Back
High Court of Judicature at Madras
THE HONOURABLE MR. JUSTICE S.S. SUBRAMANI
S.S.M. Soundappan and others
Versus
K.G. Balakrishnan and others
C.R.P.Nos.1511 of 1997 and 1661 of 1997 and C.M.A. No. 787 of 1997
Decided On : 21-07-1997
ARBITRATION - AGREEMENT - VALIDITY - BURDEN OF PROOF - EXECUTION OF DOCUMENT - MEANING - BLANK PAPERS SIGNED BY PETITIONERS - UTILISED FOR FABRICATING ARBITRATION AGREEMENT - RESPONDENTS FAILED TO PROVE GENUINENESS OF AUTHORISATION LETTER - ARBITRATION AGREEMENT NOT VALID.
Fact of the Case:
Petitioners and respondents 3 to 15 are descendants of one Mari Chettiar. Due to misunderstandings in the family, the parties decided to divide the business interests. Petitioners sold their shares in Tan India Limited and Tan India Mines and Minerals Limited to respondents 3 to 9, who in turn agreed to transfer their shares in Venna Textiles Limited and S.S.M. Brothers Limited. The parties also agreed to partition the movable and immovable properties into three groups. A Memorandum of Understanding (MoU) was reached on 28.1993, which contained a host of items and dealt with the properties of corporate bodies and partnership firms. The MoU was not a concluded contract but an agreement to enter into another contract. On the same day, respondents 3 to 9 paid a sum of Rs.95,00,000 towards the difference in the value of shares sold and purchased. Subsequently, respondents 3 to 9 filed a suit for injunction to restrain the petitioners from interfering with their possession of the properties allotted to them as per the MoU. Petitioners filed a petition challenging the existence of the arbitration agreement and the validity of the interim Award passed by respondents 1 and 2, claiming that there was no arbitration agreement and that the signatures in the blank papers were alleged to have been made use of to prepare the same.
Finding of the Court:
1. The burden of proving the validity of the arbitration agreement lies on the respondents. 2. Execution of a document implies intelligent and conscious appreciation of the contents thereof. 3. Petitioners have established that they signed blank papers which were entrusted to the second respondent for being utilized at the time of final settlement. 4. Respondents failed to prove that the arbitration agreement was signed by the petitioners with the intention to give effect and operation to the instrument signed by them. 5. The circumstances, including the subsequent conduct of the parties, indicate that there was no arbitration agreement authorizing respondents 1 and 2 to implement the MoU.
Issues: 1. Whether there was a valid arbitration agreement authorizing respondents 1 and 2 to implement the MoU. 2. Whether the signatures in the blank papers were used to fabricate the arbitration agreement.
Ratio Decidendi: 1. The validity of an arbitration agreement is determined by the intention of the parties and the circumstances surrounding the execution of the agreement. 2. The burden of proving the validity of the arbitration agreement lies on the party asserting its existence. 3. Execution of a document requires intelligent and conscious appreciation of its contents. 4. Signing blank papers does not constitute execution of a document. 5. Subsequent conduct of the parties can be considered to determine the existence or absence of an arbitration agreement.
Final Decision: C.R.P. No. 1511 of 1997 is allowed. It is declared that there was no reference of dispute to arbitration by respondents 1 and 2, and they were never appointed as arbitrators. The Letter of Authorisation or the purported agreement of arbitration dated 28.1993, is not an agreement executed by the petitioners. C.R.P. No. 1661 of 1997 is dismissed as unnecessary. C.M.A. No. 787 of 1997 is allowed.
1. C.R.P. No. 1511 of 1997 is against the Order in (Arbitration) O.P. No. 394 of 1994, and revision petitioners are the petitioners in the O.P. also. That O.P. was filed under Sections 30 and 33 of the Arbitration Act, to declare that there was no reference of disputes to respondents 1 and 2 by petitioners, to declare that respondents 1 and 2 were never appointed as Arbitrators, to declare that the letter dated 24.8,1993 purporting to appoint respondents 1 and 2 as arbitrators is forged, null and void, to declare that the document dated 310. 1994 styled as Interim Award is null and void and not binding on the petitioners, and for consequential reliefs.
2. C.R.P. No. 1661 of 1997 is against the Order passed in (Arbitration) O.P. No. 425 of 1994, filed by the respondents 3 to 15 herein to pass a decree in terms of the Award of the Arbitrators who are respondents 1 and 2 therein.
3. C.M.A. No. 787 of 1997 arises from O.P. No. 50 of 1996 filed by the petitioners herein to set aside the Interim Award dated 310. 1994.
4. All the three O.Ps. were disposed of by a common order by the Lower Court whereby it dismissed O.P. No. 394 of 1994. In O.P. No. 425 of 1994, the lower court remitted the Award to the Arbitrators directing them to pass an Award after giving notice to the petitioners herein. In O.P. No. 50 of 1994, the Court dismissed the petition.
5. Material facts which gave rise to all these proceedings may be summarised as follows:-
Petitioners 2nd respondents 3 to 15, all belong to one family and are descendants of one Mari Chettiar. So far as these matters are concerned, it is suffice to take note of the facts averred in various petitions. It is said that the ancestor Mari Chettiar promoted various companies and also started many partnership firms. Some of his children, on his death, put forward various claims, and there were misunderstandings in the family. It is said that the claims of one or two sons were settled. First petitioner herein is one of the sons of Mari Chettiar, and he became the elder member of the family. It is his case that on his becoming the elder member, the surviving members of the family who had substantial stakes in the company took a conscious decision that he should become the Chairman and Managing Director of the entire Group. It is his case that it was unanimously agreed by all the members that there should not be any misunderstanding in the family. Even though there was peace for sometime, respondents 3 to 9 had a burning desire of their own, and they did not yield to the directions of the first petitioner. They wanted to manage the Companies they chose without the fear of being voted out. First petitioner visualised the problems ahead and, therefore, it was decided to divide the business interests. It is further alleged that the first petitioner gave his consent to the proposal as he knew that it would be better to part ways when the relationship was cordial, so that a good relationship could be maintained in the family. Respondents 3 to 9 wanted to purchase the shares of the petitioners in Tan India Limited and Tan India Mines and Minerals Limited so as to enable them to have a clear majority in the voting rights in those two companies. Respondents 3 to 9 in turn agreed to transfer all the shares owned by them in Venna Textiles Limited and S.S.M. Brothers Limited. The parties agreed to these proposals. Consequently, the petitioners sold 2,70,080 shares owned and held by them in Tan India Limited and 77,350 shares in Tan India Mines and Minerals Limited. Similarly, respondents sold 8,02,730 shares owned by them in Venna Textiles Limited and 1,37,250 shares in S.S.M. Brothers Limited. In view of the transfers, the transferees of the shares resigned from the Board of the respective companies. Thus, in Tan India Limited and Tan India Mines and Minerals limited, respondents 3 to 9 came to be the exclusive shareholders. When the transfers were effected, it was genuinely thought that atlea
An indispensable Tool for Legal Professionals, Endorsed by Various High Court and Judicial Officers
Please visit our Training & Support
Center or Contact Us for assistance
Scan Me!
India’s Legal research and Law Firm App, Download now!
For Daily Legal Updates, Join us on :
Back to top
