Arbitration Award can be set aside with consent of parties
PLJ 2014 SC 950
[Appellate Jurisdiction]
Present: Tassaduq Hussain Jillani, C.J., Khilji Arif Hussain & Sh. Azmat Saeed, JJ.
A. QUTUBUDDIN KHAN--Appellant
CHEC MILLWALA DREDGING CO. (PVT.) LTD., STEEL HOUSE, KARACHI--Respondent
C.A. No. 319 of 2004, decided on 3.4.2014.
(On appeal from the judgment dated 19.3.2003, passed by the High Court of Sindh, Karachi, in H.C.A. No. 311 of 2000).
Arbitration Act, 1940 (X of 1940)--
----S. 17--Award Rule of Court--Award was announced holding entitled as costs of arbitration--Award was set aside with consent of the parties--Arbitrator was nominated by appellant while second party failed to nominate his arbitrator--Proceedings were conducted by sole arbitrator--Award was filed before High Court for making it Rule of Court--Objection raised before High Court was dismissed being barred by limitation and proceeded to make award Rule of Court--Case was remanded for decision afresh by H.C.--Challenge to--Validity--Award was filed in the Court and objections were either not filed or if filed found to be barred by limitation, whether the Court is to mechanically make such an award, the Rule of Court--Powers vested in the Court to make an Award the Rule of Court are obviously judicial and not ministerial and it is now settled law that the absence of objections to such an award does not absolve the Court of its responsibility to examine the same--In the instant case, High Court after concluding that the objections filed by the respondent were time barred, without conducting a judicial exercise of examining the award qua its validity, made the same the Rule of the Court--Hence, its order in behalf was not sustainable in law and was rightly set aside by way of the impugned judgment and the case was remanded. [Pp. 955 & 956] A & B
----S. 17--Award Rule of Court--Post remand proceedings--Scope of--Question of--Whether award was nullity or prima facie illegal--Determination--Even in the absence of objections, the Award may be set aside and not made a Rule of Court if its nullity or is prima facie illegal, or for any other reason not fit to be maintained; or suffers from an invalidity which is self-evident or apparent on the face of the record--Impugned judgment was upheld to the extent that it set asides order of and remands the case.[Pp. 957 & 958] C & D
As per Khilji Arif Hussain, J.--
----Ss. 17, 30, 33 & 39--Limitation Act, (X of 1940), Art. 158--Award Rule of Court--Agreement for providing loaders and dumpers on rent basis--Failed to make payment of claim of rent--Ex-parte award was announced--Court cannot sit a Court of appeal an award rendered by arbitrator--Validity--It is settled principle of law that the award of the arbitrator who is chosen judge of facts and of law, between the parties, cannot be set aside unless the error is apparent on the face of the award or from the award, it can be inferred that arbitrator has misconducted himself under Sections 30 & 33 of the Act--However, even if no objection under Sections 30 & 33 of the Act has been filed, the Court at the time of making award rule of Court can see that award does not suffer from patent illegality--While making award rule of the Court, in case parties have not filed objections, the Court is not suppose to act in mechanical manner, like post office and put its seal on it but have to look to award and if found patent illegality on face of it, can remit the award or any of the matter referred to Arbitrator for reconsideration or to set aside the same--However, while doing so, the Court will not try to find out patent irregularity, and only if any, patent irregularities can be seen on the face of award/arbitration proceedings like the award is beyond scope the reference or the agreement of arbitration was void agreement, or Arbitrator awarded damages on black marketing price, which is prohibited by law, award was given after superseding of the arbitration, can set aside the same--Award cannot be set aside on the ground which falls under Sections 30 & 33 of the Act, while exercising jurisdiction under Section 17 of the Act--Even if no application under Sections 30 & 33 of the Act is filed by a party, the same does not absolve the Court of its responsibility to see that the award does not suffer from any patent illegality necessitating either the setting aside the award or its remission to the Arbitrator--Appeal was accepted. [Pp. 961, 962, 964 & 969] E, F, G, H & R
Post Remand Proceeding--
----Award Rule of Court--Award was set aside by consent of parties--Agreed to nominate arbitrators within 15 days--Respondent did not nominate arbitrator and arbitrator was nominated by appellant after notice to parties--Proceedings of arbitrator--Denial of justice--Validity--Now after 13 years, again asking the parties to go before High Court would be tantamount to denial of justice. [P. 966] I
Arbitrator Act, 1940 (X of 1940)--
----S. 17--Civil Procedure Code, 1908--O. VII, R. 11--Award Rule of Court--Consent order--Comparing signatures--Question of--Whether notice of arbitration proceedings was served--Forged documents--Signature was of the person, whose signature appears on the document C-A-1--Such findings of facts cannot be termed as patent illegality to set aside the award under Section 17 of the Act--After passing the consent order that parties will appoint their Arbitrators within 15 days from the date of order, the respondent instead of nominating his Arbitrator, filed suit for declaration that the agreement is a forged document and therefore of no legal force or affect and a nullity in the eye of law and for permanently restraining the appellant from taking any action including any Arbitration proceedings--High Court rejected the plaint under Order 7 Rule 11 CPC--Service was not affected upon him; that the agreement is false and fabricated document as, according to him, in the actual terms and conditions entered into between the parties, there was no clause with regard to arbitration proceedings between the parties--High Court, after hearing the parties came to the conclusion that questions whether the agreement contained the arbitration clause or is it a false and fabricated document cannot be decided without recording of evidence and by consent of the parties set aside. [P. 967] J, K & L
----S. 17--Limitation Act, (X of 1908), Art. 158--Award Rule of Court--Objections were filed after 74 days--Validity--It is now well settled principle that properly addressed registered letter is presumed to be due service and the burden of proof of non-service is upon the addressee i.e. in the case in hand, upon the respondent, which the respondent failed to prove--After filing of the award, notice was issued to file objections and admittedly despite service of said notice, the respondent failed to file objections within 30 days from the date of service, as required under Art. 158 of the Limitation Act, and ultimately objections were filed with delay of 74 days--High Court after hearing the parties and having taken into consideration the objection raised by the respondent held that the respondent has reiterated his arguments earlier advanced--Respondent has not been able to advance any fresh ground/objection in support of his case and ultimately, after recording these findings, made the award rule of the Court. [P. 968] M & N
Civil Procedure Code, 1908 (V of 1908)--
----S. 34--Award of interest by Arbitrator--Power of arbitrator to award interest pendent lite or prior to that grant of interest prior to date of award--Question of--Whether award was nullity or prima facie illegal--An arbitrator cannot award interest prior to date of decree, in the absence of any express or implied agreement between the parties, mercantile usage and statutory provisions or on equitable grounds in a proper case--Thus, award of interest prior to date of decree is a patent illegality appears on the face of award--Section 34 of CPC, which gives discretion to Court to award interest from the date of suit or period prior to it, does not apply to arbitration proceedings--Likewise, the Interest Act also did not confer power on arbitrator to award interest--Grant of interest from the date prior to award or from the date of award until payment of the amount due and payable, the arbitrator can under no circumstances award interest for the period beyond the passing of the decree by the Court in terms of award, as under Section 29 of the Act, only the Court and not the arbitrator had discretion to order interest, from the date of the decree at such a rate as the Court deemed reasonable--Grant of interest prior to date of award, in absence of an express or implied, statutory provisions, agreement between the parties, in the facts of the case, is an error of law apparent on the face of award. [P. 969] O, P & Q
Mr. Nadeem Qutub, (Son of the Appellant in person).
Mr. Bilal A. Kh., ASC for Respondent.
Date of hearing: 22.1.2014.
Sh. Azmat Saeed, J.--This appeal by leave of the Court is directed against the judgment of the learned Division Bench of the High Court of Sindh, dated 19.03.2003, whereby an appeal filed by the Respondent was accepted and the matter was remanded to the learned Single Judge.
2. Brief facts necessary for adjudication of the lis at hand are that it is the case of the present Appellant that an agreement was executed between the parties in terms whereof the Appellant was required to provide loaders and dumpers on rent to the Respondent. The Appellant claimed to have provided the said loaders and dumpers to theRespondent, however, the rent thereof allegedly was not paid to the Appellant. The said agreement apparently contained an arbitration clause, which was invoked by the Appellant and arbitration proceedings commenced. An Award was announced by the Arbitrator, holding the Appellant entitled to Rs.86,84,990/- along with a sum of Rs.30,000/- as costs of the arbitration. The original civil jurisdiction of the learned High Court of Sindh was invoked seeking to make the said Award the Rule of the Court. The matter was apparently resisted by the Respondent and eventually disposed of by consent of the parties on 13.08.1998 in terms whereof the Award was set aside and both the parties were directed to nominate their respective Arbitrators, whereafter the de novo proceedings be conducted. The Appellant nominated Mr. Shamshad Ahmed Khan, as his Arbitrator. However, the Respondent did not nominate its Arbitrator, whereafter the arbitration proceedings were conducted by Mr. Shamshad Ahmed Khan, as the sole Arbitrator. The Respondent did not file a reply to the claim and was eventually proceeded against ex parte by the Arbitrator. An award was announced, which was filed before the learned High Court of Sindh on 14.11.1998 for making it a Rule of the Court.
3. The learned High Court of Sindh issued notice to the Respondent, which was apparently served on 24.12.1998 and it filed objections to the Award on 03.02.1999. The learned Single Judge of the High Court of Sindh seized of the matter, vide Order dated 14.07.1999 dismissed the objections, filed by the Respondents, as being barred by limitation and proceeded to make the Award the Rule of the Court, vide Order dated 05.09.2000.
4. Being aggrieved, the Appellant filed a High Court Appeal before the learned Division Bench of the High Court i.e. HCA No. 311 of 2000, which was contested by the present Appellant. However, vide impugned judgment, dated 19.03.2003, the said appeal was accepted, the Order of the learned Single Judge was set aside and the case was remanded for decision afresh on merits. Whereafter the present Appellant invoked the jurisdiction of this Court through Civil Petition for Leave to Appeal No. 483-K of 2003 challenging the said judgment of the learned Division Bench of the High Court of Sindh dated 19.03.2003.
5. This Court vide Order dated 22.03.2004 granted leave to appeal in the following terms:
"4. After hearing learned counsel for the petitioner and examining the record, we are inclined to grant to consider, inter alia, the following question of law:--
"Whether the appellate Court did not correctly apply the ratio of Muhammad Tayab (supra) case insofar as it passed an order of remand for examination of the objections on merits generally instead of restricting the scope of adjudication to the nullity or invalidity apparent on the face of record."
We order accordingly."
6. We have heard Mr. Nadeem Qutub son of the Appellant, present in person as well as the learned counsel for the Respondent and perused the available record.
7. In pith and substance, it is the case of the Appellant that the Respondent despite notice did not file the objections to the Award within the time prescribed by law in this behalf, hence, the said objections were rightly dismissed by the learned Single Judge and made the Award the Rule of the Court. Therefore, in the circumstances, there was no occasion to set aside the Order of the learned Single Judge or remand the case to be decided afresh on merits.
8. The learned counsel for the Respondent has controverted the contentions raised on behalf of the Appellant and has defended the impugned judgment of the learned Division Bench of the High Court. It is further contended that even otherwise, the Court seized of the matter where an Award is sought to be made the Rule of the Court is required to apply its mind and not act mechanically as was done by the learned Single Judge. It is added that the Award was ex parte, invalid and contrary to record, hence, not sustainable in law. In support of his contentions, the learned counsel relied upon the judgment, reported as Muhammad Tayab vs. Akbar Hussain (1995 SCMR 73).
9. In the instant case, an Award was filed in the Court. Notices were issued, in pursuance whereof, the Respondent entered appearance and filed objections to the said Award. The said objections were filed beyond the period of limitation prescribed in law, and were held by the learned Single Judge to be barred by limitation. In the above circumstances, the Award was made the Rule of the Court. The Respondent filed an Appeal, which has been accepted by a learned Division Bench of the High Court of Sindh by way of the impugned judgment and the case was remanded to the learned Single Judge. However, the finding of the learned Single Judge that the objections filed by the Respondent were barred by limitation has not been set aside by way of the impugned judgment and such findings have not been challenged independently by the Respondents before this Court.
10. In view of the above, the obvious question that floats to the surface is that in the eventuality that an Award was filed in the Court and objections thereto are either not filed or if filed found to be barred by limitation, whether the Court is to mechanically make such an Award, the Rule of the Court. The powers vested in the Court to make an Award the Rule of the Court are obviously judicial and not ministerial and it is now settled law that the absence of objections to such an Award does not absolve the Court of its responsibility to examine the same. In the instant case, the learned Single Judge, after concluding that the objections filed by the Respondent were time barred, without conducting a judicial exercise of examining the Award qua its validity, made the same the Rule of the Court. Hence, its order in this behalf dated 05.08.2000 was not sustainable in law and was rightly set aside by way of the impugned judgment and the case remanded.
11. However, the real controversy inter se the parties pertains to the scope of the exercise to be undertaken by the learned Single Judge in post-remand proceedings. The scope of such exercise has been determined by the learned Division Bench of the High Court by relying upon the judgment of this Court, reported as Muhammad Tayab (supra), which has been quoted in extenso. However, for ease of reference, the operative part of the said judgment is reproduced herein below:
"5. It is contended before us on behalf of the appellant that it was duty of the Court to have examined the award regardless of the fact whether objections were filed or not as empowered under Sections 17 and 30 of the Arbitration Act to find out whether the award was nullity because of invalidity of arbitration agreement or for any other reason. The Court could also have set aside the award in case of sole arbitrator and particularly when other party had no prior notice. In support of the contentions reliance is placed on the case of M/s. Awan Industries Ltd. v. The Executive Engineer, Lined Channel Division (1992 SCMR 65).
6. In the circumstances we are of the view that learned Single Judge in the High Court should not have refused to go into the merits of the case on the ground that objections were filed beyond stipulated time particularly in view of the plea taken by the appellant that he was not served with notice in the arbitration proceedings. We, therefore, set aside the impugned judgment in High Court appeal and also impugned order of the learned Single Judge making award rule of the Court and remand the case to learned Single Judge in the High Court to examine the record of the arbitration proceedings to find out whether the plea taken by the appellant about non-service of notice is justified or not. This seemingly can be done without going into the question of limitation as is observed in the ruling mentioned above. The Appeal is allowed in the terms stated above."
The aforesaid judgment proceeds on the dictum of the earlier judgment referred to therein i.e. M/s. Awan Industries Ltd. vs. The Executive Engineer, Lined Channel Division (1992 SCMR 65), wherein the fact that the claim raised was barred by limitation was taken into account irrespective of the fact that no objection in this behalf had been taken. The Court observed as follows:
"17. But, in his submissions, he ignored the provisions of Section 17 of the Arbitration Act, which imposes a duty on Courts to see that there is no cause to remit the award or any of the matters referred to arbitration for reconsideration or to set aside the award. This can be done by the Court suo motu, apart from the application which a party may make for either remission of the award or its reversal. Where, therefore, an award is found to be nullity because of the invalidity of the arbitration agreement or, for any other reason, or the award is prima facie illegal and not fit to be maintained, the Court has power under Section 17 of the Act to set it aside without waiting for an objection to award being filed or without considering any application for setting it aside, if there be any, and irrespective of the question whether or not any objection to the award was filed or whether the objection, if filed, was not within time. In such cases Section 30, Clause (c) of the Act is also attracted. ...
18. ...............................
22. There is yet another objection which is apparent on the face of the record. ... it is duty of the Court to see that the claim is within limitation period. Accordingly, it was also the duty of the Arbitrator to see that the claim before it was within the period of limitation, notwithstanding whether such a plea was taken or not. ..."
12. What emerges from the examination of the above quoted two judgments of this Court is that, even in the absence of objections, the Award may be set aside and not made a Rule of the Court if its nullity or is prima facie illegal, or for any other reason not fit to be maintained; or suffers from an invalidity which is self-evident or apparent on the face of the record. The adjudicatory process is limited to the aforesaid extent only.
13. In view of the aforesaid/the impugned judgment dated 19.03.2003 is upheld to the extent that it set asides the Order of the learned Single Judge dated 05.08.2000 and remands the case. The objections filed by the Respondent are time barred. The learned Single Judge in post-remand proceedings shall decide whether to make the Award the Rule of the Court after examining as to whether the said Award is a nullity or prima facie illegal or not fit to be maintained or suffers from any other invalidity which is self-evident or apparent on the face of the record.
14. Resultantly, this Appeal is disposed of in the above terms. No order as to costs.
Tassaduq Hussain Jillani, J.
Khilji Arif Hussain, J.
Sh. Azmat Saeed, J.
Khilji Arif Hussain, J.--I have the privilege to go through the judgment rendered by my learned brother in the matter (Civil Appeal No. 319 of 2004) but with due deference to his lordship's opinion, I failed to persuade my self with the same andm therefore, handing down my reasons as follows.
2. This appeal with the leave of the Court is directed against the judgment passed by High Court of Sindh, Karachi whereby the learned Division Bench, while hearing the appeal under Section 39 of the Arbitration Act, 1940 [herein after referred to as "the Act"], set aside the order passed by the learned Single Judge in Chambers of the High Court making award rule of the Court and remanded the matter to the learned Single Judge to decide afresh the same on merits, in light of the principle laid down by this Court in the case of M/s. Awan Industries Ltd. vs. The Executive Engineer, Lined Channel Division (1992 SCMR 65).
Brief facts.--
3. Facts relevant for the purpose of decision of this appeal are that the appellant entered into an agreement with the respondent for providing loaders and dumpers on rent basis; since the respondent, despite supply of loaders and dumpers by the appellant, failed to make payment of his claim of rent, therefore, the appellant, as per terms of the agreement between the parties, invoked the arbitration clause of the agreement and nominated his Arbitrator. On failure of the respondent to appoint his Arbitrator, the Arbitrator appointed by the appellant proceeded ex-parte against the respondent and announced its award, which was filed in Court for making it rule of the Court. After filing of the award in Court, notices were issued to the respondent, who filed objections against the said award under Sections 30 & 33 of the Act, including the one that the agreement containing arbitration clause is a false and fabricated document. The learned Single Judge in Chambers of the High Court, after hearing the parties noted that the core issue for decision is whether the Exb.P1 is the correct terms and conditions of the agreement entered into between the appellant/plaintiff and respondent/defendant or C-A-1, one containing arbitration clause and other not, thus, it would be difficult at this stage to ascertain which is the genuine document, without recording evidence. Both the parties agreed that they are prepared to lead evidence. With the consent of the parties, the award was set aside and both the parties undertook to nominate their Arbitrators within two weeks time from the date of order with a right to raise objections before the Arbitrators and that the Arbitrators were to decide the matter on merits, according to law within two months.
4. After passing of the above order, on 3.8.1998, the appellant appointed Mr. Shamshad Ahmed Khan as his Arbitrator vide letter dated 27.08.1998 and called upon the respondent to nominate his Arbitrator within 15 days, as ordered by the Court, otherwise his Arbitrator will act as sole Arbitrator under Section 9(b) of the Act. The respondent, despite his undertaking to nominate his Arbitrator within two weeks' time from the date of the order, failed to nominate his Arbitrator. Resultantly, the Arbitrator nominated by the appellant acted as the sole Arbitrator. Despite issuance of notice by the Arbitrator, the respondent failed to appear before the sole Arbitrator, which resulted in ex-parte proceedings against the respondent, which proceedings culminated in award on 11.11.1998. Consequently, the sole Arbitrator at the request of the appellant filed the award before the Court for making it rule of the Court.
5. After filing of the award in Court, notices were issued to the respondent to file objections. Despite service of notice, the respondent failed to file objections within the time prescribed under Article 158 of the Limitation Act, and finally filed objections which were barred by 74 days. The learned Single Judge in Chambers of the High Court after hearing the parties made the award rule of the Court, while observing that the objections filed by the respondent on the face of it were barred by time and were already rejected vide order dated 14.07.1999 and no fresh objections were filed by the respondent/defendant. Feeling aggrieved, the respondent preferred High Court Appeal, which has been accepted by means of the impugned order.
6. The appellant has appeared in person and after taking us to various documents on record contends that the learned Single Judge in Chambers of the High Court has rightly made award rule of the Court but the learned Division Bench of the High Court through the impugned judgment, without taking into account the documents available on record, remanded the matter to the learned Single Judge to decide it afresh in light of principal laid down in the case of M/s. Awan Industries Ltd. (ibid).
7. Conversely, Khawaja Bilal, learned ASC appearing for the respondent while supporting the impugned judgment contends that learned Single Judge in Chambers of the High Court made the award rule of the Court in a mechanical manner, without applying his mind to ascertain that whether the award is in accordance with law and does not suffer from any patent illegality. He has further argued that the agreement containing the arbitration clause between the parties is a forged and fabricated document. According to him the award was obtained by the appellant in collusion with the Arbitrator without service of notice upon the respondent; in support of his contention, the learned counsel relied upon the judgment in the case of Muhammad Tayab vs. Akbar Hussain (1995 SCMR 73) and Awan Industries Ltd. vs. Executive Engineer (1992 SCMR 65). The learned counsel has lastly contended that Arbitrator filed the award in Court on its own without any request by the parties.
8. I have taken into consideration the arguments advanced by the parties' counsel and have also perused the available record in light of their submissions.
Scope of Section 17 of the Arbitration Act.--
9. In order to appreciate the contention of the learned counsel for the respondent that before making the award rule of the Court, the learned High Court ought to have applied its mind and could have set aside the award, even if no objections were filed, in terms of Section 17 of the Act, it would be appropriate to reproduce herein below Sections 17, 30 and 33 of the Act:--
"17. Judgment in terms of award.--Where the Court sees no cause to remit the award or any of the matters referred to arbitration for re-consideration 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, the award.
30. Grounds for setting aside award.--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 under Section 35;
(c) that an award has been improperly procured or is otherwise invalid.
33. Arbitration agreement or award to be contested by application.--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 affidavit:
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.
10. An award may be corrected or modified under Section 15 of the Act and it may be remitted for reconsideration under Section 16 of the Act or it may be set aside under Sections 30 & 33 of the Act on objections raised by any of the parties. While hearing the objections and examining the award, the Court cannot sit as a Court of appeal on the award rendered by the Arbitrator and substitute its own view for one taken by the Arbitrator.
11. It is settled principle of law that the award of the Arbitrator who is chosen judge of facts and of law, between the parties, cannot be set aside unless the error is apparent on the face of the award or from the award, it can be inferred that the Arbitrator has misconducted himself under Sections 30 & 33 of the Act. However, even if no objection under Sections 30 & 33 of the Act has been filed, the Court at the time of making award rule of Court can see that award does not suffer from patent illegality.
12. While making award rule of the Court, in case parties have not filed objections, the Court is not suppose to act in mechanical manner, like post office and put its seal on it but have to look to award and if found patent illegality on face of it, can remit the award or any of the matter referred to Arbitrator for reconsideration or to set aside the same. However, while doing so, the Court will not try to find out patent irregularity, and only if any, patent irregularities can be seen on the face of award/arbitration proceedings like the award is beyond scope the reference or the agreement of arbitration was void agreement, or Arbitrator awarded damages on black marketing price, which is prohibited by law, award was given after superseding of the arbitration, etc., can set aside the same.
13. Section 17 of the Act is a general provision in its nature, whereas Sections 30 & 33 of the Act are special provisions, providing the ground to set aside the award. The General Provision in same Statute, cannot operate to control specific provision. Reliance can be placed on Sher Ali Baz vs. Secretary, Establishment Division, (PLD 1991 SC 143), Muhammad Nawaz Sharif vs. President of Pakistan, (PLD 1993 SC 473).
14. Section 17 of the Act cannot be used as substitute of Sections 30 & 33 of the Act or can be given overriding effect, making Sections 30 & 33 of the Act redundant/meaningless. The award cannot be set aside on the ground which falls under Sections 30 & 33 of the Act, while exercising jurisdiction under Section 17 of the Act. In this behalf, I am fortified with the judgment in the case of Madan Lal vs. Sunder Lal (AIR 1967 SC 1233), wherein it has been held by the Indian Supreme Court that:
"10. Learned counsel for the appellant, however, urges that Section 17 gives power to the Court to set aside the award and that such power can be exercised even where an objection in the form, of a written statement has been made more than 30 days after the service of the notice of the filing of the award as the Court can do so suo motu. He relies in this connection on Hastimal Dalichand v. Hiralal Motichand (AIR 1954 Bom. 243) and Saha & Co. v. Ishar Singh Kripal Singh (AIR 1956 Cal. 321 (FB), Assuming that the Court has power to set aside the award suo motu, we are of opinion that that power cannot be exercised to set aside an award on grounds which fall under S. 30 of the Act, if taken in an objection petition filed more than 30 days after service of notice of filing of the award, for if that were so the limitation provided under Art. 158 of the Limitation Act would be completely negatived. The two cases on which the appellant relies do not in our opinion support him. In Hastimal's case, AIR 1954 Bom. 243, it was that "if the award directs a party to do an act which is prohibited by law or if it is otherwise patently illegal or void it would be open to the Court to consider this patent defect in the award suo motu, and when the Court acts suo motu no question of limitation prescribed by Art. 158 can arise". These observations only show that the Court can act suo motu in certain circumstances which do not fall within S. 30 of the Act.
Saha & Co.'s case, AIR 1956 Cal, 321 (FB) was a decision of five Judges by a majority of 3:2 and the majority judgment is against the appellant. The minority judgment certainly takes the view that the non-existence or invalidity of an arbitration agreement and an order of reference to arbitration may be raised after the period of limitation for the purpose of setting aside an award because they are not grounds for setting aside the award under S. 30. It is not necessary in the present case to resolve the conflict between the majority and the minority Judges in Saha & Co.'s case, AIR 1956 Cal. 321 (FB), for even the minority judgment shows that it is only where the grounds are not those falling within S. 30, that the award may be set aside on an objection made beyond the period of limitation, even though no application has been made for setting aside the award within the period of limitation. Clearly, therefore, where an objection as in the present case raises grounds which fall squarely within S. 30 of the Act that objection cannot be heard by the Court and cannot be treated as an application for setting aside the award unless it is made within the period of limitation. The Saha & Co.'s case, AIR 1956 Cal. 321 (FB), therefore also does not help the appellant."
In the case of Devendra Singh vs. Kalyan Singh (AIR 1978 Rajasthan 134), it was held that:
"6. From the survey of the above provisions, it will appear that the Act contemplates that all applications challenging the award must be made under Section 33 irrespective of the ground of the challenge and that they must be the applications for setting aside the award. The non-existence or invalidity of the reference may be the ground of application for setting aside the award passed on such invalid or non-existent reference including the cases of award in an arbitration proceeding. Section 33 clearly and unmistakably points out that the Indian Arbitration Act does not distinguish between an application for setting aside an award and an application for the adjudication of an award to be a nullity. This section does not contemplate that an application of the former kind should be made under Section 30 of the Act and an application of the latter kind under Section 33 of the Act. The reason is obvious. Section 30 does not prescribe the procedure how the effect or existence of the award is to be contested. It only sets out the grounds for setting aside the award. If we look into Section 33 carefully, it will be clear that the application will have to be made for setting aside the award on the grounds mentioned in Section 30 under Section 33 of the Act only and no other section. There is nothing in the language of Sections 30 and 33 to suggest that the invalidities contemplated by the two aforesaid Sections are mutually exclusive and that the invalidity for which a party may challenge the award under Section 33 of the Act cannot be the invalidity for which the party could apply to the Court for setting aside the award under Section 30. But the matter cannot be judged merely on the use of the words `invalidity' and `invalid' occurring in Sections 30 and 31 respectively. The reason is furnished by the scope and effect of Sections 31, 32 and 33 which are mutually interlinked and not exclusive. It may be pointed out here that the jurisdiction given to the Court as an arbitration Court by Section 33 of the Act is the jurisdiction to decide questions relating to the existence, validity or effect of awards. The jurisdiction to set aside awards under Section 30 must be included within the jurisdiction and since Section 33 also speaks of applications by persons desiring to challenge the existence or validity of an award or to have its effect determined, such applications which throw the challenge to an award must also include applications for setting aside an award under the powers conferred by Section 30, Section 31(2) and Section 33 of the Act. To my mind, the Indian Arbitration Act uses the expression `set aside' in a wide sense and requires that whenever the award is found fit to be removed, it must be set aside. The non-existence or invalidity of an agreement must be equally challenged by means of an application under Section 30 and if it is not urged by such application within the time limited by law, then the consequences laid down by Section 17 are to follow. In other words, if the application is not made in the time prescribed for challenging the award, the challenge to the award will be disallowed as barred by time. The argument that the words "otherwise invalid" occurring in Section 30 should be read ejusdem generis with the words preceding in clause (c) of Section 30 of the Act, does not appeal to me. These words, in my opinion, are independent words and there is no reasonable justification to read the words "otherwise invalid" ejusdem generis with the clauses preceding them."
15. In exercise of power under Section 17 of the Act, even if no application under Sections 30 & 33 of the Act is filed by a party, the same does not absolve the Court of its responsibility to see that the award does not suffer from any patent illegality necessitating either the setting aside the award or its remission to the Arbitrator [Province of Punjab vs. Shafique Ahmad (PLD 1989 Lahore 26)].
16. The principle laid down in the case of Muhammad Tayab vs. Akbar Hussain, (1995 SCMR 73) is not applicable to the facts of the case in hand. In the case of Muhammad Tayyab (supra), Arbitrator sent verbal message through one party to Muhammad Tayyab and notice was not served upon him, this Court remanded the matter with an observation to find out whether the plea taken by Muhammad Tayyab about service is correct or not, whereas in the present case respondent was served with notices.
17. In the case of M/s. Awan Industries Ltd. vs. Executive Engineer, Lined Channel Division (1992 SCMR 65), award given by the sole Arbitrator who was appointed, without prior notice to other party, the Court in exercise of power under Section 17 of the Act, held that Award by such Arbitrator would be, prima facie, illegal and could be set aside whereas in the instant case, the appellant served notice of appointment of Arbitrator, and upon failure of the respondents to nominate his Arbitrator, Arbitrator nominated by him, acted a sole Arbitrator. Even otherwise, it has borne out from the record that at the time of setting aside the first award, parties agreed to nominate their Arbitrators within 15 days, and admittedly respondent failed to nominate his Arbitrator.
18. In the case of Pak. Agricultural Storage and Services Corpn. vs. Muhammad Latif (1999 MLD 2773), award was set aside under Section 17 of the Act due to invalid arbitration clause. In the case of M/s. Millat Tractors Ltd. vs. M/s. Millat Tractor House [1999 YLR 297 (Lahore)], due to error on the face of award, same was set aside.
19. In the case of Elite Builders & Developers vs. Abdul Majeed & others (1988 CLC 1872), it was held that award can be set aside due to patent legal defect.
Why not remand the matter.--
20. Before, I deal with the question whether award in question suffers from any patent illegality or not, I would like to dilate upon the question i.e. in the given facts and circumstances of the case, after 13 years of pronouncement of award, whether it would be appropriate to remand the matter to the learned Single Judge of the High Court to see any patent illegality in it, even if any?
21. In the case of Ashiq Ali vs. Mst. Zamir Fatima (PLD 2004 SC 10), it has been ruled by this Court that "only those cases should have been remanded, which could not he decided on the basis of available records, it would be in the interest of justice; we are the firm view that if a controversy can be resolved on the basis of available evidence, then the question of its remand does not arise." Similarly, in the case of Anwar Ahmad vs. Mst. Nafis Bano (2005 SCMR 152), a three member Bench of this Court has held that remand of a case can only be ordered when it became absolutely necessary and inevitable in view of insufficient or inconclusive evidence on record.
22. In the instant case, the appellant by an agreement dated 28.11.1996 agree to provide Dumpers and Loader on rent to the respondent and the dispute about the claim of rent qua the provided Dumpers and Loaders supplied, first referred for arbitration and the Arbitrator gave award on 06.12.1997. The said award was set aside by consent of the parties on 13.08.1998. As per consent order, both the parties agreed to nominate their Arbitrators within 15 days from the date of the order. Admittedly, the respondent did not nominate his Arbitrator, and the Arbitrator nominated by the appellant, after notice to the parties, gave award on 11.11.1998. The proceedings of Arbitrator are available on record. In my humble view now after 13 years, again asking the parties to go before the learned Single Judge would be tantamount to denial of justice. Therefore, keeping in view the principle laid down by this Court in Ashiq Ali's case (supra) and Anwar Ahmad's case (supra), discussed herein above, in my humble view, instead of remanding the matter to the learned High Court, it would be appropriate and would be entirely in fitness of things to deal with the objections raised by the learned ASC for the respondent and to see whether the award suffers from any patent illegality or irregularity or not. The question whether award suffers from patent illegality or not can be answered without undertaking any enquiry, on the basis of available record.
23. Learned ASC for the respondent has questioned the validity of award on the ground that the agreement, under which Arbitrator was appointed, is a forged agreement and that notice of hearing given by the Arbitrator was not served upon him.
24. As regards the contentions that the agreement Exb.P-1 is forged document, while hearing objections, on earlier award registered as Suit No. 1733 of 1997, regarding agreement is forged or not, the award was set aside by consent of the parties, as same cannot be answered without recording evidence and parties undertook to nominate their Arbitrator within 15 days from the date of the order. The learned Arbitrator, appointed by the appellant, formulated the question "whether the document asserted by the plaintiff/petitioner i.e. Exb.P-1 is the correct agreement between the parties and as such binding upon them or the document C-A-1, asserted by the defendant/respondent is the proper agreement, in light of the consent order passed in Suit No. 1733 of 1997. On the basis of the evidence on record, and after comparing the signatures on Exb.P1 with admitted signatures on document C-A-1, the learned Arbitrator gave his findings of fact that signature on Exb.P-1 is of the person, whose signature appears on the document C-A-1. Such findings of facts cannot be termed as patent illegality to set aside the award under Section 17 of the Act.
25. It will not be out of place to mention that after passing the consent order dated 13.08.1998 that parties will appoint their Arbitrators within 15 days from the date of order, the respondent instead of nominating his Arbitrator, filed Suit No. 1426 of 1998 for declaration that the agreement dated 28.11.1996 is a forged document and therefore of no legal force or affect and a nullity in the eye of law and for permanently restraining the appellant from taking any action including any Arbitration proceedings. The learned High Court rejected the plaint under Order VII Rule 11 CPC.
26. Now, I would deal with the objection whether notice of arbitration proceedings was served upon the respondent or not? Perusal of the record reveals that on the basis of agreement between the parties, an award was filed in Court, which was registered as Suit No. 1733 of 1997, to be made rule of the Court. The respondent appeared and contended that service was not affected upon him; that the agreement is false and fabricated document as, according to him, in the actual terms and conditions entered into between the parties reflected in Exb,C-A-1, there was no clause with regard to arbitration proceedings between the parties. The learned Single Judge in Chambers of the High Court, after hearing the parties came to the conclusion that the questions whether the agreement contained the arbitration clause or is it a false and fabricated document cannot be decided without recording of evidence and by consent of the parties set aside the award in the following terms:-
"1. That the parties shall appoint an Arbitrator with the Arbitrators exercising their right to appoint an Umpire.
2. Both the parties shall exercise the right to raise objection, if any in respect of the arbitration proceedings. The learned Arbitrator shall decide the matter on merits according to law within three months. The nomination of Arbitrators is to be done within two weeks."
27. In terms of the above order, passed by the learned High Court with the consent of the parties, the appellant vide registered notice dated 27.08.1998, nominated his Arbitrator and this notice was served upon the respondent as per postmaster certificate, on 31.08.1998, which is available at page 214 of the paper book. On failure of the respondent to nominate his Arbitrator, the appellant appointed his Arbitrator as sole Arbitrator vide notice dated 10.10.1998, which notice was also served upon the respondent through Registered Post Acknowledgment Due, which is also available on record. The Arbitrator appointed by the appellant, also issued three notices to the respondent through registered post but the respondent for the reasons best known to him, did not participate in the arbitration proceedings. Through notice dated 14.10.1998, the Arbitrator called upon the parties to appear before him on 23.10.1998 but the respondent did not turned up to participate in the proceedings. The learned Arbitrator again through notice dated 23.10.1998 called upon the respondent to appear, which, as per postmaster certificate, available at page 220 of the paper book, was delivered to him on 24.10.1998 but despite service of notice, the respondent failed to appear before the sole Arbitrator. It is now well settled principle that properly addressed registered letter is presumed to be due service and the burden of proof of non-service is upon the addressee i.e. in the case in hand, upon the respondent, which the respondent failed to prove. I am supported in my view by the principles laid down in the case of WAPDA vs. Saeed Badar (PLD 1991 SC 660) and Hayat Muhammad vs. Mazhar Hussain (2006 SCMR 1410).
28. The sole Arbitrator filed its award in Court in terms of Section 14 of the Act, which was registered as Suit No. 1461 of 1998. After filing of the award, notice was issued to the respondent to file objections and admittedly despite service of said notice, the respondent failed to file objections within 30 days from the date of service, as required under Article 158 of the Limitation Act and ultimately objections were filed with the delay of 74 days. The learned Single Judge in Chambers of the High Court, after hearing the parties and having taken into consideration the objection raised by the respondent held that the respondent has reiterated his arguments earlier advanced. It was further noted by the learned Single Judge that the respondent has not been able to advance any fresh ground/objection in support of his case and ultimately, after recording these findings, made the award rule of the Court.
29. As regard the contention of the learned counsel for the respondent that the Arbitrator filed award on its own, it appears from the record that the appellant through his letter dated 11.11.1998 requested the sole Arbitrator to file its award along with relevant documents in Court, which letter is also available at page 229 of the paper book, therefore, the contention of the learned counsel that the Arbitrator could not file award at his own, has lost its basis.
Award of Interest by the Arbitrator.--
30. Although, the respondent has not questioned the award of interest by the Arbitrator from the date of earlier award, which, by consent of the parties, was set aside. I would like to dilate upon this aspect of the matter.
31. An Arbitrator cannot award interest prior to date of decree, in the absence of any express or implied agreement between the parties, mercantile usage and statutory provisions or on equitable grounds in a proper case. Thus, award of interest prior to date of decree is a patent illegality appears on the face of award.
32. The fact that the Arbitrator has the power to deal with and decide disputes which cropped up at a point of time, would certainly not clothe the Arbitrator with any power, which neither any law confers upon him nor there is any usage of trade having the force of law nor is there any agreement between the parties conferring that power. Although, technical rules of procedure contained in the Code of Civil Procedure are not extended to Arbitration proceedings, even if, I look elsewhere for the power of Arbitrator to award interest pendente lite or prior to that. Section 34 of CPC, which gives discretion to Court to award interest from the date of suit or period prior to it, does not apply to arbitration proceedings. Likewise, the Interest Act also did not confer power on the Arbitrator to award interest.
33. The grant of interest from the date prior to award or from the date of award until payment of the amount due and payable, the Arbitrator can under no circumstances award interest for the period beyond the passing of the decree by the Court in terms of award, as under Section 29 of the Act, only the Court and not the Arbitrator have discretion to order interest, from the date of the decree at such a rate as the Court deemed reasonable. In this view of the matter, grant of interest prior to date of award, in absence of an express or implied, statutory provisions, agreement between the parties, in the facts of the case, is an error of law apparent on the face of award.
34. The appellant's claim before the Arbitrator was in respect of his dues for the supply of dumpers & loaders, which was the material question for decision before the Arbitrator and award of interest prior to date of award was merely consequential, and had, therefore, no effect on the decision of the main issue in the matter. The offending portion of award i.e. award of interest by the Arbitrator being separable from the rest of the award could be struck off as mere surplusage in terms of Section 15 of the Act which empowers the Court to modify or correct the award. I, therefore, while accepting the appeal, set aside the impugned judgment dated 19.03.2003 and modify the award by striking off only the portion which relates to award of interest from the date of first award and upheld the judgment of the learned Single Judge in Chambers of the High Court of Sindh dated 05.09.2000, with interest at prevailing Bank rate from the date of decree of the suit.
ORDER OF THE COURT
By majority of two to one (Khilji Arif Hussain, J. dissenting), the impugned judgment dated 19.03.2003 is upheld to the extent that it set asides the Order of the learned Single Judge dated 05.08.2000 and remands the case. The objections filed by the Respondent are time barred. The learned Single Judge in post-remand proceedings shall decide whether to make the Award the Rule of the Court after examining as to whether the said Award is a nullity or prima facie illegal or not fit to be maintained or suffers from any other invalidity which is self-evident or apparent on the face of the record.
2. Resultantly, this Appeal is disposed of in the above terms. No order as to costs.
(R.A.) Appeal disposed of
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