Case Note & Summary
The dispute concerned the time limit for making an arbitral award under rule 3 of the First Schedule to the Arbitration Act, 1940. The appellant and respondents 1 and 2 were brothers who, along with their mother Rajwanti, referred a dispute regarding partition of two houses in Banaras to two arbitrators by a registered agreement dated August 17, 1948. The arbitrators entered on the reference within ten days by giving notice to parties and taking evidence. On July 25, 1949, Rajwanti died, and the arbitrators did not proceed further. More than a year later, on August 31, 1950, the appellant gave a notice to the arbitrators requesting them to proceed and give an award. The arbitrators made and registered an award on October 1, 1950. On January 23, 1951, the appellant applied under sections 14(2) and 17 of the Act to have the award filed and made a rule of court. The respondents objected that the award was not given within the time prescribed by law. The Civil Judge rejected the objections and made a decree in terms of the award. On appeal, the High Court held that the award was made after the expiry of the limitation period, set aside the decree, and dismissed the suit. The appellant then appealed to the Supreme Court by certificate. The core legal issue was whether rule 3 provided alternative periods such that a notice to act given after the arbitrators had entered on reference could start a fresh four-month period, making the award timely. The appellant argued that under the second alternative, the award was made within four months of the notice dated August 31, 1950. The respondents contended that the words 'entering on the reference' and 'to act' were synonymous, and once the arbitrators entered on the reference in August 1948, the period expired long before the award. The Supreme Court held that rule 3 is mandatory and imposes a duty on arbitrators to make their award within one of the three alternative periods. The words 'to act' are wider than 'enter on the reference'. A notice to act may be given before or after entry, but if given after the arbitrators had entered on reference, the four-month period does not automatically restart; a subsequent notice can only be effective if given within the initial four-month period from entry, allowing the arbitrators to make an award within four months from that notice. In the present case, the notice was given more than four months after entering on reference, so it could not revive the period; the arbitrators had become functus officio, and the award was invalid unless time was extended under Section 28, which was not done. The Court affirmed the High Court's decision, dismissing the appeal.
Headnote
A) Arbitration - Time for Award - Rule 3 First Schedule, Arbitration Act, 1940 - Mandatory Time Limits - Rule 3 prescribes three alternative periods: within four months of entering on reference, within four months of being called upon to act by notice in writing, or within extended time allowed by court; the rule is mandatory and imposes duty on arbitrators to make award expeditiously. Held that the rule is mandatory, and an award made beyond the prescribed period without extension under Section 28 is invalid and arbitrators become functus officio (Paras 1-8). B) Arbitration - Interpretation - 'Enter on Reference' and 'To Act' Distinguished - Arbitration Act, 1940, First Schedule r.3 - The words 'to act' are more comprehensive and of wider import than 'enter on the reference'; they are not synonymous; a notice to act may be given before or after arbitrators entered upon reference. Held that a notice requiring arbitrators to do anything in their capacity as arbitrators is a notice to act, and it can be given to force pace after entry (Paras 1-8). C) Arbitration - Computation of Period - Notice to Act After Entry - Arbitration Act, 1940, First Schedule r.3, Section 28 - If notice to act is given within four months after arbitrators entered upon reference, arbitrators can make award within four months from date of such notice; but if notice is given after expiry of that four-month period, it does not start a fresh period, and arbitrators become functus officio unless time extended by court under Section 28. Held that in present case notice was given more than four months after entry on reference, hence award was made without jurisdiction and invalid (Paras 1-8). D) Arbitration - Functus Officio and Extension - Arbitration Act, 1940, Section 28, First Schedule r.3 - Once the four-month period expires without extension, arbitrators lose authority; court may extend time even after award factually made, otherwise award is non est. Held that because no extension was obtained, the award could not be given effect to, and the High Court rightly set aside the decree (Paras 1-8).
Issue of Consideration
Whether under rule 3 of First Schedule to Arbitration Act, 1940, when arbitrators have entered on reference and a party subsequently gives notice to act, the four-month period for making award should be computed from date of entering on reference or from date of such notice; and whether award made after expiry of period without court extension is valid.
Final Decision
Supreme Court dismissed the appeal, affirming the High Court's decision that the award was made without jurisdiction after expiry of four months from entering on reference; arbitrators had become functus officio. The majority held that a notice to act given after expiry of four months from entering on reference could not extend the time; per Raghubar Dayal J., such subsequent notice was ineffective. No extension under Section 28 was obtained, so award was invalid.
Law Points
- Rule 3 of First Schedule to Arbitration Act
- 1940 mandates arbitrators to make award within four months after entering on reference or after being called upon to act by notice in writing
- or within extended time by court
- words 'to act' are wider than 'enter on the reference'
- notice to act can be given before or after entry but if given after expiry of four months from entry
- it cannot restart the period
- arbitrators become functus officio after expiry unless time extended under Section 28
- award made after expiry is non est unless extension obtained.
