JUDGMENT
B.L. Yadav, J.
1. These first appeals from orders under Section 39 of Arbitration Act, 1940 (for short the Act) directed against
the order dated 31-8-82 passed by Civil Judge, Allahabad in Suit No. 102 of 1981 dismissing the objections of the defendant-appellant for setting aside the award dated 26-5-1981 (paper No. 14A) (paper book No. 1 pages 30 to 39) and making the award rule of the Court and directing a decree to follow.
2. A portrayal of essential facts is this. There was a registered partnership firm working in the name and style of ‘Firm Agarwal Construction Co.’ and Girdhari Lal Agarwal, Kamleshwar Prasad Agarwal and Rajesh Kumar Agarwal were its partners. The firm undertook the work of construction bf 50, quarters (11 type) from Indian Farmers Fertilizers Corporation, Phoolpur (for short IFFCO) in the year 1977. That work was in progress but in the meantime some disputes arose between Kamleshwar Prasad Agrawal and remaining partners in adjustment of accounts and share of the profits, and when they could not reconcile the same, as per Deed of Arbitration dt. 5-3-1980 signed by all the partners, Sri Pradumn Narain Singh Jyotishacharya, the respondent No. 2 was appointed as the sole arbitrator. The arbitrator permitted the parties to lead evidence and looked into the accounts particularly the costing register in respect of schedule and non-schedule items indicating the expenses incurred in respect of each item. According to the costing placed by the plaintiff-respondent No. 1, he claimed a sum of Rs. 11,47,000/-. The arbitrator sent this costing register to the expert Sri Virendra Singh, the architect, who checked the costing register and gave his opinion vide his letter dated 18-8-80 (page of paper book No. 2). His opinion indicates that the letter dated 6-8-80 was sent to him by the Arbitrator seeking his opinion in respect of the actual amount mentioned in the costing register, He made some modifications in respect of the expenses incurred as shown in the costing register. Relying upon the same the a ward was given.
3. A learned counsel for the appellant urged that the arbitrator has misconducted himself within the meaning of Section 30(a) of the Act in accepting a valuable evidence from plaintiff/respondent No. 1 i.e. costing register which was filed by him behind the back of the appellant and respondent No. 3 and no opportunity was given to rebut the material contained in the costing register about the expenses incurred in constructing each item. The expert’s evidence was taken and relied upon without any information or opportunity to rebut to the defendant-appellant. This could be discovered only when the award was given as a mention was made that a sum of Rs. 750/- was paid to an expert for his opinion. In the order sheet dated 25th September, 1980 (page 17 of paper book No. 1) (at the bottom of page No. 18 and at the top of page No. 10) only this much was mentioned that a costing has been prepared by Kamleshwar Prasad Agarwal, plaintiff-respondent No. 1 and according to that the margin of profit till 12th Bill comes to Rs. 11 lakhs 47 thousand which is 37%, for that the appellant must have been informed so that he could have an opportunity to furnish evidence in rebuttal. The principles of natural justice were violated. It was further urged that the arbitration agreement was not within the meaning of Section 2(a) of the Act and the reference to arbitrator was also invalid. It was next urged that there was another report of Mahendra Singh expert.
4. Learned counsel for the respondent No. 1 plaintiff, on the other hand urged that sufficient opportunity was given to the appellant about the costing register and furnishing the report of Sri Virendra Singh the” architect expert. The costing register contained correct expenses in respect of each item. The margin of profit was correctly shown. There was only one expert namely Sri Virendra Singh. There was no denial of opportunity to the appellant as from the judgment of the civil Judge it was obvious that opportunity was given and there was no violation of principles of natural justice. It was in any way not a misconduct contemplated by Section 30(a) of the Act. It was next urged that the arbitration agreement
Was not genuine within the meaning of Section 2(a) of the Act nor its reference can be said to be a reference as contemplated by Section 2(e) of the Act.
Having heard learned counsel for the parties, the points for our determination are as to whether the arbitrator has misconducted the proceedings in not granting reasonable, opportunity to the appellant to rebut the evidence of costing register including the opinion of the expert and thereby principles of natural justice have been violated; whether the arbitration agreement and reference were genuine and correct within the meaning of Sections 2(a) and 2(e) of the Act.
5. The expression “The arbitrator having misconducted himself or the proceedings” within the meaning of Section 30(a) has not been defined anywhere in the Act or the Rules. But this expression in law has certainly a very wide import and significance. The arbitrator misconducting himself indicates legal misconduct in judicial sense and not amounting to moral turpitude. (See Indian Minerals Co. v. Northern India Lime Marketing Association, AIR 1958 All 692 (DB)). It also signifies as to the scope of the authority conferred by the agreement. There may be irregularity in procedure adopted by the Arbitrator. In the present case it has to be seen whether the arbitrator has omitted judicial misconduct in the proceedings before him. In other words, whether the arbitrator has committed irregularities amounting to denial of opportunity of hearing to the appellant or whether he has transgressed the principles of natural justice.
6. In Halsbury’s Laws of England (IVth Edition Vol. 2 para 622, page 330) the relevant discussion is as follows :
“What constitutes misconduct. It is difficult to give an exhaustive definition of what may amount to misconduct on the part of an arbitrator. The expression is of wide import for an arbitrator’s award……….Misconduct
occurs for example : (1 to 4 examples not relevant) (5) if the arbitrator or umpire has failed to act fairly towards both parties, as for example hearing one party but refusing to hear the other…….or by taking evidence in
the absence of one party or both the parties or by failing to give a party opportunity of considering the other party’s evidence. (7) if the arbitrator delegates any part of his authority.” (See Cooper v. Shuttleworth, (1856) 25 LJ Ex 114, Oswald v. Earl Grey (1856) 24 LJQB 69; W. Ramsden & Co. Ltd. v. Jacobs, (1922) 1 KB 640 : Myron (Owners) v. Tradex Export S.A. Panama City R.P., (1970) 1 QB 527 at 534).
7. In fact the expression opportunity of hearing has got a wide range of varieties. The first is that no one shall be a judge in his own cause. The second is contained in maxim ‘Audi Alteram Partem’ which connotes that no one may be condemned unheard, the corollary of which is that a party to: proceedings should be given reasonable notice of the nature of the case to be met. (See Errington v. Minister of Health (1935) 1 KB 249). This principle has been extended even to the cases where even though there are some positive words providing that parties shall be heard yet the justice of common law will supply the intention of the legislature The principle of natural justice is a humanising principle intended to (sic) conduct the proceedings with all fairness and to secure the ends of justice. This principle has now become a widely pervasive rule affecting areas of administrative actions as well. It has to be kept in mind that the arbitrator is the chosen Judge of the parties consequently he carries more confidence of the parties and ordinarily his award need not be set aside unless the arbitrator has misconducted the proceedings.
8. In the instant case it is better to refer the proceedings dated 25-9-1980 conducted by the arbitrator.
9. From statement contained in the proceedings dated 25-9-1980 it was manifest that there was no indication whether the costing register prepared by the respondent No. 1 was sent to Virendra Singh the architect and expert nor there was anything to indicate that any opportunity was given to the appellant for furnishing any costing register in rebuttal. A perusal of the award indicates that at the
close of the award (pages 30 to 39) there was a mention that for special information a sum of, Rs. 750 was paid to an expert and some other expenses were mentioned by the arbitrator. Except this mention about the payment of Rs. 750/-to the expert, there was no mention in the entire award nor there was any mention as to whether the appellant was given any opportunity. On perusal of award, the proceedings and other materials we are satisfied that in respect of costing register being prepared and furnished by respondent No. 1 and the opinion of the expert, no opportunity was given to the appellant. Even though on page 37 of the award it has been mentioned that both the parties were given opportunity to lead their oral and documentary evidence and both were heard. Just in one sentence it has been stated that the accounts furnished by the appellant was riot reliable hence was rejected. It is stated by the arbitrator in his award page 35 that costing register was shown to the appellant who said that there is a difference in practice and theory but from this isolated reference it cannot be inferred that any opportunity was given to the appellant to lead evidence in rebuttal to obtain opinion of the expert or to file objection against the opinion received from the expert.
10. Even though the provisions of Section 45 of the Evidence Act may not apply literally in arbitration proceedings but the pith and substance of the principles contained therein about obtaining the opinion of the persons specially skilled in science or art are the relevant factors. Normally the expert has to give his opinion before the arbitrator or the court and he must be examined and cross-examined by the respective parties. In the instant case we find that no authoritative treatise is referred nor any reference to any standard book on the subject has been given by the expert nor any memorandum or data has been furnished by him while giving his opinion. If such data is furnished, details or memorandum is given or some treatise is referred the same could have been examined by the arbitrator but nothing was done. Under the circumstances we are of the view that the appellant must have been given opportunity to lead evidence in rebuttal. As regards the
details of the costing register and its reference, by the Arbitrator to the architect/expert, the mention about the reference to the opinion of the architect/expert in the order-sheet is conspicuous by its absence. In case the arbitrator would have proceeded in good faith he must have mentioned about it in the relevant order-sheet but nothing has been done. No order involving adverse consequence can be passed against any person (appellant in the present case) without giving him an opportunity to lead evidence in rebuttal and without giving him any opportunity to file objections against the opinion relied upon.
11. In exercise of judicial or quasi-judicial powers the rules of natural justice should be observed. According to Lord Mewart, C.J. in ‘R. v. Sussex, (Ex parte Mc. Carthy, (1924) 1 KB 256 at page 259), justice should not only be done but should manifestly and undoubtedly be seen to be done”. In the instant case elementary rule of natural justice was not followed as noopportunity was given to the appellant in respect of costing register and its details or the opinion obtained from the architect, the expert. We are accordingly of the considered opinion that the arbitrator has misconducted the proceedings.
(See Union of India v. Ghaziabad Railway Station, AIR 1972 All 34 (DB)).
12. Now reverting to the next point whether arbitration (sic). The expression ‘arbitration agreement’ is a defined term. It includes within its ambit the arbitration agreement and also the reference to the arbitrator. It means a written agreement to be submitted on present or future dates to the arbitrator. In the present case the arbitration agreement has been filed (vide paper book No. 1 page 1) and it has been signed by all the partners. All of them agreed that there was some dispute between the parties about the share of profit hence the reference was made to the Arbitrator Sri Pradumn Narain Singh ‘Jyotishacharya’. Nothing has been shown that the reference for arbitration agreement was invalid or the reference can be said to have been arbitrarily made. It was suggested that at one stage there
was no fresh assent for reference but as there was nothing in the reference that fresh assent would be obtained and actually the reference was made jointly by the parties the arbitrator was named. We are accordingly of the opinion that there was nothing to indicate that arbitration agreement was invalid nor the reference could be said to be vitiated in the law.
13. In view of the premises aforesaid we are of the view that the impugned order of the learned Civil Judge is liable to be set aside.
14. In the result present appeals succeed and are allowed, and order dated 31-8-1982 passed by Civil Judge, Allahabad is set aside. As the matter has dragged on for too long what is required is expedition. We accordingly direct learned Civil Judge to proceed further according to law as expeditiously as possible. Under the circumstances of the case we refrain from making any order as to costs.