STATE v. SAGARMULL AGARWALA — 1984 DIGILAW 7 (SIK)

A. M. BHATTACHARJEE, J. ( 1 ) JUDGMENT : - The learned District Judge having upheld the award passed in favour of the respondent contractor against the Sikkim Public Works Department, the State of Sikkim representing the Department has come up in appeal against the order of the District Judge. It appears that on an application filed under S. 8, Arbitration Act, 1940, by the respondent-contractor for the appointment of an arbitrator, the learned District Judge has, by his order dt. 30-4-1980 passed in Misc. Case No. 43 of 1980, not only appointed an arbitrator but has further referred two items of disputes to the arbitrator for arbitration. It is obvious that under Section 8 of the Arbitration Act, the Court is empowered to appoint an arbitrator in the circumstances mentioned therein, but has no power to make a reference to arbitration and any such reference being ultra vires S. 8 is invalid and without jurisdiction. Mr. N. B. Kharga, and then Mr. B. C. Sharma, the learned Advocates appearing for the appellant State at different stages, have accordingly urged that the award of the arbitrator in this case, having been made in pursuance and on the basis of such invalid and ultra vires order of reference, is also equally invalid and ultra vires. ( 2 ) THAT an order of reference by Court on an application made to it for appointment of an arbitrator under S. 8, Arbitration Act, is without jurisdiction is so obvious from a plain reading of the provisions of S. 8 that reference to the decision of the Supreme Court in Union of India v. Om Prakash AIR 1976 SC 1745 at p. 1748 as an authority for such proposition may not be necessary. But reference to that decision may still be necessary for the further proposition laid down therein (at 1749) that an award passed pursuant to and wholly depending on such reference alone is invalid and is liable to be set aside under S. 30, as the said decision has overturned the contrary view of some of the High Courts on this point. ( 3 ) I have no doubt that if the impugned award in this case is grounded on such invalid reference alone and cannot fall back upon anything else for its survival other than that reference, it must be set aside. ( 3 ) I have no doubt that if the impugned award in this case is grounded on such invalid reference alone and cannot fall back upon anything else for its survival other than that reference, it must be set aside. But from the facts on record I have not been able to hold that the award stands and can stand on such reference simpliciter so that the invalidity of the reference cannot but vitiate this award. It is not disputed that the disputes determined by the arbitrator are nevertheless covered by the arbitration agreement between the parties and neither Mr. Kharga nor Mr. Sharma appearing for the appellant could urge to the contrary. It also appears from the order dt. 30-4-1980 in Civil Misc. Case No. 48 of 1980, whereby the arbitrator was appointed and two disputes only were referred to him by the Court, that on the very first day of appearance before the District Judge on receipt of notice of the application filed by the respondent-contractor under Section 8, Arbitration Act for appointment of arbitrator, the appellant's concerned department itself suggested the name of the present arbitrator to which the respondent also agreed and the arbitrator was accordingly appointed by the Court. Assuming that only two items were referred by the Court to the arbitrator but the latter decided other items also over and above those two, the reference itself being without jurisdiction, the appellant could have moved this Court in revision for quashing the said order. But instead of and far from doing so, the concerned department, as noted by the learned District Judge in the judgment under appeal and as would also appear from the records of the arbitrator, voluntarily participated without protest in the arbitration of all the disputes determined by the arbitrator. It is true that the arbitrator derives his jurisdiction from the reference made to him. And if the department thought that the reference was ultra vires or, that, at any rate, the arbitrator could not decide matters beyond the scope of the reference, the department could have objected and refused to participate in the arbitration or in the determination of those extra-reference matters or could have participated therein under protest and could have then challenged the award. But as the department has all along participated in the arbitration voluntarily and without protest, the parties, participating, that is, of the department and of the contractor must be deemed to have made reference to arbitration in respect of all the disputes determined by the Arbitrator in which they participated, even though the order of reference made by the Court was beyond jurisdiction, or even though the arbitrator was deciding matters outside the scope of such reference. It may be that when a competent reference is made by the Court under S. 20 (4) in an arbitration with the intervention of a Court under Chap. III or under S. 23 in an arbitration in suit under Chapter IV, the parties by their participation in extra-reference disputes cannot enlarge the scope of the reference. Reference in this connection may be made to the decision of the Supreme Court in Orissa Mining Corpn. v. Premnath Vishwanath, AIR 1977 SC 2014 at p. 2017 which was a case of reference by Court under S. 20 (4) and such a reference cannot be enlarged by acts of the parties or of the Arbitrator. But where, as here, the arbitration is without the intervention of Court under Chap. II, and the Court while appointing an Arbitrator under S. 8, has erroneously made an order of reference also which is without jurisdiction, nothing should prevent the parties to take their disputes to the arbitrator so appointed, and if the disputes are covered by the arbitration agreement and the parties go on participating in the arbitration voluntarily and without protest, the parties shall be deemed to have made a valid reference of all those disputes to the Arbitrator. ( 4 ) WHILE an arbitration agreement must, in view of S. 2 (a), be in writing, a reference to arbitration under such an agreement is not required to be in writing. It is true that, as pointed out by the Supreme Court in Waverly Jute Mills v. Raymon and Co. AIR 1963 SC 90 at pp. 97-98, an arbitration agreement being the very foundation of jurisdiction of the Arbitrator, he cannot assume jurisdiction to determine disputes not covered by the agreement, even though the parties before him voluntarily participated in their determination unless there is a fresh arbitration agreement covering those disputes. But in an arbitration under Chap. AIR 1963 SC 90 at pp. 97-98, an arbitration agreement being the very foundation of jurisdiction of the Arbitrator, he cannot assume jurisdiction to determine disputes not covered by the agreement, even though the parties before him voluntarily participated in their determination unless there is a fresh arbitration agreement covering those disputes. But in an arbitration under Chap. II without intervention of Court, if the arbitration agreement covers the disputes in which the parties have participated before the Arbitrator voluntarily and without protest, the Arbitrator would have jurisdiction to decide those disputes, even though no formal reference was made or the initial reference did not include them, as in that case the parties shall be deemed to have made a reference of those disputes by their acts of voluntary participation without protest. ( 5 ) A notice in this case was sent to the then Additional Advocate-General of Sikkim to appear and to assist the Court in deciding the questions of law involved and Mr. A. Deb, now the Advocate-General of Sikkim, has appeared in response to that notice and has rendered admirable assistance. The learned Advocate-General has invited me to consider as to whether the department could at all be regarded to have participated in the arbitration voluntarily and without protest in view of the order passed by the Court referring the disputes to the Arbitrator. The learned Advocate-General has contended that even if under the law voluntary participation in the arbitration in respect of disputes not covered by the arbitral reference might make out a reference or enlarge the scope of one already made, the concerned department in this case submitted to the arbitration, not out of its volition but, being directed by the order of reference made by the Court. While appreciating the force of the contention made by the learned Advocate-General, I am unable to accept the same on the facts and circumstances on record. While appreciating the force of the contention made by the learned Advocate-General, I am unable to accept the same on the facts and circumstances on record. As already noted, the appellant's department concerned itself, on the very first date of its appearance on receipt of notice of the application filed by the respondent-contractor under S. 8, Arbitration Act for appointment of Arbitrator, suggested the name of the present Arbitrator, and has all along participated in the arbitration before him without any protest either on the ground that the reference was incompetent or that some of the matters were outside the scope of reference or on any other ground and that being so, I have no reason to think that the participation by the appellant's department in the arbitration proceeding was not voluntary but was under compulsion. ( 6 ) AS already noted, in Union of India v. Om Prakash (AIR 1976 SC 1745) (supra), the Supreme Court has ruled that an order of reference made by the Court on an application for appointment of Arbitrator under S. 8, Arbitration Act is without jurisdiction and an award made on the basis of such ultra vires reference is invalid and is liable to be set aside under S. 30 of the Act and this is binding or me not only by reason of its authority but by the authority of its reasons also. But as will appear from para 2 of the judgment, the Respondent-contractor in that case did not take part in the proceedings before the Arbitrator and that, in my view, would distinguish the Supreme Court decision making its ratio inapplicable to the present case. As I see it, though a reference by a Court under S. 8 on an application for appointment of an arbitrator is without jurisdiction, an award made pursuant to such a reference in an arbitration without the intervention of Court under Chap. II can still be sustained if the award is on matters covered by the Arbitration agreement and all the parties participated in the arbitration voluntarily and without protest, and, in my view, such voluntary and wilful participation by the parties in arbitrations without intervention of Court can make out a valid reference, where there is none and can enlarge the scope of the reference where there is one, as an arbitral reference need not be expressed in writing or in any particular form. ( 7 ) THE law is well-settled by a myriad of precedents that the Court must approach an award with a desire to support it, if that is reasonably possible, rather than to destroy it by calling it illegal. If two views are reasonably possible, one supporting and the other invalidating an award, the former is to be preferred and adopted As stated at the outset, an invalid reference would vitiate an award if the same stands solely on such reference. But since, in my view, the award in this case can also stand on the reference made by the parties by their voluntary participation without protest in the determination of all the disputes determined by the arbitrator and all such disputes are duly covered by the arbitration agreement, I would maintain the award. As I have already stated hereinbefore, an arbitral reference in an arbitration without intervention of a Court under Chap. II of the Arbitration Act need not be in writing but may be made out by voluntary participation in the arbitration. The appeal is accordingly dismissed but without any order as to costs. Appeal dismissed. Uttaranchal High Court 2004 2004 --- *** --- .