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Luxury Lifeline, through its Proprietor Rahul v/s Sun Petpack Jabalpur Pvt. Ltd., through its Directors & Another


Company & Directors' Information:- SUN PETPACK JABALPUR PRIVATE LIMITED [Active] CIN = U25209MP2000PTC014124

Company & Directors' Information:- PETPACK PRIVATE LIMITED [Dissolved] CIN = U24294TN1986PTC012607

Company & Directors' Information:- SUN PVT LTD [Active] CIN = U24246RJ1984PTC003093

Company & Directors' Information:- G SUN INDIA PRIVATE LIMITED [Strike Off] CIN = U74899DL1995PTC071425

Company & Directors' Information:- 5 S LUXURY PRIVATE LIMITED [Active] CIN = U72900KL2021PTC067114

Company & Directors' Information:- SUN INDIA CORPORATION PRIVATE LIMITED [Strike Off] CIN = U65991TN1943PTC000994

    Writ Petition No. 100 of 2018

    Decided On, 10 April 2019

    At, In the High Court of Bombay at Nagpur

    By, THE HONOURABLE MR. JUSTICE MANISH PITALE

    For the Petitioner: H.R. Gadhiya, Counsel. For the Respondents: R1, Rajesh Shah, Counsel.



Judgment Text

1. Heard.

2. Rule. Rule made returnable forthwith. The writ petition is heard finally, as respondent No.2 though served with notice of final disposal, remained absent.

3. By this writ petition, the petitioner is challenging order dated 18/12/2017 passed by the Court of Principal District Judge, Nagpur, whereby an application for intervention filed by the petitioner in an application filed by respondent No.2 under section 34 of the Arbitration and Conciliation Act, 1996 (hereinafter referred to as “Act of 1996”), has been rejected.

4. Respondent No.1 had initiated an arbitration proceeding against respondent No.2 under the provisions of Micro, Small and Medium Enterprises Development Act, 2006 (hereinafter referred to as “MSMED Act”), particularly section 18 thereof by making a reference to the dispute between them to the Micro and Small Enterprises Facilitation Council. As per the said provision, the provisions of the Act of 1996 applied to such a proceeding initiated upon reference before the said Facilitation Council. On 12/08/2013 the said Facilitation Council pronounced the arbitral award against respondent No.2. It was an ex parte award and respondent No.1 invoked Rule 5 of the Madhya Pradesh Micro and Small Enterprises Facilitation Council Rules 2006, for execution of the said arbitral award dated 12/08/2013. Under the said Rules, the Tahsildar is empowered to execute the award passed by the Facilitation Council. Accordingly, in the present case, the Tahsildar, Hingna, passed an order on 07/03/2017, sealing factory and industry existing on land of respondent No.2, in pursuance of the said award.

5. According to the petitioner, although the land on which the aforesaid plant and machinery was located belonged to respondent No.2, by an agreement of transfer dated 05/03/2013, respondent No.2 had transferred the plant and machinery to the petitioner. It is relevant that the Director of respondent No.2 is the uncle of the proprietor of the petitioner. It was the claim of the petitioner that while the arbitral award could be executed against the land belonging to respondent No.2, on which the plant and machinery/industry of the petitioner was located, but it could not be executed against the plant and machinery. On this basis, the petitioner filed Writ Petition No.1762 of 2017, before this Court to challenge the aforesaid order of the Tahsildar dated 07/03/2017. Although initially status quo was granted by the Division Bench of this Court, and the petitioner was directed to deposit amount of Rs.6,00,000/- to show its bona fide, by order dated 02/08/2017, the writ petition was disposed of with liberty to the petitioner to exhaust remedy under the Act of 1996. All contentions of the parties were left open. Respondent No.2 had joined the petitioner in the said writ petition as a petitioner.

6. It is relevant that respondent No.2 had approached the District Court, Nagpur by preferring an application under section 34 of the Act of 1996 for setting aside arbitral award dated 12/08/2013. The said application was filed by respondent No.2 on 21/12/2016. Since it was an application challenging award passed by the Facilitation Council under section 18 of the MSMED Act, the said application for setting aside the award was nothing but an application under section 19 of the MSMED Act, treated as an application under section 34 of the Act of 1996. The said section 19 of the MSMED Act mandates that no application under the said provision shall be entertained by any Court unless the applicant deposits 75% of the amount in terms of the award.

7. In view of order dated 02/08/2017 passed by the Division Bench of this Court, the petitioner moved an application before the District Court (Exhibit14), for seeking intervention in the aforesaid application filed by respondent No.2 to challenge the award. Respondent No.1 resisted the said application, contending that the application filed by respondent No.2 under section 19 of the MSMED Act read with section 34 of the Act of 1996, itself was not maintainable due to noncompliance with the mandatory requirement of section 19 of the MSMED Act and also the fact that it was barred by limitation. It was contended that when the main application filed by respondent No.2 itself was not maintainable, there was no question of the petitioner being permitted to intervene in the same. It was further contended that the alleged transfer agreement dated 05/03/2013 executed between respondent No.2 and the petitioner was also denied and that there was no question of the petitioner being permitted to intervene in a proceeding under the Act of 1996, wherein the petitioner was not party to the arbitration agreement.

8. By the impugned order dated 18/12/2017, the District Court accepted the contentions raised on behalf of respondent No.1 and thereby dismissed the application filed by the petitioner at Exhibit-14.

9. Aggrieved by the same, the petitioner has filed the present writ petition. Mr. H.R.Gadhia, learned counsel appearing for the petitioner, submitted that the District Court erred in dismissing the said application for intervention filed by the petitioner, because the petitioner had a right to be heard in the pending application before the District Court under the Act of 1996, because plant and machinery belonging to it was sealed in pursuance of the award passed by the Facilitation Council and that the petitioner was certainly an affected party. According to the petitioner, although it was not party to the arbitration agreement, it had a right to be heard and the petitioner could not be left remediless, when its plant and machinery stood sealed in pursuance of an order passed by the Tahsildar as per the Madhya Pradesh Rules framed under the MSMED Act. Since the entire proceeding and the order of the Tahsildar was relatable to sections 18 and 19 of the MSMED Act, which necessarily referred to the provisions of the Act of 1996, the petitioner was an affected party and it was entitled to intervene and seek relief in the pending application before the District Court. Reliance was placed by the learned counsel for the petitioner on judgment of the Hon'ble Supreme Court in the case of Chloro Controls (I) P. Ltd. v. Severn Trent Water Purification Inc.& Ors., reported in 2013 (1) SCC 641 and judgments of this Court in the case of Housing Development and Infrastructure Ltd. v. Mumbai International Airport Private Ltd. and others, (judgment and order dated 23/08/2013 in Arbitration Petition No.902 of 2013) and order dated 22/08/2006 In Arbitration Petition No.295 of 2006 in the case of Hemant D. Shah and others v. Chittaranjan D. Shah and others.

10. On the other hand, Mr. Rajesh Shah, learned counsel appearing for respondent No.1, submitted that the order passed by the District Court was fully justified because petitioner was not a party to the arbitration agreement and, therefore, he could not be said to be entitled to intervene in the application filed by respondent No.2 before the District Court challenging the arbitral award dated 12/08/2013 issued by the Facilitation Council under the MSMED Act. Reference was made to section 2 (h) of the Act of 1996 wherein “party” means a party to an arbitration agreement. It was submitted that when the petitioner was admittedly not a party to the arbitration agreement, there was no question of permitting the petitioner to intervene in the application before the District Court. It was further submitted that respondent No.1 was denying the alleged transfer agreement dated 05/03/2013 between respondent No.2 and the petitioner, whereby respondent No.2 had transferred the plant and machinery to the petitioner. It was submitted that the Director in respondent No.2 Company was uncle of the proprietor of the petitioner and that the tactics adopted by respondent No.2 and the petitioner were nothing but an attempt to avoid satisfaction of the arbitral award passed against respondent No.2. It was further submitted that even the application pending before the District Court, filed by respondent No.2 under section 34 of the Act of 1996 for setting aside the arbitral award, was not maintainable, due to want of satisfaction of the mandatory requirement under section 19 of the MSMED Act of depositing 75% of the awarded amount. It was also pointed out that the said application was barred by limitation and that when the main application filed by respondent No.2 was itself not maintainable, there was no question of the petitioner being permitted to intervene in the same.

11. Heard learned counsel for the parties and perused the record. The main question that arises for consideration in this petition is, as to whether the petitioner can be permitted to intervene in an application filed by respondent No.2 under section 34 of the Act of 1996 for challenging an arbitral award passed by the Facilitation Council under section 18 of the MSMED Act, when such an application was necessarily an application also under section 19 of the MSMED Act. There can be no quarrel with the proposition that a “party” as defined under section 2(h) of the Act of 1996 means a party to an arbitration agreement. In the present case, the petitioner is certainly not a party to the arbitration agreement. Therefore, it cannot be said that the petitioner could claim any right under the Act of 1996 to be granted with the status of being a party to the proceedings pending before the District Court.

12. But, the contention on which emphasis has been placed by the learned counsel for the petitioner is that when it owns the plant and machinery, which has been sealed by the Tahsildar by invoking Rule 5 of the Madhya Pradesh Rules under the MSMED Act in pursuance of the arbitral award dated 12/08/2013, it is an affected party and thereby it is entitled to intervene in the proceeding pending before the District Court. The petitioner claims that respondent No.2 had transferred the plant and machinery to the petitioner by transfer agreement dated 05/03/2013.

13. In this context, the fact that the Director of respondent No.2Company is uncle of the proprietor of the petitioner assumes significance. It appears that the petitioner has entered into the fray only to assist respondent No.2 in delaying or avoiding the liability under the aforesaid arbitral award passed against respondent No.2. The record shows that respondent No.2 along with the petitioner had filed Writ Petition No.1762 of 2017 before this Court against the order dated 07/03/2017 passed by the Tahsildar. The said writ petition was disposed of by a Division Bench of this Court granting liberty to the petitioners therein to approach the District Court in the application filed by respondent No.2 under the provisions of the Act of 1996. Much emphasis was placed by the learned counsel for the petitioner on the liberty granted by the Division Bench of this Court to claim that the District Court ought to have allowed the application for intervention. But, merely because liberty was granted by the Division Bench of this Court, would not mean that the application for intervention filed by the petitioner ought to have allowed by the District Court, because such an application was required to be decided, in accordance with law.

14. A perusal of the provisions of the Act of 1996 shows that there is no case made out by the petitioner for allowing its application seeking intervention. The District Court is justified in holding that such an application could not be granted under the provisions of the Act of 1996.

15. In this context, the law laid down by the Hon'ble Supreme Court in the case of Chloro Controls (I) P.Ltd. v. Severn Trent Water Purification Inc.& Ors. (supra) cannot be of any assistance to the petitioner for the reason that in the said judgment the Hon'ble Supreme Court has held that normally, arbitration takes place between persons, who have been parties to the arbitration agreement, from the outset or the substantive contract underlining that agreement. But, it may occasionally happen that a third party, a non-signatory to the arbitration agreement could become party to the proceeding. The Hon'ble Supreme Court has considered such situations and there upon it has been concluded that the non-signatory party could be subjected to arbitration provided that the transactions in question are with group of companies, where a clear intention can be found that the parties agreed to bind non-signatory party also and that agreement between the parties were composite transactions. The Hon'ble Supreme Court has also referred to the doctrine of group of companies. In this context, it has been observed that heavy onus would lie on party claiming that despite being a non-signatory, it is required to be added as party to the proceedings under the provisions of the Act of 1996. In the present case, the petitioner clearly does not satisfy the said requirements laid down by the Hon'ble Supreme Court in the aforesaid judgment.

16. Similarly, reliance placed on judgment of this Court in the case of Housing Development and Infrastructure Limited v. Mumbai International Airport Private Limited and others (supra) is also misplaced, because the same pertains to interim measures under section 9 of the Act of 1996, wherein an applicant claims interim measures not only against a party to an arbitration agreement, but also against a person claiming through or under a party to an arbitration agreement. The present case is clearly distinguishable on facts. Insofar as the judgment of this Court in the case of Hemant D. Shah and others v. Chittaranjan D. Shah and others (supra) is concerned, the same also pertained to application under section 9 of the Act of 1996, which is not relevant for the present case.

17. The learned counsel for the petitioner has failed to demonstrate as to how it could claim to be a party in the proceedings pending before the District Court merely because it claimed that aforesaid plant and machinery had been transferred to it by respondent No.2. It is also relevant that respondent No.1 has specifically challenged t

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he very maintainability of the application filed by respondent No.2 before the District Court under section 34 of the Act of 1996, in view of failure of respondent No.2 to abide by the mandatory requirement of deposit of 75% of the award amount under section 19 of the MSMED Act. Respondent No.1 has also challenged the maintainability of the application filed by respondent No.2, as it is barred by limitation. 18. In such situation, when the very maintainability of the application of respondent No.2 is to be taken up by the District Court for consideration and the alleged transfer agreement dated 05/03/2013 between respondent No.2 and the petitioner is also specifically denied by respondent No.1, it is difficult to understand as to how the petitioner could claim right to intervene in the aforesaid proceeding pending before the District Court. The petitioner may have a remedy against respondent No.2 in accordance with law, but insofar as the proceeding initiated by respondent No.2 under section 34 of the Act of 1996 read with section 19 of the MSMED Act, the petitioner has no locus to seek intervention and then to seek further reliefs from the District Court. 19. In this backdrop, when the impugned order passed by the District Court is perused, it becomes clear that no error has been committed by the District Court while dismissing the application filed by the petitioner for intervention (Exhibit14). Accordingly, it is found that the present writ petition is without any merit and it is dismissed. 20. Rule stands discharged. No costs.
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