1 IN THE HIGH COURT OF JUDICATURE AT BOMBAY ORDINARY ORIGINAL CIVIL JURISDICTION ARBITRATION PETITION NO.265 OF 2008 1. Mr. Nariman J. Palia ) ) 2. Minoo J. Palia ) ) 3. Jimmy J. Palia ) ) 4. Cyrus J. Palia ) ) 5. Farzad J. Palia ) ) all of Mumbai Indian inhabitant, ) having their office at Champion ) Jointings Pvt. Ltd. 15, Parsi ) Panchayat Road, Andheri East, ) Mumbai 400 069 ) ...... Petitioners. V/s 1. Meher K. Palia ) ) 2. Rumi K. Palia ) ) both of Mumbai, Indian Inhabitant, ) having their office at Champion Seals ) and Packing Ltd., 15 - A, Sir Homi ) Modi Street, Fort, Mumbai 400 023. ) ...... Respondents. ------- Mr. Zuben Kamdin i/b M/s. Daphtary Ferreira and Divan for the Petitioners. Mr. P.K. Samdhani, Senior Counsel i/b DSK Legal for the respondents. ----- CORAM: V.M. KANADE, J. 2 DATE : 5TH AUGUST, 2008 ORAL ORDER: 1. This is a Petition filed by the Petitioners under section 9 of the Arbitration & Conciliation Act, 1996 (hereinafter referred to as the "said Act"), seeking an order of injunction restraining the respondents from selling, alienating creating any third party rights or in any other manner dealing with the property and the structure which has been allotted to the petitioners under an award dated 28th June, 2007 and more particularly in respect of the property/land covered by shed situated at CTS No.219, Village Mogra, Parsi Panchayat Road, Andheri (East), Mumbai 400 069, admeasuring approximately 238 sq. meters. 2. Brief facts in a nutshell are as under:- 3. Petitioners and respondents are cousins. One Jehangirji C. Palia had seven sons. Respondent Nos. 1 to 3 are the sons of Jehangirji C. Palia. Respondent No.4 is the son of Fali Palia (since deceased) and the respondent No.5 is the son of 3 Jimmy Palia. Thus, there are two groups between the heirs of Jehangirji C. Palia; one represented by the respondents and the other represented by the petitioners. Disputes arose between these two groups and it is the case of the petitioners that the Memorandum of Understanding (MOU) was executed between the petitioners and the respondents and it was agreed that the parties had resolved to solve the pending family disputes in a particular manner as stated in the MOU. In clause 2 of the said MOU, it was agreed that the property at Andheri (East) would be divided physically as per their share holding in the Company instead of selling of land and the method of valuation would be finalized by M/s Namavati and Company and Artchitect Mr. Bomi Mistry. It was agreed that their decision would be final and binding on all the parties. In subsequent document which was signed by the respondents herein and one of the petitioners viz. Farzad J. Palia, it was agreed that Dr. Roshan H. Namavati was authorized to decide the division of the property at Andheri at his absolute full discretion and that he could act as an arbitrator for the same. Accordingly, the valuation was made by him on 23/8/2006 and he submitted a report and, 4 thereafter, declared an award dated 28/06/2007 on the basis of the said valuation- cum- partition report. 4. Thereafter, the petitioners called upon the respondents to workout the modalities for giving effect to the said award which was passed by the arbitrator. Respondents raised certain objections. While correspondence was going on between the parties, petitioners noticed that some alterations were being made in respect of the property which is described at Exhibit K-1 and that third party rights were being created in favour of Reliance Company and, therefore, the present Petition is filed under section 9 of the said Act. Petitioners moved the vacation court for ad-interim reliefs. Respondents' Counsel informed the vacation court that the property in question was already given on leave and license basis to Reliance Industries and third party rights were created and, therefore, the vacation court was pleased to grant an order of status quo as on the said date. 5. I have heard the learned Counsel for the petitioners and respondents at length. 5 6. The learned Counsel appearing on behalf of the petitioners invited my attention to the award which was passed by the arbitrator on the basis of valuation- cum- partition report and the correspondence between the parties. He submitted that, therefore, the respondents be restrained by an order of this Court from creating any third party rights or carrying out any construction in respect of the properties mentioned in the award. 7. In the affidavit in reply which is filed by the respondents, various contentions are raised and, inter alia, it is contended that the award dated 28th June 2007 could not be termed as an award within the meaning of the said Act. The learned Counsel appearing on behalf of the respondents submitted that there was no reference made for arbitration since there was no dispute between the parties in respect of the said property. It is further submitted that no reasons have been given in the said award. The procedure which is required to be followed in arbitration proceedings was not followed and, therefore, there was no judicial determination 6 of the rights between the parties. It is submitted that Dr. Roshan H. Namavati was merely a valuer and his services were taken for the purpose of submitting the report. It is contended that he had, however, usurped the jurisdiction not vested in him by law and has called the valuation report as an award for valuation and partition of the property in question. He then submitted that the Petition under section 9 was not maintainable even if it was assumed that the valuation report is an award, since, after the award had become enforceable, Petition under section 9 would not be admitted. He invited my attention to the correspondence between the parties which was annexed to the affidavit in reply. He then submitted that the property in question which is more particularly described in Exhibit K-1 was owned by two companies viz. Champion Jointings Pvt. Ltd. and Champion Gaskets Pvt. Ltd. and, as such, no award could be passed against the said companies since they were not parties to the arbitration proceedings. 8. In rejoinder, the learned Counsel appearing for the petitioners submitted that the said two companies are 7 private limited companies and that the respondents were the Directors of the said Companies and if the corporate veil is lifted, it would be evident that the companies were owned by respondent Nos. 1 and 2. 9. The learned counsel appearing on behalf of the petitioners and respondents relied upon number of judgments of this Court, Apex Court as also of the other High Courts. 10. So far as the first objection raised by the respondents in respect of the maintainability of the present petition under section 9 of the said Act is concerned, in my view, the said petition is maintainable and it cannot be said that after an award becomes enforceable within the meaning of section 36 of the said Act, no order can be passed under section 9 of the said Act. Section 9 of the said Act reads as under:- "9. Interim measures by court.- A party may, before or during arbitral proceedings or at any time after the making of the arbitral award but before it is enforced in 8 accordance with section 36, apply to a court:- (i).................................. (ii) ............................... (a)............................... (b) ............................. (c) .............................. (d)............................... (e) .............................." Perusal of the aforesaid provision clearly indicates that this Court has jurisdiction to pass any interim order for the protection of the subject matter of the arbitration proceedings before, during and even after the award is passed in the arbitration proceedings. It cannot be said therefore that merely because the award becomes enforceable under section 36, this Court ceases to have any jurisdiction to pass any interim order for the protection of the subject matter of the arbitration proceedings. Such a restriction cannot be read into the provision of sub-clause (1) of section 9 of the Act. Reliance was placed by the learned Counsel appearing for the respondents on the judgment of the learned Single Judge of this Court in the case of Delta 9 Construction Systems Ltd. Vs. Narmada Cement, reported in 2002(1) Mh.L.J. 684. The learned Counsel for the respondents invited my attention to paragraph 11 of the said judgment and more particularly the following observations in para 11:- "11. ...............It is in these circumstances and knowing that a party cannot be left without a remedy before the Award is enforced, that the legislature in its wisdom has used the expression "before it is enforced". Therefore, the power under section 9 in all its force must be available to the extent applicable till the Award becomes enforceable. After the Award becomes enforceable the provisions of Order 21 of the Civil Procedure Code are applicable, as the Award becomes a decree and can be executed as a decree." He also invited my attention to paragraph 12 of the said judgment which reads as under:- "12. It is no doubt true that section 9 10 (ii) uses the expression "subject- matter of the arbitration agreement", "securing the amount in dispute in the arbitration", "the detention, preservation or inspection of any property or things which is the subject- matter of the dispute in arbitration", "interim injunction or the appointment of a receiver" and "such other interim measure of protection". That does not mean that these expressions have to be read to mean that they are available only when the arbitral proceedings are going on or before the commencement of the arbitral proceedings. The section itself starts with the expression "A party may, before or during arbitral proceedings or at any time after the making of the arbitral award but before it is enforced in accordance with section 36, apply to a Court". Thus sections 9(i) and 9(ii) would be applicable even if the award has been passed but before it becomes enforceable though the arbitral process terminates except in cases covered by section 32(3). Parliament 11 when it conferred power in the court under section 9 to grant interim relief, recognized situations that will arise on the termination of the arbitral proceedings and the need to protect the subject matter of the dispute by using the expression till the Award can be enforced as the award till it becomes enforceable does not become a decree. To my mind therefore, the contention as sought to be raised on behalf of the petitioners that the various clauses of section 9 must be read as to provide for different situations before arbitration, during arbitration and after arbitration has to be rejected. The power to grant relief at all the stages is similar but depending on the nature of the relief sought." 11. It is not possible to accept the said submissions made by the learned Counsel appearing on behalf of the respondents. It has to be borne in mind that it is only the ratio of the judgment that is binding is required to be followed by the coordinate Bench of the same Court. For the 12 purpose of finding out what is the ratio laid down by the judgment, it has to be seen what is the issue which fell for consideration in the said case. Secondly, it has to be seen whether that issue was required to be decided for the purpose of deciding the Petition. In the said case, the issue was that after the award was passed, the said award was challenged by filing a Petition which was admitted. The claimant in the award filed the Petition under section 9 seeking a direction that the respondent be ordered to deposit various amounts set out in the prayer clause since the financial position of the Company was not very healthy and unless the petitioner is secured, there was every possibility that the petitioner would not be in a position to recover the amount if, ultimately, the petition filed by the respondent is dismissed. It was contended by the respondent that the reliefs, as prayed in the Petition, could not be granted under section 9 of the said Act, since the Petition was, in fact, for recovery of money and it was contended that, at the highest, the petitioner could ask for attachment before judgment. It was further contended that once the award was passed, the arbitral proceedings had to 13 come to an end and, therefore, the provisions of section 9 will have to be read keeping in mind the fact that the arbitral proceedings were over. It was, therefore, contended that section 9 and clauses thereto cover the situation in the course of arbitral proceedings and the said reliefs were not available after the arbitral proceedings had come to an end. This being the situation in the said case, it is obvious that the observations made in paragraphs 11 and 12 are with reference to the said fact situation and the reasons have been given after considering the aforesaid arguments made by the respondents. This is evident from the observations made by the learned Single Judge in para 12 itself and the said observations in para 12 read as under:- 12. ............To my mind therefore, the contention as sought to be raised on behalf of the petitioners that the various clauses of section 9 must be read as to provide for different situations before arbitration, during arbitration and after arbitration has to be rejected. The power to grant relief at all the stages is similar but depending on the nature of the relief sought." 14 The said submissions made by the learned Counsel appearing on behalf of the respondents, therefore, cannot be accepted. 12. The second submission made by the learned Counsel appearing on behalf of the respondents was that no award was passed by Dr. Roshan Namavati. He submitted that no reference was made for arbitration since there was no dispute between the parties in respect of the said properties. He further submitted that no reasons were given in the said award. The procedure which is required to be followed in the arbitration proceedings was not followed and, therefore, there was no discretion to decide the rights between the parties. In support of the said submission, he invited my attention to the Memorandum of Understanding, the addition made to the Memorandum of Understanding dated 30/8/2005, the award dated 28/6/2007, & the valuation report dated 23/8/2006 given by Dr. Rosham Namavati. In support of the said submission, he relied upon the judgments of the Apex Court in the cases of (i) K.K. Modi 15 v. K.N. Modi and others, reported in AIR 1998 SC 1297, (ii) Pride of Asia Films v. Essel Vision reported in 2004(5) Bom. C.R. 870, (iii) Mafatlal Securities Ltd. v. Birla Sun-Life Securities Ltd. & Ors. reported in 2002(3) Bom.C.R. 771. 13. The said submission made by the learned Counsel appearing on behalf of the respondents cannot be accepted for the following reasons. In the present case, perusal of the Memorandum of Understanding, the addition made to the Memorandum of Understanding, the arbitration award which is based on the reasons given in the valuation report and the correspondence between the parties clearly disclose that there was a dispute between the two groups over the division of the assets and properties and the intention of the parties was to refer the dispute in respect of the property in question to Dr. Roshan Namavati and the entire discretion was given to him to pass an award for the division of the said property. Considering the ratio of the judgments of the Apex Court on this point, it has to be held that what is to be seen is the intention of the parties and not the nomenclature used by the parties while referring the dispute to the 16 arbitrator. In this context, therefore, it will be necessary to examine the documents on which reliance is placed by both the parties to gather the true intention of the parties. 14. It is an admitted position that the Memorandum of Understanding was executed by the petitioners and the respondents.. The Memorandum records that the parties had agreed to resolve their pending family disputes. The manner in which the said disputes were to be resolved is mentioned in clauses 1, 2 and 3 of the MOU. The said clauses read as under. "1. Valuation of shares of all the three Companies (except land at Andheri East), Mechanical Packing Industries (P) Ltd., Champion Jointings Pvt. Ltd., and Fluoropolymer Packings & Seals Pvt. Ltd will be done by Mr. Rustomjee of M/s S.B. Billimoria & Co., Chartered Accountants, along with Mr. Y.H. Malegaon, if he is agreeable and their valuation will be binding on both the parties. The amount of the said value will be paid within a period of six months by the Party of the Second Part 17 to the Party of the First Part. 2. The property at Andheri (East) will be divided physically in order to make way of the Party of the First Part to receive their share as per their shareholding in the Company instead of selling of the land. The parties discussed this on Friday, 17th June 2005 and have agreed to this method. The method of division will be finalized by the valuer, Messrs. Namavati and Company and Architect, Mr. Bomi Mistry, whose decision will be final and binding on all the parties. 3. Mr. Meher K. Palia and Mr. Rumi K. Palia have put up some construction on part of the land that belongs to Champion Jointings Pvt. Ltd., and Champion Gaskets Pvt. Ltd. They will be paid its value as per the valuation given by the approved valuer Messrs. Namavati and Company & ARCHITECT BOMI MISTRY. The Valuers will decide whether Mr. Meher Palia and Rumi Palia will also be entitled to the valuation of the land and also to the valuation of the 18 constructed premises, which they are using for their business. The said amount would be adjusted in the area of land to be given to Meher Palia and Rumi Palia or will be paid by cheque." Clause 1 relates to valuation of all the three companies, excluding the land at Andheri and this task was given to Mr. Rustomjee of M/s S.B. Billimoria & Co., Chartered Accountants, alongwith Mr. Y.H. Malegaon. Clause 2 deals with the property at Andheri. What is relevant to note is that the said clause, it has been mentioned that this aspect was discussed on Friday, 17th June 2005 and it was agreed that the property would be divided physically to make way of the Party of the First Part to receive their share as per their shareholding in the Company instead of selling of the land. After having mentioned the method agreed between the parties, it is further stated that the method of division will be finalized by the valuer M/s Namavati and Company and Architect, Mr. Bomi Mistry. It is further recorded that their decision will be final and binding on all the parties. This clearly reveals the intention of the parties to refer the dispute in respect of the property at Andheri for arbitration 19 and it was agreed that that the property would be physically divided and the method of division will be finalized by M/s. Namavati and Company and it was agreed that their decision would be final and binding on all the parties. Clause (3) of the Memorandum of Understanding further records that on the part of the said land certain construction was put up by Champion Jointings Pvt. Ltd. and Champion Gaskets Pvt. Ltd. and the valuation of the said construction would be paid as per the valuation as approved by the valuer. The Memorandum of Understanding, therefore, clearly records that though the said building on the part of the property at Andheri belongs to two Companies, the value of the land and building would be arrived at and paid to the respondents. From the aforesaid clauses of the Memorandum of Understanding, it is apparent that there was a clear understanding that the valuation of the shares would be determined by Mr. Rustomjee, physical division of the land would be done by the valuer and that the value of the land and building which belongs to the two companies would be determined and paid to the respondents. It is an admitted position that the two Companies are Private 20 Limited Companies and they are owned by the respondents herein. After having executed this Memorandum of Understanding, there was a further addition made on 13/06/2006. This has been signed by the respondents herein and by Farzad J. Palia who is one of the members of the other group, though an objection has been raised that the earlier MOU was signed by the respondents and six other persons and, therefore, this addendum which is signed only by the respondents and one of the members of the other group, therefore, would not be termed as an addendum. This objection cannot be accepted. This is admittedly signed by the respondents herein and one of the members of the other group. No objection has been raised by the respondents herein. The intention of the parties to give full and absolute discretion to Dr. Roshan Namavati is further reiterated in this document. Mr. Samdhani, the learned Senior Counsel appearing on behalf of the respondents also strenuously urged that, even otherwise, it cannot be said that he was appointed as an arbitrator in view of the following sentence viz. "and he can act as an arbitrator for the same." This submission also cannot be accepted since 21 from the phraseology of the words used, it is apparent that the petitioners and respondents had given full and absolute discretion to Dr. Roshan Namavati and he was called upon to act as an arbitrator. The words "can act", therefore, cannot be construed to mean that any further steps were required to be taken by the petitioners and the respondents herein to appoint him as an arbitrator. Therefore, in my view, the conjoint reading of the Memorandum of Understanding and the addendum dated 13/6/2006, clearly reveals the intention of the parties of referring the dispute in respect of division of the entire plot to Dr. Roshan Namavati who was appointed as an arbitrator and a full discretion was given to him to divide the said property. Further, the correspondence which is annexed to the petition reveals that both the parties had approached him and had given him the requisite material and, thereafter, a valuation report was prepared by him in which he had given his reasons for division of the property and, thereafter, an award was pronounced by him in terms of the valuation report. Since the full discretion and absolute authority was given to him by the parties, the question of arguments by the parties or their counsel did not 22 arise. The determination by the arbitrator about the manner in which the property was to be divided was, therefore, a judicial determination on the basis of the material provided to him by both the parties. The submission made by the learned Counsel appearing on behalf of the respondents that no reasons were given in the award also cannot be accepted since the award was passed in terms of the valuation report which contains the reasons why the division of the property was made. 15. The learned Counsel appearing on behalf of the respondents has relied on the judgment in the case of Mafatlal Securities Ltd. v. Birla Sun-Life Securities Ltd. & Others reported in 2002(3) Bom.C.R.771. In this case, it has been held that only in cases where there is no agreement for recording reasons, the parties were entitled to know the reasons upon which the award is passed. In the present case, the valuation report itself