AI Structured Summary
Not yet generated for this judgment
Judgment
Jaganmohan Reddy J.
This is an appeal against an order of the District and Additional Sessions Judge of Secunderabad, refusing to set aside award of an arbitrator under S. 30. Arbitration Act, which was then applicable to the British Administered Areas.
The defendant who had obtained a contract for the construction of certain sections of the Mudkhed-Adilabad Railway line from the then Nizam''s State Railway, had sub-leased certain portions of his work to the plaintiff on the terms that the plaintiff was to receive the amount actually paid to the defendant for the work clone from the railway less 23 per cent.
The plaintiff filed a suit in the District Judge''s Court, Secunderabad on 13-3-1944 alleging that he had in accordance with the agreement done certain works and although the defendant has received the money, he has not paid him the amounts due to him, nor has he been rendering any account with respect to the work done by him.
After the issues were framed, the parties by their agreement dated 7-4-1945 agreed to refer their disputes to the arbitration of one N. K. Krishnaswamy Iyer, an Assistant Engineer, Railways. Pursuant to this reference the arbitrator gave his award on 6-10-1945, but evidently there was some mistake with respect to the changes specified in the plaint over which the work was done and consequently an application for amendment of plaint was filed on 17-10-1945.
Thereupon the parties having agreed upon certain terms filed a consent memo on 6-3-1946, by which each of them agreed to give up certain claims for damages and made certain admissions, with which we shall deal subsequently.
The matter was again referred to the same arbitrator who made an award on 19-11-1946 disallowing the claim of the plaintiff and in fact holding that about Rs. 300/- were due to the defendant from the plaintiff. As against this award objections were filed by the plaintiff on 30-11-1946 which were rejected by the learned District Judge on 6-2-1947.
Against this judgment an appeal was filed on 9-6-1947 in the Court of Hon''ble the Resident at Hyderabad but before the matter could be heard and determined, paramountcy of the British Crown in India had lapsed on 15-8-1947. By virtue of a Notification issued with the assent of His Exalted Highness the Nizam, who was then the sovereign legislative authority all cases pending in the Court of Hon''ble the Resident were to be transferred to the High Court to be heard and disposed of.
At the time when this appeal came up for hearing, a question arose as to whether there was a Notification and whether that was sufficient for the purposes of vesting in this High Court the jurisdiction to hear and determine the appeal.
Inasmuch as we are now satisfied that there is a Notification issued under the authority of H. E. H. the Nizam who was then the sovereign legislative authority, the transfer of the case to this High Court is valid and invests us with the jurisdiction to hear and determine this appeal.
Respondent''s Advocate had also then raised a preliminary objection that no appeal lies against the judgment of the District and Additional Sessions Judge under S. 39, Arbitration Act inasmuch as a separate order rejecting the objections was not passed.
By one and the same order the District Judge rejected the objections and passed a decree in terms of the award. This objection has now been given up and not pressed by the learned Advocate for the respondent and in our view quite rightly given up.
The only other question now which remains for determination in this appeal is whether the arbitrator in giving his award was guilty of misconducting himself or the proceedings within the meaning of S. 30(a) , Arbitration Act.
The learned Advocate for the appellant has pressed his appeal on three grounds, which according to him clearly demonstrate that the arbitrator has been guilty of judicial misconduct, in that he not only ignored the clear admissions of the parties in arriving at his conclusions, but had failed to take into consideration certain admitted facts.
The three grounds of his attack on the award, although there were other grounds which he did not give up but which according to his contention did not advance the case any further, are as follows :
(a) the arbitrator did not take into account the amount of Rs. 929/- credited in the accounts of the defendant by way of deposit, a fact which was not denied by the defendant;
(b) that the defendant admitted that the plaintiff had done work till the end of May 1940 both in his pleadings, in the evidence before the arbitrator and in the consent memo. The arbitrator in total disregard of this admission did not compute the work done by the plaintiff on chainages 151200 to 152200, but merely took an easy way out of the difficulty by apportioning the work done between the plaintiff and the defendant half and half considering it to be equitable and
(c) the Arbitrator held the work done on chainages 164400 and 164600 as not proved although the work done till the end of May 1940 between these chainages except for two gaps has been admitted by the defendant.
It is urged by the learned Advocate for the appellant that the admission and the entries recorded in the account hooks and measurement books of the railway which were the basis of payment to the defendant before May 1940, were not considered by the arbitrator, nor were the account books of the defendant which contained the items of expenditure incurred by the defendant subsequent to the return of the plaintiff''s partner and which were debited to the account of the plaintiff and acknowledged by the plaintiff''s partner, nor were the entries relating to the deposit taken into account.
On these acts of omission and commission the learned Advocate for the appellants contends that the arbitrator has been guilty of misconduct within the meaning of S. 30, Arbitration Act and the award should be set aside and the case remanded back to the trial Court for being proceeded according to law.
Clause (a) of S. 30, Arbitration Act provides that
an award shall not be set aside except on one or mere of the following grounds namely:
(a) that an arbitrator or umpire has misconducted himself or the proceedings;
(b)------------------------------
(c) that an award has been improperly procured or otherwise invalid.
There is ample authority for the proposition, and we do not propose to examine cases in support of it in any detail, that where parties to a dispute have chosen an arbitrator and have agreed to refer the matters in dispute to him whether on facts or of law any award given by him is binding on the parties provided he has applied his mind to the matters in dispute and has applied the principles of natural justice in arriving at his conclusions.
The Courts will not interfere with any finding of an arbitrator merely because they would have come to a different conclusion upon the materials on record or because the arbitrator has taken an erroneous view of the law with respect to any point referred to him for adjudication. The parties have been deemed to have taken that risk when they chose an arbitrator who may not be a lawyer or fully competent to determine the questions of law if they have referred to him question of law for adjudication.
This position is not controverted even by the learned Advocate for the appellant. What he seeks to urge before us is that where an arbitrator has been chosen by reason of his skill or technical knowledge for the determination of disputes, which require, from him the exercise of that skill & technical knowledge which he as a technical man is expected to give, it will be incumbent upon the arbitrator to arrive at a conclusion after a reasonable exercise of that skill and ability, from the records which may be capable of producing results and not find an easy way such as he has done in this case by assuming that since the plaintiff has done something and the defendant has done some other work, it will be equitable to give half and half.
He must make an attempt to arrive at an estimate of work done by each party particularly when according to the records such a result can be arrived at. In support of his contention the learned Advocate has cited the cases of -- ''Messrs. Khusiram Benarshilal v. Messrs. Mathuradass Goverdhandass'', 52 Cal WN 826 (A); ''Chhogmal Rawatmal v. Sankalchand G. Shah'', 53 Cal WN 828 (B); ''Gunais & Co. v. M/s. Amanmal Tulsidas'', AIR 1924 Sind 75 (FB) (C) and -- Sadhu Singh and Others Vs. Ramdeo Singh, .
The learned Advocate for the respondent has relied upon the Privy Council case in -- ''Ghulam Khan v. Muhammad Hassan'', 29 Cat 167 (PC) (E) at p. 183, 185 and 186; ''Firm of Saleh Mahomed Umer Dossal v. Seth Nathoomal Kessamal'', AIR 1927 164 (Privy Council) ''Nana Kwaku Amoah v. Nana Sir Afori Atta'', AIR 1933 PC 46 (G); ''Mohindar Singh v. Ramindar Singh & Another'' AIR 1944 83 (Privy Council) ''Nanak Chand v. Firm Fauna Lal Durga Prasad'' Nanak Chand Vs. Firm Panna Lal Durga Prasad and Others, , and the case of -- ''Gooroo Churn Dey v. Ram Dhun Paul'', 7 Suth WR 28 (J).
Before we deal with these authorities, it is necessary to dispose of one of the points which was strongly urged before us, viz., that the admission alleged to have been made by the defendant in para 6 of his written statement in answer to para 4 of the plaint is no admission at all. There is, in our view, force in this contention. But the matter is not of such great importance in the light of the admissions made by the defendant in his sworn statement before the arbitrator as well as the admissions made in the consent memo.
It is further'' argued on the authority of 7 Suth WR 28 (J) that the omission to consider admissions is not a ground for setting aside the award. That is a case where the appellants-defendants contended that the lower appellate Court had set aside the award of the arbitrators on the ground that they had decided against the written statement of the defendants, and as that was not one of the grounds permitted under S. 224 of Act 8 of 1859 the lower appellate Court''s decree was reversed.
It is not a case which supports the contention of the respondent''s Advocate that the award should not be set aside on the ground that the Arbitrator has ignored the admissions of the parties. If the Arbitrator through gross carelessness of mistake does not consider vital facts based on the admissions of the parties, which leads to injustice or unfairness it will amount to an improper hearing or conduct of the proceedings though no moral turpitude may be attributed to this. In -- ''Hall v. Hinds'', (1841) 10 LJ CP 20 (K) Tindal C. J. observed
The mistake as a matter of carelessness is so gross, as to amount, though not in a moral point of view yet in the Judicial sense of that word, to misconduct on the part of the Arbitrators.
Similarly the description of legal misconduct given in the old case of -- ''Ganga Sahi v. Lakhraj'', 9 All 253 (L) is pertinent inasmuch as it also lays down that neglect of the duties and responsibilities of the arbitrators and of what the Courts of justice expect from them before allowing finality to their awards though it does not imply moral turpitude will amount to misconduct.
In the case of AIR 1927 164 (Privy Council) their Lordships of the Privy Council held that the arbitrator had considered all the evidence, documents and accounts before him and the arguments of the pleaders and then made the award. In these circumstances, a mere error in construing a contract between the parties, which is referred to in the award simply to earmark the origin of the dispute in question between the parties could not in the opinion of their Lordships, be said to be an error in law on the face of the award.
That was a case under para 15, Sch. 2, Civil P. C. But in any event, that case does not assist the contention of the respondent''s advocate as it was a case where the finding was that the arbitrator had considered all the evidence on record and had given an award, while in this case the contention is that the arbitrator had not considered the materials available to him in arriving at a conclusion on matters in dispute referred to him for determination.
The cases of AIR 1933 PC 46 (G) AIR 1944 83 (Privy Council) and Nanak Chand Vs. Firm Panna Lal Durga Prasad and Others, are all cases which lay down the principle that once the matter has been referred to an arbitrator both on questions of fact and law,'' it is not open to the parties to challenge the findings merely on the ground that the arbitrator has taken a wrong view either of fact or law and that Courts will not set aside such awards.
We do not dispute this principle which is well established. The question in this case is whether, the arbitrator, because of his failure to direct his mind to admissions which, arc clearly on record and which he as a technical man being in the habit of computing the amount of work done by a contractor ought to have considered, has been guilty of gross carelessness and neglect of the duties and; responsibility of an arbitrator and hence guilty of misconduct within the meaning of S. 30, Arbitration Act.
In the case of 52 Cal WN 826 (A), Sinha J. observed at pp. 830 and 831 :
It is quite true that this Court will not allow itself to be made a Court of Appeal against the decision of arbitrators. This Court must also give a wide latitude to the arbitrators to decide rightly or wrongly and the mistake of the arbitrators, if they proceed honestly and impartially, will not be corrected unless it appears on the face of the award. This Court must also "go very far in ignoring technicalities and irregularities on the part of arbitrators unless there is some real substance of error behind them". . . .
. . If the arbitrators do not appreciate the points involved in the case and do not apply their minds to them, or if they decide in a way in which no reasonable man occupying a judicial or a quasi-judicial position would decide it is open to the Court to interfere with the award in the interest of justice.
In that case, the arbitrators had decided the matters in dispute without taking any oral evidence even though the circumstances of the case were such that they could not arrive at a conclusion without taking oral evidence. It was decided that the arbitrators were guilty of misconduct and the award was set aside.
In 53 Cal WN 828 (B) Harries C. J. and Chatterjee J. have also similarly held that the discretionary power of the arbitrators in the conduct of proceedings is never absolute and their decision would have to be reviewed by the Court and their award set aside if it appears that in the course which they have pursued they have acted in a manner in which no person vested with a judicial authority could possibly act.
Accordingly, where there has been a mishandling of the arbitration proceedings or serious neglect of duties on the part of persons vested with judicial authority to determine the rights and liabilities of parties which is likely to lead to substantial miscarriage of justice, the Court is justified in setting aside the award.
Further in the case of AIR 1924 Sind 75 (FB) (C) which is a Full Bench case of the Sind Judicial Commissioner''s Court, a similar view has been propounded after reviewing both Indian and English case laws and citing with approval the passage of Russel on Arbitration, 10th Edition 387, which was also adopted by Sinha J. in 52 Cal WN 826 (A), referred to above.
In the case o Sadhu Singh and Others Vs. Ramdeo Singh, Fazl Ali C. J. as he then was and Sinha J. observed that if there is indication of gross negligence or recklessness on the face of the award, that might also amount to a form of misconduct on the part of the arbitrators, because that might by itself be sufficient to show that "there was no proper hearing of the matter in dispute."
It appears to us perfectly clear that the defendant accepted and acknowledged the salient fact that the plaintiff and the plaintiff alone had done the work on the chainages specified above upto May 1940. It is also clear beyond any controversy that the railway measured the earth work in Cuttings and banks and made entries relating thereto on 17-3-1940, 27-4-1940, 25-5-1940 and 25-6-1940.
A reference to the measurement book and the entries therein on 27-4-1940, would show that the earth work in banks between chainages 164417 and 164550 was 50008 cubic feet and that on chainages 164550 and 164610 was 5580 cubic feet, making a total of the work done to be 55588 cubic feet.
The total quantity of work claimed with respect to earth work in cutting is 157213 cubic feet, out of which the quantity of work done before the end if May as per the measurement book is 137663 cubic feet, which leaves work amounting to 19550 cubic feet as being the matter in dispute between the parties. The plaintiff claiming to have done the work after May while the defendant delaying and himself claiming to have done it during that period.
With respect to the amount of work of 55588 cubic feet of earth work in banks executed before the end of May 1940 as appearing from the measurement book of the railways, the arbitrator has held that the plaintiff has not proved that he has done the work and that his books were unreliable.
With respect to the work done in earth work in cuttings amounting to 137663 cubic feet the arbitrator has held that the plaintiff has done some work before May 1940 and the defendant has done some work after May 1940, as such each of them should get half and half as such he proceeded to allow to the plaintiff only half of the total amount work done, namely 78000 cubic feet. We may observe that it was not a question of the plaintiff''s accounts being reliable or not.
The question is that an arbitrator, who had a highly technical knowledge of this kind of work and was in fact an Assistant Engineer in the Railway in charge of this Mudkhed-Adilabad line could by taking into account the admission of the defendant that the plaintiff did work till May 1940 have arrived at the amount of work done by the plaintiff till the end of May 1940, at any rate, by reference to the measurement books which were undisputable and in fact admitted by both the parties as showing the correct position.
The arbitrator has failed to direct his mind to and has ignored the materials on record, that is to say he has arrived at a conclusion in total disregard of the material on record, as such has not discharged the function for which he was appointed, namely to ascertain the amount of money; due to the plaintiff. This he could only determine by ascertaining the amount of work done by the plaintiff and the amount received by the defendant from the Railway and deducting therefrom 23 per cent which would be the amount due to the plaintiff.
It is therefore clear beyond a doubt that the arbitrator has been careless in determining the matters in dispute has ignored admitted facts in the light of admissions of the defendant, the cumulative effect of which in our view, would amount to misconduct within the meaning of S. 30, Arbitration Act and we are perforce compelled to set aside the award.
The appeal is consequently allowed with costs and the award of the arbitrator set aside. The case is referred to the District Judge, Secunderabad, for disposal accordingly.
Pronounced by us in open Court by dictation this fourth day of March 1954.