HARI SHANKAR SINGHANIA AND ORS. v. GAUR HARI SINGHANIA AND ORS

Citation: [2006] 3 S.C.R. 726

Court: Supreme Court of India

Bench: H.K. SEMA, AR. LAKSHMANAN

Case summary

HARI SHANKAR SINGHANIA AND ORS. v. GAUR HARI SINGHANIA AND ORS.pdf

Judgment text

HARi SHANKAR SINGHANIA AND ORS. v. GAUR HAR! SINGHANIA AND ORS. APRIL 4, 2006 [H. K. SEMA AND DR. AR. LAKSHMANAN, JJ. ] Arbitration: Arbitration Act, 1940: Section 20- Application under-- Limitation for-Three brothers formed a partnership firm-There was disagreement between them as to the division ofthe assets involvLd in the partnership firm-Distribution ofthe immoveable properties could not be effected by 31. 5. 1987 as contemplated by the Deed of Dissolution--Nominees were appointed by each group to work out an arrangement--Numerous letters written by the parties to find a w01 10 seltle the dispute pertaining to the division of assets-Lust communication in this regard was on 29. 91989--Plailll under S. 20 filed by one group on 8. 5. 1992. High Court dismissed the arbitrution suit on the ground oflimitution being 50 days beyond the period ofthree yeurs computedfrom IIJ. 3. 19,W -Correctness of-Held: Article 137 ofthe limitation Act applies to an application under S.

20 ofthe Arbitration Act--App/ication is required to be filed within a period ofthree years when the right to apply uccrues--Right to apply accrues when difference or dispute arises between the parties to the arbitration agreement- Right to apply accrued only on the date of the last correspondence i. e. 29. 9. 1989--Hence, suit filed on 8. 5. 1992 is within limitation. limitation Act, 1963: Article 137. Arbitration suit--Family arrangements or settlements-Dispute over distribution ofimmoveable properties-Duty ofcourt- -Held' Family settlement should be treated differently from any other formal commercial settlement- Technicalities as limitation elc. should not be put ut risk ofthe implementation of a settlement drawn by a family-Hence, technical considerations should give way to peace and harmony in enforcement offamily arrangements or settlements. - HARi SHANKAR SINGHANIA v.

GAUR HARi SINGHANIA 727 There was a disagreement between the appellants and the respondents as to the division of the assets involved in the partnership firm formed by three brothers. Therefore, the distribution of the immoveable properties could not be effected by 31. 5. 1987 as con. templated by the Deed of Dissolution. Ultimately, in February 1988 the three groups each of appointed nominees to work out an arrangement for satisfactory distribution of the properties of the said dissolved firm. The nominees held several meetings but no agreement of distribution could be arrived at. There were numerous letters written by both parties to find a way to settle the dispute pertaining to the division of assets. The last letter that was exchanged in this regard was a letter dated 29. 9. 1989. The appellants filed a plaint under Section 20 of the Arbitration Act, 1940 before the High Court on 8. 5. 1992.

The High Court dismissed the Arbitration Suit on the ground of limitation being 50 days beyond the period of three years computed from 18. 3. 1989. Hence the appeal. On behalf of the appellants, it was contended that the date of the last communication between the parties to reach a settlement was 29. 9. 1989; that the right to apply under Section 20 of the Arbitration Act accrued to the appellants on 29. 9. 1989; and, therefore, limitation period would start running from 29. 9. 1989 and hence arbitration suit filed on 8. 5. 1992 was within limitation as laid down in Article 137 of the Schedule to the Limitation Act. 1963. The following questions arose before the court:- - I. When the right to file the application under Section 20 of the Arbitration Act, 1940 has accrued and when it becomes time barred? 2.

Whether in the context of Section 20 of the Arbitration Act, 1940 difference or dispute can be said to have arisen between the parties without there being any denial or repudiation of a claim by a party? Allowing the appeal, the Court HELD: I. I. It is now well-settled that Article 137 of the Limitation Act, --- 1963 applies to an application under Section 20 of the Arbitration Act, 1940. Accordingly, an application under Section 20 of the Act for filing the arbitration agreement in Court and for reference of disputes to arbitration in accordance therewith is required to be filed within a period of three years when the right to apply accrues. The right to apply accrues when difference or dispute arises between the parties to the arbitration agreement. 1. 2. The High Court has committed an error in construing Article 137 of the Schedule to the Limitation Act, 1963 in a manner, which would unduly restrict the remedy of arbitration especially in family disputes.

It is a well settled policy of law in the first instance to promote a settlement between the parties wherever possible and particularly in family disputes. [737-Dj 2. 1. Where a settlement with or without conciliation is not possible, then comes the stage of adjudication by way ofarbitration. Article 137, as construed in this sense, then as long as parties are in dialogue and even the differences would have surfaced it cannot be asserted that a limitation under Article 137 has commenced. Such an interpretation will compel the parties to resort to litigation/arbitration even where there is a serio. us hope of the parties themselves resolving the issues. [737-Ej 2. 2. The High Court has failed to appreciate that merely because the parties did not take steps for distribution of the immovable properties it did not automatically follow that the 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. The correspondence between the parties does not indicate that any dispute or difference had arisen between them on or before 18. 3. 1989 and the finding of the High Court 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. (738-C, DJ 3. In the instant case, the correspondence exchanged between the parties was not merely in the nature of reminders but also instruments to resolve the matter and amicably negotiate.

Therefore, when the negotiations were taking place between the parties by way of various letters written by both the parties the right to apply can be said to accrue when it becomes necessary to apply, that is to say when a dispute in fact arose. Furthermore, the respondent did not ever dispute the claim of the appellants. (739-G j Vulcan Insurance Cu. ltd v. Maharaj Singh, AIR (1976) SC 287, Stale of Orissc1 v. Damodar Das, AIR (1996) SC 942; S. Rajan v. State ufKera/a, AIR (1992) SC 1918 and Major (R1Jtd) Inda Singh Rekhi v. Delhi Development HARi SHANKAR SINGHANIA v. GAUR HARi SINGHANIA _729 Authority, [1998) 2 SCC 388, relied on. Oriental Building and Furnishing Co. Ltd v. Union ofIndia. AIR (1981) Del 293, approved. · · · · 4. 1. It cannot be said that merely because nominees were appointed for working out an arrangement, which could not ultimately be arrived at, a· dispute or difference arose way back in February, 1988.

In fact, even immediately after this, the ~orrespondence ~xchanged between the parties reveals a forthcoming attitude and amiable effol'ts made towards implementing the deed of dissolution. [740-EJ 4. 2. Therefore, the right to apply under Section 20 of the Arbitration Act, 1940 accrued to the appellants only on the date ofthe last correspondence between the parties and the period of limitation commences from the date of the last communication between the parties. Therefore;the finding ofthe High Court that the application under Section 20 of the Arbitration- Act, 1940 is beyond the period of limitation is erroneous. )741-A) . 5. Furthermore, the contesting respondents cannot allege that moving·' the Court is a better-suited remedy than arbitration proceedings as they have . of their. own free will only adopted the arbitration clause in the Deed of . Dissolution. [741-FJ 6. 1. A family settlement is treated differently from any other formal .

commercial settlement as such settlement in the eyes of law ensures peace and goodwill among the family members. Such family settlements generally meet with the approval of the Courts. Such settlements are governed by a special equity principle where the terms are fair_ and bonafide. taking into account the well being of a family. )741-G; 742-AJ 6. 2. The concept of 'family arrangement or settlement' and the present one in hand should be treated differently. Technicalities of limitation etc. should not be put at risk of the implementation of a settlement drawn by family, which is essential for maintaining peace and harmony in a family. Any such arrangement would be upheld if family settlements were entered into to allay disputes existing or apprehendedand even any dispute or difference apart, ifit H'GS entered into bonafide to n1ainlain peace or to bring about harmony in thefamily. Even a semblance ofa claim or some otherground, as say affeetion, inay suffice. (742-A, BJ Sl!

PREME COURT REPORTS [2006] 3 S. C. R. Ram Charan v. Gir! ja Nandini, AIR (1996) SC 323, Sahu Madho Das v. Pandit Mukand Ram, f1995( 2 SCR 22, Maturi Pullaiah v. Maturi Narasimham, AIR (1966) SC 1836, Krishna Bihari/al v. Gulabchand 1197111 SCC 837, S. Shanmugam Pillai v. K. Shanmugaon Pillai, 1197312 SCC 312, Kale v. Deputy Director '. HARi SHANKAR SINGHANIA v. GAUR HARi SINGHANIA [LAKSHMANAN, J I 745 Limitation Act, 1963. Thus we conclude by observing that, the Arbitration suit filed by the appellants is well within time as the dispute is deemed to have arisen only after the last communicatior between the parties dated 29th September. 1989, whereby, there were efforts made to amicably settle the dispute between the parties. Also as an admitted fact the appellants and respondent Nos. 10 to 20 were at all material times and still are ready and willing to do all the things necessary for the proper conduct of the arbitration including the appointment of Arbitrator.

Further it is not fair on the appellants to let this dispute continue, with the assets in question under the control and enjoyment of the contesting respondents 1-9. It may be mentioned that even though the plea of extension of limitation has not been taken into account by the appellants in the application filed and the learned counsel for the respondents has objected to the learned counsel for the appellants making submission pertaining to extension of limitatio~ to tile the present application, learned Single Judge of the High Court has permitted the learned counsel for the appellant to make submissions in this regard without the plea of extension of limitation being taken in the application. Why the dispute between members offamily should be settled:- In the instant case, the partnership . firm was dissolved w. e. f. March, 1987 by consent of parties. The Deed of Dissolution was also entered into between the parties on March 26, 1987.

Jn 1988, the three groups each appointed a nominee to work out an arrangement whereby the distribution of the properties ofthe dissolved firm could be made and effected. The nominees held several meetings but no agreement of distribution could be arrived at. Meeting of the partne_rs took place on various occas. ions 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 l property in Bombay which are very ""--· valuable. Respondents 1-9 being in enjoyment were simply delaying '. distribution in specie. In the circumstances, appellant No. I herein and the 0 1 : '' 'r members of the branch of Lakshmipat Singhania wanted to take recourse 746 SUPRl:ME COURT REPORTS [2006) 3 S. C. R.

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 plea of limitation on the basis that disputes and differences arose on 18. 03. 1989 whereas the application was filed on 08. 05. 1992 i. e. to say 50 days beyond the period of 3 years. The Division Bench also dismissed the appeal filed by the appellant on the ground of limitation. .. It is an admitted fact that the three branches of Singhania family are each entitled to one-third share in immovable properties.

It is stated that the rents of the properties situated at Kanpur from family companies and other in whose favour tenancy had been shown at nominal rents long time back after the dissolution of the partnership finn are being collected by the branch of Padampat Singhania and deposited in the bank account titled J. K. Bankers (since dissolved). The said bank account was opened by the erstwhile partners of J. K. Bankers upon dissolution of J. K. Bankers the rental income from the properties in Kanpur, it is alleged is being credited by the branch of Padampat Singhania to the credit of ex-partners account of J. K. Bankers in accordance with their shares i. e. one-third share each after paying their very property tax and other outgoings. Such credit balance in the account of such bankers is being paid to the branches of Singhania family from time to time.

The three branches of Singhania family are showing the rental income in their returns of income tax as income from house property and have to pay income-tax thereon in accordance with law. Furthermore, the three branches of Singhania family are showing these properties having their own undivided proportionate share in their wealth tax returns and have to pay wealth tax therein in accordance with law. It is stated that Hari Shankar Singhania, appellant No. I and other members of Lakshmi Pat Singhania branch are n. lt being credited with or paid any monies/income whatsoever in respect ofthe Bombay property since the date of dissolution of J. K. Bankers although they have to pay wealth tax returns. It is stated by the appellants that the immovable properties in possession of the various respondents are extremely valuable and required to be protected pending disposal of arbitration. It is also stated that similar interim reliefs have been granted to the appellants are far back as 21. 05.

1992 passed by the Single Judge. Also learned Division Bench had passed an interim order dated 15. 04. 1996. While dismissing the appeal on the ground of limitation Division Bench ofthe High Court has extended the interim order by 12 weeks. This Court on 27. 08. 2004 suggested to counsel appearing for all HARi SHANKARSINGHANIA v. GAUR HARi SINGHANIA [L. -\KSHMANAN, J. ] 747 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 feelings/misunderstandings, if any, are evaporated in the thin air with the resolution of the dispute. In response to our suggestion the parties agree to refer to conciliator to be appointed by the Court. Accordingly, we appoint Hon 'ble Mr. Justice N. Santosh Hegde, retired Judge of this Court to be the Conciliator io resolve the dispute through conciliation. The terms and conditions and the place of sitting shall be decided by the Conciliator himself.

The fees and other expenses of the Conciliator shall be borne equally by the three disputing parties. We hope and trust that the parties will resolve their dispute through conciliation with a view to maintain good relationship between the parties. This order is passed without prejudice to the rights and contentions of the parties that may raise in the proceedings. But it must be grasped that the approach of the parties must be accommodative and keep no records of wrong. List it after three months. " Hon'ble Mr. Justice N. Santosh Hegde addressed a letter on 02. 02. 2006 . , to the Registrar General, Supreme Court of India, New Delhi- I I0 00 I with reference to the conciliation in the matter. The letter reads thus: "The Hon 'ble Supreme Court of India vide its Order dated 06. 09. 2005 748 SUPRF\>IE COURT REPORTS (2006] 3 S. C. R. referred the above matter for conciliation by me.

I have held many meetings between the parties and at one stage I was under the impression that a conciliation could be possible, but unfortunately at a later stage it is found that such a result could not be achieved. Having considered all the possibilities, I am to report to the Hon'ble Court that the conciliation in the case referred to above, has failed. Hence, I request you to kindly inform the Court accordingly. I express my gratitude to the Court for having referred the conciliation to me. " It is thus seen that the above facts would clearly go to show that the contesting respondent Nos.

1-9 are not at all interested in any conciliation, mediation or arbitration but only interested in enjoying the bulk of the immovable properties of the firm and refusing to carry out their obligations under and pursuant to the said Deed of Dissolution by permitting the distribution of the said properties in specie and free from any encumbrance as contemplated by the said Deed of Dissolution dated 26. 03. 1987 and the supplementary agreement dated 28. 03. 1987. At the time of hearing, it was argued by learned 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 --r· 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. I0-20. We should not, therefore, allow respondent Nos. l-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.

It was argued that in case this Court allows the appeal, the matter may be remitted to the High Court for appointment of singk Arbitrator and in case the parties are unable to agree upon a single Arbitrator a panel of three Arbitrators shall be appointed as provided in the HARi SHANKARSINGHANIA v. GAUR HARi SINGHANIA (LAKSHMANAN,J. ] 749 said agreement. We feel that such a course, if adopted, would only enable the contesting respondent Nos. 1-9 to squat on the property and enjoy the benefits, income etc. arising therefrom. We, therefore, appoint Hon'ble Mr. Justice S. N. Variava, a retired Judge of this Court as a single Arbitrator and decide the dispute between the parties within 6 months from the date of entering upon the reference. The occasion, if any, warrants the sole Arbitrator may extend further reasonable time for completion of the Arbitration proceedings. Learned Arbitrator is at liberty to fix his fees etc. and other expenses which shall be borne equally by three parties.

The arbitration shall be at Bombay or as decided by the Arbitrator in consultation with the parties. The proceedings before the Arbitrator shall be governed by the provisions contained in the Indian Arbitration Act, 1940 or by any statutory modification or re-enactment thereof. It is seen from the plaint filed in the arbitration suit the following disputes and differences, amongst others, have arisen between the parties and which are to be resolved by the sole Arbitrator pursuant to the agreement:- "(a) To the extent defendant themselves are occupying such properties, the defendants should be directed to vacate the properties to enable distribution of the said properties. in specie free from encumbrances; ' (b) The defendants obligation to have vacant possession of the immoveable properties listed at items I to l3 of Exhibit D hereto and to ensure that persons other than themselves actually vacate the said properties so that the same are available for distribution ..

in specie free from encumbrances between the plaintiffs and defendants pursuant to the said Deed of Dissolution; (c) Directions and steps be taken by defendants to achieve the vacant possession mentioned in paragraph (a) and (b) above; (d) Distribution of the abovementioned properties in specie free from encumbrances between the plaintiffs and defendants; (e) Distribution of the properties mentioned at items 14 and 15 of the Exhibit D hereto subject to the encumbrances; (t) Fixation of equalization amount, if necessary; (g) If for any reason any of the defendants do not permit and comply with direction for getting vacant possession of any of the immoveable properties listed in items 1to 13 of Ex"D" to the plaint, then the same should be valued on the basis of vacant possession and the plaintiffs should be paid their share on the basis of the vacant possession by the defendants.

" • The aforesaid disputes are all covered by the arbitration clause and fall within the scope and ambit thereof. The parties are at liberty to file their further pleadings, claims etc. before the sole Arbitrator. Conclusion: Better late than never We have already referred to the concept of family arrangement and • settlement. Parties are members of three different groups and are leading business people. We, therefore, advise the parties instead of litigating in -- Court they may as well concentrate ort their business and, at the same time, settle the disputes amicably which, in our opinion, is essential for maintaining peace and harmony in the family. Even though the parties with a good intention have entered into the Deed of Dissolution and to divide the properties in equal measure in 1987, the attitude and conduct ofthe parties have changed, unfortunately in a different direction.

Therefore, it is the duty ofthe Court that such an arrangement and the terms thereof should be given effect to in letter and spirit. The appellants and the respondents are the members of the family descending from a common ancestor. At least now, they must sink their disputes and differences, settle and resolve their conflicting claims once and for all in order to buy peace of mind and bring about complete harmony and goodwill in the family. For the foregoing reasons, we allow this appeal and set aside the orders passed by the learned Single Judge and as affirmed by the Division Bench in Appeal No. 440/1996 in arbitration Suit No. 1904/1992 dated 09. 06. 2004. Parties are directed to bear their own costs: We direct all the parties to appear before the Arbitrator on 03. 05. 2006. The interim order passed by the High Court shall be honoured by all the parties till the disposal of the matter by the Arbitrator. Parties are at liberty to take further orders from the Arbitrator. v. s. s.

Appeal allowed.