CHETAK CONSTRUCTIONS LTD. v. SANGHI BROS. — 1997 DIGILAW 740 (MP)

JUDGMENT R. S. Garg. - The applicant being dissatisfied by the order dated 25-2-1997 passed in Civil Original Suit No. 60-A/1994 by the learned Sixth Additional District Judge, Indore, granting the application filed by the non-applicant No. 1 under Section 28 of the Indian Arbitration Act. 1940, extending time in favour of the Arbitrators for delivering the award, has preferred this revision petition. 2. Brief facts necessary for the disposal of the petition are that for some dispute between M/s. Sanghi Brothers Ltd. (non-applicant No. 1) and the present applicant M/s. Chetak Constructions Ltd. the matter was referred for decision to the Arbitrators. Hon'ble Shri Justice P. D. Mulye (retired) and Shri B. L. Pavecha (Senior Counsel) were appointed as Arbitrators by the parties. Undisputedly, Hon'ble Shri Justice G. L. Oza (retired Judge of the Supreme Court) was appointed as Umpire. 3. It is alleged by M/s Sanghi Bros. that they had leased out certain auto vehicles to M/s. Chetak constructions Ltd. regarding the terms and covenants a lease agreement was executed between the parties, it was agreed between the parties that if there arises any dispute between the parties the matter would be referred to Arbitrator. M/s. Sanghi Bros. made an allegation that M/s. Chetak Constructions did not pay the amount in terms of the agreement and as there was a dispute between the parties the matter was required to be referred to Arbitrators. With the consent of the parties, Shri T. N. Unni, Chartered Accountant, and Hon'ble Shri Justice P. D. Mulye were appointed as Arbitrators. As there was some dispute regarding the appointment of Shri Unni, in his place Shri B. L. Pavecha, Advocate, was appointed as an Arbitrator. The matter was placed before the arbitrators on 19-1-1994 and the Arbitrators issued notice to the sureties and directed the case to be listed for hearing on 11-2-1994. On 11-2-1994, the present applicant M/s Chetak Constructions raised an objection before the Arbitrators that the claim was required to be filed in the form of a suit. Various other applications were also filed. On 11-2-1994 itself, Counsel representing the sureties also made a request for adjournment of the case as he was required to file reply. The non-applicant No. 1-M/s Sanghi Bros. thereafter filed its claim in the from of a suit, the present applicant filed its reply and a counter claim. Various other applications were also filed. On 11-2-1994 itself, Counsel representing the sureties also made a request for adjournment of the case as he was required to file reply. The non-applicant No. 1-M/s Sanghi Bros. thereafter filed its claim in the from of a suit, the present applicant filed its reply and a counter claim. By order dated 2-4-1994, the Arbitrators found that the sureties would not be bound by the award of the Arbitrators, therefore the sureties were relieved and discharged. The matter was adjourned from time to time but ultimately the arbitrators fixed the case for 8-6-1994 for submission of the list of witnesses. On 8-6-1994 the present applicant moved an application to the Arbitrators that as the statutory period of four months had already expired, the Arbitrators were not entitled to proceed with the matter and the matter was required to be heared, considered and decided by the Umpire. On 8-6-1994, itself, the present applicant filed a list of witnesses and also filed some documents. The Arbitrators were of the opinion that the period of four months would expire on 10-6-1994, therefore, the objection raised by the present applicant was premature. The Arbitrators were also of the opinion that looking to the nature of the dispute and the voluminous record, it may not be possible for the Arbitrators to decide the matter in a short time, therefore, the non-applicant made a request to the Arbitrators that it be permitted to move an application to the Court under Section 28 of the Arbitration Act for extension of time. The Arbitrators conceded to the request and directed the present non-applicant No. 1 to move an application to the Court. Non-applicant No. 1. moved the application to the trial Court for extension of time. The said application was opposed and contested by the present applicant on the ground that the Arbitrators had become functus officio and as the Arbitrators did not deliver their award within the statutory period of four months, the matter could only be decided by the Umpire under the powers conferred upon him under paragraph (Rule) 4 of Schedule 1 appended to the Indian Arbitration Act, 1940 (hereinafter referred as the Arbitration Act'). After hearing the parties and considering the material available on record, the Trial Court was of the opinion that the Arbitrators did not enter in the reference on 11-2-1994, therefore, the period of four months is required to be counted from 11-2-1994. The Court below also held that the objection dated 8-6-1994 was premature and as the application for extension of time has been filed under Section 28 of the Act, the Court would have jurisdiction to extend the time. The Court extended the period and granted one year's time with effect from 25-2-1997 to the Arbitrators to decide the matter. Being dissatisfied by the said order, the present applicant has filed this petition. 4. Mr. Sanghi, Senior Counsel, appeared with Mr. M. L. Agrawal for the applicant and Mr. G. M. Chaphekar, Senior Counsel appeared with Mr. J. W. Mahajan for the non-applicant No. 1. They were heard at length. The case was closed for orders on 16-5-1997. The Court found that the record of the Umpire and the Arbitrators was not available, therefore, on 19-8-1997, the records were requistioned from them. The Arbitrators sent their records immediately. The Umpire informed the Court that the original records were not placed before him, and the parties appeared before him. once, the Umpire recorded the proceedings in the order sheet which was immediately given to both the parties. The Umpire informed the Court that he did not have any original records with him. 5. The records show that the application for extension of time was filed in the Court on 10-6-1994 which, according to the non-applicant No. 1 was the last date of the statutory lamination. 6. Mr. Sanghi, Senior Counsel in support of the revision petition has submitted that the Court below was unjustified in holding that the period of four months shall commence with effect from 10-2-1994. According to him, the facts would show that the Arbitrators entered on the reference on 19-1-1994 and their jurisdiction to deliver the award come to an end on 18-5-1994. He submits that Court below was not justified in holding that the period shall commence with effect from 11-2-1994. Referring to the proceedings recorded by the Umpire on 30-7-1994, he submits that the Unpire had already entered on the reference, therefore, the Trial Court shall have no powers to extend time because the entry of the Umpire is in lieu of the Arbitrators. Referring to the proceedings recorded by the Umpire on 30-7-1994, he submits that the Unpire had already entered on the reference, therefore, the Trial Court shall have no powers to extend time because the entry of the Umpire is in lieu of the Arbitrators. Various judgments of different High Courts and the Supreme Court were cited in support of the contention. On the other hand, Mr. Chaphekar learned Counsel for non-applicant No. 1 submitted to the Court that the period shall not commence with effect from 19-1-1994 because that was not the date of hearing. According to him, the Trial Court was justified in holding that the period shall commence with effect from 11-2-1994 and shall expire on 10-6-1994. He submits that as the application for extension of time already failed on 10-6-1994., the Trial Court had fullest jurisdiction to extend time. Regarding the proceeding dated 30-7-1994 recorded by the Umpire, it was submitted by Mr. Chaphekar that firstly the Umpire had no jurisdiction to enter on the reference and secondly, material work was done on 30-7-1994 to say that the Umpire in fact entered on the reference. He submits that the Trial Court was absolutely justified in extending the period. 7. Before appreciating the rival contentions, it would be necessary to refer to certain provisions, of the Arbitration Act. The First Schedule appended to the Act provides for certain implied conditions of arbitration agreement. Paragraph 2 of the said implied conditions provides that if the reference is to an even number of Arbitrators, than one month from the latest date of their respective appointments. 8. Paragraph 3 reads as under : "The Arbitrators shall make their award within four months after entering on the reference or after having been called upon to act by notice in writing from any party to the arbitration agreement or within such extended time as the Court may allow." 9. Paragraph 4 of first Schedule reads as under; "If the Arbitrators have allowed their time to expire without making an award or have delivered to any party to the arbitration agreement or to Umpire a notice in writing stating that they cannot agree, the Umpire shall forth with enter on the reference in lieu of the Arbitrators." 10. Paragraph 3 clearly fixes the period of four months for delivering the award from the date of entry on the reference. Paragraph 3 clearly fixes the period of four months for delivering the award from the date of entry on the reference. In the alternative paragraph 3 provides that the Arbitrator(s) shall make their award within four months after having been called upon to act by notice in writing from any party to the arbitration agreement. 11. In the matter of Hari Shanker Lal v. Shambhu Nath ( AIR 1962 SC 78 ), the Supreme Court observed that the word "act" in the second clause of Schedule 1, paragraph 3, is more comprehensive than the words 'entering on the reference' of the first clause of the rule. The Supreme Court observed in paragraph 9 of its judgment that the object of Rule 3 is to prescribe a time limit in the interest of expeditious disposal of arbitration proceedings. Considering the second clause of paragraph 3 of Schedule 1, which talks of a notice in writing from any party calling upon the Arbitrators to act, the Supreme Court further observed that if under the second alternative notice to act be given at any time, it would enable one of the parties to enlarge the period of time prescribed indefinitely; not only the lime limit prescribed would become meaningless but one of the parties would also, without consent of the other, resuscitate a dead or stale reference. The Supreme Court further observed that a party can ask the Arbitrator to act if he is legally bound to act under the reference and as after the expity of four months from the date of entering on the reference the Arbitrator can no longer act, a notice given thereafter cannot ask him to act. In the same judgment, the Supreme Court considered third alternative as provided in paragraph 3 and observed that the third alternative in paragraph 3 says that the award can be made within the extended time allowed by the Court because Section 28 of the Act enable the Court to extend time for the making of the award; extension of time may be given even after the award has been actually made. The Supreme Court laid down that till time is extended, an award cannot be made, though, when extended, the award actually made, may be treated as an award made within the time so extended. The Supreme Court laid down that till time is extended, an award cannot be made, though, when extended, the award actually made, may be treated as an award made within the time so extended. Finally, the Supreme Court observed that the second alternative in Rule 3 can be invoked only in a case where the notice to act has been given to the Arbitrators either before the Arbitrators enter on the reference or after they have entered on the reference but before the period of four months from that date has run out. The Supreme Court formulated the legal position as under; (a) Notice to act may be given before or after the Arbitrators enter upon the reference; (b) If notice to act is given before they (Arbitrators) enter upon the reference the period of four months shall be computed from the date they enter upon the reference; (c) If party gives a notice to act within four months after the Arbitrators entered upon the reference, the Arbitrators can make an award within four months from the date of such notice; and (d) In that event, after the expiry of such four months the Arbitrators become functus officio unless the period is extended by the Court under Section 28 of the Act, such period may also be extended by the Court though the award has been factually made. Raghubar Dayal, J. agreeing with the order proposed by Subba Rao, J, on behalf of himself, B. P. Singh, C.J., and Mudholkar, J. proceeded to give some more reasons in his judgment. In paragraph 20 of the judgment, the Hon'ble Judge observed : "I also do not consider it necessary to decide in this case as to when Arbitrators can be said to enter on the reference or what is meant by their being called upon to act, by notice under Rule 3 of the First Schedule. I simply note that I agree with the view expressed in Ioosifoglu v. Commentaror ((1941)1 KB 396). That Arbitrator enter upon a reference as soon as they have accepted their appointment and have communicated with each other about the reference. This is a stage earlier than their starting the proceedings in the presence of the parties or under some peremptory order compelling them to conclude the hearing ex-parte. That Arbitrator enter upon a reference as soon as they have accepted their appointment and have communicated with each other about the reference. This is a stage earlier than their starting the proceedings in the presence of the parties or under some peremptory order compelling them to conclude the hearing ex-parte. Calling upon the Arbitrators to act' does include asking the Arbitrators to enter on the reference, but may also include asking them to do anything in connection with the reference except asking them to do the routine acts connected with the enquiry." The observations of the Supreme Court on the strength of Ioossing (supra) would clearly mean that the Arbitrators enter upon the reference when they have accepted their appointment and have communicated with each other about the reference. The words calling upon the Arbitrators to act, would includes directing the Arbitrators to enter on the reference and may also include asking them to do anything in connection with the reference except asking them to do the routine acts connected with the enquiry. 12. In the instant case, we arc not concerned with the second alternative, i.e., 'calling upon the Arbitrators to act', because the parties are arguing on the first Clause of paragraph 3 of the Arbitration Act. Even for the sake of repetition, it would again be necessary to say that the Arbitrators enter upon the reference as soon as they have accepted their appointment and have communicated with each other about the reference. If each of the Arbitrators accepts his appointment but do not communicate with each other about the reference, it would not be presumed that they have entered on the reference. For entering on the reference it is necessary that the Arbitrators have accepted their appointment and have communicated with each other about the reference. The latter part, i.e., and have communicated with each other about the reference' would certainly show that the Arbitrators have applied their mind because they have communicated with each other about the acceptance of office and of the subject. This stage may be even earlier than their starting the proceeding in the presence of the parties or under some peremptory order compelling them to conclude the hearing ex-parte. 13. This stage may be even earlier than their starting the proceeding in the presence of the parties or under some peremptory order compelling them to conclude the hearing ex-parte. 13. From the judgment of the Supreme Court in the matter of Hari Shanker Lal (supra), it is clear that the Arbitrators enter on the reference when they accept their appointment and communicate with each other about the reference in the matter of Nandkishore v. Bally Cooperative Credit Society (AIR 1943 Cal. 2554), and Sardarmal v. Sheobaksh (AIR 1922 All 106), AIR 1922 All 106, the Courts have taken the view that the Arbitrators may be said to have entered on the reference when they actually start to work in the presence of the parties or upon notice given to them. In the matter of S. D. Ghai & Co. v. Punjab University ( AIR 1973 P&H 410 ), and Babubhai Mehta v. Prabodh Joshi ( AIR 1956 Bom. 146 ), Courts have held that the Arbitrator is deemed to have entered on the reference, if he has bean done something which is referable to his position as Arbitrator, even though he may have actually started hearing of the proceeding. In Shahdad v. Mohammed Abdul ( AIR 1967 J&K 120 ), it has been observed that the Arbitrators shall be deemed to have entered into the reference as soon as they take some effective steps in the reference, on being asked to enter into the reference. As to when the Arbitrator(s), is, are deemed to have entered in the reference is a question of fact to be determined from the facts and circumstances disclosed in each particular case. Successful reference can be made to the judgments of different High Courts viz. Wire and Steel Industries v. Union of India ( AIR 1985 Cal. 298 ), Ramsahai v. Harishchandra ( AIR 1963 MP 143 ), M/s. Kalinga Otto Ltd. v. M/s. Charanjit Kochar (AIR 1972 Orissa 172), and Soneyla Thakur v. Lachhminarain (AIR 1957 Patna 395). The principle laid down by different Courts clearly speak that as to when the Arbitrators have entered into/on the reference is a question of fact to be determined from the facts and circumstances of each particular case. 14. In the matter of Ramsahai v. Harishchandra (1962 I.L.J. 1099), this Court mainly relied upon the judgment of the Supreme Court in the matter of Harishankarlal (supra). 14. In the matter of Ramsahai v. Harishchandra (1962 I.L.J. 1099), this Court mainly relied upon the judgment of the Supreme Court in the matter of Harishankarlal (supra). "Para 4 of the First Schedule provides for three contingencies : (a) the arbitrators have allowed their time to expire without making an award; (b) the Arbitrators have delivered to any party to the arbitration agreement a notice in writing standing that they cannot agree; and (c) the Arbitrators have delivered to the Umpire notice in writing stating that they cannot agree. If any of the eventuality occurs then the Umpire shall forth with enter on the reference in lieu of the Arbitrators. In the matter of N. Chellappan v. Secretary, Kerala State Electricity Board and another ( AIR 1975 SC 230 ), the Supreme Court was required to consider this aspect of the matter. The Supreme Court observed that where the arbitrators fail to make the award within the specified time. Schedule 1 Paragraph 4 authorises the Umpire forthwith to enter upon the reference in lieu of the Arbitrators. The Supreme Court further observed that neither the fact that the Umpire expressed his unwillingness to enter upon the reference without an order of the Court nor the fact that an application was made to extend the period for making the award by the Arbitrators long after the expiry of the period for making the award, had the effect of depriving him of his jurisdiction under Paragraph 4 of the First Schedule. The Supreme Court clearly observed that since the Arbitrators did not make the award within the extended time, the Umpire, by virtue of the provision of rule could have entered upon the reference and made the award. The Supreme Court further observed that "we do not think that the Umpire lost his jurisdiction to pass the award merely because he wanted an order from Court by was of abundant caution authorising him to enter upon the reference". The Supreme Court in very clear words observed that "neither the fact that the Umpire wanted an order from the Court to enter upon the reference nor the fact that an application was made by the Board on 5-2-1972 to extend the time for the Arbitrators to make the award would denude Umpire of his jurisdiction to enter upon reference and pass an award under Rule 4 of the First Schedule". In the matter of Reserve Bank of India v. S.S Investment and others ( (1992)4 SCC 671 ), the Supreme Court was again required to consider the effect of Clause 4 (Paragraph 4) of Schedule 1. The Supreme Court while considering the First Schedule Clause 4 (Paragraph 4) observed that "disagreement can take a variety of forms, from the facts of the case it was clear that there was a disagreement between the Arbitrators and the fact of such disagreement was conveyed to the parties". In the opinion of the Supreme Court, the Umpire therefore became entitled to enter upon the reference. From this judgment, it is clear that if the Arbitrators arc unable to agree, when give a notice in writing stating that they cannot agree, the Umpire shall forthwith enter on the reference in lieu of the Arbitrators. The judgment clearly shows that Paragraph 4 of Schedule 1 clothes the Umpire with the power and jurisdiction to enter on the reference in lieu of the Arbitrators when one of the eventuality/contingency occurs." 15. N. Chellappan (supra), was a case where the Arbitrators failed in making the award. The two cases read together would lead to the irresistible conclusion that if the Arbitrators have allowed their time to expire without making an award or when they cannot agree in making the award and informed the parties that they cannot agree, the Umpire has jurisdiction to enter on the reference in lieu of the Arbitrators. 16. N. Chellappan (supra), clearly provides that it is not necessary for the arbitrators to wait for an order from the Court or to wait for the result of the application filed under Section 28 of the Arbitration Act for extension of time in favour of the party making a request to the Court that time be extended for making the award. It also appears from the judgment of the Supreme Court that pendency of the application before the Court or Umpire's Act of awaiting decision of the Court's order either for entering on the reference or on the application for extension of time would not denude the Umpire of his right/jurisdiction to enter on the reference. 17. It also appears from the judgment of the Supreme Court that pendency of the application before the Court or Umpire's Act of awaiting decision of the Court's order either for entering on the reference or on the application for extension of time would not denude the Umpire of his right/jurisdiction to enter on the reference. 17. At this stage it would be necessary to refer to Section 28 which reads as under: (i) Court may, if it thinks fit, whether the time for making the award has expired or not and whether the award has been made or not, enlarge from time to time, the time for making the award. (ii) Any provisions in an arbitration agreement whereby the arbitrators or Umpire may, except with the consent of all the parties to the agreement enlarge the time for making the award, shall be void and of no effect. 18. In the matter of State of Punjab v. Hardyal ( AIR 1985 SC 920 = 1985 Arb. LR 297), the Supreme Court considering the effect of Sections 3, 28 and Paragraph 3 of Schedule I of the Arbitration Act observed that it is open to the parties to an arbitration agreement to fix the time within which the arbitrator must give award, but it has to be so stated in the agreement itself. If per chance no time has been specified by the parties in the arbitration agreement, then by virtue of operation of Section 3 read with Clause 3 of the First Schedule the award must be given within four months of the arbitrator entering on the reference or after having been called upon to act by notice in writing from any party to the arbitration agreement or within such extended time as the Court may allow. Sub-section (1) of Section 28 is very wide and confers full discretion on the Court to enlarge time for making the award at any time. The discretion under sub-section (1) of Section 28 should, however, be exercised judiciously. Sub-section (2) of Section 28 also makes it evident that the Court alone has the power to extend time. It further provides that a clause in the arbitration agreement giving the arbitrator power to enlarge time shall be void and of no effect except when all the parties consent to such enlargement. Sub-section (2) of Section 28 also makes it evident that the Court alone has the power to extend time. It further provides that a clause in the arbitration agreement giving the arbitrator power to enlarge time shall be void and of no effect except when all the parties consent to such enlargement. It is not open to arbitrators at their own pleasure, without consent of the parties to the agreement, to enlarge time for making the award. The Supreme Court further observed that the Act injuncts the arbitrator to make an award within the prescribed period of four months unless the same is extended by the Court. The arbitrator has no jurisdiction to make an award after the fixed time. If the award made beyond the time is invalid the parties are not estoppel by their conduct from challenging the award on the ground that it was made beyond time merely because of their having participated in the proceedings before the arbitrator after the expiry of the prescribed period. According to the Supreme Court the power to extend time can be exercised by any court having jurisdiction or even by Appellate Court. The judgment clearly lays down that the arbitrators or the parties would have no jurisdiction to extend the time unless all the parties agree and if any award is made the same would be challengeable before the Court on the ground that it was made beyond time. 19. In what circumstances, the time for making the award can be extended has been considered by different Courts. The Courts are jointly of the opinion that if the arbitrators because of the acts of the parties or because of the voluminous records or for the reason beyond their control could not make an award within the prescribed time then the Courts may ordinarily extend the time. To this, the courts have added that if parties voluntarily have taken part in the arbitration proceedings even after the period for making the award has run out and an award is made by the Arbitrators then conduct of the parties shall provide a goods ground to the Court for extending the time. The Courts have held that observation in the proceedings would not validate the award which is otherwise invalid but the Courts have power to make that award binding on the parties by extending the time for making the award. The Courts have held that observation in the proceedings would not validate the award which is otherwise invalid but the Courts have power to make that award binding on the parties by extending the time for making the award. A Court has power to extend the time when the proceedings are still pending before the Arbitrators or when an award has already been made by the Arbitrators in a case where the parties have taken fullest part in the proceedings. The principles have been laid down in the matter of P. S. Abdulla v. Director, Forest Research Institute (AIR 1983 Kerala 162), and State v. Babulal ( AIR 1974 MP 179 ). In the matter of State of Madhya Pradesh (supra), a Division Bench of this Court observed that the policy of the law is that the award of an Arbitrators is ordinarily final and conclusive and that the Court should approach the award with a desire to support it, if that is reasonably possible, rather than destroy it by calling it illegal, and that it would have been consonant with justice to extend the time in the exercise of the Courts' discretionary power. In this matter, the High Court extended the time under Section 28 of the Act. In the matter of Kanhyalal v. Ashkaran ( AIR 1957 Cal. 658 ), the Court appreciating the provisions of Section 28 and Para 3 of Schedule I of the Act observed that what is necessary for the Court in its proper exercise of discretion is to consider a case to be fit before it enlarges time. The policy of the law should however be always a consideration and that policy is that Arbitrations should not be unduly prolonged and for that purpose the First Schedule Clause (3) of the Arbitration Act provides a period of four months. The Court further observed that where even after the time expired one of the parties appeared before the Arbitrators at the meeting held without protest that the time for making the award had already expired, the conduct of the party in appearing before the arbitrator even after the time for making the award had expired without any objection on the ground of time, is to be read as a further consideration in favour of enlarging the time for the award. The Supreme Court in the matter of State of Punjab (supra) observed that "the policy of law seems to be that the arbitration proceedings should not be unduly prolonged. The Arbitrator, therefore, has to give the award within the time prescribed or such extended time as the Court concerned may in its discretion extend and the Court alone has been given the power to extend the time for giving the award. The Supreme Court further observed that the Courts have power to extend the time even after the award has been given or after the expiry of the period prescribed for the award. The Court observed that where a party takes part in the arbitration proceedings without a demur or an objection on its part and where the parties have been taking willing part in the proceedings before the arbitrator without demur, a case would be fit for extension of time. The Supreme Court in its appellate jurisdiction extended the time for giving the award and directed that the award will be deemed to have been given in time. 20. The above referred were the cases where the parties had been taking part in the proceedings without any demur or objection on their part. In the case in hands the present applicant raised an objection before the Arbitrators on 8-6-1994 that as the period had already run out, the arbitrators had no jurisdiction to proceed with the case. The present is not a case where the award has already been delivered and in the process of making the award the parties had been taking part in the proceedings without any demur or objection on their part. When a party takes part in the proceedings, the Courts ordinarily presume that the party being fully aware of its right to challenge the authority and jurisdiction of the Arbitrators on the ground of running out of the limitation had been taking part in the proceedings and as such is providing the foundation in favour of the award for extension of time. Those judgments do not consider the case that if the arbitrators have not made their award, whether in a given set of the facts of the case, the Court is bound to extend that time. Those judgments do not consider the case that if the arbitrators have not made their award, whether in a given set of the facts of the case, the Court is bound to extend that time. In the words of Supreme Court, a Court has to exercise its judicial discretion, has to approach to the facts of the case judiciously and after considering the totality of the circumstances and conduct of the parties has to extend the time or may refuse to extend the time. 21. In the matter of M/s. Modern Builders v. Hukmatrai ( AIR 1967 Bom. 373 ), a Division Bench of Bombay High Court observed that Paragraph 2 of Schedule 1, that is appointment of an Umpire is not mandatory and non-compliance of it cannot vitiate award. The High Court further observed that even if Paragraph 2 is considered to be mandatory the award would not be invalidated. In the matter of Keshav Singh v. Indian Engineering Co. ( AIR 1969 Bom. 227 ), the Bombay High Court observed that where the arbitrators were required to appoint an Umpire before entering on the reference and the appointment was not conditional upon the acceptance of appointment by the Umpire, the appointment of Umpire without obtaining consent of the appointee (Umpire) was valid. The High Court further observed that an Umpire, can enter on the reference if Arbitrators have allowed their time to expire without making an award therefore, the intention of the parties to the agreement which provides for appointment of an Umpire would only mean that Umpire can enter on reference where the Arbitrators have allowed their time to expire without making of Keshavsingh v. Indian Engineering Co. ( AIR 1972 SC 1538 ), approved this view of the matter. The Supreme Court in this judgment also placed reliance upon the judgment of Iossifoglu v. Coumantaros (supra). The Supreme Court further observed that where one of the arbitrators declines to act and the other is left alone it will, in a case of this type, amount to disagreement between the two arbitrators. From this judgment of the Supreme Court, it is again clear that appointment of Umpire with his consent is not necessary. The Supreme Court also observed in the matter of Keshavsingh (supra) that the appointment of an Umpire by Arbitrators should be act of the will and judgment of he two. From this judgment of the Supreme Court, it is again clear that appointment of Umpire with his consent is not necessary. The Supreme Court also observed in the matter of Keshavsingh (supra) that the appointment of an Umpire by Arbitrators should be act of the will and judgment of he two. Such an appointment is to be one and choice and not of a chance. From this observation, it is clear that the act of appointing the Umpire is an act of the will and the judgment of the arbitrators. From the above referred judgments, the legal principle which can be summarised are that the arbitrators are required to make their award within four months after entering on the reference or after having been called upon to act by notice in writing from any party to the arbitration agreement or in such extended time as the Court may allow. If the Arbitrators have allowed their time to expire without making an award or have delivered to any party to the arbitration agreement or to the Umpire a notice in writing stating that they cannot agree, the Umpire shall forthwith enter on the reference in lieu of the Arbitrators. The Court may, if it thinks fit whether the time for making the award has expired or not and whether the award has been made or not, enlarge from time to time, the time for making the award. Any provisions in an arbitration agreement whereby the Arbitrators or Umpire may, except with the consent of all the parties to the agreement enlarge the time for making the award, shall be void and of no effect. The Courts shall have power in the particular facts of a case to extend the time for making the award irrespective of the fact that the award has been made or not and the Court in peculiar facts and circumstances of a case can refuse to extend the time. The act of extension of time is a judicial act stand the Courts are required to make a judicial approach with a judicious mind. 22. The question still to be considered in the present case is on what date the arbitrators entered on the reference. In the present case, the Arbitrators on 19-1-1994 recorded that "Sanghi Brothers Indore Limited" have today filed their revised claim, a copy of which has been supplied to M/s. Chetak Construction Ltd. Mr. 22. The question still to be considered in the present case is on what date the arbitrators entered on the reference. In the present case, the Arbitrators on 19-1-1994 recorded that "Sanghi Brothers Indore Limited" have today filed their revised claim, a copy of which has been supplied to M/s. Chetak Construction Ltd. Mr. J. W. Mahajan has prayed by his letter dated 19-1-1994 that notice also be issued to the 4 Guarantors as mentioned therein. Mr. Mahajan undertakes to send notices to these 4 guarantors by registered A.D. post alongwith necessary copies of documents submitted before the Arbitrators today. He may serve them personally also. In the said notice the Guarantor is directed to submit their say in writing, if any, on or before the next date and to appear in person before the Arbitrators in person or through their Advocates. Mr. Kabra prays for three weeks time to file their reply to the revised claim. They shall bring the same on 11-2-1994. The case adjourned to 11-2-1994. On 11-2-1994 certain Counsel appeared for different parties. The proceedings recorded by the Arbitrators would clearly show that the claim was also submitted before the earlier Arbitrators, namely Justice Muley and Shri T. N. Unni. As Shri Unni had tendered his resignation, the parties were required to appoint another arbitrator. The other arbitrator took part in the proceedings on 19-1-1994. The Arbitrators had entered on reference and were applying their judicial mind to the claim made by the parties. It is not a case where the same Arbitrators were continuing right from day one. On 14-10-1993, the meeting was held by Justice Muley and Shri T. N. Unni. The Arbitrators had taken part in the proceedings and had entered on reference. Another arbitrator who entered on reference on 19-1-1994 had joined the proceedings which had already commenced. It is not a case where the earlier proceedings were absolutely disallowed or quashed and a fresh panel of the Arbitrators was - appointed to arbitrate in the matter. After retirement of Shri T. N. Unni, Shri Pavecha, Advocate joined in his place. It is a case where one arbitrator retired and another joined in his place. It is a case where after one Arbitrator had vacated the seat and another occupied the same. It was like boarding in a running train. After retirement of Shri T. N. Unni, Shri Pavecha, Advocate joined in his place. It is a case where one arbitrator retired and another joined in his place. It is a case where after one Arbitrator had vacated the seat and another occupied the same. It was like boarding in a running train. The proceedings wherein the arbitrators had already entered on reference came to a stand still or a halt because of the situation of stalemate as one of the arbitrators resigned. The record of the proceedings was not commencement of the fresh proceedings. At best it can be held that the two arbitrators continued with the proceedings which had already taken some shape. In the peculiar facts and circumstances of the case it has to be held that Justice P. D. Muley and Shri Pavecha, Advocate entered on reference on 19-1-1994. This material aspect of the matter has at all not been seen by the learned Court below. The Court below has only appreciated the facts which are floating on the surface but has not tried to go fathom deep in the facts and to apply the law as it is so required. The arbitrators did enter into the reference on 19-1-1994. The period of four months expired on 18-5-1994. The matter was last taken up for hearing on 17-5-1994. The panel of the arbitrators after considering the case of the parties fixed the case for fixing the date of evidence and fixed it for 8-6-1994. On 17-5-1994, the Arbitrators were acting within their authority and jurisdiction but it was not brought to their notice that the time shall run out on 18-5-1994. On 8-6-1994, an objection was raised by the present applicant before the Arbitrators that the period for making the award has already expired, the defendants (present applicants) have already approached the Umpire on 7-6-1994 for entering on the reference and the Umpire had fixed 11-6-1994 as the date for consideration of that application. The arbitrators had observed that they had entered on the reference on 11-2-1994 and not on 19-1-1994. They were also of the opinion that the acts performed by them on 19-1-1994 were of ministerial nature and adjudication function was performed by them on 11-2-1994. The arbitrators were of the opinion that the time for making the award would expire on 10-6-1994. They were also of the opinion that the acts performed by them on 19-1-1994 were of ministerial nature and adjudication function was performed by them on 11-2-1994. The arbitrators were of the opinion that the time for making the award would expire on 10-6-1994. At that point of time Counsel for M/s. Sanghi Brothers assured the arbitrators that he would make an application for extension of time. 23. I have already found that the time started from 19-1-1994. 24. On 30-7-1994. Mr. Bagdi and Mr. Jain appeared for Chetak Constructions Ltd. before the Umpire and informed the Umpire that the application filed by M/s. Sanghi Brothers in the Court has been dismissed and therefore, the proceedings before the Umpire must commence. On the other, hand, Counsel for Chetak Constructions Ltd. informed the Umpire that the application for injunction was rejected by the Court but prayer for extension of time was fixed for hearing on 8-8-1994, therefore, the date be extended till orders are passed by the District Court. The Umpire considering all the submissions fixed the case on 27-8-1994 and directed the parties to file the statements of claim and documents in support thereof, on or before 27-8-1994. The Umpire also directed the parties that the Counsel for the parties shall be prepared for submissions in respect of the points of determination to be decided at the time of hearing. The Umpire a retired Judge of the Supreme Court believing in the system of legal justice and also being aware, as I feel, of the legal position was pleased to direct that the parties may file the copy of the order passed by the Court so that the same may be considered on the next date of hearing. The proceedings recorded by the Umpire did not show that he did not enter on reference on 30-7-1994. It only shows that believing in the judicial decorum he directed the parties to produce the copy of the order, to be passed on 8-8-1994, before him so that the same may be considered. The proceedings recorded by the Umpire do not show that the Umpire refused to enter on the reference or refused to act as an Umpire or wanted to wait till final disposal of the application pending before the Court for extension of time. It clearly appears that the Umpire entered on the reference on 30-7-1994. 25. The proceedings recorded by the Umpire do not show that the Umpire refused to enter on the reference or refused to act as an Umpire or wanted to wait till final disposal of the application pending before the Court for extension of time. It clearly appears that the Umpire entered on the reference on 30-7-1994. 25. From the above discussion, it is now clear that the Arbitrators entered on the reference on 19-1-1994 and they could not deliver the award within a period of four months and as such their time ran out. It is also clear that during the pendency of the application for extension of time made under Section 28 of the Act one of the party approached the Umpire, the Umpire accepting his office directed the parties to remain present on 30-7-1994 entered on the reference by directing parties to submit their claims and also directed the parties to be prepared for making their submissions on the next date of hearing. At this stage, it would now be necessary to again refer to the judgment of N. Chellappan (supra). The Supreme Court in the said case observed that where the Arbitrators fail to make the award within the specified time. Schedule I (Paragraph 4) authorises the Umpire forthwith to enter upon the reference in lieu of the Arbitrators. Neither the fact that the Umpire expressed his unwillingness to enter upon the reference without an order of the Court nor the fact that an application was made to extend the period for making the award by the Arbitrators long after the expiry of the period for making the award, had the effect of depriving him of his jurisdiction under Rule 4 of the First Schedule. It is clear from these observations that even if an application for extension of time is pending before the Court the Umpire is not denuded of his right and jurisdiction to enter upon the reference and pass an award. Once the Umpire enters on the reference then he enters on the reference in lieu on the arbitrators. The scheme of the Act is clear. It clearly provides that the Arbitrators are bound to make their award within the time fixed or where the time is not fixed within period of four months from the date of entering on the reference. The scheme of the Act is clear. It clearly provides that the Arbitrators are bound to make their award within the time fixed or where the time is not fixed within period of four months from the date of entering on the reference. If the Arbitrators fail to make their award within the period so prescribed, the Court has jurisdiction to extend the time. If the Arbitrators have allowed their time to run out or if they cannot agree then the Umpire shall forthwith enter on the reference irrespective of the fact that an application for extension of time was pending before the Court and the Arbitrators themselves wanted an order from the Court. Once the Umpire enters on the reference in lieu of the Arbitrators then the Arbitrators would have no jurisdiction to proceed with the matter because their authority would come to an end and it is only the Umpire who can consider the matter and deliver the award. A Court shall have power to extend the time so long as the matter is in the hands of the Arbitrator and the Umpire has not intervened. Once the Umpire enters into the picture the Arbitrators are required to walk out. The Act does not comprehend a situation where the Arbitrators and Umpire can sit together. In the filed there is room for either the Arbitrators or for the Umpire. Once the Arbitrators have allowed their time to run out then the Umpire may enter and if he enters then the doors for the Arbitrators are closed for ever. The Act nowhere provides that even after the entry of the Umpire on the scene, the Arbitrators can still arbitrate in the matter. Whether the Umpire is reluctant or whether he is waiting for the order of the Court or whether an application for extension of time is pending before the Court would not affect his right, authority or jurisdiction to enter on the reference. The very entry of the Umpire from the door will open the window for the Arbitrators to fly out. 26. In the instant case, I have already found that the Arbitrators permitted their period to run out on 18-5-1994. The very entry of the Umpire from the door will open the window for the Arbitrators to fly out. 26. In the instant case, I have already found that the Arbitrators permitted their period to run out on 18-5-1994. True it is that the Court could extend the time for making the award by the Arbitrators under Section 28 but the facts of the present case would clearly oust the jurisdiction of the Court to intervene in the matter and extend the time, because the Court also lost its jurisdiction to extend the time in favour of the Arbitrators under Paragraph 3 of Schedule I appended to the Act. 27. The facts would clearly show that the Umpire had entered on the reference and the arbitrators lost their jurisdiction for ever. 28. At this stage I would again refer to the judgment of the Supreme Court in the matter of Harishankarlal (supra), where the Supreme Court following the judgment of Iossifoglu (supra), has observed that the Arbitrators enter upon the reference as soon as they have accepted their appointment and have communicated with each other about the reference. 29. The Court below, in the opinion of this Court was wrong in holding that it had jurisdiction to extend the time. The Court below failed to appreciate that the Arbitrators lost their jurisdiction to proceed with the arbitration proceedings on 19-1-1994 and the Court itself lost its jurisdiction on 30-7-1994 because the Umpire had already entered on reference. The order passed by the Court below is not in accordance with law. The Court below has exercised the jurisdiction not vested in it by law and has passed an order beyond its jurisdiction by extending the time under Section 28 in favour of the Arbitrators. 30. The order passed by the Court below is quashed. The Revision is allowed. Considering the totality of the circumstances of the case, the parties are directed to bear their own costs throughout. 31. Clause 5 of the First Schedule provides that the Umpire shall make his award within two months of entering on reference or within such extended time as the Court may allow. The Arbitrator had entered on reference on 30-7-1994. As the matter was pending before the Court/Courts, the Umpire could not proceed with the matter. The period of two months within which the Umpire was required to make his award has already expired. The Arbitrator had entered on reference on 30-7-1994. As the matter was pending before the Court/Courts, the Umpire could not proceed with the matter. The period of two months within which the Umpire was required to make his award has already expired. Any party to the arbitration agreement shall now be free to move an application to the Court of competent jurisdiction for extension of time. If such an application is made, the Court shall consider the application on its own merits. The records received from the Arbitrators may be returned back to them with a direction that if they are required to produce the records either in the Court or required to send the same to the Umpire then they shall do accordingly. Revision allowed.