B. Dayal, J.
1. These seven First Appeals From Orders have been connected together as common questions of fact and law arise in all these cases. The appellant in all the cases, Shri Om Prakash, entered into certain contract with the military department during war period, in respect of which, there were disputes and according to an arbitration clause in the agreement the matter was to be referred to an arbitrator. In appeals Nos. 220, 221, 223 and 224 of 1952 the contracts provided for arbitration by the Director of Farms General Head Quarters, Simla, in appeals Nos. 222 of 1952 and 226 of 1962 the Officer-commanding Lucknow was to be the arbitrator and in appeal No. 225 of 1952 the contract provided that the arbitrator would be a certain Quarter Master at Delhi, The case of the appellant is that all these posts were abolished after the war and the officers mentioned in the respective agreements did not exist. Consequently, the appellant talked over the matter with the military officers and it was agreed that some new arbitrator had to be appointed. For this purpose the appellant filed seven applications in respect of the seven agreements under Section 8 of the Indian Arbitration Act for appointment of an arbitrator. In each of these applications it was alleged that the relevant posts had been abolished, that it had been agreed that a fresh arbitrator be appointed and such an arbitrator could be out of one of the three names agreed to between the parties. The prayer ultimately in those applications was :
'One of the above mentioned officers mentioned in paragraph 8 be appointed to act as an arbitrator who shall have like power to act in the reference and to make an award as if he has been appointed by the consent of parties.'
This was simply an application under Section 8 of the Arbitration Act for the appointment of an arbitrator. The effect of such an appointment has been provided for in Sub-section (2) of Section 8, the relevant part of which is as follows:
'Who shall have like power to act in the reference and to make an award as if he or they had been appointed by consent of all parties.'
These words had been repeated in the prayer of the applications themselves. The position was therefore quite clear to the parties that the effect of appointment of the arbitrator in pursuance of those applications would merely be substitution of a new arbitrator in each of the seven agreements for the names mentioned therein. There was, however, no prayer whatever asking the Court to refer the matter to such an arbitrator. On the 13th of February, 1950 the Court appointed Col. Ranbir Singh as an arbitrator in all the seven cases and farther directed that all the papers be sent to the arbitrator and he was to give his award within two months from that date. A parwana was to be sent to the arbitrator. Obviously this part of the order directing a reference to the appointed arbitrator by the Court was wholly without jurisdiction. After appointment of the arbitrator the Court became functus officio. It was for the parties to approach the arbitrator and to make the reierence. However, Col. Ranbir Singh received pleadings of the parties and fixed some dates for the hearing.
On the 24th of October, 1950 the Government Counsel wrote to Col. Ranbir Singh that he should return all the papers to the Court and not to proceed with the arbitration as he was considered unable to decide questions of law that would be involved. Accordingly Col. Ranbir Singh returned the papers to the Court and on the 27th of October, 1950 the Court asked for new names without giving any information of this order to the appellant. On the 3oth of October, 1950, the appellant made an application asking the Court to review its order dated the 27th of October, 1950. Before this review application could be decided, the defendant proposed three names on the 3rd of November, 1950. On the 18th of November, 1950 the Court rejected the review application holding that Col. Ranbir Singh had himself refused to act and it was just and proper that the work should be done by another arbitrator. Both the parties filed their independent list of arbitrators which did not contain any common name. After hearing counsel for both the parties, the Court ordered on the 13th of February, 1951 that D.O.F.G.H.Q. Simla be appointed arbitrator in all the seven cases. It further directed that all the cases be referred to him and he must file his award within one month. The papers appear to Have been forwarded to the D.O.F.G.H.Q. Simla and Brig. H. L. Bhandari claiming' to be the relevant officer gave notice to the appellant that he should appear with all his papers and evidence before him in Meerut, fixing 2nd of May, 1951 as the date of hearing. This notice was issued on the 5th of March, 1951 and was received by the appellant on the 8th of March, 1951.
On receipt of this notice, the appellant applied to the Court on the 8th of March, 1951 that the order appointing D.O.F.G.H.Q. Simla as an arbitrator be reviewed and among others the main ground indicated was that this officer had already been mentioned as an arbitrator in four of the agreements but since office had been abolished it had become necessary to appoint a fresh arbitrator. Since there was no such office, the appointment of any person by that designation was improper. The appellant, however, did not apply to the Court along with this application for stay of proceedings before the arbitrator. The result was that the arbitrator continued his activities and actually reached Meerut on the date fixed. Instead of applying to the Court for stay of proceedings, the appellant sent a letter to the arbitrator saying that he had applied for a review of the order by which he was appointed an arbitrator, that he had no confidence in him and that he should not proceed further in the matter of arbitration. The arbitrator replied that he had been asked by the Court to decide the matter and he would continue to do his duty unless the Court ordered otherwise. This reply of the arbitrator was received by the appellant either on the 1st or and of May, 1951. After receipt of this reply, the appellant made an application to the Court on the 4th of May, 1951 for stay orders. The Court ordered that further proceedings before the arbitrator be stayed. But when the order reached the arbitratorhe had already made the ex parte awards and same day they were filed in Court. Against these awards the appellant made seven applications for setting aside of the awards on the 24th of May, 1951 in which a number of grounds were taken. But it is not necessary to refer to all of them. Objections to the awards were rejected by the Court and a decree was passed in terms thereof. Against this order, the appellant has filed these appeals.
2. The first question raised by the learned counsel for the appellant is that under Section 8 of the Indian Arbitration Act the parties could not appoint a man of their own choice and therefore the appointment of Col. Ranbir Singh as an arbitrator was itself invalid. That point, however, need not be decided in detail. It is enough to say that the appointment was made by the Court and it is not relevant whether the man appointed had been chosen by the parties or not. Moreover Col. Ranbir Singh having returned the papers there is no use going into the question whether his appointment was valid.
3. The second question raised by the learned counsel is that the removal of Col. Ranbir Singh by the Court was wrong. This point also does not need much discussion. On receipt of the letter from the Government Counsel Col. Ranbir Singh himself returned the papers and refused to act as an arbitrator. In these circumstances there was no question of his removal by the Court. Nobody had applied for his removal and the Court had not passed any order removing him.
4. The third point contended for by the counsel for the appellant is that Brig. Bhandari was never appointed as an arbitrator and he had no jurisdiction to take up the matter. As stated above, the Court had not appointed any person by name but had appointed D.O.F.G.H.Q. Simla. Whether Brig. Bhandari was the officer having that designation is a question of fact and whether he had the authority to act as such will depend upon the finding whether he was an officer of that designation. Brig. Bhandari has been produced as D. W. 4, He has stated that he was holding the post of the Director of Farms (D.O.F.) General Head Quarters Simla at the time when he received the papers. But in cross-examination he stated that at the time of agreement there were two independent corps, one called the Veterinary and Remount and the other Military Farms Department. Each one had a Director of its own. After the war both these corps were amalgamated and the new corps is now known as Remount Veterinary and Farms and he is the Director. This statement shows that Brig. Bhandari was the Director of the new corps that came into existence in 1947-48 and the old corps of the Military Farms was completely abolished. Since the corps itself whose Director was called the D.O.F. was abolished, it is difficult to say that the Director of the new amalgamated corps who may now be called the Director of Remount and Veterinary Farms is the same officer who was called the Director of Farms. If the position had been that the two corps had remained in existence and the same person had been appointed Director of both the corps it was possible to hold that Brig. Bhandari was the Director of Farms and was also at the same time Director of the Veterinary and Remount. But the corps themselves having been abolished, we are of opinion that there remained no officer who couldbe called the Director of Military Farms. There is therefore force in this objection raised by the learned counsel for the appellant. The contention of the respondent which was acceptable to the Court below, that mere amalgamation of the two posts in the same officer does not mean that the post of the Director of Military Farms has been abolished, is not correct. Since the Court appointed the Director of Farms as the arbitrator at the time when there was no Director of Farms, Brig. Bhandari had no jurisdiction to take up the matter and assume duties of an arbitrator.
5. But even assuming that Brig. Bhandari was the Director of Farms, there is another reason why his acting as an arbitrator was wholly illegal and without jurisdiction. As stated above, he had merely been appointed as an arbitrator and the effect of such an appointment by the Court was that he was considered to be an arbitrator appointed by the parties themselves. It was then for the parties to refer their disputes to the arbitrator. Reference in such a case must be out of Court and must be by both the parties together. Reference out of Court cannot be by one party alone. In the present case after the appointment of Brig. Bhandari only the Government approached the arbitrator to take action and the appellant flatly refused to submit to his jurisdiction and even applied to the Court for his removal. The order of the Court referring the dispute to him was wholly without jurisdiction and had no effect in law. Unless an application under Section 20 was made to the Court, for referring the matter to arbitration, the Court could not pass any orders making the reference through Court. An application under Section 20 has to be made in writing as provided for in Section 20(2) of the Indian Arbitration Act. No such application having been made the direction of the Court was without authority.
6. The contention of the learned counsel for the respondent in this respect was that, in any case, his appointment under Section 8 as an arbitrator gave him the power to act and when any one of the parties to the contract approached the arbitrator, for taking up the matter, the arbitrator had the power to proceed with the arbitration. He has referred to paragraph 3 of the First Schedule attached to the Arbitration Act which is as follows:
'The arbitrators shall make their award within four months after entering on the reference or after having been called upon to act by notice or in writing from any party to the arbitration agreement or within such extended time as the Court may allow.''
From this it was sought to be inferred that one party alone could refer the dispute to and ask the arbitrator to take up the matter. We are unable to agree with this contention. This paragraph merely refers to a stage when the matter has already been referred to an arbitrator and he neglects his duty of starting work. Then one of the parties may give notice that he should proceed with the arbitration. This paragraph has nothing to do with reference being made by one party alone. In Thawardas v. Union of India : 2SCR48 , their Lordships of the Supreme Court observed as follows:
'A reference requires the assent of both sides. If one side is not prepared to submit a given matter to arbitration when there is an agreement between,them that it should be referred, then recourse must be had to the Court under Section 20 of the Act and the recalcitrant party can then be compelled to submit the matter under Sub-section (4). In the absence of either, agreement by both sides about the terms of reference, or an order of the Court under Section 20(4) compelling a reference, the arbitrator is not vested with the necessary exclusive jurisdiction.'
In this case, therefore, Brig. Bhandari had no jurisdiction to arbitrate and the award given by him at the request of the Government department is a nullity.
7. This leads us to a consideration of another important legal point raised by learned counsel for the respondent that an award cannot be set aside on the ground that the original reference was defective. His argument is that in a proceeding to set aside an award it must be assumed that there was a valid reference to the arbitrator and only matters before the arbitrator can be raised for the purpose of getting an award set aside. For this contention learned counsel for the respondent has relied upon the cases of Chhabba Lal v. Kallu Lal and Mangal Singh v. Nawab Singh : AIR1962All219 . After a careful consideration of the arguments of both sides we are of opinion that the decision of the learned single Judge of this Court in Mangal Singh's case : AIR1962All219 requires reconsideration and the Privy Council case reported in is distinguishable.
8. Section 30 of the Arbitration Act lays down grounds on which an award can be set aside. Grounds (a) and (b) are not relevant in this case and the question for determination is whether ground (c) covers a case of invalidity of the reference. The relevant part of Section 30 of the Arbitration Act is as follows:
'An award shall not be set aside except on one or more of the following grounds, namely,--
(c) that an award has been improperly procured or is otherwise invalid.'
The precise point is whether the phrase 'otherwise invalid' includes an award which is invalid on account of some defect in the reference itself or these words must be construed as relating to invalidity arising out of arbitration proceedings alone. In the case of Mangal Singh : AIR1962All219 mentioned above, a learned single Judge of this Court referred to the case of and thought that this pronouncement by the Privy Council was decisive of the matter. One passage from the Privy Council case was quoted and relied upon which is as follows:
'All the powers conferred upon a Court in relation to an award on a reference made in a suit presuppose a valid reference on which 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.'
It escaped apparently the notice of the learned Single Judge that this passage related to a reference through Court, and had no application to reference out of Court. In a reference through Court if there was a defect in it, it could be corrected by a review application or appeal or other appropriate method for correction of Court proceedings. The attention of the learned Judge was not apparently drawn tothe distinction which their Lordships of the Privy Council made between an award made on references out of Court and an award made on reference through Court. An award made in, a proceeding out of Court was to be set aside under the second Schedule of the C.P.C. 1908 by an application under paragraph 21 while an award made on reference through Court was to be set aside on an application under paragraph 15 of the said Schedule. After the passage quoted above, their Lordships of the Privy Council went on to observe as follows:
'By way of contrast the language of para 21 of Schedule II, may be noted. That paragraph empowers the Court to pronounce judgment according to an award made on a reference out of Court, and the opening words require the Court to be satisfied that the matter has been referred to arbitration. There are no such words in paragraph 15.'
Since their Lordships of the Privy Council have not discussed the matter further than saying that they agree with the view of Sir Iqbal Ahmad, J. in Mt. Mariam v. Mt. Amina : AIR1937All65 , we would now consider the reasoning of that learned Judge, in the 1937 Full Bench case, to see whether the reasons which led the learned Judge to come to that conclusion under the provisions of the Second Schedule of the Civil Procedure Code still hold good under the new Act. Before doing so it would be convenient to read paragraphs 15 and 21 of the second Schedule. The relevant parts of paragraph 15 of the said Code are:
'An award ordered under paragraph 14 becomes void on failure of the arbitrator or umpire to reconsider it. But no award shall be set aside except on one of the following grounds, namely-
(c) The award having been made after the issue of an order by the Court suspending the arbitration and to proceed with the suit or after the expiration of the period allowed by the Court or being otherwise invalid.'
As noted above, this paragraph deals with the award made on a reference through Court and paragraph 21 which deals with awards made on reference out of Court is as follows:
'Where the Court is satisfied that the matter has been referred to arbitration and that an award has Been made thereon and where no ground such as is mentioned or referred to in paragraph 14 or 15 is proved the Court shall order the award to be filed and shall proceed to pronounce judgment according to the award.'
Thus while dealing with awards made on reference out of Court, the Court had not only to look to the grounds mentioned in paragraph 15 but also to see and be satisfied that the matter had been referred to arbitration, which necessarily involves a decision whether the reference was valid.
9. In the Full Bench case mentioned above it was contended that the words 'or being otherwise invalid' in paragraph 15 were not to be construed as referring to the invalidity of the same kind as is referred to in the other phrase in the same clause and was wide enough to include every kind ofobjections to the validity of the award. This argument was not accepted by Sir Iqbal Ahmad, J. as he then was and he proceeded to give his reasons as follows:
'If the legislature has, by the addition of these words, intended to let in objections to the invalidity of the order of reference itself or to some irregularity of the procedure of the Court antecedent to the order of reference or subsequent to the delivery of the award, nothing would have been easier for the legislature than to say so in clear and unambiguous language. At any rate, I would have, in that event, expected the legislature to enact such a rule in a separate clause. The context in which those words occur leave an impression on the mind that these words have been used ejusdem generis with the preceding sentences in Clause (c).'
It will be useful now to observe that the reasons which appealed to Sir Iqbal Ahmad, J. have now been met with by the legislature. In Section 30 of the Arbitration Act the legislature has confined clause (c) to two matters alone. One is that 'the award has been improperly procured' and second that it is 'otherwise invalid' and has completely disassociated it with the defects which were included in Clause (c) of paragraph 15 of the Second, Schedule which defects were peculiar to proceedings before the arbitrator alone. In the present Clause (c) the phrase 'has been improperly procured' is itself wide enough to include the defective references which may also have been improperly procured and thereby lead to improper procurement of an award and thus the second argument of Sir Iqbal Ahmad, J. has also been met by the legislature by associating the phrase 'is otherwise invalid'' with improper procurement of the award and now it cannot be said that the phrase 'is otherwise invalid' has any association with defects peculiar to the proceedings before the arbitrator alone. Even if this phrase is now read ejusdem generis, it cannot be confined to defects peculiar to proceedings before the arbitrator alone. In fact there is now no scope for applying this principle to this clause.
10. Another thing to be noted is that in the present Act there is no distinction in the powers of Court while setting aside an award on reference through Court and while setting aside an award on reference out of Court, as existed in the second Schedule, and which was observed as an additional ground by their Lordships of the Privy Council in . Thus all the reasons which led Sir Iqbal Ahmad, J. and the Privy Council to hold that the phrase ' is otherwise invalid' had a restricted meaning, no longer exist.
11. The learned single Judge in the case of : AIR1962All219 has also observed that an application challenging the validity of the reference on grounds other than defects in arbitration proceedings should be made under Section 33 and is not covered by Section 30 and thus according to him the Act provides an independent procedure for challenging the reference so that the same ground could not be covered within Section 30. This again, to our mind, is not the correct position.
12. To appreciate the legislature's scheme while enacting 1940 Arbitration Act it is necessary to go through some other sections also. Section 15 gives powers to the Court to modify an award andlays down three grounds on which an award can be modified. This section does not say that any party can apply for modification of the award. It only gives power to the Court to do so. Similarly Section 16 of the Act empowers the Court to remit an award under certain conditions and again does not provide for an application to that effect. Section 30 empowers the Court to set aside an award and it is significant that this section also does not provide for an application being made to that effect. All these three sections empower the Court to act in a particular manner if specified circumstances existed. Section 30 logically falls after Section 16 and then comes Section 17 which lays down:
'17. 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.........'
The language of this section is very significant. The Court is bound to pass a decree on the terms of the award if it does not remit it or does not set it aside. If the interpretation accepted by the learned single Judge is proper the result would be that the Court would be bound to pass a decree on the award even though it may hold, on an application under Section 33, that the reference itself was invalid and consequently the award was a nullity. We are unable to hold that the sections necessarily lead to such a result. We think that setting aside of the award is a necessary result of a finding that it is invalid.
13. The idea behind the whole scheme appears to be that an application, by a party challenging the validity or correctness of the award on whatever ground, has to be made under Section 33 and the language of Section 33 is not to be construed in a restricted sense so as to exclude the reliefs contained in Sections 15, 16 or 30, but in a very wide sense including all reliefs regarding arbitration matters. In such an application the party may ask for and the Court may grant any relief considered proper under Sections 15, 16, 30 or even a mere declaration.
14. That the language of Section 33 is not to be construed in a restricted sense and the setting aside of the award must be included within the term 'validity of the award' is also apparent from the language used in Sections 31 and 32. Section 31 gives jurisdiction to the Court and Sub-section (1) of the said section says that an award has to be filed in a Court which has jurisdiction in the matter to which the reference relates. Sub-section (2) thereof is important and may be quoted in full:
'31 (2) Notwithstanding anything contained in any other law for the time being in force and save as otherwise provided in this Act, all questions regarding the validity, effect or existence of an award or an arbitration agreement between the parties to the agreement or persons claiming under them shall be decided by the Court in which the award under the agreement has been, or may be, filed, and by no other Court.'
Thus by this sub-section the Act not only gives-exclusive jurisdiction to a particular Court to decide 'all questions regarding the validity, effect or existence of an award' but excludes the jurisdiction of all other Courts to go into these matters. These words 'validity, effect or existence of an award' must therefore be read in the widest sense. It cannot be held that the jurisdiction to set aside an award under Section 30 is not covered by this section.
15. Section 32 then bars a suit relating to matters which can be decided under the Act and in this section again it is provided 'no suit shall lie on any grounds whatsoever for a decision upon the existence, effect or validity of an arbitration agreement or award ...............' Again it cannot be contended with any force that these words, 'existence, effect or validity' have been used in any restricted sense. These words obviously imply that all questions relating to the invalidity whatever be the cause of it, must be decided under the Act and a suit is barred. These sections relating to jurisdiction of Courts are followed by Section 33 which runs as follows:
'33-- 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.........'
It is thus significant to note that those very crucial words 'existence, effect or validity' have been repeated in Section 33 and this is the only section which authorises a party to make an application. We are, therefore, satisfied that Section 33 is the only section under which a party has been given the right to apply to the Court to challenge either the agreement or the award. The scheme of the Act therefore is that after the award has been filed, a party is permitted to make an application under this section to bring all kinds of defects to the notice of the Court and the Court will give such reliefs as it thinks fit either under Section 15 or Section 16 or even under Section 30 of the Act. If an award has not been made and a party wants to challenge the validity of the agreement or of reference, then, of course, Court will merely give a suitable declaration.
16. It was also contended that the scope of Section 33 is merely to give a declaratory decree and not to cancel an award. We are unable to agree with this contention. Cancellation of an award also merely involves a finding by the Court that the award is invalid, The word 'cancellation' in Section 30 does not appear to have been used in a technical sense and the idea merely is that the Court shall remove the award from existence whenever it finds that the award is invalid. In this view we are supported by the Full Bench decision of the Calcutta High Court in the case of Saha and Co. v. Ishar Singh Kripal Singh and Co. : AIR1956Cal321 and we, if we may say so with respect, completely agree with the reasoning of ths learned Chief Justice.
17. We are, for the reasons given above, satisfied that the words 'or otherwise invalid' in Section 30 include an objection to the validity of the reference which affects the award and as heldabove, the arbitrator Brig. Bhandari was neither appointed by the Court nor had he any valid reference before him. He could not give any award and the award is invalid.
18. Learned counsel for the appellant also contended that the award was vitiated on account of the misconduct of the arbitrator. He pointed out that the notice which the arbitrator served on the appellant did not mention that the arbitrator would proceed ex parte if the appellant did not appear. We do not think that it was necessary for the arbitrator to mention it in the notice. When he had informed the appellant to appear along with his evidence, it was necessarily implied that 2nd of May was fixed for the final disposal of the matter and if the appellant did not appear the case would be decided on the merits. It was also contended on behalf of the appellant that the arbitrator in the absence of the appellant should have dismissed in default and should not have decided the same on the merits. We do not have any difference between the two procedures. If the arbitrator had dismissed the claim of the appellant ex parte, the result would have been the same and the contention of the learned counsel for the appellant that he would have had a right tohave it restored is without foundation. Procedure of restoration and setting aside of ex parte orders does not apply to arbitrations.
19. Lastly the contention relating to misconduct of the arbitrator was that he did not ask for fresh claim from the parties. We do not think there is any force in this contention either. The arbitrator is not bound to ask for written claims. The parties can go to the arbitrator and make him understand their respective cases even without a claim.
20. During the course of argument, it was also contended that Brig. Bhandari was instrumental in the removal of the previous arbitrator Col. Ranbir Singh and was therefore so deeply interested in the matter that he was not a proper person to be appointed an arbitrator. The facts relating to these points have not been very clearly brought out in the record. Brig. Bhandari alone was asked in cross-examination about this matter. He stated that the D.G.C. asked his permission to get Col. Kanbir Singh removed from the arbitratorship,' The D.G.C. did not give reasons but Brig. Bhandari gave his consent for such an action. Since Brig. Bhandari was the head of the department relating to which arbitration proceedings were going on, such a consent may have been only formal and it cannot be said that merely by giving his consent. Brig. Bhandari became so much interested that he could not be appointed an arbitrator. He was a high and responsible officer and no motive could be attached to him on such evidence. We are therefore unable to agree with the learned counsel for the appellant that there was any misconduct on the part of Brig. Bhandari.
21. Learned counsel for the respondent contended that the invalidity of the reference on the ground that there was no application under Section 20 of the Arbitration Act and there was no mutual reference out of Court cannot be raised because it had not been taken up at any earlier stage. We do not agree with this contention of the learned counsel for the respondent. In the first place, it is a matter of jurisdiction and even if it hadnot been raised earlier it cannot be shut out.
22. In the second place we find that the matter is amply covered by pleadings and the facts are patent on the record. In paragraph 12 of the grounds of appeal in this Court it has been stated 'that Brig. Bhandari had never been legally appointed as an arbitrator to adjudicate disputes between the parties. It was wrong for the Court below to have recognised him as arbitrator and to have passed a decree in terms of the so-called award given by him.' This ground is wide enough to embrace the objection which we have accepted. Paragraph i of the objections put forward by the appellant before the Court against the award is as follows, 'that the reference made to the arbitrator Brig. Bhandari was not valid in law ..........,..........' This objectionclearly raises the question regarding validity of the reference.
23. The result therefore is that all the appeals are allowed and the awards are set aside. The appellant will get his costs from the respondent.