ORIENTAL INSURANCE COMPANY LIMITED Vs. V D JHUNJHUNWALA

JUDGEMENT

(1.) M/s.Oriental Fire and General Insurance Co.Ltd., the petitioner in this petition is the successor in interest of M/s.Bharat General Reinsurance Ltd. who had filed the petition under Section 20 of the Arbitration Act,1940 for appointment of Arbitrator and for reference of dispute to the Arbitrator for adjudication. In the said petition, petitioner had averred that Agreement dated 4/6/1968 was entered into between the petitioner and the respondent as per which respondent agreed to purchase 25000 shares of a company named M/s'.Razabuland Sugar Co.Ltd. at the rate of Rs.10.00 per share. It was further agreed that the entire sale consideration of Rs.2,50,000.00 would be paid by the respondent to the petitioner company In four yearly instalments of Rs.62,500.00 each. The Respondent paid two instalments but failed to pay remaining two instalments which were payable at the end of May, 1971 and May,1972 respectively. Instead respondent had only made a part payment of Rs.35,000.00 against the instalment of May,1971 and no payment was made in respect of 4th instalment. The petitioner accordingly demanded the dues from the respondent and as the same were not paid, petition under Section 20 for appointment of an Arbitrator was filed. Respondent in its reply submitted that Agreement in question stood cancelled and/or determined and was not operative or binding on the parties and therefore, there being no valid, legal or subsisting agreement, the petition under Section 20 was also not maintainable. By order dated 28/3/1979 this Court disposed of the petition by appointing Shri S.N.Andley, Ex.Chief Justice of this Court as the sole Arbitrator and referring the disputes contained, in the petition as well as in the reply of the respondent, for adjudication. This order was passed on the statement of learned counsel for the parties admitting the existence of agreement. Relevant portion to this effect, which has bearing on the present case reads as under:

(2.) The learned Arbitrator gave and published the Award allowing the claim of the petitioner. Objections against the said Award were filed by the respondent. In these objections, by consent of the parties order dated 12/5/1989 was passed setting aside the said Award and referring the disputes to Shri Jagdish Chandra, a retired Judge of this Court in terms of order dated 28/3/1979 passed in Suit No.525-A/75. After adjudication the learned Arbitrator has given his Award dated 22/1/1991. By means of IA.3867/91 the petitioner has filed objections to this Award.

(3.) In the impugned Award the learned Arbitrator has held that Agreement dated 4/6/1968 in question which was entered into between the parties is illegal and void being in contravention of the provisions of Securities Contracts (Regulation) Act, 1956. The petitioner had raised the plea of res Judicata submitting that this question could not be determined by the learned Arbitrator as respondent had admitted the existence of arbitration agreement between the parties. However, this plea of the petitioner was rejected by the learned Arbitrator on the ground that question of agreement being incontravention of statute was a pure question of law going to the root of the case and thus it could be raised by the respondent even though not specifically raised in his reply to petition under Section 20 filed by the petitioner While declaring agreement to be void being violative of the statute, the learned Arbitrator has given his Award holding that petitioner is not entitled to any amount whatsoever from the respondent and on the other hand respondent is entitled to a sum of Rs.4,52,213.00 subject to respondent's re-transfer back of the shares sold by the claimant to the respondent as per the Company Law on the subject. This amount in favour of the respondent is awarded on the ground that the petitioner received this amount from the respondent in a void agreement and therefore, respondent is entitled to restitution of the money paid under the provisions of Section 65 of the Contract Act.