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Abu Hamid Zahiea Ala v. Golam Sarwar
Factual and Procedural Background
This appeal concerns the propriety of an order dismissing an application under paragraph 17 of the Second Schedule to the Civil Procedure Code, 1908, for enforcement of a private arbitration award. The parties had agreed to submit their dispute to a panel of five arbitrators, with the award to be made by a unanimous or majority decision. In the award at issue, only three arbitrators signed, with objections raised by the Defendant that two arbitrators had not attended all sittings and one did not participate in final deliberations. The Plaintiff contended that the majority award was valid as those three arbitrators attended all meetings. The Subordinate Judge dismissed the application, holding that all arbitrators must be present at all meetings, especially the final one, for the award to be valid.
Legal Issues Presented
- Whether an arbitration award signed by only a majority of arbitrators is valid when some arbitrators did not attend all sittings or participate in final deliberations.
- Whether the presence and unanimous participation of all arbitrators at all stages of arbitration is essential to the validity of an award, despite a clause permitting majority awards.
Arguments of the Parties
Defendant's Arguments
- The award is invalid because two arbitrators did not attend all sittings.
- At least one arbitrator did not participate in the final deliberations, undermining the validity of the award.
Plaintiff's Arguments
- The award is valid as the three arbitrators who signed had attended all meetings.
- The agreement allowed a majority of arbitrators to make a binding award.
Table of Precedents Cited
| Precedent | Rule or Principle Cited For | Application by the Court |
|---|---|---|
| Nanda Ram v. Fakir Chanda | Presence of all arbitrators at all meetings, especially the last, is essential for validity despite majority decision clause. | Affirmed the principle that absence of an arbitrator invalidates the award even if majority rules. |
| Sreenath Ghose v. Raj Chandra Pal | Supported the necessity of full participation of all arbitrators for a valid award. | Reinforced the requirement of presence of all arbitrators at all stages. |
| Kazi Nazar Ali v. Tinoo | An award cannot be set aside merely because only majority signed if arbitrators participated in deliberations. | Distinguished as not addressing absence from meetings but only signature and error issues. |
| Beck v. Jackson and Khelat Chandra Ghose v. Tara Chand Kundu | Arbitrators must act together, be present at every meeting for mutual assistance in decision making. | Quoted classical principle underlying the necessity of unanimous participation in arbitration proceedings. |
| Dailing v. Matchet | Every arbitrator has the right to argue and debate; absence deprives parties of this right and may affect majority opinion. | Supported the principle that absence of an arbitrator affects validity of award. |
| In re Bering | Majority award valid only after discussion with all arbitrators; no two arbitrators can make an award without consulting the others. | Emphasized consultation requirement despite majority rule. |
| Peterson v. Ayre, White v. Sharp, In re Templeman, Burton v. Knight, Morgan v. Bolt, Doberer v. Megaw | General support for the principle that arbitrators must deliberate together and that majority awards require prior consultation. | Used to reinforce the court’s adopted principle on arbitrator presence and participation. |
Court's Reasoning and Analysis
The Court analyzed the arbitration agreement and the conduct of the arbitrators in light of established precedents. It emphasized that although the agreement allowed for a majority award, the fundamental principle is that all arbitrators must be present and participate in every stage of the arbitration, especially the final deliberations. This ensures that each arbitrator’s arguments, experience, and judgment contribute to the decision, facilitating a just conclusion through mutual assistance. The Court distinguished the cited precedent supporting majority signature where all arbitrators participated, from cases where arbitrators were absent from deliberations or meetings. The Court held that the absence of two arbitrators from all meetings and the final deliberations invalidated the award, as the parties were deprived of the benefit of their participation. Consequently, the award was not legally enforceable.
Holding and Implications
The Court affirmed the decree of the Subordinate Judge and dismissed the appeal with costs. The direct effect is that the arbitration award in question is declared invalid and unenforceable due to the absence of unanimous participation of all arbitrators at all stages. No new precedent was set; rather, the Court reaffirmed established principles regarding the necessity of full arbitrator participation in arbitration proceedings.
We are invited in this appeal to consider the propriety of an order of dismissal of an application under para. 17 of the Second Schedule to the Civil Procedure Code, 1908, for the enforcement of a private award. The relevant portion of the agreement of reference was in these terms: “Considering it desirable to decide the matters in dispute by arbitrators and so appointing the above-mentioned gentlemen as arbitrators, we execute this deed of reference and agree that the award which all the arbitrators unanimously or the majority of the arbitrators will make will be accepted as a decree of a superior Court and will have force and be valid at all places. In case of difference of opinion among the arbitrators, the majority of them will make and be competent to make their award unanimously. To that no objection by any of us will be entertained, nor shall we be competent to make any.” Under this instrument five gentlemen were appointed arbitrators, three of whom alone signed the award. The application with which we are now concerned was made for the enforcement of this award. The Defendant objected that there was no valid award in law because two of the arbitrators had not attended all the sittings and one at least did not take part in the final deliberations. The Plaintiff contended that inasmuch as the three arbitrators who had made the award had attended all the meetings, and as a majority of the arbitrators was competent to make a valid award, the award was legal and enforceable. The Subordinate Judge has overruled these contentions on the ground that all the arbitrators should be present at all the meetings and particularly at the last when the final act of arbitration is done, though as a result of this united deliberation there may be an award by a majority only of them. In our opinion, the view taken by the Subordinate Judge is correct.
It is now finally settled, as ruled in Nanda Ram v. Fakir Chanda(1), that when a case has been referred to arbitration, the presence of all the arbitrators at all the meetings and above all at the last meeting when the final act of arbitration is done is essential to the validity of the award. There the case had been referred by the Court to the arbitration of three persons and the parties had agreed to be bound as to the matters in dispute by the decision of the majority. One of the arbitrators subsequently refused to act and withdrew from the arbitration. Oldfield and Mahmood, JJ., held that the award of the majority was not binding. A similar view was taken in Sreenath Ghose v. Raj Chandra Pal(2). Our attention, however, has been drawn to the earlier decision in Kazi Nazar Ali v. Tinoo(3) as an authority for the contrary position. We are of opinion that this case is clearly distinguishable, and is an authority only for the proposition that an award of arbitrators cannot be set aside on the ground that it is erroneous or that only two out of three arbitrators signed the award when the parties agreed to abide by the decision of the majority. There is nothing to indicate that the arbitrator who did not sign the award had not taken part in the deliberations. The principle which underlies the view we take is best stated in the words of Russell which have now become classical, quoted as they were with approval in Beck v. Jackson(4) and Khelat Chandra Ghose v. Tara Chand Kundu(5). “As the arbitrators must all act, so must they all act together. They must each be present at every meeting, and the witnesses and the parties must be examined in the presence of them all; for the parties are entitled to have recourse to the argument, experience, and judgment of each arbitrator at every stage of the proceedings brought to bear on the minds of his fellow-judges so that by conference they shall mutually assist each other in arriving at a just decision.” The same point of view had been emphasised in Dailing v. Matchet(6), where the Court of Common Pleas observed as follows: “It has often been said that if that one had been present, that is, the arbitrator who did not attend, he could not by his vote have turned the majority the other way, when all the rest were unanimous; yet it has always received, this answer that every one has a right to argue and debate as well as to give his vote and it is possible at least that the person absent may, if he had been present at the meeting, have made use of such argument as may have brought over the majority, of the rest to be of his opinion.” The matter was put substantially in the same way in In re Bering(7). Lord Denman observed:— “Any two under such submission as this, that is, a submission which provides for a valid award by the majority, may make a good award. But then it must be after discussion with the other arbitrators. If after discussion it appears that there is no chance of agreement with one of the arbitrators, the others may indeed proceed without him.” Coleridge, J., added: “The parties have not got what they stipulated for. They stipulated that two at least should make the award; but no two could make it till each arbitrator had been consulted.” This view accords with that adopted in Peterson v. Ayre(8), White v. Sharp(9), In re Templeman(10), Burton v. Knight(11), Morgan v. Bolt(12) and Doberer v. Megaw(13).
We adopt the principle that inasmuch as the parties to the submission have the right to the presence and effect of the arguments, experience and judgment of each arbitrator at every stage of the proceedings, so that by conference they may mutually assist each other in arriving at a just conclusion, it is essential that there should be a unanimous participation by the arbitrators in consulting and deliberating upon the award to be made; the operation of this rule is in no way affected by the fact that authority is conferred upon the arbitrators to make a majority award; even where less than the whole number of arbitrators may make a valid award, they cannot do so without consulting the other arbitrators. The inference follows that in the present case there is no valid award.
The result is that the decree of the Subordinate Judge is affirmed and this appeal dismissed with costs. We assess the hearing fee at live gold mohurs.
N.G
Appeal dismissed.
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