1969 (4) TMI 121 - HC - Indian Laws

Summary

Issues Involved:
1. Misconduct by the arbitrator for not giving notice to the party against whom ex parte proceedings were taken.
2. Jurisdiction of the arbitrator to award the sum of Rs. 9,500.00 to Shri W. N. Chowdhary.
3. Direction by the lower court to implead Shri W. N. Chowdhary as a party to the arbitration proceedings.
4. Validity of the arbitration agreement and the authority of the arbitrator.

Detailed Analysis:

1. Misconduct by the Arbitrator:
The learned Subordinate Judge set aside the award dated 29-3-1967 on the ground that the arbitrator was guilty of misconduct because no notice was given to the party against whom ex parte proceedings were taken. The matter was remitted back to the arbitrator for proceeding afresh from the stage when Shri Patanjal and Shri Om Prakash Mehra had last appeared before him. The arbitrator was further directed to make Shri W. N. Chowdhary a party to the arbitration proceedings so that all the interested parties may be represented.

2. Jurisdiction of the Arbitrator:
The main question argued was whether the arbitrator had jurisdiction to award the sum of Rs. 9,500.00 to Shri W. N. Chowdhary, considering he was not a party to the arbitration agreement. The court held that the arbitrator had no jurisdiction to determine the claim of Shri Chowdhary, as he was neither a party to the reference nor to the arbitration proceedings. Therefore, the decree could not be passed in favor of Shri W. N. Chowdhary.

3. Direction to Implead Shri W. N. Chowdhary:
The court found that the lower court acted without jurisdiction and with material illegality and irregularity in directing the arbitrator to make Shri W. N. Chowdhary a party to the arbitration proceedings. The lower court's direction was beyond its competence, as Shri Chowdhary was neither a party to the reference nor to the arbitration proceedings. Thus, the direction to implead Shri W. N. Chowdhary was deleted from the lower court's order.

4. Validity of the Arbitration Agreement:
The court observed that the arbitration agreement must be a valid agreement with terms reduced to writing, and the parties thereto should be ad idem. Third persons who are not parties to the arbitration agreement or to the contract containing an arbitration clause and not claiming under such parties are not bound by such agreement and are generally disentitled to enforce it. The court also noted that the subject-matter of the arbitration agreement must be capable of assignment for an assignee to step into the shoes of the assignor.

The court referenced several decisions, including the Punjab High Court decision in Gian Chandra Hirday Mohan v. Prem Narain Mahinder Mohan, which held that plaintiffs not party to the suit or reference had no locus standi to file the suit. The court also discussed the English decision in Shayler v. Woolf, which dealt with the assignability of arbitration clauses.

Ultimately, the court allowed the revision and deleted the direction to implead Shri W. N. Chowdhary as a party to the arbitration proceedings. The arbitrator was permitted to adjudicate upon the rights of the parties to the arbitration agreement and decide the effect of the non-payment of Rs. 9,500.00 to Shri W. N. Chowdhary on the rights and liabilities of the parties to the agreement.

Conclusion:
The revision was allowed, and the direction to implead Shri W. N. Chowdhary as a party to the arbitration proceedings was deleted. The arbitrator was directed to adjudicate the rights of the parties to the arbitration agreement and determine the effect of the non-payment of Rs. 9,500.00 to Shri W. N. Chowdhary. There was no order as to costs.