Judgment:
S.N. Variava, J.
1. This petition challenges an Award dated 16th March 1984 and the decision of the Board of Directors of The East India Cotton Association Limited dated 29th March 1985.
2. By a Contract No. section 1508 dated 19th February 1977 entered into between the petitioners and the respondents, the petitioners were to sell to the respondents 15,000 bales of cotton of the type and the quality mentioned therein. The terms relevant for our purposes read as follows :
'SELLERS : SANBRA --- SOCIEDADE ALGODOERA DO NORDESTE BRASIL-EIRO S.A.--- Caixa Postal 8149 --- Sao Pauli --- Brazil
6.SHIPPER : Sanbra S.A. and/or Third Parties.
7.PAYMENT : Cash against first presentation of shipping documents in Bombay India. In the event tendering Bolivian and/or Paraguyan cotton proceeds to be remitted to The Innesmoor Corporation, one Chase Manhattan Plaza, New York, U.S.A., favour and for account of Sanbra S.A.
9. TERMS AND ARBITRATION : Terms and Arbitration in accordance with the rules and regulations of the East India Cotton Association Ltd., Bombay.'
3. In respect of 3,831 bales of cotton delivered pursuant to this contract, disputes arose as to whether there was a loss of weight. The respondents issued 4 Debit Notes for U.S. $49,270.17 on one M/s. Bunge A.G. Zurich. It appears that the said M/s. Bunge A.G., Zurich had shipped this 3831 bales of cotton and that the Invoice in respect of this had also been raised on the said M/s. Bunge A.G., Zurich. The respondents by their telex dated 16th April 1980 sent to M/s. Bunge A.G., Zurich referred the dispute to Arbitration. By this telex, the respondents appointed their Arbitrator and called upon M/s. Bunge A.G., Zurich to appoint an Arbitrator. M/s. Bunge A.G., Zurich by their telex dated 30th April 1980 appointed one Mr. Govind Prasad Bansal as their Arbitrator.
4. The respondents then filed their statement of claim before the Arbitrators. The respondents claimed the amount from the petitioners. However in the statement of claim, they described the petitioners as 'V. Sanbra (N.V. Bunge)'. The petitioners now appear before the Arbitrator and file their Written Statement. This even though M/s. Bunge A.G. Zurich had appointed the Arbitrator. Paragraphs 1 and 6 of the Written Statement read as follows :
'1. The respondents say that V. Sanbra and N.V. Bunge are two different and distinct entities and as such the reference filed against V. Sanbra (N.V. Bunge) is not maintainable in law.
6. The respondents say that by its letter dated 16th November, 1977 addressed to the Claimants, N.V. Bunge had informed the Claimants that M/s. Bunge A.G., Zurich were the sellers to the Claimants in respect of the said goods and all debit and credit notes pertaining to the said goods were required to be issued to the said M/s. Bunge A.G. The respondents say that the Claimants are aware that the said M/s. Bunge A.G. are the contracting parties with the Claimants in respect of the said goods. The respondents say that the said M/s. Bunge A.G. had addressed a letter dated 10th August, 1979 in connection with the alleged claim of the Claimants. In reply to the said letter, the Claimants had addressed a letter dated 13th September, 1979 to the said M/s. Bunge A.G. claiming the said U.S. $ 49,270.17 from them. In the circumstances of the case, the Claimants had the knowledge that the said Bunge A.G. were the contracting party with the Claimants and as such, the respondents are not liable to pay any amount to the Claimants.'
5. The submission in paragraph 6 of the Written Statement appears to be based upon the telex dated 29th June 1977 addressed by one N.V. Bunge, Antwerpen. The Telex reads as follows:
'TO BOMBAY---COTCORP.
FORM ANTWERPEN---BUNGE (TLX 31611 BUNGE B) 29-6-1977/1146.
YR TLX 1084 29-6-1977 COTTON CTR 1507/1508'
1) TKS FOR CLARIFICATION AND RELEVANT DETAILS FOR INVOICING PURPOSES.
2) GOOD ORDER WISH MENTION THAT CONTRARY TO CONTRACT TERMS MERCHANDIZE WILL EVENTUALLY BE INVOICED BY BUNGE AG ZURICH INSTEAD OF SANBRA SAO PAULO
3) WHICH RESPECT TRUST YOU OBJECTIONLESS
4) PSE CONFIRM
TKS---RGDS
NNNN'
6. To be noted that in the Written Statement the petitioners do not contend that they have not appointed an Arbitrator and that they had never been called upon to refer the matter to Arbitration or to appoint an Arbitrator. To be noted that in this Written Statement no contention is taken that the Arbitrator Mr. Bansal had no authority to arbitrate and/or that there was a lack of jurisdiction. To be noted that the petitioners do not contend that the said Mr. Bansal was not their Arbitrator or an Arbitrator appointed on their behalf.
7. In the counter statement, the respondents reiterate that the claim is against the petitioners and that the petitioners are the only contracting parties. The respondents reiterate that the petitioners have continued to remain liable under the Contract. The respondents have also filed written arguments before the Arbitrators. In the written arguments the respondents state as follows :
'..Although in the title of the statement of claim the name used in M/s. Sanbra (N.V. Bunge) the claim is against M/s. V. Sanbra. In the bracket the name N.V. Bunge is used because they or their sister concerns were the actual shippers. The real respondents are M/s. V. Sanbra and the Claimants are making their claim against M/s. V. Sanbra alone. The words N.V. Bunge in bracket in title may be treated as deleted and the Claimants will delete that name from the title. The Claimants further submit that the contract was entered into by the Claimants on 19th February 1977 being the Contract No. S---1508 with the respondents viz. Sanbra S.A. who agreed to sell 14000 bales of cotton to the Claimants. Therefore, the principal sellers were the respondents and not anybody else.'
8. It would appear that by a letter dated 9th July 1981 the respondents had informed the petitioners that in view of the defence taken up by them, the other sister concerns would be made parties to the Arbitration proceedings. The respondents asked the petitioners to let them know whether they were agreeable to obtain the consent of the other two parties and have the same Arbitration or otherwise the respondents would approach the East India Cotton Association Ltd., for a fresh reference. By a subsequent letter dated 17th August 1981 the respondents informed the petitioners that they will be proceeding with the Arbitration as it is on pleadings and that the respondents were not making any amendment in the Statement of Claim or adding any other party. The respondents informed the petitioners that the matter would be argued at the next hearing.
9. It is an admitted position that the petitioners appeared before the Arbitrator and made their submissions. The Arbitrator heard the parties, considered the documents and the evidence of the parties and passed the impugned Award dated 16th March 1984.
10. The petitioners thereafter filed an Appeal against the Award to the Board of The East India Cotton Association Limited. In the Memo of Appeal also no ground is taken that the petitioners had not appointed any Arbitrator or that they had not been called upon to refer the disputes to Arbitration or to appoint an Arbitrator or that the Arbitrators had no jurisdiction to Arbitrate. However, my attention has been drawn to the Minutes of the proceedings before the Board. From these Minutes, it would appear that in the appeal it was contended that the petitioners had not appointed their Arbitrator and that the Award was void on that ground. By the decision dated 29th March 1985 the appeal has been dismissed.
11. Mr. Chagla submits that the Contract dated 19th February 1977 has, with the consent of the respondents, been assigned to M/s. Bunge A.G., Zurich. He submitted that all rights and obligations including the liabilities under the Contract were now of M/s. Bunge A.G. Zurich. He submitted that the petitioners therefore could not be made liable. In support of his submission Mr. Chagla took me through various documents viz. Exhibits 5, 6 and 7 to the affidavit-in-reply as well as the 4 Debit Notes being Exhibits B to E. He also relied upon the Telexes dated 16th April 1980 and 30th April 1980 being Exhibits F and G to the petition respectively. He also pointed out that even after the Award was passed the respondents had by their letter dated 4th October 1985 sought to enforce the Award only against M/s. Bunge A.G., Zurich. Mr. Chagla also calls upon Mr. Tulzapurkar to produce before the Court the Books of Accounts of the respondents for the purposes of showing that the respondents had in fact accepted such an assignment. Mr. Chagla also referred to certain earlier Arbitration Proceedings pertaining to quality in respect of the goods supplied under the Contract. Mr. Chagla submitted that in the earlier Arbitration the claim had been made only against M/s. Bunge A.G. Zurich; that the reference was only against M/s. Bunge A.G. Zurich and that ultimately payments were made by M/s. Bunge A.G., Zurich and accepted by the respondents from them.
12. On the other hand Mr. Tulzapurkar took me through various other documents being Exhibits 6 to 19 to show that the Contract was with the petitioners and that even in respect of earlier Arbitration it is the petitioners who had authorised the common Agent M/s. Khimji Visram & Sons.
13. In my view, it is not for this Court to consider this question. This is a matter which was directly before the Arbitrators. The law on the subject is clear. The Court is not sitting in Appeal over the Award of the Arbitrators. The Court cannot go behind the Award and can only look at an error apparent on the face of the Award. Even if the Court comes to a conclusion different from that of the Arbitrator the Court cannot interfere unless it is shown that the Award is against the provisions of law or there is an error apparent on the face of the record. In this case, it is not for this Court to decide whether there is an assignment or not. This was a question which was directly before the Arbitrators and thereafter before the Board of Appeal. The Arbitrators have given their decision. The Arbitrators being the final authority between the parties, the decision of the Arbitrators is binding on the parties.
14. Mr. Chagla submitted that it is necessary for the Court to go into this question as this question goes to the root of the Arbitration itself. Mr. Chagla submitted that if the Contract had been assigned then there was no Arbitration clause between the petitioners and the respondents and, therefore, there could be no Arbitration. He submitted that if there was no Agreement for Arbitration then in that case, there was an inherent lack of jurisdiction, and as a result of this inherent lack of jurisdiction the Award should be set aside. He submitted that for the purposes of considering whether there was any inherent lack of jurisdiction, the Court must go into the question as to whether there is an assignment or not. I am unable to accept this submission. This is a question of fact which the parties had left for the decision of the Arbitrator. The Arbitrators having decided it is now not open for the petitioners to ask the Court to look into the material and evidence and go into facts. In my view, in this petition, at this stage the question of calling upon the respondents to produce their Books, cannot and does not arise and there can be no question of drawing any adverse inference as argued by Mr. Chagla.
15. Mr. Chagla next submitted that there is no reference to the Arbitrators on the question as to whether there was in existence any Contract between the petitioners and the respondents. He submitted that the question as to existence of the Contract must be specifically referred to the Arbitrators. He submitted that this question has not been specifically referred to the Arbitrators and merely because an issue in this behalf was raised did not entitle the Arbitrators to decide this question. He submitted this as and by way of a general proposition as well as under Bye-laws 38-A of The East India Cotton Association Limited.
16. Considering first Mr. Chagla's abovementioned argument on the basis of a general proposition, I see no substance in this submission. There is an Agreement between the parties. The Agreement contains an Arbitration clause. The Arbitration clause has been invoked. In defence, it has been urged that there is no liability because the Contract is assigned. This was very much a question which could be decided by the Arbitrators without any special reference to them.
17. Mr. Chagla however sought to support this submission also on the basis of Bye-law No. 38(A)(b) and (B). The relevant portion of Bye-law No. 38 reads as follows :
'38(A) All unpaid claims whether admitted or not, and all disputes and differences (other than those relating to quality) arising out of or in relation to---
(a) cotton transactions between members including any dispute as to the existence of such transactions; or
(b) cotton contracts (whether forward or ready and whether between members or between a member and a nonmember) made subject to these Bye-Laws or subject to E.I.C.A. Arbitration or containing words or abbreviations to a similar effect including any dispute as to the existence of such transaction provided in the latter case the parties had agreed in writing before entering into business relation that any dispute arising between them out of that agreement or any such transactions that may be entered into including any dispute as to the existence of such transaction shall be referred to Arbitration under the Bye-laws of the Association; ................
(c) cotton contracts covered by any such Arbitration agreement; shall be referred to the Arbitration of two disinterested persons, one to be chosen by each party from amongst the members, or their authorised or nominated representatives for the purpose of determination settlement and adjustment of disputes or differences in respect of cotton transactions referred to above. The Arbitrators shall have power to appoint an umpire and shall do so if and when they differ as to their Award.'
18. Mr. Chagla submitted that under Bye-law No. 38(A)(a) so long as the disputes and differences are between the members, it could be arbitrated upon even though the question may be regarding existence of any transaction. He submitted that under sub-clause (b) of Bye-law No. 38(A) i.e. when the Arbitration is between Member and the Non-Member, the position is different. He submitted that under Bye-law 38(A)(b) even though a Contract may be made subject to the Bye-laws or subject to The East India Cotton Association Ltd Arbitration, if it included any dispute as to the existence of a transaction, then it could only be Arbitrated upon provided parties had agreed in writing, before entering into business relation, that any dispute arising between them under the Agreement, or under any of the transactions, that may thereafter be entered into including disputes as to existence of a transaction shall be referred to the Arbitration under the Bye-laws of the Association. According to Mr. Chagla, therefore, under sub-clause (b) of Bye-law 38(A), there must be a specific and written term of the Agreement under which disputes relating to the existence of the transaction are also to be referred to Arbitration. Mr. Chagla submits that in the present Contract, the only provision is that the terms and Arbitration would be in accordance with the Rules and Regulations of The East India Cotton Association Ltd. He submitted that there was no agreement in writing to refer disputes as to the existence of the transaction to Arbitration. Mr. Chagla submitted that this can be the only interpretation which can be put on sub-clause (b) of Bye-law No. 38(A). He submits that this is clear from the wording of the proviso which says that 'Provided in the latter case'. He submits that the term 'the latter case' must refer to a dispute relating to the existence of a transaction. Mr. Chagla submits that therefore, under the Bye-law, there could have been no reference as to the existence of the Contract, it not having specifically agreed upon by the parties at the time of entering into the Contract.
19. I am unable to accept the submission of Mr. Chagla. In my view, the interpretation given by Mr. Chagla is not correct. Under Bye-law 38(A) all unpaid claims whether admitted or not and all disputes and differences arising out of or in relation to cotton contracts are referable to Arbitration. It is settled law that words 'arising out of' or 'in relation to' have a very wide meaning and import. They include all disputes between the parties including the differences as to the existence of the transaction itself. Therefore, the opening part of Bye-law 38(A) itself is very wide and would contain all disputes and differences including the existence of such transaction. This is made clear by reading of sub-clause (a) which clarifies that so long as the Arbitration is between the Members even questions relating to existence of the transaction would be covered. Under sub-clause (b) the words 'latter case' refer not to the dispute as to the existence of the transaction. The words 'later case' have a reference to the type of the Arbitration clause. Sub-clause (b) deals with clauses which make 'cotton contracts subject to the Bye-laws' or it deals with the 'cotton contracts subject to The East India Cotton Association Limited Arbitration'. The words 'containing words or abbreviations to a similar effect' apply to both the above two contingencies. Therefore, there may be words or abbreviations which have a similar effect of making a Cotton Contract subject to the Bye-laws or there may be words or abbreviations which have the similar effect of making a Cotton Contract subject to The East India Cotton Association Arbitration. In our case, the Contract contains words which make it subject to the Bye-laws. In my view, it is only when the Contract is subject to The East India Cotton Association Arbitration that there must be a specific provision referring a dispute as to the existence of the transaction to Arbitration under the Bye-laws of the Association. In fact, what the proviso does is that it brings contracts containing provisions 'Subject to The East India Cotton Association Arbitration' on an equal footing as the earlier provisions i.e. subject to the Bye-laws. The proviso does not apply to Cotton Contracts subject to the Bye-laws. Since in the present case, the Arbitration is subject to all the Rules and Regulations of The East Indian Cotton Association, the question of the proviso applying does not arise. In such a case, even a dispute as to the existence of a transaction can be Arbitrated upon by the Arbitrators. In fact, the petitioners have themselves raised this as an issue which had been considered by the Arbitrators and arbitrated upon.
20. Mr. Chagla next submitted that even presuming the Arbitrators could so Arbitrate, still under Bye-law 38(A)(e) there may be a reference to Arbitration of two disinterested persons, one to be chosen by each party. Mr. Chagla submitted that in this case this Bye-law has not been complied with. He submitted that it is an admitted position that the petitioners were never called upon to enter into reference or to nominate an Arbitrator. He submitted that the respondents had called upon M/s. Bunge A.G., Zurich to nominate their Arbitrator and that it is M/s. Bunge A.G. Zurich who had appointed an Arbitrator. Mr. Chagla submitted that as the petitioners had never had an opportunity of appointing an Arbitrator there was an inherent lack of jurisdiction in the Arbitrators so appointed and because of this lack of jurisdiction the proceeding itself were vitiated and were void ab initio. He submitted that the Court has to consider whether at the stage of the initial appointment, there was a valid appointment. He submitted that the only question before the Court was whether M/s. Bunge A.G. Zurich had power or authority to appoint an Arbitrator on behalf of the petitioners. He submitted that the answer to the second question must obviously be in the negative and, therefore, the answer to the first question must be that there was no valid appointment. Mr. Chagla submitted that if there is inherent lack of jurisdiction then no amount of subsequent appearance by a party or subsequent conduct of a party could cure such inherent lack of jurisdiction.
21. In support of his submission Mr. Chagla relied upon the authority in the case of Chinoy Chalani & Co. & others v. Y. Anjiah, reported in A.I.R. 1958 A.P. 384. This was a case of an Arbitration under the Hyderabad Stock Exchange Rules which were some-what similar to the Bye-laws under consideration here. In this case, one party appointed their Arbitrator and as the other party failed to appoint its Arbitrator, the President of the Stock Exchange appointed an Arbitrator. The Court held that there was no material irregularity till this stage. Thereafter it appears that the Arbitrator appointed by the party was unable to act and, therefore, the President permitted that party to nominate somebody else as an Arbitrator in his place. This was against the Rules of the Stock Exchange. The other party immediately objected to this course, and called upon the President to also permit him to select another Arbitrator in place of the Arbitrator appointed by the President. This request was turned down. The aggrieved party objected in writing and then appeared before the Arbitrators subject to his objection. The Court held that the appointment of the Arbitrator was against the Rules and that the contravention was vital and went to the root of the matter so as to vitiate the entire proceedings. However, the Court also held that a distinction must be drawn between elements which are essential for the foundation of jurisdiction and the mode in which such jurisdiction has to be assumed and exercised. The Court held that when there is jurisdiction, but only non-compliance with the procedure prescribed, the defect could be waived. The Court thereafter considered the question of acquiescence and waiver and held that in this case the protest had been taken from the beginning and therefore, there was no acquiescence and waiver. It is clear from this judgement that had there been acquiescence and/or waiver, the decision of the Court would have been otherwise.
22. Mr. Chagla also relied upon the authority of the Supreme Court in the case of Waverly Jute Mills v. Raymon & Co., reported in : [1963]3SCR209 . This was a case where the Arbitration clause was in a Contract for supply of jute. The Court ultimately held that the Contract itself was illegal. Under those circumstances, the Court held that an Arbitration Agreement would be effective and operative only when it is separate from and independent of the Contract which is impugned as illegal. The Court held that where the provisions regarding Arbitration is a term of the Contract, then they have no existence apart from the impugned Contract and that if the impugned Contract perishes the Arbitration clause must perish with it. The Court held that an Agreement in writing is the very foundation of the jurisdiction of the Arbitrators to act and that when there is no such Agreement in existence at the time that the Arbitrators enter on their duties then proceedings are wholly without jurisdiction. It was held that this was not a defect which could be cured by appearance of the parties in the proceedings even without protest. This on the footing that consent cannot confer jurisdiction. It must be remembered that this is in respect of a case where the Contract itself has been declared illegal and void and as a result thereof, there is no Arbitration Agreement in existence.
23. Mr. Chagla next relied upon the authority in the case of M.I. Shahdad v. Mohd. Abdullah Mir & others, reported in A.I.R. 1967 J. & K. 120. This was a case where the Arbitration clause was in a Partnership Deed. Disputes having arisen the Arbitration was invoked, a Sole Arbitrator appointed by one side and an Exparte Award came to be passed. On facts the Court held that no Notices were sent to some of the parties and that the Sole Arbitrator was not appointed as per the law. It is held that therefore, the entire reference would be illegal and the proceedings and the Award would be a nullity. To be noted that in this case also the question of acquiescence and/or waiver did not arise at all.
24. Mr. Chagla next relied upon the authority of the Supreme Court in the case of Thawardas v. Union of India, reported in : [1955]2SCR48 . This was a case where there was a Contract with the Government to supply pucca bricks. Owing to the default of the Government there was a delay and the Contractor claimed for loss on account of the default and the delay. The Contractor on his own referred the dispute to Arbitration and an Award came to be passed. The Supreme Court held that a reference requires consent of both sides and that if one side is not prepared to submit a given matter to Arbitration, even though there is an Agreement between them, then recourse must be had to section 20. The Supreme Court held that in absence of Agreement by both the sides or an Order of the Court under section 20, an Arbitrator is not vested with the necessary jurisdiction. In my view this authority can be of no assistance to the petitioners. In the present case, there is an Agreement in writing to refer disputes to Arbitration. As set out hereinafter petitioners have acquiesced and affirmed the appointment of Arbitrators and have taken part in the proceedings. They have therefore, consented to the reference. Also to be noted that the Supreme Court was not considering the question of acquiescence and/or waiver and has not dealt with that question at all.
25. Mr. Chagla next relied upon the authority of the Supreme Court in the case of Khardah Company Ltd. v. Raymon & Co. (India) Private Ltd., reported in . This is a case where there was an Arbitration clause in a Contract for delivery of goods. It was contended that Contract itself was illegal. The Court upheld that contention. The Supreme Court held that the Arbitration clause was an integral part of the Contract and that if the Contract is revoked, every part of it including the Arbitration clause contained therein were revoked. The Supreme Court thus held that the Arbitrators were not competent to decide the question as to whether the Contract itself was illegal and/or void. It is under these circumstances that the Supreme Court held that the Arbitrators could not act and proceeding before them would be wholly without jurisdiction. The Supreme Court held that if there is an inherent lack of jurisdiction then the same cannot be cured by acquiescence. This on the footing that when the initial Contract, which contained the Arbitration clause, was an illegal Contract and void, the Arbitration clause being a part of this Contract was also void. It was on the basis of a lack of an Agreement in writing that the Supreme Court held that there was an inherent lack of jurisdiction. In our case there is no question of the Contract being void and/or illegal.
26. Mr. Chagla next relied upon the authority of the Allahabad High Court in the case of Jagannath Kapoor and another v. Premier Credit and Instalment Corporation (P) Ltd., reported in : AIR1973All49 . In this case, the Arbitration clause, stated that all disputes and differences were to be referred to a named Arbitrator or his nominee or failing them to another named Arbitrator. One of the parties unilaterally referred the disputes to that Arbitrator. The Court held that there could be no unilateral reference to Arbitration and that such a unilateral reference was without jurisdiction. The Court held that whatever is without jurisdiction cannot acquire sanctity merely because the parties do not raise on objection or later on consent because no amount of consent confer jurisdiction.
27. Mr. Chagla also relied upon the authority in the case of M/s. Gangaram Ratanlal v. M/s. Simplex Mills Co. Ltd., reported in A.I.R. 1982 Bom. 72, wherein it has been held that there must first be an Arbitration agreement as defined in section 2(A) of the Arbitration Act i.e. that there must be Agreement in writing. In this case it was held that if that sine qua non is absent then there was an initial lack of jurisdiction on the part of the Arbitrator which could not be cured by acquiescence or any admission of liability before the Arbitrator. It is held that a lack of jurisdiction goes to the root of the matter and that it is not merely an irregularity which can be cured.
28. Mr. Chagla also relied upon the Division Bench authority of this Court in the case of Union of India v. M/s. Ajit Mehta & Associates, reported in : AIR1990Bom45 . In this case the Contract between parties provided that disputes between parties would be referred to sole Arbitration of an Officer to be appointed by the authority named in the document. As certain disputes arose the parties filed an Application under section 8 of the Arbitration Act for appointment of an Arbitrator. The Court appointed an Arbitrator. The appellants before the Court did not appear before the Arbitrator as they challenged the jurisdiction of that Arbitrator. The Arbitrator made an Exparte Award which was then challenged on the ground of lack of jurisdiction. The Single Judge dismissed the petition. The Appeal Court after considering various cases came to the conclusion that under section 8 of the Arbitration Act, the Court has no power to appoint when, under the clauses in the Contract, the Arbitrator is to be appointed by a named authority and not by the consent of the parties. The Division Bench held that if the Court appoints contrary to the terms of the Contract then the very appointment of the Arbitrator would be void and without jurisdiction and there was an inherent lack of jurisdiction. The Court held that such an appointment could be set aside or ignored at any stage of the proceedings. The Court also held that in such cases i.e. where there is inherent lack of jurisdiction, then the question of acquiescence will not arise.
29. It is to be noted that the authorities cited by Mr. Chagla are all cases where there is inherent lack of jurisdiction which goes to the root of the matter itself. The lack of jurisdiction is in respect of the existence of the Arbitration agreement itself either by reason of it forming part of a Contract which is void or where there is no agreement as contemplated by section 2(a) of the Arbitration Act. There can be no dispute with this proposition of law. In cases like this, i.e. where there is inherent lack of jurisdiction, then subsequent conduct cannot cure that inherent jurisdiction. However, a distinction must be drawn between elements which are essential for the foundation of jurisdiction and the mode in which the jurisdiction has to be assumed and exercised.
30. Mr. Tulzapurkar has submitted and in my view correctly, that this is not a case where there is inherent lack of jurisdiction. This is a case where the challenge is to be the mode in which the jurisdiction has been assumed and exercised. In the present case, admittedly there is a Contract between Parties i.e. the Contract dated 19th February 1977. That Contract clearly contains an Arbitration clause which is binding on both the parties. Thus, there is an Agreement to refer disputes to Arbitration in writing. That clause, in view of Rule 32(A) is very wide. The only submission made is that the petitioners had no opportunity to appoint an Arbitrator and that the Arbitrator was one who had been appointed by some other party. The fact still remains that it was an Arbitrator appointed under this Contract. It was an Arbitrator appointed by the parties i.e. the respondent and a party who had delivered goods under the Contract. There was therefore, no inherent lack of jurisdiction. In fact the petitioners on their own, appeared before the Arbitrators and filed their written statement and contested on merits. This is not a case of an Arbitrator who has been imposed upon the parties by the Court. This is not a case of a unilateral reference to Arbitration. The petitioners, if they felt aggrieved, could have refused to participate in such an Arbitration proceedings. But it was also open to the petitioners to accept a reference by an Arbitrator appointed by a party who had delivered goods under the Contract. The conduct of the petitioners show that they have done just that. The conduct of the petitioners show that the petitioners have accepted the appointment of Mr. Bansal as an Arbitrator on their behalf. If that be so, then there was no inherent lack of jurisdiction. The reference was a reference between the petitioners and respondents. Once the petitioners accepted by conduct the appointment of Mr. Bansal as an Arbitrator they had acquiesces in his appointment as an Arbitrator on their behalf. In my view, the petitioners conduct in appearing before the Arbitrator, contesting on merits and making the submission before the Arbitrator clearly indicates that the petitioners have acquiesces in the reference and in the appointment of Mr. Bansal as their Arbitrator. In my view, this case is completely covered by the authority of Supreme Court in the case of N. Chellappan v. Secretary, Kerala State Electricity Board and another, reported in : [1975]2SCR811 . In this case, the provision was that if the Arbitrators failed to make an Award within a particular period, then the Umpire was to act as sole Arbitrator. The Arbitrators failed to make the Award within stipulated period. The Umpire called upon Parties to get an Order of the Court directing him to enter upon a reference. The Court so directed. The Umpire made his Award. It was challenged on the ground that there was an inherent lack of jurisdiction inasmuch as the Party had not referred the dispute to the Umpire. The Supreme Court held that the party had participated in the proceedings before the Umpire without any demur as to his jurisdiction and that the only inference from such conduct would be that it had no objection to the order revoking the authority of the Arbitrators. The Supreme Court held that a party who so acquiesces is precluded from challenging the jurisdiction of the Umpire. The Supreme Court cited with approval the observations of the Privy Council in Chowdhri Murtaza Hossein v. Mt. Bibi Bechunnissa, reported in (1876)3 IA 209 to the following effect :
'If the parties to the reference either agree beforehand to the method of appointment, or afterwards acquiesce in the appointment made, with full knowledge of all the circumstances, they will be precluded from objecting to such appointment as invalidating subsequent proceedings. Attending and taking part in the proceedings with full knowledge of the relevant fact will amount to such acquiescence'
(Note : Underlining provided.)
31. In the case of Prasun Roy v. Calcutta Metropolitan Development Authority and another, reported in : [1987]3SCR569 , the facts were that an Arbitration Agreement provided for reference to a sole Arbitration of the Director of the Unit Head. Inspite of this on an Application made to Court under section 20 of the Arbitration Act, the Court appointed a Lawyer of that Court to act as an Arbitrator. Parties appeared before the Arbitrator; the proceedings were commenced; both parties submitted to the jurisdiction, filed their claims and documents. Extensions of times were applied for by the parties by consent. Thereafter an Application was made for revocation of the Order on the ground that in view of the Arbitration clause the Court had no power to appoint an independent Arbitrator and that there was inherent lack of jurisdiction. This submission found favour with the High Court. The High Court set aside the appointment of the Arbitrator on the ground of inherent lack of jurisdiction. The Supreme Court whilst considering the question of inherent lack of jurisdiction held that the courts do not favour such contentions and conducts of parties who participate in Arbitration proceedings without protest and fully avail of the Arbitration proceedings and then when they see that the Award has gone against them come forward to challenge the whole of the Arbitration proceedings as without jurisdiction, on the ground of a known disability of a party. The Supreme Court cited with approval, a passage from Russel on the Law of Arbitration, 15th Edition at page 295 which reads as follows :
'Although a party may by reason of some disability be legally incapable of submitting matters to Arbitration that fact is not one that can be raised as a ground for disputing the Award by other parties to a reference who were aware of the disability. If one of the parties is incapable the objection should be taken in the submission. A party will not be permitted to lie by and join in the submission and then if it suits its purpose attack the Award on that ground. The presumption in the absence of proof to the contrary will be that the party complaining was aware of the disability when the submission was made.'
The Supreme Court held that acquiescence defeats the rights of an Applicant at a latter stage and that acquiescence can be shown even by conduct. The Supreme Court held that even if the initial Order was not passed by consent, by participation and acquiescence a party can be precluded from challenging it in the future.
32. This principle has been re-affirmed by the Supreme Court in the case of M/s. Neelkantan and Bros. v. Superintending Engineer, National Highways, Salem and others, reported in : AIR1988SC2045 . This again was a case where there was a Contract with the Government. In pursuance of the Arbitration clause the disputes were referred to the Arbitration of the then Superintending Engineer by name Thiru Mohan. The said Superintending Engineer proceeded with the Arbitration for some time. However, before the Arbitration proceedings were completed, he was transferred and one Mr. J.R. Cornelius became the Superintending Engineer. The said Mr. Cornelius continued as Arbitrator and passed the Award. The Award was challenged on the ground that the said Mr. Cornelius had no authority to arbitrate as there was no Agreement to refer the dispute to him and that there was no fresh Arbitration agreement. It was also contended that therefore, this violates the principles of natural justice. The Supreme Court held that if parties to a reference agreed either beforehand to the method of appointment or afterwards acquiesced in the appointment made, with full knowledge of all the circumstances, they will be precluded from objecting to such an appointment. The Supreme Court held that attending and taking part in the proceedings, with full knowledge of relevant fact will amount to acquiescence.
33. In this case there is a valid Arbitration Agreement and a valid Contract. The challenge is merely to the mode of appointment of the Arbitrator Mr. Bansal. This is not a question which goes to the root of the matter, and does not amount to an inherent lack of jurisdiction. This was a mere irregularities which it was open for the petitioners to cure either expressly or impliedly. The acquiescence in the appointment precludes petitioners from challenging it. By appearing before the Arbitrator, contesting on merit, making submissions the petitioners have acquiesces in the appointment of the Arbitrators. Not only that the petitioners have thereafter filed an Appeal before the Board. In my view on ground of acquiescence, the petitioners are precluded from raising this challenge at this stage.
34. Mr. Chagla lastly submitted that the claim made by the respondents was against 'V. Sanbra (N.V. Bunge)'. He submitted that the Award of the Arbitrator is also against 'V. Sanbra (N.V. Bunge)'. He submitted that there is no such entity in existence. He submitted that for this reason also the Award was void. Mr. Chagla submitted that in the Appeal filed by the petitioners, the Board by their Order directed the petitioners to pay the amount set out in the Award. He submitted that in the Appeal filed by the petitioners, the Board could not have gone beyond the Award and in effect passed an Award against the petitioners. I see no substance in this submission. It is apparent that in the title to the statement of claim there is typographical error. The respondents have in fact said so in their written submissions. At all stages, the petitioners knew that the claim was against them. They have appeared before the Arbitrators on the basis that the claim is against them. They have defended the claim on merit. The Award repeats the typographical error in the title. That it was typographical error is clear from the fact that the petitioners filed an Appeal against the Award. If the Award was not against the petitioners, how could the petitioners have filed the Appeal. All that the Board has done is that it is corrected the typographical error. The Board was entitled to do so.
35. Under these circumstances, all the grounds of challenge to the Award fail. The petition stands dismissed with costs.
Mr. Tulzapurkar applies for a decree in terms of the Award under Rule 787(5) of the amended High Court Rules. He applies that the Court provide in the Decree the date from which interest is to be made payable.
Mr. Desai opposes. He submits that an important question of law is involved and that the Court should not pass a decree at this stage.
I am unable to accept Mr. Desai's submission. The whole purpose of the Amended Rule is to prevent multiplicity of proceedings and unnecessary delay. If a decree is not passed in terms of the Award, then separate proceedings for a Decree in terms of Award would have to be filed, there would be separate Appeals, one in these proceedings, another in those and there would be unnecessary delay. Accordingly, there will be a decree in terms of the Award of the Appeal Board dated 29th March 1985. The interest payable under the Award to run from 29th March 1985 till payment.
Mr. Desai applies for stay of the execution of the Decree for a period of 8 weeks from today.
Mr. Tulzapurkar opposes on the ground that this being a money decree, the Court cannot grant a stay unless the petitioners are made to deposit the entire amount or give security.
In my view, the question whether petitioners should be made to deposit the entire amount, can be decided in the Appeal which the petitioners propose to file. In my view, petitioners must be given a reasonable time to file an Appeal. Accordingly, there will be a stay of execution for a period of eight weeks from today.