Rajasthan High Court - Jaipur
Shiv Lal vs Food Corporation Of India on 7 January, 1997
Equivalent citations: AIR1997RAJ93, 1997(2)WLC203, 1997(1)WLN56
JUDGMENT A.S. Godara, J.
1. This appeal has been preferred under Section 39(i)(vi) of the Arbitration Act, 1940 (hereinafter referred to as the Act) against the judgment and decree dated 6-5-1988 passed by the learned District Judge, Pratapgarh in Claim Case No. 56/80, where by a decree for Rs. 17,942.53 with interest at the rate of 9% per annum from 24-7-1976 till the date of realization, besides a sum of Rs. 500/- as expenses for arbitration proceedings on the basis of award dated 17-11-1980, has been passed.
2. Briefly stated, the facts giving rise to the present appeal are that the respondent -Food Corporation of India (for short 'the Corporation) invited tenders for handling and transportation of goods of Food Storage Depot, Chanderia for a period of two years beginning from 15-3-1974 to 14-3-1976. The appellant (Contractor) also submitted his tender and the same was accepted and the acceptance was communicated by the respondent vide his telegram dated 19/20-12-1973 and thereby the appellant was further requested that the amount of security, after adjustment of Rs. 1000/- already deposited with the Depot Incharge, Chanderia and the work be started.
3. Accordingly, the appellant deposited the security amount as required above but he did not start work right from 15-3-1974 and, he started work at the site on 21-3-1974. However, as regards the present dispute, it is further alleged that the appellant did not carry out the contracted work of handling and transporting goods as per terms of the contract and he stopped work on 31-3-1974. The appellant was required to execute contracted work as per the agreement entered into between both the parties. Since the appellant did not carry out his work after 31-3-1974 and hence the respondent terminated the contract forthwith and, thereafter, fresh tenders were invited and the work of handling and transportation of the goods was carried out through the new contractor. As per the terms of the contract, the appellant was responsible for the losses incurred by the respondent-Corporation for the work got done for the unexpired period of the contract at the risk and costs of the contractor and, therefore, the respondent, as per the terms of the contract, was entitled to claim amount of loss and damage because of the breach of contract so committed by the appellant. This amount was worked out to Rs. 23336.11 and, the respondent vide its letter dated 8-12-1976 informed the appellant that the above amount along with interest thereon, at the rate of Rs. 9%, be paid to the Corporation but the contractor did not oblige nor did he convey his consent or agreement for referring this dispute relating to the agreement so entered into in terms of clause (xix) of the agreement and, lastly, the respondent had to file an application under Section 20 of the Act in the court of District Judge, Pratapgarh camp Chittogarh. The same was contested by the appellant, inter alia, pleading that the contractor was called by the Incharge of Chanderia Depot and, after accepting bank draft of Rs. 2000/-, as above, he took the contracted work for the period 21-3-1974 to 31-5-1974 and thereafter the Incharge of the Depot misbehaved with the employees of the contractor and, lastly, they were driven out from there and they were not allowed to work any more.
4. So, the main defence of the present appellant (contractor) has been that the labour was not allowed to carry out the contracted work and he was ready and willing to carry out the contracted work from the very beginning but it was the officer-in-charge of the Food Storage Depot, Chanderia, who did not allow the labour of the contractor to carry out the work. The contractor claimed that he was entitled to get a sum of Rs. 5000/-for the work executed, admittedly, for the period 21-3-1974 to 31-5-1974.
5. The vires of Section 20 of the Act under which the aforesaid application was filed, was also challenged.
6. After hearing both the parties, the learned District Judge vide his order dated 7-10-1978, holding that there was an agreement about the work of handling and transportation of goods between the respondent (Corporation) and the appellant (Contractor) and that a dispute had arisen in respect of the work under contract and there is a specific agreement vide clause (xix) of the same, that as and when any dispute and difference arose or in the any way touching or concerning the agreement whatsoever (except as to any matter the decision of which is expressly provided for in the contract) shall be referred to the sole arbitration of any person appointed by the Managing Director of the Food Corporation of India and hence the learned District Judge, while accepting the application under Section 20 of the Act, directed the Managing Director, F.C.I. that since a dispute relating to or arising out of the agreement had arisen and, therefore, an arbitrator be named and the dispute be referred to him for his arbitration. Accordingly, the Managing Director, F.C.I. appointed Shri Seva Singh, a retired District Judge to arbitrate and make an award.
7. Accordingly, Shri Seva Singh, entered upon the reference as a sole arbitrator and, notified both the parties to appear and put-forth their claim/counter claims and defence, if any. However, the respondent put-forward its claim, as above, while the appellant challenged the authority of the arbitrator himself, besides, his jurisdiction as well and also informed the arbitrator that the reference was illegal and the claim was hopelessly time barred. Besides, the learned District Judge had directed the Managing Director, F.C.I. that a mutually agreeable arbitrator shall be appointed but no consent of the appellant was obtained and the arbitrator was appointed at his back. Therefore, the jurisdiction of the arbitration was seriously challenged and the claim was alleged to be hopelessly time barred.
8. The arbitrator, lastly, since the appellant failed to put in his appearance even after being notified for more than once proceeded with the arbitration proceedings ex parte against the present appellant and, lastly, passed the impunged award on 24-7-1976.
9. The respondent filed an application under Section 14(2) of the Act before the District Judge, Pratapgarh on 2-12-1980 with a request that since the arbitrator had already made an award, as above he may be directed to file the same in the court. Accordingly, the arbitrator Filed the impunged award in the court.
10. Both the parties were informed about the presentation of the award so passed and consequently, it was on 3-4-1981 that both the parties submitted their objections against the impugned award. The next date of hearing was 26-5-1981 and both the parties, on the same day, field their rejoinders to the objections raised by both the parties. Lastly, hearing the parties, the learned District Judge, Pratapgarh. vide his impugned judgment and decree, did not find any merit in the objections raised by the appellant and instead, as already stated in the beginning, passed impunged judgment and order with consequently decree and hence this appeal, as above.
11. I have heard the learned counsel for the appellant as well as the learned counsel for the respondent and have carefully perused and considered the impunged judgment and decree as well as record of the arbitrator.
12. The learned counsel for the appellant has contended that the appellant raised many serious objections on 3-4-1981 and, the same were within the period of 30 days from the date of notice of filing of award since the same were presented on the next date of their appearance as they were notified to.
13. Besides, it is also contended that there did not exist any agreement in regard to reference of any dispute relating to the contracted work to which the agreement relates for its reference to an arbitrator and, accordingly, the award is nullity in the eye of law. Besides, the learned District Judge vide this order dated 7-10-1978 ordered the Manag-ling Director of the F.C.I, that a mutual acceptable arbitrator be appointed whereas it was flouted by the Managing Director since the appellant was never informed about the sole arbtirator appointed by the respodent Corporation. So, the arbitrator did not have any power or authorty to arbitrate in respect of the dispute referred to him.
14. It was also contended that the District Judge Pratapgarh, too, clearly held in his order dated 5-9-1980 that the appellant was free to object before the District Judge that the claim of the Corporation under contract was time barred and this objection was neither considered and disposed of by the sole arbitrator nor the learned District Judge had appreciated the same in his impugned judgment.
15. It was further contended that the disputed claim was time barred and the sole arbitrator could not arbitrate and make award within the stipulated period and on this score also, the impunged award was vitiated and the same could not be a valid basis for awarding decree in favour of the respondent.
16. It was also contended, as was also objected to during the course of pendency of proceedings under Section 20 of the Act, that the dispute was not covered by clause (xix) of the agreement and, therefore, the same could not have been a subject-matter of arbitration by the sole arbtirator and the same having been so arbitrated and consequential award having been made, the same was without jurisdiction and as such, is not sustainable in the eye of law.
17. Besides, right and authority of the arbitrator who awarded interet as per decree has also been seriously challenged.
18. The learned counsel for the respondent has argued that the objections of the appellant were time barred under Section 119(b) of the Limitation Act, 1963, since the same were filed after expiry of period of 30 days from the date of service of notice under Section 14(2) of the Act, and, therefore, the learned District Judge was legally wrong and unjustified in considering the objections filed by the appellant. Besides, all the objections so raised have already been rejected by the learned District Judge on merit as well. That way also, there is no justification for the appellate court to disagree with the conclusion arrived at by the learned District Judge resulting in the impunged judgment and decree.
19. As regards the contention of the learned counsel for the appellant that the learned District Judge erred in holding that the objections filed under Section 30/33, Arbitration Act were time barred under Article 119(b) of the Limitation Act, 1963, corresponding to the old Section 158 of the 1908 Act, since the notice for the appearance of the appellant on 3-4-1981 was served on him on 21-2-1981 and the same being not in terms of Section 14(2) of the Act for filing of objection, if any, so, there was no service of notice as required by Section 14(2) of the Arbitration Act, 1940, and in absence of valid service of notice according to law, the limitation under Article 119(b), Limitation Act, did not start running and hence the objections were not time barred, Besides, the appellant also challenged the validity of the reference since the dispute was not covered by the arbitration clause XIX of the Agreement and hence the same purporting to be under Section 33 of the Act, the provisions of Article 119(b) of the Limitation Act did not apply to the same and hence the objections so filed as on 3-4-1981 ought to have been held to be within time.
20. The learned counsel for the plaintiff-respondent has countered the aforesaid contention arguing that the learned District Judge clearly held that, indisputably, the objections filed by both the parties were time barred under Article 119(b) of the Limitation Act and, therefore, by implication, the appellant had not struck to his contention that the objectons filed pursuant to the notice under Section 14(2) of the Act were filed within 30 days from the date of notice of filing of award, under Article 119(b) of the Limitation Act, 1963 and so, the same were not barred by limitation. He has further argued that since the learned counsel for the defendant-appellant, being well within his power and authority to have conceded such fact of his objections being barred by limitation, led the lower court to hold that the objections filed by the parties were so barred by limitation, such an agreeable conduct, now, estops the appellant from wriggling out of his admission that his objections too were barred by limitation. That being so, the learned District Judge could not have embarked upon their adjudication on merit though, ultimately, all these objections too have been held to be devoid of any merit. He has relied on the decision rendered by a Special Bench of Allahabad High Court in Akberi Begum v. Rehmat Hussain, AIR 1933 All 861 wherein it is held inter alia that as soon as an agreement so made has been fully carried out by the Court and the referee has made his statement in favour of one party or the other, it is too late for either party to go back upon the agreement, and at this stage the agreement must be deemed to have eventuated into an agreement already made and the court cannot entertain any application to withdraw from the previous agreement and resile from it unless fraud, misrepresentation, coercion, undue influence, or mutual mistake is established. Presently, there is none.
21. The learned counsel for the plaintiff-respondent further relied on the decision in Bank of Bihar v. Murari Lal, AIR 1964 SC 377. It was held by the Apex Court:
"In our opinion where a statement appears in the judgment of a court that a particular thing happened or did not happen before it, it ought not ordinarily to be permitted to be challenged by a party unless of course both the parties to the litigation agree that the statement is wrong, or the court itself admits that the statement is erroneous. If the High Court had proceeded on an erroneous impression that Mr. De had conceded that the money was taken along with him by Ram Bharosa Singh to Patna, there was nothing easier for the Bank than to prefer an application for review before the High Court after the judgment was pronounced or if the judgment was pronounced or if the judgment was read out in court immediately draw the attention of the court to the error in the statement. Nothing of the kind was done by the Bank. It is too late for the Bank now to say that the statement was wrong. It appears to have been argued on behalf of the Bank in the trial court alternatively that even on the assumption that the money was taken to Patna by Ram Bharosa Singh, the suit must be decreed. We, therefore, see nothing strange in Mr. De making a concession of the kind attributed to him by the High Court. In the cirumstances, we decline to go behind what is contained in the judgment of the High Court, quoted earlier.
22. In the present case too, the appellant did not object to the judgment wherein it was held that the objections of both the parties were, admittedly time barred under Article 119(b) of the Limitation Act, in case such recital was factually incorrect. That being so, even if the observations were factually incorrect a review petition under the provisions of Section 114 read with O. 47, R. 1, C.P.C. before the lower court was the remedial course left. It was not done. Consequently, the appellant is estopped from challenging the concluded finding of the learned District Judge that the objections filed by the parties, as on 3-4-1981 were time barred.
23. Now, on the basis of above findings, since the time granted for arbitrating and making an award of 3 months, having been enlarged by the lower court in exercise of powers conferred under Section 28 of the Act, vide its order dated 5-9-1980 thereby allowing the arbitrator to make an award within the next 3 months therefrom and the same was made within the time so enlarged, no valid objection can be taken.
24. The appellant, in spite of service of notices for the appearances/hearings before the arbitrator on 25-6-1979 and 19-8-1979, did not appear before the arbitrator, and instead, did send his objections against the validity of the reference inter alia challenging the authority and competence of the arbitrator to arbitrate and make an award. However, as regards the claim itself being time barred, the agreement was finalised as per communication dated 19/20-12-1973 made to the appellant by the respondent and the alleged breach of contract started with effect from 1-4-1974. The contract period was from 15-3-1974 to 14-3-1976. Admittedly the appellant did not carry out contracted work of handling/transportation of the food-grains after 31-3-1974. There was a clear term of contract that in case the contractor appellant failed to carry out or resume the contracted work, the same work is to be got down at his risk and costs, after termination of his contract and invitation of fresh tenders/ quotations. Therefore, Both Lal Teli was awarded fresh contract and, on completion of the contract period i.e. on 15-3-1976, the F.C.I. respondent stood to lose the impugned amount as the difference amount, resulting from the breach of contract, so committed by the appellant. So, there being a clause of reference to the arbitrator. Since there arose dispute covered by the clause XIX of the Agreement relating to the work and hence Article 137 of the Limitation Act, 1963 provides a limitation of 3 years from the date when the right to apply under Section 20 of the Arbitration Act, 1940 accrued.
25. The same having been filed on 23-5-1977 and held to be within limitation by the District Judge and, consequently, the agreement having been required to be filed in the court and, consequentially, there having arisen a dispute in respect thereof, the same was referred under Section 20, Arbitration Act, as above.
26. Since the resultant damages could be worked out after the period of work ended on 14-3-1976 and thereafter calling upon the appellant to make good the losses so suffered by the respondent vide Ex.P. 16 dated 24-7-1976 and Ex. P. 17 dated 8-12-1976 and, thereafter, in absence of positive response, thereby accruing cause of action to invoke the arbitration clause and to proceed further. Admittedly, application under Section 20, Arbitration Act, was filed on 23-5-1977 and the same was accepted on 7-10-1978. Consequently, Shri Sewa Singh Ahluwalia was appointed as an arbitrator, as above, who entered upon arbitration and called upon the parties to file claims/counter claims/counters and and, accordingly, the appellant sent his objections to the claim and the authority and competency of the arbitrator to enter upon and arbitrate in the dispute on 23-7-1979. Apparently, assuming that the cause of action arose after Ex.P. 16 notice dated 24-7-1976 was sent to the appellant, as above, and the claim of the respondent having been filed perior to 23-7-1979, as is also borne out of notice dated 26-6-1979, well within 3 years' limitation, there being no evidence on record, contrary to the same, the arbitrator does not appear to have committed any mistake warranting any interference with his impugned finding that the claim of the respondent was not proved to be barred by limitation.
27. As regards the authority, validity and competency of Shri Ahluwalia to arbitrate and adjudicate in respect of the dispute, the bone of contention is that there was a clear direction in the order of reference dated 7-10-1978 to the Managing Director, F.C.I. respondent that a "Manya" (acceptable) arbitrator be appointed whereas the Managing Director appointed Shri Ahluwalia without the consent or knowledge of the appellant and hence his appointment being without authority of the appellant, the same being invalid and, unauthorised, the arbitration proceedings became invalid and ab initio void and so the impugned award is rendered nullity. Suffice it to say that there was an application by the respondent to get the agreement filed in the court and make an order of reference to the arbitrator to be appointed by the F.C.I. respondent, Accordingly, order dated 7-10-1978 was passed.
28. The relevant clause XIX of the Agreement may be usefully quoted, which is as under:
"Arbitration - All disputes and differences arising out or in any way touching or concerning this agreement whatsoever (expect as to any matter the decision of which is expressly provided for in the contract) shall be referred to the sole arbitration of any person appointed by the Managing Director of the Food Corporation of India. It will be no objection to any such appointment that the person appointed is or was an employee of the Corporation that he had to deal with the matters to which the contract relates and that in the course of his duties as such employee of the Corporation he had expressed views on all or any of the matter in dispute or difference. The award of such Arbitrator shall be final and binding on the parties to this contract. It is a term of this contract that in the event of such Arbitrator to whom the matter is originally referred being transferred or vacating his office or being unable to act for any reason the Managing Director, of F.C.I. at the time of such transfer, vacation of office or inability to act shall appoint another person to act as Arbitrator. Such person shall be entitled to proceed with the reference from the stage at which it was left by his predecessor. It is also a term of this contract that no person other than a person appointed as aforesaid should act as Arbitrator and if for any reason that is not possible the matter is not to be referred to Arbitration at all."
29. Thus, it is clearly borne out from the term of the contract itself that all such disputes and differences arising out or in any way touching or concerning the agreement what so ever (except as to any matter the decision of which is expressly provided for in the contract), shall be referred to the sole arbitration of any person appointed by the Managing Director, F.C.I. Besides, it is also agreed to, as above, that no person other than a person appointed as aforesaid should act as an arbitrator and if for any reason that is not possible, the matter is not to be referred to the arbitration at all. This left no scope for the court as well to have asked for appointment of any arbitrator out of the aforesaid agreed terms of the contract. Therefore, a mere observation that an acceptable arbitrator be appointed did not necessarily mean that the arbitrator to be appointed be accepted to the appellant as well since it would result in negating the above term of contract which vested an absolute right in the Managing Director alone. Therefore, the appointment of Shri Sewa Singh Ahluwalia suffered from no illegality or impropriety or infirmity and no objection there against is sustainable.
30. As regards alleged insufficiency of security amount of Rs.3000/- as against Rs. 6000 /-, since the Agreement was finalised by both the parties and was also, partly, acted upon by the appellant, he is estopped from challenging it. He cannot take advantage of his own fault even if it is so assumed.
31. Therefore, there is no error apparent on the face resulting in vitiating the impugned award being contrary to law as well.
32. So, from whichever angle it is viewed, the arbitrator, after affording full opportunity to the appellant as well, passed the impugned award and the same is apparently valid and suffers from no infirmity or invalidity.
33. Besides, as held above and as also borne out of record, the notice dated 20-2-1981 purporting to be under Section 14(2) of the Act, was served on the appellant on 21-2-1981 and he filed his objections against the award purporting to be under Sections 30/33 (by implication) of the Arbitration Act, 1940, on 3-4-1981 and not before. There was no application under Section 5 of the Limitation Act to condone the delay made in filing objections against the impugned award. Article 119(b) of the Limitation Act, prescribes a period of 30 days for an application for setting aside the award or remitting it for reconsideration. Even if the Court has jurisdiction to set aside the award suo-motu that power cannot be exercised to set aside an award on the grounds which fall under Section 30 of the Act, if taken in an objection filed beyond the period of limitation, as otherwise the prescribed limitation would be completely negatived. Madan Lal v. Sunder Lal, AIR 1967 SC 1233.
34. The learned counsel for the appellant contended that a formal notice in compliance of Section 14(2) of the Act of 1940 ought to have been issued thereby informing the appellant to file objections, if any, against the award having been filed by the arbitrator under Section 14(1) of the Act within a period of 30 days. In its absence, an ordinary notice printed in Appendix-'H' form No. 4 of the Code of Civil Procedure, was issued notifying to appear on 2-4-1981, failing which the matter was to be proceeded against ex parte. The appellant did appear pursuant to the notice on 3-4-1981 and lost no time to file objections. Therefore, there is no question of any delay.
35. As discussed above, in view of the finding of the Lower Court that the objections were filed beyond 30 days limitation prescribed therefor, this argument is untenable.
Besides, the said notice clearly mentions the names of the parties and the proceedings pending under the Arbitration Act and, lastly, the purpose being hearing in respect of the award. That gave the fullest notice of the award pending for proceedings under Section 15, 16 and 17 of the said Act. That being so, he was required to have filed objections within 30 days from 21-2-1981 being the date of service of notice. Instead, objections were filed only on 3-4-1981, after 40 days. If a party wants an award to be set aside on any of the grounds mentioned in Section 30, it must apply within 30 days of the date of service of notice of filing of the award as provided in Article 119(b) (corresponding to Section 158 of , the old Act of 1908) of the Limitation Act, Madan Lal (dead) by L.Rs. v. Sunder Lal (AIR 1967 SC 1233).
36. This is not there quirement of Section 14(2) of the Act that any prescribed/formal notice be served on the party intimating about the filing of the award in the Court. Even if there is any intimation or communication to the party that an award has been filed in the Court, the mode of service of notice is irrelevant for the purpose of consideration of question of filing of objections thereto within the prescribed limitation of 30 days, as above.
37. Hon'ble Supreme Court in Indian Rayon Corpn. Ltd. v. Raunaq and Company Pvt. Ltd., AIR 1988 SC 2054 held :
"In our opinion, this conclusion irresistibly follows from the narration of events mentioned hereinbefore. In order to be effective both for the purpose of obtaining the judgment in terms of the award and for setting aside the award, the award must be filed in the Court. There must be service of notice or intimation or communication of the filing of the said award by the Court to the parties. If all these factors are established or are present, the mode of service of the notice would be irrelevant. If the substance is clear, the form of the notice is irrelevant but the notice of the award having been filed in the Court, is necessary. The filing in the Court is necessary and the intimation thereof by the Registry of the Court to the parties concerned, is essential. Beyond this there is no statutory requirement or any technical nature under Section 14(2) of the Act.
38. Similarly, since there is no requirement of the provisions of Section 14(3) of the Act that the notice of filing of award be in writing or in any other particular form and hence the notice could be given even orally. A communication of the information that an award has been filed is sufficient compliance with the requirements of Sub-section (2) of Section 14 with respect to the giving of notice to the parties concerned about the filing of the award and 'Notice' does not necessarily mean communication in writing (Nilkantha Sidramappa Ningashetti v. Kashinath So-manna Ningashetti, AIR 1962 SC 666).
39. In the present case, the appellant, admittedly, challenged the validity of the award impugned on the grounds as are mentioned in clauses (a) to (c) of Section 30 of the Act and, as held above, objections thereto having been filed beyond 30 days' limitation under Article 119(b) of the Limitation Act, 1963, the same are time barred and the same cannot be made ground to set aside the impugned award on any of the said grounds and the same cannot be validly re-agitated in this appeal.
40. However, the learned counsel for the appellant has contended that, even if the grounds for setting aside the award on the basis of its invalidity are taken out of consideration holding them to be barred by limitation, as above, the appellant also challenged the impugned award on the ground of non-existence of any agreement between the parties to refer the dispute to an arbitrator specially when the dispute was within the competence of the concerned Regional Manager and hence the Clause XII of the Annexure of the Agreement could only have been invoked and the Court had wrongly entertained an application under Section 20(1) of the Act and to have referred the agreement for arbitration, as above thereby invoking the provisions of Clause XIX of the Agreement. It is further contended that, in that case too, the learned District Judge clearly mandated that an acceptable ('MANYA') arbitrator be appointed meaning thereby that he should also be acceptable to the appellant. However, it was never to be and hence the appointment of Shri Sewa Singh Ahluwalia, as an arbitrator, was ab initio void and the impugned award was a nullity. That being so, the impugned award stood challenged on the ground of non-existence and invalidity and its effect in terms of Section 33 of the Act and hence, as is the submission of the learned counsel for the appellant, the provisions of Article 119(b) of the Limitation Act, 1963 are inapplicable and the learned District Judge committed serious mistake in holding that the provisions of Section 14(2) of the Limitation Act equally applied to the objections those advanced under Section 33 of the Arbitration Act as well.
41. The learned counsel for the appellant has relied on the decision of the Apex Court rendered in the Union, of India v. Om Prakash, AIR 1976 SC 1745, in which the scope and interpretation of Sections 8(2), 20(4) and 30(c) of the Arbitration Act were under consideration. The District Judge has already appointed Col. Ranbir Singh as a sole arbitrator under Section 8(2) of the Act to arbitrate and make awards in all the seven cases but, before awards could be made, on the objections of the Govt. Counsel, he returned the papers to the Court which transferred all the cases to the Court of Judge, Small Cause Court, presumably on the presumption that applications for appointment of arbitrator were pending. But there was none. There was no application for removal of the previous arbitrator under Section 11 of the Act. Even then, straight way, Brig. Bhandari was appointed to arbitrate in the disputes who made awards in all the cases. The same were impugned before the same Court on the ground of invalidity of reference, which lastly came in appeals before the Apex Court and, while interpreting the scope and intent of clause (c) of Section 30 of the Act, it was held "The words" or is otherwise invalid" in clause (c) of Section 30 are wide enough to cover all forms of invalidity including the reference. It was further held that there is no reason to hold as to why general and unqualified language of clause (c) should not include an award on an invalid reference which is a nullity.
42. Presently, as is to be concluded hereinafter, the provisions of Article 119(b) of the Limitation Act cover the objections' purporting to be filed under Section 30 as well as Section 33 of the Arbitration Act and hence the appellant having filed all such objections, be those under Section 30 or Section 33 of the Act, they ought to have been filed, under Article 119(b) of he Limitation Act, within 30 days from the date of service of notice under Section 14(2) of the Arbitration Act, 1940, on 21-2-1981, and instead the objections were filed as late as on 3-4-1981. The same could not be entertained to be disposed before the impugned award resulted into a Court decree under appeal.
43. As has been held in the decisions rendered in Devendra Singh v. Kalyan Singh, AIR 1978 Raj 134, Ismail v. Bans Raj, AIR 1955 Raj 153, Saha v. Ishar Singh Kripal Singh Co., AIR 1956 Cal 321 (FB) and Joseph Philip v. Verkey Mathur, AIR 1978 Kerala 208, so long as the question relates to the setting aside of the award under the Arbitration Act, 1940, for whatever reasons that may be asked for and the same be covered either by Section 30 or Section 33 of the Act, the provisions of Article 119(b) of the Limitation Act, 1963 (corresponding to Section 158 of the Limitation Act, 1908) are at once attracted as it contains no qualification and as it is specific in terms and such objections must, therefore, be filed within 30 days of the service of the notice of filing of the award on the objector, presently the appellant.
44. Therefore, the inescapable conclusion arrived at is that the objections so filed by the appellant be either under Section 30 or under Section 33 of the Arbitration Act, the same were beyond the statutory limitation of 30 days of the service of notice under Section 14(2) of the Act and hence the same could not be decided on merit for the purposes of setting aside the impugned award.
45. Alternatively, even if the validity of the reference is to be considered, there did not arise any question of discretion for appointing an arbitrator, against the provisions of Clause XIX of the Agreement when the Court, in exercise of its power under subsection (4) of Section 20 of the Act made an order of reference to the arbitrator to be, implicitly, appointed in terms of the Clause XIX of the Agreement, quoted hereinbefore and not otherwise.
46. Besides, whenever a dispute or difference arose in respect of the subject matter of the agreement entered into between the parties, there being a term and condition of arbitration, as above, the respondent was within his competence to appoint any arbitrator, otherwise not disqualified, to arbitrate and adjudicate upon the dispute and pass an award. Therefore, there was no compulsion or mandate to appoint any arbitrator, acceptable to the appellant.
47. Similarly, there is no substance in the objection that the dispute under adjudication was covered by the Clause XII and not the Clause XIX of the Annexure of the Agreement and, therefore, the reference itself being invalid, the impugned award is nullity. The Clause XII only provides for liabilities of the contractor in respect of losses etc. suffered/ incurred by the corporation, as mentioned therein, due to any act or negligence of the contractor or his employees. In that case alone, it empowers the Regional Manager to decide in regard to the failure of the contractor and his liability for the losses etc. suffered by the corporation and his decision, in this limited respect, has been agreed to be final and binding on the contractor alone, not the corporation. It has nothing to do with the arbitration Clause XIX of the Agreement which provides for reference of all the disputes and differences arising out of or in any way touching or concerning the Agreement to the arbitrator to be appointed by the Managing Director of the Corporation, as above. Therefore, the validity of reference to arbitrator could not be a subject matter of successful challenge in this appeal.
48. The last contention is whether the interest @ 9 p.a. on the award money of Rs. 17,942.53 w.e.f. 24-7-76 is impermissible and beyond the authority of the arbitrator.
49. Admittedly, as borne out of the impugned award, the arbitrator allowed interest, as above, on the award money.
50. There are three different stages when the question of award of interest arises :
(a) interest for the period before the commencement of arbitration proceedings.
(b) interest pendente lite; and
(c) interest from the date of to the date of the decree.
51. As regards award of interest upon the date of institution of arbitration proceedings, there was, earlier, provision in the Interest Act, 1839 and on its subsequent repealment, in the Interest Act, 1978. However, both the old as well as the new Acts of 1839 and 1978 do not provide for award of interest pendente lite.
52. Since, after coming into force of the Interest Act, 1978, the expression "Court" therein defines to include arbitrator, under the Interest Act, 1839 it was not so defined. As a result, in cases arising after commencement of the Interest Act, 1978, an arbitrator has the same power as the Court to award interest upto the date of institution of proceedings, in cases which arose prior to the commencement of the 1978 Act but the arbitrator had no such power under the Interest Act, 1839.
53. Therefore, it is necessary to look elsewhere power of the arbitrator to award interest upto the date of institution of the proceedings to find out whether there existed any agreement to pay interest, usage trade or provisions of law to that effect or any equity therefor.
54. This provision has been authoritatively dealt with by the Hon'ble Supreme Court in Executive Engineer (Irrigation) v. Abhadutta Jena, (1988) I SCC 418 : (AIR 1988 SC 1520) and the relevant para 4 may be quoted conveniently:
"It is important to notice at this stage that both the Interest Act of 1839 and the Interest Act of 1978 provide for the award of interest up to the date of the institution of the proceedings. Neither the Interest Act of 1839 nor the Interest Act of 1978 provides for the award of pendente lite interest. We must look elsewhere for the law relating to the award of interest pendente lite. This, we find, provided for in Section 34 of the Civil Procedure Code in the case of Courts. Section 34, however, applies to arbitrations in suits for the simple reason that where a matter is referred to arbitration in a suit, the arbitrator will have all the powers of the Court in deciding the disputes, Section 34 does not otherwise apply to arbitrations as arbitrators are not Courts within the meaning of Section 34 of Civil Procedure Code. Again, we must look elsewhere to discover the right, of the arbitrator to award interest before the institution of the proceedings, in cases where the proceedings had concluded before the commencement of the Interest Act of 1978. While under the Interest Act of 1978 the expression "Court" was defined to include an arbitrator, under the Interest Act of 1839 it was not so defined. The result is that while in cases arising after the commencement of Interest Act of 1978 an arbitrator has the same power as the Court to award interest up to the date of institution of the proceedings, in cases which arose prior to the commencement of the 1978 Act, the arbitrator has no such power under the Interest Act of 1839. It is, therefore, necessary, as we said, to look elsewhere for the power of the arbitrator to award interest up to the date of institution of the proceedings. Since the arbitrator is required to conduct himself and make the award in accordance with law we must look to the substantive law for the power of the arbitrator to award interest before the commencement of the proceedings. If the agreement between the parties entitles the arbitrator to award interest no further question arises and the arbitrator may award interest. Similarly if there is a usage of trade having the force of law the arbitrator may award interest. Again if there are any other provisions of the substantive law enabling the award of interest the arbitrator may award interest. By way of an illustration, we may mention Section 80 of the Negotiable Instruments Act as a provision of the substantive law under which the Court may award interest even in a case where no rate of interest is specified in the promissory note or bill of exchange. We may also refer Section 61(2) of the Sale of Goods Act which provides for the award of interest to the seller or the buyer as the case may be under certain circumstances in suits filed by them. We may further cite the instance of the non-performance of a contract of which equity could give specific performance and to award interest. We may also cite a case where one of the parties is forced to pay interest to a third party, say on an overdraft, consequent on the failure of the other party to the contract not fulfilling the obligation of paying the amount due to them. In such a case also equity may compel the payment of interest. Loss of interest in the place of the right to remain in possession may be rightfully claimed in equity by the owner of a property who has been dispossessed from it."
55. As regards award of interest pendente lite, there was no prohibition in the agreement entered into by the parties in respect of the (contract of handling and transportation of the food grains at the Chanderia Depot. So, when there is any claim of interest by the party in its claim against the defaulting party to the agreement and when the dispute is referred to the arbitrator, he shall also have power to award interest pendente lite for the simple reason that in such a case it must be presumed that the interest was an implied term of agreement between the parties and therefore when the parties refer all those disputes or refer the dispute to a interest as such to the arbitrator, he shall have power to award interest pendents lite also.
56. The Hon'ble Supreme Court in Secretary, Irrigation Department v. G. C. Roy, (1992) 1 SCC 508 : (AIR 1992 SC 732) after discussing a catena of rulings, authoritatively answered the question of empowerment of the arbitrator to award interest pendente lite and the principles therefor, in Paras 43 and 44 of the judgment as follows :
"The- question still remains whether arbitrator has the power, to award interest pendente lite, and if so on what principle. We must reiterate that we are dealing with the situation where the agreement does not provide for grant of such interest nor does it prohibit such grant. In other words, we are dealing with a case where the agreement is silent as to award of interest. On a conspectus of aforementioned decisions, the following principles emerge:
(i) A person deprived of the use of money to which he is legitimately entitled has a right to be compensated for the deprivation, call it by any name. It may be called interest, compensation or damages. This basic consideration is as valid for the period the dispute is pending before the arbitrator as it is for the period prior to the arbitrator entering upon the reference. This is the principle of Section 34, Civil Procedure Code and there is no reason or principle to hold otherwise in the case of arbitrator.
(ii) An arbitrator is an alternative form (sic forum) for resolution of disputes arising between the parties. If so, he must have the power to decide all the disputes or differences arising between the parties. If the arbitrator has no power to award interest pendente lite, the party claiming it would have to approach the Court for that purpose, even though he may have obtained satisfaction in respect of other claims from the arbitrator. This would lead to multiplicity of proceedings
(iii) An arbitrator is the creature of an agreement. It is open to the parties to confer upon him such powers and prescribe such procedure for him to follow, as they think fit, so long as they are not opposed to law. (The proviso to Section 41 and Section 3 of Arbitration Act illustrate this point). All the same, the agreement must be in conformity with law. The arbitrator must also act and make his award in accordance with the general law of the land and the agreement.
(iv) Over the years, the English and Indian Courts have acted on the assumption that where the agreement does not prohibit and a party to the reference makes a claim for interest, the arbitrator must have the power to award interest pendente lite. Thawardas (AIR 1955 SC 468) has not been followed in the later decisions of this Court. It has been explained and distinguished on the basis that in that case there was no claim for interest but only a claim for unliquidated damages. It has been said repeatedly that observations in the said judgment were not intended to lay down any such absolute or universal rule as they appear to, on first impression. Until Jena case almost all the Courts in the country had upheld the power of the arbitrator to award interest pendente lite. Continuity and certainty is a highly desirable feature of law.
(v) Interest pendente lite is not a matter of substantive law, like interest for the period anterior to reference (pre-reference period). For doing complete justice between the parties, such power has always been inferred.
Having regard to the above consideration, we think that the following is the correct principle which should be followed in this behalf:
Where the agreement between the parties does not prohibit grant of interest and where a party claims interest and that dispute (along with the claim for principal amount or independently) is referred to the arbitrator, he shall have the power to award interest pendente lite. This is for the reason that in such a case it must be presumed that interest was an implied term of the agreement between the parties and therefore when the parties refer all their disputes - or refer the dispute as to interest as such - to the arbitrator, he shall have the power to award interest. This does not mean that in every case the arbitrator should necessarily award interest pendente lite. It is a matter within his discretion to be exercised in the light of all the facts and circumstances of the case, keeping the ends of justice in view."
57. As a result, the arbitrator has power to arbitrate on the question of interest pendente lite in the same manner as the Court is empowered under Sections 34, C.P.C., in the circumstances and expedients laid down in the aforesaid ratio.
58. It was held by the Apex Court in Hindustan Construction Co. Ltd. v. State of Jammu & Kashmir, (1992)4 SCC 217 : (AIR 1992 SC 2192) that an arbitrator is competent to award interest for the period from the date of award to the date of payment. Keeping in view the principles of Section 34, C.P.C., it was held that arbitrator has power to award interest pendente lite as well as post decree period, though the Section 34, C.P.C. as such may not be applicable. It was observed in para 5 of the judgment as follows :
"The question of interest can be easily disposed of as it is covered by recent decisions of this Court. It is sufficient to refer to the latest decision of a five Judges bench of this Court in Secretary, Irrigation Department, Govt. of Orissa v. G. C. Roy, (1992) 1 SCC 508) : (AIR 1992 SC 732). Though the said decision deals with the power of the arbitrator to award interest pendente lite, the principle of the decision makes it clear that the arbitrator is competent to award interest for the period commencing with the date of award to the date of decree or date of realisation, whichever is earlier. This is also quite logical for, while award of interest for the period prior to an arbitrator entering upon the reference is a matter of substantive law, the grant of interests of the post award period is a matter of procedure. Section 34 of Code of Civil Procedure provides both for awarding of interest pendente lite as well as for the post-decree period und the principle of Section 34 has been held applicable to proceedings before the arbitrator, though the section as such may not apply. In this connection, the decision in Union of India v. Bungo Steel Furniture (P.) Ltd., AIR 1967 SC 1032 may be seen as also the decision in Gujafat Water Supply and Sewarage Board v. Unique Erectors (Gujarat) (P.) Ltd., (1989) 1 SCC 532 : (AIR 1989 SC 973) which upholds the said power though on a somewhat different reasoning. We, therefore, think that the award on Item No. 8 should have been upheld."
59. In A. K. Ghosh v. Bharat Coking Coal Limited, (1993) 1 SCC 145 : (1993 AIR SCW 3601), the Apex Court, while following the principles regarding power of the arbitrator to award interest pendente lite, as held in G. C. Roy's case (AIR 1992 SC 732) (supra) further explained that as held in Jena's case (AIR 1988 SC 1520) (supra), the arbitrator did not have power to award interest for the pre-reference period but did have power to award interest pendente lite. It was observed in para 10 of the judgment:
"The next contention of the learned counsel for the appellant/ State relates to the power of the arbitrator to award interest for the pre-reference period. Reliance is placed upon the decision of this Court in Executive Engineer (Irrigation) v. Abhaduta Jena (1988) 1 SCC 418 : (AIR 1988 SC 1520). Shri Bhagat, learned counsel appearing for the respondent, however, submits that the said decision is no longer good law in view of the constitution Bench decision in Secretary, Irrigation Department, Govt. of Orissav. G. C. Roy, (1992) 1 SCC 508 : (AIR 1992 SC 732). We cannot agree with Shri Bhagat. Both of us were members of the Constitution Bench which decided G. C. Roy. It was confined to the power of the arbitrator to award interest pendente lite. It did not pertain to nor did it pronounce upon the power of the Arbitrator to award interest for the period prior to his entering upon the reference (pre-reference period). This very aspect has been clarified by one of us (B. P. Jeevan Reddy, J.) in his concurring order in Jugal Kishore Prabhatilal Sharma v. Vijayendra Prabhatilal Sharma, (1993) 1 SCC 114 : (AIR 1993 SC 864). Accordingly, we hold following the decision in Jena that the arbitrator had no power to award interest for the pre-reference period in this case inasmuch as the award was made prior to coming into force of the Interest Act, 1978 (The Interest Act, 1978 came into force with effect from August 19, 1981). So far as interest for the period during which the arbitration proceeding were pending (pendente lite interest) is concerned, the arbitrator does have the power to award the same as held in G.C.Roy."
60. Thus, having regard to the ratio laid down in Hindustan Construction Co. Ltd. v. State of J. & K. (AIR 1992 SC 2192) (supra), it is evidently deducible that the arbitrator is empowered to award interest pendente lite as well for the period commencing with the date of award to the date of decree or date of realisation, whichever is earlier.
61. Section 29 of the Arbitration Act empowers the Court to award interest only from the date of the decree and not from any prior date on the principal sum adjudged by the award and confirmed by the decree and not from any date prior to the same.
62. Now, keeping in view the principles of award of interest on the award money prior to 1 the pre-reference period, since, admittedly, the arbitrator entered upon reference on 25-6-1979, as is also borne out of the arbitration proceedings on record, pursuant to the order of reference dated 7-10-1978, much prior to coming into force of the Interest Act, 1978 w.e.f. 19-8-1981. As held in Jena's case (AIR 1988 SC 1520) (supra), in the case in ham also, there is neither usage nor contract express or implied, to justify the award of interest. Similarly, interest is not payable by virtue of provision of the law governing the case. It was not payable under the Interest Act, 1839 in absence of a claim of certair amount payable at a certain time by virtue o a written instrument. Similarly, the new law of interest came into force w.e.f. 19-8-1981 only, much after the dispute arose and the same was subjected to reference by the arbitrator.
63. Besides, there was no demand of any interest in the notices Ex. P. 16 and Ex. P. 17 calling upon the contractor-appellant to pay any interest either on the ground of equity or as damages, if any, and, therefore, the arbitrator had no power or justification to have awarded interest under the impugned award w.e.f. 24-7-1976, being the date of notice Ex. P. 16. There is also no mention of the reasons for award of interest w.e.f. 24-7-1976 specially when the arbitrator, admittedly, entered upon the reference not before 25-6-1976. That being so, as regards award of interest w.e.f. 25-6-1979 to the date of making award i.e. 17-11- 1980. as is also apparent on the face of the award, was without any legal authority and the learned District Judge also erred in concurring with the same by way of passing a decree including interest on the award money for the period from 24-7-1976 to 17-11-1980 and hence the impugned judgment and decree deserve to be modified to this extent.
64. Next, coming to the award of interest for the period starting from the date of reference i.e. 8-10-1978, admittedly, the Interest Act, 1978 came into force w.e.f. 19-8-1981 as has been held in G. C. Roy's case (AIR 1992 SC 732) (supra), interest pendente lite is not a matter of substantive law, like, interest for the period anterior to reference (pre-reference period). For doing complete justice between the parties, such power has always been inferred. It was further held that where the agreement between the parties does not prohibit grant of interest and where a party claims interest and that dispute (along with the claim for principal amount or independently) is referred to the arbitrator, he shall have the power to award interest pendente lite. This is for the reason that in such a case it must be presumed that interest was an implied term of the agreement between the parties and therefore when the parties refer all their disputes or refer the dispute as to interest as such to the arbitrator, he shall have the power to award interest. It was further held that it does not mean that in every case the arbitrator should necessarily award interest pendente lite. It is a matter within his discretion to be exercised in the light of all the facts and circumstances of the case, keeping the ends of justice in view. Their Lordship further observed that the decision rendered in G. C. Roy's case (supra) on 12-12-1991, shall only be prospective in operation. As a result, in the case in hand, the arbitrator could not have awarded interest pendente lite as well, since there was no claim nor any reference for awarding any interest on the amount of award money, as discussed hereinbefore.
65. Consequently, the arbitrator could not have awarded interest pendente lite straightway in absence of demand, reference and consideration of facts and cicumstances before exercising discretion to award the same.
66. Accordingly, interest pendente lite too is also awarded against the law and in absence of any dispute either expressly or impliedly having been referred to be arbitrated in this respect and to this extent also, this appeal deserves acceptance as well.
67. As regards grant of interest for the period commencing with the date of award to the date of decree or date of realisation whichever is earlier, the Hon'ble Supreme Court in Hindustan Construction Co. Ltd. (AIR 1992 SC 2192) (supra), referring to G. C. Roy's case (AIR 1992 SC 732) (supra), observed that though the decision deals with the power of the arbitrator to award interest pendente lite, the principle of the decision makes it clear that the arbitrator is competent to award interest for the period commencing with the date of award to the date of the decree or date of realisation, whichever is earlier on the principle of Section 34, C.P.C.
68. Section 29 of the Arbitration Act, 1940 gives power to the Court to award interest from the date of decree at such rate as the Court deems reasonable, to be paid on the principal sum as adjudged by the award confirmed by the decree.
69. Therefore, on the basis of facts and/ circumstances, in the light of the legal position that has emerged as above it is held that the arbitrator was not empowered to have awarded interest on the award money prior to the date of reference as well as prior to the date of making award but, as detailed above, he was empowered to and justified in awarding interest @ 9% per annum on the award money so adjudged and also affirmed by the Court in its impugned decree, from the date of award to the date of the decree, as above.
70. Besides, the Lower Court awarding decree on the basis of the impugned award was fully empowered to have awarded interest at the said rate in the decree itself on the principal amount of award confirmed in the decree, from the date of such decree. To this extent, the award of interest is legal and fully justified and nothing sounds favourable against it.
71. Therefore, the respondent-Corporation is entitled to interest @ 9% on Rs. 17,942.53 w.e.f. 17-11-1980 till its realisation in terms of the impugned decree and not prior thereto.
72. No other submission is considered to be helpful in arriving at a different conclusion except the one regarding award of interest to the extent, as above.
73. In the result, this appeal succeeds in part. The impugned judgment and decree pursuant to the award dated 17-11-1980 is modified to the extent that the plaintiff-respondent shall be entitled to interest on the decretal amount of Rs. -17,942.53 @ 9% p.a. W.e.f-17-11-1980 instead of w. e. f. 24-7-1976, The remaining part of the award as forming part of the impugned decree is affirmed. In the circumstances, the parties are left to bear their own costs of this appeal. In case the appellant fails to satisfy the decree within 3 months from the date of this decision, he shall have to pay interest @ 12% instead of 9% thereafter, till its realisation.