1 IN THE HIGH COURT OF JUDICATURE AT BOMBAY, NAGPUR BENCH, NAGPUR Arbitration Appeal No.1 of 2008 (Smt. Kashibai Jadhaoji Rathod and others v. Smt. Neela Prabhulal Rathod) -=-=-=-=-=-=-=-=-=-=-=-=-=-=-=-=-=-=-=-=-=-=-=-=-=-=- =- Office Notes, Memoranda of Coram, appearances, Court's orders or directions : Court's or Judge's orders and Registrar's orders. =-=-=-=-=-=-=-=-=-=-=-=-=-=-=-=-=-=-=-=-=-=-=-=-=-=- =-= Shri S.V. Manohar, Advocate for Appellants. Shri A.C. Dharmadhikari, Advocate for Respondent. CORAM : R.C. Chavan, J. DATE : 15th April, 2009 1. This appeal and cross objection are directed against rejection of appellants' application bearing Misc. Civil Application No.406 of 2007 by the learned Principal District Judge, Nagpur. 2. The appellants and the respondent belong to one family, which has formed two partnerships running two businesses. The appellants are patners of M/s. Rathod and Co., which is tenant in respect of the premises owned by M/s. J.D. and Sons. The partners of M/s. J.D. and Sons are related to the appellants closely and their interests inter se may not conflict. The respondent is sister-in-law, but her husband is not partner of M/s. J.D. and Sons. There were disputes between the parties, which have been referred to Arbitrator. In the proceedings, the 2 Tribunal passed an order on Exhibit 9 restraining the present appellants from taking any decision adverse to the interest of the respondent without her consent during the pendency of the proceedings till the final award is passed. This order was challenged before the District Judge by filing Misc. Civil Appeal No.132 of 2002. By his order dated 16-12-2002, the learned District Judge diluted the requirement to take consent of the respondent and instead directed that the appellants herein shall not take any policy decision in the business without participation of respondent. 3. The appellants sought to have the rent payable to M/s. J.D. and Sons enhanced from Rs. 15,000/- to Rs.45,000/- per month. They claim to have sent intimation through courier to the respondent 2-1-2004 and 12-1-2004. They contend that since the respondent did not attend the meeting called for discussion on enhancement of rent, eventually the rent was raised to Rs.45,000/- per month and intimation to this effect was sent to the respondent on 27-1-2004. 4. On 4-6-2006, the respondent herein filed two applications before the learned Arbitrator. The first application, which is Exhibit 19, was for directions, whereby the respondent prayed that the Arbitrator may issue appropriate direction to the respondent not to debit enhanced rent to the account of the 3 respondent in future. By the second application of the same date, which is Exhibit 20, before the Arbitrator, the respondent sought appropriate orders towards an interim award in respect of several prayers made in the application. These applications had not been supported by any verification or any affidavit. The appellants filed a common reply to the applications on 17-9-2006. The respondent thereafter filed a counter- affidavit dated 14-10-2006, which was duly sworn. The appellants then filed a sur-rejoinder, which was also duly sworn on 5-11-2006. 5. After hearing the parties, the learned Arbitrator held in the first para of the order that the applications were not verified and also not supported by separate affidavits. Supporting affidavits were separately filed on 14-10-2006 and thereafter the applications were marked as Exhibits 19 and 20. The reply dated 17-9-2006 was not verified or supported by any affidavit and, therefore, the reply could not be taken on file. Since there was no reply, there was no question of counter-affidavit to the reply. He also seems to have also excluded the sur-rejoinder filed on 5-11-2006 to the counter-affidavit. In para 2, the learned Arbitrator held that the net result of the developments is that there is no valid reply of the respondents, i.e. the present appellants, to the applications. He, however, observed that they were 4 entitled to be heard and accordingly they were heard. 6. The learned counsel for the appellants contended that since their contentions were not at all considered by the Arbitrator, the orders passed by the Arbitrator would have to be set aside for violating the basic requirement of audi alteram partem. Relying on a judgment of a Division Bench of this Court in Everready Investments Pvt. Ltd. and others v. Suresh Enterprises and others, reported at 2008(6) Bom.C.R. 318, the learned counsel submitted that this was sufficient ground for entertaining petition under Section 34 of the Act and to set aisde the award. In that case, the learned arbitrator had not even opened the envelopes containing statement of defence. The arbitrator had not even disclosed reasons for not entertaining the statements. Such is not the present case. First, arbitrator has given reasons for not considering replies to applications Exhibits 19 and 20. Secondly, as the discussion to follow would show that there is no 'award' and so there is no question of invoking Section 34. As regards the technical objections raised by the Arbitrator for excluding the replies, the learned counsel for the appellants placed reliance on the judgment of this Court in Abdul Aval @ Chakuwalla v. Sayed Mohamed Ali Usmanalin and others, reported at 2001(2) Mh.L.J. 625, wherein plaint was signed and prosecuted under the signature of 5 plaintiff's brother, and the judgment of the Supreme Court in Uday Shankar Triyar v. Ram Kalewar Prasad Singh and another, reported at (2006) 1 SCC 75. In Uday Shankar, the defect was in authority of person signing memo of appeal which could obviously be rectified. These defects cannot be compared to absence of affirmation to factual contention raised in application and replies. In any case, it is doubtful if this would amount to a party being “otherwise unable to present its case” under Section 34(2)(iii) of the Act. 7. An “interim arbitral award” is referred to in Clause (6) of Section 31 of the Act. The learned counsel for appellants submitted that even an interim award could be challenged under Section 34 of the Act. For this purpose, he relied on a judgment of the Supreme Court in State of Arunachal Pradesh v. Damani Construction Co., reported at (2007) 10 SCC 742. There can be no doubt that an interim award which finally decides a part of the dispute could be challenged as if it was a final award. The following observations in para 6 of the judgment of the Supreme Court would make it clear that not all interim awards would have such a final character. “The submission of learned counsel for the appellant is totally misconceived and it cannot be accepted. A perusal of the interim 6 award passed by the arbitrator clearly shows that it was final to the extent of the claims decided therein ...” This implies that there could be an interim award which is really interim in nature and the question whether an interim award is final to some extent or is merely tentative would have to be decided by referring to the award itself. 8. The learned counsel for the respondent contended that the whole proceedings are misconceived, since there was no order, which could have been objected to under Section 34 of the Arbitration and Conciliation Act before the District Judge. He pointed out that the application Exhibit 19 was for directions. This related to enhancement of the rent without consulting the respondent. The learned Arbitrator has observed in para 9 of his order that the respondent could not be forced to share the enhanced rent and at the same time, he was not inclined to direct that the rent of the premises be reduced as ultimately it may affect the business of the firm. The Arbitral Tribunal, therefore, directed that the accounts of the respondent shall be debited on the basis of the original rent of Rs.15,000/- per month with effect from 1-4-2002 and specifically added as under : 7 “As the proceedings are still pending, this Hon'ble Tribunal is not inclined to direct the respondents to pay the difference to the claimant by way of an interim order. It is also made clear that the order in this connection shall be subject to final award in the proceedings.” It is not clear as to why the learned counsel for the appellants believes this to be an interim award resulting in final adjudication in the matter. First, these observations come on an application for directions and not for any interim award and secondly, the Tribunal has itself made it clear that the order is subject to final award in the proceedings. Clause A of the operative order passed by the Tribunal has to be read in the context of these observations in para 9 of the award passed by the Arbitrator. 9. Exhibit 20 was an application for an interim award and had an interim award been passed, the argument of the appellants as to whether such interim award was to some extent final and if so whether it could be challenged by raising a proper ground under Section 34 of the Arbitration and Conciliation Act, could have been considered. Clause 8 (B) of the operative order passed by the Tribunal reads that the claim in para-1 based on the balance sheet for the period from 1-4-2004 to 31-3-2005 is dismissed as beyond the scope of these proceedings. The respondent had challenged this before the learned District Judge and has even filed a cross- objection in this appeal. In para 10, the learned Arbitrator observed that claim for the period from 1-4-2004 to 31-3-2005 was on the face of it beyond the scope of arbitration proceedings which concerned the statement of claim filed on 5-8-2001. Obviously, the Arbitrator was to settle the claim as on 5-8-2001. Amounts becoming due subsequently could not be part of the proceeding. 10. Claim in para 3-B of application Exhibit 20 pertained to sharing costs of the proceedings. In this regard, the Tribunal observed that only 20% of the expenses of arbitration ought to be debited to the respondent's accounts. However, it was made clear that initial deposits for the expenses of the proceedings shall be subject to the final order on the costs of the proceedings. Thus, this direction, which may be treated as an interim award, is interim in nature and the exact liability of the parties is to be finally decided at the time of conclusion of the arbitration proceedings. There is also a claim about other legal expenses. In this regard, it may be useful 9 to recount that in para 12 of his order, the learned Arbitrator had said in respect of legal charges that it was impossible to decide at that stage whether these charges are pertaining only to the pending arbitration, or to all litigation going on concerning the firm. 11. As to para 2 of Exhibit 20, which related to enhanced rent, the Tribunal held in Clause (C) of the impugned order that no orders were necessary. Thus the Tribunal has not made an interim award in respect of this claim though it could have done so. As regards the claim in respect of para 3-A of the application Exhibit 20, the Tribunal observed that it could not be decided at the interim stage. Thus, there was in fact nothing which could have been challenged before the learned District Judge. 12. In view of this, it cannot be said that the learned District Judge erred in rejecting the appellants' application and the respondent's cross- objection under Section 34 of the Arbitration and Conciliation Act. 13. The appeal as well as cross-objection are, therefore, dismissed. Judge. Pdl. 10 Pdl