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PETITIONER: DEWAN SINGH

       Vs.

RESPONDENT: CHAMPAT SINGH & ORS.

DATE OF JUDGMENT: 17/10/1969

BENCH: HEGDE, K.S. BENCH: HEGDE, K.S. SHAH, J.C.

CITATION:  1970 AIR  967            1970 SCR  (2) 903  1969 SCC  (3) 447  CITATOR INFO :  R          1988 SC1340  (7)  R          1988 SC2054  (8)

ACT: Limitation Act (9 of 1908), Art. 158-Limitation for  setting aside  award-Commencement of-Decide in ’Whatever Manner’  he may  think-Whether  enables arbitrator  to  import  personal knowledge-High Court exercising revisional powers-Discretion of  Supreme  Court to interfere in appeal by  special  leave under Art. 136.

HEADNOTE: Disputes between the appellant and the first respondent were referred  to five arbitrators as per the  agreement  entered into  between the parties.  The agreement provided that  the decision could be derived at by the arbitrators ’in whatever manner’  they think.  The arbitrators made their  award,  on the basis of their personal knowledge.  The appellant  filed a  suit  for  passing  a decree in terms  of  the  award  on November 1, 1955.  Though the respondents had notice of  the suit,  they  had no notice of the filing of the  award  into court.   The  respondent  filed  his  written  statement  on February  3, 1956, challenging the validity of the award  on certain grounds.  While the first appellate court held  that the  arbitration  agreement  empowered  the  arbitrators  to import their personal knowledge, the High Court, in revision held that it did not so empower, that the award was vitiated by legal misconduct, and that the objection to the award  by the respondent was not barred by time. In appeal to this Court, HELD:     (1) Article 158 of the Limitation Act, 1908, gives to the party 30 days time for applying to set aside an award from the date of the service of the notice of filing of  the award.  Since there was no such notice, the objection by the respondent was within time. [905 G-H] (2)  Parties to an agreement of reference may include in  it such  clauses as they think fit, except those prohibited  by law, but the phrase ’in whatever manner’ they think does not mean  that  the arbitrators can decide the disputes  on  the basis  of  their personal knowledge.   Further,  arbitrators must  act  in  accordance with  the  principles  of  natural

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justice, and inform the parties to the submission about  the nature of their personal knowledge but in the present  case, it was not done so.  L906 F-G; 907 A-B, C-E] Chandris  v. Isbrandtsen Moller Co. Inc., [1951] K. B.  240, referred to. (3)  The  decision of the High Court being  eminently  just, this Court will not interfere with it under Art. 136 of  the Constitution,  assuming that the High Court, in exercise  of its  revisional powers, could not have corrected  the  first appellate court’s interpretation.

JUDGMENT: CIVIL  APPELLATE  JURISDICTION : Civil Appeal  No.  1369  of 1966. Appeal  by special leave from the judgment and  order  dated September  11,  1962 of the Allahabad High  Court  in  Civil Revision No. 653 of 1959. 904 G.   N.  Dikshit, O. P. Saini and Lakshmi Chand  Tyagi,  for the appellant. J. P. Goyal and S. N. Singh, for the respondents. The Judgment of the Court was delivered by Hegde, J. This appeal by special leave arises from an  arbi- tration  proceeding.  The appellant, the 1st respondent  and one  Sukh  Lal  who  died  during  the  pendency  of   these proceedings  referred their disputes to five arbitrators  as per  the written agreement executed by them on September  9, 1955.   Arbitrators  made their award on October  11,  1955. They   duly  served  on  the  parties  to  the   arbitration agreement,  notice  of making and  significant  award.   The award  was thereafter registered.  On November 1,  1955  the appellant filed a suit in the court of Munsiff Hawali Meerut praying  that  the award in question be made a rule  of  the court and decree passed in accordance with the same.  It  is said  that  the  notice  taken in that  suit  could  not  be personally  served  on  the defendants as  they  refused  to accept the same.  That fact was reported to the court by the process   server  as  per  his  report   dated   19-11-1955. Thereafter  the defendants filed their written statement  on February  3,  1956 wherein they challenged validity  of  the award on various grounds.  They contended that the award was vitiated   because  of  misconduct  on  the  part   of   the arbitrators inasmuch as the arbitrators decided the disputes referred  to them primarily on the basis of  their  personal knowedge.    They  also  contended  that   the   arbitration agreement  was  obtained  from them  by  exercise  of  undue influence.   Their further contention was that  the  subject matter  of the dispute could not under law be  referred  to, arbitration in view of the provisions of U.P. Act 1 of 1951. It  was also contended by them that the suit was  barred  by time. The  trial court accepted the contention of  the  defendants that  the  arbitrators were guilty of  misconduct.   Dealing with the issue of undue influence, it came to the conclusion that  the  arbitration  agreement was not  executed  by  the defendants  according to their free will.  But it held  that the plea of undue influence was not made out.  It upheld the contention of the defendants that the subject matter of  the dispute could not have been referred to arbitration in  view of the provisions of U.P. Act I of 1951. In appeal the learned Civil Judge reversed the decree of the trial  court.  While agreeing with the trial court that  the arbitrators  had used their personal knowledge  in  deciding

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the  disputes referred to them, that court held  that  under the  terms of the agreement, it was open to the  arbitrators to  decide  the disputes in question on the basis  of  their personal knowledge.  Dealing with                             905 the  question of the arbitrators’ competence to  decide  the dispute,  that  court  held that the  question  whether  the dispute  came within the scope of U.P. Act 1 of 1951 or  not is  a question of law and the same could have been  referred to  arbitration.   It  went further and  held  that  as  the defendants  had  not  taken their objection.  to  the  award within  the  time prescribed, the same could not  have  been entertained by the trial court. The High Court in revision differed from the appellate court on  all  the  points  mentioned  above.   It  came  to   the conclusion   that   the  arbitration   agreement   did   not specifically empower the arbitrators to decide the  disputes referred  to them on the basis of their personal  knowledge; they  having utilized their personal knowledge  in  deciding the  disputes,  they  were guilty of  legal  misconduct  and consequently  the award made by them is vitiated.   It  also came  to the conclusion that the disputes in question  could not  have  been  referred  to arbitration  in  view  of  the provisions of U.P. Act 1 of 1951.  It overruled the decision of  the  appellate court that the defendants had  not  taken their objections to the award within the prescribed time. We  may at this stage mention that the contention  that  the suit  was  barred by time was not pressed before  the  trial court or in any other court.  There  is no basis for the finding of the  appellate  court that the objection taken by the defendants to the award  was barred by time.  As seen earlier, the suit to make the award a rule of the court was brought by one of the parties to the arbitration agreement and not by any arbitrator.  The plaint filed  does  not  disclose that the  award  given  had  been produced  along with it.  There was some controversy as  _to whether  that  award  was produced along  with  the  plaint. There  is  no  need to go into that  question  as  we  shall presently  see.  It is not said that along with  the  plaint copy,  a copy of the award had been sent to the  defendants. Nor  is  it  said  that  notice of  the  suit  sent  to  the defendants mentioned the fact that the award had been  filed into  court  along  with  the  plaint.   Art.  158  of   the Limitation  Act,  1908  gives  to party  30  days  time  for applying to set aside an award or get an award remitted  for reconsideration  from the date of the service of the  notice of  filing  of the award.  There is absolutely no  proof  in this  case  that a notice of the filing of  the  award  into court  had  ever been given to the  defendants.   Hence  the objections  taken by the defendants to the award  could  not have been rejected on the round of limitation. Now coming to the question of misconduct on the part of  the arbitrators, that allegation is founded on the fact that the arbitrators  decided  the disputes referred to them  on  the basis of their 906 personal  knowledge.  That allegation has been  accepted  as true both by the trial court as well as the appellate court. In fact the award says : "We gave our consideration to the entire dispute which is in full knowledge of us, the panchas". Therefore there is hardly any room to contest the allegation that  the arbitrators had decided the disputes  referred  to them  primarily ,on the basis of their  personal  knowledge. Under these circumstances all that we have to see is whether

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the  appellate court was right in concluding that under  the arbitration agreement, the arbitrators had been empowered to decide  the disputes referred to them on the basis of  their personal knowledge. The  material portion of the arbitration agreement which  is in Hindi translated into English reads thus :                "All the panchas and Sarpanchas are residents               of village Keli Pargana Sarawa.  The power  is               given  to  them  that  the  said  Panchas  and               Sarpanch,   whatever  decision,  in   whatever               manner  will  give  in relation  to  our  land               described below, whatever land may be given to               any party or whatever party may be decided  to               be  the  tenant of the entire  land,  whatever               compensation  they may decide to be  given  to               any  party, whatever decision they  will  give               that  will  be final and acceptable  and  they               will  have  the right to inform  us  of  their               decision, unanimous or of majority and get the               same registered and we will fully comply  with               their decision." This  agreement  does  not empower  the  arbitrators  either specifically  or  by  necessary implication  to  decide  the disputes  referred  to them on the basis of  their  personal knowledge.    The  recital  in  that  agreement   that   the arbitrators  may  decide the disputes referred  to  them  in "whatever  manner"  they think does not mean that  they  can decide  those  disputes  on  the  basis  of  their  personal knowledge.   The  proceedings  before  the  arbitrators  are quasi-judicial  proceedings.   They  must  be  conducted  in accordance  with  the principles of  natural  justice.   The parties to the submission may be in the dark as regards  the personal  knowledge  of  the  arbitrators.   There  may   be misconceptions  or  wrong  assumptions in the  mind  of  the arbitrators.   If the parties are not given  opportunity  to correct  those misconceptions or wrong  assumptions,  ,-rave injustice may result.  It is no body’s case that the parties to  the  submission were informed about the  nature  of  the personal  knowledge, the arbitrators had and that they  were given  opportunity  to correct any  misconception  or  wrong assumption.  Further in the present case there were as  many as five arbitrators.  It is 907 not  known whether the, award was made on the basis  of  the personal  knowledge  of all of them or only  some  of  them. Arbitration  is  a reference of a dispute for hearing  in  a judicial manner.  It is true that parties to an agreement of reference  may include in it such clauses as they think  fit unless prohibited by law.  It is normally an implied term of an  arbitration agreement that the arbitrators  must  decide the dispute in accordance with the ordinary law-see Chandris v. Isbrandtsen Moller Co. Inc(1).  That rule can be departed from only if specifically provided for in the submission. The  appellate,  court,  in our  opinion,  has  misread  the arbitration  agreement and hence it erroneously came to  the conclusion that the arbitrators had been empowered to decide the dispute on the basis of their personal knowledge. It was contended on behalf of the appellant that in exercise of  its powers under s. 115 of the Code of Civil  Procedure, the  High  Court  could not  have  corrected  the  erroneous interpretation placed by the appellate court as to the scope of  the  arbitration  agreement.  We  have  not  thought  it necessary  to go into that question as, in our opinion,  the decision reached by the High Court is an eminently just one. Hence  we  do  not  feel called  upon  in  exercise  of  our

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discretionary  power under Art. 136 of the  Constitution  to interfere  with the decision of the High Court.  In view  of our  above  conclusion,  there is no need  to  go  into  the question  whether the subject matter of the  disputes  could have been referred to arbitration. In  the result this appeal fails and the same  is  dismissed with cost. Appeal dismissed. V.P.S. (1) 11951] K.B. 249. 908