Research › Search › Judgment

Delhi High Court · body

2009 DIGILAW 64 (DEL)

Hem Lata Gael v. Urmila Gael

2009-01-16

MUKUL MUDGAL, VIPIN SANGHI

body2009
Mukul Mudgal, J. 1. This appeal challenges the judgment of the learned Single Judge in IA No. 3188 & 6230/1998 in CS(OS) No. 1762N1990 and Execution Petition No. 108/1999 titled as Ms. Urmila Goel v. Ms. Hemlata Goel and Ors. dated 20th November, 2008 by which the objections preferred by the appellants against the arbitration award were rejected and the award was made executable by the court. The facts of the case briefly stated are as follows: (a) The dispute between the parties arose pursuant to dissolution of the partnership Firm, M/s. Manohar Lal Munshi Lal. (b) By the order dated 5th November, 1996, Justice D.R. Khanna (Retd.), a retired Judge of this court was appointed as the Arbitrator. Consequently, an award dated 4th March, 1998 was made by him, against which objections were preferred vide IA No. 3188/1988 under Section 30 and 33 of the Arbitration Act, 1940 (for short the 1940 Act) and under Section 34 of the Arbitration and Conciliation Act, 1996 (for short the 1996 Act) was filed on behalf of the appellants herein (who were the respondents before the Arbitrator). Since the parties had agreed that the objections may be examined without going into the issue whether the objections were under the 1940 Act or 1996 Act, the learned Single Judge proceeded to do so. The only two objections which were seriously pressed before the learned Single Judge were the issues relating to the evaluation of the goodwill and that relating to the apportionment of the capital account between the parties. " In dealing with the claim of goodwill, the learned Single Judge inter alia held as follows:(i) that the partnership deed between the parties did not contain any clause regarding goodwill. (ii) that the respondents had, in their plaint under Section 20 of the 1940 Act, raised a claim for goodwill and in the written statement filed on behalf of the appellants, they did not aver that the claim for goodwill was not maintainable or referable. (iii) that it was not the case of the appellants that the respondents had not pleaded or argued the claim of goodwill before the learned Arbitrator. Consequently, the aforesaid plea about the maintainability of the claim for valuation of the goodwill of the Firm was rejected. (iv) The partnership firm M/s. Manohar Lal Munshi Lal was carrying on the business for several decades prior to its dissolution. Consequently, the aforesaid plea about the maintainability of the claim for valuation of the goodwill of the Firm was rejected. (iv) The partnership firm M/s. Manohar Lal Munshi Lal was carrying on the business for several decades prior to its dissolution. They were agents of Hindustan Lever/Lipton and the partners were family members. (v) Indisputably, after the dissolution, the appellants entered into an agreement with HLL/Lipton to carryon the same business as was earlier being carried on by the firm. (vi) It was also not in dispute that not only the Principals of the agency business i.e. HLL/Lipton were the same, but the employees carrying on the business run by the appellants in the name of the new firm were also the same i.e. the employees of the dissolved firm were engaged by the appellants. (vii) Though, the new business was stated to be carried on from the residence of the appellant, nevertheless, since the earlier business was a successful business, having a turnover of over Rs.5 crores, there was a large customer base, the benefit of which fell to the appellants. (viii) The appellants were immediately able to enter into an agreement with HLL/Lipton and get the said dealership only for the reason of the faith reposed by HLL/Lipton in them and because of them being partners of the firm with which HLL/Lipton was earlier carrying on the business for decades. (ix) The Firms name i.e. M/s. Manohar Lal Munshi Lal was again used by the appellants with a mere suffix of "and Co.".2. On the basis of the above findings, the learned Single Judge upheld the findings of the learned Arbitrator that not only the claim of goodwill could be raised as it was not objected to, but it was also found that the deriving of the partnership business by the appellants new Firm was solely on account of prior dealerships of the partnership firm in question. It was, thus, concluded that this was sufficient evidence of the goodwill which accrued to the benefit of the appellant and was, thus, liable to be apportioned between the parties: ", 3. In support of his plea that the goodwill could not be a subject matter of the present dispute, or that it could not be valuated in the manner done by the learned arbitrator, the learned counsel for the appellant, Sh. In support of his plea that the goodwill could not be a subject matter of the present dispute, or that it could not be valuated in the manner done by the learned arbitrator, the learned counsel for the appellant, Sh. Ravi Gupta, has cited a judgment of the Honble Supreme Court in the case of Ramnik Vallabhdas Madhvani and Others v. Taraben Pravinlal Madhvani, (2004) 1 Supreme Court Cases 497 and in particular paragraph 68, which reads as follows: "68. The term "goodwill" signifies the value of the business in the hands of a successor, so far as increased by the continuity of the undertaking being preserved in the shape of the right to use the old name and otherwise. It is something more than a mere chance or probability of old customers maintaining their connection, though this is a material part of the practical fruits. "Goodwill" may be the whole advantage belonging to the firm, its reputation as also connection thereof. It, thus, means that every affirmative advantage as contrasted with negative advantage that has been acquired in carrying on the business whether connected with the premises of business or its name or style, everything connected with or carrying the benefit of the business." 4. In our view the said judgment does not aid the case set up by the appellants. On the contrary, the following sentence in the judgment i.e. "Goodwill" may be the whole advantage belonging to the firm, its reputation as also connection thereof, supports the findings of the learned Arbitrator and the learned Single Judge. 5. The advantage belonging to the dissolved Firm has accrued to the benefit of the appellants, not only in terms of reputation, but also in respect of the client base. The connections of the dissolved Firm with the Principal HLL/Lipton have also exclusively been enjoyed by the appellants as is evident from-the fact that the dealerships were renewed in the name of the new Firm. 6. The learned counsel for the appellants has also cited the judgment of the Allahabad High Court in the case of Controller of Estate Duty, Lucknow v. Jagdish Prasad, 1980 ITR 717, the relevant portion whereof ads as follows:-, "....The right to carry on the business by the two firms was a very temporary right depending upon the agency agreements entered into with M/s. Burmah-Shell and the licence issued by the State Govt. These licences and the agency agreements were not capable of being sold or transferred. Further, the Excise Rules specifically prohibited transfer of the licence. In the circumstances, the right to carryon such a business did not create a goodwill, any share of which could, on the death of a partner, pass on to his heirs or legal representatives. ........Goodwill is the benefit and advantage of the good name, reputation and connection of business. II 7. In our view, the aforesaid judgment of the Allahabad High Court has no relevance, since that was a case wherein the licence in favour of the Firm was not transferable on the death of a partner in favour of the legal heirs or legal representatives. However, that is not the position in the facts of this case. As a matter of fact, the dealerships were transferred in the name of the appellants new Firm. We may also observe that the learned Arbitrator returned a finding of fact that the dealerships from HLL/Lipton were retained on representation to them of the dissolution of the erstwhile Firm on the death of Smt. Gomti Devi and that the dealership was got converted in the name of the new Firm. Moreover, even this judgment holds that goodwill is a benefit and advantage of the good name, reputation and connection of business. Thus, in our view even if the entire portion of the judgment could be construed as being in favour of the appellant, the latter portion about the benefit and advantage of the goodwill is against the appellant. 8. In any event, in our view the law laid down by the Honble Supreme Court in the case reported as Ramnik Vallabhdas Madhvani and Others (supra) is the latest judgment by which we are bound. We are satisfied that the aforesaidjudgment in Jagdish Prasad (supra) distinguishable on facts. 9. The only other plea advanced by the learned counsel for the appellant was in respect of the apportionment of the capital accounts between the parties. Mr. Ravi Gupta, the learned counsel appearing on behalf of the appellant submits that the Arbitrator had not apportioned the liabilities. He has relied upon the balance-sheet as on 31st March, 1989 to submit that there were corresponding liabilities to the tune of Rs. Mr. Ravi Gupta, the learned counsel appearing on behalf of the appellant submits that the Arbitrator had not apportioned the liabilities. He has relied upon the balance-sheet as on 31st March, 1989 to submit that there were corresponding liabilities to the tune of Rs. 12 lakhs which were also left to the share of the appellant and not apportioned, and therefore, the learned Arbitrator fell in error in taking into account the stock in trade to the tune of Rs. 14.25 lakhs while apportioning the capital account between the parties. We find from the objections raised before the learned Single Judge that no plea with regard to the apportionment of the said alleged liability of the firm was raised. The learned Single Judge has noticed the reasoning of the learned Arbitrator while dealing with the aspect of apportionment of the capital account. The appellants had withdrawn various amounts from the capital account to the tune of nearly Rs. 3 lakhs, in comparison to withdrawal of only Rs. 5000/- odd by the respondents. The closing stock of Rs. 14.251akhs and the amounts recoverable from Lipton to the tune of Rs. 1.48 lakhs were also treated as falling in the kitty of the appellants, since it was the appellant who took over the business of the dissolved Firm and carried on the same, with more or less the same name. The learned Single Judge, therefore, found that the reasoning of the learned Arbitrator did not call for any interference as it was not shown to be without any basis, contrary to the agreement, or such, as no reasonable person could reach. The Supreme Court in the case of McDermott International Inc. v. Burn Standard Co. Ltd. and Ors., (2006).11 Supreme Court Cases 181 has observed that: "The 1996 Act makes provision for the supervisory role of courts, for the review of the arbitral award only to ensure fairness. Intervention of the court is envisaged in few circumstances only, like, in case of fraud or bias by the arbitrators, violation of natural justice, etc. Ltd. and Ors., (2006).11 Supreme Court Cases 181 has observed that: "The 1996 Act makes provision for the supervisory role of courts, for the review of the arbitral award only to ensure fairness. Intervention of the court is envisaged in few circumstances only, like, in case of fraud or bias by the arbitrators, violation of natural justice, etc. So, the scheme of the provision aims at keeping the supervisory role of the court at minimum level and this can be justified as parties to the agreement make a conscious decision to exclude the courts jurisdiction by opting for arbitration as they prefer the expediency and finality offered by it." In this view, the learned Single Judge has rightly dismissed the objections as the award appears to be fair and reasonable and the appellants have failed to establish either violation of principles of natural justice or breach of public policy as interpreted by the Supreme Court in ONGC Ltd. v. Saw Pipes Ltd., (2003) 5 SCC 705 . Consequently, the appeal has no merit and is dismissed as such. 10. The appeal stands disposed of along with all pending applications. CM No. 97/2009 Exemption allowed subject to all just exceptions. CM stands disposed of.