RAJENDRABHAI ALIAS SAMIRBHAI NATVARLAL SHAH Vs. CHANDRAJITBHAI NATVARLAL SHAH
LAWS(GJH)-2021-10-192
HIGH COURT OF GUJARAT
Decided on October 22,2021

Rajendrabhai Alias Samirbhai Natvarlal Shah Appellant
VERSUS
Chandrajitbhai Natvarlal Shah Respondents




JUDGEMENT

ASHUTOSH J.SHASTRI,J. - (1.)By way of this Arbitration Petition under Section 11 of the Arbitration and Conciliation Act, 1996, the petitioners have prayed for following reliefs :-
"7(A) That this Hon'ble Court be pleased to appoint any Retired Judge of this Hon'ble Court as Second Arbitrator to constitute the Arbitral Tribunal in accordance with provisions of Section 11 of the Arbitration and Conciliation Act, 1996 for adjudicating the disputes and differences existing between the parties;

(B) Such other and further reliefs as may be deemed fit and proper in the facts and circumstances of the case may be granted in favour of the petitioners."

(2.)The case in brief is that petitioner no. 1 and respondent no. 1 are brothers whereas petitioner nos. 2 to 4 and respondent nos. 2 to 4 are their respective family members. The petitioners as well as the respondents were jointly carrying business of manufacturing and marketing of building construction products, trading and/or supplying building material and/or construction products and/or construction and development of the land. For the purpose said business, the petitioners and respondent nos. 1 to 4 jointly formed several partnership firms and setup private limited company. Over a period of time, the petitioners and respondent nos. 1 to 4 acquired several immovable properties. While some of the properties were independently acquired and held in own name by the respective parties, there were some properties jointly acquired and held by the petitioners and respondent nos. 1 to 4 either in the course of business or otherwise.
2.1. It is the case of the petitioners that certain disputes and differences arose with regard to operation of the joint business and the management therein, including share, right or interest in immovable properties acquired and held jointly. With a view to maintain harmony and the family peace and dignity, the petitioners and respondent nos. 1 to 4 decided to resolve their inter se disputes and differences amicably with the support of the well wishers and friends. As a result of this, recorded their mutually agreed terms in handwritten documents prepared in Gujarati in the presence of the parties. The said handwritten document was without any duress and coercion signed by the respective parties and then it was decided that formal agreement be prepared by an Advocate/Solicitor and be executed containing all terms and conditions and the procedure for division of businesses and properties. In view of such understanding, Memorandum of Agreement (MOA)/Family Arrangement came to be executed on 02.01.2014 by the petitioners and the respondents for division of the joint business and joint properties. The said MOA/Family Arrangement was executed in counter-parts, and each copy was deemed to be original thereof. The petitioners have asserted that as per the said MOA/Family Arrangement, the business and properties coming to the share of the petitioners was higher than those of respondent nos. 1 to 4 and as such, it was agreed and recorded that the petitioners shall pay to respondent nos. 1 to 4 a mutually agreed sum arrived at after taking the value of the business and the properties coming to the share of respondent nos. 1 to 4 and the difference of the said value was to be paid by the petitioners to respondent nos. 1 to 4 in installments over a period of four years from the date of execution of the MOA/Family Arrangement.

2.2. It is the case of the petitioners that though the said MOA/Family Arrangement was prepared as per the Gujarati handwritten document which, respondent no. 1 had duly signed. Respondent nos. 1 to 4 raised an issue and insisted that since the petitioners would get their share of the properties and business immediately, on execution of the said agreement and the respondents would receive the difference of the valuation/consideration in installments over a period of four years, the petitioners must offer an adequate security for securing payment of the consideration by the petitioners under the said arrangement. Due to such insistence of respondents, it was decided that the petitioners would secure the payment of consideration by offering security by way of designating an immovable property having market value equivalent or more amount. As a result of this, another MOA/Family Arrangement was executed simultaneously on 02.01.2014 with an additional security clause, but without modification of other clauses contained in the original agreement.

2.3. The second version of MOA/Family Arrangement, with security clause was also signed and executed on 02.01.2014 by the parties and it was decided between the parties that any dispute/difference relating to the scope, effect, execution, interpretation and implementation of the MOA/ Family Arrangement would be referred to arbitration to be conducted by one Shri Akshaybhai Arvindbhai Kothari; Shri Vikrambhai Ugarchand Shah and Shri Prashantbhai Bipinchandra Shah and the decision by majority has been agreed to be final and binding on both the side. The said arbitration clause in the first version of the MOA/Family Arrangement dated 02.01.2014 is contained in Clause 28 wherein, in second version of MOA/Family Arrangement, due to insertion of additional security clause, incorporated at Clause no. 19 in verbatim as that of first version of the agreement.

2.4. After the said execution of the agreement as stated above, and after part implementation thereof, the respondents herein, filed Special Civil Suit No. 597 of 2014 on 14.11.2014 before the court of Civil Judge (S.D.) Vadodara, inter alia praying for declaration and permanent injunction, partition and cancellation of documents. The respondents have also joined all the three Arbitrators as agreed upon as party defendants. The petitioners in the said suit proceedings filed by the respondents preferred an application below Exhibit-10 under Section 8 of the Arbitration and Conciliation Act, 1996 for seeking reference to the arbitration about their disputes. Pursuant to the order dated 25.11.2014 passed by this Court, in Special Civil Application No. 17060 of 2014, the said application Exhibit-10 under Section 8 of the Act was heard on merit and after detailed hearing, the application was allowed vide order dated 12.12.2014, by the learned 10th Additional Senior Civil Judge and Additional Chief Judicial Magistrate, Vadodara.

2.5. The named Arbitrators Shri Akshaybhai Arvindbhai Kothari and Shri Vikrambhai Ugarchand Shah informed the petitioners that they would not like to act as arbitrators in view of the allegations levelled against them and because of the conduct of respondent no. 1 have shown disinclination to act as Arbitrators. Further, the respondents herein by challenging the order dated 12.12.2014 passed below Exhibit-10 by filing petition being Special Civil Application No. 27 of 2015 and after hearing at length, vide order dated 08.05.2015, the petition came to be dismissed and the order passed below Exhibit-10 was confirmed.

2.6. Feeling aggrieved by and dissatisfied with the said order, the respondents herein filed Special Leave Petition (C) CC No. 9160 of 2015 before the Hon'ble Apex Court, challenging the decision delivered by this Court dated 08.05.2015 and since the respondents had certain reservations about the named Arbitrators, before the Hon'ble Supreme Court, the parties agreed to appoint three independent Arbitrators and accordingly, the Hon'ble Apex Court vide order dated 20.07.2015 granted two weeks time to settle the dispute amicably, failing which the parties were directed to give names of three Arbitrators for resolution of disputes. The matter was then listed on 03.08.2015 and after hearing, Special Leave Petition came to be dismissed by the Hon'ble Supreme Court. Even, after the order passed by the Hon'ble Supreme Court on 03.08.2015, respondent nos. 1 to 4 did not take any step to proceed with the arbitration pursuant to the original order dated 12.12.2014 and accordingly, respondent nos. 1 to 4 had failed to fulfill their obligation under MOA/Family Arrangement. As a result of this, vide letter dated 31.08.2015, the petitioner have invoked arbitration clause and appointed Hon'ble Mr. Justice C.K. Buch (Retd.) as its Arbitrator and called upon respondent nos. 1 to 4 to appoint their arbitrators if so desired, within a period of 30 days from the date of receipt of letter. In view of this development, the respondents vide letter dated 29.09.2015 appointed one Smt. Induben Natvarlal Shah (Mother of petitioner no. 1 and respondent no. 1) as their arbitrator. In view of the fact that the respondents have already appointed their Arbitrator, the petitioners through their advocate addressed a letter on 05.10.2015 to Hon'ble Mr. Justice C.K. Buch (Retd.), requesting the Hon'ble Arbitrator to proceed in consultation with Arbitrator Smt. Induben Natvarlal Shah appointed by the respondents for appointment of Presiding Arbitrator and constitution of Arbitral Tribunal in accordance with the provisions of the Arbitration and Conciliation Act, 1956. Thereafter, letter dated 03.11.2015 of Hon'ble Mr. Justice C.K. Buch (Retd.) was received by the petitioners informing that both the appointed Arbitrators were unable to agree on the names of the Presiding Arbitrator for constitution of Arbitral Tribunal. As a result of this, the petitioners filed IAAP No. 78 of 2015 under Section 11 of the Act for appointment of a Presiding Arbitrator. Vide order dated 22.01.2016, the petition came to be disposed of with a request to Hon'ble Justice Shri M.B. Shah, Former Judge, Supreme Court of India to act as a Presiding Arbitrator, however, according to the petitioners, through oversight instead of the words "to act as Presiding Arbitrator", words "to act as a Sole Arbitrator" were transcribed. Hence, the learned advocate on behalf of the petitioners filed a Note for Speaking to Minutes for necessary correction and the same was accordingly disposed of vide order dated 29.01.2016.

2.7. It is further the case of the petitioners that pursuant to the order of Hon'ble Court, the Arbitral Tribunal convened and put the arbitration proceedings in motion. The respondents filed their claim statement and when the matter was posted for hearing, an application for filing of the written statement and counter claim, the Arbitrators were of the unanimous view that the disputes between the parties to be amicably settled. Hence, the Tribunal fixed a meeting for amicable settlement of the disputes on 19.05.2016. In view of the aforesaid suggestion of the Tribunal, the parties met for settlement on 19.05.2016, but after some discussion and deliberation, they arrived at an amicable settlement which came to be recorded on 19.05.2016. The said settlement agreement/ consent terms were signed by respondent no. 1 and petitioner no. 1 and on behalf of their respective family members in the presence of their advocates and Arbitrators of the Arbitral Tribunal. The said agreement by virtue of which, it was agreed that the petitioners shall pay an additional amount of Rs.14 crores to the respondents over and above the consideration of Rs.32.50 crores mentioned in original MOA/Family Arrangement. A new time schedule for payment of total amount of installments was also agreed. However, all other terms and conditions of MOA/Family Arrangement were to operate without any modification. The duly signed consent terms dated 19.05.2019 were placed before the Arbitral Tribunal and the parties requested the Hon'ble Tribunal to pass a consent award and to conclude the arbitration proceedings. The said broad terms and settlement agreement are also stated by the petitioners in para 2.19 reflecting on page 10 of the petition memo, which reads as under :-

(i) The petitioners herein (Respondents before the Arbitral Tribunal) agreed to pay additional amount of Rs.14 crores;

(ii) The additional amount was to be paid in 11 installments starting from 1st November, 2016 and ending on 1st November, 2021;

(iii) In case the Respondents desire to get the property offered as security for payment of amount by the Respondent to the Respondents herein (Claimants before the Arbitral Tribunal) as per clause no. 19 of the MOU, an unconditional bank guarantee will have to be furnished. However, separate bank guarantee will be furnished for each installment remaining payable as on the day on which the security land is released;

(iv) The Respondents shall not be permitted to create any third party rights in the land given as security before releasing the land from security;

(v) In case of default in making payment of the installment amount, the respondents shall have no right to raise any objection if the Claimants intend to realize the amount payable under the MOA by sale of land offered as security;

(vi) Even if the Respondents put up construction or develop the land offered as security, it will be open for the Claimant to take the possession of the entire land upon default of the Respondents in making payment of installments;

(vii) The parties agreed to abide by other remaining conditions as agreed by MOA dated 02.01.2014;

(viii) The parties have agreed to withdraw the proceedings initiated against each other and shall issue joint public notice and the cost of the notice shall be borne by the claimants."

2.8. The grievance of the petitioners is that even after signing the subsequent settlement agreement/consent terms on 19.05.2016, in presence of Arbitrators of the Tribunal, the respondents by way of application on 01.06.2016 made a dishonest attempt, according to the petitioners, to seek modification of the settlement agreement/consent terms under the guise of rectification of the error. The said application was not entertained and the Arbitral Tribunal on 03.06.2016 passed a consent award and concluded the arbitration proceedings.

2.9. The petitioners have further asserted in the petition that subsequent to the passing of the award, the petitioners diligently discharged their obligations. The petitioners have made payment of installments to the respondents, however, the respondents did not honour their part of the obligation and have scrupulously committed several acts in violation of the terms of the MOA/Family Arrangement despite several requests by petitioner no. 1 to respondent no. 1 through their authorized representative from time to time, respondent no. 1 did not act as per clause 23 of the MOA and award, out of total 36 parcels of joint properties which were to be released/transferred in favour of the petitioners by the respondents, only deed and documents in respect of 20 parcels of lands have been executed by the respondents over a period of time till 01.04.2020. However, about the documents/deed in respect of 16 parcels of lands, the same remained to be executed. Time and again, the request were made by the petitioners, but on one pretext or the other, the respondents have chosen not to proceed to act in consonance with the terms of the MOA/Family Arrangement as well as have chosen not to maintain spirit of consent award which has been passed by the Arbitral Tribunal. As a result of this, on 27.11.2020, the petitioners requested the respondents to execute deed/documents in respect of left out parcels of lands coming to the share of the petitioners under the MOA/Family Arrangement, but in spite of having received such request, the respondents did not comply with the terms of the MOA/Family Arrangement and gave evasive reply on 30.11.2020. Having realized that the respondents had no intention at all to fulfill their part of the agreement, a notice was given on 05.12.2020, calling upon the respondents to forthwith comply with the terms of MOA/ Family Agreement, consent award, failing which, appropriate action will be initiated. In anticipation, the respondents once again would institute legal proceedings to stall further implementation. The respondents filed caveat application first before the civil court stating that the disputes which have arisen between the parties and gave reply on 13.12.2020 against the letter written by the petitioners.

2.10. It is further the case of the petitioners that for the purpose of enforcing the consent award, the petitioners also filed execution application before the appropriate court, however, on account of non fulfillment of terms of the MOA/Family Arrangement and consent award, the petitioners sustained heavy loss in their business, hence, issued one another notice on 16.12.2020 afresh, invoking arbitration agreement contained in clause 29 of the second version of MOA/Family Arrangement and appointed Hon'ble Ms. Justice H.N. Devani, Former Judge, Gujarat High Court to act as an Arbitrator to decide and adjudicate upon the disputes and differences existing between the parties. The petitioners also called upon the respondents to appoint second Arbitrator within a period of 30 days from the date of receipt of the notice. Though notice dated 16.12.2020 is served the respondents, they have failed to appoint second Arbitrator within a period of 30 days and the same having not been replied, but later on, respondent nos. 1 and 2 through their lawyer have replied inter alia alleging that the arbitration agreement stands exhausted and by taking such dishonest stand, a reply was also given by respondent no. 4 on 18.01.2021 through her lawyer. In view of the aforesaid situation which is prevailing amongst the parties to the proceedings, the petitioners have filed present Arbitration Petition under Section 11 of the Act for appointing Hon'ble Judge which is mentioned in para 4 of the application and sought the aforesaid reliefs as contained in para 7(A).

(3.)This petition when was placed before the Court, at initial stage, learned advocate Mr. Nilesh Pandya, appearing for respondent nos. 1 and 2 had sought time to submit reply and by recording such request on 19.03.2021, the Court on 19.03.2021 placed the matter for hearing on 09.04.2021. Thereafter, it was placed before this Court for hearing on 06.08.2021 and with a view to take proper instructions, again learned advocate Mr. Nilesh Pandya had requested for some time and then the matter was lastly placed for hearing on 03.09.2021 wherein, both the learned advocates appearing for the respective sides have requested the Court to hear the matter at the stage from where the same is pending.
Accordingly, considering the request, the Court has taken up the matter for hearing.



Click here to view full judgement.
Copyright © Regent Computronics Pvt.Ltd.