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Swastika Scientific Engineering Co. of Ambala Cantt. Vs. the Union of India (Uoi) and ors. - Court Judgment

LegalCrystal Citation
SubjectArbitration;Civil
CourtPunjab and Haryana High Court
Decided On
Case NumberF.A.F.O. No. 20 of 1950
Judge
Reported inAIR1953P& H129
ActsArbitration Act, 1940 - Sections 30, 31, 31(4) and 39; Arbitration Rules - Rule 5
AppellantSwastika Scientific Engineering Co. of Ambala Cantt.
RespondentThe Union of India (Uoi) and ors.
Appellant Advocate Tek Chand and; H.L. Sarin, Advs.; H.R. Mahajan, Adv.
Respondent Advocate Bishan Narain and; K.S. Thapar, Advs.
DispositionAppeal allowed
Cases ReferredMaflzuddin v. Alimuddin
Excerpt:
.....by single judge in a writ petition filed under article 226 of the constitution of india. in a writ application filed under articles 226 and 227 of constitution, if any order/judgment/decree is passed in exercise of jurisdiction under article 226, a writ appeal will lie. but, no writ appeal will lie against a judgment/order/decree passed by a single judge in exercising powers of superintendence under article 227 of the constitution. - 5. in the second application of the same date the plaintiff's submitted that the purport of their petition dated 7-1-1949 was that the arbitration award should be set aside so that the suit may proceed, but that through an oversight this matter was not clearly set out. and if satisfied that there is no sufficient reason why the matter should not be..........by another written statement by the dominion of india that there was no prayer for getting the award filed in court and that this was an application for amendment which could not be allowed and that the prayer for getting the award filed in court was barred by him (time?). this application of the plaintiffs was dismissed by an order of 11-10-1949, the purport of which was that the plaintiffs had to make an application for getting the award filed under section 14 within three months of the notice of the award which had not been done and that if the amendment was allowed the application would be changed into one under section 14, arbitration act, which had become barred by time.6. the third application was against the wording of issue no. 4 and the plaintiffs prayed that instead of the.....
Judgment:

Kapur, J.

1. This is a plaintiffs' appeal under Section 39, Arbitration Act, against an order which the appellants claim is one refusing to set aside an award made by the umpire. The plaintiffs Swastika Scientific Engineering Company on 26-12-1942 tendered for the supply of 2050 spring balances at Rs. 21/- each. This tender was accepted and the tenderers, i.e. plaintiffs, received an acceptance of the tender at New Delhi on 26-12-1942. On 25-3-1943 the plaintiffs were informed by the Government that 850 balances were defective and the Government cancelled the contract in regard to 850 balances. On the 2-1-1945, the plaintiffs brought a suit for recovery of Rs. 17,850/- as price of 850 balances or as damages. The defendants were, (1) the Governor-General in Council, (2) Inspecting Officer E. S. Saperji, (3) Clerk Radha Krishan and (4) Inspecting Officer Mohammad Yusuf Naqvi. On 2-6-1945 the Governor-General in Council applied under Section 34, Arbitration Act, for stay of the proceedings. On the same day he also filed his written statement. The Senior Subordinate Judge stayed the proceedings on 17-12-1945.

2. Proceedings before the arbitrators went on and on 12-10-1948, on the application of She Dominion of India (as it then was) the Senior Subordinate Judge, Delhi extended the time tor the making of the award till 31-12-1948. Oa 5-12-1948, Pandit Hari Krishan Bhargava, an Advocate of Delhi, who had been appointed an umpire, gave his award dismissing the plaintiffs' claim. On 7-12-1948 the umpire informed the parties of his award. The plairt-tiffs filed objections to tne award on 7-1-1949 in the Court of a Subordinate Judge at Ambala. They alleged that the award was not within the four months allowed by Schedule I of the Act, that no extension of time was given by the Ambala Court, that the umpire was not appointed within 30 days as required by Law, that he was guilty of misconduct, that the award was 'unsustainable' and that the umpire went beyond the power conferred on him by the agreement It was stated there that the plaintiffs received the award by post from the umpire on 7-12-1948 and as 6-1-1949 was a holiday the application was within time.

3. On behalf of the Dominion of India, a written statement was filed in answer to the objection of the plainiiiTs in which it was pleaded thai the Court had no jurisdiction to decide these objections and that the award was not through Court; the other allegations were denied. It was on 26-4-1949. On 12-7-1949, another written statement (which bears no date) was filed by the Government Pleader, in which it was pleaded lhat the award about the matter in dispute had been made by Pandit Hari Krishan Bhargava, Advocate, which was a bar to the plaintiffs' suit, that the plaintiffs had not challenged the validity of the award and it operated as a merger and extinguished the claim of the plaintiffs as the award 'was the only basis by which the rights of the parties could be determined and that it constituted a bar' whether it had been filed in Court or not.

Reliance was placed on Section 32 and it was again pleaded that the Ambala Court had no jurisdiction to determine the validity of the award which could only be done by the Delhi Court. Replication of the plaintiffs was also undated -- it appears to have become a practice of some advocates in some District Courts not to put any date on their respective applications -- which was filed on 3rd of August as the order of the Judge shows. In this reply, it was submitted that the plaintiff had already filed their objections. against the validity of the award and had applied for its setting aside, that Section 32 had no applicability to the facts of the case and that as the original suit was filed in Ambala and the matter was referred to arbitration at Ambala, the only Court which had jurisdiction was the Ambala Court.

4. On 18-8-1949, three applications were filed by the plaintiffs. In the first application, they stated that they had applied for the setting aside of the award on 7-1-1949 and that as it was necessary for the purposes of setting aside the award that the award should be in Court the umpire should be ordered to file the award. Objection was taken by the Dominion of India that the application was barred by time. The objection prevailed and the Court refused to order the filing of the award on the ground of bar of time and dismissed the application as it was not one under Section 14 of the Act.

5. In the second application of the same date the plaintiff's submitted that the purport of their petition dated 7-1-1949 was that the arbitration award should be set aside so that the suit may proceed, but that through an oversight this matter was not clearly set out. It was therefore prayed that in order to complete the petition and do justice to the parties the following words may be allowed to be added :

'The award be got filed from the umpire and be set aside so that the original suit be proceeded with.'

Objection was taken by another written statement by the Dominion of India that there was no prayer for getting the award filed in Court and that this was an application for amendment which could not be allowed and that the prayer for getting the award filed in Court was barred by him (time?). This application of the plaintiffs was dismissed by an order of 11-10-1949, the purport of which was that the plaintiffs had to make an application for getting the award filed under Section 14 within three months of the notice of the award which had not been done and that if the amendment was allowed the application would be changed into one under Section 14, Arbitration Act, which had become barred by time.

6. The third application was against the wording of issue No. 4 and the plaintiffs prayed that instead of the word 'suit' in that issue, the word 'application' be substituted. This issue was then changed and the issue as given in the judgment under appeal was substituted.

7. The Court on the 26-10-1949 dismissed the plaintiffs' suit holding that the Delhi Court alone had jurisdiction under Section 31(4) to go into the matter of the award, that application for filing the award in Ambala was barred by time, that the cause of action had merged in the award and there was no independent cause of action and that the award was a bar to the suit. The plaintiffs have come up in appeal to this Court.

8. A preliminary objection has been raised on behalf of the Dominion (now the Union) of India that no appeal under Section 39, Arbitration Act, lies and the appeal should have been a Regular First Appeal under Section 96, Civil P. C. This appeal was heard by me on 6-5-1952 and was postponed to 6-6-1952 for records, but it was not heard for some reason or another; probably as I was not sitting in Single Bench, & was heard by me on 16(?)-10-1952.

9. In order to determine the questions which have been raised in this case it is necessary to examine the scheme of the Act. Section 2 gives the definition of 'arbitration agreement'.

''Court' means a Civil Court having jurisdiction to decide the questions forming the subject-matter of the reference if the same had been subject-matter of a suit, but does not, except for the purpose of arbitration proceedings under Section 2, include a Small Cause Court.'

Section 2(e) defines 'reference' to mean a reference to arbitration. Chapter II deals with arbitration without the intervention of a Court. Section 8 in this Chapter gives to the Court the power to appoint an arbitrator or arbitrators or umpire. Section 9 gives to the parties the power to appoint a new arbitrator or a sole arbitrator, as the case may be. Section 10 provides for the appointment of three or more arbitrators. Section 11 gives to the Court the power to remove arbitrators. Section 12 gives to the Court the power to fill vacancies where an arbitrator is removed.

Section 13 deals with the powers of arbitrators and Section 14 provides as follows: . 'S. 14(1) When the arbitrators or umpire have made their award, they shall sign it and shall give notice in writing to the parties of the making and signing thereof and of the amount of fees and charges payable in respect of the arbitration and award.

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

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

Section 15 gives to the Court the power to modify an award and Section 16 to remit the award. Under Section 17 if the Court sees no cause to remit the award, or to set it aside, or the time for making an application to set aside the award has expired or such an application is dismissed, the Court has to pronounce judgment in accordance with the award, and upon the judgment so pronounced a decree has to follow and no appeal lies against such decree.

10. Chapter III deals with arbitration with intervention of a Court where no suit is pending and Chapter IV with arbitration in suits. Chapter V is a general Chapter. Section 30 gives the grounds for setting aside an award and Section 31, the jurisdiction of Court, and it is as follows:

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

(2) Notwithstanding anything contained in any other law for the time being in force and save as otherwise provided in this Act, all questions regarding the validity, effect or existence of an award or an arbitration agreement between the parties to the agreement or persons claiming under them shall be decided by the Court in which the award under the agreement has been, or may be, filed, and by no other Court.

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

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

11. Section 32 bars a suit to contest an arbitration agreement or award. Under S. 33 an arbitration agreement or award is to be contested by an application which has to be made to the Court and the Court has to decide the matter on affidavits. Section 34 which provides for stay of legal proceedings is as follows :

'Section 34. Where any party to an arbitration agreement or any person claiming under him commences any legal proceedings against any other party to the agreement or any person claiming under him in respect of any matter agreed to be referred, any party to such legal proceedings may, at any time before filing a written statement or taking any other steps in the proceedings, apply to the judicial authority before which the proceedings are pending to stay the proceedings; and if satisfied that there is no sufficient reason why the matter should not be referred in accordance with the arbitration agreement and that the applicant was, at the time when the proceedings were commenced, and still remains, ready and willing to do all things necessary to the proper conduct of the arbitration, such authority may take an order staying the proceedings.'

12. Under Section 35 no reference or award is rendered invalid by reason only of the commencement of legal proceedings, but if such legal proceedings are commenced between all the parties to the reference and a notice thereof has been given to the arbitrators, all further proceedings become invalid unless a stay is granted under Section 34.

13. Chanter VI deals with appeals.'Appeal' is given under Section 39 which is asfollows :

'39(1) An Appeal shall lie from an order, (vi) x setting aside or refusing to set aside an award.'

14. Chapter VII is a miscellaneous Chapter. which bars the powers of a Small Cause Court for any arbitration proceedings. Under Section 41, the provisions of the Code of Civil Procedure are made applicable.

15. The scheme of the Act shows that where a suit is brought any party to the proceedings can. under Section 34, under the conditions there laid down, make an application for stay of the suit and the Court may stay the proceedings which was what was done in the present case. There is no doubt that in this particular case the Ambala Court had not exclusive jurisdiction to try the suit which was brought by the plaintiffs. But the application under Section 34 having been made in Ambala, it does, in my opinion, give the control of the conduct of the arbitration to the Ambala Court. I do not think that if once an application is made under Section 34, the Court making the order under Section 34 becomes powerless and has to adjourn the case sine die and to leave it to the sweet will of one party or both the parties to do whatever they like with the conduct of arbitration proceedings and the original Court becomes a powerless spectator till another Court decides to set aside the arbitration agreement or decides on the validity of the award if and when it is made, and this is what the Subordinate Judge has decided and the respondents are contending before me.

16. In -- 'Mohd. Mohideen v. Mohd. Mara-cair', AIR 1938 Mad 205, which was a case under Para. 18, Sch. II, Civil P. C., it was held that where a Court adjourns a case under Para. 18, the case should not be adjourned 'sine die'. The Court ought not to renounce its powers and duties in disposing of a suit, anal it is bound to exercise as much control as it can over the proceedings before the arbitrator and it is its duty to see that the parties do not delay the disposal of the arbitration proceedings and to see that as far as possible they prosecute those proceedings.

17. In 'Russell on Arbitration' (1949 Edn.), dealing with 'practice and procedure' the author has said at p. 94.

'But nevertheless it is submitted that the Court has power to vary or discharge such an order under the general jurisdiction of the Court.'

This in my opinion is a correct statement of the law because if this was not so the defendant can get the controversy taken to another Court by making an application to that Court after the matter is referred to an arbitrator. And the original Court will have to hold its hand and be helpless till the award is given and its validity finally determined by another Court to which an application, e.g., an application for extension of time under Sch. I is made or any other application under the Act is made. In view of the opinion of the author of 'Russel on Arbitration' and the Madras case, the control remains with the Court from where the stay was obtained and that Court alone should be the Court under Section 2(c) of the Act. It would, in my opinion, be intolerable that the Court which granted the stay of the suit should have no control and all proceedings should be transferred to the control of another Court to whom an application after the arbitrators have been appointed is made. The scheme of the Act also shows the same. Under Chapter IV. where there is an arbitration in suits, the provisions of the Act are applicable, so also where an application is made under Section 20 for filing an arbitration agreement.

If the contention of the Dominion of India were correct, then two Courts would be dealing with the same matter, one where the suit was brought & the other giving extension of 'time, which does not seem to be the intention of the Legislature. Under Section 2(c) the Court having jurisdiction is the Court which would have jurisdiction of the subject-matter of the reference if the same had been the subject-matter of the suit and under Section 31 an award can be filed in any Court having jurisdiction under Section 2(c) and all questions of validity, etc., of the award and all applications regarding the conduct of arbitration proceedings have to be made to the Court in which the award may be filed and once a Court has been chosen, that is, any application under the Act has been made, that Court alone has jurisdiction over the matter to the exclusion of all other Courts. The words used are :

'Where in any reference any application under this Act has been made in a Court competent to entertain it.....'

18. For the respondent, it is submitted that the meaning of the words 'in any reference' is a reference to arbitrators. The definition of the word, 'reference' is a ''reference to arbitration' and not a 'reference to arbitrators'. Reliance is placed by the respondent on a judgment of the Sind Judicial Commissioner in --'Ramchand Gurdasmal v. Gobindram', 56 Ind Cas 150 (Sind), where the distinction between a 'submission' and a 'reference' has been explained. It was held that 'submission' means an agreement to refer disputes and a 'reference' is made by a particular arbitrator being appointed under the agreement to refer and it is .also true that the definitions of the words 'submission' in the Act of 1899 and 'arbitration agreement' in Section 2(a) of the Act of 1940 are the same. But the words used in Section 2(e) are 'reference to arbitration' and arbitration is a function and an arbitrator is a functionary and, therefore, this case cannot be of much assistance in the present case. Section 2(c) of the Act of 1940 defines 'Court' as a Civil Court having jurisdiction over the subject-matter of the reference if the same had been subject-matter of a suit. Therefore, the Ambala Court, according to this definition, would be the Court of competent jurisdiction and if this is so and the application under Section 34 is an application under the Act, I do not see how the jurisdiction then can be given to any other Court by the unilateral act of another party.

19. As I have held, the arbitration proceedings remain subject to the control of the Ambala Court which even had the power to set aside the order of stay that it had passed. It cannot therefore be correct to say that although the control over the conduct of proceedings remained in the Ambala Court so much so that it could set aside the order of stay so as to re-start the suit which would result in making all proceedings before the arbitrators invalid under Section 35, the Delhi Court would get jurisdiction merely by the unilateral act of the Dominion of India and thus oust the jurisdiction of the Ambala Court in regard to the award. In my opinion, the Court that had jurisdiction to moke any order under the Arbitration Act was the Ambala Court and not the Delhi Court.

20. The question then arises as to whether the application for setting aside the award could be made to the Ambala Court. From what I have said above, such an application did lie to the Ambala Court. It has been held by the Calcutta High Court in -- 'I. G. H. Ariff v. Bengal Silk Mills, Ltd.', ILR (1945) 2 Cal 70, that an application for a declaration that there was no submission and that the umpire acted without jurisdiction is maintainable even without filing the award. Reliance was there placed on a judgment of Chagla J. (as he then was) in -- 'Ratanji Virpal and Co. v. Dhirajlal Manilal', ILR (1942) Bom 452, and at p. 87 Das J. said :

'It is argued by learned counsel for the respondent company, on the analogy of the principle that the cause of action in a suit must be antecedent to the institution of the suit, that the cause of action for an application to set aside the award must be antecedent to the making of the application and that there is no cause of action for setting aside an award until the award has been filed in Court. I do not agree that the filing of the award is any part of the cause of action for setting aside an award. The grounds for setting aside an award are set out in Section 30 of the Indian Arbitration Act. As soon as the conditions there laid down are fulfilled the cause of action for setting aside the award is complete.'

21. It is true that in the present case the award had not been filed in the Court but can it be said that the Court has not taken. notice of the award? The whole of the proceedings from the date of filing of the objections dated 7-1-1949 to 11-10-1949 show that the parties were circumscribing their controversy to the award, its legality and its effect on the suit. The Court has held that the suit is barred by res judicata because of the award. How could the award operate as res judicata unless the Court knew what the matters in dispute before the arbitrators were, what the issues were and what the findings were? If it is merely stated to the Court that the arbitrators have held against the plaintiffs, will it be sufficient to bar the proceedings in the suit unless the award is before the Court and it finds for itself by reference to the award as to what its findings are and how it operates as res judicata? It is true that the award itself was not before the Court but it cannot be said in this case that the Court did not take any notice of the award. Nor could a finding be given as to estoppel because of the award unless it was before the Court. In my opinion the Court took a hyper-technical view of the matter and has decided the case against the plaintiffs bv not considering the application dated 7-1-1949 to be an application which was really for setting aside the award and if there was no award before the Court, its finding on issue No. 4 is in my opinion erroneous.

22. I now come back to the original objection of the respondent that no appeal lay under S. 39, Arbitration Act. The words of the section are quite clear. An appeal lies against an order setting aside or refusing to set aside an award. Application was made on 7-1-1949, for setting aside the award. Whatever the reason for the Court not setting aside the award, the order still remains an order refusing to set aside the award and an appeal lies under S. 39. In -- 'Bholanath v. Chandra Shekhar', AIR 1950 Cal 53, G. N. Das J. held that the mere fact that by the same order objections to the filing of an award are overruled and a decree is ordered to be passed does not take away the right of an aggrieved party to file an appeal. The same view was taken in --'Sheocharan Mahton v. Sanichar Mahton', 26 Pat 115. See also -- 'Khetter Nath v. Usha-bala Dasi', 18 Cal W N 381, and -- 'Trailokya Nath v. Sukumar Bose', 44 Cal WN 1034, which were cases under Section 104(1)(f), Civil P. C. The Assam High Court has taken the same view in -- 'Maflzuddin v. Alimuddin', AIR 1950 Assam 191, where it was held that whether objections to an award are dismissed on the merits or on the ground that they are barred by time, the Court by relusing them in effect refuses to set aside the award, and this is an order which is appealable under Section 39 of the Act. I would therefore overrule the objection of the respondent that the appeal is not competent under Section 39 of the Act.

23. I have already held that the Ambala Court had jurisdiction over the subject-matter of the reference and the order of stay was made by the Court in Ambala and that Court in my opinion would have exclusive jurisdiction of controlling the further course of arbitration proceedings arid any order made by another Court for extension of time for the purposes of making an award was in my opinion without jurisdiction. If this is so, the award made by Mr. Hari Krishan Bhargava was an award made beyond the time allowed by Schedule I and should have been set aside by the trial Court.

24. I would therefore allow this appeal, set aside the order of the trial Court and remand the case for trial in accordance with law. The parties have been directed to appear in the trial Court on 24-11-1952. The costs will be costs in the cause.


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