High Court · 2007

IN THE HIGH COURT OF JUDICATURE AT MADRASDated : 18.12.2007Coram :THE HONOURABLE MR.JUSTICE K.RAVIRAJA PANDIANandTHE HONOURABLE MRS.JUSTICE CHITRA VENKATARAMANOriginal Side Appeals Nos.239 and 264 of 2001Pankaj Kumar NevatiaAppellant in boththe appealsv.1. Pradeep Kumar Nevatia2. Prabhat Kumar Nevatia3. Sumitra Nevatia4. Shaiwalini Nevatia5. Shobha Nevatia6. Punitha Agarwal7. Purnima Singhania8.Rameshwar Prasad Nevatia9. Balakrishna Nevatia10.Baroda Industries (P) Ltd.,11.Hindustan Mercantile Bank Ltd.,12.M/s.Bharat Gold Storage (P) Ltd.,13.M/s.Moon Corporation Limited14.The Kodaikanal Co-operative Stores Ltd.15.M/s.Hercules Hoists Ltd.16.M/s.Bachharaj Factories Ltd.17.M/s.Nevatia (P) Ltd.18.M/s.Bajaj International (P) Ltd.19.Modern Mills Ltd.20.M/s.Bajaj Auto Litd.21.M/s.Bajaj Hindustan Ltd.22.M/s.Oudh Sugar Mills Ltd.23.M/s.All India General Insurance Co.Ltd.24.Park Town Co-operative Stores Ltd.25.M/s.Akola Oil Industries Ltd.26.Manjari Goel27. Ashish Nevatia28.Mayuri Mittal29.Rashmi ImranRespondents in OSA.No.239/2001 https://hcservices.ecourts.gov.in/hcservices/

1. Rameshwar Prasad Nevatia2. Balakrishna Nevatia3. Pradeep Kumar Nevatia4. Prabhat Kumar Nevatia5.Sumitra Nevatia6. Shaiwalini Nevatia7. Shobha Nevatia8. Manjari Goel9. Ashish Nevatia10.Mayuri Mittal11.Rashmi ImranRespondents in OSA.No.264/2001Appeals are filed against the common order made by a learned singleJudge of this Court dated 27.03.2001 made in Original Petitions Nos.95of 1995 and 865 of 1997.For appellant:Mr.M.L.JosephFor Respondents:Mr.Sathish Parasaran for RR26,27,29Mr.R.Subbiah for R30JUDGMENTK.RAVIRAJA PANDIAN, J.The appellant Pankajkumar Nevatia filed the above two appealsagainst the common order dated 27.03.2001 made in O.Ps. Nos.95 of 1995and 865 of 1997.2. O.P. No.95 of 1995 was filed by the appellant under section 17of the Arbitration Act, 1940 praying to receive and take on file thearbitration award dated 28.12.1994 handed over to the Registrar of thisCourt on 03.01.1995 and to pass a decree in terms of the said award andfor interim relief of injunction restraining the respondents 12 to 27,the joint stock companies in which the parties were share holders, fromissuing dividends, bonus, bonus shares, right shares and other benefitsto anybody till the disposal of the petition. O.P. No.865 of 1997 wasfiled by Pramodh Kumar, the first respondent (in O.P. No.95 of 1995)under sections 30 and 33 of the Arbitration Act, 1940 to set aside theaward dated 28.12.1994.3. The learned single Judge allowed the OP. No.865 of 1997 bysetting aside the award of the arbitrator dated 28.12.1994 and dismissedthe O.P. No.95 of 1995. Aggrieved by that order, the appellant PankajKumar Nevatia has put in issue the correctness of the order of thelearned single Judge in these appeals. https://hcservices.ecourts.gov.in/hcservices/

4. The facts, in short, are: A Hindu Undivided Family consisting ofKanhaiyalal Nevatia, the father and three sons Balakrishna Nevatia,Rameshwar Prasad Nevatia, S.K.Nevatia were running certain businessunder the name and styke of 'Kanyaiyalal Rameshwar Prasad Nevatia HUF'.S.K. Nevatia died in a car accident in 1975. The HUF was divided andgot separated on 29.02.1980. Bimla Devi Nevatia, the widow of S.K.Nevatia, the four sons of S.K. Nevatia – Pramod Kumar Nevatia, PradeepKumar Nevatia, Prabhat Kumar Nevatia and Pankaj Kumar Nevatia alongwith their respective wives and their two sisters, i.e., the petitionerand respondents 1 to 9 in O.P. No.95 of 1995 appointed respondents 10and 11,the paternal uncles of the petitioner, respondents 1 to 3, 8 and9, as arbitrators jointly on 30.09.1983 to partition the assets andliabilities, business, goodwill, etc of the joint family with effectfrom 01.11.1983 and declared that the decision of the arbitrators wouldbe binding on all of them. 5. The document appointing the arbitrators proceeded that 'thearbitrators would give their award on all the items of disputesregarding the above and in particular as to which assets, liabilities,business, etc.,belonged to the joint family and which belonged to theindividual members; the value of the total joint family assets, goodwill etc., after deducting the liabilities and partition the assets,business, goodwill, etc., among the family members. The parties furtheragreed to submit all their claims and disputes in writing to thearbitrators latest by 30.09.1983 and further agreed that no claim wouldbe entertained by the arbitrators after that date. The document furtherproceeded that the award would be given by the arbitrators on or before31.10.1983. In order to make the award within the stipulated period,the parties agreed to submit their required accounts before 30.09.1983and also agreed to offer the services of PL Khaitan for preparation ofaccount of Nevatia Private Ltd, Poornima Agenices and other concerns.But none of the parties filed their statement before the arbitratorswithin the time specified. It is stated that the arbitrators passed aninterim award on 01.02.1985 in respect of shares in the joint stockcompanies alone to the effect that all the shares would be divided intofive equal parts and each son and the mother shall have one part each.As final award has not been passed, Pankaj Kumar Nevatia, the appellantin the appeals filed Application No.4794 of 1986 before this Court forextension of time for passing the award and the time was extended upto04.01.1995. The arbitrators passed the final award on 28.12.1994 anddelivered it to the Registrar of this Court on 03.01.1995. 6. The appellant filed O.P. No..95 of 1995 under section 17 of theArbitration Act, 1940 for passing a decree in terms of the award. Therespondent Pramod Kumar Nevatia resisted the same by filing countercontending inter alia, that the brothers, the petitioner, respondents 1to 3 primarily held shares in several companies apart from 1/3rd share inthe parent HUF Kanhaiyalal Rameshwar Prasad Nevatia HUF and 75% of theshares in Poornima Agenices. There was one immovable property at DoorNo.11, Wallace Garden, Madrs, which was acquired in 1966 out of the HUFfunds, but in the name of the mother Bimla Devi Nevatia. This propertyhas not been taken into consideration in the award. Though it wasagreed to resolve the dispute through arbitration by the paternal https://hcservices.ecourts.gov.in/hcservices/ uncles, respondents 10 and 11, none of the parties filed any claimstatement either within the time stipulated or even thereafter. Eventhe interim award passed dividing the shares in the joint stockcompanies could not be regarded as an award as the same was not signedby both the parties, but by one only. Even at the time of passing theinterim award or the final award, no sufficient particulars wereavailable to the arbitrators regarding the working of Nevatia privatelimited, Poornima Agencies and the immovable property at Wallace Garden. 7. It was further contended that regarding business at Kanpur noteven the profit and loss accounts were made available to thearbitrators. When these aspects of the matter were pointed out to thearbitrators, the second arbitrator, the 11th respondent insisted thatthe arbitrators would go only into the distribution of shares withoutgoing into the question regarding the availability of the other movableor immovable properties and the character of the properties – HUFproperties or individual properties. It is further alleged that thefirst respondent Pramod Kumar was residing in Door No.11, Wallace Gardenin the year 1986. During his absence, the third respondent Prabhat KumarNevatia has criminally tresspassed into the property. That made thefirst respondent Pramod Kumar Nevatia to file a suit in CS. No.354 of1986 before this Court seeking for a declaration that the house propertyat Wallace Garden belongs to the HUF and also obtained an order ofinjunction in I.A. No.2324 of 1986 against the other respondents fromalienating any share in the said property. Flouting the injunctionorder, the mother Bimla Devi sold the propery at the instigation of theother respondents. The contempt proceedings against her were closedbecause she died during its pendency.8. It is further contended that the appellant Pankaj Kumar Nevatiainstituted a suit in C.S. No.603 of 1987 against the members of the HUFseeking the relief of partition. In the plaint the appellant has, inuncertain terms, stated that the parties have not filed any statementbefore the arbitrators and by efflux of time, arbitration became deadand the arbitrators have become functus officio. He further stated thathe would withdraw the Application No.4794 of 1986 seeking for extensionof time for passing an award. However, total disregard to his ownplaint averment, he did not withdraw the application. As the appellantfiled a suit by totally abandoning the arbitration proceedings and inview of the averment contained therein, the first respondent has nottaken any steps to oppose the application for extension of time.Further, the award was attacked by the respondent on the ground that thearbitrators did not hold any enquiry in the presence of any members ofthe family. They have not perused any evidence. Being the paternaluncles of the parties, they used their personal opinion and knowledgeabout the family affairs. The arbitrators failed to consider thequestion of availability of the properties, both movable and immovableand their character. 9. The first respondent Pramod Kumar Nevatia filed OP. No.865 of1997 based on the averment contained in the counter affidavit filed byhim in O.P. No.95 of 1995, to set aside the award. Both the O.Ps weretaken together and as stated in the summation of facts they were decidedby a common order allowing O.P. No.865 of 1997 and dismissing the O.P. https://hcservices.ecourts.gov.in/hcservices/ No.95 of 1995. Hence, these appeals by the petitioner of O.P. No.95 of1995.10. Learned counsel for the appellant contended that there is nobar under the reference prohibiting the arbitrators to use theirpersonal knowledge in resolving the dispute. The two arbitrators, beingthe paternal uncles, are more informed persons about the affairs of theHUF than any other third party and would bring about the best solutionto the dispute. Non filing of the formal claim petition by the partiesclaiming their right, having regard to the reference which is onlydividing the assets, among the members, cannot ipso facto vitiate theproceedings. The arbitrators did not solely confine to their personalknowledge about the affairs of the HUF, but relied upon the income taxreturns in which there is no mention about the house property. Hence,the award passed by the arbitrator cannot be regarded as one comingwithin the purview of sections 30 and 33 of the 1940 Act. 11. On the other hand, the learned counsel for the respondentsreiterated the factual position of filing of the suit by the appellantand filing of the suit for declaration of title regarding the Wallacegarden property by first respondent and contended that the arbitrationproceedings was given a go-by which is evident from the averment in theplaint of the suit and alternatively contended that when the matter hasbeen referred to the arbitrators, the arbitrators have to pass an awardin accordance with the statutory provisions only and passing of theaward based on the personal knowledge cannot have any legal sanction.12. We heard the learned counsel on either side and perused thematerials available on record.13. It is and admitted fact that the parties have entered into anarbitration agreement dated 31.08.1983 and appointed their paternaluncles respondents 10 and 11 as arbitrators. As per the agreement, thearbitrators were to effect partition of assets as on 01.11.1983. It isstated that the arbitrators issued notice to the parties to submit theirclaims on or before 30.09.1983. None of the parties submitted theirclaim statement and consequently no award was passed as per theagreement within the period, i.e., by 31.10.1983. The appellant, byfiling the suit in C.S. No.603 of 1987, has categorically stated thatthe parties have not filed any statement before the arbitrator and byefflux of time, the arbitration agreement has become dead and thearbitrators have become functus officio. He has also stated in theplaint that he would withdraw the application in A.No.4794 of 1986,filed seeking for extension of time for passing arbitration award.Hence, he cannot support the arbitration award. There is yet anothervital factor on record by means of a letter of the second arbitrator,the 11th respondent, informing that he was not willing to be anarbitrator, with which the learned single Judge has made elaboratereference by extracting the letter. From that it is evident that out ofthe two arbitrators to whom the matter was referred for arbitration –one has uncondionally expressed his unwillingess to arbitrate theproceedings and the award passed by one of the arbitrators cannot beregarded as an award as provided in the statutory provision of theArbitration Act, 1940. https://hcservices.ecourts.gov.in/hcservices/

14. Further, as per the arbitration agreement, the arbitrator wasrequired to partition the assets, liabilities, business, goodwill, etc.,of the joint family, w.e.f., 01.11.1993. The reference included all theproperties of HUF, such as movables, especially shares of HUF in thejoint stock companies immovable and other properties though there aredifferent claims, one - that it did not form part of the HUF propertyand the other, the property was purchased by HUF including the houseproperty at Rajasthan. In the award the property has not been includeddespite specific reference to the effect that the arbitrator would givea decision as to which assets, liabilities, business belonged to thejoint family and which belonged to the individual members. It is alsoan undisputed fact that the award has been passed purely on the basis ofthe personal knowledge without there being any material evidence. TheArbitration Act does not provide for passing an award on the basis ofthe personal knowledge. The personal knowledge alone, in the absence ofany agreement to that effect, be a basis for passing an award. In spiteof the fact that the arbitrators are paternal uncles it could not beexpected that they were aware of all sort of disputes between theparties and all the assets, such as shares and stocks or other movableor immovable properties possessed by the parties. Vide M/s. TribalEngineering (P) Ltd. v. Indian Oil Corporation, 1998 (3) CTC 385. Weare also not able persuade ourselves to accept the income tax returns ofthe HUF to be a conclusive proof for deciding the dispute between theparties.15. Above all, it is obvious from the fact situation that even theinterim award in respect of division of shares made by the parties hasnot been given effect to by any of the parties. All these would go toshow that the parties have abandoned the arbitration proceedings. Theappellant cannot take undue advantage of the irregular award passed bythe arbitrators by misconducting themselves on the basis of a letter ofthis Court extending the period for completion of the arbitration. 16. Though the reference made to the paternal uncles might appearto be well advised, they being the creature of the agreement would actin accordance with the terms of reference only. The arbitrator couldnot act arbitrarily, irrationally, capriciously or independently of thecontract. A deliberate departure not only manifests the disregard ofhis authority or misconduct on his part, but it would tantamount to malafide action and is liable to be set aside. Vide Rajasthan State Minesand Minerals Ltd. v. Eastern Engineering Enterprises, (2000) 2 LW 729(SC).17. For the foregoing reasons, we find no merit in the appeals.The appeals are dismissed. No costs. sd/-Asst.Registrar/true copy/Sub Asst.Registrar https://hcservices.ecourts.gov.in/hcservices/ mfToThe Sub Assistant Registrar,Original Side,High Court, Chennai.104.+ Two ccs to M/s. Surana & Surana , SR.74853 & 74852+ one cc to Mr. R. Subbiah, SR. 75231+ one cc to Mr. Sathish Parasaran, SR.74832BS(CO)RP 28.12.2007.OSA Nos.239 and 264 of 2001