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CASE NO.: Appeal (civil)  126 of 2005

PETITIONER: Hari Shankar Singhania & Ors.                            

RESPONDENT: Gaur Hari Singhania & Ors.                               

DATE OF JUDGMENT: 04/04/2006

BENCH: H.K. Sema & Dr. AR. Lakshmanan

JUDGMENT: J U D G M E N T

Dr. AR. Lakshmanan, J.

This appeal was directed against the final judgment and  order dated 8/9th June, 2004 passed by the Division Bench of  the High Court of Judicature at Bombay in Appeal No. 440 of  1996 in Arbitration Suit No. 1904 of 1992 whereby the High  Court dismissed the appellants’ appeal and upheld the order of  the learned single Judge dismissing the appellants’ application  under Section 20 of the Arbitration Act, 1940 as being barred by  the law of limitation.  The short facts of the case are as follows:- A partnership firm was formed by three brothers of the  Singhania family.  The family owned considerable amount of  immovable property, which was brought into the firm’s business.  In 1987, the partnership firm was dissolved by way of dissolution  deed as a family settlement. Under the dissolution deed, clause  13 which enabled the parties or any party to go for arbitration in  case there was a dispute between them reads as follows: "13.  That if at any time any dispute, doubt or question  shall arise between the parties hereto or their respective  legal representative, either on the construction of  interpretation of these presents or respecting the accounts,  transactions, profit or loss of business or their respective  rights and obligations of the parties hereto or otherwise in  relation to the winding up of the partnership, then any  such dispute, doubt or question shall be referred to the  arbitration of a single Arbitrator.  In case, however, the  parties are unable to agree upon a single Arbitrator, a  panel of three Arbitrators shall be appointed, one of them  to be appointed by Shri Hari Shankar Singhania or failing  him by the Sixth Party, or failing the Sixth Party by the  Seventh Party, or failing the Seventh party, by the Eighth  party and the second to be appointed by Dr. Gaur Hari  Singhania and failing him by the second party and failing  the second party by the ninth party and the third to be  appointed by Shri Vijaypat Singhania and failing him by  the fourth party, provided always that the decision and/or  award by the said panel of the arbitrators shall have to be  unanimous and in the event of unanimity not being  reached by the panel of arbitrators, they shall appoint an  Umpire whose decision shall be final.  All the proceedings,  before the sole arbitrator and/or panel of arbitrators shall  be governed by the provisions contained in the Arbitration  Act, 1940 or by any statutory modification or re-enactment  thereof."        Disagreement between the parties took place as to the

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division of the assets involved in the partnership firm. Therefore,  the distribution of the said immoveable properties could not be  effected by 31st May 1987 as contemplated by the Deed of  Dissolution. Ultimately in February 1988, the three groups each  appointed a nominee to work out an arrangement whereby  distribution of the said immoveable properties of the said  dissolved firm could be made and effected in the manner  acceptable to all.  The nominees held several meetings but no  agreement of distribution could be arrived at. Further it can be  observed that there were numerous letters written by both  parties to find a way to settle the dispute pertaining to the  division of assets involved in the partnership firm which was  dissolved. The last letter that was exchanged in this regard was a  letter dated 29 September, 1989. On May 8, 1992, a plaint under section 20 of the  Arbitration Act, 1940 was filed before the High Court of  Judicature at Bombay by the appellants (1-7 ousted group). On  September 19, 1992, respondent No.1 herein, Dr. Gaur Hari  Singhania group (contesting respondent Nos.1-9) filed an  affidavit in opposition stating and submitting that, the suit filed  by the appellant in the High Court is barred by limitation and  that the High Court had no jurisdiction to entertain the suit and,  therefore, the same is liable to be dismissed. It is pertinent to notice that respondent Nos. 10-20  supported the claim made by the appellants.  A learned Single  Judge of the Bombay High Court on April 09, 1996 dismissed the  Arbitration Suit of the appellants on the ground of limitation  being 50 days beyond the period of three years computed from  March 18, 1989.  An appeal was preferred by appellant Nos. 1-7  and learned Judges of the Division Bench of the Bombay High  Court dismissed the appeal on the ground of limitation and that  oral prayer for condonation of delay will not be entertained by the  Courts. Against this order of the Bombay High Court, the appellants  have come by way of special leave petition before this Court.   Leave was granted on 03.01.2005 by this Court.  We heard Dr. Abhishek Manu Singhvi, learned Senior  Counsel appearing for appellants 1-7, Mr. S. Ganesh, learned  senior counsel appearing for respondents 10-20 and Mr. Anil  Diwan, learned Senior Counsel appearing for the respondents 1- 9. The claim of the appellants was that, after the dissolution of  the partnership there were a series of communication between  the appellants and the respondents on the division of the assets  which was a part of the dissolved firm in order to arrive at an  amicable settlement as evident from the words used in the letters  of correspondence like, to not cause unduly delay in the  distribution of the property/expedite the matter of dissolution  (letter dated 29th  September, 1989) etc.  Therefore, according to  Dr. Abhishek Manu Singhvi, learned counsel appearing for the  appellants, the right to apply under section 20 of the Arbitration  Act, 1940 accrued to the appellants on the date of the last  communication between the parties to reach a settlement, which  is the letter dated 29th September, 1989. Therefore, limitation  period will start running for three years as stated under Article  137 of the Limitation Act, 1963 only from that date. The thrust of  the argument on behalf of the appellants is that the right to  apply under section 20 of the Arbitration Act, 1940 accrued to  the appellants on receipt of the letter dated 29th September,  1989. According to the contesting respondents, the differences  and disputes with respect to distribution of immovable properties  amongst the partners of the dissolved firm arose before 31st May,  1987 and that is why the distribution of the said immovable  properties could not be effected as contemplated by the Deed of

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Dissolution. The respondents further claimed that the  appointment of nominees by the parties was enough evidence of  disagreement and differences between the parties which arose on  29th February, 1988. Further the respondent also relied on  communications dated 4th October, 1988, 13th February, 1989  [notice] and 18th March 1989, to prove differences among the  parties.  It is now well settled that Article 137 of the Limitation Act,  1963 applies to an application under Section 20 of the  Arbitration Act, 1940.  Accordingly, an application under Section  20 of the Act for filing the arbitration agreement in Court and for  reference of disputes to arbitration in accordance therewith is  required to be filed within a period of three years when the right  to apply accrues.  The right to apply accrues when difference or  dispute arises between the parties to the arbitration agreement.   In the facts of the case, it is therefore necessary to find out as to  when the right to apply accrued.  Therefore, the questions before us that deserve  consideration are: 1.      When the right to file the application under Section 20  of the Arbitration Act has accrued and when it  becomes time barred; and  2.      Whether in the context of Section 20 of the Arbitration  Act, 1940 a difference or dispute can be said to have  arisen between the parties without there being any  denial or repudiation of a claim by a party? We have heard both the parties extensively.  We have  carefully perused all the letters, annexures and the orders  passed by the High Court produced in Court.   Letter dated 16th September, 1988 is a letter by Shri Hari  Shankar Singhania to Shri Gaur Hari Singhania specifically  stating that "I request that the distribution of immovable properties  is being delayed and I will request you to please make all attempts  to expedite the same." Letter dated 4th October, 1988 is a letter by Shri Gaur Hari  Singhania to Shri Hari Shankar Singhania stating that "I on my  part have given all the information and materials and done  everything possible to expedite the distribution.  The Committee  appointed by the partners is seized of the matter.  I am equally  anxious that the matter should be amicably sorted out as early as  possible." Letter dated 18th October, 1988 is a letter by Shri Hari  Shankar Singhania to Shri Gaur Hari Singhania wherein it is  stated that "I only requested you to make all attempts to expedite.   You can judge for yourselves what is the reason for the delay.  In  my view, unless there is sincere desire to solve the matter  expeditiously the matter will drag on and I can only repeat that  this will not be to the benefit of any one.  I can only request you to  do all you can to get the matter expedited." Letter dated 24th November, 1988 is a letter by Shri Gaur  Hari Singhania to Shri Hari Shankar Singhania wherein it is  stated that, "I am sending the modified account for your kindly  returning the same duly signed by you and all the other partners  at your end." Letter dated 13th February, 1989 is a letter by Shri Vijaypat  Singhania, Shri Ajaypat  Singhania, Shri Raghupati Singhania,  Shri Hari Shankar Singhania and Shri Bharat Hari Singhania to  Shri Gaur Hari Singhania wherein it is stated that "As regards  Ganga Kuti, your comments on the Licence Agreement dated  2.1.1986 do not meet the issue raised in the letter of Shri Hari  Shankar, dated 18th October, 1988.  As pointed out, the said  agreement stipulates payment of Licence fee of Rs.24,000 per  annum payable by monthly instalments of Rs.2000 to be paid in  advance on the 5th day of every month.  Neither the mode of  payment nor the amount paid were in conformity with the said

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agreement.  Due to violation of this key provision, the licence is no  more valid and it should be treated as such and the monies  received on this account should be returned and suitable corrective  entries made in the accounts.  Moreover, such arrears of rent were  received after the dissolution which should not be accepted and  given effect to, in the spirit of the terms of dissolutions.  Apparently  it is not bona fide.  We are returning the accounts for the period  (20th March, 1987 to 31st March, 1988) for necessary rectification.   The property should henceforth not be rented/licensed to anyone." Letter dated 18th March, 1989 is a letter by Shri Gaur Hari  Singhania to Shri Hari Shankar Singhania wherein it is stated  that "The licence is subsisting and cannot be treated as null and  void.  Since you have returned the account unsigned, I am sending  the accounts once again to you with a request to kindly sign the  accounts and forward the same to me for signature of Shri  Vijaypat and Shri Ajaypat." Letter dated 22nd May, 1989 is a letter by Shri Vijaypat  Singhania, shri Ajaypat Singhania, Shri Raghupati Singhania,  Shri Hari Shankar Singhania and Shri Bharat Hari Singhania to  Shri Gaur Hari Singhania wherein it is stated that  "As regards  Ganga Kuti, we had in our letter dated February 13, 1989 stated  the factual position in regard to the licence agreement dated 2nd  January, 1986 and the fact of the licence remaining no more valid  particularly in view of the continuous violation of the essential  provisions of the licence agreement for two years from  1.4.1985\005\005\005\005\005\005\005The spirit of the terms of dissolution has  certainly not been adhered to in this regard and it is only fair in  the fitness of the circumstances that the licence agreement should  no more be treated as valid and appropriate amendment be made  in that regard by returning the monies received and making  suitable corrective entries in the accounts.  We are returning the  accounts for the period 20th March, 1987 to 31st March, 1988 for  necessary rectification."   Letter dated 8th July, 1989 is a letter by Shri Gaur Hari  Singhania to Shri Hari Shankar Singhania wherein it is stated  that "However, as stated above, the distribution of the immovable  properties is being delayed due to entirely the unreasonable stand  taken by or on your behalf and due to insistence on your behalf of  the distribution to be effected in a particular mode which is neither  feasible nor reasonable and proper\005\005\005\005\005\005\005It is, therefore,  not only in the interest of all the partners but imperative that you  should not hold up the signing of the accounts.  I, therefore, once  again send to you the said accounts with a request to return the  same duly signed.  I need not add that if as a result of your not  signing the said accounts any adverse orders are passed by the  Income Tax Officer in the pending assessment of the said firm for  the said two assessment years 1987-1988 and 1988-1989, you  alone will be held responsible." Letter dated 29th September, 1989 is a letter from Shri  Vijaypat Singhania, Shri Ajaypat Singhania, Shri Raghupati  Singhania, Shri Hari Shankar Singhania and Shri Bharat Hari  Singhania to Shri Gaur Hari Singhania wherein it is stated that  "It is not fair to impute impropriety or to say that the stand taken  by us is an attempt to bring pressure upon immovable properties of  the dissolved partnership.  It is equally not fair to say that the  distribution of immovable properties remains pending because of  the unreasonable or improper stand taken by us.  The Deed of  Dissolution and the understanding among the partners is quite  clear as to the mode of distribution and as such there is no  question of any partner dictating the mode of  distribution\005\005\005\005..We are sure that you will expedite the matter  of dissolution of the immovable properties in the same spirit as  was envisaged at the time of dissolving the firm." It is seen from the above letters that on 29.02.1988, the  parties decided to appoint one representative each who would

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endeavour to arrive at an agreed distribution acceptable to all  parties.  This only shows that it is the modality of distribution  which were tried to be worked out.  The contemporary  correspondence, above referred to, would also show that the  letters exchanged between the brothers were in amiable  language.  It is thus clear that at this stage the parties had not  reached a stage of break where an adjudication of dispute had  become inevitable.  Thereafter, in September, 1988 letters were  written as to the distribution of properties.  The letter written by  the appellants on 16.09.1988 and its reply of 04.10.1998 clearly  show that there was not yet a break down of the agreement, in  fact, on behalf of the respondents.  It was suggested that a  Committee appointed by the partners is seized of the matter.  It  is clear from a reading of this letter that the parties, as late as in  October, 1988 were trying to obtain an amicable resolution.  This  situation continued on 18.03.1989 as well.  The accounts were  sent by the respondents.  The letter, inter alia, annexed certain  confirmatory letters and requested that the accounts be  confirmed by the appellants.  In reply thereto in May, 1989 the  accounts were sent back, as the letter disclosed that there were  some differences as to one of the properties.  On 08.07.1989, the  respondent reiterated that the accounts were correct and sent  back for the confirmation and also alleged that the matter of  distribution of immovable properties remained pending because  of the unreasonable and improper stand taken by the appellants.   It was argued that at best it could be suggested that by this date,  the stage has reached where the partners could have  contemplated the adjudication of their disputes.  This would  show that the petition would clearly be within time.  Suit under  Section 20 of the Arbitration Act was filed on 8.5.1992.    On 29.09.1989, a letter was written by Shri Vijaypat  Singhania, Shri Ajaypat Singhania, Shri Hari Shankar Singhania  and Bharat Hari Singhania to Shri Gaur Hari Singhania,  respondent wherein it is stated that it is not fair to impute  impropriety or to say that the stand taken by the appellants is an  attempt to bring pressure upon immovable properties of  dissolved partnership.  It is also stated therein that the  respondent will expedite the matter of dissolution of the  immovable properties in the same spirit as was envisaged at the  time of dissolving the firm.  If this letter dated 29.09.1989 is  taken into account, it would show that Section 20 suit would  clearly be within time.  In our opinion, the High Court has  committed an error in construing Article 137 in a manner, which  would unduly restrict the remedy of arbitration especially in  family disputes of the present kind.  It is a well-settled policy of  law in the first instance is always to promote a settlement  between the parties wherever possible and particularly in family  disputes.   Where a settlement with or without conciliation is not  possible, then comes the stage of adjudication by way of  arbitration.  Article 137, as construed in this sense, then as long  as parties are in dialogue and even the differences would have  surfaced it cannot be asserted that a limitation under Article 137  has commenced.  Such an interpretation will compel the parties  to resort to litigation/arbitration even where there is serious hope  of the parties themselves resolving the issues.  The learned  Judges of the High Court, in our view, have erred in dismissing  the appellants appeal and affirming the findings of the learned  Single Judge to the effect that the application made by the  appellants under Section 20 of the Act, 1940 asking for reference  was beyond time under Article 137 of the Limitation Act.  The  learned Judges ought to have allowed the appeal and quashed  and set aside the impugned order passed by the learned Single  Judge and ought to have restored and allowed arbitration suit  filed by the appellants.  As already noticed, the correspondence

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between the parties, in fact, bears out that every attempt was  being made to comply with and carry out the reciprocal  obligations spelt out in the agreement between the parties.  As  rightly pointed out by learned counsel for the appellant that the  learned Judges of the Division Bench have erred in coming to the  conclusion that the distribution of immovable properties in  specie as provided in the Deed of Dissolution dated 26.03.1987  and a Supplementary Agreement dated 20.03.1987 could not be  done before 31.05.1987 due to some differences.  There is  absolutely no material on record on the basis of which the  learned Judges could have come to such a conclusion.  None of  the correspondence referred to by the learned Judges spells out  the existence of any disputes as a result of which the properties  could not be distributed prior to 31.05.1987.  The High Court, in our view, has erred in coming to the  conclusion that because no distribution of the property had been  made till 29.02.1988, it was indicative of the fact that there were  disputes and differences between the parties.  The High Court, in  our view, has failed to appreciate that merely because parties did  not take steps for distribution of the immovable properties it did  not automatically follow that disputes and differences had arisen  between them in this regard.  In fact, from the correspondence on  record, it is clear that the parties were making efforts to complete  the distribution of the immovable properties as per the terms of  the agreement between them.  It is submitted that the  correspondence between the parties does not indicate that any  dispute or difference had arisen between them on or before  18.03.1989 and the finding of the learned Judges to the effect  that the correspondence exchanged between the parties leaves no  manner of doubt that the dispute had arisen between the parties  in any case on 18.03.1989 is erroneous, contrary to the record  and unsustainable.   We shall now advert to the various decisions cited by both  the parties.  

Law on the Subject: _________________________________________________________________ Description of application               period of    Time from                                                    Limitation   which period                                                                                     begins t o run                   "Any other application for which no period         Three years   When the right  of limitation is provided elsewhere in this                          to apply accrues. division."  

 The period of three years prescribed in Art.137 of the  Limitation Act, 1963 is applicable to file an application under  section 20 of the Arbitration Act, 1940 as decided by this Court  in the case of Vulcan Insurance Co. Ltd. v Maharaj Singh, AIR  1976 SC 287. The limitation period starts running from the time  the right to apply accrue. An application filed under section 20 of  the Arbitration Act has to be filed within three years from the  date when the right to apply accrues.  In the case of State of Orissa v Damodar Das, AIR 1996  SC 942, this Court held that, the right to apply accrues under  section 20, Arbitration Act, 1940, as soon as dispute or difference  arises on unequivocal denial of claim by one party to the other  party as a result of which the claimant acquires a right to refer  the dispute to arbitration.  In the case of S.Rajan v. State of Kerala, AIR 1992 SC  1918, the right to apply accrues when the difference arises or  differences arise between the parties involved. It is thus a  question of fact, not a question of law as urged by the

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respondents, and should be determined in each case having  regard to the facts of the case.  In Major (Retd.) Inder Singh Rekhi v Delhi Development  Authority, [(1988) 2 SCC 338 at 340, this Court holding that the  application under section 20 was filed within time examined   that: "...a party cannot postpone the accrual of cause of action by  writing reminders or sending reminders but where the bill  had not been finally prepared, the claim made by the  claimant is the accrual of cause of action. A dispute arises  where there is a claim and a denial and repudiation of the  claim. \005 There should be a dispute and there can only be a  dispute when a claim is asserted by one party and denied  by the other on whatever grounds. Mere failure or inaction to  pay does not lead to the inference of the existence of  dispute. Dispute entails a positive element and assertion of  denying, not merely inaction to accede to a claim or request.  Whether in a particular case dispute has arisen or not has  to be found out from the facts and circumstances of the  case."  

In the instant case, correspondence was not merely in the  nature of reminders but also instruments to resolve the matter  and amicably negotiate. Therefore, when the negotiations were  taking place between the parties by way of various letters written  by both parties the right to apply can be said to accrue when it  becomes necessary to apply, that is to say when a dispute in fact  arose. Furthermore, the respondent did not ever dispute the  claim of the appellants. Learned counsel appearing for the appellants placed  reliance on Oriental Building and Furnishing Co. Ltd. v  Union of India, AIR 1981 Del 293, where the material question  was what is the starting point of limitation for moving a petition  under section 20 of the Arbitration Act, 1940. It was held that:  "Neither party can move the Court without the existence of a  difference between them.  So, the material question is, when the  difference arose between the parties and not when the lease  expired, nor when it was entered into." The court further  observed, "\005a difference can arise long after some work has been  done under a contract. There can be negotiations between the  parties and all sorts of correspondence. But it is only when they  come to the conclusion that they cannot resolve the dispute  between them, it can be said that a difference arises. A difference  under the arbitration agreement is a claim made by one party,  which is refuted by the other party. At that stage, it is open to the  parties or any one of them to go for arbitration to get this difference  or differences settled and it is only at this stage it is possible to  say that a difference has arisen between the parties." This decision of the Delhi High Court squarely covers the  case on hand as a close perusal of the letters exchanged between  the parties show clearly that there was intention to arrive at an  amicable settlement between the family members with regard to  the division of assets in question.  It cannot be said that merely because nominees were  appointed for working out an arrangement, which could not  ultimately be arrived at, a dispute or difference arose way back in  February 1988. In fact, even immediately after this, the  correspondence exchanged between the parties reveals a  forthcoming attitude and amiable efforts made towards  implementing the deed of dissolution.  An examination of the correspondence can give us valuable  insight as to the "differences" if any among the parties. The first  such communication was made on 16 September, 1988 from  Shri Hari Shankar Singhania [appellant] to Gaur Hari Singhania  [Respondent] requesting the respondent to make all attempts to

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expedite distribution of the immovable properties. In reply to this  was the communication relied on by the respondents from  Dr.Gaur Hari Singhania [Respondent] to Shri Hari Shankar  Singhania [appellant No.1] dated 4th October, 1988. This  communication also does not reveal either hostility or dispute  and only exposes an effort "to expedite the distribution". The last  sentence of the above mentioned communication reads: "I am  equally anxious that this matter should be amicably sorted out  as  early as possible." Therefore, we observe that the right to apply under section  20 of the Arbitration Act, 1940 accrued to the appellants only on  the date of the last correspondence between the parties and the  period of limitation commences from the date of the last  communication between the parties. Therefore, the finding of the  High Court that the application under section 20 of the  Arbitration Act, 1940, is beyond the period of limitation is  erroneous.  Further, in an English decision rendered by the Court of  Appeal in Hughes v Metropolitan Rly. Co., it was held that,  where negotiations for settlement are pending, the strict rights of  the parties do not come into play.  It is also pertinent to note that under the new Act, namely  the Arbitration and Conciliation Act, 1996 that came into force in  1996, the intervention of the Court in the matter of arbitration  proceedings has been minimized to a great extent. Further, there  is no provision in the Arbitration and Conciliation Act, 1996 that  is similar to section 8 (power of court to appoint arbitrator),  section 20 (application to file in Court the Arbitration Agreement)  and section 33(Arbitration agreement or award to be contested by  application), which were present in the Arbitration Act of 1940.  Another thing that should not miss the attention of the  Court is that, the assets in question are with the contesting  respondent Nos.1 to 9 and an amicable settlement for the  division of the assets have not been arrived at since last 18 years  as clear from the facts.   Hence it is observed that the contesting  respondents are the ones who are enjoying the assets in question  and therefore we observe that, the respondents are merely trying  to drag the proceedings endlessly forever and for another period  of uninterrupted enjoyment of the assets. Furthermore the contesting respondents cannot allege that  moving the Court is a better-suited remedy than arbitration  proceeding as they have of their own free will only adopted the  arbitration clause in the Deed of Dissolution. Family Arrangement/Family Settlement:- Another fact that assumes importance at this stage is that,  a family settlement is treated differently from any other formal  commercial settlement as such settlement in the eyes of law  ensures peace and goodwill among the family members. Such  family settlements generally meet with approval of the Courts.  Such settlements are governed by a special equity principle  where the terms are fair and bona fide, taking into account the  well being of a family. The concept of ’family arrangement or settlement’ and the  present one in hand, in our opinion, should be treated  differently. Technicalities of limitation etc should not be put at  risk of the implementation of a settlement drawn by a family,  which is essential for maintaining peace and harmony in a  family. Also it can be seen from decided cases of this Court that,  any such arrangement would be upheld if family settlements  were entered into ally disputes existing or apprehended and even  any dispute or difference apart, if it was entered into bona fide to  maintain peace or to bring about harmony in the family. Even a  semblance of a claim or some other ground, as say affection, may  suffice as observed by this Court in the case of Ram Charan v.  Girija Nandini AIR 1966 SC 323.

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In Lala Khunni Lal v Kunwar Gobind Krishna Nairain,  the Privy Council examined that it is the duty of the courts to  uphold and give full effect to a family arrangement.  In Sahu Madho Das & Ors v Pandit Mukand Ram &  Anr., 1955 (2) SCR 22 [Vivian Bose Jagannadhadas and BP  Sinha JJ.] placing reliance on Clifton v Cockburn, (1834) 3 My  &K 76 and William v William, (1866) LR 2Ch 29, this Court  held that a family arrangement can, as a matter of law, be  implied from a long course of dealings between the parties.  It  was held that "..so strongly do the courts lean in favour of family  arrangements that bring about harmony in a family and do  justice to its various members and avoid, in anticipation, future  disputes which might ruin them all, that we have no hesitation in  taking the next step (fraud apart) and upholding an  arrangement.."  The real question in this case as framed by the Court was  whether the appellant/plaintiff assented to the family  arrangement. The court examined that "the family arrangement  was one composite whole in which the several dispositions  formed parts of the same transaction"  In Ram Charan Das v Girjanadini Devi,(Supra), this  Court observed as follows:  "Courts give effect to a family settlement upon the broad  and general ground that its object is to settle existing or  future disputes regarding property amongst members of a  family\005 The consideration for such a settlement will result  in establishing or ensuring amity and good will amongst  persons bearing relationship with one another."

In Maturi Pullaiah v Maturi Narasimham, AIR 1966 SC  1836, this court held that "although conflict of legal claims in  praesenti or in future is generally a condition for the validity of  family arrangements, it is not necessarily so. Even bona fide  disputes, present or possible, which may not involve legal claims,  will suffice. Members of a joint Hindu family may, to maintain  peace or to bring about harmony in the family, enter into such a  family arrangement. If such an arrangement is entered into bona  fide and the terms thereof are fair in the circumstances of a  particular case, courts will more readily give assent to such an  arrangement than to avoid it." Further in Krishna Biharilal v Gulabchand, [1971] 1 SCC  837, this Court reiterated the approach of courts to lean strongly  in favour of family arrangements to bring about harmony in a  family and do justice to its various members and avoid in  anticipation future disputes which might ruin them all. This  approach was again re-emphasised in S. Shanmugam Pillai vs.  K. Shanmugam Pillai [1973] 2 SCC 312 where it was declared  that this court will be reluctant to disturb a family arrangement. In Kale & Ors. V Deputy Director of Consolidation and  Ors.,[1976] 3 SCC 119 [VR Krishna Iyer, RS Sarkaria & S  Murtaza Fazal Ali, JJ.] this Court examined the effect and value  of family arrangements entered into between the parties with a  view to resolving disputes for all. This Court observed that "By  virtue of a family settlement or arrangement members of a family  descending from a common ancestor or a near relation seek to  sink their differences and disputes, settle and resolve their  conflicting claims or disputed titles once for all in order to buy  peace of mind and bring about complete harmony and goodwill in  the family. The family arrangements are governed by a special  equity peculiar to themselves and would be enforced if honestly  made\005 the object of the arrangement is to protect the family  from long drawn litigation or perpetual strives which mar the  unity and solidarity of the family and create hatred and bad  blood between the various members of the family. Today when we  are striving to build up an egalitarian society and are trying for a

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complete reconstruction of the society, to maintain and uphold  the unity and homogeneity of the family which ultimately results  in the unification of the society and therefore, of the entire  country, is the prime need of the hour\005 the courts have,  therefore, leaned in favour of upholding a family arrangement  instead of disturbing the same on technical or trivial grounds.  Where the courts find that the family arrangement suffers from a  legal lacuna or a formal defect the rule of estoppel is pressed into  service and is applied to shut out plea of the person who being a  party to family arrangement seeks to unsettle a settled dispute  and claims to revoke the family arrangement\005 The law in  England on this point is almost the same."  The valuable treatise Kerr on Fraud at p.364 explains the  position of law, "the principles which apply to the case of  ordinary compromise between strangers do not equally apply to  the case of compromises in the nature of family arrangements.  Family arrangements are governed by a special equity peculiar to  themselves, and will be enforced if honestly made, although they  have not been meant as a compromise, but have proceeded from  an error of all parties originating in mistake or ignorance of fact  as to what their rights actually are, or of the points on which  their rights actually depend." Halsbury’s Laws of England,  Vol.17, Third edition at pp.215-216. In KK Modi v KN Modi & Ors., [1998] 3 SCC 573 [ Sujata  Manohar & DP Wadhwa, JJ.], it was held that the true intent and  purport of the arbitration agreement must be examined- [para  21] Further the court examined that "\005a family settlement which  settles disputes within the family should not be lightly interfered  with especially when the settlement has been already acted upon  by some members of the family. In the present case, from 1989 to  1995 the Memorandum of Understanding has been substantially  acted upon and hence the parties must be held to the settlement  which is in the interest of the family and which avoids disputes  between the members of the family. Such settlements have to be  viewed a little differently from ordinary contracts and their  internal mechanism for working out the settlement should not be  lightly disturbed."  Therefore, in our opinion, technical considerations should  give way to peace and harmony in enforcement of family  arrangements or settlements.   The observation made by the Bombay High Court while  dismissing the appeal of the appellants was that, an oral  application for condonation of delay will not be entertained in  Court of law according to the laws present in our judicial system.  This observation, in our opinion, is not pertinent in the present  case because, condonation of delay needs to be asked for only if  there is a delay in fling a suit and in the fact situation of this  case, there is no delay in the filing of the Arbitration suit as  observed earlier and the suit for arbitration filed by the  appellants is within time prescribed under Article 137 of the  Limitation Act, 1963. Thus we conclude by observing that, the Arbitration suit  filed by the appellants is well within time as the dispute is  deemed to have arisen only after the last communication between  the parties dated 29th September, 1989, whereby, there were  efforts made to amicably settle the dispute between the parties.  Also as an admitted fact the appellants and respondent Nos.  10 to 20 were at all material times and still are ready and willing  to do all the things necessary for the proper conduct of the  arbitration including the appointment of Arbitrator. Further it is not fair on the appellants to let this dispute  continue, with the assets in question under the control and  enjoyment of the contesting respondents 1-9.  It may be mentioned that even though the plea of extension  of limitation has not been taken into account by the appellants in

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the application filed and the learned counsel for the respondents  has objected to the learned counsel for the appellants making  submission pertaining to extension of limitation to file the  present application, learned Single Judge of the High Court has  permitted the learned counsel for the appellant to make  submissions in this regard without the plea of extension of  limitation being taken in the application.  Why the dispute between members of family should be  settled:- In the instant case, the partnership firm was dissolved  w.e.f. March, 1987 by consent of parties.  The Deed of  Dissolution was also entered into between the parties on       March 26, 1987. In 1988, the three groups each appointed a  nominee to work out an arrangement whereby the distribution of  the properties of the dissolved firm could be made and effected.   The nominees held several meetings but no agreement of  distribution could be arrived at.   Meeting of the partners took  place on various occasions in regard to the issue of distribution  of assets which has been considerably delayed.  Several  correspondences exchanged between the heads of three branches  regarding amicable distribution of all the immovable properties in  specie.  It is stated that 14 properties are situated in Kanpur and  1 property in Bombay which are very valuable.  Respondents 1-9  being in enjoyment were simply delaying distribution in specie.   In the circumstances, appellant No.1 herein and the other  members of the branch of Lakshmipat Singhania wanted to take  recourse to due process of law for getting distribution and  allotment in specie of their one-third share in those 15  immovable properties.  Hence, application under Section 20 of  the Arbitration Act, 1940 was filed in the High Court of Bombay  on 08.05.1992.  Other group opposed the application on the  ground of limitation and the lack of jurisdiction.  Single Judge  rejected the plea of the lack of jurisdiction but upheld the plea of  limitation on the basis that disputes and differences arose on  18.03.1989 whereas the application was filed on 08.05.1992 i.e.  to say 50 days beyond the period of 3 years.  The Division Bench  also dismissed the appeal filed by the appellant on the ground of  limitation.  It is an admitted fact that the three branches of Singhania  family are each entitled to one-third share in immovable  properties.  It is stated that the rents of the properties situated at  Kanpur from family companies and other in whose favour  tenancy had been shown at nominal rents long time back after  the dissolution of the partnership firm are being collected by the  branch of Padam pat Singhania and deposited in the bank  account titled J.K. Bankers (since dissolved).  The said bank  account was opened by the erstwhile partners of J.K. Bankers  upon dissolution of J.K. Bankers the rental income from the  properties in Kanpur, it is alleged is being credited by the branch  of Padampat Singhania to the credit of ex-partners account of  J.K. Bankers in accordance with their shares i.e. one-third share  each after paying their very property tax and other outgoings.   Such credit balance in the account of such bankers is being paid  to the branches of Singhania family from time to time.  The three  branches of Singhania family are showing the rental income in  their returns of income tax as income from house property and  have to pay income-tax thereon in accordance with law.   Furthermore, the three branches of Singhania family are showing  these properties having their own undivided proportionate share  in their wealth tax returns and have to pay wealth tax therein in  accordance with law.  It is stated that Hari Shankar Singhania,  appellant No.1 and other members of Lakshmi Pat Singhania  branch are not being credited with or paid any monies/income  whatsoever in respect of the Bombay property since the date of  dissolution of J.K. Bankers although they have to pay wealth tax

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returns.  It is stated by the appellants that the immovable  properties in possession of the various respondents are extremely  valuable and required to be protected pending disposal of  arbitration.  It is also stated that similar interim reliefs have been  granted to the appellants as far back as 21.05.1992 passed by  the Single Judge.  Also learned Division Bench had passed an  interim order dated 15.04.1996.  While dismissing the appeal on  the ground of limitation Division Bench of the High Court has  extended the interim order by 12 weeks.  This Court on  27.08.2004 suggested to counsel appearing for all parties  without looking into the relationship of the parties and the  nature of disputes, why not all the disputes among the parties be  directed to be placed for adjudication by an arbitrator or for  resolution by a conciliator.  At the time of hearing, all the learned  counsel for the parties assured that the interm order passed by  the High Court shall be honoured by all the parties until the  matter comes up for hearing.  On 03.01.2005, it was reported by  learned senior counsel appearing for respondent Nos. 1-9 that  the parties are not agreeable for settlement by conciliation.  This  Court, thereafter, granted leave and posted the appeal for final  hearing in the month of March, 2005.  The matter was listed on  06.09.2005.  After hearing the parties, this Court passed the  following order:- "Heard the parties

Having regard to the nature of dispute and the fact  that the contesting parties are close relatives, we are  clearly of the view that it is still better that such dispute is  resolved through conciliation, so that the past ill  feelings/misunderstandings, if any, are evaporated in the  thin air with the resolution of the dispute. In response to  our suggestion the parties agree to refer to conciliator to be  appointed by the Court.  Accordingly, we appoint Hon’ble  Mr. Justice N. Santosh Hegde, retired Judge of this Court  to be the Conciliator to resolve the dispute through  conciliation.  The terms and conditions and the place of  sitting shall be decided by the Conciliator himself.  The  fees and other expenses of the Conciliator shall be borne  equally by the three disputing parties.  

We hope and trust that the parties will resolve their  dispute through conciliation with a view to maintain good  relationship between the parties.  This order is passed  without prejudice to the rights and contentions of the  parties that may raise in the proceedings.  But it must be  grasped that the approach of the parties must be  accommodative and keep no records of wrong.

List it after three months."  

Hon’ble Mr. Justice N. Santosh Hegde addressed a letter on  02.02.2006 to the Registrar General, Supreme Court of India,  New Delhi \026 110 001 with reference to the conciliation in the  matter.  The letter reads thus:  "The Hon’ble Supreme Court of India vide its Order dated  06.09.2005 referred the above matter for conciliation by  me.  I have held many meetings between the parties and at  one stage I was under the impression that a conciliation  could be possible, but unfortunately at a later stage it is  found that such a result could not be achieved.  Having  considered all the possibilities, I am to report to the  Hon’ble Court that the conciliation in the case referred to  above, has failed.  Hence, I request you to kindly inform  the Court accordingly.

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I express my gratitude to the Court for having  referred the conciliation to me."  

It is thus seen that the above facts would clearly go to show  that the contesting respondent Nos. 1-9 are not at all interested  in any conciliation, mediation or arbitration but only interested  in enjoying the bulk of the immovable properties of the firm and  refusing to carry out their obligations under and pursuant to the  said Deed of Dissolution by permitting the distribution of the  said properties in specie and free from any encumbrance as  contemplated by the said Deed of Dissolution dated 26.03.1987  and the supplementary agreement dated 28.03.1987.  At the time of hearing, it was argued by learned senior  counsel for respondent Nos. 1-9 that since the appellants have  filed the suit, the same may be continued by the appellants and a  direction be issued to the Court concerned to dispose of the same  within a particular time frame.  In reply, it was submitted that  the suit was filed by the appellants without prejudice to their  rights and contentions under the arbitration clause in the  agreement and that the arbitration is the only effective and quick  remedy.  We have extracted clause 13 of the arbitration  agreement which enable the parties to go for arbitration in case  there was a dispute between them.  It has now come to a stage  that the real dispute has arisen between the parties.  Already the  matter is pending adjudication from 1987 onwards, respondent  Nos. 1-9 are admittedly in possession and enjoyment of the  valuable immovable properties depriving the valuable rights of  the appellants the other respondent Nos. 10-20.  We should not,  therefore, allow respondent Nos.1-9 to drag the proceedings any  further.  Parties have to settle their disputes one day or the  other.  In our opinion, the time has now come to nominate a  single Arbitrator as provided under clause 13 of the agreement.   It was argued that in case this Court allows the appeal, the  matter may be remitted to the High Court for appointment of a  single Arbitrator and in case the parties are unable to agree upon  a single Arbitrator a panel of three Arbitrators shall be appointed  as provided in the said agreement.  We feel that such a course, if  adopted, would only enable the contesting respondent Nos.1-9 to  squat on the property and enjoy the benefits, income etc. arising  therefrom.   We, therefore, appoint Hon’ble Mr. Justice S.N. Variava, a  retired Judge of this Court as a single Arbitrator and decide the  dispute between the parties within 6 months from the date of  entering upon the reference.  The occasion, if any, warrants the  sole Arbitrator may extend further reasonable time for  completion of the Arbitration proceedings.  Learned Arbitrator is  at liberty to fix his fees etc. and other expenses which shall be  borne equally by three parties.  The arbitration shall be at  Bombay or as decided by the Arbitrator in consultation with the  parties.  The proceedings before the Arbitrator shall be governed  by the provisions contained in the Indian Arbitration Act, 1940 or  by any statutory modification or re-enactment thereof.   It is seen from the plaint filed in the arbitration suit the  following disputes and differences, amongst others, have arisen  between the parties and which are to be resolved by the sole  Arbitrator pursuant to the agreement:-  "(a)    To the extent defendant themselves are occupying  such properties, the defendants should be directed to  vacate the properties to enable distribution of the  said properties in specie free from encumbrances;

(b)     The defendants obligation to have vacant possession  of the immoveable properties listed at items 1 to 13 of  Exhibit D hereto and to ensure that persons other  than themselves actually vacate the said properties

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so that the same are available for distribution in  specie free from encumbrances between the plaintiffs  and defendants pursuant to the said Deed of  Dissolution;

(c)     Directions and steps be taken by defendants to  achieve the vacant possession mentioned in  paragraph (a) and (b) above;

(d)     Distribution of the abovementioned properties in  specie free from encumbrances between the plaintiffs  and defendants;

(e)     Distribution of the properties mentioned at items 14  and 15 of the Exhibit D hereto subject to the  encumbrances;

(f)     Fixation of equalization amount, if necessary;

(g)     If for any reason any of the defendants do not permit  and comply with direction for getting vacant  possession of any of the immoveable properties listed  in items 1 to 13 of Ex"D" to the plaint, then the same  should be valued on the basis of vacant possession  and the plaintiffs should be paid their share on the  basis of the vacant possession by the defendants."  

The aforesaid disputes are all covered by the arbitration  clause and fall within the scope and ambit thereof.  The parties  are at liberty to file their further pleadings, claims etc. before the  sole Arbitrator. Conclusion: Better late than never  We have already referred to the concept of family  arrangement and settlement.  Parties are members of three  different groups and are leading business people.  We, therefore,  advise the parties instead of litigating in Court they may as well  concentrate on their business and, at the same time, settle the  disputes amicably which, in our opinion, is essential for  maintaining peace and harmony in the family.  Even though the  parties with a good intention have entered into the Deed of  Dissolution and to divide the properties in equal measure in  1987, the attitude and conduct of the parties have changed,  unfortunately in a different direction.  Therefore, it is the duty of  the Court that such an arrangement and the terms thereof  should be given effect to in letter and spirit.  The appellants and  the respondents are the members of the family descending from a  common ancestor.  At least now, they must sink their disputes  and differences, settle and resolve their conflicting claims once  and for all in order to buy peace of mind and bring about  complete harmony and goodwill in the family.   For the foregoing reasons, we allow this appeal and set  aside the orders passed by the learned Single Judge and as  affirmed by the Division Bench in Appeal No. 440/1996 in  arbitration Suit No.1904/1992 dated 09.06.2004.  Parties are  directed to bear their own costs.   We direct all the parties to appear before the Arbitrator on  03.05.2006.   The interim order passed by the High Court shall  be honoured by all the parties till the disposal of the matter by  the Arbitrator.  Parties are at liberty to take further orders from  the Arbitrator.