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1988 DIGILAW 41 (GAU)

State of Manipur v. Y. Chandra Singh

1988-03-30

S.HAQUE

body1988
This is an appeal under the provision of section 39 (vi) of the Arbitration Act, 1940 against the judgment dated 25.5. 1981 passed by the Subordinate Judge II, Manipur in Original Suit No, 7 of 1980, refusing to set aside the award dated 7.7.1980 made in Arbitration Case No. 1 of 1979 by the arbitrator Shri H. Angangyaima Singh and passing decree in terms of the award 2. The respondent entered into a contract with the appellant under agreement No. 44/CH-R/65 of 1985, for widening the 4' ft. trace path to 9' ft. jeepable track from Aina to Tupi River on Churachandpur Tipaimukh Road. The respondent completed the work. According to appellant, the respondent was paid an amount of Rs. 85,469.46 p., inclusive the amount of the running bills, on 4.11.1972 on the final bill. Thereafter, the respondent preferred a claim on the Department, by a representation, for the additional works done by him appertaining to the said contract work. The Department deputed Mr. T. Victor, the then Executive Engineer, Churachandpur Tipaimukh Road Survey Division, for ground verification. Mr. T. Victor by his ground verification report recommended for payment of a sum to the respondent. But the appellant refused to approve the payment on that recommendation. Thereupon, the respondent filed an application dated 13.12.1973 before the Chief Engineer claiming the sum payable to him. The Department through its Superintending Engineer by letter No. SE II-8-4/73/Vol. VI/ 10910, Imphal dated 28th December, 1973 intimated the respondent that his claim had been turned down. 3. Difference arisen out of the contract agreement, containing clause for Arbitration, the respondent filed the suit under the provision of sec­tion 20 of the Arbitration Act in the Court of Subordinate Judge II for appointment of an arbitrator. The Court appointed Shri H. Angangyaima Singh. Controller of Technical Education, Government of Manipur, Takyelpat Imphal as sole arbitrator by making an order and reference for his decision. The Arbitration Case No. 1 of 1979 was opened. The arbitrator heard the proceeding exparte in the absence of the appellant on 5.7.1980 and made the award on 7.7.1980. The appellant, by an application under sections 30 and 33 of the Arbitration Act, challenged the validity of the award praying to set aside the same. The Arbitration Case No. 1 of 1979 was opened. The arbitrator heard the proceeding exparte in the absence of the appellant on 5.7.1980 and made the award on 7.7.1980. The appellant, by an application under sections 30 and 33 of the Arbitration Act, challenged the validity of the award praying to set aside the same. The Court by its judgment dated 25.5-81 refused to set aside the award and made it the rule of the Court and a decree was passed in terms of the award directing the appellant (defendant) to pay the award money Rs. 44,328.00 to the respondent (plaintiff) with the interest indicated. 4. Learned Senior Government Advocate submitted that the arbitrator had misconducted and the award became illegal by raising three points. Firstly, that the exparte award dated 7.7.1980 was bad in law for nongiving notice on the appellant about exparte hearing, secondly, for non-deciding the first specified point of reference, which made the award incomplete ; and thirdly, that there was no evidence on record before the arbitrator to make the award, and that the material document was not considered. 5. Learned counsel Mr. L. Nandakumar Singh on behalf of the respondent submitted with reference to the order sheet and records of the arbitration proceeding, that notice of exparte hearing on 5.7. J980 was duly issued by the arbitrator on the appellant. He also submitted that it was not necessary for the arbitrator to give decision separately on the first point of reference as it was not specifically made to do so, and that the consolidated award made under the alternative reference was enough. He further submitted that the material documents namely, Measurement Book & Ground Verification report of Mr. T. Victor were the main evidence for consideration and those were scrutinised by the arbitrator and so, it could not be said that the award was based on no evidence. 6. In M/S- Lovely Benefit Chit Fund vs. Puran Dntt, A. I. R. 1983 Delhi 413, it was held that ad arbitrator can proceed exparte,in the absence of defaulting party, only when the arbitrator had fixed that date for such hearing by giving notice, to that party of his intention to proceed in that manner on a specified date, time and place. Failure to give notice, expressing such intention of the arbitrator, causing prejudice to the defaulting party by exparte award, would be a misconduct on the part of the arbitrator. In Juggilal Kamlapat vs. General Fibre Dealers, A. I. R. 1955 Cal. 354, it was held that if from the course of the proceeding it so appears that a defaulting party had absented with a view to delay or defeat the object of the reference, the arbitrator should issue notice expressing his intention to proceed exparte at specified time and place if the party concerned does not attend; and the arbitrator after making such peremtory appointment and issuing notice, proceeds to hear exparte, in the absence of the party concerned, and makes the award, then it will be in order. But if the arbitrator does not in fact proceed exparte on the date fixed in the notice, even if theconcerned party remains absent, but fixes another date, he cannot proceed exparte on such subsequent date, unless he issues similar notice in respect of that date as well. The arbitrator is not required to issue a notice expressing intention to proceed exparte, if it appears from the circumstances of the case that a particular party, by its conduct, is determined not to appear in any event, and proceeds exparte on a fixed date and makes an award, it will be valid. But an omission u give a notice, there will, however, always be a presumption that prejudice has been caused, so, the better course, even in such a circumstance, is to issue a notice. In Lachman D. Chablani vs. Union of India, A. I. R. 1973 All. 558, it was held that the arbitrator has a duty to inform the party that he intends to proceed with the reference at a specified time and place, issues such notice on that party and the party fails to appear without making out reasonable excuse for non-attendance, the arbitrator will be at liberty to proceed exparte and makes an award. Granting of adjournment to a party is within the discretion of an arbitrator. This discretion should, however be exercised in a reasonable manner upon proper material and after considering party's conduct in the proceeding. Where a party deliberately absent himself from the hearing despite notice, an exparte hearing and . Granting of adjournment to a party is within the discretion of an arbitrator. This discretion should, however be exercised in a reasonable manner upon proper material and after considering party's conduct in the proceeding. Where a party deliberately absent himself from the hearing despite notice, an exparte hearing and . making of an award will not be construed as misconduct of the arbitrator to set aside the award. Hearing exparte and making award thereon, without issuing notice on a defaulting party, will amount to gross irregularity in procedure. In the case, Must. Amir Begum vs. Syed Badruddin Husain, reported in A. I. R. 1914 Privy Council, 105, it was held that gross irregularities in procedure in an arbitration proceeding can be proved and these would amount to no proper hearing of the matter in dispute and would be construed as misconduct sufficient to vitiate the award without any imputation on the, honesty and impartiality of the arbitrator. Onus of proving _ irregularities in procedure is on the person alleging the same. 7. Thus, it is well recognised law that the arbitrator is required to issue notice on defaulting party informing his intention that hearing would proceed exparte on a fixed date if either party fails to attend. It is apparent on the face of the arbitration proceeding record, in this case, that the arbitrator invariably issued notices on the parties beginning from 27. 12. 1979 till 2. 7. 1980, in nine (9) occasions, giving full particulars of the subject matter, date, time and venue of hearing and clearly expressing that the proceeding would be heard and decided exparte if either party would remain absent. On 30. 6. 1980, both the parties were present before the arbitrator. Appellant was represented by Additional Govt. Advocate and the Executive Engineer concered. The next date of hearing 5. 7. 1980 was fixed in their presence. Thus, the appellant had full knowledge of the next date of hearing on 5.7. 1980. Besides that, the arbitrator issued notice on 2. 7. 1980 under registered post to the parties giving full particulars of the subject matter, date, time and venue of hearing and clearly stating that the proceeding would be heard exparte on 5. 7. 1980 if either party remained absent. The arbitrator was very cautious and fair in this respect. 1980. Besides that, the arbitrator issued notice on 2. 7. 1980 under registered post to the parties giving full particulars of the subject matter, date, time and venue of hearing and clearly stating that the proceeding would be heard exparte on 5. 7. 1980 if either party remained absent. The arbitrator was very cautious and fair in this respect. It is not the case of the appellant that the said notice was not served on them. The appellant remained absent on 5.7. 1980, the arbitrator waited upto 2. 30 p. m. and then recorded with the hearing exparte and informed the appellant by letter dated 5. 7. 1980 that the award in respect of the dispute" would be announced on 7th day of July, 1980 with copy to the Executive Engineer concerned. The letter was duly served. This being the position, it cannot be said that the exparte hearing on 5.7.1980 and making on the award on 7. 7. 80 were done without the knowledge and notice on the appellant. The first submission of the learned Senior Govt. Advocate has no force. 8. The basic principles to be kept in mind by the Court on deciding a challenge to an award, given by an arbitrator, on ground of its incompleteness, have been enunciated by the Hon'ble Supreme Court in Smti. Santa Sila Devi vs. Dhirendra Nath Sen, A. I. R. 1963 SC 1677. These are : (1) that a Court should approach award with a desire to support it, if that is reasonably possible, rather than to destroy it by calling it illegal; (2) unless the reference to arbitration is specifica­lly so required, the arbitrator is not bound to deal with each claim or matter separately, but can deliver a consolidated award. The legal position is clear that unless so specifically required, an award need not formally express the decision of the arbitrator on each matter, of difference; (3) unless the contrary appears the Court will presume that the award disposes finally of all the matters in difference ; and (4) where an award is made de praemissis, the presumption is, that the arbitraror intended to dispose finally of all the matters in differe­nce; and his award will be held final, if by any intendment it can be made so. 9. 9. The issues of reference to the arbitrator have been clearly made out by the Court vide letter No. SJ II/79/405-1, dated 20. 9. 1979. These are: 'to decide if the plaintiff/claimant has been made final payment on 4.11. 1972 or if the plaintiff/claimant is to get any other amount in respect of the work executed by him under the aforesaid Agreement'. Two (2) issues of reference were specifically set out for decision by the arbitrator. The first issue of reference i e. if the plaintiff/claimant has been made final payment on 4.11.72, having been specifically set out. It was incumbent on the arbitrator to give decision on it. The award being silent on this specific reference, it becomes incomplete and void. The award is liable to be set aside on this score. 10. In K. P. Poulose vs. State of Kerala, A.I.R. 1975 SC 1259, it was held that it is incumbent upon the arbitrator to get hold of all the relevant documents from the department concerned, which will focus abundant light on the actual controversy between the parties for just and fair decision. Misconduct on the part of the arbitrator is to be consrued where finding is given by ignoring very material documents. In Basheshar Nath vs. Union of India, 1978 Rajdhani LR 75 it has been held that an award based on no evidence, is liable to be set aside. Following this view, in M/S Bombay Ammonia vs Union of India, A.I.R. 1987 Delhi,148, it was held that evidence nil on record, the arbitrator has no jurisdiction to decide a specific point of reference. Thus, it is a settled principle of law that an award based on no evidence on record or an award based ignoring the prime document, the arbitrator is guilty of legal misconduct and the award becomes void. 11. The prime document for consideration by the arbitrator, in the instant case, was the ground verification report of Mr. T. Victor, On perusal of the orders dated 10.4.1980 and 23.5.1980 in the arbitration proceeding file, this Court is not sure if the Measure­ment books and the ground verification report were at all submitted for scrutiny by the arbitrator. The appellant (respondent) was absent on 10.4.1980 as per the ordersheet. That order in the end reading: 'however M.Bs. & Ground Verification report are submitted today these were examined,' appeared to be confusing on its face. The appellant (respondent) was absent on 10.4.1980 as per the ordersheet. That order in the end reading: 'however M.Bs. & Ground Verification report are submitted today these were examined,' appeared to be confusing on its face. Again in the order dated 23.5.1980 in the end reading: 'M.Bs. & Ground Verification was returned to the E.E. (Churachandpur) after scrutiny,' appeared conradictory with paragraph 3 of the order. Admittedly, the important material documents namely, the M.Bs and Ground Verifica­tion report of Mr. T. Victor were not before the arbitrator on 5.7. 1980 when the proceeding was heard exparte and also on 7.7. 1980 when award was made. Thus, there was no evidence on record for consideration by the arbitrator at the hearing and making of the award. The arbitrator has mis-conducted himself by making award on no evidence and for ignoring to get hold of the material document which was incumbent upon him. The award is also liable to be set aside on this score. 12. Non-issue of notice on a defaulting party, by an arbitrator, expressing his intention to proceed exparte on a specified date, time and place, and proceeds as such making exparte award on a fixed date of hearing, causing prejudice to the defaulting party, is to be construed as misconduct on the part of the arbitrator. Such a procedure would amount to gross irregularity. Invariably an arbitrator is duty bound to issue notice on a defaulting party, expressing his intention to proceed with the hearing exparte to make an award, at specified date, time and place. It is so required to abide the fundamental principles of natural justice, although an arbitrator is not bound by the technical rules of procedure, evidence and pleadings. Non-rendering a decision by an arbitrator, on a specific reference, making the award incomplete and illegal. Ignoring material document from consideration and failure to get hold of the same for the purpose of decision, on a specifically referred issue, amount to a misconduct on the part of the arbitrator. Misconduct under section 30 (1) of the Arbitration Act has not a connotation of moral lapse, but it comprises legal misconduct which is apparent on the face of the award. Misconduct under section 30 (1) of the Arbitration Act has not a connotation of moral lapse, but it comprises legal misconduct which is apparent on the face of the award. It is incumbent on the arbitrator to direct the party in custody of the material documents to produce the same clearly indicating that non-production will lead admission to other evidence, oral, or documentary for consideration of decision. However, if the department concerned fails to produce the material documents, the arbitrator is required to indicate in the proceed­ing order that other documents relevant for the purpose of just decision, available on record, are considered. Evidence nil on record gives no jurisdiction to the arbitrator for decision. Where evidence present the Court cannot go into the question of sufficiency of evidence. 13. In view of the above findings, it will be proper to remit the arbitration proceeding to the arbitrator for fresh hearing and award. Accordingly, the appeal is allowed. No costs. The impugned judgment is reversed and the award is set aside. 14. The arbitration proceeding is hereby remitted to the arbitrator Shri H. Angangyaima Singh. He was appointed by name, so his retirement from service would in no way reflect on the order of his appoint­ment by the learned Subordinate Judge-II. The , arbitrator will try to make the award as early as practicable within 3 (three) months from the date of the receipts of the records subject to the pro­visions of section 28 of the Arbitration Act. Learned counsel Mr. L. Nandakumar Singh submits that direction be given to the arbitrator that in the event of an award in favour of the plaintiff, the rate of interest may be enhanced with future interest till the date of payment. This matter is kept open for consideration of the arbitrator on application by the plaintiff-claimant in the proceeding. The Court will fix reasonable amount of fees for arbitrator with direction to the party liable to pay to deposit the same in Court 15. Send down the records to the Court of Subordinate Judge-II, Manipur immediately for transmitting the arbitration proceeding records to the arbitrator without delay.