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TMI Blog2004 (11) TMI 610X X X X Extracts X X X X X X X X Extracts X X X X ..... 40. On 12th June, 1989 the respondent appointed one Shri Swami Dayal as the Sole Arbitrator. It appears that the respondent gave a notice to the appellant of such appointment having been made by the respondent but the appellant failed to respond. The respondent made a reference of disputes to the Arbitrator and the Arbitrator Shri Swami Dayal entered upon the reference. The record of the proceedings of the Arbitrator have neither been produced before the High court nor are they available before us. However, it is not disputed that the appellant did not participate in the proceedings before the Arbitrator. On 14th April, 1990 the Sole Arbitrator gave an award of ₹ 14,42,130.78p. with interest at the rate of 12 per cent per annum from 14th April, 1990 till realization in favour of the respondent against the appellant. The respondent filed an application in the Court under Sections 14 and 17 of the Act for making the Award a Rule of the Court. The notice under Section 14(2) of the Act was published in the Statesman , a daily English newspaper in its edition dated 6th December, 1991. the notice reads as under:- Notice to: Dharma Prathishthanam A, 214, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... remand the objection petition for hearing and decision by the learned Single Judge on merits. However, we do not think that this exercise is at all called for, as we are satisfied that the Award given by the arbitrator is a nullity and hence the proceedings must stand terminated fully and finally at this stage itself. We proceed to record our reasons for taking this view. An arbitrator or an Arbitral Tribunal under the Scheme of the 1940 Act is not statutory. It is a forum chosen by the consent of the parties as an alternate to resolution of disputes by the ordinary forum of law courts. The essence of arbitration without assistance or intervention of the Court is settlement of the dispute by a Tribunal of the own choosing of the parties. Further, this was not a case where the arbitration clause authorized one of the parties to appoint an arbitrator without the consent of the other. Two things are, therefore, of essence in cases like the present one: firstly, the choice of the Tribunal or the arbitrator; and secondly, the reference of the dispute to the arbitrator. Both should be based on consent given either at the time of choosing the Arbitrator and making reference or e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... arbitrator or arbitrators or umpire, as the case may be, 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. Section 9 is irrelevant for our purpose as its applicability is attracted to a case where an arbitration agreement provides for a reference to two arbitrators, one to be appointed by each party and procedure to be followed in such cases which is not a situation provided in by the agreement with which we are dealing. Sections 8 and 9 are placed in Chapter II of the Act Section 20 finds place in Chapter III. According to Section 20 Application to file in Court arbitration agreement (1) Where any persons have entered into an arbitration agreement before the institution of any suit with respect to the subject-matter of the agreement or any part of it, and where a difference has arisen to which the agreement applies, they or any of them, instead of proceeding under Chapter II, may apply to a Court having jurisdiction in the matter to which the agreement relates, that the agreement be filed in court. After noticing all the parties and affording them an opportunity of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... diction and participating in the proceedings before him may later on be precluded and estopped from raising any objection in that regard. According to Russell (Arbitration, 20th Edition, p. 104) An Arbitrator is neither more nor less than a private judge of a private court (called an arbitral tribunal) who gives a private judgment (called an award). He is a judge in that a dispute is submitted to him; . . He is private in so far as (1) he is chosen and paid by the disputants (2) he does not sit in public (3) he acts in accordance with privately chosen procedure so far as that is not repugnant to public policy (4) so far as the law allows he is set up to the exclusion of the State Courts (5) his authority and powers are only whatsoever he is given by the disputants' agreement (6) the effectiveness of his powers derives wholly from the private law of contract and accordingly the nature and exercise of these powers must not be contrary to the proper law of the contract or the public policy of England, bearing in mind that the paramount public policy is that freedom of contract is not lightly to be interfered with. A reference to a few decided cases would be apposite ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a case is to seek an appointment from the Court. In Banwari Lal Kotiya Vs. P.C. Aggarwal 1985 (3) SCC 255, the question of validity of a reference came up for the consideration of the Court in the context of the issue - whether an arbitrator could enter upon a reference which was not consensual. The Court explained the law laid down by this Court in Thawardas Perumal's case (supra) that though the reference to arbitrator has to be accompanied by consent of the parties but such consent is not necessarily required to be expressed at the time of making the reference if it is already provided by the agreement or is sanctioned by statutory rules, regulations or bye-laws. The Court held that the expression arbitration agreement is wider as it combines within itself two concepts (a) a bare agreement between the parties that disputes arising between them should be decided or resolved through arbitration and (b) an actual reference of a particular dispute or disputes for adjudication to a named arbitrator or arbitrators. When the arbitration agreement is of the former type, namely, a bare agreement, a separate reference to arbitration with fresh assent of both the parties w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by reason of the provisions of Rule 1 of Schedule I, then takes the mode of appointment intended necessarily to be appointed by consent of the parties and next, if it finds that the parties cannot concur in the appointment of an arbitrator, it appoints from itself. [emphasis supplied] The view was reiterated by another Division Bench of the same High Court in M/s. Teamco Private Ltd. Vs. T.M.S. Mani AIR 1967 Cal. 168. M/s National Small Industries Corpn. Ltd. Vs. M/s. National Metal Craft, Delhi and others AIR 1981 Del. 189 is very close to the case at hand. An arbitration clause - longish one, in substance provided that on question, dispute or difference arising between the parties to the agreement, either of the parties may give to the other notice in writing of such question dispute or difference and the same shall be referred to arbitration . One of the parties served a notice on the other appointing one 'K' as arbitrator to adjudicate upon the dispute. The notice ended by saying you are hereby called upon to agree to the said reference in accordance with the arbitration agreement for the settlement of the said disputes. 'K' then ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... but also from several other cases which we proceed to notice. In Chhabba Lal Vs. Kallu Lal and Others AIR 1946 P.C. 72 their Lordships have held that an award on a reference pre- supposes a valid reference. If there is no valid reference, the purported award is a nullity. On this point, there is near unanimity of opinion as amongst the High Courts of the country as well. Illustratively, we may refer to a few cases. In Union of India Vs. M/s. Ajit Mehta and Associates, Pune and Others AIR 1990 Bom. 45 (para 34), the Division Bench held that the Court has suo motu power to set aside an award on ground other than those covered by Section 30 such as an award made by arbitrators who can never have been appointed under Section 8, as such an award would undoubtedly be ab initio void and nonest. In Union of India Vs. South Eastern Railway AIR 1992 M.P. 47 and Rajendra Dayal Vs. Govind 1970 MPLJ 322, both Division Bench decisions, the High Court of Madhya Pradesh has held that in certain situations the Court may set aside an Award even without there being an application under Section 30 or even if the petition under Section 30 has not been filed within the period of limita ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... itrator, then the parties have already been ad idem on the real identity of the arbitrator as appointed by them before hand; the consent is already spelled out and binds the parties and the Court. All that may remain to be done in the event of an occasion arising for the purpose, is to have the agreement filed in the Court and seek an order of reference to the arbitrator appointed by the parties. Thirdly, if the arbitrator is not named and the authority who would appoint the arbitrator is also not specified, the appointment and reference shall be to a sole arbitrator unless a different intention is expressly spelt out. The appointment and reference both shall be by the consent of the parties. Where the parties do not agree, the Court steps in and assumes jurisdiction to make an appointment, also to make a reference, subject to the jurisdiction of the Court being invoked in that regard. We hasten to add that mere inaction by a party called upon by the other one to act does not lead to an inference as to implied consent or acquiescence being drawn. The appellant not responding to respondent's proposal for joining in the appointment of a sole arbitrator named by him cou ..... X X X X Extracts X X X X X X X X Extracts X X X X
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