Bombay High Court
Maharashtra State Co-Operative Cotton ... vs Ralli Bros. And Coney Ltd. And Ors. on 11 July, 1991
Equivalent citations: 1992(1)BOMCR485
JUDGMENT D.R. Dhanuka, J.
1. On 4th July, 1986, the petitioner No. 1 (who was then the sole petitioner) filed this petition under section 33 of the Arbitration Act. 1940, impugning the original Award dated 3rd May, 1985 made by respondents Nos. 2 and 3 Arbitrators appointed under the Bye-laws of the East India Cotton Association Limited as well as the Appellate Award dated 7th February, 1986 made by the Board of Directors of the said Association in the appeal as permissible under the Bye-laws of the said Association. The impugned Awards were in terms made against petitioner No. 2 alone and not against the petitioner No. 1. However, the petitioner No. 1 filed this petition impugning the above-referred Awards its capacity as alleged successor in business of the petitioner No. 2. Even the notice of filing of the Appellate Award was served by this Court on the petitioner No. 2. By several affidavits filed on behalf of the respondent No. 1 in whose favour the impugned Awards were made as aforesaid, it was inter alia contended that the petitioner No. 1 had no locus standi to file this petition and petitioner No. 2 alone could file petition to set aside the Award. On 7th April, 1987, the petitioner No. 1 made an application to this Court duly supported by joint affidavit of authorised representatives of both the petitioners seeking leave of the Court to amend the petition by impleding the petitioner No. 3 as a co-petitioner and by making of certain consequential amendment. The said application was opposed on behalf of the respondent No. 1 inter alia on the ground that the respondent No. 1 could not be deprived of the right which had accrued to the respondent No. 1 by reason of lapse of time resulting from non-filing of the petition by the petitioner No. 2 within the period of limitation. By an order date 29th January, 1988, the said application was rejected by Pendse, J. By an order dated 23rd February, 1989 passed in Appeal No. 1609 of 1988, a Division Bench of our Court consisting of Desai and Kantharia, JJ., dismissed the appeal preferred by the petitioner No. 1. Being aggrieved by the order of the division Bench of this Court dated 23rd February, 1989 referred to hereinabove, the petitioner No. 1 preferred a Special Leave Petition to the Hon'ble Supreme Court of India. Arising out of Special Leave Petitions Nos. 3531-32 and 3543 of 1989, Civil Appeals Nos. 2147-2199 of 1989 were decided by the Hon'ble Supreme Court by its order dated 30th March, 1989. In the said order, the Hon'ble Supreme Court noted the contention that the petitioner No. 1 had filed the petition seeking to set aside the Award claiming to be the successor of the "Marketing Federation", In the above-referred order, the Hon'ble Supreme Court observed that it was not necessary for into to go into the question as to whether the petitioner No. 1 herein was the successor to the business of the Marketing Federation or not and whether the petitioner No. 1 was entitled to challenge the impugned Awards or not. By the said order, the Hon'ble Supreme Court observed that this Court had considered the application for amendment too technically. By the aboverefferred Order, the Hon'ble Supreme Court set aside the order, passed by that learned Single Judge as well as the Division Bench and allowed the application of the petitioner No. 1 seeking amendment of the petition by impeding the petitioner No. 2 as a co-petitioner. The Hon'ble Supreme Court directed that the matters be seen back to this Court for disposal in accordance with law. On or about 11th April, 1989, the amendment was carried out and the petitioner No. 2 was impleded as co-petitioner in this petition.
2. At the hearing of the petition, the respondent No. 1-Company raised a preliminary objection to the effect that the petitioner No 1 Cotton Growers' Marketing Federation had no locus standi to amend the petition. The respondent No. 1-Company contended that the petitioner No. 2-Co-operative Marketing Federation must be deemed to have instituted this petition on 30th March, 1989 when the Hon'ble Supreme Court granted the application for amendment seeking to implead the petitioner No. 2 as party petitioner or, in alternative, on 7th April, 1987 when an application for amendment of the petition seeking to implead the petitioner No. 2 was made to this Court. On the above footing, the respondent No. 1-Company raised another preliminary objection to the effect that the petition was barred by law of limitation, as it was not filed by the petitioner No. 2-Co-operative Marketing Federation (who alone could file the petition) within a period of 30 days from the date of service of the notice of the filing of the Award on it. Relying upon section 21 of the Limitation Act. 1963, or the principles embodied in the said section, the respondent No 1. Company contended that the petition must be deemed to have been instituted by newly joined petitioner only on the date of joinder of newly added petitioner as a party petitioner to the petition. It was also highlighted on behalf of the respondent No. l-Company that no order was passed by the Hon'ble Supreme Court under the proviso to section 21 of the Limitation Act. 1963, to the effect that the newly added petitioner should be deemed to have become a party petitioner to the petition from an anterior date or from the date when the petition was originally filed by the petitioner No. 1 Cotton Growers' Marketing Federation. The respondent No. 1 -Company contended that in the absence of an express order to the above effect, no such order could be implied from mere fact of granting of application for amendment. The respondent No. 1-Company contended that section 21 of the Limitation Act, 1963, was applicable not merely to proceedings initiated by plaint but also substantive proceeding initiated by petition in the nature of plaint. The respondent No. 1 -Company contended that the expression 'suit' as used in section 21 of the Limitation Act, 1963, be construed widely.
3. The petitioners contended that the respondent No. 1-Company had opposed the application for amendment inter alia on the ground of limitation. The petitioners contended that the respondent No. 1-Company could not urge the contention of limitation once again at the hearing and it must be assumed that the plea of limitation raised by the respondent No. 1 was rejected by the Hon'ble Supreme Court while allowing the amendment. The petitioners contended that the respondent No. 1-Cotton Growers Marketing Federation was precluded in law from urging the plea or limitation on the applicability of principles analogous to res judicata or on the ground of issue estoppel, as the Hon'ble Supreme Court must be deemed to have rejected the contention of limitation urged on behalf of the respondent No. 1 to oppose the application for amendment as aforesaid. The petitioners further contended that the matter involved merely correction of mis-description of a party and the proceeding instituted to time could not be treated to have become time-barred merely because the petitioner No. 2-Co-operative Marketing Federation was joined as a co-petitioner later on. The petitioners contended that section 21 of the Limitation Act, 1963, was applicable only to suits, properly so called, and the said section had no application whatsoever to the petition under section 33 of the Arbitration Act, 1940. The petitioners relied upon the definition of the word 'suit' as given in section 2(1) of the limitation Act, 1963, providing that the expression 'suit' used in the said Act did not include an appeal or an application. The petitioners submitted that all amendments relate back to the date of the institution of the main proceeding and the effect of granting the application for amendment by the Hon'ble Supreme Court was that the petitioner No. 2 also is deemed to have instituted the petition on 4th July 1986. The petitioners have contended that the running of the limitation stops once the suit, appeal or application is instituted in time and but for the legal fiction introduced by section 21 of the Limitation Act, 1963, there cannot be different dates of institution of the suit, one qua the original petitioner and another qua the newly added petitioner. The petitioners have contended in alternative that the discretionary power vested in the Court under the proviso to section 21 of the Limitation Act, 1963, could also be exercised by the Court hearing the main proceeding or the superior Court seized of the appeal or revision therefrom and it was not correct to state that the power vested in the Court under the proviso to section 21 of the Limitation Act, 1963 could be exercised only by the Court granting the application for amendment and by no other Court. In further alternative, the petitioners have prayed for condensation of delay in filing of this petition by the petitioner No. 2 under section 5 of the Limitation Act. 1963.
4. This matter was on my Board for final hearing on 18th September, 1990 when it was partly discussed on the question of limitation. The learned Counsel for the petitioners then applied for a short adjournment for taking out a Chamber Summons inter alia seeking condonation of delay. On 21st September, 1990, the petitioners took out Chamber Summons No. 998 of 1990 inter alia for the following reliefs :---
"(a) That it be declared that by reason of the order dated 30th March, 1989 passed by the Hon'ble the Supreme Court of India in Civil Appeal No. 2197-2199 of 1989, the present petition as regards Petitioner No. 2 is deemed to have been instituted on 4th July, 1986 i.e., the date of the petition;
(b) In the alternative to prayer (a) above, this Hon'ble Court will be pleased to direct under section 21(1) proviso that the petition as regards Petitioner No. 2 shall be deemed to have been instituted on 4th July, 1986;
(c) That in alternative to prayers (a) and (b) above, this Hon'ble Court will be pleased to condone the delay of 9 months and 3 days in filing the petition being the period from 4th July, 1986 i.e., the date of the petition and 7th April, 1987 when the application for amendment to join Petitioner No. 2 was made,"
The said Chamber Summons has been opposed as vigorously as the petition itself. It was decided by me that both the chamber summons and the petition shall be heard together and shall be disposed of by a common judgment. The matter was argued with considerable preparation and throughness by the learned Counsel for the petitioner and the learned Counsel for the Respondent No. 1. Written arguments were also field to assist the court.
5. I propose to deal with the matters connected with the above-referred preliminary objection first. In the later part of this judgment, 1 shall deal with the grounds of challenge to the Awards on merits of the challenge.
6. This chamber summons raises interesting and important questions of law pertaining to interpretation and application of section 21 of the Limitation Act, 1963, and, in particular, interpretation of the expression 'suit' used in the said Act. Before I deal with each of the contentions urged by the learned Counsel on either side on this aspect, it shall be necessary to state some more facts having bearing on this aspect of the matter, although some of these facts would have some bearing on the challenge to the impugned Awards on merits also. Some of the material facts having bearing on the aspect of limitation are as under:---
(a) The Maharashtra State Co-operative Marketing Federation Limited is now impleaded as petitioner No. 2 in this petition by virtue of order of the Hon'ble Supreme Court allowing the amendment. The petitioner No. 2 is a co-operative society duly registered under the provisions of the Maharashtra Co-operative Societies Act, 1960. The petitioner No. 1 was registered as a co-operative society only in August 1984. The petitioner No. 2 has been functioning as a co-operative society at least for more than two decades.
(b) On 1st April, 1972, the Government of Maharashtra appointed the petitioner No. 2 as its chief agent to procure, process and market cotton in the State of Maharashtra as contemplated under the Act known as the Maharashtra Raw Cotton (Procurement, Processing & Marketing) Act, 1971. The petitioner No. 2 entered into large number of transactions for sale of cotton for the purpose of export and for other purposes with different buyers. The contracts made between the petitioner No. 2 and various buyers of cotton were expressly made as contracts subject to the Bye-laws of the East India Cotton Association Limited. Section 38 of the said Act also in terms provided that in addition to any dispute arising between the parties, the Award which may be made under me Bye-laws of the Association shall be final and binding on the parties concerned. Section 38 of the above-referred Act reads as under:---
"38.(1) Notwithstanding anything contained in any law for the time being in force, when ginned cotton pressed into bales is sold by or on behalf of the State Government to any person, and there is a dispute between the seller and the buyer, regarding the quality of the goods sold or regarding the price or delivery of such goods or regarding any other matter connected with the sale, the dispute, unless resolved by settlement between the parties, may be referred to the East India Cotton Association Ltd. (hereinafter in this section referred to as "the Association"), by any of the parties to the dispute.
(2) Where any such dispute is referred to the Association under the last preceding sub-section, it shall be deemed to be submitted to arbitration of the Association and shall be decided in accordance with the provision of , its Bye-laws. The award made or decision given by the authority appointed under the Bye-laws of the Association to decide such dispute shall be communicated to the parties concerned, and they shall have a right of one or more appeals as provided in the Bye-laws of the Association.
(3) The fees payable far surveys, arbitration and appeals and the costs which may be awarded and the period of limitation for referring to arbitration and periods for filing appeals shall be in accordance with the provisions of the Bye-laws of the Association.
(4) Any award made or decision given by the authority appointed to decide the dispute, subject to an appeal or appeals, as provided in the Bye-laws of the Association, and where an appeal is filed, the decision of the appellate authority concerned, shall be final and binding on the parties concerned."
(c) On or about 19th February, 1983, the petitioner No. 2 agreed to sell 10,000 bales of cotton to the respondent No. 1 for the purpose of export. It is not necessary to set out particulars of the contract arrived at between the parties at this stage. On or about 20th February, 1983, the petitioner No. 2 agreed to sell 34,500 bales of cotton to the respondent No. 1 for the purpose of export. Both the said transactions were subject to the bye-laws of the East India Cotton Association Limited. It was the case of the respondent No. 1 at all times that the petitioner No. 2 had failed and neglected to effect shipment of the said 44,500 bales of cotton and the respondent No. 1 was entitled to close the transaction by getting the invoicing back rates fixed by the East India Cotton Association Limited. On 19th December, 1983, the respondent No. 1 forwarded 11 debit notes for the difference between the contract price and the invoicing back rates fixed by the East India Cotton Association Limited claiming payment of US $ 10,89,833.13 from the petitioner No. 2. The petitioner No. 2 denied liability to pay the said amount or any part thereof to the respondent No. 1.
(d) The petitioner No. 2 invoked Bye-law 38 of the Bye-laws of the East India Cotton Association Limited. The respondents Nos. 2 and 3 were appointed as Arbitrators by the Chairman of the Association to decide the dispute between the parties arising out of the cotton transactions which were made subject to the Bye-laws of the Association. The petitioner No. 2 filed a series of arbitration petitions in this Court under section 33 of the Arbitration Act, 1940 in respect of several arbitration proceedings filed by various cotton buyers disputing jurisdiction of the Arbitrators to decide the claims made by the respondent No. 1 inter alia on the ground that the contracts relied upon by the respondent No. 1 were contingent contracts. By his judgment and order dated 12th and 13th November, 1984. Pendse, J., dismissed all these petitions and held that the transactions in question were concluded contracts. The learned Judge held that the contracts in question were not contingent contracts. The learned Judge held that it was for the Arbitrators to decide as to whether the petitioner No. 2 was exempted from performing the said contract and whether the force majeure clause was attracted.
(e) By their Award dated 3rd May, 1985, the respondents No. 2 and 3 directed the petitioner No. 2 to pay to the respondent No. 1 a sum of U.S $ 5,44,916.56 together with interest thereon at the rate of 21% per annum from the date of the award till the date of payment. Being aggrieved by the said Award, the respondent No. 1 preferred an appeal before the Board of Directors of the East India Cotton Association Limited. By the Appellate Award dated 7th February, 1986, the Board of Directors awarded the claim of the respondent No. 1 in full i.e., in the sum of U.S.$ 10,89,833.13. By the said Award, the Board of Directors of the East India Cotton Association Limited directed the petitioner No. 2 to pay the said sum to the respondent No. 1 within three months of the publication of the said decision of the Board. It was provided by the said Award that in default, the petitioner No 2 shall also be liable to pay interest on the awarded amount, at the rate of 21% per annum from 7th February, 1986 till the date of payment. The petitioner No 2 did not pay the said amount or any part thereof to respondent No. 1 The petitioner No 1 also did not pay the said amount or any part thereof to the respondent No. 1.
(f) On 5th June, 1986, notice of the filing of the award was served by this Court on petitioner No. 2. No such notice was served on petitioner No. 1. On 4th July, 1986, the petitioner No. 1 alone filed this petition impugning both the awards dated 3rd May, 1985 and 7th February, 1986, even though the original award dated 3rd May, 1985 was superseded by the Appellate award dated 7th February, 1986 and no petition could be maintainable against the original award inasmuch as the said original award did not then subsist. In paragraph 1 of the petition, the petitioner No. 1 inter alia stated:
"At all material times the petitioners were known as the Maharashtra State Co-operative Marketing Federation Ltd."
The petitioner No. I was never known by name of petitioner No 2.
(g) On 17th February, 1986, Shri Dhirajlal V. Shah, Constituted Attorney of the respondent No I, filed his affidavit in reply to the petition inter alia, contending that the petitioner No. 1, who was then the sole petitioner in the petition, had no locus standi to file the petition and the Marketing Federation had not filed any petition against the said Appellate Award dated 7th February, 1986. It appears that on 8th September, 1984, the Government of Maharashtra for the first time appointed the Maharashtra State Co-operative Cotton Growers Marketing Federation Limited as its agents under the provisions of the Maharashtra Raw Cotton (Procurement, Processing and Marketing) Act, 1971 The petitioner No. 1 amended the petition by incorporating one more ground of challenge to the impugned Awards in the petition. Shri Dhirajlal V. Shah filed his affidavit dated 5th January, 1987 pleading to the said amendment.
(h) Shri Dayanand Dayesh, Deputy Director (Export) of the petitioner No. 1, filed his affidavit in rejoinder dated l3th February, 1987 The said affidavit is extremely significant. In paragraph 2 of the said affidavit, the deponent of the affidavit pleaded on behalf of the petitioner No. 1 that the petitioner No. 1 was the successor to the Maharashtra State Co-operative Marketing Federation Limited. In paragraph 3 of the said affidavit, the deponent averred as under:---
"I deny that the petitioners are a different entity from the Marketing Federation as falsely alleged.
In paragraph 5 of the said affidavit, the deponent of the said affidavit repeated that the petitioner No I was not a separate or distinct or different entity than the petitioner No. 2. 'The above-referred assertions are not correct.
(i) On 7th April, 1987, the petitioner No. 1 filed an application for amendment of the petition seeking to implead the petitioner No. 2 as a co-petitioner on the basis of joint affidavit of Shri Dayanand S. Desai and Shri Jagannath A. Jagtap. In the application for amendment, the petitioners relied on letter dated 8th September, 1984 issued by the Government of Maharashtra addressed to the Maharashtra State Co-operative Marketing Federation Limited. In the said letter, it was stated by (the Government of Maharashtra that in view of establishment of the Maharashtra State Cotton Growers Co-operative Marketing Federation, the Government of Maharashtra had decided to appoint the petitioner No. I as its chief agent for operating the Cotton Monopoly Procurement Scheme from the cotton season 1984-85. It was recommended by the said letter that steps be taken for effecting transfer of agency from the Marketing Federation to the Cotton Growers Co-operative Marketing Federation. The said letter by itself cannot constitute an instrument of transfer of assets and liabilities of petitioner No. 2 to petitioner No. 1 as contemplated. No deed of assignment was executed. In the proceedings concerning the said application for amendment, if was also contended by petitioner No. 1 that it was a case merely of change in name of the Marketing Federation to that of the petitioner No. 1. This contention of petitioner No. 1 was factually incorrect.
7. It is not possible to accept the submission of Mr. Tulzapurkar, the learned Counsel for the petitioners, that the Court granting an application for amendment is deemed to have decided the issue of limitation against the respondent No. 1 merely because the amendment application was allowed by the Court notwithstanding the opposition thereof inter alia on the ground of limitation. While considering the application for amendment, the Court does not adjudicate upon issues which would arise on the pleadings at the trial of the main proceedings. While considering the application for amendment, the Court exercises its discretion after considering all facts, including the plea of limitation for the limited purpose of deciding as to whether the pleading should be allowed to be amended in the interests of justice. It is open to the contesting respondent to contend at the final hearing of the petition that the main proceeding was liable to be treated as time-barred notwithstanding the order of the Court permitting amendment of the pleading, even though the application for amendment was opposed inter alia on the ground of limitation. Moreover, the order of the Hon'ble Supreme Court granting the application for amendment does not deal with the question of limitation at all. There is no scope for applying principles analogous to res judicata, actual or constructive, by inference sought to be drawn on behalf of the petitioners from the mere fact of allowing of the application for amendment as aforesaid According to my interpretation of the order of Hon'ble Supreme Court dated 30 March, 1989, all that happened was that application for amendment was allowed and all contentions of both parties were kept open. Even when a application for a amendment is opposed on the ground of limitation by the party resisting amendment, the Court not bound to record a finding on the issue of limitation and reject or allow the application for amendment after expressing its definite view in respect of contentions urged. The Court may attach some weightage to each of the grounds of opposition to the application for amendment and then take an overall view as to whether pleading should be allowed to be amended in interests of justice or not. In this view of matter, it is not possible to preclude respondent No. 1 from urging its preliminary contentions including that of limitation at the final hearing of the petition.
8. The learned Counsel for the petitioners invited my attention to observations made by the Hon'ble Supreme Court in the case of Arjun Singh v. Mohindra Kumar & others . In this case, relying upon an earlier judgment of the Hon'ble Supreme Court cited in paragraph 10 of the Judgment, the Hon'ble Supreme Court observed that the general principles of res judicata could be applicable to different stages of same suit. In the later part of paragraph 11 of the same Judgment, it was observed by Ayyangar, J., speaking on behalf of the Bench, as under:---
"But where principle of res judicata is involved in case of different stages of proceedings in the same suit, the nature of the proceedings, the scope of the enquiry, which adjectival law provides for the decision being reached, as well as the specific provisions made on matters touching such decision are some of the material and relevant factors to be considered before the principle is held applicable."
9. Having regard to the nature of the proceeding for the amendment of a pleading and the scope of enquiry in such proceeding and the specific provisions made in the order granting amendment, I hold that issue of limitation was not decided by the Hon'ble Supreme Court while allowing amendment and it is open to the respondent No. 1 to prove that the petition is time-barred as it stands today.
10. Mr. Tulzapurkar, learned Counsel for the petitioners, also relied upon the Judgment of this Court in the case of Indo-Pharma Pharmaceuticals Works Private Limited v. Pharmaceutical Company of India, LXXX Bom.L.R. 87, where it was inter alia held as under:---
"When the issue of prior continuous user has been determined by the Deputy Registrar of Trade Marks, then the said issue would operate as res judicata by reason of the application of the principle of issue estoppel and the decision has to be respected by Court irrespective of whether on evidence before the Court it would have decided in same manner as decided by the Deputy Registrar."
In my judgment, it is not necessary to discuss this judgment in detail or consider in detail the principle of law pertaining to "issue estoppel" as laid down in Halsbury's Laws of England, Fourth Edition. Vol. XVI, para 1530, for the simple reason that issue of limitation was not determined by Hon'ble Supreme Court while deciding the appeal arising from the application for amendment dated 7th April, 1987. Accordingly, the question of res judicata or issue estoppel does not and cannot arise at all.
11. I shall now turn to the question of interpretation and applicability of section 21 of the Limitation Act, 1963. Section 21(1) of the Limitation Act, 1963, reads as under :---
"21.(1) Where after the institution of a suit, a new plaintiff or defendant is substituted or added, the suit stall, as regards him, be deemed to have been instituted when he was so made a party;
Provided that where the Court is satisfied that the omission to include a new plaintiff or defendant was due to a mistake made in good faith it may direct that the suit as regards such plaintiff or defendant shall be deemed to nave been institute on any earlier date."
Section 2(1) of the said Act defines the expression "suit" for the purpose of the Limitation Act, 1963 as under:---
"2 In this Act, unless the context otherwise requires,---
(1) "suit" does not include an appeal or an application;"
Mr. Tulzapurkar, the learned Counsel for the petitioners, has submitted that the Limitation Act, 1963, discloses a clear scheme, making certain specific provisions applicable only to suit as contradistinguished with the provisions which are applicable only to appeals or applications. The learned Counsel has invited my attention to series of sections from the said Act where the opening words of the section specifics that the concerned section was in terms applicable to "suits, appeals or applications" alike. In contrast, it is pointed out by the learned Counsel that section 21 of the Act is made applicable only to suits. There is considerable force in this submission of Mr. Tulzapurkar. The expression "suit" has hot been defined under the Code of Civil Procedure, 1908, or by the Limitation Act, 1963. Ordinarily, subject to context to the contrary, a proceeding initiated by presentation of a plaint alone can be described as a suit. It is so stated by section 26 of the Code of Civil Procedure. At the most, proceeding for adjudication of a civil claim may be sometimes treated as a suit, though such proceeding is not initiated by a plaint. I shall now refer to some of the relevant judgments, cited at the Bar.
12. In Hansraj Gupta and others v. Dehra Dun Mussoorie Electric Tramway Co. Ltd. , it was observed by Lord Russell of Kollowen as under:-
"The word "suit' ordinarily means, and a part from some context must be taken to mean, a civil proceeding instituted by the presentation of a plaint."
In this case, the Privy Council held that a claim against a Company in liquidation not made by a proceeding instituted by presentation of a plaint could not be considered to be a 'suit' instituted within section. Mr. Tulzapurkar, the learned Counsel for the petitioners, has invited my attention to the judgment of the High Court of Patna in the case of Chandrika Ray v. Ram Kuer Thakur, A.I.R. 1923 Patna 88. Section 22 of the Indian Limitation Act. 1908, was identical to section 21 of the Limitation Act, 1963, except the absence of the proviso which was newly incorporated in section 21 of the said Act. In this matter, the question before the Court was as to whether the application made under Order IX. Rule 13 of the Code of Civil Procedure. 1908, was liable to be considered as a 'suit' under section 22 of the Indian Limitation Act, 1908. In the abovereferred case, the Division Bench of the High Court of Patna held that a suit did not include an application and section 22 of the said Act was not applicable to an application made by petitioner under Order IX, Rule 13 of the Code. The provisions construed in this case were section 22 of Limitation Act, 1908., The said section is identical to section 21 of the Limitation Act. 1963 in material particulars. This judgment is directly helpful to Mr. Tulzapurkar. It must also be stated at this stage itself that section 32 of the Arbitration Act, 1940 bars the remedy of filing a suit in respect of the matters involving challenge to the Award. Thus it would be doing violence to definition of the expression 'suit' contained in section 2(1) of the Limitation Act, 1963, as well as to scheme of the Arbitration Act, 1940, if it were to be held that the petition seeking to set aside an award is liable to be treated as a suit for the purpose section 21 of Limitation Act, 1963.
13. The learned Counsel for petitioners invited my attention of the judgment of the High Court of Allahabad in the case of Mangal Sen and another v. Prag Das and another . In this matter, the Division Bench of the Allahabad High Court held that an application for filing an award could not be treated as a suit for purpose of section 22 of the Indian Limitation Act, 1908, even though it was liable to be registered as a suit by Schedule II para 20 of the Code of Civil Procedure, 1908, and the parties to proceeding were liable to be described as plaintiff and defendants. The High Court of Allahabad followed the ratio of the judgment of the High Court of Patna in the case of Chandrika Ray (supra). I am in respectful agreement with the ratio of the above decisions.
14. This aspect can be examined from one more angle. A proceeding seeking to set aside an award is not a proceeding for adjudication of a civil claim, like a claim for compensation filed before the Motor Accident Claims Tribunal or some other claim. A petition seeking to set aside an award is maintainable on very limited grounds and bears no analogy with the plaint seeking adjudication of a civil claim as such.
15. In the case of Nawab Usmanali Khan v. Sagar Mal, , it was held by Apex Court that a proceeding under sections 14 and 17 of the Arbitration Act, 1940, was not a suit.
16. I do not consider it necessary to discuss the Judgment of the High Court of Madhya Pradesh in the case of (Hayatkhan & others v. Mangilal and others), -1 or the judgment of our High Court in the case of The Life Insurance Corporation of India v. The Bombay Municipal Corporation, repotted in , as, to my mind, these judgments have no direct bearing on the question under consideration.
17. Principle of section 21 of the Limitation Act, 1963 cannot be applied to applications or appeals by analogy as section 21 of the Act does not incorporate general principles of universal applicability.
18. I, therefore, hold that section 21 of the Limitation Act, 1963 has no application to petitions seeking to set aside awards and it was not necessary for the petitioners to seek an order from the Hon'ble Supreme Court or an order from this Court in application for amendment in terms of proviso to section 21 of the said Act.
19. The next connected question which arises for my consideration is as to what principal is to be applied in a case where a necessary party is added as a co-petitioner after the expiry of limitation for grant of an amendment in the absence of applicability of section 21 of the Limitation Act, 1963. In my opinion, the answer to this question is plain and simple, as indicated below:---
(a) All amendments relate back to the date of the filing of the original proceeding, including the amendment involving addition of parties.
(b) In the absence of a statutory provision like section 21 of the Limitation Act, 1963, or section 22 of the Indian Limitation Act, 1908 creating a legal fiction to the effect that a suit shall be deemed to have been instituted by the newly added plaintiff or against a newly added defendant on the date when the newly added plaintiff or newly added defendant was made a party to the suit, the suit would be regarded as instituted by all parties, including the new plaintiff, on the day when it was 'instituted'. In case of applications, above-referred fiction does not apply as the said fiction is applicable only in case of suits.
The question, however, arises as to what was the principle applicable even in case of a suit when section 21 of the Act of 1963 or section 22 of the Act of 1908 was not part of the Limitation Act, 1963 or 1908. In Ramprasad Dagaduram v. Vijaykumar Motilal Hirakhanwala & others, , the Hon'ble Supreme Court analysed the provisions of section 22 of the Indian Limitation Act 1908, and during the course of such analysis Chief Justice Sarkar, speaking for the Bench, specifically observed in paragraph 19 of his judgment as under:---
"The Court has power to add a new plaintiff at any stage of the suit, and in the absence of a statutory provision like section 22 the suit would be regarded as having been commenced by the new plaintiff at the time when it was first instituted."
Similar are observations in the Judgment of the Patna High Court in Chandrika Ray's case. (supra) relied upon by Mr. Tulzapurkar, the learned Counsel for the petitioners. In the above-referred Judgment of the Patna High Court, it was observed as under :---
"It was then contended on behalf of the opposite party that, quite apart from section 22 of the Limitation Act, the application, as regards the added party, must be regarded as having been made when the added party was actually brought on the record the of application. I do not at all agree with this view. if it were not for section 22 of the Limitation Act, it could not be urged that a suit as regards the added party should be regarded as having been instituted when the was so made a party."
The Hon'ble Division Bench of High Court of Patna placed emphasis on use of the word "deemed" in section 22 of the said Act and held that the fiction introduced in the said section was not applicable to the applications at all.
20. I accordingly hold that the effect of granting the amendment by the Hon'ble Supreme Court by its order dated 30th March, 1989 was that the petitioner No. 2 is deemed to have become a party to petition from the date of its institution i.e. 4th July, 1986 and the petition is, therefore, in time. This is on the principle of all amendments relating back and section 21 of the Act being inapplicable to applications. In this view of the matter, the question of invoking or non-invoking of the proviso to section 21 of the Limitation Act, 1963, does not arise.
21. The Code of Civil Procedure, 1908, is applicable to the proceedings in Court under the Arbitration Act, 1940. Order I, Rule 10(1) of the Code provided that where a suit had been instituted in the name of the wrong person as plaintiff or where it is doubtful whether it has been instituted in the name of the right plaintiff, the Court may, at any stage of the suit, have satisfied that the suit had been instituted through a bona fide mistake and that it is necessary for the determination of the real matter in dispute so to do order any other person to be substituted or added as plaintiff upon such terms as the Court thinks just. The order dated 30th March, 1989 passed by the Apex Court is clearly referable to the exercise of powers by the Court not merely under Order VI, Rule 17 of the Code but also under Order I, Rule 10(l) of the Code. If, therefore, I had held that section 21 of the Limitation Act, 1963, was applicable to the petitions seeking to set aside the awards, I would have exercised my power under the proviso to section 21, as in that event I would have taken the view that the omission to implead the petitioner No. 2 as a party petitioner was as a result of bona fide mistake and passed the consequential order consistent with the view taken by the Supreme Court while granting amendment. It is however, not necessary to pursue this line of discussion any further.
22. Mr. Tulzapurkar, the learned Counsel for the petitioners, has cited several cases in support of his submission that the amendment in question merely involved correction of a misdescription. I am not at all convinced that the petitioner No. 2 was really suing through petitioner No. 1 when the petition was originally filed by petitioner No. 1 and the case was merely of misdescription before the amendment.
23. The petitioner No. 1 had no valid justification to institute the petition in its own name as it was not a successor in business of the petitioner No. 2 and as the assets and liabilities of the petitioner No. 2 were never transferred to the petitioner No. 1. The petitioner No. 1 attempted to justify its locus standi to maintain the petition on grounds untenable in law. Whatever may have been the lacunae in the case of the petitioner No. 1 from the point of view of having no locus standi to file the petition and from the point of view of not impleading the petitioner No. 2 as a party petitioner in time, the same stood rectified on the amendment being allowed by the Hon'ble Supreme Court. It is now not possible to uphold the preliminary objections urged on behalf of the respondents and take a technical view of the matter in view of the Hon'ble Supreme Court having taken liberal view of the matter and in view of the Hon'ble Supreme Court having granted the application of the petitioner for amendment of the petition and permitted impleading of the petitioner No. 2 as party petitioner. I have already held that the petition is liable to be treated as having been instituted by both the petitioners on 4th July, 1986 i.e. in time and the question of bar of limitation, therefore, does not arise. Accordingly, there is no occasion to consider the question of exercising discretion one way or another in relation to condonation of delay under section 5 of the Limitation Act, 1963. If an occasion would have arisen, I would have exercised the discretion in favour of condoning the delay having regard to the totality of facts and circumstances, consistently with the approach of the Hon'ble Supreme Court granting the above referred amendment by its order dated 30th March, 1989.
24. I accordingly dispose of this Chamber Summons by holding that the petitioner No. 2 alone has the necessary locus standi to file this petition. I hold that the petition is filed in time and is not time-barred. I reject each of the preliminary objections urged on behalf of the 1st respondent for the reasons discussed above. There shall be no order as to costs in the chamber summons.
25. Merits of challenge to the award:---
Having regard to the nature of contentions urged by the learned Counsel for the parties, it is necessary to first discuss as to what is the meaning of the expression "award" as used in the Arbitration Act, 1940. Section 2(b) of the Arbitration Act, 1940, defines the expression 'award' as under :---
"award' means an arbitration award;"
The above definition of the expression 'award' is not comprehensive. It is well settled that 'award' means "decision of an arbitrator". Although the document styled as an award may contain recitals, summary of pleadings, reasons for the decision and the decision itself, every part of such a document does not constitute an 'Award'. In true and legal sense of the expression 'award', only the operative part of the decision can be described as an award. When the Court passes a decree in terms of the award under section 17 of Arbitration Act, 1940, the Court passes a decree only in terms of the operative part of the decision of the arbitrator. Thus reasons for the award do not constitute the 'Award'. Thus the final and operative part of the decision alone can be described as an award in true and correct sense of the said expression as known to law.
26. Challenge to original award In Giacomo Costa Fu Andrea v. British Italian Trading Co. Ltd., (1963)1 Q.B. 201, it was held by the Court of Appeal that the original award was superseded by the Board of Appeal and it had no independent existence. It was held by the Court in this case that the award made by the Board of Appeal was the only subsisting award. In this case, the contract contained an arbitration clause that all disputes arising out of the contract shall be referred to arbitration in accordance with the Rules of Incorporated Oil Seeds Association. The said rules provided for arbitration by the arbitrators or an umpire in the first instance. The Rules of the said Association provided right of appeal i.e. appellate arbitration, to the Committee of Appeal of the Incorporated Oil Seeds Association. In the abovereferred case, the Umpire made an award in the following terms:-
"I hereby award that buyers (i.e., Giacoma Costa Fe Andrea) have failed to declare the final grade of distinction by February 1,1961 and, therefore, the contract is void."
The Board of Appeal confirmed the order of the Umpire. The party aggrieved by the award challenged the award in Court on the ground of alleged misconduct of the Umpire. It was held by Lordship Justice Diplock in his leading judgment that in a two-tier arbitration like this the Umpire was functus officio once he had made his award and his award ceased to be binding as soon as the Board of Appeal made its award either confirming it or varying it. It was observed by Diplock, L.J., as under :---
"It seems to me to be clear that only misconduct by the Board of Appeal would justify the Court in acting under section 23 of the Arbitration Act, 1950, and no misconduct by the board of appeal is alleged."
It was further observed by Diplock, L.J., during the course of his judgment as under:---
"This was the appellate tribunal which was agreed upon by the terms of the contract. The buyers (i.e. Giacomo Costa Fu Andrea) had the choice, when the award of the umpire was published, either to proceed under section 23 of the Arbitration Act, 1950, or to appeal. They elected to appeal, and the consequence of their doing so under the rule is that the award of the umpire was superseded by the board of appeal the tribunal of their choice. That award is the only existing award and is one in respect of which no misconduct in the proceeding is now alleged."
I respectfully agree with the ratio and reasoning of this judgment. I hold that the original award in this case was superseded by the appellate award. The original award merged with the appellate award. The original award ceased to have an independent existence. In my judgment, no petition lies to challenge the original award. The learned Counsel for the petitioners has submitted that the impugned appellate award is not a complete award and the said award is not intelligible unless it is read along with the original award. It is not possible to accept this submission. By the original award, the petitioner No. 2 Co-operative Marketing Federation was directed to pay a sum of U.S. $ 5,4491656, together with interest as specified therein and part of the costs of the respondent No. 1 Company. By the Appellate award, the petitioner No. 2 Co-operative Marketing Federation was directed to pay a sum of U.S. $ 10,89,833.13 within three months of the publication of the decision of the Board, failing which the petitioner No. 2 was directed to pay interest on the awarded amount to the respondent No. 1 Company at the rate of 21% per annum from 7th February, 1986 till the date of payment. To my mind, the Appellate award is a complete award. To my mind, the Appellate award is an intelligible award and mere use of the words "modified the award of the Arbitrators to the effect...." does not mean that the decision of the Board is not a complete decision or that it is unintelligible unless it is read along with the original award. The petition, therefore, fails in so far as the petitioners have impugned the original award dated 3rd May, 1985. The petitioners have contended that the Appellate award dated 7th February, 1986 necessarily and definitely incorporates the original award with all the recitals, reasons and discussion in the Appellate award as a part and parcel of the Appellate award. This submission of the petitioners is also not correct. This submission of the petitioner deserves to be dealt with separately and in some detail. It shall be so dealt with in later part of this judgment.
27. Whether the impugned Appellate Award incorporates the original award and the reasons contained in the original Award is integral part of the Appellate Award?
My answer is in the negative. The impugned Appellate Award is a brief non-speaking Award reading as under :---
"DECISION OF THE BOARD After having gone through the State of Grounds of Appeals submitted both by the buyers as well as sellers, rejoinders thereto filed by both, the papers of the case and after having heard the parties, the Board dismissed the appeal filed by sellers viz., M/s The Maharashtra State Co-operative Marketing Federation Ltd., allowed the appeal filed by the buyers and modified the award of the Arbitrators to the effect that the sellers M/s The Maharashtra State Co-operative Marketing Federation Ltd., Bombay, shall pay to the buyers M/s Ralli Brothers & Coney Ltd., Liverpool, a sum of U.S.$. 10.89,833.13 (U.S. Dollars ten lac eightynine thousand eight hundred thirty three and cents thirteen only) within three months of the publication of the aforesaid decision of the Board, failing which the sellers shall also pay interest on the awarded amount at the rate of 21% per annum from 7th February, 1986 till the date of payment."
28. Mr. Tulzapurkar, the learned Counsel for the petitioners, has contended that the Board of Directors of the East India Association Limited has merely modified the original award by substituting higher figure of U.S. $ 10,89,833.13 in the original award. The learned Counsel has submitted that the Board of Directors has adopted the entire reasoning of the original award for the purpose of its Appellate award. The learned Counsel has submitted that the reasons set out in original award are deemed to be incorporated in the Appellate Award. The learned Counsel has submitted that these reasons constitute erroneous proposition of law as the basis of Award and the error of law is patent, obvious and apparent on the face of the Award. The learned Counsel for petitioners has contended that the expression 'modified' should be interpreted to mean and convey 'amended' or altered the original. The expression 'modified' has several shades of meanings. Some of the meanings of the word 'modify' can be noticed from the opinion of Hon'ble Supreme Court in a Reference made by President of India in the case known as ("Delhi Laws Act Case"), Reference No. 1 of 1951. A.I.R 1951 S.C. 332 at p. 335 - para 37. In "Rowland Burrow's Words and Phrases", the word 'modify' has been defined as meaning "vary, extend or enlarge, limit or restrict". Thus the word 'modify' implies an alteration in form of extension or restriction. In the above-referred special reference made by the President of India to the Hon'ble Supreme Court under Article 143 of the Constitution of India, the question arose as to within what parameters legislative power could be delegated and how far executive could be authorised to extend existing law to a particular territory by issue of a notification with or without modification. In the present case before me, the Appellate Award increased quantum of amount of compensation payable by petitioner No. 2 Co-operative Marketing Federation to the respondent No. 1 Company for reasons which board was not bound to disclose and which it has chosen not to disclose. In my Judgment, the Board of Directors of East India Cotton Association, for the reasons which it was not bound to discuss, made a decision to the effect that petitioner No. 2 must pay the amount mentioned in the appellate award to the respondent No. 1 With all respect to the learned Counsel for the petitioners, it would be strange logic if one were to hold that for the same reasons which were set out in the original award in support of its decision to award lesser amount, the Board of Directors of the Association, in its capacity as Appellate Authority, made an Award for higher amount. It is not stated in Appellate award as to for what reason it awarded higher amount. It is not open to this Court to speculate and probe into the mental process the of Appellate Arbitrators when the Appellate Arbitrators have chosen to make a non-speaking award merely setting out its decision in she award. It is well settled law that the Arbitrators are under no obligation to give reasons in support of their award. It is not possible to accept the submission that the Appellate award is unintelligible, unless it is read along with reasons set out in original award. The learned Counsel for the petitioners has built up the entire superstructure for his submissions in view of use of the word or expression 'modify'. If at all it is necessary to refer to the original award for a full and complete understanding of the Appellate Award, in my judgment, only the operative part of original award is incorporated in the Appellate Award and not the reasons or the recitals forming part of the original Award. Neither contract is incorporated in the Appellate Award nor the reasons discussed in the original Award arc incorporated in the Appellate Award. In my Judgment, the Appellate Award stands by itself as a non-speaking independent Award. The Appellate Award cannot be assailed with reference to the alleged error of law in alleged propositions set out in the original Award. It is thus not permissible to this Court to read the reasoning of the original award or the two contracts for judging the challenge of the validity of the Appellate Award which alone is the subsisting award.
29. The judgment of the Court of Appeal in Giacomo Costa Fu Andrea v. British Italian Trading Co. Ltd. (1963)1 Q.B. 201 (supra), is extremely M900539.htmuseful on this aspect. This Judgment was relied upon by the learned Counsel on both sides. In this case, the Board of Appeal made the following award :---
"The Board of appeal do hereby decide that the original award be confirmed and do further award that fees of this appeal amounting to $ 52.10s. be borne and paid by buyers."
The operative part of original award read as under:---
"...do hereby award that the buyers have failed to declare the final port of destination by February 1,1961, and therefore contract is void."
Lord Justice Diplock held that the appellate award was liable to be read with original award, as the appellate award merely confirmed the original award and it was not possible to know the contents of appellate award unless one read the original award. Lord Diplock held that it was not possible to accept submission of Counsel that the appellate award incorporated "the contract" in the appellate award although the original award referred to the contract and declined it void. Court of Appeal held that it was not possible to accept submission that the Court must examine the contract by itself and decide as to whether the contract was void or not. It was held that the question whether a contract was incorporated in the award was a question of construction of the award. It was held that the principle of reading contracts or other documents into award could not be encouraged or extended and the Court was not entitled to look at contract and deal with question as to whether was an error of law. Sellers L.J., in his concurring judgment observed that the question of incorporation was linked up with the question of intention of the award. The question to be asked was as to whether the intention of Tribunal which made award was to include the document in question as part of its award and as a part of its reasoning. All the learned Judges of Court of Appeal held that the expression "void" used in the original award was liable to be considered in the light of reasonable commercial commonsense interpretation and it merely meant that the contract had come to an end. Applying the ratio of judgment of this case to our case, it is impossible to hold that the intention of the Board of Directors of the East India Cotton Association Ltd., was to include everything which was said in the original award as a part of appellate award and incorporate reasoning of the original award, in the appellate award, It is not open to this Court to speculate or indulge in. It is a reasonably possible view to take that the appellate body made a non-speaking award and increased the quantum of claim without stating reasons in support of its decision in view of well-settled practice and law that arbitrators may not state reasons for award and a non-speaking award cannot be assailed merely on the ground that it states no reasons in support of its decision. Recently, the legal principles on this aspect have been reconfirmed by the Hon'ble Supreme Court in its well-known judgment in the case of Raipur Development Authority v. M/s Chokhamal Contractors, . If the arbitrators have chosen not to state reasons in support of their decision, in is not permissible to this Court to attribute reasons to appellate arbitrators which the arbitrators have not adopted expressly or by necessary implication. This is not to say that the reasons set out in the original award are vulnerable or that said reasons are based on propositions of law forming basis of the award which can be demonstrated to be patently erroneous. Since the original award is superseded by the appellate award and since the appellate award is a non-speaking award, the question of scrutinising the reasons contained in original award does not arise.
30. Both the learned Counsel have relied on the judgment of Willis, J., in the case of Belsfield Court Construction Co. Ltd. v. Pywell, (1969)3 W.L.R. 1051. In this case, by a Motion, Belsfield Court Construction Co. Ltd. sought to set aside the award of an arbitrator adjudging that they pay the sum of $302 and costs to appellant. The question before the Court was as to whether arbitrator had incorporated pleadings in the award merely by referring the same in the award and whether the impugned award suffered from "error on face of award". It was held by the Court that mere reference to pleadings in the award by itself did not mean incorporation thereof into award. The learned Judge cited the following passage from "Russel on Arbitration", 17th Edition (1963), page 318, with approval:---
"Thus if there are pleadings, and the arbitrator so refers to them as to incorporate them into the award, they may be looked at."
31. In the above-referred case, the learned Judge also referred to the judgment of the Privy Council in case of Champsey Bhara &. Co. v. Jivraj Balloo Spinning & Weaving Co. Ltd., (1923) A.C 480, the judM900539.htmgment of Lord Denning in the case of D.S. Blaiber & Co. Ltd. v. Leopold Newborne (London) Ltd., (1953)2 Lloyd's Rep. 427. In Blaiber's case. Lord Justice Denning observed at page 429 as under:
"I have a strong suspicion that the arbitrators went wrong in law, but we are not able to say so without looking at the contract, because the terms of the contract may vary the ordinary legal rights and implications. The difficulty is that we are not at liberty to see this contract. It is not expressly incorporated into the award, nor can I say that it is impliedly incorporated. The question whether a contract, or a clause in a contract, is incorporated into an award is a very difficult one. As I read the cases, if the arbitrator says "On the wording of this clause I hold' so-and-so, then that clause is impliedly incorporated into the award because he invites the reading of it; but if an arbitrator simply says : 'I hold that are was a breach of contract', then there is no incorporation. In this case there is simply a recital of a contract which is not incorporated into the award and therefore we cannot look at it. I have no regrets on this score."
32. Although voluminous cases have been cited by the learned Counsel on both sides on the question of principles governing incorporation of original award into appellate award or contracts or other documents in the award, I propose to refer only to two more judgments on the subject before I conclude the discussion on the subject and state my conclusions in respect thereof. In the case of M/s Allen Berry & Co. Private Ltd. v. The Union of India, , Hon'ble Supreme Court dealt with somewhat similar problem. In this case, the appellant challenged the impugned award inter alia on ground that the Umpire had misconstrued the contract and other relevant documents and question before the Court was as to whether the contract was incorporated in the award merely because of reference thereto in the award. Shelat, J., speaking for the Hon'ble Bench of the Supreme Court, referred to large number of authorities and particularly the Judgment of Diplock, L.J., in Giacomo Costa's case (supra) and reached his conclusions as set out therein after surveying relevant case law on the subject. In paragraph 9 of its judgment, the Hon'ble Supreme Court observed that a mere general reference to the contract the in award was not to be held as incorporating it. It was held that the principle of reading contracts or other documents into award is not to be encouraged or extended. It was held that the award was final both on facts as well as on law and even when an arbitrator committed a mistake either in law or on facts, the award was not liable to be set aside notwithstanding "mistake, unless error of law appeared on the face of award, in the sense that it relied upon proposition of law as the basis of the award which could be demonstrated as patently erroneous on the face of In paragraph 10 of his judgment, Shelat, J., observed that the decision of the arbitrator was binding on the parties even on a question of law and therefore the Court would interfere only if the case fell within the exception mentioned by Williams, J. In Hodgkinson v. Fernie, (1857)3 C.B. (N.S.) 189, and reaffirmed by Diplock, L.J., in Giacomo Costa's case (supra).
33. Having regard to the ratio of the above judgments and the construction of the two awards, I told that the impugned Appellate award is a non-speaking award and it does not incorporate the original Award as a part of it. In Fertilizer Corporation of India Ltd., New Delhi, v. I.D.I. Management & others (U.S.A), , a somewhat similar question arose before the Division Bench of the High Court of Delhi. In this case, the majority awards were non-speaking awards. The question before the Court was as to whether the majority awards disclosed error of law on their face when the majority awards did not incorporate any legal proposition as the basis of the majority awards. The Division Bench of the High Court of Delhi held that the majority awards did not disclose any error of law apparent on the face of the awards because the arbitrators had not tied themselves down to any legal proposition. It was also held by the Court that where there were three arbitrators and two awards, one of majority and the other of minority, and the majority award was not a reasoned award, the reasons given in the minority award could not be looked into for the purpose of finding the reasons of the majority award. While concluding discussion on the question of incorporation by inference or from a mere reference to a document in the award is concerned, the Hon'ble Division Bench of the High Court of Delhi observed, in paragraph 38 of its judgment, as under :---
"38. The majority have not stated their reasons. We do not know the route of reasoning they took in arriving at their conclusion. 'It is not open to the Court to attempt to probe (sic) the mental process by which the arbitrator has reached his conclusion where it is not disclosed by the terms of the award."
34. In paragraph 43 of its judgment, the Hon'ble Division Bench observed that "judicial demolition" of an award was possible only when some legal proposition was stated in the award and which was erroneous. In paragraph 44 of its judgment, the Court observed that it was not misconduct for the arbitrators to make a mistake of law. I hold that in our case the Appellate Award does not incorporate the reasoning contained in the original award as a part of the reasoning in the Appellate Award. In my judgment, the Appellate Award is a non-speaking Award. I do not appreciate an attempt to demolish the Appellate Award with reference to the reasoning disclosed by the original Award which is no more in existence. The principles of law laid down by the Privy Council its well-known judgment in the case of Champsey Bhara & Co. v. Jivraj Balloo Spinning & Weaving Co. Ltd, (1923) A.C. 480 (supra), have stood the test of time in so far as the award is impugned on the ground of error of law on the face of the award. The ratio of this judgment has been affirmed and reaffirmed by the Hon'ble Supreme Court in its several judgments. In this case, the appellants, as sellers, had entered into two contracts with respondents, as buyers, of certain bales of cotton subject to the rules and regulations of the Bombay Cotton Trading Association Ltd. Rules of the said Association containing the arbitration clause providing for arbitration of disputes by the arbitrators and right of appeal to the Appeal Committe were part of the contract. The respondents-buyers raised a dispute as to the quality of the cotton delivered. Upon this, an arbitration was entered into between the parties and an award was made in respect of the quality dispute. Thereupon the respondents-buyers rejected the cotton and the appellants claimed damages. This claim of damages made by the appellants was referred to arbitrators under Rule 13 of the Rules. The arbitrators made an award directing the buyers to pay a sum of Rs. 25,000/- to the sellers as damages. The arbitrators referred to contracts and the rules and regulations of the Bombay Cotton Trade Association Ltd. in the recitals to the award. The Appeal Committee of the Association confirmed the award. The award was challenged. Pratt, J., dismissed the petition. The Division Bench of the High Court of Bombay allowed the appeal holding that there was an error of law on the face of the award, after referring to letters dated 11th and 25th November, 1918 which were referred to in the impugned award. The Division Bench of our High court had also referred to Rule 52 of the rules and regulations for the purpose of considering the question as to the effect of the decision made by the arbitrators earlier in respect of quality dispute.
35. The Privy Council approved the dictum of Williams, J., in the case of Hodgkinson v. Fernie, (1857)3 C.B. (N.S.) 189 (supra). In that case it was held that it was well-settled law that the arbitrator was the sole judge of all questions both of law and fact. It was held that the only exception to the rule was cases where the award was the result of corruption or fraud and one other, i.e., where the question of law necessarily arises on the face of the award or upon some paper accompanying and forming part of the award. Lord Dunedin, speaking for the Privy Council, formulated the proposition of law as under :---
"An error in law on the face of the award means (in Their Lordships' view that you can find in the award or a document actually incorporated thereto, as for instance, a note appended by the arbitrator stating the reasons for his judgment, some legal proposition which is the basis of the award and which you can then say is erroneous. It does not mean that if in a narrative a reference is made to a contention of one party, that opens the door to seeing first what that contention is and then going to the contract on which the parties' rights depend and to see if that contention is sound." (Bracketed portion supplied) The Privy Council refused to consider the question of the alleged misinterpretation of Clause 52 or the alleged misinterpretation the contract and upheld the award. The Privy Council held that all these questions were for the arbitrators and not for the Court to decide. The Privy Council held that it was not for the Court to decide what was the effect of rejection based on an award as to quality. I must apply the ratio of the above-referred judgments to the impugned Appellate Award in this case.
36. In view of the above discussion, I hold that the impugned Appellate Award does not contain any proposition of law and is non-speaking award. Accordingly, the question of the Board of Directors tieing itself to a proposition of law and the petitioners trying to demonstrate the same to be erroneous does not arise. I hold that the so-called propositions of law set out in the original award whatever do not form part of the Appellate Award and it is not open to this Court to examine the correctness or otherwise of the reasons set out in the original award by referring to the contract, construing terms thereof one by one and dealing with each of the reasons set out in the original award. It is well-settled that an award is final both on facts as well as on law. It is well-settled that the Court must lean in favour of the award and the grounds of challenge cannot be extended or enlarged. It is equally well-settled that the jurisdiction of the Court to consider the grounds of challenge in respect of the award is extremely limited. In my judgment, the case of the petitioners does not fit in at all within the ambit of permissible scrutiny by the Court under sections 30 and 33 of the Arbitration Act, 1940.
37. The learned Counsel for the petitioners has assailed the appellate award on the footing that the reasons set out in the original award were adopted by the Board Directors for purpose of its Appellate Award. Though I have refused to scrutinise the original award in view of its merger with the Appellate Award and in view of its non-incorporation in the Appellate Award, I must state in passing that according to my study, the original award does not contain any erroneous proposition of law and the original award does not suffer from any error of law apparent on the face of the award. The said contract was expressly made subject to Bye-laws of the East India Cotton Association Ltd. Section 38 of the Maharashtra Raw Cotton (Procurement, Processing and Marketing) Act, 1971, clearly provided that the decision of the Board of Directors of the Association shall bind the parties. I do not see anything wrong in the respondent No. 1- Company getting the invoicing back rates fixed by the concerned committee of the East India Cotton Association Ltd., as contemplated under the Bye-laws of the Association as contemplated under the contracts themselves. Even the interpretation of the contract and its various terms was a matter to be arbitrated upon. Even where the award sets out reasons, reasonableness of reasons cannot be made subject-matter of judicial review. However, in view of my positive findings recorded above, I have decided not to pursue this line of reasoning any further as it appears to be unnecessary to do so.
38. The petitioners have invited me to construe the various clauses of the contract in a particular manner as reflected also in written propositions submitted by their learned Counsel at the hearing. Interpretation of clauses of the contract was entirely for the Arbitrators. The Appellate Award does not disclose any particular interpretation of any particular clause in the contract. Accordingly, it shall not be proper for me to examine the contention of the petitioners on these aspects, as if I have appellate powers over the award No appeal lies against an award.
39. The learned Counsel for the petitioners has then submitted that in any event the impugned award is liable to be set aside on the ground that the arbitrators committed misconduct by ignoring the material part of the contract and also awarding damages, although there is no proof of actual loss suffered by the respondents. In a gross and rare case, it may be possible for the Court to infer misconduct on the part of the Arbitrators by looking at the contract, even where a contract is not incorporated in the award e.g. where the prohibitory clauses in the contract barring the claim are ignored by the Arbitrators. Having regard to the facts and circumstances of this case, it is obvious to me that there was a bona fide dispute between the petitioners and the respondents regarding the interpretation of the various clauses of the contract and the resolution of the said interpretational dispute was within the scope and ambit of the arbitration clause. I am definitely of the view that the award takes a reasonably possible view. It has been argued by the learned Counsel for the petitioners that the Arbitrators appear to have attached importance to the printed clauses in the contract and ignored the typed clauses of the contract specifically incorporated therein. The learned Counsel for the petitioners has also submitted that the view taken by the appellate arbitrators is an impossible view and the only possible view could be to reject the claim of the respondent No. 1. I totally disagree. It is not possible to accept this submission of the learned Counsel for the petitioners. When the parties specifically provide for closing of the contract or an extension of the contract in a certain situation and incorporate substantive as well as machinery provisions of the Bye-laws of the East India Cotton Association Ltd. in the contract, I do not find it possible to hold that the Arbitrators have misconducted themselves or the proceeding in awarding the amount of compensation in the light of invoicing back rates fixed by the Committee . While awarding compensation, the Arbitrators need not disclose their reasons in the award and the award cannot be set aside merely on the basis of a conjecture that compensation awarded could not have been awarded except as a wrong view of law. The petitioners never challenged the invoicing back rates in spite of due intimation . The petitioners have also submitted that the petitioners could not supply the goods to the respondent. No. 1 by reason of non-registration of the contract by the Textile Commissioner and by reason of the quota being not available. The petitioners have, therefore, submitted that the doctrine of frustration was clearly attracted and no amount could be awarded as compensation by the Arbitrators to the claimants. The learned Counsel for the petitioners has also made certain submissions on the interpretation and applicability of the force majeure clause in the contract. It was rightly held by this Court in the judgment of Brother Pendse, J., dated 12th/13th of November 1984 in Arbitration Petition Nos. 55, 57, 59, 61, 63, 65 and 67 of 1984, The Maharashtra State Co-operative Marketing Federation Limited v. Paul Reinhart A.C. Company incorporated under the laws of Switgerland & others, that it was for the Arbitrators to decide as to whether the petitioners were excused for non-supply of the goods and whether the said clause was applicable. One comes across voluminous legal literature and several reported judgments of the Hon'ble Supreme Court indicating that in a given case the seller may be liable to pay damages if the seller is unable to supply the goods because of Government alrestrictions. The liability of the contracting party would depend on the nature and extent of stipulations in the contract. It all depends upon the determination of the question as to whether the seller has taken the absolute responsibility to supply the goods under the contract and the wording of force majeure clause in the contract read with other clauses. Thus it is impossible to accept the submission of the learned Counsel for the petitioners that the impugned original award suffered from error of law apparent on the face of the record. It is all of an indirect attempt on the part of the petitioners to seek judicial review from this Court on merits of the controversy beyond the permissible limits. If the alleged error of law is to be discovered by a process of reasoning which is debatable, such an exercise is not permissible in a petition under section 33 of the Arbitration Act, 1940. In my judgment, the petitioners have been unable to prove the alleged misconduct or alleged error of law apparent on the face of the original award or any other infirmity. I am recording the above view as an alternate finding although I am not concerned with validity of original award in view of its supersession by the Appellate Award and my finding in respect thereof as a non-speaking award.
40. In view of my findings summarised hereinafter, the petition is liable to fail :---
(a) The impugned original Award is not in existence and is already superseded by the Appellate Award;
(b) The impugned Appellate Award stands by itself as a non-speaking award independently of the original Award;
(c) The impugned Appellate Award does not incorporate in itself the original Award or the contracts in question or the reasons and discussion set out in the original Award either expressly or by necessary implication as an integral part of the Appellate Award. The Appellate Award is quite intelligible by itself and it is not necessary to read the same with the original Award. In any event, Award means decision of the Arbitrator and not reasons for the decision. Reasons contained in the original Award are not incorporated in the Appellate Award. The Appellate Award is not assailable with reference to the reasons contained in the original Award. The principle of incorporation cannot be unduly extended. The Court has no regrets for not examining the original disputes, interpret the contract, interpret the evidence and scrutinise the reasons forming part of the original award as if it is an appellate forum against the award. In this approach, I am in good Company of other Judges whose judgments have "Stood" the test of time.
(d) The impugned Appellate Award does not suffer from any error of law apparent on the face of the award or misconduct or perversity or any other illegality within section 30 of the Arbitration Act, 1940. There is no merit in the petition whatsoever. The impugned Appellate Award does not contain any proposition of law as the basis of the award or otherwise which can be demonstrated as patently erroneous. The impugned Appellate Award contains no proposition of law at all. The Bye-laws of East India Cotton Association Ltd. including the bye-law for closing of contract and fixation of invoicing back rates for the purpose of quantification of claim for damages are binding on the parties.
(e) The view taken by the Arbitrators is a reasonably possible view. It is not proved that the appellate Arbitrators have ignored the contract or any other relevant material. The dispute as to interpretation of the contracts was for the Arbitrators to decide and no case is made out for judicial intervention so as to set aside the award. The Award is final both on facts as well as on law. It cannot be forgotten that even when an Award is a speaking award, reasonableness of the reasons cannot be made an issue before the courts and the courts cannot set aside an award on the ground that the reasons set out in the Award are erroneous.
(f) It was open to the Arbitrators to adopt the invoicing back rate fixed by its Committee as the basis for the award of the claim without requiring the claimant to lead further evidence on issue of quantum of compensation or damages. At any rate, the view taken is a reasonably possible view. It is open to the Arbitrators to award the amount without disclosing the basis for computation of damages or without discussing any evidence in the award. Merely because the Arbitrators followed this course, the Court cannot probe into the mental process of the Arbitrators or speculate over the reasons which must have impelled the Arbitrators to make an award and set aside the award in light of its conjectures or surmises.
41. In Messrs Sudarsan Trading Co. v. The Government of Kerala & another, , the Supreme Court held that interpretation of contract was a matter for arbitrator and the Court could not substitute its own decision in place of the arbitration. It was held by the Apex Court that if on a view taken of a contract, the decision of the arbitrator was a possible view, the award could not be examined by the Court . In paragraph 29 of its judgment, the Supreme Court held that in absence of reasons for making the award ,it is not open to the Court to interfere with the award. It was held that in any event the reasonableness of the reasons given by the arbitrator could not be challenged. In a recent judgment, the Division Bench of our Court consisting of Pendse & Jhunjhunuwala, JJ., in Appeal No. 231 of 1988, Noor Mohammed & Sons v. International Airport Authority of India, decided on 21st February 1990, has taken the same view. I am bound by the ratio of the abovereferred judgments. I am also in respectful agreement with the view taken in the above referred case.
42. In M/s. Neelkantan & Bros. Construction v. Superintending Engineer, National Highways, Salem & Ors, , the Supreme Court observed as under :---
"In this case, the arbitrator gave no reasons for the award. There is no legal proposition which is the basis of the award far less a legal proposition which is erroneous. There is no appeal from the verdict of the arbitrator. The Court cannot review, in such circumstances, the award and correct any mistake in the adjudication by the arbitrator (see (Champsey Bhara & Company v. Jivraj Balloo Spinning & Weaving Co. Ltd.), 50 Indian Appeals, 224 : A.I.R. 1923 P.C. 66 and the observations of Bachawat, J., in the case of Madanlal Roshanlal Mahajan v. Hukumchand Mills Ltd, Indore, of this Court."
43. In Bango Steel Furniture (Pvt) Ltd. v. Union of India, , the arbitrators awarded damages for wrongful termination of contract. The Hon'ble Mr. Justice Bhargava, speaking for the majority, observed as under :--
"In the circumstances, it has to be held that the Umpire, in fixing the amount of compensation had not proceeded to follow any principles, the validity of which could be tested on the basis of laws applicable to breaches of contract. He awarded the compensation to the extent that he considered right in his discretion without indicating his reasons. Such a decision by an umpire or an arbitrator cannot be held to be erroneous on the face of the record."
In this minority judgment, Ramswami, J., held that on no conceivable legal basis is the arbitrator could award the amount of compensation and the arbitrator had ignored the provisions of section 73 of the Indian Contract Act and had awarded damages on wrong legal basis. It appears to me, with respect, that the submissions of the learned Counsel for the petitioners are contrary to the majority judgment of the Supreme Court in the above-referred case. In my judgment, an award cannot be assailed by speculating or inferring reasons for the award when the same are not specifically set out in the award in so many words.
44. The learned Counsel for the petitioners and the respondents have invited my attention to the following leading judgments of the Supreme Court interpreting section 56 of the Indian Contract Act on applicability or non-applicability of doctrine of frustration in a given situation and the development of law on the subject and the recent trends :
(i) Satyabrata Ghose v. Mugneeram & Co., ; and
(ii) The Naihati Jute Mills v. Khyalim Jagannathu, .
I think that I must resist the temptation of discussing intricate questions of law pertaining to applicability of doctrine of frustration in this judgment as the question does not really arise for scrutiny by this Court in view of the relevant award being a non-speaking award. It is enough to state that the arbitrators have taken a reasonably possible or plausible view of the matter and the judicial review on merits of the controversy by a Court considering a petition under section 33 of the Arbitration Act is forbidden by law of arbitration.
45. In Continental Construction Co. Ltd. v. State of Madhya Pradesh. A.I.R. 1988 S.C. 1966, the Apex Court found that the arbitrator had awarded claim for extra cost made by the contractor which claim was expressly barred under the contract. Having regard to the express prohibition in the contract barring the consideration of extra claim, the District Court set aside the award by looking into the terms of the contract and the Supreme Court upheld the decision of the District Court. To this limited extent, I have also perused the contracts. I do not find any express prohibition in the contracts barring the claim. After making the permissible limited scrutiny and applying the maxim i.e.- so far and no further - I have come to the conclusion that the arbitrators have not misconducted themselves or the proceedings by ignoring the contracts in question or any of its material terms. Interpretation of contracts was left to the Arbitrators.
46. In Union of India v. M/s. Ajit Mehta & Associates, Pune & ors., : the Division Bench of this Court set aside the award inter alia on the ground that arbitrators were not entitled to ignore the express stipulations in the contract prohibiting the making of claims. The Hon'ble Division Bench held that such an award was clearly assailable. It is not possible to hold in this case as a fact that the arbitrators have ignored the contracts or its material terms or any other material document or other material on record. The abovereferred case is, therefore, of no assistance to Mr. Tulzapurkar.
47. On the assumption that all the reasons contained in the original award are incorporated in the Appellate Award, the learned Counsel for the petitioners has argued that the following 'propositions of law' contained in the original award are deemed to have been incorporated in the Appellate Award as part thereof and the said propositions disclose patent error of law apparent on the face of the Appellate Award so as to vitiate the same :---
(1) It is stated in paragraph 7 of the original award as under :---
"In the first place under Clause 7 of the Contract it is the responsibility of the defendants to get the required export licence i.e. the export quota and the registration certificate from the Textile Commissioner".
(2) It is further stated in para 7 of the original award as under :---
"Secondly, Clause 11 of the Contract clearly states that ' this Contract cannot be cancelled on any ground but can be closed under the relevant Bye-law of the East India Cotton Association'. Hence the facility for cancelling the contract at par is not available to the defendants, when they are not in a position to get the required export quota for making the shipment of the bales contracted or to get the contract registered with the Textile Commissioner."
(3) It is further stated in paragraph 7 of the original award as under :---
"Thirdly, Clause 10 of the contract, 'the force majeure clause' including Government action, for example, non-issue of export quota, which is applicable to the present reference. But the remedy provided under the Contract in such situation is that either to extend the time for the performance of the contract or closing of the contract by either of the party under E.I.C. A. Rules."
(4) It is further in paragraph 7 of the original award as under :---
"Thus the defendants had undertaken the obligation which is absolute and unconditional to supply cotton to the plaintiffs by stipulating that even if the defendants were to face a force majeure situation of Government action like the non-issue of export quota, the period of performance stipulated in the contract would be extended as long as such circumstances prevail or until either party chooses to close out the contract under the East India Cotton Association Rules."
(5) It is also stated in paragraph 7 of the original award as under :---
"In view of the express terms contained in Clauses 7, 10 and 11 of the Contract, we do not agree with the contention of the defendants' Counsel that the contracts in question are contingent contracts. We, therefore, hold that the doctrine of frustration as codified by the Indian Contract Act does not apply to the contracts in question. As a consequence, we further hold that the defendants had committed a breach in the performance of contract in question."
48. In my judgment, reasoning for the original award cannot be treated as reasons of the Appellate Award. In alternative, I hold that each of the above-referred passages extracted by the learned Counsel from paragraph 7 of the award cannot be read in isolation. On any view of the matter, the view taken by the Appellate Arbitrators is a reasonably possible view. The above-referred passage from the original award do not constitute 'propositions of law' forming the basis of the award and the award is not assailable on the ground of error apparent on face of the award. The learned Counsel for the petitioners has interpreted paragraph 7 of the original award to mean that the doctrine of frustration is held to be inapplicable merely because the contracts are not contingent contracts. Such a construction of a commercial document is not permissible merely because of the use of word 'therefore', in the said para of the Award. A commercial document like an award is to be read as a whole with an object to find out the intention of the award. The Arbitrators set out several reasons in paragraph 7 of the original award in support of their view that section 56 of Indian Contract Act was not attracted in the instant case. One has to study paragraph 7 of the award as a whole.
49. I record an alternate finding, though not absolutely necessary, that the original award does not disclose any error of law apparent on face of the award. The Court cannot be invited to enter the arena of adjudication of main dispute and decide the merits of the controversy. There is no merit whatsoever in Ground No. 6(a) incorporated in the petition by amendment. The impugned award is not based on proposition of law referred to in the said ground. It appears to me that the plea of the petitioners, with respect, is entirely conjectural and unsupportable in law. I do not find in the Appellate Award any proposition of law of the kind attributed to the Arbitrators in the above-referred ground of challenge. The challenge made is thus conjectural and is liable to be rejected. The learned Counsel for the petitioners has submitted that the Arbitrators have misconstrued the contract by not appreciating that Clause 10 of the contract was liable to be read with Clause 14(c) thereof and Clause 11 thereof was liable to be read with Clause 12.2 thereof. The learned Counsel submits that the typed clauses in the contract prevail over the printed contract and the award suffers from error of law apparent on the face of there record as the Arbitrators have misconstrued the contracts. The learned Counsel submits that in any event the award is perverse. The learned Counsel submits that the Arbitrators are guilty of misconduct. The learned Counsel submits that the Arbitrators could not award damages without proof of loss merely on basis of "invoicing back rates" fixed by East India Cotton Association. The learned Counsel submits that the grant of damages merely on basis of invoicing back rates amounts to misconduct on the part of the arbitrators as well as the Board. I disagree. There is no merit in any of these contentions. The Bye-laws of the Association were expressly made part of the contract. The Bye-laws of East India Cotton Association Ltd. are statutory bye-laws and are binding on the parties. The Arbitrators were bound to give effect to the Bye laws. In any event, there is no question of judicial review by the Court in relation to interpretation of contract or on the subject of proof of quantum of damages. The Arbitrators are not guilty of any legal misconduct. These matters were exclusively within the jurisdiction of arbitration. The jurisdiction of the Court to set aside the awards is circumscribed by the Arbitration Act, 1940. The petitioners have not been able to establish any of the grounds of challenge within the permissible range of section 30 of the Arbitration Act, 1940.
50. Mr. A.J. Rana, the learned Counsel for respondent No. 1, advanced the principal arguments in this case on behalf of respondent No. 1. I have already referred to the leading judgments cited by Mr. Rana in the earlier part of this judgment while dealing with arguments urged on behalf of the petitioners. Mr. M.H. Shah, the learned Counsel for the respondent No. 1, in one of the petitions, adopted the submissions of Mr. Rana and made brief submissions on certain aspect concerning issue of limitation. As I have not accepted any of the submissions urged on behalf of the petitioners on merits of the challenge to the award, I do not consider it necessary to refer to remaining cases cited by the learned Counsel on either side.
51. In the result, the petition fails and is dismissed with costs. The petitioners do pay a sum of Rs. 5,000/- as costs of this petition to respondent No. 1. The Court expresses its gratitude to learned Counsel on both sides for their valuable assistance on some of the points which arose for decision in this case perhaps for the first time.
52. I confirm the award with immediate effect.
53. The Prothonotary & Senior Master shall issue certified copy of this judgment on priority basis.
54. Decree in terms of the award in exercise of the power under Rule. 787(5) of the High Court of Judicature at Bombay (Original Side) Rules, as amended.
55. Execution of the decree is stayed for a period of six weeks from today in order to enable the petitioners to file appeal. The petitioners shall give one week's notice to the respondent No. 1 before moving the Appellate Court.
56. For directions regarding conversion of the decretal amount into Indian currency, the matter is kept at 2.45 p.m. on Friday, 12th July, 1991.
57. It is hereby provided in alternative that the decretal amount payable in foreign currency will be convertible in Indian Currency at the rate prevailing on the date of the decree, that is, 11th July, 1991. I have passed this supplementary order in view of the law laid down by the Hon'ble Supreme Court in the case of Forasol v. Oil and Natural Gas Commission,