Skip to content


Kamal Singh and anr. Vs. Sekhar Chand and ors. - Court Judgment

LegalCrystal Citation
SubjectArbitration
CourtKolkata High Court
Decided On
Case NumberMatter No. 260 of 1950
Judge
Reported inAIR1952Cal447
ActsArbitration Act, 1940 - Sections 2, 32 and 33; ;Hindu Law
AppellantKamal Singh and anr.
RespondentSekhar Chand and ors.
Appellant AdvocateS.K. Mukherjia, Adv. for ;Nathmull and ;G. Mitter, Advs. for Gherochand and Ors.;I.P. Mukherjia and ;K.K. Bose, Advs.
Respondent AdvocateH.N. Sanyal, ;Subimal C. Roy and ;S.C. Sen, Advs., ;Sampat Lal, ;Sankar Banerjee and ;S.K. Acharya, Advs. for ;Sushila, Adv. and ; E.R. Meyar and ;S.P. Mitra, Advs.
Excerpt:
- orderdas gupta, j.1. this is an application on behalf of two minors named kamal singh rampuria and surendra singh rampuria through their natural guardian and next friend kesar bai 'inter alia' for setting aside and cancelling an agreement dated 28th march, 1950 for arbitration and/or declaring it invalid, inoperative & not binding on the petitioners or either of them. the matter arises in this way. the parties to this application are related to each other & their relationship would appear from a geneological table which is set out below: jawaharmal rampuria (d) ____________________________|_______________________________ | | | babadurmal (d) hazarimal (d) hiralal (d) _________|____________ ________|________________ | | | | | | sidhkaran (d) jaskaran (d) sekhar oland dhani nathmal sundar |.....
Judgment:
ORDER

Das Gupta, J.

1. This is an application on behalf of two minors named Kamal Singh Rampuria and Surendra Singh Rampuria through their natural guardian and next friend Kesar Bai 'inter alia' for setting aside and cancelling an agreement dated 28th March, 1950 for arbitration and/or declaring it invalid, inoperative & not binding on the petitioners or either of them. The matter arises in this way. The parties to this application are related to each other & their relationship would appear from a geneological table which is set out below:

JAWAHARMAL RAMPURIA (d)

____________________________|_______________________________

| | |

Babadurmal (d) Hazarimal (d) Hiralal (d)

_________|____________ ________|________________ |

| | | | |

Sidhkaran (d) Jaskaran (d) Sekhar Oland Dhani Nathmal Sundar |

Widow- Kesar Bai | | _____________|________ |

| Hulaschand | | | |

Huleshchand (adopted to Sidhkaran | Sampatmal Moolchand |

alias ____________|__________________ ______________|_________________

Bhanvarlal | | | | | |

(adopted son) Gheorchand Kanwarlal Santi Lal (minor) Jaichandlal Ratanlal Manakchand

| |__________________________ _______________|__________ (Minor)

| Ist wife Jabbar | | | | |

| Bai (d) 2nd wife Bijoylal Bimslsing Mahendra singh Abhay Kumar Rajendra Kumar

|Sushila (minor) (minor) (minor) (minor) (minor)

|_____________________________________________

| | |

Kamalsingh (minor) Surendra Singh (minor) 4 daughters

It appear's from the said geneological table that the applicants before me Kamal Singh and Surendra Singh are the sons of one Hulaschand alias Bhanwarlal. Hulaschand had two wives. Kamal Singh is the son by the first wife, and Surendra Singh is the son by the second wife named Sushila. Sushila is a respondent in this application. The mother of Hulaschand, Kesar Bai, who is the widow of Sidhkaran, is the paternal grandmother of the minors Kamal Singh and Surendra Singh. She is purporting to act as the next friend in this application. The rest of the members of the family have also been made respondents in this application. At all material times, the .petitioners and the respondents formed three branches, namely, Bahadurmull's branch, Hazarimull's branch and Hiralal's branch. The petitioners & the respondent No. 16 belong to Bahalurmull's branch. Respondents. Nos. 1 to 10 belong to Hazarimull's branch & the respondents Nos. 11 to 15 to Hiralal' branch. The three branches as represented by their senior members constituted a partnership named Hazarimull, Hiralal, each branch having an equal share therein. Partnership deeds were executed from time to time. The last of such partnership deed was executed on the 24th March 1948 and in the said partnership deeds Sm. Sushila Debi for self and as mother and natural guardian of her minor sons Kamal Singh Rampuria and Surendra Singh Rampuria was a party. The parties to the suit have amongst them various properties. The principal properties are (a) the partnership itself under the name of. Hazarimull Hiralal, (b) large number of shares in a company known as Rampuria Properties Ltd., (c) large number of shares in Rampuria Cotton Mills Ltd., (d) Managing Agency of the said two Companies being Rampuria Properties Ltd., and Rampuria Cotton Mills Ltd. The said Managing Agency was being carried on by the said firm of Hazarimull Hiralal which, as I have already said, was the partnership firm. Hulaschand Rampuria died on the 18th November 1947 leaving Kesar Bai as his mother and the minors his two sons - and the respondent No. 16 Sushila as his widow. Under the Hindu Women's Right to Property Act (Act XVIII (18) of 1937) the respondent No. 16 Sm. Sushila Debi became entitled to share as a Hindu widow in the estate of Hulaschand deceased. On the 28th March, 1950 the respondent No. 16 Sm. Sushila Debi purporting to act as the natural guardian of the two minors executed an agreement along with other parties agreeing to refer disputes which had arisen amongst them to the sole arbitration of one Mangturam Jaipuria and authorised him to effect a partition of the said properties between the parties in the manner set out in the said agreement. The scheme of the said arbitration agreement entered into by the said Sushila Debi on behalf of herself and as natural guardian of Kamal Singh Rampuria and Surendra Singh Rampuria is as follows .In the recital portion of the said agreement it is inter alia stated that Sushila Debi, Kamal Singh Rampuria and Surendra Singh Rampuria representing the branch of Bhanwarlal Rampuria and others named therein (being the respondents to this application) carry on business in partnership under the name and style of Hazarimull Hiralal and the parties form a majority of the share-holders and have a controlling interest in the public limited liability company known as 'Rampuria Cotton Mills Ltd.' It is further recited that the parties hold practically all the shares in Rampuria Properties Ltd. and have a controlling interest therein and the parties also hold other properties jointly but in specified shares. The main terms of the said agreement are contained in paragraphs 3, 4 and 5 thereof. In paragraph 3 it is stated that the Arbitrator shall proceed to divide the joint properties and allot the same amongst the three! groups, each of which is entitled to one-third share thereof so as to effect a complete separation between the parties. I should have mentioned that in the said agreement Sm. Sushila Debi, for self and as natural guardian of Kamal Singh and Surendra Singh, has been stated to be the party of the first part, and the members of the other two groups as set out in the geneo-logical table, that is the, group of Hazarimull and Hiralal, have been described as parties of the second part and of the third part respectively. In paragraph 3 of the said arbitration agreement it is further provided that for the purpose of separation the parties of the first part shall be taken to_be as one group, the parties of the second part as another group and parties of the third part as another group. In paragraph 4 of the said agreement the principal joint properties have been set out, namely, shares in Rampuria Properties Ltd., shares in Rampuria Cotton Mills Ltd. and Managing Agency in Rampuria Cotton Mills Ltd., and the assets and liabilities and goodwill of Hazarimull Hiralal and it is further stated in the said paragraph that 5 lacs deferred shares and 44375 ordinary shares in Rampuria Cotton Mills Ltd., of the total face value of Rs. 9,43,750/- held in the name of Hazarimull Hiralal together with the Managing Agency held by Hazarimull Hiralal should be auctioned by the Arbitrator amongst the three groups and so sold to the highest bidder amongst the three groups who shall pay in cash the price thereof to the other groups less the price of his share. It is further stated in the said paragraph that more than one group shall be entitled to bid jointly for the said shares and Managing Agency and if declared the highest bidder to set off their respective shares against the purchase price. In paragraph 4 of the said agreement there is a further clause to the effect, namely, that the firm of Hazarimull Hiralal including goodwill and all assets and liabilities (but excluding the Managing Agency of Rampuria Cotton Mills Ltd. and the 5,44,375 shares in Rampuria Cotton Mills Ltd.) shall be auctioned by the Arbitrator amongst the three groups and sold to the highest bidder who shall pay the price Of his share and if the Arbitrator is of opinion that a fair value has not been given at the said auction he may allot the said firm to any group at such valuation as he may consider fair and reasonable. Lastly, it is provided in the said paragraph that all other joint properties should be divided between the groups in equal shares and the Arbitrator shall be entitled to award owelty money where necessary. Then comes paragraph 5 which, to my mind, is very material for the purpose of this application. It is in these words:

'No party shall have any claim whatsoever against the other or others for accounts or otherwise.'

The petitioners' case as made out in the petition is that the respondent No. 16 Sm. Sushila Debi had no authority to agree to any such arbitration on behalf of the petitioners. The petitioners' case further is that the terms of the said agreement dated 28th March, 1950 are not in the interest of or for the benefit of the petitioners and that the interest of the said Sm. Sushila Debi is in conflict with and adverse to those of the petitioners and as such she was not entitled to and could not represent the petitioners in making the said submissions. In the circumstances, the petitioner claims the reliefs to which I have already referred.

2. The application is really made under Section 33 of the Indian Arbitration Act which pro* vides that any party to an Arbitration agreement or any person claming under him desiring to challenge the existence or validity of an 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 on affidavits. In the previous section, that is, Section 32 of the Indian Arbitration Act, it is provided that notwithstanding any law for the time being in force, no suit shall lie on any ground whatsoever for a decision upon the existence, effect or validity of an arbitration agreement or award, nor shall any arbitration agreement or award be set aside, amended, modified or in any way affected otherwise than as provided in this Act. The nett result of these two sections is that where a party wants to challenge the existence or validity of an arbitration agreement or an award or to have the effect of either determined, he cannot proceed by means of a suit but he must have to apply under the Indian Arbitration Act. Under the circumstances, the present application has been made in the matter of an Arbitration Act and in the matter of an arbitration between the minors on the one side and the respondents on the other.

3. Mr. Mukherjee appearing on behalf of the petitioner contended as follows: Firstly, he contended that Sm. Sushila Debi had no power to bind the minors by making a reference to arbitration. This is a point of law. His contention is that assuming that Sm. Sushila Debi is the natural guardian of the minors, she cannot even as such natural guardian bind the minors by making a reference to arbitration. In other words, she cannot on behalf of the minors refer the disputes relating to the minors to the arbitration. Secondly, he contended that Sm. Sushila Debi is not the natural guardian of Kamal Singh, and therefore, is not entitled. in any event, to refer the interest of Kamal Singh to the arbitration which she has purported to do. Thirdly Mr. Mukherjee's contention before me is that the interest of Sm. Sushila Debi is adverse to that of both the infants, and lastly, he contened that the present reference is not for the benefit of the minors.

4. With regard to the first contention, although Mr. Mukherjee in the beginning tried to maintain that even as a natural guardian Sm. Sushila Debi had no power to bind the minors by making a reference on their behalf to arbitration, but subsequently he realised his difficulty in maintaining such an extreme position and, if I have understood him correctly, he conceded that he could not go to that extent and relied on the other point raised by him. It is now well settled on the authorities both of this Court and also of the other High Courts that a natural guardian can bind the minors by making a reference to arbitration, but that power or authority is not an absolute power and is subject to certain conditions. The conditions under which a natural guardian can refer the disputes relating to the minors to the arbitration are, firstly, that she must not have an interest adverse to that of the minors and secondly the reference must be in any event for the benefit of the minors. Sir Shuts Mockeries in delivering judgment in the case of 'RAMJI v. SALIG RAM', 14 Cal L J 188, after reviewing a number of decisions relating to this point observed as follows:

'Now, it is indisputable that a guardian may submit to arbitration on behalf of his ward so as to bind both himself and the ward; though, no doubt, where the guardian is, in his individual capacity, a party to the submission and his interest in the controversy submitted happens to be adverse to that of his ward, he has no power to submit on behalf of the ward.'

Thus a natural guardian may submit to arbitration on behalf of his ward so as to bind the ward, but where the natural guardian is in his individual capacity the party to the submission and his interest to the controversy submitted happens to be adverse to that of his . ward, he has no power to submit on behalf of his ward. As a proposition of law, I do not think Mr. Sanyal appearing for some of the respondents disputed it. But what he contended before me is that in fact the interest of Sushila is not adverse to that of the infants. The second restriction on the power of a natural guardian to bind the minors by making a reference to arbitration is that the reference must be for the benefit of the minors. This proposition, as I have understood the learned counsel appearing for the respondents, as a pure proposition of law is also not disputed but what is contended before me is that on the facts of this particular case the terms of the reference are certainly beneficial to the minors. That being the position, all that I have to consider is whether the interest of Sushila Debi in the controversy is adverse to that of the minors and whether the reference is or is not for the benefit of the minors. With reference to the question, namely, whether the interest of Sushila was adverse to that of the infants, it appears from the affidavits which have been filed in this case and also from the affidavit of Sushila Debi herself affirmed on the 14th September 1950 that she had withdrawn a sum of Rs. 3,37,000/- from the firm of Hazarimull Hiralal since the death of her husband and she has further admitted in her said affidavit that since the death of her husband she received some payments in respect of some Policies effected by her husband, in her capacity as nominee of her husband in respect of the said Policies. She further admitted that she received some amounts as dividends in respect of the shares held by her husband in Rampuria Properties Ltd., & that the said sum is lying with her. Thus there is a clear admission by her that she withdrew a sum of Rs. 3,37,000/-from the firm of, Hazarimull Hiralal since the death of her husband and although she has not mentioned the exact amounts received by her on other accounts, namely, Insurance Policies and dividends in respect of shares held by her husband in Rampuria Properties Ltd., there is also a clear admission on her part to the effect that she did receive monies on such accounts. These statements are all in answer to the averments contained in Para. 8 of the affidavit of Kesar Bai where she alleged that since the death of Hulaschand on the 18th November 1947, Sushila had withdrawn the said sum of Rs. 3,37,000/- from the firm of Hazarimull Hiralal and that Hulaschand had several insurance policies of the aggregate amount of Rs. 1,00,000/-and Sushila Debi has received payment of most of the said policy monies and she has also received large amounts as dividends on the shares held by late Hulaschand Rampuria and she has also received various other monies which in spite of repeated enquiries from her as to what she has done with the moneys received by her, she did not give any account of the said moneys. Thus, there is, as I have already indicated, an admission even by this lady to the effect that she had received large sums of monies from the firm of Hazarimull and on other accounts for which she must be, accountable to the minors. But one of the terms of the arbitration agreement, as I have already indicated, is that no party shall have any claim whatsoever against the other or others for accounts or otherwise. From this it appears to me that at the time of making the submission it was to the interest of Sushila Debi to avoid accounts but it was to the interest of the minors to obtain accounts, not only from the other parties but also from Sushila Debi herself. If that is the position, then the interest of Sushila Debi who purported to act as the guardian of the minors and who was also in her individual capacity party to the submission had an interest in the controversy submitted adverse to that of the minors. Mr. Sanyal contended before me that Clause 5 of the Arbitration Agreement under which 'no party shall have any claim whatsoever against the other or others for accounts or otherwise' does not refer to accounts 'inter se' but it refers to accounts as between the three groups. In other words, his contention is that this clause does not prevent the minors from claiming in future accounts from Sushila Debi herself for the monies she had received. I have considered Mr. Sandal's contention and although there may be some force in that contention, I am unable to accept the same. It is true that for the sake of convenience the parties have been grouped Into three groups. The first group consists of Sushila Debi herself and the minors as represented by Sushila Debi as their natural guardian. The second group consists of members of one of the other two branches, and the third group consists of the remaining branches. But because the parties have been grouped into three groups as aforesaid, it does not follow that the members of each group also are not parties to this arbitration agreement. In Para. 3 of the said Arbitration Agreement it is stated that for the purpose of separation the parties of the first part shall be taken as one group, the parties of the second part as another group, and the parties of the third part as another group. It seems to me that it is only for the sake of convenience of partition that the parties have been grouped as aforesaid but that does not mean that the members of each group are not parties to the said arbitration agreement. That being so, 'party' as mentioned in Clause 5 of the said agreement means each and every party and the real implication of the said clause is that no one to whatever group he may belong, will have any right whatsoever to claim any accounts against the other party or parties to whatever group he or they may belong. That being the position, in my opinion, the minors will have, no claim against Sushila Debi for accounts. Mr. Sanyal then contended that he was willing on behalf of his client to give an undertaking to Court that he will have the arbitration agreement modified and to include a clause which would make it clear that the accounts which are excluded are the accounts not 'inter se' each group but between the groups themselves. Although I am grateful to Mr. Sanyal for the reasonable attitude he has taken in this matter, I am unable on this application, without the consent of the other party, to accede to Mr, Sanyal's suggestion and the question of amending the Arbitration agreement does not come within the purview of the present application. I have to decide on the matter as it now stands-before me, whether the arbitration agreement is an effective or not and whether it binds the minors. I have come to the conclusion that the Arbitration reference as it now stands cannot be operative so far as the minors are concerned.

5. The next point which I have to consider is whether the reference to Arbitration is for the benefit of the minors. Although having held that the interest of Sushila in the controversy submitted was adverse to that of the minors, it becomes unnecessary for me to decide this question but as this point has been fully argued before me I shall shortly express my views thereon. It appears from the Arbitration agreement that a reference has been made under which the Arbitrator is to decide the disputes between parties in a particular manner. His hands are feterred to the extent indicated in the reference. For instance, five lacs of deferred shares and 44375 Ordinary shares in Rampuria Cotton Mills Ltd., of the total face value of Rs. 9,43,750/- held in the name of Hazarimull Heeralal together with the Managing Agency held by Hazarimull Hiralal should be auctioned by the Arbitrator amongst the three groups and sold to the highest bidder and the highest bidder would be allowed to set off his interest in the said shares and such Managing Agency against the total sale price. Mr. Mukherji contended before me that if the minors cannot give the highest bid in the said sale they will be deprived of their shares which, as it must be admitted, are valuable. Mr. Mukherjee's contention is that in the circumstances the minors would be forced to sell off their shares but if a partition had taken place a portion' of such shares would have been allotted to the minors. Mr. Mukherji further contended before me that under the agreement the firm Hazarimull Hiralal is to be auctioned amongst the parties and the highest bidder will be entitled to obtain the same and if the Arbitration is of the opinion that a fair value has not been reached then he would be entitled to allot the said firm to any group at such valuation as he may consider fair and reasonable. Mr. Mukherji further contended that it would not be unreasonable for me to assume that it would be hardly possible for the minors to compete at the s0aid sales with other co-sharers and to retain the said shares in Rampuria Cotton Mills or to obtain the said Managing Agency or the said firm of Hazari-mull Hiralal. The result in that event will be that the minors will be compelled to part with their very valuable shares and Mr. Banerjee appearing for some of the respondents frankly admitted before me that except in the last year the company regularly gave a dividend of 5 per cent per annum. That being the position, Mr. Mukherjee contended that I should hold that the terms of the arbitration, agreement are not for the benefit of the minors. Whether a particular submission is for the benefit of the minor or not is to be decided on the facts of that particular case. It is not possible to lay down any hard and fast principle which can be said to govern in all circumstances. But certain general principles have been laid down from time to time by Judicial decision which serve as a guide to determine whether or not a particular transaction is for the benefit of the minors. In 'HANUMANPERSAUD PANDAY v. MT. BABOOEE MUNRAJ KOONWEREE', 6 Moo Ind App 393 (PC), their Lordships of the Judicial Committee observed as follows:

'The power of the Manager for an infant heir to charge ancestral estate by loan or mortgage, is, by the Hindu law, a limited and qualified power, which can only be exercised rightly by the Manager in a case of need, or for the benefit of the estate. But where the charge is one that a prudent owner would make in order to benefit the estate, a bona fide lender is not affected by the estate, the danger to be averted, or the benefit to be conferred, in the particular instance are the criteria to be regarded.'

In this particular case the minors along with the respondents are (?) the owners of the said shares. The shares are very valuable and I do not see any reason why the minors should be made to part with their interest in the said shares. If it is a question of pressure or danger to be averted I do not find any such circumstance which should induce me to hold that it is for the interest of the minors that they should part with their interest in the said shares. In my opinion, it would not be for the benefit of the infants that their interest in the said shares should be sold. I am aware of the fact that under the agreement not only the other parties but also the minors would be entitled to bid at the said sale and if the minors by any chance happen to be the highest bidder they would be entitled to get the said shares and the said Managing Agency. But I agree with Mr. Mukherjee that there does not seem to be much chance for the minors to be able to complete at the said sale. I am told that during the arbitration proceedings a sale did take place but Sushila Debi acting for herself and minors could not give the highest bid. It would not be unreasonable for me to assume that in all probability the minors will be deprived of the said shares which would go to the others. I cannot come to the conclusion that these terms which are embodied in the arbitration agreement are for the benefit of the minors. Much has been said on behalf of the respondents about the costly litigation which would follow if I do not allow the arbitration agreement to stand. I am not unaware of the fact that a litigation, particularly relating to a big estate like this, is bound to be expensive. But having regard to the other circumstances of this case, I should not hold, merely on that ground, that the arbitration agreement is for the benefit of the minors. I do not see why minors should not be permitted to come to a Court of law for getting proper justice merely on the ground that law Courts are expensive. I have on full consideration of the matter come to the conclusion that the Arbitration agreement is not for the benefit of the minors.

6. The last contention of Mr. Mukherjee is that Sushila Debi is not in any event the natural guardian of the minor Kamal Singh and therefore she cannot refer the interest of the said minor to the Arbitration. It is now well settled on authority that in Hindu Law an alienation by a. guardian, whether de facto or legal guardian, is binding on the minor provided it is for the benefit of the minor. Sir Dinshaw Mullah in his book on Hindu Law observed as follows:

'A de facto guardian has the same power of alienating the property of his ward as a natural guardian. A bona fide mortgage executed by the de facto guardian of a Hindu minor for the benefit of his estate and with due regard to his interests cannot be impeached on the sole ground that he is merely a de facto guardian, for example, if it is effected for marriage of the minor's sister. The High Courts of Bombay and Madras have held that a sale by a step-mother, though she was in each case the de facto manager of the minor's estate, is a sale by an unauthorised person, and is therefore void. The question as to the validity of a mortgage by a step-mother arose before the Judicial Committee in 'BUNSEEDHUR v. BUNDESEREE', where it was held that the transaction being fraudulent the minor was not bound by it. But the power of a step-mother to alienate the minor's property as a de facto guardian was not questioned. The Bombay decision has since been overruled by the Full Bench decision of the same Court. It is submitted that the earlier, Madras decision is wrong.' (Mullah, Hindu Law, Article 538).

A Full Bench of the Bombay High Court in 'TULSIDAS v. RAISINGHJI, 57 Bom 40, has held that a de facto guardian, although he or she cannot be a natural guardian, has the power to alienate minor's property provided, of course it is for the benefit of the minors.

7. The same view has been taken by this Court in the case of 'MOHAMMED MONDOL v. NAFUR MONDAL', 26 Cal 820. The later decisions of the Madras High Court have also taken the same view. Thus the established view of almost all High Courts is that a de facto guardian has the power to alienate minor's property provided such transfer is for the benefit of the minor and I am bound in any event by the decision reported in 26 Cal 820. That being so, then even if Sushila Debi happens to be only a de facto guardian of Kamal Singh and if as such de facto guardian she has dealt with the properties of Kamal Singh, such dealings would be valid and binding provided it is for the benefit of the infant. That an alienation and reference to arbitration stand on the same footing is not disputed by any of the parties appearing before me. In my opinion, therefore, the contention of Mr. Mukherjee on this point must fail. I accept the contentions of Mr. Mukherji on other points. The result, therefore, is that there will be an order declaring that the arbitration agreement dated the 28th March 1950 is inoperative and invalid and not binding on the petitioner or either of them. The petitioner is entitled to costs of this application. Certified for two counsel.


Save Judgments// Add Notes // Store Search Result sets // Organizer Client Files //