Delhi High Court
Union Of India. vs Surinder Kumar Khosla & Co. & Anr. on 4 September, 2008
Author: S. Ravindra Bhat
Bench: S. Ravindra Bhat
* IN THE HIGH COURT OF DELHI AT NEW DELHI
+ CS(OS) 881A/1989
Dated : 04.09.2008
Union of India. ..... Plaintiff
Through : Mr. R.V. Sinha with Mr. Amresh
Kumar, Advocates
versus
Surinder Kumar Khosla & Co. & Anr. ..... Defendent
Through : Mr. Amarjit Singh with Mr. R.C.
Bhatia, Advocates
CORAM:
HON'BLE MR. JUSTICE S. RAVINDRA BHAT
1. Whether reporters of local papers may be Yes
allowed to see the judgment?
2. To be referred to the Reporter or not? Yes
3. Whether the judgment should be reported Yes
in the Digest?
Mr. Justice S. Ravindra Bhat (Oral)
1. In these proceedings under Sections 14 and 17 of the Arbitration
Act, 1940, the correctness and legality of an award dated 28th
February, 1989, has been called into question. The Plaintiff, Union of
India questions the correctness in so far as the award does not allow
the full amount of claim made by it.
2. The brief facts necessary for purpose of this case are, the
plaintiff entered into an agreement whereby the defendant (supplier)
CS (OS) 881A/1989 Page 1
was to supply firewood charcoal and limequick at the Supply Depot
ASC, Delhi Cantonment, at agreed rates. The Union of India alleged
that the defendant/supplier defaulted from the terms of the agreement
and did not make his supplies as agreed in October 1987. It was
alleged that defendant was called upon to resume supplies in
accordance with the agreed schedule but without any success. In
these circumstances, the dispute was referred to arbitration by one Lt.
Col Azim Ahmad Chida.
3. The Sole Arbitrator, by his award dated 28.02.1989 directed that
an amount of Rs.6,39,796.88 as mentioned in the statement of claim
should be recovered from the defendant/supplier. The arbitrator in his
two page award reasoned that the material on record showed that the
supplier was granted fair and reasonable opportunity to resume supply
and that every time the plaintiff resorted to local purchase of the items
and secured the rates from the market, it sent quotations to the
defendant. The defendant admittedly submitted the quotation only
once which was found to be the lowest.
4. The arbitrator held inter alia as follows :
"4. From the perusal of the material
and evidence available on record, it is clear
that the Respondent defaulted in making the
supplies; that the claimant had no other
alternative but to procure the supplies from the
market at the rates prevailing at the time; and
that the Respondent was given fair and
reasonable opportunity to resume the supplies
CS (OS) 881A/1989 Page 2
which he failed to do. Under the
circumstances, I feel that due to respondents
default, the Clamant had to resort to the local
purchase in order to keep the troops supplies
with the essential necessities. The entire
responsibility of suspending the supplies rests
on the respondent and as such they should
bear the loss as per the terms of the contract.
In my opinion the Claimant is entitled to
recover the losses sustained by the State due
to making of local purchases at the risk and
cost of the respondent in accordance with the
terms of the contract.
5. There is no substance to the claim of the
respondent that sufficient reserves were
stocked. On the other hand it is evident from
documents available that the Claimant had
time and again given ample opportunity to the
respondent to stock the reserves.
6. There is also no truth in the claim of the
respondent that payments were not made on
time. I have checked the documents and I am
convinced that payments were made on the
day the respondent had submitted his
complete bills along with the connected
documents.
7. An amount of Rs.639796.88, as detailed
in the statement of claim of the Claimant be
recovered from the Respondent aforesaid to
indemnify the State against the losses caused
due to the Respondent's default.
The parties shall bear their own expenses
of this arbitration."
5. The Union of India has challenged the award under Section 30/33
of the Act; it alleges that the arbitrator mis-conducted himself in not
considering that the total amount of claim was Rs.7,37,284.88 which
CS (OS) 881A/1989 Page 3
was recoverable and that no attempt was made by him to explain
reason why the lower figure of Rs.6,37,248.88 was held to be payable
by the defendants. The Union of India also contends having made an
amendment to the claim during the pendency of the arbitration
proceedings in January 1989, which however, is not reflected in the
award.
6. Learned counsel for the defendant submitted that this Court
should not exercise its jurisdiction and adjudicate on the disputes
raised or even make the award Rule of the Court to the extent it is
available on the file. Learned counsel contended that the entirety of
the proceedings which include the pleadings of the parties,
documentary evidence and the depositions adduced before the
arbitrator have not been made available as is evident from the order
sheet/proceedings of various dates. Counsel took the Court through
several order sheets made in this case right from the inception i.e.
1989 and submitted that despite repeated adjournments neither the
Union of India nor the arbitrator had made the relevant records
available.
7. Learned counsel relied upon Section 14 of the Arbitration Act
(hereinafter referred to as `Act') and contended that this Court can
take cognizance of arbitral award and proceed to make the award Rule
of Court only in accordance with the procedure outlined in Section 14
CS (OS) 881A/1989 Page 4
(2) of the Act, which in turn contemplates filing of the entire record
only after which notice could be issued and objections heard. It was
submitted that if these parameters are kept in mind, there is non-
compliance with the substance of Section 14 (2) of the Act, inasmuch
as no arbitral proceedings are before the Court. If such records were
made available, and notice issued on such basis, the
defendant/respondent would have had the opportunity of questioning
the award. In the absence of these mandatory conditions, it has to be
necessarily held that due to material non-compliance with Section 14
(2) of the Act, the Court should take no cognizance of merely the
award and should reject the petition.
Learned counsel relied upon the judgment of this Court in Union
of India Vs. M/s Vishkarma Shilpi And Another, ILR 1975 (1) Delhi 788
and the judgment of the Madras High Court reported as Engineering
Construction Corporation Ltd. Vs. Madras Port Trust, Madras and
Another, AIR 1968 Madras 335.
8. It is evident from the above discussion that the award in this
case was made on 28.02.1989. Soon after that, this Court directed the
present petition to be registered on 04.04.1989. The subsequent order
sheets dated 25.05.1989 and 11.09.1989 show that the Court was
apprised of the fact that the arbitrator had filed only the original
award. On 24.11.1989 the Court issued the following order :
CS (OS) 881A/1989 Page 5
"S.No.881-A/89
It is stated by the counsel for the petitioner
that except the award there are no other
proceedings and as such the award filed may
be treated as one filed along with the
proceedings.
Let notice of the filing of the award be issued
to the parties without process fee for 15th
February, 1990 calling upon them to file
objections against the award if any in
accordance with law.
9. Section 14 of the Act reads as follows :
"14. Award to be signed and filed - (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 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
CS (OS) 881A/1989 Page 6
thereon and such opinion shall be added to,
and shall form part of, the award."
10. It is a matter of record that till date the arbitrator has not filed
the pleadings in the arbitration or proceedings recorded by him, so far.
The Union of India, which is objector, has also made no attempts to
place any such records on the file of this Court.
11. The effect and meaning of Section 14 was first considered by the
Supreme Court in the judgment reported as Nilkantha Sidramappa
Ningashetti Vs. Kashinath Somanna Ningashetti and others, AIR 1962
SC 666. The Court there was concerned with the question of limitation
in filing objections. The Court also considered the meaning of the
expression "notice" and held that it did not necessarily mean
communication in writing and that the expression "give notice" in
Section 14 (2) of the Act simply meant giving intimation of filing of the
award which was to enable the parties to take further steps. The court
rendered its decision in the context of Article 158 of the Old Arbitration
Act. Subsequently in the judgment reported as Secretary of Govt. of
Karnataka Vs. Harish Babu 1996 (5) SCC 400, it was held that if an
award is filed by one of the parties, the authority of the arbitrator to
the party concerned to file it should be established and the onus lies
on such party authorized by the arbitrator to file an award. The Court
considered its previous rulings in Ningashetti case (Supra) and held
that period of limitation for filing objections for setting aside the award
CS (OS) 881A/1989 Page 7
starts from the date of service of notice, issued by the Court upon the
parties regarding filing of the award under Section 14 (2). The
Supreme Court made a distinction between mere presence or
awareness of the representative or counsel of one party before the
Court, and actual issuance of notice which meant taking cognizance of
the case, by it, it was held in the facts of that case that the mere
lodging of the award in the Court with the further knowledge of such
lodging on the part of the respondent did not imply issuance of notice.
12. The real issue in this case is whether the notice under Section
14(2) was issued in these proceedings on 24.11.1989. The judgment
of the Madras High Court, in the opinion of this Court is an authority
on this point. The Court there was concerned with whether in the
absence of records, the issuance of notice would define the period of
limitation under Article 119 (b) of the Limitation Act. The Court in that
context held as follows :
"(14) ...... ...... When objection is raised as to
the filing of the award, the Court has to
pronounce judgment declaring that the award
has been properly filed and also issue notice of
the filing of the award and only then limitation
would commence to run. If the depositions and
documents are not filed, and if no objection is
taken and a decree is passed in terms of the
award, later on, the award cannot be attacked
on the ground that S.14 (2) of the Act, the
depositions and documents are not filed along
with the award. But a party, at the time of
filing of the award is entitled to insist upon the
Arbitrator filing the depositions and the
CS (OS) 881A/1989 Page 8
documents and the Court is bound to hear such
objections and pass some order and it is only
then the stage would reach to the filing of the
award."
"17. ........... If an award had been filed by the
Arbitrator himself without any proceedings by
either of the parties, under Section 14 (2)
calling the Arbitrator to file the award mere
knowledge of the filing of the award would not
be sufficient and the Court should give notice
in writing in conformity with Section 14(2). But
even in the case of an arbitration without the
intervention of the Court if a proceeding is
initiated by either of the parties calling upon
the Arbitrator to file the award and if in such
proceeding when both sides are represented to
counsel the Arbitrator files the award in Court
to the knowledge of the respective counsel,
notice under Section 14 (2), thereafter, may
not be necessary."
13. In this case the order dated 24.11.1989 itself makes it apparent
that the arbitration records were absent. Neither were the depositions,
nor pleadings, nor even order sheet or proceedings in arbitration
produced before this Court. The Court no doubt issued notice to the
defendant, yet a facial reading of Section 14(2) suggests that notice
has to be issued after the court receives a copy of the award together
with depositions and documents filed in arbitration proceedings are
lodged in Court. These pre-conditions have not been fulfilled so far.
The Union of India which filed the present proceedings has not taken
care to ensure that in case for any reason such arbitral proceedings
and depositions etc. are not there, leave should have been sought to
CS (OS) 881A/1989 Page 9
produce copies of the same to place them on the record of the court
file. The Court therefore was left with no option but to issue notice to
the arbitrator who at one stage wrote back saying that he had filed
whatever he had in his possession. The order sheet also reveals that
the arbitrator is no longer residing in India.
14. Section 14 (2) of the Act was wanted as a measure of public
policy to ensure that the Court should take into account the entirety of
arbitral proceedings including depositions, pleadings and the orders or
minutes of arbitration records, before proceeding to pronounce its
legality and giving its imprimatur by making award the Rule of Court.
The quintessence of legal proceedings are their regularity, testified and
evidenced by the record. This is the objective underlying Section 14
(2) which enjoins the Court to issue notice after the award and the
relevant arbitral record are placed on the record. Such being the pre-
condition of the enactment before which even notice cannot be issued,
the absence of the record in the opinion of this Court has proved fatal
to this case.
15. The Court had adjourned the matter on numerous occasions, to
enable the Union of India to take appropriate steps, which are not
forthcoming. In the circumstances, the Court cannot proceed further,
since the notice issued in 1989, cannot be treated as one in
accordance with law under Section 14 (2).
CS (OS) 881A/1989 Page 10
18. In view of the above reasons, the Court is of the opinion that no
relief can be granted. The suit is accordingly dismissed.
S. RAVINDRA BHAT, J.
SEPTEMBER 04, 2008 mb CS (OS) 881A/1989 Page 11