MOHINDER KAUR KOCHHAR v. PUNJAB NATIONAL BANK — 1980 DIGILAW 244 (DEL)

SACHAR ( 1 ) THIS is an appeal against the order of the learned single Judge by which he rejected the appellant s objections to the award and made it a rule of the court. ( 2 ) M/s. Satwant Singh Kochhar and Co. , is a partnership firm consisting of five partners, namely, (1) Satwant Singh Kochhar, son of Darshan Singh Kochhar (2) Gurmukh Singh a nephew of Darshan Singh (3) Kulwant Singh son of Asa Singh (4) Manohar Singh, one of the brothers of Darshan Singh and (5) Miss Mohinder Kochhar, the appellant, daughter of Jaswant Singh. The firm was allowed the advantage of cash credit account against hypothecation of stocks from the respondent, Punjab National Bank. The loan had been guaranteed by Darshan Singh, Manohar Singh, Asa Singh, Smt. Viranwali wife of Darshan Singh and Jaswant Singh, the father of. the present appellant. ( 3 ) IT appears that on 29th November, 1966 the accounts of the firm showed a debit balance of Rs. 6,66,530. 28 inclusive of interest at rate varying from 8 per cent up to 10 per cent per annum. As the borrowing firm and the guarantors disputed the right of the Bank to charge interest at different rates as mentioned above, the firm as well as the guarantors entered into an agreement of reference with Bank to refer the dispute to the arbitration of Mr. Madan Gopal Malhotra. By the said reference, the parties agreed that the arbitrator was competent to go into the question of interest from the start of the accornt till payment and would also be competent to fix the instalments of the amount found due. It was also agreed that the arbitrator shall be competent to adjudicate and charge the amount due and make the same payable out of the properties, already mortgaged and also personally against the borrowing firm and the guarantors. The parties hereto know full well that Shri Madan Gopal Malhotra who is appointed sole arbitrator under this agreement is in the employ of the Bank and is working in the Bank as Legal Advisor. This reference was signed on behalf of the firm by all the partners excepting the present appellant and was signed by guarantors. Thereafter, the arbitrator on 15th June, 1968, gave his award and determined that the bank was entitled to recover the amount of Rs. 5,60,709. This reference was signed on behalf of the firm by all the partners excepting the present appellant and was signed by guarantors. Thereafter, the arbitrator on 15th June, 1968, gave his award and determined that the bank was entitled to recover the amount of Rs. 5,60,709. 40 with interest from 12th June, 1968 from the firm, its partners and guarantors severally and jointly. He, however, also gave the firm and the guarantors the option to pay instead the amount of Rupees 4,65,867. 30 in the following manner: 1. The sum of Rs. 4,65,867. 30 will be paid in 46 monthly instalments beginning from 1st July, 1968. 2. The said amount of Rs. 4,65,867. 30 will not carry interest if and as long as the instalments are regularly paid as above. 3. In case of default in any two instalments at any time (not necessarily consecutive) the Bank will be entitled to charge interest at the rate of 9% p. a. with monthly rests till realisation. In case the payments as above were made the claim of the bank shall stand satisfied, otherwise the Bank shall be entitled to recover the amount of Rupees 5,60,709. 40 with interest as charged and the concession given to the opposite side in the matter of interest will stand withdrawn and forfeited. ( 4 ) THE objections were filed to the award by the appellant. The same have been dismissed, and award has been made a Rule of the Court and a decree in terms of the award has been passed. Feeling dissatisfied Amarjit Kaur Kochbar has filed this appeal. ( 5 ) THE first contention canvassed by Mr. Arun Mohan, counsel for the appellant, is that the award could not bind the appellant because admittedly she was not a signatory to the agreement of reference to arbitration made by the other partners of the firm. It is not disputed that the reference to arbitration was made by the four partners (out of total of five) of the firm and that the appellant was not a signatory to the said reference. Section 19 (2) (a) of the Indian Partnership Act, 1932 provides that in the absence of any usage or custom of trade to the contrary, the implied authority of a partner does not empower him tc submit a dispute relating to the business of the firm to arbitration. Section 19 (2) (a) of the Indian Partnership Act, 1932 provides that in the absence of any usage or custom of trade to the contrary, the implied authority of a partner does not empower him tc submit a dispute relating to the business of the firm to arbitration. It is this aspect which Mr.-A"m- Mohan emphasises to urge that as the appellant was not a party to the reference she could not be held liable under the award given in pursuance of that reference. Now Section 196 of the Indian Contract Act, 1872 provides that where acts are done by one person on behalf of another, but without his knowledge or authority, he may elect to ratify or to disown such acts. If he ratifies them, the same effects will follow as if they had been performed by his authority. Section 197 of the said Act further provides that ratification may be express or may be implied in the conduct of the person on whose behalf the acts are done. Though, no doubt Section 19 (2) (a) does not empower a partner to submit any dispute relating to the business of the firm to arbitration on behalf of another partner, there is nothing in law which prevents a partner who was not a party to the reference to arbitration to ratify this act of reference and this ratification can be done either expressly or impliedly. Thus, if on facts it can be established that a partner though not a signatory to the reference to arbitration has by his or her conduct ratified the same, (he or) she would be as much bound by the award as the partners who had actually signed the reference: "where one of the partners refers a dispute to arbitration without the authority of other partners the reference is not illegal if the other partners ratify his act. Ratification need not be by any express act or declaration and might be implied from conduct. It might be inferred from mere acquiescence or silence or inaction on the part of such other partners. " (See AIR 1952 Punj 234) ( 6 ) MR. Arun Mohan referred to Firm Khetu Ram Bashamber Das v. Kashmiri Lal Rattan Lal, AIR 1959 Punj 617 (FB ). In our opinion, it is no way contrary to the position in law mentioned above and is clearly distinguishable. " (See AIR 1952 Punj 234) ( 6 ) MR. Arun Mohan referred to Firm Khetu Ram Bashamber Das v. Kashmiri Lal Rattan Lal, AIR 1959 Punj 617 (FB ). In our opinion, it is no way contrary to the position in law mentioned above and is clearly distinguishable. In that case what was held was that where a reference to arbitration is made in a suit pending in a court but the said reference is not signed by all the partners, the order of the court is without jurisdiction and consequently null and void, and a reference to the arbitrator and the award given by him in pursuance of such a reference is altogether invalid and that no subsequent act of the parties or rati- fication can possibly clothe the court with the jurisdiction retrospectively. It is, however, relevant to note that this very Full Bench accepted the correctness of the view expressed in, AIR 1952 Punj 234 when it observed: "however, if there is a reference to arbitration without the intervention of the court when no suit is pending, the matter isentirely different. In that case, no order of the Court is required and the question of lack of jurisdiction of the Court does not arise, In a case like that it will be a mere question of agreement between the parties and if a person acts on behalf of another in the hope that such a person will agree and ratify action, such a contract would become valid and binding as bet-ween the parties as soon as the party concerned ratines the act of his agent. " ( 7 ) IN the present case admittedly the [reference to arbitration was without the intervention of the Court. ( 8 ) ONE partner cannot, without special authority bind the firm by a submission to arbitration. The partner actually referring ihe dispute is, however, himself bound by the award, and the other partners may become bound by ratification (See Lindley on Partnership, Fourteenth Edition page 263 ). ( 9 ) THE learned Judge has found that the appellant had ratified the act of reference to arbitration. Mr. Arun Mohan contends that the learned single Judge could not give a finding that there had been ratification of the act of reference to arbitration by the appellant as the said matter was not examined by the arbitrator. We cannot agree. Mr. Arun Mohan contends that the learned single Judge could not give a finding that there had been ratification of the act of reference to arbitration by the appellant as the said matter was not examined by the arbitrator. We cannot agree. The arbitrator has held that the bank was entitled to claim and realise its dues in full "from the firm, its partners and guarantors severally and jointly. " The firm, it may be stated, consists of 5 partners including the appellant. The only basis on which the arbitrator could have held the firm and its partners jointly and severally liable to the full amount of Rs. 5,60,709. 40 due to the bank could be his finding and assumption that the appellant who was one of the partners of the firm had ratified the reference even though she was not originally a signatory. The award being a non-speaking one, no reasons were to be given; but the only conclusion possible from the finding is that it was consistent with a finding of ratification, by the appellant. finding by the arbitrator making the firm liable carried inevitably the finding of implied ratification by the appellant. This finding cannot be reappraised by us, because it being a non-speaking award, there is no scope for interference, as we do not find any error of law on the face of award. But as arguments were made in detail, we may mention that even on facts, this finding is amply supported by record. The registered A. D. notice was issued to the appellant on 9-5-1968 at her address 71, Sunder Nagar, New Delhi which was duly served on her. The recipient initialled it (and though it is not really known as to who received it) but it was not disputed that the address and the name of the appellants were correctly mentioned and that it was received at the address on which she was residing. Not only that, a copy of the notice was sent to her at the same address under postal certificate. The appellant, however, did not appear before the Arbitrator on llth June, the date fixed for hearing. Not only that, a copy of the notice was sent to her at the same address under postal certificate. The appellant, however, did not appear before the Arbitrator on llth June, the date fixed for hearing. Under Section 114 of the Indian Evidence Act: "the Court may presume the existence of any fact which it thinks likely to have happened, regard being had to the common course of natural events, human conduct and public and private business, in their relation to the facts of the particular case. "illustration (f) says the court may presume that common course of business has been followed in particular cases. Here the appellant sent a registered A. D. letter and a letter under postal certificate was sent at the address where she was living with her father, Jaswant Singh. Registered notices to Jaswant Singh were also sent at the same address. Jaswant Singh had appeared and endorsed the award that he accepted the same as correct. No grievance can now be made that Jaswant Singh was not served on the same address. There is no reason to hold that she could not have received the letters on the same address. There is nothing to suggest that the usual course of business was interrupted or disturbed. ( 10 ) ADMITTEDLY, there is a registered A. D. receipt which shows that letter was received at the address given. There is also a certificate of posting. Not only these raise a presumption that the letters were duly posted but there is also a presumption that the letters were duly received by the addressee (See Sm. Kanak Lata Ghose v. Amal Kumar Ghose, AIR 1970 Cal 328 ). It must, therefore be taken that notice was sent by the Arbitrator to the appellant which was received by her, but in spite of this she chose not to appear. It, therefore, cannot be said that the appellant was not aware of the arbitration proceedings. The relationship of the partners of the firm and the guarantors shows that they were all closely related. The interest of the partners and guarantors are totally in consonance with and are identical to that, of the appellant. What is most significant is that the appellant did not dare to appear before the Court in these proceedings to depose that she had not been served by the Arbitrator. The interest of the partners and guarantors are totally in consonance with and are identical to that, of the appellant. What is most significant is that the appellant did not dare to appear before the Court in these proceedings to depose that she had not been served by the Arbitrator. Her failure to do so leads to the only inference that the appellant could not dare to state on oath that she had not received a notice from the arbitrator, evidently because she had received the same. The presumption, therefore, that she was served by the arbitrator is unrebutted. Thus having? known that disputes between the from and the bank had been referred to arbitration she took no steps to repudiate the reference or indicate to the arbitrator that she was not ratifying the order of reference to arbitration made by other partners. It may be noted that the notices were sent to the appellant on 9th and 13th May, 1968 and would have been normally served in a couple of days. The award was not given till 15th June, 1968. Jaswant Singh read the award and accepted it under his endorsement dated l3th July, 1968. The application challenging the existence of the arbitration agreement and the award was only filed by the appellant on 30th July, 1968 in this Court. It is impossible to believe that when the father of the appellant had accepted the award under his endorsement as far as l3th July, 1968, the appellant who was living with her father and has not been shown to be independently running any business, was not aware of the arbitration agreement in pursuance of which the award was made. The conduct of the appellant in not having taken any steps to challenge the award for such a long time is a clear indication of her having accepted the award, though she may not have been signatory to the reference to the arbitration. Ratification need not be by any express act or declaration and may be implied from conduct, and that it has quite frequently been inferred from were acquiescence or silence or inaction on the part of the party concerned. (See AIR 1958 All 522 ). We are, thus, satisfied that the appellant by her conduct ratified the act ofother partners in making the reference to arbitration and, therefore, she is bound by the award. (See AIR 1958 All 522 ). We are, thus, satisfied that the appellant by her conduct ratified the act ofother partners in making the reference to arbitration and, therefore, she is bound by the award. ( 11 ) THE next objection taken by the counsel for the appellant was that the award required registration. Mr. Arun Mohan contended that as the arbitrator has stated in his award that the bank will be entitled in case of default in the stipulated manner, to realise and recover the entire amount by sale of the mortgaged property hypothecated with the bank and, therefore, the award required registration as the value of the mortgaged property is more than Rs. 100. 00. In our view the argument is without merit The award has only stated that certain amount is due and in terms of the agreement of reference, the amount due, if not paid, can be realised by sale of properties mortgaged which are already equitably mortgaged with the Bank. In fact, there was no dispute that there was any equitable mortgage. The reference to the equitable mortgage was only as a factual matter in that there was some other security available in case the bank was not paid the money in terms of the award. The award did not declare; as Mr. Arun Mohan contended, any right or interest in immovable property of one hundered rupees or upwards, in terms of Section 17 (1) of the Registration Act. The word declare in Section 17 has to be read ejusdem generis with the words create , assign or limit . Now the words create , assign or limit imply a definite change of legal relation to a property and the expression declare therefore must also import a similar meaning. The distinction as such between a mere recital of a fact and something which in itself creates title in the property must be borne in mind. In the present case, no rights in the immovable property are being declared by the award. The reference to equitable mortage was only a recital of fact. Award did not declare or create a mortgage of any immovable property. This plea, therefore, fails. ( 12 ) THE next contention of Mr. In the present case, no rights in the immovable property are being declared by the award. The reference to equitable mortage was only a recital of fact. Award did not declare or create a mortgage of any immovable property. This plea, therefore, fails. ( 12 ) THE next contention of Mr. Arun Mohan was that even if it be held that the appellant was liable as a partner of the firm, to the extent of her assets in the firm her personal assets apart from her assets in the firm could not be proceeded against for realisation of the decretal amount because the arbitrator had stated in the award that "as Mohinder Kaur has not signed the agreement of reference, the award is not applicable and binding on her. " Now Order XXI, Rule 50 Civil P. C. provides that where a decree has been passed against a firm execution may be granted against any property of , the partnership and also against any person who has been individually served as a partner and has failed to appear. Thus, if there is a decree against _ a partnership (as in the present case) not only the partnership property is available for execution but that the execution can be proceeded against any partner individually and against his individual assets. The arbitrator has held that the bank was entitled to claim and realise its dues in full from the firm and its partners. This will normally include the appellant, as one of the partners and her liability will, therefore, extend to both her assets in the partnership and also her separate individual assets and properties. But then the arbitrator has said in the award that as she had not signed the agreement the award is not binding on her. Though this conclusion may apparently seem to be in conflict with the earlier conclusion of the arbitrator that the bank was entitled to realise its dues from the firm and its partners (which necessarily includes the appellant), the conflict is more apparent than real. We need not stop to consider what would have been the result had the bank filed an appeal and objected to this part of the award, as in fact the bank has not objected this part of the award, therefore has to be accepted. We need not stop to consider what would have been the result had the bank filed an appeal and objected to this part of the award, as in fact the bank has not objected this part of the award, therefore has to be accepted. According to us the correct meaning of these two findings is that though the bank is entitled to claim its dues from the firm and its partners still so far as the appellant is concerned she would be liable only to the extent of her share in the firm property unlike other partners who are liable to satisfy the bank dues not only out of their share in the partnership firm but also out of their individual properties. ( 13 ) THE arbitrator had directed that a sum of Rs. 4,65,867. 30 should be paid in 46 equal monthly instalments beginning from 1st July, 1868. This amount was not to. carry any interest if and as long as the instalments were paid regularly. In case of default of any two instalments, the bank was to be entitled to charge interest @ 9% per annum with monthly rest till realistion. This part of the award has been unheld by the learned single Judge. Mr. Arun Mohan has stated that no instalments as directed by the arbitrator have been paid. The result obviously would be that interest has to be paid on Rs. 5. 60. 709. 40 the amount which had been found by the arbitrator to be due from the firm. its partners and guarantors. No legal objection to the direction to pay interest @ 9% p. m. with monthly rest on this amount of Rs. 5,60,709. 40 P is available. Mr. Arun Mohan then sought to urge was that as Section 34 of the Civil P. C. (unamended) provided for payment of interest @ 6% p. a. the same rate should have been fixed here. Now Section 34 of the Civil P. C. is not applicable in arbitration proceedings. Admittedly Section 34, Civil P. C. is not applicable to the arbitration matter and, therefore, the limitation of Section 34, Civil P. C. cannot be read into it. Now Section 34 of the Civil P. C. is not applicable in arbitration proceedings. Admittedly Section 34, Civil P. C. is not applicable to the arbitration matter and, therefore, the limitation of Section 34, Civil P. C. cannot be read into it. Moreover, it should not be forgotten that this was a loan from the bank in the normal course of commercial transactions and even the rate agreed upon was between 8 to 10% p. a. In that view the arbitrator has treated the respondent leniently by fixing the rate @ 9% p. a. We cannot say that this discretion was exercised on any arbitrary or whimsical ground and, therefore, there is no scope tor interference. ( 14 ) THE next objection was that the arbitrator had directed the payment of the interest till realisation which was beyond his power. It is correct that the arbitrator has authority only to grant interest from the date of award to the date of decree (See AIR 1967 SC 1032 ) and, therefore, the direction in the award to pay interest till the date of realisation was technically beyond his power. The same would, therefore, have been normally severed by us. But as practical measure it is not necessary to do so because the learned single Judge has made the award rule of the Court and Section 29 of the Act provides that in so far as an award is for the payment of money the Court may in the decree order interest from the date of the decree at such rate as the Court deems reasonable to be paid on the principal sum as adjudged by the award and confirmed by the decree. Thus the Court could grant interest on the amount of Rs. 5,60,709. 43 (the printed amount) from the date of the decree that is 7-11-74 to the date of realisation. Thus the direction to pay the interest on the principal sum from the date of the decree onwards is legal as the Court has put imprint on this direction, and it will be treated to its direction, we, would therefore, clarify and direct that so far as payment of interest is concerned, it will be as follows: (A) from 1261968 to the date of decree i. e. 7-11-1974 interest will be paid on Rs. 5,60,709. 40, (b) on the principal amount of Rs. 5,60,709. 5,60,709. 40, (b) on the principal amount of Rs. 5,60,709. 40, interest at 9% will be paid from the date of decree i. e. 7-11-1974 till the realisation. ( 15 ) EXCEPTING the modification with regard to personal liability of the appellant and with regard to payment of interest as indicated above, the appeal stands dismissed. There will be no order as to costs in this appeal.