Patna High Court
Prabhat Kumar Lala And Ors. vs Jagdish Chandra Narang on 29 September, 1967
Equivalent citations: AIR1968PAT399, AIR 1968 PATNA 399
JUDGMENT Ramratna Singh, J.
1. This appeal arises out of an arbitration proceeding. The appellants are owners of a colliery while the respondent was a mining contractor who worked the mines on behalf of the appellants under an agreement dated the 20th June, 1962 On the 15th October, 1963 the respondent made an application under Section 20 of the Indian Arbitration Act, 1940 before the 2nd Subordinate Judee, Dhanbad, and ultimately two arbitrators were appointed, namely. D.T Jani (nominated by the plaintiff respondent and Sitaram Singh (nominated by the appellants). On the 23rd November, 1964 the appellants defendants filed an application for the appointment of a receiver to manage the colliery On the 18th December, 1964 the learned Subordinate Judge appointed defendant No 3, Bhupendra Nath Lala as receive) after hearing both the parties.
The plaintiff respondent, then, preferred Miscellaneous Appeal No 1 of 1965 in this court against the said order, and that appeal was disposed of by this court on the 16th March, 1965. In the meantime, on the 27th January 1965 the defendants appellants filed an application before the Subordinate Judge for a claim of Rs 3,10,000 to be forwarded to the arbitrators. On the 26th April, 1965 the plaintiff filed a petition before the arbitrators claiming Rupees 4,53.855.43P. Sometime thereafter, the appellants made an application to this Court, which was registered as M. J. C No, 312 of 1965. The application was dismissed summarily, but the Subordinate Judge was directed to expedite the disposal of the arbitration case quickly Both the arbitrators made an agreed award on the 18th July, 1965 and filed it before the Subordinate Judge on the 19th July, 1965, The plaintiff filed an objection to this award on the 17th August, 1965, under Section 30 of the Arbitration Act. On the 26th August, 1965, the defendants filed a rejoinder to the said objection. On the 7th September, 1965 the plaintiff filed a supplementary objection with an affidavit and on the 13th September the defendants filed another rejoinder. On the 17th January 1966 the learned Subordinate Judge disposed of the objections to the award, and his conclusion is contained in paragraph 18 of the order which is reproduced below:
"It thus follows that due to the failure of the arbitrators to give a reasonable opportunity to the plaintiff to support his claim by adequate notice, there has been caused a clear cut act of misconduct on the part of the arbitrators in conducting the proceeding As such the award as filed stands set aside. The arbitrators are hereby directed to afford an opportunity to the plaintiff to cross-examine the witnesses who have already been examined and to adduce such evidence as he proposes on the point of valuation of the machineries and then to be heard. They are directed to submit this award in the light of the above direction positively within 10 days time. Make over a copy of this order to each of the arbitrators."
Hence, this appeal by the defendants.
2. A preliminary objection was raised by Mr S. C Ghose, who appeared on be-half of the respondent, that the appeal was not maintainable, inasmuch as the award had merely been remitted to the arbitrators In this connection, it is necessary to refer to Section 16 of the Arbitration Act, 1940, which embodies the power of the court to remit an award. It enacts:
"16 (1) The Court may from time to time remit the award or any matter referred to arbitration to the arbitrator or umpire for reconsideration upon such terms as it thinks fit--(a) where the award has left undetermined any of the matters referred to arbitration, or where it determines any matter not referred to arbitration and such matters cannot be separated without affecting the determination of the matters referred; or
(b) where the award is so indefinite as to be incapable of execution; or
(c) where an objection to the legality of the award is apparent upon the face of It.
(2) Where an award is remitted under Sub-section (1) the Court shall fix the time within which the arbitrator or umpire shall submit, his decision to the Court;
Provided that any time so fixed may be extended by subsequent order of the Court.
(3) An award remitted under Sub-section (1) shall become void on the failure of the arbitrator or umpire to reconsider it and submit his decision within the time fixed".
Mr. Ghose placed reliance on Clause (c) of Sub-section (1) of this section and submitted that the award is upon the face of it illegal and, therefore, no appeal or revision under Section 115 of the Code of Civil Procedure could lie against the impugned order of the court below, though any ground challenging the remittance of the award could be taken on appeal against the decree passed by the court on the basis of the revised award submitted by the arbitrator after remittance. On the other hand, Mr. J.C. Sinha, who appeared for the appellants, submitted that by the impugned order" the court below set aside the award under Section 30 of the Act, which is reproduced below:
"30. An award shall not be set aside except on one or more of the following grounds, namely:
(a) that an arbitrator or umpire has misconducted himself or the proceedings:
(b) that an award has been made after the issue of an order by the Court superseding the arbitration or after arbitration proceedings have become invalid under Section 35;
(c) that an award has been improperly procured or is otherwise invalid."
A large number of decisions were cited at the bar, viz., Zaralbibi v. Shamsuddin Khan, AIR 1946 Sind 141, Vengu Ayvar v. Yegyem Ayyar, AIR 1951 Mad 414, R. T. Perumal v. John Deavin, AIR 1960 Mad 43, Satish Chandra Bose v. Paliram Agarwala, AIR 1921 Pat 161, Satyadhyan Ghosal v. Smt. Deorajin Debi, AIR 1960 SC 941, S.S. Khanna v. Brig. F.J. Billion, AIR 1964 SC 497, Jivarajbhai v. Chintamanrao, AIR 1965 SC 214, Firm Madanlal Roshanlal v. Hukum chand Mills Ltd. Indore, AIR 1967 S. C. 1030 and Champsey Bhara & Co. v. Jivraj Balloo Spinning and Weaving Co. Ltd., AIR 1923 P. C. 66. It was conceded by Mr. Sinha that no appeal lies against an order under Section 16; but he submitted that the impugned order is one under Section 30. Some of the decisions cited by Mr. Ghose do show that a revision under Section 116 of the Code will not lie against an order under Section 16. It will, however, he sufficient to refer briefly to the observations in the decisions of the Supreme Court.
In the case of Satyadhyan Ghosal, AIR 1960 SC 941 the Supreme Court observed in paragraph 16 of the report that an interlocutory order against which no appeal lies can be challenged in an appeal from the final decree or order. In the case of Major S.S. Khanna. AIR 1964 SC 497 aforesaid, it was held that the power of the High Court under Section 115 of the Code is exercisable in respect of any case which has been cited and the word 'case' includes civil proceedings other than suits and is not restricted by anything contained in the Section to the entirety of the proceeding in a civil court. It was further observed that it depends upon the facts of the case in which interlocutory order is passed, whether that order involves the decision of a case and, if it is found that the order did decide a case, a revision under Section 115 will lie. It was also observed that the word 'case' includes a part of a case. Neither of these two Supreme Court decisions deals with the provisions of the Arbitration Act, though they speak of circumstances in which a revision under Section 115 may lie. But it is not necessary to decide the question whether a revision would lie in the present case or not, because it will be seen presently that the impugned order of the court below is really an order setting aside the award.
3. In the case of Jivaraibhai, AIR 1965 S.C. 214, their Lordships said:
''The Court in dealing with an application to set aside an award has not to consider whether the view of the arbitrator on the evidence is justified. The arbitrator's adjudication is generally considered binding between the parties, for he is a tribunal selected by the parties and the power of the Court to set aside the award is restricted to cases set out in Section 30 of Arbitration Act, 1940. It is not open to the Court to speculate, where no reasons are given by the arbitrator, as to what impelled the arbitrator to arrive at his conclusion. On the assumption that the arbitrator must have arrived at his conclusion by a certain process of reasoning, the Court cannot proceed to determine whether the conclusion is right or wrong. It is not open to the Court to attempt to probe the mental process by which the arbitrator has reached his conclusion where it is not disclosed by the terms of his award."
In the case of Firm Madanlal Roshanlal, AIR 1967 SC 1030, their Lordships said that the court cannot review an award and correct any mistake in an adjudication, unless an objection to the legality of the award is apparent on the face of it. In both these decisions, their Lordships, relied on the following observation of the Privy Council in the case of Champsey Co.. AIR 1923 P. C. 66:
"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 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 to see if that contention is sound."
4. Let us now see whether in the instant case there is any illegality on the face of the award, as contemplated by Section 16 (1) (c) of the Arbitration Act. In support of his contention, Mr. Ghose relied on one sentence in the award which reads thus:
"We have determined the value of their machineries and equipments in consultation with local dealers in machineries on the basis of price list."
It is manifest that this sentence, on the face of it, does not indicate any error of law. Hence, he relied on paragraph 12 of the impugned order which is reproduced below:
"Then a further reference to the order sheet dated 14-7-65 shows that the arbitrators thoroughly discussed the items of claim and counter claims of both the parties. They ascertained and estimated the claims and counter claims and fixed their value and cost. The two other order sheets of 17-7-65 and 18-7-65 also show that the arbitrators thoroughly considered all the evidence (oral and documentary) having their bearing on the matters involved in the arbitration. It further appears that there was no notice given by the arbitrators to the plaintiffs, regarding the assessment of value being made either on 14-7-65 or on any other date. As shown by the award the value was fixed on the strength of the documents as filed as also on that of enquiry made by the dealers and on reference to price list and in consultation with the local dealers and on the basis of the price list."
But this finding of the court below which is based on the evidence adduced before it cannot be used in support of the contention that there is an error of law on the face of the award. Hence, it must be held that there was no remittance of the award in the instant case under Section 16.
5. It will be noticed from paragraph 18 of the impugned order which has been reproduced at pages 2 and 3 of this judgment that the court below set aside the award on account of misconduct on the part of the arbitrators in conducting the proceeding and then directed them to submit the award within a certain period after affording an opportunity to the plaintiff to cross-examine the witnesses who had already been examined and to adduce such evidence, as he desired, on the question of valuation of the machineries. A perusal of this paragraph also does not support the contention that the award was remitted under Section 16 of the Act. The remittance, in the instant case, of the award is really one under Section 19 of the Act, which enacts:
"Where an award has become, void under Sub-section (3) of Section 16 or has been set aside, the Court may by order supersede the reference and shall thereupon order that the arbitration agreement shall cease to have effect with respect to the difference referred."
It may be mentioned here that the corresponding provision before 1940 was contained in paragraph 15 (3) of the Second Schedule of the Civil Procedure Code, with this difference that for the word 'shall' occurring in the Code, the word 'may' finds place in Section 19. The scope of this provision has been discussed by the Supreme Court in Juggilal v. General Fibre Dealers Ltd., AIR 1962 S. C. 1123. After discussing the relevant provisions of the Act of 1940, their Lordships said: "The scheme of the Arbitration Act as disclosed from Sections 8, 10, 12, 19, 20(5) and 25 is, whether the arbitration is under Chapter II, Chapter III or Chapter IV of the Act, to give discretion to the court to decide whether to supersede the reference or not when it sets aside an award. Where it decides to supersede the reference it has to order that the arbitration agreement shall cease to have effect with respect to the difference referred; but where it decides not to supersede the reference and the reference and the arbitration agreement subsist and if there is machinery provided in the arbitration agreement for making a further reference or for continuing the same reference, further arbitration can take place.
The contention, therefore, that once the award is set aside the arbitrator becomes functus officio and consequently there can be no further reference with respect to the dispute decided by the award which is set aside must fail in view of the specific provisions of Section 19 of the Act". It may be mentioned here that Section 20 occun in Chapter III of the Act. In other words, their Lordships were of the view that, even when an award is set aside, the court may make a further reference of the dispute to an arbitrator, unless it makes an order superseding the reference. It is clear, there-tore, that in the instant case the court below set aside the award and then made a further reference to the two arbitrators who had submitted the original award; and it must be held that the impugned order is covered by Section 19 of the Act.
6. Mr. Sinha supported this interpretation of the impugned order; but he submitted at the same time that on the facts of the instant case the court below was not competent to make a further reference after having setting aside the award. He tried to support this distinction with reference to the facts of the case before the Supreme Court. In that case, a contract was entered into between the parties for supply of cornsacks, and one of the terms of the contract was that all disputes and differences shall be referred to the arbitration of the Bengal Chamber of Commerce under the rules of its Tribunal of Arbitration for the time being in force and according to such rules the arbitration shall be conducted. A dispute did arise, and it was referred to the arbitration of the Bengal Chamber of Commerce. The Chamber referred the dispute to one of its tribunals.
The award of the tribunal was set aside by the High Court on the ground of misconduct of the arbitrators, but there was no order superseding the arbitration. Thereafter, the respondent addressed a letter to the Chamber requesting it to refer the matter to arbitration de novo, and then the Chamber constituted another tribunal under its rules to decide the dispute afresh. The question was whether the tribunal so constituted had jurisdiction to decide the dispute afresh on a second reference. It was held by their Lordships that the appointment of a fresh arbitral tribunal by the Chamber in the case could be sustained under Rule X of the Arbitration Rules of the Chamber, and that, inasmuch as the award was set aside on account of the misconduct, the reference had not been superseded and the arbitration agreement subsisted, it was open to the Chamber to appoint another arbitral tribunal under Rule X. Their Lordships further said:
"Therefore, as there is a machinery by which fresh arbitrators can be appointed according to the terms of the arbitration agreement read with the rules of the Chamber and as the reference has not been superseded the appointment of a fresh tribunal and the carrying on of the arbitration further were within the terms of the arbitration agreement.'' In view of these observations. Mr Sinha submitted that it was only on account of the rules of the Chamber of Commerce that the Supreme Court took the said view of a further reference. But on having gone through the entire judgment of their Lordships with Mr. Sinha, I am unable to agree with him that there can be no further reference in a case other than the one in which the matter in dispute is referred for arbitration to an organisation or body having rules of its own, enabling the formation of an arbitral tribunal, different from throne where award has been set aside What their Lordships decided in this connection was that, where the court decides not to supersede the reference, and the reference and the arbitration agreement subsist, there can be a further reference or the same reference may be continued, provided that there is a machinery available in the arbitration agreement for the purpose It is evident from the fact that their Lordships approved the view taken in Firm Gulab Rai Girdhari Lal v. Firm Bansi Lal Hansrai. AIR 1959 Punj 102 in paragraph 9 of the report, because in that case also the dispute was referred to individual arbitrators and, though the award had been set aside, a further reference was made on the ground that the court had not superseded the reference by its order.
7. It is clear from the facts of the instant case that the court did not supersede the reference and continued the same reference by sending the matter back to the two arbitrators after setting aside the award. Hence, the impugned order was primarily an order under Section 16 of the Arbitration Act and. incidentally, a further reference was made under Section 19 thereof. There is nothing in the impugned order to indicate that the arbitration agreement or the reference itself ceased to subsist, when the order setting aside the award was passed. Merely on the ground that the award was set aside it cannot be said that there could be no further reference on the basis of the arbitration agreement in this case. It is, however, obvious that the two arbitrators Mr. Jani and Mr. Sitaram Singh might have by this time been biassed in favour of some party or prejudiced against some party. It would, therefore, not be desirable to make the reference to the same arbitrators now, even if the order setting aside the award be upheld. In view of the said finding, the preliminary objection that an appeal would not lie must fail.
8. Now coming to the merits, the first question is whether the arbitrators misconducted themselves or the proceedings, as contemplated by Section 30 (a) of the Arbitration Act, 1940. Before considering the allegation regarding misconduct, it is necessary to bear in mind the following well-settled principles based on the authorities;
The Court in dealing with an application to set aside an award has not to consider whether the view of the arbitrate) on the evidence is justified. The arbitrators' adjudication is generally considered binding between the parties, for he is a tribunal selected by the parties and the power of the Court to set aside the award is restricted to cases set out in Section 30. It is not open to the Court to speculate, where no reasons are given by the arbitrator, as to what impelled the arbitrator to arrive at his conclusion. On the assumption that the arbitrator must have arrived at his con-elusion by a certain process of reasoning, the Court cannot proceed to determine whether the conclusion is right or wrong It is not open to the court to attempt to probe the mental process by which the arbitrator has reached his conclusion where it is not disclosed by the terms of his award," (See AIR 1965 S.C. 214) The facts in Vengamma v. Kesanna, AIR 1953 SC 21 were that all the parties had filed a petition under Section 21 of the Arbitration Act agreeing to appoint one K as the 'sole arbitrator' for settling the disputes in the suit and to abide by his decision. The petition filed by the parties did not give any special powers to the arbitrator. The plaint, the written statement and the other records were agreed to be sent to him for his decision, and the arbitrator was directed to make his award after perusing the plaint and the written statement which were given to him by the court along with the order. The arbitrator examined the defendant in the absence of the plaintiff and also perused the will without giving an opportunity to the plaintiff to have her say in the matter. The statement which was obtained from the defendant contained several statements of fact, which did not find a place in his written statement.
It was held that "the course of proceeding adopted by the arbitrator was obvioasly contrary to the principles of natural justice," and, therefore, "the arbitrator was guilty of legal misconduct and that was sufficient to vitiate the award".
In the case of Firm Madanlal Roshan Lal, AIR 1967 S.C. 3030, it was held that the amendment of an issue by the arbitrator in the absence of the parties did not amount to misconduct, as it did not cause prejudice to any party. It was held by the Privy Council in Mt. Amir Begam v. Syed - Badr-ud-Din, AIR 1914 P.C. 105, with reference to paragraph 15 of schedule II to Civil Procedure Code, that if irregularities in procedure can be proved which would amount to no proper hearing of the matters in dispute, there would be misconduct sufficient to vitiate the award without any imputation on the honesty or partiality of the arbitrator, but the onus of proving the irregularities in procedure is on the person alleging the same Any enquiry behind the backs of the parties is against the ordinary rules of justice and amounts to misconduct on the part of an arbitrator (see Abdul Halim v. Ismail Momin, 6 Pat LT 544 :(AIR 1925 Pat 465), and Ganga Bhagat v. Sokhi Ram. 15 Pat LT 693 : (AIR 1934 Pat 550). On the basis of these Patna decisions, two Calcutta decisions, two English cases and Sirkar's Tagore Law lectures on the Law of Arbitration in British India (at page 174), it was observed by a bench of this court in Ganga Prasad v. Nagarmal, AIR 1951 Pat 321. that "where an arbitrator takes evidence behind the backs of the parties without notice to them, and bases his award on that evidence, the law is well settled that it amounts to misconduct". A notice to the parties that the arbitrator would proceed with the reference on a certain day was notice that, if one of the parties absented himself with sufficient reason, he would proceed ex parte and therefore, it is not necessary for the arbitrator to give a second notice of his intention to proceed ex parte fsee Udaichand Panna Lal v. Debibux Jewanram; ILR 47 Cal 951: (AIR 1920 Cal 853), Dori Lal v. Lal Sheo, AIR 1954 All 244 and New Great Insurance Co. of India Ltd. v. Bihari Lal Agarwala, 1958 BLJR 488.
Proceedings before arbitrators need not be conducted with such meticulous care as is required in ordinary civil Courts so long as there is substantial compliance with the principles of natural Justice; and the mere absence of formal notice to the parties would not invalidate an award, if the arbitrator gave the parties a reasonable opportunity of being heard (see Gurumurty v. Narasimha, AIR 1954 Orissa 234.) Where a party having a clear knowledge of the circumstances, on which he might have founded an objection to the arbitrator proceeding to make his award, did submit to the arbitration going on and allowed the arbitrator to deal with the case as it stood before him taking his chance of the decision being more or less favourable to him, he will not be permitted in law to lie by and participate in the arbitration proceedings and, if it suits his purpose, then attack on the ground of irregularity. If the parties with full knowledge of the facts select their arbitrator who is not an impartial person, the court, will not release them from the bargain upon which they agreed (B. K. Dhai Pvt. Ltd. v. Union of India, AIR 1965 Cal 424.) None of these principles was disputed at the bar
9. In the impugned order, the learned Subordinate Judge has rejected most of the allegations made by the plaintiff respondent against the arbitrators in conducting the proceedings; and these findings were not challenged in this court. There are, however, two findings in favour of the plaintiff on account of which the arbitrators were found to be guilty of misconduct. The first finding if, in respect of the work done by the arbitrators on 11-7-1965. In the order of the arbitrators dated 6-7-1965 it is stated that "the inspection of mines will be made by the arbitrators on 11-7-65 at 9 a.m.". This order was passed in presence of both parties who put their signatures in token of this fact, which is not disputed either. The orders dated 11-7-1965. 14-7-1965 and 17-7-1965 read as follows:
''11-7-65. A sitting of the arbitrator was held in the Jogidih colliery Local inspection of the mines underground and surface was held by the arbitrators as regards the claims and counter claims of both the parties. The defts. were present, but the plff. was absent; although he knew the fixation of the date for colliery inspection from beforehand. Separate local inspection memorandum is attached. 14th July 65 is fixed for further hearing Sd Illeg."
"14-7-65. A sitting of arbitrators was held on the 14th July 65 at 5 p.m. Sri Shyam Kant Lala was present. We had filed a petition in the Sub Judge Court Dhanbad on 13-7-65 for extending time, but it was not accepted. We discussed thoroughly the items of claim and counter claims of both the parties and ascertained and estimated the claims and counter claims and fixed the value and cost. The plff did not attend today although he was informed by us. 16th July is fixed for the next discussion. On this date parties are not required to attend. Sd. Illeg."
"17-7-65 The arbitrators could not sit vesterday as Mr Jain could not attend due to illness. A sitting was held today and discussions were held between the arbitrators. Parties were not required to attend today. But still the plff has filed two petitions by way of rejoinder to defts' petitions filed beforehand. We considered these petitions and discussed. We will sit tomorrow again for final discussion and submission of the award in the court.
Sd. Illeg".
On 11-7-1965 the two arbitrators made local inspection, verified the plans and a diary of sardars and surveyors and they also examined five persons, namely, Mr. G.C. Mandal, Surveyor, Mr. K.K. Malho-tra, Manager, Mr. K.L. Banerjee, Assistant Surveyor, Mr. Mahadeo Roy, Mining Sardar and Mr. Hussaini Mian, Mining Sardar. In their notes of local inspection, the arbitrators, after describing the working of the mines by the plaintiff, say;
"This sort of working by cutting and thinning away the preserved barrier ha? certainly put the colliery in serious danger and thereby putting the defts. at a several (sic) loss, as the deft will be required to construct pucca dams all along the (?) of the removed barrier. These facts are clearly proved from the plans and diaries mentioned above which are amply supported by the statements made by the person? named above."
Regarding the claim of the plaintiff of having made some permanent constructions, the arbitrators said in this note dated 11-7-1965 that they did not find any new construction "except thatching and flooring and a switch room 10' x 10'. They found two labour dhawras in a demolished condition and the persons examined told them that this was due to the managing contractor's (Plaintiff's) failure to repair them
10. The case of the plaintiff was that he or his men did not attend the local inspection on 11-7-1965, as they were assured by Mr. Jani (P. W. 7), who had been nominated as arbitrator by the plaintiff, that adjournment would be granted on that date. The court below has not accepted this allegation, and the evidence justifies this view. The plaintiff (P. W. 6) said that he was informed by Mr. Jani on 9-7-1965 on telephone that the local inspection which was to be held on 11-7-1965 had been postponed. Chandrakant Ball (P. W. 1), an employee of the plaintiff, has said that he also learnt from Mr. Jani on 9-7-1965 on the phone that the local inspection had been postponed. P. Ws. 2 and 3, employees of the colliery belonging to the plaintiff's brother, said that, though the plaintiff had asked them on 7-7-1965 to be present at the time of the local inspection for technical advice, he informed them on 9-7-1965 that the local inspection had been postponed.
Mr. Jani (P. W. 7) stated in examination in chief that at the request of the plaintiff on telephone on 9-7-1965 he told him (i.e. plaintiff) that the local inspection could be postponed (ho sakta hai) then Mr. Jani added that he told the plaintiff that the local inspection would be postponed (ho jae ga). In cross examination, P. W. 7 said that Sitaram Babu, the other arbitrator, told him on 10-7-1965 that the local inspection could not be postponed; he i.e. P. W. 7, communicated this fact on telephone to the Dhanbad residence of the plaintiff; he could got say whether the plaintiff was at his Dhanbad residence that day or not; he could not give any reason why he had no talk with anybody of the plaintiff's Dhanbad house regarding the postponement. He said further that on 11-7-1965 Sitaram Babu talked in his presence on the phone from the colliery with the plaintiff, who was at another colliery situated at a distance of 30-35 miles; but he could not deny that Sitaram Babu had told the plaintiff then that local inspection was going to be held that day.
The witness also stated that on 9-7-1965 he did not tell the plaintiff that it was not necessary for him to come on 11-7-1965. Sitaram Babu (D. W. 1) has said in his evidence that Mr. Jani did not inform him that the plaintiff wanted postponement and that even on 11-7-1965 he contacted the plaintiff on the telephone and requested him to come to the site. D. Ws. 4 and 6 have supported D. W. 1. Neither the order dated 11-7-1965 nor the notes of inspection of that date contain anything about the request of postponment or assurance by Mr. Jani. If this part of the plaintiff's case were true there is no reason why nothing would be said about the same, particularly when Mr. Jani has signed both the documents and there is no allegation that Mr. Jani had gone over to the side of the defendants appellants. It must, in the circumstances, be held that the conclusion of the learned Subordinate Judge, reproduced below, is correct:
"It may thus follow that the plaintiff's reason for not being afforded an opportunity to attend the local inspection on 11-7-65 due to the assurance of D. T. Jani for its postponement is nothing but a pretence and by way of a protest against the local inspection, as may well be indicated by the contents of the petition dated 28-6-65 that the proposed local inspection was to serve no useful purpose. It is very unlikely that with the great zeal on either side in litigating the receivership matter and also in the matter of transfer of the case from this file up to the stage of the Hon'ble High Court, the plaintiff could afford to allow the progress of the proceeding in his absence in case he was denied the opportunity to represent it as he now wants us to believe." (11) At the same time, the learned Subordinate Judge has observed that the "failure of the arbitrators to inform the plaintiff about their proposal to take evidence at the time of local inspection may not escape an adverse comment". On 18-6-1965 the defendants filed a petition before the arbitrators requesting them that, for the purpose of appreciating the claims of the defendants "on account of bad working of the mines by the plaintiff and other damages caused to machineries etc." a local inspection may be held, and evidence may be taken, on the spot. In a rejoinder dated 28-6-1965, the plaintiff requested the arbitrators to reject the defendants' petition, as no useful purpose would be served by local inspection after a lapse of six months since the time the receiver had taken possession of the mines. In none of the order dated 18-6-1985, 28-6-1965, 1-7-1965, 6-7-1965 and 8-7-1965, anything was mentioned about the taking of evidence.
On 6-7-1965, it is merely stated that the inspection of mines would be held on 11-7-1965 at 9 a.m. So, there was no notice to the plaintiff regarding evidence, oral or documentary, on 11-7-1965. But it has been pointed out earlier, with reference to the notes of local inspection, that five persons were examined on that date and the arbitrators found that certain facts were proved in favour of the defendants by the plans and diaries of sardars and surveyors, which were supported by the said five persons. It is remarkable that even the defendants had not taken any witness to the spot. The witnesses examined were all working in the colliery under the receiver and the plans and diaries were also with them in the colliery. Of course, two of the plaintiff's witnesses had been asked by the plaintiff on or before 9-7-1965 to accompany him to the colliery on 11-7-1965; but they were to go for the purpose of technical advice only. Hence, the taking of evidence on 11-7-1965 amounted to misconduct in the proceedings.
12. The only other finding of the learned Subordinate Judge that is challenged is in respect of the private enquiry by the arbitrators from dealers regarding prices of machineries and their parts. In this connection, the observation of the court below in paragraph 12 of the impugned order (quoted at pages 7-8-above) is relevant. There is another adverse comment in paragraph 14 of the impugned order. In the order dated 14-7-1965 it is written: "The plaintiff did not attend today, although he was informed by us." According to the Subordinate Judge, this sentence, which is in a different ink, is a subsequent interpolation. It may, however, be stated at once that there is no material at all on the record to support this conclusion. No allegation to that effect was made in the original objection or the supplementary objection of the plaintiff. None of the witnesses for the plaintiff has spoken about it nor was this fact put to any of the witnesses examined by the defendants.
Of course, it is possible that the alleged interpolated sentence might have been written in an ink different from the remaining portion of the order dated 14-7-1965 and it is obvious from a bare look at it that this sentence was inserted after the order had been written out; but there is nothing to indicate that the insertion was made after the signatures of the arbitrators. From these signatures and the signature of the plaintiff Shyamkant Lal, it appears that there were two of three fountainpens at the time and the ink of one was slightly deeper than that of the other two. The inserted sentence seems to have been written by the pen with the deeper ink and, therefore, it may be said that it was written with an ink different from the one with which the remaining portion of the order was written. But, as no question about it was put either to any of the two arbitrators or to Shyamkant Lal, no explanation from the most competent persons could be obtained. Hence, I am unable to agree with the learned Subordinate Judge that the sentence "The plaintiff did not attend today, although he was informed by us" was inserted after signatures of the arbitrators; and it must be held that this sentence was a part of the order dated 14-7-1965 before the signatures were put. It follows, therefore, that the plaintiff had notice of the sitting of the arbitrators on 14-7-1965, when the claims and counter-claims of the parties were discussed and the value and cost were determined.
13. Now, remains the question of enquiry from the dealers about the prices of machines and their parts in absence of the parties and without notice to them. This enquiry was not reduced into writing, nor does anything about the same find place in the order-sheet of the arbitrators. There is no evidence either on which date this enquiry was made. This is important, because the value of the machines and the parts was determined, according to the award on the basis of this enquiry as also the documents filed by the parties. None of the arbitrators could remember the names of the dealers, nor is there any document containing notes regarding their names or the prices ascertained from them. The only statement in the award is that the arbitrators "determined the value of the machineries and equipments in consultation with the local dealers in machineries on the basis of price 1st. No dealer has been examined and the price 1st is not on the record.
D.W. Sitaram Singh admitted that there was no written record of the enquiry Irons the dealers and added that the arbitrators made this enquiry for their own satisfaction. It is clear from the foregoing facts that the parties were not informed about the same and there is nothing on the record to show that the parties were Riven any opportunity to explain the facts collected from these dealers. Mr. J.C. Sinha submitted that this enquiry must have been made either on 11-7-1965 or 14-7-1965. I am unable to agree that the word 'ascertained' occurring in the order of 14-7-1965 indicates that the enquiry was made on that date or on 11-7-1965. It is obvious that, if the enquiry had been made on 11-7-1965, it would have been mentioned in the notes of inspection of that date. The oral evidence of the two arbitrators also does not indicate on which date and at what time the enquiry from the local dealers was made. It must be held, therefore that the enquiry from the dealers was held behind the backs of the parties and they were not given opportunities to meet or explain the facts found in this enquiry.
14. In short, the arbitrators misconducted the proceedings in two respects, viz., (i) evidence was taken in the colliery on 11-7-1965 without notice to, and in the absence of, the plaintiff; and (ii) enquiry was made from the dealers regarding the prices of machineries and their parts without notice to, and in the absence of, either party. This finding is sufficient to justify the order setting aside the award, inasmuch as the award is based on these materials as well.
15. Mr. J.C. Sinha, however, contended that the objection to the award, that is, the application to set aside the award on these two grounds is barred by Article 119 (b) of the Limitation Act of 1963, which corresponds to Article 158 of the Limitation Aft of 1908. The period prescribed by Article 119(b) is thirty days from "the date of service of the notice of the filing of the award." Thiss was the language in Article 158 as well since its amendment by the Arbitration Act of 1940. In the instant case, the award was filed in court on 18-7-1965 and the Subordinate Judge directed on that very date the parties to file objections, if any. The signatures of the lawyers of the parties in token of this tact were obtained within three days. Objection to the award was filed by the plaintiff on 17-8-1965. The defendants tiled a rejoinder to this objection on 26-8-1965. The plaintiff' filed a supplementary objection on 7-9-1965; and the defendants filed a rejoinder to this objection on 13-9-1965.
Mr. Sinha submitted that the supplementary objection dated 7-9-1965 could not be entertained, as it was filed beyond the prescribed period of limitation and the two instances of misconducting the proceedings found in the preceding paragraph were not mentioned in the objection dated 17-8-1965, which was in time. Mr. Ghose faintly argued that, inasmuch as no written notice of the filing of the award was served on the parties in this case, the supplementary objection was also in time. Answer to this argument of Mr. Ghose is, however, contained in the decision of the Supreme Court in Nilkantha v. Kashinath. AIR 1962 SC 686. With reference to Section 14 of the Act of 1940, their Lordships made a distinction between the manner of giving a notice by the arbitrator and that of a notice by the court and observed that the notice, which the court is required under Section 14(2) to give the parties of the filing of the award "need not be a notice in writing. The notice can be given orally. No question of the service of the notice in the formal way of delivering the notice or tendering it to the party can arise in the case of a notice given orally. The communication of the information that an award has been filed is sufficient compliance with the requirements of Sub-section (2) of Section 14 with respect to the giving of the notice to the parties concerned about the filing of the award."
It may be stated here that, Section 14(2) requires that, in certain circumstances, the court shall "give notice to the parties of the filing of the award." Their Lordships further said that they saw no ground to construe the expression "date of service of notice" in Article 158 of the old Limitation Act to mean "only a notice in writing served in a formal manner" and that the service of a notice would include "constructive or informal notice." In the instant case, therefore, the order of the court directing the parties to file objections, if any which was intimated to the lawyers amounted to "service of notice" within the meaning of the expression in Article 119(b) of the new Limitation Act. Thus, the supplementary objection was not filed in time.
16. But it was urged that the supplementary objection was merely an amendment like that of pleadings and it was accepted by the court below. It is well settled that Section 33 of the 1940 Act contemplates an application for two purposes, viz., (i) when it is desired to challenge the existence or validity of an arbitration agreement or award, and (ii) when it is desired to have the effect of such agreement or award determined (see Shiv Jute Baling Ltd. v. Hindley & Co. Ltd., AIR 1959 SC 1357.) The proper construction of Sections 30 and 33 of the Act would be that all applications challenging an award irrespective of the ground of challenge, must be made under Section 33 (see Basant v. Surendra, AIR 1957 Pat 417, and Saha & Co. v. Ishar Singh Kripal Singh & Co., AIR 1956 Cal 321 (FB)) In Madan Lal v. Sunder Lal, Civil Appeal No. 990 of 1964 (yet unreported) decided on the 9th March, 1967 (since reported in AIR 1967 SC 1233), the Supreme Court said. .
"It is clear therefore from the scheme of the Act that if a party wants an award to be set aside on any of the grounds mentioned in Section 30 it must apply within 30 days of the date of service of notice of filing of the award as provided in Article 158 of the Limitation Act. If no such application is made the award cannot be set aside on any of the grounds specified in Section 30 of the Act ..... There can be no doubt on the scheme of the Act that any objection even in the nature of a written statement which falls under Section 30 cannot be considered by the court unless such an objection is made within the period of limitation (namely, 30 days), though if such an objection is made within limitation that objection may in appropriate cases be treated as an application for setting aside the award .....
Assuming that the court has power to set aside the award suo motu, we are of opinion that that power cannot be exercised to set aside an award on grounds which fall under Section 30 of the Act, if taken in an objection petition filed more than 30 days after service of notice of filing of the award, for if that were so the limitation provided under Article 158 of the Limitation Act would be completely negatived."
The proviso to Section 33 enables the court to pass such orders for "discovery and particulars as it may do in a suit." It is, therefore necessary to examine some of the rules in Order 6 of the Civil Procedure Code. According to Rule 2, every pleading must state material facts in a concise form, As the pleading must be precise, Rule 4, requires particulars to be stated in the pleading when the party pleading relies on certain matters and "in all other cases in which particulars may be necessary." "All other cases" here include a plea of misconduct; and the party concerned must specify the acts of misconduct (see Union of India v. Pandurang Kashinath; AIR 1962 SC 630), The principle behind this rule is that it is impossible for the other side to meet the plea of misconduct (which has been placed y the Supreme Court on the same footing as a plea of fraud), unless he knows in what manner he has committed the act of misconduct.
If a party does not state in his pleading all the particulars required by the rule, the other party may apply under Rule 5 for further and better particulars, which should not, however, be repugnant to Rule 7. In other words, a party will not be allowed to depart from the grounds taken up or to plead anything new or inconsistent with his previous pleading. Amendment of pleadings is allowed by Rule 17, which gives a discretion to the court to allow either party to amend his pleadings for the purpose of determining the real questions in controversy. It is well settled that in certain cases (which are summarised in note 4 to Rule 17 at page 728 of Mulla's Civil Procedure Code, Vol. 1, 1965 Edition) leave to amend will be refused. One of these cases is that leave will be refused where the effect of the proposed amendment is to take away from the defendant a legal right which has accrued to him by lapse' of time, except in very special cases. The gists of the important decisions on this point are given at pages 729-31 of Mulla's book. I do not see anything in the instant case to bring the supplementary objections of the plaintiff-appellant within the scope of the special cases.
17. In coming to this conclusion, I have kept in view the observation of the Supreme Court in the case of L.J. Leach & Co. Ltd. AIR 1957 SC 357, which was reiterated in the case of Pirgonda Hongonda, AIR 1957 SC 363, both having been referred to in Mulla's book. Their Lordships said: It is no doubt true that the courts would, as a rule, decline to allow amendments, if a fresh suit on the amended claim would be barred by limitation on the date of the application. But that is a factor to be taken into account in exercise of the discretion as to whether amendment should be ordered, and does not affect the power of the court to order it, if that is required in the interest of justice"; in other words, "can the amendment be allowed without injustice to the other side?"
I fail to understand what prevented the plaintiff from putting in the first objection the new grounds or particulars which he mentioned in the supplementary objections even when he took about a month to file the first objection.
It cannot, therefore, be said that the supplementary objections should be accepted as an amendment without causing injustice to the defendants. I am also of the opinion that the particulars in support of the alleged misconduct were to be furnished by the plaintiff under Rule 4 of Order 6 of the Code and not under Rule 5, according to which further and better particulars were to be furnished by the plaintiff only on an application by the defendants.
18. In AIR 1954 Orissa 234, a new point regarding the misconduct of the arbitrator was urged in the Orissa High Court; and their Lordships said that, though it had not been taken in the lower court, they "thought it desirable" to deal with it also, inasmuch as some evidence had been adduced in support of it. But there was no discussion or decision whether this new point could be permitted to be raised after the period of limitation. On the other hand, in Haji Ebrahim Kassam Cochinwalla v. Northern Indian Oil Industries Ltd., AIR 1951 Cal 230, a new ground regarding misconduct was taken through an affidavit in the Calcutta High Court; and it was held that this affidavit amounted to a new application which was time-barred under Article 158 of the old Limitation Act. In the English case of Rawsthorn v. Arnold, (1827) 8 B. & C. 629, a rule nisi to set aside the award had been issued and the "rule was founded upon an affidavit, specifying certain matters in difference".
It was held that it was not necessary to state those matters in the rule, inasmuch as they had been mentioned in the said affidavit. It was further held that it was incumbent upon the party challenging an award to show sufficient cause for the delay in making the application This decision does not help the appellant in the instant case, In Nagubai Ammal v. B. Shama Rao, AIR 1956 SC 593. the Supreme Court said:
"Evidence let in on issues on which the parties actually went to trial should not be made the foundation for decision of another and different issue, which was not present to the minds of the parties and on which they had no opportunity of adducing evidence. But that rule has no application to a case where parties go to trial with knowledge that a particular question is in issue, though no specific issue has been framed therein, and adduce evidence relating thereto."
But that principle does not apply to the particulars required to be furnished under Rule 4 of Order 6 of the Code in respect of fraud, undue influence, misconduct, etc. The issue in such cases is whether there was misconduct on the part of so and so, or whether so and so practised fraud or undue influence; but the particulars constituting fraud or misconduct are never put in the issue. My concluded opinion, therefore, is that the grounds of misconduct which were not mentioned in the original ejection of the plaintiff appellant, in the instant case, cannot be entertained even though they were specified in the supplementary objection. I must make it clear, however, that a ground or particular is different from the evidence in support of the same. For instance, in the ease of Ganga Prasad Modi, AIR 1951 Pat 821, it was observed: "The fact that in the original objection it was not definitely stated that notice had not been given", was of little importance, because "the assertion that the evidence was taken behind the parties' back obviously meant that they were not given notice"
19. Now, it has to be seen whether the two instances of misconduct found earlier are Indicated by the plaintiff's objection dated 17-8-1965 or not. In paragraph 9 of this objection, it is clearly stated that the arbitrators took ex parte evidence of the employees of the colliery on the date of inspection, and the plaintiff was not allowed opportunity to cross-examine them. This is one of the instance of misconduct found in this case. In paragraph 7 of the objection, it was alleged that the plaintiff "was not informed each and every date of "sitting of the arbitrators" and in paragraph 22, it was alleged that the arbitrators submitted the award in a hurry, "without going into the details of the case and without hearing the plaintiff". These two allegations cover the other instance of misconduct, namely, the private enquiry from the dealers in the absence of the parties who were not heard at any stage in respect of the prices obtained in that enquiry. Of course, in paragraph 4 of the objections, there is the general allegation that there was misconduct on the part of the arbitrators; but that allegation by itself is not of any value. In view of the aforesaid two instances of misconduct, objections in respect of which were taken in time, the award has been rightly set aside by the court below under Section 30(a) of the Act of 1940.
20. The next question is; what consequential order under Section 19 should be passed in this case? Clause 31 of the Memorandum of Agreement for Managing contractor dated the 20th June, 1962. reads as follows:
"That in the event of any dispute arising between the owners and the managing contractor relating to any matter of the interpretation of the agreement the same shall be referred for the decision to the arbitration of two arbitrators one to be nominated by the owners and the other by the contractor. In case the arbitrators be divided in their opinion, the matter shall be decided by an umpire to be nominated by the arbitrators and the decision of such arbitrators or the umpire, as the case may be, shall be final and binding on the parties."
It will be noticed that the arbitrators and the umpire were not named in this clause and there is nothing therein to indicate that there is no machinery available for a further reference to arbitration. In pursuance of this agreement, it is possible to refer the dispute again to two other arbitrators, one nominated by the plaintiff and the other by the defendants. It is not desirable to appoint the same arbitrators, whose award has been set aside, as each of them must have, by now. become biased in favour of one party and prejudiced against the other. It also appears from an order of the learned Subordinate Judge dated 21-2-1966 that he received a letter dated 17-2-1966 from Mr. Jani stating that he was resigning thenceforth from the duty of arbitrator; and, therefore, on 22-2-1966 the learned iudge directed the plaintiff to nominate any other arbitrator in place of Mr. Jani. In view, however, of what has been stated by me above, each of the parties should now be asked by the learned Subordinate Judge to nominate another person as arbitrator for deciding the dispute in accordance with Clause 31 of the aforesaid memorandum of Agreement
21. In the result, the impugned order of the court below is upheld, subject to the modification that the dispute shall now be referred to a new set of arbitrators, as indicated above. The appeal is dismissed, subject to the said modification In the circumstances of the case, the parties will bear their own costs of this court.
Shambhu Prasad Singh, J.
22. I agree. I am in complete agreement with my learned brother that the two instances of misconduct of the arbitrators are cover-
ed by the objection dated 17-8-1965 but as at present advised I am not inclined to agree with him that if misconduct is pleaded with in time for setting aside an award, details of it cannot be allowed to be furnished subsequently in any case. However, as it is not necessary to decide that question in this appeal. I refrain from making any observation on it.