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Judgment
S.N. Jha, C.J.—This appeal u/s 39 of the Jammu and Kashmir Arbitration Act, 2002 is directed against the judgment of a learned Single
Judge of this Court dated 17th August, 2000 in Arbitration Application No. 270/1991, rejecting the objections of the appellant to the award of the
arbitrator and making the award rule of the Court. The facts of the case, briefly, are as follows.
The appellant entered into an agreement for construction of quarters/married accommodation for JCOs/Hav./Ors and Key personnel at
Akhnoor. Dispute arose between the parties and the appellant filed a petition u/s 20 of the Arbitration Act registered as AA No. 360/1986 in this
Court for reference of the dispute to the arbitrator. By order dated 15th July, 1988, as modified by order dated 22nd December, 1988, the
competent authority, namely, Engineer-in-Chief, Army Headquarters was directed to appoint an arbitrator. Initially one Brigadier M.M.S. Parihar
was appointed as arbitrator but he did not conclude the proceeding and resigned. Thereafter, on 7th February, 1991, the competent authority
appointed Brigadier Y.W. Joshi as the sole arbitrator. The said arbitrator entered upon reference on 4th March, 1991 and vide letter of the date
directed the parties to file statement of case along with supporting documents by 15th April, 1991, after serving copy thereof on the other side.
The parties were further directed to submit their pleadings on receipt of the said statement by the other side by 13th May, 1991 after serving copy
thereof. Reply to the pleadings in defence was to be submitted by the parties by 22nd May, 1991. The parties were informed that the venue of
arbitration and date of hearing would be intimated after compliance with the above. Though not disclosed in the memo of appeal, it appears from
the award that on 17th May, 1991 another communication was sent by the arbitrator to the appellant to submit its statement by 30th May, 1991.
A telegram to this effect was also sent by him on 18th May, 1991. It may be stated here that the respondents through CWE HQ 135 Works
Engineers had submitted the statement of case on 24th April, 1991 in the meantime.
The case of the appellant is that it had requested the authorities to furnish certain documents for filing the statement of case but the same was not
made available with the result he could not file the statement.
On 1st June, 1991, the arbitrator informed the parties that hearing of the case would be taken up in the office of CWE HQ 135 Works
Engineers on 21st June, 1991 from 11 am and the hearing may continue next day, if required. The parties were requested to attend the hearing and
present their oral submissions. They were also requested to produce books, papers, accounts, bills, writings, documents etc. which may be in their
possession and which they intend to refer to or would be otherwise required during the hearing. The parties were further informed that in case
either party fails to attend the hearing, the arbitrator shall proceed with the reference ex-parte.
The case of the appellant is that the appellant and its representative reached the office of CWE HQ 135 Akhnoor at 10 am on 21st June, 1991
waited for the arbitrator throughout the day but he did not turn up. The representative of the appellant delivered a letter to CWE HQ 135 Akhnoor
-- representing the Union of India -- and also posted letter to the arbitrator. In the letter the representative expressed unhappiness that reasonable
opportunity to present the statement of claim was not given and a direction be issued to the respondent to make documents available. Having
delivered the said letter, after the arbitrator failed to turn up, the appellant along with representative returned to Phillaur in Punjab in connection
with some other work.
The arbitrator, it may be stated, as per record could not reach on account of flight delay (he had to come from Lucknow where he was posted).
He, however, held the proceeding on 22nd June, 1991 and on 1st July, 1991 gave the award sending copies thereof to the parties on the same
day.
The appellant objected to the award being made rule of the Court on the ground that by denying it a reasonable opportunity of hearing in the
arbitration proceeding, the arbitrator had misconducted himself and the proceeding and, therefore, the award was fit to be set-aside. The learned
Single Judge framed two issues for decision:
Whether the arbitrator has misconducted himself and the proceedings and if so with what effect?
Whether the award suffers any error apparent on the face of the record?
Upon consideration of the materials on record and hearing the parties, the learned Single Judge decided the issues in favour of the respondents
and against the appellant and, rejecting the objections, made the award rule of the Court. The appellant has come in appeal.
Shri R.K. Gupta appearing for the appellant submitted that it is the admitted position that the arbitration proceeding was not held on 21st June,
1991 on account of absence of the arbitrator and, therefore, the arbitrator should have fixed another date and intimated the appellant of the date
and held the proceeding on that date. As per the letter/notice dated 1st June, 1991, the proceeding was to be held on 21st June and the hearing
could continue next day if it was taken up on 21st June but remained inconclusive. As the hearing did not commence on 21st June, 1991, the
proceeding could not be held on 22nd June, 1991. Counsel submitted that it is also the admitted position that the appellant / representative was
present at the venue of the proceeding and a letter had been delivered in the office of CWE HQ 135 Works Engineers. The said letter was, in fact,
handed over to the arbitrator on 22nd June, 1991. The appellant being present on the date and venue fixed for hearing, the arbitrator was not
justified in taking up the proceeding on the next day behind its back and pass ex-parte award. Counsel submitted that though it is open to the
arbitrator to decide the course of proceedings, he cannot act arbitrarily and in violation of rules of natural justice. According to the counsel, if the
arbitrator wanted to proceed ex-parte in the matter, he should have fixed another date for ex-parte proceeding and informed the appellant that the
proceeding would be held ex-parte on that date. In support of the contentions counsel placed reliance on Prem Nath L. Harsaran Dass and
Another Vs. Om Parkash L. Ram Kishen Dass Aggarwal, ; Saxena and Co. Vs. Damodar Pershad Gupta, ; Ariyur Mohammed Habeebur
Rahman and Others Vs. Ansuri Varamma (died) and Another, and Lovely Benefit Chit Fund and Finance Pvt. Ltd. Vs. Shri Puran Dutt Sood and
Others,
It is relevant to mention here that the Union of India had lodged cross claim for a sum of Rs. 3,25,280 as wages paid to the labour employed
by the appellant, at par with the departmental labour under the provisions of the Contract Labour (Regulation and Abolition) Act, 1970. By the
impugned award while the arbitrator rejected the claim of the contractor appellant and gave 'nil' award in his favour, the cross claim put forward on
behalf of the Union of India was allowed and award for Rs.3,25,280 was given in its favour, against the appellant.
Assailing the latter part of the award allowing the respondent's claim of Rs.3,25,280, Shri R.K. Gupta submitted that the claim was made as
loss suffered by the respondent as penalty on behalf of the contractor. The fact is that no amount was paid by the respondent and as it did not
suffer any loss there was no question of lodging, muchless allowing, the claim. Secondly, he submitted that in terms of arbitration clause 70 of the
agreement IAFW 2249 the arbitrator was required to give a speaking award setting out reasons therefor, whereas in the instant case the award
was non-speaking without assigning reasons for allowing the respondent's claim. On this ground alone the latter part of the award is fit to be set
aside. In this connection counsel placed reliance on Gora Lal v. Union of India (2004)1 SCC 916.
On the submission of the counsel two questions arise for consideration:
Whether the award is fit to be set aside on the ground that it was passed ex-parte without giving opportunity of hearing to the appellant?
whether in any view the latter part of the award allowing the respondent's claim of Rs. 3,25,280 against the appellant is justified?
As far as the first question is concerned, we may observe at the outset that what has been stated by the appellant, as mentioned herein-above,
is not even half truth. The fact is that on 21st June, 1991 far from making prayer for fixing another date of hearing or airing the grievance that
documents had not been supplied to him by the authorities with the result he was unable to file statement of the case, the appellant questioned the
very bona fide of the arbitrator asking him to resign as the arbitrator. The letter has been quoted in extenso by the learned Single Judge in the
impugned judgment but it would be useful to quote it again for easy reference. The letter reads as under:
Ref. Your No. SPA/791/YWJ dated 1.6.91.
From your letter under reference we apprehend the following:
(a) Your honour are likely to be biased in the matter and on such do not expect justice from your lordship being the departmental officer, on the
believable grounds that you are taking personal interest in conducting the hearing without having received the statt, of claims, pleadings in defence
without having further given us the opportunity to do the needful.
In the above circumstances your honour is requested to resign from the post of an arbitrator and your proceeding reference to exparte is not
agreed to, being a threatening attitude at your end.
Moreover, in case you do not wish to resign, we will be submitting before your hon'ble court under protest.
Hollowness of the appellant's case stands exposed by a bare reading of the aforesaid letter. The appellant wants us to believe that its
representative reached the venue of the proceeding on the date fixed i.e. 21st June, 1991 and waited for the whole day for the arbitrator to arrive,
but as the arbitrator failed to arrive he submitted the letter in token of his presence, as if had the arbitrator reached the venue and taken up the
hearing, it would have participated in the proceeding. There is no whisper in the letter about the appellant's inability to file the statement of case on
the professed ground that documents were not in its possession -- a ground which is usually taken -- and on that ground it wanted another date of
hearing to be fixed so that he could participate in the hearing on that date. As a matter of fact, we are at a loss to appreciate how the appellant
would have participated in the hearing as he had not filed his statement of claim along with supporting materials. The plea in the circumstances that
the appellant was present at the venue of the proceeding on the date fixed so that it could participate in the hearing appears to be a ploy to get rid
of the award. It is relevant to mention here that the aforesaid letter was passed on to the arbitrator by Lt. Col. H.S. Samyal, along with his letter
dated 22nd June, 1991 informing the arbitrator that a 'messenger' of the proprietor of the appellant had submitted the letter on 21st June, 1991. It
is in accord with the contents of the letter as there is no mention in the letter that either the proprietor or its authorized agent was in attendance in
the office for the purpose of participating in the hearing. As a matter of fact, on a plain reading of the letter it is abundantly clear that the appellant
merely wanted to avoid arbitration by the arbitrator and, therefore, there was no question of his being present to participate in the hearing.
We do not find any substance in the submission of the counsel that 22nd June, 1991 was not the date fixed for hearing. The letter dated 1st
June, 1991 stated as under:
I hereby give you notice that the above case will be taken up for hearing in the office of HQ CWE 135 Works Engrs on 21 June 91 starting from
1100 hours. The hearing may be continued next day if required. You are requested to attend and present your oral submissions and arguments.
The words ""may be"" and ""if required"" on which emphasis was placed by the counsel for the appellant only indicate that in case the hearing would
not conclude on 21st, it may be continued on the next day, it does not at all mean that the proceeding could not be taken up on 22nd June, 1991.
On a plain reading, our understanding of the letter is that the parties were informed to come ready for hearing on 21st June, 1991 as well as 22nd
June, 1991. No doubt, on 22nd June, 1991 the hearing could take place only if it had remained inconclusive on 21st June, 1991 but it does not
mean that if hearing did not take place on 21st June, 1991 the proceeding could not be taken up on 22nd June, 1991. It is to be kept in mind that
the arbitrator was a Lucknow based official and that apparently is reason why he had fixed two consecutive days of hearing which if we may say, it
is a normal practice in arbitration proceedings. All said and done, we would have appreciated the stand of the appellant provided its proprietor
and/or authorized representative had come to participate in the hearing. If the only object of visit of the said 'messenger' was to submit the letter
challenging the very competence of the arbitrator, it is doubtful if the messenger intended to stay at the venue so as to represent the appellant at the
time of hearing on the next day i.e. 22nd June, 1991.
Coming to the main question as to whether the arbitrator was justified in proceeding ex-parte, it is settled law -- and not disputed by the
appellant's counsel -- that there is no fixed format of arbitration proceeding. The arbitrator is competent to decide his own procedure and the
course of proceedings, of course, guided by the rules of fair play and procedure and natural justice. The correctness of the course adopted by the
arbitrator in the instant case is to be considered in the backdrop of facts and circumstances as mentioned hereinabove. Before answering the
question, in fairness to the appellant, we must notice the decisions cited by the counsel.
In Prem Nath v. Om Parkash (supra), the Punjab High Court observed that it is a well-known proposition of law that although an arbitrator is
allowed considerable latitude in the procedure adopted by him at the hearing, it is essential that he should afford the parties a reasonable
opportunity of being heard and of presenting their case. If he makes an award without complying with this essential requirement he does so at the
peril of his award being declared invalid and inoperative in the eye of law. The observations, though general in nature, were made in the facts of the
case. The Court found that though the arbitrator had informed the parties that the case would be taken up on another date intimation of which
would be sent to them in due course but he proceeded to make an ex parte award in the absence of the parties and without affording them an
opportunity of being heard.
In M/s Saxena & Co. v. D. P. Gupta (supra) the facts were that the arbitrator had given notice to the parties of the date of hearing. The
defendant requested him three-four times to adjourn the case to a further date as it was not posssible for him to produce his witness on that date or
to file affidavit of the witness which was important in the circumstances of the case. The arbitrator refused to adjourn the case and passed an ex-
parte award. In these facts the Punjab High Court held that there had been failure of compliance with the principles of natural justice. The arbitrator
should have given opportunity to the defendants to produce their witness and affidavit.
In A.M. Habeebur Rahman v. A. Varamma (supra), the points involved were completely different. While discussing them the Andhra Pradesh
High Court referred to certain observations of the Calcutta High Court in Juggilal Kamlapat Vs. General Fibre Dealers Ltd., to the effect that the
procedural rule application to arbitration proceedings is more tolerant than the rule followed in Courts of law. In the aforesaid case, it may be
pointed out, the Calcutta High Court also gave some illustrations of the cases when the arbitrator can proceed ex-parte. It was observed that if a
party to an arbitration agreement fails to appear in one of the sittings, the arbitrator cannot or, at least, ought not to, proceed ex parte against him at
that sitting. Where the non-appearance was accidental or casual, the arbitrator ought ordinarily to proceed in the ordinary way, fixing another date
of hearing and awaiting the future behaviour of the defaulting party. Having said so, the learned Judges added the following caveat:
If it appears from the circumstances of the case that a particular party is determined not to appear before the arbitrators 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 a notice of an intention to proceed ex parte against such a recalcitrant person and may proceed ex parte and make a valid award without
issuing a notice. ...
In M/s Lovely Benefit Chit Fund & Finance Pvt. Ltd. v. Puran Dutt (supra), the Delhi High Court after observing that an arbitrator ought not to
proceed ex parte against a party if he has failed to appear at one of the sittings but should fix another date for hearing and give notice to the
defaulting party of his intention to proceed ex parte on a specified date, time and place and if after notice the defaulting party does not take part in
the proceedings, the arbitrator may proceed in his absence, held as under:
When an ex parte award has been made the principle to be applied is that the award will not be upheld unless it is apparent that the failure to give
notice of intention to proceed ex parte has not caused any prejudice to the party against whom the ex parte award was made.
From the above decisions it appears that though there is no constraint on the arbitrator to proceed ex-parte against defaulting party, he ought
not proceed ex parte on the very first date, and if he intends to proceed ex parte, he may fix another date for the purpose giving intimation to the
defaulting party of such date and proposed ex parte proceeding. However, where the arbitrator is satisfied that the absence is not on account of
inability of the party to appear on the date / dates fixed but on account of some recalcitrance on his part, he is not bound to adjourn the hearing to
any other date. In such situation question may arise as to whether having invited an ex parte award, is it open to the defaulting party to make a
grievance of the conduct of the proceeding and / or the ex parte award?
In the instant case, as seen above, the appellant had questioned the very authority of the arbitrator doubting his bona fide to make arbitration
on the ground that he was a departmental officer, something which cannot be countenanced in law. As a matter of fact, he asked him to resign from
arbitration taking umbrage at the notice dated 1st June, 1991 that 'in case of absence the hearing would be taken ex parte' as a threat. We are
inclined to think in the circumstances that the appellant did not want to participate in the proceedings. It is not a case where due to one reason or
the other the party is unable to participate in the hearing. That being so, we do not think the arbitrator misconducted himself in proceeding ex parte
and giving an ex parte award against the appellant.
On behalf of the respondents reliance was placed on Lachman D. Chablani Vs. The Union of India (UOI), and P.S. Oberoi Vs. The Orissa
Forest Corporation Ltd., In the former case it was held that refusal to adjourn the case because of party absenting deliberately and without
sufficient cause and holding ex parte proceeding cannot be construed as a misconduct on the part of the arbitrator. In the latter case, it was held
that there is no statutory rule that if an arbitrator proceeds ex parte without giving notice of his intention to proceed in that manner, the award made
by him must be set aside. In the absence of any such statutory provision, the question of notice is a rule of prudence and convenience. The true test
is, has the complainant who takes exception to the validity of the award, been in fact prejudiced by the omission of the arbitrator to serve the
special notice on him? If it is established that notwithstanding such warning, he would not have appeared before the arbitrator, he has really no
grievance and cannot invite the court to set aside the award on account of the alleged defect in procedure. If there was no intention of a party to
appear in spite of notice, there would be no prejudice if an ex parte award was passed against such a recalcitrant party.
In the facts and circumstances of the case and in view of the legal position as indicated hereinabove, we, agreeinng with the learned Single
Judge, reject the submissions of the appellant's counsel that the arbitrator had misconducted himself in proceeding ex parte, vitiating the award,
making it liable to be set-aside.
As regards the second limb of the appellant's grievance against the award, we find the submission of the appellant's counsel to be well founded.
The claim put forward by the Chief Engineer, Udhampur on behalf of the Union of India was in respect of payment of wages to the contract labour
employed by the appellant at par with the departmental labour. Where the principal employer is saddled with the liability of employment of contract
labour in violation of the provisions of the Act it may lodge a claim in that regarding but for establishing the claim for recovery of the amount
through suit or other proceedings, including arbitration, it has to be proved that payment was made and thereby the principal employer suffered
loss. In the instant case there is no material to show that payment was made by the respondents. As a matter of fact, from the submissions made by
counsel, it appears that the matter relating to payment of wages remained pending after the contractor approached this Court and obtained interim
order in another proceeding. The matter, thereafter, became subject of the arbitration proceeding and the so called payment never took place. If
that is so, we do not think the respondent was entitled to any reimbursement by the contractor. Rejecting the contention in this regard the learned
Single Judge observed that whether payment was made is a question of fact and cannot be gone into. In the absence of positive material on the
point, while closing the hearing, we called upon the respondent's counsel to file affidavit affirmed by a competent person preferably the Garrison
Engineer but no such affidavit has been filed.
Even if another view of the matter could be taken, the relevant part of the award is liable to be set aside as being non-speaking contrary to the
terms of the arbitration agreement. It is well settled that award of arbitrator need not be speaking but where the arbitration agreement contemplates
that the dispute shall be resolved through arbitration by a speaking/reasoned award, on the ground of absence of reasons the award may be set-
aside. In the instant case the relevant part of the arbitration clause 70 of IAFW 2249 runs as under:
The Arbitrator shall...
... ... ...
... and shall indicate his findings, along with the sums awarded, separately on each individual item of the dispute.
In M/s Gora Lal v. Union of India 2004 (1) Supreme 916, wherein the interpretation of the same very arbitration clause was involved, an attempt
was made on behalf of the successful party, the contractor, to defend the non-speaking award pointing out difference between the expression
'finding'
and 'reason'. It was submitted that the finding denotes conclusion and not reason and since the arbitrator had already given 'findings' in his award,
the same was not liable to be set-aside. Rejecting the submission, the Supreme Court observed as under:
... Applying the above test to clause 70, we are of the view that the arbitrator was required to give reasons in support of his findings on the items of
dispute along with the sums awarded ... In such a situation as in the present case, there having been no finding recorded on each item as required
by the arbitration clause, the High Court was justified in setting aside the award...
In these premises, part of the award of the arbitrator, upheld by the learned Single Judge, allowing the cross-claim of the respondent for
Rs.3,25,280 is set aside.
In the result, the appeal is allowed in part to the extent mentioned above. The cost will be borne by the parties themselves.