Full Judgment
1. An arbitrator entering upon a reference under an arbitration agreement by virtue of his holding an office in connection with the affairs of the State of Jammu and Kashmir cannot make an award when he ceased to hold the office on account of his having demitted the office having retired from service is the main argument put across by the learned Addl. Advocate General who is appearing for the State functionaries. The other questions which have arisen are whether an award could be given vis-a-vis a matter regarding which any of the parties approached a civil Court would have failed on account of bar limitation. Misconduct has also been attributed to the arbitrator. The basis for this is that the arbitrator did not permit the appellants to have the assistance of a legal practitioner. In addition to the jurisdictional points referred to above argument vis-a-vis rate of interest which could be awarded when proceedings are taken under the Arbitration Act is also being adverted to by both the sides.
2. For the decision of the above questions, the factual foundation laid by both the sides be noticed.
Himalayan Construction Company (hereinafter referred to as the respondent Construction Company) expressed its willingness to carry on some civil constructions works regarding which earlier an offer was made by the State authorities. An agreementwas entered into. This happened in the year 1973. The work was completed in the year 1976. As per the respondent Construction Company, the State Authorities did not make payment in terms of the agreement. Differences and disputes having arisen, an application seeking appointment of an arbitrator was filed in this Court. This was so filed under Section 20 of the Arbitration Act. This Application being Arbitration Application No. 118/83 came to be decided on 14th of November 1984. The concluding part of the order passed by this Court reads as under :
'In accordance with Clause 31 of the agreement read with Clause 20 of the conditions any dispute between the contractor and the Executive Engineer, respondent No. 1, shall have to be referred to the arbitration of Chief Engineer, Irrigation and Flood Control Department, Jammu. The dispute between the parties is, therefore, required to be referred to the named arbitrator for adjudication to whom the dispute between the parties is referred with a direction to adjudicate upon the same and submit his award within the statutory period of four months. The respondent shall submit the original agreement executed between the parties before the arbitrator.'
3. In pursuance of the aforementioned order passed by this Court one Sh. D.K. Nargotra, the then Chief Engineer, Rawi Tawi Irrigation Complex, Jammu entered upon the reference. He submitted his award. An application was preferred in this Court for making the award a Rule of the Court. This application was contested by the appellant State authorities. The matter was placed before a learned Single Judge of this Court. Two issues came to be framed. These are as under :
(i) Whether the arbitrator has misconducted himself and the proceedings if so, with what effect? OPR
(ii) Whether the petitioners are entitled to interest at the rate of 24% from the date of completion of work? OPP
4. After taking note of the submission made by both the sides, a learned Single Judge of this Court came to the conclusion that there exists no material for recording a finding that there was any misconduct on the part of arbitrator. Issue No. 1 was decided accordingly. The award was thus maderule of the Court. Relying upon the decision of the Supreme Court of India in case reported as Executive Engineer Irrigation Galimala v. Abhaduta Jena, AIR 1988 SC 1520 issue No. 2 was decided against the respondent Construction Company. It was held that the arbitrator was not competent to direct payment of interest pendente-lite. It is this order passed by the learned Single Judge which is the subject matter of challenge in this appeal preferred by the Executive Engineer. The respondent Construction Company has also filed a cross appeal. This is with regard to the directions contained in the order by which the interest has been declined.
5. The appeal and cross appeals are being dealt with in this common order.
6. The learned counsel for appellant State functionaries submits that the award could not be made rule of the Court. As per the counsel the arbitrator came to be appointed by virtue of his office, he could not make the award when the arbitrator ceased to hold the office on his demitting the office on his retirement. It is urged that when the arbitrator ceased to hold the office by virtue of which he entered upon the reference, then he lost the authority to act as arbitrator also. It is accordingly stressed that the award is void-ab initio and could not be made rule of the Court. The other argument raised is that the construction company had completed the civil construction works in the year 1976. It is accordingly urged that a claim which was barred by limitation could not be adjudicated upon. As the arbitrator has allowed relief on a time barred claim, therefore, this would again be a matter covered by the term 'misconduct'. It is further urged that a prayer was made to the arbitrator to enable the State Officials to engage a counsel. This prayer was declined without any valid cause. This as per the State counsel would again fall within the parameters of the term 'misconduct'. Lastly it is urged that the interest has been rightly disallowed by the learned Single Judge of this Court. It has been pointed out that Interest Act is not applicable to the State of Jammu and Kashmir and, therefore, neither interest pendente lite nor earlier or thereafter could be allowed.
7. The learned counsel for the respondent Construction Company submits that factually the arbitrator was appointed byname and not by virtue of his holding the particular office. For this reliance has been placed on an order passed by this Court on 3rd of January 1985 in CMP No. 335/1984. This CMP was filed in arbitration application No. 125/83. This order does make mention of the fact that the parties to that litigation did agree to the appointment of Sh. D.K. Nargotra, Chief Engineer Ravi Tawi Irrigation Complex Jammu as an arbitrator. It is further urged that as the statutory period for making the award had expired, applications were preferred for getting extension of this period. Civil Miscellaneous petitions were preferred. These were filed in all the petitions. These bear Nos. 46. 47, 48, 49, 50, 51. 52, 53, 54, 55 and 56 of 1987. These applications were preferred by Sh. D. K. Nargotra, Chief Engineer Ravi Tawi Irrigation Complex Jammu, who was acting as an arbitrator. These were allowed. Four months time was allowed for filing the award. It is accordingly suggested that the parties were aware of the fact that Sh. D.K. Nargotra, Chief Engineer Ravi Tawi Irrigation Complex Jammu, stood appointed as Arbitrator. As nobody raised objections to the extension of time for filing the award, therefore, Sh. Nargotra should be deemed to have been appointed as arbitrator by name. The mere fact that he retired or ceased to be a State employee would not render the award given by him a nullity.
8. With a view to contend that the arbitrator had been appointed by name and not by office, reliance has also been placed on an earlier decision given by this Court. This decision is noticed by the learned single Judge in the order under appeal. In that case similar objection was raised. This was repelled. It is also urged that the decision so given by the Learned Single Judge in the earlier case stands affirmed by this Court also and by the Supreme Court of India and therefore, the State cannot be permitted to make any grievance on this score. It is urged that as the State did not object to the extension of time when an order came to be passed by this Court on 9-1-1987, therefore, the State should be deemed to have waived its objection. At this stage it be noticed that the State counsel has urged that consent could be given only by the Advocate General and not by a counsel who was not so authorised.
9. With regard to the plea of limitation, it is urged that this is a question which was notraised before the arbitrator. It is urged that this plea should have been raised at the time when application under Section 20 of the Arbitration Act came to be decided and the arbitrator came to be appointed by this Court. It is also urged that this is plea which is a mixed question of law and fact and cannot be looked into at this stage. It is thus urged that there is no error apparent on the face of the record. The argument advanced is that it is only an error of law apparent on the face of record which can be examined for coming to a conclusion that the arbitrator has misconducted. Reliance has been placed on a decision reported as Manjit Johl v. Dewan Modern Breweries Ltd., AIR 1994 J & K 56. Again on the basis of a Full Bench decision of this Court reported as Mekha Enterprises v. State of J & K, AIR 1995 J & K 16, it is urged that limitation Act is not applicable to proceedings taken under the Arbitration Act. With regard to the assertion of the State Counsel that due to non grant of opportunity to have the assistance of a legal practitioner, the award is vitiated, it is urged that as prayer was not made in this regard before the arbitrator, therefore, this aspect of the matter cannot be gone into now. It is also urged that authorised representative of the State appeared before the arbitrator. He addressed arguments before the arbitrator. As no written request was made for engagement of a counsel, therefore, it cannot be said that the arbitrator has committed an act which would fall within the definition of the term 'misconduct'.
With regard to the grant of interest, it is urged that the view expressed by the Supreme Court of India in case reported as Executive Engineer Irrigation Galimala v. Abhaduta Jena, AIR 1988 SC 1520, no longer holds the field. It is urged that the later view is to the contrary. This view as noticed by this Court in the case reported as Manjit Johl v. Dewan Modern Breweries, AIR 1994 J & K 56, should be given effect to.
10. As noticed in the beginning of this judgment, the questions which arise for determination in this case are :
(i) whether an arbitrator who was to be appointed as Arbitrator by virtue of the office he was holding, act as an arbitrator when he was not holding that office and could such an arbitrator make an award when he ceased to hold that office?
(ii) whether any order was passed by thisCourt by which Sh. D. K. Nargotra was appointed arbitrator by name?
(iii) whether an order passed by this Court by which time for filing award was extended could given authority to the arbitrator to file the award when he ceased to hold the office by virtue of which he came to be initially appointed?
(iv) whether in the matter of giving consent the State can be bound by the consent given by a counsel other than the Advocate General of the State or an Advocate who is on the panel of Advocates maintained by the State?
(v) whether the plea that the claim which is barred by limitation and regarding which an award has been given can be examined by this Court in this appeal and whether such an error would be an error apparent on the face of record.
(vi) whether the State officials were denied assistance of a legal practitioner and whether this denial would constitute a 'misconduct'?
(vii) what would be the rate of interest?
11. At this stage, the order passed by this Court on 3-1-85 in the arbitration application No. 125/1983 be noticed :
'Entitled : M/s. Khem Raj Sharma and
Bros
vs.
Executive Engineer and Ors. Mr. H. L. Bhagotra. Mr. S. D. Sharma.
The learned counsel for the parties have agreed to the appointment of Sh. D. K. Nargotra Chief Engineer Ravi Tawi Irrigation Jammu Complex as an Arbitrator. He is as such appointed as an Arbitrator. He shall enter into reference and submit award within statutory period. The record be sent to the Arbitrator.
Sd/- Judge.'
Jammu. 3-1-1985.
12. The order by which the time was extended on for making the award be also noticed :
'Civil Misc. Petitions Nos: 46/87, 47/87, 48/87, 49/87, 50/70, 51/87, 52/87, 53/87, 54/87, 55/87 and 56/87. M/s. Himalaya Construction Co. v. Executive Engineer.M/s. Himalaya Construction Co. v. -do-M/s. Himalaya Construction Co. v. -do-M/s. Himalaya Construction Co. v. -do-Janak Raj Gupta v. -do-Ram Krishen v. -do-M/s Khem Ram Sharma v. -do-Ashok Suri v. -do-Rattan Chand v. -do-and Bhola Ram v. -do-
Mr. H. L. Bhagotra,
This application has been filed by Sh. D. K. Nargotra who has been appointed Arbitrator in the above noted case for extension of time for submitting the award. As prayed for four months further time is granted for filing the award and the intervening delay, if any, is also condoned.
Sd/- Hon'ble Judge
Jammu:
February 9, 1987
No :
Dated :
Copy of the above forwarded to
Sh. D. K. Nargotra Arbitrator 43 GandhiNagar Jammu for information and necessary action.
(D. R. Sharma)
Deputy Registrar.'
The clause dealing with the limitation is Clause 21 in the agreement. This may also be noticed;
'Clause 21 of the agreement reproduced as under :--
For any claim whatsoever when the contractor may have to prefer he should do so within one month or the occurrence of the event or events which or for given rise to that claim. Failure to do so by the Contractor (sic) was devise him from the right of alleging any claim and the department will not entertain any such claim later on.'
12-A. The first question vis-a-vis the arbitrator having been appointed by office and he having rendered an award after he ceased to be State employee having retired be gone into.
13. The fact that the arbitrator came to be appointed by office is apparent when order passed on the application seeking appointment of arbitrator is perused. The operativeportion of the order passed by this Court has already been reproduced above. This order clearly makes mention of the fact that the dispute shall have to be referred to the arbitration of the 'Chief Engineer Irrigation and Flood Control Jammu'. Name of Sh. D. K. Nargotra has not been mentioned. This was done in terms of the stipulation contained in Clauses 29 and 31 of the arbitration agreement. Thus, it is apparent, that the reference in question was made to the officer who was holding the office of 'Chief Engineer Irrigation and Flood Control Jammu. Sh. D. K. Nargotra was never in picture at that particular point of time. The counsel for the construction Company represents that post of the 'Chief Engineer, Irrigation and Flood Control Jammu', had become non-existent, therefore, the reference came to be made to Sh. Nargotra who was at that particular point of time holding the office of Ravi Tawi Irrigation Complex Jammu'. It is further pointed out that Sh. Nargotras' appointment as arbitrator came to be extended on 3-1-1985. This fact is being highlighted with a view to stress that Sh. Nargotra came to be appointed by name. This order exists in arbitration application No: 125/83 only. The parties to this are Khem Raj and Ors v. Executive Engineer and Anr. Such order does not exist on the file of this case or any other case. It is, however, pointed out that when application for extension of time was made, then this Court on 9-1-1987 extended the time and noted that Shri Nargotra had been appointed as arbitrator. Applications seeking extension of time were filed in all the cases.
14. So far as factual position is concerned, the initial order for appointment of an arbitrator came to be passed on 14th November 1984. This makes it apparent that the appointment as arbitrator is being made of that person who was holding the office of 'Chief Engineer Flood Control Department Jammu'. Sh. D. K. Nargotra's name was not mentioned. He was even not holding this office. He was on the other hand holding the office of the 'Chief Engineer Ravi Tawi Irrigation Complex Jammu'. Under what circumstances he came to enter upon the reference is not apparent from the file. Even if it be presumed that he was holding the office of 'Chief Engineer Ravi Tawi Complex Jammu' and he entered upon the reference by virtue of this office, the fact remains that he retired by the time he gave an award. Ifthis be the situation, then the learned counsel appearing for the State is right in his submission that the arbitrator who was initially appointed by office cannot continue to perform the duties and act as arbitrator. In this regard, reliance has been rightly placed on a decision reported as Union of India v. Prahbat Kumar, AIR 1994 SC 649. In the aforementioned case, a Government servant was appointed as arbitrator. He retired. An application was filed for extension of time for filing the award. Time was extended. This happened after the arbitrator had retired from the Government service. A three member Bench of the Supreme Court of India in the above case observed in categoric terms that the arbitrator who had been appointed in his capacity as Government servant ceased to be arbitrator on his retirement from Government service. It was held in no uncertain terms that such an arbitrator cannot give any award. The order passed by the Court by which time was extended was set aside. Directions were however, given to appoint a new arbitrator. Paragraphs 5 and 7 are relevant and are noticed :--
5. 'We are of the view that the Arbitrator who had been appointed by the Government ceased to be the Arbitrator on his retirement from Government service on 17th September 1990. In terms of Condition 70, the Union of India is competent to appoint a new Arbitrator. Accordingly we set aside the impugned orders of the High Court and the Courts below :
7. The appeal is allowed in the above terms. We make no order as to costs.'
15. In view of the above authoritative pronouncements of the Supreme Court of India the conclusion is inescapable that an arbitrator who was appointed by office ceased to have jurisdiction to give an award after his retirement.
16. The learned counsel for the construction Company has placed reliance on a decision reported as Bhagwandas Goverdhandas Kedia v. Girdharilal Parshottamdas and Co., AIR 1966 SC 543. The above decision was given by a two members Bench. It is earlier in point of time, therefore, the later decision given in the case Union of India v. Prahbat Kumar & Bros., AIR 1994 SC 649 which decision have been given by a Bench of three members would hold the field.
17. Before parting with this aspect of the matter it would be apt to notice another argument of the counsel for the respondent Construction Company. The counsel urged that this aspect of the matter was pointedly raised before the learned Single Judge. The learned Single Judge expressed an opinion that this aspect of the matter has already been dealt with in another reference bearing Nos. 498/499 of 1987. In the aforementioned cases, the issue was as to whether Sh. D. K. Nargotra could be appointed by name when arbitration had to be done by the Chief Engineer Irrigation and Flood Control Jammu. The question as to whether the arbitrator who had retired could make the award was not the subject matter of issue. Even otherwise that decision would be contrary to the ratio of decision in Union of India v. Prahbat Kumar & Bros., AIR 1994 SC 649. On this point another argument has also been raised on behalf of respondent Construction Company. This is to the effect that the decision in award No. 498/1987 has been affirmed by the Division Bench of this Court and has also been approved by the Supreme Court of India. This argument cannot be accepted. The argument which has been put across in this case was never considered, and therefore, that decision cannot support the proposition that an award given by an arbitrator when he was appointed by office and when he retires, is a valid award. It is accordingly held that the arbitrator ceased to have jurisdiction in the matter and he could not render a valid award.
18. The question vis-a-vis limitation be now examined.
19. The counsel for the State submits that this is a question of law. He submits that if claim is barred by limitation then notwithstanding the fact that bar of limitation has not been set up as a defence, this plea can be permitted to be raised at any stage. Reliance is being placed on Section 3 of the Limitation Act. It is accordingly urged that the claim preferred by the Construction Company in the year 1983 when the construction work was completed in the year 1977 is barred by law of limitation.
20. A perusal of the application preferred under Section 20 of the Arbitration Act seeking appointment of an arbitrator indicates that the agreement was executed in the year 1973. The work was completed as per therespondent construction Company in the year 1977. Therefore, the question arises as to whether the claim made in the year 1983 is barred by limitation or not. The question as to whether provisions of Limitation Act would be attracted to proceedings taken under the Arbitration Act was gone into by their Lordships of the Privy Council in the case reported as . In this case their Lordships of the Privy Council held that in a reference to the arbitration it is an implied term of the contract that the arbitrators must decide the dispute according to the existing law of contract and that every defence which would have been open in a Court of law including limitation can be pleaded unless that defence has been excluded by agreement of the parties.
21. The arbitration in Ram Dutts' case (supra) was an arbitration arising out of a Mercantile Dispute. The proceedings which culminated in the appeal before their Lordships of the Privy Council were started under the Arbitration Act of 1899. An award made by one Mr. Singhleton as sole arbitrator was set aside in a suit filed for that purpose by the High Court at Calcutta and that decision was affirmed in appeal to the Privy Council. Thereafter, F.D. Sassoon and Company demanded that Merrs. Ramdutt Ramkissendass should appoint another arbitrator. The latter failed to appoint an arbitrator and the Jute Association of Calcutta nominated an arbitrator to act with the arbitrator appointed by F.D. Sassoon and Company. Merrs. Ramdutt Ramkissendas then applied to the High Court at Calcutta for an order reviewing the submissions made to the arbitrator of the arbitrator nominated by F.D. Sassoon and Company and then arbitrator nominated by Jute Association and the question which fell to be determined was whether in entertaining the claim made before the new Board of Arbitrators the time spent in the previous infructuous arbitration proceedings had to be excluded. The High Court at Calcutta regarded the new arbitration proceedings as a continuation of the previous arbitration proceedings before Mr. Singleton. The Privy Council did not agree with that view. Their Lordships however, held that even though new arbitration proceedings must be regarded as commenced when the claim was made by F.D. Sassoon and Company afresh the time spent before Mr. Singleton and in the proceedings beforethe Calcutta High Court and their Lordships of the Privy Council was liable to be excluded. They observed :
'If the period in question during which the respondents (F.D. Sassoon and Co.'s) claim was held up because of the proceedings instituted for the purpose of setting aside the first award and in obtaining final judgment on that question is excluded from the period of limitation, there can be no doubt that the respondents here were within the period prescribed.'
22. In so deciding their Lordships relied upon the analogy of Section 14 of the Indian Limitation Act and the principle of the judgment in Re-Astley and Tyldesley Coal and Suit Co., (1899) 68 LJQB 252 in which a Division Bench consisting of Bruce and Ridley JJ. held that :
'A submission to arbitration does not per se exclude the right of either party to raise the defence of the Statute of Limitation, but if it be intended to exclude such a defence an express term to that effect must be imported into the agreement of submission.'
23. It is clear from the judgment in Ramkissendas's case, (AIR 1929 PC 103) and also in Astley & Tyldesley Coal and Salt Co's case (1899 (68) LJQB 252) that in a mercantile reference it is an implied term of the contract of reference that the arbitrator must decide the dispute consistently with the law of limitation.
24. There is a distinction between arbitration under the Arbitration Act and Arbitration under a statute. The provisions of Limitation Act would apply to arbitration conducted under the Arbitration Act but may not apply to arbitrations which have been termed as arbitration under a specified statute such as Co-operative Societies Act etc. Thus in Dalpat Singh v. Registrar Cooperative Societies, Punjab. (1962) 64 Pun LR 414 it was observed 'the provisions of Indian Limitation Act' do not apply to arbitration other than those conducted under the Indian Arbitration Act. Reliance was placed on a Division Bench authority of the Bombay High Court in Savitra Khandu Board v. Nagar Agri Sale and Purchase Co-operative Society Ltd., Ahmednagar, AIR 1957 Bombay 178. The fact that the provisions of Limitation Act would apply to arbitration proceedings is again apparent from the decision of the Orissa High Court reported as Executive Engineer R.E. Division. Dhenkanalv. J.C. Budharaj, AIR 1981 Orissa 172. After making an observation that the provisions of Limitation Act would apply, on facts it was observed that the claim was within limitation. In Mury Exportation v. D. Khaitan, AIR 1956 Cal 644 the view expressed was that the limitation for a claim is judged by the point of time when the claim is instituted and not by the date when the Court itself actually takes up the claim for disposal. Thus the provisions of Limitation Act were held to be attracted to arbitration proceedings. A decision of Punjab High Court reported as Brahm Nath Datt v. Dhani Ram S/o L. Kirpa Ram, AIR 1956 Punjab 125 is again a clear pointer to the fact that the provisions of the Arbitration Act would be attracted and the question as to whether the claim is barred is a dispute which is to be decided by the arbitrator.
The learned counsel appearing for the State on the basis of a decision reported as The Kerala State Electricity Board, Trivendrum v. P. Kunhaliumm, AIR 1977 SC 282 urged that the provisions of Limitation Act would be applicable when applications are preferred under a special Act. It is urged that this decision was noticed and approved in a later decision reported as Indersingh Reshi' case, AIR 1988 SC 1007 and S. Rajan v. State of Kerala, AIR 1992 SC 1918. It is urged that in view of the above decisions the provisions of Limitation Act would be attracted to the facts of this case. It is thus urged that the decision reported as Megha Enterprises v. State, AIR 1995 J&K; 16 would not be attracted to the facts of this case.
25. It be seen that a Full Bench of this Court in Megha Enterprises case (supra) was merely dealing with the question as to whether the provisions of Article 181 would be attracted to an application preferred under Section 20 of the Arbitration Act. It was observed that Article 181 would be attracted only to a case when an application preferred under the Code of Civil Procedure and not when an application is preferred under a special Act.
The Full Bench judgment is an authority for the proposition that the provisions of Limitation Act are not attracted at all vis-avis applications preferred under Section 20 of the Arbitration Act. In any case, in view of the conclusion arrived at vis-a-vis the argument that the Arbitrator ceased to havejurisdiction to make the award on account of his having ceased to be a Government employee. Therefore, the question as to whether a time barred claim could be entertained or not, is not being commented upon any more. No final opinion is being expressed on this aspect of the matter.
26. Another argument which has been put across by the learned counsel appearing for the construction Company is that an arbitrator can be said to have misconducted in the proceedings if it is found that he has committed an error which is apparent on the face of record. If evidence is required to be gone into then it is urged that the error would be an error not be apparent on the face of record. For this reliance is being placed on a Judgment of the Supreme Court reported as N. Chellapan v. Secretary, Kerala State Electricity Board. AIR 1975 SC 230. It is urged that it is only when an arbitrator commits an error either of law or fact and where such error is apparent on the face of the record only then the Court can refuse to make the award rule of the Court. It is urged that even where the arbitrator wrongly held the claim to be within time is again a matter which was within the domain of the arbitrator and if he has given bona fide decision then this is not to be appreciated in this appeal. Reliance for this is being placed on a decision reported as State of Bihar v. Hanuman Mal Jain, (1997) 11 SCC 40. Placing reliance on a decision reported as Union of India v. V.P. Parukutty (Smt.) (1997) 2 SCC 252 : (AIR 1997 SC 1903), it is urged that where an arbitrator fails to answer any question of law, then that cannot be made a ground for not making the award rule of the Court. As a matter of fact, what is urged is that once an award is given then it is to be made rule of the Court irrespective of the view expressed by the arbitrator. Reliance is placed on the decision reported as Kapoor Nilokheri Co-op. Dairy Farm Society Ltd. v. Union of India, AIR 1973 SC 1338. The fact that an arbitrator is not bound to pass a speaking award and the fact that he can give a lump sum figure is also being adverted to with a view to project that when in such event, the question of there being any error does not arise, the same parameters should be applied in this case. What is urged is that if a non-speaking award is immune from challenge then the mere fact that arbitrator has given award would not make the same liable to challenge. Reliancefor this has been placed on a judgment of the Supreme Court reported as Firm Madanlal Roshanlal Mahajan v. Hukumchand Mills Ltd., Indore, AIR 1967 SC 1030. The argument that unless there is an error apparent on the face of the award the award cannot be set aside be also examined. The provision of law with regard to the scope of enquiry and limit of powers of the Court in dealing with an application for setting aside an award be summarised as under :
(i) an award being a decision of an arbitrator whether a lawyer or a layman chosen by the parties and entrusted with power to decide a dispute submitted to him is ordinarily not liable to be challenged on the ground it is erroneous.
(ii) the award of an arbitrator is ordinarily final and conclusive unless a contrary intention is disclosed by the agreement.
(iii) the civil Courts which are entrusted with powers to facilitate arbitration and to effectuate the award are not to exercise appellate powers over the decision, wrong or right the decision is binding if it be reached finally after giving adequate opportunity to the parties to place their grievance in the manner provided by the arbitration agreement.
(iv) the Court is to examine the award with a desire to support it rather than to destroy it by calling it illegal.
(v) an award can be set aside when there is proven misconduct on the part of the arbitrator.
(vi) an award can be set aside on the ground of error on the face thereof.
27. The word 'misconduct' when applied to the proceedings of arbitration does not necessarily imply moral turpitude. The term is used in the sense of breach or neglect of duties and responsibilities as devolve on arbitrators acting judicially and as the Courts of justice except from them before allowing finality to their award. Any mishandling of arbitration proceedings would be misconduct in a sense it amounts to legal misconduct which may arise out of some honest though erroneous breach and neglect of duty.
28. The argument that the arbitrator did not give any opportunity for engaging a counsel, therefore, he had misconducted be examined. We are of the opinion that this is not a valid ground for refusing the prayer formaking the award a Rule of the Court. This is because no request was made to the arbitrator for appointment of a counsel. The request was made after the arguments were over. The officer who was conducting the proceeding before the arbitrator stated in categoric terms that he was fully aware of the factual and legal position. In this view of the matter merely because the request if any made for appointment of arbitrator was declined cannot be made a ground for setting aside the award.
29. So far as the question of interest is concerned the legal position is as under .
30. With regard to the power of arbitrator to allow interest, the position is well settled. Whenever any claim is referred to an arbitrator it is to include a claim for interest as well. This aspect of the matter was expressly dealt with by the Supreme Court of India in the Case reported as Secretary, Irrigation Department v. G. C. Roy, AIR 1992 SC 732. In para 14 of the judgment, a reference is made to a decision given in Edwards v. The Great Western Railway Co., (1851) 138 ER 603. In the above case, the plaintiffs plea was that he was entitled to such interest whereas the defendant-Company disputed the power of the arbitrator to grant interest in this regard. The observations made by the Supreme Court in G. C. Roy's case AIR 1992 SC 732 (supra) are relevant and are fully applicable to the facts of this case and may be noticed thus;--
'The question with which we are faced has been considered by the Indian and English Courts in detail. The decisions of the English Courts have been followed by the Indian Courts. It is, therefore, necessary to refer to some of the English decisions to examine how this question has been dealt with by the Courts of England. In Edwards v. The Great Western Railway Company, (1851) 138 ER 603 the question raised before the Court was 'whether the arbitrator is empowered to award interest on the amount awarded by him if he thinks such a course proper. The plaintiffs case was that he was entitled to such interest whereas the defendant-Company disputed the power of the arbitrator. The Company's case was that inasmuch as the notice of action did not demand interest, the plaintiff was not entitled to claim interest. This argument was repelled by Jervis, C.J. In the following words :
'There are two answers to this; one is that there is no plea of want of notice of action butonly a plea of never indebted 'by statute', the effect of which is altered by Sir F. Pollock's Act 5 and 6 Vict. c 97. Section 3. The defendants had, therefore, no right to rely upon the general plea; they are bound to plead especially the want of notice of action. A further answer would be that this is a submission not only of the action but of all matters in difference whether demanded by the notice of action or not. If the arbitrator could give it, he might give it in that way, notwithstanding the want of claim of interest in the notice.'
31. It is relevant to notice that the Court clearly held that where a money claim is referred to an arbitrator, it would include the claim for interest as well. This is how it has been understood in subsequent decisions as we shall presently notice.
32. Even in the face of above observations, the argument advanced on behalf of the respondent-Slate was that the Supreme Court was not dealing strictly with the question of implied reference vis-a-vis interest. We do not agree with this argument of the counsel for the respondent-State. It may be seen that the decision given in the Great Western Railway Co. (1851) 138 ER 603 (supra) was followed by the Calcutta High Court in Bhowanidas Ramgobind v. Harsukhdas, AIR 1924 Cal 524. This is noticed by the Supreme Court in para 26 at page 743 : (of AIR 1992 SC 732). The relevant portion reads as under :--
The legal position is the same in India. In Bhowanidas Ramgobind v. Harsukhdas Balkishandas, AIR 1924 Cal 524, the Division Bench of the Calcutta High Court consisting of Rankin and Mookerjee JJ, held that the arbitrators had authority to make a decree for interest after the date of the award and expressly approved the decision of the English cases -- Edwards v. Great Western Rly, (1851) 11 C 588 : 138 ER 603; Sherry v. Okes, (1835) 3 Dowl 349 (111 and W 119) and Beahan v. Wolfe, (1832) 1 A1 and Na 233. The same view has been expressed by this Court in the recent judgment in Firm Madanlala Roshanlala Mahajan v. Hukumchand Mills Ltd., Indore, AIR 1967 SC 1030. We are accordingly of the opinion that the arbitrator had authority to grant interest from the date of the award to the date of the decree of Mallick J. and Mr. Bindra is unable to make good his argument on this aspect of the case.'
33. After noticing the aforesaid position,the Supreme Court further observed at page 744 :
'The above passages show that the Court laid down two principles : (i) It is an implied term of the reference that the arbitrator will decide the dispute according to existing law and give such relief with regard to interest as a Court could give if it decides the dispute (ii) though in terms of Section 34 of the Code of Civil Procedure does not apply to arbitration proceedings, the principle of that Section will be applied by the arbitrator for awarding interest in cases where a Court of law in a suit having jurisdiction of the subject matter covered by Section 34 could grant a decree for interest. It is also relevant to notice that this decision refers with approval to both the English decisions in Edwards (1851) 138 ER 603 and Chandris case (1951) 1 KB 240. besides the decision of this Court in Firm Madanlala Roshanlala. It is noteworthy that the decision explains and distinguishes the decision in Thawardas, (AIR 1955 SC 468) on the same lines as was done in Firm Madanlala Roshanlala's case, AIR 1967 SC 1030.
34. Thus, it is apparent that the view expressed in the Great Western Railway Co. (1851) 138 ER 603 (supra) that claim regarding interest is an implied term of reference in a money claim which was followed by the Calcutta High Court was approved by the Supreme Court. Accordingly, there is no room for contending that in a reference there has to be an express reference vis-a-vis interest. This becomes further clear from para 45 of G.C. Roy's case, AIR 1992 SC 732 (supra). This is as under :
'Where the agreement between the parties does not prohibit grant of interest and where a party claims interest and that dispute (along with the claim for principal amount or independently) is referred to the arbitrator, he shall have the power to award interest pendente lite. This is for the reason that in such a case it must be presumed that interest was an implied term of the agreement between the parties and, therefore, when the parties refer all their disputes -- or refer the dispute as to interest as such -- to the arbitrator, he does not mean that in every case the arbitrator should necessarily award interest pendente lite. It is a matter within his discretion to be exercised in the light of all the facts and circumstances of the case, keeping the ends of justice in view.'
35. In view of the above, the respondent Construction Company would be entitled to interest for the period when the dispute remained pending before the arbitrator.
36. With regard to the payment of interest for pre-reference period, it be seen that there are some observations made by the Supreme Court in the case reported as Executive Engineer Irrigation Gall Mala's case AIR 1988 SC 1520, The above decision was overruled in so far as it deals with the question of speaking nature of award. The reasoning with regard to the power of the arbitrator to grant interest with regard to pre-reference period still holds good. This matter becomes apparent when the judgment given by the Supreme Court in the case of Jugalkishore v. Vijayendra, AIR 1993 SC 864, is perused, Mr. Justice B.P. Jeevan Reddy, who was member of the Constitution Bench of the Supreme Court which decided G.C. Roy's case AIR 1992 SC 732 (supra) made this position clear in paras 35 and 38. The relevant portions read as under ;
The decision in G.C. Roy, (1992) 1 SCC 508 : AIR 1992 SC 732 was concerned only with the power of arbitrator to award interest pendente lite. It was not concerned with his power to award interest for the pre-reference period.'
xx xx xx xx
'In the circumstances, it would not be correct to read the first of the five principles set out in para 43 as overruling Jena in so far as it dealt with the arbitrator a power to award interest for the pre-reference period.'
37. In this view of the matter, the decision in the case of Executive Engineer Irrigation Galimala's case. AIR 1988 SC 1520 (supra) would continue to hold the field with regard to the power of the arbitrator to grant interest relating to pre-reference period. See also State of Orissa v. B. N. Agarwala. AIR 1993 SC 2521, which again reiterates what was stated in Jugal Kishore's case (supra).
38. On the basis of the above judgment it can be said that interest is payable for pre-reference period also. It may however, be seen that the payment of interest for pre-reference period would be governed bv the Central Act, i.e. the Interest Act of 1978. That Act is not applicable to the State of Jammu and Kashmir with regard to the payment of interest same view has been expressed by the Division Bench of thisCourt in case reported as Smt. Manjit Johl v Dewan Modern Breweries. AIR 1994 J & K 56. If there is no argument to the contrary then interest is payable.
39. In view of the above position of law, we are of the opinion that the respondent Construction Company would be entitled to interest for a period the dispute was pending before the arbitrator and also thereafter. The rate of interest in this regard is being fixed at 9%. However, as the argument put across by the learned counsel for the State that the arbitrator had no jurisdiction to make the award is being accepted and, therefore, for all practical purposes the respondent-Construction Company would not be entitled to any monetary benefits,
40. In view of the above conclusion argument that the Advocate General never gave consent on behalf of the State and that the State is not bound is not being examined. It is concluded
(i) the arbitrator was appointed by office.
(ii) the arbitrator was to be a person who was holding office of Chief Engineer, Irrigation and Flood Control, Jammu.
(iii) Sh. D. K. Nargotra was not holding the above office. He was in fact holding the office of Ravi Tawi Irrigation Complex, Jammu.
(iv) that there is no order by which Sh. Nargotra was appointed as arbitrator by name.
(v) that the order passed on 3-1-85 was passed in the case of Khem Raj v. Executive Engineer. This order merely refers the fact that the time for making the award is being extended. This order does not go into the question as to whether Sh. Nargotra was holding the office by name or by designation. Therefore, mere mention of the name of Sh. D. K. Nargotra in the order dated 3-1-1985 would not advance the case of the respondent Construction Company.
(vi) the order dated 9-1-87 was an order passed vis-a-vis various arbitration applications. There exists no order which may indicate that Sh. Nargotra was ever appointed arbitrator by name in this case.
(vii) in view of the decision given by the Supreme Court reported as Union of India v. Prabhat Kumar & Bros, AIR 1994 SC 649 and arbitrator cannot give an award after his retirement from government service.
(viii) that the question that the Arbitrator could make an award vis-a-vis a claim which was barred by limitation, is being left open and no final opinion is being expressed on this matter.
(ix) that the prayer of the State that the award be not made rule of the Court on the ground that legal counsel was not permitted to be engaged is not tenable.
(x) that the interest would be payable in the manner indicated above.
In view of the findings recorded above the award is held to be totally without jurisdiction. The State appeal is allowed. Cross appeal vis-a-vis interest shall stand answered as per opinion expressed above. Otherwise cross appeal preferred by respondents to State appeal shall stand dismissed.
There is no order as to the costs.