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V. Anjaneya Setty Vs. M.G. Brothers - Court Judgment

LegalCrystal Citation
SubjectCommercial;Arbitration
CourtAndhra Pradesh High Court
Decided On
Case NumberC.M.A. Nos. 503 of 1977 and 202 of 1978
Judge
Reported inAIR1981AP250
ActsPartnership Act, 1932 - Sections 32, 62, 68, 68(2), 69, 69(2) and 72; Code of Civil Procedure (CPC), 1908 - Sections 80 and 99 - Order 1, Rule 1 - Order 30, Rule 1; Arbitration Act, 1940 - Sections 15, 17, 30 and 39; Indian Contract Act - Sections 253(7); Evidence Act
AppellantV. Anjaneya Setty
RespondentM.G. Brothers
Appellant AdvocateK. Harnath, Adv. for ;N. Ramamohan Rao, Adv.
Respondent AdvocateC. Padmanabha Reddy and ;C. Sadasiva Reddy, Advs.
Excerpt:
(i) commercial - maintenance of suit - sections 68 and 69 of partnership act, 1932, section 99 and order 1 rule 1 of code of civil procedure, 1908 and sections 17, 30 and 39 of arbitration act, 1940 - registered partnership firm carried on business in various items - certain suit filed by firm - firm competent to maintain suit in respect of award given in relation to one of its activities - different style and name of firms did not constitute separate firm - any other mode than register can be adduced in evidence for proving membership. (ii) arbitration - award - section 15 of arbitration act, 1940 - dealings between parties to be regarded as important in pronouncement of award - certain differences in accounts between parties occurred - arbitrators gave direction to parties for.....seetharama reddy, j.1. these two appeals arise out of a common judgment and decree passed in o. s. no. 17 of 1972 and o. p. no. 66 of 1972 by the learned subordinate judge, adoni, decreeing the suit with costs and dismissing the o. p. with costs. so they could be disposed of by a common judgment 2. the plaintiff in o. s. no. 17 of 1972 is the respondent in o. p. no. 66 of 1972; and the defendant in o. s. no. 17 of 1972 and m/s. vitta dodda hanumanthappa subbaiah setty and co., represented by the then partner vitta anjinaiah are the petitioners in o. p. no. 66 of 1972.3. the suit is for passing of a decree in terms of the award of the arbitrators with necessary modifications. briefly, the plaint averments are: the plaintiff m/s. m. g. brothers, is a partnership firm carrying on business.....
Judgment:

Seetharama Reddy, J.

1. These two appeals arise out of a common judgment and decree passed in O. S. No. 17 of 1972 and O. P. No. 66 of 1972 by the learned Subordinate Judge, Adoni, decreeing the suit with costs and dismissing the O. P. with costs. So they could be disposed of by a common judgment

2. The plaintiff in O. S. No. 17 of 1972 is the respondent in O. P. No. 66 of 1972; and the defendant in O. S. No. 17 of 1972 and M/s. Vitta Dodda Hanumanthappa Subbaiah Setty and Co., represented by the then partner Vitta Anjinaiah are the petitioners in O. P. No. 66 of 1972.

3. The suit is for passing of a decree in terms of the award of the arbitrators with necessary modifications. Briefly, the plaint averments are: The plaintiff M/s. M. G. Brothers, is a partnership firm carrying on business inter alia in decorticating and crushing of groundnut seeds under the name and style of M. G. Brothers Oil Mills at Yemmiganur, and M. R. Ganganna is a partner therein. The defendant was originally a partner of M/s. Vitta Dodda Hanumanthappa Subbaiah Setty & Co. of Bellery having its plant at Adoni. The said firm, during its dealings with the plaintiff, became indebted in a sum of Rs. 10,377-83 p. to the plaintiff. Vitta Anjinaiah Setty, the defendant, came out of the said firm and started doing business under the name and style of Vitta Dodda Hanumanthappa Anjanaiah Setty. The amount due to the plaintiff-firm by Vitta Dodda Hanumanthappa Subbaiah Setty and Co. was taken over by the defendant and the defendant undertook to discharge the said liability. Apart from that, on his own ac-count, the defendant became indebted to the plaintiff in a sum of Rs. 8,167.06 p. in respect of purchase of groundnut oil. The defendant also became indebted to the plaintiff in a sum of Rs. 15,251-71 p. being the toss incurred by the plaintiff on account of the despatch of a wagon load of groundnut oil made on the instructions of the defendant. In spite of repeated demands, the defendant failed to pay the said amounts together with interest thereon. Since disputes arose in respect of these transactions, the matter was referred to arbitration after several unsuccessful efforts to resolve their differences by mediators. Both the parties appointed Sri Mothilal Mavji, Sri Gummandmal Lalchand and Sri T.V. Vasantha Guptha as their arbitrators. A mutchilika was also executed by the plaintiff and the defendant in favour of the three arbitrators. The arbitrators duly entered on the reference, and, after due inquiry, scrutiny of the accounts and also statement of accounts filed by the parties, and after due consideration, made the award by signing it on 23-11-1971. As per the award, payment of all outstanding accounts, interest and other payments ordered, was to be made within 30 days; and in case of default, the erring party should pay interest at 15 per cent per annum from the date of the award. At any rate, the payment should not be delayed beyond 60 days. As per the award, the defendant has to pay a sum of Rs. 27,920-91 p. as detailed below :

1.In Head of Office Books :Sri VittaDodda Hanuman thappa Subbaiah Chetty Adoni ...

Rs.4,000-002.In Oil Mill Books: M/s.Vitta Dodda Hanumanthappa Subbaiah Chetty & Co., Adoni,

Rs.6,377-83 b)M/s. Vitta Dodda Hanumanthappa Anjiniah Setty, Adoni, Rs. 8,496-02 p Less amount paid to SriSrinivasa Rs, 500-00

Rs. 7,996-02

7,996-023.Claims granted: a)Interest3,105-00 b)Less on a/c. of wagon sale;8,167-06

29,645-91

Since the defendant failed to pay within the stipulated date, he is liable to pay interest amounting to Rs. 1,262/- from 23-12-1971 to 10-4-1972. Thus, the defendant is liable to pay, in all, a sum of Rs. 29,182-91 p. The arbitrators, suo motu, sent the award to the Court; and the notice sent by the Court on the filing of the award into Court by the arbitrators was served on the plaintiff on 5-2-1972. The plaintiff may be permitted to make necessary representations to modify or correct the award. He thus prayed to make the said award a decree of the Court.

4. The averments of the defendant in the written statement briefly are: The suit is not maintainable as the defendant denies that the plaintiff-partnership firm is registered and that M.R. Ganganna is a partner therein. The arbitration agreement was between M/s. M. G. Brothers Oil Mills on one part and M/s. Vitta Dodda Hanumanthappa Anjaniah Setty on the second part. The plaintiff was not a party to the arbitration agreement and so the suit must be dismissed in limine. The suit is not filed by M/s. M. G. Brothers Oil Mills and also it is not filed against M/s. Vitta Dodda Hanumanthappa Subbaiah Setty and Co. who are actually the parties to the agreement as well as the award. So, the suit is liable to be dismissed in limine. The allegations that M/s. Vitta Dodda Hanumanthappa Subbaiah Setty and Co., became indebted in the course of its dealings with the plaintiff in a sum of Rs. 10,377-63 p. to the plaintiff, that the defendant came out of the said firm and started business, that the amount due to the plaintiff from the said firm was taken over by the defendant, and that the defendant has undertaken to discharge the said liability, are all false and denied. The allegations regarding the other claims made by the plaintiff cannot be alleged in this suit under Section 17 of the Arbitration Act. Further, the allegations that the defendant, on his own account, became indebted to the plaintiff in a sum of Rs. 8,167.06 p. in respect of purchase of groundnut oil, that the defendant also became indebted to the plaintiff in a sum of Rs. 15,251-71 p., that the plaintiff incurred so much loss on account of despatch of one wagon load of groundnut oil, that there were demands for payment of amount with interest, that in respect of the above mentioned transaction, disputes arose between the plaintiff and the defendant, that there were any attempts to resolve their differences are alt false and denied. It is not true and correct to say that the arbitrators considered all the points of the parties, scrutinized the accounts and statement of accounts. It is incorrect to say that both the parties filed any accounts and statements. The defendant does not also admit as to when the arbitrators made the award and as to when they signed it. The award is a document which must speak for itself. No other document can be looked into now to explain or to add to the award. The further allegation that as per the award, the defendant has to pay a sum of Rs. 27.920-91 p. as per the details mentioned in the plaint is false and denied The award does not mention anything about M/s. M. G. Brothers and the various amounts due if any according to them. The details given in the plaint are also false and denied. In the plaint, only two amounts are shown as the claims granted by the award and they are :

(a) Interest Rs. 3,105/-(b) Loss of account ofwagon sale. Rs. 8,167-06 p.

In fact, the award says that Rs. 3,105/- need not be paid towards interest. The award does not say that Rs. 29,645-91 p. was the amount due, that Rs. 1,725/- was the sale proceeds of 60 old empty drums at Rs. 28-75 p. each as per the bill dated 3-11-1971 of M/s. Hindustan Levers and it should be deducted, and that Rs. 27,920-91 p. is the amount due and payable to M/s. M. G. Brothers by the defendant. The defendant is not liable to pay Rs. 29,192-91 p. or any part of it to the plaintiff. The award does not order the defendant to pay any amount to M/s. M. G. Brothers. Further, M/s. Vitta Dodda Hanumanthappa Subbaiah Setty & Co. and this defendant as petitioners filed O. P. No. 66 of 1972 against M/s. M. G. Brothers Oil Mills as respondent as they are the only parties to the arbitration proceedings, for setting aside the award and for revoking the arbitration agreement in question. The defendant craves leave to read the said petition as part of the written statement.

5. On the said pleadings, the following issues and additional issues were framed by the trial Court in O. S. No. 17 of 1972: Issues:

1. Whether the plaintiff is a registered firm under Indian Partnership Act? and if so, whether M. R. Ganganna is partner therein?

2. Whether the suit as filed is not maintainable ?

3. Whether the award is not enforceable for any of the reasons mentioned in the written statement ?

4. Whether the plaintiff is not (as per orders) in I. A. No. 69/73 dated 28-9-1973 entitled to a decree in terms of award?

5. Whether the arbitrators are guilty of any misconduct and whether the same is liable to be set aside?

6. To what relief?

Additional issues :

1. Whether the Muchilika was not executed by the plaintiff and the defendant in favour of the three arbitrators ?

2. Whether there was no dispute between M/s. M. G. Brothers and the defendant and if so, whether the same is not referred for arbitration ?

3. Whether the suit is not maintainable for non-joinder of Vitta Dodda Hanumanthappa Subbaiah Setty and Co. ?

4. Whether Vitta Dodda Hanumanthappa Subbaiah Chetty & Co., did not become indebted to the plaintiff in a sum of Rupees 10,377-63 paise and whether the defendant had not undertaken to discharge the said liability ?

5. Whether the defendant on his own be-came indebted to the plaintiff in a sum of Rs. 8,167-06 p. in respect of purchase of groundnut oil?

6. Whether the defendant became indebted to the plaintiff in a sum of Rs. 15,251-71 on account of despatch of wagon load of oil?

7. Whether the defendant is liable to pay interest of Rs. 1,262-00; if so, is the defendant liable to pay it to M/s. M. G. Brothers?

8. Whether the drums given by M/s. Vitta Dodda Hanumanthappa Anjinaiah were returned to them as per the Award ?

9. Whether the pleas which may be relevant in a regular suit for money based on dealings or in a suit for money based on undertaking or in a suit for damages for breach of contract which have not been taken and proved before the arbitration can be taken in this suit under the Arbitration ?

10. Whether the plaintiff can allege in the plaint, rely on and prove in this suit under the Arbitration Act any material facts not alleged, not relied upon and not proved before the Arbitrators and not apparent on the face of the Arbitration Award ?

11. Whether the award ordered the defendant to pay any amount of M/s. M. G. Brothers, the plaintiff in the suit?

12. Whether the Award did not order deduction of Rs. 1,725-00 as sale proceeds of 60 old empty oil drums?

13. Whether the parties did not file accounts and statements of accounts before the arbitrators? If so, what effect?

14. Whether the arbitration agreement is not valid and admissible in evidence?

15. Whether the defendant is entitled to revoke the arbitration agreement?

16. Whether the Award is vague, invalid and inadmissible in evidence?

17. Whether the arbitrators misconducted themselves in the proceedings before them?

6. O. P. No. 66 of 1972 was filed for setting aside the award dated 27-11-1971 and for revoking the arbitration agreement.

7. The material allegations in the petition were mostly the same as averred in the written statement in O. S. No. 17 of 1972. It was further pleaded in the petition that the arbitration agreement as well as the award are chargeable with stamp duty and they are engrossed on white papers instead of stamp papers and, so, they are not admissible in evidence. The arbitration agreement merely says that the parties to it have a dispute in their dealings which are not specified at all. So, the arbitration agreement is vague and so the award is vitiated. Further, there was no proper inquiry. The arbitrators did not inquire properly. They mil-directed themselves and the proceedings before them. They did not call for accounts, statements and documents of the respondent in support of its case. They formally recorded evidence and they refused to permit the petitioners to engage a lawyer and examine witnesses. The claim has become barred by limitation several years prior to the arbitration agreement and so there was no subsisting dispute between the petitioners and M/s. M. G. Brothers. The award directs payment of amount when in law the petitioners are not liable to pay. There are a number of mistakes on the face of the award.

8. The counter filed by the respondent countered the averments in the petition, more or less on the same lines indicated in the averments made in the plaint in O. S. No. 17 of 1972. The respondent states that the inquiry was properly conducted by the arbitrators, statements were filed and scrutinized, and proper opportunity was given to the parties for letting in evidence. It is not true to say that the arbitrators misconducted themselves or in the matter of procedure adopted by them; and therefore, no case has been made out to set aside the award dated 23-11-1971. On the contrary, the decree will have to be made in terms of the award.

9. On the pleadings, the following issues were framed in O. P. No. 66 of 1972:

1. Whether the arbitration award dated 23-11-1971 is liable to be set aside for an; of the seasons mentioned in the petition?

2. Whether the petitioners are entitled to revoke the arbitration agreement?

3. Whether the petition to set aside the award is barred by limitation?

4. Whether the court-fee paid it not correct ?

5. To what relief?

10. All the issues were decided by the trial Court in favour of the plaintiff and against the defendants. On Issues (3) and (4) in O. P. No. 66 of 1972, the trial Court held that the counsel for the defendant in O. S. No. 17 of 1972 and the petitioners in O. P. No. 66 of 1972 conceded that he was not pressing those issues stating that the questions raised by him as to limitation, setting aside of the award, and the incorrectness of the court-fee paid by the plaintiff were not then disputed by him, and, therefore, it found on those issues in favour of the plaintiff.

11. The points that fall for adjudication are:

(1) Whether the suit is not maintainable for the reasons:

(a) that the plaintiff is not a party to the arbitration proceedings;

(b) that the party representing the plaintiff-firm is not a partner whose name is found in the register of firms; and

(c) that the necessary parties to the arbitration proceedings are not impleaded as parties and therefore, on the ground of nonjoinder, the suit will have to be dismissed in limine ?

(2) whether the award is not enforceable for the reasons,

(a) that the reference made to the arbitrators is vague;

(b) that the award is inadmissible in evidence as only a copy of the award has been filed and not the original; and

(c) the award is not the result of combined or mutual deliberation of all the arbitrators?

(3) Whether the award will have to be set aside as,

(a) the arbitrators have misconducted themselves; and

(b) the arbitrators have misconducted the proceedings ?

(4) Whether the claim in regard to the disputes referred to in the award are mostly time-barred and, therefore, the same should not be entertained

12. Plaintiff -- Whether is a party to an arbitration:

1 (a). The first limb of the first contention is that the suit is not maintainable when the plaintiff is not a party to the arbitration proceedings.

13. The argument is that Ex. A-17, the arbitration proceeding. Ext. A-18 the award, and the annexure to the said award (Exhibit A-18-a), show the first party as 'M. G. Brothers Oil Mills', whereas the plaintiff to the suit is 'M. G. Brothers' registered partnership firm represented by its partner M.R. Ganganna and that since 'M. G. Brothers' is not a party to the arbitration proceedings, the suit is not maintainable as 'M. G. Brothers Oil Mills' is a different and distinct entity and unless the said 'M. G. Brothers Oil Mills' is registered, it cannot maintain the suit.

14. The contra contention is that 'M. G. Brothers Oil Mills' is part and parcel of M. G. Brothers, being one of the trade names which is used to distinguish the type of business that is carried on. M. G. Brothers is the registered firm which carries on various businesses such as petrol, kerosene, workshop accessories, oil mills, groundnut oil business and so on. Therefore, M. G. Brothers Oil Mills is not a separate entity and it is not a firm at all. In fact, it is neither registered as a firm nor is it an unregistered firm. Therefore, M. G. Brothers is the party to the arbitration and consequently, the suit is maintainable.

15. Before adverting to the analysis of the case law on this aspect of the case relied on by both the parties, the material facts with reference to evidence may be noticed. M. G. Brothers Oil Mills is only a name employed for the purpose of identifying the oil business carried on by the registered firm M. G. Brothers. The assets and liabilities of M. G. Brothers Oil Mills are shown only in the accounts of the M. G. Brothers as per Ex. A-5, which is the auditor's report marked through P. W. 6, the Chartered Accountant. Ex. A-5 shows that M/s. M. G. Brothers, a registered firm, carries on various businesses in various names and at various places, in petrol, kerosene, oil mills, groundnut oil. Imperial Chemical Industries and so on. It is also in the evidence of P. W. 6 that the plaintiff-firm deals in oil under the name of M. G. Brothers Oil Mills, which is not a separate entity working with different partners and that it is not a firm at all. This is corroborated by P. W. 2, the partner M.R. Ganganna him-self. There is no contra evidence let in to discredit the evidence of P. Ws. 2 and 6 by summoning the records from the Income-tax Office or from other Government Office or from any other source. The letterhead used has got the printed script as 'M. G. Brothers'; whereas there is a typed script on the letterhead as 'M. G. Brothers Oil Mills', which connotes that it related to the Oil business of M. G. Brothers.

16. The following cases were relied on by the learned Counsel for the appellant in support of his contention. In Bhardia Bros. v. Union of India : AIR1973Ori28 , it is held, (at p. 30)

'Where the registered firm, 'Balbagas Hullas Chand' besides its principal place of business at Calcutta carried on business also at its branch in Cuttack in the name of, 'Bhardia Brothers' which was not shown as partner of the firm or the firm-name a suit by 'Bhardia Brothers' against the Railway for damages, cannot be treated as on behalf of the firm and would be barred under Section 68(2) (Partnership Act) and the notice under Section 80, Civil Procedure Code by Bhardia Brothers, cannot be treated as notice by the firm.'

This case is of little assistance to the appellant because of its peculiar facts which bear no resemblance to the facts of the present case, as in this case, two different firms were trading in the name of Bhardio Brothers and Balbagas Hullas Chand, and therefore, both the firms were required to be registered.

17. The next case, S.N. Dutt v. Union of India, : [1962]1SCR560 , turned upon the provisions enacted in Section 80, Civil Procedure Code. There, the notice under Section 80 was given by M/s. S. N. Dutt & Co., and the suit was filed by S. N. Dutt, sole proprietor of a business carried on under the name and style of S. N. Dutt and Co. And the Supreme Court held that the person giving the notice was not the same as the person suing and that, therefore, Section 80 was not complied with. The important aspect of the case has been actually dealt with in para 11 of the judgment, which may, in extenso, be usefully extracted :

'It will be immediately obvious that the notices were in the name of Messrs. S. N. Dutt and Co., while the suit was filed by S. N. Dutt claiming to be the sole proprietor of Messrs. S. N. Dutt and Co. It is urged on behalf of the appellant that the reason why the suit was filed in the name of S. N. Dutt as sole proprietor of Messrs. S. N. Dutt and Co., was that no suit could have been filed in the name of Messrs. S. N. Dutt and Co., as that was not a firm; that was merely the name and style in which an individual, namely S. N. Dutt, was carrying the business. The question therefore that immediately arises is whether S. N. Dutt who filed the suit was the person who gave the notices and the answer is obvious that it is not so. It may be that S. N. Dutt is the sole proprietor of Messrs. S. N. Dutt and Co. and is carrying on business in that name and style; but that does not mean that these notices were by S. N. Dutt. Any one reading these notices would not necessarily come to the conclusion that Messrs. S. N. Dutt and Co. was merely the name and style in which an individual was carrying on business. The prima facie impression from reading the notices would be that Messrs. S. N. Dutt and Co. was some kind of partnership firm and notices were being given in the name of that partnership firm. It cannot therefore be said on a comparison of the notices in this case with the plaint that there is identity of the person who issued the notices with the person who brought the suit. Besides, if Messrs. S. N. Dutt and Co., not being a partnership firm, could not file a suit in that name and style on behalf of its members, we cannot see how Messrs. S. N. Dutt and Co. could give a valid and legal notice in that name and style on behalf of an individual, S. N. Dutt. As was pointed out by the Privy Council in Pestonji Ardeshir Wadia's case, 76 Ind App 85 : AIR 1949 PC 143, the case of members of a firm stood on a different footing, for the members of a firm might sue in the name of the firm; but in the present case Messrs. S. N. Dutt and Co., is not a firm; it is merely the name and style in which an individual (namely S. N. Dutt) is carrying on business and though the individual may in certain circumstances be sued in that name and style, he would have no right to sue in that name. Therefore, where an individual carries on business in some name and style the notice has to be given by the individual in his own name, for the suit can only be filed in the name of the individual. The present suit is analogous to the case of trustees where the suit cannot be filed in the name of the trust; it can only be filed in the name of the trustees and the notice therefore has also to be given in the name of all the trustees who have to file a suit. Therefore comparing the notices given in this suit with the plaint, and remembering that Messrs. S. N. Dutt and Co. is not a partnership firm but merely a name and style in which an individual trades, the conclusion is inescapable that the person giving the notices is not the same as the person suing.'

Two facts determinantly emerge from these observations. One is, by reading the notices issued by Messrs. S. N. Dutt and Co., one Would not conclude that an individual was carrying on business; on the contrary, it bears an impress that some kind of partner-ship firm, was the entity and not an individual. And therefore, very rightly, the Supreme Court in the aforesaid case held that notices established the identity of the person. Secondly, where there are more than one trustee and notice is given by only one trustee, and if the suit is sought to be filed by all the trustees as unlike the partnership firm where a suit could be filed on behalf of the firm by one of the partners, such suit is not maintainable as the suit notice was not given by all the trustees.

18. In view of the above, and because of the fact that the above cited case turns upon the language of Section 80, Civil Procedure Code, the ratio is of little or no assistance to the appellant. Even otherwise, we have no hesitation to hold that in the case referred to, 'identity' between the person who was a party to the arbitration proceeding and also a person on whose behalf the notice has been issued under Section 80 on one hand and the party on whose behalf the suit has been filed, has been amply established:

19. It is needless to further extract the observations made in Hira Singh v. Ganga Sahai, (1884) ILR 6 All 322; Radha Kishan v. Sapattar Singh, : AIR1957All406 ; Muthu Kutty v. Varee Kutty, : AIR1950Mad64 cited by learned counsel for the proposition that only a party to the arbitration proceedings can execute the award.

19-A. Section 69(2) of the Indian Partnership Act lays down :

'No suit to enforce a right arising from a contract shall be instituted in any Court by or on behalf of a firm against any third party unless the firm is registered and the persons suing are or have been shown in the Register of Firms as partners in the firm.'

20. What is, therefore manifest from the language of Section 69(2) of the Partnership Act, and also in the light of the preponderant evidence let in by the plaintiff both under Ext. A-5 as well as under Ext. A-19 apart from the oral testimony given by P. Ws. 2 and 6, and in particular in the absence of any evidence whatsoever by the defendant, is that M. G. Brothers Oil Mills is nothing but a part and parcel of M. G. Brothers Partnership firm. There is no separate entity of M. G. Brothers Oil Mills constituting a separate firm with different partners at different places. It is Messrs. M. G. Brothers, a registered partnership firm, which carries on business in various items tike oils, chemical industry, spare parts and so en; and it is M. G. Brothers partnership firm which has got common partnership account wherein reflect the entire assets and liabilities with regard to all the business transactions in different items. This is further reinforced by the fact that in Exhibit A-18 (a), which is an enclosure to the award (Ext. A-18), 'Oil Mill Books' have been shown as belonging to Messrs. M. G. Brothers. Exhibit A-18 (a), in so far as it is relevant, reads.

'Outstanding Amount as per the Books of:

M/s. M. G. Brothers.

1. In Head Office Book: Sri Vitta Dodda Hanumanthappa, Subbaiah Setty, Adoni.........4,000-00

2. In Oil Mill Books:

(a) M/s. Vitta Dodda Hanumanthappa Subbaiah Setty & Co., Adoni. ....6,377-83

(b) M/s. Vitta Dodda Hanumanthappa, Anjanaiah Setty, Adoni.........8,496-02 XX XX XX XX'

The cumulative effect of the foregoing is that M. G. Brothers Oil Mills is not a separate or independent entity but is part and parcel of M. G. Brothers. If that is so, it is M/s. M. G. Brothers that is a party to the arbitration agreement and the award and, so is entitled to file the suit.

21. 1 (b). The second limb of the contention is that even assuming that the plaintiff is a party to the arbitration proceedings, still the suit is not maintainable because the party, who is said to have filed the suit representing the firm, is M. R. Ganganna who is not a partner of the firm and it is M. Ganganna that is a partner of the firm and that since M. R. Ganganna is a party to the arbitration proceedings, the suit filed is bad in law and, therefore, should be dismissed in limine. No doubt, Section 69(2) contemplates two conditions which are sine qua non to be complied with in order to enforce, a right by instituting a suit on behalf of a firm: (1) the firm should be registered; and (2) the persons suing are or have been shown in the Register of Firms as partners in the firm. Exhibit A-1 dated 11-6-1962 is an extract from the Register of Firms. In Exhibit A-1, at Sl. No. 12, M. Ganganna is shown as a partner. It is in the evidence of P. W. 1, who it a clerk of the plaintiff-firm, that M. Ganganna is a partner of this firm, and that he subsequently changed his name as 'M.R. Ganganna'. This is also corroborated further by P. W. 2, who is M.R. Ganganna himself. He states that he changed his name as M.R. Ganganna as there were two partners in the firm by name M. Ganganna, and that the other M. Ganjanna changed his name as M.P. Ganganna. He further states that his father's name is M. Ramanna, whereas M.P. Ganganna's father's name is M. Pakeerappa. He got his name changed through G. O. Ms. No. 1962 dated 22-9-1965 (Ext. A-2). It is not in dispute that it is this M. Ganganna that has been a partner of the firm right from 1963 and whose name was changed in 1965 as M.R. Ganganna. What is quarrelled by the appellant is that this changed name does not figure in the extract of the Register of Firms. Though it has been stated on behalf of the plaintiff-firm that as per Section 63 of the Partnership Act, an intimation of the alteration was sent to the Registrar of Firms after the change of the name, there is nothing to indicate that in pursuance of the same, the name has been changed. So, the contention is that since, under Section 68, any statement recorded in the Register of Firms is conclusive proof of any fact stated therein, nothing extraneous to Ext. A-1, the extract from the Register of Firms, can be brought in to establish by evidence that it is M.R. Ganganna who is the partner styled previously as M. Ganganna. In support of this contention, reliance is placed on the decision in Sudarsanam v. Viswanadham Bros., 1954 Andh LT (Civil) 121 ; (AIR 1935 Andhra 12). There, a firm was registered under the Partnership Act, and the names of five persona, A, B, C, D and E were entered in the Register of Firms as partners. Shortly thereafter, in consequence of a family partition between C, D and E, E retired from the partnership. No notice of these two facts was given to the Registrar. Later, A, C and D executed a fresh agreement of partnership. In a suit brought by this firm against the defendants for a certain sum, the claim having arisen from dealings commenced after the execution of the fresh agreement of partnership, on the defendants contending that the plaintiff-firm was different from the one constituted prior to the execution of the fresh agreement of partnership and that Section 69(2) of the Partnership Act was bar to the maintainability of the suit, this Court held (at p. 14 of AIR):

There is no corresponding provision to Section 253(7) of the Indian Contract Act providing for the dissolution of the partnership on any member of the partnership ceasing to be a partner. When an express provision in the Contract Act is omitted in compiling a separate code for partnership, it is obvious that the omission is designed and not accidental. It follows that the retirement of a partner does not have the legal effect of dissolving the partnership.'

Further,

'Under Section 69(2), a firm is disabled from filing a suit against a third party unless (i) the firm is registered and (ii) the persons suing are shown in the Register of Firms as partners of the firm. ...... ...... ..... In the present case both the conditions are satisfied and Section 69(2) does not bar the suit.'

Neither the ratio nor the facts of the above decision help the case of the appellant

22. Learned counsel next cited Ramachandraiah Gupta v. Ravula Venkat Reddy, (1970) 1 Andh WR 243, wherein the High Court of A. P. held :

'Whether the suit is filed by all the partners collectively or by some only of the partners impleading the rest as parties to the suit or whether it is filed in the name of the firm by one, or more partners in the manner indicated by Order 30, Rule 1, the conditions prescribed by Section 69(2) must be fulfilled. They are (1) that the firm must be registered and (2) that the persons suing are or have been shown in the Register of Firms as partners in the firm. The second condition requires that the names of the persons suing are presently shown or have been previously shown in the Register of Firms as partners in the firm.'

With respect, there cannot be any quarrel with the proposition laid down in the above decision.

23. The cases relied on by the learned counsel for the respondent are more apt and solid on the point In M. J. V. Mudliar v. S. V. Finance Corporation, : AIR1971AP63 , a single Judge of this Court held (at p. 68):

'The provisions of Section 69(2) only postulate that the names of the persons suing must be shown to have been entered as partners in the Register of Firms. The mode of proof of that fact is not in any way restricted. It is consequently open to the plaintiff to adduce evidence that the name of a partner suing on behalf of the firm has been entered as such in the Register of Firms.'

In M.A. Hussain v. P. V. G. K. & Bros., AIR 1970 Mys 299, a single Judge of the Mysore High Court held (at p. 302):

'It is clear from this provision (Section 69(2)) that there are two alternatives available in the second condition. The persons suing may establish either that they are partners on the date of suit or that they are persons whose names are shown in the register of firms as partners in the firm. As already observed, the second alternative, namely, the fact that the names of the persons suing have been shown in the register, of firms at partners of the firm can be established either by producing relevant register of firms or a certified copy of the same and not by adducing oral evidence. But there is no legal bar to prove the first alternative, namely, that the persons suing are partners of the firm by adducing evidence other than the register of firms or its certified copy. It appears that pointed attention of the Court has not been invited to the first alternative of the second condition in above referred case decided by the Nagpur High Court (AIR 1952 Nag 57). In my opinion, the persons suing must either in fact be partners on the date of suit or must be persons whose names are shown as on the date of suit in the Register of Firms as partners of the firm. Even if the names of the partners suing have not yet been entered in the Register of Firms, they can still institute the suit by proving that they are in fact partners of the firm on the date of suit. That can only be proved by evidence other than the Register of Firms.'

To the same effect is the ratio decidendi in Bharat Sarvodaya Mills v. Mohatta Bros., : AIR1969Guj178 and Balakrishna Trading Corporation v. Krishna Kurup, 1969 Ker LT 855.

24. Section 68 of the Partnership Act reads :

'68. Rules of evidence. (1) Any statement, intimation or notice recorded or noted in the Register of Firms shall, as against any person by whom or on whose behalf such statement, intimation or notice was signed, be conclusive proof of any fact therein stated.

(2) A certified copy of any entry relating to a firm in the Register of Firms may be produced in proof of the fact of the registration of such firm, and of the contents of any statement, intimation or notice recorded or noted therein.'

What Section 68 contemplates is that the contents in the Register of Firms shall be conclusive proof. But, we do not find anywhere in the provisions of the section any prohibition on establishing by independent evidence otherwise than by producing the extract of Register of Firms, that a particular person is a partner in the firm. In our undoubted view, Section 68 postulates only one of the modes -- which no doubt is conclusive -- by which a statement, intimation or notice said to have been signed by or on behalf of a person in the Register of Firms, could be proved by producing an extract of the Register of Firms. We will not, there-fore, read, which the learned counsel for the appellant wants us to do, Section 68 for the position that it excludes any mode otherwise than producing the extract of Register of Firms, by which a person could be established to be a partner of the firm. Hence, in our undoubted view, M.R. Ganganna is a partner of the plaintiff firm, and so the suit is maintainable.

1 (c). The suit is not maintainable because of non-joinder of parties:

25. The argument is that as per the arbitration agreement (Ext. A-17), Vitta Dodda Hanumanthappa Subbayya Setty & Co., for short V. D. H. Subbayya Setty & Co. is one of the parties and also to the award. If that is so, failure to implead in the suit the said V. D. H. Subbayya Setty & Co., must result in the dismissal of the suit on that ground alone. Further, even though Anjanaiah Setty has taken over the liability of V. D. H. Subbayya Setty & Co. on dissolution in 1966, yet unless there was tripartite agreement between M. G. Brothers, V. D. H. Subbayya Setty & Co., and Anjanaiab Setty, the presence of V. D. H. Subbayya Setty & Co. cannot be eliminated from the suit. Notwithstanding the dissolution in 1966, from the conduct of the plaintiff, it is clear both with reference to Ext. A-17 agreement as well as the award, that V. D. H. Subbayya Setty & Co. was continued to be a party to the proceedings and since there is no novation, its impleading is a must

26. Reliance was placed on a decision in Meenakshi Achi v. P.S.M. Subramanian Chettiar, AIR 1957 Mad 8, wherein it is held (at pp. 11, 12):

'Under Section 32, a partner may retire (i) with the consent of all the partners; (ii) by virtue of an express agreement between the partners and (iii) in case of a partnership at Will, by giving notice in writing to all other partners of his intention to retire. Such a partner, however, continues to be liable to third parties for acts of the firm, after his retirement, until public notice of his retirement as required by Section 72 has been given, either by himself or by the other partners.

XX XX XX XX Even where partners agree among themselves that the continuing partners shall be liable for the obligation of a retiring partner, such an agreement cannot per se affect the rights of the creditors being res inter alios acta. Such agreement may be either express or may be implied by a course of dealing between the third parties and the new firm, after knowledge of his retirement. But it will not be presumed and if it exists will have to be strictly proved.'

27. The arbitration agreement (Ext. A-17) refers to M/s. M. C. Brothers Oil Mills as one part and M/s. Vitta Dodda Hanumanthappa Subbayya Setty & Co., for short V. D. H. Subbayya Setty & Co., as well as M/s. Vitta Dodda Hanumanthappa Anjanaiah Setty for short V. D. H. Anjanaiah Setty, as the second part. Underneath the agreement, for V. D. H. Subbayya Setty & Co., as well as for V. D. H. Anjanaiah Setty, the defendant has signed. It is equally clear from the award that both V. D. H. Subbayya Setty & Co. and V. D. H. Anjanaiah Setty were treated as one part. It is admitted that the liability of V. D. H. Subbayya Setty & Co. has been taken over by V. D. H. Anjanaiah Setty; and it is stated in the award that the arbitrators together heard both the parties in two sittings.

28. P. W. 8, who is the auditor of the erstwhile Bellary firm and also the present auditor of the defendant, has produced Exts. X-2 and X-3 which are account copies relating to V. D. H. Anjanaiah Setty and V. D. H. Subbayya Setty & Co. respectively. As per Ext. X-2, the liability of the firm was taken over by the defendant. In Exhibit A-23, the Income-tax return of the defendant for 1973-74 which was proved by the Income-tax Inspector (P. W. 5), the defendant admitted his liability to the plaintiff. In view of the conspectus of the material facts, it is clear that the defendant has owned the liability which was incurred by V. D. H. Subbayya Setty & Co.; and though he has tried not to own the same in his evidence by giving evasive replies in the cross-examination, it is irresistible to conclude that the liability of Subbayya Setty & Co. has been taken over by Anjanaiah Setty on his shoulders and he cannot escape the same. There is no explanation either as to why be signed the arbitration agreement (Ext. A-17) for V. D. H. Subbayya Setty & Co. Even otherwise, we do not find any injustice is caused, under Section 99, Civil Procedure Code, reads :

'No decree shall be reversed or substantially varied, nor shall any case be remanded, in appeal on account of any misjoinder or non-joinder of parties or causes of action or any error, defect or irregularity in any proceeding in the suit, not affecting the merits of the case or the jurisdiction of the Court.'

We feel as contemplated by the aforesaid provision, no injustice has been caused to the defendant even assuming though not laying down, that there is a technical defect in the non-joinder of V. D. H. Subbayya Setty & Co. in the suit as a party for the reversal of the decision on merits. See Kiran Singh v. Chaman Paswan, : [1955]1SCR117 .

29. II (a). The second main contention it that the award is not enforceable, because the reference made to the arbitrators is vague.

30. The argument is that in the reference, no specific items of dispute have been enumerated. No dispute regarding the principal 'outstanding amount' has been referred and yet it has been decreed by the arbitrators. The award, for the purpose of enforceability, must be reasonably clear. It is stated in the award that no interest need be paid and yet it has been awarded in a sum of Rs. 3,105/-. Likewise, in the award, it has been stated that there is a difference of Rs. 1,500/- and odd in the balance struck between the accounts of the parties; but no definite deduction by way of a decision has been made with regard to the same. Points regarding which there were no differences at the time of reference, have also been dealt with in the award.

31. Reliance was placed on the observation made in Russell on Arbitration, 18th Edition, at page 323, which reads;

'An award will not be enforced as a judgment under the section, but the successful party will be left to bring an action on the award in the following cases :

1. XX XX XX XX 2. Where the award is declaratory only, for instance where it ascertains only the amount to be paid, and not the liability in law to pay. Where there has been nothing more than a quantum or amount adjudicated upon, and no adjudication as to the liability of the person who is called upon to pay the amount. In my judgment the section does not apply (1896-2. QB 412).'

Another observation at page 316 is.:

'An award on a submission of all matters in difference is no bar to the recovery of a demand which, though it existed as a claim at the lime of the reference, was not then a matter in difference and had not been referred to the arbitrator.'

32. In the arbitration agreement (Exhibit A-17), the language is:

'We, xx xx xx xx hereby declare that we have disputes in our dealings. We hereby submit ourselves to arbitration ..... .....'

From the agreement, it is amply made clear that there have been disputes between the parties in regard to their dealings in business transactions and, therefore, it covers the whole gamut of dealings, without any reference as to the period, the nature of the transaction or any specific item of the transaction. The reference, has been, therefore, couched in as wide a language as the parties intended it to be. So, on that score, it cannot be held that the reference is ambiguous or equivocal. See Mt. Amir Begam v. Syed Badruddin, AIR 1914 PC 105; R. K. Thirumalai Chettiar v. K.N. Nanjiah Gounder, AIR 1941 Mad 266 and Union of India v. D. N. Revri & Co, : [1977]1SCR483 .

33. Now, coming to the aspect of inter-cat, no doubt, in the award, it is stated :

'The arbitrators have considered both the arguments and order payment of interest on the balance outstanding in the account of M/s. Vitta Dodda Hanumanthappa Anjanaiah Setty in which the interest has been paid. The arbitrators also order that no Interest need be paid on the account of M/s. Vitta Dodda Hanumanthappa Anjaniah. This interest amounts to Rs. 3,105/-.'

It appears from the above that the arbitrators disallowed the interest. But, from the evidence of P. W. 3, who is one of the arbitrators (T. G. Vasantha Guptha), it could be gathered that there was some confusion in view of the misconstruction of the sentences in the award. The arbitrators have specifically said that the plaintiff is entitled for the payment of interest on the balance outstanding in the account of M/s. V. D. H. Subbayya Setty & Co., in which interest was collected from the plaintiff on an earlier occasion. The sentence, 'This interest amounts to Rs. 3,105/-' should have preceded the last sentence in para 1 of the award (Ex. A-18). The arbitrators, no doubt, have specifically made it clear that no interest need be paid on the account of V. D. H Anjanaiah Setty. P. W. 3 has cleared this ambiguity in his evidence. In the first para of the award, there is another mistake. For the words 'V. D. H. Subbayya Setty & Co.' the words 'V. D. H. Anjanaiah Setty' are used in the sentence which precedes the sentence at the end of the first para. It is an apparent mistake which is quite evident from the immediate following sentence, that the arbitrators also ordered that interest need be paid on the account of M/s. V. D. H. Anjanaiah. So, this exercise on behalf of the defendant is nothing but making a mountain out of a mole hill and the same deserves to be reject-ed. We may, however, point out that under Section 15 of the Arbitration Act, the Court may modify or correct any clerical mistake or error arising out of accidental slip of omission.

34. The next incident cited for the proposition that the reference as well as the award are vague is that a sum of Rs. 1,500/-has been directed to be reconciled. Herein also we do not find any substance. The arbitrators found, while scrutinizing the accounts, that there was a difference of Rupees 1,500/- and odd in the balance struck between the accounts of the parties and, therefore, they made it clear that since it was an accounting problem, there should be a reconciliation of the entries among the parties. No doubt, they stated that this should be done within a week from the date of the award. This being a matter of accounting, they directed the parties to reconcile and, therefore, we do not find any ambiguity about their decision in this behalf. In fact, pursuant to that, the plaintiff, in their communication to the defendant dated 20-12-1971 stated as under:

'We have already furnished our statements of account to enable you to reconcile the difference of Rs. 1,500/-.'

35. The proposition laid down in Ganesh Narain Singh v. Malida Koer, (1911) 10 Ind Cas 450 (Cal), namely, the arbitrator must decide on all points, and on which the learned counsel for the appellant relied on, cannot be overstressed as it is well-settled. Therefore, the contention that the decision of the arbitrators with regard to the sum of Rs. 1,500/- to be reconciled is vague, cannot be countenanced and the same is rejected.

36. The nest contention on the vagueness, is with reference to the award (Ext. A-18). This, in turn, is based on the objection that Ext. A-18 (a) which is an annexure to the award, does not form part of the record atit is said to be subsequently annexed; and this is said to be for three reasons; firstly, there is no reference in the award itself of the annexure; and secondly, the direction in the award is that the 18 drums supplied by the defendant for the consignment of oil were to be returned, whereas in the annexure (Ext. A-18 (a)), the sale proceeds of 18 drums were given the credit of and the amount actually to the paid by the defendant was determined at Rs. 27,920.91 p. Thirdly, in the annexure (Ext. A-18 (a)), 'Outstanding amounts as per the Books of has no corresponding reference in the award (Exhibit A-18). This submission, which has no substance, has to be rejected.

37. A closer scrutiny of the award would answer alt the queries raised by the learned counsel for the appellant. The concluding para of the award reads:

'The above award must be implemented by payment of all outstanding account interest and other payments ordered herein must be paid within 30 days from today.'

The words 'all outstanding account' occur for the first time in the conclusive para, in the entire award. There is nothing about it in the body of the award. Therefore, in order to give effect to this 'outstanding account', it must find its place at some propel place, which could be only in the annexure, If the annexure is not read as part of the award, the item of outstanding account would be rendered otiose, particularly so in view of the fact that the items 'interest' and 'other payments' alone have been dealt with in the preceding paras of the award. Hence, by irresistible implication, the award includes the annexure.

38. II (b). The second aspect, namely, that the direction in the award for the return of the drums cannot be reconciled with the note found at the bottom of the annexure (Exhibit A-18 (a)), wherein the sale proceeds of the drums have been given the deduction of is equally untenable. We do not find any repugnancy, inasmuch as in fee body of the award what has been stated is a statement of fact in regard to the transaction clarifying that the defendant would be entitled for the return of the drums. Since it is not in dispute that the drums were actually sold for a certain sum on 3-11-1971 long before the date of the award i.e., 23-11-1971, the same was given credit in the annexure, thereby making it clear that the actual liability is in the definite sum of Rs. 27,920-91 p. Hence there is no ambiguity.

39. Thirdly, the aspect that 'Outstanding amounts as per the Books of Accounts', which finds place in the annexure, has no reference in the award, is equally baseless. This argument apparently overlooks the conclusive portion of the award itself, wherein it is stated:

'The above award must be implemented by payment of all 'outstanding account '... ... ... ...... . ......'

Since, by implication, there was no objection with regard to the payment of all outstanding account, no discussion with regard to the same was felt necessary as it has been with regard to the other dues, namely, interest and other payments like transaction pertaining to the consignment of oil, and since the reference to the arbitrators was omnibus in the sense that the disputes regarding the entire dealings were referred to, the amount determined under the head, 'all outstanding account', which was apparently resolved without any protest, has been shown in the annexure straightway. The annexure, in our judgment, is the operative synopsis of the award, which clearly, categorically and with certainty, lays down the amounts due vis-a-vis the distinct items. Therefore, the contention on this aspect of the case also fails and the same is rejected.

40. Yet another objection which is twofold : Firstly, when Ext. A-18 was tenderedto the Revenue Divisional Officer for revaluation, he found it difficult to ascertainthe value of the award and, therefore, itwas at that time Ext. A-18 (a) was introduced. Secondly, Ext A-18 (a) containspunch marks, whereas Ext. A-18 does not.This shows that Ext. A-18 (a) has been subsequently introduced. Both the objectionsare fallacious. There is neither any suggestion in the cross-examination of P. W. 3that Ext. A-18 (a) was a subsequent introduction. nor any suggestion for that matterleading to the situation that Ext. A-18 (a)was placed for the first time before theRevenue Divisional Officer. Next, Exhibit A-17 (arbitration agreement) bears punchmarks and so also Ext. A-18 (a), whereasExt. A-18 is not punched. Should it there-fore be presumed that Ext. A-18 is a subsequent introduction? All this clearly establishes that Ext. A-18 (a) cannot be said tohave been introduced subsequently. Thedefendant certainly could have examinedeither the Revenue Divisional Officer or anyother arbitrator for conclusively establishingthe serious accusation levelled by him. Infact, P. W. 3, on a suggestion in crow-examination, stated as Under:

'It is not true that after the pronouncement of award, annexures were prepared when the award was sent to the Revenue Divisional Officer.'

It is significant to notice that underneath the annexure Ext. A-18 (a), all the three arbitrators affixed their signatures.

41. It is too late in the day for the appellant to raise objections with regard to the reference being vague at this distance of time without registering any protest either at the time when the reference was made or during the course of the arbitration proceedings. The defendant offered no opposition to the reference as well as the proceedings; By so doing, he not only consented but induced others do that from which they otherwise might have abstained and, therefore, he cannot question the legality of the act he had so sanctioned. This is the fair inference which has to be drawn from his conduct.

42. If a party has got an interest to prevent an act being done, and acquiesces in it, so as to induce a reasonable belief that be consents to it, and the position of others is altered by their giving credit to his sincerely, he has no more right to challenge the act to their prejudice than he would have had if it had been done by his previous silence. See Union of India v. K.P. Mandal, : AIR1958Cal415 .

43. This apart, it is well settled that the Court leans towards the construction that the award is certain. Prima facie the award is good, and it is for the defendant to show that it is uncertain. The arbitrator, is not bound to give an award on each point. He can make the award on the whole case. He may award one sum generally in respect of all money claims submitted to him, unless the submission requires him to award separately on some one or more of them. Where the final award professes to be made of and concerning all the matters referred to him, it must be presumed that in making it the arbitrator has taken into consideration all the claims and counter-claims. See Union of India v. J.K Misra, AIR 1970 SC 753.

44. From the foregoing, it is manifest, and we have no hesitation to hold, that both the reference as well as the award are not vague and admit of no ambiguity and that the award is good and capable of implementation.

45. II(b). The second limb of the contention is that the award is inadmissible in evidence, because only a copy of the award is filed but not the original.

46. This should not detain us long, because when we examined the award (Ex. A-18), we found that it is the original award itself and not a copy of it as sought to be canvassed by the counsel for the appellant and, therefore, it is needless to subject it to any processual interpretation. Resultantly, we hold that Ex. A-18 is admissible in evidence.

47. II (c). The third limb of the contention, namely, that the award is not the result of combined and mutual deliberation of the arbitrators and, therefore, is unenforceable, is also devoid of merit. The argument is sought to be built on the evidence of P. W. 3, one of the arbitrators. In his evidence, P. W. 3 stated,

'I prepared the award. The other two arbitrators are not completely English knowing people ... ... ... I have dictated the award to my typist and I have not gone through it after typing as I had confidence in him.'

So, the argument is that since the other arbitrators did not know English and the award was dictated to the typist and was not checked, and since there is no evidence to show that P. W. 3 read out the award to the other arbitrators, it is clear that the award is not the product of combined deliberation and hence is not enforceable. We do not find any substance in this argument. The evidence of P. W. 3 is that the other arbitrators are not completely English knowing people. From this, it cannot be inferred that the other two arbitrators were not at all conversant with English. Nowhere in the cross-examination of P. W. 3 has it been suggested that the other two arbitrators were not present at the time when the award was dictated by P. W. 3. In fact, the evidence of P. W. 3 is,

'The first meeting of arbitration was about three or four days after Ex. A-17 was given to me. Three or four days after first meeting, second meeting was held. Three or four days after second meeting third meeting was held and at the end of that meeting award was pronounced,

xx xx xx xxxx xx xx We have made notes. xx xx xx It is not true that because no accounts were produced we did not decide that dispute.

xx XX XX XX XX It is mentioned that the claim is Rupees15,241-71 out of which arbitrators allowedRs. 8,167-06. xx xx xx xxIn the award we have directed M. G. BrothersOil Mills to return the empty drums. xxxx xx It is not true that after M. R. Ganganna appeared before arbitrators, we sent for the defendant. We did not record statements of parties and witnesses.

xx xx XX XX XX XX Arbitrators did not consider it necessary to find out the market rate.'

48. This apart, it is stated in the award (Ex. A-18).

'The arbitrators have considered both the arguments and order payment of interest on the balance outstanding in the account ... .......After careful examination of the claims and the counter arguments, the arbitrators order award .. .. .. ..And at the end, all the three arbitrators have affixed their signatures.'

49. We may also usefully refer to the decision in Ramakistam v. Somalingam, AIR 1962 Andh Pra 492 wherein it is held, (at p. 494)

'Although an award should be the result of a joint deliberation of all the arbitrators, where a party to arbitration proceedings does not raise any objection to the absence of one of the arbitrators at some of meetings, it is not open to such party to contend subsequently that such absence rendered the award ineffective.'

50. From the foregoing, it is quite evident that the arbitrators, after collectively considering the entire aspect of the proceedings in the light of the evidence let in, came to a conclusion and then, in their presence, P. W. 3 dictated the award. This, in our judgment, is the result of the reading in combintion with the evidence let in this behalf and Exs. A-18 and A-18 (a). Hence the contention is rejected.

51. III (a). The third contention is that the award is vitiated and. therefore, has to be set aside, because there has been a legal misconduct on the part of the arbitrators in the sense that they have not followed the procedure.

52. This attack in the main on the procedural aspect, which is said to be quasi judicial, is levelled on the following grounds : (1) After receiving the arbitration agreement (Ex, A-17), no notice has been given to the parties detailing thereunder the subject-matter of dispute. (2) Due procedure has not been followed in recording the statement of witnesses, and in fact no adequate opportunity has been given to examine the witnesses. (3) Exs. A-18 (b), (c) and (d) are not punched, whereas Exs. A-18 and A-18 (a) are punched.

53. Reliance is placed on the decision in Nagabhushanam v. Simhadri Apparao, (1966) 2 Andh WR 284 and an un reported decision of a Bench of this Court in C. M. A. Nos. 123, 124 and 138 of 1972 dated 30-10-1975. In Nagabhushanam v. Simhadri Apparao, it is held.

'The arbitrators in their function which is quasi-judicial must act in a judicial manner and their enquiry should not be slipshod, but full and complete. They should not simply make appearances of conducting enquiry, but should follow the fundamental rules which govern judicial procedure. All this can be satisfactorily done only if they give due notices, maintain proper records and notes. Of course it may not be necessary for them to strictly comply with the rules of procedure and evidence as the Indian Evidence Act does not in terms apply to their proceedings; but in no event can they dispense with the substance of justice which is sacrosanct. It is necessary that they conduct themselves in such a manner as will subserve the interests of justice. Any departure from the fundamental rules of procedure and established canons of justice is sure to vitiate their award and the discretion of the Court conferred by the statute to set aside the award will be duly exercised as it is not controlled by an agreement between the parties to the contrary whether express or otherwise.'

The unreported decision in C. M. A. Nos. 123, 124 and 138 of 1972 dated 3-10-1975 affirms the decision in Nagabhushanam v. Simhadri Appa Rao, ((1966) 2 Andh WR 284) (supra).

54. The legal position with reference to decided cases regarding the procedure to be followed by the arbitrators and their conduct and also as to how and when the award becomes vitiated by reason of the misconduct of the arbitration proceedings, may be noticed.

55. An award should not be set aside at the instance of one of the parties who must be held to have known the general course of procedure and who did not make any protest until after the marking of the award with the terms of which the party was not satisfied. See Amir Begam Hussain v. Syed Badruddin, AIR 1914 PC 105. It does not follow that every rule of procedure laid down in the Civil Procedure Code for trial of suits ipso facto applies to arbitration proceedings. See D. Munshilal v. Harjimal and Sons, AIR 1930 Sind 170. Where the parties have referred the matter to an arbitrator related to all of them one cannot expect too precise an insistence on the forms of judicial procedure. It is not essential that in every case the ordinary rules of judicial procedure should be followed by an arbitrator enquiring into a matter. See G. Subbaiah v. K. Seshaiah, AIR 1928 Mad 48. An arbitrator is hot bound to follow technical provisions of Evidence Act and his decision cannot be challenged on ground that he relied upon document not admissible under the Act. See Kaikobad v. Khambatta, AIR 1930 Lah 280. In proceedings before the arbitrators, the law of evidence need not be very strictly applied. See Gurumurthy Raju v. Narsimha Raju, : AIR1954Ori234 . It was not obligatory on the arbitrator to send his impressions that he jotted down in the register. They were his private notes to be used in the analysis and understanding of the case in certain aspects. See N. Subrahmanyam Chetty v. Subramaiah and Sons, : AIR1959AP199 . Non-examination of witnesses by arbitrator is not judicial misconduct or does not vitiate the award when the arbitrator had taken into account the statements and admissions made by the parties. See Bhartu v. V. Tarachand, . The award may be set aside by the Court on the ground of an error of law apparent on the face of the award but an award is not invalid merely because by a process of inference and argument it may be demonstrated that the arbitrator has committed some mistake in arriving at his conclusion. See Bungo Steel Furniture v. Union of India, : [1967]1SCR633 . As the parties choose their own arbitrator, they cannot when the award is good on the face of the award, object to the decision either upon the law or the facts. See Alien Berry & Co. v. Union of India, : [1971]3SCR282 . No enquiry into the case should be undertaken behind the back of a party and if they do so, the award is vitiated. See Sheodutt v. Pandit Vishnudutta, AIR 1955 Nag 116. It is judicial misconduct if copies of claim made by one party are not given to the other party. See Union of India v. Ghaziabad Railway Station, : AIR1972All34 . It is not, however, open to the arbitrator to refuse to grant an opportunity to a party to produce evidence on the ground that there was no necessity to examine witnesses or hear counsel. By telling the parties that there was no necessity to examine witnesses or hear counsel, the arbitrator is guilty of judicial misconduct. See Tirath Singh v. Sher Singh, AIR 1948 Lah 50.

56. It does not usually happen that an arbitrator takes down pencil notes or prepares formal minutes of the evidence and proceedings for his own understanding of the case and destroys those notes after the calculations are done and the award is made. The arbitrators are not obliged to retain them and file them along with the award once they contemplate to give a lump sum amount. At any rate, mere omission to file the depositions and other documents, does not affect the validity of the filing of the award. See Shivlal v. Union of India, : AIR1975MP40 . No doubt, it is generally desirable that an arbitrator should make and retain for subsequent use, if necessary, notes of the proceedings before him; but there is no warrant for holding that in the absence of such notes an award should be set aside at the instance of one of the parties. See Amir Begam v. Syed Badruddin, (AIR 1914 PC 105) (supra). The Court has no jurisdiction to investigate into the merits of the case and to examine the documentary and oral evidence on the record for the purpose of finding out whether or not the arbitrator has committed an error of law. See N. Chellappan v. Kerala S. E. Board, : [1975]2SCR811 .

57. On a conspectus of the case law, the canons that emerge are: (1) The arbitration proceedings should not be set aside on the ground of non-observance of the highly technical web of procedure and rules of evidence unless there is something radically wrong and vicious.

(2) Non-examination of witnesses is not judicial misconduct if the arbitrator is shown to have taken into account the statements and admissions made by the parties.

(3) Civil Court cannot go into the merit of the decision arrived at by the arbitrators and set aside the award merely because by a process of inference and argument it may be demonstrated that the arbitrator has committed some mistake in his conclusions.

(4) As the parties choose their arbitrator, they cannot, when the award is ex facie good, object to the decision either upon the law or the facts.

(5) Omission to file depositions or other documents including the notes prepared by the arbitrators for their assistance, does not affect the validity of the award.

(6) An award should not be set aside at the instance of one of the parties who must be held to have known the general course of procedure and who did not make, any protest until after the marking of the award with the terms of which the party was not satisfied.

(7) The non-representation of a party at arbitration proceeding through want of formal notice of the proceedings is no ground for challenging award when that party had actual knowledge of the proceedings.

(8) The Court has no jurisdiction to investigate into the merit of the case and to examine the documentary and oral evidence on the record for the purpose of finding out whether or not the arbitrator has committed an error of law.

58. Bearing these principles in mind, we may analyse the points raised by the Counsel for the appellant.

59. The complaint it that there was no notice, after the reference (Ex. A-17), to the parties to attend the inquiry by the arbitrator. This appears more specious than substantial. Not only it is the case of the arbitrator (P. W. 3) in his evidence that when the parties went to him with Ex. A-17, he told them the dates on which they should tome and also to submit their statements of case, it is equally clear from the evidence of P. W. 2, the plaintiff, and also D. W. 5, the defendant, that on oral intimation, they attended the inquiry twice and also examined the witnesses and produced the documents. If that is so, what legitimate grievance can he made of against the arbitrators that there was no written notice to the parties Hence, to our mind, this is a rather frivolous complaint which should straightway be rejected.

60. The second complaint is directed against the lack of opportunity being given to the appellant to let in evidence. This equally is baseless. It is categorically stated in the evidence of P. W. 3 that the parties gave their statements of case at the first hearing and they voluntarily produced their extracts of accounts and accounts of which he has made notes. He in fact, categorically denied that the parties did not produce any account books or statements of accounts at the time of inquiry. He further stated in his evidence 'hat the first meeting was for about two hours and he examined Parvathappa produced by the plaintiff and also Vrajelal Shah produced by the defendant and took down notes. He further stated that he got the details mentioned in the award from the account books and other papers produced by them. They also produced invoices, travelling expenses bills, bank intimation, expenses towards interest, and extracts of their respective accounts. This is corroborated by P. W. 2. A mere denial by the defendant-appellant cannot be given any weight to destroy the evidence of P. Ws. 2 and 3 unless it is unworthy of credence.

61. The third complaint is that in the matter of assessment of damages, the arbitrators ought to have taken into consideration the difference in market rate and the contract rate at Adoni. This is equally unfounded. It is explained by the arbitrator, P. W. 3, as under:

'Arbitrators did not consider it necessary to find out the market rate. Actual loss incurred by the plaintiff was being considered and it was allowed by sale at Calcutta.'

62. The further objection in this behalf that the oil was diverted from Ranchi to Calcutta instead of selling it at Ranchi and recovering the difference of amount, if any, as loss, should equally be discounted. Firstly, it will not be competent for this Court to go into the ambit of procedure which has been adopted by the arbitrator with regard to the assessment of loss or damage. Secondly, we do not see cogency m the complaint that the oil ought not to have been sold at Calcutta, but ought to have been sold at Ranchi because there was sufficient reason for the plaintiff to have diverted oil from Ranchi to Calcutta, as it had no particular contracts at Ranchi and also anticipated better price at Calcutta. In any view of the matter, the principle is now well settled that the Civil Court cannot go into the merits of the decision arrived at by the arbitrators. The contention, which is, therefore, unfounded is rejected.

63. The next attack is on En. A-25 and A-18 (a), (b), (c) and (d). Ex. A-25 is a letter dated 20-9-1971 written by M. Ramanna, the father of the plaintiff, to the arbitrator (P. W. 3). It reads,

'M. G. BROTHERS OILMILLS

YEMMIGANUR

(Kurnool District)

20th September, 1971.

Dear Shri Vasantha Gupta,

I thank you for all the trouble you took in shaping the settlement of our account with M/s. Vitta Anjanaiah and to act as an arbitrator along with Shri Gummar Mal of M/s. A. T. R. to finalise the affairs. I am enclosing herewith the following statements in duplicate pertaining to Sri Vitta Anjanaiah's accounts as per our books of account.

???(I) The amounts shown vide Items 1, 2 and 3 (on running A/C) supra, will attract interest, since these amounts are pending payment for a considerable time from now.

Now, I will leave the matter to the Arbitrators for finalisation and settlement. I will gladly furnish any further details you require in this regard.

With kind regards.

Yours sincerely,Sd. M. Ramanna.'

Ess. A-18 (a), (b), (c) and (d) are the annexures to the Award (Ex. A-18). In fact, the amounts Rs. 4,000/-, Rs. 6,377-83 and Rs. 8,496-02 reflected in Ext. A-18 (b), (c) and (d) respectively, form part of Ex. A-18 (a) which is an annexure to Ex. A-18 (award). Ex. A-18 (a) represents the total sum including two more items pertaining to interest (Rs. 3,105/-) and loss on account of wagon sale (Rs. 8,167-06), the total amount being Rs. 29,645-91 p. and after giving credit to two items, Rs. 500/- paid to Sri Srinivasa Rao on 18-11-1966 and Rs. 1,725/- being the sale proceeds of empty drums, the amount actually due is shown as Rs. 27,920-91 p.

64. The first objection with regard to Ex. A-25 is that this has been brought in sub-sequent to the reference for arbitration and the same has been antedated purporting to have been sent on 20-9-1971, and since Exs. A-18 (b), (c) and (d), the annexures to Ex. A-18, are nothing but Annexures I, II and III to Ex. A-25, all these have been done behind the back of the defendant and that, in fact all those annexures have been added to the award subsequent to the passing of the award and they, therefore, do not form part of the award.

65. This contention it equally baseless. Ex. A-25 has been explained by P. W. 2 that it was a letter written by the plaintiff's father at a time when there was a mediation to settle the accounts and since in the mediation the matter was decided to be referred to the arbitrators somewhere in the month of September, 1971, the same was communicated to P. W. 3. In fact, this is very clear from the contents of Ex. A-25 already extracted supra, that the father of the plaintiff, who is one of the partners, thanked P. W. 3 for accepting to be one of the arbitrators along with others, after discussing about the accounts to be settled between the parties. It is, thereafter, in the month of November, 1971, the reference (Ex. A-17) was executed. That apart, Ex. A-25 was adduced in evidence through P. W. 2 on 22-6-1976 who stated that it was written by his father after the panchayat wherein it was resolved that the dispute be referred to arbitrators and both parties would abide by their decision. In fact, there was a suggestion to P. W. 2 which was emphatically denied that Ex. A-25 was written subsequent to the reference for arbitration. It is, however, significant and vital that the defendant failed to confront P. W. 3 with Ex. A-25 by recalling him -- as the defendant was certainly entitled to recall P. W. 3 -- though it was got marked on 22-6-1976 through P. W. 2 subsequent to the completion of the defence evidence i.e., 14-4-1976, by recalling P. W. 2. Without confronting, it is not open to the defendant to aver that the document has been antedated and it was written to the arbitrator subsequent to the reference or for that matter subsequent to the passing of the award.

66. Now, in respect of Exs. A-18 (b), (c) and (d) the allegation is that they have been subsequently inserted. To a suggestion in the cross-examination of P. W. 3, it has been stated by him that Exs. A-18 (b), (c) and (d) were given to him by M.R. Ganganna during the course of arbitration proceedings. It is equally relevant to notice that the annexures, Exs. A-18 (b), (c) and (d) are signed by M. R. Ganganna; whereas Ex. A-25, as stated, has been signed by M. Ramanna. This apart, we also find in Exs. A-6 to A-8, the details of the accounts representing the three amounts, Rs. 8,496-02, Rs. 4,000/- and Rupees 6.377-83 reflected in the annexnres Ex. A-18 (b), (c) and (d) to Ex. A-18 (a).

67. Yet another objection was that the letter Ex. A-25 addressed to P. W. 3 by the father of P. W. 2 amounted to interference in the course of the proceedings before the arbitrators. Ex. A-25 is nothing but an extract of the amounts due by the defendant to the plaintiff. Therein, the father of P. W. 2 thanked P. W. 3 for all the trouble be took in shaping the settlement of their account with the other party and for agreeing to act as an arbitrator along with others. Ex. A-25 came into existence much earlier to Ex. A-17 and, therefore, cannot be said to amounting to interference with the course of the arbitration proceedings. Therefore, receiving of any statement or document before the inquiry commences is only a ministerial act, Which cannot be said to vitiate the arbitration proceedings. See In the matter of the Arbitration Act, AIR 1924 Mad 274. Therefore, the decision in Chinoy Chalani and Co. v. Y. Anjiah, AIR 1958 Andh Pra 384 is of little or no assistance, as the facts are at variance.

68. It is equally baseless to contend that Ex. A-18 (a), (b), (c) and (d) cannot be looked into as they were not incorporated in the award and, therefore, it is an error of law apparent on the face of the award. In the case before us, there is no reference to Exs. A-18 (a), (b), (c) and (d) in the award. Ex. A-18 (a) is part of Ex. A-18 and is not severable from Ex. A-18. If once this position is accepted, which we have doubtless done so, the contention that the Court cannot look into Ex. A-18 (a) becomes unfounded. It is not the case of the plaintiff that Exs. A-18 (b), (c) and (d) form part of the award; and since Exs. A-18 and A-18 (a) are accepted as forming the award, the contention of the appellant is rendered devoid of merit and substance.

69. We may, however, observe that none of the objections raised herein, has been taken before or during arbitration proceedings or after the passing of the award or before the reference to Court.

70. The fourth contention is that the claims in regard to disputes referred to in the award are mostly time barred and, therefore, they ought not to have been entertained. This contention cannot sustain. In the first place, it has not at all been raised before the arbitrators and, therefore, the same cannot now be allowed to be raised for the first time in the Civil Court. Secondly, it would have been open to the parties, had it been raised before the arbitrators, to establish that a particular claim or claims, either by way of acknowledgment or otherwise, were not time barred. We know of no authority, not the proponent has placed any authority before us, for the position that failure to raise the issue before the arbitrator that certain disputed claims are time barred, notwithstanding, it will still be open to the party to raise the same for the first lime when the award is sought to be made a decree of the Court. For the aforesaid reason in our judgment, it will not be open to the defendant to raise this objection in the Court for the first time when the award is sought to be made a rule of Court, and a fortiori, in this Court. In point of fact, this is sought to be raised for the first time in this Court. Hence the contention is rejected.

71. To sum up,

(1) 'M. G. Brothers Oil Mills', which is a party to the arbitration agreement as well as the arbitration proceedings, is part and parcel of M/s. M. G. Brothers, the plaintiff herein; and, therefore, the suit is maintainable.

(2) M. R. Ganganna, who filed the suit representing the firm M. G. Brothers, is a partner of the plaintiff-firm; and is the same person who has been mentioned as M. Ganganna in the Register of Firms. Hence the suit is maintainable.

(3) M/s. Vitta Dodda Hanumanthappa Subbayya Setty & Co. is not a necessary party to be impleaded; even otherwise, since non-impleading has not caused any injustice to the defendant, it is not fatal to the suit. The suit is, therefore, maintainable.

(4) The reference to arbitration is wide and comprehensive and takes in all the claims pertaining to the dealings between the parties, disputed or otherwise. Hence the reference is not vague.

It is well settled that the Court leans towards the construction that the award is certain. When prima facie the award is good, it is for the party to show that it is uncertain.

(5) The award is the result of combined and mutual deliberation of the arbitrators and therefore, it is enforceable.

(6) In our undoubted view, there is legal misconduct neither on the part of the arbitrators nor in the conduct of the arbitration proceedings.

(7) Omission to file depositions or other documents including the notes prepared by the arbitrators for their assistance, does not affect the validity of the award.

(8) Civil Court cannot go into the merits of the decision arrived at by the arbitrators and set aside the award, merely because by a process of inference and argument it may be demonstrated that the arbitrators have committed some mistake in their conclusions.

(9) An award should not be set aside at the instance of one of the parties who must be held to have known the general course of procedure and who did not make any protest until after the making of the award with the terms of which the party was not satisfied.

(10) In our view, it will not be open to the defendant to raise the objection that certain claims which were time-barred have been adjudicated in the award for the first time in the Civil Court when the award is sought to be made a rule of Court and a fortiori in the appellate Court.

72. In the result, the appeals are dismissed with costs.


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