Punjab State and Another vs Chander Bhan Harbhajan Lal and Another

H.R. Khanna, J.—This appeal filed by the State of Punjab and the Executive Engineer, Arrear Division, Patiala, is directed against the order of learned Subordinate Judge, 1st Class, Ambala, whereby he set aside the award of the arbitrators.

The brief facts of this case are that Messrs, Chander Bhan Harbhajan Lal contractors, who are the Respondents in this appeal and are hereinafter referred to as the contractors, entered, into (a con-treat with the Punjab State through the Executive Engineer to supply bowlders for construction of Siswan super passage vide "work orders, dated 26th August, 1952 and 2nd November, 1954. Clause 5 of the work orders provided that any dispute arising between the parties should be referred to the arbitration of the Superintending Engineer of the Circle. This clause was subsequently substituted by an agreement between the parties according to which the dispute was to be referred to the Settlement Committee, Patiala, instead of the Superintending Engineer. The contractors made a claim for Rs. 33,019/2/- against the State with respect to the work done under the contract. This claim was denied by the State of Punjab which in its turn made a claim for recovery of Rs. 18,691/- against the above contractors. The matter was, accordingly, referred to the arbitration of the Settlement Committee. The Settlement Committee on 28th February, 1961, gave a conditional award for payment of Rs. 9,812/- by the State of Punjab to the above-mentioned contractors. The claim with respect to this amount, it may be stated, was admitted by the Executive Engineer. So far as the claim made by the State of Punjab for the, recovery of Rs. 18,691/- against the contractors was concerned, the arbitrators in their award observed as under:

They have also claimed a recovery of Rs 18,691/- on account of cost and carriage of boulders. It seems that the recovery was ordered by the Superintending Engineer in February, 1957, as he considered the record entries regarding 4057O eft. as suspicious. It now appears that the Chief Engineer made certain enquiries from the Superin-tending Engineer which he has now been able to-submit to the Chief Engineer. The matter being still sub judice, it will not be proper for us to order this recovery till the Chief Engineer has finally decided the matter. Since the representative of the department has already admitted the claim of the contractors for a certain amount, we make a conditional award in favour of the con-tractors for an amount of Rs. 9,812/- only (Rs. Nine thousand eight hundred and twelve only) subject to the condition that in case the Chief Engineer upholds the recovery, the same will be adjusted against this amount. Since the contractors have got only a period of 90 days to make the award a rule of Court, the department is advised to obtain the final orders of the Chief Engineer in this case within the stipulated time.

On 6th April, 1961, the contractors filed an application u/s 14(2) of the Arbitration Act in the Court of Subordinate Judge, Ambala, praying that the Settlement Committee be directed to file the award made by it in Court so that further proceedings might be taken by the con-tractors. The award ''was thereafter filed and on. 4th July, 1961, the contractors filed an application under Sections 15, 17, 30, and 33 of the Arbitration Act. It was prayed by the contractors that the award given by the arbitrators be modified and the condition regarding the adjustment of a, sum of Rs. 18,691/- if found due by the Chief Engineer against the amount awarded by the arbitrators be wiped off. In the alternative, the prayer made by the contractors was that second part of the award relating to the observations regarding recovery of Rs. 18,691/- be set aside. According to the con-tractors, the conditional award was imperfect in form and contained an obvious error inasmuch as the question, of the recovery of Rs. 18,691/- had been left open to be decided by the Chief Engineer who was a stranger to the contract. The arbitrators were, accordingly, stated to have been guilty of misconduct.

The above application of the contractors was resisted by the State of Punjab and the following issue was framed:

Whether the award is liable to be set aside or modified as per objection para No. 7 of the application?

The learned Subordinate Judge held that the arbitrators did not themselves decide the question ''about the recovery of Rs. 18,691/- regarding which claim had been made by the State of Punjab but left it open for decision'' by the Chief Engineer. According to the learned Subordinate Judge, the arbitrators could not do so and they were guilty of judicial misconduct inasmuch as they delegated their functions to the Chief Engineer. It was further observed that the portion of the award regarding claim for recovery made by the State could not be separated from the claim of the contractors. The award was, accordingly, set aside; as a whole.

Mr. Tejinder Singh Doabia learned Counsel for the Appellants has at the outset, argued that the Court below was in error in setting aside the award. According to the learned Counsel, the arbitrators did not leave the decision about the claim of the State of Punjab with regard to the amount of Rs. 18,891/- to the Chief Engineer but they only invited his opinion about that matter. This contention is wholly devoid of force because in the award it is distinctly stated that the award in favour of the contractors for the amount of Rs. 9,812/- was subject to the condition that in case the Chief Engineer upheld the claim of the Punjab State, the same would be adjusted against the amount awarded in favour of the contractors. The above words in the award leave no manner of doubt that according to the arbitrators the decision of the Chief Engineer about the claim for recovery of Rs. 18,691/- made by the State of Punjab was final and was not one which was liable to be reviewed by the arbitrators. The question as to whether it he award of. the arbitrators is in-valid because of their having left a matter in dispute to be decided by a third person, was considered in English cases and the dictum laid down in those cases has been reproduced on page 231 of Russell''s book on the Law of Arbitration, Sixteenth Edition, and reads as under:

An award is bad if the arbitrators, instead of deciding the matter submitted, award that the parties shall abide by the award of a third person whom they name; or that the Defendant shall account before such auditors as the Plaintiff shall assign, and if he be found in arrears, shall pay the amount. A partial delegation of authority equally vitiates the award if the defective part cannot be separated from the rest.

In case Juggobundhu Sahu v. Chand Mohan Saha AIR 1916 Cal 806, a Division Bench of that Court observed as under:

As regards the first ground, it appears that when the award had been submitted, objection thereto'' was taken by the Petitioner on the allegation that the arbitrator had delegated his authority to a stranger and that the award was in essence not the act of the arbitrator, but of that person. This was a serious chargeof judicial misconduct, and, if established, would invalidate the award for it cannot be disputed that an arbitrator has no authority to delegate his functions, except possibly the performance of what are called "ministerial acts.

The matter was also considered in Sheo Karan v. Kanhaya AIR 1935 Lah 113 and it was observed that an arbitrator could not abdicate his functions in favour of a third party, and that if the parties desired the arbitrator to take the opinion of some third person he could do so, but he acted illegally when he undertook to abide by the decision of the third person and to give his award in accordance with the wishes of the third person. I would, therefore, hold that as the arbitrators in the present case did not decide a vital matter themselves but left it for decision to the Chief Engineer the award given by them suffers from a serious infirmity and as such is liable to be set aside.

The other contention, which has been raised by the learned Counsel for the Appellants, is that the Court below should have remitted the award to the arbitrators and should not have merely set aside the award. It is, however, not disputed that no prayer was made on behalf of the Appellants in the Court below that the award should be remitted to the arbitrators. Awards can be remitted to the arbitrators u/s 16 of the Arbitration Act but before the Court actually decides to remit an award, the facts of the particular case must not be ignored. In the present case I find'' that the arbitrators themselves have taken a position in the award already given by them that the decision of the Chief Engineer with regard to the claim made by the State of Punjab against the con-tractors would be binding upon the parties. It would appear from the letter dated 15th May, 1961 sent by the Executive Engineer to the Chair-man, Settlement Committee, that after the award dated 28th February, 1961 the Chief Engineer has already upheld the claim of the State of Punjab against the contractors for the recovery of Rs. 18,69.1/-. As the arbitrators already stand committed to tire position that the decision of the Chief Engineer about the claim of the Punjab State against the contractors would be binding upon the parties, it may be difficult for them to get dislodged from that view. In the circumstances, even if no charge of partiality or dishonesty may be levelled against the arbitrators, it would still be not desirable to remit the award to them. I may in this context refer to the observations of Romily M.R. in Re: Tidswell, (1863) 33 Beav 213 which have been reproduced on pages 285 and 286 of Russell''s book on the Law of Arbitration, and read as under:

The objection is, in my opinion, one which would, make it inexpedient to (remit the award), because notwithstanding the perfect honesty and bona fides of an arbitrator, it is impossible, where an award has been set aside and sent back upon such grounds, that there should not be, in spite of himself, some disposition to favour one side and a disposition to make it appear that the objection to the award were useless and that the sending it back was productive of no good.

I am, therefore, of the view that if the relief to be granted to the contractors is to be real and not illusory, the award in the present case should not be remitted to the arbitrators.

The appeal, accordingly, fails and is dis-missed with costs.