Bombay High Court
Oriental Fire And General Insurance ... vs Hindustan Agro Agencies And Ors. on 2 July, 2002
Equivalent citations: 2003(1)BOMCR244
Author: D.Y. Chandrachud
Bench: D.Y. Chandrachud
JUDGMENT D.Y. Chandrachud, J.
1. This first appeal is directed against a judgment dated 26th June, 1985 of the learned Joint Civil Judge, Senior Division, Nagpur, in proceedings which arise out of the Arbitration Act, 1940.
2. On 1st November, 1972, the respondents insured certain goods with the appellant for the purpose of covering the risk of fire under an insurance policy which was valid for a period of one year. The total sum assured was Rs. 1,00,000/-. The policy covered the risk of fire and riot. The goods insured were fertilizers, insecticides, poultry and cattle feed. On 24th November, 1972, another insurance policy, was issued by the appellant valid again for a period of one year with a sum assured of Rs. 1,00,000/-. The risk covered under the policy was that of fire and riot. The case of the appellant is that the goods were destroyed by fire on 24th April, 1973. Disputes arose between the parties since the insurance company, which is the appellant herein, did not accept the claim which was preferred by the respondents. The disputes between the parties were referred to the arbitration of a sole arbitrator, Shri V.G. Bhangde, a practising Advocate. The goods which had been insured had been hypothecated with the Dena Bank by the respondents. On 28th May, 1977, a 'supplementary agreement' was entered into between the parties by which, the following disputes were referred to the arbitration, namely, (1) Whether as a result of fire on 24th April, 1973, the goods covered by the insurance policies had been destroyed and/or damaged resulting in loss to the insurer;
(2) Whether the insurer was liable to pay compensation under the insurance policies as a result of the fire resulting in loss; and (3) What would be the amount of compensation payable by the insurer to the claimants in the event of the finding on question No. 2 being in the affirmative.
3. The respondents filed their statement of claim before the arbitrator on 21st December, 1976. The appellants denied that the respondents were entitled to recover.
4. The arbitrator made his Award on 31st January, 1982 and awarded an amount of Rs. 1,36,200/- and interest of Rs. 3,19,275/- together with future interest @ 14% per annum from the date of the Award until realisation.
5. The dispute between the parties originates in what took place subsequent to the making of the Award, I have, with the assistance of the learned Counsel, perused the record and proceedings. On 31st January, 1982, the arbitrator gave a notice to the parties of the making and signing of the Award. This notice was given under the provisions of section 14(1) of the Arbitration Act, 1940. The arbitrator stated therein that if desired by the parties or by any person claiming under them or if directed by a Court and subject to the payment of his fees and charges, he shall cause the Award or a signed copy thereof together with the depositions and documents which have been proved before the arbitrator to be filed in the Court. According to the respondents, this notice together with a copy of the Award was received by them on 2nd February, 1982.
6. On 15th February, 1982, an Application (MJC 59/1982) was filed by the respondents under section 14 of the Arbitration Act, 1940, for a direction to the arbitrator to file the Award and all the papers of the arbitration in Court. Apart from the aforesaid direction, which was prayer 1 of the application under section 14 of the Arbitration Act, 1940, the respondents prayed that a decree be passed in terms of the Award dated 31st January, 1982.
7. The Roznama of the proceedings would show that on 26th February, 1982, the learned trial Judge directed that a notice be issued to the appellant herein. On 4th March, 1982, the respondents filed the original Award dated 31st January, 1982 together with a pursis at Exhibit 5. On 5th March, 1982, a show cause notice was issued to the appellant requiring it to attend the proceedings before the trial Court on 7th April, 1982. The notice does not refer to the filing of the Award on 4th March, 1982. On 4th March, 1982 a summons was also issued to the arbitrator, returnable on 7th April, 1982 to file the papers of the arbitration case before the Court. On 7th April, 1982, the appellant filed its written statement to the application, filed by the respondents for a direction to the arbitrator to file the Award and the papers of the arbitration in Court. The appellant raised the plea that the original Award and other papers in the arbitral proceedings had not yet been filed by the arbitrator and it was, therefore, not possible for the appellant to raise all its objections to the Award. However, without prejudice to the right of the appellant to file an additional statement of objections after perusing the Award and the papers after they were filed by the arbitrator, a reply raising objections to the Award was filed by the appellant. The case of the appellant was inter alia that the arbitrator had rendered his Award beyond the time prescribed by the Arbitrator Act, 1940 and that the Award was vitiated since the arbitrator was functus officio. In the written statement dated 7th April, 1982, the appellant made a reference to the objection petition which had been filed under section 30 of the Arbitration Act, by way of "abundant precaution". It is common ground between the learned Counsel that the appellant filed its objections under sections 30 and 33 of the Arbitration Act on 2nd April, 1982.
8. The Roznama of the proceedings before the trial Court shows that on 8th September, 1982, the learned trial Judge noted that the arbitrator had not filed "the report". Accordingly, the matter was adjourned to 11th October, 1982 "for record and report". The matter was thereafter adjourned until 14th February, 1983 when the Roznama records the arbitrator as having filed his 'report'. There is no dispute about the fact that what the arbitrator filed before the learned trial Judge, was not the Award, but only the statement of claim, the written statement and the documentary and oral evidence which has been produced by the parties.
9. The application which was moved by the appellant under section 14 of the Arbitration Act, 1940, for a direction to the arbitrator to file the Award in the Court, was not disposed of until by a common judgment and order dated 26th June, 1985, the learned Joint Civil Judge, Senior Division, Nagpur, rejected the objections filed by the appellant under sections 30 and 33 of the Arbitration Act and passed a decree in terms of the Award. The learned trial Judge directed that the appellant shall pay to the respondents an amount of Rs. 4,55,475/- together with interest @ 6% per annum from the date of the Award until realisation.
10. The principal point which has been urged in this proceeding on behalf of the appellant is that in the present case the entire procedure which has been followed by the trial Court was contrary to section 14 of the Arbitration Act, 1940. The learned Counsel urged that in several judgments of the Supreme Court it has been laid down that the Award has to be filed before the competent Court either by an arbitrator or by any agent on behalf of the arbitrator, which could be one of the parties to the dispute. In the present case, it has been urged that the respondents had not been authorised by the learned arbitrator to file the Award and in fact the application which was filed by the respondents proceeded on the basis that there should be a direction to the arbitrator to file the Award in Court. In the circumstances, it was urged that it is only upon the filing of an Award by the arbitrator or by someone who is duly authorised by the arbitrator that the Court issues a notice of the making of the Award under section 14(2) of the Arbitration Act, 1940. The time to file objections under section 30 of the Act, commences after a notice is issued under section 14(2) by the Court. In the present case, it was urged that, there was no Award before the Court filed by the arbitrator or by any one on his behalf. Hence, there was no occasion for the Court to pass a decree in terms of the Award and the decree which has been passed is consequently a nullity. The objections which had been filed before this Court were without prejudice to the contention that there was no Award before the Court.
11. On behalf of the respondents, the judgment of the trial Judge was sought to be supported by contending that the respondents must be regarded as having the implied authority of the arbitrator to file the Award. Further it was urged that no prejudice has been caused to the appellant since they had filed their objections to the Award.
12. In considering the submissions which have been urged on behalf of the parties, it would be necessary to have regard to the provisions of section 14 of the Arbitration Act, 1940. Section 14 of the Arbitration Act, 1940, provides as follows:---
"14. (1) When the arbitrators or umpire have made their Award, they shall sign it and shall give notice in writing to the parties of the making and signing thereof and of the amount of fees and charges payable in respect of the arbitration and Award.
(2) The arbitrators or umpire shall, at the request of any party to the arbitration agreement or any person claiming under such party or if so directed by the Court and upon payment of the fees and charges due in respect of the arbitration and Award and of the costs and charges of filing the Award cause the Award or a signed copy of it, together with any depositions and documents which may have been taken and proved before them, to be filed in Court, and the Court shall thereupon give notice to the parties of the filing of the Award.
(3) Where the arbitrators or umpire state a special case under Clause (b) of section 13, the Court, after giving notice to the parties and hearing them shall pronounce its opinion thereon and such opinion shall be added to, and shall form part of, the Award."
Sub-section (1) of section 14 postulates that upon the making and signing of the Award, the arbitrator, or as the case may be, the umpire have to furnish a notice in writing to the parties of the making and signing thereof and of the amount of fees and charges payable. In sub-section (2) the arbitrators or umpires are under an obligation upon the request of any party to the arbitration agreement, or any person claiming under such party or if so directed by the Court to cause the Award or a signed copy thereof together with any depositions and documents to be filed in the Court. This is subject to the payment of the fees and charges due in respect of the arbitration and Award and of the costs and charges of filing the Award. The Court is thereupon required to give a notice to the parties of the filing of the Award. Under Article 119 of the Schedule to the Limitation Act, 1963, the period of limitation for an application for filing of an Award and for an application for setting aside the Award or for getting the Award remitted has been specified. The limitation for an application for the filing of an Award is 30 days and time begins to run from the date of service of a notice of the making of the Award. Under Article 119(b) the limitation for moving an application for setting aside an Award or getting an Award remitted for reconsideration is again thirty days and time begins to run from the date of the service of notice of the filing of the Award. The notice, which is referred to in Clause (a) of Article 119 is obviously the notice which the arbitrator has to furnish under sub-section (1) of section 14 of the Arbitration Act, 1940 while the notice which is referred to in Clause (b) of Article 199 is a notice which the Court has to issue of the filing of an Award in the Court under sub-section (2) of section 14. The notice which is required to be served under section 14(1) by the arbitrator is a written notice under section 14(1). On the other hand, it is well-settled that the notice which the Court has to issue under sub-section (2) of section 14 of the Act, does not have to be in any specific format. In Kumbha Mawji v. Dominion of India, , a Bench of three learned Judges of the Supreme Court held that section 14(2) clearly contemplates that where the Award or a signed copy thereof is filed into Court by a party he should have the authority of the arbitrator or umpire for doing so. The Supreme Court held that even if the originals are handed over to both the parties, it cannot be assumed that the mere handing over of the Awards to the parties necessarily implies the authority of the umpire to file the same into Court on his behalf. That authority, it has been held by the Supreme Court "has to be specifically alleged and proved.". In the case before the Supreme Court, the affidavit which was relied upon only contained an assertion that the umpire had handed over the original Award to the appellant for filing. The Supreme Court held that there was no averment that the original Award was handed over to the party for filing on behalf of the umpire. In the circumstances, it was held that this would not be sufficient compliance of the Award being required to be filed either by the umpire or by any party on behalf of the umpire. A similar view has been taken in a more recent judgment of the Supreme Court in Binod Bihari Singh v. Union of India, . A Bench of learned two Judges of the Supreme Court held that the application which had been made by the appellant before it was an application for directing the arbitrator to file an Award in the Court so that the Award could be made a rule of the Court. The Supreme Court was of the view that there was no express authority given by the arbitrator to the applicant to file the Award although a signed copy of the Award was sent to the applicant. On the contrary, the Supreme Court held that the forwarding letter clearly indicated that the Award was sent for information. This is the consistent view which has been taken by the Supreme Court in a line of decisions. In Secretary to Government of Karnataka v. Harishbabu, , the Supreme Court held that under sub-section (2) of section 14 there is a mandate that the Court shall, after the filing of the Award duly signed by the arbitrator or the umpire, as the case may be, give a notice to the parties of the filing of the Award. Under sub-section (1) of section 14, the arbitrator or umpire has to give a notice, in writing, to the parties of the making and signing of the Award. Sub-sections (1) and (2) of section 14 operate in different sets of circumstances. The issuance of a notice by the Court under section 14(2) is a mandatory requirement though the section does not prescribe any formal mode for the service of the notice. However, what is essential is that there must be a service of notice, intimation or communication of the filing of the Award by the Court to the parties. The Supreme Court held that where the arbitrator himself files an Award in the Court, the Court is bound to give a notice to the parties that the Award has been filed and it is not open to the Court to pass a decree in terms of the Award unless such notice has been served on the party concerned and till after the expiry of the period of 30 days from the date service of such notice as contemplated by Article 119(b) of the Limitation Act, 1963. In a case where a party, however, obtained knowledge of the filing of the Award and seeks time to file objections to the Award, the absence of a formal notice is rendered immaterial. The Supreme Court then held that while no formality in the act of the filing of the Award in the Court is required, what is required is that the filing of the Award must be by or on behalf of the arbitrator and after the same has been filed the notice of the filing of the Award must follow from the Court under sub-section (2) of section 14 of the Act. If an Award is filed by one of the parties the authority of the arbitrator to the party concerned to file the Award must be established and the onus is on that party to establish that he had been so authorised by the arbitrator to file the Award in the Court. A plea to that effect must be found in the application which accompanies the Award. The Supreme Court held that such authority has to be "specifically alleged and positively proved" otherwise the filing of the Award in the Court cannot be said to be by or under the authority of the arbitrator or the umpire, as the case may be.
13. In the present case the facts which have been adverted to in the earlier part of the judgment would show that the arbitrator had issued a notice to the parties under section 14(1) of the Act on 31st January, 1982. The arbitrator stated in the notice that he had made and signed the Award and that upon the request of the parties or, if directed by the Court, he would cause the Award to be filed in the Court subject to the payment of his fees, charges and expenses. Therefore, the letter of the arbitrator dated 31st January, 1982, far from authorising the respondents to file the Award in the Court, expressly spoke of the arbitrator causing the Award to be filed if there was a request by the parties or a direction of the Court to that effect. The application which was moved on behalf of the appellant, M.J.C. No. 59/1982, expressly contained a prayer to the effect that the arbitrator should be directed to file the Award under section 14 of the Arbitration Act, 1940. If the respondents had been authorised by the arbitrator to file the Award in the Court, there was then no question of their praying for a direction to the arbitrator to file the Award. The respondents, therefore, clearly did not plead that they were authorised by the arbitrator to file the Award on his behalf in Court. In the absence of a pleading as such, there could be and was no proof. But, it would be necessary to note that in fact, no evidence was led by the respondents at all. The learned Counsel appearing on behalf of the respondents sought to urge that the authorisation to a party to file an Award, need not be express, but can be inferred or implied from the facts and circumstances of the given case. There can be no dispute as regards this proposition and indeed that is a principle of law which has been laid down in the judgment of the Supreme Court in Food Corporation of India v. E. Kuttappan, reported in 1993(2) U.J. (S.C.)367. However, in the present case, there was neither any pleading, nor any proof before the learned trial Judge in support of the theory that the respondents had the implied authority of the arbitrator to file the Award.
14. Under the Arbitration Act, 1940, the entire process following the making of the Award is initiated upon a filing of the Award in the Court by the arbitrator or by someone on behalf of the arbitrator. The Court has, under section 15 of the Act, the power to modify or correct the Award, under section 16 to remit the Award and, under section 17, to pass a judgment in terms of the Award after the time for making an application to set aside the Award has expired or in the event that such an application is made and refused. In the present case, the learned trial Judge has clearly not followed the provisions of section 14 of the Arbitration Act, 1940, upon the application which was moved by the respondents. It was open to the trial Court to direct the arbitrator to file the Award in the Court under section 14(2) of the Act. Thereupon, a notice ought to have been given to the parties of the filing of the Award so as to enable the appellant, if it was aggrieved by the Award, to file its objections to the Award. The question is not only one of prejudice to the appellant, as was sought to be urged on behalf of the respondents. The jurisdiction of the trial Court is attracted by the filing of the Award by the arbitrator or by a person duly authorised on his behalf. In the present case, I have come to the conclusion that the Award was not filed by the learned arbitrator or by any party duly authorised by him, before the Court and, therefore, all the consequential steps which have been taken by the learned trial Judge must necessarily be set aside.
15. In these circumstances, the appellants are entitled to succeed. The impugned judgment and order of the learned trial Judge dated 26th June, 1985 is quashed and set aside. However, having regard to the facts and circumstances of this case, it would be appropriate to direct that the matter shall now be remitted back to the learned trial Judge. The learned trial Judge shall reconsider the application which has been filed by the respondents being M.J.C. No. 59/1982, and consider issuing necessary directions thereon as prayed to the arbitrator to file the Award in the Court. The learned trial Judge shall thereupon issue a notice to the appellant of the filing of the Award under section 14(2) of the Arbitration Act, 1940, and consider such claims or objections as may be filed by the appellant to the Award of the learned arbitrator within the period of limitation. Having regard to the long pendency of the matter, the learned trial Judge is directed that in the event of any objections being filed by the appellant to the Award, those objections shall be heard, and finally disposed of within three months from the date of the filing of the objections.
16. During the pendency of this first appeal, this appeal being an appeal against a money decree, the appellants were directed to deposit the decretal amount before this Court. Permission was granted to the respondents to withdraw the amount so deposited subject to furnishing a bank guarantee. It is common ground between the learned Counsel that the respondents had submitted a bank guarantee and had withdrawn the decretal amount having regard to the interim order which had been passed in these proceedings. It would be appropriate to direct that the bank guarantee which has been furnished by the respondents shall be kept alive during the pendency of the proceedings before the trial Court and for a period of eight weeks after the judgment and decree of the trial Court. The first appeal is accordingly disposed of in the aforesaid terms. No costs.