{"id":21555,"date":"2005-03-11T00:00:00","date_gmt":"2005-03-10T18:30:00","guid":{"rendered":"https:\/\/www.legalindia.com\/judgments\/shanmughasundaram-and-ors-vs-diravia-nadar-d-by-lrs-and-anr-on-11-march-2005"},"modified":"2017-11-29T19:59:19","modified_gmt":"2017-11-29T14:29:19","slug":"shanmughasundaram-and-ors-vs-diravia-nadar-d-by-lrs-and-anr-on-11-march-2005","status":"publish","type":"post","link":"https:\/\/www.legalindia.com\/judgments\/shanmughasundaram-and-ors-vs-diravia-nadar-d-by-lrs-and-anr-on-11-march-2005","title":{"rendered":"Shanmughasundaram And Ors vs Diravia Nadar (D) By Lrs. And Anr on 11 March, 2005"},"content":{"rendered":"
Supreme Court of India<\/div>\n
Shanmughasundaram And Ors vs Diravia Nadar (D) By Lrs. And Anr on 11 March, 2005<\/div>\n
Author: Dharmadhikari<\/div>\n
Bench: D.M. Dharmadhikari, G.P. Mathur<\/div>\n
           CASE NO.:\nAppeal (civil)  3117 of 1999\n\nPETITIONER:\nShanmughasundaram and Ors.\n\nRESPONDENT:\nDiravia Nadar (D) by Lrs. and Anr.\n\nDATE OF JUDGMENT: 11\/03\/2005\n\nBENCH:\nD.M. Dharmadhikari & G.P. Mathur\n\nJUDGMENT:\n<\/pre>\n
JUDGMENT<\/p>\n
Dharmadhikari, J.\n<\/p>\n
The appeal is directed against the order of the High Court of Madras. By
\nthe impugned order, the High Court in exercise of its revisional
\njurisdiction has set aside the order of sub-ordinate Judge, Tuticorin
\nwhereby the latter had allowed substitution of the deceased arbitrator on
\nthe panel of seven arbitrators appointed by the parties under the
\narbitration agreement. The case is governed by the Arbitration Act, 1940
\n(hereinafter referred to as `the Act’ for short). The property which is the
\nsubject matter of arbitration agreement, is the land in occupation of the
\nappellant as a tenant and on which by building a superstructure he is
\ncarrying on his business of Coffee House.\n<\/p>\n
It is not in dispute that the land involved has been inherited by two
\nbrothers (respondents herein) and three sisters. It is reported that one of
\nthe sisters is dead and had left behind her heirs. The sisters and heirs of
\ndeceased sister are not parties to either the Arbitration proceedings or
\nthe proceedings which arose from them in the Court.\n<\/p>\n
A few more facts giving rise to this appeal may now be stated as under:-\n<\/p>\n
The two brothers wanted to sell the entire property involved to the
\nappellant. They entered into a written agreement with the petitioner and
\nfor deciding the rate at which the property would be sold, they agreed for
\narbitration by a panel of seven named arbitrators. On 27.7.1977 a unanimous
\naward was passed by arbitrators fixing the price of land at Rs. 1000 per
\nCent. “The appellant, who was vendee under the sale agreement, filed an
\napplication in the civil court for making the Award the Rule of the Court
\nand passing a decree thereon.\n<\/p>\n
The two brothers filed a counter case by an application for setting aside
\nthe award. The civil court on the application of the parties filed pursuant
\nto the award, came to the conclusion that the arbitrators misconducted
\nthemselves by collecting information from outside source without disclosing
\nit to the parties and without giving them opportunity of hearing. According
\nto civil court the award was vitiated as principles of natural justice were
\nviolated by the arbitrator in fixing the price. The civil court set aside
\nthe award.\n<\/p>\n
According to learned counsel appearing for the appellant-vendee, the civil
\ncourt had set aside the award only on the ground of breach of principles of
\nnatural justice as the arbitrators failed to hear the parties to the
\nagreement before taking decision on fixation of price for sale of the land.\n<\/p>\n
On the other side, learned counsel appearing for the respondents i.e. two
\nbrothers, contend that the order of the civil court dated 29.12.1980
\nproperly understood, by reading it with other relevant parts of his
\njudgment, indicate that the award was set aside specifically on two grounds
\nmentioned below :-\n<\/p>\n
1.\tIn fixation of price the arbitrators did not allow participation
\nand hearing to the parties;\n<\/p>\n
2.\tThe sisters had 3\/5th share in the property and the two brothers,
\nwho had only 2\/5th share together, could not have agreed for sale of the
\nentire property. The enforceability of the award being `open to question’
\nit was set aside.\n<\/p>\n
Against the order setting aside the award the appellant preferred an appeal
\nto the High Court under the Act which was dismissed on 21.8.1987. According
\nto the appellant, as the award was set aside but the arbitration agreement
\nwas not superseded, he made an application on 22.11.987 to the civil court
\nfor reconstitution of the panel of arbitrators by substituting one
\narbitrator for the arbitrator who, in the intervening period, had died.\n<\/p>\n
On 9.3.1990 the civil court allowed the aforesaid application and directed
\nsubstitution of another arbitrator for the deceased arbitrator. The newly
\nconstituted panel of arbitrators made a second award on 25.6.1990 and again
\nfixed price at the rate of Rs. 1000 per cent for sale of the property.
\nAccording to the appellant, the invalidity in the first award was merely of
\nnot hearing the parties on price fixation. In the subsequent arbitration
\nproceedings, before passing of second award, the parties were duly heard by
\nthe arbitrators and thereafter price fixation was done.\n<\/p>\n
The present appellant filed an application for making the second award a
\nrule of the court. The respondents did not file any application to set
\naside the second award but filed a civil revision petition against the
\norder of civil court made on 9.3.1990 by which substitution in place of the
\ndeceased arbitrator was allowed and arbitration was revived.\n<\/p>\n
By the impugned order passed in the revision petition filed by the
\nrespondents, the High Court has taken a view that the first award was set
\naside both on the ground of breach of principles of natural justice as also
\non the ground that as the sisters were not parties to the arbitration
\nagreement, the award was unenforceable. The High Court has held that the
\narbitration agreement cannot be allowed to be reinvoked for revival of the
\narbitration proceedings.\n<\/p>\n
The main submission of the learned counsel appearing for the appellant
\nvendee is that the High Court misconstrued the earlier order of the civil
\ncourt by which it had set aside the first award. The High Court erred in
\nholding that the first award was set aside both on the ground that the
\narbitrators had failed to hear the parties before fixing price as also on
\nthe ground that the sisters being not parties to the arbitration
\nproceedings, the eventual award would be unenforceable. The learned counsel
\nfurther argues that as the first award was set aside solely on the ground
\nthat the arbitrators did not disclose to the parties the source from which
\ninformation was collected for fixation of price and the arbitration
\nagreement having not been superseded, it could again be invoked by seeking
\nreconstitution of the panel of arbitrators and reference of the dispute.\n<\/p>\n
Reliance is placed on Juggilal Kamplapat v. General Fibre Dealers Ltd.,<\/a>
\n[1962] Supp 2 SCR 101.\n<\/p>\n
As an alternative argument the counsel submitted that although sisters were
\nnot parties to the arbitration agreement, the brothers represented them as
\ntheir agents. Reliance is placed on Dhannalal v. Kalawatibai,<\/a> [2002] 6 SCC
\n16 and India Umbrella Manufacturing Co. v. Bhagabandei Agarwalla,<\/a> [2004] 3
\nSCC 178.\n<\/p>\n
Learned counsel did not carry further his argument of brothers being
\nparties to the agreement acting as agents of the sisters, on realizing that
\nall brothers and sisters were co-owners of the property inherited by them.
\nNeither concept of coparcenery nor agency can be applied in their inter se
\nrelationship.\n<\/p>\n
The next contention advanced is that subsequent arbitration and the second
\naward passed thereon should have been upheld leaving the parties to work
\nout their rights to the extent possible. It is submitted that in any event,
\nthe two brothers who are signatories to the arbitration agreement would be
\nbound by the award. It is argued that it is a matter of guess whether
\nultimately the sisters, on the aforesaid price fixated by the arbitrators,
\nwould agree to join in the sale or object to it. In either of these
\neventualities, the award could not be held to be completely unenforceable
\nor invalid in law.\n<\/p>\n
Learned counsel for the appellant vendee further submitted that based on
\nthe second award, the appellant can seek specific performance of agreement
\nof sale to the extent of share of the brothers in the property. Such a
\nrelief in relation to part of the property involved can be granted under
\nSection 12 of the Specific Relief Act.\n<\/p>\n
It is contended that enforceability of the award for non-joining of three
\nsisters in the sale agreement could not be prejudged at this stage. Merely
\non a possible eventuality of the sisters not agreeing to join for sale of
\nentire property, the arbitration proceedings and the award could not have
\nbeen held to be bad in law which in any event was binding on the brothers.\n<\/p>\n
Opposing the appeal, learned counsel appearing for the respondents
\nsupported the order of the High Court by submitting that the first award
\nhad been set aside both on the ground of breach of natural justice as also
\nits invalidity because of sisters being not made parties to the agreement.
\nIt is submitted that the order setting aside the first award was challenged
\nin the High Court but it was confirmed and has attained finality as no
\nfurther appeal was brought to this Court. Principle of res judicata bars
\nsecond arbitration. Reliance is placed on Satyadhan v. Smt. Deorajin Debi,
\nAIR (1960) SC 941. The argument advanced is that as the first award was set
\naside on the ground of invalidity of the arbitration agreement as well, the
\narbitration could not have been revived under the same agreement and a
\nsecond award made. The High Court, it is submitted, therefore, rightly came
\nto the conclusion that although the arbitration agreement was not expressly
\nsuperseded, the arbitration could not be revived by allowing reconstitution
\nof panel and substitution of new arbitrator for the deceased arbitrator.
\nReliance is placed on Chhabba Lal v. Kunna Lal, AIR (1946) PC 72; Deep
\nNarain Singh v. Mt. Dhaneshwari, AIR (1960) Patna 201 and Draupadibai v.
\nNarayan Masanu Sutar, AIR (1985) Karnataka 258.\n<\/p>\n
The first question which has arisen on the rival contentions advanced for
\nthe learned counsel for the parties is whether the first award was set
\naside merely on the ground of breach of principles of natural justice or it
\nwas set aside also on the ground that sisters were not parties to the
\narbitration agreement. To appreciate the contention and to understand the
\nratio of the judgment of the civil court which had set aside the first
\naward, its relevant parts need to be reproduced :-\n<\/p>\n
“Therefore, when there is nothing to show that the parties agreed that the
\narbitrators can fix the price after making such enquiries as they deemed
\nfit without reference to the parties and without giving any opportunity to
\nthem to put forward their case, the contention of the petitioner in this
\nregard cannot be accepted. The decision relied upon by the respondents
\nclearly supports the contention of the respondents that the arbitrators
\nhave legally misconduct themselves in fixing the price without giving an
\nopportunity to the respondents to put forth their case with regard to the
\nprice. Therefore, even though the respondents have agreed to be bound by
\nthe price fixed by them the award passed by the arbitrators has to be set
\naside in as much as the arbitrators are not entitled to fix it arbitrarily
\nbut in accordance with the rules of natural justice.\n<\/p>\n
Another point put forward by the respondents is also that the property does
\nnot belong to the respondents only but also to two of their sisters and the
\nheirs of the other deceased sister. They claim that they (respondents) are
\nentitled only to 2\/5 share in the properties, while, the remaining 3\/5
\nshare belongs to their two sisters and the heirs of the other deceased
\nsister. But, the contention of the petitioner is that the property was
\npurchased by the grandfather of the respondents, and therefore on the death
\nof their (respondents) father Arunachala the respondents got it by
\nsurvivorship. But the death Register extract in respect of Arunachala shows
\nthat he died in the year 1971. Therefore, the respondents only could not
\nhave become entitled to the property by survivorship. Each of the
\nrespondent would be entitled to a 1\/3 share as co-parceners and the
\nremaining 1\/3 belonging to his father would have devolved upon his heirs
\nincluding his daughters. Therefore, it is evident that the respondents 1
\nand 2 only are not the owners of the entirety of the property in question.
\nTherefore, how far the award can be enforced as against the other owners is
\nalso open to question. The other owners are also not before the court. They
\nare not parties to the agreement Ex. A4 or the arbitration proceedings.
\nTherefore, in these circumstances, I find that the award has to be set
\naside and that it cannot be made the rule of the court.”\n<\/p>\n
[Emphasis supplied]<\/p>\n
Reading together the above two portions of the judgment of the civil court
\nit is not possible to accept the contention advanced on behalf of the
\nappellant that the first award was set aside only on ground of breach of
\nprinciples of natural justice. It is clear that both breach of natural
\njustice and absence of three sisters as parties to the agreement, were
\ngrounds to set aside the award.\n<\/p>\n
Learned counsel for the appellant laid over-emphasis on one sentence in the
\nlast portion of the order in which the learned judge of the civil court has
\nobserved thus :-\n<\/p>\n
“Therefore how far the award can be enforced as against the other owners is
\nalso `open to question.”\n<\/p>\n
The aforesaid sentence read in isolation does indicate that the learned
\njudge has not expressed any final opinion on the enforceability of the
\naward in the absence of all the co-owners being parties to the arbitration
\nagreement. The subsequent sentence –\n<\/p>\n
“They are not parties to the agreement Ex.A-4 or the arbitration
\nproceedings, therefore, in these circumstances, I find that the award has
\nto be set aside and that it cannot be made a rule of the court.”\n<\/p>\n
is a clear conclusion based on legal view that all the owners being not
\nparties to the agreement, the award is invalid.\n<\/p>\n
Unfortunately, for the appellant, the second ground of invalidity of the
\nfirst award was not expressly challenged in the appeal preferred to the
\nHigh Court against the order setting aside the said award. The High Court
\nhas confirmed judgment of the civil court setting aside the first award and
\nthe same has attained finality. It would operate as res judicata between
\nthe parties. (See the following observations in Satyadhan v. Smt. Deorajin
\nDebi, AIR (1960) SC 941) :-\n<\/p>\n
 “The principle of res judicata is based on the need of giving finality to
\n judicial decisions. What it says is that once a res is judicata, it shall
\n not be adjudged again. Primarily, it applies as between past litigation
\n and future litigation. When a matter, whether on a question of fact or on
\n a question of law, has been decided between two parties in one suit or
\n proceeding and the decision is final, either because no appeal was taken
\n to a higher court or because the appeal was dismissed, or no appeal lies,
\n neither party will be allowed in a future suit or proceeding to canvass
\n the matter again. This principle of res judicata is embodied in relation
\n to suits in section 11 of the Code of Civil Procedure; but even where
\n section 11 does not apply, the principle of res judicata has been applied
\n by courts for the purpose of achieving finality in litigation. The result
\n of this is that the original court as well as any higher court must in any
\n future litigation proceed on the basis that the previous decision was
\n correct.\n<\/p>\n
The principle of res judicata applies also as between two stages in the
\nsame litigation to this extent that a court, whether the trial court or a
\nhigher court having at an earlier stage decided in a matter one way will
\nnot allow the parties to reagitate the matter again at a subsequent stage
\nof the same proceedings.\n<\/p>\n
But an interlocutory order which had not been appealed from either because
\nno appeal lay or even though an appeal lay an appeal was not taken can be
\nchallenged in an appeal from the final decree or order.”\n<\/p>\n
In the subsequent proceedings initiated on the same arbitration agreement,
\ntherefore, it is not open to the appellant to contend that the first award
\nwas set aside only on ground of breach of natural justice and not on the
\nground of its invalidity that the sisters were not parties to the
\narbitration agreement and not bound either by agreement of sale or fixation
\nof price at the instance of the brothers. [See Chhabba Lal v. Kunna Lal,
\nAIR (1946) PC 72; Deep Narain Singh v. Mt. Dhaneshwari, AIR (1960) Patna
\n201; Patanjal v. Rawalpindi Theatres Pvt. Ltd., AIR (1970) Del 19; Narsing
\nDas v. Gogan Ram Lachmi Narain, AIR (1955) Punj. 31 and Draupadibai v.
\nNarayan Masanu Sutar, AIR (1985) Karnataka 258].\n<\/p>\n
The decision of Judicial Commissioner, Peshawar in the case of Diala Ram v.
\nMt. Nihali Bai, AIR (1936) Peshawar 96 on which reliance has been placed on
\nbehalf of the petitioners is distinguishable on facts and the statement of
\nlaw made therein cannot get our approval. There reference to arbitration
\nfor partition of property was sought by some of the joint owners and the
\naward was not disturbed on the ground that other co-owner who was not party
\nto the agreement could come forward and claim his share without upsetting
\nthe partition made through arbitration.\n<\/p>\n
Abdul Kadir Shamsuddin Bubere v. Madhav Prabhakar Oak and Anr., AIR<\/a> (1962)
\nSC 406 is the decision which has come to our notice taking a view that even
\nthough one of the interested persons in the property is left out in the
\narbitration agreement, forum of arbitration chosen by the parties to the
\nagreement can be allowed to be invoked.\n<\/p>\n
The decision, however, in that case seems to have been based on the nature
\nof dispute involved with regard to the right of cutting trees in forests in
\nwhich the parties had proprietary share. There were two agreements and to
\nthe first agreement, the party left out in the second agreement was a
\nparty. The nature of dispute which arose under the partnership agreement
\nfor cutting trees in the forests was found to be such which could have been
\ndecided even without one of the co-sharers being a party to the second
\nagreement. It is on the above facts, it was held that arbitration award
\neventually made would not be unenforceable. This Court, therefore, in that
\ncase took a view that such an arbitration agreement which leaves out one of
\nthe parties interested can still be ordered to be filed under section 20 of
\nthe Act for the purpose of initiating arbitration proceedings.\n<\/p>\n
The facts in present case are distinguishable. Admittedly, the property has
\nbeen jointly inherited by two brothers and three sisters. As heirs under
\nthe Hindu Succession Act, they inherited the property as co-owners. In the
\nabsence of partition between them, the two brothers together had undivided
\nshare in the property and they could not have agreed for sale of the entire
\nproperty. They were competent to execute agreement to the extent only of
\ntheir undivided share in the property. In the event of sale of such
\nundivided share, the vendee would be required to file a suit for partition
\nto work out his right in the property. The left out three sisters as co-
\nowners having undivided share in the whole property, the two brothers are
\nincompetent to abide by the award.\n<\/p>\n
Learned counsel makes a reference to Section 12 of the Specific Relief Act
\n1963 and submits that arbitration agreement and consequent award should be
\nallowed to be enforced to the extent of share of two brothers leaving the
\nvendee to work out his right, if necessary, in case the sisters object to
\nthe sale, by a suit in accordance with Section 12 of the Specific Relief
\nAct.\n<\/p>\n
Section 12 of the Specific Relief Act, in our considered opinion, would be
\nof no assistance in the situation obtaining here. In the absence of sisters
\nbeing parties to the agreement, the vendee can at best obtain undivided
\ninterest of two brothers in the property. Section 12 of the Specific Relief
\nAct can not be invoked by the vendee to obtain sale of undivided share of
\nthe two brothers with a right to force partition on the sisters who were
\nnot parties to the agreement of sale. Such a relief under section 12 cannot
\nbe obtained by a vendee, on purchase of an undivided share of the property
\nof some of the co-owners, against other co-owners who were not parties to
\nthe sale agreement.\n<\/p>\n
Validity or otherwise of an arbitration agreement or award has to be judged
\nby the court on the facts and situations on the date of its consideration
\nfor being made a rule of court. An award, which is found unenforceable and
\ninvalid on the date it is sought to be made a rule of court, cannot be
\nupheld on possibilities and eventualities which might occur in future. An
\naward cannot be upheld on guess and speculations.\n<\/p>\n
The civil court was, therefore, justified in setting aside the first award
\non the ground that all the co-owners of the property being not parties to
\nthe arbitration agreement, both the agreement and the consequent award were
\nunenforceable and hence invalid. Clause (c) of section 30 of the
\nArbitration Act allows court to set aside an award if it is found to be
\n`otherwise invalid’. In our view, by ignoring the two grounds of setting
\naside the first award, the civil court could not have allowed revival of
\narbitration proceedings on the same agreement, by permitting substitution
\nof another arbitrator to the panel in place of the deceased arbitrator. The
\nHigh Court was, therefore, fully justified in reversing the order of the
\ncivil court and coming to the conclusion that the arbitration could not
\nhave been revived.\n<\/p>\n
In view of the aforesaid conclusion, this appeal fails and is dismissed. In
\nthe circumstances, we direct the parties to bear their own costs.<\/p>\n","protected":false},"excerpt":{"rendered":"
Supreme Court of India Shanmughasundaram And Ors vs Diravia Nadar (D) By Lrs. And Anr on 11 March, 2005 Author: Dharmadhikari Bench: D.M. Dharmadhikari, G.P. Mathur CASE NO.: Appeal (civil) 3117 of 1999 PETITIONER: Shanmughasundaram and Ors. RESPONDENT: Diravia Nadar (D) by Lrs. and Anr. DATE OF JUDGMENT: 11\/03\/2005 BENCH: D.M. Dharmadhikari & G.P. Mathur […]<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_lmt_disableupdate":"","_lmt_disable":"","_jetpack_memberships_contains_paid_content":false,"footnotes":""},"categories":[30],"tags":[],"class_list":["post-21555","post","type-post","status-publish","format-standard","hentry","category-supreme-court-of-india"],"yoast_head":"\nShanmughasundaram And Ors vs Diravia Nadar (D) By Lrs. And Anr on 11 March, 2005 - Free Judgements of Supreme Court & High Court | Legal India<\/title>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/www.legalindia.com\/judgments\/shanmughasundaram-and-ors-vs-diravia-nadar-d-by-lrs-and-anr-on-11-march-2005\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"Shanmughasundaram And Ors vs Diravia Nadar (D) By Lrs. 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