JUDGMENT
B.S. Reddy, C.J.
1. This appeal preferred under Section 37(1)(b) of the Arbitration and Conciliation Act, 1996 (for short “the Act”) is directed against the judgment and order dated 09.07.2004 made in Execution Case No. 1(H)/2004 on the file of the learned District and Sessions Judge at Shillong. The judgment and order is challenged on various grounds and we shall notice the grounds of attack but after noting the relevant facts leading to filing of this appeal.
Factual Matrix
2. The appellants in this appeal are the joint owners of a plot of land and a three storied RCC building standing thereon situated at Paltan Bazar, Shillong, East Khasi Hills District covered by Shillong Cantonment Holding No. 10CB. The respondent/judgment debtor/defendant is a tenant occupying a room measuring 950 sq. ft. out of the said property (which shall be referred to as the “scheduled property”) for the use and purpose of godown.
3. The case of the appellants is that the scheduled property was let out to the respondent under rent agreement dated 17.11.1999. The appellants filed (Eject) Title Suit No. 9(H)/2002 on the file of the learned Assistant District Judge, Shillong for ejectment and as well as recovery of arrears amounting to Rs. 1,53,000 against the respondent. The respondent herein filed written statement resisting the suit on various grounds with which we are not concerned in this appeal. That, as many as 12 issues were framed for consideration of the court. That, when the suit was posted for evidence the respondent herein filed petition purporting it to be one under Section 89 of the said Act read with Section 151, CPC but the substance of the petition filed by the respondent herein is to refer the matter to arbitrator for adjudication in terms of Clause 9 of rent agreement. The learned Assistant District Judge upon considering the contents of the application preferred by the respondent and upon hearing the parties disposed of the same vide order dated 17.06.2003 in the following manner:
In view of Clause 9 of the rent agreement, the petition of the respondent for referring the dispute to an arbitrator is allowed and the objection of the plaintiff is hereby rejected.
4. The learned Assistant District Judge accordingly directed the appellants to appoint an arbitrator as provided under Clause 9 of the rent agreement with a further direction to dispose of the arbitration proceedings within four months from the date of assuming the proceedings. The said order passed by the learned Assistant District Judge attained its finality since the same has not been impugned by either of the parties.
5. That, in terms of the direction dated 17.06.2003 the appellants herein appointed an arbitrator, namely, Shri Kelson Tariang as the sole arbitrator. That, as a consequence of such appointment, the learned Assistant District Judge vide order dated 22.07.2003 disposed of the suit.
6. The learned arbitrator having entered into the reference issued notices to the parties through registered acknowledgement due. Having found that the respondent herein refused to receive the notices, the learned arbitrator vide order dated 09.08.2003 ordered ex parte hearing. The learned arbitrator ultimately allowed the claim of the appellants vide order dated 10.09.2003.
7. Thereafter the decree holder filed the Execution Case No. 1(H)/2004 before the court on 11.02.2004 for execution of the award dated 10.09.2003 for which notices were duly served upon the respondent. That, in response thereto, the respondent having entered appearance filed an application under Section 34 of the Act for setting aside the award. Simultaneously, the respondent has resisted the execution petition. The application filed by the respondent herein in the trial court is a composite one both resisting the execution with a further prayer to set aside the arbitration award passed by the arbitrator.
8. The respondent herein mainly contended in the trial court that she never applied to the court for referring the matter to arbitrator but filed only a petition under Section 89, CPC for settlement of the dispute between the parties before further proceedings with the ejectment suit. Therefore, the arbitrator could not have been appointed by the trial court. It is also contended that the arbitrator served no notice of the proceedings nor a copy of the award was furnished to the respondent. The agreement dated 17.11.1999 based on which the arbitrator was appointed stood expired prior to the reference of arbitration proceedings and, therefore, the entire arbitration award is illegal and need to be set aside. The award is vitiated on account of the misconduct on the part of the arbitrator.
9. The trial court having accepted the submissions made for and on behalf of the respondent herein held that the court where the suit was pending ought not to have directed the appellants to appoint arbitrator. The court ought not to have entertained the petition for reference of the dispute to arbitrator after filing of the written statement and framing of issues. The learned court also came to the conclusion that the learned arbitrator did not comply with the provision of Order 5, Rule 15, CPC before taking up the proceeding ex parte leading to passing of an ex parte award. That, the record does not disclose that the copy of the award has been furnished to the judgment debtor. The arbitration award is vitiated on account of the misconduct on the part of the arbitrator.
10. The learned Judge accordingly set aside the arbitration award and dismissed the execution petition filed by the appellants herein. It is that order of the learned trial court which is impugned in this appeal on various grounds.
Submissions
11. The learned senior counsel Shri G.N. Sahewalla, submitted that the court below committed error in coming to conclusion to dismiss the execution petition. He submitted that the impugned judgment and order suffers from incurable infirmities requiring interference by this Court for setting aside the same. The contention was that the learned Judge miserably failed to appreciate that the order referring the matter to arbitration has attained its finality and it was not open for the court to once again go into the question of appointment of arbitrator. It was also contended that the application filed by the respondent herein under Section 34 of the Act is not maintainable in law.
12. Per contra, the learned Counsel for the respondent Shri P.K. Roy submitted that the appeal preferred by the appellants itself is not maintainable in law. The arbitration award is vitiated by misconduct on the part of the arbitrator inasmuch as the arbitrator did not take any effective steps to serve notice upon the respondent. The learned Counsel further contended that the reference to arbitrator itself is bad in law. It was also contended that the arbitration award was not served upon the respondent and it is for that reason the respondent submitted application under Section 34 of the Act for setting aside the award within the prescribed period from the date of knowledge.
13. We have given our anxious consideration to the rival submissions made during the hearing of this, appeal.
Statutory Environment
14. We shall first take up the contention as to whether the appeal preferred by the appellants herein is maintainable in law. But before we do so we shall notice the scheme of the Arbitration and Conciliation Act, 1996 and few relevant provisions. The Arbitration and Conciliation Act, 1996 (for short “the Act”) is a self-contained code. It is an Act to consolidate and amend the law relating to domestic arbitration, international commercial arbitration and enforcement of foreign arbitral awards as also define the law relating to conciliation and for matters connected therewith or incidental thereto. It is evident from the Statement of Objects and Reasons, the Act has been brought into existence mainly to achieve the objectives which are:
(i) to make provision for an arbitral procedure which is fair, efficient and capable of meeting the needs of the specific arbitration;
(ii) to provide that the arbitral tribunal gives reasons for its arbitral award;
(iii) to ensure that the arbitral tribunal remains within the limits of its jurisdiction;
(iv) to minimize the supervisory role of courts in the arbitral process;
(v) to provide that every final arbitral award is enforced in the same manner as if it were a decree of the court, etc.
It would be just and necessary to notice few relevant provisions of the Act, which may have a bearing on the questions that fall for our consideration.
15. Section 12(3) of the Act provides that an arbitrator may be challenged only if:
(a) circumstances exist that give rise to justifiable doubts as to his independence or impartiality; or
(b) he does not possess the qualifications agreed to by the parties.
16. Section 13(2) of the Act provides, failing any agreement referred to in Sub-section (1), a party who intends to challenge an arbitrator shall, within fifteen days after becoming aware of the constitution of the arbitral tribunal or after becoming aware of any circumstances referred to in Sub-section (3) of Section 12, send a written statement of the reasons for the challenge to the arbitral tribunal. Sub-section (4) thereto provides that in the absence of any successful challenge the arbitral tribunal shall continue the arbitral proceedings and make an arbitral award.
17. Section 19(1) of the Act in specific terms provides, the arbitral tribunal shall not be bound by the Code of Civil Procedure, 1908 or the Indian Evidence Act, 1872.
18. Section 25 of the Act deals with the situation where the parties committed default without showing sufficient cause. Sub-section (c) of Section 25 provides, if a party fails to appear at an oral hearing or to produce documentary evidence, the arbitral tribunal may continue the proceedings and make the arbitral award on the evidence before it.
19. Section 34 of the Act, which is relevant for our present purpose reads as under:
34. Application for setting aside arbitral award–
(1) Recourse to a court against an arbitral award may be made only by an application for setting aside such award in accordance with Sub-section (2) and Sub-section (3).
(2) An arbitral award may be set aside by the court only if–
(a) the party making the application furnishes proof that-
(i) a party was under some incapacity; or
(ii) the arbitration agreement is not valid under the law to which the parties have subjected it or, failing any indication thereon, under the law for the time being in force; or
(iii) the party making the application was not given proper notice of the appointment of an arbitrator or of the arbitral proceedings or was otherwise unable to present his case; or
(iv) the arbitral award deals with a dispute not contemplated by or not falling within the terms of the submission to arbitration, or it contains decisions on matters beyond the scope of the submission to arbitration:
Provided that, if the decisions on matters submitted to arbitration can be separated from those not so submitted, only that part of the arbitral award which contains decisions on matters not submitted to arbitration may be set aside; or
(v) the composition of the arbitral tribunal or the arbitral procedure was not in accordance with the agreement of the parties, unless such agreement was in conflict with a provision of this Part from which the parties cannot derogate, or, failing such agreement, was not in accordance with this Part; or
(b) the court finds that–
(i) the subject-matter of the dispute is not capable of settlement by arbitration under the law for the time being in force, or
(ii) the arbitral award is in conflict with the public policy of India. Explanation–Without prejudice to the generality of Sub-clause (ii), it is hereby declared, for the avoidance of any doubt, that an award is in conflict with the public policy of India if the making of the award was induced or affected by fraud or corruption or was in violation of Section 75 or Section 81.
(3) An application for setting aside may not be made after three months have elapsed from the date on which the party making that application had received the arbitral award or, if a request had been made under Section 33, from the date on which that request had been disposed of by the arbitral tribunal:
Provided that if the court is satisfied that the applicant was prevented by sufficient cause from making the application within the said period of three months it may entertain the application within a further period of thirty days, but not thereafter.
(4) On receipt of an application under Sub-section (1), the court may, where it is appropriate and it is so requested by a party, adjourn the proceedings for a period of time determined by it in order to give the arbitral tribunal an opportunity to resume the arbitral proceedings or to take such other action as in the opinion of arbitral tribunal will eliminate the grounds for setting aside the arbitral award.
20. Section 37 of the Act provides for appeals. It says that an appeal shall lie against the orders, namely–(a) granting or refusing to grant any measure under Section 9; (b) setting aside or refusing to set aside an arbitral award under Section 34.
Re.: Question 1
21. The respondent herein herself claims to have filed application under Section 34 of the Act with a prayer to set aside the arbitration award. It is no doubt that such an application has been filed in the execution proceeding initiated by the appellants herein seeking enforcement of the arbitration award. It may be totally unnecessary to go into the question as to whether the said application has been filed within limitation and in accordance with the prescribed procedure under the provisions of the Act since the appellants herein did not raise any objection as to the maintainability of such an application filed by the respondent herein in the trial court. The trial court having taken the application on file proceeded to determine the same on merits and accordingly allowed the same by duly setting aside the award passed by the arbitrator. In the circumstances there cannot by any doubt that the impugned order is in the nature of an order setting aside the arbitral award under Section 34 of the Act which ultimately resulted in not only setting aside the arbitration award but also dismissal of the execution petition filed by the appellants. In the circumstances, the appeal preferred by the appellants against the impugned judgment and order is maintainable in law. The appeal preferred by the appellants is nothing but an appeal against setting aside the arbitral award under Section 34 of the Act. We accordingly reject the preliminary objection raised by the respondent. The point is accordingly answered in favour of the appellants and against the respondent. This finding of ours disposes the objection raised by the appellants herein as regards the maintainability of the very application filed by the respondent under Section 34 of the Act. The appellants since did not raise any objection as to its maintainability in the trial court we are not inclined to go into that question.
Re. : Question 2
22. The next question that falls for our consideration is whether the court committed any error in setting aside the award on the ground of misconduct on the part of the arbitrator ? On a bare reading of Section 34 of the Act would reveal that misconduct is not one of the grounds for setting aside the arbitral award passed by the arbitrator. It is a ground available under the provisions of the Arbitration Act of 1940 and not under the provisions of the present Act. Section 34 of the Act in clear and categorical terms declare that recourse to a court against an arbitral award may only by an application for setting aside such award only as provided for thereunder. It further provides that an arbitral award may be set aside by the court only on the ground as provided for thereunder. Misconduct is not one of the grounds on which arbitral award could be set aside by the court in exercise of the powers conferred under Section 34 of the Act.
23. The decision of the court below setting aside the arbitration award on the ground of misconduct on the part of the arbitrator is thus untenable and unsustainable. The point is accordingly answered.
Re.: Question 3
24. Whether the trial court was right in setting aside the arbitral award on the ground that the reference to the arbitral tribunal itself was bad? The answer is an emphatic no, since it is not one of the grounds on which the court could set aside an arbitral award in exercise of the power conferred under Section 34 of the Act, It is true that a court of competent jurisdiction may set aside the arbitral award on the ground that the arbitration agreement is not valid under the law to which the parties have subjected it or failing any indication thereon, under the law for the time being in force. But this is not the ground on which the court interfered with the arbitral award. That apart the appointment of arbitrator by the court after hearing the parties attained finality since the arbitrator was not challenged on the available grounds as provided for under Section 12 of the Act in accordance with the procedure prescribed under Section 13 of the Act. In the absence of any such challenge the arbitral tribunal was bound to continue the arbitral proceedings and make the arbitral award. The arbitrator rightly proceeded to pass the award. The view taken by the court to the effect that the reference to the arbitral tribunal itself was bad in law is misconceived and suffers from serious infirmities.
Re.: Question 4
25. Whether the trial court was justified in holding that the arbitral award is liable to be set aside on the ground that the arbitrator failed to comply with the requirements as provided for under Order 5, Rule 15, CPC? The trial court held that the learned arbitrator did not comply with the provisions of Order 5, Rule 15, CPC before taking up the proceeding ex parte leading to passing of an ex parte award. We have already noticed the relevant provisions which in specific terms declare that the arbitral tribunal is not bound by the Code of Civil Procedure or the Indian Evidence Act, as the case may be. There is a clear and categorical finding on the arbitration award that the respondent herein refused notices sent under registered post acknowledgement due on more than one occasion. The respondent herein having refused to receive the notices did not participate in the award proceedings. That, a presumption arises in law that the respondent herein not only had the knowledge of the contents of the postal cover under which notices were sent by the arbitrator but also had the knowledge of the proceedings and yet had chosen not to participate in the proceedings. The notices shall be deemed to have been properly served upon the respondent. The arbitrator having found that the respondent failed to appear at the hearing was bound to continue the proceedings and make the arbitral award on the evidence available before it. That is what exactly the arbitrator did in the instant case. The procedure adopted by the arbitrator in passing the award is not vitiated for any reason whatsoever and on the other hand the procedure adopted by the learned arbitrator is in conformity with the provisions of the Act which we have noted in the preceding paragraphs.
26. Be that as it may, there is no finding as such recorded by the trial court in the impugned judgment that the notices were not duly served upon the respondent. The trial court passed judgment setting aside the arbitral award on the ground that arbitrator failed to comply with Order 5, Rule 15, CPC which is not applicable to a proceeding under the provisions of the Act. The learned trial court misdirected itself in coming to such a conclusion which we found difficult to sustain.
27. In Oil and Natural Gas Corporation Ltd. v. Saw Pipes Ltd. , the Apex Court while dealing with the nature of jurisdiction and the power of the arbitral tribunal held that the jurisdiction of the tribunal is prescribed under the Act and if the award is de hors the said provisions, it would be, on the face of it, illegal. The decision of the tribunal must be within the bounds of its jurisdiction conferred under the Act or the contract. In exercising jurisdiction, the arbitral tribunal cannot act in breach of provisions of substantive law or the provisions of the Act. Analysing the scope of Section 34 of the Act the Apex Court observed “reading Section 34 conjointly with other provisions of the Act, it appears that the legislative intent could not be that if the award is in contravention of the provisions of the Act, still however, it could not be set aside by the court. If it is held that such award could not be interfered, it would be contrary to the basic concept of justice. If the arbitral tribunal has not followed the mandatory procedure prescribed under the Act, it would mean that it has acted beyond its jurisdiction and thereby the award would be patently illegal which could be set aside under Section 34”. We fail to appreciate as to how the said judgment in ONGC Ltd. upon which reliance has been placed by the learned Counsel for the respondent, supports and advances the proposition urged, which we have dealt with. It is not brought to our notice as to what mandatory procedure prescribed under the Act has not been followed by the arbitral tribunal nor there is any such specific plea in the memorandum of grounds raised in the lower court filed under Section 34 of the Act. There is neither any plea nor proof that the arbitral tribunal has not followed the mandatory procedure prescribed under Sections 24, 28 and 31(3) of the Act which affects the rights of the parties. It is not the case of the respondent that arbitral award is contrary to any substantive law of the land. Vague and indefinite please sought to be advanced, without there being any factual foundation, cannot be countenanced.
28. No other point is canvassed before us in this appeal.
29. For all the aforesaid reasons we are left with no option but to set aside the impugned judgment and order under appeal. The same is accordingly set aside. The award passed by the arbitrator is accordingly confirmed.
30. In the result the execution petition filed by the appellants herein is allowed. The trial court is directed to take consequential steps to eject the respondent herein from the scheduled property and deliver the same to the appellants and recover the money in terms of the award.
31. The appeal is accordingly allowed with cost throughout.
The Registry is directed to dispatch the entire records to the court below for compliance.