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High Court Of Calcutta
M. M. Dutt, N. C. Mukherji
STATE OF WEST BENGAL - Appellant
Versus
A.K.GHOSH AND BROS - Respondent
A. F. O. D. 19 Of 1971
Decided On : 02/11/1975
ARBITRATION - Reference to Arbitration - Validity - Consent of Parties - Application in Writing - Mandatory or Directory - Estoppel - Arbitrator's Award - Legality - Failure to Specify Amount on Each Item of Claim - Misconduct of Arbitrator - Acceptance of Remuneration from Party before Award.
Fact of the Case:
The respondent entered into a contract with the appellant for the execution of certain works. The contract contained an arbitration clause providing for the reference of disputes to the sole arbitration of the Chief Engineer or an arbitrator appointed by him. The respondent filed a suit for recovery of money, and the appellant applied for a stay of proceedings under Section 34 of the Arbitration Act, 1940. The respondent then filed a petition for referring all matters in dispute to arbitration under the supervision of the Court, appointing a retired Judge as Arbitrator. The Court passed an order appointing a retired Judge as Arbitrator, and the parties appeared before him and produced evidence. The Arbitrator submitted his award, allowing the respondent's claim to the extent of Rs. 2,68,250. The appellant filed a petition to set aside the award on the grounds of errors of law, want of jurisdiction, and misconduct of the Arbitrator. The Court dismissed the petition and accepted the award.
Finding of the Court:
The Court held that the Court had jurisdiction to refer the disputes to arbitration on an application under Section 34 of the Act, particularly in view of Clause 25 of the contract. The Court also held that there was a valid reference by the Court under Section 21 of the Act, even though the appellant did not join in the application or sign the same. The Court further held that the appellant was estopped from challenging the legality of the reference made by the Court on the ground that it had not joined in the application and signed the same, even assuming that the provision for making an application in writing is mandatory and not directory. The Court also held that the Arbitrator's failure to specify the amount on each item of claim did not make the award illegal and invalid, and the Arbitrator could not be held to be guilty of misconduct. Finally, the Court held that there was no substance in the contention that the Arbitrator misconducted himself by accepting his remuneration from the appellant (respondent-?) as illegal gratification which induced him to make an award in favor of the respondent.
Issues: 1. Whether the Court had jurisdiction to refer the disputes to arbitration on an application under Section 34 of the Arbitration Act, 1940, particularly in view of Clause 25 of the contract? 2. Whether there was a valid reference by the Court under Section 21 of the Act, even though the appellant did not join in the application or sign the same? 3. Whether the appellant was estopped from challenging the legality of the reference made by the Court on the ground that it had not joined in the application and signed the same? 4. Whether the Arbitrator's failure to specify the amount on each item of claim made the award illegal and invalid? 5. Whether the Arbitrator was guilty of misconduct by accepting his remuneration from the appellant (respondent-?) as illegal gratification which induced him to make an award in favor of the respondent?
Ratio Decidendi: 1. The Court has jurisdiction to refer the disputes to arbitration on an application under Section 34 of the Act, particularly in view of Clause 25 of the contract, when the parties agree to refer the matters in difference between them to arbitration. 2. There is a valid reference by the Court under Section 21 of the Act, even though the appellant did not join in the application or sign the same, as the filing of an application in writing by all the parties interested is not mandatory. 3. The appellant is estopped from challenging the legality of the reference made by the Court on the ground that it had not joined in the application and signed the same, even assuming that the provision for making an application in writing is mandatory and not directory, as the appellant participated in the arbitration proceeding before the Arbitrator without protest. 4. The Arbitrator's failure to specify the amount on each item of claim does not make the award illegal and invalid, as the Arbitrator is not required to give a separate decision on each item of claim. 5. There is no substance in the contention that the Arbitrator misconducted himself by accepting his remuneration from the appellant (respondent-?) as illegal gratification which induced him to make an award in favor of the respondent, as there is no allegation as to the mala fide intent of the Arbitrator.
Final Decision: The appeal was dismissed.
( 1 ) THIS appeal is at the instance of the State of West Bengal and it arises out of a suit instituted by the respondent for recovery of money.
( 2 ) THE respondent entered into a contract with the appellant for the execution of the following works :-- (1) The construction of the main hospital building, kitchen and morgue of 58 bedded Sub-Divisional Hospital at Arambagh in the District of Hooghly. (2) The construction of the infectious wards and staff quarters of the said hospital.
( 3 ) THE terms of the contract contained in the tender form issued on behalf of the appellant includes a provision for arbitration in Clause 25 thereof which provides inter alia that all questions and disputes relating to the meaning of the specifications, designs, drawings and instructions and as to the quality of workmanship or materials used on the work or as to any other question, claim, right, matter or thing whatsoever, arising out of or relating to the contract shall be referred to the sole arbitration of the Chief Engineer of the department. It further provides that should the Chief Engineer be for any reason unwilling or unable to act as such arbitrator, such questions and disputes shall be referred to an arbitrator to be appointed by the Chief Engineer and that the award of the arbitrator shall be final, conclusive and binding on all parties to the contract.
( 4 ) IN the suit, the respondent claimed a sum of Rs. 2,99,251. 00 as per particulars given below :
(a) For extra works done in connection with the work of tender No. 47 as per Schedule 'a' Rs. 30,040. 00
(b) For extra works done in connection with the work of tender No. 21 as per schedule 'b' Rs. 40,884. 00
(c) For costs of materials and carriage thereof payable to the plaintiff under clause 25 of the tender notices as per Sch. 'c '
Rs. 1,58,557. 00
(d) For damages as stated in paragraph 17 of the plaint Rs. 69,770. 00
Total
Rs. 2,99,251. 00
Besides the said sum of Rs. 2,99,251. 00, the respondent claimed interest on the said amount at the rate of 12 per cent, per annum upto the date of the decree and further interest at the said rate until realisation.
( 5 ) ON February 7, 1967, the appellant entered appearance in the suit and filed an application under Section 34 of the Arbitration Act, 1940 (hereinafter referred to as the Act) praying for stay of all further proceedings of the suit in view of the Arbitration Clause 25. The respondent filed a petition of objection to the said application under Section 34. Before the said application was disposed of, on September 13, 1968, the respondent made an application praying for referring all matters in dispute and difference in the suit to arbitration under the supervision of the Court, appointing a retired Judge of the rank of a District Judge as Arbitrator. Both the said applications, namely, one filed by the appellant under Section 34 of the Act and the other by the respondent for referring all matters in dispute and difference to arbitration were heard together by the learned Subordinate Judge and he passed the following order on August 2, 1969 :"in this suit for recovery of money filed against the State of West Bengal, the defendant filed a petition under Section 34 of the Arbitration Act with a prayer to stay all further proceedings in the suit. The petition was opposed by the plaintiff on 18th September, 1968. The plaintiff filed a petition stating that to cut short the entire matter and to minimise the case the plaintiff was agreeable to an arbitration under the supervision of the court in accordance with the provisions of the Arbitration Act provided a retired Judge in the rank of a District Judge is appointed as an Arbitrator. Learned G. P. has no objection to such appointment. Hence on the consent of the parties Shri P. M. Lahiri, a retried District Judge is appointed Arbitrator in this case. Let the matter be fixed on 11th August 1969 for fixing the remuneration of the Arbitrator and settlement of
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