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Chowdhury and Gulzar Singh Vs. Frick India Limited - Court Judgment

LegalCrystal Citation
SubjectArbitration
CourtDelhi High Court
Decided On
Case NumberSuit No. 469A of 1975
Judge
Reported inAIR1979Delhi97; ILR1978Delhi753
ActsArbitration Act, 1940 - Sections 8
AppellantChowdhury and Gulzar Singh
RespondentFrick India Limited
Advocates: P.K. Seth and; S.P. Aggarwal, Advs
Cases ReferredModern Builders vs. Bukatraj N. Vadirani
Excerpt:
.....that the scheme of the arbitration act is that where two arbitrators are appointed they are to appoint an umpire but in case the arbitrators failed to appoint an umpire, powers are given to the court to appoint an umpire at the instance of the parties under section 8(1)(c) of the arbitration act. the period of one month mentioned in clause 2 of the first schedule is, thereforee, or no consequence. section 8 of the act provides that the parties may serve the arbitrators with a written notice in supplying the vacancy of an umpire and if the arbitrators failed to comply with the written notice the parties have a right to approach the court for applying the vacancy of the umpire. in these circumstances, clause 2 of the first schedule of the arbitration act is not mandatory and,..........in the present case after taking into consideration all the claims and counter-claims of the parties awarded only a sum of rs. 12,500.00 to the petitioners against the respondents.(20) in view of the above it is held that there are no valid objections available to the respondent against the award dated 19th may, 1972 filed by the arbitrators in this court. i.a. 2138/75 filed by the respondent is, thereforee, dismissed with no order as to costs.(21) consequently the award dated 19th may, 1972, of the arbitrators filed by them in this court is made a rule of the court and a decree for rs. 12,500.00 is passed in favor of the petitioners against the respondents. the award is made a part of the decree.(22) the petitioners shall be entitled to costs of these proceedings and interest at 6.....
Judgment:

Sultan Singh, J.

(1) The two legal questions arise in this case. Whether the award is liable to be set aside when the two arbitrators appointed by the parties fail to appoint an Umpire i.e. they do not comply with clause 2 of First Schedule to the Arbitration Act. In other words, whether clause 2 of First Schedule of the Arbitration Act is mandatory or directory.

(2)Whether there is any period of limitation for an arbitrator to file an award in court.

(2) M/S. Chaudhury and Gulzar Singh, petitioners by their letter dated 12th September, 1969 and M/s. Frick India Limited, respondents by their letter dated 6th March, 1970 appointed Shri D. Dutt and Sbri S. L. Nayar as Arbitrators respectively to decide the various disputes amongst themselves. The arbitrators entered upon the reference on 27th May, 1970 and made their award on 19th May, 1972. During the pendency of the arbitration proceedings the petitioners and the respondents jointly made an application under Section 28 of the Arbitration Act for extension of time for the making of the award. In C.M.P. No. 22/72, V. D. Misra J. vide order dated 21st February, 1972 extended the time by a period of 4 months from that date.

(3) The arbitrators after hearing both the parties directed as under :-

'1.That the respondents shall pay to the claimants a sum of Rs. 12,500.00 in full and final settlement of all other claims'.

(4) The other portion of the award is not material for the purposes of the present controversy between the parties.

(5) It appears that at the request of the petitioners the arbitrators filed the award dated 19th May, 1972 in this court on 7th August, 1972 but the Registry returned the award for filing the same in proper court having jurisdiction in the matter as the award was only for sum of Rs. 12,5000. The arbitrators then filed the award in the sub-ordinate court on 13th September, 1972. The present respondents raised objections about the jurisdiction of the sub-ordinate court to deal with the matter. The sub-ordinate judge vide order dated 30th April, 1975, held that the claim of the respondent was above Rs. I lac before the arbitrators and thereforee the sub-ordinate judge had no jurisdiction in the matter. The sub-ordinate judge, thereforee, returned the award for filing the same in the High Court. The arbitrators again filed the award in this Court on 11th July, 1975. Notices of the filing of the award were issued to the parties. The respondents on 1st October. 1975 filed objections is No. 2138/75 against the award.

(6) The parties entered into a contract by letter dated 21st June, 1962 modified by another letter dated 11th December, 1962 and it was agreed that all questions and disputes shall be substituted to the arbitration under the Arbitration Act. The contention of the objector thereforee is that under Section 3 of the Arbitration Act clause 2 of the First Schedule became a part of the contract. Clause 2 of the First Schedule of the Arbitration Act is as under :-

'If the reference is to an even number of arbitrators, the arbitrators shall appoint an umpire not later than one month from the latest date of their respective appointments.'

(7) It is submitted that clause 2 of the First Schedule to the Arbitration Act is mandatory, and as the two arbitrators admittedly appointed by the parties did not appoint any umpire the award dated 19th May, 1972 is null and void. The learned counsel for the respondent has relied upon : His contention is that the use of word 'shall' in. the clause and further making it obligatory for the arbitrators to appoint an umpire not later than one month from the latest date of the respective appointments, make this clause mandatory and not directly. In the award made by two arbitrators without appointing an umpire was set aside. The decision in this case turned on the wording of the arbitration agreement which required the arbitrators to nominate an umpire before they proceeded to start an enquiry. The learned Judge held that in view of the expressed terms of the agreement mentioned above clause 2 of the First Schedule was attracted and the matter was governed only by the said term of the arbitration agreement. In the course of his judgment there are other observations which are obiter to the effect that clause 2 of the First Schedule is mandatory and not directory. The learned Judge has not given any reasons in support of his view. In the present case, there is no agreement between the parties which require the arbitrators to nominate an umpire before they proceed. In the award made by two arbitrators was held to be invalid on the ground that the arbitrators have not appointed an umpire. It was observed that the clause 2 of the First Schedule is of a mandatory character. In this case also no reasons were in support of that view. In other case Shambhu Nath vs. Hari Shankar Lal and others. : AIR1954All673 it was held that where the arbitrators failed to appoint an umpire and the parties do not follow the procedure prescribed by Section 8(1)(c) and Section 8(2) of the Arbitration Act but appear before the arbitrators and produce all their evidence, they must be deemed to have waived the irregularity and are estopped. It was merely an irregularity which is deemed to have been waived by the parties. I may mention that : AIR1951All474 was decided by Sapru and Chandiramani JJ. The main judgment is by Sapru J. In : AIR1954All673 the judgment was written by Malik C. J. while Sapru J. was a party to it. In the latter judgment Allahabad High Court has also considered the previous judgment reported in : AIR1951All474 and it was observed that in the earlier judgment the judges confined their decision to the facts of that particular case. In Ram Kishore vs. Raj Narain Dubey and others, : AIR1963All23 , the learned judge confirmed the order of the trial court setting aside the award made by the two arbitrators within a mon,th of their appointment without appointing an umpire. The decision reported in : AIR1951All474 was relied upon and the judgment reported in : AIR1954All673 was distinguished on the ground that the award in that case was made more than one month after the appointment of an arbitrator so that parties have an opportunity to approach for the appointment of an umpire under Section 8 of the Act. The learned single Judge held that giving an award within one month was to deprive the parties of any opportunity to take action under Section 8 of the act, and was not proper and that the award made was invalid. I do not find any difference in cases where the award is made within one month of the' appointment of the arbitrators and in cases where the award us made after expiry of one month from the date of appointment. I respectfully do not agree with the view expressed by the learned single Judge in this case.

(8) The contention of the learned counsel for the petitioner is that clause 2 of the First Schedule of the Act is not mandatory but is only directory. No doubt, a period of one month from the latest date of respective appointments of the arbitrators is prescribed for the appointment of an umpire but provision is made in Section 8 of the Act conferring power upon the court to appoint an umpire even-after the expiry of that period where the arbitrators have failed to appoint such an umpire. Reading Section 8 along with clause 2 of First Schedule, it appears that the intention of the legislature is that clause 2 of the First Schedule of the Act is not mandatory. Under Section 8 the court has power to appoint an umpire even after the expiry of one month from the date of appointment of the arbitrators. In : AIR1956Cal593 , United Printing and Binding Works Ltd. vs. Kishori Lal, a judgment by P. B. Mukherji J., it has been held that the word 'shall' in clause 2 does not make the provision mandatory in the sense that its breach will vitiate the entire arbitration proceeding and make the award illegal. It has been further held that Section 8(l)(c) expressly provides for the case where the parties are required to appoint an umpire. thereforee a failure of the arbitrators to appoint an umpire under clause 2 is a breach curable by the procedure prescribed by Section 8 of the Act itself and if a party fails to follow the procedure permitted by the Statute to remedy the bleach and stands by till the award is made he cannot later on put forward non-appointment of an umpire as a ground for setting aside the award, In the present case I may mention tha't the parties by a joint application O.M.P. No. 22/72 also applied to this Court for extension of time for the giving of the award which was allowed by order dated 21st February, 1972. In : AIR1967Bom373 , M/s. Modern Builders vs. Bukatraj N. Vadirani, clause 2 of the First Schedule is held to be directory and not mandatory. It was observed that though the legislature by using the word 'shall' in the present Arbitration Act instead of the word 'may' which was used in the earlier Act of 1899, made the appointment of an umpire obligatory, yet the obligatory rule may be either mandatory or directory depending upon whether the legislature intended that non-compliance with the rul5 should or should not result in the nullification of subsequent proceedings. It was further observed that clause 2 was not intended by the legislature to have the consequence of nullifying the proceedings before the Arbitrators. The compliance of clause 2 was, thereforee not a condition for the validity of the award- The time limit of one month specified in clause 2 was also not intended to be mandatory. The award made by the two arbitrators without appointing an umpire as per order of the reference was thereforee held to be valid.

(9) In Hidayatullah and R. Kashalendra Rao JJ. observed as follows :-

'The Arbitration Act does not say that when the reference is to an even number of arbitrators the failure to appoint an umpire vitiates the award. The intention of clause 2 First Schedule appears to be that the umpire whose function it is to decide on a difference between the arbitrators should normally be appointed before any difference arises between them. Whatever may be the result in a case of a disagreement between the arbitrators, where no disagreement arises between the arbitrators and there is no need for an umpire, to regard the omission to appoint him as fatal to the validity of all the proceedings would only result in general inconvenience without promoting any object considered essential by the statute. The statute in such case could be complied with by the arbitrators appointing an umpire just before delivering their award. But such a' compliance, though punctilious, is purposeless. When the objector cannot point to any prejudice because of the omission, to appoint an umpire .the omission does not vitiate the award'.

(10) One of the test laid down by the Supreme Court to determine whether the provision of statute is mandatory or directory is to find out whether the non-compliance is made penal.

(11) It was held that the provision of a statute is not mandatory unless the non-compliance with it is made penal.

(12) In the case of it was observed by the court as follows :-

'No general rule cam be laid down for deciding whether any particular provision in a statute is mandatory, meaning thereby that non-observance thereof involves the consequence of invalidity, or only directory, i.e. a direction the non-observance of which does not entail the consequences may occur. But in each case the Court has to decide the legislative intent. To decide this the Court has to consider not only the actual words used but 'the scheme of the statute, the intended benefit to public of what is enjoined by the provisions and the material danger to the public by the contravention of the same.'

(13) The scheme of the Arbitration Act is that where two arbitrators are appointed they are to appoint an umpire but in case the arbitrators failed to appoint the umpire, powers are given to the court to appoint an umpire at the instance of the parties under Section 8(l)(c) of the Act. The period of one month mentioned in clause 2 of the First Schedule is thereforee of no consequence. Section 8 of the Act provides that the parties may serve the arbitrators with a written notice in supplying the vacancy of an umpire and if the arbitrators failed to comply with the written notice the parties have a right to approach the court for supplying the vacancy of the umpire. In these circumstances, clause 2 of the First Schedule of the Arbitration Act is not mandatory and thereforee the failure of the arbitrators to appoint an umpire in accordance with the clause 2 of the First Schedule of the Act does not invalidate the arbitration proceedings or the Award. In the present case, although it was' open to the parties to serve a notice upon the arbitrators for appointing an umpire and approach the Court under Section 8 for the appointment of an umpire but no action was, however, taken by the parties and no prejudice has been caused to the petitioner or the respondent. It is, thereforee, held that non-appointment of an umpire does not affect the validity of the arbitration proceedings or the Award.

(14) Now coming to the next question whether there is any limitation period for filing the award in Court by an arbitrator In the present case, admittedly the award was filed by the arbitrators.

(15) In the case of, which was a case under the Limitation Act (1908), it was held that Article 178 of the Limitation Act applies to applications made by the parties and not to the filing of the award by the arbitrators. Corresponding Article in the Limitation Act 1963 is Article 119 where the words are similar to the words of Article 178 of the Limitation Act 1908. The matter came up for consideration in this Court. In the case of, it was held that the application moved by the arbitrator to file the award in court 7 years after the same was made was not barred by limitation and it was further held that there is no provision in the limitation Act which is applicable to an application made by the arbitrator to file an award under Section 17 of the Arbitration Act. It is, thereforee, held that the arbitrators rightly filed the award in court and that the filing of the award by the arbitrators was not barred by any period of limitation. As a matter of fact, no period of limitation is prescribed for the arbitrator to file the award in court. Since the award is filed in court it is for the court to proceed with the matter to serve notice of the filing of the award in court and to give an opportunity to the parties to file objections and in case no objections are filed against the award; it is the duty of the court to make the award a rule of the Court.

(16) Lastly it was contended by the learned counsel for the respondent that the petitioner never obtained completion certificate with respect to the building in question constructed in accordance with the contract between the parties. I may mention that this was a matter for consideration by the arbitrators. The arbitrators have taken into consideration, all the matters placed before them including the evidence.

(17) In the case of the Supreme Court held that where an award is silent on particular item of dispute, the claim in respect of such item should be taken as rejected by the arbitrator. Thus the objection of the respondent now raised is deemed to have been rejected by the arbitrators.

(18) Again in the case of the Supreme Court has held that the arbitrator can lawfully make an award of a sum admitted to be due and a lump sum in respect of the remaining claim. Where the final award professes to be made of and concerning all the matters referred to him, it must be presumed that in making it the arbitrator has taken into consideration all the claims and counter-claims.

(19) The arbitrators in the present case after taking into consideration all the claims and counter-claims of the parties awarded only a sum of Rs. 12,500.00 to the petitioners against the respondents.

(20) In view of the above it is held that there are no valid objections available to the respondent against the award dated 19th May, 1972 filed by the arbitrators in this Court. I.A. 2138/75 filed by the respondent is, thereforee, dismissed with no order as to costs.

(21) Consequently the award dated 19th May, 1972, of the arbitrators filed by them in this court is made a rule of the Court and a decree for Rs. 12,500.00 is passed in favor of the petitioners against the respondents. The award is made a part of the decree.

(22) The petitioners shall be entitled to costs of these proceedings and interest at 6 per cent per annum from the date of decree till realisation.


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