# SUPREME OOURT REPORTS (1962] ABD"C'L KADIR SHA!lfSUDDIN BUBERE v. MADHAV PRABHAKAR OAK IK. N. WANCHOO, K. C. DAS GUPTA and - **Citation:** [1962] 3 S.C.R. 702 - **Court:** Supreme Court of India - **Decided:** 1962 - **Source:** https://unisonlegal.in/judgment/supreme-court-of-india/supreme-oourt-reports-1962-abd-c-l-kadir-sha-lfsuddin-bubere-v-madhav-prabhakar-2470 - **Pages:** 17 ## Headnote 702 SUPREME OOURT REPORTS (1962] ABD"C'L KADIR SHA!lfSUDDIN BUBERE v. MADHAV PRABHAKAR OAK IK. N. WANCHOO, K. C. DAS GUPTA and J. c. SHAH, JJ.) Arbitrction-All pmon8 intemled in the .ubject matter of di8pule Mt made parti-.-lf diapule could be referred to arbitration-Aaking for accounts-ff amounts lo a/legation of fraud-Arbitration Act, 1940 (X of 1940), 8. 20. An agrel from the judgment and decree. dated April 14/15,1955 of the Bombay Hi"h Court in Appeal from Order No. 28 of 1955. 0 S. B. Sukhthankar, S. N. Andley, Rameshwar Nath and P. L. Vohra, for the o:tppAllant. A. V. Viswanatha Sa.stri and Ganpat Rai, for the respondents. - 1961 Abdul Kadir Shamsuddin Bubert v. hfadhav Prabhakar Oak 1961 Abdul Kadir SJumuuddiri Bubtre v. /1.-fadhav Prabhakar Oak 1Yant""'1 J. 704 SUPREME COURT REPORTS (l9G2) 1961. September 20. The Judgment of the Court was delivered by WANCIIOO, J.-This is an appeal on a. certificate granted by the Bombay High Court. An application was rlled under s. 20 of the Arbitration Aot, No. X of Hl40. (hereinafter referred to as the Act) by the two respondents against tho appellant praying that tho arbitration agreement dated February 27, l!l53 may be filed in court, arbitration be made accordingly, and thereafter a decree in terms of the award made by the arbitrator be p•ssed. The circ11msta.nccs in which the application was made were these. There is a forest in village Done, which belonged to three persons, namely, Madhav Prabhakar Oak, respondent No. l, (hereinafter rcferr0d to as Oak), Ilabaji Chandrarao Rane, uncle of thn second respondent (hcreinaftd a certificate; and '- that is how the matter has come up before us. Learned coun8el for the appellant has urged four points before us, which we have already indicated earlier. We propose to deal with t!IC'se po;nt8 one by one. Re.\l). It is urged that Ambikabai admittedly...._ bas a share in this forest and as she iR no party to~ .. thP. application under s. 20 no reference should be ;narle, ae the entiro dispute arising out of the - ~- "'"' 3 S.C.R. SUPREME COURT REPORTS 709 agreements of October 22, 1948 and May 5, 1952 would not be before the arbitrator. This argument found favour with the trial court but the High Court repelled it holding that Ambikabai's interest was sufficiently represented in arbitration proceedY ings by Anant. If that is so, there could be no objection on this ground to the filing of the arbitration agreement ; but even if that is not so, we are of opinion that that is no ground in the circumstances of this case for not referring the dispute to arbitration in accordance with the arbitration clause in the agreement of February 27, 1953. Babaji had a brother Yeshwant and Anant is his son. It is ,. not disputed that Babaji was holding eight annas share in the forest on behalf of the joint family consisting of himself and his nephew Anant, and his personal share in it was half, i.e., four annas. On his death his personal share would go to his widow Ambikabai while Anant would have the remaining half. Anant sppears to be the eldest mn,le member of the family now alive. Therefore, .'- in a sense the High Court was right in holding that Anant would represent . the entire interest of the joint family which consisted of eight annas share in this forest. But even if this was not so because at one stage at any rate Ambikabai was and the respondents should not be referred to arbitration. The share of Ambikabai as we have already stated above is not in dispute. Ambikabai was not a party to the agreement of February 27, 1953, though she was a party to the agreement dated May 5, 1952. The appellant was also a party to the earlier agreement of May 1952 and knew that Ambikabai had a share in this forest. Even -w so, he entered into the agreement of February 27, 1953, with the two respondents a.nd agreed to the disputes between him and the respondents being referred to arbitration. We fail to see how he can now say that the disputes between him and the 1961 Abdul Kadir Shamsuddin Bubere v. ~ Madhav Prabhakcr Oak Wanchoo .1. 1961 Ablhd Kadir Shamsvddin Bubert v. M adluw Pra>halm Oalc Wane/wo J. 710 SUPitEME COURT REPORTS [1962) respondents should not be referred to arbitration because Ambikabai was not a party to the agreement of February 1953. The reason why Ambikabai did not join in the application under s.20 was that she was not a party to the agreement of February 1953 and could not therefore apply under s. 20; but that is no reason why the dispute between the appelll\nt and the two respondents should not be referred to arbitration, particularly when there is no dispute as to the share of Ambikabai in this forest. All th11t would happen would be that the arbitrator would decide the dispute between the appellant and the respondents and give an award leaving out the share of .Ambikabai, the extent of which is not in dispute. The matter might have been different if the share of Ambikabai was in dispute; but as the share of Ambikabai and it~ extent are not in dispute, the arbitrator can go into accounts and give an award with respect to the parties before him, leaving out the four annas share of Ambikabai. We see no reason why where parties entered into an arbitration agreement of this nature knowing fully well that there was another person who was interested but leaving her out, the court should not send the parties to the forum chosen by them, even if the other person who might be interested and whoso share is not in dispute c&nnot be made party before the arbitrator. We are therefore of opinion that oven if Anant may not be able to represent the interest of Ambikabai in tho arbitration proceedings that will follow in this case, that is no reason for not giving effect to the arbitration clause in the agreement of February 27, 1~53 as between the parties to that agreement. The contention therefore of the appellant on this point must fail. Re.(2). It is true that in the application under s. 20 the respondents have· asked for tho agreement of February 27, 1953 to be filed in court and the dispute in connection with that agreemont and tho ttgreement of October 22, Hl48 to be referred tu I '~ • '' - ..... y - -- 3 S.C.R. SUPREME COURT REPORTS 711 arbitration, and have not specifically asked for reference of the agreement of May 5, 1952, even though it was included in the agreement of February 1953. But as already indicated, the agreement of May[1952 is merely in confirmation of the agreement of 1948 and when the arbitrator goes into the dispute between the parties he will necessarily have to refer to the agreement of May 1952, so far as it is relevant. The agreement of May 1952 had to be entered into because of the death of Babaji. It is merely supplementary to the main agreement which is of October 22, 1948. In the circumstances when the dispute is referred to the arbitrator under the agreement of February 1953 with respect to the agreement of October 1948, the arbitrator will be entitled to look into the confirmatory agreement of 1952, for the main agreement was that of October 1948. We agree with the view of the trial court in this connection that the pleadings in muffasil courts cannot be considered too strictly; even thB' trial court was prepared in case the matter should be referred to arbitrator to ask the arbitrator to consider also the agreement of May 1952. The agreement of . May 1952 would have to be considered by any arbitrator who is going into the dispute arising out of the agreement of October 1948. In the circumstances we are of opinion that it cannot be said that the reference desired in this case is piecemeal and split up the case of action. The contention of the appellant on this score must also fail. Re. (3). The oontention under this head is that the dispute flought to be referred was not covered by the arbitration clause. We have already set out the arbitration clause and as we read it we find it is of very wide import. It provides for reference to arbitration of all disputes arising out of agreements of October 22, 1948, May 5,1952 and February 27, 1953. It also provides for reference of an· diaputes arising out of the jungle 1961 Abdul Kadir Shamsudtiin Bublre v. M atihav Prabhakar Oak 1981 Abdul Iradr Shamsuddin Bubert V, lfodhatJ Prabha!.ar Oak w '"'"'"" J. 712 SUPREME COURT REPORTS [1962] cutting or export or in any othor way. In view of this wide language of the arbitration clause it cannot be possibly said that the dispute which has been raised in the present case is outside the terms of tho arbitration clause. Reliance in this connec· tion was however placed on the opening words of cl. 6 of thB agreement of February 1953, which Ray that tho agreement was arrived at "without prejudice to the cont<.mts of the letter sent by tho first party (namely, the appellant) to the second and third parties (namely, the respondents) on the date 7th of February, 1953, and without the first party (namely, tho appellant) withdrawing the said letter". This lotter contained cortain contentions of the appellant based on the agreements between the parties. Those words do not in our opinion in any way cut down the wide amp· litude of the arbitration clausr; at the best they can only mean that the appellant was free to raise the contentions which ho had ruised in this letter for the decision of tho arbitrator. Nor do these words confine the agreement of February 1953 only to the dispute arising out of the agree· ment with .Divka.r as contended for on behalf of the appellant. Wo arc theroforo of opinion that the dispute raised in this case is covered by tl1e arbitration ola.use, and the contention of the a.ppollant in this behalf must also fail. Re. (4). \Ve now turn to tho question of fraud. Tho contention on behalf of the appell.a.nt in this connection is that sorious allegations of fraud ha Vtl been made against him and therefore thi~ is not a. case which should be referred to arbitratiou. Sub-section ( 4) of s. 20 lays down that where no sufficient cause is shown, the court she.II order tho agreement to be filed and make an order of reference to tho arbitrator. It is therefore open to 11. court under this sub-section, where sufficient ca.use is shown not to order the agreement to be filed and not to make a reference to the arbitrator. Tho words of this sub-section li:ave a wide a court to take tho matter out of the forum which the parties themsolvee have chosen. This to our mind is clear even from the decision in Russel's case(•). In that case there were allegations of constructive and (I) [1942] A. C.130. (2) A. J. R. 1924 Cal. 796. (3) I. L. R .(1942) 21Patna544. (4) l.L. R' (1953) I All. 423, (l) A.l.R.1954. cal. 281. (6) l1880] 14 Cb. D. 471. - ·' ... - y ,. .,>- - 3 S.C.R. SUPREME COURT REPORTS 715 &ctual fraud by one brother against the other and it was in those circumstances that the court made the observations to which we have referred above. Even so, the learned master of the :Rolls also observed in the course of the judgment at p. 476 as follows:- "Why should it be necessarily beyond the purview of this contract to refer to an arbitrator questions of account, evert when those que&tions do involve misconduct amounting even to dishonesty on the party of some partner ? I do not see it. I do not say that in many cases which I will come to in the second branch of the case before the Court, the Court may not, in the exercise of its discretion, refuse to interfere; but it does not appear to me to follow of necessity that this clause was not intended to apply to all questions, even including questions either imputing moral dishonesty or moral misconduct to one or other of the parties." We are clearly of opinion that merely because some allegations have been made that accounts are not correct or that certain itema are exaggerated and 10 on that is not enough to ind11.ce the court to refuse to make a reference to arbitration. It is only in cases of allegations of fraud of a serious nature that the court will refu1e ·as decided in Russel' 8 ca.~e (1) to order an arbitretion agreement to be filed and will not make a reference. We may in this connection refer to Minifie v. The Railway Passengers Assurance Company ('). There the question was whether certain proceedinas sb.ould be stayed; and it was b.eld that notwithstanding the fact that the issue and the evidence in support of it might bear upon the conduct of a certain persons and of those who attended him and so might involve a question similar to that of fraud or no fraud, that was no ground for refusing stay. It is (I) [1880] 1•-ch. D. 471. (2) (1881)44 L.T. 552. 1961 .Abdul Kadir Shamsuddin Bubere1 •• Madhav Prabhakar Oak Wanclio1 J. 1961 AidtJ Kadfr Sha1111uddin Bubtre v. Afatihav Prahhak4r Oak · Wanchoo ]. ilG SUPREME COUH,T REPORTS [19u2J only when serious allegations of fraud are made which it is desirable should be tried in open court that a court would bo justified in refusing to order the arbitration agreement to be filed and in refusing to make a reference. I.et us therefore turn to the allegations in this case to see :\·hat their nature is. Those allegations arc that (i) the accounts were not made up to date, and even on demand by the respondents, tho appellant did not bring thorn up to date; (ii) tho statements of aceoun•s which were shown by the appelI:mt w<"re not complete and did not appear to be correct; and (iii) the w holo stock of goods was not to be found therein and the debit items appeared to be exaggerated and incorr<>ct. Thrse were tho only a.llegat1nns with respect to the accounta in the application and they do not in our opinion amount to serious allegations of fraud against the appellant which won Id necessitate that 'there should be a trial in open court. Such allegation as to the correctness or ot.hcrwise of <>ntries in tho accounts arc often made in accounts suits; but they in our opinion are not such serious allegations of fraud as to induce a court to order that tho arbitration agreement should not be filed and no reference should be made. Besides these allegations /18 to accounts tho respondents also said that an injunction should be granted restraining the appellant from removing the stock so as to avoid misappropriation thereof pending the appointment of a re- ('Civer. That was not an actual allegation of misappropriatien; it merely said that the respondents were afraid that there might be misappropriation in future unless an injunction was issued and a receiver appointed. :Further in the .affidavit in support of the application for appointmcnt of receiver after referring to their own conclusions from the state of accounts, tho respondents said that they had not received the true and complete account of the felling of tho jungle, ready goods, the goods 11old and tho goods in balance from the appellant. . . - > 3 8.C.R. SUPREME COURT REPORTS 717 They also said that they suspected that on their conclusions from the accounts supplied to them, there might be misappropriation of the goods and of money. They further alleged that in the accounts shown to them, the sale of charcoal was shown at a rate much lower than the prevailing market rate and under these circumstances the respondents apprehended that if the work of the sale of goods remained in the hands of the appellant, the real price of the goods would not be realised. There is no allegation, however, that in actual fact the appellant had made secret profits by selling goods at a higher price and showing a lower price in the acc:mnt. The respondents pointed to the entries in the account which showed the lower rate of the sale price in support of their apprehension tha.t if the work of sale of goods remained in the hand of the appellant the real price would not in future be realised. A perusal therefore of the application under s. 20 and the affidavit filed in support of the application for appointment of receiver does not disclose any serious allegations of fraud against the appellant. What it discloses is that the respondents were not satisfied with the accounts submitted to them and were suspicious that they did not disclose the true and complete state of affairs. Such allegations, as we have already remarked are often made in account suits and if they were to be sufficient grouml for not referring an account suit to arbitration on the ground of fraud, hardly any arbitration agreement in a matter in which accounting would be necessary could be referred to arbitration. That is why we emphasise that even in the leading case of Russel, (1) the learned Master of the Rolls was at pains to point out that it could not necessarily be ~aid in a case of accounts that no reference to arbitration should be made, even though questions relating to accounts which might involve misconduct amounting even to dishonesty on the part of some partner might arise in the arbitra.tion proceedings and even cases where moral dishonesty or moral misconduct is attributed to one party or the other might be (I} [1880] 14 Ch. D. -i71. 1961 Abdul Kadir Shammddin Bubert v. Matlhav Prabha~ar O;k Wanciw<> J. Abdul Kadir Sliamswidfo Bohm V. M adhat. Prabhakar Oak lVancl.Oo J. &pttmbtr 20. 718 SUPREME COURT REPORTS [1962) referred to arbitration. It seems to us that every allegation tending suggest or imply moral dishonesty or moral misconduct in tho matter of keeping accounts would not amount to Ruch serious allet'ation of fraud as would impel a court to refuse to order the arbitration agreement to be filed and refuse to make a reforence. Looking to the allegations which have made in this case we aro of opinion that there are no such serious allegations of fraud in this case P.S would ho sufficient for the court to say that thcro is sufficient causo for not referring tho dispute to arbitration. This contention of the appellant must also therefore fail. The appeal therefore fails and is here by dism isscd with cost a. Appeal dismissed. :IIOOL CHAND SHARMA ti. STATE OF UTTAR PRADESH (B. P. SINHA, C.J., P. B. GAJENDRAOADKAR and RAGHUBAR DAYAJ,, JJ.) Municipal Board-.Mnnber-lncurring of di~qualificaliot> lf an