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2015 Supreme(Del) 1812
IN THE HIGH COURT OF DELHI AT NEW DELHI
S. MURALIDHAR, J.
SANJAY KAPUR & ORS – Petitioners
Versus
VIKRAM KAPUR & ORS – Respondents
OMP 30, 31/2015
Decided On : 03.08.2015
For the Petitioner:Mr. Sudhir Chandra, Senior Advocate with Mr. Sudhir K. Makkar, Ms. Meenakshi Singh and Mr. Karan Lamba, Advocates, Mr. Nitish Kumar, Advocate.
For the Respondents:Mr. Salman Khurshid and Mr. U.K. Chaudhary, Senior Advocates with Mr. Antony, Mr. Himanshu Vij, Ms. Gitanjai Kapur, Ms. Shrshti Singh, Advocates for R-1. Mr. Anil Airi with Mr. Ravi Krishan Chandna, Ms. Sadhna Sharma, Mr. Aman Madan, and Mr. Ishan Khanna, Advocates for R-2. Ms. Meenakshi Singh, Advocate for R-6 to R-10.
Headnote:
Arbitration and Conciliation Act, 1996 - Section 16, 34 (2) (b) (ii) - Companies Act, 1956 - Sections 230 to 240, 390 to 396A - Company - Management and control - Trusts - Legality of - Three groups were bound by the 1999 MoU - Resolutions passed by the BoD and had also agreed that they should not use their voting powers to dislodge or disturb the restructured management in terms of the resolution of the BoD - BoD of the company is fully in control of its management and affairs - BoD have taken a consistent stand that the company is not bound by any internal arrangement between the groups of shareholders - While the 2003 resolution of the BoD may have brought about a change in the structure of management by putting the three units under the control of the respective management groups comprising different branches of Kapur family - While three subsidiary companies may have been incorporated, the transfer of the assets to those units is yet to take place - That can happen only in accordance with the procedure under the Companies Act, 2013 - Matters entirely outside the scope and ambit of the arbitration proceedings - It was impermissible in law for the Arbitrator to take upon himself a task which could be done only in accordance with the Companies Act - Parties to the 1999 MoU could not have conferred a jurisdiction upon the Arbitrator which he did not have to begin with - Patent error was committed in not dealing with the application of Mr. Arun Kapur questioning his jurisdiction - Held, directions issued by the Arbitrator as regards the division of the assets and management and control of Atlas Cycles (Haryana) Ltd. is opposed to fundamental policy of Indian Law.
Arbitration and Conciliation Act, 1996 - Section 16, 34 (2) (b) (ii) - Companies Act, 1956 - Sections 230 to 240, 390 to 396A - Division of Trusts - Trusts deed - Challenge to resolution - Estopel - Arbitrator has, despite acknowledging that the Trusts are governed by separate legal regime, remained silent in the operative portion on the division of the assets of the Trusts into three lots - Management and control of the Trusts have to be in accordance with the Trust Deed and in terms of the procedure envisaged - Removal of the trustees also have to take place accordingly and if that is not satisfactory then through appropriate legal proceedings - Resolution of the BoT dated 31st August, 2003 sought to give effect to the 2003 MoU by creating a managing committee - Challenge to the resolution by Mr. Vikram Kapur failed with the decision of Sonepat Civil Court Its decision has not been challenged and has attained finality - Procedure for giving effect to the 2003 as far as the trusts are concerned is hedged in by the legal regime governing public trusts - Held, division of assets of the trusts cannot be effected by a private agreement between certain trustees - There cannot be any estoppel against law - Directions of the Arbitrator to the extent it legitimises the division of the assets and properties of the two Trusts are unsustainable in law and are hereby set aside.
1. The challenge in both these petitions under Section 34 of the Arbitration and Conciliation Act, 1996 (“Act”) is to an Award dated 1st November 2014 passed by the learned sole Arbitrator in the disputes between the parties.
Background facts
2. The parties are all descendants of late Rai Bahadur Janki Dass Kapur. His three sons were Mr. Bishambar Dass Kapur, Mr. Jaidev Kapur and Mr. Jagdish Kapur. Mr. Sanjay Kapur, one of the sons of late Mr. Jagdish Kapur, Mr. Gautam Kapur and Mr. Girish Kapur, sons of late Mr. Jaidev Kapur and Mr. Rishav Kapur, son of Mr. Girish Kapur are the Petitioners in OMP No. 30 of 2015. Another son of Mr. Jagdish Kapur, namely, Mr. Salil Kapur is not himself a Petitioner. However, his two sons, Mr. Prashant Kapur and Mr. Ashwin Kapur, have filed OMP No. 31 of 2015.
3. The contesting Respondents in both petitions belong to the family branch of late Mr. B.D Kapur. The first two respondents, Mr. Vikram Kapur and Mr. Rajiv Kapur are the sons of late Mr. B.D. Kapur. The eldest son of Mr. B.D. Kapur, namely, late Mr. Arun Kapur, passed away during the pendency of the arbitration proceedings and his wife, Mrs. Rashmi Kapur and their sons, Mr. Akshay Kapur and Mr. Ashwath Kapur are Respondents 3, 4 and 5 respectively.
The 1999 MoU
4. After the death of late Rai Bahadur Janki Dass Kapur, his three sons had decided to split the management, ownership and control of the companies and assets jointly owned by the family in three equal shares and award one share to each of the unit/families. A Memorandum of Understanding dated 8th January 1999 (“1999 MoU”) was entered into between them. The relevant preamble clauses of the MoU read as under:
“Whereas the parties hereto have been carrying on business by owning, managing and/or controlling various assets in their individual names or in the names of different companies, private companies, partnership firms, charitable trusts and joint properties, firm, other than personal assets acquired by own savings or personal/wives business:
And whereas with the growth of the family during subsistence of complete amity between all the members of the family, it is considered prudent to split the ownership, management and/or control of the companies and the assets in three equal share and to allot each share to the three units of the family which will help in the exercise of better management controls and further augment the business of the reconstituted units and business enterprises.”
5. It requires to be mentioned that the principal company that is the subject matter of the 1999 MoU is Atlas Cycles (Haryana) Limited. It had three bicycle units. One was in Sonepat, Haryana, the second in Sahibabad (Uttar Pradesh) and the third in Malanpur (Madhya Pradesh). There were, of course, other firms, companies and properties, including five trusts that have been jointly managed by the family.
6. The 1999 MoU recorded the agreement that the division of the three lots should be made in such a manner that one bicycle unit falls in the share of each of the three groups such that the production facility including machinery, painting and plating plants etc., and that of services including tool room, maintenance, electrical, generators, research and development, heat treatment etc. of each cycle unit is more or less equally divided. It envisaged that the market areas for sales in India and exports for each separate unit “shall be clearly identified, demarcated and equated.” In case any benefit was to be given to any group/groups it could be given in the form of net worth/assets. The valuation was to be done by Mr. K.N. Memani of M/s. Ernst and Young, Chartered Accountants.
7. The 1999 MoU further stated that each of the three groups would be entitled to the use of the “Atlas” brand as well as the “logo” on products with “an additional name for identification and differentiation as may be permissible under legal regulations.” The three names were to be chosen and placed in three baskets before th
