R. Jayasimha Babu, J.
1. The appellant's prayer to set aside the award that had been made against the appellant having been rejected and a decree having been made in terms of the award by the learned single Judge, these appeals have been filed.
2. A claim was made against the present appellant by the 1st respondent company, claiming a sum of Rs. 6,78,578, together with future interest thereon at 15% p.a from 1.10.1995 It was alleged that that amount was payable to the claimant in view of the default committed by the appellant of its obligation under an agreement dated 1.6.1979, to which the claimant as also the appellant were parties. The claimant had alleged that under that agreement, the unit which was owned by the claimant at Bangalore had been handed over to the appellant and it was the obligation of the appellant inter alia to discharge a loan which was outstanding and due to the Bank. It was alleged that default had been committed by the appellant and, therefore, the agreement was terminated with effect from 31.7.1984 and the unit repossessed on 1.8.1984 It was alleged that for the period from June 1979 to July 1984, the appellant owed a sum of Rs. 6,18,037, which was in default. The amount due as on 30.9.1985 was stated to be Rs. 6,78,578. Along with the claim, the claimant had filed a tripartite agreement among the claimant, the appellant and the Indian Bank to whom the claimant had owed monies and which liability the appellant was required to discharge, as also the statement showing the calculations of the amounts claimed by the claimant from the appellant. That was marked as Annexure III and it set out all the transactions between the claimant and the appellant giving details of the date of the transaction, the particulars of the transaction, the amount of the debit and the amount of the credit. That statement of account ran into 18 pages.
3. In the statement of objections filed by the appellant, the appellant put forth a theory that the agreement was only a make believe and that it did not disclose the real transactions which had occurred. It was also contended that far from the claimant company being entitled to any amount as claimed, the appellant firm was entitled to get a sum of not less than rupees five lakhs. The variation in the manner in which certain amounts were described in Annexure III to the claim were also pointed out and it was alleged that the claimant had no consistent case. It was also asserted that no reliance could be placed upon the statement of account filed by the claimant.
4. Before the arbitrator CHOSEN BY THE PARTIES, the parties agreed to mark the documents produced by them. The learned arbitrator has noted that the counsel before him did not dispute “the proof or admissibility of the documents” filed in the case. No oral evidence was let in by the parties. The arbitrator, thereafter, rightly noted that the decision of the case depended upon the documentary evidence substantial portion of which was the correspondence between the parties.
5. In the award it was noted that the point to be decided was whether the agreement dated 1.6.1979 is enforceable and intended to be acted upon or was brought into existence only for the purpose of helping the claimant to run the concern for the claimant's benefit till the concern was disposed of. After having perused the documents carefully and after hearing the arguments, the arbitrator came to the conclusion that the agreement dated 1.6.1979 was acted upon and given effect to by the parties.
6. The arbitrator, thereafter, dealt with the amount to which the claimant would be entitled. The manner in which he dealt with that issue may be set out in his own words, which are as follows:-
“Though the 1st respondent at earlier stages was making profits and was making payments to the Indian Bank regularly for two years, later it was not able to run the business as probably expected by it, and it was not getting enough financial assistance from the banks. The 1st respondent would say that they were asking the claimant to take possession, but they did not do. On the other hand, they were asking them to run the business till they find a buyer. I am unable to accept this submission, when the 1st respondent was losing in running the business, he should have only exercised his right to terminate the lease. Admittedly, the 1st respondent did not hand over possession till the lease was terminated by the claimant. The 1st respondent has not produced the accounts for the later years. I have therefore to accept the statement of accounts submitted by the claimant. The 1st respondent is liable to pay the amount as claimed by the claimant, namely Rs. 6,78,578. However, I am not inclined to allow interest during the arbitration period since the delay in the proceedings of arbitration is contributed by all the participants to arbitration. The 1st respondent is liable to pay interest from the date of the award and is liable to pay interest from the date of the award on Rs. 6,78,578 at the rate of 15% p.a”
7. Learned Senior Counsel for the appellant submitted that the arbitrator has failed to apply the law and that the award which does not conform to the law cannot be treated as a binding award and would be liable to be set aside on the ground of error being apparent on the face of the award. Learned counsel submitted that Section 34 of the Indian Evidence Act would be applicable to the proceedings in arbitration as well and that the award made by the arbitrator was not one which had properly taken note of the effect of Section 34.
8. Section 34 of the Indian Evidence Act reads as under:-
“34. Entries in books of account when relevant.- Entries in books of account, regularly kept in the course of business, are relevant whenever they refer to a matter into which the Court has to inquire, but such statements shall not alone be sufficient evidence to charge any person with liability.”
9. Counsel in this context invited our attention to the decision of the Supreme Court in the case of Central Bureau of Investigation v. V.C Shukla and others, 1998 (3) SCC 410, wherein the court approved what had been said by the Nagpur High Court in Mukundram v. Dayaram, viz., that a book which contains successive entries of items can be a good memorandum book, but until those entries are totalled or balanced, or both, as the case may be, there is no reckoning and no account.
10. Learned counsel also invited attention to the decision of the Apex Court in the case of Ishwar Dass Jain v. Sohan Lal, 2000 (1) CTC 359: 2000 (1) SCC 434, wherein it was held that the extract of the account books filed in court without producing the originals for comparison and also without explaining the reason for the non-production of the originals had been wrongly treated as admissible by the Courts below. It was observed by the Court that under Section 34 sanctity is attached in the law of evidence to books of account if the books are indeed “account books” in original and if they show, on their face that they are kept in the regular course of business.
11. Counsel also relied upon the decision of the Apex Court in the case of Seth Thawardas Pherumal v. Union Of India, AIR 1955 SC 468, wherein it was observed that an arbitral award must be based upon the facts ascertained on the basis of evidence or on admission and cannot be found to exist from a mere contention by one side, especially when they are expressly denied by the other.
12. The submission made by placing reliance on Section 34 of the Evidence Act is not very well founded as Section 1 of the Indian Evidence Act 1872 provides that the Act applies to judicial proceedings in or before any Court, including Courts-martial. The Act in terms does not apply to arbitral proceedings. It is clear that the arbitrator is not confined by the technical rules of evidence and so long as the basic principle of fairness and the well established principles of evidence are not violated, it cannot be held that the arbitrator has failed to act in accordance with law.
13. In this case, the principal issue was as to whether the agreement to which the claimant and the 1st respondent were parties had been acted upon. The denial made by the 1st respondent in its objection statement was in the vaguest possible terms. Being a party to the agreement and being bound by its terms, it had also a duty to disclose the relevant figures and data which it did not do. The arbitrator has rightly referred to this aspect. The documentary evidence placed before the arbitrator was accepted by both the parties as genuine and its authenticity was not in question at all. The reliance placed by the arbitrator on the account produced by the claimant was an act which was well within the jurisdiction. By placing such reliance the arbitrator did not commit any misconduct.
14. We do not find any error in the impugned order of the learned single Judge, declining to set aside the award. The decree made in terms of the award is one which must be upheld. The appeals are dismissed.