2007 Supreme(SC) 137

2007(2) Supreme 923
SUPREME COURT OF INDIA
(From Punjab and Haryana High Court)
S.K. Kapadia and B. Sudershan Reddy, JJ.
Jatinder Nath—Appellant
versus
M/s Chopra Land Dev. P. Ltd. & Anr.—Respondents
Civil Appeal No. 1134 of 2007
(Arising out of SLP (C) No. 11815 of 2006)
Decided on 2-3-2007
Counsel for the Parties :
For the Appellant : Sunil Gupta, Sr. Advocate, Jatin Zaveri, Advocate.
For the Respondents : R. Venkataramani, Sr. Advocate, Nikilesh Ramachandran and Ashok Panigrahi, Advocates.

IMPORTANT POINTS
1. A bare failure of an arbitrator to make an award within the time allowed by law will not involve the consequences of it being set aside only on that ground. The court has ample powers in a given case to extend the time and give life to the vitiated award by exercising judicial discretion u/s 28 of the Arbitration Act, 1940
2. Residence or carrying an business of a party, apart from the place of accrual of a cause of action is relevant for determining the territorial jurisdiction of the court in arbitration cases, if the question so arises in connection with the subject matter of the dispute.

Headnote:Arbitration Act, 1940—Sections 14 to 17, 20, 23, 30, 31, 33—Arbitration Award—Ex-parte order making award rule of Court—Sustainability—Development Agreement between owner of property and Developer—Dispute relating to possession of property—Land located in Delhi—Arbitration Agreement—Parties agreed that in case of dispute between the parties the same shall be referred for arbitration to the sole arbitrator at Faridabad—Arbitrator entered upon reference on 24-8-1992—He fixed hearing on 5-9-1992 on which appellant, owner of land remained present at venue of arbitration—However, neither the arbitrator nor the Developer was present—Ex-parte award passed on 29-3-1994—Developer, respondent filed an application u/s 14 of the Act for filing the Award in Court at Faridabad—Appellant objected to jurisdiction of Court—Whether application filed by Developer in trial Court at Faridabad was maintainable—(Yes)—At the relevant time when contract was made appellant resided at Faridabad—Applicability of Section 20 CPC—High Court was right in holding that the Faridabad Court had jurisdiction to make the Award the rule of the court.

       Held : On the facts of this case, therefore, it cannot be said that the trial court at Faridabad had no jurisdiction to make the Award the rule of the court under section 14 of the Act. Section 31(1) of the Act provides that an Award may be filed in any court having jurisdiction in the matter to which the reference relates. Under that section, the Award can be filed in the court within whose jurisdiction the property in dispute lies. Parties cannot give jurisdiction to a court under section 14 by consent if that court does not have jurisdiction. If an award refers to an immovable property, the court having jurisdiction in respect of the same will entertain an application under section 14. In order to decide as to which court has jurisdiction to entertain a petition under section 14, reference has to be made to section 2(c) read with section 31(1) of the Act. Merely because the arbitrator chooses to hold the proceedings in a place where no suit could be instituted, and chooses to make an award at that place, it would not give the court of that place territorial jurisdiction to decide the matter under the Act. Section 30 refers to ground for setting aside an award. Section 30 is to be read with section 33. The idea behind the entire scheme of the Arbitration Act appears to be that an application by a party challenging the validity of correctness of the award on whatever ground has to be made under section 33. Section 33 is the only section under which a party is given the right to apply to the court to challenge either the agreement or the award. Under the Act, therefore, after the Award has been filed a party is permitted to make an application under section 33 to bring all kinds of defects to the notice of the court and the court will give reliefs either under section 15 or section 16 or even under section 30 of the Act. In an arbitration without the intervention of the court, an award can be filed in any court having jurisdiction in the matter to which the reference relates. The award can be filed only in the court which would have jurisdiction in respect of the subject matter of the dispute. In order to decide the jurisdiction of the court, it is necessary to decide whether the court would have jurisdiction to try a regular suit between the parties in which the relief is claimed. Section 33 does not prescribe the court before which an application under this section may be filed, but section 31 makes such provision. Section 31(2) provides that all questions regarding the validity, effect or existence of an award or an arbitration agreement shall be decided by the court in which the award has been filed or may be filed. Section 2(c) lays down the forum. The application has to be moved in the court within whose jurisdiction the opposite party resides or carries on business or within whose jurisdiction any part of the cause of action arises. Residence or carrying on business of a party, apart from the place of accrual of a cause of action is relevant for determining the territorial jurisdiction of the court in arbitration cases, if the question so arises in connection with the subject matter of the dispute.(Para 15)

       Applying the above tests to the facts of the present case, we are of the view that at the relevant time the appellant resided at Faridabad. He resided at Faridabad when the contract was made. Under the contract, the parties agreed to refer all disputes to the Faridabad court. Apart from the residence, we are also concerned with the place of accrual of the cause of action. In the present case, a bare reading of the agreement indicates that it is an agreement to develop. The appellant remains the owner, the Developer remains the contractor. The Developer is the financer. The appellant is the owner of an asset. The contractor/Developer agrees to exploit that asset on behalf of the owner. The Developer funds the scheme. The building plans remained in the name of the owner. The D.D.A. informs the owner regarding revocation of the building plan. The owner files the writ petition challenging the revocation. The contractor is paid consideration in terms of a part of the property. In the circumstances, it cannot be said that this case is similar to a suit for land. One cannot look at para 16 alone in isolation. On the other hand, with open eyes, the parties had entered into the contract, they had agreed to refer all disputes to an arbitrator at Faridabad and they had agreed that the Faridabad court alone shall have jurisdiction. In a matter of this kind, it cannot be said that the claim is similar to a suit for land. A housing complex has to be constructed at the site. When dispute arises, it will not be confined only to immovable property. Such disputes also require accounts to be maintained. The disputes also involve rendition of accounts. In the circumstances, in our view, section 20 CPC alone is attracted. Therefore, in our view, the High Court was right in holding that the Faridabad court had jurisdiction to make the Award the rule of the court.(Para 16)

       (ii) Arbitration Act, 1940—Sections 8, 20 and 28—Arbitration proceedings—Limitation period for making the award—Powers of Court to extend time—Mere failure of an arbitrator to make an award within the time allowed by law will not involve the consequences of it being set aside only on that ground—Judicial discretion u/s 28 of the Act—Arbitrator entered upon reference on 24-8-1992—On 5-9-1992, date fixed for hearing, appellant appeared but arbitrator was absent—Award given almost after fourteen months—Ex-parte order of trial Court making award rule of Court—Whether sustainable—No—Trial Court to re-examine the question on merits as to whether the Award given by the Arbitrator should or should not be made rule of Court.

       Held : Chapter II of the Arbitration Act covers references, in which the parties may proceed, if nothing goes wrong, up to the stage of delivery of the award, without the intervention of the court. This does not mean that the court has no authority to intervene at an early stage, should it become necessary. In the present case, as stated above, the arbitrator entered upon a reference pursuant to the notice given by the appellant on 24.8.1992. The notice was given on 20.8.1992. Therefore, section 8 of the Act has no application. Section 8 applies only where the parties do not concur in the appointment. Section 8 and section 20 operate in different provinces. Section 20 confers power on the court to order the agreement to be filed and to make an order of reference to the arbitrator appointed by the parties or where they do not agree, the court can appoint any other person of its choice as an arbitrator. This discussion is important. This difference between section 8 and section 20 shows that the reference flows from an agreement between the parties in the cases falling under section 8. The reference flows from the agreement in cases falling under Chapter II of the Arbitration Act and as long as the agreement stands, the reference remains valid unless it is superseded by an order of the court under section 19. Under that section, where award becomes void under section 16(3) or where an award is set aside, the court may by an order supersede the reference and shall thereupon order that the arbitration agreement shall cease to have effect. Therefore, till such time as the order is passed by the court under section 19 superseding the reference, the same shall remain valid till the agreement is superseded. This is the scope of section 8 read with section 19 of the Act. On the other hand, in cases falling under section 20 of the Act, power of conferred on the court to make an order of reference to the arbitrator. That power is conferred on the court which orders the agreement to be filed before it. In a proceeding under section 8, disputes are presented by the parties before the arbitrator. Whereas in proceedings under section 20, the disputes are referred by the court. It is for this reason that it has been repeatedly held that merely because an arbitrator does not make an award within the specified period of four months the court has the power to extend the period. The award given by an arbitrator after four months is not binding on the parties. Such an award is vitiated as the arbitrator has no power to make an award after four months. However, a bare failure of an arbitrator to make an award within the time allowed by law will not involve the consequences of it being set aside only on that ground. The court has ample powers in a given case to extend the time and give life to the vitiated award by exercising judicial discretion under section 28 of the Act. An application to have the award set aside on the ground that it was made beyond time prescribed has to be moved under the Act. No separate suit would lie for that purpose. Section 28 is not limited only to references to arbitration made in a suit pending before the court. Further, the power given to the court under section 28 is so wide that it can extend the time even if the award is made beyond four months from the date of the arbitrator entering upon the reference. The only restriction is that it must be exercised with judicial discretion. In the present case, as state above, the Developer moved an application for making the award the rule of the court on 12.4.1994. Unfortunately, the appellant chose not to appear before the trial court. In the circumstances, an ex parte decree came to be passed on 31.5.2006. We have used the word unfortunately because the appellant herein had filed his objections before the trial court. Those objections were dismissed as he chose to remain absent. The appellant chose to remain absent as he had moved or decided to move this Court in special leave petition against the impugned judgment of the High Court on the point of territorial jurisdiction. The judgment of the High Court is dated 19.4.2006. The Award is made the rule of the court by the trial court on 31.5.2006 in view of the impugned judgment of the High Court. We have also gone through the Award. We do not wish to express any opinion on the merits, however, the fact remains that the arbitrator entered upon the reference on 24.8.1992. He fixed the date of hearing on 5.9.1992. On 5.9.1992 the appellant appeared before him. The arbitrator was absent. The Award has been given almost after fourteen months and that too after 14.10.1993 when the appellant herein moved an application under section 20 of the Act for appointment of a new arbitrator. Taking into account the above circumstances, we set aside the ex parte Order dated 31.5.2006 passed by the trial court at Faridabad making Award dated 29.3.1994 the rule of the court.(Para 17)

       The trial court will re-examine the question on merits as to whether the Award given by the arbitrator on 29.3.1994 should or should not be made the rule of the court. The trial court will have to decide whether to extend the period for making the Award or not, whether to supercede the reference or not. The trial court will proceed in accordance with law.(Para 17)