Smt. Lila Devi etc. vs The State of Himachal Pradesh

Chet Ram Thakur, J.—In this case the State filed an application u/s 30 and 33 of the Arbitration Act for setting aside the award made on 18-3-1974 by the arbitrator (Shri M. P. Gupta, Conservator of Forests, Simla) in the dispute having arisen between the parties. The arbitrator had given award in favour of the claimants, who are now the legal representatives of late R. L. Kuthiala, the original contractor, for Rs. 75,000/-.

The award is sought to be set aside on the ground of misconduct on the part of the arbitrator and the proceedings. These allegations made in the application for setting aside the award are repudiated by the claimants and the Court framed the following issue:

Whether the award is liable to be set aside on the grounds mentioned in the objection petition

The objector examined Shri R. K. Punshi, who happened to be the counsel on behalf of the department before the arbitrator to conduct the proceedings, Shri Balbir Singh, Assistant Conservator of Forests, and Shri I. D. Sharma, Divisional Forests Officer, Chopal. The claimant examined only one Shri Garib Dass, who is the manager of the claimants firm.

Learned Advocate-General did not advert to the evidence adduced on the issue and instead argued the case on the point which was not at all taken nor was there any issue on the same. However, that being a legal point it was permitted to be argued. He pointed out that in terms of Clause 29 of the agreement it was the Deputy Commissioner, Sirmur, to whom the dispute, if any, rising between the contractor and the State was to be referred for arbitration but instead the dispute has been referred to a person other than the one mentioned in the agreement. The arbitrator, Shri M. P. Gupta, therefore, had no jurisdiction to enter upon the arbitration and give the award. The award, therefore, was liable to be set aside as being without jurisdiction. He relied on Smt. Dulari Devi Vs. Rajendra Prakash and Others, , where it had been held:

Where there is no contrary intention expressed in the agreement relying on which, it was open to the party to resile from or revoke the reference the agreement is irrevocable unless the leave of the court was taken.

If for some reason a party to the agreement thought that the agreement had been obtained either by fraud or the persons who had been appointed would not be very fair to him, or some matter had been suppressed from his knowledge at the time of the execution of the agreement, or there are any other reasons on which he can contend that he could revoke the agreement, it is open to him to go to the court with an application u/s 5 and ask for a revocation. Where this has not been done court is bound by the mandatory nature of S. 5 to hold that the reference would be irrevocable.

On the other hand the learned Counsel for the claimant has contended that these was no objection by the Respondent till the last date of hearing, secondly, both the parties filed their claims and counter, claims before the arbitrator. Both had led evidence and taken the risk of an award being made in their favour to which they submitted. Extension of time was sought by both the parties from time to time. When the award was finally made this objection was not specifically taken in the application for setting aside the award. The agreement was signed by the Chief Conservator of Forests and it was he, who had appointed the arbitrator on behalf of the Government. The original agreement was with the Respondent and they were aware of Clause 29 and yet they elected to appoint a Conservator of Forests to be the arbitrator in the case and on these submissions he contends that it must be deemed that the Respondents had consented to the appointment of a Conservator of Forests, who was not named in the agreement as an arbitrator and this being so the appointment of the arbitrator being by mutual consent, the Respondent should not be permitted to take up this question and they are now estopped from questioning the award on the ground that the arbitrator not being appointed in terms of Clause 29 of the agreement had no jurisdiction to enter upon the reference and to support his submissions he has also relied on a number of authorities

The first authority is Lachmi Narayan Jute Manufacturing Co. Ltd. Vs. Dwip Narayan Singh, where it has been held:

If a party allowed an arbitrator to proceed with the reference without objecting to his jurisdiction or competence, it would not be subsequently heard to say that the award should be set aside on the ground that the arbitrator was not competent to decide the dispute in question.

If objection is to be taken, it must be taken at the earliest possible opportunity or at any rate, at an early stage of the proceedings. Failure to object at an early stage acts as an estoppel.

The second authority is Assadullah Makhdoomi and Ors. v. Lassa Baba and Ors. AIR 1966 J&K 1 where it has been held:

When the parties interested take part in the proceedings before the arbitrator, they cannot be allowed subsequently to contest any want of formality in the appointment of the arbitrator and the order of reference.

The third authority is Union of India (UOI) Vs. Ch. Radhanath Nanda and Another, wherein also it has been held:

The general principle that where a Court has inherent lack of jurisdiction, mere consent of parties cannot confer juisdic-tion, has no application to arbitration proceedings where the arbitrator is a person appointed by agreement between the parties. The principle of estoppel will generally apply where a party having consented to arbitration by a person and participated in the proceedings before him subsequently attempted to challenge the jurisdiction of the Arbitrator. Thus were a party having submitted to the jurisdiction of the arbitrator subsequently challenges his jurisdiction on the ground that he did not possess the qualification required by the arbitration clause, it must be held that there was estoppel by conduct and that it was not open to the party to contend that the arbitrator was not qualified under the terms of the agreement to arbitrate in the dispute.

In the instant case there can be no dispute that under Clause 29 any dispute arising between the parties was to be referred to the arbitration of the Deputy Commissioner or should he be unable or unwilling to act, to such Assistant as the said Deputy Commissioner shall appoint as sole arbitrator. Section 5 of the Arbitration Act reads as:

The authority of an appointed arbitrator or umpire shall not be revocable except with the leave of the Court, unless a contrary intention is expressed in the arbitration agreement.

Learned Advocate-General has referred to this section in order to press his argument that in view of the fact that it was only the Deputy Commissioner, who was competent to be an arbitrator in the matter, the Conservator of Forests, therefore, could not be appointed and if any person had been appointed contrary to the terms of the agreement then that person did not have any authority to enter upon the arbitration nor the reference can be said to be a valid reference. It is on that account also that he has referred to Smt. Dulari Devi''s case (supra). From the reading of this section it would, therefore, be clear that for revocation of the authority of the arbitrator an application has got to be made to the Court for leave or where contrary intention is expressed in the arbitration agreement. Further, it means that the authoiity of the arbitrator can be revoked only before he has made his award and not at a time when the award itself has been made by the arbitrator and before whom no point about the competency or jurisdiction of the arbitrator has been taken up by any of the parties. Here in this case there is no application for revocation of the authority of the arbitrator nor could any such application be made after the award is made because after the award is made the arbitrator has become functus officio. There is, admitted no doubt that a contrary intention is expressed in the arbitration agreement that any dispute arising out between the parties to the contract shall be referred to the arbitration of the Deputy Commissioner. It may be observed that the parties did appear before the arbitrator, the Respondent filed their counter-claim before the arbitrator, submitted to his jurisdiction, the appointment was also made by the Chief Conservator of Forests on behalf of the Government and, therefore, it is not open to the Respondent now to take up this question of the jurisdiction at a time when the award has been made against it. Moreso, no such objection has been taken in the application for setting aside the award. The grounds are quite different to the one which is now sought to be taken up before the Court during the course of arguments. The parties are deemed to have waived this objection about the competency of the arbitrator and now they are estopped from their own act and conduct from challenging his authority.

According to Union of India (UOI) Vs. K.P. Mandal, a representation in order to attract the rule of estoppel need not always be a representation of a physical fact, but may as well be the representation of an attitude or a state of mind, inasmuch as, the state of a man''s mind is as much a matter of fact as the state of his digestion. If a man, either by words or by conduct, has intimated that he consents to an act which has been done, and that he will offer no opposition to it, although it could not have been lawfully done without his consent, and he thereby induces others to do that from which they otherwise might have abstained, he cannot question the legality of the act he had so sanctioned, to the prejudice of those who have so given faith to his words, or to the fair inference to be drawn from his conduct.

On the point of waiver, I may also Pioneer Engineering Works Vs. Union of India (UOI), which says:

Where the Appellant was fully aware of the counter-claim made by the Respondent, and it sought to lead evidence before the arbitrator to show that the counter-claim was not substantiated. Held that the irregularity, if any, made by the arbitrator in accepting the counter-claim beyond the time fixed by him was waived by the Appellant who took part in the proceedings before the arbitrator with full knowledge of the irregularity and without protest. It is well settled that in such a case the Court will not permit any of the parties to lie by or act in an indecisive manner, so as to obtain the benefit of the award if it is in his favour and endeavour to set it aside if it is not.

The authority, Smt. Dulari Devi (supra) relied upon by the learned Advocate General has got different facts, inasmuch as, in that case when the arbitrators sent notice to the parties fixing a date for recording evidence and it had been mentioned in the notice that in case of default of any party the proceeding was to be ex-parte against the defaulter. One of the parties sent a telegram to the following effect:

Don''t proceed. Everything bogus. No arbitrators appointed.

But on the date fixed the arbitrators held a sitting. Since one of the parties was not present, therefore, they postponed the case for a further date and sent a telegram to both the parties asking them to attend with evidence on the next date. Upon this, another tel gram was sent by the same party, which was in the following terms:

Your telegram wrong. All nonsense. Don''t persecute me.

The case was again adjourned and the parties were informed to attend the meeting at future date. To this also the party who had previously sent the telegrams not accepting the authority of the arbitrators again sent a telegram, which said:

I have not appointed you arbitrator. Dont'' proceed.

Thereafter the arbitrators heard and recorded evidence ex-parte and gave their award, a copy of which was also sent to both the panties. Whereupon, the party who had not submitted to the jurisdiction of the arbitrators filed a suit for possession, wherein he mentioned that he had never entered into an agreement to arbitration and that the arbitration was invalid. Another suit was filed by the opposite party for enforcement of the award given by the arbitrators. Before the Court it was argued that there was no legal and valid reference of arbitration. The court, however, found that the deed of reference was signed by Sheo Shankar Lal knowing it to be such and, therefore, the execution of the agreement referring the dispute to the arbitrator stood proved and the further question was whether after the execution of the deed Sheo Shankar Lal could resile from it and it was in view of these circumstances that it was held that there was no contrary intention expressed in the agreement relying on which it was open to the party to resile from or revoke the reference. Unless the leave of the Court was taken the agreement was irrevocabl If for some reason a party to the agreement thought that the agreement had been obtained either by fraud or the persons who had been appointed would not be very fair to him, or some matter had been suppressed from his knowledge at the time of the execution of the agreement, or there were any other reasons on which he could contend that he could revoke the agreement, it was open to him to go to the Court with an application u/s 5 and ask for a revocation. This not having been done then under the mandatory provision of Section 5 the reference would be irrevocable though he may have tried to resile from it. In these circumstances it cannot be said that this authority has got any application to the facts of the instant case. Section 5 does not apply to the present case and it is quite manifest that the parties did appear before Shri M. P. Gupta, the Respondent put up their counter-claim, they had led evidence and had applied for extension of time from the Court to enable the arbitrator to give his award. They never raised any objection of the kind as is put up now after the award has been made. Even if under the terms of the agreement it was the Deputy Commissioner, who was nominated as the arbitrator, yet it appears, by consent of the parties Shri M. P. Gupta had been appointed as an arbitrator although there is no express consent proved but there is implied consent on the part of the parties, inasmuch as, they appeared before him and conducted the proceedings till the last without any demur and, therefore, the objector, should be presumed to have waived the objection, if" any, with regard to the competency of the arbitrator and now the objector is estopped by his own conduct from challenging the jurisdiction of the arbitrator who has since become functus officio. The objector could take advantage of Section 5 only if they had either taken an objection before the arbitrator at the earliest stage with regard to his comptence or the arbitration proceedings were still pending, yet they had to apply to the Court for leave for revocation of the authority of the arbitrator on the ground that it was contrary to the intention expressed in the agreement. But this not having been done, the objector, who permitted the opposite party to conduct the proceedings before the arbitrator for such a long time without any objection being taken must be held to be estopped by their conduct, as already indicated above, and I am of the view that this objection of the learned Advocate-General has got no substance and must be repelled.

The other point is whether the award is liable to be set aside for the reasons given in the objection petition. Although the learned Advocate-General has not argued this point, probably on the assumption that his point with regard to the competence of the arbitrator would find favour with the Court and on that very account the suit might fail. But it is my duty to give my finding on this aspect of the case also. There are several allegations made in the application attributing misconduct to the arbitrator as also to the proceedings. In this behalf oral evidene has been led. In the Statement of Shri Balbir Singh nothing very material has been brought out except that Shri R. K. Punshi had raised the point of limitation, as some of the claims of the claimant-contractor had become time barred. In so far as the mis-conduct of proceedings is concrned it is apparent from his statement that the arbitrator gave full and adequate opportunity to the department for the conduct of the case as also for the production of their evidence. Shri I. D. Sharma also stated that the point of limitation had also been raised before the arbitrator. In so far as any ther misconduct on the part of the arbitrator or the misconduct in the proceedings are concerned there is nothing brought out in his statement. Shri R. K. Punshi, who conducted the case as a counsel on behalf of the department before the arbitrator has figured as R.W. 3, He stated that he had raised an objection before the arbitrator that the claim of the Petitioner was time barred and that all the objections raised were after thought. This was the entire evidence in examination-in-chief. In cross-examination he has admitted that during the course of arbitration proceedings issues were framed and proper opportunity had been afforded to the parties to adduce the evidence. It is also admitted that there was no issue on the point of limitation because the issues had been framed before he was engaged to conduct the case on behalf of the department. According to him he took up this point of limitation as soon as he appeared but no issue was framed. But this statement of the witness does not appear to be correct. If it were so, he should have pressed for an issue. As a lawyer it was his duty to see that his objection went down on the record, but there is no such thing on the arbitration file to indicate that he raised any such point. It was also incumbent upon the objector to have filed an application raising this additional objection so that an issue could be claimed on the point. There is no such application to warrant the truthfulness of the statement of the witness. He has stated that the arbitrator told that he would look into the matter. In fact, it was not the question of looking into the matter unless some material in support of that particular point had been placed on the record. It is also admitted by the witness that the arbitrator after the conclusion of the case heard oral arguments as also directed the parties to give written arguments. It is admitted by him that no arguments were addressed on the point of limitation before the arbitrator. However, in the second breath he has stated that at the time of oral arguments he had pressed the point of limitation. If he had put any written arguments, as admitted by him, why he did not put down specifically the point of limitation if it were a fact that he had taken up this objection before the arbitrator and had also orally argued the same. Therefore, it is unbelieveable that this point of limitation should have escaped his notice while submitting the written arguments. Hence in the face of this evidene of the objector himself, I do not feel it necessary to advert to the statement of the claimant''s witness. The objector has not been able to establish that the arbitrator misconducted himself or the proceedings and the issue remains unproved because the onus was heavily on the objector.

The result, therefore, is that the objections are frivolous and are hereby dismissed, the ward is made a rule of the Court and a decree in terms thereof is passed. The claimant is also held entitled to costs, which are assessed at Rs. 200/-.