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High Court Of Madhya Pradesh
K. K. Dube and J. S. Verma, JJ.
ARDESHAR IRANI - Appellant
Versus
STATE OF M.P. - Respondents
Miscellaneous Appeal 117 and 118 Of 1970
Decided On : 01/31/1974
The expression 'misconduct' occurring in clause (a) of section 30 of the Arbitration Act has not been defined. This expression in relation to arbitration proceedings is incapable of any precise meaning and it has always been understood to have the same meaning which it has acquired under the English law. The history of legislation shows that the words or the proceedings occurring in clause (a) of section 30 were not present initially in the corresponding earlier law and in the English law also they were introduced only by amendment in 1934. The reason for the amendment was to include within the ambit of misconduct even those cases where no turpitude on the part of the arbitrator was alleged. Such cases of technical misconduct have come to be known as those, which even though do not attribute any turpitude against the arbitrator yet dearly fall within the ambit of this expression. [Para 11
It is not only the cases where moral turpitude of the arbitrator had been made out which alone fall within this category but even the cases where no moral turpitude is definitely proved against the arbitrator, yet the facts disclose a technical or legal misconduct in relation to the arbitrators conduct or the proceedings that a ground of misconduct for setting aside the award under dowse (a) of section 30 of the Act would be made out. [Para 12
(2) Arbitration Act, 1940 - S. 30 (c) - 'otherwise in valid' - connotation of -
Where the facts of a case disclose a defect of a kind which would render the award invalid in the opinion of the Court, the award must be set aside on this ground. It necessarily follows that the defect disclosed must have the effect of rendering the award invalid in the opinion of the Court, being so related to the award as the cause and effect, in order to invoke this clause. But subject to this restriction, it is for the Court to decide whether the defect is of such a kind as to render the award invalid. [Para 13
Any cause which indicates that the award was not fairly and impartially made or that the arbitrator did not function in a manner befitting his role would render the award invalid on the ground of its being 'otherwise invalid' within the meaning of that expression in clause (c) of section 30 of the Arbitration Act even where a case of invalidity on the ground of misconduct is not dearly made out. AIR 1954 Bom. 293 & AIR 1966 Cal. 321 relied on. [Para 14
(3) Arbitration Act, 1940 - Ss. 15 (5) (iv) 38 & 14 (2) - Government Servant appointed as arbitrator by Court-fees as fixed by the Court can be charged - such arbitrator cannot have recourse to section 14 (2).
A person who is a Government servant as defined in rule 15 (5) (iv) of the M.P. Government Servant (Conduct) Rules 1959, and who is appointed an arbitrator by the Court, cannot accept any fees until the same has been fixed by the Court under section 15 (5) (iv) of the Arbitration Act. Such arbitrator cannot have recourse to section 14 (2) of the Act. [Para 17
(4) Arbitration Act, 1940 - S. 30 - effect of irregularity - the contents of the award are to be seen - giving no reasons of the award - effect -
In order to see whether an award can be allowed to stand not withstanding the irregularity, the contents of the award have to be seen and unless it is possible to conclude that the award actually made is justified on the facts, the award will have to be set aside.
It is no doubt true that an arbitrator need not give any reasons for award and where no reasons are given in the award the same cannot be set aside by the Court on the ground of an error on the face of the award itself. AIR 1967 SC 378 referred to.
That however does not indicate that the absence of reasons is of no consequence even in a case where the award is challenged on the ground of misconduct or being 'otherwise invalid'. The absence of reasons in the award is relevant in such a case, at least as indicating that there is nothing to show that no other award could properly have been made not withstanding such an irregularity. [Para 21
(5) Arbitration Act, 1940 - S.30 (a) & (c) - arbitrator Government servant appointed by Court - demanding exorbitant fees from the parties before giving award without that being fixed by Court - accepting whole of the fees from one party before giving the award - in the award making whole of the fee payable by the other parry - 'award in valid' for 'misconduct' if not for any other reason. [Paras 16, 17 & 22
( 1 ) THIS order shall also govern the disposal of Misc. (First Appeal No. 117 of 1970 a. Krishnamurthy v. The State) Both these appeals are filed under Section 39 (1) (vi) of the Arbitration Act, 1940, against judgment of the Additional District Judge, mandsaur setting aside the award.
( 2 ) THE plaintiff-appellant in each case filed the suit for recovery of the amount claimed as due from the State Government on the basis of a building contract. On the suit being filed, the defendant State of Madhya Pradesh applied for staying the suit on the ground that there was an arbitration agreement between the parties, according to which, the dispute was to be decided by arbitration. Ultimately such an objection by the defendant was sustained and the dispute was referred for adjudication by the Arbitrator. Shri B. V. Subbarao, Superintending Engineer, irrigation Department of the State Government. There was no agreement made between the parties with regard to the remuneration to be paid to the arbitrator and the court while referring the dispute to the arbitrator also did not fix the remuneration payable to the arbitrator, It appears that the question of remuneration payable to the arbitrator did not engage the attention of either party, the court or even the arbitrator at that stage.
( 3 ) SHRI B. V. Subbarao was the arbitrator in both the cases and except for the amount involved, all other facts material for the case are identical. The arbitrator proceeded with the task and the question of payment of remuneration to the arbitrator was raised for the first time by a Me,n0 No. Q-27/arb. dated 21/8/1169 issued by the arbitrator to the parties in each case. By this memo the arbitrator demanded a sum of Rs. 10,000/-as his fees, to be shared equally by the parties in addition to the expenses incurred by him in the suit which has given rise to this appeal whereas fees demanded in the other case (giving rise to Misc. (first) Appeal no. 117 of 1970) was a sum of Rs. 4,400/-to be similarly shared equally by the parties. The arbitrator also state also stated in that memo that his fees not having been settled till then, the parties were required to settle the same immediately and that the subsequent hearing or meetings to be held after 8-9-1969. the next meeting, were to be decided by him only after the remuneration had been settled. On receiving such a demand the Officer In-charge of the case on behalf of the state Government replied to the arbitrator by a letter dated 29-8-1969 stating that he had forwarded the arbitrator's demand to the State Government but a decision thereon by the State Government was bound to take some time.
( 4 ) THEREAFTER the arbitiator by Memo No. A27/arb. dated the 27th October, 1969, gave notice to the parties under Section 14 of the Arbitration Act stating that he had made and signed the award on that day and further that his fees would be as already intimated so that the sealed envelope containing the award would be made available to either of the parties on payment of the full fees. On 13-111969, the arbitrator sent another memo No. Q-36/arb. dated 13-11-1969 addressed to the Officer Incharge of the case on behalf of the State Government stating that the plaintiffs were anxious to proceed further in the matter and that they had already informed the arbitrator about their willingness to pay not only their share of the fees but also the defendant's share of the fees in order to obtain the award. It was further stated by the arbitrator that unless the defendant paid its share of the fees within 10 days, the arbitrator would be free to accept the full fees from the plaintiffs and to hand over the award to them. No document containing such an offer by the plaintiffs 'to the arbitrator in writing has been pointed out to us so that it is clear that the plaintiffs' offer must have been made orally to the arbitrator. On receiving this communication from the arbitrator, the defendant filed an application dat
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