Delhi High Court
Sardar Nirmal Singh And Anr. vs Sardar Harinder Singh And Anr. on 29 February, 2008
Equivalent citations: 2008 (2) ARBLR 184 Delhi, (2008) 2 CompLJ 297 Del
Author: S N Dhingra
Bench: S N Dhingra
JUDGMENT
Shiv Narayan Dhingra, J.
1. By this Petition under Section 34 of the Arbitration and Conciliation Act, 1996, the Petitioners have challenged the award dated 4th April, 2003, passed by Mr. Haji Ayamuddin, Sole Arbitrator, Respondent No.2 herein, on various grounds.
2. Brief facts relevant for deciding this Petition are that an Arbitration Agreement was entered into on 29th August, 2002 between Petitioners and Sardar Harinder Singh/Respondent No.1. As a result of this Agreement, the Arbitrator entered into the reference and called upon parties vide a fax message dated 6th November, 2002 to appear before him and Sardar Attar Singh, Arbitrators in respect of the dispute. The Petitioners told the Arbitrator that he was acting in a biased manner as he was enjoying hospitality of Respondent No.1 during his stay in Delhi. Petitioners also wanted photocopy of arbitration letter i.e. Agreement dated 29th August, 2002 and a statement of claim filed by Respondent No.1. The Arbitrator vide his reply dated 8th November, 2002 told the Petitioners that they were putting hurdles in the arbitration proceedings. He refuted the allegations of his being biased and asked the Petitioners to actively participate in arbitration proceedings so that he could make an award.
3. Even before Mr. Haji Ayamuddin had been assigned the duty to arbitrate between the parties, one Sardar Balwant Singh was also assigned the similar duty and he had given an award which find reference in the award of Mr. Haji Ayamuddin. Mr. Haji Ayamuddin ultimately gave his award, though the Petitioners did not cooperate. In the award, he apportioned the properties of different family members of Petitioners and LRs of deceased persons among the Petitioners and Respondent No.1 in following manner:
It is proved on records that the earnings made by S.Nirmal Singh in the prime of his age and his business career of 17-18 years are very meager and nominal. Even after 1974 till date during which time S.Harinder Singh provided him with enormous capital for the businesses he was managing and controlling, which were more than the investments made in the acquisition of all the immovable assets till 1983-84, yet from such heavy investments provided to him, the net profits made by him are very negligible. But still considering his age factor, being eldest in the family and taking into consideration the minors left behind by Late S.Manmeet Singh, he is looking after; I have allocated following movable/immovable assets for his absolute ownership.
S. Nirmal Singh, S/o Late S. Amar Singh
S. No. Particulars Amount (Rs.)
1. C-150 defense Colony, New Delhi 2,71,80,000.00
2. Zohra Emporium with all
its rights and goodwill
money of the place, 1
Arya Samaj Road, Karol Bagh,
New Delhi (The goodwill value
of which is Rs. 2,50,00,000.00 2,50,00,000.00
3. Working Capital in business
he is running in Zohra
Emporium, Karol Bagh, New
Delhi 30,00,000.00
4. U-51/41, DLF Qutab Enclave,
Gurgaon, Haryana 5,00,000.00
5. U-5/13, DLF Qutab Enclave,
Gurgaon, Haryana 5,00,000.00
6. The sale money of house
at Wazir Akbar Khan lying
with S. Kirat Singh, he is
obligated to transfer
US$ 100,000 @ 47.50=Rs.47.50 lac 7,50,000.00
Total 6,09,30,000.00
In the details given above, it has clearly been observed that S.Kirat Singh made huge losses including the capital of US$ 2 million at the end of the year 1984 and also the profits for the years from 1985 to 1992 making a total loss of US$ 4.5 to 5 million. As such, if I consider only as per business norms, he does not deserve any movable or immovable assets from the present assets, which are under his management and control. But still on humanitarian grounds and keep healthy relationship among all the brothers, I consider the following assets be awarded to him.
S. Kirat singh, S/o Late S. Amar Singh
S. No. Particulars Amount (Rs.)
1. From the money lying with
him in his custody from
the sale of the house at
Wazir Akbar Khan Watt, Kabul,
Afghanistan US$ 160,[email protected]=
Rs. 76,00,000.00 76,00,000.00
2. U-44/33, DLF Qutab Enclave,
Gurgaon, Haryana 5,00,000.00
3. U-6/4, DLF Qutam
Enclave, Gurgaon, Haryana 5,00,000.00
Total 86,00,000.00
Late S.Manmeet Singh, S/o S.Nirmal Singh
S.No. Particulars Amount (Rs.)
1. Taking into consideration
his earnings in Omega Exports
(P) Ltd. during his lifetime,
total right of property situated
at 17/3B, New Market, Tilak Nagar,
New Delhi 0,00,000.00
2. In this money the amount of
insurance received in favor
of Late Sh. Manmeet Singh
after his demise is also
taken into consideration. 30,00,000.00
3. U-4/4, DLF Qutam Enclave,
Gurgaon, Haryana 5,00,000.00
Total 95,00,000.00
Regarding account of Omega Exports Pvt. Ltd., these records are checked and prepared by S.Harinder Singh and S.Kirat Singh. These account details were also checked by the previous arbitrator, S. Balwant Singh. I am satisfied with such details. There is no dispute about his share percentage but still considering the minors are left behind Late S.Manmeet Singh, I have decided to be little more considerate about him. The above allocation has been made keeping in view my consideration towards him. Rest all the properties and movable assets under the management and control of S. Nirmal Singh are now the absolute ownership of S.Harinder Singh, S/o Late S. Amar Singh, which are as under:
S. No. Immovable Assets Amount (Rs.)
1. F-35, 37, 39, Old Double Storey,
Lajpat Nagar-VI, New Delhi 85,00,000.00
2. Shop No. 14, Zohra Emporium,
New Delhi 90,00,000.00
3. VIII-Mauja Desgran, Anandpur
Sahib, District Ropad, Punjab 22,00,000.00
4. Vill Mauja Desgran, Anandpur
Sahib, District Ropad, Punjab 22,00,000.00
5. D-10, NDSE Part-II, New
Delhi-49 (Value 50%) 4,31,08,500.00
6. A-181, Ganesh Nagar,
Tilak Nagar, New Delhi 56,02,500.00
7. House No. 1378/5-9,
1076/5-9, Gali Gujarawali,
Chawk Baba Sahib, Amritsar
Value based on S.Nirmal Singh's
book value not fair market valuation 16,87,467.00
8. House No.7, Chowk Farid, Amritsar 35,04,000.00
9. 17/18, Mall Road Market,
Tilak Nagar, New Delhi 74,77,000.00
10. Khasra No: 1284/933-936,
Lawrene Road, Amritsar (50%) 1,63,87,500.00
11. Sultanwind urban, Taran Road, Amritsar 1,09,37,500.00
12. Plot No: 13, Ranjit Ave. Amritsar 15,15,000.00
13. House No.1641, Tehsil Anandpur Sahib,
District Ropad (since premises closed,
valuer's value not available.
On the basis of general
information, approximate value) 35,00,000.00
14. Agricultural land in urban area,
Village Thapal, Tehsil Anadpur
Sahib, District Ropad.
Official value could not be
obtained but according to
the information from local
adjacent people, the approximate Value 22,00,000.00
15. C-494, 2nd Floor, Chitranjan, Park, New
Delhi as per S.Nirmal Singh's income tax
book value, no fair market value 12,60,000.00
16. House No. 1242, 1243, 1244/3-9,
Chawk Paragdas, Amritsar according
S. Nirmal Singh's income tax book value 38,09,583.00
17. Farm House at Village Satbari, Mehrauli,
New Delhi (Late S.Manmeet Singh) 1,45,90,000.00
Total 13,74,79,050.00
The absolute ownership of rest all movable assets under the management and control of S.Nirmal Singh including share capital of Late S.Manmeet Singh in Omega Exports (P) Ltd. be transferred to S.Harinder Singh. After deducting Rs.30,00,000.00 for Nirmal Singh and further Rs.30,00,000.00 for capital working of Late S.Manmeet Singh, rest all movable assets whatsoever under any name should be put to the absolute ownership of S.Harinder Singh and be transferred to him. Since S.Nirmal Singh has not provided any list of such movable assets under his control, following are the movable assets, if they are more than mentioned, they should also be transferred to the absolute ownership of S. Harinder Singh.
S. No. Movable Assets Amount (Rs.)
1. From S.Harinder Singh's own
pending amount lying with the
management of S.Nirmal Singh 12,50,000.00
2. Keeping under the name of
S. Sawinder Singh 15,00,000.00
3. Kept under the name of
Master Agamjeev Singh 18,00,000.00
4. Kept under the name of
Master Chiranjeev Singh 18,00,000.00
5. Kept under the name of
S. Bhajan Singh 6,00,000.00
6. Share capital under the name
of Late S. Manmeet Singh in
Omega Exports Pvt. Ltd. 16,02,000.00
The following movable/immovable properties/assets, which are under the management and control of S.Kirat Singh through S.Nirmal Singh, the absolute ownership of all these properties/assets be transferred to S.Harinder Singh, as I am of the opinion that he is the rightful owner of the following properties/assets:
S. No. Particulars Amount (Rs.)
1. C-185, Greater Kailash-I, New Delhi 1,83,05,000.00
2. Khasra No.1284/933-936,
Lawrence Road, Amritsar (25%) 81,93,750.00
3. B-94, Sector 60, Noida Phase-III, UP 61,69,000.00
4. Plot at Sector 43, Noida (under dispute) 5,30,000.00
5. Amount lying in bank/as loan in Zohra
Emporium and/or with S.Kirat Singh as
on 31.03.2000 13,00,000.00
6. Share Value in Omega Emports
Pvt. Ltd. 2,67,000.00
7. Capital and Current Accounting
Home Enterprises
Nova International
Total 4,28,701.00
8. Current Overseas (US$ 53000) 25,20,000.00
9. Balance sale consideration
value of house at Wazir Akbar
Khan Watt, Kabul, Afghanistan
US$ 290,[email protected]=
Rs.1,37,75,000.00 1,37,75,000.00
S. Nirmal Singh has already sold properties which he purchased with the money which has come from S.Harinder Singh. These properties are agricultural, commercial and residential. These are also reflecting in the balance-sheet filed by S.Nirmal Singh for the year 2000-01 before the Income-tax and Wealth- tax Authorities in India, copies of which were placed on record by S.Harinder Singh. I have gone through the same.
The number of these properties comes to about six. In the Return, S.Nirmal Singh has only shown the component which he received by cheque. Keeping in mind the prevailing market practice, if the value of all these properties is taken together, S.Nirmal Singh must have with him approximately Rs.1 crore in cash. In fact, one of the shops which existed in Chandigarh being Shop No.16 in Sector 17, has been sold on pagri basis. Thus, the entire money must have come in cash. I, therefore, hold that S.Nirmal Singh must pay to S.Harinder Singh a total amount of Rs.1 crore at least in cash. In addition to the other properties etc. awarded to him in my Award.
4. Regarding interest Arbitrator observed as under: I am also conscious of the fact that S.Harinder Singh was long back entitled to the properties and the monies awarded by me presently but he has been deprived of them by his brothers. Although by this Award now the position regarding the properties and the monies becomes clear I am aware of the fact that it might take some time before this Award is implemented. In fairness, therefore, S.Harinder Singh should be entitled to interest on the monies which have been awarded to him today by me. I, therefore, award interest @ 12 per cent per annum in respect of the amount awarded by me, prospectively, i.e. from the date of the Award till the actual realization of payment by S.Harinder Singh. I am not awarding any interest for the past even pendente lite to S.Harinder Singh.
5. The award has been challenged on the ground that there was no valid Arbitration Agreement between the parties. Even if the Agreement dated 29th August, 2002 is considered valid, it did not appoint Mr. Haji Ayamuddin as Sole Arbitrator and award was vitiated on this ground since it was given by one Arbitrator whereas the Agreement provided appointment of two Arbitrators viz. Mr. Haji Ayamuddin and Sardar Attar Singh.
6. The original Arbitration Agreement is in Persian language. Its four translations by different institutions/persons have been placed on record; one is by Chairperson of Centre of Persian and Central Asian Studies, Jawaharlal Nehru University, other is by Dr. Mohammed Iqbal, Department of Persian Jamia Milia Islamia, New Delhi, the third translation is by one by Mr. M.A. Jah, a translator from Persian to English and the fourth translation is by Ministry of Justice of State of Afghanistan. In the original Agreement, in Persian language, Mr. Haji Ayamuddin has been described to have been appointed as 'wakil' on behalf of S. Nirmal Singh, S. Kirat Singh, Sardar Harinder Singh and S. Avtar Singh and in subsequent paragraphs he has been assigned with the duties of deciding the accounts related matter between the parties. In translation by Department of JNU and State of Afghanistan word 'wakil' has been translated as an 'arbitrator' while other two translations have described this word as 'lawyer'. I consider that after reading entire text of agreement, the only appropriate translation of this word seems to be an 'arbitrator' and Mr. Haji Ayamuddin was appointed as Arbitrator. The title of the agreement reads ?regarding appointment of Mr. Haji Ayamuddin as an Arbitrator on behalf of S.Nirmal Singh, S. Kirat Singh, S. Harinder Singh and S. Avtar Singh. The text however, shows that Mr. Haji Ayamuddin was to resolve the dispute between the parties with the help of S.Attar Singh. If the translation of 'Wakil' is considered as 'lawyer', then this does not fit in context. Mr. Haji Ayamuddin could not have been appointed by two adversaries as their advocate.
7. Now to consider, who were the arbitrators, Court has to rely on the agreement. Translation by Jamia Milia Islamia reads that ?Mr. Haji Ayamuddin has responsibility to give money of trust to the entitled persons with participation of S. Attar Singh and with accord of S. Harinder Singh, who is the main party after solving all the account matters?. Translation by JNU Perisan Department reads that Mr. Haji Ayamuddin had undertaken the responsibility to arbitrate all financial matters with participation of S. Attar Singh which will be done with consent of S.Harinder Singh, who is the main party in the matter. The third translation by Mr. M.A. Jah reads that Mr. Haji Ayamuddin had been assigned to arbitrate with the participation of S. Attar Singh. Same is the fourth translation. However, at the signing place while S. Nirmal Singh, S. Kirat Singh and S.Harinder Singh had signed as parties, S.Attar Singh and S. Avtar Singh signed as witnesses and Mr. Haji Ayamuddin had signed as an Arbitrator. To this fact, all the four translations are unison that S.Attar Singh had signed only as a witness and not as an Arbitrator. In the award, Mr. Haji Ayamuddin had mentioned that he had taken help of S. Attar Singh in understanding the evidence, accounts and all those documents which were in 'Gurmukhi' script. 8. Learned Counsel for the Petitioners advanced arguments that the Arbitrator himself understood the agreement in the sense that there were two arbitrators and in his fax message dated 6th November, 2002 to the Petitioners, he recorded as under:
As per your request we, H. Ayamuddin and S.Attar Singh were appointed as arbitrators in regard to your still unsettled accounts among all of you - Nirmal Singh, Kirat Singh, Avtar Singh and Harinder Singh on 29.8.2002....
I Along with S. Attar Singh have studied and looked into the most of the details of accounts and gone through the views of all of you in this regard. Most of the papers....
Although the first fax message sent by Mr. H.Ayamuddin gives impression that the he considered that two Arbitrators were appointed but the subsequent fax message makes it clear that Arbitrator Mr. Haji Ayamuddin had considered himself as Sole Arbitrator. However, he was to take assistance of S. Attar Singh to understand the several documents and record between the parties recorded in 'Gurmukhi' script. Under Section 26 of the Arbitration and Conciliation Act, an Arbitral Tribunal, if considers it necessary to take the help of any person as expert on specific issues, is entitled to do so. In Arbitration Agreement, the very first line is in respect of appointment of Arbitrator and according to the agreement line, Mr. Haji Ayamuddin had been shown as a person, who was appointed as Arbitrator. In the bottom, where parties, witnesses and Arbitrator had signed, the word 'Arbitrator' appeared only under the name of Mr. Haji Ayamuddin while the word 'witness' appeared under the names of S.Avtar Singh and S. Attar Singh. The parties signed it in their individual name without mentioning as 'witness' or 'Arbitrator'. Thus, it is clear that Mr. Haji Ayamuddin was the Sole Arbitrator however, he was given the assistance of S. Attar Singh for understanding the documents, accounts etc. written in 'Gurmukhi' script and whatever help the Arbitrator might need. The role of S. Attar Singh was not to arbitrate but to help the Arbitrator. The Arbitrator also understood the role of S. Attar Singh in the same manner. In his award, Arbitrator mentioned the role of S. Attar Singh categorically and stated that S. Attar Singh acted as his helper and rendered his services in translating various documents which were in 'Gurmukhi' script. I, therefore, consider that the dispute between the parties was referred to the Sole Arbitrator Mr. Haji Ayamuddin and not to two arbitrators.
9. The next argument raised is that the agreement dated 29th August, 2002 was not a valid agreement as no dispute was referred by this agreement. It is submitted by Learned Counsel for the Petitioners that the Arbitration Agreement is valid only if it satisfies certain criteria as laid by Supreme Court in K.K. Modi v. K.N. Modi and Ors. and the said Arbitration Agreement does not satisfy the criteria as laid down by Supreme Court. Hon'ble Supreme Court in its above judgment laid down as under: Among the attributes which must be present for an agreement to be considered as an arbitration agreement are:
(1) The arbitration agreement must contemplate that the decision of the tribunal will be binding on the parties to the agreement.
(2) That the jurisdiction of the tribunals to decide the rights of parties must derive either from the consent of the parties or from an order of the Court or from a statute, the terms of which make it clear that the process is to be an arbitration.
(3) The agreement must contemplate that substantive rights of parties will be determined by the agreed tribunal.
(4) That the tribunal will determine the rights of the parties in an impartial and judicial manner with the tribunal owing an equal obligation of fairness towards both sides.
(5) That the agreement of the parties to refer their disputes to the decision of the tribunal must be intended to be enforceable in law and lastly,
(6) The agreement must contemplate that the tribunal will make a decision upon a dispute which is already formulated at the time when a reference is made to the tribunal.
10. In order to appreciate the arguments, a brief history of the parties would be necessary. Parties are brothers, who were settled in Afghanistan. Mr. Haji Ayamuddin also belonged to Afghanistan. The parties were involved in import business in Afghanistan. A property known as 'WazirAkbar Khan House' was situated in Afghanistan. The two Petitioners had started business in Delhi and they and their family members purchased various properties in different locations in India. Contention of S.Harinder Singh had been that he was the main earner and most of the amount was earned by him in Kabul and he had been sending the amount to the Petitioners in Delhi. They were authorized by S.Harinder Singh to purchase properties in Delhi and various properties were purchased in the names of different family members. However, no accounting was done. Business in Kabul also continued to run and in Delhi at different places, shops and firms were opened. Shops included Zohra Emporiums at Arya Samaj Road, at Karol Bagh, at Tilak Nagar, and Omega Enterprises Private Limited, a company opened at Tilak Nagar and many more. As is evident from the award, the parties and their family members were having various properties in Delhi, Gurgaon, Amritsar and Ropad. At the time when agreement was entered into, following was recorded in the agreement regarding dispute between the parties.
By this letter, we, each one of us, Nirmal Singh, Harinder Singh, Kirat Singh all sons of Amar Singh agree in regard to the money from the sale of Wazir Akbar Khan House the value of which is five hundred fifty thousand US Dollars until the arbitration/settlement of accounts be kept in the custody of the following:
1. With Harinder Singh three hundred thousand US Dollars
2. With Kirat Singh two hundred fifty thousand US Dollars
The expenses of sale deed based on documentary proof be borne by Kirat Singh, with the consent of all the three parties from the amount lying in his custody. The sale of this house is subject to the compliance/execution of the terms and conditions embodies in this document. This agreement is being signed by all the parties thereto as consent document. Haji Ayamuddin has undertaken the responsibility to arbitrate** (**the words arbitrate/arbitration have been used to express the meaning of 'all settlements and resolving matters') all the financial matters with the participation of S.Attar Singh which be done after the consent of Harinder Singh who is the main subject of the matters and after all settlements the money kept in the custody be handed over to the rightful parties.
11. It is submitted by the Learned Counsel for the Petitioners that the agreement did not satisfy the basic condition that there should be a dispute which is already formulated at the time when reference is made to the Arbitrator. According to Petitioners, there was no dispute formulated and only a vague reference was made and therefore, the agreement was not valid. Sr. Counsel Mr. V.P. Singh submitted that even if it was considered that dispute was there, the reference to the Arbitrator was only in respect of Five Hundred Fifty Thousand Dollors, which was the sale consideration of 'Wazir Akbar Khan House' and no other dispute was referred to the Arbitrator. The Arbitrator wrongfully took upon himself the distribution of the properties of different family members among the three brothers. The Arbitrator had travelled beyond the agreement, even if the agreement was considered a valid agreement.
12. A perusal of the agreement would show that the bone of contention at the time of entering into agreement was Five Hundred Fifty Thousand Dollors received as sale consideration and the distribution of same among the three brothers. Mr. Haji Ayamuddin also was given the responsibility to go into account and all financial matters and arbitrate financial matter. The money kept in custody was to be handed over to the rightful parties. Thus, the parties were ad idem to the fact that dispute was in respect of money of which Three Hundred Thousand Dollars were kept with S.Harinder Singh and Two Hundred Fifty Thousand Dollars were kept with S.Kirat Singh. This was to be distributed to the rightful claimant after going through the accounts and financial matters between the parties. No other dispute was formulated between the parties and this seems to be the only dispute formulated at the time when the matter was referred.
13. Thus, I think that a dispute was formulated and was referred to the Arbitrator. The Arbitration Agreement cannot be said to be void on this ground. However, the Arbitration Agreement seems to be void on another ground. It is recorded in the Agreement that Mr.Haji Ayamuddin was to arbitrate all financial matters with the help of S.Attar Singh but only with the consent of S.Harinder Singh, who was the main contender of the matters. I consider that if Arbitrator's decision is to be with the consent of one of the parties to the dispute then such an agreement cannot be considered as an Arbitration Agreement. It only means that the party himself would be the Arbitrator in respect of the dispute because whatever Arbitrator has to do has to do with the consent of the party. I, therefore, think that this Arbitration Agreement cannot be considered as a valid agreement because it obliges Arbitrator to pass an award in respect of disputed financial matters between the parties with consent of one of the major parties.
14. Be that as it may, the Arbitrator proceeded and gave the award and while giving the award Arbitrator, as is evident, he included properties of each and every family member and prepared a list as to which property will go to whom. It is to be kept in mind that none of the other family members whose properties were assigned by the Arbitrator to the Petitioners were parties to the Arbitration Agreement. They were not invited for hearing. They were not told that the properties standing in their names had been made subject matter of the arbitration by the Arbitrator. It is not understood how the Arbitrator made all the properties of families of the three brothers, held either in their own name or in the names of their wives, or in the names of their children, were made subject matter of the arbitration and an award was passed assigning properties to different Petitioners irrespective of fact, in whose name the property was standing.
15. A perusal of the claim filed by S.Harinder Singh before the Arbitrator dated 8th November, 2002 shows that he had stated that until the end of 1984, most of the business was under his control and he made huge profits and his capital at that time was 2 million US Dollars. He had carried business from 1968 to 1984, afterwards he entrusted his business to S.Kirat Singh, who did not show any profits for 8-9 years and instead shown losses and capital of the business of S.Harinder Singh was wiped by 80-90% because of losses. S.Nirmal Singh also invested big amounts taken from him in business but he did not hand over profits from the business houses like Zenith Saree House, Zohra Emporium, Zohra Saree Store and Omega Enterprises to him. It is stated that S.Nirmal Singh spent more on religious donations and personal expenses than what he earned from his business. S. Harinder Singh claimed that entire seed money for business in Delhi whether being run by S.Nirmal Singh or by S.Kirat Singh was provided by him and S.Nirmal Singh had transferred the entire money in the names of his kiths and kins either by gift or through other procedure. He stated that by dint of all this, he put his claim that S.Nirmal Singh be asked for presenting accounts details to the extent of profit earned by him and the real estates acquired by him in India as well as profits of business in India because entire seed money was provided by him.
16. Even in the statement of claim, S. Harinder Singh had only asked for statement of accounts and had not laid claim over any specific property either held by S.Nirmal Singh or his family members, however, the Arbitrator considered that the entire money for the business of S. Kirat Singh and S.Nirmal Singh was provided by S.Harinder Singh. Arbitrator in the award mentioned that how he knew the family and knew that it was S.Harinder Singh alone, who was an innovative entrepreneur and had worked in Kabul, where he earned lots of profits right from 1967 onwards and he stated that financial success and personal credibility of S.Harinder Singh was unprecedented in textile business history of Kabul. He also observed that S.Harinder Singh earned the funds and sent money from Afghanistan in different names through banks and hundis to S.Nirmal Singh and S.Kirat Singh and major properties in India were acquired in 1979 onwards.
17. I consider that the Arbitrator had no jurisdiction to travel beyond the terms of arbitration. Arbitrator was not assigned the work of distribution of properties of different family members among the three brothers. In fact, such a mandate could not have been given to the Arbitrator by the three brothers without the consent of those persons, who were having the properties in their names and were the recorded owners of the properties. It is not the case of the Respondent No.1 that these properties were HUF properties or joint family properties. The properties in fact stood in the individual names in different parts of India. A plea is taken that these properties were purchased from the funds of S.Harinder Singh benami in the names of different family members and all those properties, therefore, had the character of properties belonging to either S. Harinder Singh or his business. I consider that such a plea cannot be entertained. Section 4 of the Benami Transactions (Prohibition) Act, 1988 reads as under:
4. Prohibition of the right to recover property held benami. - (1) No suit, claim or action to enforce any right in respect of any property held benami against the person in whose name the property is held or against any other person, shall lie by or on behalf of a person claiming to be real owner of such property.
(2) No defense based on any right in respect of any property held benami, whether against the person in whose name the property is held or against any other person, shall be allowed in any suit, claim or action by or on behalf of a person claiming to be the real owner of such property.
(3) Nothing, in this section shall apply, --
(a) where the person in whose name the property is held is a coparcener in a Hindu undivided family and the property is held for the benefit of the coparceners in the family; or
(b) where the person in whose name the property is held is a trustee or other person standing in a fiduciary capacity, and the property is held for the benefit of another person for whom he is a trustee or towards whom he stands in such capacity.
18. Section 4 of the Benami Transactions (Prohibition) Act specifically prohibits a person from claiming the property as a benami property. It is submitted by Respondent No.1 that Section 4 (1) and (2) of the Benami Transaction (Prohibition) Act would not be applicable in this case because all the persons, who held the properties were holding the properties in fiduciary capacity and the matter was covered by Section 4(3). This argument must be rejected outrightly. The properties purchased were standing in the individual names. In order to claim a benami property to fall under Section 4(3)(b), it is necessary to plead and prove that the person in whose name property stood was a trustee and property was purchased for the benefit of another person in trust and the person was acting in a fiduciary capacity in trust. The claimant first had to prove that the funds for the property were provided by him and secondly that these funds were provided for purchase of property in trust by the agent, who was acting in a fiduciary capacity. No presumption can be drawn that the property was held benami in trust for the beneficiary. These properties were purchased by the persons in their own names and they have been earning benefits out of these properties for last about 20 years. The Respondent No.1 has not taken a single step against any of the holders of the properties to say that these properties were benami, held in trust, and they should be declared so. The Arbitrator had not considered the question at all and in fact had presumed that all the properties standing in the names of different family members were the properties which were to be treated in the conglomeration as business properties of the three brothers. I consider that Arbitrator had no authority to do so. The property of a third person, even if held benami, cannot be brought into the subject matter of dispute by the Arbitrator without the third person being a party to the dispute. If this is allowed then two brothers may jointly enter into an arbitration agreement asking an Arbitrator to consider the distribution of properties of various family members as a subject matter of dispute without making any family member as a party and lay a claim that the properties were benami properties. This will create chaos and is even otherwise contrary to principles of natural justice and basic tenets of law. I, therefore, consider that the award is liable to be set aside on this ground alone that the Arbitrator went beyond the scope of Arbitration Agreement and took upon himself the task of distribution of properties standing in the names of different persons to these three brothers without the different persons being party to the Arbitration Agreement. The Arbitrator had no right to presume that these properties, which were standing in the names of different persons, were subject matter of the dispute, when he had not referred any specific property for dispute.
19. Arbitrator had also presumed that Rs.1 crore was earned by one of the Petitioners i.e. S.Nirmal Singh observing that consideration received by him from sale of properties as mentioned in sale deeds by way of cheque was not true consideration. He observed that it is normal in India that only a part of amount is paid by cheque and rest of amount is paid in cash. So keeping in mind the prevalent market practice, S.Nirmal Singh must have earned Rs.1 crore in cash. He directed that S.Nirmal Singh should pay Rs. 1 crore to S.Harinder Singh, in cash. Such a presumption is based on no evidence moreover an illegal practice going on cannot be the subject matter of presumption of illegal earning by a person. An Arbitrator cannot on the basis of this presumption, direct for payment of such an amount I, therefore, find that the award passed by the Arbitrator is liable to be set aside is hereby set aside. The Petition stands disposed of.
