Smt. Sangita Aggarwal & Anr. vs Shri Virender Singh Rohtagi & Anr.
2009 Latest Caselaw 3435 Del

*        IN THE HIGH COURT OF DELHI AT NEW DELHI

                                      Date of Reserve: July 17, 2009
                                      Date of Order: August 28, 2009
+ CS(OS) Nos.3721/91 & 3722/91
%                                                   28.08.2009
     SMT. SANGITA AGGARWAL & ANR.                   .... Plaintiffs
     Through : Ms. Vijaya Lakshmi, Advocate

           Versus

     SHRI VIRENDER SINGH ROHTAGI                    .... Defendant
     Through: Mr.Ashok Chhabra, Adv.

                       &

     SMT. SANGITA AGGARWAL & ANR.                   .... Plaintiffs
     Through : Ms. Vijaya Lakshmi, Advocate

           Versus

     SHRI VIRENDER SINGH ROHTAGI & ANR.              .... Defendants
     Through: Mr.Ashok Chhabra, Adv.


     JUSTICE SHIV NARAYAN DHINGRA


1.   Whether reporters of local papers may be allowed to see the
     judgment?                                           Yes.

2.   To be referred to the reporter or not?               Yes.

3.   Whether judgment should be reported in Digest?       Yes.

     JUDGMENT

1. During pendency of the suit no. 3721/1991 for partition

and rendition of accounts of the assets and business of partnership

firm, the parties agreed to have the disputes settled through

arbitration. With the consent of parties, Justice N.N. Goswami (Retd.)

was appointed as a sole Arbitrator. Justice N.N.Goswami (Retd.) gave

his award on 24th December, 1994. Both the sides have filed

objections against the award under Sections 30/33 of Arbitration Act

1940. Smt. Sangita Aggarwal who had initially filed the petition died

during the pendency of proceedings. However, her legal heirs herein

shall be referred as petitioner and Sh.Virender Singh Rohtagi, the

respondent and his branch/family shall be referred to as objector.

2. The learned Arbitrator on the basis of pleadings of the

parties framed following issues:-

"1. Whether the reliefs claimed or any of the claims by the Claimants are beyond the terms of reference?

O.P. Respondents

2. What are the immoveable/moveable assets of the firm and what is the manner and mode of distribution and partition thereof between the parties? O.P. Parties.

3. To what amount are the parties entitled towards capital account of the firm?

4. To what amount is the Claimant entitled as a consequence of rendition of accounts by the Respondents?

5. To what amount, if any, the Claimants are entitled towards the payment received and or that due to firm relating to the chits subscribed by the partnership firm or the partner thereof or the subscription thereof were paid out of funds of the partnership firm?

6. Whether the Claimants are entitled to any interest towards their share in the capital of partnership firm and amount due to them as a result of rendition of accounts, if so, to what amount?

7. Whether Claimant no.1 is entitled to any amount from the partnership firm towards loan obtained by the firm from her?

8. Whether the Respondents have been using assets for running business in other names, if so, to what effect?

9. Relief."

3. The learned Arbitrator after recording evidence of the

parties and after considering the material and documents placed

before him came to conclusion that the assets of the partnership firm

included premises no. G-23/1767-68, Bhagirathi Place, Delhi. The

property was owned by the partnership firm. He divided this property

in two portions, prepared the site plan of two portions and gave an

award awarding one portion to the petitioner and the other to the

objector. The other assets comprised of two shops in premises bearing

no.1809, Bismal Colony, New Delhi. Shops had been used as godowns

for the business of the firm. One of the shops, the learned Arbitrator

held was under tenancy of the claimant, i.e., petitioner and other was

under tenancy of the respondent (objector). He awarded the shop

under the tenancy of claimant to the claimant and shop under tenancy

of the respondent to the respondent. Regarding value of remaining

assets, business worth of partnership, the learned Arbitrator came to

conclusion that the value of the remaining assets of the firm was Rs.70

lakhs. This conclusion was arrived at not only on the basis of pleadings

but also on the basis of offer and counter offer made by the parties in

presence of the Arbitrator, when efforts for settlement were being

made. Proper account books of the partnership firm were not before

the Arbitrator. The Arbitrator made an objective assessment of the

value of assets of the partnership business as Rs.70 lakhs. Since the

business was continued even after death of Mr. Jugal Kishore Aggarwal

by his son without informing the death to the bank, to the Sales Tax

Authority and other Authorities and the name of the firm was used

continuously, he assessed the profits of the business @ 10% of the

value of the assets. He thus gave award that the remaining assets of

the firm be divided equally and out of profits, after death of

Mr.J.K.Aggarwal which he assessed of Rs.18 lakhs, 50% would go to the

petitioner. She was also held entitled to the interest on the said

amount @ 12% per annum. He clarified that out of Nine lakh mesne

profits she would be entitled for the interest on Rs.2.75 lakhs for a

period of 2 years and 4 months, on the next Rs.2.75 lakhs she would

be entitled for the interest for a period of one year 4 months, on next

Rs.2.75 lakhs interest would be payable only for a period of 4 months,

since this profit had accumulated over a period of 3 years. On

remaining 75,000/- no interest was allowed. He also allowed interest

on entire amount of Rs.9 lakhs from the date of award till the date of

decree. The claim of the petitioner against the contribution made by

partnership firm into chits was rejected on the ground that there was

no material on record that firm had contributed towards the chits. The

partnership firm accounts showed a sum of Rs.59,000/- to the credit of

the claimant/petitioner prior to her marriage. Since a sum of

Rs.51,000/- was given to the claimant at the time of marriage, he

allowed only Rs.8,000/- payable to her with interest @ 12%. The

counter claim of the respondent/objector that petitioner's husband

business in the name of JK Enterprise and SP Industrial Corporation

were carried on from the funds transferred by late Sh. Jugal Kishore

Aggarwal were dismissed since there was no material placed before

him to show that any funds of the firm were utilized by claimant's

husband in the above firms.

4. The petitioner in her objections submitted that the learned

Arbitrator failed to award sum of money representing capital of the

claimant and/or predecessor in interest, thus he misconducted himself.

He also failed to award amount against chit funds for which partnership

firm had contributed, therefore he mis-conducted. She submitted that

out of chit funds money defendant purchased Bunglow No.C-18,

Mahindroo Enclave, Delhi and also re-built the house spending an

amount of Rs.18.5 lakhs thereon. She submitted that Exhibit C-1/2

which was a document in the handwriting of Sh.Jugal Kishore Aggarwal

was ignored by the Arbitrator. It was also submitted that the learned

Arbitrator erred and mis-conducted himself and he failed to award the

petitioner the amount wrongly withdrawn by the defendant after death

of Sh. Jugal Kishore Aggarwal and the Arbitrator failed to award amount

against the value of goodwill of the name of the partnership firm. The

learned Arbitrator also mis-conducted himself when he failed to award

the claimant money relating to the stocks of the firm and goods and

stocks in transit of the partnership firm. She submitted that the rights

of the claimant were not fully ascertained and the respondent was

allowed to continue to retain illegal gains made by him. A prayer was

made for modification of the award.

5. The respondents in their objections submitted that the

Arbitrator mis-conducted himself in conducting the proceedings and

had travelled beyond the scope of reference. He committed judicial

impropriety by giving findings which were not based on any material or

evidence or documents and were erroneous. The Arbitrator did not

appreciate the relevancy of the witnesses and had adopted a partial

approach in favour of the claimant and against the objector. He did

not follow the principles of natural justice.

6. It is further submitted that the learned Arbitrator

suggested to the parties for amicable settlement and parties counsels

initiated talks for settlement and all throughout the Arbitrator was

party to the settlement talks. The Arbitrator from time to time insisted

and forced the objector to settle the claim and for this purpose the

matter was adjourned from time to time and ultimately when the

objector agreed to the payments to the claimant and for division of

property the claimant backed out from the settlement creating an

impression as if it was the respondent who was backing out of the

compromise. Thereafter, the Arbitrator gave an award in favour of the

claimant, having become biased, and the Arbitrator was not ready to

accommodate the objector. Since the learned Arbitrator was part and

parcel of offer and counter offer made by the parties he should not

have taken into consideration, while deciding the main claims of the

petitioner, offers and counter offers in order to evaluate the assets of

the firm. The Arbitrator became disqualified to arbitrate because of his

participation in the offers and counter offers. It is also stated that the

respondent had filed a petition under Section 14 of the Arbitration Act,

1940 for removal of the Arbitrator, however without success.

7. The respondent has given details of the proceedings before

the Arbitrator which I consider this Court need not to go into. Suffice it

to say that the respondent's objection regarding biasness of Arbitrator

is baseless. The record rather shows that Arbitrator had been giving

latitude and accommodation to the respondent time and again. The

respondent had been trying, not only to delay the proceedings, but had

been deliberately trying to see that the proceedings do not come to an

end. At several occasions when the respondent did not appear before

the Arbitrator, without any intimation, the Arbitrator did not proceed ex

parte against him and sent notice to the respondent for appearance.

The principle of natural justice does not mean a license to a party not

to appear and to prolong the proceedings. The notion of principle of

natural justice is often being mistaken as a license to prolong the

proceedings. A Court or an Arbitrator can only give an opportunity to a

party to present its case and on failure of availing this opportunity by

the party, the defence of the party can be closed unless this failure had

been for some reasonable ground. Where a party deliberately does

not appear before the Court or the Arbitrator with the intention of

prolonging the proceedings, the Court and Arbitrator both have right to

proceed ex parte. The principles of natural justice are sufficiently met

on giving an opportunity to a party. The principle of natural justice

does not warrant that a party should be called to the Court repeatedly

by sending notices by the Arbitrator, for appearance. Once a party

appears before the Arbitrator on hearing, it is obligatory on the party

to appear on all subsequent hearings which are notified to it at the

time of proceedings. However, the Arbitrator in this case has shown

extra latitude to the respondent in accommodating and giving

repeated adjournments and time and again issuing notices for

appearance. The allegations made by the respondent against the

Arbitrator are malafide and unfounded.

8. I also find no force in the plea of the respondent that since

talks of settlement had taken place in presence of the Arbitrator, the

Arbitrator should not have proceeded with the arbitration proceedings

or he had became a party to the settlement talks. In fact the law does

not prohibit an Arbitrator from making an effort for amicable

settlement of the dispute between the parties. This duty has been cast

on Arbitrator as well as on the Courts that if possible the dispute

between the parties should be got settled amicably. Neither the Court

nor the Arbitrator becomes party to the dispute by making efforts of

amicable settlement. The objection raised by the objector/respondent

is baseless.

9. The other plea taken by the respondent is that the

Arbitrator failed to appreciate the relevancy of witnesses as pointed

out by the respondent/objector and dismissed an application for

summoning additional witnesses thereby the Arbitrator committed an

impropriety. It is also stated that the Arbitrator wrongly decided the

Bhagirath Palace shop to be under rent of the firm/its partner without

calling the owner of the shop, who was a necessary party.

10. It is settled law that an Arbitrator is a judge selected by the

parties and he is not bound by the technicalities of CPC or the Evidence

Act. The Arbitrator is the sole Judge to decide as to what evidence was

relevant and necessary to be examined. It is not for the Court, while

deciding objections to an award, to judge whether the evidence before

the Arbitrator was relevant or irrelevant; inadequate or adequate. The

award given by the Arbitrator cannot be challenged on the basis of

inadequacy or inadmissibility or impropriety of the evidence. In this

case, the Arbitrator gave full opportunity to both the parties to lead

evidence and to argue their respective cases. The respondent/objector

during proceedings had been acting with the sole motive of prolonging

the proceedings. If the Arbitrator had considered that certain

witnesses were not relevant for deciding the disputes, this Court

cannot enter into the controversy whether the witnesses were relevant

or not, nor the award can be set aside on this ground. Similarly, the

Arbitrator was also competent to decide whether the shop was under

the tenancy of the partnership firm or not. He was not deciding the

rights of the owner. The Arbitrator in this case has taken into

consideration, the entire evidence and material produced before him to

come at the conclusions arrived by him.

11. The other ground of challenging the award by respondent

is that the Arbitrator could not have divided the premises into two

portions as done by him in respect of two properties of the firm. It is

argued that law prohibits the division of the tenancy, without consent

and knowledge of the landlord. I consider that this plea must fail. The

landlord can take care of his rights. The Arbitrator was not deciding

the rights of landlord. After the dissolution of the partnership firm,

division of the tenanted portion between two partners does not violate

law and if this gives right to the landlord to throw out the partners from

the tenanted portion, the landlord can exercise his rights in accordance

with law and can take care of his rights.

12. The next objection taken by the respondent against the

award is about valuation of the business assets and the method of

deciding the valuation of the assets by the Arbitrator. It is stated that

the observation of the learned Arbitrator that respondent had agreed

to pay 30 to 35 lakhs to the claimant as his share is only an imaginary

act. I consider that this objection is again a baseless objection made

by the respondent. The respondent has admitted that the talks of

compromise had taken place in presence of the Arbitrator. The

Chartered Accountant of the respondent had appeared before the

Arbitrator and had admitted that he had no personal knowledge about

the correctness of the entries in the books of accounts of the firm and

he had not audited the same. He also admitted that Pushplata

Aggarwal had written a letter to him and asked him for supplying

copies of old balance sheets of the firm. He also received another

letter dated 8th November, 1991 for the same purpose but he did not

comply with the said request even on the reminder because he was

told by Sh.Virender Singh Rohtagi (respondent) that since a dispute

has arisen between the parties he (Chartered Accountant) would not

supply documents to Pushplata, without his permission. It is also

admitted by the respondent that he continued business of partnership

firm even after the death of Sh.Jugal Kishore Aggarwal and the

cheques received in the account of the firm were being diverted and

the banks were not informed about the death of Sh. J.K.Aggarwal,

neither the Sales Tax Department was informed.

13. Normally valuation of business assets of a firm is done on

the basis of books of accounts of the firm. However where books of

accounts are not properly maintained or audited and the business is

carried out by one of the parties even after death of the partner, it is

not unlawful for the Arbitrator to take into account the offers and

counter offers made in his presence by the parties to assess the real

value of the assets of the firm. The Arbitrator committed no error by

evaluating the assets of the firm on the basis of talks of compromise

which took place in his presence wherein offers and counter offers

were made. The parties, after assessing the real value of the assets

and prospectus of the firm make offer and counter offers. The

respondent had been handling the business of partnership firm after

death of Sh.Jugal Kishore Aggarwal and had been in the complete

knowledge of the value of the business assets of the firm. The

Arbitrator rightly took into consideration the offer made by the

respondent to the petitioner regarding her share for assessing the

value of the assets of the firm.

14. The objection of the respondents that the Arbitrator

exceeded his jurisdiction is also untenable. The Arbitrator was

appointed by the Court with wide reference of determining the

immoveable/moveable assets of the firm and to divide the same

between the parties and to have the accounts of the firm settled upon

rendition of accounts, to determine value of the firm, including its

registered trade mark and to determine whether the premises at

Bhagirath Place, Delhi was part of the business of the partnership firm

and to settle the capital accounts of the firm. Apart from deciding

these disputes, the Arbitrator was also given reference to decide all

necessary matters to give effect to the award. Thus, nothing was left

out of the scope of the Arbitrator, in view of vast reference order. The

plea of the respondent regarding the Arbitrator's jurisdiction is

baseless.

15. The objections raised by the petitioner against the award

are in the nature of an appeal against the award. It is settled law that

while considering objections under Section 30 of the Arbitration and

Conciliation Act, 1940, the Court does not act as a Court of appeal. It

is not open to challenge the award on the ground of Arbitrator having

reached wrong conclusion or having failed to appreciate the facts. The

jurisdiction of the Court is limited under Section 30 as clearly indicated

in Arbitration Act. The Court cannot examine the correctness of the

award on merits with reference to the material produced before the

Arbitrator. I therefore find no merits in the objections raised by the

petitioner as well.

16. The objections raised by the petitioner as well as raised by

the respondents are hereby dismissed being meritless. The award

passed by the learned Arbitrator is made rule of the Court. A decree

sheet in terms of award be prepared.

August 28, 2009                      SHIV NARAYAN DHINGRA J.
ak