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Case Number

F.A.F.O (O.S) No. 5 of 1977

Attorney(S)

D. D. Chawla
Sr. Advocate with C. L. Chaudhary
S. N. Chopra
Sr. Advocate with V. P. Chaudhary and R. L. Chopra

Judges

D.K KAPUR AND N.N GOSWAMY, JJ.

Acts

S. 39 of the Arbitration Act 1940 (hereinafter referred to as the Act)
S. 10(1) of the Delhi High Court Act.
S. 33 of the Arbitration Act

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Smart Summary

Structured Summary of the Opinion — N.N. Goswamy, J.

Factual and Procedural Background

The appellant had been appointed as Architect to the University of Delhi under Executive Council Resolution No. 202 dated 5 December 1952, with a fee of 6% of the total value of each work. Resolution No. 255 dated 30 January 1959 later reduced the fee to 3% and altered the scope of services, providing that future engagements would be on special terms by separate agreement for each job. Disputes arose about payment of bills executed by the appellant.

By notice dated 5 March 1969 the appellant invoked an arbitration clause which provided for a Board of Arbitration consisting of one nominee of the University (other than the University Engineer) and one nominee of the Architect, with differences to be referred to the Vice‑Chancellor as Umpire whose decision would be final and binding.

The appellant appointed K.P. Sharma as his nominee; the respondent, while denying existence of the arbitration agreement, appointed K.B. Rohtagi as its nominee. The two arbitrators proceeded but differed. The record was sent to the Vice‑Chancellor (Dr. Sarup Singh) as Umpire; he initially entered upon the reference but declined to act on 22 November 1971. The appellant requested appointment of another Umpire; the respondent declined to concur. The appellant then filed an application under Section 8 of the Arbitration Act, 1940 for appointment of an Umpire in place of Dr. Sarup Singh.

The respondent raised a preliminary objection contesting the maintainability of an appeal against the learned single Judge's order dismissing the appellant's Section 8 application, on the ground that the impugned order did not fall within any clause of Section 39(1) of the Arbitration Act and therefore was not appealable.

On pleadings, the learned single Judge framed five issues addressing (1) whether the Court could inquire into existence of the arbitration agreement in these proceedings, (2) whether an arbitration agreement existed, (3) whether the agreement showed that a vacancy should not be supplied, (4) estoppel by the respondents, and (5) relief. The single Judge—after considering correspondence and case law—concluded there was no arbitration agreement and dismissed the appellant's Section 8 application. The appellant appealed, challenging the maintainability ruling.

Legal Issues Presented

Whether the appeal against the single Judge's dismissal of the appellant's application under Section 8 of the Arbitration Act, 1940 is maintainable under Section 39(1) of the Act (i.e., whether the impugned order falls within any clause of Section 39(1)).
Whether, in the proceedings before the single Judge, the Court may inquire into the question whether there was an arbitration agreement between the parties.
Whether there was, on the facts and correspondence, any arbitration agreement between the parties.
If such an arbitration agreement exists, whether it shows that a vacancy in the office of Umpire was intended not to be supplied.
Whether the respondents were estopped from denying the existence of an arbitration agreement.

Arguments of the Parties

Appellant's Arguments

The appellant contended that the order of the learned single Judge, in substance, falls under either clause (i) or clause (iv) of Section 39(1) of the Arbitration Act, 1940, and therefore the appeal was maintainable.
The appellant submitted that the substance of the order should be considered (substance over form), urging the Court to look beyond the literal statutory heading or form of the order to determine appealability; reliance was placed on Full Bench decisions from the Patna High Court (Makeshwar Misra v. Laliteshwar Prasad Singh and Sashi Prasad v. Baleshwar).
In rejoinder to the respondent's position contesting existence of an arbitration agreement, the appellant stated that the question of existence of the arbitration agreement was irrelevant to proceedings under Section 8.

Respondent's Arguments / Preliminary Objection

The respondent raised a preliminary objection that the impugned order was not appealable under any clause of Section 39(1) and therefore the appeal was not maintainable.
The respondent denied the existence of any arbitration agreement and asserted it was never intended that a vacancy in the office of Umpire should be supplied.

Table of Precedents Cited

Precedent	Rule or Principle Cited For	Application by the Court
Makeshwar Misra v. Laliteshwar Prasad Singh, AIR 1967 Pat 407 (Full Bench, Patna High Court)	Where an order has the effect of setting aside an award, even if not expressed in terms, the order is appealable under Section 39(1)(vi) of the Arbitration Act.	The Court considered this authority but found it inapplicable because in that case the award was effectively set aside; the present case did not involve such a setting aside and therefore the principle did not help the appellant.
Sashi Prasad v. Baleshwar, AIR 1974 Pat 63 (Patna High Court)	Held that an award set aside on the ground of invalidity of reference under Section 33 falls under clause (vi) of Section 39(1) for purposes of appealability.	The Court observed that this decision similarly concerned cases where an award was set aside; because the present case did not result in an award being set aside, the authority was not applicable to establish appealability here.
Union of India v. A.S. Dhupia, AIR 1972 Delhi 108 (Full Bench / Division Bench proceedings described)	Consideration of whether appeals not maintainable under Section 39(1) might be competent under Section 10(1) of the Delhi High Court Act; and whether orders concerning the validity of reference (Section 33) are appealable under Section 39(1).	The Court relied on this decision to show that an order under Section 33 (determining effect/existence of arbitration reference) was not permitted to be appealed under Section 39(1); the Division Bench repelled the contention that the appeal was maintainable under Section 39(1) and dismissed the appeal in that case.
Devi Dass Gulzari Lal v. Firm Mitha Shah Ramditta Mall, AIR 1943 Pesh 8 (Division Bench)	Held that an order superseding arbitration on the ground that the reference was invalid was not maintainable as an appeal unless it was made under the relevant sections specified by the Act (i.e., S.19 or S.25) which would render it appealable.	The Court cited this authority in support of the proposition that an order cannot be converted into an appealable order by substance alone; the present appeal could not be sustained on that basis.

Court's Reasoning and Analysis

The Court's analysis proceeded in focused steps, driven by the preliminary objection to the appeal's maintainability:

Statutory framework: The Court examined Section 39(1) of the Arbitration Act, 1940, which lists, exhaustively, the orders from which an appeal lies. The clause headings considered included (i) superseding an arbitration, (iv) filing or refusing to file an arbitration agreement, and (vi) setting aside or refusing to set aside an award. The Court emphasized that appeals are creatures of statute and the list in Section 39(1) is exhaustive.
Analysis of clause (i): Clause (i) presupposes the existence of an arbitration and contemplates supersession of a reference under Sections 19 or 25. Section 19 deals with supersession where an award has become void under Section 16(3) or has been set aside; Section 25 applies in the context of "arbitration in suit" and permits supersession under specified circumstances (Sections 8, 10, 11 and 12). The Court found the appellant could not bring its case within either Section 19 or Section 25, so clause (i) could not be invoked to sustain the appeal.
Analysis of clause (iv): Clause (iv) concerns filing or refusing to file an arbitration agreement and is covered by Section 20 of the Act. The appellant urged the Court to look to the substance of the impugned order (citing Patna Full Bench authority). The Court rejected this approach, pointing out that the Patna cases relied upon were distinguishable because those cases involved orders which in effect set aside awards—thus falling within clause (vi)—whereas in the present case no award had been set aside.
Precedent and principle: The Court reviewed the authorities cited by the appellant (the Patna cases) and concluded they did not assist because there the awards had been set aside and so the orders were appealable under clause (vi). The Court relied on Union of India v. A.S. Dhupia to show that an order under Section 33 (relating to validity/existence of the arbitration agreement) is not a species of order made appealable under Section 39(1), and referred to Devi Dass Gulzari Lal to the effect that an order superseding arbitration on the ground that the reference was invalid is not appealable unless it falls under the statutory provisions (S.19 or S.25).
Statutory limitation on appeals: The Court stressed that because the right to appeal is statutory, its scope cannot be extended by judicial gloss even if the Court perceives a lacuna in the Act. The conclusion followed that no appeal lies in terms against orders passed under Section 8 of the Act.
Application to facts: Applying the statutory scheme and precedent to the facts—where the learned single Judge had held there was no arbitration agreement and dismissed the Section 8 application—the Division Bench concluded that the impugned order did not fall within any clause of Section 39(1) and therefore the appeal was not maintainable.

Holding and Implications

Holding: THE APPEAL IS DISMISSED AS NOT MAINTAINABLE.

Implications and consequences:

The Court upheld the preliminary objection and dismissed the appeal on the ground that the impugned order does not fall within any clause of Section 39(1) of the Arbitration Act, 1940.
The Court observed that, “in terms no appeal lies against orders passed under Section 8 of the Act,” and that the Legislature had not provided for an appeal against such orders; the Court declined to extend the statutory scope of appeal by judicial interpretation.
The parties were directed to bear their own costs. The judgment resolves only the maintainability question and results in dismissal of the appeal; the Court did not purport to lay down any novel principle beyond applying the statutory scheme and existing authorities to the facts before it.

Appeal dismissed.

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G.C Sharma v. The University Of Delhi .

N.N GOSWAMY, J.:— This appeal under S. 39 of the Arbitration Act 1940 (hereinafter referred to as “the Act”) is directed against the order of the learned single Judge of this Court, whereby the application of the appellant under S. 8 of the Act for supplying the vacancy was dismissed. A preliminary objection has been taken to the maintainability of the appeal, on the ground that the impugned order does not fall under any of the clauses of S. 39(1) of the Act and as such is not appealable.

2. The relevant facts for the decision of the preliminary objection are that by resolution No. 202 dated 5th Dec. 1952 of the Executive Council of University of Delhi, the petitioner was appointed as the Architect on the terms laid down by the Royal Institute of British Architect and was to be paid 6% of the total value of each work. Later on the said resolution was superseded by resolution No. 255 dated 30-1-1959 whereby the Executive Council of the University of Delhi reduced the rate of fee from 6% to 3% with reduction in the items of services to be performed by the appellant, and it was provided that the engagement of the appellant by the University in future would be far special works on specific terms under separate agreement, in each job. Certain disputes arose between the appellant and the respondent about the payments of bills for the work executed by the appellant. The appellant invoked the following arbitration agreement by notice dated 5-3-1969 :—

“That in case of any dispute arising out of or in any way touching this agreement, the dispute will be referred to a Board of Arbitration consisting of one person nominated by the University either than the University Engineer and the one person to be nominated by the Architect. In case of difference of opinion between the two, the dispute will be referred to the arbitration of the Vice-Chancellor, as an Umpire, whose decision will be final and binding on both the parties.”

3. The appellant appointed one K.P Sharma as his nominee. The respondent ‘denied the existence of the arbitration agreement but under protest appointed Shri K.B Rohtagi as its nominee. The two arbitrators entered upon the reference but differed on 10-8-1971 (sic). The record of the arbitration proceedings was forwarded to Dr. Sarup Singh, the then Vice-Chancellor of the University of Delhi as Umpire. Dr. Sarup Singh entered upon the reference as an Umpire on 5-8-1971 (sic). However, on 22-11-1971 he declined to act in the case. The appellant thereafter sent a notice dated 21st Dec. 1971 calling upon the respondent to concur in the appointment of another Umpire acceptable to both the parties. The respondent declined to concur and in these circumstances, the appellant filed an application under S. 8 of the Act, for appointment of an Umpire in place of Dr. Sarup Singh.

4. In reply to the application, the respondent stated that there was no arbitration agreement and it was never intended that the vacancy caused should be supplied. In rejoinder filed by the appellant, it was stated that the question of existence of arbitration agreement in the proceedings under S. 8 were irrelevant.

5. On the pleadings of the parties, the learned single Judge framed the fallowing issues :—

1. Whether it is open to this Court in these proceedings to inquire into the question whether there was an arbitration agreement between the parties?

2. If issue No. 1 is decided in favour of the respondent then was there any arbitration agreement between the parties?

3. If issue No. 2 is found in favour ol the petitioner, does the arbitration agreement not show that it was intended that the vacancy in the office of Umpire should not be supplied?

4. Whether the respondents are estopped from pleading that there was no arbitration agreement between the parties?

5. Relief.

6. As far as issue No. 1 is concerned, the counsel for the parties agreed before the learned single Judge that in order to find whether the agreement to refer, does not show a contrary intention regarding supplying the vacancy, it will be necessary to determine the existence of the arbitration agreement and the scope and effect thereof. In view of this, issue No. 1 was not pressed by the counsel for the appellant and was therefore decided in favour of the respondent. As regards issue No. 2, the learned single Judge after going through the entire correspondence between the parties and discussing the entire case law, on the subject, can to the conclusion that there was no arbitration agreement between the parties and as such there was no scope for filling in the vacancy. It is against this order that the present appeal has been filed.

7. The contention of the learned counsel for the appellant was that the order in substance, either falls under cl. (i) or cl. (iv) of S. 39(1) of the Act. Section 39 of the Act is :—

“S. 39(1). An appeal shall lie from the following orders passed under the Act (and from no others) to the Court authorised by law to hear appeals from original decrees of the Court passing the order —

(i) superseding an arbitration;

(ii) on an award stated in the form el a special case;

(iii) modifying or correcting an award;

(iv) filing or refusing to file an arbitration agreement;

(v) staying or refusing to stay legal proceedings where there is an arbitration agreement;

(vi) setting aside or refusing to set aside an award :

Provided that the provisions of this section shall not apply to any order pawed by a Small Cause Court.

(2) No second appeal shall lie from an order passed in appeal under this section, but nothing in this section shall affect to take away any right to appeal to the Supreme Court.”

8. Cl. (i) of S. 39(1) presupposes the existence of an arbitration and the same can be superseded either under S. 19 or S. 25 of the Act. Under S. 19 if the award has become void under sub-sec. (3) of S. 16 or has been set aside, the Court may by order supersede the reference. Section 25 of the Act falls in Chap. IV which deals with “arbitration in suit”. The section enables the Court in any of the circumstances mentioned in Ss. 8, 10, 11 and 12 to supersede the arbitration instead of filling of the vacancy and proceed with the suit. The learned counsel for the appellant was unable to bring his case in either of these two sections and as such the appeal cannot possibly fall in cl. (1) of S. 39(1). As regards cl. (iv) of S. 39(1) the learned counsel for the appellant conceded that the tiling or refusing to file an arbitration agreement is covered by S. 20 of the Act but he submitted that we have to take the substance of the order and should ignore the section for that purpose. Reliance was placed on a Full Bench decision of Patna High Court in Makeshwar Misra v. Laliteshwar Prasad Singh, AIR 1967 Pat 407. In that case, the objector disputed the existence of a valid arbitration agreement and also challenged the award on the ground that the arbitrators have misconducted themselves. The objection regarding the validity of the agreement was decided in favour of the objector and it was held that the execution of the deed of reference by defendant No. 1 was not acceptable. The consequence of the order was that the award was set aside though the Court did not in terms say so. The Full Bench of the Patna High Court held that while dismissing the case though did not use expression that award was se; aside yet the effect of its order was to set aside the award and hence the order was appealable under S, 39 (1) (vi) of the Act. Reliance was placed on a later decision of the Patna High Court in Sashi Prasad v. Baleshwar, AIR 1974 Pat 63. In that case also the award was set aside under S. 33 of the Act and the Court held that even if the award was set aside on the ground of invalidity of reference under S. 33, the same falls under cl. (vi) of S. 39(1).

9. We have given our careful consideration to the two cases cited by the learned counsel for the appellant but we are of the opinion that none of these can help the appellant because in both these cases the award was set aside and as such the order was clearly appealable under cl. (vi) of S. 39(1).

10. In Union of India v. A.S Dhupia F.A.O (OS) No. 14 of 1970, an application under S. 33 of the Arbitration Act was made by the Union of India against A.S Dhupia for the determination of the effect of the arbitration agreement between the parties. The learned single Judge of this Court held that the reference of the counter claim of the Union of India lack the concurrence of A.S Dhupia and was not therefore reference in the eye of law and the arbitrator rightly declined to consider the same. The Union of India filed an appeal against the said decision of the learned single Judge. It was contended before the Division Bench that even if the appeal was not maintainable under S. 39(1) of the Act, the same was competent under S. 10(1) of the Delhi High Court Act. This question was referred to a Full Bench and was decided against the appellant. The said case is reported as Union of India v. A.S Dhupia, AIR 1972 Delhi 108. After deciding the maintainability of appeal under S. 10 (1) of the Delhi High Court Act, the case was sent back to the Division Bench for decision. Before the Division Bench it was contended that the appeal was maintainable under S. 39(1) of the Act. This contention was repelled by the Division Bench and the appeal was dismissed.

11. It cannot be disputed that in terms no appeal lies against orders passed under S. 8 of the Act. At best the objection of the respondent regarding the existence of the arbitration agreement can be, considered to be an objection falling under S. 33 of the Act. Even if we consider it as such the same is covered by the aforesaid decision of a Division Bench of this Court and we do not find any reason to differ with the same. In firm Devi Dass Gulzari Lal v. Firm Mitha Shah Ramditta Mall, AIR 1943 Pesh 8, a Division Bench held that an order superseding arbitration on the ground that reference was invalid was not maintainable. The reason for so holding was that the supersession had to be under the Act i.e either under S. 19 or S. 25 of the Act in order to make the order appealable. It is true that an order on the question of existence or non-existence of an arbitration agreement can have far reaching effects and the same can be passed under S. 33 of the Act but the Legislature in its wisdom has not provided for an appeal against such an order. The appeal being the creation of a statute, the scope of the same cannot be extended even if we are of the opinion that there seems to be lacuna in the Act.

12. For the reasons recorded above, we have no option but to uphold the preliminary objection. The appeal is accordingly dismissed as not maintainable, but we leave the parties to bear their own costs.

Appeal dismissed.

G.C Sharma v. The University Of Delhi .

Structured Summary of the Opinion — N.N. Goswamy, J.

Factual and Procedural Background

Legal Issues Presented

Arguments of the Parties

Appellant's Arguments

Respondent's Arguments / Preliminary Objection

Table of Precedents Cited

Court's Reasoning and Analysis

Holding and Implications

G.C Sharma v. The University Of Delhi .

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