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Moolchand and ors. Vs. Kashiprasad Shukla - Court Judgment

LegalCrystal Citation
SubjectArbitration
CourtMadhya Pradesh High Court
Decided On
Case NumberMisc. First Appeal No. 103 of 1961
Judge
Reported inAIR1965MP118; 1965MPLJ294
ActsArbitration Act, 1940 - Sections 30
AppellantMoolchand and ors.
RespondentKashiprasad Shukla
Appellant AdvocateP.R. Padhya, Adv.
Respondent AdvocateR.K. Pandey, Adv.
DispositionAppeal allowed
Cases ReferredRatanchand v. Kashi Prasad
Excerpt:
.....that accounts for a certain period are not reliable, it has power to reject and ignore them and calculate profits or losses on some other basis. any detailed discussion of the accounts become wholly unnecessary in view of their findings of fact that the accounts upto 30th june 1944 had been finally settled between the parties and accounts after that date were unreliable, so that profits had to be calculated on percentage basis. they had the power to decide a question of fact wrongly as well as rightly. they found that kashiprasad carried on business of the partnership single-handed and they further found that no reliable accounts were maintained by kashiprasad......is not bound to deal with each claim or matter separately, but can deliver a consolidated award. an award need not formally express the decision of the arbitrator on each matter of difference. (5) unless the contrary appears, the court will presume that the award disposes of finally all the matters' in difference and that the award is complete. the silence of the award as regards a particular item must be taken to be intended as a decision rejecting the claim to that relief. (6) an award may be set aside on the ground of an error on the face thereof. 7. where a specific question is submitted to the arbitrator and be answers it, the fact that the answer involves an erroneous decision on a point of law, does not make the award bad on its face so as to permit of its being set.....
Judgment:

Shiv Dayal, J.

1. This appeal arises from an application for setting aside an award. The 2nd Additional District Judge, Jabalpur, allowed the objections and set aside the award. The appellants are aggrieved by that decision.

2. The parties constituted a partnership firm for supply of material to the Army. The firm existed from March, 1943 to June 1945. Certain disputes arose between the parties. On 14 April, 1047, the parties entered into an agreement to refer their disputes to arbitration. Shri S. C. Upadhaya and Shri N. M. Golvalkar, Advocates were appointed arbitrators by the parties. On the same date, the parties made an application under Section 20 of the Arbitration Act in the Court of the Additional District Judge, Jabalpur, for making a reference to the said arbitrators for decision on the disputes referred to in the agreement. A reference was accordingly made.

3. The arbitrators gave their award on 31st August, 1956. In the result they held that Kashi-prasad (respondent) was liable to pay Rs. 33,025 to the appellants. On 1st October, 1956, Kashi-prasad prayed for setting aside the award on the ground of legal misconduct and errors patent on the face of the record. This is an appeal from the decision of the Additional District Judge, dated 28th April, 1961.

4. We have carefully gone through the award. The learned arbitrators first found out what business the partnership did. Secondly, they found that the accounts of the partnership upto 30th June, 1944 had been finally settled between the parties. Thirdly, they found that after 30th June, 1944, Kashiprasad carried on the business single-handed. Fourthly, they found that the net profits of the partnership on 30th June, 1944 were Rs. 4,402. Fifthly, they found that the accounts subsequent to 30th June, 1944 were to be explained by Kashiprasad, but the accounts produced by Kashiprasad were not reliable, and they were rejected. Likewise, the accounts (Exs. X and Y) in connection with the onion business were also held unreliable. Sixthly, in the absence of reliable accounts the arbitrators decided to calculate profits on percentage basis. They adopted the basis as was adopted by the income-tax authorities. They calculated the profits accordingly and found that the appellants share in the profits was Rs. 20,025 and their 3/4th share in the amount of Rs. 44,000, which was the profit upto 30th June, 1944, came to Rs. 33,000. Thus, the total amount of profits representing the 3/4th share of the appellants was Rs. 53,025. Deducting Rs. 20,000 already paid by Kashiprasad, the net amount which remained payable by Kashiprasad to the appellants was Rs. 33,025.

5. The trial Court has found that the delay in giving the award did not amount to misconduct; that the omission to frame issues did not vitiate the award; that there was no need to appoint an umpire; that the Jairam Nagar undertaking belonged to the partnership; that rejection of the account books (Exs. X and Y) was not misconduct; and that both the arbitrators were present on 15th March, 1952 when certain evidence was recorded.

However, it gave the following findings against the appellants: (1) Refusal on the part of the arbitrators to examine accounts prior to 30th June, 1944 was omission to exercise jurisdiction and, therefore, amounted to misconduct. (2) The arbitrators had no authority to calculate profits on percentage basis. (3) The arbitrators did not discuss the disputed items of payments alleged by Kashiprasad. 4. The arbitrators ignored the admission of Moolchand regarding repayment of Rs. 25,000 by Kashiprasad to the firm. (5) No finding was given regarding discharge of liabilities by Kashiprasad, as alleged by him. (6) Oral evidence and vouchers regarding onion business were not considered by the arbitrators. (7) The arbitrators did not start with the basis that on 1st July, 1944, Rs. 51,000 was the profit belonging to the firm (as per Ex. A-9). (8) The arbitrators did not make accounts on the basis of the account books produced before them. (9) The arbitrators omitted to apply their minds to the matters in controversy and to adjudicate upon all issues with reference to the evidence recorded by them. All these findings were assailed before us by the appellants.

6. Before we proceed to consider these adverse findings, we must recall the scope of enquiry and the limits of the powers of the Court in dealing with such an application for setting aside an award The position of the law is this:

(1) An award being a decision of an arbitrator, whether a lawyer or a layman, chosen by the parties and entrusted with power to decide a dispute submitted to him, is ordinarily not liable to be challenged on the ground that it is erroneous.

(2) The award of the arbitrator is ordinarily final and conclusive, unless a contrary intention is disclosed by the agreement. The award is a decision of a domestic tribunal chosen by the parties, and the Civil Courts which are entrusted with the power to facilitate arbitration and to effectuate the awards, cannot exercise appellate powers over the decision. Wrong or right, the decision is binding if it be readied finally after giving adequate opportunity to the parties to place their grievances in the manner provided by the arbitration agreement.

(3) The Court should approach an award with a desire to support it, if that is reasonably possible, rather than to destroy it by calling it illegal.

(4) Unless the reference to arbitration specifically so requires, the arbitrator is not bound to deal with each claim or matter separately, but can deliver a consolidated award. An award need not formally express the decision of the arbitrator on each matter of difference.

(5) Unless the contrary appears, the Court will presume that the Award disposes of finally all the matters' in difference and that the award is complete. The silence of the award as regards a particular item must be taken to be intended as a decision rejecting the claim to that relief.

(6) An award may be set aside on the ground of an error on the face thereof.

7. Where a specific question is submitted to the arbitrator and be answers it, the fact that the answer involves an erroneous decision on a point of law, does not make the award bad on its face so as to permit of its being set aside. If the reference is of a specific question of law, even if the award is erroneous, the decision being of arbitrators selected by the parties to adjudicate upon those questions, the award will bind the parties.

8. The Court has no jurisdiction to override the decision of the arbitrators or to substitute its own even where the question is a mixed question of law and fact.

(See Alopi Prashad and Sons Ltd v. Union of India, AIR 1960 SC 588; Santa Silo v. Dhirendra Nath, AIR 1903 SC 1677; Union of India v. Rallia Ham, AIR 1963 SC 1685; Collar-dhan Das v. Lachhmi Ram, AIR 1954 SC 689; Rustomji v. Manmal, 1963 MPLJ 284: (AIR 1904 Madh Pra 15); Thawardas Pherumal v. Union of India, 1955-2 SCR 48. ((S) AIH 1955 SC 468) and Pannalal v. State of M. P., 1963 MPLJ 307: (AIR 1963 Madh Pra 242).)

7 Applying these principles here, we are clearly of the opinion that the Additional District Judge was in error in setting aside the award. The arbitrators having reached the conclusion that the accounts upto 30th June 1944 had been finalised between the parties, it is not for the Court to examine the correctness of that finding of fact. That finding is unassailable. It being so the question of examining the accounts prior to 30th June 1944 did not remain. As such, there was neither omission to exercise jurisdiction nor misconduct.

8. As regards the accounts after 30th June 1944, the arbitrators found that there were profits in the undertaking but no reliable accounts had been maintained by Kashiprasad who carried on the business of the undertaking single-handed.

9. It is urged that the arbitrators bad no authority to calculate the amount of profits on percentage basis. This contention is without substance. The agreement to refer is in the widest possible terms. There, it is said that the parties agreed to refer the entire disputes and then the following powers were given to the arbitrators: (1) To find out their respective investments; (2) to find out profit and loss after examining accounts; (3) to calculate how much each party is entitled to receive or liable to pay; (4) to dissolve the partnership and to arrive at a just and proper decision; (5) to make an enquiry in the manner they think fit, i.e., hear the parties, record evidence of witnesses, and examine accounts; and (6) to appoint an umpire in case they did not reach an agreed decision. From this it is quite clear that the arbitrators had unfettered powers to calculate the profits on such basis as they thought to be just and proper.

In such a ease, where the arbitration finds that accounts for a certain period are not reliable, it has power to reject and ignore them and calculate profits or losses on some other basis. In the present ease, the alternative basis chosen by the arbitrators was the one which was adopted by the income-tax authorities. The Court cannot disturb the finding of fact nor can it substitute another basis for calculating the profits. The decision of the arbitrators is final and conclusive. That they chose to adopt the same basis as the income-tax authorities, cannot be said to be an error on the face of the award.

10. Adverting now to the third finding that the arbitrators did not discuss the items of alleged payments made by, Kashiprasad, our attention is invited to Kashiprasad's statement dated 10th July 1951 before the arbitrators in which he claims to have made 7 payments. The first five items are prior to 30th June 1944 and the other two after that period. The items prior to that date are necessarily covered by the finding that accounts between the parties upto 30th June 1944 had been settled. The question of the remaining two payments of Rs. 500/-and Rs. 957/8/- also does not survive because when profits are calculated on percentage basis, individual items, receipts and payments become inconse-quantial.

11. Turning to the fourth finding, in our opinion, the trial Judge was fn error in holding that the arbitrators gave no reason for not accepting Rs. 25,000/- when they accepted the repayment by Kashiprasad at Rs. 20,000/-. It appears that Rs. 5,000/- was paid by a cheque dated 29th December 1944 and it was credited to his Khata, but subsequently in a suit by Ratanlal and Lalchand against Kashiprasad it was pleaded by Kashiprasad that this cheque was given for payment to Ratanlal and Lalchand and not to the appellants. This plea was eventually upheld by the High Court in Ratanchand v. Kashi Prasad, F. A. No. 44 of 1950 dated 12-3-1957 (MP). Thus, there is no error when the arbitrators rejected this item of Rs. 5,000/- and gave credit for Rs. 20,000/- only.

12. The fifth finding must be set aside as a necessary corollary of what we have already said. Whatever liabilities were discharged by Kashiprasad during the period that ho dealt with the business singlehanded, were necessarily accounted for and they need not have been separately considered because the profits were calculated on percentage basis and not on the basis of adjustment of entries of actual receipts and actual payments on credit and debit sides. The learned Additional District Judge, in paragraph 38 of his judgment enumerates certain items which Kashiprasad claims to have paid from his own pocket between 24th February 1945 and 29th October 1945, but he completely ignored the basis on which the accounts between the parties were calculated for the period after 30th June 1944.

13. With regard to the sixth finding, we need not repeat that as a necessary corollary of the basis on which the profits were calculated by the arbitrators for the period after 30th June 1944, the oral evidence and vouchers regarding onion business become immaterial.

14. As to the seventh finding, it is not at all clear to us what benefit Kashiprasad wanted to derive from it. When it was found by the arbitrators that Kashiprasad carried on the partnership business single handed after 30th June 1944 and they found that Kashiprasid had with him only Rs. 44,021/- belonging to the partnership as its net profit upto the period ending 30th June 1944 for what benefit to Kashiprasd could it be urged that the amount of profits was Rs. 51,000/-. In fact, the arbitrators said in the award that the recitals in Ex. A-9 to the effect that Kashiprasad had with him Rs. 51,000/- belonging to the partnership appear to be correct. Even so, they proceeded on the basis that Kashiprasad had with him only Rs. 44,000/- (see paragraphs 10 and 11 of the award).

15. The eighth finding is of no consequence in view of the above discussion.

16. The ninth finding is too general and vague. If it is the net result of the other findings which we have just now considered, that conclusion must also be set aside ipso facto.

17. It is urged by Shri Pandey that the arbitrators had no power either to do more, or to do less than what was entrusted to them. Reliance is placed on Russel, 16th Edition, pages 126 and 320 and 2 Halsbury (Simond) pages 35-37, paragraph 80. It is quite clear to us from the terms of the arbitration agreement set out above that the arbitrators had the power to decide what each parly had to pay or to receive from the other, and this they have done. Any detailed discussion of the accounts become wholly unnecessary in view of their findings of fact that the accounts upto 30th June 1944 had been finally settled between the parties and accounts after that date were unreliable, so that profits had to be calculated on percentage basis.

18. Shri Pandey had yet another objection to raise. We were told that all evidence was not recorded by the arbitrators. But we do not find any such objection in his application for setting aside the award. That objection, therefore, is too late in the day and must be rejected outright.

19. It is then strenuously maintained by the learned counsel for Kashiprasad that it was a mere conjecture on the part of the arbitrators to have said that there must necessarily have been profits in the partnership business after 30th June 1944. And moreover, the basis of 15 percent was wholly arbitrary and this amounted to an error apparent on the face of the award. This contention, in our opinion, is without merit. The arbitrators had the power to decide whether there was profit or loss and to what extent. They had the power to decide a question of fact wrongly as well as rightly. They found that Kashiprasad carried on business of the partnership single-handed and they further found that no reliable accounts were maintained by Kashiprasad. In that situation, if the arbitrators proceeded on the basis which was adopted by the income-tax authorities it was within the powers of the arbitrators. The Court cannot sit in judgment and hold that the arbitrators should have calculated the profits on the basis of 16 percent or 14 percent.

20. Another objection raised by Shri Pandey is that a Morris Car had been purchased by the appellants from the funds of partnership but it was not accounted for. The arbitrators did not adjust its price while taking accounts. As it is altogether a new objection not raised in the application for setting aside the award it was not allowed to be raised here.

21. Another objection was that Shri Upadhyaya, an arbitrator, was not present when the statements of the witnesses were recorded by Shri Golvalkar, an arbitrator, on 15th March 1962. In our opinion, the learned Additional District Judge was right in deciding that question against the respondent Shri Upadhyaya was examined as witness No. 2 by the Court. He said that on 15th March 1952 he was present and the statements of witnesses were recorded in his presence, although his signature does not appear on the order sheet of that date. He fortified this statement by saying that it had been decided between the two arbitrators that if either of them was not present that fact was to be recorded in the order sheet. Another reason which he gave was that evidence was necessarily recorded in the presence of both the arbitrators. He said that the omission to sign the order sheet of that date was by inadvertence. The other arbitrator, Shri Golvalkar, stated that he could not say if there was anything on the record to show that Shri Upadhayaya was present on 15th March 1952, yet he could positively say that Shri Upadhayaya must have been present on that date as he had always made it a point to record evidence of witnesses in the presence of both the arbitrators. There can absolutely be no ground for disbeleving the statement of either Shri Upadhyaya or of Shri Golvalkar.

22. Shri Pandey further contended that the arbitrators misconducted themselves in not appointing an umpire. The objection has to be just mentioned to be rejected. In the terms of the agreement an umpire was to be appointed in the event of any difference occurring between the two arbitrators. As no such contingency arose the appointment of an umpire was out of the question. Likewise, the objection that the arbitrators did not frame issuses must be rejected because no such request was made to the arbitrators. Moreover framing of issue by the arbitrators is not required by any law; nor was required under the arbitration agreement.

23. The appeal is allowed. The judgment and order passed by the Additional District Judge are set aside. Kashiprasad's application for setting aside the award is dismissed. The respondent shall pay costs of the appellants in both the Courts. Counsel's fee as certified, but not exceeding Rs. 300/- in each Court.


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