Patna High Court
Ganga Prasad Modi vs Nagarmal Modi And Anr. on 21 September, 1949
Equivalent citations: AIR1951PAT321, AIR 1951 PATNA 321
JUDGMENT Meredith, J.
1. This appeal is directed against an order rejecting an application for passing a decree in terms of an award in an arbitration held out of Court. The appellant was the applicant. The Court below has rejected the application and set aside the award on the ground of misconduct on the part of the arbitrator, and the question is whether that finding of misconduct was justified. The alleged misconduct is that the arbitrator took evidence behind the backs of the parties with regard to the most important question in dispute, and based his decision on that evidence.
2. In the award the arbitrator says:
"The main dispute in this case is regarding one share of Calcutta Stock Exchange the value of which has considerably increased. This was purchased on 15-8-1937, for a sum of Rs. 20,000......I made enquiries at Calcutta on 7-1-1946, in this connection from Babu Jagannath Gupta and two other gentlemen of share market and fixed the valuation at Rs. 1,01,000."
Later he says:
"The parties did not adduce any oral or documentary evidence except the account books and statements of Babu Nagarmal Modi and Chandi Prasad Modi and Ganga Prasad Modi and Madanlal Modi."
It is admitted that when these gentlemen were examined in Calcutta neither the appellant nor either of the two respondents were present.
3. In the petition of objection to the application of the appellant, the respondents simply said that the evidence had been taken behind their backs. The arbitrator has not been examined by either party, but the appellant himself gave evidence, and one of the respondents also gave evidence. The appellant in his evidence said:
"I am the sole applicant. The arbitrator informed the opposite party 1 and myself at the same time on 5th or 6th January 1946, that he would be in Calcutta on 7-1-1946, and that be would be in the Stock Exchange at 12 noon on 7-1-46 and that we should meet him there. Opposite Party 1 was appearing for both the opposite parties before the arbitrator." As against this, the respondent who gave evidence said:
"The arbitrator did not inform the opposing parties that he would be at Calcutta on 7-1-1946 and that he would examine witnesses or lake evidence there."
There is no definite finding by the learned Subordinate Judge as to whether the parties were given notice of this Calcutta excursion or not. But this is a first appeal, the evidence is before us, and we can come to our own findings. Having considered the evidence and all the circumstances I am of the opinion that there was no notice given in this case. It is notable that the arbitrator in the award does not say he gave any notice before proceeding to Calcutta. The fact that in the original objection it was not definitely stated that notice had not been given seems to me of little importance because, I think, the assertion that the evidence was taken behind the parties' backs obviously meant that they were not given notice. As for the evidence, it is oath against oath. But, as appears from the award, the question of the valuation of this Stock Exchange share was the main point in dispute, and it is very difficult to believe that, if the parties had had notice, neither of them would take the trouble to be present. The appellant himself in his evidence merely said that he had been informed either one or two days before the visit. Surely, in the circumstances, the parties would have said, if they had been unable to visit Calcutta at a day's notice, that they should be given some further notice and a different date should be fixed, so as to allow them to proceed there. But that is not suggested.
4. As I hold that the parties did not get notice, it is unnecessary to consider what the legal position would be if the parties had received due notice and had nevertheless remained absent. I desire to express no opinion on that point. But where an arbitrator takes evidence behind the backs of the parties without notice to them, and bases his award on that evidence, the law is well settled that it amounts to misconduct. It is unnecessary to deal with the cases at length. The position has been admirably summed up in Sircar's Tagore Law Lectures on the Law of Arbitration in British India at p. 174. where the learned author says on the question of the necessity of proceeding in the presence of both parties :
"Arbitrators should rigidly follow this rule because departure from it has often been considered to be a substantial ground for setting aside of the award."
He refers to In re Plews (?) and Middleton, (1846) 6 Q. B. 845 : (14 L. J. Q. B. 139) where each of the arbitrators examined the same person separately and came to the same conclusion and made their award, and in setting aside the award it was said by Coleridge J. :
"To uphold this award would be to authorise a proceeding contrary to the first principles of justice. The arbitrators here carried on examinations apart from each other, and from the parties to the reference; whereas it ought to have been conducted by the arbitrators and umpire jointly in the presence of the parties."
He adds :
"How strongly the Courts condemn the practise of examining witnesses or hearing references in the absence of one of the parties is illustrated in Ramsden and Co. v, Jacobs, (1922) 1 K. B. 640: (91 L. J. K. B. 432), where the arbitrator heard the evidence of each of the parties In the absence of the other. No objection was made by the parties at the time to the procedure, and it was not shown that any injustice had resulted from this improper procedure, and yet in setting aside the award Bray J. stated : 'It is said on behalf of the sellers that no injustice was done, that the issues were quite plain and depended upon no question of fact on which there would be a conflict of evidence. I feel the force of that, but Mr. Goddard for the buyer has urged that we ought to show our disapproval of the procedure that was followed, and, with some reluctance I yield to that argument and say that we ought to set the award aside."
5. The learned author also refers to Dobson v. Groves, (1844) 14 L. J. Q. B. 17 : (6 Q. B. 63)' where the arbitrator explained that all that had happened, when he was closeted with a witness and a pleader, was that the witness merely explained the plans and the pleader was present to give him information in connection with the case, but his opinion was not biased by any of those facts. The Court held that there was an opportunity for the mind of the arbitrator being biased and set aside the award.
6. Reference is also made to the Calcutta case Toolsimony Dassee v. Sudeni Dassee, 3 C. W. N. 361, where the first metting of the arbitrators was held behind the back of one of the parties and it was urged that nothing was done at the meeting. But Maclean C. J. said :
"It is all very well to Bay nothing was done at that meeting, but how do we know what may or may not have been said by the plaintiffs ? They may, for ought we know, have made ex parte statements to the arbitrators about the case; they may have instilled some poison into the arbitrators' minds to the prejudice of the defendants."
7. In Ganesh Narain Singh v. Malida Koer, 13 C. L. J. 399 ; (10 I. C. 450) the Bench said:
"In arbitration proceedings both aides must be heard and each in the presence of the other. However immaterial the arbitrator may deem a point, he should be very careful not to examine a party or a witness upon it except in the presence of the opponent. If he errs in this respect, he exposes himself to the gravest censure, and the smallest irregularity is often fatal to the award, Where the award recites on the face of it that the arbitrator held, partly on evidence taken before him and partly on private enquiry, that the will executed by a certain person was genuine, it was not competent for him to do so, and the award was vitiated."
8. Our attention has been drawn to only two Patna cases, both of them single Bench decisions. In Ganga Bhagat v. Sokhi Ram, 15 P.L.T. 693: (A. I. R. (21) 1934 Pat. 550) Wort J:, held that, apart from an agreement to allow the arbitrators to do so, private enquiries behind the backe of the parties is against the ordinary rules of justice. In the other case, Abdul Halim v. Ismail Momin, 86 I. C. 773 : (A, I. R. (12) 1925 put. 465) Foster J., said :
"An arbitrator who makes an enquiry or receives confidential information behind the back of the parties is guilty of misconduct."
9. All the reasons given by the learned Subordinate Judge for his decision may not be sound, but I am nevertheless of opinion that the decision itself was correct, and I would, therefore, dismiss this appeal with costs.
Ramaswami J.
10. I agree.