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1995 Supreme(Del) 186
High Court Of Delhi
R.C.BHALLA - Appellant
Versus
N.C.BHALLA - Respondent
I.T.A. 6555 of 1986
Decided On : 02/23/1995
PINKY ANAND, U.N.Sharma, V.N.KOURA
The arbitrator cannot substantially and materially alter the fights conferred upon the objectors under the interim award.
Headnote:
ARBITRATION - AWARD - MODIFICATION - INTERIM AWARD - FINAL AWARD - SCOPE OF REFERENCE - JURISDICTION OF ARBITRATOR - CONDUCT OF ARBITRATOR - MISCONDUCT - HEARING BEHIND THE BACK OF PARTIES - SUBSTANTIAL DEPARTURE FROM INTERIM AWARD - VESTED RIGHTS - IMPLEMENTATION OF INTERIM AWARD - DIVISION OF ASSETS AND LIABILITIES.
Fact of the Case:
The dispute arose between the plaintiffs and defendants 1 to 3 with regard to the business affairs and the properties of M/s. H. R. Bhalla and Sons (P.) Ltd. (H. R. B.) after the death of their father, Shri H. R. Bhalla. The parties appointed Sh. P. N. Khanna (retired Judge of this Court) as the Sole Arbitrator to adjudicate the disputes. The Arbitrator made his award on 25/12/1984, called the Interim Award. The petitioners filed a petition which was listed as OMP. No. 205/85. This Court after hearing the parties on the said interim Award observed that since the parties could not arrive at any decision hence the implementation of the interim award became difficult. Therefore, with the consent of the parties, the award was remitted to the Arbitrator vide order dated 23/05/1985 to decide the manner in which and the time when the division of assets would take place because in the Interim award the Arbitrator had in fact left these decisions open. The Arbitrator made and published the impugned award called the final award on 24/04/1986. The respondents felt aggrieved with the impugned award and filed objections vide I. A. No. 6555/86.
Finding of the Court:
The Court held that the arbitrator did not misconducted the proceedings by holding enquiry and proceedings behind the back of the objectors. The Court also held that the arbitrator has tried by the impugned award to implement the interim award keeping in view of the directions of this Court vide order dated 23/05/1985. He has divided the assets and liabilities of the company M/s. H. R. Bhalla and Sons (P) Ltd. by making adjustments wherever necessary so that the interim award pertaining to the assets and liabilities of M/s. H. R. Bhalla and Sons (P) Ltd. could be easily implemented.
Issues: 1. Whether the arbitrator misconducted the proceedings by holding enquiry and proceedings behind the back of the objectors? 2. Whether the arbitrator has exceeded his jurisdiction by making fresh distribution of properties which was beyond his jurisdiction and scope of reference made vide order of this Court dated 23/05/1985? 3. Whether the arbitrator has substantially and materially altered the fights conferred upon the objectors under the interim award?
Ratio Decidendi: 1. The Court held that the arbitrator did not misconducted the proceedings by holding enquiry and proceedings behind the back of the objectors. The Court observed that the respondents/objectors have failed to point out either from the proceedings or from the documentary or oral evidence placed on record that the arbitrator heard the petitioners behind the back of the objectors. In fact, no details have been given as to when the arbitrator heard the petitioners at their back nor it has been mentioned when the arbitrator consulted his son or his friend Shri Vinod Kapur. 2. The Court held that the arbitrator has tried by the impugned award to implement the interim award keeping in view of the directions of this Court vide order dated 23/05/1985. He has divided the assets and liabilities of the company M/s. H. R. Bhalla and Sons (P) Ltd. by making adjustments wherever necessary so that the interim award pertaining to the assets and liabilities of M/s. H. R. Bhalla and Sons (P) Ltd. could be easily implemented. 3. The Court held that the arbitrator has substantially and materially altered the fights conferred upon the objectors under the interim award. The Court observed that the interim award was accepted by all the parties. It was remitted only for the purpose of proper implementation. Hence, a vested right had accrued in their favour which could not have been altered to their detriment or disadvantage. The impugned final award has substantially and materially altered the fights conferred upon the objectors under the interim award.
Final Decision: The Court modified the award regarding para No. 9 and held that the consideration of each share shall be the full face value and not Re. I per share. With these observations, the modified award was made rule of the Court and the modified award shall form part of the decree.
( 2 ) AFTER the matter was remanded, the arbitrator heard the parties. After hearing the parties, the Arbitrator made and published the impugned award called the final award on 24/04/1986.
( 3 ) THE respondents felt aggrieved with the impugned award. Hence filed objections vide I. A. No. 6555/86. The impugned award has been challenged by them primarily on the ground that there is a substantial departure made in this award from that of the interim award particularly with regard to the mode of division of assets of the firm. They have alleged that the interim award was accepted by all the parties. It was remitted only for the purpose of proper implementation. Hence, a vested right had accrued in their favour which could not have been altered to their detriment or disadvantage. The impugned final award has substantially and materially altered the fights conferred upon the objectors under the interim award. By the interim award, the show room of M/s. H. R. Bhalla and Sons (P.) Ltd. (hereinafter called the company) was to be sold and 3/5th sale proceeds were to come to the shares of objectors and 2/5th was to go to the share of the plaintiffs. But by the impugned award, the show room has been kept entirely for the plaintiffs. Similarly, under the interim award goodwill of the company was valued equivalent to the face value of the share capital of the company. The objectors were to transfer their shares in the company at full face value i. e. @ Rs. 10. 00each share, but in the impugned award, the value has been kept at Re. 1 each share. Under the interim award, share capital and reference of the company were to be divided in five shares. 3/5th share was to go to a separate company for the benefit of the objectors and 2/5th to the plaintiffs. While in the impugned award entire share capital and reference have been even to the plaintiffs. In the interim award factory land, building and machinery were to be divided so that 3/5th portion thereof go to separate company for the benefit of objectors and the plaintiffs were to get 2/5 shares thereof. A subsidiary company was to be formed for which shares of the objectors were to be transferred. The subsidiary company was to be put under the control of the objectors. Whereas the impugned award contained contrary directions. Similarly, under the interim award, balance assets and liabilities of the company including of Engineering and Leather Division were to be shared amongst all the brothers. But under the impugned award,
