IN THE HIGH COURT OF ALLAHABAD
B. Dayal and S. N. Katju, JJ.
OM PRAKASH - Appellant
Versus
UNION OF INDIA (UOI) - Respondents
F. A. F. O. 226 Of 1952
Decided On : 07/30/1962
ARBITRATION - APPOINTMENT OF ARBITRATOR - VALIDITY OF REFERENCE - SETTING ASIDE OF AWARD - GROUNDS - INVALIDITY OF REFERENCE - WHETHER INCLUDED IN GROUNDS FOR SETTING ASIDE AWARD - INTERPRETATION OF SECTION 30 OF THE ARBITRATION ACT, 1940.
Fact of the Case:
In seven appeals arising from arbitration proceedings, the appellant challenged the validity of the appointment of the arbitrator, Brig. Bhandari, and the subsequent award issued by him. The appellant argued that Brig. Bhandari was not validly appointed as the arbitrator and that there was no valid reference to arbitration.
Finding of the Court:
The court held that Brig. Bhandari was not validly appointed as the arbitrator because the post of Director of Farms, which he was supposed to hold, had been abolished. Furthermore, there was no valid reference to arbitration as required under Section 20 of the Arbitration Act, 1940, and the reference made by the court was without jurisdiction.
Issues: 1. Whether Brig. Bhandari was validly appointed as the arbitrator? 2. Whether there was a valid reference to arbitration? 3. Whether the award could be set aside on the ground of invalidity of the reference?
Ratio Decidendi: 1. The court interpreted Section 30 of the Arbitration Act, 1940, and held that the phrase "or otherwise invalid" in the provision includes an objection to the validity of the reference which affects the award. 2. The court found that Brig. Bhandari was not validly appointed as the arbitrator because the post of Director of Farms, which he was supposed to hold, had been abolished. 3. The court held that there was no valid reference to arbitration as required under Section 20 of the Arbitration Act, 1940, and the reference made by the court was without jurisdiction.
Final Decision: The court allowed all seven appeals, set aside the awards, and directed the appellant to receive costs from the respondent.
B. DAYAL, J.
( 1 ) THESE seven First Appeals From Orders have been connected together as common questions of fact and law arise in all these cases. The appellant in all the cases, Shri Om Prakash, entered into certain contract with the military department during war period, in respect of which, there were disputes and according to an arbitration clause in the agreement the matter was to be referred to an arbitrator. In appeals Nos. 220, 221, 223 and 224 of 1952 the contracts provided for arbitration by the Director of Farms General Head Quarters, Simla, in appeals Nos. 222 of 1952 and 226 of 1962 the Officer-commanding Lucknow was to be the arbitrator and in appeal No. 225 of 1952 the contract provided that the arbitrator would be a certain Quarter Master at Delhi, the case of the appellant is that all these posts were abolished after the war and the officers mentioned in the respective agreements did not exist. Consequently, the appellant talked over the matter with the military officers and it was agreed that some new arbitrator had to be appointed. For this purpose the appellant filed seven applications in respect of the seven agreements under section 8 of the Indian Arbitration Act for appointment of an arbitrator. In each of these applications it was alleged that the relevant posts had been abolished, that it had been agreed that a fresh arbitrator be appointed and such an arbitrator could be out of one of the three names agreed to between the parties. The prayer ultimately in those applications was :
"one of the above mentioned officers mentioned in paragraph 8 be appointed to act as an arbitrator who shall have like power to act in the reference and to make an award as if he has been appointed by the consent of parties. "
This was simply an application under Section 8 of the Arbitration Act for the appointment of an arbitrator. The effect of such an appointment has been provided for in Sub-section (2) of Section 8, the relevant part of which is as follows:"who shall have like power to act in the reference and to make an award as if he or they had been appointed by consent of all parties. "
These words had been repeated in the prayer of the applications themselves. The position was therefore quite clear to the parties that the effect of appointment of the arbitrator in pursuance of those applications would merely be substitution of a new arbitrator in each of the seven agreements for the names mentioned therein. There was, however, no prayer whatever asking the court to refer the matter to such an arbitrator. On the 13th of February, 1950 the Court appointed col. Ranbir Singh as an arbitrator in all the seven cases and farther directed that all the papers be sent to the arbitrator and he was to give his award within two months from that date. A parwana was to be sent to the arbitrator. Obviously this part of the order directing a reference to the appointed arbitrator by the Court was wholly without jurisdiction. After appointment of the arbitrator the Court became functus officio. It was for the parties to approach the arbitrator and to make the reierence. However, Col. Ranbir Singh received pleadings of the parties and fixed some dates for the hearing. On the 24th of October, 1950 the Government Counsel wrote to Col. Ranbir Singh that he should return all the papers to the Court and not to proceed with the arbitration as he was considered unable to decide questions of law that would be involved. Accordingly Col. Ranbir Singh returned the papers to the Court and on the 27th of October, 1950 the Court asked for new names without giving any information of this order to the appellant. On the 3oth of October, 1950, the appellant made an application asking the Court to review its order dated the 27th of October, 1950. Before this review application could be decided, the defendant proposed three names on the 3rd of November, 1950. On the 18th of November, 1950 the Court rejected the review application holding that Col. Ranbir Sin
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