg, Hauz Khas, New Delhi ad –measuring

241.60 sq. meters to the plaintiff; c) Pass a decree of permanent injunction, restraining/prohibiting the defendant Nos. 1 to 3, their agents, representatives, servants, nominees, attorneys, assignees etc. from in any manner dealing with the suit property; d) Pass a decree awarding mesne profits and damages to the plaintiff for the use and occupation of the premises by the defendants; e) Pass any other order/orders which this Hon'ble Court may deem fit and proper in the facts and circumstances of the case. The said prayers especially prayer (d) for damages/mesne profits are definitely outside the domain of the reference before the Arbitrator which is clear from the MOU dated 22.07.2004 and Clause 5 which is the Arbitration Clause.

¶19It is also not in dispute that the defendants have appeared before the Trial Court and out of the four defendants one has filed his written statement and the others defendants had sought adjournment on four difference occasions to file the written statement; vehement contention of the respondent being that the defendant had in fact already submitted himself to the jurisdiction of the Civil Court.

¶20In these circumstances, the impugned judgment declining the prayer made by the defendants in his application under Section 8 Arbitration Act suffers from no infirmity. Reliance by the learned

counsel for the petitioner on the judgment reported as MANU/DE/1247/2000 titled as MMTC Ltd. vs. Shyam Singh Chaudhary and Ors. is misplaced. There is no dispute that where the subject matter of the suit and the subject matter of the proceedings pending before the Arbitration are the same, the suit proceedings are necessarily be stayed. This is not so in the present factual scenario.

¶21Petition is without any merit; it is dismissed.

INDERMEET KAUR, J

JANUARY 24, 2012 rb

* IN THE HIGH COURT OF DELHI AT NEW DELHI % Date of Judgment: 24.01.2012 + C.R.P. 9/2012 and CM Nos. 1005-1007/2012 VIRENDER SINGAL & ORS ..... Petitioners Through Mr. Sandeep Sethi, Sr. Adv. with Mr. Diwakar, Mr. Ajay Bhargava and Ms. Preeti Gupta, Adv. Versus DELH EXPRESS TRAVELS PVT LTD ..... Respondent Through Mr. Ashok Chhabra, Mr. Amit Saxena and Mr. Pawan Kumar, Adv. CORAM: HON'BLE MS. JUSTICE INDERMEET KAUR