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IN THE HIGH COURT OF BOMBAY
P.B. Sawant M.L. Dudhat, JJ.
Union of India.... Appellant.
Versus
Ajit Mehta Associates others.... Respondents.
First Appeal No. 21 of 1987 with First Appeal No. 22 of 1987, with First Appeal No. 23 of 1987 with First Appeal No. 24 of 1987 with First Appeal No. 25 of 1987, decided on 9-8-1989.
Advocates appeared :
R.M. Agarwal, for appellant.
H.H. Advani witk K.N. Vaishanav for J.B. Ramchandani, for respondents.
The question whether there was an accord and satisfaction was arbitrable then the arbitrator is clearly guilty of legal misconduct inasmuch as he has not arbitrated the question and has not recorded his finding thereon. If under a clause of arbitration such as ours where the arbitrator is to be appointed by a used authority and not by consent of the parties, the provisions of Section 8 ban not be invoked for appointment of an arbitrator. It is only the provision section 20 (4) that can be availed of in such circumstances, and event in that case the only direction that the Court can give, in the first instance, is to appointing authority to name the arbitrator. The second proposition which emerges from this decision is that when there is an express term in the contract that the dispute will be arbitrated only by an arbitrator is appointed by the authority and when an arbitrator is appointed under Section 8 to such a dispute, the very appointment of the arbitrator is void being without jurisdiction, the arbitrator so appointed lacks jurisdiction inherently and hence the award made by such arbitrator is nonest. The third proposition is that when the award suffers from such inherent defect it can be set aside or ignored at any stage of the proceedings.
Sections 17, 30 and 33-Suo motu power of Court to set aside award-Court having such power to set aside Illegal and void award-Bar of limitation-Award can be challenged at any stage-Article 119 of Limitation Act, 1963 has no application.
These observations of the Supreme Court therefore show that not only the suo motu powers of the Court are saved, but the suo motu power can be exercised for setting aside awards which are otherwise patently illegal or void and that such grounds can be outside the purview of Section 30 (c). Assuming, therefore, that the Court has suo motu powers to set aside an award on grounds other than those covered by Section 30, the present awards which are made by arbitrators who can never have been appointed under Section 8 are undoubtedly ab initio void and non est. The present is not a case of a mere invalidity of the award either on account of an error apparent on the face of the award or on account of its being outside the scope of the reference or being made pursuant to an invalid reference.
In the present case, the award is a nullity from its inception since the very appointment of the arbitrator was without jurisdiction. The Court which made the appointment had no power under Section 8 to appoint the arbitrator and hence no arbitrator could have been appointed under the said section at all. This is not a matter of mere illegality in the appointment of the arbitrator but a lack of power to appoint the arbitrators in question. Since the arbitrators in question could not have acted in law, they had no legal existence. The arbitrators so appointed were prohibited by law to proceed with the arbitration. Hence the proceedings conducted and the awards made by him/them are nonest from the beginning and will have always to be regarded as such. The award is thus patently illegal and void. This illegality which goes to the very foot of the award is not necessarily covered only by Section 30. It can be raised as a ground to set aside the award even independently of the said section. Hence the Court not only has the power but also a duty to quash the award or to ignore it. The nullity in such cases further runs with the award and the objection with regard to it can be raised at any stage including the stage of its execution or enforcement. The bar of limitation enacted by Article 119 of the Limitation Act therefore does not either prevent the Court from using its suo motu power to set aside the award on that ground.
Article 119.
See Arbitration Act, 1940, Sections 17, 30 and 33.
P.B. SAWANT, J.:---These five appeals arise out of the decision of the trial Court by which the trial Court has disposed of five suits and five objection petitions.
Respondent No. 1 in all the appeals is a contracting firm (hereinafter referred to as the firm). In First Appeal No. 21 of 1987 and First Appeal No. 25 of 1987 the firm is M/s. Ajit Mehta and Associates while in the rest of the appeals it is Ajit Construction Company. There are three partners in M/s. Ajit Mehta and Associates who are also the partners in M/s. Ajit Construction Company which has four partners. First Appeal No. 21 of 1987 is concerned with the contract for the construction of what is known as Married Accommodation at Jamnagar ; First Appeal No. 22 of 1987 is concerned with the contract of the construction of buildings at Dhrangadhra in Gujarat State; First Appeal No. 23 of 1987 is again concerned with the construction of the Married Accommodation at Dhrangadhra; First Appeal No. 24 of 1987 is concerned with the construction of Hospital Building at Jamnagar whereas First Appeal No. 25 of 1987 is concerned with another contract of construction of the Married Accommodation at Jamnagar. The tenders in all these contracts except in the contract in Appeal No. 22 of 1987 were invited and accepted by the Chief Engineer, Jaipur at Jaipur whereas the tender in contract involved in Appeal No. 22 of 1987 was invited and accepted by Commander Works Engineer, Baroda at Baroda.
2. The contract in First Appeal No. 21 of 1987 was of 1979-80 and the work was completed within the extended period in February 1983. The final bill was submitted by the firm on March 26, 1983 and the firm was paid the amount due under the final bill on April 27, 1983. The firm made a request for release of the bank guarantee on April 28, 1983 and the bank guarantee was released on May 13, 1983.
The contract in First Appeal No. 22 of 1987 was of 1977- 78 and the work was completed within the extended period by May 15, 1982. The final bill was submitted by the firm on July 16, 1982. The bill was not paid and the bank guarantee was also not released because there was an amount due from the firm under another contract and as per Condition 67 of the Contract between the parties, the appellant was entitled to withhold the said amount.
In First Appeal No. 23 of 1987, the contract was of 1977-78 and the work was completed on February 26, 1981 within the extended period. The final bill was submitted by the firm on March 31, 1981 and it was paid on April 24, 1981. However the bank guarantee was not released as there were certain dues owed by the firm to the appellant under another contract.
In First Appeal No. 24 of 1987 the contract was on 1978-79 and the work was completed within the extended period by October 15, 1982. The firm submitted its final bill on March 26, 1983. It was however paid on March 31, 1984 because the firm had not surrendered the excess stores laying with it till that date. The bank guarantee was released on May 18, 1984.
In First Appeal No. 25 of 1987 the dates and facts are more in less identical with those in First Appeal No. 21 of 1987. The final bill was submitted by the firm by the end of March 1983 and it was paid on April 27, 1983. The bank guarantee was released on May 13, 1983.
3. In all these cases the final bill was submitted by the firm without any conditions or reservations. The firm had also given no claim certificate. Further, where the bill was paid (which was in all case except one i.e. in First Appeal No. 22 of 1987), the firm had passed unconditional receipt and in full and final settlement of its claim. However, it raised disputes with regard to the bills subsequently and made further claims. As regards the contract in First Appeal No. 21 of 1987, although the final bill was submitted by the firm in March 26, 1983 and the unconditional receipt for its payment was given by it on April 1983, it raised dispute about it for the first time in March 1984
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