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G. Sathyan v. B. Vasudevan and Ors. - (High Court of Madras) (21 Nov 2016)

High Court having supervisory jurisdiction under Arbitration Act not expected to sit on appeal against Arbitral Award



In instant case, Arbitrator passed the Award, thereby winding up partnership firm and to settle accounts of the firm between parties in terms of Sections 46 and 48 of Indian Partnership Act, 1932. Further, ordered that assets of partnership firm is to be sold to highest bidder in auction to be held between Appellant and First Respondent and successful bidder is permitted to continue same business of firm using assets and goodwill of said firm after apportionment of sale proceeds as indicated in the Award. Aggrieved by said Arbitral Award, Appellant preferred an Original Petition before this Court in O.P. No. 553 of 2011 and Single Judge dismissed the said O.P, by confirming impugned Award. Aggrieved by said order, this Original Side Appeal has been preferred.

As per Section 36 of Arbitration and Conciliation Act, 1996, Award passed under this Act shall be enforced in accordance with provisions of Code of Civil Procedure, 1908 in same manner as if it were a decree of a Court. In Award, it has been specifically ordered that, assets of firm are to be sold through appropriate Civil Court by either party executing the Award under Section 36 of Act, 1996. In Award, it has been clearly directed that, assets of partnership firm is to be sold to highest bidder in auction to be held between partners of firm, viz,, Claimant and Respondent and auction for sale of assets of firm shall be confined only to Claimant and Respondent. Therefore, before Executing Court, both Appellant and First Respondent can bid and highest bidder will be entitled to assets of partnership firm.

It is now well settled that even the final decree can straight away be passed. In this case, the learned Arbitrator passed the Award, to settle the assets between the partners after dissolution of the partnership firm. It is left to the Executing Court under Section 36 of Act, 1996 to conduct auction between the partners and to sell the assets of the firm to the highest bidder. Arbitrator after considering the entire facts and materials, including the non- adherence of the Memorandum of Understanding by both the parties, directed assets to be sold in auction between the partners after dissolution of the firm under Sections 46 and 48 of the Indian Partnership Act,1932.

Courts jurisdiction to decide the Award is circumscribed by provisions of Section 34 of Act, 1996. The Act, 1996 makes provision for the supervisory role of courts, for review of the arbitral award only to ensure fairness. The court cannot correct the errors of the Arbitrator. It can only quash the Award leaving the parties free to begin the arbitration again if it is desired. Therefore, the High Court having supervisory jurisdiction under Section 34 of Arbitration and Conciliation Act, 1996 is not expected to sit on appeal against the Arbitral Award. Court held that, there is no reason to interfere with the orders of the learned single Judge, confirming the Award passed by the learned Arbitrator.

Relevant : Sections 34, 36 of Arbitration and Conciliation Act, 1996, Sections 46 and 48 of Indian Partnership Act, 1932


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