Roshanlal Thakur vs Kishanlal Kapoor

S. Acharya, J.—The Plaintiff in Title Suit No. 256 of 1969 has preferred this appeal against the order of the Court below refusing to set aside the award passed by the Arbitrator u/s 14 of the Arbitration Act, 1940 (hereinafter referred to as the'' Act'').

The Plaintiff made an application u/s 20 of the Act to refer the dispute between him and the Defendant arising out of a partnership firm to an Arbitrator as per the terms contained in the deed of partnership agreement between them. The Court referred the following two matters for arbitration to an Arbitrator appointed by it:

The Arbitrator would state after inspecting the accounts and other papers of the partnership firm:

(i) as to what was the amount of profit the Plaintiff was to get from 25-4-1964 to 8.8.1969; and

(ii) if the Plaintiff was to get any rateable profit out of the business of the said firm since after 29-8-1969.

The Arbitrator submitted his award on 31-1-1964. Thereafter the Plaintiff filed an application to remit or set aside the said award and send it back to the Arbitrator for reconsideration. The Court having refused to set aside the said a ward, the Plaintiff has filed this appeal.

At the outset Mr. Mohanty, the learned Counsel for the Respondent, urged that this appeal was not maintainable as the final order sought to be challenged by this appeal amounted to a decree as per Section 17 of the Act, and by this appeal it was not challenged that the said decree was in excess of of otherwise not in accordance with the said award, on which grounds alone an appeal would lie against such a final order as provided u/s 17 of the Act.

The impugned order is a composite order by which the Court below has refused the Plaintiff''s application to remit or set aside the award and has also pronounced its judgment in the suit on the basis of the said award. On a careful perusal of the provisions of Sections 17 and 39 of the Act, I am of the view that where a composite order, like the impugned order is passed by the Court an appeal can be filed u/s 39(1)(vi) of the Act against that portion of the said order by which an application for setting aside the award is rejected. Against the other portion of the said order containing the judgment of this Court passed in accordance with the award, an appeal would lie u/s 17 of the Act only on the grounds as specified therein. My above view is supported by the decisions in Raja Brijendra Singh Vs. Buti Saha and Others, , Beeraswamy Chetty v. Varadiah Chetty and Ors. AIR 1957 A.P. 493, Amarchand Sharma v. Moosabhai and Peer Mahoomed AIR 1955 Hyd 213, Bholanath Chatterjee and Another Vs. Chandra Shekhar Bhattacherjee, , Jagat Pande Vs. Sarawan Pande and Others, . On the above view of the matter I find that the appeal is maintainable.

Mr. S.C. Mohapatra, the learned Counsel for the Appellant, challenged the impugned order by saying that the Court below by one and the same order was not justified and competent to dismiss the Plaintiff''s application for setting aside the said award and also in confirming the said award. According to Mr. Mohapatra, the Court, as per the provisions of Section 17 of the Act, should at first have passed a separate order on the said application of the Appellant, and then it could have proceeded to pronounce judgment according to the award. On the above contention Mr. Mohapatra branded the impugned order as illegal \\ and without jurisdiction. I am not able to accept Mr. Mohapatra''s said contention There is nothing in Section 17 of the Act on which it has to be said that the Court at first has to set aside award by a separate order and thereafter, by a second order, proceed to pronounce judgment according to the award. Section 17 says that when an application for setting aside the award is filed that matter has to be dealt with, and after refusing that application the Court can proceed to pronounce judgment according to the award. So, if an application to set aside the award is filed, the Court, on a consideration of the grounds of objection raised before it, may set aside the award, in which case the Court cannot confirm the award. But if the said objection is not allowed, the Court can by the same order proceed to confirm the award by its judgment. There is nothing in Section 17 which disentitles the Court to pass such a composite order. So such a composite order cannot be said to be an illegal order or an order passed without jurisdiction of the Court.

In Raja Brijendra Singh Vs. Buti Saha and Others, it has been held:

The settled position of law now is that where the order of a Court is composite, which on one hand dismisses the objections of a party to the award, and, on the other, pronounces judgment on the basis of the award, then such an order should be treated as an order falling u/s 39 of the Act and an appeal is maintainable against it. In this view of the matter treating the order under consideration as being one u/s 39(vi) of the Act we hold that the appeal is competent.

The above view gets support from the decisions in Hari Dass Vs. Budhu and Others, , Beeraswamy Chetty v. Varadiah Chetty and Ors. AIR 1957 A.P. 493, and Kanpur Nagar Mahapalika Vs. Narain Das Haribansh, .

On the aforesaid considerations the above contention of Mr. Mohapatra is overruled.

The learned Counsel for the Appellant has challenged the award on the following grounds:

(i) material documents filed by the Plaintiff have not been taken into consideration;

(ii) the Arbitrator has given decisions on matters not referred to him;

(iii) while deciding such questions not referred to the Arbitrator, he has not stated and settled the incidental and ancillary reliefs which consequentially arise out of such decisions; and

(iv) the Arbitrator''s award is vitiated by errors both of law and fact.

The award is a speaking award and is quite an elaborate one. From the award itself it is evident that certain income tax assessment orders relating to the periods ending with 31-12-1965, 31-12-1966 and 31-12-1967 were filed by the Plaintiff before the Arbitrator to show the income of the partnership firm as determined by the Income Tax Authorities. The Arbitrator without probing into these documents, rejected those from consideration on the hypothetical basis that:

Sometimes the total of firm''s income is determined by the Income tax authorities by disallowing certain of the expenditures already made by the firm itself. So any such amount added to firm''s income for the purpose of assessment of the income tax of the firm cannot be calculated to be an addition to the net profit of the firm and the individual partners, therefore, cannot be entitled to have a share out of the additional or inflated amount the Income tax authorities calculated to be the profit of the firm by disallowing the expenditures so made; in other words the partners cannot in that case claim it to be a net profit of the firm.

From the above unhappy expression it appears that the Arbitrator has discarded the said income tax assessment orders merely on the ground that the Income tax authorities sometimes disallow certain expenditures and add those disallowed amounts to the income of the firm and thus show an inflated amount as the income of the firm, and so the income tax assessment orders cannot be relied upon for the purpose of calculating the actual profit of a firm and/or the share of the partners in the profit of the said firm. The Arbitrator has not stated as to whether the income tax assessment orders filed before him in respect of the partnership firm in question actually suffered from any such lacuna, shortcoming or defect. Merely on the Arbitrator''s own opinion about the alleged unsatisfactory manner of assessment made generally by the Income tax authorities, the Arbitrator should not have discarded those material documents from consideration.

Their Lordships of the Supreme Court in the case reported in K.P. Poulose Vs. State of Kerala and Another, , have held that if the Arbitrator on the face of the award arrives at a decision by ignoring very material documents which throw abundant light on the controversy to help a just and fair decision, then that would amount to legal misconduct u/s 30(a) of the Act.

The Arbitrator should have carefully probed into the said income tax assessment orders, for the said assessment orders were passed by statutory authorities who have to follow a particular statutory procedure in making assessments of income. The said assessment orders would certainly throw abundant light on the matters referred to Arbitration, and would have enabled the Arbitrator to arrive at a just and correct decision. As the Arbitrator discarded the said assessment orders merely on such hypothetical and unfounded grounds, the Arbitrator has seriously misconducted himself in the arbitration proceeding.

The Arbitrator has elaborately dealt with the question of dissolution of the partnership firm in his award and has arrived at the finding that the partnership firm M/s. Kapoor Motor Engineering Works at Ranihat. Cuttack was dissolved from 9-9-1969.

From the matters referred to Arbitration, as quoted above, it is quite evident that the question regarding the dissolution of the partnership firm in any form was not at all referred to the Arbitrator for decision. In this case the Arbitrator was only required to decide as to what was the amount of profit the Plaintiff was to get out of the partnership firm from 24-4-1964 upto 28-8-1969, and whether he is to get any rateable profit out of the business of the said firm after 29-8-1969. The books of accounts were produced before the Arbitrator, and on inspecting the same and other documents of accounts pertaining to the said firm the Arbitrator was to assess only the Plaintiff''s share in the profits made by the said firm during the aforesaid specified periods. The question of dissolution of the partnership firm, not being in issue, the parties certainly did not adduce any evidence or materials before the Arbitrator. Moreover a decision of such a matter requires investigation and determination of various legal and factual questions, and as the matter was not referred to the Arbitrator he was not competent to deal with that matter at all. As the question of dissolution of the partnership firm was not referred to the Arbitrator, he misconducted himself in dealing with that matter at length and in giving a finding that the said partnership firm was dissolved on a particular date.

In the decision in Gobardhan Das Vs. Lachhmi Ram and Others, , it has been held that so long as the Arbitrator acts within the scope of his authority there can be no doubt that his decision must be accepted as valid and binding. But if he travels outside the powers conferred upon him by the reference and if he decides any other question extraneous to the points for arbitration, he would be held guilty of acting in excess of his authority, and his such award has to be set aside.

The decision in Jivarajbhai Ujamshi Sheth and Others Vs. Chintamanrao Balaji and Others, , also supports the above view.

Accordingly, by exceeding the power in giving a decision on the question of dissolution of the partnership firm, which question was not referred to the Arbitrator, he seriously misconducted himself, and his decision to that effect is liable to be set aside.

As the Arbitrator was not to decide the question of dissolution of the partnership firm he was also not required to decide the consequential rights and liabilities of the partners of the said firm on its dissolution. Hence Mr. Mohapatra''s submission on this point does not require any consideration.

As the Arbitrator evidently discarded certain important and material documents from consideration which would have thrown abundant light on both the points referred to him, and as he acted in excess of his jurisdiction by giving a finding on a matter not referred to him, the award must be set aside in its entirety.

Mr. Mohapatra''s submission that the Arbitrator mis-conducted himself by deciding the points referred to him erroneously, both on facts and law, need not be gone into in view of my findings that the award is liable to be set aside in its entirety for reasons stated in the preceding paragraphs.

On the above considerations I set aside the, award passed by the Arbitrator and allow this appeal. The Court below shall remit this matter afresh for arbitration in accordance with law. In case the matter is remitted to the same Arbitrator his remuneration should be fixed on a consideration of his misconduct in the last proceeding and the amount already received by him for performing the work in that illegal manner. The L.C.R. be sent back to the Court below immediately.

The appeal accordingly is allowed with costs.