Even Non-Signatory Family Members Are Bound By Consent Award Executed By Heads Of Family: Gujarat High Court

The Gujarat High Court held that once heads of two families amicably resolve disputes through composite family arrangement and a consent arbitral award, individual family members cannot later challenge the award even if they were non-signatories on grounds of non-receipt of a signed copy of the award or lack of individual consent. A bench comprising Chief Justice Sunita Agarwal and Justice D.N. Ray held that family arrangements if executed bona fide and voluntarily are binding on all members represented in the proceedings and that the delay beyond the statutory period under section 34(3) of the Arbitration and Conciliation Act, 1996 (Arbitration Act) cannot be condoned. It held that “the challenge to the consent award on the ground that the consent terms were not signed by the appellants cannot be sustained. The family settlement and consent award are binding on all parties”. Background: The award was based on a consent settlement agreement executed between two brothers who had inherited properties and businesses from their father. Both parties executed a Memorandum of Agreement (MOA) / Family Arrangement where it was recorded that they sought “to divide the joint businesses and properties in such manner that each party gets exclusive ownership and control of distinct business and property without any co-interest or share of the other party.” The Appellants submitted that since they were not parties to the consent terms, the consent award should be set aside. It was further submitted that since they did not receive a signed copy of the award, the limitation period had not commenced under section 34(3) read with section 31(5) of the Arbitration Act. Lastly, it was submitted that the family settlement and the award were executed under coercion and misrepresentation. Per contra, the respondent submitted that the appellants were duly represented by their father who held valid powers of attorney and was authorised to represent them in all legal proceedings including arbitration. Findings: The court rejected the appellants' contentions regarding non-representation holding that they were effectively represented by their family head Chandrajitbhai who signed the settlement agreement and later the consent award on behalf of all family members. The court held that “The fact that the consent terms dated 19.05.2016 were not signed by the appellant, Tithi C. Shah, would not be relevant in the facts and circumstances of the present case… The family members of Chandrajitbhai were duly represented before the Arbitral Tribunal through him, the head of the group.” On limitation, the court held that the delivery of a signed copy of the award to the family head was a sufficient compliance with section 31(5) of the Arbitration Act and therefore the limitation period began from that date. It held that “the words 'each party' under Section 31(5) are to be understood in context. Here, 'each party' means the representatives of the two family groups. The limitation for filing an application under Section 34 would reckon from the date of delivery of the signed copy of the award upon Chandrajitbhai, representing his group.” The court found the appellants' plea that they became aware of the award only in 2020 to be false as the power of attorney empowering their father to act concerning the arbitral award had been executed in 2016 itself. Relying on Kale v. Director of Consolidation, the court held that family arrangements executed to maintain harmony are governed by special equity and must be upheld even if they were not signed by every member individually. The court in Kale held that “Family arrangements are governed by a special equity peculiar to themselves and would be enforced if honestly made… The courts have always leaned in favour of upholding family arrangements rather than disturbing the same on technical or trivial grounds.” On Hetalben's plea that she executed the MOA under pressure and emotional blackmail, the court found her statements contradictory as she in the pleadings had stated that both heads of the groups signed the settlement agreement after much deliberations and discussions before the tribunal. It held that “Once this is an admitted fact, the challenge to the arbitral award on the premise that the appellant was not a party to the settlement agreement is wholly unacceptable.” The court concluded that “the challenge to the consent award on the ground that the consent terms were not signed by the appellants cannot be sustained. The family settlement and consent award are binding on all parties, and the applications under Section 34 were hopelessly barred by limitation.” Accordingly, the present appeals were dismissed. Case Title: TITHI CHANDRAJIT SHAH Versus RAJENDRABHAI ALIAS SAMIRBHAI NATVARLAL SHAH & ORS Case Number: C/FA/1903/2022 Judgment Date: 13/10/2025 Click Here To Read/Download The...

Even Non-Signatory Family Members Are Bound By Consent Award Executed By Heads Of Family: Gujarat High Court

Mohd Malik Chauhan

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Even Non-Signatory Family Members Are Bound By Consent Award Executed By Heads Of Family: Gujarat High Court

Mohd Malik Chauhan

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