Karnataka High Court
Sri. Ashok Kumar. S vs Sri. Narendra Kumar. S on 29 April, 2025
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MFA No.2231 of 2021
IN THE HIGH COURT OF KARNATAKA AT BENGALURU
DATED THIS THE 29TH DAY OF APRIL, 2025
PRESENT
THE HON'BLE MR JUSTICE V KAMESWAR RAO
AND
THE HON'BLE MR JUSTICE S RACHAIAH
MFA NO. 2231OF 2021(AA)
BETWEEN:
1. SRI. ASHOK KUMAR S.,
S/O LATE SHANTILAL LALJI,
AGED ABOUT 63 YEARS,
NO.809/8, JALARAM KRUPA,
61ST CROSS, 5TH BLOCK,
RAJAJINAGAR,
BENGALURU-560 010.
2. SMT. A. DAKSHA,
W/O SRI ASHOK KUMAR S.,
AGED ABOUT 59 YEARS,
NO.809/8, JALARAM KRUPA,
61ST CROSS, 5TH BLCOK,
RAJAJINAGAR,
BENGALURU-560 010.
...APPELLANTS
(BY SRI. DHYAN CHINNAPPA, SENIOR ADVOCATE FOR
SRI. SUNDARA RAMAN .M.V, ADVOCATE)
AND:
1. SRI. NARENDRA KUMAR S.,
S/O LATE SHANTILAL LALJI,
AGED ABOUT 66 YEARS,
NO.155/9/2, 1ST FLOOR,
1ST STAGE, 5TH CROSS,
OKALIPURAM, OPP: JAIN TEMPLE,
BENGALURU-560 021.
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MFA No.2231 of 2021
2. SMT. KALPANA N.,
W/O SRI. NARENDRA KUMAR S.,
AGED ABOUT 58 YEARS,
NO.155/9/2, 1ST FLOOR,
1ST STAGE, 5TH CROSS,
OKALIPURAM, OPP: JAIN TEMPLE,
BENGALURU-560 021.
...RESPONDENTS
(BY SRI. K.N. NITISH, ADVOCATE FOR
SRI. K.V. NARASIMHAN, ADVOCATE FOR R1 & R2)
THIS MFA IS FILED U/S 37(1)(c) OF THE ARBITRATION
AND CONCILIATION ACT, AGAINST THE JUDGMENT AND
DECREE DATED 07.02.2020 PASSED IN A.S.NO.72/2017, ON
THE FILE OF THE LXIII ADDITIONAL CITY CIVIL AND
SESSIONS JUDGE(CCH-64), BENGALURU, DISMISSING THE
ARBITRATION SUIT FILED U/SEC.34 OF THE ARBITRATION
AND CONCILIATION ACT, 1996.
THIS MFA HAVING BEEN HEARD AND RESERVED FOR
JUDGMENT ON 15.01.2025, COMING ON FOR
'PRONOUNCEMENT OF JUDGMENT' THIS DAY, V KAMESWAR
RAO J., DELIVERED THE FOLLOWING:
CORAM: THE HON'BLE MR JUSTICE V KAMESWAR RAO
AND
THE HON'BLE MR JUSTICE S RACHAIAH
CAV JUDGMENT
(PER: THE HON'BLE MR JUSTICE V KAMESWAR RAO) The challenge in this appeal is to an order dated 07.02.2020 passed by the LXIII Additional City Civil and Sessions Court (CCH-64), Bengaluru, in AS No. 72/2017.
2. The AS No.72/2017 was filed under Section 34 of the Arbitration and Conciliation Act, 1996 (in short, -3- MFA No.2231 of 2021 'Act of 1997) read with Rule 4 of the High Court of Karnataka Arbitration (Proceedings before the Courts) Rules, 2001, challenging the Arbitration Award dated 05.04.2017 passed by the learned sole Arbitrator, whereby the learned Sessions Judge has dismissed Section 34 petition and confirmed the impugned award rendered by the sole Arbitrator.
3. The facts that are noted from the record are that the Appellant No.1 and Respondent No.1 are brothers. The 2nd appellant is the wife of the 1st appellant and the 2nd respondent is the wife of the 1st respondent. Due to various disputes that arose between them, they were referred to arbitration before the Five Members of Lohana Samaja at Bengaluru. After considering the issues, an Arbitral Award was passed by the said Arbitrators on 28.03.2007. It is a conceded position that the said award has not been challenged by the parties herein.
4. It is the case, in pursuance of the Arbitral Award dated 28.03.2007, a Gift Deed, Partition Deed and -4- MFA No.2231 of 2021 Memorandum of Family Settlement were entered into between the parties on 21.06.2007, which were registered on 31.07.2007 with an intent to extinguish all the disputes between them. In the year 2008, the respondents herein had filed a suit in OS No.5221/2008 before the V Additional City Civil and Sessions Judge, Bengaluru, challenging the Gift and Partition Deeds dated 21.06.2007 on the ground, they are vitiated by fraud and hence not binding on them. No reference was made to the Memorandum of Family Settlement dated 21.06.2007.
5. The appellants herein put in appearance in the suit and filed an application under Section 8 of the Arbitration and Conciliation Act, 1996 ('Act of 1996' for short) invoking Arbitration clause as contained in the registered Memorandum of Family Settlement. The Sessions Judge has allowed the said application on 13.11.2008 and referred the dispute to Arbitration. The respondents have challenged the said order by filing a writ petition being WP No.16963/2008 and a Special -5- MFA No.2231 of 2021 Leave Petition being SLP No.19811/2009, before this Court and the Hon'ble Supreme Court.
6. Suffice to state, the reference to arbitration was upheld by this Court and the Hon'ble Supreme Court.
7. The respondents herein had filed a claim statement, to which the appellants filed their statement of objections and raised a counter-claim on the respondents. The issues were framed and evidence was led. It appears at the stage of final arguments, for the first time, the respondents pointed out that the date written on the Memorandum of Family Settlement was a date prior to the purchase of stamp paper. The learned Arbitrator on this basis, in the absence of any pleading took a view that the document would result in him, not having jurisdiction to arbitrate. It is in this background that the aforesaid suit under Section 34 of the Act of 1996 was filed by the appellants stating that the award is not only erroneous but, it violates the fundamental policy of Indian Law; it also suffers from irrational appreciation of material facts and proceeds on an analysis which is hit -6- MFA No.2231 of 2021 by the principles of Wednesbury unreasoableness. It is also stated that the award is not merely perverse, but is also illegal. According to the appellants, the learned Arbitrator ought to have noticed that, no objection was raised to his jurisdiction under Section 16 of the Act. When no objection was raised, the right to object the jurisdiction is deemed waiver in terms of Section 4 of the Act. When there is no objection to jurisdiction, the learned Arbitrator cannot suo-moto decide that he has no jurisdiction. It is the fundamental policy of Indian Law that a party who objects jurisdiction, must raise the objection immediately and before filing statement of defence. It was the stand, strangely the respondents, who got the learned Arbitrator appointed were seeking to contend that the Arbitrator has no jurisdiction. To succeed in such an endeavor, the respondents have to show that the agreement is hit by any of the principles of Indian Contract Act. Unless the contract can be declared void, it is impermissible in law for an Arbitrator, who is a creature of the contract, to hold that the Arbitration -7- MFA No.2231 of 2021 Clause is invalid. It was the stand of appellants that the learned Arbitrator does not conclude that the Memorandum of Family Settlement is hit by any of the provisions of the Contract Act. Yet, he declares the agreement clause as invalid. The stand was the learned Arbitrator failed to appreciate that, once he was appointed as an Arbitrator by this Court and the Hon'ble Supreme Court, it was not open for him to conclude the arbitration clause, as not valid. The Hon'ble Supreme Court and the High Court both appointed the Arbitrator on the basis of the Arbitration Clause provided in the Memorandum of Family Settlement. When such appointment is well-settled, the Arbitrator cannot go beyond the appointment and more so in Para-2 of the order in CMP No.13/2010, the Court records the submission of the appellants and the respondents herein that the Court must appoint an Arbitrator on the basis of the Clause-5.1 of the Memorandum of Family Settlement. It was on the basis of such request, the learned Arbitrator was appointed. The learned Arbitrator cannot -8- MFA No.2231 of 2021 hold, he has no jurisdiction. It was the case that, the learned Arbitrator has failed to appreciate that the standard of proof in alleging fraud and misrepresentation is extremely high. The primary burden is on the person alleging, to specifically plead in the manner envisaged in Order VI Rule 4 of CPC, and as has been observed in catena of judgments. It was the case, the Memorandum of Family Settlement was within the knowledge of the respondents as early as in the year 2008, when the appellants herein have presented document along with an application under Section 8 of the Act of 1996 before the Civil Court. Despite the same, the respondents chose to ignore its existence and filed claim statement before the Arbitrator without even challenging the said document. It is only by way of an amendment during the pendency of the arbitral proceedings, the respondents have challenged the said document. The respondents have not averred that there is a fraud or misrepresentation. It is at the time of arguments, without there being any pleadings of fraud and -9- MFA No.2231 of 2021 misrepresentation that the impugned order has been passed.
8. The Trial Court has framed the following points for its consideration:-
i) Whether once arbitral tribunal was constituted and that it was affirmed by the Hon'ble High Court and Hon'ble Apex Court, it was not open to the Arbitral Tribunal to adjudicate on the question of validity of Arbitration agreement/ clause?
ii) Whether the Arbitral Tribunal has erred in holding that it has no jurisdiction to adjudicate the dispute referred to it?
iii) Whether the award of the Arbitral Tribunal warrants interference by this Court?
iv) What Order or decree?
9. On Point Nos. 1 to 3, the Trial Court has come to the following conclusion and accordingly dismissed the suit:-
xx xx xx xx xx
16. Clause 5.2 of the alleged Memorandum of Family Settlement agreement provides that "the parties confirm that in the event of any dispute
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regarding interpretation of the terms of this MOU, the parties shall refer the same to the arbitrators for settlement. In the additional claim statement made on 30.04.2015 under Sec.23 of the Act of 1996, in CMP.13/2010, in prayer column shows as AA, the defendants of this suit have sought to declare the Memorandum of Family. Settlement, gift and partition deeds dated 21.06.2007 as null and void. In a claim statement filed in C.M.P.13/2000 filed by the defendants on 14.02.2005 before the arbitral Tribunal U/Sec.23 of the Act, 1996, the defendants have sought for partition declaring that the claimants are entitled to half share in 'A' schedule and 1st claimant has half share in 'B' schedule property and for separate possession of shares. In both the said claim petitions, the defendants have contended that fraud was played and misrepresentation was resorted to on them and gift and partition deed were created. It is for the plaintiffs of this suit to oppose the said claim petitions. They have not sought for dismissal of the said claim petitions. They have not contended that the arbitral tribunal has no jurisdiction to decide the dispute. The defendants or the plaintiffs have not objected the jurisdiction of the arbitral tribunal before the arbitral tribunal. But the arbitral tribunal at the stage of argument found that the document dated 21.06.2007 is not executed and could not have
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MFA No.2231 of 2021been executed on 21.06.2007, but has come into existence subsequently though is not done by the parties with any criminal intention, but in a casual manner not realizing the consequences of creating a arbitral tribunal by an agreement under a document which is antedated.
17. The Hon'ble High Court in deciding the W.P.No.16963/2008 (GM CPC) that filed challenging the order allowing the I.A. filed U/Sec.8 of the Act, 1996 by the V Addl., City Civil & Sessions Judge, Bangalore, passed in O.S.NO.5221/2008 has relied case law reported in 2003(6) SCC 503, Hindustan Petroleum Corporation Ltd., V/s Pink City Midway Petroleums to hold that a clause in Memorandum of Family Settlement to reference to arbitration of all disputes is made, whether such agreement is in existence or whether it was validly executed or is tainted by fraud or misrepresentation can also be agitated before the Arbitrator. In the aforesaid case law, in Paras- 14 to 16, it was clearly held that "objection regarding the applicability of the Arbitration clause will have to be raised before the arbitrary Tribunal concerned. The Apex Court has further held that, Sec.16 empowers the arbitrary Tribunal to rule or its own jurisdiction including on any objections with respect to the existence or validity of the arbitration agreement.
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MFA No.2231 of 2021
18. Perused the case laws relied by the learned counsel for plaintiffs. In the said case laws, the Hon'ble Apex Court has not laid down a case law that once the arbitral tribunal was constituted and that it was affirmed by the Hon'ble High Court or Hon'ble Apex Court, it was not open to the arbitral tribunal to adjudicate on the question of validity of arbitration clause/agreement. Facts of this suit and the facts of reported case laws are entirely different. But, as stated supra as per case law of Hon'ble Apex Court and the order of our Hon'ble High Court in W.P.16963/208 as well as per Sec.16(1) of the Act, Arbitral Tribunal has authority to rule on its own jurisdiction including on any objections with respect to the existence or validity of the arbitration agreement. Before passing the said award, the arbitral tribunal has scrutinized the oral & documentary evidence placed with reference law and facts of this case. Therefore, it is clear that, if the Arbitral Tribunal found that there was no valid arbitration agreement between the parties, it has no jurisdiction to adjudicate upon the disputes raised by the parties herein. Therefore, no grounds to accept that the Arbitral Tribunal has erred in holding that it has no jurisdiction to adjudicate upon the disputes raised by the plaintiffs and the defendants. Hence, no
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MFA No.2231 of 2021grounds to interfere with the findings of the arbitral tribunal.
19. No specific allegations made against the learned arbitrator that he has played fraud on the plaintiffs while passing the arbitral award. In what way, the arbitral award is opposed to the public policy is not explained properly. Therefore, I am of the opinion that the impugned award of the Arbitration Tribunal was passed in accordance with the procedure laid under Arbitration and Conciliation Act, 1996. Therefore, no grounds to set-aside the impugned award of the Arbitration Tribunal. Hence, I answer the Points No.1 to 3 as in the Negative
10. According to Mr. Dhyan Chinnappa, the learned Senior Counsel appearing for the appellants, it is a settled law that the appointment under Section 11 of the Act of 1996 is a judicial order. Existence of Arbitral Agreement is neither disputed nor denied by either party. Once, the Court has upheld the appointment of an Arbitrator, the same is final and binding between the parties and no party can then raise an issue before the Tribunal on the existence of arbitration clause/appointment. In this case, this Court's order has
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MFA No.2231 of 2021been upheld by the Hon'ble Supreme Court as well, on two occasions, once while considering the application under Section-8 and next while considering the application under Section-11 of the Act. He refers to the judgment of the Hon'ble Supreme Court in the case of S.B.P & Co. Vs. Patel Engineering [(2005) 8 SCC 618] and Chloro Controls India Pvt. Ltd. Vs. Severn Trent Watar Purification Inc. [(2013) 1 SCC 641] to contend that the findings made under Section 11 are final and cannot be questioned by the Arbitral Tribunal.
11. According to Mr. Chinnappa, since the order of the Hon'ble Supreme Court has confirmed the appointment, for the learned Arbitrator to determine his jurisdiction is to state that the order of the Hon'ble Supreme Court is faulty. The award vitiates the finality to adjudication process between the parties. The order of this Court as confirmed by the Hon'ble Supreme Court is final and binding between the parties and acts as res judicata. Even assuming that it is not so, the respondents did not raise any issue of jurisdiction before
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MFA No.2231 of 2021the Tribunal and in fact confirmed the appointment. Having confirmed the appointment, the Tribunal could not have suo-moto answered the issue of jurisdiction, without even being raised by or put to the parties. Such an award is not merely contrary to the Act, but it is also violative of the fundamental policy of Indian Law and is patently illegal.
12. In support of his submissions, Mr.Chinnappa has also relied upon the following case laws:-
1. Anant Construction (P) Ltd. V. Ram Niwas MANU/DE/407/1994
2. Rajan Ram v. Jai Prakash Singh & Ors., (2019) 8 SCC 701
3. Ranganayakamma and Anr. v.
K.S Prakash (D) by LRs. And Ors (2008) 15 SCC 673
4. A.C Ananthswamy and Ors. v.
Boraiah (dead) by LRs.
(2004) 8 SCC 588
5. Ajjapalli Papireddy and Anr. v.
Ajjapalli Narayana Reddy and Anr.
MANU/AP/2646/2013
13. The case of the respondents before the trial Court as contended by their counsel was by not disputing the relationship between the parties and also that,
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MFA No.2231 of 2021Arbitral Award dated 28.03.2007 was passed by 05 Arbitrators. It was conceded, that the said award has not been challenged. They have denied the execution of Gift Deed, Partition Deed and Memorandum of Family Settlement on 21.06.2007, in pursuance of the award dated 28.03.2007 by the 05 Arbitrators. They have denied that, in the year 2008, they have belatedly decided to agitate the dispute between them and appellants, by filing a suit in OS No.5221/2008. They have not disputed the filing of Section 8 application in OS No.5221/2008. They have also not disputed the fact of appointment of the sole Arbitrator. They have not disputed dismissal of the writ petition as well as the SLP. They have not admitted the pleading of the appellants that once the dispute has been referred to Arbitration by the Court, the Arbitrator is bound by the reference and has no jurisdiction to look into reliability of the alleged agreement containing Arbitration Clause and to pass appropriate order. According to them, the Arbitrator has got jurisdiction to find-out whether the alleged
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MFA No.2231 of 2021agreement is relatable to the dispute and that he can proceed with the merits of the case. The Memorandum of Family Settlement dated 21.06.2007 cannot be trusted as it is apparently an ante-dated document. Therefore, the Arbitration clause in the said document cannot be made use of when serious allegation of fraud has been made. The Arbitrator is justified in recording its finding that, he has no jurisdiction to adjudicate.
14. According to the learned counsel, a perusal of the order passed by this Court in WP No.16963/2008 would make it evident that the jurisdiction of the Arbitrator under Section-16 was kept open. So, the issue of jurisdiction could have been determined by the learned Arbitrator under Section-16 of the Act. That apart, it is his submission that, though the order under Section 8 came to be passed on 13.11.2008, no steps were taken by the appellants herein to initiate the arbitration proceedings. As such seeking appointment of the Arbitrator, the respondents herein filed Civil Misc. Petition No.13/2010. The same came to be allowed vide order
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MFA No.2231 of 2021dated 29.03.2010. He stated that the appellants herein opposed the said application. It was after over-ruling the objection on the application, the Arbitrator was appointed. The said order was challenged by the appellants herein before the Apex Court. The said petition was disposed of by the Apex Court keeping all contentions open. As such, the invocation of Section-11 by the respondents herein cannot be considered as waiver of the claims of the respondents herein. In view of the observations made by the High Court in W.P. No.16963/2008, the filing of CMP No.13/2010 was inevitable, in as much as the respondents herein were in need of a forum to get their grievances redressed. In any event, having regard to the language employed in WP No.16963/2008 and contentions kept open by the Hon'ble Supreme Court, the aspect of jurisdiction of the Arbitrator was rightly decided by the Arbitrator himself.
15. It was the Arbitrator, who entered reference and recorded evidence and on being brought to his notice that the alleged Memorandum of Family Settlement
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MFA No.2231 of 2021dated 21.06.2027 which itself comprises arbitration clause is an ante-dated document, he eventually passed award holding that he has no jurisdiction to adjudicate upon the dispute raised by the parties. The said observation is in consonance with the ratio laid down by the 7 Judge Bench of the Hon'ble Supreme Court in Re:
Interplay between Arbitration Agreements under the Arbitration and Conciliation Act, 1996 and The Indian Stamp Act, 1899, more specifically Paragraph 158 thereof. That apart, in respect of the judgment in AS No.72/2017, which is the impugned order, he stated, it was incumbent upon the appellants to prove that the award is in conflict with public policy of India, or that it contravenes the fundamental policy of Indian Law or that it is in conflict with the most basic notions of morality and justice. According to him, an alleged tainted agreement which was apparently ante-dated, falls in the mischief of Section 23 of Indian Contract Act, the same has been rightly discarded by the Arbitrator. As such, the
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Trial Court has rightly passed the judgment dismissing the challenge of the appellants herein, to the award.
16. He contested the submission of Mr.Chinnappa that, since the alleged Memorandum of Family Settlement was registered on 31.07.2007, the mentioning of date as 21.06.2007 did not make any difference, by stating that, in terms of Section 47 of the Indian Registration Act, though the registration is subsequent to the date of execution, it shall relate back to the date of the deed. As such, the alleged document dated 21.06.2007 drawn on the stamp paper obtained by the appellants herein on 22.06.2007 incorporating a reference to the alleged Gift Deed and the Deed of Partition dated 21.06.2007 cannot be considered to be a valid document. Once the Memorandum of Family Settlement incorporating an arbitration clause goes, the consequential document(s) also goes, making the appeal non-maintainable. He has also referred to the subsequent developments by filing the documents along with a memo dated 03.12.2024. According to him, after
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MFA No.2231 of 2021the passing of the award by the learned Arbitrator on 05.04.2017, the respondents herein filed an application seeking revival of the suit in OS No.5221/2008. The said application was allowed by the Trial Court vide order dated 05.01.2018. On revival of the suit, the appellants herein have filed written statement. Based on the rival pleadings, issues have been framed. The appellants herein have sought for recasting of the issues which prayer was accepted and the issues have been recasted on 01.12.2020.
17. Having participated in the proceedings of suit and having not challenged the revival of the suit, the appellants cannot be heard in this appeal. He referred to the judgment in the case of Gaiv Dinshaw Irani and others Vs. Tehmtan Irani and others to contend, the requirement of taking note of the subsequent developments in the proceedings, is well settled. So, it is his submission, looking from any angle, the appeal deserves to be dismissed, since the appellants have already subjected themselves to the jurisdiction of the
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MFA No.2231 of 2021Trial Court and the Trial Court is seized of the matter, the appeal is liable to be dismissed. He also relied upon the judgment of the Hon'ble Supreme Court in Mcdermott International Inc. Vs. Burn Standard Co. Ltd., and Others to state that the Court cannot correct the errors of the Arbitrator(s). It can only quash the award, leaving the parties to begin arbitration again, if they desire.
18. A reference is also made to the judgment in the case of State Trading Corporation of India Ltd. Vs. M/s. Toeper International Asia Private Limited to contend that the annulment operates to negate the decision in whole or in part, thereby depriving the portion negated by legal force and returning the parties as to that portion, to their original litigating positions. So he prays that the appeal be dismissed with costs.
19. Learned counsel for the respondents has relied upon the following judgments:-
1. Mcdermott International Inc Vs Burn Standard Co. Ltd & Ors reported in 2006 (11) SCC 181.
2. State Trading Corporation of India Ltd Vs
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M/S Toeper International Asia Pvt Ltd reported in 2014 SCC Online Del 3426
3. Steel Authority of India Ltd Vs Indian Council of Arbitration reported in 2015 SCC Del 13394
4. Kinnari Mullick and Anr Vs Ghanshyam Das Damani reported in 2018 (11) SCC 328.
5. Re: Interplay between Arbitration Agreements under the Arbitration and Conciliation Act, 996 and the Indian Stamp Act, 1899 reported in MANU/SC/1325/2023
6. Gaiv Dinshaw Irani Vs Tehmtan Irani reported in MANU/SC/0475/2014 ANALYSIS
20. Having heard the learned counsel for the parties and perused the record, the facts emerge from the record are that, the parties herein are related to each other being the brothers and their wives. Various disputes arose between them. Those disputes were referred to the Arbitration consisting of Five Members and the reference has resulted in an award dated 28.03.2007. It was the case of the appellants herein
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MFA No.2231 of 2021that pursuant to the award dated 28.03.2007, a Gift Deed, Partition Deed and Memorandum of Family Settlement were executed on 21.06.2007 and registered on 31.07.2007. In the year 2008 the respondents filed OS No.5221/2008 before the City Civil Court, Bengaluru, challenging the Gift and Partition Deed dated 21.06.2007 on the ground that they have been vitiated by fraud and therefore, not binding on them.
21. In the said suit, the appellants herein have filed an application under Section 8 of the Act of 1996 contending there exists an Arbitration Clause in the Family Settlement Agreement and have sought a reference of the matter to the Arbitration. The said application was allowed vide order dated 13.11.2008 and the matter was referred to the arbitration.
22. The case of the respondents was, no Memorandum of Family Settlement dated 21.06.2007 was entered between the parties. It was also contended that, the alleged settlement agreement dated 21.06.2007 is a fraud played by the appellants. The said objection
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MFA No.2231 of 2021was over-ruled by the Court on the ground that, where an arbitration clause exists, the Court has mandatory duty to refer the dispute between the parties.
23. The order dated 13.11.2008 passed in OS No.5221/2008 was challenged by the respondents herein before this Court in Writ Petition No.16963/2008 on the ground that, since the allegations of fraud made the matter is required to be tried by the Civil Court and the matter cannot be referred to the arbitration.
24. The Paragraphs- 13 & 14 of the order of this Court dated 11.03.2009 in Writ Petition No.16963/2008 (GM-CPC) reads as under:-
"13. In the instant case, the facts and the circumstances are totally different. The petitioners are denying the existence of the Memorandum of Family Settlement, whereunder a clause pertaining to reference to Arbitration of all disputes is made. Whether such an agreement is in existence or whether it is validly executed or is tainted by fraud or misrepresentation can also be agitated before the Arbitrator. The mandate of Section 8 of the 1996 Act is very clear that wherever the parties have agreed to refer the dispute to Arbitration, the Court is required to refer the same to Arbitration as it does not have the
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jurisdiction to entertain the same in the face of such Arbitration clause.
14. Reliance placed by the petitioners on the judgment of the Apex Court in this regard in the case of Hindustan Petroleum Corpn Ltd. Vs. Pinkcity Midway Petroleums reported in (2003) 6 S.C.C. 503 is apposite. The observations made in paragraphs 14, 15 and 16 of the said Judgment makes the position very clear. The Apex Court by referring to Section 8 and Section 16 of the Arbitration and Conciliation Act, 1996 has clearly held that objection regarding the applicability of the Arbitration Clause will have to be raised before the Arbitrary Tribunal concerned. The Apex Court has further held in the said decision that Section 16 empowers the Arbitrary Tribunal to rule on its own jurisdiction including on any objections with respect to the existence or validity of the Arbitration agreement."
(emphasis supplied)
25. The respondents herein have filed a Special Leave Petition No.19811/2009 against the order dated 11.03.2009 passed in Writ Petition No.16963/2008. The Special Leave Petition was dismissed on 24.08.2009. Interestingly, a CMP was filed by the respondents before this Court being CMP No.13/2010 under Section 11(6) of the Act of 1996 to appoint a impartial Arbitrator and it is
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MFA No.2231 of 2021pursuant thereto, this Court, vide order dated 29.03.2010, appointed the learned Arbitrator, a Former Judge of this Court to resolve the dispute between the parties.
26. The submissions made by Mr. Dhyan Chinnappa can be summed-up in the following manner:
i) The appointment under Section 11 of the Act of 1996 is a Judicial Order;
ii) Once the Court has up-held the appointment of an Arbitrator, the same is final and binding between the parties;
iii) No party can raise the issue of Jurisdiction of the Arbitrator to arbitrate;
iv) The Order passed by this Court has been up-
held by the Hon'ble Supreme Court;
v) If the learned Arbitrator has to determine his jurisdiction it is like stating that the order of the Hon'ble Supreme Court is faulty;
vi) The order passed by this Court has been confirmed by the Hon'ble Supreme Court, is binding between the parties and acts as res- judicata;
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MFA No.2231 of 2021
vii) Even assuming it is not so, the respondents did not raise any issue of jurisdiction before the Tribunal and in fact, confirms the appointment;
viii) The Tribunal could not have suo-moto answer any issue of jurisdiction without even being raised by or put to the parties. Such an award is not only contrary to the Act, but it is also violative of fundamental Policy of Indian Law and it is patently illegal.
27. We have already re-produced the relevant paragraphs of the order passed by the Trial Court.
28. Vide the award dated 05.04.2017, the learned Arbitrator has primarily decided the impugned issue by stating in Paragraph-5 onwards as under:-
"5. Strangely, this is a case of both the parties having taken due interest in bringing into existence this Memorandum of Family Settlement. While the claimants Sri Narendra Kumar and Smt. Kalpana are now contending that this document also is vitiated by fraud, like the Partition Deed and Gift Deed, the document itself would show that the stamp papers for this document were purchased by none else than Sri Narendra Kumar, and the document would further show that the registration expenses, scanning fee at the time of registration were all paid by Sri Narendra
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Kumar himself. While this is the situation with regard to these documents so far as Sri Narendra Kumar is concerned, Sri Ashok Kumar throughout has been maintaining the correctness and validity of this document right from the time of invoking Section 8 of the Arbitration & conciliation Act. The argument, therefore, that has been put forth by learned Senior Counsel Sri Dhyan Chinnappa is that, when the parties themselves are shown to have actively participated in bringing into existence this document containing an arbitration clause, why should the Tribunal take serious note of a fact that has arisen only at the stage of arguments. I am, however, not convinced of this argument.
6. In the absence of a clause in the agreement between the parties, with regard to referring of the dispute to arbitration, no jurisdiction vests with the Arbitral Tribunal. Obviously, such agreement between the parties should be a valid agreement, enforceable in law. For the consideration of an object of agreement being unlawful, Section 23 of the Contract Act inter alia refers to the Court recording it as immoral or opposed to public policy. Here is a document titled as Memorandum of Family Settlement being shown to have been executed on 21.6.2007. Clause-5 of the said document deals with an arbitration agreement. The stamp papers for this document clearly show that the said stamp papers were purchased by Sri Narendra Kumar on the next day i.e., on 22nd June 2007. I am referring to the evidence on this aspect for the limited purpose of accepting the validity or otherwise of this document. One of the Arbitrators, as well as, one of
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the attesting witnesses - RW-5 Sri A.V.Rukhana, in para-6 of his affidavit by way of examination-in-chief, states that he was informed that there was another document called the Memorandum of Family Settlement, which was signed on the same day, but that it was however informed to them that the document would be registered only after the money to be paid by Sri Ashok Kumar and his family, was paid to Sri Narendra Kumar and his family. Similarly, another such Arbitrator and attestor RW-1 Sri Prafulla Raja, in his affidavit by way of examination-in-chief, in para-7, states that the parties had also decided to sign another document called the Memorandum of Family Settlement on the same day, but only after the money was paid by Sri Ashok Kumar and his wife, to Sri Narendra Kumar and his wife. It is then that extensive evidence is led to show that on the very day i.e., on 21.6.2007 in the night, in the presence of the said elders of the community, Sri Ashok Kumar paid Rs.10 lakhs to Sri Narendra Kumar. It was thus not just accidental that though the stamp papers were purchased on 22.6.2007, the date was by oversight mentioned as 21.6.2007 as the date of the Memorandum of Family Settlement. As per the case put forth, there had to be necessarily a document styled as Memorandum of Family Settlement shown to have come into existence on the very day the Gift Deed and Partition Deed came into existence viz., 21.6.2007, though its registration was intended to be delayed until the payment was made by Sri Ashok Kumar and it is then that the evidence is led to show that, that very night, Sri Ashok Kumar paid Rs.10
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lakhs to Sri Narendra Kumar. Thus, showing the date of execution of Memorandum of Family Settlement as 21.6.2007, but the document prepared on any day between 22.6.2007 and 31.6.2007, is not by inadvertence. It is intentional, in the sense that, they had to bring up a document purporting to have been executed on 21.6.2007, but, that exercise of bringing of that document happened subsequently on any day between 22.6.2007 and 31.7.2007. Thus, the document was intentionally got up. The document which purports to be of 21.6.2007, is thus, in fact, no so. This Tribunal can assume jurisdiction and proceed to adjudicate upon the disputes raised herein only by winking at this fact of the document having been got up. At the time the parties did this, I would certainly not even suggest that they had any criminal intent as contemplated under Section 192 of IPC, dealing with fabrication of false evidence, for being used as evidence in the judicial proceeding. Nevertheless, the truth remains that if the dispute did arise, this document was intended to be used as an Arbitration Agreement, to have the dispute settled by arbitration through an Arbitral Tribunal, now that, even though belatedly at the stage of arguments, it is found that the document is not what it purports to be, viz., that the document dated 21.6.2007 is not executed and could not have been executed on 21.6.2007, but has come into existence subsequently, I am of the opinion that by winking at this factual situation and to proceed to assume jurisdiction and to adjudicate the disputes raised herein as an Arbitrator would amount to the Tribunal also becoming a party to this exercise by the
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parties, though I repeat, is not done by the parties with any criminal intention, but in a casual manner not realizing the consequences of creating a Arbitral Tribunal by an agreement under a document which is ante dated.
7. I am, therefore, of the opinion that this Tribunal has no jurisdiction to adjudicate upon the disputes raised herein. Nothing said herein should be taken as an observation on the merits of the case by either of the parties. The parties should be free to pursue their remedies in accordance with law.
8. By the order on IA.II, dated 27.4.2015, under Section 17 of the Act, interim injunction had been granted with reference to Clause 3.2 of this very document - Memorandum of Family Settlement, on the basis that the said document is dated 21.6.2007. Now that a contrary view is taken with regard to the very document, leaving the parties to have their remedies worked out in accordance with law, this interim injunction also needs to be vacated.
In view of the above, I pass the following:
AWARD For want of a valid arbitration agreement between the parties, this Arbitral Tribunal has no jurisdiction to adjudicate upon the disputes raised by the parties herein.
The parties are free to pursue their remedies in accordance with law.
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Interim injunction granted on IA.II, on 27.4.2015, hereby stands vacated.
In the circumstances, the parties shall bear their own costs.
Under Section 32(1) of the Arbitration & Conciliation Act, 1996, this Arbitral proceeding hereby stands terminated.
Sd/-
(JUSTICE G. PATRI BASAVANA GOUD(RETD.) SOLE ARBITRTOR Bengaluru Date: 05.04.2017
29. The award of the learned Arbitrator directing that the Arbitral Tribunal has no jurisdiction to adjudicate upon the disputes is because of the fact that, the document titled as Memorandum of Family Settlement being shown to have been executed on 21.06.2007, whereas the Stamp Paper on which it is drawn was purchased on 22.06.2007.
30. The learned Arbitrator has also noted, that one of the attesting witnesses in his examination-in-chief stated, he was informed that there was another
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MFA No.2231 of 2021document called as Memorandum of Family Settlement, which was signed on the same day. He also stated even the Attestor-RW.1 i.e., Sri. Prafulla Raja in his affidavit stated that the parties have decided to sign another document called Memorandum of Family Settlement on the same day, but only after the money was paid by the appellants to the respondents. He is of the view, it is then that extensive evidence is led to show that on the very date i.e., on 21.06.2007 in the night, in the presence of the elders of the community, the Appellant No.1 paid Rs.10.00 Lakhs (Rupees Ten Lakhs) to the Respondent No.1. So, it was not accidental that, some Stamp Papers were purchased on 22.06.2007. The date was by over sight mentioned as 21.06.2007, as the date of Memorandum of Family Settlement. According to him, there had to be necessary document styled as Memorandum of Family Settlement shown to have come into existence on the very day that the Gift Deed and Partition Deed came into existence on 21.06.2007, though its registration was intended to be delayed until
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MFA No.2231 of 2021the payment is made. Thus, showing the date of execution of the Memorandum of Family Settlement as 21.06.2007, but the document prepared on any date between 22.06.2007 and 31.06.2007, is not by inadvertence. Thus, according to the learned Arbitrator, it is intentional in the sense that they had to bring-up a document purporting to have been executed on 21.06.2007 but that exercise of bringing of that document happened subsequently on any day between 22.06.2007 and 31.06.2007. Thus the document was intentionally got up. He was of the view that, he can assume jurisdiction and proceed to adjudicate upon the disputes raised herein only by winking at the fact that the document having been brought up. He concludes that, even belatedly at the stage of arguments if it is found that the document is not what is purports to be viz., that document dated 21.06.2007 is not executed and could not have been executed on 21.06.2007, but has come into existence subsequently, he held by winking at the said factual situation and to proceed to
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MFA No.2231 of 2021assume Jurisdiction and to adjudicate the dispute raised before the Arbitrator would amount to the Tribunal (i.e., He) also becoming party to the exercise by the parties. Accordingly he held that the Tribunal has no jurisdiction to adjudicate upon the disputes raised therein.
31. No doubt, that the appointment of the Arbitrator has been confirmed till the Hon'ble Supreme Court and at no point of time did any one raised objection on the arbitrability and it is a settled law, such an objection need to be taken/pleaded before filing objections and the Arbitrator could not have decided the issue suo moto, but the fact of the matter is that a doubt has arisen in the opinion of the Arbitrator on the execution of the document, i.e., Memorandum of Family Settlement on 21.06.2007, as the Stamp Paper was bought/purchased on 22.06.2007. Surely when the stamp paper has been purchased on 22.06.2007, the settlement could not have been executed on 21.06.2007.
32. The Arbitrator is not unjustified to conclude that, the Tribunal has no jurisdiction to adjudicate the
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MFA No.2231 of 2021dispute raised, as the Arbitration Clause should be in a valid agreement to be enforceable in law. The foundation of such a conclusion has already been narrated above. It is a possible view. The plea of Mr. Dhyan Chinnappa that, the issue of appointment of Arbitrator having been up-held till the Hon'ble Supreme Court, the Arbitrator could not have concluded so, though sounds appealing on a first blush, but on a deeper consideration of the fact that, after passing of the award by the learned Arbitrator on 05.04.2017, the respondents herein have filed an application seeking revival of the suit in OS No.5221/2008, the said application was allowed by the Trial Court vide order dated 05.01.2018 and on the revival of the suit, the appellants herein had filed a written statement and based on the rival pleadings, issues have been framed. The appellants herein have also sought recasting of the issues, which were re-casted on 01.12.2020. So in that sense the appellants having participated in the suit proceedings and having not challenged the revival of the suit, they cannot be heard
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MFA No.2231 of 2021to contend the dispute need to be decided through Arbitration. The reliance placed by the learned counsel for the respondents on the judgment in the case of Giav Dinshaw Irani Vs. Tehmtan Irani (supra) to contend that, the requirement of taking note of subsequent developments when such events have a direct bearing on the relief claimed by a party becomes relevant. The submission of Mr. Chinnappa was, as the challenge to the award was pending before the Trial Court and this Court, and the appellants were awaiting decision to the challenge and as such they could not have challenged the orders passed by the Court in civil suit, is not convincing for the simple reason, the appellants could have very well sought the stay of the award dated 05.04.2017 of the learned Arbitrator, or could have sought the stay of proceedings in suit till a decision is made in the Section 34 petition. That apart, almost seven years have elapsed from the date of revival of the suit. The proceedings in the suit have reached the stage of evidence and beyond
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MFA No.2231 of 2021that, it is too late in the day to put the clock back and relegate the parties to Arbitration.
33. Additionally we note that, pursuant to the order dated 25.03.2022 of the Trial Court, the plaint has been amended seeking a declaratory relief to hold the memorandum of family settlement dated 21.06.2007 as null and void. It means, in respect of same family settlement which incorporates the Arbitration Clause/ agreement, a declaration is sought to treat the same as null and void. In that sense also, it is doubtful that the challenge/dispute to the family settlement can be decided by an Arbitrator, who is a creature of the same family settlement. The amendment order incorporating the challenge to family settlement appears to have attained finality as no appeal has been filed. At least, nothing has been placed before us to show a challenge in that regard is pending.
34. The reliance placed on the judgment of the Hon'ble Supreme Court in the case of S.B.P. and Co. Vs. Patel Engineering [(2005) 8 SCC 618] and Chloro
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MFA No.2231 of 2021Controls India Pvt. Limited Vs. Severen Trent Water Purification Inc. [(2013) 1 SCC 641] to contend that the findings made under Section-11 of the Act of 1996 cannot be questioned by the Arbitral Tribunal is concerned, there cannot be any dispute on the proposition, but the issue of arbitrability/jurisdiction can be decided by an Arbitrator. In view of our conclusion above and also in view of the conclusion drawn by the learned Arbitrator in the award which was challenged by the appellants before the Trial Court in a petition under Section 34 of the Act of 1996 and the same having been negated, we are of the view this appeal filed under Section 37 of the Act of 1996 lacks merit, as the Trial Court held, before passing the award, the Arbitral Tribunal has scrutinized the oral and documentary evidence placed with reference to law and facts of the case and also when the Arbitral Tribunal found there was no valid arbitration agreement between the parties and as such, it has no jurisdiction to adjudicate upon the dispute between the parties and upheld the award.
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MFA No.2231 of 2021Moreover, it is seen the appellants have filed the present appeal challenging the order dated 07.02.2020 on 16.02.2021, which is almost one year after the passing of the impugned order, the challenge has to be rejected.
35. It is also important to state that, it is a settled law in terms of the judgment in Mcdermott International Inc. Vs. Burn Standard Co. Ltd., (supra) and also the State Trading Corporation of India Limited Vs. Toeper International Aisa Pvt. Limited (supra), on which reliance has been placed by the counsel for the respondents, that the Court, while exercising jurisdiction under Section 34, can only set aside the award or uphold the same, it cannot relegate the parties to their original litigating position, that is reviving the Arbitration Proceedings.
36. Insofar as the judgment in the case of Ananth Construction (P) Ltd Vs Ram Niwas (Supra) is concerned, Mr. Chinnappa has relied upon Paragraph No.10.2, more specifically the sub-para (19) and stated, a distinction sought to be urged between a
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MFA No.2231 of 2021plea requiring amendment of the plaint and a plea sought to be introduced by replication shall have to be kept in view. According to him, a plea which essentially constitutes the foundation of a claim made by the plaintiff or which is essentially a part of plaintiff's cause of action cannot be introduced through a replication, in other words a replication is always a defensive pleading in nature. The said preposition of law as advanced by Mr. Chinnappa shall not have any applicability for the issue which arises for consideration and also in view of our finding above.
37. In the case of Raja Ram Vs. Jai Prakash Singh and Others (supra), reliance has been placed by Mr. Chinnappa on Paragraphs- 4, 11, 16 and 18, which we reproduce as under is an argument on the merits of the dispute. Suffice to state, the issue is pending consideration in the suit. Surely, for the limited issue which arises for consideration in this appeal, the judgment has no applicability:-
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"4. Learned counsel for the respondent/defendants submitted that under Section 101 of the Evidence Act, 1872 the initial onus lay on the plaintiffs by establishing a prima facie case for undue influence and only then the onus would shift to them. The necessary pleadings in respect of the same were completely lacking. The First Appellate Court wrongly shifted the burden upon the respondents. The deceased may have been old and infirm, but he was not deprived of his mental faculties so as not to know the nature of documents executed by him. He was alive approximately for ten months after the execution of the deed, but never questioned the same. The deceased had executed another sale deed two years earlier in 1968, Exhibit 10 in favour of third persons which has not been questioned by the appellant. It establishes that the deceased was not in a condition where undue influence could be exercised over him. There can be no presumptions merely on account of his old age. DW1 was a witness to the sale deed and was present at the time of registration. The deceased admitted before the sub-registrar having received a sum of Rs.2,000/ earlier and Rs.4,000/ was paid at the time of registration. The SubRegistrar has not recorded any adverse inferences about the condition or capacity of the deceased at the time of registration. A registered instrument will carry a presumption about its correctness unless rebutted.
Xxxx xxxxx xxxxx xxxxx
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11. That leads us to the question of undue influence. The pleadings in the plaint are completely bereft of any details or circumstances with regard to the nature, manner or kind of undue influence exercised by the original defendants over the deceased. A mere bald statement has been made attributed to the infirmity of the deceased. We have already held that the deceased was not completely physically and mentally incapacitated. There can be no doubt that the original defendants were in a fiduciary relationship with the deceased. Their conduct in looking after the deceased and his wife in old age may have influenced the thinking of the deceased. But that per se cannot lead to the only irresistible conclusion that the original defendants were therefore in a position to dominate the will of the deceased or that the sale deed executed was unconscionable. The onus would shift upon the original defendants under Section 16 of the Contract Act read with Section 111 of the Evidence Act, as held in Anil Rishi vs. Gurbaksh Singh (supra), only after the plaintiff would have established a prima facie case. The wife of the deceased was living with him and had accopanied him to the office of the sub- registrar. The plaintiff has not pleaded or led any evidence that the wife of the deceased was also completely dominated by the original defendants. In every cast, creed, religion and civilized society, looking after the elders of the family is considered a sacred and pious duty. Nonetheless, today it has become a matter of serious concern. The Parliament taking note of the same enacted the Maintenance and Welfare of Parents and Senior Citizens Act, 2007. We are of the considered opinion, in the changing times and social mores, that to straightway infer undue influence merely because a sibling was looking after the family elder, is an extreme proposition which cannot be countenanced in absence of sufficient and adequate evidence. Any other interpretation by inferring a reverse burden of proof straightway, on those who
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were taking care of the elders, as having exercised undue influence can lead to very undesirable consequences. It may not necessarily lead to neglect, but can certainly create doubts and apprehensions leading to lack of full and proper care under the fear of allegations with regard to exercise of undue influence. Law and life run together. If certain members of the family are looking after the elderly and others by choice or by compulsion of vocation are unable to do so, there is bound to be more affinity between the elder members of the family with those who are looking after them day to day Xxxx xxxxx xxxxx xxxxx
16. In Subhas Chandra (supra), it was further observed that there was no presumption of imposition merely because a donor was old and weak. Mere close relation also was insufficient to presume undue influence, observing as follows:
"Before, however, a court is called upon to examine whether undue influence was exercised or not, it must scrutinise the pleadings to find out that such a case has been made out and that full particulars of undue influence have been given as in the case of fraud. See Order 6, Rule 4 of the Code of Civil Procedure. This aspect of the pleading was also given great stress in the case of Ladli Prasad Jaiswal [1964] 1 SCR 270 above referred to. In that case it was observed (at p. 295):
"A vague or general plea can never serve this purpose; the party pleading must therefore be required to plead the precise nature of the influence exercised,
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the manner of use of the influence, and the unfair advantage obtained by the other."
Xxxx xxxxx xxxxx xxxxx "18. The first appellate court, completely erred in appreciation of the facts and evidence in the case. There can be no application of the law sans the facts of a case. The primary ingredients of the law need to be first established by proper pleading supported by relevant evidence. Cases cannot be decided on assumptions or presumptions. We do not think that the present calls for exercise of any discretionary jurisdiction under Article 136 of the Constitution as a fourth court of appeal. In Pritam Singh (supra) it was observed:
"9. ...Generally speaking, this Court will not grant special leave, unless it is shown that exceptional and special circumstances exist, that substantial and grave injustice has been done and that the case in question presents features of sufficient gravity to warrant a review of the decision appealed against. Since the present case does not in our opinion fulfil any of these conditions, we cannot interfere with the decision of the High Court, and the appeal must be dismissed."
Xxxx xxxxx xxxxx xxxxx
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38. Similarly in Ranganayakamma and
Another Vs. K.S. Prakash (Dead) by LRs., and
Others (supra) more specifically Paragraphs- 39, 40, 42 and 43, on which the reliance is placed, the paragraphs are also for a the similar preposition in respect of the merit of the dispute between the parties.
Since, the suit is pending, the issue does not really arises for consideration.
39. In so far as the case in A.C. Ananthaswamy and others Vs. Boraiah (Dead by LRs.) (supra) is concerned, the same shall not be applicable in the facts of this case and for the issue which arises for consideration.
40. In so far as the case in Ajjapalli Papireddy and Ors Vs. Ajjapalli Narayana Reddy and Ors (supra) is concerned, having seen the said judgment, it is also on similar preposition, which has also no applicability, in the facts.
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41. In view of our above discussion, we do not see any merit in this appeal. The appeal is dismissed.
42. No costs.
Sd/-
(V KAMESWAR RAO) JUDGE Sd/-
(S RACHAIAH) JUDGE KGR*