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Alvel Sales Vs. Dujadwala Industries - Court Judgment

LegalCrystal Citation
SubjectArbitration
CourtChennai High Court
Decided On
Case NumberO.S. Appeal No. 6 of 1975
Judge
Reported inAIR1978Mad295; (1978)1MLJ171
ActsArbitration Act, 1940 - Sections 14, 14(2) and 17
AppellantAlvel Sales
RespondentDujadwala Industries
DispositionAppeal allowed
Cases Referred and Ramchander v. Jamnasankar
Excerpt:
.....arbitration act, 1940 - whether service of notice issued by court under section 14 (2) sufficient notice to parties concerned - award filed by arbitrator as required under section 14 (1) - notice under section 14 (2) need not be in writing - it would suffice if intimation or warning is given to party concerned about bringing of award into court - held, notice sufficient. - - on the failure of the respondent to do so, mr. the supreme court, however, while interpreting the word 'notice' appearing in section 14(2) of the arbitration act have expressed themselves very clearly that such a notice need not be in writing. the difference in the provisions of the two sub-sections with respect to thegiving of notice is significant and indicates clearly that the notice which the court is to..........section 14, with respect to the giving of notice to the parties concerned about the filing of the award. 'notice' does not necessarily mean 'communication in writing.' 'notice' according to the oxford concise dictionary, means 'intimation, intelligence, warning' and has this meaning in expressions like 'give notice, have notice' and it also means 'formal intimation of something, or instructions to do something' and has such a meaning in expressions like 'notice to quit, till further notice.' we are of opinion that the expression 'give notice' in sub-section (2) of section 14, simply means giving intimation of the filing of the award, which certainly was given to the parties through their pleaders on 21-2-1948. notice to the pleader is notice to the party, in view of rule 5 of order iii.....
Judgment:

Ramaprasada Rao, J.

1. This appeal is directed against the order of Paul J. in Appln. No. 2703 of 1973 in O. P. 195 of 1971.

2. In connection with certain disputes which arose between the appellant and the respondent, one Mr. V. Venkataraman was appointed as Arbitrator by the appellant in the first instance and as per Clause 21 of the arbitration agreement the respondent was called upon to nominate its arbitrator. On the failure of the respondent to do so, Mr. Venkataraman, in accordance with law, became the sole Arbitrator and he entered upon the reference as per the arbitration agreement in or about Aug. 1970. We are not, in this appeal, quoting the arbitration agreement, or the nature of the dispute between the parties, as it is not necessary.

3.. The sole Arbitrator Mr. Venkataraman gave notice of his having assumed office, to both the parties and asked them to attend the enquiry on a date fixed by him in Aug. 1970. The respondent was not prepared to participate in the enquiry and wanted the Arbitrator not to proceed with the enquiry. In spite of it, the Arbitrator who was entitled to proceed with the enquiry in terms of his appointment, intended to hear the parties and fixed the 12th Sept. 1970, as the date of hearing of the contentions of the parties on the disputes raised. It appears that the then counsel, whom we characterise as the general counsel, appearing for the respondents, telephoned the Arbitrator and wanted time. Thereafter, the same counsel said that he did not want to participate in the arbitration enquiry as it would prejudice him.

4. By that time, a civil suit, C. S. 75 of 1970 was pending between the parties. In that suit, the relief prayed was for a direction to the respondent to produce the arbitration agreement into court for purposes of appointing an arbitrator through the intervention of court. As the said proceeding was by then pending, the sole Arbitrator Mr. Venkataraman who was appointed at the instance of the appellant in the circumstances already stated, filed an application for extension of time for passing of the award. In the view that an arbitrator had already been appointed, suit C. S. No. 75 of 1970 was withdrawan. The position, therefore, early in 1971, was that the respondent did not participate in the enquiry started by the arbitrator. In these circumstances, the arbitrator passed his award on 9-3-1971 and, admittedly, gave notice of such passing of the award to both the parties, which was received by the respondent thereafter. At this stage, therefore, it is obvious that the respondent had notice of the passing of the award by the arbitrator. Duty-bound, as he was in law, the arbitrator filed O.P. 195 of 1971, that being a petition under Section 14(2) of the Arbitration Act, for reception of the award and for further proceedings.

5. It is common ground that the said O. P. 195 of 1971 filed by the Arbitrator was taken on file, and Ganesan J. issued notice to all parties concerned. This notice, according to the appellant, was served through the office of the Sheriff of the High Court on one of the representatives of the respondent firm, which by then, opened a branch office in Madras. We shall, of course, refer to this aspect in full at a later stage-It is common ground, however, that one Nandalal Agarwal working in the Madras branch of the respondent firm, received the said notice, affixed the seal of the company and thus received the court notice issued under Section 14(2). As such notices are only intended as steps-in-aid for either party to process its grievances, one party for obtaining a decree in terms of the award, and the aggrieved party for setting aside or modifying the award in accordance with the provisions of the Arbitration Act, the appellant discretely waited for passage of time and never took any steps till he came to court in Appn. No. 1043 of 1972 in O. P. 195 of 1971, for passing a judgment in terms of the award of Mr. Venkataraman dated 9-3-1971.

6. A decree in terms of the award was passed by Gokulakrishnan J. on 22-6-1972, in Appn. No. 1043 of 1972. Thereafter, the appellant filed an execution petition to obtain his remedy under the decree as above and even sought for the issue of a precept in Appln. No. 2541 of 1972, to a court in Bombay. Thereafter, the respondent, pleading that it had knowledge of the passing of the decree only in November 1972, filed Appn. Nos. 2703 and 2704 of 1972, seeking for orders from this court to set aside the so-called ex parte decree passed by the court in Appn. No. 1043 of 1972 and for reopening the entire matter to enable it to place its objections as against the award passed by the arbitrator. The Judge's summons in Appn. No. 2703 of 1972 was to the effect that the 'ex parte' decree dated 22-6-1972 should be set aside. In the other application, viz, Appn. No. 2704 of 1972, the respondent sought for stay of execution of the decree and further processing of the same.

7. In the affidavit filed in support of the application for setting aside the so-called ex parte decree, the allegation was that the court, while issuing notice in O. P. 195 of 1971, did not issue the same to the Bombay address of the respondent firm, as was usual on prior occasions when the arbitrator was corresponding with the parties, but such a notice under Section 14(2) wassought to be served on a clerk of the respondent firm then set up in Madras and that the said clerk had no authority to receive the said notice issued by the court. The respondent would add that it came to know about the passing of the ex parte decree only in November 1972, and in these circumstances, sought for the setting aside of the ex parte decree. The prayer in the other application was, as already noticed, only consequential to that asked for in Appn. No. 2703 of 1972.

8. In the counter affidavit, the appellant specifically brought to the notice of the respondent that the notice in O. P. 195 of 1971 was acknowledged by one Naudalal Agarwal, describing himself as Assistant Manager of the respondent-company working in Madras and that he had the requisite authority to receive the same and he was also directed to do so by the Manager of the office.

9. A reply affidavit was filed to this counter affidavit. Here again, the respondent did not say that Agarwala did not bring the matter of such service of court notice regarding the fifing of an award into court to the notice of the local manager, or of the Bombay Office but would spin up the matter by reiterating that Agarwala was not competent to receive any notice on behalf of the respondent and no one in Madras office was authorised to represent the company.

10. The matter came up before Paul J. The learned Judge was of the view that it was an ex parte decree, as is ordinarily understood in legal parlance, and that in the absence of such notice, knowledge, information or intelligence of the proceedings in court, on the part of the respondent herein, it would not be fair to sustain the ex parte decree under which the appellant should be allowed to work out its rights. In these circumstances, the learned Judge set aside the decree passed on the basis of the award, viewing it as an ex parte decree. It is against this decision, the present appeal has been filed.

11. The two questions that arise for consideration in this appeal are -- Firstly, whether the service of notice issued by the court under Section 14(2) of the Arbitration Act is sufficient notice to the parties concerned and whether there is any void in either the processing pf such service or the effecting of such service. Secondly, whether the respondent can agitate in this court, in the manner it has attempted to do, on the foot that there was no notice to it under Section 14(2) and that the service on Agarwala was without warrant and whether in those circumstances, it could consider it as an ex parte decree and avoid the same in a manner ordinarily known to common law.

12. Though under Section 41 of the Arbitration Act, there is a general miscellaneous provision enabling the adoption of the provisions of the C.P.C., 1908, to all proceedings arising under the Arbitration Act, yet the same is subject to the provisions of that Act. Caution, therefore, is required while mechanically adopting or invoking the procedural provisions of the C.P.C, 1908, when dealing with substantive provisions under the Arbitration Act. That this is the intention is clear from a comparison of certain relevant provisions of the C.P.C. and the Arbitration Act and the interpretation given to them by the highest court of the land. We are here concerned with service of notices, and not with reference to service of summons. Section 142, C.P.C. expressly lays down a mandate that all orders and notice served on or given to any person under the provisions of the Code shall be in writing. The Supreme Court, however, while interpreting the word 'notice' appearing in Section 14(2) of the Arbitration Act have expressed themselves very clearly that such a notice need not be in writing. In fact, they said that an oral notice to the parties concerned shall be a substitute and could be validly acted upon. In fact, the ratio of the decision of the Supreme Court reported in Nilkantha v. Kashinath : [1962]2SCR551 categorically gives the impression that such notice as is required under Sub-section (2) of Section 14 of the Arbitration Act need not necessarily mean communication in writing, but, on the other hand, the learned Judges were of the view that if in a given case there is proof of intimation or the gaining of intelligence of the administration of a warning by the court to the party concerned, that an award has come to court and that it was filed by the Arbitrator as required under Section 14(1) of the Act, then, the Supreme Court is of the view that such a notice is a valid notice. In that case, the Supreme Court observed as follows (at p. 668):

'Sub-section (1) of Section 14 of the Arbitration Act, 1940 (Act X of 1940) requires the arbitrators or umpire to give notice in writing to the parties of the making and signing of the award. Sub-section (2) of that section requires the court, after the filing of the award, to give notice to the parties of the filing of the award. The difference in the provisions of the two sub-sections with respect to thegiving of notice is significant and indicates clearly that the notice which the court is to give to the parties of the filing of the award need not be a notice in writing. The notice can be given orally. No question of the service of the notice in the formal way of delivering the notice or tendering it to the party can arise in the case of a notice given orally. The communication of the information that an award has been filed is sufficient compliance with the requirements of Sub-section (2) of Section 14, with respect to the giving of notice to the parties concerned about the filing of the award. 'Notice' does not necessarily mean 'communication in writing.' 'Notice' according to the Oxford Concise dictionary, means 'intimation, intelligence, warning' and has this meaning in expressions like 'give notice, have notice' and it also means 'formal intimation of something, or instructions to do something' and has such a meaning in expressions like 'notice to quit, till further notice.' We are of opinion that the expression 'give notice' in Sub-section (2) of Section 14, simply means giving intimation of the filing of the award, which certainly was given to the parties through their pleaders on 21-2-1948. Notice to the pleader is notice to the party, in view of Rule 5 of Order III C.P.C. which provides that, any process served on the pleader of any party shall be presumed to be duly communicated and made known to the party whom the pleader represents and unless the court otherwise directs, shall be as effectual for all purposes as if the same had been given to or served on the party in person. No doubt, in that case, the Supreme Court was considering whether a notice to the pleader was notice to the party. They held it was, and added that it was so, in view of Rule 5 of Order III C.P.C.

13. Taking advantage of this observation of the Supreme Court, a contention is sought to be made by Mr. Shanmugham that in the instant case even if Agarwala is to be treated as an authorised representative or an agent such a service should be in the manner provided for in the C.P.C. under Order III, Rule 6. Here again, we have to point out that Order III is a special procedure in the Code touching the manner and method by which courts should recognise agents and pleaders. If no such norm is prescribed or a mandate set for the courts to act and accept agents of parties, it is likely to lead to confusion. Therefore, it was the Procedural Code thought of prescribing certain conditions by which the courts should recognise agents as provided in Order III, Rule 6, that such agents who ,are to be recognised as 'agents' within the meaning of Order III should be persons who have a special or a general authority in writing from the principals concerned. This is not the apposite rule for consideration at all and particularly in the light of the observations made by the Supreme Court, as above, that a notice under Section 14(2) of the Arbitration Act need not be in writing. Obviously, the Supreme Court, conscious of the difference between the provisions in the C.P.C. and the Arbitration Act, made a departure in the matter of the understanding of the words 'service of notice' contemplated in Section 14(2) of the Arbitration Act and observed that it need not be in writing and it would suffice if an intimation or an intelligence or a warning is given to the party concerned about the bringing of an award into the court.

14. In the light of the discussion, as above, it is for us to consider whether the service on Agarwala should be deemed to be valid service in the circumstances of the case. We have referred to the pleadings. The respondent would allege in the affidavit in support of the application to set aside the so-called ex parte decree that no one had any authority to receive the notices from court. When the respondent was confronted with a specific allegation in the counter affidavit that the notice under Section 14(2) of the Arbitration Act was served on Agarwala who represented himself as Assistant Manager has affixed the seal of the firm to the copy of the notice served by the bailiff of this court on him, even then, the respondent would barely reiterate that Agarwala did not have the requisite authority to receive the notice. The respondent would not even state at that critical stage that Agarwala did not pass on the information of such service to it. As we felt a doubt whether the words of Assistant Manager appearing in the docket proved such service of notice on Agarwala who was admittedly functioning in the Madras Office of the respondent firm we thought fit to examine him as a court witness.

15. Mr. Agarwala gave evidence today before us. He is a graduate and obviously therefore is well acquainted with commercial practice. According to him, Mr. Gupta who was the manager of the firm was not present in the office on the date when the bailiff sought to serve the notice on the respondent firm on 15-9-1971. Not only Mr. Agarwala admits that he received the notice, he also says that he has affixed the seal of the firm. But he would say that the seal was openly available to anybody in, the firm. We do notbelieve him in this respect. Being an educated person entrusted with the administration of the office during the absence of the Manager, the elementary duty of his was to see that the seal of the office was not misused or tightly used by anyone functioning therein. Apart from this, he would say that he received the notice, mislaid it and never informed his employer about it. Here again we are unable to believe this witness. That this witness is speaking falsehood is clear from the fact that even in the reply affidavit filed by the respondent firm, it would not allege that Mr. Nandalal Agarwala did not inform it about the service of notice under Section 14(2). We hold that Nandalal Agarwala received the notice as a person who had implied authority to act for the respondent firm functioning in Madras and that in the peculiar circumstances he ought to have conveyed the information of such service to the respondent firm.

16. This is what is required under the rule, laid down by the Supreme Court. What is necessary is that the person aggrieved, who can be either party to the arbitration dispute should have the intelligence or a warning or information about the filing of the Award. In the circumstances stated, and as we hold that service on Nandalal Agarwala has been effected and it should be deemed to be service on the Madras branch of the respondent firm, we have no hesitation to hold that he should have passed on that information either to his Manager soon after his return, or to the head office at Bombay immediatety thereafter.

17. The plea is that even though such service was effected on 15-9-1971, the respondent firm came to know about it only in November 1972. Under Article 119 of the Limitation Act 1963, a period of 30 days is provided for setting aside an award or getting an award remitted for reconsideration, from the date of service of the notice of the filing of the award. The date of service of the notice of the filing of the award is 15-9-1971, as it was served on Agarwala who was functioning on behalf of the respondent company at Madras. The reasonable impression which we gain on a perusal of the pleadings and particularly after hearing the court witness, Agarwala, is that he should have informed the respondent within a reasonable time after 15-9-1971. The respondent company obviously lost its right and entitlement to have the award set aside in a manner known to law and as prescribed under the Limitation Act

18. On the other hand, the appellant, after having been satisfied that no application was filed by the other party either for modification or correction of the Award within the meaning of Section 15 for remittance of the award within the meaning of Section 16 of the Arbitration Act, filed the application, Appn. No. 1043 of 1972, for passing a decree in terms of the award in O. P. 195 of 1971. This application was ordered by Gokulakrishnan J. and a decree in terms of the award was passed on 22-6-1972. Rightly in the Judge's summons taken out by the appellant, notice was not intended to be served on any one. Mr. Shanmugham, learned counsel for the respondent, fairly concedes that no notice is required on that application, because it is the duty of the aggrieved party to take steps as per the provisions of the Arbitration Act read with the Limitation Act within the time provided, the appellant applicant who seeks relief under the award in the shape of a decree in terms thereof need only wait to see whether this process would in any way be interdicted by the other party filing an application to set aside the award in a manner known to law or to cause a remittance of the same as provided under the Act. Therefore, we are satisfied that no notice was called in the Appn. No. 1043 of 1972 and it was in these circumstances the learned Judge passed the decree. The question is whether this is an ex par to decree

19. We could do no better than quote the expressive language used by a Division Bench of the Patna High Court reported in Roshan Lal v. Firm Bridhichand, AIR 1924 Pat 603 which principle was followed in later decisions reported in Rajeshwar v. Ambika Prasad : AIR1956Pat28 and Ramchander v. Jamnasankar . In the words of the learned Judges (at p. 30 of AIR Pat):

'The second point is equally clear. It isasserted by the appellants that as they had no opportunity to place their case before the court the decree must be regarded as ex parte; but it is nothing of the sort. An ex parte decree is a decree passed by the court in the absence of the defendants where the plaintiff has proved his case; but here the presence of the parries was not necessary to enable the court to pronounce judgment according to the award.'

We respectfully agree with these observations and hold that the decree in the case on hand is not an ex parte decree at all. This is a decree which the court is bound to pass under Section 17 of the Arbitration Act, which appears to be rather mandatory in scope. Section 17 of the Arbitration Act says:--

'Where the court sees no cause to remit the award of 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 ft decree shall follow.'

It, therefore, appears to us that there is no scope for the contention that this is a case in which an ex parte decree ought to be set aside. Even otherwise, the respondent had lost its rights to seek for the setting aside the award, as under the Limitation Act, the period had expired and we are unable to believe without any further evidence, that it was only in Nov. 1972 that the respondent had knowledge of the passing of the award and the same having been brought into court at the instance of the arbitrator.

20. For all the reasons stated above, we are unable to agree with Paul J. The Original Side Appeal is allowed. There will, however, be no order as to costs. The appellant is at liberty to take further steps to execute the decree obtained by it in Appn. No. 1043 of 1972.


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