Calcutta High Court
Lohia Jute Press P. Ltd. And Ors. vs The New India Assurance Co. Ltd. And Ors. on 16 September, 1987
Equivalent citations: AIR1988CAL174, AIR 1988 CALCUTTA 174, (1988) 2 ARBI L.R. 201
JUDGMENT C. Mookerjee, C.J.
1. By the judgment and order appealed against, his Lordship Hon'ble Mr. Justice T. K. Basu (as he then was) had allowed the application under Sections 30 and 33 of the Arbitration Act of the New India Assurance Company Ltd. the respondent 1 herein and had set aside the award dated 22nd March, 1978 of Keshab Chandra Basu (since deceased) in favour of M/s. Lohia Jute Press Pvt. Ltd. the appellant, for a sum of Rs. 29,66,832.67 p. with interest. Being aggrieved by the said judgment and order, the Lohia Press and others having preferred this appeal.
2. On 3rd January, 1976 New India Assurance Co. Ltd. the respondent herein issued a fire insurance policy covering risk against damage by fire the raw materials jute goods, plastic materials, etc. lying at the appellant Company's factory-cum-godown at 28, Barrackpore Trunk Road. Calcutta. Originally the said properties of the appellant company were insured for a sum of Rs. 20,00,000/- and the period of insurance was from 6th October, 1975 to 6th October, 1976. Subsequently, by mutual consent, on three different dates, extra endorsements were made for making the appellant company and its mortgagee, State Bank of India, jointly entitled to certain additional benefits under the said policy. By one of these end orsements, the description of the covered goods were enlarged, by another endorsement, the sum assured under the policy was increased to Rs. 60,00,000/-.
3. On 8th May, 1976 the appellant 1 who was assured had intimated the respondent 1, insurance company that a fire had broken out at one of its godown at 28, Barrack pore Trunk Road. Mr. S.C. Majumdar, Surveyor, who was initially appointed by the Insurance Company to investigate the loss, because the appellant did (not) allow him to inspect the godown on the ground that the warehouse was a bonded warehouse and the permission of the Customs Authroities would be necessary. On 12th May, 1976 a preliminary inspection of the godown was carried out'by said S.C. Majumdar and an Administrative Officer of the insurer. On the same date the assured submitted a claim for a sum of Rs. 48,00,000/- for the said loss allegedly suffered by it. The said Administrative Officer of the respondent had reported that the fire had suspicious features. Thereupon the insurance company had appointed M/s. Ascon & Avins to jointly carry out survey with S.C. Majumdar. Thereafter a tally was undertaken by the Joint Surveyors. There was also a joint and agreed valuation made of the goods that could not be salvaged. According to the Joint Surveyors, no trace had been found of 3411 bags of goods supposed to have been in the godown.
4. The Insurance Company had then appointed Mr. S.S. Biswanathan, a Cost Accountant to investigate the books of accounts of the appellant company. According to the report of Mr. S.S. Biswanathan, a market survey undertaken by him disclosed sale of the goods inquestion. Thereafter the Insurance Company had appointed M/s. Mehta & Padamsey to investigate the matter. The Insurance Company had also informed the Customs Authorities. M/s. Ascon & Avins submitted a report inter alia observing that it was difficult to explain the fact that no trace at all could not found of as many as 3411 bags. The Chairman of the respondent Insurance Company had instructed the Area Manager of the Company to wait for the final report of the Joint Controller of Imports and of M/s. Mehta & Padamsey Ltd. before taking a final decision in the case. On 28th April, 1977 the appellant was intimated by the Insurance that the final report of M/s. Mehta & Padamsey Ltd. was awaited before bringing the claim to a conclusion. Upon the request made by the assured company the appellant the Insurance Company had extended the time for lodging their claim under Claues 19 of the Policy by three months. On 5th March, 1977 the appellant wrote a letter to the Insurance Company informing that it had appointed Keshab Chandra Basu, as an Arbitrator and invited the Insurance Company to nominate another Arbitrator by the date mentioned failing which Keshab Chandra Basu would act as the sole Arbitrator.
5. On 22nd March, 1978 Keshab Chandra Basu as the sole Arbitrator made his impugned award. The Arbitrator found that the insured M/s. Lohia Jute Press Pvt. Ltd. was entitled to recover from the Insurance Company a sum of Rs. 18,59,899.38 p. for the loss of and damage to their goods by fire exclusive of customsduty. He awarded interest upon the said sum at the rate of 12% per annum from 10th December, 1976, that is from the date of the report made by the Surveyor, up to the passing of the decree.
6. In his elaborate judgment, the learned trial judge has given a large number of reasons for setting aside the said award of Keshab Chandra Basu. Mr. Pratap Chatterjee, learned Counsel on behalf of the appellant, has submitted that the trial Judge was not justified in setting aside the award. According to Mr. Chatterjee, the facts of the case clearly proved that the only dispute between the insured and the insurer wasabout the quantum of the loss caused by destruction and damage of the insured goods as a result of fire breaking out in the insured's aforesaid godown. The Insurance Company did not dispute that the goods of the appellant were in fact were destroyed and/or damaged by fire. Therefore in terms of Clause 19 of the Policy the Arbitrator had ample authority to make his award. Neither the Arbitrator nor the parties were misled by the incorrect recital in his a ward of the said arbitration clause. The Arbitrator was fully aware of the extent of his jurisdiction. The award was a non-speaking one and it was not possible to find out whether in fact the bank clause was placed before the Arbitrator. The Insurance Company through its authorised officer, had participated up to some stage of the arbitration proceedings and thereafter in spite of due notice did not atlend at the subsequent stages of the proceedings. By its own default after having allowed, the Arbitrator to proceed ex parte, the respondent Insurance Company cannot now make any grievance. The Arbitrator did not at all commit any misconduct, legal or otherwise.
7. Mr. Bhabra, learned advocate appearing on behalf of the respondent, has on the other hand, submitted that the learned trial Judge had rightly set aside the award, not only the Arbitrator had proceeded on the basis of an arbitration clause which was materially different from th arbitration clause contained in the insurance policy in favour of the appellant but at the date the Arbitrator entered into reference. No dispute had yet arisen which could be referred to arbitration. According to Mr. Bhabra, when the appellant appointed Keshab Chandra Bose as the Arbitrator, the Insurance Company was still investigating the cause of the fire and whether the appellant's claim was covered by the policy. Mr. Bhabra further submitted that the Arbitrator misconducted himself by proceeding ex parte against the respondent. The arbitration was also beyond the scope of the re levant clause in the policy and there had been no enlargement of its scope by agreement, waiver or acquiescence on the part of the respondent. The appointment of Keshab Chandra Bose as the Abritrator was not in accordance with the arbitration clause. The a uthority of Subrata Bose to act on behalf of the respondent Insurance company in the arbitration proceedings was also challenged.
8. Having given our anxious consideration to the facts and circumstances of the case, we hold that Hon'ble Mr. Justice T. K. Basu had rightly allowed the application under Sections 30 and 33 of the Arbitration Act filed by the New India Assurance Co. Ltd. the respondent 1, to its appeal and had set aside the award dated 22nd March, 1978 made by Keshab Chandra Bose. In the first place, no dispute existed when by letter dated 5th May, 1977 the appellant had informed the New India Assurance Co. Ltd. that the appellant had appointed Keshab Chandra Bose as the sole Arbitrator (vide page 303 of the Paper Book). Upon receipt of an earlier letter of the appellant dated 8th May, 1976 intimating that the fire had broken out at its godown the Insurance Company had appointed Sri.S. C. Majumdar as the Surveyor to investigate the loss. We have already mentioned that initially he was not allowed to inspect the godown. After preliminary inspection carried out 12th May, 1976, by S.C. Majumdar and T.K. Sen, Administrative Officer of the Insurance Company, a report was made to the Insurance Company that the fire had suspicious features. Further investigation by the Insurance Company was ordered by appointing M/s. Ascon and Avins to carry out survey with S.C. Majumdar. There was considerable delay which according to the Joint Surveyor was due to plea by the appellant that their Director, Mr. Lohia was away to Kashmir. The Joint Surveyor upon completion of the tally had advised the Insurance Company that no trace could be found of 3411 bags of goods which the appellant claimed were stored in the godown. In view of this report the Insurance Company had appointed S.S. Bishwanthan, Cost Accountant, to investigate the books of the appellant's company. On 16th August, 1976 the Joint Surveyor had agreed with the company regarding the basis upon which the salvaged goods could be dealt with. The contention of the Insurance Company that further investigations were going on would be corroborated by the report dated 26th Oct. 1976 of S.S. Bishwanathan that the market survey disclosed the sale of the goods in question by Lohia Jute Press Ltd. through another firm named M/s. Extrusions Calcutta and that the goods had been transported to Madras, Vizag and New Delhi (vide page 149 of the Paper Book). The respondent Insurance Company also reported to the Customs Authorities about the suspicious feature of the dealings. The New India Assurance Company Ltd. also received confidential reports about the chemical properties of the goods from M/s. Mehta and Padmsey Ltd. According to the legal opinion obtained by the insurance company, the claim of the insured ought to be repudiated. After the said legal opinion was forwarded to the Insurance Company'shead office at Bombay, the head office directed that further development should be seen before any final decision was taken. In the meantime the Insurance Company continued to make investigations through M/s. Mehta and Padamsey and Mr. S.S. Bishwanathan. After M/s. Mehta and Padamsey had submitted their report in January, 1977 stating that it was broadly difficult to explain the fact that no trace at all could be found of as many as 3411 bags, by his letter dated 8th March, 1977 the Chairman, New India Assurance Co. advised Mr. Aurora, the Senior Area Manager to wait for the report of the Joint Chief Controller of Imports, Customs and of M/s. Mehta and Padamsey before taking final decision on the claim. On 20th April, 1977 the Senior Area Manager of the Insurance Company wrote a letter to the appellant stating, inter alia, "We are still awaiting the final report of M/s. Mehta and Padamsey and we trust you would have complied with all their requirements in order that they submit to us their final report and bring the claim to a satisfactory conclusion ."Threupon on 26th April. 1977 the appellant, Lohia Jute Press Ltd. had written a letter to the Senior Area Manager of the Insurance Company stating that the findings of Sri S. C. Majuindar and M/s. Ascon and Avins were not correct. It was also claimed that it had made over the available records to M/s. Mehta and Padamsey Ltd., who had completed the inspection. The Company further stated that the matter required immediate attention as the time for taking action on their part was first expiring. On 30th April, 1977 the appellant company wrote another letter to New India Assurance Co. demanding payment of their claim within three days. On 30th April, 1977 the Senior Area Manager of the Insurance Company wrote a letter with reference to appellant company's letter dated 26th April, 1977 and a subsequent telephonic communication that they were agreeable to grant extension for a period of three months from the date of expiry of 12 months as provided in Clause 19 of the Policy. This extension was however not to be construed as alteration of other conditions of the policy endorsement. Further, the same would be without prejudice as to other rights and contentions available to the insurance company. On 5th May, 1977 the Director of Lohia Jute Press Pvt. addressed a letter to New India Assurance Company stating, inter alia, that the Insurance Company had failed to settle the claim within a period mentioned in the notice of demand dated 30th April, 1977 and it wrongfully failed to accept the quantum of loss sustained by the appellant by reason of the aforesaid outbreak of fire and to settle the same. It is significant that the previous notice of demand dated 30th April. 1977 was not received by the Insurance Company till 7th May, 1977. The appellant by the said letter dated 5th May, 1977 had purported to refer the dispute to arbitration and appointment of Keshab Chandra Bose as one of the two Arbitrators and requested the Insurance Company to nominate and appoint another Arbitrator. It is significant that the appellant company itself had stated that they were appointing Sri Basu in order to avoid any complication in law regarding extension agreed to be granted by the insurance company by its letter dated 30th April, 1977. The appellant company had hoped that all the formalities had been since completed and the insurance company would be in a position to pay the claim within the period of two months.
9. The Senior Area Manager of the Insurance Company informed the head office at Bombay that lawyers of the insurance company were of the opinion that when there were doubts about the bona fides of the claim, it should be repudiated. In the meantime three months extension has been granted under Clasue 19 of the Policy. We agree with the learned trial judge that it is abundantly clear from the correspondence referred that the insurer had not been able to come to a final decision either on the question of admission or denial of liability or on the question of quantum of loss when Keshab Chandra Basu was unilaterally appointed by the company as the Arbitrator, the insurance company was still considering the entire matter. Therefore, no dispute then existed within the meaning of Clause 19 of the Policy entitling the appellant to invoke the jurisdiction. In this connection, Mr. Bhabra relied upon the decision of Sir Asutosh Mookerjee and Sir Ernest Edward Fletcher, JJ. in the case of Chandmull Goneshmull v. Nippon Munkwa Kabushiki Kaisha 33 Cal LJ 545 : AIR 1921 Cal 342. The Division Bench upheld the decision of Greaves, J. with reference to arbitration in the said case was incompetent as the events contemplated by the arbitration clause had not arisen. The Division Bench laid down "A dispute implies an assertion of a right by one party and a repudiation thereof by another." As in the reported case of Chandmull Ganeshmull (supra), the parties never reached that stage because in both the cases a variety of information was wanted to enable to judge. Therefore, the arbitration proceedings must be held to be without jurisdiction. Bachawat, J. (as he then was) in the case of Nandram Hanutram v. Raghunath and Sons Ltd. followed the decision in the case of Chandmull Geneshmull (supra) and observed that there was no doubt that the existence of disputes or differences contemplated by an Arbitration clause was an essential condition and pre-requisile to the exercise of the jurisdiction by the Arbitrator. Bachawat, J. had recognised that failure to perform the contract and to pay the amount claimed, may take place under such circumstances as may justify the inference of repudiation and denial of the right of the other party. Such conduct and stoic silence may be more eloquent than words and may show that the party is disputing his liability. Coupled with other circumstances a failure to pay a claim may constitute a difference between the parties. At the same time, Bachawat, J. was cautious enough to recognise that in certain circumstances the court will not infer the existence of a dispute from a mere failure to pay (vide Russell on Arbitration, 14th Ed., page 252 and Mathuradas Goverdhandass v. Khusiram Benarshilal (1949) 53 Cal WN 873 (875). In the instant case, the insurance company did not remain silent but to the knowledge of the appellant had been making investigations and enquiries, Therefore, there were no circumstances warranting the inference that dispute within the meaning of Clause 19 of the Policy had already arisen at the date the appellant had appointed Keshab Chandra Basu as the Arbitrator. Accordingly we affirm the finding of the learned trial judge that the entire arbitration proceeding was incompetent and the award in question was void.
10. The provision similar to Clause 18 of the Policy issued in favour of the appellant has been repeatedly judicially interpreted. P.B. Mukherji, J. (as he then was) in the case of National Fire and General Insurance Co. Ltd. v. Union of India , held that under such a clause only when any difference arises as to the amount of loss or damage the same could be referred to decision of the Arbitrators. The Supreme Court in the case of Vulcan Insurance Company v. Maharaja Company , also interpreted a similar clause for arbitration by holding that when the insurance company repudiated its liability to pay any amount of loss or damage and the dispute raised appertained to the liability to pay any amount of damage whatsoever, same was not covered by the arbitration clause contained in Clause 18 of the Policy which was identical with the Clause 18 of the policy issued in favour of the appellant company. Mr. Chatterjee has submitted that the respondent insurance company did not dispute that the appellant company had suffered loss as a result of fire breaking out in its godown and, therefore, the same was no longer an issue which was required to, be decided. Loss was admitted by the insurance company which did not repudiate its liability. Therefore, the scope of the dispute before the Arbitrator was confined to the question of quantum or the amount of the damage payable to the appellant company. Mr. Chatterjee further argued that in the facts of this case there was also waiver and acquiescence on the part of the insurance company which had willingly participated in the proceeding. According to Mr. Chatterjee, the insurance company never objected before the Arbitrator about his jurisdiction and therefore, the ratio of the decision of this Court in the case of New India Assurance Co. Ltd., v. Dalmia Iron and Steel Ltd. was fully applicable.
11. Sankar Prasad Mitra, J. (as he then was) in the case of New India Assurance Co. Ltd. v. Dalmia Iron and Steel Ltd. (supra) had rejected the submission made on behalf of the insurance company that a sum of Rs. 16500/- should never have been made by the umpire because same was an award with regard to a dispute which never arose before the reference to arbitration and secondly under the policy of insurance the company had no liability for consequential damage. The learned Judge held that the petitioner should not be allowed to agitate the matter when he did not object to the jurisdiction of the Arbitrators or the umpire to investigate the said claim contained in paragraph 17 of the statement of claim. After referring to several reported decisions. Sankar Prasad Mitra, J. observed that if a party allowed an Arbitrator to proceed with the reference without objecting to his jurisdiction or competent, it would not be subsequently heard to say that the award should be set aside on the ground that the Arbitrator was not competent to decide the dispute in question. Therefore, the learned Judge overruled the said objection.
12. Mr. Bhabra has pertinently pointed out that the said judgment of Sankar Prasad Mitra, J. in the case of New India Assurance Co. Ltd. v. Dalmia Iron and Steel Ltd. (supra) was reversed by Mr. G.K. Mitter and Arun Kumar Mukherjee, JJ. by their judgment dated 6th January, 1966 in the case of New India Assurance Co. Ltd. v. Dalmia Iron and Steel Ltd. Appeal from Original Order No. 206 of 1964. The Division Bench having reversed the said decision of the learned Single Judge on another ground had no occasion, however, to make any observation regarding the point whether by reason of failure to object to jurisdiction at an early stage created any estoppel. In the facts of this case no inference could be drawn that the original agreement regarding the terms of arbitration was ever enlarged. It is not disputed that the original agreement was confirmed only to the quantum of damage. At the time of hearing before the learned trial Judge there was no pleading by the present appellant about such enlargement. Minutes kept by the Arbitrator did not record any such agreement. Mere joining in the prayer of the appellant for enlargement of the time for filing of the award cannot lead to the inference that the insurance company had impliedly agreed to the enlargement of the arbitration clause. We may add that both the trial Judge and before us the present respondent had seriously disputed the authority of Subrata Bose to act on behalf of the respondent insurance company. The trial Judge in fact has upheld also the said ground of objection about absence of any such authority on the part of Subrata Bose, Mr. Bhabra has relied upon the decision of the Supreme Court in the case of State of Punjab v. Hardayal Singh , In the said reported case The Supreme Court inter alia held that when an award is given beyond the prescribed time limit of four months, parties are not estopped from challenging it and it was immaterial that the objector had participated in the arbitration proceedings held after period of four months. The court held that the time limit prescribed in Clause (3) of Schedule-I of the Arbitration Act cannot be extended by the Arbitrator and the Court alone can do it. Therefore, there could be no estoppel against a statute. The Supreme Court however held that the Court including the appellate Court may extend time when parties took willing part in the arbitration proceedings held after expiry of the prescribed time limit.
13. Mr. Bhabra has also rightly pointed out that when there was no evidence that the respondent insurance company had any intention to make a new agreement regarding the terms of reference to arbitration and in the absence of offer and acceptance, the court cannot infer that by fresh agreement the arbitration clause in question was modified to include even a dispute about the existence of the liability of the insurance company in addition to assessment of the quantum of damages. In the case of National Fire and General Insurance Co, v. Union of India (supra), P.B. Mukherjee, J. (as he then was ) in paragraph 12 had observed that although there was special stipulation in the insurance policy itself that the amount of loss or damage was alone to be the subject of arbitration, that did not deter the parties from submitting to the jurisdiction of Arbitrators the question of liability to pay the amount and who should pay to whom. Upon examination of the fact of the case P.B. Mukherjea, J. held that in the said reported case the question of liability to pay was included by enlargement of the reference. We have already held that the facts of the present case do not establish that there was any agreement and nothing done by the insurance company before Arbitrator would also lead to the inference that there was enlargement of the terms of the reference. Mr. Bhabra has also drawn our attention to paragraphs 18, 21 and 22 of the judgment of the Supreme Court in the case of Waverly Jute Mills Co. v. Raymon & Co. . Venkatarama Aiyar, J. delivering the judgment of the court has inter alia held that a dispute as to the validity of a contract could he the subject matter of an agreement of arbitration in the same manner as a dispute relating to a claim made under the contract. But such an agreement would be effective and operative when it is separate from and individual of the contract which is illegal. Where however it is a term whose validity is in question, it has no existence apart from the impugned contract and must perish with it (vide Khardah co. Ltd.'s case AIR 1962 SC 1810 . Venkatarama Aiyar, J. had distinguished the decisions of this Court is National Fire and General Insurance Co, v. Union of India (supra) and Pratabmull v. K.C. Sethia , by observing in both those cases that there was a valid submission on which Arbitrators proceeded to act. Before them the parties filed statements and therein they put forward a claim which was not actually covered by the reference and invited them to give their decision thereon. The party against whom the award had gone contended that the Arbitrators had acted without jurisdiction in deciding the claim. Thus, there was no want of initial jurisdiction but there was enlargement of the scope of the reference. This did not involve any question of jurisdiction in the Arbitrators. The observations made in paragraph 23 of the judgment in Waverly Jute Mills Co. (supra) go to indicate that when there was no lack of initial jurisdiction either by entering into fresh agreement or by filing statement before the Arbitrator, the parties , may invite the Arbitrator to adjudicate upon questions not originally included in the reference. In the present ease, as already observed, no independent agreement to enlarge the scope of the arbitration clauses was either pleaded or proved by the appellant. By filing statements before the Arbitrator neither party had invited the Arbitrator to record any finding as to whether the insurance company was liable for the loss and whether in fact the goods of the appellant stored in the godown were destroyed by fire. We have already mentioned that the respondent company has denied that it had at all participated at any stage in the arbitration proceedings. In course of his reply. Mr. Chatterjee had relied upon the decision of the Supreme Court in the case of Tarapore & Co. v. Cochin Shipyard Ltd. . This decision however is of no assistance because in the said reported case the arbitration clause was of widest amplitude and the court had held that the claim for compensation due to increase in the price of pile driving equipment and technical know-how fees would be covered by arbitration clause. The court had also made distinction between a case where a question of law is specifically referred from a case where there is no such agreement to refer points of law to the Arbitrator. In this connection, the court had rejected the argument that a party cannot be estopped from contending that the Arbitrator had no jurisdiction to entertain the dispute because he had agreed to the submission without prejudice to his right to contend to the contrary. The Supreme Court held that the respondent in the said case did not have recourse to an application under Section 33 of the Arbitration Act and had also on its own referred a specific question of law to the Arbitrator for his decision participated in the arbitration proceedings invited the Arbitrator to decide the specific question and took a chance for a decision.
14. The ratio of the Supreme Court decision in the case of Tarapore & Co. v. Cochin Shipyard Ltd. (supra) would be in applicable because the facts of the present case are entirely different. Unlike the arbitration clause of the said reported case the arbitration clause in the insurance policy in favour of the appellant company was not of widest amplitude but was confined to the question of the amount of liability for the loss. Secondly the insurance company did not either expressly or by implication agreed to the enlargement of the arbitration clause. The specific question whether loss if any had occurred by reason of the alleged fire was never agreed to be referred to arbitration and the insurance company had never invited the Arbitrator to decide the said question.
15. Sri Keshab Chandra Bose was never appointed as an Arbitrator in accordance with the arbitration clause contained in the insurance policy. The said clause provided, inter alia, that in case the parties did not agree upon a single arbitrator, the differences as to the amount of any loss or damage shall be referred to two disinterested persons as Arbitrators, one of whom shall be appointed in writing by each of the parties within two calender months after having been required to do in writing by the other party. The said clause further provided that in case either of the party within the said time refuse to appoint Arbitrator, the other party shall have the liability to appoint a sole Arbitrator. In the instant case, while the insurance company was still investigating into the claim of the appellant, the appellant company by a letter dated 5th May, 1977 straightway appointed Sri Keshab Chandra Basu as an Arbitrator and had called upon the insurance company to appoint its Arbitrator. According to the finding made by the learned trial Judge, Subrata Bose had no authority on behalf of the respondent company to take steps in the arbitration proceeding. Thereupon on 5th May, 1977 the appellant company by letter dated 9th July, 1977 had appointed Keshab Chandra Bose as the sole Arbitrator. Subrata Basu had again concealed from the respondent the said letter dated 9th July, 1977.
16. On 5th August. 1977 Keshab Chandra Basu as the Arbitrator held the first meeting which was attended by a representative of the appellant and also by Subrata Basu purported to be on behalf of the respondent insurance company. Subrata Basu had filed a letter requesting adjournment for six weeks. The Arbitrator had given directions for filing of statement and counter-statement. On September 9, 1977 the second meeting was held by the Arbitrator which was attended by Lohia and Khemka on behalf of the appellant and by Subrata Bose. Subrata Bose had requested Adjournment on the ground of talks of settlement. On 23rd September, 1977 before the Arbitrator adjournment was obtained on the plea that said Subrata Bose is unwilling. On the said date statement of claim was filed on behalf of the appellant company, a copy of which was forwarded to Subrata Bose. On 7th October 1977 the Arbitrator held his fourth meeting. Subrata Bose had requested extension of time for filing of counter-statement and according to the minutes, suggested that the matter be mutually settled. On October 14, 1977 the Arbitrator held the fifth meeting. No one appeared on behalf of the respondent company. According to the minutes, a telephone call was made to the office of the respondent company but information was obtained that the officers were on strike. The Arbitrator directed that the arbitration proceeding should continue since no intimation had been received from the insurance company. The Arbitrator had adjourned the meeting. Subrata Bose had purported to file counter-statement at the sixth meeting held by the Arbitrator on November 8, 1977. On November 16, 1977, the seventh meeting was attended by Lohia, Khemka and Subrata Bose. At that stage, the Arbitrator had directed that the application made to court for extension of time for making the award. Subrata Bose agreed to give consent. On October, 13, 1977 upon petition filed by the appellant company which was signed by Subrata Bose signifying his consent, this court had extended the time for making " of the award.
17. On December 23, 1977 the eighth meeting was held by the Arbitrator was attended by Bhadra and Khemka on behalf of the appellant company. The Arbitrator placed a letter from Subrata Bose intimating his inability to attend the meeting and giving his consent to the proceeding being continued ex parte. The meeting was adjourned. The nineth meeting was held on January 16, 1978. Again Subrata Bose had written a letter to the Arbitrator intimating that it was not possible to depute any representative to attend and stating that he had no objection if the claimant was allowed to start presenting its case in the absence of the petitioner. On the said date, the appellant company opened its case and facts of statement and claim on behalf of the appellant were presented. From this stage not even Subrata Bose had ever attended the meeting held by the Arbitrator. At the tenth meeting the Arbitrator again recorded that Subrata Bose had written a letter dated 27th January, 1978 again stating that it was not possible to appoint any representative and agreeing to the claimant being allowed to present its case in the absence of the insurance company. The Arbitrator had adjourned the said meeting. The Arbitrator had sent minutes of the said meeting dated 28th January, 1978 to the respondent. The Arbitrator recorded that the meeting had been adjourned to second day of February, 1978 and that no fresh notice will be issued. The meeting will be held peremptorily on that date even if the respondent be not present on that date. On February 2, 1978 the Arbitrator held his 11th meeting. The representatives of the appellant were present but none appeared on behalf of the respondent company. The Arbitrator had sent to the insurance company a copy of the minutes of the said 11th meeting stating that the next meeting will be held on 6th February, 1978 and no fresh notice will be issued. On 6th February, 1978 or on subsequent dates none had appeared on behalf of the respondent insurance company. No further notices were also given by the Arbitrator of the meeting held by him. On February 21, and 27, 1978 and on March 22, 1978, the Arbitrator had made his award.
18. Mr. Bhabra has pointed out that in the trial court, the Arbitrator himself did not file any affidavit stating that he had given to the insurance company notices of the sittings held subsequent to the 8th sitting. Secondly, in the present case the insurance company did not manifest any intention not to join and participate in the arbitration proceedings. Sabyasachi Mukharji, J. (as he then was) in the case of Dipti Bikash Sen v. India Automobiles Ltd. had considered earlier reported decisions including those of Sir Asutosh Mookerjee, J. in the case of Udaichand v. Debibux AIR 1920 Cal 853 : ILR 47 Cal 951 and the judgment of Phani Bhusan Chakraborty, CJ. in the case of Juggilal v. General Fiber Dealers and in paragraph (3) of his judgment Sabyasachi Mukharji, J. had summed up the principles governing the Arbitrator's right to proceed ex parte : --
(1) If a party to an arbitration agreement had filed to appear at one of the sittings, the arbitrator could not or, at least ought not to, proceed ex parte against him in that sitting.
(2) Where non-appearance was accidental or casual, the arbitration should ordinarily proceed in the ordinary way, fixing another date of hearing and awaiting the future behaviour of the defaulting party.
(3) If, on the other hand, it appears that the defaulting party had absented himself for defeating the object of the reference, the arbitrator should issue a notice that he intended at specified time and place to proceed with the reference and that if the party concerned did not attend he would proceed in his absence.
(4) But if after making such peremptory appointment issuing such a notice the arbitrator did not in fact proceed ex parte on the date fixed, but fixed another subsequent date, he could not proceed ex parte on such subsequent date, unless he issued a similar notice in respect of that date as well.
(5) If he issued a similar notice and the party concerned did not appear, an award made ex parte would be in order. But, if he did not issue such notice on the second occasion but nevertheless proceeded ex parte, the award would be liable to be set aside in spite of a notice of peremptory hearing having been given in respect of the earlier date, subject however to the condition that prejudice was caused to the party against whom the ex parte order was made.
Sir Asutosh Mookerjee, J. (as he then was) in the case of Udaychand v. Debibux (AIR 1920 Cal 853) (supra), had recognished that giving of such peremptory notices prior to proceeding ex parte was a requirement not of law but of prudence. Therefore, in a particular circumstance where a party was determined not to appear before the Arbitrator, in any event, or he had openly repudiated the reference, the Arbitrators are not required to issue a notice of an intention to proceed ex parte (see also discussion by P.B. Chakraborty, CJ. at page 154 of his judgment in the case Juggilal v. General Fiber Dealers (supra) and the quotations made by the learned Chief Justice from Russell on Arbitration, 11th Edition).
19. In the instant case, omission on the part of the Arbitrator to give any notice of the llth meeting and the subsequent ones had caused serious prejudice to the insurance company. Chakraborty, CJ. in the case of Juggilal v. General Fiber Dealers (supra), at page 155 had observed "Where there had been a omission to give a notice, there will always be a presumption that prejudice had caused". In the facts of this case the ex parte award was liable to be set aside on the ground that the Arbitrator did not give any peremptory notice to the respondent Insurance Company before proceeding ex parte from the stage of the 11th meeting. On this ground also the award was invalid.
20. For the foregoing reasons, we uphold the decision of the learned trial judge, setting aside the award of late Keshab Chandra Bose dated 27th March, 1978. We, therefore, dismiss this appeal with costs.
A.C. Sengupta, J.
21. I agree.