EXTRUSION PROCESSES PVT. LTD Vs. KASHIBHAI S. PATEL

JUDGEMENT

(1.) THIS is a petition filed by a private limited company registered under the Companies Act and its shareholders representing one group, viz. the group of the second petitioner, against shareholders of the other group represented by the first respondent and some others, to set aside an award made by one N.M. Shah on June 30, 1967. Respondents Nos. 12 to 22 and 42 have not appeared at the hearing before me, but I have been told by Mr. Bhatt on behalf of the petitioners that they are supporting the petitioners. The facts of the case are very complicated, but it is not really necessary to refer to them in detail, as I am only concerned with the question as to whether the award made in the present case should be set aside on any of the grounds relied upon by the petitioners. It may be stated that, according to petitioners Nos. 2 to 5, disputes really started because respondents Nos. 1 to 7 and others commenced carrying on a business competing with the business of the first petitioner -company in breach of the articles of association of that company, through the instrumentality of the 8th respondent -company. On the other hand, according to respondents Nos. 1 to 7 and 23 to 35 and 37 to 41 whom Mr. Modi represents (hereinafter referred to as 'the contesting respondents'), the disputes between the parties arose on account of the fact that petitioners Nos. 2 to 7 so exploited their voting rights as to edge out the contesting respondents from having any voice in the management of the company. This resulted in a large number of proceedings between the parties in the High Court, in the Bombay City Civil Court, the Court of Small Causes, and in the Criminal Courts. Whilst all the said proceedings were still pending, the parties arrived at an agreement which is dated July 3, 1966 to refer all the disputes which were the subject -matter of the various pending proceedings in different Courts, as well as all personal disputes between them, to the arbitration of one N.M. Shah who, by profession, is a chartered accountant. Protracted proceedings ensued before the said arbitrator before whom the hearing ran into over a hundred and twenty hours. Before, however, I deal with those proceedings and the various contentions of the petitioners in regard to the same, it would be convenient to set out the main provisions of the arbitration agreement entered into between the parties on July 3, 1966, a copy of which has been annexed to this petition and marked 'B'.

(2.) CLAUSE 1 of that agreement refers to the dispute between the two groups of Mohanbhai (petitioner No. 2) and Kashibhai (respondent No. 1), and states that the said Mohanbhai and Kashibhai thereby agreed to have all their disputes settled through the arbitration of the said N.M. Shah as sole arbitrator. Clause 4 of the said arbitration agreement provided that the arbitrator was first to hear 'the pending proceedings' which would be adjourned or withdrawn according to the directions given by him, and the parties would have to obey those directions faithfully without any delay or excuse. Clause 5 provided that the arbitrator would also decide personal and other disputes which each party would submit in writing in detail within the time fixed by the arbitrator. It may be stated that that was done by the parties. Clause 6 of the said arbitration agreement is in the following terms: After hearing the parties in respect of their various disputed and claims and after making the awards in respect of such disputes and claims, the Arbitrator shall fix the price of both the types of shares of Extrusion Processes Private Ltd. (Petitioner No. 1) held by the second party, (Respondent No. 1) his friends and relatives. A list of such persons desirous of selling their shares is also annexed herewith. Clause 9 of the said arbitration agreement provided that the arbitrator was to give his award within six months from the date of the said agreement or 'within such extended period from time to time with consent of the parties to agreement hereto.' The said clause then proceeded to voice the illusion from which the parties apparently suffered that the award given by the arbitrator would be final and no party was to question it in a Court of law and his award would be binding to all the signatories to the said arbitration agreement. As the time for making the award expired, a further agreement was entered into between the parties on November 9, 1966 extending the time for the arbitrator to makes his award to June 30, 1967 and, taking full advantage of that extention, the arbitrator made his award on the very last day.

(3.) THE award so made by the arbitrator on June 30, 1967 is sought to be set aside by the petitioners on various grounds by a mammoth petition running into 155 paragraphs, but I propose to confine myself to the grounds which were stated before me in the course of the hearing of this petition. Those grounds were as follows: (1) The Arbitrator had misconducted himself in various ways, exhibiting a clear bias in favour of the contesting respondents in the manner set out in paragraph 12 and the paragraph that followed paragraph 42 of the petition; (2) The Arbitration Agreement dated 3rd July 1966 is bad in law on the ground that it was not signed by all the parties thereto; (3) The agreement for extension of time dated the 9th of November 1966 was not signed by 6 of the parties who had signed the Arbitration Agreement dated 3rd July 1966; (4) In so far as the Arbitration Agreement related to defendants Nos. 6 and 7 in Bombay City Civil Court Suit No. 5 of 1964, who were minors, that Agreement, and the Award consequent thereon, are void in law; (5) The Arbitration Agreement is unlawful and void in law in so far as it Seeks to refer four criminal complaints, one inquiry and one contempt proceeding to the Arbitrator; (6) Though one of the parties to the Arbitration Agreement had died pending the reference proceedings, no notice was given to his heirs; (7) Notice of the filing of the Award has not been given to all those affected thereby; and (8) The Award is bad by reason of the fact, that though the Arbitration Agreement is one composite agreement, the Arbitrator has not declared his Award in respect of all the matters referred to him.