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M.H. Tejani Vs. Kulsumbai M. Jetha - Court Judgment

LegalCrystal Citation
SubjectArbitration
CourtMumbai High Court
Decided On
Case NumberA.F.O.D. No. 27 of 1964
Judge
Reported inAIR1967Bom300; (1966)68BOMLR809
ActsArbitration Act, 1940 - Sections 2, 5, 12(2), 19, 25 and 39(1)
AppellantM.H. Tejani
RespondentKulsumbai M. Jetha
Appellant AdvocateM.P. Amin and ;A.H. Tejani, Advs.
Respondent AdvocateM.V. Paranjpe, Adv. for ;A.G. Noorani, Adv.
Excerpt:
it was ruled that an order by the court, according to which the arbitration agreement ceased to have effect, with respect to the difference referred was in law an order that superseded the arbitration and was appealable under section 39 (1)(i) of the arbitration act, 1940;it was ruled that there is no provision in the arbitration act, 1940 that required a reference to an arbitrator in writing and in the absence of it cannot be said that there was no appointment of the arbitrators - therefore, there was no question of granting leave to revoke their authority - - after both these efforts for mediation had failed, the petitioner had requested the respondent to execute a formal agreement of reference to arbitration so that the arbitration could proceed, but the respondent avoided doing so.....(1) the appellant-original respondent and the respondent-original petitioner agreed by an indenture of the 15th of july 1954 to carry on in partnership the business of commission agents in machinery, plants and other articles. that partnership was for a period of five years. the partnership was dissolved by the respondent by a notice of the 7th of june 1959 with effect from the 14th of july 1959. clause 13 of the partnership agreement provided for arbitration of the disputes between the parties. by a letter dated the 22nd of january 1960 the respondent appointed mr, b. j. kapadia as her arbitrator. on the 16th of february 1960 the appellant wrote to the respondent saying that mr. m. j. gordhandas was appointed as his arbitrator. after these arbitrators were appointed, nothing seems to.....
Judgment:

(1) The appellant-original respondent and the respondent-original petitioner agreed by an indenture of the 15th of July 1954 to carry on in partnership the business of commission agents in machinery, plants and other articles. That partnership was for a period of five years. The partnership was dissolved by the respondent by a notice of the 7th of June 1959 with effect from the 14th of July 1959. clause 13 of the partnership agreement provided for arbitration of the disputes between the parties. By a letter dated the 22nd of january 1960 the respondent appointed Mr, B. J. Kapadia as her arbitrator. On the 16th of February 1960 the appellant wrote to the respondent saying that Mr. M. J. Gordhandas was appointed as his arbitrator. After these arbitrators were appointed, nothing seems to have happened with reference to the arbitration proceedings till the 25th of July 1963, on which date the respondent filed the petition in the Bombay City Civil Court praying, inter alia (a) that the arbitration between the appellant and the respondent before Mr. B.J. Kapadia and Mr. M. J. Gordhandas should be declared to have become infructuous and to have come to an end; (b) that the said arbitrators be removed; (c) that in the alternative, the authority of the arbitrators to continue or proceed with the reference should be revoked and/or that the Court should grant leave to the respondent to revoke that authority; and (d) for an order that the said arbitration had ceased to have effect with respect to the differences and disputes between the appellant and the respondent arising out of and/or in relation to the said partnership. Alternatively, the petition also prayed for the relief that the differences and disputes between the parties arising out of and/or in relation to the said partnership be referred to the arbitration of an arbitrator to be appointed by the Court. This petition filed by the respondent was contested by the appellant on various grounds. The learned judge in substance allowed the petition and made an order in terms of prayers (a), (c) and (d) of the petition. As pointed out, prayer (a) asked for a declaration that the arbitration had become infructuous and had come to an end. Clause (c) prayed that the Court should revoke the authority of the arbitrators to continue or proceed with reference and/or give leave to the respondent to revoke that authority. Clause (d) prayed for an order that the arbitration agreement of the 15th of July 1954 had ceased o have effect with respect to the differences and disputes arising out of and /or in relation to the said partnership. The present appeal is by the original respondent challenging that order of the learned Judge of the City Civil Court.

(2) In the petition, the respondent (hereinafter referred to as the petitioner) stated that her father-in-law Hashambhoy Jetha had intervened in the dispute and had sought to settle the matter, as the appellant (hereinafter referred to as the respondent) was the brother-in-law of the petitioner's husband. It was stated that the petitioner's father-in-law has assured the petitioner that the matter would be settled and so the arbitration was not necessary. These efforts of the father-in-law of the petitioner, however, did not succeed. According to the petitioner, her brother-in-law. Akbar Jetha mediated but it was of no avail. After both these efforts for mediation had failed, the petitioner had requested the respondent to execute a formal agreement of reference to arbitration so that the arbitration could proceed, but the respondent avoided doing so on one pretext or the other. Reference was made to a letter of 18th February 1963 written by the Advocate of the petitioner to the respondent, in which it was stated as follows:-

'Even though my client appointed Shri. B. J. Kapadia as her Arbitrator and you appointed Shri. M. J. Gordhandas as your arbitrator, it appears that the arbitrators have not proceeded with the matter as the agreement required to be presented to the arbitrators is not complied with. Your advocate had promised to send me draft agreement for approval but I am without it.'

The letter requested the respondent to send the draft agreement to proceed with the arbitration and stated that Mr. B. J. Kapadia was ready and willing to act as the petitioner's advocate and to proceed with the same. The respondent's reply to this letter, which was addressed to the petitioner's advocate stated;-

'...........The matter is clearly barred by limitation since the partnership between your client and myself has been dissolved on 14th July 1959 as per you client's letter dated 7th July 1959.'

This reply further stated:-

'Since you or your client did not reply to my advocate's letter dated 16th February 1960 there was no occasion for the arbitrators to proceed. On a reference to my advocate I find that no promise for sending the draft agreement for approval as alleged by you has been ever made by her.

With reference to your letter's last para and in view of the aforesaid circumstances of the case, the question of proceeding with the arbitration in this matter does not arise at all.' Thus, on the ground that the efforts for mediation by the petitioner's father-in-law and brother-in-law had failed and also on the ground that the respondent had deliberately avoided execution of the formal agreement of arbitration and therefore arbitration had been rendered impossible, the petitioner filed the present petition for the reliefs as stated above. In the petition it was stated that the main object of the arbitration- the speedy disposal of disputes between the parties- having been defeated, because of the obstructionist tactics adopted by the respondent,. it was necessary that the agreement of arbitration between the parties should cease to have effect with respect to the differences between the parties. The correspondence consisting of the petitioner's Adovcate's letter of the 18th February 1963 and the respondent's reply thereto and been annexed to the petition.

(3) The respondent filed an affidavit in reply to this petition. The respondent denied that the father-in-law of the petitioner who was also the respondent's father-in-law dispute as alleged by the petitioner. He denied that any assurance was given by the father-in-law of the petitioner to the effect that the matter would be settled and as such no arbitration was necessary. It was pointed out that, in fact, some differences and disputes, relating to the business of M/s Hashambhoy Jetha between the petitioner's husband Mahomedalli H. Jetha on the one part and the petitioner's father-in-law Hashambhoy Jetha and his two sons on the other part, had already been referred to arbitration and it was therefore very unlikely that Hashambhoy Jetha or Akbar H. Jetha could ever have intervened to settle the disputes between the petitioner and the respondent. It was also denied that the petitioner had ever requested the respondent to execute a formal agreement of reference to arbitration and that the respondent had avoided doing so on any pretext whatsoever. The contention raised in the reply was that the petitioner being the promoter of the arbitration proceedings, had failed to take any steps for proceeding with the arbitration and had thus in effect abandoned the arbitration and that is why the arbitration proceedings has not commenced for so long. In substance, the contention was that the petitioner had not explained the gross delay on her part in implementing and proceeding with the arbitration promoted by her. This, it was stated, amounted to an abandonment of the proposed reference to arbitration. It was on this ground that a plea of 'limitation' was set up and it was contended that, for that reason also, the petition should be dismissed.

(4) The learned Judge, in granting the reliefs as prayed for in clauses (a), (c) and (d), principally considered the effect of sub-s (5) of S. 37 of the Arbitration Act, which provides for the exclusion of the period between the commencement of the arbitration and the date on which the Court had ordered that the award be set aside or that the arbitration agreement shall cease to have effect with respect to the difference referred. The period of limitation under Art. 106 of the Indian Limitation Act, 1908, for a suit for an account and a share of the profits of a dissolved partnership is three years and the time from which the period beings to run is the date of the dissolution. IN this case the partnership dissolved with effect from the 14th of July 1959 and, if Art, 106 applied, the period of limitation for filing a regular civil suit had no doubt come to an end. Under sub-s (5) of S. 37 of the Arbitration Act only an order that an award be set aside or an order that the arbitration agreement shall cease to have effect with respect to the difference referred, could enable the petitioner to claim exclusion of the period as provided therein. The order of the learned Judge shows that the fact that the suit was otherwise barred under the Indian Limitation Act considerably weighed with him in making the order as prayed for in clauses (a), (c) and (d). There is no discussion in the judgment on the merits of the application as to whether a case had been made out by the petitioner for leave to revoke the appointment of arbitrators and for an order that the arbitration agreement shall cease to have effect. Mr. Amin's principal objection to the order of he learned Judge, therefore, was that he ignored the main requirements of the Arbitration Act before making the order that the appointments of the arbitrators should be allowed to be revoked and that the arbitration agreement should cease to have effect. Before, however, I deal with the contentions made by Mr. Amin, it would be necessary to consider a preliminary objection raised by Mr. Paranjape, learned advocate for the petitioner, to the maintainability of the appeal itself.

(5) Mr. Paranjape contended that an appeal against an order under the Arbitration Act can be maintainable only under S. 39 of the Act. To the extent relevant S. 39 is in the following terms:- 39 (1) '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 (i) superseding an arbitration.' Mr. Paranjape contends that the orders against which an appeal can lie are provided for in S. 39(1) and the section expressly provides that no other order under the Act shall be appealable. Mr. Paranjape says that the order made by the learned Judge is not an order superseding an arbitration. nor can it be any of the other orders referred to in S. 39(1). In his submission, an order superseding an arbitration under this Act is made only under Ss. 19 and 25 of the Act. Since this is not an order either under S. 19 or S. 25 of the Act. Mr. Paranjape says that the order is not an order superseding an arbitration and is, therefore, not appealable. It is true that the expressions 'superseding and arbitration' or 'Supersede the reference' have been referred to only in Ss. 19 and 25 of the Act. Mr. Paranjape, therefore, says that since no other section of the Act refers to an order superseding a reference or superseding an arbitration, an order under any of the other section, is not subject to an appeal under S. 39. In order to appreciate this argument, it would be necessary to consider the scheme of the Arbitration Act, which makes provision for different kinds of roders in respect of arbitration proceedings. Principally, the Court can make orders in arbitration proceedings in four categories; (a) The Court can make an order granting leave to revoke the authority of an appointed arbitrator or umpire. (b) The Court can make an order to remove an arbitrator or umpire. (c) It can also order that under certain circumstances the arbitration agreement shall cease to have effect. (d) Lastly, the Court has power to supersede an arbitration. Sections 5, 6(2) and sub-S. (2) of S. 12 refer to the power of the Court to grant leave to revoke the authority of an appointed arbitrator or umpire. Sections 11 and 12 speak of the power of the Court to remove an arbitrator. Clause (b) of sub-S. (2) of S. 12 and S. 19. refer to the power of the Court to make an order that the arbitration agreement shall cease to have effect and Sections 19 and 25 speak of an order superseding an arbitration. Under section 5 the authority of an appointed arbitration or umpire shall not be revocable except with the leave of the Court unless a contrary intention is expressed in the arbitration agreement. sub-section (2) of Section 6 provides that the authority of an arbitrator shall not be revoked by the death of any party by whom he was appointed. Clause (a) and (b) of sub-S. (2) of Section 12 give a two-fold power to the Court to pass consequential orders when it has granted leave to revoke the authority of an arbitrator. The Court can either appoint a person to act as sole arbitrator in the place of the person or persons who have been displaced because of the leave granted by the Court to revoke the authority of he original arbitrator; or the court can order that the arbitration agreement shall cease to have effect with respect to the difference referred. When the Court makes the former order, namely, that a person is appointed to act as sole arbitrator in place of the person or persons displaced, the arbitration agreement with respect to the differences which were previously refer to the arbitrator or arbitrators subsists but only the arbitrator or arbitrators appointed under the agreement lose their authority by revocation. On the other hand, when the Court passes an order that the arbitration agreement shall cease to have effect with respect to the difference referred, the arbitration agreement itself ceases to have effect with respect to that difference, and in such an eventuality there is no question of the arbitration agreement subsisting with respect to the differences which had been referred previously to the arbitrator or arbitrators. In the case of removal of arbitrators. Section 11 provides for the different grounds. on which such a removal can be ordered. Sub-section (1) of Section 12 provides for the power of the Court, where one or more arbitrators are removed to appoint persons to fill the vacancies created by the removal of the previous arbitrators. In the case of such removal. the arbitration agreement does not come to an end with respect to the differences referred but subsists and the only consequence is that in place and stead of the arbitrators previously appointed under the agreement of arbitration the Court appoints persons to fill the vacancies. In the case of the power of the court to order that the arbitration agreement shall cease to have effect, I have already referred to sub-s (2) of Section 12, An order that the arbitration agreement shall cease to have effect with respect to the differences referred is one of the consequences of the leave granted by the Court to revoke the authority of the arbitrator. In such a case there is no question of the arbitration agreement subsisting with respect to those differences. In other words, the arbitration agreement is at an end for those differences and nothing survives so far as the reference of that dispute to arbitration is concerned. It is significant that in Section 19 also the language employed by the Legislature is that the Court may by order supersede the reference where an award has become void under sub-S (3) of Section 16. The consequence of such an order only is that the arbitration agreement shall cease to have effect with respect to the difference referred. Prima facie therefore, it would appear that an order superseding a reference means an order that the arbitration agreement shall cease to have effect with respect to the difference referred. Section 25 finds its place in chapter IV which deals with arbitration in suits. Section 25 makes the provisions of the other Chapters applicable to arbitrations in suits so far as they can be made applicable. This is subject to the proviso that the Court has been given a power which can be used in two ways. The proviso says that instead of filing up the vacancies or making the appointments in any of the circumstances mentioned in Ss. 8, 10, 11 and 12, the Court may make an order superseding the arbitration. S. 8 provides for power of Court to appoint arbitrator or umpire Section 9 provides for power to party to appoint new arbitrator or, in certain cases, a sole arbitrator. section 11 as 1 have already pointed out, provides for power to remove an arbitrator or umpire in certain circumstances and S. 12 provides for consequential powers when an arbitrator is removed or when leave is granted to revoke the authority for appointing an arbitrator . In such cases the Court can, in view of the provision of Section 25, make an order superseding the arbitration and it can proceed with the suit. In a case where the Court decided to proceed with the suit after making an order superseding the arbitration, there is no question of the arbitration agreement subsisting with respect to the difference referred. In such cases there is no question of making a fresh appointment of an arbitrator. For the purpose of that dispute which had been referred under the agreement of arbitration to an arbitrator there is no agreement of arbitration. From these provisions it is clear that two consequences can follow on orders being made under one or the other of these sections. One are removed or leave is granted to revoke their authority and the Court makes an order appointing a new arbitrator . The other consequence is that the court can grant relief to revoke the authority of an arbitrator, but instead of making an appointment of an arbitrator in place of the arbitrator previously appointed, the court may order that the arbitration agreement shall cease to have effect. As I have already pointed out even when an order under Section 19 is made superseding an arbitration, the consequence stated in the section itself is that the Court has top make an order that the arbitration agreement shall cease to have effect. The result is that in some cases the Court is enabled to keep the arbitration agreement in subsistence by appointing arbitrators in place of the previously appointed arbitrators, and in some circumstances the Court can make an order either granting leave to revoke the authority of an arbitrator or pass an order superseding an arbitration. In the latter cases, the consequence is one and the same, namely, that the arbitration agreement shall cease to have any effect. In such cases, the arbitration agreement with subsist and there is no question of any arbitrator or arbitrators being appointed in place of the previously appointed arbitrators. From this scheme it is clear that although the language employed in Section 19 and 25 is not identical with the language employed in sub-S (2) of Section 12, in substance the power contained in the two sections is identical, namely, the power to order that there will be no arbitration with respect to the difference referred and that the arbitration agreement shall cease to have effect Mr. Paranjape says that the expression 'supersede the reference' or 'superseding the arbitration' have been employed only in Sections 19 and 25 and inasmuch as that expression is not used in sub-S (2) of Section 12 a difference must be made between an order revoking the authority of an arbitrator and an order superseding an arbitration. His contention is that the settled rule of construction of statutes is that when the Legislature employees different words in different parts of a statute those words must be accordingly construed; and if that is the position, it is not possible to equate an order granting leave to revoke the authority of an arbitrator with an order superseding an arbitration. The argument in substance is that an order superseding an agreement can be made only under Sections 19 and 25 and under no other section. It is not possible to accept it because looking at the scheme of the Act, the object of the Legislature was to provide for only two kinds of cases. One was when the arbitrators were removed or leave was granted to revoke their authority, but the court had also the power to appoint other arbitrator or arbitrators in place of the arbitrator or arbitrators previously appointed. The other case was when leave is granted to revoke the authority of an appointed arbitrator, but the Court has the power to order that the arbitration agreement shall cease to have effect or to order that the arbitration agreement is superseded. Even in S. 19, which expressly refers to superseding an agreement, the Legislature has in terms mentioned the consequence, and that consequence is an order of the Court that the arbitration agreement shall cease to have effect. Therefore, even though the language employed in Ss. 19 and 25 may not be identical, the effect is identical. That effect is that there is no arbitration agreement in subsistence with respect to the difference referred and there is not question of an arbitration taking place by the appointment of a new arbitrator or arbitrators in place and stead of the arbitrator or arbitrators previously appointed. In former case, the arbitration agreement is in subsistence, the old appointed arbitrators are either removed or leave is granted to revoke their authority, but their places are taken by the arbitrators appointed by the Court. In such a case it would not be possible to say that it is an order superseding an arbitration, because the arbitration agreement is still in subsistence with the only difference that , instead of the appointed arbitrators, new arbitrators take their place. I am, therefore, of the view that though Sections 19 and 25 are the only two sections which employ the expression 'superseding an arbitration', the effect of such supersession is the same as when the Court says that the arbitration agreement shall cease to have any effect. It would be interesting to note that the Concise Oxford Dictionary gives the following meanings to the word 'Supersede:' Set aside, cease to employ, adopt or appoint another person or thing in place of, (of person or thing appointed or adopted .take the place of, oust, supplant: 'Supersede' can, therefore, have the meaning of setting aside or ousting. It can have the alternative meaning of supplanting ot taking the place of something previously existing. When the Court orders that the arbitration agreement shall cease to have effect, in effect it sets aside the arbitration agreement with respect to the difference referred. When the Court orders that the arbitration agreement is superseded under Section 19, the Court in terms makes an order that the arbitration agreement shall cease to have effect. There is no different between such an order and an order setting aside an arbitration agreement of ousting it, so far as the differences referred are concerned. I am therefore unable to accept Mr. Paranjape's contention that superseding an arbitration is something different from the order that the arbitration agreement shall cease to have effect. Even such an order superseding an arbitration can result in the only consequence mentioned in Section 19 that the Court shall order that the arbitration agreement shall cease to have effect.

(6) Mr. Paranjape invited my attention to Bhaiyalal v. Sawai Singhai Pannalal . The learned Judge in that case held that the order allowing leave to revoke the authority of the appointed arbitrator is not an order superseding the arbitration such as can be appealed against. The only question which arose in that case was whether an order granting leave to revoke the authority of an appointed arbitrator was an appealable order under Section 39. The learned Judge held that such an order was not appealable. With respect, I agree with that conclusion because a mere order that leave is granted to revoke the authority of an appointed arbitrator is certainly not appealable. As already pointed out, an order granting leave to revoke the authority of an appointed arbitrator can result in one or the other of the two consequential orders referred to in sub-s. (2) of S. 12 of the Act. ON granting leave to revoke the authority of an appointed another arbitrator, the Court may either appoint another arbitrator under Clause (a) of sub-s (2) of S. 12 or the Court may order that the arbitration agreement shall cease to have effect with respect to the difference referred. When the Court makes the former order, as already pointed out, the arbitration agreement is in subsistence but an arbitrator appointed by the court takes the place of the previously appointed arbitrator and such an order cannot, therefore, be said to be an order superseding an arbitration. But if, on the other hand, the Court makes an order that the arbitration agreement shall cease to have effect with respect to the difference referred, the arbitration agreement not being in subsistence with respect to the difference referred, the agreement, so to say, comes to an end so far as those differences are concerned and it virtually amounts to supersession of the arbitration agreement. Therefore, unless an order that the arbitration agreement shall cease to have effect with respect to the difference referred is made by the court in consequence of leave to revoke the authority of an appointed arbitrator, a mere order granting leave to revoke the authority of an appointed arbitrator is not appealable. In the view which the learned Judge took in am unable to read anything more than what the learned Judge expressly stated in his judgment namely that an order granting leave to revoke the authority of an appointed arbitrator is not appealable. I see no reason to differ from that view. But in the present case it is not only that order which the learned Judge has made. The learned Judge has also made the consequential order that on account of the leave granted to revoke the authority of appointed arbitrators the arbitration agreement shall cease to have effect with respect to the difference referred. This is the same thing as superseding an agreement. Mr. Paranjape also invited my attention to Firm Devi Das Culzari Lal v. Firm Mitha Shah Ramdittamal AIR 1943 Pesh 8. In that case the trail Court had come to the conclusion that there was no valid reference to arbitration, as all the interested parties had not signed the agreement to refer. The question which fell for consideration was whether such an order was appealable. The learned Judges held that this was not an order superseding an arbitration agreement. I do not see how this case can be of any assistance to Mr. Paranjape's contention. when there was no valid agreement to refer, as all the interested parties had not signed the agreement to refer, there was in fact and in effect no arbitration at all. If there was no arbitration, there was no question of superseding it. The Court's view was that inasmuch as there was a fatal defect in the agreement to refer, namely, that it had not been singed by all the interested parties, there was never any reference to arbitration at all. With respect, the learned Judges therefore, rightly concluded, that there was no question of superseding an arbitration which never validly came into existence. Under these circumstances, the preliminary objection of Mr. Paranjape that the appeal is not competent because there is no order superseding the agreement cannot be upheld. In my view, an order by the Court that the arbitration agreement shall ceases to have effect with respect to the difference referred is in law an order superseding the arbitration and is, therefore, appealable under S. 39 of the Act.

(7) Coming back to the merits of the appeal, Mr. Amin, learned Counsel for the appellant, principally raised three contentions. The first contention was that in the present case there was no reference to arbitration at all and there is, therefore, no question of revoking the authority of the arbitrators who, Mr. Amin says, were never appointed. The second contention is that even assuming that there was a reference and the arbitrators were appointed, the only provision under which leave can be granted to revoke the authority of the appointed arbitrators is S. 5 of the Act and under the power given to the Court under that sectiion, Sufficiently good reasons must be shown for granting leave to revoke the authority of the arbitrators. Mr. Amin says that in this case no reason was shown for revoking that authority and such reasons as were shown in the petition were not good reasons in law for obtaining an order for revocation. The third contention, which, in a way, is connected with the second, is that, in any case, the court should have dismissed the petition, inasmuch as the petitioner, who had originally promoted the arbitration, had ben guilty of laches and inordinate delay in prosecuting that arbitration. Mr. Amin says that it was the duty of the party promoting the arbitration to take effective and speedy steps to prosecute it, and if it si found that the petitioner was guilty of laches and inordinate delay, that alone should be sufficient for dismissing the petition. It would be necessary to consider these three contentions separately.

(8) The first contention, as I have stated is that there is no reference to arbitration. In this connecion, I would be useful to bear in mind some facts about which there is no serious dispute. The partnership was dissolved with effect from the 14th of July 1959. The petitioner first appointed Mr. B. J. Kapadia as her arbitrator on the 22nd of January 1960. The respondent appointed Mr. M.J. Gordhandas as his arbitrator on the 16th of February 1960. After the two appointments had been made in February 1960, nothing is shown to have happened for nearly 3 years. The 1st step after 3 years, which the petitioner is shown to hav taken, is the letter which her advocate wrote on the 18th of February 1963 to the respondent and since much reliance is placed on this letter and the reply to it by the respondent, it would be relevant to set out a few portion of the petitioner's advocate's letter of the 18th February 1963 states:

'Even though any client appointed shri B. J. Kapadia as her arbitrator and you appointed Shri M. J. Gordhandas as your arbitrator, it appears that the arbitrators have not proceeded with the matter as the agreement required to be presented to the arbitrators is not compliedwith. Your advocate had promised to send me the draft agreement for approval but I am without it.

You are therefore requested to let me know to whom should I send the draft agreement to proceed with the arbitration in respect of dispute between you and my client. regarding partnership affairs of Messrs. Jetha Service and Smiles Co. My client's arbitrator Shri B. J. Kapadia is ready and willing to act as her arbitrator and to proceed with the same.'

The relevant portion of the reply which the petitioner's advocate received from the respondent is as follows:

'With reference to para 2 of your letter I have to state that the matter is clearly barred by limitation since he partnership between your client and myself has been dissolved on 14th July 1959 as per you client's letter dated 7th July 1959.

Since your or your client did not reply to my advocate's letter dated 16th February 1960 there was no occasion of the arbitrators to proceed. On a reference to my advocate I find that no promise for sending the draft agreement for approval as alleged by you has been ever made by her.

With reference to your letter's last para and in view of the aforesaid circumstances of the case, the question of proceeding with the arbitration in this matter does not arise at all.'

The letter written by the petitioner's advocate on the 18th of February 1963 clearly shows that the petitioner was complaining that the arbitrators had not proceeded with the matter after their appointments because 'the agreement required to be presented to the arbitrators is not complied with'. It puts the blame on the respondent by saying that his advocate who had promised to send the draft agreement for approval had not done it. The fact that the arbitrators had not proceeded with the arbitration was not disputed in the respondent's reply. What was disputed was the statement that the respondent's advocate had promised to send the draft of the agreement. From this correspondence it is clear that nothing transpired after the two arbitrators were nominated by the respective parties. The petitioner's own grievance is that the agreement of reference to the appointed arbitrators had not been made as the draft had not been made ready. It is not necessary at this stage to find out as to who was to blame, but the fact is clear that the agreement was to be drawn up, and that not having been done a submission had never been made to the arbitrators. Mr. Amin contends that in these circumstances how can it be said that there was any reference to arbitration? The argument is that the two gentlemen, Mr. Kapadia and Mr. Gordhandas, were only mentioned by the parties but they were not appointed since no steps, in pursuance to the nomination, had at all been taken. If an appointment was not made, says, Mr. Amin, there is no question of granting leave to revoke the appointment of these arbitrators. 'Arbitration agreement' has been defined in Clause (a) of S. 2. It means a written agreement to submit present or future differences to arbitration, whether an arbitrator is named therein or not. Clause (e) of S. 2 defines a 'reference' and it means a reference to arbitration. The arbitration agreement itself may or may not name an arbitrator. The reference to the arbitrator can follow if an when differences agreed to be submitted to arbitration arise. There is no provision in he Act which requires that a reference to an arbitrator must be made in writing, although, as Mr. Amin says, that is the normal practice. It appears from the provisions of the Act that although the arbitration agreement must be in writing, the reference of the dispute or difference to the person named as an arbitrator need not necessarily be in writing. In the absence of any provision requiring a written reference to be made to the arbitrators, who are appointed either by naming them in the agreement of arbitration itself or subsequently, it is difficult to accept the argument that there was no appointment of the arbitrators at all because a written reference has not been made to the arbitrators who were appointed by the parties by their letters in the year 1960. In James Finlay & Co. v. Gurdayal Air 1924 Sind 91 a similar question had arisen and Mr. Paranjape relied on the following observations of the learned Judge:-

'Now, it is usual on differences arising that a second document called a reference is drawn up sometimes defining the disputes, oftener referring all the disputes between the parties in reference to the particular contract to named arbitrators. In Dhanpatmal v. Kishinlal. 10 S L R 1: AIR 1917 Sind 95. Mr. Crouch, A. J. C., remarked that the definition of submission in Section 4 covers both what is ordinarily termed an arbitration clause and also what is commonly called a reference. The former is a contract to refer, the latter is delegation of authority to a named arbitrator and an agreement to be bound by the award. At page 41 of Russel on Arbitration it is remarked in answer to the question what is a reference to arbitration: 'Where it appears from the terms of an agreement for the settlement of disputes that the intention of the parties was that there should be an inquiry in the nature of a judicial inquiry, and that their respective cases should be heard and a decision arrived at upon the evidence there is a reference to arbitration. . . . 'Submission' comprises both what is known as the arbitration clause and what is known as the reference.'

The learned Judge held that reference to arbitration was complete and it was unnecessary to follow it up with a formal reference to the arbitrators named. In U. Ba Thet v. U. Ba Thaung AIR 1933 Rang 406 the same view has been taken. I cannot accept the contention that merely because a formal reference in writing to the arbitrators, who were named, was not made, the arbitrators were not appointed and there was therefore no question of granting leave to revoke their authority under S. 5 of the Act.

(9) The second aspect of Mr. Amin's contention is that even assuming that the two gentlemen were appointed as arbitrators, no case was made out in the petition for leave to revoke that appointment under S. 5 of the Act. Mr. Amin pointed out that the petition was filed in July 1963. The contract of partnership had been signed much prior to the dissolution of the partnership which took place on the 11th of July 1959. Even though the partnership was dissolved in July 1959, till January 1960 the petitioner did nothing in respect of arbitration agreement. For the first time, in January 1960 the petitioner and in February 1960 the respondent appointed their arbitrators. But even after the appointment of arbitrators had taken place in January and February 1960, the petitioner, once again did nothing till February 1963, i.e. for nearly three years, and it was for the first time in the letter of the 18th of February 1963 that the petitioner asked for the draft of the agreement which, according to the petitioner, had to be prepared by the advocate of the respondent, who had failed to send it to the petitioner. This was, very soon thereafter, denied by the respondent. The petition also states that, in between, the petitioner's father-in-law Hashombhoy Jetha had intervened and sought to settle the matter, as the respondent is the brother-in-law of the petitioner's husband Mahomedalli Jetha, and had assured the petitioner that the matter would be settled and so arbitration was not necessary. The efforts Hashambhoy Jetha, did not succeed. Thereafter the petitioner's brother-in-law. Akbar Jetha also tried to mediate but failed. it was after these efforts failed that the petitioner requested the respondent to execute the formal agreement to arbitration. It is curious that in the letter which was written on the 18th of February 1963 the petitioner made no reference whatsoever to these efforts by Hashambhoy Jetha and Akbar Jetha and these efforts at mediation were for the first time referred to in the petition, which was filed in July 1963. The letter refers to a supposed promise by the respondent's advocate to send a draft agreement but no reference is made to it in the petition. No material was brought before the learned Judge to show what were the efforts made by Hashambhoy Jetha and Akbar Jetha for trying to bring about a settlement. No particulars as to what progress, if any, these efforts had made have been stated either in the petition or in any other way. These allegations have been denied in the reply filed by the respondent. Mr. Amin, therefore, contends that the reasons which are given by the petitioner for filing this petition as late as in Jul;y 1963, although the partnership had dissolved as far back as in July 1959, are only made up as an excuse for filing the petition after such inordinate delay. Mr. Amin's contention, therefore, is that no reasons sufficient in law were stated or proved by the petitioner before an order for granting leave to revoke the authority of the arbitrator could be made. In my view, there is considerable substance in this contention. Mr. Paranjape had not been able to point out how these reasons, assuming they were true,. could be good grounds for filing the petition as late as three years after he cause of action for the arbitration had arisen. There is no doubt that if the reason given in the petition that the father-in-law and the brother-in-law were attempting to mediate was true, it would have found place in the letter which the petitioner wrote in February 1963 to the respondent. This reason which is now stated in the petition is, in my view, clearly an afterthought. It also appears to me that the reason that the draft agreement was not signed because the respondent's advocate had failed to supply it is made up only as an attempt to explain the delay. There is no material brought on the record to show as to when this promise was made by the respondent's advocate. There is no material brought to show as to what steps the petitioner took for seeing to it that that draft agreement was supplied by the respondent's advocate, assuming that such a promise had been made by the respondent's advocate. The petition itself does not refer to any such promise. On the material which is on the record, I have no doubt that this is a belated attempt to put the blame on the respondent, the sole idea being to find an excuse for presenting the petition after a delay of nearly three years. I am of the opinion that both these reasons are not true, and assuming that they were true, they could not be good grounds in law for an order granting leave to revoke the appointment of arbitrators. When the parties enter into an agreement of arbitration, it is a contract by which they agree to refer their disputes to a domestic forum. Such a contract is ordinarily not allowed to be evaded on flimsy grounds. Section 5 of the Act which provides for the power of the Court to grant leave to revoke the authority of appointed arbitrators is as follows:-

'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.' Neither this section nor any ther section in the Arbitration Act gives the grounds on which such leave for revoking the authority of arbitrators should be granted. A section similar to S. 11, which gives the grounds on which the arbitrators can be removed, is not there in the Act. But that does not mean that under S. 5 the Court would be entitled to grant leave to revoke the authority of the arbitrators appointed for any reason whatsoever, Russel has stated the following as the Chief grounds for granting leave to revoke:- (a) Error of law, or excess or refusal of jurisdiction by arbitrator, (b) Misconduct of arbitrator, (c) Disqualification of arbitrator, (d) Exceptional cases. In this case, leave was not granted because of error of law or excess or refusal of jurisdication by arbitrators, or because the arbitrators were guilty of misconduct or because not exist, what is the exceptional reason stated in the petition on which leave could have been granted for revoking the authority of the arbitrators? In Bhuwalka Brothersw Ltd. v. Fatechand Murlidhar, : AIR1952Cal294 it is held that when granting leave to revoke the Court must be satisfied that unless leave is granted substantial miscarriage of justice will take place. The learned Judge made the following observations, with which I respectfully agree:-

'It is difficult and undesirable to attempt to define the circumstances in which the Court should exercise its discretion. To do so would be to crystallise into a rigid definition that judicial power and discretion which the Legislature has for the best of all reasons, left undetermined and unfettered. No hard and fast rule can be laid down. The discretion is to be exercised after appreciation and consideration of all the facts which are material for the purpose of enabling a Judge to exercise a judicial discretion and after application of the right principles, remembering that parties have for better or worse agreed to make the arbitrator the final Judge in their dispute.'

For reasons which I have already stated. I do not think that any exceptional reasons for grant of leave to revoke the authority of appointed arbitrators have been given at all. On the contrary, such reasons as are given appear to be no only flimsy but are made out only for making ou an excuse for a belated presentation of the petition before the Court. The order of the learned Judge also shows that what weighted with him was that if leave to revoke the authority of the arbitrators had not been granted an order that the arbitration agreement shall cease to have effect could not have been made, and if that order could not be made the petitioner would not be entitled to avail of the exclusion of the period referred to in sub-s. (5) of s. 37 of the Act. In other words, what seems to have weighed with the learned Judge is that if the petition failed, the suit of the petitioner in a Civil court would be time-barred. Such a reason is not at all sufficient for granting leave. The basic question which must always be asked and which must always be satisfactorily answered is, are any grounds, good in law, made out for granting leave? Would refusal to grant leave result in a miscarriage of justice' From the facts it does not appear that they miscarriage of justice would have occurred if leave had been refused. On the contrary, it appears that the petitioner, who had promoted the arbitration, had, by her own omission to act, done nothing to prosecute it.

(10) In this context, the third contention of Mr. Amin is also relevant. The third contention is that a party which has promoted an arbitration agreement and which does not take prompt steps to prosecute it should not be allowed to take advantage of it after inordinate delay. In support of this, reliance was placed on Vishwas v. Bhalchandra 33 Bom LR 1022 : AIR 1931 Bom 529 . In this case, after the submission paper was signed by the parties, no steps were taken to carry out the arbitration for nearly three years. It was after three years that the plaintiff made an application to have the agreement filed in Court. M. Justice Broomfield held that the agreement to refer having lapsed on account of laches on the plaintiff's part the Court had no power to make it the rule of the Court. The learned Judge referred to Coley v. V. A. Dacosta, ILR (1889) Cal 200, in which it was held that the claimant in a reference to arbitration is the person on whom, ceteris paribus, it is incumbent to promote the conduct of the proceedings; and when therefore, there is a long and unreasonable delay unexplained by any act of the other party or waiving it, the latter is prima facie entitled to decline to go on with the reference and to revoke the agreement for submission. In the Calcutta case, to which reference was made by Mr. Justice Broomfield, the delay was only of six months. The same view has been taken by this Court in Bhogilal Purshottam v. Chimanlal Amritlal 30 Bom LR 92: AIR 1928 Bom 49 and Purshottamdas v. Impex (India) Ltd., : AIR1954Bom309 . In all these cases the party, which came to Court after the delay had occurred, was the party which sought to promote the arbitration, although after undue delay. In the present, case, the petitioner, who came to Court, did not want to promote the arbitration but wanted to have it revoked by an order of the Court that it ceased to have effect. In my view, the principle underlying these cases is that when parties agree to refer their disputes to a domestic forum. the Court would not gran relief to a party which is guilty of laches and undue delay. The forum of arbitration having been accepted, it was for the party promoting it to avail of it by taking prompt steps to see that the arbitrators acted and decided the dispute which was referred to them. After having failed to see this and after the period of limitation for a civil suit has also expired, a party would not be entitled to come to Court to seek relief under the Arbitration Act. The contention made on behalf of the petitioner,. therefore, that those cases related to applications for promoting the reference would made no difference.

(11) Before disposing of this argument, I may refer to Cameron v. Cuddy (1914) AC 651, on which Mr. Paranjape strongly relied. This authority was relied upon by Mr. Paranjape in support of his argument that it is the duty of the Court to supply the defect caused by the arbitration becoming abortive for any reason. The relevant observations of Lord Shaw, on which Mr. Paranjape relied, are as follows (p. 656):-

'When an arbitration for any reason becomes abortive, it is the duty of a Court of law, in working out a contract of which such an arbitration is part of the practical machinery, to supply the defect which has occurred. It is the privilege of a Court in such circumstances and it is its duty to come to the aid of parties by removal of the impasse and the extrication of their rights. This rule is in truth founded upon the soundest principle, it is practical in its character and it furnishes, by an appeal to a Court of justice, the means of working out and of preventing the defeat of bargains between parties.'

Relying on this passage, Mr. Paranjape says that in the present case also the arbitration had become abortive and therefore the Court must assist the petitioner who had otherwise lost her remedy of filing a suit because the suit was barred by limitation. No such principle as suggested by Mr. Paranjape is possible to be deduced from this judgment of Lord Show. The observations must of necessity be read in the context of the facts with which he was concerned. The facts very clearly show that the arbitration in that case had become abortive for no fault of the party which sought relief from the Court. In fact it was observed that the arbitration had not failed on account of any fault of the appellant in that case but because the machinery for arbitration, which was duly and properly invoked by him. broke down. It was an admitted position that but for the intervention of the Court the appellant would have been required to make payment in respect of assets which, it was admitted on all hands, he had not received, because the apparatus for fixing the value of the deficiency had failed. It is under these circumstances that Lord Shaw made the observations on which Mr. Pranjape relied.

(12) Under these circumstances it must be held that the application by the petitioner for leave to revoke the authority of the arbitrators and for an order that the arbitration agreement should cease to have any effect was without substance and the learned Judge should not have granted it on the ground that the petitioner had otherwise lost her remedy of filing a suit as it had been barred by limitation. I think, the proper order which the learned Judge should have made was to dismiss the petition.

(13) I would, therefore, allow this appeal, set aside the order of the learned Judge and dismiss the petition filed by the respondent original petitioner. In view of the fact that the parties are closely related, there will be no order as to costs.

(14) Appeal allowed.


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