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Judgment
This appeal under Section 37 of the Arbitration and
Conciliation Act, 1996 (''the Act'') is directed against the order
dated 02.08.2013 passed by the Additional District Judge No.3,
Jodhpur Metro (''the lower court''), whereby the application filed
by the appellant under Section 34 of the Act has been rejected.
On a dispute arising between the parties, on an application
filed by M/s. Jodhpur Computer Services and Smt. Anita
Chowdhary against Sushil Choudhary and Ms. Sanjana Purohit
under Section 11(5) of the Act, the High Court by its order dated
23.07.2004 appointed arbitrator indicating that the matter
concerns accounts of the partnership firm M/s. Jodhpur Computer
Services and that all objections as to the claim, jurisdiction shall
be raised before the arbitrator. The claimant-Smt. Anita
Chowdhary filed her claim before the sole arbitrator.
The claim was contested by the appellant on several
grounds. Preliminary objections were raised, which were rejected
by the arbitrator, whereafter points for determination were
framed, parties led evidence and the arbitrator after hearing the
parties, concluded the hearing on 11.01.2009 and fixed
14.02.2009 for passing of the award. On 14.02.2009, it was
indicated by the arbitrator that on 01.02.2009, he was informed
by claimant that she wanted to file certain certified copies and,
therefore, the award was not prepared. The claimant filed certain
documents alongwith application; the application was contested
by the appellant; on 22.03.2009, the application was allowed on
payment of cost of Rs.1,000/-. The appellant (herein) was
granted permission to file documents in rebuttal. Ultimately the
final arguments were heard on 10.05.2009 and the award was
passed on 24.05.2009.
The learned arbitrator came to the conclusion that in
absence of account-books, the claim based on the balance-sheet
was not justified and, thereafter went on to pass the following
award:-
"VERNACULAR MATTER OMITTED"
The sum of Rs. 5,54,355/- awarded pertained to
Rs. 2,44,000/- towards Akhaliya Chauraha Extension Centre,
Rs. 2,64,439/- towards Ratanada Extension Centre, Rs. 15,000/-
towards Motor Cycle, Rs. 23,500/- towards security deposit and
Rs. 7,416/- towards telephone charges.
Feeling aggrieved, the appellant filed application under
Section 34 of the Act. Alongwith the application, certain
documents were also filed.
The lower court after hearing the parties, came to the
conclusion that on the grounds raised by the appellant, the
award did not require any interference and, consequently,
rejected the application.
It is submitted by learned counsel for the appellant that
both the arbitrator as well as the lower court committed grave
error in passing the award and rejecting the application filed by
the appellant respectively. It was submitted that the arbitrator
was appointed in respect of the accounts of the firm, specific
reliefs were claimed in the claim raised before the arbitrator, to
which, a response was filed and evidence was led by the parties.
Whereafter, though the claim as raised was rejected by the
arbitrator, however, based on the documents, which were filed
after the arguments were concluded and the award was
reserved, the present award for a sum of Rs. 5,54,355/- has
been passed, which is beyond the scope of the claim made by the
respondent. Further submissions were made that once the final
arguments were concluded and award was reserved, as there is
no hiatus between reserving the award and its pronouncement,
the oral prayer made on telephone by the claimant, could not
have been entertained by the arbitrator, defer passing of the
award and permit filing of certain documents, which documents
have formed the basis for passing of the award. It was submitted
that the award is beyond the scope of the submission to the
arbitration and, therefore, the same was liable to be set aside.
Further submissions were made that once the arbitrator
passed the award based on documents, which were not in
contemplation at all, the appellant alongwith the application
before the lower court filed certain documents in respect of the
award, which was passed, however, the same were not taken
into consideration and, therefore, for failure of the lower court to
take the documents into consideration, the order passed by the
lower court is also vitiated.
A further submission was made that passing of the award
by the arbitrator is wholly contrary to the provisions of Section
14 and Section 48 of the Partnership Act, 1932 ('' Partnership
Act ''), inasmuch as, it is not in dispute that the appellant and the
respondent No.2 were partners in the firm having 25% share
each, and by the impugned award though the partnership has
been dissolved, however, the award has been passed as if the
same was a claim for money by the claimant, which is on its face
incorrect and deserves to be quashed and set aside.
Further submissions were made that a sum of
Rs.2,44,000/- has been awarded towards the Akhaliya Chauraha
Extension Centre, which goods were seized by the police on an
FIR lodged by the claimant and the same have been delivered to
the claimant and, therefore, on the one hand the claimant is in
possession of the entire goods and on the other hand value of
the same goods has been again ordered to be paid to him, which
amounts to the claimant having double benefit. Qua the value of
goods of Ratanada Extension Centre, it was submitted that the
entire goods were seized and they continue to be with the police
and, therefore, there was no question of the appellant making
payment of those goods. Still further submissions were made
that the award of amounts under other heads also does not arise
in the circumstances of the case and, therefore, the award as
well as order of the lower court deserve to be quashed and set
aside.
Reliance was placed on Manohar Lal (D) by LRs. v. Ugrasen
(D) by LRs. & Ors.: AIR 2010 SC 2210; Arjun Singh v. Mohindra
Kumar & Ors .: AIR 1964 SC 993; Rajasthan Financial
Corporation v. Pukhraj Jain & Ors .: AIR 2001 Rajasthan 71; Oil &
Natural Gas Corporation Ltd. v. Western Geco International Ltd .:
2014 AIR SCW 5727; ONGC Ltd. v. Garware Shipping
Corporation Ltd .: 2007 AIR SCW 7274; Venture Global
Engineering v. Satyam Computer Services Ltd. & Anr .: 2010 AIR
SCW 5027; P. Radhakrishna Murthy v. M/s. NBCC Ltd.: 2013 AIR
SCW 1515 and C. Leo Machodo v. Commissioner of Income-tax :
(1988) 172 ITR 744 (MAD.).
Vehemently opposing the submissions, the respondent
No.1, appearing in person, submitted that the appellant has
indulged in fraud and taking advantage of illness of Smt. Anita
Chowdhary, tried to hijack the entire business of the partnership
firm and the extension centres, which were opened by the firm
were sought to be abrogated by the appellant. Though the
claimant had a huge claim against the appellant, on account
technicalities, the same has not been accepted by the arbitrator,
however, the amount awarded does not call for any interference.
Submissions were made that the appellant who claims himself to
be a partner, was only a ''working partner'' and therefore, cannot
claim any right or interest in the properties of the firm and the
entire submissions sought to be raised in this regard are
baseless. It was submitted that various grounds of challenges
sought to be launched by the appellant in fact have no basis. The
lower court has appropriately dealt with the objections and the
scope of Section 34 of the Act being very limited, the lower court
was justified in rejecting the objections. Further submissions
were made that the entire dispute pertaining to the partnership
firm was before the arbitrator and once it was established before
the arbitrator that the appellant had indulging to wrong doing,
the arbitrator was justified in passing the award impugned.
Submissions were made that the order passed by the criminal
court was set aside by the revisional court and the goods, which
are in possession of the claimant are absolutely of no value and,
therefore, as the firm was put to loss by the appellant, the
arbitrator was justified in passing the award impugned.
Further submissions were made that the appellant since
beginning has been indulging in tactics so as to ensure retention
of illegally acquired benefits from the partnership firm.
Objections questioning the independence of arbitrator were filed,
which were later on withdrawn; the claimant had to approach
this Court to ensure that the application under Section 34 of the
Act is expeditiously disposed of as even before the lower court,
the appellant was seeking to procrastinate the proceedings and
even in the present case also all attempts were made to delay
the proceedings. It was submitted that after the claimants filed
the documents before the arbitrator, the appellant was also
accorded opportunity to file documents and documents in fact
were filed and, thereafter again submissions were heard and,
thereafter the arbitrator delivered his award and, therefore, it
cannot be said that filing of the documents in any manner caused
any prejudice to the appellant. It was prayed that the appeal be
dismissed.
Reliance was placed on Kulathu Iyer Harihara
Sivaramakrishna Iyer v. Annaswamy: AIR 1951 Travancore-
Cochin 192 and Indian Council for Enviro-Legal Action v. Union of
India & Ors .: (2011) 8 SCC 161.
I have considered the submissions made by learned counsel
for the appellant, respondent No.1 present in person and have
perused the material alongwith the record of the lower court as
well as the arbitrator.
Despite service, no one appeared on behalf of the of the
respondent No.2.
The parties entered into partnership vide deed of
partnership dated 15.03.1999 executed between Smt. Anita
Chowdhary, Sh. Sushil Choudhary and Ms. Sanjana Purohit. The
preamble of the deed, inter alia, indicated that Smt. Anita
Chowdhary agreed on 01.04.1999 to admit Sushil Choudhary and
Ms. Sanjana Purohit in partnership to continue to carry on
business under the name and style of M/s. Jodhpur
Computer Services with all assets and liabilities as standing in
the books and accounts on 31.03.1999. The parties also agreed
to share the net profit and losses of the partnership in ratio of
50% : 25% : 25% and it was indicated that the capital of the
firm has been and shall be contributed by Smt. Anita Chowdhary
or shall be raised by the loans etc. The deed indicated that all the
three partners called ''working partners'' shall devote their time
and attention in the conduct of affairs of the firm and would be
paid remuneration to be worked out in terms of the clause.
It appears in the year 1999 itself an extension centre was
opened at Akhaliya Chauraha by the firm, whereafter Smt. Anita
Chawdhary fell ill around the year 2001 and in the year 2002,
another centre at Ratanada in the name of extension counter of
Jodhpur Computer Centre was opened, which apparently led to
dispute between Smt. Anita Chowdhary/S.L. Chowdhary and
appellant Sushil Choudhary, wherein the appellant though
utilized the name of the firm, claimed the same to be of his own
proprietorship and the firm claimed the same as part of its
business. The same led to filing of suit by the appellant seeking
injunction and as in the suit, a receipt said to have been
executed by Ms. Sanjana Purohit on 01.05.2002 pertaining to the
Akhaliya Chauraha Centre agreeing to sale the properties of the
firm to the appellant was relied on though Ms. Sanjana Purohit
denied her signatures on the said receipt and as rent-note dated
23.02.2002 pertaining to the Ratanada Extension Centre, was
apparently inscribed on a stamp paper dated 22.04.2002, led to
filing of criminal complaints by S.L Choudhary, regarding which,
challan was filed against the appellant, wherein in one case, the
appellant has been acquitted and in another case, the trial is still
pending.
On dispute arising between the parties, in terms of the
arbitration clause contained in the partnership deed, arbitration
was sought and then application under Section 11(5) of the Act
was filed before this Court and as noticed hereinbefore, the
matter was referred to the sole arbitrator.
During pendency of the arbitration proceedings Smt. Anita
Chowdhary died on 17.07.2006 and the learned arbitrator by
order dated 15.08.2006 took S.L. Chowdhary on record.
There is no dispute that the proceedings continued before
the arbitrator, wherein voluminous material was produced and
oral evidence was recorded, wherein cross-examination of the
parties went into several hundred pages. Whereafter, after
hearing the parties on 11.01.2009, the award was reserved
and the date fixed for pronouncement was 14.02.2009 and as
noticed hereinbefore on 01.02.2009, based on the telephone call
of the claimant, the arbitrator did not deliver the award and the
claimant filed application alongwith certain documents on record,
the application was opposed, but the documents were taken on
record on 22.03.2009 and the appellant also filed documents on
10.05.2009.
The arbitrator thereafter delivered the award, wherein the
claim as raised in the claim petition before the arbitrator was
rejected, inter alia, observing as under:-
"VERNACULAR MATTER OMITTED"
The arbitrator did not stop at that stage and went on to
observe as under and based on the documents produced by the
respondent, passed the award:- "VERNACULAR MATTER OMITTED"
The entire procedure adopted by the arbitrator, apparently
cannot be countenanced, inasmuch as, besides the fact that once
after hearing the final arguments, the matter was fixed for
delivering the award, entertaining request of one of the parties
on telephone and deferring the passing of the award and,
thereafter, on production of further documents, regarding which,
no specific claim as such was raised in the claim petition, in
absence of amendment of claim petition in writing, awarding the
amount as claimed based on the documents filed subsequently, is
in gross violation of principles of natural justice and settled legal
procedure, which the arbitrator is bound to follow in all
circumstances.
Though the provisions of Civil Procedure Code may not be
required to be adhered to by the arbitrator, the principles, which
advance the cause of justice and which are based on natural
justice, have to be followed.
The Hon''ble Supreme Court in the case of Arjun Singh
(supra) way back in the year 1964 laid down that there is no
hiatus between two stages of reservation of judgment and
pronouncement of the judgment so as to afford any party, the
opportunity to move any sort of application/make prayer.
Further, this Court in the case of Rajasthan Financial Corporation
(supra) following the judgment in the case of Arjun Singh
(supra), wherein an application under then existing provisions of
Order XIII, Rule 2 CPC was moved by the plaintiff after the trial
of the suit was complete and the case was reserved for judgment
for placing on record certain documents, laid down that such an
application was not maintainable.
As noticed in the present case, admittedly the award was
reserved on 11.01.2009 and the date fixed for pronouncement
was 14.02.2009 and in between, a telephonic prayer was made,
which was entertained and thereafter, documents were taken on
record.
In view of the law laid down by the Hon''ble Supreme Court
in the case of Arjun Singh (supra) and followed by this Court, the
entire action on part of the learned arbitrator in entertaining the
telephone call, deferring the award and then entertaining the
application is against the fundamental policy of Indian law and
therefore, the procedure adopted cannot be sustained.
Further, it would be noticed that merely based on the
documents produced by the claimant, the determination was
made by the arbitrator and the award was passed. Even if the
claimant wanted to amend his claim petition and wanted to raise
additional claim, the same was required to be incorporated in the
claim petition and after providing opportunity to the non-claimant
to file response to the same, the arbitrator could have decided
the same.
The reliefs, which were claimed in the claim petition filed
before the arbitrator reads as under:-
"VERNACULAR MATTER OMITTED"
A bare perusal of the above reliefs indicates that there is no
mention whatsoever of the various claims, which have been
accepted by the arbitrator. The entire claim of money was based
on the balance-sheet as would be clear from prayer made in para
21 (supra) i.e. for Rs.16,64,897/-, which claim has been rejected
by the learned arbitrator, which rejection in absence of any
challenge under Section 34 of the Act has become final.
In that view of the matter, as the award is on its face
beyond the scope of the claim petition, the same cannot be
sustained on the said ground as well.
The learned lower court before whom the above issues were
raised, without examining the pleas raised in proper perspective,
refused to examine the said aspects by indicating that scope
under Section 34 of the Act was limited, which determination
made by the lower court also cannot be sustained.
So far as the various plea raised by the appellant and the
respondent No.1 pertaining to the merit of the various amounts
awarded are concerned and the plea raised by the appellant
pertaining to the award being in violation of provisions of
Sections 14 and 48 of the Partnership Act, in view of the findings
recorded hereinbefore, which goes to the root of the matter, the
same does not require any determination by this Court.
No other ground was raised/pressed by the appellant qua
the reliefs 4 & 5 granted by the learned arbitrator.
So far as award of costs of Rs.20,000/- by the learned
arbitrator is concerned, in the circumstances of the case, the
same does not call for any interference.
In view of the above discussion, the appeal filed by the
appellant is partly allowed. The award dated 24.05.2009 passed
by the sole arbitrator as upheld by order dated 02.08.2013 by
the Additional District Judge No.3, Jodhpur Metro is set aside
only to the extent of relief No.1. Rest of the award is upheld.
Looking to the nature of the case, there shall be no order as
to costs in this appeal.