Gupta Pvt.Loan Committee vs Perfection House

Arun Kumar Goel, Judge.

It is proposed to dispose of these six civil 1st miscellaneous Appeal No. 67/96, 68/ 96, 66/96, 69/96, 100/95 and 101/95 by a common

judgment as common questions of law and facts are involved. First four appeals are filed against the common judgment and decree dated

19.12.1995 passed by the learned Addl. District Judge, Jammu whereas later two appeals are filed against the common judgement and decree

dated 3.6.1995 passed by the then learned District Judge Jammu. Learned Additional District Judge after deciding issue no. 4 against the

appellants and issues no 5, 6 and 9 in favour of respondents found that the former is not entitled to the relief sought for. As a consequence of its

awards filed by the arbitrator and presented in court were set aside and at the same time applications under Section 14 and 17 of the Arbitration

Act were dismissed.

With a view to properly understand the respective contentions of the parties, facts which are almost common to all the cases for the amount

involved therein are as under

Appellant seems to be running a Private Loan Committee, of which respondent firm was a beneficiary/ contributory what further seems to be

there is that the amount of different groups run by the appellant was received by the respondent firm through its partner Late Shri Ganesh Dass. A

written agreement was entered upon between the parties, which amongst other conditions contained an arbitration clause. When this clause is

translated it reads as under:

I hereby write that in case there is any dispute of any sort regarding loan in question with M/s Gupta Pvt. Loan Committee, Jammu in such a

situation the case will be referred to Sh. Dwarka Nath, Advocate as arbitrator and both the parties shall be bound by such decision of the

arbitrator. This is also signed by Ganesh Dass"". This agreement was accepted on behalf of the appellant by its partner.

Thereafter what seems to have happened is that the amount in question was not repaid in terms of the agreement, as such appellant referred the

matter to the named arbitrator viz Sh. Dwarka Nath, Advocate for adjudicating the disputes. It is admitted case of the respondents that after

having put in appearance before the arbitrator they did not file any reply. On one hearing partner of respondent firm appeared after service.

Thereafter they initiated proceedings under Section 33 of the Arbitration Act. This application was dismissed, and in appeal as well as in revision

the appellate court and also the High Court order of dismissal was upheld. Another fact that needs to be noted herein is that during this entire

period the proceedings before the learned arbitrator remained pending having been stayed. Thereafter arbitrator again took up the matter and gave

his award on 2nd Dec. 96 in all the six cases.

Arbitrator appears to have filed the awards in court as under:

S. No. CIMA Date of Award Date of No. filing in Court

66/96 2.12.1976 30.11.1979

67/96 2.12.1976 30.11.1979

68/96 2.12.1976 30.11.1979

69/96 2.12.1976 30.11.1979

100/95 2.12.1976 30.11.1979

101/95 2.12.1976 30.11.1979

It may be noted in this context that the awards which are subject matter of CIMA Nos. 66/96 to 69/96 when filed before the District Judge,

these cases were assigned to Additional District Judge and the other two were retained by the learned District Judge himself. Arbitrator had filed

these awards alongwith applications under Sections 14 and 17 before the court below and had also prayed for payment of his remaining fee of Rs.

50/in each case.

On receipt of notice regarding filing of the award, objections under Sections 30 and 33 of the Arbitration Act were filed by the respondents in

all the six cases. After receiving reply from the respondents trial court framed the following common issues in the four appeals :

Whether the application u/s 30/ 33 Arb. Act is barred by limitation , if so how ? OPD.

Whether the arbitrator has not filed the complete record in the court ? If so, what is its effect ? OPP.

Whetherthe application of the respondents is barred by principle of rejudicata ? OPP.

Whether the respondent has participated in the proceedings before the arbitrator and consented in making the reference to the arbitration? OPP

Whether the award is unilateral as such the award procured on a unilateral reference is void and inoperative and is without jurisdiction ? OPP.

Whether L. Dwarka Nath Gupta was the agreed arbitrator ? OPP.

Whether the agreement and the award are not properly stamped ? If so, what is its effect ? OPP.

Whether the arbitrator has misconducted in the proceedings as well as is guilty of misconduct ? OPP.

Whether the award is vitiated am void as the same has been given after the expiry of the statutory period am that too without notice to the

respondent? OPP.

Relief. OPP"".

Similarly in the other two appeals following common issues were decided :

Whether the arbitrator has not filed the complete record in court, if so what is its effect ? OPR

Whether the application of the respondent under Section 33 Arbitration Act is barred on the principles of resjudicata ? OPP

Whethe rthe award is unilateral as such the award procured on unilateral reference is void and inoperative and without jurisdiction ? OPR.

Whethe rthe award is not properly stamped if so what is its effects ? OPR

Whether the arbitrator has misconducted the proceedings as well as is guilty of misconduct ? OPR

Whether the award is violated and void as the same has been given after the expiry of statutory period without notice to the respondent ? OPR

Whether the award has been improperly filed in court ? OPR

Relief"".

After holding that unilateral reference by the appellant was bad, therefore, the award was set aside so far CIMA Nos. 100/95 and 101/95 are

concerned and similarly amongst other issues after recording finding on issue no. 5 applications under Sections 14 and 17 filed by an arbitrator

were dismissed and unilateral reference was held to be bad in other cases also.

It may be relevant to briefly notice the objections under Sections 30 and 33 of the Arbitration Act filed by the objectothers during the course

of proceedings before the trial court. Main thrust of the objections was that there is no arbitration agreement between the parties whereunder the

disputes could be referred for arbitration nor there was any dispute in existence of the alleged agreement which could be referred to the said

arbitrator. They never joined in making the reference to Sh. Dwarka Nath, Advocate who was never appointed as such. Reason being that his

name was written by the Committee dishonestly and is an act of forgery. It is also pleaded that the arbitration agreement and the award are not

properly stamped, besides other pleas including those of legal misconduct etc. All these averments were denied by the appellant and it was

thereafter that the above extracted issues were framed.

In the aforesaid background of these cases learned counsel appearing for the appellant submitted that the trial court had fallen into error by

holding that unilateral reference was bad and submitted that the findings recorded in that behalf were liable to be reversed. According to him

parties had agreed to refer the disputes to the arbitrator. Respondents\had consented for the same, as such this is not a case of unilateral reference

as has been held by the trial court. It may also be worthwhile to point out here that none of the partners of respondent firm has disputed the

signatures and or contents of the agreement in question. They alleged forgery, nonexistence of dispute and the award as well as the agreement

being not properly stamped. This is precisely the stand of respondents at the time of hearing. Another ground forcefully urged by Sh. L.K. Sharma

appearing on behalf of respondents was that the arbitrator has relegated himself to the position of a party

by filing the award as late as on 30.11.1979 By refering to a decision of the Supreme Court of India in a case Patel Motibhai Naranbhai and

Another Vs. Dinubhair Motibhai and Others (1996) 2 SCO 585, he urged that the period of limitation for filing the award had expired, as such it is

being filed at the instance of appellant which has vitiated the proceedings and this its has been rightly set aside by the trial court.

For holding that the unilateral reference was bad in law trial court placed reliance on ""Thawardas Phermul and Another Vs. Union of India"",

AIR 1955 Sc 468, and thus came to the conclusion that unless the parties jointly refer the disputes to the names arbitrator and on their failure to

have recourse to Section 20(4) of the Arbitration Act, reference as in the present case was bad in law. Observations out of this judgment relied

upon in this behalf are in the following terms :

A reference requires the assent of both sides. If one side is not prepared to submit a given matter to arbitrator when there is an agreement

between them that it should be referred, then recourse must be had to the court under Section 20 of the Act and the recalcitrant party can then be

compelled to submit the matter under subsection (4).

In the absence of either, agreement by both sides about the terms of reference, or an order of the court under Section 20(4) compelling a

reference, the arbitrator is not vested with the necessary exclusive jurisdiction.

Therefore, when a question of a law is the point at issue, unless 'both' sides 'specifically' agree to refer it and agree to be bound by the arbitrator's

decision, the jurisdiction of the Courts to set an arbitration right when the error is apparent on the face of the award is not ousted. The mere fact

that both parties submit incidental arguments about a point of law in the course of the proceedings is not enough. The language of Lord Wright in

1933 AC 592 at p. 616

(B), a case similar to this so far as this point is concerned, is apposite here ""There is here no submission of any specific question of law as such and

as a specific question of law. no doubt incidentally and indeed necessarily, the arbitrator will have to decide some questions on the construction of

the building contract, but the two matters submitted are both composite questions of law and fact, there is no express submission of the true effect

of the contract on the basis of undisputed facts, as in the 1923 AC 395(A) or as a separate and distinct matter on facts to be separately assumed

or found as in., 'In re King and Duveen', 19132 KB 32 at p 36(1). The arbitrator was not being asked simply and specifically to decide, upon

some agreed or assumed basis of fact, the true interpretation of either clause 26 or clause 30 of the conditions or of both together, he was being

required to make an award on the two matters submitted on whatever questions of fact and law might emerge.

Clause 32 of the contract in the House of Lords case was the equivalent of clause 14 in ours. It ran

Provided always that in case any dispute or difference shall arise as to the construction of the contract or as to any matter or thing arising

thereunder such dispute shall be and is hereby referred to the arbitration and final decision of etc.

The arbitrator .relied on that to invest him with jurisdiction to determine, as a matter of law, the construction of clauses 2630 of that contract. The

House of Lords held that in the absence of a specific reference about the construction of the contract the jurisdiction of the Courts was not taken

away. Lord Russell of Killowen put it this way at page 610

No specific question of construction or of law was submitted. The parties had, however been ordered to deliver pleadings, and by their statement

of claim the contractor had claimed that the arbitrator should under his powers revise the last certificate issued etc"".

It is at this point that the question of the construction of condition 30 arouse as a question of law, not specifically submitted, ""taut material in the

decision of the matters which had been submitted. This question of law the arbitrator has decided; but if upon the face of the award he has decided

it wrongly his decision is in my opinion open to review by the Court"".

That is exactly the position here. Simply because the matter was referred to incidentally in the pleadings and arguments in support of, or against the

general issue about liability for damages, that is not enough to clothe the arbitrator with exclusively jurisdiction on a point of law.

This decision was relied upon by Shri Sharma with a view to support the decision of trial court, whereby unilateral reference was held to be

bad. On the other hand Sh. Nanda learned counsel appearing for the appellant referred to a decision in Banwari Lal Kotiya Vs. P.C. Aggarwal,

AIR 1985 SC 1003. He placed reliance on following observations in tis judgment :

It is true that the Arbitration Act. 1940 defines the two expressions ""arbitration agreement"" and ""reference"" separately Section 2(a) defines an

arbitration agreement"" to mean ""a written agreement to submit present or future differences to arbitration, whether an arbitrator is named therein or

not"" while S. 2(e) defines a ""reference"" to mean ""a reference to arbitration"". The latter expression obviously refers to an actual reference made

jointly by the parties after disputes have arisen between them referring the said disputes for adjudication to a named arbitrator or arbitratothers,

while the former expression is wider as it combines within itself two concepts (a) a bare agreement between the parties that disputes arising

between them should be decided or resolved through arbitration and (b) an actual reference of a particular dispute or disputes for adjudication to a

named arbitrator or arbitratothers This will be clear from the manner in which the expression ""submission"" was defined in the earlier Indian

Arbitration Act, 1899 because following the English Arbitration Act, 1889 the Indian Arbitration Act, 1899 defined the expression ""submission"" in

the same words now used to define ""arbitration agreement"" in the 1940 Act and in Russell on Arbitration (20th Edn.) at page 44 it has been stated

that this term (arbitration agreement as defined) covers both the concepts (a) and (b) mentioned above within it. If that be so, it stands to reason

that only when the arbitration agreement is of the former type namely a bare agreement a separate reference to arbitration with fresh assent of both

the parties will be necessary and in the absence of such consensual reference resort to S. 20 of the Arbitration Act will be essential but where the

Arbitration agreement conforms to the definition given in S. 2(a), the party desiring arbitration can straightway approach the arbitrator or

arbitratothers and resort to S. 20 of the Arbitration Act is unnecessary because consent to such actual reference to arbitration shall be deemed to

be there as the second concept is included in the agreement signed by the parties and the aspect that differences or disputes actually arose

subsequently would be inconsequential because the arbitration agreement as defined in S. 2(a) covers not merely present but future difference also.

In other words, in such a case there will be no question of there being any unilateral reference. Such being the true position in law it is difficult to

agree with the view of the Full Bench that where a contract between the parties contains what may be called an arbitration clause to refer future

disputes to arbitration the agreement is merely an agreement to submit future differences to arbitration within the meaning of Section 2(a) of the

Arbitration Act and that if disputes arise in future a reference had to be made to arbitration within the meaning of S. 2(e) of the agreement and at

this stage there should be a consent of both the parties"" In every case the question will have to be considered as to whether the arbitration

agreement is a bare agreement of the type indicated earlier or an arbitration agreement as defined in S. 2(a) of the Act and we proceed to examine

this question in regard to the arbitration agreement in the instant case"".

As we have said above the question whether fresh assent of both the parties for the actual reference is necessary or not must depend upon

whether arbitration agreement is a bare agreement of the type indicated earlier or it is an arbitration agreement as defined in S. 2(a) of the Act. If it

is the latter then clearly the actual reference to arbitration would be consensual and not unilateral and no fresh assent of the parties would be

necessary nor will resort to S. 20 be necessary. Instead the party desirous of going to arbitration can resort to remedies available to him under

Chapter II of the Arbitration Act, 1940; and in a case like the instant one he can, as the appellant did, proceed under the relevant Bylaws"". 14.

Thus the first and foremost question that requires consideration in these cases is whether there existed arbitration agreement and if so, whether the

disputes were referable in terms of such agreement. Agreement has been placed on record in each case by the appellant. As already observed plea

of forgery, nonexistence of the agreement, besides other pleas were put up. When a reference is made to the files of trial court, there is no cogent,

reliable muchless trustworthy evidence to sustain any of these pleas. Even if agreement is there, but if a party like respondent is able to establish the

forgery, no claim on its bases could have been maintained. Another plea also need to be noted here is that there is no dispute which is referable for

arbitration to the arbitrator. How and in what manner nothing has been spelt out nor it could be demonstrated at the time of hearing. Similar is the

position regarding plea of forgery and documents being not properly stamped.

15 So far reference of disputes to the named and agreed arbitrator is concerned, it only envisages the making of actual reference and nothing more.

This is the only factor to be seen to ascertain the consent of the parties for referring the disputes. This is the situation on the basis of agreement as

well as arbitration clause, which when translated is reproduced herein above. There was hardly any need of having recourse to Section 20 as the

consent of respondent can well be deemed to be there for referring the disputes In the context of agreement I am constrained to hold that its

execution as well as existence has been duly proved as per law and there is legal evidence to take a contrary view of this Thus, there was express

consent on the part of respondent to refer the disputes to the named arbitrator once those had arisen between the parties. It was no where agreed

between the parties that the disputes would be referable only with the consent of both of them. This agreement was accepted on behalf of

appellant. There is no evidence to dispute the signatures of Lala Dwarka Nath. the signatory to the agreement in question. Once this conclusion is

arrived at, decision that the reference is bad being unilateral recorded by the trial court cannot be sustained and is ordered to be reversed.

Another reason to take this view is the latter decision of Supreme Court in the case reported in AIR 1985 Sc 1003 (supra). In this context it

may be appropriate to observe that the decision of Supreme Court of India in the case of Thawardas Pherumal (supra) is not at all attracted.

So far the plea of respondents that the award has been filed belatedly by the arbitrator and thus could not be entertained even if it be assumed

that it is valid award given by the arbitrator is concerned, it need not detain these cases any further for the reasons set out hereinafter. Admittedly

there is no limitation prescribed for the arbitrator to file the award, still he is expected as well as required to file the same within the reasonable time

and not to sit over it for unduly long periods.

In the case of ""The State of Madhya Pradesh Vs. M/s Saith and Skelton (P) Ltd, and Others"". AIR 1972 SC 1507, while leaving the question

open whether the period of limitation will apply when arbitrator files his award suo moto, it was held as under:

The question specifically arose before the Nagpur High Court in Narayan Bhawu vs. Dewajibhawu, AIR 1945 Nag 17. The High Court held

that there is nothing in Section 14(2) of the Act. which precludes the arbitrator from filing the award suo motu and it is not correct to say that the

Award should be filed only if the parties make a request to the arbitrator to file the Award or make an application to the Court for that purpose.

We are in agreement with this view of the law, especially when there is no prohibition in the Act, particularly in Section 14(2) against the arbitrator

filing suo motu his Award in court"".

The decision relied upon in this behalf Sh. Sharma in the case of Patel Motibhai Naranbhai (supra) does not support his case at all. What is

relevant for this case is as under :

Under subsection (2) of Section 14, a duty is cast upon the Arbitrator to file the award or cause the award to be filed in the court at the request

of the party to the arbitration agreement or if so directed by the court. There is no provision which requires the Arbitrator to apply to the court for

filing of the award and pass a decree in terms of the award. An application for filing the award in court has to be made within thirty days from the

date of service of the notice of making the award under Article 119 of the Limitation Act. Even if it is held that Article 119 will apply only to an

application made by a party and not by the arbitrator. Article 137 will come in the way of Arbitrator's making any application beyond the period of

three years from the date of making of the award

Here the dates of each award and its filing before the court referred to in the preceding para are relevant and also those assume significance.

Admittedly in each a case arbitrator. Regarding these dates learned counsel for the parties were not at variance So it cannot be said that the

belated filing of the award is either contrary to any statutory provision or is beyond the period of limitation, if at all it applies. In the case before the

Supreme Court the award was dated 26.2.1986. On behalf of Patel Motibhai Naranbhai his Advocate wrote to the arbitrator in the following

terms :

You have recently given an award as an Arbitrator between my clients and the heirs of his deceased brother Ishwarbhai Naranbhai Patel with

regard to the properties and present distribution adhered in some of the representations made by our clients have not considered and thereby my

clients hereby raise written objection against the award being filed and hence as an Arbitrator you should not initiate any steps to file"".

Admittedly arbitrator had not filed the award and as per Section 14(2), it was open to any of the parties to have requested the arbitrator to file

the same before the court. At the same time they could have asked the court to require the arbitrator to file the same After the award is filed within

30 days of the receipt of notice regarding filing of the award from the court a party can file objections against it. Since disputes had arisen between

the parties on the basis of said award which was not filed before the court, and on the objections of appellant in that behalf one of the parties

asked the arbitrator to file the award on 8.2.1992 just about six years after the making of same, it was in this factual background that the appeal of

the appellant was allowed by the Supreme Court wherein the plea of limitation was dealt with as has been referred to hereinabove.

No other point is urged.

In view of the aforesaid discussion all these appeals are allowed and as a consequence of it applications under Section 30 and 33 of the

Arbitration Act filed under the Sections 14 and 17 filed by the arbitrator are allowed. Thus the award in each case is ordered to be made rule of

the court in accordance with law. Decree sheet be drawn accordingly. At the same time it is also ordered that a sum of Rs.50/ in each case will be

paid to the arbitrator as prayed for by him in his application under Sections 14 and 17 of the Arbitration Act which also stand allowed.

Respondents will also pay one set of costs of the appellant in these appeals.