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PETITIONER: HARI KRISHAN WATTAL

       Vs.

RESPONDENT: VAIKUNTH NATH PANDYA

DATE OF JUDGMENT18/07/1973

BENCH: PALEKAR, D.G. BENCH: PALEKAR, D.G. ALAGIRISWAMI, A.

CITATION:  1973 AIR 2479            1974 SCR  (1) 259  1973 SCC  (2) 510  CITATOR INFO :  F          1985 SC 920  (11)

ACT: Arbitration Act (10 of 1940) s. 28 and cl. (3) of  Schedule- Scope of.

HEADNOTE: Disputes  having  arisen  between  the  appellant  and   the respondent, they were referred to arbitration in  accordance with  the  agreement entered into between the  parties.  The arbitrator gave his award. The appellant applied for  filing of  the award into Court and for making it a rule of  Court. The validity of the   award   was  challenged   by   the respondent,  and the trial Court and the High Court  set  it aside on the grounds (1) that the award was made after the prescribed period  and (2) that theagreement  for arbitration was  defective  on account of vagueness and uncertainty. Allowing  the appeal to this Court and remanding the  matter to the High Court for disposal. HELD : (1) Under cl. (3) of the Schedule to the  Arbitration Act, 1940,the arbitrator is expected to make his  award within  four months of his entering on the reference  or  on his being called upon to act or within such extended time as the Court may allow. Reading the clause with s. 28 of the Act the power to enlarge the time for making the award  is vested, in the Court and not in the arbitrator. Section 28(2), however, indicates an exception. namely when   the parties  agree  to  such enlargement  after  the  arbitrator enters on the arbitration. But the section does not require that the parties should stipulate in    the     arbitration agreement  itself,  for  such  enlargement  of  time  by  a, subsequent agreement. Even in a case where there is no  such stipulation in the original  agreement  the  arbitrator  is entitled to enlarge the time if after entering  on     the reference  the  parties to the arbitration consent  to  such enlargement.[261G-H; 262A-D] In  the present case the enlargement of time for making  the award wason  the request and mutual consent of the  parties during arbitration, and therefore, the award made within the extended time must be deemed to be valid. [263A-C] (2)  A  perusal of the agreement in the  background  of  the

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disputes that had  arisen  shows  that  the  agreement  was neither vague nor uncertain. In fact,the  parties   never complained  before the arbitrator of any such  vagueness  or uncertainty. [263C; 264B]

JUDGMENT: CIVIL  APPELLATE  JURISDICTION : Civil Appeal  No.  1433  of 1967. Appeal  by special leave from the judgment and  order  dated December 7, 1966 of the Allahabad High Court in F.A.F.O.  31 of   1963. B. D. Sharma, for the appellant. Hardayal  Hardy.  Madhav Prasad and M. V. Goswamy, for  res- pondents 1 (a) to 1 (e). The Judgment of the Court was delivered by PALEKAR, J.-This is an appeal by special leave from an order of  the High Court at Allahabad dated December 7,  1966,  by which  the  Court,  in  agreement  with  the  trial   court, superseded a Reference to Arbitration. 260 Hari  Krishna  Wattal and Vaikunth Nath  Pandya  carried  on business in partnership under the name and style of  ’Wattal & Co.’. Differences having arisen between them, a  reference was made to the Arbitrator in accordance with the  agreement under  the partnership deed.  The Arbitrator,  Shri  Bagchi, Advocate,  gave  an award and Hari Krishna  Wattal  applied under  section 14 of the Arbitration Act for filing  of  the award  and for making it a rule, of the  Court.   Objections were   filed  by  Vaikunth  Nath  Pandya.   The  award   was challenged  on  several  grounds.  The Court  of  the  first instance  held inter-alia that the award dated February  27, 1959 was invalid on the ground, firstly, that the award  had been passed after the prescribed period for making the award and secondly that the reference  agreement was defective  on account  of vagueness and uncertainty.  Hari Krishna  Wattal filed an appeal in the High Court.  The learned Single Judge who heard the appeal agreed with the trial-court on the  two above grounds and superseded the reference. It  is contended by Mr. Sharma that both the Courts were  in error in holding that the award was invalid on the aforesaid grounds. Ex.  13 is the agreement to refer the disputes between  the, parties.  The agreement is dated 5-2-1958 and the award,  as already  stated, was made much beyond four months  from  the date of the reference. Prima-facie it will be invalid unless the  time for enlargement for making the award  was  legally extended.   It is contended for the appellant that the  time had  been legally extended by the mutual written consent  of the  parties  and hence the award was not liable to  be  set aside.   It  will appear from the record that the  time  was extended  not less than six times.  The first extension  was from 31-5-1958 to 31-7-1958 and the last extension was  from 29-1-1959  to 28-2-1959.  None of these six extensions’  was for  the  benefit of the appellant.   Five  extensions  were given for the convenience of the respondents and one for the convenience  of the Arbitrator.  On each occasion,  however, the appellant and the respondents had mutument agreed to the extension in writing.  The agreement for enlargement of time was generally in the following terms  "IT IS THEREFORE AGREED BETWEEN THE PARTIES AS BELOW               (1)   That  Shri  A.  K.  Wattal,  constituted               attorney for Shri H. K.   Wattal   and    Shri

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             Vaikunth  Nath  Pandya agree to  give  further               time  to the Arbitrator to give his  award  on               any date till the 31st of July, 1958.               (2)   That the said parties further agree that               they  would accept such award, if given on  or               before  31st of July 1958, as a  valid  award,               and would not raise any objection on the score               of  its  having  been  delivered  beyond  four               months of the reference to arbitration." It is not disputed that if such mutual agreement between the parties to the arbitration was capable of legally  effecting the enlargement of 261 time  for  making  the award then the  award  could  not  be challenged  on  the  particular  ground  that  it  had  been delivered beyond four months of the reference. Section 3 of the Arbitration Act, 1940, provides               "An arbitration agreement, unless a  different               intention  is  expressed  therein,  shall   be               deemed  to include the provisions set  out  in               the  First  Schedule  in so far  as  they  are               applicable to the reference.               The  First Schedule has 8  clauses  describing               the  implied  conditions  of  an   arbitration               agreement.  Clause 3 reads as follows :               "The arbitrators shall make their award within               four months after entering on the reference or               after having been called upon to act by notice               in  writing from any party to the  arbitration               agreement or within such extended time as  the               Court may allow."               The   power  of  the  Court  to  extend   time               contained in section 28, which is as follows :               "28.  Power to Court only to enlarge time  for               making award. (1) The Court may, if it  thinks               fit, whether the time for making the award has               expired or not and whether the award has  been               made  or  not, enlarge from time to  time  the               time for making the award.               (2)   Any   provision   in   an    arbitration               agreement  whereby the arbitrators  or  umpire               may,  except  with  the  consent  of  all  the               parties to the agreement, enlarge the time for               making  the  award, shall be void  and  of  no               effect." The  High Court was of the opinion that there are  only  two methods  for  enlarging  the  time.   The  first  method  is securing an order from the Court and the second method is to stipulate in the arbitration agreement for extension of time by  a  subsequent agreement.  The High Court held  that  the general  plan of section 28 suggested that  the  Legislature did not contemplate any third method for extension of  time. Since, in the present case, the arbitration agreement itself did  not  stipulate for extension of time  by  a  subsequent agreement  and there was no order of a Court  extending  the time the award was invalid. The question depends upon the true construction of  section 28.   There is no doubt that the Arbitrator is  expected  to make  Ms  award within four months of his  entering  on  the reference or on his being called upon to act or within  such extended  time as the Court may allow.  Reading clause 3  of the Schedule along with section 28 one finds that the  power to  enlarge the time is vested in the Court and not  in  the Arbitrator.  Clause 3 and section 28(1) exclude by necessary implication the power of the Arbitrator to enlarge the time.

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This is emphasised by section 28(2) which provides that even when such a provision giving the Arbitrator power to enlarge the time is contained in the agreement, that provision shall be void and of no effect.  The 262 headnote of section 28 brings out the force of this position in  law by providing that the power is of the Court only  to enlarge time for making the award. Sub-section   2  of  section  28,  however,  indicates   one exception  to  the  above rule that  the  Arbitrator  cannot enlarge  the  time, and that is when the parties  agree,  to such  an  enlargement.  The occasion for the  Arbitrator  to enlarge  the  time occurs only after he is  called  upon  to proceed   with  the  arbitration  or  he  enters  upon   the reference.  Hence, it is clear that if the, parties agree to the enlargement of time after the Arbitrator has entered  on the reference, the Arbitrator has the power to enlarge it in accordance  with  the  mutual agreement or  consent  of  the parties.   That  such  a consent must  be  a  Post-reference consent, is also clear from section 28(2) which renders null and  void  a  provision in the original  agreement  to  that effect.   In  a  sense  where a provision  is  made  in  the original agreement that the Arbitrator may enlarge the time, such   a  provision  always  implies  mutual   consent   for enlargement  but such mutual consent initially expressed  in the  original  agreement does not save  the  provision  from being  void.   It is, therefore, clear that  the  Arbitrator gets  the  jurisdiction to enlarge the time for  making  the award only in a case where after entering on the arbitration the,  parties to the arbitration agreement consent  to  such enlargement of time. The  question,  however,  is whether  it  was  necessary  to stipulate  in  the  arbitration  agreement  itself  for  the enlargement  of  time  by a  subsequent  agreement.  in  our opinion, sub-section 2 of section 28 does not say that  such a stipulation should be in the arbitration agreement itself. It only tells us in which specific case of mutual consent  a provision for enlargement of the time for making the  award, if  inserted in the agreement, will have the provision  from being  null and void.  It does not purport to lay down  that such a specific case of mutual consent should, in order  to become effective, be part of the original agreement  between the parties. The   above  interpretation  is  in  consonance   with   the fundamental principles of arbitration.  The arbitrator  gets his  jurisdiction  to make a binding award on  an  agreement between  the  parties  to  refer  a  dispute  to  him.   The agreement  between  the  parties is the  foundation  of  the jurisdiction of the Arbitrator.  Like any contract by mutual consent  of  the parties, the terms of the contract  can  be modified.  Even in a case where the Arbitrator enters on the reference on an invalid agreement it is open to the  parties to enter into a fresh agreement to refer the dispute to  the Arbitrator  while it is pending adjudication and in such  an event the proceedings before the Arbitrator can be upheld as referable  to that agreement and the award will not be  open to attack as without jurisdiction.  See : Beverly Jule Mills Co. Ltd. v. Raymon & Com. (India) Privdte Ltd.(1) Such being the power of mutual consent of the parties in the sphere  of arbitration  one  does not see why by mutual  agreement  the parties  cannot enlarge the time for making the  award  when the   Arbitrator  has  entered  on  the  reference  and   is proceeding with the arbitration. (1)  [1963] 3 S. C. R. 209, 226. 263

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In our view, therefore, section 28(2) does not provide  that the  Arbitration agreement alone should stipulate  that  the Arbitrator  may  extend the time on a  subsequent  agreement between the parties.  Even in a case where there is no  such stipulation  in  the original agreement, the  Arbitrator  is entitled  to  enlarge  the time if  after  entering  on  the reference  the  parties to the arbitration consent  to  such enlargement.   In the present case, the enlargement of  time for  making the award was on the request and mutual  consent of the parties during arbitration and, therefore, the  award made within the extended time must be deemed to be valid. The second ground on which the reference was superseded  was that  the arbitration agreement was defective on account  of vagueness  and uncertainty.  We have carefully gone  through the  arbitration  agreement Ext. 13 dated  5-2-1958  and  we think that the High Court was in error in thinking that  the agreement was vague and uncertain.  It will be seen that the agreement is between Hari Krishna Wattal on the one hand and Shri  Vaikunth Nath Pandya on the other.  The long  preamble shows that they were doing business in the name of Wattal  & Co.  and  disputes had arisen between them  with  regard  to certain amounts which were put to the debit of Vaikunth Nath Pandya  and his sons which Wattal insisted must be  paid  to him.    But  Vaikunth  Nath  Pandya  was   challenging   the correctness  of  the  entries  in  the  accounts  about  the business of Wattal & Co. It may be stated here that Vaikunth Nath  Pandya had two sons.  One son named Rishi Nath  Pandya was the Manager of Kailash Carpet Co. a proprietary  concern of Hari Krishna Wattal.  There were accounts in the name  of Rishi  Nath both in Kailash Carpet Co. and Wattal & Co.  The second  son  Ravinder Nath was doing  business  as  Ravindra Bros.   He  had a cash credit account with Wattal &  Co.  It appears  that  some dispute, was raised with regard  to  the correctness of the accounts in the names of the two sons  in the books of Wattal & Co. but if the ’accounts were held  to be  correct  there was no dispute that the  father  Vaikunth Nath  Pandya had agreed to accept the liabilities on  behalf of the sons.  So, the agreement of reference contained these four clauses :               1.    That the said Arbitrator shall determine               what  amounts  if any, are due  to  the  first               party (Wattal) from the’ second party (Pandya)               and his sons including Ravindra Brothers,  and               how  the  same should be paid  by  the  second               party (Pandya).               2.    That  the  arbitrator  shall  allow  the               second party to check and examine the accounts               of  Wattal  and Co. not only from  1-5-55  but               also  for  any  such  earlier  period  as  the               arbitrator thinks fit.               3.    That the Arbitrator shall be entitled to               hear and determine the other grievances of the               parties, if any.               4.    That the Arbitrator shall determine  the               amount payable by one party to the other after               taking  into consideration the sums due to  or               due by the second party or his sons  including               Ravindra  Brothers from or to the first  party               respectively."               L373Sup CI/74 264 We  have failed to understand what was vague  and  uncertain about  the agreement.  It appears from the record  that  the Arbitrator  had called upon Wattal to formulate  his  claims and  then  replies  on behalf of  Pandya  were  duly  filed.

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Accounts  were inspected from time to time by  Pandya,  full opportunity being given to him to do so as per the reference agreement  itself.  Arguments were also filed in writing  by both  the sides.  It does not appear that any complaint  was made  on behalf of the parties before the  Arbitrator  about anything  vague or uncertain in the agreement.  Once  it  is remembered  that the arbitration was with reference  to  the business  of  Wattal  & Co. of which the  parties  were  the partners,  it  is clear that the four  clauses  referred  to above  must be read against the background that all of  them are in the context of the business of Wattal & Co. The  mere fact that the Arbitrator had looked into accounts of Kailash Carpet  &  Co. in order to verify any entries  made  in  the books  of the business of Wattal & Co. would not  mean  that some  how  the  accounts  of Kailash  Carpet  Co.  would  be interpolated  into  the books of Wattal &  Co.  The  learned Judge agrees that if one looks at the preamble of the agree- ment,  that gave the impression that the Arbitrator  had  to decide  merely  the  disputes relating to  the  business  of Wattal  & Co. We must say with respect that this  impression is the correct impression.  We do not see how clauses 1  and 4 enlarged the scope of arbitration proceedings.  There were entries  in  the books of Wattal & Co. relating to  the  two sons of Pandya.  The father had undertaken by the  agreement to  accept the true liabilities of his sons as disclosed  in the  books  of  the  business of Wattal &  Co.  That  was  a perfectly  legal  liability  the  father  was  entitled   to undertake on behalf of his sons.  The Arbitrator had to deal with  the  disputes between the two parties in  relation  to business of Wattal & Co. And, if for deciding the matter  he required  verification  of  the  entries  in  the  books  of accounts,  we  do  not see why  the  Arbitrator  should  not examine  any  other accounts, even the accounts  of  Kailash Carpet  Co.  Nor  can we find any  sufficient  objection  to clause  3 of the- agreement referred to above.  That  clause says  that  the  Arbitrator shall be entitled  to  hear  and determine  the other grievances of the parties, if any.   It may  be that the wording of the clause is rather loose,  but once you remember that there are disputes with regard to the business  of Wattal & CO. that clause must be understood  in that  context.   The  ’grievances’ mean  nothing  more  than disputes.  Two specific disputes were mentioned in clauses 1 and  2, clause 3 made provision for any other dispute  which may legitimately arise on an examination of the accounts  of the  business.   In other words, all  disputes  between  the parties  relating  to  the debits and  the  credits  in  the accounts  of the business of Wattal & Co. were the  subject- matter of the arbitration.  We do not agree with the learned Judge  that it was possible to bring in any dispute  of  the parties within the scope of the arbitration proceedings.  We do  not,  therefore,  think that the agreement  was  bad  on account of vagueness or uncertainty.’ The  two  grounds  on which the High  Court  superseded  the reference  had not been substantiated.  The award cannot  be challenged  either on the ground that it was made after  the prescribed period or 265 that the agreement for arbitration was defective on  account of  vagueness  and  uncertainty.   Since  the  other  points arising  in  the appeal before the High Court had  not  been dealt with, the case will have to go back to the High  Court to  be disposed of in accordance with law after hearing  the parties  on points not agitated before the High Court.   The appellant  shall get his costs from the respondents in  this appeal.

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V.P.S. 2 66