TaxTMI 
TaxTMI 
TaxTMI 
2006 (4) TMI 463
X X X X Extracts X X X X
X X X X Extracts X X X X
....y to go for arbitration in case there was a dispute between them reads as follows: "13. That if at any time any dispute, doubt or question shall arise between the parties hereto or their respective legal representative, either on the construction of interpretation of these presents or respecting the accounts, transactions, profit or loss of business or their respective rights and obligations of the parties hereto or otherwise in relation to the winding up of the partnership, then any such dispute, doubt or question shall be referred to the arbitration of a single Arbitrator. In case, however, the parties are unable to agree upon a single Arbitrator, a panel of three Arbitrators shall be appointed, one of them to be appointed by Shri Hari Shankar Singhania or failing him by the Sixth Party, or failing the Sixth Party by the Seventh Party, or failing the Seventh party, by the Eighth party and the second to be appointed by Dr. Gaur Hari Singhania and failing him by the second party and failing the second party by the ninth party and the third to be appointed by Shri Vijaypat Singhania and failing him by the fourth party, provided always that the decision and/or award by the said panel....
X X X X Extracts X X X X
X X X X Extracts X X X X
....Bombay High Court, the appellants have come by way of special leave petition before this Court. Leave was granted on 03.01.2005 by this Court. We heard Dr. Abhishek Manu Singhvi, learned Senior Counsel appearing for appellants 1-7, Mr. S. Ganesh, learned senior counsel appearing for respondents 10-20 and Mr. Anil Diwan, learned Senior Counsel appearing for the respondents 1- The claim of the appellants was that, after the dissolution of the partnership there were a series of communication between the appellants and the respondents on the division of the assets which was a part of the dissolved firm in order to arrive at an amicable settlement as evident from the words used in the letters of correspondence like, to not cause unduly delay in the distribution of the property/expedite the matter of dissolution (letter dated 29th September, 1989) etc. Therefore, according to Dr. Abhishek Manu Singhvi, learned counsel appearing for the appellants, the right to apply under section 20 of the Arbitration Act, 1940 accrued to the appellants on the date of the last communication between the parties to reach a settlement, which is the letter dated 29th September, 1989. Therefore, limitation p....
X X X X Extracts X X X X
X X X X Extracts X X X X
....I will request you to please make all attempts to expedite the same." Letter dated 4th October, 1988 is a letter by Shri Gaur Hari Singhania to Shri Hari Shankar Singhania stating that "I on my part have given all the information and materials and done everything possible to expedite the distribution. The Committee appointed by the partners is seized of the matter. I am equally anxious that the matter should be amicably sorted out as early as possible." Letter dated 18th October, 1988 is a letter by Shri Hari Shankar Singhania to Shri Gaur Hari Singhania wherein it is stated that "I only requested you to make all attempts to expedite. You can judge for yourselves what is the reason for the delay. In my view, unless there is sincere desire to solve the matter expeditiously the matter will drag on and I can only repeat that this will not be to the benefit of any one. I can only request you to do all you can to get the matter expedited." Letter dated 24th November, 1988 is a letter by Shri Gaur Hari Singhania to Shri Hari Shankar Singhania wherein it is stated that, "I am sending the modified account for your kindly returning the same duly signed by you and all the other partners a....
X X X X Extracts X X X X
X X X X Extracts X X X X
....es that the licence agreement should no more be treated as valid and appropriate amendment be made in that regard by returning the monies received and making suitable corrective entries in the accounts. We are returning the accounts for the period 20th March, 1987 to 31st March, 1988 for necessary rectification." Letter dated 8th July, 1989 is a letter by Shri Gaur Hari Singhania to Shri Hari Shankar Singhania wherein it is stated that "However, as stated above, the distribution of the immovable properties is being delayed due to entirely the unreasonable stand taken by or on your behalf and due to insistence on your behalf of the distribution to be effected in a particular mode which is neither feasible nor reasonable and proper It is, therefore, not only in the interest of all the partners but imperative that you should not hold up the signing of the accounts. I, therefore, once again send to you the said accounts with a request to return the same duly signed. I need not add that if as a result of your not signing the said accounts any adverse orders are passed by the Income Tax Officer in the pending assessment of the said firm for the said two assessment years 1987-1988 and 19....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ndent reiterated that the accounts were correct and sent back for the confirmation and also alleged that the matter of distribution of immovable properties remained pending because of the unreasonable and improper stand taken by the appellants. It was argued that at best it could be suggested that by this date, the stage has reached where the partners could have contemplated the adjudication of their disputes. This would show that the petition would clearly be within time. Suit under Section 20 of the Arbitration Act was filed on 8.5.1992. On 29.09.1989, a letter was written by Shri Vijaypat Singhania, Shri Ajaypat Singhania, Shri Hari Shankar Singhania and Bharat Hari Singhania to Shri Gaur Hari Singhania, respondent wherein it is stated that it is not fair to impute impropriety or to say that the stand taken by the appellants is an attempt to bring pressure upon immovable properties of dissolved partnership. It is also stated therein that the respondent will expedite the matter of dissolution of the immovable properties in the same spirit as was envisaged at the time of dissolving the firm. If this letter dated 29.09.1989 is taken into account, it would show that Section 20 suit ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....on of the property had been made till 29.02.1988, it was indicative of the fact that there were disputes and differences between the parties. The High Court, in our view, has failed to appreciate that merely because parties did not take steps for distribution of the immovable properties it did not automatically follow that disputes and differences had arisen between them in this regard. In fact, from the correspondence on record, it is clear that the parties were making efforts to complete the distribution of the immovable properties as per the terms of the agreement between them. It is submitted that the correspondence between the parties does not indicate that any dispute or difference had arisen between them on or before 18.03.1989 and the finding of the learned Judges to the effect that the correspondence exchanged between the parties leaves no manner of doubt that the dispute had arisen between the parties in any case on 18.03.1989 is erroneous, contrary to the record and unsustainable. We shall now advert to the various decisions cited by both the parties. The period of three years prescribed in Art.137 of the Limitation Act, 1963 is applicable to file an application under ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ondent did not ever dispute the claim of the appellants. Learned counsel appearing for the appellants placed reliance on Oriental Building and Furnishing Co. Ltd. v Union of India, AIR 1981 Del 293, where the material question was what is the starting point of limitation for moving a petition under section 20 of the Arbitration Act, 1940. It was held that: "Neither party can move the Court without the existence of a difference between them. So, the material question is, when the difference arose between the parties and not when the lease expired, nor when it was entered into." The court further observed, "a difference can arise long after some work has been done under a contract. There can be negotiations between the parties and all sorts of correspondence. But it is only when they come to the conclusion that they cannot resolve the dispute between them, it can be said that a difference arises. A difference under the arbitration agreement is a claim made by one party, which is refuted by the other party. At that stage, it is open to the parties or any one of them to go for arbitration to get this difference or differences settled and it is only at this stage it is possible to say ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....oceedings has been minimized to a great extent. Further, there is no provision in the Arbitration and Conciliation Act, 1996 that is similar to section 8 (power of court to appoint arbitrator), section 20 (application to file in Court the Arbitration Agreement) and section 33(Arbitration agreement or award to be contested by application), which were present in the Arbitration Act of 1940. Another thing that should not miss the attention of the Court is that, the assets in question are with the contesting respondent Nos.1 to 9 and an amicable settlement for the division of the assets have not been arrived at since last 18 years as clear from the facts. Hence it is observed that the contesting respondents are the ones who are enjoying the assets in question and therefore we observe that, the respondents are merely trying to drag the proceedings endlessly forever and for another period of uninterrupted enjoyment of the assets. Furthermore the contesting respondents cannot allege that moving the Court is a better-suited remedy than arbitration proceeding as they have of their own free will only adopted the arbitration clause in the Deed of Dissolution. Family Arrangement/Family Settle....
X X X X Extracts X X X X
X X X X Extracts X X X X
....), this Court observed as follows: "Courts give effect to a family settlement upon the broad and general ground that its object is to settle existing or future disputes regarding property amongst members of a family The consideration for such a settlement will result in establishing or ensuring amity and good will amongst persons bearing relationship with one another." In Maturi Pullaiah v Maturi Narasimham, AIR 1966 SC 1836, this court held that "although conflict of legal claims in praesenti or in future is generally a condition for the validity of family arrangements, it is not necessarily so. Even bona fide disputes, present or possible, which may not involve legal claims, will suffice. Members of a joint Hindu family may, to maintain peace or to bring about harmony in the family, enter into such a family arrangement. If such an arrangement is entered into bona fide and the terms thereof are fair in the circumstances of a particular case, courts will more readily give assent to such an arrangement than to avoid it." Further in Krishna Biharilal v Gulabchand, [1971] 1 SCC 837, this Court reiterated the approach of courts to lean strongly in favour of family arrangements to br....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... by a special equity peculiar to themselves, and will be enforced if honestly made, although they have not been meant as a compromise, but have proceeded from an error of all parties originating in mistake or ignorance of fact as to what their rights actually are, or of the points on which their rights actually depend." Halsbury's Laws of England, Vol.17, Third edition at pp.215-216. In KK Modi v KN Modi & Ors., [1998] 3 SCC 573 [ Sujata Manohar & DP Wadhwa, JJ.], it was held that the true intent and purport of the arbitration agreement must be examined- [para 21] Further the court examined that "a family settlement which settles disputes within the family should not be lightly interfered with especially when the settlement has been already acted upon by some members of the family. In the present case, from 1989 to 1995 the Memorandum of Understanding has been substantially acted upon and hence the parties must be held to the settlement which is in the interest of the family and which avoids disputes between the members of the family. Such settlements have to be viewed a little differently from ordinary contracts and their internal mechanism for working out the settlement should n....
X X X X Extracts X X X X
X X X X Extracts X X X X
....whereby the distribution of the properties of the dissolved firm could be made and effected. The nominees held several meetings but no agreement of distribution could be arrived at. Meeting of the partners took place on various occasions in regard to the issue of distribution of assets which has been considerably delayed. Several correspondences exchanged between the heads of three branches regarding amicable distribution of all the immovable properties in specie. It is stated that 14 properties are situated in Kanpur and 1 property in Bombay which are very valuable. Respondents 1-9 being in enjoyment were simply delaying distribution in specie. In the circumstances, appellant No.1 herein and the other members of the branch of Lakshmipat Singhania wanted to take recourse to due process of law for getting distribution and allotment in specie of their one-third share in those 15 immovable properties. Hence, application under Section 20 of the Arbitration Act, 1940 was filed in the High Court of Bombay on 08.05.1992. Other group opposed the application on the ground of limitation and the lack of jurisdiction. Single Judge rejected the plea of the lack of jurisdiction but upheld the pl....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ound of limitation Division Bench of the High Court has extended the interim order by 12 weeks. This Court on 27.08.2004 suggested to counsel appearing for all parties without looking into the relationship of the parties and the nature of disputes, why not all the disputes among the parties be directed to be placed for adjudication by an arbitrator or for resolution by a conciliator. At the time of hearing, all the learned counsel for the parties assured that the interm order passed by the High Court shall be honoured by all the parties until the matter comes up for hearing. On 03.01.2005, it was reported by learned senior counsel appearing for respondent Nos. 1-9 that the parties are not agreeable for settlement by conciliation. This Court, thereafter, granted leave and posted the appeal for final hearing in the month of March, 2005. The matter was listed on 06.09.2005. After hearing the parties, this Court passed the following order:- "Heard the parties Having regard to the nature of dispute and the fact that the contesting parties are close relatives, we are clearly of the view that it is still better that such dispute is resolved through conciliation, so that the past ill fee....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ed senior counsel for respondent Nos. 1-9 that since the appellants have filed the suit, the same may be continued by the appellants and a direction be issued to the Court concerned to dispose of the same within a particular time frame. In reply, it was submitted that the suit was filed by the appellants without prejudice to their rights and contentions under the arbitration clause in the agreement and that the arbitration is the only effective and quick remedy. We have extracted clause 13 of the arbitration agreement which enable the parties to go for arbitration in case there was a dispute between them. It has now come to a stage that the real dispute has arisen between the parties. Already the matter is pending adjudication from 1987 onwards, respondent Nos. 1-9 are admittedly in possession and enjoyment of the valuable immovable properties depriving the valuable rights of the appellants the other respondent Nos. 10-20. We should not, therefore, allow respondent Nos.1-9 to drag the proceedings any further. Parties have to settle their disputes one day or the other. In our opinion, the time has now come to nominate a single Arbitrator as provided under clause 13 of the agreement.....