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TMI Blog2006 (4) TMI 463X X X X Extracts X X X X X X X X Extracts X X X X ..... only enable the contesting respondent Nos.1-9 to squat on the property and enjoy the benefits, income etc. arising therefrom. We, therefore, appoint Hon'ble Mr. Justice S.N. Variava, a retired Judge of this Court as a single Arbitrator and decide the dispute between the parties within 6 months from the date of entering upon the reference - C.A. 126 OF 2005 - - - Dated:- 4-4-2006 - HOTOI KHETOHO SEMA AND A.C. LAKSHMANAN, JJ JUDGMENT This appeal was directed against the final judgment and order dated 8/9th June, 2004 passed by the Division Bench of the High Court of Judicature at Bombay in Appeal No. 440 of 1996 in Arbitration Suit No. 1904 of 1992 whereby the High Court dismissed the appellants' appeal and upheld the order of the learned single Judge dismissing the appellants' application under Section 20 of the Arbitration Act, 1940 as being barred by the law of limitation. The short facts of the case are as follows:- A partnership firm was formed by three brothers of the Singhania family. The family owned considerable amount of immovable property, which was brought into the firm's business. In 1987, the partnership firm was dissolved by way of dissolution deed a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ertaining to the division of assets involved in the partnership firm which was dissolved. The last letter that was exchanged in this regard was a letter dated 29 September, 1989. On May 8, 1992, a plaint under section 20 of the Arbitration Act, 1940 was filed before the High Court of Judicature at Bombay by the appellants (1-7 ousted group). On September 19, 1992, respondent No.1 herein, Dr. Gaur Hari Singhania group (contesting respondent Nos.1-9) filed an affidavit in opposition stating and submitting that, the suit filed by the appellant in the High Court is barred by limitation and that the High Court had no jurisdiction to entertain the suit and, therefore, the same is liable to be dismissed. It is pertinent to notice that respondent Nos. 10-20 supported the claim made by the appellants. A learned Single Judge of the Bombay High Court on April 09, 1996 dismissed the Arbitration Suit of the appellants on the ground of limitation being 50 days beyond the period of three years computed from March 18, 1989. An appeal was preferred by appellant Nos. 1-7 and learned Judges of the Division Bench of the Bombay High Court dismissed the appeal on the ground of limitation and that or ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ication under Section 20 of the Arbitration Act, 1940. Accordingly, an application under Section 20 of the Act for filing the arbitration agreement in Court and for reference of disputes to arbitration in accordance therewith is required to be filed within a period of three years when the right to apply accrues. The right to apply accrues when difference or dispute arises between the parties to the arbitration agreement. In the facts of the case, it is therefore necessary to find out as to when the right to apply accrued. Therefore, the questions before us that deserve consideration are: 1. When the right to file the application under Section 20 of the Arbitration Act has accrued and when it becomes time barred; and 2. Whether in the context of Section 20 of the Arbitration Act, 1940 a difference or dispute can be said to have arisen between the parties without there being any denial or repudiation of a claim by a party? We have heard both the parties extensively. We have carefully perused all the letters, annexures and the orders passed by the High Court produced in Court. Letter dated 16th September, 1988 is a letter by Shri Hari Shankar Singhania to Shri Gaur Hari Sing ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t is not bona fide. We are returning the accounts for the period (20th March, 1987 to 31st March, 1988) for necessary rectification. The property should henceforth not be rented/licensed to anyone." Letter dated 18th March, 1989 is a letter by Shri Gaur Hari Singhania to Shri Hari Shankar Singhania wherein it is stated that "The licence is subsisting and cannot be treated as null and void. Since you have returned the account unsigned, I am sending the accounts once again to you with a request to kindly sign the accounts and forward the same to me for signature of Shri Vijaypat and Shri Ajaypat." Letter dated 22nd May, 1989 is a letter by Shri Vijaypat Singhania, shri Ajaypat Singhania, Shri Raghupati Singhania, Shri Hari Shankar Singhania and Shri Bharat Hari Singhania to Shri Gaur Hari Singhania wherein it is stated that "As regards Ganga Kuti, we had in our letter dated February 13, 1989 stated the factual position in regard to the licence agreement dated 2nd January, 1986 and the fact of the licence remaining no more valid particularly in view of the continuous violation of the essential provisions of the licence agreement for two years from 1.4.1985 The spirit of the terms of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eavour to arrive at an agreed distribution acceptable to all parties. This only shows that it is the modality of distribution which were tried to be worked out. The contemporary correspondence, above referred to, would also show that the letters exchanged between the brothers were in amiable language. It is thus clear that at this stage the parties had not reached a stage of break where an adjudication of dispute had become inevitable. Thereafter, in September, 1988 letters were written as to the distribution of properties. The letter written by the appellants on 16.09.1988 and its reply of 04.10.1998 clearly show that there was not yet a break down of the agreement, in fact, on behalf of the respondents. It was suggested that a Committee appointed by the partners is seized of the matter. It is clear from a reading of this letter that the parties, as late as in October, 1988 were trying to obtain an amicable resolution. This situation continued on 18.03.1989 as well. The accounts were sent by the respondents. The letter, inter alia, annexed certain confirmatory letters and requested that the accounts be confirmed by the appellants. In reply thereto in May, 1989 the accounts were se ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he appellants under Section 20 of the Act, 1940 asking for reference was beyond time under Article 137 of the Limitation Act. The learned Judges ought to have allowed the appeal and quashed and set aside the impugned order passed by the learned Single Judge and ought to have restored and allowed arbitration suit filed by the appellants. As already noticed, the correspondence between the parties, in fact, bears out that every attempt was being made to comply with and carry out the reciprocal obligations spelt out in the agreement between the parties. As rightly pointed out by learned counsel for the appellant that the learned Judges of the Division Bench have erred in coming to the conclusion that the distribution of immovable properties in specie as provided in the Deed of Dissolution dated 26.03.1987 and a Supplementary Agreement dated 20.03.1987 could not be done before 31.05.1987 due to some differences. There is absolutely no material on record on the basis of which the learned Judges could have come to such a conclusion. None of the correspondence referred to by the learned Judges spells out the existence of any disputes as a result of which the properties could not be distrib ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hi Development Authority, [(1988) 2 SCC 338 at 340, this Court holding that the application under section 20 was filed within time examined that: "...a party cannot postpone the accrual of cause of action by writing reminders or sending reminders but where the bill had not been finally prepared, the claim made by the claimant is the accrual of cause of action. A dispute arises where there is a claim and a denial and repudiation of the claim. There should be a dispute and there can only be a dispute when a claim is asserted by one party and denied by the other on whatever grounds. Mere failure or inaction to pay does not lead to the inference of the existence of dispute. Dispute entails a positive element and assertion of denying, not merely inaction to accede to a claim or request. Whether in a particular case dispute has arisen or not has to be found out from the facts and circumstances of the case." In the instant case, correspondence was not merely in the nature of reminders but also instruments to resolve the matter and amicably negotiate. Therefore, when the negotiations were taking place between the parties by way of various letters written by both parties the right to ap ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... roperties. In reply to this was the communication relied on by the respondents from Dr.Gaur Hari Singhania [Respondent] to Shri Hari Shankar Singhania [appellant No.1] dated 4th October, 1988. This communication also does not reveal either hostility or dispute and only exposes an effort "to expedite the distribution". The last sentence of the above mentioned communication reads: "I am equally anxious that this matter should be amicably sorted out as early as possible." Therefore, we observe that the right to apply under section 20 of the Arbitration Act, 1940 accrued to the appellants only on the date of the last correspondence between the parties and the period of limitation commences from the date of the last communication between the parties. Therefore, the finding of the High Court that the application under section 20 of the Arbitration Act, 1940, is beyond the period of limitation is erroneous. Further, in an English decision rendered by the Court of Appeal in Hughes v Metropolitan Rly. Co., it was held that, where negotiations for settlement are pending, the strict rights of the parties do not come into play. It is also pertinent to note that under the new Act, namely ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in the family. Even a semblance of a claim or some other ground, as say affection, may suffice as observed by this Court in the case of Ram Charan v. Girija Nandini AIR 1966 SC 323. In Lala Khunni Lal v Kunwar Gobind Krishna Nairain, the Privy Council examined that it is the duty of the courts to uphold and give full effect to a family arrangement. In Sahu Madho Das Ors v Pandit Mukand Ram Anr., 1955 (2) SCR 22 [Vivian Bose Jagannadhadas and BP Sinha JJ.] placing reliance on Clifton v Cockburn, (1834) 3 My K 76 and William v William, (1866) LR 2Ch 29, this Court held that a family arrangement can, as a matter of law, be implied from a long course of dealings between the parties. It was held that "..so strongly do the courts lean in favour of family arrangements that bring about harmony in a family and do justice to its various members and avoid, in anticipation, future disputes which might ruin them all, that we have no hesitation in taking the next step (fraud apart) and upholding an arrangement.." The real question in this case as framed by the Court was whether the appellant/plaintiff assented to the family arrangement. The court examined that "the family arrangement w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... orced if honestly made the object of the arrangement is to protect the family from long drawn litigation or perpetual strives which mar the unity and solidarity of the family and create hatred and bad blood between the various members of the family. Today when we are striving to build up an egalitarian society and are trying for a complete reconstruction of the society, to maintain and uphold the unity and homogeneity of the family which ultimately results in the unification of the society and therefore, of the entire country, is the prime need of the hour the courts have, therefore, leaned in favour of upholding a family arrangement instead of disturbing the same on technical or trivial grounds. Where the courts find that the family arrangement suffers from a legal lacuna or a formal defect the rule of estoppel is pressed into service and is applied to shut out plea of the person who being a party to family arrangement seeks to unsettle a settled dispute and claims to revoke the family arrangement The law in England on this point is almost the same." The valuable treatise Kerr on Fraud at p.364 explains the position of law, "the principles which apply to the case of ordinary com ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... here were efforts made to amicably settle the dispute between the parties. Also as an admitted fact the appellants and respondent Nos. 10 to 20 were at all material times and still are ready and willing to do all the things necessary for the proper conduct of the arbitration including the appointment of Arbitrator. Further it is not fair on the appellants to let this dispute continue, with the assets in question under the control and enjoyment of the contesting respondents 1-9. It may be mentioned that even though the plea of extension of limitation has not been taken into account by the appellants in the application filed and the learned counsel for the respondents has objected to the learned counsel for the appellants making submission pertaining to extension of limitation to file the present application, learned Single Judge of the High Court has permitted the learned counsel for the appellant to make submissions in this regard without the plea of extension of limitation being taken in the application. Why the dispute between members of family should be settled:- In the instant case, the partnership firm was dissolved w.e.f. March, 1987 by consent of parties. The Deed of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eir shares i.e. one-third share each after paying their very property tax and other outgoings. Such credit balance in the account of such bankers is being paid to the branches of Singhania family from time to time. The three branches of Singhania family are showing the rental income in their returns of income tax as income from house property and have to pay income-tax thereon in accordance with law. Furthermore, the three branches of Singhania family are showing these properties having their own undivided proportionate share in their wealth tax returns and have to pay wealth tax therein in accordance with law. It is stated that Hari Shankar Singhania, appellant No.1 and other members of Lakshmi Pat Singhania branch are not being credited with or paid any monies/income whatsoever in respect of the Bombay property since the date of dissolution of J.K. Bankers although they have to pay wealth tax returns. It is stated by the appellants that the immovable properties in possession of the various respondents are extremely valuable and required to be protected pending disposal of arbitration. It is also stated that similar interim reliefs have been granted to the appellants as far back a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... trar General, Supreme Court of India, New Delhi 110 001 with reference to the conciliation in the matter. The letter reads thus: "The Hon'ble Supreme Court of India vide its Order dated 06.09.2005 referred the above matter for conciliation by me. I have held many meetings between the parties and at one stage I was under the impression that a conciliation could be possible, but unfortunately at a later stage it is found that such a result could not be achieved. Having considered all the possibilities, I am to report to the Hon'ble Court that the conciliation in the case referred to above, has failed. Hence, I request you to kindly inform the Court accordingly. I express my gratitude to the Court for having referred the conciliation to me." It is thus seen that the above facts would clearly go to show that the contesting respondent Nos. 1-9 are not at all interested in any conciliation, mediation or arbitration but only interested in enjoying the bulk of the immovable properties of the firm and refusing to carry out their obligations under and pursuant to the said Deed of Dissolution by permitting the distribution of the said properties in specie and free from any encumbrance a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... proceedings before the Arbitrator shall be governed by the provisions contained in the Indian Arbitration Act, 1940 or by any statutory modification or re-enactment thereof. It is seen from the plaint filed in the arbitration suit the following disputes and differences, amongst others, have arisen between the parties and which are to be resolved by the sole Arbitrator pursuant to the agreement:- "(a) To the extent defendant themselves are occupying such properties, the defendants should be directed to vacate the properties to enable distribution of the said properties in specie free from encumbrances; (b) The defendants obligation to have vacant possession of the immoveable properties listed at items 1 to 13 of Exhibit D hereto and to ensure that persons other than themselves actually vacate the said properties so that the same are available for distribution in specie free from encumbrances between the plaintiffs and defendants pursuant to the said Deed of Dissolution; (c) Directions and steps be taken by defendants to achieve the vacant possession mentioned in paragraph (a) and (b) above; (d) Distribution of the abovementioned properties in specie free from encumbrances b ..... 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