Case Note & Summary
The dispute originated from an arbitration agreement dated September 9, 1955, between Dewan Singh and Champat Singh and others, referring their disputes to five arbitrators. The award was made on October 11, 1955, and the arbitrators stated they gave consideration to the dispute which was in their full knowledge. On November 1, 1955, Dewan Singh filed a suit for a decree in terms of the award. The defendants, including Champat Singh, filed written statements on February 3, 1956, challenging the award on grounds of arbitrator misconduct, undue influence, and that the subject matter could not be referred to arbitration under U.P. Act 1 of 1951. The trial court accepted the contention that the arbitrators were guilty of misconduct by deciding on personal knowledge and set aside the award. On appeal, the Civil Judge reversed, holding that the arbitration agreement empowered the arbitrators to decide on personal knowledge because the agreement stated the decision could be given 'in whatever manner' the panchas think. The appellate court also held that the objection was barred by time and that the subject matter could be arbitrated. The High Court, in revision, set aside the appellate court's order, holding that the arbitration agreement did not specifically empower the arbitrators to decide on personal knowledge, that the arbitrators' reliance on personal knowledge without notice to the parties vitiated the award, and that the objection was not barred by limitation because no notice of filing of the award was served on the defendants as required under Article 158 of the Limitation Act, 1908. The High Court also refrained from deciding whether the dispute fell under U.P. Act 1 of 1951. The appellant appealed to the Supreme Court by special leave. The Supreme Court held that Article 158 gives a party 30 days from the service of notice of filing of the award to apply to set it aside, and since no such notice was proved, the objection was within time. On the merits, the Court found that the arbitration agreement's phrase 'in whatever manner' did not empower the arbitrators to decide on personal knowledge. Arbitrators must act judicially and in accordance with natural justice; they must inform the parties of the nature of their personal knowledge so that any misconceptions could be corrected. The award explicitly showed that the panchas used their personal knowledge, and the arbitrators failed to inform the parties. Thus, the award was vitiated by legal misconduct. Regarding the revisional power under Section 115 CPC, the Court did not decide whether the High Court could correct the appellate court's interpretation, as it found the High Court's decision eminently just and declined to interfere under Article 136 of the Constitution. The appeal was dismissed with costs.
Headnote
A) Limitation - Setting Aside Award - Commencement of Limitation - Limitation Act, 1908, Article 158 - Suit filed for making award rule of court; defendants had notice of suit but no separate notice of filing of award served; limitation of 30 days to apply to set aside award runs from service of notice of filing, not from knowledge of suit; therefore, objection not barred by time. B) Arbitration - Misconduct of Arbitrator - Arbitrator's Reliance on Personal Knowledge - Arbitration Act, 1940 (General Principles) - Arbitrators must decide disputes judicially and in accordance with ordinary law; an arbitration agreement phrased 'in whatever manner' does not empower arbitrators to decide on personal knowledge; arbitrators must give parties opportunity to correct misconceptions; failure to do so vitiates award. C) Supreme Court - Special Leave Petition - Discretionary Power - Constitution of India, Article 136 - Where High Court's decision is eminently just, Supreme Court may decline to interfere under Article 136 even if High Court may have exceeded revisional jurisdiction under Section 115 CPC.
Issue of Consideration
Whether the High Court was justified in setting aside the arbitration award on grounds that the arbitrators committed legal misconduct by deciding on personal knowledge and whether the objection to the award was barred by limitation
Final Decision
Appeal dismissed; High Court's order setting aside award upheld; award vitiated by misconduct; objection not barred by limitation
Law Points
- Legal points not extracted
- Limitation Act
- 1908
- Article 158 - limitation for setting aside award commences from service of notice of filing of award
- not from mere knowledge of suit
- Arbitrators must decide disputes judicially
- in accordance with ordinary law unless arbitration agreement specifically empowers otherwise
- Phrase 'in whatever manner' in arbitration agreement does not authorize arbitrators to decide on personal knowledge
- Arbitrators must give parties opportunity to correct any misconceptions arising from personal knowledge
- Supreme Court may decline to interfere under Article 136 if High Court's decision is eminently just
