MANU/SC/1376/2015

Equivalent Citation: 2016(1)ALD56, 2015(6)ARBLR514(SC ), 2016 (1) AWC 196 (SC ), 2016(1) C HN (SC ) 193, [2016]131C LA1(SC ),
[2016]194C ompC as486(SC ), (2016)2C ompLJ401(SC ), (2016)1MLJ308(SC ), 2016(1)RC R(C ivil)941, 2015(13)SC ALE20, (2015)16SC C 631, 2016
(4) SC J 71, 2016 (2) WLN 115 (SC )

IN THE SUPREME COURT OF INDIA

Civil Appeal Nos. 3687 of 2006, 503 of 2001 and 2763 of 2002
Decided On: 01.12.2015
Appellants: Rajni Sanghi
Vs.
Respondent: Western Indian State Motors Ltd. and Ors.
Hon'ble Judges/Coram:
Vikramajit Sen and Shiva Kirti Singh, JJ.
Counsels:
For Appearing Parties: Dhruv Mehta, Gaurav Pachnanda, Anoop George Chaudhari,
June Chaudhari, Atmaram N.S. Nadkarni, Arvind P. Datar, Shyam Divan, Sr. Advs.,
Yashraj Singh Deora, Shreya Agarwal, Sameer Abhyankar, Priyadarshinee Singh,
Shashwat Purohit, Shruti Gupta, Rajni Sanghi, Ankit Kumar Lal, Mishra Saurabh,
Sarwa Mitter, Amit Gupta, Anant A. Pavgi, Advs. for Mitter & Mitter Co., Surekha
Raman, Anuj Sarma, Debarshi Bhuyan, Niharika, Advs. for K.J. John & Co.,
Siddhartha Chowdhury, Puneet Jain, Christi Jain, Abhinav Gupta, Manu Maheshwari,
Anikta Gupta, Sushil Kumar Jain, Pratap Venugopal, Jai Munim, Trisha Mukherjee,
Senthil Jagadeesan, Abhijat P. Medh, Milind Kumar, V. Ramasubramanian, Ashok
Kumar, Chand Qureshi and Mukti Chowdhary, Advs.
Case Category:
COMPANY LAW, MRTP AND ALLIED MATTERS
Case Note:
Arbitration - Implementation of award - Four brothers effected de facto
partition of family business - Held like partnership firm - All brothers had
cross holdings - Some friction at Bombay - Led to an arrangement signed by
four brothers - All four groups entered into arbitration agreement - Sole
arbitrator appointed - Effecting partition of family business into four equal
lots - Understanding that division to maintain place of business of each
group as it existed - N.K. Sanghi filed arbitration agreement - Arbitrator
entered into reference - Made communications with other three brothers -
After N.K. Sanghi's death, Appropriate application filed by N.K. Sanghi
Group - Delhi High Court enlarged time for publication of award - During
pendency, M.K. Sanghi filed company petition - Bombay High Court - Sought
injunction against A.K. Sanghi and R.K. Sanghi - Regarding shares and
management of Sanghi Motors Private Ltd. - Family members of A.K. Sanghi
and R.K. Sanghi filed petition - Section 33 of Arbitration Act, 1940 -
Challenged existence and validity of arbitration agreement - High Court
permitted making and publishing of award - Award filed with Delhi High
Court - Objection filed by M.K.Sanghi within time - Beyond time by
R.K.Sanghi and Sanghi Motors Private Ltd - A.K. Sanghi filed suit Under
Section 17 - Arbitration Act, 1940 - Learned single judge set aside the
award - Upheld in appeal by Division Bench - Order of Division Bench under
challenge - No one could obtain stay of proceedings in Company Petition

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before Bombay High Court - High Court sanctioned scheme of division -
Motors division fell to M.K. Sanghi group - Oxygen division to R.K. Sanghi
group - Settlement scheme opposed by A.K.Sanghi - Appeal dismissed by
Division Bench - Held that scheme did not violate Delhi High Court's
injunction order - In Company petition filed by R.K.Sanghi, scheme of
reconstruction and family settlement arrived - Between A.K. Sanghi, R.K.
Sanghi and N.K. Sanghi groups - Scheme approved by Rajasthan High Court
- M.K.Sanghi not a party - His interest received attention - He filed
objection within time - Pending before Delhi High Court in Suit filed by
A.K.Sanghi group - Making award a rule of Court - Orders of learned single
judge, Rajasthan challenged by M.K.Sanghi - R.K.Sanghi filed affidavit -
Alleged Uma Sanghi, Widow of N.K.Sanghi - Not honouring her
commitments under the scheme - Rajni Sanghi, widowed daugher-in-law of
Uma Sanghi filed special appeal - Later entered into compromise -
M.K.Sanghi and group filed additional affidavit - Suit before Delhi High
Court for setting aside the award - Sanghi motors under N.K.Sanghi group
filed contempt petition against A.K.Sanghi - Dismissed - Order of dismissal
challenged in Civil Appeal - Division Bench of Rajasthan High Court had
permitted son of A.K.Sanghi to be transposed as Appellant in Company
Appeal - Thus, Appeal continued even after M.K.Sanghi filed application to
withdraw appeal - Rajasthan High Court allowed appeal No. 24 and 30 of
1994 - Matter remitted to Company judge - Rajni Sanghi did not accept
Division Bench order - Preferred Civil Review Petition - Dismissed - Orders
of Division Bench partly allowing the appeal and dismissing the review
petition under challenge - Whether the view taken by the Delhi High Court
is correct - Whether the award under the Act which is yet to be made a rule
of the court deserves implementation or preference needs to be given to
the settlements finalized by the judgment of Bombay High Court and the
family settlements of 1994 and 1995 before the Rajasthan High Court
which have been now put to peril by the order of remand impugned by
Rajni Sanghi - Whether any good ground was available to Delhi High Court
under the provisions of Section 30 of the Act for invalidating the award and
for refusing to make it a rule of the court in exercise of power Under
Section 17 of the Act
Facts:
The present appeals arise out of common facts and disputes between
members of a larger family belonging to the branches of four sons of Late
Motilal Sanghi, the family patriarch who died in 1961. His four sons
effected a de facto partition of the then existing three family business. The
eldest son (Late) N.K. Sanghi became in charge of family business in
Rajasthan. The next brother (Late) A.K. Sanghi got charge of business at
Delhi and the remaining two, R.K. Sanghi and M.K. Sanghi got charge of
business at Bombay. In 1964 Sanghi Motors Private Limited (Bombay)
expanded to establish a factory for manufacture of oxygen in the name of
Sanghi Oxygen. R.K. Sanghi looked after the oxygen division and the
youngest brother M.K. Sanghi looked after the motor division of the Sanghi
Motors Private Limited (Bombay).
The family business appears to have been held by the brothers like a
partnership firm in which all the brothers have cross holdings. With passage
of almost two decades and changing profile of family headed by the four
brothers there was apparently some friction first at Bombay which led to an

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arrangement signed by the four brothers in 1983. This was mainly for
resolving dispute of authority between the two brothers in respect of
business at Bombay. Soon thereafter attempt was made for a larger family
agreement for partition of all the family business consisting of four
partnership firms and four companies, but could not be implemented
because of differences. Thereafter all the four groups entered into an
arbitration agreement on 6.8.1984 and appointed one Sh. H.K. Sanghi as
the sole arbitrator for effecting a partition of the family business into four
equal lots but with an understanding that the division would maintain the
place of business of each group as it existed already.
On 7.8.1984, N. K. Sanghi filed the arbitration agreement with the
Arbitrator who entered into reference on 18.8.1984 and made
communications with the other three brothers. N.K. Sanghi expired on
19.10.1984. On filing of appropriate application by N.K. Sanghi group the
Delhi High Court enlarged the time for publication of arbitrator's award.
During the pendency of reference, M.K. Sanghi filed a company petition
before the High Court of Bombay mainly seeking injunction against A.K.
Sanghi and R.K. Sanghi in respect of shares and management of both the
divisions of Sanghi Motors Private Limited (Bombay).
Family members of A.K. Sanghi and R.K. Sanghi filed a petition Under
Section 33 of the Arbitration Act, 1940 before Delhi High Court to challenge
the existence and validity of arbitration agreement dated 6.8.1984 but
ultimately High Court permitted the arbitrator to make and publish the
award. The award was filed with Delhi High Court which recorded the filing
and notice was issued to the parties. Objection to the award was filed by
M.K. Sanghi within time and beyond time by R.K. Sanghi and also by Sanghi
Motors Private Limited (Bombay). On the other hand A.K. Sanghi (now
represented by his sons Vijay Sanghi and Ajay Sanghi) filed Suit Under
Section 17 of the Arbitration Act, 1940 in the Delhi High Court to make the
award a rule of the Court. Learned Single Judge of the Delhi High Court
took notice of subsequent developments in the company case at Bombay
High Court and in another Company petition filed by R.K. Sanghi in
Rajasthan High Court and set aside the award. This order was upheld in
appeal by the Division Bench vide impugned order which is under challenge
in Civil Appeal of 2763 of 2002.
No one could obtain a stay of the proceedings in the Company Petition
before Bombay High Court which appointed a Receiver with respect to the
Sanghi Motors Private Limited (Bombay) and all its subsidiaries. On the
basis of a successful bid, Vaibhav Sanghi son of M.K. Sanghi entered into an
agreement with the receiver and exercised right of management in terms of
such agreement. Ultimately, Bombay High Court sanctioned the scheme of
division of two units of Sanghi Motors Private Limited (Bombay). Motors
division fell to the group of M.K. Sanghi and oxygen division to R.K. Sanghi
group. A.K. Sanghi opposed the aforesaid settlement scheme before the
Company Court as well as through an appeal before the Division Bench but
without any success. The Division Bench dismissed the appeal after holding
that the scheme of reconstruction did not violate the injunction order of
Delhi High Court. The Bombay company case has thus attained finality.
The Company Petition filed by R.K. Sanghi group before Rajasthan High
Court Under Section 397-398 of the Companies Act against Western India

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State Motors Limited (WISM), Uma Sanghi, widow of late N.K. Sanghi, Vijay
Kumar Sanghi (son of A.K. Sanghi) and an official of Rajasthan State
Industrial Development and Investment Corporation. In this company
petition which remained pending for a number of years, ultimately a
scheme of reconstruction and family settlement was arrived at between
persons representing three groups i.e., A.K. Sanghi, R.K. Sanghi and N.K.
Sanghi. This scheme was approved by the Rajasthan High Court. Although
M.K. Sanghi was not a party to this scheme but his interest clearly received
considerable attention. His objection to the award was within time and
pending before the Delhi High Court in the Suit filed by A.K. Sanghi group
to make the award a rule of the Court.
The scheme was signed by R. K. Sanghi and A. K. Sanghi also on behalf of
their respective family members. It involved passing of immovable property
from one group to another as well as payment of substantial amounts of
money for completing the adjustment required by way of reconstruction-
cum-family settlement. The orders of learned Single Judge of Rajasthan
High Court accepting the scheme of reconstruction-cum-family settlement
were challenged in appeal filed by M.K. Sanghi. Much later, R.K. Sanghi
filed an affidavit in the aforesaid appeal alleging that Uma Sanghi was not
honouring her commitments under the scheme, hence he was now of the
view that the scheme be set aside. Since learned Single Judge had rejected
an application for impleadment filed by Mrs. Rajni Sanghi, widowed
daughter-in-law of Uma Sanghi, Rajni Sanghi also preferred Special Appeal
before the Division Bench but while both the appeals were pending, she
entered into a compromise and settlement with the other parties who were
signatory to the family settlement.
While the appeal preferred by M.K. Sanghi was still pending before the
Division Bench of Rajasthan High Court, he and his group filed an additional
affidavit in Suit before Delhi High Court for setting aside the award on the
additional ground that A.K. Sanghi had undertaken before the Rajasthan
High Court to withdraw his application to make the award a rule of the
Court. As noted earlier, this weighed heavily with the learned Single Judge
as well as the Division Bench of the Delhi High Court in setting aside the
award. Sanghi Motors Bombay, under the control of N.K. Sanghi group also
filed a Contempt Petition before the Rajasthan High Court alleging that Mr.
A.K. Sanghi was guilty of contempt of order as he was still persisting with
Suit when he had undertaken to withdraw the same. This contempt petition
was dismissed as the Court came to the opinion that non-compliance was
on account of certain circumstances and not wilful. This order against
Sanghi Motors is subject matter of Civil Appeal No. 503 of 2001 which is
also be governed by this common judgment.
The Division Bench of Rajasthan High Court had permitted Vijay Sanghi son
of A.K. Sanghi to be transposed as Appellant in Company Appeal and hence
the appeal continued even after M.K. Sanghi filed an application to
withdraw that appeal. Ultimately by judgment and order, the Rajasthan
High Court allowed Appeal No. 30 of 1994 as well as Appeal No. 24 of 1994
and remitted the matter again to the learned Company Judge to proceed in
accordance with law, mainly because the Division Bench found a case of
non-compliance of Sub-clause (1) of Section 391 of the Companies Act. The
Division Bench noticed objections raised on behalf of Respondents that the
situation had become irreversible as major part of the scheme had been

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given effect to, but it left this aspect open for consideration by the learned
Company Judge after remand.
Rajni Sanghi did not accept the Division Bench order and preferred a Civil
Review Petition pointing out that she had already compromised the matter
by way of a subsequent scheme and filed the compromise petition; the only
non-signatory group i.e., M.K. Sanghi group had subsequently accepted that
compromise/settlement and had prayed for withdrawal of Appeal No. 30 of
1994 and therefore when all the stake holders had accepted the terms of
settlement and family arrangement, there was no need of interfering with
the order of the Single Judge. The review petition was however dismissed.
The aforesaid orders of Division Bench dated 3.4.2002 partly allowing
Appeal Nos. 24 and 30 of 1994 and order dated 26.8.2003 dismissing the
review petition are under challenge at the instance of Rajni Sanghi in Civil
Appeal No. 3687 of 2006.
Held, while disposing of the appeals
So far as the argument in favour of maintaining the award is concerned, the
Court found that Clause (c) of Section 30 does not attract the principle of
ejusdem generis so far as the term 'otherwise invalid' is concerned. That
ground for setting aside award is quite wide in amplitude and available to
the concerned court if it finds that the award requires to be treated as
invalid because on face of the things it runs counter to a valid law
prohibiting such an award or when the subject matter of the award has
been lawfully dealt with by a statutory authority or a court and it is no
longer available for disposal in accordance with the award under
consideration. Such a situation is only illustrative and has been enunciated
by this Court in the light of facts obtaining in this case.[25]
When the Courts having jurisdiction were allowed to proceed and decide
the properties available at Bombay and record a family arrangement in
respect of other matters in a company proceeding before the Rajasthan
High Court, the judgments and orders in these proceedings cannot be
ignored or obliterated on account of pendency of an award still waiting to
be made a rule of the court. In such a situation, in Court's view, the award
has to be set aside on the ground that it is otherwise invalid on the date it
is being considered for being made a rule of the court. Since this course of
action is available and has been rightly adopted by the Delhi High Court,
the Court does not feel necessary to examine the hypothetical question as
to whether even in absence of any ground for setting aside such an award,
could the court concerned refuse to make the award a rule of the court
Under Section 17 of the Act if it was confronted with a situation like the
one on hand in this case. Such a question need not be answered in the
present proceeding.[25]
The Court is satisfied that family arrangements made before the Rajasthan
High Court in 1994 before the Company Judge and in 1995 before the
Division Bench need to be protected and given pre-eminence over the
award which is yet not made the rule of the court. The family arrangement
was arrived at in spite of knowing the award for six years and obviously
because the parties who are family members, were at loggerheads over the
terms of the award. No doubt the family arrangements were initially made
only on behalf of three groups who originally signed the agreements for

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themselves as well as on behalf of their families but the 4th group, i.e.,
M.K. Sanghi group later decided to go along with that arrangement by
opting to withdraw its appeal.[26]
Hence, the Court accepts submissions advanced by the learned counsels of
the parties and holds that if parties settle their disputes amicably by an
agreement, even post-award, such settlement/agreement will prevail in
view of requirement of the Act that an award will acquire the status of a
decree only when it is made a rule of the court after rejection of all
objections. In that view of the matter there is no hindrance in law in
upholding the family arrangements made before the High Court at
Rajasthan as well as judgment of the Bombay High Court which has
attained finality. They deserve to have pre-eminence over the award in
question.[26]
The act of A.K. Sanghi in not honouring his undertaking to withdraw his
petition for making the award a rule of court and the attempt made by Vijay
Sanghi to obstruct the scheme of reconstruction-cum-family settlement of
1994 by getting transposed as an Appellant in Company Appeal No. 30 of
1994 when his father A.K. Sanghi had signed the settlement on behalf of
his group, were impermissible conduct of approbate and reprobate on the
part of A.K. Sanghi group which should not have been permitted. The status
of the head of the family acting as a Karta under the traditional Hindu law
deserves to be kept in mind in such a situation. The junior members of the
family are bound by decisions of a Karta in matters of family business and
property unless it can be pleaded and proved that the head of the family
has acted fraudulently or for immoral purposes. The Court has not been
shown any such case on behalf of Vijay Sanghi. In such a situation,
ignoring the traditional Hindu law and the rights of the head of the family
or Karta has put unnecessary burden not only on the larger family but also
upon the courts.[27]
The Court examined the Division Bench judgment of the Rajasthan High
Court under challenge by Rajni Sanghi and found that the remand order is
not on the basis of any defect in the agreements or supplementary
agreements but on account of certain technical requirements which should
have been ignored when the issues had been settled by all the stake
holders by reaching amicable agreement. The companies of family of four
brothers are almost like partnerships and when all were agreeable, interest
of justice was best subserved by recognizing even the supplementary family
settlement of 1995 in favour of Rajni Sanghi as well as the original family
arrangement of 1994 accepted by the Company Judge. In that view of the
matter the order of remand under challenge at the instance of Rajni Sanghi
is set aside and both the family arrangements indicated above are affirmed.
If any party fails to act as per those arrangements within three months, the
aggrieved party will be free to initiate appropriate proceedings including
those of contempt before the concerned High Court or seek execution of the
agreements through other appropriate proceedings. Civil Appeal No. 3687
of 2006 is allowed to the aforesaid extent and is disposed of accordingly.
[28]
In view of the discussions made above, Civil Appeal Nos. 2763 of 2002 and
Civil Appeal No. 503 of 2001 are dismissed.[29]

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 JUDGMENT
Shiva Kirti Singh, J.
1. These three Civil Appeals have been heard together because in essence they relate
to and arise out of common facts and disputes between members of a larger family
belonging to the branches of four sons of Late Motilal Sanghi, the family patriarch
who died in 1961. From the materials on record it appears that his four sons effected
a de facto partition of the then existing three family business. The eldest son (Late)
N.K. Sanghi became in charge of family business in Rajasthan. The next brother
(Late) A.K. Sanghi got charge of business at Delhi and the remaining two, R.K.
Sanghi and M.K. Sanghi got charge of business at Bombay. In 1964 Sanghi Motors
Private Limited (Bombay) expanded to establish a factory for manufacture of oxygen
in the name of Sanghi Oxygen. R.K. Sanghi looked after the oxygen division and the
youngest brother M.K. Sanghi looked after the motor division of the Sanghi Motors
Private Limited (Bombay). Whether in the form of partnership firm or as a company,
the family business appears to have been held by the brothers like a partnership firm
in which all the brothers have cross holdings. With passage of almost two decades
and changing profile of family headed by the four brothers there was apparently
some friction first at Bombay which led to an arrangement signed by the four
brothers on 6.7.1983. This was mainly for resolving dispute of authority between the
two brothers in respect of business at Bombay. Soon thereafter attempt was made for
a larger family agreement for partition of all the family business consisting of four
partnership firms and four companies. This family agreement involving the
methodology of partition chalked out on 22.2.1984 in a board meeting of M/s. Sanghi
Motors Private Limited (Bombay) held at Jodhpur ran into rough weather and could
not be implemented because of differences. Thereafter all the four groups entered
into an arbitration agreement on 6.8.1984 and appointed one Sh. H.K. Sanghi, a
family friend as the sole arbitrator for effecting a partition of the family business
under the control of four groups into four equal lots but with an understanding that
the division would maintain the place of business of each group as it existed already.
2 . The subsequent developments and relevant facts will be detailed hereinafter at
appropriate place but it is useful to notice that on 7.8.1984 N.K. Sanghi filed the
arbitration agreement with the Arbitrator who entered into reference on 18.8.1984
and made communications with the other three brothers. N.K. Sanghi expired on
19.10.1984. On filing of appropriate application by N.K. Sanghi group the Delhi High
Court enlarged the time for publication of the award by the Arbitrator. During the
pendency of the reference M.K. Sanghi filed a company petition bearing C.P. No. 128
of 1985 before the High Court of Bombay mainly seeking injunction against A.K.
Sanghi and R.K. Sanghi in respect of shares and management of both the divisions of
Sanghi Motors Private Limited (Bombay). Family members of A.K. Sanghi and R.K.
Sanghi filed a petition Under Section 33 of the Arbitration Act, 1940 before Delhi
High Court to challenge the existence and validity of arbitration agreement dated
6.8.1984 but ultimately High Court of Delhi permitted the arbitrator to make and
publish the award. The award dated 3.12.1987 was filed with High Court of Delhi
which recorded the filing on 17.12.1987 and notice was issued to the parties.
Objection to the award was filed by M.K. Sanghi within time and beyond time by R.K.
Sanghi and also by Sanghi Motors Private Limited (Bombay). On the other hand A.K.
Sanghi (now represented by his sons Vijay Sanghi and Ajay Sanghi, Appellants in
C.A. No. 2763 of 2002) filed Suit No. 581-A/1988 Under Section 17 of the Arbitration
Act, 1940 in the High Court of Delhi to make the award a rule of the Court. Learned
Single Judge of the Delhi High Court took notice of subsequent developments in the
company case at Bombay High Court and in another Company petition No. 6 of 1986
filed by R.K. Sanghi in the High Court of Rajasthan and set aside the award by order

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dated 11.12.1996. This order was upheld in appeal by the Division Bench vide
impugned order dated 5.10.2001 which is under challenge in Civil Appeal of 2763 of
2002.
3 . Interestingly, no one could obtain a stay of the proceedings in the Company
Petition No. 128 of 1985 before the High Court of Bombay which appointed a
Receiver with respect to the Sanghi Motors Private Limited (Bombay) and all its
subsidiaries by an order dated 11.9.1987. On the basis of a successful bid, Vaibhav
Sanghi son of M.K. Sanghi entered into an agreement with the receiver and exercised
right of management in terms of such agreement. Ultimately, Bombay High Court
vide order dated 6.7.1989 sanctioned the scheme of division of two units of Sanghi
Motors Private Limited (Bombay). Motors division fell to the group of M.K. Sanghi
and oxygen division to the group of R.K. Sanghi. A.K. Sanghi opposed the aforesaid
settlement scheme before the Company Court as well as through an appeal before the
Division Bench but without any success. The Division Bench dismissed the appeal on
30.6.1992 after holding that the scheme of reconstruction did not violate the
injunction order of the High Court of Delhi as care was taken to ensure that under the
scheme the transfer of shares would be effected only after the injunction would be
vacated by the Delhi High court. The Bombay company case has thus attained
finality.
4 . The Company Petition No. 6 of 1986, already noticed earlier was filed by R.K.
Sanghi group on 6.8.1986 before the High Court of Rajasthan Under Section 397-398
of the Companies Act against Western India State Motors Limited (WISM), Smt. Uma
Sanghi (widow of late N.K. Sanghi), Vijay Kumar Sanghi (son of A.K. Sanghi) and an
official of Rajasthan State Industrial Development and Investment Corporation. In
this company petition which remained pending for a number of years, ultimately a
scheme of reconstruction and family settlement was arrived at between persons
representing three groups i.e., A.K. Sanghi, R.K. Sanghi and N.K. Sanghi. This
scheme dated 5.9.1994 with a correction dated 6.9.1994 was approved by the High
Court of Rajasthan on 5/6.9.1994. Although M.K. Sanghi was not a party to this
scheme but his interest clearly received considerable attention. His objection to the
award was within time and pending before the High Court of Delhi in the Suit No.
581-A/1988 filed by A.K. Sanghi group to make the award a rule of the Court. In
paragraph 13 of the scheme of reconstruction filed in Company Petition No. 6 of 1986
a clear stipulation was made in following words-
13. That Shri A.K. Sanghi and his family members have filed a petition in
Delhi High Court for making the award of the Arbitrator dated 3.12.1987 as
rule of the Court being petition No. 581-A/1988. Shri A.K. Sanghi hereby
undertakes to withdraw the said proceedings unconditionally and all the
parties further agree that they shall abide by the terms of the scheme of
reconstruction.
The scheme was signed by R.K. Sanghi and A.K. Sanghi also on behalf of their
respective family members. It involved passing of immovable property from one
group to another as well as payment of substantial amounts of money for completing
the adjustment required by way of reconstruction-cum-family settlement. The widow
of N.K. Sanghi, Smt. Uma Sanghi as well as the Petitioners of that company petition,
Mr. R.K. Sanghi and his wife along with A.K. Sanghi as well as one son and daughter
in law of Uma Sanghi were personally present before the learned Single Judge when
the Company Petition No. 6 of 1986 was disposed of in terms of the scheme of
reconstruction-cum-family settlement. The order of the Court dated 5.9.1994 records
that Mr. R.K. Sanghi as well as Mr. A.K. Sanghi agreed to obtain the consent of their
family members and file the same within two weeks.

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5 . The orders of learned Single Judge of High Court of Rajasthan accepting the
scheme of reconstruction-cum-family settlement were challenged in appeal filed by
M.K. Sanghi bearing Civil Special Appeal No. 30 of 1994. Much later in October 1998
R.K. Sanghi filed an affidavit in the aforesaid appeal alleging that Uma Sanghi was
not honouring her commitments under the scheme, hence he was now of the view
that the scheme be set aside. Since learned Single Judge had rejected an application
for impleadment filed by Mrs. Rajni Sanghi, widowed daughter-in-law of Uma Sanghi,
Rajni Sanghi also preferred Special Appeal No. 24 of 1994 before the Division Bench
but while both the appeals were pending, on 20.2.1995 she entered into a
compromise and settlement with the other parties who were signatory to the family
settlement. M.K. Sanghi prayed for and was granted time to examine the terms of the
aforesaid settlement. While the appeal preferred by M.K. Sanghi was still pending
before the Division Bench of Rajasthan High Court, curiously he and his group filed
an additional affidavit on 14.8.1995 in Suit No. 581-A/1988 before High Court of
Delhi for setting aside the award on the additional ground that A.K. Sanghi had
undertaken before the High Court of Rajasthan to withdraw his application to make
the award a rule of the Court. As noted earlier, this weighed heavily with the learned
Single Judge as well as the Division Bench of the Delhi High Court in setting aside
the award. Sanghi Motors Bombay, under the control of N.K. Sanghi group also filed
a Contempt Petition No. 107 of 1997 before the High Court of Rajasthan alleging that
Mr. A.K. Sanghi was guilty of contempt of order dated 5.9.1994 as he was still
persisting with Suit No. 581-A/1988 when he had undertaken to withdraw the same.
This contempt petition was dismissed vide order dated 3.4.2000 as the Court came to
the opinion that non-compliance was on account of certain circumstances and not
wilful. This order against Sanghi Motors is subject matter of Civil Appeal No. 503 of
2001 which shall also be governed by this common judgment.
6. The Division Bench of High Court of Rajasthan had permitted Vijay Sanghi son of
A.K. Sanghi to be transposed as Appellant in Company Appeal No. 30 of 1994 and
hence the appeal continued even after M.K. Sanghi filed an application on 4.7.2000
to withdraw that appeal. Ultimately by judgment and order dated 3.4.2002 the
Rajasthan High Court allowed Appeal No. 30 of 1994 as well as Appeal No. 24 of
1994 and remitted the matter again to the learned Company Judge to proceed in
accordance with law, mainly because the Division Bench found a case of non-
compliance of Sub-clause (1) of Section 391 of the Companies Act. The Division
Bench noticed objections raised on behalf of Respondents that the situation had
become irreversible as major part of the scheme had been given effect to, but it left
this aspect open for consideration by the learned Company Judge after remand. Rajni
Sanghi did not accept the Division Bench order and preferred a Civil Review Petition
bearing No. D.R. (J) 2536/2002 pointing out that she had already compromised the
matter by way of a subsequent scheme and filed the compromise petition on
20.2.1995; the only non-signatory group i.e., M.K. Sanghi group had subsequently
accepted that compromise/settlement and had prayed for withdrawal of Appeal No.
30 of 1994 and therefore when all the stake holders had accepted the terms of
settlement and family arrangement, there was no need of interfering with the order of
the Single Judge. The review petition was however dismissed on 26.8.2003. The
aforesaid orders of Division Bench dated 3.4.2002 partly allowing Appeal Nos. 24 and
30 of 1994 and order dated 26.8.2003 dismissing the review petition are under
challenge at the instance of Rajni Sanghi in Civil Appeal No. 3687 of 2006.
7 . In the aforesaid fact situation, this common judgment will govern all the three
civil appeals. For the sake of convenience, facts have been taken from convenience
compilations in C.A. No. 2763 of 2002 unless indicated otherwise. That civil appeal
has been argued at great length as the lead case. But of equal significance is the civil
appeal of Rajni Sanghi because it offers an alternative and competing solution to the

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family dispute sought to be settled by the arbitration award. The High Court of Delhi
has set aside the award primarily because of orders passed by High Courts at Bombay
as well as Rajasthan approving schemes of reconstruction and also the undertaking of
A.K. Sanghi that he will withdraw his petition in Delhi High Court through which he
had prayed for making the Award of the Arbitrator dated 3.12.1987 as rule of the
Court. In this scenario, our task is also to find out whether the view taken by the
Delhi High Court is correct or not and further whether order of remand by Division
Bench of Rajasthan High Court under challenge by Rajni Sanghi is legally sustainable.
8 . Since A.K. Sanghi is dead, Civil Appeal No. 2763 of 2002 has been pressed on
behalf of his two sons namely Ajay Sanghi and Vijay Sanghi. On behalf of Ajay
Sanghi, Senior Advocate Mr. Dhruv Mehta has forwarded elaborate submissions for
contending that the judgment of the learned Single Judge as well as affirming
judgment of the Delhi High Court under appeal have wrongly set aside the Award
ignoring the provisions of Section 30 of the Arbitration Act, 1940 (hereinafter
referred to as 'the Act'). As per his submissions the High Court has travelled beyond
the permissible grounds for setting aside an Award, which cannot include an
undertaking or conduct of a party recorded by the Rajasthan High Court after about
seven years of making of the Award. He highlighted the legal position that as per
Section 30 of the Act, an Award can be set aside only on one or more of the three
grounds mentioned in Clause (a),(b) and (c). He has also contended that in this case
misconduct by the Arbitrator cannot be a ground, for the additional reason that no
notice of any alleged misconduct was served upon the Arbitrator which is required
under the Delhi High Court rules. The other ground under Clause (b) can also not
arise because it is nobody's case that there was any order by the Court superseding
the arbitration or holding the arbitration proceeding invalid Under Section 35. So far
as the third permissible ground is concerned, it has been submitted that there is no
case made out that the Award has been improperly procured or is otherwise invalid.
On behalf of other son of A.K. Sanghi, Mr. Anoop G. Chaudhari, Senior Advocate has
also assailed the judgments of the Delhi High Court. According to him the allegations
by Mr. M.K. Sanghi against the arbitrator in letter dated 20.11.1987 were noticed by
the Single Judge and at one place the learned Single Judge described these
accusations as "wild allegations". Mr. Chaudhari has further contended that Section
32 of the Act not only contains a bar to suits seeking decision upon the existence,
effect or validity of the arbitration agreement or award but that Section contains a
further prohibition that notwithstanding any law for the time being in force, no
arbitration agreement or award can be enforced, set aside, amended, modified or in
any way affected otherwise than as provided in the Act (emphasis supplied).
9. Section 32 of the Act reads as follows:
32. Bar to suits contesting arbitration agreement or award-
Notwithstanding any law for the time being in force, no suit shall lie on any
ground whatsoever for a decision upon the existence, effect or validity of an
arbitration agreement or award, nor shall any arbitration agreement or award
be enforced, set aside, amended, modified or in any way affected otherwise
than as provided in this Act.
According to Mr. Chaudhari if the schemes of settlement as ordered by Bombay High
Court or Rajasthan High Court are allowed to come in the way of arbitration
agreement or the award made by the Arbitrator, it shall amount to a disregard of the
mandate of law in Section 32. The second contention of Mr. Chaudhari is that Delhi
High Court had passed an interim order dated 16.3.1988 restraining the parties from
transferring, parting with, alienating or leasing out the properties covered by the
award of the Arbitrator including shares of the partnership and company businesses

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in any manner and therefore, M.K. Sanghi could not have proceeded with the
company petition in Bombay to obtain a scheme of division of the two units of
Sanghi Motors at Bombay nor any scheme could have been approved by the
Rajasthan High Court in Company Petition No. 6 of 1986 nor any undertaking of A.K.
Sanghi could have been recorded therein. According to Mr. Chaudhari also, the
allegations of misconduct could not have been gone into in absence of any notice to
the Arbitrator. Lastly, according to Mr. Chaudhari belated objections to the award
could not have been taken into consideration.
1 0 . Learned Counsel for Uma Sanghi, widow of N.K. Sanghi has reversed Uma
Sanghi's stance before the High Court and sought to support the award and assail the
judgments of Delhi High Court on the grounds already noticed. He also opposed the
family settlement and agreement dated 5.9.1994 recorded by the learned Single
Judge of High Court of Rajasthan under which Uma Sanghi (N.K. Sanghi group)
received benefits. But he defended and supported the other agreement dated
20.2.1995 in favour of Rajni Sanghi. According to him the latter agreement of
February 1995 is in effect an arrangement between the family members of late N.K.
Sanghi and the same will be honoured by Uma Sanghi and other heirs and legal
representatives of N.K. Sanghi even if the award is held valid and restored.
11. On the other hand learned senior Counsel Mr. Arvind P. Datar appearing for M.K.
Sanghi group and Mr. Shyam Divan, Senior Advocate appearing for R.K. Sanghi
group sought to strongly defend the judgments of Delhi High Court setting aside the
award. According to Mr. Datar the award deals with immoveable properties and
therefore in terms of the Registration Act, 1908 requires registration and since that
was not done, as per Section 49 of the Registration Act, the award shall not affect
any immoveable property or be received as evidence of any transaction affecting such
property. He pointed out that immoveable properties in lot No. 2 at serial Nos. 8 and
9 given to A.K. Sanghi Group and one workshop of Sanghi Motors in lot No. 3
allotted to R.K. Sanghi Group were illustrative of the fact that the award sought to
transfer immovable properties to different persons without requiring further
conveyance deeds and documents. However, the award towards the end, in
paragraph 16 stipulates that all obligations, conveyances, deeds and documents
(including transfers and assignments) required to be executed to implement the
award shall be made and executed faithfully by each and every member of all groups
within three months. This stipulation, in our view, fully meets the above noted
grievance on the basis of the non-registration of award and more particularly when it
is an arguable point, as contended by Mr. Mehta in reply that the period when an
award was called for by the Court and remained under its custody may be excluded
for the purpose of limitation on the ground that court's action shall not prejudice any
of the parties. For this dictum Mr. Mehta placed reliance on judgment in the case of
Raj Kumar Dey and Ors. v. Tarapada Dey and Ors. MANU/SC/0018/1987 :
1987(4) SCC 398. However, it is not necessary to go into several other judgments
cited on behalf of the parties on the effect of non-registration of an award which
requires registration and as to when an award may not require registration, in view of
somewhat different issue on which we propose to decide this case.
12. Mr. Datar pointed out that the main controversy between the parties is in respect
of two properties, one UMR property in Rajasthan which is to be with R.K. Sanghi
Group on account of payments made for that property under the Rajasthan settlement
arrived in the company case before the Single Judge in 1994. But that property, as
per the award is to be with N.K. Sanghi Group. The other property is the workshop
property of M/s. Sanghi Motors at Bombay which as per settlement by the Bombay
High Court has gone to M.K. Sanghi Group whereas under the award it shall go to
A.K. Sanghi Group. Mr. Datar pointed out that the learned Single Judge of Delhi High

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Court allowed several I. As including OPM No. 109 of 1989 filed by Sanghi Motors
Private Limited, Bombay but in appeal before the Division Bench, Sanghi Motors
Private Limited (Bombay) was not impleaded as a party and therefore no useful
purpose will be served by interfering with the orders of the Delhi High Court rejecting
the award when the same order of the learned Single Judge has attained finality qua
M/s. Sanghi Motors Pvt. Ltd., Bombay.
1 3 . Mr. Datar has next contended that the Delhi High Court was bound by the
undertaking recorded in the judgment of Company Judge of Rajasthan High Court.
Under such undertaking which amounts to an injunction, as per submissions, the
application of Mr. A.K. Sanghi for making the award a Rule of the Court Under
Section 17 of the Act required outright dismissal without going into the issue of
validity of the award on grounds Under Sections 30 and 33 of the Act. According to
him the undertaking before the competent court of law, in the facts of the case, was
sufficient to render the award unenforceable on the ground under Clause (c) of
Section 30 of the Act viz. "otherwise invalid". According to him the award was signed
on 3.12.1987 and it dealt with Bombay properties which were then under the receiver
appointed by the Bombay High Court. This also made the award invalid on the
ground covered by Clause (c) of Section 30 of the Act. Mr. Datar further submitted
that both, A.K. Sanghi Group which is now propounding the award and R.K. Sanghi
Group had preferred OM No. 23 of 1986 to challenge the Arbitration Agreement itself
on grounds and allegations of facts which amounted to admission on their part as to
the invalidity of the arbitration agreement and in such a situation their turning volte
face and seeking to support the award after it was signed and filed under orders of
the court inspite of their pending objections, cannot make the award good and
enforceable at their instance unless it is held that their admissions in pleadings can
be ignored for some good reasons. Mr. Datar next submitted that Section 34 of the
Act gave an option to the parties to the Arbitration Agreement to obtain stay of the
legal proceedings at Bombay or Rajasthan on account of Arbitration Agreement and if
they chose not to get the legal proceedings stayed or even if they failed to do so, the
effect of such legal proceedings cannot be ignored at the time of deciding, at the
stage of Section 17, as to whether an order/decree could be passed in terms of the
award or not. According to the submissions, once at the stage of Section 17, the
court is made aware of judgment of a competent court of law affecting the matter
covered by the award, it would be proper and lawful for such court to set aside the
award under Clause (c) of Section 30 of the Act by holding that the award is
"otherwise invalid". It was argued on the basis of Section 35 of the Act that the
principle is salutary that in case there is no stay granted Under Section 34 and if the
conditions Under Section 35 are met, further proceedings in a pending reference shall
be invalid.
14. This principle appears to have been developed and generalized further. Mr. Datar
has placed reliance upon judgment in the case of Ram Prosad Surajmull v. Mohan
Lal Lachminarain MANU/WB/0495/1920 : AIR 1921 Calcutta 770 and in the case of
Sheobabu v. Udit Narain and Anr. MANU/UP/0398/1914 : AIR 1914 Allahabad
275. The Calcutta judgment was rendered in the context of Indian Arbitration Act of
1899 but the principle enunciated therein is equally applicable to an award under the
Arbitration Act, 1940. The principle is-"if the court has refused to stay an action or if
the Defendant has abstained from asking it to do so, the Court has seisin of the
dispute and it is by its decision and by its decision alone, that the rights of the
parties are settled." This view was adopted on a larger proposition that the Courts
will not allow their jurisdiction to be ousted. In simpler words, the proposition is that
the courts' decisions will not be overridden by an award arising out of an arbitration
proceeding. In the Allahabad case, in somewhat similar situation as in the Calcutta
case, the judgment of the Court under Specific Relief Act in a regular suit was held

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valid because the parties could not or did not take proper steps to suspend the
regular suit. We find no legal or other infirmity in this proposition of law.
15. Our attention was drawn to judgment of Bombay High Court dated 30.06.1992
passed by a Division Bench in Appeal No. 350 of 1992 preferred by A.K. Sanghi
Group against order of the Company Judge dated 06.07.1989 to highlight that in
paragraph 3 of the judgment, the Division Bench rejected the contention advanced on
behalf of A.K. Sanghi Group and held that the companies are not parties to the
arbitration proceedings and consequently the decree on the basis of award cannot
bind the companies. Mr. Datar pointed out that A.K. Sanghi Group allowed the matter
to attain finality and hence in the present appeals, the Appellant A.K. Sanghi Group
cannot be permitted to take the stand that the award will bind the companies. He also
highlighted the fact that Bombay property under dispute is a property leased to M/s.
Sanghi Motors and vests with A.K. Sanghi Group as a leasehold property and in view
of law laid down in the case of M/s. General Radio and Appliances Co. Ltd. v.
M.A. Khader (dead) by L.Rs. MANU/SC/0543/1986 : AIR 1986 SC 1218 and in the
case of Singer India Ltd. v. Chander Mohan Chadha MANU/SC/0626/2004 :
(2004) 7 SCC 1, such leased property cannot be legally sublet or granted to another
under assignment. That will be the effect if award is allowed to operate. On this
ground also it has been submitted that the award suffers from patent illegality.
16. Mr. Gaurav Pachnanda, learned senior advocate appearing for Rajni Sanghi has
submitted that Rajni Sanghi preferred Special Appeal No. 24 of 1994 before the
Division Bench of Rajasthan High Court against orders of Company Judge accepting
the Scheme of Reconstruction-cum-Family Settlement because she wanted her
specific share out of the family business allotted to M.K. Sanghi Group so that she
and her children may enjoy their share separately. This was achieved by amended
family settlement dated 20.02.1995. Although M.K. Sanghi had not signed the family
settlement he took time to consider the developments and ultimately he withdrew his
appeal which signifies that he also consented to the settlements. It was pointed out
that A.K. Sanghi Group including his son Vijay Sanghi had acted upon the Scheme of
Family Settlement and also derived benefits, but they subsequently developed ill
designs and Vijay Sanghi got himself transposed as Appellant in Company Appeal No.
30 of 1994 preferred by M.K. Sanghi although the latter had applied to withdraw the
appeal. It was argued that the Division Bench failed to notice that the only non-
signatory to the Compromise Petition filed on 20.02.1995, i.e., M.K. Sanghi Group
had later accepted the settlement/compromise and prayed for withdrawal of their
appeal and this showed that all the four groups had accepted the Terms of
Settlement-cum-Family Arrangement. In such circumstances, according to learned
Counsel, the Division Bench should not have interfered with the order of the learned
Single Judge and ought not to have allowed the appeals and remanded the matter to
Single Judge vide impugned order dated 03.04.2002, on mere technicalities. He
submitted that thereafter review filed by Rajni Sanghi was also erroneously dismissed
on 26.08.2003.
17. Learned senior Counsel placed reliance upon a judgment of this Court in the case
o f Munshi Ram v. Banwari Lal (deceased) MANU/SC/0001/1962 : AIR 1962 SC
903 in support of the proposition that a compromise between the parties even after
filing of award by the arbitrators deserves to be respected and such compromise will
be made a part of the decree which will be based upon the award as modified by the
compromise. The Court held that the power to record such agreement or compromise
was available to the court under the provisions of the Act because Section 41 makes
the Code of Civil Procedure applicable to the proceedings under the Act. The
observation of the Court in paragraph 20 is of some significance where it was pointed
out that 'there is nothing in the Arbitration Act which disentitles the court from taking

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note of an agreement .....'. Reliance was also placed upon judgment in the case of
Kale v. Deputy Director of Consolidation MANU/SC/0529/1976 : (1976) 3 SCC
119 to highlight the nature, effect and value of family arrangement under the Hindu
Law. All the three Judges deciding this case were agreed on the relevant proposition
that the object of family arrangement is to sink their differences and disputes and
resolve their conflicting claims to buy peace of mind and bring about complete
harmony and goodwill in the family. Paragraph 9 of the judgment deserves full
respect and is extracted hereinafter:
9. Before dealing with the respective contentions put forward by the parties,
we would like to discuss in general the effect and value of family
arrangements entered into between the parties with a view to resolving
disputes once for all. By virtue of a family settlement or arrangement
members of a family descending from a common ancestor or a near relation
seek to sink their differences and disputes, settle and resolve their conflicting
claims or disputed titles once for all in order to buy peace of mind and bring
about complete harmony and goodwill in the family. The family
arrangements are governed by a special equity peculiar to themselves and
would be enforced if honestly made. In this connection, Kerr in his valuable
treatise Kerr on Fraud at p.364 makes the following pertinent observations
regarding the nature of the family arrangement which may be extracted thus:
The principles which apply to the case of ordinary compromise
between strangers do not equally apply to the case of compromises
in the nature of family arrangements. Family arrangements are
governed by a special equity peculiar to themselves, and will be
enforced if honestly made, although they have not been meant as a
compromise, but have proceeded from an error of all parties
originating in mistake or ignorance of fact as to what their rights
actually are, or of the points on which their rights actually depend.
The object of the arrangement is to protect the family from long-drawn
litigation or perpetual strifes which mar the unity and solidarity of the family
and create hatred and bad blood between the various members of the family.
Today when we are striving to build up an egalitarian society and are trying
for a complete reconstruction of the society, to maintain and uphold the unity
and homogeneity of the family which ultimately results in the unification of
the society and, therefore, of the entire country, is the prime need of the
hour. A family arrangement by which the property is equitably divided
between the various contenders so as to achieve as equal distribution of
wealth instead of concentrating the same in the hands of a few is
undoubtedly a milestone in the administration of social justice. That is why
the term 'family' has to be understood in a wider sense so as to include
within its fold not only close relations or legal heirs but even those persons
who may have some sort of antecedent title, a semblance of a claim or even
if they have a spes successionis so that future disputes are sealed for ever
and the family instead of fighting claims inter se and wasting time, money
and energy on such fruitless or futile litigation is able to devote its attention
to more constructive work in the larger interest of the country. The courts
have, therefore, leaned in favour of upholding a family arrangement instead
of disturbing the same on technical or trivial grounds. Where the courts find
that the family arrangement suffers from a legal lacuna or a formal defect the
rule of estoppel is pressed into service and is applied to shut out plea of the
person who being a party to family arrangement seeks to unsettle a settled
dispute and claims to revoke the family arrangement under which he has

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 himself enjoyed some material benefits. The law in England on this point is
almost the same. In Halsbury's Laws of England, Vol. 17, Third Edition, at
pp. 215-216, the following apt observations regarding the essentials of the
family settlement and the principles governing the existence of the same are
made:
A family arrangement is an agreement between members of the same
family, intended to be generally or reasonably for the benefit of the
family either by compromising doubtful or disputed rights or by
preserving the family property or the peace and security of the
family by avoiding litigation or by saving its honour.
The agreement may be implied from a long course of dealing, but it
is more usual to embody or to effectuate the agreement in a deed to
which the term 'family arrangement' is applied.
Family arrangements are governed by principles which are not
applicable to dealings between strangers. The court, when deciding
the rights of parties under family arrangements or claims to upset
such arrangements, considers what in the broadest view of the
matter is most for the interest of families, and has regard to
considerations which, in dealing with transactions between persons
not members of the same family, would not be taken into account.
Matters which would be fatal to the validity of similar transactions
between strangers are not objections to the binding effect of family
arrangements.
The legal principles enunciated above have not been disputed.
18. Before this Court all the parties appear to be in agreement over the limited issue
that the properties given to widow Rajni Sanghi and her children should belong to
them. On behalf of Rajni Sanghi it has been reiterated that she undertakes to abide
by her undertaking and liabilities under the amended Family Settlement dated
20.02.1995.
19. On behalf of R.K. Sanghi Group all the arguments advanced by Mr. Datar were
adopted and thereafter Mr. Shyam Divan, learned senior advocate advanced his own
arguments. He cited some judgments which give discretion to this Court to dismiss a
civil appeal summarily even after grant of leave to appeal. According to Mr. Divan,
the civil appeal of A.K. Sanghi Group deserves to be dismissed in limine considering
how at one point of time or other all the groups including A.K. Sanghi group were
opposed either to the arbitration agreement or to the award. He submits that the
judgments rendered by Bombay High Court settling the business interests of all the
groups in respect of business at Bombay and the judgment of Company Judge of
High Court of Rajasthan disposing of Company Petition No. 06 of 1986 in terms of
Scheme of Reconstruction-cum-Family Settlement of 1994 followed by the amended
family settlement before the Division Bench in 1995 deserve to be given a finality
because the judgment of Division Bench of Bombay High Court is no longer under
challenge and practically all the four groups had agreed to the family settlement
made before the Rajasthan High Court. According to Mr. Divan, the Division Bench
should have disposed of the appeal of Rajni Sanghi in terms of the compromise and
revised family settlement and the other appeal preferred by M.K. Sanghi should have
been dismissed because M.K. Sanghi had prayed for its withdrawal. Transposition of
Vijay Sanghi should not have given him any advantage when originally he had not
filed any appeal and had also taken advantage flowing to his father A.K. Sanghi and

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his group. He highlighted that the undertaking by the head of A.K. Sanghi group was
a solemn undertaking as a head and karta between family members and the group
should not have been permitted to resile from the undertaking whereunder they
agreed not to seek enforcement of the award for which they had filed an application
and which they agreed to withdraw. He has submitted that the family arrangement at
Rajasthan was a well thought out and considered family arrangement arrived after
more than six years of making of the award. Such choice of the parties should be
given pre-eminence over award made by an arbitrator to which many of the family
members had objections. It was also highlighted that under the Act of 1940, an
award does not have the force of a decree as is the case with an award under the
Arbitration and Conciliation Act 1996 and hence under the Act there is absolutely no
legal impediment in the way of parties arriving at a settlement even after making of
an award by the arbitrator. Referring to the amendments made in the Code of Civil
Procedure such as introduction of Section 89 and provisions in the Family Courts Act
it has been submitted that policy of law is in favour of settlement of dispute by
agreement especially between members of a family. Mr. Divan highlighted provisions
of Sections 14 and 17 of the Act to contend that an award need not be set aside if the
parties, even post-award, agree for another settlement because in the 1940 Act the
arbitrators are required to file the award only on the request of any party or upon
direction by the court which in usual course, is required to be moved by one or the
other party. Even judgment in terms of award can be passed only after rejection of
application to set aside the award or after the time for making such application has
expired. On the other hand, a judgment or order of a court has a different and higher
sanctity. It shall bind the parties till they get rid of such order or judgment in
accordance with law. He relied upon judgment in the case of Oudh Commercial
Bank Ltd. v. Thakurain Bind Basni Kuer MANU/PR/0003/1939 : AIR 1939 PC 80
in support of his submission that even a decree does not stand in the way of parties
in arriving at a different settlement. In the context of power of Executing Court Under
Section 47 of the Code of Civil Procedure, the Privy Council in the aforesaid case held
that the judgment-debtor and the decree-holder could enter into an agreement and
bargain for time, in consideration of a reasonable rate of interest. It is permissible
and such agreement can be accepted by the Executing Court without attracting the
criticism that it has attempted to amend or vary the decree. Even in general terms,
while considering the issue as to whether the parties could alter or vary a decree by
consent, the Privy Council came to an opinion that the Code of Civil Procedure
contains no general restriction of the parties' liberty of contract with reference to
their rights and obligations under the decree but such agreement may not be
enforceable in all cases through execution proceedings and in that event the
Executing Court will leave the beneficiary party to bring a separate suit upon the new
contract/agreement.
20. Mr. Divan relied upon the case of Noorali Babul Thanewala v. K.M.M. Shetty
MANU/SC/0077/1990 : (1990) 1 SCC 259 to highlight the following passage in
paragraph 11, 'when a court accepts an undertaking given by one of the parties and
passes orders based on such undertaking, the order amounts in substance to an
injunction restraining that party from acting in breach thereof.' He also referred to
certain judgments in support of well recognized principle of law that a party cannot
approbate and reprobate at the same time. Since the proposition is well settled, the
judgments need not be adverted to. But it is important to note that he pointed out the
relevant documents such as affidavit by R.K. Sanghi dated 10.10.1998 filed in D.B.
Civil Special Appeal No. 30 of 1994 in the High Court of Judicature for Rajasthan at
Jodhpur to show that family settlement had been acted upon and considerable money
was paid by Mr. R.K. Sanghi in terms of such settlement. Retirement deed of Vijay
Sanghi dated 08.11.1994 and another retirement deed of wife as well as of daughter-
in-law of A.K. Sanghi were also shown for the same purpose. On the basis of such

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undisputed materials he submitted that a family settlement already implemented
deserves to be protected by setting aside the order of Division Bench challenged by
Rajni Sanghi and the family settlements, original as well as amended, be accepted as
valid and binding on the parties.
21. In reply Mr. Mehta and Mr. Chaudhari have reiterated their earlier stand and Mr.
Mehta, as noted earlier, submitted that registration of the award was not necessary in
law in view of its contents and even if it is required, a long period when the award
was lying with the court may deserve to be excluded. According to him the judgment
of Bombay High Court cannot invalidate the award because it is not a permissible
ground Under Section 30 of the Act nor that proceeding could have been stayed
because the statutory powers available to a Company Judge cannot be available to an
arbitrator. In support of binding effect of the family settlement made before the High
Court of Rajasthan, it was submitted that the Division Bench has allowed the appeals
and remitted the matter back to the learned Single Judge. On equity, Mr. Mehta
contended that if award is upheld then also equity can be restored by ordering for
refund of money for UMR property to R.K. Sanghi group with appropriate interest or
even that building may be ordered to be with R.K. Sanghi group. A concession was
offered by him on behalf of A.K. Sanghi group that the Appellants of Civil Appeal No.
2763 of 2002 will be satisfied to have 50% of market value of the property under
dispute at Mumbai in lieu of the said leasehold property. Lastly he replied that
principle of impermissibility of approbate and reprobate at the same time is an
equitable principle and therefore subject to statutory rights. In support of this
proposition he placed reliance upon judgment in the case of P.R. Deshpande v.
Maruti Balaram Haibatti MANU/SC/0491/1998 : (1998) 6 SCC 507.
2 2 . Mr. Chaudhari also reiterated that in view of the peculiar jurisdiction of the
Company Judge the matter before the court could not have been referred to
arbitration and that ousted the parties' option of seeking a stay Under Section 34 of
the Act. According to him if Section 34 is not applicable then Section 35 will also not
be applicable. He pointed out that Section 35 is attracted only when legal proceeding
before a court is upon the whole of the subject matter of the reference and when it is
between all the parties to the reference and when notice thereof has been given to
the arbitrators or umpire. According to him such conditions were not met in this case
and therefore proceedings in the pending reference and the award resulting therefrom
are not adversely affected or rendered invalid by virtue of Section 35 of the Act. He
referred to case of Union of India v. Om Prakash MANU/SC/0004/1976 : (1976) 4
SCC 32 to support his submission that post-award conduct of a party cannot be
relevant for rendering the award invalid. However this judgment is to an extent
against this proposition because it holds that the term-'otherwise invalid'-is wide
enough to include all invalidity including that of the arbitral reference. This shows
that 'otherwise invalid' is not controlled by the principle of ejusdem generis. To same
effect is the judgment in the case of M/s. Siddeshwari Cotton Mills (P) Ltd. v.
Union of India MANU/SC/0359/1989 : (1989) 2 SCC 458.
23. According to Mr. Chaudhari, non-impleadment of Sanghi Motors (Bombay) in the
appeal before the Division Bench of Delhi High Court cannot have any adverse
consequence because no objection was taken to such defect. According to him the
company is not a necessary party because all the shareholders and directors of the
company are parties and in the context of present dispute the presence of company is
a mere formality. Lastly Mr. Chaudhari contended that Under Section 17 of the Act
there is no requirement of any obligation for making the award a rule of the court
and therefore the undertaking of A.K. Sanghi to withdraw his such application cannot
be of any consequence in law. On behalf of Rajni Sanghi it was submitted in reply
that Rajni Sanghi would be satisfied if the order of remand is modified even partially

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and the modified family settlement of 1995 is accepted. It was made clear on her
behalf that she has no interest in the 1994 agreement which benefited the three
groups and who have now to face the matter once again if the remand order is to
stand.
2 4 . In the light of aforesaid submissions and the entire facts and circumstances
relating to this dispute between family belonging to four brothers, we are required to
decide whether the award under the Act which is yet to be made a rule of the court
deserves implementation or preference needs to be given to the settlements finalized
by the judgment of Bombay High Court and the family settlements of 1994 and 1995
before the Rajasthan High Court which have been now put to peril by the order of
remand impugned by Rajni Sanghi. In course of deciding this issue we are also
required to decide another larger issue of significance as to whether any good ground
was available to Delhi High Court under the provisions of Section 30 of the Act for
invalidating the award and for refusing to make it a rule of the court in exercise of
power Under Section 17 of the Act.
25. So far as the argument in favour of maintaining the award is concerned, we find
that Clause (c) of Section 30 does not attract the principle of ejusdem generis so far
as the term 'otherwise invalid' is concerned. That ground for setting aside award is
quite wide in amplitude and available to the concerned court if it finds that the award
requires to be treated as invalid because on face of the things it runs counter to a
valid law prohibiting such an award or when the subject matter of the award has
been lawfully dealt with by a statutory authority or a court and it is no longer
available for disposal in accordance with the award under consideration. Such a
situation is only illustrative and has been enunciated by us in the light of facts
obtaining in this case. When the Courts having jurisdiction were allowed to proceed
and decide the properties available at Bombay and record a family arrangement in
respect of other matters in a company proceeding before the Rajasthan High Court,
the judgments and orders in these proceedings cannot be ignored or obliterated on
account of pendency of an award still waiting to be made a rule of the court. In such
a situation, in our view, the award has to be set aside on the ground that it is
otherwise invalid on the date it is being considered for being made a rule of the
court. Since this course of action is available and has been rightly adopted by the
Delhi High Court, we do not feel necessary to examine the hypothetical question as to
whether even in absence of any ground for setting aside such an award, could the
court concerned refuse to make the award a rule of the court Under Section 17 of the
Act if it was confronted with a situation like the one on hand in this case. Such a
question need not be answered in the present proceeding.
26. We have already referred to judgments highlighting the significance of family
arrangement under Hindu Law and in light of such judgments and considering the
scheme of the Act and provisions of Code of Civil Procedure we are satisfied that
family arrangements made before the Rajasthan High Court in 1994 before the
Company Judge and in 1995 before the Division Bench need to be protected and
given pre-eminence over the award which is yet not made the rule of the court. The
family arrangement was arrived at in spite of knowing the award for six years and
obviously because the parties who are family members, were at loggerheads over the
terms of the award. No doubt the family arrangements were initially made only on
behalf of three groups who originally signed the agreements for themselves as well
as on behalf of their families but the 4th group, i.e., M.K. Sanghi group later decided
to go along with that arrangement by opting to withdraw its appeal. Hence we accept
the submissions advanced by Mr. Datar, Mr. Pachnanda and Mr. Shyam Divan and
hold that if parties settle their disputes amicably by an agreement, even post-award,
such settlement/agreement will prevail in view of requirement of the Act that an

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award will acquire the status of a decree only when it is made a rule of the court
after rejection of all objections. In that view of the matter there is no hindrance in
law in upholding the family arrangements made before the High Court at Rajasthan as
well as judgment of the Bombay High Court which has attained finality. They deserve
to have pre-eminence over the award in question.
27. The act of A.K. Sanghi in not honouring his undertaking to withdraw his petition
for making the award a rule of court and the attempt made by Vijay Sanghi to
obstruct the scheme of reconstruction-cum-family settlement of 1994 by getting
transposed as an Appellant in Company Appeal No. 30 of 1994 when his father A.K.
Sanghi had signed the settlement on behalf of his group, were impermissible conduct
of approbate and reprobate on the part of A.K. Sanghi group which should not have
been permitted. The status of the head of the family acting as a Karta under the
traditional Hindu law deserves to be kept in mind in such a situation. The junior
members of the family are bound by decisions of a Karta in matters of family
business and property unless it can be pleaded and proved that the head of the
family has acted fraudulently or for immoral purposes. We have not been shown any
such case on behalf of Vijay Sanghi. In such a situation, ignoring the traditional
Hindu law and the rights of the head of the family or Karta has put unnecessary
burden not only on the larger family but also upon the courts.
2 8 . We have examined the Division Bench judgment of the Rajasthan High Court
under challenge by Rajni Sanghi and we find that the remand order is not on the
basis of any defect in the agreements or supplementary agreements but on account of
certain technical requirements which should have been ignored when the issues had
been settled by all the stake holders by reaching amicable agreement. The companies
of family of four brothers are almost like partnerships and when all were agreeable,
interest of justice was best subserved by recognizing even the supplementary family
settlement of 1995 in favour of Rajni Sanghi as well as the original family
arrangement of 1994 accepted by the Company Judge. In that view of the matter the
order of remand under challenge at the instance of Rajni Sanghi is set aside and both
the family arrangements indicated above are affirmed. If any party fails to act as per
those arrangements within three months, the aggrieved party will be free to initiate
appropriate proceedings including those of contempt before the concerned High Court
or seek execution of the agreements through other appropriate proceedings. Civil
Appeal No. 3687 of 2006 is allowed to the aforesaid extent and is disposed of
accordingly.
29. In view of the discussions made above, Civil Appeal Nos. 2763 of 2002 and Civil
Appeal No. 503 of 2001 are dismissed. In the facts of the case there shall be no order
as to costs.
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