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Dilip Construction Company Vs. Hindustan Steel Ltd. - Court Judgment

LegalCrystal Citation
SubjectArbitration
CourtMadhya Pradesh High Court
Decided On
Case NumberMiscellaneous (First) Appeal No. 132 of 1970
Judge
Reported inAIR1973MP261
ActsArbitration Act, 1940 - Sections 2A, 20 and 20(4)
AppellantDilip Construction Company
RespondentHindustan Steel Ltd.
Appellant AdvocateRam Kumar Verma, Adv.
Respondent AdvocateDevi Prasad Agarwal and ;H.L. Khaskalam, Advs.
DispositionAppeal dismissed
Cases ReferredUnion of India v. Tarachand Gupta
Excerpt:
- - in view of the threat in the notice sent by the appellant that in case of its failure to designate an arbitrator, the said l. on the award being filed, the respondent made an application under sections 30 and 33 of the act for setting aside the award on the grounds that, the award had ignored the terms of the contract and was as such bad on the face of it; 7. in an endeavour to overcome the difficulty, the learned counsel for the appellant has advanced a three-fold argument. , air 1965 cal 42. lastly the learned counsel urges that the respondent having failed to pay in full and settlement of the bill submitted by the appellant, there existed a dispute on the date of submission. the court must, therefore, be satisfied that there was some real point of difference which had to be.....sen, j.1. this is an appeal under section 39(1)(vi) of the arbitration act, 1940, preferred by m/s. dilip construction co. from an order of the district judge, durg at rajnandgaon, setting aside an award of the umpire in its favour, directing the payment of a sum of rs. 8,65,000/- by the hindustan steel ltd.2. the material facts, shortly stated, are these. by a contract dated 26th february, 1960, the appellant was employed by the respondent for winning and raising 45,00,000 cft. of bf grade lime-stone ore from its nandini mines, and for transporting and loading the same into wagons at the railway siding of the mines. the deed of contract contained an arbitration clause, and it reads thus:'61. if at any time any question, dispute or difference whatsoever shall arise between the employer.....
Judgment:

Sen, J.

1. This is an appeal under Section 39(1)(vi) of the Arbitration Act, 1940, preferred by M/s. Dilip Construction Co. from an order of the District Judge, Durg at Rajnandgaon, setting aside an award of the umpire in its favour, directing the payment of a sum of Rs. 8,65,000/- by the Hindustan Steel Ltd.

2. The material facts, shortly stated, are these. By a contract dated 26th February, 1960, the appellant was employed by the respondent for winning and raising 45,00,000 Cft. of BF grade lime-stone ore from its Nandini Mines, and for transporting and loading the same into wagons at the railway siding of the mines. The deed of contract contained an arbitration clause, and it reads thus:

'61. If at any time any question, dispute or difference whatsoever shall arise between the Employer and the Contractor upon or in relation to or in connection with the contract either party forthwith give to the other notice in writing of the existence of such question, dispute or difference and the sama shall be referred to the arbitration of two persons, one to be nominated by the Employer and the other by the Contractor or failing agreement between these two to an Umpire appointed by them. Such submission shall be deemed to be a submission to arbitration within the meaning of the Indian Arbitration Act, 1940 or any statutory modification thereof. The award of the Arbitrators or Umpire shall be final and binding upon the parties upon every or any such reference, the costs of and incidental to the reference and to the award respectively shall, subject to the condition that the amount of such costs to be awarded to either party shall not, in respect of a monetary claim exceed the percentage set out below of any such award, irrespective of the actual fees, costs and expenses incurred by either party, be in the discretion of the arbitrators or umpire who shall determine the amount thereof, as between party and party and direct by whom and to whom and in what manner the same shall be borne and paid. Work under the contract shall, if reasonably possible, continue during the arbitration proceedings, and no payments due or payable by the Employer shall be withheld on account of such proceedings. Provided, that in matter of claims where the amount involved does not exceed Rs. 25,000/- the decision of the Engineer shall be final and binding on the contractor and such items shall not be open to arbitration.

Except that no issues on which the final settlement is otherwise provided for in this contract shall be referred to Arbitration.'

3. The period stipulated in the contract for the completion of the work was of 12 months w.e. f. 29th December, 1959, but that period was extended from time to time upto 15th December, 1961. During the period in question, the appellant could perform the contract to the extent of 31,52,132.32 Cft. of lime stone, and received payments for the work done against running bills. Upon termination of the contract, the respondent prepared a final bill for Rupees 21,000/-. This was not accepted by the appellant and it instead submitted its own bill dated 5th May, 1965, raising a demand for payment of Rs. 16,77,197.28 P. That was followed by a letter dated 28th May, 1965, addressed by the appellant to the respondent, by which it requested a final settlement of accounts within 15 days. On 21st June, 1965, the appellant served the respondent with a lawyer's notice of submission to arbitration, stating that it had named one L. V. Parekh to be its arbitrator and requesting the respondent to nominate its arbitrator within 10 days, failing which the arbitrator named by it was to become the sole arbitrator and was to proceed with the reference. In response to the same, the respondent sent a reply dated 2nd July, 1965 to the following effect:

'In the contract under reference between your clients and the Hindustan Steel Limited, Bhilai Plant, no dispute as contemplated under the Arbitration agreement has arisen, which would entitle your clients to refer the matter to arbitration.

This is specifically so, in view of the fact that your client's claims are under examination by Bhilai Steel Plant and if in the course of finalisation of the claims any difference comes out, then only there will be any question of reference to arbitration.

It may also be mentioned that some of the claims mentioned by your client are even outside the purview of the agreement referred to by our clients.

Without prejudice to our above contentions, and reserving our right to take such action as may be deemed necessary in respect of the unmaintainability of the claims, We hereby nominate Shri R. M. Ray, Sr. D. G. M., Bhilai Steel Plant as our arbitrator.'

From the reply sent by the respondent it is quite clear that the existence of a dispute giving rise to arbitration was itself denied. However, as a matter of abundant caution, the respondent named its own arbitrator. In View of the threat in the notice sent by the appellant that in case of its failure to designate an arbitrator, the said L. V. Pareksh was to become the sole arbitrator, that was done without prejudice to the objection already raised.

4. The arbitrators named by the parties appear to have entered upon the refer-ence despite the protest of the respondent. They could not arrive at an agreement and appointed one P. N. Saxena to be the umpire. That is how the matter reached the umpire. By an award dated 10th April, 1967, the umpire directed the respondent to pay to the appellant a sum of Rs. 8,65,000/- in full and final settlement of its claim. On 1st May, 1967 the appellant presented an application under Section 14(2) of the Arbitration Act, for the filing of the award and to have the award made a rule of the Court. The learned District Judge directed the umpire to file the award. On the award being filed, the respondent made an application under Sections 30 and 33 of the Act for setting aside the award on the grounds that, the award had ignored the terms of the contract and was as such bad on the face of it; that not being based on evidence, it was a nullity and was, therefore, liable to be set aside in its entirety.

5. The most crucial question on which the decision of the appeal must turn and which, the learned District Judge did not deem it worthy of mention, is, whether there was a submission proper of a dispute to arbitration. The question is one which touches the jurisdiction of the arbitrators and the umpire, and it has been debated before us at great length.

6. In support of his contention that the award of the umpire is a nullity, learned counsel for the respondent relied upon Clause 61 of the agreement, and contends that on a plain construction of its terms, it is clear that the pre-existence of a difference or dispute is a condition precedent to the invoking of the arbitration clause. Consequently, the jurisdiction of the arbitrators and for the matter of that of the umpire to enter upon and adjudicate on a submission depends on the factual existence of such difference or dispute. In this case, there was no such difference or dispute.

7. In an endeavour to overcome the difficulty, the learned counsel for the appellant has advanced a three-fold argument. Firstly, he urges that no such objection having been taken earlier, the objection cannot be permitted to be raised for the first time at this stage in appeal. Secondly, the submission is that the respondent, having participated in the proceedings before the arbitrators and the umpire, with a clear knowledge of the circumstances on which it might have founded an objection to their proceeding to make an award; and thereby submitted to the arbitration going on, and allowed the arbitrators and the umpire to deal with the case as it stood before them, taking its chance of the decision being more or less favourable to itself, was now precluded by conduct from raising the objection to the validity of the award. In support of the contention, reliance is placed on Halsbury's Laws of England, 3rd Edn. Vol. 2., p. 37; Macaura v. Northern Assurance Co. Ltd.,1925 AC 619; Nandram Hanutram v. Raghunath and Sons Ltd., AIR 1954 Cal 245; Arbn. Juniter General Insce. Co. Ltd. v. Corporation of Calcutta, AIR 1956 Cal 470; Harbans Singh v. State of Punjab, AIR 1960 Punj 182 and New India Assurance Co. Ltd. v. Dalmia Iron and Steel Ltd., AIR 1965 Cal 42. Lastly the learned counsel urges that the respondent having failed to pay in full and settlement of the bill submitted by the appellant, there existed a dispute on the date of submission. At any event, he contends, that the respondent having joined issue on various items of claim in its counter-statement of acts filed before the arbitrators, there came into existence a difference or dispute between the parties as to the claim and, therefore, the arbitrators and the umpire had jurisdiction to deal with the matter. These contentions are wholly unfounded, and must, in our opinion, be rejected.

8. There was no jurisdiction either in the arbitrators, or the umpire to make an award in this case. The pre-existence of a difference or dispute is a condition precedent to the invoking of the arbitration clause. On a plain construction of its terms, the right to arbitration under Clause 61 of the agreement only arises, if a difference or dispute exists, at the time when a notice of submission is served by a party seeking to enforce the arbitration clause. In the present case, there was, in fact, no such difference or dispute. If there is no dispute, there can consequently be no right to demand arbitration. The Court must, therefore, be satisfied that there was some real point of difference which had to be submitted to arbitration.

9. The law on the subject is lucidly stated in Russel on Arbitration, Seventeenth Edn. p. 28 :

'To constitute a submission proper, there must be a difference. If there is no difference there is nothing for an arbitrator to arbitrate about, and in the case of an agreement to refer future disputes to arbitration, the arbitrator's jurisdiction does not arise until a dispute has arisen. It might seem, therefore, that if the agreement between the parties is in effect an agreement to prevent disputes from arising and not an agreement as to how they are to be settled, then it is neither an agreement to refer to arbitration nor a submission to arbitration, and it is not within the Act'

10. The existence of a dispute is an essential condition for the jurisdiction of an arbitrator. If there is no dispute, there can be no right to demand arbitration at all. This was clearly laid down by Rankin, J., as he then was, in Uttam Chand Saligram v. Jewa Mamooji, ILR 46 Cal 534 = (AIR 1920 Cal 143). A point as to which there is no dispute cannot be referred to arbitration. Failure to pay does not necessarily constitute a difference or dispute. A dispute implies an assertion of right by one party and repudiation thereof by another. In the instant case, there was merely an assertion of a claimmade by the appellant for payment of Rupees 16,77,197.28 P., but there was no repudiation of that claim by the respondent and, therefore there could be no dispute which could be referred to arbitration. The jurisdiction of an arbitrator depends not upon the existence of a claim or the accrual of a cause of action, but upon the existence of a dispute. (See Balmukund Ruia v. Gopiram Bhotica, 24 Cal WN 775 = (AIR 1920 Cal 808 (2)).

11. The leading case on the subject is London & North Western & Great Western Joint Railway Companies v. J. H. Billington, Ltd., 1899 AC 79 (HL). In that case, Section 5 of an Act of Parliament authorised the railway company to charge a reasonable sum, by way of addition to tonnage rate, for services rendered to a trader. The Act further provided that any differences between the parties arising under the said section was to be determined by an arbitrator to be appointed by the Board of Trade. The Railway company, in pursuance of the power so conferred on it, had given four days' time to traders to unload their wagons, and, after the said period was over, the traders were required to pay 6d. a day as demurrage for each wagon. The defendant took more than four days to unload his wagons. He knew of these conditions but all along had protested against the right of the company to levy the said demurrage. The railway company sued the defendant in the County Court to recover a certain sum for such demurrage. The defence was that the suit could not go on, and that the company's claim could only be settled by an arbitrator to be appointed by the Board of Trade. The finding of the County Court Judge was that no difference had arisen between the parties before the action had been commenced, either on the question as to whether the four free days were sufficient or not for unloading, or whether 6d. a day was a reasonable charge or not. The question before the Court was not whether the action was to be stayed or not. The question was of wider scope, namely, whether the action was maintainable or not. In the said case, the House of Lords reversed the decision of the Court of Appeal. Lord Halsbury, L. C., stated:

'A condition precedent to the invocation of the arbitrator on whatever grounds is that a difference between the parties should have arisen; and I think that must mean a difference of opinion before the action is launched, either by formal plaint in the county Court or by writ in the superior Courts. Any contention that the parties could, when they are sued for the price of the services, raise then for the first time, the question whether or not the charges were reasonable and that therefore they have a right to go to an arbitrator, seems to me to be absolutely untenable.'

Lord Halsbury then drew an analogy from an arbitration out of Court. He said thatbefore the arbitrator could enter upon the reference, it must be shown that a difference had arisen between the parties before the submission and, that the arbitrator would have jurisdiction only to adjudicate upon the particular difference which had arisen before the submission. If fresh differences arise after the arbitrator had entered upon the reference, the arbitrator cannot adjudicate upon them without a fresh submission. In the same case Lord Ludlow made the following observations-

'One matter about which I do desire to say a word.........is this.........that this difference before action brought, and that it is too late.........afterwards to raise a differencewhich can be brought within the meaning of this section.'

The principle so formulated has been applied in India where the application was for stay or action under Section 34 of the Indian Arbitration Act. In Ladha Singh Bed! v. Kalvani Prasad Singh Deo, ILR (1939) 2 Cal 181 = (AIR 1940 Cal 105) R. C. Mitter, J. dealing with this case pointed out as follows:

'The noble Lord then drew an analogy from an arbitration out of Court. He said that before the arbitrator could enter upon the reference, it must be shown that a difference had arisen between the parties before the submission and that the arbitrator would have jurisdiction only to adjudicate upon the particular difference which had arisen before the submission.'

The same view has been taken by Harries, C. J. and Chatterjee, J. in Mathuradas Goverdhandas v. Khusiram Benarshilal, ILR (1950) 1 Cal 497.

12. The weight of authority is clearly in favour of the view that unless there is repudiation of a claim, there can be no dispute in respect thereof. In Chandmull Goneshmull v. Nippon Munkwa Kabushiki Kaisha, (1921) 33 Cal LJ 545 = (AIR 1921 Cal 342), the buyer wanted a variety of information from the sellers to enable him to judge whether the goods supplied were or Were not according to the contract. Amongst other things, he demanded production of shipment samples. The sellers declined to comply with the request. But there was at no stage an assertion by the buyer that the goods had not been supplied according to the contract and consequently there was not and could not be a repudiation by the sellers of any such assertion. It was held by Mooker-jee and Fletcher, JJ. that there was no 'dispute' which could be and had been validly referred to arbitration. While repelling the contention similar to the one made before us, Mookerjee, J. stated:

'It has been argued before us that this is an unduly narrow construction of the arbitration clause and that the terms 'difference' and 'defect' need not be restricted to 'difference' or 'defect' in. quantity or qualityonly. We are disposed to accede to this contention, but, even then, the appellant is not entitled to succeed, unless he proves that there was a dispute as to difference or a dispute as to defect. Now, a dispute implies an assertion of a right by one party and a repudiation thereof by another. In the case before us, the parties never reached that stage.'

In Dawoodbhai Abdulkader v. Abdulkader Ismailji, AIR 1931 Bom 164 the plaintiff was the sub-partner of the defendant in a certain business. The deed of sub-partnership incor-ported all the articles, covenants, conditions and obligations contained in the principal partnership agreement between the defendant and his partner which were not inconsistent With the terms of the agreement. There was a clause in the deed of principal partnership which provided, inter alia, that any dispute or difference arising between partners with regard to the construction of any of the articles contained in the agreement or to any divisions of goods or things, related to the said Partnership or the affairs thereof, shall be referred to arbitration in the manner therein mentioned. The plaintiff called upon the defendant to make up the accounts and to pay him the amount found due at the foot thereof. The defendant did not pay and the plaintiff filed a suit praying that the defendant may be ordered to render a true and complete account of the profits earned by the partnership business and of the amount due to the plaintiff, and to pay the same to him. The defendant thereupon took out a summons for an order to stay further proceedings to enable the parties to refer to arbitration. It was held by Wadia, J., that as there was no dispute between the parties but mere failure to pay, the suit was maintainable and could not be stayed. The principles deducible from these authorities are-

(i) The existence of a difference or dispute is an essential condition for the arbitrator's jurisdiction to act under an arbitration clause in an agreement;

(ii) The jurisdiction of an arbitrator depends not upon the existence of a claim or the accrual of a cause of action, but upon the existence of a dispute. A dispute implies an assertion of a right by one party and repudiation thereof by another;

(iii) A failure to pay is not a difference, and the mere fact that a party could not or would not pay does not in itself amount to a dispute unless the party who chooses not to pay raises a point of controversy regarding, for instance, the basis of payment or the time or manner of payment.

13. There is no merit in the contention of learned counsel for the appellant that the respondent not having taken any objection as to the jurisdiction of the arbitrators or the umpire to enter upon the reference earlier, it cannot now be permitted to raise such an objection at this stage. Throughout, the respondent has taken the stand that therewas no difference or dispute existing at the time of reference and, therefore, the arbitration clause could not be invoked. In the first place, such an objection was expressly taken not only at the initial stage as soon as the lawyer's notice was served, but also thereafter before the arbitrators and in the Court below. In its reply dated 2nd July, 1965, the respondent had clearly stated that 'no dispute as contemplated in the arbitration agreement has arisen' as would entitle the appellant to refer the matter to arbitration. The respondent further stated that in view of the fact that the appellant's claim was 'under examination by the Bhilai Steel Plant', and if in the course of finalization of the claim 'any difference comes out' then only there will be any question of reference to arbitration. Thereafter, in para 18 of the counter-statement of facts filed before the arbitrators, the respondent reiterated that the the reference to arbitration was premature. Once again, in, the Court below, the respondent while applying under Section 30 of the Arbitration Act for setting aside the award, had specifically alleged in para 5 of the application that 'there was no dispute or difference as contemplated by Clause 61 of the agreement' and that it had only nominated an arbitrator without prejudice to this contention, and in para 41 thereof stated that the arbitrators and the umpire had 'acted without jurisdiction.' In the face of such clear and explicit assertions by the respondent, at all relevant stages, we fail to appreciate how it can be urged that no such objection was taken earlier and, therefore, the objection cannot be raised at this stage.

14. It is well established by authoritythat once the parties appearing before the arbitrators object to the jurisdiction, they do not waive their rights by proceeding with the case before the arbitrators and defending themselves as best as they may. The law is succinctly stated in Russel on Arbitration, 17th Edn. p. 174 thus :

'In cases where an arbitrator enters into the consideration of matters which are not referred to him, or which he has no jurisdiction to try, 'the question is not one of waiver or estoppel, but of authority' and a party continuing to attend the reference after objection taken and protest made does not give the arbitrator authority to make an award.'

'If a party to a reference objects that the arbitrators are entering upon the consideration of a matter not referred to them and protests against it, and the arbitrators nevertheless go into the question and receive evidence on it, and the party, still under protest, continues to attend before the arbitrators and cross-examines the witnesses on the point objected to, he does not thereby waive his objection, nor is he estopped from saying that the arbitrators have exceeded their authority by awarding on the matter.'

'Continuing to take part in the proceedings after protest made does not amount to be a consent.'

In particular, we would refer to the remarks of Lord Selborne, L. C., in Hamlyn v. Betterlay, (1880) 6 QBD 63 where he said:

'In arbitrations, where a protest is made against jurisdiction, the party protesting is not bound to retire; he may go through the whole case, subject to the protest he has made.'

See also Davies v. Price, (1864) 34 LJQB 8. The principles enunciated in these cases have throughout been followed in India. See Chetandas v. Radhakisson, AIR 1927 Bom 553; Rambaksh Lachmandas v. Bombay Cotton Company, AIR 1931 Bom 81; Babubhai Tansukhlal v. Madhavji Govindji & Co., AIR 1931 Bom 343 and Haigh v. Haigh, (1961) 31 LJ Ch 420. Thus, the appearance of the respondent after objection taken and protest made did not give the arbitrators or the umpire authority to make an award, nor estopped it from urging that the umpire has exceeded his authority. In such a case, no question of estoppel, acquiescence or waiver, arises.

15. Learned counsel for the appellant relied upon the following passage in Halsbury's Laws of England, 3rd Edn. Vol. 2, p. 37:

'84. Party protesting that arbitrator is exceeding his authority.

A party who protests that the arbitrator is acting either without authority or beyond the scope of the agreement of reference, but nevertheless attends the reference, does not thereby waive his protest.' but we fail to understand how that passage supports him,

16. The decisions relied upon by learned counsel for the appellant are distinguishable on facts. They rest on the principle of estoppel, waiver or acquiescence. They rest on the principle that if a party allowed an arbitrator to proceed without objecting to his jurisdiction or competence, he would not be subsequently heard to say that the award should be set aside, on the ground that the arbitrator was not competent to decide the dispute in question. Though the learned counsel has not referred to the leading cases on the subject, we may advert to them. That principle was enunciated by the Judicial Committee in Chowdhri Murtaza Hussain v. Mt. Bibi Bechunnissa, (1876) 3 Ind App 209 p. 220 in the following words :

'.........that the appellant, having a clearknowledge of the circumstances on which he might have founded an objection to the arbitrators proceedings to make their award, did submit to the arbitration going on, that he allowed the arbitrators to deal with the case as it stood before them, taking his chance of the decision being more or less favourable to himself; and that it is too late for him, after the award has been made, and on the application to file the award, to insiston his objection to the filing of the award.'

Likewise, the Judicial Committee in Donald Campbell and Co. v. Jeshraj Girdharilal, AIR 1920 PC 123 was faced with the question as to the defective appointment of a sole arbitrator. Their Lordships were of the opinion that though the defect, i. e., the absence of notice under Section 9(b), would have been fatal to the authority of the person appointed as sole arbitrator but for the fact that any objection on this head was waived by the party concerned, he having rested his case as to the validity of any arbitration in the place in which it was held, he could not be permitted to rely on a defect in procedure which could have been remedied at once if he had raised the point.

17. We shall now deal with the decisions relied upon. In (1925) AC 619 the House of Lords held that the claimant having allowed the point of insurable interest to be raised before the arbitrator without objection, it was not open to him to call in question the authority of the arbitrator to entertain it. In AIR 1956 Cal 470 (supra), the submission to arbitration was by a party under a statutory disability, and in spite of the disability, it had participated in the arbitration without protest and fully availed of the arbitration proceedings and then when it saw that the award had gone against it, it came forward to challenge the whole of the arbitration proceedings as without jurisdiction on the ground of a known disability of a party. That was also a case where a party having knowledge of its disability had withheld that fact and was thereby precluded by conduct from challenging the validity of the award. In AIR 1965 Cal 42 (supra), there was failure to object to the jurisdiction of the arbitrators and the umpire as to investigate a part of the claim, i. e., with respect to the hiring charges, at any stage of the proceedings, and it was held that such failure acts as an estoppel. In AIR 1960 Punj 182 (supra), there was a valid submission, and no objection was taken to the Superintending Engineer, for the time being, adjudicating upon the dispute. The party willingly and without protest took part in the proceedings before the arbitrator, and thereby took its chance of the decision going in his favour. In those circumstances, it was held that there was implied variance of the agreement to refer to a named arbitrator, by conduct, and that it was under the varied agreement that the arbitrator acted. There was, accordingly, no defect in the award.

18. We are here not concerned with any procedural irregularities, but initial lack of jurisdiction. In Khardah Company Ltd. v. Raymon & Co. (India) Pvt. Ltd., AIR 1962 SC 1810, the Supreme Court has observed:

'But what confers jurisdiction on the arbitrators to hear and decide a dispute is an arbitration agreement as defined in Section 2(a) of the Arbitration Act, and where there isno such agreement, there is an initial want of jurisdiction which cannot be cured by acquiescence. It may also be mentioned that the decision in (1860) 30 LJ Bcy 10 has been understood as an authority for the position that when one of the parties to the submission is under a disability that will not be a ground on which the other party can dispute the award if he was aware of it. Vide Russel on Arbitration, 16th Edition, 320'

When the respondent was not willing to join in the submission, the remedy of the appellant lay by way of an application under Section 20 of the Arbitration Act. We are fortified in that view by the decision of the Supreme Court in Thawardas Pherumal v. Union of India, AIR 1955 SC 468. While dealing with the question, their Lordships of the Supreme Court observed:

'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.'

19. It is now well settled that an inherent lack of jurisdiction or want of jurisdiction renders the ultimate decision a nullity so that it can be challenged at any subsequent stage and even in collateral proceedings. Such a defect cannot be cured even by waiver or acquiescence of the party entitled to raise the objection. (See Kiran Singh v. Chaman Paswan, AIR 1954 SC 340). By now the expression 'jurisdiction' has acquired a much wider meaning. However, the expression 'jurisdiction' even in its original sense when it was limited, included within its ambit the stage of commencement of a proceeding. We are concerned in this case with jurisdiction at the commencement of the proceeding and, therefore, even in the original sense of the term, when it was so limited, such a defect of jurisdiction was a nullity. This theory has now been modified by enlarging the scope of the expression 'jurisdiction' so as to include in its ambit even those defects which may crop up later during the course of the proceeding. This modified meaning enlarging the scope of the expression 'jurisdiction' is dealt with in Anisminic v. Foreign Compensation Commission, (1969) 1 All ER 208 by the House of Lords, and the same has been followed with approval by their Lordships of the Supreme Court in Union of India v. Tarachand Gupta, (1971) 1 SCC 486 = (AIR 1971 SC 1558).

20. In the state of law as it is, there can be no manner of doubt that the defectof jurisdiction with which we are concerned in the present case, is such that in case it exists, the ultimate award would be a nullity and, that being so, such an objection can be validly raised for the first time even at this stage. For these reasons, we are of the view that the objection taken on behalf of the appellant to the tenability of this argument has no force.

21. Having regard to the view that we have taken on the question of jurisdiction, there is no need for us to go into other questions. We are satisfied that the umpire had no jurisdiction to deal with the matter and, therefore, the award was rightly set aside.

22. The result, therefore, is that the appeal fails and is dismissed with costs. The order of the learned District Judge setting aside the award of the Umpire is affirmed, though of a different ground. Counsel's fee as per schedule or a certificate, whichever is less.


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