Supreme Court Modifies Arbitral Award in Family Property Dispute: Balwant Singh vs. Dungar Singh (2020)

Case Background

Balwant Singh and Dungar Singh were brothers who had a dispute over the partition of their family properties after the death of their father, Jeet Mal Jain. Instead of pursuing a legal battle, they decided to settle the matter through arbitration. On November 23, 1981, they appointed three arbitrators: Shri Fateh Lal, Kiran Mal, and Sensh Mal, who were also close relatives. These arbitrators were tasked with partitioning the immovable properties, shares, and jewelry. The arbitrators issued an award on the same day, dividing the properties and assets between the brothers. However, disputes arose regarding the implementation of the award.

Timeline

Course of Proceedings

Dungar Singh filed an application before the District Judge to make the arbitral award a rule of the court. Balwant Singh objected to the award. The District Judge dismissed the application, stating that the arbitrators had conducted the proceedings hurriedly and that the award was not clear enough to settle the dispute. The District Judge also noted that Dungar Singh had signed the award much later than the date it was written. Aggrieved by this, Dungar Singh appealed to the High Court of Rajasthan at Jodhpur. The High Court allowed the appeal, stating that the award was given unanimously by the arbitrators and that there was no misconduct on their part. The High Court set aside the order of the District Judge and declared the award to be the rule of the court. Balwant Singh then appealed to the Supreme Court.

Legal Framework

The case was primarily governed by the Arbitration Act, 1940. Section 39(1)(vi) of the Arbitration Act, 1940 allows for an appeal to the High Court against an order of the District Judge refusing to file an arbitration award. The Supreme Court considered the validity of the arbitral award and the subsequent settlement between the parties in the context of this Act. The High Court had overturned the decision of the District Judge, who had refused to make the award a rule of the court.

The High Court’s decision to set aside the District Judge’s order was based on the following reasoning:

• The award was given unanimously by the arbitrators.
• No misconduct was found on the part of the arbitrators.
• The award was based on the materials supplied by the parties and after due deliberation and discussion.
• The arbitrators were close relatives of the parties and were appointed by mutual consent.

Arguments

Appellant (Balwant Singh)’s Arguments:

• Balwant Singh objected to the arbitral award, arguing that the arbitrators had conducted the proceedings in a hurried manner.
• He contended that the award was not clear enough to settle the dispute between the parties.
• He pointed out that the award was written on 23.11.1981, but Dungar Singh signed it much later on 26.07.1982, raising doubts about the authenticity and validity of the award.
• He also argued that the original award was unaccounted for from 23.11.1981 to 26.07.1982.

Respondent (Dungar Singh)’s Arguments:

• Dungar Singh argued that the award was given unanimously by the arbitrators.
• He contended that there was no misconduct on the part of the arbitrators.
• He stated that the arbitrators were close relatives of the parties and were appointed by mutual consent.
• He maintained that the award was based on the materials supplied by the parties and after due deliberation and discussion.

Subsequent Settlement:

• During the proceedings before the Supreme Court, the parties negotiated and agreed to modify the original arbitral award.
• They agreed that in lieu of 50% of the jewelry (40 tolas) that the LRs of Dungar Singh were entitled to, the LRs of Balwant Singh would pay Rs. 10,00,000 within nine months.
• They also agreed that the LRs of Dungar Singh would continue the litigation regarding the land sold by Balwant Singh.

Issues Framed by the Supreme Court

The Supreme Court did not explicitly frame specific issues in the judgment. However, the primary issues that the court addressed were:

1. Whether the arbitral award was valid and could be made a rule of the court.
2. Whether the subsequent settlement between the parties could be incorporated into the arbitral award.

Treatment of the Issue by the Court

Authorities

The judgment does not explicitly cite any specific case laws or books. However, the relevant legal provision considered was Section 39(1)(vi) of the Arbitration Act, 1940, which allows for an appeal to the High Court against an order of the District Judge refusing to file an arbitration award. The court also considered the principles of arbitration and the importance of amicable settlement of disputes.

Judgment

How each submission made by the Parties was treated by the Court?

How each authority was viewed by the Court?

The Court did not cite any case laws. However, it considered Section 39(1)(vi) of the Arbitration Act, 1940 to determine the validity of the High Court’s decision. The Court upheld the High Court’s decision to make the award a rule of the court, emphasizing that the arbitrators were appointed by mutual consent and no misconduct was alleged against them.

The Court modified the arbitral award based on the settlement between the parties. The key modifications included:

• In lieu of 50% of the jewelry (40 tolas), the LRs of Balwant Singh would pay Rs. 10,00,000 to the LRs of Dungar Singh within nine months.
• The LRs of Dungar Singh would continue the litigation regarding the land sold by Balwant Singh.
• The amount of Rs. 9,000 payable by LRs of Dungar Singh to LRs of Balwant Singh was waived.
• The amount of Rs. 12,334 payable by LRs of Dungar Singh to LRs of Balwant Singh was waived.

What weighed in the mind of the Court?

The Supreme Court’s decision was primarily influenced by the following factors:

• Mutual Consent: The arbitrators were appointed by mutual consent of both parties, and they were close relatives.
• Unanimous Award: The arbitral award was passed unanimously by the arbitrators.
• No Misconduct: No misconduct was alleged or proven against the arbitrators.
• Amicable Settlement: The parties had reached a settlement during the proceedings before the Supreme Court, indicating their willingness to resolve the dispute amicably.
• Fairness and Equity: The Court aimed to ensure a fair and equitable resolution of the property dispute.

Logical Reasoning:

The Supreme Court considered the validity of the arbitral award, the High Court’s decision, and the subsequent settlement between the parties. The Court’s decision was influenced by the fact that the arbitrators were appointed by mutual consent and no misconduct was alleged against them. The Court also emphasized the importance of amicable settlement of disputes and modified the award based on the agreement between the parties.

The Court did not consider any alternative interpretations that would have led to a different outcome. The Court’s primary focus was to uphold the validity of the arbitral award and incorporate the subsequent settlement between the parties, ensuring a fair and equitable resolution of the dispute.

The final decision was reached by modifying the arbitral award based on the settlement agreement between the parties. This decision was based on the principle that the parties are free to settle their disputes amicably, and the Court will facilitate such settlements.

The Court’s decision was based on the following reasons:

• The arbitrators were appointed by mutual consent.
• The award was unanimous.
• No misconduct was alleged against the arbitrators.
• The parties had reached a settlement during the proceedings before the Supreme Court.

The Court quoted the following from the judgment:

• “It can be seen from the terms of reference dated 23.11.1981 that the parties had agreed that the arbitral award would be passed unanimously by the arbitrators and the same would bind the parties.”
• “Having regard to the fact that the parties have consented for the arbitrators to consider their claims and pass the award, the High Court rightly set aside the order of the District Judge holding that the award has been passed after due consideration.”
• “In view of further settlement arrived at between the parties, with the consent of the parties, the award shall stand modified…”

Key Takeaways

• Arbitral awards can be modified by the court based on subsequent settlements between the parties.
• Courts encourage amicable settlement of disputes and will facilitate such resolutions.
• The mutual consent of parties in appointing arbitrators is a significant factor in upholding the validity of an arbitral award.
• Absence of misconduct on the part of arbitrators strengthens the validity of an arbitral award.
• The Supreme Court’s decision sets a precedent for modifying arbitral awards based on mutual agreements between parties.

Directions

The Supreme Court directed that:

• The arbitral award was modified as per the settlement between the parties.
• The LRs of Balwant Singh were to pay Rs. 10,00,000 to the LRs of Dungar Singh within nine months in lieu of 50% of the jewelry.
• The LRs of Dungar Singh were to continue the litigation regarding the land sold by Balwant Singh.
• The Registry was directed to draft the decree accordingly, with the chart in Para No.(8) forming part of the decree.

Development of Law

The ratio decidendi of this case is that an arbitral award can be modified by the court based on a subsequent settlement between the parties. This decision reinforces the principle that courts will encourage and facilitate amicable resolutions of disputes. The judgment does not introduce any new legal principles but clarifies the court’s power to modify arbitral awards in light of subsequent settlements. This is a departure from the strict interpretation of the arbitral awards.

Conclusion

In conclusion, the Supreme Court modified the arbitral award based on a settlement reached between the parties during the proceedings. The Court upheld the validity of the arbitral award, noting that the arbitrators were appointed by mutual consent and no misconduct was alleged against them. The Court’s decision emphasizes the importance of amicable settlement of disputes and sets a precedent for modifying arbitral awards based on mutual agreements between parties. The Supreme Court’s decision facilitated the resolution of a long-standing family property dispute, demonstrating the court’s willingness to support amicable settlements while respecting the arbitration process.