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2023 DIGILAW 707 (JK)

Mohammad Yousuf Bhat v. Haji Abdul Ahad Bhat

2023-12-08

SANJAY DHAR

body2023
JUDGMENT : 1. The present appeal under Section 37 the Arbitration and Conciliation Act, 1996, is directed against judgment dated 16.04.2022 passed by the learned Additional District Judge (Bank Cases), Srinagar, whereby petition filed by the respondents under Section 34 of the Arbitration and Conciliation Act for setting aside award dated 14.11.2019 passed by the Arbitral Tribunal, has been allowed and the Arbitration award has been set aside. 2. Briefly stated, the facts emerging from the record of the case are that the appellant had filed a petition seeking appointment of an Arbitrator before this Court and vide order dated 04.11.2013, the petition was allowed and Shri Rashid Ahmad Lone, retired District & Sessions Judge, was appointed as Arbitrator to arbitrate between the appellant and the respondents relating to the disputes involved in the petition and to file the award within three months. 3. Pursuant to the aforesaid order passed by this Court, the learned Arbitrator entered into reference and thereafter proceeded to pass the award dated 04.11.2019, which came to be challenged by the respondents by filing a petition under Section 34 of the Arbitration and Conciliation Act before the learned Additional District Judge (Bank Cases), Srinagar, who, vide the impugned judgment, held that the award of the Arbitral Tribunal is patently illegal and against the public policy of India law, inasmuch as the learned Arbitrator has left the main disputes between the parties unsettled. Accordingly, the Arbitration award has been set aside. 4. The appellant has challenged the impugned judgment passed by the learned Additional District Judge (Bank Cases), Srinagar, on the grounds that it was not open to the court below to interfere in the reasoned award as the scope of interference in such an award is very limited. It has been further contended that the award passed by the learned Tribunal is speaking and well-reasoned, as such, there was no scope of interference by the court below. It has also been contended that the learned Arbitrator has settled all the issues between the parties and has asked them to appoint some Chartered Accountant and valuer to resolve the issues and that the same does not mean that he has not settled the issues. 5. I have heard learned counsel for the parties and perused the record of the case. 6. 5. I have heard learned counsel for the parties and perused the record of the case. 6. Before proceeding to decide the merits of this appeal, it would be apt to refer to the background facts which led to the filing of this appeal. 7. As already stated, the Arbitrator was appointed at the instance of the appellant who filed a petition under Section 11 of the Arbitration and Conciliation Act seeking appointment of the Arbitrator before this Court. After appointment of the Arbitrator, the parties filed their pleadings before the learned Arbitrator, who, after going through the pleadings, identified the following issues:- Issues raised by appellant :- 1. That the parties are joint owners in possession of different immovable properties comprising land and houses at different places. 2. That the land measuring 90 Kanals and 14 ½ Marlas situated at Khurhama, Ganderbal after compromise made in between the parties was divided in three equal shares in between them by Munsiff, Ganderbal through competent revenue authorities after leaving 14 ft. wide common road from one side of the land. 3. That land measuring 59 Kanals & ½ Marlas comprised under various Khasra Nos. along with three residential houses need to be partitioned by metes and bonds. 4. That the flat at Nizam-ud-din, New Delhi is in exclusive ownership and possession of the petitioner. 5. That the parties are running partnership trade and business as exports of Handicrafts & shawls under the name and style of Bhat Shawls and Pashmina Cottage Industry with Head Office at 2nd Floor, Haza Commercial Complex, Residency Road, Srinagar. The respondents are not rendering the accounts of the firm and as such are bent upon to tamper the accounts. Issues raised by the respondents:- 1. That the petitioner has suppressed material facts and raised bogus claims. 2. That the whole property is self-acquired of the respondents and has been acquired by them through their own earnings when the petitioner was just a minor who has been given education rare and care and fatherly affection. The petitioner is taking the benefit of their illiteracy and as such involves them in bogus litigation to cause them harassment. 3. That there has been never any verbal partition and the petitioner is trying to claim the property which never belongs to him. 4. That the petitioner has misappropriated 14 Kanals of land situated at Gasu, Tehsil and District Srinagar. 5. 3. That there has been never any verbal partition and the petitioner is trying to claim the property which never belongs to him. 4. That the petitioner has misappropriated 14 Kanals of land situated at Gasu, Tehsil and District Srinagar. 5. That the flat at Delhi is in possession of the respondents. However, the petitioner has manipulated the documents in some anonymous name. 6. Petitioner has illegally and unlawfully taken the possession of old ancestral house despite their objection. The petitioner has demolished the house which is yet unaccounted for. 7. That the petitioner has damaged the reputation of their business and has caused loss of Rs 50.00 lakhs to them. 8. After the parties led their evidence, the learned Arbitrator recorded his findings on the issues raised by the parties, which are summarized as under: (A) Findings on the issues raised by the appellant: (I) Issue No.1: All the properties which have been described in the claim petition including the flat at Delhi are joint properties of the parties. 8. After the parties led their evidence, the learned Arbitrator recorded his findings on the issues raised by the parties, which are summarized as under: (A) Findings on the issues raised by the appellant: (I) Issue No.1: All the properties which have been described in the claim petition including the flat at Delhi are joint properties of the parties. All these properties have been acquired by the parties during the subsistence of their partnership business and, as such, the same are joint properties which are required to be partitioned; (II) Issue No.2: Land measuring 90 kanals 14½ marlas situated at Khurhama Ganderbal has already been partitioned on the basis of compromise arrived at between the parties before the Court of learned Munsiff, Ganderbal, as such, no further action is required to be taken in this regard; (III) Issue No.3: Land measuring 9 kanals 1½ marlas along with three residential houses belonging to the parties in various Khasra numbers are required to be partitioned; (IV) Issue No.4: The flat at Nizam-ud-Din Delhi, though existing in the name of the appellant, is joint property and is required to be partitioned; (V) Issue No.5: No conclusive finding can be given in respect of the matter relating to rendition of accounts of the firm Bhat Shawls and Pashmina Cottage Industry, Residency Road, Srinagar; (B) Findings on the issues raised by the respondents: (I) Issue No.1: The suppression of material facts by the appellant is not established; (II) Issue No.2: The allegation that the appellant has involved the respondents in bogus litigation to cause harassment to them has not been established; (III) Issue No.3: The appellant cannot be denied his share in the joint properties and it cannot be stated that he is trying to claim the property which never belongs to him; (IV) Issue No.4: The misappropriation of 14 kanals of land at Gassu Tehsil Srinagar by the appellant has not been established; (V) Issue No.5: The flat at Nizam-ud-Din Delhi is a joint property and partnership asset and, as such, the possession of respondents over the said flat will not have any effect on its partition; (VI) Issue No.6: The contention that the appellant has illegally and unlawfully taken possession of the old ancestral house of the parties has not been established; (VII) Issue No.7: The contention that the appellant has damaged the reputation of business of the parties and has caused loss of Rs.50.00 lacs to the respondents has not been established; 9. After recording findings on the issues, the learned Arbitral Tribunal has proceeded to record the operative portion of his award, which is summarized as under : (1) The properties included in the claim petition filed by the appellant before the Arbitrator which include land measuring 59 kanals ½ marlas comprised in various Khasra numbers with three residential houses, the offices of the firm at Maulana Azad Road, Srinagar, and the flat at Delhi are all partnership properties and are subject to partition in the ratio of 34%, 33% and 33% in favour of respondent No.1, respondent No.2 and the appellant respectively; (2) Regarding rendition and settlement of business accounts, the parties are expected to comply with the Verses of Holy Quran in order to compensate the losses to the party who has suffered the losses or in the alternative they can appoint a Chartered Accountant who will audit the joint accounts to ascertain the truth so that the losses are compensated; (3) In case any party has suffered loss on account of sale of land situated at Gassu Srinagar, the said party is also required to be compensated which may be assessed by the Chartered Accountant and in this regard unauthorized withdrawals from the accounts at Srinagar and Delhi should also be accounted for and the parties would bear profit/loss in the ratio of 34%, 33% and 33%; (4) Wherever agreements arrived at between the parties have been implemented, those should not be disturbed and the position of the residential houses as occupied by the parties should remain like that whereas partnership offices at Srinagar shall remain with the respondents. Similarly, the flat at Delhi should be given to the appellant. A valuer should be appointed to assess the value of these properties and after applying the share structure formula of 34:33:33, the excess and balance should be adjusted between the parties; (5) The other landed properties of the parties are required to be partitioned in the share structure of 34:33:33. The old residential house shall fall in the share of the appellant whereas two newly constructed houses shall fall in the share of the respondents. The occupation of these residential houses shall not be disturbed. The old residential house shall fall in the share of the appellant whereas two newly constructed houses shall fall in the share of the respondents. The occupation of these residential houses shall not be disturbed. The land appurtenant to these residential houses should be shared in terms of the compromise already arrived at; (6) If there is any dispute regarding valuation and quantum of land, the same shall be resolved by making adjustments during partition of rest of the land; (7) Regarding land measuring 20 kanals and 04 marlas covered under Khasra Nos.2751/343, 2752/343, 2464/346 and Khasra No.350 situated at Fazal Haq Colony, Estate Batapora, two newly constructed residential houses along with land appurtenant to these houses shall fall in the share of respondents whereas rest of the land shall be partitioned in the share structure formula as prescribed already after adjustments. The land measuring 02 kanals and 10 marlas falling under Survey Nos.3051/1616, 1619, 3053/1620, 1621, 1622, 3055/1623 and 3021/1552 in Musha situated at Estate Batapora along with the residential house built thereon shall fall in the share of the appellant. The parties shall earmark the land for road which shall be the joint property of the parties; (8) The properties comprising land measuring 07 kanals 02 marlas under Khasra Nos.1541, 1542, 1485 and 1486 situated at Estate Batapora, the land measuring 08 kanals 01 marla under Khasra Nos.1060, 1083, 1084 and 1089 situated at Narpora Estate Batapora and land measuring 21 kanals 3½ marlas under Khasra Nos.457, 462, 456 and 455 situated at Estate Wanihama Payeen shall be partitioned in the share structure of 34:33:33 and the provision for approach of these properties shall be made by the parties which shall remain joint property of the parties; (9) Besides this, excess and balance sheet of the aforesaid lands shall be prepared mutually and adjusted against each other in the share structure of 34:33:33 and in case dispute about value of the landed property or any portion of the land which could not be adjusted against each other, the parties shall get value of the same through a mutually agreed valuer. 10. 10. From a perusal of the aforesaid summary of the award passed by the learned Arbitrator, it is clear that while the learned Arbitrator has determined that the properties mentioned in the award are joint properties of the parties and the learned Arbitrator has also devised a mechanism for partition of these properties but the learned Arbitrator has left it to the valuer and Chartered Accountant as also to the conscience of the parties as to the manner in which these properties are to be divided and the manner in which the shares of the parties have to be adjusted against the properties falling to their respective shares. The learned court below is right in observing that the learned Arbitrator has failed to finally determine the crucial issue as regards the partition of the joint assets of the parties and adjustment of their respective shares. Even the question relating to rendition of accounts of joint business of the parties has been left open to be decided by the Chartered Account or the conscience of the parties. Similarly, the learned Arbitrator has not given any conclusive finding as to the issue relating to rendition of accounts. 11. The award in the aforesaid circumstances does not finally determine all the issues and disputes that have arisen between the parties making the award unexecutable on ground. The question that arises for determination is whether such an award is sustainable in law and whether the learned court below was justified in setting aside the said award. 12. At the outset it may be clarified that jurisdiction of a court under section 37 of the Arbitration and Conciliation Act is similar to the jurisdiction of the Court under Section 34 of the said Act and the scope of interference by a court in an appeal under Section 37 of the Act in examining an award passed by an Arbitral Tribunal is restricted and subject to the same grounds as the challenge under Section 34 of the Act. Therefore, the scope of jurisdiction under Sections 34 and 37 of the Act is not as wide as appellate jurisdiction. It is a well settled law that courts cannot interfere in an Arbitral Award in a casual manner. Therefore, the scope of jurisdiction under Sections 34 and 37 of the Act is not as wide as appellate jurisdiction. It is a well settled law that courts cannot interfere in an Arbitral Award in a casual manner. It is only in case the grounds enumerated in the Arbitration and Conciliation Act for setting aside of the award are not made out that the Court can interfere in an Arbitral Award. There have been a series of judgments of the Supreme Court and this Court laying down the scope of interference in the arbitration awards by the Courts. The Supreme Court in the case of Batlibol Environmental Engineers Limited vs. Hindustan Petroleum Corporation Limited and another, 2023 SCC Online SC 1208, has, after discussing its previous judgments on the subject and noticing the provisions contained in Section 34 of the Arbitration and Conciliation Act, summarized the law on the subject in the following manner: 34. Sub-section (1) to Section 34 of the A&C Act requires that the recourse to a court against an arbitral award is to be made by a party filing an application for setting aside of an award in accordance with sub-sections (2) and (3) of Section 34. Sub-section (2) to Section 34 of the A&C Act stipulates seven grounds on which a court may set aside an arbitral award. Sub-section (2) consists of two clauses, (a) and (b). Clause (b) consists of two sub-clauses, namely, sub-clause (i) which states that when the subject matter of the dispute is not capable of settlement by arbitration under the law for the time being in force, and sub-clause (ii), which states that the court can set aside an arbitral award when the award is ‘in conflict with public policy of India’. We shall subsequently examine the decisions of this Court interpreting ‘in conflict with public policy of India’ and the explanation. 35. We shall subsequently examine the decisions of this Court interpreting ‘in conflict with public policy of India’ and the explanation. 35. Under sub-clause (a) to sub-section (2) to Section 34 of the A&C Act, a court can set aside an award on the grounds in sub-clauses (i) to (v) namely, when a party being under some incapacity; arbitration agreement is not valid under the law for the time being in force; when the party making an application under Section 34 is not given a proper notice of appointment of the arbitrator or the arbitration proceedings, or was unable to present its case; and when the composition of the arbitral tribunal or the arbitral procedure was not in accordance with the agreement between the parties, unless such agreement was in conflict with the mandatory and binding non-derogable provision, or was not in accordance with Part I of the A&C Act. Sub-clause (iv) states that the arbitral award can be set aside when it deals with a dispute not contemplated by, or not falling within the terms of submission of arbitration, or it contains a decision on matters beyond the scope of submission to arbitration. However, the proviso states that the decision in the matters submitted to arbitration can be separated from those not submitted, then that part of the arbitral award which contains the decision on the matter not submitted to arbitration can be set aside. In the present case, we are not required to examine sub-clauses to clause (a) to sub-section (2) to Section 34 of the A&C Act in detail. Hence, this decision should not be read as making any observation, even as obiter dicta on the said clauses. 36. Explanation to sub-clause (ii) to clause (b) to Section 34(2) of the A&C Act, as quoted above and before its substitution by Act No. 3 of 2016, had postulated and declared for avoidance of doubt that an award is ‘in conflict with the public policy of India’, if the making of the award is induced or affected by fraud or corruption, or was in violation of Sections 75 or 81 of the A&C Act. Both Sections 75 and 81 of the A&C Act fall under Part III of the A&C Act, which deal with conciliation proceedings. Both Sections 75 and 81 of the A&C Act fall under Part III of the A&C Act, which deal with conciliation proceedings. Section 75 of the A&C Act relates to confidentiality of the settlement proceedings and Section 81 deals with admissibility of evidence in conciliation proceedings. Suffice it is to note at this stage that while ‘fraud’ and ‘corruption’ are two specific grounds under ‘public policy’, these are not the sole and only grounds on which an award can be set aside on the ground of ‘public policy’. 37. Act No. 3 of 2016 with retrospective effect from 23.10.2015 has substituted the explanation referred to above, by two new explanations that are differently worded. Sub-section (2-A) to Section 34 of the A&C Act, which was instituted by Act No. 3 of 2016 with retrospective effect from 23.10.2015, states that the arbitral award arising out of arbitrations other than international commercial arbitrations can be set aside by the court, if it is vitiated by patent illegality appearing on the face of the award. The proviso to sub-section (2-A) to Section 34 of the A&C Act also states that the award shall not be set aside merely on the ground of erroneous application of law or by re-appreciation of evidence. The aforesaid sub-section need not be examined in the facts of the present case, as we are not required to interpret and apply the substituted explanations to (ii) to sub-clause (b) to 34(2) of the A & C Act in the present case. 38. The expression ‘public policy’ under Section 34 of the A&C Act is capable of both wide and narrow interpretation. Taking a broader interpretation, this Court in ONGC Limited. v. Saw Pipes Limited., held that the legislative intent was not to uphold an award if it is in contravention of provisions of an enactment, since it would be contrary to the basic concept of justice. The concept of ‘public policy’ connotes a matter which concerns public good and public interest. An award which is patently in violation of statutory provisions cannot be held to be in public interest. The concept of ‘public policy’ connotes a matter which concerns public good and public interest. An award which is patently in violation of statutory provisions cannot be held to be in public interest. Thus, expanding on the scope and expanse of the jurisdiction of the court under Section 34 of the A&C Act, it was held that an award can be set aside if it is contrary to: (a) fundamental policy of Indian law; or (b) the interest of India; or (c) justice or morality, or (d) in addition, if it is patently illegal. From the foregoing analysis of the law on the subject, it is clear that an Arbitral Award can be interfered with if it is against the fundamental policy of Indian law, the interest of India, justice or morality or if it is patently illegal. 13. Adverting to the facts of the instant case, as already indicated, the learned Arbitral Tribunal has failed to decide all the disputes arising between the parties finally and it has left the crucial aspect of the matter relating to partition of the joint properties of the parties to the discretion of valuers, Chartered Accountants as also to the conscience of the parties. An Arbitrator is expected to decide the disputes between the parties finally and not leave it unresolved. To “arbitrate” means “to resolve the disputes”. By not finally resolving the disputes between the parties, the learned Arbitrator has not exercised the jurisdiction that was vested with him. If at all the learned Arbitrator was feeling difficulty in assessing the value of the joint properties, while earmarking the shares and partitioning the properties amongst the parties, it was open to him to take resort to the provisions contained in Section 26 of the Arbitration and Conciliation Act which vests power with the Arbitrator to appoint experts to report on specific issues to be determined by the Arbitral Tribunal. In terms of Section 27 of the Arbitration and Conciliation Act, an Arbitral Tribunal is even empowered to take assistances of the Court in taking evidence. In the instant case, the learned Arbitrator by not taking assistance of the provisions contained in Section 26 and 27 of the Act and instead delegating his functions to valuers and Chartered Accountants to be identified by the parties, has abdicated his duties as an Arbitrator. 14. In the instant case, the learned Arbitrator by not taking assistance of the provisions contained in Section 26 and 27 of the Act and instead delegating his functions to valuers and Chartered Accountants to be identified by the parties, has abdicated his duties as an Arbitrator. 14. The learned Arbitrator has, therefore, in the aforesaid circumstances of the case misconducted the proceedings though the misconduct on his part is not on account of any malice, dishonesty or fraud, meaning thereby that the misconduct of the learned Arbitrator is not from the moral point of view but it is a misconduct on the his part in the conduct of the proceedings, inasmuch as the award passed by the learned Arbitrator has failed to achieve the objective of resolving the dispute between the parties. When a dispute between the parties is referred for resolution by an Arbitrator, the award of the Arbitrator has to meet the requirements of reasonableness and sound objective outcome. If these requirements are not met, the arbitral proceedings as also the outcome warrant intervention by the Court. 15. Having held that the learned Arbitrator has, while passing the award, failed to finally resolve the disputes between the parties and thereby misconducted the proceedings and failed to achieve the objective outcome. It is to be noted that none of the parties has levelled any allegation of bias or malice against the learned Arbitrator, either before the court below or in this appeal. In such circumstances it was not open to the learned court below to set aside the award as a whole. Instead of setting aside the award, the learned court below should have remanded the matter back to the learned Arbitrator to finally decide the issues that have been left unresolved by the learned Arbitrator while passing the award. To this extent, the judgment impugned passed by the learned court below deserves to be set aside. 16. Accordingly, the appeal is partly allowed and the impugned judgment passed by the learned Additional District Judge (Bank Cases), Srinagar, to the extent it has set aside the award passed by the learned Arbitrator, is set aside and the matter is remanded to the learned Arbitrator with a direction to pass a fresh award so as to resolve the disputes between the parties finally after taking note of the observations made by this Court hereinbefore. The fresh award shall be passed by the learned Arbitrator within a period of three months from the date a copy of this judgment is provided to him. 17. The record of the learned court below along with a copy of this judgment be sent back.