Bombay High Court
Zulfikar Mohammedhusain ... vs Shabbirbhai Abdullabhai And Ors on 13 October, 2017
Bench: A.S. Oka
SKN 1/30 769.04-app--
IN THE HIGH COURT OF JUDICATURE AT BOMBAY
ORDINARY ORIGINAL CIVIL JURISDICTION
APPEAL NO. 727 OF 2004
IN
ARBITRATION PETITION NO. 333 OF 2002
Mohammedhussain Abdullabhai (since deceased
through his heirs and legal representatives)
Zulfikar Mohammedhusain Kagalwala and others. ... Appellants.
V/s.
Shabbirbhai Abdullabhai (since deceased)
Mrs.Raziabai Wd/o Shabbirbhai Abdulllabhai
and others. ... Respondents.
WITH
APPEAL NO. 728 OF 2004
IN
ARBITRATION PETITION 354 OF 2002
Mohammedhussain Abdullabhai (since deceased
through his heirs and legal representatives)
Zulfikar Mohammedhusain Kagalwala and others. ... Appellants.
V/s.
Taherbhai Abdullabhai and others. ... Respondents.
WITH
APPEAL NO. 729 OF 2004
IN
ARBITRATION PETITION 332 OF 2002
Mohammedhussain Abdullabhai (since deceased
through his heirs and legal representatives)
Zulfikar Mohammedhusain Kagalwala and others. ... Appellants.
V/s.
Shabbirbhai Abdullabhai (since deceased
through his heirs and legal representatives)
Mrs.Raziabai Wd/o Shabbirbhai Abdulllabhai
and others. ... Respondents.
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WITH
APPEAL NO. 730 OF 2004
IN
ARBITRATION PETITION 353 OF 2002
Mohammedhussain Abdullabhai (since deceased
through his heirs and legal representatives)
Zulfikar Mohammedhusain Kagalwala and others. ... Appellants.
V/s.
Taherbhai Abdullabhai and others. ... Respondents.
WITH
APPEAL NO. 769 OF 2004
IN
ARBITRATION PETITION 332 OF 2002
Memuna Akhtarhussain Abdullabhai and others. ... Appellant.
V/s.
Shabbirbhai Abdullabhai (since deceased
through his heirs and legal representatives)
Mrs.Raziabai Wd/o Shabbirbhai Abdulllabhai
and others. ... Respondents.
WITH
APPEAL NO. 788 OF 2004
IN
ARBITRATION PETITION 333 OF 2002
Memuna Akhtarhussain Abdullabhai and others. ... Appellants.
V/s.
Shabbirbhai Abdullabhai (since deceased
through his heirs and legal representatives)
Mrs.Raziabai Wd/o Shabbirbhai Abdulllabhai
and others. ... Respondents.
WITH
APPEAL NO. 789 OF 2004
IN
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ARBITRATION PETITION 353 OF 2002
Memuna Akhtarhussain Abdullabhai and others. ... Appellants.
V/s.
Taherbhai Abdullabhai and others. ... Respondents.
WITH
APPEAL NO. 790 OF 2004
IN
ARBITRATION PETITION 354 OF 2002
Memuna Akhtarhussain Abdullabhai and others. ... Appellants.
V/s.
Taherbhai Abdullabhai and others. ... Respondents.
WITH
APPEAL NO. 492 OF 2015
IN
ARBITRATION PETITION 333 OF 2002
Zulkarnain Mohammedhusain Kagalwala. ... Appellant.
V/s.
Shabbirbhai Abdullabhai (since deceased
through his heirs and legal representatives)
Mrs.Raziabai Wd/o Shabbirbhai Abdulllabhai
and others. ... Respondents.
WITH
APPEAL NO. 493 OF 2015
IN
ARBITRATION PETITION 332 OF 2002
Zulkarnain Mohammedhusain Kagalwala. ... Appellant.
V/s.
Shabbirbhai Abdullabhai (since deceased
through his heirs and legal representatives)
Mrs.Raziabai Wd/o Shabbirbhai Abdulllabhai
and others. ... Respondents.
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WITH
APPEAL NO. 494 OF 2015
IN
ARBITRATION PETITION 353 OF 2002
Zulkarnain Mohammedhusain Kagalwala. ... Appellant.
V/s.
Taherbhai Abdullabhai and others. ... Respondents.
WITH
APPEAL NO. 495 OF 2015
IN
ARBITRATION PETITION 354 OF 2002
Zulkarnain Mohammedhusain Kagalwala. ... Appellant.
V/s.
Taherbhai Abdullabhai and others. ... Respondents.
Mr.Aditya Thakkar, Mr.Mubashir Syer & Mr.Murtaza Federal i/b.
M/s.Federal & Rashmikant for the appellants in APP/727/04,
APP/728/04, APP/729/04, APP/730/04, APP/492/15,
APP/493/15, APP/493/15, APP/494/15 and APP/495/15 and
for respondent No.2(d) in APP/769/04, APP/788/04,
APP/789/04 APP/790/04.
Mr.Sean Wasoodew a/w Mr.Rupesh Mandhare i/b M.M.Vashi for
appellant in APP/769/04, APP/788/04, APP/789/04 and
APP/790/04.
Mr.Sarosh Bharucha with Mrs.Vijayalaxmi Kulkarni and Ms.Hilla
Boatwalla i/b M/s.Nanu Hormasjee & Co. for respondent No.2
in APP/493/15, APP/492/15, APP/729/04; for respondent No.1
in APP/495/15, APP/494/15, APP/730/04, APP/727/04,
APP/728/04, APP/789/04. APP/790/04, APP/730/04; and for
respondent No. 3 in APP/769/04, APP/788/04.
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CORAM : A.S. OKA AND A. K. MENON, JJ.
RESERVED ON : 20th April 2017.
PRONOUNCED ON: 13th October 2017.
JUDGMENT : (Per A.S.Oka, J.)
1. These appeals can be conveniently disposed of by a common
judgment and order. With a view to appreciate the submissions made
across the bar, it will be necessary to make a brief reference to the facts of
each case.
2. Appeal No.769/2004 takes an exception to the judgment and
order dated 1st September 2004 passed by the learned single Judge in
Arbitration Petition No.332/2002. By the said judgment and order dated
1st September 2004, the learned single Judge decided four Arbitration
Petitions (Arbitration Petition Nos.353/2002; 332/2002; 354/2002; and
333/2002). The said Arbitration Petitions under Section 34 of the
Arbitration and Conciliation Act,1996(for short "the Arbitration Act") were
filed for challenging the consent awards made by the learned Arbitrator.
3. In Appeal No.769/2004, the appellants are the legal
representatives of late Akhtarbhai Abdullabhai. The said Akhtarbhai, the
original the first, second and fifth respondents (Shabbirbhai,Mohammed
Hussain and Ashfaqbhai), the third respondent (Taherbhai) the fourth
SKN 6/30 769.04-app--
respondent(Moizbhai) and eighth and ninth respondents are brothers and
sisters respectively. Their father was Abdullabhai. It appears that the
dispute in respect of rights of the properties of deceased Abdullabhai were
referred to the Sole Arbitrator. In the arbitration proceeding, the parties
filed consent terms in respect of the reference relating to the properties of
a firm M/s Abdullabhai Fiddali and Company. A consent award was
made accordingly on 26th April 2001. The parties also arrived at a
settlement of the two references relating to a firm Abdullabhai Fiddali and
Sons on 5th April 2002. Consent awards were made and after filing of the
consent terms and consent awards as aforesaid, two references in relation
to the joint family properties and five rooms in Fiddali Building remained.
There were negotiations between the parties as regards these disputes. It
appears that the consent terms were drafted but some of the parties were
not agreeable to sign the consent terms. Thereafter, the Arbitrator
proceeded to decide the question whether there was a settlement reached
between the parties and recorded a finding that in fact, there was a
settlement between the parties and proceeded to pass an award in terms
of settlement in respect of all remaining properties except five properties
in respect which he passed a separate award on merits. The Award was
made on 13th June 2017. We may also note here that an application was
made by one of the parties (Akhtarbhai) for correcting the award in
accordance with section 33 of the Arbitration Act and, accordingly,
corrections were carried out. Appeal No.769/2004 arises out of
Arbitration Petition No.332/2002 filed by Shabbirbhai wherein challenge
was to the award dated 13th June 2002. By the impugned order dated 1st
September 2004, the learned single Judge decided the said Arbitration
SKN 7/30 769.04-app--
Petition No.332/2002 along with Arbitration Petition Nos.353/2002;
354/2002; and 333/2002. By the impugned judgment and order, the
learned single Judge proceeded to set aside the consent awards. However,
the awards made on merits were not disturbed.
4. Appeal No.769/2004 has been preferred by respondent
Nos.5a to 5d in Arbitration Petition No.332/2002.
Appeal No.492/2015 is again directed against the same order
of the learned single Judge dated 1 st September 2004 in Arbitration
Petition No.333/2002. The appellant in this appeal is not the party to the
Arbitration Petition No.333/2002.
Appeal No.493/2005 is directed against the same order in
Arbitration Petition No.332/2002. The appellant is not a party to the said
arbitration petition.
Appeal No.494/2015 is preferred for challenging the same
judgment and order dated 1st September 2004 in Arbitration Petition
No.353/2002. Appeal No.495/2015 is preferred against the same order
in Arbitration Petition No.332/2002. Appeal No.496/2015 is preferred by
one Zulkarnain Kagalwala being aggrieved by the same judgment and
order in so far as it relates to Arbitration Petition No.354/2002. Though
this appellant is not a party to the Arbitration Petition, a Division Bench of
this Court by order dated 6th August 2016 granted leave to him to prefer
appeal. Appeal No.797/2004 has been preferred by the original first
respondent in Arbitration Petition No.333/2002 for challenging the same
judgment and order. Appeal No.727/2004 is preferred for challenging
the order in Arbitration Petition No.333/2002. Appeal No.728/2004
SKN 8/30 769.04-app--
challenges the order in Arbitration Petition No.354/2002. Appeal
No.788/2004 has been preferred by the respondent Nos.5a to 5d in
Arbitration Petition No.333/2002 against the same judgment and order
passed. Appeal No.790/2004 has been preferred by the respondent
Nos.5a to 5d in Arbitration Petition No.354/2002. Appeal No.729/2004
has been preferred by the first respondent in Arbitration Petition
No.332/2002 for challenging the same order. Appeal No.730/2004 has
been preferred by the first respondent in Arbitration Petition No.353/2002
for challenging the same judgment and order. Appeal No.789/2004 has
been preferred by the respondent Nos.5a to 5d in Arbitration Petition
No.353/2002.
5. Before we advert to the submissions made by the parties, we
may refer to the findings recoded by the learned single Judge. The
submission made before the learned single Judge by the petitioners in
Arbitration Petition was that the learned Arbitrator has no jurisdiction to
decide an issue whether a settlement is arrived between the parties or
not. A submission was made that unless all the parties request the
learned Arbitrator to make a consent award, he has no jurisdiction to
make a consent award. The learned single Judge held that on conjoint
reading of sections 30 and 32 of the Arbitration and Conciliation Act,
1996 (for short "Arbitration Act"), if the parties to the arbitration state
before the Arbitrator that they have settled the dispute, the Arbitrator has
no option but to terminate the proceeding unless a request is made by the
parties for making an award in terms of the agreed settlement. The
learned single Judge held that unless such request is made by all the
SKN 9/30 769.04-app--
parties to pass a consent award in terms of the settlement, the Arbitrator is
powerless to pass a consent award. The learned single Judge held that
admittedly such a request was not made by all the parties to the awards
and, therefore, the consent awards made by the Arbitrator were liable to
be set aside. The learned single Judge held that the Arbitrator had no
jurisdiction to decide whether the parties have arrived at settlement.
6. Detailed submissions have been made by the learned counsel
appearing for the parties. Written submissions have been filed by the
appellants in some of the appeals. It will be necessary to mention in brief
the rival submissions made across the bar.
7. The learned counsel appearing for the appellants in Appeal
Nos.769/2004 and 789/2004 pointed out that two separate awards were
made by the learned Arbitrator on the basis of the settlement. Those two
separate awards are in respect of (a) joint family properties and (b) five
rooms in Fiddali Building. He pointed out that in the meeting held on
7th September 2001, all the parties through their learned counsel had
agreed that the consent terms would be drawn in terms of the settlement
in respect joint family properties which was initially in the form of a
chart. He pointed out that the consent terms were initially drawn up by
the advocate of Taherbhai group and circulated to all other advocates and
to the learned Arbitrator on 9 th January 2002. It is pointed out that the
Arbitrator proceeded to pass an award in terms of the consent terms. He
made a distinction between the provisions of Rule 3 of Order XXIII of the
Code of Civil Procedure, 1908 (for short "the said Code") and section 30
SKN 10/30 769.04-app--
of the Arbitration Act. The submission is that Rule 3 of Order XXIII of
the said Code specifically requires that the lawful agreement or
compromise must be in writing and signed by the parties. But, section 30
of the Arbitration Act talks only about the settlement of disputes. It was
submitted that though the ground that the settlement is not signed by all
the parties is raised in the petitions, this ground is advisedly given up by
the petitioners in Arbitration Petition Nos.332/2002 and 353/2002. His
submission is that the statement of all the parties through their learned
counsel in the meeting dated 7th September 2001 is that the consent terms
would be drawn and filed is an implied request to record the settlement
made by all the parties. The observation in the Judgment that
"admittedly" all the parties did not request that a settlement should be
recorded must be construed to mean that there was no explicit request in
writing by all the parties to pass an award in terms of the settlement. In
the alternative, it was submitted that the appellants be permitted to resile
from the said concession recorded in the fifth line of page 286 of Appeal
No.769/2004. Assuming that it is a concession by the advocate for the
appellants, it was made on a wrong appreciation of law and has led to
gross injustice. It is urged that in view of express language of section 30
of the Arbitration Act, the express consent of all the parties is not
necessary for passing a consent award.
8. The learned counsel appearing for the appellants submitted
that the record of the case before the learned Arbitrator would show that
the parties filed pleadings on the question whether settlement was arrived
or not and the question was determined by the learned Arbitrator without
SKN 11/30 769.04-app--
any demur by any party. In any event, after participating in the
proceedings, the parties shall be deemed to have waived their right to
object to the act of the learned Arbitrator of going into the question
whether there was any settlement. He submitted that after participating
in the decision making process on the said issue, now it is not open for the
concerned respondents to raise the issue by filing Arbitration Petitions
under section 34 of the said Act. He submitted that the contention that
there must be agreed terms and even though there are agreed terms, the
learned Arbitrator can make a consent award provided there is a request
by all the parties to record the settlement, is not raised in the petition
filed under section 34 of the said Act. There is a vague contention that
the award is not in terms of section 30 of the Arbitration Act. He
submitted that the view taken by the learned single Judge that upon
settlement between the parties, the arbitral proceedings are mandatorily
terminated is not correct. Our attention is invited to clauses (a) and (b)
of sub-section (2) of section 32 of the said Act. He submitted that the
ground that the learned Arbitrator had no jurisdiction to decide the
question whether there was a settlement arrived at was not at all raised.
He urged that merely because rule 3 of the order XXIII of the said Code is
not incorporated in the said Act, it cannot be said that the Arbitrator does
not possess the said power. Reliance is placed by the learned counsel
appearing for the appellants on the decisions of the Apex Court in the
cases of Narayan Prasad Lohia v. Nikunj Kumar Lohia and others 1;
Hari Shankar Singhania v. Gaur Hari Singhania and others 2.
Reliance is placed on the decisions of this Court in the cases of Union of
1 2002 (3) SCC 572
2 2006 (4) SCC 658
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India v. Maa Agency and another 3; O.N.G.C. v. Comex Services SA 4;
Union of India v. Ghanekar Builders & Chemicals Pvt.Ltd. 5; and
Pushpa P. Mulchandani v. Admiral R. Tahilani (Retd.) and others6.
9. In support of Appeal No.494/2004, the learned counsel
appearing for the appellants submitted that power under section 30 of the
Arbitration Act would include the power to enquire whether the
settlement has been concluded or not. Another submission was that
consent to arbitrate would include consent to record settlement and for
recording compromise, a separate consent was not required. He urged
that word "all" is not at all found in section 30 and the same has been
erroneously read into section 30 by the learned single Judge. The learned
counsel appearing for the appellants in Appeal No.494/2004 relied upon
the following decisions:
Ramjas Marwari and others v. Baruni Mahton and others 7; Sukhdeo
Missir and others v. Kamleshwari Prasad Singh 8; Mst.Kalpa v. Sita
Ram and another9; Misrilal Jalamchand and another v. Sobhachand
Jalamchand and others10; K.Chandrahasa Shetty v. Jayaram
Sasani11; Shobha Ram v. Inamul Haq.12; Bhaja Govinda Maikap and
another v. Janaki Dei and others13; Bharat Alluminium Company v.
3 2003 (2) Mh.L.J. 643
4 2003 (5) Bom.C.R. 146
5 2007 (2) Bom.C.R. 30
6 2001 (1) Bom.C.R. 592
7 AIR 1929 Patna 102
8 AIR 1937 Patna 39
9 AIR 1955 All 187
10 AIR 1956 Bom 569
11 AIR 1970 Mysore 209
12 AIR 1974 All 253
13 AIR 1980 Orissa 108
SKN 13/30 769.04-app--
Kaiser Aluminium Technical Services Inc. 14; Doshion Ltd. v.
Sembawang Engineers and Constructors Pvt.Ltd.15
10. The learned counsel appearing for the appellants in Appeal
Nos.788/2004 and 790/2004 pointed out that the settlement in respect of
Fiddali Building is signed by seven out of eight parties. He pointed out
that though the respondent Nos.6 and 7 in Arbitration Petition
No.333/2002 may not have signed separately, the second respondent
thereto has signed the same who has been consistently signing on their
behalf as their constituted attorney. The learned counsel appearing for
the appellants also raised a contention that the learned single Judge has
gone into the contentions which were not at all raised specifically in the
memorandum of petitions filed under section 34 of the Arbitration Act.
11. The learned counsel appearing for the respondents supported
the impugned judgment and order. The learned counsel appearing for
some of the respondents relied upon the relevant portion of the Report on
the United Nations Commission on International Trade Law on the work of
its eighteenth session and in particular article 30 thereof. The learned
counsel appearing for the respondents relied upon certain passages in the
commentaries on the Arbitration Act by Dr.P.C.Markanda as well as by
Justice Saraf and Justice Jhunjhunwalla. Their contention is that sub-
section (2) of section 30 of the Arbitration Act refers to settlement by the
parties and a request made by the parties to record settlement in the form
of an arbitral award on agreed terms. It was pointed out that before the
14 (2012) 9 SCC 552
15 (2011) 3 Singapore Law Reports 118
SKN 14/30 769.04-app--
United Nations Commission on International Law, a proposal was
submitted that a request to record settlement as an award needed to be
made only by one of the parties. The Commission, after deliberation,
agreed that that there must be the dual will of the two parties that the
settlement may be recorded as an award. Their submission is that as a
rule, settlement of the disputes in arbitral reference results into
termination of the proceedings and only an exception to the said rule is
that the settlement in the form of an award on agreed terms can be made
in accordance with section 31 of the Arbitration Act. Therefore, the
contention of the contesting respondents is that no interference is
warranted with the impugned Judgment and order.
12. We have considered the submissions. We have carefully
perused the decisions and other material relied upon by the parties. The
relevant provisions for our consideration are sections 30, 31 and 32 of the
Arbitration Act. Before we analyze the sections, it will be necessary to
sum up the findings recorded by the learned single Judge. He has held as
under:-
(i) If the parties settle the dispute before the Arbitrator, he has to
terminate the proceedings;
(ii) In such a case, if a request is made by all the parties to the arbitral
proceedings and if such request is not objected to by the arbitral Tribunal,
the settlement can be recorded by the arbitral Tribunal in the form of an
arbitral award on the agreed terms;
(iii) Unless there is a request made by all the parties to the arbitral
SKN 15/30 769.04-app--
proceedings to make an award on the agreed terms, the consequence of
the settlement between the parties is that the arbitral proceedings are
terminated and the mandate of the Arbitrator comes to an end;
(iv) Because of initial consent given by the parties, the Arbitrator gets
jurisdiction to make an award on the basis of the adjudication and,
therefore, to enable the Arbitrator to make an award based on something
other than adjudication, there has to be a fresh consent given by all the
parties;
(v) Rule 3 of order XXIII of the said Code specifically confers a power on
a Court to record a finding on the issue of existence or otherwise of the
settlement in case the settlement is disputed a party or some of the parties
to the suit. There is no such specific power conferred on the Arbitrator by
the Arbitration Act;
13. There was an argument made before the learned Single Judge
that the grounds for setting aside the arbitral awards urged before him
were not pleaded in the petitions under section 34 of the Arbitration Act.
In paragraph-8 of the impugned judgment, the learned single Judge
observed that there was a specific ground taken that the consent award
made by the learned Arbitrator is not in accordance with section 30 of the
Arbitration Act and, if one goes through the entire petitions, it is clear that
the challenge which was argued before him is raised in the petition.
14. Firstly, we have to consider the question whether the
contentions which were raised before the learned single Judge were
agitated in the Arbitration Petitions. Therefore, we are referring to the
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averments made in each petitions. Firstly, we make a reference to
Arbitration Petition No.332/2002 filed by Shabbirbhai which is subject
matter of Appeal No.769/2004. In paragraph-8 of the said petition, a
specific contention was raised that the parties to the proceedings have not
given their consent to the terms in Annexure-3 of the impugned award in
terms of which the impugned award is passed. In ground-B of challenge,
a specific contention has been raised that the petitioner has not given any
consent either oral or in writing in terms of Annexure-3. Ground-F is
taken to the effect that after prolonged negotiations, a final settlement
was not arrived at and in any case, the said petitioner or his advocate has
not signed the same. In ground-H, it is contended that there was no
signed document on record indicating settlement and, therefore, the
impugned award is against the public policy in India and not in
accordance with the Arbitration Act.
15. It will be necessary now to advert to the findings recorded
by the learned Arbitrator. In paragraph-2, the basic facts are set out. It
is pointed out that Abdullabhai was a well established businessman who
had acquired several properties in Mumbai and other States. There were
partnership firms constituted by him. It is pointed out that said
Abdullabhai had eight sons and three daughters. The claimant
(Mohammed) before the learned Arbitrator was one of the sons of
Abdullabhai. Taherbhai, Moizbhai, Ashfaqbhai Akhtarbhai and
Shabbirbhai (the respondent Nos.1 to 5 before the learned Arbitrator)
were the sons of Abdullabhai. The respondent Nos.6 and 7 before the
learned Arbitrator (Hussenabai and Shamimabai) are the daughters of
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Abdullabhai. Two sons i.e. Fida Hussain and Abbasbhai died in the years
1977 and 1989 respectively. The daughter Khatijabai predeceased
Abdullabhai. Abdullabhai died on 5 th December 1967. After his death,
the dispute was referred to the arbitration of Mukasir Mukasur E-Dawal
Salabhai Saheb Saidufdin. The learned Arbitrator declared five different
awards which were challenged before the learned single Judge. By
setting aside the said awards, a reference was made to the learned
Arbitrator.
16. In paragraph-3 of the award, the learned Arbitrator has
observed that initially Taherbhai was supported by his two brothers
Moizbhai and Ashfaqbhai and two sisters Hussenabhai and Shaminabai.
The claimant before the Arbitrator (Mohammed), Akhtarbhai and
Shabbirbhai were together. Later on Shabbirbhai decided to support the
group led by Taherbhai. After recording of some evidence, the parties
started negotiations for settlement in cases of disputes in respect of three
firms (a) Fidaali Abdul Rasul Atterwala Company; (b) Abdullbhai Fiddali
and Company; and (c) Abdullabhai Fidaali and Sons. Consent terms were
filed and consent awards were made. Thereafter two references relating
to (i) joint family properties and (ii) five rooms in Fiddali Building
remained pending. In the reference pertaining to the joint family
properties, the parties to the arbitration filed a chart duly signed by them
as well as their advocates which is annexed as Annexure-1 to the award of
the learned Arbitrator. The said chart sets out the shares of the parties to
the arbitral proceeding. Even in respect of five rooms in the Fiddali
Building, the parties commenced negotiations for settlement. In
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paragraph-5, the learned Arbitrator has noted as to how the settlements
were arrived in respect of specific properties mentioned therein. The
minutes recorded by the Arbitrator on 6 th September 2001 record that
"Agreement reached. Taken on record." The agreement was in respect of
five rooms in Fiddali Building. On 7 th September 2001, in the minutes it
was recorded that the parties are not able to reach an amicable settlement
in respect of the joint family properties as there was a serious dispute
whether five properties were belonging to the family or not. Accordingly,
points for determination were framed to enable the parties to lead
evidence. In the minutes, it was further recorded by the learned
Arbitrator "Further, the Counsel stated after taking instructions from the
respective clients that in view of the negotiated settlement there was no
other dispute in respect of any of the properties involved in the reference
which is required to be adjudicated." In the minutes, it is recorded that
the learned counsel stated that the consent terms in respect of properties,
save and except five properties for which points for determination were
framed, will be filed. It appears from the minutes dated 11 th September
2001 that the dispute was further narrowed down as some of the parties
gave up their claims in respect of the properties mentioned in the minutes.
It is further recorded that the parties desired to lead evidence in respect of
shares of Standard Oil and Paint Company and Laxmi Mill Estate. In the
minutes of the meeting held on 30 th October 2001, the following things
were recorded:
"2. Proceedings adjourned to November 1, 2001 at
3.00 pm. On that day the Parties to lead
evidence, if they so desire, in respect of the
following items:
(i) Standard Paint Company's shares.
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(ii) Godown at Andheri.
(iii) Unit Trust Certificates which are encashed.
In case evidence is not led, the finding will be
recorded on all the three points after hearing
Counsels.
3. Mr.Ghanekar assures that Consent Terms will be
drafted and signed within one week from today.
4. After determination of the three disputed items
mentioned herein above the remaining item
would be taken up for adjudication."
The minutes dated 21st December 2001 record that the parties were
discussing settlement in respect of Khamgaon property. On 5 th April 2002,
evidence was recorded.
17. We may note here that various affidavits were filed before the
learned Arbitrator on the issue of settlement. Mr.Ghanekar appearing for
the Taherbhai group forwarded a draft of the settlement on 9 th January
2002 to the counsel representing other sharers. The said draft of consent
terms is Annexure-3 to the award of the Arbitrator. As noted earlier, in
the minutes of the meeting held on 6 th September 2001 it is recorded that
the consent terms will be drafted and signed within one week from the
said date. It is stated that on 30 th March 2001 it was informed to the
Arbitrator that Taherbhai group is not willing to sign the settlement in
respect of division of joint family properties. Even Shabbirbhai started
claiming that there was no settlement in respect of the joint family
properties. In the affidavit filed by Akhtarbhai (respondent No.4 before
the learned Arbitrator) on 1 st April 2002, a request was made to declare
SKN 20/30 769.04-app--
the award in accordance with the settlement and that no one should be
allowed to resile from the settlement. It was claimed that not only the
disputes in respect of joint family properties except five properties were
settled but also the disputes as regards five rooms in Fiddali Building were
settled. The claimant- Mohammed also filed his affidavit supporting the
stand taken by Akhtarbhai. On 17th April 2002, the learned counsel
appearing for Akhtarbhai pleaded that an award may be passed in terms
of the settlement to which Advocate Ghanekar representing Taherbhai
group informed that the issue as to whether the parties have settled the
dispute should be first determined. The parties were informed that they
are at liberty to file affidavits on the issue of settlement. On 19 th April
2002, the parties were heard on the issue of settlement. In paragraph-10
of the award, the learned Arbitrator recorded that the question which is
required to be determined is whether final and concluded settlement
between the parties in respect of joint family properties and five rooms in
Fiddali Building was arrived at. Thereafter, there is a discussion about
the term of settlement in Annexure-3 and affidavits filed on record. The
learned Arbitrator referred to the contentions raised by Shri Ghanekar
appearing for Taherbhai group that the said group never signed the
consent terms and, therefore, in view of Rule 3 of Order XXIII of the said
Code, as there was no signed compromise, the issue need not be
considered. The Arbitrator has observed that the advocate who was
earlier appearing for Shabbirbhai was all along supporting the settlement
and opposing Taherbhai group. The said advocate was discharged by
Shabbirbhai on 30th March 2002 and, ultimately, on 19 th April 2002
Shabbirbhai filed an affidavit claiming that the settlement was not
SKN 21/30 769.04-app--
reached. Thereafter, there are findings recorded on five points for
determination. The operative part of the award dated 13 th June 2002
reads thus:
"(A) Award as per Consent Terms attached and
marked Annexure '3'.
(B) Respondent No.3 Ashfaqbhai is directed to pay to
the Claimants and each of the Respondents their
share in the proceeds of the Units of Unit Trust of
India, that is Rs.4,82,511.50 along with interest
at the rate of 13% per annum from December 1,
1989 till realization. The Claimant and
Respondents No.1 to 5 each have 1/7th share
while respondent Nos.6 and 7 each have 1/14 th
share.
(C) The Counterclaim filed by Taherbhai Group
stands dismissed in its entirety.
(D) The Parties to bear their respective costs."
18. The consent terms at Annexure-3 record settlement in respect
of nine properties which are stated to be the joint family properties and
five rooms in Fiddali Building. The consent terms were signed by the
claimant, the second, third, fourth and fifth respondents in the
proceedings before the learned Arbitrator. The issue regarding shares in
the proceeds of units of Unit Trust of India is not covered by the
settlement.
19. At this stage, without going to the question as to whether all
the contentions which are raised before the learned learned single Judge,
SKN 22/30 769.04-app--
were raised in the Arbitration Petitions, it will be necessary to advert to
the powers of the Arbitrator. Section 19 of the Arbitration Act reads thus:
"19. Determination of rules of procedure.- (1)
The arbitral tribunal shall not be bound by the Code of
Civil Procedure, 1908 (5 of 1908) or the Indian
Evidence Act, 1872 (1 of 1872).
(2) Subject to this Part, the parties are free to agree
on the procedure to be followed by the arbitral
tribunal in conducting its proceedings.
(3) Failing any agreement referred to in sub-section
(2), the arbitral tribunal may, subject to this Part,
conduct the proceedings in the manner it considers
appropriate.
(4) The power of the arbitral tribunal under sub-
section (3) includes the power to determine the
admissibility, relevance, materiality and weight of any
evidence."
In view of sub-section (1) of section 19, the arbitral Tribunal is not bound
by the said Code.
20. At this stage, it will be necessary to make reference to Rule 3
of Order XXIII of the said Code, which reads thus:
"3. Compromise of suit
Where it is proved to the satisfaction of the Court that
a suit has been adjusted wholly or in part by any
lawful agreement or compromise in writing and signed
by the parties, or where the defendant satisfies the
plaintiff in respect of the whole or any part of the
SKN 23/30 769.04-app--
subject-matter of the suit, the Court shall order such
agreement, compromise or satisfaction to be recorded,
and shall pass a decree in accordance therewith so far
as it relates to the parties to the suit, whether or not
the subject-matter of the agreement, compromise or
satisfaction is the same as the subject-matter of the
suit:
Provided that where it is alleged by one party
and dented by the other that an adjustment or
satisfaction has been arrived at, the Court shall decide
the question; but no adjournment shall be granted for
the purpose of deciding the question, unless the Court,
for reasons to be recorded, thinks fit to grant such
adjournment.
Explanation.--An agreement or compromise which is
void or voidable under the Indian Contract Act, 1872
(9 of 1872), shall not be deemed to be lawful within
the meaning of this rule."
Rule 3 of Order XXIII requires a lawful agreement or compromise in
writing and signed by the parties. Apart from the fact that Rule 3 of
Order XXIII will not apply to the arbitral proceedings in view of section
19(1) of the Arbitration Act, in section 30 there is no such requirement of
a settlement being in writing and signed by the parties. Sub-section (1)
of section 30 shows that the arbitral Tribunal is required to encourage
settlement of disputes and the arbitral Tribunal can follow the procedures
(Mediation, Conciliation or other proceedings) at any time during the
proceedings to encourage settlement. Preamble of the Arbitration Act
itself relies upon adoption of UNCITRAL Model Law on international
commercial arbitration by the United Nations Commission on
International Trade Law. It refers to the recommendations of General
Assembly of the United Nations that all the countries should give due
SKN 24/30 769.04-app--
consideration to the said Model Law in view of the desirability of
uniformity of law of arbitration. Article 30 of the Model Law dealing with
settlement contains two clauses. Clause (1) thereof is incorporated in the
form of sub-section (2) of section 30. Clause (2) of Article 30 has been
bifurcated into sub-sections (3) and (4) of section 30. In the report of the
United Nations Commission in clause 250, it is noted that a proposal was
moved that a request to record settlement as an award needed to be made
only by one of the parties. Paragraph-250 dealing with the said
suggestion reads thus:
"250. Another proposal was that the request to
record the settlement as an award needed to be made
by only one of the parties. The Commission, after
deliberation, was agreed that there must be the
dual will of the two parties that the settlement be
recorded as an award, but that the formal request
needed to be made by only one of them."
(emphasis added)
21. Sub-section (2) of section 30 provides that if during arbitral
proceedings, the parties settle the dispute, it is mandatory for the arbitral
Tribunal to terminate the proceedings. If requested by the parties and not
objected to by the arbitral Tribunal, it is open for the arbitral Tribunal to
record the settlement in the form of an arbitral award. Sub-section (2) of
section 32 mandates that in case of three contingencies specified in
clauses (a), (b) and (c), it is mandatory for the arbitral Tribunal to order
for termination of the arbitration proceedings. Thus, during the arbitral
proceedings, if the parties settle the dispute, the arbitral Tribunal has no
SKN 25/30 769.04-app--
choice but to terminate the proceedings provided there is no request made
to record settlement in the form of an arbitral award. As sub-section (1)
of section 30 does not require settlement to be in writing or signed by the
parties, if a contention is raised before the learned Arbitrator that there is
a settlement of disputes between the parties, for the purpose of sub-
section (2) of section 30, the arbitral Tribunal will have to decide whether
there is such a settlement. The reason being that if there is a settlement,
the mandate of sub-section (2) of section 30 must be followed of
terminating proceedings as the Arbitrator has no jurisdiction to continue
the arbitral proceedings after the settlement of the disputes subject matter
of the reference . Therefore, it is not possible to endorse the view taken
by the learned single Judge that the Arbitrator has no jurisdiction to
decide the question whether the dispute referred to him is settled by the
parties. If such interpretation is not accepted, first part of sub-section (2)
of section 30 will become redundant. If such interpretation is not
accepted, in a given case, though the parties have settled the dispute, if
one of the parties raises a dispute for namesake or a frivolous dispute
about the fact of settlement, the Arbitrator will have to proceed with the
arbitral proceedings without terminating the same which will be contrary
to the mandate of sub-section (2) of section 30. In view of the mandate
incorporated in the first part of sub-section (2) of section 30, the power of
the Arbitrator to decide whether there is a settlement of the disputes is
implicit. This is so especially when the settlement of the dispute before the
Arbitrator need not be in writing signed by the parties to the proceedings.
Therefore, in the case in hands, the learned Arbitrator was well within his
powers to decide the issue whether there was a settlement of dispute.
SKN 26/30 769.04-app--
22. In a given case, if the Arbitrator comes to a conclusion that
there was a settlement of dispute, the other question which arises is
whether it is necessary for all the parties to the arbitral proceedings to
make a request to the arbitral Tribunal to record the settlement in the
form of an arbitral award. In a given case, assuming that all the parties
to the arbitral proceedings make such a request to record settlement as
contemplated by sub-section (2) of section 30, the arbitral Tribunal can
always object to such request and refuse to record such settlement. In
such a case, the arbitral Tribunal will have to terminate the proceedings.
23. In a case where there is a settlement in writing and signed by
all the parties which is not disputed or where on adjudication, the
Arbitrator finds that there is a settlement, the question which arises is
when only some of the parties expressly request the Arbitrator to record
settlement in the form of an arbitral award, whether the arbitral Tribunal
is powerless to record the settlement in the form of an award. If the
settlement which is admitted or proved itself provides that there should be
an award in terms of settlement, no separate request is required to be
made to record the settlement in the form of an award. It is well settled
that in the same section, the same words used can have different
meanings. In first part of sub-section (2) of section 30, the word "parties"
means all the parties to the arbitral proceedings as settlement has to be
between all the parties. In the second part of sub-section (2), the word
"parties" has been used which has to be interpreted to mean any of the
SKN 27/30 769.04-app--
parties. When there is a settlement, the request to record settlement is
implicit unless the settlement provides that the proceedings be terminated
in view of the settlement without passing an award. Therefore, if it is
established that there is a settlement of dispute, unless the settlement
provides that the proceedings be terminated in view of the settlement
without passing an award, on a formal request made by some of the
parties, the settlement can be recorded in the form of an award. The
reason is that dual will of the parties is reflected from the settlement itself.
In the case of Bhatia International v. Bulk Trading S.A. and another 16
in paragraph-15, the Apex Court held thus:
"15. It is thus necessary to see whether the language
of the said Act is so plain and unambiguous as to
admit of only the interpretation suggested by Mr. Sen.
It must be borne in mind that the very object of the
Arbitration and Conciliation Act of 1996, was to
establish a uniform legal framework for the fair and
efficient settlement of disputes arising in international
commercial arbitration. The conventional way of
interpreting a statute is to seek the intention of its
makers. If a statutory provision is open to more
than one interpretation then the Court has to
choose that interpretation which represents the
true intention of the legislature. This task often is
not an easy one and several difficulties arise on
account of variety of reasons, but at the same, it must
be borne in mind that it is impossible even for the
most imaginative legislature to forestall exhaustively
situations and circumstances that may emerge after
enacting a statute where its application may be called
for. It is in such a situation the Courts' duty to
expound arises with a caution that the Court should
not try to legislate. While examining a particular
provision of a statute to find out whether the
16 (2002) 4 SCC 105
SKN 28/30 769.04-app--
jurisdiction of a Court is ousted or not, the principle of
universal application is that ordinarily the jurisdiction
may not be ousted unless the very statutory provision
explicitly indicates or even by inferential conclusion
the Court arrives at the same when such a conclusion
is the only conclusion. Notwithstanding the
conventional principle that the duty of judges is to
expound and not to legislate. The Courts have taken
the view that the judicial art of interpretation and
appraisal is imbued with creativity and realism and
since interpretation always implied a degree of
discretion and choice, the Court would adopt
particularly in areas such as, constitutional
adjudication dealing with social and defuse rights.
Courts are therefore, held as "finishers, refiners, and
polishers of legislatures which gives them in a state
requiring varying degrees of further processing". (see
Corrocraft Ltd. vs. Pan American Airways , . If a
language used is capable of bearing more than one
construction, in selecting the true meaning, regard
must be had to the consequences, resulting from
adopting the alternative constructions. A construction
that results in hardship, serious inconvenience,
injustice, absurdity or anomaly or which leads to
inconsistency or uncertainty and friction in the system
which the statute purports to regulate has to be
rejected and preference should be given to that
construction which avoids such results. (see Johnson
vs. Moreton and Stock vs. Frank Jones (Tipton) Ltd. .
In selecting out of different interpretations the
Court will adopt that which is just reasonable and
sensible rather than that which is none of those
things, as it may be presumed that the legislature
should have used the word in that interpretation
which least offends our sense of justice. In Shanon
Realites Ltd. vs. Sant Michael at page 192-193 Lord
Shaw stated, "where words of a statute are clear, they
must, of course, be followed, but in their Lordships
opinion where alternative constructions are equally
SKN 29/30 769.04-app--
open that alternative is to be chosen which will be
consistent with the smooth working of the system
which the statute purports to be regulating and that
alternative is to be rejected which will introduce
uncertainty, friction or confusion into the working of
the system." This principle was accepted by Subba
Rao, J. while construing Section of the Sea Customs
Act and in coming to the conclusion that the Chief of
Customs Authority was not an officer of custom, 1983
ECR 2163 D (SC)."
(emphasis added)
24. With the greatest respect to the learned single Judge, if the
view taken by the learned single Judge is accepted as correct, it will result
in hardship, serious inconvenience and absurdity. It will completely defeat
the very object of sub-section (1) of section 30 of the Arbitration Act
which requires the arbitral Tribunal to encourage settlements. In our
considered opinion, the view which we have taken above is just and
reasonable which is consistent with the smooth and effective working of
the provisions of the Arbitration Act.
25. By the impugned judgment and order, the learned single
Judge has set aside the impugned award only on the ground that the
arbitral Tribunal had no jurisdiction to decide the dispute whether there
was a settlement of the claim and that even if there was a settlement,
request for passing the award in writing has to be made by all the parties
to the arbitral proceedings. This view is erroneous. The learned single
Judge has not disturbed the awards made on adjudication by the learned
Arbitrator.
SKN 30/30 769.04-app--
26. Therefore, in our considered view, the impugned judgment
and order cannot be sustained and will have to be set aside. Accordingly,
the appeals must succeed and we pass the following order:
O R D E R
(i) The impugned judgment and order dated 1 st
September 2004 is hereby set aside;
(ii) Arbitration Petition Nos.353/2002; 332/2002;
354/2002; and 333/2002 stand dismissed;
(iii) The appeals are allowed on the above terms;
(iv) There shall be no order as to costs.
(v) At this stage, the learned counsel appearing for the
contesting respondents pray for stay of execution of the
impugned awards (except the awards made on merits).
Considering the facts and circumstances of the case, we
direct that the execution of the awards shall remain stayed
for a period of eight weeks from today.
(A. K. MENON, J.) (A.S. OKA, J.)
