Case: Mrs.Pushpa P. Mulchandani &amp; Others Vs. Admiral Radhakrishin Tahiliani (Retd.) &amp; Others

2.The facts that are relevant for deciding this Appeal are that the parties to this Appeal entered into an agreement dated 31st December, 1996. The parties to that agreement described themselves as share holders of James Engineering Co.Ltd. They noted that there are disputes amongst them and they appointed one Mr.J.C. Bhatia as the sole arbitrator. It was stated that the disputes have arisen between the parties to the agreement, who were share holders of Jayems Engineering Co.Ltd. in regard to the matters relating to the aforesaid company as also interpretation of the Will dated 15th May, 1966 left by late Mr.Kimatrai Sanwalsingh Khushalani. It appears that initially the aforesaid company was the proprietary concern of the said Mr.Kimatrai Khushalani. The parties to the arbitration agreement were all related to him and that in the Will of said Mr.Kimatrao Khushalani there was provision made for distribution of his estate as also in relation to the affairs of the company. The parties to the agreement referred all the disputes and differences between them which were set out in schedule to the agreement to Mr.J.C.Bhatia, in whom the parties declared to have full faith and confidence. He was given full power and he was empowered to make an award without the presence of the legal representatives or the legal adviser. The learned arbitrator was given power to device his own procedure. He was also empowered to take services of auditors and chartered accountants etc. as he may find necessary. According to the agreement, he was to make an award within four months from the date of entering upon the reference. He was also not required to give any reason for the award that he would make. It was also provided that the arbitrator can proceed only on the documents and no oral evidence or oral submission will be necessary. In the schedule following twelve disputes were narrated, which were referred to the arbitrator:"SCHEDULEDisputes and differences referred to the Arbitration.1) Did Mr.Kimatrai S. Khushalani by his will dated 15th May, 1966 dispose off the interest of all or any of the partners other than himself in Jayems Engineering Co. and if yes then could he have done so2) Has the testator willed the goodwill of his trading concerns to the Trust3) Can the tenancy of the premises be valued as a part of the Good will of the trading concerns4) Was it open to the Trustees to allow conversation of the Partnership business of Jayems Engineering Company into a Limited Company5) Were the Trustees under an obligation to furnish to the beneficiaries full information on the working of the trust and render accounts6) Can any of the beneficiaries resist the termination of the business of the Company7) Can any of the beneficiaries insist that if the company is to bethen the assets of the Company should be returned to the corpus of the trust8) Can the Companys business be valued distinctly from its Real Estate and/or its tenancy rights9) Can there be a equal Division of the Companys assets and liabilities irrespective of the shareholding10) Can Ensemble division of the Company be purchased by Tarun Tahiliani and/or Mrs.Gayatri Parikh in consideration for the share in the other divisions and if yes what should be the fair value of Ensemble division11) On dissolution and/or winding up of M/s.Jayems Engineering Co.Ltd., including making up of accounts thereof and distribution of assets and liabilities and determining what is due and owing by one or other of the parties hereto to the other of them and how payable12) What should be the distribution as per the Will dated 15th May 1966 of late Mr.Kimatrai S. Khushalani and when should it be payable or distributable3.These disputes were decided by the arbitrator by his award datedIn paragraph (5) of the award the arbitrator stated that in order to decide the issues referred to him he obtained valuation reports in respect of business of Jayems Engineering Co. including its Ensemble division, as an independent business. The learned arbitrator decided twelve issues that were referred to him ases thetestator willed the goodwill of his trading concerns to the Trust.Issuetenancy of the premises can be valued as a part of the Goodwill of the trading concerns.Issueit was open to the Trustees to allow conversation of the partnership business of Jayems Engineering Company into a Limited Company.Issuethe Trustees are under an obligation to furnish to the beneficiaries full information on the working of the Trust and render accounts.Issuenone of the beneficiaries can resist the termination of the business of the Company.Issuenone of the beneficiaries can insist that if the Company is to be would up then the assets of the company should be returned to the Corpus of the Trust.Issue No.8Companys business can be valued distinctly from its Real Estate and/or its tenancy rights.Issue No.9there cannot be an equal Division (distribution) of the Companys assets and liabilities irrespective of the shareholding.IssueI do hereby Award and determine that Tarun Tahiliani and/or Mrs.Gayatri Parikh have the option to purchase Ensemble Division of Jayems Engineering Co.Ltd. in consideration for their respective shares in the other Division at or for the price of Rs.135.00 Lakhs (Rupees One Hundred Thirty Five Lakhs) only plus payment of rent of Rs.1,48,000/(Rupees One lakh Forty Eight Thousand) only per month for the use of the following premises currently occupied by Ensemble in Great Western Building,Shahid Bhagatsingh Marg, Fort, Mumbai 23.(i) On the ground floor 2174 sq.ft.(ii) On the first floor in the front portion 179 st.ft. And 178 sq.ft.(iii)On the first Floor in the rear out house 416 sq.ft.I have come to the conclusion that the total value of the interest of Tarun Tahiliani and Mr.Gayatri Parikh in Jayems Engineering Co.Ltd., is as followsName Shares held Total Value1. Tarun Tahiliani 319 Rs.Mrs.Gayatri Parikh 320 Rs.Tarun Tahiliani and/or Mrs.Gayatri Parikh intent to exercise the said option, they would be required to do so within a period of six months from the date of this Award.Issue No.11I hold that in the event of dissolution and/or winding up of M/s.Jayems Engineering Co.ltd., accounts shall be made so that the realised value of assets as reduced by the liabilities of the Company can be distributed amongst the existing share holders of the Company in the ratio of their respective shareholding after adjusting the balances in their individual accounts in the books of the Company on the relevant date/s.Issue No.12The Trust Property shall be divided amongst the legal heirs surviving at the end of the duration of the trust on the youngest grandchild of late Mr.Kimatrai S. Khushalani attaining the age of 18 years and the distribution shall be according to the provisions of Hindu succession Act, 1956, pertaining to the Intestatepresent Appellants felt aggrieved by that Award. In particular, they were aggrieved by the decision of the arbitration of fixing the valuation of the Ensemble division of the Jayems Engineering Co.Ltd. at Rs.1,35,00,000/and also valuation of the shares of Jayems Engineering Co.Ltd. They were aggrieved by the decision of the arbitrator of giving option to Mr.Tarun Tahiliani and Mrs.Gayatri Parikh to purchase Ensemble division by paying only Rs.They were also aggrieved by the decision that the valuation of the shares of Mr.Tarun Tahiliani and Mrs.Gayatri Parikh was fixed at approximately Rs.94 lakh and Rs.95 lakh respectively. The award was challenged by the Appellants by filing a petition under Section 34 of the ArbitrationConciliation Act, 1996 (hereinafter referred to as the Act) on various grounds.

Reasoning: 12.From the rival submissions, it is clear that it is an admitted position that the copies of the valuation reports were not supplied to the Appellants during the pendency of the arbitration proceedings. They were also not supplied to the Appellants during the pendency of the proceedings before the learned single Judge. It is also an admitted position that the principal award made by the learned arbitrator is based on the valuation reports obtained by the learned arbitrator. Perusal of the award shows that in paragraph (5) of the award the learned arbitrator observed thus:"5. I state that to decide the issues referred to me, I have obtained valuation reports in respect of (i) the business of Jayems Engineering Co.Ltd. (including its Ensemble Division) and its interest in immovable properties by way of tenancies and (ii) of Ensemble Division as an Independent business."13.Perusal of the above quoted paragraph makes it clear that for deciding the issues referred to the arbitrator, he obtained valuation reports in respect of Jayems Engineering Co. including its Ensemble division as also in relation to the interest of that company in immoveable properties by way of tenancies and he also obtained a valuation report of the Ensemble division of the Jayems Engineering Co. Ltd. as an independent business. Perusal of answers given to Dispute No.10 referred to the arbitrator shows that it is only on the basis of the valuation reports of the Ensemble division as an independent Unit that the learned Arbitrator has held that Mr.Tarun Tahiliani and Mrs.Gayatri Parikh have to pay an amount at Rs.1,35,00,000/in order to become owners of Ensemble division and that except this valuation report, there is no other reason for fixing the amount at Rs.1,35,00,000/payable by the above said two persons as the value of the Ensemble division. By the award the learned arbitrator has held that the value of the shares held by Mr.Tarun Tahiliani and Mrs.Gayatri Parikh together in Jayems Engineering Co. is in excess of Rs.2 crore only on the basis of the valuation reports obtained by the learned arbitrator. The result is for becoming the owners of the Ensemble division of the company, the above said two persons do not have to pay anything to the company, on the contrary, they will be entitled to receive an amount in excess of Rs.60 lakh from the company towards the balance value of their shares in Jayems Engineering Co.Ltd. It is, thus, clear that valuation reports obtained by the arbitrator are not only relevant and material for the purpose of the award that is made by the learned arbitrator, but the valuation reports are the very foundation of theof the above quoted paragraphs from the judgment of the Supreme Court makes it clear that the Supreme Court calls the procedure laid down by Section 24 of the Act as mandatory procedure. In our opinion, one more aspect is required to be considered at this juncture. The Supreme Court has considered the question as to whether the observance of the principles of natural justice is mandatory and what is the consequence ofof those principles, in its judgment in the case of Nawabkhan Abbaskhan vs. State of Gujarat, AIR 1974 SC 1471  . The Supreme Court has held that when principles of natural justice are incorporated in the statute, compliance with this requirement becomes mandatory and an action taken in violation of those provisions is void. In our opinion, in view of this law laid down by the Supreme Court, the observations of the learned single Judge quoted above that because Section 24(3) incorporates only a facet of principles of natural justice and therefore, it is open to the parties to contract themselves out of that provision cannot be called legallyobserved above, the Supreme Court in its judgment in the case of Saw Pipes (supra) has held that Section 24 incorporates mandatory procedural requirement. The general rule is thatof a mandatory requirement results in nullification of the act. The requirement which has been held to be mandatory by the Supreme Court is a procedural requirement. The settled rule is that while consideringwith the procedural requirement, it has to be kept in view that such a requirement is designed to facilitate the justice and further its end. The prejudice which would be caused to the parties because ofof that mandatory requirement incorporated in3 of Section 24 cannot be over stated. The prejudice is obvious. In our opinion, therefore, as observed above, merely by the arbitration agreement conferring summary power on the arbitrator and by absolving him of the necessity of giving the reasons in his award, it cannot be said that the Appellants had waived their right under Section 24(3) of the Act.18.The settled law is that, generally, when the statute incorporates a requirement and also provides that an act done without complying that requirement would be invalid, then the requirement can be taken to be mandatory. If one looks at the provision of the Act, specially Section 34(2)(iii), it becomes clear that if Court finds that, before the arbitrator a party was not able to present his case, then the Court can set aside the award. Thus, in case an arbitrator in breach of the duty cast on him by Section 24(3) of the Act does not furnish copy of a report submitted by expert and bases his award on that report, if the court is satisfied that because ofof the report prejudice is caused to the interest of the Petitioner, the award will liable to be set aside by the Court. It is probably for this reason that the Supreme Court has said that the requirement contained in Section 24(3) is a mandatory procedural requirement. Generally when a statutory requirement is mandatory though it may be procedural, inference of waiver of that requirement by a party cannot be drawn easily. So far as the subject of waiver of the rights of the parties is concerned, it is Section 4 of the Act which makes elaborate provision. Section 4 reads asWaiver of right to object.A party who knowsany provision of this Part from which the parties may derogate, or(b) any requirement under the arbitration agreement, has not been complied with and yet proceeds with the arbitration without stating his objection to suchwithout undue delay or, if a time limit is provided for stating that objection, within that period of time, shall be deemed to have waived his right to so object."An analysis of the above quoted provision shows that so far as the provisions of the Act are concerned, it is only those provisions which the Act permits the parties to derogate can be waived. In other words, those provisions of the Act which the Act does not permit the parties to derogate cannot be waived. Perusal of various provisions contained in Part I of the Act shows that there are many provisions which the Act permits the parties to derogate and there are many provisions from which the parties can not derogate. For example, if one considers the period during which arbitration is pending, then as per the provision of the Act interim relief can be given by the Court under Section 9 of the Act and by the Arbitrator under Section 17. The parties can not by agreement exclude the jurisdiction of the Court under Section 9, whereas the parties can do so in relation to the jurisdiction of the arbitrator under Section 17. A comparison of the provision of1 of Section 24with the provisions of(2) and (3) of that Section shows that the provision of(1) are derogable, whereas provisions of(3) are not so derogable. Perusal of the provisions of Section 4 further shows that an inference of waiver of a right can be drawn because of failure of a party to raise an objection at appropriate stage. In any case, while rejecting the argument, that the Appellants were unable to present their case because of the failure of the arbitrator to supply copy of the valuation report, on the ground that the Appellants had waived their right to receive the copies of the valuation reports consideration of the provisions of Section 4 of the Act was necessary. Perusal of the order of the learned single Judge shows that finding about waiver of right under Section 24(3) of the Act by the Petitioner has been recorded without application of mind to the provisions of Section 4 of the Act. Therefore, in our opinion, the order of the learned single Judge is liable to be set aside.19.So far as submissions made on behalf of the Respondents relying on the judgment of the Supreme Court in the case of Narayan Lohias, referred to above, that the provisions of Section 24(3) is capable of being waived is concerned, firstly we find that merely by conferring summary powers on the arbitrator absolving him from responsibility of giving reasons and even personal hearing, the Appellants cannot be said to have waived their right to receive the copies of the valuation reports obtained by the Arbitrator. Perusal of the judgment of the Supreme Court in Narayan Lohias case shows that the Supreme Court has held that the award made by the arbitral tribunal consisting of two members, though contrary to the provisions of Section 10 of the Arbitration Act, cannot be set aside because an objection to the jurisdiction of the arbitral tribunal was not raised as required by the provisions of Section 16 of the Act, and the Supreme Court relying on the provisions of Section 4Section 16 of the Act has held that an objection to the jurisdiction of the tribunal is deemed to have been waived by the parties. In so far as provisions of Section 24(3) are concerned, if the arbitrator relies on an expert report or other documents in his award, without supplyingf to the parties, the parties will come to know of it only when they receive the award. There is no provision in the Act, whichthe parties toraise an objection to theof an expert report before the arbitrator, after the award is made. The fact that expert opinion has been relied on would come to the knowledge of the parties only after a copy of the award is received and by the time the partypy of the award, in view of the provisions of Section 32 the mandate of the arbitrator would already be terminated. In our opinion, therefore, the submissions made on behalf of the Respondents, based on the judgment of the Supreme Court in Narayan Lohias case have no substance.20.Perusal of the judgment of the learned single Judge shows that in paragraph 54 the learned single Judge has observed that though the grievance is made by the Appellants that the copies of the valuation reports were not given to them they have not challenged the valuation report, and therefore, according to her there is no substance in the submission made on behalf of the Appellants in relation toof copies of the valuation reports. In our opinion, these observations suffers fromof mind. While making those observations, the learned single Judge forgot that when the proceedings were pending before her, the Appellants did not have the copies of the valuation report and therefore, in the absence of being supplied copies of the valuation report, they could not have challenged the valuation given in the valuationhaving heard the learned Counsels for both sides and after having gone through the record, we find that the view that has been taken by the learned single Judge on this aspect is a possible view and therefore, in our opinion, no exception can be taken to the finding recorded by the learned single Judge in thisof the record, however, shows that role of the said Harish Melwani was that he was second holder in relation to certain shares held by his wife. By the award it is not contemplated that he ceases to hold any shares or that his shares are transferred and consequence of the award is that part of the property of the company gets transferred. Mr.Melwani being the second holder of the shares, his interest cannot be said to be adversely affected by any order that may have been made by the learned single Judge. Considering the status of Mr.Melwani, at the best he can be called as a proper party, but by no stretch of imagination it cannot be said that he is a necessary party. Therefore, in our opinion, petition did not suffer from.It is, thus, clear that if the Court finds that the award is vitiated because of violation of principles of natural justice, or such other reasons which cannot be called as "adjudication" on merits, the Court can set aside the award and if the award is set aside for such reasons, it is open tothe parties toinvoke the arbitration clause again and initiate arbitration proceeding. In our opinion, in this regard reference can be made to the provisions of4 of Section 43. They read asWhere the Court orders that an arbitral award be set aside, the period between the commencement of the arbitration and the date of the order of the Court shall be excluded in computing the time prescribed by the Limitation Act, 1963 (36 of 1963), for the commencement of the proceedings (including arbitration) with respect to the dispute so submitted.""When the award is set aside for the reasons other than merits, then it is open tothe parties tothe arbitration agreement, if arbitration agreement survives, to invoke the arbitration agreement and to have the matter referred to arbitration. In othery can adopt other remedy that may be available to them and in that situation, either for adopting any other remedy or in initiating arbitration, the period spent during the earlier arbitration is liable to be excluded while computing the period of limitation. In our opinion, the decision of various courts either on Arbitration Act, 1940 or the Acts which were in the field before that, while considering whether the Court has the power to modify the award in a petition filed under Section 34 cannot be considered because under those enactments power was positively conferred on the court to modify the award. It is further to be seen here that Arbitration Act, 1996 has repealed the Arbitration Act, 1940. Arbitration Act 1940 had a specific power conferred on the court to modify the award. While enacting 1996 Act, the Parliament has chosen not enact that provision."In our opinion, the intention of the Legislature, therefore, was clear not to confer on the court power to modify the award. It is now well settled that scheme of Arbitration Act, 1996 is clear departure from the scheme of 1940 Act. In 1940 Act, power was conferred on the court itself to modify the award. In 1996 Act, as observed above, the scheme is that the power is conferred on the court to modify the award only in one situation found in Clause (iv) of Section 34(2), and in all other situations the court, if an application is made by the party, has to follow the course of action contemplated by4 of Section 34 or in the absence of any application set aside the award and leavethe parties totheir own remedy. In our opinion, one more principle has to be taken into consider. The court before 1996 Act came into force, under the Arbitration Act had power to modify an award. While framing 1996, Act, the Legislature was conscious of the power of the court under 1940 Act to modify the award. While enacting 1996 Act, the Legislature has chosen to confer power on the court to modify the award only in one contingency found in Clause (iv) of Section 34(2), and therefore, in our opinion, it will have to be held that the Legislature has denied power to the court to modify the award in all otherArbitration Action 1940 and the Arbitration Act, 1996 are two legislations enacted by the same Legislature on the same subject. Therefore, the use of different language in the later statute as was used in the earlier statute on the same subject is suggestive of the intention of the Legislature that the language so used in the later statute is used in the different sense than in the earlier one. Change of language in the later statute on the same subject is suggestive that the change was deliberately made. Brett, J. in Dickerson v. Fletcher, (1873) LR 9 CP 1 has observed thus:"Where two statutes dealing with the sameuse different language, it is an acknowledged rule of construction that one may be looked at as a guide to the construction of the other. If one uses distinct language, imposing a penalty under certain circumstances and other does not, it is always an argument that the Legislature did not intend to impose a penalty in the later, for where they did so intend they plainly said so."Similarly, it was stated by Cockburn, C.J. in R. V. Price, (1871) LR 6 QB 411 that,"When the Legislature, in legislating in pari materia and substituting certain provisions in that Act for those which existed in the earlier statute, has entirely changed the language of the enactment, it must be taken to have done so with some intention and motive."In relation to consideration of question of construction to be placed on the amending Act in its judgment in the case D.R. FraserCo. Ltd. vs. Minister of National Revenue, AIR 1949 Privy Council 120, it has been observed,"When an amending Act alters the language of the principal statute, the alteration must be taken to have been made deliberately."It is, thus, clear while considering the decision based on the provisions of 1940 Arbitration Act, the change in the language adopted by the Legislature while enacting 1996 Act has to be taken into consideration. The schemes of the 1940 Act and the 1996 Act are totally different and therefore, it would be hazardous to base interpretation of the provisions of 1996 Act on the judgments rendered by the court under 1940 Act. Placing of such a construction would result in denying efficacy to the changes that have been deliberately made by the Legislature while enacting 1996 Act.28.It is further to be seen here that though the learned Counsel appearing for the Respondents urged before us that only a part of the award should be set aside, before us no submissions were made to show how and in what manner the valid portion of the award can be segregated from the invalid portion and how the portion which remains, would still be valid and executable award.29.Taking overall view of the matter, therefore, in our opinion, the award and the order of the learned single Judge are vitiated and are liable to be set aside.