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2000 DIGILAW 277 (HP)

HIM SPORTS v. STATE OF HIMACHAL PRADESH

2000-10-17

R.L.KHURANA

body2000
JUDGMENT R.L. Khurana, J.—The parties entered into an agreement on 10.7.1975 whereby the defendant, State of Himachal Pradesh, agreed to sell standing Willow and other species trees to the plaintiff for the manufacture of sport goods and other allied products, subject to availability. The agreement starting from 1.4.1975, was to remain in force and effective for a period of ten years and covered the supply of 400 cubic metres and available volume of other broad leaf species annually for the purpose of manufacture of sport goods in the factory to be set up by the plaintiff at Mehatpur in District Una. 2. Since there were complaints that the plaintiffs was defrauding the defendant by selling the wood outside the State and that the plaintiff had neither factory nor machinery for the manufacture of sport, goods, an enquiry was conducted into the matter by the Deputy Commissioner, Una. On the basis of the report of the Deputy Commissioner a show cause notice was issued to the plaintiff and thereafter the agreement dated 10.7.1975 was rescinded by the defendant. A penalty of Rs. 1,14,210 was also imposed on the plaintiff. 3. Disputing the allegations made against him, the rescission of the agreement arid the imposition of penalty, the plaintiff filed a suit in the Court of Senior Sub-Judge, Una, for restraining the defendant from cancelling the agreement and imposing penalty on the plaintiff. Such suit was, however, dismissed for want of notice under Section 80, Code of Civil Procedure. After serving the requisite notice, another suit was filed by the plaintiff. The defendant pleaded arbitration clause. Consequently, the suit was stayed under Section 34, Arbitration Act, 1940. 4. The plaintiff filed another suit against the defendant before this Court for the recovery of Rs. 35.63,200. An application under Section 34, Arbitration Act, 1940, was made by the defendant. Such application was allowed by this Court and the suit filed by the plaintiff was stayed on 197.1982. 5. Under the directions of this Court dated 3.11.1982, the Chief Conservator of Forests vide office order dated 16.1.1983 appointed one Shri R.C. Datta as Arbitrator to go into the dispute between the parties. Shri R.C. Datta expressed his inability to act as an Arbitrator. 5. Under the directions of this Court dated 3.11.1982, the Chief Conservator of Forests vide office order dated 16.1.1983 appointed one Shri R.C. Datta as Arbitrator to go into the dispute between the parties. Shri R.C. Datta expressed his inability to act as an Arbitrator. With the consent of the plaintiff, vide office order dated 24.4.1984 Shri G.C. Gupta, a member of the Indian Forest Service, came to be appointed as an Arbitrator to adjudicate upon the disputes between the parties and make his award within four months from the date he entered upon the reference. On the expiry of the requisite period, the plaintiff conveyed its inability to agree to enlargement of time for making the award on the ground that the appointment of Arbitrator was not agreed to by it. Claiming Shri G.C. Gupta having become functus officio on his failure to make the award within the stipulated period and in the absence of extension of time, the plaintiff vide his letters dated 15.11.1985 and 5.12.1985 nominated one Shri Guru Dutt Sharma as an Arbitrator. The defendant was asked to agree to the appointment of Shri Guru Dutt Sharma as an Arbitrator, failing which to nominate its own Arbitrator. The defendant took the stand that since the appointment of Shri G.C. Gupta was at the instance of the Court, he could be removed only by the order of the Court. Consequent upon the failure of the defendant either to agree to the appointment of Shri Guru Dutt Sharma as mutually acceptable Arbitrator or to nominate its own Arbitrator, the plaintiff vide letter dated 1.1.1986 informed the defendant that Shri Guru Dutt Sharma, nominated by him, will be deemed to have been appointed as an Arbitrator under Section 9(b) of the Arbitration Act, 1940 read with Clause 39 of the agreement dated 10.7.1975. 6. The arbitrator so nominated by the plaintiff entered upon the reference. The defendant did not participate in the proceedings. The Arbitrator made his award and filed the same in this Court on 8.4.1986 for being made the rule of the court. On the award having been filed in this Court, the same came to be registered as Civil Suit No. 38 of 1986. Objections to the award being made the rule of the Court were preferred by the defendant under Section 30/33, Arbitration Act, 1940. On the award having been filed in this Court, the same came to be registered as Civil Suit No. 38 of 1986. Objections to the award being made the rule of the Court were preferred by the defendant under Section 30/33, Arbitration Act, 1940. Such objections were allowed and vide judgment dated 22.10.1992 the award made by the alleged Arbitrator Shri Guru Dutt Sharma was set aside. While setting aside, the award a learned Single Judge of this Court observed:— "The main question to be examined is, whether Shri G.C. Gupta continues to remain Arbitrator or became functus officio when he failed to complete the proceedings and make the award within four months allowed to him and whether the plaintiff could, in the facts and circumstances of this case, proceed to appoint Shri Guru Dutt Sharma as a sole Arbitrator in the case, and whether the award made by him is legally sustainable in view of the objections raised by the defendant in this case? Shri G.C. Gupta was appointed Arbitrator in accordance with condition (i) supra by Government order dated April 25, 1984. The plaintiff consented to this appointment and the contention that the consent was given under protest, is hardly acceptable, since there was no justifiable reason for the plaintiff to do so. Further, the participation by the plaintiff in the arbitration stops it from raising this plea. Shri G.C. Gupta entered upon the reference, called upon the parties to file their claims. Accordingly, the parties filed their claims but before he could finalise the proceedings and give the award, he called upon the parties to give their consent for extension of time. The plaintiff declined to give further time to the Arbitrator with the result that the Arbitration proceedings stand where they were. Shri G.C. Gupta has been appointed as Arbitrator under condition (i) of clause 39 of the arbitration agreement by the parties. This order has not been rescinded. The plaintiff may have written number of communications for early disposal of the arbitration proceedings. However, no step was taken to rescind this appointment in accordance with law. Unless that was done, no other appointment could be made by the plaintiff. The condition (ii) of clause 39 of the agreement could not come in operation. The plaintiff may have written number of communications for early disposal of the arbitration proceedings. However, no step was taken to rescind this appointment in accordance with law. Unless that was done, no other appointment could be made by the plaintiff. The condition (ii) of clause 39 of the agreement could not come in operation. Reliance on decisions (supra) by the learned counsel for the plaintiff is completely misconceived since the facts in the present case are quite peculiar. The arbitration proceedings in this case came to an end because the plaintiff did not agree for extension of time. This was to his own dis-advantage. The arbitration proceedings were stultified by the plaintiff himself. The conduct of the plaintiff demonstrates that by not agreeing to extend the time, it succeeded in ending the functioning of the Arbitrator whose appointment the plaintiff had not otherwise liked. Who was going to suffer, in case extension of time was not allowed to the Arbitrator? Obviously, the plaintiff, as the facts disclose, that is why the defendant also remained silent over the matter and did not approach this Court for extension of time. The occasion to appoint another Arbitrator could have arisen in case Shri G.C. Gupta had declined to proceed with the matter by resignation or otherwise. He has not said so. His appointment could be rescinded at the instance of the parties in accordance with law. This has not been done. He is still Arbitrator in the case. In such a situation, no other Arbitrator could be appointed by the parties, more so, under Section 9 of the Arbitration Act read with condition (ii) of clause 39 of the agreement, and other provisions of the Arbitration Act as contended. Functionally he may have become inactive (functus officio) for want of extension of time, but he continues to remain Arbitrator and the proceedings can be reactivated by extension of time. So expiry of the period does not end arbitration proceedings (See : AIR 1979 Delhi 75, M/s. Nav Bharat Construction Co., New Delhi and another v. Union of India and others). The appointment of Shri Guru Dutt Sharma is, therefore, absolutely illegal and without jurisdiction, so is the award given by him." 7. Feeling aggrieved, the plaintiff preferred an appeal, being F.A.O. No. 372 of 1992 before the Division Bench of this Court against the order dated 22.10.1992. The appointment of Shri Guru Dutt Sharma is, therefore, absolutely illegal and without jurisdiction, so is the award given by him." 7. Feeling aggrieved, the plaintiff preferred an appeal, being F.A.O. No. 372 of 1992 before the Division Bench of this Court against the order dated 22.10.1992. Such appeal was dismissed on 10.11.1995. The appointment of Shri G.C. Gupta as Arbitrator was upheld. 8. The defendant thereafter approached this Court by way of a petition under Section 28, Arbitration Act, 1940, being O.M.P. (M) No. 24 of 1992 seeking extension of time for making the award by the Arbitrator Shri G.C. Gupta. This petition was allowed by a learned Single Judge of this Court on 5.11.1996 and the time for making the award, which stood expired in 1985, was extended. The Arbitrator Shri G.C. Gupta was directed to make his award within a period of six months from the date of receipt of the copy of the order. While extending the time and asking the Arbitrator to make his award within the extended time, the learned Single Judge observed:— "It is earnestly hoped that both the parties will now co-operate in the arbitration proceedings so as to bring this long and protracted drama of arbitration proceedings to its logical conclusion." 9. The Arbitrator Shri G.C. Gupta in pursuance to the extension of time for making the award, took up the proceedings on 13.1.1997 and called upon the parties to put in appearance before him on 23.1.1997 at 3 p.m. However, since 23.1.1997 was declared a National Holiday, vide notice dated 18.1.1997 directed the parties to put in appearance before him on 4.2.1997 at 3. p.m. Since the registered cover containing the notice sent to the plaintiff was returned to the Arbitrator as undelivered, the case was adjourned by the Arbitrator to 3.3.1997. Again, the notice sent to the plaintiff for 3.3.1997 was returned undelivered. Consequently, the learned Arbitrator while postponing the proceedings to 2.4.1997 at 11.30 a.m. directed the publication of notice in the newspapers. Such notice came to be published in Jansatta and The Tribune, Chandigarh, in their issue dated 23.3.1997 calling upon the plaintiff to put in appearance before the Arbitrator on 2.4.1997 at 11.30 a.m. failing which ex parte proceedings would be conducted. The plaintiff, however, did not put in appearance. Ex parte proceedings were, therefore) conducted against him. Such notice came to be published in Jansatta and The Tribune, Chandigarh, in their issue dated 23.3.1997 calling upon the plaintiff to put in appearance before the Arbitrator on 2.4.1997 at 11.30 a.m. failing which ex parte proceedings would be conducted. The plaintiff, however, did not put in appearance. Ex parte proceedings were, therefore) conducted against him. The Arbitrator made his award on 17.6.1997 whereby a sum of Rs. 1,14,210 was awarded in favour of the defendant. The Arbitrator also allowed interest on the amount awarded at the rate of 12% per annum from the date of the award. The award was filed in this court by the Arbitrator on the same day, that is, 17.6.1997. Notices of the award having been filed in the court for being made the rule of the court were issued to the parties 10. The defendant was served on 12.11.1997. No objections to the award being made the rule of the court, were filed by the defendant. 11. The plaintiff could be served only on 1.9.1998. Objections under Section 30/33, Arbitration Act, 1940, were filed by the plaintiff on 5.10.1998 to the award being made the rule of the court, inter-alia, on the following grounds:— (a) the appointment of Shri G.C. Gupta, not having been made by mutual consent of the parties, is bad and he has no jurisdiction to proceed with the matter; (b) Time for making the award was wrongly extended by this Court in O.M.R (M) No. 24 of 1992; (c) the Arbitrator has misconducted himself and the proceedings inasmuch as—- (i) the plaintiff was never served in accordance with law; (ii) he failed to continue the proceedings from the stage the same stood when the time for making the award expired in 1985; (iii) the award has been made with a pre-determined mind; and (iv) the award has not been made within the extended period. 12. The objections are being resisted and contested by the defendant. It is pleaded that the Arbitrator has made his award in accordance with law. The plaintiff himself chose not to take part in the arbitral proceedings inspite of having the knowledge and notice thereof. The Arbitrator has neither misconducted himself nor the proceedings. 13. On the pleadings of the parties, following issues were framed on 21,5.1999:— 1. Whether the Arbitrator has misconducted himself and/or the proceedings, as alleged? If so, to what effect? The plaintiff himself chose not to take part in the arbitral proceedings inspite of having the knowledge and notice thereof. The Arbitrator has neither misconducted himself nor the proceedings. 13. On the pleadings of the parties, following issues were framed on 21,5.1999:— 1. Whether the Arbitrator has misconducted himself and/or the proceedings, as alleged? If so, to what effect? OPP 2. Relief. 14. I have heard the learned Counsel for the parties and have also gone through the record of the case. My findings on the above issues are as under : Issue No. 1. The first contention raised on behalf of the plaintiff is with regard to the validity of appointment of Shri G.C. Gupta as Arbitrator. 15. The appointment of Shri G.C. Gupta as Arbitrator was held valid by a learned Single Judge of this Court vide judgment dated 22.10.1992 in Civil Suit No. 38 of 1986. The plaintiff preferred an appeal against such order, being F.A.O. No. 372 of 1992. This appeal was dismissed by a Division Bench of this Court on 10.11.1995. No further appeal was preferred by the plaintiff. The decision holding the appointment of Shri G.C. Gupta as Arbitrator, to be valid, therefore, has become final. The plaintiff as such, cannot re-agitate the same issue in the present case. 16. The second contention of the plaintiff that time for making the award has been wrongly extended by this Court vide order dated 5.11.1996 in O.M.P. (M) No. 24 of 1992 is also to be rejected since the plaintiff cannot raise such question in the present case having failed to assail the order dated 5.11.1996 by way of an appeal. 17. Insofar as the contention that the Arbitrator has misconducted himself and the proceedings, is concerned, much stress was placed on the fact that the plaintiff was never served by the Arbitrator in accordance with law and as such has gravely erred in making the award ex parte against the plaintiff. 18. A perusal of the record of the Arbitrator shows that notices sent to the plaintiff for each and every date of hearing was being returned undelivered with the report that inspite of repeated attempts plaintiff was not available. Ultimate notice to the plaintiff was published in Newspapers "Jansatta" and "The Tribune" in the issues dated 23.3.1997, 19. 18. A perusal of the record of the Arbitrator shows that notices sent to the plaintiff for each and every date of hearing was being returned undelivered with the report that inspite of repeated attempts plaintiff was not available. Ultimate notice to the plaintiff was published in Newspapers "Jansatta" and "The Tribune" in the issues dated 23.3.1997, 19. Section 42, Arbitration Act, 1940 which deals with service of notice by party or Arbitrator provides— "Any notice required by this Act to be served otherwise than through the Court by a party to an arbitration agreement or by an arbitrator or umpire shall be served in the manner provided in the arbitration agreement, or if there is no such provision, either— (a) by delivering it to the person on whom it is to be served, or (b) by sending it by post in a letter addressed to that person at his usual or last known place of abode or business in India and registered under Chapter VI of the Indian Post Office Act, 1898 (6 of 1898).” 20. A Division Bench of the Delhi High Court in Union of India v. M/s. Bhatia Tanning Industries, Kanpur, AIR 1986 Delhi 195, has held that Section 42 is a complete Code and provides for the modes of service of notice by the Arbitrator on a party before he proceeds to hear the case. 21. The provisions contained in Section 42 are procedural and apply to all the notices that are required to be served otherwise than through Court. The object of such a notice is obviously to bring to the knowledge of the party the intention to act upon the arbitration agreement by the person or party which is seeking to refer the matter. All that is required and necessary is that such a notice must be duly sent to the persons last known place of address. If, therefore, a notice is duly sent to the persons address and there is evidence to this effect, it must be treated as a good and proper notice. 22. The High Court of Punjab in Firm, Kanpur and Sons, Amritsar v. Raj Kumar Khanna and another, AIR 1955 Punjab 235, has held that a notice sent by post to a person at his last known place of business or abode, is a good and proper notice. 22. The High Court of Punjab in Firm, Kanpur and Sons, Amritsar v. Raj Kumar Khanna and another, AIR 1955 Punjab 235, has held that a notice sent by post to a person at his last known place of business or abode, is a good and proper notice. The view that a registered notice, unless served is not sufficient service, shows fundamental fallacy in reasoning. 23. In the present case repeated notices under registered post at the last known address of the plaintiff. It is not the case of the plaintiff that the address mentioned in the notice is wrong. In fact he was served in the present suit on such address. Therefore, in view of the provisions contained in Section 42, the plaintiff would be deemed to have been duly served with the notice of arbitration proceedings. 24. In so far as service by publication is concerned, it has been held in Firm, Kanpur and Sons, Amritsars case (supra) that the Arbitrator has no power to order service of notice by means of publication. However, if the registered notice are properly served, then publication must be treated as a superfluity, a needless exercise. Publication, in no way, vitiates the proceedings. The Arbitrator by publishing, does not misconduct the proceedings. He did all that the law required him to do and something more EX ABUNDANTI CAUTELA. 25. In Jawahar Lal Wadhwa v. Hariprada Chakraborty, 1985 Arb. LR 420, it has been held that a party which has repeatedly failed to take notice and to whom indulgence was shown by the Arbitrator cannot be permitted such a hyper-technical objection. 26. Evidence is available on the record to show that the plaintiff was in the know of the arbitration proceedings and he was himself avoiding to associate Vide letter dated 3.2.1997 addressed to the Arbitrator by the plaintiff, which appears to have been written by him in response to the notice sent to him, he has not only questioned the authority of the Arbitrator to proceed with the proceedings, he had levelled allegations of fraud and dishonesty against the Arbitrator. The plaintiff vide this letter made his intention clear that he would not associate in the arbitral proceedings being conducted. 27. The plaintiff vide this letter made his intention clear that he would not associate in the arbitral proceedings being conducted. 27. If it appears from the circumstances of the case that a particular party is determined not to appear before the Arbitrator in any event, as when he has openly repudiated either the reference itself or the particular Arbitrators and has shown no desire to recant, the Arbitrators are not required to issue notice of an intention to proceed ex parte against such a recusant person and may proceed ex parte and make a valid award. [See Juggilal Kamlapat v. General Fibre Dealers Ltd., AIR 1955 Calcutta 354; Dipti Bikash Sen and another v. India Automobiles (1960) Ltd., AIR 1978 Calcutta 454 and Lohia Jute Press P. Ltd. and others v. The New India Assurance Co. Ltd. and others, AIR 1988 Calcutta 174]. 28. On the facts of the present case, the plaintiff not only knew the arbitral proceedings, he was duly served with a notice and he avoided to join such proceedings. Rather he made his intention clear to the Arbitrator vide his letter dated 3.2.1997 that he would not join such proceedings. Therefore, there has been no misconduct of the proceedings by the Arbitrator in proceeding ex parte against the plaintiff. 29. There is nothing on the record to show that the Arbitrator after the extension of time for making the award did not proceed from the stage the proceedings were at the time of expiry of the period for making the award in 1985, or that the Arbitrator was prejudiced against the plaintiff and the award has been made with a pre-determined mind. There is also nothing on the record to show that the award has been made beyond the extended period. A persual of the record of Arbitrator shows that the copy of the order dated 5.11.1996 of this Court and the record of the case was received in his office on 3.1.1997. The award was required to be made within six months from such date. The award was made on 17.6.1997, that is, within the stipulated period. 30. For the foregoing reasons, it cannot be said that the Arbitrator has misconducted himself and/or the proceedings. Therefore, the award dated 17.6.1997 is not liable to be set aside. The issue is decided against the plaintiff. Relief 31. The award was made on 17.6.1997, that is, within the stipulated period. 30. For the foregoing reasons, it cannot be said that the Arbitrator has misconducted himself and/or the proceedings. Therefore, the award dated 17.6.1997 is not liable to be set aside. The issue is decided against the plaintiff. Relief 31. As a result, the objection preferred by the plaintiff, being O.M.P. No. 513 of 1998, are dismissed leaving the parties to bear their own costs. Civil Suit No, 33 of 1997. 32. Consequent upon the dismissal of the objections preferred by the plaintiff, the award dated 17.6.1997 is made the rule of the court and a decree in terms thereof for a sum of Rs. 1,14,210 is passed in favour of the defendant and against the plaintiff. The defendant shall further be entitled to interest on the decretal amount from the date of the award, that is, 17.6.1997 till the date of payment/realisation of the amount at the rate of 12% per annum. Petition dismissed.