1. This judgment will govern the disposal of Civil First Appeals Nos. 55, 58 and 63 of 1961. aS these appeals are directed against the same judgment of a learned single Judge of this court and raise common questions of law and fact, hence they are being disposed of by a common judgment,
2. Put briefly, the facts leading up to the filing of these appeals are as follows:--
On 30-9-1974, Prem Prakash Kapoor, the contesting respondent in all these appeals, brought a suit in this court against Gobind Ram Kapoor, Kashmiri Lal Kapoor, Kailash Chander- Kapoor, Satish Chander Kapoor, Ramesh Chander Kapoor and Kamal Kapoor, who are the , appellants in these appeals. The suit Was for declaration to the effect that he was a partner with these persons in a firm known as Messrs, Kapoor and Co.; and continued, to be so till date, and for rendition of account's, directing them to render to him the accounts of the firm from the date of the commencement of the partnership not only till the date of the suit, but also during its pendency. In this suit, he also sought an injunction against the defendants, restraining them from interfering with, his participation in the partnership business.
3-4. This suit was contested by the defendants inter alia on the grounds; that the partnership being one at will, it was dissolved with effect from 1-4-1973 by serving a notice on the plaintiff in terms of Section 43 of the Partnership Act, and a new firm was constituted by the defendants thereafter with which the plaintiff had no concern; that the suit on the plaintiff's own showing being a suit for rendition of accounts of a subsisting partnership, it was not legally maintainable; and that the plaintiff had hardly invested a sum of Rs. 25,000/- in the partnership business, which too he had withdrawn on the dissolution of the firm.
5. On 5-11-1974, the parties submitted a joint application to the court that their disputes be referred to the agreed arbitrator, namely, Lala Tirath Ram Amla, whose decision shall be binding on them. The learned single Judge, who was trying the suit, accordingly made a reference to the named Arbitrator by his order dated 11-11-1975, which is reproduced as below :
'The parties have made an application praying that the matters in controversy between them in the present suit may be referred to the sole arbitration of Mr. Tirath Ram Amla Ji r/o Opposite Broadway Cinema, Srinagar, who may be directed to give his award within 4 months from the date he enters on the reference. The statements of counsel for the parties were recorded. They verified the application. Accordingly, I hereby direct that the matters in controversy between the parties in the present suit are referred to the sole arbitration of Sh. Tirath Ram Amla Ji. He will give his award within four months from the date he enters on the reference. The case shall be put up for orders as and when necessary.'
6. The Arbitrator entered upon the reference, recorded the evidence led by the parties, and after hearing them eventually gave his award on 8-6-1977, the relevant part whereof reads as under:--
'And whereas I have heard the parties and gone through the evidence produced by them. Now I give my award as under:--
1. That Prem prakash Kapoor (plaintiff ceased to be a partner of the firm M/s. Kapoor and Co., Srinagar on 31st March, 1973 as submitted by the defendans.
2. That in consideration of Prem Prakash Kapoor (plaintiff) having ceased tobe a partner of the firm M/s. Kapoor &' Co., and in consideration of the various amounts due to him by the firm by way of his share capital, deposits, goodwill, stocks, the defendants shall pay the sum of Rs. 1,75,000/- (Rupees one lakh seventy five thousand only) to the plaintiff (Prem Prakash Kapoor) within 1 month from the date the award is made a rule of the court; The defendants shall pay interest to the plaintiff on the awarded amount at the rate of 12% from 8-6-1977 till the date the entire amount is paid.'
7. The award was filed in the court, and the parties were provided opportunity to file their objections to it, if any. Whereas the plaintiff accepted the award, and did not file any objections to it, the defendants challenged it on a variety of grounds. This controversy gave rise to a number of issues. The parties joined the issues and led evidence on them. The learned single Judge on consideration of the same eventually rejected all the contentions raised on behalf of the defendants, and made the award a rule of the court by his order dated 17-7-1981. It is this order which has been challenged in all these appeals.
8. As before the learned single Judge, the award has been challenged before us on the grounds: firstly, that it is bad because two of the defendants namely, Kailash Chander Kapoor and Kamal Kapoor had not joined the other parties to the suit in maiding the reference to the Arbitrator; secondly, that it has been improperly procured, inasmuch as, it is based not only upon enquiry made by the Arbitrator privately, but also by ignoring the documentary evidence produced by the defendants before him; thirdly, that it is vitiated by an error of law apparent on its face, that the Arbitrator has granted a decree for a specific sum in favour of the plaintiff in a suit for accounts of a subsisting partnership, which suit as such, was not maintainable; and fourthly, that the Arbitrator had no jurisdiction to award future interest, at any rate, interest from the date of the decree to the date the decretal amount was fully realised, much less, when no interest was claimed by the plaintiff in the suit, and consequently no reference of a dispute relating to its recovery could have been made to the Arbitrator, and nor was it in fact made. We now proceed to deal with these grounds one by one.
9. The application for reference to Arbitration Ex, P. KL/1, no doubt reveals that two of the six defendants, namely, Kailash Chander Kapoor and Kamal Kapoor did not sign it themselves. Whereas it was signed by Kashmiri Lal Kapoor on behalf of Kailash Chander as his attorney, it was signed by Satish Chander on behalf of Kamal Kapoor, also as his attorney. The fact, however, remains that it was also signed on behalf of the parties by their counsel. Whereas Mr. M. L. Bhat, Advocate signed it on behalf of the plaintiff, Messrs. K. N. Raina and S, P. Vohra, Advocates signed it on behalf of the six defendants. Defendant Kashmiri Lal appeared as a witness and stated that he held a power of attorney on behalf of Kailash Chander Kapoor, when he signed the application Ex. PKL/1 on his behalf. He also admitted having signed the affidavit Ex. PKL/2 in that behalf. In view of this statement, Mr. Raina did not press the objection to this extent, but confined it to the other defendant, namely, Kamal Kapoor, who the learned counsel argued, is not proved to have appointed Satish Chander Kapoor as his attorney. Satish Chander Kapoor has no doubt not appeared as a witness to depose to the, fact that he held a power of attorney on behalf of Kamal Kapoor at the relevant time. Consequently, it is not possible to hold that he in fact held a power of attorney on his behalf, and was therefore, competent to sign the application Ex. PKL/1 on behalf of Kamal Kapoor. Even so, it cannot be said that there was no valid reference to arbitration on behalf of Kamal Kapoor, Mr. Raina, Advocate himself signed the application Ex. PKL/1 along with Mr. S. P. Vohra, Advocate as counsel for all the defendants, as already noticed. These two advocates also made a statement which reads as under;--
(Text in Urdu not printed.--Ed.)
Their signatures on the application were proved by Kashmiri Lal, who further went on to state that these two advocates had made the aforesaid statements on the instructions of the defendants themselves. There is also a Vakalatnama on the file which has been personally signed by Kamal Kapoor in favour of Mr. K. N. Raina, advocate. This Vakalatnama was shown to Mr. Raina who did not deny that it was so signed. Under the terms of this Vakalatnama Mr. K. N. Baina was competent to appoint an Arbitrator on behalf of his client. This Vakalatnama exists at page six of part B of the file. In view of these facts, it is idle to contend that Kamal Kapoor had not joined the other parties in the appointment of the Arbitrator, as also in making a reference of the disputes to him. Ground No. 1 consequently fails.
10. In order to support the first limb of his second ground, that the award has been improperly procured, Mr. Raina made a pointed reference to Para 3 of the application Ex. PKL/1, which, for the sake of ready reference, is reproduced as below :
'The said arbitrator has been authorised to go into the accounts of the firm in any manner he likes, make private enquiries in the absence of any one of the parties, and proceed to decide the matter in any manner he likes. The parties hereto shall have no objection, whatsoever, to the same.'
11. His argument was that the Arbitrator could not have based his award on private enquiries made by him, but could have based it only on the evidence produced before him by the parties, even if he had been authorised by them to make private enquiries and base his award on them. An award based upon private enquiries made by the Arbitrator, it is well settled, is illegal and unenforceable, where he has not been authorised by the parties to do so. The functions of an Arbitrator being that of a Judge, he will be guilty of gross misconduct, if he decides a ease on the basis of private enquiries. But, there is a cleavage in judicial opinion as to whether an award would still be bad where it is based upon private enquiries made by the Arbitrator, When he has been authorised to make such enquiries by the parties themselves. One view is that this being only a defect in procedure, consent of the parties, who are sui juris will euro it and the award will be unassailable. (See Chandrika Dutt Ram Paudey v. Shyamlal, AIR 1926 Oudh 383, Husain Baksh v. Lachhman Dass, AIR 1922 All 69, and Saxena and Co. v. Damodar Pershad Gupta, AIR 1956 Punj 243). The other view is that an Arbitrator even by agreement of parties, cannot be allowed to act in a manner that makes his conduct unfair. (See Abdul Halim v. Ismail Momin, AIR 1925 Patna 465, and Meharchand v. Magan, AIR 1952 Punj 364). It is not necessary for us to go into the controversy as to which of the aforesaid two views is correct, because the award does not reveal that it is based upon any private enquiries made by the Arbitrator. On the other hand, it clearly says that, it has been based upon evidence led by the parties. That apart, no evidence has been led on behalf of the appellants to show that the award is based upon any private enquiry and what that private enquiry was. Even the Arbitrator has not been examined is admit or deny this fact. In this view, it is not possible to challenge the award on the ground that it is based upon private enquiry made by the Arbitrator.
12. Coming now to the second limb of the argument, it is manliest that the award is a lump sum award which is not supported by any reasons. We cannot, therefore, assume that in giving the award the Arbitrator must have adopted a particular process of reasoning which, in our opinion, would be faulty, and constitute an error of law apparent on the face of the award. The award clearly says that the Arbitrator has made it on consideration of the entire evidence produced before him by the parties, including the balance sheets of the firm. It is thus not possible to hold that the Arbitrator totally ignored the balance sheets showing a lesser amount to the credit of the plaintiff and thereby committed an error of law, as contended by Mr. Raina. On the other hand, the award clearly says that he considered the entire evidence before giving his award. It was the cumulative effect of that evidence which persuaded him to give his verdict. We have no power to go into the question as to whether or not his appreciation of evidence is correct. Had he discussed the evidence and his discussion revealed that he had totally ignored the balance sheets then that would have constituted an error vitiating the award. But that of course is not the case here. (See Jivaraj Bhai Ujamshi v. Chintamanrao Balaji, AIR 1965 SC 214). The second ground too, therefore, fails.
13. This brings us to the third ground, which too has two limbs. Its first limb is that the plaintiff himself not having claimed a decree for a specific sum representing his share in the assets of the dissolved partnership, but having merely claimed a decree for rendition of accounts of a subsisting partnership, there could have been, no reference of such a dispute to the Arbitrator, authorisinghim to award a specific sum in his favour by way of his share in the assets of the dissolved partnership. The Arbitrator has thus, it was argued, committed an error of law, which is apparent on the face of the award. Its second limb is that a suit for rendition of accounts of a running partnership not being maintainable under law, the arbitrator again committed an (sic) of law in entertaining it and giving relief to the plaintiff on its basis. In our opinion, none of the contentions can prevail.
14. True, the plaintiff went to the Arbitrator with the specific case that the defendants were neither allowing him to participate in the continuing partnership business, nor were they rendering him its accounts, but the case with which the defendants went to him was that the plaintiff had ceased to be a partner in the firm with effect from 1-4-1973. The Arbitrator on the totality of the facts and circumstances of the case and the evidence produced by the parties before him eventually accepted the defendants case and held that the plaintiff had ceased to foe a partner in the firm with effect from 3-4-1973. He at the same time did not accept their case, that the money which the plaintiff had invested in the business did not exceed rupees twenty five thousand, and that he had withdrawn it before the suit came to be filed. Having held so, he was competent to grant him the appropriate relief of a decree for specific sum of rupees one lac and seventy five thousand which, according to him represented his share in the assets of the dissolved firm. This was a general relief which he was always competent to grant, and for which no specific prayer was necessary. That apart, the arbitration agreement Ex. PKL/1 itself empowered the Arbitrator to decide the matter in dispute in any manner he liked. Clause 3 of the agreement gave him plenary power to decide the disputes referred to him in any manner he liked, and to grant any relief to a party, which in his opinion the party would be entitled to.
15. Equally untenable is the other contention that a suit for rendition of accounts of a subsisting partnership not being maintainable at all, no relief could be given to the plaintiff on its basis: Such a suit, it is well settled, is not absolutely barred. It can lie on proof of special equity in favour of the plaintiff. A similar view appears to have been taken by this court in Pt. Loknath v. Pt. Bhagwan Dass, 1980 Srinagar LJ 296. Even assuming that such a suit did not lie, the question of law, as to whether such a suit lay in case it was itself referred to the arbitrator, his decision on it even if wrong would be binding on the parties. In taking this view, we are supported by the following observations made in Union of India v. A. L. Rallia Ram, AIR 1963 SC 1685. (Para 13) ;
'......An error in law on the face of theaward means : 'you can find in the award or a document actually incorporated thereto, as for instance, a note appended by the arbitrator stating the reasons for his judgment, some legal proposition which is the basis of the award and which you can then say is erroneous. It does not mean that if in a narrative a reference is made to a contention of one party, that opens the door to setting first what that contention is, and then going to the contract on which the parties' rights depend to see if that contention is sound' : Champsey Bhara and Co. v. Jivraj Balloo Spinning and Weaving Co. Ltd.. 50 Ind App 324 : (AIR 1923 PC 66). . But this rule does not apply where questions of law are specifically referred to the arbitrator for his decision, the award of the arbitrator on these questions is binding upon the parties, for by referring the specific questions the parties desire to have a decision from the arbitrator on those questions rather than from the Court, and the Court will not, unless it is satisfied that the arbitrator had proceeded illegally, interfere with the decision.'
16. As appears from the application Ex. PKL/l and the order of reference passed by the court on 11-11-3975 the whole case was referred to the arbitrator. If the whole case has been referred to the arbitrator, then all points indispute in it shall be deemed to have been so referred, and there would be no heed to make a specific reference of each such point of dispute. The plea that a suit for rendition of accounts of a subsisting partnership is not maintainable under law, was raised by the defendants in their written statement. This dispute on a question of law will, therefore, be deemed to have been referred to the arbitrator for his verdict, when the case was referred to him for arbitration.
His verdict having gone, against the defendants, they are bound by it, even if itis not legally correct. We, therefore, reject the third ground as well.
17. Then comes the last ground which relates to the powers of the Arbitrator to award interest from the date of the award, till the amount decreed on making the award a rule of the court is realised by the decree-holder. Here the attack was threefold : firstly, that interest not having been claimed by the plaintiff in the suit, and nor Section 34, Civil P. C. being applicable to proceedings before an arbitrator, the arbitrator had no power to award interest ; secondly, that Section 29 of the Arbitration Act being a special provision regarding interest, it would override the other general provisions of law relating to interest, as such, power of an Arbitrator to award interest, would be deemed to have been impliedly taken away : and thirdly, that in any case the Arbitrator could not have awarded interest for any period beyond the date of the decree.
18. To support the first plea, reliance was placed upon Thawardas Pherumal v. Union of India, AIR 1955 SC 468, in particular, to the following observations made therein (at p. 478) ;
'It was suggested that at least interest from the date of 'suit' could be awarded on the analogy of Section 34 of the Civil P. C., 1908. But Section 34 does not apply because an arbitrator is not a 'court' within the meaning of the Code nor does the Code apply to arbitrators, and, but for Section 34, even a court would not have the power to give interest after the suit. This was, therefore, also rightly struck out from the award.'
19. These observations no doubt go the whole length of Mr. Raina's contention, but the aforesaid decision was considered by the Supreme Court in its later judgment's, and it was held that these observations were not intended to lay such a broad and unqualified proposition. In Firm Madanlal Roshanlal Mahajan v. Hukumchand Mills Ltd., AIR 1967 SC 1030, for instance, it was held (at page 1032) :
'.........Though, in terms, Section 34 of theCode of Civil Procedure does not apply to arbitrations, it was an implied term of the reference in the suit that the arbitrator would decide the dispute according to law and would give such relief with regard to pendente lite interest as the Court could give if it decided the dispute. This power of the arbitrator wasnot fettered either by the arbitration agreement or by the Arbitration Act, 1940. The contention that in an arbitration in a suit the arbitrator had no power to award pendente lite interest must be rejected.'
20. A similar view was taken in Union of India v. Bungo Steel Furniture Private Ltd., AIR 1967 SC 1032 wherein again it was held (para 5) :
'.........In the present case, all the disputes in the suit, including the question of interest were referred to the arbitrator for his decision. In our opinion, the arbitrator had jurisdiction, in the present case, to grant interest on the amount of the award from the date of the award till the date of the decree granted by Mallick, J. The reason is that it is an implied term of the reference that the arbitrator will decide the dispute according to existing law and give such relief with regard to interest as a Court could give if it decided the dispute. Though, in terms, Section 34 of the Code of Civil Procedure does not apply to arbitration proceedings, the principle of that section will be applied by the arbitrator lor awarding interest in cases where a Court of law in a suit having jurisdiction of the subject matter covered by Section 34 could grant a decree for interest. In Edwards v. Great Western Rly. (1851) 11 CB 588, one of the questions at issue was whether an arbitrator could or could not award interest in a case which was within Section 28 of the Civil Pr. Act, 1833. It was held by the Court of Common Pleas that the arbitrator, under a submission of 'all matters in difference', might award the plaintiff interest, notwithstanding the notice of action did not contain a demand of interest; and, further that, assuming a notice of action to have been necessary, the want or insufficiency of such notice could not be taken advantage of since the 5 and 6 Vict. C. 97, Section 3, unless pleaded specially. In the course of his judgment Jervis, C. J. observed : 'A further answer would be, that this is a submission, not only of the action, but of all matters in difference; and the interest would be a matter in difference, whether demanded by the notice of action or not. If the arbitrator could give it, he might give it in that way, notwithstanding, the want of claim of interest in the notice.'
21. The law is thus well settled that even though Section 34 does not in terms apply to proceedings before an Arbitrator, nevertheless, the principles underlying the section do apply to such proceedings. To decide the dispute and give appropriate relief to the parties according to law, being always an implied term of the reference, an Arbitrator shall have as much power to award interest in arbitration proceedings, as a court trying a suit will have Under Section 34. The next question that immediately falls for determination is : can even a court award interest in exercise of its powers Under Section 34 where it has not been claimed in the suit? If the answer to this question is in the affirmative, then there can be no manner of doubt, that even an Arbitrator shall have power to award interest in arbitration proceedings even if it has not been specifically claimed. This point is no more res integra. Authorities on the point that the court can award interest Under Section 34, even if it is not specifically claimed are legion, A Full Bench of the High Court of Punjab and Haryana in State of Punjab v. Ajit Singh, AIR 1979 Punj and Har 179 took a similar view, wherein speaking for the court C. J. Sandhawalia interpreted Section 34 as under (at p. 182):--
'It, however, becomes necessary to notice a spacious argument, which was still raised on behalf of the respondents to the effect that even conceding the power to the arbitrator to grant future interest, nevertheless it cannot be awarded unless it was expressly and in terms claimed and pleaded on behalf of the party. It was contended that where such a claim or plea has not been taken, the arbitrator would still be powerless to grant future interest however well merited the claim may be. I am unable to agree. The language of Section 34 does not leave any manner of doubt that here primarily the power has been vested in the discretion of the Court itself. Therefore, it cannot be easily fettered on the technical plea that in so many words the claim for future interest was not made, by the party entitled thereto. However, it is unnecessary to dilate on this aspect of the matter either, because this also appears to be equally concluded in favour of the appellant by precedent.' (Also see Rup Ram v. Harphul, AIR 1921 Lahore 125, and Chaturbhuj Tulsiram Marwadi v. Ambarsing Harji, AIR 1931 Bom 549).
22. Nor do we find any force in Mr. Raina's other contention, even though) raised feebly, that Section 34 shall have no application to suits for accounts. A suit for accounts is as good a suit for money, as any other suit for its recovery, and the 'Principal sum adjudged' within the meaning of Section 34 in a suit for accounts, will be the sum found due at the date of the suit. In taking this view, we are supported by a Bench decision of the Madras High Court, viz. ; Sigappiachi v. M. A. P. A. Palaniappa Chettiar, AIR 1972 Mad 463 wherein it was held (at p. 464):
'From the provisions of Order VII, Rule 2, it is clear that an account suit is also treated as a money suit. Therefore, the provisions relating to money suit will apply to a suit for taking of accounts also. Prima facie, the provisions of Section 34 would be applicable in awarding interest in an account suit. But the question arises as to what is the 'Principal sum adjudged' in an account suit.
Taking into account the provisions of the Code of Civil Procedure and the method in which an account suit is valued and court-fee paid thereon, the principal sum adjudged would be the principal amount that is found payable by the defendant on the date of suit.'
23. We now turn to the other two contentions. Section 29 of the Arbitration Act reads as under:
'29. Interest on awards. Where and in so far as an award is for the payment of money the court may in the decree order interest, from the date of decree at such rate as the Court deems reasonable, to be paid on the principal sum as adjudged by the award and confirmed by the decree.'
24. This section does not in terms apply to proceedings before an Arbitrator. It is an enabling provision which confers discretion on the court to award interest, but only from the date of the decree and not from a date anterior to it. Awarding interest pendente lite is the exclusive domain of the Arbitrator. This section in no way comes into conflict with the ordinary powers of the Arbitrator to award interest pendente lite, or till the award is made a rule of the court, though there can be no manner of doubt, that it, on the principle of generalia specialibus non derogant, excludes the jurisdiction of the Arbitrator to award interest beyond the date of the decree. Awarding interest from the date of the decree, till the amount decreed isrealised, is entirely in the discretion of the court that makes the award a rule of the court. No power can be, therefore, assumed in the Arbitrator to fetter this discretionary power of the court. To this extent--and we say this with utmost respects to the learned Judges, who constituted the Full Bench--we are unable to subscribe to the view taken by the Bench in Ajit Singh's case (AIR 1979 Puni and Har 179) (supra) that an Arbitrator with the aid of Section 34 C.P.C. has power to award interest even from the date of the decree to the date the amount decreed is realised, as such an intepretation is bound to create a conflict between the powers of the court and those of the Arbitrator assuming that these powers are co-extensive. Their Lordships in Madan Lal's Case (AIR 1967 SC 1030) (supra) in our opinion, never meant to say that in exercising his powers to award interest, an Arbitrator could even disregard the express provisions of Section 29.
25. The Arbitrator in the instant case has awarded interest from the date of the award to the date the amount decreed on making the award a rule of the court, is realised. He could have awarded interest till the date of the decree only and not beyond that. The learned single Judge has committed an error in making the award a rule of the court as it stood. There is no doubt that in exercise of his powers under Section 29, he himself could have awarded interest from the date of the decree till the date amount decreed was realised, provided to do so would in his opinion be just and reasonable. But, he does not appear to have exercised his own discretion in the matter, rather he appears to have assumed this power also to vest in the Arbitrator himself. To this extent, therefore, his order cannot be sustained. Mr. Bhagirath Dass, however, wanted us to uphold this part of the award by raising a contention that if not the Arbitrator, at least the learned single Judge could have awarded interest from the date of the decree till the date the sum decreed was recovered, as such, his order in ao far as it relates to interest after the date of the decree may be treated as his own order, tracing his powers to pass the same to Section 29 of the Act. We are unable to accept this contention. The argument is purely presumptive. For aught we know, whether in view of the higher rate of interest of12% per annum allowed by the Arbitrator, the learned single Judge would have still deemed it just: and reasonable to award future interest from the date of the decree onwards.
26. For the reasons stated heretofore, we uphold the award as well as the order of the learned single Judge making the same a rule of the court, but with the modification that the plaintiff shall be entitled to interest on the principal sum of Rs. 1,75,000-00 from the date of the award to the date of the decree only, but not thereafter, and dispose of the appeals accordingly. The decree holder, namely, Prem Prakash Kapoor shall be entitled to withdraw from the Bank the amount deposited by the appellants in F. D. Rs. in obedience to court orders along with interest that has accrued on it in the meantime, and the balance shall be paid to him by them Within One month from today, failing which the decree-holder shall be entitled to recover it from the appellants by taking out execution of the decree against them. In view of the peculiar circumstances of the case, we leave the parties to bear their own costs in this court.