J. Kuppuswami Chetty vs B.V. Anantharamier and Another

Frederick William Gentle, C.J.—The appellant and the two respondents formerly carried on a business in partnership under the name of

Bhagyalakshmi & Co. Disputes arose between them which were referred to the arbitration of three named arbitrators by an agreement in writing

between the parties, dated 4th January, 1945. The agreement, inter alia provides that (1) in case P. Govindasawmi Ghetti (one of the arbitrators)

declined to act, the appellant should be at liberty to nominate another arbitrator in his place ; (2) in case two of the arbitrators declined to act, the

whole arbitration should come to an end and the parties be relegated to their prior rights ; a decision of the majority of the arbitrators should be the

decision which must prevail in all matters connected with the arbitration ; (3) the arbitration should be completed within one month from the date of

the agreement subject to an extension of time, not exceeding six weeks thereafter, being taken if all the three arbitrators passed a resolution to that

effect.

No resolution was passed by the three arbitrators extending the time during which they could conclude the arbitration and make their award.

The one month''s period expired on February 4th, 1945, by which date no award had been made. Subsequently the three arbitrators examined the

partnership accounts. This examination was completed by February the 27th. Thereafter P. Govindaswami Ghetti declined to act further as an

arbitrator, but the appellant did not appoint another arbitrator in his place pursuant to his power or right to do so given by the agreement.

Later, on 15th March, 1945, the remaining two arbitrators addressed a communication, which later was called a letter, to the first respondent

and to the appellant. None of the parties requested the signatory arbitrators to file this document in Court and no other steps were taken in that

behalf and it has not been filed in Court as an award as provided in the Arbitration Act.

The document states that the two signatory arbitrators give "" the following decision "". It recites that a copy of the account ascertained by the

three arbitrators, dated 27th February, 1945, had been given to the first respondent (who acted, on his own behalf and on that of the second

respondent) and an unsigned copy to the appellant ; thereafter Govindaswami Chetti did not associate with the other two arbitrators in further

proceedings ; the document then states that the other two arbitrators "" decide the following matters mentioned herein finally in accordance with our

joint opinion."" Then follows their conclusions regarding the subject of their arbitration.

On 23rd April, 1945, the same two arbitrators wrote to the respondents that they had ascertained that their letter, dated 15th March, addressed

to the respondents as well as to the appellant was served upon him (the appellant) also through post several days back and he had not chosen to

send a reply or to use the arbitrators in that connection and they refused to act as arbitrators for such people ; the letter concludes that they would

do nothing more in the arbitration matter and the respondents were at liberty to take such proceedings in Court as they liked ; the arbitrators

declined to act.

On 25th May, 1945, the respondents instituted against the appellant a suit claiming dissolution of the partnership and the customary

consequential reliej in a suit of that nature. In his written statement the appellant pleaded that the respondents had induced him to consent to the

arbitration and had procured an award which would be rejected by the Court on the face of it as illegal and invalid, and further that the

respondents had lost their right to institute the suit, which was barred, by reason of the arbitration ending in an award.

On 25th February, 1946, the respondents made an application u/s 33 of the Arbitration Act to the Court for a declaration that there is no valid

awardin existence and no subsisting arbitration agreement. In his affidavit in reply the appellant states that the period of one month prescribed in the

arbitration agreement for an award to be made was extended as provided therein and the majority of the arbitrators gave their decision on 15th

March, 1945 and he denies that no valid award is in existence. He asserts that its validity cannot be questioned by proceedings u/s 33 of the Act

and alleges that the proceedings are defective on account of the absence of the award being filed with the petitioner. Clearly the appellant has

asserted that the document, dated 15th March, 1945, is an award under the Arbitration Act.

The application came before Clark, J. At the hearing before him the document, dated March 15th, was placed before the Court and the learned

Judge held that it was not an award and rejected the appellant''s contention, that he had no jurisdiction to entertain its validity or otherwise on the

ground that it had not been filed in Court. This is the appellant''s appeal against the learned Judge''s decision.

In my opinion, the learned Judge was perfectly correct in the conclusion to which he arrived.

Firstly, if the document dated March 15th, 1945, is an award, it was made more than one month after the date of the arbitration agreement and

after the period which the agreement prescribes for the award to be made. There was no resolution by the arbitrators pursuant to the provision in

the agreement by which they, apparently, were authorised to extend the time by six weeks, making ten weeks in all from January the 4th ; that

circumstance alone vitiates the award and makes it a nullity. Assuming, however, that such a resolution, which the arbitration agreement prescribes,

was passed, nevertheless, the award is not one which has any validity or legality. Section 28(2) of the Arbitration Act enacts that any provision in

an arbitration agreement, whereby the arbitrators or umpire may, except with the consent of all the parties to the agreement, enlarge the time for

making the award, shall be void and of no effect. There was no agreement by all the parties for the arbitrators to extend the time by passing the

resolution envisaged in the arbitration agreement. Consequently, the time could not be legally enlarged and the period during which the arbitrators

could make an award expired about six weeks before the document of March the 15th came into existence. Even if that document is an award it is

one which has no validity and is not, in law, an award.

Secondly, the document of March 15th, in my view was never intended to be, and never in fact was, an award. It sets out what is expressed to

be a decision of two out of three arbitrators on the conclusions to which they had arrived. The original was sent to the respondents and a copy,

apparently, was forwarded to the appellant, but he refused to accept the document or the envelope in which it was contained. Arbitrators do not

send to one party the original award and to another party a copy. They intimate to both parties that their award has been made. It is then for the

parties, pursuant to Section 14 of the Arbitration Act, to request the award to be filed or the Court directs that course to be taken. Looking at the

document, in my view, it was merely nothing more than the parties being notified the conclusions to which the two remaining arbitrators had arrived

and it was not intended to be the award formally required by them under the Act. This view is confirmed and supported by the letter which the

arbitrators wrote to the respondents alone on the April 23rd, 1945, to which reference has previously been made.

Thirdly, the arbitration agreement referred the matters in dispute to three named arbitrators. One of them withdrew after a partial disposal of

the businesses which all would be called upon to carry out. The remaining two arbitrators completed the disposal of the remaining business and

then wrote their letter dated March the 15th the subject-matter of arbitration did not receive the united attention of all the arbitrators. Whilst the

agreement provides that the decision of the majority of the arbitrators shall prevail, nevertheless, the law requires, and it is well established, that all

the arbitrators must give their united consideration to all matters arising in the arbitration which has been referred to them. This well-established

principle of law is discussed and explained in Patel Bros. v. Shree Meenakshi Mills, Ltd. ILR 1942 Bom. 558 by Chagla, J., at page 565 of the

report. The learned Judge''s view and conclusion were upheld by an appellate Bench of the Bombay High Court a report of which is included after

the judgment of Chagla, J. In that case the Court of first instance and the appellate Court each held that an award was a nullity when one of nine

arbitrators himself absented after proceedings in arbitration commenced and before the conclusion. The decision of the appellate Bench of the

Bombay High Court proceeded to the Judicial Committee and the judgment of their Lordships of the Privy Council is to be found under the name

of Shree Meenakshi Mills, Ltd. v. Patel Bros. ILR 1944 Bom. 469 When the matter reached the Judicial Committee, it was assumed that the

award of the 8 of 9 arbitrators was a nullity and the question was not argued and no judgment was given with regard to whether it was a nullity or

not. But, at pages 473 and 474, the Board observed as follows :

Should the same question arise for decision hereafter it will be necessary to consider whether the well-established principle that, in the case of a

reference to two or more named arbitrators, all the arbitrators must act together, can properly be applied when the reference is not to individuals

but to a body, such as a committee or a Board, whose corporate powers are regulated by its constitution.

From the observations of the Judicial Committee it would seem that the well-established principle was not one which could be disputed. The

only question which might arise was whether that principle could be extended to arbitrators not named personally but as members of the same

body. With respect I agree with the judgments given by the learned Judge of first instance and the appellate Bench of Bombay. In my opinion,

since the document of May the 15th, 1945, was a decision, which it purports to be, arrived at after a consideration of the whole matter by two and

not by all the arbitrators to whom the matters in dispute had been referred, even if that document otherwise might have been an award, since the

three arbitrators did not together consider the matters in arbitration throughout, the award by two of them is not one which can stand, in spite of the

provision in the arbitration agreement in this case that the majority view should prevail.

Fourthly, the argument that the application before Clark, J., was defective because no award was filed with the application is based upon the

contention with reference to Section 14 of the Arbitration Act. That section requires the award to be signed and to be filed in Court by the

arbitrators at the request of the parties or at the direction of the Court. Section 15 empowers the Court to modify an award, Section 16 to remit

the award back to the arbitrators, and Section 17 to pass judgment in terms of the award ; and Section 30 specifies the grounds upon which an

award can be set aside. The sections to which reference has been made, in my view, have to be read together. It is quite clear, and there is no

need to refer to the decisions of the several High Courts in this country, as well as in England, that the Court cannot pass judgment upon an award

or set it aside or remit it back to be modified by the arbitrators unless the award has been filed in Court. The application before Clark, J., was u/s

33 of the Act which enables an application to be made challenging the very existence of an award. If no award has ever existed, how can it be said

that the award must be filed in Court? It is difficult to follow the argument of learned Counsel for the appellant who strenuously and repeatedly

maintained that no application lies u/s 33 unless the applicant files with his application the award which has been made. In my opinion, when an

application to the Court is presented which challenges the existence of an award, no award need, or can, be filed in such an application. At the

hearing before Clark, J., the document of March the 15th was produced, but that was to enable him to examine it and to arrive at a conclusion

whether it was an award or not. Since it was not an award, clearly it was not required to be filed when the petition was presented in which the

application was made.

In my opinion, for reasons given above, this appeal must be dismissed with costs.