9911796707
TMI Blog2002 (3) TMI 877X X X X Extracts X X X X X X X X Extracts X X X X ..... are the members of HCC. It appears that sometime in July or August, 1997 the respondents had placed an oral order for purchase of certain cloth. It further appears that at the time of taking delivery of cloth, the respondents found the same defective and less in quantity and hence there arose disputes between the parties. The applicants referred the matter to the HCC with a request to enforce their claim for damages. The HCC referred the letter of the applicants to the respondents and asked them to settle the claim. The respondents disputed the claim made by the applicants and refused to pay any amount claimed by the applicants. Consequently, on 2-2-1999, the respondents lodged their claim with the HCC with a request for referring the matter to the arbitrator as per the arbitration rules of the HCC. According to the respondents they pointed out that they were not the members of the HCC and that there was no arbitration agreement with the applicants and that, therefore, the arbitration rules of the HCC were not applicable. However, the HCC persisted and appointed arbitrator on behalf of the respondents without their consent. The respondents, therefore, appeared before the arbitrator ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n proper notice of appointment of arbitrator. He has further contended that the arbitration rules of the HCC are not followed and enforceable as they are not in accordance with the provisions of sections 10 and 11 of the Act. Sanjay Patel has further stated that the appointment of the arbitrator by the HCC on behalf of the respondents was illegal and invalid as the HCC had not authority to do so. He has further alleged that the arbitrators misconducted themselves. On behalf of the applicants there constituted attorney Anand Ridhkaran Goenka has filed his affidavit in reply, wherein, he has contended that the award in question was legally and validly made and published which in law it has become an executable decree. He has further pointed out that the decree has already been executed and properties of the respondents have been attached. Therefore, according to him, there is no scope left in law to dislodge the execution of the award/decree. It is also contended that this Court being an executing court cannot go beyond the award/decree. Anand Goenka has further pointed out that the petition filed by the respondents for setting aside the award has been dismissed and, therefore, the r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e therefore, trying to enforce it under section 35 of the Act, which provides for the enforcement of arbitral award under the Code of Civil Procedure, 1908 as if it is a decree of the court. It is well settled law that the executing court cannot go behind the decree and has to execute it as it is unless it can be shown that the court which passed it had inherent lack of jurisdiction. [ Vide Vasudev. Dhanjibhai Modi v. Rajabhai Abdul Rehman AIR 1970 SC 1475 and Sunder Dass v. Ram Prakash AIR 1971 SC 1201 ( sic )]. In that case, the decree is null and void ab initio and it is non est. The present Chamber Summons by the respondents is an attempt to challenge the validity of the award, which has now become decree of the court, on the several grounds including the ground of jurisdiction. It is not open to the respondents to press into service other grounds of challenge in execution proceedings. Therefore, their challenge can be entertained and considered so far as it relates to the ground of jurisdiction only. The respondents Director Sanjay Patel has in paragraph 3 of his affidavit raised several grounds; viz. ( a ) to ( p ) but only following two can be considered as th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... arbitral Tribunal may rule on its own jurisdiction, including ruling on any objections with respect to the existence or validity of the arbitration agreement, and for that purpose, ( a )an arbitration clause which forms part of a contract shall be treated as an agreement independent of the other terms of the contract; and ( b )a decision by the arbitral Tribunal that the contract is null and void shall not entail ipso jure the invalidity of the arbitration clause. (2) A plea that the arbitral Tribunal does not have jurisdiction shall be raised not later than the submission of the statement of defence; however, a party shall not be precluded from raising such a plea merely because that he has appointed, or participated in the appointment of, an arbitrator. (3) A plea that the arbitral Tribunal is exceeding the scope of its authority shall be raised as soon as the matter alleged to be beyond the scope of its authority is raised during the arbitral proceedings. (4) The arbitral Tribunal may, in either of the cases referred to in sub-section (2) or sub-section (3), admit a later plea if it considers the delay justified. (5) The arbitral Tribunal shall decide on a plea r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e award made by such arbitrator is non est . The third proposition is that when the award suffers from such inherent defect it can be set aside or ignored at any stage of the proceedings..." (p. 65) In the facts of the case before it, the Division Bench proceeded to observe as under : "34. The present is not a case of a mere invalidity of the award either on account of an error apparent on the face of the award or on account of its being outside the scope of the reference or being made pursuant to an invalid reference . In the present case, the award is a nullity from its inception since the very appointment of the arbitrator was without jurisdiction. The Court which made the appointment had no power under section 8 to appoint the arbitrator and, hence no arbitrator could have been appointed under the said section at all. This is not a matter of mere illegality in the appointment of the arbitrator but a lack of power to appoint the arbitrators in question. Since the arbitrator/s in question could not have acted in law, they had no legal existence. The arbitrators so appointed were prohibited by law to proceed with the arbitration. Hence the proceedings conducted and the award ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bitral Tribunal has no jurisdiction to arbitrate and make an award is based on the alleged fact that there is absence of arbitration agreement within the meaning of section 7 of the Act. Shri Jain the learned counsel for the applicants, while refuting this contention, pointed out that the bills issued to the respondents contain an endorsement : Subject to the sale dispute and arbitration Rules of Hindustan Chamber of Commerce, Mumbai . He further relied upon the decision in Krishan Chander Ramesh Chander Bros. v. Sohan Lal AIR 1982 Delhi 122 wherein incorporation of such a term in the bill was held to constitute a valid arbitration agreement. The Delhi High Court was dealing with an application under section 20 of the Arbitration Act, 1940. In our case, however, the question arises in the execution proceeding. In my opinion, the executing court is not expected nor warranted to enter into an investigation of the facts whether there is absence of arbitration agreement or not; if not, whether the alleged incorporation of the term in the bills amounts to a valid arbitration agreement or not etc. These questions clearly fall outside the jurisdiction of the executing court which n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f an arbitration agreement and held : "In the instant case, it is no doubt true that there was no contract in writing between the parties. Nevertheless by accepting the membership of the Association and agreeing to abide by the Rules, Bye-laws, etc., as framed by the Association the said By-laws and Rules become a contract by incorporation between the parties and to that extent it can be said that there is an agreement in writing by virtue of incorporation. In that light of the matter I have no hesitation in holding that even under the Arbitration Conciliation Act, 1996 pursuant to the Rules of the Association both the applicants and the respondents, by virtue of incorporation, entered into an agreement for Arbitration in writing. Once having so held, the main contention as to jurisdiction or nullity must be rejected." With great respect, in my opinion, such an exercise is not necessary nor warranted by the executing court in view of the clear ratio laid down by the Apex Court in Vasudev Dhanajibhai s case ( supra ). 11. Shri Gala made reference to the decision of another learned Single Judge of this court (Kochar, J.) in Jaimal Shah v. Ila Pandya 2001 (2) Bom. C.R. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s well settled law that the executing court cannot go behind the decree and has to execute it as it is unless it can be shown that the court which passed it had inherent lack of jurisdiction. [ Vide Vasudev. Dhanjibhai Modi v. Rajabhai Abdul Rehman AIR 1970 SC 1475 and Sunder Dass v. Ram Prakash AIR 1971 SC 1201 ( sic )]. In that case, the decree is null and void ab initio and it is non est. The present Chamber Summons by the respondents is an attempt to challenge the validity of the award, which has now become decree of the court, on the several grounds including the ground of jurisdiction. It is not open to the respondents to press into service other grounds of challenge in execution proceedings. Therefore, their challenge can be entertained and considered so far as it relates to the ground of jurisdiction only. The respondents Director Sanjay Patel has in paragraph 3 of his affidavit raised several grounds; viz. ( a ) to ( p ) but only following two can be considered as they relate to the question of jurisdiction. They are : ( a )There is no arbitration agreement between the parties. ( b )The award was made without jurisdiction. 7. Sanjay Patel has made th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bitration clause which forms part of a contract shall be treated as an agreement independent of the other terms of the contract; and ( b )a decision by the arbitral Tribunal that the contract is null and void shall not entail ipso jure the invalidity of the arbitration clause. (2) A plea that the arbitral Tribunal does not have jurisdiction shall be raised not later than the submission of the statement of defence; however, a party shall not be precluded from raising such a plea merely because that he has appointed, or participated in the appointment of, an arbitrator. (3) A plea that the arbitral Tribunal is exceeding the scope of its authority shall be raised as soon as the matter alleged to be beyond the scope of its authority is raised during the arbitral proceedings. (4) The arbitral Tribunal may, in either of the cases referred to in sub-section (2) or sub-section (3), admit a later plea if it considers the delay justified. (5) The arbitral Tribunal shall decide on a plea referred to in sub-section (2) or sub-section (3) and, where the arbitral Tribunal takes a decision rejecting the plea continue with the arbitral proceedings and make an arbitral award. (6) A pa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 65) In the facts of the case before it, the Division Bench proceeded to observe as under : "34. The present is not a case of a mere invalidity of the award either on account of an error apparent on the face of the award or on account of its being outside the scope of the reference or being made pursuant to an invalid reference . In the present case, the award is a nullity from its inception since the very appointment of the arbitrator was without jurisdiction. The Court which made the appointment had no power under section 8 to appoint the arbitrator and, hence no arbitrator could have been appointed under the said section at all. This is not a matter of mere illegality in the appointment of the arbitrator but a lack of power to appoint the arbitrators in question. Since the arbitrator/s in question could not have acted in law, they had no legal existence. The arbitrators so appointed were prohibited by law to proceed with the arbitration. Hence the proceedings conducted and the award/s made by him/them are non est from the beginning and will have always to be regarded as such. The award is thus patently illegal and void. This illegality which goes to the very root of the a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n the learned counsel for the applicants, while refuting this contention, pointed out that the bills issued to the respondents contain an endorsement : Subject to the sale dispute and arbitration Rules of Hindustan Chamber of Commerce, Mumbai . He further relied upon the decision in Krishan Chander Ramesh Chander Bros. v. Sohan Lal AIR 1982 Delhi 122 wherein incorporation of such a term in the bill was held to constitute a valid arbitration agreement. The Delhi High Court was dealing with an application under section 20 of the Arbitration Act, 1940. In our case, however, the question arises in the execution proceeding. In my opinion, the executing court is not expected nor warranted to enter into an investigation of the facts whether there is absence of arbitration agreement or not; if not, whether the alleged incorporation of the term in the bills amounts to a valid arbitration agreement or not etc. These questions clearly fall outside the jurisdiction of the executing court which need not and can t record its finding on these factual aspects. Bearing in mind the ratio and test laid down by the Apex Court in Vasudev Dhanjibhai Modi s case ( supra ), the lack of jurisdicti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ation and agreeing to abide by the Rules, Bye-laws, etc., as framed by the Association the said By-laws and Rules become a contract by incorporation between the parties and to that extent it can be said that there is an agreement in writing by virtue of incorporation. In that light of the matter I have no hesitation in holding that even under the Arbitration Conciliation Act, 1996 pursuant to the Rules of the Association both the applicants and the respondents, by virtue of incorporation, entered into an agreement for Arbitration in writing. Once having so held, the main contention as to jurisdiction or nullity must be rejected." With great respect, in my opinion, such an exercise is not necessary nor warranted by the executing court in view of the clear ratio laid down by the Apex Court in Vasudev Dhanajibhai s case ( supra ). 11. Shri Gala made reference to the decision of another learned Single Judge of this court (Kochar, J.) in Jaimal Shah v. Ila Pandya 2001 (2) Bom. C.R. 72 wherein the learned Judge proceeded in the interest of justice to examine whether the award in terms of which a decree was passed suffered from the vice of perversity and misconduct on the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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