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Taherbhai Abdullabhai and anr. Vs. Mohammed HussaIn Abdullabhai and ors. - Court Judgment

LegalCrystal Citation
SubjectArbitration
CourtMumbai High Court
Decided On
Case NumberArbitration Petition Nos. 332, 333, 353 and 354 of 2002
Judge
Reported in2004(3)ARBLR371(Bom); 2004(6)BomCR4; 2005(1)MhLj566
ActsArbitration and Conciliation Act, 1996 - Sections 30, 30(2), 32 and 34; Code of Civil Procedure (CPC) - Order 23, Rule 3; Arbitration Act
AppellantTaherbhai Abdullabhai and anr.
RespondentMohammed HussaIn Abdullabhai and ors.
Appellant AdvocateV.V. Tulzapurkar, Adv., i/b., Nanu Hormasjee & Co.
Respondent AdvocateSubodh Joshi, Adv., i/b., Nandlal Kothari and Sabir for the Respondent No. 1 and ;S.S. Shetty, Adv., i/b., M.P. Vashi, Adv. for the Respondent No. 5
Excerpt:
..... remediless and that would further buttress the above view. [jagannath singh v dr. ajay upadyay & anr 2006 cri lj 4274; 2006 (5) air bom r held per incuriam]. - in this situation, it appears the parties continued to hold negotiations, but they failed to come to any settlement. in my opinion, the submission is not well founded. 7. so far as the submission of the learned counsel appearing for the petitioners that the learned arbitrator does not have jurisdiction even to record a finding in the face of the dispute about the existence or otherwise of the settlement is concerned, in my opinion, the submission is well founded. 8. so far as the contentions raised on behalf of the respondents that the arguments made before me have not been raised in the petitions is concerned, in my opinion,..........section 34 of the arbitration and conciliation act challenging the consent awards passed by the learned arbitrator. it is common ground before me that all these petitions can be conveniently disposed of by a common order.2. petition no. 353 of 2002 has been filed by one taherbhai abdullabhai. the same petitioner has filed arbitration petition no. 354 of 2002. arbitration petition no. 332 of 2002 has been filed by shabbirbhai abdullabhai. the same petitioner has filed arbitration petition no. 333 of 2002.3. the facts that are material and relevant for deciding these four petitions as are, that one abdullabhai fidaali kagalawala owned several properties. after his death, disputes arose between his heirs. disputes between the heirs regarding their respective rights in the properties left.....
Judgment:

D.K. Deshmukh, J.

1. All these petitions have been filed under Section 34 of the Arbitration and Conciliation Act challenging the consent Awards passed by the learned Arbitrator. It is common ground before me that all these petitions can be conveniently disposed of by a common order.

2. Petition No. 353 of 2002 has been filed by one Taherbhai Abdullabhai. The same petitioner has filed Arbitration Petition No. 354 of 2002. Arbitration Petition No. 332 of 2002 has been filed by Shabbirbhai Abdullabhai. The same petitioner has filed Arbitration Petition No. 333 of 2002.

3. The facts that are material and relevant for deciding these four petitions as are, that one Abdullabhai Fidaali Kagalawala owned several properties. After his death, disputes arose between his heirs. Disputes between the heirs regarding their respective rights in the properties left behind by Abdullabhai were referred to the sole Arbitrator by an order made by this Court. The petitioners in the present petitions are also heirs of the deceased Abdullabhai. It appears that after the hearing commenced before the learned Arbitrator, the parties decided to hold negotiations for amicable settlement. After negotiations between the parties, the parties filed consent terms in respect of the reference which is related to the properties of the Abdullabhai Fidaali & Co. and the learned Arbitrator also made the consent Award on 26th April, 2001. The parties also reached a' settlement in respect of the reference relating to that properties of Abdullabhai Fidaali and Co. and Abdullabhai Fidaali Sons and the Arbitrator made a consent Award on 5th April, 2002 on the basis of those consent terms. After the aforesaid two consent terms were filed and the consent Awards were made. Now the disputes between the parties remained relating to two references, (i) in relation to the joint family property and (ii) five rooms in Fidaali Building. It appears that in relation to these properties also parties continued to have talks for settlement. The parties also submitted before the learned Arbitrator some charts duly signed by the parties indicating the shares of the parties in the properties. Those charts were taken on record by the learned Arbitrator. It appears that some consent terms were taken on record by the learned Arbitrator. It appears that some consent terms were also arrived at. But the consent terms were not signed on 6th September, 2001, because payment that was required to be made was not made. Thereafter, negotiations between the parties continued, but as the parties could not reach the settlement, the learned Arbitrator on 7th September, 2001 framed points for determination in relation to the properties with respect to which no settlement was reached between the parties. On 7th September, 2001, the learned Arbitrator stated in the minutes that the parties have agreed to file consent terms in respect or properties, save and except five properties in relation to which points for determination have been framed and the matter was adjourned to 11th September, 2001, it further appears that Shri Ghanekar, counsel for the petitioner Taherbhai drafted the consent terms and that draft was forwarded on 09.01.2002 to the other shares. On 30th March, 2001, Taherbhai Group through their Advocate Shri Ghanekar stated before the learned Arbitrator that the settlement in the consent terms is not acceptable to the Taherbhai group. Similar statement was made on behalf of another petitioner Shabbirbhai. In this situation, it appears the parties continued to hold negotiations, but they failed to come to any settlement. It appears that at the request of the parties, then the learned Arbitrator decided to hear the parties to find out whether there was any settlement between the parties. The learned Arbitrator, thereafter, heard the parties and came to the conclusion that there was a settlement reached between the parties and on the basis of that finding the learned Arbitrator proceeded to pass the Award in terms of the consent terms which are marked as Annexure '3'. The learned Arbitrator also considered the dispute between the parties in relation to five properties with regard to which there was no settlement and the learned Arbitrator also made the Award in relation to those properties. However, in so far as the present petitioners are concerned, what has been challenged by the petitioners is only the consent Award made by the learned Arbitrator in Arbitration Petition No. 353 of 2002 and Arbitration Petition No. 332 of 2002. In Arbitration Petition No. 333 of 2002, consent Award made in terms of Annexure to the Award made in that case challenged.

4. The learned counsel appearing for the petitioner submits that the consent Awards passed by the learned Arbitrator are without jurisdiction. According to the learned counsel, firstly, there is no jurisdiction vested in the learned Arbitrator to decide whether a settlement is reached between the parties or not, if some of the parties to the Arbitration before the learned Arbitrator dispute the position that there is a settlement reached between the parties. Secondly, it is submitted that in view of the provisions of Sub-section (2) of Section 30 of the Act, unless all the parties to the settlement make a request to the Arbitrator, the Arbitrator cannot make an Award on the basis of the settlement. In the submission of the learned counsel, in order to enable the Arbitrator to make the Award on the basis of settlement reached between the parties firstly there has to be an admitted settlement between the parties to Arbitration and secondly there has to be a request made by all the parties to the settlement to pass an Award in terms of the settlement. If there is a dispute between the parties regarding existence of settlement, the Arbitrator cannot decide the question whether there is a settlement or not. Even if there is an agreed settlement between the parties, then also unless there is a request made by all the parties to the Arbitration to make an Award in terms of the consent terms, the learned Arbitrator cannot make an Award in terms of the settlement.

5. On the other hand, on behalf of the respondents relying on the provisions of Sub-section (1) of Section 30, it is submitted that it is a duty of the Arbitrator to encourage settlement and, therefore, the learned Arbitrator would get power to hold an inquiry to find out whether the parties had reached the settlement and if he so finds, he can make an award in terms of that settlement. It is further submitted that in order to enable the Arbitrator to make an Award in terms of the settlement reached, it is not necessary that all the parties to the Arbitration should make a request. It is submitted that even if one of the parties to the Arbitration makes a request, the Arbitrator can pass an Award in terms of the settlement produced before him. On behalf of the respondents, it was also contended that in the petition there is no ground raised by the petitioners that the learned Arbitrator had no jurisdiction to inquire into the question whether parties have reached the settlement or that without a joint request by all the parties Arbitrator cannot make an Award in terms of the settlement.

6. Now, in order to appreciate these rival submissions, in my opinion, it is necessary to refer to some of the provisions of the Act. First provision that is relevant is provision of Section 30 of the Act. Section 30 reads as under :

'30. Settlement

(1) It is not incompatible with an Arbitration agreement for an Arbitral Tribunal to encourage settlement of the dispute and, with the agreement of the parties, the Arbitral Tribunal may use mediation, conciliation or other procedures at any time during the Arbitral proceedings to encourage settlement.

(2) If, during Arbitral proceedings, the parties settle the dispute, the Arbitral Tribunal shall terminate the proceedings and, if requested by the parties and not objected to by the Arbitral Tribunal, record the settlement in the form of an Arbitral Award on agreed terms.

(3) An Arbitral Award on agreed terms shall be made in accordance with Section 31 and shall state that it is an Arbitral Award.

(4) An Arbitral Award on agreed terms shall have the same status and effect as any other Arbitral Award on the substance of the dispute.'

Perusal of the provisions of Section 30 shows that it lays down that an Arbitrator can encourage settlement of dispute between the parties. This obviously means the settlement of dispute without adjudication by an agreement reached between the parties. Sub-section (2) of Section 30 lays down that if the parties reached settlement in relation to the dispute which is before the Arbitrator, the Arbitrator has to terminate the proceedings and if a request is made by the parties if it is not objected to by the Arbitral Tribunal, the Arbitrator can record a settlement in the form of the Arbitral Award on the agreed terms. Sub-section (3) lays down that an Arbitral Award on agreed terms has to be made in accordance with the provisions of Section 31. Sub-section (4) declares that the Arbitral Award on agreed terms has the same status and effect as an Award made as a result of adjudication by the Arbitrator. In my opinion, the next provision which is relevant is Section 32. It reads as under :

'32. Termination of proceedings

(1) The Arbitral proceedings shall be terminated by the final Arbitral Award or by an order of the Arbitral Tribunal under Sub-section (2).

(2) The Arbitral Tribunal shall issue an order for the termination of the Arbitral proceedings where :

(a) the claimant withdraws his claim, unless the respondent objects to the order and the Arbitral Tribunal recognises a legitimate interest on his part in obtaining a final settlement of the dispute ;

(b) the parties agree on the termination of the proceedings ; or

(c) the Arbitral Tribunal finds that the continuation of the proceedings has for any other reason become unnecessary or impossible.

(3) Subject to Section 33 and Sub-section (4) of Section 34, the mandate of the Arbitral Tribunal shall terminate with the termination of the Arbitral proceedings.'

Perusal of the above quoted provision makes it clear that on the Arbitrator finding that the dispute is settled between the parties, he can terminate the proceedings and on termination of the Arbitral proceedings/ mandate of the Arbitrator also stands terminated. Now, if the provisions of Section 30 and Section 32 are read together, it becomes clear that if the parties to the Arbitration state before the Arbitrator that they have settled the dispute, the Arbitrator has to terminate the proceedings, unless a request is made by the parties for making an Award on the agreed terms, and after the Arbitration proceedings are terminated the mandate of the Arbitrator comes to an end. It is, thus, clear that unless there is a request made by the parties to make an Award on agreed terms, the consequence of the settlement of dispute between the parties is that the Arbitral proceedings are terminated and the mandate of the Arbitrator also comes to an end. Therefore, to enable the Arbitrator to make an Award on agreed terms, there has to be a request made by the parties. The learned counsel appearing for the respondents submitted that Sub-section (2) of Section 30 uses the term 'parties'/ as singular includes plural, even if one of the parties makes a request, the Arbitrator can make an Award. In my opinion, the submission is not well founded. It is true that as per the provisions of the General Clauses Act, singular includes plural and vicc-a-versa, but that is so unless the context indicates otherwise. In the present case, it cannot be said that even if the single party makes a request, an Award on the agreed terms can be made. Plain reading of Sub-section (2) of Section 30 shows that the Arbitrator gets jurisdiction to make an Award on agreed terms only if there is a request made by the parties and not otherwise. The jurisdiction of an Arbitrator is based on the consent of the parties, therefore, an Arbitrator because of consent of the parties gets jurisdiction to decide the disputes between the parties and make an Award on the basis of the findings recorded on the disputed issues. It is open to the parties to reach a settlement, it is also open to the parties to decide whether they want an Award in terms of the settlement or they want the termination of the Arbitral proceedings because of the settlement reached between them. Because of the initial consent given by the parties an Arbitrator gets jurisdiction to make an Award on the basis of adjudication and, therefore, to enable an Arbitrator to make an Award based on something other than adjudication, there will have to be a fresh consent given by the parties. It is clear from the provisions of Sections 30 and 32 that the law contemplates two types of settlements between the parties to an Arbitrator in relation to the subject-matter of the Arbitration i.e. (i) a settlement which results in termination of the Arbitral proceedings as also termination of the mandate of the Arbitration and (ii) a settlement which the parties to the settlement want to convert into an Arbitral Award. In so far as the present case is concerned, I find that though the learned Arbitrator has referred to the provisions of Sub-section (2) of Section 30, he has no where referred to there being a request made even by one of the parties to make an Award on agreed terms. Admittedly, there was no request made by all the parties to the settlement to make an Award in terms of the alleged settlement. In my opinion, therefore, for this sole reason the Award passed by the learned Arbitrator is liable to be set aside.

7. So far as the submission of the learned counsel appearing for the petitioners that the learned Arbitrator does not have jurisdiction even to record a finding in the face of the dispute about the existence or otherwise of the settlement is concerned, in my opinion, the submission is well founded. Perusal of Sub-section (2) of Section 30 makes it clear that if all the parties agree that they have settled the dispute, the Arbitrator can terminate the proceedings in the absence of any request from the parties to make the Award on agreed terms. If there is a dispute between the parties whether there is a settlement or not, in my opinion, in terms of the provisions of Sub-section (2) of Section 30 it cannot be said that the Arbitrator gets the power to decide the question about existence of settlement or otherwise. In my opinion, one has to consider the provisions of Order XXIII, Rule 3 of CPC. Order XXIII, Rule 3 reads as under :

'3. Compromise of suit--Where it is proved to the satisfaction of the Court that a suit has been adjusted wholly or in part by any lawful agreement or compromise in writing and signed by the parties, or where the defendant satisfies the plaintiff in respect of the whole or any part of the subject-matter of the agreement, compromise or satisfaction is the same as the subject-matter of the suit, the Court shall order such agreement, compromise or satisfaction to be recorded and shall pass a decree in accordance therewith so far as it relates to the parties to the suit, whether or not the subject matter of the suit :

Provided that where it is alleged by one party and denied by the other that an adjustment or satisfaction has been arrived at, the Court shall decide the question, but no adjournment shall be granted for the purpose of deciding the question, unless the Court, for reasons to be recorded, thinks fit to grant such adjournment.'

This provision was in existence when Arbitration and Conciliation Act, 1996 was enacted. It is clear from the provisions of Rule 3, Order XXIII that a power is required to be specifically conferred to record a finding in the face of dispute between the parties regarding existence or otherwise of a settlement. The Court has been conferred power by the provisions of Order XXIII, Rule 3 to record a finding that the parties have reached a settlement though some of the parties may be disputing that position. There is no such power conferred on an Arbitrator by the Arbitration Act. This law is enacted by the same legislation which enacted the Arbitration Act, therefore, if the legislature had intended that Arbitrator should have the same powers as the Court in so far as recording of compromise is concerned, the legislature would have specifically said so. In my opinion, the scheme of the Arbitration Act appears to be, if all the parties have agreed that the dispute has been settled, the Arbitrator is under a duty to terminate the proceedings. If all the parties do not agree that there is a settlement, then the Arbitrator has to proceed further to decide the dispute between the parties and make an Award. If there is a dispute between the parties about existence of a settlement, it cannot be said that the Award made by the Arbitrator is the Award on agreed terms. Power is conferred on the Arbitrator to make an Award only on agreed terms. It appears from the consent Awards, that are impugned in the petitions, that the learned Arbitrator found that one of the parties to the proceedings agreed to the settlement and thereafter relied from that. If that is so, then the effect of the Award made by the learned Arbitrator is to enforce the consent that was initially given by that party to the settlement. In my opinion, this could not have been done by the learned Arbitrator. The learned Arbitrator could have considered the dispute between the parties on merits and if evidence of settlement is also led by the parties, could have considered the evidence led by the parties in relation to settlement in considering the rival claims of the parties. But there could not have been an Award made by the learned Arbitrator solely on the basis of the settlement which was disputed by some of the parties.

8. So far as the contentions raised on behalf of the respondents that the arguments made before me have not been raised in the petitions is concerned, in my opinion, the submission is not well founded. Because I find that in the first ground itself the contention is raised that the consent Award made by the learned Arbitrator is not in accordance with the provisions of Section 30 of the Arbitration Act. If one goes through the entire petition, it is clear that the challenge which was argued before me is clearly raised in the petition.

9. For all these reasons, in my opinion, the petitions in so far as it challenges the consent Awards deserves to be allowed. Accordingly, all the Four petitions are allowed in part. The consent Awards made by the learned Arbitrator which are challenged in the petitions are set aside. The Awards made by the learned Arbitrator on adjudication are not disturbed. There shall be no order as to costs.

10. All petitions are disposed of.


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