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Deep Narain Singh And Others v. Mt. Dhaneshwari And Others
Factual and Procedural Background
This appeal arises from an order of the Additional Subordinate Judge, Muzaffarpur dated 31-8-1955, which set aside an arbitration award made outside court. The underlying dispute concerned Title Suit No. 83 of 1951 in the Court of the 1st Munsif, Muzaffarpur, about certain kasht lands belonging to Kanhaiya Singh. On or about 9-8-1951 (the opinion records the arbitration agreement dated 9-8-1951 and records that on 6-8-1951 the arbitrators gave their award), the parties purportedly executed a written agreement (Exhibit 3, characterized as a Panchnama) referring the dispute to five arbitrators. An award (Exhibit 4) was recorded and a registered award (Exhibit 4(a)) was later registered on 8-9-1951. On 6-11-1951 the plaintiffs applied under Sections 14 and 17 of the Arbitration Act for directions to have the arbitrator file the award in court and for a decree in terms of the award.
Multiple defendants filed two sets of written statements challenging the arbitration agreement and the award on grounds including: non-existence/invalidity of the reference; lack of notice and absence of hearing; misconduct; pendency of the subject matter in a court of competent jurisdiction; excess of reference; and alleged fabrication/forgery. The Subordinate Judge found the arbitration agreement and the award not genuine and valid, held the award to be void, set it aside and dismissed the suit. The plaintiffs appealed; the present opinion (Kanhaiya Singh, J.) disposes of that appeal.
Legal Issues Presented
- Whether there was any valid agreement to refer the dispute to arbitration and, if so, whether that agreement was binding on all defendants.
- Whether the arbitration award (and the subsequently registered award) was genuine and valid, or vitiated by vagueness, interpolation/alteration, lack of notice, absence of hearing, misconduct, or forgery.
- Whether a subsequent altered or registered award given after the arbitrators had already pronounced an award is valid (i.e., whether arbitrators become functus officio once an award is pronounced).
- Whether objections to an award filed out of time are barred by limitation (Article 158 of the Limitation Act) and, relatedly, whether Section 17 of the Arbitration Act requires the court to pronounce judgment per the award when objections are time-barred.
- Whether an objection that the reference itself was invalid falls under Section 30 of the Arbitration Act (and so attracts limitation) or falls under Section 33 (and so is not subject to the same limitation), and whether the court has power to set aside an award suo motu if it is prima facie a nullity.
Arguments of the Parties
Plaintiffs / Appellants (as presented in the opinion)
- The application to present and enforce the award was made under Sections 14 and 17 of the Arbitration Act; after expiry of time for setting aside the award the court must pronounce judgment according to the award.
- Mr. R.S. Sinha (for appellants) argued that the defendants' objection was filed beyond the period of limitation and therefore could not be entertained; reliance was placed on the Full Bench decision in Seonarain Lal v. Prabhu Chand (AIR 1958 Pat 252) to support the position that the court is bound to pronounce judgment according to the award when an objection is time-barred.
Defendants / Respondents (as presented in the opinion)
- The arbitration agreement (Panchnama) and award(s) are not genuine — the document carries thumb marks/signatures only of defendants interested in certain bakasht lands; other defendants did not sign and Bigu's alleged authority to sign for others was unproved.
- The award was vitiated by want of notice, absence of hearing, misconduct by arbitrators, vagueness, and alleged fabrication/interpolation of the Panchnama and award.
- Mr. R.S. Chatterji argued (as recorded) that no separate notice of filing of the award was served, so limitation under Article 158 does not arise; and that an objection based on invalidity of the reference is not an objection under Section 30 of the Arbitration Act but falls under Section 33, for which no limitation is prescribed.
Table of Precedents Cited
| Precedent | Rule or Principle Cited For | Application by the Court |
|---|---|---|
| Chhabba Lal v. Kailu Lal, AIR 1946 P.C. 72 | The principle that if there is no valid reference, the purported award is a nullity. | The court relied on this decision to hold that because there was no unanimous/valid reference the entire award is a nullity and must be set aside. |
| Jai Govind Singh v. Bagal Lal Singh, AIR 1950 Pat 445 | A bench decision that an agreement framed in vague terms (e.g., "decide all matters") could be too vague to constitute an enforceable agreement to refer to arbitration. | Used to support the conclusion that the vagueness of the Panchnama and unspecified subject-matter vitiates the arbitration agreement and award. |
| Chhati Lal v. Ram Chariter Sahu, AIR 1941 Pat 215 | Arbitrators become functus officio once an award is issued and have no jurisdiction to alter or rewrite the original award. | Applied to hold that the subsequent altered award (exhibit 4(a)) which sought to supersede the original award was null and void for want of jurisdiction. |
| Seonarain Lal v. Prabhu Chand, AIR 1958 Pat 252 (Full Bench) | Where an objection to an award made without intervention of Court is filed after expiry of time for making application to set it aside, such objection cannot be entertained and the Court is bound to pronounce judgment under Section 17. | Recognized as supporting the appellants' limitation argument; the court distinguished and limited its application because an objection that the reference itself is invalid falls outside Section 30. |
| Mariam Bibi v. Mt. Amina, ILR 1937 All 317 : AIR 1937 All 65 | Full Bench considered whether words "or being otherwise invalid" include challenges to the validity of the reference itself; the majority said yes, one judge (Iqbal Ahmad, J.) dissented. | The opinion recounts the Full Bench split and uses subsequent Privy Council authority (Chhabba Lal) to accept Iqbal Ahmad, J.'s view that invalid reference is not within that clause. |
| Deo Narain Singh v. Siabar Singh, AIR 1952 Pat 461 | Authority supporting the proposition that courts have power to set aside an award which is a nullity or prima facie illegal even suo motu. | Cited to support the proposition that the court may set aside an award independent of whether an objection was filed within time. |
| Hastimal Dalichand v. Hira Lal Motichand, AIR 1954 Bom 243 | A Division Bench decision of the Bombay High Court supporting the court's power to refuse enforcement of a prima facie illegal or null award. | Cited as supporting authority for the view that the court may set aside an award on inherent illegality notwithstanding limitation arguments. |
| Umadutt Nemani v. Chandrao C. Kadam, AIR 1947 Bom 94 | Single Judge decision holding that Section 17 applies even to a bogus award (view later doubted/rejected by Division Bench). | The court expressly rejected this single-judge view, aligning instead with authorities that treat bogus awards as nullities not to be enforced under S.17. |
Court's Reasoning and Analysis
The court proceeded by analyzing (a) the authenticity and scope of the arbitration agreement, (b) the conduct and procedure of the arbitrators, (c) the relationship between Sections 14–17, Section 30 and Section 33 of the Arbitration Act, and (d) limitation under Article 158 of the Limitation Act.
1. Validity of the arbitration agreement and factual findings:
- The Panchnama (Exhibit 3) bore thumb marks or signatures of only six defendants (Madho Singh (D1), Ram Lakhan Singh (D2), Bigu Singh (D3 — signed purportedly on behalf of others), Dhorai Singh (D4), Sahai Singh (D7) and Ramautar Singh (D9)). The other defendants did not sign or thumb mark the Panchnama.
- The defendants explained they had signed blank papers concerning bakasht lands and alleged subsequent fraudulent use for the Panchnama. The Subordinate Judge accepted this explanation; the appellate court found ample evidence to support that conclusion.
- There was no evidence that Bigu had authority to sign on behalf of other defendants; relevant documents and oral testimony were silent or vague on this point.
- Because not all persons interested in the dispute joined the arbitration agreement, the court concluded the agreement was invalid and could not give arbitrators jurisdiction to decide the dispute.
2. Vagueness, interpolation and procedural irregularities:
- The Panchnama did not specify the precise subject-matter of the dispute (no detailed description of lands); details appeared only later in the registered award (Exhibit 4(a)); marginal writings on Exhibit 3 looked like subsequent interpolations.
- Witness evidence was partisan and inconsistent; P.W.6 (allegedly the person who dictated the Panchnama and award) did not explain how the materials were obtained or how the reference came about.
- The arbitrators apparently gave an award without giving notice of their sitting and without examining evidence. These procedural defects, together with vagueness and apparent interpolation, made the arbitration proceeding and the award highly suspicious and vitiated the award.
3. Alteration / subsequent award and functus officio:
- An original award (Exhibit 4) was followed by a materially different registered award (Exhibit 4(a)). The court applied the Chhati Lal principle that arbitrators, once they have issued an award, become functus officio and lack jurisdiction to alter it; therefore the later altered award was without jurisdiction and void.
4. Limitation and appropriate statutory remedy:
- Article 158 prescribes 30 days for making an application under the Arbitration Act to set aside an award, computed from service of notice of filing the award. The court held Article 158 operates only if the required notice has in fact been served.
- There was no evidence that a separate notice of filing the award had been served on the defendants independent of the plaint; the mere notice of the application (treated as the plaint) was insufficient because the award had not been filed in court with that application. Consequently, the limitation period under Article 158 did not begin to run and the defendants' objections were not time-barred on that ground.
- More fundamentally, an objection that there was no valid reference is not an objection falling under Section 30 of the Arbitration Act (which lists certain grounds for setting aside an award). The court followed Privy Council authority (Chhabba Lal) to hold that invalidity of the reference makes the award a nullity and such an objection can be taken in an appropriate proceeding and is not governed by the limitation applicable to Section 30 objections.
- Section 33 provides a specific remedy for challenging the existence or validity of an arbitration agreement; no specific period of limitation is prescribed for an application under Section 33; the residuary Article 181 (three years) might apply, but even on that basis the present challenge to the reference was maintainable.
5. Court's duty under Section 17 and suo motu power:
- Section 17 requires the court to pronounce judgment according to the award when the court sees no cause to remit or set aside the award and after the time for making an application has expired (or such an application having been made has been refused).
- The court interpreted S.17 as operating only when the court "sees no cause" to remit or set aside the award; it concluded the court has power to remit or set aside an award suo motu if the award is prima facie illegal or a nullity arising from invalid reference or other fundamental defects.
- Therefore, even if no party files a timely objection, the court remains under a duty to examine the award and to refuse enforcement where it is prima facie invalid or a nullity.
Conclusion of analysis: considering the lack of a valid, unanimous reference; the vagueness, interpolation and procedural irregularities; the invalidity of any attempted subsequent alteration of the original award; and the legal position that invalid reference produces a nullity which is not confined by Section 30 limitation, the court concluded the award was void and properly set aside by the Subordinate Judge.
Holding and Implications
Holding: The appeal is dismissed; the decision of the Subordinate Judge setting aside the arbitration award is affirmed.
Implications and immediate consequences (as stated in the opinion):
- The arbitration agreement and award were found not genuine and not binding; the award is a nullity and has been set aside.
- The plaintiffs are consequently unsuited (the suit was dismissed below and that decision is affirmed).
- The court exercised and affirmed the principle that when an award is prima facie illegal or a nullity (for example, because there was no valid reference, or because the award was materially altered after arbitrators became functus officio), the court may and should refuse enforcement even if no timely objection was filed — Section 17 does not compel enforcement of such a prima facie void award.
- No novel general principle of law was announced; the opinion applies and relies on existing authorities (including Privy Council and High Court decisions) to determine the appropriate interaction between Sections 30 and 33 of the Arbitration Act, the Limitation Act (Article 158 and residuary Article 181), and the court's duty under Section 17.
Disposition: Appeal dismissed with costs.
Kanhaiya Singh, J.:— This is an appeal from the order of the Additional Subordinate Judge, Muzaffarpur, dated 31-8-1955, setting aside the award given by the arbitrators outside the Court.
2. The facts are short and simple. During the pendency of Title Suit No. 83 of 1951 in the Court of the 1st Munsif, Muzaffarpur, relating to a portion of kasht lands belonging to Kanhaiya Singh, the plaintiffs and the defendants first party by a written agreement dated 9-8-1951 referred, a without the intervention of the Court, their dispute in respect of the aforesaid suit land and aother matters to the arbitration of five persons, namely, (1) Ramautar Singh, (2) Ram Prasad Singh and (3) Jugeshwar Singh, all of village Belaur, (4) ftasiautar Singh of village Mohini and (5) Barham Singh of village Nasratpur, who are defendants second party, and on the same day, that is, 6-8-1951, the arbitrators gave their award (exhibit 4). Subsequently, the arbitrators registered the award on 8-9-1951. The registered award is exhibit. 4(a). On 6-11-1951 the plaintiffs presented an application before the 1st Subordinate Judge, Muzaffarpur, under Sections 14 and 17 of the Arbitration Act, alleging that the arbitration agreement (exhibit 3), the original award and the registered award were in the custody of arbitrator Ramautar Singh of Belaur and praying that the said arbitrator be directed to file the award in Court and that, after hearing the parties, a decree in terms of the award be passed.
3. Two sets of written statements were filed, one on behalf of defendants Nos. 1, 2, 3, 4, 7 and 9 and the other on behalf of defendants Nos. 5, 6 and 10 to 15. Their defence is practically common. They challenged the existence and validity of the arbitration agreement and also the validity of the award based upon invalidity of reference. They also attacked the validity of the award on the grounds of want of notice, total absence of hearing and misconduct of the arbitrators. They also denied that the notice of the filing of the award was served upon them. They further impugned the award on the ground that the subject of the dispute was already pending decision in a Court of competent jurisdiction. The award was further challenged as invalid on the ground that it exceeded the terms of the reference. They asserted that the entire arbitration proceeding was a fake and the award was forged and fabricated through the machination of the Belaur arbitrators. The learned Subordinate Judge held that the arbitration agreement and the award were not genuine, valid and legal. He held further that the award was wholly void and accordingly set it aside and dismissed the suit.
4. The first and important question for con sideration is whether there was any agreement at all to refer the dispute to arbitration, and if there was any agreement, whether it was valid and binding upon the defendants first party. The arbitration agreement which has been termed as Panchnama is exhibit 3. It bears the thumb mark of Madho Singh (defendant No. 1), Ram Lakhan Singh (defendant No. 2), Dhorai Singh (defendant No. 4), Sahai Singh (defendant No. 7) and Ramautar Singh (defendant No. 9) and is signed by Bigu Singh (defendant No. 3). who purports to have signed it for self as well as on behalf of the other defendants.
5. These defendants have explained the circumstances in which they happened to affix their thumb marks or signatures to the document which was characterized by them as Panchnama. Their defence was that they put their signatures or thumb marks on blank papers regarding their dispute in respect of bakasht lands in tauzis Nos. 16818 and 16821, and their apprehension was that the said papers had been fraudulently utilised for the present Panchnama. On a careful consideration of the evidence the learned Subordinate Judge held that there was in fact no reference to the arbitrators for decision regarding the kasht lands of Kanhai Singh. In his opinion, the defence was right, and six of the defendants, whose thumb marks and signatures appear on the Panchnama and who alone, and not the other defendants, were interested in the Bakasht lands, entered into some agreement to refer their dispute regarding the said lands to arbitration and with that end in view, the aforesaid six defendants affixed their thumb marks and signatures to blank papers.
6. There is ample evidence to support the conclusion of the learned Subordinate Judge. Ona thing which goes a long way to support his finding is the absence of signatures or thumb marks of the other defendants on the Panchnama. If in fact the dispute related to the kasht lands of Kanhai and not to the bakasht lands, there is no satisfactory explanation why the other defendants also did not sign or thumb mark the arbitration agreement. The fact that thumb marks or signatures of only those defendants who wera interested in the bakasht lands appear in the Panchnama lends considerable support to the defence set up by the defendants. During the course of the nearing the plaintiffs offered?n explanation for the absence of signatures or thumb marks of the other defendants and alleged that Bigu signed the Panchnama on behalf of the other defendants. There is however, no evidence to establish that Bigu had authority on behalf of the other defendants to agree to refer the dispute to arbitration and to sign the arbitration agreement on their behalf.
7. The relevant documents are silent about the authority of Bigu, and the oral evidence is equally vague. No witness has deposed that Bigu had been authorised by the said defendants to sign the arbitration agreement. Even P.W 6 prima facie an important witness, because, according to the plaintiffs, it was he who dictated the terms of the reference and the award, does not say that the other defendants were present there and authorised Bigu to sign the Panchnama and the award on their behalf. If in fact, they gave authority to Bigu, there is no reason why they like, the other defendants, did not append their thumb marks or signatures to the arbitration agreement.
8. This is a circumstance which not only affects the validity of the arbitration agreement for want of proper authority in Bigu, but also renders the whole arbitration proceeding highly suspicious and militates against the genuineness of the arbitration agreement and the award. Another circumstace is that none of the witnesses has stated in evidence as to why, how and for what the agreement of reference was brought about. Again, it is remarkable that the subject of dispute was not specified at all in the Panchnama (Exhibit 3). The areas and other details of the lands have not been given. No explanation has been, given why the disputed lands were not mentioned in the Panchnama. It is equally eloquent that these details are absent even from the award (Exhibit 4). This vagueness of the award was sufficient to vitiate it, and this inherent infirmity of the award was appreciated by the plaintiffs and also the arbitrators who subsequently attempted to rehabilitate the award by writing another award which was subsequently registered, and which is exhibit 4(a).
9. This is the award which was registered on 8-9-1951. Exhibit 4(a) is entirely different from exhibit 4 and mentions the disputed properties in detail and also their description in full. There is another thing that in the Panchnama (exhibit 3) an attempt has been made to describe the lands, and this description occurs on the margin of the Panchnama. It is alleged that the writings on the margin were subsequent interpolations in order to cover up all the lands of Kanhai just to show that the dispute existed between the parties from before. If in fact the kasht lands of Kanhai alone were the bone of contention between the parties and if the subject of reference to arbitration was those kasht lands, then the use of the word “Digar Amurat” (other matters) on the margin of the Panchnama appear to be wholly redundant and uncalled for.
10. When Kanhai's lands formed the subject of dispute, why the details of these lands which find place in the subsequent award, exhibit 4(a), were omitted altogether from the original award (exhibit 4)? The most significant circumstance in this case is that prior to the award the subject matter of the reference itself was not known to anybody. Even P.W 6 at whose dictation the Panchnama and the award are alleged to have been written, did not disclose in evidence as to how he got the materials for dictating the Panchnama, or, for the matter of that, the award itself. These facts support the defence that the descriptions of the lands in exhibit 3 are subsequent interpolations made to counteract any argument against the vagueness of the reference made contemporaneously with the altered award, exhibit 4(a). Not less surprising is the fact that no sooner the arbitrators were appointed than they gave the award, without, as it appears from the evidence, giving any notice of their sitting and without examining the evidence.
11. Apart from the partisan character of the evidence, none of the witnesses have given a consistent story, nor have they given a reasonable explanation as to what exactly was the subject matter of the dispute and what really were the terms of the reference. The entire proceeding before the arbitrators commencing with the execution of the Panchnama is so suspicious and so out of accord with the natural course of events as to invest the arbitration agreement and the award with unnaturalness. I am inclined to agree with the learned Subordinate Judge that the defendants never entered into an agreement to refer their dispute regarding the kasht lands of Kanhai to arbitration and that the arbitration agreement and also the award based thereon are not genuine and valid but that they have been brought into existence fraudulently having secured somehow blank papers containing the thumb marks and signatures of five of the defendants, as stated above. The award, therefore, could not be maintained.
12. Even assuming that there was a reference to an arbitration and the Panchnama (Exhibit 3) is a genuine document, the arbitration agreement was invalid and legally ineffective, because all the defendants did not join in the execution of the agreement. It is well to remember that there are fifteen defendants, and, as will appear from the Panchnama, only six of them were parties to this agreement. The other defendants have not joined in the arbitration agreement. It is said that Bigu (defendant No. 3) had the authority on behalf of the other defendants to refer the matter to arbitration and to sign the arbitration agreement or the consequential award. But, as held above, this authority has not been established at all.
13. The result is that all the persons interested in the matter of dispute were not parties to the arbitration agreement and it is manifest that when an agreement is not consented to by all, such an agreement is invalid and cannot give the arbitrators jurisdiction to decide the dispute, and the award given on the strength of such void reference is not void. The award passed upon such invalid reference does not bind even the consenting parties. It is void altogether. This does not require a detailed investigation. It has been laid down by their Lordships of the Privy Council in Chhabba Lal v. Kailu Lal, AIR 1946 P.C 72 that if there is no valid reference, the purported award is a nullity. As, in the present case, there was no unanimous reference to arbitration the entire award based upon such invalid reference must be held to be a nullity, and on this ground alone the award is liable to be set aside and the plaintiffs unsuited.
14. The award is further invalid because of vagueness as well as subsequent alteration. As pointed out above, the Panchnama suffers from extreme vagueness. The precise nature of the dispute and the lands involved are not described. There is a general authorisation to decide all matters of dispute. The mention of details of lands on the margin of exhibit 3, which, as held above, are mere interpolations, instead of clarifying the position vitiates the entire Panchnama as spurious. I am fortified in this view by the Bench decision of this Court in Jai Govind Singh v. Bagal Lal Singh, AIR 1950 Pat 445. In this case the compromise petition stated: “The following five gentlemen shall decide all matters relating to our moveable and immoveable property and the said 20 bighas of land”. It was held that the terms of this clause were so vague that it could not amount to an enforceable agreement or a contract. The same principle, in my opinion, governs an agreement to refer a dispute to arbitration. When the agreement is vague and when the dispute is not specified, as in the present case, the award based upon such vague reference is equally vitiated and cannot but be set aside.
15. Further, it will appear that the award which the arbitrators gave on 9-8-1951 is not the award which was subsequently registered and on the basis of which a decree was sought. There are material differences between the two awards. Now the question is whether the subsequent award can be regarded as valid award so as to entitle the plaintiffs to a decree in terms thereof. When the arbitrators gave their original award on 9-8-1951 they became functus officio and they had no jurisdiction to alter, amend or modify the award once pronounced. In Chhati Lal v. Ram Chariter Sahu, AIR 1941 Pat 215, a Division Bench of this Court has laid down that once the arbitrators have issued an award they become functus officie, and they have no jurisdiction subsequently to rewrite the original award. This is exactly what has happened in this case. The altered award which supersedes the original award is sought to be enforced in this case. The subsequent award is null and void as being without jurisdiction and, therefore, not enforceable in a Court of law. This ground also is equally sufficient to vitiate the entire award and to disentitle the plaintiffs to a decree in terms of the award.
16. Mr. R.S Sinha appearing for the appellants attempted to get out of these difficulties by urging that the objection of the defendants to the award was filed beyond time and, therefore, could not be looked into. His submission is that when once their objection is refused, there is no option for the Court but to proceed to pronounce the judgment according to the award, as provided in Section 17 of the Arbitration Act. In support of his contention he relied upon the decision of the Full Bench of this Court in Seonarain Lal v. Prabhu Chand. AIR 1958 Pat 252. This decision no doubt supports his contention. It has been laid down by the Full Bench that an objection to an award, made without intervention of Court, filed after the expiry of the time for making an application to set it aside, cannot be entertained, and the Court is bound to pronounce judgment according to it under S. 17 of the Act. Article 158 of the Limitation Act prescribes a period of thirty days for making an application under the Arbitration Act, 1940, to set aside an award or to get an award remitted, for reconsideration computed from the date of service of the notice or the filing of the award.
17. It is conceded in this case that the objection to the award in the shape of written statement was filed beyond the period of limitation. Prima facie this objection comes within the mischief of the decision of the Full Bench aforesaid. The reply of Mr. R.S Chatterji appearing for the respondents is two-fold, first, that no notice of the filing of the award independent of the summons of the plaint of this suit was served upon the defendants. Therefore, the question of limitation did not arise in this case. Secondly, the objection envisaged in Section 17 of the Arbitration Act is an objection under Section 30 of the Arbitration Act, but the objection to the validity of the award on the ground of invalidity of the reference is not an objection falling under Section 30, but is an objection under Section 33 of the Arbitration Act, for which there is no limitation. Both these criticisms are valid and cannot but be accepted.
18. There is no evidence in this case that the notice of the filing of the award was served upon the defendants. Mr. Sinha complained that no such objection was taken by the defendants. This is not correct. The written statement contains such an objection. It is also apparent on the records of this case. It is nowhere mentioned, and there is no evidence either that the notice of the filing of the award was served upon the defendants. The notice of the application which has been treated as the plaint in this suit is not sufficient, for the simple reason that the award was not filed in Court along with the application. In my opinion, Article 158 of the Limitation Act comes into operation only when the required notice has been served. If before the service of the notice the objection is filed, as in the present case, the question of limitation loses all significance. Therefore, the objection of the defendants cannot be said to be barred by time.
19. As to the second point taken by Mr. Chatterji, the award in this case was impugned, inter alia, on the ground that there was no valid reference at all, and, therefore, the award was a nullity. Now it is well settled that an application under Section 30 of the Arbitration Act is not maintainable on the ground that there was no valid reference at all, and, consequently, the arbitrators had no jurisdiction to make the award. Section 30 of the Act provides that the award shall not be set aside except on one or more of the following grounds, namely:
“(a) that an arbitrator or umpire has misconducted himself or the proceedings;
(b) that an award has been made after the issue of an order by the Court superseding the arbitration proceedings have become invalid under S. 35;
(c) that an award has been improperly procured or is otherwise invalid”.
Apparently, the validity of a reference does not come within the scope of this section. The question is whether the expression “is otherwise invalid” in clause (c) is comprehensive enough to include an objection relating to the validity of the reference. This particular question came up for decision before a Full Bench of the Allahabad High Court in Mariam Bibi v. Mt. Amina, ILR 1937 All 317 : (AIR 1937 All 65). In this case their Lordships were considering the true scope and effect of paragraph 15 of the Second Schedule to the Code of Civil Procedure.
20. This paragraph corresponds exactly to Section 30 of the Arbitration Act, 1940, and clause (c) of that paragraph also contains the words “or being otherwise invalid”. The majority of Judges, namely, Sukiman, C.J and Harries, J., held that the words “or being otherwise invalid” introduced in clause (c) of paragraph 15 included within their scope objections against the award on the ground that the reference itself was invalid. In the opinion, therefore, an objection to the validity of the reference to arbitration comes within the purview of paragraph 15. Iqbal Ahmad, J., one of the Judges constituting the Full Bench, differed from this view and held that it did not so include. He expressed himself as follows:
“I cannot assent to the proposition that the words ‘or being otherwise invalid’ in clause (c) of paragraph 15 of the second schedule do not refer to the invalidity of the kind referred to in the preceding sentences of the said clause and embrace an objection which challenges the validity of the order of reference itself. If the legislature had, by the addition of these words, intended to let in objections to the invalidity of the order of reference itself or to some irregularity of the procedure of the court antecedent to the order of reference or subsequent to the delivery of the award, nothing would have been easier for the legislature than to say so in clear and unambiguous language. At any rate I would have, in that event, expected the legislature to enact such a rule in a separate clause.
21. The context in which those words occur leaves an impression on the mind that these words have been used ejusdem generis with the preceding sentence in cl. (c). In any case it appears fairly clear to me that those words have reference to the invalidity of the award itself as distinct from some invalidity attaching to the procedure of the court. clauses (a), (b) and (c) of paragraph 15 are preceded by the words, ‘No award shall be set aside except on one of the following grounds.’ These words coupled with the contents of clauses (a), (b) and (c) lead to the conclusion that the grounds set forth in that paragraph have reference to proceedings before the arbitrator alone and not to the proceedings of the Court. The words ‘being otherwise invalid’ must, therefore, refer only to the invalidity of the award based on any ground unconnected with the proceedings of the court.”
In AIR 1946 P.C 72, their Lordships of the Privy Council did not accept the majority view as correct and affirmed the view taken by Iqbal Ahmed, J. They made the following significant observations:
“A further question referred to the full Bench was ‘whether an objection to the validity of reference to arbitration comes within the provisions of para 15 of Sch. II of the CPC.’ The learned Chief Justice and Harries, J. considered that it did, relying on the words “being otherwise invalid” in para 15; Iqbal Ahmed, J., considered that it did not. Upon this question their Lordships agree with the view of Sir Iqbal Ahmed. In their opinion all the powers conferred upon the Court in relation to an award on a reference made in a suit presuppose a valid reference on which an award has been made which may be open to question. If there is no valid reference, the purported award is a nullity, and can be challenged in any appropriate proceeding.”
Therefore, when the objection does not fall under Section 30 of the Arbitration Act, Article 158 of the Limitation Act has no application. An objection to the validity of the award on the ground that it is invalid, as it is consequent on an invalid reference, can be taken, as observed by the Privy Council in the aforesaid case in any appropriate proceeding and is not therefore, subject to any limitation.
22. It will be seen that there is a specific provision contained in S. 33 of the Act for challenging the existence or validity of an arbitration agreement. This section is in the following terms:
“Any party to an arbitration agreement of any person claiming under him desiring _ to challenge the existence or validity of an arbitration agreement or an award or to have the effect of either determined shall apply to the Court and the Court shall decide the question on affidavits:
Provided that where the Court deems it just and expedient, it may set down the application for hearing on other evidence also, and it may pass such orders for discovery and particulars as it may do in a suit”.
This section empowers a party to an arbitration agreement or any person claiming under him to challenge the existence or validity of an arbitration agreement by an application to the Court. When such an application is made the court is bound to decide whether or not the arbitration agreement is valid, since the very foundation of the award is the arbitration agreement, and if the arbitration agreement is legally invalid, the award automatically falls to the ground. Now, there is no period of limitation prescribed for an application under S. 33 for a declaration that the award is invalid and illegal as there was no valid reference. Taking the view most favourable to the plaintiffs, it may be said that in absence of any specific period of limitation, the residuary Article 181 of the Limitation Act applies.
23. This Article provides a period of three years for applications for which no period of limitation is provided elsewhere in the schedule to the Limitation Act or by Section 48 of the CPC, 1908 and, the period of limitation is to be computed from the time when the right to apply accrues. Even if it is assumed that such an application is governed by three years' rule of limitation, the present application, so far as it challenges the validity of the reference is maintainable. The contention of Mr. Sinha that the objection is wholly barred by time, therefore, cannot be accepted as correct and must be overruled.
24. Mr. Sinha laid great stress upon the provisions of Section 17 of the Arbitration Act and contended that the decree must follow the award when the objection to the award is either not entertained or, if entertained, it is refused. I am unable to accede to this general proposition of law. If the entire scheme of the Arbitration Act is considered, it is apparent that the Court has an inherent jurisdiction and power to set aside an award if it is vitiated by any illegality, including any illegality arising out of the invalidity of the reference independent of any objection filed by the affected parties to the award. Section 14 lays down the procedure in filing an award. It provides that when the arbitrators or umpire have made their award, they shall sign it and shall give notice in writing to the parties of the making and signing there of and of the amount of fees and charges payable in respect of the arbitration and award.
25. It further provides that after the necessary conditions laid down in sub-s. (2) of S. 14 are fulfilled, the arbitrators shall cause the award to be filed in Court. Section 15 empowers the Court to modify or correct an award, first, by striking out of it something not referred to arbitration; secondly, by amending imperfections in form or correcting any obvious error without affecting the decision in the case and thirdly, by correcting clerical mistakes or errors arising from accidental slips or omissions. Section 16 vests in the Court power to remit the award or any matter referred to arbitration to the arbitrators or umpire for reconsideration on the grounds enumerated therein. Then follows S. 17 which provides as follows:
“Where the Court sees no cause to remit the award or any of the matters referred to arbitration for reconsideration or to set aside the award, the Court shall, after the time for making an application to set aside the award has expired, or such application having been made, after refusing it, proceed to pronounce judgment according to the award, and upon the judgment so pronounced a decree shall follow, and no appeal shall lie from such decree except on the ground that it is in excess of, or not otherwise in accordance with, the award.”
This section opens with the words “where the Court sees no cause to remit the award or any of the matters referred to arbitration for reconsideration or to set aside the award”, and this expression clearly shows that the rest of the provisions of S. 17 come into operation only when the Court sees no cause to remit the award or any of the matters referred to arbitration for reconsideration or to set aside the award. If, however, for any reason the award is either remitted or set aside, the question of consideration of any objection from the other side to the validity of the award does not arise. It is therefore, manifest that this section empowers the Court to remit or set aside an award suo motu, apart from the application which a party may make for either remission of the award or its reversal.
26. When, therefore, an award is filed, it is incumbent upon the Court to examine it and see for itself, whether or not any objection has been filed by any party, whether the award is prim a facie valid. If the Court suo motu considers that the award is fit to be set aside it will pass appropriate orders without waiting for an application from any party objecting to the validity of the award. If, however, on an examination of the award the Court finds it prima facie valid and not liable to remission or reversal, it will proceed in the manner laid down in S. 17 of the Act. Even if the validity of the award is not prima fade open to objection, a decree will not automatically follow. The Court will then consider any application that may have been made to annul it. If no application has been filed, the Court is bound to wait until the prescribed period for making an application under S. 30 of the Act has expired.
27. If no such application is made within the period of limitation, the Court shall proceed to pronounce judgment according to the award. If, however, an application is made within the time allowed by law, the Court is bound to consider it. Two consequences may ensue. The application is other allowed or refused. If the objection is upheld and the application is allowed, lire award will be set aside. If, however, the application is reftaed, in that case also judgment will be pronounced by Court in accordance with the award. Where, therefore, the award is found to be a nullity because of invalidity of the arbitration agreement or, for any other reason or the award is prima facie illegal and not fit to be maintained, the Court has power under S. 17 of the Act to pet it aside without waiting for an objection to, the award being filed or without considering any application for setting it aside, if there be any.
28. These are matters which really go to the root of the award itself and irrespective of any objection by the parties, a duty is cast upon the Court to decide these matters before a decree can be passed on the basis of the award. Therefore, the mere fact that an objection is not filed by any of the parties to the award within the period of limitation does not altogether absolve the Court from its responsibility of deciding whether there was a competent reference or whether the award was a valid award on the face of it. It is obvious that in such a situation the question of limitation is of no materiality. The award has to be set aside because of this inherent infirmity. This view finds ample support from the decision of this Court in Deo Narain Singh v. Siabar Singh, AIR 1952 Pat 461 and a Bench decision of the Bombay High Court in Hastimal Dalichand v. Hira Lal Motichand, AIR 1954 Bom 243, with the reasonings of which I respectfully agree.
29. Mr. Sinha, however, contended that the provisions of S. 17 are attracted even when the award is bogus, and in support of this contention relied upon a decision of the Single Judge of the Bombay High Court in Umadutt Nemani v. Chandrao C. Kadam, AIR 1947 Bom 94. In this case Blagden I. no doubt expressed the view that an award in S. 17 included because award. I need hardly say with respect that this view is incorrect, and was also subsequently rejected by a Division Bench of the same Court in the case of Hastimal Daliband Bora referred to above. The award in S. 17 obviously means a prima facie valid award. Further this contention cannot be accepted in view of the pronouncement of the Council in the case of Chhakba Lal, AIR 1946 PC 72, referred to above. The Privy Council has observed that all the powers conferred upon the Court in relation to an award on a reference made in a suit presuppose a valid reference on which an award has been made.
30. If the award is bogus in the sense that it in illegal or without jurisdiction for want of a valid reference, it is a nullity and can be ignored altogether, and can be challenged whenever it is set up in a proceeding independent of the provisions of the Arbitration Act. The contention of Mr. Sinha therefore, that even if the award is bogus, a decree must be passed in terms of the award, when either there is no objection or an objection has been filed beyond time, cannot be accepted as correct. In the instant case the application, in so far as it asked for a declaration that the award was illegal and invalid on the ground of invalidity of the reference could be treated and dealt with as one coming under Section 33 of the Arbitration Act, 1940, and as such it could be entertained, as no period of limitation, as observed above, was prescribed for the making of an application under that section. Thus, the award being a was fit to be set aside by the Court under S. 17, irrespective of the question whether or not any objection to the award was filed or whether the objection, if filed was or was not within time.
31. It follows that taking any view of the matter, the award is bound to be set aside.
32. The decision of the learned Subordinate Judge is therefore, right.
33. In the result, this appeal is dismissed with costs.
34. Ramaswami, C.J:— I agree.
BD/D.H.Z
35. Appeal dismissed.
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