Loading judgment…
No AI summary yet for this case.
FAO(OS) 373/2011 Page 1 of 44
* IN THE HIGH COURT OF DELHI AT NEW DELHI
Reserved on: 08.10.2018 Pronounced on: 04.02.2019
+ FAO (OS) 373/2011
RAMAN KAPOOR
..... Appellant Through: Sh. Joy Basu, Sr. Advocate with Sh. Sunil Magon, Sh. Abhinav and Sh. Kanak Bose, Advocates.
Versus
O.P. KAPOOR
...... Respondents Through: Sh. Harish Malhotra, Sr. Advocate with Sh. Rajender Agarwal, Advocate.
CORAM:
HON'BLE MR. JUSTICE S. RAVINDRA BHAT HON'BLE MR. JUSTICE A.K. CHAWLA
MR. JUSTICE S. RAVINDRA BHAT %
FACTS AND BACKGROUND 1. In this appeal, the correctness of the learned single judge‟s order dated 08.06.2011 is in question, in OMP No. 245/2015 which was a petition under Section 34 of the Arbitration & Conciliation Act, 1996 (hereafter referred as the “Act”). The award of the arbitral tribunal, was set aside by the learned single judge in the impugned judgment. The respondents had challenged an award dated 01.05.2005 of the sole arbitrator in the disputes between Raman Kapoor (hereafter referred as “appellant”) and O.P. Kapoor and others (hereafter referred as “defendants”). The disputes were between the appellant on one side being the youngest of the sons and the father O.P. Kapoor and
FAO(OS) 373/2011 Page 2 of 44
the other three sons Lalit, Arun and Anil on the other side. Sh. O.P. Kapoor, the appellant‟s father died during the pendency of the present appeal. These disputes arose out of a letter dated 15.02.1992 (hereafter referred as “Ex. R- 34”) allegedly written by the appellant to the respondent expressing his desire to not continue as a partner in the firm Kapoor Sons and Co. and requested to dissolve the partnership. 2. The following partnership firms were constituted at different times between the parties to the lis:- - Kapoor Sons and Co. (01.04.1998) - Continental Films (05.05.1977) - Reconstituted Continental Film (01.08.1979), lastly reconstituted on 01.04.1982 - Ropas International (10.02.1983) 3. M/s Kapoor Sons and Co., the partnershiop firm was constituted in 1966 and the appellant was one of the partners though being minor. The firm was later reconsituted by Deed of Partnership dated 01.04.88 and at that time, the partners were O.P. Kapoor (16%), Arun Kapoor (21% share), Lalit Kapoor (21% share), the appellant, Raman (21% share) and Anil Kapoor (21% share). 4. Arun Kapoor, though a partner in Kapoor Sons and Co., shifted to Lima (Peru) and settled there since 1972. The other partners were in Delhi. M/s Continental Films was constituted on 01.08.1979 with Lalit Kapoor (20% share), the appellant (20% share), Sarla Rani (40% share) and Anil Kapoor (20% share). As far as M/s Ropas International is concerned the firm
FAO(OS) 373/2011 Page 3 of 44
was formed by Deed of Partnership dated 10.02.1983 with the appellant (33.33% share) and Smt. Sarla Rani (33.33%) share. 5. In the year 1989, in terms of the decision of O.P. Kapoor and the other partners, the appellant left India for Lima, Peru for further expansion of the business M/s Continental Films at Peru. It was further decided later, that the appellant should move to Columbia. In Columbia, he established a firm in the name of the M/s Continental De Comercio for the purpose of importing various materials from India through M/s Ropas International. The disputes arose in 1998 when the appellant returned to India and was not allowed to participate in the partnership business of the aforesaid three firms. On 01.05.1998, the appellant filed four suits bearing Nos. 918/1998, 919/1998, 920/1998 and 921/1998 for dissolution and rendition of accounts and for his share in (i) Kapoor Sons and Co (ii) Continental Films (iii) Ropas International and (iv) for partition of residential property No. B-5/13, Safdarjung Enclave, New Delhi and grant of 1/4th share in the same. 6. Since disputes arose, litigation commenced between the parties and ultimately the matter was referred to the Arbitration of Mr. Justice P.K. Bahri (retired judge of this court) by order of this court dated 01.10.1999. In fact, parties also agreed that the disputes with regard to the claim of the appellant of share in residential house No. B-5/13, Safrdarjung Enclave, New Delhi be also referred to arbitration. The appellant filed one statement of claim in respect of all the four disputes, claiming various reliefs and inter alia a declaration that he continued to be a partner in respect of his share, for rendition of accounts and partition of the assets of the partnership firms. So far as the house No. B-5/13, Safdarjung Enclave is concerned, he claimed 1/4th share each, i.e. himself, Arun Kapoor, Lalit Kapoor & Anil Kapoor.
FAO(OS) 373/2011 Page 4 of 44
The learned arbitrator made an interim award on 01.06.2005; ultimately he made and announced his final award on 23.04.2009. These became the subject matter of challenge in proceedings under Section 34 of the Arbitration and Conciliation Act, 1996 (hereafter “the Act”). 7. OMP 245/2005 was a petition under Section 34 of the act to assail the interim award dated 01.06.2005 passed by the tribunal in Arbitration case nos. 157-160/1999 in relation to the claims raised by the appellant. OMP 351/2009 was a petition under Section 34 of the Act challenging the final award dated 23.04.2009 passed by the tribunal in continuation of the interim award. This petition was preferred by O.P. Kapoor and his three sons. 8. The order of the learned single judge, partially set aside the interim award dated 01.06.2005 and since the final award dated 23.04.2009 was founded on the interim award, the same was also set aside insofar as it depended on the findings of the interim award. Interim award dated 01.06.2005 9. The dispute with respect to the firms hinged on the appellant‟s claim that he was a partner holding separate shares in each respective firm and could not be unilaterally ousted by his father and other members of the family. The father and the other brothers argued that he had resigned from the firm and, therefore, could not claim any right in the business of the four firms or a share of the profits and consequently could not seek a direction for accounts. The appellant argued before the arbitral tribunal that the dissolution deed and two partnership deeds said to have be signed (by him) in 1992 were forged documents as they did not bear his signatures. He also denied that he had written two letters dated 15.02.1992 and 24.04.1992. He
FAO(OS) 373/2011 Page 5 of 44
pleaded that he signed these letter heads blank. He further relied upon the letters dated 21.12.1992, 15.01.1993 and 20.11.1993 (CW1/12 to14) sent by the respondents wherein the respondents continued to admit that the appellant to be a partner in the said firm. 10. The defendants submitted that the appellant had successfully established himself in Bogota and expressed his desire to retire as partner from Kapoor Sons and Co; this desire was expressed by him in his letter dated 15.02.1992 (R-34). Smt. Sarla, his mother, left India on 07.02.1992 for Miami and on 25.02.1992 she came over to Lima and stayed with her son Sh. Arun Kumar till 20.04.1992. The dissolution deed of the two new partnership deeds of the other two firms (Continental Films and Ropas International) were sent to Sh. Arun Kumar at Lima and they were signed by him and thereafter Smt. Sarla took them with her to Bogota on 20.04.1992 and handed them over to the appellant. He is then said to have signed these documents; and with a letter dated 24.04.1992 (R-34) sent them by post to Sh. O.P. Kapoor at Delhi. These documents were filed with the Income Tax Authorities and also the Registrar of Firms. The said two letters are on the letter heads of the firm “Continental DC Commercio” belonging to the claimant, Raman Kapoor. Thus, the defendants pleaded that the appellant voluntarily retired from the firm and on his visit to India in 1994 and 1997 he confirmed this fact to all close relatives. In this regard, the defendants examined a number of relatives of the parties to prove the case that in their presence the claimant admitted that he had voluntarily retired from the partnership firm as he was well settled in Bagota. They are RW-1, O.P. Kapoor, RW-2 Lalit Kapoor, RW-4 Smt. Poonam (daughter of O.P. Kapoor), RW-6 Smt. Kamal Khanna (daughter of O.P. Kapoor), RW-7 Sh. R K Anand
FAO(OS) 373/2011 Page 6 of 44
(husband of FW-5), RW-8 Smt. Sarla Kapoor (mother of the appellant), RW- 9 Arun Kapoor. 11. The Arbitrator framed as many as 7 points for consideration and they read as: (i) Whether the claimant retired from the partnership of Kapoor Sons and Co with effect from 01.04.1992 and did the claimant sign and execute the dissolution deed dated 31.03.1992? (ii) What are the immovable assets of Kapoor Sons and Co.? (iii) What was the value of goods exported by M/s Ropas International to the claimant‟s firm and what amount has been paid by the claimant in that account? (iv) Whether various assets standing in individual names of the respondents are assets of any partnerships firms in which the claimant is a partner? (v) What are the actual assets of M/s Continental Films and M/s Ropas International? (vi) Whether the various business standing in individual names of some of the respondents were opened with funds from the partnerships in which the claimant was a partner? (vii) Whether the business of the partnership firm Continental Films stood transferred to LA Films, a firm of Sh. Lalit Kapoor? 12. The facts and various findings on disputed factual issues returned by the arbitrator: i. O.P. Kapoor was one of the two sons of Sh. Mela Ram resident of Jalandhar city in Punjab who had four daughters. After the demise of Sh.
FAO(OS) 373/2011 Page 7 of 44
Mela Ram, the appellant carried on the business of „kabari‟ and then moved to Delhi. ii. The tribunal rejected the appellant‟s plea that O.P. Kapoor had utilized the ancestral funds to set up his business, by observing that in case O.P. Kapoor was as affluent as was sought to be made out by the claimant, the family would not have struggled to make good in Delhi. iii. The appellant had shifted to Bogota on his own wish and established his firm in which he joined his wife as a partner. Ropas International was already exporting goods (mostly cycle parts) to Arun Kapoor and thereafter started exporting similar goods to the appellant‟s firm. O.P. Kapoor was annoyed with the appellant as he was of the view that the appellant was not sending the whole amount due from his firm for the exports. iv. The arbitral tribunal rejected the appellant‟s version that the said plot was purchased by Smt. Tej Kaur from her own funds and monies. There was no member other than O.P. Kapoor. In the income tax assessment orders, the properties were shown to have been acquired from the income of the O.P. Kapoor. v. The tribunal believed the version of O.P. Kapoor that the business of Kapoor jewellers was set up as the appellant‟s father-in-law had jewellery business and desired that appellant have his own independent business before he agrees to marry his daughter with the claimant. vi. The arbitral tribunal also rejected the version of the appellant, that he did business as long as he stayed with Arun Kapoor, vii. The arbitral tribunal returned the finding that the claimant appellant did not transmit the sale proceeds in their entirety in favour of M/s Ropas International. The version of the claimant that the goods exported by M/s
FAO(OS) 373/2011 Page 8 of 44
Ropas International were overvalued too was rejected by the arbitral tribunal. viii. The appellant had produced a document (Mark Z-12) claimed to be in the handwriting of O.P. Kapoor, which showed that till 31.12.1995 US $ 1,69,500/- remained outstanding from him. 13. The arbitral tribunal disregarded the two letters dated 15.02.1992 and 24.02.1992 (R-34 and 35), which bore the appellant‟s signatures. While accepting his claim that these two letters were signed blank along with other documents at the behest of his father, the arbitrator observed that it no unusual for son to give signed blank documents to his father for use in business. 14. The arbitral tribunal rejected the defence of the defendants that the two letters dated 15.02.1992 and 24.04.1992 were typed on the same typewriter as the one, on which another letter of the year 1997 (sent to Arun Kapoor) was typed. While rejecting this defence, the arbitral tribunal held that there was no evidence on record that the said letter of 1997 was written by the appellant to Arun Kapoor. 15. After an elaborate discussion of the said points, the arbitral tribunal passed an interim award on 01.06.2005 and it was stated that all the aforesaid points are interlinked, therefore, are dealt together. The main controversy relating to M/s Kapoor Sons and Co. turned on whether the deed of dissolution dated 31.03.1992 was signed by the appellant. To prove the dissolution deed 31.3.1992, the defendant-respondents set up the case that the appellant had desired to retire from M/s Kapoor Sons and Co. and conveyed this by his letter dated 15.2.1992 (R-34). It is also stated that Smt. Sarla, his mother left India on 07.02.1992 for Miami and on 25.02.1992, she
FAO(OS) 373/2011 Page 9 of 44
went over to Lima and stayed with her son Sh. Arun Kumar till 20.04.1992. The dissolution deed of M/s Kapoor Sons and Co. (R-36), two new partnership deeds of the two other firms. i.e. Continental Films and Ropas International (R-37, R-38) were sent to Sh. Arun Kumar at Lima and they were signed by him; after which, Smt. Sarla took them with her Bogota on 20.04.1992 and handed over them over to the Appellant. He is then said to have signed these documents and with a letter dated 24.02.1992 (R-34) had sent them by post to Sh. O.P. Kapoor at Delhi. The two letters are on the letterheads of the firm Continental D.C. Commercio belonging to the appellant 16. In this regard, the arbitral tribunal held that the appellant did not sign the dissolution deed dated 31.03.1992 and reconstituted deeds of partnership dated 01.04.1992 of the other two firms and also held that the letters R-34 and R-35 were not written by the appellant. The relevant portion extracted hereunder: “33. the disputes signatures even to naked eye appear different from the admitted and specimen signatures. The reason given by the Respondent that the claimant deliberately with some hidden motive made different signatures on these documents is not plausible. Thus, it has to be held that it is not proved that the claimant had signed the said deeds.
it is significant to note that Shri O P Kapoor in his letter dated 21.12.1992 gave a threat to the claimant in the following words:
“I being your power of attorney & guardian hereby call upon you to send Rupees one crore twenty lacs in US $ i.e. foreign exchange by 31st December, 1992 failing I will dispose of your share of the property in Kapoor Sons and co.”
FAO(OS) 373/2011 Page 10 of 44
Further, in Para no. 58 of the interim award, the arbitral tribunal held that for construction of the cinema and its equipment, the partnership sought a loan from the financial institutions and from the business of partnership more assets were acquired and loan was paid. In para no. 59, the arbitrator found that: “in the letters dated 15.02.1994 and 24.04.1992 allegedly written by the claimant, it was mentioned that the claimant was short of funds and Arun gave him financial help and the claimant was making earnest efforts to clear the export dues and had requested Arun for lending him money. These facts so recorded in these letters do not show that the claimant had been financially well established so as to decide to give up his share in assets in India.”
The appellant refuted the stand of the defendant/respondents and the arbitrator mentioned about the stand of the Appellant in the interim award in paras 28 and 29 as under: “28. The case of the claimant is that he had complete faith in his father and brothers and all the affairs of the family were being managed by the father and his sons including the claimant always obediently followed his wishes with demur. He has averred that as desired by his father, he went to Lima to assist his brother Sh. Arun in the business set up at Lima. According to him, he had given a number of blank papers duly signed by him to his father including blank letter heads of his firm set up in Bagota. He has denied that he had ever expressed and wish to leave this firm. He has denied that the dissolution deed of this firm or the partnership deeds of the other two firms and any form V were given to him by his mother. He denied that he ever signed the said documents. He admitted his signatures on the said two letters but pleaded that these letterheads of his firm were blank when he signed the same. He has pleaded that he gave even a blank when he signed the same. He has pleaded
FAO(OS) 373/2011 Page 11 of 44
that he even gave a blank cheque book duly signed and cheques were filled in by the respondents for payment to Ropas International. According to him, he came to know about these forged documents only in the year 1998 when he was not allowed to have access to the business and the account books by the respondents.”
he has relied upon the letter dated 21.12.1992, 15.01.1993 and 20.11.1993 CW1/12 to CW-1/14 sent by the respondents where in the respondents continued to admit the claimant to be a partner in the said firm. The Claimant had lodged a FIR against the respondents for having committed the forgeries aforesaid and in investigation the disputed documents above mentioned along with some admitted signatures of the claimant were got examined from the expert of FSL and reports (CW4/1, CW 1/8) were given. In the opinion of the said expert the disputed signatures of the said documents are not made by the claimant. He has also relied upon a letter dated 05.02.1997 (Z- 19) oh O P Kapoor asking the claimant to sign the Memorandum of Association for converting the partnership firm Kapoor Sons and Co. into Pvt. Ltd. Company (Z-20) showing the claimant as one of the shareholders. It is further pointed out that Sh. O P Kapoor, Sh. Lalit Kapoor have deposed that after the dissolution deed, form V and the new partnership deeds came from the claimant, they had signed the said documents have not been examined in these proceedings. The respondents did execute a new partnership deed excluding the claimant with effect from 01.04.92 which was filed before the Income Tax Authorities. An assessment order of the Income Tax Authority for the AY 1993-94 produced on the record shows this fact. The form V came to be filed before the Registrar of Firms only in January, 1994. It purports to bear signatures of Sh. Surender Goyal, Advocate who ..”
With respect to the status of the appellant as a partner in Ropas International and Continental Films, the arbitrator in para 60 concluded that he did not sign the new partnership deeds of these two firms, thus, he
FAO(OS) 373/2011 Page 12 of 44
continued as partner under old deeds and not under partnership deeds dated 01.04.1992.It was held that these firms stood dissolved from the date of filing of suit for dissolution by the appellant. It was also held that the Anil Kapoor was liable to render the accounts of the firm M/s Ropas International in terms of the order while Sh. Lalit Kapoor had to render the accounts of Continental Films in terms of this order (01.06.2005). The arbitral tribunal after giving elaborate and detailed reasoning came to the conclusion in para 60 as under: “60. Thus, I concluded that these letters could not have been sent by the claimant. I come to a firm conclusion that the claimant did not sign the dissolution deed and form V or the new partnership deed of the other two firms.”
With respect to the settled issue relating to the assets of M/s Kapoor Sons and Co., the arbitral tribunal held in para no. 92 of the interim award as follows: “92, on the basis of this principles laid down in section 14 of the partition act that the asset of the plot of the Kamal Cinema became the asset of the partnership firm and Shri O P Kapoor on becoming partner later on, is entitled to share in the same in accordance with his shareholding in the same.”
The arbitral tribunal further directed as under: “para 95. Thus, I hold that the claimant is entitled to have his share in Kapoor Sons and Co. including the assets standing in the name of the said Firm. It is also held that the said firm stands dissolved from the date of filing of the suit of dissolution by the claimant and the dissolution deed is not binding on the claimant and Sh. O.P. Kapoor is the accounting party to render the accounts of this firm for the period of three years preceding the date of dissolution and till date.”
FAO(OS) 373/2011 Page 13 of 44
The arbitral tribunal also further directed as follows: “100. Thus, I hold that the claimant is entitled to have 1/4th share in this property. Parties are required to make submissions as to the mode of partition of the said property to separate the share of the claimant by metes and bounds.”
Therefore, arbitral tribunal concluded at para 101 of the award and passed the following directions by way of the interim award: i. That three partnership firms namely Kapoor Sons and Co., Ropas International and Continental Films stand dissolved; ii. The dissolution deed 31.03.1992 of Kapoor Sons and Co. is invalid and that claimant continues to be partner in the said firm and is entitled to have his share in all the assets of the said firm; iii. That Sh. O.P. Kapoor would render accounts of the Kapoor Sons and Co. in terms of this order. The parties were to suggest the mode for dealing with the assets of this firm in order to finalise the share of the claimant. Apart from the assets shown in accounts book of the firm, there are on other assets of the firm; iv. The Sh. Anil Kapoor had to render the accounts of firm Ropas International in terms of the order; v. That Sh. Lalit Kapoor was to render the accounts of Continental Films in terms of his order; vi. That the claimant had1/4th share in the property No. B-5/13, Safdarjung Enclave, New Delhi and the parties shall suggest mode for dealing with the said party so as to give the share of the claimant.
FAO(OS) 373/2011 Page 14 of 44
Final award dated 23.04.2009 24. The arbitral tribunal made the following final award which is mentioned in para 20. Para 20 is reproduced hereunder: “20. thus, I make the award as follows: i. that the respondent shall pay to the claimant an amount of Rs. 16,00,55,700/-. ii. that the claimant is left with no other right or claims in respect to the partnership firms, as well as, the assets of the said firms and the said immovable properties. iii. that the claimant shall surrender physical possession of the portion occupied by him in H. No. B-5/13, Safdarjung Enclave, New Delhi to the respondent, simultaneously, while receiving the amount mentioned at S. NO. (i) from the respondent iv) that the respondents shall pay the amount mentioned at Sr. No. (i) within six months from the date of this award, falling which, respondent shall pay interest @ 12% p.a. on the unpaid amount from the dare of default till payment v) Keeping in view the facts of the case, I leave the party to bear their own cost of these proceedings.”
Impugned Judgment and order 25. The learned single judge partially allowed OMP Nos. 245/2005 and OMP 351/2009 and set aside the interim award dated 01.06.2005 of the arbitral tribunal in arbitration case Nos. 157-160/1999 in relation to the firm Kapoor Sons and Co. and since the final award dated 23.04.2009 of the arbitral tribunal was based upon the said interim award, the same is set aside insofar as it depends on the findings and award of the Arbitral Tribunal pertaining to Kapoor Sons and Co. 26. The learned single judge recorded that the respondents (in OMP 245/2005 and 351/2009) admitted that the appellant was a partner in Ropas
FAO(OS) 373/2011 Page 15 of 44
International and Continental Films, and did not challenge the interim award and the final award, insofar as they related to the said two partnership firms. 27. Further, in relation to the claim of Appellant for the 1/4th share in the house property No. B-5/13, Safdarjung Enclave, New Delhi, the arbitral tribunal had rejected the defence of the petitioners O.P. Kapoor and his three sons, i.e. that O.P. Kapoor was the real owner of the said property. The arbitrator relied on upon the provision in Benami Transaction (Prohibition) Act, 1998. Consequently, the award made by the arbitrator insofar as it pertains to house no. B-5/13, Safdarjung Enclave, New Delhi also could not be challenged, and to that extent the challenge to the awards was repelled. 28. Therefore, the learned single judge recorded that the real dispute between the parties pertained to the partnership firms M/s Kapoor Sons and Co: while, according to the appellant, he was a partner of the said firm and was entitled to seek its dissolution and the share in the assets of the said firm, and according to the respondents, he had resigned as a partner from the said firm and his account had been settled by transferring the amount due to him to the other partnership firms, and the firm was dissolved on 31.03.1992 and reconstituted as 01.04.1992 without the appellant as partner. According to the defendant/respondents, the appellant was not a partner of Kapoor Sons and Co. in the reconstituted firm. The arbitral tribunal returned the finding that the appellant, however, continued to remain a partner of the firm Kapoor Sons and Co. The resignation attributed to him was not believed by the arbitral tribunal. On this premise the arbitrator has apportioned the share of the appellant in the partnership firm Ms Kapoor Sons and Co; it is this finding that was the subject matter of dispute before the learned single judge.
FAO(OS) 373/2011 Page 16 of 44
The learned single judge after placing reliance on the various documents and evidence on record, noted -in regard to the Ex. R-34 and R- 35, that the findings of the arbitral tribunal could not be sustained. The impugned judgment recorded that appellant had admitted his signatures. He had also admitted that these two letters were issued on the letterhead of his firm set up in Bogota under the name of and style of M/s Continental DC Commercio. However, he submitted that he had given blank signed letterheads to his father, on which the defendant/respondents had created the documents, by using the typewriter lying in the office of Kapoor Sons and Co. he also lodged FIR bearing no. 159/99 at the police station, alleging forgery of the two letters by the defendant/respondents. In this regard, Sh. Arun Kapoor had submitted before the IO that a letter said to have been issued in 1997 (hereafter referred as “TA-9”) by Appellant from Bogota. The appellant had claimed that the letters Ex. R-34 and R-35 were typed out on the same letterhead with the same type style as the letters issued by him, in 1997 from Bogota. 30. The learned single judge recorded that these said letters were examined and were submitted to the Forensic Science Laboratories (FSL). Upon comparison of the three documents, the FSL gave its opinion on 26.12.2001; “that the sample typewriting marked TA-9 tally with the questioned type writings marked TA-9 tally with the questioned type writings marked TQ-13 and TQ-13/1 in size, design, relative location of the corresponding characters/ words and also super impose over each other.”
FAO(OS) 373/2011 Page 17 of 44
The learned single judge further recorded that when the FSL report dated 26.12.2001 was produced before the arbitral tribunal by appellant himself and that it was not his claim that TA-9 document was not an admitted document or the said documents had been treated by FSL as a specimen/ admitted document unilaterally, without the respondent/ claimants being confronted by the appellant; the appellant for the first time disputing the letter TA-9 in his written synopsis filed before the arbitral tribunal as late as 15.07.2003, i.e. after the close of the arguments before the arbitrator on 02.07.2003. 32. The question, therefore, for consideration was that whether a party could urge new factual averments in his written synopsis- after the stage of evidence and hearing. In this regard, the learned single judge ruled that the arbitral tribunal did not have any pleading before it to embark on an enquiry (and suo motu one at that – as the respondent never asked for re-opening of the proceedings to agitate the aforesaid issue) on the issue whether TA-9 was an admitted document or not, whether the same could have been relied upon by FSL for comparison with Ex. R-34 and R-35. 33. Further, the learned single Judge noted that the Sh. R.S. Chauhan AW- 2, the Inspector who was an independent witness clearly stated that he had asked appellant about the document TA-9 and he stated that it related to another transaction having nothing to do with the issues mentioned in the FIR. Therefore, in this background, it was held that this counted as an admission on behalf of appellant that TA-9 related to another transaction and was not forged. 34. The impugned judgment also recorded that on perusal of letters R-34 and R-35, ex facie, showed that the respondent – claimant had expressed his
FAO(OS) 373/2011 Page 18 of 44
intention not to continue as a partner in Kapoor Sons and Co. and he had requested the defendant/ respondents to send him the dissolution deed for his signature. It is also evident that the appellant had indeed signed a dissolution deed dated 31.03.1992 in relation to M/s Kapoor Sons and Co. and sent the same to the petitioners. 35. The learned single judge recorded that the arbitral tribunal had on account of the aforesaid patent error in rejecting R-34 and R-35, failed to examine and balance the evidence on the two sides. The relevant extracts from the impugned judgment and order are reproduced as follows: “64. it is pertinent to note that for the first time, the respondent/ claimant disputed the letter TA-9 in his written synopsis filed before the ld. Arbitrator as late as 15.07.2003 i.e. after the close of the arguments before the learned arbitrator on 02.07.2003. the questions that arises for consideration is whether a party can make absolutely new factual averments In his written synopsis, filed nearly two weeks after the clause of the final arguments, even though the said averments could and ought to have been made at the first available opportunity, i.e. soon after 26.12.2001. the purpose is not to slip in a fresh factual averment which has never before been contended or raised during the proceedings. It also needs consideration whether a party who has himself filed a document without any demur or reservation, and without claiming that the same is illegal or illegally procured, can seek to revile therefrom in his written synopsis field, as aforesaid, nearly two weeks after the close of the final arguments and reservation of the award. 65. in my view, the answer to the aforesaid question has to be an emphatic „No‟. otherwise, there would no sanctity in legal proceedings before an arbitrator. The arbitral tribunal did not have any pleading before it to embark on an enquiry (and that too Suo moto- as the respondent never asked for reopening of the proceedings to agitate the aforesaid issue) on the issue whether TA-9 was an admitted document or not, and whether
FAO(OS) 373/2011 Page 19 of 44
the same could or could not have been relied upon by FSL for comparison with EX 34 and R-35. Moreover, it would be highly unfair to the opposite party to be suddenly confronted with an absolutely new case of the first party, to deal with which, it has had no opportunity, on the basis of something said for the first item in a written synopsis filed after the close of arbitral hearing and reservation of the award. If the arbitrator permits such a course of action to be adopted, it would clearly be in violation of the principles of natural justice i.e. the rule of Audi alteram partem. 67. the learned arbitrator, in my view, gravely erred in going into the issue whether TA-9 was an admitted document or not, and whether it was validly used for comparison purposes with Ex R-34 and R035. The reference by the learned arbitrator in his order dated 18.02.2004 to the two applications mimed during the proceedings by the respondent, praying for expert opinion with regard to age of typing of Ex R34 and R35 is also misplaced, as even in these applications. It was the respondents‟ case that the specimen letter TA-09 used by FS: for comparison purposes had not been written by the respondent. Pertinently, there is no finding returned by the arbitral tribunal with regard to the age of Ex. R34 and 35, and this is not the basis on which the arbitral tribunal has rejected the petitioner reliance on these documents.
The impugned judgment further recorded that the reasoning of the arbitrator is flawed and the dispute could not be a mere question of appreciation of evidence. The error was patent and more fundamental, as the arbitral tribunal ignored the independent witnesses‟ testimony on a specious ground. The relevant portion of the order is extracted hereunder: “68. The patent illegality in the impugned award does not stop with the reopening of the proceedings to inquire into the authenticity of the specimen letter TA-9. Shri R.S. Chauhan AW-2, the inspector who was an independent witness had clearly stated that he had asked the respondent Raman Kapoor
FAO(OS) 373/2011 Page 20 of 44
about the documents TA-9, and Raman Kapoor had stated that it related to another transaction having nothing to do with the issues mentioned in the FIR. If the aforesaid statement of AW-2, Shri R S Chauhan is to be believed. It would constitute an admission on the part of the respondent, as the respondent had claimed that the said documents TA-9 pertained to another transaction – meaning thereby that there was another transaction in relation to which the document TA-9 as not being genuine or being forged. Despite this being the position, the learned arbitrator has rejected the report of the FSL dated 26.12.2011 on the premise that the investigation officer had not mentioned the factum of his having shown the document TA-9 to the respondent, Raman Kapoor in the case diary. *************************
********************** 78. I find merit in the petitioner‟s submission that the learned arbitrator has not critically examined the report of the FSL dated 24.09.1999 to assess its quality. As to why various documents which contained the admitted signatures of the respondent, and which were produced before the FSL were not used for comparison has not been explained by CW-4 Harsh Wardhan in his cross-examination. To this extent the reliance placed by the ld. Arbitrator on the said report of FSL dated 26.12.2001, filed by the respondent and relied upon by the petitioners, is a report which is based on empirical and scientific basis. The said report is worthy of much greater reliance that the handwriting report pertaining to the dissolution deed dated 31.03.1992.”
The arbitral tribunal in the final award valued various immovable properties. The defendant/respondent in spite of interim award did not provide the books of accounts to the appellant as well as to the arbitral tribunal. The appellant challenged those valuations by OMP 400/09. The appellant had also filed two OMPs being OMP No. 428/09 as well as OMP no. 429/09 for certain directions under Section 9 of the Act.
FAO(OS) 373/2011 Page 21 of 44
FAO(OS) No. 429/2011 is directed against the order in OMP No. 400/2009 seeking modification of the final award dated 23.04.2009 to a limited extent. The other two Petitions were filed by the appellant seeking interim measures consequent to passing of the interim and final award. These were taken up for hearing and in terms of the submissions made on behalf of the appellant, OMP No. 400/2009 was not pressed with regard to the modification of the final award and was accordingly dismissed by order dated 08.06.2011. The relevant portion of the order dated 19.10.2011 is extracted for ready reference: “ 7. We have heard the learned counsel for the parties. The impugned order dated 21,07.2011 leaves us in no manner of doubt that the appellant is trying to act clever by half and moved the application, which was dismissed vide the impugned order, only as having seen the final verdict in the other OMPs in terms whereof the awards have been partially interfered with. The learned single judge has noted that the senior counsel appearing for the appellant had filed the OMP challenging the valuation, the same was not pressed as the appellant was accepting the valuation made by the learned arbitrator. The learned single judge, who dealt with the matter, found that false averments have been made and as to how different counsels appeared on different dates not having personal knowledge of what had transpired, has been noticed in the impugned order. We cautioned learned counsel for the appellant at the inception itself that the application filed by the appellant appear to us to be complete abuse of the process of the court which is aggravated by assailing the order in the present appeal. Learned counsel for the appellant, however, persisted in arguing the appeal and making his submissions seeking to re- agitate the issue and contending that the learned single judge has misunderstood the stand of the appellant.
FAO(OS) 373/2011 Page 22 of 44
In our considered view, there is no question of misunderstanding. The learned single judge is quite categorical in his finding in the impugned order as to what had transpired. We must note another aspect in the matter that while the settlement discussions were on, the appellant rand up the senior counsel for the respondents personally and threatened him on the phone. Learned counsel for the respondents states that he had bought this to the notice of the learned counsel for the appellant, who had assured that the appellant would not, in future, try to communicate with learned senior counsel for the respondents. The factum of such communication and the advice given by the counsel for the appellant is not disputed by him. This only shows that the present appeal is not a starry incident where the appellant has tried to plead falsehood and his conduct, even otherwise, raises many question marks. 11. We are, thus, of the considered view that not only should the appeal be dismissed as meritless, but the appellant must be burdened with exemplary costs to send a signal that such kind of litigation is not encouraged by the courts. 12. We, thus, dismiss the appeal with costs of Rs. 1,00,000/-.”
Appellant‟s contentions 39. It is urged by Sh. Sunil Magon, learned counsel, that the learned single judge erroneously recorded that the arbitral tribunal disregarded the two letters dated 15.02.1992 and 24.02.1992. in fact, the arbitrator considered all these letters in para 27 onwards along with FSL reports in Para 32 along with other documents and concluded in para 60 that the said letters could not have been sent by the claimant. 40. It was also urged that the learned single judge did not consider that as a fact, after recording the evidence of the parties, and hearing arguments, the award was reserved in June 2003. Thereafter, an application was filed for deciding pending application for determining the age of letters i.e. (R-34 and
FAO(OS) 373/2011 Page 23 of 44
R-35); notice of this application was issued for 04.02.2004. Thereafter, arbitrator sought clarification and fixed 18.02.2004. On 18.02.2004, the arbitrator ordered that the two witnesses namely Sh. Mohan Lal, ACP and RS Chauhan, IO be summoned by the claimant through court and it was recorded that it is agreed that these witnesses would be allowed to be cross- examined by both the counsels. 41. It was argued that the learned single judge did not consider that at no point of time the respondent/defendants could produce the original TA-9 nor could disclose as to where the original of that document (TA-9) was. The learned single judge did not consider that TA-9 which is a photocopy was not produced in evidence by the respondents before the learned Arbitrator before the closing of their evidence. 42. Counsel submitted that the learned single judge set aside findings of the arbitrator recorded in paras 32 to 37 of the interim award mainly on the basis of the observations in the 26.12.2001 FSL report based on a photocopy of TA-9. Counsel submitted that in the realm of appreciation of fact, the arbitrator possesses great autonomy; as long as the findings pertain to facts and disputes referred for arbitration, the court cannot interfere in exercise of power under Section 34, merely on the ground that a different conclusion could have been arrived at. 43. It was highlighted by Sh. Magon that the circumstances in which the FSL report dated 26.12.2001 was obtained were mentioned in detail in the preceding paragraphs (of the award) which the learned single judge filed to take note of. In fact, the FSL report was first produced by the defendant/respondents in May 2002 and later the appellant produced a copy of the same to show that IO had added some document which was handed
FAO(OS) 373/2011 Page 24 of 44
over by Sh. Anil Kapoor. In fact, it was necessary that R-34 and R-35 had to be examined to determine whether they were typed on the typewriter seized from the office of M/s Kapoor Sons and Co. Instead of doing so what was examined was the type print of R-34 and R-35 and photocopy of TA-9 which did not compare the type print of R-34 and R-35 -with the typewriter seized from the office of M/s Kapoor Sons and Co. 44. It was submitted that it is apparent that the IO had himself admitted that he did not record in the police file that TA-9 was brought to the notice/ knowledge of appellant. Therefore, the learned single judge erroneously inferred that report of FSL dated 26.12.2001 was an admitted document. It was argued that the learned single judge placed a great reliance on the report dated 26.12.2001 based on the photocopy of the 1997 letter (TA-9) for overruling the findings and the reasoning of the Arbitrator which is contrary to law. 45. Counsel argued that even otherwise, the type print could be compared only if the original of the document is available, while in the present case the original type print of the original letter were erroneously compared with the photocopy of another letter. (TA-9 of 1997) Counsel stated that the learned single judge ought to have ignored the FSL report dated 26.12.2001 as was done by the arbitral tribunal for sound and cautious reasons. 46. Sh. Magon pointed out that the learned single judge failed to take note of the facts based on relevant evidence that O.P. Kapoor even mentioned that the appellant was a partner of Kapoor Sons and Co. subsequent to 31.03.1992. Moreover, the learned single judge did not return finding within the parameters of Section 34 of the Act to set aside the findings/ reasons given by the arbitral tribunal in the interim award to the effect that the
FAO(OS) 373/2011 Page 25 of 44
dissolution deed dated 31.03.1992 was not signed by the appellant. The appellant had argued, in the statement of claim that the dissolution dated 31.03.1992, Form V and the fresh partnership deeds were not signed/ executed by him. These were the contentions regarding the fresh partnership deed of M/s Continental Films and M/s Ropas International. The arbitrator concluded in para 60 of the interim award that the claimant did not sign the dissolution deed and Form V or the new partnership deed of the other two firms and it was also directed that the accounts be rendered to the appellant. In fact, initially the respondents challenged the interim award even with regard to the other two firms, namely M/s Continental Films and M/s Ropas International. But before the learned single judge the respondents gave up their objections to the interim and the final award in so far as it pertained to the said two partnership firms. The appellant, in these circumstances, was aggrieved by the impugned judgment relating to OMP 245/2005 as well as OMP No. 351/2009. 47. Counsel for the appellant has argued that the arbitrator took into account various letters/ documents authored by O.P. Kapoor wherein he admitted the factum of Appellant being a partner in the firm. These letters were all of the period after the date of the dissolution deed dated 31.03.1992. The counsel further argued that Kapoor Sons and Co. was the only firm amongst the three firms which had valuable assets. There was no reason for the appellant to retire/ resign from the firm and to continue as partner in the other two firms. He further submitted that even though certain amounts were due from him, no counter-claim for the said amounts were raised by the petitioners before the arbitrator.
FAO(OS) 373/2011 Page 26 of 44
Counsel also submitted that the finding is based upon the report of the handwriting expert, wherein he has opined that the signatures on the dissolution deed dated 31.03.1992, which were attributed to Appellant, were, in fact, not his. It was argued that the arbitral tribunal was the final authority to determine issues of fact and its findings cannot be overturned or substituted by a court with its own while examining the award in proceedings under Section 34 of the Act. The court can only examine whether the tribunal has ignored relevant material on record or whether it has considered wholly irrelevant material in arriving at its findings. 49. The learned Counsel placed reliance on the decision of the Supreme Court in the case of State of Rajasthan Vs. Puri Construction Co. Ltd.(1994) 6 SCC 485, where, the court observed that: “In recent times, error in law and fact in basing an award has not given the wide immunity as enjoyed earlier, by expanding the import and implication of legal misconduct' of an arbitrator so that award by the arbitrator does not perpetrate gross miscarriage of justice and the same is not reduced to mockery of a fair decisions of the lis between the parties to arbitration. Precisely for the aforesaid reasons, the erroneous application of law constituting the very basis of the award and improper and incorrect findings of fact, which without closer and intrinsic scrutiny, are demonstrable on the face of the materials on record, have been held, very rightly, as legal misconduct rendering the award as invalid. It is necessary, however, to put a note of caution that in the anxiety to render justice to the party to arbitration, the court should not reappraise the evidence intrinsically with a close scrutiny for finding out that the conclusion drawn from some facts, by the arbitrator is, according to the understanding of the court, erroneous. Such exercise of power which can be exercised by an appellate court with power to reverse the finding of fact, is alien to scope and ambit of challenge of an award under the Arbitration Act.
FAO(OS) 373/2011 Page 27 of 44
Where the error of finding of facts having a bearing on the award is patent and is easily demonstrable without the necessity of carefully weighing the various possible viewpoints, the interference with award based on erroneous finding of fact is permissible. Similarly, if an award is based by applying a principle of law which is patently erroneous and but for such erroneous application of legal principle, the award could have been made, such award is liable to be aside by holding that there has been legal misconduct on the part of the arbitrator. In ultimate analysis, it is a question of delicate balancing between the permissible limit of error of law and fact and patently erroneous finding easily demonstrable from the materials on record and application of principle of law forming the basis of the award which is patently erroneous.
The appellant also relied upon inter alia M/s Ispat Engineering and Foundary works Bokaro v/s M/s Steel Authority of India Ltd. 2001 (6) SCC 347 Submissions of the Respondent/defendants 51. Sh. Harish Malhotra, learned senior counsel submitted that the firm Kapoor Sons and Co. was constituted by late Sh. O.P. Kapoor, deceased father of the appellant in 1966, when the appellant was only a young boy. It was admitted even in the award as well as in the impugned judgment, that it is only his father (O.P. Kapoor) who had invested monies out of his own earnings to buy a residential house bearing No. B-5/13, Safdarjung Enclave, New Delhi and the plot, where ultimately Kamal Cinema was constructed. 52. It was urged that the admitted case in arbitration, as well as, in. the impugned judgement was that late O.P. Kapoor, constituted a firm in the name of Kapoor & Sons in which he made all his sisters, children, brothers as partners and he did not name himself as a partner. The firm was later reconstituted on 01.04.1998 when O.P. Kapoor joined as a partner of the said
FAO(OS) 373/2011 Page 28 of 44
firm along with four sons, namely Arun, Lalit, Anil and the appellant. Eventually, the appellant moved to Bogota and opened his own firm by the name of Continental De-Commercio and started importing goods from India, being cycle parts, which were being sent to him by the father from another firm called Ropas. He started withholding payments of the goods exported from India and ultimately withheld approximately one million USD (US$) for the goods exported by the father to him. 53. The appellant wrote a letter dated 15.02.1992 expressing his desire to not continue as a partner in the firm Kapoor & Sons and requested for dissolution of the partnership. He signed the dissolution deed dated 24.02.1992 and sent it to his father. The said two letters were proved before the Arbitrator as exhibit R34 and R35. It was highlighted here that the signatures were admitted by the appellant. The only dispute raised by him was that it was given on blank paper which was later on stated to have been typed at his father‟s behest. This position was refuted by the respondents. An intimation in this regard was sent to the income tax authorities and till 1998 no dispute was ever raised regarding the appellant‟s retirement from Kapoor Sons and Co. despite his visiting India twice during the said period and despite the fact that no return/ balance sheet was ever signed by him (the appellant) after 1992, which he was earlier doing till retirement. It was argued that in addition to his earnings at Bogota, the appellant had illegally withheld the dues payable to Ropas International on account of the export made to him amounting to 1 million USD. The amount was also with the appellant which the appellant has failed to pay back and which became the bone of contention between the parties.
FAO(OS) 373/2011 Page 29 of 44
Counsel also contended that the appellant had also taken a loan from Arun in Lima and the cheque issued by the appellant towards repayment was dishonoured. He later wanted to re-enter Kapoor Sons and Co. post his return to India which was not allowed by the father. This matter was ultimately referred to arbitration. 55. Sh. Malhotra argued that in the award the arbitrator agreed with the contention of the respondents that the entire investment in the firm and creating assets of Kapoor was made by the father and not even a single paise was contributed by the appellant and his story that the father had started the said business by using the ancestral funds was totally disbelieved. Though the arbitrator admitted that the said two letters Ex R34 and R35 were signed by the appellant, yet, without any rational basis, a finding was returned that the said letters were given in blank duly signed by the appellant. This overlooked that the letters were not on the letterheads of the appellant firm at Bogota, which letterheads were of no use in India. The arbitrator also ignored the FSL report dated 26.12.2001, which was relied upon by the appellant himself and was filed by him before the arbitrator without any demur or condition. The said FSL report categorically opined that Ex R34 and R35 were typed at Bogota. The reason for the said opinion was that as the appellant had made a complaint falsely alleging that the said two letters, which were admittedly signed by him, were said to have been typed at the father‟s behest at Delhi and that the type writer was lying in Kamal cinema building itself. 56. The learned single judge agreed with the submissions of the respondents and set aside the interim award so far as it related to Kapoor Sons and Co. It was submitted that there was an admission on the part of the
FAO(OS) 373/2011 Page 30 of 44
appellant that he had given a power of attorney to his father, which duly authorized him to even execute a dissolution deed on behalf of the appellant. It was always the appellant‟s claim before the arbitrator that he was most obedient son of the father and he used to sign on the dotted lines whenever he asked him to do so. If that was the situation, then the father could have signed the dissolution deed of his own as an attorney and if he so desired or could have asked the appellant to sign the dissolution deed, he would have signed as submitted before the arbitrator being the obedient son. In view of the said situation, there was no reason whatsoever for forging the dissolution deed as has been falsely alleged by the appellant. The letters Ex. 34 and 35 clearly suggested that the appellant wished to withdraw from the said partnership and it was on his request, the firm was dissolved and that the dissolution deed was signed by the appellant. 57. Counsel for the defendant/respondent argued that the reliance of the appellant on the letter dated 15.1.1993 and 20.11.1993 exhibited as CW1/13 and CW1/14 were not executed by Anil Kapoor at all, nor it was ever admitted by the defendant/respondents in evidence. The original of the said two letters were never produced despite directions by the arbitrator. That is submitted that the appellant took no steps to produce the original of these letters and thus the said letters were not liable to be relied upon. 58. Counsel also stated that pertinently Sh. O.P. Kapoor, the appellant‟s father, Arun Kapoor, Lalit Kapoor and Anil Kapoor (his brothers) and all his sisters and even the mother also appeared in the witness box and had categorically deposed that appellant had retired from Kapoor Sons and Co. Mrs. Sarla Kapoor has stated that when she went to Bogota, she handed over the dissolution deed along with the partnership deeds of Ropas International
FAO(OS) 373/2011 Page 31 of 44
and Continental Films to Appellant which was sent by appellant after signing the same to Delhi. It is submitted that all these relatives who have appeared in the witness box have categorically stated that appellant retired from the firm in 1992, which fact he disclosed to everyone, which evidence remained unrebutted. 59. The Senior Counsel also submitted that the appellant was in the habit of making different signatures at different times. He submits that this argument is also taken note by the Arbitrator in para 36 of the award and the arbitral tribunal also noted the various documents placed on record which, admittedly, bore the signatures of the appellant, which were different. 60. It was submitted that Sh. R.S. Chauhan, Inspector, Economic Wing Crime Branch, categorically stated as follows: “ I did ask Appellant about the document (TA9) and Appellant stated that it related to another transaction and having nothing to do with the issues mentioned in the FIR.” In view of this, it could not be said that TA-9 was not an admitted document. Thus, reliance upon exhibit R34, R35 and TA9 by the learned single judge was in accordance with law and there was no ground to assail the judgement of the learned single Judge. Analysis and conclusion 61. The question which arises for consideration, therefore, in this appeal is whether the learned Single Judge overreached the jurisdiction conferred by Section 34 of the Act by setting aside the award having regard to the circumstances of the case, and the facts on the record. 62. It is now established law that judicial intervention by a court, in proceedings under Section 34 of the Act is circumspect and narrow of scope.
FAO(OS) 373/2011 Page 32 of 44
In the seminal authority – Oil and Natural gas Commission vs. Saw Pipes, (2003) 5 SCC 705, the court laid out the applicable principles: "31. Therefore, in our view, the phrase "public policy of India" used in Section 34 in context is required to be given a wider meaning. It can be stated that the concept of public policy connotes some matter which concerns public good and the public interest. What is for public good or in public interest or what would be injurious or harmful to the public good or public interest has varied from time to time. However, the award which is, on the face of it, patently in violation of statutory provisions cannot be said to be in public interest. Such award/judgment/decision is likely to adversely affect the administration of justice. Hence, in our view in addition to narrower meaning given to the term "public policy" in Renusagar case [1994 Supp (1) SCC 644] it is required to be held that the award could be set aside if it is patently illegal. The result would be - award could be set aside if it is contrary to: (a) Fundamental policy of Indian law; or (b) The interest of India; or (c) Justice or morality, or (d) in addition, if it is patently illegal. Illegality must go to the root of the matter and if the illegality is of trivial nature it cannot be held that award is against the public policy. Award could also be set aside if it is so unfair and unreasonable that it shocks the conscience of the court. Such award is opposed to public policy and is required to be adjudged void.”
Since this is an appeal under Section 37(1) of the Act, the Court should first consider the scope of the Court‟s power under Section 34. The leading case which explains the Court‟s role at Section 37 stage is Associated Builders v Delhi Development Authority [2015 (3) SCC 49]. The court had revisited and considered several previous decisions on the subject; after iterating Saw Pipes (supra) and various decisions outlining the
FAO(OS) 373/2011 Page 33 of 44
principles, the Court held that unreasonable decisions too can be interpreted, on limited grounds: “The third juristic principle is that a decision which is perverse or so irrational that no reasonable person would have arrived at the same is important and requires some degree of explanation. It is settled law that where- a finding is based on no evidence, or an arbitral tribunal takes into account something irrelevant to the decision which it arrives at; or ignores vital evidence in arriving at its decision, such decision would necessarily be perverse. A good working test of perversity is contained in two judgments. In H.B. Gandhi, Excise and Taxation Officer-cum-Assessing Authority v. Gopi Nath & Sons, 1992 Supp (2) SCC 312 at p. 317, it was held:
"7. ...................It is, no doubt, true that if a finding of fact is arrived at by ignoring or excluding relevant material or by taking into consideration irrelevant material or if the finding so outrageously defies logic as to suffer from the vice of irrationality incurring the blame of being perverse, then, the finding is rendered infirm in law."
In Kuldeep Singh v Commr of Police, (1999) 2 SCC 10 at para 10, it was held:
"10. A broad distinction has, therefore, to be maintained between the decisions which are perverse and those which are not. If a decision is arrived at on no evidence or evidence which is thoroughly unreliable and no reasonable person would act upon it, the order would be perverse. But if there is some evidence on record which is acceptable and which could be relied upon, howsoever compendious it may be, the conclusions would not be treated as perverse and the findings would not be interfered with."
FAO(OS) 373/2011 Page 34 of 44
It must clearly be understood that when a court is applying the "public policy" test to an arbitration award, it does not act as a court of appeal and consequently errors of fact cannot be corrected. A possible view by the arbitrator on facts has necessarily to pass muster as the arbitrator is the ultimate master of the quantity and quality of evidence to be relied upon when he delivers his arbitral award. Thus an award based on little evidence or on evidence which does not measure up in quality to a trained legal mind would not be held to be invalid on this score[1]. Once it is found that the arbitrators approach is not arbitrary or capricious, then he is the last word on facts. In P.R. Shah, Shares & Stock Brokers (P) Ltd v BHH Securities (2012) 1 SCC 594, this Court held:
"21. A court does not sit in appeal over the award of an Arbitral Tribunal by reassessing or reappreciating the evidence. An award can be challenged only under the grounds mentioned in Section 34 (2) of the Act. The Arbitral Tribunal has examined the facts and held that both the second respondent and the appellant are liable. The case as put forward by the first respondent has been accepted. Even the minority view was that the second respondent was liable as claimed by the first respondent, but the appellant was not liable only on the ground that the arbitrators appointed by the Stock Exchange under Bye-law 248, in a claim against a non-member, had no jurisdiction to decide a claim against another member. The finding of the majority is that the appellant did the transaction in the name of the second respondent and is therefore, liable along with the second respondent. Therefore, in the absence of any ground under Section 34 (2) of the Act, it is not possible to re-examine the facts to find out whether a different decision can be arrived at."
It is with this very important caveat that the two fundamental principles which form part of the fundamental policy of Indian law (that the arbitrator must have a judicial
FAO(OS) 373/2011 Page 35 of 44
approach and that he must not act perversely) are to be understood.”
The above authorities, clarify that appreciation of facts and evaluation of evidence is ordinarily the preserve of the arbitrator. Associate Builders (supra), therefore, stated a principle that in the narrow window of permissible scrutiny given to the court by law, a finding of fact may be interfered with if “is that a decision which is perverse or so irrational that no reasonable person would have arrived at the same”. This was further explained by the Supreme Court, which held that a perverse or irrational decision is “a finding is based on no evidence, or an arbitral tribunal takes into account something irrelevant to the decision which it arrives at; or ignores vital evidence in arriving at its decision, such decision would necessarily be perverse”. 65. The Court would now examine the degree of discretion granted to an arbitral tribunal under Section 19 for determining evidentiary standards in the light of decided cases. In Pradyuman Kumar Sharma v Jaysagar M Sancheti (2013 4 Mah LJ 86), the Bombay High Court considered whether a Petitioner could dispute the veracity of a document that it had previously relied upon, and it held as follows: “38. Question then arises for consideration of this Court is whether by rejecting application made by the petitioner seeking permission to apply in this Court for issuance of writ of summons or for referring the disputed document to handwriting expert at belated stage, would be at all in violation of principles of natural justice and no prejudice would have been caused to the petitioner by rejecting his application to lead oral evidence. The petitioner wanted to apply for permission to file proceedings in this Court for issuance of witness summons or to
FAO(OS) 373/2011 Page 36 of 44
refer the disputed document to handwriting expert at belated stage for the purpose of proving his allegation that the documents relied upon by the respondents were forged and fabricated documents. Though an opportunity was given by the learned arbitrator earlier, petitioner did not examine the Expert witness, though his affidavit was filed. Perusal of record indicates that the petitioner himself had relied upon the same agreements in various proceedings filed by him and/or did not deny existence and contents of the said agreements in criminal proceedings. The petitioner also admitted the correctness of certified copy produced by the respondents before the learned arbitrator. If both the parties have relied upon the same documents in various proceedings without raising any dispute in respect of the existence and/or contents thereof, and not having disputed the correctness of the certified copy thereof in the proceedings before the learned arbitrator, in my view, the application made by the petitioner for referring the said disputed document to handwriting expert or to get the writ of summons issued by this Court at belated stage was nothing but one more attempt to delay and frustrate the outcome of arbitration proceedings which was pending for quite some time. The petitioner having admitted the agreements relied upon and annexed to the proceedings in several other proceedings between the same parties, petitioner in my view, could not have proved any fact contrary to one that was already admitted by him in series of proceedings.”
In Aidek Tourism Services Pvt Ltd v Aditya Birla Nuvo Ltd (2016 SCC Online Bom 5352), in a case involving allegations of forgery, the Bombay High Court held that an arbitral tribunal had considerable latitude to weigh the evidence and held as follows: “92. Insofar as the submission of the learned senior counsel for the petitioners that the hire purchase agreement was fabricated and though the petitioners had examined the handwriting expert to prove such allegations and that the respondent neither controverted such allegations by amending their statement of
FAO(OS) 373/2011 Page 37 of 44
claim nor by examining any other handwriting expert to controvert the allegations made by the petitioners is concerned, a perusal of the impugned award indicates that the learned arbitrator has considered the entire evidence led by both the parties and has rendered a finding of fact that the documents were not fabricated or forged as alleged by the petitioners. In the first written statement filed by the petitioners, no such allegations were made by the petitioners. Only in the amended written statement filed subsequently, the petitioners made such allegations. The respondent had examined the witnesses to prove the existence and contents of the hire purchase agreement as well as the loan agreement. 93. The learned arbitrator in my view has rightly rendered the findings that the documents were not fabricated or forged which cannot be interfered with by this Court.”
In Govt of NCT of Delhi v Shri Khem Chand (AIR 2003 Delhi 314), this court held that non-consideration of certain evidence by the arbitrator would not constitute a violation of principles of natural justice. It refused to set aside the arbitral award and held as follows: “In the present context, there is neither any allegation of non- adherence to the principles of natural justice nor that the Arbitrator acted contrary to any agreement between the parties as to the procedure to be followed by him. In the circumstances, the award in question cannot be set aside simply on the ground that the Arbitrator according to the petitioner-objector excluded certain evidence placed before him by it.”
68, From reading of the above decisions of the courts, it is clear that the scope of judicial review under Section 34 of the Act with the arbitral award is narrow and limited and cannot be equated with appellate jurisdiction. This court in exercise of the appellate jurisdiction is not expected to re-appreciate evidence for arriving at a different conclusion. It is also clear that the juristic
FAO(OS) 373/2011 Page 38 of 44
principle of a "judicial approach" demands that a decision be fair, reasonable and objective. On the obverse side, anything arbitrary and whimsical would obviously not be a determination which would either be fair, reasonable or objective. However, it is also clear that the court can set aside an award if it finds that the tribunal has made an error on the face of the contract, or provided a “patently illegal” interpretation of the law. 69. In the facts of the present case, the appellant alleged that letters of 15.02.1992 (R-34) and 24.04.1992 (R-35) were typed fraudulently on blank letter heads which he had signed and given to his father. He also alleged that the respondents had forged his signatures to open some bank accounts. The appellant further alleged that the respondents had forged and fabricated the dissolution deed and form V. 70. The learned single judge set aside the tribunal‟s award which had held that the dissolution deed 31.03.1992 was invalid and the appellant continues to be a partner in the said firm. However, the findings of the arbitrator in relation to Ex. R-34 and R-35 were not sustained. The patent illegality in the manner in which the learned Arbitrator has proceeded to deal with the said documents in the award. The patent illegality is discernible on a mere reading of the award, the orders passed by the arbitral tribunal and the documents placed on record before the arbitral tribunal. 71. The arbitrator adopted two different yardsticks while dealing with the parties. With respect to the issue of the disputed signatures (on the dissolution deed 31.03.1992), the arbitrator recorded that the expert opinion of FSL could not be ignored. However, even though there was no pleading made by appellant in relation to the specimen document TA-9, the learned Arbitrator of his own took the initiative to re-open the proceedings and
FAO(OS) 373/2011 Page 39 of 44
record evidence to return a finding that TA-9 was not an admitted document. This was one of the grounds that persuaded the learned single judge to set aside the award. 72. The two disputed letters, R-34 and R-35, were reproduced in full by the learned single judge. For facility of reference, they are extracted below: R-34: Letter dated 15-02-1992: "15 February 1992 Respected Papaji, Peripana, We are fine here and hope that you will be in good health. With your kind help and guidance and with the financial help by Arun I have established my business here and doing very good business. As I have already told you number of time that I am not interested to continue as partner in Kapoor Sons & Co. and I am requesting you once again to please dissolved the partnership and send me the dissolution deed for my signature. Yesterday I send you the fax, ordering tyre and tubes and cycle parts. Please see that the same are despatched immediately as these are in great demand, please do not worry I will send the payment and will also clear the pending bills shortly, as you know that I am short of funds as I have investment the same in setting up showrooms. How is chaiji, pay my regards to her and also let me know about her legs, please take care of her. I also understand from Arun that Kamal's husband is not doing any business, if he feels you can send him to me at Bogota and I will see that he is fully settled here. Ask Kamal and Poonam to drop me a letter as Bela remembers them to much. I have received one peauget car from Lima and got it cleared from custom. Please send all the containers to Buenaventura instead of Bogota as custom duty is less at duty free port. Cycle part business is very good because I am the only Importer from India. There is margin of Hundred percent after deducting on the cost. My turnover this year will be 3 to 4 million USD. My family is very happy and settled here solani is going to the best school in Bogota and every week we go for outing. We have good Indian friends at the Embassy and there is no
FAO(OS) 373/2011 Page 40 of 44
problem for Indian food. This year we are planning to go to Miami to visit Disney land and after that my wife will visit India to meet her parents. Rest everything is fine here. Your son"
R-35: Letter dated 24-04-1992: "24 April 1992. Respected Papa Ji, Namastey, I am sending the following documents/ Papers duly signed on all the pages. 1. Dissolution deed dated 31.3.92 and M/S Kapoor sons & Co., duly signed on all the pages. 2. Partnership deed of M/S Continental Films and Ropas International duly signed on all the pages dated 1.4.92. Rest if O.K. Business is good. Colour tures and tubes are in good demand, Please send one container of tyres which I ordered and faxed to you last week. As told that I am expending the business and making investment in real estate showrooms and I will try my level best to clear all the export bills and will send some money. I have also requested Sh. Arun Kumar to help me and lend me some money so that pending bills are cleared. How is chaiji health, is there any improvement in her legs, Please take her care, Pay my paripan to chaiji. How are Poonam and Kamal, pay my regard to them and love to their childrens. Please see Poonam and Kamal can come to Bogota Bela remember to them very much. Rest is find, Please take care of your health and if there is anything to be done, Please let me know. I know cinema is closed and the business is very bad in Delhi, I know you have to pay a lot of money to the suppliers of cycle parts. As I have invested in Property in Bogota so I am unable to help you right now. With kind regards; Your son"
The appellant had conceded that the two letters bore his signature; he disputed the contents, saying that the respondents (including his father) had
FAO(OS) 373/2011 Page 41 of 44
typed the blank letterheads somehow and, therefore, that the documents were forgeries; this is discernible from his deposition, in cross-examination: “I admit my signatures on the letter in question Ex. R-35 but it was on blank paper when I signed it. The letter is on my letterhead. It is incorrect that I had sent the letter Ex. R-34 to my father on 15th February, 1992. I admit my signatures on this document but it was also on blank paper. It is incorrect that I signed on the dissolution deed and I am left with no share in that company.”
Interestingly, the FSL had finalized a report dated 26.12.2001, which was relied upon by the appellant and was produced before the arbitrator. That report categorically stated that Exhibits R34 and R35 were typed at Bogota. The reason for the said opinion was that as the appellant had made a police complaint alleging that the said two letters, which concededly signed by him, were got typed by O.P. Kapoor at Delhi and alleged that the typewriter was lying in Kamal Cinema building itself. On the basis of the said complaint, the typewriter was seized by the police. During investigation, letter Ex. TA9 which was written by the appellant from Bogota to his brother Arun Kapoor at Lima, on which also his signature was admitted, was also given to the investigating agency. The police gave an opinion that the letters Ex. R-34 and R-35 were typed at Bogota- where TA9 was typed and not on the typewriter which was seized from Delhi. This is significant, because the appellant‟s allegation was that the letterheads containing his signatures were typed at Delhi, on a typing machine that was in the control of his father. 75. However, in the said report itself the signature at the dissolution deed was alleged to be not that of the appellant. This was so, because various other signatures of the relevant period, matched with the signatures of the
FAO(OS) 373/2011 Page 42 of 44
appellant on the dissolution deed, were not taken into consideration by the investigating agency. It was argued that the respondent had placed evidence on record to show that the appellant was in the habit of using signatures in different manner on different occasions. 76. As discussed earlier, courts do not ordinarily examine the analysis of evidence carried out by arbitral tribunals in the course of proceedings. However, the genuineness or otherwise of documents became of crucial import in the present case. To recapitulate, the appellant had set up claims that his father had used ancestral family funds to establish business; the arbitral tribunal held this to be baseless. The tribunal went by the record, which showed that O.P. Kapoor was a self-made man, who struggled to make both ends meet, and by dint of hard work, had established business. The finding of the dissolution deed not being valid or binding and that it was contrary to other evidence, was primarily the basis for the interim and final awards. 77. It is manifest from the records that the appellant was away to Lima, where he stayed initially; he moved to Bogota, later. The evidence on record, in the form of deposition and testimonies of O.P. Kapoor, Arun Kapoor and all other relatives of the appellant, are consistent that he voluntarily left the partnership. The appellant had relied on three letters, i.e. CW-1/12 (dated 21.12.1992), CW-1/13 dated 15.01.1993) and CW-1/14 dated 20.11.1993 to prove that despite the alleged dissolution of partnership, Arun Kapoor and members of the family continued to write letters to him, as though the partnership firm subsisted. That circumstance, along with his allegation of forgery of documents, had to, no doubt, be weighed during evaluation of proceedings. However, the arbitrator completely ignored the second FSL
FAO(OS) 373/2011 Page 43 of 44
report. Apart from opining that the appellant‟s plea that the letters were typed in Delhi was baseless (because the admitted letters sent from Lima, were with the typewriter was also used for T-9), that report also stated that a cheque for US $ 3,40,000/- (containing signatures of Raman Kapoor Q-44) tallied with the disputed signatures A-91 to A-109 and A-109/1 (disputed by him). The appellant had disputed that the cheque was not signed by him, and alleged forgery by his father and brothers. 78. This court further notices that almost all near relatives of the appellant Raman Kapoor – including his mother deposed against him. The arbitrator, however, brushed aside these depositions, stating that they could not give any convincing reason why the appellant would have resigned from the partnership firm. As regards the rationale, i.e. that the appellant had withheld substantial amounts payable to Ropas International, which had supplied and exported goods, the arbitrator rendered somewhat contradictory findings: on the one hand, it was held that the appellant did not produce any books or documents, to suggest that amounts were paid. On the other hand, however, the tribunal inferred that since the appellant did not have any account, he used to remit amounts through Arun Kapoor‟s bank accounts. That finding can be sustained only with reference to the appellant‟s statement and no other material. The father, O.P. Kapoor stated in more than one place that over US $ 804,000 was due and payable by the appellant towards the supplies made to him of which he had remitted roughly half. The award, however, stated that amounts payable on account of the firm were inter se disputes between the appellant and his brother, Arun Kapoor. 79. The upshot of the above discussion is that the learned single judge carefully analysed all the circumstances, including the weight given by the
FAO(OS) 373/2011 Page 44 of 44
arbitrator to the evidence led before the tribunal and noticed that disparate and differential standards of judging evidence was adopted and furthermore, vital documents which had to be considered, were not taken into account. These resulted in findings that no reasonable man could have rendered, placed in such circumstances. This court is of the considered opinion – after considering the overall facts and circumstances, including the oral testimony of all parties, that the impugned judgment does not suffer from any infirmity. 80. For the above reasons, the appeal must fail; it is, therefore, dismissed without order on costs.
S. RAVINDRA BHAT (JUDGE)
A.K. CHAWLA (JUDGE) FEBRUARY 4, 2019