Case Note & Summary
The matter arose from an arbitration petition under Section 34 of the Arbitration and Conciliation Act, 1996, challenging an award dated 1st December, 2006. The dispute involved four brothers and their family company over a property that had been mortgaged. Respondent No.1, Seth Industries Limited, had executed an English mortgage in favour of one Ravi Madan Shah and his family as security for a loan of Rs.10,00,000. The repayment was guaranteed by the original petitioner Naresh Seth and other brothers who were directors. When Respondent No.1 failed to repay, the original petitioner paid the mortgagees Rs.10,45,000 on 28th September, 1984, and took a transfer of the mortgage. The transfer deed provided that Respondent No.1 would repay the amount with interest at 18% per annum by 1st September, 1985. The original petitioner informed the parties of default and later, with Respondent No.1's authorization, sold the ground floor of the property to a third party for Rs.11,00,000. Disputes arose over the accounting: Respondent No.1 claimed that after adjusting the sale proceeds, only Rs.2,01,220 was payable, and further alleged that the original petitioner owed Rs.74,00,000 for occupation of the second floor. In 1986, a company petition for winding up was filed, and the Court Receiver was appointed; the original petitioner was allowed to continue in possession as agent on payment of royalty. The parties later executed a Memorandum of Understanding on 20th July, 1995, which inter alia provided for sale of assets, pooling of sale proceeds, reimbursement of payments, and arbitration. The Court Receiver was discharged on 20th December, 1996, and the original petitioner delivered possession of the first floor but retained the second floor. Arbitral proceedings were invoked under the MoU, resulting in an award on 1st December, 2006. The arbitrator declared that the mortgage deed of Rs.10,45,000 with interest stood fully satisfied and discharged as on 31st March, 1991, directed reassignment and delivery of the first floor and 2000 sq ft on the second floor by 31st January, 2007, and ordered payment of Rs.27,36,351 with interest at 18% from 1st September, 2000, and compensation at 18% on Rs.1,42,60,046 from 12th April, 2000 till reassignment. The original petitioner’s counter-claim was dismissed as not pressed. The original petitioner, Naresh Seth, died during the pendency, and his heirs were brought on record as petitioners. Similarly, other respondents died and their heirs were substituted. The petitioners challenged the award, contending, among other things, that the arbitrator had improperly brought the heirs of a deceased respondent on record without an application. The judgment text ends abruptly before recording the court’s final decision and reasoning.
Issue of Consideration
Whether the arbitral award dated 1 December 2006 is liable to be set aside under Section 34 of the Arbitration and Conciliation Act, 1996
Case Details
2010 LawText (BOM) (10) 72
Arbitration Petition No. 180 of 2007
Mr. Feredun DeVitre, Mr. Arif Bookwala, Mr. Farhan Dubash for Petitioners; Mr. S.U. Kamdar, Mr. Dinyar D. Madon, Mr. A.H. Gokhale for Respondents
Smt. Veena wd/o Naresh Seth and Suchit Naresh Seth (Heirs and Legal Representatives of Naresh Seth)
1. Seth Industries Limited, 2. Shiv Prakash Seth, 3. Heirs of Janak Raj Seth (Shukla Janak Raj, Benu Bharany, Bela Sehgal), 4(a)-4(d) Heirs of Ramesh Kumar Seth (Smt. Asha Ramesh Seth, Dinesh Ramesh Seth, Ashok Ramesh Seth, Nisha), 5. Seth Industries Private Limited
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Nature of Litigation
Arbitration petition under section 34 of the Arbitration and Conciliation Act, 1996 challenging an arbitral award
Remedy Sought
The petitioners sought to set aside the arbitral award dated 1 December 2006.
Filing Reason
The original petitioner was aggrieved by the award directing satisfaction of mortgage, reassignment of property, and payment of amounts with interest.
Previous Decisions
Arbitral award dated 1 December 2006; earlier: Company Petition No.158 of 1986 for winding up, Court Receiver appointed on 27 September 1984, discharged on 20 December 1996.
Issues
Whether the arbitral award dated 1 December 2006 is liable to be set aside under Section 34 of the Arbitration and Conciliation Act, 1996.
Whether the arbitrator erred in bringing the legal heirs of Janak Raj Seth on record without an application for the same.
Submissions/Arguments
Respondent No.1 contended that as on 30 June 1986, it owed the original petitioner a sum of Rs.13,75,000 inclusive of interest, and after adjusting Rs.11,74,000 from sale proceeds, only Rs.2,01,220 was due and payable; it further alleged that Rs.74,00,000 was payable by the original petitioner for his occupation of the second floor.
The original petitioner’s case as to what transpired after the discharge of the Court Receiver is not fully stated in the available text.
Judgment Excerpts
The learned arbitrator declared that a mortgage deed of Rs.10,45,000/- and interest thereon is fully satisfied and stood discharged as on 31st March, 1991, directed the original Petitioner to reassign and deliver the mortgaged property to the Claimant i.e. Respondent No.1, admeasuring about 2000 square feet on the second floor and the entire first floor of a building named Simplex House which was part of the mortgaged property, latest by 31st January, 2007.
The arbitrator also directed the original Petitioner to pay Respondent No.1, a sum of Rs.27,36,351/- with simple interest thereon at eighteen per cent per annum from 1st September, 2000, till payment and compensation at the rate of eighteen per cent per annum on Rs. 1,42,60,046/-, being the value of the said first and second floor premises from 12th April, 2000, being the date of expiry of the notice period given by the first Respondent to the original Petitioner till reassignment thereof.
The parties agree to have all differences and disputes, if any, among them in relation to or in connection with this Memorandum of Understanding decided by arbitration for which purpose, their Lordships, S.C. Pratap and failing him, P.B. Sawant and failing him, B. Lentin, who are all retired Judges will be the sole arbitrator, if possible.
Procedural History
On 24 December 1979, Respondent No.1 executed an English mortgage in favour of Ravi Madan Shah et al. for a loan of Rs.10,00,000. On 28 September 1984, the original petitioner paid the mortgagees Rs.10,45,000 and obtained a transfer of mortgage. Following default, the original petitioner, with Respondent No.1’s authorization, sold the ground floor on 30 June 1986 for Rs.11,00,000. In 1986, Company Petition No.158 of 1986 for winding up was filed; by order dated 27 September 1984, the Court Receiver was appointed and the original petitioner continued as agent on payment of royalty. A Memorandum of Understanding dated 20 July 1995 provided for sale of assets, pooling of proceeds, and arbitration. The Court Receiver was discharged on 20 December 1996. Arbitration led to an award on 1 December 2006. The original petitioner filed Arbitration Petition No. 180 of 2007 under Section 34 of the Arbitration and Conciliation Act, 1996, challenging the award. During pendency, the original petitioner died on 22 June 2007; his heirs were substituted as petitioners. Respondent No.4, Ramesh Kumar Seth, died on 4 July 2007, and his heirs were substituted. Respondent No.3, Janak Raj Seth, had died before the award; the arbitrator brought his heirs on record. The High Court heard the matter and delivered oral judgment on 29 October 2010.
Acts & Sections
- Arbitration and Conciliation Act, 1996: Section 34
- Companies Act, 1956:
