JUDGMENT
S.M. Jhunjhunwala, J.
1 By this petition the petitioners are seeking enlargement of time to make and publish the award and directions to the effect that the arbitration proceedings pending before the arbitrators viz., Chief justice P.N. Bhagwati (Retired) and Mr. Justice V.D. Tulzapurkar (Retired) be proceeded with notwithstanding the filling of a suit being O.S. Suit No. 1016 of 1989 filed by respondent No. 32 on behalf of respondents 18 and 21 herein in the Court of the First Additional Judge, City Civil Court, at Hyderabad, which suit has now been transferred to this Court and is still pending. The petitioners are also seeking certain inter-locutory reliefs as prayed for in the petition it is necessary to recall material facts which led to the present dispute.
2. One Ramesh Chand (since deceased ), Dr. Naresh Chand and Mahesh Chand have been real brothers. Ramesh Chand died in a car accident at the age of 47 years on 18th December, 1986. The last petitioner is the widow and the 2nd and 3rd petitioners are the daughters of the said Ramesh Chand. The petitioners are hereinafter jointly referred to as ‘Ramesh Chand Group’. The said Dr. Naresh Chand is the respondent No. 1 and the said Mahesh Chand is the respondent No. 5 in the petition. Respondent No. 2 is the wife and respondents 3 and 4 are the minor children of the said Dr. Naresh Chand. The respondent Nos. 1, 2, 3 and 4 are hereinafter jointly referred to as ‘Naresh Chand Group’. Respondents 6 to 21 are the children of the said Mahesh Chand out of which respondents 18,19,20 and 21 have been minors at the material time. Respondents 5 to 21 are hereinafter referred to as ‘Mahesh Chand Group’.
3. The businesses of the companies consisting of respondents 22 to 31 and of the partnership firms and associations of firms set out in Ex. ‘A’ to the petition were until 18th December, 1986 carried on by one or more of the members of the there groups. The said three groups also had controlling interest in Western India Glass Works Ltd., a company having its office at C- 11, MIDC Industrial Area, Village Nawda, Taluka Panvel, District Raigad, Maharashtra, hereinafter, referred to as ‘WIG’. The said Ramesh Chand Group had 28% share in business of the said WIG. There is a property at Hyderguda, Hyderabad, which belongs to respondent No. 30. There is an agricultural farm known as Shivbaug at Hyderabad which belongs to respondent No. 23.
4. After the demise of the said Ramesh Chand, disputes arose between the said Ramesh Chand Group on the one hand and the said Naresh Chand Group and Mahesh Chand Group on the other hand in relation to the said businesses as also in relation to the 28%, share of the said Ramesh Chand Group in the business of the said WIG. The said Ramesh Chand Group filed a Company Petition being Company Petition No. 49 of 1988 for winding up of Mahalaxmi Glass Works Pvt. Ltd., the respondent No. 22 herein and also took out Company Application No. 28 of 1988 therein for interim reliefs. On 14th September, 1988, the said Company Petition No. 49 of 1988 was admitted and was ordered to be advertised. The said Mahalaxmi Glass Works Pvt. Ltd., the respondent No. 22 herein, filed an appeal being Appeal No 1205 of 1988 against the said order dated 14th September, 1988. The said appeal was ultimately withdrawn on 31st January, 1989.
5. In order to preserve family peace and harmony and to resolve all disputes and differences between the said three groups and to avoid future disputes, the said three groups arrived at a family arrangement whereby the said Ramesh Chand Group agreed to go out of the said businesses and to serve its connection with the said businesses, companies, firms and associations of persons and the said WIG and to resolve the value of their 1/3rd share therein including in the said Hyderabad property and also the interest to the extent of the 28% in the business of the said WIG. The said three groups were unable to agree upon the value of the 1/3rd share of the said Ramesh Chand in the said business including the said Hyderabad property and the interest to the extent of 28% of the said Ramesh Chand Group in the business of the said WIG, and the mode, manner and time of payment thereof and as to whether payment thereof was to be made with or without interest In order to resolve these disputes, the parties agreed to refer these disputes and differences to the arbitration of Chief justice Mr. P.N. Bhagwati (Retired) and Mr. Justice V.D. Tulzapurkar (Retired) (hereinafter referred to as the said arbitrators ), and an agreement dated 3rd January, 1989 was executed. A copy of the said agreement dated 3rd January, 1989 is annexed and marked as Exhibit ‘C’ to the petition. The said agreement was a part of the family arrangement, and was signed by the respondent No. 5 for himself and on behalf of respondents 18 to 21 as their father and natural guardian.
6. The relevant clauses for the purposes of the present petition, of the said agreement dated 3rd January, 1989 are 4, 10, 12, 14, 15, 16 and 17, which read as under:—
“4. The parties hereto agree to refer and hereby refer to the summary arbitration of Mr. Justice P.N. Bhagwati (Retired) and Mr. Justice V.D. Tulzapurkar (Retired), the following issues and all other connected and incidental issues:—
(a) The determination of the value of the 1/3rd share of the Ramesh Chand Group in the aforesaid businesses, including the Hyderabad properties and the value of the interest to the extent of 28% of the Ramesh Chand Group in the business of WIG.
(b) The aforesaid valuation shall be made as on the Relevant Date. The parties shall be at liberty to urge their respective contentions in regard to the mode and manner of such valuation, including the question as to how, in what manner and to what extent the claims liabilities and demands in respect of the aforesaid businesses including the Hyderabad properties pertaining to the period prior to the Relevant Date which may be crystalised or raised subsequent to the relevant Date are to be valued.
(c) Whether any interest and if so, at what rate, may be awarded as from the Relevant Date and/or pendente lite and/or from the date of the award till realisation .
(d) The determination of the mode, manner and time of payment of the aforesaid value of the 1/3rd share of the Ramesh Chand Group in the aforesaid businesses including the Hyderabad properties and the value of the interest to the extent of 28% of the Ramesh Chand Group in the business of WIG, and interest, if any as determined by the learned Abitrators and by whom.
10. The arbitrators shall make and publish their award within six months from the date of entering upon the reference under this agreement. The arbitrators shall have power to extend the said period by consent of the persons representing the parties as mentioned in clause 20 below.
12. The parties hereto agree to obtain a consent order of reference to arbitration from the High Court of Bombay under section 20 of the Arbitration Act, 1940 in terms of this agreement and on such order of reference being made, the Ramesh Chand Group agrees and undertakes to withdraw Company Petition No. 49 of 1988 and the Company Application No. 35 of 1988 and have the orders passed therein vacated.
14. The party of the 11th Part shall repay the following deposits, together with accrued interest thereon, to the Ramesh Chand Group in the following manner:—
(a) Rs. 2 lakhs to Suruchi Chand on or before 31st December, 1988;
(b) Rs. 2 lakhs to Saloni Chand on or before 31st January, 1989;
(c) Rs. 2 lakhs to Shivani Chand, and
d) Rs. 1.5 lakhs to Ramesh Chand Group representing the deposit of the deceased Ramesh Chand, both to be paid on or before 28th February, 1989.
15. Until the payment in full to Ramesh Chand Group of the value of its one—third share in the said businesses, including the said Hyderabad properties and the value of the interest to the extent of 28% of the Ramesh Chand Group in the business of WIG and the interest, if any, awarded thereon, Saloni Chand shall continue to be employed as an Executive Officer and to receive the present salary from the party of the 4th Part and the party of the 11th part and shall enjoy all the perquisites that are presently given and made available by the parties of the 4th part and the 11th part. So far as the perquisite by way of the telephone facility at the residence is concerned the expenses shall continue to be payable in the same manner as at present subject to the limit of Rs. 5000/- per month in respect of all the telephones at the residence of Saloni Chand.
16. It is agreed that the Ramesh Chand Group shall be paid by the parties of the 2nd to the 13th part or any one or more of them in the following manner :
(a) Rs. 3,75,000/- to be paid on or before 31st December, 1988;
(b) Rs. 50,000/- to be paid on or before 31st December, 1988;
(c) Rs . 1,50,000/- to be paid on or before 15th January, 1989.
(d) Rs 1,50,000/- to be paid on or before 15th April, 1989.
(e) Rs. 1,50,000/- to be paid on or before 15th July, 1989.
(f) Rs. 1,00,000/- to be paid on or before 15th October, 1989.
It is agreed that the aforesaid amounts shall be paid to M/s. Bachubhai Munim & Co., for and on behalf of the Ramesh Chand Group.
17. From December 1989 the parties of the 2nd to the 13th part or any one or more of them shall pay a sum of Rs. 50,000/- per month which sum shall be paid on or before the 15th of every month and the first of such payments shall be made on or before the 15th December, 1989 and the subsequent payments on or before the 15th of every succeeding month thereafter to the Ramesh Chand Group in the manner more particularly set out hereinafter until the date of the final award. As from the date of the final award a sum of Rs. 50,000/- per month shall be paid on or before the 15th of every month to the Ramesh Chand Group until the value of the one third share in the said business including the Hyderabad properties and the interest to the extent of 28% of the Ramesh Chand Group in the business of WIG with interest thereon that may be awarded by the Arbitrators is paid in full and the question as to which of parties shall be liable to pay the same shall be decided by the arbitrators. Provided that the arbitrators shall decide as to whether and in what manner and to what extent the liability to pay Rs. 50,000/ , salary, perquisites and dividends shall be reduced on part payments from time to time towards the amount of the final award together with interest, if any, awarded . The said monthly sums of Rs. 50,000/- shall be paid to M/s. Bachubhai Munim & Co., on behalf of the Ramesh Chand Group. The said sum of Rs. 50,000/- shall belong to and be divided equally between Suruchi Chand, Saloni Chand and Shivani Chand.”
7. In pursuance of the said agreement and while acting upon clause 12 thereof, the petitioners, in the month of January 1989, filed against the respondents herein an arbitration suit being Arbitration Suit No. 197 of 1989 in this Court for filing the said arbitration agreement dated 3rd January, 1989 in this Court and for an order of reference to the said arbitrators being the arbitrators appointed by the parties to the said agreement. In the said Arbitration Suit No. 197 of 1989, the petitioners applied for the appointment of respondent No. 5, being the father and natural guardian of the minor respondents 18 to 21, as guardian ad litem of the said minor respondents 18 to 21. In said proceedings, respondent No. 5 affirmed and filed an affidavit, inter alia, admitting that respondent No. 5 was the father and natural guardian of the minor respondents No. 18 to 21 and that he had signed the said agreement dated 3rd January 1989 also in his capacity as the father and natural guardian of the said Respondents 18 to 21. It was further started in the said affidavit that it was in the interest of the said minor respondents 18 to 21 that the disputes which had arisen amongst the said three groups be referred to the said arbitrators and orders accordingly be passed by the Court under section 20 of the Arbitrators Act, 1940 in the said suit. The respondent No. 5 has further stated in the said affidavit that he was agreeable to be appointed as guardian ad litem of the said minor respondents 18 to 21. On 31st January, 1989, an order was made by this Court whereby respondent No. 5 was appointed as guardian ad litem of the minor respondent 18 to 21 in the said Arbitration Suit No. 197 of 1989. I may mention here that the petitioners had also filed an Arbitration Petition No 16 of 1989 in the said Arbitration Suit No 197 of 1989. In the said Arbitration petition No. 16 of 1989, the petitioners had also applied for appointment of respondent No. 5 being the father and natural guardian of respondents 18 to 21. as guardian ad litem of the said minor respondents 18 to 21. In the said proceedings also the respondent No. 5 had filed a similar affidavit which was filed in the said Arbitration Suit No. 197 of the 1989. On 31st January, 1989, an order was made by this Court whereby respondent no. 5 was appointed as guardian ad litem of the minor respondents 18 to 21 in the said Arbitration Petition No. 19 of 1989.
8. On 27th January, 1989, another affidavit was filed by respondent No. 5 wherein respondent No. 5 has admitted that he had signed the said arbitration agreement as father and natural guardian of the said minor respondents 18 to 21 and that the interest of the minor respondents would not be adversely affected if the respondent No. 5 was appointed as guardian ad litem of the said minor respondents. Respondent No. 5 has further stated in the said affidavit that it was in the interest of the said minors that the Court should pass the order in terms of the consent terms settled between the parties.
9. On 31st January, 1989, by separate orders, this Court appointed respondent No. 5 as guardian ad litem of respondents 18 to 21 for the purposes of the said Arbitration Suit No. 197 of 1989, the said Arbitration Petition No. 16 of 1989 as aforesaid and also for the arbitration proceedings before the said arbitrators and certified the compromise recorded in the consent terms filed in the said Arbitration Petition No. 16 of 1989 for the benefit of the said minors, viz., respondents 3 and 4 as also respondents 18, 19, 20 and 21. I may mention here that the respondent No. 1 was appointed as guardian ad litem of respondents 3 and 4 in the similar manner in which the respondents No. 5 was appointed as guardian ad litem of respondents 18 to 21.
10. On 31st January, 1989 a decree on admission was passed by this Court in the said Arbitration Suit No. 197 of 1989 in terms of prayers (a) and (b) thereof and accordingly the said arbitration agreement was ordered to be filed in this Court and order of reference was made to the said arbitrators. The said arbitrators were directed to make and publish their award within six months from the date of entering upon the reference. I may mention here that as provided in the said consent terms, the said Appeal No. 1205 of 1988 filed by respondent No. 2 in the said Company Petition No. 49 of 1988 was withdrawn on 31st January, 1989 itself. The respondent No. 18 has attained majority on 12th January, 1990.
11. On 13th February, 1989 the said arbitrators entered upon the reference and held a meeting in which the said arbitrators gave certain directions, including directions appointing one Srinivasan of M/s. V. Shankar Iyer & Co., as an expert to advise and assist the said arbitrators for the purpose of determining in the first instance as to what should be the basis of the valuation of the said share of the said Ramesh Chand Group. On 11th April, 1989 another meeting was held before the said arbitrators. At both the said meetings held before the said arbitrators, the said Mahesh Chand Group, including the said minor respondents 18 to 21, by counsel and solicitors. Between 28th March, 1989 to 19th April, 1989 meetings were held by the said Srinivasan for the purpose of determining in the first instance as to what should be the basis of valuation of the share of the said Ramesh Chand Group. In these meetings the said Mahesh Chand Group, including the said minor Respondents 18 to 21, was represented by Counsel, solicitors and chartered accounts and also by respondent No. 5 himself.
12. On 20th June, 1989, respondent No. 32 filed a suit, being Suit No. 1016 of 1989 in the City Civil Court at Hyderabad on behalf of minor respondents 18 and 21 claiming to be their natural guardian in the said suit No. 1016 of 1989 (hereinafter referred to as “the said Hyderabad Suit”) declaration is sought to the effect that the said agreement dated 3rd January, 1989 is illegal, void and unenforceable at law. Various other reliefs are also claimed by respondent No. 32 on behalf of respondents 18 and 21 in the said suit.
13. Respondent No. 1 has filed an affidavit on his own behalf as also on behalf of respondents 2, 3 and 4 as also respondents 22 to 31 in reply to the above petition (Arb. Petition No.200, of 1989). In paragraph 2(a) of the said affidavit, the respondent No. 1 has stated as under:-
“(a) On or about 20th June, 1989, respondent Nos. 18 and 21 filed Suit No. 1016 of 1989 in the Court of the Additional Judge, City Civil Court at Hyderabad through Smt. Jamunabai respondent No. 32. The petitioners herein are party Defendants to the said suit amongst others. In the said suit, the plaintiffs represented by the said Smt. Jamunabai, have sought a declaration that the agreement dated 3rd January, 1989 is illegal, void and unenforceable in law and various other reliefs. A copy of the plaint in the said suit is annexed to this petition as Exhibit ‘N’. It is totally false to allege that the said suit was filed as a result of “collusion”, as alleged by the petitioners or otherwise. It is not for me to state as to whether the allegations made in the plaint in the said suit are correct or not. The fact remains that the controversy raised by the said respondent in the said suit is subjuaice and is required to be resolved by a judicial order, at the earliest possible. The petitioners herein made an application for stay of the said suit under section 34 of the Arbitration Act. By an order dated 15th December, 1989 passed by the Hon’ble Court at Hyderabad, the said application has been rejected. I crave leave to refer to the proceedings in the said suit and the above referred order passed by the Hon’ble Court. The controversy raised in the said suit has a direct and substantial bearing on the efficacy of the arbitration clause contained in the agreement dated 3rd January, 1989. The said arbitration clause is clearly severable from the other clauses in the said agreement. It was the essence of the said arbitration agreement that the arbitration proceedings be completed within a period of six months from the date the learned arbitrators entering upon the reference. The learned arbitrators did not appoint an umpire within a period of one month, or otherwise. The said period has expired for no fault of mine. In view of the pendency of the said civil suit in the Court at Hyderabad, it is futile for the petitioners to seek extension of time for resumption of arbitration as the said proceeding of arbitration would be hit by section 35 of the Arbitration Act, 1940.”
The Respondent No. 1 has further stated in the said affidavit that it is in the interest of justice that the proceedings in the above petition be adjourned sine die until the disposal of the said Hyderabad suit. The respondent No.1 has also raised the question of legal effect on the said arbitrators having not appointed an umpire. The respondent No. 1 has made further averments in the said affidavit which I think are not germane to the issue involved in the above petition.
14. Respondent No. 32 has also filed an affidavit in reply to the above petition for self as also on behalf of respondents 18 and 21. In paragraph 3 of the said affidavit, respondent No. 32 has stated as under:—
“32. I say that much prior to the filing of the above petition by the petitioners I have as natural guardian of respondents No. 18 and 21, on 20th June, 1989, have filed the suit being Original Suit No. 1016 of 1989 before the Court of the 1st Additional Judge, City Civil Court at Hyderabad inter alia for a declaration that the arbitration agreement dated 3-1-1989 alleged to have been entered into by petitioners and others, including respondents no. 18 and 21 who were both minors on 3-1-1989 and who were in my care and guardianship ever since their birth, is null and void inter alia on the ground that respondent No. 18 and respondent No. 21 herein were not properly and legally represented by a person competent to represent them and further that the purported arbitration agreement and order obtained thereon are squarely against the interest of respondent No. 18 and 21. In the said original suit at Hyderabad I have been appointed guardian of respondents No. 18 and 21. I crave leave to refer and rely upon all the plaint and proceedings of the Original Suit No. 1016 of 1989 filed by me on behalf of respondents No. 18 and 21 herein in the Court of the 1st additional Judge, City Civil Court at Hyderabad. I say that the basic issue is whether the purported arbitration agreement dated 3-1-1989 is binding on the respondents No. 18 and 21. The said issue can only be determined in O.S. No. 1016 of 1989 pending in Hyderabad Suit. The petitioners herein have tried to stall the said determination by adopting one proceeding after another, knowing full well that the said issue will be determined against them and seek to force the arbitration proceedings to continue in the meanwhile, which, I respectfully submit, is impermissible.”
Subsequently in the latter portion of the said paragraph 3 of the said affidavit., the respondent No. 32 has further stated as under:
“Without prejudice to the above submissions, I further submit that the Hyderabad suit involved the whole of the subject matter of the reference, between all the parties concerned, and in any event any orders passed by this Hon’ble Court would be intructous, as till the disposal of the said suit the reference cannot be proceeded with.”
In paragraph 5(a) of the said affidavit, respondent No. 32 has stated as under :
“5(a) Respondent No. 18 and 21 were born to me through respondent No. 5. 1 say that respondent No. 5 Shri Maheshchand was never married to me and my status to date remains that of an unmarried person. Respondents No. 18 and 21 were right since their birth under my protection, care and guardianship and therefore upto 21th January, 1990 I was the natural guardian of both respondents No. 18 and 21 in respect of their person as well as their property as provided under section 6 clause (b) of the Hindu Minority and Guardianship Act I say that on 12th January, 1990 respondent No. 18 has completed the age of 18 years thereby attaining majority and from 12th January, 1990 I continue of be the natural grardian of respondent No. 21 in respect of his person as well as property.”
I may mention here that as per the order made by the Hon’ble the Supreme Court in Transfer petitions bearing Nos. 95-97 of 1990 the said Hyderabad Suit has been transferred to this Court and the same is now pending in this Court.
15. In view of the confentions raised in the said affidavit of respondent No. 32 filed in reply to the above petition, Mr. Vahanvati, the learned Counsel appearing for respondents 18, 21 and 32 has submitted that since respondent No. 5 was not having the legal authority and was not legally entitled to represent the respondents 18 and 21 while entering into the said agreement being the agreement dated 3rd January, 1989, the said agreement is null and void and unenforceable at law and unless it is otherwise held to be legal and binding on the respondents 18 and 21, the question of enlargement of time to make and publish the award did not arise. He further submitted that in the circumstances of the case the said Hyderadad suit be first decided and the hearing of the above petition be adjourbad sine die until the disposal of the said Hyderabad suit.
16. I may mention here that respondent No. 5 who had failed affidavits admitting to be the father and natural guardian of respondents 18 and 21 and showing its willingness to be appointed as guardian ad item of respondents 18 and 21 as aforesaid, has curiously chosen not to file any affidavit either in reply to the above petition or to corroborate the allegations made by respondent No. 32 in her said affidavit in reply the petition. The respondent No. 5 has even chosen not to appear in Court in the above petition.
17. It is significant to note that in each of the above referred affidavits of respondent No. 5 the respondent No. 5 has categorically stated and admitted that residents No. 5 is the father and natural guardian of respondents 18 and 21 and that he was entitled to and also willing to be appointed as guardian ad litem for them. Not only this, but the respondent No. 5 was in fact appointed as guardian ad litem of the said respondents 18 and 21 by this Court for the purposes of the said Arbitration Suit No. 197 of 1989 and the said Arbitration Petition No. 16 1989, and the said arbitration proceedings. Consent terms filed in the said Arbitration Petition No. 16 of 1989 were certified to be in the interest of and for the benefit of the minors including the respondents 18 and 21. The said orders passed by this Court are binding on me and I cannot go behind the same in this proceedings. Moreover, in the said Arbitration Suit No. 197 of 1989, this Court has passed an order on 31st January, 1989 by which the arbitration agreement dated 3rd January, 1989 entered into between the petitioners and the respondents was ordered to be filed in this Court and order of reference to the said arbitrators was made. The said Arbitration Suit No. 197 of 1989 was filed under section 20 of the said Act. Section 20(1) and (5) of the said Act reads as under:—
20. Application to file in Court arbitration agreements —
(1) Where any person have entered in to an arbitration agreement before the institution of any suit with respect to the subject matter of the agreement or any part of it, and where a difference has arisen to which the agreement applies, they or any of them. Instead of proceeding under Chapter II, may apply to Court having jurisdiction in the matter to which the agreement relates, that the agreement be filed in Court
(2) ….
(3) ….
(4) ….
(5) Thereafter the arbitration shall proceed in accordance with, and shall be governed by, the other provisions of this Act so far as they can be made applicable.
18. After Being satisfied about the existence of a valid, legal and binding arbitration agreement between the petitioners and the respondents and after making an order for filling thereof in this Court, this Court proceeded to make the said order of reference to he said arbitrators. The said order being final, it is neither open for me nor permitted of me nor possible for me to go behind the said order in the present proceedings.
19. In the present proceedings the basic questions which arise for consideration are two fold:
(1) Whether the Court should at this stage exercise its discretion to enlarge the time to make and publish the award ? and
(2) Whether the arbitration proceedings pending before the said arbitrators be proceeded with not withstanding the pendency of the said Hyderabad Suit ?
Accordingly, for the purpose of deciding the aforesaid questions involved in the above petition, I proceed on the basis that the respondent No. 5 was properly appointed guardian ad litem of respondents 18 and 21 and had the proper and legal authority to enter into said arbitration agreement dated 3rd January, 1989 for and on behalf of respondents 18 and 21 and that the said order of reference to the said arbitrators is valid. Mr. Chenoy , learned counsel appearing for the petitioners, has moreover made a statement to the effect that the petitioners would not look upon respondents 18 and 21 to make any payment of any amount that may be awarded d to the petitioners by the said arbitrators in the said arbitration proceedings. This, in my view, further sufficiently safeguards the interest of the said respondents 18 and 21.
20. Mr. Zaiwala, learned Counsel appearing for respondents 1 to 4 and 22 to 32, has submitted that if prayer (a) of the above petition is not pressed, the respondents 1 to 4 and 22 to 32 would not oppose enlargement of time for making and publishing the award by the said arbitrators. In other words, his grievance is not against the enlargement of time for making and publishing the award but is against the said arbitrators. Proceeding with the said arbitration reference during the pendency of the proceeding with the said arbitration reference during the pendency of the said Hyderabad suit which has been filed by respondent No. 32 on behalf of respondents 18 and 21 wherein a declaration, inter alia. has been sought to the effect that the said agreement dt 3rd January, 1987 is illegal, void and unenforceable in law. Mr. Zaiwala has submitted that the said Hyderabad suit being a legal proceeding commenced between the parties to the said arbitration reference upon the whole of the subject matter of the said reference, the stay of the said suit under section 34 of the said Act having been refused, and the notice thereof having been given to the said arbitrators, all further proceedings in the said pending reference would be invalid under section 35 of the said Act and as such time to make and publish the award be not enlarged.
21. Section 35 of the said Act reads as under:
” 35. Effect of legal proceedings on arbitration.
1) No reference nor award shall be rendered invalid by reason only of the commencement of legal proceedings upon the subject matter of the reference, but when legal proceeding upon the subject matter of the reference, but when legal proceeding upon the whole of the subject-matter of the reference have been commenced between all the parties to the reference and a notice thereof has been given to the arbitrators or umpire, all further proceedings in a pending reference shall , unless a stay of proceedings is granted under section 34, be invalid.
2) in this section the expression “parties to the reference” includes any person claiming under any of the parties and litigating under the same title’.
The underlying object of section 35(1) is to stop the conflict of decisions between the private forum and the public tribunal. The section contemplates that mere commencement of the legal proceeding will not by itself render the arbitrations proceeding invalid. The reasons why the whole of sub section (1) of section 35 has been put in the negative form is to give only a limited right to the party commencing the legal proceeding. He cannot, by his own act by commencing the same , simplicity render the arbitration proceeding invalid. He can effectively do so only upon fulfilling the preconditions laid down in the said section. Hence the legal proceeding, in order to invalidate the arbitration proceeding , must include the whole of the matter which is the subject matter of the reference.
22. This leads to the interpretation and understanding of the words “whole of the subject matter of reference” used in the said section 35 of the said Act. In support of his submission that the said Hyderabad Suit covers the whole of the subject matter of the said reference, Mr. Zaiwala has relied upon the following observations made by Mr. Justice Blagden in (Re : All India Groundnut Syndicate)1, reported in A.I.R. 1945 Bombay 497:
“No doubt what the legislature had in mind by the subject matter of the reference was the questions which arose on the pleadings if any, in the reference or at all events, the questions which the arbitrators were investigating. But it would be an absurdity if a legal proceeding which had for its object or one of its objects the ousting of the arbitrators from jurisdiction and the complete supersession of the arbitration as a whole could have been taken and yet the arbitration could go on merrily in spite of those proceeding even if no stay had been granted under section 34 or otherwise.”
In that case an agreement was entered on 23rd April, 1941 under which the petitioner therein agreed to supply a considerable quantity of groundnuts to the respondents therein. Clause 10 of the said agreement provided for as follows:
“All disputes whatsoever, which shall arise between the parties hereto out or of in connection with this agreement, or as to the construction or application thereof, or the respective rights and obligations of the parties hereunder, or as to any clause or thing herein contained, or any account or valuation to be made hereunder or as to any other matter in any way relating to these presents, shall be referred to arbitration, in Bombay City”.
After supplying certain amounts of goods thereunder, disputes arose between the parties thereto. Towards the end of July 1941, a meeting of representatives of the said parties took place at Madras. According to one of the said parties, a fresh agreement was arrived at on that occasion whereas the other of such parties denied the same. Hence, whether any fresh agreement was arrived at towards the end of July, 1941 at the said meeting of the representatives was in dispute. If it was, it was also in dispute as to whether such fresh agreement superseded the original agreement or that it was a modification or working out of that agreement. Reference to arbitration as per the above quoted clause 10 of the said original agreement was made, arbitrators were appointed, pleadings had been exchanged, issues were settled and even part evidence was adduced and documents were produced. At a last date, a contention was raised on behalf of the petitioner therein that the arbitrators had no jurisdiction on the ground that the question between the said parties arose not under the agreement which contained the said clause 10, that is, the April agreement, but under the said fresh July agreement. Eventually, the petitioner therein instituted a suit in the Court of the Subordinate Judge at Chittoor. The amended plaint in that suit contained paragraph 12(a) whereby the petitioner therein had asked the Chittoor Court to take jurisdiction over the subject matter of the suit superseding the arbitration. For the rest, the plaint did not deal with all the matter that were in dispute before the arbitrators. After considerable time, the plaint was handed back to the petitioner therein for being presented at a proper Court. Although an appeal from the order of return of the plain for presentation at a proper Court was preferred, according to the respondent therein, it was preferred at a belated stage. Meanwhile, on 28th January, 1944, the arbitrators made an award against the petitioner therein which was sought to be set aside by the petitioner therein. In the petition to set aside the said Award, Mr. Maneksha, the learned Counsel appearing on behalf of the respondent therein, had submitted that the Plaint in the said Chittoor suit did not cover the whole of the subject matter of the reference. In view of the aforesaid clause 12(a) in the plaint, the above refered observations were made by Blagden, J. It is correct that an arbitration agreement may be superseded by a new agreement which has the effect of extinguishing the existing agreement. However, having regard to the facts and circumstances of the present case in my view, the said judgment in the matter of All India Groundnut Syndicate is distinguishable. In my view, the submission of Mr. Zaiwala is not correct.
23. The expression “the whole of the subject matter of the reference” has a special significance of its own and it is only when this is strictly complied with that it might have the force to render the arbitration proceeding invalid. The principal behind this is to have the entire disputes decided in legal preceding without leaving any part to be decided in the pending arbitration proceeding so that there might not be any possibility of conflict of decisions. In the instant case the subject matter of the reference is what is incorporated in clause 4 of the said agreement dated 3rd January, 1979, viz.:
(i) determination of the value of the 1/3rd share of the said Ramesh Chand Group in the businesses mentioned in the said agreement including the Hyderabad properties as on 18th December, 1986;
(ii) determination of the value of the interest to the extent of 28% of the said Ramesh Chand Group in the business of the said WIG as on 18th December, 1986;
(iii) whether any interest and, if so, at what rate may be awarded as from 18th December, 1986 and/or pendente lite and/or from the date of award till realisation ;
(iv) determination of mode, manner and time of payment of the aforesaid value of the 1/3rd share of the said Ramesh Chand Group in the said businesses, including the Hyderabad properties and the value of the interest to the extent of 28% of the said Ramesh Chand Group in the business of the said WIG and interest, if any, as may be determined by the said arbitrations and by whom.
24. The said Hyderabad suit filed on behalf of respondents 18 and 21 is for declaration that the said agreement is void, illegal and unenforceable at law as according to respondent No. 32, respondent No. 5 had no legal authority to enter into the same for and on behalf of respondents 18 and 21. The said prayer was neither and nor could be the subject matter of reference to arbitration for the same went to the very root of the contract between respondents 18 and 21 on the one hand and the petitioners and other respondents on the other and implied that there was no agreement at all between the respondents 18 and 21 on the one hand and the petitioners and other respondents on the other hand.
25. In this connection, Mr. Chinoy, learned Counsel appearing for the petitioners, has invited my attention to the case of Shiva Jute Baling Ltd v. Hindley and Company Ltd., . In this case, the appellant, Shiva Jute Baling Ltd. (hereinafter referred to the said Company), entered into a contract with the respondent, Hindley & Co. Ltd., which was incorporated in England and had its registered office in London. The contract was for the supply of 500 bales of jute of crop 1945-46 to be shipped from Calcutta or Chittagong to Rio de Janeiro, when freight became available. The said contract contained a provision for arbitration. Some bales were consigned against the said contract in part performance thereof. The said company repudiated the said contract for the balance quantity and thus, disputes and differences arose between the parties thereto and the respondents therein eventually claimed default in terms of the said contract. The respondent therein refered the matter to arbitration. The said Company filed an application under section 33 of the Arbitration Act, 1940, on the Original Side of the Calcutta High Court, in which it made three prayers, namely-
(a) declaration that the arbitration agreement, if any, between the parties was void ab initio on the ground of uncertainty and was not binding on the said Company:
(b) declaration that there was in facts and in law no contract between the parties on account of mutual mistake of the parties and
(c) that the Court might be pleased to adjudicate on the existence and/or validity of the alleged arbitration agreement and the effects of the same.
Notice of the above application was given to the arbitrators. The arbitrators, however, proceeded with the arbitration and gave their Award. A petition was, thereafter, filed by the said Hindley & Co. Ltd. In the Calcutta High Court under section 5 of the Arbitration (Protocal and Convention) Act, 1937 and along therewith, the said Award was filed and prayers for judgment being pronounced in accordance thereof and decree being passed accordingly were also made. When the said petition under the Protocol Act came to be heard, one of the points urged on behalf of the said company was as under:
“(1) that the award was made after the notice of filing of the petition dated August 10, 1949, under section 35 of the Arbitration Act had been given to the respondent and the arbitrators and consequently the award made after the receipt of the said notice and during the pendency of the said application was bad under section 35 of the arbitration Act.”
The said contention was negatived by the learned Single Judge as also by the Division Bench of the Calcutta High Court in an appeal preferred by the said Company. Special Leaves petition made by the said company was granted and the said point alongwith other point was again raised before the Apex Court of the country. While considering the said point, in paras 11 and 13 of the said judgment, the Hon’ble Supreme Court has held as under:
“11. Then we come to section 35. It provides that no reference or award shall be rendered invalid by reason only of the commencement of legal proceedings upon the subject matter of the reference, but when legal proceedings upon the whole of the subject matter of the reference have been commenced between all the parties to the reference and a notice thereof has been given to the arbitrators or umpire, all further proceedings in a pending reference shall, unless a stay of proceedings is granted under section 34, be invalid. It will be seen, therefore, that section 35 makes proceedings before the arbitrators invalid in the absence of an order under section 34 staying the legal proceedings where the whole of the subject matter of the reference is covered by any legal proceedings taken with respect to it. In other words, an arbitrator can continue the proceedings and proceed to make the award on the reference, unless the whole of the subject matter of the reference is covered by the legal proceedings which have been instituted. Assuming that the proceedings”, taken under section 33 are “legal proceedings”, mentioned in section 35, the question which immediately arises on the facts of the present case is whether the whole of the subject matter of the reference in this case was covered by the legal proceedings taken by the appellant by its application under section 33 of the Arbitration Act.”
“(13) Then we turn to prayers (a) and (b) of paragraph 9 of the application based on paragraphs 6 and 7 thereof. These prayers undoubtedly cannot be the subject matter of arbitration, for they go to the very root of the contract and imply that there was no contract between the parties at all and therefore no arbitration agreement. These prayers can certainly form the basis of an application under section 33, for they relate to the existence and validity of the arbitration agreement contained in the contract, but not being matters within the competence of the arbitrators, there can be no identity of the subject matter under reference to the arbitrators and the subject matter of prayers (a) and (b). The conclusion, therefore, is that prayers (a) and (b) can be the subject-matter of an application under section 33 but they cannot be the subject matter of the reference to the arbitrators. Therefore, the subject matter of the legal proceedings under section 33 in this case cannot and does not cover any part of the subject-matter of the reference. Section 35 in consequence can have no application and the award cannot be assailed as invalid on the ground that it violates section 35 of the Arbitration Act. The first contention, therefore, must fail.”
I am bound by the decision of the Hon’ble Supreme Court of India in the matter of Shiva Jute Baling Ltd. v. Hindley and Co. Ltd. The ratio of the said judgment correctly applies to the facts and circumstances of the present case.
26. Thus, prayer (a) of the said Hyderabad suit which is the main prayer in that suit, cannot be the subject matter of arbitration. Hence, there can be no identity of subject-matter under reference to the said arbitrators and the subject matter of prayer (a) of the said Hyderabad suit. Section 35 of the said Act in consequence can have no application since section 35 makes proceedings before the arbitrators invalid where whole of the subject matter of the reference is covered by any legal proceedings taken with respect to it.
27. Mr. Chinoy has also relied upon the case of Rambilas Nandlal v. Imperial Oil Mills Ltd., , wherein disputes between a buyer and a seller were referred to arbitrators under the arbitration clause. While arbitration proceedings were pending, the seller filed a suit praying for a declaration that the contract and the bought and sold notes in respect thereof were void and for delivery up and cancellation of the contract. Notice of the said suit was served upon the arbitrators under section 35 of the said Act. However, the arbitrators made the award. Since the legal proceeding commenced was for a declaration that the contract was void and invalid and for cancellation and delivering up of the contract and as the validity or invalidity of the contract was not and could not be referred to arbitration under the arbitration clauses contained in the said contract, it was held that the award was not rendered invalid. It was further held that the legal proceeding commenced was not upon either the whole or part of the subject matter of the reference, the subject matter of the reference being a dispute relating to and arising out of the contract and the subject matter of the legal proceeding being the validity or invalidity of the contract. It was further held that section 35 of the said Act pre- supposes a legal proceeding which is capable of being stayed by the Court under section 34 of the Act. I am in agreement with the view taken in the said judgment.
28. Mr. Chinoy has also relied upon the case of Jawahar Lal Barman v. Union of India, , wherein the principal point relating to construction of sections 32 and 33 of the said Act was decided. In the case of Jawahar Lal v. Union of India, after the reference of disputes to arbitration was made, a petition was filed under section 28 alongwith section 33 of the said Act praying for suitable extension of time for the arbitrators to make their award. In defence, it was pleaded that no concluded contract was made between the parties and that there was no jurisdiction in the Court to grant extension under section 28 of the said Act. The trial Judge declared that there was a concluded contract between the parties under which the matter was duly referred to arbitration through an arbitration agreement clause in the contracts. As a result of the declaration he held that there was a valid reference to arbitration between the parties. Consequently he granted a month’s time to the arbitrators to make their Award. This decision was challenged by way of a revision petition preferred in the High Court of Punjab at Chandigarh. The High Court has confirmed the findings of the trial Court. Against the decision of the High Court, the matter went to the Apex Court by way of special leaves petition. The Supreme Court, while appreciating the effect of provisions contained in sections 32 and 33 of the said Act, held as under:
“Therefore, stated breadly, it would be correct to assume that the main object of introducing the new provisions of section 31, 32 and 33 was to entrust the decision of the relevant disputes to the specified Court and to require the parties to bring the said disputes for the decision of the said Court in the form of petitions. Remedy by a regular suit is intended to be excluded.”
Accordingly, Mr. Chinoy submitted that no suit would lie under section 32 of the said Act on any ground whatsoever for a decision upon the existence, effect or validity of an arbitration agreement or an award and as such, the said Hyderabad suit is not even maintainable in law. He further submitted that in the circumstances of the case, there is no question of adjourning the hearing of the above petition until disposal of the said Hyderabad suit. I accept the submissions of Mr. Chinoy. Accordingly in my view, notwithstanding the pendency of the said Hyderabad suit, the said arbitration reference pending before the said arbitrators can be proceeded with if the time to make and publish the award is enlarged by this Court under section 28 of the said Act. As a matter of fact, there is no serious objection to enlargement of time to make and publish the award in the said reference. In the circumstances stated herein above, it is obvious that the petitioners had been proceeding with the said arbitration reference with due deligience. The said Srinivasan, an expert, has already made his report advising the said arbitrators as to what should be the basis of valuation of the share of the said Ramesh Chand Group. The said report was made only on 30th July, 1989 after the said Srinivasan holding meetings between 28th March, 1989 and 19th April, 1989 where at the said Mahesh Chand Group, including respondents 18 and 21, was represented by Counsel, solicitors, chartered accountants and respondent No. 5 himself and the period of six months fixed for making and publishing the award has expired on 12th August, 1989. The petition has there after been filed expeditiously. According to the petitioners, on the basis advised by the said Srinivasan, several crores of rupees will be payable to the petitioners and hence respondent No. 32 has been put up by respondent No. 1, in collusion with respondent No. 5 to defeat the very purpose and object of arbitration. I am however not going into the merits of these allegations. Suffice it to say that in this case the reference has been made to two eminent persons having vast and rich judicial experience who till recently, have been occupying high judicial posts. Any delay if permitted to be caused in the expeditious disposal of the said reference may tend to defeat the very purpose of arbitration more particularly when the said arbitrators are vested with summary power with the consent of all the parties concerned. I am, therefore, inclined to exercise my discretion in favour of the petitioners and make an order for enlargement of time for making and publishing the award.
29. As regards the question of legal effect on the arbitrators having not appointed an umpire is concerned. I am of the view that the same is not fatal to the arbitration proceedings pending before the said arbitrators. Moreover, a Division Bench of this Court in the case of M/s. Modern Builders v. Hukmatrai N. Vadirani, , has held that the use of the word ‘shall’ in condition 2 of the implied conditions of arbitration agreement mentioned in the first schedule of the said Act is merely directory and the failure to appoint an umpire within the time is a mere irregularity which will not render subsequent appointment of the umpires invalid or deprive him jurisdiction or invalidate the subsequent proceedings. Hence omission to appoint an umpire is merely an irregularity and not illegality and would not consequently vitiate to the award.
30. So far as prayer (c) of the petition is concerned, I am of the view that the interest of Ramesh Chand Group has been safeguarded by making sufficient provisions in the consent-terms filed in the said Arbitration Petition No. 16 of 1989 and in the consent order passed in terms thereof by this Court on 31st January, 1989. The petitioners are at liberty to take such proceedings as are available to them in law for enforcement of the said consent order.
31. Accordingly, I pass the following orders:-
(i) Time for making and publishing the award by the said arbitrators is extended upto 31st March, 1991;
(ii) The said Hyderabad suit, being OS suit No. 1016 of 1989 filed by respondent No. 32 on behalf of respondents 18 and 21 originally in the Civil Court at Hyderabad and now pending in this Court is not a legal proceeding on whole of the subject matter of the said reference pending before the said arbitrators and as such, despite the pendency of the said Hyderabad suit, the arbitration proceedings pending before the said arbitrators may be proceeded with ;
(iii) In view of the consent order being the order dated 31st January, 1989 made in terms of the consent terms filed by the parties in the said Arbitration Petition No. 16 of 1989, no order is presently made in terms of prayer (c) of the petition. However, the interim order passed in terms of prayer (c-iv) will continue till the said arbitrators hereafter held the first meeting in the said reference. Both the parties shall be at liberty to make such application or applications before the said arbitrators as may be deemed fit for seeking such interlocutory or other directions as may be desired by either or both of them;
(iv) In the circumstances of the case, there shall be no order as to costs and the parties shall bear their respective costs.
32. Mr. Zaiwala, learned Counsel appearing for respondents 1 to 4 and 22 to 31, applies for stay of the operation of this order for a period of four weeks. Mr. Chinoy, learned Counsel appearing for the petitioners, objects to the grant of any stay on the ground that so far as respondents 1 to 4 and 22 to 31 are concerned, the arbitration agreement dated 3rd January, 1989 is admitted by them and the validity thereof has not been challenged by them. He has further submitted that under section 39 of the said Act, no appeal lies from this order. Although there is considerable force in the submissions made by Mr. Chinoy, yet with a view not to give any cause for any grievances being made, I am inclined to stay the operation of this order only for a period of two weeks from today. Accordingly, operation of the order is stayed for a period of two weeks from today.