MADHYA PRADESH HIGH COURT
D. M. Dharmadhikari, Usha Shukla, JJ.
MADAN MOHAN AGRAWAL - APPELLANT
v.
SURESH AGRAWAL AND OTHERS - RESPONDENTS
Misc. Appeal No. 740 of 1996,
Decided on : December 17, 1996.
ARBITRATION - AWARD - REMISSION - ILLEGALITY - PARTNERSHIP - DISSOLUTION - APPORTIONMENT OF CAPITAL AND INVESTMENTS WITHOUT CONSIDERING DEBTS AND LIABILITIES - APPARENT ILLEGALITY - AWARD REMITTED FOR RECONSIDERATION.
Fact of the Case:
The appellant and respondent were partners in a firm. Disputes arose between them and they agreed to refer the disputes to arbitration. The arbitrators passed an award directing the appellant to return the capital and investments of the respondent and his wife. The appellant objected to the award on various grounds, including that the arbitrators had not considered the debts and liabilities of the firm before apportioning the capital and investments. The lower court rejected the objections and made the award a rule of the court.
Finding of the Court:
The court held that the award was apparently illegal as it violated the provisions of Sections 46 and 48 of the Partnership Act. The court also held that the appellant could not raise the objection of apparent illegality for the first time in appeal, as he had not filed an objection within the limitation period prescribed under Section 30 of the Arbitration Act.
Issues: 1. Whether the award was apparently illegal for not considering the debts and liabilities of the firm before apportioning the capital and investments? 2. Whether the appellant could raise the objection of apparent illegality for the first time in appeal?
Ratio Decidendi: 1. Yes, the award was apparently illegal as it violated the provisions of Sections 46 and 48 of the Partnership Act. 2. No, the appellant could not raise the objection of apparent illegality for the first time in appeal, as he had not filed an objection within the limitation period prescribed under Section 30 of the Arbitration Act.
Final Decision: The court remitted the award to the arbitrators for reconsideration in the light of the observations made by the court. The arbitrators were directed to send due notice to the parties, re-hear them and pass a supplementary or a fresh award clearly mentioning their decision with regard to the debts and liabilities of the firm and shall resolve the disputes between them in accordance with law.
Dharmadhikari, J. - This appeal has been preferred under Section 39(iv) of the Arbitration Act, 1940 against the judgment dated 1.5.1996 of the court of XIIth Additional Judge to the Court of District Judge, Jabalpur whereby the objections raised by the present appellant to the award passed jointly by the two Arbitrators have been rejected and the award has been made rule of the court by passing a decree in terms of the award.
2. The facts leading to the appointment of arbitrators and passing off the award may now be stated.
3. The family started its business in the name of M/s. Chaturbhujdas Ballabhdas and the original partners were Chaturbhujdas with his two sons Madan Mohan Agrawal (appellant herein) and Vallabhdas. From 1966, the trade is being carried on in the partnership firm, named M/s. Chaturbhujdas Vallabhdas. On the death of Vallabhdas in the year 1974, his wife Smt. Rampyaribai (Mother of Smt. Prabhat Agrawal-respondent No. 2 herein) joined as partner in the firm. Smt. Rampyaribai also expired in the year 1991 and Suresh Agrawal (respondent No. 1 - the son-in-law of late Smt. Rampyaribai and husband of respondent No. 2 Smt. Prabhat Agrawal) joined as partner in the firm under a document of partnership dated 14.6.1991. The partnership firm now consists only of two partners i.e. the appellant Madan Mohan Agrawal and respondent No. 1 Suresh Agrawal. They both have equal share 50-50 in the firm.
4. Disputes arose between the two partners who have relation of uncle-in-law and son-in-law. On 19.6.1994, appellant Madan Mohan Agrawal got published a public notice in the newspaper declaring that he has expelled Suresh Agrawal from the partnership. The partnership deed contained an arbitration clause. The two partners agreed with Smt. Prabhat Agrawal wife of Suresh Agrawal that all the disputes between them regarding the partnership firm and family affairs be referred to two arbitrators, both jointly chosen by the parties. The two arbitrators chosen were Shri K. Kumar who is Chartered Accountant of the partnership firm and Shri Bhanu Kumar Jain who was a contractor at Katni and was customer of the firm since several years. The appointment of the two arbitrators jointly by the parties and reference of disputes to them are contained in three affidavits separately sworn by them. The terms of reference are also contained in the affidavits. In the affidavit sworn by the appellant Madan Mohan Agrawal, there is a specific reference to appointment of arbitrators for resolving of disputes regarding the firm and family properties of the parties. They jointly agreed to be bound by the award of the arbitrators.
5. After filing of affidavits by the parties, arbitrators entered upon the reference on 11.8.1994. The first effective meeting of the arbitrators and the parties took place on 23.8.1994. The order sheet of that day contained in the proceedings of the arbitration states that no written submissions were made by any of the parties. They agreed to file oral statements of their claims. The appellant explained his viewpoints and answered various queries. Suresh Agrawal and his wife Smt. Prabhat Agrawal also explained their view points and answered the queries. On 23.8.1994, the arbitrators agreed to appoint Hon'ble Shri B. C. Verma, Retired Chief Justice of Punjab and Haryana High Court as Umpire for resolving the dispute in the event of difference of opinion between them. On 31.8.1994, the arbitrators were served with a legal notice by Shri J. P. Tiwari, Advocate on behalf of Madan Mohan Agrawal informing that under changed circumstances and looking to the behaviour and acts of the arbitrators it was desired to cancel the appointment of the two arbitrators.
6. The two arbitrators adjourned the proceedings fixed before them on 31.8.1994 and then sent a joint reply to the legal notice on 23.4.1994 stating therein that the authority of the arbitrators cannot be revoked unilterally by one of the parties to the reference. In the said
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