RESERVE BANK OF INDIA Vs. S S INVESTMENTS

JUDGEMENT

(1.) LEAVE to appeal granted.

(2.) THIS is an appeal against the judgment and order of the Madras High Court whereby it declared that arbitration awards given on 7th and 30/12/1989, by the 2nd and 3rd respondents respectively, in respect of a dispute between the appellant and the first respondent, were not valid; and that the subsequent proceedings conducted by the Umpire, the 4th respondent, were also not valid. The order of the Madras High Court remitted the matter to the 2nd and 3rd respondents to pass awards afresh in the light of its observations.

(3.) CLAUSE 36 of the agreement provided that disputes between the parties would be resolved by arbitration; if the parties could not agree upon a common arbitrator each would nominate an arbitrator, who would appoint an Umpire before entering upon the reference. Disputes having arisen the appellant appointed the 2nd respondent, who was a former Judge, and the Ist respondent appointed the 3rd respondent, who was a member of the Bar, as their arbitrators. The 2nd and 3rd respondents entered upon the reference on 19/04/1988, appointed the 4th respondent as Umpire and heard the appellant and the 1 st respondent. On 7/12/1989 the 2nd respondent made an award holding the I st respondent to be in breach of the agreement with the appellant and gave consequential directions. On 12/12/1989 the 3rd respondent wrote to the 2nd respondent stating that he could not subscribe to the award made by the 2nd respondent. He said that "for the purposes of the record 1 shall write a separate award... He added, "We could have sat together and discussed matters before writing the award even if our points of view or judgments therein varied or even if differed on any issues or point for determination." On 30/12/1989 the 3rd respondent made his award. He came to a conclusion quite different from that arrived at by the 2nd respondent. The last day upon which an award could have been made was 31/12/1989. On 3/04/1990 the appellant requested the 2nd and 3rd respondents to refer the matter to the 4th respondent as Umpire in view of the differing awards made by them. On 19/04/1990 the Ist respondent objected to the 4th respondent entering upon the reference. It stated that the 2nd respondent had made his award unilaterally and without any deliberations with the 3rd respondent. The 3rd respondent had made his award on 3 1/12/1989. Both the awards had been made without joint deliberations and, therefore, the arbitration proceedings were vitiated and there had to be a fresh arbitration. A copy of this letter was sent to the 4th respondent. On 19/11/1990 the 4th respondent entered upon the reference as Umpire. Counsel on behalf of the appellant presented his submissions to the 4th respondent in the presence of the Ist respondent's representatives and counsel on 22/12/1990 and 12th, 15th and 19/01/1991. On 2 6/01/1991, the arguments on behalf of the appellant were concluded and the matter was adjourned to 4/02/1991 to enable counsel for the 1st respondent to address the 4th respondent. In the meantime, on 17/01/1991, counsel for the appellant and the Ist respondent made a written submission to the 4th respondent which noted that his time to make the award expired on 18/01/1991 and that the proceedings before him were in progress. The submission stated, "The claimant and the respondent have no objection for extension of time by two months from 18/01/1991 for the Umpire to make the Award." On 3 1/01/1991 the Ist respondent filed the proceedings before the Madras High Court upon which the judgment and order'under appeal were passed. It prayed for declarations that the arbitration proceedings and awards passed therein 'were invalid and unenforceable, that the arbitration agreement was valid and unenforceable and had ceased to have effect and that the reference to the 4th respondent was without jurisdiction and invalid. The I st respondent also prayed that 4th respondent's authority as Umpire revoked and a permanent injunction be granted restraining the appellant and the 2nd, 3rd and 4th respondents from proceeding to pass any award or execute any award in respect of the reference before the 4th respondent.4. The High Court held that the case was "one in which admittedly there has been no joint deliberation or consultation between respondents 2 and 3 before the passing of the awards and, therefore, the awards passed by respondents 2 and 3 individually in the circumstances will become void." It also stated that it was not possible to hold that the Ist respondent had acquiesced in the competency of the reference to the 4th respondent. In the result, the High Court declared that the awards of the 2nd and 3rd respondents were invalid and that the entering upon the reference by the 4th respondent and the subsequent proceedings conducted by him were not valid. It remitted the matter to the 2nd and 3rd respondents to pass awards afresh in the light of the observations it had made.