Consent Arbitral Award Executed by Family Heads Binds All Members, Including Non-Signatories: Gujarat High Court
Safiya Malik
The High Court of Gujarat, Division Bench of Chief Justice Sunita Agarwal and Justice D.N. Ray upheld the dismissal of challenges to a consent arbitral award arising from a family settlement over ancestral properties and joint businesses. The Court held that when the heads of two families voluntarily and bona fide resolve disputes through a composite family arrangement culminating in a consent award, such an award binds all represented members, even if some were not individual signatories. It further held that objections based on non-receipt of a signed copy or absence of personal consent cannot defeat the award and that delay beyond the limitation prescribed under Section 34(3) of the Arbitration and Conciliation Act, 1996, is not condonable.
The dispute centered around ancestral properties and businesses inherited by two brothers, Rajendrabhai alias Samirbhai Natwarlal Shah and Chandrajitbhai Natwarlal Shah. Both families jointly held multiple properties and operated various business entities. Differences arose regarding management, operations, and division of assets, leading to the execution of a Memorandum of Agreement (MOA) or Family Arrangement on January 2, 2014. The document, signed by both groups, recorded agreed modalities for division of properties and businesses to preserve family peace and dignity.
The MOA identified two factions: the “Rajendrabhai Group” and the “Chandrajitbhai Group.” Clause 29 of the MOA provided that disputes arising from the arrangement would be settled through mediation governed by the Arbitration and Conciliation Act, 1996. The family arrangement was signed by Hetalben Chandrajit Shah, while her daughter, Tithi Chandrajit Shah, was represented by her father Chandrajitbhai as she was a minor at that time.
Despite partial implementation of the arrangement, disputes persisted. The Chandrajitbhai Group filed Special Civil Suit No. 597 of 2014 before the Civil Judge, Senior Division, Vadodara, seeking declarations and injunctions. The matter was referred to arbitration under Section 8 of the Act. Subsequent challenges before the High Court and Supreme Court were dismissed. A three-member Arbitral Tribunal, including a former Supreme Court Judge as Presiding Arbitrator, was constituted.
During arbitral proceedings, both family heads — Rajendrabhai and Chandrajitbhai — executed a written settlement on May 19, 2016, resolving all disputes. The Tribunal, upon consent of both sides, incorporated the settlement into a consent award dated June 3, 2016, effectively dividing the family properties and businesses.
Five years later, in 2021, Hetalben and Tithi filed applications under Section 34 before the Vadodara District Court to set aside the award, alleging lack of notice, non-receipt of signed copies, and coercion in executing the MOA. The District Court dismissed the petitions as time-barred and non-maintainable, leading to the present appeals under Section 37.
The Bench observed that the appeals arose from a challenge to a “consent arbitral award based upon the settlement terms arrived at between the heads of two families in respect of ancestral properties and joint family businesses.” The Court recorded that both family heads had “voluntarily and bona fide agreed to the settlement before the Arbitral Tribunal,” and that “the consent award is binding on all the parties.”
The Bench stated that the appellants’ contention of not having received a signed copy of the award “does not appeal to us in the facts and circumstances of the present case.” It held that “the requirement under Section 31(5) of the Act, 1996 stood satisfied when the signed copy of the award was delivered to the head of the family who was representing the appellant before the Arbitral Tribunal.” The Court observed that such delivery was “sufficient compliance” and that limitation under Section 34(3) “would reckon from the date of delivery of the signed copy of the award upon the representative of the group.”
Addressing the argument of lack of individual consent, the Court recorded that “once heads of the two groups agreed to settle the disputes and signed the consent terms before the Arbitral Tribunal, the said terms were binding on their respective family members.” The Bench also observed that “the family arrangement dated 02.01.2014 and the consent terms dated 19.05.2016 were duly acted upon and form the basis of the arbitral award.”
The Court rejected the plea of fraud, observing that “the allegations of fraud and technical grounds to maintain the challenge to the consent award do not stand in the eye of law.” It stated further that “the plea of fraud is nothing but a disguise to unsettle the family arrangement arrived between the heads of the two joint families with regard to ancestral properties and joint businesses.”
Finally, the Court noted that “it is an admitted position that Chandrajitbhai Shah, the head of the ‘Chandrajitbhai Group’ has accepted the award and has not filed any Section 34 application indicating that he has been defrauded by his brother.” The Bench concluded that “the submission of the appellant that she came to know about the arbitral award only in December 2020, after receiving the execution notice, is absolutely false.”
It stated that “we do not find any merit in the challenge to the order dated 04.12.2021 passed by the learned 6th Additional District Judge, Vadodara.” The Court further held that “the challenge to the consent award dated 03.06.2016 on the ground that the consent terms dated 19.05.2016 had not been signed by the appellant cannot be sustained.”
“The consent award is binding on all the parties and hence, the challenge to the consent award cannot be sustained.” Regarding limitation, it recorded that “the limitation for filing application under Section 34 of the Act, 1996 would, thus, reckon from the date of delivery of the signed copy of the award upon [the group head] who was representing the appellant.” The Court held that such delivery “satisfied the statutory requirement” and that the Section 34 applications were time-barred.
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“The allegations of fraud and technical grounds to maintain the challenge to the consent award do not stand in the eye of law. The plea of fraud is nothing but a disguise to unsettle the family arrangement arrived between the heads of the two joint families with regard to ancestral properties and joint businesses.”
“In view of the above discussion, the First Appeal No. 227 of 2023 filed by Hetalben Chandrajit Shah… is hereby dismissed being devoid of merits. No order as to costs.” It pronounced that “both the appeals, i.e., First Appeal No. 1903 of 2022 and First Appeal No. 227 of 2023 stand dismissed. No order as to costs. Connected civil applications in the respective first appeals stand disposed of, accordingly.”
Advocates Representing the Parties:
For the Appellants: Mr. Gautam Joshi, Senior Counsel with Mr. Parth D; Mr. Mehul S. Shah, Senior Counsel with Mr. Akash R. Patel
For the Respondents: Mr. D.C. Dave, Senior Counsel with Mr. Anal S. Shah; Mr. Nilesh A. Pandya; Mr. Akash R. Patel; Mr. Rakesh R. Vyas; Mr. Mihir Joshi, Senior Counsel with Mr. Anal S. Shah.
Case Title: Tithi Chandrajit Shah v. Rajendrabhai alias Samirbhai Natvarlal Shah & Others
Case Number: R/FIRST APPEAL NO. 1903 of 2022 with R/FIRST APPEAL NO. 227 of 2023
Bench: Chief Justice Sunita Agarwal and Justice D.N. Ray
