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Ardeshar Irani Vs. the State of M.P. - Court Judgment

LegalCrystal Citation
SubjectArbitration
CourtMadhya Pradesh High Court
Decided On
Case NumberMiscellaneous Appeal No. 117 and 118 of 1970
Judge
Reported inAIR1974MP199; 1974MPLJ514
ActsArbitration Act, 1940 - Sections 30 and 38; Madhya Pradesh Government Servant (Conduct) Rules, 1959; Madhya Pradesh Government Servant (Conduct) Act - Sections 15(5)
AppellantArdeshar Irani
RespondentThe State of M.P.
Appellant AdvocateU.N. Bhachawat, Adv.
Respondent AdvocateP.L. Mehta, Adv.
DispositionAppeal dismissed
Cases Referred(See Bungo Steel Furniture v. Union of India
Excerpt:
- - such conduct of the plaintiffs does indicate that they were keen to obtain the award at any cost on account of which they chose to remain silent000 about the propriety of fees demanded by the arbitrator, which even according to them, was clearly exorbitant. he must observe in this the ordinary well-understood rules for the administration of justice. such cases of technical misconduct have come to be known as those, which even though do not attribute any turpitude against the arbitrator yet clearly fall within the ambit of this expression. ..depends upon whether the court is satisfied that there may have been--not must have been--or that this irregularity may have caused not must have caused -asubstantial miscarriage of justice that would be sufficient to justify the setting aside.....j.s. verma, j.1. this order shall also govern the disposal of misc. (first appeal no. 117 of 1970 a. krishnamurthy v. the state) both these appeals are filed under section 39(1)(vi) of the arbitration act, 1940, against judgment of the additional district judge, mandsaur setting aside the award.2. the plaintiff-appellant in each case filed the suit for recovery of the amount claimed as due from the state government on the basis of a building contract. on the suit being filed, the defendant state of madhya pradesh applied for staying the suit on the ground that there was an arbitration agreement between the parties, according to which, the dispute was to be decided by arbitration. ultimately such an objection by the defendant was sustained and the dispute was referred for adjudication by.....
Judgment:

J.S. Verma, J.

1. This order shall also govern the disposal of Misc. (First Appeal No. 117 of 1970 A. Krishnamurthy v. The State) Both these appeals are filed under Section 39(1)(vi) of the Arbitration Act, 1940, against judgment of the Additional District Judge, Mandsaur setting aside the award.

2. The plaintiff-appellant in each case filed the suit for recovery of the amount claimed as due from the State Government on the basis of a building contract. On the suit being filed, the defendant State of Madhya Pradesh applied for staying the suit on the ground that there was an arbitration agreement between the parties, according to which, the dispute was to be decided by arbitration. Ultimately such an objection by the defendant was sustained and the dispute was referred for adjudication by the Arbitrator. Shri B. V. Subbarao, Superintending Engineer, Irrigation Department of the State Government. There was no agreement made between the parties with regard to the remuneration to be paid to the arbitrator and the court while referring the dispute to the arbitrator also did not fix the remuneration payable to the arbitrator, It appears that the question of remuneration payable to the arbitrator did not engage the attention of either party, the court or even the arbitrator at that stage.

3. Shri B. V. Subbarao was the arbitrator in both the cases and except for the amount involved, all other facts material for the case are identical. The arbitrator proceeded with the task and the question of payment of remuneration to the arbitrator was raised for the first time by a Me,n0 No. Q-27/Arb. dated 21/8/1169 issued by the arbitrator to the parties in each case. By this memo the arbitrator demanded a sum of Rs. 10,000/- as his fees, to be shared equally by the parties in addition to the expenses incurred by him in the suit which has given rise to this appeal whereas fees demanded in the other case (giving rise to Misc. (first) Appeal No. 117 of 1970) was a sum of Rs. 4,400/- to be similarly shared equally by the parties. The arbitrator also state also stated in that memo that his fees not having beensettled till then, the parties were required to settle the same immediately and that the subsequent hearing or meetings to be held after 8-9-1969. the next meeting, were to be decided by him only after the remuneration had been settled. On receiving such a demand the Officer In-charge of the case on behalf of the State Government replied to the arbitrator by a letter dated 29-8-1969 stating that he had forwarded the arbitrator's demand to the State Government but a decision thereon by the State Government was bound to take some time.

4. Thereafter the arbitiator byMemo No. A27/Arb. dated the 27th October, 1969, gave notice to the parties under Section 14 of the Arbitration Act stating that he had made and signed the award on that day and further that his fees would be as already intimated so that the sealed envelope containing the award would be made available to either of the parties on payment of the full fees. On 13-11-1969, the arbitrator sent another memo No. Q-36/Arb. dated 13-11-1969 addressed to the Officer Incharge of the case on behalf of the State Government stating that the plaintiffs were anxious to proceed further in the matter and that they had already informed the arbitrator about their willingness to pay not only their share of the fees but also the defendant's share of the fees in order to obtain the award. It was further stated by the arbitrator that unless the defendant paid its share of the fees within 10 days, the arbitrator would be free to accept the full fees from the plaintiffs and to hand over the award to them. No document containing such an offer by the plaintiffs 'to the arbitrator in writing has been pointed out to us so that it is clear that the plaintiffs' offer must have been made orally to the arbitrator. On receiving this communication from the arbitrator, the defendant filed an application dated 17-11-1969 in the court stating that the fees demanded by the arbitrator were exorbitant, even assuming that he was entitled to any payment in spite of his being a Government servant drawing the salary of a Superintending Engineer. It was prayed in that application that the Court may fix the amount of fees, if any payable to the arbitrator and also direct the arbitrator to file the award in the court. A telegram was also sent by the defendant to the arbitrator on 20-11-1969 intimating him that an application praying for settlement of the fees had already been filed in the court so that the matter was sub judice and for that reason the award should not be handed over to the plaintiff. A confirmation copy of the telegram was also duly sent. Another application was filed in the court by the defendant on 25-11-1969 to the same effect. The full amount of fees as demanded bythe arbitrator was also simultaneously deposited by the defendant in the court while praying for fixation of proper fees in accordance with Section 38 of the Arbitration Act.

5. Thus, the defendant had not only disputed the demand made by the arbitrator; but had also made an application as required by Section 38 of the Act in the court, deposited the entire amount demanded by the arbitrator as lees by 25-11-1969 and had also intimated to the arbitrator on 20-11-1969 that the matter was pending decision of the court. However, on 14-12-1969, the arbitrator accepted payment of full fees from the plaintiffs and handed over the award to the plaintiffs, who in turn filed it in the court with the prayer to make it a rule of the court Curiously enough, the plaintiffs having paid the full amount of fees to the arbitrator according to his demand without any protest till then in spite of knowledge of the defendant's objection and of the matter being sub judice. in their application dated 9-1-1970 filed in the court along with the award praying that the same be made as the rule of the court, the plaintiffs also stated expressly that the fees charged by the arbitrator were exorbitant so that the proper amount of fees may be determined by the court. Such conduct of the plaintiffs does indicate that they were keen to obtain the award at any cost on account of which they chose to remain silent000 about the propriety of fees demanded by the arbitrator, which even according to them, was clearly exorbitant.

6. Thus, award in the present case was made in favour of the plaintiffs for a sum of Rs. 74,466.37 P. against a total claim of Rs, 1,12,753/- together with interest at six per cent, per annum from 31-7-1961 to 27-6-1969 and counsel's fees Rs. 3,000/- to be paid by the defendant to the plaintiffs. In addition the costs of arbitration amounting to Rs. 10,720/- on account of arbitrator's fees and expenses were to be shared equally by both the parties. In the other case, against the claim of Rs. 41,171.49 P. the award was given in favour of the plaintiff for a sum of Rs. 40,187.05 P. together with interest at six per cent, per annum thereon from 16-6-1961 to 27-6-1969 and Rs. 1.450/- as fees of the plaintiff's counsel in addition to Rs. 5,080/- as costs of arbitiation to be paid entirely by the defendant. In this award (at page 41 of the paper book in Misc. (First) Appeal No. 117 of 1970) in respect of the entire costs of arbitration, the direction is for the defendant to pay the same to the plaintiff which would mean that the entire costs shown therein had already been incurred by the plaintiff. Such costs, incidentally, also include the arbitrator's total fees.

7. The defendant filed objection to the award and the award in each case has been set aside by the court below on the around of misconduct. The court below has held that the fee demanded by the arbitrator in each case was exorbitant and in the facts of the case it amounts to misconduct justifying setting aside of the award. The award has, therefore, been set aside and while doing so a sum of Rupees 2,200/- has been settled as the arbitrators fees in one case and Rs. 1,200/- in the other, both parties being directed to share equally.

8. In support of this appeal Shri 0. N. Bhachawat, learned counsel for the plaintiff-appellants contends that no misconduct has been made out in as much as the arbitrator had a right to fix any amount which he considered reasonable as his fees and to demand the same by virtue of S. 14(2) of the Arbitration Act. He argues that the amount fixed by the court under S. 38 of the Arbitration Act would no doubt govern the question as to what amount the arbitrator is lawfully entitled to; but the only effect thereof is to enable the recovery of the excess amount from the arbitrator and the same has no relevance for deciding the question of misconduct. In this connection, it is also argued that the prohibition contained in Rule 15 (5) (iv) of the M. P. Government Servant (Conduct) Rules 1959 is not relevant for this purpose even though it may render the arbitrator liable to disciplinary action as an employee of the State Government. His further argument is that the award cannot also be treated as 'otherwise invalid' so as to invoke the aid of Clause (c) of Section 30 of the Arbitration Act to set aside the same. Shri P. L. Mehta learned Additional Government Advocate on the other hand contends that the demand and acceptance of exorbitant fees in the present case is by itself sufficient to constitute misconduct justifying setting aside the award on that around. He further contends that the facts of the case are sufficient to render the award atleast 'otherwise invalid within the meaning of that expression of Clause (c) of Section 30 of the Arbitration Act.

9. The question before us really is whether the trial court having set aside the award in exercise of its discretion, it is necessary for us to interfere with the same in the present appeal.

10. It would not be out of place to state at, the outset the nature of function of an arbitrator and the manner in which he has to perform his duty. A relevant passage in Russell on the Law of Arbitration (17th Edition) at page 132 under the head 'The Duty to act fairly' is as follows:--

'The first principle is that the arbitor must act fairly to both parties, and inthe proceedings throughout the reference he must not favour one party more than another, or do anything for one party which he does not do or offer to do for the other. He must observe in this the ordinary well-understood rules for the administration of justice.'

11. The expression 'misconduct' occurring in Clause (a) of Section 30 of the Arbitration Act has not been defined. This expression in relation to arbitration proceedings is incapable of any precise meaning and it has always been understood to have the same meaning which it has acquired under the English law. The history of legislation shows that the words 'or the proceedings' occurring in Clause (a) of Section 30 were not present initially in the corresponding earlier law and in the English law also they were introduced only by amendment in 1934. The reason for the amendment was to include within the ambit of misconduct even those cases where no turpitude on. the part of the arbitrator was alleged. Such cases of technical misconduct have come to be known as those, which even though do not attribute any turpitude against the arbitrator yet clearly fall within the ambit of this expression.

In Halsbury's Laws of England, Third Edition, Volume 2. para 126 at page 57, it is stated as follows:--

'What constitutes 'misconduct'--It is difficult to give an exhaustive definition of what amounts to misconduct on the part of an arbitrator or umpire. The expression is of wide import, including on the one hand bribery and corruption and on the other a mere mistake as to the scope of the authority conferred by the agreement of reference or a mere error of law appearing on the face of the award.'

In Russell on Arbitration, 47th edition, at page 307, it is stated-

'The term 'misconduct' here would appear to be used in its widest sense per haps even including mistake (in law or fact) admitted by the arbitrator,'

It is further stated at page 331 as under:--

'Misconduct justifying intervention by the court may take place at any stages between appointment and entering upon the reference, during the reference, or in the making of the award.'

At page 332, it is stated as under:--

'The more difficult question, however is whether the extent of that irregularity is such as to justify interference by this court either by way of setting aside the award or remitting the award. The determination of that issue............depends upon whether the Court is satisfied that there may have been--not must have been--or that this irregularity may have caused not must have caused -- asubstantial miscarriage of justice that would be sufficient to justify the setting aside or remitting of the award. Unless those resisting the setting aside or remission could show that no other award could properly have been made than that which was in fact made, notwithstanding the irregularily.

The Irish Courts have perhaps an even stricter approach; 'When once they enter on an arbitration, arbitrators must not be guilty of any act which can possibly be construed as indicative of partiality or unfairness. It is not a question of the effect which misconduct on their part had in fact upon the result of their proceedings, but of what effect it might possibly have produced. It is not enough to show that even if there was misconduct on their part, the award was unaffected by it, and was in reality just: arbitrators must not do anything which is not in itself fair and impartial.' (underlining is by us).

In London Export Corpn. Ltd. v. Jubilee Coffee Roasting Co. Ltd., (1958) 1 WLR 661 at p. 665, Jenkins. L. J., explains the meaning of misconduct as follows :--

' 'Misconduct' is, of course, used in the technical sense in which it is familiar in the law relating to arbitrations as denoting irregularity, and not any moral turpitude or anything of that sort.'

12. Thus, such is the wide meaning that the expression 'misconduct' has assumed in legal parlance and that is how the expression has to be understood in relation to arbitration proceedings. It is not only the cases where moral turpitude of the arbitrator has been made out which alone fall within this category but even the cases where no moral turpitude is definitely proved against the arbitrator, yet the facts disclose a technical or legal misconduct in relation to the arbitrator's conduct or the proceedings that a ground of misconduct for setting aside the award under Clause (a) of Section 30 of the Act would be made out.

13. It has next to be seen as to what exactly is the meaning of the expression 'otherwise invalid' in Clause (c) of Section 30 of the Arbitration Act. The preamble to the Arbitration Act, 1940 states that it is an Act to consolidate and amend the law; relating to arbitration. Such a consolidating Act must be treated as exhaustive to the extent provision is made therein. The opening words of Section 30 also indicate that an award can be set aside only on one or more of the grounds contained therein.

Admittedly one such ground as contained in the latter part of Clause (c) of Section 30 is, if the award is 'otherwise invalid'. The difficulty really arises in determining as to what are the cases falling within this ground relating to invalidity of the award. No indication _ of the cases where the award is 'otherwise invalid is given in the act so that to this extent the Arbitration Act. 1940 cannot be treated as exhaustive. It has, therefore, to be held that where the facts of a case disclose a defect of a kind which would render the award invalid in the opinion of the court, the award must be set aside on this ground. It necessarily follows that the defect disclosed must have the effect of rendering the award invalid in the opinion of the court, being so related to the award as the cause and effect, in order to invoke this Clause. But subject to this restriction, it is for the court to decide whether the defect: is of such a kind as to render the award invalid. It is now settled that the expression 'otherwise invalid' is not to be construed 'ejusdem generis' as held by, Chagla, C. J., in A. R Savkur v. Amritlal Kalidas, AIR 1954 Bom 293 and a Full Bench of the Calcutta High Court in Saha and Co. v. Ishar Singh, AIR 1956 Cal 321 (FB). In the Calcutta case, Chakravartti. C, J., held as follows;--

'It is true that S. 30 does not say in terms that an award may be set aside on 'the ground that there was no agreement to refer to the arbitrators to make an award or that some other ground, making the award void in law, exists. The section, however, in setting out the grounds on which an award may be set aside, includes a residuary ground of a general character and speaks of awards which are 'otherwise invalid'. I think the controversy which had raged at one time as to whether the expression 'otherwise invalid' was to be read ejusdem generis with the statement of invalidity immediately preceding need not trouble us any longer. The expression which occurred formerly in Clause (c) of para 15 (1) of Schedule II Civil P. C. in juxtaposition with what is now Clause (b) of Section 30 has now been relegated to Clause (c) of that section where only a single type of invalidity is mentioned before it.

I pointed out in the Order of Reference that where only one species was mentioned, there was no basis for formulating a genus and therefore there was no room for the application of the principle of 'ejusdem generis' in such a case. I need not cite again the authorities which I then cited. It appears to me. however, that apart from whether a genus can be formulated or not it is wholly impossible to apply the principle of 'ejusdem generis' to the expression'otherwise invalid' as it now occurs in Section 30(c) of the act.

The whole of Clause (c) is that 'an award has been improperly procured or is otherwise invalid'. A genus can be formulated only when some objective standard or specimen has been mentioned and the principle of 'ejusdem generis', when applied to such a case, will on the one hand draw in other species of the same genus and. on the other hand, limit the additions to the genus formulated, The words preceding the expressions 'is otherwise invalid' in Clause (c) of Section 30 are 'that an award has been improperly procured.' If the genus is 'awards improperly procured' other awards, properly belonging to the same genus must also be awards improperly procured and if they are so, 'the description already appearing in the preceding words will completely cover them and therefore the expression 'is otherwise invalid' would really add nothing.'

In my view, the words 'is otherwise invalid' are perfectly general and intended to be so. They cover all forms of invalidity, including invalidities which amount to nullities. Such construction of the expression appears to me to be legitimate and indeed necessary, not only because it is wholly unqualified by any restrictive words of any kind but also because nullities, and illegalities less than nullities, both occur in other Clauses of the section.'

In the same case, P.B. Mukherji, J., held as follows:--

'Section 30(c) permits an award to be set aside on the ground that the award is 'otherwise invalid'. Many legal battles have been fought over the mean-ins of the words 'otherwise'. One kind of dispute is whether the expression 'otherwise' is to be construed ejusdem generis.

My own view is that the word 'otherwise' in Section 30(c) Arbitration Act should not and cannot be construed ejusdem generis. The first reason for so holding is that what precedes sub-section (c) itself as well as Sub-sections (a) and (b) of Section 30 does not form any dependable genus in support of that conclusion.

The observation of Viscount Maugham and Lord Wright in Alexander v.Tredegar Iron and Coal Co. Ltd.. 1945AC 286 at pp. 293 and 298 and of Viscount Simon, L. C. in National Association of Local Govt. Officers v. BoltonCorporation, 1943 AC 166 at pp. 176 and177 illustrate this point. Sir N. N. Sarkar in his Tagore lectures of the law ofarbitration expresses the same view atpage 231 where the learned authorsays:--

'It is submitted that there is no jurisdiction for this ejusdem generis construction and awards have been set aside as being otherwise invalid on grounds which are not ejusdem generis.

'In other words, it is said that if a section like Section 30, Arbitration Act was intended to limit the grounds on which awards could be set aside by using the expression 'An award shall not be set aside except on one or more of the following grounds' then to introduce all grounds by an interpretation of the words 'otherwise invalid' appearing at the end of that section in its sub-Clause (c) would be really going against the spirit of restriction dominant in that section.

I am unable, generally to agree with 'that proposition because courts are guided primarily by the amplitude of the expression used. The words 'otherwise invalid' are, in my opinion designedly vague, because, it was intended that an invalid award, whatever the grounds on which it may be invalid for. should not be allowed to remain but should be set aside.

There is, in my view no meritorious justification for holding that awards invalid on some grounds should be set aside, while awards equally invalid on other grounds, or perhaps more invalid, should remain inviolate. To my mind the scheme of Section 30, Arbitration Act is clear.

It is a comprehensive section which sets out all the grounds on which an award could be set aside; By its first Sub-clause (a) it includes any misconduct, either personally or of the proceedings, so far as the arbitrators or umpires are concerned. But by its second Clause (b) it renders invalid awards made after the court's order superseding the arbitration. Pausing here, for the time being, it is clear why an award is set aside on this ground.

The reason is that there is no valid reference on which the award could stand: that is why it is rendered invalid. If. therefore, the context of these different sub-clauses is an indication, then where the reference is invalid otherwise than by an order of court, it should also be included as ground for setting aside the award. That is precisely what is done and was intended to be done by the use of the expression 'otherwise invalid' in Sub-section (c) of Section 30, Arbitration Act. This Sub-section (c) of Section 30 Arbitration Act is widest in its tone when compared with the preceding subsections (a) and (b). Mark the first expression improperly procured. 'Wherever an award, is improperly procured, it is liable to be set aside. The cases on this expression 'improperly procured' are mostly older cases dealing with such ins-lances as where the arbitrator or the umpire was bribed.

Such decisions as have come to my knowledge are mostly of the 17th or 18th century, if an award is made by arbitrators who are said to be pretended arbitrators and not arbitrators of 'the choice of the parties, then the award resuiting from such a proceeding is. in my judgment, also an award which is 'improperly procured' within the meaning of this sub-section. The other expression, 'otherwise invalid', is also designedly ample in its significance.'

14. It follows from the above thatany cause which indicates that theaward was not fairly and impartially made or that the arbitrator didnot function in a manner befittinghis role would render the award invalid on the ground of its being'otherwise invalid' within the meaning ofthat expression in Clause (c) of Section 30of the Arbitration Act even where a caseof invalidity on the ground of misconduct is not clearly made out.

15. We have now to see whether the trial court was justified in setting aside the award and such conclusion can be supported on either or both of the aforesaid grounds of invalidity provided in Section 30 of the Arbitration Act.

16. The admitted facts of the case do show that the demand of fees by the arbitrator was exorbitant. In fact this was the common case of the parties in the trial Court itself, inasmuch as even though plaintiffs had paid the whole amount, yet they had themselves thereafter made such an allegation and requested the court to determine a reasonable amount payable to the arbitrator. The conduct of the plaintiffs in not making any such protest prior to obtaining the award from the arbitrator but in making that allegation soon thereafter while filing the award in the court does indicate that the plaintiffs for some reason were keen to obtain the award, even though they treated the fees charged by the arbitrator as exorbitant. It is also clear that the plaintiff's did not wish to indicate to the arbitrator their intention to dispute the quantum of fees before they had obtained the award. This conduct alone is sufficient to indicate that the plaintiffs had reason to believe that the award was to be favourable to them.

Such a conclusion is reinforced by some other facts which are also patent from the record. In the award commencing at p. 41 in paper book of Misc. Appeal No. 117 of 1970 there is a clear direction requiring the defendant to pay the entire costs of the arbitration to the plaintiffs which includes the total fees of the arbitrator. Such a direction in the award itself is difficult to understand unlessthe plaintiffs had already incurred that expense and paid the entire amount of fees to the arbitrator. In this situation the criticism of Shri Mehta learned Additional Government Advocate that the plaintiffs had already paid the entire fees to the arbitrator before the award had been made and signed or atleast a promise to that effect had been made by the plaintiffs to the arbitrator behind the back of defendant, has considerable force. In fact there appears to be no other reason why such a direction should have been made in the award itself. It has already been indicated earlier that no document from the record has been pointed out containing the plaintiffs' offer to pay the entire fees for obtaining the award, mention of which offer was made by the arbitrator in his memo dated the 13th November 1969 addressed to the Officer Incharge of the case, on behalf of the State Government. Such a mention of the plaintiff's offer in the arbitrator's memo does indicate some talk between the arbitrator and the plaintiffs in this connection, which was not in writing and was behind the back of the defendant. It is further significant that the defendant having disputed the reasonableness of the arbitrator's demand and having filed an application in the court requiring the court's decision on the point under Section 38 of the Arbitration Act, an intimation of the same having been given to the arbitrator on 20-11-1969 the arbitrator acted with indecent haste in fixing the fees and including it in the costs shown in the award and then in accepting the entire fees from the plaintiffs without awaiting the court's decision on that application. No doubt the conduct of the arbitrator subsequent to 27-10-1969. the date of the award would ordinarily not be relevant on this question, but in the facts of this case we cannot treat this subsequent conduct as wholly unconnected with the making of the award so as to be irrelevant for our purpose. This subsequent conduct is in fact relevant to explain the arbitrator's conduct upto the time of making the award.

17. It is. therefore, clear that the arbitrator demanded and accepted exorbitant fees and included the same in the costs shown in the award demand and that too in the manner already indicated without waiting for the court's decision under Section 38 of the act. According to Section 15 (5) (iv) of the M. P. Government Servant (Conduct) Rules, 1959, the arbitrator being a Government Servant could have accepted only such fees as were fixed by the court. Section 15 (5) (iv) ibid is as follows:--

'15 (1) * * * *(2) * * * *(3) * * * *(4) * * * (5) Acting as arbitrators:-- Government Servants may be permitted to actas arbitrators for settlement of dispute,subject to the following conditions:--

(i) to (iii) * * * * (iv) if he acts by appointment of acourt of law, he may accept such fees asthe court may fix.'

It follows that there was no occasion for the arbitrator to accept any fees until the same had been fixed by the court and then also he was entitled to accept only the amount so fixed. In the present case, the arbitrator had demanded and has accepted an amount much greater than that ultimately fixed by the court and that too before its fixation. There can be no doubt that this conduct of the arbitrator was in contravention of the rule. Shri Bhachawat contends that contravention of this rule is not relevant in the present case while determining whether the award is invalid. In our opinion, it is certainly relevant to indicate that the arbitrator had no hesitation in contravening such a rule which regulated his conduct as an arbitrator and to say the least this fact alone indicates that the arbitrator had no hesitation in resorting to such a course of action in order to obtain a pecuniary benefit for himself to which he was not entitled. We have no doubt that the arbitrator's conduct while functioning in that capacity was resulted by Section 15 (5) (ivl ibid and he was bound to comply with the same. The agreement by which he was appointed sole arbitrator by virtue of his office alone also required the observance of such a provision by which he was governed, as an implied term of the agreement. By virtue of this provision, the arbitrator was not entitled to demand any fees till the same was fixed by the court and after its fixation he could demand only the amount so fixed. For this reason, relying on Section 14(2) of the Arbitration Act 1940, alone the arbitrator could not fix the amount himself and demand the same ignoring Section 15 (5) (iv) of the M. P. Government Servants (Conduct) Rules 1959. Admittedly, the amount demanded was also exorbitant as is evident from the fact that this was common ground in the court below and the court has ultimately fixed only about, one-fourth of the same a? proper fees. No attempt was made before us to suggest that the court has fixed an amount which is not reasonable or is low. There can be no doubt that such a conduct of the arbitrator was certainly unbecoming on his part.

18. The effect of such a demand made by the arbitrator before making the award was to give an opportunity to a party so minded to gain the favour of the arbitrator by offering to pay the en-tire amount even though the same was considered exorbitant by both the parties. The possibility of plaintiffs gaining favour of the arbitrator in this mannercannot, therefore, be ruled out.

19. In Re Prebble and Robinson (1892) 2 QB 602, the arbitrator demanded an excessive and extravagant charge for his services ............ and a questionarose whether such a demand amounted to misconduct. Lord Coleridge, C. J., observed as follows:--

'It is. I think an open question whether an excessive and extravagant charge by an arbitrator, made by him in the award as part of the award, might not amount to such misconduct as would justify the court in setting that award aside. I am far, from saying that it might not.'

In that case even though the demand was in the award and such a question was indicated to be an open one, yet the Lord Chief Justice was inclined to think that such a demand might amount to misconduct.

In in re Enoch and Zaretzky Bock and Co.'s Arbitration (1910) 1 KB 327 the umpire required payment of his charges as a condition for delivery of his award and such a demand was never withdrawn. The court of appeal treated such a demand by the umpire as amounting to misconduct justifying the removal of the umpire. Cozens Hardy, M. R. held as follows:--

'The first point and one to which I attach very considerable importance is that unfortunate transaction about the 1501. ....................................

So that we have this umpire making the highly improper demand for 1501, making it in writing, and not withdrawing it for months afterwards, when his attention is called to it and when it is described as 'improper and exorbitant'; and that does seem to give a colour to the case which one cannot possibly put aside.'

It was further held at page 331 as follows:--

'I wish to make it clear that I am not suggesting fraud on the part of Mr. Von Lymburg. but I do say his conduct as umpire, as manifested by the particulars which I have given, is such that it would not be satisfactory, it would not be fair, it would not be just, to leave the rights of the parties, as they necessarily would be, in his sole hands.'

19-A. In Halsbury's Laws of England, Third Edition. Volume II, para 126 one of the instances of misconduct being stated as taking a bribe from either party, in foot note (K) at pages 59-60 relying on the authority of Turner v. Rose, (1756) 1 Keny 393 it is stated that theamount of costs awarded may be so excessive as to amount to evidence of partiality. Admittedly the costs of arbitration include also the arbitrator's fees and that is how the fees are described in the award made in the present case. In Girdharilal v. Surendranath Mukharjee (AIR 1934 Nag 199) the question for determination was whether the costs of arbitration included the arbitrator's remuneration and the question was answered in the affirmative. That decision was on the law prior to the Arbitration Act. 1940 when the arbitrator's remuneration was not separately provided for. It is, therefore, clear that award of excessive costs, which expression includes within its ambit the arbitrator's fees, may also indicate partiality of the arbitrator. In any case that is one of the relevant factors in a case like the present.

20. In Akshoy Kumar v. S. C. Dass and Co. (AIR 1935 Cal 359). it washeld as follows:--

'All the same however, in my judgment the principles underlying the decision in Shephard v. Brand (1734) 2 Barn. K. B. 463 still hold good and it is imperative that arbitrators should always scrupulously avoid any course of action which even remotely bears the complexion of their having put themselves into a position where it might be said against them that they had received ,a pecuniary inducement which might have had some effect on their determination of the matters submitted to their adjudication.' However in that case unlike the present, it was by mutual arrangement between the contending parties that payment of the entire fees of the arbitrator was made by one party alone and as such the award was not held to be vitiated in view, of that mutual arrangement even though the principle laid down in (1734) 2 Barn KB 463 (supra) was accepted as sound and correct. In National Bank v. Beri Brothers (AIR 1956 Punjab 239) where no fees were fixed by agreement or by the court, the arbitrator having accepted the entire fees from one party without the knowledge of the other and a direction being made in the award that half of it should be paid by the other party to the first party, the arbitrator was held guilty of misconduct vitiating the award. Reliance was placed on Shephard v. Brand (1734) 2 Barn KB 463 (supra). The principle followed and relied on was quoted therein as under:--

'The judgment given in (1734) 94 ER 620 is stated in these words at p. 620;

'Shephard and Brand.

How far an award shall be set aside, or not by reason of the arbitrators receiving money for making their award.

On rule to show cause why an award should not be set aside, several exceptions were taken to it, but the court overruled them all, excepting one, which was that before making the award the arbitrators insisted upon there guineas apice to be paid them by each of the parties for their trouble and expenses. The defendant refused doing it on his part; upon which the plaintiff paid the whole money. The court said that they thought it might be something dangerous to suffer one side only to give money to arbitrators, accordingly for that reason the rule was made absolute' ............... Para 10.

'In AIR 1935 Cal 359. an identical point arose for decision. In deciding the point Costello, J., said at page 365:

'.................. In my judgment, theprinciples underlying the decision in 2 Barn KB 463, still hold good and it is imperative that arbitrators should always scrupulously avoid any course of action which even remotely bears the complexion of their having put themselves into a position where it might be said against them that they had received a pecuniary inducement which might have had some effect on their determination of the matters submitted to their adjudication.'

In 2 Barn KB 463, the judgment given in is reported; ......,.................'Para 15.

21. In the passage at page 332 of Russell, on Arbitration already quoted above, the test indicated is whether the irregularity may have caused and not necessarily must have caused a substantial miscarriage of justice that would be sufficient to justify the setting aside of the award unless it could be shown that no other award could jgroperly have been made notwithstanding the irregularity. In order to see whether the award can be allowed to stand notwithstanding the irregularity, the contents of the award have to be seen and unless it is possible to conclude that the award actually made is justified on the facts, the award will have to be set aside. Unfortunately in the present case there are no reasons given by the arbitrator for his decision nor are there any other particulars to indicate the process by which the arbitrator reached his conclusion. The award contains only the conclusion, that is, the amount which was to be paid by the defendant to the plaintiffs. There is nothing even to indicate how that amount was calculated. It is, therefore, not possible for us in the present case to examine whether the award would be justified on the facts of this case notwithstanding the irregularity already dealt with at length by us. The possibility of sustaining the award notwithstanding the above position by applyingthis test is. therefore, not ayailable to us in the present case. It is no doubt true, as settled by the Supreme Court relying on an earlier Privy Council decision, that an arbitrator need not give any reasons for the award and where no reasons are given in the award the same cannot be set aside by the Court on the ground of an error on the face of the award itself. It has been held that an error on the face of the award cannot be discovered by attributing some reason to the arbitrator by a process of inference and argument where, in fact, no 'reasons have been given by the arbitrator himself (See Bungo Steel Furniture v. Union of India, AIR 1967 SC 378.) Those decisions, however are no authority for the proposition that the absence of reasons in an award cannot be taken notice of even for the purpose of applying the test indicated above in a case like the present. In all those cases the question for determination was whether an award disclosed an error on its face on account of its containing no reasons. It was in that context that the Privy Council and the Supreme Court took that view. That however, does not indicate that the absence of reasons is of no Consequence even in a case like the present where the award is challenged on the ground of misconduct or being 'otherwise invalid'. In our opinion the absence of reasons in the award is relevant in acase like the present atleast as indicating that there is nothing to show that no other award could properly have been made than 'that which was in fact made notwithstanding such an irregularity.

22. We are. therefore, of the opinion that the facts of this case do justify the setting aside of the award on the ground of misconduct of the arbitrator under Clause (a) of Section 30 of the Arbitration Act or atleast on the ground that the award was 'otherwise invalid under Clause (c) thereof. We would be distressed if such a view were not possible because that would lead to the undesirable result of permitting an award like the present to be upheld but as we have shown, the court has been given ample powers under Section 30 of the Arbitration Act, 1940 to set aside such awards. The object of providing a ground as is contained in the latter part of Clause (c) of that section which is of wide amplitude is clearly to cover such a situation even assuming that Clause (a) is not wide enough for that purpose. No interference with the decision of the court below is, therefore called for.

23. Accordingly, this appeal fails and is hereby dismissed with costs. Counsel's fee Rs. 500/-, if certified.


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