1. This is an appeal from an order of the City Civil Court, Bombay, setting aside the award passed by an Arbitrator upon a reference made to him by the parties.
2. The facts as alleged by the respondent are as follows: One Nanikram, who is now dead, and his wife Gunavantibai on behalf of herself and her two sons, Pahlajraj, appellant No. 2, and Pribhdas, appellant No. 3, entered into an agreement on 29th June 1957 for referring a dispute between them concerning the partition of certain moveable and immoveable properties to arbitration by one Rughnath on 29th June 1951. The arbitrator made-an award on 5th July 1951 after hearing the parties and considering the evidence adduced by them. This award was filed in the City Civil Court immediately thereafter. On 8-10-1951, Nanikram filed a petition in that Court, which was No. 95 of 1951 for setting aside the award on various grounds. His counsel, however, withdrew that petition sometime thereafter with the result that the Court passed a decree in terms of the award. Upon an application made to him by the Official' Assignee the decree passed in terms of the award was set aside by Mr. Honavnr, the then principal Judge of the City Civil Court, on the ground that at the date of the withdrawal or the application No. 95 of 1951. Nanikram had been adjudicated an insolvent. After the decree was set aside the learned Judge enquired into that application made by Nanikram. It may be mentioned that on the adjudication of Nanikram as an insolvent, the Official Assignee was substituted in his place and that is how he came to make an application for selling aside the decree. Mr. Honavar, eventually, set aside the award on the ground that there was no real dispute between the parties, that the award was collusive and that the reference itself was made for perpetrating a fraud on the creditors of Nanikram. An appeal was preferred from the decision of Mr. Honavar which was heard by Chagla, C. J., and Dixit. J., who by their judgment dated 22-7-1955 set aside the decision of Mr. Honavar and remanded the matter to the City Civil Court with certain directions. Thereafter the Official Assignee amended the original application made by Nanikrarn and the application as amended was enquired into by Mr. Divan, a Judge of the City Civil Court.
3. After the amendment of the petition he-fore the City Civil Court, the appellants filed a further affidavit denying what was stated by the Official Assignee. The learned Judge of the City Civil Court then framed a number of issues and came to the conclusion that the reference and the award were bogus and colourable and further came to the conclusion that there was no valid reference of the dispute to arbitration. These findings of the learned Judge are challenged before me by Mr. Parikh on behalf of the appellants.
4. Dealing with the question of the validity of the reference, the learned Judge observed that if there is a joint family and there is an agreement to refer disputes to arbitration to which dispute the father on the one hand and the mother representing herself and the minor sons on the other are parties, such a reference is not a valid reference at all. He relied upon an unreported decision of Mr. Justice M. V. Desai in suit No. 2176 of 1948 decided on 28-9-1948, Chinubhai Madhavlal v. Udyan Girjaprasad, in support of this conclusion. In that case an application for stay of proceedings in a suit was made under Section 34 of the Arbitration Act, upon the ground that there was an agreement between the parties to refer the dispute to arbitration. There also the dispute was between the father on the one hand and his sons and wife on the other and related to the partition of the family property. The sons were minors and the reference to arbitration was signed on their behalf by their mother. The learned Judge referred to a number of decisions on the point and came to the conclusion that in circumstances like these the reference is not competent at all because where a mother is also a party to the agreement in her individual capacity she cannot at the same time act as a guardian of her two minor children, In the course of his judgment the learned Judge observed:
In the case of a joint Hindu family where there is an agreement to refer to arbitration, the agreement is between all members of the co-parcenery and each member must agree with the other member to refer to arbitration. It is clear that the mother acting as the natural guardian of minor defendants Nos. 2 and 3 could not enter into an agreement with herself. Further so long as the plaintiff continued to be the natural guardian of minor defendants Nos. 2 and 3, the mother had no tight to bind the minors by an agreement of reference to arbitration and there was no order of the Court authorising her to enter into such an agreement.
Before the learned Judge reliance was placed, upon a decision of a Division Bench of this Court of Beaumont, C. J., and Mirza, J., in ILR 56 Bom 595 : AIR 1932 Bom 498 -- Shantilal Mewaram v. Munshilal Kewalram -- and in particular upon the following passage therein :
'Then the next point taken by Mr. Desai is that there was no legal reference, inasmuch as the mother had no power on behalf of her minor son to refer the matter to arbitration. The learned Judge dealt with that point, as I understand him, by saying that if the mother had gone to the Court and asked to he appointed as guardian of her minor son with liberty to file a suit for partition, that liberty would no doubt have been granted, and although she did not actually go to the Court nevertheless she is entitled to be put into the same position as though she had taken that step. I doubt myself whether that reasoning is right. Generally speaking, the only way to bind an infant by a contract is to get the approval of the Court to the contract on behalf of the infant, and if in fact the approval of the Court is not asked, for, it seems to me irrelevant to consider what view the Court would have taken had an application in the matter been made to it To bind an infant an order of the Court is vital. As there was no order of the Court here, I am disposed to think that the mother could not bind the infant by the reference to arbitration. But in my view of the matter that is really irrelevant, because I think the father, as the manager of the joint property had power to refer to Kunwerson and at any rate to bind his own interest.'
The learned Judge, however, distinguished this case from the one before him on the ground that in the case before him the so-called agreement was between the father on the one hand and the mother on the other acting for herself as well as representing her sons and was thus no agreement at all in law.
5. It seems to me, however, that the decision in the aforesaid case can be distinguished on another ground also. There a partition had already been effected by an arbitrator in pursuance of a reference made to him by the father in which reference the mother had also joined in her capacity as the guardian of her minor children. As has been rightly pointed out by Beaumont, C. J. the father has an undoubted power under the Hindu Law to effect a partition between himself and his sons and, therefore, where a partition is effected by the father, it is ordinarily binding on the sons. Further, according to the learned Chief Justice such a partition cannot be permitted to be questioned by the father himself though it would be open to the minor sons, on attaining majority, to question it on the ground that it is unfair. Since in that case the partition had already been effected and had been acted upon, the Court held that the creditors of the father could not reach in execution the properly allotted to the sons at the partition. In the present case the partition has not been acted upon at all. The arbitrator has made an award whereunder he has allotted certain property to the father, some to the mother, and some to the minor sons. It does not appear that the members of the family have taken possession of the property respectively allotted to them in pursuance of the partition effected by the award. On the other hand the mother and the sons wanted the help of the Court for establishing their rights under the award and therefore, they made an application to the Court for passing a decree in terms of the award. Such being the position the Court has undoubted jurisdiction to satisfy itself whether there was a valid reference to arbitration and whether there was really any dispute between the parties. Now, where the matter stands at a stage like the one in this case it is competent to the Court, may even necessary, to satisfy itself that there was a valid agreement to refer the dispute between the parties to arbitration. The essential condition for an agreement is that there must be two parties to it. Here, it is said, the parties are the father on the one hand and the mother and the minor sons as represented by the mother on the other. But the position in law is that so long as the father is alive and has not abandoned his rights of guardianship over his children, he alone is their legal guardian. The mother, therefore, cannot arrogate to herself the capacity of the legal guardian of her children nor indeed can she regard herself even as their natural guardian during the lifetime of her husband, unless, of course, the husband has abandoned all his rights of guardianhip. That is not the position here. The mother cannot be said to be a de facto guardian either because admittedly all the parties were, at the relevant time, living together and continued to live together even after the so-called award was made by the Arbitrator. It would follow from this that the mother could not in any way represent the minors when she purported to enter into an agreement on their behalf with her husband to refer the dispute to arbitration,
6. As already pointed out, in the aforesaid case Beaumont, C. J. did take the view, and with, respect rightly, that inasmuch as there was no order of the Court entitling the mother of the minors to make a reference to arbitration, she could not bind the sons by the reference made by her. The further question, whether the reference being invalid the award itself is vitiated, did not arise for consideration in that case, for there, the assistance of the Court was not sought for passing a decree in terms of the award. It would follow, therefore, that had no decree been passed in that case upon the basis of the award made by the arbitrator and an objection been raised to the award on the ground that the reference itself was invalid, the objection would have been upheld. Where no objection is taken to the passing of a decree in terms of an award, the decree cannot be said to be a nullity but is merely voidable at the instance of the person who contends that he was not represented at all or was not properly represented in the arbitration proceedings. In other words, the decree being voidable and not void ab initio, is good until it is set aside. Where a decree has yet to come into existence it is, in my judgment, open to every party connected with the arbitration proceedings to allege and prove that those proceedings are ill-founded because there were in fact no two opposing parties to the reference to arbitration or because no real dispute was involved in the so-called reference. In this connection I may refer to Section 38 of the Arbitration Act, which runs thus:--
'33. Any party to an arbitration agreement or any person claiming under him desiring to challenge the existence or validity of an arbitration agreement or an award or to have the effect of either determined shall apply to the Court and the Court shall decide the question on affidavits: 'Provided that where the Court deems it just and expendient, it may set down the application for hearing on other evidence also, and it may pass such orders for discovery and particulars as it may do in a suit.'
This section plainly relates to a stage prior to the passing of a decree in terms of an award. Under this provision a party to the arbitration agreement is permitted to challenge the existence of the arbitration agreement. Such a challenge may be based on various grounds and one of those grounds could be that there were really no two parties to the so-called agreement and consequently what is styled as an agreement is not an agreement at all in law. The considerations, which may well weigh with the Court, when the question before it is whether the decree passed upon an award is to be set aside or not would not necessarily be relevant when the Court has to deal with an objection under Section 33. Where an award is filed in a Court and the Court is invited to pass a decree in terms of the award the position, where the award affects the interests of the minors also, is this; If the minor is shown in the proceedings as being represented by some one as a guardian, the Court gets jurisdiction to pass a decree with respect to the interests of the minors in terms of the award; where such a person is not the legal guardian of the minor the Court has to make an order appointing such a person as a guardian ad item of the minor; but if the Court omits to do so the decree ultimately passed by it does not become a nullity but is merely voidable at the instance of the minor. Strictly speaking the provisions of Order XXXII, Rule 7 would not apply to that stage but even where the provisions of this rule apply but are not complied with, it has been held in a number of decisions that the eventual decree is voidable at the option of the minor and is not void ab initio. Where no decree has been passed different considerations would have to be borne in mind. It is for this reason that any person who on the face of it appears to be a party to a reference to arbitration, is entitled to show to the Court that the reference to arbitration of a dispute was itself bad because there was no agreement in law between the parties to refer such a dispute to arbitration. What I have said above would apply not only to a case where on the one side there is a major and on the other side there is a minor, who is not properly represented but also to a case where oh the one side there is a major and on the other side apart from an improperly represented minor, there is a major. The reason is that the parties must be deemed to intend that the agreement is one and indivisible, that is, it is one to which each of the persons named is legally a party. Therefore, if in law there is no effective agreement as between a major party and a minor, no obligation is created and the position is not altered because along with an unrepresented or improperly represented minor person is also ranged a major party.
7. It was next contended by Mr. Parikh for the appellants that the father, that is, Nanikram, being himself a party to the alleged fraud could not he permitted to plead his own fraud and have the award set aside under that fraud. This question would really not arise for consideration upon the view which I have taken that there was no agreement in law to refer the dispute to arbitration. However, as the point has been argued at very considerable length, I must deal with it. It is no doubt a well settled principle of law that in pari delicto potior est conditio defendantis. But this principle would come into play when the object of the fraud has been carried out. Here the fraud was in the process of being completed. No doubt an award was made in pursuance of an alleged fraudulent reference but that award had yet to be made a rule of the Court. I agree with the learned Judge Mr. Divan that in such circumstances a party has locus penitential for retracing his steps and setting out the true nature of the transaction before the Court whose aid is being enlisted for completing the fraud. Mr. Parikh, however, says that Nanikram had acquiesced in the fraud and was thus precluded from seeking the assistance of the Court for having the award set aside. Mr. Parikh points out that within a few days of the making of the award, that is, on 17th July 1951, Nanikram, relying upon the award, objected to the levy of attachment against certain properties. Again, on 9th August 1951 he filed an affidavit in which also he relied upon the award. This conduct, according to him, amounts to acquiescence. Whether it does or does not amount to acquiescence is immaterial because the award had not by then become a rule of the Court and was thus not enforceable at law. I, therefore, reject the contention of Mr. Parikh.
8. Two more grounds were raised on behalf of the respondent, and though it is not necessary for me to decide them in the light of what I have said regarding the main contention, I think it is desirable to deal with them briefly as it is possible that a further appeal may be preferred against my judgment. One of those contentions was that there were no real disputes between the parties for being referred to arbitration and the other contention was that the arbitration proceedings were merely a farce and that actually nothing was done by the arbitrator. Looking merely at the agreement executed by Nanikram and purported to be executed by the mother of the minors, on their behalf, and on behalf of herself, it. does appear that there was a dispute on the question as to whether certain properties in the hands of Nanikram were joint family properties or his self-acquired properties. According to the respondent, Nanikram was in financial difficulties at about the end of June 1951 add in order to screen his properties he wanted to bring into existence a 'pocket instrument' and that is why a reference was made to an arbitrator. There is no doubt left whatsoever from the evidence which has been adduced and which has not been challenged before me that in the beginning of July 1951, or even earlier, that is round about 30th June 1951, Nanikram was carrying on negotiations for the mortgage of one of his properties and he in fact mortgaged it on the 4th of July. It is significant that the so-called agreement to refer the dispute to arbitration was entered into just at about that time. In the mortgage itself the property was described as the self-acquired property of Nanikrarn and, as is clear from the uncontradicted evidence of Ranchboddas the bulk of the consideration of the mortgage was paid to Gunvantibai, the wife of Nanikram at the instance of Nanikram. Ranchhoddas hag clearly stated in the evidence that be told her that this amount was obtained by Nanikram by mortgaging his property at Chunim near Bandra to his client Hansraj. There is no reason to disbelieve the evidence of Ranchhooddas, particularly so because the learned Judge before whom he made it, accepted it. It would, therefore, follow that Gunvantibai, the mother of the minors, accepted the position that the property was the self-acquired property of Nanikram. In spite of that, we find it stated in the arbitration agreement that there was a dispute between the parties as regards the nature of Nanikram's interest in the properly. This statement is clearly false and had deliberately been made to give a colour of reality to the reference. Agreeing with the Court below I accept the contention of the respondent that there was no real dispute between the parties, which had to be settled by a reference to arbitration.
9. As regards the proceedings before the arbitrator a bare look at the three sheets, which were submitted by him to the Court, would show that those proceedings were also a farce. The arbitrator was one Rughnath Hiranand and the reference was made on the 29th June 1951. Rughnath says that he never knew the parties before. He is admittedly a relative of Parasram, who is-a friend of the father of Gunvantibai. It is Nanikram's case that the entire farce of arbitration was arranged by his father-in-law and this statement of his was not without any basis. Rughnath, immediately after the agreement was executed, wrote out some notices calling upon the parties to appear before him on the 1st July and obtained their signatures on them. It would appear that these notices were also drafted by the same pleader, who drafted the arbitration agreement. The matter was to be heard the next day but it is said to have been heard on 4th July 1951. On that day the arbitrator has recorded the following statements of the parties :--
'The Arbitrator has heard the parties and their evidence. We close our case and we have no further evidence to adduce.
I have got no other evidence and I close my side.
(Signed) Nanikram C. H.
Date 4th July 1951.
'I have placed all my evidence to the Arbitrator. I have no further evidence to produce.
'i.e. Gunvantibai Nanikram.
Date 4th July 1951.
'I know Gunvanti. She is my daughter. She has written above and signed the same in my presence with her free will and in full senses.
'(Signed) Jiwanmal Keshavdas.
Date 4th July 1951.
How long the proceedings went on, what was the evidence, what documents were produced before the arbitrator, cannot at all be ascertained from the papers filed by him.
10. Apart from the three sheets of paper and the arbitration agreement nothing else was forwarded by the arbitrator to the court along with the award. The arbitration agreement as well as the award appear to have been typed on the same typewriter. The award itself was drafted by Mr. Punjabi, who had drawn up the deed of reference to arbitration. No doubt he says that he drafted this award on the basis of some 'slip'' and the notes made by the arbitrator. That slip is not forthcoming. He has also deposed that at the time of drafting the deed of reference he was told that he would also have to draft the award. From this one can infer that the arbitrator himself was to play only a nominal role in the so-called arbitration proceedings, On the basis of all these materials, I have no hesitation in concluding that the arbitration proceedings were a farce and the award was merely a make believe.
11. I must notice one point which was very strenuously urged by Mr. Parikh and it is this: The ground that the award was brought about by collusion was not raised at all by Nanikram in his application nor was it raised by the Official Assignee within 30 days of the filing of the award and that consequently the Official Assignee cannot urge it here. It is sufficient to say that such a contention was not raised on behalf of the appellant before this Court when the matter was remanded by it. Apart from that it is the duty of the Court which is called upon to pass a decree in terms of the award, to be satisfied that there was a real dispute between the parties and that it is not being made merely an instrument for Perpetrating fraud. In this connection it would be proper to refer to a decision of this Court in ILR 38 Bom 638 : AIR 1914 Bom 123 Velchand Chhaganlal v. Lt. R. C. C. Liston -- in which it is laid down that it is the duty of the Court to scrutinise an award filed before it and that it is open to the Court, in exercise of its inherent powers, to. set aside an award, if it is satisfied that there has been an abuse of judicial process. The learned Judges there referred to a Circular issued by this Court and which was incorporated in the Civil Manual then in force. Similarly instructions have been incorporated by this Court in the Revised Manual and they are to be found in paragraphs 2 and 3 of Chapter VI. It will thus be clear that the Courts must exercise due diligence, particularly when they are faced with awards of this kind. It is the bounden duty of the Courts to see that their machinery is not availed of by unscrupulous litigants to perpetrate fraud on others. Therefore, quite apart from the question whether Nanikram or the Official Assignee would be entitled to raise the contention that the award was collusive the Court can suo motu consider it.
12. For all these reasons I uphold the orderof the Court below, and dismiss the appeal withcosts.
13. Appeal dismissed.