Inder Sain
Mittal Vs. Housing Board Haryana & Ors [2002] Insc 90 (21 February 2002)
M.B.
Shah & B.N. Agrawal B.N.Agrawal, J.
Leave
granted.
These
appeals by special leave are directed against judgment rendered by the High
Court of Punjab & Haryana at Chandigarh in Civil Revision Applications
whereby the same have been allowed, orders passed by the appellate court
upholding orders of the trial court disallowing the objections under Section 30
of the Arbitration Act, 1940 (hereinafter referred to as 'the Act') have been
set aside, objections allowed and awards set aside.
The
Housing Board, Haryana-respondent No.1(hereinafter referred to as 'the Board'),
filed two separate money suits against the appellant in the Court of the Senior
Sub Judge, Sonepat, which were transferred to the Court of Addl. Civil Judge
(Sr. Divn.), Sonepat, who, by separate orders dated 19th March, 1997, as agreed
to by the parties, appointed Superintending Engineer, A.D.B.
Branch
Circle, P.W.D.(B & R) Br. Faridabad, as Arbitrator for settlement of
certain disputes between the parties pertaining to the works of construction of
Houses 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 hearing the parties
in the arbitration proceedings, on which date the Contractor attended the
proceedings whereas the Executive Engineer, who was representing the Board,
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 written reply, the Contractor attended
the proceedings and filed documents and his counsel almost concluded the
argument. The matter was, however, adjourned to 8th June, 1997. In the meantime, on 2nd June, 1997, Shri R.K. Jain,
Superintending Engineer, A.D.B., Branch Circle, P.W.D. (B & R) Branch, Faridabad,
who was the Arbitrator, was transferred and posted as Superintending Engineer,
Construction Circle No.1, Union Territory Chandigarh, but he continued with the
arbitration proceedings in spite of his transfer. On the next date of hearing,
i.e., on 8th June, 1997, the Contractor attended the
arbitration proceedings with his counsel whereas Executive Engineer
representing the Board though attended the proceedings but without counsel and
did not file written reply but requested for adjournment. Accordingly the
arbitration proceedings were adjourned to 18th June, 1997, on which date, an
affidavit was submitted on behalf of the Board in support of its case and after
evidence was adduced on behalf of the parties, counsel appearing on behalf of
the Contractor resumed further argument and concluded the same whereafter,
counsel appearing on behalf of the Board also concluded his argument on that
day itself.
The
Arbitrator thereupon gave the awards on 28th June, 1997.
Applications
under Section 14(2) of the Act were filed on behalf of the Contractor for
summoning the original awards from the Arbitrator and, upon receipt of the same
and after hearing the parties, making the awards rule of the Court. On the
other hand, on behalf of the Board, objections were filed under Section 30 of
the Act on grounds, inter alia, that the awards in question were without
authority and jurisdiction as the Court appointed Superintending Engineer,
A.D.B., Branch Circle, P.W.D. (B & R) Branch, Faridabad, as Arbitrator and
upon the transfer of the Arbitrator, Shri R.K.Jain, as Superintending Engineer
Circle No.1, Union Territory, Chandigarh, on 2nd June, 1997, he had no
authority and jurisdiction to further continue with the arbitration proceedings
which should have been taken over from that stage by the successor
Superintending Engineer, A.D.B., Branch Circle, P.W.D.(B & R) Branch, Faridabad,
who succeeded Shri R.K.Jain upon his transfer.
The
trial court after due consideration rejected the objections under Section 30 of
the Act and directed the awards to be made rule of the Court which order was
affirmed in appeal. When the matter was taken to the High Court of Punjab &
Haryana at Chandigarh in Civil Revision Applications filed under Section 115 of
the Code of Civil Procedure (hereinafter referred to as 'the Code'), the same
have been allowed, orders passed by the appellate court as well as the original
court set aside, objections allowed and awards set aside.
Hence,
these appeals by special leave.
Dr. Vikas
Vashishth, learned counsel appearing on behalf of the appellant, in support of
the appeals submitted that as the Executive Engineer representing the Board not
only attended the arbitration proceedings with his counsel even after transfer
of the Arbitrator, Shri R.K. Jain, but also consciously participated therein by
filing affidavit in support of claims of the Board, adduced evidence and
counsel appearing on behalf of the Board argued the matter, the Board would be
deemed 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
transfer and after the awards having gone against the Board, it was not open to
it to challenge the same on the ground that the arbitration proceedings were
continued and concluded by Shri R.K. Jain after he ceased to be the
Superintending Engineer, ADB Branch Circle, PWD(B&R) Branch, Faridabad in
view 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 of the
Board, submitted that as the appointment of Arbitrator was by designation, the
Arbitrator could not have continued with the arbitration proceedings and given
the awards after his transfer and the same could have been continued from that
stage and awards rendered by the successor only.
We
find that the point raised in this case is no longer res integra as the same
has been considered by this Court times without number. Reference in this
connection may be made to a decision of this Court rendered in the case of N. Chellappan
vs. Secretary, Kerala State Electricity Board & Anr., 1975 (2) SCR 811, in
which case the dispute, which had arisen between the parties , was referred by
them for decision of two Arbitrators who appointed an Umpire, but as the award
was not made by the Arbitrators within the time limit which was extended from
time to time, a petition was filed in Court for revoking authority of the
Arbitrators on the ground that they did not make the award within the
prescribed time limit and further prayer was made that the Umpire may be
appointed as a sole Arbitrator in place of two Arbitrators and he be directed
to enter upon the reference. The prayer was granted by the Court and after
revoking authority of the two Arbitrators, Umpire was appointed as the sole
Arbitrator with the consent of the parties and he was directed to enter upon
the reference and make the award. Parties thereupon participated in the
proceedings before the Umpire without demur and ultimately the award was given
to which one of the parties filed objections whereas the other filed a petition
for making the award rule of the Court. The objection was disallowed and prayer
for making the award rule of the Court was granted. When the matter was taken
in appeal to the High Court of Kerala the objection was allowed and award set
aside on the ground that the order revoking authority of the Arbitrators to
pass the award and appointing the Umpire as the sole Arbitrator was bad in law,
as such the Umpire as a sole Arbitrator had no jurisdiction to enter upon the
reference and pass the award. When the said matter was brought to this Court,
objection to the award was disallowed as Umpire was appointed by the Court,
with consent of the parties, to act as the sole Arbitrator after revoking
authority of the Arbitrators already appointed and no endeavour was made to
have that order vacated by filing a review inasmuch as the parties participated
in the proceedings before the Umpire without any demur to his jurisdiction from
which conduct of the parties only inference that can be drawn is that the
party, who was objecting to the award, by his conduct had no objection to the
order revoking the authority of the Arbitrators. Therefore, by acquiescence
such a party was precluded from challenging the jurisdiction of the Umpire by
filing an objection to the award.
Similarly,
in the case of Chowdhri Murtaza Hossin v. Mussumat Bibi Bachunnissa, 3 I.A.
209, which is a decision of the Privy Council and referred to in the case of N.
Chellappan (Supra) with approval, it has been laid down that a party having a
clear knowledge of the circumstances on which he might have founded an
objection to the Arbitrators proceedings to make their award, did submit to the
proceeding going on; that he allowed the Arbitrators to deal with the case as
it stood before them, taking his chance of the decision being more or less favourable
to himself; and that it is too late for him, after the award has been made, and
on the application to file the award, to insist on his objection to the filing
of the award.
In the
case of Prasun Roy vs. Calcutta Metropolitan Development Authority & Anr.,
(1987) 4 SCC 217, on an application made under Section 20 of the Act, the Court
appointed another Arbitrator in place of the arbitrator named in the
arbitration agreement on the allegations of bias and the parties participated
in the proceedings before the new Arbitrator without any objection for long,
which was raised at a later stage to the arbitration award on the ground that
the appointment of Arbitrator was bad. In that case it was laid down by this
Court that on the principle of waiver and estoppel a party would be precluded
from challenging the award as by participating in the arbitration proceedings
without any objection it would be deemed to have acquiesced.
In the
case of M/s. Neelakantan & Bros. Construction vs. Superintending Engineer,
National Highways, Salem & Ors., (1988) 4 SCC 462, according to the
arbitration clause, the Superintending Engineer of the Circle for the time
being was the named Arbitrator and accordingly one Thiru Mohan was appointed as
Arbitrator, who entered upon the reference and before him evidence was adduced
by the parties, but before the Arbitrator could conclude the arbitration, he
was transferred and was succeeded by one Thiru J.R. Cornelius, who, after
taking over charge from Thiru Mohan, concluded the arbitration proceedings and
after giving opportunity of hearing to the parties gave the award, which was
objected to on the ground that the successor officer had no jurisdiction to
conclude the arbitration proceedings and give the award. The objection was
overruled by the trial court and the said order was upheld by the High Court as
well as this Court on the ground that since the party who was objecting to the
award had knowledge of the alleged defect and had acquiesced in the proceedings
before the successor, it would be precluded from objecting to the award on the
ground that the same made by the successor officer upon transfer of his
predecessor, who had entered upon the reference, was invalid, especially when
taking over the arbitration proceedings and its conclusion by the successor
would not be in disregard of any law.
Learned
counsel appearing for the Board heavily relied upon a decision of this Court in
the case of State of Punjab vs. Hardyal, (1985) 2 SCC 629. In that case the
parties participated in the arbitration proceedings, initiated with the intervention
of Court, even after expiry of four months' period prescribed for submitting
the award, as required by law, in the absence of extension of time granted by
the Court, and an award was made. An objection was filed under Section 30 of
the Act to the award on the ground that the Arbitrator had no jurisdiction to
make the award after the expiry of prescribed period of four months in the
absence of any order of extension. On these facts, this Court laid down that
time to be fixed for making an award is initially one of agreement between the
parties to the agreement, but if no time has been specified by the parties in
the arbitration agreement, then the award must be given within four months as
prescribed in Section 3 read with clause 3 of the First Schedule to the
Arbitration Act as time can be extended by the court and not by the parties at
any stage inasmuch as since the Arbitrator is injuncted to give an award beyond
the prescribed period of four months unless the same is extended by the Court,
he had no jurisdiction to make an award after the expiry of specified time in
the absence of any order of extension and in view of this the award made beyond
time is ipso facto invalid, the same having been prohibited by law, and parties
are not estopped by their conduct from challenging the same on the ground that
it was made beyond time, merely because they participated in the proceedings
before the Arbitrator after expiry of the prescribed period as established
principle is that there can be no estoppel against a statute.
In
view of the foregoing discussions, with reference to the provisions of the Act,
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 the award can be
classified into two categories, viz., one emanating from agreement and the
other law.
(ii)
In case the ground of attack flows from agreement between the parties which
would undoubtedly be a lawful agreement, and the same is raised at the initial
stage, Court may set it right at the initial stage or even subsequently in case
the party objecting has not participated in the proceedings or participated
under protest. But if a party acquiesced to the invalidity by his conduct by
participating in the proceedings and taking a chance therein cannot be allowed
to turn round after the award goes against him and is estopped from challenging
validity or otherwise of reference, arbitration proceedings and/or award
inasmuch as right of such a party to take objection is defeated.
(iii)
Where ground is based upon breach of mandatory provision of law, a party cannot
be estopped from raising the same in his objection to the award even after he
participated in the arbitration proceedings in view of the well settled maxim
that there is no estoppel against statute.
(iv)
If, however, basis for ground of attack is violation of such a provision of law
which is not mandatory but directory and raised at the initial stage, the
illegality, in appropriate case, may be set right, but in such an eventuality
if a party participated in the proceedings without any protest, he would be
precluded from raising the point in the objection after making of the award.
In the
case on hand, it cannot be said that continuance of the proceedings and
rendering of awards therein by the Arbitrator after his transfer was in
disregard of any provision of law much less mandatory one but, at the highest,
in breach of agreement. Therefore, by their conduct by participating in the
arbitration proceedings without any protest the parties would be deemed to have
waived their right to challenge validity of the proceedings and the awards,
consequently, the objections taken to this effect did not merit any
consideration and the High Court was not justified in allowing the same and
setting aside the award.
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.
J.
[M.B.
SHAH] ..J.
[B.N.
AGRAWAL] FEBRUARY 21,
2002.
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