Union of India, All India Radio, Hyderabad vs Kwality Consturction, Engineer and another

A.S. Bhate, J.—The Civil Revision Petition No. 2645 of 1998 and C.M.A. No. 1601 of 1998 are being disposed of by a common judgment.

Why we are disposing of these two matters by a common judgment will become clear on stating facts and background leading to the filing of these two proceedings before us. The Quality Construction Engineers (hereinafter referred to as the "Contractors") entered into an agreement with the Union of India (All India Radio, Ramanthapur, Hyderabad) for construction of work of T.V. Studio Complex at Hyderabad. The terms and conditions were fully incorporated in the agreement. As certain disputes arose, the Contractor invoked the Arbitration clause in the agreement. There was dispute regarding payment in respect of certain items. The matter was referred to Arbitrator Sri R.J. Bakru, who was a Retired Chief Engineer of Central Public Works Department, New Delhi. The Arbitrator adjudicated upon the dispute referred to him and passed and Award. The Award was dated 10-6-1992. An application was made u/s 17 of the Arbitration Act, 1940 (hereinafter referred to as the "Act") for making the Award "Rule of the Court". This application was obviously made by the Contractor in whose favour the Award was passed for a total sum of Rs. 7,58,404/- . Interest at the rate of 14% p.a. was also awarded. That application was vide O.S. No. 386 of 1992 before the learned Senior Civil Judge (Principal Subordinate Judge), Saroornagar, Ranga Reddy District. The Union of India filed its objections, before the said senior Civil Judge by O.P. No. 84 of 1992, to the said Award. The purpose of filing the objections was to challenge the Award passed. It appears that O.P. No. 84 of 1992 was dismissed for default on 15-9-1994. O.S. No. 386 of 1992 was decreed by ordering that the Award be made the Rule of the Court. This was on 19-9-1994. The said order was passed ex parte as against the Union of India.

Aggrieved by the two aforesaid orders, the Union of India filed CMA No. 1601 of 1998 and CRP No. 2645 of 1998. The CMA challenges the dismissal of objection raised u/s 30 of the Act while the revision petition takes exception to the order dated 19-9-1994 making the Award ''Rule of the Court''. It will thus be seen that the decision of CRP No. 2645 of 1998 is very much dependent on the decision CMA No. 1601 of 1998. In any event both the proceedings before us arise out of one and the same Award and hence it is not only convenient but necessary to decide them by common judgment.

Before proceeding to consider rival contentions it is necessary to have a look at the relevant provision under the Act.

Section 17 of the Act is as follow:

" Where the Court sees no cause to remit the award or any of the matters referred to arbitration for reconsideration or to set aside the award, the Court shall, after the time for making an application to set aside the award has expired, or such application having been made, after refusing it, proceed to pronounce judgment according to the award, and upon the judgment so pronounced a decree shall follow, and no appeal shall lie from such decree except on the ground that it is in excess of, or not otherwise in accordance with, award."

Section 30 has to be read with Section 33 of the Act. These two sections are as follows:

"30-An award shall not be set aside except on one or more of the following grounds, namely:

(a) that an arbitrator or umpire has misconducted himself or the proceedings;

(b) that an award has been made after the issue of an order by the Court superseding the arbitration or after arbitration proceedings have become invalid u/s 35;

(c) that an award has been improperly procured or is otherwise invalid.

Any party to an arbitration agreement or any person claiming under him desiring to challenge the existence or validity of an arbitration agreement or an award or to have the effect of either determined shall apply to the Court and the Court shall decide the question on affidavits:

Provided that where the Court deems it just and expedient, it may set down the application for hearing on other evidence also, and it may pass such orders for discovery and particulars as it may do in a suit."

While Section 30 states as to what arc the grounds on which an Award can be objected to, it is Section 33 which indicates as to in what manner these objections are to be taken. An application is required to be filed as provided u/s 33 of the Act for taking objections enumerated u/s 30 of the Act.

The order in OP No.84 of 1992 passed on 15-9-1994 may be extracted. It is a docket order and is as follows:

"No representation for the petitioner till 3.30 p.m. Respondents'' advocate present. Petitioner is called absent. Petition is dismissed without costs."

However above this docket order there is an endorsement stating that when the matter came up for final hearing it was in presence of Sri Radhakrishna Kumar, advocate for petitioner and Sri Vosudeva Rao, advocate for respondent No.2. Petitioner therein was Union of India and respondent No.2 was the Contractor. Respondent No.1 was the Arbitrator, who had rendered the Award. It is clear that the endorsement above the docket order conflicts with what is stated in the docket order. Presence of petitioner''s advocate is recorded in the endorsement though in the docket order it is stated that he is absent. Obviously there was non-application of mind in making the endorsement. It is no more in dispute that the said order was passed only because the objectors'' (Union of India) Counsel was absent. There was no determination of the merits of the objections raised by the Union of India. The objections were dismissed simply because none appeared for the Union of India, including the Counsel. It is argued by the learned Counsel for the appellant that the absence on behalf of the petitioner before the learned senior Civil Judge was purely due to utter negligence on part of the Standing Counsel- The affidavit which has been supplied in support of the application for condonation of delay in presenting the appeal narrates as to how the Standing Counsel of the appellant totally neglected his duties while conducting OP No. 84 of 1992. It is pointed out that even after the order dated 15-9-1994 and subsequent decree passed in OS No.386 of 1992 on 19-9-1994, the appellant was never informed by the Standing Counsel about passing of these orders. It was only when an Executive Petition was filed that the appellant came to know of such orders. It is evident from the affidavit that there was a satisfactory reason for appellant not to appear on 15-9-1994. The appellant was never informed by its Standing Counsel of the date or of the steps to be taken on that date. In our view the absence of appellant/petitioners in OP No.84 of 1992 was purely due to reasons beyond its control and result of callousness shown by the Standing Counsel appearing for it. In State of Haryana Vs. Chandra Mani and others, , the Supreme Court has made certain very pertinent observations regarding impersonal machinery of the State. It was observed that on account of impersonal machinery and the inherited bureaucratic methodology imbued with the note making file pushing, and passing-on-the buck the ethos, delay on part of the State is less difficult to understand though more difficult to approve. It was further observed that the State represents collective cause of the community. At another place it was observed that certain amount of latitude is not impermissible in respect of the State. The lapses committed by the cogs in the State machinery would ultimately result in loss to the public exchequer. Therefore, if there is material to show that some definite lapse was committed by the person expected to take steps on behalf of the State, State cannot be at once held responsible for not putting in appearance on a particular date. We arc of the view that in the present case there was sufficient cause for absence of appellant on 15-9-1994 and Court below ought not to have passed an ex parte order in such circumstances.

Argument has been advanced that in an appeal filed against an ex parte order it is not open for the appellant to canvass the grounds regarding the cause of absence on the date of hearing. The appellant can at the most challenge the reasons on which the ex parte decree was passed but not the order setting the appellant ex parte. In other words the question whether the lower Court was right in proceeding ex parte cannot be dealt or argued in appeal. This is the contention of the learned Counsel for the respondent. We do not agree. There is ample authority for the proposition that Court of Appeal can deal with reasons for defendant''s non-appearance and if not satisfied with the ex parte order can remand the whole matter back to trial on merits. We may refer to the decision in Jnanendra v. Profullananda, AIR 1928 Calcutta 812 and Sadhu Krishna Ayyar v. Kuppan Ayyangar, ILR 1907 (30) Madras 54. The Full Bench of the Madras High Court pointed out that the Appellate Court could consider the reason for defendant''s non-appearance and if it is clear that the lower Court ought not to have proceeded ex parte, it has power to remand the case for re-hearing. The Bombay High Court reiterated the same view in Jethalal Giridhar v. Vararaj Lal Bhai Shankar, ILR 46 Bombay-184. The Patna High Court has also taken the same view and that is the consensus of most of the High Courts. We are therefore of the view that it is permissible for us in appeal to go into the aspect as to whether there was sufficient cause for absence of the appellant. As pointed out already we are satisfied that there was sufficient cause. We think that order passed in OP No.84 of 1992 dismissing the petition, merely on the ground of default, is unsustainable when the absence on behalf of the appellant was for sufficient reasons. The said order deserved to be set aside by allowing the CMA on this ground.

There is one more ground which we think is much more strong, on which the appeal has to be allowed. We have already pointed out that Section 30 of the Act provides the grounds on which the Award can be challenged or objected. Section 33 of the Act prescribes mode in which the challenge is to be made. Such challenge has to be made by filling an application. The section further states that the challenge to the Award shall be decided by the Court, on affidavits. (Underlined to give emphasis). The proviso no doubt empowers the Court, in cases deemed fit by the Court, to set down the application for hearing the oral evidence. But the normal rule is that the application of objection shall be decided on affidavits, hi the instant case there is absolutely no material to show as to whether the Court below had directed the parties to file affidavits as required by the mandate of this Section. The Court has not referred to any affidavit filed by the appellant. The reading of the Section clearly shows that upon filing of the objections, it is the duty of the Court to decide the matter on affidavits. It is not necessary that the parties need appear after filing of the affidavits to argue the matter or, do further more unless the Court gives specific directions of leading further oral evidence. In this view of the legal position, we are unable to pursuade ourselves to accept propriety or power of the Court below to dismiss the petition for mere absence. Whether appellant was present or not, a duty was cast on the lower Court to decide the matter on affidavits, on merits. The Court could not have resorted to an escapist procedure of dismissing the objection petition, for default. The Court was indeed bound to consider the affidavit filed in support of the objection petition and the reply by the Contractor and decide the matter on merits. In other words the absence of the appellant on 15-9-1994 could not necessarily result in dismissal of the objection petition. The Court below has not referred to any affidavit and has not given any reason for dismissing the petition on merits. The Court has not even stated as to whether any affidavit was filed in support of the petition or not. In our view the order passed by the learned Court below this suffers from this infirmity. It would have been a different case had the Court stated that inspite of granting opportunity affidavits were not filed by the petitioner and petitioner had remained absent after such opportunity of filing affidavit was given to it. Had it been so, then some argument could have been canvassed to support the dismissal merely for default. We therefore, hold that the lower Court acted with material illegality in not deciding OP No. 84 of 1992 on basis of affidavits as required by Section 33 of the Act and by dismissing the same merely for default of the objector. The impugned order dated 15-9-1994 thus deserves to be set aside on this ground also.

Once the order dated 15-9-1994 is set aside, the order passed in OS No. 386 of 1992 on 19-9-1994 must of necessity be set aside. The order dated 19-9-1994 is as follows:

"In this type of suit, no ex parte evidence of the plaintiff need be recorded in variance of provision of Section 33 of Arbitration Act. The Award is marked as Ex.C1. The defendants filed a separate OP to set aside the award on the file of this Court. The defendant though filed written statement remained ex parte. There are no grounds to remit the award of any of the matter referred to arbitration for reconsideration.

In the result the suit is decreed with costs, making the Award Ex. C-1 as a Rule of Court with subsequent interest at 14% p.a. from the date of the decree till the date of realization."

Section 17 of the Act, referred above, makes it clear that the judgment in accordance with the Award is to be pronounced after initial conditions are fulfilled. One of the conditions precedent is, that if an application for setting aside an Award has been made, the same must have been refused by the Court. It is only thereafter that Court can make the Award as Rule of the Court. In the present case as we have set aside the order in OP No. 84 of 1992, the consequence would be that the said OP No. 84 of 1992 has to be sent back for disposal according to law. Thus the objections have not been rejected as yet. As a result till the objections are decided one way or the other according to law, no order in OS No. 386 of 1992 can be passed. There will be back of jurisdiction in the Court to pass an order without the application for objections having decided according to due procedure. That is why we have said that once CMA No. 1601 of 1998 is allowed, CRP No. 2645 of 1998 must necessarily be allowed, CRP No. 2645 of 1998 must necessarily be allowed and, sent back for appropriate orders after OP No. 84 of 1992 is decided in accordance with law.

For the aforesaid reasons, we allow CRP No. 2645 of 1998 and CMA No. 1601 of 1998. We set aside orders passed in OP No. 84 of 1992 as well as in OS No. 386 of 1992 and remand both the proceedings back to the learned senior Civil Judge for deciding them according to law in the light of what we have observed above.

We further directed that to void any confusion, the learned senior Civil Judge should fix OP No. 84 of 1992 and, OS No. 386 of 1992 on one and the same day as the Original Suit is necessarily to be decided after the result of the Original Petition. Parties are directed to appear before the Senior Civil Judge, Saroornagar, Ranga Reddy District on 17-8-1998. The matters may be disposed off before end of October 1998.

Before we part with the judgment we think it necessary to point that the irresponsible conduct of the learned Standing Counsel for Union of India in the senior Civil Judge''s Court may be taken note of by the Bar Council for making appropriate disciplinary enquiry.

In the result the CRP No. 2645 of 1998 and CMA No. 1601 of 1998 are allowed with the above directions. No order as to costs.