Case: Reserve Bank Of India Vs. S.S. Investments

2. This is an appeal against the judgment and order of the Madras High Court whereby it declared that arbitration awards given on December 7 and 30, 1989, by respondents 2 and 3 respectively, in respect of a dispute between the appellant and respondent 1, were not valid; and that the subsequent proceedings conducted by the umpire, respondent 4, were also not valid. The order of the Madras High Court remitted the matter to respondents 2 and 3 to pass awards afresh in the light of its observations3. An agreement for the sale of five blocks of residential flats and a community complex, along with the land, was entered into between the appellant and respondent 1 on June 4, 1984. Clause 36 of the agreement provided that disputes between the parties would be resolved by arbitration; if the parties could not agree upon a common arbitrator each would nominate an arbitrator, who would appoint an umpire before entering upon the reference. Disputes having arisen the appellant appointed respondent 2, who was a former Judge, and respondent 1 appointed respondent 3, who was a member of the Bar, as their arbitrators. Respondents 2 and 3 entered upon the reference on April 19, 1988, appointed respondent 4 as umpire and heard the appellant and respondent 1. On December 7, 1989 respondent 2 made an award holding respondent 1 to be in breach of the agreement with the appellant and gave consequential directions. On December 12, 1989 respondent 3 wrote to respondent 2 stating that he could not subscribe to the award made by respondent 2. He said that "for the purposes of the record I shall write a separate award ...." He added,"We could have sat together and discussed matters before writing the award even if our points of view or judgments therein varied or even if differed on any issues or point for determination." *On December 30, 1989 respondent 3 made his award. He came to a conclusion quite different from that arrived at by respondent 2. The last day upon which an award could have been made was December 31, 1989. On April 3, 1990 the appellant requested respondents 2 and 3 to refer the matter to respondent 4 as umpire in view of the differing awards made by them. On April 19, 1990 respondent 1 objected to respondent 4 entering upon the reference. It stated that respondent 2 had made his award unilaterally and without any deliberations with respondent 3. Respondent 3 had made his award on December 31, 1989. Both the awards had been made without joint deliberations and, therefore, the arbitration proceedings were vitiated and there had to be a fresh arbitration. A copy of this letter was sent to respondent 4. On November 19, 1990 respondent 4 entered upon the reference as umpire. Counsel on behalf of the appellant presented his submissions to respondent 4 in the presence of the first respondents representatives and counsel on December 22, 1990 and January 12, 15 and 19, 1991. On January 26, 1991, the arguments on behalf of the appellant were concluded and the matter was adjourned to February 4, 1991 to enable counsel for respondent 1 to address respondent 4. In the meantime, on January 17, 1991, counsel for the appellant and respondent 1 made a written submission to respondent 4 which noted that his time to make the award expired on January 18, 1991 and that the proceedings before him were in progress. The submission stated, "The claimant and the respondent have no objection for extension of time by two months from January 18, 1991 for the umpire to make the award." On January 31, 1991 respondent 1 filed the proceedings before the Madras High Court upon which the judgment and order under appeal were passed. It prayed for declarations that the arbitration proceedings and awards passed therein were invalid and unenforceable, that the arbitration agreement was invalid and unenforceable and had ceased to have effect and that the reference to respondent 4 was without jurisdiction and invalid. Respondent 1 also prayed that the fourth respondents authority as umpire be revoked and a permanent injunction be granted restraining the appellant and respondents 2, 3 and 4 from proceeding to pass any award or execute any award in respect of the reference before respondent 44. The High Court held that the case was "one in which admittedly there has been no joint deliberation or consultation between respondents 2 and 3 before the passing of the awards and, therefore, the awards passed by respondents 2 and 3 individually in the circumstances will become void". It also stated that it was not possible to hold that respondent 1 had acquiesced in the competency of the reference to respondent 4. In the result, the High Court declared that the awards of respondents 2 and 3 were invalid and that the entering upon the reference by respondent 4 and the subsequent proceedings conducted by him were not valid. It remitted the matter to respondents 2 and 3 to pass awards afresh in the light of the observations it had made

Reasoning:
17. Regard must be had, in our view, to the ordinary course of conduct of judicial and arbitration proceedings, especially considering the fact that one of the arbitrators was a former Judge and the other was a member of the Bar. Discussions do ordinarily take place during the course of the arguments between counsel and the Judges or arbitrators. Questions are asked by the Judges or arbitrators which would indicate their minds to counsel and to each other. Discussions also, ordinarily, take place between the Judges or arbitrators inter se during the course of the hearings and immediately before or after the same. It is not, therefore, imperative that arbitrators should meet upon the conclusion of the hearings to discuss the matter and agree to an award or agree to disagree in that behalf18. That there had been divergent views expressed even during the course of the present arbitration hearings is clear from the letter written by the respondent 3 to respondent 2 for he says, "We could have sat together and discussed matters before writing the award even if our points of view or judgments varied or eve differed on any issues or point for determination". That the respondent 2 wrote out his own award indicates that he had no doubt in his mind that the differences between him and respondent 3 about the case before them were irreconcilable. As has been said, disagreement can take a variety of forms. Upon the facts of this case we are of the view that there was a disagreement between respondents 2 and 3; the fact of such disagreement was conveyed to the parties when respondent 2 sent them his award and respondent 4 then became entitled to enter upon the reference as umpire19. We think that the High Court was not justified in placing reliance upon the fact that there was no plea on behalf of the appellant that there was a joint consultation between respondents 2 and 3 after the submission of the arguments by both sides and before the passing of the award by respondent 2, which, in its view, established that there was "no joint deliberation or united consideration" by respondents 2 and 3. Parties to an arbitration cannot be expected to know that such joint consultations or deliberations had taken place between the arbitratorsThe authorities do not say that the party so objecting is obliged to extend the time for the arbitrator or umpire to make the award. At any rate, the agreement to extend the time for respondent 4 to make the award should have been qualified by the respondent 1 and should have reserved to it the right to agitate its objection to the fourth respondents jurisdiction. The terms of the joint submission made by counsel for the appellant and respondent 1 to respondent 4 are unqualified and we think that, in the circumstances, respondent 1 must be held to have waived its objection to the entering upon the reference by respondent 4 as umpire