:1: IN IN IN THE HIGH COURT OF JUDICATURE AT BOMBAY THE HIGH COURT OF JUDICATURE AT BOMBAY THE HIGH COURT OF JUDICATURE AT BOMBAY ORDINARY ORDINARY ORDINARY ORIGINAL CIVIL JURISDICTION ORIGINAL CIVIL JURISDICTION ORIGINAL CIVIL JURISDICTION ARBITRATION PETITION NO. 455 OF 2006 ARBITRATION PETITION NO. 93 OF 2006 ARBITRATION PETITION NO. 311 OF 2007 SushilKumar Gupta ....Petitioner. Versus VinodKumar Gupta & Ors. ....Respondents. ------- Mr. Arif Bookwala, Sr.Adv. with Ashwin Ankhad i/by. Ashwin Ankhad Adv. for the petitioner in Arb.Petn No.93 of 2007 and Arb.Petn No.455 of 2006. Mr.Rohit Kapadia, Sr.Adv. with Mr.P.N. Mody and Riyaz Chhagla i/by. Thakordas and Madgaonkar for respondent nos.1 to 4. Mr.N.C.Dalal for respondent no.5. Mr.S.J. Purohit for respondent no.10. Mr.Sanskar Marathe for respondent no.9. CORAM: S.C.DHARMADHIKARI, J. DATED: 20TH DECEMBER, 2007. JUDGMENT JUDGMENT JUDGMENT : : : 1. This Arbitration Petition under Section 34 of the Arbitration and Conciliation Act, 1996 challenges the Award made by the Learned Sole Arbitrator on 24.4.2006. The Award is rendered in a dispute between the Petitioner and First Respondent who are the real brothers. The rest of the Respondents are their mother and sisters, the private limited companies and firms, which are closely family held units. Thus, the dispute :2: is between the family members and the Award purports to put an end to them. 2. Mahavir Prasad Gupta, father of the Petitioner and Respondent No.1 was a self made man. The said Mahavir Prasad came to Bombay and set up various business. He was a self made man who shifted from a small place in the state of Haryana to Mumbai in 1950. Initially he started working as an employee with his cousins and thereafter established extensive business of his own. Subsequently his two brothers B.P. Gupta and Kishen Chand Gupta joined him. They carried out the business jointly for some time. Mahavir Prasad married Shantidevi in 1946. He had two sons and two daughters from this marriage. Petitioner and Respondent Nos. 1 are the sons and Respondents Nos.10 and 11 are the daughters. Their mother Shantidevi is Respondent No.5. The daughters are married. Petitioner married Anjana (Respondent No.6) and they have three children. The First Respondent married Respondent no.2 and they have two sons. The Petitioner joined the father’s business in 1975 followed by First Respondent who joined in 1977. :3: 3. In 1986, Mahavir Prasad and his two brothers entered into an arrangement whereby the share of Mahavir Prasad was determined as 45% and that of his two brothers at 30% and 25%. The arrangement between them need not be referred to in detail. In 1976 Mahavir Prasad’s health started deteriorating. He noticed that his two sons Sushil and Vinod (hereinafter referred to as ‘SKG’ and ‘VKG’) had several differences. Mahavir Prasad appointed his younger brother Kishen Chand Gupta to suggest distribution of properties. The properties of Mahavir Prasad at the relevant time included residential premises at Laxmi Vilas, NapeanSea Road and a Bungalow at Shakti Nagar, New Delhi. The commercial premises included Office at Mittal Towers, Nariman Point and a plot of land at Bhandup, Warehouse at Sitaram Mills Compound, and also a warehouse at Byculla, Land/Godown at Vadgadi, Land at Karamboli and other places. They had several business interests after the sons joined the father. 4. Due to the differences between SKG and VKG the business activities were adversely affected. In such :4: circumstances, it was decided to commence the process of distribution and a valuation was carried out as on 23.2.1997. It is contended that as per the wishes of Mahavir Prasad Gupta, SKG would have 51% of the Assets while VKG would have 49% It appears that SKG claimed one percent more on the footing that he joined the business two years prior to VKG. It is not necessary to make any detailed reference to the attempts made by the uncle and other close relatives to put an end to the differences between SKG and VKG. However, it is of some relevance to note that on 24.4.1997 the document styled as "Award" was made by Mahavir Prasad Gupta. He subsequently expired on 27.7.1997. The said Mahavir Prasad would now be referred to as ‘the father’. 5. The document prepared by the father is dated 24.4.1997 and reads thus : "I Mahabir Prasad Gupta hereby award to my sons Sushil K. Gupta and Vinod K. Gupta as follows :- The following distribution/division of fixed asset were made and accepted. PROPERTIES PROPERTIES PROPERTIES :- :- :- ------------------------------------------------------ Sushil Sushil Sushil Gupta Gupta Gupta Vinod Vinod Vinod Gupta Gupta Gupta 51% share Bhandup 49% share Bhandup Land :5: 51% loans 49% of loans 51% of All Receivables 49% of all receivables Flat at Sumangal Flat at Laxmi Vilas Unit # 161 Mittal Unit # 162 Mittal Land at Mulund SVA Ltd. 2 flats at Raag Mangla Capital Godown at Byculla Vadgadi Manish Kalamboli Ragnigandha Badli Panvel Mazgaon Gurgaon Shops Radhepuri Diamond Ghusari 51% of Ery Sterate 49% of Ery Sterate 51% of cylinder stocks 49% of Cylinder stocks 51% of Chlro base 49% of Chlro base stocks stocks 51% of POY and HCL thoyo 49% of POY and HCL thoyo goods and stocks 112 lacs Goods and stocks 39.35 per annexure 1 lacs per annexure 1 VKG to pay SKG 13 lacs by 15 June 1997 and the balance of 15.3 lacs by 15 July 1997 without demur in default VKG will pay 2 percent p.m. :6: 6. It is material to note that the father kept some properties to himself. However, he died without leaving a will. 7. Upon death of the father the disputes between the two brothers increased and this time they fought over implementation of the arrangement which has been made by the father. Although the relatives were requested to intervene in the disputes and differences between the two brothers they withdrew from the reference. The parties were executed a reference on 18.11.2000 and nominated Mr. Justice M.L.Pendse, Retired Chief Justice of Karanataka High Court and a Learned Judge of this Court as sole Arbitrator. Initially the brothers were represented by Advocates but later on they appeared in person. The sole Arbitrator has extensively referred to the attempts made by him to resolve the disputes amicably. During the course of the reference, these attempts did not yield the desired results and therefore the points for determination were settled on 1.2.2002. A notice :7: was given to the sisters and it appears that the two brothers took a reasonable stand and insofaras the claim of the sisters and mother was concerned they were put an end to. Sister Pushpa Aarya Gupta stated in writing that she is giving up her claim in the estate of the father. The Memorandum of Understanding was executed between the parties by which the claims of the mother and other sisters were settled. This MOU is enclosed and marked as Annexure 1 to the Award. 8. Thereafter, oral evidence was recorded of the witness examined by VKG. The old mother’s claim was also settled during the course of recording the evidence. The claims of the mother have been put an end by a Deed of Settlement dated March 4, 2000. An Interim Award was made in terms of this Deed of Settlement on 9.6.2004 (Annexure-2) to the Award. The mother was given the property at Shakti Nagar, Flat in Phoenix Building, Mumbai and two Flats in Vrindavan Building, Malad as her exclusive and absolute property. In addition a sum of Rs.5 crores were to be paid to the mother from the estate of the father. The Memorandum of Settlement between the mother and the others has :8: been countersigned by SKG and VKG. The mother gave up her right, title and interest in the properties which are more particularly described in the terms of Settlement. 9. The Award proceeds on the basis that VKG asserted that the father’s Award is final and he is entitled to whatever has been awarded to him under that document. He further claimed that MPG’s estate should be distributed equally between SKG and VKG. He further claimed that the liabilities which were not listed in the Award should be shared equally by the two brothers. The Award proceeds to state that SKG’s claims are that the MPG’s estate should go to Shantidevi and the Award of the father did not specify the list of Assets and Liabilities. Even the mother Shantidevi stated that the Award is not valid and binding on any of the partners. She stated that the estate of MPG should be distributed in accordance with Section 14 of the Hindu Succession Act. It is not necessary to refer to these aspects when independent settlement has been arrived at between himself and the sisters. :9: 10. In the Award in Para 8 this is what is stated by the Learned sole Arbitrator. "8. In large number of meetings held with Sushil and Vinod, it was suggested that as both of them are not disputing the disbursement made by the ‘Award’, it would be in the interest of both the brothers to work out the directions in the ‘Award’ in respect of immovable property. Both the brothers took a very practical view and agreed to implement the directions given in the ‘Award’ in respect of the immovable property." 11. From paragraphs 9 to 21, the Learned sole Arbitrator refers to the several properties which would go to the share of the respective brothers and in paragraph 22 he refers to the suggestion given to the brothers to approach a Chartered Accountant who shall submit a report with regard to the Shares and Receivables, Stock Lists and Liabilities. Both partners agreed to this course of action but differed on the name of the C.A. On 15.3.2005, M/s. Haribhakti and Co. C.A. were appointed by the Learned sole Arbitrator with the following directions. ". Ultimately I suggested that the Parties should approach the Chartered Accountant and before whom the issue as regards shares and receivables, stocks lists and liabilities with reference to accounts and incidental documents should be raised. Sushil and Vinod agreed to :10: the suggestion but could not agree to the name of the Chartered Accountant and ultimately on March 15, 2005 Messers Haribhakti and Company, well known Chartered Accountants were appointed with the following directions. (a) Both the parties should file their claim in respect of the amounts before the Chartered Accountants on or before July 11, 2005 and furnish copy to the other side. (b) Both the parties to file Reply on or before July 5, 2005. (c) The Chartered Accountants to hear the Parties on July 21, 22 and 23, 2005. If required, the Chartered Accountants to seek further documents prior to hearing the parties. (d) The Chartered Accountants to make report before August 13, 200e5 in writing. The Chartered Accountants were requested to take accounts for two accounting periods namely (1) September 1, 1996 to May 31, 1997 and (b) From June 1st 1997 to end of July 2005. The accounts were to be determined in respect of following: (i) Stocks. (ii) Entry. (iii) Loans and advances. (iv) Shares. (v) Bank balances. (vi) Liabilities prior to May 1997. (vii) Assets. (viii) All accounts. :11: 12. The Learned sole Arbitrator refers to the directions given to the parties with regard to production of material before the C.A. The direction issued was that the C.A. shall proceed to make a report on the basis of the material produced by either of the parties. The C.A. may examine the material and seek an explanation. Even if the parties fail to appear, and within the stipulated time the report of the C.A. must be submitted. 13. Accordingly parties appeared before the C.A. and they submitted a report on 27.8.2005. 14. On the basis of this report and various documents which were produced and oral submissions made, the Learned sole Arbitrator made the following Award. 15. Since the Award is challenged by SKG to the extent of the properties which were in dispute with VKG, it would be convenient to refer to only what has been referred to in depth. :12: SUSHIL KUMAR GUPTA : (L) Sushil Kumar is entitled to Bhandup property after handing over the area of 7594 sq.meters to Vinod Gupta. The area of 7594 sq.meters will include CTS No.782. (M) The Flat at Sumangla is allotted to the share of Sushil. As and when the stamp duty is required to be paid in respect of this flat, Vinod should reimburse the amount only to the extent of 49%. (N) Unit No.161 in Mahindra Towers, Mumbai, is exclusively allotted to the share of Sushil. (O) The godown at Byculla is tenanted in the name of Gourisons and which has been exclusively allotted to Sushil. The rights in this property belong to Sushil. (P) The property bearing CTS No.551/76 at Mulund is allotted exclusively to Sushil. The property is standing in the name of Shantidevi, Vimla Devi and Asharani. Shantidevi should execute proper documents in favour of Sushil and Sushil to secure proper documents from Vimla Devi and Asharani. (Q) The unit in Manish Commercial Centre is allotted to Sushil and the documents in respect of this property are already handed over to Sushil. (R) Two flats in Rajnigandha, Gokuldham at Goregaon are allotted to the share of Sushil. The documents in respect of the share transfers, bills, possession and keys are already handed over to Sushil by Vinod. (S) Two flats at the building Raag at Film City, Goregaon are allotted to Sushil. The agreement of sale in respect of these flats was handed over by Vinod to Sushil along with assignment of documents by Vinod and Ranjana in :13: favour of Sushil. (T) The area covered by Portion I marked on Annexure 9 in respect of Sitaram Mills Compound is allotted to share of Sushil and to be divided by partition wall. (U) The land at Ghusari, Howrah, has been exclusively allotted to Sushil and Vinod has signed a letter of disclaimer in respect of this property. (V) Sushil is entitled to the Diamond as mentioned in the division made by Mahavir and Vinod shall handover that diamond to Sushil and in case of failure Vinod shall pay Rs.35 lakhs to Sushil. (W) Vinod shall pay Rs.7/- Lakhs (Rupees Seven Lakhs) to Sushil in respect of Gurgaon shops which are allotted to the shares of Sushil. In addition Vinod is liable to handover vacant and peaceful possession of these shops to Sushil. (X) Vinod shall pay to Sushil the following three amounts. (1) Rs.85,64,931/- (Rupees Eighty Five Lakhs Sixty Four Thousand nine hundred thirty one only) out of the amounts received by Vinod. (2) Rs. 5,80,000/- (Rs.Five lakhs Eighty Thousand only) being the balance amount awarded during division by Mahavir Prasad. (3) Rs.7/- Lakhs (Rupees Seven Lakhs only) as hereinabove mentioned in respect of Gurgaon shops. (4) Vinod shall pay the amounts along with interest at the rate of 24% per annum from November 18, 2000 till the date of Award in present Reference and thereafter at the rate of 9% per annum till the date of realisation. :14: VINOD KUMAR GUPTA : (Z) Flat at Laxmi Vilas Building is exclusively allotted to Vinod. All papers in respect of this flat including the letter of disclaimer signed by Sushil are already handed over to Vinod. In case any stamp duty is required to be paid in respect of purchase of this Flat, then Sushil shall contribute 51% of the said duty and make payment to Vinod. Sushil will issue necessary letters in respect of this flat in case pending before the Income Tax Authorities. (AA) Unit No.162 in Mittal Towers is allotted to Vinod exclusively. Shantidevi shall transfer her interest in the Unit in favour of Ranjana, wife of Vinod. (BB) The plot of land at Kalamboli is allotted to Vinod exclusively. Shantidevi shall transfer her share in the plot in favour of Ranjana as desired by Vinod. (CC) The area covered by portion II as marked on Annexure 9 in respect of Sitaram Mills property is allotted to the share of Vinod and the same should be divided with portion I allotted to Sushil by putting the boundary wall. The expenses for putting up the boundary wall shall be borne equally by both the brothers. (DD) In respect of monetary claims, arising out of loans, stocks, entry, shares, bank balances etc.Sushil shall pay to Vinod the following amounts. (1) Rs.3,51,31,642/- (Rs.Three crores fifty One lakhs thirty one thousand six hundred forty two only) towards half share in the rent received from Mid Day. :15: (2) Rs.1,82,50,000/- (Rupees One crore Eight Two Lakhs fifty Thousand Only) as share arising out the sale proceeds of Embassy flat. (3) Rs.2,86,340/- (Rs.Two lakhs eighty six thousand three hundred and forty only) being half share in opening Bank Balance. (4) Rs.2,50,000/- (Rs.Two Lakhs fifty thousand only) as HALF share in respect of payments made towards sales tax. (5) Sushil shall pay interest on the abovementioned amounts at the rate of 24% from November 18, 2000 till the date of Award in present Reference and thereafter at the rate of 9% per annum till the date of realization. 39. Before parting with the reasons it must be observed that though several attempts were made to sort out the differences and disputes between the brothers the attempts failed. Though the brothers settled with their two sisters and the mother, it was impossible to put an end to the family disputes as the relations were extremely strained. Let this Award put an end to the family quarrels and let the two brothers who are very efficient in their vocations proceed separately and be happy. 40. In the circumstances, each party to bear their respective costs." 16. It is this Award which is subject matter of challenge. Subsequently parties appeared before the sole Arbitrator who gave certain clarifications on :16: 26.7.2006. That direction is on application made by VKG under Section 33 of the Act on 24.5.2006. Even SKG filed an application on 17.7.2006. By a common order on these applications, the sole Arbitrator issued corrections thereby correcting the typographical errors and disposed off both the applications accordingly by rejecting rest of the prayers. 17. It is this exercise which is subject matter of challenge in the present petition. 18. Mr.Bookwala, Learned Senior Counsel appearing for SKG in support of the Arbitration Petition, submits that, the dispute now is in regard to the following : (a) Rent received in respect of the premises at Sitaram Mills Compound. (b) Consideration received in respect of Embassy Apartment flat. (c) Delivery of diamond. :17: (d) Shops at Gurgaon in the state of Haryana. (e) Receivables. (f) Property at Tikri and the objections to the report of the C.A. 19. During the course of the submissions in rejoinder, Mr.Bookwala also referred to the rent which is recoverable in respect of the Bungalow at Shakti Nagar, New Delhi (50%). 20. The main objection of Mr.Bookwala is that the Award does not put an end to the dispute between the parties at all. The Award is a narration of the disputes and events leading to the same. The Award makes no reference to the pleadings, evidence, points for determination and oral submissions at all. It is the most unusual way of resolving a dispute by arbitration in as much as the Arbitrator is expected to render a decision one way or the other. The Arbitrator cannot put his own version on the dispute referred, adverting to the rival contentions. He submits that :18: the Award made in this manner can never be upheld. He submits that the fundamental aspect for resolving disputes in Arbitration, is that the Arbitrator has to be fair and just. His approach must be such as could be termed fair, just and proper. The Arbitrator may seek assistance of a Chartered Accountant in disputes on accounting matters but he is not expected to abdicate his essential function. Mr.Bookwala criticises the said Award as being unreasonable, unfair and unjust. He submits that the Arbitrator does touch the core issues and try to resolve them at all. In other words, he faults the approach petitioner and submits that the Arbitrator has rendered an Award against him and in favour of VKG. Mr.Bookwala, submits that with regard to the lease and the rent receivable in respect of Sitaram Mills premises, there is hardly any discussion with regard to the rival versions. The Arbitrator could not have issued a direction which does not serve any purpose. Mr.Bookwala, points out, that in so far as the loans and receivables are concerned, no directions are issued. What the Arbitrator has in mind is that SKG must resort to litigation and recover monies due to him. If the claims that are going to the :19: share of SKG concerned, are no longer receivable, then, any direction in regard to the loans and receivables are futile and meaningless. Mr.Bookwala, submits that, in any event, no documents were produced with regard to the loans and receivables. Just a paper direction has been issued. The Learned Arbitrator should have kept the father’s wishes in mind and issued appropriate directions to recover the loans and receivables in proportion, to the heirs of the brothers. If VKG is to recover some amounts, then he should be directed to do so and hand them over to SKG. If there is a shortfall, then, that also must be made good. Nothing of this has been done and therefore this Award is wholly vitiated. With regard to the Embassy Flat, Mr.Bookwala’s submission is that the directions issued are wholly erroneous. 21. He submits that the petition clearly sets out as to why the Award on this count is contrary to the fathers wishes and the basic facts. The report of the C.A. which is accepted by the Arbitrator shows that a sum of Rs.1,13,25,500/- was used for repayment of loans and interest taken from Vijaya Bank for purchasing :20: these premises. No credit has been given by the Arbitrator to the Petitioner in respect of this sum. This sum has to be deducted from either, sums which are payable to VKG or from the sale proceeds of the flat in Embassy Apartments. While Respondent No.1 has been awarded his one-half share in the sale proceeds of this flat, no credit has been given to the Petitioner for discharging the liabilities incurred towards purchasing this flat. Thus there is a patent error committed by the Arbitrator. Mr.Bookwala has pointed out that the Respondent No.1 vide his statement dated 4.8.2005 submitted to the C.A. has given credit to the Petitioner of Rs.1,48,52,500/-. The C.A.’s have voluntarily reduced the said amount to Rs.1,13,21, 500/-. This shows total non application of mind and gross inefficiency. Even the C.A. has taken the sale value on an assumed basis. The sale proceeds were utilised to pay loans, meeting miscellaneous expenses, legal expenses, society maintenance charges, repairs, brokerage on purchase and sale etc. The balance amount was adjusted by the Income-Tax department towards tax liability of the father. It is urged that the statement in this behalf was before the C.A. and the :21: Learned Arbitrator but the same has not been considered by either of them. He has invited my attention to the operative part of this Award in so far as this aspect is concerned and contended that even if there is no dispute that the flat was sold and the amount received was Rs.47 lakhs and the appropriation and adjustment as sought by VKG have not been accepted, yet, the observations in the Award at pages 96 and 101 and the ultimate direction are contrary to each other. In such circumstances, the conclusion drawn by the Arbitrator with regard to the payment made is contrary to the terms of reference. Therefore, the Award be set aside. Mr.Bookwala has also invited my attention to Annexure 3 to the Award and has submitted that the entire working