Delhi State Industrial ... vs Yashpal Dhalla
1997 Latest Caselaw 195 Del

JUDGMENT

J.B. Goel, J.

(1) Suit No. 389-A/85 is a petition under sections 14 and 17 of the Indian Arbitration Act, 1940 (for short the Act) Filed by the above named petitioner for directing the Arbitrator to File the Award and for making the Award rule of the Court, whereas Omp No.28/85are the objections Filed by the respondent under sections 30 and 33 of the Act. The petitioner has not Filed any objections.

(2) Briefly the facts are that the petitioner is a Government Company and is entrusted with the development of Industries in the Union Territory, of Delhi and as such they had secured an order for supply of 50,000 sets of Differential Housing Cover and Handles from M/s. Scooter India Ltd., Lucknow.

(3) The respondent is an Entrepreneur of the petitioner who agreed to execute the Purchase Order within the date of supply and for that purpose requested the petitioner for grant of Financial assistance of Rs. 6,500.00 for the preparation of Dyes etc. which was granted. Petitioner had also earlier advanced vide another loan of Rs. 25,000.00 agreement dated 30.9.1975 and for the repayment of these two amounts respondent had entered into an agreement cum undertaking bond dated 17.6.1977 with the petitioner agreeing to pay these amounts of Rs. 6,500.00 and Rs. 25,000.00 with interest at 1% over and above the Commercial Bank rate of interest. Respondent failed to repay these amounts and the agreement between the parties contained an arbitration clause No. 12 to the effect that all matters of dispute or any differences between the parties touching that agreement were to be referred to the Chairman-cum-Managing Director of the Corporation or any other person nominated by him.

(4) The Chairman of the Petitioner Corporation vide his Letter No. DSIDC/F/1(6)PD/TP, dated 20.6.1984 (wrongly mentioned as May 8, 1984) had appointed Shri V.K. Bhalla, I.A.S.(retired) as the sole Arbitrator, The said Arbitrator entered upon the reference and issued notices to the parties on 15.9.1984 asking them to appear before him on 29.9.1984 and to File their statement of claims. The respondent did not appear before the Arbitrator inspite of service of the notice. However, the Arbitrator issued another notice dated 29.9.1984 to the respondent for 12.10.1984 which was also duly served on the respondent by Registered Ad post but the respondent again did not join the arbitration proceedings. The petitioner had filed its statement of claim and examined two witnesses and produced some documents in ex-parte evidence. The Arbitrator gave his Award dated 14.1.1985 in favour of the Petitioner in the sum of Rs. l,05,591.00 including interest up to 15-11-1994 and further interest up to the date of award at the agreed rate of interest and also further interest at the rate of 12% from the date of the award till the Award was made a rule of the Court or payment which occurred first.

(5) The Arbitrator had given notice of the making of the award to the parties.

(6) The petitioner filed Petition under sections 14 and 17, and the Arbitrator Filed the Award and proceedings in the Court, but before that respondent had filed his objections against the award being Omp No. 28/85.

(7) The respondent in his objections has alleged that he had entered into an agreement with the petitioner on 30th September, 1975 for the manufacture and supply of 50,000 sets of Differential Housing Cover and Handle left and right as per specifications and drawings etc. provided by M/s. Scooter India Ltd., Lucknow and for that petitioner had provided financial assistance to him in the sum of Rs. 25,000.00 . This amount was to be adjusted out of the sale proceeds of the goods supplied by the respondent. The respondent had prepared the dyes. The petitioner supplied materials for manufacturing only 1000 pieces which were manufactured and goods worth Rs. 4,797.20 P. were supplied and thereafter the petitioner did not supply material in accordance with the Purchase Order. The respondent had incurred an expenditure of Rs. 50.000.00 in preparing dyes etc. and after adjusting the amount of Rs. 32,000.00 paid by the petitioner, he is entitled to the recovery of Rs. 18,000.00 from the petitioner. It is denied that agreement dated 17.6.1977 in question was executed by the respondent. However, he alleged that an agreement in respect of advance of Rs. 6,500.00 was the subject matter between the parties in Suit No. 1373-A/1979. It is also alleged that the petitioner used to obtain his signatures on blank papers and it appears that this agreement has been prepared on such blank documents. The main objections taken are (1) Award has been wrongfully and illegally procured. (2) The reference is bad because the notice issued by the petitioner appointing the Arbitrator is vague as it did not give any details of the agreement and the disputes referred for arbitration. (3) The Arbitrator has wrongfully and illegally passed the ex-parte award without giving notice to proceed exparte against the respondent and the award thus has been passed without affording an opportunity to the respondent to defend himself. (4) That the petitioner has not disclosed before the Arbitrator the relevant documents and facts in as much as it is the petitioner who owed a sum of Rs. 10.000.00 to the respondent. The Award is thus alleged to be not legal and valid.

(8) Reply has been filed by the petitioner to the objections who have alleged that the objections are devoid of substance and merits. It is denied that the notice appointing the Arbitrator is not proper and valid or that the award has been fraudulently or illegally procured. It is also denied that signatures of the respondent were obtained on any blank papers or the agreement dated 17.6.1977 was not executed. It is denied that the petitioner owed Rs. 18,000.00 to the respondent. It is also alleged that the objections are not maintainable as the respondent had not appeared before the Arbitrator.

(9) On the pleadings of the parties the following issues were framed on August 18, 1988.

1. Whether the award is liable to be set aside on the grounds stated in the objection-petition?

2.Relief.

Respondent has filed affidavit in support of his case. Respondent had taken an objection that the notice appointing the Arbitrator was vague and did not contain necessary particulars. He had also denied that he had executed agreement dated 17.6.1977 in question. However, in the affidavit dated 25.4.90 filed by the respondent he has admitted having executed the agreement dated 17.6.1977 which is the basis of the present award and the validity of the letter dated 20.6.1984 appointing the Arbitrator has not been challenged in arguments. Learned counsel for the objector has contended that the learned Arbitrator has acted illegally in proceeding ex-parte against the respondent without giving peremptory notice to proceed ex-parte; and that the copy of the claim petition filed by the petitioner as directed by the arbitrator was never supplied to him and the award is bad and liable to be set aside. He has relied on judgment of this Court reported as M/s. Lovely Benefit Chit Fund and Finance Pvt. Ltd. Vs. Puran Dutt Sood & Ors. . Whereas learned counsel for the petitioner has disputed the same and has contended that two notices were admittedly served on the respondent and it was mentioned in the notices that if the respondent did not appear the matter will be proceeded according to law and as the respondent did not appear, the Arbitrator was justified in proceeding ex-parte and the Award is not liable to challenge on this ground. She has relied on Lachman D. Chablani vs. The Union of India (UOI) (08.03.1973 - ALLHC) and Smt. Manjit Johal Vs. Dewan M. Travels Ltd. Air 1994 J&K 56 (DB). After his appointment the Arbitrator had given notice dated 15.9.1984 to both the parties appraising them of his appointment as Arbitrator to resolve disputes and difference arising out of the agreement dated 17.6.1977 and directing the petitioner to file its statement of claim, documents and evidence and both the parties were directed to appear before him at the specified date, time an(J place. It was also specifically mentioned in the notice that "in case of non appearance the matter shall be proceeded accordingly". This notice was sent by registered Ad and was admittedly served on the respondent. But no one on behalf of the respondent appeared before the Arbitrator in pursuance of this notice. The Arbitrator gave another notice dated 29.9.1984 to the respondent pointing out his absence and informing him that the case was next Fixed for 12.10.1984 at 3.00 P.M. directing the petitioner to File this statement of claim with copy to the respondent and both the parties were again directed to appear before him on the next date of hearing failing which "the case will be heard and determined in accordance with law". Admittedly this notice was also served on the respondent. Thus inspite of these two notices the respondent did not appear before the Arbitrator and remained absent throughout. In the case of M/s. Lovely Benefit Chit Fund (Supra) it was held that an Arbitrator ought not proceed ex-parte against a party if he has failed to appear at one of the sittings and the Arbitrator should Fix an other date for hearing, giving a notice to the defaulting parly of his intention to proceed ex-parte on. the specified date, lime and place and even if after such notice the defaulting party does not appear, in that eventuality the Arbitrator may proceed ex-parte in his absense and which an ex-parte award has been made without doing so principle to he applied is that the Award will nol be upheld unless it is apparent that the failure to give notice of intention to proceed expanse had not caused .any prejudice to the defaulting party. In the facts and circumstances of the case, It was held that the Arbitrator had misconducted himself by his omission to serve, a peremptory notice of his intention to proceed ex-parte upon the objectors and the Award was held to be not valid and was set aside. In this case in Para 10 it has been observed that there is no hard and fast rule of giving notice by the Arbitrator of his intention to proceed exparle but the principles of natural justice require that a person cannot be condemned unheard and he should be afforded a reasonable opportunity of being heard and where ever alter notice if the defaulting party docs not take part in the proceedings the arbitrator may proceed in his absence. In the two cases relied on behalf of the petitioner it was found that inspite of service of the notice the defaulting party had nol appeared before the Arbitrator and in the facts and circumstances of those cases it was held that proceeding ex-parte could not be considered as mis-conduct on the part of the Arbitrator. Obviously it depends upon the facts and circumstances of each case. It is well established principle that an Arbitrator is not bound by the technical rules of procedure which the Courts are required to follow. Courts would not insist upon a too minute observance of the regularity of forms among persons who by their education or by their opportunities cannot be supposed to be very familiar with legal procedure, and may accordingly make slips in what is mere matter of form without any interference with the substance of their decisions. In the present case as already noticed two notices were sent by the Arbitrator to the respondent which were admittedly served on him but the respondent did not appear. In the First notice it was mentioned that in case of non appearance the matter shall be proceeded accordingly, and in the second notice the parties were directed to be present on the date of hearing failing which case will be heard and determined in accordance with law. Though it is not specifically mentioned that the Arbitrator will proceed exparte against the defaulting parly, however, it is clear from these notices that intention was that in case of non-appearance he will proceed ex-parte against the defaulting party. If inspite of these warnings the respondent did not appear before the Arbitrator, he could really have no grievance and cannot invite the Court to set aside the Award on account of the alleged defect of procedure. In the circumstances, in my view the ex-parte award is not liable to be set aside especially when the respondent has not shown any cause what to speak of sufficient cause for his not appearing before the Arbitrator. It is also contended that it was specifically mentioned in the second notice that copy of the statement of claim will be sent to the respondent and this was not complied and this vitiates the award. Again when the respondent did not appear before the Arbitrator he had clearly shown his intention not to join the proceedings. He cannot have grievance for his own dfcfaull. In any case if a copy of the statement of the claim was not supplied to him he should have written a letter to the Arbitrator requesting for supply of a copy thereof which was also not done. This objection thus also has no merits. The next contention is that as per the agreement dated 17.6.1977 the amounts of Rs. 6,500.00 and Rs. 25,0()().00 were payable within 3 months thereafter. The cause of action or the cause for arbitration had arisen on expiry of those 3 months, i.e., on or about 17.9.1977 and the reference was made to the Arbitrator on 20.6.1984 is hopelessly time barred. Law of limitation applied in the case as held in Panchoo Gopal Bose Vs. Board of Trustees for Port of Calcutta 1994 Arbitration Law Reporter 476 (SC). The learned Arbitrator has misconducted himself in making the award on a lime barred claim. Whereas learned counsel for the respondent has relied on Fertilizer Corporation of India Ltd. Vs. I.D.I. Management (USA) & Ors. and has contended that even where an Arbitrator has committed a mistake of law but which is not apparent on the face of the record, the Award cannot be set aside. The case of Panchoo Gopal Bose was not a case where the Award in respect of a time barred claim was given and set aside. The facts were that the respondent had filed a petition under sections 5, 12, and 33 of the Arbitration All for revoking the Arbitration clause. The dispute was that the claim made by the petitioner was rejected on July 12, 1979 and they did not take any steps for the appointment of an Arbitrator for next 10 years. The learned Single Judge held that as the claim was made after 10 years the arbitration cannot be proceeded with and accordingly cancelled the arbitration clause. This was upheld by a Division Bench. In the Supreme Court it was held that the provisions of Section 37 of the Arbitration Act makes the law of limitation applicable in these proceedings for arbitration and as the claim for adjudication of those claims was made after 10 years it was time barred. It was held that the arbitration clause was validly revoked. This is not the position in the present case. In N. Chilleppan Vs. Secretary, Kerala Stale Electricity Board & Anr. principle of Law and the scope of power of the Courts to interfere in the award have been considered. It was held that if an Arbitration of Empire in passing the award makes a mistake of law or of fact, that is no ground for challenging the validity of the Award. It is only when a proposition of law is stated in the award and which is the basis of the award, and that is erroneous, can the award be set aside or remitted on the ground of error of law apparent on the face of the record. An error of law on the face of award means that can be found in the award or document actually incorporated thereto, as for instance, a note appended by the arbitrator staling the reasons for his judgment, some legal proposition which is the basis of the award and which could be said to be erroneous. It was further laid down that the court has no jurisdiction to investigate into the merits of the case and to examine the documentary and oral evidence on the record for the purpose of finding out, whether or not the arbitrator has committed an error of law. In that case the Empire as the sole Arbitrator had awarded a sum to the Contractor, on account of certain claims made by the contractor after considering the arguments of the Board for disallowing it, but without expressly adverting to the question of limitation, it was. held that the award is not vitiated on account of mistake or error apparent on the face of the Award. In the present case the respondent had not appeared before the arbitrator to contest the claim and the arbitrator has not specifically discussed this question in the award. On the face of the Award at cannot be said that there is an error apparent on the face of the award to this effect. Even if a time barred claim is allowed by the Arbitrator, it cannot always be said that the arbitrator allowed claim contrary to the provisions of law. If the claim is time barred or could not have been awarded by the Arbitrator, the respondent should have appeared and taken an objection before him. And as no such objection, was raised the objection, cannot be raised in this Court. As such it cannot be said that the arbitrator has committed any misconduct or there is an error of law apparent on the face of the award. This ground also has no merits. Then it is contended that the claim in respect of Rs. 25,000.00 relates to another earlier agreement dated 30.9.1975 the dispute pertaining to it had not been referred for the arbitration and as such the Arbitrator had gone beyond the scope of the reference. This is disputed by the learned counsel for the petitioner. It is not disputed that the claim of Rs. 25,000.00 arose out of the earlier agreement of 30.9.1975. However, that liability was incorporated in this latter agreement dated 17.6.1977 as is apparent from Clause 10 of the agreement dated 17.6.1977 which provides asunder: 10. That the obligor undertakes and binds himself that entire financial assistance of Rs. 6,500.00 with interest thereon granted under this deed and the earlier loan of Rs. 25,000.00 together with interest thereon granted to the obligor vide agreement dated 30th Sept., 1975 shall be repaid by him within three months from the date of execution of this deed in one lump sum and if the same is not realised by the Corporation from the sale proceeds received by the Corporation from the purchaser against the supplies made by the obligor and balance, if any, shall be paid to the obligor after deducting all its dues against the obligor." And the Arbitrator was appointed to resolve disputes arising out of this agreement which obviously included the liability pertaining to the earlier agreement. This objection also has no force. For the reasons given above I do not find any merit in the objections filed by the respondent. As such Omp No. 28/85 is dismissed and Suit No. 389/85 is allowed and the Award dated 14.1.1985 passed by Shri V.K. Bhalla, Sole Arbitrator is made a rule of the Court with costs here. The petitioner is also awarded interest at the rate of 12% per annum on the amount of Rs. 31,500.00 from the date of the decree till realisation. Costs assessed at Rs. 2,000.00 . The award shall form part of the decree.