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P.S. Oberoi Vs. the Orissa Forest Corporation Ltd. - Court Judgment

LegalCrystal Citation
SubjectArbitration
CourtOrissa High Court
Decided On
Case NumberMisc. Appeal No. 42 of 1981
Judge
Reported inAIR1982Ori168
ActsArbitration Act, 1940 - Sections 8(1), 20, 20(4) and 30; Code of Civil Procedure (CPC) - Order 9, Rule 13
AppellantP.S. Oberoi
RespondentThe Orissa Forest Corporation Ltd.
Appellant AdvocateS.C. Mohapatra, ;r. Mohanty and ;P.K. Ray, Advs.
Respondent AdvocateS. Patnaik, Adv.
DispositionAppeal allowed
Cases ReferredPrabhat General Agencies v. Union of India
Excerpt:
.....so, it is challenged by the respondent that the entire proceeding is bad. but as i have already stated above, the respondent agitated this matter in a miscellaneous appeal as well as in a petition for restoration and those have been dismissed. the order of the court is also not bad, inasmuch as the present appellant alleged that the arbitrator named in the agreement was unfit to be the arbitrator and this allegation was before the court when he appointed the arbitrator. the very same points were also urged in the miscellaneous appeal as well as in the petition under order 9, rule 13, c. the very same points were also urged in the miscellaneous appeal as well as in the application under order 9, rule 13, c......the entire quantity of timber and did not perform any work in some coupes. therefore, the divisional manager got the work done with the help of other contractors. without raising any dispute, the appellant filed an application under section 20 of the arbitration act for appointment of arbitrator. with fraudulent design, the appellant impleaded the divisional manager representing the orissa forest corporation, though the divisional manager had no authority to represent the corporation in legal matters. no notice was served on the corporation or any other principal officer of the corporation. by practising fraud on the court, the appellant got shri rao appointed as arbitrator, who is a retained lawyer and the legal adviser of the appellant. it was further pleaded that according to.....
Judgment:

N.K. Das, J.

1. Appellant is a contractor under the Orissa Forest Corporation for transport of round timbers and an agreement had been entered into by the parties on 11-8-1978. The Divisional Manager of the respondent had signed the agreement on behalf of the respondent. As disputes arose between the parties, the present appellant instituted O. S. No. 41/79-I under Section 20 of the Arbitration Act for appointment of an arbitrator. The court appointed one Shri S.H. Rao, an advocate of Jeypore as the arbitrator. The arbitlator called upon the parties to file statements of claims. In pursuance of the notice of the arbitrator, the present appellant appeared and filed his statement of claims, but the respondent did not appear nor participated in the arbitration proceedings. The arbitrator passed an award for Rupees 2,25,000.00. The said award was challenged by the present respondent under Sections 30 and 33 of the Arbitration Act and the application of the respondent was registered as Misc. Case No. 240/80.

It was alleged that the appellant did not transport the entire quantity of timber and did not perform any work in some coupes. Therefore, the Divisional Manager got the work done with the help of other contractors. Without raising any dispute, the appellant filed an application under Section 20 of the Arbitration Act for appointment of arbitrator. With fraudulent design, the appellant impleaded the Divisional Manager representing the Orissa Forest Corporation, though the Divisional Manager had no authority to represent the corporation in legal matters. No notice was served on the corporation or any other principal officer of the corporation. By practising fraud on the court, the appellant got Shri Rao appointed as arbitrator, who is a retained lawyer and the legal adviser of the appellant. It was further pleaded that according to the arbitration clause, any dispute arising shall be decided on the sole arbitration of the Chairman of the Corporation, or the Managing Director, or the Chief Executive Marketing, as may be nominated by the Chairman.

In case the said Chairman or the Managing Director or the Chief Executive Marketing, as the case may be, is not available or willing to be the arbitrator, then the arbitration clause would be ignored and considered as non-existent. Thus, according to the respondent, the arbitration clause does not provide for appointment of any outsider as arbitrator. If the named arbitrators are not available or willing to act as arbitrator, the arbitration clause was non-operative. In order to appoint an outsider as arbitrator, there should have been a proceeding to remove or revoke the authority of the appointed arbitrator. It was further contended that Shri Rao, the arbitrator, was a retained lawyer for the appellant and he did not give any proper notice to the respondent while hearing the arbitration matter ex parte. Whatever notice was sent by the arbitrator was to the Divisional Manager who was not authorised. In short, the respondent contended that the reference was void and the award suffered from legal misconduct of the arbitrator.

2. The appellant filed a counter-affidavit denying the allegations of the respondent and contended that the Divisional Manager was a party to the agreement and, as such, he was the proper party. The allegation that the arbitrator was the retained lawyer was denied. It was further contended that in spite of notice by the arbitrator nobody appeared on behalf of the respondent and, as such, the arbitrator had acted according to law and there was no fraud practised and the award was a proper one.

3. Undisputedly, a decree was passed in O. S. No. 41/70 which was filed under Section 20 of the Arbitration Act. The present respondent filed an application under Order 9, Rule 13 of C. P. C. to set aside the ex parte decree. In the said application, one of the main contentions of the respondent was that the Divisional Manager was not authorised to issue order to be sued and he had no authority to represent the corporation. That application was disposed of on contest and it was held that the Divisional Manager being the signatory to the agreement was the opposite party, The same question was also raised here. The learned Subordinate Judge has held that the ex parte judgment passed by the Subordinate Judge (sic) cannot be questioned at the present stage, but he held that according to the terms of the agreement, the appointment of an outsider as arbitrator was wrong and the arbitrator lacked initial jurisdiction. The appointment under Section 20 was void and the arbitrator had misconducted himself as he had not issued proper notice to the respondent expressing his intention to proceed ex parte.

4. The following facts are not disputed. An agreement was entered into by the parties on 11-8-1978. On 28-3-1979 the appellant filed a petition for appointment of arbitrator and the said petition was registered as O. S. No. 41/79. Service of notice on the present respondent was held to be sufficient on 19-8-1979. On 3-9-1979, an application was sent by the Divisional Manager of the respondent to adjourn the suit and the suit was adjourned to 26-11-1979 when ex parte order was passed, directing filing of the agreement and the decree was drawn up in the next month. On 27-11-1979 notice was served on the Divisional Manager to appear on 10-12-1979 and to produce the document. On 10-12-1979, Shri S. Hanu-manta Rao, Advocate was appointed as the arbitrator. The arbitrator issued notice on 27-12-1979 to both parties to file their statements. The notice was received by the Divisional Manager on 29-12-1979.

On 7-1-1980 a letter was sent by the Divisional Manager to the court intimating that the respondent was not willing to appoint Shri Rao as the arbitrator. A copy of this letter was also received by the arbitrator on 10-1-1980. On 12-1-1980 another notice was sent by the arbitrator fixing the case to 10-2-1980. That was received by the Divisional Manager on 15-2-1980. The corporation was set exparte by the arbitrator and the matter was posted to 23-3-1980 for evidence. Thereafter, the case was again posted to 26-3-1980. Evidence was recorded and documents were received by the arbitrator and the award was passed for Rupees 2,25,000/-. The award was sent to the court on 4-4-1980 and the Divisional Manager also received a copy of the award on 5-4-1980. A petition under Order 9, Rule 13 of C. P. C. was then filed to set aside the ex parte decree passed in O. S. No. 41/79 on 5-5-1980. Being unsuccessful, M. A. No. 99/80 was filed in the High Court on 12-5-1980 which was later withdrawn.

5. The learned Subordinate Judge has held that the arbitrator was not interested in the case and that notice to the Divisional Manager was notice to the corporation. On two grounds, he has set aside the award, namely, there was no notice at the time of passing the ex parte award and this amounts to legal misconduct. The other ground is that the arbitration clause was not available and, as such, the award was illegal.

As regards notice by the arbitrator, it appears from the records submitted by the arbitrator that several dates were given to the present respondent to appear, but there was no appearance and ultimately the ex parte award was passed after hearing and considering the claims submitted by the present appellant. Notice was given on each date by the arbitrator which was also received by the Divisional Manager and ultimately the Divisional Manager wrote a letter that the respondent did not want that particular person as the arbitrator. The fact that due notices were sent on each date by the arbitrator is not disputed. The only dispute raised by the respondent is that before disposing of the proceeding ex parte, the arbitrator should have given prior notice to the respondent that in his absence on any particular date the matter would be disposed of ex parte. Undoubtedly, respondent was not responding to the notices of the arbitrator and was all along recalcitrant. Where the time and place of meeting appointed by the arbitrator are reasonable, and due notice has been given to the parties, but one of the parties refuses to at-tend, the arbitrator may proceed with the reference in his absence. Where the arbitrator proposes to proceed with the reference notwithstanding the absence of one of the parties, it is advisable that he should give that party distinct notice of his intention to do so (See Halsbury's Laws of England, Fourth Edition, Vol. 2, 306 para 590).

The question came up before a Division Bench of the Calcutta High Court in Udaichand Panna Lall v. Debibux Jewanram, AIR 1920 Cal 853. Sir Asutosh Mukherjee, J. held that there is no statutory rule however that if an arbitrator proceeds ex parte without giving notice of his intention to proceed in that manner, the award made by him must be set aside. In the absence of such an inflexible statutory provision, the question of notice is a rule of prudence and convenience. If either party, after the arbitrator has given him sufficient notice and proper opportunities of attending, will not appear, the arbitrator may proceed in his absence. The true test is, has the complainant, who takes exception to the validity of the award, been in fact prejudiced by the omission of the arbitrator to serve the special notice on him. If it is established that, notwithstanding such warning, he would not have appeared before the arbitrator, he has really no grievance and cannot invite the court to set aside the award on account of the alleged defect in procedure.

In the instant case the proceeding was started before the Subordinate Judge. The respondent never appeared. On submission of a panel of names, the learned Subordinate Judge appointed an arbitrator. At that stage also the respondent did not co-operate. The arbitrator, after being appointed, gave notice for several dates. On 27-12-79 notice was given to both the parties to submit their statements and such notice was received by the Divisional Manager of the respondent. A letter was written on 7-1-80 by the Divisional Manager that the respondent did not want the particular person to act as arbitrator. Again notice was sent on 12-1-1980 and the case was fixed to 10-2-80 This notice was received on 15-2-80. On 2-3-80 the following order was passed by the arbitrator:--

'x x The respondent has not turned up today. He has not filed any counter. I have waited till 8 p.m. to see if the respondent would take any step in the matter. The respondent has not sent any intimation nor has he prayed for time. In fact, ever since the commencement of this arbitration proceeding the respondent has not responded at all except sending a copy of his letter addressed to the Sub-Judge, Bhubaneswar vide his Memo No. 48 (4) dated 7-1-1980 in which he has expressed that he is not agreeable for my appointment as arbitrator in this case. From the silence it is clear that the respondent does not want to co-operate in the conduct of the arbitration proceedings or to defend himself. In the circumstances as I have already given sufficient opportunity to him, there is no point in further waiting for him particularly when he exhibited an attitude of callousness and indifference. The respondent is therefore set ex parte.

The case is posted to 23-3-1980 at 10 A.M. for ex parte evidence of the claimant

XX XX '

The arbitrator was sick on 23-3-80 and the case was posted to 26-3-80. From the orders passed on 26-3-80, it appears that the claimant was present with evidence and he had filed a true copy of the agreement along with the schedules forming part of the agreement. Statements were recorded and award was to be passed. This would show that there was no prejudice to the respondent. The case reported in AIR 1920 Cal 853 (supra) has been followed by the Calcutta High Court in Bhowanidas Ram Govind v. Harsukhdas Balkishandas, AIR 1924 Cal 524; Premchand Manickchand v. Fort Gloster Jute ., AIR 1959 Cal 620 and Dipti Bikash Sen v. India Automobiles, AIR 1978 Cal 454. The Allahabad High Court also in Dori Lal v. Lal Sheo, AIR 1954 All 244, has followed the principles laid down in AIR 1920 Cal 853. A Division Bench of this Court in V. Gurumurty Raju v. V. Narasimha Raju, AIR 1954 Orissa 234 has also held that if reasonable and substantial principle has been complied, then that will amount to compliance of the principles of natural justice. Even, verbal information is sufficient. To the same effect are also two decisions of the Sind High Court.

In Grahams Trading Co. v. Chandulal Parmanand, AIR 1935 Sind 228, it has been held that if there was no intention of a party to appear in spite of notice, there would be no prejudice if an ex parte award was passed against such an recalcitrant party. So also in Thadomal v. Menghraj, AIR 1930 Sind 190, it has been held that when actual knowledge of notice is there and there is non-appearance, the ex parte award does not become invalid. The Punjab High Court in Azad Hind Chemicals Ltd. v. Ram Lal, AIR 1961 Punj 206 has also held that if such ex parte award is passed against a recalcitrant party, then there would be no prejudice. This Court in Union of India v. Joginder Singh & Co., ILR (1961) Cut 544 has also held that the arbitrator is not bound by any technical rules of procedure for conducting the proceeding before him. So long as he follows substantially the rules of natural justice, fairly hears both parties and determines without any ambiguity all matters referred to him for arbitration, his award must be upheld. The technicalities of the Civil P. C. apply to the Civil Court before whom the award is filed and challenged. This case has been followed in Choudhury Radhanath Nanda v. Union of India, (1965) 31 Cut LT 260. In Chatterjee Bros. and Company v. State of Bihar, 1979 BLJR 720, it has been held that the Civil P. C. does not apply to arbitration proceeding.

Section 41(a) of the Arbitration Act makes it clear that the provisions of the Civil P. C. shall apply to all proceedings before the Court and to all appeals under the Act. It is contended on behalf of the respondent that according to the provisions of the Civil P. C. when a matter is to be heard ex parte, there should be a previous order that if on a particular date the contesting party does not appear, then he will be set ex parte. The arbitrator, in the instant case, having not done so, it is challenged by the respondent that the entire proceeding is bad. As I have already observed above and in view of the consistent decisions of several High Courts, it should be held that there was no prejudice caused to the respondent in the instant case and the rules of natural justice have been complied with and sufficient opportunity was given to the respondent and, as such, it cannot be held that the award is to be set aside for legal misconduct of the arbitrator as the action of the arbitrator does not amount to legal misconduct.

There is of course a Division Bench decision of the Calcutta High Court in Juggilal Kamlapat v. General Fibre Dealers Ltd., AIR 1955 Cal 354. A careful examination of this ruling would show that this is not contrary to the principle laid down in AIR 1920 Cal 853. It was a case in which the party reached a few minutes late after the ex parte order was passed, as he had gone to Kashmir and reached just at that time. The facts and circumstances of that case are different. This principle was again followed in Smt. Dulari Devi v. Rajendra Prakash, AIR 1959 All 711. But I have already held that these decisions are not contrary to the principles laid down in AIR 1920 Cal 853 and the facts and circumstances were different,

6. The next question is whether the reference to the arbitrator was without jurisdiction and whether the proceeding before the arbitrator was without jurisdiction. Clause 20 of the agreement runs as follows:--

'20. If any dispute arises regarding any matter arising out of or incidental to this agreement or regarding interpretation of any clause or term of this agreement, the matter shall be decided on the sole arbitration of the Chairman of the Corporation or the Managing Director or the Chief Executive Marketing as may be nominated by the Chairman and the provisions of the Indian Arbitration Act, 1940 shall apply. In case the said Chairman or the Managing Director or the Chief Executive Marketing as the case may be is not available or willing to be the arbitrator, this arbitration clause should be ignored and considered nonexistent. In anticipation of relief from arbitrator no party can apply or obtain any order of stay or injunction from court.'

It may be pointed out here that the appointment of the arbitrator by court was not challenged. Against that appointment, M. A. No. 99/80 was filed but that was withdrawn. A letter was sent by the respondent on 7-1-80 by the Divisional Manager to court intimating that the respondent was not willing to the appointment of Shri S. Hanumanta Rao as the arbitrator. Nowhere, it was challenged that the court had no jurisdiction to appoint the arbitrator. It would thus appear that the appointment of the arbitrator went unchallenged by the respondent. In the arbitration clause, as has been reproduced above, it has been stated that the arbitration clause would be deemed (o be non-existent if the three authorities mentioned therein are not available or not willing. It would appear from that clause that the arbitralion clause prevails.

It will only be deemed to be not existent if those three authorities are not willing or not available. There had been definite allegation against the chairman that he had already decided against the present appellant and so he could not be the arbitrator. This allegation was before the court when he appointed the arbitrator. So, there was allegation of bias against a particular person mentioned in the arbitration clause. This allegation was also agitated in the M. A. which was dismissed as withdrawn. This fact was also agitated by the present respondent in the proceeding under Order 9 Rule 13 C. P. C. for restoration, which was also dismissed. The appointment of the present arbitrator is not without jurisdiction. It does' not say that if there is sole arbitrator appointed, the appointment of another arbitrator is not without jurisdiction. Section 20 of the Arbitration Act may be referred to. It has also been held in Ferliliser Corporation of India Ltd. v. Ravi Kumar Ohri, AIR 1979 Orissa 19 in para 7 that appointment of such arbitrator is not without jurisdiction.

It is contended on behalf of the respondent that if it is without jurisdiction, then the matter can be agitated at any stage. But as I have already stated above, the respondent agitated this matter in a Miscellaneous Appeal as well as in a petition for restoration and those have been dismissed. The letter dated 7-1-80 also does not say that the clause is not available. The order of the Court is also not bad, inasmuch as the present appellant alleged that the arbitrator named in the agreement was unfit to be the arbitrator and this allegation was before the court when he appointed the arbitrator. It has been held in a Division Bench of the Calcutta High Court in Union of India v. M.S. Grewal & Co., AlR 1968 Cal 333, that in the absence of any allegation that the arbitrator is unfit, the appointment of another arbitrator amounts to refusing to file the arbitration agreement and if such an order is passed that is appealable. It would appear that in the instant case appeals were filed and were dismissed.

It has also been held in Yar Muhammad v. Ghulam Sarwar, AIR 1950 Lahore 145, that if the arbitrator named in the agreement is found not to be competent for acting as such, it will be presumed that it was intended to supply the vacancy and the parties may themselves agree to another arbitrator being nominated by them, or failing that, by the Court. Unless it is shown that it was intended by the parties that the vacancy shall not be filled up, the agreement will be kept alive and allowed to be filed. There is no ban in the arbitration clause that the parties cannot fill up the vacancy and in absence of such clause, the court can appoint an arbitrator. It has also been held in U. P. Co-operative Federation Ltd. v. Sunder Bros., Delhi, AIR 1967 SC 249, that if there is any bias of an officer of the Department to be an arbitrator. it is also desirable that the court should appoint another arbitrator.

7. In the facts and circumstances of this case, which are peculiar, it is clear that the challenges about the appointment of the arbitrator have already been negatived in M.A. filed by the respondent and also in the application under Order 9, Rule 13, C.P.C. At the initial stage, by letter dated 7-1-80 the respondent also did not challenge the appointment of the arbitrator. There was definite allegation against the Chairman of the Corporation before the court while ordering for appointment of the arbitrator. Taking an overall view and considering the peculiar facts and circumstances of the case, 1 hold that the appointment of the arbitrator was not without jurisdiction and the reference was not void. The reference is not a nullity.

It has also been held by this Court in Tata Iron & Steel Co. Ltd. v. Rajrishi Mineral Industries, (1978) 46 Cut LT 237: (AIR 1979 Orissa 88), para 8, that unless a negative intention is indicated, Section 8(1)(b) of the Act would be applicable and under the provisions of Section 20(4) of the Act, which confers power on the Court to appoint arbitrator or umpire, jurisdiction would be vested in the Court to make the appointment and thus fill up the vacancy. The Supreme Court has also held in Union of India v. Raghunath Singh & Co., AIR 1980 SC 103, that only if the arbitration agreement did show that the parties did not intend to supply the vacancy, the court had no power to supply the vacancy under Section 8(1)(b). If no such intention could be culled out from the arbitration clause, the court could supply the vacancy. When there was a named arbitrator, even though he was named by office, it was open to the court to supply the vacancy in his place under Section 8(1)(b). Reliance for this has been placed on Prabhat General Agencies v. Union of India, AIR 1971 SC 2298.

8. There is another facet of this case. There is no dispute that by virtue of Section 37(1) of the Arbitration Act, all the provisions of the Limitation Act shall apply to arbitration as they apply to proceedings in court. By virtue of the aforesaid provision, the Limitation Act also applies. The party should have stated at the time when the application under S. 20 of the Arbitration Act was under consideration that the arbitration clause is not available. The party cannot be allowed to say this afterwards to frustrate the entire proceeding. It was open to the respondent to state at that stage that the persons named in Clause 20 of the agreement are (not) willing and (not) available and that the arbitration clause is nonexistent.

9. It is contended by the respondent that there was no proper notice on the respondent. The notice that was served on the Divisional Manager is not sufficient notice. The learned Subordinate Judge has negatived this contention. I entirely agree with the reasoning given by the learned Subordinate Judge. It has also been held in AIR 1979 Orissa 19 para 7 (referred to above) that such notice is also sufficient. In the instant case, the Divisional Manager is the person who admittedly signed the agreement. Notices have been received by the Divisional Manager. He has also intimated the court that the respondent was not willing for the appointment of Shri S.H. Rao as the arbitrator. The very same points were also urged in the Miscellaneous Appeal as well as in the petition under Order 9, Rule 13, C.P.C. The said appeal and the application have already been dismissed. In such circumstances. I hold that the notice was sufficient.

10. The respondent contends that the arbitrator was biased because he happened to be lawyer for the appellant. A report was called for from the arbitrator. It appears that the arbitrator was also a lawyer for the respondent. No definite bias has been established in this case. The very same points were also urged in the Miscellaneous Appeal as well as in the application under Order 9, Rule 13, C.P.C. and both the said matters have been dismissed. I entirely agree with the findings of the learned Subordinate Judge on this point.

11. In the result, the appeal is allowed. The judgment of the learned Subordinate Judge so far as absence of proper notice and jurisdiction about the reference are concerned is set aside and the award of the arbitrator is made a rule of the Court.

12. No costs.


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