1. This is an appeal brought by the defendants Messrs. Saxena and Co., against an order passed by a learned Subordinate Judge of Delhi refusing to set aside an award made in favour of the plaintiff during the course of a suit for the recovery of a sum of Rs. 10,000/-.
2. In 1946 Saxena and Co. purchased two lacs of parachutes worth Rs. 32,00,000/- for a Mr. King from the Disposals Department. They were to be paid a commission of one rupee percent, which worked upto Rs. 32,000/- and this commission was to be shared half and half between the plaintiff Damodar Parshad Gupta and the defendants.
For some reason or another King did not take over this bargain and the parachutes were purchased by Messrs. Milkhi Ram and Bros. of Bombay on or about 23-7-1946 with the consent of King and it was arranged by the plaintiff and the defendants to make delivery of parachutes to. Messrs Milkhi Ram and Bros. On 23-7-1946 a cheque for Rs. 10,000/- was issued by Messrs. Saxena and Co, in favour of Damodar Parshad Gupta which was presented to the Bank in January 1947 but it was dishonoured on the 16th January on the ground that the drawer had stopped payment.
Meanwhile on 13-8-1946 Saxena and Co., gave a cheque for Rs. 5,000/- to Damodar Parshad Gupta which it is how alleged was in full and final settlement of Gupta's share in the commission. Damodar Parshad Gupta then brought a suit for the recovery of Rs. 10,000/- on the basis of this cheque on 29-7-1949. As a result of the pleas of the defendants several issues were stated by the learned Judge.
3. On 8-1-1952 the suit was referred to the arbitration of Mr. B. S. Soni, a chartered accountant of Chandni Chowk, Delhi, who made an award on the 11th March in favour of the plaintiff. The objections filed by the defendants against the award were overruled and a judgment was passed in accordance with the award and a decree followed. In the deed of reference there was a clause to the following effect-
'The award of the arbitrator whether with or without enquiry made within one month from today shall be final and binding on the parties, and it will not be open to any objection. It would be in the sole discretion of the arbitrator to take evidence or not to hear any party or not, and to arrive at his decision in any way he likes, even behind the back of both or either of the parties. The fee of the arbitrator to be fixed by the Court will be borne by the defendants.'
4. The real question raised in trial Court was that the defendants did not get an adequate opportunity for putting their side of the case before the arbitrator and that the proceedings had been taken ex parte which vitiated the award. The learned Judge was of the opinion that the arbitrator was justified in proceedings ex parte.
5. Two questions have been debated before me,(1) that the arbitrator has misconducted himself as he proceeded ex parte without reasonable cause and (2) (which was raised by the respondent) that in' terms of the agreement he need not have heard the defendants at all.
6. The record of proceedings before the arbitrator shows that a notice was given for the appearance of the parties for 16-2-1962 and the parties were on that day present or represented and at the request of the defendants the case was adjourned to the 23rd February for the production of certain documents and on the 23rd February an adjournment was given at the request of the parties for a compromise. The next date of hearing was 29-2-1952.
There was no compromise and the arbitrator issued notice to the parties to appear on 1-3-1952 on which date the plaintiff appeared but the defendants did not. The defendants' Advocate Mr. Shiv Dayal Mehra applied for an adjournment to the second week of March as the notice was short and evidence could not be arranged for 1-3-1952 but the case was adjourned to 8-3-1952. This notice reached the defendants at Bombay on 3-3-1952. The defendants deny that this notice was received, but the learned Judge has found against them, and I think rightly.
7. Before I decide the question of Justification for the arbitrator proceeding ex parte I must dispose of the question as to what is the effect of the agreement which was entered into between the parties giving the arbitrator very vast-powers. Really that question does not arise in this case because the arbitrator does not purport to have acted under the powers given in that clause.
On the other hand he has tried to proceed with the arbitration as if such a clause did not exist. The respondent's counsel relied on those cases which have decided the effect of the parties consenting to the arbitrator not proceeding according to the ordinary recognised rules of the judicial proceedings and where he is entitled to receive evidence in the absence of one of the parties or make private enquiries or act on his own knowledge.
It has been held that such agreements are, effective and in such cases awards cannot be set aside, but as I have said above there is nothing to indicate that the arbitrator was acting under these powers and therefore the cases quoted by the respondent where the awards were upheld under arbitration agreements giving full power to the arbitrator to decide the case in any manner he deems proper without hearing the parties or after making private enquiries -- open or confidential -- have no applicability to the present case. These cases are -- 'Debi Das v. Keshava Deo', AIR 1945 All 423 (A); -- 'Husain Bakhsh v. Lach-man Dass Mathra Das' AIR 1929 All 69 (B): --'Mt. Aftab Begum v. Haji Abdul Majid Khan'. AIR 1924 All 800 (1) (C): -- 'Lachmi Narain v. Sheonath Pandey' ILR 42 All 185 (AIR 1919 All 98) (D) ; -- 'Sanyasirao v. Venkatrao', AIR 1923 Mad 301. (E)'; and-- Baijnath v. Bajranglal Kamalia',AIR 1938 Cal 166 (F).
8. The award and the proceedings show that the arbitrator gave notice to both parties and adjourned the case when one of the parties was not present or asked for an adjournment and that he did not act under the special power given to him, nor did he purport to act under that clause. On the other hand he proceeded ex parte because-
'On 8-3-1952, the plaintiff with his counsel was present at' the appointed time and place while the defendants and his counsel were absent. I waited for one and one quarter- hours and yet they did not turn up.'
and then gave his award.
9. The case, therefore, resolves itself to and it has to be decided as to whether there was an adequate opportunity given to the defendants to make their appearance and to effectively put up their side of the case before the arbitrator. The letter, Ex. C. 5, dated 14-2-1952 by the defendants to the arbitrator shows that according to the defendants Milkhi Rain was an important witness who was out of India and the defendants were anxious to file his affidavit and wanted a date to be fixed between the 10th and 14th March.
Again on 28-2-1952 they wrote to the arbitrator asking that the date be not fixed before the middle of March (Ex. C. 7). On 1-3-1952 again the defendants wrote to the arbitrator that the case be adjourned to some other date between 10 and 15-3-1952 in order to enable them to produce their witnesses and they again wrote on 3-3-1952 (Ex. C. 19) that G. B. Saxena will be in Delhi between the 12th and 15th of March and would be obliged if he was told as to what date the hearing was fixed for, and again on 7-3-1952 they again wrote acknowledging receipt of arbitrator's letter dated 6-3-1952 and in this letter they again stated that Saxena would not be in Delhi before the 10th of March and asked for the case to be fixed between the 10th and 15th March.
In these circumstances I am of the opinion that there has been a failure of compliance with the provisions of natural justice, and in my opinion, the arbitrator should have given opportunity to the defendants to produce Milkhi Ram or the affidavit of Milkhi Ram which was important in the circumstances of this case.
10. The law in regard to hearing by an arbitrator has been stated by Russell on arbitration at page 108-
'The principles of universal justice require that the person who is to be prejudiced by the evidence ought to be present to hear it taken, to suggest cross-examination or himself to cross-examine, and to be able to find evidence, if he can, that shall meet and answer it; in short, to deal with it as in the ordinary course of legal proceedings.'
11. In Halsburys Laws of England, Edn. 3, Vol. 2, at page 34, the law is stated-
'In fixing the times and places of meetings it is usual for the arbitrator to consult the convenience of the parties and to comply, so far as possible, with their wishes; but it is within his discretion to fix such times and places as he may think proper,'
In 'Bache v. Billingham'. (1894) 1 QB 107 (G), it has been held that hearing witnesses of one party in the absence of the other is a wrong procedure, and Erle J., in -- 'Oswald v. Earl Grey', (1855) 24 LJ Q3 69 (72) (H) said;
'If there be in any part of the country a usage or practice for arbitrators to make their award not on a mere view but on the examination of witnesses for one party in the absence of the, other, and without notice to the latter, I am clearly of the opinion that such a usage would be contrary to law, and that an award made pursuant to such a usage ought to be set aside.'
12. In 'Ramasden and Company Ltd. v. Jacobs', (1922) 1 KB 640 (I), an award was set aside on the ground that the arbitrators had acted improperly in hearing the evidence on behalf of one party in the absence of the other. It was argued in that case that it was a violatiotn of the elementary principles of justice which require that each party should be heard in the presence of the other & should have an opportunity of cross-examining witnesses of the other, & if such a procedure is not adopted, it was held that such a violation would be an absolutely wrong procedure. Bray J, said at page 641 with which Bailhache J., agreed-
'That procedure was absolutely wrong; I wish to make that quite clear whatever may be the practice.'
13. In India the same rule has been adopted'and it is stated in Sarkar's Arbitration Act atpage 126 that notice fixing the date of hearingmust be sufficiently long: See also -- 'PratapSingh v. Kishan Prasad and Co.', 33 Bom LR1357: (AIR 1932 Bom 68) (J). At page 132 aregiven some of the Indian decisions where it washeld that the act of an arbitrator proceeding exparte without sufficient cause of refusing or failing to give reasonable opportunity to all parties amounts to legal misconduct.
14. As in my opinion there was no sufficient cause for proceeding ex parte the award must be set aside and I respectfully follow 'Gladwin v. Chilkote', 61 RR 825 (K), where it was held that in order 'to justify an arbitrator proceeding ex parte a very strong case must be shown of wilful delay by the party not attending and therefore if a reasonable excuse is shown the Court will set aside an award.
15. It was also contended by the defendants that the arbitrator had not made his award on 11-3-1952 and that when an application was made for setting aside the ex parte proceedings, the arbitrator should have set them aside. This application was made on the 13th of March, but on the 19th of March the arbitrator decided that he had no power to reopen the proceedings. The stamp paper was purchased on 10-3-1952 and the award bears the date 11-3-1952, and I have no reason to doubt the statement of the arbitrator that the award had been made on the date on which it purports to have been made.
16. I hold therefore that-
(1) the arbitrator did not purport to act under the special powers given to him;
(2) the request of the defendants was reasonable and the arbitrator should have fixed the date convenient to the defendants because Milkhi Ram's affidavit could not be produced by the 8th;
(3) the defendants were residing at Bombay and the time given to them was too short; and
(4) there was no justification in the circumstances to proceed ex parte and the ex parte award should therefore have been set aside.
17. In the result, this appeal is allowed andthe award is set aside, but the parties will beartheir own costs throughout.