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Rajasthan High Court · body

2017 DIGILAW 2120 (RAJ)

Sushil Choudhary v. Shyam Lal Choudhary

2017-10-03

ARUN BHANSALI

body2017
JUDGMENT Arun Bhansali, J. - 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. 2. 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. 3. The claim was contested by the appellant on several grounds. Preliminary objections were raised, which were rejected by the arbitrator, where-after 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 along-with 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. 4. 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:- 5. 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. 6. Feeling aggrieved, the appellant filed application under Section 34 of the Act. Alongwith the application, certain documents were also filed. 7. 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. 8. 7,416/-towards telephone charges. 6. Feeling aggrieved, the appellant filed application under Section 34 of the Act. Alongwith the application, certain documents were also filed. 7. 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. 8. 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. Where-after, 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. 9. Further submissions were made that once the arbitrator passed the award based on documents, which were not in contemplation at all, the appellant along-with 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. 10. 10. 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. 11. 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. 12. Reliance was placed on Manohar Lal (D) by LRs. vs. Ugrasen (D) by LRs. & Ors., AIR 2010 SC 22l0; Arjun Singh vs. Mohindra Kumar & Ors., AIR 1964 SC 993 ; Rajasthan Financial Corporation vs. Pukhraj Jain & Ors., AIR 2001 Rajasthan 71 ; Oil & Natural Gas Corporation Ltd. vs. Western Geco International Ltd., 2014 AIR SCW 5727; ONGC Ltd. vs. Garware Shipping Corporation Ltd., 2007 AIR SCW 7274; Venture Global Engineering vs. Satyam Computer Services Ltd. & Anr., 2010 AIR SCW 5027; P. Radhakrishna Murthy vs. M/s. NBCC Ltd., 2013 AIR SCW 1515 and C. Leo Machodo vs. Commissioner of Income-tax, (1988) 172 ITR 744 (MAD.). 13. 13. 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. 14. 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. 15. Reliance was placed on Kulathu Iyer Harihara Sivaramakrishna Iyer vs. Annaswamy, AIR 1951 Travancore-Cochin 192 and Indian Council for Enviro-Legal Action vs. Union of India & Ors., (2011) 8 SCC 161 . 16. 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. 17. Despite service, no one appeared on behalf of the of the respondent No. 2. 18. 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. 19. 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. 19. 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. 20. 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. 21. 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. 22. There is no dispute that the proceedings continued before the arbitrator, wherein voluminous material was produced and oral evidence was recorded, wherein crossexamination of the parties went into several hundred pages. 21. 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. 22. There is no dispute that the proceedings continued before the arbitrator, wherein voluminous material was produced and oral evidence was recorded, wherein crossexamination of the parties went into several hundred pages. Where-after, 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 along-with 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. 23. 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:- 24. 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:- 25. 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. 26. 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. 27. 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. 27. 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 13, 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. 28. 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. 29. 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. 30. 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. 31. The reliefs, which were claimed in the claim petition filed before the arbitrator reads as under:- 32. 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. 33. 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. 33. 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. 34. 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. 35. 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. 36. No other ground was raised/pressed by the appellant qua the reliefs 4 & 5 granted by the learned arbitrator. 37. 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. 38. 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. 39. Looking to the nature of the case, there shall be no order as to costs in this appeal. Appeal Partly Allowed.