High Court Of Delhi
UNION OF INDIA - Appellant
Versus
ASSOCIATED PRODUCERS COMPANY - Respondent
Suit 144A of 1973
Decided On : 05/15/1991
ARBITRATION - AWARD - SETTING ASIDE - GROUNDS - SERVICE OF NOTICE - SUBSTITUTED SERVICE - JURISDICTION OF ARBITRATOR - EXTENSION OF TIME - CONTRACT - NULL AND VOID - EFFECT ON ARBITRATION AGREEMENT.
Fact of the Case:
The Union of India filed a petition under Section 20 of the Arbitration Act, 1940 against M/s. Associated Producers Company, Penang and Mr. Abdul Wahab of Madras. The arbitrator, Mr. Hardyal Hardy, was appointed and entered on the reference on September 12, 1972. He made his award on February 21, 1973. The award was challenged by the objectors on various grounds, including improper service of notice, lack of jurisdiction of the arbitrator, and the null and void nature of the contract.
Finding of the Court:
The court found that the service of notice on the objectors was improper. The arbitrator had no jurisdiction to proceed ex parte against the objectors as they were not duly served. The award was not made within the statutory period of four months and no extension of time was granted. The contract was not declared null and void by the Union of India unilaterally. The arbitration agreement remained applicable even if the contract was breached.
Issues: 1. Whether the objection petition was filed within the period of limitation? 2. Whether the objector was not duly served in arbitration proceedings? If not, its effect? 3. Whether the award is liable to be set aside on other grounds mentioned in the objection petition?
Ratio Decidendi: 1. The court held that the objection petition was filed within the period of limitation. 2. The court held that the objector was not duly served in arbitration proceedings and that the arbitrator had no jurisdiction to proceed ex parte against them. 3. The court held that the award was not made within the statutory period of four months and no extension of time was granted. The court also held that the contract was not declared null and void by the Union of India unilaterally and that the arbitration agreement remained applicable even if the contract was breached.
Final Decision: The court set aside the award.
( 1 ) THE facts giving rise to this judgment fall into a short compass. Let me recapitulate.
( 2 ). On a petition by the Union of India under Section 20 of the Arbitration Act, 1940 (hereinafter called the Act) against M/s. Associated Producers Company. Penang and Mr. Abdul Wahab of Madras, Avadh Behari, J. by his order dated May 26, 1972 appointed Mr. Hardyal Hardy, a retired Chief Justice of this Court, as the sole arbitrator who entered on the reference on September 12, 1972 and made his award on February 21, 1973. Whereas the Award has won whole hearted approval of the Union of India, the other side, namely M/s. Associated Producers Company, Penang as well as its sole proprietor Mr. M. A. A. Wahab have found it totally unacceptable. They have thus filed separate objections under Sections 30 and 33 of the Act.
( 3 ). On the basis of the objections raised, following issues were framed:-
(1) Whether the objection petition has been filed within the period of limitation ? OPO
(2) Whether the objector was not duly served in arbitration proceedings ? If not, its effect ? OPO
(3) Whether the award is liable to be set aside on other grounds mentioned in the objection petition ? OPO
(4) Relief.
( 4 ). Let me first give a brief resume of what led to the framing of the issues.
( 5 ). As far as the first issue is concerned, it being self-speaking needs no feed-back excepting this much that as per the Union of India, the objections filed by objector No. 2 are not within time.
( 6 ). The objectors have taken the plea that neither the objector firm nor its sole proprietor had ever been served with any notice issued by the arbitrator on his entering on the reference and that, in any case, Mr Hardy was hardly justified in law or even on facts, in resorting to service by publication in "the Hindu Madras" and as even that did not constitute proper service there was no justification for him to proceed ex parte against the objectors. It is this. objection which has given birth to issue No. 2.
( 7 ). The third issue has within its fold, two objections. It is claimed thal Mr. Hardyal Hardy having entered on the reference on September 12, 1972 and having made the award on February 21, 1973, the award is beyond the statutory period of four months and no extension having been granted nor there being any application undersection 28 of the Act for any such extension, it is liable to be thrown out as barred by limitation. This is the first objection. The second is that as the Union of India had unilaterally declared the contract containing the arbitration clause as null and void, therefore, ibe arbitration clause also fell along with it and for that reason too the arbitration clause could not be invoiced or resorted to.
( 8 ). The last issue, of course, relates to relief.
( 9 ). Time now to examine the nuts and bolts.
( 10 ). I am sure that Union of India would not have raised this objection had the Deputy Registrar of this Court not been guilty of a faux pas by wrongly noting in his order dated September 2, 1976, that respondent No. 2 had been served by registered post on August 26, S976. Actually August 26, 1976 was the dale put by the postal authorities showing when the registered envelop had been received in the post office. The Deputy Registrar took it to be the dale of service. Had he cared to look a! the back of the registered envelop itself he would have found two endorsements by the postal authorities as follows :
"left "left sd/ -. . sd/- 30/8 31/8
( 11 ). Anyhow, we have the acknowledgment due on record showing that respondent No. 2 was served on September 1,1976 The objections having been filed on September 28, 1976, were thus well within lime. There is no dispute that as far as objector No. 1 is concerned, its objections were within limitation. This much for the issue.
( 12 ). It is issue No. 2 which was witness to lot of firework and not without basis. However, first the prologue. A contract was entered into on August 23,1987 betwe
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