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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 ..... d the learned arbitrator had declared that the MOU dated 30th April, 2008 executed between M/s. Heritage Enterprises (original claimant in arbitration proceedings and respondent no. 1 herein) and Apsara Coop. Hsg. Soc. Ltd. is valid subsisting, enforceable and binding upon those parties and that the claimant is entitled to specific performance thereof. 2. At the threshold Mr. Samdani learned senior counsel for the respondent no. 1 raises a preliminary objection to the maintainability of this petition. In view of the issue of maintainability raised by the learned senior counsel for respondent no. 1 I have heard the learned senior counsel for the petitioner as well as the respondent no. 1 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. Petiti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... placed reliance on the judgment of Division Bench of this court in case of Girish Mulchand Mehta Vs. Mahesh S.Mehta & Anr. 2010 (1) All MR 719 and in particular paragraphs 15 and 16 which read thus : 15. The Appellants would then rely on the decision of the Apex Court in Ramesh Himmatlal Shah v. Harsukh Jadhavji Joshi reported in MANU/SC/0531/1975 : AIR 1975 SC 1470 to contend that the flats in question occupied by them have been allotted to them by the Housing Society which allotment is coupled with the right to transfer their shares of the Society and interest in the said flat which is the property of the Society. In the said decision, the Apex Court has observed that 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 vali ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... represent as the corporate aggregate. The Court also observed that the stream cannot rise higher than the source. Suffice it to observe that so long as the Resolutions passed by the General Body of the Respondent No. 2 Society are in force and not overturned by a forum of competent jurisdiction, the said decisions would bind the Appellants. They cannot take a stand alone position but are bound by the majority decision of the General Body. Notably, the Appellants have not challenged the Resolutions passed by the General Body of the Society to redevelop the property and more so, to appoint the Respondent No. 1 as the Developer to give him all the redevelopment rights. The propriety rights of the Appellants herein in the portion (in respective flats) of the property of the Society 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 Appella ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rendered against the society and in favour of the respondent no. 1 developer which affected the rights of the petitioners, petitioners being parties affected by the impugned award, are entitled to exercise their rights under section 34 of the said Act to impugn such arbitral award. 8. Learned senior counsel submits that even minority members of the society can challenge an arbitral award if the majority members have decided not to challenge the arbitral award for any reasons. It is submitted by the learned senior counsel that though petitioners were not parties to the arbitration proceedings, since the liability of the society as well as members are now crystalized under the said award and the rights of the petitioners having been affected and prejudiced, petitioners are entitled to challenge the impugned award. It is submitted by the learned senior counsel that this 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. Le ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sale of the said property in execution of the decree. We have already pointed out the difference in language between Section 29 and Section 31 and also made reference to Section 47(1)(b) in that connection. There is nothing in the language of Section 31 to indicate that the right to occupation which is the right to be sold in auction is not attachable in execution of the decree. There is nothing in Section 31 to even remotely include a prohibition against attachment or sale of the aforesaid right to occupation of the flat. Once Section 31 is out of the way, we are left with Section 29 wherein we do not find even a provision of prior consent for transfer of share or interest in such property. The only restrictions under Section 29(2) are that the member may not transfer his interest in the property prior to one year and the transfer is made to an existing member of the Society or to a person whose application for membership has been accepted by the Society. It 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 Ma ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s limited' as it uses the word 'limited' as part of its name. All this is provided in various sections of the Delhi Co-operative Societies Act, 1972, Even when the liability is limited, any claim against the Society can be recovered from the property of the Society as well as from the members of the Society to the extent of their liability. This is so provided in S. 75 of the Act Even if no personal liability is involved, it is obvious that each member of the Society has an interest in the Society and as each member can have only one share, all the members share the interest equally. If the interests of the Society are adversely affected, the value of the share of each member to that extent is diminished. So, it cannot be denied that each member has an interest in the Society. One of the items in the award is that a sum of Rs. 22,45,742/- has to be paid to the Administration. There is also another item to the effect that the Society shall not contest the smooth acquisitions of its land and 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 diffic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 20. It is now necessary to turn to perhaps the most important aspect of this case, which is regarding the rights of individual members of a Corporation to maintain a suit in the name of the Corporation or in the interest of the Corporation, since it is the analogy of a Corporation that has been applied here to a Cooperative Society as well. This matter was considered by the Federal Court in Dr. Satya Charan Lal v. Rameshwar Prosad Bajoria, . It was stated in that judgment that it was well-settled that in order to redress a wrong done to a company or to recover monies or damages alleged to be due to the company, the action should be brought by the company itself. This was the rule in Foss v. Harbottle, . It is unnecessary to refer to the other cases cited by the Federal Court. The law was summarised in the following terms:- " The correct position seems to us to be that ordinarily the directors of a company are the only persons who can conduct litigation in the name of the company, but when they are themselves the wrong-doers against the company and have acted mala fide or beyond their powers, and their personal int ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Society who have filed objections cannot maintain the objections. These objections have been filed in the individual names of the members and now, they are supported by the present management of the Society. No meeting was called by the Court because it was not a case of objections being filed in the name of the CO-operative Society. 25. Applying the above principle to the case of the present objector, on the footing that they are a minority set of shareholders in the Co-operative Society, it would appear that some remedy should be open to them in respect of the Society's failure to object to the award. For the purpose of this analysis, it must be assumed that there is something wrong with the award, if this is so, it would be for the Society to challenge the same in normal circumstances. If the persons in charge of the management refuse to challenge the award, then it should be open to the minority shareholders to maintain a suit in respect of the award. However. S. 32 of the Arbitration Act states that no suit can lie on any ground whatsoever for a decision upon the existence, effect or validity to arbitrati ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as they are debarred from filing a suit because of S. 32 of the Arbitration Act, to challenge the award or the arbitration agreement, as the case may be. These objections can be filed on the same basis as a suit can be filed by majority or minority shareholders of a company, which means that if the majority shareholders object to the award they can do so in the name of the company and if the minority shareholders challenge the same, they can do so in their own names, (6) In order to determine whether it is the majority or minority shareholders who are maintaining the objections, the Court can even call a meeting of the company. 27. Applying these propositions to the circumstances of this case, it clearly appears that the nominated management of the Society was not willing to file objections to the award. The award was filed at the instance of one of the members of the Co-operative Society and not at the instance of the parties to the reference. Against this award, objections could be filed by the majority of the members in the name of the Co-operative S ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ntextual facts and circumstances warrant expansion of the definition found under Section 2(1)(h) of the Arbitration & Conciliation Act, 1996 to include the Government of India, which is a party non-signatory for the purpose of challenging the award under Section 34 of the Act. We fail to appreciate the stand taken by UOI that it is a nonsignatory party to the agreement. Learned ASG was unable to show as to how UOI can be said to be a party to the agreement in the face of express provision contained in the agreement, which defined party to include only "ChPT & CCTPL". The word 'Party' is defined in Section 2(1)(h) of the Act to mean a "party to an arbitration agreement" and therefore, ordinarily, the expression 'Party' as used in Section 34 of the Act must carry the same meaning, namely, a party to the arbitration agreement or award. But, as the opening part of Section 2(1) (h) of the Act shows, the definitional meaning is subject to anything repugnant in the subject or context. We must, therefore, see whether there is anything in Section 34 or in the context in which it occurs which should compel us to place a broader meaning different from the one given to it in S ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Court in ITI Ltd v. Siemens Public Communications Network Ltd . MANU/SC/0502/2002 : [2002]3SCR1122 submitted that the provisions of CPC would apply to the proceedings under Section 34 of the Act and an aggrieved party for the purpose of challenging the award can invoke Section 34 of the Act. The contention is required to be stated only for rejection. In ITI Ltd. Case the Court held that merely because second appeal is barred under Sub-section (3) of Section 37, remedy of revision would not cease to be available. Although revision is not specifically provided for by the Act but in the absence of any express exclusion of CPC, no inference can be drawn that provisions of CPC would not apply to proceedings arising under the Act and revision is not maintainable. This decision has no application to the case on hand. Section 34 of the Act read with the definition of 'party' in Section 2(1)(h) of the Act makes it amply clear that only a party to the arbitration agreement can invoke the provisions of Section 34 of the Act. A third party has no locus standi to challenge the award under Section 34 of the Act. REASONS AND CONCLUSION 12. Section 34 of the Arbitration and Conciliati ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ors before the Chief Justice or any person or institution designated by him. 16. Sections 12 and 13 of the Act provides for grounds for challenge which challenge can be made only by the parties to the arbitration agreement. Under section 14 of the Act, the parties to the arbitration agreement can apply to the court to decide on the termination of the mandate if a controversy remains concerning any of the grounds referred to in clause (a) of sub-section 1 of section 14. Section 15 of the Act provides for termination of mandate and for making an application by the parties to the arbitration for substitution of arbitrator. Section 17 of the Act permits parties to the arbitration agreement to apply for interim measures before the arbitral tribunal. Section 18 of the Act provides that the parties shall be treated with equality and each party shall be given a full opportunity to present his case. 17. Section 19 provides for determination of rules of procedure and further provides that subject to the said part, the parties are free to agree on the procedure to be followed by the arbitral tribunal in conducting its proceedings. Section 20 provides for an agreement between the parties to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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. 21. Division Bench of this court in case of Girish Mulchand Mehta and another (supra) has held that a member of the society speaks through the society and has no independent right qua the society. Society is entitled to represent as the corporate aggregate. Division bench of this court has considered the judgment of Supreme Court in case of Ramesh Himmatlal Shah (supra) which is relied upon by Mr.Thacker, learned senior counsel for the petitioners and held that the members of the society not having challenged the resolution passed by the society and such resolution not having been set side by the appropriate forum are binding on all the members. 22. Supreme court in case of Firm Ashok Traders vs. Gurmukhdas Saluja and others AIR 2004 SC 1433 while constru ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n motion several periods of limitation such as an application for correction and interpretation of an award within 30 days under Section 33(1), an application for making an additional award under Section 33(4) and an application for setting aside an award under Section 34(3) and so on. As this delivery of the copy of award has the effect of conferring certain rights on the party as also bringing to an end the right to exercise those rights on expiry of the prescribed period of limitation which would be calculated from that date, the delivery of the copy of award by the Tribunal and the receipt thereof by each party constitutes an important stage in the arbitral proceedings. (Emphasis added) 24. Supreme Court in case of Benarsi Krishna Committee & Ors. vs. Karmyogi Shelters Pvt. Ltd. (2012) 9 SCC 496 has held that copy of the award has to be delivered to the party as defined in section 2(1) (h) of the Act which clearly indicates that such a person shall be a party to the arbitration agreement. A copy of the award can be served only on the party himself and not his or her agent or advocate. Paragraph 15 of the said judgment of the Supreme Court read thus :- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt between the parties, the impleadment of the person not party to arbitration agreement as a respondent in the arbitration proceedings and the award against such person in such arbitration can not be sustained. Paragraphs 5, 7 and 19 of the said judgment read thus :- 5. The High Court of Delhi by two orders dated 23.5.2000 appointed a retired Judge of the High Court as the sole arbitrator. The arbitrations ended in two awards dated 1.5.2002. The first award directed respondents 2 and 3 and appellant to pay Rs. 93,23,288/- (that is Rs. 50 lakhs with interest at 20; up to the date of the appointment of arbitrator) with interest at 18% per annum from 24.5.2000. Similarly the second award directed respondents 2 and 3 and appellant to pay Rs. 46,49,315/- (that is Rs. 25 lakhs with interest at 20% upto the date of appointment of arbitrator) with interest at 18% per annum from 24.5.2000. The two arbitration awards were challenged by the appellant by filing applications under Section 34 of the Act (OMP No. 319/2002 and 322/2002). The second and third respondents also challenged the awards in OMP No. 320/2002 and 321/2002. A lea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nbsp; 19. As there was no arbitration agreement between the parties (the first respondent and appellant), the impleading of appellant as a respondent in the arbitration proceedings and the award against the appellant in such arbitration cannot be sustained. As a consequence, both the arbitration awards, as against the appellant are liable to be set aside. If the first respondent wants to enforce the alleged guarantee of the appellant, it is open to the first respondent to do so in accordance with law. 26. In my view since the petitioners herein could not have been impleaded as parties to the arbitration proceedings before the learned arbitrator for want of arbitration agreement between the petitioners and the respondent no.1, nor the petitioners were parties to the arbitration proceedings, petitioners have no locus to file petition under section 34 of the Act for setting aside such an arbitral award. 27. This court in case of Supreme Megha Constructions LLP Vs.Symphony Co-operative Housing Society Limited and Mr.Ajay Wadhwa applicant in Notice of Motion (L) No.2410 of 2014 in Suit (L) No. 867 of 2014, delivered on 29th October 2014 has held that sinc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 29. In so far as judgment of Delhi High Court in case of Sohan Nayyar and others (supra) relied upon by Mr.Thacker, learned senior counsel is concerned, a perusal of the said judgment clearly indicates that the said judgment was delivered in the proceedings governed by the provisions of Arbitration Act 1940. In case of Chennai Container Terminal Pvt. Ltd. (supra) Division Bench of Madras High court has dealt with the proceedings under the provisions of the Arbitration and Conciliation Act, 1996. Question of law considered by the Madras High Court was whether the applicant who was neither a party to the arbitration agreement nor to the arbitration proceedings could file an application under section 34 of the Arbitration and Conciliation Act for setting aside the arbitral award. The Madras High Court has held that there is nothing in the subject or context of section 34 which would suggest the court to depart from the definitional meaning of the expression 'party' . It is held that the expression party is used in section 34 (2) in its definitional sense to mean a party to the arbitration proceedings and does not include a third person who is not party to the agreement. 30. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ard to each party. It is thus clear that a party to the arbitration agreement who may be a party to the arbitration proceedings and/or all the parties to the arbitration proceedings only would be entitled to be furnished with a copy of the arbitral award by the learned arbitrator under section 31(5) of the Act and upon delivery of copy of award from the arbitrator it which would commence the period of limitation for the purpose of filing an application under section 34 and can be filed within the time prescribed therein. If the arguments of the learned senior counsel appearing for the petitioners are accepted that the petitioners though were not parties to the arbitration agreement nor were parties to the arbitration proceedings can file an application for setting aside an award, there would be no limitation for filing an application for setting aside an arbitral award at the instance of such an outsider. 33. In my view the grounds of challenge which are available under section 34 of the Act and various other provisions which are applicable to the parties who are defined under section 2(1) (h) of the Arbitration and Conciliation Act, 1996 cannot be exercised by an outsider or by a ..... X X X X Extracts X X X X X X X X Extracts X X X X
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