Bombay High Court
Jayantilal Hiralal Patel vs Dhanlaxmi Kantilal Patel And Others on 6 August, 2012
Author: D.Y.Chandrachud
Bench: D.Y. Chandrachud, R.D. Dhanuka
PNP 1/8 APP42-6.8.sxw
IN THE HIGH COURT OF JUDICATURE AT BOMBAY
ORDINARY ORIGINAL CIVIL JURISDICTION
APPEAL NO.42 OF 2012
IN
ARBITRATION PETITION NO.154 OF 2008
Jayantilal Hiralal Patel ..Appellant.
versus
Dhanlaxmi Kantilal Patel and others ..Respondents.
.....
Mr. Udaya Sankar Samudrala for the Appellant.
Mr. K.K. Malpathak for the Respondents.
......
CORAM : DR.D.Y.CHANDRACHUD, and
ig R.D.DHANUKA, JJ.
6 August 2012.
ORAL JUDGMENT (Per DR.D.Y.CHANDRACHUD, J.) :
The Appellant and the Respondents are heirs of Late Hiralal Velji Sankhala. The Appellant and the Second Respondent are brothers. The First Respondent is the widow of a deceased brother of the Appellant and the Second Respondent. The Third Respondent is the son of the First Respondent. The Fourth Respondent is the son of the Second Respondent. This Appeal arises from a decision dated 18 November 2011 of a Learned Single Judge by which a petition under Section 34 of the Arbitration and Conciliation Act 1996 has been dismissed. A power of attorney was executed among others by the Appellant and the Respondents on 31 October 2007. Exhibit A to the Arbitration Petition is an English translation of the power of attorney which reads as follows :
"We, the sons of late Shri Hiralal Velji Sankhala (1) Jayantilal Hiralal and his heirs (2) Late Shri Kantilal Hiralal's wife, Dhanlaxmi Kantilal and his heirs (3) Bakulkumar Hiralal and his heirs, are giving in written that to divide the property of our father Hiralal Velji Sankhala, we are giving right (power) in written to the below mentioned Panch. In the presence of our father on dated 30/1/1995 division was done as also our father late Shri Hiralal Velji Sankhala had in his presence made a Will in presence and witness of (1) Chandulal Bhavanji Nakrani (C.A.) Thane (2) Our maternal uncle Mavjibhai Pethabhai Pokar, Ghatkopar. After considering both the items if you feel the need, then we give you right (power) (are empowering you) to take the decision after making changes ::: Downloaded on - 09/06/2013 18:56:56 ::: PNP 2/8 APP42-6.8.sxw as required.
We, the three brothers and our heirs, who are giving in writing that the decision made by Panch after applying their awareness and brains is accepted and will be acceptable by us all.
We are empowering the below mentioned Panch.
1. Shri Ratansibhai Punjabhai Pokar, Mulund
2. Shri Kanjibhai Virjibhai Dhondu, Ghatkopar
3. Shri Jayantilal Kanjibhai Pokar, Petlod.
We are empowering above mentioned Panch. The Persons giving the Power and their heirs are as below.
1. Jayantilal Hiralal ig age 62
2. Dhanlaxmi Kantilal age 46
3. Bakul Kumar Hiralal age 44
4. Rajesh Kumar Jayantilal age 41
5. Paresh Kumar Jayantilal age 36
6. Vishal Kumar Kantilal age 26
7. Gyanesh Kumar Bakulkumar age 19 Witness :
1. Jitendra Jethalal Bhavani, Ahmedabad
2. Khimjibhai Laljibhai Diwani, Pune."
2. The power of attorney would indicate that an agreement was entered into by the co-sharers in the property, including the Appellant by which three members of the community were appointed to effect a division of the property among the co-sharers. The agreement records that a division had been made on 30 January 1995 in the present of the father, Hiralal Velji Sankhala, who had also executed a will. The power of attorney authorised the three panchas, after considering the division already made and the terms of the will to take a decision "after making changes as required". The power of attorney states that the three brothers and their heirs would accept the decision of the three panchas.::: Downloaded on - 09/06/2013 18:56:56 :::
PNP 3/8 APP42-6.8.sxw
3. The three panchas who were appointed under the power of attorney rendered a decision on 4 November 2007 by which they purported to effect a division of the property. The decision was impugned on the basis that it was an arbitral award in a petition under Section 34 of the Arbitration and Conciliation Act 1996. Among the grounds specifically raised in the arbitration petition was that the decision does not constitute an arbitration award within the meaning of the Arbitration and Conciliation Act 1996. Moreover, it was asserted that the decision was not arrived at after a process of adjudication and no dispute was formulated for adjudication by the three panchas.
4. The Learned Single Judge dismissed the Arbitration Petition holding that the agreement as reflected among the co-sharers in the power of attorney constituted an arbitration agreement within the meaning of Section 7(1).
Moreover, the Petitioner was found to have accepted the decision of the panchas by signing it and by signing the statement of account which was prepared after the "award". On this ground, it was held that the Appellant could not be permitted to resile from the award. In any case, according to the Learned Single Judge, by the award disputes between persons who are closely related in relation to the division of joint property was decided by persons who it appears were also related to the parties. Hence, the Learned Single Judge held that it would not be appropriate for this Court to interfere with the award in its jurisdiction under Section 34. The challenge in consequence has been rejected.
5. Counsel appearing on behalf of the Appellant submits that the agreement between the heirs and co-sharers as reflected in the power of attorney does not constitute an arbitration agreement within the meaning of Section 7(1)of the Arbitration and Conciliation Act 1996. It was urged that before a written agreement can be construed to be an arbitration agreement, it must indicate an intention on the part of parties to refer their disputes to a private tribunal for adjudication and a willingness to be bound by the decision of such a tribunal. The private tribunal constituted by the parties must be empowered to adjudicate upon the dispute. In the present case, it was submitted that no such intent to confer upon the private tribunal the power to render an adjudication of the ::: Downloaded on - 09/06/2013 18:56:56 ::: PNP 4/8 APP42-6.8.sxw disputes between them can be inferred.
6. On the other hand, it was urged on behalf of the Respondents, relying upon the decision of the Supreme Court in Kale v. Deputy Director of Consolidation1 that there was a family settlement as reflected in the power of attorney and the decision of the panchas was rendered in pursuance of the family settlement. Learned counsel submitted that the Supreme Court has construed the ambit of a family settlement in broad and liberal terms. Hence, it was urged that the Appellant having joined in the agreement to appoint the three panchas and having accepted the decision, he ought not be permitted to challenge it on the ground that there is no arbitration agreement or an arbitral award.
7. Section 7(1) provides that an arbitration agreement is an agreement by parties to submit to arbitration all or certain disputes which have arisen or which may arise between them in respect of a defined legal relationship, whether contractual or not. An arbitration agreement may be in the form of an arbitration clause or in the form of a separate agreement. An arbitration agreement has to be in writing. It may be contained in a document signed by the parties, in an exchange of letters or in an exchange of a statement of claim and defence in which the existence of an agreement is alleged by one party and not denied by the other. The essence of an arbitration agreement is that it constitutes an agreement in writing by parties to submit to arbitration disputes which have arisen or which may arise between them in respect of a defined legal relationship. By an arbitration agreement, parties agree to refer their disputes to a private tribunal for adjudication and express a willingness to be bound by the decision of the tribunal.
8. The principles which underlie an arbitration agreement have been enunciated in the judgment of the Supreme Court in Jagdish Chander v. Ramesh Chander2. The Supreme Court held as follows :
1 (1976) 3 SCC 119.
2 (2007) 5 SCC 719.::: Downloaded on - 09/06/2013 18:56:56 :::
PNP 5/8 APP42-6.8.sxw "(i) The intention of the parties to enter into an arbitration agreement shall have to be gathered from the terms of the agreement. If the terms of the agreement clearly indicate an intention on the part of the parties to the agreement to refer their disputes to a private tribunal for adjudication and a willingness to be bound by the decision of such tribunal on such disputes, it is arbitration agreement. While there is no specific form of an arbitration agreement, the words used should disclose a determination and obligation to go to arbitration and not merely contemplate the possibility of going for arbitration. .............
(ii) Even if the words 'arbitration' and 'Arbitral Tribunal (or arbitrator)' are not used with reference to the process of settlement or with reference to the private tribunal which has to adjudicate upon the disputes, in a clause relating to settlement of disputes, it does not detract from the clause being an arbitration agreement if it has the attributes or elements of an arbitration agreement. They are : (a) The agreement should be in writing. (b) The parties should have agreed to refer any disputes (present or future) between them to the decision of a private tribunal. (c) The private tribunal should be empowered to adjudicate upon the disputes in an impartial manner, giving due opportunity to the parties to put forth their case before it. (d) The parties should have agreed that the decision of the private tribunal in respect of the disputes will be binding on them.
(iii) Where the clause provides that in the event of disputes arising between the parties, the disputes shall be referred to arbitration, it is an arbitration agreement. Where there is a specific and direct expression of intent to have the disputes settled by arbitration, it is not necessary to set out the attributes of an arbitration agreement to make it an arbitration agreement. But where the clause relating to settlement of disputes, contains words which specifically exclude any of the attributes of an arbitration agreement or contains anything that detracts from an arbitration agreement, it will not be an arbitration agreement. For example, where an agreement requires or permits an authority to decide a claim or dispute without hearing, or requires the authority to act in the interests of only one of the parties, or provides that the decision of the authority will not be final and binding on the parties, or that if either party is not satisfied with the decision of the authority, he may file a civil suit seeking relief, it cannot be termed as an arbitration agreement."
9. This judgment of the Supreme Court was followed subsequently in Deutsche Post Bank Home Finance Ltd. v. Taduri Sridhar 3. In a later decision in State of Orissa v. Bhagyadhar Dash 4, the Supreme Court cited a passage from Russell on Arbitration5 and held that where the intention of the parties is that a person appointed by them should hold an enquiry in the nature 3 AIR 2011 SC 1899.
4 AIR 2011 SC 3409.
5 19th Edn. Page 59.
::: Downloaded on - 09/06/2013 18:56:56 :::PNP 6/8 APP42-6.8.sxw of a judicial enquiry, hear the respective cases of the parties and decide upon evidence laid before him, then the case is one of an arbitration. The intention in such a case is that there should be a judicial enquiry worked out in a judicial manner. The Supreme Court held as follows after adverting to its earlier decisions in State of Uttar Pradesh v. Tipper Chand 6 and State of Orissa v. Damodar Das7 :
"It would, thereby, be clear that this Court laid down as a rule that the arbitration agreement must expressly or by implication be spelt out that there is an agreement to refer any dispute or difference for an arbitration and the clause in the contract must contain such an agreement. We are in respectful agreement with the above ratio. It is obvious that for resolution of any dispute or difference arising between two parties to a contract, the agreement must provide expressly or by necessary implication, a reference to an arbitrator named therein or otherwise of any dispute or difference and in its absence it is difficult to spell out existence of such an agreement for reference to an arbitration to resolve the dispute or difference contracted between the parties."
The principles which were laid down in Jagdish Chander have been reiterated.
10. If the facts of the present case are analyzed on the touchstone of the law laid down by the Supreme Court, it is evident that the parties did not envisage that the three panchas whom they had appointed would perform an adjudicatory function. The agreement does not postulate an enquiry in the nature of an adjudication. The agreement does not postulate that the three panchas were required to hear the parties or that they would have to decide upon the basis of evidence adduced. On the contrary, while adverting to the fact that a division had taken place on 30 January 1995 and a will had been executed by the deceased father, parties empowered the three panchas to take a decision after making changes as required. The will of the father, it is common ground, has not been probated. The three panchas have purported to make certain changes on the basis of an agreement between the three brothers and their heirs. The Respondents may at the highest be in a position to assert that the decision which was rendered by the three panchas ultimately has the imprimatur of an agreement between the parties and that the Appellant had in fact signed that 6 1980(2) SCC 341.
7 1996(2) SCC 216.
::: Downloaded on - 09/06/2013 18:56:56 :::PNP 7/8 APP42-6.8.sxw decision. If that be so, the decision of the panchas may constitute a family settlement reflecting an agreed understanding between the parties. We do not express any view on that aspect because that was not the basis on which proceedings were initiated before the Court. If there is a family settlement which reflects an agreed understanding between the brothers and the heirs of a deceased brother, it would be open to the parties who seek to rely upon the power of attorney and a family settlement to independently seek enforcement by adopting suitable proceedings in accordance with law. The issue which falls for determination in these proceedings is however distinct. The issue is as to whether the agreement which was reflected in the power of attorney constitutes an arbitration agreement and whether the decision which was rendered by the three panchas would constitute an arbitral award. For the reasons that we have indicated, we have come to the conclusion that the agreement as reflected in the power of attorney lacks the essential attributes of an arbitration agreement. Parties did not contemplate an exercise of an adjudicatory function by the three panchas. There was no requirement that the panchas must hear them or that they have to render a decision on the basis of evidence adduced on the record. As a matter of fact, it is an admitted position that there was no claim or defence on the basis of which it could be postulated that there was an agreement to refer disputes to arbitration. The panchas have purported to rely upon a will which has not been probated and as the decision itself states the panchas proceeded to make certain changes on the ground that it was acceptable to the brothers.
This does not have the basic attributes of an adjudicatory proceeding which must lie at the foundation of an arbitral award.
11. Now we must note that it was the Appellant who had moved the Court for challenging the decision of the panchas on the ground that it constituted an arbitral award. In our view and with respect, the Learned Single Judge was in error in entertaining the Petition under Section 34 and proceeding on the basis that it constituted an arbitral award emanating from an arbitration agreement as defined in Section 7(1) of the Arbitration and Conciliation Act 1996. Consequently, while allowing the Appeal we hold that (i) There was no arbitration agreement between the parties within the meaning of Section 7(1); and (ii) The decision which was rendered by the panchas does not constitute an arbitral ::: Downloaded on - 09/06/2013 18:56:56 ::: PNP 8/8 APP42-6.8.sxw award within the meaning of the Act. We, however, clarify that in view of the issues which have arisen in this Appeal, it has not been necessary for this Court to express any opinion on whether the power of attorney and the resultant decision of the panchas reflects an agreed family settlement. If any of the parties seeks to rely upon the power of attorney and the decision of the panchas as being reflective of a family settlement and seeks enforcement thereof, it would be at liberty to do so by taking recourse to such remedy as may be available in law. For the aforesaid reasons, we set aside the impugned judgment of the Learned Single Judge dated 18 November 2011. The Arbitration Petition shall accordingly stand disposed of in the aforesaid terms.
In the circumstances, there shall be no order as to costs.
ig (Dr. D.Y. Chandrachud, J.)
(R.D.Dhanuka, J.)
::: Downloaded on - 09/06/2013 18:56:56 :::