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P.C. Aggarwal Vs. K.N. Khosia Etc. - Court Judgment

LegalCrystal Citation
SubjectArbitration
CourtDelhi High Court
Decided On
Case NumberFirst Appeal No. 17 of 1969
Judge
Reported inAIR1975Delhi54; 1974RLR596
ActsArbitration Act, 1940 - Sections 2
AppellantP.C. Aggarwal
RespondentK.N. Khosia Etc.
Advocates: R.L. Aggarwal,; R. Sethi,; K.R. Gupta and;
Cases ReferredJuggilal Kamlapat v. General Fibre Dealers
Excerpt:
arbitration - arbitration clause - sections 9 (b) and 20 (4) of arbitration act, 1940 - whether reference made by one party legal - section 9 (b) contemplates reference made by one party as legal - right of opposite party is to cooperate - other party can not insist reference must be made through court under section 20 (4) - party given right to appoint sole arbitrator if other party fails - once consent is specific effect has to be given to it - no fresh consent necessary for making reference - held, reference made by one party legal and ex-parte proceedings justified. - 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.....t.v.r. tatachari and v.s. deshpande, jj. (1) [appellant carried on forward transactions in stock and shares through respondent no. 1 who was a member of delhi stock exchange association. contract note between them contained arbitration clause that disputes would be settled a :cording to rules of the association. respondent no. 1 appointed his arbitrator and on appellant's, failure, president of association appointed his arbitrator. appellant challenged the award given by them as unilateral. single judge held against the appellant and he filed appeal against the same. the d.b. observed that definitions of 'agreement' and 'reference' in s. 2(2) and (e) of the act of 1940 are not without significance para 9 onwards the judgment is ; (2) it is to be noted, however, that the definition of.....
Judgment:

T.V.R. Tatachari and V.S. Deshpande, JJ.

(1) [APPELLANT carried on forward transactions in stock and shares through respondent No. 1 who was a member of Delhi Stock Exchange Association. Contract note between them contained arbitration clause that disputes would be settled a :cording to Rules of the Association. Respondent No. 1 appointed his arbitrator and on appellant's, failure, President of Association appointed his Arbitrator. Appellant challenged the award given by them as unilateral. Single Judge held against the appellant and he filed appeal against the same. The D.B. observed that definitions of 'agreement' and 'reference' in S. 2(2) and (e) of the Act of 1940 are not without significance Para 9 onwards the judgment is ;

(2) It is to be noted, however, that the definition of 'arbitration agreement' in the Act of 1949 is precisely the same as the definition of 'submission' in the Act of 1899. How is it then that the definition of 'arbitration agreement' in the Act of '940 is the same despite the insertion of the new definition of 'reference' in the Act of 1940 The reason appears to be this ; The definition of 'arbitration agreement' is comprehensive enough to include two types of arbitration agreement. On the one hand, it includes merely an agreement between the parties that disputes arising between them should be decided by arbitration. This is a bare arbitration agreement. It does not provide for a reference of the dispute to arbitration. It merely provides that disputes would be referred to arbitration On the otter hand, the definition also includes arbitration agreements which combine an agreement that disputes shall be decided by resort to arbitration with a reference of the disputes between the parties to arbitration. It is only when the arbitration agreement is of the former type, namely, a bare agreement, that disputes shall be decided by resort to arbitration that an arbitration agreement is used' separately from the reference of disputes to arbitration. It is only when an arbitration agreement is of this type that a separate reference to arbitration would have to be made apart from the arbitration agreement and this is why the two things have been separately defined in sections 2(a) and 2(e). But because section 2(a) is comprehensive enough to include the latter type of arbitration agreement which combines both the arbitration agreement and the reference that only the 'arbitration agreement' is defined to include both the types of agreement while 'reference' is not defined at all except to mean that it is a reference to arbitration. B. Nature, manner & time of consent

(3) In a bare arbitration agreement the consent of the parties is restricted to the fact that disputes between them would have to be decided by resort to arbitration. But when arbitration agreement includes also reference to arbitration, the consent of the parties would cover not only the fact that the disputes will have to be referred to arbitration but also the fact that they are referred to arbitrators for decision. The disputes may be of two types'-(a) present disputes, and (b) future disputes. When the disputes have already arisen, then there is no difficulty in under standing that the consent of the parties that the disputes should be decided by resort to arbitration would automaticaliy include a reference of those disputes to arbitration. At first sight it would appear that the consent of the parties underlying a reference can exist only regarding past and present disputes and that it cannot exist regarding future disputes. But this view, though plausible, is opposed to the conception of a submission or a comprehensive arbitration agreement comprising both the agreement to refer to arbitration and also the reference on which the system of arbitration in

(4) England and India has been based right from its inception'till now. It is because the consent of the parties to the reference (as distinguished from a mere agreement to refer disputes to arbitration) can be given in advance in a written agreement or submission or a written comprehensive arbitration agreement in advance before the arising of the future disputes that the nature of reference has become consensual in the law of arbitration. Had the law been that here can be no agreement between the parties as to the actual reference of disputes to arbitration Unless the disputes have actually arisen, there would have been a sharp difference between an arbitration agreement including a reference regarding the past and present disputes and a mere arbitration agreement not including the reference regarding future disputes. But the definitions of 'submission' and 'arbitration agreement' in the Acts of 1899 and 1940 would show that no such differentiation between the existing and the future disputes has been made in making reference to arbitration. It follows, thereforee, thit the Conset of the parties can be given in advance in referring future disoutes to arbitration. (C) When is reference unilateral : - If, thereforee the consent of the parties to the reference of the future disputes to arbitration can be given in advance before the disputes have arisen, does this consent ensure for the benefit of both the parlies when the disputes actually arise Or whether a fresh consent has again to be given to the reference after the disputes have actually arisen As already stated above, no difference between the existing and the future disputes has been been made in the law of arbitration in India at all as far as the reference of these disputes to arbitration is concerned. It would follow, thereforee, that the advance consent given by the parties to the reference of future disputes to arbitration can be acted upon when the disputes -actually arise. Human nature being what it is, it would be unrealistic to expect that even after the disputes have arisen both the parties will again agree to make a reference of the disputes to arbitration. For, after the disputes have arisen, one party would be a claimant and the other would be a respondent. It is the claimant alone who is interested in referring the disputes to arbitration and getting a decision thereof with a view to realise his claim from the opposite party. But the non claimant would be tempted to delay the reference of the dispute to arbitration and its decision with a view to avoid payment of the claim. It is trite knowledge that life of the law is experience and not logic.' The Legislature could not have, thereforee, made a doctrinaire approach to the subject of arbitration and required a fresh consent of the parties to reference even though an advance consent has already been given to the reference before the disputes arose. It is because the Legislature knew that a second , consent of both the parties would not be firth coming or would be very difficult to obtain that the Legislature did not insist on such a consent. It is clear, thereforee, that the previous consent of the parties to the reference of the disputes to arbitration binds them throughout and no fresh consent is necessary after the disputes have arisen. thereforee, when, in a case like present one, both the parlies have consented that the reference to arbitration should be made in a particular manner and has given their consent in advance the actual reference to arbitration according to the procedure agreed by both the parties in the comprehensive arbitration agreement has to be regarded as a bilateral reference inasmuch as it is based on the agreement of parties which includes not only the bare arbitration agreement but also the reference of future disputes to arbitration. Such a reference cannot, thereforee, be said to be unilateral.

(5) A truly unilateral reference would arise when the agreement between the parties is restricted to the simple fact that disputes between the parties would be decided by arbitration but the agreement does not include the reference of disputes to arbitration. To decide, thereforee, whether the reference in a particular case is based on the previous consent of the parties or whether it is a unilateral reference by one of the parties, the agreement between the parties would have to be construed. It is only if it does not include the reference that the question of unilateral reference would arise. (D) When reference can be made only u/8 20 the Arbitration Act :-

(6) There is a widespread belief that section 20 has been enacted in the Act of 1940 to ensure that every reference to arbitration made by one of the parties to the arbitration agreement in which the other party does not join is a unilateral reference and has to be made through the Court under section 20 of the Arbitration Act, 1940. Such opinion is opposed to the provisions of the Arbitration Act 1940 itself. The Act deals with three different kinds of arbitration separately, Chapter Ii is 'Arbitration without intervention of a Court,' Chapter Ii is

'ARBITRATIONwith intervention of a Court where there is no suit pending' and Chapter Iii is 'Arbitration in suits. Section 20(1) falling in Chapter ill itself states as follows - '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,'

(7) A proper construction of section 20(1) would be as follows :- If the arbitration agreement between the parties includes the reference of future disputes to arbitration, then the parties or one of the parties would have an option to proceed either under the provisions of Chapter Ii or under the provisions of Chapter Iii in proceeding with the reference. On the other hand, if the arbitration agreement does not include the reference of the disputes to arbitration, the parties together would have to make such a reference or one of the parties can do so under section 20 of the Act. Naturally, when the arbitration agreement does not include a reference of the disputes to arbitration and yet one of the parties persists in proceeding with the reference without resorting to section 29, such a reference would be unilateral and would, thereforee, be illegal. For, it would not be protected either by the agreement between the parties or by section 20 of the Act. This view would appear to have been accepted by the Full Bench of this Court in PC. Aggarwal v. Banwari Lal, (1972) I Delhi 279=1971 R.L.R. 93, where following observation occurs :- 'If disputes arise in the future, a reference has to be made to arbitration within the meaning of section 2(e) of the Arbitration Act and at this stage there should be a consent of both the parties. If the consent exists, it would not be necessary to proceed under Chapter Iii by making an application under section 20 of the Arbitration Act and the parties or one of the parties can proceed under Chapter Ii of the said Act.'

(8) Our view is also supported by the legislative history of section 20.......... This shows that section 20 was enacted to be an optional provision which is to be invoked only when one of the parties has to proceed with the reference without having previously secured the agreement of the other party to the reference and where only the bare arbitration agreement exists between them.

(9) How do we account for the judicial decisions which seem to take the view that reference to arbitration could be made only through section 20 unless both the parties join in the reference The origin of this view is traceable to the following observation of the Supreme Court in Thawardas Pherumal v. Union of India, : [1955]2SCR48 :-

'Areference 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.'

(10) With respect, it seems to us that the above observation of the Supreme Court has been wrongly understood in some decisions as laying down the wide proposition that there can be no reference to arbitration except through the Court under section 20 unless both the parties join in it. For instance, in P.C. Aggarwal v. Banwari Lal F.A.O. 139-D of 1962 decided by P.N. Khanna, J. on July, 18, 1972, the reference to arbitration had been made in accordance with the Bye-laws and Regulations of the Delhi Stock Exchange Association which had become a part of the arbitration agreement which also thus contained the reference to arbitration. Though the attention of P.N. Khanna, J was invited to the Bye-laws and Regulations as being a part of the arbitration agreement, the learned Judge did not consider whether the arbitration agreement thereby contained the reference to arbitration also. An absolute proposition that no unilateral reference could be made except through Court was laid down under the impression that the decision of the Supreme Court in Thawardas & of the Full Bench in P.C Aggarwal supported such a view. The learned Judge was, with respect, in error in this conclusion for the reasons stated by us. In M/s. Security and Finance (P) Ltd. v. Bachittar. Singh, : AIR1973Delhi140 , Ansari, J also thought that no unilateral reference can be made at all except under section 20. It is not known if the arbitration agreement included the reference also in the case before the learned Judge. If it did, than the learned Judge was not justified in hying down such a broad proposition. The same remarks would apply to the decisions in Madhusudan Limited v. Ram Parkash, 1966 D.L.T. 123, and Om Prakash v. Union of India, : AIR1963All242 . The observation of the Supreme Court does not mean that no reference to arbitration can be made except under section 20 of the Act unless all the parties join in making the reference. Our reasons are as follows :- (1) In the case of Thawardas itself the arbitration provision was invoked by the Government while the reference was proceeded with by the contractor alone. The Government and the contractor did not join in making a reference to arbitration. On the contrary, the reference was initiated by the contractor basing himself on the consent of the parties to the reference contained in the original arbitration agreement. (2) The Supreme Court did not not hold that the award was bad because the initial reference to the arbitration was itself bad being unilateral. (3) On the contrary, the Supreme Court held that the award was bad because it disclosed an error of law apparent on the face of the record. (4) The Court further expressed the view that the arbitrator would have been entitled to commit such an error of law apparent on the face of the record and the award would still have been binding between the parties if a specific question of law had been referred by the parties for the decision of the arbitrator. Such a specific question of law could not be expected to be referred to. arbitration in the original arbitration agreement containing the reference inasmuch as the question would not be known to the parties unless and until the dispute actually arises. Such a question can be formulated only after the dispute arises. Since the question was not contained in the original reference, it has to be referred to arbitration by both the parties. It is in this context that the Supreme Court considered the necessity of the making of such a reference by both the parties. Even if the general observation of the Supreme Court is construed to apply to all references and is not restricted to the reference of a specific question of law, till the said observation cannot mean that no reference to arbitration can be made except through section 20 unless it is jointly made by the parties.

(11) We are fortified in this view by a subsequent decision of the Supreme Court in Bhusawal Borough Municipality v. Amalgamated Electricity Co. Ltd., : [1964]5SCR905 .......

(12) Our view is also supported by the other provisions of the Arbitration Act itself. Firstly, according to section 3. an arbitration agreement, 'unless a different intention is expressed therein,' shall be deemed to include the provision set out in the First Schedule to the Act. One implied condition of arbitration agreement is in para 3 of the First Schedule. As was pointed out by Desai, C.J., speaking for the majority of the Full Bench in Mangal Prasad v. Lachhman Prasad, : AIR1964All108 , in paragraph 6 :- 'A party or the parties could itself or themselves, without intervention of the Court, call upon the arbitrator by notice in writing to make an award, vide, clause 3 of the First Schedule. But the remedy given by section 20(1) is an alternative to that provided by Chapter Ii, which means that Chapter Ii also applies to a case in which a difference arises after the agreement has been entered into. It cannot be disputed that the Act governs an arbitration agreement preceding a difference and also an arbitration agreement following a difference and if Chapter Ii does not exclusively deal with a difference preceding an agreement it cannot be said that section 20(1) exclusively deals with a difference arising after an agreement.'

(13) A contrary view was taken in Om Prakash v. Union of India, : AIR1963All242 (DB).......

(14) Between these two conflicting decisions, we are inclined to agree with the Full Bench in preference to the Division Bench for the following reasons :- 1. Paragraph 3 of the First Schedule refers to the point of time at which the arbitrators have already been appointed. The practical meaning of 'reference to arbitration' is the appointment of the arbitrators. Once the arbitrators are appointed, they are bound to enter on the reference or are liable to be called upon to act by a notice in writing by any party to the arbitration within the meaning of paragraph 3 of the First Schedule. Judicial opinion is unanimous in so construing section 2(e) of the Arbitration Act. In Ramchand v. Gobind Ram, 55 IC 150, it was observed that 'A reference is made by a particular arbitrator being appointed under the agreement to refer. An agreement to refer, and a reference are only distinguishable as separate transactions, where there is an agreement to refer in which no arbitrators are named, and subsequently a reference is made to an arbitrator in pursuance of the agreement. In the present case there was an agreement to refer and a reference in one and the same document, i.e., a submission to named arbitrators.' The agreement in the case before us also combines the agreement to refer and the reference. In James Finlay v. Guardayal Pahlajrai, 76 Ind Cas 650, it was held that where there is a submission in the terms of the Arbitration Act, and in pursuance of it either party appoints his arbitrator, the reference to arbitration is complete and it is not necessary to follow it up with a formal reference to arbitrators named. In Baranagore Jute v. Hulaschand, : AIR1958Cal490 , paragraph 13, it was held that 'reference' means the actual submission of a particular dispute under the arbitration agreement to the arbitrator contemplated therein. Paragraph 3 of the First Schedule, thereforee, contemplates the reference of a dispute to arbitration by a party or parties without the intervention of the Court. In so far as the observation of the Division Bench of the Allahabad High Court implies that a reference under section 20(4) of the Arbitration Act had to be necessarily made before paragraph 3 of the First Schedule became applicable, such an implication is not warranted. Paragraph 3 of the First Schedule, thereforee, supports the argument that a reference by a party or parties is competent without taking recourse to section 20(4). (2) If a reference is made through the Court, the power to extend the time for making the award is given to the Court under section 23 of the Act. It is only when reference is made without the intervention of the Court that paragraph 3 of the First Schedule becomes applicable and the time for making the award is presumed to be four months. Section 28 generally empowers the Court to extend time for making of an award. But the law is well settled that in a reference made without the intervention of the Court, it is open to the arbitration agreement itself to fix a time within which an award should be made or to contain provisions for extension of time. Since the parties have provided for the time and the extension thereof, resort to section 28 would become unnecessary.

(15) Secondly, the Act itself makes a clear distinction between a reference without the intervention of a Court and a reference with the intervention of a Court. Chapter Ii of the Act deals with the former and Chapter Iii with the latter. Section 9(b) of the Act forms part of Chapter Ii and deals with reference (that is, appointment of an arbitrator or arbitrators) without the intervension of Court and is :--

(16) The facts of the present case are analogous to the facts contemplated in section 9(b). The significant features of section 9(b) are as follows : - 1. Reference by only one party is regarded as legal. The right of the opposite party is to be invited to co-operate. But he does not have the right to insist that the reference must be made through Court under section 20(4). 2. The party first appointing the arbitrator is given the right to appoint his arbitrator as the sole arbitrator in the reference if the opposite party fails to appoint his own arbitrator. But this is subject to the expression 'unless a different intention is expressed in the agreement'. This means that the arbitration agreement can provide for some other method of reference (that is, appointment of an arbitrator) which may be different from the one specified in section 9(b) but would still be without the intervention of a Court.

(17) The method contemplated in the present case is in point. The arbitration agreement provides that the second arbitrator will be appointed by the President of the Association on the failure of the appellant to do so. This has been attacked by Shri Aggarwal as being a unilateral reference contrary to the decisions of the Supreme Court in Thawardas and of the Full Bench in P.C. Aggarwal. In our view, this is not the meaning of 'a unilateral reference.' In E.D. Sassoon and Company v. Ramdutt Ramkissen Das, Air 1922 P.C. 374, also the Rules and Bye-laws of the Association provided that the remaining arbitrator may be appointed by the Association. Unfortunately, he had been appointed under section 9(b) of the Arbitration Act, 1899 by a party to the arbitration agreement. The privy Council held that the provision in the arbitration agreement prevailed over section 9(b) in view of the expression 'unless a different intention is expressed in the agreement' appearing in section 9. This decision of the Privy Council establishes the law that the appointment of the arbitrator on behalf of the party in default like the appellant herein can be made by the Association on behalf of the appellant and such a procedure does not amount to a unilateral reference.

(18) Section 20(1) itself expressly gives an option to the party desiring to make a reference to the arbitration to proceed either under Chapter Ii or under Chapter III. On the facts of the present case, as we have seen above, Respondent No. I could have proceeded under section 9(b). But the specific provision in the arbitration agreement incorporating the Bye-laws and the Regulations of the Association prevail over section 9(b). By virtue of section 20(1), thereforee they also prevail over Chapter Iii of the Arbitration Act.

(19) Is there any limitation on the time at which the consent to the reference can be given by the parties and the manner in which the reference is to proceed as contemplated by the parties to the arbitration agreement Neither the Act nor any of the decisions speaks of any such restriction. The provisions of Arbitration Act referred to above show that full latitude is given to the parties to provide for the time at which the consent to the reference may be given and the manner in which the reference may be made. Unless and until the provisions in the arbitration agreement as to the time of the consent and the manner of the reference are found contrary to any provisions of the Arbitration Act, they must be given effect to. This position was clearly understood in the Privy Council decision referred to above. For, the provisions of the arbitration agreement permitting the appointment of an arbitrator on behalf of the party in default by the Association were squarely challenged as ultra virus on the ground that they conflicted with section 9(b) of the Arbitration Act, 1899 which was in pari material with section 9(b) of the Arbitration Act, 1940. That contention was rejected by the Privy Council because section 9 itself contemplated the manner of reference to be different from that set out in section 9(b) if the arbitration agreement so provided. In present case, the appellant has nowhere challenged the provisions of the Bye-laws and the Regulations of the Association forming part of the arbitration agreement as being either ultra virus or illegal for any other reason. Nor has the appellant shown any reason whatever as to why effect should not be given to the provisions of the arbitration agreement. As observed in Russell on Arbitration, pages 1 and 2:- 'The parties to an arbitration may in large degree themselves determine the Procedure to be followed and the powers the arbitrator is to have, as well as the constitution of the arbitral tribunal. The Act lays down a code governing these matters, but many of its provisions may be excluded by agreement between the parties.'

(20) If the provisions of the arbitration agreement have to be given effect to, we do not see how the reference made in accordance with the Bye-laws and the Regulations could be said to be invalid. Section 20 does not say that it is the only provision under which the reference must be made unless it is a joint reference by both the parties after the dispute had arisen. Human nature being what it is, the Legislature could not have contemplated that both the parties should give a fresh consent to the making of the reference after the dispute had arisen. As observed by us above, such a consent would be necessary only if it had not been already given. If the consent has been already given in the arbitration agreement, then merely because it was given before the arising of the dispute it would not make it insufficient. For, the consent expressly contemplates what is to happen after the disputes arise. It contemplates also that one of the parties may refuse to co-operate in the making of the reference. It, thereforee, gives the other party a right to make the reference by appointing his own arbitrator and on the failure of the recalcitrant party to appoint his own arbitrator gives the power to the President of the Association to appoint the arbitrator on behalf of the party in default, These provisions are contained in the Bye-laws and the Regulations of the Association which is a commercial association. Expedition is the essence of commercial transaction. Numerous commercial associations in the States of Bombay, Calcutta, Delhi and Madras have got their own Bye-laws and Regulations governing references to commercial arbitrations. Hundreds and thousands of transactions and also among the members and non-members are dealt with by arbitrations under these standardised provisions. In the vast majority of cases under these Bye-laws and Regulations, no one thinks of approaching the court under section 20 for the making of reference. Advantage is taken of the option given by section 20(1) itself to the parties of proceeding either under Chapter Ii or Chapter Iii of the Act. Advantage is also taken of the option given by section 9 to the parties of proceeding either under section 9(b) or under the special terms of the agreement. Such established commercial practice would be completely thrown out of gear if an extreme view is taken that a party in default can nullify the provisions in the Bye-laws and Regulations of these Associations by refusing to abide by them even though he has agreed to them in the arbitration agreement. We do not find any provision of law for taking the view that the consent given in the arbitration agreement as to the manner of making the reference must be repeated after the dispute has arisen. On the other hand, we take the view once the consent is specific as to how the reference is to be made, it has to be given effect to. No fresh consent is necessary at the time of making the reference because both the parties have expressly agreed that the reference may be made by one of the parties if the other party refuses to co-operate and the President of the Association has to nominate the arbitrator on behalf of the party in default.

(21) In Jagannath Kapoor v. Premier Credit and Installment Corporation (P) Ltd., : AIR1973All49 , a learned Single Judge expressed the view that a unilateral reference, though not prohibited by anything in the Arbitration Act, was contrary to the consensus of the case-law. We have discussed the case-law above and found that it could not support a facile generalisation that every reference in which both the parties do not join after the arising of the dispute and give a second consent to the reference in addition to the previous one embodied in the arbitration agreement becomes a unilateral reference. We note, however, that even the learned Single Judge in Jagannath's case, referred to above, conceded in paragraph 15, after the Supreme Court decision in Bhusawal Borough Municipality case was brought to his notice, that- 'In fact, their Lordships of the Supreme Court had come to the conclusion that the second proviso to clause 5 had specifically authorised any one of the parties interested to approach the Provincial Government for decision. Thus there being a clear provision to the contrary in the proviso itself, the case was to be 'governed by the language of the relevant clause and not by the general rule relating to arbitration proceedings.'

(22) We further find that a Division Bench of this Court has expressed the same view as we have done here in M/s, Smart's Private Ltd. v. Mrs. Satyawati and Others, Suit No. 15 of 1967-application under sections 14 and 17 of the Arbitration Act, 1940-decided on December 8, 1970.

(23) If, thereforee, the Bye-laws and the Regulation? incorporated in the arbitration agreement in the present case expressly make a provision to the contrary, the so-called general rule against the unilateral reference would not apply to the facts of the present case. Further support to the view that the consent of the parties to the reference of future disputes to arbitration can be given in advance so as to make it unnecessary that the parties should again agree to the reference after the disputes have arisen comes from section 5 of the Act which is as follows :- 'The authority of an appointed arbitrator or umpire shall not be revocable except with the leave of the Court, unless a contrary intention is expressed in the arbitration agreement.'

(24) What is the meaning of the expression 'authority of an appointed arbitrator' in Prafulla Chandra Karmakar v. Panchanan Karmakar, Air 1946 Cal 427, Chakravarti, J. in the course of a concurring jugement observed as follows at page 433 :- 'At first sight it might seem that this provision applies only to the authority of a particular 'arbitrator or arbitrators and has no application to the reference itself. But the real scope of the section will appear if the meaning of the word 'authority' is closely examined. In the corresponding provision in the English Arbitration Act of 1889, section 1, the word used is ''submission' and in criticising that section Brown L.J. pointed out in (1890) 25 Q.B.D. 545, thai the word 'submission' had been used with some inexactitude, because the agreement to refer, whichthe term 'submission' might seem to denote, was always irrevocable and it was only necessary to provide for the irrevocability of 'the authority of the arbitrator.'the agreement to refer is one thing, the actual submission, whether by act of the parties or by an order of the Court, that is to say, the reference, is another and the latter is nothing but the consignment of the case to particular arbitrators and the authority conferred on them. The Indian Legislature seems to have metthe criticism of Brown L.J. by accepting the exact language suggested by him and when the section speaks of the authority of the arbitrator, it means the reference.'

(25) In Juggilal Kamlapat v. General Fibre Dealers Ltd. (1952) Supp. 2 S.C.R. 101, the respondent alone referred the disputes between the parties to the arbitration of the Bengal Chamber of Commerce. The award having been set aside, the respondent begged to refer the matter to the arbitration de novo. The appellant appeared before the Tribunal of the Bengal Chamber of Commerce and contended that it had no jurisdiction to make an award on a second reference in the same dispute. The Supreme Court held that after the award was set aside the reference continued to exist in view of section 19 of the Act and could be proceeded with again inasmuch as it has not been superseded by the Court. At page 108 the Supreme Court observed as follows :- 'Section 19 provides inter alias that where an award has been set aside, the court may by order supersede the reference and shall thereupon order that the arbitration agreement shall cease to have effect with respect to the difference referred. The section thereforee leaves it to the discretion of the court when it decides to set aside an award, whether to supersede the reference or not. It may not supersede the reference at all in which case though the award may be set aside the reference will continue.

(26) This decision of the Supreme Court also, thereforee, supports the view that the original arbitration agreement referring the disputes to arbitration governs the parties unless and until the reference itself is superseded and the arbitration agreement ceases to exist under section 19 of the Arbitration Act.

(27) Afterthe appellant had systematically attempted to delay the arbitration proceedings and after several adjournments had been given to him by the arbitrators, the appellant's counsel made an application praying for further adjournment till August 29, 1964 on the ground that the matter was likely to be settled. It was in these circumstances that the case was taken up on August 29, 1954 at 11.30 A.M. when the appellant failed to appear before the arbitrators. The arbitrators expressed the view that Shri P.C. Aggarwal had deliberately kept away and accordingly, decided to proceed exparte after waiting for him till 12.10 P.M.the case was then adjourned to August 31, 1954 at 4 P.M. for making the award. It appears that the counsel for the appellant appeared before the arbitrators at 12.30 P.M. on August 29, 1964 and said :- 'I am sorry that I am late. Please be kind enough to start the hearing right now.'

(28) Shri R.L. Aggarwal for the appellant argued that the arbitrators did not hear the counsel for Shri P.C. Aggarwal in spite of his request and ultimately delivered the award against Shri P.C. Aggarwal. The question is whether the arbitrators misconducted themselves in refusing to hear the counsel for Shri P.O. Aggarwal at 12.30 P.M. on August 29, 1964. Shri R.L. Aggarwal relies on the decision of Calcutta High Court in Juggilal Kamlapat v. General Fibre Dealers, Ltd., : AIR1955Cal354 , which lays down that if a party to an arbitration agreement fails to appear at one of the sittings, the arbitrator cannot or, at least, ought not to, proceed exparte against him at that sitting. If, on the other hand, it appears that the defaulting justice or defeating party had absented himself with a view to preventing justice or defeating the object of the reference, the arbitrator should issue a notice that he intends at specified time and place to proceed with the reference and that if the party concerned does not attend, he will proceed in his absence. If it appears from the circumstances of the case that a particular party is determined not to appear before the arbitrators in any event, as when he has openly repudiated either the reference itself or the particular arbitrators and has shown no desire to recant the arbitrators are not required to issue a notice of an intention to proceed ex parte against such a recusant person. In the light of these observations it may be said that the conduct of the appellant before the arbitrators was defiant as well as dilatory. He had openly denied the existence of the arbitration agreement itself. He had applied under section 33 of the Arbitration Act and failed. Then he applied for the revocation of the authority of the arbitrators and again failed. Hardy, J. has noted the obstructive attitude adopted by the appellant before the arbitrators. He held that the arbitrators were justified in coming to the conclusion that the appellant deliberately kept away from the proceedings and they had, thereforee, no other option but to proceed ex parte and to decline to vacate the ex parte order made against him. The arbitration proceedings had been going on since about the middle of 1961. The arbitrators could not allow them to be delayed further. Hardy, J. has given all the details of the dilatory tactics adopted by the appellant before the arbitrators. In view of them we see no reason to disagree with reasoned conclusion of the learned Single Judge that the arbitrators were justified in proceeding ex parte against the appellant. We, thereforee, reject this contention also.


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