Kumar And Kumar v. Union Of India — 1977 DIGILAW 206 (PAT)

Judgment 1. This appeal has been placed before me for hearing on account of difference of opinion between H.L.Agrawal,J. and C.S.Sinha,J. While the appeal was allowed by H.L.Agrawal,J.,it was dismissed by C.S.Sinha,J. Both the Judges, however, agreed that they would make no order as to costs in favour of the successful party. 2. The facts of the case are elaborately stated in the judgment of H. L. Agrawal. J, and I do not consider it necessary to restate them in any detail. As it appears the appellant submitted a tender in the prescribed form which was accepted by the respondent and thus there was a contract between them dated 16th of December, 1956 according to which the appellant was required to manufacture and supply certain furniture to Garrison Engineer, M.E.S. (Independent) Dinapore at Ramgarh at the rates mentioned in the document. The contract contained an arbitration clause according to which the parties were to refer all disputes as required by condition 36 to the sole arbitration of an Engineer/Officer to be appointed by the Chief Engineer, Eastern Command, whose decision was to be final, conclusive and binding. Condition No. 36 read as follows :- "All disputes between the parties to the contract (other than those for which the decision of the C. W. R or any other person is by the contract expressed to be final and conclusive) shall, after written notice by either party to the contract to the officer appointed by the authority mentioned in the tender document......" As the appellant did not supply the furniture, the C.W.E., Ranchi, on behalf of the respondent wrote a letter dated 31st of July, 1957 to the appellant informing it that the respondent would get the work done through other agency at the risk and cost of the appellant. Thereafter the respondent entered into two separate contracts with other firms who supplied the furniture and incurred extra cost amounting to Rs. 21,535/-. The Chief Engineer, Eastern Command by his letter dated 10th of July, 1959 appointed Lt. Col. J. S. Sandhu as the sole arbitrator to decide the dispute between the parties. Thereafter the respondent entered into two separate contracts with other firms who supplied the furniture and incurred extra cost amounting to Rs. 21,535/-. The Chief Engineer, Eastern Command by his letter dated 10th of July, 1959 appointed Lt. Col. J. S. Sandhu as the sole arbitrator to decide the dispute between the parties. The Arbitrator by his letter dated 15th of July, 1959 called upon both the parties to forward to him terms of reference preferably a joint statement signed by both the parties and in case they were unable to come to an agreement as to the points in dispute to be referred to him, they should forward to him separately their statements of the items in dispute with a copy to the either party. The appellant refused to submit its case to the arbitrator and took a stand that there was no legal and valid contract between the parties. It further challenged the validity of the appointment of the arbitrator. The respondent submitted its claim before the arbitrator claiming the aforesaid sum of Rs. 21,535/- being the extra cost incurred by it in getting the two contracts executed later on on the failure of the appellant to perform the same. It also claimed Rs. 500.00 as cost. As the appellant did not attend the arbitration proceeding, the arbitrator proceeded with it ex parte and made an award on 2nd of May, 1961 in favour of the respondent for the sum of Rs. 21,535/- but rejected the claim for cost. Thereafter he sent an application dated 24th of May, 1961 to the court of Special Subordinate Judge, Ranchi, for making the award a rule of the court and passing a decree in terms thereof which was received in court on 13th of June, 1961. That was registered as Title Suit No. 60 of 1961. The case was, however, transferred to Patna under orders of this court in M.J.C. No. 380 of 1962 and finally disposed of by the 3rd Additional Subordinate Judge, Patna, by his judgment and decree dated 24th of June, 1968. It also appears from the order sheet of the Special Subordinate Judge, Ranchi that both the parties had appeared before that court by 26th of March, 1962 and thus the appellant had notice of the filing of the award by that date. It also appears from the order sheet of the Special Subordinate Judge, Ranchi that both the parties had appeared before that court by 26th of March, 1962 and thus the appellant had notice of the filing of the award by that date. At any rate, the appellant must have had notice of the filing of the award before 30th of April, 1962 on which date it filed the M. J. C. No. 380 of 1962 in this Court. The appellant filed its written statement on 3rd of December, 1963 challenging the award on various grounds, namely, that there was no valid contract at all between the parties, that the arbitrator had no jurisdiction to decide the dispute as the appellant was not a party to the contract and that the arbitrator had misconducted the proceeding and did not give any award as required by the Arbitration Act (hereinafter referred to as the Act). The plea of the appellant that it was not a party to the contract was based on a statement that it was signed by one Suresh Kumar who had no authority to sign it on behalf of the firm of the appellant. The learned Additional Subordinate Judge came to the conclusion that the contract entered into by Suresh Kumar was valid and binding on the appellant and that Ajit Singh (father of Suresh Kumar) the other partner, must be deemed to be aware that there was a contract between the parties and that the award was valid and within the jurisdiction of the arbitrator and was not in any way vitiated on account of misconduct in any manner. 3. The appeal as originally filed in this court in the year 1968 was styled as First Appeal No. 583 of 1968 and a declaratory court-fee of Rs. 22.50 p. was paid on its memorandum. In the year 1970 it was converted into a Miscellaneous appeal. 4. The main arguments which were advanced by Mr. R. S. Chatterji appearing on behalf of the appellant before H. L. Agrawal and C. S. S. Sinha, JJ. were three :- (Please see para. 11 of the judgment of H. L. Agrawal, J.). (i) Suresh Kumar being only a partner of the appellant firm, could not of his own accord, agree to any arbitration agreement. R. S. Chatterji appearing on behalf of the appellant before H. L. Agrawal and C. S. S. Sinha, JJ. were three :- (Please see para. 11 of the judgment of H. L. Agrawal, J.). (i) Suresh Kumar being only a partner of the appellant firm, could not of his own accord, agree to any arbitration agreement. (ii) The contract was void because there was no mutuality of consent between the parties, (In other words, the contention was that inasmuch as the contract in question had been entered into only by Suresh Kumar, the other partners of the firm having no knowledge of the same, it could not be held that the firm was bound by the contract in question.) (iii) There was never any concluded contract between the parties. Both the learned Judges are agreed that there was no merit in any of these three contentions of Mr. Chatterji. In course of elaborating these three contentions, it appears, Mr. Chatterji canvassed a further point which has been discussed in detail in para. 17 of the judgment of H. L. Agrawal, J. The substance of the point raised by Mr. Chatterji was that the point referred to the arbitrator was not really a dispute between the parties but a claim for damages. Mr. Chatterji appears to have further contended that as the appellant had repudiated the validity of the contract itself by writing letters to the respondent, the respondent should have referred, if at all, to the arbitration the question whether the contract was valid or not and not the claim for Rs. 21,535/- on the assumption that the contract was valid. In spite of the findings recorded by him rejecting all the three contentions of Mr. Chatterji and holding that there was a concluded contract between the parties binding on the appellant, the aforesaid contention of Mr. Chatterji that what was referred to the arbitrator by the respondent was not a dispute but a claim for damages appealed to H. L. Agrawal, J. He accordingly came to the conclusion that the award submitted by the arbitrator was invalid and beyond his competence and, therefore, it should not have been made a rule of the court. Chatterji that what was referred to the arbitrator by the respondent was not a dispute but a claim for damages appealed to H. L. Agrawal, J. He accordingly came to the conclusion that the award submitted by the arbitrator was invalid and beyond his competence and, therefore, it should not have been made a rule of the court. On the other hand, C. S. S. Sinha, J. has held that since the appellant was denying the existence of a valid contract itself, any notice issued to it demanding the exact amount was not likely to serve any useful purpose and in the circumstances there was a dispute between the parties as to the amount which the respondent claimed on account of non-performance of the contract by the appellant which was valid according to the respondent and invalid according to the appellant. C. S. S. Sinha, J. has further emphasised on the fact that after the appellant challenged the jurisdiction of the arbitrator to proceed with the arbitration, the arbitrator wrote to the appellant on 6th of Oct., 1959 that it could move a court of law if it so liked but the appellant did not choose to do so and it was in these circumstances that the arbitrator had to proceed ex parte and give his award and that the arbitrator in his turn also gave opportunity to the appellant to submit statement outlining the dispute. 5. After having given anxious consideration to the judgments of the learned Judges on the point they have differed and to the arguments advanced by learned counsel for the parties, I am inclined to agree with the view taken by C. S. S. Sinha, J. As already stated, both the learned Judges are agreed that the contract was not invalid. Therefore, the award of the arbitrator cannot be held to be invalid on the ground that he has not said a single word on that question in his award. The fact that the arbitrator has given an award in favour of the respondent for a sum of Rupees 21,535/- shows that the arbitrator proceeded on the assumption that the contract was valid and as I shall show hereafter he was right in doing so. The fact that the arbitrator has given an award in favour of the respondent for a sum of Rupees 21,535/- shows that the arbitrator proceeded on the assumption that the contract was valid and as I shall show hereafter he was right in doing so. The appellant, though it sent a letter to the arbitrator challenging the validity of the contract, did not ask him to deckle that question, rather challenged his jurisdiction itself to proceed with the arbitration proceeding, thus, there was no question on which the appellant wanted a decision from the arbitrator. The only question which the arbitrator had to decide was one raised before him by the respondent and it is well settled that an arbitrator while giving an award on any dispute raised before him need not give his reasons for the award. The award cannot be held bad for want of reasons or, in other words, a finding that the contract was a valid one. C. W. E., Ranchi, on behalf of the respondent had written a letter dated 31st of July, 1957 informing the appellant that the respondent would get the work done through other agency at the risk and cost of the appellant. Nothing was pointed out to me to show that the appellant challenged the power of the respondent to do so except that it had already informed the respondent that by an earlier letter it had repudiated the contract itself. However, it has not been the case of the appellant either before the arbitrator or the court below or this Court that it admitted its liability to pay to the respondent extra cost incurred by the latter for the work done through other agency. It is obvious that had such been the case of the appellant, then it could not be allowed to challenge the claim of the respondent to realise extra cost incurred in getting the work done through other agency. Thus, there was, in my opinion, a dispute between the appellant and the respondent on this question. The language of Cl. 36 is wide and reference of such a dispute to the arbitrator fay the respondent was within its ambit. Thus, there was, in my opinion, a dispute between the appellant and the respondent on this question. The language of Cl. 36 is wide and reference of such a dispute to the arbitrator fay the respondent was within its ambit. Even H. L. Agrawal, J. admits this position when he observes : "It is no doubt true that in the arbitration agreement there may be an agreement to submit present or future difference to arbitration." As pointed out by C. S. Sinha, J., though the arbitrator wrote to the appellant on 6th of Oct., 1959 that it could move a court of law challenging the jurisdiction of the arbitrator, the appellant did not choose to do so. The arbitrator had also written to the parties that on failure on their part to submit a joint statement as to the disputes between them, either of the party could state the dispute separately and send a copy of it to the other side. In the circumstances, it must be presumed that the respondent must have sent to the appellant a copy of the letter which it wrote to the arbitrator claiming Rs. 21,535/-. The appellant did not challenge the correctness of the amount claimed by the respondent before the arbitrator. After the respondent made the claim before the arbitrator and sent a copy of it to the appellant, though the latter had challenged the jurisdiction of the arbitrator to proceed with the arbitration, in the alternative, it should have either admitted the claim or repudiated it. If it is assumed that the appellant admitted the claim, then once if is held that the contract was valid and all disputes relating to it could be referred for arbitration, the award of the arbitrator has also to be held as valid as an award on admission. On the other hand, if one proceeds on the assumption that the appellant repudiated the claim of the respondent to claim extra cost incurred by it for getting the work done through other agency, then there was a dispute between the parties on that question and the award of the arbitrator will be valid. 6. However, there is another aspect of the matter which has not been considered in the judgment of either of the learned Judges for, it appears, it was not argued before them. 6. However, there is another aspect of the matter which has not been considered in the judgment of either of the learned Judges for, it appears, it was not argued before them. Once an award is filed in court by the arbitrator under S. 14 of the Act and notice thereof is given to the parties, four courses are open to the party aggrieved by the award, viz., (i) to make an application under S. 15 of the Act for modifying or correcting an award in accordance with the provisions of that section, (ii) to make an application under S. 16 of the Act to remit the award if the objection is covered by the provisions of that section, (iii) to make an application under S. 30 of the Act for setting aside the award on the three grounds mentioned therein and (iv) to make an application under S. 33 of the Act challenging the existence or validity of an arbitration agreement or an award or praying to have the effect of either determined. Sec.17 of the Act lays down that where the court sees no cause to remit the award or any of the matters referred to arbitration for reconsideration or to set aside the award, the court shall, after the time for making an application to set aside the award has expired, or such an application having been made, after refusing it, proceed to pronounce judgment according to the award, and upon the judgment so pronounced a decree shall follow and no appeal shall lie from such decree except on the ground that it is in excess of, or not otherwise in accordance with the award. According to Art. 158 of the Limitation Act (Act IX of 1908) or Art. 119 (b) of the New limitation Act (Act No. 36 of 1963), 30 days is the period for limitation for application under the Act for setting aside an award or getting an award remitted for reconsideration, the time from which period begins to run being the date of service of the notice of the filing of the award. In the instant case the written statement of the appellant was filed much after 30 days of the date it had notice of the filing of the award. In the instant case the written statement of the appellant was filed much after 30 days of the date it had notice of the filing of the award. It was suggested on behalf of the appellant that it was the duty of the arbitrator to have determined the dispute as to the validity of the agreement for the question was raised before him. Assuming that it was the duty of the Arbitrator to decide that matter and he left a matter referred to him for arbitration undetermined, the appellant then should nave made a prayer for remitting the award under S. 16 of the Act within 30 days from the date it had notice of the filing of the award, but it failed to do so. 7. It was contended, however, by learned counsel for the appellant that really the appellant challenged the validity of the award before the court below under S. 33 of the Act and there is no limitation for an application under that section. In support of that contention reliance has been placed on a Bench decision of this Court in Deep Narain Singh V/s. Mt. Dhaneshwari, AIR 1960 Pat 201 . The question which arises for decision, therefore, is whether the written statement of the appellant can be treated as an application under S. 33 of the Act for the purposes of this case. The prayer portion of the written statement reads as follows :- "It is, therefore, prayed that the petition under S. 14 (2) of the Arbitration Act filed by Lt. Col. J. S. Sandhu, Arbitrator, be dismissed with costs or your honour may be pleased to pass such other order or orders as may be deemed fit and proper." The written statement nowhere refers to a 33 of the Act. In the case of Panchanan Pal V/s. Nani Gopal Niyogi, 1961 1 ILR(Cal) 438 it has been held that S. 33 of the Act does not extend to a case of challenge to the existence or validity of an arbitration agreement by way of defence. This case, however, further lays down that courts may ignore technicalities and treat the petition objection as an application under S. 33 where, in substance, it compiles with the terms thereof. In Deep Narain Singhs case, however, the written statements were treated as applications under S. 33 of the Act. This case, however, further lays down that courts may ignore technicalities and treat the petition objection as an application under S. 33 where, in substance, it compiles with the terms thereof. In Deep Narain Singhs case, however, the written statements were treated as applications under S. 33 of the Act. From the facts stated in the decision it is not quite clear whether in those written statements any reference was made to S. 33 of the Act or there was any prayer for deciding the question as to the existence and validity of arbitration agreement or award. Since the written statements have been referred to as applications for it is observed in para. 10 of that judgment "Even if it is assumed that such an application is governed by three years rule of limitation, the present application, so far as it challenges the validity of the reference is maintainable." I am inclined to think that necessary prayers were there in the written statements so that they could be treated as applications under S. 33 of the Act on account of substantial compliance of the terms thereof. However, even if the appellant is given benefit of the decision in Deep Narain Singhs case and its claim is not held as barred by limitation, in view of the finding that a difference as to the claim of the respondent for getting extra cost from the appellant on account of getting furniture made through other agency did arise for decision within the meaning of the arbitration clause and the arbitrator had jurisdiction to decide it, it has to be held that in such a case petition under S. 33 of the Act by the appellant would not be maintainable. If any authority is needed, I may refer to the decision of the Supreme Court in Ruby General Insurance Co. Ltd. V/s. Pearey Lal Kumar, AIR 1952 SC 119 . Rather, this decision lays down that when there is a difference as to the existence or validity of the arbitration agreement itself that question cannot be decided by the arbitrator. If any authority is needed, I may refer to the decision of the Supreme Court in Ruby General Insurance Co. Ltd. V/s. Pearey Lal Kumar, AIR 1952 SC 119 . Rather, this decision lays down that when there is a difference as to the existence or validity of the arbitration agreement itself that question cannot be decided by the arbitrator. The arbitrator cannot therefore, be said to have failed in his duty by not deciding that point and proceeding on the assumption that the arbitration agreement was valid one when the appellant did not go to a court of law for a decision of that point even though it was expressly asked by the arbitrator to do so. An application under S. 33 of the Act being not maintainable on the question the arbitrator has given his award, the decree based on the award of the arbitrator cannot be challenged by the appellant except on the ground that it is in excess of or not otherwise in accordance with the award as provided for in S. 17 of the Act. 8 In fine, I agree with the view taken by C. S. S. Sinha, J. and dismiss the appeal but without costs.