Patna High Court
Blue Star Ltd. vs Elite Radio And Appliance on 26 March, 1991
Equivalent citations: 1991(39)BLJR1044
Author: Satyabrata Sinha
Bench: Satyabrata Sinha
JUDGMENT Satyabrata Sinha, J.
1. This application is directed against an order dated 22-12-1990 passed by Sri S.P. Sinha, 3rd Court, Jamshedpur in Title (Arbitration) Suit No. 68 of 1979, whereby and whereunder the said learned court rejected an application filed on behalf of the plaintiff-petitioner on 11-9-1990 to direct the Umpire that he is required to give his award not only on the point of limitation but also on all other points.
2. The facts of the matter lies in a very narrow compass.
3. The opposite party was appointed by the petitioner as a Stockist by an agreement dated 16-6-1971. Disputes and differences having arisen by and between the parties to the said agreement, the plaintiff invoked the Arbitration Clause contained in the said agreement dated 16-6-1971 and for that purpose filed an application under Section 20 of the Arbitration Act. 1940.
4. In the written statement, the opposite party made a cross-claim within the meaning of Order VIII, Rule 6-A of the Code of Civil Procedure, whereby and whereunder a sum of Rs. 67,292.86 paise was claimed.
5. By an order dated 3-9-1986 the defendant was directed by the court to file the Arbitration agreement in court and it appointed with consent of both parties Sri R.K. Sarkar and Shri Shyamal Choudhary as Arbitrators, by an order dated 19-9-1986.
However, Sri Shyamal Choudhary later on was replaced by Sri B.N. Mukherjee with consent of the parties.
6. On or about 6-6-1990, the said Arbitrators filed their separate awards. Sri R.K. Sarkar, one of the Arbitrators was of the view that the counter claim filed by the defendant opposite party was barred under the law of Limitation whereas Sri B.N. Mukherjee disagreed with the said view.
7. By an order dated 19-9-1986, Sri B.K. Mitra was appointed as an Umpire with consent of the parties and the matter was referred to him by the learned court below for a decision only on the question as to whether counter claim of the opposite party was barred under the law of Limitation or not.
8. On 11-9-1990, the Umpire filed an application before the court below for clarification on the point as to whether he should hear the parties on all points or confine the hearing only to the question of limitation.
On the same day, the petitioner also filed an application before the court below that the Umpire should be directed to give his award on all issues involved in Arbitration proceedings which fell for decision by the joint Arbitrators.
9. By reason of the impugned order, as noticed hereinbefore the learned court below held that the Umpire is required to give his findings with regard to the question of limitation inasmuch as, on other issues, the joint Arbitrators had agreed.
10. Mr. B.K. Dey, the learned Counsel appearing on behalf of the petitioner submitted that a difference of opinion between two Arbitrators cannot be said to be an 'award' within the meaning of the provisions of the Arbitration Act, and in that view of the matter, when the difference and disputes between the parties are referred to Umpire, in view of the disagreement of the joint Arbitrator ; the Umpire's jurisdiction extends to all the disputes and differences and not only on the question on which the Arbitrators disagreed.
The learned Counsel, in this connection has strongly relied upon in Firm Gaurishankar Shyamsunder v. Biharilal AIR 1952 Nag. 314, Probodh K. Sarkar v. Union of India AIR 1953 Cal 385; Ramsahai Sheduram v. Harishchandra Duttchandi and Anr. ; State of Mysore v. R. J. Shah and Co. Ltd. and Anr. AIR 1969 Mysore 238 and in State of Madhya Pradesh v. Preconco Indore AIR 1989 MP 284.
11. Mr. M.K. Roy, the learned Counsel appearing on behalf of the opposite party, on the other hand, submitted that in view of the fact that the Arbitrators have agreed on most of the points, those areas of agreement should be treated as an interim award and only such disputes and difference in respect whereof the Arbitrators differed, namely, the question as to whether the counter claim filed on behalf of the opposite party is barred under the law of limitation or not can only be referred to the Umpire for his adjudication.
The learned Counsel, in this connection has strongly relied upon a decision of the Madras High Court in Penukonda Rathakrishamurty v. Chalamayya Chetty and Co. and Anr. AIR 1948 Mad 365.
12. It was further submitted by the learned Counsel that it is a settled law that an invalid part of the award can be separated from the valid part thereof.
13. According to the learned Counsel, it is also settled law that a portion of the award may also be remitted either to the Arbilrators or to an Umpire.
14. It is admitted that in terms of Clause IX of the Stockist Agreement dated 16-6-1971, all disputes and differences relating thereto came within the ambit of the Arbitration agreement.
15. Admittedly the Arbitrators framed the following issues:
(1) Whether the plaintiff has any recoverable dues from the defendant to the tune of Rs. 1,65,125.49 paise including the interest?
(2) Whether the defendant's claim by way of set off and counter claim to the tune of Rs. 2.50,724.70 paise apart from interest is recoverable from the plaintiff.
(3) Whether the said claim is barred by the limitation (sic) if so, to what extent?
(4) Whether the claim for interest, compensation and cost can be allowed?
(5) Any other relief or reliefs.
16. Section 3 of the Arbitration Act reads as follows:
Provisions implied in arbitration agreement.--An arbitration agreement, unless a different intention is expressed therein, shall be deemed to include the provisions set out in the first Schedule in so far as they are applicable to the reference.
17. In terms of Clause 2 to the First Schedule appended to the Arbitration Act, 1940, if the reference is to an even number of arbitrators, they are required to appoint an Umpire. In terms of Clause IV thereof if the Arbitrators have delivered to any party to the arbitration agreement or to the Umpire a notice in writing stating that they cannot agree, the Umpire shall forthwith enter on the reference in lieu of the arbitrators.
(Italicised is mine for emphasis)
18. In a case, therefore, where an Arbitrator is appointed through court in terms of Sub-section (4) of Section 20 of the Arbitration Act filed their respective opinions before the court it is enjoined with a duty to direct the Umpire so appointed by the Arbitrators or by it to enter into to the references in lieu of the Arbitrators.
19. It is, therefore, clear that when the Arbitrators disagree and/or differ, in my opinion such a disagreement cannot be said to be an 'award' which is capable of being filed in court, or made a rule thereof, in terms of Section 14 of the Arbitration Act.
20. Such a difference of opinion thus is not award at all and in that view of the matter, the question of invoking the doctrine of the power of the court to separate the invalid part of the award from the valid part thereof or for that matter remitting the same to an Arbitrator or an Umpire does not arise. In terms of Section 16 of the Arbitration Act, the court may remit the award only to an Arbitrator or an Umpire who has submitted an award. If the disputes and difference between the parties have been referred to the Joint Arbitrators and they have not been able to arrive at a consensus, such difference cannot be said to be an award at all and in that view of the matter, the question of remitting the same by the court, in exercise of its power under Section 16 of the Act does not arise.
21. Such power of remittance of an award for reconsideration of the Arbitrator or Umpire is hedged by the conditions contained in Section 16 of the Act.
22. An Umpire's jurisdiction to enter into reference does not commence unless and until Arbitrators are unable to agree. Unless the Umpire sits with the Arbitrators from the commencement of the reference, he would have to hear all the evidences led before the Arbitrators.
The Umpire thus if and when required to make an award is substituted for and has the same powers with regard to the conduct of the Arbitration as had, the Arbitrators.
(See para 591 of Halsbury's Laws of England 4th Edn. (sic) Vol. 2).
23. This aspect of the matter has also been dealt with by Russel on Arbitration (Twentieth Edition) at page 240 wherein, the learned author states:-
Where the umpire enters upon the reference in lieu of the arbitrators under Section 3(2), all the matters referred fall to be decided by him, and not merely the matters in respect of which the arbitrators have disagreed. Megaw J. has, however, pointed out the difficulties inherent in this view of the matters.
24. However, in a case where Section 8(2) of the English Arbitration Act is excluded and the court has made no order, it depends upon terms of the agreement where all the matters or only the matter upon which the arbitrators are not agreed are referred to Umpire.
Prima facie, if the Arbitrators cannot agree to an award on any one of the matters referred, the Umpire should decide on all of them and not only upon those as to which the Arbitrators disagreed.
(See page 241, Russel Arbitration Act.)
25. As to what constitutes a disagreement, the learned author states the law thus:
The question that constitutes such a disagreement between arbitrators as will entitle the Umpire to make an award in case where Section 8(2) does not apply, is one upon which no definite rule can be laid down. It has been held that there was such a disagreement when one of the arbitrators declined to proceed further with the case, and also where one arbitrator refused to permit certain evidence to be produced which his follow arbitrator declared to be essential, and in another case it was decided that non-agreement on important points was equivalent to disagreement.
26. In Mustill and Boyd on Commercial Arbitration at page 226, the learned authors state:-
Where the reference is in the hands of two arbitrators, it may be important to decide whether they have disagreed, for upon this may depend whether the umpire has power to enter upon the reference, and whether the arbitrators are functus officio, and may properly assume the status of arbitrator/advocates.
The courts have not yet defined precisely what constitutes a disagreement. It is, however, clear that a disagreement may take place during the interlocutory stages of the reference, before the hearing itself begins; that the disagreement may relate to procedure as well as the merits; that it is sufficient for the parties to disagree on some, or even only one, of several issues which aries for consideration, and that evident failure to agree is sufficient, even if there is no formal disagreement. The matter may be tested this way; Can the arbitration proceed if the arbitration do not rule on the matter upon which they disagree. If the answer is 'No' then there is a sufficient disagreement to let in the umpire. Thus for example, we consider the disagrrements concerning pleadings dates for hearing adjournments, discovery, evidence and costs' are all matters which are enough to make the arbitrators functus officio, and to give the umpire power to enter upon the reference.
The learned authors further state:-
In an ordinary arbitration the arbitrators cease upon disagreement to have any connection with the reference; they have no right to participate, and no power to make any binding order or award.
27. In Probodh K. Sarkar v. Union of India Bachawat, J. held:-
If there is disagreement between the arbitrators there is no award and the jurisdiction of the umpire is attracted, in the absence of a contrary provision in the arbitration agreement the umpire must adjudicate upon the whole case even if the arbrators disagree on one point. Wicks V. Cox. 11 Jur, 542(A)--Winteringhan v. Robertson (1858) 27 LJ Ex. 301(B).
28. In Firm Gaurishankar Shyamasunder v. Biharilal AIR 1952 Nagpur 314), a Division Bench stated the law thus:-
In a later case, 'Winteringham v. Robertson (1858) 27 LJ Ex 301. there it was laid down that the effect of the appointment of an umpire is to enable him to sit with the arbitrators and hear and consider the matter referred, and if they do not agree in an award to make an award upon all the matter referred and not merely those on which they do not agree. We respectfully agree with this view and hold that this objection also fails.
29. In Ramsahai Sheduram v. Harishchandra Dullchandji and Anr. , a Division held:-
This arbitrator was to decide every one of the disputes arisine between the parties out of these building contracts. As a matter of convenience, he gave the decision in the award in regard to such of them as could be calculated in terms of money while he decided separately the dispute regarding the material as such in the end of May. The whole process is really one arbitration in which a piece-meal acceptance or challenge of the decision can" not be allowed. There is case-law of this point; but the principle is very simple. A party to arbitration should take the decision of the arbitrator as a whole and cannot, having taken advantage of the part suitable to him, he heard to challenge a part which he finds not so suitable, On this view the appellant should have been estopped from objecting to the award on any ground whatsoever.
30. In State of Madhya Pradesh v. Preconco, Indore , a Division Bench of the M.P. High Court held:-
A perusal of the said clause shows the relevant portion thus, in the event of a disagreement between the Arbitrators, on any matter or matters such matter or matters shall be referred to an umpire to be nominated by the E.E., and the award of such Arbitrators or the Umpire is to be final'. A plain reading of the language discloses that the Award of the Arbitrators to be final. It does not envisage a limited jurisdiction of the Umpire confined only to resolving the extent of difference between the Arbitrators. The Award of the Umpire are mutually exclusive situations. It, therefore, becomes abundantly clear that so long as it is possible to make an agreed Award by the Arbitrators the same finally adjudicates the dispute between the parties and the jurisdiction of the Umpire does not arise, but in the event of disagreement between the Arbitrators there can be no award at the instance of the Arbitrators and the matter is left solely to the jurisdiction of the Umpire who is supposed to act as a substitute in place of the disagreeing Arbitrators, to adjudicate on the entire reference in the same manner as the Arbitrators, if they were in agreement, could have done. There are no words of limitation so as to curtail the jurisdiction of the Umpire or limit his discretion in making the Award.
31. From the decisions aforementioned, the position of law clearly emerges that in absence to any agreement to the contrary whereby the provisions of the first Schedule appended to the Arbitration Act are excluded the Umpire will have the jurisdiction to hear on all points and not only on the point of purported disagreement between the two Arbitrators.
32. In Penukonda Rathakrishnamurthy v. Ganamukala Chanealrava Chetty Chalamayya Chetty and Co. and Anr. AIR 1948 Mad 365 upon which strong reliance has been placed by Mr. Roy, an interim award was passed by the arbitrators. An opinion of the court on the question had already been obtained. Before the Madras High Court, the decision of Wicks v. Cox. reported in (1847), 11 Jur, 542 was referred.
The Madras High Court distinguished that decision saying:
That ignores the terms upon which the reference in the present case was made. Those terms are contained in the association's arbitration bye-laws. Terms 27(b) of these bye-laws provides that the arbitrator or arbitrators or umpire shall have power to make an interim award or awards.
33. It is, therefore, clear that decison is not an authority for the proposition that the Umpire will have jurisdiction to decide only the matters in respect whereof the Arbitrators disagreed.
34. In Penukonda Rathakrishanamuthy's case (supra), the Court held that the only matter which can be referred on which the Arbitrators differed the Umpire dealt with those matters properly and there is nothing to justify with the interference of his award on the ground that he did not take up all matters which were taken up.
35. Evidenty, in the case before the Madras High Court, there existed an agreement contrary to the provisions contained in clause 4 of the first Schedule appended to the Arbitration Act, 1940.
36. This decision, therefore, is not applicable to the facts and circumstances of the present case at all.
37. For the reasons stated above, I am of the opinion that the learned Court below has committed an illegality in holding that the Umpire should confine his jurisdiction only on the question of limitation on which Sri B.N. Mukherjee and Sri R.K. Sarkar, the learned Arbitrators differed.
38. The learned court below' in his impugned order failed to take into consideration the fact that the difference of opinion by and between the Arbitrators was not an award within the meaning of provisions of the Arbitration Act, and in that view of the matter the court had no other option but to refer the entire disputes and differences to the Umpire.
39. The learned court below, therefore, should have reviewed his earlier order as there existed an error apperant on the face thereof, unless and until all the differences and disputes which had arisen between the parties to the Arbitration agreement are referred to the Umpire, the award of the Umpire will be vitiated in law and thus in such a situation,, the court was clearly under an obligation to clarify that the Umpire will have jurisdiction to determine all the disputes and differences between the parties.
Having not done so, the learned court below has misdirected himself in law.
40. In the result, this application is allowed and the impugned order dated 22-10-1990 is set aside and the learned court below is directed to make a reference to the Umpire all the disputes and differences by and between the parties in the light of the aforementioned findings.
41. However in the facts and circumstances of the case, there will be no order as to costs.
Let the lower court records be sent down forth with.