Bhagirathi Co-Operative Joint Farming Society Ltd. v. Howrah Zilla Parishad Opposite Party.

Anil K. Sen, J.:— This is an application under Article 227 of the Constitution of India at the instance of Bhagirathi Co-operative Joint Farming Society (hereinafter referred to as the defendant) and is directed against ah order dated October 12, 1982, passed by the West Bengal Co-operative Tribunal, dismissing an appeal under Section 134 of the West Bengal Co-operative Societies Act, 1973 (hereinafter referred to as the said Act). The opposite party Howrah Zilla Parishad (hereinafter referred to as the plaintiff) preferred a dispute under Section 86 of the said Act before the Assistant Registrar of Co-operative Societies, Howrah. The dispute so raised was to the effect that the plaintiff entered into, a contract with the defendant Co-operative society for purchase of 3,00,000 bricks from the society and they paid the price thereof being a sum of Rs. 34,500/- but the defendant society delivered only 1,74,000 pieces of bricks and failed and neglected, to deliver, the balance 1,26,000 pieces of bricks. Hence, the plaintiff claimed that the defendant must deliver the said balance pieces of bricks or in the alternative pay damages to the plaintiff.

2. The dispute thus raised before the Assistant Registrar was referred fo an arbitrator for adjudication on March 15, 1979. Notice of the said proceedings having been served upon the defendant society the defendant filed a written statement disputing the claim. The defence was to the effect that they had delivered the entire quantity of bricks deliverable under the contract. On evidence led, the arbitrator found that the defendant society had failed to furnish evidence to show that balance 1,26,000 bricks were delivered to the plaintiff as per contract. Hence the arbitrator made an award directing the defendant to deliver the said quantity of bricks within 6 months and further directed that in the event of default the plaintiff shall be at liberty to claim suitable damages in an appropriate Court of law. Such an award was made on April 3, 1982, and feeling aggrieved the defendant society preferred an appeal. The appellate tribunal reviewed the entire evidence and affirmed the finding of the arbitrator that contract to deliver 3,00,000 bricks being admitted, the defendant had failed to establish delivery of the balance 1,26,000 pieces of bricks as claimed by the defendant. The tribunal, therefore, dismissed the appeal and affirmed the award. Feeling aggrieved, the defendant society has now moved this Court with the aforesaid application under Article 227 of the Constitution.

3. The actual defence of the defendant society having been overruled by the two Courts below upon a concurrent finding that they had failed to establish their defence that they had also delivered the balance 1,26,000 pieces of bricks, Mr. Bose appearing in support of this application under Article 227 of the Constitution has raised two points including one which is a short point of law and which was not raised before the tribunal below. According to Mr. Bose, reference to the arbitrator having been made on March 15, 1979, the arbitrator could make an award only within a period of 3 months from the said date. Since no award was made within 3 months and since no extension of time was obtained from the next higher authority, the arbitrator became functus officio so that the award made is a void award. Strong reliance is placed by Mr. Bose on the provisions of Section 87 sub-sections (4) and (5) of the said Act, in contending that those provisions being mandatory, the arbitrator could not have retained any jurisdiction to make an award beyond the time prescribed. The other point raised by Mr. Bose is to the effect that the arbitrator should have assessed the damages in the alternative and should not have relegated the parties to a suit for that.

4. The first contention of Mr. Bose has been seriously contested by Mr. Bhaskar Ghosh who is appearing on behalf of the plaintiff, Howrah Zilla Parishad. Since the point raised, when decided, may affect innumerable other adjudications pending under the material provisions of the said Act, we had given notice of this application upon the learned Government Pleader. The learned Government Pleader has appeared to contest the point thus raised by Mr. Bose Both the learned Government Pleader and Mr. Ghose strongly contended that on the scheme of the Act though the provisions of sub-sections (4) and (5) of Section 87 are required to be substantially complied with, yet those provisions are not so mandatory as to render an award made beyond the time so prescribed, void and inoperative. Thus, the most important point which arises for our consideration in this application is as to whether the provisions of sub-sections (4) and (5) of Section 87 are so mandatory that any infringement thereof would render the award made under Section 87, void and inoperative.

5. In order to decide this point it would be necessary to refer to the scheme of the provisions in the Act providing for settlement of disputes and determine the true intention of the legislature. Section 86 provides that any dispute relating to the affairs of co-operative society as between the parties specified therein, shall be referred to the Registrar for adjudication subject to two exceptions not relevant for our present purposes. Under Section 87(1) Cl. (c) the Registrar in his turn may refer such a dispute for disposal to one or more arbitrators to be appointed by the Registrar. Sub-section (2) of Section 87 empowers the Registrar to withdraw any reference and to deal with the same himself in the manner prescribed by the Rules. Sub-section (3) of Section 87 empowers the Registrar or the arbitrator to pass such interlocutory orders as may be necessary for the preservation of any property involved in the dispute. Sub-Sections (4) and (5) provide as follows:

“(4) All disputes referred to in S. 86 shall be decided within 3 months from the date of receipt of such disputes by the Registrar.

(5) If any person dealing with such dispute fails to decide it within the aforesaid period he shall make a report to the next higher authority stating reasons for such failure and the said authority may allow him such further time not exceeding 3 months for disposal of the dispute.”

Section 88 provides that an award made on a dispute involving property pledged as a collateral security shall have the force and effect of a mortgage decree.

6. These are the statutory provisions regarding settlement of disputes referable to the Registrar for adjudication under the said Act. Chapter X of the Rules lays down the procedure for making a reference, for appointment of arbitrator, for disposal of disputes and execution of awards. Under Rule 132 board of arbitrators or the Registrar in proceeding to adjudicate the dispute referred to, shall fix the time and place of hearing and shall issue summons or notices to the parties at least 15 days before the date fixed for hearing requiring them to attend with witnesses and all relevant books and documents relating to the dispute. Such notice is to be served either personally or by registered post or in a manner substituted service is effected and in the event any of the parties do not appear the board of arbitrators or the Registrar may proceed to decide the dispute ex parte against him. Rule 133 prescribes how the award is to be made. Such an award is to be made in writing under the signature with the date of the authority and shall be communicated to the parties. In drawing up the award the authority should make a memorandum of the statement of the parties and their witnesses and should be so made on consideration of all evidence including documentary evidence produced by the parties. It should clearly specify the relief granted the amount decreed, future interest, allowed, if any, and costs. Rule 135 provides that an award shall be enforceable by any civil court having local jurisdiction in the same manner as a decree of such court. These are all the provisions in the Act and the rules providing for adjudication of disputes, making of award and execution thereof.

7. Coming back to consider the point at issue it is no doubt true that on the terms of sub-sections (4) and (5) of Section 87 the time prescribed for making of an award appears to be mandatory. While sub-section (4) provides that all disputes shall be decided within 3 months, sub-section (5) provides that if any person dealing with such dispute fails to decide it within the aforesaid period he shall make a report to the next higher authority stating reasons for such failure and the said authority may allow him such time not exceeding three months. The obvious implication is that the arbitrator whoever he may be has to decide the dispute positively within the time schedule prescribed failing which he is to seek for extension from the next higher authority. There is no dispute between the parties and we too agree that such a statutory prescription has to he strictly followed and if not followed can be enforced upon the arbitrator. But still the more important question which has been raised now before us is as to what is the effect of its breach upon an award made in such hreach. Relying upon the parallel provision of the Arbitration Act, Mr. Bose has strongly contended that once the time expires the arbitrator becomes functus officio and he loses all his jurisdiction to proceed with the arbitration so that any award made thereafter becomes null and void. The statute, however, has not provided for any such penal consequences. Relying strongly upon the absence of any such penal consequence being provided by the statute, it has been strongly contended both by Mr. Ghosh and the learned Government Pleader that the court should not accept the contention of Mr. Bose and should not read into the statute the consequence of invalidity of an award made beyond the time prescribed by necessary implication. Mr. Ghosh has drawn our attention to Craies on Statute Law 7th Edition page 267, where the observations of Taunton, J, with regard to the distinction between absolute and directory provisions has been referred to, to mean that a clause is directory where the provisions contain mere matter of direction but not so where they are followed by words as “that anything done contrary to these provisions shall be null and void to all intents”. Mr. Ghosh has also relied on the decision of the Supreme Court in the case of Jagannath v. Jaswant Singh, AIR 1954 SC 210 where interpreting the provisions of Section 82 of the Representation of the People Act 1951, as directory, the Supreme Court observed: “It is one of the rules of construction that a provision like this is not mandatory unless non-compliance with it is made penal.” Reliance has been placed both by Mr. Ghosh and the learned Government Pleader on other decisions expressing similar views. In our considered opinion, a statutory provision which prescribes a particular manner or time for the performance of any act and goes on further to provide that the breach thereof would render the performance void or without jurisdiction, must necessarily be held to be absolute. But absence of any provision providing for such a penal consequence need not necessarily lead to the contrary conclusion. Whether such a provision would be directory or not would depend upon the nature and effect of the prescription and the intention of the legislature as would appear from the scheme of the Act.

8. Coming back to consider the contention of Mr. Bose with reference to the provisions of the Arbitration Act, we find the parallel provision in Rule 3 of the first Schedule which is as follows:

“The arbitrators shall make their award within four months after entering on the reference or having been called upon to act by notice in writing from any party to the arbitration agreement or within such extended time as the court may allow.”

9. Section 28 of the Act empowers the court to enlarge from time to time the time for making of the award if the court thinks fit. It is settled law now that in the absence of any extension of time the arbitrators become functus officio on the expiry of the time prescribed by Rule 3 as aforesaid, and any award made beyond such time becomes null and void. Reference may be made to Hari Sankar Lal's case AIR 1962 SC 78. But it should be remembered that under the provision of Section 3 of the Arbitration Act, unless a different intention is expressed the prescription provided for by Rule 3 becomes an implied term of the arbitration agreement itself. Where as in such a case the jurisdiction to arbitrate is conferred by agreement between the parties, it is obvious that the arbitrators assume jurisdiction strictly on the terms of agreement and not otherwise. Therefore, if the parties had agreed that the arbitrator must decide the dispute within four months unless that prescription is overridden by an order of court obtained under Section 28, the jurisdiction of the arbitrators ceases on the expiry of the said term of agreement. Obviously the Arbitration Act further contemplates that the parties themselves by their own consent extend the time by altering the term in that regard by mutual consent.

10. Such a case, however, has to be distinguished from a statutory arbitration Where the obligation to arbitrate and consequently the jurisdiction therefor is vested by the statute. In such a case the jurisdiction is not dependent upon an agreement between the parties and is not limited by the terms thereof. Here the jurisdiction is entirely dependent upon the provisions of the statute and unless the statute by express words or by necessary implication limits the jurisdiction, the jurisdiction of the arbitrator should not be read as limited in any manner. In that background the contention of Mr. Ghosh and the learned Government Pleader assumes importance because in the statute now under consideration there is no express provision that if the dispute is not decided within the time prescribed it should be considered as null and void. But still we have to carefully consider the further contention of Mr. Bose that such is the implied consequence intended as such by the legislature and such an implication follows from the mandatory provisions of sub-sections (4) and (5) of Section 87. In a Single Bench decision in the case of Avenue Co-operative Housing Society Ltd. v. Ramendra Mohan Guha (C.R No. 1853 of 1975) disposed of on February 10, 1977, one of the learned Judges of this court overruled such a contention when he held that no such implication can be drawn because even if a particular arbitrator may become functus officio the reference to the Registrar still remains which could validly be assigned by the Registrar for adjudication to successive arbitrators or in the alternative there may be successive references being made to the Registrar over the same dispute. In our considered opinion there exists a stronger ground on which we can overrule the contention of Mr. Bose.

11. Section 86 read with Section 87 of the said Act, not only imposes a statutory duty upon the Registrar or his delegate to decide the dispute but further makes them the exclusive forum for adjudication of such a dispute as would come within sub-section (1) of Section 86. Section 132(2)(d) rules out the jurisdiction of civil and revenue court to adjudicate upon any dispute required under Section 86 to be referred to the Registrar. Therefore, unlike the Arbitration Act, in the event the arbitration fails the parties cannot fall back upon the civil court for adjudication of the particular dispute so that the result would be if we accept the contention of Mr. Bose and hold that the Registrar or the arbitrator totally loses his jurisdiction to adjudicate on the expiry of the time prescribed, then in that event if the Registrar or the arbitrator due to his own laches or preoccupation is unable to adhere to the time schedule, the party preferring the claim may lose it altogether. One should not overlook the special limitation prescribed by the statute itself for preferring some of these disputes. In our opinion, such a consequence could never have been the intention of the legislature. Mr. Ghosh has rightly drawn our attention to an observation of Maxwell on Interpretation of Statutes, 9th Edition page 374. Enunciating the proper principle of interpretation of a statute like one now under consideration, it was therein observed: “When a public duty is imposed and the statute requires that it shall be performed in a certain manner or within a certain time or under Other specified conditions, such prescriptions may well be regarded as intended to be directory only in cases when injustice or inconvenience to others who have no control over those exercising the duties would result if such requirements were essential and imperative.” This observation has been approved by the Privy Council in the case of Montreal Street Rly. Co. v. Normandin, AIR 1917 PC 142 and has received universal approval by different courts since then. Reliance has also been placed by Mr. Ghosh on the following observation of Lord Blackburn in the case of Middlesex Justices v. R. (1884) 9 AC 757 at p. 778 quoted with approval in Craies on Statute Law, 7th Edition page 249: “There is a numerous class of cases in which it has been held that certain, provisions in acts of Parliament are directory in the sense that they were not meant to be a condition precedent to the grant, or whatever it may be, but a condition subsequent: a condition as to which the responsible persons may be blameable and punishable if they do not act upon it but their not acting upon it shall not invalidate what they have done, third persons having nothing to do with them.” Craies has also referred to the aforesaid decision of the Privy Council with approval as laying down the proper principle of interpretation to be followed.

12. Interpreting the particular provisions of the statute on the principles so laid down, we cannot but accept the contention of the learned Government Pleader as also that of Mr. Ghosh that though sub-sections (4) and (5) of S. 87 impose a time limit for deciding a dispute which is required to be strictly complied with—otherwise the object of providing for arbitration by way of an early adjudication of the dispute would lose much of its effect - yet we are unable to construe the said two provisions to be so absolute in character that any breach thereof would render the arbitrator or the Registrar functus officio and consequently make the award made in breach thereof, null and void.

13. We now proceed to consider the second point raised by Mr. Bose. According to Mr. Bose the opposite party in raising the dispute before the Registrar claimed delivery of the balance quantity of bricks or damages in the alternative. The arbitrator could not have made an award merely directing delivery of the bricks with a further direction that in default of such delivery the claimant is to go for a suit for damages. This according to Mr. Bose is incomplete adjudication. Moreover according to Mr. Bose the dispute was raised in March, 1979 and the award was not made before October 1982. In course of these three years there has been enormous rise in price of bricks and, therefore, it was improper and unjust for the arbitrator to make an award directing delivery of bricks in October 1982.

14. Mr. Ghose has not disputed the position that the award is incomplete in the sense that the arbitrator had not disposed of the alternative claim but he had relegated that to a suit. But according to Mr. Ghose, the petitioner having failed to deliver the bricks for which he accepted advance payment, they are liable to pay damages at the prevailing rate.

15. We have carefully considered the point thus raised. In our view the arbitrator went wrong in not passing a comprehensive award. He was conscious of the position that the petitioner may not deliver the balance amount of bricks and if not delivered that direction may not be enforced against the petitioner. Hence he directed that in that event the parties were to go for a suit for damages. This the arbitrator was not entitled to do. On the scheme of the Act, the entire dispute has to be decided and resolved by the arbitrator, jurisdiction of the civil court being barred by the statute. Hence, the claim of damages in the alternative which was a part of the dispute could not have been relegated to a suit by the arbitrator.

16. Moreover there is some substance in the objection of Mr. Bose, that, but for the three years delay in deciding the dispute, the petitioner would not have to face the situation of being forced to deliver bricks at an enormously higher price prevailing in 1982.

17. Taking into consideration all these aspects, we would, therefore, modify the award by incorporating an alternative direction to the effect that in the event the petitioner fails to deliver the balance bricks within a month, they would be liable to pay damages which is assessed at Rs. 14,390/- being the advance price for the said balance quantum of bricks received with interest at 10% per annum on the said amount from March 1979 till the date of payment.

18. The revisional application is disposed of accordingly.

S.N Sanyal, J.:— I agree.

Order accordingly.