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Lachhman Dass Deceased and ors. Vs. Veer Finance Company and ors. - Court Judgment

LegalCrystal Citation
SubjectArbitration
CourtDelhi High Court
Decided On
Case NumberFirst Appeal No. 22 of 1971
Judge
Reported inAIR1983Delhi397; 23(1983)DLT231; 1983RLR109
ActsArbitration Act, 1940 - Sections 14(l) and 30; Limitation Act, 1908 - Schedule - Article 119
AppellantLachhman Dass Deceased and ors.
RespondentVeer Finance Company and ors.
Advocates: M.S. Sahni and; S.P. Gupta, Advs
Cases ReferredIn MadanLal v. Sunder Lnl and
Excerpt:
.....ground that the substituted service could not be held as sufficient - in this view, the appellant filed the objections and respondent contended the objections as time barred - it was held that the objections so raised were not barred by limitation even in the application under order 9 rule 13 of the code - - ahuja, sub-judge, 1st class, delhi dated 17th november, 1970. it raises an interesting point pertaining to the question of limitation under sections 14 and 17 of the arbitration act, 1940 (to be referred to in short as 'the act') read with article 119 of the limitation act, 1963. (2) the facts and dates arc not disputed. manmohan singh sahni, learned counsel for the appellant contends that the decisioni relied on by the trial court are clearly not on point as they pertain to cases..........finance ca. and others, 1969 d.l.t. 306. (6) thereafter, on 22nd february, 1969, the appellant filed objections under sections 30 and 33 of the act. on 1st april, 1969, respondent no. i filed a reply to the said objections. the replication was filed on 15th april, 1969. subsequently, on 15th september, 1969 respondent no. i filed an amended reply. he took an additional preliminary objection, which is the crux of the issue before me. this is what he stated : 'thatthe objections have not been filed within time as required by law.........'a replication to this amended reply was, then, filed on 23rd september, 1970. the replication to the above mentioned preliminary objection, reads as follows: 'theobjection is without force. the objection petition is within time. the ex-parte decree was.....
Judgment:

Leila Seth, J.

(1) This first appeal is directed against the judgment and order of Mr. S.C. Ahuja, Sub-Judge, 1st Class, Delhi dated 17th November, 1970. It raises an interesting point pertaining to the question of limitation under Sections 14 and 17 of the Arbitration Act, 1940 (to be referred to in short as 'the Act') read with Article 119 of the Limitation Act, 1963.

(2) The facts and dates arc not disputed. On 4th October, 1965, M/s. Veer Finance Co., respondent No. I, filed an application under Sections 14 and 17 of the Act. On 10th November, 1965, the arbitrator filed the award. Notices were issued on various dates but were not served on the appellant. The case wa adjourned from time to lime but service could not be effected. Thereafter, the court ordered substituted service on, inter alia, the appellant. It ordered that service be effected by publication in 'Ekta Sandesh'. The publication having been made, the court passed a decree ex parte in terms of the award, on 13th May, 1966.

(3) It appears, thereafter, that respondent No. I proceeded in execution of this decree and motor vehicle No. Upd 8312 belonging to the appellant was attached on 4th January, 1967. On 13th January, 1967 the appellant filed an application under Order 9 Rule 13, Civil Procedure Code for setting aside the ex parte decree. This application also referred to Sections 30 and 33 of the Act. On 30th June, 1968 the trial court dismisled the said application.

(4) The appellant, then, filed an appeal in this court which was numbered as F.A.0. 172 of 1968. This court allowed the said appeal and held that the substituted service sought to be effected on the appellant by publication in 'Ekta Sandesh' was not sufficient and the appellant had no knowledge, prior to 4th January, 1967, of the passing of the decree or of the proceedings antecedent thereto. This Court, thereforee held that there was sufficient cause to set aside the ex parte decree.

(5) The court also held that the application dated 13th January, 1967 for setting aside the ex parte decree was within time, as time would begin to run from 4th January, 1967, i.e. the date of knowledge of the decree and not from 16th April, 1966 when the appellant was alleged to have been served by substituted service. In these circumstances, Mr. Justice S.N. Andley (as he then was) allowed the appeal with costs and remitted the file to the trial court and directed the parties to appear in that court on 27th February, 1969. This decision i(r) reported as Shri Lackhman Daaa v. Meiars Veer Finance Ca. and others, 1969 D.L.T. 306.

(6) Thereafter, on 22nd February, 1969, the appellant filed objections under Sections 30 and 33 of the Act. On 1st April, 1969, respondent No. I filed a reply to the said objections. The replication was filed on 15th April, 1969. Subsequently, on 15th September, 1969 respondent No. I filed an amended reply. He took an additional preliminary objection, which is the crux of the issue before me. This is what he stated :

'THATthe objections have not been filed within time as required by law.........'

A replication to this amended reply was, then, filed on 23rd September, 1970. The replication to the above mentioned preliminary objection, reads as follows:

'THEobjection is without force. The objection petition is within time. The ex-parte decree was set aside by the Hon'ble High Court vide order dated 6-2-1969 holding that the objector had no knowledge of the Award and the decree before 4-1-1967 when the property of the judgment debtor/objector was attached. The court also held that the objector had no notice of the filing oF the award. The objections were filed, on 22-2-1969 when the Hon'ble High Court directed, to appear in the court for further proceedings. The order dated 6-2-1969 is final and binding, prior to this date. No proceedings under Section 14/17 of the Arbitration Act were legally pending and the objector would not have filed any objections.'

The trial court framed three issues. These are as follows :-

'1. Whether the award is liable to be set aside on the grounds mentioned in the objection petition O.P.A. 1. (a) Whether the objection petition is time barred O.P.R. 2. Relief.'

(7) The trial court dealt with issue No. I (a) and held that the objection petition was hopelessly time barred and deserved to be dismissed. In this view of the matter, if observed that issue No. I had become redundant. However, it specifically recorded that it was conceded by counsel for respondent No. I 'that the award was given unilateral and same should be set aside, if the objection petition is within time. However, I have also held that the objection petition is time barred, hence this issue is decided accordingly'. The trial court dismissed the objection petition and made the award a rule of the court and ordered the decree sheet to be prepared accordingly. It also awarded costs.

(8) In coming to its conclusion the trial court held that it was the duty of the appellant to file the objection petition within thirty days from his knowledge of the award i.e. from 4th January, 1967, irrespective of the fact that the award had been made a rule of the court. In support, it relied on the decisions in Bhola Nath Mallick v. Mahadev Mallick, : AIR1952Cal226 , Nilkantha Sidramappa Ningashetti v. Kashinath Somanna Ningashetti and others, : [1962]2SCR551 and Bahadur Singh v. Fuleshwar Singh and otheras : AIR1969Pat114 . The court also opined that the judgment of Mr. Justice S.N. Andley letting aside the ex parte decree did not give the appellant a fresh lease for filing objections.

(9) Mr. Manmohan Singh Sahni, learned counsel for the appellant contends that the decisioni relied on by the trial court are clearly not on point as they pertain to cases where the proceedings were pending before the court for making the award a rule of the court. In the present case, as there was an ex parte decree, he could not file objections to the award until the decree was set aside.

(10) Alternatively he argues that, even assuming, that in the present case, he did not have to wait for the setting aside of the ex parte decree and no notice under Section 14 of the Act was necessary, then his application dated 13th January, 1967 under Order 9 Rule 13, Civil Procedure Code which pertained to Sections 30 and 33 of the Act as well, is a composite application and should be also treated as his objections. This, admittedly, is in time.

(11) Mr. S.P. Gupta, learned counsel appearing for respondent No. 1 contends that on facts the application dated 13th January, 1967 cannot be treated as a composite application. Further, the fact that the appellant filed objections under Sections 30 and 33 of the Act on 22nd February, 1969, after the ex parte decree was set aside, would indicate that he did not himself treat the earlier application as a composite application. His submission, thereforee, is that only the application dated 22nd February, 1969 can be treated as a regular objection and this is time barred as the appellant had knowledge of the decree on 4th January, 1967; and he must have inspected the record thereafter, before filing the application dated 13th January, 1959, under Order 9 Rule 13, Civil Procedure Code, as such he must be deemed to have knowledge of the award.

(12) In order to appreciate the rival contentions, it is necessary to examine the relevant provisions : Section 14(1) and (2) and Section 17 of the Act read as follows :

'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 the Court, and the Court shall thereupon give notice to the parties of the filing of the award.

'17.Where the Court sees no cause to remit the award or any of the matters referred to arbitration for reconsideration or to set aside the award, the Court shall, after the time for making an application. to set aside the award has expired, or such application having been made, after refusing it, proceed to pronounce judgment according to the award, and upon the judgment so pronounced a decree shall follow, and no appeal shall lie from such decree except on the ground that it ii in excess of, or not otherwise in accordance with the award.'

Section 30 gives the grounds on which an award may be set aside. Section 33 provides the procedure, inter alia, for challenging the award.

(13) Article 119 (b) of the Limitation Act, 1963 provides that an application for setting aside an award or getting an award remitted for reconsuderation must be filed within thirty days from 'the date of service of the notice of the filing of the award'. Article 119(b) of the Limitation Act, 1963 is equivalent to Article 158 of the Limitation Act of 1908.

(14) From a perusal of Section 14(1) and (2) it is clear that notice under Section 14(1) to be given by the Arbitrators or the Umpire must be in writing, whereas under Section 14(2) pertaining to the notice to be given by the court of the filing of the award, this is not necessary. The starting point of limitation in a case under Section 14(2) is the date of service of the notice of filing the award. The provision as to notice is mandatory; and the court is incompetent to pass a decree unless parties have notice regarding filing of objections. But where parties have knowledge and arc present and appear and apply for leave to examine the award and pray for time to file objections the service of notice becomes unnecessary. In such cases, the date of appearance in the proceedings is deemed to be the date of service of notice though actually no notice has been served.

(15) In BholaNath Mallick v. Mahadw Mallick (supra) the Calcutta High Court held that under Article 158 of the Limitation Act, 1908, the starting point of limitation is the date of the service of notice of filing the award. The provision as to service of notice of filing the award in Section 14(2) of the Act is mandatory and the court has no power to pass a decree on the award unless notice is given to the parties to file objections. The court also observed that where a party who is already cognizant of the filing of the award appearl in the court and applies to the court for leave to examine the award and for time to file objections, service of notice of filing the award becomes unnecessary. In such a case even if the court has failed to give notice to him, the date when he enters appearance in the proceedings will be deemed to be the date of the service of notice of the filing of the award and an application filed more than thirty days from such date will be barred.

(16) In that case the award had been filed on 21s.t September, 1949. One Mahadev Mallick filed his objections on 17th December, 1949. A preliminary objection was taken that the objections were barred by time and could not be entertained. After the filing of the award on 21st September, 1919 anotice purporting to be under Section 14(1) was issued in September, 1949. Mahadcv Mullick received that notice on 10th October, 1949. No formal notice was given to the parties about the filing of the award. But on 28th October, 1949 Mahadev Mullick coming to know of the filing of the award made an application for permission to inspect the award so that he might file the objections. Though the notice under Section 14(2) had never been issued Mahadev Mullick had come to know from some source or the other about the filing of the award and that was on 28th October, 1949 when he applied for permission to inspect. He filed the objection on 17th December, 1949 i.e. beyond thirty days from the date of filing of the award as also from the date of his knowledge that the award had been filed. Since the party was cognizant of the filing of the award and had applied to the court for facilities to examine the award, the court opined that there was no necessity for serving such a party again. It observed : 'In the present case the party in question applied to Court for leave to examine the award and for time to file objections. Had the party not filed the aforesaid application there could not have been any question of that party being barred by lapse of time. Limitation would not begin to run. Mandatory provisions contained in Article 158 of the Limitation Act as it now stands become unnecessary for strict application when the party has already appeared in the case'.

(17) The Court further noticed: 'There is no Explanationn why after the defendant had applied on 28th October, 1949 to Court for permission to inspect the award, the objection was not filed until 17th December, 1949 more than 40 days after such appearance in Court. The materiallity of the service consist in the fact that a party has been properly made aware of the matter contained in the notice. The Civil Procedure Code . provides for the service of notice in the usual way on the defendant or respondent as the case may be after a suit or an appeal respectively is filed. If the defendant or the respondent enters appearance service becomes unnecessary'.

(18) In the opinion of that Court, the defendant had by entering appearance himself made it unnecessary for having a separate notice served on him. It was in these circumstances that it held that the objections filed on 17th December, 1949 were barred by limitation.

(19) In Nilkantha Sidramappa Ningashetti v. Kashinath Somanna Ningashetti (supra), dealing with Article 158 of the Limitation Act, 1908, the Supreme Court observed that though it was provided that limitation would begin to run from 'the date of service of the notice of the filing of the award' this did not mean only a notice in writing served in a formal manner. Referring to the difference between Section 14(1) which requires notice to be given in writing and Sub-section (2) of Section 14 which does not so specify, the Supreme Court opined that the word 'notice' means not only a formal intimation but also an informal one. The Court held that notice to the pleader is notice to the parties in view of rule 5 of Order Iii, Civil Procedure Code. The parties certainly had notice through their pleader on 21st February, 1948. The appellant-defendant No. 12 was a minor. Defendant No. I was his guardian. However, later his mother became his guardian in June, 1948. She could be presumed to have knowledge of the filing of the award on that date. In any case, she knew definitely on September 7, 1948 that an award had been filed and she had to file an objection. She took one month's time to file the objection and again one month's time on . October 7, 1948. But the objections were finally filed on November 9,1948. Even assuming, that her knowledge of the filing of the award only originated on 7th September, 1948, then also the filing of the award on November 9, 1948 was beyond the period of thirty days prescribed in Article 158 of the Limitation Act. Raghubar Dayal,J. speaking for the Court observed :

'WEsec no ground to construe the expression 'date of service of notice' in Col. 3 of Art. 158 of the Limitation Act to mean only a notice in writing served in a formal manner. When the Legislature used the word 'notice' it must be presumed to have borne in mind that it means not only a formal intimation but also an informal one. Similarly, it must be deemed to have in mind the fact that service of a notice would include constructive or informal notice. If its intention were to exclude the latter sense of the words 'notice' and 'service' it would have said so explicity. It has not done so here. Moreover, to construe the expression as meaning only a written notice served formally on the party to be affected, will leave the door open to that party, even though with full knowledge of the filing of the award he has taken part in the subsequent proceedings, to challenge the decree based upon the award at any time upon the ground that for want of a proper notice his right to object to the filing of the award had not even accrued. Such a result would stultify the whole object which underlies the process of arbitration-the speedy decision of a dispute by a tribunal chosen by the parties.'

(20) In Bahadur Singh v. Fuleshwar Singh and others, (supra), the Patna High Court following the abovementioned decision of the Supreme Court held the starting point of limitation for filing of the objections to the award to be from the date of filing of an application for inspection of the award.

(21) In all these three cases, it is clear that the proceedings were pending before the Judge when the objections were filed and notice was effected.

(22) In the present case the position is patently different. An ex parte decree had been passed making the award a rule of the court on 13th May, 1966. The award had merged into a decree. There were no proceedings pending before the court. As a result of the decree, the property of Lachhman Dass was attached in execution proceedings, on 4th January, 1967. It is, then, that he came to know of the decree.

(23) On 13th January, 1967 he moved the application under Order 9 Rule 13, Civil Procedure Code for setting aside the ex parte decree. He also referred to the provisions of Sections 30 and 33 of the Act in this application. In brief, he referred to the main objection against the award. On 30th June, 1968 this application under Order 9, Rule 13, Civil Procedure Code was dismissed as the Court held that the service by publication was sufficient and the application was barred by limitation. He filed an appeal, and as already noticed, the said appeal was allowed and the exparte decree set aside. On 6th February, 1969 the parties were directed to appear before the trial court on 27th February, 1969.

(24) It was only, then, after the proceedings were revived that he could appear in those proceedings and file objections against the award; and it must follow, that it is only then, that the question of limitation under Article 119(b) would arise. The need to give formal notice thereafter in not necessary as on 6th February, 1959, the appellant had notice that the proceedings were alive and that an award had been filed. The objections were filed on 22nd February, 1969, i.e. well within thirty days of setting aside of the ex parte decree. It is, thereforee, apparent to me that the appellant could not be deemed to have put in an appearance before the ex parte decree was set aside, there being no pending proceedings. Once the hurdle of the ex parte decree was removed on 6th February, 1969 and the Court directed the parties to appear on 27th February, 1969, it was permissible for the appellant to file an application for inspection of the award and file his objections. It is not necessary for me to go into the question whether the starting point of limitation in this case is from 6th February, 1969 when the ex parte decree was set aside or only from 27th February, 1969, the date that the parties were directed to appear as the objections have been filed on 22nd February, 1969-well within time from 6th February, 1969.

(25) In any case, in the facts and circumstances of the present case, the question of the objections being barred by limitation does not arise, as even on 13th January, 1967 in the application under Order 9 Rule 13, Civil Procedure Code, the appellant had included his objections to the award in paragraphs 3 and 4. There is no dispute that if this application is considered as a composite one, it was well within time.

(26) In paragraph 3 of the said application, the appellant asserts: 'That the proceedings taken by the arbitrator and the award based thereon are illegal, void and without jurisdiction. There is no valid or arbitration agreement between the parties even the reference to the arbitration is illegal and void and the arbitrator had no jurisdiction to pass the award on the basis of the unilateral reference'.

(27) In paragraph 4 he states: 'That the proceedings taken by the arbitrator arc against the rules of natural justice inasmuch as the arbitrator did not give an opportunity to contest the proceedings to the objector. The award and the proceedings arc void against the rules of natural justice and, thereforee, nullity'.

(28) In the prayer portion, he pray(r) that the ex parte decree dated 13th May, 19 6 be set aside and that he be permitted to contest the proceedings on merits. He also requests for the execution proceedings to be stayed.

(29) It is well accepted that there is no special form prescribed for an application under Section 33 of the Act. The composite application dated 13th January, 1967 specifically refers to Sections 30/33 of the Act. It is also specifically stated therein that prior to 4th January, 1967, the appellant had no knowledge of any proceedings taken by respondent No. I against him. That respondent No. I had 'cancelled the service of summons' and 'got the award made rule of the court. No summons or notice for filing the objections was ever served...'. It is clear, that even though no special prayer is made in the said application, the averments therein clearly challenge not only the ex parte decree but also the award.

(30) In MadanLal v. Sunder Lnl and another, A.I.R. 1967 S.G.I 233 it has been observed, that there is no special form prescribed for making an application for setting aside an award and in an appropriate case an objection to an award in the nature of a written statement may be treated as such an application, if it is filed within the period of limitation.

(31) The Supreme Court opined that even though the appellant did not pray for setting aside the award in his objections, that, was clearly his object.

(32) In the present case, also, it is clear, that what the appellant wanted was first that the decree be set aside and then the award be set aside. He could not ask for the award to be set aside until he had got the decree out of the way. It is, thereforee, apparent, that what the appellant was asking for was the setting aside of the award, once the decree had been set aside.

(33) So, from whichever angle I look at the matter, the appellant is entitled to succeed ai the objections are within time.

(34) In the result, and for the reasons outlined above, the judgment and order of Mr. S.C. Ahuja, Sub-Judge 1st Glass, Delhi, dated 17th November, 1970 is set aside. Further, in view of the concession of M/s. Veer Finance Co., respondent No. I, before that court, that the award should be set aside as it has been given unilaterally, if the objection petition is within time, there is no need to remit the matter to the trial court. Accordingly the appeal is allowed with costs.


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