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United Printing and Binding Works Ltd. Vs. Kishori Lal - Court Judgment

LegalCrystal Citation
SubjectArbitration
CourtKolkata High Court
Decided On
Case NumberAward Case No. 67 of 1956
Judge
Reported inAIR1956Cal593
ActsArbitration Act, 1940 - Sections 8, 8(1) and 30; ;Evidence Act, 1872 - Section 115; ;Code of Civil Procedure (CPC) , 1908 - Section 100
AppellantUnited Printing and Binding Works Ltd.
RespondentKishori Lal
Appellant AdvocateD.C. Sethia and ;A.K. Bose, Advs.
Respondent AdvocateTibriwalla, Adv.
DispositionApplication dismissed
Cases ReferredShambhu Nath v. Hari Shankar Lal
Excerpt:
- .....the arbitrators without any protest. that conduct waives the defect of non-appointment of an umpire. the applicant also had his remedy in his hands. he should have applied under section 8(l)(c), arbitration act for the appointment of an umpire and not quietly appeared before the arbitrators who had not appointed the umpire; and then when the award goes against him he cannot be allowed to make a point that the award is bad because no umpire was appointed. section 8(1)(c), arbitration act, 1940, is one of the express cases provided by the statute, 'where the parties or the arbitrators are required to appoint an umpire and do not appoint him, any party may serve the other parties or the arbitrators, as the case may be, with a written notice to concur in the appointment or appointments.....
Judgment:
ORDER

P.B. Mukharji, J.

1. This is an application by United Printing & Binding Works Ltd., a private limited Company, to set aside an Award made by two Arbitrators Bimal Chatterjee and Kishanlal Mohta being respectively the nominees of the petitioner and the respondent Kishori Lal Saraogi. By Clause 15 of an Agreement dated 30-3-1954 the petitioner and the respondent agreed to the following arbitration clause:--

'All disputes and difference arising out of matters relating to the Agreement shall be decided by Arbitration under the Indian Arbitration Act by reference to a single Arbitrator if the parties to these presents so agree upon and in default two arbitrators one to be nominated by either of the parties and to be appointed.'

The applicant's arbitrator Bimal Chatterjee was appointed on 17-10-1955 and the respondent's Arbitrator Kishanlal Mohta was appointed on 21-10-1955, Various statements and counter-statements were filed before the Arbitrators by the parties, The Arbitrators agreed on their award and published their joint award on or about 17th/19th March 1956.

2. On behalf of the applicant the first objection taken to the award is that the Arbitrators went beyond the matters which were referred to them for decision. That objection is taken In para 2 of the petition. Paragraph 2 of the petition refers to a letter of 17-10-1955 and makes the allegation that the parties did not make any reference to the Arbitrators to terminate the agreement between the parties and come to any final accounting. A reference to the letter of 17-10-1955 written by the applicant to the respondent shows that 'all disputes between them were referred to arbitration in terms of the agreement. In fact, in the letter of 17-10-1955 the applicant writes: --

'We cannot allow our interest to be jeopardised in this manner any further and we havedecided all disputes between us should be referred to arbitration in terms of the said agreement. We have accordingly appointed Sri Bimal Chatterjee of 9/3a, Arpuli Lane Calcutta as arbitrator' etc.

In fact, the last paragraph of that letter also ends with this statement:--

'We reserve our right to put our other disputes and differences before the arbitrator or arbitrators.'

Having said all that, it is now contended by the applicant that the award goes beyond the matters referred to the Arbitrators although 'all disputes' between the parties were referred to Arbitrators according to the applicant himself. Obviously the disputes related to the agreement between the parties and the financial control mentioned there and the disputes certainly cover the disputes regarding accounts.

3. The gist of the award of the Arbitrators is (a) that the applicant was to pay to Saraogi a sum of Rs. 66,800/- in full payment of the claim of the said Saraogi against the Company with interest thereon at the rate of 6 per cent per annum from the date of the award until payment, (b) the specified assets of the Company were charged for payment of the said amount.

4. Looking at the award it is clear to me that It did not travel at all beyond the matters referred to the Arbitrators. In fact, I find that the statements and counter-statements filed before the Arbitrators cover the exact point or which the award was made. In the statement of Kishori Lal Saraogi dated 27-1-1958 before the Arbitrators in para 8(k) the respondent actually asked for an award for Rs. 66,200/- with interest and profits. In fact, this is what was asked in the respondent's statement:

'Award should be made directing the Company to make payment of the dues of the financier amounting to Rs. 67,200/- plus interest and profits in terms of the agreement.'

That being so, it is clear to my mind that the award is not beyond the terms of the reference. In fact, I hold it is very much within the terms of reference constituted both by the letters appointing the Arbitrators as well as by the statements and counter-statements filed before them.

5. The second objection urged against the award is that the Arbitrators did not appoint an Umpire or did they allow the applicant to nominate an Umpire in spite of repeated requests. This is put forward as a ground of misconduct. I have already quoted the arbitration agreement between the parties in this case. It does not expressly refer to the appointment of an Umpire. The argument is that under Clause 2 of the First Schedule of the Arbitration Act, 1940 it is provided:

'If the reference is to an even number of arbitrators, the arbitrators shall appoint an umpire not later than one month from the latest date of their respective appointments.'

It is, therefore, urged on the basis of this provision that the entire arbitration proceeding before the Arbitrators without the appointment of an umpire is illegal and invalid and the whole award is bad. I have no hesitation in rejecting this argument as unsound. There are many reasons for rejecting this argument. I shall state them briefly.

6. The first reason is that failure to appoint an umpire under Clause 2 of the 1st Schedule of the Arbitration Act does not in my judgment render invalid either the arbitration or the award. It is at best a breach of a regulatory provision. My opinion is that the word 'shall' in the above Clause 2 of the First Schedule of the Arbitration Act does not make the provision mandatory in the sense that its breach will vitiate the entire arbitration proceeding and make the award illegal. It is directory and not mandatory. All that it does is to make a directory provision whose breach does not necessarily vitiate the arbitration proceeding and whose breach certainly can be waived by the conduct of the parties.

7. The applicant relied on a decision of the Lucknow Bench of the Allahabad High Court in the case of Jawala Prasad v. Amar Nath, reported in : AIR1951All474 (A). It was a decision of a Division Bench consisting of sapru and Chandra mani JJ., and the judgment was delivered by Sapru J. I regret my inability to subscribe to that decision in so far as it holds that the provisions of Clause (2) of Schedule I of the Arbitration Act are of a mandatory character and therefore the absence of appointment of an umpire in such an event makes the award invalid. With respect I condider the sounder view is the one expressed by the Nagpur Division Bench of Hidayatullah and Kaushelendra Rao, JJ. in the case of Tikaram Khupchand v. Hansraj Hazarimal reported in AIR 1954 Nag 241 (B). The Nagpur decision, although a later one, did not notice the Lucknow Bench decison of the Allahabad High Court. My reason for preferring the Nagpur decision to the Lucknow Bench decision is first because the former noticed the difference between mandatory and directory construction of the word 'shall' which the latter did not and secondly because the Nagpur decision is based on well known and persuasive precedents while the Lucknow Bench is not supported by authorities.

8. I shall however add one more reason of my own to those stated in the Nagpur decision in support of the view that appointment of Umpire in Clause (2) of Schedule I, Arbitration Act 1940 Is directory and not mandatory. It is this Section 8(1)(c), Arbitration Act, 1940 expressly provides for the case where the parties are required to appoint an umpire and do not do so and such a provision would have been unnecessary if failure to appoint an umpire under Clause (2) of Schedule I of the Act irretrievably and incurably taints and vitiates the arbitration proceedings and the resulting Award.

9. An older decision of this High Court by Chitty J., not on Arbitration Act, 1940, but on the old arbitration law in The Bombay Company Ltd. v. The National Jute Mills Co. Ltd. ILR 39 Cal 669 at p. 680 (C) may be usefully quoted for explaining the underlying legal principle:

'The Court will, I take it, be averse to setting aside, or pronouncing as illegal, the proceedings of a Tribunal selected by the parties themselves. It certainly should not do so on technical grounds. Here it is conceded that the arbitrators have agreed upon their award. There has therefore been no necessity for the intervention of an Umpire. If one had been nominated, the parties would be in the same position. No further reference could have been made by either side to obtain the Umpire's opinion, or to question the correctness of the arbitrators' award.'

10. Here also in this case the Arbitrators have agreed and there was no occasion for any Umpire. It will be more than insensible technicality in such a case as this to hold that the award is bad because no Umpire was appointed who if appointed would have had no function as the Arbitrators agreed in this case.

11. Lastly, this argument also fails on the ground of waiver. Now Clause (2) of Schedule I, Arbitration Act makes it a duty of the Arbitrators to appoint an Umpire not later than one month from the latest date of their respective appointments. Now the latest date of appiontment in this case was 21-10-1955 One month expired on 21-11-1955. But thereafter on 8-12-1955, on 17-1-1955, and on 15-2-1956 the applicant and the respondent appeared at different sittings before the Arbitrators without any protest. That conduct waives the defect of non-appointment of an Umpire. The applicant also had his remedy in his hands. He should have applied under Section 8(l)(c), Arbitration Act for the appointment of an Umpire and not quietly appeared before the Arbitrators who had not appointed the Umpire; and then when the award goes against him he cannot be allowed to make a point that the award is bad because no Umpire was appointed. Section 8(1)(c), Arbitration Act, 1940, is one of the express cases provided by the Statute, 'where the parties or the arbitrators are required to appoint an umpire and do not appoint him, any party may serve the other parties or the arbitrators, as the case may be, with a written notice to concur in the appointment or appointments or in supplying the vacancy.' It also provides in Section 8(2) that if such appointment is not made within fifteen days after service of notice, the Court may, upon the application of the party who gave the notice and after giving the other parties an opportunity of being heard, appoint an umpire. Therefore, the applicant, in my opinion, has missed his chance twice, and I do not think he can now avail himself of this irregularity or defect of the non-appointment of an Umpire as a ground for setting aside the Award. Failure of the Arbitrators to appoint an Umpire under Clause (2) of Schedule I, Arbitration Act being a breach curable by the procedure prescribed by Section 8 of the Act itself, a party who fails to follow the procedure permitted by the Statute to remedy the breach and stands by till the award is made cannot put forward non-appointment of an umpire as a ground for setting aside the Award.

12. In fact, the Very decision of the Lucknow Bench of the Allahabad High Court on which reliance was placed by the applicant states that this is a condition which could be waived. In a later decision of the Allahabad High Court in the case Shambhu Nath v. Hari Shankar Lal, reported in : AIR1954All673 (D) a Division Bench consisting of Malik, C. J. and Sapru, J., came to the conclusion that 'where the arbitrators fail to appoint an umpire and the parties do not follow the procedure prescribed by Section 8(1)(c) and Section 8(2), but appear before the arbitrators and produce all their evidence, they must be deemed to have waived the irregularity and are estopped.' That decision clearly says that the failure to appoint the Umpire is only an 'irregularity'. In so far as it does so, it whittles down the authority of the previous Lucknow Bench decision, which it considered although not expressly disavowed.

13. I therefore overrule this objection.

14. The next objection is that the award was out of time. If anything, it was out of time by a day. But as an application was made to extend the time and that application has been granted by this Court, no further objection can exist on this ground. I, therefore, overrule this objection as to time.

15. The next objection is that the applicant was not allowed inspection of the books of account and that the Arbitrators did not take into consideration the alleged false entries made by the respondent or that the Arbitrators did not allow the applicant to place its case properly. Now these are questions of fact. The different statements and counter-statements of the parties went into elaborate questions of account. It is, therefore, impossible for this Court to say that the Arbitrators did not give any proper hearing to the applicant. In fact, the objection really is that the books of account were seized and taken away by the Central Government, Detective Department, and as the Arbitrators could not have them, they really had no sufficient evidence to make the award. That objection is taken in para 3(g) of the petition. But the fact there is that if that was so, the applicant could have applied for a subpoena for the production of those documents from the police under Section 43 Arbitration Act. But the applicant took no such steps to get such evidence before the Arbitrators. It is, therefore, not open to him to complain that such books as were seized by the police were the only evidence that could be produced before the Arbitrators. I, therefore, overrule these objections.

16. The last ojection is that no meeting was held on 16-3-1956. The respondent's case on this point is that the Arbitrators fixed a meeting for 14-3-1956 by their letter of 8-3-1956, but the said meeting on 14-3-1956 could not be held on account of the inability of the applicant's own Arbitrator Bimal Chatterjee to attend and the respondent's further case is that the next meeting was fixed for the 16th March in the house of Bimal Chatterjee and the parties Were orally intimated accordingly and both the respondent and the Managing Director of the petitioner were present at the meeting of 16-3-1956 and the Arbitrators duly heard both parties. Now the applicant disputes it and says that there was no meeting on 16-3-1956. For that purpose he relies on a letter which is written by the applicant on 17-3-1953 to the Arbitrators. Now that letter of 17-3-1956 was not sent by a peon Book or under any registered cover with acknowledgment due. I find that letter is not on the minutes and papers filed by the Arbitrators. Therefore, there is no evidence before me to show that that letter was actually received by the Arbitrators. Besides that I find that there is something more damaging to the applicant's case on this point. In fact, I find there are minutes of the meeting of 16-3-1956 which record the presence of S. C. Bhowmick, Managing Director of the applicant. The minute says that the meeting was held at the residence of Bimal Chatterjee, the Arbitrator who was the nominee of the applicant. These minutes are signed by the two arbitrators. That being so, the prima facie evidence is entirely against the applicant's case that there was no meeting on 16-3-1956. It is also supported by the fact that although the papers were filed and the applicant had opportunity to Inspect the records before he made this objection, not a word is said in his petition that the minute signed by his own nominee Arbitrator Bimal Chatterjee recording his own presence at the meeting of 16-3-1956 is false & that his Arbitrator Chatterjee had signed a false statement by signing those minutes. If it was a fact, I have no doubt in my mind that the applicant would have made that his very first ground of challenging the award. Not a word, however, appears in the petition on that point that Bimal Chatterjee's signature to the minutes of 16-3-1956 records a false statement by recording the presence of the applicant himself.

17. The general allegation is made on the basis of these facts that the Arbitrators were biassed. I find no bias at all. There are, in fact, no other particulars of alleged bias except those which I have discussed above.

18. All the objections, therefore, fail. I dismiss this application with costs. Judgment UponAward will follow with interest and costs.


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