Holding

An arbitral award can be set aside only if a party shows that a breach of natural‑justice principles, such as lack of reasonable notice, caused real prejudice; mere procedural irregularities without prejudice do not invalidate the award.

Summary

The case involved a dispute between two family groups over shared assets, which was referred to a sole arbitrator who issued two awards. Seven members of one group objected, claiming they had not received reasonable notice and that the arbitrator’s request for a letter not to challenge the award violated natural justice. The Supreme Court held that parties are entitled only to a reasonable opportunity to present their case, not an absolute right to be consulted on every procedural matter, and that the arbitrator may manage hearings by directing attendance. To set aside an award, a party must prove both a breach of natural‑justice principles and that such breach caused real prejudice. The Court found that the objector had received notice, participated in the proceedings, and suffered no prejudice; thus the award stood. The appeals were allowed, overturning the lower courts’ orders.

Issues considered

The adequacy of notice given to a party in arbitration proceedings
Whether a breach of natural‑justice principles alone suffices to set aside an arbitral award
The extent of an arbitrator’s discretion to manage hearings and direct parties’ attendance
The requirement to demonstrate prejudice resulting from any procedural irregularity

Legislation cited

Subjects

ArbitrationNatural JusticeReasonable NoticeArbitrator's DiscretionPrejudiceAward EnforcementArbitration Act 1940Section 68 Arbitration Act 1996Section 33 Arbitration Act 1996Section 108 Companies ActSection 50(2) Land Acquisition Act

Judgment

SOHAN LAL GUPTA (DEAD) THR. LRS. AND ORS. A
v.
SMT ASHA DEVI GUPTA AND ORS.

SEPTEMBER I, 2003

[V.N. KHARE, CJ. AND S.B. SINHA, J.]
B

Arbitration Act, 1940

Arbitration proceedings-Reasonable opportunity-Held, every party
entitled to reasonable opportunity-However, party does not have unfettered C
right-Arbitrator has a right ofmanaging the hearing and giving directions
in pursuance thereof-Direction to remain present on particular date, time
and place would be sufficient compliance ofthe requirement of law-Party
has no absolute right to insist on being consulted-Matter within the
discretion ofarbitrator and court will intervene only in the event ofpositive D
abuse-Party alleging violation of principles of natural justice claiming
that no proper notice received-Held, party not only required to show that
proper notice was not given but also to show that serious prejudice was
caused thereby-Jn the facts and circumstances, held, reasonable opportunity
of participation in arbitration proceedings was granted-Principles of E
natural justice-Administrative Law.

Two groups of persons-Group G and Group S held several
properties in which both groups had 50% shares each. Disputes and
differences having arisen between the two groups as also between
family members of the same group, an agreement was entered into for F
referring some of the disputes to a Sole Arbitrator. The Arbitrator gave
two awards, one for division of 50% cumulatively and another for
division among family members of G group. Seven members of G
group including S filed objections to the said awards. Single Judge set
aside the award, inter a/ia, on the ground that no reasonable notice was G
given to S which amounted to violation of principles of natural justice
and that conduct of the Arbitrator in seeking a letter from the parties
in anticipation that they would accept his award makes the award
vulnerable. Appeal filed by appellants was dismissed by the Division
Bench. Hence, these appeals. H
249
250 SUPREME COURT REPORTS [2003) SUPP. 3 S.C.R.

A Appellant contended that notice was issued to all the parties and
a reasonable notice to S in the facts and circumstances of the case
should be inferred; that S had appeared before the Arbitrator earlier
on various dates; that interest of all objectors had sufficiently been
represented before the arbitrator since other objectors participated in
B the arbitration proceedings; and that the letter of the Arbitrator to the
parties seeking a letter that they would not challenge the award did
not vitiate the arbitration proceedings.

Allowing the appeals, the Court

C HELD : I. There cannot be any dispute with regard to the
proposition of law that the parties would be entitled to a reasonable
opportunity of putting their case. For constituting a reasonable
opportunity, the following conditions are required to be observed : (i)
Each party must have notice that the hearing is to take place; (ii) Each
D party must have a reasonable opportunity to be present at the hearing,
together with his advisers and witnesses; (iii) Each party must have the
opportunity to be present throughout the hearing; (iv) Each party must
have a reasonable opportunity to present evidence and argument in
support of his own case: (v) Each party must have a reasonable
opportunity to test his opponent's case by cross-examining his witnesses,
E presenting rebutting evidence and addressing oral agrument; (vi) The
he11ring must, unless the contrary is expressly agreed, be the occasion
on which the parties present the whole of their evidence and argument.
[263-F, 265-8-F)

F Montrose Cannel foods ltd v. Eric Wells (Merchants) ltd., (1965)
1 Lloyd's, Report 597; Henry Southern ltd v. Norwich Union Life Insurance
Society, (1992) 31 E.G. 701 referred to.

Russel on Arbitration 22nd Edition, Paragraph 5-053 referred to.

G 2. A party does not have an unfettered right. The arbitrator can
not only ask a party to comply with procedural orders and directions
including those imposing limits as to time and content of submissions
and evidence but also the arbitrator has a right of managing the
hearing. If the arbitrator is to manage the arbitration proceedings, he
H would be entitled to give direction to the parties to be present on the
S. L. GUPTA v. ASHA DEVI GUPTA 251

particular date, particular time and particular place which would be A
sufficient compliance of the requirement oflaw. A party has no absolute
right to insist on his convenience being consulted in every respect. The
matter is within the discretion of the arbitrator and the Court will
intervene only in the event of positive abuse. If a party, after being
given proper notice, chooses not to appear, then the proceedings may B
properly continue in his absence. (264-F, 266-B, C, 266-E, F)

Montrose Cannel Foods Ltd. v. Eric Wells (Marchants) Ltd., (1965)
1 Lloyd's Report 597 and British Oil and Cake Mills Ltd. v. Horrace
Battin & Co. Ltd., (1922) 13 LI L Rep. 443, referred to.
c
Russel on Arbitration 22nd Edition, paragraphs 5-054 and 5-057,
referred to.

3.1. The principles of natural justice, it is trite, must not be. stretched
too far and cannot be put in a straight jacket formula. In a given case D
the party should not only be required to show that he did not have a
proper notice resulting in violation of principles of natural justice but
also to show that he was seriously prejudiced thereby. (267-C, DJ

Managing Director, ECIL v. B. Karunakar, (1993) 4 SCC 727 and E
U.P. Awas Evam Vikas Parishad v. Gyan Devi (Dead) by L.Rs. and Ors.,
(1995) 2 sec 326, followed.

The Chairman, Board of Mining Examination and Chief Inspector of
Mines and Anr. v. Ramjee, [1997) 2 SCC 256; R.S. Dass Etc. v. Union
of India and Ors., (1986) Supp. SCC 617; State Bank of Patiala v. SK. F
Sharma, [1996) 3 SCC 356; Union of India and Ors. v. Anand Kumar
Pandey and Ors., (1994) 5 SCC 663; MC. Mehta v. Union of India and
Ors. (1999) 6 SCC 237; Graphite India Ltd. and Anr., v. Durgapur Project
Ltd. and Others, [1999) 7 SCC 645; Aligarh Muslim University and Others
v. Mansoor Ali Khan, [2000] 7 sec 529; and State of U.P. v. Harendra G
Arora and Anr., [2001) 6 SCC 392, relied on.

D.L.Mi/ler and Co. Ltd. v. Daluram Goganmull, AIR (1956) Calcutta
361; Khaitan (India) Ltd. & Ors. v. Union ofIndia & Ors., Cal LT (1999)
2 HC 478 referred to. H
252 SUPREME COURT REPORTS [2003] SUPP. 3 S.C.R.

A Administrative Law 8th Edn. by william Wade and Christopher
Forsyth at P. 491 referred to.

3.2. Each party complaining violation of natural justice will have
to prove the misconduct of the arbitral tribunal in denial of natural
B justice to them. He must show that!!~ was otherwise unable to present
his case which would show that the matters were outside his control
and not because of his own failure to take advantage of an opportunity
duly accorded to him. (271-G-H]

Renusagar Power Co. Ltd v. General Electric Co., AIR (1994) SC
C 860 relied on.
Minmetals Germany Gmbh Ferco Steel Ltd, (1999) I All ER (Comn)
315 referred to.

4. The minutes of the arbitration proceedings clearly show that
D not only S had notice of arbitration proceedings but also took active
part therein days after days. The circular letter dated 12.5.1976 was
issued by the arbitrator so as to give a notice of caution that the
arbitration proceedings shall be held and continued at Kolkata. S does
not say that he did not receive the circular letter dated 12.5.1976. He
E did not make out a case that the said dates did not suit him. S does
not say that he had difficulty in appearing on 15.6.1976 or any subsequent
date and he had asked for adjournment. As despite receiving the said
circular letter from the arbitrator, he did not choose to make himself
available on 8.6.1976 at his own, the arbitrator sent him a telegram
F dated 12.6.1976. The said telegram was sent ex abundanti cautela.
(265-G-H, 266-C, D]

5. The ground that the arbitrator had asked the parties to issue
a letter to him that his award shall not be questioned would not render
G the award a nullity inasmuch the same was not acted upon and in fact
no letter was issued. The arbitrator must have done so keeping in view
the particular nature of the disputes and to see that all the disputes
come to an end. (272-C]

6. Keeping in view the facts and circumstances of the case, S
H cannot be said to have been refused a fair opportunity of participation
S. L. GUPTA v. ASHA DEVI GUPTA [SINHA, J.] 253

in the arbitration proceedings. Award given by the arbitrator is made A
rule of the court. Any transaction in regard to property covered by the
award shall be subject to the present decision. (272-8, 274-8)

·- CIVIL APPELLATE JURISDICTION : Civil Appeal No. 2809 of
1979.
B
From the Judgment and Order dated 1.8. 79 of the Culcutta High Court
in A. No. 241 of 1978.

WITH

C.A. No. 2810/79 C.P. (C) No. 484 of 1998 in C.A. No. 2809/79. C
Bhaskar P. Gupta, J.P. Goyal, R.K. Maheshwari, Rishi Maheshwari,
Ms. Shaily Bhasin Maheshwari, Raj Kumar Kaushik, Mis. J.B.D. & Co.,
(NP), Parijat Sinha, Rameshwar Prasad Goyal K.K. Gupta, Varinder Kumar
Sharma, Bijan Kumar Ghosh, B.P. Subha, B.P. Nirbhay, Shrish Kumar
Misra (NP), Gourab K. Banerji, Kaushik Manda!, Ms. Sangeeta Manda!, D
Kapil Chaudhary, Ms. Jayasree Singh, Ms. Swati Sinha, Ms. Sandhya
Goswami (NP), Tarun Johri, Arvind Kumar, Ms. Jaya, C.S. Ashri, P.D.
Sharma, Vijay Kumar Sharma in-peron for Respondent No. 11, Senthil
Jagadeesan, V. Ramasubramanian, J.P. Pandey, D.N. Mishra, Uma Datta
(NP), Chinnasamy (NP), Arun Aggarwal, Pallav Saxena and Rao Ranjit E
(NP) the the a9pearing parties.

The Judgment of the Court was delivered by

S.8. SINHA, J. : What constitutes a reasonable notice by an arbitrator
is the question involved in these appeals which arise out of a judgment F
and decree dated 1.3 .1979 passed by a Division Bench of the Calcutta High
Court affirming an order passed by a learned Single Judge setting aside
an arbitration award.

The basic fact of the matter is not in dispute. Two groups of persons
- one Guptas and another Sharmas - held several properties including G
three firms, six limited companies, one trust and other movable and
immovable assets. Both the groups had 50% shares each. The family
members of the Guptas and Sharmas Groups were interested in many or
in some of the businesses and the firms. The fwnily tree of the Gupta
Group is as under : H
254 SUPREME COURT REPORTS [2003] SUPP. 3 S.C.R.

A GENEOLOGICAL TABLE OF GUPTA GROUP

ll ll JV
Dulichand Sita Ram Balaprnsa Shrila
(Deceased) (Died on 112 75) -Basanti (deceased)-Anari

B
(1) (2) (3)

Motil al Brijmohan Sohanlal
(1) (2) (3)
-Kapuri -Padma Gayatri
I
c Ashok Kail as
-Pushp
Vi nod
-Manjuia
Arun

Rambabu Hari Pd Prem Om Kamal
- Radha - Shanl.lllltala • Asha Prakash

D
Nira1~an Banwari Ganshyam
-Kamla •Vidya -Renu

Disputes and differences having arisen between the two groups as
E also between the family members of the same group, an agreement was
entered into on or about 10.4.1975 for referring some of the disputes to
the arbitration of one Mr. B.J. Bhide. The material parts of said agreement
are as under :

F "I. The parties hereto hereby agree that all disputes differences
between the parties or their representatives concerning or
relating to or touching the said several firms, companies,
assets moveable or immoveable or any act done by the
parties or in regard to their respective rights, duties and
G obligations of the parties hereto or their enforcement which
exist between the parties and also of other disputes and
differences that may hereafter arise between the parties and
be laid by the parties or either of them before he shall make
his award are hereby referred to the Award and final
H determination of Shri P.J. Bhide alias Purshottam Jagannath
S. L. GUPTA v. ASHA DEVI GUPTA [SINHA, J.) 255

Bide, son of Shri J.V. Bhide, residing at No.P-390 Keytolla A
Lane, Calcutta-29.

2. That the said Arbitrator shall have powers to have the
accounts of the said firms and/or companies and/or assets
checked, inspected and/or audited by the Chartered accountant
or by any other person or persons. B
3. That the said Arbitrator shall have powers to formulate and
lay down his own procedure for the conduct of arbitration
proceedings according to law.

4. That the said Arbitrator shall have power to proceed ex parte C
in case the other party fails after reasonable notice to attend
before him.

5. That the said Arbitrator shall have powers to ask for any
paper, documents and/or information from any of the parties D
hereto and to draw adverse inference for non-production
thereof.

6. That the said Arbitrator shall be free to make use of
information, documents, papers received from any source
whatsoever if he considers them relevant to the matter and E
•o this regard his decision will be final.

7. That the Arbitrator shall have powers to apply and employ
his personal knowledge in the matter under reference while
giving his award.
F
8. That the Arbitrator shall have power to award cost and to
ask for periodical deposits towards his own fees and charges,
audit charges and/or other charges from the parties hereto in
the manner he may think fit and proper.
G
9. That the said Arbitrator shall not be required to give any
reasoning for his determination and award.

I 0. That the said Arbitrator shall have powers to give directions
for the running of the business .Jf the said firm and/or
companies including the direction for operation of Banking H
256 SUPREME COURT REPORTS [2003] SUPP. 3 S.C.R.

A Account during the pendency of arbitration proceedings.

11. That the said Arbitrator shall have full power and control
over all the assets, properties, moveable or immoveable of
the said firms and/or companies and shall also have the
powers to dispose of any of them at his discretion, for the
B good and benefit of the said firm.

12. *** *** ***
13. That the arbitrator shall have in his absolute discretion
power to award the dissolution of the various partnership
c firms and to name the date from which such dissolution shall
take effect. He may also provide for the mode of realisation
of the partnership assets and discharging the liabilities and
discharging either by award that the said be done by one of
the partners or by the Receiver to be named by the
D Arbitrator. He may also award which of either of the groups
shall be entitled to continue, carrying on business and upon
what terms as to the price, mode, payment, indemnity and
otherwise. AND he may direct the execution of the each of
the parties hereto of all notices, deeds and documents
whatsoever necessary for giving full effect to his Award.
E
14. Each of the groups within fifteen days of this agreement
shall deliver to either of them and to the said Arbitrator a
full and particular statement of claim in writing of all his
claims and all of the items thereof giving credits for all
F payments, counter claims and deductions and leaving a
margin of at least 2 and Y, inches of each page and shall at
the same time deliver all contracts, documents and papers
thereof that may be necessary to explain the said Account

16. The same course shall be adopted and concerning in the set
G off or the counter claim adduced by either of the parties
against the demands of either of them.

17. The Arbitrator shall be at liberty to employ an Accountant
to whose examination he may submit such account connected
H with the matters hereby referred as she shall think fit. AND
S. L. GUPTA v. ASHA DEVI GUPTA (SINHA. J.] 257

the said Arbitrator may act upon any statement of accounts A
given by such accountant without being obliged to verify the
same.

18. The Arbitrator may have a legal assessor to sit with him and
may act under the advice of such assessor.
B
19. The Arbitrator shall be at liberty at any stage of the
proceedings to state a case for the opinion of counsel or
Court upon any question arising in the course of the
reference and may act upon the opinion so taken.

20. The Arbitrator shall have power to cause such maps plans
c
and measurements valuations to be made and taken as he
shall deem necessary or expedient and the costs and
expenses thereof shall be in the discretion of the arbitrator
and he may accept such valuation as correct and act in terms
thereof. D
*** *** ***
38. Ten days' time shall be considered as reasonable time for
the purpose of doing or complying with any direction of the
Arbitrator." E
The jurisdiction of the Arbitrator was, thus, of wide import.

It is not in dispute that said Shri B.J. Bhide was a Chartered
Accountant and a Tax Consultant. He had been dealing with accounts and F
other matters for and on behalf of the firms and the companies belonging
to the parties. The parties indisputably had great faith and confidence in
him.

During the pendency of the arbitration proceedings, certain disputes
arose as regards management, wherefor also intervention of the arbitrator G
was sought for. Several correspondences passed between the arbitrator and
the parties with which we are not concerned at this juncture.

The arbitrator gave. two awards, which were as regards ( l) division
of 50% cumulatively and (2) the said division among the family members
of the Guptas. H
258 SUPREME COURT REPORTS (2003] SUPP. 3 S.C.R.

A Seven members of the Guptas Groups filed objections to the said
awards including one Ghanshyamdas Gupta. The said Ghanshyamdas
Gupta at the relevant point of time was a resident of Madras. The primary
objections raised by the objectors i.e. as regard validity of the awards
purported to be ( 1) violative of Section 108 of the Companies Act, (2)
B awards made in favour of different persons including friends, relations and
other individuals who were not the parties to the agreement; and (3) that
the arbitrator erred in treating all the disputes in a composite award, were
rejected.

The learned Single Judge although did not set aside the said award
C on the ground of misconduct on the part of the arbitrator but set aside the
said award, inter alia, on the ground of procedural irregularity holding that
no reasonable notice was given to the said Ghanshyamdas Gupta. Before
the learned Single Judge, a further contention was raised that the arbitrator
committed illegality insofar as he sought for a letter from the parties in
D anticipation that they would accept his award. The learned Single Judge
in this behalf was of the opinion :

" .. .In the background of this case, this conduct of the arbitrator,
seeking for such a letter from the parties, in my opinion, makes
the award vulnerable."
E
The appellants herein carried the matter in appeal before a Division
Bench against the said judgment. The Division Bench of the High Court
upheld the findings of the learned Single Judge that Ghanshyamdas Gupta
had not been given a reasonable notice amounting to violation of principles
F of natural justice. The Division Bench also upheld the second finding of
the learned Single Judge holding that the comments of the learned Single
Judge were clearly justified.

On the said findings the appeal was dismissed. Cross objections filed
G bylhe respondent were also dismissed. Aggrieved thereby and dissatisfied
therewith, the appellants are before us.

Before proceeding to consider the rival contentions of counsel for
the parties, we may notice that Ghanshyamdas Gupta filed an Interlocutory
Application in the year 1998 withdrawing his objections. However, he
H engaged another counsel without obtaining a certificate of no objection
S. L. GUPTA v. ASHA DEVI GUPTA [SINHA, J.] 259

from his Advocate on Record for withdrawing the same. We may further A
place on record that keeping in view the fact that the parties are relations
and have a large number of properties, this Court at one stage opined that
the disputes and differences amongst the parties should be amicably settled
and for the said purpose the matter was referred to Hon'ble Mr. Justice
M.K. Mukherjee, a retired Judge of this Court for conciliation. The learned B
Judge, however, failed in his efforts in this behalf and submitted a report
to that effect before this Court in 200 I.

Mr. Bhasker P. Gupta, learned senior counsel appearing on behalf of
the appellants, has raised a short question in support of these appeals. The
learned counsel would submit that the findings of the learned Single Judge C
as also the Division Bench of the High Court that no reasonable notice was
given to Ghanshyamdas Gupta by the arbitrator in terms of the arbitration
agreement suffers from manifest error insofar as the entire fact situation
obtaining in this case had not been taken into consideration. The learned
counsel would submit that the arbitrator was required to submit his award D
by 30.6.1976. He had been holding arbitration proceedings wherein
Ghanshyamdas Gupta had participated from time to time and all the
parties having regard to the enormity of the disputes were directed to
remain present at Kolkata on 8.6.1976 so that the they may be heard and
award may be made on or before 30.6.1976, wherefor a notice was issued E
on 24.5.1976 to all the parties which is in the following terms :

"P.J. Bhide & Co. 7, Waterloo Street,
Chartered Accountants Calcutta-700 069
24.5.76 F

Shri Omprakash Gupta,
Calcutta.
Dear Sir,
G
Re: Finalization of Arbitration Proceedings.

It has been desired by all that the arbitration proceedings
should be completed at the earliest, so that the necessary Award
can be given by the middle ofnext month. · H
260 SUPREME COURT REPORTS (2003] SUPP. 3 S.C.R.
A In this connection, you are directed to furnish to me the
following, at the earliest :-

1. Please submit to me a list of furniture, fixtures, fittings and
other household appliances in possession of yourself and/or
other persons whom you represent belonging to the firm and/
B or Limited Companies in which you are or the others are
partner and/or director. Also state the year in which the same
were purchased and the present market value thereof. Similar
details may please be furnished in respect of car scooter or
cycle, the year of purchase, the make, the present condition
c thereof and the present market value thereof.

2. Kindly furnish to me full description of the buildings and
land under the occupation of a partner and/or his relatives
in your Group and owned by the Firm and/or company as
D mentioned in the Arbitration Agreement dated 28th June,
1975. Kindly also state what in your opinion is the market
value thereof with supporting evidence, if any. Also state
what is the Municipal rateable value of the said buildings and
land.

E 3. As regards plants, factories and branches owned by the said
firms and limited companies, kindly state what in your
opinion is the net worth of each plant factory and branch,
i.e. value of all the assets at the factories which may arise
in future in respect of past dealings.
F
4. Regarding drawings made by the partners or their relatives,
of your Group from partnership firms and/or Limited
Companies, as mentioned in the Arbitration Agreement
referred to above, kindly furnish details of datewise of the
drawings made after I st January 1976 to-date, indicating the
G nature and purpose of such withdrawal. Similar details may
kindly be furnished in respect of credits therein.

5. Drafts of resignation letters from the Directorship of Ltd.
Companies and/or partnership firms and/or from the office
H of Trusteeship are enclosed herewith. Kindly complete
S. L. GUPTA v. ASHA DEVI GUPTA [SINHA, J.) 261

therein the name and address of the Company and/or the A
name and address of the partnership firm in which you or
otherwise whom you represent are Director and/or Partner
and/or a Trustee and return to me the said resignation letters
duly signed by you and/or the others as the case may be,
leaving the date blank. If required, you can have copies B
made of these resignation letters to cover all the persons
represented by you in your Group. Please ensure that these
resignation letters reach me by 5th June, 1976. Arising out
of this, I am arranging to send to you in a day or two Transfer
Deeds which should be signed by you or the other persons C
whom you represent, at the place marked with an "X" in
pencil and witnessed by a known person and returned to me
with the relevant shares scrip of the concerned Limited
Company.

The next meeting in connection with the finalisation of the D
arbitration proceedings will be held in Calcutta on 8th June,
1976. I have a mind to have continuous sittings upto 12th
June, 1975 and declare the Award immediately thereafter.~

You are therefore requested to make yourself available
to Calcutta at the proposed meetings 0n and from the 8th E
June 1976 without fail. Kindly bring with you all the books
of accounts upto-date part pertaining to the branches and/or
companies under your control.

I trust the above programme will suit you and you will F
extend your whole-hearted co-operation to expedite
finalisation of the arbitration proceedings.

Thanking you,

Yours faithfully, G
Sd/- P.J. Bhide & Co.,
Arbitrator.

Enclo: Draft of resignation
Letters for completion and signatures
and return by 5.6.1976." H
262 SUPREME COURT REPORTS [2003] SUPP. 3 S.C.R.

A When Shri Ghanshyamdas Gupta did not reach Kolkata pursuant to
the said circular letter, a telegram was sent to him on 12.6.1976 asking
him to attend the meeting on 15 .. 6.1976. The said telegram reads thus:

"C.No.88 INDIAN POSTS AND
TELEGRAPHS DEPARTMENT.
B
TELEGRAM

88/13
GHAN SHY AMDAS HARANA THRAIKA CARE
c SANSARMA YA MADRAS

x 1905 547 CALCUTTA 12 45

REMYLET 24TH MAY STOP YOU HA VE NEITHER
REACHED HERE NOR REPLIED MY LETTER STOP
D RETURN IMMDTL Y ENCLOSURE TO MY LETTER DULY
SIGNED STOP MEETING FIXED I 5TH AFTERNOON 7
WATERLOO ST. PROCEEDING CONTINUE EX PARTE IF
YOU DON'T A. DON'T ATTEND.

E ARBITRATOR BHIDE
131 547 SANSARMAYA 24 157"

The learned counsel drew our attention to the minutes of the meetings
maintained in the arbitration proceedings and submitted that even if the
F minutes produced before the High Court by the respondents are taken to
be correct; from a perusal thereof it would appear that Ghanshyamdas
Gupta appeared before the arbitrator on 27 .11.1975 at 11 a.m., 27 .1.1976
and 28.1.1976 both in the first session as also in the second session and
on 29.1.1976 at 1.30 p.m. and 4 p.m. It was pointed out that apart from
Ghanshyamdas Gupta, objections were filed by Asha Devi w/o Prem
G Kumar Gupta, Om Prakash Gupta, Kamal Kumar Gupta, Prem Kumar
Gupta, Ram Babu Gupta and Smt. Radha Rani. Our attention has been
drawn to the fact that as Om Prakash Gupta, Ram Babu Gupta and Kamal
Kumar Gupta were present in thP- meeting.dating 15.6.1976 on various
dates in the arbitration proceedings and, thus, the interest of all the
H objectors had sufficiently been represented before the arbitrator.
S. L. GUPTA v. ASHA DEVI GUPTA [SINHA, J.) 263

The learned counsel would contend that even if the decision of the A
Calcutta High Court in [D.L.Miller and Co., Ltd. v. Daluram Goganmull,
AIR (1956) Calcutta 361] is taken to its logical conclusion, a reasonable
notice in the facts and circumstances of this case should be inferred. It
was further submitted that Rambabu Gupta, Kamal Kumar Gupta and Brij
Mohan Gupta attended the meeting also on 19.6.1976. B
Mr. Gupta would urge that the purpo_rted letter of the Arbitrator to
the parties asking them to send a letter to him stating that they would not
challenge the award would not vitiate the arbitration proceedings.

Mr. Parijat Sinha, learned counsel appearing on behalf of Respondent C
Nos. 22 to 32, Mr. Vijay Kumar Sharma, appearing in person and Mr.
Gourab Banerji, appearing on behalf of some members of the Sharma
Group, supported the contentions of Mr. Bhasker Gupta.

Mr. Bijan Kumar Ghosh, learned counsel appearing on behalf of the D
respondents, however, drew our attention to the objections raised before
the learned Single Judge of the Calcutta High Court and submitted that
in the peculiar facts and circumstances of this case, the Court should not
only consider the same de nova but also must take into consideration the
subsequent events. According to the learned counsel, as the cross-
objections filed by the objector-respondents were dismissed by the Division E
Bench without assigning any reason therefor, this Court in the interest of
justice shoula consider the same on its own merits, although no appeal
thereagainst or any cross-objection has been filed by the respondents.

There cannot be any dispute with regard to the proposition of law that F
the parties would be entitled to a reasonable opportunity of putting their
case. [See Montrose Cannel Foods Ltd. v. Eric Wells (Merchants) Ltd.,
(1965] I Lloyd's Report 597]. A reasonable opportunity would mean
that a party must be given an opportunity to explain his arguments before
the Tribunal and to adduce evidence in support of his case. However, G
under the old Act, an oral hearing would only be permitted if a party
requested one, unless there was some agreement to the contrary [See
Henry Southeran Ltd. v. Norwich Union Life Insurance Society, (1992)
31 E.G. 70].

What would constitute a reasonable opportunity of putting case as H
264 SUPREME COURT REPORTS [2003] SUPP. 3 S.C.R.

A also qualification of the right has been stated in 'Russell on Arbitration',
22nd Edition, paragraphs 5-053 and 5-054 which are in the following
terms :

"5-053 A reasonable opportunity of putting case. Each party
must be given a reasonable opportunity to present his own case.
B
This means he must be given an opportunity to explain his
arguments to the tribunal and to adduce evidence in support of
his case. Failure to comply with this requirement may render the
award subject to challenge under section 68 of the Arbitration Act
1996. It is also a ground for refusing enforcement of the resulting
·C award under the New York Convention.

5-054 Qualification of the right. The need to allow a party a
reasonable opportunity to present his case can give rise to
difficulties. To what extent can the tribunal intervene where, for
D example, a party's submissions or evidence is needlessly long,
repetitive, focuses on irrelevant issues or is sought to be made
over an extended period of time? What if a party ignores
procedural deadlines imposed by the tribunal but maintains he still
has points to put before it in support of his case? Inevitably each
E situation has to be dealt with in its own context but the following
general considerations should be taken into account."

There cannot, therefore, be any doubt that a party does not have an
unfettered right. The arbitrator can not only ask a party to comply with
procedural orders and directions including those imposing limits as to time
F and content of submissions and evidence but also the arbitrator has a right
of managing the hearing. In 'Russell on Arbitration', 22nd Edition the
Jaw is stated thus :

"5-057 Managing the hearing. Similarly, a tribunal cannot be
G expected to sit through extended oral hearings listening to long-
winded submissions on irrelevant matters. The tribunal is entitled,
and under section 33 is obliged and encouraged, to avoid the
unnecessary delay and expense that would be caused by such an
approach. The tribunal should take a grip on the proceedings and
H indicate to the parties those areas on which it particularly wishes
S. L. GUPTA v. ASHA DEVI GUPTA [SINHA, J.) 265

to be addressed and those which it does not consider relevant to A
the real issues in dispute. If a party fails to heed such guidance,
the tribunal might seek to focus the proceedings by allocating the
remaining hearing time between the parties. This the tribunal is
entitled to do, provided it will allow a reasonable time for both
parties to put forward their argument and evidence." B

For constituting a reasonable opportunity, the following conditions
are required to be observed

I. Each party must have notice that the hearing is to take place.
c
2. Each party must have a reasonable opportunity to be present
at the hearing, together with his advisers and witnesses.

3. Each party must have the opportunity to be present throughout
the hearing D
4. Each party must have a reasonable opportunity to present
evidence and argument in support of his own case.

5. Each party must have a reasonable opportunity to test his E
opponent's case by cross-examining his witnesses, presenting
rebutting evidence and addressing oral argument.

6. The hearing must, unless the contrary is expressly agreed,
be the occasion on which the parties present the whole of
their evidence and argument. F

The objectors do not say that Ghanshyamdas Gupta has an interest
adverse to or independent of them. Ghanshyamdas Gupta himself has not
stated as to whether his interests were not safeguarded by other co-sharers
who were present in the meeting. G

The minutes of the meeting referred to hereinbefore clearly show that
not only he had notice of arbitration proceedings but also took active part
therein days after days. The circular letter dated 12.5.1976 was issued
by the arbitrator so as to give a notice of caution that the arbitration H
266 SUPREME COURT REPORTS [2003} SUPP. 3 S.C.R.
A proceedings shall be held and continued at Kolkata.
Can it be said having regard to the magnitude of the problem and the
number of parties involved, the extent of the properties in dispute and the
disputes not only between the two groups but also some members of the
B same group that the arbitrator was not entitled to take recourse thereto ?
If the arbitrator is to manage the arbitration proceedings, in our opinion,
he would be entitled to give direction to the parties to be present on the
particular date, particular time and particular place which would be
sufficient compliance of the requirements of law. Ghanshyamdas Gupta
does not say that he did not receive the circular letter dated 12.5.1976. He
C did not make out a case that the said dates did not suit him. As despite
receiving the said circular letter from the arbitrator, he did not choose to
make himself available on 8.6.1976 at his own, the arbitrator sent him
a telegram dated 12.7.1976. The said telegram was sent ex abundanti
cautela.

D The arbitrator, as appears from the minutes of the meeting, proceeded
only on the documentary evidences. No party appears to have presented
oral evidence. Thus, the question of cross-examination the witnesses
appearing on behalf of the other parties did not arise. Submissions must
have been made by the parties themselves. Ghanshyamdas Gupta does not
E say that he had difficulty in appearing on 15.6.1976 or any subsequent date
and he had asked for adjournment. Even otherwise, a party has no absolute
right to insist on his convenience being consulted in every respect. · The
matter is within the discretion of the arbitrator and the Court will intervene
only in the event of positive abuse. [See Montrose Cannel Foods Ltd.
F (supra)]. If a party, after being given proper notice, chooses not to appear,
then the proceedings may properly continue in his absence. [See British
Oil and Cake Mills Ltd. v. Horace Battin & Co. Ltd., (1922) 13 LI L Rep.
443].

In D.L. Miller (supra) the law is stated in the following terms :
G
"The doctrine of Arbitrators' legal misconduct has been so
over-worked in recent years that across the whole branch of case
law on this point one finds the blazing trial of principles of natural
justice. They are discussed and agitated in an atmosphere of
H complete unreality and divorced from the facts of each case.
S. L. GUPTA v. ASHA DEVI GUPTA [SINHA, J.] 267

Somehow the obvious point is missed in most of such cases A
that when the parties agree to go to arbitration they stipulate not
so much for vague principles of natural justice as for concrete
principles of contractual justice according to the contracts of the
parties and their specific stipulations. Where the contract of
arbitration itself prescribes a private procedure of its own, then B
so long as such agreed private procedure is not against the laws
and the statutes of the land, then such agreed procedure must
prevail over the notions and principles of natural justice."

The principles ofnaturaljustice, it is trite, cannot be put in a straight C
jacket formula. In a given case the party should not only be required to
show that he did not have a proper notice resulting in violation of principles
of natural justice but also to show that he was seriously prejudiced thereby.
Jn The Chairman, Board of Mining Examination and Chief Inspector
of Mines and Another v. Ramjee, [1977) 2 SCC 256, this Court held :
D
" ...Natural justice is no unruly horse, no lurking land mine, nor
a judicial cure-all. If fairness is shown by the decision-maker to
the man proceeded against, the form, features and the fundamentals
of such essential processual propriety being conditioned by the
facts and circumstances of each situation, no breach of natural E
justice can be complained of. Unnatural expansion of natural
justice, without reference to the administrative realities and other
factors of a given case, can be exasperating. We can neither be
finical nor fanatical but should be flexible yet firm in this
jurisdiction. No man shall be hit below the belt - that is the F
conscience of the matter."

(See also Union of India and Ors. v. Anand Kumar Pandey and Ors.,
[1994) 5 SCC'663, and R.S. Dass Etc. v. Union of India and Ors., (1986)
Supp. sec 617). G

In Anand Kumar Pandey 's case (supra), this Court again reiterated
that the rules of natural justice cannot be put in a straight jacket and
applicability thereof would depend upon the facts and circumstances
relating to each particular given situation. H
268 SUPREME COURT REPORTS (2003] SUPP. 3 S.C.R.

A In MC. Mehta v. Union of India and Ors. (1999] 6 SCC 237, this
Court held that in a case of natural justice upon admitted or indisputable
factual position, only one conclusion is possible, a writ of certiorari may
be issued.

B In State of UP.v. Harendra Arora and Anr., (2001] 6 SCC 392, this
Court followed, inter alia, Managing Director, ECIL v. B. Karunakar,
(1993] 4 SCC 727 and State Bank ofPatiala v. S.K. Sharma, (1996] 3 SCC
364 and held that an order passed in a disciplinary proceeding cannot ipso
facto be quashed merely because a copy of the enquiry report has not been
C furnished to the delinquent officer, but he is obliged to show that by non-
furnishing of such a report he has been prejudiced, would apply even to
cases where there is requirement of furnishing a copy of enquiry report
under the statutory rules.

In Aligarh Muslim University and Ors. v. Mansoor Ali Khan, (2000]
D 7 sec 529, it was held :

"The principle that in addition to breach of natural justice,
prejudice must also be proved has been developed in several
cases. In KL. Tripathi v. State Bank of India, Sabyasachi
E Mukharji, J. (as he then was) also laid down the principle that not
mere violation of natural justice but de facto prejudice (other than
non-issue of notice) had to be proved. It was observed, quoting
Wade's Administrative Law (5th Edn., pp. 472-75), as follows:

"It is not possible to lay down rigid rules as to when the
F principles of natural justice are to apply, nor as to their scope
and extent... There must also have been some real prejudice
to the complainant; there is no such thing as a merely
technical infringement of natural justice. The requirements
of natural justice must depend on the facts and circumstances
G of the case, the nature of the inquiry, the rules under which
the tribunal is acting, the subject-matter to be dealt with, and
so forth."

Since then, this Court has consistently applied the principle of
H prejudice in several cases. The above ruling and various other
S. L. GUPTA v. ASHA DEVI GUPTA [SINHA, J.) 269

rulings taking the same view have been exhaustively referred to A
in State Bank ofPatiala v. S.K. Sharma. In that case, the principle
of "prejudice" has been further elaborated. The same principle
·~
has been reiterated again in Rajendra Singh v. State of MP."

In UP. A was Evam Vikas Paris had v. Gyan Devi (Dead) by LRs. and B
Ors., [1995] 2 SCC 326, the Constitution Bench observed :

" ... In other words the right conferred under Section 50(2) of the
L.A. Act carries with it the right to be given adequate notice by
the Collector as well as the reference court before whom the
acquisition proceedings are pending of the date on which the C
matter of determination of the amount of compensation will be
taken up. Service of such a notice, being necessary for effectuating
the right conferred on the local authority under Section 50(2) of
the L.A. Act, can, therefore, be regarded as an integral part of the
said right and the failure to give such a notice would result in D
denial of the said right unless it can be shown that the local
authority had knowledge about the pendency of the acquisition
proceedings before the Collector or the reference court and has
not suffered any prejudice on account of failure to give such
notice."
E
In Graphite India Ltd and Anr. v. Durgapur Project Ltd and Ors.
[1999] 7 sec 645, it has been held that the principles of natural justice
can be waived.

In 'Administrative Law', 8th Edn., by William Wade and Christopher F
Forsyth at page 491, it has been stated :

" ... At the other end of the spectrum of power, public authorities
themselves are now given the benefit of natural justice, as
illustrated at the end of this section. Basically the principle is G
confined by no frontiers.

On the other hand it must be a flexible principle. The judges,
anxious as always to preserve some freedom of manoeuvre,
emphasise that' it is not possible to lay down ri5:d rules as to when
the principles of natural justice are to apply: nor as to their scope H
270 SUPREME COURT REPORTS (2003] SUPP. 3 S.C.R.

A and extent. Everything depends on the subject-matter'. Their
application, resting as it does upon statutory implication, must
always be in conformity with the scheme of the Act and with the
subject-matter of the case. 'In the application of the concept of
fair play there must be real flexibility'. There must also have been
B some real prejudice to the complainant: there is no such thing as
a merely technical infringement of natural justice."

In Khaitan (India) Ltd. & Ors. v. Union of India & Ors., Cal LT
(1999) 2 HC 478, one of us said :

c "The concept of principles of natural justice has undergone a
radical change. It is not in every case, that the High Courts would
entertain a writ application only on the ground that violation of
principles of natural justice has been alleged. The apex court,
in State Bank ofPatiala & Ors. v. S. K. Sharma reported in (1996]
3 sec 364 has clearly held that a person complaining about the
D violation of the principles of natural justice must show causation
of a prejudice against him by reason of such violation. The apex
court has held that the principles of natural justice, may be said
to have been violated which require an intervention when no
hearing, no opportunity or no notice has been given. Reference
E in this connection may also be made to Managing Director,
E.C./.L. v. B. Karmarkar, reported in AIR (1994) SC 1076. The
question as to the effect of non-grant of enough opportunity to
the learned counsel for the appellant by the Commission to meet
the allegations made in the supplementary affidavit requires
F investigation. As to what extent the appellant has suffered would
be a question which would fall for a decision of a High Court.
Where such a disputed question arises, in the considered opinion
of this Court, a writ application will not be entertained only
because violation of natural justice has been alleged and more
so, in a case of this nature where such a contention can also be
G
raised before the Highest Court of India. A distinction has to be
borne in mind between a forum of appeal which is presided by
an Administrative Body and the apex court as an appellate court."

The principles of natural justice, it is trite, must not be stretched too
H far.
S. L. GUPTA v. ASHA DEVI GUPTA [SINHA, J.) 271

I.A. Nos. 1 and 19 in CA. Nos. 2809-10 of 1979 A
Ghanshyamdas Gupta on or about 30.8.1998 filed an application
'. withdrawing his objections for setting aside the award; having regard to
the various developments which took place since the passing of the award.
The prayer made in the said application reads as under :
B
"That the objections raised on behalf of Shri Ghanshyam Das
Gupta, the respondent No.7 herein may be allowed to be withdrawn
in respect of Awards dated 29th June, 1976 and 30th June, 1976
passed by Sole Arbitrator Shri P.J. Bhide and the said Awards be
made the rule of the Court;" C
Thus, the fact remains that unequivocally Ghanshyamdas Gupta had
withdrawn his objections. He now seeks to resile therefrom by filing an
application i.e. I.A. No.19 of 2003 wherein he has prayed for discharge
of his advocate. D
Keeping in view the statements made by Ghanshyamdas Gupta in the
said interim application, we are of the opinion that at this stage, he cannot
be permitted to change his advocate, particularly in view of the fact that
he stuck to his earlier stand for several years.
E
In view of the aforementioned, no orders are passed on I.A. Nos. 1
and 19.

Furthermore, in this case Ghanshyamdas Gupta expressly relinquished
his right by filing an application stating that he would withdraw his F
objection. Such relinquishment in a given case can also be inferred from
the conduct of the party. The defence which was otherwise available to
Ghanshyamdas Gupta would not be available to others who took part in
the proceedings. They cannot take benefit of the plea taken by Ghanshyamdas
Gupta. Each party complaining violation of natural justice will have to G
prove the misconduct of the arbitrator tribunal in denial of justice to them.
The appellant must show that he was otherwise unable to present his case
which would mean that the matters were outside his control and not
because of his own failure to take advantage of an opportunity duly
accorded to him. [See Minmetals Germany GmbH v. Ferco Steel Ltd, H
272 SUPREME COURT REPORTS [2003] SUPP. 3 S.C.R.

A (1999) I All ER (Comm) 315. This Court's decision in Renusagar Power
Co. Ltd v. General Electric Co., AIR (1994) SC 860 is also a pointer to
the said proposition of law.

Keeping in view the facts and circumstances of this case, we are of
B the opinion that Ghanshyamdas Gupta cannot be said to have been refused
a fair opportunity of participation in the arbitration proceedings.

So far as the other ground is concerned, which found favour of the
High Court, namely, that the arbitrator had asked the parties to issue a letter
to him that his award shall not be questioned would render the award a
c nullity inasmuch the same was not acted upon and in fact no letter was
issued. The arbitrator must have done so keeping in view the peculiar
nature of the disputes and to see that all the disputes come to an end.

OTHER INTERLOCUTORY APPLICATIONS :
D
Several interlocutory applications have been filed, some of which are
required to be dealt with.

I.A. No.I 5 in C.A. No.2809 of 1979

E I.A. No. 15 has been filed at the instance of one of the parties herein
for staying the auction of the properties belonging to Mis Omrao Industrial
Corporation Private Limited, Kanpur and Oil Corporation of India Private
Limited, Kanpur. The auction of the properties was stayed by this Court
by an order dated 20.1.2003.
F
The said auction was being held at the instance of Bank of Baroda
in terms of a recovery certificate issued by the Debt Recovery Tribunal.
The said proceeding was initiated by the Bank for enforcement of an
equitable mortgage as also of guarantee. The dispute by and between a
G third party and a company has nothin.g to do with the question as to
whether an award made by the arbitrator should be set aside or not.
Whatever be the little connection, the same cannot be permitted to be
agitated in this appeal. The parties must take recourse to such remedies
which are available to them in law. The interim order dated 20.01.2003
H is vacated.
S. L. GUPTA v. ASHA DEVI GUPTA [SINHA, J.] 273

I.A. No.17 in C.A. No.2809 of 1979: A

An application has also been filed for appointment of a receiver by
the legal heirs of Respondent Nos.12 to 15. Having regard to the fact that
as a limited question arises for our consideration in these appeals, it may
not be proper for us to pass any order on the said application. If any B
necessity arises, parties can file appropriate application for initiating
appropriate proceedings before the appropriate forum.

I.A. No.3 in C.A. No.2809 of 1979
Contempt Petition No. 484 of 1998 :
c
Applications have been filed for initiating proceedings for contempt
of this Court for alleged violation of this Court's orders dated 21.9.1979,
16.8.1982 and 20.10.1982. According to the applicant, Appellant nos. 2
and 9 and Respondent Nos. I to 4, 7, 19, 22 and 28 have violated the said
orders by surrendering the tenancy rights purported to be in violation of D
order dated 16.8.J 982. It is further alleged that several other appellants
and respondents have similarly violated the interim orders passed by this
Court. No order appears to have been passed on the contempt petition.
A direction was merely issued that this matter may be considered at the
time of final hearing. E

Keeping in view the fact that the appeal remained pending for a long
time, it is not advisable that this Court now adjudicate upon the factual
disputes. We, thus, do not intend to pass any order on the said applications.
F
We may, however, observe that an appropriate proceeding may be
initiated by the parties concerned before the executing court, if any
occasion arises therefor.

I.A. No..... in C.A. No.2809 of 1979 for substitution of L.Rs. of Deceased G
Respondent No.5 :

The I.A. is allowed.

I.A. No. No .... in C.A. Nos. 2809-10of1979 for withdrawal a/VIA on behalf H
274 SUPREME COURT REPORTS (2003] SUPP. 3 S.C.R.
A of Appellant Nos. 9 and JO :
No orders are necessary to be passed.

For the reasons aforementioned, the impugned judgment cannot be
sustained which is set aside accordingly. These appeals are allowed.
B Award given by the arbitrator is made rule of the court. Any transaction
in regard to property covered by the award shall be subject to this decision.
The Executing Court would look into these matters. However, in the facts
and circumstances of the case, there shall be no order as to costs.

A.K.T. Appeals allowed.