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PETITIONER: M/S. DODSAL PRIVATE LIMITED

       Vs.

RESPONDENT: DELHI ELECTRIC SUPPLY UNDERTAKING OF THE MUNICIPALCORPORATIO

DATE OF JUDGMENT:       14/02/1996

BENCH: HANSARIA B.L. (J) BENCH: HANSARIA B.L. (J) VENKATASWAMI K. (J)

CITATION:  1996 SCC  (2) 576        JT 1996 (5)   626  1996 SCALE  (2)123

ACT:

HEADNOTE:

JUDGMENT:                        O R D E R      An  absolutely  inequitable  stand  taken  by  the respondent (Delhi  Electric Supply Undertaking) has led us to  examine some  fundamental questions  of law.  We have opened  with  this  observation  inasmuch  as  the respondent has  challenged the award of the arbitrators made in  favour of the appellant on the ground that the contract, which  contained  arbitration  agreement,  is void, because  of which  there is no agreement to refer the dispute to arbitration; and so, the arbitrators had no jurisdiction  to pass  impugned award.  Such a stand flies on  the face of the respondent inasmuch as of the two arbitrators,  one, namely  Shri K.L. Vijh, had been appointed by  the respondent  itself. But  as the award ultimately went  in favour  of the appellant, it raised the question  of jurisdiction.  We have no doubt in our mind that  such a  stand is  inequitable, indeed highly inequitable. Question,  however,  is  whether  the  law permits such a question to be raised. 2.   The High  Court accepted  the contention  that the contract was  void inasmuch  as sections 201 and 203 of the Delhi  Municipal Corporation  Act read with bye law 3(1) (a)  were violated. Dr. Singhvi, appearing for the respondent has  urged that  the  contract  being  void, along with  it fell the arbitration agreement contained in the  contract, because  of which the arbitrators had no jurisdiction to pass the award in question. 3.   It is  further  submitted  that  in  such  a  case appearance of  the respondents  in the proceeding, i.e. its acquiescence, would not alter the situation in view of what  has been  held by a Constitution Bench of this Court in  Waverley Jute  Mills Co.Ltd.  vs. Raymon  and Co.(India) Pvt.Ltd., AIR 1963 SC 90, in paragraph 21 of which it  was stated that "an agreement for arbitration is the very foundation on which the jurisdiction of the

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arbitrators to  act rests,  and where  that is  not  in existence, at the time when they enter on their duties, the proceedings  must be  held  to  be  wholly  without jurisdiction. And  this defect  is  not  cured  by  the appearance of  the parties in those proceedings even if that is  without protest,  because it  is well  settled that consent cannot confer jurisdiction". 4.   The  aforesaid   stand  brings  to  the  fore  the following fundamental questions of law :-      (1)Whether the  present was  a  case  of  contract being void or voidable ?      (2)Whether a  mandatory provision cannot at all be waived ? 5.   As we  are proposing  to refer  the  matter  to  a Constitution Bench,  we may  not dilate  the questions, except stating  that a  perusal of ’Administrative Law’ by wade  and Forsyth  (7th Edn. pages 339 to 344) would show that  in Ridae v. Baldwin, 1964 AC 40, some of the dissenting judges  of the House of Lords suggested that even ultra  vires  action  might  be  merely  voidable. Reference has  also been  made  to  what  was  held  in Anisminic  Ltd.  v.  Foreign  Compensation  Commission, (1969) 2  AC 147,  which has  dealt with  the  question whether there  are degrees  of nullity. As to of waiver of a  mandatory provision,  we may  refer to  a  recent decision of  this Court in Krishan Lal vs. State of J & K, 1994  (4) SCC  422, in  which this  aspect has  been dealt in  paras 16  to 25. It has been pointed out that even a  mandatory  provision  can  be  waived,  if  the provision be  intended for the benefit of the concerned person, as  distinguished from  one  which  serves  "an important purpose"  in which  case there  would  be  no waiver. 6.   In this  connection  we  may  also  refer  to  the provision contained in section 4 of the Arbitration and Conciliation Ordinance,  1996, which  is on the subject of "Waiver of right to object". It has laid down that a party who  knows (a)  any provision  of this  Part from which the  parties may derogate, or (b) any requirement under the  arbitration agreement, has not been complied with and  yet proceeds  with  the  arbitration  without stating his  objection to  such non-compliance  without undue delay shall be deemed to have waived his right to so object. 7.   Another legal  aspect  is  also  involved  in  the present  case.  The  same  is  whether  an  arbitration agreement can be read de hors what was contained in the contract. The respondent having itself appointed one of the arbitrators  in  writing,  an  examinable  question arises whether this act cannot be said to constitute an implied agreement  to refer  the matter to arbitration. It  may  be  pointed  out  that  section  7(2)  of  the aforesaid Ordinance  recognizes  a  separate  agreement also. 8.   Though the  aforesaid questions  were not examined in Waverley  Jute Mills’  case and  it would  have been open to  us to  decide the  same ourselves,  we do  not propose to  do so,  lest it  be  thought  that  we  are overreaching the  decision by  a larger bench. Instead, we desire  that a  5-Judge Bench  -  Waverley  being  a rendering by  such a  Bench -  should decide whether in the context of the legal aspects mentioned by us above, it is open to a person like the respondent to raise the question of  lack of  jurisdiction of the arbitrator(s) and thereby  deny the  fruits (to  the other side) of a

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long fought  and won battle, involving huge expenditure of time,  money and  energy, and  thereby cause serious damage to  equity also,  which is  an equally important facet to  be borne  in mind  by the  courts when seized with deciding a lis between parties. 9.   Let the Registry lay the papers before the Hon’ble Chief Justice of India for doing the needful.