Case: Union Of India Vs. Om Parkash

These seven appeals by certificate have been preferred by the Union of India against a common judgment of the Allahabad High Court disposing of seven appeals under section 39(1)(vi) ofthe Arbitration Act, 1940. The appeals turn on the true meaning and scope of sections 8 and 30 of the Act. Section 8 is in these terms:Power of Court to appoint arbitrator or(1) In any of the following cases-(a) where an arbitration agreement provides that the reference shall be to one or more arbitrators to be appointed by consent of the parties, and all the partes do not, after differences have arisen" concur in the appointment or appointments; or(b) if any appointed arbitrator or umpire neglects or re fuses to act, or is incapable of acting, or dies, and the arbitration agreement does not show that it was intended that the vacancy should not be supplied, and the parties or the arbitrators, as the case ma y be, do not supply the vacancy; or(c) where the parties or the arbitrators are required to appoint an umpire and do not appoint him;any party may serve the other parties or the arbitrators, as the case may be, with a written notice to concur in the appointment or appointments or in supplying the vacancy.(2) If the appointment is not made within fifteen clear days after the service of the said notice, the Court may, on the application of the party who gave the notice and after giving the other parties an opportunity of being heard, appoint an arbitrator or arbitrators or umpire, as the case may be, who shall have like power to act in the reference and to make an award as if he or they had been appointed by consent of allfacts leading to the appeals are these. During the last world war the respondents a contractor, entered into seven agreements with the military department of the Government of India for the construction of a hospital" three other buildings and three tub e wells. In each of these agreements there was a clause providing that any dispute arising between the parties would be referred to an arbitrator. In four cases the agreements provided for arbitration by the Director of Farms, General Headquarters, Simla, in two cases the officer Commanding, Lucknow, was to be the arbitrator, and in the remaining other case, a Quarter-Master at Delhi was chosen as the arbitrator. Disputes having arisen between the parties, the respondent made seven applications in the court of the First Civil Judge, Meerut, under section 8(2) of the Act stating that the offices by reference to which the arbitrators were selected in the agreements had been abolished and it was therefore necessary to appoint new arbitrators. In the applications the respondent named several officers praying that one of them be appointed to act an arbitrator "who shall have like power to act in the reference and to make an award as if he has been appointed by the consent of the parties". It will be noticed that the prayer repeats the material portion of sub-section (2) of section 8. On February 13, 1950 the court appointed Col. Ranbir Singh whose name was not in the respondents list, to act as arbitrator in all the seven cases and further directed the papers to be sent to him, asking him to give his award within two months from that date. If the respondents contention in these A appeals is correct t hat after appointing an arbitrator under section 8(2) the court ceases to have jurisdiction and cannot make an order of reference, the further directions given in the order of February 13, 1950 were invalid. However, the question did not assume importance at that stage because both sides agreed to submit the disputes to Col. Ranbir Singh for arbitration. After the arbitration had made some progress, Col. Ranbir Singh returned the papers to the court on being asked not to proceed further by the Government counsel who thought that the arbitrator was not competent to deal with the questions of law arising for decision. After this the District Judge, Meerut, transferred the cases to the Judge of the Small Cause Court, Meerut, presumably on the assumption that the respondents applications for the appointment of an arbitrator were pending. If the respondents contention is right, this was an erroneous assumption, but no objection was raised at the time and the Judge of the Small Cause Court by his order dated February 13, 1951 appointed Director of Farms, General Headquarters, Simla, to act as arbitrator in all the seven cases. In that order the court further directed as follows:"All these cases should be referred to him for arbitration. He must file his award within one month of thispapers were then sent to Brigadier H. L. Bhandari who was. said to be the officer concerned. The respondent applied to the court on March 8, 1951 for review of the order alleging that the office of the Director of Farms, General Headquarters, Simla, had been abolished and as such Brig. H. L. Bhandari could not be the officer mentioned in the order . The respondent did not take part in the proceedings be fore Brig. Bhandari, but before he moved the court on May 4, 1951 for stay of the proceedings before the arbitrator, the latter had made his awards which were filed in court on that very day. The review application was ultimately dismissed on May 12,respondent made seven applications urging several grounds for setting aside the awards, but the Judge of the small Cause Court, Meerut, overruled all objections and conferred the awards, and a decree in terms of the award in each case was passed on May 26, 1952. Against that order the respondent preferred seven appeals to the Allahabad High Court. The High Court allowed the appeals accepting the contention that the court was functus officio after appointing the arbitrator under section 8(2) and had no jurisdiction to refer the cases to the arbitrator. The High Court was of the view that it was for the parties to refer their disputes to t he arbitrator after he was appointed by the court, and the reference by the court being without jurisdiction the awards were invalid. The High Court further held that when the court below made the order of reference there was no post of Director of Farms, General Headquarters, Simla, in existence and, as such, Brig. Bhandari was not competent to act as arbitrator on the basis of the order dated February 13, 1951. The Union of Indra questions the correctness of the High Courts decision in these appeals.The validity of the order of reference depends upon the scope of section 8 which deals with the power of the court to appoint an arbitrator or umpire. Sub-section (1) of section 8, so far as it is relevant for the present purpose, provides that if any appointed arbitrator is incapable of acting, and the arbitration agreement does not show that it was intended that the vacancy should not be supplied, any party to the agreement may serve the other parties with a written notice to concur in supplying the vacancy. Sub-section (2) of section 8 lays down that if no appointment is made within 15 days after the service of the said notice the Court may, on the application of the party who gave the notice and after giving the; other parties an opportunity of being heard" appoint an arbitrator or arbitrators "who shall have like powers to act in the reference and to make an award as if he or they had been appointed by consent of all parties .

Court's reasoning:
If there is no valid reference, the purported award is a nullity, and can be challenged in any appropriatewas no provision in the 2nd schedule to the Choice of Civil Procedure, which was repealed by the Arbitration Act, 1 940, like section 32 or section 33 of the Act. Section 32 bars the institution of suits concerning arbitration agreements or awards and provides that no arbitration agreement or award shall bet set aside, , amended, . modified or in anyway affected otherwise than as provided in this Act; section 33 says that a party to an arbitration agreement seeking to challenge the agreement or the award must do so by making an application to the court. When the 2nd schedule to theCode of Civil Procedure was in force, an award made on an invalid reference could be set aside only by filing a suit which was then the "appropriate proceeding", but now the proceeding appropriate for the same purpose is an application to the court as the respondent in these cases has done. Also, these are cases of arbitration without the intervention of court, and the obsenation from the judgment in Chhabe Lals case, quoted above, that a reference in a suit should be presumed to b e a valid reference, does not apply to these cases. The words "or is otherwise invalid" in clause (c) of section 30 are wide enough to cover all forms of invalidity including invalidity of the reference.We do not find any reason why the general and unqualified language of clause (c) should not include an award on an invalid reference which is a nullity. The cases cited at the Bar show that all the High Courts with only one or two exceptions have taken this view. We hold therefore that the awards challenged in these appeals are nullities and have been rightly set aside by the High Court. In the view we have taken that is not necessary to consider the other question, whether Brig. Bhandari who made the awards was the officer answering the description on Director of Farms, General Headquarters, Simla, to whom the court had referred the disputes.