IN THE MATTER OF : UNION OF INDIA v. KOHINOOR TARPAULIN INDUSTRIES
2008-11-06
HIMA KOHLI
body2008
DigiLaw.ai
HIMA KOHLI, J. (ORAL) 1. The present objections are filed by the objector/ contractor under Sections 16, 30 and 33 of the Arbitration Act, 1940 against an ex-parte award dated 11.6.1992 made and published by Sh.Ram Bahadur, Sole Arbitrator. 2. In a nutshell, the facts of the case are that the petitioner/DGSandD entered into a contract dated 31.8.1987 with the objector/contractor for supply of tent private MK-3. The aforesaid tender is stated to have been accepted by the objector/contractor vide letter dated 9.9.1987. It is the case of the petitioner that as per clause 9 of the contract, the objector/contractor was required to deposit security to the tune of Rs.27,290/- by 30.9.1987 in favour of DGSandD for due performance of the contract. The aforesaid clause also stipulated that in case of failure on the part of the objector/contractor to deposit the security by the date specified, it would be a breach of the contract which would entitle the petitioner to cancel the contract and recover damages for the loss sustained as a result of repurchase. As per the petitioner, the objector/contractor failed to furnish the security by the date fixed, i.e 30.9.1987. As a result, the petitioner/DGSandD cancelled the contract for the unsupplied quantity of stores at the risk and cost of the objector/contractor. Though the objector/contractor participated in the risk purchase tender, but his offer was not considered on account of non-furnishing of 10% security and instead, the tender was awarded to two other parties. The petitioner claimed that it suffered loss amounting to Rs.5,13,149.60 paise which was demanded from the objector/contractor on 15.9.1989. 3. As the objector/contractor failed to pay the aforesaid amount to the petitioner, disputes and differences arose between the parties. Vide letter dated 23.9.1989, the objector/contractor invoked the arbitration clause governing the parties and requested the DGSandD to appoint an arbitrator. Vide order dated 27.12.1989, Mr.R.K.Gupta was appointed as the Sole Arbitrator, but he tendered his resignation on 26.7.1990. Subsequent thereto, vide order dated 31.10.1990, Sh.C.Achuthan, was appointed as the Sole Arbitrator . Vide order dated 30.1.1991, both the parties gave a written consent for enlargement of time for the purposes of making and publishing the award within a period of four months. The aforesaid period was further extended upto 3.11.1991. In the meantime, as per the order dated 14.10.1991, the objector/contractor filed an affidavit by way of evidence.
Vide order dated 30.1.1991, both the parties gave a written consent for enlargement of time for the purposes of making and publishing the award within a period of four months. The aforesaid period was further extended upto 3.11.1991. In the meantime, as per the order dated 14.10.1991, the objector/contractor filed an affidavit by way of evidence. Vide order dated 30.10.1991, the learned Arbitrator adjourned the case sine die in the absence of consent for enlargement of time. Thereafter, on 17.1.1992, Mr.Achuthan tendered his resignation. 4. Vide order dated 31.3.1992, the petitioner, DGSandD appointed Sh.Ram Bahadur as the Sole Arbitrator. On 9.4.1992, the case was adjourned by the learned Arbitrator for hearing on 27.4.1992. On 27.4.1992, the learned Arbitrator adjourned the case to 11.5.1992 with an observation that he would proceed ex-parte against the objector/contractor in case he did not appear on the next date. Meanwhile, on 10.5.1992, the objector/contractor, who was based in Kolhapur, sent a letter seeking an adjournment on the ground that he could not contact his counsel and there was a demise in the family. On 21.5.1992, in view of the aforesaid letter issued by the objector/contractor on 10.5.1992, the Sole Arbitrator adjourned the case to 11.6.1992 and clarified that if the parties did not appear on the next date, they would be proceeded against ex- parte. As none was present on behalf of the objector/contractor on 11.6.1992, the impugned ex-parte award came to be passed by the learned Arbitrator. 5. The main plank for assailing the impugned award on behalf of the objector/contractor is that the learned Arbitrator while proceeding ex-parte against it on 11.6.1992, failed to follow the principles of natural justice. Counsel for the objector/contractor submits that notice for the date of hearing, i.e 11.6.1992 came to be communicated to his clients only on 16.6.1992, by which date, the ex-parte award had been passed. He states that a perusal of the arbitral records shows that no postal receipt has been placed on the record to establish that the objector/contractor had received intimation of the next date of hearing before the date fixed, i.e.11.6.1992. He further states that by passing the ex-parte award, the Sole Arbitrator misconducted himself and thus deprived the objector/contractor of a reasonable opportunity of being heard. In support of his submission, counsel for the objector/contractor relies on the following judgments:- (i) M/s Saxena and Co. Vs.
He further states that by passing the ex-parte award, the Sole Arbitrator misconducted himself and thus deprived the objector/contractor of a reasonable opportunity of being heard. In support of his submission, counsel for the objector/contractor relies on the following judgments:- (i) M/s Saxena and Co. Vs. Damodar Pershad Gupta AIR 1956 Punjab 243 (ii) M/s Lovely Benefit Chit Fund and Finance Pvt.Ltd. Vs. Puran Dutt Sood and Ors. AIR 1983 Delhi 413 (iii) Daisy Trading Corporation Vs. Union of India 95 (2002) DLT 12 (iv) Power Grid Corporation of India Ltd. Vs. Electrical MFG. Co.Ltd. and Ors 2008 (106) DRJ 1 (DB) .6. A perusal of the record of the learned Arbitrator bears out the aforesaid factual position stated on behalf of the objector/contractor. Counsel for the petitioner also concedes that the records do not reflect any proof of service of the communication by the Sole Arbitrator to the objector/contractor as to the next date of hearing in the case prior to the said date, i.e. 11.6.1992. In fact, a perusal of the arbitral proceedings shows that there is no proof of despatch or receipt at all placed on the record in respect of the service effected on the objector/contractor prior to proceeding ex-parte against it. The learned Arbitrator has noted in the award that the case was closed and heard ex-parte because of pressing hard by the counsel for the petitioner who stated that the case was pending since 1989 and the objector/contractor was using dilatory tactics. Considering the fact that prior to the aforesaid date, the matter was adjourned to enable the petitioner to file a reply to the affidavit by way of evidence filed by the objector/contractor, it cannot be said that dilatory tactics were adopted by the objector/contractor. The aforesaid observation is also borne out by the fact that the objector/contractor took the precaution of writing a letter dated 10.5.1992 to the learned Arbitrator informing that they were trying to contact their counsel and that due to personal difficulties on account of bereavement of the brother of the proprietor of the objector/contractor, they could not contact the counsel and thus an adjournment was sought. In the aforesaid circumstances, it would have been appropriate if the learned Arbitrator would have ensured service on the objector/contractor who was residing in Kolhapur, before passing any adverse order against it.
In the aforesaid circumstances, it would have been appropriate if the learned Arbitrator would have ensured service on the objector/contractor who was residing in Kolhapur, before passing any adverse order against it. While a perusal of the order dated 21.5.1992 shows that the copy of the aforesaid order was forwarded by the registered post to the objector/contractor, however, as indicated above, neither proof of destpach, nor proof of service is placed on the record. .7. Counsel for the objector/contractor is therefore justified in stating that irreparable loss and injury has been caused to his client in view of non-compliance of the principles of natural justice and fair procedure. In this context, it is relevant to quote from the judgment of a Division Bench of this Court in the case of Power Grid Corporation (supra) as below: 19. Indisputably, the arbitrators would in law neglect their duty if they do not listen to one party who might be interested either in controverting or who is legally entitled to controvert the claim of the party approaching them. Similarly, the person who is to be affected by the evidence ought to be present to hear it so that he would be able to meet and answer it. The arbitrator is ordinarily free from the fetters of procedural law but that does not make him free from the fundamental principles of justice. Though the arbitrator may not strictly follow the rules and procedures as observed by the Civil Court but at the same time it would not imply that the Arbitral Tribunal can ignore or circumvent the principles of natural justice and fair procedure. The omission in giving notice to a party before proceeding ex-parte is a serious irregularity in the procedure and amounts to misconduct. It is a salutary principle of natural justice that nobody should be condemned unheard. Where the arbitrator proposes to proceed with the reference notwithstanding the absence if one of the parties, it is advisable that he should give that party distinct notice of his intention to do so. If reasonable excuse for not attending the appointment can be shown, the court will set aside an award made by an arbitrator who has proceeded ex-parte. In Russell on Arbitration, Nineteenth Edition page 271 the following passage appears.
If reasonable excuse for not attending the appointment can be shown, the court will set aside an award made by an arbitrator who has proceeded ex-parte. In Russell on Arbitration, Nineteenth Edition page 271 the following passage appears. Notice of intention to proceed ex-parte: In general, the arbitrator is not justified in proceeding ex-parte without giving the party absenting himself due notice. It is advisable to give the notice in writing to each of the parties or .their solicitors. It should express the arbitrators intention clearly, otherwise the award may be set aside. An ordinary appointment for a meeting with the addition of the word Peremptory marked on it is, however, sufficient. If the arbitrator declines to proceed on the first failure to attend a peremptory appointment, and gives another appointment, he is not authorized to proceed ex-parte at the second meeting, unless the appointment for it was also marked peremptory or contained a similar intimation of his intention. 21. The elementary Principle of Natural Justice implies a duty to act fairly, i.e. fair play in action. The Principle of Natural Justice is not dogmatic in character and a duty is cast upon on every adjudicatory body be it judicial or quasi judicial to strictly adhere to the Principle of Natural Justice unless such adherence is dispensed with under any particular Statute. The Rules of Natural Justice are although not embodied Rules, but the same afford minimum protection to the rights of any person against the arbitrariness of any authority be it judicial, quasi judicial or administrative whose decision involves any civil consequences or can affect the rights of an individual. The aim of Rules of Natural Justice is to secure justice or to put it in the negative to prevent miscarriage of justice. Emphasis added 8. Even in the present case, it cannot be denied that the objector/contractor has been gravely prejudiced by the omission on the part of the Sole Arbitrator to serve a notice of his intention to proceed ex-parte against it. In these circumstances, this Court has no option but to set aside the impugned award and allow the aforesaid objection raised by the objector/contractor. 9. It is pertinent to note that the counsel for the objector/contractor gives up his objection with regard to non-extension of time for the purposes of making and publishing the award.
In these circumstances, this Court has no option but to set aside the impugned award and allow the aforesaid objection raised by the objector/contractor. 9. It is pertinent to note that the counsel for the objector/contractor gives up his objection with regard to non-extension of time for the purposes of making and publishing the award. Accordingly, the petitioner is directed to appoint an Arbitrator as expeditiously as possible and preferably within eight weeks, particularly in view of the fact that the vintage of this case is of the year 1992. The learned Arbitrator shall enter upon reference and issue notice of appearance to both the parties. He shall proceed further in respect of the arbitral proceedings from the point at which it was left on 31.10.1991. The records of the original arbitral proceedings forwarded to this Court shall be remitted by the registry to the named Arbitrator upon the parties intimating the registry as to the name of the newly appointed Arbitrator. 10. The present application as also the suit are disposed of. 11. The parties are left to bear their own costs.