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1970 Supreme(All) 141
Allahbad High Court
S.K.VERMA
The Industrial Gases Ltd. - Appellant
Versus
The Ganesh Flour Mills Co., Ltd. - Respondent
Decided On : 11/10/1970
M/s. S.N. Kacker and Shri Dhar, for Appellant; Krishna Sahai, for Respondent.
Headnote:
ARBITRATION ACT, 1940 - SECTION 39 - AWARD - UMPIRE - DUTIES AND POWERS - UMPIRE ACTING AS SARPANCH - AWARD SET ASIDE.
Fact of the Case:
Defendant appealed an order under Section 39 of the Arbitration Act, challenging an award made by an umpire in an arbitration proceeding. The dispute arose from a suit filed by the respondent company against the appellant company for rent and other charges related to certain buildings used by the appellant. The appellant counterclaimed for overpayment and the value of building materials left behind. The dispute was referred to three arbitrators, including an umpire, who gave differing awards.
Finding of the Court:
The court found that the umpire, instead of entering upon the reference and giving the parties an opportunity to make further submissions after the other two arbitrators differed, proceeded to give his award immediately. This was a violation of the umpire's duties and powers, as the umpire should have acted only after the arbitrators had failed to agree.
Issues: 1. Whether the umpire properly entered upon the reference and gave the parties an opportunity to make further submissions after the other two arbitrators differed. 2. Whether the umpire acted as an umpire or as a sarpanch, and the implications of such actions on the validity of the award.
Ratio Decidendi: The court held that the umpire failed to properly enter upon the reference and did not give the parties an opportunity to make further submissions after the other two arbitrators differed. This was a violation of the umpire's duties and powers under the Arbitration Act. The court also found that the umpire acted as a sarpanch or chairman, rather than as an umpire, which further invalidated the award.
Final Decision: The court allowed the appeal, set aside the order of the lower court and the award given by the umpire. The case was sent back to the lower court for further proceedings, with the option for the parties to choose between arbitration or a trial by the court.
2. The respondent-company filed a suit against the appellant-company for the recovery of a sum of Rs. 38,659.25 P. as rent of certain buildings used by the defendant. They also claimed the price of current consumed and the price or oxygen supplied. The suit was defended by the defendant on various grounds which need not be enumerated. Suffice it to say that the appellant-company made a counter claim on the allegation that the respondent-company had been overpaid. A claim was also made for the value of the building material which had been left behind when the premises were vacated by the appellant-company. After issues had been framed in the case, the dispute was referred to three arbitrators, namely, Sri Narendrajit Singh, Bar-at-Law, Sri Ganpat Sahai, Chief Engineer of the respondent-company and Sri H. S. Ramaswami, Chief Engineer of the appellant-company. Of these Sri Narendrajit Singh was to be umpire. The arbitrators took a long time over the arbitration and took repeated extensions for giving the award. Eventually arguments were heard on May 10, 1963. Sri Ganpat Sahai and Sri H. S. Ramaswami gave differing awards on May 14, 1963. Thereupon the umpire Sri Narendrajit Singh gave his award on May 15, 1963.
3. Against this award, both parties filed objections. These objections were heard by the learned Third Additional Civil Judge of Kanpur. He allowed the objections filed by the respondent-company. Most of the objections filed by the appellant-company were, however with slight modifications, rejected. The defendant-company has come up in appeal to this Court.
4. Apart from the other arguments that Mr. Kacker has raised, his main contention, goes to the root of the matter, is that the award is vitiated and must be set aside because Sri Narendrajit Singh never really entered upon the reference as umpire. The record of the arbitration proceedings shows that all the three arbitrators sat together. Witnesses were examined, documents were produced and arguments were heard by all of them. Sri Ganpat Sahai and Sir H. S. Ramaswami gave their differing awards on May 14, 1963 and Sri Narendrajit Singh gave his award the very next day, that is to say on May 15, 1963. When the two arbitrators differed, Sri Narendrajit Singh, the umpire, instead of proceeding to give his award forthwith, should have entered upon the reference, that is to say, he should have given notice to the parties so that they would have had an opportunity of making any other submissions that they desired in view of the difference of opinion between the two arbitrators mentioned above. I should not be understood to mean that Sri Narendrajit Singh could not act upon the evidence that was led and the arguments that were advanced before him and the other two arbitrators. He could have done so validly provided the parties had been given an opportunity of raising objections. In case they did not object, Sri Narendrajit Singh could have acted as he did. According to Russell on the Law of Arbitration, Fifteenth Edition, an umpire is not merely a third arbitrator. I find this in Russell :
"An umpire is a person appointed to take over the reference from arbitrators who are unable to agree amongst themselves. In general, he is in the same position as a sole arbitrator. ............"
Another passage in the same book, which is relevant, is :
"The powers and duties of an umpire, when he is called upon to act, are in general the same as those of the arbitrators.
The umpire must hear the evidence of the parties and their witnesses, if application is made to him to do so by either party, notwithstanding that the same evidence has already been adduced before the arbitrators. The umpire is not justified, in the face of an objection by either party, in taking any part of the evidence from the notes of the arbitrators, unless there are special provisions in the submission permitting him to do so.
