Jatinder Nath vs M/S Chopra Land Developers Pvt. Ltd. & ...

The Developer is a private limited company having its registered office at Saket, New Delhi. On 16.3.1990 an Agreement was entered into by the Developer with one Jatinder Nath (appellant herein). At that time, the appellant was residing at Faridabad. Under the above agreement, the Developer agreed to construct a housing complex on a plot bearing No. G-13, Saket, New Delhi. Under the said Agreement, the Developer agreed to finance the construction from its own resources. Clauses 11, 20 and 21 of the said agreement read as follows:

In terms of the said agreement, when the dispute arose between the parties, the appellant herein requested for a reference to the named Arbitrator. This was vide letter dated 20.8.1992. The Arbitrator entered upon the reference on 24.8.1992. He fixed the hearing on 5.9.1992 on which date the appellant remained present at the venue of arbitration. However, neither the arbitrator nor the Developer was present. Suddenly after fourteen months, the arbitrator purported to act. He fixed the matter for hearing on 20.2.1994. Since the entire matter was pending before the Delhi High Court which was moved by the appellant herein under section 20, the arbitrator was requested not to proceed. Despite the request, the arbitrator proceeded to give his Award (ex parte). This was on 29.3.1994.

As stated above, one of the points raised on behalf of the appellant herein is that ex parte Award dated 29.3.1994 was non est since it was made beyond four months from the date when the arbitrator entered upon the reference. We do not find any merit in this contention. Chapter II of the Arbitration Act covers references, in which the parties may proceed, if nothing goes wrong, up to the stage of delivery of the award, without the intervention of the court. This does not mean that the court has no authority to intervene at an early stage, should it become necessary. In the present case, as stated above, the arbitrator entered upon a reference pursuant to the notice given by the appellant on 24.8.1992. The notice was given on 20.8.1992. Therefore, section 8 of the Act has no application. Section 8 applies only where the parties do not concur in the appointment. Section 8 and section 20 operate in different provinces. Section 20 confers power on the court to order the agreement to be filed and to make an order of reference to the arbitrator appointed by the parties or where they do not agree, the court can appoint any other person of its choice as an arbitrator. This discussion is important. This difference between section 8 and section 20 shows that the reference flows from an agreement between the parties in the cases falling under section 8. The reference flows from the agreement in cases falling under Chapter II of the Arbitration Act and as long as the agreement stands, the reference remains valid unless it is superseded by an order of the court under section 19. Under that section, where award becomes void under section 16(3) or where an award is set aside, the court may by an order supersede the reference and shall thereupon order that the arbitration agreement shall cease to have effect. Therefore, till such time as the order is passed by the court under section 19 superseding the reference, the same shall remain valid till the agreement is superseded. This is the scope of section 8 read with section 19 of the Act. On the other hand, in cases falling under section 20 of the Act, power is conferred on the court to make an order of reference to the arbitrator. That power is conferred on the court which orders the agreement to be filed before it. In a proceeding under section 8, disputes are presented by the parties before the arbitrator. Whereas in proceedings under section 20, the disputes are referred by the court. It is for this reason that it has been repeatedly held that merely because an arbitrator does not make an award within the specified period of four months the court has the power to extend the period. The award given by an arbitrator after four months is not binding on the parties. Such an award is vitiated as the arbitrator has no power to make an award after four months. However, a bare failure of an arbitrator to make an award within the time allowed by law will not involve the consequences of it being set aside only on that ground. The court has ample powers in a given case to extend the time and give life to the vitiated award by exercising judicial discretion under section 28 of the Act. An application to have the award set aside on the ground that it was made beyond time prescribed has to be moved under the Act. No separate suit would lie for that purpose. Section 28 is not limited only to references to arbitration made in a suit pending before the court. Further, the power given to the court under section 28 is so wide that it can extend the time even if the award is made beyond four months from the date of the arbitrator entering upon the reference. The only restriction is that it must be exercised with judicial discretion. In the present case, as state above, the Developer moved an application for making the award the rule of the court on 12.4.1994. Unfortunately, the appellant chose not to appear before the trial court. In the circumstances, an ex parte decree came to be passed on 31.5.2006. We have used the word unfortunately because the appellant herein had filed his objections before the trial court. Those objections were dismissed as he chose to remain absent. The appellant chose to remain absent as he had moved or decided to move this Court in special leave petition against the impugned judgment of the High Court on the point of territorial jurisdiction. The judgment of the High Court is dated 19.4.2006. The Award is made the rule of the court by the trial court on 31.5.2006 in view of the impugned judgment of the High Court. We have also gone through the Award. We do not wish to express any opinion on the merits, however, the fact remains that the arbitrator entered upon the reference on 24.8.1992. He fixed the date of hearing on 5.9.1992. On 5.9.1992 the appellant appeared before him. The arbitrator was absent. The Award has been given almost after fourteen months and that too after 14.10.1993 when the appellant herein moved an application under section 20 of the Act for appointment of a new arbitrator. Taking into account the above circumstances, we set aside the ex parte Order dated 31.5.2006 passed by the trial court at Faridabad making Award dated 29.3.1994 the rule of the court. Consequently, we direct restoration of the matter to the file of the Court of Additional Civil Judge (Senior Division), Faridabad in Case No. 7 instituted on 12.4.1994 titled M/s Chopra Land Developers Pvt. Ltd. v. Jatinder Nath and anr.. We may clarify that the trial court will proceed on the basis that it has territorial jurisdiction to decide the application made by the Developer under sections 14 to 17 of the Act. The said application will be decided on merits alone in accordance with law. In other words, the trial court will re-examine the question on merits as to whether the Award given by the arbitrator on 29.3.1994 should or should not be made the rule of the court. The trial court will have to decide whether to extend the period for making the Award or not, whether to supercede the reference or not. The trial court will proceed in accordance with law. Any observation on the merits of the case mentioned hereinabove shall not be treated as opinion of this Court. Further, the trial court will proceed on the basis that it has territorial jurisdiction to decide the above matter.

Subject to above, the civil appeal is dismissed with no order as to costs.