Delhi Khadi & Village Industries ... vs Pragati Sansthan And Ors.
1993 Latest Caselaw 454 Del

JUDGMENT

Sat Pal, J.

(1) This petition has been filed by Delhi Khadi & Village Industries Board,Delhi (hereinafter referred to as 'the claimant') under sections Hand 17ofthelndianArbitration Act (in short 'the Act') against M/s. Pragati Sansthan and others (here in after referred to as the 'principal debtor') and S/Shri Ved Prakash, Sardar Singh, Rameshwar and Gugan Singh (hereinafter referred to as 'the sureties'). In the petition it has been prayed that the arbitrator be directed to file the award and after issuing notices of the award to the parties, the award be made a rule of the Court.

(2) After the award was filed in the Court, notices were issued to the parties. Objections under sections 30 and 33 of the Act against the award have been filed on behalf of respondent No. I vide Ia No. 13/89 and on behalf of respondents 2 to 5 vide Ia No.3173/89. The objections contained in the aforesaid two I As have been controverter by the claimant in their reply to these applications. Thereafter the following issues were framed on 30th July, 1990. 1)Whether the award dated 24th September, 1987 is liable to be set aside on the grounds stated in the objection petitions? 2) Relief.

(3) As directed by this Court the parties have filed affidavits in support and . opposition to the objections against the award. I have heard the learned counsel for the parties.

(4) Mr. B.D. Kaushik, learned counsel appearing on behalf of respondents 2 to 5 (sureties) submitted that the learned arbitrator has misconducted himself inasmuch as without issuing any notice to the said respondents, he has passed the award against them. He, therefore, contended that the award against the said respondents was illegal and without jurisdiction. He submitted that the basic principles of natural justice have been violated by the learned arbitrator and as such the award was liable to be set aside. In support of his submissions, the learned counsel placed reliance- on a judgment of Patna High Court in Deep Narain Singh and others vs. Mt. Dhaneshwari and others, a judgment of Karnataka High Court in Draupadibai and others vs. Narayan Masanu Sutar and others, .

(5) Another contention raised by the learned counsel for respondents 2 to 5 was that the award has been given beyond the period of limitation. The learned counsel submitted that the matter was referred to the learned arbitrator by this Court vide orders dated 29th January, 1987 passed in Suit No. 1661 -A/86. Pursuant to the orders passed by this Court, the Lt. Governor had appointed the arbitrator on 26th February, 1987 and the award has I been given by the arbitrator on 24th September, 1987 and as such the award was beyond ; the period of limitation. He, therefore, contended that the award was liable to be set aside f on this ground also.

(6) Mr. Prikshit Raj, learned counsel appearing on behalf of respondent No. 1 reiterated the submissions made by the learned counsel appearing on behalf of respondents 2 to 5.

(7) Mr. R.L. Gupta, learned counsel appearing on behalf of the petitioner/claimant admitted the fact that no notice was given to respondents 2 to 5 by the learned arbitrator and they were not afforded any opportunity in the arbitration proceedings. He, however, contended that the liability of the surety is co-extensive with that of the principal debtor and as such the sureties have got no locus standi to be heard before the arbitrator in the arbitration proceedings. In support of his submissions the learned counsel placed reliance on a judgment of this Court in Lovely Benefit Chit Fund & Pvt. Ltd. vs. Puran Dutt Sood etc. 1975 Rlr 296.

(8) As regards the contention of the learned counsel for the respondents that the award was beyond the period of limitation, the learned counsel for the petitioner submitted that the limitation starts from the date when the learned arbitrator entered on the reference. He submitted that from the arbitration proceedings it is clear that the claim statement on behalf of the claimant was filed on 17th June, 1987 and it was on that date when the learned arbitrator for the first time applied his mind and as such entered on the reference on that date. He, therefore, contended that since the award which is dated 24th September, 1987 has been given within four months from the date of entering on the reference, it is within the period of limitation. In support of his contention he has placed reliance on a Full Bench judgment of Calcutta High Court in Ramanath Agarwala vs. M/s. Goenka & Co. and others, .

(9) I have given my anxious consideration to the submissions made by the learned counsel for the parties and have perused the records. From the records I find that the claim statement on behalf of the claimant was filed on 17th June, 1987 and a such it is clear that the learned arbitrator has not applied his mind prior to that date. In the case of Ramanath Agarwala (supra) it has been held that "The arbitrator, under the Act, may have to do various ministerial acts but the doing of any of the ministerial acts is not entering on the reference. It is only when he first applies his mind to the dispute referred to him that he enters on the reference." In the present case it cannot be said that prior to the receipt of claim statement, the arbitrator could have applied his mind and as such he entered on the reference only on 1th June, 1987. Since the award has been given within four months from the said date, I hold that the award is within the period of limitation.

(10) From the award itself it is clear that respondents 2 to 5 were not issued any notice nor they were afforded any opportunity during the arbitration proceedings though in the statement of claim filed on behalf of the claimant, respondents 2 to 5 have been shown as respondents. Without affording any opportunity to the said respondents, the learned arbitrator could not hold them liable for the payment of the amount awarded against them. It is true that in terms of Section 128 of the Contract Act, the liability of the surety is coextensive with that of the principal debtor unless it is otherwise provided by the contract but it does not follow from this that the surety should not be given any opportunity before passing the award against him. The judgment in the case of overly Benefit & Chitfund Pvt. Ltd., (supra) is of no assistance to the claimant as in that case it has been only held that the disputes inter se between the petitioner on one side and the principal debtor as well as two sureties on the other should be referred to the arbitrator as per clause 20 of the contract. It was not held in that case that the arbitrator without giving any notice to the sureties could pass the award against them. I am, therefore, of the view that the surety cannot be held for the payment of the amount without an affording opportunity to him, and thus three is error apparent on the face of the impugned award.

(11) In view of the above discussions, I set aside the award dated 24th September, 1987 passed by the arbitrator in this case and remit the same under Section 16(I)(c) of the Act to the arbitrator for passing a fresh award after affording proper opportunity to the parties. The arbitrator is directed to submit his decision to the Court within four months from today. With this order the petition and IANos.l3/89 and 3173/89 stand disposed of. The parties are left to bear their own costs.