IN THE HIGH COURT OF DELHI AT NEW DELHI
Judgment reserved on: 14.02.2011
% Judgment delivered on: 09.03.2011
+ O.M.P. No. 138/2011 & I.A. Nos. 2250-51/2011
SMT. ANITA GARG ..... Petitioner
Through: Mr. C.A. Sundaram & Mr. Dhruv
Mehta, Sr. Advocates, with Mr. N.M.
Sharma, Ms. Mithu Jain, Ms. Mallika
Gehlot & Mr. Abhishek Sharma,
Advocates.
versus
M/S. GLENCORE GRAIN ROTTERDAM B.V. & ANR ......Respondents
Through: Mr. Rajiv Nayar, Sr. Advocate, with
Ms. Niti Dixit, Mr. Darpan Wadhwa,
Mr. Vidur Bhatia, Advocates.
CORAM:
HON'BLE MR. JUSTICE VIPIN SANGHI
1. Whether the Reporters of local papers may
be allowed to see the judgment? : NO
2. To be referred to Reporter or not? : YES
3. Whether the judgment should be reported
in the Digest? : YES
JUDGMENT
VIPIN SANGHI, J.
1. This petition has been preferred under Section 34 of the
Arbitration and Conciliation Act, 1996 (the Act) to challenge the interim
award dated 20.06.1997 and the final award dated 29.07.1997 passed
by The Grain and Feed Trade Association (for short „GAFTA‟) in
disputes between respondent no.1 M/s Glencore Grain Rotterdam B.V
OMP 138.2011 Page 1 of 17
and M/s Shivnath Rai Harnarain (India) Company, a registered
partnership firm (the firm) of which the petitioner was one of the
partners at the relevant time.
2. The arbitral awards in question has been rendered in an
international commercial arbitration. To maintain these objections, the
petitioner places heavy reliance on the decision of the Supreme Court
in Venture Global Engineering V. Satyam Computer Services
Ltd. and Anr., (2008) 4 SCC 190 wherein the Supreme Court has held
that objections under Section 34 of the Act (which falls in Part I) would
lie in respect of an award made in an international commercial
arbitration.
3. The admitted position is that the firm filed suit being CS(OS)
1103/1997 before the Delhi High Court to challenge the legality and
validity of the 11 underlying contracts, in relation to which arbitration
proceedings were initiated at the instance of respondent No. 1. The
issue of jurisdiction of the arbitral tribunal was raised by the firm,
before the tribunal, and the same was rejected by it by its interim
award dated 20.06.1997. The aforesaid foreign awards were made
against the firm wherein, inter alia, the petitioner and her husband Shri
Prem Garg were partners. The firm participated in the arbitration
proceedings upto the point when the issue of jurisdiction was decided
against it. The firm was represented in the arbitration proceedings by
its partner Shri Prem Garg. The issue of legality and validity of the
OMP 138.2011 Page 2 of 17
underlying contracts had been arbitrated by the arbitral tribunal and
the finding returned thereon was against the firm.
4. After the final award was rendered, respondent No. 1 filed
CS(OS) 541/1998 to enforce the foreign award. I have called for the
records of the disposed of CS (OS) No.1103/1997 and CS (OS)
No.541/1998. This suit was contested by the aforesaid firm acting
through its authorized representative and power of attorney holder
Shri Ram Lal Thakur & partner Shri Prem Garg. The suit filed by
respondent no.1, and the defence raised therein were treated as
proceedings under Sections 47 and 48 of the Act. The earlier suit filed
by the partnership firm, i.e., CS(OS) 1103/1997 was also listed and
taken up along with the suit filed by respondent no.1.
5. On 27.11.2008, the learned single Judge decreed the suit filed by
respondent no.1, being CS(OS) 541/1998 and held that the foreign
award was enforceable. The objections to the awards were dealt with
in detail. On the same day, by another consequential order, the suit
filed by the partnership firm Shivnath Rai Harnarain (India) was
dismissed “In view of the findings recorded in connected suit No.
541/1998”.
6. The aforesaid firm filed two regular first appeals to assail the
order dated 27.11.2008 in respect of the decisions rendered in CS(OS)
1103/1997 and CS(OS) 541/1998. They were numbered as RFA No.
17/2009 and RFA No. 20/2009. The Division Bench, however, vide
OMP 138.2011 Page 3 of 17
order dated 06.11.2009 held that the regular first appeals were not
maintainable. The partnership firm then preferred SLP to assail the
order dated 06.11.2009.
7. In the meantime, respondent no.1 had preferred execution
proceedings, being Ex.Pet.No.72/2009 against the firm; Shri Prem
Garg; the petitioner herein, Smt. Anita Garg; Shri Brij Mohan Gupta and
Lal Mahal Ltd who had apparently taken over the business of the firm.
To rope in, inter alia, the petitioner, reliance was placed on Order 21
Rule 50 CPC.
8. The Supreme Court granted interim stay against the execution of
the foreign awards, subject to deposit of 50% of the principal amount
under the foreign awards. The partnership firm, however, did not
deposit any amount. Consequently, the stay of execution proceedings
did not become operative.
9. On 19.04.2010, in the execution proceedings the Court directed
that the assets of Shri Prem Garg and the petitioner Smt. Anita Garg,
namely the shares held by them in Lal Mahal Ltd. be sold by public
auction. Sh. Prem Garg and the petitioner Smt. Anita Garg, and the
firm preferred EFA (OS) Nos. 15/2010 and 16/2010 to challenge the
order dated 19.04.2010 passed by the executing court. On
11.06.2010, these appeals were dismissed by the Division Bench by a
detailed order. It was, inter alia, held that the petitioner was a partner
of the firm at the relevant time. The Court placed reliance on
OMP 138.2011 Page 4 of 17
Gambhir Mal Pandiya (since deceased) v. J.K. Jute Mills Co. Ltd.
Kanpur & Anr., AIR 1963 SC 243. The Division Bench held in
paragraph 15 as follows:-
“We are of the view that the scope of enquiry under Rule
50 Order XXI of the CPC is limited to the fact as to whether
the person against whom the execution is sought was a
partner when the cause of action accrued against the firm
and against the Decree Holder, but the person may
question the decree on the ground of collusion,
fraud or the like but not have a fresh adjudication
on the question of liability. (emphasis supplied).”
10. The order passed by the Division Bench in EFA (OS) 15/2010 and
16/2010 has attained finality. I may note that this order of the Division
Bench, though referred to, has not been filed with this petition. The
present objections have been filed after the dismissal of the said
appeals, on or about 19.01.2011.
11. I have heard senior counsels for the parties on the aspect of
maintainability of these objections. It is not disputed that a signed
copy of the award was sent to the party to the arbitration proceedings,
namely, the partnership firm M/s. Shivnath Rai Harnarain (India). The
firm not only opposed the proceedings under Sections 47 of the Act by
participating in CS(OS) 541/1998, but also raised its objections under
Section 48 of the Act. It also pursued its own suit in CS(OS)1103/197
to challenge the legality and validity of the underlying contracts.
12. In the aforesaid suit being CS (OS) No.541/1998, issues were
framed on 09.11.2000. Two of the issues framed by the Court were:
OMP 138.2011 Page 5 of 17
“1. Whether the petitioner has complied with the
provisions contained in Section 47(1)(a) to (c) of Act, 1996,
for enforcement of the award dated 29.7.97?
2. If the issue No.1 is decided in affirmative, whether
the respondent has furnished proof as required under
Section 48 of the Act, 1996, showing that the enforcement
of the said award is liable to be refused under Section 48?”
The Court dealt with the objections raised by the firm under
Section 48 of the Act. This is evident from the following extracts of the
said judgment:
“He, however, sought to resist the enforcement of the
award by placing reliance on the provisions of Section
48(1)(a) and (b) as well as Section 48(2)(b) to which I shall
presently refer.”
… … … ….
“43. Adverting to Issue No.2, which deals with the
question as to whether the defendant has furnished proof
as required under Section 48 of the Act, showing that the
enforcement of the award is liable to be refused under
Section 48, Mr. Tiku, the learned counsel for the defendant
has raised a three-fold contention:-
(i) There was no arbitration agreement between the parties
and accordingly the arbitral tribunal had no jurisdiction to
arbitrate upon the matter.
(ii) The defendant was not given proper notice of the
arbitral proceedings and was unable to present its case.
(iii) The enforcement of the award would be contrary to the
public policy of India.”
13. The findings returned by the Court on the issues are the
following:
“54. ….. …. ….. The necessary corollary is that it
must be held that there was an arbitration
agreement between the parties and the defendantOMP 138.2011 Page 6 of 17
being fully aware of the same, cannot turn round at
this stage to urge that it was not so.”
………
“56. It is clear from the above that the defendant’s
contention that the defendant was not able to
present its case before the arbitral tribunal is wholly
untenable. The plaintiff’s submissions were received
by the Arbitral Tribunal on 3rd July, 1996. The award
was rendered a year later on 29th July, 1997. During
this period, a long rope was given to the defendant
to present its case. If the defendant after receipt of
the interim award on 20th June, 1997 failed to
contest the matter, the blame cannot be laid at the
door of the arbitrators for no fault of theirs, more so
as the Arbitral Tribunal on the insistence of the
defendant agreed to consider the question of its
jurisdiction in the first instance and to hear the
submissions on the substantive issues in the event
that they determined they had jurisdiction to do so.”
14. The Court then considered the submission of the firm that the
award was opposed to public policy of India for the reason that under
the Indian law, a partner of a firm cannot bind the partnership firm for
referring the disputes to arbitration and that there is no such implied
authority with the partner of a firm. This submission was also rejected
by the learned Judge in para 61, by placing reliance on the Supreme
Court decision in Renusagar Power Co. Ltd. v. General Electric
Co., AIR 1994 SC 860, wherein it is held that:
“61…………….the defence of public policy should be
construed narrowly and that ‘the expression ‘public policy’
covers the field not covered by the words ‘and the law of
India’ which follow the said expression, contravention of
law alone will not attract the bar of public policy and
something more than contravention of law is required’. See
paragraph 65 of the judgment in Renusagar (supra).
OMP 138.2011 Page 7 of 17
62. Apparently with a view to place matters beyond the
pale of controversy, the legislature while enacting the
Arbitration and Conciliation Act, 1996 deemed it expedient
to add an Explanation in order to explain the scope and
ambit of the expression ‘contrary to the public policy of
India’. Hence the declaration contained in the Explanation
to Sub-section (2) of Section 48 of the Act ‘for the
avoidance of any doubt, that an award is in conflict with
the public policy of India if the making of the award was
induced or affected by fraud or corruption’. Thus, even
assuming that the enforcement of the award would involve
any contravention of the law of partnership in India, it
cannot be said that the enforcement of the award would be
contrary to the public policy of India. The scope and ambit
of the expression ‘public policy of India’ must necessarily
be construed narrowly to mean the fundamental policy of
India and, as clarified by the Explanation to Section 48(2),
conflict with the public policy must involve the element of
fraud or corruption.”
15. As aforesaid, the said suit filed by respondent no.1 was decreed.
Consequently the objections raised by the partnership firm to the
foreign award were rejected. The petitioner herein was a partner of
the partnership firm M/s. Shivnath Rai Harnarain (India) on the relevant
day. The first question that, therefore, arises is whether the present
proceedings are barred by res judicata.
16. The partnership firm is only a compendium of its partners which
remains liable even to the extent of their personal assets till the time
all the creditors are satisfied. A partner is the agent of the firm for the
purpose of the business of the firm (Section 18 of the Partnership Act).
The act of a partner which is done to carry on, in the usual way,
business of the kind carried on by the firm, binds the firm. The
authority of a partner to bind the firm is called his “implied authority”.
OMP 138.2011 Page 8 of 17
17. The arbitration proceedings were contested by the partnership
firm M/s. Shivnath Rai Harnarain (India); CS(OS) 1103/1997 was filed in
the name of the partnership firm, and; CS(OS) 548/1998 was contested
in the name of the partnership firm M/s. Shivnath Rai Harnarain (India)
by Shri Ram Lal Thakur, its authorized representative and power of
attorney holder and Shri Prem Garg, partner. The acts of defending
and prosecuting arbitration proceedings and litigation by a partner or
authorized representative/power of attorney of the firm, would qualify
as acts done by the partner/attorney in usual course of business, of the
kind carried on by the firm. Consequently, by virtue of Section 19 of
the Indian Partnership Act, the aforesaid acts of Shri Raml Lal Thakur
and Shri Prem Garg, bind the firm. Pertinently, the conduct of Shri
Prem Garg and Shri Ram Lal Thakur, in defending the arbitration
proceedings; prosecuting CS(OS) No. 1103/1997, and; defending
CS(OS) No. 548/1998 does not fall in any of the instances mentioned in
clauses (a) to (h) of section 19(2) of the Partnership Act, which enlists
the various acts to which the implied authority of a partner does not
extend, in the absence of any usage or custom or trade to the
contrary.
18. In Krishna Pillai Raghavan Pillai and Anr. V. Karthiayani
Amma Sarasamma and Ors., AIR 1969 Kerala 26, the Division Bench
of the Kerala High court, inter alia, held as follows:-
OMP 138.2011 Page 9 of 17
“When a person is, either by operation of law, or by act of
parties, duly authorised to represent another in a litigation,
that other is, we should think, in truth a party to the
litigation even if not co nomine (sic eo nominee) so. The
case of a manager litigating on behalf of his joint family,
which under their personal law he is competent to
represent would, we think, satisfy the requirement of
identity of parties in the body of Section 11 of the Code
with regard to members of the family claiming as such in a
subsequent litigation — all the members of the joint family
being represented by the manager are, in truth, parties to
the suit. The case would, of course, fall within Explanation
VI, but we do not think it really needs the aid of the
explanation to satisfy the requirement of identity.
………….”
19. In my view, the same legal position would hold good where a
partner of a partnership firm, or an attorney of a firm litigates on
behalf of the firm and represents the firm. A decision rendered in such
a proceeding would bind the firm and all its partners, unless there are
any other reasons to exclude such binding force.
20. In Her Highness Maharani Mandalsa Devi Vs. M.
Ramnarain (P) Ltd., (1965) 3 SCR 421, AIR 1965 SC 1718, the
Supreme Court held:
“The suit against the firm is really a suit against all the
partners who were its partners at the time of the accrual of
the cause of action, ……………………………..Order 30, R. 4
of a Code of Civil Procedure enables the creditor to
institute the suit against the firm in the firm name without
joining the legal representative of the deceased partner.
………………………………The decree passed in such a suit
will, therefore, bind the partnership and all the surviving
partners, ……………………………………………..”
21. When the partnership firm, acting through one of its partners,
namely, Shri Prem Garg and its attorney Shri Ram Lal Thakur,
OMP 138.2011 Page 10 of 17
contested the arbitration proceedings; thereafter filed CS(OS)
1103/1997 and defended CS(OS) 541/1998, the rights, contentions
and obligations of the petitioner as a partner of the said firm stood
duly represented. The matter directly and substantially in issue in the
earlier suit, i.e. CS(OS)No.541/1998, as demonstrated above, was the
issue of enforceability of the foreign award. By now preferring their
objections under Section 34, it is the same matter which is again
sought to be put in issue. The earlier suit was a suit between
respondent no.1 on the one hand, and the firm on the other hand. The
partnership firm is merely a compendium of its partners. Therefore,
the earlier suit was, in effect, a suit between the same parties as in the
present petition. The mere impleadment of respondent no.2, i.e.
GAFTA in these proceedings makes no difference. Respondent no.2 is
not even a proper party, let alone necessary party to these
proceedings.
22. Mr. Sundaram submitted that the suit filed by the firm, i.e. C.S.
(OS) No.1103/1997 was not maintainable in view of section 5 of the
Act. Consequently, the dismissal of the said suit is also of no
relevance.
23. As aforesaid, the said suit was filed to question the legality and
validity of underlying contracts. Section 5 of the Act is a mandate
directed against the judicial authority, not to intervene in matters
governed by Part I of the Act, except where so provided by the said
OMP 138.2011 Page 11 of 17
Part. Therefore, the factum of filing of the said suit by the firm, and its
dismissal cannot be underplayed on the principle that there is no
estoppel against a statute. The petitioner and the firm cannot blow hot
and cold at the same time. In any event, even if that suit was not
maintainable, the decree passed in C.S. (OS) No.541/1998 stares the
petitioner in the face.
24. Mr. Sundaram then contended that C.S. (OS) No.1103/1997 was
not dismissed on merits. I find no force in this submission as well. The
said suit was dismissed as a consequence of the Court decreeing the
suit filed by respondent no.1 and holding the foreign awards to be
enforceable. The foreign awards upheld the contracts in question – the
legality and validity whereof was challenged by the firm.
25. The fact that while filing the objections, Section 34 had not been
invoked, and only Section 48 had been invoked by the partnership firm
also does not make any difference to the maintainability of this
petition. This is because, “Any matter which might and ought to have
been made ground of defence or attack in such former suit shall be
deemed to have been a matter directly and substantially in issue in
such suit” (Explanation IV to Section 11 CPC). The fact that the
decision of the Supreme Court in Venture Global Engineering
(supra) was rendered after the filing of CS(OS) No.1103/1997, and the
filing of the written statement in CS(OS) No.541/1998 is also of no
relevance. This is because the Supreme Court merely declared the
OMP 138.2011 Page 12 of 17
pre-existing legal position and did not vest or create any fresh right on
the petitioner or the partnership firm to prefer objections under Section
34 of the Act. The decision in Venture Global Engineering (supra) in
any event, was rendered on 10.01.2008, i.e. prior to the disposal of
CS(OS) No.541/1998 on 27.11.2008. However, no objections were
preferred under Section 34 of the Act at any stage by the partnership
firm, which could have been and ought to have been so preferred. In
my view, the decisions rendered in CS(OS) 1103/1997 and CS(OS)
541/1998 operate as res judicata against the petitioner in these
proceedings, and consequently, these proceedings are not
maintainable.
26. There is also the aspect of bar of limitation which stares the
petitioner in the fact. The awards in question are of 20.06.1997 and
29.07.1997. The petitioner submits that the petitioner has not been
provided with a signed copy of the awards. Mr. Sundaram has placed
reliance on Bharat Sanchar Nigam Ltd V. Haryana Telecom Ltd in
FAO(OS) 290/201 decided by the Division Bench on 06.08.2010 to
submit that since a signed copy of the arbitral award has not been
delivered by the arbitral tribunal to the petitioner, the period for filing
of objections has not even commenced. Mr. Sundaram submits that
the petitioner sent a legal notice dated 29.09.2010 requesting GAFTA
to supply an ink signed copy of the two awards. Respondent No.2
expressed its inability to provide a signed copy of the awards.
However, it agreed to supply photocopy of the awards on payment of
OMP 138.2011 Page 13 of 17
fee and costs. It is further submitted that GAFTA provided the interim
and the final awards under the cover of its letter dated 21.10.2010 on
24.10.2010. He submits that the period of limitation of three months, if
computed from the date of receipt of the unsigned copies of the award,
did not expire when this petition was filed, firstly on 19.01.2011.
27. Undisputedly, the signed copy of the award was served on the
partnership firm M/s. Shivnath Rai Harnarain (India) of which the
petitioner was a partner at the time of making of the two awards.
Notice to the firm is notice to a partner and vice versa. See section 24
of the Partnership Act, and Ashutosh v. State of Rajasthan & Ors.,
(2005) 7 SCC 308, para 12. Objections to the two awards were then
preferred in the name of the firm by Shri Prem Garg partner and Shri
Ram Lal Thakur, authorized representative and duly appointed
attorney of the firm. There was no obligation on GAFTA to
independently serve signed copies of the two awards on the partners
of the firm M/s. Shivnath Rai Harnarain (India). The petitioner was a
partner of the said firm at the relevant time. Therefore, she ought to
have been aware of the fact that the signed copy of the awards had
been served on the firm and that the liability under the awards in
question would fasten upon her personal assets as well. If she was so
minded, she could have joined the firm as a party plaintiff while filing
CS(OS) 1103/1997. She could have also applied to the arbitral
tribunal, and to the Court to be added as party defendant/respondent
in the arbitration proceedings and in CS(OS) 541/1998 filed by
OMP 138.2011 Page 14 of 17
respondent no.1 herein and contested those proceedings by setting up
her own defence. She did not do so as she was satisfied with the
actions being taken by Shri Prem Garg, the other partner of the firm
and Shri Ram Lal Thakur, the attorney of the firm. Pertinently, she
never alleged any fraud by Shri Prem Garg or Shir Ram Lal Thakur, in
collusion with respondent no.1 in the conduct of the arbitration
proceedings and the two suits. The Division Bench in its decision in
EFA (OS) 15/2010 and 16/2010 did not permit, inter alia, the petitioner
to raise the plea of fraud for the first time before it. Consequently, the
plea that objections could not have been preferred by the petitioner
earlier cannot be accepted. The objections are clearly barred by
limitation and are liable to be dismissed on that ground alone.
28. Mr. Nayar, learned senior counsel for the respondent submits
that the petitioner has deliberately suppressed from this Court, the
order passed in EFA 15/2010 and EFA 16/2010 dated 11.06.2010
passed by the Division Bench, which has attained finality. He submits
that the Division Bench in paragraph 15 has held inter partes against
whom execution is sought by resort to Rule 50 of Order 21 CPC may
question the decree on the ground of collusion, fraud or the like but
not have a fresh adjudication on the question of liability. Mr.
Nayar submits that the aforesaid observation of the Division Bench
means that it is not open to the petitioner to challenge the award in
question on merits under Section 34 or even under Section 48 of the
Act to seek a fresh adjudication on the question of her liability. The
OMP 138.2011 Page 15 of 17
petitioner has suppressed the said order of the Division Bench, which
has attained finality and binds the petitioner.
29. I agree with the aforesaid submission of Mr. Nayar. Though a
reference of the said order of the division bench has been made in the
petition, calculatedly the said order has not been filed on record. the
observation made by the Division Bench in para 15 of its order clearly
holds that the petitioner is not entitled to challenge the two awards on
merits i.e. either under Section 34 or under Section 48 of the Act. In
Gambhir Mal Pandiya (supra), the Supreme Court held as follows:
“19. …. …. … As we have pointed out O. 30 of the code
permits suits to be brought against firms. The summons
may be issued against the firm or against persons who are
alleged to be partners individually. The suit, however,
proceeds only against the firm. Any person who is
summoned can appear, and prove that he is not a partner
and never was; but if he raises that defence, he cannot
defend the firm. Persons who admit that they are partners
may defend the firm, take as many pleas as they like but
not enter upon issues between themselves. When the
decree is passed, it is against the firm. Such a decree is
capable of being executed against the property of the
partnership and also against two classes of persons
individually. They are (1) persons who appeared in
answered to summons served on them as partners and
either admitted that they were partners or were found to
be so, and (2) persons who were summoned as partners
but stayed away. The decree can also be executed against
persons who were not summoned in the suit as partners,
but r. 50(2) of O. 21 gives them an opportunity of showing
cause and the plaintiff must prove their liability. This
enquiry does not entitle the person summoned to reopen
the decree. He can only prove that he was not a partner,
and in a proper case, that the decree is the result of
collusion, fraud or the like. But, he cannot claim to have
other matters tried, so to speak, between himself and his
other partners. Once he admits that he is a partner andOMP 138.2011 Page 16 of 17
has no special defence of collusion, fraud, etc. the Court
must give leave forthwith.”
If the petitioner is precluded from re-opening the decree in the
execution proceedings, she cannot do so in these proceedings as well.
30. It is clear to me that the petitioner, by suppressing the said vital
document has sought to mislead this Court by seeking to challenge the
two awards on merit so as to seek a fresh adjudication on the question
of liability, even though in the petitioner‟s very own appeal, the
Division Bench has ruled against the maintainability of any fresh
adjudication on the question of liability.
31. In my view the present petition is nothing but a gross abuse of
the process of the Court by the petitioner. It is clear to me that the
firm M/s. Shivnath Rai Harnarain (India) and its partner, Smt. Anita
Garg are hell bent on somehow stalling the execution proceedings and
the present is an attempt to put a spoke in the wheel to somehow
obstruct the execution proceedings. For the aforesaid reasons, I
dismiss this petition with costs quantified at Rs. two lakhs.
(VIPIN SANGHI)
JUDGE
MARCH 09, 2011
as
OMP 138.2011 Page 17 of 17