K.C. Mehra vs Satish Mehra & Ors.
2009 Latest Caselaw 2393 Del

*            IN THE HIGH COURT OF DELHI AT NEW DELHI


                Judgment reserved on:       06.05.2009
%               Judgment delivered on:      01.07.2009

+              I.A. No.5704/1999 & OMP No. 167/1999


      K.C. MEHRA                                      ..... Appellant
                        Through:    Mr. Rakesh Tiku, Advocate.

                              versus

      SATISH MEHRA & ORS.                             ....Respondents
                     Through:       NEMO.


CORAM:
HON'BLE MR. JUSTICE VIPIN SANGHI

1.    Whether the Reporters of local papers may
      be allowed to see the judgment?                              No

2.    To be referred to Reporter or not?                           Yes

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


                            JUDGMENT

VIPIN SANGHI, J.

1. The petitioner has filed the present petition under Section 34

of the Arbitration and Conciliation Act 1996 (The Act) to challenge the

award dated 24.12.1998 made by the sole arbitrator respondent no. 1

Sh. Satish Mehra. The petitioner Sh. K.C. Mehra, respondent no.1-Sh.

Satish Mehra, respondent no. 2 Sh. P.N. Mehra and respondent no. 7

Sh. P.R. Malhotra are sons of Late Sh. Dinanath Mehra. Respondent no.

3 is the wife of Sh. P.N. Mehra, respondent no. 2. Respondent nos. 4, 5

and 6 namely Sh. Pawan Mehra, Sh. Sanjay Mehra and Sh. Sandeep

Mehra are the sons of Late Sh. A.N. Mehra, who was the son of Sh.

Dinanath Mehra. The petitioner states that Late Sh. Dinanath Mehra

who had seven sons partitioned the property which he possessed

among his family members by a duly registered partition deed dated

26.08.1955 registered before the Sub-Registrar, Delhi on 09.01.1957.

Late Sh. Dinanath Mehra expired in the year 1961. In 1981, Sh. R.N.

Mehra, i.e. respondent no. 2, filed a Suit for partition before this court

being Suit No. 282/1981. The other six brothers were arrayed as

defendants. He sought partition of the movable and immovable

properties belonging to the parties and claimed 1/7th share in such

properties. On 09.03.1987 the parties to the suit entered into a

compromise and moved an application under Order 23 Rule 3 CPC

being I.A. No. 1522/1987. The court recorded the statements of the

parties and the suit was disposed off in terms of the compromise. The

petitioner states that attempts made by two brothers namely Sh.

Suresh Mehra and Late Sh. A.N. Mehra to challenge the compromise

decree by filing I.A. Nos. 1741-42/1987 (by Suresh Mehra) and suit no.

1143/1985 (by Late Sh. A.N. Mehra) were not pursued and were

dismissed for non prosecution on 01.09.1998 and 23.03.1999

respectively.

2. The petitioner states that he was shocked to receive a

communication from one Sh. Vinod Kumar, Advocate, c/o Kumar and

Company, Advocates, stating that respondent no.1 had been appointed

as an Arbitrator by consent of some of the brothers, including the

petitioner and that respondent no. 1 had made an award on

24.12.1998, a copy of which was enclosed with the said

communication. It was also informed that Sh. Satish Mehra,

respondent no.1 had got the award registered before the Sub-Registrar

Paharganj, New Delhi. The petitioner states that he had never entered

into any arbitration agreement with anyone appointing respondent

no.1 as an Arbitrator. There was no occasion to appoint an Arbitrator

as all disputes had been fully and finally settled between the brothers

vide compromise dated 09.03.1987 in Suit No.282/1981. The

petitioner alleged forgery by respondent no.1 by misusing a blank

signed paper of the brothers including the petitioner. The petitioner

states that the suit earlier filed by Sh. P.N. Mehra for partition was only

in respect of a few properties namely :

A. Property No. 4/33, W.E.A, Karol Bagh, New Delhi.

B. Agrigultural land in Moja Tihar (now Hari Nagar).

C. Property No. 16/B-6, Deshbandhu Gupta Road, New Delhi.

D. Shed No. F-9, DSIDC, Nangloi 4, New Delhi.

E. Jewellery.

F. Rendition of Accounts.

3. He submits that in the compromise application the parties had

clearly agreed and stated that with regard to the other properties held

by the respective brothers, there was no dispute. In the compromise

application the parties had specifically stated:

"The other properties claimed in the plaint, for partition and not included in the compromise, shall be deemed that the plaintiff or the defendants have no dispute over those properties."

4. He further submits that the factum of the brothers having

signed blank papers earlier had been recorded in the compromise

application and it had then been agreed that neither party would use

such blank signed papers. The petitioner refers to para 2 of the

compromise application namely I.A. No. 1522/1987 which reads as

under:

"It is apprehended that there are certain blank papers or stamp papers signed by the defendants and the plaintiffs in possession of Shri Amar Nath Mehra and now his heirs. There may be similar papers with the other parties. All these papers shall be deemed to be void and nobody will have any right to use those papers etc. nor they will claim any right against the others by using these papers."

5. The first submission of the petitioner to challenge the award,

therefore, is that there was no arbitration agreement entered into

between the parties thereby appointing by respondent no.1 as the sole

Arbitrator and that the said agreement was a forged and fabricated

documents. The specific averment made by the petitioner in this

respect is found in para 18 of the petition and the same reads as

follows:

"That the petitioner was shocked to not only receive the letter but perused the alleged award dated 24.12.98 as he never agreed to any arbitration or appoint the respondent No. 1 as Arbitrator and there was no question of the same once the matter and/or disputes, if any raised were settled amongst all brothers fully and finally vide compromise dated 9th March, 1987 in suit No. 282/81. It was apparent that the respondent No. 1 had indulged in forgery, misusing some blank documents on which signatures were got by all the brothers which as per the compromise dated 9th March, 1987 were deemed to be void for all intents and purposes."

6. The next submission of learned counsel for the petitioner is

that the disputes between all the three brothers had been amicably

settled on 09.03.1987 in suit no. 282/1981. There was no outstanding

dispute remaining which could have been referred to arbitration. For

this he relies on the terms of the compromise application which in

detail sets out the manner of division of various properties mentioned

in para 1 of the said application. The application also records that

several suits pending inter se between the parties would stand

withdrawn upon the parties entering into the compromise. Para 7 of

the application specifically records "there was now no dispute

whatsoever left between the parties" and para 8 records "the parties

shall include their heirs and successors and all shall be bound by this

compromise". As aforesaid para 5 of the application states "the other

properties claimed in the plaint for partition and not included in the

compromise, shall be deemed that the plaintiff or the defendant have

no dispute over those properties".

7. The next submission of learned counsel for the petitioner is

that a perusal of the award shows that respondent no. 1, the so-called

sole arbitrator, in any event, could not have acted as an arbitrator

since he had a personal stake in the so-called dispute. The award

shows that the sole arbitrator threw his hat into the ring by himself

becoming one of the claimants, claiming a share in practically all the

properties and businesses, and he made the award in his own favour.

The respondent no.1 was, therefore, disqualified from acting as an

Arbitrator as he had an inherent bias. He was himself not even a party

to the so-called arbitration agreement. He had not even raised any

claim or dispute with regard to the compromise decree passed in Suit

No. 282/1981. However, respondent no.1 seized the opportunity while

acting as an arbitrator under a forged and fabricated arbitration

agreement to claim a share in various properties and businesses,

disputes in respect whereof stood completely and finally settled under

the compromise decree, and proceeded to make a self serving award

in his favour.

8. The further objection of the petitioner is that the so-called

Arbitrator namely respondent no. 1 did not conduct any arbitration

proceedings. There were no statements of claim or counter claim or

any other document or record filed before the arbitrator, and no record

of any proceedings which are claimed to have been held was ever

maintained. In fact, there is no arbitration record to back up the

impugned award. There is only a forge arbitration agreement followed

by the impugned award. The petitioner states that no arbitration

proceedings of any kind were held.

9. The next submission of learned counsel for the petitioner is

that the impugned award made by the sole arbitrator is beyond the

terms of reference. Assets and properties, which did not form subject

matter of the reference, and rights of persons, who were not even

parties to the so called arbitration agreement have been dealt with in

the impugned award. In this respect, the petitioner highlights the

award made in respect of property bearing nos. 16-B/6, Desh Bandhu

Gupta Road, Dev Nagar, New Delhi and C-48, Sector-6, Noida. The

submission made in respect of these properties would be dealt with a

little later.

10. It is lastly argued that the impugned award does not disclose

any reasons. The arbitrator has not supported his findings and

conclusions with reasons, and he merely declares the share of the

various persons (including those not party to the reference) in respect

of various properties (including those not part of the reference) without

indicating why and how he has arrived at his findings and conclusions.

11. The arbitration agreement on the strength of which the

impugned award had been made by the respondent no. 1 has been

placed on record by respondent no. 1 Sh. Satish Mehra, the Arbitrator.

This arbitration agreement reads as follows:

"We the undersigned agree and declare that we have appointed Satish Mehra to resolve and decide the disputes between us regarding the various properties and assets of Mehra Associate, Gemini Apparel and Hartmann Pharmaceuticals. The decision taken by him will be binding upon us and we understand that we shall not, directly or indirectly dispute the decision taken by him in any court of law. Regarding Suresh Mehra, if he does not agrees to the decision, Satish Mehra and Pawan Mehra will be authorized to contest the matter on our behalf with him.

             Sd/-   P.N. Mehra       Sd/-   Pawan Mehra
             Sd/- Asha Mehra         Sd/- for Sanjay Mehra
                                     and Sandeep Mehra
             Sd/-   K.C. Mehra
             Sd/-   P.R. Malhotra
             Witnesses:
             1.     Prateek Mehra sd/- 16/02/98
             2.     Mrs. Uma Malhotra sd/- 16/02/98"

12. From the said agreement, it appears that apart from the

petitioner Sh. K.C. Mehra, the other parties to this agreement were Sh.

P.N. Mehra, respondent no. 2, Mrs. Asha Mehra, respondent no. 3, Sh.

P.R. Malhotra, respondent no. 7, Sh. Pawan Mehra, Sh. Sanjay Mehra

and Sh. Sandeep Mehra, respondent nos. 4 to 6. Respondent no.1 was

not a party to the agreement but was purportedly appointed as the

sole arbitrator, is the one who has mainly defended the challenge

raised by the petitioner by filing the present petition. The other

respondents viz. respondent Nos.2 & 7 have filed their joint response

limiting the same to only two issues. They have affirmed the validity of

the arbitration agreement and given their version of the scope of the

arbitration agreement vis-à-vis the compromise decree. However, at

the time of hearing none appeared for any of the respondents to make

their submissions.

13. Respondent no.1 denies that the arbitration agreement is a

forged and fabricated document and that no arbitration proceedings

took place. Respondent no.1 makes his submissions in respect of

various properties held by one or more of the brothers or their father

late Sh. Dinanath Mehra. So far as the compromise decree in suit No.

282/1981 is concerned, the stand of respondent no. 1 is that the said

compromise application was signed by the petitioner as the attorney of

respondent no.1 herein Sh. Satish Mehra. Respondent no. 1 seeks to

question the action of the petitioner in acting as his attorney in Suit

No. 282/1981. He states that the said compromise was not acceptable

to him and the same was without his consent. Respondent no. 1 states

that in the year 1988, he came from USA (where he resides) and

prevailed upon the parties to settle the disputes out of court. He

states that the parties entered into an agreement to refer the disputes

to his sole arbitration despite the fact that he himself was also a

claimant to the properties standing in the name of other parties and

the other parties were claiming rights in properties standing in the

name of respondent no.1.

14. Pertinently, respondent no.1, in para „I‟ under the heading

"Brief facts" of his counter affidavit states "petitioner's submission that

property which is not part of the arbitration agreement have been

included in the award is correct". The explanation furnished is that the

parties had initially drawn up a preliminary list of properties on which

question marks were put against a couple of properties, and that after

discussion the final list was drawn in which "these properties were not

included but taking into account that funds for their purchase also

came from partners funds, these were mentioned in the award but

deponent did not make any determination regarding them".

Respondent no.1 disputes the averment of the petitioner that the

petitioner had to recover huge amounts of money from respondent no.

1 and goes on to state that respondent no.1 has to recover huge

amounts from the petitioner. He states that parties had been called

upon to file their respective statements of claim but the parties chose

not to file any claim statements. However some documents in writing

in support of their claims were given to respondent no. 1 which are

annexed as annexure R-4 to the counter affidavit of respondent no.1.

He further states that minutes of meeting held on 20.12.1998 were

recorded and the same is filed as annexure R-5. He further states that

during the period 16.02.1998 till the passing of the award, nobody

raised any objections and the award is the outcome of deliberations

which respondent no.1 has held with the parties to the petition both

jointly as well as separately with other respondents.

15. Respondent no. 1 also states that present objection petition is

barred by limitation, inasmuch as, the award is dated 24.12.1998

whereas the objections have been preferred by the petitioner only on

20.05.1999. The same could have been preferred within three months

and delay could be condoned on justifiable grounds being shown to the

court up to a maximum period of thirty days.

16. Respondent nos.2 to 7 have filed a joint reply. In their short

reply they have restricted their submissions primarily to the aspect of

the arbitration agreement being genuine and with regard to its scope

in relation to the compromise decree. They state that on 16.02.1998

the parties had decided to appoint respondent no.1 as the sole

arbitrator. They deny the allegation of the petitioner that the

agreement is forged or fabricated on pre-existing blank signed papers.

They state that on 16.12.1998 everyone including the respondents and

the petitioner, and respondent no.1 Sh. Satish Mehra placed all the

properties into the pool irrespective of the fact as to who owned them

on paper or how they were obtained i.e. whether by purchase, under

the compromise decree or inheritance. The properties standing in the

name of two remaining brothers Sh. J.N. Mehra and Sh. Suresh Mehra

were not included in the agreement, namely, shares in Khasra

No.2066/78 awarded to them as per the compromise decree of 1987.

They also state that the petitioner had challenged the inclusion of

some of the properties in the award. He had initially objected to such

inclusion at the time of signing of the agreement but had subsequently

agreed to their inclusion. They further state that the petitioner not

only attended the meetings, except one, but even held individual

meetings with some of the respondents.

17. Along with objection petition, the petitioner had also moved

I.A. No. 5704/1999 under Section 34 (3) of the Act to seek condonation

of eleven days‟ delay in filing of the objections. The petitioner states in

the said application that he was shocked to receive a communication

from one Sh. Vinod Kumar, Advocate, c/o Kumar and Company,

Advocates, informing him that some alleged award has been made by

Sh. Satish Mehra, his brother of which he had no knowledge. He

further states that he started making enquiries to find out how the

forgery has been committed. While he was making enquiries, he was

suddenly taken ill with unstable Angina, Hypertension etc. and was

advised rest for one month. He could not move out of his house. He

was able to move out of his house only on 15.05.1995. He collected

his old files and consulted his counsel. Thereafter, the objections were

drafted and filed. He states that the communication from Sh. Vinod

Kumar was received on 10.02.1999 through courier at 12.30 pm. The

knowledge of the petitioner of the making of the award is, therefore,

claimed from 10.02.1999. He states that the objection could,

therefore, have been filed by 09.05.1999. Since the same have been

filed on 20.05.1999, there is a delay of eleven days of which

condonation is sought. The application is supported by the affidavit of

the petitioner.

18. Despite notice, no reply has been filed to this application by

any of the respondents. The petitioner has placed on record the

communication stated to have been received from Sh. Vinod Kumar,

Advocate which is dated 07.01.1999. However, there is no denial of

the fact that the petitioner was served with the communication of Sh.

Vinod Kumar through courier on 10.02.1999. Consequently, I see no

reason to disbelieve the case of the petitioner that the petitioner was

served with the award and became aware of the same only on

10.02.1999. The objections could have been preferred by the

petitioner within three months from the date he received the arbitral

award. That period expired on 09.05.1999. However, the Court has

power to condone delay for a period of upto 30 days, but not

thereafter. Since, the delay is only about eleven days, looking to the

averments made in the application duly supported by affidavit of the

petitioner, and the fact that there is no challenge to the same, I am

inclined to condone the delay and accordingly I allow the application.

19. Having heard learned counsel for the petitioner, perused the

impugned award, the arbitration agreement, the proceedings placed

on record by respondent no.1 as well as having perused the counter

affidavit of respondent no.1 and the joint reply of respondent nos.2 to

7, I am of the view that the impugned award cannot be sustained and

is liable to be set aside for multiple reasons.

20. Firstly, I may deal with the submission of the petitioner with

regard to the arbitration agreement being forged and fabricated by the

use of blank signed documents by respondent no. 1. The averment of

the petitioner is that the arbitration agreement was forged and

fabricated by respondent no. 1 by using earlier blank signed papers.

Pertinently, no allegation of forgery or fabrication has been made

against any of the other respondents. Respondent no. 1 and

respondent nos. 2 to 7 have separately and squarely denied any

forgery as alleged by the petitioner. The petitioner, with a view to cast

a doubt on the arbitration agreement seeks to place reliance on para 2

of the compromise application filed in suit no.282/1981 wherein it was

recorded that there are certain blank papers or stamp papers signed

by the defendants and plaintiffs in possession of Sh. A.N. Mehra and

now his heirs, and that there may be similar papers with the other

parties and such papers shall be deemed to be void and nobody will

have the right to use the same.

21. A perusal of the arbitration agreement filed by respondent no.

1 as annexure R-1 however, shows that the same has been signed not

only by the petitioner but by the other parties in the present petition

and the same has also been witnessed by Prateek Mehra and Uma

Malhotra. The placement of the signatures of all the parties on

Annexure R-1 does not support the case of the petitioner that the said

arbitration agreement has been forged on blank signed papers. If the

same had been forged, the forgery would have been committed by not

only respondent no. 1 but also by the other parties and witnesses.

However that is not even the allegation of the petitioner. Even the

statement made in the compromise application is with regard to the

existence of some blank signed papers containing signatures of parties

to the said suit. However, the arbitration agreement contains

signatures of not only the petitioner and some of the parties to the said

suit, but also of those who were not parties to the said suit.

Consequently, I am not inclined to accept submission of the petitioner

that the arbitration agreement is a forged and fabricated document.

The same appears to be a genuine document.

22. I also cannot accept the submission that there could have

been no reference to arbitration in respect of the subject matter of the

agreement. Whatever may have been the effect of the compromise

decree passed in Suit No.282/1981, the fact of the matter is that the

petitioner agreed to refer the disputes relating to three firms viz.

Mehra Associates, Gemini Apparel and Hartmann Pharmaceuticals to

arbitration. It does not lie in his mouth to now say that there was no

subsisting dispute in relation to the assets and properties of three firms

which could be referred to arbitration. I, therefore, reject this

submission of the petitioner.

23. A perusal of the arbitration agreement shows that the parties

to the said agreement had agreed to refer their inter se disputes

regarding the properties and assets of Mehra Associates, Gemini

Exports, Hartmann Pharmaceuticals to the sole arbitration of Sh. Satish

Mehra, respondent no. 1. However, admittedly, the award has been

made not only in respect of the assets and properties of Mehra

Associates, Gemini Exports and Hartmann Pharmaceuticals but also in

respect of the following properties :

1. 4/33 WEA.

2. 16-B/6 Deshbandhu Gupta Road

3. F-9, DSIDC, Industrial Block No. 4, Nangloi.

4. Khasra No. 2066/78, Village Tihar.

5. Khasra No. 2091, Hari Nagar, Village Tihar.

6. C-48 Sector - 6, Noida.

7. A-26, Sector 5, Noida.

8. A-27, Sector 5, Noida.

9. Assets of Kingsmen Pharmaceuticals, Delhi.

24. Respondent No.1, as extracted above, admits the inclusion of

various other properties in the award which did not form part of the

initial reference. He further states that a final list of properties was

drawn up (of the properties subject matter of arbitration) which too did

not include the other properties. Pertinently, this so called final list is

not a part of the arbitral record. In any event, admittedly that list did

not include other properties. Though respondent No.1 claims that he

did not make a determination in respect of three other properties, the

fact of the matter is that he has made a determination in respect of the

properties enlisted above in the impugned award.

25. Though respondent nos.2 to 7 in their reply state that the

petitioner after initial objections consented to other properties not

forming part of the reference being included in the arbitration

proceedings, there is nothing to show on record that the parties had

agreed to enlarge the scope of the reference before the sole arbitrator.

Arbitration agreement necessarily has to be in writing. It may be

contained in a document signed by the parties, in an exchange of

letters, telex, telegrams or other means of telecommunication which

provide record of the agreement, or any exchange of statements of

claims and defence in which the existence of the agreement is alleged

by one party, and not denied by the other. The modification,

enlargement or curtailment of the arbitration agreement, therefore,

necessarily has to be in writing. In the present case, though initial

arbitration agreement is in writing, the purported enlargement of its

scope and reference of disputes with regard to various other properties

to arbitration, admittedly, is not in writing. It cannot, therefore, be

accepted that the scope of arbitration agreement was enlarged

mutually by the parties. A perusal of the award shows that the

arbitrator on the very first page incorrectly records that the agreement

dated 16.02.1998 was entered into to resolve the differences/disputes

"regarding various properties and assets of various companies which

are either in their individual names or in the joint names of some of the

parties.....................". Thereafter, the sole arbitrator goes on to deal

with, inter alia, the aforesaid properties which were not even a part of

the reference before the sole arbitrator. Since the award, admittedly,

deals with the aforesaid properties apart from the properties and

assets of the three firms namely Mehra Associates, Hartmann

Pharmaceuticals and Gemini Exports and the award is beyond the

terms of reference and cannot be sustained. The arbitrator acted

beyond his jurisdiction while making the award dealing with the

aforesaid properties.

26. There is also merit in the submission of the petitioner that

respondent no. 1 was disqualified from acting as an arbitrator as he

had personal interest and stake in the dispute. A perusal of the

arbitration agreement shows that respondent no. 1, the sole arbitrator

was not a party to the same. It cannot, therefore be said that he had

raised a dispute or claim in respect of three firms, the assets and

properties whereof were sought to be divided between the petitioner

and respondent nos.2 to 7 through his arbitration. How then,

respondent no. 1 could have jumped into fray and staked a claim for

himself in the various properties and made an award in his own favour

is not understood. The sole arbitrator observes that the "compromise

decree had been obtained by the parties excluding Mr. Satish Mehra

and without his consent, which was subsequently challenged by Sh.

Suresh Mehra". Therefore, respondent no.1 sought to undermine the

compromise recorded before the court in Suit No. 282/1981 by

bringing in his own grievance that the compromise in the suit had been

arrived at without his consent. If respondent no.1 was aggrieved by

the compromise decree which was made on the basis that he had also

consented to the same, it was open for respondent no. 1 to have

challenged the compromise decree in accordance with law. The filing

of a separate suit to challenge a compromise decree is expressly

barred by Order 23 Rule 3A. If a suit is not maintainable for that

purpose, certainly arbitration could not have been resorted to, to set

aside a compromise decree. Having not done so, it was not

permissible for respondent no. 1 to exploit his position as an arbitrator

while adjudicating disputes between a few of his brothers/their

successors in respect of only a few specific properties, to settle his own

scores with one or the other party. Respondent No.1 further records

"This appointment as an Arbitrator is made by the parties knowing fully

well that I am also one of the claimants of the properties regarding

which the disputes were in the family. It is also relevant that most of

the properties which are subject matter of the present dispute were

not in any case included in the previous compromise decree. Further

more it was agreed that previous interse agreements stand null and

void."

27. If the position was as stated by the arbitrator in his award,

how is it that respondent no. 1 did not become party to the arbitration

agreement and did not sign the same, is not explained. The statement

that most of the properties, the subject matter of the "present dispute"

were not included in the previous compromise decree and that it had

been agreed that previous inter se agreements stand null and void is

wholly substantiated and finds no basis whatsoever in the arbitration

record produced by respondent no.1. Since the sole arbitration has

proceeded on the foundation of the aforesaid premise, the impugned

award cannot be sustained for this reason as well.

28. In the award the sole arbitrator, respondent No.1, observes

that the parties had themselves agreed not to file any claims in

writing, but that they have shown to him the relevant records in their

possession in support of their respective claims and counter claims.

However, from the record of the arbitrator it appears that no notice

was issued to the parties requiring them to present their claims/

counter claims, no time lines were fixed, and no opportunity was

granted. Even the so called agreement between the parties is not

reflected in any order sheet, and no consent in writing in this respect

was taken from the parties. What documents were shown to the

arbitrator by the parties and considered by him is also not evident from

the record filed by the arbitrator. Since these documents do not form

part of the arbitral record, it is impossible to appreciate as to what is

the purport or effect of the so-called documents shown to the

arbitrator. Respondent No.1 has filed along with his counter affidavit

as Annexure R-4 what he claims to be some documents and writings in

support of their claims given by the parties to him. A perusal of these

documents shows that they all appear to have been written in the

handwriting of one person. They are mere short notes prepared in

respect of various properties and subject matter of the award. They do

not bear the name or signature of the party, who has purportedly filed

them before the arbitrator. Such a record is wholly unintelligible and

serves no purpose. The lack of reasons in the award further

compounds the confusion.

29. It also appears that no party was given the opportunity to

meet the case of the others. The petitioner has stated that he never

received any notice of any arbitration proceedings. From the record

filed by the arbitrator it appears that this position is beyond any

controversy. The arbitrator has filed on record, along with his counter

affidavit, the proceeding sheet of only one date i.e. of 20.12.1998 as

Annexure R-5. These proceedings record as follows:

"A meeting was held on 20.12.98 at 2 Hare Krishna Temple, East of Kailash, New Delhi which was attended by Mr. P.N. Mehra, Mrs. Asha Mehra, Mr. P.R. Malhotra and Mrs. Uma Malhotra wife of Mr. P.R. Malhotra but he did not attend the meeting even though he confirmed that he shall attend. Mr. Pawan Mehra was also informed of the meeting by Mrs. Asha Mehra but he also could not attend the meeting."

30. It is clear that the petitioner was not issued any notice by the

arbitrator and even if these proceedings are believed to be genuine

they show the adoption of a very casual approach by the arbitrator.

No other proceeding of any kind claimed to have been held by the

arbitrator has been filed on record. The procedure adopted by the

respondent-arbitrator appears to be in clear violation of the principles

of natural justice.

31. The arbitrator in paragraph 6 on internal page 6 of the award

observes that the major points of difference between the parties are in

respect of, inter alia, the rights and obligations of K.C. Mehra and A.N.

Mehra jointly and separately with respect to various properties bought

in Noida in the names of Hartmann‟s Pharmaceuticals, Kingsmen

Pharmaceuticals and Mehra Associates etc. "of which Mr. Satish Mehra

was a partner with them but his name was removed arbitrarily by them

from those properties which were subsequently transferred in their

individual or joint names". The arbitrator, therefore, takes the

opportunity while making his award to declare his removal from the

aforesaid partnership firms, as arbitrary. This he does even though he

is not a party to the arbitration agreement and he has not raised any

claim in the arbitration. The aforesaid finding of the arbitrator is a self-

serving statement made by him. This clearly brings out the bias of the

arbitrator. The arbitrator continues to make various self-serving

statements in paragraph 7 of the award, which begins with the words

"Some important facts placed before me and important for

consideration of the matter are as follows:". He goes on to state that

the firm Mehra Associates was started in 1971 by Satish Mehra, the

arbitrator and Amar Nath Mehra. He further states that the legal heirs

of Sh. A.N. Mehra have obtained the sale proceeds equivalent to 4/7 th

of 4/33 W.E.A. whereas they admit that they are entitled to 1/7 share

only while Sh. Satish Mehra (the arbitrator) and Sh. K.C. Mehra did not

get any share. He further states that a plot of land in Noida, inter alia,

jointly belonging to Satish Mehra was sold by Sh. A.N. Mehra in his

lifetime but his legal heirs have no knowledge about the sale proceeds.

In paragraph 8 of the award the arbitrator states as follows:

"8. Since I am also a party to the dispute, in one of the meetings at the residence of Mr. K.C. Mehra, I removed myself from the meeting to allow the remaining parties to arrive at an amicable solution. A blue print of the division of the various properties among the parties to the dispute were presented to me for approval."

32. However, from the award and the proceedings filed before me

there is nothing to suggest as to when this meeting took place at the

residence of K.C. Mehra; what was the blue print of division of various

properties amongst the parties to the dispute presented before the

arbitrator; whether the same was in writing and signed by the parties,

and; whether the arbitrator then proceeds to apportion the shares in

the various properties dealt with by him in accordance with the so

called blue print. In respect of the following properties, the arbitrator

declares his own interest:

             i.       1/7 share in 4/33 W.E.A. which is due to
                      him from the legal heirs of Mr. A.N.
                      Mehra.
             ii.      2/7 share in Khasra No.2066/78 village
                      Tihar
             iii.     5/21 share in Khasra No.2091 Hari Nagar
             iv.      1/4 share in 16B/6 D.B. Gupta Road
             v.       1/3 share in C/48 Sector 6 Noida"

33. Under the heading "Adjustments", in para 11 of the award the

arbitrator declares himself to be the owner of C-48, Sector-6, Noida, to

the extent of 1/3. He also declares himself to be the owner of 16B/6,

Deshbandhu Gupta Road, property to the extent of 5/16 share. He

declares his share in property No.2066/78 Hari Nagar to the extent of

3/7 and his share in khasra No.2091, Hari Nagar to the extent of 5/21.

In respect of properties in Village Tihar and Hari Nagar he declares that

the same would be developed by the parties by making their

contribution. He holds that in case the other parties are unable to

contribute for the same, inter alia, he would advance money for this

purpose on behalf of other parties, which would be recoverable along

with interest @ 16% per annum upon the sale of the properties in

Tihar/ Hari Nagar. In paragraph 13, he enlists the mode of

management of various properties and includes himself in the

management of property situated in Khasra No.2091. So far as the

property bearing Khasra No.2066/78, Hari Nagar, is concerned, he

keeps to himself the entire management of the property.

34. I have narrated all these details only to show the extent of

personal interest the arbitrator had in the various properties dealt with

in the award. It is elementary that no person who has a personal

interest in the subject matter of arbitration can function as an

arbitrator unless such interest is known to the parties even before they

nominate such a person as an arbitrator. A perusal of the arbitration

agreement in question does not show that it was within the knowledge

of the parties to the agreement that the sole arbitrator would stake a

claim in the assets and properties which were the subject matter of

arbitration. In case the arbitrator becomes interested in the matter of

dispute at a later point of time, he is obliged under Section 12 of the

Act to disclose without delay to the parties writing any circumstances

which are likely to give rise to justifiable doubts as to his independence

or impartiality. There is no communication by the arbitrator to the

parties in writing about his interest in any of the properties dealt with

by him in the award in question. It is elementary that no person can

be a judge in his own cause. If a person is personally interested in the

subject matter of dispute, and he has a personal stake in the dispute,

he cannot function as an arbitrator, unless all the parties, despite

being aware of this situation voluntarily agree to his acting as the

arbitrator. An arbitrator, the moment he acquires an interest in the

dispute pending before him, loses his mandate in law. I hold that the

sole arbitrator had lost his mandate to act as an arbitrator as he

became de jure unable to perform his functions as an arbitrator.

Reference may be made to Alcove Industries Ltd. v. Oriental

Structural Engineers Ltd. & Anr. 2008 (1) Arb. L.R. 393 (Delhi).

35. I also find merit in the submission of learned counsel for the

petitioner that by the impugned award, respondent No.1 has sought to

nullify the compromise decree passed in Suit No.282/1981. Two

glaring instances are the award in respect of property No.16B/6,

Deshbandhu Gupta Road, Dev Nagar, New Delhi and property No.C-48,

Sector-6, Noida. In Suit No.282/1981, the parties had agreed in their

compromise that the petitioner is the exclusive owner of the said

property at 16B/6, Deshbandhu Gupta Road, Dev Nagar, New Delhi.

Even after the passing of the compromise decree, attempts were made

by Sh. A.N. Mehra and by Sh. Suresh Kumar Mehra to challenge the

ownership of the petitioner in respect of that property were dismissed.

Property No.C-48, Sector-6, Noida did not even form part of Suit

No.282/1981 or the compromise dated 09.03.1987. On the other hand,

the compromise application bearing I.A. No.1522/1987 clearly recorded

that in respect of properties not included in the compromise, there is

not dispute about the ownership. The award, however, seeks to

apportion shares in these two properties to the other parties. Once a

decree has been passed by a Court making a declaration in respect of

ownership and title of a property, it is not understood how the same

could have been upset in a subsequent arbitration, unless the party in

whose favour the declaration made by the Court stands, consents to a

redetermination of his rights in respect of the same property or

voluntarily agrees to a reduction or impairment of his rights in such a

property. The decree passed by the Court would continue to bind the

parties who were parties to the suit in which the decree is passed. No

doubt, those who are not parties before the Court would not be bound

by a decree which operates in personam. However, no Court or

arbitrator can disregard the terms of the decree in subsequent

proceedings between all or some of the parties who were parties to the

proceedings in which the decree was passed. The arbitrator was

probably conscious of this limitation and, therefore, recorded that the

parties agreed that previous inter se agreements stand null and void.

However, as already noticed this statement in the award is wholly

unsubstantiated. The award of respondent No.1 is clearly opposed to

the Public Policy of India which is to uphold the sanctity of a decree

passed by a Court of competent jurisdiction inter parties. This policy is

incorporated in the Rule of res judicata contained in Section 11 C.P.C.,

and in Order 23 Rule 3A C.P.C.

36. The impugned award contains no reasons and basis on which

the same has been made. Apart from stating that in one of the

meetings at the residence of Mr. K.C. Mehra, in his absence, the other

parties produced before him a blue print of the division of various

properties amongst the parties to the dispute, the arbitrator does not

give any further details. Even the so-called blue print is not contained

in the arbitral record. It is not reflected as to when the said meeting

was held. The award cannot be said to be the product of an

adjudication of rights of the parties in dispute. It is merely expressive

of the manner of division of various properties including those not

forming part of the reference by the arbitrator in the manner that he

may have considered fair, just and practicable. However, even this

determination is vitiated since the arbitrator seeks to claim a share for

himself in various properties which he has sought to divide through his

award.

37. For all the aforesaid reasons, I am of the view that the award

made by the sole arbitrator, the respondent No.1, is completely

unsustainable and is liable to be set aside in its entirety. The same has

been made by the arbitrator:

(i) by going well beyond the scope of the reference contained in

the arbitration agreement;

(ii) whose mandate stood terminated as he had personal interest

and stake in the subject matter of dispute and, therefore, the

arbitrator became de jure unable to act as an arbitrator;

(iii) in breach of the principles of natural justice, inasmuch as, no

opportunity appears to have been given to the parties to call for

their statements of claim, replies, counter claims etc and no

documents appeare to have been filed in the arbitration

proceedings. No notice appears to have been issued to the

parties including the petitioner of any of the hearings and no

record has been maintained of the proceedings conducted by

the arbitrator except in respect of the proceeding purportedly

held on 20.12.1998 in the absence of the petitioner;

(iv) in derogation of the compromise decree passed by this Court in

Suit No.282/1981, which was not permissible considering the

scope of the reference made before the arbitrator;

(v) Without assigning any reasons for the conclusions and findings

reached by him.

38. Accordingly, the impugned award dated 24.12.1998 is hereby

set aside leaving the parties to bear their respective costs.

(VIPIN SANGHI) JUDGE July 01, 2009 dp/rsk