Delhi High Court

Goel Associates vs Kk Coop. Group Housing Socy. Ltd. on 21 December, 2009

Author: Manmohan

                                                                              #F-17

*      IN THE HIGH COURT OF DELHI AT NEW DELHI

+      CS(OS) 2015/1996

GOEL ASSOCIATES                             ..... Petitioner
                                Through:    Mr. D.R. Bhatia, Advocate with
                                            Mr. M.P. Goel in person.

                       versus

KK COOP. GROUP HOUSING
SOCY. LTD.                                  ..... Respondent
                 Through:                   Mr. Rakesh Mahajan,
                                            Mr. Sheetesh Khanna,
                                            Mr. Pramod K. Tyagi ,
                                            Mr. Gautam Anand & Ms. Rajni
                                            Singh, Advocates.

%                                  Date of Decision : DECEMBER 21, 2009

CORAM:
HON'BLE MR. JUSTICE MANMOHAN

1. Whether the Reporters of local papers may be allowed to see the judgment?

2. To be referred to the Reporter or not?                        No

3. Whether the judgment should be reported in the Digest?        No



                                JUDGMENT

MANMOHAN, J (ORAL)

I.A. 11173/1996

1. By way of present application, applicant-cooperative society has

filed objections under Sections 30 and 33 of Arbitration Act, 1940

(hereinafter referred to as "Act, 1940") challenging the ex-parte Award

dated 10th May, 1996 passed by the sole Arbitrator, Mr. Charan Shah

Singh.

2. Mr. Rakesh Mahajan, learned counsel for applicant-objector-

cooperative society contended that the Agreement dated 7th May, 1988

was a forged document. He stated that the petitioner-architect had

forged the signatures of the then Secretary of applicant-cooperative

society, Mr. K.K. Bhargava. He stated that even pencil marks were

visible on the signatures purportedly executed by Mr. Bhargava.

According to him, a crude attempt had been made to trace the signature

of Mr. K.K. Bhargava from his letter dated 7th May, 1988 addressed to

the petitioner-architect.

3. Mr. Mahajan next submitted that no attempt had been made to

effect service of notice upon the applicant-cooperative society at its

registered office at Quarter No. 75, Sector VI, P&T Quarters, R.K.

Puram, New Delhi. In this connection, Mr. Mahajan drew my attention

to the contemporaneous correspondence exchanged between the

applicant-cooperative society and petitioner-architect at the applicant's

aforesaid address.

4. Mr. Mahajan further submitted that the arbitral Award had to be

made by an arbitral tribunal comprising two members, that is, one

arbitrator appointed by each party and even if the applicant-cooperative

society had not appointed an arbitrator, petitioner-architect ought to

have approached this Court under Section 20 of the Act, 1940 for

appointment of second arbitrator. In this connection, Mr. Mahajan

placed reliance upon a judgment of the Supreme Court rendered in

Dharma Prathishthanam Vs. Madhok Construction (P) Ltd. reported

in (2005) 9 SCC 686 wherein the Apex Court has held as under:-

"2. The appellant Dharma Prathishthanam is a charitable institution. The respondent is a builder engaged in construction activity. In the year 1985, the appellant proposed to have a building constructed for which purpose it entered into a works contract with the respondent for the construction as per the drawings and specifications given by the appellant. We are not concerned with the correctness or otherwise of the allegations and counter-allegations made by the parties which relate to the question of who committed breach of the agreement. Suffice it for our purpose to say that disputes arose between the parties. Clause 35 of the agreement which is the arbitration clause reads as under:

"Settlement of disputes shall be through arbitration as per the Indian Arbitration Act."

3. Obviously and admittedly the reference was to the Arbitration Act, 1940.

4. On 12-6-1989 the respondent appointed one Shri Swami Dayal as the sole arbitrator.

xxxx xxxx xxxx xxxx

12. On a plain reading of the several provisions referred to hereinabove, we are clearly of the opinion that the procedure followed and the methodology adopted by the respondent is wholly unknown to law and the appointment of the sole arbitrator Shri Swami Dayal, the reference of disputes to such arbitrator and the ex parte proceedings and award given by the arbitrator are all void ab initio and hence nullity, liable to be ignored. In case of arbitration without the intervention of the court, the parties must rigorously stick to the agreement entered into between the two. If the arbitration clause names an arbitrator as the one already agreed upon, the appointment of an arbitrator poses no difficulty. If the arbitration clause does not name an arbitrator but provides for the manner in which the arbitrator is to be chosen and appointed, then the parties are bound to act accordingly. If the parties do not agree then arises the complication which has to be resolved by reference to the provisions of the Act. One party cannot usurp the jurisdiction of the court and proceed to act unilaterally. A unilateral appointment and a unilateral reference -- both will be illegal. It may make a difference if in

respect of a unilateral appointment and reference the other party submits to the jurisdiction of the arbitrator and waives its rights which it has under the agreement, then the arbitrator may proceed with the reference and the party submitting to his jurisdiction and participating in the proceedings before him may later on be precluded and estopped from raising any objection in that regard. According to Russell (Arbitration, 20th Edn., p. 104)--

"An arbitrator is neither more nor less than a private judge of a private court (called an Arbitral Tribunal) who gives a private judgment (called an award). He is a judge in that a dispute is submitted to him; ... He is private insofar as (1) he is chosen and paid by the disputants, (2) he does not sit in public, (3) he acts in accordance with privately chosen procedure so far as that is not repugnant to public policy, (4) so far as the law allows he is set up to the exclusion of the State courts, (5) his authority and powers are only whatsoever he is given by the disputants' agreement, (6) the effectiveness of his powers derives wholly from the private law of contract and accordingly the nature and exercise of these powers must not be contrary to the proper law of the contract or the public policy of England, bearing in mind that the paramount public policy is that freedom of contract is not lightly to be interfered with."

xxxx xxxx xxxx xxxx

31. Three types of situations may emerge between the parties and then before the court. Firstly, an arbitration agreement, under examination from the point of view of its enforceability, may be one which expresses the parties' intention to have their disputes settled by arbitration by using clear and unambiguous language, then the parties and the court have no other choice but to treat the contract as binding and enforce it. Or, there may be an agreement suffering from such vagueness or uncertainty as is not capable of being construed at all by culling out the intention of the parties with certainty, even by reference to the provisions of the Arbitration Act, then it shall have to be held that there was no agreement between the parties in the eye of the law and the question of appointing an arbitrator or making a reference or disputes by reference to Sections 8, 9 and 20 shall not arise. Secondly, there may be an arbitrator or arbitrators named, or the authority may be named who shall appoint an arbitrator, then the parties have already been ad idem on the real identity of the arbitrator as appointed by them beforehand; the consent

is already spelled out and binds the parties and the court. All that may remain to be done in the event of an occasion arising for the purpose, is to have the agreement filed in the court and seek an order of reference to the arbitrator appointed by the parties.

Thirdly, if the arbitrator is not named and the authority who would appoint the arbitrator is also not specified, the appointment and reference shall be to a sole arbitrator unless a different intention is expressly spelt out. The appointment and reference -- both shall be by the consent of the parties. Where the parties do not agree, the court steps in and assumes jurisdiction to make an appointment, also to make a reference, subject to the jurisdiction of the court being invoked in that regard. We hasten to add that mere inaction by a party called upon by the other one to act does not lead to an inference as to implied consent or acquiescence being drawn. The appellant not responding to the respondent's proposal for joining in the appointment of a sole arbitrator named by him could not be construed as consent and the only option open to the respondent was to have invoked the jurisdiction of court for appointment of an arbitrator and an order of reference of disputes to him. It is the court which only could have compelled the appellant to join in the proceedings.

32. In the present case, we find that far from submitting to the jurisdiction of the arbitrator and conceding to the appointment of and reference to the arbitrator Shri Swami Dayal, the appellant did raise an objection to the invalidity of the entire proceedings beginning from the appointment till the giving of the award though the objection was belated. In ordinary course, we would have after setting aside the impugned judgments of the High Court remanded the matter back for hearing and decision afresh by the learned Single Judge of the High Court so as to record a finding if the award is a nullity and if so then set aside the same without regard to the fact that the objection petition under Section 30 of the Act filed by the appellant was beyond the period of limitation prescribed by Article 119(b) of the Limitation Act, 1963. However, in the facts and circumstances of the case, we consider such a course to follow as a futile exercise resulting in needless waste of public time. On the admitted and undisputed facts, we are satisfied, as already indicated hereinabove, that the impugned award is a nullity and hence liable to be set aside and that is what we declare and also do hereby, obviating the need for remand."

5. Mr. Mahajan lastly submitted that the Award was perverse as

petitioner-architect had not performed any service and, therefore, they

were not entitled to any amount as compensation.

6. On the other hand, Mr. D.R. Bhatia, learned counsel for

petitioner-architect drew my attention to the Agreement dated 7th May,

1988 executed between the parties and pointed out that each and every

page of the said Agreement had been signed by Mr. K.K. Bhargava. He

contended that if the Agreement containing the arbitration clause was a

forged document, the applicant-cooperative society should have filed a

police complaint as soon as the said fact had came to their notice.

Mr. Bhatia contended that the allegation of forgery had not been proved

by independent evidence like that of a handwriting expert.

Consequently, according to Mr. Bhatia, the Agreement dated 7 th May,

1988 contained an arbitration clause and the said document was not a

forged or fabricated one.

7. As far as the service of notice at the wrong address was

concerned, Mr. Bhatia stated that at the relevant time applicant-

cooperative society had shifted its office to D-20, Dalhousie Square,

Kali Bari Marg, Near Gole Market, New Delhi - 110 001. In this

connection, Mr. Bhatia relied upon the applicant-cooperative society's

own letter dated 7th December, 1995 as well as the then Delhi Electric

Supply Undertaking's (in short "DESU") letter dated 17th April, 1996

addressed to applicant-cooperative society at the new address. The said

two letters are reproduced hereinbelow :-

A) Applicant-cooperative society's letter dated 7th

December, 1995:-

              Ref. No. KKC/95                    Dated: 7.12.95

                                 Regd. Office:-
                                 D-20, Dalousie Square
                                 Kali Bari Marg,
                                 Near Gole Market
                                 N. Delhi-110001.


                          TO WHOM SOEVER IT MAY CONCERN

We authorise Mr. Arun Khullar, Hony. Secretary of K.K. Co-operative Group Housing Society Ltd. to sign all the concerned documents related to D.D.A., DUAC and other concerned agencies, whose signature is attested below.

               Sd/-                                  Sd/-
             UMESH BHARGAVA                   ARUN KHULLAR
             President                        Hony. Secretary
                                              (signature attested)

                                                      Sd/-

                                              UMESH BHARGAVA
                                                  President


      B)     Letter dated 17th April, 1996 issued by the then DESU:-


                   DELHI ELECTRIC SUPPLY UNDERTAKING

                                            Tele: 733003
                                 Room No. 25 Shakti Deep Bldg.
                                 Near EXIDE House, Jahandewalan
                                 Extn. New Delhi


             No: XPW/95-96/212 (P/C-91)/46       DT: 17/4/96





              To,

M/s. K.K. Co.op Group Housing Society Ltd., D-20, Dalhousee Square, Kali Bari Marg, Near Gole Mktd.

New Delhi.

SUB: Tentative approval of location for K.K. CGHS Ltd. at plot no.4, Sect.9, Dwarka.

.........

Sir,

This has reference to your letter no. nil dt. 20.3.96 on the above cited subject. It is to inform you that the one no. s/stn. site as offered in the stilted portion at ground floor level with a clear height of 18 feet 1 inch is acceptable to DESU tentatively. However, you are requested to come forward for final approval of the s/stn. site after getting the same approved from DDA through our commercial officer III IP Estate, at the time of electrification of your society.

Copies of the layout plan indicating therein the s/stn. location duly approved and copies of approved drawing of the stilted portion so prepared for s/stn. space are attached.

However, it may be noted that electrification of your society shall be taken by DESU only when DDA gets complete sector electrified from DESU.

Yours faithfully,

Sd/-

(K.S. SETHI) Ex. Engineer (PLG) WEST

8. As far as the applicant-cooperative society's reliance on Dharma

Prathishthanam's case (supra) was concerned, Mr. Bhatia submitted

that the said judgment dealt with a case under Section 8 of Act, 1940

where one or more arbitrators had to be appointed with consent of the

parties.

9. Mr. Bhatia lastly submitted that if a party's rights had been

violated, the aggrieved party was entitled to compensation so as to

place him in the same position so far as money can do, as if the

aggrieved party's rights had been observed.

10. In rejoinder, Mr. Mahajan submitted that even if applicant-

cooperative society had failed to appoint the arbitrator, petitioner-

architect's nominee could not have become the sole arbitrator till a

separate notice was given to applicant-cooperative society. In this

connection, he placed reliance upon Section 9(b) of Act, 1940.

11. Mr. Mahajan also pointed out that the applicant-cooperative

society's witness Mr. K.K. Bhargava had not been cross-examined on

the vital aspect of forgery.

12. Having heard the parties at length and having perused the

impugned Award, I am of the view that before I deal with the rival

contentions, it would be appropriate to first outline the scope of

interference by this Court with an arbitral award rendered under Act,

1940. The Supreme Court in Arosan Enterprises Ltd. Vs. Union of

India & Another reported in (1999) 9 SCC 449 has clearly outlined the

scope of interference by this Court in petitions filed under Sections 30

and 33 of the Act, 1940. The relevant observations of the Supreme in

the said judgment Court are reproduced hereinbelow :-

"36. Be it noted that by reason of a long catena of cases, it is now a well-settled principle of law that reappraisal of evidence by the court is not permissible and as a matter of fact exercise of power by the court to reappraise the evidence is unknown to proceedings under Section 30 of the Arbitration Act. In the event of there being no reasons in the award, question of interference of the court would not arise at all. In the event, however, there are reasons, the interference would still be not available within the jurisdiction of the court unless of course, there exist a total perversity in the award or the judgment is based on a wrong proposition of law. In the event however two views are possible on a question of law as well, the court would not be justified in interfering with the award.

37. The common phraseology "error apparent on the face of the record" does not itself, however, mean and imply closer scrutiny of the merits of documents and materials on record. The court as a matter of fact, cannot substitute its evaluation and come to the conclusion that the arbitrator had acted contrary to the bargain between the parties. If the view of the arbitrator is a possible view the award or the reasoning contained therein cannot be examined. .........

(emphasis supplied)

13. Upon a perusal of the applicant-cooperative society's admitted

letter dated 7th May, 1988, it is apparent that an Agreement dated 7th

May, 1988 was executed between the applicant-cooperative society and

petitioner-architect. The said letter reads as under :-

Date : 7-5-88 M/s. Goel & Associates, A-72/1, S.F.S. Saket, New Delhi

Dear Sir,

With reference to your Quotation, we are pleased to appoint you as our Architect for the Group Housing Complex. A cheque consisting No. 050781 Dt. 7-5- 1988 on the Delhi State Co-op. Bank Ltd., Darya Ganj, New Delhi for Rs. 20000/- is enclosed

herewith as an advance. The agreement duly signed is returned herewith.

Yours faithfully, Sd/-

K.K. Bhargava Hony. Secretary

Encl. a.a.

(emphasis supplied)

14. The original Agreement produced by petitioner-architect bears

the signature of the then Secretary of applicant-cooperative society on

each and every page. In fact, on a careful perusal of the Agreement

dated 7th May, 1988, I cannot reach the conclusion that

Mr. K.K. Bhargava's signature have been traced out from the letter

dated 7th May, 1988. I am further of the view that if the applicant-

cooperative society wanted to prove that the Agreement produced by

petitioner-architect was a forged and fabricated one, it ought to have

produced a copy of the said Agreement which was in its possession and

if it did not have the same, it should have led independent expert

evidence like that of handwriting expert to show that Mr. Bhargava's

signatures had been forged and fabricated.

15. I also find that the notices had been correctly issued by the sole

Arbitrator at the new address of the applicant-cooperative society,

namely, D-20, Dalhousie Square, Kali Bari Marg, Near Gole Market,

New Delhi. In fact, Mr. K.K. Bhargava, the then Secretary of

applicant-cooperative society in his cross-examination had admitted

that in April, 1996 office of applicant-cooperative society was located

at D-20, Dalhousie Square, Kali Bari Marg, Near Gole Market, New

Delhi. The relevant portion of the said cross-examination is reproduced

hereinbelow :-

"Cross-examination by Shri D.R. Bhatia, Advocate for the plaintiff.

The office of the Society in 1995 was at G-166 Nanakpura, New Delhi. I do not remember where was the office of the Society in April, 1996. It is correct that in April, 1996 the office of the Society was located at D- 20 Dalhauzi Square, Gole Market, New Delhi. Copy of the letter received from D.E.S.U. is Ext.RW-1/X-1. It is correct that in the letter Ext. RW-1/X-2 the address of the Society as in December 1995 has been shown at Dalhauzi Square. It is correct that in June 1996 the address of the Society has been shown as GG-I/105-B Vikaspuri, New Delhi. On 20/4/1996 letter was addressed by D.D.A. to the Society at its Nanakpura address. Letters marked as Annexures Y & Z were also received at Nanakpura address from D.D.A."

(emphasis supplied)

16. Moreover, keeping in view the applicant-cooperative society's

own letter dated 7th December, 1995 and the letter dated 17th April,

1996 addressed by DESU to applicant-cooperative society, I am of the

view that the sole Arbitrator had taken all steps to serve the applicant-

cooperative society at the correct address.

17. I am also in agreement with Mr. Bhatia's submission that the

judgment of Supreme Court in Dharma Prathishthanam's case (supra)

is not applicable to the facts of the present case as here we are not

dealing with appointment of an arbitrator with consent of parties. In

fact, the arbitration clause in the Agreement dated 7th May, 1988 reads

as under :-

"ARBITRATION: In the event of any dispute, difference of question arising out of or touching or concerning this agreement or execution of the said works, the same shall be referred to the arbitration of two persons, one each appointed by the parties, who intern may appoint an umpire, if required."

18. From the aforesaid, it is apparent that both parties had to

unilaterally appoint one arbitrator each. Since, the applicant-

cooperative society had failed to appoint an arbitrator despite notice,

petitioner-architect's nominee became the sole arbitrator in accordance

with Section 9 of Act, 1940. Consequently, in my view the present

case is governed not by Sections 8 and 20 but Section 9 of Act, 1940

which reads as under :-

"9. Power to party to appoint new arbitrators or in certain cases, a sole arbitrator.-- Where an arbitration agreement provides that a reference shall be to two arbitrators, one to be appointed by each party, then, unless a different intention is expressed in the agreement,-

(a) if either of the appointed arbitrators neglects or refuses to act, or is incapable of acting, or dies, the party who appointed him may appoint a new arbitrator in his place;

(b) if one party fails to appoint an arbitrator, either originally or by way of substitution as aforesaid, for fifteen clear days -after the service by the other party of a notice in writing to make the appointment, such other party having appointed his arbitrator before giving the notice, the party who has appointed an. arbitrator may appoint that arbitrator to act as sole arbitrator in the reference, and his award shall be binding on both parties as if he had been appointed by consent: Provided that the Court may set aside any appointment as sole arbitrator made under clause (b) and either, on

sufficient cause being 20 shown, allow further time to the defaulting party to appoint an arbitrator or pass such other order as it thinks fit."

19. It is pertinent to mention that even in Dharma Prathishthanam's

case (supra), the Supreme Court had taken pains to point out that it was

not dealing with a case of Section 9 of Act, 1940. The relevant portion

of the said judgment wherein this observation has been specifically

mentioned is reproduced hereinbelow:-

"9. The relevant parts of the provisions relevant in the context of a general clause merely providing for arbitration as in the present case, are extracted and reproduced herein:-

xxxx xxxx xxxx xxxx

Section 9 is irrelevant for our purpose as its applicability is attracted to a case where an arbitration agreement provides for a reference to two arbitrators, one to be appointed by each party and procedure to be followed in such cases which is not a situation provided in/by the agreement with which we are dealing."

(emphasis supplied)

20. I also find from the record that petitioner-architect had vide its

letter dated 15th February, 1995 given advance notice that in case

applicant-cooperative society did not appoint an arbitrator within 15

days, the arbitrator appointed by petitioner-architect would became the

sole arbitrator. The relevant portion of the said letter dated 15th

February, 1995 reads as under :-

"4. That the appointment of your Arbitrator be done within 15 days from the receipt of this notice, failing which Arbitrator appointed by my client will act as sole Arbitrator."

21. I am also of the view that impugned Award is not perverse

inasmuch as petitioner-architect is entitled to the compensation so as to

place him in the same position so far money can do, as if party's rights

had been observed. In fact, a Division Bench of this Court in Bhatia

Nidhi Ltd. Vs. Union of India Ltd. & Ors. reported in 26 (1984) DLT

(SN) 21, has held as under :-

"the governing purpose of damages is to put the party whose rights have been violated in the same position, so far as money can do so, as if his rights had been observed. (Victoria Laundry (Windsor) Ltd. v. Newman Industries (1949) 2 KB 528 at p 539 per Asquith LJ). In actions for breach of contract, the object is to put the plaintiff in the position he would have been in if the contract had been satisfactorily performed."

22. Moreover, this proposition has been upheld in another case filed

by petitioner-architect in this Court titled as Goel Associates Vs.

Shama Coop. Group Housing Society reported in 2009 (113) DRJ 523.

23. However, as petitioner-architect did not render any service to

applicant-cooperative society, I asked Mr. M.P. Goel, sole proprietor of

petitioner firm who was present in Court if he would be willing to

accept a nominal compensation instead of the awarded amount. Mr.

Goel fairly stated that though he was entitled to the entire fee as

stipulated in the Agreement dated 7th May, 1988, he would be satisfied

in case this Court were to vary the impugned Award and award him

only 40% of the fee along with 6% per annum simple interest.

24. Accordingly, keeping in view the aforesaid concession made by

Mr. Goel, I modify the Award by awarding petitioner-architect a total

compensation of Rs. 7,51,270/- (being 40% of his fee) along with

interest @6% per annum simple interest, with effect from 10th May,