Case Note & Summary
The dispute arose between the Government of Bihar and M/s. Karam Chand Thapar & Brothers Ltd., a building contractor company, over bills for construction works at Ranchi, including aerodrome, hangarettes, buildings, and stores. The parties had entered into three contracts in 1942 and 1943. After completion, disputes over payments arose, and by an agreement dated February 6, 1948, the parties referred the disputes to arbitration of Col. A.W.S. Smith. The arbitrator made his award on June 4, 1948, and sent copies to the parties. The respondent company filed a petition under Sections 17 and 20 of the Arbitration Act, 1940, for a decree in terms of the award. The State of Bihar filed objections, and the petition was registered as Title Suit No. 53 of 1951. While the suit was pending, the arbitrator sent to the court a copy of the award duly signed by him for filing. Notices were issued under Section 14(2) of the Act, and the State filed an application to set aside the award. The respondent then did not press its earlier petition, and proceedings continued as the title suit. The Additional Subordinate Judge, Ranchi, passed a decree in terms of the award except for a part held to be in excess of the claim. The State appealed to the Patna High Court, which confirmed the decree and granted a certificate under Articles 132 and 133(1) of the Constitution. The State then appealed to the Supreme Court. The Supreme Court restricted the controversy to two questions: whether there was a valid agreement of reference to arbitration binding on the Government under Section 175(3) of the Government of India Act, 1935, and whether a decree could be passed on the unstamped copy of the award filed in court. The appellant contended that the agreement did not comply with Section 175(3) because it was not signed by a person authorised under the notification dated April 1, 1937; the agreement fell under item 12, not item 2, of that notification, so the Executive Engineer was not competent. The appellant further argued that the instrument before the court was a certified copy and could not be validated under Section 35 of the Indian Stamp Act, 1899. The respondent argued that the Executive Engineer had been specifically authorised by the Secretary and that the award sent to court was the original. The Supreme Court examined the correspondence and held that the Secretary had throughout acted on behalf of the Government and had authorised the Executive Engineer to execute the arbitration agreement; Section 175(3) does not prescribe any particular mode of conferring authority, and ad hoc authorisation is sufficient. On the stamp issue, the Court held that the award sent by the arbitrator to the court was the original and not a copy, and by applying Section 35 of the Indian Stamp Act, 1899, it was effectively validated. Accordingly, the Supreme Court dismissed the appeal and upheld the decree in terms of the award.
Headnote
A) Arbitration - Government Contracts - Authority to Execute - Government of India Act, 1935, Section 175(3) - The agreement for reference to arbitration was expressed to be made by the Governor and executed by Executive Engineer Y.K. Lall, who was specifically authorised by the Secretary to the Government. The court held that Section 175(3) does not prescribe any particular mode in which authority must be conferred, and ad hoc authorisation satisfies the requirements. Held that the arbitration agreement was validly executed and binding on the Government. (Paras not mentioned) B) Stamp Law - Validation of Unstamped Award - Indian Stamp Act, 1899, Section 35 - The arbitrator sent to court a copy of the award duly signed by him; the court held it was the original award, not a copy, and therefore could be validated by payment of requisite stamp duty under Section 35. Held that a decree could be passed on the validated award. (Paras not mentioned)
Issue of Consideration
Whether the agreement for reference to arbitration dated February 6, 1948 complied with Section 175(3) of the Government of India Act, 1935; whether a decree could be passed on the basis of the award when it was alleged to be an unstamped copy and whether Section 35 of the Indian Stamp Act, 1899 permitted validation.
Final Decision
Supreme Court dismissed the appeal, holding that the arbitration agreement was validly executed because ad hoc authorisation by Secretary satisfied Section 175(3); the award sent to court was the original and was effectively validated under Section 35 of the Indian Stamp Act, 1899; decree in terms of award upheld.
Law Points
- Section 175(3) of the Government of India Act
- 1935 does not prescribe any particular mode of conferring authority
- ad hoc authorisation suffices. An arbitrator sending signed original award to court is not a copy
- section 35 of Indian Stamp Act
- 1899 allows validation of unstamped original award by payment of duty
- decree can be passed on validated award.
