(Per : HONOURABLE MR.JUSTICE AKIL KURESHI) 1. First Appeal is directed against the judgment and order dated 5.1.1990 passed by learned Judge of City Civil Court, Ahmedabad in Civil Misc. Application No.96 of 1989.
2. Brief facts are as follows:-
2.1. Appellant was original opponent No.1 in Civil Misc. Application No.96 of 1989 filed by the State Government. The said Civil Misc. Application was filed with a prayer to set aside the arbitral award rendered by the original opponent No.2. By the said award, the arbitrator had allowed a claim of Rs.28,42,257/- in favour of the appellant herein. Appellant had executed certain works contract. Since the disputes arose between the parties, a reference was made to the Arbitral Tribunal consisting of a sole arbitrator, who, as noted above, passed an award on 14.12.1988. On the ground that the arbitrator had misconducted himself and also on the ground that the reference itself was not competent, State Government approached the Civil Court by filing Civil Misc. Application No.96 of 1989 seeking a prayer for setting aside the arbitral award.
2.2. Learned Judge of the City Civil Court by the impugned order allowed the application of the State. With respect to the ground of misconduct, by the arbitrator, learned Judge held against the Government and concluded that there was no substance in the objections raised with respect to the appreciation of the documentary evidence on record awarding compensation.
2.3. However, on the ground of lack of jurisdiction of the arbitrator, on the premise that the reference itself was invalid, learned Judge held in favour of the Government. In view of the learned Judge, reference was made under Clause 30 of the agreement between the parties. However, such clause did not contain any arbitration agreement. In absence of any arbitration agreement, learned Judge was of the opinion that the reference was incompetent and the award was, therefore, invalid. Contractor's plea that the reference was made under an order of the Court and that in any case, during pendency of the arbitration proceedings, parties had entered into a fresh agreement specifically for the purpose of resorting to arbitration, was not accepted.
3. It is this order of the learned Judge which the original opponent No.1 has challenged before us in the present appeal.
4. Learned counsel for the appellant submitted that the Court committed grave error in holding that Arbitral Tribunal has no jurisdiction and that, therefore, the award was invalid. He submitted that the parties had agreed to approach the arbitrator. Such arbitration reference was made by the Civil Court. In any case, subsequently, the parties entered into a fresh agreement for arbitration.
5. In support of his contention, counsel relied upon the decision in the case of Authorised Officer, Indian Overseas Bank and Another Vs. Ashok Saw Mill reported in (2009)8 SCC 366, in which, the Apex Court observed as under:
“40. The other point regarding the maintainability of the appeal against the review petition, is of little consequence since the appeal was preferred by the appellants themselves. Having invoked the jurisdiction of the appellate court, it was no longer open to the appellants to take a contrary view and to urge that such appeal was not maintainable having been filed against an order passed in a review petition.”
6. On the other hand, learned Assistant Government Pleader Ms. Thakkar appearing for the State Government opposed the appeal, contending that the reference to the arbitrator was invalid in absence of any arbitration agreement. She relied upon the following decisions:
(1) In the case of Md. Army Welfare Housing Organization Vs. Sumangal Services (P) Ltd., reported in (2004)9 SCC 619, in which case, the Apex Court opined that an arbitrator in absence of any specific agreement cannot pass an interim order even with the consent of the parties. It was observed that arbitrator's jurisdiction is confined to the four corners of the arbitration agreement and he can pass only such order which may be the subject matter of the reference. One of the prime questions before the Court was whether the arbitrator has power to pass an interim order. It was in this background, the Court held that arbitrator has no inherent powers.
(2) In the case of Bharat Coking Coal Limited Vs. Annapurna Construction, reported in (2008)6 SCC 732, wherein it was observed that parties cannot confer jurisdiction by mutual consent.
(3) In the case of The District Panchayat, Bhavnagar and Another Vs. M/s. Mahmad Haji Gafur & Company, Bhavnagar, reported in AIR 1984 Gujarat 98.
7. Additionally, learned Assistant Government Pleader also submitted that the award of the arbitrator was a non-speaking award. No reasons whatsoever have been recorded for allowing the claim of the contractor in excess of Rs.28 lakhs. She pointed out that the State Government has filed counter claim of Rs.54,46,017/-. The arbitrator has not given any reasons for rejecting such counter claim. In short, she supported the order on this alternative ground also.
8. Having heard learned counsel for the parties and having perused the documents on record, with respect to the question of validity of reference, we need to see the facts little more closely.
9. Present appellant had filed Civil Suit No.1694 of 1978 before City Civil Court, Ahmedabad against the State Government for filing an agreement in the Court, which, according to the contractor, contained arbitration agreement in Clause 30 thereof. Prayer was made for making reference of all disputes arising out of such agreement to the arbitrator. On 4.11.1982, learned Judge of the City Civil Court, Ahmedabad passed an order, as under:-
“(1) The disputes between the plaintiff and the defendant no.1 arising out of the agreement and/or in connection thereof, as per the agreement dated 8th February, 1977 entered into between the plaintiff and the defendant no.1 in relation to the construction of Earthen Dam, Masonry Dam (exclusive of Spillway Bridge and Gates) of Sani Irrigation Scheme and mentioned in the plaint of this suit, regarding penalty and adjustment of the full amount of the running bills, are ordered to be referred to the arbitration of the Superintending Engineer, as per Clause 30 of the contract at 33, for adjudication.”
10. On 1.9.1985, advocate for the contractor issued a notice to the Government and called upon the Government to refer the dispute to the arbitrator. In terms of such a request and in view of the order passed by City Civil Court, the Government issued an order dated 19.4.1986 and referred the disputes to sole arbitrator Shri G.J. Soneji, Retired Superintending Engineer, Irrigation Department, Government of Gujarat. In the said order, it was specifically provided as under:-
“9. The terms, conditions and fees in connection with the appointment of the arbitrator shall be as per Appendix-I accompanying PWD G.R. No. TNC/5074/158/C dated 8th March, 1977. Copy of this resolution is attached herewith.
10. The arbitrator shall proceed only after an agreement is entered into by both the parties, in the form appended as appendix II of GR quoted in para (9) above.”
11. We may record that pursuant to such terms, the parties entered into a fresh agreement dated 23.7.1987. This agreement was titled as “Arbitration Agreement”. Agreement recorded that the Contractor had raised claim of Rs.38,73,200/- before Shri G.J. Soneji, sole arbitrator. Likewise, the Government had put its counter claim of Rs.54,46,017/-. It was, therefore, recorded that, “and further it is hereby agreed between the parties that the claims aforesaid are hereby referred to the award and final determination of the aforesaid”. Parties also agreed that:
“6). AND FURTHER the Government and the Contractor hereby agree as follows:-
a) There shall be no objection to any such appointment for the reason or on the ground that the arbitrator so appointed had to deal with the matters to which the contract relates and that in the course of this duties as Govt. servant, he had expressed views on all or any of the matter under dispute.”
12. We may record that at one stage, the parties had also approached the Civil Court in the pending suit by filing Misc. Civil Application No.128 of 1987, seeking extension of time, for completion of the arbitration proceedings. Such request jointly made by both the sides was granted by the Civil Court by order dated 4.3.1987.
13. Pursuant to such developments, the arbitrator started the proceedings and held series of meetings. For a long time, no objection was raised by the Government with respect to the competence of reference. It was only in about 9th meeting that such an objection came to be raised. Arbitrator, undeterred by such objection proceeded to adjudicate on the disputes and rendered his award, as mentioned hereinabove.
14. With respect to validity of the reference, we are of the opinion that learned Judge has committed an error in declaring such an award invalid. It does appear that clause 30 of the original agreement did not envisage arbitration proceedings. However, in the present case, as already recorded, the facts are peculiar. When the contractor approached the Civil Court for referring the dispute for arbitration in terms of such clause, Civil Court granted such a request and passed judicial order, requiring the Government to make a reference to the arbitrator. In terms of such an order of the Civil Court, the Government itself passed an order appointing Shri G.J. Soneji as sole arbitrator. Whatever defect in such a reference, parties desired to cure it by entering into a separate agreement dated 23.7.1987. Agreement itself recorded that the parties mutually agreed to refer the disputes arising out of Clause 30 of the contract to Shri G.J. Soneji. It was further agreed that no objection shall be raised to such appointment. Before the Civil Court, parties had jointly approached seeking extension of time for completing the arbitration proceedings.
15. Combined effect of these factors would be that it was thereafter not open to the Government to question the jurisdiction of the arbitrator. The order passed by the Civil Court requiring the Government to make reference to the arbitrator was never challenged. In fact, such an order was accepted. Government thus acquiesced in the order and made appointment of an arbitrator. It was thereafter, not open to the Government to question the reference itself.
16. Having thus, found that the Civil Court erred in setting aside the arbitral award on the ground of jurisdiction, the question arises whether the arbitral award was otherwise valid. In this respect, we may recall that the State Government had contended before the Civil Court as well as before us that the award of the arbitrator was a non- speaking award and therefore, bad in law.
17. It is not in dispute that the agreement required the arbitrator to pass a speaking order. Having perused the award, it emerges unequivocally that the award was a non-speaking award. Learned arbitrator gave no reasons whatsoever for allowing the claim of the contractor to the tune of Rs.28,42,257/-. Simultaneously, the arbitrator did not give any reasons for rejecting the Government's counter claim of Rs.54,46,017/-. On this ground itself, the arbitral award is required to be set aside.
18. Under the circumstances, on the grounds somewhat different from those adopted by the Civil Court, we are inclined to confirm the decision in Civil Misc. Application, setting aside the arbitral award. On behalf of the appellant, no further grounds were urged or prayer made. The State Government has also not taken any steps to challenge rejection of its counter claim by the arbitrator. We, therefore, terminate the whole proceedings at this stage.
19. In the result, appeal is dismissed.
Record and Proceedings be transmitted to the Trial Court.
Sd/-
(AKIL KURESHI, J.) omkar Sd/-
(C.L. SONI, J.)