Back
In the High Court of Andhra Pradesh at Hyderabad
SATYANARAYANA RAJU AND NARASIMHAM, JJ.
Vadlapudi Subbayya Setty - Appellant
Versus
Vadlapudi Chinna Subbayya Setty – Respondent
A.A.O. No. 367 of 1959 and C.R.P. No. 1838/57
Decided on : 14-04-1960
A party cannot challenge an arbitration award on the ground of bias of an arbitrator if he was aware of the bias before the arbitration proceedings began and did not raise any objection at that time.
Headnote:
ARBITRATION - AWARD - SETTING ASIDE - GROUNDS - BIAS OF ARBITRATORS - INTEREST OF ARBITRATOR - DELAY IN PASSING AWARD - STIPULATION FOR PAYMENT OF MONEY IN CASE OF DEFAULT - WHETHER PENALTY - CONTRACT ACT, S. 74.
Fact of the Case:
The plaintiff and the defendant were brothers who had a dispute regarding the partition of their properties. They referred the dispute to arbitration. The arbitrators passed an award in favor of the defendant. The plaintiff filed a suit to set aside the award on the grounds of bias of the arbitrators, interest of one of the arbitrators in the defendant's business, delay in passing the award, and a provision in the arbitration agreement for payment of Rs. 1000/- by the defaulting party.
Finding of the Court:
The court found that there was no evidence of bias on the part of the arbitrators. The court also found that the plaintiff was aware of the interest of one of the arbitrators in the defendant's business before the arbitration proceedings began and that he had not raised any objection at that time. The court further found that there was no evidence that the arbitrators had intentionally delayed the passing of the award. Finally, the court found that the provision in the arbitration agreement for payment of Rs. 1000/- by the defaulting party was not in the nature of a penalty.
Issues: 1. Whether the award of the arbitrators was vitiated by bias. 2. Whether one of the arbitrators was incompetent to adjudicate upon the reference due to his interest in the defendant's business. 3. Whether the arbitrators delayed the passing of the award with a view to enable the defendant to collect the outstandings. 4. Whether the provision in the arbitration agreement for payment of Rs. 1000/- by the defaulting party was in the nature of a penalty.
Ratio Decidendi: 1. The court held that there was no evidence of bias on the part of the arbitrators. 2. The court held that the plaintiff was aware of the interest of one of the arbitrators in the defendant's business before the arbitration proceedings began and that he had not raised any objection at that time. Therefore, he was precluded from challenging the award on this ground. 3. The court held that there was no evidence that the arbitrators had intentionally delayed the passing of the award. 4. The court held that the provision in the arbitration agreement for payment of Rs. 1000/- by the defaulting party was not in the nature of a penalty.
Final Decision: The court dismissed the plaintiff's suit to set aside the award.
JUDGMENT :
SATYANARAYANA RAJU, J.
1. The appeal and the Revision petition arise out of two suits, O.S. Nos. 94 of 1956 and 95 of 1956. The former was for setting aside an arbitration award and the latter was for passing a decree in terms of the award.
2. The circumstances which have given rise to these proceedings may be briefly stated. Subbayya Chetti (hereinafter referred to as ‘the plaintiff’ and Chinna Subbayya Chetti (hereinafter referred to as ‘the defendant’) are brothers. They have another brother Venkatasubbayya who separated himself from the family seven or eight years before suit and has since been living separately. The plaintiff and the defendant continued to be joint and carried on business at Nellore till about the middle of 1955, in which year disputes arose between them with regard to the partition of their properties. They bad by then cash to the extent of about Rs. 20,000/-, stock in trade and outstandings. On the 22nd January, 1956, they made a written reference of their disputes for adjudication by five named arbitrators. It is not necessary to give the details of the contents of this written agreement Ex. A-1. On the 12th June, 1956, the arbitrators gave their award, Ex. B-8. On the 19th June, 1956, they gave notice of the award to the plaintiff. On the 10th July, 1956, the plaintiff sent Ex. A-3 disputing the validity of the award. The arbitrators sent a reply (Ex. B-5) to the plaintiff on the 26th July, 1956. The plaintiff thereupon hied an application, under S. 20 of the Arbitration Act, for setting aside the award; and the arbitrators filed an application for passing a decree in terms of the award. Pursuant to Rule 5 of the Rules framed by the Madras High Court under the Arbitration Act which Rules are also applicable in this state], these applications were numbered and registered as suits.
3. In the lower court, the plaintiff raised various grounds for setting aside the award. In a well-considered judgment, the learned subordinate judge held that none of the grounds was tenable and passed a decree in terms of the award. The plaintiff has thereupon preferred the appeal and the revision petition.
4. Before us, the appellant's grounds are compressed into four points and may be stated as follows:—
(1) The award of the arbitrators is vitiated by bias.
(2) Chidella Bala Krishnayya, one of the arbitrators, was taken by the respondent as a partner in his business subsequent to the reference and, therefore, he was not competent to adjudicate upon the reference.
(3) The arbitrators delayed the passing of the award for two months with a view to enable the defendant to collect die outstandings.
(4) The provision in Ex. A-1 for payment of Rs. 1000/-, by the defaulting party is in the nature of a penalty and plaintiff should be relieved against it. We shall deal with these points seriatum.
5. The plaintiff examined himself as P.W. 1. He stated that he had confidence in all the arbitrators and, therefore, chose them that they recorded his statement and thet of the defendant as to the properties in their possession; that ten days after the agreement, in the presence of the arbitrators, the defendant got provoked and beat him; that the arbitrators did not interfere then and that he immediately told them that he did not want their arbitration and repudiated the agreement, Ex. A-1. In his cross-examination he did not want their arbitration and repudiated the agreement, Ex. A-1. In his cross-examination he admitted that the arbitrators made a full enquiry. Though he alleged that the arbitrators were partial to his brother he did not state any particular instance of partiality. He was twice examined by the arbitrators. After the incident referred to by him he did not issue any notice to them repudiating the arbitration.
6. The plaintiff examined one of the arbitrators as P.W. 2. P.W. 2 admitted that the defendant and the plaintiff quarrelled in their presence that the defendant dealt a blow with his hand to me plaintiff; that
