P.K. Damodaran vs T.K. Bhaskaran and Others

Shamsuddin, J.—This Civil Revision Petition came before us on a reference made by Thomas, J. To appreciate the legal questions raised in the C.R.P. it is necessary to briefly state the facts.

O.P. (Arbitration) No. 7/79 on the file of the Subordinate Judge''s Court, Thodupuzha was filed by the 1st Respondent herein seeking to pass a decree in accordance with an arbitration award dated 5th May 1979. The case of the 1st Respondent was that he and the Petitioner herein entered into a partnership agreement for starting a rice mill, that the said business ceased to function from November, 1976 onwards, that thereafter he had applied to the local S.N.D.P. office bearers to arbitrate the dispute between him and the Petitioner and accordingly the S.N.D.P. Office-bearers arbitrated the matter and passed an award dated 5th May 1979.

While the O.P. was pending, the-Petitioner filed I.A. No. 1331 of 1981 on 3rd November 1981 praying to declare that the award was a nullity as there was no valid agreement to refer the dispute to arbitration. The Respondents filed objection to the I.A. raising the contention that the application was barred by limitation since it was not filed within 30 days from the date of filing the award in Court. The learned Subordinate Judge upheld the objection and held that I.A. No. 1331 of 1981 was barred by limitation and accordingly the I.A. was dismissed with costs; That order is now challenged in this Civil Revision Petition.

A preliminary objection was raised by the learned Counsel for the 1st Respondent that since an appeal is provided u/s 39 of the Arbitration Act, no revisional jurisdiction can be exercised in view of the bar contained in Section 115(2) of the CPC According to the learned Counsel, an appeal would lie u/s 39(1) of the Arbitration Act against the order under challenge Since against the order refusing to set aside the award an appeal is maintainable u/s 39(1) of the Arbitration Act.

The learned Counsel for the revision Petitioner ventured to meet this preliminary objection contending that the impugned order is not an order coming within the purview of Section 39(1)(vi) of the Act. According to him, the rejection of the petition on the ground that it was barred by limitation will not amount to a refusal to set aside the award within the meaning of Section 39(1)(vi) of the Act.

Section 30 of the Arbitration Act, 1940 which deals with the grounds for setting aside the award, reads as follows:

Any award shall not be set aside except on one or more of the following grounds, namely,

(a) that an arbitrator or umpire has misconducted himself or the proceedings;

(b) that an award has been made after the issue of an order by the Court superseding the arbitration or after arbitration proceedings have become invalid u/s 35;

(c) that an award has been improperly procured or otherwise invalid.

Section 32 of the Act lays down as follows:

Bar to suit contesting arbitration agreement or award-Notwithstanding any law for the time being in force no suit shall lie on any ground, whatsoever for a decision upon the existence, effect or validity of an arbitration agreement or award, nor shall any arbitration agreement or award, be enforced, set aside, amended modified or in any way affected otherwise than as provided in this Act.

Section 33 of the Act provides that any party to an arbitration agreement or any person claiming under him desiring to challenge the existence or validity of an arbitration agreement or an award or to have the effect of either determined shall apply to the Court and the Court shall decide the question on affidavits. Proviso to the said sections further lays down that where the Court deems it just and expedient, it may set down the application for hearing on other evidence also, and it may pass such orders for discovery and particulars as it may do in a suit.

Article 119 of the Schedule to the Limitation Act, 1963 provides a period of 30 days from the date of service of notice of the filing of the award for filing an application for setting aside the awarder remittance for reconsideration. If the application filed by the Petitioner to set aside the award is based on any of the grounds mentioned in Section 30 of the Act then there can be no doubt that the same is barred by limitation in view of the above provision of the Limitation Act. In that event, the order passed by the Court below will come within the purview of Section 39(1)(vi) of the Act and an appeal would lie.

The learned Counsel for the revision Petitioner submits that the award in the instant case is totally without jurisdiction and is a nullity in the eye of law and therefore his application cannot be treated as an application for setting aside an award or for remitting the award for reconsideration and that therefore the period of 30. days prescribed under Article 119 of the schedule to the Limitation Act is not applicable and that it is only the residuary Article 137 which deals with application for which no period of limitation is provided in the Limitation Act, that would apply to this case and that therefore a period of three years from the date on which the right to apply accrued is available to him. His further contention is that since the application is not one made u/s 30 for Setting aside the award for the reasons stated in Section 30 of the Act, the order passed by the lower Court is not an appealable order u/s 39(1)(vi) of the Arbitration Act, and that therefore a revision u/s 115 CPC is maintainable. The learned Counsel for the Petitioner heavily relied on the judgment of the privy council in AIR 1946 72 (Privy Council) The Court said:

A further question referred to the Full Bench was ''whether an objection to the validity of reference to arbitration comes within the provisions of para 15 of Schedule II, Code of Civil Procedure''. The learned Chief Justice and Harries, J., considered that it did, relying on the words ''being otherwise invalid'' in para 15; Iqbal Ahmad, J., considered that it did not. Upon this question their Lordships agree with the view of Sir Iqbal Ahmad. In their opinion all the powers conferred upon the Court in relation to an award on a reference made in a suit presuppose a valid reference on which an award has been made which may be open to question. If there is no valid reference, the purported award is a nullity, and can be challenged in any appropriate proceedings.

He also placed, reliance on the observations of Division Bench decisions of the Patna High Court in Basant Lal Vs. Surendra Prasad and Others, and Deep Narain Singh and Others Vs. Mt. Dhaneshwari and Others, and a Full Bench decision of the Delhi High Court in Prem Sagar v. Security and Finance Ltd. AIR 1963 Del 21. All these rulings took the view that if an award is a nullity it does not require to be set aside and only to be declared as a nullity and this declaration can be made only u/s 33 of the Arbitration Act.

A contrary view has been expressed by a Division Bench of this Court in Joseph Philip Vs. Varkey Mathai and Others, the Calcutta High Court in Saha and Co. Vs. Ishar Singh Kripal Singh and Co., the Bombay High Court in Savkur v. Amrit Lal Kalidas AIR 1953 Bom 293. All these rulings took the view that an award cannot be declared to be null and void otherwise than in terms of Section 17, read with Sections 30 and 33 of the Arbitration Act.

In our view, the contraversy has been set at rest by the decision of the Supreme Court in The Union of India (UOI) Vs. Shri Om Prakash, The Court observed:

According to the Respondent an award obtained on an invalid reference is also invalid and is covered by Clause (c) of Section 30, It was argued on behalf of the Appellant, on the authority of the Privy Council in AIR 1946 72 (Privy Council) that the words ''otherwise invalid'' in Section 30(c) did not cover a case where the award was challenged on the ground of some invalidity attaching to anything outside the award itself. In Chhabba Lal''s case the privy Council held that an objection to the validity of a reference to arbitration did hot come within the provisions of paragraph 15 of the second schedule to the Code of Civil Procedure, 1908, which provided that no award was to be set aside except on the specific, grounds mentioned therein, or the award ''being otherwise invalid''. This view which affirms that of Iqbal Ahmad, J. in his dissenting judgment in a Full Bench decision of the Allahabad High Court, Mt. Mariam and Another Vs. Mt. Amina and Others was taken in relation to an award on a reference made in a suit. Their Lordships observed:

...all the powers conferred on the Court in relation to an award on a reference made in a suit presuppose a valid reference on which an award has been made which may be open to question. If there is no valid reference, the purported award is a nullity, and can be challenged in any appropriate proceeding.

There was no provision in the Second Schedule to the Code of Civil Procedure, which was repealed by the Arbitration Act, 1940, like Section 32 or Section 33 of the Act. Section 32 bars the institution of suits concerning arbitration agreements or awards and provides that no arbitration agreement or award shall be set aside, amended, modified or in any way affected otherwise than as provided in this Act Section 33 says that a party to an arbitration agreement seeking to challenge the agreement or the award must do so by making an application to the Court. When the Second Schedule to the CPC was in force, an award made on an invalid reference could be set aside only by filing a suit which was then the ''appropriate proceeding'' but now the proceeding appropriate for the same purpose in an application to the Court as the Respondent in these cases has done. Also, these are cases of arbitration without the intervention of Court, and the observation from the judgment in Chhabba Lal''s case, quoted above, that a reference in a suit should be presumed to be a valid reference, does not apply to these cases. The words ''or is otherwise invalid'' in Clause (c) of Section 30 are vide enough to cover all forms of invalidity including invalidity of the reference. We do not find any reason why the general and unqualified language of Clause (c) should not include an award on an invalid reference which is a nullity.

(Emphasis supplied)

In the light of the Supreme Court decision referred to above, we are of opinion that the ruling of the Division Bench in Joseph Philip Vs. Varkey Mathai and Others, does not call for reconsideration.

For the forgoing reasons, we hold that the application filed by the Petitioner after 30 days from service of notice of the filing of the award is barred by limitation and it is liable to be dismissed. It has also to be held that the order passed by the lower Court would fall within the purview of Section 39(vi) of the Arbitration Act and that therefore it is an appealable order. It follows that the revision petition is not maintainable in law in view of Section 115(2) Code of Civil Procedure.

In the result, the C.R.P. is dismissed with costs.