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Lovely Benefit Chit Fund and Finance Pvt. Ltd. Vs. Shri Puran Dutt Sood and ors. - Court Judgment

LegalCrystal Citation
SubjectArbitration
CourtDelhi High Court
Decided On
Case NumberC.R. No. 174/1971
Judge
Reported inAIR1983Delhi413; 23(1983)DLT261; 1983(5)DRJ27
ActsArbitration Act - Sections 14 and 17
AppellantLovely Benefit Chit Fund and Finance Pvt. Ltd.
RespondentShri Puran Dutt Sood and ors.
Appellant Advocate S.M. Grover, Adv
Respondent Advocate J.N. Aggarwal, Adv.
DispositionApplication dismissed
Cases Referred and Hari Shanker Lal v. Shambhu Nath and Ors.
Excerpt:
.....ex parte on the day fixed, but fixes another subsequent date, he cannot proceed ex parte on such subsequent date unless he issues a similar notice in respect of that date as well. the better course, however, even in such a case is to issue a notice and give the party concerned a change to change his mind. the principle to be borne in mind in such cases is that the failure to attend is not required to be explained on satisfactory grounds in order to dislodge the ex parte award, but the ex parte award requires to be defended by establishing that the omission to issue a notice of an intention to proceed ex parte has not caused any prejudice. ramdeo singh air1943pat318 .11. from these authorities, it is apparent that an arbitrator ought not to proceed ex parte against a party if he has..........till 24th august, 1980.5. on 18th september, 1980 shri d.r. dhamija, arbitrator made an ex parte award. the arbitrator to the award said, 'i award to the claimant company against the three respondents rs. 10,742.30 which includes the principal amount of rs. 3,432.90 dividends forfeited, incidental expenses, interest at 12% p.a. on the principal amount up to 18th september, 1980, costs of arbitration proceedings including fee, miscellaneous expenses, arbitration fee and stamp for the award. the principal amount of rs. 3,432.60 shall further carry interest at rs. 12% p.a. from the date of award till its execution'.6. the petitioner-claimant made the above application under sections 14 and 17 of the arbitration act for filing of the award and making the same a rule of the court......
Judgment:

Sultan Singh, J.

1. This is an application for making the award of Shri D.R. Dhamija, Advocate dated 18th September, 1980 a rule of the court. The respondents have filed objections to the award.

2. Briefly the facts are that Puran Dutt Sood of Ludhiana respondent No. 1 took a chit of the value of Rs. 10,000/- from M/s. Lovely Benefit Chit Fund & Finance (P) Ltd., the petitioner company and agreed to pay Installments of Rs. 200/- each for 50 months as contribution. Respondent No. 1 gave a bid in an auction held by the petitioner on 16th August, 1974 and received Rs. 6000/- from it and agreed to forego Rs. 4000/- commission, dividend discount etc. in accordance with Rules and Regulations. He executed the agreement dated 3rd October, 1964 in favor of the petitioner and agreed to pay Rs. 200/- per month to the petitioner against the said chit of Rs. 10,000/-. Ganesh Parkash Gupta and Surinder Singh Sood, both of Ludhiana respondents 2 and 3 executed surety bond as guarantors for punctual payment of monthly contribution by respondent No. 1. The agreement contained the arbitration clauses for reference of the disputes to the sole arbitration of Bakshi Harbans Singh Puri, Advocate.

3. A sum of Rs. 3432.62 as balance of the chit, Rs. 1130.00 as dividend, Rs. 340/- as interest and Rs. 25/- as incidental charges total Rs. 4927.62 remained due to the petitioner and disputes arose between the parties. Thepetitioner on 15th June, 1968 filed an application under Section 20 of the Arbitration Act for filing of the arbitration agreement in court and reference of the disputes to the said arbitrator. The respondents contested the application on various grounds and the trial court by judgment dated 24th November, 1969 dismissed the application on the ground that respondents 2 and 3 were not parties to the agreement containing the arbitration clause. On appeal the Additional District Judge by judgment dated 4th November, 1970 partly set aside the judgment of the trial court and ordered for reference of the disputes between the petitioner and respondent No. 1 to the arbitration of Bakshi Harbans Singh Puri, Advocate, the arbitrator named in the agreement. The petitioner aggrieved by the order of the first appellate court further filed Civil Revision No. 174 of 1971 under Section 115 of the Code of Civil Procedure. S. Rangaranjan, J. by judgment dated 4th February, 1975 directed that all disputes inter se between the petitioner on the one side and respondent No. 1, principal debtor and as well as two sureties, respondents 2 and 3 on the others should be referred to the arbitration of the said arbitrator.

4. Bakshi Harbans Singh Puri, Advocate had expired before entering upon reference. This court by order dated 16th August, 1978 thereforee with the consent of the parties referred the disputes to the sole arbitration of Shri D.R. Dhamija, Retired Additional District Judge, Delhi. Parties were directed to appear before him on 11th September, 1978 at 4 P.M. in the High Court Bar Association. The arbitrator was granted four months, from the date of entering upon reference, to make his award. In an application (C.M. No. 2303 of 1979) by order dated 25th April, 1980 time for making of the award was extended till 24th August, 1980.

5. On 18th September, 1980 Shri D.R. Dhamija, arbitrator made an ex parte award. The arbitrator to the award said, 'I award to the claimant company against the three respondents Rs. 10,742.30 which includes the principal amount of Rs. 3,432.90 dividends forfeited, incidental expenses, interest at 12% p.a. on the principal amount up to 18th September, 1980, costs of arbitration proceedings including fee, miscellaneous expenses, arbitration fee and stamp for the award. The principal amount of Rs. 3,432.60 shall further carry interest at Rs. 12% p.a. from the date of award till its execution'.

6. The petitioner-claimant made the above application under Sections 14 and 17 of the Arbitration Act for filing of the award and making the same a rule of the court. Notice of the filing of the award was served upon the respondents who filed their abjections to the award on 3rd January, 1981. This judgment will dispose of these objections.

7. Learned counsel for the respondent-objectors submits that the objectors were not given reasonable opportunity of being heard by the arbitrator, that the arbitrator misconducted himself by his omission to give notice to the objectors of his intention to proceed ex-parte and change the venue of the arbitration proceedings from the High Court Bar Association to his office at Punjabi Bagh, New Delhi. He further submits that the arbitrator a had no locus standi to make ex-parte award after the expiry of the time fixed for the making of the award. He submits that the award dated 18th September, 1980 is ex-parte and the court had extended time for making the award only up to 24th August, 1980.

8. From the record of the arbitration proceedings it is apparent that on 6th August, 1980 counsel for the petitioner and the objectors were present before the arbitrator. He directed the respondents to file written statement by 19th August, 1980 at 1.30 P.M. On 19th August, 1980 parties were present and last opportunity was granted to the respondents and proceedings were adjourned to 3rd September, 1980 at 1.30 p.m. It is also apparent that the respondent objectors filed before the arbitrator, their written statement, to the claim of the petitioner, objecting to all the items claimed by it. In 3rd September, 1980 however counsel for the claimant appeared before the arbitrator, and there was no appearance on behalf of the respondents till 1.45 P.M. The respondents were proceeded ex-parte. The proceedings for recording ex-parte evidence were adjourned to 5th September, 1980 at 12.00 noon at the office of arbitrator 35, Road No. 56 Punjabi Bagh, New Delhi, The proceedings dated 3rd September, 1980 are signed by the counsel for the petitioner. In the margin of the order sheet there is a not by the arbitrator in his hand that Shri Chopra turned up at 3 P.M. Shri Chopra was counsel for the respondent On 6th September, 1980 the petitioner and its counsel appeared before the arbitrator. It was submitted that evidence could not be recorded without the documents to be called for from the court file. Accordingly documents were sent for from the court for 16th September, 1980 at 1.30 p.m. Again in the margin of the proceedings the arbitrator in his hand has noted that Shri Chopra rang up in the morning to say that he has to apply for setting aside the ex-parte proceedings. He was asked to come over at the appointed time but he did not turn up'. On 16th September, 1980 again the petitioner with counsel appeared. He sought adjournment and the arbitration proceedings were adjourned to 17th September, 1980 at 6 P.M. in the office of the Arbitrator on which date the statement of M.L. Jaggi, on behalf of the petitioner was recorded and arguments were heard. On 18th September, 1980 it was recorded in the proceedings that the award has been made and a signed copy was being seat to the claimant and the counsel for the respondent. This is in short the record of the arbitration proceedings.

9. Learned counsel for the objectors submits that on 3rd September, 1980 and 6th September, 1980 neither the respondents nor their counsel appeared before the arbitrator, that notice of change of venue of arbitration proceedings from High Court Bar Association to the Office of the Arbitrator at Punjabi Bagh was never served or sent to the respondents or their counsel, that 'peremptory' notice of his intention to proceed ex-parte against the respondents also ought to have been issued by the arbitrator to the respondents or their counsel He submits that as no such notices were issued by the arbitrator, he has misconducted himself, that the respondents have been prejudiced by omission of the arbitrator to issue such notices, that they have not been heard by the arbitrator, and thereforee, the award is liable to be set aside. Learned counsel for the petitioner on the other hand submits that on 3rd September, 1980 ex-parte proceedings were taken at 1.45 P.M. against the respondents and their counsel Shri Chopra had appeared before the arbitrator at 3 P.M. and he was informed about the adjourned date and the change of venue. Similarly he says that on 6th September, 1980 Shri Chopra rang up the arbitrator in the morning when he was informed to attend the proceedings at the appointed time.

10. The question for decision is whether in this case the arbitrator should have given notice of change of venue and of his intention to proceedex-parte against the respondents when they had not appeared before him. There is no hard and fast rule of giving notice by the arbitrator of his intention to proceed ex-parte or to change the venue of arbitration proceedings. But the principles of natural justice require that a person cannot be condemned unheard and he should be afforded a reasonable opportunity of being heard. In the instant case all the respondents are not residents of Delhi but of Ludhiana. The petitioner-claimant has its registered office at New Delhi. The respondents selected their Advocate, briefed him and paid his fee. They can remain confident that their lawyer will look after their interest and as such they have done what was in their power and expect the lawyer to do the needful. The respondents after having appointed the lawyer should not suffer for the in action or deliberate omission of their counsel. In Rafiq and Anr. v. Munshilal and Anr., : [1981]3SCR509 it has been held that a party should not suffer for the inaction of his counsel. In that case appeal was dismissed for default of appellant's counsel. The dismissal was set aside by the Supreme Court. In the instant case, as already stated, the respondents are residents of Ludhiana and thereforee the arbitrator before proceeding ex parte ought to have given notice of his intention to proceed ex parte against them on a specified date, time and place of arbitration proceedings. In Halsbury's Laws of England, Fourth Edition, Vol. 2 Page 590 page 306 it has been stated as under :

'Where the arbitrator proposes to proceed with the reference notwithstanding the absence if one of the parties, it is advisable that he should give that party distinct notice of his intention to do so. If reasonable excuse for not attending the appointment can be shown, the court will set aside an award made by an arbitrator who has proceeded ex parte.'

In Russell on Arbitration, Nineteenth Edition page 271 the following passageappears.

'Notice of intention to proceed ex parte :

In general, the arbitrator is not justified in proceeding ex parte without giving the party absenting himself due notice. It is advisable to give the notice in writing to each of the parties or their solicitors. It should express the arbitrator's intention clearly, otherwise the award may be set aside. An ordinary appointment for a meeting with the addition of the word' 'Peremptory' marked on it is, however, sufficient.

If the arbitrator declines to proceed on the first failure to attend a peremptory appointment, and gives another appointment, he is not authorised to proceed ex-parte at the second meeting, unless the appointment for it was also marked 'peremptory' or contained a similar intimation of his intention.'

In Bhowanidas Ramgobind v. Harasukhdas Balkishendas : AIR1924Cal524 a Division Bench has held that arbitrators should give notice of their intention to proceed ex-parte if one of the parties should not appear but their award is valid if the complainant has not been prejudiced in any manner by the failure of the arbitrators to give such notice. In Udaichand Panna Lall v. Debibux Jewanram AIR 1920 Cal 553 it has been observed that before an arbitrator proceeds ex-parte he should give notice in writing to each of the parties, otherwise the award may be liable to be set aside. In Bratapsingh v. Kishanprasad and Co. Ltd. AIR 1932 Bom 68 it has been observed that even when an arbitrator considers that the time and place fixed by him for the meeting are reasonable and if after service of notice one of the parties to the arbitration fails to attend before him he is entitled to proceed with the arbitration ex-parte. But it is still advisable for him though it is not compulsory, that he should give that party notice of his intention to do so. Similar observation were made in Ariyur Mohammad Habeebur Rahman and Ors. v. Ansuri Varama (died) and Anr. : AIR1974AP113 and Prem Nath L. Harsaran Dass and Anr. v. Om Parkash L. Ram Kishen Dass Aggarwal, . In Juggilal Kamlapat v. General Fibre Dealers Ltd., : AIR1955Cal354 the following principles have been a laid down to determine whether the failure of the arbitrator to give notice of his intention to proceed ex parte amounts to misconduct.

1. 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 ex prate against him at that sitting. Where in such a case it does not appear that the non appearance was anything but accidental or casual, the arbitrator ought ordinarily to proceed in the ordinary way, fixing another date of hearing and awaiting the future behavior of the defaulting party.

2. If, on the other hand, it appears that the defaulting 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 a specified time and place to proceed with the reference and that if the party concerned does not attend, he will proceed in his absence. But if after making such a peremptory appointment and issuing such a notice, the arbitrator does not in fact proceed ex parte on the day fixed, but fixes another subsequent date, he cannot proceed ex parte on such subsequent date unless he issues a similar notice in respect of that date as well.

3. If he issues a similar notice and the party concerned does not appear, an award made ex parte, will be in order. But if he does not issue such a notice on the second occasion, but nevertheless proceeds ex parte, the award will be liable to be set aside in spite of a notice Of a peremptory hearing having been given in respect of the earlier date, subject, however, to the condition that prejudice was caused to the party against whom the ex parte order was made. But this duty to give notice of an intention to proceed ex parte is not an absolute duty.

4. 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 recent, the arbitrators are not required to issue a notice of an intention to proceed ex parte against such a resent person and may proceed ex parte and make a valid award without issuing a notice. The better course, however, even in such a case is to issue a notice and give the party concerned a change to change his mind.

5. Where the question arises after an ex parte award has, in fact, been made an it appears that no notice of an intention to proceed ex parte had been given, the principle to be applied is that the award will not be upheld, unless it is shown or it appears that the omission to give a notice has not caused any prejudice to the party against whom the ex parte award was made, because he had made it abundantly clear that he would not appear before the arbitrators in any circumstances. When there has been an omission to give a notice, there will, however, always be a presumption that prejudice has been caused. But the presumption can be rebutted by the other party or can be borne in mind in such cases is that the appearing on the face of the record. The principle to be borne in mind in such cases is that the failure to attend is not required to be explained on satisfactory grounds in order to dislodge the ex parte award, but the ex parte award requires to be defended by establishing that the omission to issue a notice of an intention to proceed ex parte has not caused any prejudice.'

In Mt. Amir Begam v. Syed Badruddin Husain and Ors. AIR 1914 PC 105 it has been observed that if irregularities in procedure can be proved which would amount to no proper hearing of the matters in dispute, there would be misconduct sufficient to vitiate the award without any imputation on the honesty or partiality of the arbitrator. Similar observations were made in Sadhu Singh and Ors. v. Ramdeo Singh : AIR1943Pat318 .

11. From these authorities, it is apparent that an arbitrator ought not to proceed ex parte against a party if he has failed to appear at one of the sittings. The arbitrator should fix another date for hearing and give notice to the defaulting party, of his intention to proceed ex pane on a specified date time and place. Even after notice if the defaulting party does not take part'in the proceedings the arbitrator may proceed in his absence.

12. When an ex parte award has been made the principle to be applied is that the award will not be upheld unless it is apparent that the failure to give notice of intention to proceed ex parte has not caused any prejudice to the party against whom the ex parte award was made.

13. Keeping in view the above principles it has to be seen what is the position of the present case. The objectors-respondents have been contesting the claim of the petitioner tooth and nail since the date of filling the application under Section 20 of the Arbitration Act. Their case has been that they were not liable to pay any amount. They appointed a lawyer to take part in the proceedings. They are residents of Ludhiana. They filed the written statement before the arbitrator as ordered. It is not known why their lawyer Mr R.L. Chopra did not appear on the date and time when the arbitrator held proceedings on 3rd September, 1980. The time fixed was 1.30 P.M. The arbitrators waited up to 1.45 P.M. and then proceeded ex parte. Mr. Chopra according to the record of the proceedings appeared before the arbitrator at 3 P.M. From the record it does not appear whether Mr. Chopra was made aware of the proceedings dated 3rd September, 1980 proceedings ex parte against the respondents. Counsel for the petitioner signed the proceeding sheet dated 3rd September, 1980 but there are neither signature nor initials of Mr. Chopra, counsel for the respondents. Again on 6th September, 1980 the arbitrator has mentioned in the margin of the order sheet that Mr. Chopra rang up in the morning to say that he had to apply for setting aside the ex parte proceedings. This part of proceedings, the arbitrator, could have recorded before recording any other proceeding or order on 6th September, 1980. The two noting of the arbitrator in proceedings dated 3rd September, 1980 and 6th September, 1980 in the margin of the order sheet, if correct, show that the counsel for the respondents had an intention to appear and take part in the arbitration proceedings. In these circumstances the arbitrator ought to have issued a peremptory notice to the respondents or their counsel of his intention to proceed ex parte. The respondents, as already stated, are residents of Ludhiana. The have been prejudiced by omission of notice by the arbitrator of his intention to proceed ex parte. The respondents cannot be said to be aware of the proceedings fixed for 6th September, 1980, 16th September, 1980 or 17th September, 1980. The period intervening the two dates of hearing before arbitrator is so short that the respondents at Ludhiana are not expected to have knowledge of having been proceeded ex-parte, unless somebody informs them. Thus after going through the record of proceedings before the arbitrator. I am of the opinion that omission to give notice to proceed ex parte against the respondents by the arbitrator has prejudiced them. This omission on the part of the arbitrator is an irregularity in procedure adopted by the arbitrator and amounts to misconduct as the respondents have not been given proper hearing of the matters in dispute and as such the award is liable to be set aside.

14. Learned counsel for the objectors next submits that the award given by the arbitrator after the expiry of the time extended by the court is invalid and is liable to be set aside. He submits that the arbitrator ceased to have jurisdication as soon as the time for making the award expired. He submits that the arbitrator or the parties ought to have approached the court for extension of time specially when the arbitrator proceeded ex parte on 3rd September, 1980 and the time for making award had expired on 24th August, 1980. He relies upon K.L. Khanna & Co. and Ors. v. Model Town Society Ltd. AIR 1933 Lah 173, J. Kuppuswami Chetty v. B.V. Anantharamier and Anr. AIR 1948 Mad 3, Sowaran Singh v. Municipal Committee, Pathankot and Anr., and Hari Shanker Lal v. Shambhu Nath and Ors., : [1962]2SCR720 in support of his submission. There appears force in the submission of the learned counsel, but it is not necessary to decide this point in view of my decision on the other points. The arbitrator, as already stated, has misconducted himself by his omission to serve a peremptory notice of his intention to proceed ex parte upon the objectors, who have been prejudiced ex parte upon the objectors, who have been prejudiced by omission of such notice. The award is, thereforee, liable to be set aside by accepting the objections. In accordingly set aside the award dated 18th September, 1980 of Shri D.R. Dhamija, Arbitrator. The application (C.M. No. 3449 of 1980) for making the award a rule of the court is dismissed with no order as to costs.


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