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Debts due to the firm from persons other than partners had to be "calculated at 85 % of the book value of the firm". Ratio |
In respect of the stock of raw materials and other moveable property the "book value in the books of the firm" had to be accepted by the arbitrator and in the case of immoveable property such as buildings, godowns, gardens, lands etc. Ratio |
"the book value in the books of the firm" was to be accepted and if none such was available the purchase price as mentioned in the books was to be accepted. Ratio |
In all these matters the arbitrator had by cl. 4 of the arbitration agreement to make the final account of the retiring partners according to and taking into consideration the terms and conditions of the partnership agreement and had no option. Ratio |
It is necessary to remember that the partnership agreement does not grant to a retiring partner a share in the aggregate of the four items mentioned in cls.(a), (b), (c) & (d) of paragraph 13 i.e., goodwill of the firm, outstandings, stock of raw materials including 488 moveable and immoveable property. Ratio |
The partnership agreement merely provides that the "valuation of the firm" shall be made as set out therein for the purpose of settling the account of the retiring partners i.e., in ascertaining the.amount due to the retiring partners valuation of the assets in cls.(a) to (d) of paragraph 13 shall be made in the manner... |
The arbitrator was therefore bound to adopt the valuation prescribed by the partnership agreement, but that is not to say that the retiring partner was entitled to a share equal to the aggregate of the values of the four items mentioned in paragraph 13. Ratio |
It is neces sary to emphasize this matter because on behalf of the retiring partners a considerable argument was advanced before us on the assumption that they were entitled to a share equal to the aggregate of the values of the four items of property mentioned in paragraph 1 3 of the partnership agreement, and that by... |
Paragraph 13 merely prescribes the valuation in respect of four out of the items which had to be considered in ascertaining the "valuation of the firm". Ratio |
The phraseology used in paragraph 13 in the opening part of the paragraph makes it clear beyond all doubt that the valuation of the firm had to be made on the basis specified for the purpose of settling the account of the retiring partner. Ratio |
The specific items in paragraph 13 do not prescribe any method of valuation of the debts and liabilities of the firm, but the debts and liabilities must be taken into account in assessing the value of the share of the retiring partners. Ratio |
The arbitrator had to make a valuation of the firm i.e. of all the assets of the firm and of the debts due by the firm and thereafter to settle the account of the retiring partners. FAC |
We may now turn to the award made by the arbitrator. Ratio |
The dispute between the parties has to be resolved on a true interpretation of the following clause: "I assess the value of the goodwill at Rs. 32 lakhs. Ratio |
489 This amount includes the depreciation and appreciation of the property, dead stock and dues to be recovered. Ratio |
" (We have taken this as the correct rendering into English of the original award which is in Hindi. Ratio |
It is accepted by both the parties before us as a true rendering.) The arbitrator has, as he has observed in his award, taken only the value of the goodwill, in determining the amounts to be allotted to the retiring partners, and has not expressly referred to the valuation of the three other items, viz., the outstandin... |
Counsel for the retiring partners urged that on the admission made by Chintamanrao, the value of the goodwill alone was Rs. 21,70,650/10/and if the value of the immoveables, stock in trade etc.and outstandings be added thereto, the aggregate would considerably exceed Rs. 32 lakhs. ARG |
But this argument is founded on the fallacious assumption that the debts and liabilities of the firm have to be ignored in determining the shares of the retiring partners. Ratio |
Counsel for the respondent submitted that in substance the goodwill had alone to be valued by the arbitrator for the property, moveable and immoveable, stockin trade and the outstandings of the firm were approximately equal to the aggregate of the debts and obligations of the firm. ARG |
Reliance in this behalf was placed upon a balance sheet Ext.A 13 of the assets and liabilities of the firm, showing the financial position of the firm on April 16,1958, and the value of the tangible assets, such as the stock of raw materials, moveable and immoveable property and outstandings, according to the balance s... |
But it is not necessary for us to decide whether the submission of the respondents is correct. Ratio |
The arbitrator has in his award stated that Rs. 32 lakhs is the value of the goodwill alone, and for some reason not disclosed by him he has not valued the other 490 assets. Ratio |
He has also not disclosed in his award how he has arrived at the valuation of Rs. 32 lakhs. Ratio |
One thing, however, stands out prominently in the award, that in assessing the value of the goodwill, he has included the depreciation and appreciation of the property, dead stock and the outstandings. Ratio |
The arbitrator could undoubtedly make a lump sum valuation of the firm in the award made by him. Ratio |
He was not obliged in the absence of a direction in that behalf to set out in his award the valuation of the different components which aggregated to the lumpsum. Ratio |
The arbitrator had to "value the firm", and in doing so to abide by the specific directions, but he was not obliged to set out in the award separate valuations of all or any of the items mentioned in para 4 of the deed of reference, or in paragraph 13 of the partnership agreement, nor to set out the extent of the debts... |
What then is the effect of the inclusion by the arbitrator in the valuation of Rs. 32 lakhs, of the depreciation and appreciation of the property, deadstock and dues to be recovered? Ratio of the decisionDiverse arguments were submitted by counsel for the appellants in support of the plea that the inclusion of what is ... |
It may be re iterated that the powers of the arbitrator were, by the terms of cl. 4 of the deed of reference, clearly restricted. Ratio |
He was "to take final account of the retiring partners with regard to the matters mentioned therein, as far as possible, according to and taking into consideration the terms and conditions of the partnership agreement". Ratio |
Restriction on the power of the `rbitrator in valuing the property, dead stock and outstandings was explicit. Ratio |
He could not therefore adopt any valuation different from the valuation prescribed by paragraph 13 of the partnership agreement. Ratio |
But the arbitrator has, as he has himself stated, in valuing the goodwill at Rs. 32 lakhs included in that amount the value of the depreciation and appreciation of the property, dead stock and dues to be recovered. Ratio |
491 Counsel for the appellant submitted that reduction of outstandings of the firm by 15 % in respect of the dues from persons other than the partners was a mode of ascertaining the depreciation in respect of that item provided by cl. Ratio |
(b) of paragraph 13 of the partnership agreement, and the arbitrator in taking into consideration that depreciation has not acted outside his jurisdiction. Ratio |
It would be difficult to regard the method of valuation as prescribed in respect of the outstandings as "including depreciation". Ratio |
Even assuming that the reduction of the outstandings of the firm from persons other than the partners by 15 % as directed in cl.(b) of paragraph 13 of the partnership agreement be regarded as depreciation of the assets, inclusion of depreciation and appreciation in respect of the other assets was not permitted by the d... |
In valuing the moveable property including the stock of raw materials, the arbitrator could not adopt any valuation other than that mentioned in cl.(c) of paragraph 1 3 of the partnership agreement, namely, the book value as given in the books of the firm. Ratio |
Similarly, in the valuation of immoveables such as buildings, godowns, gardens, lands etc., he had to accept the book value as mentioned in the books of account of the firm and if no book value was available the purchase price as mentioned in the books was to be accepted. Ratio |
The arbitrator had no power to make any adjustment in respect of those items by including depreciation or appreciation in their value. Ratio |
The principle of Cruikshank and others vs Sutherland and others(1) on which reliance was placed by counsel for the retiring partners, has, in our judgment no application to this case, because in that case though there was an article of the partnership providing that the share of a deceased partner in the assets of the ... |
There was no usage or course of dealings between the partners from which an inference could be drawn that on the death of a partner his share shall be paid out on the footing of book value. Ratio |
The executors of the deceased partner claimed that his share be determined "at the fair value of the firm". Ratio |
At p. 138 it was observed by Lord Wrenbury. Ratio |
"Even if there were a usage to state an account for one purpose in one way, that is not a usage to state it for another purpose in the same way. Ratio |
There is a passage in Blisset vs Daniel (10 Hare, at p. 515) which is useful reading in this connection. Ratio |
An account stated for one purpose is not necessarily stated for another purpose. Ratio |
The fact is, that in this partnership an account has never been stated with a view to fitting the case of a retiring partner, or a deceased partner, or a senior partner who is going to exercise an option of taking over all the assets. Ratio |
The partners have never had any such event in view in making the account which they have made. Ratio |
There has never been an account prepared which was intended to meet all the various contingencies of events such as these. Ratio |
In the case before us there is no dispute that the duty of the arbitrator was to make "valuation of the firm" subject to paragraph 13 of the partnership agreement and it may even be granted that in arriving at that valuation he was not bound by paragraph 7, but on this question we express no opinion. Ratio |
But the values as mentioned in the different clauses had to be accepted in making up the partnership account in respect of the four matters specifically enumerated. Ratio |
The principle of Cruikshank 's case(1) did not apply, because the partnership agreement in this case itself provides that the book value in the books of the firm shall be accepted. Ratio |
(1) 493 The expression "book value" in the context in which it occurs in the partnership agreement means, the value entered in the books of account. Ratio |
Adoption of the book value is therefore obligatory and there is no scope of any adjustment in the value in the light of any depreciation or appreciation of the property, outstandings, stock in trade or dead stock, apart from what may actually be included in the book value, in the books. Ratio |
It is the book value alone which has to be taken. Ratio |
If the depreciation or appreciation has been taken into account by the partners in assessing the book value, that was evidently part of the book value as entered in the books of account. Ratio |
If there was no book value entered in respect of any immoveable property, the decisive value was to be the purchase price. Ratio |
It was then urged that it was for the arbitrator to adjudicate upon the true meaning of the partnership agreement and to give effect thereto, and if in making a "valuation of the firm" he was of the opinion that depreciation and appreciation in respect of certain items of assets should be included for the purpose of ma... |
But if the partnership agreement was incorporated in the deed of reference, the limits of the jurisdiction of the arbitrator must be determined by the Court and not by the arbitrator. Ratio |
By assuming that he was entitled to include, beside the value of the four items as mentioned in paragraph 13, some amount by way of appreciation in the value of those items, the arbitrator purported to set at naught the specific directions given in that behalf An award made by an arbitrator is conclusive as a judgment ... |
An award may be set aside by the Court on the ground of error on the face of the award, but an award is not invalid merely because by a process of inference and argument it may be demonstrated that the arbitrator has com mitted some mistake in arriving at his conclusion. Ratio |
As observed in Chempsey Bhara and Company vs Jivraj Balloo Spinning and Weaving Company Ltd.(" at p. 331: "An error in law on the face of the award means, in their Lordships ' view, that you can find in the award or a document actually incorporated thereto, as for instance a note appended by the "arbitrator stating the... |
It does not mean that if. PRE |
in a narrative a reference is made to a contention of one party, that opens the door to seeing first what that contention is, and then going to the contract on which the parties ' rights depend to see if that contention is sound." PRE |
The Court in dealing with an application to set aside an award has not to consider whether the view of the arbitrator on the evidence is justified. Ratio |
The arbitrator 's adjudication is generally considered binding between the parties, for he is a tribunal selected by the parties and the power of the Court to set aside the award is restricted to cases set out in section 30. Ratio |
It is not open to the Court to speculate, where no reasons are given by the arbitrator, as to what impelled the arbitrator to arrive at his conclusion. Ratio |
On the assump tion that the arbitrator must have arrived at his conclusion by a certain process of reasoning, the Court cannot proceed to determine whether the conclusion is right or wrong. Ratio |
It is not open to the Court to attempt to probe the mental process by which the arbitrator has reached his conclusion where it (1) L.R. 50 I.A. 324.495 is not disclosed by the terms of his award. Ratio |
But the arbitrator has in the present case expressly stated in his award that in arriving at his valuation, he has included the depreciation and appreciation of the property, outstandings and dead stock, and in so doing in our judgment the arbitrator has travelled outside his jurisdiction and the award is on that accou... |
The question is not. Ratio |
one of interpretation of paragraph 13 of the partnership agreement but of ascertaining the limits of his jurisdiction. Ratio |
The primary duty of the arbitrator under the deed of reference in which was incorporated the partnership agreement, was to value the net assets of the firm and to award to the retiring partners a share therein. Ratio |
In making the "valuation of the firm". Ratio |
his jurisdiction was restricted in the manner provided by paragraph 13 of the partnership agreement. Ratio |
It was next urged that the depreciation or appreciation which had been entered in the assessment of the book value were "other matters connected with" the "transactions" mentioned in the deed of reference. Ratio |
But manifestly those other matters were apart from the valuation of the goodwill, property, outstandings and the dead stock. Ratio |
It was then urged that when the arbitrator stated that he had included depreciation and appreciation of certain assets in the value of the goodwill in the award, he merely meant that such depreciation and appreciation was included as was in the circumstances permissible. Ratio |
But that would be ignoring the express recital in the award. Ratio |
In fact under the scheme of valuation envisaged by the partnership agreement and therefore the deed of reference, there was no scope for including in the valuation, appreciation of the assets. Ratio |
Again to argue, as was sought to be done, that even though the arbitrator stated that he had included in the amount of Rs. 32 lakhs "the depreciation and appreciation" of the property, dead stock and dues, there being no power to include appreciation, appreciation in the property and the 496 dead stock could not have b... |
It was also urged that the expression depreciation and appreciation had no such meaning as decrease or increase in the market value of the property, ,dead stock and outstandings, and the clause merely meant that in fixing the valuation such depreciation or appreciation as had gone into the assessment of the book value ... |
But the arbitrator has not said that he merely took into consideration the depreciation and appreciation which went into the book value assigned by the partners to the assets in the account: he has clearly stated that he had included the depreciation and appreciation in those assets in the valuation of the goodwill. Ra... |
Finally it was urged that the recital about the inclusion of depreciation or appreciation was a mere surplusage and should be discarded. Ratio |
But it would be difficult to regard a statement made by the arbitrator relating to what he says he had included in the valuation of the goodwill, as a mere surplusage, especially having regard to the orders made by him insisting upon the production of documentary evidence and certain books of account from Chintamanrao.... |
It may be pointed out that by cl. 7 of the deed of reference very wide powers were conferred upon the arbitrator to call upon the disputing parties to produce the accounts etc. which the arbitrator desired and to produce any other papers or documents which the arbitrator would like to inspect, and to reply to any enqui... |
The orders passed by the arbitrator in exercise of these powers tend to indicate that in his view he was competent to ascertain and include in the valuation of the firm the depreciation and appreciation on the various items which were taken into account in arriving at the valuation. Ratio |
By order dated September 16, 1958, the arbitrator gave direction, amongst 497 others, to Chintamanrao to file a statement of houses etc.of immoveable property, valuation of the same as shown in the books of account, i.e. figures regarding it, and "also the approximate value statement as it existed" at the date of deman... |
In the note to the order, it was stated that Chintamanrao had produced certain papers but they were incomplete, and therefore he was ordered to bring copies of the incomplete papers and also those papers which were not sent by him. Ratio |
On October 10, 1958, Chintamanrao produced a statement of the net profits of the five years preceding the date of dissolution which he called the price of the goodwill for Samvat years 2009 to 2013. Ratio |
The aggregate of the net profits was Rs. 21,70,650/10/which he called "price of the goodwill". Ratio |
He then submitted a statement of the outstandings of the different shops aggregating to Rs. 9,16,366/ and the value of the goods purchased, and other property, and submitted that the total value of the goodwill of the firm by taking into account the profits of the firm for the last five years "as per the statement file... |
On December 2, 1958, an application was filed by Chintamanrao inviting the attention of the arbitrator to the agreement of reference and to the terms of the deed of partnership, especially paragraphs 7 and 13, and submitting that the book values of items (2) to (5) in paragraph 4 of the agreement of reference were alre... |
On this application an order was passed on December 5, 1958, by the arbitrator that the inspection of the books of account do start on December 21, 1958, in his presence at Sagar in the office of Messrs Virajlal Mannilal and Company and that Chintamanrao do 1 SCI/64 32 498 make arrangements for giving inspection of all... |
On December 22, 1958, another application was submitted by Chintamanrao stating that it was not necessary to produce certain registers and manufacturing accounts and that the orders in that behalf were beyond the jurisdiction of the arbitrator and that he was unable to produce the ,documents demanded. Ratio |
It was submitted by that application that the kind of inspection claimed and granted amounted to re opening of the accounts for the last five years which were closed with the consent and to the knowledge of all the partners and which could not in law be re opened. Ratio |
On December 23, 1958, an application was made by Amrat Lal son of Jivraj (one of the retiring partners) submitting that the arbitrator had to value the goodwill and this had to be done by ascertaining the value of the profits of the five years, and for that purpose the arbitrator was entitled to ascertain yearly profit... |
On these applications on December 25, 1958 the arbitrator gave a direction that Chintamanrao do produce the papers mentioned in item No. 2 in the order dated September 16, 1958, namely, the gross and net profits of the last five years, and that he do produce the other papers which were ordered to be produced by the ord... |
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