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Chidambaram Chettiar Alias Somasundaram Chettiar Vs. Ayyappa Chettiar - Court Judgment

LegalCrystal Citation
SubjectFamily;Arbitration
CourtChennai
Decided On
Reported inAIR1935Mad152; 155Ind.Cas.1059; (1935)69MLJ558
AppellantChidambaram Chettiar Alias Somasundaram Chettiar
RespondentAyyappa Chettiar
Cases ReferredMercer v. Reid
Excerpt:
.....the assets may well have increased to this amount. there is no doubt that if the arbitrators used knowledge or information derived from other sources than these, if they failed to communicate to the parties what they so knew and if the party making the objection was prejudiced, the award would be invalidated. the three arbitrators were of the same village and community as the parties, and must necessarily have been well acquainted not only with nattukottai chetty customs and procedure but also with the family circumstances and antecedents of the two brothers. their award merely states that these other properties will be enjoyed by the two parties in equal shares. the plaintiff says that the defendant has all the jewels, while the house and the other immovable property possessed by the..........movable properties, 'after looking into the accounts and taking the statements of parties'. the arbitrators' award is dated the 3rd april, 1929. after summarising the family history it deals with the three branches for which separate accounts purport to have been kept, moulmein, virudupatti and the headquarters' or the vurkadai at kandanur. the finding in each case is that the accounts of his management produced by the defendant are not correct and that no fair conclusions can be derived from them. except therefore for certain limited purposes the arbitrators felt themselves compelled to proceed upon a footing independent of the accounts. briefly they have ascertained what funds the family possessed in 1903 and they have then made an estimate of what it may be supposed to have.....
Judgment:

Curgenven, J.

1. This is an appeal by the defendant against the order of the Subordinate Judge of Devakottah directing the filing of an award on a matter referred to arbitration without the intervention of the Court under Rule 20 of second Schedule of the Civil Procedure Code. The plaintiff and the defendant are brothers and belong to the Nattukottai Chetti community. In 1903 their father divided from his other brothers, receiving certain sums of money and some immoveable and movable property. In 1917 the father died. Up to the time of his death he was managing the business, which consisted in money-lending, and the property together with the younger son, the defendant. After his death it was managed by the defendant. In 1922 the brothers attempted to make a division by means of an arbitration which is said to have awarded to the plaintiff Rs. 12,000, but this fell through. On the 31st December, 1928, the brothers executed the muchilika Ex. I to three arbitrators, requesting them to make a division of the family property, particularised as cash, headquarters' account, Virudupatti shop account, Moulmin shop account, jewels, house, immovable and movable properties, 'after looking into the accounts and taking the statements of parties'. The arbitrators' award is dated the 3rd April, 1929. After summarising the family history it deals with the three branches for which separate accounts purport to have been kept, Moulmein, Virudupatti and the headquarters' or the Vurkadai at Kandanur. The finding in each case is that the accounts of his management produced by the defendant are not correct and that no fair conclusions can be derived from them. Except therefore for certain limited purposes the arbitrators felt themselves compelled to proceed upon a footing independent of the accounts. Briefly they have ascertained what funds the family possessed in 1903 and they have then made an estimate of what it may be supposed to have possessed at the time of the arbitration, after allowing for drawings, losses and other charges. We will revert later in more detail to the method adopted in making this calculation. The result was that they found the family had started in 1903 with about half a lakh of rupees and that the assets might be estimated at 11/2 lakhs in 1929. The share awarded to the plaintiff was therefore Rs. 75,000 the defendant being declared sole possessor of all outstandings. This related only to the business assets and not to the immoveable property or jewels of which no actual division was made, the arbitrators merely declaring each party entitled to a half share.

2. At the trial the defendant attacked the award on a variety of grounds. Some of these have now been given up, as for instance, that the reference was procured by undue influence and that the award was passed after notice of revocation was given by the defendant. Before us the grounds of attack may be summarised as follows:

(1)the arbitrators exceeded their powers

(a) by ignoring the accounts and by adopting an unauthorised and inappropriate method of computation,

(b) by making use of their personal knowledge (and information).

(2) they made a mistake regarding a certain calculation of interest which vitiates the award;

(3) they exhibited partiality for the plaintiff and prejudice against the defendant; and

(4) they omitted to make a complete division of the assets.

3. The last of these criticisms would relate to paragraph (a) of Rule 14 of Schedule II, Civil Procedure Code; the remainder it is said amount to misconduct on the part of the arbitrators.

4. The arbitrators deal with the three series of accounts in paragraphs 2 and 3 of their award. The defendant was in control of the Moulmein shop from 1906 to 1911, when it was closed. After examining the accounts the arbitrators found that they had not been kept properly according to the practice of the Chetties, that the defendant failed to give them a satisfactory explanation and that they were unable to rely upon them. Nevertheless, they accepted the defendant's statement that this business closed with a loss of Rs. 9,258, over and above the loss of the share capital of Rs. 7,000 and they made allowance for this loss, together with 9 per cent, compound interest, in a sum of Rs. 97,738. The Virudupatti shop was opened in 1911 and had not been closed at the time of the arbitration. It was conducted throughout by the defen-ant. Here too the accounts appeared to be incorrect and defective and the defendant was unable to produce a proper balance-sheet. It also appeared that he was appropriating the partnership funds to his own purposes. Similar remarks are made about the third set of accounts, those kept at Kandanur. They do not appear to have been written properly for a very long time and when the defendant produced a balance-sheet it was found not to tally with them. The arbitrators concluded that the accounts had been falsified in order to defraud the plaintiff. Thus the general result is that the arbitrators found the accounts throughout untrustworthy and useless as a basis for a fair division of the assets. It is not of course for us to say that they were wrong in rejecting these accounts. It has been argued that they should have relied on the accounts so far as they go, supplementing them by information obtained from the parties. Without ourselves undertaking an enquiry into the merits of these accounts it is impossible for us to say that even to this extent they deserve attention or that merely by examining the plaintiff and the defendant the defects in them could have been rectified. We must take it accordingly that the arbitrators were justified in rejecting the accounts in to to, except in so far as the award says that they were used, as for instance, in allowing for the family drawings. What course were they then to pursue? It has been suggested that they should have professed their inability to comply with the terms of the reference and done nothing more. We do not think that they were so reduced to impotence. Their powers to make use of such material as was available, in order to reach conclusion, so long as what they did was not in breach of the terms of the reference, were not less than powers which a Court would possess in similar circumstances. If a defendant either suppresses his accounts or has falsified them, the Court will presume everything most unfavourable to him consistent with the established facts Vide Gray v. Haig (1855) 20 Beav. 219 : 52 E.R. 587. A case of this Court in which such a presumption was made in Kristnayya v. Guravayya (1921) 14 L.W. 668. The first defendant in that case was the manager of a Hindu family and it lay upon him to prove the assets available at the date of partition. It was found that he was suppressing evidence of the extent of the joint family money-lending business, and on the principle that any reasonable presumption might be drawn against him a computation was made of the profits which he had been in a position to make. The arbitrators in this case have adopted a very similar course and short of throwing up their commission it appears to have been the only course open to them. As we have already said, they have taken the assets as they stood in 1903 and have enhanced them by adding compound interest at the rate of 9 per cent, per annum. This rate has been adopted not because it is the prevailing rate at which Nattukkottai Chetties lend money. It is in fact very much below the normal rates, which rise as high as 24 per cent. But allowance had to be made for bad debts and for other losses, for money lying idle, and for ordinary living expenses. On the other hand the losses sustained in the Moulmein business, drawings by the two brothers and by the Common Vilasam, and some other specific expenses have been deducted from the amounts so found. The net result, as we have said, is that the amount available for division is estimated at 11/2 lakhs. If there is anything in this finding of an arbitrary or speculative character the defendant has only himself to thank for his failure to maintain and produce proper accounts. We do not think that the sum awarded to the plaintiff is an unreasonable amount, even if it lay upon us to criticise the merits of the award. In twenty five years the assets may well have increased to this amount. The further objection made before us, that the arbitrators were wrong in awarding the plaintiff a sum of money and that they should have restricted themselves to dividing the outstandings, loses sight of the fact that there were no means of ascertaining what the outstandings were and what they actually amounted to.

5. The next criticism is that the arbitrators exceeded their powers by making use of their personal knowledge and information. The charge is based upon a passage in the award which runs as follows:

To our knowledge and on information we do not find that both these parties and the common families incurred any heavy loss in any foreign places and that any heavy expenses were incurred in the family.

6. This is a big family. The muchilika it will be remembered requires the arbitrators to pass their award after looking into the accounts and taking the statements of parties. There is no doubt that if the arbitrators used knowledge or information derived from other sources than these, if they failed to communicate to the parties what they so knew and if the party making the objection was prejudiced, the award would be invalidated. These principles must of course be applied within reason. The three arbitrators were of the same village and community as the parties, and must necessarily have been well acquainted not only with Nattukottai Chetty customs and procedure but also with the family circumstances and antecedents of the two brothers. They could not have been expected to bring to the enquiry minds as devoid of particular information as is required of a Court. We agree in the view taken by a Bench of the Bombay High Court, based as it is on English authorities, that where an arbitrator has been selected because of his personal knowledge of the matter in dispute it would not be misconduct on his part to use his personal knowledge in coming to a certain decision although in such cases it is desirable that he should tell the parties what his personal knowledge is and give an opportunity to them to adduce sufficient evidence to vary his views. See Doulatsing v. Ratna Anadsing : AIR1926Bom527 . In Muhammed Nawaz Khan v. Alam Khan , the Privy Council referred to the fact that the arbitrator was selected by reason of his knowledge of the circumstances of the family, so that a decision based upon that knowledge would not amount to misconduct. Consideration such as these will not of course justify the arbitrators in passing their award on such facts as that no loss had been incurred in foreign businesses or that family expenses had not been exceptionally high (the only two instances in which they confess to have acted upon their own information) if the facts were really in dispute and the parties were not apprised of their intention to use the information. As to this latter point the only arbitrator available for examination in Court. P.W. 2, has stated that they did not tell the parties what they knew about their family affairs, and though he has made a contrary statement in reexamination we cannot agree with the lower Court in accepting it in preference to the earlier one. Further, however, the information used must relate to matters which were really open to question. Now as regards the losses incurred in foreign businesses the only such business was that at Moulmein and, as we have stated, the defendant's version as to the losses incurred there has been accepted. Then as regards heavy family expenses, such special expenses as the defendant claimed and as are shown in the accounts appear to have been allowed for. It was open to him to put in a claim about others, and the fact that he did not do so is in itself sufficient to show that there was nothing more to claim in respect of the two particular pieces of information referred to in the award. Both of these it may also be noted are of a negative character. Our finding therefore must be that the arbitrators had no need to rely upon any knowledge they might have possessed upon these matters because they would have been led to the same conclusion without it, and where a party is not prejudiced by such an error on the part of an arbitrator the Court will not interfere Mercer v. Reid (1931) 47 Times Law Rep. 574. We do not think that the award has been substantially affected by any knowledge or information possessed or obtained by the arbitrators and not communicated to the parties, and we disallow the objection.

7. The alleged mistake with regard to the calculation of interest has reference to a sum of Rs. 29,575-8-0 allowed in the defendant's favour 'for the salary of the second party, expenses for the mother's ceremony and on account of difference in the rate of interest.' It has been suggested that the arbitrators intended to add interest at 9 per cent, to the plaintiff's drawings instead of the 6f per cent, shown in the accounts to make it correspond with the rate charged on the assets, that this item would in itself amount to as much as Rs. 85,000 and that the error involved is so great as to amount to legal misconduct. Now in the first place the single arbitrator examined, who was in fact the arbitrator nominated by the defendant, was not put any question upon this point, which perhaps he was in a position to explain satisfactorily. We cannot therefore accept the suggestion that a gross error has been committed by men of a class which is certainly adept in dealing with account matters, unless the other view is possible. It is clear that there is no reason in the nature of the case why the two rates should be equal. The 9 per cent, allowed is not the actual but a hypothetical figure, adopted as roughly representing the presumed rate of increase in the assets. Whether therefore the panchayatdars ever intended to allow for the whole difference is doubtful. They may have meant only to make some allowance for the lower rate of interest charged on the drawings. Whatever be the correct explanation, it has not been shown either that the arbitrators unintentionally committed an error or they intentionally falsified the figures. No question of the consequences of such conduct therefore arises.

8. The charge of partiality preferred against the arbitrators is based mainly on the circumstances in which the award was drawn up. It is suggested that the documents were not written on the third April, which is the date they bear, but on the fourth at the earliest, and that the arbitrators deliberately evaded the receipt of the registered notices from the defendant revoking the reference. What appears to have happened is that on the third they orally announced what their award was going to be and as it involved payment by the defendant of a substantial sum they may have had reason to suppose that he would resist it. They naturally did not want their labours to be fruitless and accordingly they got the award completed before his registered letters could reach them. They may even have found it advisable to remain out of the way of such objections after completing the award. In all this we can find no ground whatever for imputing bias against the defendant, nor is there any other evidence worth the name to prove such bias.

9. The last objection relates to the omission of the arbitrator to divide the properties other than the outstandings. Their award merely states that these other properties will be enjoyed by the two parties in equal shares. As regards this the defendant made no objection to the award before the trial Court and in fact he has stated on more than one occasion that the jewels had already been divided. The plaintiff says that the defendant has all the jewels, while the house and the other immovable property possessed by the family seem in fact to be already separately enjoyed. The truth seems to be that the parties did not press before the arbitrators for the actual division of these items. In any case the division of the outstandings was a matter separable from the division of the other assets; so that under Rule 14 of Schedule II it was open to the Court to file the award as a decree and not remit it for further action. There is no substance in this objection.

10. The result is that we think that the learned Subordinate Judge was right in directing that the award should be filed. We dismiss the appeal with costs.


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