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Ramnath Narendranath Vs. Nanjee Shamjee and Co. - Court Judgment

LegalCrystal Citation
SubjectArbitration
CourtKolkata High Court
Decided On
Case NumberAward Case No. 52 of 1953
Judge
Reported inAIR1953Cal787
ActsArbitration Act, 1940 - Sections 3, 11, 28(1), 28(2) and 33; ;Bengal Chamber of Commerce, Tribunal of Arbitration Rules - Rules 5(3), 6, 7 and 25
AppellantRamnath Narendranath
RespondentNanjee Shamjee and Co.
Appellant AdvocateD.C. Sethia, Adv.
Respondent AdvocateA.N. Roy, Adv.
DispositionPetition allowed
Cases ReferredArbitration Ladhuram v. Dunichand
Excerpt:
- .....in contravention of the said rules must, in my opinion, cannot have any jurisdiction to act. rule 7 makes it clear that the persons who are to constitute the second court must be persons different from the persons who are to constitute the first court. 14. the next question is whether the extended time, as mentioned in rule 7, within which the first court is to make its award should be a time extended before the four months have expired or whether such time can be extended even after the expiry of four mouths. mr. roy's contention before me amounts to this that the time can be extended even after the four months had expired and therefore, his client is entitled even at this stage to apply before this court to have the said time extended. in my opinion, the extended time within.....
Judgment:
ORDER

S.R. Das Gupta, J.

1. This is an application under S. 33 of the Arbitration Act for an order declaring the award No. 1347 of 1952 made by the Bengal Chamber of Commerce and Industry, Tribunal of Arbitration, to be null and void, alternatively for an order setting aside the said award.

2. The principal ground taken in support of this application is that the second Court constituted by the Registrar, Bengal Chamber of Commerce under Rule 7 of the Rules of the Tribunal of Arbitration, Bengal Chamber of Commerce, had no jurisdiction to make the award. In other words, it is contended that the Registrar, Bengal Chamber of Commerce, in constituting the second Court under Rule 7 of the Rules of the Tribunal ofArbitration, Bengal Chamber of Commerce, cannot appoint the same persons who constituted the first Court but must appoint different persons, different from the persons who constituted the first Court, to determine the dispute which has been referred to the Bengal Chamber of Commerce. In this case, it is said that, the persons who constituted the second Court were the same persons who constituted the first Court and therefore such constitution is void and contrary to the provisions of Rule 7 of the said rules and the arbitrators so constituted had no jurisdiction to make the award.

3. Previously in a number of applications I have already held that if the Registrar appoints the same persons who constituted the first Court as members also of the second Court, then such appointment is invalid and the arbitrators who constituted the second Court would have no jurisdiction to make the award and on that ground I have set aside a number of awards. The point which is now agitated before me on behalf of the respondent to this application is, that although the arbitrators as constituting the second Court had no jurisdiction to make the award, they had jurisdiction to make the award as constituting the first Court and under Rule 25 of the Rules of the Tribunal of Arbitration this Court has power to extend the time for making the award.

This Court, it is also contended, has the power to extend the time to make the award under Section 28 of the Arbitration Act and this Court can so extend even after the award is made. In other words, it is urged before me on behalf of the respondent that the arbitrators who constituted the first Court no doubt neglected to make their award within the time specified in Rule 7, but this Court has the power to extend the said time and although the said arbitrators have already made their award, this Court can under Section 28 of the Arbitration Act extend the time even after the award is made. Therefore the respondent prayed before me that I should exercise my discretion and extend the time for the arbitrators constituting the first Court to make their award.

4. Mr. Roy appearing on behalf of the respondent urged two points before me in support of his client's case. In the first place, he contended that this Court should grant an extension of time for the arbitrators to make their award. His second contention is that Rule 7 of the Rules of Tribunal of the Arbitration is ultra vires being in conflict with the provisions of Sub-section 2 of Section 28 of the Arbitration Act. In order to appreciate the contentions of the respective parties made before me on this application it would be necessary to set out some of the provisions of the Rules of the Tribunal of Arbitration, Bengal Chamber of Commerce as also of the Arbitration Act. The provisions of the rules of the Tribunal of Arbitration, Bengal Chamber of Commerce which are material for the present purpose are as follows:

'Rule 1, Sub-rule 2' -- 'Court' means the Arbitrator or Arbitrators appointed for determining a particular dispute, or the umpire where an umpire has been appointed.

'Rule V(1)' -- 'In every case where a dispute or difference has arisen between parties who have agreed that such dispute or difference shall be referred for decision to the Chamber or the Tribunal, an application for arbitration may be addressed by either party to the Registrar which application, in the case of disputes relating to piece-goods shall be in such form as the Committee of the Chamber may from time to time prescribe.'

(2) 'On receipt of such application, the Registrar shall constitute a Court for the adjudication of the dispute.'

(3) 'In constituting any Court the Registrar shall select, as arbitrator or arbitrators or umpire as the case may be, so far as possible, persons or a person having a practical knowledge of the subject-matter of the contract or contracts in question, and the Registrar shall not appoint any person who for any reason within his knowledge would not be a proper person to act as arbitrator or umpire in the particular matter, but no award shall be invalid nor shall any objection be taken thereto by any party, on the ground that any person so appointed did not possess such practical knowledge, or was not in fact a proper person to act as arbitrator or umpire.'

VI -- 'Unless, the agreement to refer the dispute or difference to the Chamber or Tribunal otherwise expressly provides the Court shall consist of two arbitrators, who shall be selected by the Registrar from the Tribunal and appointed in writing under his hand.'

VII -- 'If the Court have allowed the time or extended time to expire without making any award, and without having signified to the Registrar that they cannot agree, the Registrar shall constitute in manner aforesaid another Court which shall proceed with the arbitration and shall be at liberty to act upon the record of the proceedings as then existed and on the evidence, if any, then taken in the arbitration or to commence the arbitration de novo.'

XXV -- 'The Court shall make its award in writing within four months after entering on the reference or on or before any later day to which the Court, with the consent of all parties concerned in the proceedings, by any writing signed by them, may from time to time, enlarge its time therefor or any extension of time granted by the Court of Judicature at Fort William in Bengal.'

5. The material provisions of the Arbitration Act with which we are concerned in this application are as follows:

Section 3 -- 'An arbitration agreement unless a different intention is expressed therein, shall be deemed to include the provisions set out in the first schedule in so far as they are applicable to the reference.'

6. Paragraph 3 of the First Schedule runs as follows:

'The arbitrators shall make their award in writing within three months after entering on the reference, or after having been called on to act by notice in writing from any party to the submission, or on or before any later day to which the arbitrators by any writing signed by them, may from time to time enlarge the time for making the award.'

7. Section 11 of the Arbitration Act provides as follows:

'The Court may on the application of any party to a reference, remove an arbitrator or umpire who fails to use all reasonable dispatch in entering on and proceeding with the reference and making an award.'

8. The rest of the section is not material for the present purpose.

Section 28(1): 'The Court may, if it thinks fit, whether the time for making the award has expired or not, and whether the award has beenmade or not, enlarge from time to time the time for making the award.'

9. Mr. Roy contended before me, in the first instance, that the real position in the present case is that the arbitrators, who constituted the first Court have made their award. The effect of Rule 6 and of Para. 3 of the First Schedule to the Arbitration Act is that the arbitrators who constituted the first Court should make their award within four months. The first Court so constituted did not make its award within the said four months, but this Court under Sub-section 1 of Section 28 of the Arbitration Act has the power to extend the time for the said arbitrators to make their award and Mr. Roy contended that he is applying before me for such extension. Mr. Roy further contended before me that the Rule 25 of the Rules of the Tribunal of Arbitration of the Bengal Chamber of Commerce there is also a provision for such extension and he is also applying before me under the said rule for such extension and his contention is that such extension can be given even after the award has been made.

10. Mr. Roy further contended before me that even if it is held that the provision of Rule 7 of the Rules of the Tribunal of Arbitration of the Bengal Chamber of Commerce has not been complied with, the result in that event may be that the second Court constituted under Rule 7 is invalid but that does not mean that the first Court cannot still proceed to make its award. He contended that the same arbitrators who constituted the first Court have also been appointed arbitrators constituting the second Court, and they have made their award. They may not make the award as arbitrators constituting the second Court but they can make the award as arbitrators constituting the first Court and even if the award has been made beyond time this Court acting under Section 28 of the Arbitration Act can extend the time for the arbitrators to make the said award.

11. This argument at first sight is attractive, but I am unable to accept the same. The real position in the matter to my mind is as follows:

12. The parties by agreement between them had agreed to refer their disputes to the arbitration of Bengal Chamber of Commerce. They also agreed that the said arbitration is to be effected under the rules of the Tribunal of Arbitration of the Bengal Chamber of Commerce. In other words, the rules of the Tribunal of Arbitration, Bengal Chamber of Commerce were in effect incorporated in the said agreement and the parties are bound by the said rules. The effect of Rule 6 and of Rule 7 of the Rules of Tribunal of Arbitration, Bengal Chamber of Commerce, to my mind, is as follows:

13. After a dispute or difference has arisen between the parties, who agreed to abide by the arbitration of the Bengal Chamber of Commerce, and the said dispute has been referred to the decision of the Chamber, the Registrar shall constitute a Court for the adjudication of the dispute. Under Rule 6, the said appointment is to be in writing under the hand of the Registrar. The said arbitrators so appointed are to make their award within four months or they are to make their award within the time extended under the rules of the Tribunal of Arbitration, Bengal Chamber of Commerce. The provision for such extension is to be found in Rule 25 of the rules of Tribunal, Bengal Chamber of Commerce. But if the first Court constituted by the Registrar fails to make its award within the period of four months or within the time so extended, then the Registrar shall constitute another Court which shall proceed with thearbitration and make its award. In other words, the said rules which are part of the agreement between the parties, provide that if the first set of arbitrators or the persons who constituted the first Court do not make their award within four months or within the extended time, then the Registrar shall appoint other persons to constitute a second Court and they shall thereafter proceed with the reference.

The effect of the Rules of the Tribunal of Arbitration, Bengal Chamber of Commerce, which form part of the agreement between the parties, to my mind, is that the first Court to be constituted by the Registrar must make its award within four months and if they do not do so and if there has been no extension of time to make the said award, then the Registrar must appoint another set of persons who shall proceed with the arbitration and make their award. The same persons cannot after four months have expired and if no extension has been granted, proceed to make the award and the same persons cannot also be appointed by the Registrar to constitute the second Court and make the award and if they do so, they must be held to have acted without jurisdiction. In such case there is no question of extending the time for the arbitrators to make their award.

Thus, for example, if A and B, who constituted the first Court, do not make their award within the time, then persons other than A and B are to be appointed arbitrators and shall proceed with the arbitration. If then A and B do not make the award within the said period of four months, they become functus officio by virtue of the agreement between the parties and some other persons have to be appointed arbitrators to proceed with the reference. It is not a case, as I have just now indicated, where there is any question of extending the time for the arbitrators to make their award. This is a case where a new set of arbitrators has to be appointed, a new Court has to be constituted with new set of persons under Rule 7 of the Rules of the Tribunal of Arbitration, Bengal Chamber of Commerce.

The question which then arises is whether the said rules have been complied with. If not, then the persons appointed in contravention of the said rules must, in my opinion, cannot have any jurisdiction to act. Rule 7 makes it clear that the persons who are to constitute the second Court must be persons different from the persons who are to constitute the first Court.

14. The next question is whether the extended time, as mentioned in Rule 7, within which the first Court is to make its award should be a time extended before the four months have expired or whether such time can be extended even after the expiry of four mouths. Mr. Roy's contention before me amounts to this that the time can be extended even after the four months had expired and therefore, his client is entitled even at this stage to apply before this Court to have the said time extended. In my opinion, the extended time within which the first Court is to make its award must be the time extended before the expiry of the period of four months and it cannot be the time extended after the expiry of the period of four months. The reason seems to me to be obvious.

Rule 7 inter alia provides that if the Court has allowed the time to expire without making any award, then the Registrar shall constitute another Court. The time there referred to is the period of four months from the date when the arbitrators entered on the reference. After the expiry of the said period of four months, the first Court ceases to have any jurisdiction whatsoever, and the Registrar must constitute in the manner indicated in Rule 7 another Court who shall proceed with the arbitration. That being so, there cannot be any question of extending the time after the expiry of the period of four months because, as soon as the said period of four months expires, the Registrar is bound to constitute another Court and that is the agreement between the parties.

In other words, the effect of agreement between the parties is that as soon as the period of four months expires and if the time has not been extended within that date, then the persons constituting the first Court cease to have any Jurisdiction in the matter and the Registrar must constitute another Court who is to proceed with the arbitration and whose award will be binding upon the parties. In that view of the matter, I am also of the opinion that the extended time mentioned in Rule 7 must be the time extended before the period of four months has expired. That being so, I am unable to accept the contention of Mr. Roy.

In my opinion, there is no question of extending the time for the arbitrators to make their award, but the question really is whether or not the second Court constituted by the arbitrators had jurisdiction to proceed with the arbitration and make the award. I see no reason to revise my previous decision that the Court constituted under Rule 7 must consist of persons other than the persons who constituted the first Court. This seems to be clear from the definition of the word 'Court' as given in Rule 1. In the premises, the first ground taken before me by Mr. Roy fails.

14a. The next contention of Mr. Roy is that Rule 7 itself is ultra vires, being in conflict with the provisions of Sub-section 2 of Section 28 of the Arbitration Act. The said sub-section, as I have already mentioned, provides that any provision in an arbitration agreement whereby the arbitrator or umpire may, except with the consent of all the parties to the agreement, enlarge the time for making the award, shall be void and of no effect.

Mr. Roy contended before me that although the arbitration proceedings are to take place under the Rules of the Tribunal of Arbitration, Bengal Chamber of Commerce, but the arbitrator in this case is the Bengal Chamber of Commerce. That being so, Rule 7 which according to him in effect allows the arbitrator to enlarge the time to make its award to such period as it may desire must be held to be void and of no effect. In other words, his contention is that if Rule 7 is given effect to, then the Registrar, by constituting one Court after another at the expiry of every four months, can go on enlarging the time for the arbitrator, which is Bengal Chamber of Commerce, to make its award as long as it desires and such a provision is in conflict with the provisions of Sub-section 2 of Section 28 of the Arbitration Act.

15. Mr. Roy drew my attention to Section 3 and to Para 3 of the first Schedule of the Arbitration Act and contended that the arbitrator must make its award within a period of four months as prescribed therein. He contended that if there is any agreement between the parties whereby it is provided that the arbitrators, without the consent of the parties to the agreement, may enlarge the time for making the award, such a provision must be held to be void. Rule 7, according to him, is such a provision and therefore it must also be held to be void. This very point came up for decision before Bachawat J. in the case of 'In Re 'Arbitration Ladhuram v. Dunichand', 'Award' No. 45 of 1952 (Cal) (A)'. Bachawat J. fully dealt with all the arguments which were advanced before him in support of the said contention. His Lordship could not agree with the same. I had the advantage of looking into the judgment of His Lordship and the reasonings given therein. I and no reason to disagree with the view taken by him on this point.

In my opinion, Rule 7 is not such a provision as is contemplated in Sub-section 2 of Section 28 of the Arbitration Act. It is not a provision whereby the arbitrators may extend the time without any reference to the parties as is contemplated in Section 28. The effect of the said rule, to my mind, is -- and it must be remembered that the said rule is a part of the agreement between the parties -- that time is fixed within which the arbitrators are to make their award. In other words, the parties agree that a Court is to be constituted in the first instance which is to make its award within a period of four months and if the said Court does not make its award within the said period of four months, (and if the period is not extended before the said period expires) then a new set of persons is to be appointed who shall proceed with the reference.

In other words, the parties fixed the time by agreement amongst themselves. Rule 7 is enacted for that purpose. Rule 7 is not a provision which empowers the arbitrators at their pleasure without the consent of the parties to the agreement to enlarge the time for making the award. If the rule was to that effect, then, no doubt, the rule would have been repugnant to the provisions of Sub-section (2) of Section 28 and would have been void. In this connection it should be remembered that Section 3 of the Arbitration Act which includes the provisions set out in the First Schedule does not apply to a case where there is a different intention expressed in the arbitration itself. The period of four months mentioned in Para. 3 of the First Schedule is subject to any contrary intention which may be expressed in the arbitration agreement. In other words, the parties if they so choose, can fix any period of time, within which the arbitrators are to make their award. In Rule 7 the parties have made provision as to the period within which the arbitrators are to make their award. It is not a provision whereby the arbitrators can extend the time without the consent of the parties to the agreement at their own pleasure. I am unable to accept this part of Mr. Roy's contention.

16. Before concluding the matter I ought to mention that at the hearing of this application I allowed all learned counsel who are appearing in other applications in which this very point has cropped up, to make their respective submissions before me so that I can decide this point once for all after hearing all of them, Mr. Kar appearing for one of the parties, in one of such applications, referred me to Sub-rule 3 of Rule 5 of the Rules of the Tribunal of Arbitration in support of his contention that the award should not be declared void on the ground that the second Court constituted by the Registrar consisted of the same persons constituting the first. The said Sub-rule 3 of Rule 5 of the Rules of Tribunal of Arbitration provides that in constituting a Court, the Registrar shall select persons having a practical knowledge of the subject-matter of the contract and the Registrar shall not appoint any person who for any reason within his knowledge would not be a proper person to act as arbitrator or umpire in the particular matter. The said rule then provides that no award should be invalid nor any objection be taken on the ground that any person so appointed did not possess such knowledge or was not in fact a proper person.

Mr. Kar's argument before me is that the effect of non-compliance with the provisions of Rule 7 of the Rules of Tribunal of Arbitration, that is to say, the effect of appointing the very same persons to constitute the second Court, is that the said persons constituting the second Court are not proper persons to act as arbitrators or umpires and therefore, in view of the provisions of Sub-rule 3 of Rule 5 no award can be set aside on that ground. I am unable to accept this contention. Whether or not the persons appointed are proper persons to act as arbitrator or umpire as contemplated in Sub-rule 3 of Rule 5, is not the question before me but the question is whether or not these persons can at all be appointed. In other words, the question is whether or not those persons had the jurisdiction to act as arbitrators. In my opinion, this contention of Mr. Kar must also fail.

17. It is not disputed before me that in this case the persons constituting the second Court were the same persons who constituted the first Court.

18. The result, therefore, is that there will bean order declaring the award No. 1347 of 1952made by the Bengal Chamber of CommerceIndustry, Tribunal of Arbitration, in case 379G of1952 to be null and void. The respondent is to payto the petitioner the costs of this application.


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