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1979 DIGILAW 288 (PAT)

Heavy Engineering Corporation Limited v. Premier Fabricators

1979-12-19

LALIT MOHAN SHARMA

body1979
Judgment Lalit Mohan Sharma, J. 1. This is an appeal under section 39 of the arbitration Act (hereinafter referred to as the Act) directed against the decision of the 2nd Additional Subordinate Judge, Ranchi, upholding an award. The appeal was heard by a Division Bench, but as the learned Judges took divergent views, it has been placed for hearing before me by an order of the Hon ble the Chief Justice. 2. There was an agreement between the appellant and the respondent for execution of certain works and a reference of certain disputes arising between them was made by them to two Arbitrators in 1972. The letter of reference by the appellant nominating Mr. K. N. Mehra at its Arbitrator is printed at page 1 of the papertook and if indicates that the dispute was on five counts, as detailed in Annexure a. The second and third items have been further divided into sub-items. The total claim made by the responded amounted to Rs.2,55,600/-. The respondent nominated Mr. S. N. Ganodia, advocate, as its Arbitrator. The Arbitrators were called upon to give a joint award on all claims "after deciding whether claims referred to at 2, 3, 4, 5 of annexure a are or are not referable to arbitration in terms of the contract. " the Arbitrators, by their order dated 6th February, 1973, held that the claims nos.2 to 5 were referable under the arbitration agreement and the parties were informed of this decision. The Arbitrator, however, could not come to an agreed conclusion about the merits of the claims and they appointed an umpire as is evident by their letter dated 2nd November, 1973 at page 6 of the paper book. The Umpire made an award directing the appellant to pay a sum of Rs.80,000/- besides interest and the court below was moved for making it a rule of the court. The case was registered as a title suit and the appellant (defendant) filed a written statement pleading that the award was invalid, inter alia, on the ground that the Umpire was under a duty to have decided, in the first instance, whether the claims under items 2 to 5 were referable to arbitration or not, which he failed to do. It is said that his right to give his decision on merits, being dependant on the preliminary question, the award is void. It is said that his right to give his decision on merits, being dependant on the preliminary question, the award is void. Objection was also taken to the grant of interest and to the lump sum award allowed against the different claims made item-wise. The court below overruled the objections and decided the proceeding in favour of the plaintiff-respondent. The defendant now has appealed. 3. When the appeal was placed for hearing before the Division Bench. Mr. K. D. Chatterjee the learned counsel for the appellant, pressed only one point in support of the appeal, namely, that the award was invalid in absence of a decision by the Umpire on the question whether the claims under items 2 to 5 were referable for arbitration or not. The court below has held that since the two Arbitrators before referring the matter to the Umpire had decided the issue in affirmative, the defendants objection had no merit. In this court, both Mr. Justice B. P. Jha and Mr. Justice B. S, Sinha, who constituted the Division Bench, held that the order dated 6th February, 1973 passed by the two Arbitrators did not dispose of the preliminary question and the entire dispute including the question of referability had to be decided by the Umpire. Mr. Justice B. P. Jha further held that by his award the Umpire must be deemed to have decided the question of referability of the items 2 to 5 is in the affirmative and his award must, therefore, be accepted as valid. Mr. Justice B. S. Sinha held that in the facts and circumstances of the present case, it was not possible to inferentially hold that the Umpire must have decided the preliminary question against the appellant in the facts and circumstances of the present case, specially when an award to the tune of Rs.80,000/- only has been made. 4. When the hearing of the case was taken up before me, Mr. K. D chatterjee again made it clear that he was challenging the award as illegai on the sole ground that the Umpire had failed to decide the question of refer ability of the claims under items 2 to 5. I suggested to both the learned counsel for the parties. Mr. K. D. Chatterjee for the appellant and Mr. K. D chatterjee again made it clear that he was challenging the award as illegai on the sole ground that the Umpire had failed to decide the question of refer ability of the claims under items 2 to 5. I suggested to both the learned counsel for the parties. Mr. K. D. Chatterjee for the appellant and Mr. Jagdish Swaroop for the respondent that the question as to whether the claims could have been validly referred to the Arbitrators or not was dependant on the arbitration agreement itself and came within the scope of Sec.33 of the act and, therefore, it is for the court to finally decide the question ; and the decision of the Arbitrators or for that matter of the Umpire cannot be final and conclusive. I invited their comments on this aspect and on merits of the question of referability with reference to the arbitration agreement itself. Both the learned counsel did not accept the proposition as correct and were of one view that I cannot decide the question, by referring to the arbitration agreement. They argued that the parties had referred the question to the arbitrators for a final and binding decision which could not be re-examined by the court. Developing the point, Mr. Swaroop contended that the parties made the Arbitrators the sole Judge for deciding the question and it will be only the Umpires decision, in the facts and circumstances of the case, which will be binding on the parties as well as on the court. The only question according to both the learned counsel for me to decide, therefore, is as to whether the Umpire will be deemed to have decided the question by necessary implication and if he has done so, the award has to be accepted as valid and binding They further pointed out that on reference, as a third Judge, my jurisdiction is limited to the difference in the opinions of the Judges constituting the Division Bench and since the proposition, I was thinking of was beyond the judgments of the learned Judges, I may refrain from deciding that point. Consistent with this stand, they did not refer to the arbitration agreement at all in their arguments. In view of the joint stand taken on behalf of the parties, I proceed to decide the sole question urged before me in the light of the submissions made. Consistent with this stand, they did not refer to the arbitration agreement at all in their arguments. In view of the joint stand taken on behalf of the parties, I proceed to decide the sole question urged before me in the light of the submissions made. I may point out at this stage that the learned Judges have not jointly formulated the question or questions on which they have disagreed but for that reason I do not think the reference to the case to me is illegal (See Mst. Rulia Devi V/s. Raguhunath prasad, 1979 B. B. C. J.49 ). 5. Mr. K. D. Chatterjee contended that the award given by the Umpire is not necessarily consistent with the conclusion that he must have held all the five claims referable as (i) he might have been under an impression that the two Arbitrators having decided the question affirmatively, he was bound by the same and was not called upon to express his opinion, (ii) alternatively he might have been of the view that only some of the four items were referable to arbitration, and (iii) he might have thought that none of the four items was referable but he could make the impugned order on the basis of the claim no.1 only. In any of these three conditions, it cannot be assumed with any celainty that the Umpire must have decided that each of the four claims, vide items 2 to 5, was referable. Mr. Swaroop, on the other hand, strenuously argued that the Umpire must be held to have given an implied decision on the preliminary question in favour of the respondents. 6. As has been stated earlier, the two Arbitrators held, before they made a reference to the Umpire, that all the claims were referable. The question as to whether that decision is binding on the Umpire or not or whether the Umpire was under a duty to come to his own decision on the point before proceeding to consider the merits of the claims is not very simple to answer and it is, therefore, not possible to assume that the Umpire must have appreciated the position correctly, namely, that it was for him to decide afresh the question of referability in the first instance. Initially, I had myself started to examine this point on mertits, when it was pointed out jointly by the learned counsel that since both Mr. Justice B. P. Jha and Mr. Justice b. S. Sinha were agreed that it was for the Umpire to have considered and decided the preliminary question, I was not called upon to express my opinion. However, when the matter was placed before the Umpire, it is conceivable that he might not have appreciated the position in the light of the views of b. P. Jha and B. S. Sinha, JJ. and there is the possibility that he might not have considered it necessary to form his opinion on the point. I, therefore, agree with Mr. K. D. Chatterjee that an inference in favour of the respondent cannot be drawn from the mere fact that the Umpire chose to give an award allowing the claims partially. The next branch of the argument addressed on behalf of the appellant also appears to be well founded. Unless only one inference is possible to be drawn from the impugned award, it is not permissible in law to arrive at a exclusion in favour of the respondent on the basis of a mere possibility of the Umpire having arrived at a decision on the preliminary question which he has not stated in express terms. I, therefore, hold that the respondent, the applicant in the court below, has failed to show that the Umpire had decided the preliminary question in its favour before proceeding to consider the claime on merits. The award must, therefore, be set aside, 7. I according agree with the conclusion arrived at by Mr. Justice b. S. Sinha and regret to have taken a view different from Mr. Justice B. P. Jha for whom I have great respect. 8. In the result, the appeal is allowed, but in the circumstances parties are directed to bear their own costs throughout. It follows that the parties may now move the court below to proceed further in the matter in accordance with the provisions of the Indian Arbitration Act.