2019 Supreme(Bom) 483

IN THE HIGH COURT OF JUDICATURE AT BOMBAY
S.C. GUPTE, J.
Sushma B Chandak - Appellant
Vs.
SMC Global Securities Ltd. - Respondent
Arbitration Petition No. 754 of 2016; Notice of Motion No. 2683 of 2016
Decided on : 09-04-2019

Headnote:

Indian Penal Code, 1860 - Sections 406, 409, 467,468,415, 420, 421 and 422, 120B and 34 - Criminal Procedure Code,1973 – Sections 41A,320(6) - Arbitration and Conciliation Act, 1996 - Section 34 - Contract Act - Section 23 - Challenge – Sale Deed – Quashing of order - Parties entered into a deed of settlement under which the Petitioner along with others agreed to pay in full and final settlement of award and Respondent accepted this payment in full and final settlement of all its claims whatsoever including its debit balance outstanding in UCC No.ZAN0001 which was subject matter of arbitration reference - Both parties agreed that no further claims disputes actions by whatever name called by and between parties shall lie and the parties would unconditionally and immediately withdraw each and every claim against each other such claims included in terms present arbitration petition filed under Section 34 of Arbitration and Conciliation Act, 1996 - There is no dispute between parties that deed of settlement produced by Respondent in support of its contention was in fact executed though it is case of Petitioner that she never personally signed deed even though her name has been mentioned as ‘first party’ in it - Learned Counsel for Petitioner submits that the so called compromise reflected in deed of settlement is void since one of considerations for compromise was withdrawal of a criminal prosecution involving inter alia charges under Sections 467 and 468 of Indian Penal Code which are non-compoundable. - Whether or not to decree suit by recording compromise Court is bound to consider whether compromise was lawful and every argument on voidness or voidability is bound to be considered in such a case on merits - Whether consideration for an agreement is opposed to public policy or not it was immaterial whether debt in respect of which the agreement was made for illegal consideration was real or whether crime had in fact been committed - Whether in law a prosecution has been commenced or not - Whether an arbitration agreement supported by an illegal consideration could result into an enforceable award - Whether compromise between parties reflected in deed of settlement and on basis of which orders were sought from Calcutta High Court in a quashing petition, was or was not supported by a lawful consideration - Whether Petitioner who not only entered into a compromise with her opponent but also made use of it in a criminal prosecution and on that basis managed to get bail for her co-accused and eventually have criminal prosecution quashed should be heard to challenge award which was the subject matter of such compromise – Held, Courts came to conclusion that withdrawal from criminal prosecution in respect of non-compoundable offences if offered as a consideration for an arbitration agreement was opposed to public policy and agreement arrived at as a result was invalid in law - In present case that is not subject matter of challenge before this Court - It is not that arbitration agreement or the award in any event is vitiated by any illegal consideration -What needs to be considered in present case and that in the context of a challenge petition filed under Section 34 of Arbitration and Conciliation Act, 1996 is whether compromise between parties reflected in deed of settlement and on basis of which orders were sought from Calcutta High Court in a quashing petition was or was not supported by a lawful consideration - No doubt some of offences in present case such as offences under Sections 467 and 468 of the Indian Penal Code, are non-compoundable - At same time other offences such as offences under Sections 406, 409, 415, 420, 421 and 422, read with Sections 120B and 34 of Indian Penal Code are indeed compoundable with permission of the Court. What is important to note is that the parties not only agreed to termination of a criminal prosecution but actually implored the High Court to quash same on basis of their compromise essentially submitting before Court that transaction between them was of a commercial nature and considering backdrop of case any further prosecution in the matter would amount to abuse of process of Court and on that basis prosecution ought to be quashed - In other words Petitioner and others clearly relied on deed of settlement and called upon Court to act on such settlement and Court in fact accepted compromise as lawful and proceeded to quash prosecution on its basis - Question now is whether Petitioner, who not only entered into a compromise with her opponent but also made use of it in a criminal prosecution and on that basis managed to get bail for her co-accused and eventually have criminal prosecution quashed should be heard to challenge award which was subject matter of such compromise - And Court must note that this has to be considered in context of Section 34 - In every case merely because challenger satisfies court that award is in contravention of either of clauses of sub-section (2) of Section 34 Court is not bound to set aside the award - Court has a discretion whether or not to do so. The real question in this case is whether or not to use that discretion and reject challenge whether or not party having compromised award and entered into an agreement of satisfaction and sought benefit thereof should be permitted to prosecute her challenge - Ordered accordingly