1 IN THE HIGH COURT OF JUDICATURE AT BOMBAY ORDINARY ORIGINAL CIVIL JURISDICTION APPEAL NO.281 OF 2009 IN ARBITRATION PETITION NO.390 OF 2009 Sandeep Kaur Ahluwalia & Ors. .. Appellants V/s Ravinder Singh Ahluwalia & Ors. .. Respondents Mr.Virag Tulzapurkar, Senior Advocate with Ms.Saumya Srikrishna i/by M/s.Wadia Ghandy & Co.for the Appellants. Mr.N.H.Seervai, Senior Advocate with Mr.Prateek Seksaria and Mr.Vishal Thaker i/by Ms.Anjali Trivedi for Respondent No.1. Mr.P.K.Samdani, Senior Advocate with Mr.Chetan Kapadia, Mr.Sanjay Jain & Mr.Ishwar Nankani i/by M/s.Nankani & Associates for Respondent No.2. CORAM : A.M.KHANWILKAR & R.G.KETKAR, JJ. DATE : 25th August, 2009. JUDGMENT: (Per R.G.Ketkar, J.) 1. This appeal takes exception to the Judgment and order dated May 7, 2009 passed by the learned Single Judge in Arbitration Petition No. 390 of 2009 whereby the Arbitration Petition filed by Respondent No. 1 u/s.9 of the Arbitration and Conciliation Act, 1996 (for short “Act”) was allowed with certain directions. The appeal arises under following circumstances. By an indenture of partnership made and entered into in Mumbai on Septembere 17, 1975 between the deceased Shri.Rajinder Singh and deceased Gurdev Kaur, they had entered into an agreement for carrying on partnership business of 2 dealing in all types of metals including iron and steel, fabricated material and/or other allied business under name and style of M/s.Muktanandan Corporation, on the terms and conditions more particularly set out in the said deed of partnership. Clause 15 of the said partnership deed provided for referring all disputes and questions between the partners to a single arbitration in case of partners agree upon or otherwise to two or more arbitrators one to be appointed by each partner to the difference in accordance with and subject to the provisions of Arbitration Act, 1940 or any statutory modifications thereof for the time being in force. 2. The controversy in the present appeal relates to 33,24,400 equity shares of Rs.10 each of M/s. Mukat Pipes Limited acquired during the period 1991-2001 in the name of deceased Rajinder Singh. The Appellant No.1 is the wife and Appellant Nos. 2 to 4 are the daughters of deceased Rajinder Singh. Smt. Gurdev Kaur is the mother of first and second Respondents and Rajinder Singh (since deceased). The first respondent filed arbitration petition u/s.9 of the Act alleging that these shares were held by deceased Rajinder Singh in his fiduciary capacity and/or as a trustee for and on behalf of partnership firm. These shares were purchased on behalf of the firm out of the funds paid from the bank account of partnership, but in the name of deceased Rajinder Singh. It was set out that u/s.41 of the Companies Act, 1956 the partnership firm is not a “person” within the meaning 3 thereof and consequently, cannot be a member. The parrtnership firm also cannot be entered as shareholder in the record of the Company. In support of this proposition, reliance is also placed upon the Circular No.4/1972. 3. It is further asserted by the first respondent that deceased Rajinder Singh, during his life time, as a partner, had signed Balance Sheet, Profit & Loss Account of the firm. The equity shares of Mukat Pipes Limited have been shown as asset and investment of the firm in the Balance Sheet for the year ended March 31, 1991. The annual accounts for the year ending March 31, 2001 and March 31, 2002 had been admittedly signed by deceased Rajinder Singh. It is therefore submitted that the shares were always treated as asset and investment of the said partnership firm at the relevant time. The Balance Sheet for the year ended March 31, 2003 showing the said shares as investment of the partnership firm was also signed by deceased Rajinder Singh as a partner of the firm. The income received by way of dividend in respect of the shares had been reflected as a income of the firm in the Profit and Loss Account coupled with the schedule of the other income for the year ended March 31, 2002. The first respondent also placed reliance upon the Assessment Order dated January 14, 1999 passed by the Income Tax Department for the year 1996-1997 that reflected the income received by the firm as and by way of dividend from Mukat Pipes Limited to the tune of Rs. 4 53,19,014/- had been assessed as income of the firm. Form 1992 till the year 2001 the partnership had received an agreegate sum of Rs. 3,80,00,000/- approximately towards the dividend and the same was credited as an income of the firm. Even in the individual Income Tax Returns of deceased Rajender Singh, the income from dividends received from Mukat Pipes Limited were never shown in his personal annual returns or books of account. The sum and substance of the case of the first respondent is that though these shares stood in the name of deceased Rajinder Singh, he had purchased those shares from the funds of partnership firm and consequently he was not sole and exclusive owner of those shares. Those shares were held by him in his fiduciary capacity and or as trustee for and on behalf of the firm. 4. On April 2, 2003 without dissolving the existing partnership firm it was reconstituted by supplementary deed of partnership whereby the deceased Rajinder Singh and deceased Gurdev Kaur, Respondent Nos. 1 and 2 herein and the Appellant No.1 agreed to have 20% share in the profit, losses, assets, liabilities including the capital of the said partnership firm. Clause 8 of the supplementary partnership deed provided that all other terms and conditions as specified in earlier agreement (September 17, 1975) to the extent they are not contrary to the terms and conditions of the supplementary partnership deed shall be same. The supplementary partnership deed dated April 2, 2003 appears to have been signed by all the partners and also 5 initialed on all pages by deceased Rajinder Singh, deceased Gurdev Kaur, Appellant No.1 and Respondent Nos.1 and 2 herein at the relevant time. On September 7, 2003 Mrs.Gurdev Kaur expired intestate and on January 3, 2004 Rajender Singh also expired intestate. After expiry of the original partners of the firm, partnership firm continued with Respondent Nos.1 and 2 herein and Appellant No.1. There were disputes and differences between the parties with regard to the ownership of these shares. In respect of passing of Resolution by circulation in respect of transmission of shares. The Respondent No.1 herein by letter dated March 21, 2005 addressed to M/s.Mukat Pipes Limited informed that the said shares were pledged with Industrial Development Bank of India as per the terms of sanction of various financial limits. Similarly, deceased Rajinder Singh had executed agreement for pledging the shares on September 22, 2001. In view of this no transfer/ transmission was possible unless and until the permission from IDBI was received in writing. The respondent No.1 further asserted that the resolution in that regard itself was void. Somewhat similar letter was also addressed by Respondent No.2 herein to M/s.Mukat Pipes Limited on March 21, 2005. 5. It is the case of the first respondent that the said company transmitted shares in the name of Appellant herein on May 11, 2005 without his consent. Respondent Nos.1 and 2 filed company petition u/s.111A of 6 the Companies Act 1956 before the Company Law Board challenging the transmission of shares and for rectification of the Register of Members. Appellant No.1 herein also filed company petition on December 13, 2005 before the Company Law Board u/s.397, 398 of the Companies Act, 1956. Both the cases were disposed of by learned Member of Company Law Board on February 14, 2007. 6. Being aggrieved by the decision of the Company Law Board, Company Appeal No.8 of 2007 and Company Appeal No.9 of 2007 were filed by the Respondent Nos.1 and 2 herein. The order dated April 11, 2007 recorded statement made on behalf of the appellants therein to the effect that Appellant No.2 (first respondent herein) did not wish to prosecute the appeals and on oral request made, leave was granted to transpose Appellant No.2 therein as Respondent No.3 to the appeals. Ultimately, those appeals were disposed of in terms of the Consent Minutes of the Order on May 4, 2007. Clause (2) of the Consent Minutes of the Order reads thus: “In view of the fact that the impugned order observes that the Appellant should agitate his grievances with regard to the disputed 33,24,400 shares in civil suit, the Appellants will be at liberty to file a suit within a period of 8 weeks in respect of the disputes arising in the Company Petitions filed before the Company Law Board. The suit and all proceedings therein will proceed without being in any manner influenced by the findings of the Company Law Board in any manner whatsoever. The directions contained in the impugned order regarding the appointment of Directors will be subject to orders passed in the suit or in any interlocutory proceedings therein.” 7 7. It appears that pursuant thereto, Respondent No.2 instituted Suit No. 1453 of 2007 in this Court on May 31, 2007 against the Appellant No. 1 and Respondent No.1 among other defendants for declaration that 33,24,400 shares of M/s.Mukat Pipes Limited are the property of partnership firm of M/s.Muktanandan Corporation, of which he - the plaintiff and Defendant Nos.1 and 2 therein are equal partners. Prayer clause (a) of the Plaint reads as under: “(a) That this Hon’ble Court order and declare that the said 33,24,400 shares of Defendant No.4 Company are the property of Defendant No.3 Partnership Firm, of which the plaintiff and Defendant Nos.1 & 2 are equal partners.” 8. In view of bar under section 69(1) of the Partnership Act, 1932, learned Single Judge dismissed the said suit on December 16, 2008. Second respondent herein preferred appeal before the Division Bench of this Court on January 22, 2009. It is common ground that the said appeal was allowed and now the suit is restored to file of this Court and the same is pending. 9. It further appears that after transmission of the said shares in the name of the Appellant No.1 herein and being the owner having 43.38% shares of the subscribed and paid up capital of M/s.Mukat Pipes Limited, the Appellant No.1 issued notices for holding the 19th Annual General Meeting on April 27, 2009. The first respondent 8 therefore through the Advocate’s notice dated April 16, 2009 dissolved the partnership firm and prayed for the account of all assets and profits of the firm. Since there was no compliance of the notice of dissolution, the first respondent preferred Arbitration Petition on April 20, 2009. As set out earlier, the learned Single Judge allowed the said petition subject to certain directions. 10.In support of this appeal, Mr.Tulzapuprkar, learned senior Counsel raised following contentions: (i) There is no valid arbitration agreement between the parties and consequently the petition u/s.9 of the Act is not maintainable, (ii) Admittedly, the shares stood in the name of deceased Rajinder Singh and therefore, the claim set up by first respondent is barred u/s. 4 of the Benami Transactions (Prohibitions) Act, 1988 (for short “Benami Act”). (iii) No declarations u/s.187C of the Companies Act 1956 were filed by the beneficiaries viz.Respondent Nos.1 and 2 herein after the death of Rajinder Singh. On the other hand, under communication dated March 21, 2005 addressed by Respondent Nos.1 & 2 herein, the only objection raised for transmitting the shares in the name of Appellant No.1 was that the permission in writing from IDBI is required to be obtained. No other objection save and except to the above extent were raised by the Respondent Nos.1 and 2 for 9 transmitting of shares in the name of Appellant No.1. (iv) Against order of learned Member of the Company Law Board dated February 14, 2007 Respondent Nos.1 and 2 preferred Company Appeals in this Court. On behalf of the first respondent herein statement was made that he did not wish to prosecute the appeals and on the oral request made on behalf of the appellants, leave was granted to transpose first respondent herein as respondent No.3 to the appeals. Thus, in so far as first respondent is concerned, he has accepted the order of Company Law Board. (v) By order dated May 4, 2007 the company appeals were disposed of in terms of the consent minutes of the order. Clause (2) of the consent minutes of the order recorded that the second respondent herein should agitate his grievances with regard to disputed 33,24,400 shares in civil suit and he will be at liberty to file suit within the period of eight weeks in respect of the disputes arising in the company petition filed before the Company Law Board. The suit and proceedings therein, will proceed without being in any manner influenced by the findings of the Company Law Board whatsoever. The directions contained in the order of the Company Law Board regarding the appointment of directors were to be subject to the order passed in the suit or in any interlocutory proceedings therein. Pursuant to this order, the 2nd respondent instituted Suit No.1453 of 2007 which is pending on the file of this Court. The first respondent cannot simultaneously prosecute the present Arbitration Petition for 10 the identical reliefs. If the simultaneous proceedings in respect of the identical reliefs are filed, the private forum will yield to the public forum viz. Civil suit. The submission of the learned counsel for the appellants is that since the civil suit for identical reliefs is pending, the present arbitration petition filed u/s.9 of the Act is not maintainable. (vi) Lastly he submitted that the arbitration petition is barred by law of limitation . 11.On the other hand, Mr.Seervai, learned Senior Counsel submitted that while dealing with the petition u/s.9 of the Act, the Court has to consider only the prima-facie case. The Court need not record the positive and final conclusion which would bind the arbitrators. On merits, he submitted that from the documents/material on record, it is more than clear that the shares in dispute belong to the partnership firm though the shares stood in the name of deceased Rajinder Singh. 12.Reliance was placed upon (i)statement of assets and liabilities of Muktanandan Corporation at Exh.C, page 43 of the appeal paper book indicating the investment in shares of Mukat Pipes Limited of 33,24,400 equity shares of Rs.10 each, (ii) Balance sheet of Muktanandan Corporation as on March 31, 2002 at Page 84 read with Schedule E at page 87 indicating investment in shares of Mukat Pipes 11 Limited, as also receipt of income by way of dividend received as on March 31, 2001 and as on March 31, 2002 at page 89, (iii) Balance sheet of Muktanandan Corporation as on March 31, 2003 at page 95 indicating investment and schedule E at page 98 of the Appeal paper book, (iv) Balance sheet of 2003-2004 reflecting balance sheet as on March 31, 2004 at page 107, investment read with schedule E at page 110, (v) Balance sheet of the Corporation as on March 31, 1991 at page 125 indicating the investment made in 4,78,600 equity shares in Mukat Pipes Limited and the payment made through the funds of the partnership firm, (vi) Income Tax Returns of the partnership firm for the Assessment year 2001-2002 signed by deceased Rajinder Singh, (vii) Income shown in the statement of computation of total income in the Assessment year 2001-2002 and financial year 2000-2001 of Muktanandan Corporation received by way of dividend of shares at page 142, (viii) Balance sheet dated March 31, 2001 at page 159 indicating investment made in 33,24,400 equity shares in Mukat Pipes Limited, (ix) Individual Income Tax Returns submitted by deceased Rajinder Singh for the Assessment year 2000-2001 at page 169 and the Balance Sheet as on March 31, 2000 of deceased Rajinder Singh at page 180 showing amount of Rs.6,35,500/- towards the shares of Mukat Pipes Limited, (x) Assessment order of Muktanandan Corporation dated January 14, 1999 in respect of the Assessment year 1996-1997 and clause 4 thereof at page 191, (xi) Chart showing the manner in which the funds of the other group Companies were 12 transferred to the partnership firm for purchasing the shares of M/s.Mukut Pipes Limited at page 193 and 197, (xii) Statement of dividend received by Muktanandan Corporation for the financial years 1992-1993 to 2000-2001 at page 198. 13.Mr.Seervai, learned Senior Counsel invited our attention to paragraph 3 of the affidavit of Appellant No.1 in Arbitration Petition No.390 of 2009 and criticised that nothing is set out in the exhaustive and detailed affidavit as to how deceased Rajinder Singh acquired 33,96,700 shares of Mukat Pipes Limited. Mr.Seervai also relied upon section 2(a), 4 and 7 of the Benami Act, Section 14 of the Partnership Act, 1932, and Section 88 of the Indian Trusts Act, 1882. 14.Elaborating arguments that there is no valid arbitration agreement between the parties, Mr.Tulzapurkar submitted that the partnership deed dated September 17, 1975 entered into between deceased Rajinder Singh and deceased Gurdev Kaur no doubt contains clause 15 for referring disputes, differences to the arbitration. However, the supplementary partnership deed dated April 2, 2003 is forged, fabricated document and signature of Appellant No.1 on the said document is obtained by mis-representation or fraud. Therefore there is no valid arbitration agreement for referring the disputes to the arbitration and consequently, the petition u/s.9 of the Act is not maintainable. 13 15.We are unable to accept this contention. It is not in dispute that the partnership deed dated September 17, 1975 contains valid arbitration agreement. By subsequent supplementary deed of partnership dated April 2, 2003 by clause 8 thereof, all other terms and conditions specified in the earlier partnership deed to the extent they are not contrary, were to be the same. No inconsistency between the first deed of partnership and the second deed of partnership was pointed out by the learned counsel for the appellants. Prima-facie, at this stage, one has to go by document on record which is signed by all the partners and also initialed on all the pages by deceased Rajinder Singh and deceased Gurdev Kaur, Appellant No.1 and Respondent Nos.1 & 2 herein. The question whether the supplementary partnership deed is fraudulent or whether the signature of the Appellant No.1 was obtained by mis-representation or fraud, cannot be investigated or tried in a petition u/s.9 of the Act. While considering the petition u/s. 9 of the Act, the Court has to prima-facie find out whether there is an arbitration agreement or not. The question whether the supplementary deed of partnership is fraudulent or not is a matter of trial, for which the parties will have to lead the evidence in support of their respective cases. The learned Single Judge came to the conclusion that there is an arbitration agreement between the parties for referring the disputes to the arbitral tribunal. We find no error in the said finding arrived at by the learned Single Judge. 14 16.Mr.Tulzapurkar, learned Senior Counsel invited our attention to the provisions of the Benami Act. Section 2(a) of the Benami Act defines “Benami Transactions” to mean any transaction in which property is transferred to one person for a consideration paid or provided by another person. Section 2(c) of the Benami Act defines “property” to mean the property of any kind, whether movable or immovable, tangible or intangible, and includes any right or interest in such property. He further submitted that no suit, claim or action to enforce any right in respect of any property held benami against the person in whose name the property is held or against any other person shall lie by or on behalf of a person claiming to be the real owner of such property as per Section 4(1) of the Benami Act. He submitted that as per Section 4 (3) (b) of the Benami Act, deceased Rajinder Singh did not hold the property as a trustee or in a fiduciary capacity for the benefit of the partnership firm. In short his submission is that the case of the Respondent No.1 does not fall in the exception to Section 4 of the Benami Act. 17.Mr.Tulzapurkar submitted that the claim set up by the first respondent is barred under the provisions of the Benami Act. He submitted that u/s.7 thereof, section 82 of the Indian Trusts Act is repealed. There has to be an express trust and not constructive trust. Mr.Tulzapurkar submitted that the shares stood in the name of deceased Rajinder Singh alone and not the partnership firm. He was a member of 15 M/s.Mukat Pipes Limited. In support of his submission he relied upon the judgment of the Division Bench of this Court in the case of Chloro Controls (India) Pvt.Ltd.and Anr.V/s. Severn Trent Water Purification Inc.& Ors., 2006 (3) Bom.C.R. 119 and in particular paragraph 50 thereof. In paragraph 50 the Division Bench approved observations made by the learned Single Judge in para 12 of BBN (UK) Limited and Others v/s.Janardan Mohandas Rajan Pillai & Ors, 1993 (3) Bom.C.R. 228. 18.As against this Mr.Seervai submitted that section 7 of the Benami Transactions Prohobition Act no doubt repealed section 82 of the Indian Trusts Act, 1882. However, section 88 of the Indian Trusts Act is not repealed. He invited our attention to Section 88 of the Indian Trusts Act read with illustration (d), which reads thus:- “Section 88: Advantage gained by fiduciary – Where a trustee, executor, partner, agent, director of a company, legal adviser, or other person bound in a fiduciary character to protect the interests of another person, by availing himself of his character, gains for himself any pecuniary advantage, or where any person so bound enters into any dealings under circumstances in which his own interests are, or may be, adverse to those of such other person, and thereby gains for himself a pecuniary advantage, he must hold for the benefit of such other person the advantage so gained. Illustration (d): A, a partner, buys land in his own name with funds belonging to the partnership. A holds such land 16 for the benefit of the partnership.” 19.From the material on record, indicated hereinabove, it is abundantly clear that though the shares of Mukat Pipes Limited stood in the name of deceased Rajinder Singh, he was holding the shares for the benefit of all the partners and it was for and on behalf of the firm. The shares were held by deceased Rajinder Singh in trust and for all partners, and in view of this, the judgment in Chloro Controls (supra) is of no assistance to the Appellants. Mr.Seervai also relied upon section 14 of the Partnership Act 1932 to contend that the shares are the property of the firm. While dealing with this aspect, the learned Single Judge came to the conclusion that there are various disputes and differences between the parties based upon the documents of either sides, and this requires scrutiny and a detailed inquiry as also the evidence with regard to the contents of these documents, which again is a matter of trial. The learned Single Judge was justified in not recording positive and conclusive finding on this aspect, which otherwise would bind the arbitrators. Prima-facie, from the material on record, there is nothing to show that deceased Rajinder Singh purchased shares from his own income and was exclusive owner thereof. He never treated those shares as his individual property. On the other hand, there is ample material on record to indicate that the said shares were treated as property of the partnership firm and even the dividend received therefrom from time to time was shown as income of the partnership firm. 17 20.Reliance placed by Mr.Tulzapurkar on the judgment of the Apex Court in the case of Prem Ballabh Khulbe V/s.Mathura Datt Bhalt, AIR 1967 SC 1342 is of no assistance to the Appellants. The facts in that case were that the appellant and respondent