Union of India vs Pratap Chandra Biswas

S.K. Dutta, J.—This appeal is directed against the judgment of the Subordinate Judge, Lower Assam Districts at Gauhati passed on an award. The facts leading to the impugned judgment may be briefly stated as follows. On the 10th January, 1945, the respondent Pratap Chandra Biswas entered into a contract with the Union of India represented by the Executive Engineer of the Bengal and Assam Railway which was later merged into the North Eastern Railway. The contract was for the supply of line ballast and concrete shingles at the Dittocherra stone quarry in the North Cachar Hills. During this period the railway line between Lumding and Badarpur, commonly known as the Hill Section, fell in an area declared to be "prohibited" for defence purpose. The case of the respondent is that the opposite party undertook to give him facilities for the transport of his labourers through the prohibited area. On this assurance he brought a large number of labourers from Bihar and other places and asked for transport facilities for, taking them for their work at Dittockcherra. But the railway authorities failed to provide the same. Consequently, the respondent had to keep his labourers at Gauhati and Lumding at a considerable expense and finally to send them away.

After some time, when the ban on the movement in the prohibited area was partially lifted the respondent could take some of his labourers to the site of his work, but the Executive Engineer terminated the contract on the 24th May, 1945 without any legal justification. The respondent, therefore, claimed a sum of Rs. 54364/- as compensation for alleged breach of contract on the part of the Union of India. The agreement between the parties contained an arbitration clause and the claim of the respondent was referred to arbitration in conformity with the said clause. Shri I.L. Shome was the sole arbitrator who gave an award and this was filed in the Haflong Court. The matter came up to this Court on appeal and it was found that the Haflong Court had no jurisdiction in the matter and the award was ordered to be filed in the proper court. But when the respondent requested the Arbitrator Shri I.L. Shome to do the needful, he refused to take any further steps in the matter on the ground that he considered himself functus officio and was unwilling to accept re-appointment. So the respondent appointed a fresh arbitrator. The Union of India did not appoint any arbitrator. The second arbitrator after notice to both the parties, gave his award and found the petitioner entitled to Rs. 26,548/10/-. On the filing of the award a case was'' registered on 9-2-52 and notices were issued for filing objections. The Union of India filed an objection on the 29th April 1952 and a supplementary objection on the nth July, 1952. The learned Subordinate Judge, held that the objections were out of time. He, however suo motu went into the question whether the reference was legal and gave a finding in favour of the respondent. Hence this appeal.

It is not disputed that the objections were filed out of time. Therefore the first point raised is whether the appeal is at all maintainable. Mr. Dam, appearing on behalf of the respondent submits that Section 39 of the Arbitration Act has made specific provisions for appeal against certain orders of the Court passed under express provisions of the Arbitration Act. So, according to Mr. Dam, an appeal will lie under this section against an order refusing to set aside an award provided the refusal is made on an application submitted u/s 33 of the Act. In this case the objections filed being out of time, there can be no refusal to set aside the award within the meaning of section 39(1) (vi) of the Arbitration Act. Consequently no appeal can lie.

The learned Advocate General submits that the appeal is maintainable inasmuch as there was no valid reference to arbitration for the second time and consequently the award passed was a nullity. In such a case the validity of the award can be challenged in any appropriate proceedings. In this connection he relies on the decision of the Privy Council in AIR 1946 72 (Privy Council) and cites several cases of different High Courts in which this decision has been followed. But all these decisions are in connection with appeals from decrees made in terms of awards which were alleged to have been made on invalid references. Thus these decisions are irrelevant for our purpose as in the present case we have an appeal not from any decree but obviously u/s 39 of the Arbitration Act against an order refusing to set aside an award. Section 39(1) of the Arbitration Act reads as follows:

An appeal shall lie from the following orders passed under this Act (and from no others) to the court authorised by law to hear appeals from original decrees of the court passing the order: --

An order:

(1) Superseding an arbitration;

(2) On an award stated in the form of a special case;

(3) Modifying or correcting an award;

(4) Filing or refusing to file an arbitration agreement;

(5) Staying or refusing to stay legal proceedings where there is an arbitration agreement;

(6) Setting aside or refusing to set aside an award;.

Provided that the provisions of this section shall not apply to any order passed by a Small Cause Court.

So the question arises whether the appeal is maintainable under the above section. There is however nothing in the above section or in any other provision of the Arbitration Act to show that the Court can refuse to set aside an award only on an application made by a party. On the other hand, Section 17 provides that the Court will proceed to pronounce judgment according to an award if it sees no cause to remit the award or any of the matters referred to arbitration for reconsideration or to set aside the award. The Section further provides that the Court can make the award only after the time for making an application to set aside the award has expired, or such application having been made, after refusing it. From a bare reading of this section it appears that the Court can suo motu set aside an award. As held by a Division Bench of the Patna High Court in Deep Narain Singh and Others Vs. Mt. Dhaneshwari and Others, , if the entire scheme of the Arbitration Act is considered, it is apparent that the Court has an inherent jurisdiction and power to set aside an award if it is vitiated by any illegality, including any illegality arising out of the invalidity of the reference independent of any objection filed by the affected parties to the award. The mere fact that an objection is not filed by any of the parties to the award does not altogether absolve the court from its responsibility of deciding whether there was a competent reference and whether the award was a valid award on the face of it. These are matters which really go to the root of the award itself and irrespective of any objection by the parties, these matters have to be decided by the court before a decree can be passed on the basis of the) award. Deo Narain Singh and Others Vs. Siabar Singh and Others, . Article 158 of the Limitation Act fixes a time limit of a petition for setting aside an award. But there can be no time limit for the Court to act suo motu. Mr. Dam ultimately has to concede that the Court can act suo motu and refuse to set aside an award. But the question is whether in the present case the learned Subordinate Judge has acted thus. In his judgment the learned Subordinate Judge says as follows: --

Though the objections of the 1st party are out of time the Court can suo motu see if the dispute was legally referred to arbitration and if the arbitrator was competent to make the award and whether arbitrator misconducted himself and whether the award is void ab initio or vitiated by fraud.

Thus it is obvious that the objection that the second award was without jurisdiction was taken before the learned Subordinate Judge who went into the question of the legality of the reference and refused to $et aside the award, and hence an appeal u/s 39 of the Arbitration Act is maintainable.

The next question is how far the refusal to set aside the award is justified. There is no doubt that the first arbitrator Shri Shome made an award. Mr. Dam contends that an award is not "made" till it is filed and as the award made by the first arbitrator could not be filed, it was not "made" within the meaning of Section 14 of the Arbitration Act. According to Mr. Dam, therefore, the first award which was not filed, is a nullity and does not exist in the eye of law. There appears to be no force in this contention. Section 14 of the Arbitration Act reads as follows:

(1) Where the arbitrators or umpire have made their award, they shall sign it, and shall give notice in writing to the parties of the making and signing thereof and of the amount of fees and charges payable in respect of the arbitration and award.

(2) The arbitrators or umpire shall, at the request of any party to the arbitration agreement or any person claiming under such party or if so directed by the Court, and upon payment of the fees and charges due in respect of the arbitration and award and of the costs and charges of filing the award, cause the award or a signed copy of it together with any depositions and documents which may have been taken and proved before them to be filed in Court, and the Court shall thereupon give notice to the parties of the filing of the award.

(3) Where the arbitrators or umpire state a special case under clause (b) of section 13, the Court, after giving notice to the parties and hearing them shall pronounce its opinion thereon and such opinion Shall be added to and shall form part of the award.

Having regard to the language of this Section there can he no doubt that an award is "made" when it is authenticated by the person who makes it. "Made" thus means that the mind of the arbitrator has been declared and filing is only a ministerial act. Thus if time is fixed for delivery of the award, it is not necessary for the validity of such award that it should actually reach the hands of the court within such period. Asad-ul-Lah v. Muhammad Nur. ILR 27 All 459.

It is true that unless an award is filed and judgment is passed in terms of the award, it cannot be enforced. But failure to file an award does not make the award a nullity. After an award is made, it exists unless it is set aside by the competent authority in accordance with law. In the present case the award made by Shri Shome has not been so set aside and it continues to exist in the eye of law. Hence a second reference on the same dispute was incompetent and the award made on such a reference must be set aside.

Mr. Dam contends that as the arbitrator Mr. Shome failed to act by not making an attempt to file the award in court, the reference to him came to an end and there was no bar to have a second reference to another arbitrator in accordance with the provisions of the Arbitration Clause in the agreement. Section 14 of the Arbitration Act gives ample power to any of the parties to the arbitration agreement to apply to the court for a direction to the arbitrator to file the award. In the present case no attempt was ever made by the respondent to get directions from the court to the arbitrator to file the award.

Reliance is then placed by Mr. Dam on section 8(1) (b) of the Arbitration Act which provides that if any appointed arbitrator or umpire neglects or refuses to act, or is incapable of acting, or dies and the arbitration agreement does not show that it was intended that the vacancy should not be supplied and the parties or the arbitrators, as the case may be, do not supply the vacancy, any party may serve the other parties or the arbitrators as the case may be with a written notice to concur in the appointment or appointments or in supplying the vacancy. But this clause is attracted only if the arbitrator neglects or refuses to act. Mr. Shome had already given his award and thus it cannot be said that his failure to file the award amounts to neglect or refusal on his part to act.

Lastly the learned Advocate-General submits that the cause of action arose on the 24th May, 1945 i.e. the date on which the contract was terminated and the second reference was made in 1951 and thus it was long barred by limitation. u/s 37 of the Arbitration Act the limitation runs from the date on which the cause of action will arise in such a matter notwithstanding any clause in the arbitration agreement that it shall not accrue until an award is made. The parties thus have either to refer their dispute to arbitration or prefer their claim in Court within the period of limitation prescribed for the claim, which in the present case is three years under Article 115 of the Limitation Act. This contention appears to be correct.

In any view of the matter, therefore this appeal must succeed. The judgment of the Subordinate Judge is set aside. There will, however, be no order as to cost.