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High Court of Judicature at Bombay
D.Y. CHANDRACHUD & A.A. SAYED, JJ.
Dr. Vijaypat Singhania & Others
Versus
Hari Shankar Singhania & Others
Appeal Nos.361 of 2010 & 505 of 2010
Decided on : 08-03-2013
Where a possible view was taken by arbitrator, no case arises for interference with award under Section 34 of Act. - Section 26(1) empowers an Arbitral Tribunal to appoint an expert to report to it on a specific issue to be determined by the Arbitral Tribunal. Under sub-section (2) of Section 26, unless otherwise agreed by the parties, if a party so requests or if the Arbitral Tribunal considers necessary, an expert shall, after submitting the report, participate in an oral hearing where the parties have opportunity to put questions and to present expert witnesses in order to testify on the points at issue. The arbitrator has held that in the present case, the agreement dated 20th March, 2007 was an agreement as contemplated by Section 26(2) between the parties. The parties, as have been noted earlier, by the terms of their agreement, contemplated that the expert would hear them before submitting his report. The expert, HDFC Limited, was one in whom the parties reposed confidence since the appointment was made by consent. The underlying purpose and object of the provisions of Section 26(2) was duly fulfilled by the parties by (i) participating in the proceedings before the expert and being allowed a full opportunity to produce material and advance submissions; (ii) being furnished with a copy of the draft report; (iii) being allowed to present their suggestions on the draft report, and above all (iv) making submissions before the arbitrator in regard to their choice of properties based on the valuation of the properties as made. The submission of the appellants in the Mumbai group is that in the concluding part of the agreement dated 20th March, 2007, the parties agreed that all other contentions (except the valuation at market value) would be kept open and what was concluded was only the principle that the basis of valuation was to be market value in stead of book value. Court cannot accede to the submission. The arbitrator in the present case was called upon to interpret the terms of an agreement between the parties. The arbitrator was acting within jurisdiction in interpreting the terms of the agreement. Where an arbitrator takes a view on a provision of an agreement and which is possible view, the Court under Section 34 will not interfere. This principle has been laid down in the recent judgment of the Supreme Court in Rashtriya Ispat Nigam Limited v. Dewan Chand Ram Saran, (2012) 5 SCC 306 : 2012 (3) All MR 972 (SC), at paragraph 43 :
"43. In any case, assuming that Clause 9.3 was capable of two interpretations, the view taken by the arbitrator was clearly a possible if not a plausible one It is not possible to say that the arbitrator had travelled outside his jurisdiction, or that the view taken by him was against the terms of contract. That being the position, the High Court had no reason to interfere with the award and substitute its view in place of the interpretation accepted by the arbitrator."
Undoubtedly, under the provisions of Section 28, the Arbitral Tribunal is required to decide a dispute submitted to the arbitrator in accordance with the substantive law for the time being in force in the country. The Arbitral Tribunal is required to decide in accordance with the terms of the agreement. An arbitrator, it is well-settled, is a creation of a contract between the parties and if he ignores the specific terms of the contract, that would constitute a jurisdictional error which is susceptible of being corrected by the Court
[Rajasthan State Mines and Minerals Limited v. Eastern Engineering Enterprises and another, (1999) 9 SCC 283 and Ispat Engineering and Foundry Works, B.S.City, Bokaro v. Steel Authority of India Ltd., B.S. City, Bokaro, (2001) 6 SCC 347].
In the present case, the question of construing the terms of the agreement dated 20th March, 2007, arose before the arbitrator in the course of the arbitral proceedings. As we have noted, two of the three contesting parties were in fact in agreement before the arbitrator that the valuations fixed by HDFC Limited were binding on all parties. This was not merely the position of the claimants namely, the Kolkata group but a solemn statement made before the arbitrator by the counsel appearing for the Kanpur group. But apart from that, the construction that has been placed by the arbitrator on the terms of the agreement which envisaged that all other contentions of the parties, except the valuation at the market value are kept open, was a possible construction which would not warrant interference in proceedings under Section 34 of the Act of 1996. The Single Judge has found no basis to set aside the arbitral award on this aspect. Surely, as a Division Bench exercising appellate jurisdiction from a decision of a Single Judge declining to set aside an arbitral award under Section 34, Court must exercise caution and circumspection. The construction of the agreement fell within the province and domain of the arbitrator. Where a possible view is taken, no case arises for interference with the award under Section 34.
Dr. D.Y. Chandrachud, J.
1. By a judgment dated 1 October 2009 the learned Single Judge dismissed petitions filed by the Appellants under section 34 of the Arbitration and Conciliation Act, 1996. The petitions sought to question the legality of an arbitral award dated 4 August 2008 of a sole arbitrator, Mr.Justice S.N.Variava.
2. On 21 February 1980 a deed of partnership was constituted in which three branches of the Singhania family were represented. The three branches, in these proceedings, would for convenience of reference, be referred to as the Kanpur, Kolkata and Mumbai branches. Clause-10 of the deed of partnership provided that a partner could retire with a stipulated period of notice and unless mutually agreed to, upon retirement, an outgoing partner would be entitled to receive his proportionate share in the properties of the firm in specie after deducting the liabilities. Clause-11 of the deed of partnership provided as follows:
“That in the event of dissolution of the firm accounts shall be settled between the partners in accordance with the provisions of Section 48 of the India Partnership Act as applicable at the relevant time. The assets of the firm shall be valued on the basis of the values standing in the books of accounts and not on the basis of market value. Unless otherwise agreed upon, on dissolution the partners will be entitled to and will receive their proportionate share in the assets of the firm in specie after paying the liabilities, so however that they will be entitled to a share in each category of assets equivalent to their share of profit. The share of each company shall be considered as a separate category.”
(emphasis supplied)
Clause-13 of the deed of partnership contained an agreement to refer disputes to arbitration. The partnership was dissolved on 26 March 1987 by a deed of dissolution which took effect from 19 March 1987.
Clause-4 of the deed of dissolution provided as follows:
“The parties hereto have agreed to distribute the immovable properties, mentioned in Annexure-II hereto in specie free from encumbrances as provided in the Deed of Partnership dt. 21 February 1980 in proportion to their shares in the said partnership. The distribution shall be completed as soon as possible and the parties will strive to accomplish the same by 31 May 1987.”
An arbitration agreement was also contained in the deed of dissolution. On 28 March 1987, a supplementary agreement was entered into under which it was provided that the allotment and distribution of the immovable properties of the dissolved firm shall be free from all tenancies, licenses or leases that may be subsisting in favour of group companies, firms, trusts, societies, relatives and family members. Between 1987 and 1989, there was an exchange of correspondence on matters relating to the winding-up of the affairs of the firm.
3. A suit under section 20 of the Arbitration Act, 1940 was instituted on 8 May 1992 by Harishankar Singhania representing the Kolkata group. The Defendants to the suit comprised of the Kanpur group and Mumbai group. The suit was dismissed as barred by limitation by a Single Judge on 20 February 1986. An appeal was dismissed by a Division Bench on 8/9 June 2004. The Supreme Court allowed a Civil appeal against the order of the Division Bench by a judgment dated 4 April 2006 and held that the suit under section 20 was not barred by limitation. By the judgment of the Supreme Court in HariShankar Singhania Vs. Gaur Hari Shankar Singhania (2006)4-SCC-658), the disputes and differences between the parties were referred to the arbitration of a sole arbitrator Mr.Justice S.N.Variava. While disposing of the civil appeal, the judgment of the Supreme Court, inter alia, specified the nature of the disputes that had arisen and which would have to be resolved in arbitration viz.:
“65. … … … … (a) to the extent the defendants themselves are occupying such properties, the defendants should be directed to vacate the prop
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