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Vineet Kumar Vs. Smt. Bhagwandei - Court Judgment

LegalCrystal Citation
SubjectArbitration
CourtAllahabad High Court
Decided On
Case NumberCivil Revn. No. 455 of 1976
Judge
Reported inAIR1977All403
ActsArbitration Act, 1940 - Sections 14, 17, 32 and 33
AppellantVineet Kumar
RespondentSmt. Bhagwandei
Appellant AdvocateH.S. Nigam, Adv.
Respondent AdvocateH.S. Joshi, Adv.
DispositionRevision dismissed
Excerpt:
.....- decree - fraud in proceeding - held, suit for setting-aside the award is not barred. (ii) award - application - section 33 of arbitration act,1940 - decree passed under section 17 - held, the application is not tenable in law under section 33. - - if certain fraudulent proceedings had taken place in a suit where the award is made the rule of the court, then irrespective of whether the arbitration agreement or the award is bad or not, it should be open to a party to challenge the decree passed in such a suit on the ground of fraud vitiating the proceedings in the suit. and, it is not necessary that such an application on the ground of non-existence of the arbitration agreement need be made before the passing of the judgment and the decree, because the very fact that fraud has..........she, in fact, was no party to the same. she alleged that she came to know of the fraud when the award-decree was sought to be executed and in the execution thereof her residential house and cash deposit were got attached. she then got the file of misc. case no. 64 of 1974 inspected and then she came to know about the aforesaid fraud.3. the defendant did not file any written statement but put in applications and in one of such applications, a contention was raised that the suit was not maintainable and the plaintiff's only remedy was by way of application under section 33 of the arbitration act. it was also pointed out that the plaintiff had earlier moved such an application under section 33 but she got the same dismissed after filing the suit. by the impugned order, the trial court.....
Judgment:
ORDER

M.P. Mehrotra, J.

1. This revision is directed against an order whereby the trial court rejected a preliminary objection which was raised on behalf of the defendant to the maintainability of the suit.

2. The brief facts are these: An award was made the rule of the court in Misc. Case No. 64 of 1974 by the court of the District Judge, Rampur. Subsequently, Smt. Bhagwandei, the plaintiff-opposite party, filed regular suit No. 64 of 1975 in the same court seeking a declaration that the decree passed in the aforesaid Misc. Case No. 64 of 1974 was null and void and inoperative. She contended that she never entered into any arbitration agreement and was never any party to any arbitration proceedings. She further alleged that the application whereby she was alleged to have moved the District Judge in the aforesaid Misc. Case for making the award of the arbitrator the rule of the court was not made by her and her alleged signature thereon was forged. In other words, her challenge was that the entire proceedings were fraudulent and she, in fact, was no party to the same. She alleged that she came to know of the fraud when the award-decree was sought to be executed and in the execution thereof her residential house and cash deposit were got attached. She then got the file of Misc. Case No. 64 of 1974 inspected and then she came to know about the aforesaid fraud.

3. The defendant did not file any written statement but put in applications and in one of such applications, a contention was raised that the suit was not maintainable and the plaintiff's only remedy was by way of application under Section 33 of the Arbitration Act. It was also pointed out that the plaintiff had earlier moved such an application under Section 33 but she got the same dismissed after filing the suit. By the impugned order, the trial court rejected the objection raised on behalf of the defendant and held that the suit was maintainable and was not barred by Section 32 of the Arbitration Act, Feeling aggrieved, the defendant has come up in the instant revision and in support and opposition of the revision, I have heard the learned counsel for the parties. Sri H. S. Nigam learned counsel for the applicant, has placed reliance on Basant Lal v. Surendra Prasad : AIR1957Pat417 . A reference has also been made to Mangal Singh v. Nawab Singh : AIR1962All219 , Prem Sagar Chawla v. Security and Finance (P.) Ltd. (AIR 1968 Delhi 21) (FB) and Jawahar Lal Berman v. Union of India : [1962]3SCR769 . On the other hand, Sri H. S. Joshi, learned counsel for the plaintiff-opposite party has placed reliance on Saha & Company v. Ishar Singh Kripal Singh and Company : AIR1956Cal321 , Kailashpati Singhania v. Ram Gopal Gupta : AIR1973All316 , L. Madan Lal Haveliwala v. Sunder Lal : AIR1964All38 and Ved Prakash v. Ram Narain Goel : (1977)ILLJ101Del .

4. To appreciate the nature of controversy, a few sections of the Indian Arbitration Act may be noticed, Sections 14, 17, 30, 31, 32 and 33 are as follows:

'14. Award to be signed and filed.--(1) When the arbitrators or umpire have made their award, they 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.

(2) The arbitrator or umpire shall, at the request of any party to the arbitration agreement or any person claiming under such party or if so directed by the court and upon payment of the fees and charges due in respect of the arbitration and award and of the costs and charges of filing the award, cause the award or a signed copy of it, together with any depositions and documents which may have been taken and proved before themto be filed in court, and the court shall thereupon give notice to the parties of the filing of the award.

(3) Where the arbitrators or umpire state a special case under Clause (b) of Section 13, the court, after giving notice to the parties and hearing them, shall pronounce its opinion therein and such opinion shall be added to, and shall form part of the award.

17. 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 except on the ground that it is in excess of, or not otherwise in accordance with the award.

30. 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.

31. Jurisdiction-- (1) Subject to the provisions of this Act, an award may be filed in any court having jurisdiction in the matter to which the reference relates.

(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.

(3) All applications regarding the conduct of arbitration proceedings or otherwise arising out of such proceedings shall be made to the court where the award has been, or may be filed, and by no other court.

(4) Notwithstanding anything contained elsewhere in this Act or in any otherlaw for the time being in force, wherein any reference to any application under this Act has been made in a court competent to entertain it; that court alone shall have jurisdiction over the arbitration proceedings and all subsequent applications arising out of that reference and the arbitration proceedings shall be made in that court and in no other court.

32. Bar to suits contesting arbitration agreement or award. -- Notwithstanding any law for the time being in force, no suit shall lie on any ground, whatsoever for a decision upon the existence, effect or validity of an arbitration agreement or award, nor shall any arbitration agreement or award be enforced, set aside, amended, modified or in any way affected otherwise than as provided in this Act.

33. Arbitration agreement or award to be contested 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.'

The point for decision is when an award has been made the rule of the court and a decree has been passed thereon, then can such a decree be challenged by an application under Section 33 of the Arbitration Act and whether a suit to challenge the decree would be barred by Section 32 of the said Act. Apart from the case law whose drift I shall notice presently it seems to me that in terms Sections 32 and 33 do not apply where the challenge is to the de-cree and not to the award. It is true that in the facts of the instant case, the challenge by the plaintiff is directed to the existence of the arbitration agreement itself and to all subsequent proceedings but, at least one part of the challenge, and the basis thereof must be held to have arisen after the delivery of the award and the same is independent of the award. The plaintiff has alleged that she did not sign any application which was alleged to have been moved by her under Section 14 of the Arbitration Act for making the award the rule of the court. In other words, she alleged that the so-called application under Section 14 ofthe Arbitration Act was a forgery and not a genuine one. I do not think this allegation or contention can be said to be covered by Sections 32 and 33 of the Arbitration Act, Irrespective of whether an arbitration agreement is genuine or valid or an award is genuine or valid or not, it is a challenge to certain proceedings which have taken place in the suit itself where the award was sought to be made the rule of the court. A fraud has been alleged in the proceedings in the suit. It is true that in the facts of the instant case, fraud is alleged to have been committed much earlier than the proceedings in the suit. The arbitration agreement itself is said to be vitiated by fraud. But one can conceive of a situation where a party does not allege the arbitration agreement or the award to be non-existent or invalid and yet may seek to question the proceedings in the suit in which the award has been made the rule of the court. If certain fraudulent proceedings had taken place in a suit where the award is made the rule of the court, then irrespective of whether the arbitration agreement or the award is bad or not, it should be open to a party to challenge the decree passed in such a suit on the ground of fraud vitiating the proceedings in the suit. If it is open to a party to challenge a decree on the ground of fraud vitiating the proceedings under Sections 14 and 17 of the Arbitration Act, then the party. I conceive, cannot be compelled to challenge the arbitration agreement or the award instead of challenging only the proceedings in the suit under Section 14 read with Section 17 of the Arbitration Act. It is obvious that a bar under Section 32 to the maintainability of a suit has been created inasmuch as a more efficacious alternative remedy is provided in Section 33 itself but Section 33 will not be attract-ed to a case where a party seeks to question the passing of a decree under Section 17 of the Arbitration Act on the ground of fraud in the proceedings in the court which took place under Section 14 read with Section 17 of the said Act. In this situation, a regular suit cannot be barred to question the decree.

5. The next question is whether an application under Section 33 is maintainable when a decree has been passed on the basis of the award under Section 17 of the Arbitration Act. There is clear divergence of judicial opinion on this controversy. In : AIR1956Cal321 (supra) a Full Bench of the said court by a majority verdict has laid down that an applicationunder Section 33 could not be made after the award has been made the rule of the court. Chief Justice Chakravarty, with whom two other learned Judges of the said court agreed to form the majority, observed:

'It is said that the anomaly cannot be avoided by simply including all grounds of attack against an award among the grounds for setting an award aside, because the right to challenge an arbitration agreement is an independent right under Section 33 and therefore even if a decree may be passed on an award, the right to challenge an arbitration agreement would remain unaffected.

I do not consider that view to be sound, It is true that Section 33 provides for a separate and independent challenge to an arbitration agreement. If no arbitration proceedings have yet been had and no award has been made, a party may undoubtedly challenge an arbitration agreement by means of an application made to the court.

But I am of opinion that after an award has been made, a party, if he desires to challenge the validity of an arbitration agreement, can make his challenge only by way of advancing it 'as a reason for impugning the award as invalid. No independent application against the agreement would at that stage be maintainable. It follows that if a party desiring to challenge an arbitration agreement has not done so by way of asking the award to be set aside on that ground and has allowed a decree to be passed on the award, cannot thereafter launch an attack against the agreement.

The true view to take appears to me to be that after an award has been made, all grounds of objection to the award, including grounds of the non-existence or invalidity of the agreement or reference, and all other grounds of nullity must be taken in an application for setting aside the award and that no ground not so taken, can be available after the time, for making such an application hag expired. All grounds not so taken must be deemed to have been waived.

I do not consider it right to say that the invalidity or non-existence of an agreement is not a proper ground to urge for setting aside an award and that a party desiring to plead such invalidity or non-existence will not be concluded by not urging it by means of an application for setting aside the award, but that he must nevertheless urge such ground before the decree is passed and will be concluded by the decree if he does not urge them even at a later stage. In my view, as I have already explained at some length the non-existence or invalidity of an agreement is also a ground for setting aside an award and therefore must be urged by means of an application under Section 30 and if it is not urged by such an application within the time limited by law, the consequence laid down in the last part of Section 17 of the Act will follow.'

6. Therefore, the Calcutta view seems to be that after the award has been made, then no application under Section 33 would lie but a party may file objections to the award including an objection about the non-existence of the arbitration agreement and may seek the setting aside of the award under Section 30. On the other hand, in : AIR1957Pat417 (supra), a Division Bench laid down as under:

'An application under Section 33 by a person alleged to be a party to an arbitration agreement, for declaration of its non-existence, on the ground that it was fabricated, and, he was no party to it is maintainable, notwithstanding that an award, judgment and decree, have been passed: and, it is not necessary that such an application on the ground of non-existence of the arbitration agreement need be made before the passing of the judgment and the decree, because the very fact that fraud has been committed upon the court and the party clearly indicates that the party wronged had no knowledge of the proceedings before the court, or the arbitrator, and naturally, therefore, in such circumstances he could make an application, under Section 33 of the Act, only when the fraud becomes known to him.'

A mere reading of Sections 31 and 32 of the Act make the position absolutely clear that the question about non-existence, or invalidity, of an arbitration agreement also has to be dealt with under the Act itself, and, not by a separate suit. It is for this reason that Section 33 has been enacted providing the making of an application for such a purpose.'

7. The Patna Court has placed reliance on the Privy Council decision in Shree Meenakshi Mills Ltd. v. Patel Brothers but I do not think that the said case is of any assistance in view of the fact that Sections 32 and 33 of the Arbitration Act did not fall for consideration in the said case. In : (1977)ILLJ101Del (supra), a learned single Judge laid down as under:

'After an award of an Arbitrator has been made a Rule of court by court by consent of parties or after contest, no application will lie under Section 33 though if the decree passed was a nullity in the sense that it was passed without jurisdiction, it may be possible to have it challenged under Section 47 of the Civil P. C. whenever and wherever it is sought to be enforced against a party.''

8. In : AIR1973All316 (supra), it was laid down as under:

'Where a consent decree based on an award is passed and the award and decree both are declaratory in nature and the rights and liabilities of the parties under both of them are only contingent, a suit for the enforcement of certain claims which have accrued subsequent to the passing of the decree, even if claims are made by virtue of rights declared by the decree, is not barred under Section 32 nor is it barred under Section 47 C.P.C. Section 47 is not attracted in case of declaratory decrees.'

9. I do not think that this case has any bearing on the present controversy.

10. In : AIR1964All38 (supra)', a Division Bench laid down as under:

'Anything like a written statement is completely out of place in a proceeding under the Arbitration Act. There cannot be an application under Section 33 without a prayer for certain relief. Though no form is prescribed for an application under Section 33 and that even the words 'under Section 33' need not be written in the application a written statement simpliciter containing no prayer at all, bearing no court-fee and filed after the expiry of the period of limitation for an application, in response to a notice issued under Section 14(2) of the Act cannot be treated as an application under Section 33.'

11. The Division Bench expressed its agreement with the aforementioned Full Bench decision of the Calcutta High Court reported in : AIR1956Cal321 (supra). The Division Bench seems to be of the view that the period of limitation for an application under Section 33 is the one which was prescribed by Article 158 of the old Limitation Act for setting aside the award viz. 30 days from the date when the notice of the filing of the award is served. It is obvious that in view of the aforesaid facts, it must be held that the said Division Bench pronouncement byimplication lays down that after the award has been made the rule of the court and a decree has been passed thereon under Section 17 of the Arbitration Act, then no application under Section 33 could lie for setting aside the award. This follows from the clear law laid down in the said case that the limitation for making such an application under Section 33 is 30 days from the date when the notice of the filing of the award is served on a party. As the Division Bench is binding on me, I cannot follow the view of the Patna Court reported in the aforesaid : AIR1957Pat417 . In : AIR1962All219 (supra), a learned single Judge laid down as under:

'In an application to set aside an award, the validity of the arbitration agreement cannot be challenged.

The grounds upon which an award can be set aside have been stated in Section 30 and they do not embrace the invalidity of an arbitration agreement. The expression 'or is otherwise invalid' in Clause (c) of Section 30 does not include such an objection. The expression is to be taken as ejusdem generis with the words preceding in Clause (c). The true meaning and effect of those words is that the party challenging the award must be presumed to accept the validity of the reference on which the award is based.

Section 33 is the only section under which an application can be made challenging the existence or validity of the arbitration agreement.''

12. The learned Judge expressed his preference for : AIR1957Pat417 . and dissented from the law laid down in : AIR1956Cal321 . But a subsequent Division Bench of our court reported in : AIR1964All38 (supra) has expressed its agreement with the Calcutta Full Bench and in this view of the matter, the learned single Judge's view cannot be upheld. Moreover, there is nothing in this case touching on the question whether after a decree has been passed under Section 17, an application under Section 33 would or would not lie. In AIR 1968 Delhi 21 (supra), the Full Bench of the said court undoubtedly differed from the majority view in : AIR1956Cal321 and preferred the observation of the minority view as laid down by Bachawat, J. in the said case. It should, however, be made clear that the Full Bench was also not directly called upon to consider the controversy which I have been called upon i. e. whether after the passing of thedecree under Section 17 of the Arbitration Act an application under Section 33 would or would not lie. The Full Bench in the Delhi case had to consider whether the period of limitation under the old Article 158 was also applicable to an application under Section 33 of the Arbitration Act. Moreover, the following observations seem to suggest that after the passing of the decree under Section 17, no application under Section 33 would lie:

'Once a notice is served on a party about the filing of the award it has to object to the award being made the rule of the court before a decree is passed. It cannot, therefore, be said that although after the expiry of 30 days the court may pass a decree under Section 17 yet the period of limitation for challenging the factual existence of the agreement would not have run out with the result that the aggrieved party may still make an application under Section 33. If no objection challenging such existence of an arbitration agreement is filed before the decree is made, the decree will then bind the party and such party's abjections regarding the factual existence of the arbitration agreement may be ineffective.'

13. In : [1962]3SCR769 (supra); the scope of Sections 31, 32 and 33 has been examined. The instant controversy did not arise for consideration in the said case.

14. I should like to make it clear that the suit in the instant case was filed in the same court in which the application under Section 33 would have been made if such an application were maintainable in law. I have already observed that it was the court of the District Judge which had passed the decree in the aforesaid Misc. Case No. 64 of 1974. The suit was also filed in the same court and the application under Section 33, if at all maintainable, would have been filed in the said court. Therefore, so far as the forum is concerned, not much turns whether the suit is treated as a regular suit or is deemed to be an application under Section 33. If the courts below were of the view that no suit would lie in view of Section 33, then, there would be nothing to prevent the said court treating the plaint in the suit as an application under Section 33. However, there will be one big difference and that has to be noticed. In case the suit is maintainable, then it will result in the passing of a decree from which an appeal would lie to this court. However, if the plaint is treated as an application under Section 33, then no appeal liesunder Section 39 of the Arbitration Act. Therefore, for practical purposes, the controversy between the parties would have no significance in the trial court but could have assumed significance after the decision of the trial court, when an appeal might be contemplated by a party. However, as I have taken the view that the suit is maintainable, I hold that the impugned order in the revision does not suffer from any defect warranting an interference in the instant revision. The revision is accordingly dismissed but in the circumstances of the case, I make no order as to costs. The record of the court below shall be sent down immediately and without any further delay.


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