VASHDEV MORUMAL SAWLANI Vs. YOGESH MEHTA

JUDGEMENT

(1.) THE petitioner herein was the original applicant and the respondent No. 1 herein was the original respondent. The applicant herein sought reference from the second respondent. By the said reference, petitioner herein claimed from the respondent as on 1st February, 1997 a sum of Rs. 20 lacs. plus interest at the rate of 20% p. a. on the said amount. The arbitral Tribunal by the impugned Award dated 19-7-1999 dismissed the reference and consequently rejected the claim of the petitioner. The petitioner by the present petition has challenged the said Award. Various grounds were taken in the petition including that the constitution of the Tribunal was contrary to section 10 of the Arbitration and Conciliation Act, 1996. However, in view of the judgment of this Court in (Stock Exchange, Mumbai v. Vinay Bubna and others), 1999 (2) Bom. C. R. (O. O. C. J.)597 : A. I. R. 1999 Bombay 266. The learned Counsel does not press the said contention. It is however, contended that the petitioner reserves the right to challenge the said decision as according to learned Counsel in Stock Exchange, Mumbai (supra), the issue namely whether the expression "under the Act and the Rules" which did not include words "byelaws" was not considered and what was considered was merely the expression under the Act. In view of the judgment of the Division Bench that issue need not be considered at this stage.

(2.) IT is then contended that Award is in conflict with the substantive law of India and at any rate there being no reasons the Award is in conflict with section 31 (3) of the Act of 1996 as there was no agreement between the parties that the Tribunal should not record reasons. A perusal of the Award would show that no reasons have been given by the Tribunal for rejecting the claim. Once that be the case, the Award with no reasons, would be arbitrary and therefore, contrary to public policy of India and arbitral Tribunal is bound to give reasons. The Tribunal which does not give reasons act arbitrarily. An Arbitrary act has been held by the Apex Court to fall within the expression public policy of India and consequently the Award is liable to be set aside. On behalf of the respondent, it is contended that the Act should be construed considering the challenges available under the Act. It is contended that the challenge should be restricted to section 34. For that purpose reliance is placed on the judgment of this Court in (Dattatraya Eknath Lanka v. Returning Officer, Amravati and others), 1985 (2) Bom. C. R. 185 : A. I. R. 1986 Bombay 354. That was the judgment under the Representation of Peoples Act. There can be no dispute that no part of any legislation can be rendered otiose and Court must try as far as possible to assign meaning to the language given by the legislature without rendering the provision otiose. In the instant case as seen the Award does not discloses reasons and as such is arbitrary and against public policy. Next reliance is placed on the judgment of the Apex Court in the case of (Olympus Superstructures Pvt. Ltd. v. Meena Vijay Khetan and others), 1999 (4) Bom. C. R. (S. C.)355 : A. I. R. 1999 S. C. 2102. My attention is invited to the following paragraphs :

(3.) HAVING heard parties, the question to be decided whether this Court ought to interfere with the impugned Award. On perusal of the Award it is clear that the petitioner herein had produced all contract notes between petitioner and respondent and also acknowledgement for delivery of shares. There is no dispute that the shares were transferred in the name of the respondent. The defence taken by the respondent herein was that the contract notes and acknowledgement for delivery of shares was taken from him fraudulently from his office. In other words, the respondent admits that there were contract notes and acknowledgement. The contention however, is that the contract has procured by fraud and as such voidable and he can be avoided. After setting out the defence by the respondent, the Tribunal proceeded to state that considering the claim of Rs. 20 lacs the onus was on the applicant, the petitioner herein to prove their case. It is surprising as to how the arbitral Tribunal still has arrived at this conclusion. Once the contract notes were produced as also the acknowledgement, the petitioner herein would have discharged his burden whether the provisions of Indian Evidence Act apply or not as there is no dispute about the existence of contract notes or acknowledgement. The dispute is whether the document were taken by practising fraud. Perusal of the Award does not show the basis on which the Tribunal has come to the conclusion and what was the reasons in so far as coming to the conclusion that the contract was not binding on the respondent. The only reason given and which I find in the Award is that in view of the facts on record and after hearing parties, taking into account their statements and in view of totality of facts, the Tribunal was of the opinion that the applicants have failed to prove their case and accordingly dismissed the claim. At least it is not discernible from the above as to the reasons why the case of the petitioner herein was rejected or the defence of the respondent was accepted without answering the issue whether the contract was not binding on account of fraud. If there were reasons given, then considering the reasons challenges would have been restricted. A mandatory duty is cast on the Tribunal under Act of 1996 which provides that unless the parties otherwise agree the Tribunal must give reasons in the Award. The policy behind this is to enable the Court to find whether the Tribunal has exceeded its jurisdiction or has acted without jurisdiction. The language of the Act itself is clear that the Tribunal must state reasons. If the normal meaning is given to the word "shall" in section 31 (3) it would be mandatory. It is only in a case where the parties agree that the reasons need not be recorded or when the Tribunal has been dispensed from giving reasons that no reasons need be given. In all other cases, reasons must be given. That is because if section 28 is considered, the Tribunal is bound to pass the Award according to substantive law of India and has to bear in mind the terms of the contract. In the instant case, admittedly the Award of the Tribunal does not disclose any reasons. The Tribunal in refusing to give reasons has acted contrary to the provisions of the Act of 1996. In other words, the Award suffers from arbitrariness. When the Tribunal constituted under law is bound to give reasons or to follow the substantive law of India, it can not bypass the said provisions. Hence, the Award passed would be contrary to the provisions of the Act and consequently any Award passed would be rendered arbitrary and contrary to public policy of India. Hence the Award is liable to be set aside, in the light of the above, following order : impugned Award dated 19th July, 1999 is quashed and set aside, considering and bearing in mind sections 21 and 43 of the Act of 1996. Time taken for the arbitral proceedings would be excluded. It will be open to the petitioners to apply for fresh reference in which event if so applied time taken in previous proceedings would be excluded. In the circumstances of the case, no order as to costs. Order accordingly.