The Issue

1. The Chamber Summons before the Court is filed in aid of an application for the execution of an arbitral award. The arbitral proceedings were governed by the Arbitration and Conciliation Act, 1996. The arbitral Tribunal consisted of the Hon'ble Mr. Justice M.H Kania, the Hon'ble Mr. Justice M.N Chandurkar and the Hon'ble Mr. Justice D.R Dhanuka. Mr. Justice M.H Kania and Mr. Justice M.N Chandurkar made and signed their award on 18th February, 2004. Mr. Justice M.N Chandurkar died on 28th February, 2004. The third Arbitrator signed and delivered a Dissenting award on 4th March, 2004. There was no challenge to the award under section 34 of the Arbitration and Conciliation Act, 1996 (“the Act”). In execution, the defence that has been set up on behalf of the first respondent is that an award which is made and signed by two of the learned Arbitrators is not a valid award in law. That defence falls for consideration. Before dealing with the rival contentions some of the prefatory facts will have to be narrated.

The Facts

2. A Deed of Trust was executed on 11th September, 1954 by Mr. Framroz Rustomji Damania. The Settlor expired on 2nd May, 1979. He left behind applicant No. 1, respondent No. 1, respondent No. 4, one freny Rustom Dubash and Nargesh Framroz Damania. Freny died in May, 1992 and her legal heirs are the 6th and 7th applicants. Nargesh was single until her death in September, 1998. Disputes arose and, on 10th December, 2003, an Arbitration Agreement was arrived at between the parties to refer them to arbitration. Mr. Justice M.H Kania and Mr. Justice D.R Dhanuka were nominated by the parties. Mr. Justice M.N Chandurkar was appointed as Presiding Arbitrator. The main issue in controversy between the parties was whether (as contended by the applicants and by the 4th respondent), the trust came to an end on the death of the settlor, or whether (as contended by the first, second and third respondents), the trust would come to an end on the death of the last surviving daughter of the settlor. The genesis of the dispute was whether the proceeds of the sale of the trust property could be retained and managed by the trust. After the reference was made to the arbitral Tribunal, joint deliberations took before the arbitral Tribunal. The fact that there were joint deliberations between the Arbitrators has not been denied in the pleadings. On 18th February, 2004 an award was made and signed by Mr. Justice M.H Kania and by Mr. Justice M.N Chandurkar: (i) Declaring that the trust came to an end on the death of the settlor; (ii) Directing that the properties and funds of the trust be distributed to the beneficiaries in the following proportion:

Applicant No. 1 25% Applicant No. 6 15% Applicant No. 7 10% Respondent No. 1 25% Respondent No. 4 25%

and (iii) Directing that necessary steps for implementing the award be initiated by the Trustees within a period of 3 months.

3. On 28th February, 2004, Mr. Justice M.N Chandurkar died. On 4th March, 2004, Mr. D.R Dhanuka recorded his reasons for not agreeing with the award of the majority and made and signed what is referred to by the learned Arbitrator as a “Dissenting award”. On 13th March, 2004, parties are stated to have received the arbitral award of the two learned Arbitrators together with the reasons for dissent of the third Arbitrator. A considerable amount of correspondence thereafter ensued to which a detailed reference would not be necessary in view of the fact that the parameters of the challenge have been confined, as recorded hereafter, to what was urged during the course of the submissions.

4. During the course of the correspondence, Mr. Justice M.H Kania by a letter dated 3rd May, 2004 clarified the factual position thus —

“As you know, in the above arbitration, Mr. Justice M.N Chandurkar expired some time in the end of February, 2004. Prior to that, Justice Chandurkar and I had made our award on 18th February, 2004. Mr. Justice Dhanuka made his dissenting award on 4th March 2004. In these circumstances, the arbitral Tribunal has come to an end and nothing remains to be done as far as the arbitral Tribunal is concerned. Please note that further correspondence in this regard is (in) futile and will not be entertained. The parties may take such steps as they think fit according to law”.

5. The first respondent claims that she had received from one of the tenants in the Trust property a document which is titled as an award signed by Mr. Justice M.H Kania and Mr. Justice M.N Chandurkar on 16th February, 2004. On the question whether the award was dated 16th or 18th February, 2004, Mr. Justice Kania clarified the position to the first respondent by a letter dated 18th June, 2004 which reads thus —

“After our award was signed by Justice Chandurkar and myself, Justice Chandurkar sent to me a document, a copy of which is sent herewith. This document which is titled ‘award’ was signed by Justice Chandurkar and myself and dated 16th February, 2004. I telephoned Justice Dhanuka for signing the said document but he was not able to do so, as he had some dental problems and informed me that he had to be hospitalized. After that Justice Chandurkar expired and Justice Dhanuka rightly pointed out that he could not sign the said document which was titled as ‘award’. The document was of no legal effect and it is for that reason, it was not sent to you. M/s Bilawala and Co. took inspection of arbitration papers lying with me and took a xerox of the said document was in my record. It is in these circumstances, they got the copy and might have sent it to you. This should clarify the position. There is no question of any document being false or fabricated. It is, however, of no legal effect”.

Submissions

6. On behalf of the applicants, it has been submitted that (i) Under the provisions of section 29 and section 31 of the Arbitration and Conciliation Act, 1996, a decision of the arbitral Tribunal where the Tribunal consists of more than one Arbitrator has to be made by a majority of its members. (ii) An award signed by a majority of the Arbitrators is valid and so long as this was proceeded by the joint participation of all the Arbitrators and a joint deliberation between them; the fact that the award has not been signed by one of the Arbitrators constituting the minority would not dilute the efficacy of the award or affect its validity. (iii) This was the position in law even under the Arbitration Act of 1940 as consistently expounded in judgments of several High Courts. By the Act of 1996, the legal position has been placed beyond any manner of doubt; (iv) The reason why the third learned Arbitrator had not signed the award of the majority is obvious and apparent on the record namely the learned Arbitrator had differed with the majority. The award of the majority having been made and signed before the death of one of the learned Arbitrators; the award is for all intents and purposes valid and enforceable and that position would not be affected by the fact that the dissenting award was delivered after the death of one of the Arbitrators constituting the majority.

7. On the other hand, it has been averred on behalf of the First, Second and Third respondents, who are the contesting parties, that (i) There was no award in the eyes of law since in Sub-section (1) of section 31, an arbitral award has to be signed by the members of the arbitral Tribunal. (ii) Though the signatures of the majority of all the members of the arbitral Tribunal are sufficient, the arbitral award must contain reasons for the omission of the signature of the 3rd Arbitrator. The 3rd Arbitrator not having signed the arbitral award there is no valid award in existence. (iii) The award of the arbitral Tribunal was not served on the First respondent in breach of sub-section (5) of section 31 and what came into the hands of the First respondent was a letter addressed by the claimant to the tenants on 19th May, 2004.

8. Before dealing with the submissions which have been urged on behalf of the parties, it would, at the outset, be necessary to make a reference to the fact that in the pleadings filed in the Chamber Summons a dispute was sought to be raised by the first respondent at some stage on whether the arbitral award has, as a matter of fact, been signed by Mr. Justice M.N Chandurkar at all. However, the learned counsel appearing for respondent Nos. 1, 2 and 3 stated during the course of the submissions before the Court that he does not press any allegation to the effect that the signature of Mr. Justice M.N Chandurkar has been interpolated or that the signature is not his. In fact, the learned counsel stated that in fairness such a defence has not been raised in the affidavit in reply. Arguments have, therefore, been confined purely to a question of law, as is apparent from the rival submissions which have been recorded in the earlier part of this judgment.

The Arbitration Act, 1940

9. Before dealing with the provisions of the Arbitration and Conciliation Act, 1996, it would be necessary to briefly advert to the position as it obtained under the legislation which held the field until the new Act came into force. Section 10 of the Arbitration Act, 1940, provided that where an Arbitration Agreement provides that the reference shall be made to three Arbitrators, one to be appointed by each party and the third by the two appointed Arbitrators, the agreement shall have effect as if it provides for the appointment of an Umpire and not for the appointment of the third Arbitrator by the two Arbitrators. Sub section (2) of section 10 provides as follows:

“10(2) Where an arbitration agreement provides that a reference shall be to three arbitrators to be appointed otherwise than as mentioned in subsection (1) the award of the majority shall, unless the arbitration agreement otherwise provides, prevail”.

10. Section 14(1) then stipulated that when the arbitrators or umpire have made their award, they shall sign it, and shall give a notice in writing to the parties of the making and signing of the award. Under sub-section (2) of section 14, the arbitrators or as the case may be, the umpire shall, at the request of the parties to the agreement or any person claiming under such party or if so directed by the Court (and subject to the payment of fees, charges and costs), shall cause the award and a signed copy of it together with the depositions and documents to be filed in Court. The Court was thereupon required to issue notice to the parties of the filing of the award. Sub-section (1) of section 14, therefore, contained a stipulation that the Arbitrators shall sign the award and that the Arbitrators (or the umpire) shall file the award in Court.

11. In several judgments of the High Courts, the issue which fell for consideration was as to whether the failure of one of the three Arbitrators or one of the members constituting the arbitral Tribunal to sign the award would affect the validity of the award though the award had been signed by a majority. The consistent thread in the judicial interpretation of the provisions of the Arbitration Act, 1940 was that the test is whether there was a joint deliberation between the Arbitrators. If the Arbitrators had participated in the hearings and there was a joint deliberation between them, the failure of one of the Arbitrators to sign the arbitral award, was held not to affect the validity of the award. The reason for this was obvious. Where the arbitral proceedings have been conducted by all the Arbitrators sitting together as a body and there is a joint participation of all the Arbitrators, one Arbitrator cannot stultify the proceedings by inaction, though a majority has agreed upon and signed its award.

12. One of the early judgments is of the Patna High Court in Raghubir Pandey v. Kaulesar Pandey, AIR (32) 1945 Patna 140. In that case, though all the three Arbitrators had jointly deliberated upon the matter in controversy, one of the Arbitrators had not signed the arbitral award though as a matter of fact, he was in agreement with the view of the majority. A Division Bench of the Patna High Court rejected the challenge to the validity of the arbitral award holding that the fact that one of the Arbitrators had not signed the award would not impinge upon the validity of the award. The Court held thus—

“………A review of all these cases satisfies me that the true principle upon which the matter is to be decided is to find in a particular case whether all the arbitrators have joined in the deliberation or have attended the important meetings in which the crucial questions for decision were deliberated. If one or more of the arbitrators have not joined in the deliberation, the award is invalid if it is not signed by an arbitrator even though he may choose to sign it later on. Again, if all the arbitrators have joined in the deliberation and there is a distinct provision in the agreement between the parties that the award of the majority will be binding, in that case the failure, deliberate or accidental, of one of the arbitrators to sign the award will not make it invalid……”.

The Division Bench of Patna High Court held that signing of the award was not a judicial act but was merely a record of that which had already been done in the judicial exercise of the functions of the Arbitrators.

13. The same view was reiterated in a judgment of a Division Bench of the Calcutta High Court in Ramtaran Das v. Adhar Chandra Das, AIR 1953 Cal 646 where the Bench held thus —

“……The question has been considered in a number of cases and has been answered in the negative. In the case of ‘Abinash Chandra v. Parasuram’, 44 Cal WN 866(g), which was a case under para 10 of Sch. II Civil P.C, 1908 Henderson J. was of the opinion that once the making of the award is discussed by all the arbitrators acting together and the majority comes to a certain conclusion and an award is drawn up, the mere fact that the dissenting minority does not sign the award does not render the award invalid. The learned Judge pointed out that this rule is based on commonsense. I respectfully agree with the above view. If a contrary view is taken, the minority would be able to frustrate a decision reached by the majority of the arbitrators which, according to the arbitration agreement, was binding on all of them……”.

14. In a judgment of a Division Bench of the Madras High Court in Johara Bibi v. Mohammad Sadak Thambi Marakayar, AIR (38) 1951 MADRAS 997 the Court held that the signing of the award is only a formality once it is demonstrated that the Arbitrator who refused to sign the arbitral award had taken part in the Arbitration proceedings throughout and was a party to the decision.

The Act of 1996

15. The Arbitration and Conciliation Act, 1996 has provided in section 29, that unless otherwise agreed by the parties, in arbitral proceedings with more than one arbitrator, any decision of the arbitral tribunal shall be made by a majority of all its members. Sub-section (1) of section 31 provides that an arbitral award shall be made in writing and shall be signed by the members of the arbitral Tribunal. Sub-section (2) lays down that for the purposes of sub-section (1), in arbitral proceedings with more than one arbitrator, the signatures of the majority of all the members of the arbitral tribunal shall be sufficient so long as the reason for any omitted signature is stated. Sub-section (5) provides that after the arbitral award is made, a signed copy shall be delivered to such party.

16. Section 31 of the Act of 1996 has now made a clear departure from the provisions of section 14 by dispensing with the requirement of the filing of the award in Court. Under the Act of 1996, the requirement of the filing of the award in Court and the issuance of a notice by the Court to the parties of the filing of the award has been done away with. Sub-section (1) however, requires that the arbitral award has to be in writing and to be signed by the arbitral Tribunal. The law in India even under the Act of 1940, which required the signing of the award by the Arbitrators under section 14(1) was that so long as the Arbitrators had participated in the arbitral process and there was a joint deliberation, the omission by one of the Arbitrators to sign the award would not affect the validity of the arbitral award. The test under the old Act being whether there was a joint deliberation that had to be determined as a matter of fact and, as the judgments of the High Court to which a reference has already been made would show, it was on a consideration of the evidence adduced that the Court had to enter a finding on whether there was joint deliberation. This position in law under the Act of 1940 was obviously within the contemplation of the legislature when it enacted the Act of 1996. Sub-section (2) of section 31 now clarifies that the signatures of a majority of all the members of the arbitral tribunal shall be sufficient so long as the reason for any omitted signature is stated. Sub-section (2) is clarificatory and facilitative, in order to avoid the kinds of dispute which arose under the earlier Act. Where an award has been signed by a majority of the arbitral Tribunal that award constitutes in fact and in law an award of the arbitral Tribunal. The omission of one of the Arbitrators to sign the award, or for that matter, to deliver his or her award would not affect the legitimacy or validity of the award of the majority. Nor for that matter does the fact that one of the Arbitrators has delivered a dissenting award affect the validity of the award of the majority. The Act now places the matter beyond doubt by providing that what is required in law for a valid award is an award of the majority constituting an arbitral tribunal. The reasons for the omission of the signature of an Arbitrator have to be stated. But that in certain cases may be obvious when one of the Arbitrators has made a dissenting award. That is exactly what has happened in the present case. The majority of the arbitral Tribunal consisting of Mr. Justice M.H Kania and Mr. Justice M.N Chandurkar made and signed the arbitral award on 18th February, 2004. From the record it appears that as a matter of fact, the Arbitrators had kept their award ready to be signed by all three of them on 16th February, 2004. The document which was prepared on 16th February, 2004 (of which inspection was stated to have been taken from the files of Mr. Justice Kania) demonstrates the position that even as on that date, the award was to be of the majority and that Mr. Justice D.R Dhanuka was to deliver a minority award. Mr. Justice Kania in his letter dated 18th June, 2004 clarifies the position by stating that the document could not be signed by Mr. Justice Dhanuka on 16th February, 2004 since the learned Arbitrator was hospitalized. But that, to my mind does not carry the matter any further because what is to be considered is whether the award as it stands was valid without the signature of Mr. Justice Dhanuka on 18th February, 2004. The answer to that must be in the affirmative. Before the death of one of the Arbitrators constituting the majority, there was a valid award which was made and signed by the majority. That was sufficient to constitute a valid award in law.

17. The submission that the award was not served on the respondent Nos. 1 to 3 has no substance whatsoever. In the affidavit in reply that has been filed by the first respondent, it has been stated in para 4 that the first respondent had received the award dated 18th February, 2004 together with the dissenting award on 13th March, 2004. The first respondent now claims that it was received from an unknown source. Whether the source was known or unknown would make absolutely no difference regarding fact of passing of award. There is no merit in the submission which has been made on behalf of the applicant that the applicant has received both the majority and dissenting awards on 13th March, 2004.

18. The defence that has been set up to the validity of the arbitral award lacks in substance.

19. The arbitral award contains directions in regard to the division of the Trust fund and the Trust property to the following effect:

“So far as the Trust fund is concerned, there will be no difficulty in dividing the available funds. So far as the immovable property is concerned, since according to Clause 11 of the Second Schedule of the Deed of Trust the ownership and management of their respective shares of the Trust Premises is to be transferred to the abovementioned beneficiaries, each one of them will now become co-owners of the respective shares, as indicated above. It does not appear that the property “Dhun Lodge” along with the plot on which it stands would be capable of physical division into five shares or four shares if the shares of Claimants Nos. 6 and 7 are clubbed. The only alternative, therefore, would be for the present Trustees, namely, respondents Nos. 1, 2 and 3, to sell the property and distribute the sale proceeds in the proportion set out above. In order to obviate any controversy between the beneficiaries with regard to the price recovered, it would be appropriate to direct the Trustees to invite offers from prospective buyers of the property and the said offers should be considered by the Trustees along with the beneficiaries referred to above and the highest offer should be accepted. On sale of the property, each of the beneficiaries would be entitled to the proportionate amount in the sale proceeds remaining after meeting all the expenses in connection with and incidental to the transaction of sale”.

20. In order to effectuate the directions contained in the arbitral award, it is only appropriate and proper that the Court Receiver of this Court be appointed as Receiver of the erstwhile trust property in execution. Prayer (a)(i) of the Chamber Summons reads as follows:

“(a) that pending the enforcement of the award (referred to in the Affidavit in Support of this Chamber Summons) in execution proceedings filed by the Applicants and the grant of the reliefs sought in execution and for a period of four weeks thereafter:

(i) this Hon'ble Court be pleased to appoint the Court Receiver, High Court, Bombay, Receiver of the erstwhile Trust property (including the said property “Dhun Lodge” more particularly described in Exhibit

‘V to the Affidavit in Support), with necessary powers under Order XL Rule 1 of the Code of Civil Procedure 1908, including the power to sell the erstwhile Trust property including the said property “Dhun Lodge” or any part thereof and to pay over/disburse/distribute the net sale proceeds/realisation to the beneficiaries, viz. Applicant Nos. 1, 6 and 7 and Respondent Nos. 1 and 4, in the proportions more particularly stated in the award dated 18th February, 2004 (being Exhibit ‘C to the Affidavit in Support)”.

21. The reliefs sought in terms of the aforesaid prayer would have to be granted in execution of the arbitral award. The agreed position before the Court is that there was no challenge under section 34 to the Arbitral Award. The award is enforceable as a decree. The Chamber Summons is, accordingly made absolute in terms of prayer clause (a)(i). Until the Receiver takes charge of the property, there shall be an injunction restraining the first, second and third respondents in terms of prayer clause (a)(iii) of the Chamber Summons, save and except for the bracket portion, which reads as follows:

“(iii) that the Respondent Nos. 1 to 3 by themselves, their servants and agents be restrained by an order and injunction of this Hon'ble Court from in any manner alienating, selling, parting with, letting out and/or creating any third party rights or encumbrances on the erstwhile Trust property and (including’ the said property “Dhun Lodge” more particularly described in Exhibit ‘V to the Affidavit in Support) or any part thereof”.

22. The Chamber summons is made absolute in the aforesaid terms.

Order accordingly.