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1961 Supreme(SC) 168

SUPREME COURT OF INDIA
7th April 1951
S.K. DAS, J.L. KAPUR, M HIDAYATULLAH, J.C. SHAH AND T.L. VENKATARAMA AYYAR JJ.
State of Bihar, Appellant
Versus
M/s. Karam Chand Thapar & Brothers Ltd., Respondents.
Civil Appeal No. 209 of 1959.
Advocates appeared
Mr. L. K. Jha, Senior Advocate (Mr. R. C. Prasad, Advocate with him), for Appellant Mr. M C. Setalvad, Attorney General for India, Mr. N. De, Senior Advocate, (Mr. P. K. Mukherjee, Advocate, with them), for Respondents.

Advocates:
L.K.JHA, M.C.SETALVAD, N.DEY, P.K.MUKHERJI, R.C.Prasad

1. An agreement for reference to arbitration is valid and binding on the Government if it is executed by a person who is authorised to do so by the Governor. 2. A copy of an award which is sent by the arbitrator to the court is the original instrument and not a copy thereof, and therefore it can be validated under S. 35 of the Stamp Act, 1899.

Headnote:

ARBITRATION - VALIDITY OF REFERENCE - AGREEMENT EXECUTED BY AUTHORISED PERSON - STAMP ACT, 1899, S. 35 - VALIDATION OF COPY OF AWARD - ORIGINAL AWARD SENT TO COURT - VALIDATION OF COPY NOT NECESSARY.

Fact of the Case:

The State of Bihar entered into three contracts with Karam Chand Thapar and Brothers Limited for the construction of various works at Ranchi. Disputes arose between the parties over the bills, and they were referred to arbitration by an agreement dated February 6, 1948. The arbitrator made his award on June 4, 1948, and sent a copy thereof to the parties. The respondents filed a petition under Ss. 17 and 20 of the Indian Arbitration Act, 1940, for a decree in terms of the award. The appellant filed objections thereto, and the petition was dismissed. The arbitrator then sent a copy of the award duly signed by him to the Court of the Additional Subordinate Judge of Ranchi for being filed as provided in the Act. The appellant filed an application to set aside the award on various grounds. The Additional Subordinate Judge, Ranchi, passed a decree in terms of the award except as to a part which he held to be in excess of the claim. The appellant took the matter in appeal to the High Court of Patna which confirmed the decree of the Subordinate Judge. The appellant then appealed to the Supreme Court.

Finding of the Court:

The Supreme Court held that the agreement dated February 6, 1948, was executed by a person who was authorised to do so by the Governor, and in consequence there was a valid reference to arbitration. The Court also held that the copy of the award which was sent by the arbitrator to the court was the original instrument and not a copy thereof, and therefore it could be validated under S. 35 of the Stamp Act, 1899.

Issues: 1. Whether the agreement for reference to arbitration dated February 6, 1948, was valid and binding on the Government? 2. Whether a decree could be passed on the unstamped copy of the award filed in the Court?

Ratio Decidendi: 1. The agreement for reference to arbitration dated February 6, 1948, was executed by Y. K. Lall, Executive Engineer, Ranchi Division, who was authorised to do so by the Governor of Bihar. This was evident from the correspondence between the Secretary to the Government, the arbitrator, and the Executive Engineer. 2. The copy of the award which was sent by the arbitrator to the court was the original instrument and not a copy thereof. Therefore, it could be validated under S. 35 of the Stamp Act, 1899.

Final Decision: The appeal was dismissed with costs.

Judgment

VENKATARAMA AYYAR, J. : This is an appeal against the Judgment of the High Court of Patna in an appeal under the Arbitration Act, 1940. The appellant is the State of Bihar, and the respondents are a company registered under the Indian Companies Act, doing business as building contractors. They entered into three contracts for the construction of aerodrome, hangarettes, buildings, stores and other works at Ranchi, the first of them being contract No. 21 of 1942 dated November 5, 1942, and the other two being contracts Nos, 6 and 8 dated April 5, 1948. After the above works were completed, disputes arose between the parties over the bills and eventually by an agreement dated February 6, 1948, they were referred to the arbitration of one Col. A. W. S. Smith. The arbitrator made his award on June 4, 1948, and sent a copy thereof to the parties. The respondents thereupon filed a petition under Ss. 17 and 20 of the Indian Arbitration Act, 1940, for a decree in terms of the award. The appellant filed objections thereto, and the petition was then registered as Title Suit No. 513 of 1951. While this suit was pending, the arbitrator who had meantime left for Hong Kong sent to the Court of the Additional Subordinate Judge of Ranchi before whom the suit was pending a copy of the award duly signed by him, for being filed as provided in the Act. Notices were issued by the Court under S. 14 (2) of the Act and, in answer thereto, the appellant filed an application to set aside the award on various grounds. To this, the respondents filed their reply statement. In view of this application, the respondents did not press their petition under Ss. 17 and 20 of the Arbitration Act, which was in consequence dismissed, and the proceedings which commenced with the receipt of the award from the arbitrator were continued as Title Suit No. 53 of 1951. After an elaborate trial the Additional Subordinate Judge, Ranchi, passed a decree in terms of the award except as to a part which he held to be in excess of the claim. The appellant took the matter in appeal to the High Court of Patna which confirmed the decree of the Subordinate Judge but granted a certificate under Arts. 132 and 133 (1) of the Constitution, and hence this appeal.

2. Though the controversy between the parties ranged in the courts below over a wide area, before us, it was restricted to two questions whether there was a valid agreement of reference to arbitration binding on the Government and whether a decree could be passed on the unstamped copy of the award filed in the Court. On the first question, the appellant contends that the agreement for reference to arbitration does not comply with the requirements of S. 175 (3) of the Government of India Act, 1935, which was the Constitutional provision in force at the relevant date, and it is therefore void, that the award passed in proceedings founded thereon is a nullity and that no decree could be passed in terms thereof. Section 175 (3) is as follows :

"Subject to the provisions of this Act with respect to the Federal Railway authority, all contracts made in the exercise of the executive authority of the Federation or of a province shall be expressed to be made by the Governor-General, or by the Governor of the Province, as the case may be, and all such contracts and all assurances of property made in the exercise of that authority shall be executed on behalf of the Governor-General or Governor by such persons and in such manner as he may direct or authorise."

Under this section, a contract entered into by the Governor of a Province must satisfy three conditions. It must be expressed to be made by the Governor; it must be executed; and the execution should be by such persons and in such manner as the Governor might direct or authorise. We have now to examine whether the agreement to refer to arbitration dated February 6, 1948, satisfies the above conditions. It is expressed to be made between the Governor of Bihar and the respondents. It




















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