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PETITIONER: THE STATE OF BIHAR

       Vs.

RESPONDENT: M/s.  KARAM CHAND THAPAR &  BROTHERS LTD.

DATE OF JUDGMENT: 07/04/1961

BENCH: AIYYAR, T.L. VENKATARAMA BENCH: AIYYAR, T.L. VENKATARAMA DAS, S.K. KAPUR, J.L. HIDAYATULLAH, M. SHAH, J.C.

CITATION:  1962 AIR  110            1962 SCR  (1) 827  CITATOR INFO :  F          1962 SC 113  (11)  R          1967 SC 203  (6)  RF         1971 SC1070  (17)  F          1977 SC2149  (8)  R          1988 SC2149  (13)

ACT: Stamp--Award--Arbitrator  sending  copies of  the  award  to parties  and  to  the  court,  duly  signed--Validation   of unstamped  award--Decree  passed   thereon--Validity--Indian Stamp Act, 1899 (2 of 1899), s. 35. Arbitration--Agreement to refer to arbitration--Execution on behalf  of  Governor  by  Person  specifically  authorized-- Requirements of authorization--Government of India Act, 1935 (25 & 20 Geo. 5 Ch, 42), s. 175(3).

HEADNOTE: A dispute between the respondent company and the  Government of  Bihar  over  the bills for the amount  payable  to  tile company in respect of the construction works carried out  by it  for  the Government was referred  to  arbitration.   The agreement to refer to arbitration was executed on behalf  of the  Governor  by  L, an executive engineer,  who  had  been specifically  authorised  to  do so by a  Secretary  to  the Government.   The arbitrator made his award and sent  copies thereof to the parties.  The respondent applied to the Court under  the  provisions of the Arbitration Act, 1940,  for  a decree  in terms of the award.  The State  filed  objections thereto and the matter was registered as a suit.  While  the suit was pending the arbitrator sent to the court a copy  of the award duly signed by him for being filed as provided  in the  Act, and on the receipt thereof the respondent  bad  it validated on payment of the requisite stamp duty under s. 35 of the Indian Stamp Act, 1899.  The appellant, the State  of Bihar, contended that no decree could be passed on the basis of  the  award  on the grounds (1) that  the  agreement  for reference   to   arbitration  did  not   comply   with   the requirements  of s. 175(3) of the Government of  India  Act, 1935, inasmuch as it was not signed by the person authorised

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to do so under the notification issued by the Government  of Bihar on April 1, 1937, in exercise of the powers  conferred by  s. 175(3), and (2) that the instrument before the  court was  a  certified copy and that under S. 35  of  the  Indian Stamp  Act,  1899, a copy Could not be  validated  or  acted upon. Held,  that S. 175(3) of the Government of India Act,  1935, does  not prescribe any particular mode in  which  authority must be conferred and that where authorisation is  conferred ad  hoc on any person, the requirements of the section  must be held to be satisfied. 828 Held, further, that the award sent by the arbitrator to  the court  was the original and not a copy of the award  and  by applying  the provisions of s. 35 of the Indian  Stamp  Act, 1899, it was effectively validated. The  Rajah  of Bobbili v. Inuganti China  Sitaramasami  Garu (1899) L.R. 26 I.A. 262, referred to.

JUDGMENT: CIVIL APPELLATE JURISDICTION: Civil Appeal No. 209 of 1959. Appeal from the judgment and order dated October 5, 1956, of the  Patna  High Court in Miscellaneous Appeal  No.  367  of 1953. L.   K. Jha and R. C. Prasad, for the Appellant. M.   C.  Setalvad, Attorney-General for India, N. De and  P. K. Mukherjee, for the respondents. 1961.  April 7. The Judgment of the Court was delivered by VENKATARAMA AIYAR, J.-This is an appeal against the Judgment of  the  High  Court  of  Patna  in  an  appeal  under   the Arbitration Act, 1940.  The appellant is the State of Bihar, and  the  respondents  are a company  registered  under  the Indian   Companies   Act,   doing   business   as   building contractors.   They  entered into three  contracts  for  the construction  of aerodrome, hangarettes,  buildings,  stores and other works at Ranchi, the first of them being  contract No.  21  of 1942 dated November 5, 1942, and the  other  two being contracts Nos. 6 and 8 dated April 5, 1943.  After the above  works  were  completed, disputes  arose  between  the parties over the bills and eventually by an agreement  dated February  6, 1948, they were referred to the arbitration  of one Col.  A. W. S. Smith.  The arbitrator made his award  on June  4, 1948, and sent a copy thereof to the parties.   The respondents  thereupon filed a petition under ss. 17 and  20 of  the Indian Arbitration Act, 1940, for a decree in  terms of  the award.  The appellant filed objections thereto,  and the  petition  was then registered as Title Suit No.  53  of 1951.   While this suit was pending, the arbitrator who  had meantime  left  for  Hong  Kong sent to  the  court  of  the Additional Subordinate Judge of 829 Ranchi before whom the suit was pending a copy of the  award duly signed by him, for being filed as provided in the  Act. Notices were issued by the court under s. 14(2) of the  Act, and,  in answer thereto, the appellant filed an  application to  set  aside the award on various grounds.  To  this,  the respondents  filed their reply statement.  In view  of  this application,  the respondents did not press  their  petition tinder  ss. 17 and 20 of the Arbitration Act, which  was  in consequence  dismissed, and the proceedings which  commenced with  the  receipt  of the award from  the  arbitrator  were continued as Title Suit No. 53 of 1951.  After an  elaborate trial  the  Additional Subordinate Judge, Ranchi,  passed  a

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decree  in terms of the award except as to a part  which  he held  to be in excess of the claim.  The appellant took  the matter in appeal to the High Court of Patna which  confirmed the  decree of the Subordinate Judge but granted a  certifi- cate under Arts. 132 and 133(1) of the Constitution, and hence this appeal. Though  the  controversy between the parties-ranged  in  the courts below over a wide area,, before us, it was restricted to  two  questions-whether there was a  valid  agreement  of reference  to  arbitration  binding on  the  Government  and whether  a decree could be passed on the unstamped  copy  of the  award filed in the court.  On the first  question,  the appellant  contends  that  the agreement  for  reference  to arbitration  does  not comply with the  requirements  of  s. 175(3)  of the Government of India Act, 1935, which was  the Constitutional provision in force at the relevant date,  and it  is therefore void, that the award passed in  proceedings founded  thereon is a nullity and that no decree  should  be passed in terms thereof.  Section 175(3) is as follows:-               "Subject to the provisions of this Act.  with,               respect to the Federal Railway authority,  all               contracts   made  in  the  exercise   of   the               executive authority of the Federation or of  a               province shall be expressed to be made by  the               Governor-General,  or by the Governor  of  the               Province,  as  the case may be, and  all  such               contracts and all assurances of property 830 made in the exercise of that authority shall be executed  on behalf  of the Governor-General or Governor by such  persons and in such manner as he may direct or authorise." Under this section, a contract entered into by the  Governor of  a  Province must satisfy three conditions.  It  must  be expressed  to be made by the Governor; it must be  executed; and  the  execution should be by such persons  and  in  such manner  as the Governor might direct or authorise.  We  have now to examine whether the agreement to refer to arbitration dated February 6, 1948, satisfies the above conditions.   It expressed  to be made between the Governor of Bihar and  the respondents.   It is also a formal document executed by  one Y. K. Lall, Executive, Engineer, Ranchi Division, and by the respondents.    So   the  only  point   that   remains   for consideration is whether the Executive Engineer was a person who  was directed or authorised by the Governor  to  execute the  agreement in question.  The appellant contends that  he as  not,  and  relies  in support of  his  contention  on  a notification  dated April 1, 1937, issued by the  Government of  Bihar.  That notification, in so far as it is  material, is as follows:  "In exercise of the powers conferred by sub-section (3)  of section 175 of the Government of India Act, 1935, the Governor of Bihar is pleased, in supersession of  all existing orders, to direct that  the  undermentioned classes  of  deeds, contracts and other  instrument  may  be executed on his behalf as follows:- A.In the case of the Public Works Department (subject  to any limit fixed by. Departmental  orders) 2.   All instruments relating to  the execution of works  of all kinds connected with buildings, bridges, roads,  canals, tanks,  reservoirs, docks and harbours and embankments,  and also instrumets relating By  Secretaries  to Government, Chief   Engineers,  Superin- tending Engineers, Divisional Officers, Sub-divisional Offi- cers, Assistant or Assistant Executive      831

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to the construction of water            Engineers, and the works, sewage works, the n              Electric Inspector. erection of machinery, and the working of coal mines.  ...........................            ................... 12. All deeds and in-                   By Secretaries and struments relating to any’            Joint Secretaries to matters other than those               Government". specified in heads 1 to 11. There was a discussion in the courts below as to whether the present  agreement  fell within item 2 or item  12.  If  the agreement could be held to be an instrument relating to  the execution  of  works, it would fall within item 2,  and  the Executive  Engineer would be a person authorised under  this notification to enter into this contract, but if it does not fall  within  that item, it must fall within  entry  12,  in which  case  he  would  not  be  competent  to  execute  the agreement.   Both  the  courts  below  have  held  that  the agreement  to refer to arbitration was not one  relating  to execution  of  works  as that had  been  completed  and  the dispute  related  only  to payment of the  bills,  and  that further  the essential feature of an  arbitration  agreement was the constitution of a private Tribunal and it could  not therefore  be brought within item 2 and that accordingly  it fell  within item 12.  But the learned Judges  of  the  High Court were also of the opinion that Y. K Lall, the Executive Engineer had in fact been specifically authorised to execute the arbitration agreement, and that that was sufficient  for the  purpose  of  s.  175(3).   The  appellant  impugns  the correctness  of this conclusion and contends that it is  not warranted  by the record.  It becomes, therefore,  necessary to  refer  in some detail to the correspondence  bearing  on this point.  On July 26, 1947, Mr. Murrel, Secretary to  the Government, wrote to Col.  Smith as follows: "I  am directed to say that the Government of Bihar  propose to  appoint you as Arbitrator for the settlement of a  claim put  forth  by  Messrs.  Karam  Chand  Thapar  and  Brothers Limited  in  connection with the construction of  the  Hinoo Aerodrome at Ranchi-Job 108 If You agree to undertake the 832               work....... the necessary forms of  acceptance               of  appointment of Arbitrator etc. may  please               be   for   warded  to  this   Department   for               completion by the Government of Bihar and,  by               the Contractor." To  this,  Col.   Smith  sent a reply  agreeing  to  act  as arbitrator.   In  that  letter he also  suggested  that  the contract between the parties might be suitably amended so as to  permit arbitration.  This is significant, because  under cl. 23 of the contract, all disputes between the parties had to be referred to the Superintending Engineer whose decision was to be final, and if that had been amended as  suggested, the  arbitration  clause  would  have  become  part  of  the original contract and there would have been no occasion  for the  present contention.  Referring to the above  suggestion for amending the agreement, the Secretary, Mr. Murrel, wrote on September 5, 1947, to Col.  Smith that the opinion of the Legal  Remembrancer  would have to be got.  On  January  19, 1948,  Col.  Smith wrote to the Secretary that he was  ready to  take up his duties as arbitrator and again desired  that the  contract  should  be  amended  so  as  to  provide  for arbitration.   On  January 27, 1948, the  Secretary  to  the Government  informed  Col.   Smith  that  opinion  had  been received  from the Legal Remembrancer that an agreement  for arbitration  should  be  executed  in  accordance  with  the

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provisions  of  the  Arbitration  Act  and  that  a   "draft agreement (copy enclosed) has been drawn up accordingly  and steps are being taken to execute it, as quickly as possible" On  the  same  date, the Executive  Engineer  wrote  to  the respondents as follows:-               "It  has since been decided by  Government  to               determine  your claims in connection with  the               above   through   arbitration   conducted   in               accordance   with   the  provisions   of   the               Arbitration Act 1 of 1940.  You are  therefore               requested  to  please  attend  the  Divisional               Office   immediately  to   execute   necessary               agreement for the purpose." Pursuant  to  this  letter, the respondents  joined  in  the execution  of  the agreement dated February 6,  1948,  along with the Executive Engineer for referring the 833 dispute to arbitration.  On February 25, 1948 the  Secretary informed  the arbitrator that the draft agreement  had  been slightly  modified  in  consultation  with  the   Government Pleader,  and he also wrote to the Executive  Engineer  that certain  formal corrections should be made in the  agreement and signed by both the parties.  And that was done. Having  carefully gone through the correspondence, we  agree with the learned Judges of the High Court that the Executive Engineer had been authorised by the Governor acting  through his  Secretary  to execute the agreement  for  reference  to arbitration.  It will be seen that it was the Secretary  who from  the very inception took the leading part in  arranging for arbitration.  He was throughout speaking in the name  of and on behalf of the Government and he did so "as directed". The  subject-matter  of the arbitration was  a  claim  which concerned  the  Government.   The proposal  at  the  earlier stages  to  amend cl. 23 of the original contract so  as  to include  an  arbitration  shows that the  intention  of  the parties  was to treat the agreement for arbitration as  part and  parcel of that contract.  Even after the agreement  was executed,  the Secretary made corrections and  modifications in  the  agreement on the basis that it was  the  Government that was a party thereto.  The conclusion from all this  is, in our judgment, irresistible that Y. K. Lall, the Executive Engineer had been authorised to execute the agreement dated February 6, 1948. It  was suggested that the Secretary was possibly  labouring under  a  mistaken  notion that the agreement  to  refer  to arbitration  was  covered by item 2 and  acting  under  that misconception  he  directed  Y.  K.  Lall  to  execute   the agreement.   Even if that were so, that would not  make  any difference   in   the  position,   because   the   Secretary undoubtedly  did intend that Y. K. Lall should  execute  the agreement and that is all that is required under s. 175(3). It  was further argued for the appellant that there being  a Government notification of a formal character, 834 we  should  not travel outside it and find  authority  in  a person who is not authorised thereunder.  But s. 175(3) does not prescribe any particular mode in    which authority must be  conferred.  Normally, no doubt, such conferment will  be by notification in the        Official Gazette, but there is nothing  in  the section itself  to  preclude  authorisation being  conferred  ad  hoc on any person, and  when  that  is established the requirements of the section must be held  to be  satisfied.  In the result, we hold  that  the  agreement dated  February  6, 1948, was executed by a person  who  was authorised  to  do so by the Governor,  and  in  consequence

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there was a valid reference to arbitration. It is next contended that as the copy of the award in  court was  unstamped,  no decree could have been  passed  thereon. The  facts  are  that the arbitrator ,sent to  each  of  the parties  a copy of the award signed by him and a third  copy also  signed by him was sent to the court.  The copy of  the award which was sent to the Government would appear to  have been  insufficiently stamped.  If that had been produced  in court,  it  could  have been validated  on  payment  of  the deficiency and penalty under s. 35 of the Indian Stamp  Act, 1899.   But the Government has failed to produce  the  same. The  copy of the award which was sent to the respondents  is said  to  have been seized by the police  along  with  other papers  and is not now available.  When the third  copy  was received in court, tile respondents paid the requisite stamp duty under s. 35 of the Stamp Act and had it validated.  Now the  contention  of  the appellant is  that  the  instrument actually  before the court, is, what it purports to  be,  "a certified copy", and that under s. 35 of the Stamp Act there can be validation only of the original, when it is unstamped or insufficiently stamped, that the document in court  which is  a copy cannot be validated and "acted upon" and that  in consequence  no decree could be passed thereon.  The law  is no doubt well-settled that the copy of an instrument  cannot be  validated:  That was held in The Rajah  of,  Bobbili  v. Inuganti China Sitaramasani Garu (1), where it was observed: 835               "The  provisions of this section (section  35)               which  allow  a  document to  be  admitted  in               evidence  on  payment  of  penalty,  have   no               application when the original document,  which               was  unstamped or was insufficiently  stamped,               has  not  been  produced-  and,   accordingly,               secondary  evidence of its contents cannot  be               given.   To hold otherwise would be to add  to               the Act a provision which it does not contain.               Payment  of penalty will not render  secondary               evidence  admissible, for under the stamp  law               penalty  is leviable only on an  unstamped  or               insufficiently   stamped   document   actually               produced  in  Court  and  that  law  does  not               provide  for the levy of any penalty  on  lost               documents", Therefore  the question is whether the award which was  sent by the arbitrator to the court is the original instrument or a copy thereof.  There cannot, in our opinion, be any  doubt that  it is the original and not a copy of the  award.  What the  arbitrator did was to prepare the award in  triplicate, sign  all  of them and send one each to the  party  and  the third  to the court.  This would be an original  instrument, and the words, "certified copy" appearing thereon are a mis- description and cannot have the effect of altering the  true character of the instrument.  There is no substance in  this contention  of  the appellant either.  In  the  result,  the appeal fails and is dismissed with costs.                                       Appeal dismissed. 836