2021 (11) TMI 456 - SC - Indian Laws

Grant of Interim award - stridhana property of Respondent No. 1 or not - Section 34 of the Arbitration and Conciliation Act, 1996 - HELD THAT - The Arbitrator had committed an error in deciding the issue relating to 99 diamonds and one emerald ring for the following reasons. As has been rightly held by the High Court, the mandate for the Arbitrator is to decide whether said jewellery is stridhana property of the Respondent No. 1. A plain reading of the terms of reference No.(iii) would indicate the fact that the said jewellery being given to the Appellants in 1971 has been taken note of. Mere handing over of the jewellery to the Appellants in 1971, therefore, cannot be the reason for holding that the Appellants are entitled to retain the jewellery. The Arbitrator has concluded that 99 diamonds and one emerald ring, are in fact, stridhana property of Respondent No.1. The Arbitrator has committed a jurisdictional error by travelling beyond the terms of reference. Further, the Arbitrator has committed an error in permitting the Appellants to retain the jewellery - the Arbitrator had to decide the entitlement of all the seven parties to equal shares in the event of finding that the jewellery is not stridhana property - the conclusion of the High Court is approved by upholding the impugned judgment. Appeal dismissed.

Issues Involved:
1. Validity of the interim award by the Arbitrator regarding the partition of properties.
2. Determination of whether 99 diamonds and one emerald ring are stridhana property of Respondent No.1.
3. Jurisdictional errors and patent illegality in the Arbitrator’s award.

Detailed Analysis:

1. Validity of the Interim Award by the Arbitrator Regarding the Partition of Properties:
The dispute among the family members of P.V.G. Raju was referred to arbitration, and the Arbitrator passed an interim award on 26.05.2007. The Arbitrator concluded that the properties should be divided into seven equal shares, but noted that each sharer might not receive a one-seventh share in each asset due to previous partitions in 1960 and 1971. The Arbitrator upheld the previous partitions with slight modifications and directed that the properties listed in various schedules be divided accordingly. The Arbitrator also highlighted the complexities involved in the physical division of properties and suggested that parties settle the matter amicably to avoid prolonged proceedings.

2. Determination of Whether 99 Diamonds and One Emerald Ring Are Stridhana Property of Respondent No.1:
The Arbitrator concluded that the 99 diamonds and one emerald ring were initially given to Respondent No.1 by P.V.G. Raju as stridhana property at the time of their engagement and marriage. However, the Arbitrator observed that these items were given to the Appellants in 1971 pursuant to the 1971 award for partition. The Arbitrator noted discrepancies in wealth tax returns before and after 1971 and concluded that Respondent No.1 had validly relinquished her rights over the said jewellery. The High Court, however, set aside this finding, stating that the Arbitrator committed a jurisdictional error by rejecting Respondent No.1's plea, especially after acknowledging the jewellery as her stridhana property. The High Court emphasized that the Arbitrator's mandate was solely to determine whether the jewellery was stridhana property and not to decide on its division if it was found to be such.

3. Jurisdictional Errors and Patent Illegality in the Arbitrator’s Award:
The District Judge, Vizianagaram dismissed the petition filed under Section 34 of the Arbitration and Conciliation Act, 1996, upholding the interim award. However, the High Court partly allowed the appeals under Section 37, finding that the Arbitrator had committed a jurisdictional error by being influenced by the 1960 partition and the 1971 award. The High Court held that the Arbitrator should have decided the partition afresh as per the terms of reference. The High Court also found that the Arbitrator erred in concluding that Respondent No.1 had relinquished her rights over the 99 diamonds and one emerald ring, thus traversing beyond the terms of reference. The Supreme Court agreed with the High Court’s judgment, stating that the Arbitrator exceeded his mandate by deciding on the division of the jewellery despite it being acknowledged as stridhana property.

Conclusion:
The Supreme Court upheld the High Court’s judgment, agreeing that the Arbitrator committed jurisdictional errors and exceeded his mandate. The appeals were dismissed, and Mr. Justice Kurian Joseph was appointed as the sole Arbitrator to continue the arbitration proceedings and pass a final award. The Supreme Court emphasized the need for expedited proceedings due to the prolonged nature of the dispute.

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