Case: R.N. Agarwal Vs Laxmi Sugar Mills Co. Pvt. Ltd. through Director. High Court of Allahabad (India)
| Judges | Devi Prasad Singh and S.C. Chaurasia, JJ. |
| Issue | Arbitration Act |
| Judgement Date | April 16, 2010 |
| Court | High Court of Allahabad (India) |
Judgment:
Devi Prasad Singh, J., (Lucknow Bench)
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Present appeal under Section 39 of the Indian Arbitration Act, 1940 (In short the Act), has been preferred against the judgment and order dated 27.10.1999, passed by the First Additional District Judge, Sitapur, rejecting the objection filed by the appellant under Section 30/33 of the Act against the Award dated 23.8.1998 of the Arbitrator in Civil Suit No. 11 of 1979. By the judgment and order dated 27.10.1999, the Additional District Judge Sitapur, while rejecting the objection, made the Award Rule of the Court. Hence the present appeal.
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The respondent M/s. Laxmiji Sugar Mills Co. Private Limited (In short M/s. Laxmi Sugar Mills), entered into the agreement on 8.1.1976 with the appellant Sri R.N. Agarwal, Managing Director, M/s. Shree Balaji Textile Mills (P) Ltd., Bangalore. Under the agreement, M/s. Laxmi Sugar Mills had undertaken to sell the business assets of "Narain Vegetable Products" involved in the business of manufacture of vegetable oil Products including Tin Container Plant and Soap Plant. M/s. Laxmi Sugar Mills has been referred as Seller and absolute owner of M/s. Narain Vegetable Products. The agreement with regard to sale of property of M/s. Narain Vegetable Products described in schedule-I of the said agreement, was settled subject to payment of Rs. 50 lakhs by the purchaser.
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The agreement reveals that the appellant R. N. Agarwal has signed the agreement in the capacity of Managing Director of one M/s. Balaji Textile Mills (P) Limited, Bangalore. The agreement provides that the appellant R.N. Agarwal has agreed to purchase the business assets of M/s. Narain Vegetable Products for M/s. Balaji Textile Mills (P) Limited (In short M/s. Balaji Products) or in any other name to be approved by the Registrar of the Companies. The agreement further reveals that on the date of agreement, the buyer had paid a sum of Rs. 6,51,000/- by means of demand draft/cheque and for the rest amount to the tune of Rs. 43,49,000/-, it was agreed that it shall be paid by the buyer to seller after discharging certain liabilities of the seller which are detailed in schedule-II of the agreement. It has been further provided in the agreement that on clearance of such liabilities of the seller by the buyer, it shall be treated as balance of sale consideration to the seller by the buyer for all intents and purpose. It was further agreed that it shall be the duty of seller to discharge other liabilities pertaining to the business of M/s. Narain Vegetable Products carried on till 31.12.1975 and not referred to in Schedule-II. The agreement was signed by the appellant on behalf of M/s. Balaji Product. Clause No. 11 of the agreement provides that in the event of any dispute arising between the parties, the matter may be referred to Arbitrator under the Act.
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M/s. Laxmi Sugar Mills moved an application under Section 20 of the Act with the allegation that in terms of agreement dated 8.1.1976, the possession of the plant was delivered to the appellant. The appellant M/s. Balaji Products by virtue of agreement, purchased only the assets of the plant and not the entire business of M/s. Narain Vegetable Products. In the application, it has been stated that the agreement for sale expired on 8.1.1979 and since M/s. Balaji Vegetable Products is not ready to pay the entire amount for execution of the sale-deed hence dispute arose.
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While submitting the reply to the application filed under Section 20 of the Act, the appellant had not disputed the execution of Agreement dated 8.1.1976. However, it was stated that purchase was for the plants, land, machinery and everything belonging to M/s. Narain Vegetable Products. It is further alleged that entire amount has been paid up and the respondent is not executing the sale deed in spite of repeated requests by M/s. Balaji Products/appellant. It was further stated that the appellant M/s. Balaji Vegetable Products was shirking from their responsibility and no cause of action has arisen hence the present petition is not maintainable.
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The application under Section 20 of the Act moved by M/s. Laxmi Sugar Mills was heard and decided by the learned First Additional District Judge Sitapur, and vide judgment and order dated 25.3.1980, the application was dismissed with costs. Against the judgment and order dated 25.3.1980, M/s. Laxmi Sugar Mills had filed an appeal which was registered as F.A.F.O. No. 174 of 1985, before this Court. The appeal was heard and decided by the High Court. Vide judgment and order dated 22.4.1987, and the High Court had set aside the judgment dated 25.3.1980 passed in Civil Suit No. 11/1979 by the First Additional District Judge Sitapur. The High Court directed to refer the issue to the Arbitrator under Sub-section (4) of Section 20 of the Act. While remanding the matter, High Court itself has framed two issues for reference to Arbitrator. Relevant portion from the judgment and order dated 22.4.1987 passed by Division Bench of the High Court is reproduced as under:
F.A.F.O. No. 174 of 1985 is allowed. The judgment dated 25.3.80 of the learned 1st Addl. District Judge, Sitapur in Original Suit No. 11 of 1979 is set aside. The learned lower court is directed to refer the following dispute between the parties to an Arbitration under Section 20 (4) of the Act:
(i) Whether the opposite party respondent, R.N. Agarwal, has discharged the liabilities undertaken by him by agreement dated 8.1.76, Ex.2?
(ii) Whether the opposite party respondent R.N. Agarwal is entitled to the execution of a sale deed in pursuance of the terms of agreement contained in Ex.2 and if so, in respect of what property?
The applicant appellant will get costs throughout from the opposite party respondent.
F.A.F.O. No. 128 of 1983 is allowed and the order dated 19.4.83 in Original Civil Suit No. 91 of 1981 is set aside. The proceedings of said Original Civil Suit shall remain stayed under Section 34 of the Indian Arbitration Act, 1940 till the disposal and conclusion of the Arbitration proceedings in Original Civil Suit No. 11 of 1979 giving rise to F.A.F.O. No. 174 of 1985. The appellants shall get costs throughout.
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It may be noted that during the pendency of application under Section 20 of the Act, M/s. Balaji Vegetable Products Private Limited and M/s. Sri Balaji Textile Mills Pvt. Ltd., both were represented by Mr. R.N. Agarwal in the capacity of Managing Director and Director respectively, and filed Civil Suit No. 91/81 in the Court of Civil Judge, Sitapur, for specific performance of contract for sale in terms of agreement dated 8.1.1976. The suit came up for disposal in the Court of IIIrd Additional District Judge Sitapur. Feeling aggrieved, M/s. Laxmi Sugar Mills filed an application under Section 34 of the Act to stay the proceeding of civil suit, pending arbitration proceeding. The application under Section 20 of the Act was dismissed by the judgment and order dated 25.3.1980, passed by the First Additional District Judge, Sitapur. Against the judgment and order dated 25.3.1980, F.A.F.O. No. 174/1985 was filed in the High Court whereas, application under Section 34 of the Act was dismissed by the order dated 19.4.1983. Feeling aggrieved, M/s. Laxmi Sugar Mills filed F.A.F.O. No. 128 of 1983. Both the appeals were clubbed together and decided by the High Court, vide judgment and order dated 22.4.1987 (supra).
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In compliance of directions of High Court, the First Additional District Judge Sitapur, vide order dated 16.1.1989, appointed Hon'ble Mr. Justice J.S. Trivedi (Rtd.) as Arbitrator. Both the parties filed their claims, written statement and rejoinder. The Arbitrator, in his Award dated 23.8.1998, had framed another issue as Issue No. 3 which is as under:
The issue No. 3: Is the agreement for sale between Sri R.N. Agarwal or as Managing Director, M/s. Balaji Textile Mills Limited and M/s. Laxmi Sugar Mills?
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The Arbitrator, keeping in view the judgment of Karnataka High Court, framed another issue, which is reproduced as under:
Issue No. 4. In view of the order of the Hon'ble High Court of Karnataka what consequential relief can be granted?
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While assailing the impugned judgment, Sri U.K. Srivastava learned Counsel for the appellant has relied upon the cases reported in AIR 1977 SC 2014: Orissa Mining Corporation Ltd. v. Prannath Vishwanath AIR 1989 SC 402: Union of India and Ors. v. Santiram Ghosh and Ors. AIR 1990 SC 1128: Dandasi Sahu. v. State of Orissa 1990 SC 1132: Ratilal B. Soni and Ors. v. State of Gujarat and Ors. AIR 1992 SC 232: Associated Engineering Co. v. Government of Andhra Pradesh and Anr. (1994) 3 SCC 521: Tarapore & Co. v. State of M.P. AIR 1996 SC 2965: Union of India v. G.S. Atwal and Company (Asansole) AIR 1987 Karnataka 113: Balaji Vegetable Products (P) Ltd., Bangalore. v. The Union of India and Ors.
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On the other hand, learned Counsel for the respondents relied on the judgments reported in (1994) 6 SCC 485: State of Rajasthan. v. Puri Construction Ltd. (1999) 9 SCC 449: Arosan Enterprises Ltd. v. Union of India 2004 (3) Arbitration Law Reporter 534 (SC): Hari Om Maheshwari. v. Vinitkumar Parikh (1999) 4 SCC 214: H.P. State Electricity Board. v. R.J. Shah and Company (2010) 1 SCC 409: Ravindra Kumar Gupta and Company. v. Union of India.
Issues before the Karnataka High Court:
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It shall be appropriate to deal with the controversy adjudicated by the Karnataka High Court between the parties. M/s. Balaji Vegetable Products (P) Limited, had filed Writ Petition No. 1878 of 1977 before Karnataka High Court at Bangalore. In the writ petition, Union of India, Director of Vanaspati, Ministry of Civil Supplies Government of India and M/s. Laxmi Sugar Mills Private Ltd., were respondents. It was prayed that a writ in the nature of mandamus be issued directing the respondents to amend the industrial license dated 14.12.1970 for manufacture of 15 tonnes of vanaspati per day by entering the name of the...
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