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2014 Supreme(Del) 1576

IN THE HIGH COURT OF DELHI AT NEW DELHI
NAJMI WAZIRI, J.
PAWAN KUMAR GUPTA & ANR - Petitioner
Versus
VINAY MALANI - Respondent
And
VINAY MALANI - Petitioner
Versus
DELHI PRANTIYA MARWARI YUVA MANCH & ORS - Respondent
CM(M) 1067/2011, CM APPLs. 17144/2011 and 18242/2013 and CM(M) 606/2013, CM APPL. 9118/2013
Decided On : 30.05.2014

Advocates Appeared:
Mr. Manish Kaushik, Advocate
Mr. Kirti Uppal, Senior Advocate with Mr. Anshumaan Sahni, Ms Aastha Dhawan, Mr. Shanker Chhabra and Ms.Aakriti Jain, Advs.
Mr. Manish Kaushik, Advocate for Pawan Gupta.

Headnote:

Fraud - Dispute over Society President's Election - Arbitration and Conciliation Act, 1996, section 8 - Summary of Acts and Sections: The court discussed the arbitrability of disputes involving fraud and the interpretation of the arbitral clause under section 8 of the Arbitration and Conciliation Act, 1996. It highlighted the distinction between simple fraud and serious fraud, and the parties' willingness to have the matter referred to arbitration.

Fact of the Case:

Two petitions were filed in relation to the impugned elections of the President of a Society. The primary contentions were that the elected President and another member had concealed their ages and committed fraud. The first petition challenged the rejection of an Arbitration Application, while the second petition challenged the appointment of a Court Observer and the interpretation of the first interim order.

Finding of the Court:

The Court found that the issue of fraud did not affect the arbitrability of the dispute, as it did not go to the root of the main dispute. It emphasized the distinction between simple fraud and serious fraud, and the parties' willingness to have the matter referred to arbitration.

Issues: The main issues were the arbitrability of disputes involving fraud, the interpretation of the arbitral clause, and the distinction between simple fraud and serious fraud.

Ratio Decidendi: The Court held that the issue of fraud did not affect the arbitrability of the dispute, as it did not go to the root of the main dispute. It emphasized the distinction between simple fraud and serious fraud, and the parties' willingness to have the matter referred to arbitration.

Final Decision: The first petition was allowed, and the first impugned order was set aside. All disputes and differences between the parties were referred to arbitration before the arbitral tribunal of the Organisation, constituted under the arbitral clause. All rights and contentions of the parties were left open.

JUDGMENT

NAJMI WAZIRI

1. Two petitions of two parties are being heard and decided by this common judgment. Although the petitions were filed two years apart and in respect of two different impugned orders, the petitions were heard together for two reasons: (a) the decision of CM(M) 1067/2011 (“first petition”) is likely to have an impact CM(M) 606/2013 (“second petition”), and (b) the disputes all arise from the same dispute between substantially the same parties.

Parties to the dispute

2. Given the multiplicity of parties and the diverse titles attributable to them, for ease of reference the parties are hereinafter referred to as follows: Mr. P is the first petitioner in the first petition; his election has been impugned in the suit that gave rise to both petitions; he is also the third respondent in the second petition. Mr. S is his co-petitioner, who is also the fourth respondent in the second petition; he was the Returning Officer for the elections. Mr. V is the sole respondent in the first petition and the petitioner in the second petition; he initiated the suit that gave rise to both petitions. The Society is the first respondent in the second petition; Mr. P was elected as President to the Society. The Organisation is the second respondent in the second petition; the Society is regional component of the Organisation, which functions at three levels (national, prantiya (i.e., regional), and branch). Mr. K is the fifth respondent in the second petition; he is the President of the Faridabad Branch of the Organisation.

Proceedings

3. Although the various proceedings are not as many as the parties involved, they deserve to be recounted once. A suit, being Civil Suit no. 68 of 2011 (“Suit”), was filed by Mr. V in the Court of Senior Civil Judge-cum-Rent Controller (Central), Tis Hazari Courts, Delhi (“Trial Court”) challenging Mr. P’s election to the post of the President of the Society. It was filed on 22nd July, 2011 and an interim order was passed on 23rd July, 2011 (“first interim order”) granting certain interim relief to Mr. V. The Society, Mr. P and Mr. S filed an application (“Arbitration Application”) under section 8 of the Arbitration and Conciliation Act, 1996 (“Act”) seeking that the matter be referred to arbitration in view of clause 31G (o) in the Constitution of the Organisation (“arbitral clause”). This was rejected by the Trial Court by its order dated 8th August, 2011 (“first impugned order”), which was challenged in the first petition by Mr. P and Mr. S.

4. The proceedings in the Trial Court was initially stayed by this Court in the first petition, which was later modified and only the first impugned order was stayed. Mr. P then preferred an application under Order XXXIX rule 4 of the First Schedule to the Code of Civil Procedure, 1908 (“Code”) for vacation of the first interim order (“Mr. P’s application”). In the meanwhile, contending that Mr. P has acted in violation of the first interim order, Mr. V filed an application under Order XXXIX rule 2A of the First Schedule to the Code (“Mr. V’s application”). By an order of 3rd March, 2012, Mr. P’s application was allowed by the Trial court and Mr. V’s application was rejected and a Court Observer was appointed (“second interim order”). Mr. V challenged the second interim order in RCA no. 14/12 (“first appeal”) in the Court of the Additional District Judge – 06 (Central), Delhi (“Appellate Court”) and Mr. P challenged the same in RCA no. 19/12 (“second appeal”) before the Appellate Court. By its order dated 19th November, 2012 (“second impugned order”), the Appellate Court rejected the first appeal and allowed the second appeal and set aside the appointment of the Court Observer. The second impugned order is the subject matter of challenge by Mr. V in the second petition.

Facts

5. The facts, apart from what is set out hereinabove, are that Mr. P was elected president to the Society by the elections held on 17th July, 2011 (“impugned elections”). Mr. V filed t

































































































































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