S.M. Venkatayyan Chettiar vs S.M. Subramanian Chettiar and Others

Srinivasan, J.—This is an appeal from the judgment and decree made in Original Petition No. 31 of 1956 by the learned Additional Subordinate Judge of Madurai. The petition before the Court below was one to set aside an award, dated 27th February 1956. In 1940, a partnership firm, consisting of a father and his three sons, was started. On the death of one of the partners, the partnership was continued by the three surviving partners. Differences, which arose among the partners were referred to a panchayat, but that proved infructuous. There was a subsequent mediation which also failed. In 1951, there was a reference to a fresh set of panchayatdars who made a partial award in the first instance, followed by a final award. This was followed by a suit to direct the arbitrators to file the award. Thereafter, the Plaintiff filed an application (Interlocutory Application No. 1254 of 1952) to set aside the award. This application was compromised, the parties accepting the partial award with some modifications and dropping the final award. By the compromise Interlocutory Application No. 384 of 1953 filed into Court during those proceedings, outstanding disputes were referred to two Advocate-arbitrators. The arbitrators went into the matter and finally made an award on 27th February 1956, whereby the Plaintiff and the first Defendant were directed to pay certain sums to the second Defendant in the suit. It is to set aside this award that the original petition was filed in the Court of the Subordinate Judge.

One of the principal contentions advanced before the Court below was that the award filed by the arbitrators is not valid as it was not duly stamped. It was further claimed that the document had to be registered u/s 17 of the Indian Registration Act. On merits also, the award was attacked.

The learned Subordinate Judge examined the question and came to the conclusion that the award did not require to be stamped under the Stamp Act. He also took the view that since the award in the case was made on the intevention of the Court, that is to say, by a reference being made by the Court to two arbitrators agreed upon in the proceeding in which the earlier award was challenged and on the basis of the compromise that was entered into by the parties, such an award passed under the orders of the Court has no force until a decree is passed on it, in contra-distinction to a private award. The learned Subordinate Judge examined the cases cited before him and held that these cases dealt with private awards and had no application to a case where an award was made on the intervention of the Court. His conclusion was, accordingly, that the award was only part of a judicial proceeding and that unless a decree is passed thereon, it could not validly purport to transfer any interest in the immovable properties covered by it and that, therefore, at the stage at which it came before the Court it was not liable to be registered. At this stage, it is unnecessary to examine the other contentions raised in this appeal, for the question has been argued on the preliminary ground that the finding of the Court below, that the award in the instant case is not liable to be registered, is erroneous. He is only after the disposal of this question, that the other grounds of attack upon the award would require to be canvassed.

CIVIL REVISION PETITION NO. 2143 OF 1960

This Revision Petition is directed against the judgment of the learned District Judge of East Thanjavur, made in Original Petition No. 78 of 1959. The facts are briefly these. The parties executed a muchilika on 4th June 1958, and referred certain disputes with regard to the partition of their joint properties as well as the settlement of their business accounts to two arbitrators, Respondents 6 and 7 before the lower Court. The award was not passed within the period of four months, nor did the arbitrator apply to get an extension of time. A fresh muchilika was executed on 3rd February 1959, and ultimately, the arbitrators made the award on 1st June 1956. A petition was made to get the award filed into Court by Respondents 1 to 5. That was subsequently numbered as Original Suit No. 23 of 1959. The opposite parties were duly served. (Independently of this proceeding, a suit for partition, Original Suit No. 24 of 1959 was also filed.) The Petitioners thereafter filed an application Original Petition No. 73 of 1959, challenging the validity of the award, one of the principal contentions being that the award has no legal existence as it was neither stamped nor registered as required by law.

Against the decision of the learned District Judge in Original Petition No. 73 of 1959, holding that the award was bad for want of compliance with the Stamp Act and the Registration Act, the present revision petition had been filed before this Court.

Apparently, by way of abundant caution, the Petitioners in the above civil revision petition have filed a civil miscellaneous appeal, 291 of 1962, against the very same judgment in Original Petition No. 73 of 1959.

When Civil Revision Petition No. 2143 of 1960, and Civil Miscellaneous Appeal No. 291 of 1962, came up for hearing before my learned brother Venkatadri J., it was represented that since the Civil Miscellaneous Appeal involved properties exceeding a lakh of rupees in value and as there is no provision for a second appeal against the order of a single judge, the matter deserved to be posted before a Bench. Venkatadri J., concurred in this view and holding that there is a substantial question of law to be decided, had the papers placed before the Hon''ble the Chief Justice, who hag directed the matter to be posted before a Bench. That is how the question comes up before us.

In Original Petition No. 73 of 1959 leading to Civil Revision Petition No. 2143 of 1960, and Civil Miscellaneous Appeal No. 291 of 1962, the learned District Judge was also called upon to examine the question whether the award required registration. On his view of the authorities cited before him, the learned District Judge, came to the conclusion that the question of registration of a document had to be considered according to the provisions of the Registration Act and that what effect the award would have under the Arbitration Act was irrelevant for that purpose. Basing himself on certain decisions of this High Court, he concluded that it did not matter whether the award was one which was passed after the Arbitration Act of 1940, came into force and that if the parties intended that the award should itself declare the rights of parties, that should decide whether the award was liable to be registered. He took the view that Section 17 of the Registration Act applied to the instant case and that since the award dealt with immovable properties but was not registered, in so far as the immovable properties were concerned the award had to be declared as invalid.

It will thus be seen that the two Courts have reached diametrically opposite conclusions.

The question that we have now to decide is whether an award made through the intervention of a Court is a document which comes within the scope of Section 17 of the Registration Act and is liable to be registered and whether for want of registration it is inadmissible for any purpose whatsoever; and whether after the coming into force of the Arbitration Act, 1940, any difference in this regard exists between awards made with and without the intervention of the Court.

The documents of which registration is compulsory are specified in Section 17 of the Indian Registration Act. For our purpose those documents the nature of which is outlined in Section 17(1)(b) are material. They are Sub-section (2) of Section 17 sets out the exceptions to Sub-section (1). Clause (vi) of Sub-section (2) was amended by Section 10 of the Transfer of Property Amendment Supplementary Act, 1929, which came into force on the 1st of April 1930. The clause, as it stood before the amendment, excluded the operation of Sub-sections (b) and (c) of Section 17(1) to any decree or order of a Court and any award. By the amendment referred to, an award was no longer excepted from registration. It would, therefore, appear that all awards are compulsorily registerable if the removal of the exception is to be any guide. But, nevertheless, it has to be established that an award is one which falls within the scope of Section 17(1)(6) of the Act, that is to say, whether it is of the character referred to in that clause. The question would, therefore, arise whether an award would be a non-testamentary instrument which purports or operates to create, declare, etc., any right, title or interest...to or in immovable property. It is in order to interpret this provision in connection with an award that it becomes necessary to examine the position with regard to awards in general after the modification of the Indian Arbitration Act, 1940.

Other non-testamentary instruments which purport or operate to create, declare, assign, limit or extinguish, whether in present or in future, any right, title or interest, whether Tested or contingent, of the value of Rs. 100 and upwards, to or in immovable property.

Before this Act was placed on the statute book, arbitrations were covered, in so far as presidency towns were concerned, by the Arbitration Act of 1899, and in the mofussil by the Second Schedule to the Code of Civil Procedure, 1908. The scheme of the Arbitration Act will be referred to in due course and the extent to which any distinction is created between private awards and awards made with the intervention of the Court. But at this stage, it would suffice to postulate the question whether an award which is brought to Court for one or the other of the purposes mentioned in the Indian Arbitration Act can be described as a document falling within the scope of Section 37(1)(b) of the Act.

A reference has also to be made to Section 49 of the Indian Registration Act. Under this provision, no document required by Section 17 of the Act to be registered shall be received as evidence of any transaction affecting such property. The question would also have to be examined whether in a proceeding under the. Indian Arbitration Act, where an award is directed to be filed into Court and proceedings for the passing of a decree in terms of the award or for setting aside the award for one or the other of the many reasons contained in the Indian Arbitration Act are set afoot, this provision Section 49 of the Indian Registration Act has any effect, that is to say, whether it prohibits an award to be received in Court in such a proceeding unless it has been registered. It would be necessary then to examine the nature of the proceedings in the Court under the provisions of the Indian Arbitration Act and to ascertain whether in such a proceeding an unregistered award is in fact received in evidence as pertaining to any transaction affecting immovable property.

On the last of these questions, there is a recent pronouncement of the Supreme Court which affords guidance. In Champalal Vs. Mst. Samrath Bai, the question arose in the following manner. In a dispute regarding a will authorising a widow to adopt, arbitration was agreed upon. An award was made by the arbitrators after time had been extended by the Court for the making of the award. The award was at first unregistered, but later it was registered and filed into Court. An application was made u/s 14(2) of the Arbitration Act for passing of a decree in terms of the award. There was also an application for setting aside the award. The contention was advanced that the award was not registered according to law, that the trial Court had no jurisdiction to extend the time for making the award, and that misconduct on the part of the arbitrators must be held to have vitiated the award. On the question which is now relevant, their Lordships observe thus:

The second question that the award required registration and could not be filed by the arbitrators before it was registered is equally without substance. The filing of an unregistered award u/s 49 of the Registration Act is not prohibited; what is prohibited is that it cannot be taken into evidence so as to affect immovable property falling wader section 17 of that Act.

It would, therefore, appear from the above observation of their Lordships upon the scope and operation of section 49 of the Indian Registration Act that it would not prohibit the filing of an unregistered award into Court m proceedings under the Indian Arbitration Act, for at that stage it was not tendered or accepted as evidence affecting immovable property. It was only to establish the fact that an award had been made by the arbitrators, and the question before the Court was whether a decree should follow in terms of the award or whether the award should be set aside for any one of the reasons contained in the Indian Arbitration Act. No question, therefore, would at that point of time arise whether any term of the award affected immovable property, and the award was certainly not received by the Court as evidence so as to affect immovable property. So much seems to be clear from the above decision.

A decision of some importance is Jitendranath De. v. Nagendranath De ILR (1934) Cal. 201. That was a case which dealt with an award made by an arbitrator appointed without the intervention of the Court, and the very question whether the award was compulsorily registrable arose. On one side it was contended that the effect of the amendment to Section 17(2)(vi) of the Indian Registration Act removing the words any award which appeared therein was not to make the registration of awards made without intervention of the Court compulsory but to place them on the same footing as awards of arbitrators made through Court. On the other side it was urged that while an award made by an arbitrator under orders of Court has no force until a decree is passed thereon, private award, if valid, is operative although neither party sought to enforce it by a suit. It was accordingly contended that a private award falls within the scope of Section 17(1)(b) of the Registration Act. The learned Judges of the Calcutta High Court pointed out that the words any award, which appeared in Section 17(2)(vi) prior to the 1929 amendment, included a private award, which, though it fell within the scope of Section 17(1)(b), was exempted from the category of documents compulsorily registrable. The argument that both classes of awards belonged to one and the same class of documents was repelled by the learned Judges who observed that:

whereas an award made by the arbitrators under orders of Court has no force until a decree is passed on it, a private award, if valid, is operative.

The specific pronouncement of the Court was that a private award falls within the class of decuments specified in Section(17)(1)(b) of the Registration Act, whereas an award of the other class does not. In that case, the award also appears to have been presented into Court for the purpose of using it as evidence of a transaction affecting immovable property. It followed, therefore, that Section 4 prohibited its admissibility. It would be noticed that the award in this case was made before the 1940 Act.

The above decision is certainly of some importance as it lays down the vital point of distinction between private awards and what may be broadly described as Court awards.

In Kashinathsa Yamosa Kabadi v. Naringsa Bhaskarsa Kabadi (1968) 3 S.C.R. 792 the following question arose. Certain disputes between the branches of a family were referred to arbitrators with authority to determine what shares should be allotted to the different branches of the family. There was a partial award, the decision of the arbitrators being reduced to writing. It was signed by the arbitrators as well as the parties in token of acceptance. Thereafter, the arbitrators proceeded the deal with movable properties and residential houses. The division effected by the arbitrators was made at several stages. One of the parties issued a notice cancelling the auhotrity of the arbitrators and also filed a suit for partition of the properties still remaining to be divided. There was a separate suit by the Defendants also for partition and possession of a half share in all the properties of the joint family. In this suit, misconduct on the part of the arbitrators was alleged. When the matter came before the Supreme Court, the position that emerged was that the divisions made by the arbitrators, were not merely tentative arrangements liable to be superseded at a later stage, but that they were final and were in fact given effect to. But the question which their Lordships had to decide was whether the defence set up, viz., that there was a partition by agreement accepting the method of partition suggested by the arbitrators was or was not barred by section 32 of the Indian Arbitration Act. Their Lordships point out that, before the Arbitration Act, 1940, an award made by arbitrators appointed out of Court, even if it was not made a rule of the Court, was regarded as equivalent to a final judgment, and any suit filed on the original cause of action referred to the arbitrators was held barred. They refer to Section 31(2) of the Arbitration Act which provides that all questions regarding the validity, effect or existence of an award shall be decided by the Court in which the award has been or may be filed and by no other Court, and to Section 33 of that Act which provides the procedure to be followed. They point out that the prohibition contained in Section 32 of the Act, that no suit shall lie for a decision upon the existence, effect or validity of an arbitration agreement or award otherwise than as provided for in the Arbitration Act, was not a bar to the specific defence raised before them. They say:

It may be sufficient to observe that where an award made in arbitration out of Court is accepted by the parties and it is acted upon voluntarily and a suit is thereafter sought to be filed by one of the parties ignoring the acts done in pursuance, of the acceptance of the award, the defence that the suit is sot maintainable is not founded on the plea that there is an award which bars the suit but that the parties have by mutual agreement settled the disputes and that the agreement and the subsequent actings of the parties are binding. By setting up a defence in the present ease that there has been a division of the property and the parties have entered into possession of the properties allotted, Defendant No. 1 is not seeking to obtain a decision upon the existence, effect or validity of an award. He is merely seeking to set up a plea that the property was divided by consent of parties. Such a plea is in our judgment not precluded by anything contained in the Arbitration Act.

These observations clearly indicate that in the case of a private award it is open to the parties to act upon it without having it made a rule of Court and quite possibly without even having it registered. Certain further passages in that judgment make reference to the aspect of the matter. Their Lordships say:

The records made by the Panchas about the division of the properties, it is true, were not stamped nor were they registered. It is however clear that if the record made by the Panchas in so far as it deals with immovable properties is regarded as a non-testamentary instrument purporting or operating to create, declare, assign, limit or extinguish any right, title or interest in immovable property, it was compulsorily registerable u/s 17 of the Registration Act and would not in the absence dt registration be admissible in evidence. But in our judgment, the true effect of what are called awards is not by their own force to create any interest in immovable property. They recorded the divisions already made and on the facts proved in this ease, and their validity depends upon the acceptance by the parties. The records made by the Panchas were documents which merely acknowledge the partitions already made and were not by law required to be registered.

This passage indicates whether an award is registerable or not would depend upon what exactly was the purported operation of the award and not the mere fact that it is an award made by the arbitrators.

We may now refer to a decision of the Sind High Court which deals directly with the point before us. In Firm Bassanand v. Jodhomal AIR 1936 Sind. 79, 80 (F.B.) a Full Bench had to consider whether an award made by an arbitrator when submitted to Court could be received in evidence for want of registration. The Full Bench had to consider the following questions:

(i) Is an award made in pursuance of a reference filed in Court under paragraph 17 G.P.O., compulsorily registerable

(ii) It yes, is it compulsorily registerable before the Court has accepted it and has passed a decree in terms thereof?

(iii) If not, is the award or the decree passed in terms thereof to be registered after the decree has been passed?

The learned Judges referred to the amendment of Section 17 of the Registration Act by the amending Act of 1929 which deleted the words any award which appeared previously in Section 17 (2)(vi), and to the decision of the, Privy Council in Bindesri Naik v. Ganga Saran Sahu ILR (1897) All. 171, 180 (P.C.). They followed the classification laid down by the Judicial Committee, which, according to them, was as below:

(i) Where the parties to a litigation desire^ to refer to arbitration any matter or difference between them in the suit; in that case, all proceedings from the first to the last are under the supervision of the Court;

(ii) Where parties without having recourse to litigation agree to refer their differences to arbitration and it is desired that the agreement should have the sanction of Court; in that case, all further proceedings are under the supervision of the Court;

(iii) Where the agreement of reference is made and the arbitration itself takes place without the intervention of the Court, and the assistance of the Court is only sought to give effect to the award.

They held that in the first two classes of cases, the awards do not require registration but that awards falling under the third category require registration. In coming to this conclusion, they made the following observations:

We think however a distinction must be drawn between an application which is made after the award has been given and an application to file a reference which is made before an award is given, between an award made without and an award with the intervention of the Court. An award on a reference made without the intervention of the Court will be binding upon the parties even if no application is made under paragraph 20. But an award made after an application under paragraph 17 and not submitted to the Court would not be binding on the parties.

It is on that principle that the above decision was given. In the Privy Council decision referred to Bindesri Naik v. Ganga Saran Sahu ILR (1897) All. 171, 180 (P.C.), the Judicial Committee expressed themselves in this manner:

Although, in the view which their Lordships take, the question, whether those proceedings can be founded on, without their having been registered in terms of the Act of 1877, does not necessarily arise in this appeal, they think it right to add that, having heard counsel fully upon the point, they are satisfied that the provisions of Section 17 of the Act do not apply to proper judicial proceedings, whether consisting of pleadings filed by the parties or of orders made by the Court.

The case of a private award was considered by the Calcutta High Court in Nani Bala Shaha v. Ram Gopal Shaha ILR (1945) 1 Cal. 454, 460, 463. In the course of some proceedings before the Court of a Magistrate, the parties agreed to the arbitration of the dispute by two named arbitrators. The arbitrators tiled the award into Court. The award declared title to immovable property worth more than Rs. 100 and partitioned between the parties immovable property of considerable value. It was not registered under the Registration Act. This was followed by one of the parties filing an application in the Court of the Sub-Judge purporting to be under paragraph 20 of schedule II, Code of Civil Procedure, to direct the arbitrators to file the award into Court and to pass judgment and decree in accordance with the award. The opposite parties objected to the filing of the award basing then objection on the non-registration of the award. The Subordinate Judge upheld this plea and against his decision an appeal was taken to the High Court. The learned Judges had to consider whether the award was compulsorily registerable and, if so, what was the effect of its non-registration. Construing the material terms of the agreement to submit to arbitration, they held that the parties agreed that the award itself would have effect on their title, and if that was so, the award would be compulsorily registerable. They reasoned thus:

By reason of the exception contained in Sub-section (2), Clause (vi) of Section 17 of the Registration Act, an award did not before 1929 require registration. But by reason of the amendment of that clause in 1929 by which the phrase any award was deleted from that clause, a private award would require registration if it comes within Clause (b) of Sub-section (1) of that section. A private award is a non-testamentary instrument. It would require registration if it purports or operates to create, declare, limit or extinguish any right, title or interest-to or in immovable property of the value of one hundred rupees or upwards.

The award which we have before us deals with title to immovable property worth more than Rs. 100 and so would prima facie require registration. The learned advocate for the Appellant however contends that the award in this case by its own force has not the effect of creating, declaring or limiting right to the immovable properties mentioned in the award, for the parties in referring their disputes td arbitration intended that the Court should make u decree on the award and that it is only when such a decree had been made that the rights of the parties would be regulated in the manner indicated in the award by the force of that decree. The substance of the contention is that the parties intended that the decree of the Court on the award and not the award would create, declare, or limit, as the case may be, the rights of the respective parties ...

It is in this context that they examined the agreement to refer to arbitration and came to the conclusion that the intention of the parties was that the award of its own force should operate upon the title to immovable property, and they reached the conclusion that in such a case the award did require registration. They referred also to the decision in Jitendranath De v. Nagendranath De ILR (1934) Cal. 201 already referred to in this judgment and held on the authority of that decision:

...in so far as it decides that a private award has td be registered before it can be filed in the Civil Court for the purpose of obtaining a decree thereon has not been shaken by the repeal of Schedule II of the Code of Civil Procedure, and the enactment of the Arbitration Act of 1940.

A decision of a Bench of this Court in Chavakula Yanadamma and Another Vs. Chavakula Venkateswarlu and Others, does not bear directly upon the question. It was a case where the decision of the arbitrators settled a dispute between the parties only as to the quantum of property and the terms of its assignment. It did not by itself operate as a conveyance. The learned Judges held that a mere declaration would not suffice to give a title to the Plaintiffs when a conveyance was obviously necessary, and that the award stood on no higher footing than an agreement to transfer in future. The view was taken that such an award did not require to be registered and is admissible in evidence without registration. The distinction between private awards and awards made with the intervention of the Court was not discussed in this decision.

In the decision of the Supreme Court in Kashinathsa Yamosa Kabadi, etc. Vs. Narsingsa Bhaskarsa Kabadi, etc., , already referred to, it was pointed out that before the Arbitration Act, 1940, an award made by arbitrators appointed out of Court, even if it was not made a rule of the Court was regarded as equivalent to a final judgment and any suit filed on the original cause of action referred to the arbitrators was held barred. Their Lordships referred to the wide divergence of judicial opinion among the High Courts on the question whether an award made in a reference out of Court can be set up as a defence to an action filed by a party thereto on the original cause of action, when the award is not filed in Court. They referred to Sections 31 and 33 of the Arbitration Act in that context. They point out that according to the decision in S.K. Kuer v. B.N. Sinha ILR (1952) Pat. 886, an award made on a private reference to arbitration is not operative of its own force and that it becomes operative only on being made a rule of the Court, and refer to a similar view taken in the decisions of other High Courts. But, as has already been indicated, the actual decision in that case proceeded on the position that it is not prohibited to a Defendant to put forward an award in defence when the award had been acted upon by the parties and the principle upon which the bar of section 31 stood removed was on the factum that the parties had by mutual agreements settled the disputes and that the agreements and the subsequent sections of the parties were binding upon them.

Another decision of the Supreme Court in Rikhabdas v. Ballabhadas (1962) 1 S.C.R. 475 (Supp.), although it does not directly bear upon the point, is still of importance in affording considerable guidance upon the question. In that case, an unstamped and unregistered award was filed into Court by the arbitrator. An objection was taken to a judgment being passed on such an award, and the trial Court remitted the award to the arbitrator for resubmitting it to the Court on a duly stamped paper and after getting it registered. A Division Bench of the Nagpur High Court, to whom the case was referred by a single Judge, dealt with the questions whether the award made on a reference by the Court is chargeable to stamp duty, whether it is compulsorily registerable and whether the Court has powers to remit the award to get it stamped and registered. Before the Bench it seems to have been conceded by the parties that the award required to be stamped. That question was not, therefore, decided and the learned Judges also found it unnecessary at that stage of the proceeding to determine whether the award required registration. On the third question they held, apparently following an earlier decision of that High Court, that an award could be remitted to the arbitrator, as the want of proper stamp thereon would be an illegality apparent on the face of the record. This view of the Nagpur High Court was not accepted by their Lordships of the Supreme Court. In the view of their Lordships, the Court was competent to remit the award only for re-consideration, and re-consideration did not in their opinion deal with any matter other than the merits of the award. They approved of the statement of the law by Mitra J., in Moni Bala Shaha v. Ram Gopal Shaha ILR (1945) 1 Cal. 454, 464, where the learned Judge observed that:

Want of registration is a defect de hors the award or the decision of the arbitrator, and so, in our judgment, is not covered by Clause (c) of Section 18(1) of the Arbitration Act.

The Supreme Court further held that what was stated about want of registration is clearly equally applicable to a want of stamp.

Their Lordships also dealt with the question whether Section 14(1) of the Arbitration Act, which enables arbitrators to call upon the parties to pay the fees and charges payable, would equally enable them to call for the stamp fees. But they did not consider it necessary to express any final opinion upon the matter; but they nevertheless observed that it is no part of the duty of the arbitrators under the Act or otherwise to find to the costs of the stamp fees, and they express grave douts whether the fees and charges mentioned in Section 14(1) include the stamp duty payable on the award. In Juggilal Kamlapat v. General Fibre Dealers, Limited (1962) 2 S.C.R. 101 (Supp.) the question of, the discretion of the Court to supersede the reference arose. In that case, an award was set aside and it was contended that thereafter the arbitrator became functus officio and could not function again to decide the same dispute. Their Lordships point out that while it is true generally speaking that an arbitrator becomes functus officio, after lie has made the award, that only means that no power survives in the arbitrator to make any change of substance in the award that he had made. They proceeded to consider the scheme and the provisions of the Arbitration Act which govern arbitrations without the intervention of a Court. They point out that when a Court sets aside an award under schedule II of the Code of Civil Procedure, the reference has also to be superseded and the Court is enjoined to proceed with the trial of the suit. This provision also applied to a case covered by paragraph 17 of the schedule and by implication to arbitration outside the Court. Dealing with Section 19 of the Act, they point out that when once an award has been set aside, the arbitration agreement does not for that reason cease to have effect. The section thereafter leaves it to the discretion of the Court when it decides to set aside the award whether to supersede the reference or not. It is only by a specific order of the Court superseding the arbitration agreement that the, agreement ceases to have effect. It is open to the Court not to supersede the reference with the result that the reference as well as the arbitration agreement on which it is based would survive. This decision is of importance in showing that the Court has the fullest control over the arbitration proceedings, whether the reference is made with or without the intervention of the Court.

A decision of some considerable importance in tins context is that of a Full Bench of the Patna High Court in Seonarain Lal v. Prabu Chand ILR (1956) Pat. 252, 258, 269 (F.B.). The question which the Full Bench had to determine were:

(i) Is en award on a reference to arbitration without intervention of a Court mad* subsequent to the coming into force of the Indian Arbitration Act, 1940, deciding questions of title to the immovable property worth one hundred rupees and upwards, is compulsorily registerable?

(ii) Can an objection to the award that for want if registration or for any other pronounce judgment according to it u/s 17 of the Indian Arbitration Act, 1940 and

(iii) Can an objection to the award that for want of registration or for any other reason it could not be enforced, filed after the expiry of the time for making an application to set it aside be entertained, and if not, is the Court bound to pronounce judgment according to it u/s 17 of the Indian Arbitration Act, 1940?

This Full Bench had to consider whether an award in respect of immovable property worth Rs. 100 and upwards purports or operates to create, declare, assign, limit or extinguish, whether in present or in future, any right or interest to or in immovable property. They referred to the Amending Act of 1929 by which the exemption previously granted to awards by Section 17(2)(vi) of the Registration Act was removed. Shortly put, the question was whether such awards of their own force affected immovable property. On an examination of the provisions, they held that the scheme of the Act is that once a reference is made to arbitrators, the control of the Court, without any party to the dispute inviting such a control, starts immediately. They refer to Section 5 which makes the authority of the appointed arbitrator irrevocable except with the leave of the Court. Sections 8 and 9 confer power upon the Court to appoint an arbitrator or to set aside the appointment of an arbitrator. The power of the Court, where the arbitration is removed or his authority revoked is dealt in Section 12. The learned Judges observe:

These sections illustrate the fact that though the reference to arbitrators is without the intervention of the Court, the Court has power to intervene in matters referred to in the aforesaid sections, in other words, from the very start, the scheme of the Act is that the Court must have effective control over the arbitration proceedings.

They refer to Sections 18 and 19 which indicate that both before and after the filing of the award, the Court is given control over the arbitration proceedings. Sections 31 and 32 were next considered and these sections give exclusive jurisdiction to the Court under the Arbitration Act to deal with questions regarding the existence, effect or validity of an arbitration agreement or award and further provide that no arbitration agreement or award can be set aside, amended or modified otherwise than as provided in the Act. On a review of these provisions, the learned Judges observe that the Court in the Act has got exclusive jurisdiction in regard to the validity, effect or existence of the reference and the award and the jurisdiction of all civil Courts stands ousted. Turning to Section 17 of the Act, they observe that it lays down that the Court shall, after the time for making an application to set aside an award has expired or if such an application has been made and refused, proceed to pronounce judgment according to the award and a decree shall follow thereupon. From these provisions in the Act, they concluded. that an award though given without the intervention of the Court has to be made a rule of the Court, that the Court has to pronounce judgment on the basis of the award and a decree shall follow, and that the award by itself is of no effect. They make reference to the analogous provisions of the Second Schedule to the CPC and point out that the distinction between the provisions in the Code and in the 1940 Act was, that the latter Act barred the jurisdiction of all Courts to pronounce upon the validity, effect or existence of an award.

Dealing next with Section 17(1)(b) of the Registration Act, they hold that an award as such does not purport to create, etc. any right in immovable property and that an award is only effective when a decree follows a judgment upon the award. Dealing with the earlier cases, it was held on a comparison between the provisions of Schedule II to the CPC and the provisions of the Act of 1940 that under the Act of 1940 all awards made on a reference to arbitration, whether with or without the intervention of the Court, have been brought on the same level so that any uncertainty about the awards made on a reference to arbitration without the intervention of the Court may not exist and that every award to be effective and enforceable in law must be made a rule of the Court under the Act. The scope of Section 49 of the Registration Act was also considered in this judgment. The learned Judges observe:

If the only way to challenge the validity or otherwise of an award is by filing the. Award in Court under the Act and taking a decision upon it in terms of the award, then the matter cannot be agitated even by way of defence in a proceeding other than a proceeding envisaged by the Act itself.

They repelled the contention that Section 49 prohibited the riling of the unregistered award into Court for any of the purposes contained in the Arbitration Act. In effect, the view taken by the Court was that where an award, is sought to be filed into Court either for getting a judgment and decree thereupon or for having it set aside for any of the reasons contained in the relevant provision of the Arbitration Act, it is not produced in evidence as a transaction affecting immovable property. On the other hand, it is produced for the purpose of showing that a dispute had been validly adjudicated upon by a reference to arbitrators under an arbitration agreement, or that the arbitrators had misconducted themselves, or there was an error which rendered arbitration invalid and the award liable to be set aside.

The emphasis is accordingly upon the purpose for which the document, that is, the award is brought into Court. At that stage it is not produced as evidence of any transaction affecting immovable property so that the prohibition u/s 49 would not apply.

This decision is relied upon as an authority for the position that there is no distinction between awards made with the intervention of the Court and without the intervention of the Court and that an award when it is brought to Court under any of the relevant provisions of the Arbitration Act, is not required to be stamped or registered and is not prohibited from being received, in evidence in the course of proceedings under the Arbitration Act by reason of Section 49 of the Act.

In Chandrabhaga Sadashiv and Another Vs. Bhikachand Hansaji, , the question whether an invalid award bars a suit on the original cause of action was considered. The actual decision in that case is not relevant, but the learned Judges point out that the Act of 1940, which was enacted to consolidate and amend the law relating to arbitration, intended to formulate a scheme which brought all arbitrations under the control of the Court and treated them as effective only if a decree were obtained on the award in accordance with the Act, and to prevent the parties from agitating any question relating to existence, validity or effect of an arbitration agreement or award in any manner other than that provided in the Act.

It seems to be the undoubted position that after the passing of the Arbitration Act any difference existing between awards made with and without the intervention of the Court, difference in the sense that no rights can flow from the award passed upon such arbitration agreements made outside Court and references made through Court, in so far as the right to property dealt with by the award is concerned, stand removed. In either case, the award has to be filed in Court arid a judgment and decree have to follow before such rights can become concrete. An award has, therefore, no force of its own and cannot effect a transfer of title to immovable property unless it is made a decree of Court. If that should be the conclusion to be reached, then it would as a result follow that an award which at best is only as a recommendation made by arbitrators in respect of the mode of the division of the property or settlement of the dispute referred to them can hardly be regarded an instrument which is capable of effecting transfer of title to property within the meaning of Section 17(1)(6). The result would then be that an award, when brought into Court under any of the provisions of the Arbitration Act, does not require to be registered. Equally, it does not required to be stamped.

We shall now revert back to the decision of the Supreme Court in Champalal Vs. Mst. Samrath Bai, , for it is argued on the basis of certain observations therein that it was decided that an award required registration. In that case, certain disputes with regard to the disposition of property by will arose and proceedings under the Succession Act were pending before the District Court. During the pendency of these proceedings, an arbitration agreement was entered into. After obtaining extension of time from the Court, an award was made and filed into Court. While the one party prayed for a judgment in terms of the award and for a decree, the other sought to have the award set aside. This proceeding was separated from the proceedings under the Succession Act. It would appear that the original award was unregistered when it was filed into Court. But subsequently at the request of one of the parties it was handed over for getting it registered and it seems to have been registered. An appeal against the decree on the basis of the award was dismissed by the High Court and the matter came before the Supreme Court. In dealing with the point that the award required registration and was not registered in accordance with the law and the mere fact that it was registered does not clothe it with legality, their Lordships expressed themselves thus:

The second question that the award required registration and could not be filed by the arbitrators before it was registered is equally without substance. The filing of an unregistered award u/s 49 of the Registration Act is not prohibited; what is prohibited is that it cannot be taken into evidence so as to effect immovable property falling u/s 17 of that Act. That the award required registration was rightly admitted by both parties. It was contended by Counsel for the Appellant that u/s 21 of the Registration Act and the rules made u/s 22, a description of the property was necessary and as that was supplied through Mithulal who, according to Council, did not have the necessary authority to do so, the award must be taken to be an incomplete document which could not be registered. The High Court has found that in the circumstances of this case lists were not necessary and therefore anything done by Mithulal whether authorized or not, will not affect the legality of the registration .

For the proposition that the award required registration and could not be received by Court in any proceedings even under the Arbitration Act by reason of Section 49 of the Registration Act, reliance has been placed upon the solitary sentence appearing in the above extract, that the award repaired registration was rightly admitted by both parties. We are unable to read this sentence torn out of the context, for the contention whether the award required registration and could not be filed by the arbitrators before it was registered was held by their Lordships to be equally without substance. The effect of this decision is, to our minds, accordingly that in proceedings under the Arbitration Act, where parties seek to get an award before the Court for one or the other of the purposes relevant to proceedings under that Act, it is not necessary that the award should be registered. We have already referred another decision of the Supreme. Court where it has been held that it is no part of the function of the arbitrators to get the award stamped or registered and the further proposition that when an award is brought to Court under the provisions of the Arbitration Act, the Court is enjoined to deal with it in a particular manner and that it has no jurisdiction to return the award for getting it stamped or registered. From all of these facts, it should necessarily follow that the award is not required to be registered when it is brought to Court in the circumstances indicated.

It is necessary to refer to a Bench decision of the Andhra Pradesh High Court in Srinivasa Rao v. Venkatanarasimha Rao (1963) 1 And. W.R. 45, where a Bench of the Andhra Pradesh High Court dissented from the view expressed by the Full Bench of the Patna High Court in Seonarain Lal v. Prabhuchand ILR (1958) Pat. 252. In that ease, an award was originally made on a plain paper signed by all the five arbitrators and was engrossed on stamp paper and registered with only four of the arbitrators signing it, the fifth having died in the meantime. The District Court set aside the award as invalid and the question that had to be considered by the High Court was whether the re-written award was validly made. The High Court held that the arbitrators were not entitled to re-write the award on a duly stamped paper and present it for registration to get over the objection as to want of stamp and registration. But they proceeded to hold that even after the passing of the Arbitration Act, a private award required registration and when the award purports to create an interest in immovable property, it must be duly stamped and registered. With all respect, the proposition so stated would certainly appear to be beyond cavil. But there is, undoubtedly a distinction that has been noticed in several of the decisions to which we have made reference, between a private award upon which the parties choose to act on their own volition and a private award which is brought before the Court for enforcement by passing a judgment and decree thereon. While in the former case, the parties lay claim to properties on the ground that the award effected a transfer of title to immovable property worth Rs. 100 or more, it cannot be admitted in evidence to establish that it effected a transfer of the property, in the case of an award which is brought to Court for any of the purposes mentioned in the Arbitration Act, the position would certainly appear to be different. Referring to Chavakula Yanadamma and Another Vs. Chavakula Venkateswarlu and Others, , the learned Judges quote a passage from that judgment which merely sets out that since the amendment of the Registration Act in 1929, an arbitrator''s award is not excluded from the operation of Section 17 and that the only question to consider is whether the award does itself create, declare, etc., any right, title or interest in immovable property, or whether it merely creates a right to obtain another document which will then execute, create, declare...any such right, title or interest. If the latter is the case, then Sub-clause 5 of Clause 2 of Section 17 will exempt the award from the necessity of registration. They referred also to Raghava Reddi v. Venkata Reddi (1954) 2 M.L.J. (And.) 131, where it was stated that a combined reading of Sections 17 and 49 clearly shows that an unregistered partition deed or award cannot affect any immovable property comprised therein. These statements, if we may say so with respect, are fully in accordance with the legal principles laid down. But, in any event, the question would, necessarily be whether the award of its own force creates, declares any right, title or interest in immovable property. These observations extracted above cannot cover a case where the award cannot have that vitality or when it derives such force only by a subsequent proceeding.

In an unreported decision of a Bench of this Court in Appeal Against Order No. 102 of 1951, Govinda Menon and Rajagopalan JJ., decided that if an application is made to the Court to file an unregistered award, the Court must reject it for want of registration. In that case, an application was not made for passing a decree in terms of the award. What the Petitioner in the lower Court wanted was that the award should be set aside on the ground that it was not a valid award. The learned Judges observed:

Whatever that be, if it is not possible for the Court to look into the award on account of the circumstance that it is not registered, then all the more so it cannot set aside such a document which is non est as it were.

This decision has been relied upon. The facts, however, are not quite clear from this judgment which is a very short one. But it appears from some of the foregoing parts of the judgment that:

Admittedly this award deals with immovable properties worth more than Rs. 100 and it declares right, title and interest to such properties and therefore tinder Section 17 of the Registration Act such an award before it is received in evidence should be registered.

They refer to most of the cases to which we have made reference and observe further:

So far as this Court is concerned, the decisions are not specifically on this point, though such questions have arisen in cases where allied topics were the subject-matter of discussion. In Mulla''s Registration Act (fifth edition) at page 103, the learned author says that the effect of the amendment of Section 17 of the Registration Act is that an award which embodies a transaction under Sections 17(1)(6) or 17(1)(c) is no longer exempt from registration. Such an award must be registered and is invalid if not registered. If an application is made to Court to file such an award, the Court must reject it for want of registration.

It seems to us that the specific point that arises in the present case did not arise for consideration before the learned Judges and in any event it seems more than likely that in that particular case the award--presumably a private award--did itself operate to create or declare the right, title or interest in properties and came within the requirement of Section 17(1)(b). The distinction between private awards of that nature and awards which could not have the effect of creating or declaring any right, title, or interest in property except on the passing of decree thereon was not specifically considered by the learned Judges. We are, therefore, unable to hold this as an authority for the proposition which is now debated before us.

We may next refer to a decision of a Full Bench of this Court in Mohammed Yusuf v. Gulam Mohammad I.L.R (1963) Mad. 922, 926, 936 (F.B.). In that case, this particular point did not arise. The questions which the Full Bench had to consider were.

(i) Whether an award made on a reference out of Court and which has not been filed into Court in accordance with the provisions of the Arbitration Act, 1940, can be pleaded as a defence to a suit instituted by a party thereto on the basis of the original cause of action;

(ii) Whether such award if performed by one of the parties, can afford a good defence to an action on the original cause of action by the other party;

(iii) Whether such an unfiled award, if later on accepted by the parties thereto, can afford a fresh cause of action;

It will be noticed that in so far as the question whether such an award can afford a good defence is concerned, the Supreme Court has held in a decision to which we have already referred that if the parties had acted upon the award, then, the defence is not on the basis that an award has been made but that parties by an agreement had given effect to a transfer of title or interest. This Full Bench decision is, however, important, as it points out that the binding nature and inviolability of a valid award is rested on the contract giving rise to it. Unless the statute requiries that an award should be filed in Court, it will not be necessary that the Court should either confirm it or accept it and an award in that aspect has the effect of merging the original cause of action within it, and in so much as such an award supersedes the original cause of action, the award alone would thereafter be capable of furnishing the basis by which the rights and liabilities of the parties could be determined. The Full Bench accordingly held that in the absence of any statutory provision, the existence of a valid award will be a bar to any action on the original claim or demand. The learned Judges referred to cases before the 1940 Act where the position was that an award duly passed would be equivalent to a final judgment and that there would be no necessity for any subsequent consent or approval of the parties thereto in order to give effect to it. But, they also point out that an arbitration award is not the same thing as judgment of a Court. Reference was made to the observations of Mukherjea J., in Bhajahari Saha Banikya v. Behari Lab Basak ILR (1906) Cal. 881, where the learned Judge observed:

... a valid award operates to merge and extinguish all claims embraced in the submission, and after it has been-made, the submission and award furnish the only basis by which the rights of the parties can be determined, and constitute a bar to any action on the original demand.

Proceeding further, they point out the position as it was before the passing of the Indian Arbitration Act of 1940. The Arbitration Act, 1899, by section 15 thereof, provided that an award when filed into Court was enforceable as if it were a decree of the Court. The Code of Civil Procedure, 1908, which in its Second Schedule dealt with orbitration, however treated awards differently in that it required the Court to pronounce a judgment according to the award. It was also pointed out that according to the decision of the Privy. Council in Sassoon and Co. v. Ramdutt Ramkissen Das ILR (1992) Cal 1 (P.C.) an affected party could challenge the validity of an award in a suit and the fact that the award had been made a rule of Court and even enforced by execution would not disentitle the party to relief by way of a suit. It was this feature about the pre-existing law that led to the codification of the Arbitration Act. Referring to the provisions of the Arbitration Act and the decision of the Supreme Court in Hanskumar Kishanchand Vs. The Union of India (UOI), , the Full Bench say that that Act has reduced the opportunities open to the parties to choose the forum in attacking an award and that it prevents suits with respect to matters relating to arbitration. The result is accordingly that after the passing of this Act, a suit to enforce an award and equally to set aside an award will be incompetent. They observe:

It will follow from the above that the principle on which an award was considered effective under the law, as it stood prior to 1940, namely the merger of the original cause of action in the award which furnished a fresh cause of action to the parties, and also of itself operating as equivalent to a judgment has no longer any validity. It cannot also be said that the original cause of action is satisfied by the mere passing of the award, for without filing it and obtaining a judgment thereon, the party cannot enforce it. Secondly, an award by an arbitrator after the Act is but a stage in a scheme formulated therein for the adjudication of disputes by a private Tribunal. The confirmation of the same by a judgment of Court is essential in order to render it an effective adjudication of the disputes. The mere fact that an unfiled award might have to be registered or stamped cannot be decisive of its effectiveness, as stamping and registration have to be done on account of statutory provisions and not because that it has any force by itself...

These observations have a great bearing on the question as to the vitality Or the operative force of an award.

On a consideration of all of these decisions, it seems to us that the following principles emerge. The position under the Act of 1899 that an award when filed into Court could be executed as a decree of Court no longer exists. Equally, an award before the passing of the Act had to receive the judgment; of a Court before it could be put into force. The right of suit which was available to the parties on the original cause of action under the law as it stood prior to the Arbitration Act has been expressly taken away and only the Court which would have jurisdiction under the Arbitration Act is empowered to deal with the dispute arising out of the award. The Court''s control over arbitration, whether it is with or without the intervention of the Court is undeniable. But the Court is not competent to admit the award for stamping or registration but has to proceed with the matter according to the provisions of the Act. It should, therefore, follow from these features that an award, whether a private award or made through the intervention of Court, has no force of its own by which any right, title or interest to immovable property worth more than Rs. 100 could be created, transferred as assigned. The principle of the Privy Council decision that an award, which is only a part of a judicial proceeding, does not require registration stands unaffected even after the passing of the Act and by the nature of the peculiar position which a private award occupies, viz., that it cannot become enforceable unless it is filed into Court and a decree is passed thereon, it necessarily becomes assimilated into a part of the judicial proceedings so that even in that case the principle of the decision should apply.

It, therefore, appears to us from the above that when an award is brought into Court either u/s 14 or u/s 30, the Court is not competent to refuse to admit the award for lack of registration, for at that stage, that award is nothing more than an inchoate instrument which has not the force of affecting title to immovable property and will not, therefore, come within the scope of Section 17(1)(b) of the Registration Act.

A certain amount of argument was advanced that the award required to be stamped. Even on this aspect of the matter, it would suffice to state that unless it is an effective instrument, it would not require to be stamped. In any event, since the Court has under the Stamp Act powers to deal with documents which are unstamped or insufficiently stamped, the admissibility of the document is not affected thereby. It is not necessary for us to consider this aspect of the matter further in the view that we have already taken.

The result would be that the decision of the learned Subordinate Judge in Original Petition No. 31 of 1956, leading to Civil Miscellaneous Appeal No. 117 of 1960, on the question of the necessity for registration it upheld. The civil miscellaneous appeal will, therefore, be posted for hearing on merits. The decision of the learned District Judge in the petition leading to Civil Revision Petition No. 2143 of 1960, and Civil Miscellaneous Appeal No. 291 of 1162, is set aside and the matter will be remanded to the learned District Judges, to dispose of the proceedings before him on its merits. In the circumstances of the case, there will be no order as to costs in the appeals and the petition.

Appeal Against Order No. 117 of 1960

Venkatadri, J.

This appeal is against the order passed by the learned Subordinate Judge of Madurai dismissing the petition filed by one S.M. Venkatayyan Chettiar, the Appellant herein under Sections 31 to 33 of the Arbitration Act to set aside the award filed by the arbitrators who were appointed to settle and adjudicate the dispute between the Appellant and his brothers in respect of their partnership business, their accounts and their immovable properties.

The Appellant and Respondents 1 and 2 are brothers. Originally these brothers along with their father Meenakshi Chettiar were carrying on a partnership business. After their father''s death, the three brothers who were the surviving partners continued the partnership business. In the year 1951 there were misunderstandings and disputes among the brothers with the result they referred their disputes to a panchayat of one Muruga Konar and others. An interim award was passed on 4th May 1952 and the Appellant herein filed the suit Original Suit No. 108 of 1952, for calling upon the arbitrators to file the award. The arbitrators prayed for an extension of time for rendering their award and ultimately filed their award on 5th June 1952. On 19th September 1952 the Appellant filed Interlocutory Application No. 1254 of 1952, for setting aside the award. During the pendency of that petition the Appellant and Respondents 1 and 2 filed a compromise petition (Interlocutory Application No. 384 of 1953) agreeing in general with the award given by Muruga Konar on 4th May 1952 subject I to certain alterations and modifications. They also agreed that the award, dated 5th June 1952, be set aside and that the matters in dispute be referred to a fresh set of arbitrators, with a condition that if they disagree the matter should be referred to the Court. Accordingly two Advocates of the Madurai Bar were appointed as arbitrators and the matters in dispute were reduced into writing and they are the following. The arbitrators had to find out whether the accounts of the partnership firm are true and genuine and maintained in the regular course of business, whether Respondents 1 and 2 have retained in their hands any anamath amounts earned from the partnership business and whether the Appellant had collected, appropriated and recovered large amounts from the partnership business by making fictitious entries in the accounts and by not disclosing some items in the account, itself. The arbitrators had to determine the mesne profits of A and B portions of the mills from 4th May 1952 to 28th March 1953. Lastly the arbitrators were asked to auction the Nilakottai lands with an upset price of Rs. 10,000 to the highest bidder. The Appellant and Respondents 1 and 2 filed their statement and also let in voluminous documentary evidence before the arbitrators. There was an elaborate enquiry by the arbitrators and it went on for a considerable time. The arbitrators gave their award on 27th March 1956, which contained findings on all the points referred to them. The most important finding was that there were anamath amounts in the partnership accounts, it was not possible for them to find out the exact extent of anamath amount retained in the hands of Respondents 1 and 2. The arbitrators declared that the Appellant was the highest bidder of Nilakottai lands. The Appellant not being satisfied with the findings given by the arbitrators filed Original Petition No. 31 of 1956 before the Subordinate Judge, Madurai, for setting aside the award. The learned Judge confirmed the award and dismissed the petition. Now it is against the dismissal of the petition the Petitioner has preferred this appeal.

When the appeal came for hearing in the first instance before us, an important point was argued by the learned Counsel for the Appellant that the award itself could not be looked into, as it was not registered. This point was argued as a preliminary point before us. After a detailed consideration of the argument in our judgment, dated 18th October 1963, we held that the award need not be registered, even though it related to immovable property.

The preliminary objection raised having thus been disposed of, the appeal has now come before us for final hearing on the merits. The point for consideration is whether the order passed by the Subordinate Judge, Madurai, is correct or not. It is necessary for the disposal of the appeal to give some more facts with regard to the background of the partnership business, the way in which the business was conducted by the brothers, the mode of keeping their account books, the part played by each of the brothers in the running of the business and also the knowledge of the brothers about the existence of anamath accounts in the partnership accounts. The brothers along with their father originally started a partnership business in paddy and rice and also textile business. They were having a large volume of business. They were maintaining accounts in the regular course of business. It is also admitted by all the three brothers that they were all maintaining separate personal account books. All the partners were adopting various dubious methods for sequestering illegal profits and unaccounted money in the names of their kariasthans, relations and their persons, some of whom are fictitious persons. They were aware of the way in which these illegal profits and unaccounted moneys were entered in the partnership account books. The account books were audited every year and income tax statements were prepared for the purpose of assessment. All the partners were taking out moneys from these anamath amounts either for their own business purposes or for their own personal use, after making fictitious entries. Even during the second year of the partnership firm, the partners began to secrete these illegal profits and unaccounted moneys, which according to the Appellant amounted to Rs. 25,000. The partners used to take large amounts of loan from the banks and the loans were discharged from and out of the anamath amounts. All the partners were taking some part or other in the work of the partnership, business. They were having consultations daily and they must have knowledge of the working of the business and general policy adopted in the management of the business

The Appellant filed a statement before the arbitrators stating the various methods adopted by his brothers, the Respondents herein, for putting unaccounted profits in the accounts of various persons, relations and friends. According to him, the entire accounts in respect of these businesses were maintained by the Respondents. He has appended a list to his statement which mentions the various bogus entries in the names of creditors and also subsequent withdrawal by debiting them whenever there was cash in hand as far as accounts permitted. It is his case that none of the creditors made any advances to the firm nor was any repayment made by the firm to them. The credit and debit amounts standing in the name of various persons would show that a considerable portion of anamath amounts was brought into the partnership business and subsequently withdrawn by the Respondents as and when necessary. When disputes arose between the parties the Respondents took possession of all the account books including the private accounts of the Appellant, which were in the latter''s possession. The Appellant estimated that the anamath amounts would be at least Rs. 30,000 so far as his share is concerned. Equally the Respondents filed their statement before the arbitrators not in the form of a counter statement but by way of an independent statement stating that the Appellant as the eldest member of the family was for a considerable time in absolute management of the affairs of the partnership and as maintaining accounts and only under his instructions and in his immediate presence the accounts have been written. The Appellant was in charge and custody of the cash and other records. The Appellant without any interference from Respondents 1 and 2 had been appointing accountants and other employees in the partnership business and the main accountant was his son-in-law, Sundaram Chettiar. The other accountants and employees were persons of his own choice or his partisans. He was keeping the account books under his custody. After misunderstand arose between the parties, the Appellant refused to hand over the accounts to the auditors. The Respondents at the instance of the income tax Inspectors took possession of all the account books for the purpose or handing over to the auditors. The Respondents in their statement did not make any reference to the various fictitious entries made in the account books as alleged by the Appellant. On the other hand, they blamed the Appellant for collecting considerable amounts and appropriating the same for his own use without bringing them into the accounts.

Before the arbitrators evidence was let in to prove that the Appellant was a dominant person and he was aware of all the transactions including the making of fictitious entries. It has been found in the course of the enquiry that the Appellant appointed his sister''s son who was also his son-in-law, his brothers, his mother''s sister''s husband and brothers-in-law as employees and they were working in the partnership business. When there were misunderstandings arid quarrels between the brothers, their relatives and common friends arrayed themselves into two groups, one supporting the Appellant and the other supporting the Respondents. The arbitrators did not rightly place any reliance on the evidence of these witnesses to find out the truth or genuineness of the allegations made by each of the parties. The arbitrators took elaborate pains to investigate the part played by all the partners in the management of their business and found that all the partners participated in the management in some form or other. All the partners were conversant with what was going on in the firm at least on broad lines, though the minute details might not be known to each of them. In the circumstances it was not possible for the arbitrators to believe that any one partner was ignorant of what was happening with regard to the running of the partnership business and the arbitrators rightly came to the conclusion that all the partners not only participated in the day to day administration of the partnership business but were aware in general of the way the partnership businesses were conducted. It is true that the Appellant is not a well educated man. The first Respondent is a little more educated than him. The second Respondent has passed S.S.L.C. and it might be that he was in charge of the correspondence of the firm. It was also proved during the enquiry that the Appellant''s son-in-law P.W. 2 has written most of the accounts. P.W. 2 deposed before the arbitrators as to how the brothers, Appellant and Respondents, used to conduct the partnership business. He deposed that every evening and night the brothers would meet, sometimes in his presence, and discuss about the day''s transactions and dealings in the business. All the brothers knew that there were anamath amounts and how they were entered in the account books. The Appellant himself deposed before the arbitrators that he used to be present at the time of the opening of the new accounts of the firm annually. He also admitted that some of the entries in the accounts were written by him. Thus all the brothers must have known about the fictitious entries made in the accounts and the extent of the amounts thus entered in the accounts. Lindley on Partnership (twelfth edition) at page 519 says:

As regards the partnership books, these being accessible to all the partners, and being kept wore or less wider the surveillance of them all, are prima facts evident against each of them, and, therefore, also for any of them against the others.

In the circumstances the natural presumpt on would be that all the partners were participating in the conduct of the partnership business and Living consultations with regard to them sometimes daily. The partners must have therefore, had knowledge about the working of the business and determine the general policy with regard to the management of the business. The Appellant cannot pretend that he was quite ignorant about the existence of what are called anamath amounts. But on the other hand, he must have acquainted himself with the state of accounts through his son-in-law, P.W. 2, who has been mostly writing the accounts. When all the partners were aware of the existence of unaccounted profits in the firm and of fictitious entries in the accounts, it is difficult to believe that they would have allowed such amounts to remain with the firm and not divided or apportioned them between themselves from time to time for their own purposes or for their business. The question that was posed before the arbitrators was, what is the amount standing under this category in the account books and also the extent of anamath amounts retained in the hands of the Respondents and available for division. The Appellant wants to take advantage of the finding that the first Respondent suppressed the rokka chittas and ka chittas in respect of the anamath amounts and that if these documents were produced, it would have been easy for the arbitrators to find out the exact extent of anamath amount available for division. But equally there is another finding by the arbitrators that all the parties were maintaining personal accounts and that when they were called upon to produce their accounts, while the Respondents readily agreed to produce them provided the Appellant also produced his personal accounts, the Appellant refrained from producing his personal accounts with the result that the arbitrators were really handicapped in their task of determining the extent of anamath amount available for division. Both the Appellant and the Respondents did not help the arbitrators to arrive at the quantum of anamath amount by placing the best evidence available with them. It will be useful to refer the observation made by Jessel M.R., in Gthing v. Korghley (1878) 9 Ch. 547, 552.

Where there is a question of surcharging and falsifying accounts, the case alleged must be clearly proved by the person impeaching them and if there is an doubt it will be determined against him.

As stated already they did not speak the truth and deliberately kepi out some of the documents which would have been useful for the arbitrators for deciding the question at issue.

The arbitrators observed that the parties must have known annul the sequestering of moneys and that they would have partitioned the same from time to time either by withdrawing for their own personal use or ploughing it hack Into the joint family business. They pointed out that if the partners had come with clean hands and stated that they had taken so much amount from the anamath amounts, it would have been easy to assess the anamath amounts to calculate the withdrawals and to divide the balance amount among the runners. The result was that the arbitrators felt helpless n the, matter and could not arrive at the exact extent of anamath amount on the materials placed before them.

The Appellant contended that in any event the sum of Rs. 10,000 deposited by the second Respondent in his name in the bank represents unaccounted profits of the partnership business and that this sum should be made available as an asset of the firm for division among all the brothers. According to the Appellant this sum was deposited in 1043, and the second Respondent himself advised the bank to treat this deposit amount as security for the advances made by the bank for the partnership business and it was always understood among the partners that this amount should be treated as a partnership asset. He says that the second Respondent had no property except his interest in the partnership business and no other source of income from which he could have deposited this amount in fixed deposit in his name. But the second Respondent states that when this amount was deposited in the bank in 1943, he himself gave a letter to the bank to advance amounts to the firm on the security of this fixed deposit amount. It was also agreed between the partners themselves that whatever amount was drawn by the firm from the fixed deposit amount, it should be pad to the second Defendant from the funds of the partnership firm. It would be found from the accounts that several amounts were drawn from this fixed deposit amount and by the time misunderstandings arose between the parties all the amount had been utilized for the partnership business. The second Respondent hence claimed before the arbitrators that this amount should be made available to him for his own use. On behalf of the Appellant evidence was adduced before the arbitrators to prove that this sum of Rs. 10,000 in fixed deposit was really anamath amount and it never belonged to the second Respondent as his own amount. But the Appellant''s son-in-law P.W. 2, who was the accountant and who wrote the major entries in the account books, deposed that he was not able to give details about the anamath amounts or say as to how this sum of Rs. 10,000 could be treated as anamath amount. He was doubtful whether the Appellant, was aware that this Rs. 10,000 came out of the anamath amount. He also admits that this sum was in the fixed deposit even three years after the commencement of the partnership. The Appellant also admits that during the third year of the partnership business, each partner credited into their respective folios a sum of Rs. 6,383-4-7 as and for his share of profits in the partnership business. It is the case of the second Respondent that the sum of Rs. 10,000 deposited by him in fixed deposit in 1943 is made up of the profits earned by him in the partnership business, moneys belonging to his wife and also commission earned by him as an agent of insurance company during that period. Therefore, there is some evidence on record to show that the second Respondent had some resources of his own for putting this amount in fixed deposit in his name in the bank. The arbitrators felt that merely because the second Respondent did not produce his personal account, books, no adverse inference could be drawn against him on mere surmises or suspicion. The conduct of the partners would show that they allowed the second Respondent to retain the fixed deposit amount in his name for more than ten years. At no time during the period of their business, the Appellant claimed this amount as partnership property. The arbitrators found that the amount belonged to the second Defendant since it was allowed to remain in his name for several years.

On account of the conduct of the partners themselves, the paucity of evidence and the dilatory tactics adopted by the partners it was difficult for arbitrators to arrive at the exact extent of anamath amount available for division and they could not also determine the extent of anamath amount retained in the hands of Respondents 1 and 2. The arbitrators, however, gave a definite finding that the partners were having anamath amounts and making fictitious entries in the accounts. We entirely agree with the finding. We do not agree with the contention of the Appellant that the arbitrators failed to exercise the jurisdiction conferred on them in not ascertaining the quantum of anamath amounts retained by Respondents 1 and 2. We accept the conclusion arrived at by the arbitrators that on the evidence on record it was not possible, for them to come to a conclusion as to the amount due from one party to the other on the anamath amount. We are satisfied that the arbitrators did their best to arrive at a decision with regard to all points of dispute. They elaborately considered the matter and gave sufficient reasons for their inability to come to a conclusion about the exact amount under the anamath account. Merely on the ground that they have not determined the amount, the award cannot be set aside. It will be relevant in this connection; to refer to the observations of Rajamannar C.J., in Louis Dreyfus and Co. Ltd. Vs. V.S. Balasubbaraya Chettiar and Son, :

The arbitrators are the final judges of matters of fact. It is not open to the Court on an application u/s 30 of the Indian Arbitration Act to say that in the opinion of the Court, evidence was not sufficient to establish the conclusion at which the arbitrators arrived. It is not open to the Court to consider whether the conclusion of the arbitrators was right or wrong. It must be assumed that they considered all the evidence adduced before them. In the words of Day J, in Darlington Wagon Co. v. Harding and Trouville Pier and Steamboat Co. (1891) 1 Q.B. 245, 247.

We are not at liberty to investigate the evidence given in this ease for the purpose of ascertaining whether the arbitrator came to a mistaken conclusion as regards either law or fact.

In James Clark (Brush Materials) Ld. v. Carters (Merchants) Ld. (1944) 1 K.B. 566, 569: the Court had to determine whether an award of the arbitrators should be remitted or set aside on the ground that there is an error of law appearing on the face of it Tucker J., observed:

In my opinion, it is impossible to set aside an award of this kind on the assumption that facts have not been proved which would support a finding in the award, simply because the award does not say, one way or the other, that those facts have been established. It is my duty to look at the award in the way most, favourable to its preservation and looking fit it from that angle, I find it impossible to say, because the arbitrator has not set out these facts, that they have not been proved to his satisfaction.

Here the arbitrators are two experienced Advocates of the Madurai Bar. They conducted the enquiry in detail for a considerable time, gave ample opportunity to the parties in action to prove their respective cases and after a careful consideration of the material placed before them came to certain conclusions, which we consider to be quite fair and reasonable. To use the language of Tucker J., we have:

I to look at the award in the way most favourable to its preservation.

We are satisfied that no case has been made out for setting aside the award.

One other point of dispute referred to the arbitrators was the amount of mesne profits to be ascertained in respect of A and B portions of the mills for the period 5th June 1952 to 28th March 1953. Here also the arbitrators found it difficult to determine the mesne profits in respect of these portions for the said period on account of the recalcitrant attitude of Respondents 1 and 2 in not producing the account books. Under the previous award A and B portions of the mills were allotted to Respondents 1 and 2 and the C portion of the family house was allotted to the Appellant. What the arbitrators did was to calculate the difference in value between the portion allotted to the Appellant and Respondents 1 and 2 and on the difference, for equalisation of shares, to award interest at the rate of 9 per cent per annum from 5th June 1952 to 28th March 1953, though the Appellant alleged that the Respondents had obtained huge profits. The Appellant seriously questioned the procedure adopted by the arbitrators in fixing the (sic) profits in respect of these properties. In the statement filed by the Appellant before the arbitrators he offered to take for his share the interest on the difference in value: or wanted a direction to the respond dents to pay his share of the profits earned from the mills. He also requested the arbitrators to direct the Respondents to produce the account books relating to the A and B portions of the mills. The Respondents in their statement to the arbitrators did not give any information in regard to the income earned by them from the A and B portions of the mills. At the time of the enquiry before the arbitrators, the Appellant filed a memorandum stating that the amount due to him in respect of the income from the mills may be ascertained on the basis of the income disclosed by the partnership accounts already filed before the arbitrators and also asked for a direction to be given to the Respondents to produce the account books in pursuance of the notice, dated 25th March 1955. The Respondents could have filed the account books in respect of the working of the mills as admittedly they were in management of the mills during the relevant period. They were disclosing the income derived from the mills in their returns to the income tax authorities. There was evidence available for the arbitrators to determine the compensation payable to the Appellant in respect of the A and B portions of the mills. It is admitted that the A portion of the mills was leased to their parties for Rs. 475 per month as per Exhibit B-425 and that in the accounts the income for the B portion has been shown, that at Rs. 750 per month was received by way of income from A and B portions of the mills. We think that the awarding of nine per cent interest on the difference in Value between the C portion and A and B of the mills may not adequately compensate the Appellant for his share of the income from the A and B portions of the mills for the period in question. We feel that the Appellant will he prejudiced if the procedure adopted by the arbitrators for determining mesne profits is upheld. The award has, therefore, to be remitted for reconsideration with regard to this point of dispute alone, namely, compensation to he paid to the Appellant in respect of the A and B positions of the mills.

The result is the arbitrators will reconsider their award only with regard to the compensation to be paid to the Appellant in respect of the A and B portions of the mills. The award will stand in other respects and the appeal is otherwise dismissed.

[And this Appeal having been set down this day (17th day of April 1964) for being mentioned, the Court made the following Order]

Srinivasan, J.

The matter has been set down for being spoken to. Learned Counsel for the Appellant points out that in the view that has been taken by this Court with regard to the compensation which is payable in respect of the income from A and B mills, re-determination of the amount is called for by the arbitrators, and that it would, therefore, be necessary to set aside the decree passed by the Court below. After the arbitrators determine the amount with regard to the A and B mills in the light of the observations contained in the judgment if this Court, the Court below will have to pass a fresh decree incorporating therein the altered amount as a result of the fresh examination now directed. The award, however, need not be set aside as a whole, for the contentions of either party with regard to the other parts of the dispute have not been accepted and the findings of the arbitrators stand in that respect. The result is that the decree as passed by the Court below will be set aside and a direction will be incorporated to remit the matter to the arbitrators for determination of compensation payable, to the Appellant in respect of his share of the income from the A and B mills. The figures that have been computed as sums payable by one party to the other in the award will be worked out on the basis of such determination and a fresh decree passed in the usual course.

Each side will bear its own costs.