Kailash Rani Dang vs Rakesh Bala Aneja & Anr

2. These appeals arise out of the following facts: On 7th

June, 1995 a partnership deed was executed between

Subhash Chander Aneja, since deceased, his son Amit Aneja

and the appellant Kailash Rani Dang, a cousin of Subhash

Chander Aneja, aforesaid with regard to the running of Alka

Cinema, situated at P-2, Sector-15 NOIDA. The shares in the 2

partnership were also delineated therein. On 21st July, 1998,

a family arrangement was entered into between Subhash

Chander and Kailash Rani, in which it was agreed that the

latter would get 50% of the earnings from the Cinema Hall as

well as from the commercial exploitation of the adjoining plot,

whereas 50% would go to the former. This agreement also

contained an arbitration clause whereby all disputes and

differences would be referred to the sole arbitration of Shri

Hans Raj Dang and on his non-availability, to the sole

arbitration of Dr. Amar Nath Kumar. Disputes having arisen,

Kailash Rani vide her letter dated 2nd July, 1999, invoked the

arbitration clause in the family arrangement by writing to Shri

Hans Raj Dang requesting him to act as the arbitrator. Shri

Hans Raj Dang, however, vide his letter dated 7th July, 1999

informed Kailash Rani that he would not be able to act as

such because of ill-health. Copies of these letters were sent to

the respondent Subhash Chander as well. Kailash Rani, in

these circumstances, wrote a letter dated 12th July, 1999 to

the alternate Arbitrator Dr. Amar Nath Kumar requesting him

to act as the arbitrator and also informing him that though the 3

cinema hall was bringing an income of Rs. 2.5 lacs per month,

she had not been paid a single penny on that account. Dr.

Amar Nath Kumar accordingly wrote a letter dated 17th July,

1999 to Kailash Rani calling upon her to file her statement of

claim before 25th July, 1999 and to send a copy thereof to

Subhash Chander, through registered post. He also called

upon Subhash Chander to file his reply to the statement of

claim by 2nd August 1999 and fixed 11.00 A.M. on 8th August,

1999 as the date and time of the hearing at a specified venue

at Ghaziabad. On 23rd July, 1999, Kailash Rani dispatched

her statement of claim by registered post to the Arbitrator as

well as to Subhash Chander. The receipt of this statement

was acknowledged by Subhash Chander by his

communication on 29th July, 1999 addressed to Kailash Rani

wherein he asked for the supply of certain documents, failing

which it would not be possible for him to file a reply to the

statement of claim. Kailash Rani, vide her letter dated 2nd

August 1999, replied reminding Subhash Chander that the

documents he was seeking were already in his possession as

he was one of the executants thereto, but that in any case the 4

copies could be taken from the arbitrator during the course of

hearing on 8th August, 1999. Subhash Chander nevertheless,

through his Advocates, M/s. Sen & Sen addressed a

communication dated 7th August, 1999 to the arbitrator

denying the execution of any family arrangement dated

21st July, 1998 and again asking for the supply of the

documents referred to in the statement of claim, and further,

that the arbitration proceedings be deferred till all the

documents were in fact supplied. As a follow up to the

communication from his Advocates, Subhash Chander did not

appear before the Arbitrator on 8th August, 1999. The

Arbitrator, accordingly, addressed a letter to him pointing out

that his non-appearance justified the initiation of ex-parte

proceedings but another opportunity was being afforded to

him and further that Kailash Rani had undertaken to supply

copies of all documents relied upon by her on the next date of

hearing in his presence. The hearing was also fixed at 11.00

A.M. on 25th August, 1999. Subhash Chander however did not

appear before the Arbitrator on 25th August, 1999 as well and

after waiting till 2.00 P.M. on that date the Arbitrator ordered 5

ex-parte proceedings and thereafter passed an ex-parte Award

against him. A copy of the Award was sent by the Arbitrator

to both parties through speed post; the copy of the Award

being addressed to Subhash Chander at his business address,

Alka Cinema, P-2, Sector -15, NOIDA. The Postman visited

the cinema premises on 30th August, 1999 but Subhash

Chander was not present. The Postman went to the address

again the next day but Subhash Chander refused to receive

the registered envelope, though the name of the sendor Dr.

Amar Nath Kumar, the Arbitrator stood written thereon. The

Postman accordingly returned the envelope to the sender with

an endorsement of refusal dated 31st August 1999. Kailash

Rani thereafter (on 7th April, 2000) filed an Application in the

Court of the District Judge, Gautam Budh Nagar for the

execution of the Award. Subhash Chander at this stage filed

an Application under Order 21 Rule 26 of the Code of Civil

Procedure in the Executing Court seeking a stay of the

execution proceedings, and denying any knowledge of the

passing of the Award dated 25th August, 1999 and also, inter

alia, pleading that though he had not appeared before the 6

Arbitrator on 25th August, 1999, one Mishra, his Manager, had

done so on his behalf, who, after having waited for an hour,

had found neither the appellant nor the Arbitrator present, on

which he had gone away and that this fact had been

communicated to the Arbitrator by Registered post on

6th September, 1999. He also filed an application dated

28th November 2000 under Section 34 of The Arbitration and

Conciliation Act, 1996 (hereinafter referred to as "the Act")

praying that the ex-parte Award dated 25th August, 1999 be

set aside emphasizing therein that he had received a copy of

the Award only on 7th October, 2000 during the course of the

execution proceedings. Subhash Chander expired on 29th

November 2000 and is now represented by his L.Rs including

respondent No. 1 Rakesh Bala Aneja, his widow. Kailash

Rani, in response to the aforesaid objection petition, filed a

reply pleading that it was time barred and raising several

objections on merits as well. The District Judge - the

Executing Court, thereafter, called upon the parties to

produce their evidence. The statement of the Postman

Dharam Pal, who had tendered the envelope on 30th and 31st 7

August, 1999 which Subhash Chander had refused to accept

was recorded. The Court accordingly concluded that as

Subhash Chander had refused to accept the notice from the

Postman he was deemed to have been served and as such the

application under Section 34 was clearly beyond time as the

maximum time permissible for such an application was 90

days. The objection petition was, thus, dismissed. Rakesh

Bala filed a Revision Petition in the Allahabad High Court

which set aside the order of the Executing Court vide the

impugned judgment dated 13th November 2006, which to us,

suffers from some basic contradictions. This is what the

Court had to say:

"It is true that in usual course if the entry of refusal of service of the award is made by the Postman it is to be accepted by the Court as correct. In this view of the matter the present objections are to be found presented after the expiry of the limitation period provided for the purpose. The service of award upon a party who is definitely aggrieved by the same is not a matter to be viewed very lightly. The service is not a mere formality and it is a matter of substance. The termination of an arbitral proceedings are always subject to certain conditions and it is 8

also subject to provisions of Section 33 & 34 of the Act. In fact the delivery of award to a party has to be effective after the same has been received by the said party. This delivery actually has the effect of conferring `certain rights upon the parties as also bringing to an end the right to exercise those rights on expiry of the period of limitation'. Therefore, the delivery of the copy of the award made is something which is very substantial for the parties. The mere entry of refusal of acceptance by the Postman upon the registered envelope should not be given so much importance as to shut the entire available avenues for the redressal of his grievance of a party which has been quite adversely effected by it."

In support its observations the High Court relied on the

judgment of this Court in Union of India vs. Tecco Trichy

Engineers and Contractors (2005) 4 SCC 239. It was

accordingly held that the date of receipt of the Award by

Subhash Chander would be deemed to be 11th October 2000

and as such the application under Section 34 of the Act was

within time. Kailash Rani filed a review application against the

judgment dated 13th November, 2006 but it too was dismissed 9

on 7th August 2007. Faced with this situation, Kailash Rani is

before us in the present appeals, both against the orders

dated 13th November 2006 and 7th August 2007.

3. Mr. Arun Jaitley, the learned senior counsel for the

appellant has raised several arguments during the course of

hearing. He has first pointed out that Subhash Chander, the

deceased respondent, had always adopted an indifferent

attitude towards the arbitration proceedings inasmuch that

though he had knowledge of the proceedings he had

deliberately stayed away on the 25th August 1999 when he, as

per his own statement, had not appeared before the Arbitrator

but had sent his Manager Mishra instead, though even his

alleged appearance was an afterthought. He has also pointed

out that Subhash Chander in his objection petition had

denied the execution of the family arrangement dated 21st

July 1998 though the execution of the partnership deed which

was, in fact, the parent document executed on 7th June 1995

had not been denied and this too, and the fact that the

appellant Kailash Rani though entitled to 50% of the income

from the cinema had not received even a penny on that 10

account, was the reason for his recalcitrant attitude. He has

pleaded that it is in this background that the matter would

have to be examined even with regard to the receipt of a copy

of the award by him on 31st August 1999, as held by the

executing court or on the 11th of October 2000 as observed by

the High Court. In this connection, Mr. Jaitley has then

brought to our notice the statement of Dharam Pal PW1, the

postman who deposed that he had visited Alka Cinema on the

30th August 1999 and after finding Shri Aneja absent he had

again visited the next day but the latter had refused to accept

the envelope on which he had made an endorsement to that

effect and returned the unsealed envelope to the sender.

Reliance has also been placed on Section 3 of the Act which

talks about the receipt of written communications, to support

the argument that as the envelope had been addressed to the

very address, which was the subject matter of the business

and the partnership, it was deemed to have been served. Mr.

Jaitley has also distinguished the judgment of this Court in

Tecco Trichy Engineers (supra) and submitted that it had no

applicability to the facts of the present matter. 11

4. Mr. Ranjeet Kumar, the learned senior counsel for the

respondent has, however, pointed out that the execution of

the family arrangement dated 7th June 1995 had been denied

by him and as the service of the award was a matter of great

moment and with deep ramifications for him and his family,

there was no reason as to why he would not have filed his

objections had he been served on the 30th August 1999 or

31st August 1999, as alleged. He has also pleaded that

Subhash Chander had asked for several documents by his

communication dated 29th June 1999 and the request had

been reiterated on 7th August 1999, and as the said

documents had not been supplied, he had advisedly stayed

away from the arbitration proceedings. It has also been

submitted that as per the family arrangement dated 21st July

1998, the sole learned arbitrator was Shri Hans Raj Dang and

in his absence Dr. Amar Nath Kumar and that there was no

evidence to show that the former had, at any stage, been

approached to assume the role of arbitrator and as such the

very initiation of proceedings before the latter was not in

order. He has also pleaded that in any case the 12

presumptions, if any, raised on account of Section 3 of the Act

had been dispelled by the certificate dated 26th August 2003

issued by the Manager of Hotel Shakti, Allahabad to the effect

that Subhash Chander Aneja had checked into the hotel at

8.10 a.m. on 30th August 1999 and had checked out

on the 31st of August 1999 at 8.35 p.m. to submit that on both

dates when the postman had allegedly visited the premises of

Alka Cinema in Noida, Subhash Chander Aneja had been in

Lucknow and the postman's statement was, thus, a complete

lie. Mr. Ranjeet Kumar has placed reliance on Tecco Trichy

Engineers (supra) and, in addition, on Oil & Natural Gas

Corporation Ltd. Vs. Saw Pipes Ltd. (2003) 5 SCC 705 in

support of his submissions.

5. We have heard the learned counsel for the parties and

gone through the record. We reproduce herein-under Section

3 of the Act:

"Sec.3. Receipt of written communications. -(1) Unless otherwise agreed by the parties-

(a) any written communication is deemed to have been received if it is delivered to the addressee personally or at his place of 13

business, habitual residence or mailing address, and

(b) if none of the places referred to in clause (a) can be found after making a reasonable inquiry, a written communication is deemed to have been received if it is sent to the addressee's last known place of business, habitual residence or mailing address by registered letter or by any other means which provides a record of the attempt to deliver it.

(2) The communications is deemed to have been received on the day it is so delivered.

(3) This section does not apply to written communication in respect of proceedings of any judicial authority."

6. A bare perusal of the aforesaid provisions would reveal

that if a written communication is delivered to the addressee

personally at his place of business, it shall be deemed to have

been received by him on the day it was delivered. Admittedly,

a copy of the award had been sent to Subhash Chander at the

Alka Cinema which was, in fact, the property which was the

subject matter of the partnership business between the 14

parties. In this view of the matter, the statement of the

postman Dharam Pal becomes extremely relevant wherein he

deposed that on the 30th August 1999, Subhash Chander had

not been present in the cinema premises and that on the next

day he had refused to receive the communication even when

tendered to him which fact had been endorsed by him on the

envelope which had then been returned to the sender.

We are, thus, of the opinion that by virtue of sub-clause (a) of

Section 3 (1) read with Section 3(3), a presumption that the

document had indeed been delivered is writ large on the facts

of the case. Mr. Ranjeet Kumar has, however, drawn our

attention to the certificate issued by Hotel Shakti. We find

that this document is dated 26th August 2003 that is about

four years after the event. Moreover, it is significant that in

the objections filed in the executing court, no reference

whatsoever had been made to this communication and, even

more significantly, it had been produced in the Executing

Court for the first time during the course of arguments. We

are, therefore, of the opinion that this document is an

afterthought and created with the object of strengthening the 15

submission that the copy of the award could not have been

delivered to Subhash Chander as he had been absent from the

cinema on the two crucial dates.

7. Mr. Ranjeet Kumar's reliance on Tecco Trichy

Engineers case (supra) to our mind is tenuous. In this

matter, the Southern Railways had entered into a contract

and a dispute having arisen, the matter was referred to

arbitration. The Tribunal gave its award on the 10th

March 2001/11th March 2001 and a copy of the award was

delivered in the office of the General Manager, Southern

Railway on 12th March 2001 and an acknowledgement of its

receipt was given by some clerk. On 10th July 2001, the Chief

Engineer presented an application for setting aside of the

award and also an application for condonation of delay under

Section 34(3) of the Act. The application for condonation of

delay was contested by the contractor as being beyond

limitation. The objection found favour with the learned Single

Judge of the High Court who rejected the application holding

it as barred by limitation. This decision was upheld by the

Division Bench leading to the filing of an appeal in this Court. 16

This Court set aside the aforesaid judgment and while doing

so observed that the Ministry of Railways was a very large

conglomerate with several divisions and sub-divisions headed

by senior officers and the General Manager being at the apex

of the administration of the division was responsible for laying

down the policy and taking broad strategic decisions and was

not involved in the day-to-day management and operations of

the different departments and that it was only departmental

head, who was directly connected with a particular dispute

who would know what the matter was about. This is what the

Court had to say:

7. It is well known that the Ministry of Railways has a very large area of operation covering several divisions, having different divisional heads and various departments within the division, having their own departmental heads.

The General Manager of the Railways is at the very apex of the division with the responsibility of taking strategic decisions, laying down policies of the organisation, giving administrative instructions and issuing guidelines in the organisation. He is from elite managerial cadre which runs the entire organisation of his division with different departments, having different departmental heads. The day-to-day management and operations 17

of different departments rests with different departmental heads. The departmental head is directly connected and concerned with the departmental functioning and is alone expected to know the progress of the matter pending before the Arbitral Tribunal concerning his department. He is the person who knows exactly where the shoe pinches, whether the arbitral award is adverse to the department's interest. The departmental head would naturally be in a position to know whether the arbitrator

has committed a mistake in understanding the department's line of submissions and the grounds available to challenge the award. He is aware of the factual aspect of the case and also the factual and legal aspects of the questions involved in the arbitration proceedings. It is also a known fact and the Court can take judicial notice of it that there are several arbitration proceedings pending consideration concerning affairs of the Railways before arbitration. The General Manager, with executive workload of the entire division cannot be expected to know all the niceties of the case pending before the Arbitral Tribunal or for that matter the arbitral award itself and to take a decision as to whether the arbitral award deserves challenge, without proper assistance of the departmental head.

9. In the context of a huge organisation like the Railways, the copy of the award has to be received by the person who has knowledge of the 18

proceedings and who would be the best person to understand and appreciate the arbitral award and also to take a decision in the matter of moving an application under sub-section (1) or (5) of Section 33 or under sub-section (1) of Section 34.

10. In the present case, the Chief Engineer had signed the agreement on behalf of the Union of India entered into with the respondent. In the arbitral proceedings the Chief Engineer represented the Union of India and the notices, during proceedings of the arbitration, were served on the Chief Engineer. Even the arbitral award clearly mentions that the Union of India is represented by the Deputy Chief Engineer/Gauge Conversion, Chennai.

The Chief Engineer is directly concerned with the arbitration, as the subject-

matter of arbitration relates to the department of the Chief Engineer and he has direct knowledge of the arbitral proceedings and the question involved before the arbitrator. The General Manager of the Railways has only referred the matter for arbitration as required under the contract. He cannot be said to be aware of the question involved in the arbitration nor the factual aspect in detail, on the basis of which the Arbitral Tribunal had decided the issue before it, unless they are all brought to his notice by the officer dealing with that arbitration and who is in charge of those proceedings. Therefore, in our opinion, service of the arbitral award on the General Manager by way of receipt in his 19

inwards office cannot be taken to be sufficient notice so as to activate the department to take appropriate steps in respect of and in regard to the award passed by the arbitrators to constitute the starting point of limitation for the purposes of Section 34(3) of the Act. The service of notice on the Chief Engineer on 19-3-2001 would be the starting point of limitation to challenge the award in the Court.

11. We cannot be oblivious of the fact of impersonal approach in the government departments and organisations like Railways. In the very nature of the working of government departments a decision is not taken unless the papers have reached the person concerned and then an approval, if required, of the competent authority or official above has been obtained. All this could not have taken place unless the Chief Engineer had received the copy of the award when only the delivery of the award within the meaning of sub-section (5) of Section 31 shall be deemed to have taken place.

As would be evident, no analogy between the case before us

and the above cited case exists. The second judgment relied

upon by Mr. Ranjeet Kumar i.e. Oil & Natural Gas

Corporation Ltd. Vs. Saw Pipes Ltd. (2003) 5 SCC 705 20

deals with the general policy pertaining to certain kinds of

arbitration agreements and has nothing to do with the

question posed before us. We, therefore, find that Mr. Ranjeet

Kumar's arguments based on these two cases are misplaced.

8. A discussion on this aspect would be incomplete without

a reference to the obstructionist attitude of Subhash Chander

during the course of the arbitration proceedings. It is

significant that though the execution of the family

arrangement has been denied, the fact of the partnership deed

qua Alka Cinema has not been denied. It is also clear that

the cinema was under the complete and effective control of

Subhash Chander and is now under the control of his legal

representatives and that nothing has been paid to Kailash

Rani on account of the income of the partnership. It has been

submitted by Mr. Ranjeet Kumar that Subhash Chander had

not appeared before the arbitrator as the documents referred

to in the statement of claim had not been supplied despite

several requests. Some facts, however, bear re-capitulation

and they would be best put as in the award wherein the

arbitrator observed as under:

21

"In pursuance of the Arbitration Clause, Smt. Kailash Rani Dang, since she was aggrieved by the acts and omissions of Shri S.C. Aneja referred the matter to the Arbitration of Shri Hans Raj Dang who refused to arbitrate due to his illness and other personal reasons by means of his letter dated 7.7.1999.

Accordingly, Smt. Kailash Rani Dang, referred the matter to my arbitration by means of letter dated 12.7.99.

I, there upon entered into the reference and by means of letter dated 17.7.99 called upon Smt. Kailash Rani Dang to send or to file a detailed statement of her claims before me latest by 25.7.99 and send a copy thereof to Shri S.C.Aneja through registered post. Shri S.C.Aneja was also called upon to send or file the reply of statement of the claim by 2.8.99. I also fixed 8.8.99 as the date of hearing at 11 A.M. at the following address:

KH-219, New Kavi Nagar, Ghaziabad (U.P.).

Smt. Kailash Rani Dang filed her statement of claim in time and sent a copy thereof to Shri S.C.Aneja by registered post.

However, Shri S.C.Aneja did not send any reply to the statement of claim. By means of letter dated 29.7.99 addressed to Smt. Kailash Rani Dang along with copy endorsed to me, Shri 22

S.C. Aneja acknowledged the receipts of the letters regarding statement of claim etc., but requested Smt. Kailash Rani Dang to send him the Photostat certified copies of the family arrangement and the partnership deed to him as well as to his wife.

Later on by means of letter dated 7.8.99 M/s. Sen & Sen Advocates on behalf of their client S.C.Aneja requested to supply the documents to their client while acknowledging 8th Aug.99 as the date of hearing and requested to refer the arbitration proceeding till the documents are received by their client.

It will not be out of place to mention here that by means of letter dated 2.8.99 sent through speed post addressed to Shri S.C.Aneja and copy endorsed to me, Smt. Kailash Rani Dang informed that the documents shall be produced before the Arbitrator and that Shri S.C. Aneja is free to inspect and get the copies from Dr.Amar Nath Kumar on that date i.e. 8.8.99 accordingly.

Inspite of the full information and knowledge about the date fixed hearing i.e. 8.8.99 Shri S.C.Aneja remained absent on the date and did not appear to participate in the proceeding or to obtain copies of the documents Smt. Kailash Rani Dang remained present on that date, I also waited upto 2 p.m., but in vain.

23

To give one more opportunity to Shri S.C. Aneja I fixed another date i.e. 25.8.99 as the next date of hearing specially mentioning therein that Smt. Kailash Rani Dang has offered to supply to Shri S.C.Aneja copies of the documents relied upon by her on the next date of hearing i.e. 25.8.99 in my presence as Arbitrator. By means of letter dated 8.8.99 sent through Speed Post.

And I also fixed the following Venue as the place of hearing at 11 a.m. on 25.8.99:-

14, Old Navyug Market, Ghaziabad (U.P.).

A copy of the said letter was also sent to Sen & Sen Advocates and Consultants, B-12, Nizamuddin West, New Delhi with reference to their letter dated 7.8.99.

On 25.8.99 Smt. Kailash Rani Dang appeared and filed the following documents in support of her claim:

1. Partnership deed in original dated 7.6.1995.

2. Family arrangement in original dated 21.7.1998

3. Copy of affidavit filed by Shri S.C.Aneja in the High Court.

24 4. Copy of letter of reference dated 2.7.99 to Shri Hans Raj Dang.

5. Copy of letter of Shri Hans Raj Dang dated 7.7.99 expressing his inability to arbitrate.

I waited upto 2 p.m. on 25.8.99 for Shri S.C.Aneja to appear but nobody appeared on his behalf. Thus, it is established that Shri S.C.Aneja only wanted to delay the proceedings and he deliberately absented himself in the hearing and accordingly, I was left with no option but to proceed/continue with the arbitration proceedings in his absence."

Nothing more needs be said about Subhash Chander's

conduct in the face of these serious indictments by the

arbitrator.

9.In view of the above observations, and the fact that no

misconduct has been alleged against the arbitrator, we must

take it as proved that Subhash Chander had deliberately

stayed away from the arbitration proceedings in order to

frustrate and delay the claim of Kailash Rani. 25

10. Mr. Ranjeet Kumar, as already indicated above, has also

challenged the very appointment of the arbitrator and has

referred us to the family arrangement under which Shri

Hans Raj Dang had been named as the sole arbitrator and

on his refusal Dr. Amar Nath Kumar, to suggest that as no

request had been made to Shri Hans Raj Dang and as there

was no refusal on his part, the appointment of the alternate

arbitrator was not justified. This matter has been dealt with

by the arbitrator in his award, but we have re-examined the

matter ourselves. We find from the record that Kailash Rani

had addressed a letter dated 2nd July 1999 to Shri Hans Raj

Dang to arbitrate in the dispute and, he had, by his letter

dated 7th July 1999, refused to accede to the request

because of ill health and that a copy of this letter had also

been endorsed to Subhash Chander. Faced with this

situation, Kailash Rani had written letter dated 12th July

1999 requesting Dr. Amar Nath Kumar to act as the

arbitrator which request had been accepted. The facts

stated above have not been denied by Subhash Chander at

any stage. It must, therefore, be taken that the aforesaid 26

communications had indeed been exchanged. Moreover,

even assuming that the family arrangement dated 21st July

1998 had not been executed and a dispute on facts had to

be raised, Subhash Chander ought to have done so before

the arbitrator and a boycott of the proceedings was

unjustified. We, therefore, find no flaw whatsoever in the

conduct of the arbitration proceedings by Shri Amar Nath

Kumar.

11. The judgment of the High Court cannot, to our mind, be

sustained. We, accordingly, allow Civil Appeal No. 7258 of

2008 arising out of SLP) No. 1958 of 2008, set aside the

judgment of the High Court and restore that of the Executing

Court dated 31st October 2006. Civil Appeal No. 7257 of 2008

arising out of SLP) No. 1957 of 2008 is rendered infructuous.

There will be no order as to costs.

.................................J. (DALVEER BHANDARI)

..................................J. (HARJIT SINGH BEDI) New Delhi, Dated: December 12, 2008