Tuesday, 17 November 2020

Whether the court can permit amendment of the petition filed U/S 34 of Arbitration Act?

 From these pleadings it can be seen that since filing of the written submissions the respondent nos. 1 and 2 had disputed the agreement dated 17.08.1999 and the stand that they were not aware as to who the Arbitrator was had been specifically taken. As regards the other respondents, they had denied execution of both the agreements. They had also stated that they were not aware as to who the Arbitrator was. In the application filed vide Exhibit 52 seeking to raise the additional ground of challenge, it has been stated that the respondent nos. 1 and 2 got knowledge about the proceedings in S.C.S. No. 844/2003 filed on behalf of the Arbitrator during the pendency of the proceedings under Section 34 of the said Act. There is no specific denial to this aspect in reply filed on behalf of the claimant at Exhibit 56. The only stand taken is that the application contained misleading statement of facts. The learned Principal District Judge while allowing the said application found that the interests of justice required grant of reasonable opportunity to the respondent nos. 1 and 2 to raise that challenge and that it would not change the nature of the proceedings. Heavy reliance has been placed by the learned Senior Advocate on the decision in Hindustan Construction Company Limited (supra) to urge that such a challenge which constitutes a new ground to assail the award of the Arbitrator could not have been permitted to be raised beyond the period of limitation prescribed for challenging the award. In Hindustan Construction Company Ltd. (supra), it was observed that if incorporation of an additional ground by way of amendment in the application under Section 34 of the said Act is held to amount to filing of a fresh application for challenging the award, in all situations it would follow that no amendment in the application for setting aside the award howsoever material or relevant it may be for consideration by the Court could be added nor an existing ground could be amended after expiry of the period of limitation. It was held that this could not have been the intention of the legislature while enacting Section 34 of the said Act. The observations in paragraph 30 of the said case are relevant and the same read as under:-


"30. More so, Section 34(2)(b) enables the Court to set aside the arbitral award if it finds that the subject-matter of the dispute is not capable of settlement by arbitration under the law for the time being in force or the arbitral award is in conflict with the public policy of India. The words in clause (b) "the Court finds that" do enable the Court, where the application under Section 34 has been made within prescribed time to grant leave to amend such application if the very peculiar circumstances of the case so warrant and it is so required in the interest of justice."


11. From these observations it is seen that the hands of the Court hearing proceedings under Section 34 of the said Act are not tied if the Court finds that the circumstances of the case justify the grant of leave to amend the application under Section 34 of the said Act.

IN THE HIGH COURT OF BOMBAY (NAGPUR BENCH)

Arbitration Appeal No. 14/2017

Decided On: 30.08.2019

Ganesh Builders  Vs.  Nagorao and Ors.

Hon'ble Judges/Coram:

A.S. Chandurkar, J.

Citation: MANU/MH/2442/2019,2020(2) MHLJ 720.


1. Admit. Taken up for hearing with the consent of counsel for the parties.


2. This appeal filed under Section 37 of the Arbitration and Conciliation Act, 1996 (for short, 'the said Act') takes exception to the judgment of the learned Principal District Judge, Nagpur in Miscellaneous Civil Application No. 25 of 2006 dated 10.11.2016. By that judgment the application filed under Section 34 of the said Act by the respondent nos. 1 to 5 herein has been allowed and the award dated 13.10.2005 passed by the sole Arbitrator has been set aside.


3. The facts giving rise to the present proceedings are that it is the case of the appellant-claimants that one Motiram was the owner of land admeasuring about 19.20 acres in Khasra Nos. 27/4 and 240/4. After his death his widow-Manjulabai, two sons Nagorao and Baban and three daughters - Chhayabai, Suman and Chandrakala succeeded to that property. The said legal heirs on 01.04.1999 executed an agreement with the claimant so as to sell the aforesaid land @ Rs. 12,50,000/- per acre. After the payment of initial earnest amount of Rs. 2,50,000/-, it is the case of the claimant that it has paid an amount of Rs. 35,00,000/- in all to Nagorao and Baban. Since requisite steps were not being taken by the signatories to the said agreement, a legal notice dated 13.09.2011 came to be issued on behalf of the claimant calling upon the signatories to take necessary steps to complete the transaction. It is the further case that on 17.08.1999 another agreement containing an arbitration clause (Lavad Kararnama) came to be executed appointing Shri C.V. Kale, Advocate as an Arbitrator. The claimant came across a public notice dated 14.05.2002 in various newspapers which indicated that the respondents were intending to deal with the property in question. On 27.11.2003 the claimant issued a letter to the respondents as well as to the sole Arbitrator seeking initiation of the arbitral proceedings. In response to the claim statement as filed, Nagorao and Baban filed written statement admitting the execution of agreement dated 01.04.1999. However it was denied that the subsequent agreement dated 17.08.1999 containing the arbitration clause was executed by them. Receipt of amount of Rs. 20,00,000/- by both the brothers was admitted. Receipt of cash payment of Rs. 15,00,000/- as pleaded by the claimant was disputed. Before the sole Arbitrator the parties led their evidence. After considering the same, the Arbitrator came to the conclusion that the respondents had failed to complete the transaction as agreed on 01.04.1999. They were accordingly directed to receive the balance consideration which the claimant was directed to pay and thereafter execute the sale deed in favour of the claimant. The said award was passed on 13.10.2005. Nagorao and Baban challenged the aforesaid award by filing Miscellaneous Civil Application No. 25/2006. During the pendency of the said proceedings, Baban expired. His legal heirs were brought on record. By the impugned judgment, the learned Principal District Judge came to the conclusion that there existed circumstances that gave rise to justifiable doubts as to the independence and impartiality of the Arbitrator. Since these circumstances which were required to be disclosed to the parties by the Arbitrator were not so disclosed and as there was perversity found in the adjudication by the Arbitrator, the award came to be set aside under Section 12 read with Section 13(5) of the said Act. Being aggrieved the claimant has filed the present appeal.


4. Shri S.P. Dharmadhikari, learned Senior Advocate for the appellant-claimant in support of the appeal made the following submissions:


(a) The learned Principal District Judge erred in setting aside the award under the provisions of Section 12 read with Section 13(5) of the said Act. The reason that was upheld in the proceedings under Section 34 of the said Act for setting aside the award was that Shri S.T. Madnani, Advocate representing the claimant in the arbitral proceedings was the counsel who had represented the Arbitrator in S.C.S. No. 844/2003. That suit in which the Arbitrator was the plaintiff had been filed on 28.10.2003 and it had ended in a compromise on 25.11.2003. It was submitted that the notice invoking the arbitration clause was issued to the respondents on 25.11.2003 and the proceedings before the sole Arbitrator commenced on 10.12.2003. Vakalatnama of Shri S.T. Madnani, Advocate was filed on behalf of the claimant before the Arbitrator in February 2004. It was thus submitted that as the proceedings in S.C.S. No. 844/2003 had come to an end by 25.11.2003 and as the arbitration proceedings were initiated thereafter on 27.11.2003, it would be too far-fetched to hold that as the claimant's counsel was also the counsel for the sole Arbitrator in the suit in which the Arbitrator was the plaintiff, the same would have given rise to justifiable doubts as to the independence or impartiality of the Arbitrator. In that regard, the learned Senior Advocate referred to the provisions of Section 12(1)(b) of the said Act. Placing reliance on the decision in Murlidhar Roongta and others Vs. S. Jagannath Tibrewala and othersMANU/MH/0764/2004 : 2005 (2) Mh.L.J. 285, it was submitted that as the engagement of the claimant's counsel as the counsel for the sole Arbitrator had come to an end before commencement of the arbitration proceedings, the Arbitrator was not expected to make any disclosure of this aspect before commencement of the arbitration proceedings. He also referred to the judgment of learned Single Judge in Saurabh Kalani & Tata Finance Limited and another, MANU/MH/0519/2003 : 2003 (5) Mh.L.J. 217 on the aspect of the duty on the part of the Arbitrator to disclose aspects that could give rise to justifiable doubts with regard to his independence or impartiality. The apprehension in the mind of a party was required to be judged from a healthy, reasonable, and average point of view and not on mere apprehension of any whimsical person. It was submitted that the aforesaid decision of the learned Single Judge was affirmed by the Division Bench in appeal in Saurabh Kalani Vs. Tata Finance Ltd. and anr., MANU/MH/0519/2003 : 2003 (4) Mh.L.J. 810. Thus applying the aforesaid tests as laid down, it was clear that the aspects considered by the learned Principal District Judge for holding the award to be vitiated in view of the provisions of Section 12(1)(b) read with Section 13(5) of the said Act were misconceived.


To buttress the aforesaid contention, the learned Senior Advocate also referred to the fact that the provisions of Section 15 had been amended vide Amendment Act No. 16 of 2015. By virtue of such amendment, the provisions of Schedule V and VII had been inserted which acted as a guide for determining whether circumstances existed that could give rise to justifiable doubts that would affect the impartiality and independence of the Arbitrator. Referring to the entries in Schedule V, it was submitted that the past engagement of an Advocate could not be treated as a circumstance giving rise to justifiable doubts. Emphasis was laid to the use of various expressions in the said Schedule to indicate that such engagement should be existing when the arbitration proceedings had taken place. Previous engagement or rendering of previous services was not relevant and the same was excluded from the purview of Section 12(1)(b) of the said Act. In the light of the admitted position that the claimant's Advocate who had represented the Arbitrator earlier in S.C.S. No. 844/2003 which was an earlier engagement as the proceedings in that suit had come to an end on 25.11.2003, there was no reason to have any justifiable doubt as to the independence or impartiality on the part of the Arbitrator especially as the arbitration proceedings had commenced subsequently. It was urged that the circumstances relied upon by the learned Principal District Judge were not even akin to the circumstances enumerated in Schedule V of the said Act. In that regard reliance was placed on the decisions in Government of Haryana PWD Haryana (B and R) Branch Vs. G.F. Toll Road Private Limited and others, MANU/SC/0003/2019 : (2019) 3 SCC 505, and Bharat Broadband Network Limited Vs. United Telecoms Limited, MANU/SC/0543/2019 : (2019) 5 SCC 755. Thus in absence of any ground under the provisions of Section 12(1)(b) of the said Act being made out and as the impugned judgment was principally based on that aspect, it was liable to be set aside.


b) The respondent nos. 1 to 5 had not challenged the award on the ground that the proceedings were hit by the provisions of Section 12(1)(b) of the said Act. The grounds raised in the application filed under Section 34 of the said Act did not indicate that such challenge was raised by them nor was any challenge based on Section 13 of the said Act raised earlier. It was only by moving an amendment application at Exhibit 52 on 12.07.2013 that the respondent nos. 1 to 5 sought to raise a specific challenge in that regard. The application for amendment came to be allowed on 22.02.2016. In the light of the fact that the award was dated 13.10.2005 and the application under Section 34 of the said Act had been filed immediately thereafter, the challenge as raised under Section 12(1) (b) of the said Act was highly belated and beyond the period of limitation. Such a challenge raised after considerable delay and beyond the period of limitation should not have been permitted to be raised by allowing the amendment application. Placing reliance on the decision in State of Maharashtra Vs. Hindustan Construction Company Limited, MANU/SC/0215/2010 : (2010) 4 SCC 518, it was submitted that since a new ground was sought to be urged by referring to the provisions of Section 12(1)(b) of the said Act beyond the period of limitation, the learned Principal District Judge erred in allowing that amendment. It was open for the claimant which was aggrieved by the interlocutory order passed below Exhibit 52 to raise a challenge to that order in the present appeal. The said ground therefore could not have been permitted to be raised while deciding the proceedings under Section 34 of the said Act. If that ground was excluded from consideration, the impugned order would automatically fall to the ground. He also referred to the decision in Satyadhyan Ghosal and others Vs. Deorajin Debi (Smt.) and another, MANU/SC/0295/1960 : AIR 1960 SC 941 in that regard.


(c) The finding recorded by the learned Principal District Judge that the award suffered from perversity had been arrived at without proper consideration of the material on record and without assigning any reasons for such a conclusion. By referring to the observations in paragraph 22 of the impugned order, it was submitted that the conclusions recorded therein were not preceded by any consideration of relevant material nor were there any reasons for arriving at such conclusion. The Arbitrator having considered all relevant aspects and having found that the claimant was entitled for an award, the same could not have been set aside merely by observing that the award suffered from perversity. It was necessary for the learned Principal District Judge to have assigned reasons for the basis of the conclusion recorded that the award suffered from perversity. On this count also, the impugned judgment was liable to be set aside. The learned Senior Advocate referred to the evidence that was led before the Arbitrator to substantiate his contentions in that regard.


The finding recorded in the impugned judgment that there was no material on record to hold that the legal heirs of Motiram had one sixth share each in the property in question was incorrect. The said finding had been recorded by the Arbitrator after referring to the evidence on record and especially the statement made by Chandrakalabai in her deposition that Motiram expired in the year 1974 and that all the parties thereafter had one sixth share in the properties. Similarly, the finding recorded that the Arbitrator did not give a fair opportunity to Manjulabai to lead evidence was contrary to the record. On 03.06.2005, time had been sought by Manjulabai's counsel which was granted. On the next date which was 06.06.2005 again time was sought on her behalf though said date was fixed at the instance of Manjulabai. It therefore could not be said that fair opportunity was not given to Manjulabai to lead evidence. The observations as made in paragraph 22(viii) of the impugned judgment were also factually incorrect as the report of handwriting expert at Exhibit 135/1 was dated 11.02.2004.


It was thus submitted that the impugned judgment was liable to be set aside on all these counts.


5. Shri A.B. Patil, learned counsel for the respondent nos. 1 to 5 namely Nagorao and legal heirs of Baban supported the impugned judgment. In reply, it was submitted as under:


(a) The circumstances on record as to Shri S.T. Madnani, Advocate representing the Arbitrator as his counsel in S.C.S. No. 844/2003 and the very same counsel representing the claimant shortly thereafter before the Arbitrator did give rise to justifiable doubts as to the independence or impartiality of the Arbitrator. According to him, the execution of the agreement dated 17.08.1999 had been specifically denied by Nagorao and Baban before the Arbitrator. In fact, it was the specific pleading of the said parties that they were not aware of the Arbitrator Shri C.V. Kale, Advocate. Since the proceedings in S.C.S. No. 844/2003 came to an end on 25.11.2003 and the arbitration notice was issued shortly thereafter, justifiable doubts would arise in the mind of any prudent person as regards the independence and impartiality of the Arbitrator. On the aspect of bias on the part of the Arbitrator, it was submitted that the same was not a mere apprehension and that there was a real danger of bias which had vitiated the award in question. In that regard, he relied upon the decisions in State of Punjab Vs. V.K. Khanna and others, MANU/SC/0744/2000 : (2001) 2 SCC 330 and Narinder Singh Arora Vs. State (Government of NCT of Delhi) and others, MANU/SC/1478/2011 : (2012) 1 SCC 561.


It was then submitted that the provisions of Section 12(1) of the said Act as amended in the year 2015 did not have retrospective operation. The amended provisions would not be applicable to the arbitration proceedings that had commenced and concluded much prior to the Amendment Act coming into force. In that regard, he referred to the decision in S.P. Singla Constructions Private Limited Vs. State of Himachal Pradesh and Another MANU/SC/1416/2018 : (2019) 2 SCC 488 and submitted that the provisions prior to the amendment of Section 12 by Amendment Act No. 16 of 2015 were required to be taken into consideration.


(b) It was submitted that before the Arbitrator it was the specific ground raised by Nagorao and Baban that they were not aware about the Arbitrator in question. In fact the execution of agreement dated 17.08.1999 which was stated to include the arbitration clause itself had been denied. Since it was the case of the said parties since beginning that the agreement dated 17.08.1999 was a bogus document that plea was further sought to be substantiated by amending the pleadings so as to amplify that challenge. By permitting paragraph 10 A to be added in the written statement, the learned Principal District Judge merely permitted Nagorao and Baban to substantiate their contentions as to the illegality of the arbitration agreement. Moreover, the said facts having come to the knowledge of the respondent nos. 1 and 5 during pendency of the proceedings the same were rightly permitted to be brought on record. No error was committed by permitting such amendment. It was further submitted that the observations in paragraphs 29-30 of the decision in Hindustan Construction Company Ltd. (supra) supported the stand taken by the respondent nos. 1 to 5.


(c) It was then submitted that it was rightly found by the learned Principal District Judge that the award suffered from perversity. It could not be said that the learned Principal District Judge had merely recorded conclusions without recording any findings. The judgment under challenge was to be read as a whole and merely by referring to the conclusions recorded in para 22 thereof it could not be said that the conclusions were not preceded by any findings. On the aspect of absence of readiness and willingness, the learned counsel referred to the agreement dated 01.04.1999 and submitted that there was total lack of readiness and willingness on the part of the claimant. Only an amount of Rs. 20,00,000/- was received by Nagorao and Baban. Even if it was assumed that further amount of Rs. 15,00,000/- was paid in cash, the total amount paid according to the claimant was only Rs. 35,00,000/- which indicated that the claimant itself had not complied with the terms of the agreement. Significantly, in the legal notice dated 13.09.2001 the consideration as alleged to be paid by the claimant till that date had not been disclosed. This in fact supported the stand taken by the respondent nos. 1 to 5 that it was only an amount of Rs. 20,00,000/- that was paid. Without considering the pleadings and evidence on the aspect of readiness and willingness, the Arbitrator erred in holding that the claimant was ready and willing to perform its part of the agreement. This itself indicated the perversity in the award. In that regard, the learned counsel referred to the decisions in Pushparani S. Sundaram and ors. Vs. Pauline Manomani James (Deceased) and others, MANU/SC/2493/2000 : (2002) 9 SCC 582, N.P. Thirungnanam (Dead) by LRs. Vs. Dr. R. Jagan Mohan Rao and others, MANU/SC/0025/1996 : (1995) 5 SCC 115 and Pemmada Prabhakar and others Vs. Youngmen's Vysya Association and others, MANU/SC/0737/2014 : 2015 (6) Mh.L.J.487 to urge that the claimant had failed to prove its readiness and wiliness to be entitled to an award of specific performance.


Reference was also made to the observations in paragraph 22(vi) of the impugned judgment and the fact that stamp paper no. 1515 dated 17.03.1999 had been used to scribe the arbitration agreement dated 17.08.1999 while other stamp papers of the same date bearing numbers 1513, 1514 and 1516 to 1518 had been used to scribe the agreement dated 01.04.1999. This aspect remained unexplained.


On these counts it was submitted that the impugned judgment did not warrant any interference.


6. Shri A.G. Gharote, learned counsel for the respondent nos. 6 to 8 who are the daughters of Motiram also supported the impugned judgment. In that regard, he made the following submissions:-


(a) The respondent nos. 6 to 8 were neither signatories to the initial agreement dated 01.04.1999 or the subsequent agreement dated 17.08.1999. In absence of the sisters being signatories to either agreement coupled with the fact that they had made known to their stand that they were not aware of Shri C.V. Kale, Advocate as an Arbitrator, knowledge in that regard could not have been imputed to them. The likelihood of circumstances giving rise to justifiable doubts as to the independence or impartiality of the Arbitrator has to be adjudicated on the basis of the facts of each case. Since the claimant was relying upon the agreement dated 17.08.1999 in which the Arbitrator was named, the entire period from 17.08.1999 till the commencement of the arbitration proceedings in the year 2003 would have to be taken into consideration while determining the said aspect. As the Arbitrator was shown to have been named in the agreement dated 17.08.1999 and as the said named Arbitrator was represented by Shri S.T. Madnani, Advocate as his counsel in S.C.C. No. 844/2003 during the period from 28.10.2003 to 25.11.2003, it was incumbent upon the said Arbitrator to have made disclosure of this fact. The very same counsel who had represented the Arbitrator in the Civil Court after 17.08.1999 had sought to represent the claimant by appearing before the Arbitrator in February 2004. If such disclosure would have been made by the Arbitrator at the commencement of the proceedings, the respondent nos. 6 to 8 would have definitely objected to the conduct of the arbitration proceedings by said Arbitrator especially when the said respondents were not familiar with the Arbitrator. Merely because the proceedings in the civil suit terminated on 25.11.2003 and the arbitration proceedings were sought to be initiated by issuing notice on 27.11.2003, the same would not mean that the Arbitrator was not bound to make such disclosure. Relying upon the decision in Ranjit Thakur Vs. Union of India and others, MANU/SC/0691/1987 : AIR 1987 SC 2386, it was submitted that the test laid down as to the likelihood of bias was with regard to the mind of the party and not the mind of the Arbitrator. Even if the Arbitrator may have felt that the said fact was not likely to affect his adjudication, what was material was the consideration of the mind of the party. Viewed from that angle, it was clear that the said circumstance did give rise to justifiable doubts as to the independence or impartiality of the Arbitrator.


It was submitted that Amendment Act No. 16 of 2015 by which the provisions of Section 12 were amended was prospective in nature. Same would not apply to arbitration proceedings which had concluded long back. It was the unamended provisions of Section 12 that were required to be taken into consideration while determining this aspect.


(b) The amendment as sought vide Exhibit 52 on 12.07.2013 was rightly permitted to be incorporated by passing an order dated 22.02.2016 as it was the stand of the said respondents that since inception they had not authorised anybody to sign the agreement dated 01.04.1999 or the subsequent agreement dated 17.08.1999. They had no knowledge either about the agreement or about the appointment of the sole Arbitrator. The ground with regard to non-existence of such agreement coupled with the stand that the same was a bogus document was already pleaded. The restriction of raising a new ground of challenge after the period of limitation would not apply in the present case especially since the agreements had already been disputed and the respondents had no knowledge about the said Arbitrator. In that regard, he referred to the decision in State of Maharashtra Vs. Hindustan Construction Company Limited, MANU/SC/0215/2010 : (2010) 4 SCC 518 and submitted that the said ground of challenge was rightly permitted to be raised.


(c) On the aspect of findings as to perversity of the award, it was submitted that the same had to be examined in the light of the findings recorded by the Arbitrator which were by ignoring material evidence that was existing on record. Non-consideration of relevant material also indicated bias on the part of the Arbitrator which was liable to be considered under Section 34 of the said Act. Referring to the material on record to indicate the absence of agreement dated 01.04.1999 being signed by the respondent nos. 6 to 8 and absence of any document of power of attorney in favour of Nagorao, it was clear that by ignoring these aspects the Arbitrator proceeded to hold that both the agreements were legal and valid. He referred to the evidence on record that was led before the Arbitrator and submitted that the power of attorney that was executed by Sumanbai and Chandrakalabai had been specifically cancelled by issuing the public notice much prior to 01.04.1999. Since the deed of cancellation was duly registered, there was no basis for the Arbitrator to have ignored this aspect. The perversity was clear in the light of the fact that despite such documents being brought on record, it had been held that the sisters had authorised their brothers to represent their interests while executing the agreement. Moreover, it was never pleaded by the claimant that there was any notional partition of the property in question. The respondents had clearly stated that they were co-owners of the property but the Arbitrator proceeded to observe that it was coparcenary property that was liable to be equally shared by the parties after the death of Motiram. Even the conclusion that the brothers were managing the affairs of the family was recorded without the same being pleaded or such case being made out in that regard. He also referred to the provisions of Section 25(b) of the said Act and submitted that the joint written statement at Exhibit 23 that was filed by the sisters and was verified by Chandrakalabai could not have been ignored. This indicated bias on the part of the Arbitrator.


It was thus submitted that on all these counts the learned Principal District Judge was justified in coming to the conclusion that the impugned award was liable to be set aside. No interference was therefore called for in the appeal.


7. I have heard the learned counsel for the parties at length and with their assistance, I have also perused the relevant material that was placed before the Arbitrator. I have given thoughtful consideration to the respective submissions. The award dated 13.10.2005 has been set aside in proceedings under Section 34 of the said Act firstly on the ground that the same was vitiated on account of the provisions of Section 12(2) read with Section 13(5) of the said Act. Secondly, it has been held that the award suffered from perversity and patent illegality while considering the relevant material. It would thus be necessary to consider the challenges as raised to the impugned judgment in the aforesaid backdrop.


8. (a) Award being vitiated under Section 12 (2) read with Section 13(5) of the said Act.


According to the respondents the grounds that gave rise to justifiable doubts as to the independence or impartiality of the Arbitrator is that the Arbitrator-Shri C.V. Kale as plaintiff had filed S.C.S. No. 844/2003 seeking specific performance of an agreement against one Ramdas Sawarkar. The said suit for specific performance of the agreement was filed on 28.10.2003. The counsel for the plaintiff-Arbitrator was Shri S.T. Madnani, Advocate who had filed his Vakalatnama in the said suit on the same day. The said suit came to be compromised and disposed of on 25.11.2003. On 27.11.2003 a legal notice came to be issued on behalf of the claimant invoking the arbitration clause and calling upon Shri C.V. Kale, Advocate, the Arbitrator to commence the arbitration proceedings in connection with the agreement dated 01.04.1999. First session of the arbitration proceeding was held on 10.12.2003. On 20.02.2004 Vakalatnama was filed by Shri S.T. Madnani, Advocate on behalf of the claimant before the Arbitrator Shri C.V. Kale. According to the respondents, the aspect that the claimant's counsel had also represented the Arbitrator as his counsel in the suit filed by the Arbitrator ought to have been disclosed by the Arbitrator being relevant as it would have enabled the respondents to consider whether to object to the continuation of the arbitration proceedings before the said Arbitrator or otherwise. This aspect was however not disclosed. It was specifically stated that the respondent nos. 1 and 2 got knowledge on this fact during the pendency of the proceedings under Section 34 of the said Act. Thus, during the pendency of the arbitration proceedings the respondent nos. 1 and 2 sought amendment of the application filed under Section 34 of the said Act. An application was filed vide Exhibit 52 in the proceedings under Section 34 of the said Act by incorporating paragraph 10 A. An additional ground in this regard was sought to be raised to indicate that there were justifiable doubts as to the independence and impartiality of the Arbitrator. In the reply filed by the claimant at Exhibit 56 it was stated that the respondent nos. 1 and 2 had not raised this ground before the Arbitrator and hence they were estopped from raising the same at this stage. The learned Principal District Judge allowed the application at Exhibit 52 by order dated 22.02.2016.


9. It would first be necessary to consider whether the respondent nos. 1 and 2 could be permitted to raise this ground in proceedings under Section 34 of the said Act by amending the application. According to the claimant, since the said challenge to the award based on the provisions of Section 12(2) of the said Act was raised only in the year 2013, it was raised much beyond the period of limitation for filing an application under Section 34 of the said Act. As the award was passed on 13.10.2005, the learned Principal District Judge was not justified in permitting that amendment. For considering this ground, it would be necessary to refer to the relevant pleadings of the parties. In the statement of claim filed by the claimant, it has relied upon the initial agreement dated 01.04.1999 as well as subsequent agreement dated 17.08.1999 containing the arbitration clause. In the written submissions filed on behalf of the respondent nos. 1 and 2 at Exhibit 35, the execution of the arbitration agreement dated 17.08.1999 has been specifically disputed. In the specific pleadings, it has been stated that the said respondents even while filing the written statement were not aware as to who Advocate C.V. Kale was who had been named as an Arbitrator. A stand was also taken that since there were no disputes between the parties at the relevant time, there was no necessity to execute the arbitration agreement on 17.08.1999. In the written submissions filed on behalf of the respondent no. 3 Manjulabai a similar stand was taken that she was not aware as to who the Arbitrator was. It was denied that the agreements dated 01.04.1999 and 17.08.1999 had been executed by Manjulabai. In the written submissions by the daughters of Motiram at Exhibit 23, a specific stand has been taken that the agreements dated 01.04.1999 and 17.08.1999 were null and void as they were not executed by them.


10. From these pleadings it can be seen that since filing of the written submissions the respondent nos. 1 and 2 had disputed the agreement dated 17.08.1999 and the stand that they were not aware as to who the Arbitrator was had been specifically taken. As regards the other respondents, they had denied execution of both the agreements. They had also stated that they were not aware as to who the Arbitrator was. In the application filed vide Exhibit 52 seeking to raise the additional ground of challenge, it has been stated that the respondent nos. 1 and 2 got knowledge about the proceedings in S.C.S. No. 844/2003 filed on behalf of the Arbitrator during the pendency of the proceedings under Section 34 of the said Act. There is no specific denial to this aspect in reply filed on behalf of the claimant at Exhibit 56. The only stand taken is that the application contained misleading statement of facts. The learned Principal District Judge while allowing the said application found that the interests of justice required grant of reasonable opportunity to the respondent nos. 1 and 2 to raise that challenge and that it would not change the nature of the proceedings. Heavy reliance has been placed by the learned Senior Advocate on the decision in Hindustan Construction Company Limited (supra) to urge that such a challenge which constitutes a new ground to assail the award of the Arbitrator could not have been permitted to be raised beyond the period of limitation prescribed for challenging the award. In Hindustan Construction Company Ltd. (supra), it was observed that if incorporation of an additional ground by way of amendment in the application under Section 34 of the said Act is held to amount to filing of a fresh application for challenging the award, in all situations it would follow that no amendment in the application for setting aside the award howsoever material or relevant it may be for consideration by the Court could be added nor an existing ground could be amended after expiry of the period of limitation. It was held that this could not have been the intention of the legislature while enacting Section 34 of the said Act. The observations in paragraph 30 of the said case are relevant and the same read as under:-


"30. More so, Section 34(2)(b) enables the Court to set aside the arbitral award if it finds that the subject-matter of the dispute is not capable of settlement by arbitration under the law for the time being in force or the arbitral award is in conflict with the public policy of India. The words in clause (b) "the Court finds that" do enable the Court, where the application under Section 34 has been made within prescribed time to grant leave to amend such application if the very peculiar circumstances of the case so warrant and it is so required in the interest of justice."


11. From these observations it is seen that the hands of the Court hearing proceedings under Section 34 of the said Act are not tied if the Court finds that the circumstances of the case justify the grant of leave to amend the application under Section 34 of the said Act. As noted above, it is the specific case of the respondents that they were not aware as to who the Arbitrator was. In the application seeking amendment, it was specifically stated that they got information with regard to the proceedings in S.C.S. No. 844/2003 only during the pendency of the proceedings under Section 34 of the said Act. That stand was not specifically traversed. Since inception the respondent nos. 1 and 2 have disputed the agreement dated 17.08.1999 and have also stated that they were not aware about who the Arbitrator was. The other respondents have denied both the agreements. The learned Principal District Judge while allowing the said application was of the view that due opportunity deserves to be granted to the respondent nos. 1 and 2 to raise that challenge. In these facts, therefore, it is found that by granting permission to raise an additional ground vide para 10 A, a new ground of challenge has not sought to be incorporated. It is merely another shade of the defence raised by the respondent nos. 1 and 2 while disputing the appointment of the Arbitrator. I therefore find that the learned Principal District Judge while allowing the application at Exhibit 52 for raising such ground has not permitted raising of a fresh ground beyond the period of limitation. The circumstances of the case warrant grant of such leave as observed in Hindustan Construction Company Ltd. (supra). The challenge to the order passed below Exhibit 52 therefore is not liable to be upheld.


12. While considering the applicability of the provisions of Section 12(1) of the said Act to the facts of the present case, it would be first necessary to resolve whether the challenge in that regard would be governed by the provisions of Section 12 as amended by Act No. 16 of 2015 or whether the same would be governed by the unamended provisions. The answer to this question can be found in the judgment of the Hon'ble Supreme Court in S.P. Singla Constructions Private Ltd.(supra) wherein it has been categorically held that where the arbitration proceedings have commenced much prior to the Amendment Act coming into force with effect from 23.10.2015, the provisions of the Amended Act would not be applicable and the proceedings would be governed by the unamended provisions. In the present case, there is no dispute that the arbitration proceedings commenced in the year 2003 and concluded with the passing of the award on 13.10.2005. In the light of this clear position the case in hand would be required to be decided in the light of the provisions of Section 12 (1) before its amendment in the year 2015. For the very same reason therefore, it would not be permissible to refer to Schedules V and VII of the said Act as sought to be urged by the learned Senior Advocate. The adjudication in the present case would therefore be governed by the provisions of Section 12(1) of the said Act as it stood prior to being amended by Amendment Act No. 16 of 2015.


13. The provisions of Section 12(1) of the said Act require a person who has been approached in connection with his possible appointment as an Arbitrator to disclose in writing any circumstances likely to give rise to justifiable doubts as to his independence or impartiality. Under Section 12 (2) of the said Act an Arbitrator from the time of his appointment and throughout the arbitral proceedings is required, without any delay, to disclose to the parties in writing any circumstances referred to in sub-section (1) of Section 12 unless the parties have already been informed about such circumstances by the Arbitrator. The words "any circumstances likely to give rise to justifiable doubts as to his independence or impartiality" are intended to cover all possible situations that could give rise to justifiable doubts in the mind of the parties to the arbitration proceedings. The Arbitrator may as per his own assessment be independent or impartial qua all parties to the arbitration. His independence or impartiality would however not absolve him of disclosing in writing any circumstances that are likely to give rise to justifiable doubts in the mind of the parties before him as to his independence or impartiality. The duty to disclose such circumstances if any, starts from the appointment of the Arbitrator and continues throughout the arbitral proceedings. Thus a duty has been cast on the Arbitrator to disclose to the parties any circumstance which is likely to give rise to justifiable doubts as to his independence and impartiality in the mind of the parties.


14. As per Black's Law Dictionary, Eighth Edition, the expression "justifiable" means capable of being legally or morally justified; excusable; defensible. As held in Ranjeet Thakur (supra), the test of real likelihood of bias is whether a reasonable person in possession of relevant information would have thought that there was likelihood of bias. It was observed that what was relevant was the reasonableness of the apprehension in that regard in the mind of the party. The impression that would be given to other people was relevant and what was in the mind of the Court was not very relevant. These observations have been followed in Murlidhar (supra). The proper approach which was indicated was not for the Judge to look at his own mind and ask himself whether he was biased but to look at the mind of the party before him.


In Saurabh Kalani (supra), the learned Single Judge (Dr. D.Y. Chandrachud, J. as His Lordship then was) considered the duty of disclosure in the light of various English cases as well as by applying the real danger test. Reference was made to the said thinking on the part of a fair minded and informed observer. In the facts of the said case, it was observed that the Arbitrator who had been employed by one of the parties prior to about twelve years was not a circumstance that was spelt out by Section 12 of the said Act. The said judgment was affirmed by the Division Bench in appeal. In Narendrasingh Arora (supra), it was observed that no person can act in a judicial capacity if his previous conduct gives ground for believing that he cannot act with an open mind or impartially. Such person trying a cause must be able to act above suspicion of unfairness and bias.


It is thus seen that the relevant test to be applied is not what the Arbitrator thinks and concludes that such circumstance does not give rise to any justifiable doubt as to his independence or impartiality. What is material is the mind of the parties to the arbitration and whether they feel that same circumstance gives rise to a justifiable doubt in that regard. It is not for the Arbitrator to himself take a call on the circumstances if any and be content with the thought that he would act independently and impartially as an Arbitrator. The circumstances if any have to be disclosed in writing to the parties to enable them to take a call, if warranted by such circumstances. Just as it is said that justice has not only to be done but must be shown to have been done it may not be illogical to observe that independence and impartiality of an Arbitrator must not only exist but must be shown to actually exist.


15. When the facts of the present case are considered, it can be seen that arbitration agreement sought to be relied upon by the claimant is dated 17.08.1999 in which Shri C.V. Kale, Advocate is named as an Arbitrator. The Arbitrator has been named in case any disputes were to arise in the context of the earlier agreement dated 01.04.1999. Specific performance of the earlier agreement has been sought. In a case where the Arbitrator has been named, the date of the arbitration agreement cannot not be ignored. The provisions of Section 12(2) of the said Act in fact require an Arbitrator from the time of his appointment and throughout the arbitral proceedings to disclose to the parties the existence of any of the circumstances referred to in Section 12(1) of the said Act that could give rise to justifiable doubts as regards his independence or impartiality. There is no reason found to exclude applicability of the principles on which the provisions of Section 12(2) of the said Act are based. Thus if an Arbitrator is named by the parties, it would be reasonable to expect of the Arbitrator to disclose to the parties any circumstances that exist from the date of his appointment which could give rise to justifiable doubts as to his independence or impartiality. Merely because the arbitration proceedings have commenced after a substantial period of time from the date when the arbitration agreement naming the Arbitrator was entered into, the same would not be a reason to exempt the Arbitrator from disclosing in writing any circumstance that had occurred or arisen from the date of the arbitration agreement naming the said Arbitrator till the actual commencement of the arbitration proceedings. The object of the aforesaid provisions being to allay any doubts in the mind of the parties as regards any circumstance likely to give rise to justifiable doubts as to his independence or impartiality, it would be in the fitness of things to expect the Arbitrator to disclose existence of any such circumstance as contemplated by Section 12(1) of the said Act. The period from the date of the arbitration agreement naming him till conclusion of the arbitration proceedings would thus be relevant. Taking a narrow view of the matter would result in doing violence to the object behind the enactment of Section 12(1) of the said Act. The words "from the time of his appointment" in Section 12(2) are distinct and have no connection with the provisions of Section 21 of the said Act that refer to the commencement of arbitral proceedings.


I am therefore inclined to hold that in the present case, the period from 17.08.1999 till the conclusion of the arbitration proceedings on 13.10.2005 is relevant for the purposes of Section 12(1) of the said Act. The Arbitrator named in agreement was obliged to disclose in writing any circumstances that were likely to give rise to justifiable doubts as to his independence or impartiality. The contention raised on behalf of the respondent nos. 6 to 8 that the entire period from 17.08.1999 till the conclusion of the arbitration proceedings would have to be taken into consideration is well founded and is thus upheld.


16. It would now be necessary to consider whether the circumstance that the counsel for the claimant having represented the Arbitrator as his counsel in S.C.C. No. 844/2003 after being named as Arbitrator on 17.08.1999 was required to be disclosed to the parties at the commencement of the arbitration proceedings. Since it is claimed that the Arbitrator was named in the agreement dated 17.08.1999 and the claimant had relied upon that agreement to maintain the arbitration proceedings, the other parties to the agreement would in such situation be definitely concerned with the conduct of the named Arbitrator atleast from 17.08.1999. Hence, if after 17.08.1999 the Arbitrator himself was represented by the counsel for the claimant in the civil suit in which the Arbitrator was the plaintiff, a case of disclosure of this relevant circumstance on the part of the Arbitrator was made out. This is for the reason that the representation of the Arbitrator by Shri S.T. Madnani, Advocate who was also the counsel for the claimants in the arbitration proceedings was after the arbitration agreement came into force. Such disclosure would have enabled the respondent nos. 1 and 2 to have taken a call on proceeding further with the arbitration proceedings. An informed decision in that regard could have been taken which would have obviated any further challenge in that regard.


17 The aspect whether the representation of the Arbitrator by the claimant's counsel after the arbitration agreement was entered into was a ground to give rise to justifiable doubts as to the independence or impartiality of the Arbitrator would have to be examined from the mind of the parties to the arbitration proceedings. If it was the stand of the respondents since inception that they were not aware of Shri C.V. Kale, Advocate as an Arbitrator and were in fact denying the existence of the arbitration agreement itself, the fact that the counsel representing the claimant had acted as counsel for the Arbitrator after the arbitration agreement was entered into would have definitely given rise to justifiable doubts as to the independence or impartiality of the Arbitrator. When these facts are tested on the anvil of the law as laid down in Ranjeet Thakur (supra), it becomes apparent that what is required to be considered is the mind of the party before the Arbitrator and not the mind the Arbitrator himself. It is not necessary to impute any bias against the Arbitrator in this regard. As observed in Ranjeet Thakur (supra), it is not necessary to look at the mind of the Arbitrator but to look at the mind of the party to the arbitration proceedings. When these aspects are considered from the mind of the respondents in the most reasonable manner, justifiable doubts are likely to arise as to whether the Arbitrator would act independently or impartially when the claimant was being represented by the same Advocate who had represented the Arbitrator himself after the arbitration agreement dated 17.08.1999 naming the Arbitrator came into existence. This is because the claimant whose claim they were opposing was represented by the same Advocate who had after the arbitration agreement was entered into represented the Arbitrator. Hence in these facts when the respondents disputed the arbitration agreement and were also not aware as to who the Arbitrator was, justifiable doubts were likely to arise as to whether said Arbitrator who was not known to them would act independently or impartially. It would have been a different matter if there was no challenge to the arbitration agreement which named the Arbitrator. The named Arbitrator being a person of confidence of both the parties, the circumstances that could give rise to justifiable doubts would have to be of a graver nature. But when the arbitration agreement is disputed and a stand is taken that the Arbitrator is unknown, the situation would be different. Seen from any angle, the finding that the award was hit by provisions of Section 12(1) read with Section 13(5) of the said Act is a reasonable finding not warranting interference.


18. b) Perversity in the award passed by the Arbitrator:-


The issue whether the award passed by the Arbitrator suffers from perversity would have to be considered in the light of provisions of Section 28 of the said Act. Under Section 28(1) of the said Act the award has to be decided in accordance with the substantive law for the time being in force in India. Reference in this regard can be made to the decision in M/s. Lion Engineering Consultants Vs. State of M.P. and others, MANU/SC/0313/2018 : AIR 2018 SC 1895 wherein it has been held that the expression "public policy of India" refers to law in force in India, whether State law or Central law.


In Associate Builders Vs. Delhi Development Authority, MANU/SC/1076/2014 : 2015 (4) Mh.L.J. 593, it has been observed in the context of "patent illegality" that the contravention of the substantive law of India would result in the death knell of an arbitral award. Further, on the aspect of perversity in the award, it has been observed as under:


"The third juristic principle is that a decision which is perverse or so irrational that no reasonable person would have arrived at the same is important and requires some degree of explanation. It is settled law that where-


1. a finding is based on no evidence, or


2. an arbitral tribunal takes into account something irrelevant to the decision which it arrives at; or


3. ignores vital evidence in arriving at its decision, such decision would necessarily be perverse.


A good working test of perversity is contained in two judgments. In H.B. Gandhi, Excise and Taxation Officer-cum-Assessing Authority v. Gopi Nath & Sons, 1992 Supp (2) SCC 312 at p. 317, it was held:


"7. ...................It is, no doubt, true that if a finding of fact is arrived at by ignoring or excluding relevant material or by taking into consideration irrelevant material or if the finding so outrageously defies logic as to suffer from the vice of irrationality incurring the blame of being perverse, then, the finding is rendered infirm in law."


In Kuldeep Singh v. Commr. of Police, MANU/SC/0793/1998 : (1999) 2 SCC 10 at para 10, it was held:


"10. A broad distinction has, therefore, to be maintained between the decisions which are perverse and those which are not. If a decision is arrived at on no evidence or evidence which is thoroughly unreliable and no reasonable person would act upon it, the order would be perverse. But if there is some evidence on record which is acceptable and which could be relied upon, howsoever compendious it may be, the conclusions would not be treated as perverse and the findings would not be interfered with."


It has also been observed that when it is urged that the award is against the public policy of India that the merits of the award can be looked into. Keeping these aspects in mind, the challenge in that regard can be considered.


19. The award passed by the Arbitrator has been set aside by the learned Principal District Judge also on the ground that the same suffers from perversity. In this regard the absence of readiness and willingness on the part of the claimant for being entitled to the relief of specific performance has been taken into consideration. It has been held that under the provisions of Section 28(3) of the said Act, the Arbitrator was bound to decide in accordance with the terms of the contract. In the absence of necessary material in the form of pleadings and evidence to indicate readiness and willingness of the claimant, the Arbitrator could not have directed enforcement of the agreement dated 01.04.1999. The absence of any positive finding with regard to payment of Rs. 15,00,000/- as urged by the claimant to the respondent nos. 1 and 2 is also a factor considered by the learned Principal District Judge.


20. As regards the aspect of readiness and willingness on the part of the claimant is concerned, under the agreement dated 01.04.1999 initially an amount of Rs. 2,50,000/- was paid as earnest. It was further agreed that an amount of Rs. 7,60,000/- would be paid in five instalments after every six months. The first instalment was payable on 31.12.1999 and the last instalment was to be paid on 31.12.2001. The agreement further requires the claimant to take all necessary steps including obtaining all relevant documents, permissions and clearances to facilitate execution of the sale deed. To prove the claim, the claimant examined one of its partners who had filed his affidavit at Exhibits 70 and 80. According to the said partner, initially an amount of Rs. 10,00,000/- each had been paid by cheques to the respondent nos. 1 and 2. Thereafter further payment of Rs. 15,00,000/- in cash was made for which purpose vouchers dated 09.04.1999, 30.06.1999 and 04.01.2001 came to be executed by the respondent nos. 1 and 2. There is a dispute with regard to the subsequent payment of Rs. 15,00,000/-. While the claimant claims that this amount was paid in cash to the respondent nos. 1 and 2 equally, the said fact is denied by the respondent nos. 1 and 2. The claimant sought to rely upon the vouchers in that regard while the respondent nos. 1 and 2 denied having signed those vouchers. Keeping aside this disputed aspect as regards payment of Rs. 15,00,000/- for sometime, it is relevant to note that on 13.09.2001 the claimant issued a notice to the respondents calling upon them to take necessary steps to complete the transaction. It is however pertinent to note that in this legal notice there is no reference to the actual amounts paid by the claimant till that date nor is there any reference to the balance amount which was due and payable as per the said agreement. Also conspicuous by its absence is the reference to the arbitration agreement dated 17.08.1999. The normal conduct of a person seeking specific performance of an agreement would be to refer to the payments already made as well as to the balance amount due and payable by him. There is no explanation furnished by the claimant in his deposition as to why these relevant aspects were not mentioned in the notice dated 13.09.2001. Another factor that requires consideration is that though in the agreement dated 01.04.1999 the manner in which the instalments of Rs. 7,60,000/- each were to be paid had been stipulated, the claimant has not adhered to the time schedule as mentioned in the said agreement. It was necessary for the claimant to have paid the instalments as per the time schedule mentioned in the said agreement.


21. As per the agreement dated 01.04.1999, there was no corresponding duty on the respondents that was required to be done by them while receiving the consideration in instalments as mentioned in the agreement. All requisite permissions and other clearances of the Nagpur Improvement Trust, Nagpur Municipal Corporation and Nazul Department as mentioned in the agreement were to be obtained by the claimant. There is no material on record to indicate that all necessary pre-requisites for executing the sale deed were obtained and complied with by the claimant.


It is to be noted that as per the schedule of payments to be made by the claimant, the last instalment was payable on 31.12.2001. Prior thereto the claimant issued a legal notice on 13.09.2001 with aforesaid shortcomings. The material on record thus indicates that initially an amount of Rs. 20,00,000/- which is undisputed was received by the respondent nos. 1 and 2 and thereafter it is claimed that further amount of Rs. 15,00,000/- was paid in cash to the respondent nos. 1 and 2. Even if it is assumed that the claimant had paid a total amount of Rs. 35,00,000/- to the respondent nos. 1 and 2 till 04.01.2001, the same is much less than what was agreed to be paid by the claimant under the agreement dated 01.04.1999. This aspect coupled with absence of necessary steps being shown to have been taken by the claimant to enable execution of the sale deed are material aspects that have not been taken into consideration by the Arbitrator in his award. Except for referring to the deposition of the witness examined by the claimant that the claimant was always ready and willing to pay balance consideration, there is no further consideration with regard to the terms of the agreement dated 01.04.1999 and whether the claimant had completed its obligation thereunder. There is no consideration as to whether the claimant had obtained all necessary permissions that were contemplated by the said agreement. Absence of reference to the amounts paid while issuing legal notice on 13.09.2001 has also not been considered by the Arbitrator.


22. The learned Principal District Judge in the impugned judgment has observed that it was incumbent upon the Arbitrator to have considered the requirements as to readiness and willingness on the part of the claimant before holding it entitled to the relief of specific performance. This consideration was necessary in view of the provisions of Section 28(1) of the said Act. It is well settled that the Arbitrator while considering the claim for grant of specific performance has to take into consideration all requirements contemplated by the provisions of Section 16 and Section 20 of the Specific Relief Act, 1963. As noted above, the Arbitrator has failed to consider the aspect of readiness and willingness on the part of the claimant in the context of the agreement dated 01.04.1999. As observed in Pemmada Prabhakar and others (supra) that even there is a breach of terms of the contract on the part of the plaintiff in the matter of paying the balance sale consideration as mentioned in the agreement, that factor would dis-entitle the plaintiff from being granted the relief of specific performance. Similarly in Pushparani S. Sundaram and ors. (supra), it has been observed that the obligations stipulated under the contract are required to be fulfilled by both the parties and the same is a relevant aspect before concluding whether the relief of specific performance has to be granted or not. Under the provisions of Section 28(3) of the said Act, the Arbitrator was bound by adjudicate the claim for specific performance in accordance with the terms of the agreement dated 01.04.1999. As noted above, while there was no obligation on the respondents to do anything further till they received the entire consideration in question, the claimant was obliged to obtain all necessary permissions and clearances before the sale deed was to be executed. The claimant's witness had not deposed anything about this aspect. In N.P. Thirungnanam (supra), it has been held that the relief of specific performance is an equitable relief and it is in the discretion of the Court to grant the same which discretion has to be exercised according to settled principles of law and not in a arbitrary manner under Section 20 of the Specific Relief Act, 1963. The Court is not bound to grant such relief merely because there is a valid agreement of sale. Continuous readiness and willingness on the part of the plaintiff in the context of the agreement is a condition precedent to grant the relief of specific performance. In the light of this legal position, the learned Principal District Judge was justified in coming to the conclusion that the Arbitrator failed to consider these material aspects before granting the relief of specific performance. The finding recorded that the award suffered from perversity on the ground that the requirements for grant of specific performance were not considered by the Arbitrator therefore does not call for any interference especially in the light of the provisions of Section 28(1) and Section 28(3) of the said Act.


23. As regards the dispute with regard to payment of Rs. 15,00,000/- by the claimant to the respondent nos. 1 and 2, it has been observed in the impugned judgment that the entire material on record has not been taken into consideration for recording a positive finding with regard to the payment of that amount. This aspect cannot be considered in isolation and it is to be considered on the touchstone of preponderance of probability while considering the entire material on record. While the claimant contends that an amount of Rs. 2,50,000/- each was paid to the respondent nos. 1 and 2 on 09.04.1999, 30.06.1999 and 04.01.2001 on account of which they had signed on the vouchers at Exhibits 71/3 to 71/8, the respondent nos. 1 and 2 deny their signatures thereon. The first relevant aspect is the absence of any reference to this amount of Rs. 15,00,000/- being paid in cash to the respondent nos. 1 and 2 in the legal notice that was issued on 13.09.2001. Such absence is conspicuous. While pursuing a claim for specific performance a reference is normally made by such claimant to the payment already made and the balance amount due which he is ready to pay. The absence of this factor in the legal notice which was issued after 04.01.2001 when it was claimed that the amount of Rs. 15,00,000/- was paid in cash cannot be ignored. What has been given importance by the Arbitrator is the fact that the photocopies of these vouchers were available with the respondent nos. 1 and 2. This aspect was not required to be considered in isolation. The respondent nos. 1 and 2 claim that the vouchers were sent to the handwriting expert Shri Anant Jadhav for examination. The respondent nos. 1 and 2 in their depositions had categorically denied having received these amounts in cash. It cannot be lost sight of the fact that the initial payment of Rs. 20,00,000/- had been made to the respondent nos. 1 and 2 by cheque and this payment was not disputed by the respondent nos. 1 and 2. Considering all these aspects, the learned Principal District Judge found that the material already on record was not taken into consideration by the Arbitrator before recording a finding that the amount of Rs. 15,00,000/- was paid to the respondent nos. 1 and 2 in cash. In the light of the entire material on record, this finding takes a possible view of the matter and thus does not deserve to be interfered with.


24. Though it has been observed in paragraph 22 (xvi) of the impugned judgment that the Arbitrator did not give fair opportunity to Manjulabai to lead evidence, I find that nothing much would turn on that aspect. It is also on record that on 03.06.2005 at her request time was granted and the proceedings were kept on 06.06.2005 when further time was sought on her behalf which request was refused. Manjulabai thereafter did not make any further request.


Similarly, the observations in paragraph 22(viii) of the impugned judgment have to be read in the context of the entire material on record. Nagorao in his deposition had stated that on 01.04.1999 he and his brother Baban had been to the office of the claimant. He noticed that in the agreements there were various blank spaces. He was paid a total amount of Rs. 10,00,000/- after which he signed the agreements. After seeing the copy of the agreements, he noticed that he was shown to have signed as power of attorney holders of the respondent nos. 3 to 6. In his cross-examination he has stated that he would have to verify at his residence if he was in possession of the photocopies of all the agreements filed on record. He volunteered that he was in possession of the photo copies of the agreements since beginning. He further stated that he had not compared the photo copies with the original documents filed by the claimant.


The Arbitrator has only on the basis of the statement of Nagorao that he was in possession of photo copies of the agreements recorded the finding that the agreements were signed by Nagorao. This finding is recorded by excluding all the other deposition of Nagorao and by ignoring the material on record. The Arbitrator by failing to consider the entire deposition of Nagorao has thus failed to consider the entire material on record which prompted the learned Principal District Judge to hold that said finding suffered from perversity. After going through the deposition of Nagorao in its entirety for the purposes of examining the finding as regards perversity, I am satisfied that said conclusion recorded in the impugned judgment does not deserve to be interfered with. In that context therefore the observations that the arbitration agreement was given to the handwriting expert on 14.02.2004 do not assume much importance.


It may however be noted that though Chandrakalabai in her affidavit has referred to Motiram's death in 1974 and the legal heirs having one-sixth share each which aspect was reiterated by her sisters, that aspect does not affect the conclusion recorded in the impugned judgment. The claimant's witness was not in a position to clarify how one of the stamp papers bearing number 1515 dated 17.03.1999 was utilised for the arbitration agreement dated 17.08.1999 when stamp papers bearing numbers 1513, 1514 and 1516 to 1518 were used for the agreement dated 01.04.1999.


25. Though it was vehemently urged by the learned Senior Advocate for the claimant that sufficient reasons have not been assigned by the learned Principal District Judge while recording the conclusion that the award suffered from perversity, it is found that reference has been made to various circumstances on record before recording a conclusion that failure to consider those relevant aspects resulted in perversity. In any event having perused the entire material on record, it is found that the learned Principal District Judge was justified in coming to the conclusion that on account of non-consideration of relevant material on record, the award suffered from perversity. That finding therefore does not call for any interference.


26. In the light of aforesaid discussion, it is found that the learned Principal District Judge did not commit any error while recording a finding that the award passed by the Arbitrator suffered from perversity. The award has been rightly set aside in view of the provisions of Section 12(2) read with Section 13(5) of the said Act. Similarly, the conclusion arrived at by the Arbitrator that the claimant was entitled to the relief of specific performance also suffered from perversity. The said finding therefore stands confirmed. Arbitration Appeal No. 14/2017 is accordingly dismissed leaving the parties to bear their own costs.


 

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