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HIGH COURT OF CALCUTTA
S. Datta
ARBN HINDUSTHAN STEEL - Appellant
Versus
APPEJAY PR. LTD. - Respondent
Award 179 Of 1965
Decided On : APRIL 4, 1966
ARBITRATION - REVOCATION OF AUTHORITY - ARBITRATORS BECOMING FUNCTUS OFFICIO - ARBITRATION AGREEMENT CEASING TO HAVE EFFECT - SECTION 5, 11, 12, 28, 34, 35 OF THE ARBITRATION ACT, 1940.
Fact of the Case:
The respondent and Union of India entered into an agreement for the sale and purchase of steel ingots for export. The agreement included an arbitration clause. Disputes arose, and the respondent appointed an arbitrator, and the petitioner appointed another arbitrator. The arbitrators entered into the reference and held their first sitting. The respondent filed a statement of claim, and the petitioner made a counterclaim. The respondent then filed a suit against the Union of India in respect of matters considered within the arbitration clause, and served a notice on the arbitrators under Section 34 of the Arbitration Act. The petitioner sought to remove the arbitrators, revoke their authority, and declare that the arbitration agreement had ceased to have effect.
Finding of the Court:
The court held that the arbitrators had become functus officio on the expiry of four months from the date of entering on the reference, as per Section 28 of the Arbitration Act read with Clause 3 of Schedule I. The court also held that the respondent's notice under Section 35 did not make any difference as it was served after the arbitrators had become functus officio. The court further held that the respondent's actions in invoking the arbitration clause, filing a claim, allowing the petitioner to file counterclaims, proceeding with the arbitration proceedings, and then suddenly filing a suit and serving a notice under Section 35 amounted to an abuse of process and a miscarriage of justice.
Issues: 1. Whether the arbitrators could be removed or their authority revoked, or whether the court could declare that the arbitration agreement had ceased to have effect. 2. Whether the respondent's actions in invoking the arbitration clause, filing a claim, allowing the petitioner to file counterclaims, proceeding with the arbitration proceedings, and then suddenly filing a suit and serving a notice under Section 35 amounted to an abuse of process and a miscarriage of justice.
Ratio Decidendi: 1. The court held that the arbitrators had become functus officio on the expiry of four months from the date of entering on the reference, as per Section 28 of the Arbitration Act read with Clause 3 of Schedule I. The court also held that the respondent's notice under Section 35 did not make any difference as it was served after the arbitrators had become functus officio. 2. The court held that the respondent's actions in invoking the arbitration clause, filing a claim, allowing the petitioner to file counterclaims, proceeding with the arbitration proceedings, and then suddenly filing a suit and serving a notice under Section 35 amounted to an abuse of process and a miscarriage of justice.
Final Decision: The court dismissed the application for removal of the arbitrators, revocation of their authority, and declaration that the arbitration agreement had ceased to have effect. The respondent was awarded half the costs.
( 1 ) THIS is an application for re-moval of the arbitrators, revoking the authority of the arbitrators and for declaration that the arbitration agreement dated April 8, 1960 has ceased to have any effect with respect to the differences referred to the said arbitrators, and for other reliefs.
( 2 ) THIS application, in my opinion, can be disposed on one point of law on the basis of a few undisputed facts without going into the elaborate arguments advanced before me.
( 3 ) THE respondent and Union of India entered into an agreement on the 8th day of April, 1960 for the sale and purchase of steel ingots for export. This agreement included an arbitration clause, the material words of which are as follows :--"should any dispute or disagreement arise in relation to the matter of payment, allowance or loss, or the interpretation of any one or more of the clauses of this contract (except as to any matter the decision of which is specially provided for by these conditions) which dispute or disagreement cannot he satisfactorily by mutual conference, (sic) then the matter shall be referred to the award of an arbitrator to be nominated by the seller and an arbitrator to be nominated by the buyer or in case. . . . . Supply under this contract shall be continued by the seller and delivery taken by the buyer under the terms of this agreement during the arbitration proceedings unless the matter is such that the supply cannot possibly be continued or delivery taken until the decision of the arbitrators is obtained. "
( 4 ) THERE were disputes and differences between the parties regarding the matters mentioned in the said agreement on or about September 10, 1963. The respondent appointed Mr. Holways, Barrister-at-Law as its arbitrator under the said arbitration clause. On or about September 21, 1963 the petitioner appointed Mr. S. K. Mukherji, Barrister-at-Law as its arbitrator under the said arbitration clause. On or about December 12. 1963 the arbitrators entered into the reference. They held their first sitting on or about December 20, 1963. They gave directions in the matter. The respondent filed a statement of claim before the arbitrators. The petitioner also made counter claim against the respondent before the arbitrators. In these circumstances on or about June 12, 1964 the respondent filed a suit against Union of India in respect of matters which were considered earlier to be within the ambit of the arbitration clause notwithstanding the pendency of the said arbitration proceedings Before the said arbitrators. Thereafter on or about December 4, 1964 the, respondent served a notice on the arbitrators under Section 34 of the Arbitration Act. The respondent did not make any application under Section 34 in the suit. The respondent filed its written statement. The suit is now proceeding and the petitioner is now unwilling to have the matter settled by arbitration and prefers that disputes and differences should be settled in the suit.
( 5 ) IN these circumstances the questions for consideration are whether the arbitrator can be removed or his authority can be revoked or the Court can declare that the said arbitration agreement dated April 8, 1960 shall cease to have any effect with respect to the differences referred to the said arbitration.
( 6 ) IT will be noticed from what has been stated above that the time to file an award expired on the 12th day of April, 1964, that is to say, after the expiry of four months after the date of entering on the reference on December 12. 1963. In view of the provisions of Section 28 of the Arbitration Act read with Clause 3 of Schedule I of the Arbitration Act tbe arbitrators have become functus officio on the expiry of the 12th day of April, 1964. This view receives support from Louis Dreyfus and Co. v. Arunachala Ayya, 33 Bom LR 1536: (AIR 193) PC 289 ). This matter, however, has been clinched beyond doubt by the majority view of the Supreme Court in the case of Hari Shankarlal v. Sham
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