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Judgment Summary — R.N. Mittal, J. (F.A.O No. 59 of 1970 & Civil Misc. Application No. 6751 of 1970)

Factual and Procedural Background

The Punjabi University, Patiala invited tenders for construction of a Physics Block. The appellant submitted a tender which was accepted and a formal agreement was executed on 5 November 1965. Clause 25-A of the agreement provided that disputes would be referred to the Superintending Engineer P.W.D. (Buildings and Roads), Patiala as Arbitrator.

After completion of the work a dispute arose. The appellant referred his claim to the Arbitrator and sent his claim with a letter to the Arbitrator on 1 August 1968, and a copy to the University. On 9 August 1968 the Arbitrator wrote to the appellant that the claim had been entered at serial No. 187 and on the same day wrote to the University requesting it to submit its statement in duplicate and stating that the hearing date would be fixed after one month from that reference.

On 29 April 1969 the Arbitrator fixed 6 May 1969 as the date of hearing. After adjournments, the Arbitrator gave his award on 20 August 1969 and sent the award to the Court on 28 August 1969. The Senior Subordinate Judge, Patiala issued notices to both parties. The University filed objections under section 30 read with section 33 of the Arbitration Act, 1940, including that the award was not made within four months and allegations of misconduct by the Arbitrator.

The trial Court framed issues: (1) Whether the award is null and void as it was not within time? (2) Whether the arbitrator has misconducted himself or the proceedings as alleged? (3) Relief.

The trial Court held that the award had been made after a period of four months from entering on the reference and set the award aside on that ground. The contractor (appellant) appealed to this Court (High Court).

Legal Issues Presented

  1. Whether the award is null and void because it was not made within four months after the arbitrator entered on the reference.
  2. Whether the arbitrator misconducted himself or the proceedings as alleged by the University.
  3. What relief should follow (including whether the Court should enlarge the time for making the award under section 28 of the Arbitration Act, 1940)?

Arguments of the Parties

Appellant's Arguments

  • The Arbitrator did not "enter on the reference" on 1 August 1968 because he had not applied his mind or taken proceedings on that date; mere registration of the claim did not amount to entering on the reference.
  • The Arbitrator entered on the reference on 29 April 1969 (or when he fixed the hearing for 6 May 1969) — that is, the date on which he applied his mind and fixed the hearing.
  • Under section 28 of the Act the Court has power to enlarge the time for making the award; the definition of "Court" under the Act includes appellate and revision courts, so this Court can enlarge the time.
  • An oral request was repeatedly made in the trial Court to enlarge the time for the award (an affidavit of counsel was attached to the application), and the trial Court should therefore have enlarged the time.
  • Principles of waiver and estoppel were raised in the application (but were not pressed subsequently at hearing).

Respondent's Arguments

  • The Arbitrator had entered on the reference on 1 August 1968 — the Arbitrator's letter requiring the University to file a statement showed application of mind and entry on the reference.
  • An enlargement of time (under section 28) can be obtained only by motion to the Court; reliance was placed on authority suggesting that a motion (interpreted as an application) is required.
  • Disputed the appellant's assertion that oral requests were made; contended no such oral application was made to the trial Court and contested the affidavit of the counsel (noting counsels' relationship to the appellant-firm).

Table of Precedents Cited

Precedent Rule or Principle Cited For Application by the Court
Soneylal Thakur v. Lachhminarain Thakur, AIR 1957 Pat 395 Defines "entering on the reference" — arbitrator enters when, after accepting, he applies his mind and does something in furtherance/execution of arbitration; exact date is fact-specific. Relied on to explain that an arbitrator must perform a judicial act (e.g., fixing hearing, directing pleadings) to be treated as having entered on the reference.
Ramsahai Sheduram v. Harishchandra Dulichundji, AIR 1963 MP 143 Support for the interpretation of "entering on the reference" (cited as supporting authority). Used as supporting authority for the proposition that applying mind and taking steps such as fixing hearing amounts to entering on the reference.
Assadullah Mzkhdhoomi v. Lassa Baba, AIR 1966 J & K 1 Cited in support of the interpretation of "entering on the reference". Placed alongside other authorities to show consistent judicial approach that "entry" depends on a judicial act by the arbitrator.
Harish Chandra Saksona v. The Union of India, 1966 ILR 1 Pb I Held that fixing date of hearing and issuing directions for pleadings are acts by which an arbitrator exercises functions and thereby "enters on the reference". The Court treated the present case as similar and held that the Arbitrator's letter directing the University to file a statement indicated entry on the reference.
Ct. A. Ct. Nachiappa Chettiar v. Ct. A Ct. Subramaniam Chattiar, 1960 2 SCR 209 Interpreted "suit" and "court" in section 21 to include appellate courts; used to expand scope of "Court" in arbitration context. Relied on in arguing and supporting the proposition that "Court" in section 28 may include appellate courts.
State of Madhya Pradesh v. Saith and Skelton (P) Ltd, 1972 1 SCC 702 Held that the expression "Court" in section 14(2) of the Arbitration Act includes appellate Court. Followed to hold that this Court (High Court) is a "Court" for the purposes of section 28 and thus has power to enlarge time for making an award.
Sakalchand Moti v. Ambaram Haribhai, AIR 1924 Bom 380 Observed that a written application is not necessary to secure an extension of time for filing the award. Relied on to hold that section 28 does not require a written application and that an oral request can suffice to enlarge time.
Sowaran Singh v. Municipal Committee, Pathankot, AIR 1963 Pb 427 Observed that enlargement of time can be obtained by motion to the Court; "motion" construed as a process of moving which can be oral or written. Used to reject respondent's argument that only a written application would suffice and to support the conclusion that oral application is not barred.
Tejpal Jamunadas v. B Nathmull & Co, AIR 1920 Cal 115 Example where trial court was asked for extension and refused; High Court granted extension on appeal in view of circumstances. Distinguished by the Court — held not to assist the appellant because, unlike those cases, no request had been made to the trial Court in the present case or there was no evidence of such request being considered.
Union of India v. K.D. Mehta Manohar Singh & Co., 1965 67 PLR 166 Another instance where appellate court enlarged time where trial court had refused extension. Distinguished on facts; not applied because the appellant had not shown that a request had actually been made to the trial Court in the present case.

Court's Reasoning and Analysis

The Court began by analysing rule 3 of Schedule I to the Arbitration Act (the four-month rule), observing it has three alternatives: (i) four months after entering on the reference; (ii) four months after having been called upon to act by notice from any party; or (iii) within such extended time as the Court may allow.

The crucial factual and legal question was when the Arbitrator "entered on the reference." The Court summarised and applied authorities which hold that "entering on the reference" is a question of fact and occurs when, after acceptance, the arbitrator applies his mind and performs some act in furtherance of the arbitration (e.g., fixing a date of hearing or directing pleadings).

Applying that test to the material before it, the Court found that the Arbitrator's letter of 1 August 1968 (and his subsequent communication on 9 August 1968 directing the University to file a statement and registering the claim) evidenced that the Arbitrator had applied his mind and had taken steps in furtherance of the reference. The Court therefore concluded that the Arbitrator entered on the reference on 1 August 1968.

Because the award was made on 20 August 1969 (beyond four months from 1 August 1968), the Court affirmed the trial Court's finding that the award was not made within the four-month period and was consequently unenforceable under the rule unless the time had been validly extended.

The Court then addressed the question whether it had jurisdiction under section 28 to enlarge the time. Relying on precedents interpreting "Court" in the Arbitration Act to include appellate courts, the Court held that this Court has power to enlarge the time under section 28.

The Court considered whether an oral request to enlarge time made before the trial Court had been proved. It held that section 28 does not require a written application and that an oral request can suffice (relying on Sakalchand Moti and Sowaran Singh). However, on the facts the Court found the appellant had not shown that the trial Court was actually moved (or that the request was properly advanced and considered) to enlarge time; the plea of repeated oral requests was treated as an afterthought because no application had been moved in the trial Court and the application filed later before this Court was significantly delayed and lacked contemporaneous affidavits at the time of appeal filing.

For these reasons — (a) the date of entry on the reference being 1 August 1968, (b) the award being beyond four months from that date, and (c) absence of proof that a timely request to extend time had been made and considered by the trial Court — the Court upheld the trial Court's order setting aside the award.

Holding and Implications

Core Ruling: Appeal dismissed.

Consequences and immediate implications:

  • The High Court upheld the trial Court's finding that the Arbitrator entered on the reference on 1 August 1968 and that the award dated 20 August 1969 was made after the four-month period prescribed by rule 3 of Schedule I; on that ground the award was not enforceable and the trial Court's order setting it aside was affirmed.
  • The Court held that it (the High Court) qualifies as a "Court" for the purposes of section 28 of the Arbitration Act and therefore has the statutory power to enlarge the time for making an award; however, that power was not exercised in this case because the appellant failed to prove any timely oral or written request had been made and considered by the trial Court.
  • The Court accepted that (subject to proof) an oral application to enlarge the time under section 28 is not impermissible, but found no satisfactory evidence of such an application having been made earlier in the trial Court in this matter.
  • No broader precedent was established beyond applying existing authorities on (a) the factual test for "entering on the reference," (b) the permissibility of appellate courts to exercise enlargement powers under section 28, and (c) the acceptability of oral requests in appropriate circumstances. The decision's direct effect is limited to the parties: the award remains set aside and the appeal is dismissed, with parties left to bear their own costs.

Order of the Court: Appeal dismissed; parties to bear their own costs.

    Messrs S.D Ghai & Co. v. Punjabi University .

    R.N Mittal, J.:— This judgment of mine will dispose of F.A.O No. 59 of 1970 and Civil Miscellaneous Application No. 6751 of 1970.

    2. The Punjabi University, Patiala (hereinafter referred to as ‘the University’) invited tenders for construction of Physics Block in the Campus of the University. The appellant submitted a tender in reply to the invitation which was accepted by the University and a formal agreement was executed on November 5, 1965, between the appellant and the University in accordance with which he started construction work. There was clause 25-A in the agreement by which the disputes between the parties were to be referred to the Superintending Engineer P.W.D (Buildings and Roads) Patiala (hereinafter referred to as the Arbitrator). After the completion of work, some dispute arose between the parties and the appellant made a reference of the dispute to the Arbitrator. The appellant sent his claim along with a letter to the Arbitrator on August 1, 1968, and also sent a copy thereof to the University. The Arbitrator on August 9, 1968, wrote a letter to the appellant that this claim had been entered at serial No. 187 and on the same day wrote a letter to the University that the appellant had referred a claim (copy enclosed) for arbitration in respect of the work cited as subject stated to have been executed by him. The University was also requested to submit its statement in duplicate on the date of hearing of the case which was to be fixed after one month from the date of issue of this reference. The Arbitrator on April 29, 1969 wrote to the parties that May 6, 1969, had been fixed by him as date of hearing. They should appear on that date and if they failed to do so, ex-parte proceedings would be taken against them. After the adjournment of the case on some of the hearings, the Arbitrator gave his award on August 20, 1969. The appellant filed an application in the Court that the Arbitrator be ordered to file an award in the Court and that the same may be made the rule of Court. The Arbitrator sent the award to the Court of Senior Subordinate Judge, Patiala, vide his letter dated August 28, 1969. The Senior Subordinate Judge, Patiala, sent notices to both the parties. The University in response to the notice filed objections under section 30 read with section 33 of the Arbitration Act, 1940 (hereinafter referred to as ‘the Act’) against the award. One of the objections was that the award was not made within a period of four months. The University also made allegations regarding the conduct of the Arbitrator and raised an objection that he had misconducted himself and the proceedings. The appellant controverted the pleas of the University and the following issues were framed:—

    “1. Whether the award is null and void as it was not within time?

    2. Whether the arbitrator has misconducted himself or the proceedings as alleged?

    3. Relief.”

    3. The trial Court held that the award had been made after a pariod of four months after entering on the reference and, as such, it was Unenforceable. It decided issue No. ? against the University. The objection petition was, however, allowed on the decision of issue No. 1 and the award was orderd to be set aside. The Contractor having felt aggrieved against the said order has come up in appeal to this Court. The first contention of the learned counsel for the appellant is that the Arbitrator cannot be said to have entered on reference on August 1, 1968, as he had not applied his mind on that date and no proceedings were taken by him. He has drawn my attention to the letter dated August 1, 1968, which was written by the Arbitrator to the appellant in which he had stated that his claim be registered. He has farther submitted that registration of claim would not tantamount to entering on the reference. The learned counsel for the appellant submits that the Arbitrator entered on the reference on April 29, 1969, when he fixed May 6, 1969, as the date of hearing of the case. He has also urged that the letter written by the Arbitrator to the University did show that he asked the University to file a statement against the claim. He, however, stated that in case the appellant would have been intimated that the University had been called upon to file the statement, in that case, in view of the decided cases, it could be said that the Arbitrator entered on the reference. The learned counsel on the other side has controverted this position. It will be useful to notice rule 3 of Schedule I which is in the following terms:—

    “The arbitrators shall make their award within four months after entering on the reference or after 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?”

    4. The above rule has thus three ingredients, namely, (i) the arbitrators shall make their award within four months after entering on the reference, or (ii) they shall make the award within four months after having been called upon to act by notice in writing from any party to the arbitration agreement, or (iii) within such extended time as the Court may allow. The argument of the learned counsel is that his case falls under sub-clause (i). The matter has now been settled by a string of authorities in which the words ‘entering on reference’ have been interpreted. In Soneylal Thakur v. Lachhminarain Thakur . AIR 1957 Pat 395., the Bench of Patna High Court observed as follows:—

    “An arbitrator does not enter upon a reference the moment he accepts to work as an arbitrator, nor can it be said that he enters upon a reference only when he actually hears the reference. An arbitrator enters upon a reference when, after having accepted the reference, he applies, his mind and does something in furtherance and execution of the work of arbitration. The exact date as to when an arbitrator enters on a reference in a particular case, however, has to be determined on the facts and circumstances of the case.”

    5. In the above case, the Arbitrator had sent a letter on April 30, 1952, to the parties under a registered cover by which he fixed May 20, 1952, for hearing the mutter. It was held that April 30, 1952, was the date on which the Arbitrator entered on the reference. The ratio is that the date on which the Arbitrator applied his mind and wrote to the parties that they should appear before him is the date on which he entered on the reference. In support of his proposition, the learned counsel for the appellant has also relied on Ramsahai Sheduram v. Harishchandra Dulichundji . AIR 1963 MP 143. and Assadullah Mzkhdhoomi v. Lassa Baba . AIR 1966 J & K 1.. From the reading of the first clause of rule 3 and the aforesaid cases, it is clear, that the period of four months prescribed forgiving the award starts from the date when the Arbitrator enters on the reference but no specific date can be laid down as to when the Arbitrator be said to enter on reference. It depends on the facts of each case and is, therefore, a question of fact. One thing, however, is clear that the Arbitrator should do some judicial act for progress of the reference pending before him. The order that the University should file the statement in reply to the claim of the appellant, in my opinion, is such an act, by which it can be inferred that the Arbitrator entered on the reference. It is not necessary that intimation of that order should have been sent to appellant as the rule does not provide so anywhere. A similar matter also came up for decision in Harish Chandra Saksona v. The Union of India . 1966 ILR 1 Pb I., where in Gurdev Singh, J., observed as follows:—

    “Held that an arbitrator enters on the reference when he takes upon himself the office of the arbitrator and exercises some functions as arbitrator. When the arbitrator fixes the date of hearing and issues directions as to pleadings, he exercises the functions of an arbitrator and from that date he should be treated as having entered on the reference. It is not necessary that both the parties must be before him or that there must be some previous preemptory order compelling the arbitrator to conclude the hearing ex parte. Issuing mandatory direction for pleadings or for particulars or for interrogatories or fixing preemptory dates for hearing can only be done by the arbitrator when he has beguo his work as such and taken upon himself the functions of an arbitrator.”

    6. The case in hand is similar to the case which was decided by Gurdev Singh, J. In this case, a notice was issued by the Arbitrator to the respondent on August 1, 1968, that he should file a statement to the claim. This letter shows that the Arbitrator applied his mind on that date and entered on the reference. It is not necessary that the intimation of entering on the reference should be sent to the other party also. Even if no intimation was sent by the Arbitrator to the appellant that be had ordered the University to file a statement, it does not mean that he had not entered on the reference. In case the intention of the Legislature was that both the parties should be intimated regarding the date of entering on the reference, it could have specifically provided so. In my view, the Arbitrator entered on the reference on August 1, 1968. If we take the limitation from that date the award has been made beyond four months and I, therefore, affirm the findings of the trial Court on this point.

    7. The next argument which has been advanced by the learned counsel for the appellant is that under section 28 of the Act, this Court has got powers to extend the period of limitation. Section 28 of the Act is in the following terms:—

    “(1) The Court may, if it thinks fit, whether the time for making the award has expired or not and whether the award has been made or not, enlarge from time to time the time for making the award.

    (2) Any provision in an arbitration agreement whereby the arbitrators or umpire may, except with the consent of all the parties to the agreement, enlarge the time for making the award shall be void and of no effect.”

    8. The learned counsel submits that ‘the Court’ has been defined in sub-section (c) of section 2 of the Act which means a Civil Court having jurisdiction to decide the questions forming the subject-matter of the reference if the same had been the subject-matter of a suit, but does not, except for the purpose of arbitration proceedings under section 21, include a ‘Small Cause Court’. The learned counsel for the appellant states that the definition of ‘court’ is wide enough to include the Courts of appeal and revision. In support of his proposition, he has relied on Ct. A. Ct. Nachiappa Chettiar v. Ct. A Ct. Subramaniam Chattiar . 1960 2 SCR 209.. Their Lordships while ??? section 21 of the Act observed that the words ‘suit’, and ‘court’ in section 21 of the Arbitration Act, 1940, include appellate Court proceedings and appellate Court, respectively. Subsequently, following this decision, the Supreme Court again observed in State of Madhya Pradesh v. Saith and Skelton (P) Ltd. . 1972 1 SCC 702., that the expression ‘Court’ in section 14(2) of the Arbitration Act also includes the appellate Court. In that case, an arbitrator was appointed by the consent of the parties by the Supreme Court. The award was filed in the Supreme Court by the Arbitrator. One of the parties raised an objection that it could not be filed in that Court. The learned Judges came to a conclusion that award had been properly filed. In view of the aforesaid decisions, I hold that this Court, is a Court also for the purpose of section 28 of the Act and has got the power to enlarge the I time for making the award.

    9. The learned counsel for the appellant then submitted that the above Advocate made an oral request to the Court for enlarging the time for making the award. In support of his allegations, he also filed an application under section 28 of the Act in this Court wherein after giving the history of the case, he has stated that the principles of waiver and estoppel should have full application as the University authorities allowed the Arbitrator to proceed with the making of the award. It is also stated therein that the date on which the first Arbitrator enter ained the claim was not the starting point of time for making the award. It is also stated that the Advocate requested repeatedly during the course of proceedings for extending the period for making he award by the Arbitrator. The relevant para of the application is as follows:—

    “That even otherwise oral request was repeatedly made to the trial Court on behalf of the applicants by the counsel Shri Prem Parkash Mehra, Advocate during the course of proceedings for extending the time for making the award by the Arbitrator. An affidavit to this effect of the counsel is attached herewith.”

    10. The learned counsel for the respondent has controverted this fact and has submitted that neither any such oral application was made nor any oral application could be made. The first question that arises is whether the appellant could make an oral request that the period for making the award should be enlarged. Section 28 does not mention that an application should be made in writing. I do not find from the reading of the said section that it is necessary that the application in writing should be filed by the party who wants that the time for making the award should be enlarged. In this view I am supported by a decision of the Bombay High Court reported as Sakalchand Moti v. Ambaram Haribhai . AIR 1924 Bom 380., wherein it has been observed that a written application is not necessary for extension of the time for filing the award. The learned counsel for the respondent has also relied on Sowaran Singh v. Municipal Committee, Pathankoi . AIR 1963 Pb 427., wherein Shamsher Bahadur, J. made observations to the effect that the enlargement of time can be obtained only by motion to the Court. The word ‘motion’ does not mean that the application should be moved. The word ‘motion’ has been defined in the Shorter Oxford English Dictionary, 1968 Edition, at page 1287 to mean ‘process of moving’. The process of moving means moving the Curt orally or by a written application. The learned counsel for the respondent has not been able to point out as to how this authority helps him. He only submits that from word ‘motion’, the only interpretation that can be accepted is moving the Court by on application. This contention of Mr. S.K Sayal, in my view, has got no force. I am of the view that an application need not be made in writing and the Court can even be requested orally to enlarge the time.

    11. The next question that arises for determination is whether the Court was requested to enlarge the time orally. In the grounds of appeal, in para 10 it has been stated by the learned counsel for the appellant as follows:—

    “That at any rate taking into consideration the facts and circumstances of the present case the trial Court ought to have enlarged the time for making the award under section 28 of the Act. This request was repeatedly made to the trial Court on behalf of the appellant during the course of the proceedings in the said Court.”

    12. The reading of para 10 of the grounds of appeal as well as that of the application shows that a request was repeatedly made to the trial Court on behalf of the appellant during the course of the proceedings in the said Court to enlarge the time. In case, the repeated requests were being made to the Court during the whole of the trial and the Court was not favourable to enlarge the period the appellant should have moved the application under section 28 of the Act. There was no point in making repeated requests to the Court without moving any application. In the miscellaneous application, the pleas of waiver etc., were also raised which, however, were not pressed subsequently. The miscellaneous application was filed after a period of about three months. No affidavit of the counsel was filed at the time of filing of the appeal. The learned counsel for the respondent has also submitted that the counsel in this case was the son-in-law of the proprietor of the appellant-firm and his affidavit should not be taken notice of. Without commenting on the affidavit, the grounds which have been taken in the grounds of appeal and the application clearly show that the argument of the appellant that a request was made at the time of arguments for enlarging the time is an after-thought. In view of the above circumstances, I am not inclined to hold that the learned Subordinate Judge was requested to extend the period of limitation and he has not considered this request in his order. The learned counsel for the appellant has also submitted that this Court has got ample powers to enlarge the time and the Court should exercise its discretion under section 28 of the Act. He has referred to Tejpal Jamunadas v. B Nathmull & Co. . AIR 1920 Cal 115. and Union of India v. K.D Mehta Manohar Singh & Co. . 1965 67 PLR 166.. Those cases are distinguishable from the present one. In those cases, a request was made to the trial Court for extension of time but that was refused. On appeal, the High Court came to the conclusion that in the circumstances of the aforesaid cases, the time should have been enlarged. In the present ease, in my opinion, as no request was made before the trial Court and the matter was not considered by it, the request cannot be taken into consideration for the first time in this Court. I do not find any force in this submission of the learned counsel for the appellant.

    13. In view of my above findings, I uphold the order of the trial Court and dismiss the appeal. In the circumstances of this case, I, however, leave the parties to bear their own costs.

    14. Appeal dismissed.

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    Messrs S.D Ghai & Co. v. Punjabi University .
    (May 10, 1972)