JUDGMENT
K. Ramamoorthy, J.
(1) Shri Virender Kohli who was the Architect of M/s Natra) Vihar Cooperative Group Housing Limited is hereinafter referred to as the Society. The Society entrusted with M/s Mohan Construction Company, the Construction of a building complex (hereinafter referred to as the Contractor). The architect was nominated by the Society and the Contractor as their Arbitrator to adjudicate upon the disputes. The Arbitrator passed the award in favour of the Contractor exparte on 15.5.1990.
(2) The Society has filed the objections challenging the award. Before dealing with the objections filed by the Society it is better to notice a few facts. Tenders were invited by the Architect/Arbitrator on behalf of the Society for the construction of 74 flats on plot No. 67, Patparganj, Delhi. The work was awarded to the Contractor. On 13.11.1986 the Contract was entered into between the Society and the Contractor. The estimated cost of the work was approximately Rs. 1.20 crores. The date of commencement of the work fixed was 23.11.1986. The scheduled date for the completion of the work was 22.2.1988. The work was not completed within the stipulated period and it is not necessary to go into the question as to who was responsible for the delay.
(3) On 5.12.1988, the Contractor wrote to the Society requesting for extension of time upto 30.9.1989 without any compensation. By letter dated 16.12.1989 the Architect/Arbitrator Mr. Virender Kohli recommended for the extension of time upto 31.7.1989. On 16.12.1989 the Society wrote to the Contractor imposing following conditions: “THE above extension of time is subject to clause 20 of the General Instructions of the Contract and the Tender Form. However, the said penalty clause has been renewed as follows : (i) The balance work must be completed by 3U.9.89, failing which the Society will entitled to get a penalty of RS. 1,000.00 per day. If the work is still not completed by 30.9.1989, the penalty will be increased to Rs. 2,000.00 per day. (ii) The above amount will be considered as liquidated damages, and the contractor will be bound to pay the said penalty, which can be deducted from the final bills; (iii) The work will be completed as per the attached schedule, suggested by you, which is a condition of this extension. (iv) Further extension will not be considered by the Society on any ground, whatsoever. The escalation in the cost of material as well as labour wages is hereby superseded as the fault in non-completion of the construction work entirely lies with the contractor. Accordingly the contractor will have to complete the work on the agreed rate schedule. If you agree the above terms, please confirm. It may be stated here that as per the terms of the original contract, your contract period having expired, the same is being over-looked with the further rider that in case of any further default, without any notice, the contract shall stand terminated, and the Society will be entitled to get the work completed at its own cost, and will be entitled to get any escalation in cost from the contractor”.
(4) On the same date the Contractor replied in the following terms : “IN reply to your letter dated 16.12.1988, I hereby give my unconditional confirmation to the said terms, without any reservation”.
(5) On 22.12.1988 the Contractor wrote the following That the Society through its letter dated 16.12.1988 is trying to make an attempt to put such conditions which are contrary to the terms and conditions of the contract agreement reduced in writing and signed by both the parties with open eyes. The undertaking given by us vide our letter dated 16.12.1988 may therefore be considered as null and void and the work can be continued only in the circumstances when facts of the case are pre-decided as there is no lapse on our part to execute the work at any state. It is, therefore, requested that our balance payment be released immediately, and the undertaking given by us under duress on 16.12.1988 may kindly be treated as null and void. The reasonable prices be decided well in advance and the damages suffered by us be reimbursed. It may also be kept in view that the work executed by us shall not be tempered with by the Society till our final accounts are settled. In case any arbitrary action is taken by the Society, it would be at its own risk and cost and we shall be painfully constrained to seek legal remedy civil/criminal, which may be available to us or be advised”.
(6) On 30.12.1988 the Society wrote to the Contractor in the following terms: Sub: Construction of 74 Dus at Patparganj for the Society. Ref : Letter dated 22/12/88 No. MCC/159/Natra)/Coo/GHS/88-89/7250 We are in receipt of your above letter. After going through your letter it is felt that you have resented to the letter dated 16.12.88. After discussions held with the members, the Architect and a joint meeting with your Shri Satish Mittal and Sh. Satish Mittal held at Architect’s office on 26th December. Finally we have taken following decisions : (1) The contractors shall not be allowed to charge for increase in cost of materials only under clause 10(c)(c) of the CPWD. (2) All the terms and conditions for the original Contract remain unchanged and binding on both the parties. (3) The extension upto 30.09.1989 granted without levy of any compensation. (4) A penalty of Rs. 1,000.00 per day for the first 30 days and Rs. 2,000.00 per day exceeding the delay more than 30 days and Rs. 2000.00 per day exceeding the delay more than 30 days provided the Society makes the payment of the bill within 7 days of passing the same by Architect. This clause supersedes Clause 20 of the Original Contract Agreement. (5) The penalty clause will not be applicable if a payment more than Rs. 5,00,000.00 (Rupees five lacs only) remains pending with Society for more than three weeks. (6) No further extension will be granted by the Society on any ground except Natural Calamities and Force de Majoures. (7) The Society is entitled to get the work done at the risk and cost of Contractor after 30.9.89 in case of default from Contractor’s side provided the Society complies with all the above said conditions. 536 (8) All these decisions have been taken in supersession to our letter dated 16.12.1988. It is hoped and expected that the works wilt be executed with full real and enthusiasm to achieve the completion as per programme/schedule chart provided by you.
IN this letter the Contractor made the following endorsement : “I hereby give my unconditional acceptance and confirmation of this letter.
(7) The Contractor apparently was allowed to do the work. On 20.9.1989 the parties held a meeting and the minutes of the meeting was recorded and, inter alia, the parties agreed to the following: Date of completion for the work is extended upto 15.12.1989 instead of 30.9.1989 without levy of any compensation and vis-a-vis without imposing of penalty of any nature in future. Extension is granted in supression to the decision taken by the Society vide para 3,4 and 7 of letter dated 30.12.1988. No further escalation if enforce by the Government after 30.9.1989 shall be paid.
(8) On 16.11.1989 the Contractor wrote to the Society enclosing R/A Bill dated 6.11.1989 claiming 25,00,798.00. with copy to the Arbitrator. On 25.11.1989 the architect/Arbitrator wrote the following : Iam enclosing 16th R/Bill of the Contractors duly verified physically at site. Bill submitted Rs. 1,57,16.875.00 Bill verified Rs. 1,42,91,818.00 Net payments are to be released after verification/deductions of all the payments/advances made upto date. Income tax surcharge to be deducted as applicable.”
(9) On 28.11.1989 the Society wrote to the architect the following : A please refer to your certificate regarding 16th R/A Bill. We have also gone through the bill with the help of our site engineer. It appears that you are not working as per the required norms of your profession. You certify bills without actual checks at the site, as is evident from your certificate i.e. 16th R/ A bill. The deficiency exists in the following items. You have also not care to look into the 15th R/A bill before certifying the 16th R/A bill which also further shows not your negligence only but also dereliction of your duty. The Society considering the welfare of the members is interested in getting the work completed at the earliest. Accordingly we desire and request you to kindly check the items covered by 15th & 16th R/A Bill and then only certify. You are also requested to get the said checking counter signed by our site engineer, who is being paid by the Society to check the work at the site, so that the society may not suffer. You are also requested to check the fittings including the wood work with relation to the contract, so that legal formalities may not be entered into. You are requested to see the following discrepancies particularly. (A)Block A – Items Nos. 7, 8, 12, 13, 14, 15, 17 and 19. (b) Block B – Item Nos. 7, 8, 10, Ii, 13, 14, 15, 17 and 19. (c) Block C – Item Nos. 7, 10, 12, 13, 14, 15, 17, 18 and 19.
An early action will be highly appreciated.
(10) The Contractor wrote to the Society enclosing therewith 17th Running Account Bill dated 5.12.1989 for release of payment to the tune of Rs. 23,83,334.00. On 7.12.1989 the Site Engineer wrote to the Society giving his report on the 17th running bill. On 15.12.1989 the Contractor wrote to the Architect/Arbitrator enclosing his claims and called upon the Arbitrator to adjudicate upon the disputes.
(11) On 16.12.1989, the Architect wrote to the Society in the following terms: Please find herewith a copy of 18th R/A Bill for verification by the Site Engineer 16th and 17th R/A Bill which were given to me for amendment. I have to explain as follows : The percentage which are recommended by the site engineer are for varying than works executed site. The items of sanitation fixtures are brought at site and it was decided by your self Hon’ble Secretary and my self that payment for this item to be made after retaining fixing charges. Regarding item No. 20 and 29 the extra item are being paid as per agreement. But however the suggestions made by the Society regarding extra items are being reviewed. The Bills will be amended accordingly after keeping all the legal & contractual obligations intact.”
(12) 0N21.12.1989, the Architect/Arbitrator wrote to the Society that by a letter dated 15.12.1989 the Contractor has nominated him as an Arbitrator and requested the Society to file authenticated copy of the agreement, ask the Society to file the written statement within 15 days from the date of receipt of statement of facts from the counter claim latest by 25.1.1990 and he has fixed next date of hearing as on 30.1.1990 at 2.30 p.m. at his office. On 26.12.1989 the Site Engineer wrote to the society. On 27.12.1989 the Society wrote to the architect/Arbitrator staling in the following terms: Please refer your letter dated 21.12.1989 regarding notice for arbitration. We are to bring to your kind notice that the arbitration proceeding at this stage entered in by you, are not only uncalled for, but the height of preponderance shown by you to favour the contractor. In this respect, we point out to you your letter dated 16.12.1989 regarding the 15th, 16th and 17th running bills, also enclosing copy of the 18th running bill. Apparently, the bills are wholly uncalled for. After submitting the 16th running bill upto date, no further work has been done at the site, and as such there could be no question of the 17th and the 18th running bills.You have stated in your letter dated 16.12.1989, that you were still to check the running bills for further sending to the Society for payment, but inspite of the fact that the said running bills duly verified by the Site Engineer, were handed over to you on 7.12.1989, no useful action has been taken by you. Instead on a unilateral reference by the contractor, you have shown your inclination to enter upon the reference. It is no doubt true that under clause 57, you are the named Arbitrator, but your apparent action shows that instead of protecting the interest of the Society, under the norms of your profession, you are trying to favour the contractor. Accordingly, we are not submitting to your Jurisdiction to act as an Arbitrator. Instead you should verify the bills so that the payments could be made and matter can be amicably settled. We may point out that as an architect of the Society, you are expected to work impartially, particularly with a view to seek that the Society is not cheated by the Contractor. However, your actions are otherwise than following the norms of your profession. In the circumstances, please hold up your hands from entering into the arbitration. In the alternative, the Society will be compelled to take legal proceedings in the matter, in which case the contractor, your good self and the Society will all suffer. This is for your information, an early action will oblige the Society.”
(14) On 29.12.1989 the Contractor wrote to the Arbitra tor staling that he is filing a copy of the agreement.
(15) On 16.1.1990 the contractor wrote to the Arbitrator making the claim through its Counsel. It is stated therein that the Society is not submitting to his jurisdiction to the named Arbitrator and the Arbitrator could proceed as per his programme. On 10.1.1990 the Contractor wrote to the Arbitrator stating that the Con tractor reserved its right to submit or demand any letter accept document orally and/or writing evidence during the course of proceedings. On 16.1.1990, the Arbitrator wrote to the Society in the following manner Please refer your letter No. Nil dated 27th December, 1989. In this connection, it is brought on record that a letter under reference does not appear to be reasonable, lawful or in accordance with the ethics of business between a Society and the architect. You are aware that since the very start of the work I have been extending my fullest cooperation to the Society so as to get the project completed without any botheration and at the earliest possible. The civil works have already more or less completed except minor rectifications and final touching items. I have also been ignoring the shortcomings of the Society as and when noticed. Even my bill dated 4th December, 1989 has not been honoured so far, besides, previous payments have also been delayed abnormally which is a matter of record. It is a matter of record that while approving the contact agreement by the society, my name was contemplated as a named Arbitrator agreeable to both the parties and thereafter the contract agreement was reduced in writing. The letter under reference speaks very unexpected language making allegations against me which cannot be tolerated by a respectable person and I will not be in a position to digest such allegations which may please be noted as my working is known to all concerned. In the end, I will advise you to participate in the proceedings and rest assured that there will be no injustice to either party but I will not be in a position to do it only when both the parties extend their cooperation and bringing out the facts to my knowledge as an Arbitrator. It is true that I am not to favour the contractor but simultaneously I am also bent to act according to law an impartial judge so that no party to the contract can have a grudge and the parties will get justice in due course”.
(17) On the same date the Arbitrator records his minutes in the following manner: “AFTER careful reading the contents of both the letters under reference I hereby advise the parties as under :- That the copy of the agreement has been supplied by the Claimants as per directions contained in my letter dated 29.12.1989. It has been looked into and I am the named Arbitrator as contemplated under Clause 57 of the contract agreement. That the respondents being a civilised organisation is supposed to behave in a business like attitude. But on perusal of respondents letter dated 27th December 1989, it appears that the respondents society has tried to adopt unbusiness like attitude which should be avoided by the either party. 3. That I, Virender Kohli, as a named Arbitrator in the contract have altogether different role i.e. to act as an impartial judge in terms of the Arbitration Act. The duties and rights as an architect do not come in between at this stage. In view of the aforesaid facts, I, as an Arbitrator, advise the parties to submit to my jurisdiction as an Arbitrator being agreed between the parties at the time of entering upon the contract and the respondents are requested to file the counter statement of facts in reply to the statement of facts already filed by the Claimants so as to enable me to proceed further. It may please be noted that in case either party choose not to participate in the proceedings, I shall proceed further ex-parte and no separate notice for the exparte proceedings shall be issued. The date of hearing is already fixed as 31.1.1990 at 2.30 p.m. in my office and parties are hereby directed to attend positively. The respondents are also directed to file the counter statement of facts on or before 25.1.1990 so that the claimants may also file their rejoinder, if any, on or before the date of hearing already fixed.”
(18) On 19.1.1990, the Society wrote to the Arbitrator in the following manner: “WITH reference to your letter dated 16.1.1990, we have to request you to kindly reconsider your decision in the light of the following facts : Since the entire work is being executed under your technical guidance and instructions, the responsibility for defending the Society’s case in any arbitration legal proceedings lies with you. This responsibility cannot be discharged in case you function as Arbitrator yourself. We do not have anybody in the Society who can defend our case in respect of decisions/action taken under your instructions. Even if, you have the fact of intentions, you cannot adjudicate our claims/dispute which have arisen against your own decisions/instructions. Since you are party to the disputes, it would be duly fair that some outsider person not connected with any of the party should be appointed as Arbitrator. We have to requested you to kindly withdraw your earlier notice dated 21.12.1989 and resign as an Arbitrator to enable the concerned parties to appoint another Arbitrator mutually acceptable to them. In case, however you refuse to do so and proceed exparte you shall make yourself liable to dismissal by the High Court on ground of misconduct.”
(19) On 31.1.1990 the Arbitrator recorded the minutes of his proceedings wherein he has stated that the parties were given final opportunity and he entered upon the reference on that date. The time for making/publishing the award is four months which start from 31.1.1990 and he had adjourned the matter to 13.3.1990 at 2.30 p.m. in his office. On 23.2.1990, the Arbitrator wrote to the Society that he was not withdrawing from the post as Arbitrator and, therefore, it was not fair on his part to resign at that stage. On 1.3.1990, the Arbitrator wrote to the Society in reply to the letter of the Society dated 20.2.1990 (not filed) in the following terms : The contents of your letter dated 20the February, 1990 addressed to M/s. Mohan Construction Company with a copy to me enclosing therewith some interim report alleged to be prepared by some outsider expert, have been noted with great surprise. However, the matter is already pending in arbitration and I am the named Arbitrator in terms of the arbitration agreement and as such I will not like to make any comments on the said alleged report. However, you may make your submissions in my capacity as an Arbitrator which will be given due consideration while participating by the parties during the course of proceedings.”
(20) On 3.3.1990 the Society wrote to the Arbitrator in the following terms: We are surprised that you are insisting on acting as Arbitrator by taking shelter under the arbitration clause of our Agreement. The Society had signed the Agreement with your name mentioned as Arbitrator because of the following reasons:- (I)Since the Society had no technical expertise of their own, they had entrusted the total technical responsibility for our housing project to you, and it was expected that there would be no occasion for resolving any contractual disputes through arbitration. (ii) The Society had no experience of implementing construction contracts and they were not aware of the roles and functions to be performed by you in the dual capacity i.e. as Architect and Arbitrator and the inherent conflict between these two roles. In fact, the advice should have come from you that these two roles should be kept separate so as to inspire confidence amongst the Members of the Society. 2. As already informed you earlier, the Society is not willing to accept you as an Arbitrator due to the following reasons :- (a) The disputes between the Society and the Contractor have arisen out of decisions or technical advice given by you in respect of of drawings, specifications, quality of works, contract tender etc. and only you are aware of the back ground/justification for such decisions or advice. In case of Arbitration, whomsoever we may engage for defending our case, you cannot shirk your responsibility of assisting the Society in preparing their defense. (b) During the execution of the project, your conduct has amply demonstrated your bias in favour of the Contractor (instances can be cited) and the Society has totally lost its confidence in your objectivity and impartiality. No one can act as Arbitrator unless he enjoys confidence of both parties. (c) The Society has now come to realise that even if you try to be fair, you cannot legitimately sit in judgment over disputes which have arisen out of your own omissions and commissions and may be even indiscretions. Your adjudication would therefore, not inspire confidence in the minds of our Members. In the light of the above facts, we totally repudiate the incorporation of your name in the Agreement as Arbitrator. The most honourable course open for you would be to resign as Arbitrator and for the parties to amicably agree to appoint some outside expert acceptable to both as Arbitrator. 3. Since the Society repudiates your appointment as Arbitrator and has no intention of appearing before you in any arbitration proceedings, the minuted of the hearing dated 31.1.90 are null and void. If you still insist on pursuing this matter further, the Society would be compelled to approach the High Court and restrain you from acting as Arbitrator, until another Arbitrator is appointed by the two parties with mutual consent or directly by the Court itself. 4. As far as the interim report received from Shri A.P.parasar, Addl. Director General (Retd.), C.P.W.D. is concerned, the Society has invited your comments in your capacity as Architect and not as Arbitrator. This Report does not deal with disputes as such – it only covers a Contractor. We hope you would go through the interim report and point out factual, errors, if any, that you may notice in the Report. It may be appropriate to point out here that your Agreement with the Society is still valid and that you are under contractual obligation to give your advice/comments to the Society on all technical matters relating to this project. The Society hopes that instead of adopting a confrontationist approach and creating avoidable complications, you would adopt a constructive attitude and assist the Society in setting all outstanding issues between them and the Contractor with good grace. The assistance of an outside expert has been sought primarily to ensure that on one hand contractor is not denied his legitimate dues under his contract and on the other hand the Society is not taken for a ride. After all, the Society is a public body which is fully accountable to its members as well as to the Govt.
(21) On 9.3.1990 the Contractor filed a petition before the Arbitrator requesting him to proceed further and decide the case on the basis of the available evidence before him. On 12.3.1990, the Arbitrator stated in his minutes that parties have noj powers to revoke the authority of the Arbitrator and every point shall be kept in I view during the course of adjudication. On 13.3.1990, the Arbitrator has stated that final opportunity will be given to the Society and the case was fixed for 3.4.1990 at 2.30 p.m. in his office. On 31.3.1990 the Arbitrator adjourned the hearing on 3.4.19901 at 2.30 p.m at his office to 25.4.1990 as requested by the Society over telephone. I
(22) On 23.4.1990, the Society wrote to the Arbitrator that the Society never authorised any person to make any phone call to the Arbitrator and that the Society was not submitting to his Jurisdiction, that the Arbitrator entered into the reference on 22.2.1990 and the 4 months period have already expired and consequently the Arbitrator has no right to proceed further with the arbitration proceedings. On I 23.4.1990, the society wrote to the Arbitrator requesting him as an Architect to j intimate the further action taken by him as Architect.
(23) On 30.4.1990, the Arbitrator recorded the minutes staling that the case was fixed on that date in consultation with both the parties but no one had appeared on behalf of the Society. Therefore, according to him he was left with no other alternative except to decide the case exparte. He states “that the claimants have elaborated the facts mentioned in their statement of facts and the case is hereby concluded”. He further stated that the Society can file written pleadings on or before 10.5.1990 and if no written pleadings are received by him on or before 10.5.1990 he would publish the award as the time for making/publishing the award would be expiring on 30.5.1990.”
(24) On 11.5.1990 the Contractor furnished the stamp paper to the Arbitrator. On 15.5.1990 the award was published. It is interesting to notice that on 17.5.1990, the Contractor wrote to the Arbitrator requesting to file the award and on 18.5.1990 the petitioner presented the petition under section 14(2) of the Arbitration Act, 1980 in this Court. It is not explained as to how the Petitioner/Contractor received the award from the Arbitrator.
(25) In the award the Arbitrator has considered 11 claims. Claim No. I
(26) Claim No. 1 relates to Rs. 11,50,000.00 alleged to be the balance payment upto 16th running account bill Claim is partly justified to the extent of Rs. 11,03,644.00. No reasons have been given. It is not stated as to how the Arbitrator arrived at the figure. Claim No.-2
(27) This claim relates to Rs. 1,00,000.00 being refund of security deposit. It is also awarded. Claim No. 3
(28) This claim relates to Rs. 1,77,673.00 alleged to be payment due to increase in labour wages. The Arbitrator stated that the claim is partly justified to the extent of Rs. 1,50,000.00. Claim No. 4 543
(29) This claim relates to Rs. 12,85,614.00 alleged to be escalation due to increase in cost of materials. The learned Arbitrator has rejected this claim as not justified. Claim No. 5
(30) This claim relates to Rs. 12,39,483.00 alleged to be further payment after submission of the 17th and 18th Running Account Bill. “The Arbitrator states that the claim is partly justified to the extent of Rs. 7,14,741.00. Claim No. 6
(31) This claim relates to Rs. 2,00,000.00 alleged to be cost of materials lying at site. The claimant could not establish the valuation claimed for, as such the claimants are allowed to remove their materials and T&P from site. In case the claimants are not allowed to remove the materials from the site within 15 days from the date of notification of the award the respondents do pay a sum of Rs. 1,00,000.00 to the claimants. Claim No. 7
(32) This claim relates to Rs. 6,26,125.00 alleged to be infructuous expenditure and damages. The learned Arbitrator has stated that the claim is partly justified to the extent of Rs. 2,00,000.00. Claim No. 8
(33) This claim relates to Rs. 1,40,000.00 alleged to be loss of profit. The learned Arbitrator has rejected the claim as being not justified. Claim No. 9
(34) This claim relates to Rs. 55,000.00 alleged to be interest at the rate of 12% per annum for belated payments. This claim was rejected by the learned Arbitrator. Claim No. 10
(35) The Contractor had claimed interest at the rate of 18% per annum from 15.12.1989 upto the date of decree or realisation. The learned Arbitrator allowed interest @ 18% per annum from the date of this award to the date of its decree or payment whichever is earlier provided the payment in terms of the award is not made by the respondents within 60 days from the date of notification of the award. Claim No. Ii
(36) This claim relates to the cost of proceedings. The Arbitrator stated that the costs of proceedings be borne by the respective parties.
(37) In fine the Arbitrator passed the award for a sum of Rs. 22,68,385.00 (Rupees twenty two lacs sixty-eight thousand and three hundred eighty five only) directing the Society to pay the claimant within 60 days from the date of notification of the award. The Arbitrator directed the society to allow the Contractor to remove their materials and T&P from the site within 15 days from the date of notification of award failing which the respondents shall pay Rs. 1,00,000.00 in lieu of the materials and T&P belonging to the claimants. The Arbitrator directed the payment of interest'(c) 18% per annum.
(38) Mr. Rajesh Lakhanpal learned Counsel for the Society challenged the award formulating his points in the following manner : (1)Exparte award made by the Arbitrator was made after the expiry of four months period after the Arbitrator entered on reference and, therefore, it was without jurisdiction. (2) The basic requirements of Arbitration proceedings were not complied with. According to him the Arbitrator was biased and he was guilty of violation of principle of natural justice. (3) The Arbitrator has to make his award in relation to the dispute which exists. Unless there is a dispute there can be no reference and there can be no arbitration. In this case the contractor did not raise any dispute with the Society and, therefore, there could be no reference to the Arbitrator. (4) The exparte award was not based on any evidence and no material has been filed by the Contractor to substantiate his claim.
(39) I shall take up the fourth point first, whether there was any material for the Arbitrator to pass the award. I perused the file produced by the Arbitrator. I find the contract entered into between the parties and the statement of facts filed by the Contractor on 10.1.1990 and the correspondence that passed between the parties. Mr. S.K. Mittal learned Counsel for the Contractor submitted that inasmuch as the Society refused to participate in the arbitration proceedings, the Arbitrator was justified in passing the award exparte and that cannot be challenged by the Society in a petition under Section 30 of the Arbitration Act, 1940. In my view, the scope of the jurisdiction of this Court under Section 30 in respect of exparte award is the same as that of an Appellate Court in an appeal against an exparte decree passed by the Trial Court. In an appeal before the Appellate Court under the Civil Procedure Code against a decree passed by the Trial Court exparte, the decree can be challenged on the ground that there are no materials in support of the claim of the plaintiff. Sadhu Krishna Ayyar v. Kuppan Ayyangar and Ors. (1907) Ilr 30 Madras page 59, the Full Bench of the Madras High Court held ” I think it must be taken that the Legislature by accident or design has given a right of appeal, apart from the merits, against an order on the ground that the defendant was not in default failing to appear and against an exparte decree, also apart from the merits, upon the same grounds”. A Division Bench of Allahabad High Court in Hummi v. 4212 -Ud-Din, Air 1917 All 475 had held the defendant can file an appeal against the decree passed exparte. The Court observed “they could challenge the decree by way of appeal (Section 96) on the ground that the evidence which the plaintiff had adduced was not sufficient to justify the decree” ln Jhabarmal Panda v. Bhagawati Prasad Kedia, Air 1990 Guwahatipage35 the Guwahati High Court held that “even if the Court proceeded under Order 8 Rule 10 Civil Procedure Code appeal under Section 96 Civil Procedure Code was competent. ” Therefore, in my view, under Section 30 of the Arbitration Act, 1940 it is open to a party aggrieved to challenge the award on the ground that there was absolutely no material for the Arbitrator to come to the conclusion which he arrived at.
(40) Mr. S.K. Mittal learned Counsel for the plaintiff relied upon the decision of the High Court of Jammu and Kashmir reported in the case of Smt.Manjit jhol v. Dewan Modern Breweries Ltd., 1994 (2) Arbitration Law Reports 166 show in that exparte award cannot be set aside. The High Court of Jammu and Kashmir held that the appellant before it did not make any application for setting aside the exparte order before the Arbitrator nor did instruct the Counsel to appear on the same day fixed for appearance and their non-appearance before the Arbitrator was deliberate. The question whether the exparte award could be set aside on the ground that there was no material to support the decree was not dealt with by the High Court of Jammu and Kashmir. Therefore, I fail to see how this decision could help the Contractor.
(41) Learned Counsel Mr. Rajesh Lakhanpal brought to my notice a few cases in support of his submissions that the exparte award could be set aside if there is no evidence to support the claim reached by the Arbitrator. Thawardas Pherumal 6- Ors. v. 1101 and Ors., wherein the Supreme Court observed: “The error is apparent. The facts must be based either on evidence or on admission. They cannot be found to exist from a mere contention from one side especially when they are denied by the other”. In this case there were pleadings filed by the parties. The Arbitrator passed the award that was challenged before the Court under Section 30 of the Arbitration Act, 1940. The High Court set aside the award and that was upheld by the Supreme Court.
(42) In Dewan Singh v. Champat Singh and Ors., the parties agreed for an adjudication of disputes by the arbitration and the relevant arbitration clause reads as follows : All the Panches and Sarpanchas are residents of village Keli Pargana Sarawa. The power is given to them that the said Panchas and Sarpanchas whatever decision in whatever manner will give an relation to our land described below, whatever land may be given to any party or whatever party may be decided to be the tenant of the entire land, whatever compensation they may decide to be given to any party, whatever decision they will give that will be final and acceptable and they will have the right to inform us of their decision, unanimous or of majority and get the same registered and we will fully comply with their decision.” The argument was that arbitration clause gave very wide powers to the Arbitrator and therefore, whatever decision that was taken by the Arbitrator was final and conclusive on the party and the decision by him was not open to challenge. Supreme Court held: “THE recital in that agreement that the Arbitrators may decide the disputes referred to them in “whatever manner” they think does not mean that they can decide those disputes on the basis of their personal knowledge. The proceedings before the Arbitrators are quashi-judicial proceedings. They must be conducted in accordance with the principles of natural justice.”
M/s.Mehta Teja Singh andCo. v. Uoi and Ors., . This Court held that the Arbitrator was bound to follow the principle of natural justice. In para 24 this Court held “refusal to order production of a document which is the foundation of the claim is a denial of justice”. In para 25 this Court observed : The Arbitrator’s procedure should not be opposed to natural justice. He should perform his function in a quashi-judicial manner and should not make a farce of the enquiry before him. But if he does not follow the fundamental rule governing judicial procedure he commits misconduct. The word misconduct does not involve moral turpitude. It is a technical misconduct. The words misconducted the proceedings’ in Section 30 mean in the words of Atkin, J such a mishandling of the arbitration as is likely to cause some substantial miscarriage of justice’ (Williams v. Wallis, (1914) 2 Kb 478). One instance of such mishandling is this case. There can be no exception to this proposition of law laid down by this Court. This judgment was confirmed by an appeal by this Court in Union of India Delhi Cantt. v. M/s. mehta Teja Singh & Co.,
(43) In the case of the Fertilizer Corporation of India Ltd. v. M/s. Bharat Painters, 1986 Orissa page 82 the Orissa High Court held that the award passed without material on record would amount to an award on the basis of misconduct committed by the Arbitrator and that could be interfered by the Court. Here the parties had filed pleadings. In Mis.Bombay Ammonia Pvt. Ltd. v. Union of India, 1987 Delhi page 148, Sultan Singh, J. has observed as follows : Legal misconduct means and includes some honest though erroneous breach of duty causing miscarriage of justice. If there has been mishandling of the arbitration proceedings or serious neglect of duties on the part of the Arbitrator which is likely to lead substantial miscarriage of justice, the Court is justified in setting aside the award. In K.P. Poulose v .State of Kerala, it has been held that if an Arbitrator ignores material documents he is guilty of legal misconduct. It has been further observed that even if the Department did not produce the documents before the Arbitrator it was incumbent upon him to get hold of all the relevant documents in question for the purpose of just decision. It was held that the Arbitrator had misconducted himself. In Mehta Teja Singh & Co. v. Union of India, it has been held that an Arbitrator must follow the principles of natural justice and if he mishandles the arbitration proceedings likely to cause substantial miscarriage of justice he misconducts the proceedings. In that case the Arbitrator had failed to order the production of document which was a material document. The award was thus partly set aside on that ground holding that the Arbitrator had misconducted. In Union of India v. Mehta Teja Singh b Co., it has been observed that if an Arbitrator had made the award without looking at a vital document, he misconducts himself and the award was liable to be set aside. In the instant case, the Arbitrator had directed the respondent Union of India to produce the documents sought to be produced by the petitioner but he did not pursue the matter further. The documents sought to be produced by the petitioner before the Arbitrator are not available on the record of the proceedings of the Arbitrator. In other words it means that the Arbitrator failed to do his duty and his failure or negligence has resulted in substantial miscarriage of justice to the petitioner. On this ground, alone the award is liable to be set aside. Learned Counsel for the petitioner next submits that the award is based on no evidence and, therefore, it would be set aside. His argument is that the main dispute was about the capacity of the air conditioning plant. He submits that there is no evidence on behalf of the respondent Union of India in support of its plea that the capacity of the air conditioning plant was agreed to be 45.2 TR. If there is no evidence on record the Arbitrator has no jurisdiction to hold on issue No. I that the contract was not executed by the claimant/contractor in terms of the agreement. In Basheshar Nath & Co. v. Union of India, 1978 Rajdhani Lr 65 it has been held that if an award is based on no evidence, then it may be set aside, that Court can go into the question but Court cannot go into the sufficiency of evidence.
(44) In West Bengal Industrial Infra-Stricture Development Corporation v. Mis. Star Engineering Co., 1987 Cal page 126 Mrs. Justice Pratibha Bonnerjea held: Total absence of evidence or Arbitrator’s failure to take into consideration a very material document on record or admission of the parties in arriving at the finding are however good grounds for challenging the proceeding for legal misconduct of the arbitrator.
(45) I do not find any difficulty at all in coming to the conclusion that the award passed by the Arbitrator is based on no evidence and cannot at all be sustained. Therefore, the award is liable to be set aside and it is accordingly set aside.
(46) Consequently the matter is to be remitted back for adjudication.
(47) Mr. Rajesh Lakhanpal did not press the point with reference to the passing of the award beyond the period of four months. In view of the above. It is not necessary to deal with the other points argued by Mr. Rajesh Lakhanpal. Sections 16 and 30 of the Arbitration Act are as follow : Section 16 (1)The Court may from time to time remit the award or any matter referred to arbitration to the Arbitrators or empire for reconsideration upon such terms as it thinks fit – (a) where the award has left undetermined any of the matters referred to arbitration, or where it determines any matter not referred to arbitration and such matter cannot be separated without affecting the determination of the matters referred; or (b) where the award is so indefinite as to be incapable of execution; or (c) where an objection to the legality of the award is apparent upon the face of it. (2) Where an award is remitted under Sub-section (1) the Court shall fix the time within which the Arbitrator or Umpire shall submit his decision to the Court. Provided that any time so fixed may be extended by subsequent order of the Court. (3) An award remitted under Sub-section (1) shall become void on the failure 548 of the Arbitrator or Umpire to reconsider it and submit his decision within the time fixed. Section 30 An 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 or after arbitration proceedings have become invalid under Section 35; (c) that an award has been improperly procured or is otherwise invalid. On a combined reading of the above two sections, in my view if the award is set aside on the ground that there was no evidence to sustain the exparte award the matter could be remitted back for adjudication. This Court took the same view in Union of India v. Mis. Pampassar Distillery, Bellary and Other Air 1981 Delhi 399.
(48) I don’t think it proper to send back the matter for adjudication by the same Arbitrator in the light of his conduct in conducting the proceedings. Therefore, in the interest of justice, I feel that an independent Arbitrator should be appointed. Accordingly, I appoint Mr. Justice H.C. Goel, retired Judge of this Court, B-504, New Friends Colony, New Delhi, as an Arbitrator who shall pass/publish the award within four months from the date of entering on the reference. The Arbitrator shall be paid a sum of Rs. 30,000.00 which shall be borne by both the parties, each party by paying Rs. 15,000.00 to the Arbitrator. The parties shall separately pay to the Arbitrator the expenses which may be incurred by the Arbitrator for adjudication. The suit and the petition stand disposed of. There shall be no order as to costs.