The Union of India v. Mangaldas N. Varma

After reading this case analysis, you will learn about a very different approach adopted by the High Court when arbitration was just beginning to gain popularity. This is a must-read case for those interested in the subject.
CITATION(1958) 2 MLJ 16
COURTHigh Court of Madras
JUDGES/CORAMJustice O.P. Rajagopalan
DATE OF JUDGEMENT18.11.1957

Introduction

The High Court in this case made some important observations with regard to the appointment of umpires in arbitration and arbitration awards. While these observations are extremely important, the view of the Court in regard to some points seems to have shifted since.

Facts

The facts of the case are as follows: The respondent had entered into a contract with the Government of India. According to the contract, in case of a dispute regarding the quantum of payment, it would be referred to arbitration. Upon arbitration, the two arbitrators differed and referred the issue to an umpire. The umpire in its award instructed the Government to pay the outstanding amount to the respondent. When the respondent approached the District Judge for passing of a decree in regard to the award, the Government filed a suit to set aside the award.

It is pertinent to note that as per the contract, the Major-General (Administration) was to be the arbitrator. However, that office was abolished, and it ceased to exist and thus, the parties agreed to submit the dispute to two arbitrators. The reference to arbitration specifically provided that if there was any difference between the arbitrators the disputes should be referred to an umpire. Subsequently, the arbitrators failed to come to an agreement and they appointed Mr. E. A. Nadir Shaw as the umpire. He relinquished this position shortly thereafter and the parties requested the arbitrators to appoint a new umpire. Mr. C.G. Modi, a Judge of the Court of Small Causes, Bombay was appointed as the umpire after permission from both the parties. However, a few days before the preliminary meeting, the Government Solicitor advised the Government that possibly the arbitrators had no authority to appoint a fresh umpire. The Government Solicitor agreed to abide by the opinion of the Advocate-General on the legality of the appointment of Mr. Modi as umpire, even though he knew that the latter was the respondent’s counsel. After this, the Government gave up its attempt to challenge the jurisdiction of Mr. Modi to act as umpire. On the next date of proceeding, the Government again objected to the appointment of the umpire. Ultimately, after seeking the extension to complete the proceedings multiple times by both parties, the award was given by the umpire.

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Issues

The main issues in the case were:

  1. Whether or not the appointment of the umpire was invalid under the Arbitration Act.
  2. Whether in such a case, the subsequent participation in the proceedings before the umpire after the initial protest would amount to a waiver of the Government’s right to challenge the jurisdiction of the umpire does not arise for consideration in the circumstances of this case.
  3. Whether or not the award is vitiated on the ground that reasons of the award with respect to each specific head was not given.

Contentions of the parties

The appellant argued that the appointment of Mr. Modi as umpire was invalid and he had no jurisdiction at all to proceed with the arbitration. Further, it was contended that the award was vitiated because the umpire did not give his decision with reference to each head of claim and counter-claim especially when the umpire had to decide the plea of limitation also with reference to each head of claim of the contractor.

Summary of court decision and judgment

The respondent preferred a petition to the District Judge of Chingle- put to file the award and pass a decree in terms thereof. The Government in its turn filed another petition to set aside the award of the umpire. The learned District Judge allowed respondent’s petition and dismissed the other. Against these decisions appeals were preferred by the Government.

The Madras High Court, after discussing Section 8 of the Arbitration Act held that it cannot be said that the umpire acted without jurisdiction or that his appointment was not legal.

Reading Section 8(1)(c) and Section 8(2) together, it seems to us that, even where the arbitrators were requested by the parties to appoint an umpire, if the request was complied with and an umpire was appointed, and that appointment was accepted by the parties, the validity of the appointment cannot be challenged on the ground that that appointment was made more than fifteen days after the parties had asked the arbitrators to appoint an umpire.

With regard to the Government’s right to challenge his jurisdiction, the Court observed that after the proceedings could be completed within the time allotted by law, the Government itself requested the Court to extend the time for the umpire to give his award. If the Government had a problem with the jurisdiction of the umpire, the proper stage to challenge the same was when application for extending the time was made.

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The conduct of the Government in accepting the validity of the proceedings before the umpire, on the basis of which alone the Government could have asked for extension of time or acquiesced in the subsequent request for extension of time, should be sufficient to deny them the right at this stage to impeach the validity of the appointment of Mr. Modi as umpire.

Further, the Court observed that while it is true that the umpire did not give any reasons in the award, this in itself cannot vitiate the award. Every claim and head were fully considered by him before giving the award, and the apparent failure to record specific findings on the issue of limitation with reference to each head of claim did not vitiate the umpire’s award. Nor can the validity of the award be impugned on the ground that each item of claim or counterclaim was not specifically dealt with and the umpire’s decision thereon recorded. The appeals were thus dismissed.

Analysis

In the present case, the Court rightly held the appointment of the umpire as legal and valid. It is pertinent to note that by asking for extension of time to the umpire, the Government relinquished its right to challenge his jurisdiction. If the Government still had a problem with the appointment, the extension would not have been asked for. The Court refused to vitiate the award on the basis that reasons weren’t given in it. However, the concept of a reasoned award has developed substantially since the passing of this judgment. In Jajodia (Overseas) Pvt. Ltd v. The Industrial Development[1], the Supreme Court held,

“as peaking or reasoned award is one which discusses or sets out the reasons which led the Arbitrator to make the award. Setting out the conclusions upon the questions of issues that arise in the arbitration proceedings without discussing the reasons for coming to these conclusions does not make an award a reasoned or speaking award.”

It has also been held in Hemadri Cements Pvt. Ltd. v. Walchandnagar Industries Ltd[2]that an award even if it is valid is liable to be set aside, if the award in question does not contain any reasons.

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Conclusion

While the decision of the Court with regard to the appointment of the umpire was based on sound logic, perhaps if the case was to be decided now, in light of the jurisprudence on reasoned awards, the decision would have been different ultimately.


[1] Jajodia (Overseas) Pvt. Ltd v.The Industrial Development, 1993 SCC (2) 106.

[2] Hemadri Cements Pvt. Ltd. v. Walchandnagar Industries Ltd,1995 (3) ALT 120.