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High Court Of Delhi
ANIL GUPTA - Appellant
Versus
ATUL KUMAR GUPTA - Respondent
Civil 295A of 1980
Decided On : 07/20/1981
ARBITRATION - AWARD - SETTING ASIDE - BREACH OF CONTRACT - WAIVER - ESTOPPEL - ELECTION - RESCISSION - TIME OF THE ESSENCE - CONTRACT ACT, 1872, SECTIONS 55, 64.
Fact of the Case:
A partnership firm, M/s Deoki Nandan and Sons, had a dispute regarding the control of a company, Iron Traders Private Limited. The partners agreed to refer the dispute to arbitration. The arbitrator found that one of the partners, Anil Kumar Gupta, had breached the contract by failing to obtain the release of guarantees and title deeds from a bank within the stipulated time. However, the arbitrator also found that the other partners had waived their right to rescind the contract by accepting payments from Anil after the breach.
Finding of the Court:
The court held that the arbitrator's award was valid and should be made a rule of the court. The court found that the arbitrator had not gone beyond the terms of reference and that there was no error of law on the face of the award. The court also found that the other partners had not effectively communicated their intention to rescind the contract and that their acceptance of payments from Anil after the breach constituted a waiver of their right to rescind.
Issues: 1. Whether the arbitrator had gone beyond the terms of reference? 2. Whether the award was liable to be set aside on any other ground raised by the objector?
Ratio Decidendi: 1. The court found that the arbitrator had not gone beyond the terms of reference because the dispute that was referred to arbitration was the same dispute that the arbitrator decided. 2. The court found that the award was not liable to be set aside on any other ground raised by the objector because: a. The arbitrator had not erred in law by applying section 55 of the Contract Act, 1872, to the facts of the case. b. The arbitrator's finding that the other partners had waived their right to rescind the contract was a finding of fact that was not reviewable by the court. c. The arbitrator's finding that the other partners had not effectively communicated their intention to rescind the contract was also a finding of fact that was not reviewable by the court.
Final Decision: The court dismissed the objections to the award and made the award a rule of the court.
( 1 ) A family firm M/s Deoki Nandan and Sons carries on business at Delhi. The firm consists of lour partners. They are three brothers find a widow of a deceased brother. These are Atul Kumar Gupta, Anil Kumar Gupta, Sushil Kumar Gupta and Mrs. Sudha Gupta, wife of late Krishan Kumar Gupta. Of this partnership Atui Kumar Gupta is the managing[ partner. This firm has a large holding of shares in a company called Iron Traders Private Limited. The firm, its partners and other members of the family of the partners own shares in Iron Traders Private Limited. They have the controlling interest in the Company. Anil Kumar Gupta is the managing director ot the company. Disputes arose amongst the partners of the firm regarding the control of the company M/s. Iron Tiaders Private Limited. There is a clause of arbitration in the partnership deed of the firm. In terms of the arbitration clause the partners agreed to refer their disputes on March 10,1980 to Justice S. N. Andley (retired) as sole arbitrator.
( 2 ) THE partics appeared before the arbitrator. He heard them. They made oral and written submissions to him. On May 7, 1980 he made the award. The award went in favour of Anil Kumar Gupta. Anil then made an application to this Court under sections 14 and 17 of the Arbitra- tion Act, 1940 for making the award arule of the Court. To the award objections were filed by Atul Kumar Gupta, Sushil Kumar Gupta and Mrs. Sudha Gupta seeking to set aside the award.
( 3 ) THE nature of the dispute between the parties was this. The dispute, as I ve said, centres round the control of the company Iron Traders Private Limited. All the four partners have shares in the company. In order to have smooth management of the company it was decided that Anil shall purchase the shares held by Atui, Sushil and Sudha at 10^ of their face value and these three shall withdraw from the Board of Directors of Iron Traders Private Limited. An agreement dated February 1, 1978 was executed between the parties. To this agreement Anil Kumar Gupta, the present petitioner, (for short anil ), was one party on one side. Atui, Sushil and Mrs. Sudha were the other party to the contract. I shall refer to these three contracting parties collectively as the other party in this judgment.
( 4 ) THE salient terms of the agreement are these. In the first place Anil was to obtain release from the Central Bank of India who were the bankers of the company of the guarantees given to the said bank by the other party. The other party had deposited the title deeds of a certain property in Sadar with the bank as collateral security. Shares belonging to the firm has also been pledged with the bank. Anil was required to get all the guarantees, shares, title deeds etc. released from the bank and returned to the other party on or before a fixed date. Originally it was agreed that he will do all this by March 31, 1979. But by mutual agreement this date of March 31, 1979 was extended to August 31, 1979.
( 5 ) IN the second place, Anil was to make payment of a substantial amount to the other party in specified instalments over a given period. In a phased programme spread over a period of nearly two years beginning from April 1978 and ending with March 1980 he was to pay approximately a sum of Rs. 3,27,353. 89p in stated instalments. On his performing these two essential-conditions, the other party agreed to transfer their shares at 10% of their face value in favour of Anil. There were certain other conditions in the written contract dated February 1, 1978 but they are not material for the purposes of this case. Anil s case was that he had performed these two conditions and was entitled to the transfer of shares from the other party. The other party, on the contrary, contended that Anil had failed to perform his part of the bargain by the stipulated date of August 31, 1979 and was, therefore, not entitled to the transfer of shares from tliern. This was, in broad outline, the d
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