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Nav Bharat Construction Co., New Delhi and anr. Vs. Union of India and ors. - Court Judgment

LegalCrystal Citation
SubjectArbitration
CourtDelhi High Court
Decided On
Case NumberSuit No. 1056A of 1977
Judge
Reported inAIR1979Delhi75
ActsArbitration Act, 1940 - Sections 20 - Schedule I - Rule 3
AppellantNav Bharat Construction Co., New Delhi and anr.
RespondentUnion of India and ors.
Appellant Advocate G.N. Aggarwal, Adv
Respondent Advocate M. Iyengar, Adv.
Cases ReferredHari Shankar v. Shambhu Nath
Excerpt:
.....the arbitrator on the expiry of period - it was closed without the intervention of the court for making award without passing any award - it was held that the court could not order the start of new arbitration proceedings as per section 20 of the act as the period had only expired not the proceedings - section 13: [altamas kabir & cyriac joseph,jj] custody of child - welfare of child vis--vis comity of courts - the minor girl child of 3 1/2 years was brought to india by her mother. the minor girl was a citizen of u.k. being born in u.k. her parents had set up their matrimonial home in u.k. and had acquired status of permanent residents of u.k. the child with her mother was supposed to return to u.k. but the mother cancelled her tickets and remained behind in india. the husband..........abandoned. it is stated that in any case the petitioner's right was to get the time for making the award extended and not to get a new arbitrator appointed.4. i think that the present proceedings can be decided on a very short point. there are two ways in which an arbitration can be commenced. either the parties appoint the arbitrator or arbitrators, as the case may be, and start the proceedings or, the parties apply to this court for having the arbitration. in such a, case he arbitration is called an arbitration with the intervention of the court and is the subject matter of chapter iii of the arbitration act, 1940. if the arbitration is without the intervention of a court it is covered by chapter ii of the arbitration act, 1940. these two portions of the act differ from each other and.....
Judgment:
ORDER

1. This is an application under Section 20 of the Arbitration Act , 1940, which has been registered as a suit. The facts of the case are that the petitioners had entered into a contract with the Union of India for the construction of some building at Rampur. There was an arbitration clause, Clause 25, in that agreement. Due to certain disputes having arisen, the petitioners had requested for the appointment of an arbitrator on June 29, 1976 Shri H. C. Gupta was appointed as arbitrator. Later this arbitrator resigned and on March 25, 1977 Kumari K. P. Sarojni was appointed as the arbitrator. The proceedings remained pending for some time before her but on August 26, 1977, she passed an order saying that the period for making the award had expired and she had no jurisdiction to proceed with the matter. She also said that no assent had been given for extending the time for making the award.

2. The petitioners then applied to the Chief Engineer to appoint another arbitrator in place of Kumari Sarojni but no new arbitrator was appointed. The petitioners then applied to this Court under Section 20 of the Arbitration Act under the impression that this Court had power to direct the appointment of a new arbitrator.

3. The Union of India has contested this matter. As a preliminary objection, it has been stated that the petitioners have no right to make this application under Section 20 of the Arbitration Act because the arbitration has already been abandoned. It is stated that in any case the petitioner's right was to get the time for making the award extended and not to get a new arbitrator appointed.

4. I think that the present proceedings can be decided on a very short point. There are two ways in which an arbitration can be commenced. Either the parties appoint the arbitrator or arbitrators, as the case may be, and start the proceedings or, the parties apply to this Court for having the arbitration. In such a, case he arbitration is called an arbitration with the intervention of the Court and is the subject matter of Chapter Iii of the Arbitration Act, 1940. If the arbitration is without the intervention of a Court it is covered by Chapter Ii of the Arbitration Act, 1940. These two portions of the Act differ from each other and the parties have a choice of commencing the proceedings under one or the other procedure. In the present case, having commenced the proceedings under one procedure and the arbitration having come to an end under that procedure, the question for decision is whether a new arbitration can be commenced under the same arbitration agreement under Chapter Iii of the Arbitration. Act.

5. It is quite obvious that the opening words of Section 20 i.e. sub-section (1) of that section, indicate that there is an alternative and I quote:

'20 (1). Where any persons have entered into an arbitration agreement before the institution of any suit with respect to the subject matter of the agreement or any part of it, and where a difference has arisen to which the agreement applies, they or any of them, instead of proceeding under Chapter Ii, may apply to a court having jurisdiction in the matter to which the agreement relates that the agreement be filed in Court'.

The important words in this section for the purpose of present case are 'instead of proceeding under Chapter Ii, may apply to a Court having jurisdiction in the matter'. So the legislature has clearly indicated that the choice of going to the provisions of Section 20 are available instead of going directly to the arbitrator. Once the proceedings having gone to the arbitrator without the Court having anything to do in the matter, then the other provisions of Chapter Ii apply and not the provisions of Chapter III. In fact, Section 20 by its own terms applies only if there has been in reference to arbitration without the intervention of the Court.

6. The contention of the learned counsel for the petitioners that the Court can pass an order appointing the arbitrator in this case is based on the mistaken belief that the old arbitration has come to an end because the time for making the award has, expired. The arbitration clause is not available again and again. Once an arbitration has started it is not open to the party merely to stop appearing and then say that this arbitration has come to an end, please appoint another arbitrator. This conduct of the petitioners is self-defeating and would make a mockery of the Arbitration Act.

7. The facts as set out above would indicate that the original arbitration which was before Kumari Sarojni came to an end because she thought that unless the time is extended it was pointless for her to proceed any further with the arbitration. The provisions of the Arbitration Act include in the First Schedule a condition that the award shall be given within four months from when the arbitrator entered into the reference. In the present case there was also a term in the arbitration clause (25) that the parties could agree to extend the time for making the award by mutual consent. The facts show, that on a previous occasion the time had been extended but the order dated August 26, 1977 (Ex. R-8) shows that there was no consent from the petitioners to extend the time for the award. I quote from the order. 'The statutory period of 4 months for making the award expired on July 4, 1977 and the parties were called upon on June 18, 1977 to enter their as sent for extending the time for making the award up to November 3, 1977. No assent has been given to this. Since the statutory period of four months has expired, I have no jurisdiction to proceed with this case. In the circumstances the case is closed.' In my view this order is based on some misunderstanding of the law relating to extension of time for making the award. It is open to the party to agree to the time being extended. If that be so the arbitrator has no difficulty. If the parties do not agree to the extension of time even then the Court has the power to extend the time. The provisions of Section 28 of the Arbitration Act are as follows:

'28 (1) The court may, if it thinks fit, whether the time for making the award has expired or not and whether the award has been made or not, enlarge from time to time the time for making the award.'

Hence, the Court can extend the time even if the award is made after the statutory period of four months. It is not necessary to get the extension before the award is made. In the words of Subba Rao J., in Hari Shankar v. Shambhu Nath, : [1962]2SCR720 'So, till the time is extended, an award cannot be made, though when extended, an award factually made may be treated as one made within the time so extended. To put it differently even if time was not extended by the Court the document described as an award would be treated as non est.' The obvious possibility to which this observation refers is the possibility of the arbitrator giving an award after the statutory period of four months has expired. In such a case the award being time barred would be ineffective unless the Court extends the time for making the award. Generally, and in practice, the filing of the award and the extension of time have to be concurrent. So, in order to apply Section 28 in a case when the award has been made after the statutory period, it would require that award to be placed before the Court for the purpose of making it a rule of the Court and in case the Court extended the time and dismissed any objection to the award it would become an effective award even though made beyond the statutory period. The statement in the learned arbitrator's order that she had become powerless to proceed is not altogether incorrect and is yet not altogether correct. Undoubtedly, the arbitrator becomes functus officio after four months had passed but Section 28 gives the Court every power to reinstate even a time barred award i.e. an award made after the period of four months has expired. As generally, no award can be made in such a short period as four months it is almost customary for the court to extend the time for making the award and this is generally done in all bona fide cases or the parties themselves can agree to the extension of the time.

8. Unfortunately, on the facts of this case, the parties did not choose to agree to the extension of time and consequently, the arbitrator thought that the award could not be made in order to meet this situation the petitioners should have applied for extension of time under Section 28 or made some other application instead of seeking a fresh arbitration under Section 20 which is not at all the correct procedure available in this case.. As a matter of fact there are numerous other reported decisions which also have taken the view that Section 20 does not apply to a situation Me the present one but the-learned counsel or the petitioners says that possibly Section 20 has been applied in some unreported cases to appoint a fresh arbitrator.

9. I cannot see how an arbitrator can be appointed in the present case because the previous arbitrator has never resigned. All that the previous arbitrator did in this case is that she held that the statutory period for making the award has expired. This did not mean that she had resigned from her arbitrator's post. There cannot be two arbitrators existing under the same arbitration agreement. As long as the previous arbitrator is neither removed nor resigns it is not possible for the Court to appoint a new arbitrator. The contention of the learned counsel that by merely holding that the arbitrator has become functus officio she ceases to be an arbitrator is not correct. All that the arbitrator held was that she cannot proceed further with the arbitration. The answer to this problem was to somehow get the arbitration revived or to get the same superseded in some way. It is there fore, for the party to move the Court in some other way. The present suit is not maintainable and is dismissed with costs.

10. Application dismissed.


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