Narayan Prasad Lohia Vs. Nikunj Kumar Lohia
& Ors  Insc 30 (28 January 2003)
N. Santosh Hegde & B.P. Singh.
JUDGEMENT B.P. SINGH, J.
Appeal (civil) 1384 of 2002
Civil Appeal No. 1382 of 2002 is directed
against the judgment and order of the High Court of Calcutta dated 18th May,
2000 in A.P.O. No.620 OF 1999 whereby the Division Bench of the Calcutta High
Court while affirming the order of the learned Single Judge dismissed the
appeal of the appellant and affirmed the finding of the learned Single Judge
that the purported arbitral award made and published by the 5th and 6th
respondents on October 6, 1996 was void and unenforceable and was not binding
on the parties.
Civil Appeal No. 1384 of 2002 is directed
against the judgment dated 14th July, 2000 whereby the High Court dismissed A.P.O. No. 619
of 1999 following its earlier judgment dated 18th May, 2000.
The facts not in dispute are that the appellant
and the respondents belong to the same family. On disputes and differences
arising in respect of family business and properties, they agreed to get them
resolved through one Shri Pramod Kumar Khaitan. Later, on 29th September, 1996 the parties agreed to
the disputes being resolved by the aforesaid Shri Pramod Kumar Khaitan and one Shri
Sardul Singh Jain. The parties accordingly submitted their respective claims
before the aforesaid two persons and took part in the proceedings which
resulted in an award dated 6th October, 1996.
The award was challenged by the first and the
second respondents who prayed for setting aside of the award. Several grounds
were urged in support of the applications, one of them being that the
arbitration by two arbitrators was not permissible under the provisions of the Arbitration
and Conciliation Act, 1996 as it prohibited arbitral tribunal consisting of
even number of members. Several other grounds were urged in support of the
applications for setting aside the award.
The learned Single Judge, who heard the
applications, allowed the same and set aside the award. In doing so he recorded
his findings which may be summarized thus :-
1. It appeared from the original Award filed
with the Registrar (Original Side) by the Arbitrators that the Memorandum of
Understanding was neither annexed thereto nor had it been initialled by them.
The award was, therefore, incomplete and could not be given effect to.
2. The award was not signed by the 3rd
respondent signifying her acceptance.
3. A perusal of the award disclosed that the 5th
and the 6th respondents, the arbitrators, intended the award to form the basis
of further negotiation between the parties and that the same was not to be made
a rule of the court.
4. The arbitrators in their award did not record
reasons nor did they specify the place of arbitration, and hence the award was invalid
being contrary to the provisions of section 31 of the Act.
5. The provisions of the award were uncertain,
vague and unworkable, in that it purported to record that the third respondent
will have no concern with profit and loss of any company owned or controlled by
the parties, without specifying which are the companies and/or businesses that
are owned and controlled by the parties and by whom. Further the award directs
that the guarantee given by the parties in respect of company/business of the other
parties, shall be released from financial institutions and banks, it does not
specify the companies or the businesses concerned or the financial institutions
or the banks. It further directs payment of Rs.375/- in favour of the second
respondent without specifying as to who has to pay the said amount.
6. That the provisions of section 30 of the Act
do not apply to the award in question. If it was a settlement between the
parties, there would have been no occasion for the arbitrators to reject the
claim of the parties as they had purported to do by their award.
Moreover paragraph 13 of the award made it
abundantly clear that the arbitrators treated the same as "our
On all these grounds the learned Single Judge
set aside the award and allowed the applications filed by the first and the
As noticed earlier, a Division Bench of the High
Court has affirmed the order of the learned Single Judge but while doing so,
the Division Bench considered only two questions, namely –
(1) whether the reference, if at all made to two
arbitrators, was valid in law; and
(2) whether the fact that the arbitrators did
not give reasons in support of their award would make the award bad in the eyes
of law. Both these questions were answered in favour of the contesting
respondents. The appellant has moved this Court by way of special leave.
At the thresh-hold, a question arose as to
whether, having regard to the provisions of the Arbitration and Conciliation
Act, 1996, there cannot be an even number of arbitrators and that arbitration
by two arbitrators was against the statutory provision of the said Act and,
therefore void and invalid. This Court noticed in its order dated 16th January,
2000 that the question being an important question of law which was likely to
arise in future cases, it was only appropriate that this issue be decided by a
larger Bench of at last three Hon'ble Judges. This Court noticed that earlier a
similar question was referred to a larger Bench but the question was not
decided since that matter was decided on other grounds.
Accordingly the matter was placed before the Hon'ble
the Chief Justice for suitable orders, who directed that the matter be heard by
a Bench of 3 Hon'ble Judges of this Court. Accordingly the matter was heard by
a Bench of 3 Hon'ble Judges who by their judgment dated February 20, 2002 held
that section 10 of the Act was a derogable provision and respondents 1 & 2
not having raised any objection to the composition of the arbitral tribunal, as
provided in section 16, they must be deemed to have waived their right to
object. The question was, therefore, answered in favour of the appellant, but
the Bench directed that the appeal be placed before a Bench of two judges for
consideration of other aspects of the matter.
Before us, it was submitted by Mr. K. Parasaran
and Mr. Kailash Vasdev, Senior Advocates appearing on behalf of the
respondents, that the appellate Bench of the High Court has considered only two
of the grounds on which the learned Single Judge set aside the award, namely
the ground pertaining to the objection raised on the basis of section 10 of the
Act, and the ground pertaining to failure of the arbitrators to record reasons
for their award. Apart from these two grounds, there were other grounds also on
which the learned Single Judge had held the award to be void and ineffective.
Those questions have not at all been considered by the appellate Bench and,
therefore, it was only appropriate that the matters be sent back to the High
Court for its decision on those questions. We are of the view that the request
made by learned counsel for the respondents is fair and also in the interest of
justice. Since there are more grounds available to the respondents to challenge
the award, apart from the two grounds, on which the appellate Bench disposed of
the appeals before it, it is only appropriate that the Division Bench of the
High Court should consider the other grounds also on which the award had been
set aside by the learned Single Judge. This is necessary because in the event
of our holding in favour of the appellant on the second ground, the Court will
be deprived of the view of the High Court on other grounds on which the award
was invalidated by the learned Single Judge.
Accordingly we dispose of these appeals with the
direction that the matters be remitted to the High Court for the Division Bench
to consider the other grounds on which the learned Single Judge had set aside
the award by its judgment and order dated 17th November, 1998, which have not
been considered by the Division Bench in its judgment and order dated 18th May,
2000. These appeals are disposed of accordingly. There will be no order as to
Two Contempt Petitions No. 368 and 369 of 2002
have been filed in these two appeals alleging that respondent No.2 in both the
appeals has willfully and intentionally disobeyed the order of this Court dated
21st August, 2000 directing maintenance of status quo with respect to the
implementation of the award. Since we have remitted the matters to the High
Court for its findings on other questions involved in the appeals, we do not
consider it necessary to pass any order on these contempt petitions and they
are accordingly disposed of.