Union Of India v. Narinder Singh Kanwar — 1981 DIGILAW 176 (PAT)

Judgment SATYESHWAR ROY, J. 1. The defendants are the appellants. On a reference made under an arbitration agreement, the arbitrator gave an award. After the award was filed in Court, the contractor filed an application under Sec.30 of the Arbitration Act (the Act) for setting aside the award and the same was registered as Title Suit No.11 of 1976. Union of India filed an application for making the award rule of the Court and that was registered as Title No.56 of 1975. By the impugned order the Court below has set aside the award. As two title suits arose out of the same award, Union of India have filed two appeals, Miscellaneous Appeal No.168 of 1977 (R) arising out of Title Suit No.11 of 1976 and Miscellaneous Appeal No.143 of 1977 (R) arising out of Title Suit No.56 of 1975. 2. Admitted facts are that the respondent and appellant entered into written agreement by and under which the former agreed to execute certain civil engineering works. There was clause for referring all disputes to sole arbitration of persons appointed by the Chief Engineer (C.E.) C.P.W.D. in charge of the work at the time of dispute. Disputes arose between the parties and by letter dated 15-11-1971 the contractor (respondent) submitted his claim and requested the C.E. to refer the same to arbitrator. The C.E. by letter dated 4-2-1972 referred some of the claims of the contractor and the claims of the department to the sole arbitrator of Shri M.D. Iyengar. By letter dated 5-7-1972 Shri Iyengar resigned from the case and the C.E. by letter dated 19/21-7-1972 appointed Shri B.S. Sekhon as the sole arbitrator. Shri Sekhon in his award held that the appellant was entitled to Rs. 68,453/- from the respondent. By the impugned order the Court below has set aside the award. 3. Three points were urged on behalf of the appellants in challenging the order :- (i) not giving any reasons by the arbitrator did not vitiate the award; (ii) objection regarding invalidity of reference cannot be subject-matter of an application under Sec.30 of the Act; (iii) an award cannot be set aside under Sec.30 of the Act on the ground that all claims of the respondent were not referred to arbitrator, particularly when the respondent took part in the arbitration proceeding without any objection. 4 With regard to point No. (i) it appears from the arbitration agreement that the arbitrators was not required to give reasons for his award. Mr. K. Prasad, learned counsel appearing on behalf of the respondent fairly conceded that the Court below could not have set aside award on this ground. We, therefore, hold that the order of the Court below in setting aside the award for not giving reasons by the arbitrator cannot be sustained. 5. On point No. (ii) it was submitted by Sbri D. Prasad appearing on behalf of the appellants that for challenging the award on the ground of invalidity of reference, application under Sec.30 of the Act was not maintainable. According to him the respondent ought to have filed the application under S.33 of the Act. He urged that Court below, therefore, could not have set aside the award on the ground of invalidity of reference. Reliance was placed in Basant Lal V/s. Surendra Prasad ( AIR 1957 Pat 417 ); B.S. Co-op. Batik V/s. Phosphate Company ( AIR 1975 Pat 63 ) and Ashlok Singh V/s. Jugeshwar Singh (1980 BBCJ (HC) 457) : (AIR 1981 NOC 68). In Basant Lals case a Bench of this Court held that Sec.30 of the Act speaks only of invalidity in making the award and invalidity of an arbitration reference is neither contemplated by nor included in the words of Sec.30(c) "or is otherwise invalid". In B.S. Co-op. Banks case a Bench of this Court agreed with that interpretation of "or is otherwise invalid" and held that invalidity of reference can be subject matter of an application under S.33 of the Act but not Sec.30 of the Act. Basant Lals case was again referred in Ashlok Singhs case and the Bench held that the words "or is otherwise invalid" do not include invalidity of reference. In Deep Narain Singh V/s. Mt. Dhaneshwari ( AIR 1960 Pat 201 ) and Bahadur Singh V/s. Fuleshwar Singh ( AIR 1969 Pat 114 ) also it was held that invalidity of reference cannot be challenged under S.30 of the Act. 6. With respect, if I may say so, the law laid down in those cases on that point can no longer be held to be good law. 6. With respect, if I may say so, the law laid down in those cases on that point can no longer be held to be good law. In Union of India V/s. Om Prakash ( AIR 1976 SC 1745 ) the Supreme Court interpreted the words "or is otherwise invalid" and held that the words "are wide enough to cover all forms of invalidity including invalidity of the reference". The cases of Surendra Prasad, B.S. Co-op. Bank, Deep Narain Singh and Bahadur Singh were decided before the case of Supreme Court. But unfortunately the Supreme Court case was not brought to the notice of the Bench hearing the case of Ashlok Singh. In view of the decision of the Supreme Court it must be held that under S.30 of the Act, invalidity of reference may be a ground for challenging the award. 7. This leaves us with point No. (iii). It is admitted case that the respondent made a number of claims and requested for referring all the claims. The C.E. referred only some of the claims. It was submitted on behalf of the respondent that according to clause 25 of the agreement the C.E. was required only to appoint the arbitrator and he was not required to specify the claims which the arbitrator was required to go into. It was further submitted that the C.E. was bound to refer all claims of the respondent and he had no jurisdiction to withhold from reference some of the claims. On these two grounds it was urged that the reference was invalid and the Court below was correct in setting aside the award. The Court below has held that the C.E. had no option but to refer all the claims. Since the reference was in respect of part of the claims of the respondent, the reference was a nullity; consequently the award was liable to be set aside. 8. It is true that the C.E. referred part of the claims. Clause 25 of the agreement is in a very wide term. It provides that all disputes arising out of or relating to the contract, except where otherwise provided, shall be referred to arbitration by the C.E. It was urged on behalf of the respondent that since there was no provision in the agreement for settling the disputes not referred otherwise than by arbitration, the reference was a nullity. It provides that all disputes arising out of or relating to the contract, except where otherwise provided, shall be referred to arbitration by the C.E. It was urged on behalf of the respondent that since there was no provision in the agreement for settling the disputes not referred otherwise than by arbitration, the reference was a nullity. It was submitted on behalf of the appellant that reference of part of disputes will not make the reference invalid. To my mind invalidity of reference may arise out of invalidity in the agreement itself or invalidity in the arbitration clause of the agreement. Invalidity of reference may arise if the reference made was without jurisdiction or if made by a person not competent to do or if not to the person named in the arbitration clause. What I have stated above may not be exhaustive of cases where the reference may be held to be invalid. But in this case there is no dispute with the jurisdiction of the person, namely, the C.E. who had made the reference. Therefore, there is no question that the person who referred the disputes had jurisdiction to do it. But it cannot be said that as the C.E. did not refer all disputes, the reference was without jurisdiction. Consequently, the reference in this case cannot held to be invalid. When the respondent found that the C.E. had not referred some of the disputes, it was open to him to file an application under Sec.20 of the Act for appropriate relief with regard to those disputes. 9. There is another difficulty for the respondent. He cannot be allowed to argue that the reference was invalid when he accepted it and participated in the proceeding. No objection in this regard was taken in the Court below. The Court below, therefore, was not called upon to decide an issue not raised by the parties. It was, therefore, not required to go into the question of invalidity of the reference. For all the reasons aforesaid the finding of the Court below that the reference was invalid, and consequently the award was bad cannot be sustained. 10. Mr. K. Prasad submitted that when the respondent had in big statement requested the arbitrator to decide the claim not referred to him, the arbitrator was bound to give its finding on the same. For all the reasons aforesaid the finding of the Court below that the reference was invalid, and consequently the award was bad cannot be sustained. 10. Mr. K. Prasad submitted that when the respondent had in big statement requested the arbitrator to decide the claim not referred to him, the arbitrator was bound to give its finding on the same. This according to him was a misconduct on the part of the arbitrator. It is true that in this statement the respondent had requested the arbitrator to decide that claim, but the arbitrator in his award did not decide it on the ground that the same had not been referred to him. In my opinion the arbitrator was correct in not deciding that claim. An arbitrator must act within the scope of his authority, he cannot go beyond the reference. It cannot, therefore, be held that the arbitrator misconducted himself in not deciding the dispute raised by the respondent before him, but not referred by the C.E. 11. For the reasons aforesaid the appeal is allowed, the order of the Court below is set aside and the award is made rule of the Court. UMESH CHANDRA SHARMA, J. 12 I agree.