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Brahma Swaroop Gupta Vs. Diwan Chand Minotra - Court Judgment

LegalCrystal Citation
SubjectContract;Arbitration
CourtKolkata High Court
Decided On
Case NumberA.F.O.O. No. 28 of 1961
Judge
Reported inAIR1963Cal583,67CWN947
ActsContract Act, 1872 - Sections 51 and 52; ;Arbitration Act, 1940 - Sections 16, 16(1), 16(3) and 29
AppellantBrahma Swaroop Gupta
RespondentDiwan Chand Minotra
Appellant AdvocateP.K. Sen and ;K. Banerjee, Advs.
Respondent AdvocateD. Ghose, Adv. led by Sankar Ghose, Adv.
DispositionAppeal partly allowed
Cases ReferredNachiappa Chettiar v. Subrarnaniam Chettiar
Excerpt:
- .....disputes to the arbitration of sri ram chandra singhi. on april 30, 1956 the arbitrator made his award. clauses 2, 4 and 7 of the award read as follows:clause--2: 'the said brahma swaroop gupta do pay a sum of rupees twenty thousand to the said diwanchand minotra within a fortnight from the date hereof and the said diwanchan minotra to deliver two hundred ordinary shares held by him in the capital of the said eagle paint and pigment industries ltd., in his own name or in the names of his friends and relatives to, and also make over the relative transfer deeds duly executed in favour of brahma swaroop gupta or his nominee or nominees against payment of the said sum of rs. 20,000/- (rupees twenty thousand) only.' clause --4: 'the said brahma swaroop gupta will pay a sum of rupees five.....
Judgment:

Bachawat, J.

1. This is an appeal from an order directing the issue of a writ of attachment in execution of a decree. On December 19, 1955, the appellant and the respondent submitted their disputes to the arbitration of Sri Ram Chandra Singhi. On April 30, 1956 the arbitrator made his award. Clauses 2, 4 and 7 of the award read as follows:

Clause--2: 'The said Brahma Swaroop Gupta do pay a sum of Rupees Twenty thousand to the said Diwanchand Minotra within a fortnight from the date hereof and the said Diwanchan Minotra to deliver two hundred ordinary shares held by him in the capital of the said Eagle Paint and Pigment Industries Ltd., in his own name or in the names of his friends and relatives to, and also make over the relative transfer deeds duly executed in favour of Brahma Swaroop Gupta or his nominee or nominees against payment of the said sum of Rs. 20,000/- (Rupees Twenty thousand) only.'

Clause --4: 'The said Brahma Swaroop Gupta will pay a sum of Rupees Five thousand to the said Diwanchand Minotra, within a period of fortnight from the date nereor in full settlement of all claims and demands of the said Diwanchand Minotra in respect of the said partnership of Messrs. Reno Trading Co.'

Clause --7: 'If the payments referred to in Clauses 2 and 4 herein above will not be made by Brahma Swarup Gupta to Diwanchand Minotra within the time mentioned therein, then interest at the rate of 6% shall be paid by Brahma Swarup Gupta to Diwanchand Minotra from the expiry of a period of fortnight from date hereof.'

2. The appellant moved for the setting aside of the award. On December 18, 1956, the Court held inter alia that the arbitrator had omitted to consider the question mentioned in paragraph 9(j) of the petition and passed an order the material part of which reads as follows:

'* * it is further ordered that the said Award be and the same is hereby remitted to the Arbitrator herein to come to a decision on the question mentioned in paragraph 9(j) of the said petition. And it is further ordered that the said Arbitrator do within two months from the date of receipt of the papers make and submit his Award on the said question so to be remitted as aforesaid.'

3. On April 16, 1957, the arbitrator made a supplementary award deciding the question remitted to him. The supplementary award recited the making of the first award and the order of the Court dated December 18, 1956. On March 24, 1958, the Court passed judgment and decree in terms of the two awards. The principal sum of Rs. 20,000/-payable under Clause 2 of the first award was paid on December 18, 1959. On March 24, 1960 the respondent filed a tabular statement claiming that a sum of Rs. 4313/- was due to him on account of interest at 6% per annum from the 14th May, 1956 upto the 18th December, 1959 on the aforesaid principal sum of Rs. 20,000/- and a further sum of Rs. 250/- was due to him on account of interest at 6% per annum from the 16th February, 1959 upto the 18th December, 1959 on the principal sum of Rs. 5,000/- payable under Clause 4 of the award and prayed for the issue of a writ of attachment of a decree passed in favour of the respondent against a third party and for realisation of the respondent's claim and costs. On August 31, 1960 the learned Judge passed an order directing the issue of writ of attachment as prayed for.

4. On behalf of the appellant it is urged firstly that as the respondent did not tender the shares mentioned in Clause 2 to the appellant, the appellant cannot be said to have defaulted in payment of Rs. 20,000/- and consequently he is not liable to pay any interest thereon. There is no substance in this contention, Clause 2 of the award fixed a definite time for payment of the sum of Rs. 20,000/- and Clause 7 provided that in default of such payment interest would be paid. The fact that Clause 7 provided for the consequences of non-payment of the aforesaid sum, and did notprovide for the consequences of non-delivery of the shares, plainly points to the conclusion that the appellant was under the obligation to make the payment in the first instance. The subsidiary obligation of the respondent to deliver the shares would arise only on tender of payment of the afore-said sum. This point is also stressed by words 'do' and 'to' in Clause 2.

5. No other point was urged on behalf of the appellant either before the learned Judge or in the memorandum or appeal. At the hearing of the appeal the learned counsel for the appellant formulated several new points of law. The respondent's counsel stated that he was ready to meet the points. In all the circumstances of the case we have allowed the appellant's counsel to agree those new points.

6. On behalf of the appellant it is contended that the effect of the order of reference back dated the 18th December, 1956 is that the second award is the only effective award, that the second award should therefore be read as one comprehensive award embodying the terms of the first award and an adjudication upon the matters referred back to the arbitrator, that consequently the words as 'fortnight from date hereof' in Clauses 2, 4 and 7 of the first award must new be read as 'fortnight from the 16th April, 1957' and that the appellant is not therefore liable to pay any interest for the period prior to the 2nd May, 1957. On a careful consideration of the matter I think that this contention should be rejected. Section 16(1) of the Indian Arbitration Act empowers the Court to remit the award or any matter referred to arbitration to the arbitrator or umpire for reconsideration upon such terms as the Court thinks fit. Now the power to remit the award is distinct from the power to remit any matter referred to arbitration, and the exercise of one or the other power may lead to different results. Section 16(3) provides that the award so remitted shall become void on the failure of the arbitrator to reconsider it and submit his decision within the time fixed. Section 16 contains no other indication as to the effect of an order passed by the Court under Section 16(1). In the leading case of Johnson v. Latham, (1851) 20 LJ QB 236, the Court considered the effect of an order of Court referring back one of several matters referred under a submission empowering the Court to send the matters referred or any one of them back to the arbitrator for reconsideration.

7. If the whole award is remitted, the effective award is the second award, see Brearcy v. Kemp, (1855) 24 LJ QB 310 at p. 312. On such an order being made, the arbitrator must make a fresh award on all the matters referred to arbitration. Section 16(3) shows that on the failure of the arbitrator to reconsider the award and submit his decision within the time fixed, the award remitted to the arbitrator becomes void, see also Mohun Kishen v. Bhoobun Shyam, 7 Suth WR 406. In this context it would appear that the first award is avoided altogether also on the making and tiling of the fresh award, see Ganpatrai and Sons v. Ram Gopal Nanda Kishore, : AIR1955Cal302 .

8. But if only one or some of the matters referred to arbitration is remitted to the arbitrator for reconsideration, pending the second reference, the award as to matters not sent back to the arbitrator seemed to be in a manner suspended. The arbitrator is functus officio as to those matters and cannot alter his judgment as to them, see (1851) 20 LJ QB 236 at p. 238. The order under Section 16(1) may be made on such terms as the Court thinks fit. The Court may, therefore, give directions to the arbitrator as to the form of the fresh award. The arbitrator is bound to abide by and carry out the directions of the Court in this behalf. Inthe absence of any such direction the arbitrator acting under an order referring back some of the matters for reconsideration, must make a fresh award, confirming and repeating the first award as to matters not sent back which he could not alter 'as it were with a dry pen', thus the fresh award would embrace all matters originally referred, and in the result the first award would become null and inoperative, see (1851) 20 LJ QB 236 at pp. 239 and 240. In that case it was held that as the first award became thus null, the Master's allocator for costs issued under it also became null though the second award repeated the terms of the first award as to costs. In this context the observation in Halsbury's Laws of England, 3rd Edition, Vol. II, Article 122, page 57 to the effect that where only a part of the award is remitted, the remainder is valid and enforcible, appears to be too broad. I am, however, inclined to think that where the order of reference back of one or some of the matters referred to arbitration specially directs the arbitrator to make his fresh award limited to the matters remitted to him, the fresh award must be limited to those matters and consequently the first award with regard to the matters not remitted to the arbitrator would remain operative.

9. In the instant case the order dated December 18, 1950 remitting the award for reconsideration of one of the matters referred to arbitrator and directing the arbitrator to submit his award on that matter on the ground that the arbitrator had omitted to consider it in his award, is in substance an order remitting only one of the matters referred to arbitration. In (1851) 20 LJ QB 236, an order remitting the award to the arbitrator to reconsider the prospective directions given in the award on the ground that these directions as given in the original award were bad as an excessive delegation of authority, was treated as an order of reference back of one of several matters referred.

10. The order dated December 18, 1956 specially directed the arbitrator to make his award only on the matters referred back to him for reconsideration. The arbitrator duly made his second or supplementary award on those matters. The Court passed judgment on both the awards on the footing that both of them were valid and effective. In these circumstances the expression 'fortnight from the date hereof' in clauses 2, 4 and 7 of the award dated the 30th April, 1956 must mean 'fortnight from the 30th April, 1956'. Consequently interest would run under Clause 7 as from the 14th May, 1956.

11. Even if the order dated the 18lh December, 1956 did not give any special direction as to the form of the fresh award, it would make no difference in the result. The second or the supplementary award recited the making of the first award and then proceeded to adjudicate on the matter referred back. Assuming that the arbitrator was bound to make a fresh award embracing all matters originally referred to arbitration, the supplementary award may well be read as confirming the first award as to matters not referred back and as an adjudication on the matter referred back and thus confirming the directions in clauses 2, 4 and 7 of the award for payment of the principal sum within a fortnight from the 30th April, 1956, and, in default for payment of interest from the expiry of the aforesaid period. The appellant is therefore bound to pay interest as from the 14th May, 1956. To read the second award as directing payment of the principal sum within a fortnight from the 16th April, 1957 and for payment of interest after the expiry of the aforesaid period would be to alter the judgment already pronounced by the arbitrator on those matters. The arbitrator had no power to do so.

12. On behalf of the appellant it is next contended that the arbitrator had no power to award interest after the date of the award and that consequently the direction for payment of interest contained in Clause 7 of the award is bad and cannot be enforced in execution. There is no substance in this contention. The argument assumes that the arbitrator had no power to make such an award under the terms of the submission. The submission to the arbitrator has, however, not been placed before the Court. It may well be an implied term of the submission that, subject to the provisions of Section 29 of the Arbitration Act, the arbitrator has the power to award interest from the date of the award, see Union of India v. Buago Steel Furnilyre (Pr.) Ltd., : AIR1963Cal70 , Nachiappa Chettiar v. Subrarnaniam Chettiar, : [1960]2SCR209 . Secondly the point is taken too late. No application was made for setting aside the award as to interest. The point cannot be taken in proceedings for execution of the decree passed on the award.

13. On behalf of the appellant it was next contended that neither the award nor the decree passed thereon directed the appellant to pay interest on the principal sum awarded as from the date of the judgment and decree passed on the award. This contention is sound and must be accepted. Clause 7 of the award directed that interest would be paid from the expiry of a period of a fortnight from the 30th April, 1955. The award did not expressly specify the period upto which interest would be paid. Had the arbitrator power to award interest after the passing of the decree on ihe award, I would have read Clause 7 as directing by necessary implication that interest would be paid until payment or realisation of the principal sum awarded. But it appears that the arbitrator has no power to award interest on the principal sum awarded as from the date of the decree on the award, see : AIR1963Cal70 . In this background Clause 7 should not be read as providing by necessary implication that interest would continue to be paid after the passing of the decree. If an award can be read in two ways, one of which would make it lawful and the other unlawful, the Court would read it in a way which would make it lawful. The award should therefore be read as providing that interest on the principal sum awarded would be paid upto the date of the decree passed by the Court. By the decree passed on the award, the Court did not direct payment of interest from the date of the decree under Section 29 of the Arbitration Act. In these circumstances, it must be held that the appellant is liable to pay interest only upto the 24th March, 1958. This is not a case where the Court J has passed judgment on an award which has expressly directed a party to pay interest on the principal sum awarded until payment or realisation. Had the Court passed judgment on such an award, other considerations would have arisen.

14. The result is that the appellant is liable to pay interest at 6 per cent per annum on the sum of Rs. 20,000/-from the 14th May, 1955 upto the 24th March, 1958 and is not liable to pay any other sum on account of interest, we pass the following order:

14a. The appeal is allowed in part. This court adjudges and declares that the respondent is entitled to realise from the appellant interest at 6 per cent per annum on the principal sum of Rs. 20,000/- from the 14th May, 1956 upto the 24th March, 1958 and is not entitled to realise from the appellant any other sum on account of interest. The respondent is also entitled to the costs of execution including the costs of the application in the Court below. The order appealed from and the writ of attachment issued thereunder will stand modified accordingly.

15. We diract that each party will pay and bear his own costs in the appeal.

Arun K. Mukherjea, J.

16. I agree.


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