TaxTMI 
TaxTMI 
2020 (2) TMI 1525
X X X X Extracts X X X X
X X X X Extracts X X X X
....n proceedings titled as Shri Pawan Kumar Gupta & Anr. Vs Shri A.K.Gupta by the Ld. Sole Arbitrator; (c) pass such other and further order(s) as this Hon'ble Court may deem fit and proper in the facts and circumstances of the present case. 2. The current petition has been preferred by petitioner No.1 Sudha Gupta, who is the wife of the claimant i.e. late Pawan Kumar Gupta ('late Claimant', for short) who had passed away during the pendency of the arbitral proceedings on August 10, 2008. Petitioner No.2, Tarun Gupta, is the son of Late Claimant. The petitioners were impleaded as legal heirs in the arbitration proceedings. 3. The respondent no.1 herein is A.K. Gupta and respondent No.2 Mohit Gupta is also the son of late Claimant. It may be stated here that respondent No.2 Mohit Gupta was claimant No.2 before the arbitration proceedings along with his father, i.e., the late Claimant. 4. Before going into the merits of the controversy, it would be appropriate to briefly state the facts of the case which can be culled out from the record. 5. The respondent No.1 with one Nitin Gupta were engaged in the business of pharmaceuticals products, whereas the late claima....
X X X X Extracts X X X X
X X X X Extracts X X X X
....nt of Rs. 268.52 Lacs. This Statement of Account shows that Rs. 219.52 Lacs was due to the late Claimant and his associates whereas Rs. 49 Lacs was payable to M/s. Brawn Group of Companies of which the respondent No.1 was the Director. 10. Thereafter, issues arose with regard to the settlement of dues, pursuant to which a legal notice dated December 31, 2004 was issued by M/s. Brawn laboratories to the late Claimant, demanding the settlement of the monies due, on the allegation that he had received post-dated cheques of USD 2,83,287.46 and USD 2,75,121.00. The late Claimant replied to the said legal notice denying such averments. 11. Then on June 8, 2006 the late Claimant issued a notice to respondent No.1 through which the arbitration clause in the MoU was invoked. Thereafter, a petition under Section 11 of the Act was filed by the late Claimant, being Arb.P. 409/2006. Accordingly, this Court vide order dated January 22, 2008 in the said petition had appointed Ms. Justice Sharda Aggarwal (Retd.) as the sole Arbitrator to adjudicate the disputes between the parties. 12. The late Claimant along with respondent No2. had preferred a claim for Rs. 219.52 lacs along with intere....
X X X X Extracts X X X X
X X X X Extracts X X X X
....n of their share amounting to Rs. 49.00 lakhs (Rupees forty nine lakhs only), M/s Brawn will have no claim for any balance payment from M/s. Balajee." (emphasis supplied). 15. It was further claimed that after the closure of business in Angola, the parties were to get an amount of Rs. 268.52 Lacs released from Neopharma, so that it could be distributed as per Statement of Account found at Annexure-A to the supplementary MoU. As per the said Statement of Account, it is the case of the petitioners that they were entitled to an amount of Rs. 219.52 Lacs and it is also admitted position that M/s. Brawn Laboratories represented by respondent no.1 was entitled to Rs. 49 Lacs. 16. It was the case of the petitioners as per Article 5, the late claimant had to pursue the matter with M/s Neopharma to release the payment so that the accounts could be settled in terms of the MoU. It was alleged by the late claimant that despite his various emails to Neopharma requesting to release the payment and despite his personal visit to Angola, the money could not be released because of non-cooperation and malafide approach of the respondent No.1. The petitioners therefore prayed for directions to r....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... of Rs. 49 Lacs. 21. It was further argued that irrespective of the facts whether the claimants had recovered the amount of Rs. 49 Lacs under the supplementary MoU, it was the personal liability of late claimant to pay the sum of Rs. 49 Lacs to the respondent No.1/counter-claimant, after a maximum period of 8 months from the date of execution of Supplementary MoU, and that the said period expired on July 31, 2004 due to which the respondent No.1 had claimed the aforesaid amount with 18% interest w.e.f. September 01, 2004. 22. The Arbitrator went on to frame the following issues: "1. Whether the parties are bound by the two agreements (Annexure P-1 and Annexure P-2 to the statement of Claim) dt 01.12.2003 ? OPC 2. Whether the amount of Rs. 219.52 Lacs (Two crores Nineteen Lakhs Fifty Two Thousand) stood released by M/s. Neopharma at Angola to the claimant as alleged by the respondent? OPR 2A. Whether the amount of Rs. 219.52 (Two crores Nineteen Lakhs Fifty Two Thousand) as alleged by the claimant, is still lying with M/s. Neopharma at Angola? OPC 3.Whether the two cheques for the amount of USD 2,83,287.46 & USD 2,75,121 were issued by M/s. ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....earned Arbitrator on issue No.3 observed, the fact remained that the payment did not reach the respondent No.1 while holding that since the two cheques for an amount of USD 2,83,287.46 and USD 2,75,121 (INR valuing Rs. 2,35,92,000) were not proved and in the absence of cheques and other related documents, it cannot be stated that the two cheques were issued by M/s. Balajee in discharge of their liability. 27. The learned Arbitrator observed, that M/s. Neopharma had no direct dealing with the respondent No.1's company i.e. M/s. Brawn Laboratories Ltd and as per the agreement M/s. Neopharma had to make payment to M/s. Balajee according to its realization upon sale. M/s. Balajee was obligated to make payment, after deduction of expenses to M/s. Brawn Laboratories and the money so received was to be distributed as per the agreement. It was further held by the learned Arbitrator that respondent No.1 had failed to prove that the petitioners had received or recovered the aforesaid amount from M/s. Neopharma or the amount of Rs. 219.52 lacs stood released by M/s. Neopharma at Angola. 28. It was further held by the learned Arbitrator that, since it was the case of the petitioners that....
X X X X Extracts X X X X
X X X X Extracts X X X X
....vide impugned Award, awarded a sum of Rs. 49 lacs by way of counter-claim along with simple interest @ 8% p.a. with effect from September, 01, 2004 till realization awarded in favour of respondent. 33. The petitioners have, in substance, taken the following grounds for challenging the impugned award: (i) The Learned Arbitrator did not consider that late claimant had agreed that by or before August 01, 2004 he would ensure the payment of Rs. 49 lacs to M/s. Brawn Pharmaceuticals Ltd. and not to respondent No.1 in his personal capacity. Despite this, the award for payment has been made to respondent No.1 in his individual capacity. (ii) The learned Arbitrator failed to consider that no agreement existed between late claimant and M/s. Brawn Pharmaceuticals Ltd. and that no claim could have been made by it against the late claimant. (iii) M/s. Brawn Pharmaceuticals not a party to the arbitration agreement contained in the MoU dated January 1, 2003 or in the supplementary MoU. (iv) That also M/s. Brawn Pharmaceuticals Ltd. had made no claim or counter claim or demand against the late claimant for payment of money. (v) respondent No.1 is on....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... Brawn Laboratories Ltd, the company of the respondent. viii. Even in para 3 of reply-cum-counter-claim it was the case of the respondent No.1 himself that it was M/s. Brawn Pharmaceuticals Ltd. which was entitled to the payment. ix. So also in Para 4, 6 & 8 the reply filed by the respondent No.1 himself to the Petition Under Section 11 of the the Act of 1996; wherein the respondent No.1 had stated that there exists no dispute between petitioners and respondent No.1 in his individual capacity; the petition under reply is unsustainable since the respondent No.1 is not a party to the supplementary MoU. x. respondent No.1 was not entitled to payment of any money from the late claimant. It is settled law that individual shareholder has no right in the property of the company and further that no relief could be granted in favour of respondent No.1 in his individual capacity for any amount allegedly due by late claimant to M/s. Brawn Pharmaceuticals Ltd. merely because the respondent No.1 is the director/ shareholder of M/s. Brawn Pharmaceuticals Ltd. xi. The amount to be paid by the late claimant to M/s. Brawn Pharmaceuticals Ltd. by or before August ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ment of the amount was to be finished within a maximum period of 8 months from date of execution of agreement. 38. It is submitted by the petitioners in the legal notice dated December 31, 2004 which was issued by M/s. Brawn Pharmaceuticals Ltd., through the respondent No.1 seeking certain amounts from the petitioners, the emphasis was made on the obligations of the petitioners. It is contended that a reply dated February 22, 2005 was given to abovementioned legal notice and the liability was denied by the petitioners. 39. It is argued by the petitioners that not only did the respondent No.1 fail to fulfil its obligation under the Supplementary MoU but rather he started filing vexatious criminal proceedings against the late Claimant and Mohit Gupta, respondent No.2; and that a legal notice under Section 11 of the Act of 1996 dated June 08, 2006 was issued to the respondent No.1 seeking his consent for appointment of Justice R.C. Chopra (Retd.) as the Sole Arbitrator. The petitioners state that neither any reply was given to the legal notice nor did the respondent No.1 make any request for appointment of an arbitrator furthermore respondent No.1 did not give any consent to ini....
X X X X Extracts X X X X
X X X X Extracts X X X X
....as sought that the respondent No.1 was to write a letter to M/s. Neopharma seeking the release of amount and to deposit the same in any branch of Punjab National Bank under the direct control of the learned Arbitrator. The petitioners have stated that this application was opposed by the respondent No.1 and it is the case of the petitioners that no adjudication was done on this application and further that the contents of the application were sufficient to allow the prayer of the petitioner. It is the contention of petitioners that the money is still lying at Angola and for want of cooperation in the nature of personal obedience, the respondent No.1 was liable to suffer the Award. It is also urged, that, the award of counter-claim in favour of respondent No.1 is unsustainable, and contrary to the Supplementary MoU. Thus the impugned award be set aside and the petitioners be awarded the claimed amount with interest. 44. On the other hand, learned counsel for the respondents justifies the Award. According to him, the learned Arbitrator has rightly, on an interpretation of the Supplementary MoU, allowed the counter-claim in favour of the respondent No.1 and the same should not be di....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ayable to M/s. Brawn Pharmaceuticals Ltd. I reproduce the same as under:- "19. Thus the claimant No.1 (Since deceased) having failed to realize the said amount from M/s. Neopharma or M/s. Balajee of Angola had become personally liable to pay the same to M/s. Brawn Pharmaceuticals Ltd, a company owned by the respondent. By virtue of the M.O.U dated 01.12.2003, Mr. Pawan Kumar Gupta was bound to arrange remittance within 8 months from 01.12.2003. Therefore Limitation of three years started w.e.f. 01.08.2004 (8month after 01.12.2003) which expired on 31.07.2007." 49. If that be so, the conclusion arrived at by the learned Arbitrator in favour of the respondent No.1 cannot be justified and to that extent the counter claim awarded by the learned Arbitrator in favour of the respondent No.1 need to be set aside. This I say so because M/s. Brawn Pharmaceuticals Ltd. is a separate entity in the eyes of law, whereas the respondent No.1 herein is only a Director of the Company and as a Director, he is different from the entity called M/s. Brawn Pharmaceuticals Ltd. The benefit under the Supplementary MoU could only flow to the entity M/s. Brawn Pharmaceuticals Ltd. In the absence ....