Bombay High Court
Nina Anil Shah vs Kusum Bhaskarrao Gorule Alias ... on 5 June, 2017
Bench: K.R. Sriram
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IN THE HIGH COURT OF JUDICATURE AT BOMBAY
ORDINARY ORIGINAL CIVIL JURISDICTION
ARBITRATION PETITION NO.369 OF 2006
WITH
NOTICE OF MOTION NO.1651 OF 2015
WITH
NOTICE OF MOTION NO.137 OF 2017
WITH
NOTICE OF MOTION NO.141 OF 2017
IN
ARBITRATION PETITION NO.369 OF 2006
Nina Anil Shah,
aged 40 years, Occupation : Business,
the partner of M/s. Chitralekha Builders,
residing at 6-F, Dhan-Ratna, Bhardawadi,
Andheri (West), Mumbai - 400 058. .... Petitioner
Vs.
Kusum Bhaskarrao Gorule
@ Geetanjali Ganesh Sohani
having address at Flat No.4, 2nd Floor,
"Deepti", Shraddhanand Road, Vile Parle
(East), Mumbai - 400 057. .... Respondent
WITH
SUIT NO.3162 OF 2005
WITH
NOTICE OF MOTION NO.1556 OF 2014
WITH
CHAMBER SUMMONS NO.1383 OF 2016
WITH
NOTICE OF MOTION NO.1750 OF 2016
IN
SUIT NO.3162 OF 2005
Nina Anil Shah ....Plaintiff
Vs.
M/s. Chitralekha Builders and 2 Ors. ....Defendants
----
Mr. Anil G. Shah, Constituted Attorney of petitioner present in person.
Mr. M.P. Rao, Senior Advocate a/w. Ms. Savita Ganoo i/b. Mr. Sanskar
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Marathe for respondent.
Mr. Bhavin Manek holding for Mr. Shyam Mehta, Senior Advocate -
Amicus Curiae present.
----
CORAM : K.R.SHRIRAM, J.
RESERVED ON : 13th APRIL, 2017
PRONOUNCED ON : 5th JUNE, 2017
JUDGEMENT:
1 The Arbitration Petition impugns, under Section 34 of the
Arbitration and Conciliation Act, 1996 (the Act), an Award dated
1st August, 2006. The Arbitral award reads as follows :-
"a) The firm M/s. Chitralekha Builders stands dissolved as on
15.7.1004.
b) The Suit Property viz. CTS No.727 at Sorojini Naidu Road,
Mulund (W), Mumbai - 400 080 does not constitute the asset of the
firm Chitralekha Builders.
c) The Claimant is ordered/directed to make payment to the
respondents 50% of the expenses from the sum of Rs.62,18,324/-.
The aforesaid amount has been arrived upon considering the
expenses incurred by the firm till 15.7.2004 on which date the firm
M/s. Chitralekha Builders was dissolved. The aforesaid amount will
carry interest at the rate of 12% per annum from 8.4.1989 till
payment. The aforesaid amount is directed to be paid on or before
1st November, 2006. In the event of default in payment on or before
the aforesaid date the aforesaid amount will carry interest at the rate
of 15% per annum from 1st November, 2006 till payment.
d) The Claimant will pay cost of the present Counter Claim to the
respondent, which are quantified at Rs.50,000/-."
By an order dated 3rd October 2006, Learned Single Judge
(D.K. Deshmukh, J. as he then was) was pleased to dismiss the petition.
2 Against the said order dated 3 rd October, 2006, the petitioner
filed an Appeal No.813 of 2006. By an order dated 21 st/22nd July, 2014 the
Hon'ble Appeal Court set aside the order dated 3 rd October, 2006 and
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restored this Arbitration Petition to the file of the Learned Single Judge
keeping open all contentions of the parties on the merits of the Arbitration
Petition.
3 Against this order dated 21st/22nd July, 2014 of the Appeal
Court, the respondent filed a Special Leave Petition No.31627 of 2014.
The Hon'ble Supreme Court, by an order dated 6 th October, 2016,
dismissed the Special Leave Petition.
4 As the petitioner was not represented by an Advocate, but by
her Constituted Attorney, who also happened to be her husband Mr. Anil
Shah and he was not able to assist the court effectively, the court
appointed Mr. Shyam Mehta, senior Advocate to be the Amicus Curiae. In
fact the court had to time and again tell Mr. Shah to keep a check on his
emotional outbursts and personal allegations and attacks on Mr. Rao, the
counsel for respondent. I must also add that the written submissions
running into 100 pages submitted, on behalf of the petitioner, by Mr. Shah,
was also of no assistance.
5 During the course of the hearing of the present petition, the
Hon'ble Court on a perusal of the Arbitration Petition and without much
assistance from Mr. Shah, but due to assistance of Amicus stated an
outline of the petitioner's grounds of challenge of the award. The Learned
Amicus Curiae developed those points and submitted a list of 12 points for
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consideration, three of which do not find mention in the petition. The
Learned Amicus Curiae did mention that those three points for
consideration, viz., Point No.9, Point No.11 and Point No. 12 did not find
place in the Arbitration Petition. These three were included based on
Mr. Shah's oral submissions. The 12 points for consideration are as under :
(1) After the conveyance of the suit property on
26th July, 2005 the arbitration proceedings were frustrated
and nothing survived in the arbtiration proceedings and the
same ought to have been terminated by the Hon'ble Arbitral
Tribunal.
(2) The Hon'ble Arbitral Tribunal failed to pass any order on
the preliminary statement dated 14th December, 2005 filed by
the petitioner raising the issue of jurisdiction in the light of
the disposal of the suit property.
(3) In the absence of a statement of claim being filed by the
petitioner, no counter claim of the respondent could be
entertained by the Hon'ble Arbtiral Tribunal.
(4) The order dated 8th June, 2006 passed by the Hon'ble
Arbitral Tribunal as received by the petitioner was in variance
with the order dictated by the Hon'ble Arbitral Tribunal to
both sides in the arbitration meeting. In this manner the
Hon'ble Arbitral committed misconduct.
(5) One Mr. Prakash Naik, an agent of M/s. Oswal
Enterprises was allowed to attend the proceedings by the
Hon'ble Arbitral Tribunal despite strong objection from the
petitioner. This again amounts to misconduct by the Abritral
Tribunal.
(6) The Hon'ble Arbitral Tribunal ought to have discontinued
the proceedings in view of the refusal on the part of the
petitioner to pay its charges and expenses by continuing with
the proceedings, the Hon'ble Arbitral Tribunal was again
guilty of misconduct.
(7) The Hon'ble Arbitral Tribunal wrongly passed an order of
costs of rs. 25,000/- on the petitioner for allegedly failing to
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serve a copy of the arbtiration petition no. 285 of 2006 on the
respondent vide its order dated 14th July, 2006. This also
amounted to misconduct on the part of the Arbitral Tribunal.
(8) The arbitral proceedings were conducted in a biased
manner by the Hon'ble Arbitral Tribunal.
(9) The original award was never served on the petitioner. A
purported true copy thereof was served by the advocate of
respondent on the petitioner's advocate under cover of his
letter dated 4th August, 2006.*
(10) The impugned award contains contradictory findings in
as much as on one hand the Hon'ble Arbitral Tribunal allowed
a claim for Rs.62,18,324/- for maintenance of the partnership
property whereas on the other hand the Hon'ble Arbitral
Tribual held that the suit property does not constitute
partnership property.
(11) While coming to the conclusion that the suit property
does not belong to the partnership firm, the Hon'ble Arbitral
Tribual failed to consider the recitals in the Partnership Deed
itself as well as the Development Agreement dated 20 th April,
1980 between the Vaity's and the firm Chitralekha Builders.*
(12) There is no material whatsoever to justify the award of
Rs.62,18,324/- against the petitioner.*
FACTS :
6 On 28th April, 1980 an Agreement for Sale was entered into
between 52 members of one Vaity Family, the original owners of a huge
piece of land, bearing Survey No.281, CTS No.727 of Village Mulund,
situated at S.N. Road, Mulund (West), Mumbai - 400 080 admeasuring
4249.16 sq.mts. (the said property) and one M/s. Chitralekha Builders, a
partnership firm, which was then constituted by the respondent and one
Shri Thukaram Baliram Nalawade in respect of the said property.
* Not in the petition
* Not in the petition
* Not in the petition
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7 Shri Thukaram Nalawade retired from the partnership firm
on 16th April, 1980 and the respondent herein continued as the sole
proprietor of Chitralekha Builders. An Agreement dated 9th May, 1980 was
entered into between Chitralekha Builders and GIC Employees
Co-operative Housing Society Ltd. whereby Chitralekha Builders agreed to
sell the constructed area after developing the said property to GIC
Employees Co-operative Housing Society Ltd.
8 The Vaity's, i.e., the original owners of the said property
attempted to resile from the Agreement for Sale in favour of Chitralekha
Builders. Therefore in 1988, GIC Employees Co-operative Housing Society
Ltd. and the respondent herein as the sole proprietor of Chitralekha
Builders, filed Suit No.1335 of 1988 against the Vaity's seeking specific
performance of the Agreement dated 28 th April, 1980. During the
pendency of Suit No.1335 of 1988 a Deed of Partnership dated 8 th April,
1989 was entered into between Kusum Bhaskarrao Gorule (respondent
herein), Mrs. Nina Anil Shah (petitioner herein), one Mr. S. J. Pakhare and
one Mr. S. N. Gadekar who carried on business in name of Chitralekha
Builders. By an order dated 30th July, 1991 passed in said Suit No.1335 of
1988, the Court Receiver, High Court, Bombay, was appointed in respect of
the said property.
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9 In the year 1996, two of the partners, i.e., Mr. S.J. Pakhare
and Mr. S.N. Gadekar retired from the partnership firm M/s. Chitralekha
Builders. The petitioner and the respondent were the only remaining
parties. Disputes arose between the petitioner and the respondent and the
petitioner, by her letter dated 15 th July, 2004, dissolved the partnership
firm M/s. Chitralekha Builders. The petitioner filed a Chamber Summons
No.1334 of 2004 wherein she sought herself to be impleaded as a co-
plaintiff in Suit No.1335 of 1988. This Hon'ble Court by an order dated
26th October, 2004, rejected the Chamber Summons No.1334 of 2004 filed
in Suit No.1335 of 1988 against which the petitioner filed an Appeal
No.598 of 2005.
10 The petitioner filed an Arbitration Application No.62 of 2005
in this Hon'ble Court under Section 11 of the Arbitration & Conciliation
Act, 1996 seeking appointment of a sole arbitrator with respect to disputes
that arose under the Partnership Deed for forming the firm Chitralekha
Builders, that was dissolved by the petitioner. Meanwhile, in Suit No.1335
of 1988 consent terms between the original owners of the suit property,
i.e., the Vaity's and the respondent herein, were filed whereby, Vaity's, the
original owners agreed to convey the suit property to the
respondent/nominee of the respondent herein. By an order dated
22nd July, 2005 the Arbitration Petition No.62 of 2005 was allowed and
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Hon'ble Mr. Justice A. C. Agarwal (Retired) was appointed as the sole
arbitrator.
11 The owners of the suit property, i.e., the Vaity's executed a
conveyance dated 26th July, 2005 in respect of the suit property in favour
of one M/s. Oswal Enterprises (nominee of the respondent) and the
respondent was the confirming party therein.
The petitioner filed in this court Suit No.3162 of 2005 against
the respondent as well as M/s. Oswal Enterprises seeking, inter alia,
setting aside of the conveyance dated 26th July, 2005.
12 By an order dated 19th August, 2005 the Appeal No.598 of
2005 filed by the petitioner challenging the order dated 26 th October,
2004, as stated in paragraph 9 above, was allowed and the petitioner was
directed to be added as party defendant in Suit No.1335 of 1988.
BEFORE THE LEARNED ARBITRATOR
13 The Ld. Arbitrator, upon his appointment, held the first
meeting on 28th August, 2005, wherein he took on record a reply of the
respondent to an application filed by the petitioner to adjourn the
proceeding sine die until the disposal of Suit No.3162 of 2005 filed by the
petitioner in this Hon'ble Court. As the petitioner was absent, the
Arbitration proceedings were adjourned to 28th January, 2006.
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14 The petitioner addressed a letter dated 28 th September, 2005
to the Ld. Arbitrator stating that he had requested the Advocate for the
respondent for a copy of the Deed of Conveyance dated 26 th July, 2005
and on receipt of the same, the petitioner would file a reply. The
petitioner, therefore, prayed that the Ld. Arbitrator adjourn the
proceedings for a period of 8 weeks.
15 On 14th December, 2005, the petitioner filed a preliminary
statement praying therein that the Arbitration Proceedings be adjourned
sine die till the hearing and final disposal of Suit No.3162 of 2005. The
petitioner contended that the arbitral proceedings had become infructuous
in view of filing of Suit No.3162 of 2005. The petitioner pleaded that the
controversy between the parties could not be resolved through the
procedure of Arbitration and could only be resolved in Suit No.3162 of
2005. According to the petitioner, in view of the subsequent
developments, the petitioner would not be filing statement of claim at that
stage.
16 The petitioner, thereafter, addressed a letter dated
30th January, 2006 to the Ld. Arbitrator seeking an adjournment of the
arbitration proceedings for a period of 5 years until the petitioner secures
a true copy of the conveyance dated 26 th July, 2005. The respondent's
Advocate addressed a letter dated 8 th February, 2006 to the petitioner
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stating that the conveyance had nothing to do with the present arbitral
proceedings and that the respondent would oppose any application for
adjournment by the petitioner.
17 On 20th February, 2006, the petitioner addressed another
letter to the Ld. Arbitrator praying that the arbitration proceedings be
stayed and adjourned sine die until the hearing and final disposal of Suit
No.3162 of 2005. The next date of hearing was fixed as 9 th March, 2006
and the same was informed to the petitioner by letter dated
20th February, 2006 from the respondent.
18 On 1st March, 2006, the petitioner addressed a letter to the
Advocate for the respondent as well as marked a copy to the Arbitrator
refusing to deposit the fees of the Arbitrator and repeated that the
arbitration proceedings have become infructuous and would have to be
adjourned sine die until the hearing and final disposal of Suit No.3162 of
2005.
19 On 7th March, 2006, the petitioner addressed another letter to
the Arbitrator again stating that the arbitral proceedings had become
infructuous and that accordingly the same must be adjourned sine die till
Suit No.3162 of 2005 was finally heard and disposed off. Petitioner further
stated that due to the obsequial ceremonies of petitioner's maternal
grandmother petitioner had difficulty in appearing before the Ld.
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Arbitrator on 9th March, 2006.
20 On 9th March, 2006, the Arbitration meeting was held and the
Ld. Arbitrator held that the petitioner could not unilaterally terminate the
arbitration proceedings and that the proceedings would continue before
the Ld. Arbitrator as per its own merits. As the petitioner had expressed
difficulty to attend the Arbitration proceedings vide letter dated
7th March, 2006, the Arbitration proceedings were adjourned to
20th March, 2006.
21 The respondent's Advocate by a letter dated 10 th March, 2006
addressed to the petitioner, enclosed a copy of the Minutes of the
Arbitration meeting held on 9th March, 2006 and informed petitioner that
the next meeting was fixed on 20 th March, 2006. The petitioner by a letter
dated 14th March, 2006 addressed to the Ld. Arbitrator stated that because
petitioner was to leave for a pilgrimage, petitioner would not be able to
attend the arbitration proceedings until 20th March, 2006. Petitioner
refused to share the expenses of the Arbitration and prayed that the
arbitration proceedings be adjourned until the final hearing and disposal
of Suit No.3162 of 2005. The respondent's Advocate addressed a letter
dated 17th March, 2006 stating therein that the Ld. Arbitrator would not
conduct the arbitration proceedings in view of the fact that the petitioner
was not available and asked petitioner to inform convenient dates to the
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Ld. Arbitrator. The petitioner addressed a letter dated 22 nd March, 2006 to
the Ld. Arbitrator repeating the request that the proceedings be adjourned
until the respondent revokes the conveyance and brings the property to
status quo ante. Respondent's Advocate vide letter dated 24 th March, 2006
informed the petitioner that the Ld. Arbitrator had fixed the next date of
hearing as 28th March, 2006.
22 The reason why I have mentioned about the correspondence
exchanged and minutes of meeting is only to show that the Ld. Arbitrator
had given the petitioner numerous opportunities to appear and participate
in the arbitration proceedings. It also shows that on one hand the
petitioner refused to file statement of claim and urged that the
arbitration proceedings had become infructuous and on the other hand
kept seeking adjournments. This also shows the allegation of bias against
the Ld. Arbitrator is baseless.
23 On 28th March, 2006, the Ld. Arbitrator held a meeting and
directed the petitioner to file on or before 10 th April, 2004 statement of
claim with copy to the respondents. The respondent was further directed
to file Written Statement and Counter Claim, if any, on or before 15 th
April, 2006. The proceedings were adjourned to 18th April, 2006.
24 On 18th April, 2006, the petitioner failed to remain present
before the Ld. Arbitrator despite being informed. The Ld. Arbitrator
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recorded that the petitioner failed to file her Statement of Claim despite
directions in that regard. The Ld. Arbitrator granted time until 26 th April,
2006 to the respondent to file her counter claim as also her Affidavit of
Evidence. The next date was fixed on 2nd May, 2006.
25 On 29th April, 2006, the respondent filed her Counter Claim
with the Ld. Arbitrator. The respondent prayed :
(a) it be declared that the said property does not constitute an
asset of the firm M/s. Chitralekha Builders; and
(b) the petitioner be directed to make payment to the
respondent of a sum of Rs.81,00,000/- (Rupees Eighty One Lakhs Only)
together with interest thereon at the rate of 24% per annum from the date of
dissolution of the firm, i.e., 14th July, 2004 till payment and/or realization.
26 The Ld. Arbitrator held a meeting on 2 nd May, 2006. An
Advocate appeared for the petitioner and sought an adjournment as the
husband of the petitioner was required to go out of Mumbai to attend a
matter in the Hon'ble Supreme Court and prayed that the proceedings be
adjourned beyond summer vacation. The Ld. Arbitrator acceded to the
request of the petitioner and adjourned the matter to 8 th June, 2006.
27 On 8th June, 2006, the petitioner filed an application before
the Ld. Arbitrator, in which the petitioner made reference to petitioner's
preliminary statement dated 14th December, 2005 and all letters addressed
by the petitioner to the Ld. Arbitrator and prayed that in view of the same,
the Arbitration proceedings must be stayed until the hearing and final
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disposal of Suit No.3162 of 2005. In the said Application dated 8 th June,
2006, the petitioner reiterated the petitioner's contentions that in view of
the conveyance the arbitral proceedings had become infructuous.
28 The Ld. Arbitrator in the minutes dated 8th June, 2006 dealt
with the contentions urged by the petitioner that the arbitration
proceedings ought to be adjourned until the hearing and final disposal of
Suit No.3162 of 2005. The Ld. Arbitrator held that the arbitration
proceedings were maintainable. The Ld. Arbitrator recorded that the
Statement of Claim was not filed by the petitioner. The Ld. Arbitrator
further recorded that the respondent had filed her Counter Claim. The Ld.
Arbitrator gave the petitioner a last opportunity to file her statement of
claim and adjourned the proceedings to 29th June, 2006.
29 The petitioner on 26th June, 2006 filed an Arbitration Petition
No.285 of 2006 in this Court and sought quashing of the Arbitration
Proceedings pending before the Ld. Arbitrator on the ground that the said
property had been conveyed to Oswal Enterprises. The petitioner further
sought a stay of the arbitration proceedings until the hearing and final
disposal of Suit No.3162 of 2005.
In the meeting held on 29 th June, 2006, the husband and
Constituted Attorney of the petitioner, remained present. The Ld.
Arbitrator was informed by the Parties that the minutes of the meeting
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dated 8th June, 2006 was challenged by the petitioner in the said Petition.
In view of the same the arbitration proceedings were adjourned to
14th July, 2006.
30 The Ld. Arbitrator held a meeting on 14 th July, 2006. In the
said meeting he recorded that no orders were secured by the petitioner in
Arbitration Petition No.285 of 2006. In view of the fact that no claim was
filed by the Claimant despite several opportunities having been given, the
Ld. Arbitrator dismissed the claim of the petitioner for default or non
prosecution under Section 23 read with Section 25(a) of the Act. The Ld.
Arbitrator further ordered the petitioner to pay the respondents cost of
Rs.25,000/- which was towards the dismissal of the claim and not for
failing to serve a copy of the Arbitration Petition No.285 of 2006 as sought
to be contended by the petitioner. Despite the refusal of the petitioner to
file statement of claim, the Ld. Arbitrator gave the petitioner yet another
opportunity to put petitioner's house in order and participate in the
Arbitration proceedings.
31 The petitioner filed an Application dated 28 th July, 2006
before the Ld. Arbitrator to recall the minutes dated 14 th July, 2006 and
further prayed that the Ld. Arbitrator withdraw himself from the matter.
For the very first time, the petitioner alleged that the Ld. Arbitrator has
lost its impartiality to dispense justice and that the petitioner had lost faith
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in the Ld. Arbitrator.
32 The allegation of bias is based on the fact that the Ld.
Arbitrator levied cost of Rs.25,000/- on the petitioner. The petitioner
addressed a letter dated 14th July, 2006 on the premise that the Ld.
Arbitrator refused to adjourn the proceedings sine die and proceeded with
the hearing of the matter on 28 th July, 2006 and recorded evidence led by
the respondent in support of the Counter Claim filed by the respondent.
The Ld. Arbitrator thereafter adjourned the matter after hearing
arguments and made and declared his Award 1 st August, 2006, which is
impugned in this petition.
33 The Ld. Arbitrator passed the impugned award on 1 st August,
2006. Arbitration Petition No.285 of 2006 was dismissed on
27th September 2006. The petitioner filed an Appeal challenging the order
dated 27th September 2006 which was withdrawn by the petitioner on
29th January, 2007. Therefore, the order dated 27 th September, 2006
dismissing the petition filed by the petitioner for quashing the arbitration
proceedings and for stay of the arbitration proceedings attained finality.
POINTS OF LAW AND DISCUSSION ON GROUNDS OF CHALLENGE :
34 Section 34 of the Arbitration and Conciliation Act, 1996 reads
as under :
34. Application for setting aside arbitral award. --
(1) Recourse to a Court against an arbitral award may be made only by an
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application for setting aside such award in accordance with sub-section (2) and sub-
section (3).
(2) An arbitral award may be set aside by the Court only if--
(a) the party making the application furnishes proof that--
(i) a party was under some incapacity, or
(ii) the arbitration agreement is not valid under the law to which the parties have
subjected it or, failing any indication thereon, under the law for the time being in
force; or
(iii) the party making the application was not given proper notice of the appointment
of an arbitrator or of the arbitral proceedings or was otherwise unable to present his
case; or
(iv) the arbitral award deals with a dispute not contemplated by or not falling within
the terms of the submission to arbitration, or it contains decisions on matters beyond
the scope of the submission to arbitration:
Provided that, if the decisions on matters submitted to arbitration can be separated
from those not so submitted, only that part of the arbitral award which contains
decisions on matters not submitted to arbitration may be set aside; or
(v) the composition of the arbitral tribunal or the arbitral procedure was not in
accordance with the agreement of the parties, unless such agreement was in conflict
with a provision of this Part from which the parties cannot derogate, or, failing such
agreement, was not in accordance with this Part; or
(b) the Court finds that--
(i) the subject-matter of the dispute is not capable of settlement by arbitration under
the law for the time being in force, or
(ii) the arbitral award is in conflict with the public policy of India.
Explanation. --Without prejudice to the generality of sub-clause (ii) it is hereby
declared, for the avoidance of any doubt, that an award is in conflict with the public
policy of India if the making of the award was induced or affected by fraud or
corruption or was in violation of section 75 or section 81.
(3) An application for setting aside may not be made after three months have elapsed
from the date on which the party making that application had received the arbitral
award or, if a request had been made under section 33, from the date on which that
request had been disposed of by the arbitral tribunal: Provided that if the Court is
satisfied that the applicant was prevented by sufficient cause from making the
application within the said period of three months it may entertain the application
within a further period of thirty days, but not thereafter.
(4) On receipt of an application under sub-section (1), the Court may, where it is
appropriate and it is so requested by a party, adjourn the proceedings for a period of
time determined by it in order to give the arbitral tribunal an opportunity to resume
the arbitral proceedings or to take such other action as in the opinion of arbitral
tribunal will eliminate the grounds for setting aside the arbitral award.
The petitioner is challenging the Award under Section 34 (2)
(b) (ii), i.e., the arbitral award is in conflict with the public policy of India.
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35 Which are the heads of "Public Policy of India" has been very
elaborately analysed by the Apex Court in Associate Builders Vs. Delhi
Development Authority1. While in this subject matter, the Apex Court in
paragraph 33 of Associate Builders (Supra) has held as under :
"It must clearly be understood that when a court is applying the
"public policy" test to an arbitration award, it does not act as a
court of appeal and consequently errors of fact cannot be corrected. A
possible view by the arbitrator on facts has necessarily to pass muster
as the arbitrator is the ultimate master of the quantity and quality of
evidence to be relied upon when he delivers his arbitral award. Thus
an award based on little evidence or on evidence which does not
measure up in quality to a trained legal mind would not be held to be
invalid on this score. Once it is found that the arbitrators approach is
not arbitrary or capricious, then he is the last word on facts."
36 We shall now deal with each of the 12 points for
consideration, three of which are not raised in the petition, agreed upon
by both parties and the Amicus as to be the only points for consideration
in the present Petition. For convenience and brevity and as they overlap,
certain points are clubbed and dealt with.
Point No.1 - After the conveyance of the suit property on 26
th
July, 2005 the
arbitration proceedings were frustrated and nothing survived in the
arbtiration proceedings and the same ought to have been terminated by the
Hon'ble Arbitral Tribunal and
Point No.3 - In the absence of a statement of claim being filed by the
petitioner, no counter claim of the respondent could be entertained by the
Hon'ble Arbtiral Tribunal.
37 The main contention of the petitioner is that after the suit
property was sold on 26th July, 2005, nothing survived in the arbitral
proceedings and the same was liable to be terminated. This contention of
1. (2015) 3 Supreme Court Cases 49
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the petitioner is not correct.
38 In Arbitration Application No.62 of 2005 filed by the
petitioner in this Court seeking reference of the disputes and differences
between the parties to arbitration and in particular para 17 thereof, the
petitioner stated that the dispute between the parties was whether the
respondent was entitled to dispose of the partnership property without
the consent of the other partner. On this Application the disputes between
the parties were referred to arbitration by this Court by its Order dated
22nd July, 2005.
39 Thereafter, on 26th July, 2005, the suit property was conveyed
to Oswal Enterprises by the Vaity family, the owners thereof. The
respondent was a confirming party in the conveyance. The petitioner
thereupon filed Suit No.3162 of 2005 in this Court challenging the
aforesaid conveyance. Apart from the respondent, Oswal Enterprises was
also a Defendant in the suit.
40 Thereafter instead of filing a Statement of Claim before the
Arbitral Tribunal, the petitioner filed a Preliminary Statement dated
14th December, 2005 requesting that the arbitral proceedings be
adjourned sine die till the hearing and final disposal of the Suit No.3162
of 2005. According to the petitioner in view of the conveyance and the
said suit, nothing survived in the arbitral proceedings and the same had
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become infructuous.
41 Although the petitioner did not file a Statement of Claim
before the Arbitral Tribunal, the respondent filed a Counter Claim before
the Arbitral Tribunal seeking the following final reliefs against the
petitioner :
"(a) that it be declared by the Hon'ble Tribunal that the suit
property i.e. Plot of land bearing CTS No.727 at Sarojini
Naidu Road, Mulund West, Mumbai-400 080 does not
constitute an asset of the firm of M/s. Chitralekha Builders;
(b) that the Claimant be ordered and directed to make
payment to the respondent a sum of Rs.81,00,000.00 as per
Particulars of Claim being Exhibit-"B" hereto alongwith
interest on the principal sum of Rs.81,00,000.00 at the rate
of 24% per annum from the date of dissolution of the firm i.e.
14.7.2004 till payment or realization;
(c) that this Hon'ble Tribunal be pleased to restrain the
Claimant by an order and injunction from in any manner
dealing with, disposing off, alienating, encumbering or
creating any third party rights in respect of her property viz.
6-F, Dhan Ratna, Bhardawadi, Andheri (West), Mumbai -
400 058;
(d) for ad-interim reliefs in terms of prayer (c) above be
granted;
(e) that the Claimant be directed to pay costs of this
Application;
(f) for such further and other orders as this Hon'ble
Tribunal may deem fit and proper."
42 It is pertinent to note that after the Counter Claim was filed
by the respondent, although the petitioner was appearing before the
Arbitral Tribunal, the petitioner did not raise any issue of arbitrability in
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respect of the claims made by the respondent in the Counter Claim. The
only contention repeatedly raised by the petitioner was that the arbitral
proceedings had become infructuous in view of the said conveyance and
the said suit no.3162 of 2005 filed by the petitioner. On this basis the
petitioner repeatedly made applications to the Arbitral Tribunal to
adjourn the arbitral proceedings sine die till the disposal of the said suit.
43 Once the disputes between the parties are referred to
arbitration, both sides are entitled to make claims and/or counter claims
against each other. If one party decides not to seek reliefs, it does not
mean that the arbitral proceedings come to an end and the other party is
not entitled to seek any relief before the Arbitral Tribunal. This would be
so even if the party at whose instance the disputes were referred to
arbitration, eventually decides not to seek any relief before the Arbitral
Tribunal. I find support in the decision of the Hon'ble Supreme Court in
the case of State of Goa V/s. Praveen Enterprises2
44 Section 23(1) of the Act provides, as per direction of arbitral
tribunal or as agreed, for filing of a statement of claim as also for
respondent to file his/her reply/counter claim, if any. In the absence of
the statement of claim not being filed or the respondent choosing not to
file reply/counter claim, under Section 25(a) of the Act, the Tribunal is,
when no sufficient cause is shown, mandated to dismiss the claim from
2. (2012) 12 SCC 581
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being preferred if the default is of the petitioner and dismiss the right to
file a reply/counter claim, if respondent is in default. The Arbitral
Tribunal after giving several opportunities to the petitioner finally
exercised the statutory right under Section 25(a) of the Act and dismissed
the petitioner's claims. The petitioner has wrongly construed the
provisions of the Act to the effect that the Ld. Arbitrator is required to
terminate the entire proceedings for the petitioner's default of not filing a
statement of claim.
45 A Single Judge of Delhi High Court, in the case of Indian Oil
Corporation Ltd. vs. ATV Projects India Ltd. & Anr. 3 has held that the
Arbitral Tribunal may terminate the arbitral proceedings in respect of the
claim but continue the proceedings in respect of the counter claim and
vice versa. The Hon'ble Court in paragraph 14 has held as follows:
"14. A reading of the said provision does make it clear that where the
deposit in respect of a claim or counter claim is not made, the Arbitral
Tribunal may suspend or terminate the arbitral proceedings in respect of
such claim or counter claim, as the case may be. Therefore the act itself
countenances a situation where for example, if no deposit as stipulated
under Section 38 is made in respect of a claim, the Arbitral Tribunal may
terminate arbitral proceedings in respect of the claim but may continue the
arbitral proceedings in respect of the counter claim and vice versa. The Act
itself therefore contemplates termination of part of the arbitral proceedings.
Therefore, it would not be possible for me to agree with the contention of the
learned counsel for the respondent No.1 (ATV) that a continuation of the
arbitral proceedings in respect of the claim of the petitioner (IOCL) would
ipso facto mean that the arbitral proceedings in respect of ATV's claim was
also alive and continuing. It is permissible in law to terminate the
proceedings in respect of one of the claimants or counter claimants
and to continue proceedings in respect of the other or other claimants
or counter-claimants, as the case may be."
(emphasis supplied)
3 . 2004(3) R.A.J. 6 (Del)
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The judgment passed by the Ld. Single Judge in Indian Oil
Corporation Ltd. (Supra), was challenged before the Division Bench. The
Division Bench set aside the judgment of the single bench solely on the
ground that a writ petition could not be filed against order passed by the
Arbitrator and did not set the judgment aside on its merits. Paragraph 16
reads as under :
"16. Once it is held that the writ petition itself was not maintainable, the
question of going into the merits of the order dated 02.06.2003 of the
respondent no.2 Arbitrator does not arise. However for the sake of
completeness, we may mention that the respondent no.2 Arbitrator having
in the recall order dated 02.06.2003 recorded that he was satisfied with the
reasons given by the appellant for being unable to file the Statement of
Claim within the time granted by the respondent no.2 Arbitrator and
having in the exercise of discretion vested in him recalled the order holding
the right of the appellant to file the Statement of Claim having been lost, no
case for interference with such decision arrived at by the by the Arbitrator or
the discretion exercised by the Arbitrator especially in jurisdiction under
Article 226 of the Constitution of India does not arise."
46 The Hon'ble Supreme Court in the case of State of Goa Vs.
Praveen Enterprises (Supra) held even if the Claimant fails to file her
Statement of Claim, in order to avoid multiplicity of proceedings, a
respondent need not resort to filing of a fresh application under Section
11 of Arbitration & Conciliation Act, 1996 to refer the same disputes or
the respondent's claims arising under the same agreement or under the
same arbitration clause for fresh orders under Section 11 to appoint a
tribunal but the same tribunal which is appointed for the adjudication of
disputes can continue to adjudicate the counter claim filed by the
respondent in reference.
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47 In the present case the respondent had sought certain reliefs
against the petitioner by filing a Counter Claim. It was not the case of the
petitioner that these claims were not arbitrable. In fact as regards prayer
(a) of the Counter Claim, even the petitioner had sought to refer the same
dispute to the Arbitral Tribunal vide her Arbitration Application. This
being the position, even though the petitioner did not seek any relief
against the respondent, it was always open to the respondent to seek
reliefs against the petitioner before the Arbitral Tribunal. The mere sale of
the suit property and/or filing of the suit did not prevent the Arbitral
Tribunal from deciding the claim of the respondent.
48 Moreover the petitioner had challenged the decision of the
Arbitral Tribunal dated 8th June, 2006 whereby the Arbitral Tribunal
rejected the request of the petitioner to adjourn the arbitral proceedings
sine die till the disposal of the suit, in this Hon'ble Court by filing the
Arbitration Petition No.285 of 2006. By an Order dated 27 th September,
2006 this Hon'ble Court dismissed the aforesaid Arbitration Petition. The
petitioner filed Appeal No.812 of 2006 against this order. However, the
same was withdrawn by the petitioner on 29 th January, 2007.
Consequently this issue stands concluded and it is not permissible for the
petitioner to re-agitate the same.
Point No.2 - The Hon'ble Arbitral Tribunal failed to pass any order on the
th
preliminary statement dated 14 December, 2005 filed by the petitioner
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raising the issue of jurisdiction in the light of the disposal of the suit
property.
49 According to the petitioner the Hon'ble Arbitral Tribunal
failed to pass any order on the Application of the petitioner as contained
in her Preliminary Statement dated 14th December, 2005.
50 As stated above the request made by the petitioner vide the
Preliminary Statement was that the arbitral proceedings be adjourned sine
die till the hearing and final disposal of Suit No.3162 of 2005 filed by the
petitioner in this Hon'ble Court questioning the sale of the Suit Property.
The primary reason for seeking this relief was that the Suit Property was
conveyed to a third party, who was not a party to the arbitral proceedings,
and that such conveyance was impugned in the aforesaid Suit. According
to the petitioner, by reason of the sale of the Suit Property, the Arbitral
Tribunal had no jurisdiction over the controversy between the parties,
which now included a third party viz. M/s. Oswal Enterprises.
51 From the record it also appears that although the Arbitral
Tribunal did not decide the Application immediately, the Arbitral Tribunal
eventually ruled on the petitioner's request to adjourn the arbitral
proceedings sine die pending the final hearing of the said Suit vide its
Order dated 8th June, 2006. After filing the Preliminary Statement the
petitioner on several occasions addressed letters/applications to the
Arbitral Tribunal reiterating the same request. The last such Application
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was made by the petitioner on 8 th June, 2006. Hence although the Arbitral
Tribunal does not refer to the Preliminary Statement in its Order dated
8th June, 2006, the issues raised in the Preliminary Statement and the
request made vide the Preliminary Statement was decided by the Arbitral
Tribunal vide its Order dated 8th June, 2006.
52 This contention has been raised time and again by the
petitioner right from preliminary statement dated 14 th December, 2005,
through all letters and application dated 8 th June, 2006. The same was
dealt by the Ld. Arbitrator in minutes dated 8 th June, 2006. The Ld.
Arbitrator in minutes dated 8th June, 2006 held therein that the contention
is devoid of merit. The Ld. Arbitrator held that the issue before the
Arbitrator was distinct and same relates to the dispute inter se between
the partners and the monetary claim which may arise inter se between
them. Admittedly the said order dated 8th June, 2006 was challenged in
Arbitration Petition No.285 of 2006 filed by the petitioner. There is no
valid explanation forthcoming from the petitioner as to why the petitioner
did not file statement of claim after the petitioner's objection to the
continuation of the Arbitration proceedings was rejected.
53 This Court by an order dated 27 th September, 2006 was
pleased to dismiss the Arbitration Petition No.285 of 2006 and held that
the mere fact that the said property was conveyed does not render the
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Arbitration proceedings infructuous. The petitioner challenged the order
dated 27th September, 2006 by filing an Appeal No.812 of 2006. The
petitioner, on 29th January, 2007, withdrew the said Appeal No.812 of
2006. On having withdrawn the said Appeal No.812 of 2006, the order
dated 27th September, 2006 has attained finality and therefore this ground
cannot be urged and considered in the present Petition. The petitioner
cannot be now heard to urge that the Arbitrator ought to have recused
himself or adjourned the proceedings sine die.
th
June, 2006 passed by the Hon'ble Arbitral
Tribunal as received by the petitioner was in variance with the order dictated
by the Hon'ble Arbitral Tribunal to both sides in the arbitration meeting. In
this manner the Hon'ble Arbitral committed misconduct.
54 It was a case of the petitioner that when the Arbitrator
dictated the Minutes on 8th June, 2016, the petitioner's representative
Mr. Anil Shah wrote down the minutes alongwith the Stenographer.
Mr. Anil Shah submitted that when the final minutes were received by him
and when he compared it with his hand written notes, he found there
were certain differences. Mr. Shah further submitted that the minutes
were sent to him through the respondent's office and therefore, there was
misconduct.
I find the submissions of Mr. Shah to be preposterous. It is
Mr. Anil Shah's words against what is placed on record as the minutes of
the meeting held on 8th June, 2016 by the petitioner and signed by the Ld.
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Arbitrator. Even assuming, the Ld. Arbitrator has dictated and edited the
minutes of the meeting later, there is nothing wrong with that and the Ld.
Arbitrator was entitled to edit and firm up the minutes of the meeting.
That would not amount to any bias or misconduct by the Ld. Arbitrator.
The petitioner has placed on record the minutes of the meeting held on
8th June, 2006 which have been signed by the Arbitrator. Those minutes
are final.
55 It must be noted that the Ld. Arbitrator infact showed lot of
indulgence to the petitioner and time and again accommodated the
petitioner to enable the petitioner to file statement of claim and
participate in the Arbitration Proceedings. The Ld. Arbitrator, as noted
above, was consistently, from 28th March, 2006, extending the time to
enable to petitioner to file her statement of claim which the petitioner was
persistently refusing to do so. The Ld. Arbitrator also adjourned the matter
from 8th June, 2006 to 29th June, 2006 by giving one more opportunity to
the petitioner to put her house in order and to proceed with the
arbitration proceedings in accordance with law.
This ground also, therefore, is baseless.
Point No.5 - One Mr. Prakash Naik, an agent of M/s. Oswal Enterprises was
allowed to attend the proceedings by the Hon'ble Arbitral Tribunal despite
strong objection from the petitioner. This again amounts to misconduct by
the Abritral Tribunal.
56 Even assuming Mr. Prakash Naik was an agent of M/s. Oswal
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Enterprises and he attended the hearings, in my view that cannot be
termed misconduct by the Ld. Arbitrator. The petitioner is flinging all
these ridiculous allegations perhaps hoping that atleast one may hit. In my
view, this ground does not fall within the purview of Section 34 of the
Arbitration & Conciliation Act, 1996. Mr. Rao submitted that reference to
Mr. Prakash Naik as an agent of Oswal Enterprises is wholly misconceived.
Mr. Rao explained that Mr. Prakash Naik is a representative of the
respondent and was a personal friend of the husband of respondent and
has since been assisting the respondent and that the allegations against
Mr. Prakash Naik are all false and Mr. Prakash Naik remaining present in
the arbitration proceedings on behalf of the respondent does not amount
to any misconduct.
I accept the explanation given by Mr. Rao and the Ld.
Arbitrator was within his rights to decide who could attend the hearing
and who could not. Court's have no jurisdiction to go into these aspects
under Section 34 of the Act. The Ld. Arbitrator is the best judge of the
situation prevailing before him.
Point No.6 - The Hon'ble Arbitral Tribunal ought to have discontinued the
proceedings in view of the refusal on the part of the petitioner to pay its
charges and expenses by continuing with the proceedings, the Hon'ble
Arbitral Tribunal was again guilty of misconduct.
57 Again this is no ground for setting aside an Award as per the
provisions of Section 34 of the Act. The Act itself anticipates such a
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situation in Section 38 wherein if one of the parties fails to deposit his
share of the deposit, the other party is required to pay that share. Section
38 reads as under :
38. Deposits.--
(1) The arbitral tribunal may fix the amount of the deposit or
supplementary deposit, as the case may be, as an advance for the costs
referred to in sub-section (8) of section 31, which it expects will be
incurred in respect of the claim submitted to it: Provided that where,
apart from the claim, a counter-claim has been submitted to the arbitral
tribunal, it may fix separate amount of deposit for the claim and
counter-claim.
(2) The deposit referred to in sub-section (1) shall be payable in equal
shares by the parties: Provided that where one party fails to pay his
share of the deposit, the other party may pay that share: Provided
further that where the other party also does not pay the aforesaid share
in respect of the claim or the counter-claim, the arbitral tribunal may
suspend or terminate the arbitral proceedings in respect of such claim or
counter-claim, as the case may be.
(3) Upon termination of the arbitral proceedings, the arbitral tribunal
shall render an accounting to the parties of the deposits received and
shall return any unexpended balance to the party or parties, as the case
may be.
Therefore, the respondent paid the share of the petitioner.
Accepting the petitioner's share of fees cannot be misconduct.
58 Section 38(2) of the Arbitration & Conciliation Act and more
particularly the proviso to Section 38(2) enables the Ld. Arbitrator to
make claims for his fees and expenses from the other party if the first
party refuses to make payment of the fees. Section 38 also prescribes
other methods for the arbitrator to discontinue the proceedings if any one
of the parties fails to pay the fees of the tribunal, like, in the case of the
Claimant, the arbitrator could refuse to hear the Claimant's case and vice-
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versa.
Point No.7 - The Hon'ble Arbitral Tribunal wrongly passed an order of costs
of Rs. 25,000/- on the petitioner for allegedly failing to serve a copy of the
arbtiration petition no. 285 of 2006 on the respondent vide its order dated
th
14 July, 2006. This also amounted to misconduct on the part of the Arbitral
Tribunal.
59 This again cannot be a ground for setting aside an Award
under Section 34 of the Act. The contention that the Ld. Arbitrator
imposed cost of Rs.25,000/- upon the petitioner for failure to serve a copy
of the Arbitration Petition No.285 of 2005 is not correct. The petitioner
has not understood the order imposing the cost. The cost of Rs.25,000/-
was imposed upon the petitioner for failure to file statement of claim since
28th March, 2006 despite express directions to file the same. It is evident
from the minutes of the meeting dated 14 th July, 2006, that the Ld.
Arbitrator on considering the fact that the petitioner failed to file
statement of claim despite several opportunities being given passed its
order dismissing the right of the petitioner to prefer any claim before the
arbitral tribunal and accordingly imposed cost of Rs.25,000/-.
Point No.8 - The arbitral proceedings were conducted in a biased manner by
the Hon'ble Arbitral Tribunal.
60 The petitioner has contended that the manner in which the
arbitral proceedings were conducted shows that the Arbitral Tribunal was
biased. This contention of the petitioner also is without any basis.
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61 The petitioner's contention of bias rests on the fact that she
did not contribute towards the fees of the Ld. Arbitrator and because the
Ld. Arbitrator was proceeding with the arbitration without receiving fees
and expenses from the petitioner, there was a needle of suspicion towards
the Ld. Arbitrator. The petitioner, in the Application dated 28 th July, 2006,
for the very first time raised the ground that the petitioner had lost faith
in the Ld. Arbitrator and that the Ld. Arbitrator has lost his impartiality. It
is pertinent to note that in petitioner's various correspondence and
applications prior thereto, the petitioner never raised the allegation of
bias. The petitioner states that it was improper for the tribunal to conduct
arbitration proceedings in view of the fact that the petitioner had refused
to pay the charges of the Arbitrator and the same amounts to bias.
62 With a view to demonstrate how the arbitral proceedings
were conducted the Amicus Curiae tendered a list of dates and events
during the course of the hearing. This list of dates and events have also
been noted earlier and these establish that the Ld. Arbitrator was very
accommodating and showed ample latitude while dealing with the
petitioner and petitioner's letters and applications. The Ld. Arbitrator
repeatedly adjourned the proceedings at the request of the petitioner. The
Ld. Arbitrator gave ample opportunities to the petitioner to secure orders
in petitioner's favour from this Court.
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63 In the circumstances, no case of bias is made out against the
Ld. Arbitrator.
Point No.9 - The original award was never served on the petitioner. A
purported true copy thereof was served by the advocate of respondent on the
th
petitioner's advocate under cover of his letter dated 4 August, 2006.
64 This is one of the grounds which has not been raised in the
petition as stated earlier. This ground is without any merit. This ground
could have been raised by a party when he/she seeks to file a Petition
under Section 34 of the Arbitration & Conciliation Act, 1996 and the same
is held to be time barred. In the present case the petitioner has accepted
the letter of the Advocate for the respondent serving a copy of the Award
on the petitioner and has also filed this petition accordingly.
Point No.10 - The impugned award contains contradictory findings in as
much as on one hand the Hon'ble Arbitral Tribunal allowed a claim for
Rs.62,18,324/- for maintenance of the partnership property whereas on the
other hand the Hon'ble Arbitral Tribual held that the suit property does not
constitute partnership property ;
Point No.11 - While coming to the conclusion that the suit property does not
belong to the partnership firm, the Hon'ble Arbitral Tribual failed to consider
the recitals in the Partnership Deed itself as well as the Development
Agreement dated 20 th
April, 1980 between the Vaity's and the firm
Chitralekha Builders and
Point No.12 - There is no material whatsoever to justify the award of
Rs.62,18,324/- against the petitioner.
65 The petitioner urged that the impugned award is
contradictory, as, on the one hand the arbitral tribunal allowed the claim
of Rs.62,18,324/- for the maintenance of the partnership property
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whereas on the other hand the tribunal has held that the suit property
does not constitute an asset of the partnership firm M/s. Chitralekha
Builders. Mr. Rao submitted that this submission of petitioner is erroneous
as the Tribunal has granted expenses to the extent of Rs.62,18,324/-
which were incurred by the respondent as a partner of M/s. Chitralekha
Builders during the subsistence of the partnership, i.e., from 8 th April,
1989 to 15th July, 2004. Each partner is liable to contribute towards
expenses and accordingly the Tribunal has awarded the said claim by way
of counter claim.
66 The respondent submitted as under :
(a) That the petitioner deliberately did not participate in the
arbitration proceedings despite being given several opportunities to file
statement of claim and participate in the arbitration proceedings. The
respondent filed Counter Claim on 29 th April, 2006. The respondent
further filed witness's Affidavit in lieu of Examination in Chief on the same
day 29th April, 2006. The Ld. Arbitrator in the impugned Award at
paragraph 8 records that the counsel for the respondent has examined his
witness and tendered documents in support of the proof of claim made by
the respondent. The Ld. Arbitrator refers to documents marked as Exhibit
R-16 Collectively which substantiates that the documents were marked
and they have been considered by the Ld. Arbitrator. Further the Ld.
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Arbitrator records at paragraph 9 of the impugned Award that the
Affidavit of Shri. Kumar Sohani the witness of the respondent has already
been filed and that Mr. Anil Shah has declined to cross examine him. The
petitioner was given an opportunity to cross examine the witness of the
respondent but he failed to do so and therefore today ought not to be
heard on the merits of the Counter Claim.
(b) As held in the judgment in the case of Indian Institute of
Technology, Mumbai vs. Creative Construction4 the petitioner cannot be
allowed to raise a point for the first time in the Petition as that would give
no opportunity to the respondent to defend its case.
"7.... It was sought to be raised for the first time before the Learned
Single Judge in the Arbitration Petition. Once it is evident from the
records that the ground on which the Award was sought to be modified
or challenged was not raised before the Arbitrator and that it is related
to the disputed questions of facts or mixed questions of fact and law and
consequently there was no opportunity for the respondents to meet the
ground in that regards before the Learned Arbitrator, before whom the
evidence was required to be produced by the parties in support of their
rival contentions, the Appellants cannot be allowed to raise such point
for the first time in the Arbitration Petition. By allowing the Appellants
to raise such a point for the first time in the petition, it would result in
the respondents being left with no opportunity to defend the case. It is
not the case of the Appellants, that the Appellants were not able to raise
such point before the Arbitrator for any sufficient reason or ground."
(c) As held in the judgment of the Hon'ble Supreme Court in
the case of Associate Builders (Supra) when a Court is applying the
"public policy" test to an Arbitration Award, it does not act as a Court of
Appeal and consequently errors of fact cannot be corrected. A possible
4. 2007 (5) MhL.J. 323
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view by the Arbitrator on facts has necessarily to pass muster as the
Arbitrator is the ultimate master of the quantity and quality of evidence to
be relied upon when he delivers the Arbitral Award. The Court while
considering challenge to the Arbitral Award does not sit in appeal over the
findings and decision of the Arbitrator. The umpire is legitimately entitled
to take the view which he holds to be the correct one after considering the
material before him and after interpreting the provisions of the
Agreement. If he does so, the decision of the umpire has to be accepted as
final and binding. In Associate Builders (Supra) paragraph 22 reads as
under :
"22... As has been held above, the expression "justice" when it comes to
setting aside an award under the public policy ground can only mean
that an award shocks the conscience of the Court. It cannot possibly
include what the Court thinks is unjust on the facts of a case for which it
then seeks to substitute its view for the Arbitrator's view and does what
it considers to be justice. The Division Bench has lost sight of the fact
that it is not a first Appellate Court and cannot interfere with errors of
fact.
(d) The Ld. Arbitrator in paragraph no.12 whilst dealing with
the issue as regards the making up of the Accounts of the firm has
permitted expenses to be shared by the Claimant/petitioner and the
respondent to the extent of Rs.62,18,324/- (Rupees Sixty Two Lakhs
Eighteen Thousand Three Hundred and Twenty Four Only). The Arbitrator
having held that the firm stood dissolved by the petitioner on 15 th July,
2004 held that the accounts ought to have been accounted in respect of
the expenses that the firm M/s. Chitralekha Builders incurred until
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15th July, 2004. In all 16 heads of expenses were urged for consideration
of the Ld. Arbitrator. The respondent put forth the evidence of her son and
constituted attorney alongwith evidence to prove the said expenses.
(e) It was submitted by Mr. Rao that since the expenses were
incurred over a long period of time only a few documents were available
to substantiate the case of the respondent and all of them have been
produced. The respondent submitted that towards her claim for
Miscellaneous expenses she had produced numerous vouchers for over a
period of time which have all been placed on the record of the Ld.
Arbitrator and which was not challenged by the petitioner despite having
been given an opportunity to do so. In case of other expenses such as
Survey charges, compound wall, site office, professional charges, zone
change charges, right of way, Architect/consultant fees, Municipal
Corporation Expenses, Plinth Supplier/Construction Work, Repairs of
boundary wall, security charges as per the demand of the Court Receiver,
the respondent submitted the respondent had produced the necessary
evidence and proved respondent's case and the petitioner did not
challenge the amounts despite being aware of the claim and in the light of
the documents produced by the respondent, respondent is entitled to
cause the petitioner to share the expenses.
(f) Ground 11 has not been raised in the petition and
therefore ought not to entertained. Mr. Rao relied upon Indian Institute of
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Technology, Mumbai vs. Creative Construction (Supra) wherein it was
held that the petitioner cannot be allowed to raise a point for the first time
in the Petition as that would give no opportunity to the respondent to
defend its case.
67 In respect of the heads of expenses, i.e., legal expenses,
scrutiny and Registration charges for the Power of Attorney, Advocate's
fees and interest on loan taken by the firm M/s. Chitralekha Builders until
15th July, 2004 it has been urged by the Amicus Curiae that there did not
exist sufficient evidence to substantiate the case of the respondent.
68 The petitioner also submitted that the Arbitral Tribunal
wrongly concluded that the suit property was not an asset of the firm
Chitralekha Builders. According to the petitioner, the Arbitral Tribunal
failed to consider relevant material like the Partnership Deed and the
Development Agreement dated 20th April 1980 while deciding this issue.
69 The Amicus Curiae submitted that :
(a) there was substance in the contention of the petitioner.
(b) it is the undisputed position that there was a Development
Agreement dated 28th April, 1980 between the owners of the suit
property and the respondent in respect of the suit property. It is
also the undisputed position that when the Partnership Deed
dated 8th April, 1989 was entered into, inter alia, between the
petitioner and the respondent, the respondent brought her rights
in respect of the suit property into the firm. In fact the
Partnership Deed itself recites this fact. The Partnership Deed
further provides that the place of business of the firm shall be on
the suit property. Under the Deed the petitioner was required to
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infuse capital to develop the suit property. Hence there is no
doubt at all that the partnership firm Chitralekha Builders
acquired rights in respect of the suit property.
(c) From the impugned Award it is clear that the Arbitral
Tribunal did not consider this aspect at all and completely
ignored the recitals and admissions contained in the Partnership
Deed. In para 11(ix) of the impugned Award, the Arbitral
Tribunal, inter alia, came to the conclusion that Chitralekha
Builders never became the owner of the suit property because
there was no conveyance or any right or title in favour of
Chitralekha Builders in the suit property. This finding is totally
contrary to the admitted facts referred to above including the
recitals in the Partnership Deed.
(d) No doubt that the firm was never the owner of the suit
property. However, it cannot be said that the firm had no right
or interest or title in respect of the suit property. Accordingly if
the declaration made by the Arbitral Tribunal in para 14(b) of
the Award is taken to mean that the firm Chitralekha Builders
had no right, title or interest in the suit property, the same is
clearly and ex facie erroneous and contrary to the admitted facts
and terms of the Partnership Deed itself.
(d)
(e) It is well settled that the Wednesbury Test is applicable to
Arbitral Awards. This test, inter alia, requires that all relevant
material is required to be considered by the Arbitral Tribunal
while making its Award. In the instant case the Arbitral Tribunal
totally ignored the Development Agreement dated 28 th April,
1980 as well as the terms of the Partnership Deed while coming
to the conclusion that the firm did not have any right or title in
the suit property and that the same was not an asset of the firm.
(f) In the circumstances this part of the Award of the Arbitral
Tribunal is ex facie illegal and contrary to law.
70 I must note with appreciation that the assistance of the
Amicus Curiae has been immense. Mr. Mehta did a very commendable job.
I would, however, not agree with the submissions of the
Amicus Curiae that this part of the award is bad because the Arbitral
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Tribunal failed to consider the relevant material, to wit, the Partnership
Deed and the Development Agreement, etc., while deciding the issue.
71 The prayer in the counter claim was to declare that the suit
property does not constitute an asset of the firm Chitralekha Builders and
the Ld. Arbitrator has only confirmed that. Infact it is also stand of the
petitioner that the property never belonged to the firm. If the petitioner
had any objection, petitioner should have appeared before the Ld.
Arbitrator, filed statement of defence to the Counter Claim and contested
the matter. Instead of contesting the matter, petitioner chose not to appear
or file any reply to the counter claim. How much can the Arbitral Tribunal
do? The petitioner never appeared and pointed out the various clauses of
the Partnership Deed and the Development Agreement and make
submissions. It is too much of a burden on the Arbitral Tribunal to go
through the entire records and argue the matter on behalf of the
petitioner, who never appeared or filed reply to Counter Claim. To expect
the Arbitral Tribunal to have considered all these agreements on its own
and then decide the matter in favour of the petitioner is not correct.
Moreover, if the petitioner has not raised any of those points before the
Ld. Arbitrator, the petitioner cannot, for the first time, raise those points in
its petition filed under Section 34 of the Act. This court under Section 34
is not sitting as a court of appeal. It is settled law that courts would
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interfere only when findings of the Arbitrator are arbitrary, capricious and
perverse. What has not been raised before the Ld. Arbitrator cannot be
permitted to be raised for the first time in Section 34 application.
The decision could be stated suffered from perversity,
following a patent error on a fundamental principle of law or disregard to
relevant materials or cognizance of irrelevant or non-germane
determinants. A decision, however, on the issues raised, is a sine qua non
for a question of law or ground of challenge under Section 34 to exist. If
the petitioner has not even filed a defence or written statement to the
counter claim, the question of raising that issue also did not arise.
Moreover, the prayer sought in the counter claim was that it
be declared by the Hon'ble Tribunal that the suit property does not
constitute the asset of the firm - M/s. Chitralekha Builders. Even if one
considers the Partnership Deed or Development Agreement, they do not
mention anywhere that the suit property was an asset of the firm. Infact
this is also confirmed by the fact that the respondent had filed suit
no.1335 of 1988 for specific performance against Vaity family, in which
the petitioner was joined on petitioner's application as defendant. The suit
no.3162 of 2005 filed by the petitioner itself is on the basis that the suit
property has been sold to M/s. Oswal Enterprises by the Vaity brothers and
for cancellation of the sale and conveyance. The suit property was never
an asset of the firm or owned by the firm and this was the correct position
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as neither side was disputing this fact.
72 Therefore, the Ld. Arbitrator was not in error in his
conclusion that the said property did not constitute an asset of the firm
Chitralekha Builders. So far as the amount of Rs.62,18,324/- against the
petitioner is concerned, in my view, the award is severable.
73 According to the petitioner and Amicus Curiae there is no
material whatsoever to justify the Award of Rs.62,18,324/- against the
petitioner. Further while making this Award the Arbitral Tribunal has not
given any reasons. Hence the Award is illegal and liable to be set aside.
74 In my view, there is substance in the contentions of the
petitioner and Amicus Curiae. It is well settled that an Award of the
Arbitral Tribunal must be based on evidence. Further an Award must be
reasoned, unless parties agree to the contrary. In the present case, as
stated below, neither is the Award of Rs.62,18,324/- based on any
evidence nor has the Arbitral Tribunal given any reasons in support
thereof. The impugned Award to this extent deserves to be set aside. These
aspects are elaborated below.
75 The Arbitral Tribunal has dealt with the issue of expenses in
para 12 of the impugned Award. A perusal of para 12 shows that while
holding that the expenses have been proved by M/s. Chitralekha Builders,
the Arbitral Tribunal has not provided any reason in support thereof. The
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Arbitral Tribunal has not considered whether there was sufficient material
or evidence on record to prove the expenses. There are no reasons
whatsoever in support of the finding that the expenses have been proved.
To this extent the impugned Award is clearly without reasons and
therefore contrary to law.
76 As a matter of fact also there is no material or evidence on
record to prove the expenses. To prove her claim the respondent led the
evidence of her son vide an Affidavit in Evidence dated 29 th April, 2006. In
support of claim for expenses, no material was produced by respondent
along with this Affidavit. However, further Examination-in-Chief was
conducted of the witness by the respondent's Advocate before the Arbitral
Tribunal whereby evidence was sought to be given in support of the claim
for expenses. However, as stated above, the said evidence does not prove
the expenses.
77 Before we proceed further, we must keep in mind, the firm
Chitralekha Builders came into existence by a Partnership Deed dated
8th April, 1989 between petitioner, respondent, one Pakhare and Gadekar.
Pakhare and Gadekar resigned in 1996. Prior to 8 th April, 1989, after
Thukaram Nalawade retired on 16 th April, 1980, Chitralekha Builders was
a sole Proprietor concern of respondent. Therefore, when we state below
"it was before the petitioner joined as a partner" it means the firm itself
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was not in existence.
(i) Rs.3,03,000/- was claimed towards legal expenses. From
para 1 of the further Examination-in-Chief it is clear that these alleged
expenses relate to the period prior to 1989, i.e., when the petitioner
became a partner in the firm. Secondly there is receipt for only Rs.3000/-
issued by Advocates Thakurdas & Madgaonkar and there is no receipt to
prove the payment of the balance Rs.3,00,000/-.
(ii) Rs.5000/- claimed towards purported survey charges. In
para 2 of the further Examination-in-Chief a receipt issued by G.N. Sohani
is relied upon. Once again this pertains to a period before the petitioner
became a partner of the firm. Moreover, it is a receipt issued by the
respondent's husband which raises doubts about its authenticity.
(iii) An amount of Rs.1,29,275/- is claimed as expenses
towards construction of a compound wall. Once again, from para 3 of the
further Examination-in-Chief, it is seen that the wall was purportedly
constructed in the year 1980 which was before the petitioner became a
partner of the firm. Moreover there is no proof of payment of this bill or
of the construction of the wall.
(iv) Rs.40,500/- is claimed towards construction of a site
office. To justify this claim in para 4 of the further Examination-in-Chief a
bill dated 18th September, 1980 is relied upon. Once again the alleged
expenses towards the construction of the site office relate to the period
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prior to the petitioner becoming a partner of the firm. Further, no receipt
is produced showing that this amount is actually paid.
(v) The next claim is for the alleged professional charges of
Rs.1,00,000/-. From para 5 of the further Examination-in-Chief, it is again
seen that this alleged payment pertains to bills dated 19 th July, 1986 and
15th February, 1987 which are prior to the petitioner becoming a partner of
the firm. Moreover there are no receipts acknowledging payment of these
amounts.
(vi) An amount of Rs.9000/- is claimed towards zone change
fees. In para 6 of the further Examination-in-Chief the witness has relied
upon a bill dated 25th June, 1983 raised by M/s. G.N. Sohani Associates.
Once again this expense pertains to the period prior to the petitioner
becoming a partner in the firm. Moreover, the bill is raised by the
respondent's husband which again raises a doubt about its genuineness.
There is also no proof of payment of this amount.
(vii) A sum of Rs.40,000/- is claimed towards a right of way.
From para 7 of the further Examination-in-Chief it appears that this
alleged payment was made under an Agreement dated 24 th October, 1983,
which was before the petitioner became a partner in the firm. Further the
Agreement produced is not the original and not even a photocopy of the
original. It appears to be a typed copy. The respondent is not a party to
this Agreement. The Agreement has not even been proved as required by
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law.
(viii) An amount of Rs.19000/- is claimed towards
Architect's/Consultant's fees. From para 8 of the further Examination-in-
Chief it is evident that even this purported expense pertained to the period
prior to the petitioner becoming a partner of the firm. Further there is no
proof of payment of these bills by the firm.
(ix) A sum of Rs.1,82,580/- is claimed towards Municipal
Corporation expenses. From para 9 of the further Examination-in-Chief it
is clear that these bills pertain to the period from 1984 to 1988, before the
petitioner became a partner. A perusal of the bills show that they are all in
the name of G.H. Vaity. There is no proof of these bills having been paid by
the firm.
(x) An amount of Rs.2,50,524/- is claimed towards Plinth
Supplier and Construction Work. Again from para 10 of the further
Examination-in-Chief it is apparent that these alleged expenses pertain to
the period prior to the petitioner becoming a partner in the firm. Further
there is no proof of payment of these amounts.
(xi) Rs.1,25,000/- is claimed towards repairs to the boundary
wall. In para 11 of the further Examination-in-Chief the witness has
produced a bill dated 13 th March, 2004. There is no proof of payment of
this bill by the firm.
(xii) An amount of Rs.7,28,000/- is claimed towards scrutiny
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and registration for Power of Attorney. Although in para 13 of the further
Examination-in-Chief there is a reference to a purported receipt issued by
the Sub Registrar of Assurances dated 2 nd June, 2005, admittedly no such
receipt was tendered nor is any such receipt available on record.
Moreover this appears to be an expense pertaining to the period after the
dissolution of the firm on 15 th July, 2004. In para 12 of the impugned
Award the Arbitral Tribunal has observed that expenses for the period post
15th July, 2004 have been disallowed. By awarding this claim the Arbitral
Tribunal has contradicted itself.
(xiii) A sum of Rs.11,45,000/- is claimed towards security
charges paid as per the Court Receiver. Para 12 of the further
Examination-in-Chief pertains to this claim. An examination of the
receipts, inter alia, show that, except for the first receipt, they do not
mention the period to which they relate. Further, the amounts in the
receipts also vary drastically. There is no evidence as to what was the
amount payable per month for the security service. No letter from the
Court Receiver has been produced directing payment of any amounts for
the security service.
(xiv) An amount of Rs.2,00,000/- is claimed towards
Advocate's fees. There is no evidence in respect of this alleged expense
either in the Affidavit of Evidence or in the further Examination-in-Chief.
(xv) An amount of Rs.8,41,145/- is claimed towards
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miscellaneous expenses. In para 14 of the further Examination-in-Chief the
witness has referred to alleged vouchers in support of this claim. The
witness has not deposed that he is familiar with the signatures on the
vouchers or that he prepared the vouchers. The vouchers have therefore
not been proved as required by law. The witness also does not say that the
amounts mentioned therein were paid. Further, all the vouchers appear to
have been signed by just 2 or 3 persons although they are issued in
different names. The handwriting on the vouchers also appears to be of
only 2 or 3 persons. The vouchers are clearly of doubtful veracity.
(xvi) An amount of Rs.21,00,000/- is claimed as interest on
loans. This claim is sought to be proved by the deposition in para 15 of the
further Examination-in-Chief. Although the witness has deposed that he is
producing vouchers proving payment of interest, what is actually
produced is just typed statement purporting to show payment of interest.
No details have been provided. No proof of payment is produced.
78 The above facts and analysis of the material produced by the
respondent to prove her claim for expenses establish beyond doubt that
there is no material or evidence at all to prove the expenses. The material
produced does not constitute evidence. This is therefore not a case of
erroneous appreciation of evidence but a case where there is no evidence
to support the claims. The Arbitral Tribunal totally overlooked this aspect
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and, in fact, did not even consider the same.
CONCLUSIONS :
79 The judicial discretion vested in the Court in terms of the
provisions of Section 34 of the Act takes within its ambit power to set
aside an Award partly. A Full bench of this Court in the case of R.S.
Jiwani vs. Ircon International Ltd.5 answered two question that were put
up for its consideration (i) Whether doctrine of severability can be applied
to an Award while dealing with a Petition under Section 34 of the Act?
and (2) What is the scope of the proviso to Section 34 (2)(iv) and whether
its application is restricted to clause (iv) alone or it applies to the whole of
Section 34 (2) of the Act? The Full bench answered the reference as
follows.
"38.Thus we proceed to record our answers to the question framed as
follows: 1. The judicial discretion vested in the Court in terms of the
provisions of Section 34 of the Arbitration & Conciliation Act, 1996 takes
within its ambit power to set aside an Award partly or wholly depending
on the facts and circumstances of the given case. In our view, the
provisions of Section 34 read as a whole and in particular Section 34(2)
do not admit of interpretation which will divest the Court of competent
jurisdiction to apply the principle of severability to the award of the
Arbitral Tribunal, legality of which is questioned before the Court. The
Legislature has vested wide discretion in the Court to set aside an Award
wholly or partly, of course within the strict limitations stated in the said
provisions. The scheme of the Act, the language of the provision and the
legislative intent does not support the view that judicial discretion of the
Court is intended to be whittled down by these provisions. 2. The proviso
to Section 34 (2)(a)(iv) has to be read ejusdem generis to the main
section, as in cases falling in that category, there would be an absolute
duty on the Court to invoke the principle of severability where the matter
submitted to arbitration can clearly be separated from the matters not
referred to arbitration and decision thereupon by the Arbitral Tribunal.
5. 2010(1) Mh.L.J. 547
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80 Accordingly the Award of 50% of the claim for Rs.62,18,324/-
by the Arbitral Tribunal in favour of the respondent against the petitioner
is legally perverse and is hereby set aside.
81 Therefore, the petition is partly allowed, i.e., prayer
clause - (c) of the Award ordering/directing the petitioner to pay 50% of
the sum of Rs.62,18,324/- is set aside.
82 In the facts and circumstances of the case, no order as to
costs. The court must, once again note the immense help received from
the Amicus Curiae Mr. Mehta whose efforts made the task easy.
83 In view of the above, all interim applications in the arbitration
petition stand disposed.
84 The suit and all interim applications in the suit be listed for
directions on 23rd June, 2017.
(K.R. SHRIRAM, J.)
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