Skip to content


SachIn Sahakari Gruhanirman Sanstha Maryadit Vs. Shreeram Construction Co. - Court Judgment

LegalCrystal Citation
SubjectArbitration
CourtMumbai High Court
Decided On
Case NumberO.S. Appeal No. 127 of 1978 in Arbitration Petition 30 of 1974
Judge
Reported in(1980)82BOMLR647
AppellantSachIn Sahakari Gruhanirman Sanstha Maryadit
RespondentShreeram Construction Co.
DispositionPetition dismissed
Excerpt:
arbitration act (act x of 1940), sections 16, 17, 30, 33 - limitation act (act xxxvi of 1963), article 119 - civil procedure code (act v of 1908), order 29, rule 2, order 5, rules 17, 19-a -- maharashtra co-operative societies act, 1960 (mah. act xxiv of 1961), sections 36, 37, 78 -- application for setting aside award on ground of invalidity of reference found time-barred -- court whether has power to set aside an award suo motu -- notice of filing of award in court sent by registered post to co-operative society at its registered address -- administrator appointed to co-operative society -- notice whether required to be addressed to administrator of co-operative society and not to co-operative society.;there is no question of a court exercising suo motu powers to set aside an award.....p.s. shah, j.1. this is an appeal directed against the order of pendse, j., dismissing the appellants' petition for setting aside the award made by the arbitrator and duly filed in court.2. the facts giving rise to the petition are these : . the appellants are a co-operative housing society registered under the maharashtra co-operative societies act, 1960, having its registered office at mithagar road, mulund (east), bombay-400 081. the respondents are contractors carrying on the business of construction. on november 23, 1972, the appellants and the respondents entered into an agreement regarding the construction of a building for the appellant-society. under the agreement, the construction of the buildings was to be completed within a period of eighteen months from september 20, 1971......
Judgment:

P.S. Shah, J.

1. This is an appeal directed against the order of Pendse, J., dismissing the appellants' petition for setting aside the award made by the Arbitrator and duly filed in Court.

2. The facts giving rise to the petition are these : . The appellants are a Co-operative Housing Society registered under the Maharashtra Co-operative Societies Act, 1960, having its registered office at Mithagar Road, Mulund (East), Bombay-400 081. The respondents are contractors carrying on the business of construction. On November 23, 1972, the appellants and the respondents entered into an agreement regarding the construction of a building for the appellant-society. Under the agreement, the construction of the buildings was to be completed within a period of eighteen months from September 20, 1971. The disputes between the appellants and the respondents led to the filing of the suit by the respondents against the appellants in the City Civil Court for an injunction restraining the appellants from taking possession of the property under construction or from interfering with their possession till the respondents' dues under the contract were paid. The respondents filed the suit for an injunction claiming a right of lien in respect of their dues. In the said suit bearing No. 4731 of- 1973, the respondents on the same day on which the suit was filed also took out a Notice of Motion for an ad interim relief of injunction. As the Court declined to grant the ad interim injunction, on July 23, 1973, the respondents filed suit No. 712 of 1973, on the Original Side of the High Court against the appellants for a decree in the sum of Rupees 3,65,234.60 p. in respect of the work completed as well as for damages for wrongful termination of the contract by the appellants. It appears that this contract was terminated by the appellants soon after the suit came to be filed in the City Civil Court. On July 25, 1973, the respondents took out a Notice of Motion for injunction restraining the appellants from interfering with their possession of the property. This Motion came to be dismissed on August 1, 1973. The respondents challenged the order of dismissal of the Notice of Motion in Appeal No. 87 of 1973, filed by them on August 8, 1973. The same day, i.e., on August 8, 1973, a consent-order came to be passed by the Appellate Court. Under this consent-order, the appellants were directed to deposit a sum of Rs. 1,20,000/-, out of this amount, an amount of Rupees 1,00000/- was permitted to be withdrawn by the respondents on furnishing security. The balance of Rs. 20,000/- was directed to be deposited with the State Bank of India pending the disposal of the said suit No. 712 of 1973. Thereafter, on April 8, 1974, the respondents filed a petition under Section 20 of the Arbitration Act for appointment of an Arbitrator. In this Arbitration Petition, the parties filed consent-terms on October 31, 1974. It was inter alia agreed under these consent-terms that all matters in dispute between the parties as set out in Petition No. 30 of-1974, Suit No. 712 of 1973, in all the proceedings therein and in all the claims and counter claims of the respondents against the appellants, which the respondents shall be at liberty to file before the Arbitrator, and in reply to the counter claim which the appellants were at liberty to file before the Arbitrator, were referred to the arbitration and determination of Shri H.N. Dallas, Architect of M/s. Paralikar and Dallas. It was agreed that the Arbitrator should sign, publish and file in Court his award in writing within six months from the date of his entering upon the reference. The said sole Arbitrator entered the reference on April 10, 1975. The time for making the award was extended by the Court from time to time, and the final date fixed before which the award was to be made and published by the Arbitrator was January 5, 1978.

3. The Arbitrator held several meetings with the parties on his entering the reference. In the beginning, the Managing Committee of the appellant-society appeared before the Arbitrator. However, on February 18, 1976, one Mr. Kanekar was appointed as the Administrator of the society under the provisions of the Maharashtra Co-operative Societies Act. On his appointment, Mr. Kanekar appeared in the proceedings before the Arbitrator through an advocate. On January 3, 1978, the Arbitrator made his award and on the same day he informed both the appellant and the respondents by his letter that he had published the award and also informed them that the award would be available to the parties for inspection.

4. It appears that there has been some confusion before the learned trial Judge regarding the dates of filling of the award and the service of the notice about the filing of the award was served on the appellants. It appears that when the award was filed, Class III and Class IV employees of the High Court staff were on strike, and, therefore, there was some delay in entering the filing of the application in the filing register. However, the fact that the award was filed on January 27, 1978 has been noted by the Prothonotary & Senior Master on the precipe accompanying the' award. The Award was also accompanied by the necessary documents required to be filed along with it. Thereafter, on February 9, 1978, the note of filing of the award was made in the filing register. In the meantime, the respondents' advocate filed a precipe on February 8, 1978, requesting the Prothonotary & Senior Master to issue notice of filing of the award for service on the parties. On February 15, 1S78, the notice of filing of the award was sent by registered post to the parties by the office of the Prothonotary and Senior Master. The affidavit of service has been made by Laxman PatiJ, the clerk in the office of the Prothonotary and Senior Master. Along with his affidavit, he has filed the acknowledgement receipt of the postal envelope which the office of the Prothonotary and Senior Master had received back on February 18, 1978. The acknowledgement receipt shows that it was properly addressed to the appellant-society on its official address and that it has been received by the addressee on February 18, 1978. There is also the signature of the person receiving the packet who has put the date of the receipt with the rubber stamp of the society. It is common ground that the signature is of Huprikar who was at the material time serving with the society. The date of receipt of the postal acknowledgement by the Prothonotary and Senior Master, viz., February 21, 1978 is also noted therein. This is also mentioned in the affidavit of Laxman Patil. The appellants kept quiet for a considerable time, and it was only by a letter dated April 1, 1978 that the respondents' solicitors wrote separately to the Administrator of the appellant-society and to M/s. Solomon & Co., (who had previously appeared on behalf of the society in Court for the purpose of extending the time for making the award) stating that the inspection of the award would be taken by the respondents' advocate on April 4, 1978. A copy of this letter was addressed to V.D. Kanekar, the Administrator of the society who has acknowledged this letter under his signature. One Chakranarayan who was then the employee of the society has also acknowledgeed the receipt of the letter dated April 1, 1978, by making his signature with the date thereon.

5. On May 5, 1978, the respondents took out two Notices of Motion, the first being No. 480 of 1978 for passing a decree in terms of the award, and the second bearing No. 481 of 1978 for the appointment of a receiver. In view of the interim relief claimed, a copy of the Notice of Motion for appointment of a receiver was served on the Administrator on the 5th itself at 11.30 p.m. As the respondents' advocate felt that the service at night time was bad in law, the Notice of Motion was again served on the Administrator on May 12, 1978. Both the endorsements dated May 5, 1978 and dated May 12, 1978, bearing the signature of the Administrator are on the Notice of Motion No. 481 of 1978. The other Notice or Motion No. 480 of 1978 for passing the decree in terms of the. award was also duly served on the appellants' administrator on May 10, 1978, as can be seen from the endorsement which bears the signature of the Administrator on the Notice of Motion. Long time thereafter, that is, on June 14, 1978 the present petition for setting aside the award was presented before the learned trial Judge. The petition was sworn in by the appellants earlier on June 12, 1S78.

6. The above narration of facts would show that the appellants were aware of the making of the award on January 3, 1978, and were also aware of the filing of the award in Court from February 18, 1978; and between February 18, 1978 and June 14, .1978, Notice of Motion were taken out and served on the appellants. They were also informed of the intention of the respondents to take inspection of the record relating to the award which was filed in Court.

7. The learned trial Judge held that the notice of the filing of the award was duly served on the appellant-society on February 21, 1978 (however, as stated above, the correct date is February 18, 1978). He held that the petition for setting aside the award is clearly barred by limitation as it is filed after the prescribed period of 30 days in. Article 119(b) of the Limitation Act. He also held that the petitioners had failed to make out a sufficient cause for condonation of delay. In this view of the matter, he dismissed the petition by his order dated April 10, 1978.

8. Mr. Cooper, the learned Counsel appearing for the appellants firstly submitted that there was no legal and valid service of notice of the filing of the award. In the absence of proper service of the notice, the petition filed on June 14, 1978 was well within limitation. Secondly, he contended that in any event, the appellants had made out a sufficient cause for condonation of delay in making the petition. Thirdly, he contended that the award was invalid both on the ground that the Arbitrator had exceeded his jurisdiction in awarding amount in excess of the claim of the respondents in. their suit and on the ground that the Arbitrator had failed to publish the award within the time prescribed by the terms of reference. Lastly, he submitted that in view of the fact that the award was invalid even if the appellants' application for setting aside the Award is held to be time-barred, the Court should suo motu set aside such an invalid award. According to him, the Court did possess such a power when the award is shown to be illegal and invalid and made in excess of the terms of reference.

9. In order to appreciate the contentions of the learned Counsel, it would' be useful to refer to the relevant provisions of the Arbitration Act, 1940 (Act No. 10 of 1940). Under Sub-section (1) of Section 14, when an arbitrator makes an award, he 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. There is no specific provision regarding the publication of the Award in Section 14 or in any other provisions of the Act. Under Sub-section (2) of Section 14, when the award is filed in Court, the court has to give notice to the parties .of the filing of the award. Section 15 provides for the powers of the court to modify or correct the award in certain cases. Section 16 deals with the powers of the court to remit the award to the arbitrator. Section 16 inter alia provides:

(a) Where the award has left undetermined any of the matters referred to arbitration, or where it determines any matter not referred to arbitration and. such matter cannot be separated without affecting the determination of the matters referred; or

(b) where the award is so indefinite as to be incapable of execution; or 6

(c) where an objection to the legality of the award is apparent upon the face of it;

10. The Court may remit the award to the arbitrator for reconsideration. The other material provisions are Sections 17, 30 and 33. It would be useful to set out these sections in extenso. Section 17 provides :

Judgment in terms of award : Where the Court sees no cause to remit the award or any of the matters referred to arbitration for reconsideration or to set aside the award, the Court shall, after the time for making an application to set aside the award has expired, or such application having been made, after refusing it, proceed to pronounce judgment according to the award, and upon the judgment so pronounced a decree shall follow, and no appeal shall lie from such decree except on the ground that it is in excess of, or not otherwise in accordance with, the award.

11. Section 30 provides :

Grounds for setting aside award : An award shall not be set aside except on one or more of the following grounds namely :

(a) that an arbitrator or umpire has misconducted himself or the proceedings;

(b) that an award has been made after the issue of an order by the Court superseding the arbitration or after arbitration proceedings have become invalid under Section 35;

(c) that an -award has been improperly procured or is otherwise invalid.

12. Section 33 makes a provision for an application to the court by a party challenging the existence or validity of the arbitration agreement or an award. It runs as under :

Arbitration agreement or award to be confessed by application. 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.

13. The relevant Article under the Limitation Act of 1963 is Article 119 which corresponds to Article 158 of the old Limitation Act of 1908. Under Article 158, a period of 30 days was prescribed for an application to set aside an award or to get an award remitted for consideration, and the starting point of Limitation was the date of service of the notice of filing of the award. It appears that there was no provision under the old Limitation Act of 1908 prescribing a period for the court directing the Arbitrator to file an award. Although Section 14 of the Arbitration Act made a provision conferring powers on the court to direct the Arbitrator to file an award, under Article 119 of the new Limitation Act, a period of 30 days is prescribed for making an application for filing the award in court, the starting point of Limitation being the date of the service of the notice of making of the award. The period of Limitation of setting aside an award or getting an award remitted for consideration remains the same as under Article 158 and Article 119. In other words, the parties have to apply within 30 days from the date of service of the notice of the filing of the award for setting aside the award or getting an award remitted for reconsideration.

14. Adverting to the contentions- of the learned Counsel, the question that falls for consideration is whether the appellants were served, and if so served were properly and legally served with the notice of the filing of the award in Court. It was urged by the learned Counsel that the proper mode of service was to serve the notice on the Administrator personally. Even if the notice is served by registered post, the notice could not be deemed to be received by the appellant-society unless the registered packet was received by the Administrator personally and not by any employee of the Society. Now Order 29, Rule 2 of the Civil Procedure Code provides the mode of service of process on corporation. The said rule envisages three modes of service of process viz. (1) on the secretary, or any director, or other principal officer of the corporation, or (2) by leaving it at the registered office, or if there is no registered office, then at the place where the corporation carries on business; or (3) by sending it by post addressed to the corporation at the registered office, or if there is no registered office then at the place where the corporation carries on business. The appellant-society is admittedly registered under the Maharashtra Co-operative Societies Act, 1960, and has its registered office at Mithagar Road, Mulund (East), Bombay 400081. Under Section 36 of the Said Act, the registration of a society shall render it a body corporate by the name under which it is registered with perpetual succession and a common seal, and with power to acquire, hold and dispose of property, to enter into contracts, to institute and defend suits and other legal proceedings, and to do all such things as are necessary for the purpose for which it is constituted. Section 37 of the' Act provides that every society shall have an address, registered in accordance with the rules, to which all notices and communications may be sent; and the society shall send notice, in writing to the Registrar of any change in the said address, within thirty days thereof. It is undisputed that the society is a registered society under the Act, it has its registered address in accordance with the rules, and the registered address is the one mentioned above. The appellant-society being a corporation it will be governed by Order 29, Rule 2 for service of any process.

15. In this case, the postal acknowledgement clearly shows that the packet was properly and correctly addressed in the name of the society and to its registered office. It is, therefore, clear that it complies with the requirements of the third mode in Rule 2 of Order 29 referred to above. Under the said provision, the service would be proper if the notice is sent by post addressed to the corporation at the registered office. When this mode is resorted to, there is no question of the delivery of the postal article personally to the Administrator. It was contended by the learned Counsel that when the postal packet is not received by the Administrator himself a copy of the notice must be served on the Administrator personally. On a plain reading of Rule 2 of Order 29, it is not possible to uphold this contention. It nowhere provides that in the event of the postal packet not being received personally by the Administrator, or the head of the Society, a further personal service of the notice be resorted to. It was suggested that when the managing committee was not in existence and the society was in charge of an Administrator, the postal packet should have been addressed to the administrator and not to the society. It is not possible to accept this contention in view of the clear provisions of Sections 36 and 37 of the Maharashtra Co-operative Societies Act. Even when an administrator is appointed, the society still continues to be a corporate body and is to be dealt with for the purposes of service of notice under Order 29, Rule 2. On his appointment, the administrator merely takes place of the managing committee, but the society's existence as a corporate entity is not affected by such a change. Whoever is in .the management of the society, it does not lose its character of a corporate body so long as it exists. Reliance was placed by the learned Counsel on the decision of the Supreme Court in Shalimar Rope Works v. Abdul Hussain : [1980]3SCR1028 . In that case, the summons of the suit was left at the registered office of the company personally. The question that fell for consideration was whether such a service is proper. The Supreme Court held that merely leaving the summons at the registered office in the sense of its being left anywhere uncared for in the registered office of the company could be no valid service as contemplated by Rule 2 of Order 29, and that part of the rule viz., service by leaving the process at the registered office of the Corporation had to be read in the background of the provisions contained in Order 5, Rule 17 of the Code. But such is not the case before us. The notice was not merely left at the registered office of the society, but it was actually sent by registered post at its registered office which is a perfectly legitimate and valid mode of service prescribed under Rule 2 of Order 29. In paragraph 8 of the Judgment, the Supreme Court observed (at. p. 1165) :

Sending summons to a corporation by post addressed to it at its registered office may be a good mode of service either by itself, or preferably, by way of an additional mode of service. But leaving the summons at the registered office of the corporation if it is literally interpreted to say that the summons can be left anywhere uncared for in the registered office of the company, then it will lead to anomalous and absurd results. It has to be read in the background of the provision contained in Order 5, Rule 17 of the Code. In other words, if the serving peon or bailiff is not able to serve the summons on the Secretary or any Director or any other Principal Officer of the Corporation because either he refuses to sign the summons or is not to be found by the serving person, even after due diligence - then he can leave the summons at the registered office of the company and make a report to that effect....

16. It is, therefore, clear that the Supreme Court itself made a distinction between the First part of Rule 2(b) of Order 29, viz., the mode of service by leaving the summons at the registered office and the other mode viz., by sending it by post at the registered address of the corporation office. In the first case, if a summons could not be served personally on the officer, then it would be necessary and proper to send the summons by post; but the converse is not necessarily true, because even in this decision, it has been clearly observed by the Supreme Court that sending the summons to the registered address of the corporation by post is a good mode of service. The position is still clear from what is observed in paragraph 7 of the judgment of the Supreme Court which clearly shows that as far as sending of the summons by post to the registered office of the company is concerned, unless the contrary is shown, it will be presumed to be service on the company itself. It is only with regard to the first part of Clause (b) of Rule 2 of Order 29, viz., the mode of service by leaving the copy of the notice in the registered office of the Corporation, that it is held that it is desirable that the provisions of Order 5, Rule 17 of the Code has to be borne in mind while considering that mode of service. Thus, the Supreme Court has made a clear distinction between the said two modes of service Contemplated under Rule 2(b) of Order 29. In the first case, Order 5,' Rule 17 has to be borne in mind, while in the other case, i.e., where the mode of service of the notice by post is resorted to, it shall be presumed to be proper service on the Corporation)'- and Rule 17 of Order 5 will have no application. It may be noticed that Sub-rule (2) of Rule 19-A of Order 5 provides that when an acknowledgement purported to be signed by the defendant is received by the Court, the Court issuing the summons shall declare that the summons has been duly served on the defendant. In the present case, it is clear that the postal packet, was properly addressed to the registered address of the society. The acknowledgement receipt bears the rubber stamp of the society and also bears the signature of the employee of the Society. Thus the service in this case is effected in compliance with the third mode prescribed in Rule 2 of Order 29, viz., sending it by post addressed to the society at its registered office. It must be presumed to be good and effective on the Society. The only contention raised by the appellants is that the postal acknowledgement not being signed by the Administrator the packet should have been personally delivered to the Administrator who was conducting the affairs of the Society. All that is said in the petition is that Huprikar who has accepted the postal packet and no authority to receive the summons, but there is no contention raised that he was not authorised to receive the postal deliveries. The very fact that he was kept in charge of the rubber stamp of the Society clearly shows that he had the authority to use the same and accept the postal deliveries, The learned trial Judge gave an opportunity to the appellants to lead evidence. The only evidence led by the appellant is that of Vengurlekar who was the Administrator of the Society from April 1979. His evidence shows that he has no personal knowledge of the affairs of the Society before he took the charge as the Administrator. All that he has said in his examination-in-chief is that he knew that Huprikar was working during the regime of Kanekar but, according to him, the record did not disclose the duties performed by him. He, however, Stated that Huprikar was writing accounts because the Government auditors had summoned him to explain discrepancies in the accounts. He further admitted that he could not say whether Huprikar was doing any other work than writing accounts. His evidence, therefore, cannot be of assistance whatsoever to the appellants on the relevant question as to whether Huprikar had or had not the authority to accept the postal deliveries, including the registered packets. It appears that the learned trial Judge has marked the postal receipt signed by Huprikar as Exh. 'Y' for identification. The fact that the postal acknowledgement receipt bears the signature of Huprikar is not only not disputed by the appellants but in paragraph 33 of the petition, it has been admitted in so many words that the acknowledgement receipt bears the signature of Huprikar, the only grievance being that he had no authority to accept the service of any process of law. The acknowledgement, therefore, should have been exhibited as a proved document. A case has been made out in the petition that the receipt of the registered packet was not brought to the notice of Kanekar by Huprikar. There is not an iota of evidence to support this contention. The best evidence on the point would have been the evidence of Kanekar. Significantly enough, the evidence of Venguriekar shows that Kanekar was in Bombay at the time when his evidence was recorded. For reasons best known to the appellants, Kanekar has not been examined. We have, therefore, no hesitation in coming to the conclusion that the appellants were properly served with the notice by registered post on February 18, 1979. The petition for setting aside the award is filed on June 14, 1978 and is, therefore, clearly barred by limitation.

17. The only question that would remain is whether a case for condonation of delay has been made out by the appellants. The main ground on which condonation of delay was sought is that the administrator who was in charge of the affairs of the Society had no knowledge of the receipt of the notice of the filing of the award. The best evidence on this question would have been of Kanekar. However, the appellants have not examined him. It is, therefore, difficult to believe the case of the appellants that the administrator had no knowledge of the receipt of the notice by post. We have already referred to the fact that the Administrator as well as the society did receive a letter dated April 1, 1978 regarding the inspection of the arbitration proceedings filed in Court. Assuming that Huprikar did not inform Kanekar about the receipt of the notice of the making of the award, still at least, on April 1, 1978, on receipt of the respondents' letter, the Administrator did get knowledge of the making of the award. Even then, no steps were taken by the administrator to make an application for setting aside the award within the prescribed period. The administrator should have been really surprised to receive such a letter in the absence of a notice to him about the filing of the award, but there is no evidence to show that he had taken any steps. The matter does not rest here. The two Notices of Motion for the appointment of a receiver and for passing a decree in terms of the award were' also duly served on the administrator. As mentioned above, the motion for appointment of receiver was served on him on the 5th of May, 1978, although at night time, which made no difference so far as the aspect of knowledge of the fact of filing of the award is concerned. Again if this is treated as a starting point of limitation, even then petition ought to have been filed on or before June 4, 1978. The motion for passing the award in terms of the decree was also served on the administrator on May 10, 1978. All this would go to show that the appellants were negligent and were not interested in opposing the award. In the petition, the ground for condonation of delay mentioned is that the administrator discovered the notice of the filing of the award only on the Notice of Motion 480 of 1978 being served upon him. Even then the petition would be time-barred because the Motion was served on the Administrator on May 10, 1978 and the application was presented on June 14, 1978, after the expiry of the period of limitation. Moreover, the statement that the knowledge was only after the service of the Notice of Motion is itself a false statement, because as mentioned above, the Administrator is fastened with the knowledge of the receipt of the letter of April 1, 1978. It is significant that Kanekar who is best person to depose on this aspect of the matter has not been examined by the appellants. Instead they have chosen to examine the Administrator Vengurlekar who had no personal knowledge but was appointed as the administrator only from April 1979. He has clearly admitted in his evidence that Kanekar was in Bombay at the time when his evidence was recorded. Having regard to the , apparently contrary, inconsistent and false statements made in the petition, it was all the more necessary for the appellants to examine Kanekar who was the competent witness on this material aspect of the matter. .Even the clerk Huprikar who was at the material time serving with the Society has not been examined. The appellants tried to lay the blame on Kanekar by making allegations against him of mismanagement of affairs of society by an amendment to the petition. The appellants have not led any evidence to show that Kanekar had-mismanaged the affairs of the Society or that he was responsible for any Joss caused to the society. There is not 3 title of evidence to support this averment. On the other hand, it is admitted that another administrator was appointed only on the expiry of his term. Haying regard to the above facts and circumstances, the learned trial Judge has rightly refused to condone the delay.

18. It was urged by Mr. Cooper that the award made by the Arbitrator is invalid .for two reasons viz., that the award was made in excess of the terms Of reference and that he failed to publish the award within the time fixed by the reference. He submitted that if an award is invalid, the court has the inherent power to act suo motu. He submitted that the court is not precluded from considering such' patent defects in the award suo motu and no question of limitation prescribed by Article 119 would arise in such a case. In other words he submitted that even if an application for setting aside the award ;has not been filed within the limitation or has not been filed at all would not affect the jurisdiction of the court to act suo motu. Aggrieved party can always approach the court to act on its own to set aside the award if it is found to be invalid. Before adverting to the various decisions Cited, at the bar it should be noticed that Section 30 of the Arbitration Act, the text of which has been quoted in extenso above enumerates the grounds on which the award can be set aside. Analysing Section 30 we find that it contemplates as many as six heads of grounds on which the award could be set aside. They are :

1. The arbitrator or umpire has misconducted himself.

2. The arbitrator or umpire has misconducted the proceedings.

3. The award has been made after the issue of an order by the court superseding the arbitration.

4. The award has been made after the arbitration proceedings have become invalid under Section 35.

5. The award has been improperly procured; or

6. The award is otherwise invalid.

19. Thus the invalidity of the award by itself is an independent ground on which the award can be set aside. In support of his contention That the courts' powers to act suo motu and set aside the award are not fettered by whether an application for setting aside the award has or has not been filed within limitation, Mr. Cooper strongly relied on the decision of a Division Bench of this Court in Hastimal v. Hiralal : AIR1954Bom243 . After making a reference to the provisions found in Sections 16, 17, 30 and 33 of the Act, Gajendragadkar, J. as he then was, speaking for the Bench observed (at p. 102 of 56 Bom.L.R. 99) :

If the application i.e. an application for setting aside the award is allowed, the award would naturally be remitted or set aside, in which case other appropriate orders would have to be passed. While making this provision the section does seem to contemplate that the Court may proceed to consider the question whether the award should be remitted or set aside even though an application may not have been made before it by any party to the award. In such a case if the Court suo motu sees any cause to remit or set aside the award, the Court may make that order. If the Court sees no cause to remit or set aside the award, even so, the Court must wait until the period for making an application under Section 33 has expired, and, if an application is made, until the application is refused. It would, therefore, be clear that on a fair and reasonable construction of- the -words used in Section 17, the Court has jurisdiction to consider the question of remitting or setting aside the award 'suo motu'.

Section 30 lays down that 'An award shall not be set aside except on one or more of the following grounds' and three grounds are mentioned in this section. The provision contained in this section is put in the negative form; but even so it would not be correct to assume that the jurisdiction conferred under this section can be invoked only at the instance of a party making an application under Section 33. It would be legitimate to infer from the wording of this, section that even if an application is not made by any of the parties for that purpose, the Court may set aside an award if it is satisfied suo motu that any of grounds mentioned in Section 30 vitiates the award....

Section 33, therefore, requires parties to make application if they wish to challenge the existence or validity of an arbitration agreement or an award or to have the effect of either determined, and it lays down the procedure for dealing with applications which are made under this section. Article 158 of the Limitation Act prescribes a limitation of thirty days for the purpose of applications made for remitting or setting aside an award. It is perfectly true that if a party to an award wants to challenge the validity of the award on any ground and desires that the award should either be remitted or set aside, he has to make an application in that behalf under Section 33 within the time prescribed by Article 158.

20. Consistent with the above reasoning the Division Bench in the said case proceeded to observe (at p. 103 of 56 Bom.L.R. 99) :.But from the fact that a party is precluded from challenging the validity of the award on the ground that he has not made a proper application, within the limitation prescribed by Article 156, it would not follow that the Court cannot suo motu consider the same question in a proper case.

If the award directs a party to do an act which is prohibited by law or if it is otherwise patently illegal or void, we think it would be open to the Court to consider this patent' defect in the award 'suo motu', and when the Court' acts suo motu. no question of limitation prescribed by Article 158 can arise. In our opinion, the words used both in Section 17 and Section 30 are wide enough to include the jurisdiction of the Court to deal with matters covered by those sections suo motu. It would appear that under the English law the Court has a similar power to set aside an award, apart from the motion made by the parties in that behalf.

21. What had happened in Hastimal's case was that in respect of an agreement between the plaintiff and the defendants in regard to the transfer of a house, a dispute arose between them as to the nature of the agreement. The plaintiff alleged that it was an agreement to sell the property; whereas according to the defendants, they had merely agreed to mortgage the property. On this dispute being referred to arbitration, the arbitrator made his award that the agreement between the parties is one of mortgage and not of sale and on that footing the award purported to direct the defendants to pay to the plaintiff certain amount with interest in instalments and if the defendants did not pay the amount as directed, the plaintiff could proceed to recover that amount by sale of the property mortgaged through Court and if the sale-proceeds were not enough to pay the plaintiff the amount due to him, the plaintiff could proceed to recover the balance from the other property of the defendants. It was urged on behalf of the defendants that the award was invalid because the arbitrator had exceeded the terms of reference and although they had not filed an application for setting aside the award within the limitation, the Court had the jurisdiction to set aside the award suo motu. While upholding the contention that the Court had the jurisdiction to suo motu set aside the award, if it is found to be invalid, on some other ground which is not necessary to state here, the Division Bench refused to exercise the suo motu powers in that case. In fairness to the learned Counsel we must observe that the Division Bench decision in Hastimal's case does support his contention that even if a party is precluded from challenging the validity of the award on the ground that he has not made an application within the limitation prescribed by Article 119, the Court if it finds the award to be invalid can act suo motu and set aside the award.

22. In our view, however, having regard to the ratio of some of the later decisions of the Supreme Court, Hastimal's case can no longer be treated as a good law. In that connection we may first refer to the decision of the Supreme Court in Afadanlaz v. Sunderlala : [1967]3SCR147 , and, The Union of India v. Shri Om Prakash : [1976]3SCR998 . The appeal to the Supreme Court in Madanlal's case was against a decision of the Allahabad High Court which has been reported in : AIR1964All38 . It appears from the facts stated in the judgment of the Allahabad High Court that one of the several grounds on which the award was challenged was that the award was made with respect to matters beyond the scope of reference and was inseparable from the award given on matters within the scope of reference. The High Court held that the appellant's said objection could not be entertained as his remedy was to apply under Section 33 of the Act, if he wanted the award to be set aside. As he had not .done so and as the objection was itself filed more than 30 days after the service of notice on him, he was barred from raising any ground for setting aside the award which fell under Section 30 of the Act. After reviewing the scheme and the relevant provisions of the Act, the Supreme Court in para 8 of the judgment observed :

It is clear, therefore, from the scheme of the Act that if a party wants an award to be set aside on any of the grounds mentioned in Section 30 it must apply within 30 days of the date of service of notice of filing of the award as provided in Article 158 of the Limitation Act. If no such application is made, the award cannot be set aside on any of the grounds specified in Section 30 of the Act. It may be conceded that there is a special form prescribed for making such an application and in an appropriate case an objection of the type made in this case may be treated as such an application, if it is filed within the period of limitation. But if an objection like this has been filed after the period of limitation it cannot be treated as an application to set aside the award, for if it is so treated it will be barred by limitation.

23. Before Supreme Court reliance was placed on the decisions in Hastimal's case and Saha and Co. v. Ishar Singh Kripal Singh : AIR1956Cal321 , to support the argument that the Court can act suo motu and set aside the award even when the objection to set aside the award is filed beyond the period of limitation. Repelling this argument, the Supreme Court held (at p. 1236 of AIR 1967 SO :

Assuming that the Court has power to set aside the award suo motu, we are of opinion that that power cannot be exercised to set aside an award on grounds which fall under Section 30 of the Act, if taken in an objection petition filed more than 30 days after service of notice of filing of the award, for if that were so the limitation provided under Article 158 of the Limitation Act would be completely negatived. The two cases on which the appellant relies do not in our opinion support him. In Hastimal's case, : AIR1954Bom243 (at p. 245) it was observed that :

If the award directs a party to do an act which is prohibited by law or if it is otherwise patently illegal or void, it would be open to the Court to consider the patent defect in the award suo mota, and when the Court acts suo motu no question of limitation prescribed by Article 158 can arise.These observations only show that the Court can act suo motu in certain circumstances which do not fall within Section 30 of the Act.

24. It will be seen that the further question as to which particular ground would fall outside the ambit of Section 30 and if such a ground exists whether the Court can act suo motu was not considered by the Supreme Court in Madanlal's case. But what is significant to note is that the ground on which the award was challenged in Madanlal's case was that the arbitrator had passed the award in regard to the matters beyond the scope of reference. . In other words the award was said to be invalid as the arbitrator had exceeded its jurisdiction. But nonetheless, it is clear that the wide view taken by this Court in Hastimal's case that the Court can exercise suo motu power even when the case is covered by Section 30 has not been accepted by the Supreme Court in Madanlal's case.

25. What is covered by the words 'or is otherwise invalid' in Section 30(c) has been explained by the Supreme Court in Union of India v. Om Prakash. In that case the validity of the award was challenged on the ground that the Court had become functus officio after appointing an arbitrator under Section 8(2) and had no jurisdiction to refer the matter to him and consequently the award itself was without jurisdiction and a nullity. The Supreme Court accepted the contention and held that the Court in that case had no jurisdiction, after appointing an arbitrator under Section 8(2) to proceed further to make an order referring the dispute to an arbitrator. The Supreme Court then proceeded to consider the question as to whether the award can be set aside because the reference itself was incompetent. The Supreme Court observed (at p. 1749 of AIR 1976 SC) :

The words 'or is otherwise invalid' in Clause (c) of Section 30 are wide enough to cover all forms of invalidity including invalidity of the reference which is a nullity.

26. The decision in Madanlal's case clearly shows that there is no question of exercising suo motu powers where the ground for setting aside the award falls under any of the clauses under Section 30 and in such a case it is incumbent on the person challenging the award to make an application within the time prescribed under Article 119 of the Limitation Act, 1963. If no such application is made, the Court has no power to set aside the award suo motu. What is covered by the words 'or is otherwise invalid', is clearly explained in the case of Union of India v. Om Prakash (supra). According to this decision Clause (c) of Section 30 covers all forms of invalidity including the nullity of reference. In view of these two decisions of the Supreme Court, we are of the view that the decision of the Division Bench of this Court Hastimal's case will have to be regarded as impliedly overruled and no longer good law.

27. Assuming, therefore, that the award in the present case which was made by the Arbitrator is invalid on the ground that it was made in excess of the terms of reference and that the Arbitrator failed to publish the award within the time fixed by the terms of reference, such a ground would be clearly covered by the words 'or is otherwise invalid' in Clause (c) of Section 30. Further, the ground being covered by the said clause, the remedy of the party lies in making an application for setting aside the award within the limitation prescribed under Article 119 of the Limitation Act. There is, therefore, no scope for the argument that the Court can act suo motu and set aside the award on the ground of invalidity.

28. We may, however, add that there is actually no basis for the contention that Arbitrator had acted beyond the reference by passing an award for an amount higher than that claimed in the suit. It appears from the record that the reference was not merely in respect of the amounts claimed in the suit, but was also in respect of certain additional claims made by the respondents in respect of the construction of which the measurements were not then taken, but were agreed to be taken by the architect. Even in the petition for reference to the arbitration the respondents did state that the measurements of certain work were agreed to be taken and they were entitled to claim the amount in respect of such work done by them. Similarly, the terms of reference as provided in the consent terms are also wide enough to include not only the claims mentioned in the plaint, but also the claims referred to in the terms of reference. Similarly, it is seen that the consent terms provided for reference to the arbitration the disputes between the parties as set out in the arbitration petition and also in the suit and also in Suit No. 712 of 1973 and in all the proceedings therein and in all the claims and counter-claims by the petitioner and respondents for which the respondents were given opportunity to file before the Arbitrator and also in reply to counter-claim the petitioners were given opportunity to file before the arbitrator. What is significant to note is that the respondents had also filed before the arbitrator the claim for additional amount. The appellants did not raise any objection to the filing of such claim for the-first time before the arbitrator. They did not contend that the arbitrator had no jurisdiction to entertain such claim or that the additional items were not covered by the reference. In the suit the respondents had also claimed an amount of rupees one lakh for damages for wrongful termination of the contract. Having regard to the fact that the claim before the arbitrator was also in respect of certain work about which measurements were not taken and the architect had not submitted the report and the fact that the total claim of the respondents was to the tune of rupees seven lakhs, and the amount awarded was much less, it is not possible to accept the contention that the arbitrator had acted beyond the terms of reference in awarding the amount of rupees five lakhs. We are unable to accept the contention that in the circumstances of the case non-publication of the award within the time prescribed by the terms of reference rendered award invalid.

29. In the result, the appeal fails and is dismissed with costs which are quantified at Rs. 500/-.

30. At this stage, Mr. Naik applies for leave to appeal to the Supreme Court under Article 133 of the Constitution. We refuse to grant the leave. We have merely applied the law as declared by the Supreme Court. We are also of opinion that there is no substantial question of law of general importance involved in this case.

31. Leave to appeal to Supreme Court refused.


Save Judgments// Add Notes // Store Search Result sets // Organizer Client Files //