AKSHAY KAPUR Vs. RISHAV KAPUR

JUDGEMENT

(1.) These Orders shall decide an application filed on behalf of Defendants No. 8 and 9 under Section 8 read with Section 5 of the Arbitration & Conciliation Act 1996 (hereinafter referred to as the 'Act') praying that the parties and the disputes be referred to arbitration and the pending suit be dismissed. The suit is for Declaration and permanent injunction in which the reliefs prayed for are "a. pass a decree of declaration declaring the impugned report to be invalid and/or void. b. pass a decree of permanent injunction restraining the defendants from pursuing or taking any steps pursuant to the impugned report."

(2.) In IA No. 338/2003 which accompanied the plaint praying for an ex- parte ad interim injunction, the Defendants had been restrained from taking any steps or acting in pursuance of the Final Valuation Report prepared by Messrs Ernst & Young Private Ltd., Defendant No. 11, through Defendant No. 10. Arguments have been addressed at length on the application under Section 8 only. It needs to be clarified that since the applicants, as well as the other Defendants, have not pressed for the recall of the ex-parte ad interim injunction passed on 14.1.2003, pending disposal of the Section 8 application, those Orders would continue until it is found that the suit is not maintainable, or IA No. 388/2003 is devoid of merit.

(3.) Dr. A.M. Singhvi has drawn attention to the Clause 4 of the Memorandum of Understanding (MoU) dated 8.1.1999 which clarifies that it "incorporates only the broad guidelines to be followed for arriving at a final settlement between the parties. The essence of the mutual understanding is that all the assets and the Companies referred to above shall be divided in the three equal baskets after the same has been properly evaluated at the present market price. The valuation of all the assets, Companies, Trusts and Firms shall be done by Shri K.N. Memani of Messrs Ernest & Young, Chartered Accountants who shall value the Companies, Private Limited Companies, Partnership Firms, Charitable Trusts and other assets at market price as per the accepted principles of accountancy. Shri K.N. Memani will confer jointly with the three groups regarding the valuation of all the Companies/Firms/Trusts etc. and thereafter declare the value. Shri K.N. Memani's valuation will be final and 334 un-challengable by the parties or even the Arbitrator." It is contended that the process of valuation was started in August 2000 and all concerned parties, including the Plaintiff fully participated therein. He has also submitted that the valuers, namely, Messrs Ernst & Young, had been represented before the learned Arbitrator, who has already held about fifty hearings. It is Dr. Singhvi's further contention that the principles of waiver, acquiescence and estoppel are clearly attracted since the Plaintiff has participated in the arbitral proceedings with full knowledge and without any demur whatsoever. He has submitted that the present objections have been raised only when alleged siphoning of funds has come to light and that if suits of the present genre are entertained, the Act would be totally defeated and emasculated. The Arbitration & Conciliation Act, 1996 in terms bars the interference of Civil Courts in arbitral proceedings and instead envisages or permits a challenge to the Award only after it is passed. He has referred to Clause IV(v) of the Objects of the Act and has relied on Sections 5, 8, 16 and 37 thereof. In respect of the factual matrix, Dr. Singhvi has submitted that there has been a suppression of relevant events in the litigation, in particular to the dismissal of SLP No. 13239/2002 on 29.7.2002 which was preferred against the Order dated 10.5.2002 of Hon'ble Mr. Justice M.A. Khan in which the prayer to declare the mandate of the arbitrator to have de facto and de jure ended, was dismissed in limini. The defalcation of funds by the Plaintiff is stated to have been for approximately Rs. 9,00,00,000/- from the Malanpur unit to various companies owned by the Arun Kapur family, i.e. the Plaintiffs. He has strenuously submitted that if the Valuation Report is not given effect to, the whole purpose of the arbitration proceedings will come to a grinding halt.