1. Partnership dispute — family settlements and partnership agreements — claim for declaration of shares, dissolution, and winding up — reference to arbitration. (Para 2 , 3 , 4 , 7 )
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1949 Supreme(SC) 40
Privy Council At Calcutta
Sir Malcolm Macnaghten, Lord Radcliffe, Justice Lord Simonds, JJ.
Durga Prosad Chamria and another -Appellant
Versus
Sewkishendas Bhattar and others -Resopndent
Privy Council Appeal No. 19 of 1948
Decided On : 28-07-1949
Advocates Appeared:
Hunter, Giles, Sanderson Lee and Co., T.L. Wilson and Co., R. Parikh, L.M. Jopling, T. Strangman, R. Milliter, D. Foot
Hunter, Giles, Sanderson Lee and Co., T.L. Wilson and Co., R. Parikh, L.M. Jopling, T. Strangman, R. Milliter, D. Foot
A court will not set aside an arbitration award for an error of law if the legal issue was specifically referred to the arbitrator, nor will it interfere if the award is merely inconsistent but still capable of execution.
Headnote:(A) Arbitration - Setting aside of award - Error of law on the face of the award - Admissibility of unregistered documents and limitation - Where the arbitrator is specifically referred to decide specific questions of law, the court will not interfere with the award even if the court itself would have taken a different view of those points of law. (Para 11)
(B) Arbitration - Rules of evidence - Where the terms of reference dispense with the ordinary rules of the conduct of a trial and legal rules as to the admissibility of evidence, the mere reference to certain documents in the award is insufficient to establish an error of law on the face of the award. (Para 12)
(C) Arbitration - Scope of reference - Findings that are introductory to the main determination of interests in a partnership firm and intended to explain the purpose of a settlement do not constitute exceeding the scope of the reference. (Para 13)
(D) Arbitration - Indefiniteness - An award is not to be set aside or remitted merely because of a possible inconsistency in its terms; it must be so indefinite as to be incapable of execution. (Para 14)
Facts of the case:
A dispute arose regarding the shares in a partnership business following the death of a partner. The matter was referred to a sole arbitrator under a consent order to resolve outstanding matters. The arbitrator issued an interim award determining the interests of various parties based on a family settlement and partnership arrangements. The award was challenged on the grounds that it showed an error of law on its face due to the admission of unregistered documents and the failure to bar the claim by limitation, that the arbitrator exceeded the scope of the reference, and that the award was too indefinite to be executed.
Findings of Court:
The court found that the legal issues regarding admissibility and limitation were specifically referred to the arbitrator. Furthermore, the terms of reference allowed the arbitrator to disregard ordinary rules of evidence. The findings regarding co-ownership were deemed introductory to the determination of partnership interests. The court also found that the award, while complex, was not so indefinite as to be incapable of execution.
Issues: Whether the interim award should be set aside due to an error of law on its face regarding the admissibility of unregistered documents and limitation; whether the arbitrator exceeded the scope of the reference; and whether the award was too indefinite to be executed.
Ratio Decidendi: A court will not interfere with an arbitrator's decision on a point of law if that point was specifically referred to the arbitrator, regardless of whether the court would have reached a different conclusion. An award is not void for indefiniteness unless it is completely incapable of execution, and introductory findings do not expand the scope of the reference.
Result: Appeal dismissed.
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2. Challenge to arbitration award alleging errors of law regarding document registration and limitation, exceeding the scope of reference, and indefiniteness rendering it incapable of execution. (Para 10 )
3. Must an arbitrator always adhere to legal rules of evidence?
No, if the agreed terms of reference dispense with the ordinary rules of evidence or the conduct of a trial at law, the arbitrator is not required to observe those legal rules. (Para 7 )
Lord Radcliffe.-
The purpose of this appeal is to secure the setting aside of an interim award made on 9th January 1941, by Sir Manmatha Nath Mukherjee, sitting as sole arbitrator appointed by agreement of the parties to a partnership suit. An application by appellant 1 to set aside, remit or modify the award was dismissed by the High Court at Calcutta on 7th March 1941, and on 10th March 1941, the same Court made a decree that the award should be carried into effect. An appeal was taken to the High Court in its appellate jurisdiction and on 28th May 1946, that appeal was dismissed. It is from the judgment and orders made on that appeal that the present appeal reaches this Board.
[2] It is necessary to make some reference to the facts that led up to the arbitration in order to appreciate what it is of which the appellants complain. The arbitration concerned the affairs of a partnership business known as Hurdutroy Chamria "or Hurdutroy Chamris and Co. The business seems to have been originally in the sole bands of Hurdutroy Chamria, but at any irate by 6th October 1910, he had made a written agreement associating with him as a partner his nephew Ramprotap. Hurdutroy married three times, his third wife being Anardeyi Sethani, whose legal personal representative is respondent 1 in this appeal. By her he had two sons, Radhakissen Chamria, respondent 3 and Motilal Chamria, respondent 4. The appellant Durga Prosad was an adopted son of Hurdutroy, the adoption having been effected during the period of Hurduiroy's first marriage. The appellant Keshardeo Chamria is by birth a son of Durga Prosad but became the adopted son of Amolakchand, Ramprotap's brother, by an adoption effected after Arnolakchacd's death by his widow Surji, respondent 5.
[3] The crucial year for the purpose of this narrative is the year 1916. On 2nd December of that year Hurdutroy died. It is apparent from what has been said previonsly that the interest in Hurdutroy Chamria and Co. was divided between his branch of the family and the branch represented by Ramprotap. It is also apparent that there were possibility of disputes in his own family owing to the presence of an adopted elder son and two younger sons by his third marriage.
[4] Three written agreements were made shortly before Hurdutroy's death in 1916, It is not necessary to give any details of their respective contents but in order to understand the arbitrator's award and the objections made to it it is necessary to state what they were, On 1st October 1916, Hurdutroy and Ramprotap entered into a new partnership agreement, under which the partnership business was to be continued for SO years from that date, an 11 anna share going to Hurdutroy and a 5 anna share to Ramprotap. On 16th November 1916, a memorandum, which has been referred to as "the family settlement," was signed by Anardeyi, and by Hurdutroy as father and guardian of Radhakissen and Motilal, both of whom were then minors. It was witnessed by Ramprotap and it contained certain terms defining the interests of Hurdutroy's family in his various properties, including his share in the partnership business of Hurdutroy Chamria and Co. On the same day another memorandum was drawn up. This, which has been referred to as "the partnership arrangement," was signed by Ramprotap for himself and Surji, by Durga Prosad and by Hurdutroy as father and guardian of Radhakissen and Motilal. Its main purpose was evidently to specify the shares in the partnership business on and from 1st January 1917. The shares were set out in the usual division of 16 annas, but nothing was allotted to Anardeyi. It also contained the words "Neither Rai Hurdutrai Chamria Bahadur nor his estate will have any interest in the said business of Hurdutrai Chamria and Co."
[5] It is the significance of this partnership arrangement and its true place in the intended dispositions of the members of these two families that have since proved one of the main subjects of dispute between them.
[6] For
