2022 Supreme(Del) 2035

IN THE HIGH COURT OF DELHI
Prateek Jalan, J.
Rahul Jain - Appellant
Versus
Atul Jain - Respondent
Arb.P. 539 of 2017
Decided On : 17-11-2022

1. A proper invocation of the arbitration clause is mandatory for the appointment of an arbitrator under Section 11 of the Arbitration and Conciliation Act, 1996. 2. A party to an arbitration agreement cannot be bound by the arbitration clause unless he has signed the agreement or otherwise indicated his concurrence to it. 3. A litigant is obliged to disclose all material facts to the court, including any adverse orders passed by other courts.

Headnote:

ARBITRATION - Appointment of Arbitrator - Family Settlement - MOFS - Invocation of Arbitration Clause - Validity - Suppression of Material Facts - Costs.

Fact of the Case:

Petitioners sought appointment of an arbitrator to adjudicate disputes arising between the parties under a "Memorandum of Family Settlement" (MOFS) dated 23.07.2016. Disputes arose between the parties relating to the conduct of business and control and ownership of assets. The MOFS contemplated that those companies, firms, and immovable properties are enumerated in the schedules to the Memorandum. The petitioners pleaded that disputes arose between the parties with regard to implementation of the MOFS. They placed on record the correspondence exchanged between the parties. The arbitrator responded that he had supplied copies of the communications received in response to his letter dated 05.08.2017 to Rahul. He also withdrew from the case by an order dated 12.08.2017. The present petition was filed by Rahul, Nipur, Aastha and Aviral on 23.08.2017. There is also reference in the documents on record to the following civil proceedings instituted by the family members. Apoorv has filed CS(OS) 612/2016 in this Court against Rahul and Nipur, principally claiming partition of property No. H-27C, Sainik Farms, New Delhi. In this suit, it is an admitted position that the petitioners herein filed I.A. No. 6898/2017, under Sections 5 and 8 of the Act, which was dismissed on 30.05.2017. Apoorv has also placed certain documents on record to show that he has filed CS(OS) 136/2019 seeking a declaration that the MOFS is illegal, as also possession and injunction in respect of property No. 409-412, Ward No. V, Katra Chauban, Chandni Chowk, Delhi-110006. Poonam, who has sought to intervene in this petition, has placed on record a copy of a suit filed by her [CS (OS) 79/2018] against all the parties in this petition, as well as her sister Alka.

Finding of the Court:

The Court found that the arbitration proceedings were not properly invoked in terms of Section 21 of the Act, which disentitles the petitioners to relief under Section 11 of the Act. The Court also found that Apoorv admittedly did not sign the MOFS himself. His impleadment as a party to this petition and to the proposed arbitration proceedings is sought to be justified on the ground that the MOFS was signed by Atul on behalf of other members of his family, including Meenakshi, Ananya and Apoorv. The Court found that the description of the parties in the opening part of the MOFS refers to Atul and Rahul as representing themselves and the other named individuals, being their respective wives and children. However, it also states that all the individuals "have appended their signatures to this memorandum as concurrence thereof". The undisputed fact is that Apoorv has not appended his signature to the MOFS and, notwithstanding any arguments as to the actual or ostensible authority of his father to sign the document on his behalf, no assumption of his concurrence can be made in view of the specific stipulation that the signature of each of the parties would be appended to signify their concurrence. The Court also found that the petitioners were obliged to disclose the fact that they had made an application under Section 8 of the Act in the proceedings instituted by Apoorv. The inclusion of a reference to Apoorv's suit in the petition clearly shows that the petitioners were aware of its relevance. While seeking appointment of an arbitrator in the present case, the fact that they had been refused reference to arbitration in the suit, cannot possibly be discounted as irrelevant. A litigant is certainly entitled to offer any explanation available to explain a particular fact--or indeed an adverse order of a Court --but cannot get away by avoiding reference to a relevant fact or order altogether.

Issues: 1. Whether the arbitration proceedings were properly invoked in terms of Section 21 of the Act? 2. Whether Apoorv was a party to the MOFS and, if so, whether he was bound by the arbitration clause contained therein? 3. Whether the petitioners were guilty of suppression of material facts by failing to disclose the fact that they had made an application under Section 8 of the Act in the proceedings instituted by Apoorv?

Ratio Decidendi: 1. The Court held that the arbitration proceedings were not properly invoked in terms of Section 21 of the Act, as the alleged parties to the arbitration agreement were not put on notice thereof. The Court found that the communication dated 26.11.2016 addressed by Rahul to the named arbitrator alone, did not fulfil the conditions of a valid invocation of the arbitration clause. The Court also found that the subsequent correspondence exchanged between the parties did not remedy this defect. 2. The Court held that Apoorv was not a party to the MOFS and, therefore, was not bound by the arbitration clause contained therein. The Court found that Apoorv did not sign the MOFS himself and that there was no assumption of his concurrence in view of the specific stipulation that the signature of each of the parties would be appended to signify their concurrence. 3. The Court held that the petitioners were guilty of suppression of material facts by failing to disclose the fact that they had made an application under Section 8 of the Act in the proceedings instituted by Apoorv. The Court found that the petitioners were aware of the relevance of this fact and that they could not get away by avoiding reference to it.

Final Decision: The petition was dismissed. The petitioners were ordered to pay costs of Rs.50,000/- to Apoorv.