Karnataka High Court
Venkataramana Rao vs P. Ramachandra Rao And Others on 18 September, 1997
Equivalent citations: 1998 A I H C 2342, (1998) 33 ARBILR 1
JUDGMENT M.F. Saldanha, J.
1. The appellant Venkataramana Rao, one of the beneficiaries of an award dated 14-6-1986 has assailed the correctness of an order dated 8-3-1989 passed by the learned Civil Judge at Mangalore whereby the award in question has been set aside. Briefly stated, the dispute in question concerns the estate of one Sharadamma who died on 7-12-1985 and the question arose as to on whom the estate would devolve and secondly, to what extent. The matter was referred to the arbitration of two arbitrators Sri. P. Ramachandra Rao, a retired Civil Judge and Sri. B. Ananta Somayaji, a Senior Advocate of Mangalore. There were various contestants. The principal problem arose because of the fact that Sharadamma's father-in-law the late Venkataramaniah had as many as three wives, the first of whom did not have any children but the second two wives did have children resulting in two distinct branches of the family. The arbitration proceedings culminated in an award whereunder the arbitrators held that the daughter of the brother of Sharadamma's late husband Ramachandra Rao by name Vishalakshi would be the sole heir to the estate. However, the award indicates that it was decided to give effect to certain wishes of the deceased Sharadamma and therefore, a small share of the property was, with Vishalakshi's consent, held to devolve on the present appellant Venkataramana Rao. The award in question was challenged on several grounds and after a detailed hearing the court set aside the award for two main reasons. In the first instance, the court took a rather serious view of the fact that one of the learned arbitrators by the name of Somayaji was shown to have been the lawyer for deceased Sharadamma during her lifetime and in the award, a sum of Rs. 15,000/- has been directed to be paid over to the learned arbitrator B. Somayaji on the ground that this represents the outstanding professional charges due to him. The Court has held that this clearly demonstrates that the learned arbitrator was interested in the dispute in question and that therefore, the award stands vitiated. The second ground on which the Court has interfered is principally that the learned Judge has rejected the contention that Vishalakshi would be the sole beneficiary of the estate and has held that it would be necessary to divide the property between the legal heirs of deceased Sharadamma, it is against this order that the present appeal has been filed.
2. Mr. Holla, learned counsel representing the appellant had taken serious objection to both the grounds. As far as the question of personal interest goes, he demonstrates to me that the principal reason why Somayaji was nominated as the arbitrator was because he was a senior member of the family but more importantly a person known to the family in so far as he had handled litigation on behalf of the deceased Sharadamma and as her legal advisor had also assisted and advised her on many occasions. He submits that in this background, Somayaji was the most suitable and most competent person to resolve the family dispute which was why the parties willingly and consciously appointed him as one of the arbitrators. Learned counsel demonstrates to me that at no stage during the proceeding did any of the parties indicate that their confidence in the arbitrator is undermined nor at any stage did they object to his continuing with his arbitration and making the award. On the other hand, learned counsel has demonstrated to me that the various contesting parties had taken part in the proceedings and that they had even endorsed the order sheet from time to time. Also, what he demonstrates to me is that one of the heads of reference to the arbitrators was that they were required to make an inventory of the various heards of the estate and so also compute the liabilities or outstanding and it was for this reason that the arbitrators held that the outstanding professional charges due to Somayaji to the extent of Rs. 15,000/- had to be paid to him out of the estate. Learned counsel submits that this has in no way affected the fairness or impartiality of the arbitrator and that this is no ground on which any court could have come to the concision that the award is vitiated. In this context, he has placed strong reliance on a decision of the Supreme Court reported in 1994(6) JT SC 412 in which, in more or less similar circumstances the Supreme Court has observed that where parties have participated in the arbitration proceedings and have invited an award, they cannot seek to attack the validity of the award on the ground of disqualification of the arbitrator. The Supreme Court reiterated the principle earlier laid down in the decision . Mr. Holla is supported in his submissions by the learned advocate who represents the beneficiary Vishalakshi who is Respondent No. 8 to this proceeding.
3. On the other hand, the learned advocate who represents the respondents has vehemently submitted that there are a host of decisions in relation to not only arbitration proceedings but judicial proceedings in which the fundamental principle has been laid down that if the Presiding Officer or the Arbitrator is in any way interested in the proceedings or has represented any of the parties to those proceedings that the rule of professional ethics mandates that the person should not hear the matter or decide it as there is always the possibility of some degree of bias creeping in. Mr. Haranahalli and Mr. Achar have strongly submitted that they can demonstrate from the record which they have in fact done before me that Somayaji had not only appeared on behalf of Sharadamma in some earlier litigation but more importantly that he was advising Sharadamma, which is clear from some of her letters that have been produced. They have however, alleged that the arrangement where under the appellant has benefited to the extent of some property is not something which emerges out of the dispute over heirship but that on the other hand, it is clear from the correspondence that Somayaji had given certain advice to the deceased with regard to transfer of some property to the appellant. Learned counsel therefore submitted that it is not merely the interest of Somayaji to the extent of Rs. 15,000/- which he has awarded virtually to himself but also the aspect that he had something to do with the proposed transfer of some property to the appellant and he submits that in this background, the bias that has been alleged is well founded and that it is really in this background they have placed reliance on a decision of the Calcutta High Court reported in Indian Decisions Vol. 1 p. 142 (sic) wherein a Division Bench of the Court upheld the view that where the arbitrator was the retained pleader of the plaintiff and had not disclosed this fact before the arbitrator was appointed, that the award would stand vitiated. Essentially, the challenge proceeds on the ground that learned counsel have submitted that an arbitrator gets disqualified from adjudicating on any dispute with which he is in any manner connected and they submitted that in the aforesaid circumstances even if there is no special interest it can be demonstrated that the connection is established. While they concede that there may be no direct nexus with any of the parties, they have contended that the arbitrator definitely had a personal financial interest to the extent of the money that was due to him and that therefore, the decision of the trial Court is liable to be upheld.
4. The purity of legal proceedings depends to a large extent on the doctrine of absolute impartiality and it is an extension of this principle that requires that a Judge or an arbitrator would stand disqualified from dealing with or deciding a dispute with which the Presiding Officer is connected or has any form of interest in it. For purposes of assessing whether on the basis of this principle Somayaji stood disqualified, one would have to first take note of a few special facts. The first of them is that the dispute related to inter se claims between the various parties before the arbitrators and there is nothing on record to indicate that Somayaji was in any way related or connected with any of these persons. The fact that in the correspondence he might have given certain advice to Sharadamma who appears to have been desirous of transferring some property to the appellant was within the framework of the legal advice that any lawyer would tender to a client and this would not create any bias either in favour of the appellant or against him. These are the normal functions of a legal advisor and it would be assured to impute any interest of any type, even remote, to Somayaji merely because he may have given some advice along these linces. It is true that he was the lawyer of deceased Sharadamma but the point to be noted is that he had not acted as the lawyer on behalf of any of the contestants. Had that been the case, the principle laid down by the Calcutta High Court in the case referred to by the respondents would certainly have created a disqualification. His having been the lawyer of Sharadamma would not cloud his impartiality in any manner whatsoever when it came to the question of deciding the simple issues that had been referred to the Arbitrators. This was a case wherein a fair and correct decision had to be taken with regard to devolution of the property of the deceased and in this background the intention of the deceased is an irrelevant factor and that was one of the precise reasons why the family members appointed Somayaji as one of the arbitrators because deceased Sharadamma was his client for some time, he had occasion to deal with her and he knew in which direction her mind was working. I do not see any ground on which, in these circumstances bias for or against any of the contestants can be attributed to Somayaji and infact a reading of the award that has been made will indicate that the arbitrators have proceeded quite impartially and have decided the matter in good faith and to the best of their judgment. One cannot impute bias or motive only on technical grounds to arbitrators or judicial officers because this is a factor that has got to be demonstrated and established and in this background, to my mind the findings of the lower Court whereby it is held that the award is vitiated on this ground become unsustainable and will have to be set aside.
5. I need to deal precisely with the award of the amount of Rs. 15,000/- by the arbitrator to himself. Prima facie, it would appear rather unusual and the award of such an amount may even lead to a passing inference that the arbitrator had some subsisting interest. Again a distinction will have to be drawn between mere interest and a situation where a member of the Bar is entitled to reimbursement of professional charges due to him. Where the relationship is that of a lawyer and a client and where the client is dead and where an inventory is made of the assets and liabilities, it is perfectly, within the rights of the lawyer concerned even if he is an arbitrator to specify that a certain by way of professional charges was outstanding to him and that this must be disbursed. I find from the proceedings that all the parties have willingly consented to this which was in the fitness of things and that is an additional ground on which the Court ought never to have interfered with this award particularly when it pertained to a senior member of the Bar. The finding recorded by the trial court to the effect that by virtue of the amount of Rs. 15,000/- being awarded to Somayaji that it was a total and complete proof of his interest in the subject-matter of dispute is not only unjustified but is in bad taste. The learned Judge seems to have overlooked the fact that in identical situations arbitrators invariably quantify the fees payable to them by way of professional charge and if the logic of the lower Court is to be established, every arbitrator would be disqualified from quantifying the professional charges from being paid to the arbitrator. It is on this basis that the challenge to the award that was accepted by the trial court will have to be set aside.
6. There was a considerable amount of dispute with regard the question as to whether the reference to arbitration was in order. To my mind, this ground is only an after thought because all the parties were represented either by themselves or their respective spouses. All the parties did appear either personally or through respective spouses and the technical plea that is canvassed is that one or two parties have not personally signed is to my mind unjustified and unfortunate. It may be true that these persons have not given a specific power of attorney to their respective spouses but it is demonstrated that they knew about the arbitration proceedings that there has been a total family partition in the proceedings and at the end of the day to plead such hyper technicalities is nothing more than indulging in legal hair splitting which no Court could uphold.
7. There is however another ground of challenge which was hotly debated. Mr. Holla relied on the provisions of the Hindu Succession Act particularly Sections 15, 16 and 18 while defending the award because he submitted that even though the arbitrators have not set out detailed reasoning, that it is very clear that they have proceeded on the basis that on the strength of the principle laid down in Section 18, Vishalakshi who is the full blooded heir would have precedence over the other contestants who would come under the definition of half-blooded heirs. I need to mention here that looking at the genealogy, the submission canvassed by Mr. Holla essentially proceeds on the footing that the arbitrators have correctly applied the law in arriving at their decision. This position is however seriously contested by the various counsel who represent the respondents. The first limb of their argument proceeds on the footing that it is Sharadamma whose estate we are concerned with and not her husband late Ramachandra Rao. They have contended that this is the fundamental error in so far as if Sharadamma is the Hindu wife who has died intestate, that going back on Section 15 since they had no children, sub-clause (b) would apply and the property would devolve equally on all the heirs. The submission is that no distinction could be made between full-blood and half-blood by virtue of the provisions of Section 15, though learned counsel conceded that Ramachandra Rao and Sharadamma being husband and wife that their heirs would be common. What they pointed to me is that the entire category of heirs would have to be taken into consideration and the property is to be apportioned because they object to the principle on which precedence has been given by the arbitrators to Vishalakshi as against the rest of the family on the ground that she is the full-blooded heir. The learned counsel have submitted that in this view of the matter, the interference by the lower Court is justified and they have contended that it is open to this Court to take corrective action by correctly apportioning the shares of the various claimants. As far as this aspect of the matter is concerned, Mr. Holla has placed strong reliance on a Full Bench decision of the Bombay High Court in support of his contention that the correct interpretation of the relevant provisions of the Hindu Succession Act would necessarily require that the full-blooded heir excludes the half-blooded heir. That does appear to be the correct position in law and to that extent I see no ground on which the award in question can be interfered with. I need to mention in passing that the issue cannot be decided in a vacuum on the basis of a mere reading of sections and provisions of law dehors the special facts and circumstances of a case and it is in that background that one has to take cognizance of the fact that the property in question was not the personal or self-acquired property of Sharadamma but that it was essentially the family property of her husband Ramachandra Rao who pre-deceased her and whose property she virtually inherited. I am conscious of the fact that the respondents' learned counsel did emphasise on one aspect of the matter irrespective of what the source of the property was that even if it had been inherited by Sharadamma from her own husband that as on the date of the arbitration it had vested in her and that therefore, the arbitrators ought to have proceeded on the basis of the fact that it was she who had died intestate and not her late husband who had pre-deceased her and who had also died intestate. The position would really set at rest if one were to seek assistance relief from the provisions of Section 16(3) of the Hindu Succession Act which really throws light in situations of this type. The Courts have held time and again that it is the essential scheme of Hindu Law that property vests in the coparceners or in the male heirs and as far as the present situation is concerned, there is a virtual deeming provision whereby one would have to go back to the position as though Sharadamma had pre-deceased Ramachandra Rao. This becomes essential principally because of the general scheme of Hindu Law but more importantly because of the fact that the couple and no children. Viewed at from any angle therefore the findings of the arbitrators do appear to be correct and interference by the Court under this head is unjustified.
8. The respondents' learned advocate in passing pointed out to me that this is not a case in which the arbitrators made an award without giving any valid reasons but that on the other hand, they have given some reasons which virtually leave the issue hanging in the air as it is difficult to gather as to what precisely was the logic behind the various findings. Under the scheme of the Arbitration Act as it then existed the arbitrator was not obliged to give any reasons and this position is well settled. I need only to quote one decision of the Supreme Court namely the case .
9. On the question of acquiescence, Mr. Holla relied on a case reported in 1994 (6) JT 412 and the decision in support of his contention that parties who have willingly participated in an arbitration cannot shift their stand and virtually blow hot and cold. The courts will insist on a degree of consistency of conduct in such matters and it is not unusual for a party who is unhappy with a decision or an award to seek to raise grounds of dispute as an after thought but on the aforesaid principles that have been laid down, they would be estoppel from doing so.
10. It is in the aforesaid circumstances that I see no valid ground on which any part of the award in question can be set aside on interfered with. In this view of the matter, the impugned order is accordingly set aside and the award is maintained. As a necessary consequence, there shall be a decree in terms of the award.
10A. The appeal accordingly succeeds and stands disposed of. In the circumstances of the case, there shall be no order as to costs.
11. Appeal allowed.