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High Court Of Delhi
UNION OF INDIA - Appellant
Versus
BHATIA TANNING INDUSTRIES - Respondent
First Appeal (OS) 68A of 1984
Decided On : 11/24/1984
ARBITRATION - SERVICE OF NOTICE - SECTION 42 OF THE ARBITRATION ACT, 1940 - PUBLICATION IN NEWSPAPER - VALIDITY - SECTION 43 OF THE ARBITRATION ACT, 1940 - APPLICABILITY.
Fact of the Case:
The appellant, Director General of Supplies and Disposals, entered into an agreement with the respondent, Bhatia Tanning Industries, for the supply of certain material. The Industries failed to make the supplies, leading to a claim against them for risk purchase. The arbitration clause in the agreement allowed the Director General to appoint a sole arbitrator. The appointed arbitrator, Mr. P. C. Rao, issued registered notices to the Industries at their last known address in Kanpur, but both notices were returned undelivered. The arbitrator then ordered publication in a newspaper, and an ex parte award was made when no one appeared on behalf of the Industries. The Industries objected to the award, arguing that the arbitrator had no power to order service by publication and should have obtained a court order under section 43 of the Arbitration Act, 1940. The trial court agreed and set aside the award.
Finding of the Court:
The court held that section 42 of the Arbitration Act, 1940, applied to the case, not section 43. Section 42 provides for service of notice by the arbitrator either by delivering it to the person or by sending it by registered post to their usual or last known place of abode or business. The court found that the arbitrator had complied with section 42 by sending registered notices to the Industries' last known address, even though they were returned undelivered. The court also held that section 43, which empowers the court to issue processes for appearances before an arbitrator, is limited to cases where a person is required to appear as a witness, not where a party to the arbitration agreement is to be summoned for appearance.
Issues: 1. Whether the arbitrator was guilty of misconducting the proceedings by resorting to publication in the newspaper for service on the respondent. 2. Whether section 42 or section 43 of the Arbitration Act, 1940, applied to the case.
Ratio Decidendi: 1. The court held that the arbitrator was not guilty of misconducting the proceedings. The arbitrator had complied with section 42 of the Arbitration Act, 1940, by sending registered notices to the Industries' last known address, even though they were returned undelivered. The publication in the newspaper was not necessary but did not vitiate the proceedings or prejudice the Industries in any way. 2. The court held that section 42 of the Arbitration Act, 1940, applied to the case, not section 43. Section 42 provides for service of notice by the arbitrator either by delivering it to the person or by sending it by registered post to their usual or last known place of abode or business. Section 43, which empowers the court to issue processes for appearances before an arbitrator, is limited to cases where a person is required to appear as a witness, not where a party to the arbitration agreement is to be summoned for appearance.
Final Decision: The court set aside the trial court's order and allowed the appeal. The case was sent back to the trial court to deal with other objections to the award, if any.
( 1 ) THE short question in this appeal is whether the arbitrator was guilty of misconducting the proceedings because he resorted to the method of publication in the newspaper for the purpose of effecting service on the respondent, Bhatia Tanning Industries, for the hearing of the case.
( 2 ) THESE are the facts. An agreement was entered into between the appellant. Director General of Supplies and Disposals and the respondent, Bhatia Tanning Industries (the Industries) on 1-11-1974. The Industries were to supply certain material to the Director-General. The case of the Directorgeneral was that the Industries had committed default in making the supplies. So he raised a claim against the Industries on account of risk purchase. The agreement provided for arbitration. According to the terms of the arbitration clause the disputes between the parties were to be referred by the Director General to a sole arbitrator named by him. The Director-General appointed an arbitrator who resigned. Subsequently he appointed another arbitrator, Mr. P. C. Rao. Mr. Rao, the learned arbitrator, issued notice to the Industries requiring them to appear before him on a particular day fixed for hearing of the case. Such registered A. D. notices were issued twice at the last known address of the Industries at Kanpur. On both occasions the registered notices were returned with the report that the addressee was not available and had gone to Punjab.
( 3 ) IT is not disputed before us that the registered letters contained the correct address of the Industries. Mr. Mehta, learned counsel for the Industries, has pointed out that in one of the registered letters the address is 138 instead of 133 Beconganj, Kanpur. On the other registered cover he does not dispute that the address is correctly given as 133 Beconganj. In our opinion, 138 in place of 133 is an inconsequential error because the letter did go to the addressee s place of business and was not delivered. On the second occasion, as on the first, the report on the registered letter was the same. In any case there is at least one registered letter correctly addressed admittedly which was sent to the Industries. This is all that the law requires of the arbitrator.
( 4 ) ON 10-1-1980 the arbitrator ordered that there shall be a publication in the newspaper. This was done in The Pioneer dated 8-2-1980. No one appeared on behalf of the Industries even after the publication in the newepaper. So the arbitrator made an ex parte award on 12-3-1980.
( 5 ) WHEN the award was filed in court, notice was issued to the Industries. They raised an objection that the arbitrator had no power to order service by means of publication in the newspaper. The learned judge accepted this contention of the Industries and set aside the award. He held that the arbitrator was guilty of misconducting the proceedings because he ought to have gone to court under section 43 of the Arbitration Act and should have obtained an order from the court regarding service by means of publication in the newspaper. From his order dated 16-12-1983 the Director-General appeals to this court.
( 6 ) THE two relevant sections in this connection are sections 42 and 43 of the Arbitration Act, 1940 (the Act ). Section 42 says : Serviceof notice by party or arbitrator : Any notice required by this Act to be served otherwise than through the Court by a party to an arbitration agreement or by an arbitrator or umpire shall be served in the manner provided in the arbitration agreement, or if there is no such provision, either- (a) by delivering it to the person or whom it is to be served, or (b) by sending it by post it a letter addressed to that person at his usual or last known place of abode or business in India and registered under Chapter VI of the Indian Post Office Act, 18. 98. " Section 43 says : - "power of Court to issue processes for appearances before arbitrator :. (1) The Court shall issue the same processes to the parties a
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