1 chs1025-10.doc IN THE HIGH COURT OF JUDICATURE AT BOMBAY ORDINARY ORIGINAL CIVIL JURISDICTION CHAMBER SUMMONS NO.1025 OF 2010 IN EXECUTION APPLICATION NO. 258 OF 2010 M/s.Somani Sales Corporation .. Plaintiffs Versus M/s.Rafini Fashion (P) Ltd. & Ors. .. Defendants Mr.Naushad Engineer i/b. JRT Legal for applicants Mr.B.K.Bali i/b. Bali Associates for defendant Nos. 2 and 3 CORAM : S.C.DHARMADHIKARI, J. DATE : 16th November 2011. P.C.: 1] This matter was argued on the earlier occasion and some time was taken on behalf of the defendant Nos. 2 and 3 to inform the court as to whether they could make a reasonable offer for settlement of the dues. However, it is informed by Mr.Bali appearing on their behalf that there are no instructions with regard to any payment and in fact these defendants are unable to arrange for any sum. 2] It is in such circumstances that I have proceeded to decide 2 chs1025-10.doc this chamber summons. 3] This chamber summons is moved by defendant Nos. 2 and 3 seeking a relief that the award passed against them is a nullity and not enforceable. In addition, a relief is sought that defendant Nos. 2 and 3 were directors of defendant No.1 and, therefore, are not personally liable for the debt and liability of defendant No.1. It is then claimed that the award is not enforceable against their personal properties. It is in pursuance of such declarations that the warrant of attachment is challenged and it is prayed that the attachment levied be raised and the properties released. 4] In the affidavit in support of this chamber summons which is filed on 22nd July 2010 it is stated that a warrant of attachment on immovable properties more particularly described in the same was served on the defendants on 17th June 2010. They have also received warrant of attachment in relation to moveables. In the affidavit in support it is stated that the defendants are residing at the address more particularly 3 chs1025-10.doc mentioned in the same and insofar as defendant No.1 is concerned, it is a company and to the knowledge of the plaintiffs it has no right, title and interest in the immovable properties. The residential flat is an ancestral property and according to these defendants it is inherited from their father and the same is partitioned after developing the property. The moveables therein belong exclusively to the defendant No.2. It is stated that the arbitral tribunal passed the award but it lacked inherent jurisdiction to entertain the dispute between the plaintiffs and defendant Nos. 2 and 3. The arbitration clause is contained in the invoice raised by the plaintiff on the first defendant. It is stated in paras 3 and 4 of the affidavit in support as under:- “3. At the further outset, I say and submit that the arbitral tribunal that passed the above award lacked inherent jurisdiction to entertain the disputes between the plaintiffs and defendant Nos. 2 and 3, assuming there were any. The arbitration clause is contained only in the invoices raised by the plaintiffs on the 1st defendant company on the rear side whereof it is, inter alia, stated “if any dispute arises about this transaction, the same shall have to be referred to the Hindustan Chamber of Commerce, Mumbai for decision under its arbitration rules and award made thereunder shall be binding on both/all the parties.” .... A bare perusal of the said invoices 4 chs1025-10.doc clearly shows that the said invoices are raised by the plaintiffs on the first defendant company alone. The dispute was referred by the plaintiffs to the said Hindustan Chamber of Commerce as against defendant No.1 company alone by their letter dated 28th September, 2007. The said Chamber on 1st October 2007 addressed a letter to the 1st defendant company alone in respect of the disputes. The plaintiffs by their undated letter to the Chamber referred to their application dated 28th September, 2007 inter alia recorded that the 2nd defendant, the owner of the first defendant company, could be contacted at his residential address at 501, Rafi Mansion, Near Gurunanak Park, 28th Road, Bandra (West), Mumbai 400 050. In the circumstances the arbitral Tribunal lacked the inherent jurisdiction to entertain any claims against defendant Nos. 2 and 3 and in view thereof the award passed by the Arbitral Tribunal is a nullity and as such non est and cannot be enforced against defendant Nos. 2 and 3 which the plaintiffs are attempting through the above execution proceedings. I say that in any case there are no disputes between the plaintiffs and the defendant Nos.2 and 3 as the Award transactions were between the plaintiffs and the 1st defendant company. “4. At the further outset, I submit that in any case it is amply clear from the award as also from the full title of the warrants of attachment that the said award has been passed against the defendant Nos. 2 and 3 in their capacity as the Directors of defendant No.1, a private limited company which was incorporated on 7th May 2002. The said company being a juristic entity separate from its Directors and shareholders, the Directors and shareholders are not liable for its debts and liabilities. The 1st defendant being a juristic entity alone is liable for its debts and liabilities. I, therefore, submit that since defendant 5 chs1025-10.doc Nos. 2 and 3 have been impleaded in their capacity as Directors of defendant No.1 company they are not liable to pay the debts of the 1st defendant company and the above award cannot be enforced against defendant Nos. 2 and 3 personally or against their personal properties. I say that on this ground also the said Award is not enforceable against defendant Nos. 2 and 3.” 5] It is in these circumstances that it is prayed that the attachment which proceeds to attach the personal properties of defendant Nos. 2 and 3 is bad in law and the warrant in that behalf be set aside and the attachment be raised. 6] An affidavit in reply has been filed on behalf of the claimant – decree holder/ plaintiffs, in which it is stated that none of the statements made by defendant Nos. 2 and 3 would enable this court to raise the attachment. This is nothing but an attempt to re open the arbitral reference and to go behind the award. The award cannot be challenged in execution as the defendant Nos. 2 and 3 have not filed application under section 34 of the Arbitration and Conciliation Act, 1996, although they were all aware of the reference and the award. The award has thus become binding on them. All the arguments that are 6 chs1025-10.doc canvassed pertain to the merits of the award and it is not permissible for this Court to set aside the award in the limited jurisdiction. In the affidavit in reply, it has been pointed out that the award dated 20th June 2009 has attained finality. It is also stated that defendant No.2 on behalf of defendant No.1, which is a private limited company, has time and again assured and undertook to the plaintiffs that he would clear the outstanding amount and thereby induced the plaintiffs to part with the goods. The entire events leading to the award have been set out in the affidavit in reply and it is then submitted that the award made by the Hindustan Chambers of Commerce is binding on all defendants. Ultimately this is a private limited company and defendant Nos. 2 and 3 are the only parties closely connected with it. This is nothing but a family unit. Thus it is not as if some distinct corporate entity is liable for the dues and the award proceeds to make the Directors of such an entity personally liable. This is a family concern and defendant Nos. 2 and 3 are closely associated with it. They are managing its day to day affairs/ business and it is their unit and the dealings have been carried out by them. This is nothing but an attempt to delay and 7 chs1025-10.doc defeat the execution of the award. Once such is the intent, then, this court should not permit the defendant Nos. 2 and 3 to wriggle out of their obligations and assurances and defeat the award. For all these reasons, the chamber summons be dismissed. 7] There is a rejoinder affidavit which has been filed by the defendant Nos. 2 and 3 and what is stated therein is nothing but a repetition of the statements made in the affidavit in support. 8] The only contention raised before me is that the award is a nullity and unenforceable against defendant Nos. 2 and 3. According to Mr.Bali, this is an application which invokes section 47 of the Code of Civil Procedure, 1908 and even if the award has become final, it is open for this court to consider the objection regarding its nullity and unenforceability in law. If the objection goes to the root of matter then, assuming that award has become final, the same can still be considered and upheld. 9] I am afraid, it is not possible to accept any of these 8 chs1025-10.doc contentions in the facts of the present case. The affidavit in support itself proceeds on the basis that the defendants were aware of a contract between the parties and that the liability of defendant No.1 company of which they are Directors. They were aware of the arbitral reference and the proceedings before the arbitral tribunal. It is futile to urge that proceedings were only against the defendant No.1 at this belated stage. If the plaintiffs had proceeded against all of them and the arbitral reference was decided on the basis of the claim of the plaintiffs raised against all the parties, then, if the defendant Nos. 2 and 3 failed to raise their objections before the arbitral tribunal or challenge the final award by appropriate proceedings, they have to blame themselves. It is not permissible for this Court to consider the objections raised as it is well settled that the plea of nullity must be considered on the basis that the decree or the award is apparently bad in law or unenforceable. The objection can be decided only if it is possible to consider and decide it by looking at the award itself. If the same requires an elaborate process or a deeper probe and investigation that is impermissible in law. A decree cannot be assailed on merits at 9 chs1025-10.doc this stage. An award or a decree can be challenged only by the mode provided in law. If the challenge to the same is on merits, then, the only course open is to assail it by the process provided in law. At a belated stage and that too at the stage of execution, it will not be possible to consider the objections that are raised in the affidavit in support. That would require this Court to go into the issues which were subject matter of the reference and the award. If all these contentions have to be gone into that would amount reopening the arbitral reference and the proceedings before the arbitral tribunal. In my limited jurisdiction and at this belated stage, that course is not open in law. 10] I have reproduced the objections which have been raised by defendant Nos. 2 and 3 in the affidavit in support only for the purpose of emphasising that what the parties intend at this stage is rendering of a decision by the executing Court as to whether they can be held to be liable under the award. That they are directors of defendant No.1 and that being directors they are not personally liable for the dues of the company is an objection which could have been raised while assailing the 10 chs1025-10.doc award. That has admittedly not been done. Any such objection being raised, it will be necessary for this Court to record evidence and to find out as to how private limited company with which defendant Nos. 2 and 3 are stated to be closely associated, has an independent legal existence and cannot be considered to be a family unit or concern. As is well settled, this cannot be considered at the stage of execution and the award cannot be set aside on merits. 11] In the light of the above discussion, this chamber summons fails and it is accordingly dismissed, particularly because, there is no dispute that defendant Nos. 2 and 3 who are liable under the award have right, title and interest in the properties which are attached and equally the same belong to defendant No.1 company. No costs. (S.C.DHARMADHIKARI, J)