MANU/SC/0117/2002

True Court CopyTM EnglishUC

IN THE SUPREME COURT OF INDIA

Civil Appeal Nos. 1398-1399 of 2002

Decided On: 21.02.2002

Appellants: Inder Sain Mittal Vs. Respondent: Housing Board, Haryana and Ors.

Hon'ble Judges/Coram:
M.B. Shah and B.N. Agrawal

JUDGMENT

B.N. Agrawal, J.

1. Leave granted.

2. These appeals by special leave are directed against judgmentrendered by the High Court of Punjab & Haryana at Chandigarh in Civil RevisionApplications whereby the same have been allowed, orders passed by theappellate court upholding orders of the trial court disallowing the objections underSection 30 of the Arbitration Act, 1940 (hereinafter referred to as 'the Act') havebeen set aside, objections allowed and awards set aside.

3. The Housing Board, Haryana-respondent No. 1 (hereinafter referredto as 'the Board'), filed two separate money suits against the appellant in theCourt of the Senior Sub Judge, Sonepat, which were transferred to the Court ofAddl. Civil Judge (Sr. Divn.), Sonepat, who, by separate orders dated 19th March,1996, as agreed to by the parties, appointed Superintending Engineer, A.D.B.Bench Circle, P.W.D.(B & R) Br. Faridabad, as Arbitrator for settlement ofcertain disputes between the parties pertaining to the works of construction ofHouse in the Housing Board Colony at Sonepat. On receipt of the references,the Arbitrator entered thereupon and fixed 6th May, 1997 as the date for hearingthe parties in the arbitration proceedings, on which date the Contractor attendedthe proceedings whereas the Executive Engineer, who was representing theBoard, absented himself. On the next date of hearing, i.e., on 13th May, 1997,while the Executive Engineer made a prayer for adjournment for filing the writtenreply, the Contractor attended the proceedings and filed documents and hiscounsel almost concluded the argument. The matter was, however, adjournedto 8th June, 1997. In the meantime, on 2nd June, 1997, Shri R.K. Jain,Superintending Engineer, A.D.B., Bench Circle, P.W.D. (B & R) Branch,Faridabad, who was the Arbitrator, was transferred and posted asSuperintending Engineer, Construction Circle No. 1, Union Territory Chandigarh,but he continued with the arbitration proceedings in spite of his transfer. On thenext date of hearing, i.e. on 8th June, 1997, the Contractor attended thearbitration proceedings with his counsel whereas Executive Engineerrepresenting the Board though attended the proceedings but without counsel anddid not file written reply but requested for adjournment. Accordingly thearbitration proceedings were adjourned to 18th June, 1997, on which date, anaffidavit was submitted on behalf of the Board in support of its case and afterevidence was adduced on behalf of the parties, counsel appearing on behalf ofthe Contractor resumed further argument and concluded the same whereafter,counsel appearing on behalf of the Board also concluded his argument on thatday itself.

4. The Arbitrator thereupon gave the awards on 28th June, 1997.Applications under Section 14(2) of the Act were filed on behalf of the Contractorfor summoning the original awards from the Arbitrator and, upon receipt of thesame and after hearing the parties, making the awards rule of the court. On theother hand, on behalf of the Board, objections were filed under Section 30 of theAct on grounds, inter alia, that the awards in question were without authority andjurisdiction as the Court appointed Superintending Engineer, A.D.B., BranchCircle, P.W.D. (B & R) Branch, Faridabad, as Arbitrator and upon the transfer ofthe Arbitrator, Shri R.K. Jain, as Superintending Engineer Circle No. 1, UnionTerritory, Chandigarh, on 2nd June, 1997, he had no authority and jurisdiction tofurther continue with the arbitration proceedings which should have been takenover from that stage by the successor Superintending Engineer, A.D.B., BranchCircle, P.W.D. (B & R) Branch, Faridabad, who succeeded Shri R.K. Jain upon histransfer.

5. The trial court after due consideration rejected the objections underSection 30 of the Act and directed the awards to be made rule of the Court whichorder was affirmed in appeal. When the matter was taken to the High Court ofPunjab & Haryana at Chandigarh in Civil Revision Applications filed underSection 115 of the Code of Civil Procedure (hereinafter referred to as 'theCode'), the same have been allowed, orders passed by the appellate court aswell as the original court set aside, objections allowed and awards set aside.Hence, these appeals by special leave.

6. Dr. Vikas Vashishth, learned counsel appearing on behalf of the appellant,in support of the appeals submitted that as the Executive Engineer representingthe Board not only attended the arbitration proceedings with his counsel evenafter transfer of the Arbitrator, Shri R.K. Jain, but also consciously participatedtherein by filing affidavit in support of claims of the Board, adduced evidence andcounsel appearing on behalf of the Board argued the matter, the Board would bedeemed to have acquiesced to the continuance of the Arbitrator, Shri R.K. Jain,with the arbitration proceedings and making of the awards even after his transferand after the awards having gone against the Board, it was not open to it tochallenge the same on the ground that the arbitration proceedings werecontinued and concluded by Shri R.K. Jain after he ceased to be theSuperintending Engineer, ADB Branch Circle, PWD(B&R) Branch, Faridabad inview of the fact that the Arbitrator was not appointed by name but by designation.On the other hand, Shri Mahabir Singh, learned counsel appearing on behalf ofthe Board, submitted that as the appointment of Arbitrator was by designation,the Arbitrator could not have continued with the arbitration proceedings andgiven the awards after his transfer and the same could have been continued fromthat stage and awards rendered by the successor only.

7. We find that the point raised in this case is no longer res integra as thesame has been considered by this Court times without number. Reference inthis connection may be made to a decision of this Court rendered in the case of N. Chellappan v. Secretary, Kerala State Electricity Board and Anr., MANU/SC/0002/1974 : [1975]2SCR811 , in which case the dispute, which had arisen between the parties, wasreferred by them for decision of two Arbitrators who appointed an Umpire, but aswas award was not made by the Arbitrators within the time limit which wasextended from time to time, a petition was filed in Court for revoking authority ofthe Arbitrators on the ground that they did not make the award within theprescribed time limit and further prayer were made that the Umpire may beappointed as a sole Arbitrator in place of two Arbitrators and he be directed toenter upon the reference. The prayer was granted by the Court and afterrevoking authority of the two Arbitrators, Umpire was appointed as the soleArbitrator with the consent of the parties and he was directed to enter upon thereference and make the award. Parties thereupon participated in the proceedingsbefore the Umpire without demur and ultimately the award was given to whichone of the parties filed objections whereas the other filed a petition for making theaward rule of the Court. The objection was disallowed and prayer for making theaward rule of the Court was granted. When the matter was taken in appeal tothe High Court of Kerala the objection was allowed and award set aside on theground that the order revoking authority of the Arbitrators to pass the award andappointing the Umpire as the sole Arbitrator was bad in law, as such the Umpireas a sole Arbitrator had no jurisdiction to enter upon the reference and pass theaward. When the said matter was brought to this Court, objection to the awardwas disallowed as Umpire was appointed by the Court, with consent of theparties, to act as the sole Arbitrator after revoking authority of the Arbitratorsalready appointed and no endeavour was made to have that order vacated byfiling a review inasmuch as the parties participated in the proceedings before theUmpire without any demur to his jurisdiction from which conduct of the partiesonly inference that can be drawn is that the party, who was objecting to theaward by his conduct had no objection to the order revoking the authority of theArbitrators. Therefore, by acquiescence such a party was precluded fromchallenging the jurisdiction of the Umpire by filing an objection to the award.

8. Similarly, in the case of Chowdhri Murtaza Hossin v. Mussumat BidiBachunnissa, 3 I.A. 209, which is a decision of the Privy Council and referredto in the case of N. Chellappan (Supra) with approval, it has been laid down thata party having a clear knowledge of the circumstances on which he might havefounded an objection to the Arbitrators proceedings to make their award, didsubmit to the proceeding going on; that he allowed the Arbitrators to deal withthe case as it stood before them, taking his chance of the decision being more orless favourable to himself, and that it is too late for him, after the award has beenmade, and on the application to file the award, to insist on his objection to thefiling of the award.

9. In the case of Prasun Roy v. Calcutta Metropolitan DevelopmentAuthority and Anr., MANU/SC/0017/1987 : [1987]3SCR569 , on an application made under Section 20 ofthe Act, the Court appointed another Arbitrator in place of the arbitrator named inthe arbitration agreement on the allegations of bias and the parties participated inthe proceedings before the new Arbitrator without any objection for long, whichwas raised at a later stage to the arbitration award on the ground that theappointment of Arbitrator was bad. In that case it was laid down by this Courtthat on the principle of waiver and estoppel a party would be precluded fromchallenging the award as by participating in the arbitration proceeding withoutany objection it would be deemed to have acquiesced.

10. In the case of M/s. Neelakantan & Bros. Construction v. SuperintendingEngineer, National Highways, Salem and Ors., MANU/SC/0303/1988 : AIR1988SC2045 , according to thearbitration clause, the Superintending Engineer of the Circle for the time beingwas the named Arbitrator and accordingly one Thiru Mohan was appointed asArbitrator, who entered upon the reference and before him evidence wasadduced by the parties, but before the Arbitrator could conclude the arbitration,he was transferred and was succeeded by one Thiru J.R. Cornelius, who, aftertaking over charge from Thiru Mohan, concluded the arbitration proceedings andafter giving opportunity of hearing to the parties gave the award, which wasobjected to on the ground that the successor officer had no jurisdiction toconclude the arbitration proceeding and give the award. The objection wasoverruled by the trial court and the said order was upheld by the High Court aswell as this Court on the ground that since the party who was objecting to theaward had knowledge of the alleged defect and had acquiesced in theproceedings before the successor, it would be precluded from objecting to theaward on the ground that the same made by the successor officer upon transferof his predecessor, who had entered upon the reference, was invalid, especiallywhen taking over the arbitration proceeding and its conclusion by the successorwould not be in disregard of any law.

11. Learned counsel appearing for the Board heavily relied upon a decision ofthis Court in the case of State of Punjab v. Hardyal, MANU/SC/0002/1985 : [1985]3SCR649 . In thatcase the parties participated in the arbitration proceedings, initiated with theintervention of Court, even after expiry of four months' period prescribed forsubmitting the award, as required by law, in the absence of extension of timegranted by the Court, and an award was made. An objection was filed underSection 30 of the Act to the award on the ground that the Arbitrator had nojurisdiction to make the award after the expiry of prescribed period of fourmonths in the absence of any order of extension. On these facts, this Court laiddown that time to be fixed for making an award is initially one of agreementbetween the parties to the agreement, but if no time has been specified by theparties in the arbitration agreement, then the award must be given within fourmonths as prescribed in Section 3 read with Clause 3 of the First Schedule to theArbitration Act as time can be extended by the court and not by the parties at anystage inasmuch as since the Arbitrator is injuncted to give an award beyond theprescribed period of four months unless the same is extended by the Court, hehad no jurisdiction to make an award after the expiry of specified time in theabsence of any order of extension and in view of this the award made beyondtime is ipso facto invalid, the same having been prohibited by law, and partiesare not estopped by their conduct from challenging the same on the ground thatit was made beyond time, merely because they participated in the proceedingsbefore the Arbitrator expiry of the prescribed period as established principleis that there can be no estoppel against a statue.

12. In view of the foregoing discussions, with reference to the provisions of theAct we conclude thus:

(i) Grounds of objection under Section 30 of the Act to the reference made,with or without intervention of the Court, arbitration proceedings and theaward can be classified into two categories, viz., one emanating fromagreement and the other law.

(ii) In case of ground of attack flows from agreement between the partieswhich would undoubtedly be a lawful agreement, and the same is raisedat the initial stage, Court may set it right at the initial stage or evensubsequently in case the party objecting has not participated in theproceedings or participated under protest. But if a party acquiesced to theinvalidity by his conduct by participating in the proceedings and taking achance therein cannot be allowed to turn round after the award goesagainst him and is estopped from challenging validity or otherwise ofreference, arbitration proceedings and/or award inasmuch as right of sucha party to take objection is defeated.

(iii) Where ground is based upon breach of mandatory provision of law, aparty cannot be estopped from raising the same in his objection to theaward even after he participated in the arbitration proceedings in view ofthe well settled maxim that there is no estoppel against statute.

(iv) If, however, basis for ground of attack is violation of such a provision oflaw which is not mandatory but directory and raised at the initial stage, theillegality, in appropriate case, may be set right, but in such an eventuality ifa party participated in the proceedings without any protest, he would beprecluded from raising the point in the objection after making of the award.

13. In the case on hand, it cannot be said that continuance of the proceedingsand rendering of awards therein by the Arbitrator after his transfer was indisregard of any provision of law much less mandatory on but, at the highest, inbreach of agreement. Therefore, by their conduct by participating in thearbitration proceedings without any protest the parties would be deemed to havewaived their right to challenge validity of the proceedings and the awards,consequently, the objections taken to this effect did not merit any considerationand the High Court was not justified in allowing the same and setting aside theaward.

14. In the result, the appeals are allowed with cost, which is quantified at Rs.10,000/-, and the impugned judgment passed by the High Court is set aside.

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