Satish Kumar Pawha vs Shri Suraj Parkash Pawha And ...
1998 Latest Caselaw 424 Del

ORDER

C.M. Nayar, J.

1. The present matter relates to the Award dated March 30, 1983 made by late Mr.Justice V.S.Deshpande, former Chief Justice of this Court. The matter was referred to the sole arbitration of the learned Judge by the order of the Court (Hon'ble Mr.Justice D.R.Khanna) passed on November 12, 1981 in suit No.761 of 1981 Satish Kumar Pawha vs. Suraj Prakash Pawha. The reading of the Award will indicate that the following claims were made by the claimant Satish Kumar Pawha:

Credit to be given as per the balance sheet as of Diwali 1980 for Rs.14,722/- as share of profits. The interest was claimed on this amount as it was not paid from Diwali of 1980. The learned Arbitrator recorded the following findings in respect of this claim:

"He based his claim on clause 12 of the partnership deed for interest. But this clause refers to contributions made by partners over and above their Capital which are to be treated as loans to the partnership business and to carry interest at 12 percent per annum. The share of profit of each partner is to be paid to each partner and is not a contribution made by a partner to be used for the purpose of business. Clause 12 of the Partnership Deed does not, therefore, apply. No provision of law under which interest can be payable was pointed out. Hence while the claim for the share of profits is allowed, interest thereon is not allowed."

2. On January 1, 1981 credit of Rs.60,000/- was given to Shri Satish Kumar Pawha by Shri Suraj Prakash Pawha in the partnership accounts. Later on Shri Suraj Prakash Pawha deleted this entry which was protested by Shri Satish Kumar Pawha. The same was justified by the respondents on the ground that this amount was due to be paid to the claimant as a result of compromise regarding the business with M/s S.P.& Bros which consisted of a Cold Storage in Bulandshar. Respondents and others filed affidavits to the effect that a sum of Rs.84,000/- was paid to the claimant and thus his claim to a share arising out of the cold storage business was satisfied. This plea was rebutted by the petitioner claimant. The learned arbitrator perused the affidavits as well as the documents which were placed on record and the order of the Court dated March 3, 1982 to consider this claim. The reading of the award will indicate that the pleadings, documents and the entire evidence placed on record were examined and it was held that the amount of Rs.60,000/- shown to the credit of the petitioner-claimant was payable but no interest was payable on it under any provision of law. Therefore, the claim was upheld to the extent of Rs.60,000/- only.

3. Claim No.5 for Rs.11,277.50 as share of the money payable to the petitioner-claimant at the end of the balance sheet as on October 31,1981 was allowed but no interest was held payable.

4. Similarly, claim for Rs.300/- as fee payable to the Local Commissioner was also allowed. The remaining claims were rejected, therefore, it will not be necessary to deal with the same. The ultimate award was made as follows:

"Rs.1,00,000/- Capital contributed by him which is admitted.

      i)   Claim No.1     ...       Rs. 14,732.00
     ii)  Claim No.2     ...       Rs. 60,000.00
     iii) Claim No.5     ...       Rs. 11,277.50
     iv)  Claim No.6     ...       Rs. 300.00
                              --------------
                              Rs.1,86,309.50
 

 Out of this is to be deducted the proportionate share of the loss of Rs.50,000/- suffered in the sale of the cloth. The share of Shri Satish Kumar Pawha in the Partnership is 17 per cent, so Rs.8,500/- is to be deducted and is payable by Shri Satish Kumar Pawha to Shri Suraj Prakash Pawha and others."


 

 The counter claims of the respondents were disallowed after due consideration and appreciation of the material placed on record.

 

5. The main contention of learned counsel for the respondents is that the arbitrator has gravely erred in not recording the evidence of the parties and has, therefore, misconducted himself as the proceedings have not been conducted on the basis of the ordinary law. Reference has been made to the judgment of the Supreme Court as reported in Dewan Singh v. Champat Singh and others . Paragraph 9 from this judgment has been cited which reads as follows:

"9. This agreement does not empower the arbitrators either specifically or by necessary implication to decide the disputes referred to them on the basis of their personal knowledge. The recital in that agreement that the arbitrators may decide the disputes referred to them in "whatever manner" they think does not mean that they can decide those disputes on the basis of their personal knowledge. The proceedings before the arbitrators are quasi-judicial proceedings. They must be conducted in accordance with the principles of natural justice. The parties to the submission may be in the dark as regards the personal knowledge of the arbitrators. There may be misconceptions or wrong assumptions in the mind of the arbitrators. If the parties are not given opportunity to correct those misconceptions or wrong assumptions, grave injustice may result. It is nobody's case that the parties to the submission were informed about the nature of the personal knowledge, the arbitrators had and that they were given opportunity to correct any misconception or wrong assumption. Further in the present case there were as many as five arbitrators. It is not known whether the award was made on the basis of the personal knowledge of all of them or only some of them. Arbitration is a reference of a dispute for hearing in a judicial manner. It is true that parties to an agreement of reference may include in it such clauses as they think fit unless prohibited by law. It is normally an implied term of an arbitration agreement that the arbitrators must decide the dispute in accordance with the ordinary law: see Chandris v. Isbrandtsen Moller Co., 1951-1 KB 240 that rule can be departed from only if specifically provided for in the submission."

6. Reliance is also placed on the judgments reported in West Bengal Industrial Infra-Stricture Development Corporation Vs. M/s Star Engineering Co. and Girdhari Lal Agarwal Vs. Kamleshwar Prasad Agarwal and others . Paragraph 3 from the judgment West Bengal Industrial Infra-Stricture Development Corporation (supra) reads as follows:

"But the Evidence Act is not applicable to arbitration proceeding. The arbitrator has to follow the principles of natural justice in conducting the arbitration proceeding. It is not for the Court to judge whether the evidence before the arbitrator was improper or inadmissible or inadequate. The arbitrator was the sole Judge of the law and of the facts. If he had taken the decision on the basis of whatever evidence was on record and had allowed the claim, his award cannot be challenged on the basis of inadequacy or inadmissibility or impropriety of evidence, particularly when both the parties had the full opportunity to argue their respective cases and adduce evidence. Total absence of evidence or arbitrator's failure to take into consideration a very material document on record or admission of the parties in arriving at the finding are however good grounds for challenging the proceeding for legal misconduct of the arbitrator."

The learned counsel for the respondents has then made reference to paragraphs 5,6,7 and 11 of the judgment Girdhari Lal Aggarwal (supra) which read as follows:

5. The expression "The arbitrator having misconducted himself or the proceedings" within the meaning of Section 30(a) has not been defined anywhere in the Act or the Rules. But this expression in law has certainly a very wide import and significance. The arbitrator misconducting himself indicates legal misconduct in judicial sense and not amounting to moral turpitude. (See Indian Minerals Co. Vs. Northern India Lime Marketing Association. . It also signifies as to the scope of the authority conferred by the agreement. There may be irregularity in procedure adopted by the Arbitrator. In the present case it has to be seen whether the arbitrator has omitted judicial misconduct in the proceedings before him. In other words, whether the arbitrator has committed irregularities amounting to denial of opportunity of hearing to the appellant or whether he has transgressed the principles of natural justice.

6. In Halsbury's Laws of England (IVth Edition Vol.2 para 2 622, page 330) the relevant discussion is as follows :

"What constitutes misconduct. It is difficult to give an exhaustive definition of what may amount to misconduct on the part of an arbitrator. The expression is of wide import for an arbitrator's award...... Misconduct occurs for example : (1 to 4 examples not relevant) (5) if the arbitrator or umpire has failed to act fairly towards both parties, as for example hearing one party but refusing to hear the other......or by taking evidence in the absence of one party or both the parties or by failing to give a party opportunity of considering the other party's evidence.(7)`the arbitrator delegates any part of his authority." (See Cooper Vs. Shuttle worth (1856) 25 LJ Ex 114, Oswald Vs. Earl Grey (1856) 24 LJQB 69; W.Ramsden & Co.Ltd. Jacobs, (1922) 1 KB 640 : Myron (owners) Trades Export S.A. Panama City R.P.(1970) QB 527 at 534).

7. In fact the expression opportunity hearing has got a wide range of varieties. The first is that no one shall be a judge in his own cause. The second is contained in maxim 'Audi Alteram Partem' which connotes that no one may be condemned unheard, the corollary of which is that a party proceedings should be given reasonable notice of the nature of the case to be met. (See Errington Vs. Minister of Health (1935)1 KB 249). This principle has been extended even to the cases where even though there are some positive words providing that party shall be heard yet the justice of common law will supply the intention of the legislature. The principle of natural justice is a humanitarian principle intended to (sic) conduct the proceedings with all fairness and to secure the ends of justice. This principle has not become a widely pervasive rule affecting area of administrative actions as well. It has to be kept in mind that the arbitrator is the chosen Judge of the parties consequently he carries more confidence of the parties and ordinarily his award need not be set aside unless the arbitrator has misconducted the proceedings.

11. In exercise of judicial or quasi-judicial powers the rules of natural justice should be observed. According to Lord Mewart, C.J. in R. Vs. Sussex, (Ex parte Mc. Carthy, (1924)1 KB 256 at page 259), justice should not only be done but should manifestly and undoubtedly be seen to be done". In the instant case elementary rule of natural justice was not followed as no opportunity was given to the appellant in respect of costing register and its details or the opinion obtained from the architect, the expert. We are, accordingly, of the considered opinion that the arbitrator has misconducted the proceedings. (See Union of India Vs. Ghaziabad Railway Station, "

7. Reference is next made to the judgment of the Supreme Court as reported in K.K.Modi Vs. K.N.Modi & others which may be examined. Paragraphs 17 and 18 of this judgment have been cited to reiterate the proposition that it was obligatory on the part of the arbitrator to receive evidence from both the sides and hear the contentions or atleast give the parties an opportunity to put them forward. There is no dispute about that position of law and the reading of the Award will clearly indicate that the learned arbitrator has assigned detailed reasons for giving findings after going through the pleadings of the parties as well as the documents placed on record.

8. The criticism of the Award by the learned counsel for the respondents is, therefore, not justified as the learned Arbitrator has given cogent grounds and arrived at conclusions after due application of mind and appreciation of documents and affidavits of the parties. The proceedings which have been filed in this Court will also show that sufficient opportunity was granted to both the parties to place on record all material which was in their power and possession and the award cannot, therefore, be faulted on the contentions which have been raised by learned counsel for the respondents. The learned arbitrator in his own writing on 27th March, 1983 also recorded as follows:

"Parties argue their case and close."

9. Similarly, number of hearings took place in the presence of the parties and they were given ample opportunities to put forward their respective pleas. In this background it cannot be argued that the arbitrator has not applied his mind and has misconducted himself by not recording the evidence. The law is well settled that it will not be open for this Court to evaluate the thought process of the arbitrator and to reappraise the findings which have been arrived at after due consideration of pleas of both the parties. The Court cannot sit in appeal and review the findings as it is not mandatory for the arbitrator even to give detailed reasons. The Court can only interfere when the award is not supported by any evidence or is based on an error of law. This was so held in the judgment of the Supreme Court reported as Indian Oil Corporation Ltd.Vs. Indian Carbon Ltd. 1988 Vol (Eight) Arbitration Law Reporter 394. The reasons which have been assigned by the learned arbitrator are reasons which are not only intelligible but also deal with the substantial points that have been raised. The Court can set aside the award only if it is apparent that there is no evidence to support the conclusion or if the award is based upon any legal proposition which is erroneous. The Supreme Court in Gujarat Water Supply & Sewerage Board Vs. Unique Erectors (Gujarat) (P) Ltd. & Anr. has held that " even if giving the reasons is held to be obligatory, it is not obligatory for the arbitrator to give detailed judgment." The following passage from this judgment reads as follows:

"9. The scope and extent of examination by the Court of the award made by an arbitrator has been laid down in various decisions. It has to be noted that there is a tread in modern times that reasons should be stated in the award though the question whether the reasons are necessary in ordinary arbitration awards between the parties is pending adjudication by the Constitution Bench of this Court. Even, however, if it be held that it is obligatory for the arbitrator to state reasons, it is not obligatory to give any detailed judgment. An award of arbitrator should be read reasonably as a whole to find out the implication and the meaning thereof. Short intelligible indications of the grounds should be discernible to find out the mind of the arbitrator for his action even if it be enjoined that in all cases of award by an arbitrator reasons have to be stated. The reasons should not only be intelligible but should also deal either expressly or impliedly with the substantial points that have been raised. Even in a case where the arbitrator has to state reasons, the sufficiency of the reasons depends upon the facts and the circumstances of the case. The Court, however, does not sit in appeal over the award and review the reasons. The Court can set aside the award only if it is apparent from the award that there is no evidence to support the conclusion or if the award is based upon any legal proposition which is erroneous. See the observations of this Court in Indian Oil Corporation Ltd. Vs. Indian Carbon Ltd. ."

10. In view of the above, the objections against the Award dated March 30, 1983 are dismissed and the same is upheld and is made Rule of the Court. The learned counsel for the petitioner-claimant contends that the petitioner is entitled to interest from the date of the Award till realisation as no attempt was made to make the payment till date in terms of the award. Reference is made to the judgment of this Court in Babu Lal Barwa Vs. Delhi Development Authority and others and Mangal Sain Vs. Union of India 1997 V AD (Delhi) 209. These judgments lay down that it will be open for the Court to award interest from the date of the award till realisation. The petitioner, therefore, shall be entitled to interest at the rate of 12% per annum from the date of award till realisation. There will be no order as to costs.