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A.R. Savkur Vs. Amritlal Kalidas and ors. - Court Judgment

LegalCrystal Citation
SubjectArbitration
CourtMumbai High Court
Decided On
Case NumberO.C.J. Appeal No. 70 of 1953
Judge
Reported inAIR1954Bom293; (1954)56BOMLR89; ILR1954Bom686
ActsArbitration Act, 1940 - Sections 17, 30, 32, 33 and 39; Limitation Act, 1908 - Schedule - Articles 158 and 181; Code of Civil Procedure (CPC), 1908
AppellantA.R. Savkur
RespondentAmritlal Kalidas and ors.
Appellant AdvocateMurzban J. Mistree and ;D.P. Madon, Advs.
Respondent AdvocateH.G. Advani, Adv.
Excerpt:
.....articles 158 and 181 of schedule to limitation act, 1908 - whether agreement to refer dispute to arbitration was invalid and not binding when contract was void forward contract and not ready contract for purchase of sale of shares - not open to party to assume that an award which has been filed and in respect of which notice has been served is nullity - party must go to court and get it set aside. - - 1. a very interesting question under the arbitration act arises in this appeal. the appellant having failed to pay, at the instance of the respondents the matter was referred to arbitration. it is well settled that a decree which is a nullity may be ignored and it is not necessary to have such a decree set aside. the other ground is, as in our opinion rightly pointed out by the..........expression ''otherwise invalid' is 'ejusdem generis', then the power of the court to declare an award invalid on the ground that the arbitration agreement was invalid would arise under section 33. but even so the question would still have to be decided whether under section 30 or section 33 the application that has to be made is an application to set aside an award or not. we are not now concerned with the grounds on which the court can set aside an award and whether the grounds fall under section 30 or section 33.what we are concerned with is whether the arbitration act contemplates only an application to set aside an award to which article 158 applies, or whether the arbitration act contemplates two different types of applications, one to set aside an award and the other to have a.....
Judgment:

Chagla, C.J.

1. A very interesting question under the Arbitration Act arises in this appeal. The appellant engaged the respondents to effect certain transactions on the stock exchange. The respondents are brokers and members of the Bombay Native Share and Stock Brokers' Association. In respect of certain transactions the respondents made a claim upon the appellant. The appellant having failed to pay, at the instance of the respondents the matter was referred to arbitration. The appellant challenged the right of the arbitrators to go into matters which were in dispute between him and the respondents, and his contention was that the contract being a forward contract and not a ready contract for purchase and sale of shares, the contract was void, and therefore the agreement to refer the disputes to arbitration was also invalid and not binding.

2. Notwithstanding the objection of the appellant, the arbitrators proceeded with the arbitration and made and published their award on 21st June, 1952. The award was then filed in Court and the notice of the filing of the award was served on the appellant on 6th October, 1952. The appellant then filed a petition on 9th January, 1953, for a declaration that the award dated 21st June, 1952, was null and void and was not binding on the appellant. Mr. Justice Desai held that the petition having been made more than 30 days after the notice of the filing of the award having been served on the appellant it was beyond time and therefore dismissed the petition. It is from that order that this appeal is preferred.

3. Turning to the Arbitration Act, what is relied upon is Section 33 and that section provides:

'Any party to an arbitration agreement or any person claiming under him desiring to challenge the existence or validity of an arbitration agreement or an award or to have the effect of either determined shall apply to the Court and the Court shall decide the question on affidavits:

'Provided that where the Court deems it just and expedient, it may set down the application for hearing on other evidence also, and it may pass such orders for discovery and particulars as it may do in a suit.'

The contention is that Article 158, Limitation Act deals with an application to set aside an award and the application of the appellant was not to set aside an award but for a declaration that the award was invalid under Section 33, and therefore the proper article which applied was not Article 158 but the residuary Article 181. In other words, according to the appellant the period of limitation was not 30 days, but three years. It is rather significant to note that apart from Section 33 the Arbitration Act does not provide for the making of any application to set aside an award.

The only other relevant section is Section 30 which does not deal with an application to set aside an award but which deals with the grounds on which an award can be set aside. It is couched in the negative form and it provides that 'an award shall not be set aside except on one or more of the following grounds.' Therefore, it precludes the Court from setting aside an award except on the grounds specifically mentioned in that section. In our opinion it is clear that whereas Section 30 deals, with the grounds on which an award can be set aside, Section 33 is the procedural section which lays down the procedure to be followed in making an application either for the purpose of setting aside an award or for the purpose of setting aside an arbitration agreement. It is futile to attach importance to the fact that Section 33 does not in terms refer to an application to set aside an award, taut when a party makes an application challenging an award, the result of the challenge if successful must be the setting aside of that award.

The challenge cannot stop short of asking the Court to set aside an award, nor can the Court merely give a declaration to the effect that the award is invalid and not proceed to set aside the award. In this connection it is very material to look at Section 17. That section makes it incumbent upon the Court to pronounce judgment according to the award and it also lays down that on such a Judgment being pronounced a decree shall follow, and Section 17 indicates what are the circumstances under which it would not be incumbent upon the Court to pronounce judgment as required by Section 17. The one circumstance is where the Court sees no cause to set aside the award, and the other circumstance is that the Court must wait until the time for making an application to set aside an award has expired or such application having been made such application has been refused.

Therefore, the scheme of Section 17 is that after an award has been filed an opportunity is given to She party challenging or disputing the award to file an application to set aside the award and the application has got to be filed within the period of limitation. If no application is filed, the party in whose favour the award is made is entitled to a decree upon the award, or if the application is filed and has been dismissed on merits, then also the party in whose favour the award is made is entitled to a decree. It is only when an application to set aside an award having been made in time and the application having succeeded that the party in whose favour the award is made is not entitled to a decree in terms of the award under Section 17.

4. Now, if the contention of the appellant were sound, it would come to this that there would be two periods of limitation for two different applications, one under Section 30 and the other under Section 33. According to Mr. Mistree for the appellant, if an application to set aside an award were made under Section 30, the article in the Limitation Act which would apply is Article 158 and the period of limitation would be 30 days. If, on the other hand, the application for a declaration that the award is invalid without asking to set aside the award was made, then that application would be an application under Section 33 and the period of limitation would be three years under Article 181. But strangely enough, if that was the scheme of the Act and if the Legislature contemplated two different applications with two different periods of limitation under Section 30 and 33. Section 17 does not refer to any application under Section 33 at all.

Therefore the curious result will be that the obligation upon the Court is only to wait till the period of limitation under Article 158 has expired and then it becomes incumbent upon the Court to proceed to pass a judgment upon the award, with the consequence that although a judgment upon the award has been passed under Section 17, the period of limitation to make an application to set aside the award having passed, it would still be open to the party adversely affected by the award to make an application under Section 33 and that application he could make right up to three years. In our opinion such a contention would not only be contrary to the scheme of the Act but it would result in anomalies which the Legislature could never possibly have contemplated.

Therefore, the only proper interpretation to give to Section 17 is that it contemplates all applications to set aside an award and all applications to set aside an award filed under Section 33 and not under Section 30. Section 30 does not deal with applications to set aside an award at all. It deals with what the powers of the Court are when an application is made to set aside an award. But when we want to decide what is the right of a party to apply to set aside an award and what procedure, he should follow, then we have got to turn to Section 33.

5. Mr. Mistree has argued that if the arbitration agreement is invalid, then the award is a nullity and it is not necessary to set aside the award. Therefore, as far as Section 33 is concerned, it will be sufficient for the party merely to ask for a declaration that the award is a nullity. If that contention were to be accepted, then it would not even be necessary for a party to apply under Section 33 for a declaration that an award is a nullity. It is well settled that a decree which is a nullity may be ignored and it is not necessary to have such a decree set aside. But what the Arbitration Act contemplates is that if an award is on the file of the Court, unless steps are taken to have that award set aside a certain definite result must follow and that definite result is the result indicated by the Legislature in Section 17. Therefore, it is not open to a party to assume that an award which has been filed and in respect of which a notice has been served upon him is a nullity. He must go to Court and get it set aside, and the Legislature in Section 30 has stated the grounds on which the party can succeed in setting aside an award.

Again, it is important to turn to Section 39 which is the section giving the right of appeal. The right of appeal is given against an order setting aside or refusing to set aside an award. Therefore, if the appellant's contention were to be accepted, there would be no right of appeal from an order made by a Judge under Section 33 refusing to declare that an award was invalid or declaring an award to be invalid on the ground that the arbitration agreement which resulted in the award was itself invalid. Again, it is impossible to assume that the Legislature gave a right of appeal when an application was made to set aside an award on the grounds mentioned in Section 30, but it did not give a right of appeal if an application was made to have it declared that the award was invalid, although the consequences as far as the party in whose favour the award was made would be equally serious.

6. It is then urged that under Section 30 the only grounds on which an award can be set aside are the grounds mentioned in clauses. (a), (b) & (c), and it is stated that the expression in clause (c) 'or is otherwise invalid' is 'ejusdem generis' and it does not extend the jurisdiction of the Court to set aside an award on grounds other than those mentioned in clauses (a), (b) and (c) of Section 30. It is, therefore, pointed out that if an award is challenged on the ground that an arbitration agreement which led up to the award was invalid, that award cannot be set aside under Section 30 but can only be declared to be invalid under Section 33. For this purpose reliance is placed on a decision of the Privy Council in -- 'Chhabba Lal v. Kallu Lal .

In that case the Privy Council was considering the provisions with regard to arbitration in the second schedule to the Civil Procedure Code and It was construing para. 15 which also used the expression 'an award being otherwise invalid', and the Privy Council accepted the dissenting judgment of Mr. Justice Iqbal Ahmad who took the view that the expression must be construed 'ejusdem generis', and Sir John Beaumont delivering the judgment of the Board stated at p. 75:

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

Therefore, what is urged is that here also the appropriate proceeding contemplated is a proceeding under Section 33 by which an award is being challenged on the ground that the reference made to arbitration was not a valid reference.

Now, in the first place, there was no provision of the law in the second schedule to the Civil Procedure Code corresponding to Section 33, and Section 33 deals with all proceedings which have got to be taken when an arbitration agreement or an award is being challenged, and Section 32 bars all suits in respect of the existence, effect or validity of an arbitration agreement or award, and it also provides that no arbitration agreement or award be set aside, amended, modified, or in any way affected otherwise than as provided in this Act. Therefore, whereas the Privy Council could contemplate a suit for the purpose of a declaration that a particular award was a nullity, as far as the Arbitration Act is concerned all proceedings with regard to arbitration, arbitration agreements, and awards can only be taken as laid down in the Arbitration Act itself. The Arbitration Act now constitutes a self-contained Code with regard to the law of arbitration. That is the first ground on which the decision of the Privy Council can be distinguished. The other ground is, as in our opinion rightly pointed out by the learned Judge below, that one must look to the history of judicial decisions antecedent to the passing of the Arbitration Act (Act 10 of 1840), and a review of judicial decisions clearly shows that the High Courts of Bombay, Allahabad, Madras, Lahore, Patna, Rangoon, and the Chief Courts of Lucknow and Bind, all took the view that the expression 'otherwise invalid' in para. 15 was not to be construed 'ejusdem generis.'

The only discordant note was struck by the Calcutta High Court. It would only be right to assume that the Legislature had knowledge of the view taken by the High Courts as to the true meaning of this expression as occurring in para 15 of the second schedule to the Code. Therefore, with that knowledge, if the Legislature in enacting Section 30 used the same expression, we would be entitled to assume that the Legislature gave to that expression the connotation which had been accepted by a large volume of judicial opinion. The decision of the Privy Council came much later; it came in 1946. The position might have been different if the Legislature had the decision of the Privy Council before it.

7. But even assuming that the true interpretation of the expression 'otherwise invalid' is as contended for by the appellant and as was held by the Privy Council, we fail to see how that view helps the appellant on the question of limitation. Assuming that under Section 30 the power of the Court to set aside an award is limited to the grounds mentioned in that section and the expression ''otherwise invalid' is 'ejusdem generis', then the power of the Court to declare an award invalid on the ground that the arbitration agreement was invalid would arise under Section 33. But even so the question would still have to be decided whether under Section 30 or Section 33 the application that has to be made is an application to set aside an award or not. We are not now concerned with the grounds on which the Court can set aside an award and whether the grounds fall under Section 30 or Section 33.

What we are concerned with is whether the Arbitration Act contemplates only an application to set aside an award to which Article 158 applies, or whether the Arbitration Act contemplates two different types of applications, one to set aside an award and the other to have a declaration that the award is invalid. In our opinion, for the reasons already stated, the only application contemplated by the Arbitration Act is an application under Section 33, and whether the award is challenged on the grounds mentioned in Section 30 or on the grounds mentioned in Section 33, the application has got to be made under Section 33, it has to be decided under Section 33 and the award has got to be set aside never mind how the challenge is made to the award, and once the application has been made to set aside an award under Section 33, Section 17 comes into operation and the Court is bound to pass a judgment in terms of the award if that application to set aside the award is refused or if the application to set aside the award is not made within the time mentioned in Article 158, Limitation Act.

8. Mr. Mistree has relied upon a judgment of the Calcutta High Court in support of his contention and that indeed is the only judgment which is really directly in point. It is, therefore, unnecessary to consider other judgments which do not deal with the point we are considering. That is a judgment of Mr. Justice Sinha in -- 'Haji Ebrahim Kassim Cochinwalla v. Pannalal Johurmull ILR (1949) 1 Cal 245 (B). In that case a double-barrelled, application was made which the learned Judge had to consider. The application was partly to set aside the award and partly it was for a declaration that the award was invalid. The learned Judge held that the application to set aside the award was barred by limitation having been made beyond 30 days, but he went on to hold that the application in so far as it asked for a declaration that the award was invalid as there was no valid reference was within time and he proceeded to decide it on merits.

With very great respect to the learned Judge, he has failed to consider either Section 17 or Section 39 or the difficulties and anomalies which would result if the view which has found favour with him were to be accepted. We are sure that if the learned Judge had considered these two Sections 17 and 39 Which we have considered, he would not have-come to the conclusion which he did. With respect, therefore, we are unable to accept the view taken by the learned Judge.

9. In our opinion, therefore, the learned Judge below was right in the conclusion he came to The result is that the appeal fails and must be dismissed with costs.

Undertaking given by the respondents discharged.

Liberty to the respondents' attorneys to withdraw the sum of Rs. 500 deposited in Court.

10. Appeal dismissed.


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