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Ratnawa Vs. Gurushiddappa Gurushantappa Magavi and ors. - Court Judgment

LegalCrystal Citation
SubjectArbitration;Limitation
CourtKarnataka High Court
Decided On
Case NumberRegular Appeal No. 70 of 1957
Judge
Reported inAIR1962Kant135; AIR1962Mys135; ILR1962KAR257
ActsArbitration Act, 1940 - Sections 14(1) and 42; Limitation Act, 1908 - Schedule - Article 178
AppellantRatnawa
RespondentGurushiddappa Gurushantappa Magavi and ors.
Appellant AdvocateN.H. Naik, Adv. by ;B.A. Maheshi, Adv.
Respondent AdvocateBasalingappa and ;V.S. Malimath, Advs.
Excerpt:
.....was set aside and amendment was allowed. - (1) has the failure of the arbitrators to appoint an umpire vitiated the award made by them ? and (2) is the suit barred by art. the court below has opined that the appointment of an umpire within the stipulated time is a mandatory requirement of the law and any failure to comply with that requirement vitiates the award made. ahmad isaque, (s) [1955]1scr1104 :it is well-established that an enactment in form mandatory might in substance be director, and that the use of the word 'shall' does not conclude the matter. they are well-known, and there is no need to repeat them. what we have to see is whether in rule 47, the word 'shall' could be construed as meaning 'may'.before proceeding further, it may be noticed that the 'act' nowhere..........the following facts: the award was made and signed on 7-1-1950. at the time of the signing of the award, the parties to the award were present. it appears the award was read out to them and their signatures obtained. but no notice of the making and signing the award as such had been issued to them. the present petition under s. 14(2) of the 'act' was filed only on 24-12-1951. the question for consideration is whether the petition was barred by limitation, the relevant article of the limitation act being art. 178. that article reads thus:' under the arbitration act, 1940, ninety the date of service of the notice of for the filing in court of the award. days. the making of the award'.from the above it is seen that the starting point of limitation is the date of service of the notice of.....
Judgment:

Hegde, J.

(1) This appeal arises out of proceeding under S. 14(2) of the Indian Arbitration Act to be referred to as the 'Act' hereinafter. The parties to this appeal are relations. The appellant as the plaintiff instituted Special Civil Suit No. 29 of 1954 in the Court of learned Civil Judge, Senior Division, Dharwar, praying that the award made and signed by defendants 1 and 2 on 7-1-1950 or a signed copy of the same be caused to be filed in Court and judgment according to that award be pronounced. Some of the parties to the award raised various objections to the reliefs prayed for by the plaintiff. On the pleadings, the Court below raised three preliminary issues. They are :

'1. Is this suit in time ?

2. Is the award before the Court void as contended and

3. Is the suit barred under S. 32 of the 'Act' '

It answered the first and their third issues in favour of the plaintiff. But, under issue No.2, it held that the award is vitiated as the Arbitrators have contravened clause (2) of the First Schedule of 'Act'. In the result, it dismissed the suit. The aggrieved plaintiff has come up in appeal to this Court. He challenges the correctness of the conclusion reached by the Court below. The contesting defendants are not only supporting of the decision of the Court below on Issue No. 2, they go further and contend that the suit under appeal is barred under Art. 178 of the Limitation Act. Therefore, the two questions that arise for decision by this Court, are: (1) Has the failure of the Arbitrators to appoint an umpire vitiated the award made by them and (2) Is the suit barred by Art. 178 of the Limitation Act?

(2) The material facts are undisputed. The parties to the arbitration referred their disputes to defendants 1 and 2 as per Ex. 3/1 dated 26-10-1949. Immediately thereafter, the Arbitrators entered upon their duties. The ward in question was made and signed on 7-1-1950. The two Arbitrators mentioned above were unanimous in their decision. No umpire had been appointed by them. In the terms of reference, no provision for the appointment of an umpire was made. But, as per S. 3 of the 'Act', an arbitration agreement, unless a different intention is expressed therein, shall be deemed to include the provisions set out in the First Schedule in so far as they are applicable to the reference. Four our present purpose, only clause (2) of the First Schedule is relevant. That clause reads:

'If the reference is to an even number of arbitrators, the arbitrators shall appoint an umpire not later than one month from the latest date of their respective appointments'.

The award was made and singed long before the time fixed for the appointment of an umpire under clause (2 ) of the First Schedule. The Court below has opined that the appointment of an umpire within the stipulated time is a mandatory requirement of the law and any failure to comply with that requirement vitiates the award made. Is this view correct ?

(3) The language employed in clause (2) of the First Schedule appears at first sight as imperative. That clause lays down that 'the arbitrators shall appoint an umpire not later than one month from the latest date of their respective appointments'. But as observed in Hari Vishnu Kamath v. Ahmad Isaque, (S) : [1955]1SCR1104 :

'It is well-established that an enactment in form mandatory might in substance be director, and that the use of the word 'shall' does not conclude the matter. The question was examined at length in Julius v. Bishop of Oxford (1880) 5 AC 214 and various rules were laid down for determining when a statute might be construed as mandatory and when as directory. They are well-known, and there is no need to repeat them. But they are all of them only aids for ascertaining the true intention of the legislature which is the determining factor and that must ultimately depend on the context. What we have to see is whether in Rule 47, the word 'shall' could be construed as meaning 'may'.

Before proceeding further, it may be noticed that the 'Act' nowhere stipulates, either specifically or by necessary implication, that if the Arbitrators fail to appoint an umpire, the ward made by them, for that very reason would become void.

(4) In construing whether a particular rule is mandatory or directory, we have to look to the language employed therein, the purpose behind the rule, the scheme of the 'Act' etc. Clause (2) of the First Schedule comes into play only in the absence of any provision in the terms of the reference as regards the appointment of an umpire. In other words, it is open to the parties to the reference to refuse to have an umpire. It is equally open to them to devise other measures for appointing an umpire in cause of need. From this it follows that the provisions contained in clause (2) were included only as a measure of convenience and not as the crux of the matter.

The reason for having that clause is obvious. There is always the possibility of evenly balanced disagreement amongst the arbitrators. Therefore, it is necessary to create a machinery to resolve that disagreement unless the parties insist on some other course. The time limit was evidently fixed in the present Act for two reasons. Firstly, it must have been thought desirable that the Arbitrators should appoint an umpire even before there was any disagreement between them; once they begin to disagree on any point, human reactions being what they are the atmosphere is likely to be surcharged with suspicion, prejudice and the like; it may be difficult for them to make an impartial selection thereafter. Secondly, provision is made in the Act for the parties to approach the Court, for the appointment of an umpire. If the Arbitrators fail to do so. Unless a time limit is fixed for the Arbitrators to make their selection, it is difficult for the parties to approach the Court.

(5) An empire does not come into the picture unless and until there is evenly balance disagreement between the Arbitrators. Even if an umpire is selected as required by clause (2) of the First Schedule, he would have to remain in the background till occasion arises for him to step out.

In cases where the Arbitrators are unanimous in their decision, or even in cases where they are able to arrive at a majority decision, the appointed umpire would function as the fifth wheel to the coach. If we bear in mind all these aspects, it is clear that the requirements laid down in clause (2) of the First Schedule cannot be consider as mandatory.

(6) This view of ours is further strengthened by an examination of the scheme of the 'Act'.

The failure of the Arbitrators to appoint an umpire does not finally close that chapter. As seen earlier, under S. 8(c) of the 'Act', the Court can at any stage step in and appoint an umpire. If the failure of Arbitrators to appoint an umpire is deemed as per se vitiating the arbitration proceedings, S. 8(c) becomes meaningless. In our opinion, clause (2) of the First Schedule is just one step in the proceedings and by no means the final step. It may possibly put limits on the powers of the Arbitrators in the matter of appointing an umpire, --- though we do not propose to express any firm opinion on that point; but, we are satisfied that any contravention of that clause does not in any manner enter into the validity of an award made. In other words, it is only a directory provision and not a mandatory one.

(7) The preponderance of judicial opinion is in favour of the view taken by us. In United Printing and Binding Works Ltd., v. Kishori Lal, : AIR1956Cal593 , P. B. Mukharji, J. Held that the word 'shall' in clause (2) does not make the provision mandatory in the sense that its breach will vitiate the entire arbitration proceeding and make the award illegal. A similar view was taken in Shambhu Nath v. Harishankar Lal, : AIR1954All673 ; Sheoramprasad Ram Narayanlal v. Gopal prasad Parmeshwardayal Shukla, : AIR1959MP102 and Chacko v. Chacko, : AIR1959Ker149 .

(8) The learned counsel for the respondents invited our attention to the decision in Jawala Prasad v. Amar Nath, : AIR1951All474 and Vinayak Vishnu Saharabundhe v. B. G. Gadre,

: AIR1959Bom39 in support of the contrary view. The effect of the decision in Jawala Prasad's case, : AIR1951All474 is considerably weakened by the decision of another Bench of the Allahabad High Court in Shambhu Nath's case, : AIR1954All673 , Sapru J. Who delivered judgment in Jawala Prasad's case : AIR1951All474 was a party to the latter decision. The latter Bench distinguished Jawala Prasad's case, : AIR1951All474 with these words:

'Learned counsel for the appellant has, however, relied on a decision of a Bench of this Court to which one of us we as a party, viz. : AIR1951All474 and has urged that it has been held that the provisions of paragraph 2 of First Schedule are mandatory as the arbitrators are bound to appoint an umpire; in the absence of such appointment the award is invalid. The provisions of paragraph 2 of the First Schedule impose an obligation and it cannot be denied that the arbitrators should have appointed an umpire. But the question remains, what is the effect of such failure. The question whether the parties had walved the irregularity and were esteemed from questioning the award on that ground was not considered in that case as the point was not raised. The learned judges took care to confine their decision to the facts of that particular case and have said that in the circumstances of 'this particular case' the award made is not valid'. In view of the above decision, the decision in Jawala Prasad's case, : AIR1951All474 has to be confide to the facts of that particular case. With great respect to the learned judges who decided Vinayak Vishnu Sahasrabundhe's case, : AIR1959Bom39 we are unable to subscribe to the view taken in that decision for the reasons already mentioned. From what we have stated earlier, it follows that, in our opinion, the Court below was not right in holding that the failure on the part of the Arbitrators to appoint an umpire has vitiated the arbitration proceedings.

(9) For considering the question of limitation, it is necessary to set out the following facts: The award was made and signed on 7-1-1950. At the time of the signing of the award, the parties to the award were present. It appears the award was read out to them and their signatures obtained. But no notice of the making and signing the award as such had been issued to them. The present petition under S. 14(2) of the 'Act' was filed only on 24-12-1951. The question for consideration is whether the petition was barred by limitation, the relevant Article of the Limitation Act being Art. 178. That Article reads thus:

' Under the Arbitration Act, 1940, Ninety The date of service of the notice of for the filing in Court of the award. Days. the making of the award'.

From the above it is seen that the starting point of limitation is the date of service of the notice of the making of the award. It has been urged on behalf of the respondents that the notice contemplated under Act. 178 is the same as the knowledge of the party about the making of the award. In other words, it was urged that the limitation for filling an application under S. 14(2) of the 'Act' begins to run from the date the party comes to know about the making of the award. This contention cannot be accepted. Under S. 14(1) when the arbitrators or the umpire have made their award, they shall sign if and shall give notice in writing to the parties of the making and signing thereof. Section 42 of the 'Act' prescribes the mode in which the notice has to be given. It says:

' Any notice required to be served otherwise than through the Court by a party to an arbitration agreement or by an arbitrator or umpire shall be served in the manner provided in the arbitration agreement, or if there is no such provision, either --

(a) by delivering it to the person on whom it is to be served,

or

(b) by sending it by post in a letter addressed to that person at his usual or last known place of abode or business in India and registered under Chapter VI of the Indian Post Office Act, 1898'. Admittedly, in the instant case, no written notice of making the ward had been given to the parties to the reference. All that is said is that the parties were aware of the making of the award. For the purpose of computing the period of limitation under Art. 178 of the limitation Act that circumstances is a wholly irrelevant circumstance. See: Puppala Ramulu v. Nagidi Appalaswami, AIR 1957 AP 11; Jagadish Mahton v. Sunder Mahton. AIR 1949 Pat 393; Misri Lal v. Bhagwati Prasad, : AIR1955All573 and Ganga Ram v. Radha Kishan, (S) .

(10) The only decision brought to our notice which has taken the contrary view is the decision of a single Judge of the Punjab High Court in Ganga Ram v. Radha Kishan, . That decision was dissented from by a Division Bench of the Punjab High Court in Ganga Ram's case, (S) .

(11) In our opinion before time begins to run under Art, 178 of the Limitation Act, the parties concerned must have been notified by means of a notice in writing as contemplated in S. 14(1) read with S. 42 of the 'Act'.

(12) A feeble attempt was made to show that in the absence of a notice as contemplated under S. 14(1) of the 'Act', the suit under appeal must be considered as premature. We do not think that there is any substance in that contention. See AIR 1949 Pat 393.

(13) In the result, this appeal is allowed and the decree and judgment of the Court below are set aside and the case remanded to that Court for deciding the other points arising in the case.

(14) The costs of this appeal will abide the result of the suit in the trial Court and shall be provided for therein.

(15) Appeal allowed.


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