Case Note & Summary
The appeal arose from a family dispute within the Malhotra family of Pune, who owned and controlled several businesses including Weikfield Products Company (I) Private Limited and various other assets. To resolve their differences, the family members appointed one Mr. Rustam S. Gae, a former Law Secretary and Senior Advocate, as a sole arbitrator. The arbitration was conducted informally, without advocates or formal evidence, as agreed by the parties. By an undertaking and mandate dated 28th October 2005 and an addendum on 5th December 2005, the parties referred all their disputes to arbitration. The family divided themselves into five groups for the purpose of the arbitration. Groups C and D filed a Statement of Case on 10th November 2005, seeking a fair division of all family businesses and assets, including agricultural lands situated at Bhavadi, Lonikand and Wagholi, which were claimed to have been purchased with family funds. The respondents disputed that these lands formed part of the family assets or were subject to the arbitration. On 31st December 2005, the arbitrator made an Interim Award, noting that complete separation of all businesses, including real estate and investments, was necessary and directing valuation of the properties by approved valuers. Subhash Shah and Associates were appointed as valuers. Meanwhile, the respondents filed a petition before the Company Law Board under Sections 397-398 of the Companies Act, 1956 and also moved the District Court, Pune under Section 34 of the Arbitration and Conciliation Act, 1996 to set aside the interim award and remove the arbitrator. While that Section 34 petition was pending, the Company Law Board facilitated a settlement and on 15th December 2006 passed a Consent Order, resolving all disputes except those relating to the said agricultural lands. The respondents agreed to pay three times the registered value for those lands, and a total sum of Rs.29 crores was paid. The parties also jointly appointed Bapat Valuers & Consultants Pvt. Ltd. to value the real estate including the disputed lands, and a report was received on 22nd December 2006. On 3rd April 2007, the District Judge-4, Pune dismissed the respondents' application under Section 34 challenging the interim award, holding that the arbitration reference clearly included separation of business and assets and that there was no merit in the challenge. The arbitrator then proceeded to pass a final award on 21st July 2007. However, the respondents subsequently filed a fresh application under Section 34 before the District Judge-1, Pune, which by order dated 31st May 2010 allowed the application and set aside the final award. The appellants then filed the present Arbitration Appeal No. 12 of 2010 under Section 37 of the Arbitration and Conciliation Act, 1996 in the High Court of Judicature at Bombay, challenging the order setting aside the award. The respondents also filed cross-objections. The High Court, after hearing the parties, reserved its judgment on 6th May 2013 and delivered its judgment on 14th June 2013, the contents of which are partially set out in the record.
Headnote
A) Arbitration - Informal Arbitration - Parties agreed to refer all family disputes to a sole arbitrator and to conduct proceedings without advocates or oral evidence, relying on written submissions - All parties accepted this informal arrangement (Paras 2-4, 7). B) Arbitration - Interim Award - Arbitrator directed complete separation of all businesses including real estate and investments, holding that a permanent solution required full division; valuation to be at fair market value by approved valuers (Paras 8-9). C) Companies Act, 1956 - Sections 397-398 - Consent Order - Company Law Board recorded settlement of all disputes except agricultural lands; Rs.29 crores paid, properties divided, and separate valuation by BVCPL obtained by mutual consent (Paras 10-12). D) Arbitration and Conciliation Act, 1996 - Section 34 - Challenge to Interim Award - District Judge dismissed application to set aside interim award, finding that the reference clearly included separation of business and assets and that the challengers’ contentions lacked substance (Para 13).
Issue of Consideration
Whether the learned District Judge was justified in setting aside the arbitral award on the ground that the reference did not include separation of family businesses and assets, particularly agricultural lands standing in the names of individual family members.
Law Points
- arbitration agreement can be informal
- separation of family businesses through arbitration
- company law board settlement
- valuation of family assets
- agricultural lands as family assets
- section 34 challenge to interim award
- distinction between interim and final award
