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TMI Blog2015 (2) TMI 488X X X X Extracts X X X X X X X X Extracts X X X X ..... nd 41 i.e. in case of the death of a party to the arbitration agreement which can be enforceable by or against the legal representative of the deceased and in case of insolvency, if such insolvant was party to arbitration agreement and if official assignee or receiver adopts such contract. Arbitral tribunal is a private forum and gets jurisdiction to adjudicate upon the disputes between the parties to the arbitration agreement and not the persons who are not parties to the arbitration agreement. Proceedings under section 34 of the Act are not by way of an appeal. There is no other provision under the Act for challenge of an arbitral award except what is provided under section 34 of the Act. In my view only a party to the arbitration agreement which is defined under section 2(1) (h) of the Act can challenge an arbitral award under section 34 of the Act and not by a person who is not a party to the arbitration agreement unless covered by sections 40 and 41 of the Act. However if a person is wrongly impleaded as party to the arbitration proceedings and is aggrieved by arbitral award, he can invoke section 34 of the Act. Since the petitioners herein could not have been impleaded ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on the issue of maintainability of this petition filed by the petitioners. 3. Mr.Samdani learned senior counsel for the respondent no. 1 submits that the memorandum of understanding which recorded an arbitration agreement was between the respondent no. 1 developer and M/s. Apsara Co-op. Hsg. Soc., Ltd a society registered under the provisions of Maharashtra Co-operative Societies Act, 1960. The said society consists of 24 tenements allotted to 24 persons who are members of the said society. Petitioners are three of the members of the said society. Learned senior counsel submits that the petitioners were not parties to the said memorandum of understanding which contained arbitration agreement. It is submitted that the society had passed a resolution pursuant to which dispute was referred to arbitration. The petitioners were not parties to the arbitration proceedings as they were not parties to the arbitration agreement. 4. It is submitted that since the petitioners were not parties to the arbitration agreement, petitioners cannot file a petition under section 34 of the Arbitration and Conciliation Act, for impugning an arbitral award. In support of this submission learned sen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hat the right so enjoyed by the member is the species of the property namely the right to occupy a flat of this type, which assumes significant importance and acquires under the law a stamp of transferability in furtherance of interest of commerce. It went on to observe that there is no fetter in any of the legal provisions against such a conclusion and for which reason the attachment and sale of the property of the member in execution of the decree are valid under the law. The legal position expounded by the Apex Court in the said decision will be of no avail to the case on hand. The crucial question is whether the members can be heard to say that their rights in the flats occupied by them were dehors the rights of the Society therein and that they were not claiming under the Society at all. In our considered opinion such stand of the members(Appellants herein) cannot be countenanced. 16. In the present case, it is not in dispute that the General Body of the Society which is supreme, has taken a conscious decision to redevelop the suit building. The General Body of the Society has also resolved to appoint the Respondent No. 1 as the Developer. Those decisions have no ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ty cannot defeat the rights accrued to the Developer and/or absolve the Society of its obligations in relation to the subject matter of the Arbitration Agreement. The fact that the relief prayed by the Respondent No. 1 in Section 9 Petition and as granted by the Learned Single Judge would affect the propriety rights of the Appellants does not take the matter any further. For, the propriety rights of the Appellants in the flats in their possession would be subservient to the authority of the General Body of the Society. Moreso, such rights cannot be invoked against the Developer (Respondent No. 1) and in any case, cannot extricate the Society of its obligations under the Development Agreement. Since the relief prayed by the Respondent No. 1 would affect the Appellants, they were impleaded as party to the proceedings under Section 9 of the Act, which was also necessitated by virtue of Rule 803E of the Bombay High Court (Original Side) Rules. The said Rule reads thus: R803E. Notice of Filling Application to persons likely to be affected.- Upon any application by petition under the Act, the Judge in chambers shall, if he accepts the petition, direct notic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... court has wide powers to grant leave to the petitioners to challenge the impugned award. Learned senior counsel submits that the petitioners have very good chances of succeeding in this petition on merits and this court therefore, shall grant such leave in favour of the petitioners to impugn the arbitral award. 9. Learned senior counsel placed reliance on the judgment of the Supreme Court in case of Ramesh Himmatlal Shah Vs. Harsukh Jadhavji Joshi AIR 1975 SC 1470 and in particular paragraphs 17 and 18 in support of the submission that the flat in a tenant co-partnership housing society under the Maharashtra Cooperative Societies Act is liable to attachment and sale in execution of the decree against the member who has been allotted flat by the society and is accordingly party aggrieved., Paragraphs 17 and 18 of the said judgment read thus: 17. From a review of the foregoing provisions the position with reference to the particular Society is as follows: There is no absolute prohibition in the Act or in the Rules or in the Bye-laws prohibiting transfer of interest of a member in the property belonging to the Society. The only transfer which is void under the Act is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is true that bye-law 71D says that a member to whom a tenement is allotted shall not assign or underlet, vacate or part with the possession of the tenement or any part thereof without the previous consent in writing of the Managing Committee, but there is nothing to show that contravention of this bye-law makes the assignment void under the Act unlike in the case of a transfer being void under Section 47(3). There is no impediment to ratification of the assignment by the Committee particularly in view of the legal position arising out of the conjoint effect of Section 29, Rule 24 and bye-law 9. Section 29 read with Rule 24 shows that there is no prohibition as such against transfer of a share to a member or even to a nonmember if he consents to be a member and makes an application for membership by purchasing aye shares as provided under bye-law 9. Reading the aforesaid provisions there is no reason to think that there is any question of refusal of membership of the Society to a non-member if he is qualified otherwise and makes an appropriate application in which case the transfer of shares will be operative and thus the assignment of the right to occupation will hold good. Further ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... shall not appeal for enhancement of its compensation. These two items are sufficient to show that the interest of the members is adversely affected to some extent, though it is difficult to see the exact implications of the award. 18. It appears that on this ground the members of the Society can maintain objections if the Society itself does not file the same. 19. There is yet another reason to come to the conclusion that the objection could be maintained. From an analysis of the facts set out earlier in the judgment, it plainly appears that the Managing Committee was superseded on 9th July, 1971. The application moved in this Court under S. 14 of the Arbitration Act was moved by Shri Bal Mokand Vig who was the ex- Secretary of the Society. S. 14 (2) of the Act provides that the arbitrators or umpire may file the award at the request of the parties or under directions by the Court. Obviously, for the purpose of that application, a member of the Society was treated as being competent to obtain an order from the Court to direct the filing of the award. If we come to the conclusion that no objections could be filed, then it would also have to be held that t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ot or will not take steps to seek redress for the wrong done to the company, the majority of the shareholders must in such a case be entitled to take steps to redress the wrong. This view upheld the right to the majority of share-holders to maintain an action in the name of the company. The law has been summarised in this behalf in Para No. 767 of Halsbury's Laws of England, Fourth Edition Vol. 7 as follows: In an action to redress a wrong done to a company or to recover money or damages alleged to be due to it, the company is the only proper plaintiff, but its name should be used as plaintiff by direction of the company or its directors. Where the members complaining represent the majority of the company, the action may be brought in the company's name, ever though the directors object. The court may allow the matter to stand so that a company meeting can be held to decide whether the action should proceed in the company's name. At such a meeting the votes of the persons complained of cannot be excluded. Nevertheless, proceedings may be brought by any member or members in his or their own name or names where such authority cannot be obtained and th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... they can only approach The Court under the Arbitration Act. This is, therefore, an additional ground on which the objections could be heard by the Court. 26. To summarise the conclusions, it may be useful to state the following propositions:- (1) In the case of Corporations, where there are members, a suit may be maintained by the Corporation acting through its directors. If the directors refuse to act or the action complained of is that of the directors themselves, then such a suit can be maintained by the majority shareholders in the name of the Corporation. (2) If the action is challenged by the minority shareholders when the directors refuse to act, then the action or suit has to be brought by the minority shareholders in their own name. This may be done by them acting jointly or there may be a representative suit by a class of shareholders or members. (3) In the case of an arbitration award which is filed in Court, the objections may be filed by the parties thereto or if the parties refuse to file objections or fail to file objections, then a person claiming under them can also file objections provided they can show so ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... invited my attention to the judgment of Madras High Court in case of Chennai Container Terminal Pvt. Ltd.etc. Vs. Union of India and Ors. reported in AIR 2007 Madras 225 (DB) and submits that Division Bench of Madras High Court has considered the judgment of Delhi High Court in case of Sohan Nayyar and Ors. (supra) relied upon by Mr.Thacker learned senior counsel and has also considered the provisions of Section 34 read with section 2(1)(h) of Arbitration and Conciliation Act, 1996 and has distinguished the judgment of learned Delhi Court on the ground that the provisions for impugning award under section 30 read with 33 of the Arbitration Act, 1940 which were considered by the Delhi High Court and section 34 of the Arbitration and Conciliation Act, 1996 are totally different. It is submitted that the principles laid down by Madras High Court in which the court had considered the provisions under section 34 of the Arbitration and Conciliation Act, 1996 read with section 2(1)(h) which are squarely applicable to the facts of this case and shall be considered by this court and not the judgment of Delhi High Court. Paragraph 9 to 11 of the said judgment of Madras High Court read thus : ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... llenge the award, but not be bound by it, if the challenge fails. Equally, a third party can render the limitation period envisaged under the Act otiose by merely claiming knowledge of the award long after the period of limitation has expired. 10. Learned ASG, however, submitted that UOI is an aggrieved party inasmuch as the arbitrator has totally misconstrued the guidelines of UOI and therefore, the UOI can challenge the award of the arbitrator. In support of his submission, learned ASG placed reliance on the Division Bench judgment of the Delhi High Court in Sohan Nayyar v. Lt. Governor, Delhi MANU/DE/0483/1982 : AIR 1983 Delhi 301. The said decision is under the old Arbitration Act of 1940 and the Bench clearly found that the provisions of the Act of 1940 do not specify as to which can make an application, and therefore held that as the Act does not prohibit filing of an objection by a third parties, there is no bar to some one else filing objections provided they have some interest in the subject matter of the litigation. As observed by the Supreme Court in Sundaram Finance Limited v. NEPC Limited , the Arbitration and Conciliation Act, 1996 is based on UNCITRAL M ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the impugned award and the said award has affected the rights of the petitioners in respect of their respective flats in the society, petitioners who are claiming through the society are also thus parties to the arbitration agreement and being parties aggrieved are entitled to challenge the impugned award though the society has not impugned the said arbitral award. 14. A perusal of the Arbitration and Conciliation Act, 1996 in toto shows that the term party has been used in almost every section of the said Act. Under section 7 of the said Act the parties by an agreement can submit to arbitration all or certain disputes which have arisen or may arise between them in respect of a defined legal relationship whether contractual or not. It is provided that an arbitration agreement shall be in writing. Section 7(4) of the Act provides as to when an arbitration agreement can be construed as in writing if it is contained in various documents and pleadings. 15. Section 8 provides that a party to an arbitration agreement can file an application before a judicial authority before which an action is brought in a matter which is the subject of an arbitration agreement, to refer parties to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bitral award has to be delivered or shall be delivered to each party. The arbitral tribunal is empowered to grant interest unless the parties have otherwise agreed that interest not to be awarded by the arbitral tribunal. Under section 32 of the Act the arbitral proceedings are terminated if the parties agree on the termination of the proceedings. Under section 33, a party may apply for correction, interpretation and for additional award. Under section 34 of the Act, a party can challenge an arbitral award on the grounds setout therein. 19. A perusal of the aforesaid provisions of the Act and the scheme makes it clear that only the parties to the arbitration agreement can exercise various rights and invoke the mechanism of adjudication of disputes by arbitration by referring their disputes to arbitration for adjudication and not by an outsider. The only exception carved out under the Act is under sections 40 and 41 i.e. in case of the death of a party to the arbitration agreement which can be enforceable by or against the legal representative of the deceased and in case of insolvency, if such insolvant was party to arbitration agreement and if official assignee or receiver adopt ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... an arbitration agreement subject to sections 40 and 41 of the Act and by a person wrongly impleaded as party to arbitration proceedings and is aggrieved by such arbitral award. 23. Supreme court in case of The state of Maharashtra Ors. vs. Ark Builders Pvt. Ltd. AIR 2011 SC 1374 while interpreting section 31 (5) of the Act has held that copy of an arbitral award has to be delivered to the party by the arbitral tribunal and the limitation for making an application for correction or interpretation of award under section 33(1) and for making an application for setting aside an award under section 34(3) commences from the date of delivery of such arbitral award by the arbitral tribunal to a party to the arbitration agreement. Paragraph 12 of the said judgment reads thus:- 12. We are supported in our view by the decision of this Court in Union of India v. Tecco Trichy Engineers Contractors MANU/SC/0214/2005 : (2005) 4 SCC 239; in paragraph 8 of the decision it was held and observed as follows: 8. The delivery of an arbitral award under Sub-section (5) of Section 31 is not a matter of mere formality. It is a matter of substance. It is only after ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ny way so as to include the agent of the party to such agreement. Any reference, therefore, made in Section 31(5) and Section 34(2) of the 1996 Act can only mean the party himself and not his or her agent, or Advocate empowered to act on the basis of a Vakalatnama. In such circumstances, proper compliance with Section 31(5) would mean delivery of a signed copy of the Arbitral Award on the party himself and not on his Advocate, which gives the party concerned the right to proceed Under Section 34(3) of the aforesaid Act. 25. Supreme Court in case of S.N.Prasad vs. Monnet Finance Ltd. and others AIR 2011 SC 442 after considering the definition of arbitration agreement under section 2(1) (b) definition of 'Party' under section 2(1) (h) and section 7 of the Arbitration and Conciliation Act, 1996 has held that there can be reference to arbitration only if there is an arbitration agreement between the parties. An arbitrator can be appointed under the said Act at the instance of a party to an arbitration agreement only in respect of the disputes with another party to the arbitration agreement. If there is a dispute between a party to an arbitration agreement with other parties ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... equires an arbitration agreement to be in writing. Sub-section (4) explains as to when an arbitration agreement could be said to be in writing, that is: (a) a document signed by the parties; (b) an exchange of letters, telex, telegrams or other means of telecommunication which provide a record of the arbitration agreement; or (c) an exchange of statements of claim and defence in which the existence of the arbitration agreement is alleged by one party and not denied by the other. Sub-section (5) provides that the reference in a contract to a document containing an arbitration clause constitutes an arbitration agreement if the contract is in writing and the reference is such as to make that arbitration clause a part of the contract. Thus there can be reference to arbitration only if there is an arbitration agreement between the parties. The Act makes it clear that an Arbitrator can be appointed under the Act at the instance of a party to an arbitration agreement only in respect of disputes with another party to the arbitration agreement. If there is a dispute between a party to an arbitration agreement, with other parties to the arbitration agreement as also non-parties to the arbitr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... society, same would not have been maintainable. Application under section 8 can be filed only by a party to the arbitration agreement. Section 8 has to be read with section 2(1) (h) of the Arbitration and Conciliation Act, 1996. 24. This court in case of Vardhaman Developers Ltd. vs. Andheri Krupa Prasad Co-op.Hsg.Soc.Ltd. Ors. in Notice of Motion (L) No. 248 of 2014 in Suit No.94 of 2014 in a judgment rendered on 20th February, 2014 has taken a view that the member of the society who was not party to the arbitration agreement cannot mention an application under section 8 of the Arbitration and Conciliation Act, 1996. I am therefore of the view that even such application under section 8 of the Arbitration and Conciliation Act if would have been filed by a member claiming through the society which society is party to the arbitration agreement, such application would not be maintainable. 28. In my view the principles laid down by this court in the said judgment in the case of Supreme Megha Constructions LLP (supra) would be applicable to the application made by the petitioners under section 34 of the said Act. I am therefore of the view that this petition is not ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fact reference to 1940 Act may actually lead to misconstruction. 31. A perusal of section 30 read with section 33 of the Arbitration Act, 1940 makes it clear that an application to challenge the existence or validity of an arbitration agreement or an award or to have the effect of either determined could be applied to the court by any party to the arbitration agreement or any person claiming under him. A perusal of the said Act makes it clear that the expression 'party to an arbitration agreement' has not been defined under the said Arbitration Act 1940. A perusal of the provisions of Arbitration and Conciliation Act, 1996 and in particular section 34(2) makes it clear that an application for setting aside an award can be made only by the party which is defined under section 2(1) (h) of the said Act or by the party to the arbitration proceedings. 32. A perusal of section 34 of the Act makes it clear that the said application has to be filed within the time prescribed under section 34(3) of the said Act. The time to file such application commences from the date of such party receiving copy of the arbitral award from the learned arbitrator. Under section 31(5) of the A ..... X X X X Extracts X X X X X X X X Extracts X X X X
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