Gujarat High Court
Naranbhai Amthalal Panchal vs Ramchandra Somnath on 22 July, 1994
Equivalent citations: (1995)1GLR354, 1995 A I H C 2543, (1995) 1 GUJ LR 354, (1995) 2 ARBILR 156, (1995) 4 CURCC 590
JUDGMENT K.R. Vyas, J.
1. The appellant as well as the respondent No. 4 and 5 formed partnership in the name and style of Maheshwari Plastics Engineering Works. One partner Mr. D. P. Patel continued as partner upto 15-1-1969, however, he was relieved from 16-1-1969 and the partnership between the appellant and the respondents No. 4 and 5 continued. It appears that a partnership deed was subsequently executed on 16-8-1969. As usually happens in a partnership, certain disputes arose between the partners as a result of which it was impossible for the partners to continue with the partnership firm and as such all the partners appointed the respondents No. 1, 2 and 3 who happened to be respectable gentlemen doing business and belonging to the community of the partners as arbitrators under a writing in the form of an agreement dated 7-4-1972 for resolving disputes and winding up work of the partnership, managing the debts, outstandings stock of goods and to do other work as stated in the said agreement. The arbitrators declared their award on 11-12-1973 and sent copy by registered post to the three partners and also filed the award in the court to make the Rule of the court by filing Civil Misc. Application No. 311 of 1974 against which the appellant has preferred Civil Misc. Application No. 425 of 1975 under Section 30 of the Indian Arbitration Act challenging the award and seeking necessary orders to the effect that the award be not made the Rule of law. The learned City Civil Judge by allowing the parties to lead evidence on 27-11-1978 allowed the Civil Misc. Application No. 311 of 1974 filed by the arbitrators while the Civil Misc. Application No. 425 of 1975 filed by the appellant came to be dismissed with cost.
The appellant has preferred this First Appeal against the judgment and order passed in Misc. Civil Application No. 311 of 1974 as well as the Appeal From Order against the order passed in Misc. Civil Application No. 425 of 1975. Since both these matters arise out of the same judgment and similar facts, the same are being conveniently disposed of by this common judgment.
2. Mr. H. M. Parikh, learned Advocate for the appellant challenged the impugned judgment on various grounds. The broad submissions of Mr. Parikh are as under :
(i) The arbitration agreement Exh. 84 is not an arbitration agreement as there is no valid Reference, and therefore, the award Exh. 83 is not an award in the eye of law.
(ii) If the court comes to the conclusion that there was a valid arbitration between the parties, in that case, the award is invalid as the arbitrators have misconducted themselves in as much as the award is one sided and biased with a view to benefitting the respondent Nos. 4 and 5.
(iii) The arbitrators have no jurisdiction to decide some of the points which are not referred to them, more particularly, there was no reference to decide the dispute with respect to shed No. 3 as the arbitrators have passed the awards with respect to shed No. 3 not referred to them and as such the award is without jurisdiction.
(iv) The decision by the arbitrator qua shed No. 3 is hit by the provisions of the Benami Transactions (Prohibition) Act, 1986.
(v) The award cannot be looked into as it is not registered as per the requirement of Section 17 of the Indian Registration Act.
(vi) As the arbitrators have taken legal advice in making the award, the award vitiates.
3. Mr. J. R. Nanavati, learned Advocate for the respondents No. 4 and 5, on the other hand, supported the judgment passed by the trial court in toto.
4. Before I proceed to consider the rival contentions, it is necessary to see the law on the subject regarding the challenge to the award of the arbitrators.
In Smt. Santa Sila Devi and another v. Dhirendra Nath Sen and others (AIR 1963 SC 1677), the Supreme Court has observed that :
"Where an award given by the arbitrator is filed in court and it is challenged on the ground of its incompleteness, the court has to bear in mind certain basic positions. These are : (1) a court should approach an award with a desire to support it, if that is reasonably possible rather than to destroy it by calling it illegal; (2) unless the reference to arbitration specifically so requires the arbitrator is not bound to deal with each claim or matter separately, but can deliver a consolidated award. The legal position is clear that unless so specifically required an award need not formally express the decision of the arbitrator on each matter of difference; (3) unless the contrary appears the court will presume that the award disposes finally of all the matters in difference and; (4) where an award is made depraemissis (that is, of and concerning all the matters in dispute referred to the arbitrator), the presumption is, that the arbitrator intended to dispose finally of all the matters in difference; and his award will be held final, is by any intendment it can be made so".
In the case of M/s. Sudarsan Trading Co. v. The Govt. of Kerala (AIR 1989 SC 890), the question that arose before the court was as to whether the award can be set aside on the ground that no reasons were given by the arbitrator. The Supreme Court has observed therein as under :
"it is not open to the court to probe the mental process of the arbitrator and speculate, where no reasons are given by the arbitrator, as to what impelled the arbitrator to arrive at his conclusion. In the instant case, the arbitrator has merely set out the claims and given the history of the claims and then awarded certain amount. He has not spoken his mind indicating why he has done, what he has done; he has narrated only how be came to make the award. In absence of any reasons for making the award, it is not open to the court to interfere with the award. Furthermore, in any event, reasonableness of the reasons given by the arbitrator, cannot be challenged. Appraisement of evidence by the arbitrator is never a matter which the court questions and considers. If the parties have selected their own forum, the deciding forum must be conceded the power of appraisement of the evidence. The arbitrator is the sole judge of the quality as well as the quantity of evidence and it will not be for the court to take upon itself the task of being a judge on the evidence befors the arbitrator".
The Supreme Court further observed that :
"Once there in no dispute as to the contract, what is the interpretation of that contract, is a matter for the arbitrator and on which court cannot substitute its own decision. If on a view taken of a contract, the decision of the arbitrator on certain amounts awarded, is a possible view though perhaps not the only correct view, the award cannot be examined by the court".
Similar is the view expressed by the Supreme Court in the later judgment of the Supreme Court in the case of Rajpur Development Authority etc. etc. v. M/s. Chokhamal Contractors etc. etc. (AIR 1990 SC 1426), where the award of the arbitrator was not supported by the evidence and the Supreme Court observed that it is not a ground for remission or setting aside the award.
The Division Bench of this court in the case of State of Gujarat v. M/s. Vir Vijay Construction Co. (1994 (1) GLR 119) after considering the various judgments had laid down the following principles :
(a) in the award, the Arbitrator is not required to given reasons in detail;
(b) the award can be set aside only on the ground of error of law on the face of it, that is to say, if the award is based upon any legal proposition which is erroneous;
(c) the Civil Court has no jurisdiction to sit in appeal over the award and review the reasons assigned by the Arbitrator and the award cannot be set aside merely because by process of inference and arguments it could be demonstrated that the Arbitrator has committed some mistake in arriving at the conclusion.
(d) the award cannot be interfered with even in the case where on an interpretation of any contract of documents, two views are plausible and the Arbitrator accepts one view while the other view is more appealing to the court.
(e) the award can be set aside by the Civil Court if the Arbitrator has misconducted himself or the Arbitrator has acted contrary to or gone beyond the terms of the reference.
5. From the aforesaid judgments, it emerges that the court has very limited jurisdiction in deciding the matters arising out of the award given by the Arbitrator. The Civil Court cannot sit in appeal over the award and review the decision arrived at by the arbitrator. Even if the arbitrator has failed to give reasons in the award, the court cannot set aside the award on that ground. The court can on limited grounds interfere with the award if the arbitrator has misconducted himself or the arbitrator has acted contrary or has gone beyond the terms of the Reference. Keeping this principle in mind, let us examine the case on hand.
Exh, 83 is the award given by the arbitrators the respondents No. 1, 2 and 3 herein. Paragraphs (1), (2), (3) and (4) of the award gives reference about the work the arbitrators were required to do which includes setting of the accounts, resolving the disputes with regard to dissolution and winding up etc. As per the agreement the partnership came into existence on 19-1-1969 and the partnership deed was executed between the three partners on 18-8-1969. On 17.3.1972 one of the partners-Narandas A. Panchal (the appellant) retired from the partnership firm and gave notice for taking accounts to other two partners and accordingly the firm was dissolved by mutual understanding on 3-4-1972 and all the three partners have agreed to resolve all their inter se disputes with regard to dissolution and winding up, over and above, resolving any dispute that may be shown by the three partners and by an agreement dated 7-4-1972 the arbitrators were appointed. It is also provided in the arbitration agreement that the accounts be settled, the disputes be resolved, the estate be ascertained, the debts be determined and the recovery be effected and after ascertaining the property of the firm and setling the accounts to pay each other, the property or the account. Accordingly, all the partners have handed over the estates and documents like account books, files etc. for the purposes of paying the debt of third party and also to adjust the price of the property and to give it to the partners if desired by them. Paragraph (5) of the agreement deals with how the arbitrators have commenced the work. According to them, with the consent of all the partners they have carried out the winding up of the Firm and had recovered the debts of the firm from the third parties. They have also sold the goods of the firm and collected the amount and paid up the possible debts of the firm. Paragraph (6) of the agreement gives details about giving possession of one shed belonging to the firm situated at Dudheshwar Road to the original landlord after setling the dues. Paragraph (7) gives details about account from the Accounts Clerk of the firm one Babubhai Patel from whom the details the debts and recoveries were ascertained. According to the arbitrators, Rs. 52,646.24 p. were paid towards debt against the recovery of Rs. 45,029.28 p. with the consent of all the partners and their co-operation and necessary entries were made in the account books of the firm. A substantial amount was recovered from Packard Plastic Industries against the sale of machinery with the efforts of the appellant-Naranbhai A. Panchal and accordingly with his consent necessary entry was made in the accounts of Naranbhai A. Panchal of having recovered the said amount. Paragraph (8) to (11) also deal with the sale of other machinery and accounts and as per the say of the arbitrator whatever work they have carried out was with the consent of the parties and after hearing them. It is stated therein that after taking the view point of all the partners in their interest the work carried out against which no party had taken objection. Paragraph (11) deals with a shed being shed No. 3 situated at Panchal Sahakari Udognagar Limited premises, Dudheshwar Road, Ahmedabad belonging to the firm. According to the arbitrator, the firm has paid Rs. 11,403/- as per the accounts of the Firm for the said shed and it is in possession of the firm. Some of the machinery belong in to the firm are lying three. With the consent of the parties and with all their rights and liabilities the price of the estate was fixed and entry was made in the account books. Similarly the accounts with regard to machinery of the firm, dead stock and other properties have also been entered in books of account. There after, the parties were called at the residence of one of the arbitrators, namely. Prabhudas Panchal where all the parties remained present and stated that they did not want to add any terms to the agreement was according to them all the disputes have been settled by the arbitrators and hence they have requested the arbitrators to give the award and accordingly the award came to be passed. Paragraph (13) of the award gives details about the rights and liabilities of each of the partners which inter alia provides that the firm is dissolved with effect from 3.4.1972. The shed No. 3 of Panchal Sahakari Udyognagar Ltd. whose price came to be fixed as per the account books has been given to the respondents No. 4 and 5 with equal rights jointly and thus they have become the joint owners. The possession has been given to them and the keys of the shed have been given jointly to the respondents No. 4 and 5. The appellant has been restrained from disturbing and/or causing any obstruction with respect of the shed. As per the balance-sheet of the firm the debts were to the tune of Rs. 24,031/- with respect to third parties and dues to be recovered were to the tune of Rs. 29,230/-. All the three partners were to recover the dues and clear the debts of the firm jointly with equal rights and liabilities. Similarly, all the partners shall be equally responsible to pay the income-tax and sales-tax assessed for the relevant year. The firm is indebted to the extent of Rs. 51,195.36 ps. after paying its debts to the respondents No. 4 and 5 against which the total assets and properties (machinery/stock/shed) are to the extent of Rs. 48,028.72 ps. inclusive of the dues from the appellant. After adjusting the same it was declated that the appellant ought to pay Rs. 13,601.66 ps. to the respondent No. 6 with 9% interest. Similarly, the respondent No. 5 is entitled to recover Rs. 7,819.18 ps. from the appellant and the same shall be paid with 9% interest. For doing the work of arbitration lawyer's advice was sought and for that Rs. 1,200/- were paid towards the cost which shall be paid by all the partners within 30 days.
6. Reading the award Exh. 83, it is amply clear that it is a complete document which gives all details about how the work was entrusted to the arbitrators, what they were to do, what they have done etc. Exh. 83 is not a document which given no reasons but it gives something more which has become a subject to controvery as the appellant has challenged the award on various grounds. Mr. Parikh, learned Advocate for the appellant challenged the award mainly on the ground that as there is no valid Reference to the arbitrators, the award Exh. 83 is not an award in the eye of law. In the submission of Mr. Parikh, the firm was in fact already dissolved before the arbitrators, and therefore, they had to perform the work of only winding up of the firm. It was contended that the act of winding up is ministeral work, and therefore, the same is not an arbitration work. After having invited my attention to the agreement for arbitration Exh. 84, Mr. Parikh submitted that the document does not disclose as to what were the disputes between the parties. He further submitted that the document Exh. 84 does not refer to the existing disputes between the parties. In substance, it was contended before me that whatever statements were made in Exh. 84 are the joint disputes between the parties and in absence of any particular dispute to be decided by the arbitrator, the have misdirected themselves in deciding the disputes. In support of his submission, Mr. Parikh invited my attention to the decision rendered in the case of The Bangalore Jute Factory Co. Ltd. v. Hulaschand Rupchand (AIR 1958 Cal. 490), as also, in the case of P. C. Agarwal v. K. H. Khosla (AIR 1975 Delhi 54). The Division Bench of the Calcutta High Court has observed that a Reference in the present Act clearly means the actual submission of a particular dispute under the provisions of the arbitration agreement to the arbitrator contemplated therein. Similarly, the Division Bench of the Delhi High Court in the case referred above has observed that an agreement to refer, and a reference are only distinguishable as separate transactions, where there is an agreement to refer in which no arbitrators are named and subsequently a reference is made to an arbitrator in pursuance of the agreement, "reference" means the actual submission of a particular dispute under the arbitration agreement to the arbitrator contemplated therein. Paragraph (3) of the first Schedule also contemplated the reference of dispute to arbitration by a party of parties without with the intervention of the court.
7. There cannot be any dispute to the principles laid down under the said rulings, but these two judgments are easily distinguishable on the fats. A bare glance at Exh. 84 would reveal the fact of appointment of arbitrators (Lavad) under the arbitrator agreement (Lavad Nama) and the work entrusted to the arbitrator to do the work of winding up of the dissolved firm and the settle all the disputes reading the accounts of the firm and whichever disputes that may be raised with consent by all the three partners, the three arbitrators possessing the confidence of all the partners were to undertake the work of the firm such as settling the accounts, dissolving the disputes, determining the assets, findings out the debts and dues and administering the properties. After setting all the accounts, the price of the property was to be fixed and paid to the concerned partner. The parties have unanimously appointed the three arbitrators who were the men of their confidence. The various details given in the agreements were to be decided by the arbitrator. This court in the case of Vaidya Harishankar Laxmiram Rajyaguru v. Pratapray Harishankar Rajyaguru (1988 (2) GLR 986), while dealing with Section 30 of the Arbitration Act has held that once a party either before the award is made, acquiesces to arbitration proceedings going on or acquiesces in the award after it is made, cannot challenge the binding nature of the award. As can be seen father and son respectively have entrusted their dispute to one Kantibhai Vadiya who had intervened between them with a good intention to bring that dispute between them to an end. As can be seen from the award passed by Shri Kantibhai Vaidya wherein it was stated by him that he had called both father and son at his residence on 18-1-1971 and had discussed the matter with both of them and had warned them that both of them could ruine themselves over the property dispute if they were not solved amicably. It is specifically mentioned in the award that the entire responsibility of arbitration will lie on Shri Kantibhai Vaidya which responsibility he had undertaken. Both of them have singed the endorsement below the award after reading and fully understanding.
8. The aforesaid fact would clearly reveal that there is no specific form or mode of writing the agreement. It is the sole intention and the desire of the parties to resolve their disputes through arbitrators. The contents are hardly material, If the parties appoint a man of their confidence to act as an arbitrator who has been entrusted with the work to resolve dispute, it would be a valid agreement for arbitration. The said judgment in the case of Vaidya Harishankar (supra) was carried by way of leave to appeal before the Supreme Court. The contention before the Supreme Court was that there was no written agreement singed by both the parties to refer the dispute to arbitration. The Supreme Court dealing with the said contention has observed.
"Is is clear from the narration of facts that the parties had agreed to refer the dispute to the arbitrator. The award signed by both the parties about which there is no factual dispute reiterated the fact that the parties had agreed to refer the dispute to the arbitration of the said arbitrator and that he made an award. All these are in writing and signed by all the parties. This in our opinion, in the light of facts and circumstances of the case, can certainly be construed to be a proper arbitration agreement in terms of Section 2(a) of the Act."
It was further observen that :
"It is clear that the conduct of the parties that there was an arbitration agreement and by signing the two awards it can be said that the parties had agreed to refer the disputes in writing to the arbitration of the named arbitrator. This agreement was done twice, firstly, by signing an endorse ment below the award, and secondly, by entering into an agreement in the form of a letter dated August 14, 1978 (Exh. 40) (See Vaidya Harishankar Laxmiram Rajyaguru of Rajkot v. Pratapray Harishankar Rajyaguru of Rajkot (1988 (3) SCC 21).
9. Mr. Parikh tried to distinguish the aforesaid judgment of the Supreme Court by contending that in the case before the Supreme Court, the parties had agreed to appoint the arbitrator and in token thereof they have made an endorsement below the award and also addressed a letter which is not so, in the case on hand. He also attacked the award on the ground of acquiescence. It is not possible to accept the submission of Mr. Parikh for the simple reason that Exh. 84 which is an arbitration agreement is clearly signed by the appellant as well as the respondents No. 4 and 5 and also the three arbitrators the respondents No. 1, 2 and 3 herein. There cannot be an absolutely identical case as some facts are bound to differ. In the case of Vaidya Harishankar (supra) before the Supreme Court, the facts reveal that the parties have voluntarily appointed the arbitrator to resolve their disputes. Even though there was no written agreement singed by both the parties to refer the dispute to arbitration, the Supreme Court, in view of the fact that the award was signed by the parties had accepted the award by holding that it was a proper arbitration agreement in terms of Section 2(a) of the Act.
10. In view of the aforesaid discussion. I am of the view that by virtue of arbitration agreement Exh. 84, a valid reference was made to the arbitrator, and therefore, the award Exh. 83 is also a valid award.
11. Mr. Parikh, learned Advocate for the appellant also submitted that even if there was a valid reference to the arbitrators, the arbitrators have misconducted themselves on various counts. He challenge the award on the ground that the arbitrators have misconducted themselves as the award is hit by the principle of natural justice, more particularly, the principles of bias. He invited my attention to paragraph (7) of the application filed by the appellant wherein it was alleged that the respondents No. 1, 2 and 3 are the associates and relatives of the respondents No. 4 and 5. According to Mr. Parikh the impugned award is liable to be aside as it was improperly procured. The aforesaid facts have not been disclosed by the respondents before or after the writing dated 7.4.1974. The arbitrators the respondents No. 1, 2 and 3 in their written statement have denied the aforesaid allegations. The respondents No. 4 and 5 in their written statement while denying the said allegations have contended that the respondent No. 1, 2 and 3 are the respectable gentlemen of the Panchal community dealing in business. Other details regarding their business activities have also been given in the said written statement. Mr. Parikh after reading the aforesaid pleadings between the parties had contended that the respondent No. 2, one of the arbitrators is admittedly a maternal cousin of the respondent No. 4-Hargovinds which relationship is also established in the facts of the case. Mr. Parikh, therefore, submitted that the arbitrator has admittedly not disclosed and that the appellant was not knowing the said fact before the award was made and therefore the arbitrators have misconducted themselves in passing the award. In support of his submissions, reliance was placed on the decision of the Division Bench of his Court (Coram : M/s. S. D. Dave & R. D. Vyas, JJ.) in First Appeal No. 799 of 1977 decided on 29.2.1992.
12. Before I could proceed to answer the question as to whether the arbitrators have misconducted themselves or not another question creeps in as to whether it is open for the appellant to make allegations against the arbitrators before the court, especially when all the partners including the appellant were parties to appoint the arbitrators ? As can be seen from the agreement to arbitration Exh. 64, it has been clearly understood between the parties that the three arbitrators who were the ment of their confidence have been appointed with the consent of one another to decide the dispute as stated in the agreement and other disputes that may be shown to them. It is an undisputed fact that the three arbitrators are belonging to the same Panchal community and the appellant and the respondents No. 4 and 5 who are the partners are also of the same community. The arbitrators are admittedly men of repute hailing from business community. At this stage, it is necessary to refer to the averments made by the appellant in his application challenging the award of the arbitrator before the Civil Court. It is stated in Para (3) of the said agreement that on 7.4.1992 when it (arbitration agreement) was made, the appellant was not knowing the fact that the respondents No. 1, 2 and 3 are the associates of the respondents No. 4 and 5 and that they will do the work of arbitration in favoue of the respondents No. 4 and 5. However, it is only after receiving the award by registered post on December 11, 1973 upon making enquiry that the appellant came to know about the said facts, meaning thereby, that even though the appellant was one of the parties in appointing the respectable gentlemen of the community was not aware of the fact hat the arbitrators were associates of the respondents No. 4 and 5 and will pass the award in their favour and had permitted the arbitrators to pass the award. It is to be noted that in the application not a word stated about the relationship between the respondents No. 2 and 4. It is only in the evidence that the appellant has for the first time come with a case that the respondents No. 2 and 4 are maternal cousins. In view of this, even as per the case of the appellant, it is clear that it is only when the award had gone against him, he made enquiries, and thereafter, he has come out with a case of the arbitrators being the associates of the respondents Nos. 4 and 5. Merely because the respondents including the arbitrators have not challenged these allegations, in my view, that will not be of any benefit to the appellant. It is difficult to gulp down the theory of the appellant that the arbitrators are associates of the respondents No. 4 and 5 and that he came to know about this fact only after receiving the award. It is an admitted position that the arbitrators were respectable gentlemen of small Panchal community and the appellant as well as the respondents No. 4 and 5 belonged to the same community, and therefore, the appellant could have known about the relations between the arbitrators and the respondents No. 4 and 5 well in advance. Even if the allegations of the appellant is believed, it is pertinent to note that a joint allegation of association and relatives are made in the application between the respondents No. 1, 2 and 3 the respondents Nos. 4 and 5, but no specific allegation is coming forth as to which of the respondents is an associate or relative to which of the arbitrators. It is true that subsequently, it is established that the respondent No. 2 arbitrator is the maternal cousin of the respondent No. 4. Mr. Parikh tried to contend that the possibility of the respondents No. 2 influencing the other arbitrators, namely, the respondents No. 1 and 3 in making the award in favour of the respondents No. 4 and 5 cannot be ruled out and in that connection, he invited my attention to the decision rendered in the case of A. K. Kraipak v. Union of India (Rep. in AIR 1971 SC 150). I will discuss about this judgment a little later. However, the question that still remains to be decided is as to whether it is open for the appellant to make allegations against the arbitrator after getting the award which is against him ? The Supreme Court in the case of Prasun Roy v. Calcutta Metropolitan Development Authority (Rep. in AIR 1988 SC 205), has observed that :
"Where though a party is aware from the beginning that by reason of some disability the matter is legally incapable of being submitted to arbitration, participates in arbitration proceeding without protest and fully avails of the entire arbitration proceedings and then when he sees that the award has gone against him comes forward to challenge the whole of the arbitration proceedings as without jurisdiction on the ground of a known disability, the same cannot be allowed. This principle applies both before and after making of the award. The principle is that a party shall not be allowed to blow hot and cold simultaneously. Long participation and acquiescence in the proceeding preclude such a party from contending that the proceedings were without jurisdiction."
13. Mr. Parikh tried to distinguish the aforesaid judgment by stating that the case before the Supreme Court was not of bias as the Supreme Court while deciding the question of acquiescence has made the aforesaid observation. May be it was a case of acquiescence before the Supreme Court, but the fact remains that one cannot challenge the award after it goes against him after having permitted the arbitrators to go ahead by participating in the proceedings and after having voluntarily consented to the appointment of the arbitrators.
14. Assuming the case of the appellant to be true, let us analyse the case of the appellant on the question of basis. As per the allegation of the appellant, the respondent No. 2 being the maternal cousin of the respondent No. 4, all the arbitrators have passed the award just with a view to benefitting the respondents No. 4 and 5, and therefore, the award is bias one. The question therefore arises as to what is that test for bias. The Supreme Court in the case of International Airport Authority of India v. K. D. Bali. (Rep. in AIR 1988 SC 1099) has observed that :
"It is well settled that there must be purity in the administration of justice as well as in administration of quasi-justice as are involved in the adjudicatory process before the arbitrators. It is well said that once the arbitrator enters in an arbitration, the arbitrator must not be guilty of any act which can possibly be construed as indicative of partially or unfairness. It is not a question of the effect which misconduct on his part had in fact upon the result of the proceeding, but of what effect it might possibly have produced. It is not enough to show that, even if there was misconduct on his part, the award was unaffected by it, and was in reality just; arbitrator must not to anything which is not in itself fair and impartial. The purity of administration requires that the party to the proceedings should not have apprehension that the authority is biased and is likely to decide against the party. But it is not every suspicion felt by a party which mush lead to the conclusion that the authority hearing the proceedings biased. The apprehension must be judged from a healthy, reasonable and average point of view and not mere apprehension of any whimsical person." It was the case before the Supreme Court that the party to arbitration proceedings was apprehensive that the sole arbitrator was biased against the party because the arbitrator being the appointed of the party was not acceding to its request which the party considered to be reasonable. The Supreme Court considering the said case observed :
"This cannot be and should never be in a judicial or quash-judicial proceeding. A party who is a party to the appointment can and should never seek the removal of an appointed authority or arbitrator on the ground that appointee being his nominee had not acceded to his prayer about the conduct of the proceeding. It will be a sad day in the administration of justice if such be the State of Law".
The Supreme Court in the Secretary to the Government, Transport Dept., Madras v. Munuswamy (1988 (4) JT SC 730), while testing for bias observed :
"Unless there in allegation against the named arbitrator either against his honesty or capacity or mala fide or interest in the subject-matter or reasonable apprehension of the bias, a named and agreed arbitrator cannot and should not be removed in exercise of a discretion vested in the court under Section 5 of the Act".
That was a case of removal of a named arbitrator under Section 5 of the Act which gives jurisdiction to the court to revoke the authority of the arbitrator. In that connection, the court observed :
"When the parties entered into the contract, the parties knew the terms of the contract including arbitration clause, the parties knew the scheme and the fact that the Chief Engineer is superior and the Superintending Engineer is subordinate to the Chief Engineer of the particular Circle. Inspite of that the parties agreed and entered into arbitration and indeed submitted to the jurisdiction of the Superintending Engineer at that time to begin with, who, however, could not complete the arbitration because he was transferred and succeeded by a successor. In those circumstances, on the facts stated no bias can reasonably be apprehended and made a ground for removal of a named arbitrator.
The Supreme Court further observed :
"Reasonable apprehension of bias in the mind of a reasonable man can be a ground for removal of the arbitrator. A predisposition to decide for or against one party, without proper regard to the true merits of the dispute is bias. There must be reasonable apprehension of that predisposition. The reasonable apprehension must be based on cogent materials".
15. In view of this ruling, it is clear that in order to determine the question of bias, the party must having a real likelihood of bias and not mere suspicion. There must be reasonable apprehension of bias and which must be based on cogent material. Merely because an allegation of relationships between one of the arbitrators and the respondent No. 4 is made which came out to be true, that by itself is not sufficient enough to apprehend bias in the case. The concerned party has to besides alleging such a relationship between the arbitrator and the party has also to produce sufficient material so as to enable the court to come to the conclusion that the decision rendered by the arbitrator was on account of bias on the part of the arbitrator. As stated above, except making general allegations to the effect that the arbitrators are the associates of or in relation with the respondents No. 4 and 5, there is no specific allegation against concerned arbitrator about the relationship with the respondent No. 4 and that the concerned arbitrator has influenced the mind of other arbitrators with a view to getting the dispute decided against the appellant. All the arbitrators were trustworthy and respectable gentlemen when they were appointed by all the partners as villains when the award had gone against the appellant. This is the sum and substance of the case of the appellant. The arbitrators were men of their choice as far as the appellant and the respondents No. 4 and 5 are concerned and spared their valuable time for resolving the problems and have thus undertaken the thankless job. It very easy for the appellant to make allegations against the arbitrators after realising that the award has gone against him his by taking all sorts of contentions including the technical contentions. In the matter of private arbitration the court should as far as possible never encourage technicalities. The decision of the Division Bench of this court rendered in First Appeal No. 799 of 1977 cited by Mr. Parikh can hardly be of any help to the appellant. This was a case wherein one Mr. U. J. Bhatt, the sole arbitrator was appointed by the State of Gujarat and M/s. Shah Construction Co. Ltd. for adjudication of certain disputes pending between them. The sole arbitration forwarded his award to the court which was registered as a Civil Suit. The Government had filed objection to the award by inter alia contended that the sole arbitrator has misconducted himself in the proceeding as he was being consulted by the Company in respect of the construction of certain other works-French-wills (sic) to be constructed by the Company and that the above said relationship between the arbitrator and the Company was not disclosed to the Government by the sole arbitrator, and therefore, the award rendered by the sole arbitrator is vitiated. A finding was recorded by the trial court that there was no close relationship between arbitrator and the Company and that there was no question of the arbitrator misconducting himself in the proceedings and that is cannot be said that the award improperly procured or was otherwise invalid, Against the said judgment and order, appeal was preferred before this court. Allowing the appeal of the State of Gujarat, this court observed that the Government was not made award of the relationship between the sole arbitrator and the Company inspite of the fact that it has been admitted by the Company that there in fact existed such relationship. On the facts of the case, the Division Bench held that there was such a relationship and it was not brought to the notice of the Government either by the sole arbitrator or by the Company and in this view of the matter, the reference of the dispute to the arbitrator, the arbitration proceedings and the ultimate award of the arbitrator stand vitiate. The facts of the case before the Division Bench is quite different from that of the present case. In the case before the Division Bench, it was held that the sole arbitrator was paid by the Company for the services rendered by him for the Company, and therefore, he was having interest in the Company. In that view of the matter, it was the duty of the sole arbitrator and the Company to disclose the fact of having the relationship to the Government; whereas that is not the case before me.
16. In view of the discussions made hereinabove, the decision rendered in the case of A. K. Kraipak v. Union of India (supra) upon which reliance has been placed by Mr. Panikh on the question of bias will have no bearing deciding the present case. That was a case where the petitioners who were serving in the Forest Department of the State of Jammu and Kashmir have challenged the selection made from among the Officers serving in the Forest Department of the State. The Selection Board which consisted of Chairman and other Members of the Board were the Inspector General of Forests of the Government of India, one of the Joint Secretaries of the Government of India, the Chief Secretary to the State Government of Jammu and Kashmir and Naquishbund, the Acting Chief Conservator of Forests of Jammu and Kashmir. It may be stated that the said Naquishbund was him one of the candidates seeking to be selected to the All India. Forest Services who had taken part in selecting the candidates. Ultimately, the selection was finally made by the Board which was accepted by the Commission and the name of Naquishbund was placed at the top of the first of the selected Officers. In the light of the facts of that case, the Supreme Court while negativing the contention of the learned Attorney General observed that :
"After all the selection board was only a recommendatory body. Its recommendations had first to be considered by the Home Ministry and thereafter by the U.P.S.C. The final recommendations were made by the U.P.S.C. Hence, grievance of the petitioners have no real basis. According to him, while considering the validity of administrative actions taken, all that we have to see is whether the ultimate decision is just or not. We are unable to agree with the learned Attorney General that the recommendations made by the selection board were of little consequence".
The Supreme Court further observed that :
"Looking at the composition of the board and the nature of the duties entrusted to it we have no doubt that its recommendations should have carried considerable weight with the U.P.S.C. It the decision of the selection board is held to have been vitiated. The recommendations made by the U.P.S.C. cannot be disassociated from the selections made by the selection board which is the foundation for the recommendations of the Union Public Services Commission".
17. Reading the said judgment, it is amply clear that the selection of the candidate was made by the board wherein one of the members was himself a candidate for selection. Even though he had not taken part in deliberation of board at the time of his own selection, he had taken part throughout while making selection of other candidates including his rival candidates. The Supreme Court under those circumstances considered the question of conflict of interest and duty of such member and ultimately held that there is reasonable likelihood of bias. As stated above, in the present case, till the proceedings before the arbitrators were over there was no allegation about bias. It is only after reading the award that the appellant was struck with the idea of arbitrators having relationship with the respondents No. 4 and 5 and that the respondents No. 4 and 5 were hand in gloves with the arbitrators in getting the awards passed in their favour. In view of this the challenge to the award on the ground of bias by Mr. Parikh is rejected.
18. The award is also challenged on the ground that even though there is no reference regarding shed No. 3 of Panchal Sahakari Udhyog Mandli in the arbitration agreement Exh. 84 which is of the exclusive ownership of the appellant, the said shed has been wrongly included as property of the firm and has been entrusted to the respondents No. 4 and 5. Mr. Parikh in order to substantiate his submission invited my attention to certain documents, namely, the receipts of instalments paid by the appellant for the shed and also certificate in his favour issued by Panchal Sahakari Udhyog Mandli entering the name of the appellant as the member. It is not possible to accept the said submission. It clearly appears from the agreement to arbitration Exh. 84 that the said agreement is for the appointment of arbitrator to carry out all works including the winding up of Maheshwari Plastic Engineering Works to which the appellant and the respondents No. 4 and 5 were partners. The parties have entrusted all the documents including the books of account, files and other Dastavej with respect to the property in question. In Paragraph (12) of the award Exh. 83, the arbitrators have stated : "As per the say of the parties one shed belongs to the firm situated at Panchal Sahakari Udyognagar Limited, Dudeshwar Road, near Metal Moulders, Ahmedabad, Block No. 3 and as per the accounts of the firm, the firm has paid Rs. 11,403/- and the shed came in possession of the firm". Thus, considering all the material produced by the partners before the arbitrators, the arbitrators have held that the firm is the owner of the shed in question. Exh. 100 which is produced under list Exh. 63 is the document wherein issues to be determined by the arbitrators are raised signed by all the partners. Issue No. 6 pertains to the shed in question to be decided by the arbitrator. Exh. 98 is a letter dated 26-6-1971 signed by the appellant himself for Maheshwari Plastic Engineering Works addressed to Panchal Sahakari Udyognagar Limited. Exh. 98 and Exh. 100 has been challenged by Mr. Parikh on the ground that the signature of the appellant was obtained on a blank paper (Exh. 100) whereas the signature on Exh. 98 has also been denied to be his own. It is obvious, the appellant is bound to deny the execution of these documents. The trial court has considered these and other documents and has rightly come to the conclusion that the said shed No. 3 is not of the exclusive ownership of the appellant but the same belongs to the firm. I see no reason to take an exception to it.
19. A question still arises as to whether it is open for the court to examine the findings recorded by the arbitrator on all the issues minutely and in detail. As can be seen from the various Judgments referred above, the arbitrator is not bound to give any reasons while arriving at the findings. Merely because the arbitrators, in the instant case, have given detailed reasoning, as observed earlier, the same has become a matte of controversy as the respondent has questioned the same by filing applications for setting aside the same before the court. This being a private arbitration for the settlement of disputes between the partners it will have its binding effect and it cannot be contended that a particular finding is bad erroneous as it is contrary to the material on record. It is now settled principle of law that absence reasoning by an arbitrator is not a ground for remission or setting aside of the award of the arbitrator. Whenever there is a private arbitration for settlement of disputes, the party has to accept the award made against him as binding as there is an element of finality of the award than the legality. In the instant case, the arbitrators have given reason in support of the award and the appellant has not refrained himself from questioning the legality of the award but filed applications in the court for setting aside the award. The fact that the appellant as well as the respondents No. 4 and 5 have agreed to accept the award passed by the arbitrator, it is not open for the appellant to challenge the same by finding fault with the award. In view of this, I do not find any substance in this submission of Mr. Porikh that in absence of dispute regarding shed No. 3, the arbitrators sought not to have decided the said issue.
20. Mr. Parikh Ltd. Advocate for the appellant while challenging the decision of the arbitrators with regard to shed No. 3 also submitted the at the shed No. 3 was purchased in the name of the appellant and the appellant was in fact made member by the Panchal Sahakari Udyog Mandli and that in view of the receipts Exh. 44, the appellant had paid instalments for the shed in question. In the submission of Mr. Parikh, the proceedings initiated by the arbitrator itself is not maintainable. According to him, the shed in question has been declared as the property of the firm. Thus, the firm purchased the property in the name of the appellant which is a benami transaction and in view of the provisions of Benami Transaction (Prohibition) Act (45 of 1988) such a transactions is void, and therefore, in support of his submission he has invited my attention to the decision rendered in the case of Mitillesh Kumari v. Prem Behari Khare (AIR 1989 SC 1247), wherein the plaintiff respondent instituted as suit in the court of the Civil Judge for a declaration that he is the sole and real owner of the suit house and the defendant-appellant to permanently restrained from transferring the suit house. The suit was decreed in favour of the plaintiff and the appeal before the District Court as well as the High Court were also dismissed. The Supreme Court while allowing the appeal in favour of the original defendant held that all properties held benami at the moment of the Act coming into operation may be affected irrespective of their beginning, duration and origin. This will be so even if the legislation is not retrospective but only retroactive and in view do the commencement of the Act during pendency of the appeal, the suit would not be maintainable. The aforesaid submission when canvassed before me, frankly speaking. I did find some substance, however, when the facts of the Supreme Court case was examined and was compared to the facts of this case, I was convinced without any manner of doubt that there is no merit in the said submission as it was merely an attempt to create storm in the tea cup. Looking to the case on hand, as per the award the said shed No. 3 is found to be the property of the firm. All the partners have stated before the arbitrators that the shed in question is of the ownership of the firm which is clear from the award of the arbitrators. The books of account and the counterfoils of the cheques produced in the case would also clearly go to show that the amounts of the instalments have been paid by the firm till the date of arbitration. It was all throughout the consistent say of the partners that the shed in question belongs to the firm not to any individual. Not only that the case at benami transaction not been pleaded before the trial court. Section 14 of the Indian Partnership Act, 1932 deals with the property of the firm. It reads as under :
"Subject to contract between the partners, the property of the firm includes all property and rights and interests in property originally brought into the stock of the firm, or acquired, by purchase or otherwise, by or for the firm, or for the purposes and in the course of the business of the firm, and includes also the goodwill of the business.
Unless the contrary intention appears, property and rights and interest in property acquired with money belonging to the firm are deemed to have been acquired for the firm."
In view of the provisions of Section 14 of the Indian Partnership Act, it is clear that the shed in question was acquired by the firm as admittedly Rs. 11,403/- have been paid by the firm which is found from the books of account of the firm. Apart from the books of account there are other documents reference to which is already made. As per the award, the appellant himself has admitted that shed No. 3 belongs to the firm. In this view of the matter, the contention of benami transaction raised by Mr. Parikh deserves to be rejected.
21. Mr. Parikh tried to contend about the conduct of the respondents No. 4 and 5 in not filing the complaint to the police making grievance against the appellant of taking forcible possession and certain circumstances of making payment of instalments even after the award and has tried to contend that the possession of the shed in question has remained with the appellant till date which would go to suggest that he is the owner. In view of what is discussed by me above, it is not open for the Civil Court to go into all these questions. Once the arbitrators have decided the dispute between the parties, the Civil Court cannot sit as a Court of Appeal over the decision of the arbitrator and come to its own conclusion. However, the fact remains that the appellant even though was a party in appointing the known and respectable gentlemen as arbitrators has come forward to challenge the award by raising all sorts of grounds after having sat tight over his claim for the shied in question right from 11.12.1973, the day on which the arbitrators have passed the award and that too knowing fully well that the award has gone against him. It is unfortunate that the respondents No. 4 and 5 though succeeded before the arbitrators are not in a position to enjoy the fruits of the decisions for about 21 years.
22. Mr. Parikh then submitted that arbitrators have misconducted themselves by taking legal advice in making the award, and therefore, the arbitrators having taken legal help have not decided the disputes between the parties by themselves. Mr. Parikh also invited my attention to the initial stand of the arbitrators wherein they have denied of having taken any legal assistance, However, in cross-examination, one of the arbitrators has admitted that they have in fact taken the advice of a lawyer while doing the work of arbitration. It is also an admitted fact that in the award of arbitration. The aforesaid statement of Mr. Parikh has to be stated merely for being rejected. A half hearted attempt is made by the appellant in the cross-examination of the arbitrator regarding taking legal assistance. The arbitrator has stated that while doing the work of arbitration, the legal advice was sought. The arbitrator could have been cross-eamined in detail as to on what point, such as, for drafting the award or otherwise, but there in no cross-examination seeking any detail from the arbitrator. The arbitrators is very clear when he deposes that while doing the work of arbitration, the legal advice was sought. In absence of any further details from the appellant, one cannot jump to the conclusion that the entire award was made by the lawyer and not by the arbitrator. One note book wherein details of minutes have been recorded by the arbitrators is produced in the case vide Exh. 99 on the title "Clarification to be sought from the lawyer." There are five items (i) to write the award of the arbitration (ii) whether the property machinery lying in old shed can be sold and how to make the judgment for the same ? (iii) How to dispose of the machinery with regard to the new shed ? (iv) What to do with wo number machinery and (v) To think about the steps to be taken legally for giving the award. Reading the said clarification sought by the arbitrators, there is no manner of doubt that the award was in fact written by the arbitrators after fully applying their minds. Merely because some clarifications were sought from the layers to make the award legal, it cannot be contended that the award in question not of the arbitrators, but the work of a legal brain, and therefore, this contention of Mr. Parikh is also to be rejected.
23. Mr. Parikh, lastly raised a hypotechnical ground of registration of the award which is compulsory under Section 17 of the Indian Registration Act and since under the award the respondents No. 4 and 5 have been made the exclusive owner of the shed in question which is immovable property of the value of more than Rs. 100, if the award is unregistered it cannot be looked into for passing the judgment in terms of the award. In support of his submission Mr. Parikh, relied on a decision rendered in the case of Ratan Lal Sharma v. Purushottam Harit (AIR 1974 SC 1066). In the case before the Supreme Court, the appellant and respondents as partners started a factory having various movable and immovable properties, however, the dispute arose between the partners. They by a written agreement referred their dispute to the arbitration of the two persons. The arbitrators filed award in the High Court. The respondents filed an application for determining the validity of the agreement and for setting aside the award. The learned Single Judge of the High Court dismissed the application as time barred, but he declided the request of the appellant to pronounce the judgment according to the award. Against this part of the order, the appellant filed an appeal, but the appeal was dismissed as not maintainable by the Division Bench. The appellant then preferred appeal against the decision of the Single Judge declining to pronounce the judgment in accordance with the award. He also filed affidavit against the judgment of the Division Bench.
The Supreme Court took up the Civil Appeal. As can been from the facts before the Supreme Court, the learned Single Judge refused to pronounce the judgment in accordance with the award because (1) according to him the award was void for uncertainly, and (2) the award, which created rights in favour of the appellant over immovable property worth over Rs. 100/- requtred registration and was unregistered. I am concerned with the second part of the order whereby the Supreme Court held that :
"Where the terms of the arbitration award did not transfer the share of a partner A in the assets of a firm to the other partner B either expressly or by necessary intendment but on the other hand expressly made an allotment of the partnership assets and liabilities to B making him absolutely entitled to the same in consideration of a sum of money to be paid by him to the other partner A, right in immovable property of the firm worth above Rs. 100, the award is compulsorily registrable under Section 17 of Arbitration Act, 1940 which presupposes the existence of an award which can validly be looked into by the court".
24. Mr. J. K. Nanavati, Ld. Advocate for the respondents No. 4 and 5 distinguished the said judgment of the Supreme Court by contending that the procedure of Section 48 of the Supreme Court by contending that the mode of settlement of accounts between the partners is not followed in the case before the Supreme Court. He further submitted that the partnership was not dissolved and that the accounts were also not taken which is not so in the case on hand. According to the submission of Mr. Nanavati even that judgment of Batanalal (Supra) has also been considered in a later judgment rendered in the case of S. V. Chandra Pandian v. S. V. Sivalinga Nadar, (1993) 1 SCC 569). The Supreme Court held that on dissolution of a partnership, distribution of residue among partners after settlement of account in terms of Section 48 of the Partnership Act is to be treated as distribution of movable property and does not result in partition, transfer or extinguishment of interest so as to attract Section 17 of the Registration Act. The arbitration award directed dissolution of residue or surplus properties of the dissolved firm among partners after settlement of account not required to the registered under Section 17(1). In the circumstances, challenge to the award under Section 30 of the Arbitration Act on the ground of non registration is not sustainable.
25. In my view, the aforesaid judgment of the Supreme Court is squarely applicable to the facts of the present case. In the present case also, the arbitrators have distributed the residue or surplus properties of the dissolved firm among the partners after settlement of accounts. As can be seen from the award, the shed No. 3 in question is a property brought in and/or acquired in the course of business of the partnership and would certainly constitute the property of the firm. All the patterns during the subsistence of the partnership could have been entitled to their shares in the property but after the dissolution and settlement of accounts the partners. are entitled to proportionate share in the residue of the property, that is, shed No. 3. Such residue is required to be treated as movable property being money representing the value of the property, and therefore, when the residue is distributed by allocating the property to any partner proportionate to his share, no partition or transfer takes place; not is there any extinguishment of the interest of other properties in the allocated property. This is clear from reading Section 46(b)(iii) of the Indian Partnership Act. 1932. The Supreme Court in the case of S. V. Chander Pandian (supra) has taken the same view and hold that arbitration award directing dissolution of the partnership firm and providing distribution of residue or surplus properties of the dissolved firm among partners after settlement of accounts not required to be registered under Section 17(1) of the Registration Act. In view of this, I do not find any merit in the last submission of Mr. Parikh also. No other submissions have been advanced before me and since I find no substance in any of the submissions, the obvious conclusion would be that of dismissal of the Appeal as well as the Appeal from Order.
26. In the result, the Appeal from Order No. 66 of 1979 and the First Appeal No. 853 of 1979 a.e. dismissed with costs and the judgment and decree passed by the learned City Civil Judge, in Civil Misc. Application No. 311 of 1974 stands confirmed.
27. At this stage, Mr. Parikh, Ld. Advocate for the appellant states that this judgment may be stayed for a period of three months to enable him to approach the higher forum. Since I have dismissed the appeal on all courts and particularly in view of the fact that the appellant has continued his business activities in shed No. 3 without making any payment to the respondents No. 4 and 5 for all these 21 years, it would be too harsh to the respondents No. 4 and 5 if the request for stay is granted in favour of the appellant. These respondents will be deprived of the benefits of the two judgments in their favour. Hence, considering all these aspects, the ends of justice shall be met if I direct this judgment shall be stayed for a period of eight weeks from today on condition that the appellant shall deposit Rs. 21,498/- with 9% interest as awarded by the arbitrators from the date of the award till date which comes to about Rs. 63,173/- within four week from today. It is also directed that the appellant shall not effect any change to the shed in question and shall file an undertaking before this court within one week from today stating that the aforesaid amount shall be deposited by him in this Court within four weeks from today failing which it will be presumed that the appellant is not willing to deposit the amount. It will be open for the respondents No. 4 and 5 to withdraw the said amount of the Registrar of this court. Order accordingly.
28. Order accordingly.
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