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1985 DIGILAW 37 (MP)

Bharat Aluminium Company Ltd. , Korba v. Hukum Chand Stone and Lime Co. , Katni

1985-01-11

C.P.SEN, S.AWASTHY

body1985
JUDGMENT : C.P.Sen, J. ( 1. ) This is an appeal under section 39(1) of the Arbitration Act, 1940, against the judgment of the Court below making the award rule of the Court under section 17 of the Act. ( 2. ) The appellant is a Government company registered under the Companies Act. The entire share capital is owned by the Union of India. The company is engaged in production and sale of Aluminium in various categories, having its factory at Korba in district Bilaspur. The General Manager of the Aluminium plant at Korba invited tenders for supply of lime. The tender of the respondent was accepted and 5 purchase orders were issued to him on 12-9-1978, 12-2-1979, 20-2-1980, 23-2-1980 and 13-3-1981. The contracts were governed by the terms and conditions of the agreement and the tender notice. It was stipulated that the lime to be supplied was to be of specified quality given in the purchase orders and 90 to 95 percent of the purchase price was to be paid b\ the appellant in advance through bank and the balance was payable on receipt and acceptance of material at the site by the appellant after sampling and analysing the material in order to ascertain its quality. The decision of the Inspecting Officer or any other person nominated by the purchaser as regards the quality and quantity of supplies made was to be treated as final. The purchase orders also, inter alia, provided the price to be fixed by the buyer of the lime supplied which fell below the required specification and quality. The decision of the appellant regarding sampling and analysing was also treated to be final and binding. The purchase orders also, inter alia, provided the price to be fixed by the buyer of the lime supplied which fell below the required specification and quality. The decision of the appellant regarding sampling and analysing was also treated to be final and binding. Clause 24 of the Standard Conditions of Contract provided as under : - "In the event of any dispute or difference between the purchaser and the contractors as to their respective rights and obligations of the parties hereunder or as to the true intent and meaning of these presents and of any articles or conditions thereof such disputes or difference of opinion {except the matter regarding which the decision has been specifically provided for in the terms of the contract) shall be referred to the sole arbitration of an officer who shall be nominated for the purpose by the C. M. D. Bako/General Manager (Korba) for the time being, as the case may be and his decision shall be final, conclusive and binding on the parties." The respondent by its letter dated 24-6-1982 claimed a sum of Rs 5.21,320.67 p. from the appellant. This claim was rejected and the appellant informed the respondent that on the other hand it has to pay a sum of Rs. 3,73,447 to the appellant. The respondent by its letter dated 29-11-1982 appointed one L. P. Singh as the sole arbitrator and he in turn gave notice to the appellant to appear and submit its claim. The appellant did not recognise the arbitrator so appointed and did not participate in the proceedings before him. However, on 18-3-1983 L. P. Singh gave an ex parte award of Rs. 18,52,049.11 p. in favour of the respondent. The respondent then filed an application under section 14 of the Act in the trial Court for directing the Arbitrator to file the award and to make the award rule of the Court. The Arbitrator filed the award in the Court on 8-4-1983. The Court issued a notice of the filing of the application on 7-5-1983 which was received by the appellant on or about 2-6-1983. The appellant put in its appearance on 16-6-1983 and was supplied with a copy of the application on that day as it was not furnished along with the notice. The Court issued a notice of the filing of the application on 7-5-1983 which was received by the appellant on or about 2-6-1983. The appellant put in its appearance on 16-6-1983 and was supplied with a copy of the application on that day as it was not furnished along with the notice. On 13-7-1983 the appellant filed an application under section 30 read with section 33 of the Act challenging the appointment of the Arbitrator and the award made by him. ( 3. ) It appears that the appellant appointed Shri S. N. Mendhekar advocate of Bilaspur for appearing on behalf of the appellant and a junior local counsel Shri S. P. Jain was appointed to attend formal hearings and inform the proceeding to the appellant as well as to the senior counsel. On 21-7-1983 an objection was raised by the respondent that Shri Jain was not duly authorised to appear and wanted time to argue the point. The case was adjourned from time to time and on 26 8-1983 the arguments were heard on this objection. On 5-9-1983 the trial Court held that prima facie it appears that Shri Mendhekar and Shri Jain were empowered by the Assistant Purchase Officer to appear on behalf of the appellant and their wakalatnamas were filed. Whether the said Officer was competent to appoint the Advocates would be considered later on and so the appellant cannot be proceeded ex parte. The respondent further pointed out that no objection has been filed against the award and so decree be passed in terms of the award. It may be mentioned that on that day none appeared for the appellant. On 19-9-1983 the Presiding Judge was on leave and the case was adjourned to 21-9-1983. Again on that day the Presiding Judge was on leave. On these two dates, the appellant was not represented by its counsel. On 28-9-1983 the respondent appeared by its counsel but none appeared for the appellant and the impugned judgment was delivered. On 19-9-1983 the Presiding Judge was on leave and the case was adjourned to 21-9-1983. Again on that day the Presiding Judge was on leave. On these two dates, the appellant was not represented by its counsel. On 28-9-1983 the respondent appeared by its counsel but none appeared for the appellant and the impugned judgment was delivered. The appellant filed the present appeal on 6-1-1984 without certified copy of the judgment but with an application that it may be exempted from filing the certified copy saying that it has been informed by senior counsel Shri Mendhekar that he learnt on 19-11-1983 through Shri Jain that the judgment has been delivered in the case and so he went to Katni on 20-11-1983 to see the judgment and he was informed by Shri Jain that he has already applied for certified copy. Shri Mendhekar informed this development to the appellant by his letter dated 19-11-1983. Since copy of the judgment was not received till 1-12-1983 the appellant wrote a letter to Shri Mendhekar to take immediate steps for filing appeal in the High Court. Getting no reply from either of their counsel, on 19-12-1983 the Law Officer of the appellant came to Katni and met Shri Jain who informed that he has already despatched a copy of the judgment to the appellants office at Korba a Week earlier and that the record of the case has gone to the District Judge, Jabalpur, under M. P. Civil Courts Rules. Thereafter, the Law Officer came to Jabalpur and instructed its standing counsel Shri P. S. Nair to obtain certified copy of the judgment. An application for copy was made on that very day but on reopening of the Court the appellants representative was informed that the record has not yet been received in the office of the District Judge, Jabalpur. Shri Nairs junior then went to Katni on 3-1-1984 and obtained a true copy of the judgment. It was found-that an application for certified copy was earlier made on 3-12-1983 by Shri Jain and the copy was delivered on 16-12-1983 but this copy has not been received by the appellant. Since the limitation for filing of appeal was expiring, the appeal was filed with a plain copy on 6-1-1984. The certified copy applied on 20-12-1983 was delivered on 25-1-1984 and the certified copy was filed in this Court on 27-1-1984, which was accepted. Since the limitation for filing of appeal was expiring, the appeal was filed with a plain copy on 6-1-1984. The certified copy applied on 20-12-1983 was delivered on 25-1-1984 and the certified copy was filed in this Court on 27-1-1984, which was accepted. The appellant also mentioned in the memo of appeal that since then P.N. Sharma, Works Manager has been appointed Arbitrator by the General Manager in terms of the contract to settle the dispute and the matter is pending before him. ( 4. ) The judgment of the lower Court is assailed by the appellant on the following grounds:-(i) the Court below erred in making the award rule of the Court without considering the objection raised by the appellant for setting aside the award under section 30 of the Arbitration Act, (ii) the Court below could not have pronounced the judgment without giving opportunity to the appellant to substantiate its objection, the Court ought to have fixed a date for trial after overruling the objection of the respondent about the representation of the appellant, (iii) The Court below mechanically made the award rule of the Court without going through the record to find out that there is a valid objection raised by the appellant, (iv) The Court below did not consider that the award of the so-called arbitrator, L. P. Singh was non est and he had no jurisdiction to give the award as he was not validly appointed arbitrator and the respondent had no authority to appoint the arbitrator unilaterally. The authority vested with the General Manager of the appellant in naming the arbitrator, (v) The respondent in his notice to the appellant and also in his letter of reference to the arbitrator claimed only Rs. 5,21,320.67 but the Arbitrator gave a non-speaking award of Rs. 18,52,049.11 p. without any basis and the Court below should have set aside the award as invalid and non est. 5,21,320.67 but the Arbitrator gave a non-speaking award of Rs. 18,52,049.11 p. without any basis and the Court below should have set aside the award as invalid and non est. The respondent on the other hand raised preliminary objections that (i) the appeal is not competent under section 39 (1) (vi) of the Arbitration Act since there was no valid objection under section 37 as the objection was filed beyond the period of limitation and (ii) the appeal is barred by limitation since the appellant had already applied for certified copy of the judgment on 3-12-1983 and got the copy on 16-12-1983 but that copy was not produced and the appeal was filed without a certified copy and subsequently another certified copy granted on 25-1-1984 was produced which was applied on 20-12-1983. It was also contended that even if there was a valid objection under section 30, the same was waived since the appellant failed to pursue the same in the Court below. ( 5. ) After having heard the learned counsel for the parties at length, we are of the opinion that the judgment of the Court below cannot be sustained for the reasons stated hereunder. First of all it is necessary to consider the preliminary objections. It is contended by the learned counsel for the respondent that notice of the application under section 14 was served on the appellant on 2-6-1983 and the objection under section 30 was filed by the appellant on 15-7-1983 i. e. much beyond the period of limitation of 30 days provided under Article 119 of the Limitation Act, 1963. According to the respondent, notice of tiling of the application was sufficient notice about filing of the award in the Court. It relies on a decision of the Patna High Court in Prabhat Kumar v. Jagdish Chandra,A I R 1968 Pat 399. That was a proceeding under section 20 of the Arbitration Act and the arbitrator filed the award in the Court and the counsel were intimated about the same and so it was held that it was sufficient notice. The counsel were noticed about tiling of the award, that is not the case here. The submission of the respondent looks attractive at the first impression but it cannot be supported. The counsel were noticed about tiling of the award, that is not the case here. The submission of the respondent looks attractive at the first impression but it cannot be supported. Reliance is placed on the decisions of the Supreme Court in Nilkantha v. Kashinatth, AIR 1962 S C 666, and Madan Lal v. Sunder Lal, AIR 1967 S C 1233. that limitation begins to run under old Article 158 (new Article 119) from the date of intimation about filing of the award. There is no prescribed form, even oral notice is sufficient. If the party fails to file an objection within the prescribed time for setting aside the award, there is no question of refusing to set aside the award and, therefore, no appeal is maintainable under section 39 (1) (vi). These two cases have no application here. Limitation begins to run under Article 119 from the date of notice of filing of the award, notice that was given to the appellant was regarding filing of an application under section 14 and not about filing of the award though award was filed on 8-4-1983. It may be mentioned that along with the notice a copy of the application was not even appended. It appears from the order-sheet and the objection raised by the appellant under section 30 that the appellant for the first time appeared in the Court below on 16-6-1983 and learnt about filing of the award on that date, A copy of the application filed by the respondent under section 14 was supplied on that date to the appellant Even in that application, there is no mention about filing of the award. There is nothing on record to show that earlier to this date the appellant bad intimation about filing of the award in the Court. In fact, the respondent has not controverted the allegations of the appellant that it learnt about filing of the award on 16-6-1983. Objection under section 30 read with section 33 was filed by the appellant on 15-7-1983 i. e. within one month of the date of knowledge of filing of the award in Court and, as such, the objection was filed, within time. Objection under section 30 read with section 33 was filed by the appellant on 15-7-1983 i. e. within one month of the date of knowledge of filing of the award in Court and, as such, the objection was filed, within time. Even if the objection was not filed within time, the appellant could have applied for extension of limitation on sufficient cause being shown because section 5 of the old Limitation Act did not apply to applications to set aside award and the Court had no power to enlarge the time, but section 5 of the present Act now applies to all applications except those under Order 21 of Civil Procedure Code Soorajmull v. Goldon Fibre and Products, AIR 1969 Cal 381 =1979 GujLR 918. The next objection is that the present appeal is barred by limitation. The judgment of the Court below was delivered on 28-9-1983, the present appeal was filed without certified copy on 6-1-1984 with an application for exemption from filing the certified copy as the certified copy which was obtained by its counsel had not been delivered to it However, another certified copy which was applied on 20-12-1983 and granted on 25-1-1984 was produced in the appeal on 27-1-1984 which has been accepted. So even if the appeal is deemed to have been filed on 27-1-1984, it is still within the period of limitation by excluding copying days i. e. 36 days. Further contention is that the appellant should have produced the certified copy which was obtained earlier along with the appeal and the limitation should be calculated on the basis of that copy. Since that copy was never delivered to the appellant by its local counsel at Katni, it had no option but to apply for fresh copy. A party may obtain any number of copies but the copy which is filed along with the appeal has to be considered for computing the limitation. The Supreme Court in State of U. P. v. Maharaja Singh AIR 1968 S C 960. held that what is deductible under section 12 (2) is time required for obtaining copy of order appealed from and not any lesser period which might have been occupied if application for copy had been filed at some other date. The Supreme Court in State of U. P. v. Maharaja Singh AIR 1968 S C 960. held that what is deductible under section 12 (2) is time required for obtaining copy of order appealed from and not any lesser period which might have been occupied if application for copy had been filed at some other date. In that case the appellant had obtained a number of copies and did not append with the memo of appeal the copy which was obtained in the minimum period and the Supreme Court held that the Court is not concerned with any copy other than the one produced with the memo of appeal. Even assuming that earlier certified copy was obtained by the appellant and not filed along with the memo of appeal yet it is entitled to deduct the time required for obtaining that copy. That copy was applied on 3-12-1983 and obtained on 16-12-1983 and so the appellant is entitled to deduction of 14 days. If these 14 days are deducted, then the appeal filed on 6-1-1984 was within time as has been held by the Supreme Court in S. T. Commr., U. P. v. M. D. and Sons, A I R 1977 SC 523 that if the certified copy is not filed, yet the time required for obtaining the same has to be deducted. Therefore, both the objections are overruled. ( 6. ) However, the question now remains for consideration is about the merits of this appeal. The appellant filed an objection against the award under section 30 read with section 33 of the Arbitration Act within the period of limitation. Without considering the objection raised or without giving any opportunity to the appellant to substantiate the same, strangely enough, the Court below made the award rule of the Court. It is pertinent to note that the respondent raised objection about the representation of the appellant in the Court below and by order dated 5-9-1983 it was held that prima facie the two counsel appointed by the appellant having power of attorney can represent it, though the question whether the person giving power of attorney was so authorised was a matter which would be examined later on. On that day, the appellant was not represented by its counsel but the Court noted the further prayer of the respondent that the decree be drawn in terms of the award as there is no objection raised to the award, without trying to find out from the record whether there is any objection or not, nor the Court has held that the objection was not competent as it was filed beyond the period of limitation. Under this erroneous impression that there is no objection, the Court fixed the case on 19-9-1983 for hearing and judgment. On that day, the Presiding Judge was on leave and the Reader fixed the case on 21-9-1983 but on that day the Presiding Judge was again absent and the Reader straightway fixed the case for orders on 28-9-1983. So the judgment has been delivered on 28-9-1983. The Court ought to have fixed the case for hearing on the objection of the appellant and given an opportunity for substantiating the same before deciding the case. It is beyond comprehension as to why the trial Judge was in great haste in disposing of the case without following the procedure prescribed under the law. Therefore, the judgment deserves to be set aside as being illegal and without jurisdiction. Now the question remains whether the case should be remanded for consideration of the objection to the award raised by the appellant, we do not think any useful purpose would be served by remanding the case because the award given by the self appointed arbitrator of the respondent is without authority of law and he had no jurisdiction to arbitrate in the matter. Besides, he also exceeded his jurisdiction by giving an award of Rs. 18,52,049.11 p. when the dispute of Rs. 5,21,320.67 p. alone was referred. It is a non-speaking award and there is nothing to indicate from the record as to how this inflated figure has been arrived at. Under clause 24 of the agreement between the parties, in case of dispute or difference between the parties the same has to be referred to the sole arbitration of an officer nominated for that purpose by the Chairman-cum-Managing Director /General Manager, Korba. Since the agreement was executed with General Manager, Korba, he alone had the jurisdiction to appoint an arbitrator. No right was given to the respondent to appoint any arbitrator. Since the agreement was executed with General Manager, Korba, he alone had the jurisdiction to appoint an arbitrator. No right was given to the respondent to appoint any arbitrator. The respondent did write to the appellant for appointing an arbitrator and on its failure to do so the only remedy open to it was to apply to the Court under section 8 or 20 of the Arbitration Act to direct the appellant to appoint an arbitrator or the Court could appoint some other arbitrator in his place. That was not done. The respondent by its letter dated 29-11-1982 unilaterally appointed one L. P. Singh as the sole arbitrator and referred to him the dispute about nonpayment of its bills amounting to Rs. 5,21 ,320.67 p. Appointment of the arbitrator being invalid, he had no jurisdiction to give any award. Further the arbitrator exceeded his jurisdiction by giving an award of Rs. 18,52,049.1 1 p. The Supreme Court in Gobardhan Das v. Lachhmi Ram A I R 1954 SC 689, has held that so long as the arbitrators act within the scope of their authority there can be no doubt that their decision must be accepted as valid and binding. In the present case, however, we are of the opinion that the arbitrator acted in excess of his authority and the award must, therefore, be set aside. ( 7. ) The learned counsel for the respondent was unable to point out any provision under the Arbitration Act or under the agreement which authorised the respondent to appoint the arbitrator. Reliance is placed on a decision of the Bombay High Court in M/s. Vallabh Pitte v. Narsingdas, AIR 1963 Bom 157 . to show that on the failure of the appellant to nominate an arbitrator, the respondent had the right to appoint one. In that case, as per the agreement two arbitrators were to be appointed, one by each party under the rules of business at the cotton exchange. If one of the parties failed to appoint an arbitrator, the Chairman of the association could appoint one on his behalf. That was done. Such an authority was under the agreement itself. In that case, as per the agreement two arbitrators were to be appointed, one by each party under the rules of business at the cotton exchange. If one of the parties failed to appoint an arbitrator, the Chairman of the association could appoint one on his behalf. That was done. Such an authority was under the agreement itself. Besides, under section 9 of the Arbitration Act, in case of one arbitrator to be appointed by each of the party, on failure of the other party to appoint one, the arbitrator appointed by the other party can proceed with the arbitration. The Bombay case is on the question as to what has to be d,one by the arbitrator in case one of the parties denies the existence of the agreement of arbitration and not the proposition propounded by the respondent. The next case relied upon is Union of India v. D. N. Revri and Co., AIR 1976 S C 2257. That case has no application to the facts of the present case. There the contract was entered into for supply of sugar with the Ministry of Food and Agriculture and the arbitration clause provided for reference of all disputes to a single arbitrator to be nominated by the Secretary of the said Ministry. Subsequently the Ministry was bifurcated into Ministry of Food and Ministry of Agriculture. Thereafter there was again amalgamation into one Ministry but two secretaries instead of one manned the ministry, one for Food and another for Agriculture. Sugar came under the Ministry of Food. The arbitrator was nominated by the Secretary of Food and award was given which was upheld by the Supreme Court which said that contract being a commercial document must be interpreted in such a manner as to give efficacy to contract rather than to invalidate it. There, the arbitrator was nominated by the Secretary of Food instead of Secretary for Food and Agriculture as that post no longer existed and the Secretary for Food was the successor so far as that dispute was concerned. It has not been said in that case that in the absence of Secretary for Food and Agriculture, the contractor could nominate the arbitrator. The last case relied upon is the Full Bench decision of the Delhi High Court in Ved Prakash v. Union of India, AIR 1984 Delhi 325. That case has no application. It has not been said in that case that in the absence of Secretary for Food and Agriculture, the contractor could nominate the arbitrator. The last case relied upon is the Full Bench decision of the Delhi High Court in Ved Prakash v. Union of India, AIR 1984 Delhi 325. That case has no application. There, the contract provided that in case of dispute, arbitrator was to be appointed by the Chief Engineer and on his failure to do so, dispute is not to be referred to arbitration. That means that the parties agreed that dispute can only be referred to an arbitrator to be nominated by the Chief Engineer and on his failure to do so, there has to be no arbitration and the aggrieved party can seek recourse in civil Court. So it was held that section 8 could not be invoked in that case because the parties never wanted any other arbitrator to arbitrate in the matter. It is evident that the arbitrator misconducted in proceeding with the arbitration without any authority by being in handin-glove with the respondent and the award was procured illegally by the respondent which has no valid existence under the eye of law. It appears that besides getting a collusive award from the arbitrator, the respondent tried to win over the local counsel of the appellant and that may be the reason why the counsel did not put up any effective appearance and did not intimate the progress of the case-to the appellant. The respondent was also successful in misguiding the Court in getting the award made rule of the Court. If its designs had succeeded, the respondent would have pocketed rupees 18 lacs and odd of the Government company i. e. public money. ( 8. ) With the result, the appeal is allowed, the judgment of the Court below is set aside and the award of the arbitrator is quashed with costs. Counsels fee Rs 2,000, if certified. The arbitrator appointed by the appellant can now proceed with the arbitration. Appeal allowed.