1976 (4) TMI 222 - SC - Indian Laws

Court dismisses appeals, upholds High Court ruling on arbitrator appointment jurisdiction. Awards set aside as invalid.

UNION OF INDIA Versus OM PARKASH

UNION OF INDIA Versus OM PARKASH - 1976 AIR 1745, 1976 SCR (3) 998, 1976 SCC (4) 32 Issues Involved:1. Jurisdiction of the court after appointing an arbitrator under Section 8(2) of the Arbitration Act, 1940.2. Validity of the court's order of reference to the arbitrator.3. Grounds for setting aside the arbitration awards under Section 30 of the Arbitration Act, 1940.Issue-wise Detailed Analysis:1. Jurisdiction of the Court After Appointing an Arbitrator Under Section 8(2) of the Arbitration Act, 1940:The primary issue in these appeals is whether the court, having appointed an arbitrator under Section 8(2) of the Arbitration Act, 1940, can proceed further to make an order of reference to the arbitrator. According to the respondent, the court becomes functus officio after appointing an arbitrator and has no jurisdiction to refer the matter to him.The court observed that Section 8(2) of the Act empowers the court to appoint an arbitrator if the parties do not concur in the appointment within fifteen days after the service of notice. However, the court does not have the authority to make an order of reference to the arbitrator once the appointment is made. The Act contemplates three kinds of arbitration: arbitration without court intervention, arbitration with court intervention where there is no suit pending, and arbitration in suits. The provisions of Chapter II of the Act indicate that after the appointment of an arbitrator, the proceedings are to be outside the court, and the court's intervention is not required unless the occasion arises to remove the arbitrator under Section 11.2. Validity of the Court's Order of Reference to the Arbitrator:The court held that the validity of the order of reference depends upon the scope of Section 8. Section 8 does not contain any provision empowering the court to make an order of reference to the arbitrator, unlike Section 20(4), which explicitly provides for the court to make an order of reference to the arbitrator appointed by the parties or by the court. Therefore, the court concluded that it had no jurisdiction to make an order referring the disputes to the arbitrator after appointing him under Section 8(2).3. Grounds for Setting Aside the Arbitration Awards Under Section 30 of the Arbitration Act, 1940:The respondent argued that the awards should be set aside as invalid because the reference was incompetent. Section 30(c) of the Act states that an award can be set aside if it is 'improperly procured or is otherwise invalid.' The respondent contended that an award obtained on an invalid reference is also invalid and falls under this clause.The court referred to the Privy Council's decision in Chhabbe Lal v. Kallu Lal, which held that the words 'otherwise invalid' did not cover cases where the award was challenged on the ground of some invalidity outside the award itself. However, the court noted that the Arbitration Act, 1940, includes Section 32 and Section 33, which bar the institution of suits concerning arbitration agreements or awards and require challenges to be made through an application to the court. The court concluded that the words 'or is otherwise invalid' in Section 30(c) are broad enough to cover all forms of invalidity, including the invalidity of the reference.The court held that the awards in these appeals were nullities due to the invalid reference and were rightly set aside by the High Court. As a result, the appeals were dismissed with costs.Conclusion:The Supreme Court dismissed the appeals, affirming the High Court's decision that the court had no jurisdiction to make an order of reference to the arbitrator after appointing him under Section 8(2) of the Arbitration Act, 1940. The awards were set aside as invalid due to the incompetent reference, and the appeals were dismissed with costs.