Gurcharan Singh vs Raghbir Cycles Pvt. Ltd. and Others

V.K. Bali, J.—This order shall dispose of Company Application No. 46 of 1993 in Company Petition No. 134 of 1987, and Company

Application No. 47 of 1993 in Company Petition No. 79 of 1987 under Rule 9 of the Companies (Court) Rules, 1959, to make the award of Shri

D.S. Tewatia, arbitrator-cum-umpire a rule of the court. This order shall also dispose of Company Application No. 45 of 1993 in Company

Petition No. 134 of 1987 raising objections under Sections 30 and 31 of Arbitration Act, 1940, against the very same award. Before, however,

the objections raised against the award are noticed, it shall be useful to give the factual matrix of the events leading to appointment of the arbitrator.

Gurcharan Singh, his wife, Smt. Jaswant Kaur, his daughters, Miss Soniya and Miss Ramanjit Kaur, as also his son, Gurpreet Singh, filed

Company Petition No. 79 of 1987 u/s 155 of the Companies Act, 1956, for rectification of the register of members. This petition was fixed against

Raghbir Cycles Private Limited, Raghbir Singh and his sons, Manjit Singh, Kanwaljit Singh, Paranjit Singh and Harjit Singh. This petition was filed

way back in July, 1987, and at that time Paranjit Singh and Harjit Singh were admittedly minors and were sued through their father, Raghbir Singh,

as their natural guardian. It is, inter alia, pleaded that the petitioners hold the following shareholding in accordance with the books of the company :

Gurcharan Singh 600 shares (although he is entitled to 2,100 shares in

accordance with the allotment of 1,500 shares which was

made on July 22, 1985, as evidenced by the return of shares

made by the company to the Registrar of Companies).

Smt. Jaswant Kaur, 2.375 shares.

wife of S. Gurcharan

Singh

Miss. Soniya 2,640 shares.

Gurpreet Singh minor 3,250 shares.

Miss. Ramanjit Kaur 2,685 shares.

11.650 of Rs. 100 each.

The mother of petitioner No. 1, Smt. Chanan Devi, who was also mother of respondent No. 2, it is pleaded, held 1,500 shares. She died on

November 2, 1984. These shares, it is pleaded, have been illegally allotted to Paranjit Singh, son of respondent No. 2, who is respondent No. 5 in

the petition. Smt. Chanan Devi had two sons, i.e., petitioner No. 1 and respondent No. 2, and as such both of them were equally entitled to the

extent of half of these 1,500 shares. This allotment by transmission made in favour of Paranjit Singh on October 15, 1985, was asked to be

rectified. Further, the company had allotted 1,500 shares to petitioner No. 1 on July 22, 1985, by a resolution of the board of directors. A return

of allotment was filed by the company with the Registrar of Companies. It was pleaded that the petitioner was entitled to the allotment and

rectification of the register to the extent of these 1,500 shares. In the year 1981, respondent No. 2 managed to show in the books of the company,

various credits as having been made by Sethi Finance Company, Sikri Finance Company and Sachdeva Finance Company. These deposits were

started in the year 1981 and were increased as under :

Sethi Finance Company Rs. 2,61,050 which was increased to Rs.

11,15,550 on June 30, 1983.

Sikri Finance Company Rs. 3,23,025 which was increased to Rs.

11,98,425 on June 30, 1983.

Sachdeva Finance Co. Rs. 2,20,875 which was increased to Rs.

10,79,375 on June 30, 1983.

It was alleged that these are fictitious deposits. No interest whatsoever was paid by the company to these finance companies. Interest was paid

by bearer cheques in their names but the same were encashed from the Punjab and Sind Bank, Miller Ganj, Ludhiana, by Raghbir Singh,

respondent No. 2, his sons. Manjit Singh and Kanwaljit Singh. Some of the cheques that were issued have been detailed in paragraph No. 5 of the

petition. It is pleaded that the said cheques were not account payee cheques but were bearer cheques and the bank which had made payment of

these cheques will prove the persons who had withdrawn the money. The above sums were withdrawn either by Raghbir Singh, respondent No. 2

himself, or his sons, Manjit Singh and Kanwaljit Singh. Thereafter, the amounts standing to the credit of the three finance companies, i.e., Sethi

Finance Company, Sikri Finance Company and Sachdeva Company, were washed off by allotting the shares to Shri Narinder Singh Sethi,

proprietor of Sethi Finance Company, Shri Devinder Singh, proprietor of Sikri Finance Company and Shri Sampuran Singh, proprietor of

Sachdeva Finance Company. It is pleaded that these shares were never applied for by these allottees and the same were subsequently got

transferred by Raghbir Singh, respondent No. 2, in the names of Kanwaljit Singh, Paranjit Singh and Harjit Singh, respectively. The total number

of shares allotted were 37,336 with the following break up :

Sardar Narinder Singh 12,256 shares.

Sardar Sampuran Singh 11.980 shares.

Sardar Devinder Singh 15,100 shares.

37,336 shares.

The allotment was made on July 4, 1985. It is alleged that Gurcharan Singh who was the director of the company never attended such a meeting

authorising such allotment. The transfers were also pleaded to be in violation of the articles of association of the company which have been

reproduced at pages 7, 8 and 9 as under :

Subject to the restriction of these articles shares, shall be transferable but every transfer must be in writing in the prescribed form and must be

left at the office accompanied by the certificate of the shares to be transferred, and such other evidence (if any) as the directors may require, to

prove the title of the intending transferor.

Except as hereinafter provided, no shares in the company shall be transferred unless and until the rights of the existing shareholders hereinafter

conferred shall have been exhausted and the following provisions in that behalf shall apply and take effect :

(a) Every member or other person referred to in Clause II hereof who intends to transfer shares (hereinafter called ''the vendor'') shall give notice in

writing to the board of directors of his intention. The notice shall constitute the board his agent for the sale of the said shares in one or more lots at

the discretion of the board to members of the company at a price to be agreed upon by the vendor and the board, or in case of difference at the

price which the auditor of the company for the time being shall certify by writing under his hand to be in his opinion the fair selling value thereof as

between a willing vendor and a willing purchaser.

(b) Upon the price being fixed as aforesaid, the board forthwith shall give notice to all members of the company of the number and price of the

shares to be sold and invite each of them to state in writing within fourteen days from the date of the said notice whether he is willing to purchase,

and if so, what maximum number of the said shares.

(c) On the expiry of the said fourteen days, the board shall allocate the said shares to or in favour of the member or members who shall have

expressed his or their willingness to purchase as aforesaid, and (if more than one) so far as may be pro rata according to the number of shares

already held by them respectively, provided that no member shall be obliged to take more than the said maximum number of shares so notified by

him as aforesaid. Upon such allocation being made, the vendor shall be bound on payment of the said price to transfer the shares to the purchaser

or purchasers, and if he or she makes default in so doing, the board may receive the price and give a good discharge for the number of shares on

behalf of the vendor and enter the name of the purchaser in the register of the members as holder by transfer of the said shares purchased by him

or her.

(d) In the event of the whole of the said shares not being sold under the foregoing sub-clauses hereof, the vendor may at any time within six

calendar months after the expiry of the said 14 days, transfer the shares not so sold to any person (subject to the provisions of Clause 15 hereof).

(e) The provisions hereinbefore contained shall not apply to a transfer merely for the purposes of effecting the appointment in the name of new

trustees, nor to a transfer by executors or administrators of a legatee under the will of, or, to the husband, wife or next of kin of a deceased

member, nor a transfer by a trustee to a beneficiary provided that is proved to the satisfaction of the board that the transfer bona fide, falls within

one of these exceptions.

It is further pleaded that no notice whatsoever was given to the petitioners in compliance with Article 12(a) reproduced above nor were they

asked if they were willing to get these shares which were sought to be transferred by the allottees who themselves were fictitious. Narinder Singh

and Sampuran Singh are brothers-in-law of respondent No. 2, the sisters of petitioner No. 1 as also respondent No. 2 being married to them.

Devinder Singh is the sister''s son of petitioner No. 1 and respondent No. 2. Somehow or the other fictitious documents were prepared in the

names of Narinder Singh, Devinder Singh and Sampuran Singh without their knowledge and consent. It is pleaded that they were neither parties to

the deposits nor to the withdrawals of interest nor to the allotment of shares nor to the transfer of shares. An affidavit of Sampuran Singh in support

of the aforesaid assertions was also filed with the petition. Besides, the aforesaid fictitious shares, further shares were allotted to 40 persons, 11

existing and 29 non-existing employees of the company. Allotment was made on August 1, 1994, and the return of allotment was made to the

Registrar of Companies. Petitioner No. 1, who was director of the company, was never issued any notice of a meeting nor did he attend any such

meeting. Fictitious credit entries were made to the extent of Rs. 50,000 to Rs. 52,000 per shareholder according to the allotment which was

sought to be made in the names of these persons. The said persons were neither in a position to pay the money nor did they ever pay the money

and, thus, the scheme for allotment of shares to these persons was facilitated on account of these fictitious entries in the books of account of the

company. These shares again were shown to have been transferred by these 40 allottees in the names of Raghbir Singh (10,060 shares) and

Manjit Singh (10,055 shares). This transfer again was stated to be against the provisions contained in Articles 11 and 12 of the articles of

association of the company. In fact the whole of the credit entries were made by Raghbir Singh by utilising the black money which had been

generated by him by either making wrong expenditure, entries in the books of account of the company and withdrawing the same from the coffers

of the company and utilising the same for making credit entries or by underselling the goods and stocks of the company and taking away hush

money in lieu of the real price. The credit entries were made in the books of the company by utilising black money which respondent No. 2 was

generating either by fictitious names in the books of the company under the heads ""Bonus paid"", ""Lease with wages"", ""Coal and fuel account"" and

Labour charges"" and the ultimate balance-sheet did not reflect the correct state of affairs.

On June 30, 1986, 9,100 shares were allotted to the following persons:

1,500 shares by Raghbir Singh to self.

1,500 shares to Manjit Singh, his son.

1,700 shares to Kanwaljit Singh, his son.

2,700 shares to Paranjit Singh, his minor son.

1,700 shares to Harjit Singh, his another minor son.

The aforesaid allotment, it is pleaded, was made in the meeting which was never attended by petitioner No. 1 nor was any notice issued to him.

It is further pleaded that the above devices were adopted by respondent No. 2 and his sons, respondents Nos. 3 to 6, with a view to obtain a

majority holding in the equity capital of the company and defeating for all times to come, the right of petitioner No. 2 who was a shareholder of the

company to the extent of 50 per cent. at the time of its inception. The above devices were adopted by respondent No. 2 in league and in

consultation with Shri D.C. Gupta, who was the auditor of the company. He never looked into the fictitious entries which had been made. On the

other hand, he himself got 10 shares allotted to the Punjab Management Consultants Private Limited of which he is the managing director. On the

aforesaid facts, it was sought to be made out that 1,500 shares which had been allotted to petitioner No. 1 were unnecessarily not shown in the

register of members; that the shares of Smt. Chanan Devi had been transmitted in the name of Paranjit Singh although petitioner No. 1 was entitled

to 750 shares out of the same ; that the allotment of 37,336 shares to the three finance companies, i.e., Sethi Finance Company, Sikri Finance

Company and Sachdeva Finance Company, was fictitiously made and consequent transfers thereafter were in violation of Articles 11 and 12 of the

articles of association of the company ; that 20,115 shares were allotted to 40 persons by utilising black money and showing fictitious names of

persons who never applied nor were parties to the transfer which transfers were illegal in view of the provisions of Articles 11 and 12 of the

articles of association of the company ; that 9,011 shares were allotted without any meeting being conducted in this behalf and 10 shares were

allotted to the Punjab Management Consultants Private Limited of which Shri L. C. Gupta, auditor of the company who was the managing

director. The prayer was, thus, to call for the records of the company and to rectify the register of members so as to reflect the correct

shareholding of the company.

The claim of the petitioners was endeavoured to be defeated by two identical written statements, one filed on behalf of respondents Nos. 1, 2, 5

and 6 and the other by respondents Nos. 3 and 4. It was pleaded by way of preliminary objections that the petition was not maintainable in the

present form as the same had not been supported by an affidavit as contemplated under Rule 21 of the Companies (Court) Rules, 1959. The

petition was stated to raise a whole lot of disputed questions of fact which could not be gone into u/s 155 of the Companies Act, 1956. On the

merits, the case was also contested by pleading that the correct picture of the share allotment as per the register of members of the company was

as under :

SHARE POSITION FROM 1974 TO DATE

S. Raghbir Singh S. Gurcharan Singh

S. Raghbir Singh 50 S. Gurcharan Singh 50

1976B/f 50 B/f 50

S. Raghbir Singh 950 Smt. Jaswant Kaur 300

Smt. Hardip Kaur 300 Sh. Gurpreet Singh 400

Sh. Manjit Singh 500 Miss. Sonia 300

Sh. Kanwaljit Singh 550 Miss. Ramanjit 300

Sh. Harjit Singh 500

Sh. Paranjit Singh 100

2,950 1,350

B/f 2,950 B/f 1,350

June, S. Raghbir 500 1,350

Singh 1977

3,450

June, 1978B/f 3,450 B/f 1,350

June, 1979B/f 3,450 B/f 1,350

June, 1980B/f 3,450 B/f 1,350

June, 1981B/f 3,450 B/f 1,350

Smt. Hardip Kaur 400 S. Gurpreet Singh 600

S. Manjit Singh 450 Miss. Sonia 350

S. Kamaljit Singh 500 Miss. Ramanjit 300

S. Harjit Singh 500

S. Paranjit Singh 500

5,850 2,600

June, 1982B/f 5,850 B/f 2,600

June, 1983B/f 5,850 B/f 2,600

Smt. Hardip Kaur 800 Smt. Jaswant Kaur 1,200

S. Manjit Singh 550 S. Gurpreet Singh 500

S. Kamaljit Singh 450 Miss. Sonia 850

S. Harjit Singh 500 Miss. Ramanjit Kaur 950

S. Paranjit Singh 850

9,000 6,050

June, 1984B/f 9,000 B/f 6,050

S. Raghbir Singh 900 S. Gurcharan Singh 550

S. Manjit Singh 1,700 S. Gurpreet Singh 1,650

S. Kamaljit Singh 1,600

S. Harjit Singh 1,650

S. Paranjit Singh 1,400

16,250 8,350

June, 1985B/f 16,250 B/f 8,350

Smt. Jaswant Kaur 75

S. Gurpreet Singh 100

Miss. Sonia 1.240

Miss. Ramanjit Kaur 1.185

16,250 11,650

June, 1986B/f 16.250 B/f 11,650

S. Raghbir Singh 1,500

S. Manjit Singh 1,500

S. Kamaljit Singh 1,700

S. Paranjit Singh 2,700

25,350 11,650

June, 1987B/f 25,350 B/f 11,650

S. Raghbir Singh 10,060

S. Manjit Singh 10,055

S. Kamaljit Singh 12,251

S. Harjit Singh 11,980

S. Paranjit Singh 14.600

84.296 11.650

October 15, 1986.

S. Raghbir Singh 84,296

S. Gurcharan Singh 11,650

Outsiders 40

Total shares 95,986

at Rs. 100 each

Rs. 95,98,600.

It was, thus, pleaded that there was no annual return or any return of shares filed by the company on July 22, 1985, and, therefore, the

question of showing additional 1,500 shares in the name of Gurcharan Singh did not arise. Gurcharan Singh had ceased to be the director of the

company with effect from June 24, 1987. The relationship of the parties was admitted and it was pleaded that Smt. Chanan Devi held 1,500

shares of the company and she died on November 2, 1984. The shares of the late Smt. Chanan Devi were transmitted in the name of Paranjit

Singh in accordance with the will executed by her. Application for transmission of 1,500 shares of Smt. Chanan Devi, after having been endorsed

by the Registrar of Companies, was filed with the company along with the photostat copy of the will for and on behalf of Paranjit Singh which was

considered by the board of directors in their meeting held on October 15, 1986, in which the petitioner was present himself and the transmission

was approved by the board of directors of the company. It was further pleaded that the company was doing excellent business and wanted to

expand business and go for the export of the product of the company in a big way and as such the company needed finances. The company

obtained finances from the firms, Sethi Finance Company, Sikri Finance Company and Sachdeva Finance Company. All the said firms are the sole

proprietorships and are in the control of the brothers-in-law and nephew of petitioner No. 1 and respondent No. 2. Petitioner No. 1 was himself

director of the company in the year 1981 and was fully aware of the investments which were made by the brothers-in-law and nephew of

petitioner No. 1 and respondent No. 2. It had been agreed that the loan/deposit given by the said firms shall be given 18 per cent. interest. The

said firms rightly advanced money and gave deposits as they were aware of the fact that the company was doing good business and was

contemplating to extend and expand the export business as well. Petitioner No. 1 and respondent No. 2 had agreed to accept the deposit/loan

from their relations as the amount would be available without going through numerous formalities as were required if the amount was to be taken

from banks or other financial institutions. It was denied that the said deposits are fictitious deposits and no interest was paid by the company to the

said finance companies. The other transfer of shares as have been noticed in the petition were also pleaded to be legal, proper and in accordance

with the provisions of the Companies Act and the rules framed thereunder.

The petitioners filed the replication controverting the contents of the written statement.

Company Petition No. 134 of 1987 was filed on November 3, 1987, by Gurcharan Singh, his wife, two daughters and his son, Gurpreet

Singh, against Raghbir Cycles Private Limited and Raghbir Singh u/s 433 read with Section 439 of the Companies Act, 1956, for the winding up

of the respondent-company.

Briefly, the case of Gurcharan Singh petitioner and others was that Raghbir Cycles Private Limited was registered on August 15, 1974. The

initial authorised capital of the company was Rs. 10 lakhs divided into 10,000 equity shares of Rs. 100 each. At the time of incorporation,

petitioner No. 1 had 50 shares and so had respondent No. 2, and, thus, the proportion of shares was 50 per cent. each. Further allotment of

shares was made totalling 95,986 shares of Rs. 100 each by increasing the authorised capital of the company to Rs. 1 crore. The authorised

capital was increased from Rs. 10 lakhs to Rs. 30 lakhs in the year 1983 and to Rs. 60 lakhs in the year 1984 and to Rs. 1 crore in the year 1985.

The petitioners held the following shares totalling 13,150 shares of Rs. 100 each :

Gurcharan Singh 2,100 shares

Jaswant Kaur, wife of 2,375 shares

Gurcharan Singh

Miss Soniya 2,740 shares

Gurpreet Singh minor 3,250 shares

Miss Ramanjit Kaur 2,685 shares

13,150 of Rs. 100 each.

The shareholding aforesaid did not include the shares of Smt. Chanan Devi, mother of petitioner No. 1 and respondent No. 2 who, it is

pleaded, were equally entitled to receive half of the shareholdings in their names and which shares have been fictitiously transferred by respondent

No. 2 in the name of Paranjit Singh through a forged will dated January 10, 1984, alleged to have been executed by Smt. Chanan Devi. The initial

shareholding of the company was divided into two groups of the shareholders of the company, one headed by Raghbir Singh, respondent No. 2

and the other by petitioner No. 1. The shareholding of the group of petitioner No. 1 in the year 1983 was as under :

Shareholding of the group of Shareholding of group of Raghbir

petitioner No.1 Singh, respondent No.1

19836,050 shares 9,000 shares.

(Additional 1,500 shares of Smt. Chanan Devi, mother of petitioner No. 1 and respondent No. 2 who was alive at that time. In addition, 20 shares

were being held by persons other than the two groups mentioned above).

1984 8 250 shares 16,250 shares.

(Additional 1,500 shares of Smt. Chanan Devi, mother of petitioner No. 1 and respondent No. 2, who was alive at that time. In addition, 40

shares were being held by persons other than the two groups mentioned above).

1985 11,650 shares 16,250 shares.

(June 30, 1985)

(Additional 1,500 shares of Smt. Chanan Devi, mother of petitioner No. 1 and respondent No. 2, who was alive at that time. In addition, 40

shares were being held by persons other than the two groups mentioned above).

1985 13,150 shares 16,250 shares.

(December 31, 1985)

(With the addition of 1,500 shares allotted by the company on July 22, 1985).

(Additional 1,500 shares of Smt. Chanan Devi, mother of petitioner No. 1 and respondent No. 2, who was alive at that time. In addition, 40

shares were being held by persons other than the two groups mentioned above).

It is further pleaded that the affairs of the company were being managed since its incorporation by respondent No. 1. Petitioner No. 1 was

managing the sales organisation of the products of the company at Calcutta and having full faith in the integrity and honesty of respondent No. 2.

However, it transpired in the year 1981 that the following deposits were shown to have been made by the various companies as mentioned below:

Sethi Finance Company Rs. 2,61,050 which was increased to

Rs11,15,550 on June 30, 1983.

Sikri Finance Company Rs. 3,23,025 which was increased to

Rs. 11,98,425 on June 30, 1983.

Sachdeva Finance Company Rs. 2,20,875 which was increased to

Rs. 10,19,375 on June 30, 1983.

On these amounts, interest had been paid by the company. Sardar Sampuran Singh was shown as proprietor of Sachdeva Finance Company.

This company never existed nor it made any deposit to the company. The same position was with regard to the other two finance companies. The

interest amounts were paid by bearer cheque up to June 30, 1985, on July 4, 1985. Shares of value equivalent to the credit standing against the

various companies were converted into shareholdings of Narinder Singh, proprietor of Sethi Finance Company, Sardar Devinder Singh, proprietor

of Sikri Finance Company and Sampuran Singh, proprietor of Sachdeva Finance Company. Narinder Singh, Devinder Singh and Sampuran Singh

had neither the capacity to deposit the amounts as alleged and as reflected in the books of account of the company nor had they applied for the

allotment of any shares to them in the equity share capital of the company. The interest which was paid by bearer cheques was received by

persons other than the drawee of the cheques and mostly by respondent No. 2 or his sons, namely, Manjit Singh and Kanwaljit Singh, after June

30, 1985, these credit entries were converted into share capital of the company in the respective names of the proprietors of the finance

companies. The return of allotment of 37,336 shares filed with the Registrar of Companies as on July 4, 1985 was placed on the records of the

case. These shares, it is pleaded, were subsequently got transferred, i.e., 12,251 shares, in the name of Narinder Singh were transferred in the

name of Kanwaljit Singh son of Raghbir Singh. 13,000 shares in the name of Devinder Singh were transferred in the name of Paranjit Singh, son of

Raghbir Singh, and 11,980 shares in the name of Sampuran Singh were transferred in the name of Harjit Singh. On August 1, 1984, 20,115 shares

were alleged to have been allotted to 40 persons. The names of these 40 persons have been separately given in annexure-D. Out of these 40

persons, there were only two employees who were working in the company whereas 38 persons were non-existing. Out of these, 20,115 shares

so allotted to the shareholders were subsequently got transferred by respondent No. 2 in his own name. 10,680 shares were transferred in the

name of Raghbir Singh and balance of 10,055 shares were got transferred in the name of Manjit Singh, son of Raghbir Singh. No transfer deed

was ever executed by the shareholders nor did the shareholders to whom the allotments of shares were made ever pay the amount said to have

been paid at the time of allotment.

On June 30, 1986, another lot of 9,100 shares of Rs. 100 each were allotted by Raghbir Singh, as under :

1,500 shares to self.

1,500 shares to Manjit Singh, his son.

1,700 shares to Kanwaljit Singh, his son.

2,700 shares to Paranjit Singh, his minor son.

1,700 shares to Harjit Singh, his another son.

It is further pleaded that no meeting of the board of directors was held. Petitioner No. 1 who was one of the directors of the company never

received any notice nor did he attend any such meeting whereby these allotments may have been sanctioned. Again on March 5, 1984, respondent

No. 2, appointed Kanwaljit Singh, one of his minor sons, a director of the company without holding any meeting or issuing any notice to petitioner

No. 1. He also appointed his other son, Manjit Singh, a director of the company on June 30, 1983. It is further pleaded that under law, no minor

could be appointed a director of the company. Further, the appointment of Kanwaljit Singh as director of the company was neither confirmed in

the annual general meeting which was held on December 31, 1984, nor was a return in Form 32 submitted to the Registrar of Companies after the

said annual general meeting. The petitioner, Ramanjit Kaur, it is pleaded, had two accounts, i.e., current account and fixed deposit account. From

the current account of the said petitioner, a sum of Rs. 5,000 was transferred on December 24, 1983, to Manjit Singh, son of Raghbir Singh, and

similarly on February 29, 1984, from her fixed deposit account a sum of Rs. 25,000 was transferred to Paranjit Singh as gift. It is pleaded that the

said petitioner never made any gift nor could any gift be made by a minor and the same money was utilised for facilitating the purchase of shares by

Manjit Singh and Paranjit Singh, sons of Raghbir Singh. Similarly, from the fixed deposit account of Miss Soniya, petitioner, a sum of Rs. 25,000

was transferred to Paranjit Singh on February 29, 1984, and a sum of Rs. 5,000 was transferred to Manjit Singh on December 24. 1983, from the

current account. Miss Soniya, it is pleaded, never made any such gift and these transfers were made with a view to show credit entries to facilitate

the purchase of shares by Paranjit Singh and Manjit Singh. Various other amounts from the accounts of other petitioners were also likewise

withdrawn. There is a complaint of not holding general meetings after December 31, 1985. There is also a complaint that the balance-sheet of the

company has not been passed in accordance with Section 210 of the Companies Act, 1956. Further, with a view to defeat the purposeful

profitability of the company, respondent No. 2, Raghbir Singh, started another concern by the name and style of Raghbir Bicycles International in

the premises of the company and that concern is run under the sole proprietorship of Mrs. Hardeep Kaur, wife of respondent No. 2, This concern,

it is pleaded, is manufacturing cycle parts and utilising the machines and other assets of the respondent-company and is diverting the profits of the

company to this concern. By this device, what the company would have gained or earned is being diverted to the coffers of Smt. Hardeep Kaur. It

is further pleaded that the company receives different quotas of steel, coal, nickel, etc. These quotas are of the total value of about Rs. 10 lakhs

per mensem. The quotas were supplied either monthly or by intervals of two or three months but the total value of the receipts during the year is

about Rs. 1 crore. These quotas have been allotted to the respondent-company for the manufacture of bicycle parts and other articles but instead

of utilising the same, it is pleaded, the respondent-company is selling the same in the black market. For example, ORC sheets and rods are

received in the items of ""steel"" but they cannot be disposed of as such. The device adopted by the respondent-company is to sell the same by

saying they were scrap. Such sales have been effected as scrap to the following parties and this list, it is pleaded, not only includes the disposal of

scrap of steel but also nickel scrap :

Sonu Steels, Ludhiana (Steel scrap)

Sanjay Sales Corporation, Ludhiana do.

Standard Castings, Ludhiana do.

3. K. Metal Works. Ludhiana do.

Saraswati Metal Works, Ludhiana do.

Modern Steel Industries, Ludhiana do.

Makkar Metal Industries (Nickel scrap)

Mahesh Iron Store, Ludhiana (Steel scrap)

B. C. Jain and Company, Ludhiana do.

Amar Steels, Ludhiana do.

R. K. Steels (India) do.

Ashoka Brothers and Co. do.

Durga Steels, Ludhiana do.

Gupta Iron and Chemicals (Nickel scrap)

Kochhar Iron Traders, Ludhiana (Steel scrap)

Malerkotla Steel Industries, Ludhiana do.

Bicycle Wheel (India), Ludhiana do.

New Bharat Udyog, Ludhiana do.

Om Parkash and Co., Ludhiana (Nickel scrap)

Om Sales Corporation, Ludhiana (Steel scrap)

R. S. Steel Corporation, Ludhiana do.

Ravi Industries, Ludhiana do.

R. R. Steel Industries, Ludhiana do.

R. S. Steel Traders, Ludhiana do.

Ludhiana Rolling Mills, Ludhiana (Steel scrap)

Antarctic Industries, Ludhiana do.

Arti Steels, Ludhiana do.

Vijay Foundry Works, Ludhiana do.

Grover Foundry Works, Ludhiana do.

Similarly, coal quota was never received in the factory but the same was sold at the railway siding. By this, the money is pocketed by

respondent No. 2 and instead of coal, rice husk was used for firing the boiler.

There is no need to go into other allegations and suffice it to say that it is pleaded that the assets of value of over Rs. 2 1/2 crores have been

found with Raghbir Singh and his two sons, which have been siphoned off from the assets of the company by illegal and objectionable activities and

have been utilised by Raghbir Singh and his two sons for their private ends by taking either fixed deposit receipts or keeping the money in pillows

and quilts which were seized by the Income Tax Department officials. It is further pleaded that all the books of account which have been seized by

the department prove conclusively the allegations which have been made by the petitioners with respect to the fraudulent credit entries of the three

finance companies, the payment of commission and the withdrawals of money by Raghbir Singh and his two sons from the bank accounts in the

Punjab and Sind Bank, Miller Ganj, Ludhiana, Oriental Bank of Commerce and Punjab and Sind Bank, Guru Nanak Engineering College Branch,

Ludhiana.

From the facts stated above, it is ultimately prayed that an order for winding up of the company be passed and the official liquidator be

appointed to take charge of the company.

This petition, too, has been seriously opposed by the respondents as in the written statement filed by the respondents, by way of preliminary

objections, it has been pleaded that the petition u/s 433 read with Section 439 of the Companies Act, 1956, is not maintainable as the petitioners

have already agitated the matter by filing a petition under Sections 397 and 398 of the Companies Act, 1956, on the very same grounds, i.e.,

Company Petition No. 78 of 1987, to which a detailed reply has already been submitted. It is also pleaded that the entire story of the claim vis-a-

vis the shares of the petitioners has been reiterated in another petition, i.e., Company Petition No. 79 of 1987, filed u/s 155 of the Companies Act,

1956, seeking rectification of the members of the company. Therefore, the two petitions with regard to one relief cannot proceed simultaneously.

The petition is stated to be not disclosing any case for winding up of the company as made out u/s 433(f) of the Companies Act, 1956. It is

pleaded that the company is functioning smoothly and is successful in achieving the objects as contained in the memorandum of association of the

company. The company has already completed the building and respondent No. 2 has already obtained no objection certificates from all the

prescribed authorities but unfortunately the petitioners have filed a frivolous civil suit against respondent No. 2 and other directors of the company

by misstating the facts before the civil court. The trial court has exceeded the jurisdiction while granting ex parte injunction, vide order dated

November 24, 1987. 1,500 shares of Rs. 100 each belonging to Smt. Chanan Devi were transferred by virtue of will executed by the late Smt.

Chanan Devi and it is pleaded that the said will was never questioned by anyone. The will was executed on January 10, 1994 (?). The correct

picture of the respective shareholding of the shareholders of the company from its inception has been given at pages 9, 10 and 11 of the reply and

the allegations of the petitioners that petitioner No. 1 and respondent No. 2 were entitled to the transmission of 1,500 shares in equal halves, after

the death of Smt. Chanan Devi have been refuted. The other allegations of the petitioners as have been noticed above have also been refuted in a

detailed written statement which is accompanied by several documents.

After these two petitions had matured for arguments and arguments in fact had been heard for about 8/9 days, the parties to this litigation filed

two applications, one under Rule 9 of the Companies (Court) Rules, 1959, for appointment of an umpire to decide the disputes between the

parties. The same was filed on behalf of the petitioners. The other application was filed on behalf of the respondents under Order 23, Rule 3 read

with Section 151 of the CPC and Rule 9 of the Companies (Court) Rules, 1959, for appointment of an umpire to reconcile the dispute between

the parties. This court, on October 28, 1992, passed the following order on the aforesaid applications :

After going through the contents of the applications and hearing learned counsel for the parties, I order that the entire dispute between the parties

would be decided by Shri D.S. Tewatia, senior advocate, practising in the Supreme Court. Mr. D.S. Tewatia will act as an arbitrator as also

umpire. He would hear the parties or counsel and not the attorneys of the parties and would record whatever proceedings he might deem

necessary and decide the dispute with regard to the companies known as Raghbir Cycles (P) Ltd. and Overseas Cycles Company. It will be open

to the parties to place necessary evidence before the arbitrator/umpire to show that the other properties even though individually owned were

acquired through the funds of the company and if that is shown to the satisfaction of the umpire, it shall be open for him to go into the dispute with

regard to the said properties as well. The decision of the arbitrator/ umpire shall be final and binding upon the parties and shall not be called in

question in any court of law. It is made clear that it is the ambit and scope of both Petitions Nos. 79 of 1987, and 134 of 1987 which shall be

before the umpire/arbitrator for decision.

The remuneration of the arbitrator/umpire shall be Rs. 1 lakh and that would be shared by Gurcharan Singh, petitioner, and the respondent,

Raghbir Singh, equally from their own funds and not from the funds of the company and/or the firm. Any other expenditure that might be incurred

by the arbitrator/umpire for visiting Calcutta or Ludhiana or for any other purpose whatsoever shall be shared by the parties equally. It will be in

the sole discretion/jurisdiction of the umpire to pass any interim orders inclusive of restraint on the parties who are not to alienate the property or

create liability. The parties through their counsel have been directed to appear before the arbitrator/umpire on November 8, 1992.

At this stage, the parties agree that all proceedings inter se (civil and criminal) pending anywhere in the country would remain stayed.

This case will come up on January 29, 1993, to await the decision of the arbitrator/umpire.

Shri D.S. Tewatia, retired Chief Justice of the Calcutta High Court and now a senior advocate practising in the Supreme Court, vide his letter

dated January 27, 1993, addressed to the Registrar (Judicial) of this court sent the award as envisaged in the order of this court dated October 28,

1992, along with the minutes of the proceedings. It is on receipt of this award that the applications referred to in the beginning of the judgment

which are being dealt with and shall be disposed of by this order were filed by the parties to this litigation. Before, however, the objections made

out in the application filed by the respondent are noticed, it shall be useful to see as to how the arbitrator proceeded in the matter. The first meeting

was held by the arbitrator on November 8, 1992, Shri L.M. Suri, advocate, appeared for the petitioners and Shri J.S. Narang with Mr. P.S.

Chhina, advocates, appeared for the respondents. Learned counsel appearing for the parties agreed before the arbitrator to appear before him on

November 21, 1992, for filing their respective claims. On the adjourned date, i.e., November 21, 1992, whereas the petitioners'' counsel, Shri

L.M. Suri, was present for Gurcharan Singh, petitioner, Shri J.S. Narang appeared with his client, Shri Raghbir Singh. The following order was

passed on the said date :

Mr. Suri has placed on the record claim petition as directed on the last date of hearing, Mr. P.S. Chhina undertakes to file the requisite claim

petition of his side on December 5, 1992, after having given a copy thereof to Mr. Suri in advance. Mr. Suri would hand over the copy of the

claim petition to Mr. Chhina while receiving the copy of the claim petition from Mr. Chhina. Copies of the two applications filed along with the

claim petition one for injunction restraining transfer of the property Miscellaneous Petition No. 1 and the other for inspection of record

Miscellaneous Petition No. 2 have, however, been given to Mr. Chhina today. Both the sides undertake to file a reply to the respective claim

petition, including the application aforesaid, on December 19,1992. Both sides agree to appear on the said date, i.e., December 19, 1992, before

me at A-27/15 DLF Qutab Enclave Phase-I, Gurgaon at 11.30 a.m. Mr. Suri has paid/made over a draft for Rs. 50,000 and Mr. Chhina has

paid/made over a draft for Rs. 25,000 and has undertaken to pay the remaining Rs. 25,000 by December 19, 1992.

On the adjourned date, i.e., December 19, 1992, no proceedings could be carried out as counsel for the parties had telegraphically made a

joint request to grant more time to enable them to file replies to the respective claim petition and also requested that the next date of hearing be

fixed at Chandigarh on December 29, 1992. Accordingly time for filing replies was extended up to December 29, 1992, and the next date was

fixed as December 29, 1992, at Chandigarh. On December 29, 1992, Shri L.M. Suri with Mr. Deepak Suri appeared along with the petitioner,

Gurcharan Singh, before the arbitrator whereas Shri J.S. Narang with Mr. P.S. Chhina appeared for the respondent, Raghbir Singh, Both the

parties submitted replies to the respective claim petitions. Mr. Chinna also submitted replies to the applications earlier submitted by Mr. Deepak

Suri. Both counsel requested that the matter be taken up on December 30, 1992, at 3 p.m. for consideration of the applications in question. The

matter was, thus, adjourned to December 30, 1992. On the adjourned date of hearing, parties with their counsel appeared before the arbitrator

but the matter was adjourned to January 16, 1993, to enable them to file rejoinders to the respective replies and for consideration of the

application for inspection filed on behalf of Shri Gurcharan Singh. With regard to the restraint order, it was observed by the arbitrator that an order

to that effect had already been passed in C. A. No. 19 of 1991 in Company Petition No. 134 of 1987 on May 3, 1991, and that being so it was

ordered that the said order be reiterated. The matter was, however, taken up on January 17, 1993, when both the parties were present with their

respective counsel. Counsel submitted rejoinders to each other''s respective replies to the respective claim petition of each party. The hearing was

adjourned to January 24, 1993, on which date it was ordered by the arbitrator that only Gurcharan Singh and Raghbir Singh, i.e., the concerned

parties would appear without their counsel to make efforts at reconciliation. On the next date of hearing, Gurcharan Singh and Raghbir Singh

placed documents before the arbitrator. They made joint statements to the following effect :

The arbitrator/umpire is requested to give his award on the basis of the material already submitted before him by either party as we do not wish to

adduce any evidence documentary or oral.

After recording the aforesaid statement, the arbitrator passed the order that the award shall be announced in due course. On January 27,

1993, the proceedings reveal that the award was signed and the same along with two signed copies thereof and the minutes of the proceedings

were sent to the High Court by courier so that the same was submitted before this court on January 29, 1993, the date which had been fixed for

awaiting the award.

In the award, the arbitrator, after noticing the two petitions, bearing No. 79 of 1987 u/s 155 of the Companies Act, 1956, and No. 134 of

1987 u/s 433 read with Section 439 of the Companies Act, 1956, as also the application under Rule 9 of the Companies (Court) Rules and the

application under Order 23, Rule 3 read with Section 151 of the Civil Procedure Code, referred to above, as also the order passed by this court

appointing the arbitrator as also the proceedings that have taken place before him and taking into consideration the documents furnished by each

party in support of their respective claims decided as under :

I. Company Petition No. 134 of 1987 is dismissed.

II. The Overseas Cycles Company shall remain the sole proprietary concern of Shri Gurcharan Singh, petitioner, and no one would have any

right/share in the said company. The respondent, Raghbir Singh, and his sons shall with immediate effect withdraw proceedings of any nature

pending before any court, Tribunal or authority against Shri Gurcharan Singh or his family members, i.e., wife, son and daughters, concerning the

property or affairs of Overseas Cycle Company or concerning any claim to any share in the said company or its property or premises owned or

held on lease by it or by Shri Gurcharan Singh on its behalf.

III. The alleged will of Smt. Chanan Devi, mother of the petitioner and the respondent, allegedly executed by her on January 10, 1984, in favour of

Paranjit Singh, son of Shri Raghbir Singh, respondent, and witnessed by respondent attested as witness by the said respondent, Shri Raghbir

Singh, and a neighbour of his and which was got post facto registered on October 7, 1985, after the death of Smt. Chanan Devi, on November 2,

1984, is held to be invalid in law and the beneficiary named therein shall acquire no benefit thereunder.

IV. As per document submitted before me by Shri Raghbir Singh, respondent, which depicted the share position of the respective families (headed

by the petitioner and the respondent) from the year 1984, up to date, the two brothers to begin with held 50 shares each in Raghbir Cycles Private

Limited. Thereafter, the parity changed and the ratio of the respective shareholding of the two families fluctuated. In the year 1983, the ratio came

to be Raghbir Singh and his family 60 per cent. and Gurcharan Singh and his family 40 per cent. In the year 1985, Raghbir Singh and his family

held 16,250 shares 58 1/2 per cent. and Gurcharan Singh and his family held 11,650 shares, i.e., 41 1/2 per cent. Up to this point the parties are

ad idem. Further addition to the above shareholding positions is in dispute. In this regard, I decide and direct-

(i) That out of 1,500 shares held by Smt. Chanan Devi in Raghbir Cycles Private Limited, 750 shares shall belong to Shri Gurcharan Singh and

shall be deemed to have belonged to him from the moment of her death.

(ii) That 37,336 shares allegedly acquired by the three sons of Shri Raghbir Singh, viz., Kanwaljit Singh--12,256, Paranjit Singh--13,100 and

Harjit Singh--11,980 and 20,115 shares acquired by Shri Raghbir Singh, respondent--10,060 and son, Manjit Singh--10,055 as referred to in

para 9 of Company Petition No. 79 of 1987, and detailed in paras 9, 13 and 14 of the claim petition of Shri Gurcharan Singh submitted before

me, are not to be owned by them alone. Out of 57,451 shares, Shri Raghbir Singh and his sons would retain only 34,471 shares, i.e., 60 per cent.

and the remaining 22,980 shares are deemed to have been owned by Shri Gurcharan Singh and his family all along from the same relevant date

and these shares shall be treated as paid up shares. The resultant position would be that in regard to 37,336 share mentioned above-

(a) Kanwaljit Singh''s holding shall stand reduced to 7,354 shares;

(b) Pranjit Singh''s holding shall stand reduced to 7,860 shares;

(c) Harjit Singh''s holding shall stand reduced to 7,188 shares;

And in regard to 20,115 shares referred to above-

(a) the shareholding position of Shri Raghbir Singh shall stand reduced to 6036 shares ;

(b) and that of Manjit Singh shall stand reduced to 6,033 shares.

(iii) As regards 9,100 shares referred to in para 7 of the Company Petition No. 79 of 1987, and detailed in para 15 of the claim petition filed

before me by Shri Gurcharan Singh, petitioner, it is decided and directed that out of the said 9,100 shares, Shri Gurcharan Singh and his family

shall be entitled to own 3,640 shares, i.e., 40 per cent. and are held to have been the owners all along from the very date the said shares had been

allotted to Shri Raghbir Singh and/or any of his family members and these shares shall be treated as fully paid up shares. The resultant position of

the shareholding in regard to these shares would be that-

(a) Raghbir Singh''s shareholding shall stand reduced to 900 shares ;

(b) Manjit Singh''s shareholding shall stand reduced to 900 shares;

(c) Kanwaljit Singh''s shareholding shall stand reduced to 1,020 shares ;

(d) Paranjit Singh''s shareholding shall stand reduced to 1,620 shares ;

(e) Harjeet Singh''s shareholding shall stand reduced to 1,020 shares.

(iv) Shri Gurcharan Singh and his family shall be entitled to maintain a shareholding position in Raghbir Cycles Private Limited at least to the extent

of 40 per cent. if he is willing to purchase which means that if even after the reduction of shareholding position of Shri Raghbir Singh and his family

in the said company as detailed earlier, he and his family is left with more than 60 per cent. shares then the shares in excess of 60 per cent. shall be

offered to Shri Gurcharan Singh, petitioner, to be purchased by him if he is willing to purchase. In the alternative, the share capital limit can be

increased to such an extent that it would enable Shri Gurcharan Singh to gain 40 per cent. shareholding in the said company. The option would be

of Shri Gurcharan Singh or as the High Court directs.

The register of members shall be rectified accordingly and shares shall be allotted/transferred accordingly.

(v) There shall be only two directors of Raghbir Cycles Private Limited, viz., Shri Gurcharan Singh and Shri Raghbir Singh or their respective

nominees provided that the parity is maintained between the two families in question.

(vi) Out of the two cinemas owned and operated by Raghbir Cycles Private Limited, Arora Palace Cinema shall be run and operated under the

direct supervision of Shri Gurcharan Singh in his capacity as the director of the said company.

(vii) That the house at 319, Model Town, Ludhiana, is and shall be the absolute and exclusive property of Shri Gurcharan Singh, petitioner.

(viii) S.C.O. at 3 Bentick Street, Calcutta, is the rented premises of Overseas Cycles Company and Raghbir Cycles Private Limited has no right of

any kind in and over the said premises.

(ix) Flat No. 1 (First floor) 10, Lord Sinha Road, Calcutta, is the absolute and exclusive property of Shri Gurcharan Singh as an individual.

(x) That Raghbir Cycles Private Limited shall have no concern with the land and building at Partap Nagar, Ludhiana, which at one point of time,

was owned by Smt. Chanan Devi. The said property is and shall be treated in the ownership of Paranjit Singh.

(xi) Kothi at 2, 3, 4 and 5, Sant Fateh Singh Nagar, Ludhiana, is and shall be the absolute and exclusively owned property of Shri Raghbir Singh

and his sons.

(xii) Shri Gurcharan Singh, petitioner, and his family or Raghbir Cycles Private Limited, shall have no right of any kind whatsoever in the following :

(a) Farm at village Budhewal, Ludhiana or

(b) Sikri Steels (P) Limited built in property unit at Nichi Mangli Focal Point, Ludhiana.

(c) Sikri Exports (P) Ltd.

(d) Raghbir Bicycles International.

(xiii) The factory premises of Raghbir Cycles Pvt. Ltd. and the machinery, tools and its property of any kind shall not be used/utilized in any

manner by Shri Raghbir Singh and his family or Shri Gurcharan Singh and his family for running and promoting companies and firms individually

already floated and run by either family or that may be launched hereafter.

(xiv) That Shri Gurcharan Singh shall account for the rent received of the Flat No. 9 on 7th floor (Chowranghee Chatterjee International) 33-A,

Jawaharlal Nehru Road, Calcutta, as the flat in question is the properly of Raghbir Cycles (Pvt.) Ltd.

(xv) That the respondent, Shri Raghbir Singh, and his family members on the one hand and the petitioner, Shri Gurcharan Singh, and his family

members on the other hand shall not take out any proceeding in any court, tribunal or authority against each other individually or through the

instrumentality of Raghbir Cycles Pvt. Ltd. as the plaintiff or the petitioner regarding past claims to money or property. And all pending

suits/proceedings in any court, tribunal or authority against either side shall be withdrawn by the concerned party with immediate effect.

Date : January 27, 1993.

(Sd.) D.S. Tewatia,

Arbitrator/Umpire.

It is now time to examine the objections preferred by the respondents against the award. It is the admitted position between the parties that if

the objections are accepted, the two company petitions would revive and shall have to be disposed of on the merits, whereas if the objections are

rejected, the applications filed by the petitioner for making the award a rule of the court shall have to be accepted, thus resulting in making the

award a rule of the court and thereby rendering the company petitions infructuous.

The objections as culled out from Company Application No. 45 of 1987 reveal that it is either the procedure in conducting the proceedings

that has been styled to be against law or the unworkability of the decision contained in the award that has been mainly canvassed for accepting the

objections. During the course of hearing, not for a moment was the impartiality with which the arbitrator proceeded with the matter questioned.

However, the first objection as contained in the petition is that the arbitrator has misconducted the arbitration proceedings inasmuch as he

examined the parties separately behind each other''s back like a conciliator and not as an arbitrator. This procedure is not warranted in arbitration

proceedings. Most of the time was spent on the separate meetings and the joint meeting was held only for 10 to 15 minutes. Having found that

there were vast differences between the two brothers and reconciliation was not possible, the learned arbitrator ought to have allowed them

opportunity to assist him in resolving the disputes with the help of their counsel who"" could refer to the documents on the record and argue the case

of their respective clients effectively. It is further pleaded by way of another objection that besides the two brothers, the sons of Raghbir Singh

were also parties to the petition u/s 155 of the Companies Act, 1956, but they were not called for hearing at any time although it was mentioned in

the order appointing the arbitrator that the parties or their counsel shall be heard and not the attorney of the parties. In the manner aforesaid, it is

pleaded that the sons of Raghbir Singh have been deprived of the larger part of their shareholding without hearing them or their counsel. It is further

pleaded that the arbitrator had misconducted himself by picking up the percentage of shareholding of the parties in the year 1983 and 1985

ignoring the latest position in 1986 and there could be no object except to favour Gurcharan Singh to bestow more shares on him and his family so

that they could retain 40 per cent. shareholding of the company instead of 31 per cent. held by them in the year 1986. It is further pleaded that in

Company Petition No. 79 of 1987, the allotment of 9,100 shares was not challenged but the arbitrator has cancelled the same in Clause IV(3) of

his award whereby the shareholding of Raghbir Singh and his sons has been reduced to their prejudice. It is also pleaded that the award is beyond

the order of reference as nowhere in Company Petition No. 79 of 1987 and Company Petition No. 134 of 1987 was any request made for

making arrangements for the future management of the company Raghbir Cycles Private Limited whereas the arbitrator had directed in Clause (v)

of his award that there shall be only two directors of Raghbir Cycles Private Limited, namely, Shri Gurcharan Singh and Shri Raghbir Singh or their

respective nominees and that parity was to be maintained between the two families. In Clause VI, the arbitrator has handed over the management

of Arora Palace Cinema to Gurcharan Singh in his capacity as director of the said company. The said two provisions in the award are contrary to

the statutory provisions of the Indian Companies Act, inasmuch as the group holding the majority of shares has been placed at par with the group

of shareholders holding the minority of shares. It is also pleaded that a base has been laid for creating a deadlock in the company. It was known to

the arbitrator that the two brothers, Raghbir Singh and Gurcharan Singh, who were made directors were not on speaking terms and, therefore,

would not sit together to decide about the affairs of the company. It is also pleaded that there is no provision in the Companies Act according to

which the business of the company can be divided amongst the directors for management. There has to be prepared only one annual balance-sheet

of the company and all the accounts of the company are to be recorded in one set of books. The management as a whole vests in the board of

directors and there is no provision to make it obligatory for Gurcharan Singh to render accounts to the company of the Arora Palace Cinema

whose management has been entrusted to him. If he does not render the accounts of the cinema to the company, no balance-sheet can be

prepared as the accounts of the company will be incomplete. It is further the case of the respondent that both the cinema houses are owned by the

company and are located in the same premises. There is only one way to the cinema halls. There is only one booking window for both the cinema

houses and separate management of each cinema house is not possible. It will create operational difficulties in the running of the cinema shows.

There will always be conflict between the employees of the company and those of Gurcharan Singh. It is, thus, pleaded that the directions given in

the award were unworkable and void being against the provisions of the Companies Act.

The next objection of the respondent is that the arbitrator has awarded Overseas Cycle Company to Gurcharan Singh as a sole proprietory

concern against the documents on record which include judgments by the courts as also that the arbitrator has not read and applied his mind to the

entire evidence on the record. The parties while giving him authority to decide the case on the basis of the documents already on the record rightly

thought that he would go through those documents with the help of counsel for the parties. That not having been done, mistakes have appeared in

the award and most of the decisions are not borne out by the documents on the record. The award is further objected to on the ground that the

arbitrator had directed in Clause VII of the award that the house at 319, Model Town, Ludhiana, shall be the absolute and exclusive property of

Gurcharan Singh. This house belongs to the company and was purchased through its funds. The sale deed with regard to this house is also in the

name of the company and is also on the records of the case. In the order of reference, it was stated that it would be open to the parties to place

necessary evidence before the arbitrator/umpire to show that the other properties even though individually owned were acquired through the funds

of the company and if that is shown to the satisfaction of the umpire, it will be open to him to go into the dispute with regard to the said properties

as well. It is pleaded that it was not said in the order of reference that any property of the company would be given to an individual. Gurcharan

Singh, it is pleaded, is owner of shares of the company along with his family members and the arbitrator has stated that he will continue to own 40

per cent. of the shares. In spite of this, the company''s property has been given to Gurcharan Singh which is beyond the scope of Company

Petitions Nos. 79 and 134 of 1987, and the order of reference made by this court. The award is also asked to be rejected on the ground that one

of the properties in dispute was a godown at 12, Ganesh Chander Avenue, Calcutta, which was claimed by the company as its property on rent

but it has been grabbed by Gurcharan Singh. Gurcharan Singh has admitted that the tenancy rights were of the company Raghbir Cycles Private

Limited and he was prepared to return the said premises if the company starts its business at Calcutta. The learned arbitrator has not given any

award with regard to this item of the company. Similarly, no award has been made with regard to one S.C.O. at 3, Bentick Street, Calcutta, in

spite of the fact that claim had been laid by Raghbir Cycles Private Limited and various documents had been placed on record in support of this

claim.

The matter with regard to the will as decided by the arbitrator has also been objected to.

The last objection is that in Clauses VII, VIII and IX, the arbitrator has created rights in immovable property in favour of Gurcharan Singh and

Overseas Cycles Company. The award containing these clauses requires compulsory registration u/s 17(1)(e) of the Registration Act. The award

having not been registered cannot be made rule of the court nor can a decree be passed on the basis thereof.

In the reply filed on behalf of the petitioners by way of preliminary objections, it is pleaded that the objection petition is not competent in law as

it had been agreed between the parties that the decision of the arbitrator/umpire shall be final and binding upon the parties and shall not be

questioned in any court of law. On the merits also the objections as made out above have been stated to be incorrect. It is pleaded that the umpire

had meetings with both the parties to their satisfaction and both of them had given in writing that they did not want to lead any other additional

evidence or present any other documents. It was agreed by the parties and counsel for both the parties on January 16, 1993, when the case was

adjourned to February 6, 1993, that the said date had been given for reconciliation between the parties and the presence of their counsel was not

necessary. It is also made out from the reply filed that the arbitrator had not misconducted himself in examining the parties separately behind each

other''s back like a conciliator. The scope and jurisdiction of the arbitrator was to be an umpire and an arbitrator. There was no such procedure

prescribed and it was incorrect that only little time was spent with the two parties by the umpire. In fact the whole day was spent with the two

parties who had presented their case respectively. It is also pleaded that none of the parties desired the help of their counsel to refer to the

documents and both the parties gave it in writing that they did not want to refer to any other documents. It is further pleaded that the real dispute

was between the two brothers who represented themselves, their wives and their children and at no stage during the five years in the High Court

did the family members of any of the brothers participate in the proceedings. In fact, the sons of Raghbir Singh were specifically impleaded as

parties in the petition u/s 155 of the Companies Act and they were represented by their father throughout. In fact Raghbir Singh had attended to

the affairs along with his sons but did not show any inclination for any further representation by any of the parties. In so far as the objections that

the arbitrator has misconducted himself by picking up the percentage of shareholdings of the parties in the year 1983 and 1985 ignoring the latest

position of 1986 is concerned, it is pleaded that the allegations of the petitioners all through were that Raghbir Singh and his sons had suddenly

increased their shareholding in 1985 to the detriment of Gurcharan Singh and his family and the umpire had tried to peg down the shares of the

parties to 60 : 40 ratio. In fact the correct ratio should have been 50 : 50 as both the brothers had equal shares in the company. It was denied that

Gurcharan Singh did not challenge the allotment of 9,100 shares. His main case was that Raghbir Singh and his sons could not increase their

shareholding to the detriment of Gurcharan Singh and, therefore, the entire gamut but (sic) was of allotment of shares to increase the percentage of

shares of Raghbir Singh. It is denied that the award is beyond the order of reference. The arrangement for future management is part and parcel of

the reference because Gurcharan Singh had filed a winding up petition and it is within the ambit and scope as also the authority of the umpire and

the court to provide for future management of the company. The arbitrator has rightly directed that there shall be only two directors. The plea of

the objector that it would not be possible to run the cinemas together has been refuted. It is also pleaded that there will be no difficulty in running of

the company. It has been made clear by the umpire that the company would be run by the directors being both the brothers or their nominees.

Therefore, no part of the award is null and void. It is further pleaded that there is no question of preparation of two annual sheets. In fact it is well

known that in large companies, various directors look after the work of the company. With regard to workability of the cinema hall, it is denied that

there is only one way to the cinema hall or only one set of booking windows and there is no provision of separate management of the two cinemas.

It is pleaded that although there is only one plot on which two cinemas are built they are two separate independent entities managed by the

company separately. Separate accounts are maintained, separate returns are filed under various laws and, therefore, there cannot be any conflict

between the employees of the company and Gurcharan Singh, inasmuch as there would be no employee of Gurcharan Singh. It is further pleaded

that it is Gurcharan Singh who would manage the affairs of the cinema for and on behalf of the company and all employees would be the

employees of the company. The decision of the umpire is also endeavoured to be supported by pleading that the umpire had considered all the

pros and cons as also the entire evidence produced by the parties and only then has given a correct finding regarding the various properties of the

company as well as various properties which had been constructed by the sons of Raghbir Singh and has rightly considered these properties while

giving his award. It is denied that the company''s property has been given to Gurcharan Singh. It is also pleaded that premises as 12, Ganesh

Chunder Avenue, Calcutta, are not under the tenancy of Raghbir Cycles Private Limited and, therefore, the umpire had rightly ignored the said

premises. The shop at 3, Bentick Street, Calcutta, also did not belong to Raghbir Cycles Private Limited and, therefore, the umpire rightly ignored

this property. It was within the scope and ambit of the court''s jurisdiction to decide about the will inasmuch as all the disputes between the parties

were referred to the umpire. It is further pleaded that the rights in the properties in Clauses VII, VIII and IX belong to Gurcharan Singh and do not

require any registration. It is also pleaded that Raghbir Singh has wrongly referred to the requirements of Section 17(1)(e) of the Registration Act.

As the award was being filed in this court, therefore, the same would not form part of decree and would not require any registration.

I have heard Mr. G. Ramaswamy, the learned senior advocate appearing on behalf of the objector as also Mr. Hira Lal Sibal, the learned

senior advocate appearing on behalf of the petitioners who want that the award may be made rule of the court and have carefully perused the

entire records.

Before, however, the specific points raised by learned counsel appearing for objectors are noticed, it shall be useful at this stage to examine the

basic limitations in challenging the award. It is settled law that the court does not sit in appeal or reassess the evidence and even if there is

misconduct by the arbitrator but the same pertains to infirmity in the procedure, it is no ground to set aside the award. The apex court in Jagdish

Chander Bhatia Vs. Lachhman Das Bhatia, , while relying upon its judgment in Food Corporation of India Vs. Joginderpal Mohinderpal, , held that

(at page 236) : ""an award of an arbitrator can only be interfered with or set aside or modified within the four corners of the procedure provided by

the statute. The court must find out whether the arbitrator has misconducted himself or there was any infirmity in the procedure, such as, the

arbitrator having travelled beyond the terms of the reference or there being an error apparent on the face of the award. It is not misconduct on the

part of an arbitrator to come to an erroneous conclusion on a disputed issue. In the case of an error apparent on the face of the award, the award

can be set aside only if there is any proposition of law on which the award is based which is in conflict with law. It must be demonstrated to the

court that the reasons given by the arbitrator are so palpably erroneous in law that they have resulted in the arbitrator taking a view which cannot

be sustained in law. To put it differently, the court does not sit in appeal and does not reassess the evidence. Even if the court feels that had it been

left to it, it would have assessed the evidence differently that would not be a valid ground for setting aside the award."" The award can be set aside

on the ground that there is an error apparent on the face of it. However, the scope of the court''s jurisdiction in interfering with a non-speaking

award on the ground noticed above is extremely limited. In Champsey Bhara and Co. v. Jivraj Balloo Spinning and Weaving Co. Ltd. [1922] LR

50 Ind Ap 324, the judicial committee enunciated the rule of limitation in this respect. The Supreme Court in Hindustan Construction Co. Ltd. v.

State of Jammu and Kashmir JT [1992] 5 (SC) 325 , while relying upon the enunciation of the judicial committee in Champsey Bhara''s case

[1992] LR 50 IndAp 324 , held that (at pages 330 and 331): ""Even if the arbitrators had interpreted the relevant clauses of the contract in making

their award on the impugned items and even if, in fact, the interpretation is erroneous, the court cannot touch the award as it is within the

jurisdiction of the arbitrators to interpret the contract. Whether the interpretation is right or wrong, the parties would be bound ; only if they set out

their line of interpretation in the award and that is found erroneous can the court interfere"". Apart from the existence of an error apparent on the

face of the award, another angle from which a non-speaking award can be considered by the court is that when there is error in excess of

jurisdiction or that the error is within the jurisdiction, the award cannot be challenged. (sic) Only in a case of total denial of hearing, the award can

be set aside but technical rules of evidence do not apply to arbitration proceedings. A Division Bench of the Bombay High Court in Rashtriya

Chemicals and Fertilizers Limited Vs. Mohindersingh and Co. and Another, , held that (headnote), ""It is true that an award is liable to be set aside

if there is total denial of hearing, but technical rules of evidence do not apply to arbitration proceedings."" A party to arbitration proceedings cannot

be permitted to take an objection if no such objection was taken before the arbitrator. Acquiescence by conduct itself debars a particular party

from raising the objection which was not canvassed before the arbitrator. This was so held by the Bombay High Court in Rashtriya Chemicals and

Fertilizers Limited Vs. Mohindersingh and Co. and Another, , while relying upon N. Chellappan Vs. Secretary, Kerala State Electricity Board and

Another, , Kapoor Nilokheri Co-op. Dairy Farm Society Ltd. Vs. Union of India (UOI) and Others, and National Electric Supply and Trading

Corporation Private Ltd. Vs. Punjab State and Another, . The other well known principle is that the court can not review the award of an

arbitrator and correct any mistake in adjudication unless an objection to the legality of the award is on the face of it. The award on both fact and

law is final and there is no appeal from the verdict of the arbitrator. In Champsey Bhara and Co. v. Jivraj Balloo Spinning and Weaving Co. Ltd.

[1922] LR 50 IndAp 324, the Privy Council stated that ""An error in law on the face of the award, means, in their Lordships'' view, that you can

find in the award or a document actually incorporated thereto, as for instance a note appended by the arbitrator stating the reasons for his

judgment, some legal proposition which is the basis of the award and which you can then say is erroneous."" Further, it is well-settled that if the

award is to be set aside on the sole ground, then the sole ground complained of must be of such nature as to amount to no hearing at all. Further,

the parties cannot get out of an award upon objections which do not affect the substantial justice of the case. This was so held in Amir Begum v.

Khwaja Saiyed AIR 1914 PC 105 . Further, it is also settled that where the award is a fair and honest settlement of a doubtful claim based both

on legal and moral grounds it should not be interfered with. It was so held in AIR 1934 105 (Privy Council) .

The first contention of Mr. Ramaswami, learned counsel for the objectors is that the order passed by appointing the arbitrator, even though

prayed for by the parties themselves in applications filed by them in that behalf, has not emanated from any of the provisions of the Arbitration Act.

The award too, has not been given in pursuance of the provisions of the Arbitration Act and, therefore, it cannot be made rule of the court. In the

alternative, it is argued that if it can be made rule of the court, the restrain on the parties as made out in the order appointing arbitrator, i.e., that the

parties shall not call into question the award of the arbitrator in any court, would be of no consequence and it shall be open to the parties to

challenge the award under the known modes of challenging the same under the provisions of the Arbitration Act. Whereas, Mr. Sibal, learned

counsel for the petitioner-applicant, asking for making the award rule of the court, accepts the latter part of the contention as noticed above and

concedes that even though it has been mentioned in the order appointing an arbitrator that the award cannot be called into question, it is still open

to the parties to this litigation to raise objections, seriously contests the first contention and styles the same not only impermissible in the facts and

circumstances of the case but also one which borders on a plea that can be well termed dishonest. The facts and circumstances that are available,

however, in my considered view, debar the objectors from asking for acceptance of objections and of the rejection of the award on the plea that

the order appointing the arbitrator and consequent award rendered by the arbitrator were not under the provisions of the Arbitration Act. The

company petitions, referred to above, were filed way back in the year 1987 and the same had matured for arguments and it was when the

arguments almost in entirety were heard that the parties to the litigation filed two applications, one under Rule 9 of the Companies (Court) Rules,

1959, for appointment of an umpire to decide the disputes between the parties and the other under Order 23, Rule 3, read with Section 151 of the

CPC and Rule 9 of the Companies (Court) Rules, 1959, for appointment of an umpire to reconcile the disputes between the parties. The

application under Order 23, Rule 3 read with Section 151 of the CPC and Rule 9 of the Companies (Court) Rules was filed by the objectors. It is

on account of the two applications, referred to above, that an arbitrator was appointed.

Reference to arbitration under the provisions of the Arbitration Act is decipherable from Sections 8 20 and 21. Section 8 deals with the

situation where there is an arbitration agreement which provides that the reference shall be made to one or more arbitrators to be appointed by the

consent of the parties. Section 20 deals with the persons who have entered into an arbitration agreement before the institution of any suit with

respect to the subject-matter of the agreement or any part of it and where a difference has arisen to which the agreement applies. Either of the

parties, instead of proceeding under Chapter II, may apply to a court having jurisdiction in the matter to which the agreement relates, that the

agreement be filed in court. Section 21 which is attracted to the facts of the present case, reads thus :

Where in any suit all the parties interested agree that any matter in difference between them in the suit shall be referred to arbitration, they may at

any time before judgment is pronounced apply in writing to the court for an order of reference.

From the narration of the facts that have been given in the earlier part of the judgment it is clear that all the interested parties had agreed that

the matter in difference between them which pertains to two company petitions, details whereof have been given above, be referred to arbitration.

The applications were filed before the pronouncement of judgment and those were in writing. It cannot, thus, be said that the order passed by me

on the applications of all the interested parties to the company petitions, referred to above, was not under the provisions of the Arbitration Act or

that the award was also outside the provisions contained in the Arbitration Act.

That apart, having asked for appointment of an arbitrator in writing and having participated before the arbitrator without raising any kind of

objection, whatsoever, would not permit objectors to contend that the order passed by this court appointing the arbitrator and the award itself

were not under the provisions of the Arbitration Act. The conduct of objectors amounts to acquiescence. The Division Bench of the Bombay High

Court in Rashtriya Chemicals and Fertilizers Limited Vs. Mohindersingh and Co. and Another, , relying upon N. Chellappan Vs. Secretary, Kerala

State Electricity Board and Another, , Kapoor Nilokheri Co-op. Dairy Farm Society Ltd. Vs. Union of India (UOI) and Others, , and National

Electric Supply and Trading Corporation Private Ltd. Vs. Punjab State and Another, , held that, ""a party cannot sit back on an objection during

the hearing before the arbitrator and raise it later after finding himself faced with an adverse award ; such conduct would amount to acquiescence.

The first contention of learned counsel for the objectors is, thus, repelled.

The alternative contention raised by Mr. Ramaswami and as noticed above, has to be accepted not only as per the concession of counsel

opposite but also for the reason that merely mentioning in the order that the award cannot be challenged, a party cannot be debarred to raise

objections, if law so permits. The provisions of the Arbitration Act clearly envisage the filing of objections on the grounds specified thereunder and

that being the law, the objectors are well within their rights to raise objections and ask for setting aside or rejecting the award. As mentioned

above, the impartiality of the arbitrator has not even been remotely questioned and all that has been mentioned in the various objections is that the

arbitrator conducted the proceedings in such a manner which clearly shows legal misconduct.

On the merits of the case and while elaborating the legal misconduct, it is argued that the arbitrator violated the principles of natural justice

inasmuch as even though the matter was fixed for arguments for February 6, 1993, when it was adjourned for the said purpose on January 24,

1993, the arbitrator called only Shri Gurcharan Singh and Shri Raghbir Singh on January 24, 1993, and without giving any notice to the company

or other parties, announced the award on January 27, 1993, i.e., before even the date fixed for arguments. The contention appears to be attractive

but when the same is examined in the light of the proceedings conducted by the arbitrator it pales into complete insignificance. The way and manner

the proceedings were taken by the arbitrator have been given in detail above. On December 19, 1992, no proceedings could be taken as learned

counsel for the parties telegraphically sought more time to file replies to their respective claim petitions and also requested that the next date of

hearing be fixed at Chandigarh on December 29, 1992. On the adjourned date, i.e., December 29, 1992, the parties submitted replies to the

respective claim petitions. Counsel representing both the parties requested that the matter be taken up on December 31, 1992. The matter was

thereafter adjourned to January 16, .1993, when the parties were to file rejoinders to their respective replies. The matter was thereafter taken on

January 17, 1993, when the following order was passed :

Both the parties are present with their respective counsel.

Counsel submitted on record rejoinders to each other respective replies to the claim petitions of each party. The hearing is adjourned to January 1,

1993, for 11.30 a.m. on which date only S. Gurcharan Singh and S. Raghbir Singh, who are the concerned parties, would appear without their

counsel to make efforts of reconciliation.

To come upon January 24, 1993, at 11.30 a.m.

On the adjourned date, i.e., January 24, 1993, the joint statement of parties, i.e., Shri Gurcharan Singh and Shri Raghbir Singh was recorded.

It was stated by them that the arbitrator/umpire is requested to give award on the basis of material already submitted before him by either party as

they did not wish to adduce any evidence, documentary or oral. The proceedings sheet of the arbitrator duly sent by him along with the award

does not show that the case was taken on January 16, 1993. As mentioned above, it was taken only on January 17, 1993. It was on the said date

that the case was adjourned to January 24, 1993, and not for February 6, 1993. As mentioned above, the joint statement of the parties

concerned, i.e., Shri Gurcharan Singh and S. Raghbir Singh was recorded on January 24, 1993, and the award was given on January 27, 1993.

The contention of learned counsel, thus, that the award was pronounced before the date fixed and without giving any chance to counsel

representing the parties to address arguments is devoid of any merit being against the records of the case.

The second contention raised by learned counsel for the objectors that since the parties, i.e., Gurcharan Singh and Raghbir Singh, were heard

separately and not in the presence of each other, the award was vitiated, has no merit. However, for his aforesaid contention, learned counsel

relies upon Payyavula Vengamma Vs. Payyavula Kesanna and Others, and Bakhtawar Lal and Others Vs. Ram Kumar and Others, .

It is on January 17, 1993, that the arbitrator after receiving the rejoinders to each other respective replies to the respective claim petitions

adjourned the matter to January 24, 1993, on which date only S. Gurcharan Singh and S. Raghubir Singh, i.e., the concerned parties were to

appear without their counsel to make efforts at reconciliation. As mentioned above, on January 24, 1993, the joint statement of the parties, i.e.,

Gurcharan Singh and Raghbir Singh, was recorded. It appears that the point that the arbitrator heard the parties behind each other''s back is

sought to be made from the proceedings that were conducted on January 24, 1993. Nothing as such has been made out from the proceedings and

the order that was recorded on January 24, 1993. However, it has been pleaded in paragraph 3(a) of the objection petition that the arbitrator

misconducted the arbitration proceedings as he examined the parties separately behind each other''s back like a conciliator and not as an

arbitrator, and this procedure was not warranted in arbitration proceedings. Most of time was spent in separate meetings and the joint meeting was

held only for 10 or 15 minutes. It is further pleaded that having found that there were vast differences between the two brothers and reconciliation

was not possible, the arbitrator should have allowed them opportunity to assist him in resolving the disputes with the help of their counsel, who

could refer to the documents on record and argue the case of their respective clients effectively. In the reply that has been filed on behalf of

petitioner, it has been pleaded that the whole day was spent with the two parties who had presented their cases respectively and that none of the

parties desired the help of their counsel to refer to the documents. The assertion of the objectors that the arbitrator had heard the parties behind

each other''s back, has been denied by saying that it was incorrect that the arbitrator/umpire had misconducted the proceedings like a conciliator.

From the proceedings, as referred to above, as also the pleadings of the parties, all that can perhaps be made out is that on January 24, 1993,

when the arbitrator tried for reconciliation, he might have heard the parties separately as well as jointly. It is from this background that the

contention of learned counsel that Gurcharan Singh and Raghbir Singh were heard separately and not in the presence of each other, has to be

appreciated. The facts of Payyavula Vengamma Vs. Payyavula Kesanna and Others, , would reveal that one ""P"" died leaving behind his widow,

his undivided brother, a son of another predeceased brother and his son by his predeceased wife. The deceased had purported to make a will

under which he had made certain provision for maintenance and residence of the widow. The widow filed a suit for maintenance, arrears of

maintenance and residence. When the plaintiff was being examined as P.W.-1, in the suit all the parties filed a petition u/s 21 of the Arbitration Act

agreeing to appoint K as the ""sole arbitrator"" for settling the disputes in the suit and to abide by his decision. The petition filed by the parties did not

give any special powers to the arbitrator. The plaint, the written statement and the other records were agreed to be sent to him for his decision and

the arbitrator was directed to make his award after perusing the plaint and written statement which were given to him along with the order. The

arbitrator examined the defendant in the absence of the plaintiff and also perused the will without giving an opportunity to the plaintiff to have her

say in the matter. The statement which was obtained from the defendant contained several statements of fact, which did not find a place in his

written statement. On the facts aforesaid, it was held that the procedure adopted by the arbitrator was obviously contrary to the principles of

natural justice. The arbitrator was guilty of legal misconduct and there was sufficient material to vitiate the award. The facts of the cited case reveal

that the statement given by the plaintiff to the arbitrator did not mention anything beyond the request that he should peruse the plaint and written

statement and give his award according to law and justice. The statement which was obtained from the defendant, however, did not merely repeat

the request but contained several statements of fact, which did not find a place in his written statement. These statements have been reproduced at

page 22 which are as under:

(1) she felt glad with what was given to her by her husband ;

(2) It is seen from the Government accounts that as per the settlement made by her husband, the lands given to her have been in her possession ;

(3) Just like the plaintiff has her jewels in her possession, the other females in the house have their jewels in their respective possession or right

therein and

(4) Considering the domestic circumstances, our elder brother provided maintenance for the third wife, the plaintiff just as he had provided

maintenance for his second wife.

It is in the aforesaid circumstances that it was held that the statements referred to above constituted evidence given by defendant No. 1 in

addition to the averments contained in his written statement and it is futile for defendant No. 1 to contend that in obtaining the statement exhibit No.

5 from him the arbitrator merely obtained from him a narration of what was already found in his written statement.

In so far as the facts of the present case are concerned, it is proved on records of the case that on January 24, 1993, both the parties were

heard jointly as well as separately, The date was fixed for endeavouring a settlement between the parties by way of conciliation. In the very nature

of things, thus, the arbitrator was to hear them separately as well as jointly. It is in this manner only that he had to acquaint himself of the differences

between the parties and, thus, attempt settlement, if possible. The facts of this case are, thus, entirely different and, therefore, the judgment of the

Supreme Court in Payyavula Vengamma Vs. Payyavula Kesanna and Others, , strongly relied upon by learned counsel, cannot come to the rescue

of the objectors.

The facts of Bakhtawar Lal and Others Vs. Ram Kumar and Others, , reveal that as a matter of fact it was found that the arbitrator had heard

the appellant behind the back of the respondents and that he did not inform the respondents about that hearing. While considering the relevant

clause of the arbitration agreement it was found that the same did not entitle the arbitrator to hear one or the other party in the absence of each

other. In paragraph 10 of the reported case, it has been mentioned that ""It was subsequently that the appellant changed his case by pleading that

the arbitrator did not hear the two parties in the absence of each other and wanted to establish that the arbitrator heard both of them together and

jointly. Neither before the court below nor before us any evidence from the record was shown which could establish that the two parties were

heard jointly by the arbitrator. The arbitrator had filed along with the award other papers which were maintained by him. None of them is a minute

of the proceedings of the arbitration. It is not established from these papers that any joint meeting had taken place. In fact in the award the

arbitrator himself admitted that he had heard the parties separately and one party was heard in the absence of other."" It shall be, thus, seen that the

facts of the aforesaid case are entirely different and, therefore, the judgment of the Supreme Court in Bakhtawar Lal and Others Vs. Ram Kumar

and Others, , would provide no help to the objectors.

The next contention of Mr. Ramaswami is that in the entire proceedings that were conducted by the arbitrator no notice was given either to the

company or to other parties, i.e., parties other than Gurcharan Singh and Raghbir Singh. The parties, who have been affected on various counts by

the arbitration award, were, thus, not heard in the matter, violating the principles of natural justice, contends learned counsel. In the facts and

circumstances that are available before this court even this argument of learned counsel has no merit and, thus, deserves to be rejected. From the

array of parties in Company Petition No. 79 of 1987, it shall be seen that Gurcharan Singh along with his wife, Smt. Jaswant Kaur, daughters,

Miss Soniya and Miss Ramanjit Kaur, and son, Gurpreet Singh, had filed the petition against Raghbir Singh, his sons, Manjit Singh, Kanwaljit

Singh, Paramjit Singh and Harjit Singh. Hardip Kaur, was impleaded as party before the arbitrator. In Company Petition No. 134 of 1987, the

petitioners are the same but the respondents are the company and Raghbir Singh. It is throughout the case of the parties that the two brothers, i.e.,

Raghbir Singh and Gurcharan Singh, are the heads of the two groups. Referring to the pleadings contained in the application under Order 23, Rule

3 read with Section 151 of the CPC and Rule 9 of the Companies (Court) Rules, 1959, which, it is significant to mention, was filed jointly by

Gurcharan Singh and others, petitioners and Raghbir Cycles (P) Ltd. and others, it shall be seen that in paragraph 2 of the application it has been

pleaded that the petitioner, Gurcharan Singh, and the respondent, Raghbir Singh, are the heads of their families in respect of their shareholding in

Raghbir Cycles Pvt. Ltd. and both the brothers, i.e., Gurcharan Singh and Raghbir Singh, might be able to reconcile their disputes vis-a-vis

Raghbir Cycles Pvt. Ltd. and Overseas Cycles Co. In paragraph 3, it has been further mentioned that both the brothers are agreeable that an

umpire might be nominated by this court and that the decision given by the umpire upon reconciliation shall be binding upon both the brothers

including the members of their families, Coming now to the application filed under Rule 9 of the Companies (Court) Rules, it shall be seen from the

pleadings that it is mentioned that the petitioner, Gurcharan Singh, was the brother of Raghbir Singh, respondent, and both of them had floated a

company initially as partners which was subsequently converted into a private limited company with almost equal shares. It is also mentioned in

paragraph 3 that there were numerous other disputes between the two brothers and their families regarding the properties built from the earnings of

the Raghbir Cycles (P) Ltd. which were pending in various courts at Ludhiana, in this court and in the Supreme Court. Paragraph 4 further

mentions that the parties agree that the entire disputes between the families of both the brothers concerning Raghbir Cycles (P) Ltd. and their other

concerns and properties may be referred to an umpire so that the same may be decided once for ever. In paragraph 5, it has been mentioned that

the decision given by the umpire would be acceptable to both the brothers and their families and they would be bound by the same in all respects.

In so far as this application is concerned, the same was also filed jointly and it does contain the name of counsel for the respondents, Shri J.S.

Narang, advocate, although it has not been signed by the said learned counsel. It shall, thus, be seen that it is the two brothers who along with their

families who were holding various shares and it is the dispute between them which was to be referred to the umpire/arbitrator whose decision was

to be binding upon them and their family members. That apart, this court, while appointing the arbitrator, directed the parties to appear before the

arbitrator on a particular date. Admittedly, counsel for the objectors was representing not only Raghbir Singh but his family members as also the

company. Once an appearance was made before the arbitrator by counsel, who, as mentioned above, was representing all the respondents, it was

not obligatory for the arbitrator to have issued separate notices to all the individuals involved in the matter and if someone really wanted to be

heard separately, it was for him or her to have put in appearance before the arbitrator.

Mr. Ramaswami has raised serious objection to Clause (vii) of paragraph (iv) of the award which runs thus :

That the house at 319, Model Town, Ludhiana is and shall be the absolute and exclusive property of Shri Gurcharan Singh, petitioner.

The precise objection of learned counsel is that the house in question is company property and, thus, could not be given to Gurcharan Singh by

the arbitrator as the parties while asking for arbitration had not agreed that the property of the company be divided or distributed nor was the same

permissible in view of the order passed by this court vide which arbitrator was appointed. It is further the contention of learned counsel that the

two company petitions, one of which was for rectification of the register and the other for winding up of the company, could not even remotely

have within their ambit and scope ordering the transfer of a house to an individual which belongs to the company. By referring to Section 443 of

the Companies Act, learned counsel contends that the power of the court of hearing a winding up petition is to either dismiss it, with or without

costs ; or to adjourn the hearing conditionally or unconditionally; or to make any interim order that it thinks fit ; or to make an order for winding up

the company with or without costs or any other order that it thinks fit. That being the only power with which the court is vested, the arbitrator could

not do that which even court had no jurisdiction to do. It is in the same strain that objections have been raised to Clause (iii) of paragraph 6 of the

award which is with regard to the will executed by Smt. Chanan Devi in favour of Paranjit Singh son of Raghbir Singh, which clause reads thus :

The alleged will of Smt. Chanan Devi, mother of the petitioner and the respondent allegedly executed by her on January 10, 1984, in favour of

Paranjit Singh, s/o Shri Raghbir Singh, respondent and witnessed by respondent attested as witnesses by the said respondent Shri Raghbir Singh

and a neighbour of his and which was got post facto registered on October 7, 1985, after the death of Smt. Chanan Devi on November 2, 1984,

is held to be invalid in law and the beneficiary named therein shall acquire no benefit thereunder.

Besides, of course, raising the same objection, as has been noticed above, in regard to sub-para (vii), it is further the contention of learned

counsel that the will could be declared invalid only by an appropriate court and the arbitrator had no jurisdiction to deal with the matter, thus,

rendering the award to be wholly illegal and without jurisdiction. Raising the same kind of objection, as has been noticed above, it is stated that

there could not be shuffling of shares as has been done by the arbitrator because this was not the scope of either the company petition which was

for rectification of the register or the one which was filed u/s 433 of the Companies Act for winding up of the company. In one petition, the prayer

was for rectification of the register, whereas, in the other, it was for deletion of shares or for transfer of shares of Chanan Devi in the name of the

petitioner. This objection is with regard to Clauses (i), (ii), (iii) and (iv) of paragraph (iv) of the award rendered by the arbitrator. The same is the

objection of learned counsel with regard to removal of the director without any process and it is argued that if this course could not be adopted by

this court while dealing with the company petitions, referred to above, the same could not be done by the arbitrator.

Mr. Sibal, learned senior advocate, appearing on behalf of the petitioners, has, however, joined issue with learned counsel for the objectors on

all the points noticed above. I am not impressed with either of the points noticed above and all these objections, as noticed above, deserve to be

repelled. The applications filed by the parties asking for appointment of an arbitrator and the contents thereof have already been noticed above.

The order that emanated from the two applications has also been reproduced. A conjoint reading of the pleading''s as also the orders passed by

this court would clearly manifest that all kinds of disputes were referred to the arbitrator and the order passed on that count was most

comprehensive. With regard to all matters, be it increase of shares by one party in clandestine manner or the will executed by Smt. Chanan Devi,

the parties to this litigation were having disputes, both, civil and criminal, pending in various courts in the country and it is for that precise reason

that it was specifically mentioned in the order appointing the arbitrator that the entire disputes between the parties shall be decided by Shri D.S.

Tewatia, senior advocate, who will act as an arbitrator as also umpire. It was further ordered that in view of the agreement arrived at between the

parties the proceedings in all the disputes inter se (civil and criminal) pending anywhere in the country shall remain stayed. That apart, the

allegations in the two company petitions, as have been noticed in the earlier part of the judgment, clearly demonstrate that there were serious

allegations against the objectors with regard to the shares owned by Smt. Chanan Devi which had devolved upon the beneficiary under the will.

Obviously, there was dispute with regard to increase in the shareholding of the objectors and serious allegations of siphoning off the assets of the

company with a view to raise the shareholding of the objectors were raised in the pleadings. There were also allegations coming forth that by

diverting the assets of the company the objectors had purchased properties in their individual names. The specific allegation in Company Petition

No. 79 of 1987 filed u/s 155 of the Companies Act, 1956, for rectification of the register of members is that Smt. Chanan Devi, who was the

mother of petitioner No. 1 and respondent No. 2, held 1,500 shares. She died on November 2, 1984. These shares, it was further pleaded, had

been illegally allotted to Paranjit Singh son of respondent No. 2 and that the two sons of Smt. Chanan Devi, petitioner No. 1 and respondent No.

2, were equally entitled to the extent of half of these shares. There were further allegations with regard to respondent No. 2 managing to show in

the books of the company various credits as having been made by Sethi Finance Company, Sikri Finance Company and Sachdeva Finance

Company. It was alleged that these were fictitious deposits. No interest whatsoever was paid by the company to these finance companies. Interest

was paid by bearer cheques in their names but the same was encashed from the Punjab and Sind Bank, Miller Ganj, Ludhiana, by Raghbir Singh,

respondent No. 2, his sons, Manjit Singh and Kanwaljit Singh. It was also pleaded that these shares were never applied for by the allottees and

the same were subsequently got transferred by Raghbir Singh, respondent No. 2, in the names of Kanwaljit Singh, Paranjit Singh and Harjit Singh.

It is further the case of petitioners that shares were allotted to 40 persons, 11 existing and 29 non-existing employees of the company.

Even though there could not be a prayer in the two company petitions, referred to above, for either transfer of the house in favour of one of the

parties to the litigation or to declare the will executed by Smt. Chanan Devi to be invalid or other things, as have been noticed above, it cannot be

said by any meaningful argument that there was no dispute between the parties on the said matter. When the parties to the litigation had agreed

voluntarily to refer the entire disputes (emphasis* supplied) to the arbitrator, then it is not the scope of the company petitions which is relevant but it

is the scope of reference which is more pertinent. It was the dispute with regard to the companies known as Raghbir Cycles Private Ltd. and

Overseas Cycles Limited, which was to be decided by the arbitrator. It was specifically mentioned in the order appointing the arbitrator that it

would be open to the parties to place necessary evidence before the arbitrator/umpire to show that the other properties even though individually

owned were acquired through the funds of the company and it was open to the arbitrator to go into the dispute with regard to the said properties.

Mention in the orders that ambit and scope of both the petitions, i.e., Company Petitions Nos. 79 and 137 of 1987 would be before the

umpire/arbitrator for decision, did not mean that it is only the prayers contained in the said petitions which could be gone into and denied or

accepted by the arbitrator. That was to be done, if at all, by this court while dealing with these petitions and in so far as the arbitrator is concerned,

he was to reconcile the disputes between the parties, as is clearly envisaged in the applications culminating in the order of reference as also the

order itself.

There is another significant way of looking at the matter. The scope of one of the company petitions was to liquidate the company as such. As

mentioned earlier, the said petition had matured and in fact arguments almost in their entirety were heard. If the plea of petitioners was to succeed,

the company would have been liquidated. It is relevant to mention that it is at that stage when the arguments were heard that applications under

Rule 9 of the Companies (Court) Rules, 1959, for appointment of an umpire and the other under Order 23, Rule 3 read with Section 151 of the

CPC and Rule 9 of the Companies (Court) Rules, 1959, were filed. The parties to the litigation were conscious of the fact that there could be an

order liquidating the company. It is in that back ground that the parties came to this court in the applications, referred to above, asking for

reconciliation through an arbitrator, who was to decide the disputes with regard to the two companies known as Raghbir Cycles (P) Ltd. and

Overseas Cycles Ltd. This reconciliation was necessary for the purpose of working the company and not for finishing it. The arbitrator in that light

decided the matter and arranged things in a way that the company continues to exist. This court, in addition to rejecting the arguments, as noticed

above, is constrained to observe that in all probability the objectors came up with the applications sensing an adverse decision against them,

perhaps, with a view to gain time and then to raise all kinds of frivolous objections. The court has no choice in the matter but to reject all the

objections as noticed above. It may also be mentioned here that there are four houses with the respondents and the specific allegations of the

petitioners are that the same were purchased out of the funds of the company.

Mr. Ramaswami, learned counsel, has also touched on some minor points, like the non-workability of the company in view of some of the

clauses of the award and, in particular, with regard to the Arora Palace which is a cinema hall and reference to which has been made in clause (vi)

of paragraph (iv). The same reads thus :

Out of the two cinemas owned and operated by Raghbir Cycles Pvt. Ltd., Arora Palace Cinema shall be run and operated under the direct

supervision of Shri Gurcharan Singh in his capacity as the director of the said company.

The argument is that there is one generator set and one A. C. plant for the two cinemas owned by the company, known as Arora Palace and

Mini Arora Palace. There is only one entry point, one booking window and inasmuch as the Arora Palace Cinema is to be run and operated now

under the direct supervision of Shri Gurcharan Singh, it would cause problems in the working of the two cinemas. The non-workability of the

cinemas on the counts noticed above has been denied in the pleadings. This court is not able to understand as to how there will be any difficulty in

running the two cinemas only because Gurcharan Singh in his capacity as director of Arora Palace, has been given the right to operate the said

company under his supervision. His supervision cannot possibly mean that he would order the running of the generator or the A. C. plant for one

cinema only and not the other or that he would ban entry for one cinema and not for the other.

Non-mentioning of the properties and distribution and management thereof which are at Calcutta, S.C.O. 3, Bentick Street, and Overseas

Cycles Ltd. in the award, appears to this court of no significance whatsoever and the contention of learned counsel that the award has to be

remitted to the arbitrator for that reason carries no conviction with this court. That apart, it has been specifically mentioned in the award that

S.C.O. 3, at Bentick Street, Calcutta, is the rented property of the Overseas Cycles Company and Raghbir Cycles Pvt. Ltd. has no right of any

kind in and over the said premises. It is also mentioned in Clause (ix) of the award that Flat No. 1 (First Floor), 10, Lord Sinha Road, Calcutta, is

the absolute and exclusive property of Shri Gurcharan Singh as an individual.

Mr. Narang, learned counsel appearing for the objectors in rebuttal, has touched a new point by contending that Clause (v) of the award

rendered by the arbitrator would create a deadlock in the company. Mr. Narang also contends that Smt. Hardeep Kaur is the sole proprietor of

Raghbir Bicycles International and there was no dispute of any kind but the arbitrator has still mentioned the same in Clause (xii) of paragraph (iv)

of the award. He has also repeated the points that were taken threadbare by Mr. Ramaswami and have been noted above in the earlier part of the

judgment which need no further consideration. However, in so far as the new points, as noticed above, are concerned, it is not understandable as

to how in view of Clause (v) of para (iv) of the award, there would be a deadlock. All that has been mentioned in the para in question is that there

shall be two directors of Raghbir Cycles (P) Ltd. namely, Gurcharan Singh and Raghbir Singh or their respective nominees provided that parity is

maintained between the two families in question. Why a company cannot carry on and transact business with two directors or their respective

nominees, is wholly un-understandable. All that appears is that the arbitrator in view of the disputes between the parties thought that the two

brothers representing their families were in fact the real persons who floated the company and there should be parity in their families in so far as the

directors are concerned. It is not disputed between the parties as well that the pioneers of these companies are the two brothers. In so far as

Clause (xii) of the award which mentions Raghbir Bicycles International as well, is concerned, suffice it to say that it is mentioned that Gurcharan

Singh and his family members or Raghbir Cycles P. Ltd. shall have no right of any kind whatsoever in the said company. This rather supports the

case of the objector, and, thus, in no way detracts from the validity of the award. These are the only points on which arguments were addressed.

In as much as no arguments were addressed on the other points mentioned in the objection petition, reproduced in the earlier part of the judgment,

no comments on the said objections are necessary.

Finding no merit in the objections, I reject the same. Resultantly, the award dated January 27, 1993, rendered by the arbitrator is made the

Rule of the court. Let a decree be drawn up in accordance with the award. The objections are rejected with costs quantified at Rs. 5,000.