STATE OF PUNJAB Vs. SURRINDER NATH GOEL

JUDGEMENT

(1.) THE Punjab Government on 12th of December, 1955 sold to Shri Surinder Nath Goel its pottery factory at Sonepat along with the manufactured goods by means of a registered sale-deed for a sum of Rs. 2,23,642/ -. A sum of Rs. 36,000/- was paid as advance money and Rs. 17,044/-on account of price of finished goods were to be paid within a period of six months from the date of the sale-deed; it is admitted that this sum was duly paid. The remaining amount of Rs. 1, 70, 598/- was agreed to be paid with interest at 51/4 per cent per annum computed from the date of the sale-deed in ten years by means of half-yearly equated instalments. The first instalment consisting of Rs. 10,8881/1/- (Principal and interest) was payable six months after the execution of the sale-deed and the subsequent half yearly instalments consisting of similar amount were payable on the expiry of further six months till the whole amount including interest was paid. In case of default of any instalment the Government was entitled to recover the entire balance in lump sum. There was also an arbitration clause in the sale-deed proving for reference to the arbitration of the Secretary to Punjab Government, Industries Department, in the event of any dispute or difference arising between the seller and the purchaser as to the true intent and meaning of the contract. Mr. Goel failed to pay any instalment and in the result the Government applied to the Secretary concerned to act as arbitrator, claiming Rs. 1,70, 598/- on account of principal and Rs. 29,151/14/- on account of interest, the total being Rs. 1,90,749/14/ -. A prayer for future interest and costs of the arbitration proceedings was also made. Mr. Goel resisted the claim, but the arbitrator rejected the purchaser's defence and upholding the government's claim gave an award for a sum of Rs. 1,90,749/14/- on 15th of November 1958 with future interest at 51/4 per cent per annum from the date of the application till the date of realization. The purchaser was also directed to pay the costs of the arbitration proceedings incurred by the Government.

(2.) IN February, 1959 the Government applied under sections 14 and 17 of the Indian arbitration Act for filing in Court the award and for making it a rule of the Court. After the award was filed Mr. Goel raised objections contending inter alia that the arbitrator had misconducted himself and the proceedings and that the reference could not be made to him in terms of the arbitration clause. The Government controverted the objections. Two issues were tried; one relating to the alleged misconduct on the part of the arbitrator and the other to the validity of the arbitration. In the present appeal we are only concerned with one of the objections covered by issue No. 1. According to this objection the arbitrator had exceeded the terms of the agreement of reference by awarding costs and future interest to the Government which, according to Mr. Goel, were not expressly included in the agreement embodied in the sale-deed. Following the decision in sewdutrai Narsaria v. Tata Sons, Ltd. , AIR 1921 Cal 576, the Court held that the provision of the award regarding future interest was invalid and could not be enforced.

(3.) IN so far as the question of making an order as to costs is concerned, Mr. Mehra has drawn out attention to para 8 of the First Schedule to the Arbitration Act (Act No. X of 1940), which contains "implied Conditions of Arbitration Agreements. " This para lays down that--