1 IN THE HIGH COURT OF JUDICATURE AT BOMBAY ORDINARY ORIGINAL CIVIL JURISDICTION ARBITRATION PETITION NO. 570 OF 2008 1 Dr. Vijaypat Singhania, residing at 59, Bhulabhai Desai Road, Mumbai 400 026, 2 Madhupati Singhania, s/o. Dr.Vijaypat Singhania, Residing at, 59, Bhulabhai Desai Road, Mumbai 400 026, 3 Gautam Hari Singhania, s/o. Dr. Vijaypat Singhania, residing at 59, Bhulabhai Desai Road, Mumbai 400 026, 4 Smt.Asha Devi Singhania, w/o. Dr.Vijaypat Singhania, Residing at, 59, Bhulabhai Desai Road, Mumbai 400 026, 5 Smt.Veena Devi Singhania w/o.Late Shri Ajaypat Singhania, Residing at 59, Bhulabhai Desai Road, Mumbai 400026, 6 Mr.Anant Singhania, s/o.Late Shri Ajaypat Singhania, Residing at 59, Bhulabhai Desai Road, Mumbai 400026, 7 Mr.Akshaypat Singhania, s/o.Late Shri Ajaypat Singhania, Residing at 59, Bhulabhai Desai Road, Mumbai 400026, ...Petitioners 2 vs. 1 Hari Shankar Singhania, working for gain at “Nehru House”, 3rd floor, 4, Bahadur Shah Zafar Marg, New Delhi 110 002., 2 Bharat Hari Singhania for himself and as Karta of the Hindu Undivided family of Bharaqt Hari Singhania HUF, working for gain at “Link House”, 4th floor, 3, Bahadur Shah Zafar Marg, New Delhi 110 002, 3 Raghupati Singhania for himself and as Karta of the Hindu Undivided family of Raghupati Singhania HUF, working for gain at “Link House”, 4th floor, 3, Bahadur Shah Zafar Marg, New Delhi 110 002, 4 Smt.Vinita Singhania, working for gain at “Nehru House”, 4th floor, 3, Bahadur Shah Zafar Marg, New Delhi 110 002, 5 Anshuman Singhania, residing at 101, Friends Colony(East), New Delhi 100 065 “since attained majority”. 6 Srivats Singhania, residing at at 101, Friends Colony(East), New Delhi 100 065 “since attained majority”. 7 Dr.Gaur Hari Singhania, residing at Ganga Kuti, Cantt, Kanpur 8 Smt.Sushila Singhania, 3 w/o. Dr. Gaur Hari Singhania, residing at Ganga Kuti Cantt, Kanpur. 9 Yadupati Singhania, s/o. Dr. Gaur Hari Singhania, residing at Ganga Kuti Cantt, Kanpur. 10 Govind Hari Singhania of Ganga Kuti cantt., kanpur presently residing at 3, Barakhamba Road, New Delhi. 11 Abhishek Singhania, a minor by his Naturla Guardian and next friend Shri Govind Hari Singhania, his father, residing at 3, Barakhamba Road, New Delhi 110 001, 12 Smt.Manorama Singhania, w/o. Govind Hari Singhania, Kanpur residing at 3, Barakhamba Road, New Delhi 13 Ramapati Singhania, son of late Shri Gopal Krishna Singhania, presently residing at Jayakanagar, Kota (Rajasthan), 14 Nidhipati Singhania, son of late Shri Gopal Krishna Singhania, residing at W/126, Greater Kailash, Part-II, New Delhi 110 048. 15 Smt.Kalpana Singhania, wife of late Gopal Krishna Singhania, residing at W/126, Greater Kailash, Part-II, New Delhi 110 048. ...Respondents ALONG WITH ARBITRATION PETITION NO. 6 OF 2009 4 1 Dr.Gaur Hari Singhania, residing at Ganga Kuti, Cantt, Kanpur 208 001. 2 Smt.Sushila Singhania, wife of petitioner No.1 above named, residing at Ganga Kuti Cantt, Kanpur-208 001, 3 Yadupati Singhania, son of petitioner No.1 abovenamed, residing at Ganga Kuti Cantt., Kanpur 208 001, 4 Govind Hari Singhania of Ganga Kuti cantt., kanpur presently residing at 3, Barakhamba Road, New Delhi 110 001. 5 Abhishek Singhania, son of petitioner No.4, residing at 3, Barakhamba Road, New Delhi 110 001, 6 Smt.Manorama Singhania, wife of Govind Hari Singhania of Ganga Kuti Cantt., Kanpur residing at 3, Barakhamba Road, New Delhi 110 001, 7 Ramapati Singhania, son of late Shri Gopal Krishna Singhania, presently residing at PGR Villa, 738, P.O. Box No.28121, Dubai (U.A.E.). 8 Nidhipati Singhania, son of late Shri Gopal Krishna Singhania, residing at A-15/9, Vasant Vihar, New Delhi 110 057. 9 Smt.Kalpana Singhania, wife of late Gopal Krishna Singhania, residing at 124, Madhuli Apartments, Dr.Annie Besant Road, Mumbai 400 018. .... Petitioners vs 5 1 Hari Shankar Singhania, working for gain at “Nehru House”, 3rd floor, 4, Bahadur Shah Zafar Marg, New Delhi 110 002., 2 Bharat Hari Singhania for himself and as Karta of the Hindu Undivided family of Bharaqt Hari Singhania HUF, working for gain at “Link House”, 4th floor, 3, Bahadur Shah Zafar Marg, New Delhi 110 002, 3 Raghupati Singhania for himself and as Karta of the Hindu Undivided family of Raghupati Singhania HUF, working for gain at “Link House”, 4th floor, 3, Bahadur Shah Zafar Marg, New Delhi 110 002, 4 Smt.Vinita Singhania, working for gain at “Nehru House”, 4th floor, 3, Bahadur Shah Zafar Marg, New Delhi 110 002, 5 Anshuman Singhania, residing at 101, Friends Colony(East), New Delhi 100 065 “since attained majority”. 6 Srivats Singhania, residing at at 101, Friends Colony(East), New Delhi 100 065 “since attained majority”. 7 Vijaypat Singhania, residing at 59, Bhulabhai Desai Road, Mumbai 400 026, 8 Madhupati Singhania, son of Respondent No.7, residing at 59, Bhulabhai Desai Road, 6 Mumbai 400 026, 9 Gautam Hari Singhania, son of Respondent No.7, residing at 59, Bhulabhai Desai Road, Mumbai 400 026, 10 Smt.Asha Devi Singhania, wife of Respondent No.7, residing at 59, Bhulabhai Desai Road, Mumbai 400 026, 11 Mrs.Veena Devi Singhania, wife of late Shri Ajaypat Singhania, residing at 59, Bhulabhai Desai Road, Mumbai 400 026, 12 Mr.Anant Singhania, son of late Shri Ajaypat Singhania, residing at 59, Bhulabhai Desai Road, Mumbai 400 026, 13 Mr.Akshaypat Singhania, son of late Shri Ajaypat Singhania, residing at 59, Bhulabhai Desai Road, Mumbai 400 026, .... Respondents Mr.Janak Dwarkadas, Sr.Counsel with Mr.Zal Andhyarujina, Mr.Shreekant Mehta, Mr.Shailesh Shukla, i/b. M/s.Malvi Ramnchddas & Co. for Petitioners in Petition No.6/2009 and for respondents 7 to 15 in Petition No.570/2008. Mr. D. D. Madon, Sr.Counsel with Mr.Chetan Kapadia, with Mr.Chakripani Mishra with Mr. Vishal Maheshwari with Mr.Ameya Gokhale i/b. Khaitan & Co. for respondents 1 to 6 in both petitions. Mr. J. J. Bhatt, Sr.Counsel with Ms.Gitanjali Prabhu i/b. Vigil Juris, for petitioners in Petition No.570/2008 and for respondent nos.7 to 13 in 7 Petition No.6/2009. CORAM: ANOOP V. MOHTA, J. DATE OF RESERVING THE JUDGMENT :- 13/08/2009. DATE OF PRONOUNCING THE JUDGMENT :- 01/10/2009. JUDGMENT: 1 These are two petitions under Section 34 of the Arbitration and Conciliation Act, 1996 ( the Act). 2 An arbitration Award dated 04.08.2008, which is modified on 12.09.2008, has been challenged by the two branches of a Singhania family, the Bombay group and the Kanpur group, as dissatisfied and aggrieved by the 1/3rd share of distribution and partition of the family firm M/s. J.K. Bankers properties. One branch, the Calcutta group supports the same. The Petitioners in Arbitration Petition No. 570 of 2008 are one of the three groups of the Singhania family, a Bombay Group. Respondents 1 to 6 and Respondents 7 to 15 are the other two groups being the Calcutta Group and the Kanpur Group respectively. Arbitration Petition No.6 of 2009 is filed by the Kanpur group. The Respondents are other two groups. 3 The background of the family dispute can be gathered from the 8 following events: 4 Late Lala Kamlapat Singhania started his business at Kanpur many long ago in the name and style of “Juggilal Kamlapat” and in the course of said business acquired, inter alia, several immoveable properties. 5 During Pre-1969 the three branches of Singhania family viz. The Kanpur branch, the Kolkata branch and the Bombay Branch formed a partnership firm in the name of M/s. Juggilal Kiamlapat Bankers (M/s. J.K. Bankers)(the firm). The said firm was lastly reconstituted on 21st February 1980 with equal 1/3rd shares in profits and Losses. 6 On 26/03/1987, by a Deed of Dissolution having an arbitration clause, the firm was dissolved by a mutual consent effective from 19th March, 1987. The immovable properties of the firm was agreed to be distributed in specie at book value. 7 On 28/03/1987, a Supplementary Agreement was executed between the three branches recording therein that for the purpose of allotment and distribution of the immovable properties of the dissolved firm the same shall be free from all tenancies, leases or licenses therein that may be subsisting in favour of the group companies, firms, trusts, societies, relatives and family members and that petitioner nos. 1 to 3 (Arbitration Petition No. 6/2009) would be 9 responsible in respect of Kanpur properties and some respondents and late Ajaypat Singhania shall be responsible in respect of Bombay properties and that it would not apply to two properties at Kanpur bearing property No.88/473, Hiraman Purwa and Property No.80/80 known as Oil Mills Land except the portion which is in occupation of J.K. Jute Mills Co. Ltd. 8 From 11/11/1987 to 29/09/1989 the correspondences between the three branches exchanged about the distribution and allotment of the immovable properties. 9 On 08.05.1992, an Arbitration Suit under Section 20 of Arbitration Act, 1940 being Suit No.1904 of 1992 was filed by the Kolkata branch in the Bombay High Court against the other two branches inter alia for appointment of an arbitrator. 10 On 20.02.1996, this Hon’ble Court dismissed the Suit as barred by law of limitation. On 09.04.1996 the Kolkata branch filed an Appeal No.440 of 1996 (the Appeal). 11 On 20.04.2000 the Kolkata branch filed in Bombay High Court Suit No.1663 of 2000 without prejudice to the pending Appeal inter alia seeking possession of the immoveable properties of the firm in specie in accordance with the Deed of Dissolution. 12 On 13/01/2003 Shrivats Singhania (Respondent No.6 herein) 10 filed a similar suit in this High Court being Suit No.706 of 2003. 13 On 8-9/06/2004, the appeal was also dismissed. 14 On 09.08.2004 the Kolkata branch filed a Special Leave Petition in the Supreme Court of India being SLP (Civil) No.16454 of 2004, later converted as an Appeal being Civil Appeal No.126 of 2005 from the dismissal appeal. 15 On 04/04/2006 the Supreme Court of India by its Judgment and Order inter alia held that the Arbitration Suit No.1904 of 1992 was not barred by law of limitation and appointed Mr.Justice S. N. Variava, a former Judge of the Supreme Court to act as a Sole Arbitrator in respect of the disputes between the three branches of Singhania family. 16 On 12.05.2006, the Statement of Claim was filed by the Calcutta group (The claimants) before the learned Arbitrator. The separate replies were filed by the other two groups (the Bombay group & the Kanpur group). 17 On 07.09.2006, based on the pleadings and submissions of the parties, the Issues and further issue for determination were framed by the learned Arbitrator. 18 On 20/03/2007, it was agreed upon by the parties by an Agreement that the learned Arbitrator would be required to distribute 11 only the properties described at Items No.1 to 10 of Annexure II of the Deed of Dissolution on the basis of the market value of the properties. The date of valuation and Valuer were to be decided by the learned Arbitrator. It was further stated that the properties mentioned at Item Nos. 11 to 15 of Annexure II of the Deed of Dissolution are not to be included in the said Agreement. The parties recorded that the properties at Item Nos. 11 and 12 had been sold. An opportunity and the hearing was provided for the parties even before the valuer. The valuer report was agreed to be final and binding. 19 The name of a Valuer were fixed, however, it was later objected to as it was found that this particular Valuer had worked for Respondents 1 to 6 on an earlier occasion. Subsequently, HDFC Limited were appointed as Valuers to value the properties at their respective market values. Date of valuation was decided by the learned Arbitrator to be 20th March 2007. 20 On 13.02.2008 a draft report was submitted by HDFC Limited to the learned Arbitrator in February, 2008. - The parties submitted their written representations to HDFC Limited report vide their replies. A meeting was also fixed and oral submissions were made. 21 On 08.03.2008, HDFC Limited submitted its final report to the learned Arbitrator. As alleged by the Bombay group, no opportunity 12 was provided to the parties to cross examine HDFC Limited and/or question the validity of the report in terms of the objections raised by the parties. The Arbitrator rejected such objections/submissions. 22 On 31.03.2008, a letter No.3585/147 was issued by the office of the Divisional Director, Forest Department, Kanpur, U.P. Addressed to Dr. Gaur Hari Singhania, respondent no.7 (Arbitration Petition No. 570/2008) herein whereby item No.6 of Annexure 2 of the Deed of Dissolution being Kamla Retreat Kanpur was identified as a “Forest Like area.”. 23 On 08.05.2008, further written submissions were filed by the Bombay group, before the learned Arbitrator. 24 On 04/08/2008, the learned Arbitrator passed the Award whereby the immovable properties have been partitioned amongst the three groups. The sole Arbitrator gave his Award whereby some properties at Kanpur were allotted to the Kanpur branch and some properties at Kanpur were allotted to the Bombay branch and the properties at Bombay were allotted to the Kolkata branch with direction/order for payment of equal amount. 25 On 19/08/2008 , the Calcutta group through their Advocates’ letter requested the sole Arbitrator to make certain clerical and typographical corrections of the errors in the Award dated 4th August, 13 2008. On 23-28/08/2008, the Kanpur group and the Bombay group vide their Advocates’ letter informed the sole Arbitrator that they had no objection to the corrections suggested but requested for the some changes in the title. 26 On 29/08/2008, the Bombay group also vide their Advocates’ letter sought certain clarifications and interpretation of the Award under Section 33 of the Act. The meeting was called for on 10/09/2008. On 12/09/2008 the sole Arbitrator clarified and modified the Award. 27 On 8/12/2008 being aggrieved by the Awards dated 4th August, 2008 and 12th September, 2008, the Bombay group and the Kanpur group have filed the Petition (Arbitration Petition Nos. 570/2008 and 6/2009) under Section 34 of the Act. As per order of the Hon’ble Chief Justice, both the matters were placed before me for hearing. As common award and the parties are involved, by consent heard finally and therefore, also the common Judgment. 28 Strikingly, the Apex Court, in the litigation between the parties, [(2006) 4 SCC 658, Hari Shankar Singhania & Ors. Vs. Gaur Hari Singhania & Ors.], by a detailed Judgment has expressed as under:- On limitation:- “Therefore, we observe that the right to apply under section 14 20 of the Arbitration Act, 1940 accrued to the appellants only on the date of the last correspondence between the parties and the period of limitation commences from the date of the last communication between the parties. Therefore, the finding of the High Court that the application under section 20 of the Arbitration Act, 1940, is beyond the period of limitation is erroneous.” On the ground of Family arrangement/ family settlement:- “Another fact that assumes importance at this stage is that, a family settlement is treated differently from any other formal commercial settlement as such settlement in the eyes of law ensures peace and goodwill among the family members. Such family settlements generally meet with approval of the Courts. Such settlements are governed by a special equity principle where the terms are fair and bona fide, taking into account the well being of a family. The consent of ‘family arrangement or settlement’ and the present one in hand, in our opinion, should be treated differently. Technicalities of limitation etc. should not be put at risk of the implementation of a settlement drawn by a family which is essential for maintaining peace and harmony in a family. Also it can be seen from decided cases of this Court that, any such arrangement would be upheld if family settlements were entered into ally disputes existing or apprehended and even any dispute or difference apart, if it was entered into bona fide to maintain peace or to bring about harmony in the family. Even a semblance of a claim or some other ground, as say affection, may suffice as observed by this Court in the case of Ram Charan V. Girija Nandini, AIR 1966 SC 323.” “The courts have, therefore, leaned in favour of upholding a family arrangement instead of disturbing the same on technical or trivial grounds. Where the courts find that the family arrangement suffers from a legal lacuna or a formal defect the rule of estoppel is pressed into service and is applied to shut out plea of the person who being a 15 party to family arrangement seeks to unsettle a settled dispute and claims to revoke the family arrangement.... The law in England on this point is almost the same.” “The valuable treatise Kerr on Fraud at p. 364 explains the position of law, “the principles which apply to the case of ordinary compromise between strangers do not equally apply to the case of compromise in the nature of family arrangements. Family arrangements are governed by a special equity peculiar to themselves, and will be enforced if honestly made, although they have not been meant as a compromise, but have proceeded from an error of all parties originating in mistake or ignorance of fact as to what their rights actually are, or of the points on which their rights actually depend.” Halsbury’s Laws of England, Vol. 17, Third edition at pp. 215-216. In KK Modi v KN Modi & Ors., [1998] 3 SCC 573 [Sujata Manohar & DP Wadhwa, JJ.], it was held that the true intent and purport of the arbitration agreement must be examined- [para 21] Further the court examined that “..a family settlement which settles disputes within the family should not be lightly interfered with especially when the settlement has been already acted upon by some members of the family. In the present case, from 1989 to 1995 the Memorandum of Understanding has been substantially acted upon and hence the parties must be held to the settlement which is in the interest of the family and which avoids disputes between the members of the family. Such settlements have to be viewed a little differently from ordinary contracts and their internal mechanism for working out the settlement should not be lightly disturbed.” Therefore, in our opinion, technical considerations hould give way to peace and harmony in enforcement of family arrangement or settlements.” 29 It is also observed to settle the matter and expedite the the distribution as early as possible. It is also recorded that “it is an 16 admitted fact that the three branches of Singhania family are each entitled to 1/3rd share in immovable properties.” The points of differences were referred, after appointing Hon’ble Mr. Justice S.N. Variava (Retired Judge of Supreme Court) as a sole Arbitrator to decide the dispute between the parties, within a period of six months from the date of entering upon the Reference. The points for Reference were recorded. 30 The learned Arbitrator, after considering the rival contention, as well as, material placed on record, framed the following issues:- 1. Whether the claims as set out in the Statement of Claim are barred by the law of limitation? 2. Whether the Arbitral Tribnunal is prevented from proceeding with this arbitration on account of the fact that the Claimants have filed Suits Nos. 1663 of 2000 and 706 of 2003 before the Hon’ble Bombay High Court? 3. Whether this Arbitral Tribunal has jurisdiction to entertain the claim for damages and/or interest as set out in paragraph 11 and prayer (e) of the Statement of Claim and if so whether the Claimants are entitled to damages and interest and to what extent? 4. Whether Respondent Nos. 1 to 9 are under an 17 obligation to have the properties at Kanpur vacated and free from encumbrances as set out in paragraph 8(b) of the Statement of Claim? 5. Whether the Arbitral Tribunal is required to take into account the occupation of properties belonging to the partnership firm, by various Respondents, while ordering their allotment and distribution in specie, between the Claimants and the Respondents? 6. Whether Respondent Nos. 1 to 9 prove that they have incurred expenses on the said properties? 7. Whether Respondent Nos. 1 to 9 are entitled to offset the expenses allegedly incurred by them on the said properties against the amounts payable to the Claimants as and by way of damages and/or interest? 8. Whether the Arbitral Tribunal has jurisdiction to entertain any claim pertaining to any properties not set out in Annexure II to the Deed of Dissolution dated 26th March, 1987? 9. Whether the Claimants are entitled to the reliefs prayed for in the Statement of Claim? 4A. Whether the Respondent Nos. 10 to 16 are also under 18 obligation to have the property at Juhu, Mumbai vacated and free from encumbrances? (Added on 3rd October, 2006) 31 It is recorded in the agreement dated 20th March, 2007 between the parties to settle the matter amicably. The Arbitrator has noted the same in paragraph 9 is as under:- “9. Various meetings were held in order to see whether the family could settle the disputes amicably. Initially parties could not agree on anything. They could not agree on the values which should be put on the properties. They could not even agree on the manner in which the valuation was to be done or the date, which should be taken, for purposes of valuation. Ultimately however, thanks solely to the efforts of the Counsel/Advocates representing the parties, better sense prevailed and an Agreement dated 20th March, 2007 was entered into. This Agreement reads as follows: AGREEMENT With reference to the Arbitration pending before the Hon’ble Arbitrator, Mr. Justice S.N. Variava, Former Judge, Supreme Court of India, in relation to the distribution of the properties described at items 1 to 10 set out in Annexure II to the Deed of Dissolution dated March 27, 1987, the parties have agreed that the properties will be distributed on the basis of market value and the date of valuation and the Valuer would be decided by the Hon’ble Arbitrator. The Valuer will hear the parties before giving his report. It is clarified that the properties mentioned at items 11 to 15 of the said Annexure II are not to be included in this Agreement. Parties agree that the property at Item 11 is sold, the 19 properties at items 12,13 and 15 are to be sold and proceeds distributed. The property at item 14 is not part of this Agreement. All other contentions of the parties, except the valuation at market value, are kept open”. Thus, what now remained was getting the 10 properties valued and then distributing the same. With the consent of all the parties directions were passed on 2nd November, 2006 that the property at Sr. No.12 above i.e. 363, Harish Gunj, Kanpur, be sold and the price thereof be distributed amongst the parties in accordance with their share. This property has since been sold and the money distributed to the heads of each group. Also it must be noted that parties had agreed that distribution was to only of properties at Sr.Nos. 1 to 10 above. In respect of the properties at Sr. Nos. 13 and 15 the parties had agreed, amongst themselves, that they would separately deal with these properties in consultation with Shri Hemantpat Singhania who had a 50% share in these properties. The lease of the property at Sr. No.14 had already run out and the same was supposed to be returned to the landlord. Thus this property was also excluded from this proceeding and parties have agreed that they will deal with it by themselves. This Arbitration thus proceeded in respect of the properties at Sr. Nos. 1 to 10 only.” (emphasis added) 32 The learned Arbitrator, considering all the issues as referred above, by award dated 4th August, 2008, has partitioned the properties as under:- a) The Claimants are allotted the property at Sr. No.5 i.e. Kamala Cottage, Property No.6 at Juhu, Mumbai. As the market value of this property is fixed at Rs. 89.66 20 crs. and each group is entitled to assets worth Rs. 43,55,00,000/- the Claimants will have to bring into the pool of the family, in the manner set out hereafter, a sum of Rs.46,11,00,000/-. This then will have to