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HIGH COURT OF ORISSA
Narasimham And Mohanty, JJ.
V. GURUMURTY RAJU - Appellant
Versus
V. NARASIMHA RAJU - Respondent
M. A. 26 Of 1949
Decided On : MARCH 05, 1954
ARBITRATION - AWARD - VALIDITY - GROUNDS FOR SETTING ASIDE - (i) Object of arbitration agreement to stifle criminal prosecution - (ii) All partners in the two businesses did not join in the arbitration agreement - (iii) Award hit by Section 35, Arbitration Act, and was, therefore, invalid - (iv) Arbitrator went beyond the terms of reference in determining the profits of the firm after the date of the reference - (v) Arbitrator was guilty of misconduct in passing the award without giving fresh written notice to Sriram Murty after the resumption of his enquiry in May, 1946.
Fact of the Case:
The dispute arose out of a partnership business between several individuals, including Narasimha Raju and Gurumurty Raju. The partners had entered into an arbitration agreement to resolve their disputes, and an arbitrator was appointed. However, Narasimha Raju filed a petition under Sections 5 and 11 of the Arbitration Act, seeking the removal of the arbitrator on the ground of misconduct. This petition was dismissed by the subordinate Judge, but Narasimha Raju filed a revision petition before the Patna High Court. During the pendency of the revision petition, the arbitrator resumed his enquiry and gave notice to the parties. Narasimha Raju, however, asked for an adjournment, stating that he intended to move the High Court in revision against the order of the Subordinate Judge dismissing M. J. C. No. 34/44. The arbitrator refused to grant an adjournment and completed the enquiry ex parte. Gurumurty Raju then filed an application under Sections 14 and 30, Arbitration Act, for the filing of the award in Court and for passing a decree in terms of the award. Narasimha Raju also filed an application under section 10, Arbitration Act, for setting aside the award.
Finding of the Court:
The Court held that the object of the arbitration agreement was not to stifle criminal prosecution, and that all the partners in the two businesses were not required to join in the arbitration agreement. The Court also held that the award was not hit by Section 35, Arbitration Act, and that the arbitrator did not go beyond the terms of reference in determining the profits of the firm after the date of the reference. Finally, the Court held that the arbitrator was not guilty of misconduct in passing the award without giving fresh written notice to Sriram Murty after the resumption of his enquiry in May, 1946.
Issues: (i) Whether the object of the arbitration agreement was to stifle criminal prosecution? (ii) Whether all the partners in the two businesses were required to join in the arbitration agreement? (iii) Whether the award was hit by Section 35, Arbitration Act? (iv) Whether the arbitrator went beyond the terms of reference in determining the profits of the firm after the date of the reference? (v) Whether the arbitrator was guilty of misconduct in passing the award without giving fresh written notice to Sriram Murty after the resumption of his enquiry in May, 1946?
Ratio Decidendi: The Court held that: (i) The object of the arbitration agreement was not to stifle criminal prosecution, as the withdrawal of the criminal case was not the consideration for the agreement but only a motive for the same. (ii) All the partners in the two businesses were not required to join in the arbitration agreement, as it was not necessary that all parties in a suit should concur in an application for an order of reference to an arbitrator. (iii) The award was not hit by Section 35, Arbitration Act, as the subject-matter of the reference was not identical with the subject-matter that was pending before the High Court. (iv) The arbitrator did not go beyond the terms of reference in determining the profits of the firm after the date of the reference, as the business was actually carried on till that date and the arbitrator found that Gurumurty was entitled to two annas share of the profits. (v) The arbitrator was not guilty of misconduct in passing the award without giving fresh written notice to Sriram Murty after the resumption of his enquiry in May, 1946, as Sriram Murty was informed orally about the resumption of the enquiry and he did not care to avail of it.
Final Decision: The appeals were allowed, the order of the lower Court was set aside and a decree was passed in terms of the award. The appellant was entitled to costs of both the Courts from Narasimha Raju.
NARASIMHAM, J.
( 1 ) THESE two are analogous appeals from the order of the Subordinate Judge of berhampur in M. J. C. Nos. 109 of 1946 and 8 of 1947 setting aside an award made by an arbitrator named Sri T. N. Murthy on 15-9-1946.
( 2 ) FROM 1941 to 1944 one Narasimha Raju took lease of a rice mill belonging to the Maharaja of Parlakimedi by a registered lease deed dated 9-12-1940 (ext. 2)and subsequently admitted several other persons as partners for the management of the mill. The shares of the partners were fixed as follows:
V. Narsimha Raju J. Appa Rao 1/2 Y. Krishna Murty U. Samba Murty for D. Lakshman Murty 1/2 ? 2 " B. Dali Appana ? 1 " K. Ktishna Raju ? 1 " V. Gurumurty Raju ? 2 " 16 annas. ? 5 annas. ? 2 " ? 2 "
The business of the partners consisted of milling rice and extracting oil from ground-nut. Some of the partners carried on another independent business in which their interests were as follows:
V. Narsimham Raju J. Appa Bao Y. Krishna Murty 1/2 ? 2 " U. Samba Murty for D. Lakshman Murty 1/2 ? 2 " V. Gurumurty Raju ? 2 " 16 annas. ? 5 annas. ? 4 "
Y. Krishna Murty and U. Samba Murty retired from the partnership business and the other partners continued the same for some time. Thereafter, at the request of gurumurty Raju the partnership business was closed and the profits were divided. Gurumurty Raju claimed his two annas share of the profits. But one Srirama Murty contested the claim of Gurumurty Raju saying that he was entitled to one anna out of the two annas share of Gurumurty. While the dispute between the two was thus going on, Gurumurty Raju brought a criminal case (C. C. No. 139 of 1943) (ext. 3)in the Court of the Joint Magistrate, Berhampur, on 5-10-1942 against some of the partners including Narasimha Raju and Srirama Murty charging them with offences under Sections 420, 465, 468, 477 read with Sections 120 and 120b, Penal Code. Processes were in due course issued in that case and the case was fixed for hearing on 30-12-1943. On that date, however, Gurumurty appeared before the trying Magistrate and stated on oath that as his witnesses had turned hostile he would not be able to prove his case (ext. 12 ). Thereupon, the learned Magistrate discharged all the accused persons under Section 253 (1), Criminal P. C. On the very same date Gurumurty and all the accused persons of that case jointly executed an agreement (ext. 1) for the determination of all their disputes by an arbitrator named Tangadu Narasimha Murty (Sri T. N. Murty ). The terms of reference as embodied in that agreement are as follows:
"1. To determine whether the -2- share existed in the name of gurumurty Raju or in the name of Sriram Murty Raju or in the name of both of them in the joint shop business and the contract business of the rice mill of Sri Parlakimedi Samastanam, which we did from 1-2-1941 belonging jointly, to both or not and to determine what proportionate share each has to get. 2. To determine the accounts kept until the date till which the joint business was carried on or was deemed to have been carried on. 3. To determine the profits got for the said -/2/- share in the mill and joint business. 4. Out of the said profits, to get paid by Vyaya-raju Narasimha Raju, separately the profits that have to be paid to Sriram Murty Raju and gurumurty Raju in the joint business and mill business. 5. To determine who and in what manner are to bear the costs incurred by both parties in C, C. No. 139/43 on the file of Berhampur 2nd officer's Court, according to justice and injustice. 6. All the account books, papers, etc. , which had been seized and now existing in Court have to be taken return of by Vyayaraju Narasimha raju, and have to be handed over to Tangadu Narasimha Murty Raju, the arbitrator, and to be kept with him. 7. It is requested to give the award by knowing all the matters required to determine all the above matters from the accounts of the said mill and joint business, from the statemen
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