Principal Chief Engineer-cum-Secretary vs M.B Chettri

R. Dayal, J

In this fust appeal against the judgment dated 24.1.1994 passed by the learned Addl. District Judge, Sikkim, against the dismissal of the objections

filed by the appellant under Section 30 of the Arbitration Act and making the award of the arbitrator rule of the court, only point for decision is

whether the validity of an award can be challenged, on the ground of the award being in excess of the jurisdiction of the arbitrator, being beyond the

reference having been made to him, merely on the basis of oral arguments when no such objection was taken in the application filed under Section 33

of the Arbitration Act within the period of limitation prescribed for such an application.

The respondent is a government contractor. Parties entered into an ngreement on 18th July, 1981, regarding construction of road. Differences arose

between the parties. The respondent issued a notice to the department for appointment of an arbitrator in terms of the arbitration clause. On the

department's failure to comply with the notice, he filed an application, which was registered as Civil Misc. Case No. 1 of 1984 in the court of the

District Judge, Sikkim, under Section 20 of the Arbitration Act for appointment of an arbitrator and for making an order of reference in respect of the

differences and disputes that arose between the parties. Vide judgment dated 26.6.1985, the learned District Judge allowed the application and

appointed an arbitrator and made a reference of the disputes specified in paragraph 10 of the judgment to the arbitrrtor and further directed in

paragraph 11 that he shall proceed with the arbitration to settle ‘the said point’ in accordance with the provision of the Arbitration Act. The

arbitrator made an award on 11.6.1993 awarding a total amount of Rs. 12,41,028 and also Rs. 100 by way of cost of stamp duty and filed the same in

the court. Objections were filed by the appellant under Section 30 of the Arbitration Act praying for setting aside the award alleging that the award

was bad on account of errors apparent on the face of records. Seven alleged errors were specified in the objections and it was pleaded that the errors

indicated that the arbitrator did not apply his mind while making the award. In the reply filed against these objections, the contractor alleged that the

arbitrator had considered all the points raised in the objections and since the award was a non-speaking award, there was no scope for analysing, the

award or for probing the mind and the mental process of the arbitrator by which he arrived at the decision. The objections were apparently not

tenable. The validity of the award could not be challenged on the ground that the award was bad on the face of the record. Even no attempt was

made by the learned Advocate General who appeared before the learned District Judge to show as to how the award was erroneous on the face of

record or on the face of the award. Instead, the award was challenged as invalid on two other grounds which had not been taken in the objections

these ground being: (a) the arbitrator decided matters outside the terms of reference, and (b) the amounts awarded by the arbitrator are

disproportionately high. Which errors were covered by the words “or is otherwise invalid†in clause (c) of Section 30. Shri S.P Wangdi, the

learned counsel appearing on behalf of the contractor before the learned Trial Court and also in this court, urged before the learned Trial Court that

both the grounds urged by the learned Advocate General being new grounds not stated in the application were barred by limitation. On the other hand,

the learned Adovate General submitted that since the objections related to the jurisdiction of the arbitrator to make the award, the objections could be

taken even at the time of arguments after the period of limitation had expired for filing an application under Section 33. After referring to several

authorities, the learned Trial Court held that all the objections for setting aside the award must be taken by means of an application within the

prescribed period of limitation and the objections taken by the learned Advocate General having not been so taken the pleas of the learned Advocate

General could not be entertained. Further, it held that the objector had not taken any objections regarding the jurisdiction of the arbitrator during the

arbitration proceedings, and, therefore, on the strength of the decision in Union of India v. Manipur Builders Association . AIR 1977 Gau. 5., the

objector was estopped from challenging the jurisdiction of the arbitrator after the award went against the objector.

Aggrieved the department has come up in appeal urging that the learned arbitrator has travelled beyond the scope of reference set out in the order

of the learned District Judge in Civil Misc. Case No. I of 1984 and the objection as to jurisdiction, although not pleaded in the written objection, could

be taken at the stage of hearing and as such could not be barred by limitation.

On our query as to how the award was beyond reference or in excess of the amount claimed by the contractor at the time of reference, the learned

Advocate General has submitted that except for items No. 8, 9, 11 and 12 in the award for which reference was made in sub-paragraphs 2, 3, 4 and 1

respectively of paragraph 10 of the judgment dated 26th June, 1985, of the learned District Judge, for the remaining 13 of the 17 items for which

award was made by the arbitrator, there was no reference to the arbitrator and further that in respect of Item No. 11 in the award which is

“Interest @ Rs. 24 per annum on Rs. 5,21,263 from June, 1985, till June, 1993†for which a sum of Rs. 3,07,200 was awarded, the award was in

excess of the claim referred which by virtue of sub-paragraph 4 of paragraph 10 of the aforesaid judgment was only “about Rs. 1,00,000 (Rupees

one Lakh only)â€. This factual position could not be disputed by Shri S.P Wangdi, who appeared on behalf of the respondent-contractor. It is thus

clear that the award was in excess of the reference made in respect of several items and was in excess of the amount claimed in respect of item No.

11 relating to interest. In Orissa Mining Corpn. v. F.V Rawlley . 1977 3 SCC 535, the Supreme Court observed in paragraph 11: “When an

agreement is filed in court and order of reference is made then the claim at a result of the order of reference is limited to a particular relief and the

arbitrator cannot enlarge the scope of the reference and entertain fresh claims without a further order of reference from the court.†It was also

observed in paragraph 10: “When the amount has been specified in the plaint and when the reference is confined to the claim made in the plaint the

arbitrator would have to restrict bis award only to the claim. We are satisfied that in- this case the arbitrator has exceeded his jurisdiction in embarking

on the claim that was for the first time put forward before him by the respondent.†It is thus evident that the award in respect of the items not

referred to the arbitrator and the amount allowed in respect of interest in excess of what was referred, was in excess of jurisdiction or the arbitrator.

We find ourselves not inclined to endorse the view of the learned Trial Court that since, the objector did not take any objection regarding jurisdiction

of the arbitrator at any time during the arbitration proceedings, he was estopped from challenging the jurisdiction of the arbitrator in the court after the

award went against him. In our view reliance placed on Union of India v. Manipur Builders Association (supra), in support of the view was misplaced.

A distinction has to be made between a case where there is patent lack of jurisdiction and a case where lack of jurisdiction is latent. In the former

type of cases, acquiescence of parties could not be material. The Supreme Court observed in Tarapore & Co. v. State of Madhya Pradesh . JT 1994

2 SC 162., in paragraph 19: “It deserves to be stated that if an authority would lack jurisdiction in the sense that the subject matter is not amenable

at all to its decision, i.e, the case be of patent lack of jurisdiction, acquies- cence of the parties would not be material inasmuch as it is settled law that

by agreement jurisdiction cannot be conferredâ€. In Union of India v. Manipur Builders Association (supra), lack of jurisdiction was not patent. In that

case, an objection was taken in the court that appointment of the arbitrator was not in terms of the arbitration clause which provided that the arbitrator

should be Additional Chief Engineer, Central Public Works Department Incharge of the work at the time of dispute or if there be no Additional Chief

Engineer, the Administrative Head of the said Central Public Works Department at the time of such appointment. The objection was that as no

Additional Chief Engineer was incharge of the work at the relevant time, it was the Administrative Head of the CPWD at the time of appointment,

who was competent to appoint the arbitrator, it was in this context that it was observed that at no stage the respondent raised any objection as to the

jurisdiction of the arbitrator. “All the time he took a chance to get an award in his favour.†It was pointed out that a “reference may be invalid

if there is some defect in the contract nontaining the arbitration clause or in the arbitration agreement itself. In such a case, the defect cannot be cured

by waiver. But, when there is no such defect in the contract or in the arbitration clause, but there is some irregularity in exercise of jurisdiction a party

cannot be allowed to turn round and take an objection afterwards as to the jurisdiction of the arbitrator if he once submitted to the Arbitration

Proceedings, filed his claims and look part in the proceeding without any objection.†Thus, that was a case where an irregularity was held to be in

exercise of jurisdiction and not a patent lack of jurisdiction. Since an arbitrator does not have the jurisdiction to entertain a claim which has not been

referred to him. If he entertains such a claim, there is a patent lack of jurisdiction in him. Similarly, entertaining a claim beyond the amount specified in

the order of reference also suffers from the same defect and such an objection can be taken in the court even when no such an objection was taken

during arbitration proceedings.

Now the question is whether a party can take objection as to the jurisdiction of the arbitrator in court even when no such objection was taken in the

application under Section 33 of the Arbitration Act within the period of limitation prescribed therefor. A perusal of Sections 30 and 33 would indicate

that the Arbitration Act provides a complete machinery for the decision of all questions regardiog the validity, effector existence of an award or an

arbitration rgreement between the parties. Section 31(1) provides that subject to the provisions of the Act, an award may be filed in any court having

jurisdiction in the matter to which the reference relates. Sub-section (2) of Section 31 says that “Notbwithstanding anything contained in any other

law for the time being in force and save as otherwise provided in the Act, all questions regarding the validity, effect or existence of an award or an

arbitration agreement between the parties to the agreement or persons claiming under them shall be decided by the court in which the award under the

agreement has been, or may be, filed, and by no other court.†Not only does the Act provide for the court where all such questions may be decided,

Section 32 further provides that “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.†Thus existence or validity of an arbitration agreement or award can be

challenged in the court only in the manner provided in the Act and Section 30 specifies three grounds on which an award may be set aside. However,

it does not provide the manner how a challenge can be made to the validity of an award. The manner is provided by Section 33 which says that any

party to an arbitration agreemeni 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. Thus, if a party seeks to get an award

set aside, an application for that purpose has to be made under Section 33 on any of the grounds specified in Section 30. Period of limitation for such

an application is prescribed under Article 119(b) of the Limitation Act, 1963, as 30 days from the date of service of the notice of the filing of the

award. Thus, where an award has been filed and any party seeks to get such an award set aside, an application has to be filed for that purpose within

30 days from the date of service of the notice of the filing of the award. The learned Advocate General has submi’.ted that where an award

suffers from patent lack of jurisdiction, the award is a nullity and such an objection can be the time of arguments, even if it is not mentioned in the

taken at written objections filed within time. We see absolutely no merit in the submission. If a party wants to get an award adjudged to be a nullity, an

application for that purpose has to be made under Section 33. No such prayer has been made by the objector in the written objections. The objection

was filed by the appellant with the prayer to set aside the award. Advocate General cannot make a prayer different from what has made in the

objections filed in the court. Furthermore, a perusal of the grounds specified in Section 30 of the Act on which an award can be set aside shows that

the grounds may relate to the jurisdiction of the arbitrator. The ground specified in Clause (b) of that section is 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 under Settion 35. Clause (c) of that

section specifies the ground where an award has been improperly procured or is otherwise invalid. It wae held in Union Of India v. Shri Om Prakash .

1976 4 SCC 32, that the “words or is otherwise invalid†in Clause (c) of Section 30 are wide enough to cover all forms of invalidity including

invalidity of the reference. We do not find any reason why the generel and unqualified language of Clause (c) should not include an award on an

invalid reference which is a nullity.â€​ Furthermore, the Supreme Court has held in Madan Lai v. Suiar Lal . AIR 1967 SC 1233.:

“(8) It is clear, therefore, from the scheme of the Act that if a party wants an award to be set aside on any of the grounds mentioned in Section 30

it must apply within 30 days of the date of service of notice of filing of the award as provided in Article 158 of the Limitation Act. If no such

application is made the award cannot be set aside on any of the grounds specified in Section 30 of the Act.â€​

“(10)………………… Clearly, therefore, where an objection as in the present case raises grounds which fall squarely within Section 30 of the

Act that objection cannot be heard by the eourtand cannot be treated as an application for setting assde the award unless it is made within the period

oflimitationâ€​

The Rajasthan High Court also held in Devendra Singh v. Kalyan Singh . AIR 1978 Raj. 134. after considering several decisions on the point

including the Full Bench decision rendered by the Calcutta High Court inS aha & Co. v. Ishar Singh Kripal Singh & Co. . AIR 1956 Cal. 32.1, that

from the survey of the provisions of the Act it will appear that “the Act comtemplates that all applications challenging the award must be made

under Section 33 irrespective of the ground of the challenge and that there must be the applications for setting aside the award. The non-existence or

invalidity of the reference may be the ground of application for setting aside the award passed on such invalid or non-existent reference including the

cases of award in an arbitration proceeding. Section 33 clearly and unmistakably points out that the Indian Arbitration Act does not distinguish

between an application for setting aside an award and an application for the adjudication of an award to be a nullity. The section does not contemplate

that an application of the former kind should be made under Section 30 of the Act and an application of the later kind under Section 33 of the Act.â€​

After a careful consideration of the law on the subject, we are of the firm view that where an award has been filed and a party seeks to challenge

the validity of that award, even if that challenge is based on the ground of being in excess of jurisdiction, the challenge can be made only on the basis

of an application which may be filed within the period of limitation prescribed under Section U9(b) of the Limitation Act. A party cannot be allowed to

circumvent the law of limitation by saying that he is challenging the award on the ground of want of jurisdiction.

Though the award was beyond the reference in respect of several items and was in excess of the amount of interest referred by the learned

District Judge, and as such was clearly beyond the jurisdiction of the arbitrator to that extent, yet the award has to be confirmed because the case of

the department was not conducted properly either before the arbitrator or in the court after the award was filed. Omission to take a proper plea before

the adjudicating authority may sometimes be due to negligence and may sometimes be deliberate. The way the proceedings of the present case were

conducted before the arbitrator and in the court of the learned Additional District Judge upto the stage of filing of the application/objections indicate

that those who conducted the case miserably failed to do their duty to protect the interest of the department. The estimated value of the contract was

less than six lakh rupees and the department got against itself the award in favour of the contractor for an amount of Rs. 12,41,028 which is more than

double the estimated value of the contract, in addition to the amount already paid to the contractor. In the written objections, such untenable pleas

were taken as could not even be pressed during arguments, and the pleas which were real and apparent were woefully omitted to be taken, thus the

defence put up was a complete sham. It is difficult to imagine that the omission to take the pleas before the arbitrator that some of the claims made by

the contractor were beyond the reference made by the District Judge and that the amount claimed by way of interest before the arbitrator was in

excess of what was referred by the District Judge could be bona fide. Similarly, the omission to take these pleas in the objections filed in the court not

possibly be for any bona fide reason. We expressed our displeasure during arguments about the manner in which the case was conducted on behalf of

the department. Thereafter, written submissions, were filed on behalf of the department saying, inter alia, that the application filed by the department

has been settled by the learned Advocate General. This highlights the need for the complete overhaul of the machinery that conducts the cases on

behalf of the government.

The respondent filed cross-objection complaining that the learned Trial Court did not award pendente lite and future interest. He is however, not

entitled to pendente lite interest in view of the latest judgment of the Supreme Court in Union of India v. Jain Associates . JT 1994 3 SC 303., where

after taking note of the Constitution Bench decision in The Secretary, Irrigation Department v. G.C Roy . AIR 1992 1 SC 50,8 it was held that since

Section 29 of the Act enables the court to grant interest on the principal amount adjudged in the award and confirmed in the decree only from the date

of the decree. It carries a negative import with it that the court has no power to grant interest pendente lite. It is, however, permissible to allow future

interest. But in the circumstances, where the award has to be confirmed even in respect of certain items which were beyond the reference, because

of the sham defence put up on behalf of the department, we are not inclined to allow future interest. In the result, we dismiss the appeal and also the

cross-objection. In the circumstances, parties shall bear their own costs. Let a copy of the judgment be sent to the Chief Secretary for information and

necessary action.

Appeal dismissed.