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Union of India Vs. Delhi Small Scale Industries - Court Judgment

LegalCrystal Citation
SubjectArbitration
CourtDelhi High Court
Decided On
Case NumberFirst Appeal Order (OS) No. 63 of 1974
Judge
Reported in19(1981)DLT334; 1981RLR339
ActsArbitration Act, 1940 - Sections 39; Delhi High Court Act, 1966 - Sections 10
AppellantUnion of India
RespondentDelhi Small Scale Industries
Advocates: B.K. Mehra and; J.K. Mehra, Advs
Cases ReferredN. H. Tejani v. Mrs. Kulsum M. Jetha
Excerpt:
.....and section 10 of delhi high court act, 1966 - appeal against refusal to enlarge time for giving award - arbitration clause provides in event of any dispute matter shall be referred to sole arbitrator - clause worded very widely - clause contemplates general reference - all matter to be decided by arbitration - matter open to appellant to take appropriate steps to have matter referred for arbitration. - - (6) it is well settled that against an order passed by a single judge of delhi high court on the original side an appeal will lie under section 10 of the delhi high court act in a matter arising under the arbitration act only if such an order is appealable under section 39 of the act ;vide air1972delhi108 union of india v. the legislature has given discretion to the court under..........arbitration act (to be called the act) refusing to enlarge the time for the arbitrator to make the award appealable under section 39 of the act is the point involved in this appeal against the order of t.p.s. ghawla, j. by which the learned judge refused to extend time under section 28 of the arbitration act on an application moved by union of india, the appellant. (2) a contract was entered into between the appellant and the respondent for the supply of soap sometime in 1966. the full price for the supply was made in august, 196/. however, the appellant/union of india by its letter of 3.2.1968 informed the respondent that the supplies by it were found defective on test. the said claim was not accepted by the respondent. as the agreement contained an arbitration clause the matter was.....
Judgment:

Rajindar Sachar, J.

(1) Is an order passed under Section 28 of the Arbitration Act (to be called the Act) refusing to enlarge the time for the arbitrator to make the award appealable under Section 39 of the Act is the point involved in this appeal against the order of T.P.S. Ghawla, J. by which the learned Judge refused to extend time under Section 28 of the Arbitration Act on an application moved by Union of India, the appellant.

(2) A contract was entered into between the appellant and the respondent for the supply of soap sometime in 1966. The full price for the Supply was made in August, 196/. However, the appellant/Union of India by its letter of 3.2.1968 informed the respondent that the supplies by it were found defective on test. The said claim was not accepted by the respondent. As the agreement contained an arbitration clause the matter was referred to Mr. P. Ramchandani, Arbitrator, to adjudicate the dispute on 20.8.1969. He entered upon a reference on the same date. Proceedings continued before him till 15.3.1971 though hardly any progress was made. On that date the respondents objected that period of 4 months laid down by the Act had expired and, thereforee, arbitration proceedings could not continue. The arbitrator thereupon adjourned the matter sine die to enable the parties to obtain the extension of time.

(3) On 22.12.1971 the Union of India moved on application under section 28 of the Act for obtaining extension of time for making the award, being Omp No. 4/72. The respondents to whom the notice was issued filed a reply objecting to the extension being given and also filed an application under sections ; and 33 of the Act. This application was numbered as Omp 25/1972.

(4) Before the learned Judge the respondents had challenged the existance of arbitration agreement and also that the arbitration clause was vague and that the arbitrator appointed was biased. All these objections were found against the respondents and the said application was, thereforee, dismissed. By the same order the learned Judge considered the question for granting the extension of time for making the award. The learned Judge by the impugned order has taken the view that no justification was given by the Union of India for filing an application after a delay of over about 9 months. He, thereforee, refused to grant extension of time and dismissed the application filed under section 28 of the Act. No appeal has been filed by the respondents. 'The present appeal, however, has been filed by the Union of India against the refusal to enlarge time for giving the award. In the appeal justification is sought to be given as to why an application for enlarging time was filed after some delay. During the course of hearing the counsel for the Union of India has also filed an affidavit dated 29.10.1980 purporting to explain the movement of file from the date of the order of the arbitrator with a view evidently to show that there has been no undue laxity on the part of the appellant to move an application under Section 28 of the Act.

(5) Before, however, we go into the merits of the sufficiency of the cause for moving an application after 9 months Mr. J.K. Mehra, the learned counsel for the respondent has.raised a preliminary objection that no appeal lies under the Act against an order enlarging or refusing to enlarge the time for making the award. It is this objection which must first be decided.

(6) It is well settled that against an order passed by a single Judge of Delhi High Court on the original side an appeal will lie under section 10 of the Delhi High Court Act in a matter arising under the Arbitration Act only if such an order is appealable under section 39 of the Act ; vide : AIR1972Delhi108 Union of India v. A.S. Dhupia and another. Section 39(1) of the Act which mentions a list of the orders against which appeal lies does not as such contain any clause providing for an appeal against an order passed under section 28 of the Act. That no appeal is provided under section 39 of the Act against an order of the Court refusing to grant extension of time for filing the award of the arbitrator has been held in ( 2nd 1973(1)160) Union of India v. K.L. Bhalla; though there was no discussion on this point in that citation, Mr. R K. Mehra, the learned counsel for the appellant however, urged that an appeal would lie under clause (l)of sub-section (1) of section 39 of the Act. The argument is that when the court refuses to extend the time for giving an award the result of it is that the arbitration agreement no longer subsists, with the result that a party cannot again seek an arbitration. Such an order, it is urged, though apparently purporting to be only an order or refusal to extend time for making the award in reality amounts to an order superseding an arbitration, mentioned in clause (1). We cannot agree.

(7) Section 3 of the Act provides that an arbitration agreement......... shall be deemed to include the provision set out in the first schedule. Paragraph 3 of the First Schedule provides that the arbitrators shall make their award within 4 months after entering upon the reference.........Rule 3 is couched in a mandatory form and it imposes a duty on the arbitrator to make their award within the said period, unless the time is extended by Section 28. If an award is made after the expiry of 4 months and no extension has been obtained under section 28 the award would be vitiated and liable to be set aside, vide : [1962]2SCR720 Hari Shankar v. Shambhu Nath and others. The argument of .Mr. R.K.. Mehra that if the time is not extended under Section 28 of the Act it amounts to superseding an arbitration, proceeds on the assumption that in such an eventually the arbitration agreement as such will cease to subsist and that it would no longer be possible to ask for a reference again. This is the same argument as to urge that once an award has been made but is subsequently set aside for any reason, no resort can be had again to the arbitration agreement containing the arbitration clause. This position however, is not correct in law. Section 19 of the Act provides 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 reference to the differences refered. It will be seen that section 19 confers a discretion on the court whether after setting aside the award to further pass an order superseding the arbitration. The legislature has given discretion to the court under section 19 that it may after setting aside the award not supersede the reference with the result that the reference as well as the arbitration agreement on which it is based survives. In such a case there can in our opinion be no doubt that where the reference and the arbitration agreement survive the same dispute may go before the arbitrators again provided there is machinery provided in the arbitration agreement which makes this possible. Thus if there is machinery provided in the arbitration agreement for making a further reference or for continuing the same reference, further arbitration can take place. Thus the court is entitled under section 19 not be supersede the reference and so leave the arbitration agreement effective even when it sets aside the award. See : AIR1962SC1123 Juggi Lal v. eneral Fibre Dealers. The Supreme Court accepts the correctness of the view which had been earlier expressed by various High Courts in AIR 1956 Madras 369 Rallies India Ltd. v. B.V. Manickam Chetti and Co. and another AIR 1959 Punjab 102 Firm Gulab Rai Girdhari Lal & others v. Firm Bami Lal Hansraj ; & : AIR1958Cal490 The Baranagorc Jute Factory Co. Ltd. v. M/s. Hulaschand Rupchand. Thus the basis of the argument that the refusal to extend time would result in the supersession of an arbitration has no substance. This argument by counsel for appellant was obviously raised to highlight the hardship and inconvenience which would result when time is not extended, if there was not even the safeguard of having such an order challenged in appeal, the serious consequence being that arbitration agreement no longer survives if time is not extended under section 28 of the Act. But we have pointed out about the fallacy of this argument. The disaster that is, thereforee, visualised by Mr.R.K.Mehra is a mere shadow and of self creation. In the present case, even if award had been made, the only consequence would have been that the award would have become void. The arbitration agreement would have continued to subsist and a further reference to arbitration could have been made. It is no doubt true that Section 19 of the Act deals with the award becoming void under section 16(3) on failure of the arbitrator to 'reconsider it and submit it within time fixed or being set aside by the court under section 30, of the Act. It is also true that in the present case the stage for passing the award had not yet arisen. But in our view this situation makes no difference. In terms of paragraph 3 of the 1st Schedule to the Act, if the award is not made within a period of 4 months the arbitrators become functus officio unless the period is extended by the court under section 28 of the Act and thereforee, cannot give the award without notice calling upon them to Act, see Hari Shankar's case (supra). The consequence, thereforee, of the 4 months having expired and no extension having been granted under section 28 of the Act is only to make the arbitrators functus officio but the arbitration agreement nevertheless subsists, thus entitling the parties to again invoke the arbitration clause and seek a reference to the arbitrators. In a case where an award is made beyond the period of 4 months the court will under section: 19 of the Act set aside the award on the ground that it was given by the arbitrator beyond the period of limitation and unless the court .passed an order to supersede the reference the arbitration agreement will remain alive. Thus the situation is the same either when the award has been made beyond time or no award has been made within the time. We also see no logic why the consequences should be different if an award is made beyond the period of 4 months or 4 months have passed without the arbitrator having given the award. If in the former case unless there is a specific order of superseding the reference, the arbitration clause survives and can be invoked by the parties, there is no logic why in a case like the present where four months have expired without the arbitrator giving the award the arbitration agreement would not continue to subsist. Thus there is not even the argument of inconvenience and hardship available to Mr. R. K. Mehra. If the arbitration agreement survives, as we do hold, the result will be that the order refusing to enlarge time under Section 28 of the Act would not amount to an order of superseding an arbitration and the impugned order would, thereforee, not be appealable under Section 39( l )(i) of the Act.

(8) Mr. Mehra refers us to AIR 1928 Mad 69 G. Hartirosi v. A. K. C. T. Subramaniam Chettiar; where the court held that refusal to extend time was a judgment within the meaning of the Letters Patent Act and, thereforee an appeal lay. That case is distinguishable on the ground that in view of A. S. Dhupia's case (supra) the appeal under Delhi High Court Act would only lie if it would fall under section 39 of the Act and the reference to the meaning of word 'Judgment' in Letters Patent is inapplicable. Reference to Mt. Chimman & Ors. v. BrijDas is inapposite because there an order superseding the arbitration was passed and; naturaly the order was appealable. One major point of distinction of those cases decided earlier to 1940 Act is significant. At that time para 15(2) of Sechedule Ii of the Code of Civil Procedure 1903 provided that where an award becomes void or is set aside the court shall make an order superseding the arbitration. The result was that in the earlier provision before the Act when the award was set aside supersession of the arbitration was an inevitable consequence. That provision has been changed and now it is discretionary with the court, after setting aside an award, whether to go further and to supersede the reference or not. That is why unless there is an order to supersede the reference it cannot be said that a mere refusal to extend lime under Section 28 of the Act would lead to the consequence of superseding the arbitration. Similarly reference to : AIR1967Bom300 N. H. Tejani v. Mrs. Kulsum M. Jetha, is of no assistance to Mr. Mehra. In that case an order was passed under section 12(2)(b) which empowers the court after removing an Umpire who has entered upon a reference to either appoint a person in place of the person displaced or to order that the arbitration agreement shall cease to have effect with respect to the differences referred. That is why it was held in that case that an order under section 12(2)(b) is of similar effect as an order under section 19 of the Act when specially an order is passed superseding the arbitration. It was held, and with respect, rightly that the effect of an order under section 12(2)(b) is the same as an order superseding a reference under section 19 of the Act, such an order is appealable under section 39(1)(i). But no such order has been passed in the present case. In our view, thereforee, the preliminary objection has to be sustained and it has to be held that the appeal is not maintainable.

(9) The appellant need not be much perturbed by our finding because the arbitration clause 24 in the present case provides that in the event of any question or dispute the matter shall be referred to the sole arbitration of an officer in the Ministry of law appointed to be the arbitrator by the Director General, Supplies and Disposal. The clause is worded very widely and is not restricted to one reference. Rather the clause contemplates general reference and all matter be decided by arbitration. It should prima facie, thereforee, be open to the appellant to take appropriate steps to have the matter referred to arbitration, if it is so advised, because even though the time was not exended in the present case it does not mean that the arbitration clause between the parties has ceased to exist. Notwithstanding the order of refusal to enlarge time. the parties can still resort to the arbitration clause which continues to subsist and Mr. R.K. Mehra had made strong efforts to satisfy us as to the sufficiency of cause for filing the application somewhat late. But in view of our decision as to the contency of appeal, we deem it unnecessary to say anything on this aspect. No costs.


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