Judgment:
Devinder Gupta, J.
(1) This is a petition under Section 8(1)(b) of the Arbitration Act, 1940; hereinafter referred to as 'the Act', wherein prayer made is to appoint an Arbitrator to fill up the vacancy created on the refusal to act by one of the Arbitrators and to pass such other order, as may be deemed fit in the facts and circumstances of the case.
(2) The parties to the petition are members of the same family. The petitioner Rakesh Khanna and respondents 2 and 3, Shri Rajesh Khanna and Shri Mahesh Khanna are the three sons of respondent No. 1, Shri Vishwanath Khanna. Respondent No. 4, Smt.Brij Rani Khanna is their mother and wife of Shri Vishwanath Khanna. Respondents 5,6 and 7 respectively are the wives of respondents 2,3 and the petitioner. Respondents 8 and 9 are the two sons of respondent No. 2. The entire controversy between the parties, which is subject matter of this petition along with other two connected petitions, namely, O.M.P.46/94 titled as Rakesh Khanna v. Vishwanath Khanna and Others and O.M.P.No. 93/94, titled as Vishwanath Khunna v. Rajesh Khanna and Others revolves around the agreement dated 19th February, 1994.
(3) It is not in dispute that Shri Vishwanath Khanna constituted Joint Hindu Family along with his wife, sons, daughter-in-laws and grand children, namely, the petitioner and respondents 2 to 9, which Joint Hindu Family styled as M/s. Vishwanath Khanna and Sons (H.U.F.). Owned joint family properties, both movable and immovable. Some of the members of the family separately carried on distinct and independent contractual partnership business and some of the members of the family are also holding shares in their own rights in various companies constituted under the Companies Act, 1956. It is also not a matter of controversy that disputes and differences arose amongst the parties regarding mode and manner of partition. When all efforts failed it is alleged that an agreement dated 9th February, 1994 was entered into. Parties to the agreement agreed to refer all disputes/ differences, in totality, with respect to the mode and manner of the partition and their respective shares to the arbitration of Shri Vijay Nand Maker and Shri Kamal K.Kapur, both of whom are the son-in-laws of Shri Vishwanath Khanna. It is also not in dispute that the two Arbitrators entered upon reference through their letters addressed to the parties on 19th February, 1994 and some proceedings were also held by the Arbitrators, who with the consent of the parties also appointed Shri Ravi Khanna as the Umpire. Parties to the agreement agreed and extended the period for making the award till 19th October, 1994.
(4) On 2nd April, 1994, petitioner Rakesh Khanna filed a petition under Section 41(b) of the Act (O.M.P.No. 46/94) praying for certain interim reliefs, in which proceed ings learned Single Judge of this Court directed status quo to be maintained with respect to the properties mentioned in Schedule A, B, C, and D and the business, the subject matter of arbitration proceedings. The said petition is pending and is seriously contested by some of the respondents. In the said proceedings, applications for taking proceedings under the Contempt of Courts Act for violation of the orders passed by Learned Single Judge are also pending. The same have been registered as C.C.P.Nos. 73 and 79 of 1994.
(5) Shri Vishwa Nath Khanna, on 18th August, 1994, filed a petition (O.M.P. 93 of 94) under Section 33 of the Act praying that the arbitration agreement dated 19th February, 1994 be declared as null and void and of no effect. The ground which the prayer has been made are that the disputes regarding dissolution of firm are not arbitrable and have to be decided by the Court. The dissolution of firm and more especially on just and equitable ground involves the exercise of judicial discretion by Court, which cannot be delegated to the Arbitrators but has to be exercised under statutory provisions of Section 44 of the Partnership Act and as such the matter of dissolution of partnership cannot be referred to arbitration. The second ground is that the mode of winding up and for obtaining other reliefs is prescribed by statutory provisions of the Companies Act, 1956. The other modes are forbidden, thereforee, the agreement of reference being contrary to the provisions of the Companies Act is illegal and void by virtue of Section 9(b) of the Companies Act. The third ground being that the partition of the joint family is claimed under the Partition Act, which can only be effected by the Court and not by arbitration. It is alleged that since the matters have been referred to Arbitrators as a compact unit, these cannot be separated or bifurcated and the agreement as a whole deserves to be declared void under Section 23 of the Contract Act. This petition is opposed by the plaintiff and respondent No. 7 herein but is duly supported by respondents 2 to 6,8 and 9 herein. This petition is also pending, in which issues were framed on 2nd February, 1995 and parties were directed to lead evidence.
(6) During the pendency of the aforementioned two petitions, Shri Vijenand Maker through his letter dated 9th May, 1995 informed the petitioner and respondents 1 to 3 that he would not like to be associated with arbitration. Information was also conveyed by him to Shri Kamal K.Kapur and Shri Ravi Khanna, the other Arbitrator and the Umpire that he would not like to be associated with arbitration proceedings. The petitioner taking this act of Shri Vijenand Maker to be a refusal to act got a notice dated 18th May, 1995 served upon the respondents calling upon them to concur in the appointment of Shri P.R. Das, as one of the Arbitrators to fill up the vacancy created by Shri Vijenand Maker. The respondents declined to concur in the appointment of Shri P.R. Das.
(7) PETITIONER'S case is that since more than 15 days have expired and respondents have failed to concur in the appointment of Shri P.R. Das, to fill up the vacancy created by Shri Vijenand Maker and the arbitration agreement does not show that it was intended that vacancy should not be supplied, thereforee, it is necessary and also in the interest of justice that vacancy created by the refusal to act on the part of Shri Vijenand Maker be supplied by the Court. This petition was preferred on 3rd July, 1995. Respondents 2, 5 and 8 filed a joint reply opposing this application. Respondent No. 9 has also filed a separate reply opposing the prayer. On behalf of respondents 1, 3, 4 and 6 also the petition has been contested during the course of arguments, without filing any reply.
(8) Respondents 2, 5 and 8 have alleged that Shri Vijenand Maker and Shri Kamal K. Kapur were appointed as joint Arbitrators because of their personal qualifications being brothers-in-law of petitioner and respondents 2 and 3, since parties to the agreement had absolute faith in them on account of their special relationship. Parties never intended to introduce any stranger jointly with them or with any one of them. It was never the intention of the parties that the vacancy, if any, be filled up. It is stated that the agreement shows that it was intended that vacancy, if any, created at any time should not be supplied and as such Court has no jurisdiction to supply the vacancy. Similar is the stand of the other contending respondents. Respondent No. 9, however, has taken up an additional stand that that there is no biding and conclusive arbitration agreement qua him. He never signed the agreement, which appears to have been signed by respondent No. 2 on the strength of a power of attorney. The power of attorney given by respondent No. 9 to respondent No. 2 does not authorise respondent No. 2 to enter into any arbitration agreement on behalf of respondent No. 9 and since he was not a party to the arbitration agreement, there is no question of allowing the petitioner's prayer.
(9) Learned Counsel for the parties have been heard at length, who have reiterated, during the course of arguments, the respective stands taken by them in the pleadings. Learned Counsel for the parties agreed that O.M.P. No. 69 of 1995 deserves to be decided first, before taking any decision at this stage on O.M.P. No. 93/94, in which pleadings are also complete. Though the arguments were also addressed by the parties in O.M.P. No. 93/94,1 need not go into the respective stand taken by the parties in those proceedings since in rny view decision in O.M.P.No. 69/95alonewillbesufficienttoset at rest the present:controversy leaving the parties to take such other recourse, as may be permissible in law.
(10) From the facts stated above, which are not in dispute, it is now abundantly clear that one of the named Arbitrator Shri Vijenand Maker has refused to act as such. The controversy thus is narrow that whether jurisdiction can be exercised by the Court under clause (b) to Section 8 of the Act in supplying the vacancy, for which purpose it will be necessary to quote Section 8 of the Arbitration on Act, which reads:-
'POWER of Court to appoint Arbitrator or Umpire: (1) In any of the following cases : (a) where an arbitration agreement provides that the reference shall be to one or more Arbitrators to be appointed by consent of the parties, and all the parties do not, after differences have arisen, concur in the appointment or appointments; or (b) if any appointed Arbitrator or Umpire neglects or refuses to act, or is incapable of acting or dies, and the arbitration agreement does not show that it was intended that the vacancy should not be supplied,and the parties or the Arbitrators, as the case may be, do not supply the vacancy; or (c) where the parties or the Arbitrators are required to appoint an Umpire and do not appoint him : Any party may serve the other parties or the Arbitrators, as the case may be, with a written notice to concur in the appointment or appointments or in supplying the vacancy.
(2)If the appointment is not made within fifteen clear days after service of the said notice, the Court may, on the application of the party who gave the notice and after giving the other parties an opportunity of being heard, appoint an Arbitrator or Arbitrators of Umpire, as the case may be, who shall have like power to act in the reference and to make an award as if he or they had been appointed by consent of all parties'.
(11) Reading clause(b) of Sub-section(1) of Section 8 would show that it is only when the arbitration agreement evinces an intention not to supply the vacancy that the Court will have no power to make the appointment. If the arbitration agreement provides for supplying the vacancy or is silent about supplying the vacancy, the Court will have the power to make the appointment. To take the case out of Section 8(l)(b) of the Act, what is required is not the intention of parties to supply the vacancy but their intention not to supply the vacancy. The intention has to be ascertained from the agreement itself. The agreement has to be read as a whole, which must show either expressly or impliedly that the parties intended that the vacancy should not be supplied. The Supreme Court in M/s. Prabhat General Agencies etc. v. Union of India and Another, : [1971]2SCR564 , held that to take the case out of Section 8(l)(b) what is required is not the intention of the parties to supply the vacancy but their intention not to supply the vacancy. This position was reiterated in a subsequent decision by the Supreme Court in Union of India v. M/s. Raghunath Singh and Co., : [1980]1SCR128 , wherein it was held that the Court has no power to supply the vacancy under Section 8(l)(b) only if the arbitration agreement did show that the parties did not intend to supply the vacancy. If no such intention could be culled out from the arbitration clause, the Court could supply the vacancy. M/s. Prabhat General Agencies case (supra) has been followed in the latter decision of the Supreme Court in State of West Bengal v. National Builders . The position in law was reiterated that the expression used in Section8(l)(b) is clear indication that the Court is precluded from exercising its powers only if the parties intended that the vacancy should not be filled. In other words, the Court shall exercise jurisdiction to appoint another Arbitrator except where the agreement specifically debar from doing so. The Court held that the words 'show' used in the clause appears to be significant, which furnishes the key to the construction of the expression. Mere neglect or refusal to act alone is not sufficient to empower the Court to intervene. The agreement must not further show that the parties intended that the vacancy shall not be supplied. In absence of clear words or explicit language to the contrary, the Court may appoint another Arbitrator. The following observation made in Ch. Raghunath Singh & Co.'s case (supra) were cited with approval :-
'THE Court had no power to supply the vacancy under Section 8(1)(b) only if the arbitration agreement did show that the parties did not intend to supply the vacancy. If no such intention could be culled from the arbitration clause, the Court could supply the vacancy.'
(12) In view of the aforementioned position in law, what is required to be decided is whether from the arbitration clause intention of the parties can be culled that the same does show that the parties intended not to supply the vacancy, for which purpose a few clauses of the agreement are relevant for decision and deserves to be quoted :-
'ANDWHEREAS disputes and differences have arisen amongst the parties aforesaid regarding the mode and manner of the partition amongst the differences to pcrsun(s) I'M whom all the aforesaid parties have absolute faith and trust. And Whereas it was unanimously agreed to refer all the disputes/ differences in their totality in respect of the mode and manner of the partition and their respective shares as detailed below to the arbitration of: (a) Shri Vijaynand Makar, son of late Lala Sadanand Makar. 67/B, Nepeansen a Road, Bombay-400006. (b) Shri Kamal Kumar Kapur son of Shri Mohan Lal Kapur, residing at 45, Grant Road, Bangalore.
and the aforesaid parties specifically agree that the Award passed by the aforesaid Arbitrators namely Shri Vijaynand Makar and Shri Kamal Kumar Kapur shall be final and binding on all the aforesaid parties. It is hereby clarified that the said two gentlemen viz. Shri Vijaynand Makar and Shri Kamal Kumar Kapur are the sons-in-laws of Shri V.N.Khanna and Brothers-in-laws of Shri Rajesh Khanna, Shri Mahesh Khanna and Shri Rakesh Khanna. Now this Deed Witnesseth as Under: 1. That the parties aforesaid have agreed to refer all their disputes and differences in respect of the following matters to the Arbitration of SI Shri Vijaynand Makar son of late Lala Sadanand Makar and Shri Kamal Kumar Kapur son of Sim Mohan Lal Kapur:
(A)The mode and manner of partition of all the properties and business mentioned in Schedule 'A', i.e. dissolution of the partnership firm and/ or 're-construction' of the said firms and/or allocation of the various assets and liabilities of the same in the manner provided hereinafter. (b) The mode and manner of partition of all the properties and businesses mentioned in Schedule 'A', i.e. winding up of companies and/or reconstitution and/or allocation of the shares,assets and liabilities of the same in the manner provided herein under. (c) The Division/Partition of the properties mentioned in Schedule 'C' by metes and bounds or otherwise in accordance with the Partition Act in the manner provided hereinafter. (d) The Partition/allocation of the various businesses and the division of the properties mentioned in Schedule 'D' by metes and bounds or otherwise in accordance with the principles of Hindu Law.'
Reading of the aforementioned clause will make it clear that parties agreed that have absolute faith and trust shall be final and binding. Mode and manner of partition of the partnership firms could be either by dissolution of the partnership firms and /or reconstitution of the same and/or allocation of the various assets and liabilities. Similarly, as regards the companies, the mode and manner of partition could by winding up of the companies and/or reconstituion and /or allocation of the shares, assets and liabilities. It is not in dispute that the Umpire chosen by the two Arbitrators is also a close relation of the parties.
(13) The agreement explicitly does not show the contrary intention stated in Section 8(l)(b) with regard to the filling up of the vacancy. In terms of the decision in M/s. Prabhal Agencies case (supra), agreement read as a whole must show either explicitly or impliedly that the parties intended that vacancy should not be supplied, for which purpose intention of the parties will have to be gathered from the language used in the agreement. Ch.Rashunath Singh's case (supra), which was reiterated in National Builders case (supra) permits the 'intention to be culled'' from the agreement itself. Intention of the parties, in the circumstances as are apparent from the language used in the agreement is apparently clear that for the disputes and differences, which had arisen amongst the members of the same family they appointed two Arbitrators, in whom they had absolute faith. Such Arbitrators will be deemed to possess special knowledge, as regards intricacy of the disputes or differences amongst their father-in-law and brothers-in-laws etc. or in other words amongst the members of the family of their father-in-law. Not only the parties possess a delicate relation with the Arbitrators, being sons-in-laws of V. N. Khanna and brothers-in-law of the petitioner and respondents 2 and 3 but also specifically agreed that the award passed by the 'aforesaid Arbitratores' by which term they again clarified by naming the two Arbitrators and stating that the same 'shall be final and binding'. For the two named Arbitrators, it was stated that the disputes and differences were being referred to the person 'in whom all the aforesaid parties have absolute faith and trust'. I need not go into the question whether the disputes as regards dissolution of partnership and/or winding up of the companies could or could not be referred to arbitration, in order to cull out the intention of the parties, since the stand of the contesting respondents is that the mode and manner and partition of the partnership and companies could not be made subject matter of arbitration, thereforee, they had specifically agreed lo appoint two close relations as the Arbitrators. Ignoring this argument, the intention can be culled out from the of the nature of disputes between the parties and when they chose two close relations to be the Arbitrators, in whom they had absolute faith and trust for resolving the disputes and differences and finding out the mode and manner of partition. By use of the quoted words, it can be said that the parties made their intention clear that vacancy occurring for any reason whatsoever, they intended that the same be not supplied. The fact that each of the partnership deed with respect to various partnerships, which are subject matter of the agreement also contain a separate arbitration clause will also make no difference, since the said
(14) In view of the above discussion, the prayer made in the application filed by Shri Rakesh Khanna for supplying the vacancy cannot be allowed since the Court will have no jurisdiction to supply the vacancy when the intention of the parties in the agreement is clear that parties intended that the vacancy should not be supplied. Consequently, O.M.P. No. 69 of 1995 is dismissed. No costs.
(15) In view of the dismissal ofO.M.P.No. 69 of 1995, the other two petitions, namely, O.M.P. 46/94 and O.M.P.No. 93/94 are rendered infructuous and are disposed of as such with liberty reserved to the petitioners therein to approach the Court again for revival of the petitions, in case for any reason, the order passed in O.M.P.No. 69/95 is reversed in appeal or otherwise. A copy of this order be placed on the records of O.M.P. 93/94 and O.M.P. No. 46/94.