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Rajasthan High Court · body

2016 DIGILAW 676 (RAJ)

BHAMBRI DEVI v. MANJU SHARMA

2016-05-13

MOHAMMAD RAFIQ

body2016
ORDER : This application under Section 11 of the Arbitration and Conciliation Act, 1996 (for short 'the Act') has been filed by the applicant Smt. Bhambri Devi with the prayer to appoint sole arbitrator to resolve the dispute between the parties. According to averments made in the application, a partnership deed was executed between the applicant Smt. Bhambri Devi and non-applicant No. 1, Smt. Manju Sharma on 15.01.2000 to run the business of manufacturing of small stabilizers, inverters, UPS and CVTs and other like electronic items in the name and style of 'M/s. Shiv Shakti Electronic'. Satish Kumar Sharma, non-applicant No. 2, husband of non-applicant No. 1, under the deceitful means and in fabricated manner, was handling all the works related to banks, purchasing and selling of the manufactured goods and all the money transactions. Not a single penny has been given/paid to the applicant by the non-applicants towards her share of profits since the execution of the partnership deed. Applicant has alleged that non-applicant No. 1 and 2, in a fraudulent and deceitful manner, got her signature on the blank papers and they have been using these papers for withdrawing the money from the bank. Worth of the movable, immovable, fixed assets and credit of the firm is more than 50 lacs, which has wrongly been undervalued by the non-applicants. Non-applicants have purchased number of plots at various places in their own names out of the profits of the firm. Applicant is an illiterate lady and does not know English. Applicant later came to know that non-applicants had prepared a forged agreement dated 14.09.2012 wherein applicant is shown to have given her consent to retire from the partnership firm. This fact came to her knowledge when a case was filed by non-applicants against the firm M/s. Shiv Shakti Industries, run by her husband Shri Prem Chand. Learned counsel for the applicant contended that applicant sent a legal notice to non-applicants through her advocate by speed post on 19.12.2012, calling upon them to give the name of their nominated arbitrator within 10 days from the date of receipt of the notice whereafter the applicant was to give the name of her nominated arbitrator as per Clause 18 of the Partnership Deed. However, the non-applicants have so far not acted upon the notice and not indicated name of their nominated arbitrator. Hence, this application has been filed by the applicant. However, the non-applicants have so far not acted upon the notice and not indicated name of their nominated arbitrator. Hence, this application has been filed by the applicant. Learned counsel for the non-applicants opposed the application and submitted that since the incorporation of partnership deed, non-applicant No. 2 was duly authorised by both the partners to act as a business manager and to take care of day to day activities of the firm. Profit of the firm was equally divided between both the parties regularly, which is evident from the income tax returns of the firm. Applicant herself decided to retire from the partnership firm. Proper assessment of the properties of the firms was made after executing an agreement between both the partners. A fresh partnership deed was executed on 08.09.2012 retiring the applicant and admitting non-applicant No. 2 as a new partner in the firm. Even after retirement from the firm, applicant continued the same business with the same logo and resemblance of name “Shiv Shakti” with malice intention to cause financial loss to the firm in violation of Trade Mark Act. Aggrieved thereby, non-applicants filed an application No. 03/2012 for permanent injunction and interim order was passed in their favour on 31.08.2013. Applicant thereupon lodged a false FIR No. 364/2013 against non-applicants with Police Station Shyma Nagar, Jaipur on 01.10.2013 alleging therein that non-applicants with the intention to deceive applicant, coerce her into signing deed dated 11.09.2012, which was typed in English in which they agreed to give her half share. In place of giving half share of the firm amounting to Rs. 4,68,653/- in cash, non-applicant paid the same to appellant by cheque dated 15.09.2013 drawn on Rajlaxmi Urban Co-operative Bank Limited, which when presented to the bank for payment was dishonoured because their account had a balance of only Rs. 1,000/-. It is further contended that after investigation in the aforesaid FIR, allegations were found false and therefore, the police filed negative final report in the aforesaid FIR which has since been accepted by the court concerned. Before proceeding to examine the matter on merits, it is deemed appropriate to examine the Clause 18 of the Partnership Deed executed between the parties which deals with arbitration. Said clause for the facility is reproduced hereunder: “18. Before proceeding to examine the matter on merits, it is deemed appropriate to examine the Clause 18 of the Partnership Deed executed between the parties which deals with arbitration. Said clause for the facility is reproduced hereunder: “18. That in case of dispute or differences arising between the partners either in continuance or at the time of dissolution shall be referred to the arbitration and governed by the provision of the Indian Arbitration Act, then in force and the decision will be the final and binding on all the parties.” While on one hand, it has been asserted by applicant in para 7 of the application that agreement dated 14.09.2012 was forged by non-applicants wherein applicant has been shown to have consented to retire from the firm and this fact came to her knowledge much later when she learnt that a case has been filed by non-applicants against the firm M/s. Shiv Shakti Industries run by her husband, on the other hand, she has lodged FIR No. 364/2013 alleging that the said deed dated 11.09.2012 was got signed from her by the non-applicants using inducement and coercion. Allegation of the non-applicants is that the applicant has not made full and complete disclosure of facts. In the application filed before this Court, it has been alleged by the applicant that she is an illiterate lady and does not know English. Non-applicants are clever persons and all the documents provided to her by them were in English. Those documents which were prepared on 14.09.2012 were actually forged. The applicant has further alleged that she came to know about these documents when non-applicants filed a case against the firm M/s. Shiv Shakti Industries run by her husband Shri Prem Chand. However, in the FIR, the applicant alleged that non-applicant and her husband with the intention to defraud the applicant and take control of the properties of the firm, threatened her that if she did not sign the agreement, which was prepared in English, by accepting her share in the firm, she would be ruined. The amount that was agreed to be given to the applicant towards her share in the firm was Rs. 4,68,653/-, but instead of giving the said amount in cash, non-applicants gave a self cheque drawn on the Raj Laxmi Women Urban Cooperative Bank Limited. The amount that was agreed to be given to the applicant towards her share in the firm was Rs. 4,68,653/-, but instead of giving the said amount in cash, non-applicants gave a self cheque drawn on the Raj Laxmi Women Urban Cooperative Bank Limited. When the said cheque was presented, it was dishonoured as there was balance of only Rs. 1,000/- in the account of non-applicants. The facts averred in the application and the FIR, though are not exactly the same but they are substantially the same. In these circumstances, it cannot be said that there does not exist a dispute between the parties. The Supreme Court in Nandan Biomatrix Limited Vs. D.I. Oils Limited, (2009) 4 SCC 495 was dealing with a case wherein the applicant was seeking appointment of arbitrator to decide its claim arising out of agreement containing arbitration clause. The non-applicant therein opposed the application on the ground that the said agreement stood terminated by a subsequent termination agreement. The applicant alleged that the said termination agreement was a forged document and also filed criminal complaint under provisions of the Indian Penal Code. He, however, gave an undertaking to the Supreme Court to withdraw the criminal complaint, if the matter was referred to arbitration. The Supreme Court took that undertaking on record and referred the dispute to arbitration. In the present case, however, the police has filed negative final report in the investigation in the FIR lodged by the applicant. The Supreme Court in Bharat Rasiklal Ashra Vs. Gautam Rasiklal Ashra & Another, (2012) 2 SCC 144 was considering an application for appointment of arbitrator under Section 11(6) of the Act and dealing with the question that issue in regard to existence of such arbitration agreement, if raised, has to be decided by the Chief Justice/his designate himself and only if the finding is in the affirmative, can he proceed to appoint arbitrator. The dispute relating to a contract not containing arbitration clause cannot be referred to arbitration merely because another contract executed by same parties contains arbitration clause. Likelihood of necessity of recording of evidence or likelihood of delay in disposal of application under Section 11 of the Act are not good grounds to refuse to consider allegations of fraud, forgery and fabrication made by opposite party in respect of deed of contract. Likelihood of necessity of recording of evidence or likelihood of delay in disposal of application under Section 11 of the Act are not good grounds to refuse to consider allegations of fraud, forgery and fabrication made by opposite party in respect of deed of contract. Apprehension that such contentions might be raised frequently to protract or delay proceedings under Section 11 of the Act was examined in detail and rejected as unreal. However, there being no arbitration clause pertaining to disputes raised, High Court's order appointing arbitrator and leaving to arbitrator question of existence of valid contract containing arbitration clause was set aside. In National Insurance Company Limited Vs. Boghara Polyfab Private Limited, (2009) 1 SCC 267 , the Supreme Court relied on its Constitution Bench judgment in SBP & Co. Vs. Patel Engineering Ltd., (2005) 8 SCC 618 wherein the preliminary issues that may arise for consideration in an application under Section 11 of the Act were identified and segregated into three categories. Para 22.1 to 22.3 of the report in National Insurance Company Limited Vs. Boghara Polyfab Private Limited(supra) detailing out such caterorisation are reproduced hereunder: “(22.1) The issues (first category) which Chief Justice/his designate will have to decide are: (a) Whether the party making the application has approached the appropriate High Court. (b) Whether there is an arbitration agreement and whether the party who has applied under section 11 of the Act, is a party to such an agreement. (22.2) The issues (second category) which the Chief Justice/his designate may choose to decide (or leave them to the decision of the Arbitral Tribunal) are: (a) Whether the claim is a dead (long barred) claim or a live claim. (b) Whether the parties have concluded the contract/transaction by recording satisfaction of their mutual rights and obligation or by receiving the final payment without objection. (22.3) The issues (third category) which the Chief Justice/his designate should leave exclusively to the Arbitral Tribunal are: (i) Whether a claim made falls within the arbitration clause (as for example, a matter which is reserved for final decision of a departmental authority and excepted or excluded from arbitration). (ii) Merits or any claim involved in the arbitration.” The Supreme Court in National Insurance Company Limited Vs. (ii) Merits or any claim involved in the arbitration.” The Supreme Court in National Insurance Company Limited Vs. Boghara Polyfab Private Limited(supra) further held that in regard to issues falling under the second category above, if raised in any application under Section 11 of the Act, the Chief Justice/his designate may decide them, if necessary, by taking evidence. Alternatively, he may leave those issues open with a direction to the Arbitral Tribunal to decide the same. If the Chief Justice or his designate chooses to examine the issue and decides it, the Arbitral Tribunal cannot re-examine the same issue. It was further held that the Chief Justice/his designate will, in choosing whether he will decide such issue or leave it to the Arbitral Tribunal, be guided by the object of the Act(that is expending the arbitration process with minimum judicial intervention). Where allegations of forgery/fabrication are made in regard to the document recording discharge of contract by full and final settlement, it would be appropriate if the Chief Justice/his designate decides the issue. The issue that arose before the Supreme Court in that case was whether the contract was discharged by performance or by accord and satisfaction and as to whether full and final discharge/settlement voucher/no-dues certificate was given validly, voluntarily and without duress. It was held that if the party which has executed the discharge agreement/voucher alleges fraud/coercion/undue influence practised by the other party and is able to establish the same, then obviously discharge of such contract by such agreement/voucher is rendered void and cannot be acted upon. Consequently, any dispute raised by the executor of the discharge agreement/voucher would be arbitrable. The kind of dispute, which is being raised by the parties in the present case, would fall in second category referred to above. If such dispute is raised in the application under Section 11 of the Act, it should be either decided by the Chief Justice/his designate, if necessary, by taking evidence or alternatively, that issue may be left open by him with a direction to the Arbitral Tribunal to decide the same. If such dispute is raised in the application under Section 11 of the Act, it should be either decided by the Chief Justice/his designate, if necessary, by taking evidence or alternatively, that issue may be left open by him with a direction to the Arbitral Tribunal to decide the same. Although, the applicant in the present case has alleged that the agreement referred to above was fabricated and forged one, but a conjoint reading of para 6 and 7 of the application and allegations made in the FIR rather make it clear that the applicant did sign such agreement but what she has alleged is that she was made to sign such agreement by coercion and duress and on the threat that if she did not sign the same, she would be ruined and further alleged that the amount of share which was agreed to be given to her was paid by cheque, which was subsequently dishonoured and she did not receive any amount. The applicant served a legal notice through her advocate upon the non-applicants calling upon them to give name of arbitrator within ten days of the receipt of the said notice for resolving all the disputes, failing which the applicant shall be constrained to approach the competent court seeking appointment of arbitrator. The non-applicant failed to act according to the procedure contained in the Partnership Deed. In the FIR lodged by the applicant, the police has filed negative final report after investigation, which has since been accepted by the Magistrate concerned. This clearly shows that there exists a live arbitral dispute between the parties. I am, therefore, persuaded to accept the application for appointment of arbitrator, leaving all the issue open for him to decide including the issue that the applicant was allegedly made to sign the agreement referred to above under the duress and coercion used by the non-applicants and non-payment of share of the applicant in the firm to her. In view of above discussion, the application deserves to succeed and the same is accordingly allowed. Hon'ble Mr. Justice Shiv Kumar Sharma(Retd.), 878, Mahaveer Nagar-I, Near Durgapura Railway Station, Tonk Road, Jaipur(Mobile 9829051118) is hereby appointed as an independent sole arbitrator to resolve the disputes between the parties and the issues referred to above. In view of above discussion, the application deserves to succeed and the same is accordingly allowed. Hon'ble Mr. Justice Shiv Kumar Sharma(Retd.), 878, Mahaveer Nagar-I, Near Durgapura Railway Station, Tonk Road, Jaipur(Mobile 9829051118) is hereby appointed as an independent sole arbitrator to resolve the disputes between the parties and the issues referred to above. Payment of the cost of arbitration proceedings and the arbitration fees shall be made as per the Manual of Procedure for Alternative Dispute Resolution, 2009, of this Court. A copy of this order be sent to Hon'ble Mr. Justice Shiv Kumar Sharma(Retd.), 878, Mahaveer Nagar-I, Near Durgapura Railway Station, Tonk Road, Jaipur(Mobile 9829051118).