Rsg Share & Stock Brokers Ltd. vs Anju Gupta And Ors.
2002 Latest Caselaw 74 Del

JUDGMENT

A.K. Sikri, J.

1. Because of certain disputes, which had arisen between the petitioner and the respondent No. 1, the same were arbitrated upon. The petitioner is a company which is a member of National Stock Exchange of India Ltd.(NSE)/respondent No. 3 and is bound by its rules and bye-laws which, inter alia, provided for arbitration in case of such disputes. The respondent No. 1 is the real sister of Mr. Rajiv Gupta, Managing Director of the petitioner company. The respondent No. 1 raised the claims against the petitioner company by filing its claim with NSE. Following claims were made:

a) Rs. 12,13,493.45/- paisa plus interest from 8th February, 2000.

b) Rs. 4,10,000/- plus 25 per cent interest from 17th September, 1999.

c) Delivery of 100 shares of Zee Telefilms.

d) Delivery of 50 shares of SBI

e) Delivery of 3500 shares of ICICI and dividend thereof.

2. The respondent No. 3 appointed Mr. Justice T.R. Handa(Retd.) as the sole arbitrator to adjudicate upon these disputes. The arbitrator has given his award dated 12th March, 2001 as per which the petitioner is called upon to pay a sum of Rs. 16 lacs to the respondent No. 1. It is this award which is challenged by the petitioner by filing the instant petition under Section 34 of the Arbitration and Conciliation Act, 1996 (for short 'the Act').

3. Before we proceed to take note of the nature of objections, it would be appropriate to scan through the records in order to find out as to how the proceedings were conducted by the arbitrator which led to passing of the impugned award. This exercise is undertaken because of the reason that the main thrust in this petition is on the procedure adopted by the arbitrator in rendering the award which according to the petitioner, is in conflict with some provisions of the Act.

4. Mr. Rajiv Gupta is the Managing Director of the petitioner company. He and the respondent No. 1 are real brother and sister. When the respondent No. 2 was appointed as the arbitrator, the petitioner herein filed its statement of defense to the aforesaid claims preferred by the respondent No. 1. The arbitrator fixed the initial hearing on 26th February, 2001 and notice dated 8th February, 2001 for this hearing was sent to both the parties. The parties appeared before the arbitrator. On the very first date before the arbitrator after coming to know of the fact that the parties were brother and sister, the arbitrator considered that it was a fit case for reconciliation and advised the parties to amicably settle their dispute for which various methods were discussed. The parties wanted some more time, and therefore, the case was adjourned to 5th March, 2001. On 5th March, 2001 the parties made a joint statement before the arbitrator to the effect that they would be ready to have the mediation of Mr. B.K. Gupta, Mr. M.L. Aggarwal, Mr. Tarseem Aggarwal and Mr. Surinder Soni and the case was adjourned to 12th March, 2001. Order sheet dated 5th March, 2001 gives an indication to this effect which reads as under:

"Present: Dr. Anju Gupta, Complainant. Sh. Rajiv Gupta for self and for respondent No. 1.

The parties have today made a joint statement which has been recorded separately.

The case to now come up on 12-03-2001 at 4.30PM for recording statement of the parties relations in terms of their statement recorded today. Shri Rajiv Gupta undertakes to bring along with him S/Sh. M.L. Aggarwal and Surinder Soni. The complainant Dr. Anju Gupta undertakes to bring with her S/Sh. B.K. Gupta and Tarseem Aggarwal.

in case the date and time fixed above are not convenient to the mediators named above, the parties shall notify the Exchange in advance to enable the exchange to arrange for adjournment."

5. From the aforesaid, it appears that the four persons who were to be called on 12th March, 2001 were also the relations of the parties and/or known to the parties intimately.

6. It appears that, keeping in view the relationship between the parties, the parties agreed before the arbitrator that four persons, namely, Mr. B.K. Gupta, Mr. Tarseem Gupta, Mr. M.L. Aggarwal and Mr. Surinder Soni may intervene and try to settle the dispute. This would be clear from letter dated 7th March, 2001 addressed by the respondent No. 1 to the arbitrator which reads as under:

"To

The Arbitrator,

Arbitration Department

NSE/ARBN/D002/2001

Respected Sir,

As per directions by you, all your parties-

1. Mr. B.K. Gupta,

2. Mr. Tarseem Aggarwal.

3. Mr. M.L. Aggarwal.

4. Mr. Surinder Soni.

have been contacted by me and they all have agreed to come for hearing on 12/3/2001 at 4.30PM in NSE. I hope you will give due consideration and help me get justice.

Thanking you,

Sincerely yours

sd/-

Dr. Anju gupta

17/2/ Shakti Nagar,

7211838, 7111932."

Dated 7.3.2001

7. On 12th March, 2001 out of the aforesaid four persons, three persons presented themselves before the arbitrator and Mr. Surinder Soni could not appear. When the proceedings started, the parties agreed as under:

" 12th March, 2001

Statement of Dr. Anju Gupta claimant and Sh. Rajiv Gupta for self and for respondent No. 1.

Vide our statement dated 05-03-2001, we had agreed to be bound by the verdict of S/Shri B.K. Gupta, M.L. Aggarwal, Tarseem Aggarwal and Surinder Soni in who we have full confidence. Three of them S/Sh. B.K. Gupta, M.L. Aggarwal and Tarseem Aggarwal are present today but Sh. Surinder Soni could not come present today. We now agree that the award in this case may be made as per unanimous verdict of the three persons present, namely, S/Sh. B.K. Gupta, M.L. Aggarwal and Tarseem Aggarwal. The case may please be decided according to the verdict of these persons."

8. As per the aforesaid methodology adopted by the parties, they agreed that award can be made as per the unanimous verdict of the three persons present. On this agreement having been reached between the petitioner and the respondent No. 1, the aforesaid three persons after deliberating the matter and discussing with the parties held unanimous view that the petitioner pays a sum of Rs. 16 lacs with interest since August, 2000. They made a recording to this effect and signed the said recording which was handed over to the arbitrator. Based thereon, the arbitrator returned the award and operative part of the award reads as under:

"Accordingly as per provisions of regulation 5.13 of the National Stock Exchange of India Limited Capital Market Regulations, 1999 and in terms of the unanimous verdict, of the three referees named and mutually agreed upon by the parties, I make the following Award.:

The respondent shall pay a total sum of Rs. 16.00 lacs to the claimant along with interest @ 18% P.A. w.e.f. 15th August, 2000 till the date of payment."

9. The objections of the petitioner to the aforesaid course having been adopted by the arbitrator, resulting into impugned award, are two-fold:

1. It was for the arbitrator to adjudicate upon the dispute between the parties and be could not delegate this responsibility to other three persons, whom the petitioner refers to as 'referees' to act as 'conciliators' without complying with the provisions of Section 73 of the Act which are mandatory in nature.

2. Mr. Makihja, learned senior counsel appearing for the petitioner further submitted that in the present case the award was not a result of settlement between the parties but was in fact an adjudication and adjudication could proceed only in accordance with provisions of the Act. It was not signed either. Therefore, the arbitrator wrongly referred to para 5.13 of the trading regulations of NSE which is as under:

"5.13 ARBITRAL AWARD ON AGREED TERMS:

If after the appointment of an arbitrator, the parties settle the dispute, then the arbitrator shall record the settlement in the form of an arbitral award on agreed terms."

10. It was further submitted that no reasons were given in the impugned award although giving of reasons was mandatory as per the stipulation contained in Section 31 of the Act. He also relied upon the judgment of the Apex Court in the case of Sky Pack Carriers Ltd. v. Tata Chemicals Ltd. reported in 2000 (5) SCC 294.

11. On the other hand, Mr. R.K. Aggarwal, learned counsel appearing for the respondent No. 1 referred to the record of the proceedings before the arbitrator on the basis of which his plea was that keeping in view the relation between the parties, right from the word go, the parties intended to settle the dispute and not to adjudicate. Therefore, it was for this reason that the three persons, mutually acceptable to both the parties, were called upon to intervene who had thought it fit that the petitioner pays a sum of Rs. 16 lacs with interest to the respondent No. 1. The award was, in these circumstances, in the nature of settlement and not result of any adjudication. The learned counsel referred to the provisions of the Act to demonstrate that one of the avowed objectives of the Act was to persuade the parties to settle the matter amicably and Section 30 specifically provided for the same.

12. I have given my thoughtful consideration to the arguments advanced on either side. The petitioner being a member of the NSE, the case started when the respondent No. 1 filed a complaint with the NSE, inter alia, stating that she was dealing with the petitioner company as an investor, doing sale and purchase of shares and in the process a sum of Rs. 16 lacs became outstanding which was payable by the petitioner to her. She had other claims also. On this complaint, the NSE appointed the respondent No. 2, a retired Judge of High court, as arbitrator keeping in view the Regulations of the NSE providing for arbitration in case of such disputes. On the very first day fixed by the arbitrator, i.e., 26th February, 2000 the arbitrator persuaded the parties for amicable settlement. This is clear from the proceedings of this date wherein the arbitrator recorded that the considered it to be a fit case for reconciliation and advised the parties to amicably settle their disputes. Various methods for such amicable settlement were also discussed for which parties wanted some more time. In fact the case was adjourned to 5th March, 2001 'for settlement'. On 5th March, 2001 both the parties gave a joint statement as per which they agreed for the intervention by the four persons named therein. These four persons appeared to be the relations of the parties. Proceedings of 5th March, 2001 record that case was adjourned to 12th March, 2001 'for recording settlement of the parties' relations in terms of their statement recorded today." The intervention of the aforesaid four persons was therefore agreed upon by the petitioner as well as respondent No. 1 with the purpose of arriving at amicable settlement in whom both the parties had confidence. Three out of the four persons appeared before the arbitrator on 12th March, 2001. Both the parties again gave the statement that they would abide by whatever is decided by these three persons. Therefore, the said three persons unanimously decided that the petitioner pays the respondent No. 1 a sum of Rs. 16 lacs with interest since August, 2000 and on the same date, in the presence of the parties, the award in terms thereof was made by the arbitrator. The entire exercise, it appears, is undertaken with a view to settle the matter amiably. May be, the proceedings do not record any categorical terms as to what was the so-called 'verdict' of three persons was in fact the result of mutual settlement between the parties. However, the manner in which the proceedings initiated which progressed and culminated in the impugned award leaves an impression that after the three persons had come to the conclusion that the petitioner should pay a sum of Rs. 16 lacs to the respondent No. 1, it was agreed upon by the parties.

13. The underline theme in the new Act i.e. persuading the parties to settle the matter amicably runs through the various provisions of the Act. It may be mentioned that in the Arbitration Act, 1940 the role of the arbitrator was only as an adjudicator and the arbitrator could not decide as 'amiable compositeur' or give amy decision according to what was just or reasonable. As an adjudicator, he had to decide according to law. However, Section 28(2) of the new Act recognized such a power with the arbitrator provided the parties have expressly authorised to do so. Keeping in view spirit of this provision on the very first day, the arbitrator expressed his desire that parties settle the matter amiably. The parties in fact agreed upon the same. In this manner, the parties had authorised the arbitrator to decide the matter amiable compositeur. The difference was that instead of asking the arbitrator to perform this role, the parties agreed to have four persons doing this job. However, even this course was the choice of the parties to which they consciously and thoughtfully agreed. They gave their joint statement to this effect. Only after the parties themselves agreeing for this particular course of action that the arbitrator proceeded further an invited such persons for mediation, Section 30 of the Act specifically empowers the arbitral tribunal to use mediation/conciliation or other procedures at any time during the arbitral proceedings to 'encourage settlement'. The procedure which could be adopted is not confined to mediation and conciliation only but "any other procedure" which the arbitrator, o for that matter the parties can think of, could be resorted to.

14. Going by the nature of the proceedings resulting into the award, it can be said that the award is the result of agreement between the parties as per which the parties agreed upon a particular procedure within the meaning of Section 30 of the act. The procedure adopted was to choose certain persons who were near relations/known intimately to both the parties, the parties themselves being closely related to each other and asked these persons to decide according to their conscious. The three persons therefore surfaced on the basis of agreement between the parties and as per the procedure adopted by the parties themselves. They agreed that whatever is decided by the three persons would be binding on them. They further agreed that the award may be passed by the arbitrator in terms of the 'verdict' of those three persons. Therefore, the entire procedure adopted is the result of specific course of action having been agreed upon by the parties.

15. Can such an award, based upon the procedure consciously adopted and agreed to by the parties, be challenged by contending that the arbitrator delegated his powers which he was not supposed to? The answer to the question has to be in the negative. Various reasons can be given in support of this conclusion.

16. First, As already mentioned above, the award is the by-product of the agreed procedure between the parties. The new Act encourages the parties to settle the dispute and not necessarily to have the adjudication of the matter at the hands of the arbitrator. Keeping in view the spirit in the Act and also the fact that the parties are real brother and sister, the tone of amiable settlement set in from day one of the arbitration proceedings and the parties did not adopt adversarial stance.

17. Secondly, Section 30 of the Act does not limit the settlement through mediation and conciliation but envisages 'other procedures as well'. Here other procedure is the "verdict" (verdict used in loose sense and not in the sense of adjudication) of the three persons in whom both the parties had availed. They themselves decided the matter and gave their 'verdict' more as family members rather than adjudicators.

18. Thirdly, the award can be challenged on the grounds that are mentioned in Section 34 of the Act. None of the grounds raised by the petitioner comes within the four corners of Section 34. Once, it is held that the procedure having been adopted as the procedure as agreed between the parties, and therefore, it did not amount to any delegation by the arbitrator of his adjudicatory powers and further that Section 73 of the Act had no application in such matter, on merits, the only ground available to the petitioner under Section 34 on which the petitioner could succeed was if the award was in conflict with the public policy of India. Far from it, the arbitral award is in conformity with the public policy of India which was the award is rendered in the spirit as contained in Arbitration and Conciliation Act, 1996.

19. Fourthly, having regard to the aforesaid facts, the petitioner is even estopped from challenging the award on hypertechnical objections after having agreed to a particular course of action. The action of the petitioner in challenging the impugned award by filing the present petition is clearly an afterthought. It is a dishonest act, to say the least. The petitioner having reposed his confidence in the three persons in now attempting to wriggle out. The 'verdict' of the three persons on which the award is based, is the result of 'give and take'. The respondent No. 1 had many other claims which are not awarded as a result of the impugned award. The three persons and the arbitrator approached the problem treating the same as a family dispute between the brother and the sister. The petitioner wants to violate this spirit. It cannot be permitted to do so by taking technical approach which is even otherwise misconceived.

20. Edmund Burke remarked way back in eighteenth century: "There are two, and only two, foundations of law ... equity and utility." The petitioner's case is not founded on either of these two.

21. No doubt, it would have been more appropriate for the three persons to take the signature of the parties of their 'verdict' or that matter for the arbitrator, to undertake this exercise on the award. However, even if it is not done, that may not affect the validity of the impugned award when the objections of the petitioner to the said award are to be adjudged on the touchstone of Section 34 of the Act.

22. Reliance of the petitioner on the judgment of the Supreme Court in the case of judgment of the Apex Court in the case of Sky Pack Carriers Ltd. (supra) is of no avail. That was a case dealing with the powers of National Commissioner constituted under Consumers Protection Act, 1986. In an appeal, the National Commission appointed an arbitrator and referred the matter for his adjudication. It was the National commissioner who was supposed to hear the appeal and instead of discharging its statutory duty, it suo moto delegated the same to the arbitrator which the Supreme Court held to be impermissible as there was no provision in the Consumer Protection Act, 1986 permitting the National Commission to adopt such a course. This is what the Supreme Court observed:

"..... The Commissions, under the Act, are quasi-judicial bodies and they are supposed to provide speedy and simple redressal to consumer disputes and for that purpose, they have been empowered to give relief of a specified nature and in an appropriate way, to award compensation. On a detailed scrutiny of the different provisions of the Act and bearing in mind the powers conferred on the Commissions, it is indeed difficult to conceive that such Commissions would be authorised to refer the disputes for a consensual adjudication, merely because to arrive at a decision, it would be necessary to take evidence in the proceedings. In the absence of any provision in the Act itself, authorising the Commission to refer a pending proceeding before it, on receipt of a complaint from a consumer, for being settled through a consensual adjudication, the conclusion is irresistible that the Commissions under the Consumers Protection Act do not have the jurisdiction to refer the dispute for a consensual adjudication and then make the said decision of the so called consensual Arbitrator, an order of the Commission itself."

23. This is not the position in the instant case. Here, Section 30 of the Act specifically empowers the arbitral tribunal to encourage settlement with the agreement of parties to use mediation/conciliation or other procedure. The parties in the instant case had agreed for adopting a particular course which was resorted to. It, therefore, does not amount to any abdication of the arbitrator' authority. Such a course was admissible even prior to the enactment of this Act and has been given judicial approval in various cases, quoted by learned counsel for the respondent, some of which are:

1. Gobardhan Das v. Jai Kishen Das reported in I.L.R. 22 All.225.

2. L. Ramu Naidu and Anr. v. V. Nayanappa reported in AIR 1925 Madras 56.

3. Darbari Lal and Ors. v. Wasu Malik reported in AIR 1920 Lahore 220 (2).

4. Hanu Ram and Anr. v. Dhanna Singh-Diwan Singh reported in AIR 1928 Lahore 915.

5. Dulan Bai v. Sundersao and Anr.

reported in AIR 1938 Nagpur 132.

6. Narbadabai and Ors. v. Natyerlal Chunilal Bhalakia and Anr. .

24. The petition and IA are hereby dismissed. Interim orders stand vacated.