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1987 DIGILAW 50 (BOM)

Bansilal & Brothers v. Swadeshi Mills Co. Ltd. & another

1987-02-03

N.K.PAREKH, S.P.BHARUCHA

body1987
JUDGMENT - BHARUCHA S.P., J.:—We are concerned in this appeal principally with the interpretation of Rules framed by the Millowners' Association, Bombay, called the "Rules for Arbitration on Indian Piecegoods and Yarn." The appellants (original petitioners) are a registered partnership firm trading in piecegoods in Bombay. The 1st respondents manufacture piecegoods and the 2nd respondents are their selling agents. The appellants used to place indents for the purchase of piecegoods of the 1st respondents manufacture. The 1st respondents accepted such indents and delivered piecegoods under invoices. Upon receipt of the invoices the appellants took delivery and executed hundis for the price thereof. The contracts between the parties were in a form approved by millowners' association. The contained an arbitration clause which required the reference of disputes between the parties to arbitration under the aforesaid Rules. 2. Disputes and differences arose between the parties in or about 1971 and the 1st respondents made a claim upon the appellants in the sum of Rs. 61,533.68 in respect of certain hundis executed by the appellants. On non-payment thereof the 1st respondents invoked the arbitration clause. The appellants denied the claim of the 1st respondents and filed a counter-claim for damages in the sum of Rs. 2,56,638.57 for non-delivery and short delivery of piecegoods. In respect of the counter-claim, it was agreed that separate proceedings would be taken. Consequently, an arbitration case was filed by the appellants on 9th October, 1974. It covered 55 indents between the period May 1968 and January 1971. The period for delivery under each of the contracts was 3 months or thereabouts. Arbitrators were appointed by the parties. An umpire was appointed by the arbitration before proceeding with the reference. The 1st respondents contended before the arbitration that the appellants' claim was barred by the law of limitation. The arbitration felt that the contention required expert opinion and it was sought from Senior Counsel. After receipt of the opinion the arbitrators held a conference with Counsel. Thereafter, being unable to agree upon the contention in regard to limitation they made separate and differing awards. Consequent upon their disagreement, the umpire was called upon to enter upon the reference and the parties were so informed. The umpire, without fixing a time and place for hearing the parties, gave an award on 5th January, 1977 holding that the appellants' claim was barred by limitation. 4. Consequent upon their disagreement, the umpire was called upon to enter upon the reference and the parties were so informed. The umpire, without fixing a time and place for hearing the parties, gave an award on 5th January, 1977 holding that the appellants' claim was barred by limitation. 4. The appellants challenge the award of the umpire by filling an arbitration petition. They contention that the umpire had been guilty of legal misconduct in making the award without hearing the parties. The learned Single Judge dismissed the arbitration petition. The appeal impugns his judgment and order. 5. It is necessary to set out certain of the rules before we proceed further. 11. The arbitrators shall fix a time and place for the hearing of the reference and notify the Secretary-General thereof. The date so fixed shall be not later than 15 days after their appointment. The Secretary-General shall forthwith notify the parties of the time and place appointed. 12. Parties to the reference shall attend at the time and place appointed for the hearing of the reference, either in person, or (subject to the provision of Rule 18) by any person duly authorised by them acquainted with all matters in dispute or in question and they shall if so required by the arbitrators submit written statements of their respective cases to the arbitrators and answer all material questions relating to the dispute or question. 24. If the arbitrators fail to make an award or to agree upon their award (not being an interim award under Rule 21 hereof) within the prescribed period or any permitted extension thereof, the Secretary-General shall forthwith call upon the umpire to enter upon the reference and the umpire shall thereupon proceed with the reference. 25. The arbitrators shall furnish the umpire with a brief statement of the facts of the case and their reasons for such failure to make an award or to agree upon their award or interim award as the case may be. 26. The foregoing rules as to the practice and procedure before the arbitrators shall apply mutatis mutandis to the proceedings before the umpire. 29. 26. The foregoing rules as to the practice and procedure before the arbitrators shall apply mutatis mutandis to the proceedings before the umpire. 29. When a dispute or question stands referred to an umpire, he may proceed to adjudicate in the matter on the basis of the statements furnished to him by the arbitrators as provided by Rule 25 and shall make his award thereon within 30 days of his first entering on the reference or within the period of any permitted extention of time." The learned Single Judge held that Rule 26 was an enabling provision and conferred upon the umpire the power to seek additional statements and additional evidence. The umpire the was not bound or required to follow that procedure in cases where he found that the material on record was sufficient to pass an award. Under the provisions of Rule 29 it was open to the umpire to adjudicate upon the matter on the basis of the statements furnished and it was not mandatory to give a notice of hearing to the parties fixing the time and place thereof. 6. Rule 29 empowers the umpire to adjudicate "on the basis of the statements furnished to him by the arbitrators as provided by Rule 25". Rule 25 requires the arbitrators to furnish the umpire with "a brief statement of facts of the case" and the persons for the arbitrators' failure to agree upon an award. What Rule 29, therefore, authorises the umpire to do is to make an award on the basis of factual material collected by the arbitrators. If, however, he requires more material, it is open to him to seek it. 7. Rule 26 states that the Rules that precede it in regard to the practise and procedure before the arbitrators "shall apply mutatis mutandis to the proceedings before the umpire". The Rule (Rule 11) that requires the arbitrators to fix a time and place for the hearing of the reference and inform the Secretary-General accordingly applies to the umpire. He is bound to fix the time and place of a hearing and the Secretary-General of the Mill-owners' Association is obliged under Rule 11 to inform the parties of it. 8. The Rule (Rule 11) that requires the arbitrators to fix a time and place for the hearing of the reference and inform the Secretary-General accordingly applies to the umpire. He is bound to fix the time and place of a hearing and the Secretary-General of the Mill-owners' Association is obliged under Rule 11 to inform the parties of it. 8. Reading the Rules harmoniously, and particularly Rules 26 and 29, the true position is that the umpire is bound to follow every rule of practise and procedure applicable to the arbitrators save only that he need not collect the facts afresh but may proceed upon those collected by the arbitrators. It is not Rule 26 that is the enabling provision but Rule 29. Rule 26 is mandatory. 9. It appears to us, therefore, that the umpire was in error in publishing the award without fixing a time and place for hearing and in having decided the reference without hearing the parties. 10. It was submitted on behalf of the 1st respondents that the umpire had decided a point of law which had been the subject-matter of Counsel's opinion and that at the hearing the appellants could not have changed the umpire's view. It appears from the record before us in the appeal that what was referred to Counsel was only the question whether the appellants' claim was time-barred. Counsel's opinion answered that query in the affirmative. Counsel was asked in conference thereafter whether the period of limitation would be extended if there were acknowledgements of liability. Counsel replied in the affirmative but declined to be drawn into the controversy as to whether there were, in facts, acknowledgements. He said, rightly, that was a question for the arbitrators. The appellant, had they had the opportunity of addressing the umpire, might have convinced the umpire that certain documents amounted to acknowledgements of liability. Certainly, they ought to have had the opportunity. 11. In the result, we set aside the order of the learned Single Judge and make the petition absolute in terms of prayers (a) and (b) thereof. The papers shall be sent back to the Millowners' Association for being placed before the umpire. He shall proceed with the reference. Such award as he makes shall be only after hearing the parties and applying his mind to their submission. No order as to costs. Order accordingly.