2012 (11) TMI 84 - HC - Indian Laws

Arbitration Act 1940 - Challenge to the award by arbitrator - unreasoned award - held that - Once the arbitrator would choose to publish an unreasoned award it would be too difficult for the Court to interfere with the same. The Court of law was not the Court of appeal over the award of the arbitrator. It could only be interfered with when it was patently perverse. The present award would not satisfy such test. The arbitrator published a money award for Rs. 86258 along with interest at the rate of 6% per annum. What would be the basis of the said award, is unknown to us. Hence, we are not competent to examine the same. Transfer of tenancy award - held that - The arbitrator made alternative provision that would take care of the absurdity, if any, in the award. The learned Single Judge observed, Kamal Kumar resigned in 1983 without considering the assertions of his heirs to the extent that he had acted as partner for next five years until his death. The documents filed before the arbitrator were not considered. In any event, learned Judge also observed that the award was bad in view of allotment of tenancy that was not permissible under the tenancy law. We fail to appreciate, as observed herein before, the arbitrator having published an alternative award by giving money compensation in lieu of such allotment would remove the legal obstacle, if any, on that score. Hence the award could not be faulted on that ground. Period of limitation - application after 30 days of receipt of notice - held that- there was stamp of Court on September 19, 1998. Hence it was within the period of limitation. Even if it was not so, the order of remand would make it specifically clear that the Division Bench referred the issue back to the learned Single Judge for being heard afresh. Once it was so the plea of limitation would not be applicable.

Issues Involved:
1. Validity of Kamal Kumar's resignation from the partnership.
2. Entitlement of Kamal Kumar's heirs to a share in the partnership.
3. Validity of the arbitrator's award.
4. Limitation period for filing an application to set aside the award.
5. Consideration of counterclaims by the arbitrator.
6. Legality of tenancy allotment in the arbitrator's award.
7. Award of interest by the arbitrator.

Detailed Analysis:

1. Validity of Kamal Kumar's Resignation from the Partnership:
Kamal Kumar wrote a letter on October 20, 1983, expressing his intention to resign from the partnership due to his advanced age and ailment. However, the letter was addressed only to Adhar and not to all partners, which, according to the appellant's counsel, does not meet the criteria for a valid resignation under the Partnership Act. The letter was seen as an emotional outburst rather than a formal business communication. The court noted that despite this letter, Kamal Kumar continued to act as a partner, signing balance sheets and other statutory documents until his death in 1988.

2. Entitlement of Kamal Kumar's Heirs to a Share in the Partnership:
After Kamal Kumar's death, his daughters claimed a share in the partnership based on the provisions of the Deed of Partnership. Rajat and Adhar, however, denied this claim, arguing that Kamal Kumar had resigned in 1983. The arbitrator awarded Kamal Kumar's heirs a monetary sum and a share in the tenanted shop room. The court found that the arbitrator's decision to award a portion of the tenancy was pragmatic, given the alternative monetary compensation.

3. Validity of the Arbitrator's Award:
The arbitrator's award was unreasoned, which is permissible under the Arbitration Act of 1940. The court emphasized that it is difficult to interfere with an unreasoned award unless it is patently perverse. The arbitrator awarded Rs. 86,258 along with interest and a share in the tenancy or alternative compensation of Rs. 4 lacs. The court found the award to be within the scope of the original statement of claim and not perverse.

4. Limitation Period for Filing an Application to Set Aside the Award:
The application to set aside the award was filed on September 22, 1998, after the 30-day limitation period from the receipt of the notice on August 19, 1998. However, the Division Bench remanded the matter to the learned Single Judge for a fresh hearing on merits, which effectively addressed the limitation issue. The court upheld that the application was within the limitation period.

5. Consideration of Counterclaims by the Arbitrator:
The respondents argued that the arbitrator failed to consider their counterclaims regarding financial losses due to Kamal Kumar's alleged siphoning off of funds. The court noted that no formal counterclaim was made before the arbitrator, only a passing reference to the loss. Thus, the arbitrator was not required to consider it.

6. Legality of Tenancy Allotment in the Arbitrator's Award:
The arbitrator awarded a portion of the tenanted shop room to Kamal Kumar's heirs, which was contested on the grounds of tenancy law. The court noted that the arbitrator provided an alternative monetary compensation, which addressed the legal obstacle of tenancy allotment without the landlord's consent. The landlord's consent letter did not include all heirs and an eviction suit was pending, making the monetary compensation a pragmatic solution.

7. Award of Interest by the Arbitrator:
The learned Single Judge had observed that the arbitrator should not have awarded interest as it was beyond the contract. The court, however, referenced the Supreme Court decision in Secretary, Irrigation Department, Government of Orissa Vs G.C. Ray, which allows arbitrators to award interest unless specifically barred by the arbitration agreement. Since the Deed of Partnership did not debar awarding interest, the court found the award of interest to be valid.

Conclusion:
The court allowed the appeal, setting aside the judgment and order of the learned Single Judge. The arbitrator's award was upheld, including the monetary compensation and interest, while addressing the legal issues of tenancy allotment through alternative compensation. The appeal was disposed of without any order as to costs.

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