IMPORTANT POINT
In appeal in a matter of arbitration award, if party approached Court with unclean hands, it could not be heard on merits.

JUDGMENT

Kapadia, J.-A partnership firm, M/s. Laxmi Fancy Stores had among others Laxmi Narayan Bansal, Om Prakash Bansal, and Jagdish Prasad Bansal as its partners. It carried on business from a shop owned by Laxmi Narayan Bansal located at Topi Bazar, Lashkar, Gwalior. The three partners were members of Hindu Undivided Family (HUF). They were occupying different portions of a residential house at 31, Dahimandi, Daulatganj, Lashkar, Gwalior. On 28th May, 1971 dispute arose between the parties in the matter of repayment of loan of Rs. 2,50,400/- owed by the firm to its creditors. By written agreement of even date, the partners appointed two arbitrators, Mattulal and Nathulal for decision on the said dispute. On 12th June, 1971 award was given by five arbitrators. The award refers to an oral agreement dated 9.6.1971 between the partners by which they had agreed to addition of three more arbitrators and to enlargement of the scope of reference by which the parties sought settlement of all disputes including dissolution of the firm, settlement of accounts, settlement of assets and liabilities as also settlement of disputes pertaining to the shop of Laxmi Narain and the ancestral house (see the recital clause). Under the award dated 12.6.1971, directions were given on the question of repayment of loan undertaken by Laxmi Narayan on behalf of the firm; contributions to be made by Laxmi Narayan, Jagdish Prasad and Om Prakash towards the said repayment and it further recorded a family settlement involving partition and transfer of immovable properties. Thereafter, an application was moved by the arbitrators before the District Judge under section 14(2) of the Arbitration Act 1940 to make the award dated 12.6.1971, rule of the Court. An objection was filed by Laxmi Narain stating that the award was a nullity as the partners had appointed only two arbitrators by written agreement dated 28.5.1971 and that the two arbitrators had no authority to co-opt three additional arbitrators. It was further submitted that reference was made to the arbitrators only for liquidation of the loans incurred by the firm and that the arbitrators could not have enlarged the scope of the reference agreement which was in writting by placing reliance on oral consent which was also disputed. That the family settlement involving partition as ordered by the arbitrators was beyond the scope of the reference. At this stage it may be noted that Om Prakash and Jagdish Prasad also objected to para 7 of the award by which Jagdish Prasad was asked to hand over a portion of the residential house in his occupation to Laxmi Narain. Laxmi Narain died in 1993. By judgment and order dated 29.11.1997 the District Judge upheld the award and dismissed the above objections. Being aggrieved, heirs of Laxmi Narain and Jagdish Prasad came to the High Court by way of First Appeal No. 18/98 and cross Appeal No. 59/98 respectively. By impugned judgment, the High Court allowed the appeal filed by the heirs of Laxmi Narain and set aside the award. By the impugned judgment the cross appeal filed by Jagdish Prasad for deletion of clause 7 was also disposed of and parties were ordered to be relegated to their original position vis-a-vis the house. Being aggrieved, heirs of Om Prakash filed the present civil appeals before this Court.

2. Mr. U.N. Bachawat, learned senior counsel for the appellant submitted that all the partners had acquiesced to the co-option of three additional arbitrators, that all the parties had taken part in the proceedings, that the award has been counter signed by all the parties saying that they accepted the award and that the award has been implemented and acted upon and in the circumstances the High Court had erred in setting it aside. In this connection reliance was placed on the judgment of this Court in the case of Pooran Chand Nangia v. National Fertilizers Ltd. reported in [JT 2003(8) SC 273].

3. Mr. Sunil Gupta, learned senior counsel appearing on behalf of the