SHANMUGHASUNDARAM Vs. DIRAVIA NADAR

JUDGEMENT

(1.) The appeal is directed against the order of the High Court of Madras. By the impugned order, the High Court in exercise of its revisional jurisdiction has set aside the order of sub-ordinate Judge, Tuticorin whereby the latter had allowed substitution of the deceased arbitrator on the panel of seven arbitrators appointed by the parties under the arbitration agreement. The case is governed by the Arbitration Act, 1940 (hereinafter referred to as 'the Act' for short). The property which is the subject matter of arbitration agreement, is the land in occupation of the appellant as a tenant and on which by building a superstructure he is carrying on his business of Coffee house.

(2.) It is not in dispute that the land involved has been inherited by two brothers (respondents herein) and three sisters. It is reported that one of the sisters is dead and had left behind her heirs. The sisters and heirs of deceased sister are not parties to either the Arbitration proceedings or the proceedings which arose from them in the court.

(3.) A few more facts giving rise to this appeal may now be stated as under :- 3.1. The two brothers wanted to sell the entire property involved to the appellant. They entered into a written agreement with the petitioner and for deciding the rate at which the property would be sold, they agreed for arbitration by a panel of seven named arbitrators. On 27.7.1977 a unanimous award was passed by arbitrators fixing the price of land at Rs. 1000/- per cent. The appellant, who was vendee under the sale agreement, filed an application in the civil court for making the Award the Rule of the Court and passing a decree thereon. 3.2. The two brothers filed a counter case by an application for setting aside the award. The civil court on the application of the parties filed pursuant to the award, came to the conclusion that the arbitrators misconducted themselves by collecting information from outside source without disclosing it to the parties and without giving them opportunity of hearing. According to civil court the award was vitiated as principles of natural justice were violated by the arbitrator in fixing the price. The civil court set aside the award. 3.3. According to learned counsel appearing for the appellant-vendee, the civil court had set aside the award only on the ground of breach of principles of natural justice as the arbitrators failed to hear the parties to the agreement before taking decision on fixation of price for sale of the land. 3.4. On the other side, learned counsel appearing for the respondents i. e. two brothers, contend that the order of the civil court dated 29.12.1980 properly understood, by reading it with other relevant parts of his judgment, indicate that the award was set aside specifically on two grounds mentioned below :- 1. In fixation of price the arbitrators did not allow participation and hearing to the parties; 2. The sisters had 3/5th share in the property and the two brothers, who had only 2/5th share together, could not have agreed for sale of the entire property. The enforce-ability of the award being 'open to question' it was set aside. 3.5. Against the order setting aside the award the appellant preferred an appeal to the High Court under the Act which was dismissed on 21.8.1987.3.6. According to the appellant, as the award was set aside but the arbitration agreement was not superseded, he made an application on 22.11.987 to the civil court for reconstitution of the panel of arbitrators by substituting one arbitrator for the arbitrator who, in the intervening period, had died. 3.7. On 9.3.1990 the civil court allowed the aforesaid application and directed substitution of another arbitrator for the deceased arbitrator. The newly constituted panel of arbitrators made a second award on 25.6.1990 and again fixed price at the rate of Rs. 1000/- per cent for sale of the property. According to the appellant, the invalidity in the first award was merely of not hearing the parties on price fixation. In the subsequent arbitration proceedings, before passing of second award, the parties were duly heard by the arbitrators and thereafter price fixation was done. 3.8. The present appellant filed an application for making the second award a rule of the court. The respondents did not file any application to set aside the second award but filed a civil revision petition against the order of civil court made on 9.3.1990 by which substitution in place of the deceased arbitrator was allowed and arbitration was revived. 3.9. By the impugned order passed in the revision petition filed by the respondents, the High Court has taken a view that the first award was set aside both on the ground of breach of principles of natural justice as also on the ground that as the sisters were not parties to the arbitration agreement, the award was unenforceable. The High Court has held that the arbitration agreement cannot be allowed to be reinvoked for revival of the arbitration proceedings.