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1948 DIGILAW 259 (CAL)

Hansraj Bajaj v. Chunilal and Co.

1948-12-20

body1948
JUDGMENT Banerjee, J. - The only point pressed in this application is that the award made by the Bengal Chamber of Commerce, dated August 2, 1948, is invalid and should be set aside. 2. The case turns on the construction of the words "entering on "the reference", in Rule 25 of the Rules of the Tribunal of Arbitration, Bengal Chamber of Commerce. 3. The facts shortly are these: By a contract in writing dated December 16, 1946, the Petitioner agreed to buy and the Respondents to sell certain goods. The contract contained an arbitration clause. There were disputes between the parties arising out of the contract. In terms of the arbitration agreement, the Petitioner made an application for arbitration to the Chamber, and on March 10, 1948, filed his statement of case. The application for arbitration was addressed to the Registrar as is required by the rules of the Tribunal. The Registrar, in the course of his duty, received the application, and on March 18, 1948, informed the Respondents that the Petitioner had applied for arbitration and asked them (the Respondents) to send the statement of their case: "I shall be "glad to receive in duplicate, your statement of the case". 4. The duties of the Registrar are defined in Rule 4 of the said Rules. They are, inter alia, to receive application to the Tribunal, to appoint the arbitrator or arbitrators, who will constitute the court, to deal with any dispute, to communicate to the parties the orders and directions of the court. 5. The Registrar, by a letter dated March. 27, 1948, gave notice to the Respondents to send their statement. The material portion of the letter is this: I am directed by the Court, which has been constituted to adjudicate on the dispute, to give you notice, which I hereby do, to send in your statement and papers on or before April 6, 1948, after which date the arbitration will be proceeded with on the evidence before the Court. 6. On April 10, 1948, the Registrar, under direction of the court, sent notices to the parties "that the arbitration will now "proceed". 7. 6. On April 10, 1948, the Registrar, under direction of the court, sent notices to the parties "that the arbitration will now "proceed". 7. It is unnecessary to give further dates in the history of the arbitration proceedings save and except that, on June 18, 1948, the court, which was constituted to adjudicate the dispute, took evidence and on June 26 of that year, gave notice to the Respondents to produce certain documents in support of their case. 8. On July 22, 1948, the Registrar gave notice to the parties that-- under the provisions of Rule 7, on Thursday, July 22, 1948, I duly constituted another court to adjudicate upon this dispute. 9. This court, which I shall call in my judgment the second court, made the award which is sought to be set aside. 10. The award is assailed on three grounds: (i) that the award is not final; (ii) that the second court was not properly constituted and (iii) that material evidence was not taken by the court. 11. Ground No. 1 was not pressed. With regard to ground No. 3, counsel for the Petitioner frankly admitted that the evidence was neither produced before the court nor tendered. I, therefore, do not think there is any substance in this contention. 12. As to ground No. 2, the question is: "Was the second court "properly constituted ?" If the second court was not properly constituted, the award must be held to be invalid. 13. For a solution of this problem we must turn to certain rules of the Tribunal of Arbitration. Rule 25 reads: The court shall make its award in writing within four months after entering on the reference or on or before any later day to which the court, with the consent of all parties concerned in the proceedings, by any writing signed by them, may from time to time enlarge its time therefor or any extension of time granted by the Court of Judicature at Fort William in Bengal. 14. There is a proviso which is not material to be stated. 14. There is a proviso which is not material to be stated. Rule 7 runs as follows: If the court have allowed the time or extended time to expire without making any award and without having signified to the Registrar that they cannot agree, the Registrar shall constitute in manner aforesaid another court which shall proceed with the arbitration and shall be at liberty to act upon the record of the proceedings as then existing and on the evidence, if any, then taken in the arbitration or to commence the arbitration de novo. 15. It is clear from these rules that the Registrar can constitute a second court when the time mentioned in Rule 25 expires, but not before that. That time is counted from the date when the court "enters on the reference", or any extended date within the meaning of Rule 25. We are not concerned here with any extension of the date. 16. The question therefore is: What is the meaning of this expression, "entering on the reference"? 17. In Russell on Arbitration (12th Ed.), p. 351, it was said-- Arbitrators do not enter on the reference by mere acceptance of the appointment, or by giving a peremptory notice for a meeting, nor until they begin judicially to enquire into the case. 18. As authority for this proposition, two cases were cited: Baker v. Stephens (1867) L.R. 2 Q.B. 523; In re Varipati and Co. and Olympia Oil and Cake Company Limited. (1914) W.N. 208. 19. This passage is wanting in the subsequent edition of Russell by reason of repeal in 1934 in England of para, (c) of the first schedule to the principal Act, which ran as follows: The arbitrators shall make their award in writing within three months of the entering on the reference.... 20. By virtue of Section 6(3) of the Act of 1934 in England, there is now no time limit in which an award is to be made. 21. But that does not make any difference in the case before us, having regard to the wording of the rule we have to construe. We can still read the English cases cited above for guidance. 22. In Nanda Kishore Goswami v. Bally Co-operative Credit Society Ltd. ILR (1943) Cal. 431, 434-5 it was held: An arbitrator cannot be said to enter on the reference, the moment that he is appointed an arbitrator. We can still read the English cases cited above for guidance. 22. In Nanda Kishore Goswami v. Bally Co-operative Credit Society Ltd. ILR (1943) Cal. 431, 434-5 it was held: An arbitrator cannot be said to enter on the reference, the moment that he is appointed an arbitrator. It is necessary that he must actually begin the work in the presence of the parties or with notice to them before he can be said to have entered on the reference. 23. In Sardar Mal, Hardat Rai v. Sheo Bakhsh Rai, Sri Narain ILR (1922) All. 432, the proposition of law laid down in Baker v. Stephens (supra) was referred to. 24. Relying on these authorities, counsel for the Petitioner contends that the date in this case when the court "entered on "the reference" was March 27, 1948, if not July 22, 1948. If either of these dates is taken as the date the court entered on the reference, it is clear that the second court was constituted by the Registrar before the expiry of the time mentioned in Rule 25. 25. It is urged on behalf of the Respondents that, under the rules of the Tribunal, "entering on the reference" has a different meaning. Learned counsel for the Respondents contends that, under the said rules, the court "enters on the reference" when the first statement of the case is sent to the Registrar and from this point of view urges that the date when the court "entered "on the reference" was March 18, 1948, if not March 10, 1948. No other date was mentioned or suggested by counsel of the parties as the date of "entering on the reference". Counsel for the Respondents refers to Rules 5 and 15 in support of his contention. Rule 5 consists of four parts: (i) Applications for arbitration; (ii) The Registrar, on receipt of application, to constitute a court for the adjudication of the dispute; (iii) arbitrators to have practical knowledge; and (iv) Names of arbitrators or umpires. 26. Rule 15, I set out in extenso: The dispute will normally be decided by the court on the written statements of the parties and oral evidence will not be taken nor will the parties be entitled to appear or any formal hearing be held. 26. Rule 15, I set out in extenso: The dispute will normally be decided by the court on the written statements of the parties and oral evidence will not be taken nor will the parties be entitled to appear or any formal hearing be held. The court shall have power, however, if it thinks fit, to appoint a time and place for the hearing of the reference and to hear oral evidence. 27. I do not find any suggestion in any of these rules why "entering on the reference" would have, under the rules, a meaning as suggested by counsel on behalf of the Respondents. I am, therefore, unable to accept the contention urged on behalf of the Respondents. The true rule, on the authorities, seems to be this,--in the words of Cockburn C.J., in Baker v. Stephens (supra): The arbitrator actually enters upon the reference, not from the time that he merely takes upon himself the office of arbitrator by accepting the reference, but from the time he takes upon himself and exercises the functions of arbitrator. 28. We cannot say that the arbitrator enters on the reference until he takes some step judicially to enquire into the case. 29. In this connection I would like to read a very recent case: Lossifoglu v. Coumantaros (1941) 1 K.B. 396. In this case the contract provided that, should any dispute arise between the parties to the contract, it should be referred to two persons in London, one to be appointed by each of the parties thereto and that "in case "the arbitrators so appointed disagree they shall appoint an "umpire". A dispute having arisen between the parties, each of them appointed an arbitrator. One of the arbitrators appointed attempted to arrange a meeting with the other arbitrator, but without success. The buyer served a notice upon the arbitrators to appoint an umpire within seven days, but no appointment was made. A dispute having arisen between the parties, each of them appointed an arbitrator. One of the arbitrators appointed attempted to arrange a meeting with the other arbitrator, but without success. The buyer served a notice upon the arbitrators to appoint an umpire within seven days, but no appointment was made. An application was then made by the buyer to the court u/s 5 of the Arbitration Act, 1889, to appoint an umpire, to which the objection was taken by the sellers that no disagreement had arisen between the arbitrators as they had not entered upon the reference: Held, by the Court of appeal in England (Scott, Mackinnon and Luxmoore L. JJ.)--that the arbitrators entered upon the reference as soon as they accepted their appointment and communicated with each other about the reference and that therefore, there being a disagreement between the arbitrators with reference to the conduct of the reference, the court was entitled to appoint an umpire u/s 5 of the Arbitration Act, 1889. This case is most favourable to the Respondent's contention, but, even here, I find that some step was taken in the reference by the arbitrators in exercise of their function as arbitrators. 30. In the present case, I find that, on March 10, 1948, only a statement of case was filed and on March 18, 1948, the Registrar fiends an information to the Respondents for sending their statement of case. 31. In this letter of March 18, 1948, there is no reference even to any court or of any direction of a court, as there is in the letter of March 27, 1948. 32. In the circumstances, I am unable to hold that the court "entered on the reference" before March 27, 1948. 33. In the view I have taken, I hold that the Registrar constituted the second court before the expiry of the time mentioned in Rule 25. The award, therefore, was made by a court not properly constituted and as such, is invalid. I, therefore, set aside the award. The Petitioner is entitled to the costs of this application. 34. I think I should append a note to this judgment. After I had delivered the judgment Mr. The award, therefore, was made by a court not properly constituted and as such, is invalid. I, therefore, set aside the award. The Petitioner is entitled to the costs of this application. 34. I think I should append a note to this judgment. After I had delivered the judgment Mr. G.P. Kar, counsel for the Respondent, said that, at the instance of his clients, under a subpoena, the records of the arbitration proceedings had been brought from the Bengal Chamber of Commerce to this Court in a sealed cover and that I should open the cover and look into the records. That was rather an unusual request to make. I felt, however, that in the interest of justice the cover should be opened and papers read. I thought no party in this Court should suffer for the remissness of his lawyer. Accordingly, under my direction, the seal was broken and the cover opened. The records were handed over to Mr. Kar and I asked him to draw my attention to such document as he thought would help his clients. Mr. Kar then said that since judgment had been delivered he did not desire to place any other document from the records before him. I was rather taken aback. However, I went through the records myself. So far as is material to this case, I found in the records the letter of March 18, 1948, a copy of which, is annexed to the petition. Then there is a letter of March 22, 1948, from the Respondents to the Registrar, Bengal Chamber of Commerce thanking the Registrar for his letter of the 18th inst and sending Rs. 50. There is no other document in the records which is of any assistance to the Respondent. 35. I do not think my judgment should in any way be modified.