RAMASWAMI CHETTIAR Vs. VENKATARAMA AIYAR

JUDGEMENT

(1.) The two Civil Revision Petitions are presented against the order of the District Munsif of Mayayaram confirming an award in the matters in dispute in O.S. No. 505 of 1919 on his file, dismissing petitioners objections and granting the respondents a decree in accordance therewith. The petitioners challenge the order on various grounds, the chief contention being that the arbitrators decided two matters beyond the scope of the reference and therefore beyond their jurisdiction and therefore the Lower Court, in accepting their decision on these points and incorporating it in its decree, has exceeded its jurisdiction. The arbitration was in the matter of the dissolution of partnership between the six plaintiffs in the suit and the defendants, who were jointly working a mill concern. The reference to arbitration, Ex. A, gave the arbitrators authority, inter alia, to sell the property, moveable and immoveable, by public auction to the highest bidder, whether he be a partner or a stranger, to collect the sale proceeds and to distribute them among the partners according to the interests they had in the concern. The arbitrators were also to sell book-debts and outstandings but among the partners only. The final amounts due to the various partners were then to be settled and adjusted with reference to any liability incurred by any partner who may have been a successful bidder at any of the sales.

(2.) The arbitrators held a public sale of the mill itself and its machinery on 30th May, 1920, and they were knocked down to the fourth plaintiff, one of the petitioners, for Rs. 28,000. One of the conditions of the sale [see Exhibit D-1] was that the bidders should deposit Rs. 1,000 as soon as the sale was knocked down. The fourth plaintiff was able to deposit only Rs. 500. Under a further condition, any bidder, who thus made default in paying his deposit, had to run the risk of a re-sale, his own sale being cancelled and he being responsible for any loss arising out of the re-sale. Accordingly, a re-sale was held on the same terms on 19 July, 1920, at which the highest bidder was one M. K. V. Kandasami Pillai for Rs. 20,000. [See Exhibit U.] He had deposited Rs. 100 before bidding and before the sale was closed was asked to pay up the balance of Rs. 900 to make up the initial deposit of Rs. 1,000. This was prima facie a clear breach of the rules. He went away saying that he had no money. The property was therefore not knocked down to him but was again put up to auction, and this time one Ramasami Reddi bought for Rs. 14,950. The arbitrators in their award have taken Rs. 14,950 as the " sale proceeds " and, in their adjustment, have debited plaintiffs 4 to 6, the present petitioners, with the difference between that figure and Rs. 28,000, the amount for which the property was knocked down to 4 plaintiff at the first sale.

(3.) Three points are hereon raised by the petitioners: first, that the arbitrators had no jurisdiction to break their own rules of sale and postpone knocking down the second sale to Kandasami Pillai until he had paid up the full Rs. 1,000 and thus make petitioners responsible for a deficit of Rs. 28,000--14,950 instead of Rs. 28,000--20,000. Secondly, that the arbitrators had no jurisdiction to adjust this deficit in calculating the amounts due to each partner, and thirdly that, in any case, they had no jurisdiction to debit the shares of plaintiffs 5 and 6 with any portion of this deficit. We are of opinion that all these points are valid. The reference, Exhibit A, empowers the arbitrators to sell and carry over to the general adjustment the sale proceeds. The power to sell would no doubt naturally carry with it the power to make rules for the conduct of the sale, and such rules, embodied in Ex. D and subscribed to by the bidders would, in the case of such parties to the reference as subscribed to these rules, extend to the arbitrators authority to sell according to these rules, but would not extend to them any power to act outside these rules, or--and this is the important point--any power to decide in a case of controversy whether or not these rules had been complied with. Neither the terms of the reference nor the terms of the sale imply any consent by the parties to submit to the decision of the arbitrators on any controversy regarding the arbitrators own conduct of the sales or re-sales, and such consent cannot be considered to be inherent in a consent to have the sale or re-sale conducted according to rules laid down by the arbitrators. One would require a very definite and specific term in the reference before concluding that the parties to it agreed to be bound, in a matter of the arbitrators own conduct of the sale, by the arbitrators own decision. We are clear that the arbitrators, in deciding that there had been no sale to Kandasami Pillai and that therefore the petitioners were liable for the difference between Rs. 28,000 and Rs. 14,950, were acting outside the scope of their reference.