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Kottapalli Gopalam v. Myneni Subyanabayana

Madras High Court
Jan 27, 1926
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Structured Summary of the Opinion

Factual and Procedural Background

This appeal challenges a decree of the lower Court which confirmed an arbitration award. The dispute arises between plaintiffs (who are descendants of Nagayya) and the 1st defendant (brother of Sriramulu, deceased). Plaintiffs alleged that Nagayya had been taken into the family as a son-in-law with a promised share in family property, and after Sriramulu's death in 1923 plaintiffs claimed their share from the 1st defendant. The 2nd defendant (a widow) claimed maintenance. The parties submitted their disputes to arbitrators, who issued an award (Ex. A) giving the plaintiffs one-third of the family property and awarding land to the 2nd defendant for maintenance. The 1st defendant refused to comply with the part of the award in favour of the plaintiffs; plaintiffs sued to enforce it. The lower Court entered a decree in favour of the plaintiffs in enforcement of the award; the 1st defendant appealed.

Legal Issues Presented

  1. Whether the plaintiffs' claim to a share of the family property had been validly referred to arbitration under the terms of the written reference (Ex. B), so as to give the arbitrators jurisdiction to decide that claim.
  2. Whether the arbitration award was vitiated because the arbitrators decided the matter on their own personal knowledge (and on the personal knowledge of some arbitrators adopted by others) rather than on the evidence given before them.

Arguments of the Parties

Appellant (1st defendant) — Principal contentions

  • Challenged the legal validity of the award on two main grounds: (a) the plaintiffs' claim to a share in the family property was never referred to arbitration under Ex. B, and (b) the arbitrators decided the matter on their personal knowledge rather than on evidence.
  • Maintained that Ex. B did not mention any claim by the plaintiffs for a share and that when he put his mark on Ex. B he did not consent to referring that claim; he also suggested Ex. B was not read to him and that he was not present when it was drawn up (although his evidence was described as not very satisfactory).
  • Evidence before arbitrators (Ex. C1) indicated, in his view, that the dispute known to him related only to the 2nd defendant's maintenance claim.

Plaintiffs — Principal contentions

  • Urged that Ex. B should be read as including the plaintiffs' claim for a share because it mentioned Nagayya and Anjayya being kept in the house and used the plural term "disputes", which they said implied more than one dispute was referred.
  • Argued that if Ex. B were ambiguous, extraneous evidence could be considered to show the matter actually referred and pointed to the arbitrators' evidence as supporting their interpretation that both claims were referred.
  • Relied on authorities (including Maung Shewe Hpu and others v. U. Min Nyun) to argue that awards made after a private inquiry by arbitrators are not necessarily vitiated unless it can be shown the results of that inquiry were used—an argument the Court considered but did not accept in full.

The opinion also records a defence suggestion that the 1st plaintiff may have signed Ex. B to support the 2nd defendant (his sister), but that the 1st plaintiff did not give evidence to explain his signature.

Table of Precedents Cited

Precedent Rule or Principle Cited For Application by the Court
Atlas Assurance Company Limited v. Ahmadbhoy Habibbhoe (referred to with Arbitration Act (Indian)) The Court will not be unreasonably technical in construing documents drawn up by persons not familiar with legal phraseology, but the Court must be satisfied by the language used that a matter decided was in truth referred to the arbitrators. The Court invoked this principle to explain that Ex. B must be read sensibly but that sensible reading did not supply a missing reference to the plaintiffs' claim; it required clear language conveying referral.
Atchayya v. Chinnayya (and cases quoted therein: Palavesan Chettiar v. Narayana Aiyar; Lachmi Narain v. Sheonath Pande) That an award not passed on a consideration of the evidence in the case can be vitiated. The Court relied on this line of authority to support the conclusion that an award based on arbitrators' personal knowledge rather than the evidence is vitiated.
Ramdhri Sahu v. Ram Charitter Sahu Referenced by plaintiffs; Court noted it is not "on all fours" with the present facts. The Court considered the case relied on by the plaintiffs but found it distinguishable and not directly controlling.
Maung Shewe Hpu and two others v. U. Min Nyun Relied on by plaintiffs for the proposition that an arbitrators' private inquiry will not vitiate an award unless it can be shown the inquiry influenced the decision. The Court declined to accept the broader implication of this decision, expressing concern that adopting that principle would open a wide door to misconduct; therefore it did not follow this authority so as to uphold the award.
Dobson and Sutton v. Groves Principle that arbitrators are entitled to decide on their personal knowledge only by express agreement of the parties. The Court applied this principle to hold that, absent express consent, arbitrators must decide on the evidence and not on their personal knowledge; this supported invalidation of the award insofar as it rested on private knowledge.

Court's Reasoning and Analysis

The Court addressed the two main contentions sequentially.

1. Whether the plaintiffs' claim was referred (jurisdiction of arbitrators)

  • The Court examined the written reference (Ex. B). That document, signed by the 1st plaintiff, the 2nd defendant and the 1st defendant, explicitly mentions the 2nd defendant's claim for maintenance and refers to disputes in the plural, but contains no clear statement that the plaintiffs' claim to a share in the family property was submitted for arbitration.
  • The plaintiffs argued the reference to Nagayya and Anjayya being kept in the house and the plural "disputes" implied the plaintiffs' claim had been referred. The Court rejected speculative inferences about why those facts were mentioned and held that the language of Ex. B was plain and intelligible as it stood.
  • The Court relied on Sect. 94 of the Indian Evidence Act to hold that extraneous evidence cannot be used to show that Ex. B was not meant to apply to the facts it facially described; further, even considering extraneous evidence did not help the plaintiffs because the arbitrators (PWs 1–4) agreed Ex. B did not state the plaintiffs' claim and could not explain why it was omitted.
  • The Court observed important evidentiary omissions: plaintiffs did not call the attestators or the writer of Ex. B (independent witnesses who could have explained the document), and the 1st plaintiff did not give evidence to explain why he signed Ex. B.
  • Ex. C1 (the 1st defendant's statement before the arbitrators) indicated he understood the dispute to concern the 2nd defendant's maintenance only, supporting the conclusion that he did not consent to refer the plaintiffs' property claim.
  • Applying the principle from Atlas Assurance (that courts should not be unduly technical but must be satisfied language conveys a reference), the Court concluded the language of Ex. B did not convey agreement to refer the plaintiffs' claim; therefore the arbitrators lacked jurisdiction to decide that matter and exceeded their jurisdiction in doing so.

2. Whether the arbitrators decided on personal knowledge (and whether that vitiates the award)

  • The Court analyzed the arbitrators' testimony and the award's wording and concluded that the arbitrators' decision on the plaintiffs' family share "purports to have been based only on their personal knowledge."
  • PW3 admitted that he had no personal knowledge and had taken his knowledge from PWs1 and 2; PWs1 and 2 themselves had decided on personal knowledge. None of the arbitrators decided on the evidence led before them.
  • The Court explained the governing principle (citing Dobson and Sutton v. Groves): absent express consent of the parties, arbitrators cannot decide a case on their private knowledge; they may use personal knowledge only to understand and appreciate evidence, not to repudiate the case presented by parties or substitute private inquiry for the evidence-based process.
  • The Court also considered but did not accept the plaintiffs' cited authority (Maung Shewe Hpu) to the extent it suggested awards after private inquiries are not necessarily vitiated; the Court found that approach would risk permitting misconduct and was inconsistent with the principle that arbitrators must decide on evidence unless parties agree otherwise.
  • Because the award in favour of the plaintiffs' family was reached by a majority that in practice rested on two arbitrators' personal knowledge (with the third arbitrator adopting second-hand knowledge), the procedure was a flagrant departure from required evidence-based decision-making and therefore vitiated the award.

The Court thus concluded: the arbitrators exceeded their jurisdiction by deciding a matter not referred to them, and the award was vitiated by reliance on personal knowledge rather than the evidence.

Holding and Implications

Holding: The Court allowed the appeal and made the following orders:

  • DISALLOWED (as to enforcement by plaintiffs): The award insofar as the plaintiffs in this suit seek to enforce it (the part awarding one-third of the family property to the plaintiffs) is bad and cannot be supported; the lower Court's confirmation of that part is reversed.
  • UPHELD (as to 2nd defendant's maintenance): The portion of the award awarding maintenance to the 2nd defendant was not attacked and therefore remains valid and will stand.
  • The suit (other issues) is remanded to the lower Court for trial of the remaining issues.
  • Costs: The 1st defendant (appellant) will get his costs in this appeal from the plaintiff; no costs are awarded to the 2nd defendant.
  • Final disposition summary (as recorded): "Appeal allowed and case remanded."

Implications: The direct effects are limited to the parties in this litigation — the plaintiffs cannot enforce the award as to their claim for a share of the family property; the maintenance award to the 2nd defendant survives; the remaining issues must be tried afresh in the lower Court. The opinion does not purport to lay down any broader, novel precedent beyond applying established principles about (a) the necessity of clear reference language to confer arbitrator jurisdiction and (b) the prohibition on arbitrators deciding on private knowledge without express party consent.

Appeal allowed and case remanded.
Show all summary ...

This appeal is against a decree of the lower Court confirming an award. The 1st defendant and Sriramulu, the husband of 2nd defendant were brothers. It was alleged by the plaintiffs that 1st defendant's father Venkayya brought his sister's son Nagayya, the father of plaintiffs 1 to 3 into the family as illatom son-in-law, promising him a share in the family property sanctioned by usage to a person in his position, that when Sriramulu died early in 1923, the plaintiffs claimed their share from the 1st defendant and the 2nd defendant also claimed maintenance, that these two disputes were referred to arbitration, the arbitrators being P. Ws. 1 to 4 and D. W. 1 and that the arbitrators passed an award, Ex. A giving to the plaintiffs a third share of the family property and to the 2nd defendant certain land for maintenance. The 1st defendant refused to carry out the first part of the award and the plaintiffs sued to enforce it. The lower Court passed a decree in their favour and the 1st defendant appeals. The 1st defendant challenges the legal validity of the award on two main grounds, first, that the matter of the plaintiff's claim to a share in the family property was never referred at all, and, secondly, that the award is vitiated because the arbitrators have relied on their own personal knowledge and not on evidence given before them for the decision of the case. We shall deal with these points in order.

The first point has to be decided on the terms of the reference which is Exhibit B. It runs:

“As first Nagayya, the father of one of us, Suryanarayana and later my younger brother Anjayya were being kept in the house of the late Venkayya for conducting the duties of the house and as the wife and heir of the late Sriramulu, the elder brother of one of us, Gopalam had claimed proper main, tenance for her livelihood etc., and so we are disputing about this affair, we both desire that you should act as panchayatdars and settle the above disputes between us.”

It is signed by the 1st plaintiff, the 2nd defendant and the 1st defendant, it is evident that the only matter mentioned in it as a claim of any kind is the maintenance affair of the 2nd defendant. But the plaintiffs urge that the mention of Nagayya and Anjayya being kept in the house was made because there was this other claim by the plaintiffs to a share and that, because of that mention of these facts, the Court is to infer that the other claim was not only advanced by them but was specifically referred for arbitration. It was also emphasised for the plaintiffs that the word ‘disputes’ is in the plural and, therefore, there must have been more than one dispute. It is further urged that, if Ex. B is obscure because of ambiguity, it is permissible to take and consider extraneous evidence as to what was really referred; and the plaintiffs urge that that evidence is wholly in favour of their interpretation of Ex. B. Now Ex. B is clear and quite intelligible as it stands. The fact that there is no very convincing reason appearing in it for inserting the statement about the 1st plaintiff's father and brother being kept in the house is not a ground for holding that the document considered as a reference is obscure. Nor is a Court entitled to speculate as the lower Court has done on what must have been the reasons for the insertion of this statement. As to the use of the plural ‘disputes’, even if the plural was designedly used—and that is a considerable assumption—the document itself says that the 2nd defendant was claiming livelihood etc., so that the plural may legitimately be used of her claims alone. It is difficult to believe that, if this was a deliberate document as it is claimed to be setting out what were the disputes to be settled the statement of claim by the plaintiffs for a share in the family property which was the more important of the two claims should have been omitted altogether, if it really had been referred, unless the omission was deliberately made with intent to deceive the 1st defendant who is an illiterate man.

We further think it is a case where the language used is plain in itself and applies accurately to existing facts. Under Sect. 94 of the Indian Evidence Act extraneous evidence cannot be given to show that it was not meant to apply to such facts. Even if the extraneous evidence is considered, it does not seem to us to help the plaintiffs' case. The arbitrators who were examined as witnesses 1 to 4 for the plaintiffs are agreed that all the parties and themselves met before Ex. B was drawn up and agreed as to what were the disputes to be settled. It is said that both the claims of the plaintiffs and that of the 2nd defendant were matters for settlement and they sat down and formally drew up a reference. It is not the plaint case that there was any reference outside Ex. B of any dispute which Ex. B does not mention. It is their case that Ex. B covered everything that was referred to arbitration. See paragraph 5 of the Plaint. Now P. Ws 1 to 4 all agree that it was not written in Ex. B that there was a dispute raised by the 1st plaintiff for a share in the properties and none of them can explain why. “We did not” says P. W, 3 “so clearly examine the wording of Ex. B.” There is therefore no evidence in support of the plaintiffs case that there is latent in Ex. B a claim by the plaintiffs for a share in the property. It may of course be that the arbitrators genuinely thought that this other dispute had been referred to them, but that will not give them jurisdiction to decide a matter not referred. Considering the language of Ex. B we are clear that it lay on the plaintiffs to show that Ex. B does contain a reference of this claim to arbitration and that the let defendant put his mark on it with the knowledge that it did. We are unable to hold that the language of Ex. B could in any way convey to him that this other claim had also been referred to arbitration.

It is not without significance that the plaintiffs have not examined the attestators or the writer of Ex. B. The arbitrators are no doubt good enough witnesses in their own way, but they are not likely to put forward a view that a matter disposed of by them was not within their jurisdiction. The evidence of the attestators and the writer would be that of more independent witnesses on this part of the case and it has not been put forward. It may be remarked also that the 1st plaintiff himself has not gone into the box to speak to his case. This is important in view of the argument put forward by him, that there was no reason why he should have signed Ex. B if some claim of his had not been referred. He has not gone into the box to tell us why he signed it and submit to cross-examination on the point. The defence suggestion is that he signed it in order to support the claim of the 2nd defendant who is his own sister and a gosha woman.

The evidence of P. Ws. 1 to 4 i.e also further shaken by the fact that they do not agree as to whether the plaintiffs claim put forward just before Ex. B was written was for himself only or for his family. There is nothing what ever in Ex. B to show that there was any dispute about the claim of the plaintiffs' whole family to a share. It is clear that even the arbitrators did not clearly realise the exact nature of the claim which, they now say, was so clearly referred to them. Although the 1st defendant's evidence in the lower Court is not very satisfactory and he is obviously endeavouring to improve his case by denying that Ex. B was read to him and maintaining that he was not present when it was drawn up Ex. C 1, his statement before the arbitrators, only three days after Ex. B makes it clear that to his knowledge the dispute that he had with the plaintiff was as regards the maintenance claim. There is nothing in Ex. C 1 to indicate that he was aware that Ex. B embodied a reference on any other point. As we have already said, if all the parties at the time of writing Ex. B were agreed that there were two claims referred, the more important being plaintiffs' claim for a share of the family's property, it is incredible that, while the second and less important claim is categorically put down, the other and more important one should have been omitted. To our minds Ex. B only mentions one person who wants or claims anything and that, is the 2nd defendant, and we can see no good reason for holding that, when the 1st defendant put his mark to it, he was consenting to refer also the matter of the claim of the plaintiffs to a share.

The principle on which such cases have to be decided is clear. Firstly, it must be clear that the dispute has been referred before the arbitrators get jurisdiction to decide it. See Arbitration Act (Indian) In re Atlas Assurance Company Limited v. Ahmadbhoy Habibbhoe Courts no doubt will not be unreasonable or unduly technical in construing documents drawn up by persons not familiar with law and legal phraseology; but at the same time the Court must be satisfied by the language used that a matter decided was in truth referred to the arbitrators for decision. It does not matter whether or not the arbitrators genuinely believed the matter was referred and therefore held an inquiry about it, if in fact it was not, or that they genuinely believed that one of the parties had agreed to refer the matter if, as a matter of fact, he had not, and the final decision as to whether the particular matter was referred or whether a particular party had consented to refer it lies not with the arbitrators but with the Court. This is not a case in which the reference is wide enough to include in the matters referred the question whether or not this particular dispute was within the submission. There is no wide language used at all, the language is restricted and definite. In such a case it is the Court which has to decide whether the matter in respect of which the suit is brought is one which was agreed to be referred. For the above reasons we must hold that this dispute about plaintiff's share was not referred and, therefore, the arbitrators did exceed their jurisdiction in deciding it.

As to point (2) namely, whether the arbitrators disposed of the case on personal knowledge, we think that also is a good ground of attack on the award. It is clear from the evidence of P. Ws. 1, 2 and 3 all arbitrators and from the wording of the award and the statement of reasons in the award which precedes the words “Therefore we decide accordingly” (that is, that the plaintiff's family should have a third share in the property), that the decision of the arbitrators purports to have been based only on their personal knowledge. It is clear further from P.W 3's evidence that he had no personal knowledge of these matters at all and that he merely accepted his knowledge from P. Ws. 1 and 2. Thus the award was passed on the personal knowledge of P. Ws. 1 and 2 and the acquiescence of P. W. 3 in their opinion based on their personal knowledge. None of them decided on the evidence and P. W. 3 decided on what P. Ws. 1 and 2 who were not witnesses in the case told him. This procedure also vitiates the award. It is true of course that personal knowledge does not of itself disqualify an arbitrator from acting as such and may even be a good reason for his being selected; but, unless the parties expressly consent to such a course, no arbitrator has a right to decide the matter on his personal knowledge. That knowledge may be of use in enabling him to understand and appreciate the evidence, but he is not entitled to use it to repudiate the case put forward before him by any of the parties and his decision must be on the evidence and not on his personal knowledge; still less has any arbitrator a right to accept and adopt as his own the purely personal knowledge of other arbitrators. Such a course was the more flagrant misconduct in this case as the award was passed by a majority of one, the one being the arbitrator who took his knowledge at second hand not from the witnesses but from his fellow arbitrators. That is, the decision WBP really only by two arbitrators and that on their personal knowledge only.

It is clear that the award was not passed on a consideration of the evidence in the case and that is enough to vitiate it. (See Atchayya v. Chinnayya and the cases quoted therein Palavesan Chettiar v. Narayana Aiyar and Lachmi Narain v. Sheonath Pande. The case in Ramdhri Sahu v. Ram Charitter Sahu relied on by the plaintiffs is not on all fours. The case in Maung Shewe Hpu and two others v. U. Min Nyun is relied on by the plaintiffs, but if that decision means that, where arbitrators have held a private enquiry of their own, their award is not vitiated unless it can be shown that they have used the results of their enquiry in coming to their conclusion—a matter extremely difficult to prove, we are not prepared to agree. It would open a very wide door for misconduct and such a principle seems to us to be opposed to the principle laid down in Dobson and Sutton v. Groves which is that it is only by express agreement of parties that arbitrators are entitled to decide a case on their own personal knowledge. Here there is no such agreement but rather one to the contrary since the parties in Ex. D expressly declared therein their consent to the decision being based upon their statements alone.

In conclusion, therefore, the award, in so far as plaintiff in this suit seeks to enforce it, is bad and cannot be supported and we reverse the finding of the lower Court on this issue (2). The award so far as it decides the question of 2nd defendant's maintenance, being not attacked, will stand. The other issues now fall to be tried and the suit is remanded to the lower Court for this purpose. 1st defendant will get his costs in this appeal from the plaintiff. No costs to 2nd defendant.

K. S. D.Appeal allowed and case remanded.