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V.S. Ramanujachariar v. Veena Avanna Mana Vatapathra Sayee Thathachariar

Madras High Court
Aug 24, 1942
Smart Summary (Beta)

Structured Summary of the Opinion (Wadsworth, J.)

Factual and Procedural Background

The appellant (plaintiff in the original suit) sought to enforce an arbitration award under paragraph 20 of Schedule II of the Code of Civil Procedure. The dispute concerned the division of joint family properties between two brothers. The parties had purportedly submitted their dispute to arbitration by means of a written instrument (muchilika, Exhibit A) dated 3 September 1933, appointing their brother‑in‑law (P.W.4) as arbitrator. The arbitrator conducted inquiries at various dates in 1934 and communicated interim decisions by several notices; a formal award (Exhibit D) was passed on 21 November 1934.

The defendant refused to accept the award and raised multiple contentions, including denial of the reference to arbitration, denial of the existence of a joint family, allegations of arbitrator partiality, and procedural objections to the arbitrator's conduct. The trial (Subordinate) Court found Exhibit A truthful, Exhibit LIV (another document) false, and the plaintiff's factual version substantially correct, but dismissed the suit on legal grounds concerning the arbitrator's procedure and the validity of the award. The present opinion is an appeal from that dismissal.

Legal Issues Presented

  1. Whether the formal award (Exhibit D) is enforceable despite the arbitrator's having communicated piecemeal decisions by earlier notices.
  2. Whether the award is invalid for not conforming to the terms of reference, specifically because the arbitrator allotted the money‑lending outstandings en bloc and directed a lump sum payment (Rs. 4,000) to the plaintiff instead of dividing the outstandings into two portions.
  3. Whether the arbitrator acted beyond his power or committed misconduct by effectively making more than one award (i.e., whether interim communications constitute final awards rendering the arbitration defective).
  4. Whether the arbitrator's use of personal knowledge of family matters amounted to misconduct or partiality sufficient to invalidate the award.
  5. Whether the arbitrator displayed partiality in continuing the proceedings after the defendant repudiated the reference, in awarding a lump sum, in pronouncing the award without notice to the parties, or in signing the award away from the parties' place of residence.

Arguments of the Parties

Appellant / Plaintiff

  • The reference to arbitration (Exhibit A) was genuine and valid; the plaintiff relied on the arbitration agreement executed on 3 September 1933.
  • The plaintiff's factual narrative (including the division of Srivilliputtur properties and the arbitrator's conduct) was substantially true; the trial Court's factual findings supported the plaintiff.
  • The arbitrator was entitled to proceed and make an award on the available materials; the defendant had withheld key documents (money‑lending documents), forcing the arbitrator to estimate the value of the outstandings.
  • The formal award (Exhibit D), which summarizes all decisions, should be enforced notwithstanding interim notices or oral communications made during the arbitration process.

Respondent / Defendant

  • The defendant denied the truth of the reference to arbitration and set up an alternate reference of a different character.
  • He denied the existence of a joint family at the time of reference and asserted that some properties (Koilpatti lands) were acquired under a will and that the family had been divided since 1904.
  • The defendant alleged partiality and misconduct by the arbitrator, including reliance on personal knowledge and proceeding despite accusations of bias.
  • He contended the award did not conform to the reference because the arbitrator allotted outstandings en bloc to the defendant's share and directed a lump sum payment to the plaintiff, rather than dividing debts as required by the reference.
  • The defendant argued that the arbitrator made multiple, separate awards (on 20 April, 26 June, and 11 July) so that no single, comprehensive award covering all matters was made, rendering the arbitration defective.

Table of Precedents Cited

Precedent Rule or Principle Cited For Application by the Court
Winter v. Munton; Winter v. White Authority for the proposition that an arbitrator must make a single award unless the terms of reference permit a series of awards; an arbitrator cannot separate connected disputes into separate awards where a consolidated award is required. The Court accepted the principle but distinguished the present facts: it held that an arbitrator conducting a complex partition enquiry may proceed piecemeal (classifying evidence by subject and arriving at tentative conclusions) provided no final written award is made until the whole matter is decided. The Court found earlier communications were not final formal awards and that Exhibit D was the sole formal award.
Chidambaram Chettiar v. Ayyappa Chettiar Recognition that an arbitrator's personal knowledge of the matters in dispute does not necessarily amount to misconduct where the arbitrator is chosen for such knowledge. The Court relied on this principle to reject the contention that the arbitrator's use of personal knowledge invalidated the award. It observed that the arbitrator was a family member chosen for his knowledge, and that using such knowledge in conjunction with the materials placed before him did not constitute misconduct or partiality.

Court's Reasoning and Analysis

The Court undertook a structured review of the Subordinate Judge's grounds for rejecting the award and applied legal principles to the factual record as found by the trial court:

  1. Non‑conformity with the reference (outstandings allotted en bloc / lump sum Rs. 4,000): The Court observed the arbitrator had to work with limited materials because the defendant kept the principal documents (money‑lending papers) in his custody and refused cooperation. Given only old accounts and an abstract were available, the arbitrator made a reasoned estimate and awarded a half share of the estimated value to the plaintiff. The Court held that this was the only practical and legally defensible course; an arbitrator (and similarly a Court) may draw proper inferences from a party's suppression of evidence. The arbitrator thus acted within his duty to divide the outstandings as fairly as possible on the materials before him.
  2. Allegation that the arbitrator made multiple awards: The Court acknowledged the general rule (citing Winter) that an arbitrator must normally make a single award unless the reference permits multiple awards. However, it explained that conducting a partition enquiry often requires a piecemeal approach—identifying properties available for division, classifying evidence, and arriving at tentative conclusions on sub‑issues—so long as the arbitrator does not reduce any interim decision to a final written award before deciding the whole matter. The Court examined the earlier communications (Exhibit XXIX, K‑2, K‑3) and concluded they were notices, addenda, or oral communications of decisions, not final formal awards. Exhibit D, the 21 November 1934 document, was the sole formal award embodying the arbitrator's conclusions as a whole.
  3. Use of personal knowledge and alleged misconduct: The Court queried whether mere personal acquaintance with facts invalidates an award and concluded it does not as a matter of law. Relying on Chidambaram Chettiar v. Ayyappa Chettiar, the Court reasoned that when an arbitrator is chosen for his personal knowledge of the family or subject matter, it is permissible for him to examine evidence in light of that knowledge, provided his conclusions are grounded in the materials placed before him. The arbitrator's reference to a past assignment he personally witnessed did not amount to misconduct; on the contrary, in another instance the arbitrator was criticized for not invoking personal knowledge.
  4. Allegations of partiality and procedural impropriety: The Court reviewed the defendant's complaints that the arbitrator continued proceedings despite repudiation, awarded a lump sum instead of dividing outstandings, pronounced the award without notice, and signed it away from the parties' residence. The Court concluded the arbitrator acted correctly. It would have been improper to abandon the arbitration merely because the defendant sought to resile from the reference and raised false pleas. Given the defendant repeatedly failed to produce evidence, there was no necessity to notify him of the date of signature; nor is an arbitrator obliged to pronounce or sign an award in any particular place or in the presence of the parties.

On the whole, the Court found the Subordinate Judge's legal objections unsustainable in light of the facts (including the defendant's conduct), and it upheld the validity of the formal award, Exhibit D.

Holding and Implications

HOLDING: The appeal is allowed. The Court directed that there will be a decree in terms of the formal award, Exhibit D, and awarded costs to the appellant throughout.

Implications:

  • Direct consequence for the parties: The formal arbitration award (Exhibit D) is declared enforceable and a decree in its terms is to be entered—the defendant's challenges to the award were rejected.
  • On broader legal consequences: The opinion clarifies that (i) an arbitrator conducting a partition enquiry may proceed piecemeal so long as no interim decision is reduced to a final written award before the whole matter is decided, and (ii) the mere fact that an arbitrator possesses and uses personal knowledge does not of itself amount to misconduct when the arbitrator was chosen for such knowledge. The Court applied existing authorities to the facts but did not purport to lay down any novel precedent beyond these applications.
N.S
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Wadsworth, J.:— The appellant was the plaintiff in a suit under paragraph 20 of schedule II of the Code of Civil Procedure to enforce an award in a matter referred to arbitration without the intervention of the Court. The plaintiff is the younger brother of the defendant and it was his case that the division of their joint family properties was by consent of parties referred to the arbitration of their brother-in-law, P.W 4, who passed an award on 21st November 1934, which award the defendant had wrongfully refused to accept. The defendant raised many contentions, most of which have been held to be unfounded in fact. He denied the truth of the reference to arbitration, setting up another reference of a completely different character, denied the existence of a joint family at the time when the reference was made and made various allegations suggesting partiality on the part of the arbitrator. The trial Court has found that the muchilika, Exhibit A, which contains the reference to arbitration is true, that the other muchilika, Exhibit LIV, put forward by the defendant is false and that the plaintiff's version of the facts is substantially the truth. It is not now contended that these findings are incorrect. The learned Subordinate Judge has, however, dismissed the suit on the ground of various legal defects in the proceedings of the arbitrator.

The reference to arbitration is contained in Exhibit A, dated 3rd September 1933, the material portion of which runs as follows:—

“Since certain disputes arose in the matter of effecting a division, into two parts, of the nanja, punja, house, and other immovable properties belonging to our family and the money-lending items due to the family through individual No. 1, out of us, and the debts payable, it was found impossible to make a division. In these circumstances, we requested you to act as mediator in regard to the aforesaid division and as to how we should act regarding the same and agreeing that both of us would act according to the decision passed by you and that we would execute documents as per the award that you may pass in that behalf, we have executed this muchilika in your favour. Therefore both of us shall act according to the decision that you would make in the matter and conduct ourselves accordingly.”

It will be noticed that this reference contemplates the passing of an award by the arbitrator and the execution of documents by the parties in accordance with the terms of that award. Apart from these provisions, the reference does not indicate in any way how the arbitrator shall proceed. On 20th April 1934 the parties met the arbitrator at Srivilliputtur and a decision was reached, apparently by consent, as to the way in which the immovable properties in the neighbourhood of Srivilliputtur should be divided. Nothing appears to have been drawn up in writing on this date and it is clear that the money-lending capital still remained to be divided. On 1st May 1934 the plaintiff took a lease from his sister, Janaki, of the lands settled on her under a deed of 1924, Exhibit E. This action of the plaintiff provoked the defendant and on 2nd May under Exhibit LV he executed a deed in which he purported to cancel the settlement, Exhibit E. On the next day, 3rd May 1934, a registered notice, Exhibit XXIX, was issued by the arbitrator to the parties reciting the reference to arbitration, the inspection of the Srivilliputtur properties and the decision of 20th April regarding the immovable properties and the admitted debts. He forwarded a draft partition agreement which makes a division of the bulk of the immovable properties and the debts due by the two brothers. In the same notice the brothers are required to appear before the arbitrator on 5th June 1934 to produce evidence of debts alleged to have been incurred individually for family purposes and of the amounts due to the family in respect of money-lending dealings. On 7th May 1934 the defendant sent a notice, Exhibit J, to the arbitrator in which he denied having executed any such reference as is mentioned in Exhibit XXIX, denied having consented to the division of the immovables, and referred to certain Koilpatti lands and other properties as having been got under a will, and asserted that the family had been divided ever since 1904. The effect of Exhibit J is a denial by the defendant of the whole basis of the arbitration and an assertion that there were no joint family properties capable of division. The Koilpatti lands referred to are certain dry lands of small value which appear to have been omitted from the draft partition deed attached to Exhibit XXIX by oversight. After the exchange of further notices between the parties, the arbitrator on 15th June 1934 sent a further notice, Exhibit K-1, to the defendant stating that the defendant had not appeared on the date fixed for hearing, but that the plaintiff had given a statement of his case and had filed documents and that the matter was re-posted to 25th June for the examination of the defendant and that in case of default a decision would be made ex parte. On the following day a further notice, Exhibit K-2, was sent intimating that the Koilpatti lands had been divided into two halves, the northern half being allotted to the plaintiff and that the decision with reference to the money-lending transactions was adjourned to 10th July. There is no suggestion that the division of the Koilpatti lands was unfair and, the defence claim to these lands as acquired under a will having been found to be untrue, it is evident that the arbitrator, probably reminded of these lands by the defendant's notice, Exhibit J, was merely adding to his previous division of the family properties what had been omitted by oversight.

On 11th July 1934 the arbitrator sent a further notice, Exhibit K-3, to the defendant. It refers to the muchilika of 3rd September 1933 and states that all the properties and debts having been divided, “as regards the money-lending items due to the family in your name, it has been decided that you should make good Rs. 4,000 to the said V.S Rarnanujachariar (plaintiff) on the liability of your share of family properties and that an award has been passed on this date containing other particulars”. The English word “award” is used in this notice. There is no suggestion that any written award was in fact passed at this time. But the arbitrator appears to have orally announced his decision regarding the money-lending assets. With reference to these assets the evidence is that all the documents were in the possession of the defendant who was refusing to co-operate with the arbitrator. The plaintiff was able to produce only certain accounts said to have been, signed by the defendant showing the financial position of the family in 1909 and 1910 and an abstract of the money-lending documents as they stood in 1913. On the basis of these materials the arbitrator appears to have made a rough calculation of the amount of the money-lending capital which must be presumed to be comprised in the documents suppressed by the defendant and, as he was unable to deal with the actual documents, he awarded to the plaintiff a half share of the estimated value of these assets.

Up to this date we find that the arbitrator has communicated to the defendant three piecemeal decisions regarding the partition of various items of the family property. Firstly, there is the division of the bulk of the immovables and the admitted debts on 20th April communicated with the notice, Exhibit XXIX, of 3rd May; secondly, there is the division of the Koilpatti lands communicated under Exhibit K-2 of 26th June; and thirdly, there is the decision regarding the outstandings communicated under Exhibit K-3 on 11th July with the reference to an oral award. Nothing more of importance seems to have happened until 21st November 1934, when the arbitrator passed a formal award, Exhibit D, which summarises the whole of his proceedings and his various decisions including an observation that neither party had adduced evidence regarding his individual borrowings for the family and that each must therefore be held responsible for his own debts. It is this award which the Court is asked to enforce.

It has been rejected by the lower Court on various grounds. Firstly, the learned Subordinate Judge finds that the award is not in conformity with the terms of reference because, instead of dividing the outstandings into two portions, they are allotted en bloc to the share of the defendant and he is directed to pay a lump sum of Rs. 4,000 to the plaintiff. It is difficult to see how the award can be held invalid on these grounds. It was the duty of the arbitrator to divide these outstandings as fairly as possible having regard to the materials placed before him. All the essential documents were in the custody of the defendant who deliberately withheld them from the arbitrator's enquiry. The only materials available to the arbitrator were these old accounts furnished by the plaintiff on the basis of which he was able to make a rough estimate of the approximate value of the money-lending capital. It was impossible for him on these materials to divide the individual debts; for, he did not know what these debts were, from whom they were due and how much was outstanding under each. The absence of this information was entirely due to the default of the defendant. It seems to us that the arbitrator has done the only thing which he could possibly have done in these circumstances and has acted on inferences which are the proper legal inferences to draw having regard to the conduct of the defendant. He has in fact done that which a Court would have done in similar circumstances on the same materials and has made the best possible division of the outstandings, which was practicable. It would in our opinion be most improper to allow the defendant to defeat the arbitration by the simple process of suppressing all the evidence at his disposal.

A more serious challenge to the validity of the award, and in fact the only substantial challenge made actually in the defendant's written statement, is based on the contention that the arbitrator has made more than one award and that therefore the arbitration cannot be upheld. The learned Subordinate Judge finds that there were three awards, one on 20th April embodied in Exhibit XXIX of 3rd May, another relating to the Koilpatti lands on 26th June and a third relating to the outstandings on 11th July, preceding the final award which is sought to be enforced. It is no doubt the law that an arbitrator must make a single award unless the terms of reference permit him to make a series of awards. The case commonly referred to as authority for this doctrine is Winter v. Munton, Winter v. White. That was a case in which winter filed two suits, one against Munton and the other against White. The suits were closely inter-connected and a reference to arbitration was first made in Munton's case. Subsequently the Court ordered that white should be made a party to the arbitration between winter and Munton and that the award should be binding and effectual upon all three, as if white had been a party to the original order, and that all matters in difference between the three parties jointly and severally should be referred to the determination of the same arbitrator, who should make an award thereof, and that the costs in both suits should abide by the award. Instead of making a single award consolidating the two connected disputes, the arbitrator made two separate awards, one, of the liabilities as between winter and Munton, and the other, of the liabilities as between winter and white. It was held that there was no award determining all the matters in difference between all the parties and that the arbitrator had no power to separate the two disputes and that his award was defective also in that it did not decide whether there were any liabilities between the two defendants, White and Munton.

It seems clear on the authority of this case and Other similar decisions that, if in a partition dispute a reference is made of the whole matter to the arbitrator with directions to make an award, the arbitrator would not be empowered to make a series of separate awards, each dealing with one branch of the dispute; and this is reasonable, for, on the making of an award the arbitrator would be functus officio and would have no power to do anything further. Moreover, the first award which he made would be defective in that it did not cover the whole of the matters referred. We do not, however, consider that it is the law that an arbitrator dealing with a complicated partition dispute is debarred from taking up the enquiry piecemeal, classifying the evidence according to the subject-matter more or less under issues, just as a Court would do, and arriving at tentative conclusions on each section of the case, always provided that he does not make anything in the nature of an award in writing until the whole matter is decided. In a partition enquiry the arbitrator must decide first what are the properties available for division, before he proceeds to decide how those properties should be divided. The apportionment of the debts will, not infrequently, depend upon the apportionment of the lands and it is to our minds almost inevitable that an arbitration of this kind should proceed piecemeal. It follows that there is nothing wrong in the procedure of the arbitrator in this case unless he can be deemed to have made a final and formal award at any of the stages before he passed his award, Exhibit D, which is sought to be enforced.

When we examine these various stages it does not appear that there was in fact or in intention any final or formal award prior to Exhibit D. The notice of 3rd May, Exhibit XXIX, enclosing the draft partition is in terms nothing more than a notice calling for the consent of the parties to the draft agreement and requiring them to appear at a future date for the decision of the remaining matters. It is true that the notice speaks of a decision regarding the lands, the word “faisal” being used. But there is not, in our opinion, anything which can properly be regarded as a final award. The notice of 26th June about the Koilpatti lands is a mere addendum to the decision regarding the immovable properties. Had there been a final award on 3rd May, presumably the arbitrator would not have had the power to revise that award or add to it. But we do not consider that there was any final award embodied in Exhibit XXIX. Much emphasis has been placed upon the use of the word “award” in Exhibit K-3 which says that? “an award has been passed on this date containing other particulars”. No such award appears to have been reduced to writing. The most that there seems to have been is an oral communication of the decision of the arbitrator on the various matters submitted to him. This decision must have been substantially the decision embodied in the formal award, Exhibit D,) passed some four months later. It does not appear that the formal award, Exhibit D, adds anything to the decisions already communicated in the earlier notices, except perhaps the finding that in the absence of evidence each party must be liable for the debts standing in his own name. We are not prepared to hold on the materials available that there was any final and formal award at the time of Exhibit K-3. There was probably an indication given to the plaintiff of the nature of the arbitrator's findings. But this had necessarily to be reduced to a formal document signed by the arbitrator embodying the result of the arbitration as a whole and the only document of this nature is, in our opinion, Exhibit D. We therefore hold that the award sought to be enforced is not invalid because of earlier awards in the same matter.

The learned Subordinate Judge finds that the award is also bad because the arbitrator has imported his personal knowledge into his decisions. We doubt very much whether as a matter of law an award can be invalidated merely because the arbitrator is personally acquainted with some of the facts upon which a decision is required. No doubt cases might arise in which the use by an arbitrator of his personal knowledge as a ground for rejecting the evidence put before him might amount to misconduct; but much must depend upon the nature of the arbitration and the relations between the arbitrator and the parties. When an arbitrator is apparently chosen for his personal knowledge of the questions in issue, it would be ridiculous to hold that the mere fact of his possessing such personal knowledge and examining the evidence in the light of that personal knowledge would amount to misconduct. So much has been held in Chidambaram Chettiar v. Ayyappa Chettiar. In the present case the parties selected as the arbitrator their own sister's husband, a man intimately connected with the family and necessarily aware of its status and to some extent of its properties. The lower Court has criticised the arbitrator because he judged the truth of Exhibit L-1, an account filed by the plaintiff showing the financial position of the family, with reference to his personal knowledge of one of the items mentioned in that account, which was an assignment made in the presence of the arbitrator many years ago. Curiously enough, the other instance in which the arbitrator has been criticised under this heading is an instance in which the arbitrator believed the evidence of the plaintiff and did not attack that evidence by reference to a transaction alleged to be within the personal knowledge of the arbitrator. That is to say, in one instance the arbitrator is criticised for using his personal knowledge and in the other instance the real burden of the criticism is that he did not use his personal knowledge. It seems to us that when, as in this case, the arbitrator is chosen from the family circle he must necessarily make the enquiry in the light of his personal knowledge of the family; and so long as he bases his enquiry on the materials placed before him read in the light of his knowledge of the family, we do not think that he can be held guilty of misconduct on that account.

The learned Subordinate Judge also comes to the conclusion that the arbitrator displayed partiality. The basis for this conclusion is the arbitrator's action in going on with the enquiry when the defendant repudiated the reference and accused him of bias, the action of the arbitrator in awarding a lump sum payment to the plaintiff instead of dividing the outstandings, the action of the arbitrator in pronouncing his award without notice to the parties and in passing his award at a place other than the place where the parties reside. It seems to us that in all these matters the conduct of the arbitrator was correct. It would have been most improper for him to abandon the arbitration merely because the defendant tried to resile from the reference and put forward false pleas as to its nature. The defendant having refused to appear before the arbitrator in response to repeated notices to produce his evidence, there was, in our opinion, no necessity whatever for the arbitrator to give him notice of the date on which he proposed to sign his award. Nor is there any obligation upon an arbitrator to pronounce his award in any particular place or in the presence of the parties.

Summing up the case, we have no doubt that the positive assertions of the defendant regarding the facts are almost entirely untrue, that the conduct of the arbitrator has not been marked by partiality, and that his procedure in deciding the various sections of the enquiry piecemeal and summing them up in one final award does not amount to the giving of several awards so as to render his decision invalid. The appeal is therefore allowed with costs throughout and there will be a decree in terms of the award, Exhibit D.

N.S