LexJIVARAJBHAI UJAMSHI SHETH AND OTHERS versus CHINTAMANRAO BALAJI AND OTHERS
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1963 R.P. Kapur Y. Union of India and Anr. 480 SUPREME COURT REPORTS [1964] I would therefore dismiss the appeal. ORDER In accordance with the opinion of the majority the appeal is allowed with costs in this Court and in the High Court. 1963 JIVARAJBHAI UJAMSHI SHETH AND OTHERS Nov.19 v. CHINTAMANRAO BALAJI AND OTHERS (A.K. SARKAR, M. HIDAYATULLAH AND J.C. SHAH, JJ.) Arbitration-Partnership Agreement-Arbitration clause-For- mula of valuation on dissolution-Arbitrator appointed by deed of reference-Validity of award questioned-Grounds on which award can be set aside-Error apparent on the face of 1he records- Arbitrator exceeding jurisdiction-Validity of Award-Severability- Indian Arbitration Act, 1940 (X of 1940), s. 30. The appellants and the respondents entered into a partnership in the business of manufacturing bidis. Under the agreement a partner was entitled to retire after giving notice of six months to all partners. It contained a clause for reference of disputes between the partners relating to the business or dissolution of the firm to arbitration. It also contained a clause providing how four items including goodwill should be valued. According to this clause goodwill was equal to five years net profits for, debts due to the firm were to be taken not at their book value but at 85 % of that value, stocks of raw materials were to be valued at book value and immovable properties were to be valued at their purchase price or their book value. About two years later the appellants desired to retire from the partnership and a deed of reference was executed and a sole arbitrator was appointed. This provided that the remaining partners shall continue the firm and they shall make full payment to the retiring partners of such amounts in such manner and on such conditions as shall be de- cided upon by the arbitrator. The arbitrator gave the award. He fixed the value of the goodwill of the firm at Rs.32 lakhs including in that amount the "depreciation and appreciation of the property, dead stock and dues to be recovered." The award was filed in the Court under s. 14(2) of the Indian Arbitration Act, 1940. " I .. SS.C.R. SUPREME COURT REPORTS 481 The respondents applied for an order setting aside the award on diverse grounds, two out of which survived for consideration in the present appeal. The first was that the arbitrator in making this award exceeded his jurisdiction because in fixing Rs. 32 lt khs as the value of t.he devisable assets of the firm he included therein the depreciation and appreciation of the property dead stock 1963 Jivara}bhai Ujamshi Sheth and others and outstandings; secondly that the .arbitrator was guilty of mis- v. conduct. The trial court upheld these and certain other objections Chintamanrao and set aside the award. The High Court confirmed the decision Balaji and otherJ of the trial court insofar as it related to the two contentions. The present appeal is on a certificate granted by the High Court. Held: (i) An award made by an arbitrator is conclusive as a judgment between the parties and the court is entitled to set aside an award if the arbitrator has misconducted himself in the proceeding or when the award has been made after the issue of an order by the Court superseding the arbitration or after arbit- ration proceedings have become invalid under s. 35 of the Arbit- ration Act or where an award has been improperly procured or is otherwise invalid under s. 30 of the Act. An award may be set aside by the Court on the ground of error on the face of the award, but an award is not invalid merely because by a process of inference and argument it may be demonstrated that the arbi- trator has committed some mistake in arriving at his conclusion. Champsey Bhara and Company v. Jivraj Balloo Spinning and Weaving Company Ltd., L.R. 50 I.A. 324 and Cruikshank and others v. Sutherland and others, (1923) 92 L.J. Ch. 136, distinguished. (ii) It is not open to the Court to speculate, where no reasons are given by the arbitrator, as to what impelled the arbitrator to arrive at his conclusions. (iii) In the present case the arbitrator ·had included deprecia- tion and appreciation of certain assets in the value of the goodwill which he was incompetent to include by virtue of the limits placed upon his authority by the deed of reference. This was not a case in which the arbitrator has committed an error of fact or law in
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