Rajiv Kumar Gupta vs Susham Singla - 2015 Supreme(P&H) 1612

Judicial Analysis Court Copy Headnote Facts Arguments Court observation

2015 Supreme(P&H) 1612

IN THE HIGH COURT OF PUNJAB AND HARYANA
Before
The Hon’ble Mr. Justice Amit Rawal
FA.O.No.1531 of 2010 (O&M)
Rajiv Kumar Gupta
v.
Susham Singla & Ors.
{Decided on 20/11/2015}

Advocates:
For the Appellant (in FAO No.1531 of 2010):Mr. Kanwalvir Singh Kang, Advocate.
For the Appellant (in FAO No.1532 of 2010):Mr. Ashish Aggarwal, Senior Advocate with Mr. S. Kajla, Advocate & Mr. Kartik Gupta, Advocate.
For the Appellants (in FAO No.1533 of 2010):Mr. M.L. Sarin, Senior Advocate with Mr. Hemant Sarin, Advocate.
For the Respondent No.1 (in FAO No.1531 & 1533 of 2013):Mr. A.K. Chopra, Senior Advocate with Mr. Akshit Chaudhary, Advocate.
For the Respondent No.3 (in FAO No.1532 of 2010):Mr. A.K. Chopra, Senior Advocate with Mr. Akshit Chaudhary, Advocate.
For the Respondent No.1 (in FAO No.1531 and 1533 of 2010):Mr. Avnish Mittal, Advocate.
For the Respondent No.3 (in FAO No.1532 of 2010):Mr. Avnish Mittal, Advocate.
For the Respondent No.1 (in FAO No.1531 and 1533 of 2010):Mr. Puneet Jindal, Senior Advocate with Mr. Siddhant Kant, Advocate, Mr. Varun Goyal, Advocate & Ms. Sakshi Advocate.
For the Respondent No.3 (in FAO No.1532 of 2010):Mr. Puneet Jindal, Senior Advocate with Mr. Siddhant Kant, Advocate, Mr. Varun Goyal, Advocate & Ms. Sakshi Advocate.

Headnote:Agreement to sell--Property of Partnership Firm--In absence of authority of other partners as mentioned in partnership deed, the sole partner could not validly enter into an agreement to sell property of firm--Therefore, such agreement is not enforceable.
       (A) Partnership Act, 1932, S.19--Agreement to sell--Property of Partnership Firm--In absence of authority of other partners as mentioned in partnership deed, the sole partner could not validly enter into an agreement to sell property of firm--Therefore, such agreement is not enforceable--Held;
       (i) Once there was an inherent defect in agreement to sell, the same is incapable of performance;
       (ii) The terms and conditions of the draft agreement to sell though provide that all the partners have authorised Executor to receive further payments on behalf of the firm and sign all the documents, whereas there is “No Authorisation” strictly in consonance with partnership deed--Specific Relief Act, 1963, S.20. (Para 30)
       (B) Arbitration & Conciliation Act, 1996, S.34--Award--Objections--Limitation for filing objections would start from the date of the receipt of the award or acquisition of the knowledge of the award--Limitation Act, 1963, S.5. (Para 28)
       (C) Arbitration & Conciliation Act, 1996, S.34--Agreement to sell--Award--Setting aside of--Property of Partnership firm--Notice for arbitration not send to firm and all partner but send only to one partner--Mere presence of one partner before arbitration cannot be take as implied consent--Award set aside--Specific Relief Act, 1963, S.16.
       (D) Specific Relief Act, 1963, S.16--Agreement to sell--Buyer Beware--A person, who is not the owner of the entire property, cannot enter into an agreement to sell, vis-a-vis their shares and it is the duty of the buyer to verify the title of the property as it is an old phrase “Buyer beware”. (Para 24)
       (E) Specific Relief Act, 1963, S.16--Agreement to sell--Once there was an inherent defect in agreement to sell, the same is incapable of performance. (Para 30)
       (F) Partnership Act, 1932, S.19--Agreement to sell--Draft Agreement--The agreement to sell by one of the partners, in the absence of authority of other partners as per Section 19(2)(g) of 1932 Act, is not a legal agreement and rather it was a draft agreement and, therefore, cannot be enforced in law--Specific Relief Act, 1963, S.20. (Para 35)
       The respondents have not been able to prove that the payment of Rs.2.75 crores was made through bank draft or cheque and rather, during the course of arguments, it was argued that the amount was paid in cash. In my view, no sane person would pay such an enormous amount without any receipt, that too in cash, thus, it is irresistible to conclude that it was a draft agreement where the parties have tentatively agreed to sell the property in dispute, which was an assurance and the actual agreement to sell, its execution and payment of earnest money was yet to commence. (Para 36)

JUDGMENT

Mr. Amit Rawal, J.: - By this order, I intend to dispose of three F.A.O.Nos.1531, 1532 and 1533 of 2010 as the common questions of law and facts involved in all the three appeals are the same. The facts are being taken from FAO No.1531 of 2010.

2. This is a classical case where the objects and the reasons, preceding the proclamation of Act No.26 of 1996, which provided that the arbitration procedure should be fair, efficient and the role of the Courts should be minimal in the arbitration proceedings, have been thrown to the wind and is analogous to the procedure being followed in a Civil Court, inasmuch as that the dispute between the parties to the lis has arisen out of execution of an agreement to sell dated 1.10.2002. Thus, in my view, the intention of the Legislature in its wisdom, though had proclaimed vide Act No.26 of 1996, minimising the role of the Court and as well as expeditious disposal/resolution of the disputes through arbitration, has not been achieved. In order to appreciate the controversy between the parties to the lis, it would be apt to give brief facet of the matter.

3. An agreement to sell dated 1.10.2002 was allegedly executed between M/s Jagtumal Murari Lal, a partnership firm consisting of Rajiv Kumar Gupta, Mrs.Sunhena Gupta and Raghav Gupta partners on one side and Susham Singla on the other side for the sale of leasehold property called “Malwa Cinema” situated on The Mall Road, Patiala for a total consideration of Rs17.25 crores. The sole question, which arises for adjudication of the dispute, is as to whether in the absence of the signatures/authorisation of other partners, the sole partner could enter into an agreement to sell the property or not. I would not be refraining myself in not reproducing the relevant clause/portion of the agreement to sell, which reads thus:-

“ AGREEMENT TO SELL

This AGREEMENT is made at New Delhi, on this Ist day of October, 2002, BY AND BETWEEN: M/s Jagtumal Murarilal, a partnership firm, situated at Gur Mandi, Patiala, Punjabi, presently operating Malwa Theatre, Patiala, consisting of Shri Rajiv Kumar, Mrs.Sunhena Gupta and Shri Raghav Gupta, as partners, represented herein through (1) Shri Rajiv Kumar son of Late Shri Sham Lal, presently residing at 128, Gudajpur Band Road, Chandanhula, Chattarpur, New Delhi, signing for self and on behalf of Shri Raghav Gupta, son of Shri Rajiv Kumar, and (2) Mrs.Sunhena Gupta, wife of Shri Rajiv Kumar, presently residing at 128, Gudaipur Band Road, Chanduhula, Chattarpur, hereinafter referred to as the “SELLER” of the ONE PART:

AND

Mr.Susham Singla, son of Shri Jagdish Chand, resident of Dhaliwal Colony, Patiala, hereinafter referred to as the “BUYER” of the SECOND PART.

The terms the Seller and the Buyer shall unless repugnant or expressly excluded by the context hereof, shall mean and include their respective heirs, successors, executors, survivors, legal representatives and assigns.

WHEREAS the Seller is absolute lease owner and in possession of the leasehold property called “Malwa Cinema” situated on The Mall Road Patiala and the said property has been leased out vide Indenture made on 22nd day of Vaisakh, 1996, between High Highness i.e. Government of Patiala through its Minister Incharge, Development, and the Seller. The Seller wants to sell off this leasehold property and the Buyer wants and has agreed to buy the said property for a total consideration of Rs.17.25 crores (Rupees Seventeen crores and Twenty five lacs only) on the terms and conditions hereinafter mentioned.

NOW IT IS AGREED BETWEEN THE PARTIES HERETO AS FOLLOWS:

1. That all the partners of the Seller have assured the Buyer that Shri Rajiv Kumar and Mrs.Sunaina Gupta are authorized to enter into this Agreement to Sell with the Buyer as true legal persons to deal with the said property. All the partners have authorized Shri Rajiv Kumar to receive all further payments in the name of the firm, to issue Receipts and can sign all documents on behalf of all

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Judicial Analysis

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2015 Supreme(P&H) 1612

IN THE HIGH COURT OF PUNJAB AND HARYANA Before The Hon’ble Mr. Justice Amit RawalFA.O.No.1531 of 2010 (O&M)Rajiv Kumar Gupta v. Susham Singla & Ors.{Decided on 20/11/2015}

Cases Referred (8)

Judicial Analysis

IN THE HIGH COURT OF PUNJAB AND HARYANA
Before
The Hon’ble Mr. Justice Amit Rawal
FA.O.No.1531 of 2010 (O&M)
Rajiv Kumar Gupta
v.
Susham Singla & Ors.
{Decided on 20/11/2015}