TaxTMI 
TaxTMI 
2003 (9) TMI 533
X X X X Extracts X X X X
X X X X Extracts X X X X
....assed by a Division Bench of the Calcutta High Court affirming an order passed by a learned Single Judge setting aside an arbitration award. 2. The basic fact of the matter is not in dispute. Two groups of persons - one Guptas and another Sharmas - held several properties including three firms, six limited companies, one trust and other movable and immovable assets. Both the groups had 50% shares each. The family members of the Guptas and Sharmas Groups were interested in many or in some of the businesses and the firms. The family tree of the Gupta Group is as under: GENEOLOGICAL TABLE OF GUPTA GROUP I II III IV Dulichand (Deceased) Sita Ram (Died on 1-12-1975) Balaprasad Basajnti Shrilal (deceased) - Anarij (1) (2) (3) (1) (2) (3) Motilal -Kapuri Brijmohan -Padma Sohanlal Gayatri Kailash -Pushpa Vinod -Manjula Arun Ashok &nbs....
X X X X Extracts X X X X
X X X X Extracts X X X X
....s received from any source whatsoever if he considers them relevant to the matter and to this regard his decision will be final. 7.That the Arbitrator shall have powers to apply and employ his personal knowledge in the matter under reference while giving his award. 8.That the Arbitrator shall have power to award cost and to ask for periodical deposits towards his own fees and charges, audit charges and/or other charges from the parties hereto in the manner he may think fit and proper. 9.That the said Arbitrator shall not be required to give any reasoning for his determination and award. 10.That the said Arbitrator shall have powers to give directions for the running of the business of the said firm and/or companies including the direction for operation of Banking Account during the pendency of arbitration proceedings. 11.That the said Arbitrator shall have full power and control over all the assets, properties, movable or immovable of the said firms and/or companies and shall also have the powers to dispose of any of them at his discretion, for the good and benefit of the said firm. 12.****** 13.That the Arbitrator shall have in his absolute discretion power to award the dis....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... 4. The jurisdiction of the Arbitrator was, thus, of wide import. 5. It is not in dispute that said Shri B.J. Bhide was a Chartered Accountant and a Tax Consultant. He had been dealing with accounts and other matters for and on behalf of the firms and the companies belonging to the parties. The parties indisputably had great faith and confidence in him. 6. During the pendency of the arbitration proceedings, certain disputes arose as regards management, wherefor also intervention of the arbitrator was sought for. Several correspondences passed between the arbitrator and the parties with which we are not concerned at this juncture. 7. The arbitrator gave two awards, which were as regards (1) division of 50% cumulatively and (2) the said division among the family members of the Guptas. 8. Seven members of the Guptas Groups filed objections to the said awards including one Ghanshyamdas Gupta. The said Ghanshyamdas Gupta at the relevant point of time was a resident of Madras. The primary objections raised by the objectors i.e., as regard validity of the awards purported to be (1) violative of section 108 of the Companies Act, (2) awards made in favour of different persons including ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....01. 13. Mr. Bhasker P. Gupta, learned senior counsel appearing on behalf of the appellants, has raised a short question in support of these appeals. The learned counsel would submit that the findings of the learned Single Judge as also the Division Bench of the High Court that no reasonable notice was given to Ghanshyamdas Gupta by the arbitrator in terms of the arbitration agreement suffers from manifest error insofar as the entire fact situation obtaining in this case had not been taken into consideration. The learned counsel would submit that the arbitrator was required to submit his award by 30-6-1976. He had been holding arbitration proceedings wherein Ghanshyamdas Gupta had participated from time to time and all the parties having regard to the enormity of the disputes were directed to remain present at Kolkata on 8-6-1976 so that they may be heard and award may be made on or before 30-6-1976, wherefor a notice was issued on 24-5-1976 to all the parties which is in the following terms: "P.J. Bhide & Co.7, Waterloo Street, Chartered AccountantsCalcutta - 700 069 24-5-1976 Shri Omprakash Gupta, Calcutta Dear Sir, Re: Finalization of Arbitration Proceedings It has been d....
X X X X Extracts X X X X
X X X X Extracts X X X X
....e resignation letters to cover all the persons represented by you in your Group. Please ensure that these resignation letters reach me by 5-6-1976. Arising out of this, I am arranging to send to you in a day or two Transfer Deeds which should be signed by you or the other persons whom you represent, at the place marked with an "X" in pencil and witnessed by a known person and returned to me with the relevant shares scrip of the concerned Limited Company. The next meeting in connection with the finalisation of the arbitration proceedings will be held in Calcutta on 8-6-1976. I have a mind to have continuous sittings up to 12-6-1975 and declare the Award immediately thereafter. You are therefore requested to make yourself available to Calcutta at the proposed meetings on and from the 8-6-1976 without fail. Kindly bring with you all the books of account uptodate part pertaining to the branches and/or companies under your control. I trust the above programme will suit you and you will extend your whole-hearted co-operation to expedite finalisation of the arbitration proceedings. Thanking you, Yours faithfully, Sd/- P. J. Bhide & Co., Arbitrator Enclo: Draft of resignation Letter....
X X X X Extracts X X X X
X X X X Extracts X X X X
....rma, appearing in person and Mr. Gourab Banerji, appearing on behalf of some members of the Sharma Group, supported the contentions of Mr. Bhasker Gupta. 19. Mr. Bijan Kumar Ghosh, learned counsel appearing on behalf of the respondents, however, drew our attention to the objections raised before the learned Single Judge of the Calcutta High Court and submitted that in the peculiar facts and circumstances of this case, the Court should not only consider the same de novo but also must take into consideration the subsequent events. According to the learned counsel, as the cross-objections filed by the objector-respondents were dismissed by the Division Bench without assigning any reason therefore, this Court in the interest of justice should consider the same on its own merits, although no appeal thereagainst or any cross-objection has been filed by the respondents. 20. There cannot be any dispute with regard to the proposition of law that the parties would be entitled to a reasonable opportunity of putting their case - Montrose Cannel Foods Ltd. v. Eric Wells (Merchants) Ltd. [1965] 1 Lloyd's Report 597. A reasonable opportunity would mean that a party must be given an opportunity ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ip on the proceedings and indicate to the parties those areas on which it particularly wishes to be addressed and those which it does not consider relevant to the real issues in dispute. If a party fails to heed such guidance, the Tribunal might seek to focus the proceedings by allocating the remaining hearing time between the parties. Thus the Tribunal is entitled to do, provided it will allow a reasonable time for both parties to put forward their argument and evidence." 23. For constituting a reasonable opportunity, the following conditions are required to be observed: 1.Each party must have notice that the hearing is to take place. 2.Each party must have a reasonable opportunity to be present at the hearing, together with his advisers and witnesses. 3.Each party must have the opportunity to be present throughout the hearing. 4.Each party must have reasonable opportunity to present evidence and argument in support of his own case. 5.Each party must have a reasonable opportunity to test his opponent's case by cross-examining his witnesses, presenting rebutting evidence and addressing oral argument. 6.The hearing must, unless the contrary is expressly agreed, be the occasio....
X X X X Extracts X X X X
X X X X Extracts X X X X
....oper notice, chooses not to appear, then the proceedings may properly continue in his absence - British Oil & Cake Mills Ltd. v. Horace Battin & Co. Ltd. [1922] 13 LT. L. Rep. 443. 28. In D.L. Miller & Co. Ltd.'s case (supra) the law is stated in the following terms: "13. The doctrine of arbitrators' legal misconduct has been so over-worked in recent years that across the whole branch of case law on this point one finds the blazing trial of principles of natural justice. They are discussed and agitated in an atmosphere of complete unreality and divorced from the facts of each case. Somehow the obvious point is missed in most of such cases that when the parties agree to go to arbitration they stipulate not so much for vague principles of natural justice as for concrete principles of contractual justice according to the contracts of the parties and their specific stipulations. Where the contract of arbitration itself prescribes a private procedure of its own, then so long as such agreed private procedure is not against the laws and the statutes of the land, then such agreed procedure must prevail over the notions and principles of natural justice." [p. 364] 29. The principles of ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....h of natural justice, prejudice must also be proved has been developed in several cases. In K.L. Tripathi v. State Bank of India [1984] 1 SCC 43 Sabyasachi Mukharji, J. (as he then was) also laid down the principle that not mere violation of natural justice but de facto prejudice (other than non-issue of notice) had to be proved. It was observed, quoting Wade's Administrative Law (5th Edn., pp. 472-75), as follows (SCC p. 58 para 31): 'It is not possible to lay down rigid rules as to when the principles of natural justice are to apply, nor as to their scope and extent...There must also have been some real prejudice to the complainant; there is no such thing as a merely technical infringement of natural justice. The requirements of natural justice must depend on the facts and circumstances of the case, the nature of the inquiry, the rules under which the Tribunal is acting, the subject-matter to be dealt with, and so forth.' Since then, this Court has consistently applied the principle of prejudice in several cases. The above ruling and various other rulings taking the same view have been exhaustively referred to in State Bank of Patiala v. S.K. Sharma [1996] 3 SCC 364. In that ca....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... said : "The concept of principles of natural justice has undergone a radical change. It is not in every case, that the High Courts would entertain a writ application only on the ground that violation of principles of natural justice has been alleged. The Apex Court, in State Bank of Patiala v. S.K. Sharma reported in 1996 (3) SCC 364 has clearly held that a person complaining about the violation of the principles of natural justice must show causation of a prejudice against him by reason of such violation. The Apex Court has held that the principles of natural justice, may be said to have been violated which require an intervention when no hearing, no opportunity or no notice has been given. Reference in this connection may also be made to Managing Director, E.C.I.L. v. B. Karmarkar, reported in AIR 1994 SC 1076. The question as to the effect of non-grant of enough opportunity to the learned counsel for the appellant by the Commission to meet the allegations made in the supplementary affidavit requires investigation. As to what extent the appellant has suffered would be a question which would fall for a decision of a High Court. Where such a disputed question arises, in the consi....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... to take advantage of an opportunity duly accorded to him. - Minmetals Germany GmbH v. Ferco Steel Ltd. [1999] 1 All ER (Comm) 315. This Court's decision in Renusagar Power Co. Ltd. v. General Electric Co. AIR 1994 SC 860 is also a pointer to the said proposition of law. 40. Keeping in view the facts and circumstances of this case, we are of the opinion that Ghanshyamdas Gupta cannot be said to have been refused a fair opportunity of participation in the arbitration proceedings. 41. So far as the other ground is concerned, which found favour of the High Court, namely, that the arbitrator had asked the parties to issue a letter to him that his award shall not be questioned would render the award a nullity inasmuch the same was not acted upon and in fact no letter was issued. The arbitrator must have done so keeping in view the peculiar nature of the disputes and to see that all the disputes come to an end. Other Interlocutory Applications: 42. Several interlocutory applications have been filed, some of which are required to be dealt with. I.A. No. 15 in C.A. No. 2809 of 1979: I.A. No. 15 has been filed at the instance of one of the parties herein for staying the auction of the....