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1981 DIGILAW 149 (GAU)

Mahamad Ali & Ors. v. Lokman Ali & Ors.

1981-12-10

B.L.HANSARIA

body1981
Hansaria, J.- This case finds me confronted with an unsolved riddle, in which the legislature could have helped much, but has not. The same relates to the boundaries bet­ween Section 30 and 33 of the Arbitration Act, 1940, for short the Act. This problematical question has arisen out of a suit filed by the plaintiffs to declare a Sulenama and the award based on it as forged and invalid. According to the plaintiffs though they had appointed proforma defendant No. 15 as Arbitrator on 15.6.68 and the arbitrator had proceeded with the matter, efforts were made by the villagers to mediate and settle the dispute. This mediation took place on 11.8.68 when certain terms were agreed upon and noted in an exercise book. These terms were subsequently manipulated and a forged Sulenama was taken before proforma defendant No. 15, who on the basis of the same, made an award on 15.10.68 about which they knew on 14.4.69 on obtaining a copy of the registered award. This led the plaintiffs to pray for declara­tion of the award as well as of the aforesaid Sulenama as forged and invalid. The learned Munsiff decreed the suit, but on appeal the same has been dismissed on the ground that the suit was premature inasmuch as no cause of action had been arisen for filing the suit which was taken to be one under section 30 of the Act. It may be stated that though the award was subsequently filed in the Court, the date of the same could not be known for definite. No notice as well of the filing of the award had been served on the parties. The learned Assistant District Judge, therefore, held that cause of action in such a case could only arise after service of notice. As the suit has been filed before such service, the same was held to be premature and as such not maintainable. 2. In assailing the judgment under appeal, Shri Laskar has urged that the suit was covered by Section 33 of the Act. According to the learned counsel this section comes into play where an award is challenged as nullity. As the suit has been filed before such service, the same was held to be premature and as such not maintainable. 2. In assailing the judgment under appeal, Shri Laskar has urged that the suit was covered by Section 33 of the Act. According to the learned counsel this section comes into play where an award is challenged as nullity. Obtaining of an award by practising fraud (which in this case on the arbitra­tor, who was presented a forged Sulenama representing it to be genuine) would make the same nullity, says the counsel This legal submission is countered by Shri Mazuradar, the learned counsel for the respondents. According to him it is Clause (c) of section 30, more particularly, the last part containing the words "is otherwise invalid" which is attracted. As per Shri Mazumdar, section 30 takes within its fold all types of attack on an award except where inter alia the factual existence of the award or the agreement is questioned. It has not been dis­puted before me by Shri Laskar that to get relief under section 30 of the Act, the award must be filed in the Court setting in motion section 14 and other related provisioni of the Act. It has been noted by me that filing of the award was regarded as a condition precedent to an order under section 30 in S. Suryanarayan vs. S. Ramchandra, AIR 1963 AP 8 . Similar view was taken in Ajmer Traders, AIR 1963 Rajasthan 87. As in this case suit had been instituted before the filing of the award in the Court, the same has to be regarded as without cause of action and premature if it be that section 30 of the Act alone got attracted in the case. 3. The point which needs to be determined relates to the ambit of interference under section 30 of the Act. Clauses (a) and (b) of this section present no difficulty for this purpose. The controversial words are "otherwise invalid in Clause (c). 3. The point which needs to be determined relates to the ambit of interference under section 30 of the Act. Clauses (a) and (b) of this section present no difficulty for this purpose. The controversial words are "otherwise invalid in Clause (c). To understand the width of this expression, it would be help­ful if the different grounds which ware available for setting aside an award under different statutory provisions at different points of time are noted For this purpose we need not tra­vel beyond the Code of Civil Procedure, 1882, although provi­sions relating to arbitration were to be found almost from the advent to British Rule right from Bengal Regulations of 1772 as the Britisher had not wisely abrogated the Indian Panchayati system. Chapter XXXVII of this Code dealt with reference to arbitration and section 521 set out the grounds for setting aside an award which read: "521. An award remitted under section 520 becomes void on the refusal of the arbitrators or umprie to reconsider it. But no award shall be set aside except on one of the following grounds (namely)- (a) corruption or misconduct of the arbitrator or umpire. (b) either party having been guilty of fraudulent concealment of any matter which he ought to have disclosed, or of wilfully misleading or deceiving the arbitrator or umpire; (c) the award having been made after the issue of an order by the Court superseding the arbitration and restoring the suit; and no award shall be valid unless made within the period allowed by the Court". The privy Council had an occasion to deal with the provisions of arbitration as finding place in this Code in Ghulam Jilani vs. Muhammad Hassan (1901) 29 Indian Appels 51. Of course the Judicial Committee was more concerned with Section 522 which had provided for drawing a formal decree following a judgment according to the award if the same was not remitted or set aside. That section had also stated: "No appeal shall lie from such decree except in so far as the decree is in excess or, or not 'in accordance with the award". By referring to these words of section 522 Privy Council stated that the intention of the legislature was to give finality to the judgment. 4. The next land mark in codification of arbitration law was the Indian Arbitration Act, 1899. By referring to these words of section 522 Privy Council stated that the intention of the legislature was to give finality to the judgment. 4. The next land mark in codification of arbitration law was the Indian Arbitration Act, 1899. Though that statute remained confined to the Presidency towns it would be useful to see as to when award could be set aside under the pro­vision of that Act. Section 14 dealt with this which read: "Where an arbitrator or umpire has misconducted himself, or an arbitration or award has been impro­perly procured, the Court may set aside the award". The next statutory mile stone is the Code of Civil pro­cedure, 1908, wherein the Second Schedule dealt with arbitra­tion. Para 15 of that Schedule dealt with grounds for sett­ing aside an award and were as below:- (1) An award remitted under paragraph 14 becomes void on failure of the arbitrator or umpire to reconsider it. But no award shall be set aside except on one of the following grounds namely- (a) corruption or misconduct of the arbitrator or umpire; (b) either party having been guilty of fraudulent concealment of any matter which he ought to have disclosed or, of wilfully misleading or deceiving the arbitrator or umpire; (c) the award having been made after the issue of an order by the Court superseding the arbitration and proceeding with the suit or after the expiration of the period allowed by the Court, or being other­wise invalid. (Emphasis supplied) (2) Where an award becomes void or is set aside under clause (I), the Court shall make an order superse­ding the arbitration and in such case shall proceed with the suit." It would thus be seen that the expression "otherwise invalid" found its place in the statute book for the first time in the Code of Civil Procedure, 1908. As per the decision of a Full Bench of the Allahabad High Court in Lutawan vs. Lachaiya, (1913) 21 Indian Cases 989, this expression had been inserted in the Code in consequence of the decision of their Lordship of the Privy Council in Ghulam Khan (supra) with the intention to give finality to the decision of arbitra­tors and to the decrees passed in accordance with law. Under the Code of 1882 or for that matter under the Arbitration Act, 1899, an objection could not be taken before the court that the award was invalid for any reason other than those mentioned in Section 521 of the Code, or Section 14 of the aforesaid Act. This had left the decrees or awards susceptible to challenge in some other proceedings. 5. The statute which holds the field to-day the Arbitra­tion Act, 1940, does not allow an award to be set aside except on the ground mentioned in section 30 which reads: "30. An award shall not be set aside except on one or more of the following grounds, namely- (a) that an arbitrator or umpire has misconducted himself on the proceedings; (b) that an award has been made after the issue of an order by the Court superseding the arbitration or after arbitration proceedings have become invalid under section 35; (c) that an award has been improperly procured or is otherwise invalid". It would be also apposite to note the relevant portion of section 33 of the Act. "Any party to an arbitration agreement or any person claiming under him desiring to challenge the existence or validity of an arbitration agreement or an award or to have the effect of either determined shall apply to the Court and.........." The Act had thus also found the words "otherwise invalid" in Clause (c), but in a different setting. This apart, sections 31 to 33 are new additions to this branch of law. Section 32 prohibits bar of suits Contesting arbitration agreement or award. The clear intention of the legislature in framing the Act was to provide a complete code insofar as disputes rela­ting to arbitration are concerned. 6. In this background we have to give full meaning to the expression "otherwise invalid" so that the intention of the law makers is not frustrated. The controversy in this regard is whether the expression "otherwise invalid” should be read ejusdem generis or not. This has attracted the atten­tion of the courts for a long time. 6. In this background we have to give full meaning to the expression "otherwise invalid" so that the intention of the law makers is not frustrated. The controversy in this regard is whether the expression "otherwise invalid” should be read ejusdem generis or not. This has attracted the atten­tion of the courts for a long time. It would be enough to first refer in this connection to the decision of Chagla, C. J. speaking for a Division Bench in A. R. Savkur vs Amrit Lal, AIR 1954 Bombay 293, where it was stated in para 6 that this expression is not to be construed "ejusdem generis", which was the view of the High Courts of Bombay, Allahabad, Madras, Lahore, Patna, Rangoon, Chief Courts of Lucknow and Sind. The only discordant note said to be struck was by the Calcutta High Court. In Saha & Co. (infra) however, which is rendering of 1955, the majority, as well as Bachawat, J. agreed that the expression is not to be under­stood ejusdem generis. Of course a rider was added by Bacha-wat J. that Clause (c) would cover all grounds of attack only when there is a valid agreement. Das Gupta, J. had however, stuck to the stand taken by him in AIR 1954 Cal. 164 . 7. Though it has been pointed out in Devendra Singh vs. Kalyan Singh, AIR 1978 Rajasthan 134 that in some subse­quent decisions namely Basant lal vs, Surendra Prasad, AIR 1957 Patna 417 and Prem Sugar (infra,) it was held that this expression has to be interpreted ejusdem generis,, this is only partially true, because according to these decisions, clause (c) would embrace all grounds of attack except where the chal­lenge is on the ground of non-existence or validity of the arbitration agreement or reference. This would be clear from the following observations in para 21 of Basant Lal: "Non-existence or invalidity, of an arbitration agreement, or reference, are not contemplated by, and, included in the words 'or is otherwise invalid' in Section 30(c) and are, as such not grounds, contemplated by, and, within the meaning of Section 30, on which an award can be set aside, under it even if the award is based on any invalid and non-existent arbitration agreement, or reference without the intervention of the Court. These words consequently should not be read ejusdem generis with the other cases mentioned in clause (a) and (b), or in the preceding words in Clause (c) of Section 30. They should be restricted to cases where an award is on one or more of the grounds mentioned in Section 30 or on grounds other than those specifically mentioned in Clauses (a) and (c) of Sec. 30, relating to the invalidity of the award.'' This decision was cited with approval in Prem Sagar (infra) which also agreed with the dissenting view of Bachawat, J. In Saha & Co. It would thus seem that all the Courts in India have now a consensus that the words "otherwise invalid" in Clause (c) should not be restricted in its meaning, in case the challenge to an award be not on the ground relating to in­validity etc. the arbitration agreement on reference. This view has prevailed despite favouring of the other view by the Privy Council in Chhaba lal vs. Kallu Lal, AIR 1946 PC 72. The reasons for this are to be found in the aforesaid judgment of Chagla, C J. and in Saha & Co. I do not propose to burden this judgment with the same. To maintain uniformity of approach and consistency of views, which has its own virtue in a judicial make shift world, I also hold that the expres­sion "otherwise invalid" cannot be given restricted meaning. 8. This takes us to the adventure of finding out relative scope of sections 30 and 33 of the Act which has been a subject matter of great controversy A detailed discussions has to be found in Saha & Co. vs. Ishar Singh, AIR 1956 Cal. 321 a deci­sion of five learned Judges. The majority (Chakravartti, C.J. Lahiri and Mukheijee, JJ.) took the view that the Act does not distinguish between an application for setting aside an award, and an application for the adjudgment of an award as nullity and does not contemplate that an application of the former kind can be made under section 30 of the Act and of the later kind under section 33. The Act contemplates, as per the majority, that all applications challenging an award must be made under section 33 irrespective of the ground of challenge (even if it be on the ground of nullity) and these applications must be for setting aside the award except in cases where the factual existence of the award is challenged. The majority was of the view that the non-existence and invalidity of the reference can be a ground of an application for setting aside an award which is based on such invalid and non-existent reference. This followed according to Chakravartti, C.J. because of the mutual inter connection between Sections 31, 32 and 33 of the Act. It was pointed out that section 32 speaks only of setting aside of an award in this connection. The expression 'set aside' was used in a wide sense according to the majority to take care of even null and void awards and not merely illegal awards. It was felt by the majority that the expression "otherwise invalid" in clause (c) of Section 30 cannot be read ejusdem generis and even nullity of an award can be a ground under this clause to set aside an award. 9. Das Gupta and Bachawat, JJ. however differed. Accor­ding to Das Gupta, J. though section 33 lays down the proce­dure to challenge the award on any ground, award based on invalid agreement or reference need not be set aside; and as such the expression "otherwise invalid" in clause (c) does not cover cases of invalid reference and the operation of the clause has to be confined to invalidity in the proceeding before the arbitrator. Bachawat, J. drew attention to certain difference in the scope of section 30 and 33 of the Act. The learned Judge held that an attack on the arbitration agreement is distinct from the attack on the award and it is so treated by the Act. Section 30 of the Act presupposes, as per Bachawat, J. valid agreement and so though clause (c) of Section 30 cannot be read ejusdem generis and would cover all grounds of attack on an award, the same would be confined to those awards which are based on valid agreements. 10. The difference in the scope of the two sections as pointed out by Bachawat, J. in paras 116 to 119 deserves special notice. To put in the language of his Lordship. 10. The difference in the scope of the two sections as pointed out by Bachawat, J. in paras 116 to 119 deserves special notice. To put in the language of his Lordship. "(116) Section 30 confers on the Court power to set aside an award. No such power is conferred on the Court by S. 33. (117) The Court cannot set aside an award under S. 30 unless the award is filed in Court but the Court may decide under S. 33 that no award exists where a document which in fact is not an award is set up as award though the document has not been filed in Court.-'Kuppuswami Chetty vs. Anantharamier, 1948 Mad. 40 (AIR V. 35) (118) Section 33 provides for a decision as to the exis­tence and validity of an arbitration agreement as to the existence of the award and as to the effect of either of them. Section 30 contains no such provision. A non­existent award e.g. an award which should be but is not registered under the Indian Registration Act cannot be set aside under section 30. 1945 Cal. 19 (AIR V. 32) at page 22. The challenge on the existence of the award may however be determined under S. 30. (119) An award which has become void under sub-Sec. (3) of S. 16 does not legally exist and the Court may so decide under S. 33 but such award cannot and need not be set aside under S. 30". 11. Following the view of Bachawat, J. in the aforesaid case, a Full Bench of Delhi High Court speaking through Kapur, J. in Prem Sagar vs. Security and Finance (P) Ltd. AIR 1968 Delhi 21 mentioned some difficulties in accepting that section 33 is only a procedural provision (See para 4 of the judgment at p. 24) Kapur, J. thereafter stated as below:- "Where the challenge to the award is on the ground of factual non existence of the arbitration agreement, the case would be one of challenge to the existence of the award in Section 33 and not to its validity in section 30, with the result that such an award will have to be adjudged as non-existent. An award on the supposition of an agreement which does not exist is void abinitio and, therefore, not worthy of notice in the eye of law for the purpose of being set aside." 12 Shri Laskar seeks to draw some assistance from this observation of Kapur, J. in this case. "If the words "otherwise invalid" in section 30 were comprehensive enough to include cases where an award was alleged to be non existent or a nullity, then the word "existence" with reference to the award in section 33 was unnecessary." Relying on this observation it is submitted by Shri Laskar that if the award be a nullity the same would come within the fold of section 33 irrespective of the ground of nullity. The other submission made is that as stated by the majority in Saha & Co. every petition for setting aside an award must be filed under section 33 of the Act and so the present suit could not have been held as one under section 30. There is simple answer to the last submission and the same is that as per the majority in Saha & Co., even void awards are to be set aside under section 30. So, what was stated by majority in that case cannot assist Shri Laskar. 13. Let it be seen whether the decision in Prem Sagar comes to the aid of the appellants. In that case the applica­bility of sections 30 and 33 of the Act was examined when a challenge was made to the award on the ground of non-oxis-tence of the arbitration agreement. In the present case there is no such challenge because it is not disputed that the parties appointed proforma defendant No- 15 as their arbitrator. The whole attack is on the ground that the Sulenanu on the basis of which it was prepared was a forged one, or that the Sulenama had been obtained by fraud. This would make the award not void, but voidable- According to me those awards alone should be treated as nullity which are founded on non-existent or invalid agreement or reference. If any fraud is played during the course of the proceedings after an arbitrator has been duly appointed, the challenge would be clearly covered by the open­ing words of clause (c) of section 30 and in any case by the expression "otherwise invalid" in this clause. If any fraud is played during the course of the proceedings after an arbitrator has been duly appointed, the challenge would be clearly covered by the open­ing words of clause (c) of section 30 and in any case by the expression "otherwise invalid" in this clause. Any other view would restrict the scope of clause (c), which cannot be conceded for reasons already alluded. 14. Because of all the above, I hold that the suit of the appellants in so far it related to the challenge to the award attracted section 30 of the Act. As it had been instituted before the filing of the award, the same was rightly held to be premature. Shri Laskar contended that as the award is before the court and as the trial court has gone into the merits of the contentions, the appellants should not be relegated to another bout of litigation to challenge the validity of the award under section 30 of the Act. The learned counsel definitely has a point but if section 30 proceeding cannot be commenced before filing of the award, can I put the cart before the horse? Here is an illustration of a technical rule throttling substantial justice. But this too, cannot defeat justice fully as in the suit the validity of the Sulenama as well was challenged and the same had been done well within the period of limitation. I do not also find any other bar in deciding the question of validity of the Sulenama in the present proceeding. 15. In the result, the appeal is partly allowed. The impug­ned judgment and decree are set aside insofar as these relate to non consideration of the controversy relating to Sulenama. The matter is remanded back to the learned Assistant District Judge No. 1 to decide the contention of the parties relating to the invalidity of the Sulenama on merits. Before parting may I say that though under section 39(2) of the Act no second appeal lies, I have not dismissed this appeal on this ground; instead, I have treated it as revision, as question of jurisdiction of the Court was undoubtedly involved.