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Judgment
Rajiv Sahai Endlaw, J.—The petitioner instituted the petition under Sections 14 and 17 of the Arbitration Act, 1940 for filing of the arbitral award dated 13th June, 1996 before the court and for making the same rule of the court. Notice was issued to the arbitrator to file the award in this Court and thereafter notice of filing of the award was issued to the parties. The petitioner has not filed any objections to the award. However, the record shows that considerable difficulty was faced and time taken in service of the respondent No. 1 company. The respondent company has filed the objections under Sections 30 and 33 of the Act pleadings whereof were completed and the usual issues framed on 23rd March, 2001. Though the arbitral record has been requisitioned but at the time of hearing it transpired that the arbitral record on the file of the court was not complete. The matter being very old and in view of the admitted position that the respondent No. 2 arbitrator who had rendered the award is now no more and considering the likelihood of the record being now available to be remote, the counsels were, during the course of hearing, permitted to hand over copies of the arbitral record relied upon by them in support of their respective submissions. A perusal of the order sheet shows that on 20th April, 2006 also it was found that the record was not complete and directions were issued to the registry. The registry had reported that only the record on the file of this Court had been received from the arbitrator.
The arbitration in the present case also has a chequered history. Disputes and differences had accrued between the parties with respect to the contract/order of 1980 placed by the petitioner on the respondent for construction of double story godowns at Okhla; the time for completion of the work was of the essence of the agreement and the works were to be completed on or before 7th July, 1981; the works were not so completed and the respondent continued with the works; however the petitioner vide letter dated 22nd June, 1982 rescinded the contract. It is the case of the petitioner that having found that the respondent was not in a mood to complete the work, the contract was rescinded. The respondent avers that the termination of the contract was illegal. It is further the case of the petitioner that it got the work completed at the risk and cost of the respondent and filed a suit for recovery of Rs 14,88,620.26 against the respondent. The respondent filed an application u/s 34 of the Act in the said suit and also filed a suit in this Court being Suit No. 1675A/1983 u/s 20 of the Act for reference of the parties to the arbitration in accordance with the agreement. Vide order dated 13th February, 1985 in the suit, arbitrator was ordered to be appointed.
In the aforesaid circumstances the petitioner appointed an arbitrator. The said arbitrator retired from service on 31st March, 1988 before completing the proceedings. Another arbitrator was appointed on 20th July, 1989 but resigned on 13th September, 1991. The third arbitrator appointed on 7th February, 1992 expired before completion of arbitration. It was in these circumstances that on 19th May, 1995 the arbitrator who has rendered the award was appointed.
The award records and it is also borne out from the arbitral record, that the arbitrator inter alia held proceedings on 19th June, 1995, 13th July, 1995, 18th October, 1995, 8th December, 1995, 17th January, 1996, 16th February, 1996, 25th March, 1996 and 1st May, 1996 but were adjourned as the record of arbitration had not been received from the earlier arbitrator. Mr Yogender Behal Managing Director of the Respondent, appeared before the arbitrator on 19th June, 1995, 16th February, 1996 and 1st May, 1996. On 1st May, 1996 the officer of the petitioner informed the arbitrator in the presence of the said Shri Yogender Behal, that the arbitral record had been collected from the earlier arbitrator and after pagination would be handed over to the new arbitrator. The next date of 13th May, 1996 was given in the presence of the said Shri Yogender Behal, for the respondent.
However, none appeared for the respondent before the arbitrator on 13th May, 1996. The arbitral record collected from the earlier arbitrator was submitted before the new arbitrator. The arbitrator ordered issuance of notice to Shri Yogender Behal, Managing Director of the respondent for 3rd June, 1996.
On 3rd June, 1996 the arbitrator recorded that Mr Yogender Behal, Managing Director of the respondent had been served with notice for that date by registered post, A.D. and A.D. duly signed had been returned; however none appeared on behalf of the respondent and the arbitrator accordingly proceeded against the respondent ex parte and listed the matter next on 7th June, 1996 for evidence of the petitioner. On 7th June, 1996 permission was given to the petitioner to file affidavits by way of evidence and the matter was adjourned to 10th June, 1996. On 10th June, 1996 the affidavit of one of the witnesses of the petitioner was tendered into evidence and on request of the petitioner the matter was adjourned to 11th June, 1996. On the next date again adjournment was sought and the matter was adjourned to 12th June, 1996. On 12th June, 1996 the affidavit of the other witness of the petitioner was tendered, the petitioner closed his evidence and also made submissions before the arbitrator. The Arbitrator on the next date i.e., 13th June, 1996 published the award.
The respondent has in its objections not disputed that it was served with the notice of hearing for 3rd June, 1996 before the arbitrator. It is, however, the case of the respondent that Mr Yogender Behal, Managing Director of the respondent spent time, besides in Delhi, in Jalandhar where he had some properties and where litigation was going on; that due to certain rush of work with regard to the property disputes the said Mr Yogender Behal had to rush to Jalandhar and could not appear before the arbitrator on 3rd June, 1996; that Mr Yogender Behal remained at Jalandhar for considerably long period; that the respondent company had by that time more or less closed the business and all the employees had left and it was mainly Mr Yogender Behal who was left to look after the affairs of the respondent company; that Shri Yogender Behal remained at Jalandhar till 3rd week of June, 1996 and thus could not appear before the arbitrator.
The main stay of the contention of the counsel for the respondent is that from the dates aforesaid it is evident that the arbitrator acted in haste and the ex parte award is liable to be set aside on this ground alone. It is also the contention of the counsel for the respondent that the arbitrator inspite of service of notice of hearing on the respondent and non-appearance of the respondent on 3rd June, 1996, ought to have served another notice on the respondent of his intention to proceed ex parte against the respondent.
The counsel for the petitioner to rebut the aforesaid contention of the respondent relied on Hemkunt Builders Pvt. Ltd. Vs. Punjabi University, Patiala, where a Single Judge held that when a party was determined not to appear before the Arbitrator and had been openly repudiating the authority of the arbitrator to proceed with the arbitration, the arbitrator is not required to issue notice of intention to proceed ex parte against such person. He has also relied upon P.S. Oberoi Vs. The Orissa Forest Corporation Ltd., holding that where an opportunity has been given to the party, the principles of natural justice were satisfied and the act of the arbitrator of proceedings ex parte could not amount to misconduct. Reliance is also placed on Dori Lal Vs. Lal Sheo, holding that where due notice of proceeding has been given, the arbitrator is entitled to proceed ex parte against the party choosing not to appear and that there is no provision in the Arbitration Act requiring the arbitrator to give a second notice of his intention to proceed ex parte against the absenting party. The conduct of the arbitrator of not giving a second notice was not held to be legal misconduct.
Per contra, the counsel for the respondent/objector relied upon Lovely Benefit Chit Fund and Finance Pvt. Ltd. Vs. Shri Puran Dutt Sood and Others, where another Single Judge of this Court held that an arbitrator ought not to proceed ex parte against a party which has failed to appear at one of the sittings and the arbitrator should fix another date for hearing and give notice to the defaulting party of his intention to proceed ex parte on a specified date; it is only if the party defaults in appearance inspite of such notice that the arbitrator may proceed ex parte. It was further held that an ex parte award will not be upheld unless it is apparent that the failure to give notice of intention to proceed ex parte had not caused any prejudice to the party against whom the ex parte award was made. Reliance is also placed on M/s. Shri Ram Ram Niranjan Vs. Union of India and Others, where also finding that the arbitrator had acted in haste, the award was set aside holding the same to be legal misconduct.
This Court''s own research shows that yet another Single Judge of this Court in Anil Jain Vs. Madhunam Appliances (P) Ltd., has expressly differed with the view taken in Lovely Benefit Chit Fund (supra) and relying upon the judgments of the Division Bench of the Allahabad High Court and of the Single Judge of the Punjab High Court held that it will be of no use to go on serving a man who is not ready to cooperate and to participate in the proceedings despite innumerable opportunities granted to him to appear and defend himself. It was further held that if the arbitrator is required to give a notice again despite the previous non- appearance, then it would tantamount to putting premium on the party''s lapse. However, it appears that the judgment in Anil Jain (supra) was not brought to the attention of the court in subsequent judgment in Shri Ram Ram Niranjan which is based merely on Lovely Benefit Chit Fund. I also find that the matter has also invited the attention of the Division Bench of this Court in Power Grid Corporation of India Ltd. Vs. Electrical Mfg. Co. Ltd. and National Thermal Power Corporation Ltd., . Though the judgment including in Lovely Benefit Chit Fund was cited before the Division Bench, the Division Bench did not lay down any proposition that a second notice of intention to proceed ex parte has to be necessarily served by the arbitrator. Rather emphasis was placed on compliance with the principles of natural justice and fair opportunity. In the facts of that case it was held that the principles of natural justice and fair play had not been complied with and the arbitral tribunal had acted in haste and thus the award was set aside. To complete the narrative, reference also must be made to judgments of other Single Judge of this Court in Union of India (UOI) Vs. The Kohinoor Tarpaulin Industries, where also the ex parte award was set aside.
Coming to the facts of the present case, it is found that the arbitration proceedings were pending for over ten years; pleadings had already been completed before the earlier arbitrators. The proceedings before the arbitrator, who has rendered the award, were held up for the reason of non-availability of the arbitral record. The respondent was fully aware of the appointment of the new arbitrator and was appearing before the arbitrator intermittently when the proceedings were being adjourned awaiting the record. On 1st May, 1996 when the official of the petitioner informed the arbitrator of the arbitral record having been collected from the earlier arbitrator, the respondent was represented through its Managing Director and in the presence of the respondent the next date of 13th May, 1996 was given. The respondent thus knew that by the next date the arbitral record would be filed before the arbitrator and further proceedings commence. The respondent, however, failed to appear before the arbitrator on the next date i.e., 13th May, 1996. There is no explanation whatsoever for non appearance on 13th May, 1996. Even though the arbitrator could have proceeded ex parte against the respondent on 13th May, 1996 itself, since the respondent had appeared on the previous date and had notice of that date, but the arbitrator still chose to issue notice of the next date i.e. 3rd June, 1996 to the respondent. The said notice is admitted to have been served. The respondent still neither appeared before the arbitrator nor sent any communication to the arbitrator. In these circumstances it cannot be said that the principles of natural justice, audi altrum partum had not been complied with or that fair play has not been meted out to the respondent.
I also do not find the reasons given by the respondent for non appearance to be sufficient. All that has been said is that the Managing Director of the respondent had to go to Jalandhar in connection with some litigation. Neither the particulars of the said litigation, if any, been disclosed nor is it the case that the said litigations were listed before the court and the appearance of the Managing Director of the respondent was necessary before the court. By 1996 there was huge advancement in communications in the country and Jalandhar was literally a call away from Delhi. The respondent even if was unable to be represented on 13th May, 1996 and/or 3rd June, 1996 ought to have at least informed the arbitrator and/or sought further time. There is no explanation whatsoever why the same even was not done. In these circumstances, the non- appearance of the respondent before the arbitrator appears to be intentional and deliberate.
There is yet another very important aspect of the matter. Though the Managing Director of the respondent is stated to have returned from Jalandhar to Delhi at least in 3rd week of June, 1996 but still no efforts are stated to have been made to contact the arbitrator or to find the fate of proceedings. Had the respondent been bonafide unable to appear on 13th May, 1996 and 3rd June, 1996, it would have immediately thereafter, upon finding of ex parte award, applied to this Court for filing thereof and setting aside thereof. Then the respondent''s contention of arbitrator acting in haste and prejudice thereby caused to it would have been established. On the contrary, the respondent could not be served with the notice of this Court for nearly four years. Even though the notices of this Court erroneously issued in the name of the Managing Director of the respondent instead of in the name of the respondent Company were served as recorded in the order sheet dated 11th January, 1999 but still the respondent did not appear before this Court. All this shows the intention of the respondent to, somehow or the other, delay the proceedings. From the conduct of the respondent, the haste even if any of the arbitrator is not found to have caused any prejudice to the respondent.
There is yet another aspect of the matter. The respondent has in its objection petition itself stated that the business of the respondent company has come to an end and it has no employees. The petitioner had in the present proceedings filed IA. No. 159/2001 under Order 38 of the CPC for attachment of certain monies in another proceeding between the petitioner and M/s T.R.Behal & Company. However, the said application was dismissed on 23rd March, 2001 for the reason of the award in the present case being against the company, even though it appears that the firm M/s. T.R. Behal and company was of the directors/shareholders of the respondent company only. The respondent though preferred claims before the arbitrator has also not shown any urgency for pressing the same. In fact, the respondent, in spite of termination of the agreement, is not stated to have initiated any proceedings whatsoever for recovery of its claims, if any, against the petitioner. The arbitrator was appointed only after the petitioner instituted the suit for recovery of monies. The facts of the arbitrator who has rendered the award having expired, the arbitral record being not available and likelihood of any recoveries under the award being made by the petitioner from the respondent company being remote, also compel me to hold that no useful purpose would be served in giving another opportunity to the respondent for setting aside of the award merely for the reason of being ex parte.
Yet another factor which prevails upon me is that the procedure before the arbitrator cannot be made more stringent than before the court, unless expressly agreed by the parties. The courts, upon finding service to be completed or upon non appearance of any party on any date are free to and generally do proceed ex parte against such party. There is no requirement for the courts to issue a notice to the defaulting party giving it a second chance informing it that upon another default it will suffer. If that be so, I find no reason to hold that arbitrator is so liable. However, if it were to be found that the arbitrator has acted in connivance with the party, to enable that party to steal a march owing to accidental non appearance of the other, then the court would certainly be entitled to interfere. Nothing of this sort is found in the present case. The arbitrator who has rendered the award is a retired judge of High Court and is not an officer of the petitioner. It is not the case of the respondent also that the arbitrator did not issue a second notice to help the petitioner in any manner whatsoever.
The purpose of arbitration is expediency. Arbitration law has been re-enacted with the said motive. It is also common knowledge that in most of the cases one party is interested in delay. If general propositions that a notice of intention to proceed ex parte must be given, were to be laid down, it will give a handle to unscrupulous litigants to indefinitely delay the arbitral proceedings and to make it virtually impossible for the arbitrator to proceed. It would also add to the costs of the arbitration.
The counsel for the respondent has also argued that while the arbitrator was earlier giving dates of minimum 15 to 20 days or over a month, after non-appearance of the respondent, the proceedings were concluded within ten days. There is no merit in the said contention also. Long dates were being given earlier since the arbitral record was being requisitioned from the family of the earlier arbitrator. Once the arbitral record had been received, there was no reason for adjourning the matter for a long date. No party can claim a right to delay litigation. Moreover, as aforesaid no case of the respondent having suffered any prejudice is made out.
The respondent had made claims before the arbitrator of Rs 10,70,800/- for works done and not paid for, of Rs 52,133/- for refund of security deposit; for Rs 1,50,000/- towards costs of its material lying at site and not permitted to be removed, of Rs 3,05,780/- as costs of its tools, plants & machinery besides scaffolding, shuttering etc lying at the site and not permitted to be removed, of Rs 4,00,000/- for wrongful suspension of work, of Rs 2,45,000/- as compensation for idle labour and staff and overhead expenses and finally Rs 12,00,000/- as damages for wrongful termination.
Even though, in my view, upon default of the respondent to appear before the arbitrator and substantiate its claims, the arbitrator was entitled to dismiss the same in default and consider only the counter claims of the petitioner but the arbitrator allowed Rs 5,17,022.28p to the respondent for the works done and not paid for and Rs 52,133/- for refund of security deposit. The remaining claims of the respondent were dismissed.
The arbitrator has allowed counter claims of the petitioner of Rs 98,501/- for removal of goods/materials supplied by petitioner and removed by respondent from site without permission, of Rs 8,34,269.33p on account of penal recovery of steel issued by the petitioner at site and removed by the respondent from the site, of Rs 1,16,492.72p towards price of cement removed by the respondent from the site and of Rs 13,78,501.88p towards costs of getting the work completed at the risk and costs of the respondent. Interest at 12% per annum from 1st May, 1986 on the amounts due to the petitioner, after adjusting the amounts found due from the respondent has also been awarded. Other claims of the petitioner have been dismissed.
The counsel for the respondent has challenged the award on merits contending that there is an inconsistency therein. It is urged that once the arbitrator had allowed the claim of the respondent for refund of security deposit, it implies that there was no breach of agreement by the respondent. It is contended that, in the circumstances, the arbitrator could not have, on the other hand, allowed the claim of the petitioner on the premise of the respondent being in breach of the agreement. This contention of the counsel for the respondent is fallacious. The petitioner had before the arbitrator admitted the receipt of security deposit from the respondent but had asserted its claims to forfeit the same in satisfaction of its claims against the respondent. The arbitrator has in the award, in fact, adjusted the security deposit in the claims of the respondent. Merely because security deposit has been so taken into account does not imply that the arbitrator has returned the finding of the petitioner not being in breach.
It is next contended that during the pendency of the suit u/s 20 of the Act before this Court a Commissioner was appointed who had submitted a report and had shown materials/goods lying at site. It is contended that the respondent had no access to the site thereafter and thus the award holding that there were no material/steel lying at site is erroneous. Though as aforesaid the arbitral records are not available but the counsel for the respondent has handed over a copy of the report dated 2nd January 1986 of the Court Commissioner in Suit No. 1675A/1985. The same shows some bricks and steel lying at site. However, upon default of the respondent to appear before the arbitrator and establishing that after the said report said materials continued to be at site and / or of being not removed by it, it cannot be said that there is any error on the face of the award or that the arbitrator has misconducted himself.
Similarly, objections are raised to other amounts allowed under the award. However, in my view, if a party does not press/establish its case before the arbitrator, opportunity to do the same cannot be given at this stage, especially when no sufficient cause has been found for non appearance of the respondent before the arbitrator. I must however record that the counsel for respondent has urged that that non application of mind by arbitration is borne out from paras 6 and 7.5 of the award. It is argued that in para 6 claims of contractor are stated to be of Rs 10,86,133/- only, from para 6.1 to 6.7, they are found to be of much more . However, I find this to be merely a typographical error. With respect to para 7.5 it is pointed out that while the claim for cost of excess cement was of Rs 10,064.73p only, a sum of Rs 1,16,492.72p is allowed. The counsel for respondent has not filed anything to demonstrate the same. The counsel for the petitioner has filed a copy of its claim. Though under claim No. 4 at one place it is mentioned that Rs 10.064.73p is claimed for excess cement, at another place, the amount claimed is mentioned as Rs 1,21,525.09. The respondent having chosen not to appear before arbitrator, he cannot be permitted a second chance before this Court. The counsel for respondent has also urged that while the officials of petitioner were caught selling imported steel, the arbitrator has awarded costs of steel to the petitioner against the respondent. This submission also cannot be considered. There is nothing to show that the steel attempted to be sold was that issued to the respondent and with respect to cost of which award has been made. Also, the steel issued to the respondent was to be in custody of respondent and the question of officials of petitioner selling the same does not arise.
Resultantly the objections are dismissed. The arbitral award dated 13th June, 1996 is made rule of the court and judgment in terms thereof is pronounced. The petitioner shall also be entitled to interest u/s 29 of the Act on principal amount, with effect from the date of the decree at 12% per annum. The petitioner shall also be entitled to costs of Rs 25,000/-.