Jiwan Kumar Lohia v. Durga Dutta Lohia — 1987 DIGILAW 45 (CAL)

JUDGMENT This is an application under sections 5, 11 and 12 of the Arbitration Act praying for removal of the sole arbitrator and revocation of his authority and/or appointment of another arbitrator in his place and stead. 2. The parties to the proceeding have vast properties and businesses which consist of a number of private limited companies and partnership firms etc. Differences and disputes arose amongst the two groups the petitioners on the one hand and the respondents on the other regarding the control and management of the aforesaid properties and businesses. Several suits were filed by the parties and-ultimately the parties entered into an arbitration agreement on 4th November, 1976 for resolving their disputes by arbitration of four named arbitrators. The agreement contained clause (e) :– "The Arbitrators shall proceed summarily and will admit or reject evidence which they in their absolute discretion shall deem fit and proper." The named arbitrators held 15 sittings but could not make the award. The petitioner No. 2 herein, Rabindra Kumar Lohia, took out an application being Matter No. 662 of 1979 for removal of the named arbitrators and for appointment of a new one. By an order dated 12.9.80, the four named arbitrators were removed and the present arbitrator was appointed. The new arbitrator entered upon the reference and proceeded with the arbitration. After 108 sittings were held, Rabindra Kumar took out an application on 7th November, 1983, being Matter No. 1650 of 1983, for removal of the arbitrator on various allegations. This application was dismissed by me by my order dated 15.2.85. The petitioner moved the Supreme Court but his special leave petition was also dismissed on 2.5.85. Thereafter, the arbitration proceeding again continued. On 4th October, 1985 the present and 3rd application was taken out by the petitioners for removal of the arbitrator on several grounds. It must be recorded here that the petitioners are not entitled to re-agitate the grounds taken in the application dated 7.11.83 for removal of the arbitrator which was dismissed on 15.2.85. 3. The new grounds agitated in the present application and pressed during the hearing are as follows :– 1. The arbitrator is unable to control the arbitration proceedings. 2. The arbitrator is deliberately dragging on the proceeding. 3. The arbitrator is not taking advantage of the summary power given to him under clause (e) of the arbitration agreement. 4. 3. The new grounds agitated in the present application and pressed during the hearing are as follows :– 1. The arbitrator is unable to control the arbitration proceedings. 2. The arbitrator is deliberately dragging on the proceeding. 3. The arbitrator is not taking advantage of the summary power given to him under clause (e) of the arbitration agreement. 4. The arbitrator refused to express his desire under section 43(1) of the Arbitration Act to enable the petitioners to produce the documents before him under sub-poena. The shows lack of bonafides au the part of the arbitrator. Long and elaborate submissions were made on behalf of all the parties by their respective eminent counsel and as such the matter continued before me for a number of days. Several authorities were cited in support of their respective contentions. The scope of the application is, however, very short. By this application the petitioners are, in fact, censoring the conduct of the arbitrator. Before the dismissal of the first application on 15.285 and the dismissal of the petitioner's special leave petition by the Supreme Court on 2.5.85, the arbitrator had held 108 sittings but no witness had been examined. What had happened on those 108 sittings had been deal with in my judgment dated 15.2.85. So that chapter is closed. 4. The arbitrator held 109th sittings in which, on behalf of Durga Dutta, it was submitted that the hearing should be taken up with utmost expedition and, if necessary, from day to day. But to what extent this submission or the request or the warning to the arbitrator was complied with or observed by the parties themselves, including Durga Dutta himself, is worth noticing. The petitioner, Rabindra Kumar Lohia's examination-in-chief started from 111th sittings. On 112th sittings, at the suggestion of the counsel appearing for Durga Dutta Lohia, formal proof of many of the documents was dispensed with. The evidence of Rabindra Kumar Lahia took from 111 to 122 sittings. The petitioner, Rabindra Kumar Lohia's examination-in-chief started from 111th sittings. On 112th sittings, at the suggestion of the counsel appearing for Durga Dutta Lohia, formal proof of many of the documents was dispensed with. The evidence of Rabindra Kumar Lahia took from 111 to 122 sittings. The progress of the oral evidence of Rabindra Kumar during this period was unnecessarily slow as well be evident from the chart set out below :– Number of meeting Date Total questions put 111 15.5.85 35 112 30.5.85 No question 113 31.5.85 6 questions 114 1.6.85 No question 115 7.6.85 32 116 8.6.85 17 117 20.6.85 47 118 22.6.85 No question 119 26.6.85 No examination due to illness of Rabindra 120 18.7.85 58 121 19.7.85 No sitting due to illness of Rabindra 122 24.7.85 12 Hence in 10 sittings, total 207 questions were put because the rest of the time was consumed in arguing about the admissibility of the documents objected to by the other side at the time of tendering the same. On an average, about 20 questions per sitting could be asked. The parties did not allow the questions or the documents to go in subject to objection and instead insisted the arbitrator to decide about their admissibility then and there. It is interesting to note that elaborate submissions made by the parties regarding the admissibility of the documents were allowed by the arbitrator also. The matter proceeded in this manner inspite of the understanding arrived at by the parties and the arbitrator at 109th sitting that the hearing should be taken up with utmost expedition and inspite of section 1 of the Indian Evidence Act, clearly prohibiting application of its provisions to the arbitration proceedings as will be evident from the words "nor to proceedings before an arbitrator". I am sure that the counsel for respective parties as well as the arbitrator were all aware of the aforesaid provisions of the Indian Evidence Act. Even then the hearing was prolonged for deciding the question of admissibility of the documents strictly in terms of the Evidence Act. It is well-settled law that in conducting the arbitration proceeding, the arbitrator has to follow the principle of natural justice and to give full opportunity to the parties. Even then the hearing was prolonged for deciding the question of admissibility of the documents strictly in terms of the Evidence Act. It is well-settled law that in conducting the arbitration proceeding, the arbitrator has to follow the principle of natural justice and to give full opportunity to the parties. In my opinion, the counsel for the respective parties as well as the arbitrator should not have dragged on the proceeding in this manner and I strongly disapprove of the same. The blame for dragging on the matter, therefore, must be equally shared by the parties as well as by the arbitrator himself. Therefore, the arbitrator alone cannot be criticised for dragging on the arbitration proceeding. 5. While Rabindra Kumar Lohia's examination was continuing, the respondent Jiwan Kumar Lohia made an application for transposing him as the petitioner. The said application was heard on 1.8.85 and the application was allowed. Jiwan Kumar's evidence started from 123rd sitting held on 1.8.85 and only 28 questions could be put on that date. Altogether 9 sittings were held from 123rd to 131st sittings but the total questions put to Jiwan Kumar were 285 because of obstruction, objection and argument on admissibility which followed as before. It is argued before me that objections had to be taken during evidence as otherwise the parties objecting should be estopped from raising the question of admissibility afterwards. Mr. Tibrewal appearing for the respondent No. 19, Pradip Kumar Lohia, relied on the following authorities on this point : 1. AIR 1955 SC 468 para 11 2. AIR 1973 SC 1338 paras 8 and 11 3. AIR 1972 SC 330 para 14 In (1) Thowardas Pherumal v. Union of India, AIR 1955 SC 468 . It was held that an award based on inadmissible evidence is liable to be challenged. It did not deal with the principles of waiver or estopped. In (2) M/s. Kapoor Nelokhari Co-operative Dairy's Case, AIR 1973 SC 1338 the Supreme Court, relying on Russel on Arbitration, 17th Edn. Page 182, held that objection regarding admissibility of evidence in arbitration proceeding must be taken in time otherwise the party would be estopped from challenging the same later on. With great respect, I must point out that Russel was dealing with English Arbitration Act which is governed by English Law of evidence whereas in India, the evidence Act does not apply to arbitration proceedings. With great respect, I must point out that Russel was dealing with English Arbitration Act which is governed by English Law of evidence whereas in India, the evidence Act does not apply to arbitration proceedings. This point of distinction was overlooked in this case. In (3) M/s. Barully Electricity Supply Co.'s Case, AIR 1972 SC 330 , it was held that principle of natural Justice does not mean that where an issue is seriously contested, it can be established without following the requirements relating to proof. Documents must be proved by calling its writer who must be subjected to cross-examination by the other side. In my opinion, the parties could have protected their rights to raise the question of inadmissibility of evidence later on by taking timely objection only and recording the same. Elaborate arguments on question of admissibility was not necessary as had been done in this case. There could be no waiver or estopped, if these objections were recorded. In my opinion, the parties have lost their right to take objection later on by obtaining the decision of the Arbitrator on admissibility which is binding on them. 6. Mr. Kapoor appearing for the petitioners submitted that the arbitrator had failed to take advantage of the summary power given to him by the agreement. It should be noted that when the present arbitrator entered upon the reference, none of the parties had drawn his attention to the clause (e) of the agreement nor insisted that proceeding must be conducted summarily. It is only on 7.10.82, at the 75th sitting, Jiwan Kumar Lohia, for the first time, asked the arbitrator to exercise summary power. The clause (e) of the agreement does not indicate what parties had really intended by summary power as the provisions Indicated arbitrary power. Summary power cannot be exercised arbitrarily and at 75th meeting Mr. Tibrewal suggested : " 'Arbitrator shall proceed summarily' is a vague expression and as such before the arbitrator would proceed any further, the procedure to be followed under summary power of the Arbitrator must be clearly pointed out by Jiwan Kumar Lohia so that every one including the arbitrator know in what manner the hearing of the reference to be continued". 7. The counsel for Jiwan Kumar Lohia did not explain what was meant by summary power and in what manner it was to be exercised by the arbitrator. 7. The counsel for Jiwan Kumar Lohia did not explain what was meant by summary power and in what manner it was to be exercised by the arbitrator. None of the parties explained the same and there was complete non co-operation. On behalf of Jiwan Kumar, exercise of summary power was suggested for quick disposal of 100 issues which had been framed in this matter. Jiwan Kumar had serious grievances against so many issues. But Jiwan Kumar himself was present when 100 issues were framed. After being partially responsible for framing 100 issues, all on a sudden, Jiwan Kumar became alert that the matter must be disposed off quickly by exercising summary power. There is no explanation why this summary power was not insisted upon at the beginning of the reference by the parties when the present arbitrator, entered upon the reference and started the proceeding. Moreover, all this happened before 15.2.85. I do not think that the petitioner is entitled to re-agitate this point in the present application. The period covered by the present application started on and from 3.5.85 (109th sitting). The question of summary power was agitated at the 75th sitting, which is now a closed chapter, being the subject-matter of the first application for removal of the arbitrator dismissed by me on 15.2.85. This dispose of the 2nd and 3rd grounds taken by the petitioner. 8. The other two grounds taken by the petitioners are that the arbitrator is unable to control the matter and that he should have expressed his desire to examine the documents under section 43(1) of the Arbitration Act, and his refusal to do so establishes lack of bonafides on the part of the Arbitrator. These two points have to be considered very carefully and seriously. The petitioners had caused a sub-poena to be issued on 13.9.85 on one Biswanath Ghosh, the accountant of Maud Tea & Seed Co. of 13B, Biplabi Rashbehari Bose Road, for production of 1) Minute Books for annual general meetings and Directors' meeting from 1940 upto date. 2) Register of members. 3) All transfer deeds from 1940 to upto date regarding the purchases made in the names of Senairam Doongarmall, Durga Dutta Lohia, J. S. Lohia, Harikissen Lohia and R. G. Lohia. of 13B, Biplabi Rashbehari Bose Road, for production of 1) Minute Books for annual general meetings and Directors' meeting from 1940 upto date. 2) Register of members. 3) All transfer deeds from 1940 to upto date regarding the purchases made in the names of Senairam Doongarmall, Durga Dutta Lohia, J. S. Lohia, Harikissen Lohia and R. G. Lohia. This sub-poena was served on the person concerned on 18.9.85 at 12.30 p.m. for production of these documents before the arbitrator at 5.30 p.m. on the very same day. At about 3-45 p.m. on 18.9.85. Mr. Gupta, who was appearing before the arbitrator on behalf of the respondent Nos. 3 and 4, mentioned this matter to me in Court and submitted that the said sub-poena had been issued in violation of the provision in section 43(1), of the Arbitration Act which is as follows :– "The Court shall issue the same process to the parties and witness whom the arbitrator or unpire desires to examine as the Court may issue in suits before it." Mr. Gupta, submitted before me that he was mentioning that matter without notice to the other parties and contended that this sub-poena could not have been issued unless the arbitrator had expressed his desire to examine those documents. He also submitted that he was compelled to mention the matter ex parte as he came to know about the sub-poena just before mentioning this matter. There was no time to give notice to the other side as under the sub-poena, documents were to be produced at 5.30 on that very same day. Under the circumstances, I stayed the operation of the sub-poena. Once I passed the order for stay, certainly the arbitrator was not the competent authority to Judge whether my order was right or wrong. Still elaborate arguments were made before him by all the parties regarding court's power to issue sub-poena and the parties right to have the sub-poena issued under Order 16, Rule 1 of C.P.C., independency of the provisions of section 43(1) of the Act. It was also contended by the petitioners' counsel that the sub-poena dated 13.9.85 was perfectly valid and enforciable. On the other hand, submissions were made on behalf of the respondents that court's power to issue sub-poena in connection with an arbitration proceeding is restricted by the provisions of section 43(1) of the Arbitration Act. It was also contended by the petitioners' counsel that the sub-poena dated 13.9.85 was perfectly valid and enforciable. On the other hand, submissions were made on behalf of the respondents that court's power to issue sub-poena in connection with an arbitration proceeding is restricted by the provisions of section 43(1) of the Arbitration Act. I fail to understand with what motive and object, long arguments were made by the parties and entertained by the arbitrator on this point. Did the parties want to have arbitrator's decision regarding the validity or invalidity of my order dated 18.9.85 ? If the arbitrator would have held that court's power to issue sub-poena in respect of arbitration proceedings was independent and was unrestricted by section 43(1) of the Arbitration Act, he would have virtually decided that my order dated 18.9.85 was wrong. If he would have held that court's power was restricted by the provisions of section 43(1) of the Arbitration Act, in that case it would be confirming the correctness of my order. Could he sit on appeal over my order? The net result was, that the Arbitrator, although he allowed this useless arguments to be made before him for three days, he did not give any decision as he could not give any. If the parties intended to have a decision on this point, the petitioner should have mentioned the matter before me for vacating my order dated 18.9.85 and I, after hearing their arguments, either would have refused to recall my order or would have vacated the same. But that course was not taken. It was also argued before the arbitrator that the provisions of section 43(1) of the Act only applies if the arbitrator suo motu wants to mine any document or any witness. But even on this point, the arbitrator did not give any decision expressly. On the contrary, reading his order recorded in the minutes dated 21.9.85 it would be clear that the arbitrator had rejected that contention by implication. 9. While the present application was heard by me, all these aforesaid contentions were again raised by the parties and cases were cited on this point and the provisions of section 43(1) of the Arbitration Act, and its effect an Order 16, Rule 1 of C. P. C. were trend to be explained by the parties. 9. While the present application was heard by me, all these aforesaid contentions were again raised by the parties and cases were cited on this point and the provisions of section 43(1) of the Arbitration Act, and its effect an Order 16, Rule 1 of C. P. C. were trend to be explained by the parties. But in this application, I have not been called upon to decide that question. In my opinion these contentions, raised at this stage are all irrelevant and redundant as decision on this point is not necessary to dispose of this application. Hence I refrain from dealing with the cases cited on this point by the parties. The short point to be decided in this application is, that when the arbitrator had rejected the contention raised before him by the respondents that section 43(1) would only apply when the arbitrator would like to see the documents or examine witnesses suo motu, and not at the instance of any party to the proceeding whether he should have expressed his desire under section 43(1) of the Act or not. For deciding this, it would be necessary to carefully go through the relevant minutes of the sittings before the Arbitrator. At the meeting held on 18.9.85 the petitioners' counsel submitted before the arbitrator : "I am drawing your attention to section 43 and I am submitting that in terms of my requirements which I have mentioned in the sub-poena, you will indicate in today's minutes you desire that these documents should be produced as indicated in this sub-poena." He further submitted :– "The book I am asking for production of will support two aspects of the matter which I want to prove before you. Firstly, they will establish all the circumstances relating to acquisition and transfer of the share-holdings in Maud by the joint family Senairam Doongarmall. For this purpose items (b) and (c) in the sub-poena are very important....... Firstly, they will establish all the circumstances relating to acquisition and transfer of the share-holdings in Maud by the joint family Senairam Doongarmall. For this purpose items (b) and (c) in the sub-poena are very important....... So far as the management of the affairs and business of Maud are concerned if will be proved by item (a) which are the minute books mentioned in the sub-poena................The minute books will show the extent of the control over the business and affairs of Maud by the joint family Senairam Doongarmall and its members." Therefore, the counsel for the petitioners clearly invited the attention of the arbitrator that these books would throw much light on the controversy between the two groups before him and were important evidences. On behalf of the respondents', objections were raised on the following grounds :– 1. Arbitrator cannot express his desire on the oral application. A written application has to be made which would be contested by the parties and after hearing the parties, the arbitrator will decide whether to express his desire or not. 2. There are alternative modes of production of documents. The petitioners can obtain certified copies from the Registrar of Joint Stock Companies or can obtain certified copies from the company itself as the petitioners are shareholders of Maud. On behalf of the respondents, sections 159, 161 read with Part I of Schedule V of the Companies Act, as also provisions of section, 192, 303(2), 610(3), 610(b) of the Companies Act were pointed out. 3. It was also contended that if this alternative mode of production could be taken by the petitioners then there would be no question of the arbitrator expressing his desire under section 43(1) of the Act. After hearing the parties the arbitrator directed on 21.9.85 :– "I have carefully considered the elaborate arguments advanced by the learned counsel of both sides. I find that there are ample provisions in the Companies Act to get certified copies of the documents required by the claimants and which are also admissible in evidence under the said Act. In view above, I find no reason to express my desire under section 43(1) of the Arbitration Act, for the purpose of issuing summons by the Court. The claimant should apply to the company or Registrar of Joint Stock Companies for getting certified copies of the documents, if advised. In view above, I find no reason to express my desire under section 43(1) of the Arbitration Act, for the purpose of issuing summons by the Court. The claimant should apply to the company or Registrar of Joint Stock Companies for getting certified copies of the documents, if advised. If they fail, in that case, I might consider the matter upon proper materials." On proper construction of his order, set out above, it clearly appears : (a) The Arbitrator wanted to have production of the documents. (b) But he restricted the petitioners to a particular mode of production by obtaining certified copies from the Registrar of Joint Stock Companies or the company itself. (c) He reserved his right to express his desire only if petitioners would fail to give production by following the mode prescribed by the arbitrator. He will not express his desire otherwise. (d) For expressing his desire, at the instance of the petitioners, there must be proper materials before him. Therefore his view was that section 43(1) was not enacted for arbitrator's desire to examine documents on witnesses suo motu. An arbitrator can express his desire under section 43(1) at the instance of a party to the proceedings. 3. The arbitrator had entertained the oral application of the petitioners for production of those documents thereby he rejected the respondents' contention that a written application would be necessary for the same. 10. When the arbitrator entertained the oral application of the petitioners for production of documents and impliedly held that on proper materials, an arbitrator can express his desire to examine documents at the instance of a party to the proceeding under section 43(1) of the Act, then what prevented him from doing so in this case ? In that case, the petitioners could have produced the documents within a very short time. What prompted the Arbitrator to direct the petitioners to take resort to the provisions of the Indian Companies Act for obtaining the certified copies when the Arbitration Act itself contains an express provision for production of documents under sub-poena? What other materials will be necessary for expressing his desire excepting that the documents will help the petitioners to prove their case and that they would be produced from the proper custody ? What according to the arbitrator would be "proper materials"? What other materials will be necessary for expressing his desire excepting that the documents will help the petitioners to prove their case and that they would be produced from the proper custody ? What according to the arbitrator would be "proper materials"? Considering the fact, that the matter had already been heard for 135 days but with very little progress in my opinion, the arbitrator ought to have expressed his desire under section 43(1) of the Act which is the quickest possible method for production of documents from the possession of a third party before the Arbitrator. The direction given by the arbitrator on 21.9.85, without giving any reason for the same, establishes the allegations of the petitioners that he is unable to control the parties to the proceedings. His direction was intended to appease both the parties. This establishes that the arbitrator is unable to take firm steps for speedy disposal of the matter and has become responsible for prolonging the matter. In my opinion, this application would not have been taken out at all but for his refusal to express his 'desire' in spite of the clear and express provisions under section 43(1) of the arbitration Act itself. This also proves non-application of the mind by the Arbitrator. The matter cannot be allowed to go on in the manner. In my opinion, the Arbitrator, by refusing to express his 'desire' has failed to exercise his power conferred on him under section 43(1) of the Act, to assist the party to produce documents which was urgently needed in this case for speedy disposal of the matter. The main purpose and object of the Arbitration Act is to have speedy disposal of the proceedings. Unfortunately he has failed to appreciate the same and by following this appeasement policy, he has failed to do justice to this case as a result the matter is being dragged on indefinitely. In this case, Arbitrator alone is responsible for this delay. Therefore, I am constrained to hold with heavy heart that, it is a fit case, where the present Arbitrator should be removed and his authority should be revoked. In his place and stead, I appoint Mr. Anil Kumar Sen, a retired Chief Justice of this Court, as the sole arbitrator. In this case, Arbitrator alone is responsible for this delay. Therefore, I am constrained to hold with heavy heart that, it is a fit case, where the present Arbitrator should be removed and his authority should be revoked. In his place and stead, I appoint Mr. Anil Kumar Sen, a retired Chief Justice of this Court, as the sole arbitrator. He is to enter upon the reference within a fortnight from the date of receipt of the signed copy of the minutes of this order and to take up the matter from the stage left by the outgoing arbitrator. I am quite aware of the fact that immense difficulties wm have to be faced by the incoming arbitrator in taking up the matter after 135 days of hearing. But I have every hope that he will be able to handle the matter firmly and keep the parties under control and will complete the hearing within a reasonable time. If the parties want to enforce the agreement of summary power as contained in Clause (e) of the agreement, they will be entitled to do so but the manner in which the summary power has to be exercised by the arbitrator must be decided at the meeting of the arbitrator before hearing of the case starts. The outgoing arbitrator is directed to hand over the records of the proceeding to the incoming arbitrator within a week from the date of receipt of the signed copy of the minutes of this order. The parties to the proceedings are directed to assist both the outgoing and the incoming arbitrators in this respect. The remuneration of the incoming Arbitrator is fixed at 60 Gms. per each effective sitting irrespective of hours. He will be entitled to appoint a Stenographer, an interpreter, if necessary, and a clerk and their remunerations are to be fixed at the meeting of the arbitrator. All these remunerations are to be paid in equal shares by both the groups to the proceedings. In view of the fact that the new arbitrator has to take up the matter after a long hearing, the petitioners are directed to serve a certified copy of this judgment on the incoming Arbitrator within a month from date to enable him to know the history of the case and the scope of the reference as well as the previous conduct of the parties. The incoming arbitrator will make and publish the award within 8 months from the date of entering upon the reference. The cost of this application will be cost in the arbitration proceeding. Signed copies of the minutes of this order have to be served on the incoming and outgoing arbitrators within 15 days from date. In default the order will stand vacated. All parties and the incoming and the outgoing Arbitrators are to act on the signed copy of the minutes of this order.