Sri Sanjay Kumar Jain And Others vs Sri Manoj Jain And Others
2023 Latest Caselaw 21725 ALL

HIGH COURT OF JUDICATURE AT ALLAHABAD
 
 


Neutral Citation No. - 2023:AHC:162874
 
Reserved on 6.7.2023
 
Delivered on 11.8.2023
 
Court No. - 44
 
Case :- FIRST APPEAL FROM ORDER No. - 1524 of 2009
 
Appellant :- Sri Sanjay Kumar Jain And Others
 
Respondent :- Sri Manoj Jain And Others
 
Counsel for Appellant :- ,Aklank Jain,Pankaj Agarwal
 
Counsel for Respondent :- Ranjit Saxena,Raghvendra Yadav,Ranjit Saxena
 

 
Hon'ble Dr. Kaushal Jayendra Thaker,J.

1. Heard Sri Aklank Jain, learned counsel for appellant and Sri Raghvendra Yadav, learned counsel for respondent..

2. This appeal, at the behest of the claimants-appellant, has been filed against the judgement and order dated 9.4.2009 passed by District Judge, Firozabad in Arbitration Petition (Misc. Case) No.11 of 2000 whereby the learned District Judge has refused to set aside the arbitral award dated 17.2.2000.

3. The parties are referred to as Appellants and Respondents.

4. Brief facts of the case are that on 30.4.1985 a registered partnership deed was executed between Sri Mahesh Chand Jain, Pramod Kumar Jain, Arun Kumar Jain, Smt. Sulochana Devi Jain ( the petitioner ) and Manoj Kumar Jain, was created in the name of M/s Sapna Glass Industries at Muhalla Sheetal Khan, herein referred as FIRM, was created and got its registration on 15.5.1985. Later on an amendment was made regarding the period of notice to leave the firm and in this regard a new partnership deed dated 1.4.1992 was signed among the same partners. In deed dated 30.4.1985 it was only one month whereas in the deed dated 1.4.1992 it became to leave two months. The partners of the firm were regularly performing legal duties towards the firm and enjoying all the rights and privileges as available to the partner. On 24.10.1998 after the death of one of the partners, namely, Sri Mahesh Chand Jain, his wife Smt. Shashi Prabha Jain was admitted as partner in the aforesaid firm. Smt. Shashi Prabha Jain was admitted as partner vide partnership deed dated 27.10.1998, which was totally forged and fictitious.

5. It is contended by appellant's counsel that properties Nos. 15, 20 and property no.2 belong to a cooperative society and therefore they have been wrongly covered in award by arbitrator committee. Properties Nos. 14, 13 and part of property No.5 belong to Smt. Sulochana Devi Jain, wife of Sri Suresh Chand Jain and they have been wrongly covered under impugned award and properties Nos. 4, 11, 12 and 16 are the properties of Sri Mitesh Kumar Jain in whose favour Sri Munshi Lal executed a will and they have also been wrongly covered in this award. Therefore the award according to the applicants is beyond the scope of arbitration. It is against law. It has been further argued that no reasons have been assigned for the award . The partition deed dated 23.11.1998 is the basis of impugned award which is absolutely unjustified and one sided against morality. The dispute amongst the brothers who are common descendants of Sri Munshi Lal is arbitrary because the arbitrators are the two sisters and two brothers-in-law of the brothers who are benefices of the properties. About the share of Sri Mitesh Kumar Jain, it has been argued that Sri Munshi Lal had only a comparcenary share in the property in dispute and even by a will he could not transfer more than his share, since it was a joint Hindu Family property.

6. This Court on 12.5.2009 passed the following order directing the parties to maintain status quo :-

"This appeal is arising out of an order passed by learned District Judge, Firozabad dated 9th April, 2009 under Section 34 of Arbitration & Conciliation Act, 1996 (for short the new Act). Two valid points have been taken by Mr. M.K.Gupta, learned counsel appearing for the appellants; firstly that no unreasoned or nonspeaking award can be passed under the new Act and secondly that the District Judge while hearing the application under Section 34, cannot act as a court of appeal to change or replace the award and in support of both the points he placed reliance on two decisions of Supreme Court reported in (2006) 11 SCC 181, Mcdermott international inc. Vs. Burn Stand Co. Ltd. and others (Paras 55 & 56) & (2006) 11 SCC 245, Centrotrade Minerals & Metals Inc. Vs. Hindustan Copper Ltd.(Para 45).

Mr. Ranjit Saxena, learned counsel appearing for the respondent no. 1 contended before this Court that in fact arbitrators wanted to put their seal and signatures on a family settlement. However, all such questions will be taken into account after notice to the parties. Therefore, issue notice upon remaining respondents i.e. the respondents no.2 to 8 within a week from this date by registered post acknowledgement due as well as by dasti summons, and so far as service by dasti summons is concerned, an affidavit of service will be filed before this Court. Counter affidavit will be filed within a period of 3 weeks. Rejoinder, if any, will be filed within a period of one week thereafter. Appeal will appear 3 weeks hence.

It is agreed between the parties that the appeal will be heard on informal papers and if any document is escaped that will be brought before this Court by means of affidavit. As far as the respondents no. 2 to 8 are concerned, upon service of notice if they want to file counter affidavit and the appellant want to file rejoinder thereto, they can also file the same within the period as prescribed by this Court above.

However, considering the pros and cons of the case parties are directed to maintain status quo as on date in respect of the properties, which means that no sale or transfer or partiing with the possession or alienation will be made by either of the parties in the mean time."

7 The learned District Judge, Firozabad while deciding the Arbitration Case No. 11 of 2000 framed four issues which read as under :

"(1) Whether the award dated 17.2.2000 is liable to be set aside as alleged in the petition.

(2) Whether the petition is under valued and the Court fee paid is insufficient.

(3) Whether the petition is bad for mis-joinder of opposite parties Nos. 5 to 8.

(4) Whether the petition is beyond the purview Act No.26 of 1996. If so, to what effect."

8. Can this Court acting as an Appellate Court exercise its jurisdiction as is prescribed under the Arbitration and Conciliation Act, 1996 (for short, 'Act, 1996'). It is submitted that the impugned award is bad as the arbitrator works to arbitrate within the terms of agreement. Though there is challenge even to the agreement and the Court did not delve into the same which is also bad in eye of law. The arbitration committee had no power apart from the parties had opted who being arbitrated on. The Arbitral committee has travel beyond the scope of the proceedings. Recently the Apex Court in State of Chhattisgarh V. Sal Udyog ( P) Ltd., (2022)2 SCC 275 has considered the phrase of 'patent illegality' would be where the arbitrator fails to decide the matter in accordance with terms of contract governing the parties relating to recovery of 'supervision charges' from the respondent- Company and the Circular dated 27th July, 1987 issued by the State Government on the same lines which as per the appellant-State, goes to the root of the matter. The arbitral award is bad in eye of law as there is total unreasoned award. This ground is available to the appellant as the facts reveal that the appellant did not agree to the jurisdiction of the arbitrator's committee. The Provision of Section 11 of Act, 1996 reads as follows :

"11. Appointment of arbitrators.--(1) A person of any nationality may be an arbitrator, unless otherwise agreed by the parties.

(2) Subject to sub-section (6), the parties are free to agree on a procedure for appointing the arbitrator or arbitrators.

(3) Failing any agreement referred to in sub-section (2), in an arbitration with three arbitrators, each party shall appoint one arbitrator, and the two appointed arbitrators shall appoint the third arbitrator who shall act as the presiding arbitrator.

(4) If the appointment procedure in sub-section (3) applies and--

(a) a party fails to appoint an arbitrator within thirty days from the receipt of a request to do so from the other party; or

(b) the two appointed arbitrators fail to agree on the third arbitrator within thirty days from the date of their appointment, the appointment shall be made, upon request of a party, by 1 [the Supreme Court or, as the case may be, the High Court or any person or institution designated by such Court];

(5) Failing any agreement referred to in sub-section (2), in an arbitration with a sole arbitrator, if the parties fail to agree on the arbitrator within thirty days from receipt of a request by one party from the other party to so agree the appointment shall be made, upon request of a party, by 1 [the Supreme Court or, as the case may be, the High Court or any person or institution designated by such Court].

(6) Where, under an appointment procedure agreed upon by the parties,-- (a) a party fails to act as required under that procedure; or

(b) the parties, or the two appointed arbitrators, fail to reach an agreement expected of them under that procedure; or

(c) a person, including an institution, fails to perform any function entrusted to him or it under that procedure, a party may request 1 [the Supreme Court or, as the case may be, the High Court or any person or institution designated by such Court]to take the necessary measure, unless the agreement on the appointment procedure provides other means for securing the appointment. 2

[(6A) The Supreme Court or, as the case may be, the High Court, while considering any application under sub-section (4) or sub-section (5) or sub-section (6), shall, notwithstanding any judgment, decree or

order of any Court, confine to the examination of the existence of an arbitration agreement.

(6B) The designation of any person or institution by the Supreme Court or, as the case may be, the High Court, for the purposes of this section shall not be regarded as a delegation of judicial power by the Supreme Court or the High Court.]

(7) A decision on a matter entrusted by sub-section (4) or sub-section (5) or sub-section (6) to 3 [the Supreme Court or, as the case may be, the High Court or the person or institution designated by such Court is final and no appeal including Letters Patent Appeal shall lie against such decision]. 4

[(8) The Supreme Court or, as the case may be, the High Court or the person or institution designated by such Court, before appointing an arbitrator, shall seek a disclosure in writing from the prospective arbitrator in terms of sub-section (1) of section 12, and have due regard to--

(a) any qualifications required for the arbitrator by the agreement of the parties; and

(b) the contents of the disclosure and other considerations as are likely to secure the appointment of an independent and impartial arbitrator.]

(9) In the case of appointment of sole or third arbitrator in an international commercial arbitration, 5 [the Supreme Court or the person or institution designated by that Court] may appoint an arbitrator of a nationality other than the nationalities of the parties where the parties belong to different nationalities. 6

[(10)The Supreme Court or, as the case may be, the High Court, may make such scheme as the said Court may deem appropriate for dealing with matters entrusted by sub-section (4) or sub-section (5) or sub-section (6), to it.]

(11) Where more than one request has been made under sub-section (4) or sub-section (5) or sub section (6) to the Chief Justices of different High Courts or their designates, [different High Courts or their designates, the High Court or its designate to whom the request has been first made] under the relevant sub-section shall alone be competent to decide on the request. 1

[(12) (a) Where the matters referred to in sub-sections (4), (5), (6), (7), (8) and sub-section (10) arise in an international commercial arbitration, the reference to the "Supreme Court or, as the case may be, the High Court" in those sub-sections shall be construed as a reference to the "Supreme Court"; and (b) Where the matters referred to in sub-sections (4), (5), (6), (7), (8) and sub-section (10) arise in any other arbitration, the reference to "the Supreme Court or, as the case may be, the High Court" in those sub-sections shall be construed as a reference to the "High Court" within whose local limits the principal Civil Court referred to in clause (e) of sub-section (1) of section 2 is situate, and where the High Court itself is the Court referred to in that clause, to that High Court.] 2

[(13) An application made under this section for appointment of an arbitrator or arbitrators shall be disposed of by the Supreme Court or the High Court or the person or institution designated by such Court, as the case maybe, as expeditiously as possible and an endeavour shall be made to dispose of the matter within a period of sixty days from the date of service of notice on the opposite party.

(14) For the purpose of determination of the fees of the arbitral tribunal and the manner of its payment to the arbitral tribunal, the High Court may frame such rules as may be necessary, after taking into consideration the rates specified in the Fourth Schedule.

Explanation.--For the removal of doubts, it is hereby clarified that this sub-section shall not apply to international commercial arbitration and in arbitrations (other than international commercial arbitration) in case where parties have agreed for determination of fees as per the rules of an arbitral institution.] "

9. Learned counsel further submits that the first court did not consider the fact that Sri Ramesh Chand Jain one of the son of late Munshi Lal Jain was not a signatory to the arbitration agreement and the arbitrators have travelled much beyond the scope of the arbitration because even assuming that alleged family settlement dated 23.11.1998 was arrived at between the parties, but it will deemed to be abandoned and not acceptable to the parties consequent to reference of the dispute to the arbitrators. In such circumstances, reliance placed on the alleged family settlement dated 23.11.1998 while allotting share of Sri Ramesh Chandra Jain under the impugned arbitration award has rendered it illegal and unsustainable in law.

10. Learned counsel for the appellant has further submitted that there are material contradictions in the version of the arbitrators relating to evaluation of the property : while in paragraph 4.7 of the award it was mentioned that the revised value of all properties as on the date of the award was taken into consideration but in paragraph 3(d) of their objections filed in Misc. Case No. 11 of 2000, they have admitted that in fact no valuation was ever made. Learned counsel for the appellant further submits that two arbitrators opposite parties no. 5 and 6 are permanent resident of Gwalior while the other two arbitrators opposite parties no. 7 and 8 are permanent resident of New Delhi. They never informed the appellants about the place where the arbitrations will take place. They also never fixed any date for hearing the appellants. They never gave any opportunity to the appellants to make their statements, to produce the evidence or their witnesses. Abruptly, the impugned award has been made which is wholly illegal.

11. As against this, learned counsel for the respondents has submitted that the jurisdiction of this Court to interfere in the arbitral awards is bad and this Court should not interfere in well reasoned award passed by the arbitrator who are family members of the parties and it is further submitted that the Court has rightly rejected the contention raised by the appellant herein.

12. The parties had not agreed for the family members to act as arbitrator committee, hence, the award is bad.

13. Decisions in United India Insurance Co. Ltd. and other vs. Roshan Oil Mill, (2000) 10 SCC 19, National Insurance Co. Ltd. vs. Aleyamma Varghese and others, II (2006) CPJ 193 (NC), Oriental Insurance Co. Ltd. Vs. B. Rama Reddy, (II) 2006 CPJ 339 & New India Assurance Company Limited Vs. Pradeep Kumar, IV (2009) CPJ 46 SC, relied by the appellant before the learned District Judge have been not properly interpreted by him. The case is covered by the decision in Shobika Attire Vs. New India Assurance Co. Ltd. and another, IV (2006) CPJ 3 SC.

14. The Apex Court in FCI Versus Joginderpal Mohinderpal, (1989) 2 SCC 347 has held that the objection against an arbitral award can be raised only if it falls within the parameters fixed by the provisions of Section 14, and 33 of the Act, 1940. If the award satisfies that it is based on equity, fair play, principles of natural justice and established practice and procedure then the award should not be interfered. In proceedings of arbitration there must be adherence to justice, equity, law and fair play in action. The proceedings must adhere to the principles of natural justice and must be in consonance with such practice and procedure which will lead to a proper resolution of the dispute and create confidence of the people for whose benefit these processes are resorted to FCI Versus Joginderpal Mohinderpal (supra).

15. The judicial review of an award has been circumscribed by Apex Court in FCI Versus Joginderpal Mohinderpal ( supra) wherein it has been held that arbitration as a mode for settlement of disputes between the parties, has a tradition in India. It has a social purpose to be fulfilled today. It has a great urgency today when there has been an explosion of litigation in the courts of law established by the sovereign power . It is, therefore, the function of Courts of Law to oversee that the arbitrators act within the norms of justice. Once they do so and the award is clear, just and fair, the Courts should, as far as possible, give effect to the award of the parties and make the parties compel to adhere to and obey the decision of their chosen adjudicator. It is in this perspective that one should view the scope and limit of correction by the court of an award made by the arbitrator.

16. In backdrop of this it will have to be decided as to whether can it be said that the decision of arbitrator committee upheld by the Court below is bad and was wrongly made the Rule of Court as per Arbitration Act, 1940.

17. While perusing the award, it is found that the arbitrators have not considered each item threadbare. The committee gave its finding without assigning reasons. Can it be said that arbitral award fulfills the contours of principles which are required to be followed by an arbitrator under the Act, 1940. This Court is fortified in its view by the following authoritative pronouncements:

(i) Steel Authority of India Ltd Vs. Gupta Brothers Steel Tubes Ltd. (2009) 10 SCC 63 .

"...... The courts below have currently held that the arbitrator has gone into the issues of facts thoroughly, applied his mind to the pleadings, evidence before him and the terms of the contract and then passed duly considered award and no ground for setting aside the award within the four corners of Section 30 has been made out......... In what we have already discussed above, the view of the arbitrator in this regard is a possible view. Consequently, appeal has no merit and costs."

(ii) Sumitomo Heavy Industries Ltd Vs. Oil & Natural Gas Commission of India (2010) 11 SCC 296

".... award was not only a plausible one but a well reasoned award. In the circumstance the interference by the High Court was not called for. In that view of the matter we allow this appeal and set aside the judgment of the learned Single Judge, as well as that of the Division Bench...."

(ii) Rashtriya Ispat Nigam Ltd. Vs. M/s Dewan Chand Ram Saran reported as 2012 (5) SCC 306

".... There was no reason for the High Court to interfere in the view taken by the arbitrator which was based, in any case on a possible interpretation of clause 9.3. The learned single Judge as well as the Division Bench clearly erred in interfering with the award rendered by the arbitrator. Both those judgments will, therefore, have to be set-aside. Accordingly, the appeal is allowed and the impugned judgments of the learned Single Judge as well as of the Division Bench, are hereby set aside...."

(iii) Reported as 2011 (5) SCC 758, in the case of J.G. Engineers Pvt. Ltd. Vs./ Union of India & Anr.

(iv) First Appeal No.137 of 1992, in the case of State of Gujarat & Anr. Vs. Nitin Construction Company, judgment dated 22.03.2013 of the Hon'ble High Court of Gujarat.

(v) First Appeal No.3688 of 2012, in the case of State of Gujarat Vs. Vijay Mistri Construction & Anr., judgment dated 22.03.2013 of the Hon'ble High Court of Gujarat.

(vi) Reported as 2000 (4) GLR 3652 in the case of Oil & Natural Gas Corporation Limited V/s. Essar Steel Limited, (Paragraph-8).

(vii) Reported in 1999(9)SCC 449, Arosan Enterprises Limited V/s. Union of India & Anr.

(viii) Reported in 2003 (8) SCC 4, Continental Construction Limited V/s. State of U.P., Assam State Electricity Board V. Buildworth (P) Ltd., AIR 2017,Gujarat Water Supply & Sewerage Board V. Unique Erectors (Gujarat) (P) Ltd., 1989 (1) SCC 532: Irrigation Department, State Of Orissa V. G.C. Roy, 1992 1 SCC 508 : Jugal Kishore Prabhatilal Sharma V. Vijayendra Prabhatilal Sharma, AIR 1993 SC 864 and Smt. Aruna Kumari V. Government Of Andhra Pradesh, AIR 1988 SC 873.

(ix) Rajasthan State Road Transport Corporation Vs. Indag Rubber Ltd, 2006 (7) SCC 700 wherein it has been held that the award can be set aside on the ground of misconduct if relevant documents are not considered by the Arbitrator.

18. Therefore in light of decisions of the Apex Court and the discussion herein above, the scope of interference with the findings of Arbitrator and confirmed by the District Judge, on the basis of principles would permit this Court to interfere with the findings, as settled in view of decision in case of Bharat Coking Coal Ltd Vs. Annapurna Construction reported in 2003 (8) SCC 154.

19. As far as ground of jurisdiction is concerned, the learned Judge has not assigned reasons why he concurs with arbitral committee's decision. There is any perversity in the same. The arbitral award has to be quashed for the reason that it does not confirm to provisions of Act.

20. This appeal will have to be allowed as the decisions of Supreme Court reported in (2006) 11 SCC 181, Mcdermott International Inc. Vs. Burn Stand Co. Ltd. And others ( paras 55 & 56 ) and (2006) 11 SCC 245, Centrotrade Minerals & Metals Inc. Vs. Hindustan Copper Ltd. ( para - 45). The order dated 9.4.2009 by learned Judge is bad. The order of Arbitrator Committee showed that it was not in consonance with family distribution.

21. In that view of the matter, this appeal is allowed. The arbitral award as well as order of Court below dated 9.4.2009 are quashed and set aside. The parties to maintain status quo. The award as opponent nos. 5 to 8 are the members of the arbitral committee as per the judgment of the court below who are also the members of family and interested persons. The award is so an unreasoned award. The Judge has also not given reasons. The award dated 9.4.2009 passed by learned District Judge, Firozabad is quashed and set aside.

Order Date :-11.8.2023

Mukesh