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1998 Supreme(J&K) 438
JAMMU AND KASHMIR HIGH COURT
M. Y. Kawoosa, T. S. Doabia, JJ.
HIMALAYA CONSTRUCTION COMPANY - PETITIONER
v.
EXECUTIVE ENGINEER - RESPONDENT
CIMA Nos. 40 of 1989 and 408 of 1992,
Decided on : December 30, 1998.
Sh. H. L. Bhagotra, Acvocate, for the Petitioner.
Sh. A. Kapoor, A.A.G., for the Respondent.
An Arbitrator appointed by virtue of his office loses the authority to act as Arbitrator upon his retirement from government service and any award given by him thereafter is void ab initio.
Headnote:
ARBITRATION - JURISDICTION - APPOINTMENT OF ARBITRATOR - RETIREMENT OF ARBITRATOR - AWARD - VALIDITY - LIMITATION - APPLICABILITY - MISCONDUCT - DENIAL OF ASSISTANCE OF LEGAL PRACTITIONER - INTEREST - RATE.
Fact of the Case:
The dispute arose from a construction contract between the respondent Construction Company and the appellant State authorities. The contract was executed in 1973 and the work was completed in 1976. The Construction Company claimed payment for the work done, but the State authorities did not make the payment. The Construction Company filed an application under Section 20 of the Arbitration Act, 1940, seeking appointment of an Arbitrator. The Arbitrator, Sh. D. K. Nargotra, was appointed by the Court in 1984. He submitted his award in 1987. The State authorities challenged the award on various grounds, including the jurisdiction of the Arbitrator, limitation, misconduct, and the rate of interest awarded.
Finding of the Court:
The Court held that the Arbitrator was appointed by virtue of his office as Chief Engineer, Irrigation and Flood Control Department, Jammu. He ceased to hold this office upon his retirement from government service. Therefore, he lost the authority to act as Arbitrator and the award given by him was void ab initio. The Court further held that the plea of limitation was not raised before the Arbitrator and could not be examined at this stage. The Court also held that the denial of assistance of a legal practitioner to the State officials did not constitute misconduct on the part of the Arbitrator. The Court allowed the State's appeal and set aside the award. The Court also dismissed the Construction Company's cross-appeal regarding the rate of interest.
Issues: 1. Whether an Arbitrator who was appointed by virtue of his office can make an award when he ceases to hold that office? 2. Whether an order passed by the Court appointing an Arbitrator by name can give authority to the Arbitrator to file the award when he ceases to hold the office by virtue of which he came to be initially appointed? 3. Whether the State can be bound by the consent given by a counsel other than the Advocate General of the State or an Advocate who is on the panel of Advocates maintained by the State? 4. Whether the plea that the claim is barred by limitation and regarding which an award has been given can be examined by the Court in this appeal and whether such an error would be an error apparent on the face of record? 5. Whether the State officials were denied assistance of a legal practitioner and whether this denial would constitute a 'misconduct'? 6. What would be the rate of interest?
Ratio Decidendi: 1. An Arbitrator who was appointed by virtue of his office cannot make an award when he ceases to hold that office. 2. An order passed by the Court appointing an Arbitrator by name cannot give authority to the Arbitrator to file the award when he ceases to hold the office by virtue of which he came to be initially appointed. 3. The State cannot be bound by the consent given by a counsel other than the Advocate General of the State or an Advocate who is on the panel of Advocates maintained by the State. 4. The plea that the claim is barred by limitation and regarding which an award has been given cannot be examined by the Court in an appeal unless it is an error apparent on the face of record. 5. The denial of assistance of a legal practitioner to the State officials does not constitute a 'misconduct' on the part of the Arbitrator. 6. The rate of interest payable on the award shall be as per the Interest Act, 1978.
Final Decision: The State's appeal was allowed and the award was set aside. The Construction Company's cross-appeal regarding the rate of interest was dismissed.
M. Y. Kawoosa, J. - An Arbitrator entering upon a reference under an arbitration agreement by virtue of his holding an office in connection with the affairs of the State of Jammu and Kashmir cannot make an award when he ceased to hold the office on account of his having demitted the office having retired from service is the main argument put across by the learned Addl. Advocate General who is appearing for the State functionaries. The other questions which have arisen are whether an award could be given vis-a-vis a matter regarding which had any of the parties approached a civil court would have failed on account of bar of limitation. Misconduct has also been attributed to the Arbitrator. The basis for this is that the Arbitrator did not permit the appellants to have the assistance of a legal practitioner. In addition to the jurisdictional points referred to above argument vis-a-vis rate of interest which could be awarded when proceedings are taken under the Arbitration Act is also being adverted to by both the sides.
2. For the decision of the above questions, the factual foundation laid by both the sides be noticed.
Himalayan Construction Company (hereinafter referred to as the respondent Construction Company) expressed its willingness to carry on some civil construction works regarding which earlier an offer was made by the State authorities. An agreement was entered into. This happended in the year 1973. The work was completed in the year 1976. As per the respondent Construction Company, the State Authorities did not make payment in terms of the agreement. Differences and disputes having arise, the application seeking appointment of an Arbitrator was filed in this Court. This was so filed under Section 20 of the Arbitration Act. This Application being Arbitration Application No. 118/ 83 came to be decided on 14th of November 1984. The concluding part of the order passed by this Court reads as under :-
"In accordance with Clause 31 of the Agreement read with Clause 20 of the conditions any dispute between the contractor and the Executive Engineer, respondent No. 1, shall have to be referred to the arbitration of Chief Engineer, Irrigation and Flood Control Department, Jammu. The dispute between the parties is, therefore, required to be referred to the named Arbitrator for adjudication to whom the dispute between the parties is referred with a direction to adjudicate upon the same and submit his award within the statutory period of four months. The respondent shall submit the original agreement executed between the parties before the Arbitrator."
In pursuance of the aforementioned order passed by this Court one Sh. D. K. Nargotra, the then Chief Engineer, Rawi Tawi Irrigation Complex, Jammu entered upon the reference. He submitted his award. An application was preferred in this Court for making the award a Rule of the Court. This application was contested by the appellant State authorities. The matter was placed before a learned Single Judge of this Court. Two issues came to be framed. These are as under :
(i) Whether the Arbitrator has misconducted himself and the proceedings if so, with what effect ? OPR
(ii) Whether the petitioners are entitled to interest at the rate of 24% from the date of completion of work ? OPP
After taking note of the submission made by both the sides, a learned Single Judge of this Court came to the conclusion that there exists no material for recording a finding that there was any misconduct on the part of Arbitrator. Issue No. 1 was decided accordingly. The award was thus made rule of the Court. Relying upon the decision of the Supreme Court of India in case reported as Executive Engineer Irrigation, Galimala v. Abnadute Gena (AIR 1988 SC 1520 = 1988(2) Arb. LR 356), issue No. 2 was decided against the respondent Construction Company. It was held that the Arbitrator was not competent to direct payment of interest pendente-lite. It is this order passed by the learned Single Judge which is
