ARUN KAPUR Vs. VIKRAM KAPUR

JUDGEMENT

(1.) THIS appeal has been preferred against order dated 31. 5. 2002 passed by the learned Sole Arbitrator whereby the learned Arbitrator dismissed the objections of the appellant against the report of Ernst and Young, Chartered accountants and accepted the report, except in respect of item no. 6 and found that the amount as stated in the report (except sum of item no. 6) was payable by the appellant which he should make good within a period of three months, failing which the order could be executed by the other group or groups as belonging to the Malanpur unit.

(2.) BRIEF facts relevant for the purpose of deciding this appeal are that the parties had entered into a Memorandum of Understanding (Mou) on 8. 1. 1999 whereby it was agreed between the parties that the business being managed and controlled by the different family members and the various assets in the individual names and in the names of different companies, private limited companies, partnership firms, charitable trusts, joint properties and firms and other personal assets owned by different persons be divided among the three family groups in equal parts. The three family groups were mentioned in the Mou. The three groups were headed by Mr. Bishamber Das Kapur, Mr. Jai Dev Kapur and mr. Jagdish Kapur. The appellant belonged to the first family group viz. group headed by Mr. Bishamber Das Kapur consisting of Mr. Bishamber Das Kapur, mr. Arun Kapur, Mr. Vikram Kapur, Mr. Rajiv Kapur, Mr. Akshay Kapur, Mr. Ashwath Kapur and Mr. Angad Kapur. Clause 6 of Mou provided that in case of difference of opinion on any matter and if a settlement was not arrived at, the matter would be referred to the arbitration of Shri A. M. Ahmadi, retired Chief justice of the Supreme Court of India, who was unanimously selected by the three groups as the Sole Arbitrator. Since the parties could not mutually settle the division of assets and properties, the matter was referred to Justice a. M. Ahmadi (Retd.) for arbitration.

(3.) DURING pendency of the arbitration, a status quo order was passed and later on it transpired that Mr. Arun Kapur, who was managing Malanpur plant had siphoned off huge amounts from the unit. On an application by other family member Mr. Arun Kapur was directed to restore the original position. The record shows that Mr. Arun Kapur had siphoned off around 6 crores of rupees and later on with great difficulty had restored this amount. During further progress of arbitration proceedings, again it was brought to notice of the learned Arbitrator that in Malanpur plant being managed by Mr. Arun Kapur, there were accounting discrepancies worth crores of rupees and allegations of fictitious purchases and other allegations were made, alleging that Mr. Arun Kapur had siphoned off huge amounts. With the agreement of the parties, M/s Ernst and Young, Chartered accountants' firm was appointed to go into the accounts. Mr. Arun Kapur had specifically contended that allegations were false and let M/s Ernst and Young verify the accounts and give a report. M/s Ernst and Young went into the accounts and gave a report about the allegations made by the other members of the group in respect of Malanpur Unit. An objection was raised against the report on the ground that M/s Ernst and Young themselves had not done the job and got this job done through S. R. Batliboi and Co. These objections were found untenable since s. R. Batliboi and Co. was a partner of M/s Ernst and Young, in India and the report was found to be credible and that of Ernst and Young. Against the previous order of learned Arbitrator regarding report of Ernst and Young, the present appellant filed an FAO No. 450/2001, which was dismissed by this Court with costs. The learned Arbitrator thereafter proceeded further to consider the report of Ernst and young. The learned Arbitrator after considering the report of Ernst and Young came to the conclusion that the report was reliable and had been given by the chartered Accountants after following the proper procedure. Mr. Manoj Gupta who was one of the team members and who carried out the review of the accounts was also subjected to cross examination by the counsel for the appellant before the learned Arbitrator and the learned Arbitrator found that Mr. Manoj Gupta stood the cross examination well and dismissed all objections of the appellant against the report. After accepting the report, the learned Arbitrator passed the impugned order asking the appellant to make good the loss except for item no. 6 and in case it was not made good, this could be executed.