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Mulchand Doshi Vs. Dalam Chand Bengani and ors. - Court Judgment

LegalCrystal Citation
SubjectArbitration;Civil
CourtKolkata High Court
Decided On
Case NumberMatter No. 706 of 1977
Judge
Reported inAIR1978Cal352
ActsRegistration Act, 1908 - Section 17; ;Arbitration Act, 1940 - Sections 30 and 33
AppellantMulchand Doshi
RespondentDalam Chand Bengani and ors.
Appellant AdvocateR.C. Deb, ;P.K. Roy and ;S.K. Auddy, Advs.
Respondent AdvocateA.C. Bhabra and ;P.K. Chatterjee, Adv. (for No. 1) and ;P.C. Sen and ;Choucharia, Advs. (for Nos. 2 and 3)
DispositionApplication dismissed
Cases ReferredAnnamalay Chetty v. B.A. Thornhill
Excerpt:
- .....contentions on the grounds inter alia, that there was no necessary averment to indicate that the award in question dealt with the rights of the parties in immoveable properties of the value of more than rs. 100/-. i held that in this case this contention involved mixed questions of law and facts and in theabsence of necessary averments it was not possible to go into that question in that application. i, further, held that so far as interest and rights are concerned, on the retirement of a partner the other two partners became entitled to the share of the outgoing partner. therefore, from that point of view, in my opinion, it did not require registration accordingly the application was dismissed by me and judgment in accordance with the award was passed.3. an appeal has been preferred.....
Judgment:

Sabyasachi Mukharji, J.

1. Disputes and differences arose between Khin Karan Doshi, Dhanraj Doshi, Mulchand Doshi and Dalam Chand Bengani, the four partners of the firm of Novelty Engineering Works. There was an agreement to refer the disputes to the arbitration on the 7th Aug. 1974. The said disputes were, accordingly, referred to the arbitration of two arbitrators and they appointed on the 8th August, 1974 one Umpire. The joint arbitrators having failed to arrive at a unanimous decision, referred the matter to the Umpire. The Umpire on the 5th of December, 1974 wrote to the parties and held sittings. There was a meeting on the 7th of December, 1974. This meeting is recited in the award. The minutes of the meeting were signed by the parties. On the 20th of December, 1974 another meeting was held by the Umpire when all the parties were present and by consent of all the parties M/s. Fulchand Manmal, a firm, which was a creditor of the partnership firm in question, was added as a party to the reference. The said minutes were also signed by all the parties. On the 3lst of December, 1974 an award was made by the Umpire. The said award was signed by all the parties as well as by Fulchand Manmal. The award is important for the purpose of examining the contentions of the partners. The award after reciting the facts and circumstances of this case, inter alia, provided as follows: --

'1. I Award that Dalamchand Bengani will retire on and from the 31st day of December, 1974 from the business of Messrs. Novelty Engineering Works and will be paid a sum of Rs. 1, 708-74 p.(Rupees One Thousand Seven Hundred Eight and paise Seventy-four) towards his capital and share in the partnership business by the continuing partners in full and final settlement of all his claim. I further Award that a sum of Rs. 1,66,000/-(Rupees One Lac and Sixty-six Thousand), which is lying credited to the firm of M/s. Fulchand Manmal which amount was procured by Shri Dalamchand Bengani for the purpose of the business of Novelty Engineering Works would be paid back by the said firm Novelty Engineering Works and the continuing partners Shri K.K. Doshi, Shri M.C. Doshi and Shri D.R. Doshi for which they have executed a Promissory Note of date in favour of the said Messrs. Fulchand Manmall and the said amount will be repaid by them with interest at the rate of 12% per annum payable every month till the entire amount is paid off. The said entire amount with the interest has been agreed to be repaid by the continuing partners in the following instalments to the said Messrs- Fulchand Manmall :--

Rs. 41,500/- on or before the 31st December, 1975;

Rs. 41,500/- on or before the 31st December, 1976;

Rs. 41,500/- on or before the 31st December, 1977;

Rs. 41,500/- on or before the 31st December; 1978;

2. That the said sum of Rs. 1,66,000/-payable to Messrs. Ful Chand Manmall will form a charge on the assets and machineries of Messrs. Novelty Engineering Works, which are at present valued at Rs. 4,00,000/- (Rupees Four Lacs) approximately and the same shall be deemed to be charged for payment of Rs. 1,66,000/-with interest, but for the purpose of their business the continuing partners shall be entitled to create charge with any Bank or financial institution. A list of assets and machineries are shown in the Schedule hereunder written and the said continuing partners will not do or cause to be done any act whereby the security is in any way impaired and/or jeopardised and/or reduced. In default of payment of any instalment the said Messrs. Fulchand Manmall may take steps for realisation of the money in any manner they may like.

3. That upon payment of the dues of Sri Dalamchand Bengani, he will cease to be partner and will sign the necessary Deed of Retirement and will also cease to have any right, title and interest ofany nature whatsoever in the partnership assets and properties.

4. That the continuing partners will share profit and losses in future in equal shares.

5. That the continuing partners shall be entitled to all licences, tenancy rights, quota rights, benefits of pending contracts, book-debts and good-will, telephone connections, machineries, stock, furnaces, sheds etc. of the said business as going concern.

6. That the continuing partners shall bear and pay all the liabilities statutory or otherwise arising out of all or any of the transactions done or otherwise upto the date of retirement, of Dalamchand Bengani and shall keep the said Dalamchand Bengani indemnified against any claim or demand in respect thereof and/or arising therefrom.

7. That each of the partners shall bear and pay their respective income-tax liabilities.'

2. Thereafter the Umpire wrote on the 31st of December. 1974 to all the parties including Fulchand Manmall informing them that he had made the award. In implementation of the award on the same day a promissory note of Rs. 1,66,000/'-was executed on the 31st of December. 1974 by Khin Karan Doshi. Dhanraj Doshi, and Mulchand Doshi in favour of Dalam Chand Bengani by way of security for the payment of the sum of Rs. 1,66,000/- by the firm of Novelty Engineering Works to Fulchand Manmall. On the 6th of May, 1976 notice of the filing the award was served on all the parties. Thereafter, an application was made on the 23rd of June, 1976 by Khin Karan Doshi and another for setting aside of the award. It was contended, inter alia in the said application that the award purported to create, declare or assign or limit or extinguish the right, title or interest of the parties in the immoveable properties of the value of more than Rs. 100/- and, therefore, the award required registration. It was submitted that the award being unregistered was bad and a nullity and, therefore, should not be given effect to and should be set aside. I rejected the said contentions on the grounds inter alia, that there was no necessary averment to indicate that the award in question dealt with the rights of the parties in immoveable properties of the value of more than Rs. 100/-. I held that in this case this contention involved mixed questions of law and facts and in theabsence of necessary averments it was not possible to go into that question in that application. I, further, held that so far as interest and rights are concerned, on the retirement of a partner the other two partners became entitled to the share of the outgoing partner. Therefore, from that point of view, in my opinion, it did not require registration Accordingly the application was dismissed by me and judgment in accordance with the award was passed.

3. An appeal has been preferred from the said decision of mine and T am told that an application for stay was made before the Division Bench of this Court. The Division Bench granted a conditional stay upon furnishing certain security On the failure of the appellant to furnish security required of it the stay was vacated. The appeal, however, is pending.

4. In these circumstances, Mulchand Doshi has made this application for determination of the validity, effect and admissibility of the award dated the 31st of December, 1974 and the judgment and decree passed on the 23rd of March. 1977 and for a declaration that the award was inadmissible for want of registration and accordingly the decree was void and for other consequential reliefs.

5. At the hearing of this application learned advocate for the petitioner contended that he was asking that the award be taken off the file or removed from the record. In this application, in my opinion, the following questions fall for consideration --

(1) Whether the award in question in the instant case requires registration?

(2) If the award requires registration, then the award being unregistered, is it void or a nullity?

(3) If the award is a nullity, then does it require to be set aside as such and if so, is there any period of limitation for such an application?

(4) If the award is a nullity, then what is the effect of decree being passed on that award?

(5) Whether the petitioner is entitled, in the facts and circumstances of this case, to ask for the order that the award or the decree be taken off the file?

6. The first question as mentioned hereinbefore, is, whether the instant award requires registration There are two clauses of the award upon which the contention that the award is bad because of non-registration is made, namely Clause 2, which stipulates that the saidsum of Rs. 1,66,000/- payable to M/s. Fulchand would form charge on the assets and machinery of M/s. Novelty Engineering Works, which are at present valued at Rs. 4 lakhs and the same should be deemed to be charged for payment of Rs. 1, 66.000/-, a list of assets and machinery having been annexed in the award, and the 5th clause which declares that the continuing partners shall be entitled to all licences, tenancy rights, quota rights etc.

7. So far as the Clause 5 of the said Award is concerned, it has been alleged on behalf of the petitioner that the tenancy right involved in this matter was in respect of immoveable property of the value of Rs. 100/- and more. That point, however, is disputed. Assuming that the tenancy right was for the value of Rs. 100/- and more, Clause 5 in my opinion, does not create or extinguish any charge or interest or right in the immoveable property of the value of Rs. 100/- and more, when on the retirement of a partner, the other partners became entitled to the share of the outgoing partners. Such an adjustment in the award dealing with the assets of the partnership firm, in my opinion, does not affect immoveable property but only partners' shares in the firm which are move-able properties. In this connection, reference may be made to the observations of the Supreme Court in the case of A. Narayanappa v. Bhaskara Krishnappa, reported in : [1966]3SCR400 . There the interest of the partners in a partnership assets comprising of an immoveable property was treated as moveable property and it was held that the document dealing with the same did not involve the question of registration under Section 17(1) of the Registration Act. The same view was reiterated by the Supreme Court in the case of Ratan Lal v. Purushottam Harit reported in : [1974]3SCR109 . There the Supreme Court observed that it was well settled that the share of a partner in the assets of the partnership which had also immoveable properties was moveable property and the assignment of the share does not require registration under Section 17 of the Registration Act. Clause 5 in the instant award even assuming that the tenancy right was in respect of immoveable property over the value of Rs. 100/- does not, in my opinion, therefore, attract the question of the applicability of Section 17 of the Registration Act. In the aforesaid decision the Supreme Court observed thatwhere the terms of the arbitration award did not transfer the share of a partner A in the assets of a firm to the other partner B either expressly or by necessary intendment but on the other hand expressly made an allotment of the partnership assets and liabilities to B making him absolutely entitled to the same in consideration of a sum of money to be paid by him to the other partner A, thereby expressly purporting to create rights in immoveable property of the firm worth above Rs. 100/-, the award was compulsorily registrable under Section 17 of the Registration Act and, if unregistered, could not be looked into and the court could not pronounce judgment in terms of the award under Section 17 of the Arbitration Act. Therefore, in the instant case if there was clear evidence that the property in respect of which charge or right was created was in respect of immoveable property of the value of more than Rs. 100/- then the position would have been different. I have noted in the previous decision of mine in the case of the instant award that so far as Clause 5 of the instant award is concerned, the facts of the present case are distinctly different from the facts before the Supreme Court in the last mentioned decision, upon which reliance was placed in the previous application and reliance has been placed in this application also on behalf of the petitioner. I adhere to the said view I have taken on this aspect of the matter.

8. The other part of the Award, namely -- Clause (2), however, is different. This involves the question of creating a charge in favour of M/s. Ful Chand Manmal. Therefore, if the charge is in respect of immoveable properties over the value of Rs. 100/-, then this charge under Section 17 of the Registration Act should have been registered. As I have noted before in the previous decision of mine on this matter that this aspect involves mixed question of law and fact in the sense that it involves the question whether the property in question in respect of which charge has been created was immoveable property worth Rs. 100/-. In the petition the petitioner has averred to that effect and the same has further been disputed by the respondent. It is clear, however, that the award as such ex facie or patently Ls not inadmissible nor bad for lack of registration. In order to determine whether the award is bad or not it is necessary to adjudicate whether the property in question in respect of whichcharge has been purported to be created is immoveable property over Rs. 100/-or not. If such a determination is necessary then the question is whether that determination can be made at this stage in the application by the petitioner. Section 33 of the Arbitration Act provides that a party to an arbitration agreement or any person claiming under him desiring to challenge the existence or the validity of arbitration agreement or an award or to have the effect of either determined shall apply to the court and the Court shall decide the question. Here the existence of the award and the right of the petitioner to have it removed from the file are being sought for and that depends on the determination of the question whether the properties involved in Clause 2 of the award are immoveable property or moveable assets and whether the value is for Rs. 100/-. Is there any procedure, apart from or independent of Section 30 of the Arbitration Act, by which this challenge can be entertained or this dispute can be resolved? It was submitted that what was an unregistered award was a nullity and what was nullity did not require to be set aside and as such there was no question of any application under Section 30 of the Arbitration Act being made within the time prescribed for the same. If there was no scope for an application under Section 30 of the Arbitration Act within the time prescribed, then for an application of this nature, it was contended, in view of the facts and circumstances of this case, under the residuary clause of Article 137 of the Limitation Act and three years' period of limitation would be applicable. Reliance in this connection was placed on the observations of the Supreme Court in the case of the Kerala State Electricity Board, Trivandrum v. T.P. Kunhaliumma reported in : [1977]1SCR996 . My attention was also drawn to the often quoted dicta of Lord Denning in the case of Macfoy v. United Africa Co. Ltd. reported in (1961) 3 All E. R. 1169 at p. 1172 that if an act was void then it was in law a nullity and there was no need for an order of the court to set it aside. It was automatically null and void without more ado, though as Lord Denning observed sometimes it was convenient to have the court declare it to be so. To the similar effect are the observations of this Court in the case of Nanibala v. Ram Gopal reported in AIR 1945 Cal 19 at p. 22 where the Division Bench observed that as the award was inadmissible in evidence by reason of the provisions of the Registration Act, and therefore, on the principle that 'of things that do not appear and things that do not exist the reckoning in a court of law was the same' it must be taken so far these proceedings are concerned that the award did not exist. The Court further observed that no question of either setting it aside or of remitting it to the arbitrators would arise in such circumstances. Mr. Justice Gentle in the case of Anandi Lal v. Keshavdeo, reported in AIR 1949 Cal 549 observed that failure to have the award registered was not a ground upon which it could be set aside.

9. This question so far this Court is concerned, has to be viewed in the light of the decision of the Full Bench of this Court in the case of Saha & Co. v. Ishar Singh Kripal Singh & Co. reported in : AIR1956Cal321 where the majority of the three of the learned Judges came to the conclusion that in the Indian Arbitration Act there was no distinction between the application for setting aside of an award and an application for adjudgment of the award to a nullity and all applications must be under Section 30 within the time stipulated for that application. The existence of an award and validity of the reference both have to be challenged in the same manner. Learned advocate for the petitioner, however, drew my attention to the judgments delivered by the learned Judges in the said Full Bench and submitted that Chief Justice Chakrabortti and Mr. Justice Lahiri were of the view that after an award had been made, all grounds of objection to the award including the grounds of non-existence and/or validity of the agreement or reference and/or other grounds must be taken in an application for setting aside the award and any ground not so taken would not be available after the expiry of the time for making such an application. Mr. Justice S.R. Dasgupta and Mr. Justice Bachawat held contrary views that what was nullity could not be set aside. According to the learned advocate for the petitioners Mr. Justice P.B. Mukharji, who agreed with the majority view, did not expressly deal with the question whether an unregistered award could be set aside or not. He drew my attention to the observations of His Lordship appearing at page 344 of the report where his Lordship observed that no question of registration of an award arose in the Full Bench reference and, therefore, he did not wish to say what the effect of an unregistered award was and would not make any observation on the point whether an unregistered award could not be set aside. His Lordship further expressed his opinion that the said doctrine may have to be more critically examined in the light of many other considerations under the Arbitration Act, 1940 and did not seem to be at one with the observations of the Division Bench of this Court in the case of Nani Gopal Saha v. Ram Gopal Saha reported in AIR 1945 Cal 19 and his Lordship seemed to agree with the view with Sir John Beaumont that an appropriate proceeding might be necessary to challenge the validity of the reference in certain cases.

10. Whatever may be the position in case of an award which is patently and ex facie bad because of non-registration, in this case an adjudication is necessary to find out whether the award requires registration or not in order to give effect to it. I need not go into the question whether in case of an award which is ex facie or patently bad the same could be set aside or required to be set aside and if so whether there is any procedure of setting aside apart from or independent of Section 30 of the Arbitration Act. For the purpose of this application it is sufficient, in my opinion to proceed on the basis that where the question whether an award requires registration or not has to be adjudicated and the award is not ex facie or patently clear on that aspect; in such a case an adjudication that goes to the existence of the award must only be by the procedure enjoined by Section 30 of the Arbitration Act as held by the Full Bench decision of this Court. If that is the position then the petitioner in this case had sufficient time to make the application within the time provided under Section 30. The petitioner chose not to apply to have the existence of the award determined and therefore, in my opinion, the petitioner is now estopped from agitating that question now.

11. It was urged that the award in question was not a nullity and reliance had been placed on the decision of the Full Bench of the Madhya Pradesh High Court in the case of Bansilal Bansidhar v. Nandlal, reported in : AIR1975MP25 . There, the Madhya Pradesh High Court held that the decree passed on an unregistered award was not a nullity. A Division Bench of theMadhya Pradesh High Court proceeded to come to this conclusion on a Full Bench decision of the same High Court in the case of Moolchand v. Maganlal, reported in : AIR1965MP75 . The last mentioned decision of the Full Bench of the Madhya Pradesh High Court was considered by me in the case of Balabox Singhania v. Smt. Santi Debi in Award Case No. 156 of 1954. The judgment was delivered on 4th July, 1977 where I have held that in view of the public policy involved in the prohibition under Section 17 of the Registration Act and in view of the decision of the Supreme Court in the case of Ratanlal v. Purushottam Harit reported in : [1974]3SCR109 and in the case of Satish Kumar v. Surinder Kumar reported in : [1969]2SCR244 an award which is ex facie and patently in violation of Section 17 of the Registration Act was a nullity and a decree passed on such an award was also a nullity. There, of course, no question arose as to whether the award required registration because property involved was immoveable or moveable asset. I adhere to this view but the same principle would not apply in the instant case as mentioned before because in this case an adjudication is necessary t6 determine whether the award deals with immoveable properties or moveable assets and such an adjudication on the award must be by the procedure under Section 30 of the Arbitration Act,

12. In the case of Satish Kumar v. Surinder Kumar reported in : [1969]2SCR244 the Supreme Court held that an award given under the Arbitration Act on a private reference required registration under Section 17(1)(b) of the Registration Act, if the award effected partition of immoveable property exceeding the value of Rs. 100/-. The award was not a mere waste paper but had some legal effect. It was final and binding on the parties and it could not be said that it was a waste paper unless it was made a rule of the Court. The award created rights in property but those rights could not be enforced until the award was made a decree of the Court. It was one thing to say that a right was not created, it was an entirely different thing to say that the right created could not be enforced without further steps. For the purpose of Section 17(1)(b) of the Registration Act, all that was necessary was whether the award purported or operated to create or declare, assign, limit or extinguish whetherin present or future any right, title or interest whether vested or contingent of the value of one hundred rupees and upwards to or in immoveable property. If it did, it was compulsorily registrable. Section 17 did not concern itself with the enforcement of rights. This principle however in my opinion is not involved in this case. As I have mentioned before here that an adjudication is necessary to determine whether the award requires registration in order to become enforceable or to be valid. In the aforesaid view of the matter it is not necessary for me to refer to a decision in the case of Vineet Kumar v. Smt. Bhagwandei reported in : AIR1977All403 and ILR July 725 at pp. 734 and 735. I need only refer to the observations of Mr. Justice Vivian Bose in the case of Gangaprasad v. Mt. Bunaspati reported in AIR 1937 Nag 132. In an application made to the Court to file an unregistered award which required registration, His Lordship has observed that if an application was made to the Court to file an unregistered award which required registration then the Court must reject it. Therefore, that was one of the grounds it could be urged against the filing of an award and if that was not urged and the award was filed then the question was barred in a subsequent suit on the principles of res judicata. In the instant case the petitioner was a party to the proceedings taken up by Shew Karan Doshi in the Award Case No. 54 of 1976 and the petitioner did not take this point. Therefore the petitioner, in my opinion, cannot now be allowed to take this point again. Furthermore, the petitioner had 30 days' time to make an application under Section 30 of the Arbitration Act independently to challenge the existence of the award which the petitioner did not choose to do. Therefore, in my opinion, the petitioner should not be allowed at this stage to agitate this question again. The prohibition contained under Section 17 of the Registration Act is for public policy and that policy intends the Court to ignore or not to take any notice of the unregistered award. Another important public policy is to insist on the finality of the litigation. This compels the Court to disallow the petitioner in its belated attempt to challenge again the existence of the award which could have been challenged in the proceeding in which he was a party and which independently could have been challenged by him again. In this connection reliance may be placed on the observation of the Privy Council, Khagendra Nath v. Pran Nath Roy, (1902) 29 Ind. App. 101 at p. 106.

13. Learned advocate for the petitioner, however, drew my attention to the observation of the Privy Council in the case of Annamalay Chetty v. B.A. Thornhill reported in AIR 1931 PC 263. It was submitted that the appeal is pending. This application should be adjourned. Here the question is whether the petitioner independently has any right to challenge the existence of the award beyond the time provided for in an application under Section 30 of the Arbitration Act. In that view of the matter, in my opinion, the observations of the Judicial Committee would not be applicable to the facts of the instant case.

14. In the light of the above conclusions I answer the questions posed in the beginning as follows :--

(1) Whether the award requires registration depends upon adjudication. (2) and (3) Though what is nullity may not require to be set aside but ex facie the award in the instant case cannot be said to be nullity and it must be adjudicated within the time prescribed for Section 30 application. (4) This question is not required to be answered in the view taken. (5) This question must be answered in the negative. Before I conclude I must observe that legal conclusions on the questions involved are fortified by the feeling that the justice of the case and the merits of the case do not deserve any other conclusion.

15. In the aforesaid view of the matter this application fails and is accordingly dismissed with costs.


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