TaxTMI 
TaxTMI 
2020 (9) TMI 1322
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....Arbitrator. 2. With consent of parties, who have been heard over several days, this judgement disposes of the appeal of the appellant. Facts Undisputed Facts 3. Anand Gupta, Rajesh Gupta and Dinesh Gupta are brothers, Anand Gupta being elder to Rajesh Gupta, who is elder to Dinesh Gupta. Dinesh Gupta is Appellant No. 1, and Anand Gupta is Respondent No. 1, in these proceedings. Rajesh Gupta has not been impleaded as a party. 4. Dinesh Gupta, Anand Gupta and Rajesh Gupta headed three groups of a joint family, referred to, in the impugned order, by the acronyms 'DGG', 'AGG' and 'RGG', respectively. A fourth group, namely the Bechu Singh Group ('BSG') was also a party before the learned Sole Arbitrator. For ease of reference, this judgement uses the same acronyms. 5. The appellants, in this appeal, are Dinesh Gupta, his wife Shivani Gupta and his son Shreyansh Gupta, as Appellants No. 1, 3 and 2, and the various Companies constituting part of DGG, as Appellants No. 4 to 19. Respondents No. 2, 3 and 4 are the son, wife and daughter of Respondent No. 1 Anand Gupta, Respondent No. 5 is the HUF of the respondents and Respondents Nos. 6 to 12 are Companies which, together....
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....g in the Companies vested in Rajesh Gupta and in Rajesh Gupta and Associates is Annexed herewith as Annexure-G. 8. The above said settlement is binding on the parties, on companies/entities vested in the parties as well as family members and associates of the parties. None of the parties shall challenge the terms of the settlement in any court, authority etc. 9. The cross holdings shall be mutually transferred between the parties on the basis of vesting of companies as detailed above and in a manner and at valuations which will lead to the entire capital distributed 50:50 between both groups detailed as above A and B. 10. The parties agreed that the tax will be borne respectively by the respective parties as per Annexure- A & B. However, taxes pertaining to claims as per Annexure E & F as list as per Annexure H shall be borne by the respective beneficiary. 11. The parties shall cooperate with each other to implement the terms of this settlement. 12. That more than 100 Crores worth of actionable claims were held in excess by Dinesh Group which is to be reimbursed to Rajesh Group if received. Specific irrevocable resolutions of companies w....
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....s, between Rajesh Gupta and Dinesh Gupta, the former wrote, to the latter, on 10th January, 2018, alleging that Dinesh Gupta was illegally trying to encash mutual funds of BDR, which, as per the Family Settlements, were vested in Rajesh Gupta. Resultantly, it was alleged that Dinesh Gupta was liable to reimburse, to Rajesh Gupta, an amount of Rs. 22,44,85,000/-. Dinesh Gupta was also called upon to furnish resolutions for pursuing actionable claims of companies, which vested in RGG. The communication also requested that a reputed accounting/auditing firm (the names of KPMG and PricewaterhouseCoopers (PwC) were suggested), be appointed to resolve the disputes between RGG and DGG. 13.2 DGG responded, on 12th January, 2018, asserting that the Mutual Funds in issue were in the personal name of Dinesh Gupta, and that Rajesh Gupta was merely the second holder therein. It was further asserted that the investments, in the said Mutual Funds, had been made by Dinesh Gupta from his personal savings. DGG, therefore, denied any monetary liability towards RGG, but assented to the appointment of KPMG, to settle the disputes between RGG and DGG. 13.3 On 19th January, 2018, RGG sent requisiti....
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....h Gupta, on behalf of DGG, had transferred the said moneys into the personal account of DGG, thereby misappropriating the said amount. The communication, therefore, required the said amount to be transferred back to AGG. 14.2 On 12th February, 2018, Anand Gupta wrote to BDR, Dinesh Gupta and Shreyansh Gupta, requiring them to repay, to Anand Gupta, a loan of Rs. 77,48,870/-, advanced by Anand Gupta, for investment in real estate projects and repayable on demand. The notice was predicated on the allegation that Dinesh Gupta and Shreyansh Gupta had committed various frauds, with which the present petition is not really concerned. 14.3 On 16 February, 2018, Sanchit Gupta issued a requisition, under Section 100 (2) of the Companies Act, in respect of Renu Promoters. Sanchit Gupta asserted his authority to issue the said requisition, as he held 50% of the total paid-up equity share capital in Renu Promoters. Alleging that Dinesh Gupta had mismanaged the affairs of Renu Promoters and had, thereby, rendered himself incapable of continuing as Director of the said Company and liable to be removed under Section 169 of the Companies Act, the requisition sought convening of an EGM for th....
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...., an interim order was passed restraining defendant No. 2 from giving effect to the notice dated 16.02.2018 issued under Section 100 of the Companies Act. 54. However, the above interim order shall continue to operate during pendency of the accompanying suit provided the plaintiff does the following acts within six weeks from today: - (i) He will pay to Mr. Rajesh Gupta a sum of Rs. 11.28 crores plus Rs.5.28 crores which he is seeking to withhold on his own interpretation of the family settlement. This amount would be in lieu of the redemption of mutual funds held by BDR Developers and Builders Private Limited. This would also be subject to further orders that may be passed by the court. (ii) The plaintiff will ensure resolution of the Board of Directors of the companies vested in Dinesh Gupta Group be given in favour of Mr. Rajesh Gupta to contest/pursue the case of actionable claims pertaining to the said companies/actionable claims have been given to the Rajesh Gupta Group. This is subject to further orders the court may pass. (iii) Plaintiff will also pass a resolution of the Board of Directors in favour of Rajesh Gupta of Companies which hav....
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....of the Arbitration and Conciliation Act, 1996 before the learned Arbitrator. Ordered accordingly. The learned Arbitrator shall be free to pass orders under Section 17 of the Arbitration and Conciliation Act, 1996 after hearing the parties, uninfluenced either by the impugned order dated 16.11.2018 passed by a learned Single Judge, or by the order dated 14.1.2019 passed by the Division Bench. The impugned order dated 16.11.2018 passed by the learned Single Judge and the order dated 14.1.2019 shall merge in the orders that may be passed by the Ld. Arbitrator." Proceedings before the learned Sole Arbitrator, and the passing of the impugned Order dated 18th February, 2020 18. Before the learned Sole Arbitrator, Anand Gupta/AGG filed two counter-claims. 19. Counter-claim by Anand Gupta/AGG related to Mutual Funds, claiming a total of Rs. 19,55,00,000/-: 19.1 This counter claim (hereinafter referred to as "the Mutual Funds counter-claim", for the sake of convenience) was preferred by Anand Gupta (HUF) and Sanchit Gupta, representing, in essence, the interests of AGG. It was contended, in the counter-claim, that, on 30th November, 2017 and 4th December, 2017, the coun....
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...., without paying the agreed consideration therefor. Emphasising the fact that they were not party to the purported Family Settlements between DGG and RGG, the counter-claimants asserted their right to be paid the agreed consideration, for transfer of the aforesaid equity shares of BDR, along with interest. 20.2 The counter-claim, therefore, prayed that DGG be directed to pay Rs. 19,02,74,000/- to Anand Gupta, Rs. 21,07,24,000/- to Sanchit Gupta, Rs. 4,81,20,000/- to Meena Gupta and Rs. 8,81,20,000/- to Aashna Gupta, along with interest @ 18% p.a. Fresh applications, under Section 17, preferred before the learned Sole Arbitrator 21. Four fresh applications, under Section 17 of the 1996 Act, were preferred, before the learned Sole Arbitrator. Of these, one was preferred by DGG and three were preferred by AGG. 22. Fresh application, under Section 17, preferred before the learned Sole Arbitrator by DGG, seeking implementation of the Family Settlements: 22.1 Alleging that, while it had itself implemented the covenants of the Family Settlements "to an extent of more than eighty percent", RGG had implemented the said covenants only to the extent of thirty percent, and that ....
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.... the sake of convenience, they would be referred to, hereinafter, as the first, second and third Section 17 applications, respectively. 23.2 The first Section 17 application was filed by Sanchit Gupta, purportedly for protection of the rights and interests of shareholders in Renu Promoters, against the acts of Dinesh Gupta and Shreyansh Gupta, in their capacity as Directors in the said Company. The application alleged that Dinesh Gupta and Shreyansh Gupta were "not handling the issue efficiently with the tenant of the property" of Renu Promoters, located at W-12, Greater Kailash Part II, New Delhi. Even while judgement was reserved, by the learned Single Judge in CS (OS) 100/2018, it was alleged that Dinesh Gupta and Shreyansh Gupta had sold the said property, vide Sale Deed dated 18th May, 2018, for Rs. 10,50,00,000/-. 23.3 Pointing out that AGG was not a party to the Family Settlements between DGG and RGG, and that the said Family Settlements had also been disputed by RGG on various grounds, the application asserted that, in issuing notices under Section 100 of the Companies Act, for convening of the EGM, Sanchit Gupta was merely exercising his statutory rights, in view of ....
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....cation alleged that Dinesh Gupta and Shreyansh Gupta had fraudulently transferred 26,86,190 shares, of BDR, to their DEMAT Account. The applicants, therefore, claimed that they were entitled to consideration, for the said transfer, amounting to Rs. 53,72,38,000/-. The application, therefore, sought a restraint, against Dinesh Gupta and Shreyansh Gupta, from alienating the aforesaid 26,86,190 equity shares of BDR, or from creating any third party rights in respect thereof. 24. As a result, the learned Sole Arbitrator had, before him, seven applications, under Section 17 of the 1996 Act - the three Civil Suits filed before the learned Single Judge, i.e. CS (OS) 51/2018, CS (OS) 100/2018 and CS (OS) 101/2018, one fresh application filed by Dinesh Gupta and three fresh applications filed by AGG/its members. Besides these, applications had also been preferred, under Section 17, by RGG and by Bechu Singh, with which we need not concern ourselves. The impugned Order 25. Though the grievance of the petitioner is with respect to a limited direction in the impugned Order, it is necessary to examine how the learned Sole Arbitrator has proceeded, while deciding the aforesaid applicati....
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.... were in tune with the covenants of the Family Settlements, the learned Sole Arbitrator has found that a prima facie case existed, in favour of DGG. 30. The learned Sole Arbitrator has, thereafter, referred to the decisions of the Supreme Court in Narendra Kante v. Anuradha Kante [(2010) 2 SCC 77] and M. S. Madhusoodanan v. Kerala Kaumudi (P) Ltd [(2004) 9 SCC 204], as well as of this Court in Satya Pal Gupta v. Sudhir Kumar Gupta [2016 SCC OnLine Del 2502], to observe that family settlements were enforceable even against non- signatories thereto. As BDR and Nishit fell, under the Family Settlements, to the share of DGG, the learned Sole Arbitrator held that it was not appropriate to restrain DGG from dealing with the said Companies, especially as they were in the business of real estate, and any direction, to them, to maintain status quo in respect of the immovable assets of BDR and Nishit would stifle their business. It was noticed that the said assets were the stock-in-trade of BDR and Nishit. Even so, DGG was directed to maintain status quo in respect of those immovable assets which constituted part of its capital assets, and were not part of its stock-in-trade. 31. Adver....
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.... (ii) in addition to continuation, of the order, dated 16th November, 2018 supra, passed by the learned Single Judge, the orders of restraint, passed by the learned Single Judge, in respect of the notices, under Section 100 of the Companies Act, dated 12th February, 2018, 22nd February, 2018 and 23rd February, 2018, were also continued, and (iii) the prayer for "clarification", of the direction, to DGG, to transfer the shares of Nishit by Renu Gupta to BDR, amounted to seeking a review of the impugned order, which was not permissible. Apropos the clarifications sought by AGG, the learned Sole Arbitrator only addressed the submission that, qua the impugned direction to DGG to furnish security, no time period had been stipulated. The learned Sole Arbitrator clarified that security was required to be furnished, by DGG, as directed in the impugned para 3.28 of the order dated 18th February, 2020, within four weeks, to the satisfaction of the learned Sole Arbitrator. 34. The findings of the learned Sole Arbitrator, qua the clarifications sought by RGG, are not relevant for the purposes of the present petition, and are not, therefore, being adverted to. Rival Contentio....
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....ulding had to be informed by reasons, to be contained in the order. Relief, not sought in the application under Section 17, and not pressed even during arguments before the learned Sole Arbitrator, could not have been granted. Least of all could the learned Sole Arbitrator have directed furnishing of security, by DGG, without putting DGG, in the first instance, on notice in that regard. Reliance was placed, in this context, on the judgements of the Supreme Court in Om Prakash Gupta v. Ranbir B. Goyal [(2002) 2 SCC 256] (which, according to Mr. Nayar, set out the circumstances in which relief could be moulded, none of which were satisfied in the present case) and Seshambal v. Chelur Corporation Chelur Building [(2010) 3 SCC 470]. (v) No finding of the existence of a prima facie case, in favour of AGG, had been returned by the learned Sole Arbitrator. Nor has the learned Sole Arbitrator addressed the concerns of balance of convenience and irreparable loss, which, in conjunction with the existence of a prima facie case, constituted the troika for grant of interim relief. Mr. Nayar relied, in this context, on the judgement of this Court in Intertoll ICS Cecons O & M Co. Pvt Lt....
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....at, in fact, the property at C.R. Farms had been purchased by DGG using the monies realised by liquidation of the Mutual Funds, in which AGG had invested. (vi) Besides, even on facts, it was submitted that, as the order, dated 18th March, 2019, of the Division Bench in FAO (OS) 6/2019 and FAO (OS) 18/2019, directed the said appeals to be treated as applications under Section 17, it could not be said that the learned Sole Arbitrator had exceeded his jurisdiction in directing furnishing of security by DGG. My attention was invited, in this context, to the reliefs sought in the appeals which, according to Mr. Nandrajog, were in excess of mere furnishing of security. (vii) The reliefs claimed by AGG, in its counter claims, was also relevant. The amounts claimed by AGG were in excess of Rs. 70 crores. (viii) Para 3.27 of the impugned Order clearly noted the contentions of the parties, and gave reasons for not granting the larger relief claimed by AGG. The status quo, as directed to be maintained by DGG, was also restricted to its capital assets, and did not extend to its stock-in-trade. This direction was not assailed by DGG. AGG had, in fact, sought restituti....
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....s to destroy the letter and spirit of such terms of the Family Settlement dated 02.12.2017 and 09.12.2017?" (xiv) There was nothing to indicate that the claim of Rs. 19.55 crores, by AGG, was part of the Family Settlement. Nor was there any evidence to indicate that the said amount had been gifted by AGG to DGG. The appellant, too, had not averred that this amount was shown as gift, in its Tax Returns. (xv) Inasmuch as the issue of whether AGG was, or was not, part of the Family Settlement, and was bound by the terms thereof, was yet to be determined, the direction, to DGG, to furnish security, was equitable, and did not call for interference. If, ultimately, the learned Sole Arbitrator was to reach the opinion that the Family Settlements were binding, AGG would be left high and dry. (xvi) The reliance, by the appellant, on Sections 91 and 92 of the Evidence Act, was misplaced, as these provisions applied only where a person sought to lead evidence contrary to the document to which he was a signatory. No such occasion arose in the present case. (xvii) The impugned Order had been passed at a preliminary stage, and could not be said to suffer from ....
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....the order, namely : -- (a) refusing to refer the parties to arbitration under section 8; (b) granting or refusing to grant any measure under section 9; (c) setting aside or refusing to set aside an arbitral award under section 34. (2) Appeal shall also lie to a court from an order of the arbitral tribunal-- (a) accepting the plea referred to in sub-section (2) or sub-section (3) of section 16; or (b) granting or refusing to grant an interim measure under section 17. (3) No second appeal shall lie from an order passed in appeal under this section, but nothing in this section shall affect or take away any right to appeal to the Supreme Court." 40. Oftentimes, the question arises as to whether the jurisdiction of the High Court, under Section 37, is subject to the same circumscriptions as formed by its jurisdiction under Section 34. Mr. Nayar had submitted, before me, that it would be folly to restrict the jurisdiction of the High Court, under Section 37, by the principles which apply to Section 34. He had sought to emphasise that the jurisdiction vested in the Court by Section 37 was appellate, unlike Section 34. Appel....
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....hat the jurisdiction of the Court, over the interlocutory decision of the arbitrator, would be much wider than the jurisdiction against the final award. Though, jurisprudentially, perhaps, such a position may not be objectionable, it does appear incongruous, and opposed to the well settled principle that the scope of interference with interim orders, is, ordinarily, much more restricted than the scope of interference with the final judgement. 44. Here, yet another peculiar dispensation, in the 1996 Act, apropos the scope of interference with the decision of the arbitrator, manifests itself. The proviso to Section 36 (3) ordains that the Court, while considering an application for grant of stay of a final arbitral award for payment of money, shall "have due regard to the provisions for grant of stay of a decree under the provisions of the Code of Civil Procedure, 1908". By reference, therefore, Order 41 Rule 5 of the CPC, which deals with stay, by the appellate court, of original decrees, stands incorporated into Section 36(3) of the 1996 Act. Though, therefore, the final arbitral award is not made amenable to appeal, by the 1996 Act, any prayer for stay of the arbitral award, th....
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....nt of foreign arbitral awards and to define the law relating to conciliation, taking into account the said UNCITRAL Model Law and Rules. 4. The main objectives of the Bill are as under:- a. to comprehensively cover international and commercial arbitration and conciliation as also domestic arbitration and conciliation; b. to make provision for an arbitral procedure which is fair, efficient and capable of meeting the needs of the specific arbitration; c. to provide that the arbitral tribunal gives reasons for its arbitral award; d. to ensure that the arbitral tribunal remains within the limits of its jurisdiction; e. to minimize the supervisory role of the courts in the arbitral process; f. to permit an arbitral tribunal to use mediation, conciliation or other procedure during the arbitral proceedings to encourage settlement of disputes; g. to provide that every final arbitral award is enforced in the same manner as if it were a decree of the court; h. to provide a settlement agreement reached by the parties as a result of conciliation proceedings will have the same status and effect as an arbitral award....
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....ppeal" as employed in Section 7 of the Interest on Delayed Payments to Small Scale and Ancillary Undertakings Act, 1993, the Supreme Court held that , "if ... the meaning of "appeal" is ambiguous, the interpretation that advances the object and purpose of the legislation, shall be accepted." Purposive interpretation, as has been noticed in Shailesh Dhairyawan v. Mohan Balkrishna Lulla [(2016) 3 SCC 619] and Richa Mishra v. State of Chhattisgarh [(2016) 3 SCC 619], has, over time, replaced the principle of "plain reading" as the golden rule, for interpreting statutory instruments. 49. In my opinion, this principle has to guide, strongly, the approach of this Court, while dealing with a challenge such as the present, which is directed against an order which, at an interlocutory stage, merely directing furnishing of security, by one of the parties to the dispute. The power, of the learned Sole Arbitrator, to direct furnishing of security, is not under question; indeed, in view of sub- clause (b) of Section 17 (1) (ii) of the 1996 Act, it cannot. The arbitrator is, under the said sub-clause, entirely within his jurisdiction in securing the amount in dispute in the arbitration. Wheth....
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.... it was held, in McDermott International Inc. v. Burn Standard Co. Ltd [(2006) 11 SCC 181], thus: "The 1996 Act makes provision for the supervisory role of courts, for the review of the arbitral award only to ensure fairness. Intervention of the court is envisaged in few circumstances only, like, in case of fraud or bias by the arbitrators, violation of natural justice, etc. the court cannot correct errors of the arbitrators. It can only quash the award leaving the parties free to begin the arbitration again if it is desired. So, the scheme of the provision aims at keeping the supervisory role of the court at minimum level and this can be justified as the parties to the agreement make a conscious decision to exclude the court's jurisdiction by opting for arbitration as they prefer the expediency and finality offered by it." (Emphasis supplied) Though the above exposition of the law is in the context of Section 34, the principles enunciated therein embody the general philosophy underlying the 1996 Act. The italicised words, towards the conclusion of the paragraph, especially, would apply, with equal force, to challenges to interlocutory orders of arbitral tribunals, u....
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....tion 17. Section 17(1), for its part, reads thus: "17. Interim measures ordered by arbitral tribunal. - (1) A party may, during the arbitral proceedings, apply to the arbitral tribunal - (i) for the appointment of a guardian for minor or person of unsound mind for the purposes of arbitral proceedings; or (ii) for an interim measure of protection in respect of any of the following matters, namely: - (a) the preservation, interim custody or sale of any goods which are the subject-matter of the arbitration agreement; (b) securing the amount in dispute in the arbitration; (c) the detention, preservation or inspection of any property or thing which is the subject-matter of the dispute in arbitration, or as to which any question may arise therein and authorizing for any of the aforesaid purposes any person to enter upon any land or building in the possession of any party, authorizing any samples to be taken, or any observation to be made, or experiment to be tried, which may be necessary or expedient for the purpose of obtaining full information or evidence; (d) interim injunction or the appointment of a receiver; ....
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.... Act. There is also the principle that when a power is conferred under a special statute and it is conferred on an ordinary court of the land, without laying down any special condition for exercise of that power, the general rules of procedure of that court would apply. The Act does not prima facie purport to keep out the provisions of the Specific Relief Act from consideration. ... we may indicate that we are prima facie inclined to the view that exercise of power under Section 9 of the Act must be based on well-recognized principles governing the grant of interim injunctions and other orders of interim protection or the appointment of a Receiver." (Emphasis supplied) In Adhunik Steels Ltd [(2007) 7 SCC 125], P.K. Balasubramanyan, J. (who had also authored Arvind Constructions Co. (P) Ltd [(2007) 6 SCC 798]), after a somewhat longer and more detailed discussion, reiterated the position that "it would not be correct to say that the power under Section 9 of the Act is totally independent of the well known principles governing the grant of interim injunction that generally governed the courts in this connection". 57. The principles governing Order XXXIX of the CPC have, ther....
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....erred on an ordinary court of the land, without laying down any special condition for exercise of that power, the general rules of procedure of that court would apply. The Act does not prima facie purport to keep out the provisions of the Specific Relief Act from consideration. No doubt, a view that exercise of power under Section 9 of the Act is not controlled by the Specific Relief Act has been taken by the Madhya Pradesh High Court. The power under Section 9 of the Act is not controlled by Order XVIII Rule 5 of the Code of Civil Procedure is a view taken by the High Court of Bombay. But, how far these decisions are correct, requires to be considered in an appropriate case. Suffice it to say that on the basis of the submissions made in this case, we are not inclined to answer that question finally. But, we may indicate that we are prima facie inclined to the view that exercise of power under Section 9 of the Act must be based on well recognized principles governing the grant of interim injunctions and other orders of interim protection or the appointment of a receiver." 26. Interestingly, in a previous decision, Firm Ashok Traders v. Gurumukh Das Saluja (2004) 3 SCC 155,....
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....ce is whether the granting of the injunction would carry that higher risk of injustice which is normally associated with the grant of a mandatory injunction. The second point is that in cases in which there can be no dispute about the use of the term 'mandatory' to describe the injunction, the same question of substance will determine whether the case is 'normal' and therefore within the guideline or 'exceptional' and therefore requiring special treatment. If it appears to the court that, exceptionally, the case is one in which withholding a mandatory interlocutory injunction would in fact carry a greater risk of injustice than granting it even though the court does not feel a 'high degree of assurance' about the plaintiff's chances of establishing his right, there cannot be any rational basis for withholding the injunction." " (Emphasis supplied) 58.3 The Special Leave Petition, preferred against Ajay Singh32, was dismissed, by the Supreme Court on 28th July, 2017, albeit without going into merits, as the order was interlocutory in nature. 58.4 Steel authority of India Ltd31 and Ajay Singh32 were, however, both decisions which arose under Section 17 of the 1996 Act, a....
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.... It is also significant that the decisions cited by both parties seek to interpret Section 17 as it stood prior to its amendment. ***** 35. It is also clear from the impugned order that the AT failed to come to any conclusion even prima facie that Lanco was about to dispose of or remove whole or part of its assets from the local limits of the AT which was one of the contentions warranting exercise of power under Order XXXVIII Rule 5 CPC the underlying principle of which, as explained in the decisions examined hereinbefore, apply to Section 17 of the Act as it stood prior to the amendment with effect from 23rd October, 2015." (Emphasis supplied) 58.5 The Special Leave Petition, preferred by M/s Hindustan Construction Co. Ltd against the aforesaid judgement of the learned Single Judge in Lanco Infratech [234 (2016) DLT 175] was dismissed, by the Supreme Court, on 30th January, 2017, holding that "no ground for interference (was) made out". 58.6 The resultant legal position is that, while the applicability of Order XXXVIII Rule 5, CPC, to the amended Section 17(1)(ii)(b) of the 1996 Act, may be seriously questionable, even under the pre- amended Section 17, the pr....
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....iscretionary exercise, intended to balance the equities. The scope of interference, in appeal, with a discretionary order passed by a judicial forum, stands authoritatively delineated in the following passages, from Wander Ltd v. Antox India P Ltd [1990 Supp SCC 727]: "13. On a consideration of the matter, we are afraid, the appellate bench fell into error on two important propositions. The first is a misdirection in regard to the very scope and nature of the appeals before it and the limitations on the powers of the appellate court to substitute its own discretion in an appeal preferred against a discretionary order. The second pertains to the infirmities in the ratiocination as to the quality of Antox's alleged user of the trademark on which the passing-off action is founded. We shall deal with these two separately. 14. The appeals before the Division Bench were against the exercise of discretion by the Single Judge. In such appeals, the appellate court will not interfere with the exercise of discretion of the court of first instance and substitute its own discretion except where the discretion has been shown to have been exercised arbitrarily, or capriciously o....
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.... that sought by the respondents 62.1 In order to appreciate this submission, it is necessary, in the first instance, to set out the reliefs sought by AGG, in its applications under Section 17, which stand adjudicated by the impugned order. 62.2 The order, dated 18th March, 2019, of the Division Bench of this Court in FAO (OS) 6/2019 and FAO (OS) 18/2019, directed that the said appeals be treated as applications under Section 17. Additionally, parties were granted liberty to file fresh applications, under Section 17, before the learned Sole Arbitrator. Acting on the liberty thus granted, AGG filed three fresh applications, under Section 17, before the learned Sole Arbitrator. In all, therefore, there were four applications, under Section 17, of AGG, before the learned Sole Arbitrator, i.e. FAO (OS) 18/2019 and the three fresh applications. 62.3 The prayer clauses, in FAO (OS) 18/2019, and in the three fresh applications filed by AGG before the learned Sole Arbitrator, may be reproduced, to the extent relevant, thus: FAO (OS) 18/2019 "It is, therefore, most respectfully prayed that this Hon'ble Court may kindly be pleased to allow the present Appeal: - ....
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....No. 2 until the Rs. 19,55,00,000 (Rupees Nineteen Crores and Fifty-five Lakhs only) is paid by the Claimant No. 2 to the Counter-Claimant Nos. 2 and 5; c. Restrain Claimant No. 2 from enjoying any benefit(s) including exercising of voting rights accruing to the Claimant No. 2 out of the shares held in C. R. Farms Pvt. Ltd. until the Rs. 19,55,00,000 (Rupees Nineteen Crores and Fifty-five Lakhs only) is paid by the Claimant No. 2 to the Counter-Claimant Nos. 2 and 5. d. Restrain Claimant No. 2 from transferring/liquidating any mutual fund(s) which has been acquired from the fraudulently transferred amount until the Rs. 19,55,00,000 (Rupees Nineteen Crores and Fifty-five Lakhs only) is paid by the Claimant No. 2 to the Counter-Claimant Nos. 2 and 5." (Claimant No. 2 and 5 were Shreyansh Gupta and Dinesh Gupta, and Counter-Claimants Nos. 2 and 5 were Anand Gupta and M/s. Anand Gupta HUF, respectively.) The Third Section 17 application "It is therefore, most respectfully prayed that the Ld. Arbitrator may be pleased to: - a. Restrain the Claimants from alienating the 26,86,190 (Twenty-Six Lakh Eighty-Six Thousand One Hundred And Ninety) equity ....
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....d, to the Tribunal." 62.5 The notices, dated 12th February, 2018, 16th February, 2018, 22nd February, 2018 and 23rd February, 2018, issued by AGG/its members, alleged (i) misconduct, on the part of Dinesh Gupta and Shreyansh Gupta, in the affairs of BDR, (ii) mismanagement in the affairs of Renu Promoters, (iii) fraudulent transfer of shares, held by AGG in BDR, to the DEMAT Account of DGG, and (iv) fraudulent misappropriation, by DGG, of the amounts earned by liquidation of Mutual Funds, held by AGG. Premised on these allegations, AGG sought, vide the said notices/communications, (i) repayment, by DGG, of the loans advanced by AGG and lying in the accounts of BDR, totaling Rs. 81,31,725/-, (ii) convening of an EGM of Renu Promoters, to remove Dinesh Gupta and Shivani Gupta from the Directorship of the said Company, (iii) repayment, to AGG, of Rs. 19,55,00,000/-, earned by liquidation of the Mutual Funds held by AGG and, allegedly, fraudulently misappropriated by Dinesh Gupta and Shreyans Gupta and (iv) payment, by DGG, of Rs. 53,72,38,000/-, as the price for 26,86,190 equity shares of BDR, held by AGG/its members and, allegedly, fraudulently transferred by DGG to its DEMAT Acco....
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....s. 53,72,38,000/-. AGG, therefore, sought a restraint, against DGG, from alienating the equity shares in BDR, held by AGG and allegedly misappropriated by DGG, as well as payment of the amount of Rs. 53,72,38,000/-, accompanied by an order of restraint, against DGG, from alienating the aforesaid 26,86,190 equity shares of BDR. 62.8 The learned Sole Arbitrator did not grant any of the reliefs, as sought by AGG, opining that, as DGG was engaged in the real estate business, grant of the said reliefs would result in severe financial hardship to it. No restraint, on DGG dealing with the affairs of any of these Companies, was, therefore, imposed by the learned Sole Arbitrator. Neither was any direction issued, to pay, or repay, any amount to AGG, as sought by it. All that the learned Sole Arbitrator did, in the circumstances, was, having rejected the prayers of AGG, and continued the interlocutory injunction, on the notices issued by AGG, as granted by the learned Single Judge in his order dated 16th November, 2018, to secure the claim of AGG, directed DGG to furnish Bank Guarantee for the said amount. 62.9 There is substance in the submission, of Mr. Nandrajog, that the concluding....
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....xercise of discretion by the arbitrator, what may seem, to the Court, to be a "more appropriate" manner of such exercise. In other words, even if the Court were to feel that the equities could have been better balanced, by some arrangement other than that which has appealed to the discretion of the Arbitral Tribunal, that would not constitute a legitimate basis, for interfering with the exercise of such discretion. 62.11 The impugned Order of the learned Sole Arbitrator does not grant any interlocutory mandatory injunction. Nor has the learned Sole Arbitrator secured, stricto sensu, the amount, or property, in dispute in the arbitral proceedings, by directing deposit, thereof, by the appellant/DGG. He has merely directed furnishing of a Bank Guarantee, after an examination of the competing stands of the parties before him, to ensure that the balancing claims are secured. Directing securing of the amount involved in the arbitration, is a power statutorily invested in the learned Sole Arbitrator, by Section 17(1)(ii)(b). No excess of jurisdiction can, therefore, be imputed to the learned Sole Arbitrator, in directing furnishing of security by DGG. No want of proper application of ....
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....is, in my opinion, out of place. Following on the said observation, the learned Sole Arbitrator proceeded to reject the prayer, of AGG, for a direction, to DGG not to deal with the properties of BDR and Nishit, limiting the relief, in that regard, to maintenance of status quo in relation to immovable assets constituting the capital assets of the said two companies. The learned Sole Arbitrator, thereby, acted on the basis of his finding that DGG had made out a prima facie case. The direction, to DGG, to furnish security, for the amount in dispute in the arbitral proceedings, does not militate, in any manner, against the said finding. At the cost of repetition, it must be emphasised that the circumstances, and rationale, behind the said direction, are required to be appreciated. Para-3.28 of the impugned Order, though brief, is sufficiently evocative in that regard. The learned Sole Arbitrator has, initially, noted that, in the Section 17 applications filed by it, AGG had sought restitution of the amounts remitted by it - which, according to AGG, were unlawfully and illegally appropriated, by DGG, into its accounts. The learned Sole Arbitrator, thereafter, goes on to observe that, "f....
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....ued, to DGG, not to deal with the finances of Renu Promoters, C.R. Farms or BDR. No direction, to secure the amounts credited to the accounts of DGG, without any consideration having been paid to AGG therefor, was issued. In the circumstances, I am of the opinion that DGG really has no cause to complain against the direction to furnish security, which, as the learned Sole Arbitrator himself observes, was "in order to secure the interest of AGG, in the event AGG ultimately succeeds". This is precisely what Section 17(1)(ii)(b) contemplates. 63.3 The amounts/shares in question having shifted base, from the accounts of AGG to those of DGG, without a farthing by way of consideration, and with no written document, evidencing intent, on the part of AGG, to such transfer gratis, no exception can be taken to the decision, of the learned Sole Arbitrator, to secure the amounts, to protect the interests of AGG and, thereby, balance the equities. 64. Re. Order XXXVIII Rule 5, CPC 64.1 This judgement has, adequately, dealt with Order XXXVIII Rule 5, CPC, in the backdrop of the impugned direction, hereinabove. Mr. Nayar has, however, placed reliance on several decisions, and, in fairnes....
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.... In this context, it was held, in para 55 of the report, that "even if a prima facie case is made out by the respondent No. 1 as to the claim for put amount, the same will not entitle them to seek an interim measure of protection by restraining the appellants from dealing with their assets unless it is also established that the appellants are intending to defeat the right of the respondent No. 1 to enforce the arbitral award". In these circumstances, the Division Bench opined that the learned Single Judge erred in issuing orders of prohibitory injunction. The order of the learned Single Judge, which was under challenge before the Division Bench in C. V. Rao [218 (2015) DLT 200 (DB)], and the impugned direction, as issued by the learned Sole Arbitrator are, therefore, as alike as chalk and cheese. 64.5 Before parting with the point, I deem it appropriate to observe that reliance, in a case such as the present, with precedents dealing with orders of interlocutory prohibitory injunctions, would be entirely misguided. Interim prohibitory injunctions, as a category of relief, are a specie sui generis. They follow a strict regimen, chalked out, by the Supreme Court, in a series of aut....
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....interregnum, the respondent would attempt to obstruct satisfaction of a decree which might be awarded in the petitioner's favour. No doubt, there is an observation, in para-55 of the judgement, that, "for grant of the relief as prayed for by the petitioner, the petitioner has to show that; (a) it has a prima facie case and balance of convenience in its favour and shall succeed in the arbitration proceedings and (b) that the respondent is acting in a manner as to defeat the realisation of the future award that may ultimately be passed". Besides the fact that the said decision does not consider Lanco Infratech [234 (2016) DLT 175], or the difference, if any, which the amendment to Section 17, would make to the applicability of Order XXXVIII Rule 5, CPC, thereto (no such case having, apparently, been urged before the learned Single Judge, before whom Lanco Infratech [234 (2016) DLT 175] was not cited by either party), the facts, before the learned Single Judge in that case are so markedly different from those in the present, as to render the decision in Goodwill Non-Woven (P) Ltd [2020 SCC Online Del 631] an extremely unsafe precedent, while examining the present controversy. 67. E....
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....oodwill Non- Woven (P) Ltd [2020 SCC Online Del 631], and the reliance, by Mr. Nayar, on the said decision, therefore, fails to impress. 69. BMW India Private Limited [2019 (5) Arb LR 118 (Del)], similarly, was a case which arose under Section 9 of the 1996 Act. This decision is, in para-29 of the report (in SCC OnLine), observed that, while the Court should not ignore the principles all the well-known guidelines, governing Order 38 Rule 5 of the CPC, while exercising jurisdiction under Section 9(1)(ii)(b), it should not be unduly bound by the text thereof. Observing, further, that an order for securing the amount, prior to an arbitral award, was comparable to the nature of relief provided under Order 38 Rule 5, the learned Single Judge of this Court has, in the said decision, observed that, before directing furnishing of security, the Court is required to be satisfied regarding the existence of a prima facie case in favour of the applicant, and the possibility of the opposite party defeating the realisation of the future award that may ultimately be passed, were such security not directed. Direction for furnishing of security cannot, in the opinion of this Court in the said cas....
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....rred to the "reasons given above", as constituting, inter alia, the basis for this decision. Having, for the said reasons, rejected the relief sought by AGG, which was undoubtedly much more drastic, the learned Sole Arbitrator restricted his order to a direction, to DGG, to secure the amount in dispute, by furnishing suitable security. A holistic reading of the order reveals that the balance of convenience was kept in mind, while passing the impugned direction. No patent illegality can, in my view, be discerned, in the impugned decision. Conclusion 71. This Court, while exercising appellate jurisdiction, under Section 37 (2) of the 1996 Act, over the interim order of the learned Sole Arbitrator, is not expected, or even required, to delve deep into the facts of the case. Nor is it expected to substitute its own discretion, for the discretion of the learned Sole Arbitrator. If the exercise of discretion, by the learned Sole Arbitrator, suffers from patent illegality, or is otherwise unconscionable in law or on facts, interference may be justified; never otherwise. 72. Judicial intervention, with arbitral proceedings, has necessarily to be reduced to a bare minimum, under th....