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State of West Bengal Vs. A.K. Ghosh and Bros - Court Judgment

LegalCrystal Citation
SubjectArbitration
CourtKolkata High Court
Decided On
Case NumberA.F.O.D. No. 19 of 1971
Judge
Reported inAIR1975Cal227,79CWN349
ActsArbitration Act, 1940 - Sections 21, 30 and 34; ;Evidence Act, 1872 - Section 115
AppellantState of West Bengal
RespondentA.K. Ghosh and Bros
Appellant AdvocateP.K. Sen Gupta, ;Nani Gopal Das and ;Jolly Sett, Advs.
Respondent AdvocateAmiya Bose, ;Saktinath Mukherjee and ;Monisa Mitter, Advs.
DispositionAppeal dismissed
Cases ReferredIn Sm. Padmabati Paul v. Pannalal Paul
Excerpt:
- .....mr. sengupta has been laid down. in the first mentioned case, some of the parties did not agree to make a reference and, consequently, it has been held that where there is no such agreement between all the parties interested, the court is not competent to make a valid order of reference and that the order of reference is invalid not only against those who have not agreed but also against those who have agreed. in the other case, the same thing happened as in dooly chand's case and the principle of law laid down in that case was followed. in the instant case, both the appellant and the respondent agreed to make a reference to the arbitration of mr. p. m. lahiri. the reference cannot be held to be bad, nor can the award of the arbitrator be challenged on the ground that the appellant did.....
Judgment:

M.M. Dutt, J.

1. This appeal is at the instance of the State of West Bengal and it arises out of a suit instituted by the respondent for recovery of money.

2. The respondent entered into a contract with the appellant for the execution of the following works :--

(1) The construction of the main hospital building, kitchen and morgue of 58 bedded Sub-Divisional Hospital at Arambagh in the District of Hooghly.

(2) The construction of the infectious wards and staff quarters of the said hospital.

3. The terms of the contract contained in the tender form issued on behalf of the appellant includes a provision for arbitration in Clause 25 thereof which provides inter alia that all questions and disputes relating to the meaning of the specifications, designs, drawings and instructions and as to the quality of workmanship or materials used on the work or as to any other question, claim, right, matter or thing whatsoever, arising out of or relating to the contract shall be referred to the sole arbitration of the Chief Engineer of the department. It further provides that should the Chief Engineer be for any reason unwilling or unable to act as such arbitrator, such questions and disputes shall be referred to an arbitrator to be appointed by the Chief Engineer and that the award of the arbitrator shall be final, conclusive and binding on all parties to the contract.

4. In the suit, the respondent claimed a sum of Rs. 2,99,251.00 as per particulars given below :

(a)For extra works done in connection with the work of tender No. 47 as per Schedule 'A'

Rs. 30,040.00(b)For extra works done in connection with the work of tender No. 21 as per schedule 'B'

Rs. 40,884.00(c)For costs of materials and carriage thereof pay- able to the plaintiff under clause 25 of the tender notices as per Sch. 'C'

Rs. 1,58,557.00(d)For damages as stated in paragraph 17 of the plaintRs. 69,770.00

TotalRs. 2,99,251.00

Besides the said sum of Rs. 2,99,251.00, the respondent claimed interest on the said amount at the rate of 12 per cent, per annum upto the date of the decree and further interest at the said rate until realisation.

5. On February 7, 1967, the appellant entered appearance in the suit and filed an application under Section 34 of the Arbitration Act, 1940 (hereinafter referred to as the Act) praying for stay of all further proceedings of the suit in view of the Arbitration Clause 25. The respondent filed a petition of objection to the said application under Section 34. Before the said application was disposed of, on September 13, 1968, the respondent made an application praying for referring all matters in dispute and difference in the suit to arbitration under the supervision of the Court, appointing a retired Judge of the rank of a District Judge as Arbitrator. Both the said applications, namely, one filed by the appellant under Section 34 of the Act and the other by the respondent for referring all matters in dispute and difference to arbitration were heard together by the learned Subordinate Judge and he passed the following order on August 2, 1969 :

'In this suit for recovery of money filed against the State of West Bengal, the defendant filed a petition under Section 34 of the Arbitration Act with a prayer to stay all further proceedings in the suit. The petition was opposed by the plaintiff on 18th September, 1968. The plaintiff filed a petition stating that to cut short the entire matter and to minimise the case the plaintiff was agreeable to an arbitration under the supervision of the court in accordance with the provisions of the Arbitration Act provided a retired Judge in the rank of a District Judge is appointed as an Arbitrator. Learned G. P. has no objection to such appointment. Hence on the consent of the parties Shri P. M. Lahiri, a retried District Judge is appointed Arbitrator in this case. Let the matter be fixed on 11th August 1969 for fixing the remuneration of the Arbitrator and settlement of other terms in presence of the lawyers of both sides. In-form learned lawyers. Shri Lahiri may be informed after 11th August 1969.'

In the order-sheet, on the left hand side of the said order, Mr. P. K. Ghosh, learned Government Pleader made the following endorsement : 'Seen P. K. Ghosh, G. P. 8th August 1969'. On December 2, 1969 the respondent filed a petition submitting the points of dispute to be referred to arbitration. By an order dated December 15, 1969 the learned Subordinate Judge referred the points of dispute as mentioned in the petition of the respondent dated December 2, 1969 to the Arbitrator Mr. P. M. Lahiri and directed him to settle the disputes after hearing the parties and to make an award and submit the same to court within three months from that date. The remuneration of the Arbitrator was fixed at Rs. 75/- per sitting. Thereafter, a writ of appointment was also issued. It appears that there were 17 sittings in the proceedings before the Arbitrator Mr. P. M. Lahiri and both parties appeared before him and produced evidence in support of their respective claims. On May 19, 1970 the Arbitrator submitted his award and other connected papers. By his award, the Arbitrator allowed the claim of the respondent to the extent of Rs. 2,68,250.00 and directed the appellant to pay the said amount. In the award, it was stated by the Arbitrator that the respondent had fully paid up his remuneration for 17 sittings amounting to Rs. 1,275.00.

6. On June 17, 1970, the appellant filed a petition presumably under Section 30 of the Act, praying for setting aside the award. The grounds as set forth in the said petition are errors of law apparent on the face of the award, want of jurisdiction of the Arbitrator in allowing the claim of the respondent and misconduct of the Arbitrator in awarding interest and also cost of the materials in clear violation of the terms, conditions and scope of the contract. The respondent opposed the said petition of the appellant for setting aside the award.

7. At the hearing of the petition, it was contended on behalf of the appellant that the learned Government Pleader had no authority to give consent to the appointment of Mr. P. M. Lahiri as an Arbitrator in view of Clause 25 in the contract; that there was no valid order of reference to arbitration in accordance with Section 21 of the Act and that there were errors of law apparent on the face of the award. The other grounds which were taken in the petition relating to the misconduct of the Arbitrator were not pressed on behalf of the appellant. The learned Subordi-nate Judge by his order dated September 7, 1970 overruled all the contentions made on behalf of the appellant and dismissed the petition for setting aside the award. By the said order he accepted the award and directed the passing of a decree in terms of the award. Accordingly, a decree was passed on the basis of the award the terms of which, formed part of the decree. Hence, this appeal.

8. Mr. P. K. Sengupta, learned Advocate appearing on behalf of the appellant submits that the Court had no jurisdiction to refer the disputes between the parties to arbitration on an application under Section 34 of the Act, particularly in view of Clause 25 of the contract. This contention is without any substance. When application under Section 34 is filed, the Court has to decide whether it will proceed with the suit or stay the proceedings thereof. The party filing an application under Section 34 may press the same or may give it up and agree with other parties to refer any matter in difference between them in the suit to arbitration. If such an agreement is made between the parties including the party making the application under Section 34 and pursuant to such an agreement the parties apply to the Court to refer the matters in difference between them to arbitration the Court, in our opinion, has ample jurisdiction to entertain such an application and refer the matters in difference between the parties to arbitration. There is, therefore, no question as to the jurisdiction of the Court as contended on behalf of the appellant. The contention is accordingly rejected.

9. It is, however, argued that there was no valid reference by the Court under Section 21 of the Act. Section 21 is as follows :

'Where in any suit all the parties interested agree that any matter in difference between them in the suit shall be referred to arbitration, they may at any time before judgment is pronounced apply in writing to the Court for an order of reference.'

It is contended that there was no agreement for reference to arbitration and as the respondent (appellant?) did not make any application in writing to the Court for an order of reference, the learned Subordinate Judge acted without jurisdiction in referring the matters in dispute to arbitration. We have already quoted the order dated August 2, 1969, the correctness of which has not been disputed before us. The order shows that the learned Government Pleader, who was present at the hearing of the application under Section 34 and the application of the respondent praying for referring the matters in dispute to arbitration expressed that he had no objection to the appointment of a retired Judge in the rank of a District Judge as an Arbitrator. By consent of parties, the learned Subordinate Judge appointed Mr. P. M. Lahiri, a retired District Judge, as the Arbitrator. The learned Government Pleader also made an endorsement in the order-sheet by the side of the said order. It is also not disputed before us that the learned Government Pleader was fully aware of the said order which was made by consent of parties. Apart from this, it appears that in all the sittings before the Arbitrator, the parties appeared and put forward their respective claims. The appellant was represented by itslawyer and Engineer. In some of the proceedings, Mr. P. K. Ghosh, the learned Government Pleader appeared and made his submissions before the Arbitrator. In these circumstances, it is difficult for us to accept the contention of the appellant that the appellant did not agree to refer the matters in dispute to arbitration.

10. It appears that no written application was made on behalf of the appellant nor did the Government Pleader sign the application filed by the respondent praying for referring the matters in dispute to arbitration of a retired District Judge. It has been strenuously urged on behalf of the appellant that in the absence of an application signed by all the parties interested, the Court has no jurisdiction to make the order for reference to arbitration. Section 21 no doubt provides for an application in writing by all the parties interested. By such an application the parties bring to the notice of the Court an agreement between them to refer any matter in difference between them to arbitration. It will be also easy for the Court to ascertain whether all the parties interested have agreed. The question is whether in the absence of a joint application in writing by all the parties interested, the Court has power to make an order for reference. In other words, whether the provision of Section 21 relating to the filing of an application in writing by all the parties interested is mandatory.

11. There can be no doubt that the condition precedent to the making of an application by the parties interested is an agreement between them. Unless the parties agree to refer their disputes to arbitration, there is no scope for filing an application to Court praying for an order of reference. The Court will have to ascertain whether the parties interested have agreed to an order for reference, which can be done from the application if it is made and signed by all the parties interested. In our view, it is not the intention of the legislature that the Court will ignore the agreement between the parties simply because some of the parties have not joined in the application. In such a case, it is the duty of the Court to ascertain from the parties who have not joined in such an application whether they have agreed to the malting of an order for reference. While the agreement between the parties is a sine qua non to the exercise of jurisdiction by the Court to refer disputes to arbitration, the filing of an application in writing by all the parties interested is not mandatory. The view which we take finds support from a decision of this Court in Shama Sundaram Iyer v. Abdul Latif, (1900) ILR 27 Cal 61; where it has been held that the provision of paragraph 1, Schedule II of the Code of Civil Procedure, which is same as Section 21 of the Act, to the effect that application shall be in writing is directory only and not mandatory. This decision has been followed inMababir v. Monohar Singh, AIR 1924 All 540; G. Subbayya v. K. Seshayya, AIR 1928 Mad 48 (2). We are not also impressed with the contention that the application is required to be signed by all the parties interested. Section 21 does not require that the parties must sign the application. In Thakur Umed Singh v. Sobhag Mal Dhadha 43 Ind App 1 = (AIR 1915 PC 79), the Privy Council has laid down that it is not necessary that the application should be signed by the parties.

12. In support of his contention that all the parties interested should join in the application, Mr. Sengupta has placed reliance on two decisions of this Court in Seth Dooly Chand v. Mamuji Musaji 25 Cal LJ 339 = (AIR 1917 Cal 481) and Girija Nath Roy Choudhury v. Kanai Lal Mitra 27 Cal LJ 339 = (AIR 1918 Cal 336). In neither of these two decisions, such a proposition of law as advanced by Mr. Sengupta has been laid down. In the first mentioned case, some of the parties did not agree to make a reference and, consequently, it has been held that where there is no such agreement between all the parties interested, the Court is not competent to make a valid order of reference and that the order of reference is invalid not only against those who have not agreed but also against those who have agreed. In the other case, the same thing happened as in Dooly Chand's case and the principle of law laid down in that case was followed. In the instant case, both the appellant and the respondent agreed to make a reference to the arbitration of Mr. P. M. Lahiri. The reference cannot be held to be bad, nor can the award of the Arbitrator be challenged on the ground that the appellant did not join in the application for reference or sign the application.

13. Even assuming that the order of reference is bad as the appellant did not join in the application or sign the same still, in pur view, the appellant is precluded from taking any such objection after having participated in the arbitration proceeding before the Arbitrator without protest. In Chowdhary Murtaza Hossein v. Mussummat Bibi, (1876) 3 Ind App 209 (PC), their Lordships of the Privy Council observed as follows :

'On the whole, therefore, their Lordships think that the Appellant, having a clear knowledge of the circumstances on which he might have founded an objection to the arbitrators proceeding to make their award, did submit to the arbitration going on; that he allowed the arbitrators to deal with the case as It stood before them, taking his chance of the decision being more or less favourable to himself; that it is too late for him, after the award has been made, and on the application to file the award, to insist on this objection to the filing of the award.'

The same principle as laid down by the Privy Council in the above case applies to the factsand circumstances of the instant case. The appellant took a chance for a favourable decision in the arbitration proceeding but the award having gone against the appellant, it is now too late to take the objection.

14. In Union of India v. K. P. Man-dal, : AIR1958Cal415 both the parties knew that the Arbitrator was not competent to act as Arbitrator according to the qualification prescribed by the arbitration clause. The respondent, in that case, not only submitted to the arbitration of the said Arbitrator on the Government's claim but also put forward a counter-claim against the Government for adjudication by the same Arbitrator, took part in the proceedings from beginning to end, agreed to extensions of time for filing award and, when the award went against him, sought to set aside the award on the ground that the Arbitrator was not competent to act as such. It was held by Chakravartti, C. J. who presided over the Bench that in the circumstances, although there can be no representation by the respondent as to the actual competence of the Arbitrator, the rule of estoppel would still bind him and would still prevent him from contending that the Arbitrator was not qualified under the terms of the agreement to arbitrate in the dispute.

15. K. P. Mandal's case has been followed by P. C. Mallick, J. in Union of India v. B. M. Sen, : AIR1963Cal456 , where also both the parties having full knowledge that the Arbitrator did not answer to the description of the officer referred to in the arbitration agreement and was not competent to make an award, appeared before such Arbitrator, led evidence and made application for extension of time to file an award. It was held that they were estopped from challenging the award even though the Arbitrator had no authority to make the award and was not competent to arbitrate under the arbitration clause. In the facts and circumstances of the instant case, it must be held that the appellant is estopped from challenging the legality of the reference made by the Court on the ground that it had not joined in the application and signed the same, even assuming that the provision for making an application in writing is mandatory and not directory.

16. It is next argued on behalf of the appellant that the Arbitrator not having specifically dealt with and determined each item of the claim made by the respondent, the award is illegal and invalid. The respondent has claimed Rs. 2,99,251.00 in respect of four items the particulars of which have been mentioned above. He has also claimed interest for the said amount. It appears from the award that before the Arbitrator, the respondent claimed a sum of Rs. 3,64,193.00 on account of interest for ten years five months from January 1960 to May 1970, as well as for cost of the suit and the arbitration pro-ceedings. The Arbitrator made the following award :

(a) The plaintiff (claimant) is entitled to Rs. 2,68,250.00 and the defendant is directed to pay this amount to the plaintiff.

(b) Except that the plaintiff claiman, will bear the entire cost of the remuneration of the Arbitrator amounting to Rs. 1,275.00 each party will bear its own cost of the suit M. S. No. 5 of 1966 as well as of Arbitration Proceedings.

(c) Except as stated in Clause (a) above, the plaintiff is not entitled to any other relief or reliefs.

17. It is said that it does not appear from the said award of the Arbitrator how much he allowed for interest and how much for the cost of materials. It is contended that the failure of the Arbitrator to specify the amount on each item of claim particularly as to interest and cost of materials, is an error of law apparent on the face of the award. It is not the case of the appellant that the Arbitrator has not decided all the matters in dispute between the parties but the complaint of the appellant is that the Arbitrator has not dealt with each item of the claim of the respondent but has made a consolidated award. The reference which was made by the Court did not require the Arbitrator to give the decision separately on each item of claim. The matters m difference between the parties were referred tq the Arbitrator and if the Arbitrator has disposed of all the matters without specifically and separately deciding each matter, we do not think that the Arbitrator has committed any illegality. In Raminder Singh v. Mohin-der Singh, AIR 1940 Lah 186, it has been held that an Arbitrator is not bound by the technical rules of procedure which the Court must follow, nor need he record separate findings on the various points on which the parties are at issue, or write a reasoned judicial decision. All that he is required to do is to give an intelligible decision which determines the rights of the parties in relation to the subject-matter of the reference In Sm. Padmabati Paul v. Pannalal Paul, : AIR1959Cal156 ; P. C Mallick J. has taken the same view, namely, that where the issues are framed by the Arbitrator in the proceedings before himself, the law does not require the Arbitrator to answer each one of the issues, and the failure to answer the issues does not amount to misconduct. In our opinion, also the failure of the Arbitrator in not dealing with each item of the claim separately does not make the award illegal and invalid and the Arbitrator cannot also be held to be guilty of misconduct.

18. The last point that remains to be considered is the alleged misconduct of the Arbitrator in accepting the remuneration from the respondent even before the making of the award. The point has not been taken in the court below. We do not think that there is any substance in the point. Therespondent made an application before the Court for payment to the Arbitrator, his remuneration. Although no order was passed by the Court authorising the respondent to make the payment, the respondent paid the remuneration of the Arbitrator on the eve of the award being made. In the absence of any allegation as to the mala fide intent of the Arbitrator it is difficult to hold that the Arbitrator misconducted himself by accepting his remuneration from the appellant (respondent-?) as illegal gratification which induced him to make an award in favour of the respondent. We would, accordingly, reject this contention of the appellant. No other point has been argued on behalf of the appellant in the appeal.

19. In the result, all the contentions of the appellant having failed, this appeal fails and it is dismissed. But in view of tha facts and circumstances of the case, we do not make any order as to costs.

N.C. Mukherji, J.

20. I agree.


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