HIGH COURT OF CALCUTTA
P. C. Mallick
UNION OF INDIA (UOI) - Appellant
Versus
B. M. SEN - Respondent
Award Case 228 Of 1952
Decided On : FEBRUARY 10, 1961
ARBITRATION - Validity of Arbitration Agreement and Award - Challenge - Existence and Validity of Arbitration Agreement - Authority of Arbitrator - Ratification of Agreement - Estoppel - Interpretation of Legal Provisions.
Fact of the Case:
The Government challenged the existence and validity of an arbitration agreement and an award made thereunder. The dispute arose from construction works done by the Respondent Contractor in 1944/45. The contract contained an arbitration clause referring disputes to the Superintending Engineer of the Circle. Disputes arose, and the Chief Engineer referred them to Mr. B. K. Guha, Superintending Engineer, Delhi Aviation and Planning Circle, New Delhi. Later, an agreement was entered into modifying the arbitration clause and appointing Mr. B. K. Guha, Superintending Engineer, Calcutta Aviation Circle C. P. W. D. as the arbitrator. The arbitration proceedings went on, and Mr. B. K. Guha published his award on June 21, 1960. The Government challenged the validity of the arbitration agreement and the award, contending that Mr. B. K. Guha was not the proper Superintending Engineer competent to act as arbitrator and that the agreement dated November 12, 1952, was invalid as N. V. Rao, who signed on behalf of the President, had no authority to do so.
Finding of the Court:
The Court found that there was no evidence before it that N. V. Rao had no authority to enter into the arbitration agreement. The Court also held that even if N. V. Rao had no authority, the agreement was not void ab initio but was capable of ratification by the Government, which could be done through its conduct. The Court further held that the Government's participation in the arbitration proceedings and its applications to the court for extension of time constituted ratification of the agreement. The Court also found that the Government was estopped from challenging the validity of the arbitration agreement and the award, as it had full knowledge of Mr. B. K. Guha's incapacity and allowed the arbitration proceedings to go on.
Issues: 1. Whether Mr. B. K. Guha was the proper Superintending Engineer competent to act as arbitrator under the arbitration clause in the contract? 2. Whether the agreement dated November 12, 1952, was invalid due to lack of authority of N. V. Rao to sign on behalf of the President? 3. Whether the Government's participation in the arbitration proceedings and its applications to the court constituted ratification of the agreement? 4. Whether the Government was estopped from challenging the validity of the arbitration agreement and the award?
Ratio Decidendi: 1. The Court held that the Government's failure to provide evidence that N. V. Rao had no authority to enter into the arbitration agreement was fatal to its case. 2. The Court relied on the Supreme Court decision in Chatturbhuj Vithaldas v. Moreshwar Parashram, which held that a contract not in compliance with Article 299 (1) of the Constitution is not void but is capable of ratification. 3. The Court found that the Government's participation in the arbitration proceedings and its applications to the court constituted ratification of the agreement. 4. The Court applied the principle of estoppel to bar the Government from challenging the validity of the arbitration agreement and the award, as it had full knowledge of Mr. B. K. Guha's incapacity and allowed the arbitration proceedings to go on.
Final Decision: The Court dismissed the Government's application challenging the existence and validity of the arbitration agreement and the award made thereunder.
( 1 ) THIS is an application challenging the existence and validity of an arbitration agreement and an award made thereunder.
( 2 ) THE Respondent is a Contractor who was entrusted with certain construction works to be done in Ghuskara, Bolepur, Rampurhat and Madhaiganj. The contract is evidenced by the acceptance of a tender in the usual term. All the works done under this contract were done sometime in the year 1944/45. The contract contains the usual arbitration clause whereby "all disputes and differences between the parties under the contract shall be referred to the arbitration of the Superintending Engineer of the Circle for the time being. . . . . "
( 3 ) DISPUTES and differences arose between the parties in respect to and in connection with the contract and one C. S. Mathur, Chief Engineer, referred the disputes to the arbitration of Mr. B. K. Guha, Superintending Engineer, Delhi Aviation and Planning Circle, New Delhi. The latter ot reference is dated May 11, 1951. It appears that altogether there were five disputes referred to the arbitration of the said Mr. B. K. Guha.
( 4 ) SHORTLY thereafter Mr. B. K. Guha as such arbitra-tor entered upon the reference and pursuant to his direec-tions the parties filed their respective State of Facts and Counter State of Facts. Subsequently on November 12, 1952 the parties entered into an agreement in respect to the five disputes referred to arbitration as stated above. This agree-ment modified and amended the arbitration clause in the contract. The operative part of the agreement reads as follows :1. That the disputes and differences between the par ties in respect of the recovery made from the con tractors bills for materials supplied and service rerdered by the C. P. W. D. in connection with the said agreements and work orders be referred to the arbitration of Mr. B. K. Guha, Superintending Engineer, Calcutta Aviation Circle C. P. W. D. and that his award shall be final, conclusive and bind ing on the parties and the provision of the Indian : Arbitration Act of 1940 shall apply to said arbitra tion. 2. That the respective arbitration clauses and the said agreements be read and construed as if there was inserted therein the words 'mr. B. K. Guha, Superintending Engineer, Calcutta Aviation Circle C. P. W. D. Calcutta Aviation Circle' in place of 'superintending Engineer of the Circle for the time being. ' this agreement is signed by N. V. Rao, Executive Engineer, Calcutta Aviation Division No. 111 Calcutta "for and on he-half of the President of India. "
( 5 ) THE arbitration proceedings then went on before Mr. B. K. Guha. The parties tendered their respective statements and evidence and there were a number of sittings held. Under the direction of the arbitrator the parties prepared a joint statement of recoveries which were actually disputed and this joint statement as to the disputed items with respect to recoveries was placed before the arbitrator. The arbitrator finally published his award on June 21, 1960, whereby he allowed some of the recoveries but disallowed most of them. It should, incidentally, be noted that apart from this award, four other disputes were referred to the same arbitrator under the same arbitration clause in the contract and the arbitrator made four other awards. These four awards have been accepted fay the Government and it is stated in paragraph 8 of the petition that they have been satisfied. The award in due course was filed by the arbitrator and a notice under Section 14 (2) of the Indian Arbitration Act was served on the Government on August 17, 1960. The present notice was taken out by the Government on September 17, 1960.
( 6 ) IT is contended in the petition that at the time when the disputes were referred to arbitration, Sri B. K. Guha was the Superintending Engineer of the Delhi Aviation and Planning Circle, New Delhi and not the proper Superintending Engineer competent to act as arbitrator under the-arbitration clause i
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