IN THE GAUHATI HIGH COURT (The High Court of Assam, Nagaland, Mizoram and Arunachal Pradesh) Case No: [CASE NUMBER] [ENTITY] and others Appellants -Versus- [ENTITY] and others Respondents
BEFORE
HON'BLE MR. JUSTICE PRASANTA KUMAR DEKA For the Appellants : Mr. [ENTITY] Sr. Advocate Mr. [ENTITY] Advocate For the Respondents : Mr. [ENTITY] Sr. Advocate Mr. [ENTITY] Advocate Date of Hearing : 28.03.2017 Date of delivery of Judgment and Order : 09.06.2017 JUDGMENT AND ORDER (CAV) Heard Mr. [ENTITY], learned senior counsel assisted by Mr. [ENTITY], the learned counsel for the appellants and Mr. [ENTITY], learned senior counsel assisted by Mr. [ENTITY], learned counsel for the respondents.
2. This is an appeal filed under [SECTION] of the [ACT] challenging the judgment dated 30.11.2012 passed in [CASE NUMBER] by the learned Additional District Judge No. 1, [ENTITY] at Guwahati rejecting the application filed under [SECTION] of the [ACT] (hereinafter referred to as 'the Act') by the present appellants.
3. The appellants are the respondents/ counter claimants in [CASE NUMBER] before the arbitral Tribunal of the sole arbitrator, Justice [ENTITY], retired Chief Justice of the Gauhati High Court and the present respondents are the claimants in the said arbitration proceeding.
4. The facts of the case in brief are that the present parties to the appeal are partners of the partnership firm, namely, M/s Rajkamal & Co. having its registration under the provisions of the [ACT]. The said firm carrying on business was reconstituted w.e.f. 01.01.1996 and the partners are governed by the terms stipulated in the partnership deed dated 01.01.1996. During the subsistence of the said partnership business, the respondents No. 1 and 3 raised the dispute as to the management of the business of Hotel Rajmahal, a unit of the firm.
5. In order to resolve such dispute, 10 (ten) partners out of 17 numbers of total partners issued notice on 23.05.2001 to the other partners to propose names of Arbitrators by invoking Clause 11 of the partnership deed which is reproduced hereinbelow:-
"11) ARBITRATION:
That all the disputes relating to this Partnership business between the partners or their representatives, if cannot be settled mutually, the same shall be referred to Arbitration and entire proceeding thereof shall be governed as per provisions of the [ACT]."
6. As alleged, there was no response from the rest of the partners (appellants herein) in appointing their respective arbitrators following which [CASE NUMBER] was filed by the respondents herein before this court under [SECTION] of the Act and vide order dated 28.02.2002 passed by the then Chief Justice of this Court, Justice [ENTITY], retired Chief Justice was appointed as the sole Arbitrator to enter into the disputed claims and counter claims. While passing the said order it was observed that the dispute was a family dispute arising out of partnership between the family members.
7. It is pertinent to mention here that Shri [ENTITY] (Sethia), the father of the appellants/ counter claimants No. 1 and 2 and the 'Karta' of the appellant/ counter claimant No. 3, Sri [ENTITY], the father of claimant/ respondent No. 1 and the 'Karta' of the claimant/ respondent No. 4 and Sri [ENTITY], the claimant/ respondent No. 3 are three brothers. Dispute arose amongst the said three brothers. The said claimant/ respondent No. 3 ([ENTITY]) and the 'Karta' of the claimant/ respondent No. 4 ([ENTITY]) wrote two letters dated 22.11.1999 and 29.11.1999 respectively referring the family dispute amongst the said three brothers in order to fix their separate shares in the assets of the family properties and for separate allotment of the shares to the Arbitrators, namely, Sri [ENTITY], Sri [ENTITY] and Sri [ENTITY]. The said two letters reflect the dispute amongst the said three brothers. It is also apparent from the letters dated 22.11.1999 and 29.11.1999 that before initiation of the arbitral proceeding, certain pre-conditions were imposed by the said writers of the letters. However, no such documentary piece of evidence is on record to show participation in the said arbitral proceeding or consent of Sri [ENTITY].
8. The respondents filed their joint claim petition before the learned sole Arbitrator for the following reliefs:-
"(i) To appoint an independent Chartered Accountant to scrutinise, verify and render an independent account relating to Rajkamal and Co. from 1.4.98 to till date and
(ii) To rectify the capital contributions of the claimant by suitably correcting the accounts illegally debited as indicated in the petition including the amount of Rs. 52,25,000/- debited from the account of [ENTITY].
(iii) To apportion the shares of profits after rendering of account by Chartered Accountant.
(iv) To run the day to day functions of the hotel by working partners and restrain others from creating any hindrance in their functioning.
(v) To pass appropriate order not to allow [ENTITY] or any other partners from running the liquor business from the Hotel Premises".
9. In the claim petition, the respondents/ claimants alleged that the appellants/ counter claimants started to indulge interfering in day to day affairs and management in running the business of Hotel Rajmahal against the will / desire of the respondents / claimants. On 27.04.1998, the appellant/ counter claimant No. 2 wrote a letter to the Station Manager (Sahara India Airlines, City Office, Guwahati) informing that the respondent/ claimant No. 1 is no longer assigned with the day to day management of Hotel Rajmahal and in future all hotel related matters would be conducted either by himself or the appellant/ counter claimant No. 1. Similarly, by way of another letter dated 28.04.1998, the appellant/ counter claimant No. 2 asked the Finance Manager, Indian Airlines to directly deal with him or with appellant/ counter claimant No. 1 for any matter relating to hotel management. On 13.07.1998 and 12.08.1998, the appellants/ counter claimants No. 1 and 2 physically obstructed and interfered with the claimants/ respondents No. 1 and 3 in the management of the Hotel Rajmahal etc.
10. It was alleged further that after removing the old Chartered Accountant, a new Chartered Accountant was appointed who in collusion with the appellants/ counter claimants had been submitting returns before the Income Tax Authorities causing wrong entries decreasing capital of the claimants/ respondents. The appellants/ counter claimants have taken recourse to rampant manipulation and falsification of accounts to misappropriate and to convert the properties of the firm into individual properties etc. Accordingly, the claimants/ respondents prayed for the reliefs as aforesaid. It is pertinent to mention here that nowhere in the claim petition there is any whisper with regard to signing of cheques and other financial documents jointly by the working partners prior to the alleged dispute or it was the practice followed as such by the working partners.
11. The appellants/ counter claimants filed statement of defence/ counter claim denying the allegations and specifically pleaded that the claimants/ respondents No. 1 and 3 never entered into the management of Hotel Rajmahal and as such the question of ouster does not arise at all. It is further pleaded that the working partners named in the partnership deed looked after their own business though included in the Deed. The fact of falsification of accounts and submission of wrong income tax returns were also denied. The appellants/ counter claimants prayed for following reliefs:-
"(A) rejection of the claim of the claimants;
(B) a direction to the claimants to produce all the books of account and other relevant documents in relation to M/s Rajmahal Travel 'N' Tours, M/S Pragati Finance Co., a unit of the firm, M/S Pragati Finance Co., Guwahati, a proprietorship concern owned by Sri [ENTITY], M/s R.K. Finance Co., Guwahati, M/S R.K. Finance Co., Surat, M/S Pragatri Finance Co., Surat, M/S Naresh Auto Finance Co., Guwahati, M/S Naresh Auto Finance Co., Surat, M/S Naresh Motor Finance Co., M/S [ENTITY] & Sons, M/S [ENTITY], M/S North East Enterprises Pvt. Ltd., M/S Manglam Enterprises Pvt. Ltd., M/S Door Chester, M/S. Catering Med and M/S Hotel Rajmahal (catering business carried on by the claimant No. 1 as its proprietor), on production thereof and on proper scrutiny as to the correction or otherwise, the profits of the same may kindly be awarded proportionately to the opposite parties; (C) an award directing the claimants and specifically the claimants No. 1 and 3 to close down the businesses carried on by them competing the firm;
(D) an award directing the retirement of the claimants from the firm on taking away their respective shares as determined by this Hon'ble Tribunal for acting prejudicially to the interest of the firm; (E) costs of the proceedings may be awarded to the opposite parties; and (F) award any other appropriate relief or reliefs to the opposite parties to which they are entitled under law and equity".
12. The appellants/ counter claimants after filing the statement of defence/ counter claim, filed an application under [SECTION] of the Act questioning the jurisdiction of the sole arbitrator to enter into reference of the dispute on the ground that the dispute so referred had already been under the seisin of another arbitral Tribunal comprising 3 (three) Arbitrators which was initiated by the respondents/ claimants. The said petition was duly contested by the respondents/ claimants by filing the written objection. The learned sole Arbitrator after hearing the parties vide order dated 22.12.2002 passed in [CASE NUMBER], dismissed the said petition under [SECTION] of the Act.
13. The respondents/ claimants along with their statement of claim, also filed an application under [SECTION] of the Act for the following interim reliefs:-
"(i) allowing [ENTITY] and [ENTITY] to effectively participate in the day to day activities and the affairs of the firm and directing all working partners to jointly sign all vouchers, cheques, accounts, expenditure accounts, booking account and all statutory returns and documents to be filed by the firm before the concerned authority and
(ii) directing the Opposite Parties to forthwith deposit all documents of the firm in their possession such as cheque books, cash books, ledgers, original documents pertaining to land of Hotel Rajmahal, Municipal Tax Receipts and other valuable documents in the Head Office of the firm, and/ or
(iii) pass such further or other order(s) as your Honour may deem fit proper in the facts and circumstances of the case."
The said petition was registered as [CASE NUMBER] in [CASE NUMBER].
14. The appellants/ counter claimants filed their joint written objection against the said petition under [SECTION] of the Act. The claimant/ respondents vide another petition prayed for striking of the relief No. (i) sought for in the said petition under [SECTION] of the Act. During the pendency of the said [CASE NUMBER], the respondents/ claimants filed an application before sole arbitral Tribunal for passing an interim award which was registered as [CASE NUMBER]. The prayer for the interim award is reproduced hereinbelow:-
"(i) Allowing [ENTITY] and [ENTITY] to effectively participate in the day to day activities and the affairs of the firm and directing all the working partners to jointly sign all vouchers, cheques, accounts, expenditure accounts booking account and all statutory returns and documents to be filed by the firm before the concerned authority, and/or pass such further or other order(s) as Your Honour may deem fit and proper in the facts and circumstances of the case."
15. In the said petition for passing interim award, it was pleaded that the appellants/ counter claimants had ousted the working partners [ENTITY] (respondent No. 3) and [ENTITY] (respondent No. 1) from day to day management of the affairs of the firm though they are working partners with [ENTITY] (appellant No. 1).
16. The appellants/ counter claimants filed their written objection against the said application for interim award raising amongst other pleas, that the interim award cannot be passed in absence of framing the necessary issues, production of documents, other evidence, recording of statements on oath, cross examination of the witnesses.
17. The learned sole Arbitrator after hearing the parties, vide award dated 22.06.2003 in [CASE NUMBER] allowed the interim award to the following extent which is reproduced hereinbelow:-
"10.3. In the result, the application praying for interim award is allowed.
Accordingly, it is directed that -
i. [ENTITY] (Claimant No. 1) and [ENTITY] (Claimant No. 3) be allowed to effectively participate in the day to day activities and affairs of the firm M/S Rajkamal & Co.; AND ii. All the three working partners, namely, [ENTITY] (Claimant No. 1), [ENTITY] (Claimant No. 3) and [ENTITY] (Respondent No. 2) to jointly sign all vouchers, cheques, expenditure accounts booking account and all statutory returns and documents to be filed by the firm before the concerned authority."
18. The present appellants/ counter claimants filed a petition under [SECTION] of the Act before the learned Additional District Judge No. 1, [ENTITY] at Guwahati both in respect of interim award dated 22.06.2003 passed in [CASE NUMBER] and the order dated 22.12.2002 passed in [CASE NUMBER] (rejection of petition under [SECTION] of the Act) both arising out of [CASE NUMBER]. The said application was registered as [CASE NUMBER].
19. The learned Additional District Judge No. 1, [ENTITY] at Guwahati vide judgment dated 30.11.2012 dismissed the petition holding that the grounds taken by the appellants/ counter claimants do not fulfil the requirements of [SECTION] of the Act. Being aggrieved, the appellants/ counter claimants have preferred this appeal challenging the judgment dated 30.11.2012 passed by the learned Additional District Judge No. 1, [ENTITY] at Guwahati.
20. Considering the submissions of the learned counsels appearing for the parties to this appeal, this court accordingly at first takes up the order dated 22.12.2002 passed in [CASE NUMBER] by the learned sole Arbitrator with regard to the point of jurisdiction of the Tribunal which was upheld by the learned Additional District Judge No. 1, [ENTITY] at Guwahati.
20.1. Perused the petition under [SECTION] of the Act filed by the appellants/ counter claimants. It is specifically pleaded that the learned Tribunal had no jurisdiction to arbitrate the dispute as raised by the respondents / claimants on the ground that the same dispute was raised by the respondents/ claimants, prior to submission to the sole arbitral Tribunal. The present respondent No. 3 (claimant No. 3) and the 'Karta' of respondent No. 4 (claimant No. 4) for themselves and on behalf of other claimants/ respondents referred the same family dispute to the arbitral Tribunal consisting of three arbitrators, namely, Sri [ENTITY], Sri [ENTITY] and Sri [ENTITY] vide appointment letters dated 22.11.1999 and 29.11.1999. The Sethia Group emerged consisting of the family business similar to the business carried out by the constituent partners in the partnership deed dated 01.01.1996. Referring the familial relationship it was pleaded that Sri [ENTITY], the 'Karta' of the respondent No. 4 and Sri [ENTITY], the respondent No. 3 were competent to refer the dispute terming the same as family disputes to the aforesaid arbitrators and the same arbitral proceeding having not terminated within the meaning of [SECTION] of the Act, the learned Tribunal of the sole Arbitrator had no jurisdiction to enter into the reference. 20.2. The respondents/ claimants on their part through the written objection specifically denied the pleadings of the appellants/ counter claimants. Their specific case is that the dispute referred to the sole arbitrator evolves out of the partnership business which cannot be termed to be a family dispute. The learned sole Arbitrator on the basis of the said pleadings and other documents decided the point of jurisdiction against the appellants/ counter claimants.
20.3 The learned sole Arbitrator while disposing of the petition held that under the [ACT] though a partner is an agent of the firm but, under [SECTION] of the [ACT], no implied authority is granted to a partner for referring disputes to arbitration in the absence of any usage or custom of trade to the contrary. It was also held that under [SECTION] of the Act, arbitration agreement must be in writing and [SECTION] of the Act provides that the same would be sufficient if the writing is signed by the parties, exchange of letters etc. or an exchange of statement of claims and defence in which existence of the agreement is alleged by one party and not denied by the other. An arbitration award can be set aside under [SECTION] of the Act if the composition of the arbitral Tribunal or the arbitral proceeding was not in accordance with the agreement of the parties. The said section stipulates that there must be an agreement regarding composition of arbitral Tribunal and also procedure for appointment of Arbitrators and if there is no agreement, the appointment of arbitral Tribunal should not be in conflict with the provisions of the [SECTION] of the Act. [SECTION] of the Act stipulates that the parties are free to determine the number of arbitrators provided such number shall not be an even number. Failing the determination of the number of the arbitrators, the arbitral Tribunal shall consist of a sole Arbitrator. [SECTION] of the Act stipulates that the parties are free to agree on a procedure for appointment of an Arbitrator or Arbitrators. The learned sole Arbitrator bringing references of the aforesaid provisions, came to the conclusion that the existence of an appointment procedure agreed upon by the parties for appointment of Arbitrator or Arbitrators is essential. 20.4. The learned sole Arbitrator referring the letters dated 22.11.1999 and 29.11.1999 came to the finding that there was no uniformity in number of Arbitrators. Similarly, the notice dated 23.05.2001 issued by the respondents/ claimants herein consists of names of 10 (ten) arbitrators. Accordingly, it was held that there was no agreed procedure for appointment of arbitrator or arbitrators amongst the members of the family. It was also held that there was no mention of the partnership business in the letters dated 22.11.1999 and 29.11.1999 nor was there any mention of the names of all the partners. As such, the learned sole Arbitrator held that the parties failed to agree on a procedure for appointment of arbitrator and determine the number of arbitrators. So on request being made, this court appointed him as the sole arbitrator to enter into reference of the dispute and the learned sole Arbitral Tribunal has the jurisdiction to enter into the reference. 20.5. Mr. [ENTITY], the learned senior counsel, submits at the very outset of his argument that the nature of the order passed by this court in [CASE NUMBER] dated 28.02.2002 appointing arbitrator, initially held to be an administrative order as reported in the case of [PRECEDENT] . However, the aforesaid judgment along with one passed in [PRECEDENT] were overruled by the Hon'ble Apex Court in the case of [PRECEDENT] which was decided on 26.01.2005 by the 7 (seven) judges bench of the Hon'ble Apex Court wherein it was held in paragraph 47(i) that the power exercised by the Chief Justice of India under [SECTION] of the Act is not an administrative power but is a judicial power. It was also held that appointments of arbitrators or arbitral Tribunal thus far made, are to be treated as valid, all objections being left to be decided under [SECTION] of the Act.
20.6. It is further submitted that as the finding of the Hon'ble Chief Justice of this Court while appointing the sole Arbitrator was in respect to a family dispute arising out of partnership between the family members, so the sole arbitrator had no jurisdiction to enter into the family dispute which had already been under the seisin of another Tribunal consisting of 3 (three) arbitrators. Such question of subsequent appointment of the sole arbitrator and its jurisdiction to enter into reference can very well be entertained in a petition under [SECTION] of the Act. So, Mr. [ENTITY] submits that the learned sole Arbitrator has no jurisdiction to enter into the reference. 20.7. Mr. [ENTITY], learned senior counsel appearing on behalf of the respondents, submits that no arbitral Tribunal consisting of 3 (three) arbitrators was ever formed in order to take seisin of the disputes referred in letters dated 22.11.1999 and 29.11.1999. As apparent from the letters, there were certain pre-conditions to be followed before the arbitrators enter into the reference. Those pre-conditions were never fulfilled. Further it was the mandate of the writer of the said two letters that the arbitration process ought to be started immediately and completed within a period of 30 days or any other date so extended. The appellants failed to bring any such material in order to show that there exists an arbitral Tribunal on the date of appointment of the present sole arbitrator by this court and that too, with similar dispute being referred to the sole arbitrator.
20.8. It is the contention of Mr. [ENTITY] that the earlier reference was with respect to the fixation of the shares of the three brothers over the family assets and not for resolving any dispute of the partnership business submitted by the writer of the letters dated 22.11.1999 and 29.11.1999 as the partners of the aforesaid firm. There is specific bar in the [ACT] whereby a partner cannot refer a dispute to the arbitrator on the implied authority. Mr. [ENTITY] further submits that even if assuming that the arbitral Tribunal was formed earlier than the sole arbitral Tribunal, there is no iota of evidence on record to show that Mr. [ENTITY], one of the brothers had submitted to the jurisdiction of the said earlier Tribunal.
20.9. Mr. [ENTITY] submits that the dispute referred to the sole arbitrator appointed by the Hon'ble Chief Justice of this court, is distinct and different to the one agreed to refer by the two brothers through the said letters. The dispute before the sole arbitrator is referred by 10 (ten) partners and all the partners are before the sole arbitral Tribunal and any award passed would be binding on each of the partners. On the other hand, any award if passed by the earlier Tribunal of three arbitrators, the same would not bind any of the partners. The observation made by the Hon'ble Chief Justice of this court while appointing the sole arbitrator is a casual observation and nothing to do in deciding the petition under [SECTION] of the Act.
20.10. Mr. [ENTITY] in response to the submissions of Mr. [ENTITY], referring to the pre-conditions mentioned in the aforesaid letters, submits that the clause 'a' of the said pre-condition itself refers to the statement of accounts of all firms/ companies of the family including the protection sought for retired partners. So, the dispute referred to the sole arbitrator cannot be differentiated from the one in seisin of the earlier Tribunal. Moreover, there is no specific denial that no arbitral proceeding/ Tribunal was formed as per the letters referred hereinabove.
20.11. With regard to the necessity of an agreement as held by the learned sole Arbitrator for referring the dispute to arbitration, Mr. [ENTITY] submits that there is no such requirement of an agreement in writing. In support of such submission, Mr. [ENTITY] relies [PRECEDENT] and also referred the case of [PRECEDENT] . So, Mr. [ENTITY] submits that from the said two letters dated 22.11.1999 and 29.11.1999 it can be inferred that there was an implied consent of the present parties to refer the family dispute to the 3 (three) arbitrators / Tribunal which includes the partnership business. 20.12. It is also submitted by Mr. [ENTITY] that the parties cannot be allowed to approbate and reprobate. He submits that the respondents filed [CASE NUMBER] in the civil court, thereafter referred the same dispute in the said title suit to the three arbitral Tribunal and thereafter again moved petition for appointment of the sole arbitrator for the same dispute which cannot be allowed under the law so far the doctrine of election is concerned. In support of his submission, Mr. [ENTITY] relies Joint Action Com m ittee of [PRECEDENT] .
20.13. Mr. [ENTITY] finally submits that the learned court below failed to consider those relevant materials and the submissions made before it and passed the impugned judgment upholding the finding of the learned sole Arbitrator which is wrong and liable to be set aside.
20.14. Perused the impugned judgment and also considered the submissions of both the learned counsel. The learned sole Arbitrator in order to differentiate the disputes, had looked into the manner in which the earlier dispute was referred to the 3 (three) arbitrators and compared the same with the one in which 10 (ten) partners have made a request to the Hon'ble Chief Justice of this court to appoint an arbitrator and to refer the dispute arising out of the partnership business arraying the other 7 (seven) partners. After such scrutiny, the learned sole arbitrator came to the conclusion that there was no agreement for reference of the disputes between the parties nor were there any determined number of arbitrators agreed to by the parties both for referring any family dispute and any dispute arising out of partnership business. As the 10 (ten) partners had made the request to the Hon'ble Chief Justice of this Court to appoint an arbitrator invoking Clause II of the Partnership deed, so the appointment and/ or composition of sole arbitral Tribunal is valid and the said Tribunal had the jurisdiction to decide the dispute so referred arising out of the partnership business. It is in that aspect of the matter, that the learned sole arbitrator had held that existence of an appointment procedure agreed upon by the parties for appointing arbitrator or arbitrators is essential. The number of arbitrators referred in the said two letters dated 22.11.1999 and 29.11.1999 varies and as such the learned sole arbitrator intended to mean that such reference cannot be considered to be a valid one as under [SECTION] of the Act parties are free to determine the number of arbitrators. There was no arbitration agreement to refer family dispute which the learned arbitrator held by inferring as to number of arbitrators mentioned in the said letters.
20.15. The learned sole arbitrator in order to strengthen the reasoning also took shelter under the provision of [SECTION] of the [ACT]. Because if the earlier dispute referred to three arbitrators be presumed to be arising out of the partnership business, same ought to have been referred by all the partners of the said business. There is no whisper in the petition that as per practice / custom under any usage the three brothers were authorised to refer dispute to the Arbitrator arising out of the partnership business.
20.16. The ratio laid down in [PRECEDENT] (supra) and [PRECEDENT] (supra) is totally in different context. In [PRECEDENT] (supra), an award was already passed under the [ACT] which was an outcome of intervention of the arbitrator between the dispute of the father and son. The award was signed by both the father and son and thereafter the son applied to the court for passing a judgment on the basis of the award as required under the provisions of [ACT]. The father failed to raise objection and the civil court made a decree on the basis of the award. In such backdrop, a challenge was made to the award by the father on the plea that there was no written agreement signed by both the parties to refer the dispute to arbitration. The Hon'ble Apex Court held that signing of the award by both the father and son infers that both of them had agreed to refer the dispute to arbitration.
20.17. The ratio of the decision reported in [PRECEDENT] also is in other context inasmuch as during the pendency of the appeal the parties therein entered into an arbitration agreement. But in the present case in hand an arbitration agreement exists in the partnership deed and there was no agreement for reference of the family dispute. The learned sole arbitrator accordingly held that there was no agreement for referring the family dispute as there was no agreement of numbers of arbitrators because from the letter of the two respondents it shows a variance of number of arbitrators. So it was opined that in order to conclude that the reference made by the High Court was proper and the arbitrator has jurisdiction to decide the dispute so referred.
20.18. The submission of Mr. [ENTITY] with regard to the observation of Hon'ble Chief Justice of this court while appointing the sole arbitrator about the nature of the dispute, the same cannot be considered to be a finding of a judicial nature rather the same is a casual observation and the same cannot help in examining the jurisdiction of the learned sole arbitrator with respect to the dispute and its nature. More so, on the face of the partnership deed stipulating the arbitration clause, even if it is assumed to have the force of judicial finding, then also it refers to the partnership business which is governed by the partnership deed and the partners therein are family members. The learned sole arbitrator had considered the submissions of the appellants including contents of the letters dated 22.11.1999 and 29.11.1999 and came to the finding that no mention had been made about the partnership business and also came to a finding that prima facie the dispute in the present case differs from the one mentioned in the said two letters. 20.19. The submission with respect to the doctrine of law of election that the respondents went to the civil court, the Tribunal formed by 3 (three) arbitrators and the sole arbitral Tribunal with respect to the same dispute and as such the present Tribunal ought not to have assumed the jurisdiction to the dispute so referred also cannot be considered. The submission of the appellants that the respondents through their own acts have lost from asserting the right by invoking the arbitration clause in partnership deed is also not tenable.
20.20. With regard to the said submission, this court at first holds that [SECTION] of the [ACT] is not applicable to proceedings of other nature instituted under any other statute inasmuch as [SECTION] is referable to a suit instituted in a civil court. So, mere pendency of the title suit in the civil court cannot be a bar in preferring the arbitration proceeding.
20.21. The Hon'ble Apex Court in [PRECEDENT] (supra) accepted that the Doctrine of Election is based on the rule of estoppel wherein the principle is that one cannot approbate and reprobate which is inherent in it. It is also held that a person is precluded by his action or conduct or silence when it is his duty to speak from asserting a right which he would have had otherwise.
20.22. From the perusal of the objection filed by the respondents against the petition under [SECTION] of the Act, it is seen that without denying the existence of the earlier Tribunal with 3 (three) arbitrators, it is pleaded that the dispute referred to the said Tribunal of three arbitrators is different from the one referred to the present sole arbitrator. By way of such pleading, the onus of the respondents is discharged, inasmuch as, it is the case of the appellants that the dispute referred to the sole arbitral Tribunal is the same as the one already referred to the earlier Tribunal of 3 (three) arbitrators. In fact, the appellants had failed even to discharge the initial burden that the said arbitral Tribunal is still in seisin of the dispute so referred to the learned sole arbitrator. As submitted by Mr. [ENTITY], the appellants failed to bring any iota of evidence in order to show that Mr. [ENTITY], one of the brothers, had submitted to the jurisdiction of the said Tribunal consisting of 3 (three) arbitrators. In order to bring the application of the ratio laid down in [PRECEDENT] (supra), the burden lies upon the appellants at least to show that the said earlier Tribunal of 3 (three) arbitrators is still in existence, at least, at the time of referring the dispute to the learned sole Arbitrator and the said dispute is similar to the one referred to the learned sole Arbitrator. The pendency of the civil suit has nothing to do in application of the said principles of Doctrine of Election. Accordingly, the submissions made by Mr. [ENTITY] cannot be accepted and the findings of the learned court below are upheld so far the point of jurisdiction is concerned.
21. The award dated 22.06.2003 passed in [CASE NUMBER] by the learned sole Arbitrator which was upheld by the learned Additional District Judge No. 1, [ENTITY] at Guwahati is taken up for discussion and its findings.
21.1. Mr. [ENTITY], the learned senior counsel, while assailing the interim award, submitted that in case of interim award the principles of granting the mandatory injunction as interim measures applies. The evidence on record must establish the facts pleaded and an award in absence of evidence is an award patently illegal and arbitrary. The interim award was passed on the basis of presumption and impermissible inferences. The letters dated 27.04.1998 and 28.04.1998 referred hereinabove never indicates that Sri [ENTITY] and [ENTITY] were in the management of Hotel Rajmahal. It was specifically denied in the written objection to that effect. However, the learned Arbitrator wrongly exercised this jurisdiction in passing the award.
21.2. It is further submitted that there is no evidence on record that the respondents/ claimants No. 1 and 3 were looking after the management of the Hotel Rajmahal prior to their alleged ouster. No cogent evidence producing vouchers, invoices or any other documents relevant to prove such facts are on record. The interim award ought not to have been passed as the same amounts to passing of the final award. The fact of physical obstruction to the respondents/ claimants No. 1 and 3 in entering the office premises within the Hotel, rampant manipulation and falsification of accounts to misappropriate and to convert the properties of the firm etc. were not proved by the respondents/ claimants and as such awarding the interim award is patently illegal.
21.3. Mr. [ENTITY], the learned senior counsel, further submits that the learned sole Arbitrator exceeded his jurisdiction in making the impugned award as the partnership deed does not contain any stipulation as to signing of all vouchers, cheques, accounts, all returns and documents by all working partners and so, the award runs counter to the expressed terms and conditions of the partnership deed. So, the finding of the learned Additional District Judge No. 1, [ENTITY] at Guwahati that the grounds taken in the application under [SECTION] of the Act do not fulfil the requirements of [SECTION] of the Act is perverse. It is also argued that the interim award dated 22.06.2003 is absolutely against the public policy of India and in support relied [PRECEDENT] . 21.4. Mr. [ENTITY], the learned senior counsel, submits that the finding of the learned Arbitrator does not suffer from any infirmities nor the findings, under no stretch of imagination could be construed to be opposed to the substantive laws and/ or opposed to the public policy or patently illegal. It is submitted that the award dated 26.03.2003 cannot be permitted to be construed as an interim injunction or interim mandatory injunction. Referring to [SECTION] and [SECTION] of the Act, Mr. [ENTITY] submits that the arbitral Tribunal may, at any time during the arbitral proceedings, make an interim award on any matter with respect to which it may make a final award. Relying the case law, [PRECEDENT] , the learned senior counsel submits that four types of award could be passed under the Act i.e., interim award, additional award, settlement or agreed award and final award. Relying further on the case law of [PRECEDENT] (supra), the learned senior counsel submits that it was held by the Hon'ble Apex Court that ad-interim award in terms of the said provisions is not one in respect of which final award can be made but it will be final award on the matters covered thereby but made at an interim stage.
21.5. Opposing the submission that the respondents/ claimants No. 1 and 3 are looking after separate business but not in management of the Hotel, Mr. [ENTITY] submits Clause 6(B) of partnership deed specifically mentions that the respondents/ claimants No. 1 and 3 are appointed as the working partners along with the appellant/ counter claimant No. 2 who shall look after the day to day business affairs of the firm and its business. In the said clause it has not been stipulated that they will look after separate business. The submission that the appellant/ counter claimant No. 1, Sri [ENTITY] is looking after the management of the Hotel Rajmahal as a policy taken to that effect, cannot be considered inasmuch as no such policy and/or resolution of the partners to that effect had been produced. Out of 17 (seventeen) partners, 10 (ten) partners have denied such policy and the same cannot stand in opposition which the learned sole Arbitrator rightly ignored. The denial that the respondents/ claimants No. 1 and 3 were ever managing the Hotel itself is a contrary stand taken by the appellants on the face of the stipulation of the partnership deed. No extrinsic evidence would dispel the unambiguous terms of the partnership deed. In view of absence of evidence of any policy/ mutual consent of all the partners in modifying the terms of the partnership as regard working partners, the letters referred hereinabove by the appellant/ counter claimant No. 1 to the two airlines stating that the two working partners were no longer associated in the day to day management and affairs of the hotel clearly testifies that the claimants/ respondents No. 1 and 3 were, in fact, participating as working partners.
21.6. Mr. [ENTITY] submits that the contention of the appellants/ counter claimants that in absence of framing of necessary issues, production of documents and other evidence, cross examination of witnesses etc., no interim award can be given, is not at all relevant inasmuch as in view of the findings of the learned sole Arbitrator in paragraphs No. 6.4.7, 6.4.8, 6.4.9, there is no necessity of further arguing to that point. The findings therein, under no circumstances, can be construed to be opposed to the substantive law and/ or opposed to public policy or patently illegal and as such there is no illegality in the judgment passed by the learned court below. 21.7. Considered the submissions of both the learned counsels. The Act defines in [SECTION] "the arbitral award" which includes an "interim award". As held in [PRECEDENT] (supra), under the Act, there are four types of awards which can be passed, such as interim award, additional award, settlement or agreed award and final award. In [PRECEDENT] (supra), it was held that [SECTION] of the Act includes an interim award. [SECTION] of the Act contemplates an interim award and the said interim award in terms of the said [SECTION] is not one in respect of which a final award can be made but it may be a final award on the matters covered thereby and made at an interim stage. 21.8. The interim award sought by the respondents/ claimants had already been referred hereinabove. The learned sole Arbitrator took note of the pleadings of the respondents/ claimants that after ouster of the two working partners, the appellants/ counter claimants had taken recourse to rampant manipulation and falsification of accounts to misappropriate and to convert the properties of the firm into individual properties which the appellants had denied specifically. The learned sole Arbitrator while discussing with regard to the jurisdiction of the Tribunal to pass the interim award within the purview of the Act, scrutinised the award prayed for by the respondents and came to the conclusion as follows:-
"The first part of the interim award prayed for, namely, allowing Sri [ENTITY] and Sri [ENTITY] to effectively participate in the day to day activities in the firm and the claim (iv) made in the statement of claim i.e. "to run the day to day functions of the hotel by working partners and restrain others from creating any hindrance in their function are substantially the same in context. But the second part of the interim award prayed for direction to sign cheques, vouchers etc. jointly by the working partners is not found in the relief claimed in the statement of claim, although it is stated in this regard at the end of paragraph 11 of the statement of claim. The claim (iv) referred to above and the first part of the interim arbitral award prayed for by the claimants are similar, or in any event, they are substantially the same, and therefore, [SECTION] is attractive, although it may be a different question as to whether or not, the prayer for interim arbitral award should be granted. As regards, the second part of the interim award asked for, whether that part of the relief can or cannot be granted shall have to be considered having regard to the general or other relief or other reliefs, as m ay be just, can be given w ithout asking for, as if it had been asked for."
21.9. The learned sole Arbitrator scrutinised the prayer for interim award on the submission of the learned counsel for the appellants with regard to the jurisdiction of the Tribunal in passing the same. Against the said submission, the learned Arbitrator accepted the same to the extent of the second part of the interim award meaning thereby that the said relief of interim award was beyond the scope of [SECTION] of the Act as the respondents/ claimants also never prayed for in their claim petition. 21.10. After hearing the parties to the proceeding, without taking any extrinsic evidence on record and on the basis of the pleadings, the learned sole Arbitrator held in paragraph 8.12 of the impugned award as follows:-
"Proceeding further to the two letters of [ENTITY] (respondent No. 2) to the Airlines referred to above, [ENTITY] (claimant No. 1) was co-partner with [ENTITY] (respondent No. 2) till April, 1988. This supports the plea of the claimants that the two working partners, namely, [ENTITY] (claimant No. 1) and [ENTITY] (claimant No. 3) were ousted from the management of the firm in July, 1998 and August, 1998, and it contradicts the statement that [ENTITY] (respondent No. 2) with active support of Manoj Kumar Sethia (respondent No. 1) has been managing the firm of partnership business."
21.11. The learned sole Arbitrator before coming to the said finding, arrived at the finding that the deed of partnership is a solemn agreement of the partners. It is also held that the partners, who are parties to the instrument have put into writing all that they considered necessary to give full expression to their meaning and intention. It is also held within the stipulation of the said partnership deed that the respondents/ claimants No. 1 and 3 and the appellant/ counter claimant No. 2 are working partners of the firm. On the basis of the said stipulation, the learned sole Arbitrator disbelieved the pleadings of the appellants/ counter claimants and held that mere categorisation of the said claimants No. 1 and 3 does not mean that they were not in the management of Hotel Rajmahal. The fact that the learned sole Arbitrator had relied the stipulation of the partnership deed, is apparent from the findings in paragraph 8.7 of the award wherein it was held that any statement or evidence that [ENTITY] (claimant No. 1) and [ENTITY] (claimant No. 3) are not working partners of the firm shall amount to contradicting or varying the terms of partnership deed and such statement cannot be accepted or admitted as the same would defeat the very object of reducing to a written form. So, the pleadings that the respondents/ claimants No. 1 and 3 were not working partners, had not been accepted. Therefore, the learned Arbitrator had granted the award directing the appellants/ counter claimants to allow [ENTITY] and [ENTITY] both respondents/ claimants No. 1 and 3 to effectively participate in the day to day activities and affairs of the firm, M/s Rajkamal & Co. The said finding is well within the stipulation of the partnership deed and the same is rightly arrived at by the learned Arbitrator. 21.12. Now, let us examine the second limb of the award which is reproduced hereinbelow:-
"10.3(ii) All the three working partners, namely, [ENTITY] (claimant No. 1), [ENTITY] (claimant No. 3) and [ENTITY] (respondent No. 2) to jointly sign all vouchers, cheques, expenditure accounts, booking account and all statutory returns and documents to be filed by the firm before the concerned authority."
21.13. The reasoning as to why the said award is granted by the learned Arbitrator is that it is necessary to ask for general or other relief/ reliefs, as may be just, can always be given, as if asked for. However, the said general or other reliefs should be in the nature of ancillary or incidental relief and not inconsistent with the case set up by the claimants. Therefore, the said general or other reliefs, if can be given in the final award without asking for it in the statement of claims, interim award may be given in respect of the relief keeping in view of provisions of [SECTION] of the Act. 21.14. The learned sole Arbitrator also came to the finding which is reproduced hereinbelow:-
"19.3. In the present case, the claimants have stated at the end of paragraph 11 of their statement of claim that it is necessary to direct all the working partners to jointly sign all vouchers, cheques, accounts, expenditure accounts, booking accounts and all the statutory returns and documents to be filed by the firm before the concerned authority.
The respondents have filed their statement of defence denying the above statement and have also contended that such an interim prayer cannot be granted. Therefore, the respondents are fully aware of the matter. This being the position, the second part of the interim relief as prayed for, can be granted if it is in the nature of ancillary relief."
21.15. The learned Arbitrator taking note of the opposition of the appellants/ counter claimants, granted the second limb of the award holding the relief being an ancillary one to the main relief No. iv as sought for in the claim petition.
21.16. The partnership deed stipulates Clause (2)(c) defining 'business' under the firm M/S Rajkamal & Co. Clause (2) (c) stipulates as follows:-
"2(c). That in view of the Government policies or other principles regulating distribution of contracts, agencies, permits, licenses, quotas, appointment of dealers/ brokers/ agents/ distributors/ liason agents etc., the partners are entitled to secure the business in their individual name(s) or any other name(s) but all such business(es) if agreed am ong the parties hereto, shall be carried on under the term s of this deed."
21.17. Thus the partners are at liberty to secure business in their individual names and such business(es), if agreed to by the partner in whose name the same is secured, shall be carried on under the terms of the deed. But within the stipulations of the partnership deed, no stipulation similar to the one prayed for in the second limb of the interim award is found. The learned sole Arbitrator held that the said relief need not be asked for, as the same is ancillary in nature and not inconsistent with the case set up by the claimants. The learned sole Arbitrator is to decide the dispute within the bounds circumscribed by the partnership deed. That is a gospel truth. 21.18. The learned Arbitrator had defined the word 'dispute' in the award itself and in context of the reference made to the Tribunal which is reproduced hereinbelow:-
"6.3.3. The word 'dispute' in the context denotes a claim which is asserted by one party and denied by the other, may be, the claim is a false or a true one. The claimants have asserted that two claimants, namely, [ENTITY] (claimant No. 1) and [ENTITY] (claimant No. 3) are working partners along with [ENTITY] (respondent No. 2) whereas the respondents have denied that any of them is a working partner, and they have also said that only [ENTITY] (respondent No. 2) has been managing the affairs of the firm and the hotel. It is therefore, a dispute amongst the partners as to whether or not, they are working partners in the conduct of business, be the claims, is a true or false one."
The learned Arbitrator taking note of the objection of the appellants/ counter claimants ought to have gone for the evidence as to the practice followed by the partners in managing the affairs of the partnership business prior to the accrual of the cause of action for the respondents/ claimants to come to the Tribunal in view of Clause (2)(c) in the partnership deed. In addition to that, there is a clause empowering the partners to vary terms of the partnership deed expressly or impliedly. But there is no such piece of evidence on record.
21.19. Keeping the said mindset, the learned sole Arbitrator, passed the award of the first limb within the ambit and scope of the partnership deed. However, in the context of the second limb of the award, it is apparent that the initial burden to show that even prior to the dispute between the parties, there exists a practice for signing of vouchers, cheques etc. by the three working partners jointly and after the dispute, the said practice had been stopped with the intent of the appellants/ counter claimants to reduce the capital of the firm etc. had not been discharged by the respondents. In addition to that, there is a clause in the partnership deed for variation of the terms of the partnership deed which may be expressly or impliedly by the acts of the partners. From the partnership deed it cannot be inferred that the parties to the deed had agreed to such a condition expressly so far the second limb of award is concerned inasmuch as the present appellants who are parties to the partnership deed had objected to granting of the second limb of prayer of the interim award.
21.20. In [PRECEDENT] (supra), the Hon'ble Apex Court held in paragraph 112 as follows:-
"112. It is trite that the terms of the contract can be express or implied. The conduct of the parties would also be a relevant factor in the matter or construction of a contract. The construction of the contract agreement is within the jurisdiction of the arbitrators having regard to the wide nature, scope and ambit of the arbitration agreement and they cannot be said to have misdirected themselves in passing the award by taking into consideration the conduct of the parties. It is also trite that correspondences exchanged by the parties are required to be taken into consideration for the purpose of construction of a contract. Interpretation of a contract is a matter for the arbitrator to determine, even if it gives rise to determination of a question of law."
21.21. The ratio of the said decision is that conduct of parties is to be looked into by the arbitrator and there is no bar in doing it. From the averment made in the claim petition it cannot be said that there was a practice followed of signing of all vouchers, cheques etc by the three partners as sought for in the interim award. Also it cannot be said even from the petition for interim award about existence of the said practice. The relief so prayed for as interim award was objected by the appellants/ counter claimants. So, from the claims/ counter claims of the parties it is clear that there was no practice followed as prayed for by the respondents/ claimants rather, it is the practice followed, authorised by the stipulations and agreed to by the parties in the partnership deed. So, the learned arbitrator ought to have passed the second limb of award as per the terms of the deed and/ or usage of the trade applicable in running the firm. The learned arbitrator definitely in bringing a harmonious relationship among the working partners as well as the partners, termed the second limb of the award as ancillary to the first limb of the award so granted. But there is no material to show any such practice followed earlier and the present appellants had deviated from the said practice for their personal gain. In such a situation, it cannot be held that the relief could have been granted, inasmuch as, the same amounts to violation of [SECTION] of the Act and the second limb of the award also cannot be considered within the four corners of the partnership deed. The same amounts to introduction of a new condition into the partnership deed thereby disturbing the state of equilibrium amongst the partners as apparent from the objections raised by some of the partners. The sole Arbitrator has no discretion to make a new contract for the parties nor can the discretion applied by the learned sole Arbitrator be taken to be a sound one.
21.22. In the case of [PRECEDENT] , it was held that "patent illegality"
covers any contravention of [SECTION] of the Act. It was also held that the said contravention must be understood with a caveat. An arbitral Tribunal must decide in accordance with the terms of the contract, but if an arbitrator construes a term in a reasonable manner, it would not mean that the award can be set aside on this ground. Construction of a term of a contract is primarily for an arbitrator to decide unless the arbitrator construes the contract in such a way that it could be said to be something that no fair minded or reasonable person could do. Thus the discretion is left with the arbitrator.
21.23. In the case of [PRECEDENT], the Hon'ble Apex Court approved the meaning and exercise of 'Discretion' as enumerated by Lord [ENTITY] in Sharp vs. Wakefield (1891) AC 173, 179 which is reproduced hereinbelow:-
" 'Discretion' means when it is said that something is to be done within the authorities that something is to be done according to the rules of reason and justice, not according to private opinion: [ENTITY]'s case ([PRECEDENT] a : according to law, and not humour. It is to be, not ancillary, vague and fanciful, but legal and regular. And it must be exercised within the limit, to which an honest man competent to the discharge of his office ought to confine himself."
The learned sole arbitrator has his bounds within the ambit and scope of the stipulations of the partnership deed which as per the finding of the learned arbitrator is 'solemn' in nature. In such a situation, introduction of the second limb of the award and that too, without any proof of the practice followed by the partners is purely a wrong application of his discretion keeping in view of the mindset of the sole Arbitral Tribunal. 21.24. In the present case in hand, the partnership deed itself shows that the business under the firm is a varied one. It is also agreed between the parties that in view of government policies or other principles of regulation, distribution etc., the partners are entitled to secure business in their individual or in other names and all such businesses shall be carried on under the terms of the partnership deed subject to the consent of the parties to the deed. In such a situation, the award directing the three working partners to jointly sign all vouchers, cheques, expenditure accounts, booking accounts and all statutory returns and the documents to be filed by the firm before the concerned authority is not reasonable, more so, when there is no material to show such usage in practice prior to the dispute. To that aspect, there is even no evidence either documentary or oral and the discretion applied is beyond the stipulation of the partnership deed. Holding the relief to be an ancillary the learned arbitrator cannot apply the discretion but same must be a regular one. The said relief cannot be considered ancillary to the first limb of the award. So, the second limb of the award is well covered under the term 'patent illegality' and contravenes [SECTION] of the Act. Thus, the second limb of the award is hit under [SECTION] of the Act which the learned Additional District Judge No. 1 failed to consider. Accordingly, the interim award of the learned sole arbitrator directing the three working partners, namely, Sri [ENTITY] (respondent/claimant No. 1), Sri [ENTITY] (respondent/ claimant No. 3) and Sri [ENTITY] (appellant/ counter claimant No.
2) to jointly sign all vouchers, cheques, expenditure accounts, booking accounts and all statutory returns and the documents to be filed by the firm before the concerned authority is set aside.
22. This appeal is partially allowed.
Send back the lower court records.
JUDGE BiswaS