Case Note & Summary
The appeal arose from a decision of a Learned Single Judge dated 8 July 2011 dismissing an Arbitration Petition under Section 34 of the Arbitration and Conciliation Act, 1996, challenging an arbitral award. The appellant and respondent were co-owners of a building, with the appellant holding 42% and the respondent 26% shares. A room admeasuring 200 sq. ft. was in dispute. The respondent claimed that the appellant obtained possession of the room from a tenant but excluded co-sharers. The respondent filed a suit in the Bombay High Court for recovery of Rs.4,05,600 as his proportionate share of the value of the premises. By order dated 13 October 2006, a Learned Single Judge referred the disputes to arbitration by Hon'ble Mr. Justice Hosbet Suresh, former Judge of the Bombay High Court, with costs to be borne initially by the plaintiff subject to the arbitrator's order. The respondent filed a statement of claim before the arbitrator, asserting that based on his 26% share and the market value of Rs.15.26 lakhs, his share was Rs.4,05,600. The respondent alleged that the appellant had instituted a suit in the Small Causes Court against the tenant without the co-owners' knowledge, but later gave an assurance on 7 August 2001 that benefits would enure to all co-owners, recorded in an agreement dated 21 August 2001. The appellant filed a written statement and counterclaim for legal expenses incurred in obtaining vacant possession. The sole arbitrator allowed the respondent's claim for Rs.4,05,600 with interest at 12% per annum from the date of the suit. The appellant challenged the award under Section 34, which was dismissed by the Learned Single Judge. In appeal under Section 37, the Division Bench considered whether the award suffered from patent illegality. The appellant argued that the arbitrator ignored the agreement dated 21 August 2001 and that the costs of arbitration should not have been imposed on him. The Court held that the arbitrator had considered the agreement and found that the appellant had not complied with its terms. The Court also held that the direction on costs was within the arbitrator's discretion and not patently illegal. The appeal was dismissed, and the award was upheld.
Headnote
A) Arbitration Law - Challenge to Arbitral Award - Section 34 of the Arbitration and Conciliation Act, 1996 - Patent Illegality - The appeal challenged the dismissal of a petition under Section 34 against an arbitral award granting a co-owner's proportionate share of property value. The Court held that the award was not patently illegal as the arbitrator had considered the evidence and the agreement between parties. The appeal was dismissed. (Paras 1-11) B) Arbitration Law - Costs of Arbitration - Section 31(8) of the Arbitration and Conciliation Act, 1996 - The Court held that the arbitrator had the discretion to apportion costs, and the direction that the appellant bear the costs of arbitration was not patently illegal. (Paras 8-11)
Issue of Consideration
Whether the Learned Single Judge erred in dismissing the challenge to the arbitral award under Section 34 of the Arbitration and Conciliation Act, 1996, on the ground of patent illegality.
Final Decision
The appeal is dismissed. The arbitral award and the order of the Learned Single Judge are upheld.
Law Points
- Arbitration and Conciliation Act
- 1996
- Section 34
- Section 37
- Patent illegality
- Co-ownership
- Proportionate share
- Costs of arbitration
