Arbitration Petition No.515 of 2013

8th December, 2014.

Petitioner Counsel: Mr. HIRALAL THACKER, Sr. Adv. a/w. Mr. JEETENDRA RANAWAT, Ms. URVI PATEL, i/b. Mr. MANOJ KADAM
Respondent Counsel: Mr. P.K. SAMDHANI, Sr. Adv. a/w. Mr. AASHISH KAMAT, Mr. S.A. OAK, Mr. C.M. JADHAV, i/b. MAHESH MENON & CO.

Cases Cited:
Girish Mulchand Mehta Vs. Mahesh S.Mehta & Anr., 2010(1) ALL MR 719 [Para 5,21]
T.K.Lathika Vs. Seth Karsandas Jamnadas, (1999) 6 SCC 632 [Para 6]
Ramesh Himmatlal Shah Vs. Harsukh Jadhavji Joshi, AIR 1975 SC 1470 [Para 9,21]
Sohan Nayyar And Ors. Vs. Lf. Governor of Delhi and Anr., AIR 1983 Delhi 301 [Para 10,11,29,30]
Chennai Container Terminal Pvt. Ltd.etc. Vs. Union of India and Ors., AIR 2007 Madras 225 (DB) [Para 11,29]
Firm Ashok Traders Vs. Gurmukhdas Saluja and Ors., AIR 2004 SC 1433 [Para 22]
The State of Maharashtra & Ors. Vs. Ark Builders Pvt. Ltd., 2011 ALL SCR 906=AIR 2011 SC 1374 [Para 23]
S.N.Prasad Vs. Monnet Finance Ltd. and Ors., AIR 2011 SC 442 [Para 25]
M/s.Sundaram Finance Limited Vs. M/s. NEPC Limited, 1999(2) SCC 499 [Para 30]

JUDGMENT

JUDGMENT :- By this petition filed under section 34 of the Arbitration and Conciliation Act, 1996 (hereinafter referred to as the said 'Act') the petitioners have prayed for leave to file this petition for raising their objections to the impugned award dated 19th March, 2013 and have prayed that the said award be quashed and set aside. The learned arbitrator is impleaded as respondent no. 2. The petitioner has also prayed that this court shall direct the learned arbitrator to deposit in this court all the records, paper and proceedings of the arbitration between the respondent no. 1 (original claimant) and the society i.e. Apsara Coop. Hsg. Soc. Ltd. By the impugned award the learned arbitrator had declared that the MOU dated 30th April, 2008 executed between M/s. Heritage Enterprises (original claimant in arbitration proceedings and respondent no. 1 herein) and Apsara Coop. Hsg. Soc. Ltd. is valid subsisting, enforceable and binding upon those parties and that the claimant is entitled to specific performance thereof.

2. At the threshold Mr. Samdani learned senior counsel for the respondent no. 1 raises a preliminary objection to the maintainability of this petition. In view of the issue of maintainability raised by the learned senior counsel for respondent no. 1 I have heard the learned senior counsel for the petitioner as well as the respondent no. 1 on the issue of maintainability of this petition filed by the petitioners.

3. Mr.Samdani learned senior counsel for the respondent no. 1 submits that the memorandum of understanding which recorded an arbitration agreement was between the respondent no. 1 developer and M/s. Apsara Co-op. Hsg. Soc., Ltd a society registered under the provisions of Maharashtra Co-operative Societies Act, 1960. The said society consists of 24 tenements allotted to 24 persons who are members of the said society. Petitioners are three of the members of the said society. Learned senior counsel submits that the petitioners were not parties to the said memorandum of understanding which contained arbitration agreement. It is submitted that the society had passed a resolution pursuant to which dispute was referred to arbitration. The petitioners were not parties to the arbitration proceedings as they were not parties to the arbitration agreement.

4. It is submitted that since the petitioners were not parties to the arbitration agreement, petitioners cannot file a petition under section 34 of the Arbitration and Conciliation Act, for impugning an arbitral award. In support of this submission learned senior counsel invited my attention to section 34 and also definition of 'Party' defined under section 2(1) (h) of the Act. It is submitted by the learned senior counsel that only a party to the arbitration agreement can file a petition under section 34 of the Act and not an outsider. It is submitted that section 34 has to be read with section 2(1) (h) of the Act. There is no general power under section 34 of the Act to permit a person who is not a party to the arbitration agreement to file a petition for impugning an arbitral award. It is submitted that the said Apsara Co. Hsg. Soc. Ltd. who was party to the arbitration agreement and also before the learned arbitrator has accepted the arbitral award by passing a resolution. The impugned award has been acted upon by the society. The petitioners who are members of the society thus cannot be allowed to impugn the arbitral award as they were not parties to the arbitration agreement.

5. Learned senior counsel submits that this court has no power to grant any leave to the petitioners to file arbitration petition and to impugn the arbitral award. It is submitted that this is not an appellate proceeding in which a party aggrieved can apply for leave to file an appeal. Learned senior counsel placed reliance on section 36 of the Mah. Coop. Societies Act, 1960 and submits that the society having registered is a body corporate and thus society only can be sued or sue in its own name. Society has to act through the committee. No members can file any proceedings on behalf of the society. It is submitted that the members of the society speak through society and has no independent say. In support of this submission, learned senior counsel placed reliance on the judgment of Division Bench of this court in case of Girish Mulchand Mehta Vs. Mahesh S.Mehta & Anr. 2010(1) ALL MR 719 and in particular paragraphs 15 and 16 which read thus :

15. The Appellants would then rely on the decision of the Apex Court in Ramesh Himmatlal Shah v. Harsukh Jadhavji Joshi reported in MANU/SC/0531/1975 : AIR 1975 SC 1470 to contend that the flats in question occupied by them have been allotted to them by the Housing Society which allotment is coupled with the right to transfer their shares of the Society and interest in the said flat which is the property of the Society. In the said decision, the Apex Court has observed that the right so enjoyed by the member is the species of the property namely the right to occupy a flat of this type, which assumes significant importance and acquires under the law a stamp of transferability in furtherance of interest of commerce. It went on to observe that there is no fetter in any of the legal provisions against such a conclusion and for which reason the attachment and sale of the property of the member in execution of the decree are valid under the law. The legal position expounded by the Apex Court in the said decision will be of no avail to the case on hand. The crucial question is whether the members can be heard to say that their rights in the flats occupied by them were dehors the rights of the Society therein and that they were not claiming under the Society at all. In our considered opinion such stand of the members(Appellants herein) cannot be countenanced.

16. In the present case, it is not in dispute that the General Body of the Society which is supreme, has taken a conscious decision to redevelop the suit building. The General Body of the Society has also resolved to appoint the Respondent No. 1 as the Developer. Those decisions have not been challenged at all. The Appellants who were members of the Society at the relevant time, are bound by the said decisions. The Appellants in the dispute filed before the Cooperative Court have only challenged the Resolution dated 27/4/2008, which challenge would merely revolve around the terms and conditions of the Development Agreement. As a matter of fact, the General Body of the Society has approved the terms and conditions of the Development Agreement by overwhelming majority. Merely because the terms and conditions of the Development Agreement are not acceptable to the Appellants, who are in minuscule minority (only two out of twelve members), cannot be the basis not to abide by the decision of the overwhelming majority of the General Body of the Society. By now it is well established position that once a person becomes a member of the Cooperative Society, he looses his individuality with the Society and he has no independent rights except those given to him by the statute and Bye-laws. The member has to speak through the Society or rather the Society alone can act and speaks for him qua the rights and duties of the Society as a body (see Daman Singh and Ors. v. State of Punjab reported in MANU/SC/0392/1985 : AIR 1985 SC 973). This view has been followed in the subsequent decision of the Apex Court in the case of State of U.P. v. Chheoki Employees Cooperative Society Ltd. reported in MANU/SC/0332/1997 : AIR 1997 SC 1413. In this decision the Apex Court further observed that the member of Society has no independent right qua the Society and it is the Society that is entitled to represent as the corporate aggregate. The Court also observed that the stream cannot rise higher than the source. Suffice it to observe that so long as the Resolutions passed by the General Body of the Respondent No. 2 Society are in force and not overturned by a forum of competent jurisdiction, the said decisions would bind the Appellants. They cannot take a stand alone position but are bound by the majority decision of the General Body. Notably, the Appellants have not challenged the Resolutions passed by the General Body of the Society to redevelop the property and more so, to appoint the Respondent No. 1 as the Developer to give him all the redevelopment rights. The propriety rights of the Appellants herein in the portion (in respective flats) of the property of the Society cannot defeat the rights accrued to the Developer and/or absolve the Society of its obligations in relation to the subject matter of the Arbitration Agreement. The fact that the relief prayed by the Respondent No. 1 in Section 9 Petition and as granted by the Learned Single Judge would affect the propriety rights of the Appellants does not take the matter any further. For, the propriety rights of the Appellants in the flats in their possession would be subservient to the authority of the General Body of the Society. Moreso, such rights cannot be invoked against the Developer (Respondent No. 1) and in any case, cannot extricate the Society of its obligations under the Development Agreement. Since the relief prayed by the Respondent No. 1 would affect the Appellants, they were impleaded as party to the proceedings under Section 9 of the Act, which was also necessitated by virtue of Rule 803E of the Bombay High Court (Original Side) Rules. The said Rule reads thus:

"R803E. Notice of Filling Application to persons likely to be affected.-

Upon any application by petition under the Act, the Judge in chambers shall, if he accepts the petition, direct notice thereof to be given to all persons mentioned in the petition and to such other persons as may seem to him to be likely to be affected by the proceedings, requiring all or any of such persons to show cause, within the time specified in the notice, why the relief sought in the petition should not be granted."

6. Mr. Samdani learned senior counsel submits that since the petition filed by the petitioners itself is not maintainable this court cannot enter into the merits of the matter and any adjudication on merits in these circumstances would be without jurisdiction. In support of this submission, learned senior counsel placed reliance on the judgment of Supreme Court in case of T.K.Lathika Vs. Seth Karsandas Jamnadas (1999) 6 SCC 632 and in particular paragraph 9. It is submitted that the said M/s. Apsara Coop. Hsg. Soc. Ltd. who were the parties to the arbitration proceedings have not been even impleaded as party respondent to this proceedings.

7. Mr. Thacker learned senior counsel for petitioners in reply to the preliminary objection raised by Mr. Samdani, learned senior counsel submits that the petitioners are admittedly the members of the said society. It is submitted that the petitioners being allottees of flats have right and interest to occupy their respective flats which rights can be even sold/transferred and can be attached in execution of the decree. It is submitted that since the society has in collusion with the respondent no. 1 has not impugned the arbitral award which was rendered against the society and in favour of the respondent no. 1 developer which affected the rights of the petitioners, petitioners being parties affected by the impugned award, are entitled to exercise their rights under section 34 of the said Act to impugn such arbitral award.

8. Learned senior counsel submits that even minority members of the society can challenge an arbitral award if the majority members have decided not to challenge the arbitral award for any reasons. It is submitted by the learned senior counsel that though petitioners were not parties to the arbitration proceedings, since the liability of the society as well as members are now crystalized under the said award and the rights of the petitioners having been affected and prejudiced, petitioners are entitled to challenge the impugned award. It is submitted by the learned senior counsel that this court has wide powers to grant leave to the petitioners to challenge the impugned award. Learned senior counsel submits that the petitioners have very good chances of succeeding in this petition on merits and this court therefore, shall grant such leave in favour of the petitioners to impugn the arbitral award.

9. Learned senior counsel placed reliance on the judgment of the Supreme Court in case of Ramesh Himmatlal Shah Vs. Harsukh Jadhavji Joshi AIR 1975 SC 1470 and in particular paragraphs 17 and 18 in support of the submission that the flat in a tenant co-partnership housing society under the Maharashtra Co-operative Societies Act is liable to attachment and sale in execution of the decree against the member who has been allotted flat by the society and is accordingly party aggrieved., Paragraphs 17 and 18 of the said judgment read thus:

17. From a review of the foregoing provisions the position with reference to the particular Society is as follows:

There is no absolute prohibition in the Act or in the Rules or in the Bye-laws prohibiting transfer of interest of a member in the property belonging to the Society. The only transfer which is void under the Act is one made in contravention of Sub-section (2) of Section 47 [see Section 47(3)]. We have not been able to find any other provision anywhere to the same effect. In the scheme of the provisions a dichotomy is seen between share or interest in the capital and interest in property of the Society. While Section 29(2) refers to transfer of a member's share or his interest in the capital or property of any society, Section 31 in contrast speaks of "the share or interest of a member in the capital of a society". The Act, therefore, makes a clear distinction between the share or interest in the capital and share or interest in property of the Society. We have also noticed that the Act does recognise interest in the immovable property of the Society as well [see Section 47(1)(b)]. We have seen the qualifications for membership. There is no reason to suppose that if the qualifications under the Bye-laws are fulfilled an application" for membership may be rejected. It is admitted that the flat is owned by the Society and the judgment-debtor has a right or interest to occupy the same.

18. This right or interest to occupy is a species of property. We have to consider whether this right to the particular property is attachable and saleable in execution of the decree against the judgment-debtor. It is contended by Mr. Chatterjee, amicus curiae, that Section 31 of the Act completely bars attachment and sale of the said property in execution of the decree. We have already pointed out the difference in language between Section 29 and Section 31 and also made reference to Section 47(1)(b) in that connection. There is nothing in the language of Section 31 to indicate that the right to occupation which is the right to be sold in auction is not attachable in execution of the decree. There is nothing in Section 31 to even remotely include a prohibition against attachment or sale of the aforesaid right to occupation of the flat. Once Section 31 is out of the way, we are left with Section 29 wherein we do not find even a provision of prior consent for transfer of share or interest in such property. The only restrictions under Section 29(2) are that the member may not transfer his interest in the property prior to one year and the transfer is made to an existing member of the Society or to a person whose application for membership has been accepted by the Society. It is true that bye-law 71D says that a member to whom a tenement is allotted shall not assign or underlet, vacate or part with the possession of the tenement or any part thereof without the previous consent in writing of the Managing Committee, but there is nothing to show that contravention of this bye-law makes the assignment void under the Act unlike in the case of a transfer being void under Section 47(3). There is no impediment to ratification of the assignment by the Committee particularly in view of the legal position arising out of the conjoint effect of Section 29, Rule 24 and bye-law 9. Section 29 read with Rule 24 shows that there is no prohibition as such against transfer of a share to a member or even to a non-member if he consents to be a member and makes an application for membership by purchasing aye shares as provided under bye-law 9. Reading the aforesaid provisions there is no reason to think that there is any question of refusal of membership of the Society to a non-member if he is qualified otherwise and makes an appropriate application in which case the transfer of shares will be operative and thus the assignment of the right to occupation will hold good. Further it is significant that under Section 146(a) of the Act, contravention of Sub-section (2) of Section 47 is punishable under Section 147 of the Act. Contravention of any bye-law is, however, no offence. We, therefore, unhesitatingly come to the conclusion that this species of property, namely the right to occupy a flat of this type, assumes significant importance and acquires under the law a stamp of transferability in furtherance of the interest of commerce. We have seen no fetter under any of the legal provisions against such a conclusion. The attachment and the sale of the property in this case in execution of the decree are valid under the law.

10. Mr. Thacker learned senior counsel also placed reliance on the judgment of Delhi High Court in case of Sohan Nayyar And Ors. Vs., Lf. Governor of Delhi and another AIR 1983 Delhi 301 and in particular paragraph 17 to 21, 25 to 27 in support of the submission that even minority members of the society can challenge an arbitral award. Paragraphs 17 to 21 and 25 to 27 of the said judgment read thus :

17. In the case of Co-operative Society, the liability of a member may be limited or it may be unlimited. If there is a limited liability, then the Society will use the words 'limited' or its equivalent as part of its name. It so happens that in the instant case, the liability of the members is limited' as it uses the word 'limited' as part of its name. All this is provided in various sections of the Delhi Co-operative Societies Act, 1972, Even when the liability is limited, any claim against the Society can be recovered from the property of the Society as well as from the members of the Society to the extent of their liability. This is so provided in S. 75 of the Act Even if no personal liability is involved, it is obvious that each member of the Society has an interest in the Society and as each member can have only one share, all the members share the interest equally. If the interests of the Society are adversely affected, the value of the share of each member to that extent is diminished. So, it cannot be denied that each member has an interest in the Society. One of the items in the award is that a sum of Rupees 22,45,742/- has to be paid to the Administration. There is also another item to the effect that the Society shall not contest the smooth acquisitions of its land and shall not appeal for enhancement of its compensation. These two items are sufficient to show that the interest of the members is adversely affected to some extent, though it is difficult to see the exact implications of the award.

18. It appears that on this ground the members of the Society can maintain objections if the Society itself does not file the same.

19. There is yet another reason to come to the conclusion that the objection could be maintained. From an analysis of the facts set out earlier in the judgment, it plainly appears that the Managing Committee was superseded on 9th July, 1971. The application moved in this Court under S. 14 of the Arbitration Act was moved by Shri Bal Mokand Vig who was the ex-Secretary of the Society. S. 14 (2) of the Act provides that the arbitrators or umpire may file the award at the request of the parties or under directions by the Court. Obviously, for the purpose of that application, a member of the Society was treated as being competent to obtain an order from the Court to direct the filing of the award. If we come to the conclusion that no objections could be filed, then it would also have to be held that the award has been wrongly filed in the Court because it was at the instance of a party not entitled to maintain the application. We do not think that this is the correct view. The exact language used in S. 14 (2) is as follows:

"The arbitrators or umpire shall, at the request of any party to the arbitration agreement or any person claiming under such Party or if so directed by the Court cause the award or a signed copy to be filed in the Court."

This shows that a person claiming under a party to the arbitration agreement has also a right. If this right exists under S. 14 (2), it would appear that that party can also move the Court and consequently can also file the objections. All the members of the Society can be deemed to be persons claiming under the Society and, therefore, they are entitled to get the award filed in the Court and must also have the right to maintain the objections, otherwise, there was no point in giving the right to a person claiming under a party to move the arbitrator or the Court, as seems to be implicit in the language of S. 14 (2). For this reason also it seems the objections could be maintained by the members.

20. It is now necessary to turn to perhaps the most important aspect of this case, which is regarding the rights of individual members of a Corporation to maintain a suit in the name of the Corporation or in the interest of the Corporation, since it is the analogy of a Corporation that has been applied here to a Co-operative Society as well. This matter was considered by the Federal Court in Dr. Satya Charan Lal v. Rameshwar Prosad Bajoria, . It was stated in that judgment that it was well-settled that in order to redress a wrong done to a company or to recover monies or damages alleged to be due to the company, the action should be brought by the company itself. This was the rule in Foss v. Harbottle, . It is unnecessary to refer to the other cases cited by the Federal Court. The law was summarised in the following terms:-

"The correct position seems to us to be that ordinarily the directors of a company are the only persons who can conduct litigation in the name of the company, but when they are themselves the wrong-doers against the company and have acted mala fide or beyond their powers, and their personal interest is in conflict with their duty in such a way that they cannot or will not take steps to seek redress for the wrong done to the company, the majority of the shareholders must in such a case be entitled to take steps to redress the wrong."

This view upheld the right to the majority of share-holders to maintain an action in the name of the company. The law has been summarised in this behalf in Para No. 767 of Halsbury's Laws of England, Fourth Edition Vol. 7 as follows:

"In an action to redress a wrong done to a company or to recover money or damages alleged to be due to it, the company is the only proper plaintiff, but its name should be used as plaintiff by direction of the company or its directors. Where the members complaining represent the majority of the company, the action may be brought in the company's name, ever though the directors object. The court may allow the matter to stand so that a company meeting can be held to decide whether the action should proceed in the company's name. At such a meeting the votes of the persons complained of cannot be excluded. Nevertheless, proceedings may be brought by any member or members in his or their own name or names where such authority cannot be obtained and the act complained of is of a fraudulent character or oppressive or is ultra vires the company, or criminal or where the wrongdoers control the majority of votes; or where the result would otherwise be that the company was carrying out by an ordinary resolution something which could only be properly carried out by a special resolution, or by any other resolution requiring a prescribed majority."

Thus, the position as far as the latest Edition of Halsbury's Laws of England is concerned is that the action may be brought without the directors consent by a majority of shareholders in the name of the company and in some cases where the majority does not support the litigation by the shareholders in their representatives capacity. In such a case, the suit may be either by all the complaining members altogether or representatively by some of them. There is no case in which the minority of shareholders cannot protect their interest.

21. Keeping this in view, it does not seem right to hold that the members of the Society who have filed objections cannot maintain the objections. These objections have been filed in the individual names of the members and now, they are supported by the present management of the Society. No meeting was called by the Court because it was not a case of objections being filed in the name of the CO-operative Society.

25. Applying the above principle to the case of the present objector, on the footing that they are a minority set of shareholders in the Co-operative Society, it would appear that some remedy should be open to them in respect of the Society's failure to object to the award. For the purpose of this analysis, it must be assumed that there is something wrong with the award, if this is so, it would be for the Society to challenge the same in normal circumstances. If the persons in charge of the management refuse to challenge the award, then it should be open to the minority shareholders to maintain a suit in respect of the award. However. S. 32 of the Arbitration Act states that no suit can lie on any ground whatsoever for a decision upon the existence, effect or validity to arbitration agreement or award. So, these 143 members could not maintain a suit, on the principles laid down by the Supreme Court in Jawahar Lal Barman v. Union of India, MANU/SC/0005/1961 : AIR 1962 SC 378. This means that they can only approach The Court under the Arbitration Act. This is, therefore, an additional ground on which the objections could be heard by the Court.

26. To summarise the conclusions, it may be useful to state the following propositions:-

(1) In the case of Corporations, where there are members, a suit may be maintained by the Corporation acting through its directors. If the directors refuse to act or the action complained of is that of the directors themselves, then such a suit can be maintained by the majority shareholders in the name of the Corporation.

(2) If the action is challenged by the minority shareholders when the directors refuse to act, then the action or suit has to be brought by the minority shareholders in their own name. This may be done by them acting jointly or there may be a representative suit by a class of shareholders or members.

(3) In the case of an arbitration award which is filed in Court, the objections may be filed by the parties thereto or if the parties refuse to file objections or fail to file objections, then a person claiming under them can also file objections provided they can show some interest in the subject-matter of the award or reference, as the case may be.

(4) The principle which applies to appeals, namely, that third parties can also file objections, even though not parties to the suit, applies also to objections against an award being made a rule of the Court subject to the same limitations, i.e., the objectors must show that they have an interest in the subject-matter of award or reference and they obtain leave of the Court which should normally not be refused.

(5) In the case of arbitration awards against a Corporation which have been filed in the Court, members of the Corporation can maintain objections as they are debarred from filing a suit because of S. 32 of the Arbitration Act, to challenge the award or the arbitration agreement, as the case may be. These objections can be filed on the same basis as a suit can be filed by majority or minority shareholders of a company, which means that if the majority shareholders object to the award they can do so in the name of the company and if the minority shareholders challenge the same, they can do so in their own names,

(6) In order to determine whether it is the majority or minority shareholders who are maintaining the objections, the Court can even call a meeting of the company.

27. Applying these propositions to the circumstances of this case, it clearly appears that the nominated management of the Society was not willing to file objections to the award. The award was filed at the instance of one of the members of the Co-operative Society and not at the instance of the parties to the reference. Against this award, objections could be filed by the majority of the members in the name of the Co-operative Society or by a minority in their own names. If the objectors could establish an interest in the subject-matter of the award, they were entitled to get the leave of the Court to maintain the objections or they could be treated as persons claiming under a party and, therefore, entitled to maintain objections. Alternatively, they could maintain these subjections on the principles on which minority shareholders could challenge the decision of the majority. For all these reasons, we think the objections in this case were maintainable and we could allow the present appeal.

11. Mr. Samdani learned senior counsel in rejoinder invited my attention to the judgment of Madras High Court in case of Chennai Container Terminal Pvt. Ltd.etc. Vs. Union of India and Ors. reported in AIR 2007 Madras 225 (DB) and submits that Division Bench of Madras High Court has considered the judgment of Delhi High Court in case of Sohan Nayyar and Ors. (supra) relied upon by Mr.Thacker learned senior counsel and has also considered the provisions of Section 34 read with section 2(1)(h) of Arbitration and Conciliation Act, 1996 and has distinguished the judgment of learned Delhi Court on the ground that the provisions for impugning award under section 30 read with 33 of the Arbitration Act, 1940 which were considered by the Delhi High Court and section 34 of the Arbitration and Conciliation Act, 1996 are totally different. It is submitted that the principles laid down by Madras High Court in which the court had considered the provisions under section 34 of the Arbitration and Conciliation Act, 1996 read with section 2(1)(h) which are squarely applicable to the facts of this case and shall be considered by this court and not the judgment of Delhi High Court. Paragraph 9 to 11 of the said judgment of Madras High Court read thus:-

9. However, in the case on hand the learned single Judge has held that though Section 34 of the Act contemplates challenge of the award made by the party to the arbitration agreement, in view of Section 2(1)(h) of the Act, the import of the word 'party' can be judiciously expanded, if the context so warrants. Hence, the word 'party' may include not only the signatory to the arbitration agreement, but also a party non-signatory to the agreement. According to the learned single Judge, the contextual facts and circumstances warrant expansion of the definition found under Section 2(1)(h) of the Arbitration & Conciliation Act, 1996 to include the Government of India, which is a party non-signatory for the purpose of challenging the award under Section 34 of the Act. We fail to appreciate the stand taken by UOI that it is a non-signatory party to the agreement. Learned ASG was unable to show as to how UOI can be said to be a party to the agreement in the face of express provision contained in the agreement, which defined party to include only "ChPT & CCTPL". The word 'Party' is defined in Section 2(1)(h) of the Act to mean a "party to an arbitration agreement" and therefore, ordinarily, the expression 'Party' as used in Section 34 of the Act must carry the same meaning, namely, a party to the arbitration agreement or award. But, as the opening part of Section 2(1)(h) of the Act shows, the definitional meaning is subject to anything repugnant in the subject or context. We must, therefore, see whether there is anything in Section 34 or in the context in which it occurs which should compel us to place a broader meaning different from the one given to it in Section 2(1)(h). In our opinion, there is nothing in the subject or context of Section 34 which would suggest us to depart from the definitional meaning of the expression 'party'. The expression 'party' is used in Section 34(2) in its definitional sense to mean a party to the arbitration proceedings and does not include a third person, who is not a party to the agreement. To our mind the interpretation suggested by the learned ASG would make the Act totally unworkable. It is well settled that an award is final and binding only on the parties and can be enforced only against the party to the award. A third party would therefore be in a position to challenge the award, but not be bound by it, if the challenge fails. Equally, a third party can render the limitation period envisaged under the Act otiose by merely claiming knowledge of the award long after the period of limitation has expired.

10. Learned ASG, however, submitted that UOI is an aggrieved party inasmuch as the arbitrator has totally misconstrued the guidelines of UOI and therefore, the UOI can challenge the award of the arbitrator. In support of his submission, learned ASG placed reliance on the Division Bench judgment of the Delhi High Court in Sohan Nayyar v. Lt. Governor, Delhi MANU/DE/0483/1982 : AIR 1983 Delhi 301. The said decision is under the old Arbitration Act of 1940 and the Bench clearly found that the provisions of the Act of 1940 do not specify as to which can make an application, and therefore held that as the Act does not prohibit filing of an objection by a third parties, there is no bar to some one else filing objections provided they have some interest in the subject matter of the litigation. As observed by the Supreme Court in Sundaram Finance Limited v. NEPC Limited, the Arbitration and Conciliation Act, 1996 is based on UNCITRAL Model. It is entirely different from the Arbitration Act, 1940. The provisions of this Act must, therefore, be interpreted and construed independently and in fact reference to 1940 Act may actually lead to misconstruction. In order to get help in construing these provisions it is more relevant to refer to the UNCITRAL Model Law rather than the 1940 Act.

11. Learned ASG, relying upon the decision of the Supreme Court in ITI Ltd v. Siemens Public Communications Network Ltd. MANU/SC/0502/2002 : [2002]3SCR1122 submitted that the provisions of CPC would apply to the proceedings under Section 34 of the Act and an aggrieved party for the purpose of challenging the award can invoke Section 34 of the Act. The contention is required to be stated only for rejection. In ITI Ltd. Case the Court held that merely because second appeal is barred under Sub-section (3) of Section 37, remedy of revision would not cease to be available. Although revision is not specifically provided for by the Act but in the absence of any express exclusion of CPC, no inference can be drawn that provisions of CPC would not apply to proceedings arising under the Act and revision is not maintainable. This decision has no application to the case on hand. Section 34 of the Act read with the definition of 'party' in Section 2(1)(h) of the Act makes it amply clear that only a party to the arbitration agreement can invoke the provisions of Section 34 of the Act. A third party has no locus standi to challenge the award under Section 34 of the Act.

REASONS AND CONCLUSION

12. Section 34 of the Arbitration and Conciliation Act, 1996 provides for an application for setting aside arbitral award. Section 34(2) provides for the grounds of challenge of an arbitral award on which such award may be set aside by the court. The said provision also provides that an arbitral award may be set aside if the party making application furnishes any of the proof that is specifically setout in section 34(2) (a) (i) to (v). Under section 2(1) (h) party is defined as 'party' means a party to an arbitration agreement.

13. A perusal of the record clearly indicates that none of the members of the society were parties to the development agreement entered into between the respondent no.1 and the society. It is however the case of the petitioners that since the society did not challenge the impugned award and the said award has affected the rights of the petitioners in respect of their respective flats in the society, petitioners who are claiming through the society are also thus parties to the arbitration agreement and being parties aggrieved are entitled to challenge the impugned award though the society has not impugned the said arbitral award.

14. A perusal of the Arbitration and Conciliation Act, 1996 in toto shows that the term party has been used in almost every section of the said Act. Under section 7 of the said Act the parties by an agreement can submit to arbitration all or certain disputes which have arisen or may arise between them in respect of a defined legal relationship whether contractual or not. It is provided that an arbitration agreement shall be in writing. Section 7(4) of the Act provides as to when an arbitration agreement can be construed as in writing if it is contained in various documents and pleadings.

15. Section 8 provides that a party to an arbitration agreement can file an application before a judicial authority before which an action is brought in a matter which is the subject of an arbitration agreement, to refer parties to arbitration. Section 9 of the Act provides for interim measures which can be applied by a party. Section 10 provides for composition of arbitral tribunal which can be determined by the parties to the arbitration agreement. Section 11 of the Act provides for appointment of arbitrators in the mode and manner prescribed therein and prescribes for an application to be made by a party to the arbitration agreement for appointment of arbitrators before the Chief Justice or any person or institution designated by him.

16. Sections 12 and 13 of the Act provides for grounds for challenge which challenge can be made only by the parties to the arbitration agreement. Under section 14 of the Act, the parties to the arbitration agreement can apply to the court to decide on the termination of the mandate if a controversy remains concerning any of the grounds referred to in clause (a) of sub-section 1 of section 14. Section 15 of the Act provides for termination of mandate and for making an application by the parties to the arbitration for substitution of arbitrator. Section 17 of the Act permits parties to the arbitration agreement to apply for interim measures before the arbitral tribunal. Section 18 of the Act provides that the parties shall be treated with equality and each party shall be given a full opportunity to present his case.

17. Section 19 provides for determination of rules of procedure and further provides that subject to the said part, the parties are free to agree on the procedure to be followed by the arbitral tribunal in conducting its proceedings. Section 20 provides for an agreement between the parties to the arbitration agreement to agree on the place of arbitration. Section 21 provides as to when the arbitral proceedings commences unless otherwise agreed by the parties. Section 22 to 26 of the Act provides for the mode and manner of conducting arbitration proceedings by the parties before the arbitral tribunal and consequence of a default of a party.

18. Section 28 of the Act provides that what rules shall be applicable to substance of dispute. The arbitral tribunal has to decide in accordance with the terms of the contract entered into between the parties. Under section 31, the arbitral tribunal has to render reasons in the arbitral award unless the parties have agreed that no reasons are to be given. It provides that a signed copy of the arbitral award has to be delivered or shall be delivered to each party. The arbitral tribunal is empowered to grant interest unless the parties have otherwise agreed that interest not to be awarded by the arbitral tribunal. Under section 32 of the Act the arbitral proceedings are terminated if the parties agree on the termination of the proceedings. Under section 33, a party may apply for correction, interpretation and for additional award. Under section 34 of the Act, a party can challenge an arbitral award on the grounds setout therein.

19. A perusal of the aforesaid provisions of the Act and the scheme makes it clear that only the parties to the arbitration agreement can exercise various rights and invoke the mechanism of adjudication of disputes by arbitration by referring their disputes to arbitration for adjudication and not by an outsider. The only exception carved out under the Act is under sections 40 and 41 i.e. in case of the death of a party to the arbitration agreement which can be enforceable by or against the legal representative of the deceased and in case of insolvency, if such insolvant was party to arbitration agreement and if official assignee or receiver adopts such contract.

20. In my view the arbitral tribunal is a private forum and gets jurisdiction to adjudicate upon the disputes between the parties to the arbitration agreement and not the persons who are not parties to the arbitration agreement. Proceedings under section 34 of the Act are not by way of an appeal. There is no other provision under the Act for challenge of an arbitral award except what is provided under section 34 of the Act. In my view only a party to the arbitration agreement which is defined under section 2(1) (h) of the Act can challenge an arbitral award under section 34 of the Act and not by a person who is not a party to the arbitration agreement unless covered by sections 40 and 41 of the Act. However if a person is wrongly impleaded as party to the arbitration proceedings and is aggrieved by arbitral award, he can invoke section 34 of the Act.

21. Division Bench of this court in case of Girish Mulchand Mehta and another (supra) has held that a member of the society speaks through the society and has no independent right qua the society. Society is entitled to represent as the corporate aggregate. Division bench of this court has considered the judgment of Supreme Court in case of Ramesh Himmatlal Shah (supra) which is relied upon by Mr.Thacker, learned senior counsel for the petitioners and held that the members of the society not having challenged the resolution passed by the society and such resolution not having been set side by the appropriate forum are binding on all the members.

22. Supreme court in case of Firm Ashok Traders vs. Gurmukhdas Saluja and others AIR 2004 SC 1433 while construing section 9 of the Act held that a person not a party to an arbitration agreement cannot enter the court for protection under section 9 of the Act. A party to an arbitration agreement can invoke the said jurisdiction for securing relief which the court has power to grant before, during or after arbitral proceeding by virtue of section 9. The court is competent to grant such relief to a party under clauses (i) and (ii) of section 9. In my view the principles laid down by the Supreme Court while interpreting section 9 of the Act which provides for a remedy of interim measures available only to a party to arbitration agreement are applicable also to the proceedings under section 34 of the Act for setting aside an award only by a party to an arbitration agreement subject to sections 40 and 41 of the Act and by a person wrongly impleaded as party to arbitration proceedings and is aggrieved by such arbitral award.

23. Supreme court in case of The state of Maharashtra & Ors. vs. Ark Builders Pvt. Ltd. AIR 2011 SC 1374 : [2011 ALL SCR 906] while interpreting section 31 (5) of the Act has held that copy of an arbitral award has to be delivered to the party by the arbitral tribunal and the limitation for making an application for correction or interpretation of award under section 33(1) and for making an application for setting aside an award under section 34(3) commences from the date of delivery of such arbitral award by the arbitral tribunal to a party to the arbitration agreement. Paragraph 12 of the said judgment reads thus:-

12. We are supported in our view by the decision of this Court in Union of India v. Tecco Trichy Engineers & Contractors MANU/SC/0214/2005 : (2005) 4 SCC 239; in paragraph 8 of the decision it was held and observed as follows:

8. The delivery of an arbitral award under Sub-section (5) of Section 31 is not a matter of mere formality. It is a matter of substance. It is only after the stage under Section 31 has passed that the stage of termination of arbitral proceedings within the meaning of Section 32 of the Act arises. The delivery of arbitral award to the party, to be effective, has to be "received" by the party. This delivery by the Arbitral Tribunal and receipt by the party of the award sets in motion several periods of limitation such as an application for correction and interpretation of an award within 30 days under Section 33(1), an application for making an additional award under Section 33(4) and an application for setting aside an award under Section 34(3) and so on. As this delivery of the copy of award has the effect of conferring certain rights on the party as also bringing to an end the right to exercise those rights on expiry of the prescribed period of limitation which would be calculated from that date, the delivery of the copy of award by the Tribunal and the receipt thereof by each party constitutes an important stage in the arbitral proceedings. (Emphasis added)

24. Supreme Court in case of Benarsi Krishna Committee & Ors. vs. Karmyogi Shelters Pvt. Ltd. (2012) 9 SCC 496 : [2012(6) ALL MR 415 (S.C.)] has held that copy of the award has to be delivered to the party as defined in section 2(1) (h) of the Act which clearly indicates that such a person shall be a party to the arbitration agreement. A copy of the award can be served only on the party himself and not his or her agent or advocate. Paragraph 15 of the said judgment of the Supreme Court read thus :-

15. Having taken note of the submissions advanced on behalf of the respective parties and having particular regard to the expression "party" as defined in Section 2(h) of the 1996 Act read with the provisions of Sections 31(5) and 34(3) of the 1996 Act, we are not inclined to interfere with the decision of the Division Bench of the Delhi High Court impugned in these proceedings. The expression "party" has been amply dealt with in Tecco Trechy Engineer's case (supra) and also in ARK Builders Pvt. Ltd.'s case (supra), referred to hereinabove. It is one thing for an Advocate to act and plead on behalf of a party in a proceeding and it is another for an Advocate to act as the party himself. The expression "party", as defined in Section 2(h) of the 1996 Act, clearly indicates a person who is a party to an arbitration agreement. The said definition is not qualified in any way so as to include the agent of the party to such agreement. Any reference, therefore, made in Section 31(5) and Section 34(2) of the 1996 Act can only mean the party himself and not his or her agent, or Advocate empowered to act on the basis of a Vakalatnama. In such circumstances, proper compliance with Section 31(5) would mean delivery of a signed copy of the Arbitral Award on the party himself and not on his Advocate, which gives the party concerned the right to proceed Under Section 34(3) of the aforesaid Act.

25. Supreme Court in case of S.N.Prasad vs. Monnet Finance Ltd. and others AIR 2011 SC 442 after considering the definition of arbitration agreement under section 2(1) (b) definition of 'Party' under section 2(1) (h) and section 7 of the Arbitration and Conciliation Act, 1996 has held that there can be reference to arbitration only if there is an arbitration agreement between the parties. An arbitrator can be appointed under the said Act at the instance of a party to an arbitration agreement only in respect of the disputes with another party to the arbitration agreement. If there is a dispute between a party to an arbitration agreement with other parties to the arbitration agreement as also non-parties to the arbitration agreement, reference to arbitration or appointment of arbitrator can be only with respect to the parties to the arbitration agreement and not the non-parties. It is held that since there was no arbitration agreement between the parties, the impleadment of the person not party to arbitration agreement as a respondent in the arbitration proceedings and the award against such person in such arbitration can not be sustained. Paragraphs 5, 7 and 19 of the said judgment read thus :-

5. The High Court of Delhi by two orders dated 23.5.2000 appointed a retired Judge of the High Court as the sole arbitrator. The arbitrations ended in two awards dated 1.5.2002. The first award directed respondents 2 and 3 and appellant to pay Rs. 93,23,288/- (that is Rs. 50 lakhs with interest at 20; up to the date of the appointment of arbitrator) with interest at 18% per annum from 24.5.2000. Similarly the second award directed respondents 2 and 3 and appellant to pay Rs. 46,49,315/- (that is Rs. 25 lakhs with interest at 20% upto the date of appointment of arbitrator) with interest at 18% per annum from 24.5.2000. The two arbitration awards were challenged by the appellant by filing applications under Section 34 of the Act (OMP No. 319/2002 and 322/2002). The second and third respondents also challenged the awards in OMP No. 320/2002 and 321/2002. A learned single Judge of the Delhi High Court by a common order dated 22.5.2006 dismissed the said applications. The said common order dated 22.5.2006, insofar as it dismisses OMP 319/2002 and 322/2002, is challenged by the appellant in this appeals by special leave.

7. Section 2(b) defines "arbitration agreement' as an agreement referred to in Section 7 of the Act. Section 2(h) defines "party" as party to an arbitration agreement. Section 7 of the Act defines an 'arbitration agreement'. Sub-section (1) of Section 7 defines an arbitration agreement as an agreement by the parties to submit to arbitration all or certain disputes which have arisen or which may arise between them in respect of a defined legal relationship, whether contractual or not. Sub-section (2) provides that an arbitration agreement may be in the form of an arbitration clause in a contract or in the form of a separate agreement. Sub-section (3) requires an arbitration agreement to be in writing. Sub-section (4) explains as to when an arbitration agreement could be said to be in writing, that is: (a) a document signed by the parties; (b) an exchange of letters, telex, telegrams or other means of telecommunication which provide a record of the arbitration agreement; or (c) an exchange of statements of claim and defence in which the existence of the arbitration agreement is alleged by one party and not denied by the other. Sub-section (5) provides that the reference in a contract to a document containing an arbitration clause constitutes an arbitration agreement if the contract is in writing and the reference is such as to make that arbitration clause a part of the contract. Thus there can be reference to arbitration only if there is an arbitration agreement between the parties. The Act makes it clear that an Arbitrator can be appointed under the Act at the instance of a party to an arbitration agreement only in respect of disputes with another party to the arbitration agreement. If there is a dispute between a party to an arbitration agreement, with other parties to the arbitration agreement as also non-parties to the arbitration agreement, reference to arbitration or appointment of arbitrator can be only with respect to the parties to the arbitration agreement and not the non-parties.

19. As there was no arbitration agreement between the parties (the first respondent and appellant), the impleading of appellant as a respondent in the arbitration proceedings and the award against the appellant in such arbitration cannot be sustained. As a consequence, both the arbitration awards, as against the appellant are liable to be set aside. If the first respondent wants to enforce the alleged guarantee of the appellant, it is open to the first respondent to do so in accordance with law.

26. In my view since the petitioners herein could not have been impleaded as parties to the arbitration proceedings before the learned arbitrator for want of arbitration agreement between the petitioners and the respondent no.1, nor the petitioners were parties to the arbitration proceedings, petitioners have no locus to file petition under section 34 of the Act for setting aside such an arbitral award.

27. This court in case of Supreme Megha Constructions LLP Vs.Symphony Co-operative Housing Society Limited and Mr.Ajay Wadhwa applicant in Notice of Motion (L) No.2410 of 2014 in Suit (L) No. 867 of 2014, delivered on 29th October 2014 : [2015(2) ALL MR 1] has held that since the applicant in the notice of motion who was member of the society was not party to the arbitration agreement cannot file an application under section 8 of the said Act for referring the parties to the suit to arbitration. This court has considered section 8 read with the definition of party under section 2(1) (h) of the said Act and has held that society was party to the arbitration agreement and not the applicant member and thus application under section 8 would not be maintainable at the instance of such member who was not party to the arbitration agreement. Paragraphs 23 and 24 of the said judgment read thus :-

23. Perusal of the record indicates that except the plaintiff and the defendant no.1 society, none of the parties to this proceedings are party to development agreement. In my view since applicant and other defendants except the society are not parties to the arbitration agreement, even if application under section 8 would have been filed by the applicant to this Notice of Motion or other defendants except the society, same would not have been maintainable. Application under section 8 can be filed only by a party to the arbitration agreement. Section 8 has to be read with section 2(1) (h) of the Arbitration and Conciliation Act, 1996.

24. This court in case of Vardhaman Developers Ltd. vs. Andheri Krupa Prasad Co-op.Hsg.Soc.Ltd. & Ors. in Notice of Motion (L) No. 248 of 2014 in Suit No.94 of 2014 in a judgment rendered on 20th February, 2014 has taken a view that the member of the society who was not party to the arbitration agreement cannot mention an application under section 8 of the Arbitration and Conciliation Act, 1996. I am therefore of the view that even such application under section 8 of the Arbitration and Conciliation Act if would have been filed by a member claiming through the society which society is party to the arbitration agreement, such application would not be maintainable.

28. In my view the principles laid down by this court in the said judgment in the case of Supreme Megha Constructions LLP, [2015(2) ALL MR 1] (supra) would be applicable to the application made by the petitioners under section 34 of the said Act. I am therefore of the view that this petition is not maintainable at the instance of the petitioners.

29. In so far as judgment of Delhi High Court in case of Sohan Nayyar and others (supra) relied upon by Mr.Thacker, learned senior counsel is concerned, a perusal of the said judgment clearly indicates that the said judgment was delivered in the proceedings governed by the provisions of Arbitration Act 1940. In case of Chennai Container Terminal Pvt. Ltd. (supra) Division Bench of Madras High court has dealt with the proceedings under the provisions of the Arbitration and Conciliation Act, 1996. Question of law considered by the Madras High Court was whether the applicant who was neither a party to the arbitration agreement nor to the arbitration proceedings could file an application under section 34 of the Arbitration and Conciliation Act for setting aside the arbitral award. The Madras High Court has held that there is nothing in the subject or context of section 34 which would suggest the court to depart from the definitional meaning of the expression 'party' . It is held that the expression party is used in section 34 (2) in its definitional sense to mean a party to the arbitration proceedings and does not include a third person who is not party to the agreement.

30. It is held that a third party can render the limitation period envisaged under the Act otiose by merely claiming knowledge of the award long after the period of limitation as expired. The Madras High Court in the said judgment has distinguished the judgment of Delhi High Court in case of Sohan Nayyar (supra) by holding that the Delhi high Court had found that the provisions of the Arbitration Act 1940 did not specify as to who can make an application and therefore held that as the said Arbitration Act 1940 did not prohibit filing of an objection by a third party, there was no bar to someone else filing objections provided they had some interest in the subject matter of the litigation. The Madras High Court adverted to the judgment of Supreme Court in case of M/s.Sundaram Finance Limited vs. M/s.NEPC Limited 1999(2) SCC 499 holding that the Arbitration and Conciliation Act 1996 is based on UNCITRAL Model and is entirely different from the Arbitration Act 1940. The Supreme Court has held in the said judgment that the provisions of Arbitration and Conciliation Act 1996 must therefore be interpreted and construed independently and in fact reference to 1940 Act may actually lead to misconstruction.

31. A perusal of section 30 read with section 33 of the Arbitration Act, 1940 makes it clear that an application to challenge the existence or validity of an arbitration agreement or an award or to have the effect of either determined could be applied to the court by any party to the arbitration agreement or any person claiming under him. A perusal of the said Act makes it clear that the expression 'party to an arbitration agreement' has not been defined under the said Arbitration Act 1940. A perusal of the provisions of Arbitration and Conciliation Act, 1996 and in particular section 34(2) makes it clear that an application for setting aside an award can be made only by the party which is defined under section 2(1) (h) of the said Act or by the party to the arbitration proceedings.

32. A perusal of section 34 of the Act makes it clear that the said application has to be filed within the time prescribed under section 34(3) of the said Act. The time to file such application commences from the date of such party receiving copy of the arbitral award from the learned arbitrator. Under section 31(5) of the Act the arbitral tribunal has to deliver a copy of the award to each party. It is thus clear that a party to the arbitration agreement who may be a party to the arbitration proceedings and/or all the parties to the arbitration proceedings only would be entitled to be furnished with a copy of the arbitral award by the learned arbitrator under section 31(5) of the Act and upon delivery of copy of award from the arbitrator it which would commence the period of limitation for the purpose of filing an application under section 34 and can be filed within the time prescribed therein. If the arguments of the learned senior counsel appearing for the petitioners are accepted that the petitioners though were not parties to the arbitration agreement nor were parties to the arbitration proceedings can file an application for setting aside an award, there would be no limitation for filing an application for setting aside an arbitral award at the instance of such an outsider.

33. In my view the grounds of challenge which are available under section 34 of the Act and various other provisions which are applicable to the parties who are defined under section 2(1) (h) of the Arbitration and Conciliation Act, 1996 cannot be exercised by an outsider or by a person who is not a party to the arbitration agreement or the arbitration proceedings. In my view the petitioners who are members of the society which society was party to the arbitration agreement not having filed application for setting aside the impugned award cannot step into the shoes of the society and cannot be granted any leave to challenge the arbitral award. In my view there is no provision under the Arbitration and Conciliation Act, 1996 for granting any such leave as prayed by the petitioners to file an application under section 34 for setting aside the arbitral award.

34. In my view the petition filed by the petitioners who are neither parties to the arbitration agreement nor parties to the arbitration proceedings can not maintain this petition.

35. I therefore pass the following order :-

(a) Arbitration Petition is dismissed as not maintainable.

(b) No order as to costs.

Petition dismissed.