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2025 Supreme(Online)(Kar) 9069
IN THE HIGH COURT OF KARNATAKA AT BENGALURU DATED THIS THE 29 TH DAY OF APRIL, 2025 PRESENT THE HON'BLE MR JUSTICE V KAMESWAR RAO AND THE HON'BLE MR JUSTICE S RACHAIAH MFA NO. 2231OF 2021(AA)
BETWEEN:
1. SRI. ASHOK KUMAR S., S/O LATE SHANTILAL LALJI, AGED ABOUT 63 YEARS, NO.809/8, JALARAM KRUPA, 61 ST CROSS, 5 TH BLOCK, RAJAJINAGAR, BENGALURU-560 010.
2. SMT. A. DAKSHA, W/O SRI ASHOK KUMAR S., AGED ABOUT 59 YEARS, NO.809/8, JALARAM KRUPA, 61 ST CROSS, 5 TH BLCOK, RAJAJINAGAR, BENGALURU-560 010.
…APPELLANTS (BY SRI. DHYAN CHINNAPPA, SENIOR ADVOCATE FOR SRI. SUNDARA RAMAN .M.V, ADVOCATE)
AND
1. SRI. NARENDRA KUMAR S., S/O LATE SHANTILAL LALJI, AGED ABOUT 66 YEARS, NO.155/9/2, 1 ST FLOOR, 1 ST STAGE, 5 TH CROSS, OKALIPURAM, OPP: JAIN TEMPLE, BENGALURU-560 021.
2. SMT. KALPANA N., W/O SRI. NARENDRA KUMAR S., AGED ABOUT 58 YEARS, NO.155/9/2, 1 ST FLOOR, 1 ST STAGE, 5 TH CROSS, OKALIPURAM, OPP: JAIN TEMPLE, BENGALURU-560 021.
…RESPONDENTS (BY SRI. K.N. NITISH, ADVOCATE FOR SRI. K.V. NARASIMHAN, ADVOCATE FOR R1 & R2)
THIS MFA IS FILED U/S 37(1)(c) OF THE ARBITRATION AND CONCILIATION ACT, AGAINST THE JUDGMENT AND DECREE DATED 07.02.2020 PASSED IN A.S.NO.72/2017, ON THE FILE OF THE LXIII ADDITIONAL CITY CIVIL AND SESSIONS JUDGE(CCH-64), BENGALURU, DISMISSING THE ARBITRATION SUIT FILED U/SEC.34 OF THE ARBITRATION AND CONCILIATION ACT, 1996.
THIS MFA HAVING BEEN HEARD AND RESERVED FOR JUDGMENT ON 15.01.2025, COMING ON FOR ‘PRONOUNCEMENT OF JUDGMENT’ THIS DAY, V KAMESWAR RAO J ., DELIVERED THE FOLLOWING:
CORAM: THE HON'BLE MR JUSTICE V KAMESWAR RAO AND THE HON'BLE MR JUSTICE S RACHAIAH
The court affirmed that an arbitrator may question the validity of an arbitration agreement, and if found invalid, lacks jurisdiction to adjudicate disputes.
Headnote:(A) Arbitration and Conciliation Act, 1996 - Sections 8 and 34 - Jurisdiction of Arbitral Tribunal - Disputes arising between family members referred to arbitration and an award passed - Appellants challenged the award claiming the arbitrator lacked jurisdiction due to an ante-dated Memorandum of Family Settlement - Court affirmed that the arbitrator has authority to rule on jurisdiction; however, the validity of the agreement was questioned due to the date of execution and stamp paper purchase - The court found that the arbitrator's conclusion of lacking jurisdiction was justified, as the agreement was not valid under law. (Paras 9, 10, 29, 30, 41)
Facts of the case:
The appellants, family members, had disputes leading to arbitration, resulting in an award. The respondents contested the validity of the Memorandum of Family Settlement, claiming it was executed on an incorrect date. The trial court upheld the arbitrator's decision that he lacked jurisdiction due to the invalidity of the agreement.
Findings of Court:
The court upheld the arbitrator's decision, asserting that the Memorandum of Family Settlement was invalid, thereby confirming the arbitrator's lack of jurisdiction to adjudicate the dispute.
Issues: The main issues included whether the arbitrator could question the validity of the arbitration agreement and whether the arbitration clause was enforceable given the circumstances of its execution.
Ratio Decidendi: The court ruled that the arbitrator's authority to determine jurisdiction includes questioning the validity of the arbitration agreement. The memorandum was deemed invalid due to discrepancies in its execution date, leading to the conclusion that the arbitrator had no jurisdiction to proceed with the case.
Result: Appeal dismissed.
CAV JUDGMENT
(PER: THE HON'BLE MR JUSTICE V KAMESWAR RAO)
The challenge in this appeal is to an order dated 07.02.2020 passed by the LXIII Additional City Civil and Sessions Court (CCH-64), Bengaluru, in AS No. 72/2017.
2. The AS No.72/2017 was filed under Section 34 of the Arbitration and Conciliation Act, 1996 (in short, ‘Act of 1997) read with Rule 4 of the High Court of Karnataka Arbitration (Proceedings before the Courts) Rules, 2001, challenging the Arbitration Award dated 05.04.2017 passed by the learned sole Arbitrator, whereby the learned Sessions Judge has dismissed Section 34 petition and confirmed the impugned award rendered by the sole Arbitrator.
3. The facts that are noted from the record are that the Appellant No.1 and Respondent No.1 are brothers. The 2nd appellant is the wife of the 1st appellant and the 2nd respondent is the wife of the 1st respondent. Due to various disputes that arose between them, they were referred to arbitration before the Five Members of Lohana Samaja at Bengaluru. After considering the issues, an Arbitral Award was passed by the said Arbitrators on 28.03.2007. It is a conceded position that the said award has not been challenged by the parties herein.
4. It is the case, in pursuance of the Arbitral Award dated 28.03.2007, a Gift Deed, Partition Deed and Memorandum of Family Settlement were entered into between the parties on 21.06.2007, which were registered on 31.07.2007 with an intent to extinguish all the disputes between them. In the year 2008, the respondents herein had filed a suit in OS No.5221/2008 before the V Additional City Civil and Sessions Judge, Bengaluru, challenging the Gift and Partition Deeds dated 21.06.2007 on the ground, they are vitiated by fraud and hence not binding on them. No reference was made to the Memorandum of Family Settlement dated 21.06.2007.
5. The appellants herein put in appearance in the suit and filed an application under Section 8 of the Arbitration and Conciliation Act, 1996 (‘Act of 1996’ for short) invoking Arbitration clause as contained in the registered Memorandum of Family Settlement. The Sessions Judge has allowed the said application on 13.11.2008 and referred the dispute to Arbitration. The respondents have challenged the said order by filing a writ petition being WP No.16963/2008 and a Special Leave Petition being SLP No.19811/2009, before this Court and the Hon’ble Supreme Court.
6. Suffice to state, the reference to arbitration was upheld by this Court and the Hon’ble Supreme Court.
7. The respondents herein had filed a claim statement, to which the appellants filed their statement of objections and raised a counter-claim on the respondents. The issues were framed and evidence was led. It appears at the stage of final arguments, for the first time, the respondents pointed out that the date written on the Memorandum of Family Settlement was a date prior to the purchase of stamp paper. The learned Arbitrator on this basis, in the absence of any pleading took a view that the document would result in him, not having jurisdiction to arbitrate. It is in this background that the aforesaid suit under Section 34 of the Act of 1996 was filed by the appellants stating that the award is not only erroneous but, it violates the fundamental policy of Indian Law; it also suffers from irrational appreciation of material facts and proceeds on an analysis which is hit by the principles of Wednesbury unreasoableness. It is also stated that the award is not merely perverse, but is also illegal. According to the appellants, the learned Arbitrator ought to have noticed that, no objection was raised to his jurisdiction under Section 16 of the Act. When no objection was raised, the right to object the jurisdiction is deemed waiver in terms of Section 4 of the Act. When there is no objection to jurisdiction, the learned Arbitrator cannot suo-moto decide that he has no jurisdiction. It is the fundamental policy of Indian Law that a party who objects jurisdicti
