Mathra Dass vs The State of Punjab and others

Bal Raj Tuli, J.—This judgment will dispose of Civil Writ No. 570 of 1972, Gurnam Singh v. State of Punjab and others Civil Writ No. 1153 of 1972, Mathra Dass v. Stale of Punjab and others, and Civil Writ No. 2140 of 1972, Kehar Singh v. State of Punjab and others, because of the similarity of the question of law involved in all these cases.

In order to decide the points of law involved in these cases the facts of Civil Writ No. 1153 of 1972 may be stated. The petitioner took a loan of Rs. 10,000/- from the Co-operative Agriculture Service Society of Bandlehri, tehsil Anand Pur Sahib, district Ropar, of which he is one of the members. He took a further loan of Rs. 340/- Since he did not repay these loans, proceeding for arbitration were taken u/s 55 of the Punjab Co-operative Societies Act, 1961 (hereinafter called the Act). It was also alleged by the Co-operative Society that the petitioner had taken a loan of Rs. 18,500/- on November 7, 1968, but this loan was denied by the petitioner. The arbitrator gave award in favour of the Co-operative Society and against the petitioner directing him to pay the sum of Rs. 28,840/- on account of principal Rs. 5,096.94 on account of interest at the rate of Rs. 9.37 Paise per cent per annum to the date of the award and Rs. 8484.23 Paise on account of costs. In all, the claim of the Co-operative Society against the petitioner was allowed for Rs. 42,421.17 Paise with the direction that he will pay interest at the rate of Rs. 9.37 Paise per cent, per annum till the date of realisation on the principal amount of Rs. 28,840/-. Against that award, the petitioner filed an appeal which was decided by the Under Secretary Development (I) (Co-operation), Punjab, in exercise of the powers u/s 69 of the Act. The Under Secretary upheld the award of the arbitrator so far as it related to the loins of Rs. 10,000/- and Rs. 340/- along with interest and costs on those amounts but set aside that part of the award which related to the loin of Rs. 18,500/-. He remanded the case for fresh decision by and arbitrator to be appointed by the Assistant Registrar, Co-operative Societies, Ropar, with regard to the amount of Rs. 18,500/-. The award and the order of the Under Secretary to Government, Punjab, have been challenged by the petitioner in this petition to which a written statement has been filed by respondent No 5. During the pendency of the writ petition, Sardara Singh, arbitrator, has made his award with regard to the amount of Rs. 18,500/- on April 18, 1972. That award has not been challenged in this petition and, therefore, is not for consideration before me.

The main argument of the Learned Counsel for the petitioner is that the appellate authority (Under Secretary to Government, Punjab) should have set aside the award as a whole because of the reason that he could not uphold It In respect of Rs. 18,500/-, In my opinion, this submission has no merit because separate arbitration proceedings could have been taken in respect of each loan and if all the three loans were lumped together in one reference, the appellate authority could have upheld the award in respect of the loans proved and set it aside in respect of the loans which were not proved In any case this matter is of academic interest only because the petitioner does not deny his liability for the two loans of Rs. 10,340/-. He, however, contends that the arbitrator not being a Court, could not award any interest beyond the date of the award nor could he award costs at a flat rate of 25 per cent of the amount awarded but he had to determine the expenses incurred by the Co operative Society in order to award costs.

The Learned Counsel for the petitioner has relied on a Division Bench judgment of this Court in State of Punjab Vs. Surrinder Nath Goel, which was a case under the Arbitration Act, 1940, and it was held, as per head-note (b), as under :--

Section 29 gives specific powers to the Court to award interest from the date of the decree that section is exhaustive and exclusive. It does not confer any implied power on an arbitrator to grant future interest. Even a Court has no inherent or implied power to grant future interest except u/s 34, Civil Procedure Cods. The arbitrator is not a Court. Therefore, even by analogy of section 34, Civil Procedure Code, the arbitrator cannot be held to possess that power.

In view of the provisions of section 29 of the Arbitration Act, the arbitration could not award future interest after the date of the decree. But as held by the Supreme Court in Firm Madanlal Roshanlal Mahajan Vs. Hukumchand Mills Ltd., Indore, and Union of India v. Bungo Steel Furniture Private Limited AIR 1967 1032 the arbitrator could award interest up to the date of the decree. It is, therefore, evident from the decisions of the Supreme Court that an arbitrator has the power to award interest in the same manner as a Court can do u/s 34 of the Code of Civil Procedure. In Sujant Singh v. Seth Mohinder Paul AIR 1964 P&H. 395 a learned Single Judge of this Court (H.R. Khanna, J., as his Lordship then was) held that an arbitrator, not being a Court, cannot award future interest. A Division Bench of this Court in Amar Kumar v. The State of Punjab LPA No. 578 of 1972 L.P.A. No. 578 of 1972, decided on April 2, 1974, held--

It is no doubt true that in the form of award, there is a provision for future interest and it may be that in a given case, the parties may raise a dispute as to the grant of future interest before the arbitrator. But so far as the present case is concerned, the question of future interest was not a subject-matter of adjudication before the arbitrator although the arbitrator has proceeded to award future interest in spite of the fact that there is no provision in the rules or in the Act in this respect. Mr. Kuldip Singh, Learned Counsel for the Society, however, asked us to spell it from this form. We are unable to do so. The form merely provides that the decision of the arbitrator should be recorded in this manner. It does not confer power to grant future interest. That being so there is substance in the contention of the Learned Counsel for the appellant that future interest could not be granted. Before the learned Single Judge, reference was made to a number of decisions of the Supreme Court under the Arbitration Act for the proposition that an arbitrator has the power to award interest right upto the date of the decree, but the Supreme Court nowhere held that the arbitrator had the power to grant future interest. Therefore, the ratio of the decisions in cases under the Arbitration Act also supports the conclusion at which we have arrived. It is no doubt true that the provisions of the Arbitration Act do not apply to the references under the Co-operative Societies Act, out the answer to the question as to whether the arbitrator, either under the Arbitration Act or under the Co-operative Societies Act, has the power to award future interest, has to be found within the four corners of the particular Act.

It is submitted that there is no provision in the Act or the Rules framed under it empowering an arbitrator to award future interest and, therefore, he has no jurisdiction to do so. According to the Supreme Court judgments, an arbitrator under the Arbitration Act has the power to grant future interest up to the date of decree only presumably for the reason that after that date it is the Court, which makes the award the rule of the Court and passes a decree thereon, that can award future interest u/s 29 of the Arbitration Act and thus the jurisdiction of an arbitrator to award future interest is limited only to the date of the decree. There is, however, no such power given to an arbitrator under that Arbitration Act. But the decision by the Supreme Court has been arrived at by reference to section 34 of the Coda of Civil Procedure on the ground that the monetary claim, which is decided by an arbitrator, is such which would have been decided by a Court, if reference to arbitration had not been made. Under the Arbitration Act, 1940, an award made by an arbitrator does not have the force of law and in order to make it enforceable it has to be made the rule of the Court by passing a decree which becomes enforceable. An award under the Co-operative Societies Act, on the other hand, amounts to a decree and is enforceable proprio vigore without being made a rule of the Court nor does it require any decree to be passed thereon I am, therefore, of the opinion on the ratio decidenci of the Supreme Court judgments, referred to above, that an arbitrator appointed under the Act has the power to award future interest just like a Court passing a decree u/s 34 of the CPC and, for this reason, he can award interest at the rate not exceeding 6 per cent, from the date of the award till the date of realisation.

As regards costs, there is rule 56 which gives the power to an arbitrator to order the expenses of determining a dispute or the costs of either party to be borne by such party or parties to the dispute as he may think fit. While awarding costs, he must determine the expenses which have been incurred by the parties in having the dispute settled by the arbitrator. This rule does not authorise the arbitrator to award costs at a flat rate of 25 per cent. It has been submitted that this rate has been prescribed by the Registrar, Co-operative Societies and is uniformly followed. The Registrar has no power to issue any such direction under any provision of the Act. A reference in this connection may be made to the form of a decree under the CPC and the heads it enumerates for determining the expenses of the parties to a suit. That form can be adopted by the arbitrator under the Act but before awarding any costs under any such head the amount thereof has to be determined on the basis of the expenses incurred by the parties.

A strange notion of the reasons for awarding costs at a flat rate of 25 per cent is depicted in the written statement filed by Shri K.S. Sidhu Assistant Registrar, Co-operative Societies, Bhatinda, in Civil writ No 500 of 1972, wherein it is stated that "the costs have been awarded at 25 percent, because the Society incurred sufficient expenditure for the recovery of the loan advanced to the petitioner, and that it is not out of place to mention that the Society had sufficiently spent in arbitration, appeal, revision petition and now in Civil Writ and, in this view, the Society has incurred sufficient amount and shall have to incur more for its recovery through a Civil Court." In view of these factors, the rate of 25 per cent, has been justified as quite reasonable. To say the least, a very false notion seems to be in the mind of the Assistant Registrar. The costs to be allowed in the award art the costs incurred by the parities to the arbitration for getting the dispute decided by arbitration and the costs to be incurred in taking further proceedings are not to be taken into consideration. The arbitrator has not to see that the party failing in the arbitration will file appeal, revision or writ petition or that it will not pay the amount and for the recovery of the same proceedings in the civil Court will have it be taken. All these matters are subsequent to the award and not for settling the dispute by an award. The award of costs at the flat rate of 25 per cent, is therefore, liable to be quashed.

1 am also of the opinion that the award made by the arbitrator and upheld by the appellate authority deserves to be quashed for the reason that it does not state the points of difference referred to the arbitrator for decision and the manner in which he arrived at the conclusion that the petitioner was liable to pay all the amounts as claimed by the Co-operative Society. No form of an award to be made by an arbitrator under the Act should have been prescribed, as has been done in Appendix ''F'' to the Co-operative Societies Rules. 1963, for the reason that, unlike an award under the Arbitration Act, an award under the Co-operative Societies Act must conform to a quasi-judicial decision. Under the Indian Arbitration Act, an award consist of the points of deference referred to the arbitrator for decision and his decision thereon. He is not strictly required to give reasons in support of his decision with regard to every dispute referred to him. But an award under the Act is distinguishable from an award under the Arbitration Act. No appeal is allowed against an award made by an Arbitrator under the Arbitration Act while an appeal is allowed against the award made by an arbitration under the Co-operative Societies Act. A further revision is also competent to the State Government. It is, therefore, necessary that an arbitrator, while deciding a dispute referred to him under the Act, must set the items of the dispute and the decisions there on together with the reasons for those decisions. It may be remembered that an arbitrator, while determining a dispute between the parties, acts as a quasi-judicial tribunal and his decision is a quasi judicial one. A quasi-Judicial decision must be supported by reasons so that it is shown that the arbitrator has applied his mind and while deciding a disputed question the process of reasoning for coming to a particular conclusion must be evident from the discussion in the award itself If that is not done, the appellate authority will not be able to know how the arbitrator came to the decision under appeal before him. In the case in hand, the Under Secretary, while deciding the appeal, stated that the arbitrator did not go into any of the points which he enumerated in paragraph 3 of his order and that he did not see the record of the Society or the original (sic) bond and gave an exports award merely because the petitioner had not turned up before him at the time given in the notice. Since an appeal is provided against the award, in order to enable the appellate authority to come to the conclusion whether the award has been correctly made or not, he must know how the arbitrator arrived at his conclusions. In the award made in this case, the arbitrator even did not mention the items of dispute referred to him. Since the award made by the arbitrator is not in accordance with law, I have no option but to quash the same. With the quashing of that award, the order passed by the appellate authority shall also fall qua the loans of Rs. 10, 340/-.

For the reasons given above, this petition is accepted with costs and the impugned award of the arbitrator dated May 23, 1970, and the order of the appellate authority dated January 10, 1972 as stated above, are hereby quashed. The disputes may be decided by the arbitrator afresh in accordance with law keeping in view the observations made above. Counsel''s fee Rs. 100/- to be paid by the Co-operative Society respondent No. 5.

C.Ws. Nos. 570 and 2140 of 1972

In these cases, the petitioners have paid the principal amount due from them but they have disputed the award of interest and costs. In view of what has been stated above, the arbitrator can award interest at the rate agreed upon between the parties up to the date of award and for the period thereafter up to the date of realisation interest can be awarded at the rate not exceeding 6 per cent, per annum as provided in section 54 of the Civil Procedure Code. Since the awards of the arbitrator are not in accordance with law, these petitions are accepted with costs and the impugned awards are quashed. The orders of the appellate authority and the revising authority are also quashed. The principal amount having been repaid, the only liability of the petitioner in each case now is to pay the interest thereon upto the date of the payment of the principal amount and that matter can be decided manually by the parties. If it is not so settled, the matter can be referred for decision to an arbitrator. Counsel''s fee in each case Rs. 100/- to be paid by the Cooperative Society respondent No. 2.