JUDGMENT
A.K. Sikri, J.
Page 0473
1. Union of India through General Manager, Northern Railway, invited tenders for ‘earth work in formation, diversions and construction of bridges, including training works in Zone KVR-4 from KM 3.171 to Km 3.643 on proposed realignment between Jawanwalashahr-Guler Stations on Pathankot-Joginder Nagar Section’ of Northern Railway. This contract was ultimately awarded to the petitioner herein, namely, M/s. Siri Ram Sayal & sons. Some dispute arose and the General Manager appointed Sh. J.L. Jain and Sh. O.N. Endley as the Arbitrators to adjudicate upon the same. These Arbitrators have made and published their award dated 20.5.1988. By this award, the two Arbitrators have directed the Union of India to pay to the petitioners a sum of Rs. 6,86,280/- in full and final settlement of their claims. It is also directed that if the payment is not made within 45 days, this amount shall carry interest @ 12% per annum after the expiry of 45 days till the payment is made or decree passed, whichever is earlier.
2. On the publishing of this award, the petitioner filed application under Section 14 & 17 of the Arbitration Act, 1940 for filing of the award and making it rule of the court which is registered as suit No. 1481A/88. The Union of India intended to challenge this award and they also filed petition under Section 14 of the Act for filing of the award which was registered as suit No. 1425A/88. Arbitrators were directed to file the award in original. When it was filed, notice thereafter was given to the parties. The Union of India filed IA No. 8293/88 which are objections under Section 30 & 33 of the Arbitration Act challenging the said award. The petitioner filed reply thereto. On 17.10.89, the following issues were framed:
1) Whether the objection-petition has been filed within period of limitation?
2) Whether the award is liable to be set aside on the grounds set up in the objection-petition?
3) Relief.
Parties were directed to lead evidence in the form of affidavits which was done thereafter and arguments were heard. In these circumstances, I proceed to first deal with these objections.
3. As is clear from the issues which were framed on these objections, the petitioner has objected to the maintainability of these objections on the ground Page 0474 that they were filed beyond the period of limitation. It is contended that notice of filing of the award was served on the Union of India on 4.10.1988. Though it is admitted that objections were filed on 2.11.88 (which would be within limitation) but the contention is that it did not bear sufficient stamps and was cearly under stamped. The application was thus filed without proper court fee and since this objection was put by the Registry on 7.11.1988 with remarks that the same be refiled after removing the objection within one week i.e. by 14.11.1988. The proper court fee was in fact paid and application was refiled only on 15.11.1988, as such the objections can be treated as having been filed only on 15.11.1988 and these would be time barred.
4. This objection of the petitioner is without any merit. It is admitted that the objections were filed within the statutory period of limitation. If there was some objection regarding under stamp, the same was removed. Only because the Registry stipulated that it should be removed within seven days but the applicant took eight days in removing the same would not be a ground to hold that these objections are time barred. It may also be noted that as per the respondent, the objections were filed on 1.11.88 vide filing counter No. 12989. Since two petitions were registered as mentioned above, the Registry initially took the objection that because title mentioned namely Union of India v. Siri Ram Syal & Sons is not proper as the objections were filed in Suit No. 1481A/88 which bears the cause title Siri Ram Syal & Sons v. Union of India. This objection was removed on 4.11.88. At that time, no objection regarding court fee was taken which was subsequently taken on 7.11.88 and was sent to the filing counter on 8.11.88. Thus, the respondent came to know about the objections on 8.11.88 and removed the same within one week. It is also explained by the respondent that court fee stamp of Rs. 2.75 was affixed on this application and the objection was that Rs. 19.50/- should be affixed which was not a valid objection as the court fee required to be affixed is Rs. 2.75/- only but still the objection was removed by affixing the court fee as demanded by the Registry. I am of the view that all these explanations given by the respondent are valid and, therefore, the objections were filed within the period of limitation. Presumably because of this factual position existing at the time of arguments, this issue was not even pressed or argued by the learned Counsel for the petitioner. This issue is accordingly decided in favor of the objector and against the petitioner.
5. Coming to the merits of the objections, the perusal of the objections would show that the principle challenge to the award is on the following counts:
i) No proper notice of the proceedings was given, which ultimately led to an ex-parte Award against the petitioner.
ii) Unreasoned Award.
iii) Retirement of the Arbitrator Sh. O.N. Endley during the course of proceedings and the revocation of his authority.
iv) Misconduct of proceedings by favoring the respondent as well as passing a back dated award.
Page 0475
v) Expiry of the period of arbitration before the passing of the award.
vi) Adjudication of certain claims, though they are “excepted matters” in terms of Clause 63 of the GCC, and do not form part of reference to Arbitration.
6. I would take up these objections in seriatum and discuss these objections in detail at that stage.
7.(i) It is alleged by the objector that the Arbitrators deliberately did not furnish proper/sufficient opportunity to the objector to represent its case before the Arbitrators and acted in a sheer haste to pass and publish the impugned award. It is submitted that the Arbitrators on 16.5.1988 had sent a telegraphic notice at Jammu for the hearing being fixed for 19.5.1988 and 20.5.1988 in Delhi, which telegraphic notice was received in the office of the petitioner at Jammu towards the evening of 17.5.1988 when the concerned officials dealing with the matter had left to attend to the Principle Engineer of the Railway Board, who was visiting Jammu at that time. It is further submitted that on 18.5.1988 happened to be “Id” due to which there was a Gazetted holiday and the offices were closed. It is submitted that it was only on 19.5.1988 that the telegram was noticed by the petitioner herein and the attempts were made to contact the Counsel at Delhi. The notice by Registered Post dated 16.5.1988 could only be received at Jammu on 19.5.1988 when the dates fixed had already passed. Thus, it is contended that the said notice was not sufficient service as it did not provide sufficient opportunity to the objector to represent themselves and the arbitral proceedings conducted on 19.5.1988 and 20.5.1988 in a surreptitious manner which amounted to negation of natural justice and award is liable to be set aside on this ground. I am of the view that the aforesaid objection is far-fetched. In the first instance, it is to be noted that even as per the objectors’ own admission, the telegram was received in the evening of 17.5.1988 at Jammu. If there was some difficulty to attend the hearing on 19.5.1988 and 20.5.1988, the minimum which was required was to take immediate steps by writing to the Arbitrators for adjournment. However, inspite of receiving this telegram, the objector which is Railway and having large establishment, did not take any steps for informing the Arbitrators. There could have been a telegraphic request to the Arbitrators which was not done. The Railway has well equipped legal section in New Delhi and the officers were appearing before the Arbitrators on earlier dates. No steps were taken to inform New Delhi office as well. The Railway was also represented through counsel and at least a telephonic call to their counsel to inform about the date with instructions to seek adjournment could have worked. All this was not done and it appears that this move was deliberate as pointed out hereinafter. As on 19.5.1988, when the hearing was scheduled, in so far as Arbitrators are concerned, there was no communication to them. They had no option but to proceed with the matter. The petitioner may be right in their submission that it amounts to deliberate negligence and malafide dereliction of duty on the part of the objections. Mr. Surinder Kaul, Deputy Chief Engineer (Construction), Northern Railway, Jammu, was not receiving all correspondence himself. It is received by his staff. Deputy Chief Engineer is Page 0476 required under rules to look after all the work of his office. It is further contended by the petitioner that Sh. Surinder Kaul was not attending all the hearings. What is more important is the background in which these hearings were fixed. The petitioner has stated that in the previous hearings, the objector came to know of the minds of the Arbitrators. Since they could guage that Arbitrators may give an award against the objector, on 11.5.1988 allegedly a letter was addressed by the objector informing that since Sh. Endley had retired from the Railway service on 31.5.88, he could not have acted as Arbitrator thereafter and had vacated his office. There is specific objection of the objector on this aspect which shall be dealt with separately. What is emphasised is that as the Railways had taken objection to Sh. Endely continuing as the Arbitrator on 11.5.88 that may be the reason to avoid hearing on 19.5.88 and gain time. It may be noted that application was allegedly drafted which was sought to be given to Mr. Jain, only on 24.5.88 by which date award had been published which was given on 20.5.88. I am, therefore, of the opinion that the objector cannot contend that they were not given proper opportunity.
(ii) Next contention of the learned Counsel for the objector was that the impugned award is unreasoned award which is not in conformity with the mandatory provisions of the Arbitration agreement as well as Arbitration Act, 1940. In support of this, reliance is placed on Clause 64(3)(b)(i) of the GCC which reads as under:
the Arbitral Award shall state item-wise, the sum and reason upon which it is based.
It is not in dispute that normally the Arbitrators are not supposed to give reasons in support of their award as held by the Supreme Court in the case of State of Rajasthan v. R.S. Sharma and Co. . The award will not be set aside merely because no reasons have been given in the award. However, if it is a term of the agreement that reasons are to be given, then it becomes mandatory on the part of the Arbitrators to pass reasoned award. It is not in dispute that in the present case award given by the learned Arbitrators is non speaking. In fact, the petitioner has itself admitted that the award does not give any reasons but the argument is that no such reasons were required to be given. Submission of the petitioner is that the non reasoned award cannot be challenged unless the award is per se preposterous or absurd. Appraisement of evidence by the Arbitrator is not matter of the Court and for this the petitioner has relied upon the judgment of the Supreme Court in the case of Messrs Gujarat Water Supply & Sewerage Board v. Unique Errectors (Gujarat) Pvt. Ltd. and Anr. 1989(1) SC 285. It is contended that since it is a lump-sum award given by the Arbitrator, it is not possible to decipher from the award as to what claims and to what extent have been accepted by the Arbitrators and which have not been accepted and what grounds. Therefore, the whole exercise of attacking individual claims by the objector is beyond the scope of the present proceedings. This argument begs the questions. Such an argument would be valid if the Arbitrator had a right to give non-speaking award.
Page 0477
We are, here, concerned with the question as to whether Arbitrators were bound to give reasons in support of their award in view of the Clause 64 (3)(b)(i). This clause which is reproduced above categorically states two things. (a) The arbitral award shall state item-wise, the sum awarded i.e. against each item of claim the amount awarded would be stated; and (b) reasons upon which the said sum award is passed would be stated. This clause thus in no uncertain terms imposes an obligation upon the Arbitrators to give itemized award and also give reasons in support thereof. Since this obligation is cast upon the Arbitrators as per the arbitration clause itself, lumpsum non-speaking award passed by the Arbitrators vitiates that award as it is contrary to this condition and without following the mandate contained therein.
In Khub Chand and Ors. v. State of Rajasthan and Ors. , the Supreme Court held that when it is mandatory to state reasons, failing to do so would render the award invalid and liable to be set aside. Likewise in Raipur Development Authority and Ors. v. Chokamal Contractors and Ors. AIR 1990 SC 1426, Constitution Bench of the Supreme Court laid down proposition of law in the following manner:
19. It is now well-settled that an award can neither be remitted nor set aside merely on the ground that it does not contain reasons in support of the conclusion or decisions reached in it except where the arbitration agreement or the deed of submission requires him to give reasons. The arbitrator or umpire is under no obligation to give reasons in support of the decision reached by him unless under the arbitration agreement or in the deed of submission he is required to give such reasons and if the arbitrator or umpire chooses to give reasons in support of his decision it is open to the Court to set aside the award if it finds that an error of law has been committed by the arbitrator or umpire on the face of the record on going through such reasons. The arbitrator or umpire shall have to give reasons also where the court has directed in any order such as the one made under Section 20 or Section 21 or Section 34 of the Act that reasons should be given or where the statute which governs an arbitration requires him to do so.
This dictum has been reiterated in the case of Rajender Construction Co. v. Maharashtra Housing and Area Development Authority and Ors. (2005) 7 A.D. (S.C.) 276. The award in question, therefore, suffers from this serious infirmity and is liable to be set aside on this ground itself.
Since the award cannot stand the legal scrutiny, being non-speaking, it may not be necessary to go into the other objections raised by the objector particularly objections No. (iv) & (v). However, as the matter requires to be remitted back to the Arbitrators directing them to give speaking award, it would be necessary to deal with objection No. (iii) namely continuance of Sh. O.N. Endley as the Arbitrator. I, therefore, deal with this objection before giving final directions.
Page 0478
(iii) It is the contention of the learned Counsel for the objector that Sh. O.N. Endley was appointed as the Arbitrator by virtue of his being official of the Railways and he had no jurisdiction to continue as an Arbitrator after his retirement and, therefore, when the General Manager, Northern Railway expressly removed him as Arbitrator. Vide letter dated 11.5.88, he had no jurisdiction to proceed with the matter after that date. Reference made to Clause 64 of the GCC as per which an Arbitrator has to be a Gazetted Officer and he ceased to be a Gazetted Officer on his retirement. Relevant portion of the Clause 64 reads as under:
3 (a)(ii) – Matter in dispute shall be referred to 2 Arbitrators who shall be Gazetted Railway Officers of equal status to be appointed in the manner laid down in Clause 64(3)(b) for all claims of Rs. three lakhs and above and for claims irrespective of the amount and value of such claim if the issues involved are of a complicated nature. The General manager shall be the sole judge to decide whether issues are of a complicated nature or not. In the event of two arbitrators being divided in their opinion the matter under dispute will be referred to an umpire to be appointed in the manner laid down in sub Clause 3(b) for his decision.
3 (a)(iii) – “If one or more of the Arbitrators appointed above refuses to act as Arbitrator, withdraw from his office as Arbitrator or vacates his/their office/s or is/are unable or unwilling to perform his functions as Arbitrator/s, for any reason whatsoever, or dies or in the opinion of the General Manager fails to act without undue delay, the General Manager shall appoint new Arbitrator/s in their place in the same manner in which the earlier Arbitrator/s had been appointed. Such re-constituted Tribunal may at its discretion proceed with reference from the stage at which it was left by the previous Arbitrator.”
3(b) – For the purpose of appointing “two Arbitrators” as referred to in Sub-clause (a)(ii) above, the Railways will send a panel of more than 3 names of the Gazetted Railway Officers of one or more departments of the Railways to the contractor who will be asked to suggest to the General Manager one name out of the list for appointment as contractor’s nominee. The General Manager while so appointing the contractor’s nominee will also appoint a second Arbitrator as Railway nominee either from the panel or from outside the panel ensuring that one of the two Arbitrators so nominated is invariably from the two Arbitrators so nominated is invariably from the Accounts Department. Before entering upon the reference the two Arbitrators shall nominate an umpire who shall be a Gazetted Railway Officer….”
3(c) – If the Sole Arbitrator appointed under Sub- clause (a)(i) or one or both the Arbitrators appointed under Sub-clause (b) above resigns his appointment/resign their appointments or vacates his office/vacate their offices or is/are unable or unwilling to act for any reason whatsoever or dies/die, the General Manager may Page 0479 appoint a new Arbitrator/Arbitrators as the case may be. Such Arbitrator/Arbitrators, as the case may be, shall be entitled to proceed with the reference from the stage at which it was left by the previous Arbitrator/Arbitrators.”
3(f) – Subject as aforesaid Arbitration Act 1940 and the Rules there under and under statutory modification thereof shall be applied to the arbitration proceedings under this Clause.
8. Sub-clause 3 (a)(ii) of Clause 64 states that matter in dispute shall be referred to two arbitrators who shall be Gazetted Railway Officers of equal status. It is not in dispute that Sh. Endley, the date on which he was appointed was a Gazetted Officer. It is also not in dispute that appointment was made after following the procedure contained in Sub-clause 3(b).
9. Learned Counsel for the objector referred to the following judgments in support of his submission that if an Arbitrator, who has been appointed by the Union of India by post ceases to hold the post he cannot continue as an Arbitrator:
1) UOI and Ors. v. Prabhat Kumar and Bros. and Anr. .
2) UOI v. Ch. Radhanath Nanda and Anr. .
3) Bharat Construction Co. Limited v. UOI .
10. On the other hand, it was argued by the learned Counsel for the petitioner that in the absence of any provision in the arbitration agreement that a Gazetted Officer must continue to remain Gazetted Officer all through his appointment as Arbitrator, he would not suffer any disqualification on his retirement as Gazetted Officer. It was also submitted that even after retirement from the Railways on 31.5.1986, he continued to serve with M/s. RITES and, therefore, he was holding a position in a Government Sector undertaking even on the date when the award was published. He also submitted that though Mr. Endley had retired on 31.5.1986, he continued to hold arbitration proceedings, which was never challenged by the objector and only on 11.5.1988 purportedly letter of removal was sent though it was never received by the petitioner. Judgments cited by the learned Counsel for the petitioner in support of his submission are the following:
1) Construction India v. Secretary, Works Department, Government of Orissa and Ors. .
2) Mohinder Pal Mohindra v. Delhi Admn. and Ors. 1989 (1) Delhi Lawyer 85.
3) M.K. Shah Engineers & Contractors v. State of M.P. .
11. In the present case, the agreement categorically states that the Arbitrators to be appointed shall be Gazetted Railway Officers. The letter Page 0480 of appointment also shows that two Arbitrators were appointed and the matter referred to them in view of their being Gazetted Officer. The order of reference in case of Sh. O.N. Endley clearly states that he is OSD/IR Northern Railway, Baroda House, New Delhi. Therefore, in view of the judgment of the Supreme Court in the case of UOI and Ors. v. Prabhat Kumar and Bros. and Anr. (supra) normally he could be removed as the Arbitrator once he ceased to be Gazetted Officer on his retirement. However, this course of action though available to the General Manager, Northern Railway, was not adopted by him. On the contrary, even after 31.5.86, the objector kept on participating in the arbitration proceedings with Mr. Endley as co-arbitrator. As pointed out above, there is no clause in the agreement that if a person ceases to be a Gazetted Officer, he ceases to be Arbitrator as well. Therefore, he could continue as Arbitrator though it was permissible for the appointing authority to appoint another Arbitrator in his place. However, since such a course of action was not taken and for almost two years the objector also participated in the proceedings, it would be a clear case where the persona designated waived his right to appoint another Arbitrator in his place and accepted him as the Arbitrator even after his retirement.
12. In the cases cited by the learned Counsel for the petitioner, note whereof is taken above, it is categorically held that in such circumstances, there would be acquiescence by the parties to submit to the Arbitrators and thereafter the objection of lack of jurisdiction cannot be taken. In Construction India v. Secretary, Works Department, Government of Orissa and Ors. (supra) one Sh. G.S. Patnaik, Chairman of the Orissa Arbitration Tribunal was appointed as Arbitrator with consent of the parties. He demitted his office of the Chairman of the Tribunal during the pendency of the arbitration proceedings. Objection that he had ceased to have jurisdiction to continue with the arbitration was raised and later was withdrawn by the respondents during the arbitration proceedings, it was held that award rendered by the Arbitrator was valid as the respondent consciously acquiesced in continuance of arbitrator’s jurisdiction. Similarly in Mohinder Pal Mohindra v. Delhi Admn. and Ors. (supra) which is a decision rendered by this court, the Arbitrator was a Government servant who continued with the arbitration even after his retirement and it was held that parties had acquiesced the continuation of the said arbitrator and his authority could not be revoked. That was a case where petition was filed by the Government seeking leave of the court to remove the authority of the arbitrator on the ground that he ceased to be Arbitrator on his vacating his office on reaching the age of superannuation. Referring to various judgments of the Supreme Court and our own High Court on the subject the court held that principle of acquiescence and waiver was clearly applicable. It may be of interest to note that in view of the Page 0481 arbitration clause, the court had opined that on vacating the office, the arbitrator could be removed but because of the reason that Government had participated in the arbitration proceedings without demur even after his retirement, principle of acquiescence was held applicable and application of removal was dismissed. Relevant portion of the judgment is as under:
I do not agree with the learned Counsel for the Contractor with regard tot eh fact of the arbitrator retiring from the service. The word that the arbitrator would seize to have jurisdiction over the arbitration matter on his vacating the office obviously means that on his vacating the official office i.e. on his attaining the age of retirement or superannuation as far as his service is concerned. However, in view of the fact that the arbitration agreement between the parties continued to be legal and valid, the Delhi Administration is now estopped from challenging the jurisdiction of Shri Kishan Chand to act as arbitrator in as much as Delhi Administration had participated in the arbitration proceedings without demur and had also given consent in writing for extending the period for making the award by the said arbitrator even though the said arbitrator had retired from service much earlier.
13. In the present case as well, not only the Union of India kept on appearing before the two arbitrators for almost two years, during this period consent was specifically given by the Union of India for extending the period for making the award by the said arbitrators. It is only at the fag end of the arbitration proceedings that alleged letter dated 11.5.88 was written purportedly removing Mr. Endley as arbitrator. But this action was too late. I may also mention at this stage that there is a dispute as to whether such a letter was written or not as the petitioner has stated that no such letter was received and even the genuineness of this letter is challenged on the ground that it is not signed by the General Manager. However, this aspect need not be dealt with. In view of my opinion even if such a letter exists, it is afterthought and is of no consequence.
14. The upshot of the above discussion would be to set aside the award on the ground that it is non reasoned award and item-wise claims are not given. The matter is accordingly remitted back to the Arbitrators with direction to give further opportunity of hearing to the parties and thereafter pass item-wise award supported by reasons as required under Clause 64(3)(b)(i) of GCC.