Full Judgment Text
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CASE NO.:
Appeal (civil) 1134 of 2007
PETITIONER:
Jatinder Nath
RESPONDENT:
M/s Chopra Land Developers Pvt. Ltd. & Anr
DATE OF JUDGMENT: 02/03/2007
BENCH:
S. H. Kapadia & B. Sudershan Reddy
JUDGMENT:
J U D G M E N T
Arising out of SLP (C) No. 11815/06
KAPADIA, J.
Leave granted.
This civil appeal arises from the final order dated 19.4.2006 passed by
the High Court of Punjab and Haryana at Chandigarh allowing Civil
Revision No. 4877/96.
The short question which arises for determination in this civil appeal
is whether the Additional Civil Judge (Senior Division), Faridabad was right
in dismissing the application filed under section 14 of the Arbitration Act,
1940 (for short "the Act") filed by M/s Chopra Land Developers Pvt. Ltd.
("the Developer") on the basis of Award dated 29.3.1994 given by the
Arbitrator in the above court for want of jurisdiction.
The Developer is a private limited company having its registered
office at Saket, New Delhi. On 16.3.1990 an Agreement was entered into by
the Developer with one Jatinder Nath (appellant herein). At that time, the
appellant was residing at Faridabad. Under the above agreement, the
Developer agreed to construct a housing complex on a plot bearing No.
G-13, Saket, New Delhi. Under the said Agreement, the Developer agreed to
finance the construction from its own resources. Clauses 11, 20 and 21 of the
said agreement read as follows:
"11. In case of any dispute arising between the parties
in this respect, the matter shall be referred to the
Sole Arbitrator for his valuable decision and his
decision shall be final and binding on both the
parties.
20. That in case of any dispute arising between the
parties in respect of these presents, the same shall
be referred for arbitration to the sole Arbitrator.
Shri Damodar Sharma, 5-N/35, NIT Faridabad
shall be the sole Arbitrator and the decision shall
be binding on both the parties.
21. The agreement has been entered into between the
parties at Faridabad and the Faridabad Courts
only shall have the jurisdiction in case of any
dispute between the parties to the said
agreement."
In terms of the said agreement, when the dispute arose between the
parties, the appellant herein requested for a reference to the named
Arbitrator. This was vide letter dated 20.8.1992. The Arbitrator entered upon
the reference on 24.8.1992. He fixed the hearing on 5.9.1992 on which date
the appellant remained present at the venue of arbitration. However, neither
the arbitrator nor the Developer was present. Suddenly after fourteen
months, the arbitrator purported to act. He fixed the matter for hearing on
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20.2.1994. Since the entire matter was pending before the Delhi High Court
which was moved by the appellant herein under section 20, the arbitrator
was requested not to proceed. Despite the request, the arbitrator proceeded to
give his Award (ex parte). This was on 29.3.1994.
To complete the chronology of events, it may be pointed out that the
Developer (first respondent herein) filed an application under section 14 of
the Act for filing the Award in the court of Additional Civil Judge (Sr. Div.),
Faridabad (for short "the trial court"). Notice of the said application was
also given to the appellant herein. The appellant herein appeared and filed
his objections. He objected to the jurisdiction of the trial court. According to
the appellant, the suit land stood located in Saket, New Delhi and, therefore,
the trial court had no jurisdiction to pass the decree in terms of the said
Award. This was the basic objection raised by the appellant before us. Apart
from his objection on territorial jurisdiction, the appellant also submitted
before the trial court that the Arbitrator had issued notice dated 24.8.1992
fixing the date of hearing on 5.9.1992. However, when his advocate reached
the residence of the Arbitrator on the date fixed, neither the Arbitrator nor
the Developer had turned up. The appellant also contended before the trial
court that the Award was not made within the period of four months from
entering upon the reference and, therefore, the Arbitrator had become
functus officio. He further pointed out to the trial court that an application
under section 20 of the Act has also been filed in the High Court by him for
filing the arbitration agreement in court. The appellant submitted that despite
raising the above objections before the Artbitrator, the Arbitrator proceeded
to pass an ex parte Award dated 29.3.1994. The appellant further pointed out
that the Developer had filed a suit for permanent injunction in the Court of
Senior Sub-Judge, Delhi and that the Developer had sought intervention of
the civil court for adjudication of the dispute and, in the circumstances, the
Arbitrator could not have made an ex parte Award dated 29.3.1994.
According to the appellant, the said ex parte Award passed by the Arbitrator
was in violation of the provisions of the Act; that it was non est, and,
therefore, the same could not be made rule of the Court.
The trial court on the basis of the above pleadings framed several
issues. Two of the six issues were, whether Award dated 29.3.1994 was
non est as the Arbitrator had become functus officio and whether the trial
court had no territorial jurisdiction to entertain the matter since the suit lands
are located in Saket, New Delhi.
By impugned judgment dated 24.9.1996, the trial court held that in
view of section 31(4) of the Act, since the land in question stood located in
Saket, New Delhi and since the appellant herein is the resident of Delhi and
since the Developer was carrying on business in Delhi the trial court had no
territorial jurisdiction to pass the decree in terms of the Award. The trial
court rejected the contention of the Developer that the subject matter of the
reference was the contract between the parties; that under the contract, the
dispute, if any, was to be referred for arbitration in Faridabad; that under the
contract, the dispute was referable to the sole arbitrator whose decision was
to bind both the parties. The trial court also rejected the contention of the
Developer that the agreement was entered into between the parties at
Faridabad and that the Faridabad court alone had the jurisdiction to decide
the above dispute. The trial court also rejected the contention of the
Developer that on the date of execution of the agreement, the appellant
herein was residing in Faridabad. On the merits of the case, the trial court
found that the appellant herein had moved a petition under section 20 of the
Act on 14.10.1993 in the Delhi High Court which was registered as Suit No.
2482/93 wherein it was prayed that an independent arbitrator be appointed
and the matter be referred for arbitration. On 14.10.1993 the Arbitrator had
not made the award. On 14.10.1993 the period of four months had expired.
The trial court found that after the institution of petition under section 20 of
the Act on 14.10.1993, the arbitrator, suddenly, after a lapse of almost
fourteen months from the date of his entering upon the reference, made an
ex parte Award against the appellant on 29.3.1994. According to the trial
court, though the agreement (Ex. P-1) stood executed at Faridabad, the
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validity of that agreement and the dispute arising therefrom have to be
decided in the civil court at Delhi since the property in question stood
located in Saket, New Delhi. According to the trial court, the Developer had
moved an application under section 14 of the Act on 12.4.1994, by that
application, the Developer sought a decree from the trial court at Faridabad
in terms of the ex parte Award. On 12.4.1994, according to the trial court,
the appellant herein was residing in Delhi, he was served with the summons
at his residential address in Delhi coupled with the fact that the suit property
was in Delhi and, therefore, the trial court at Faridabad had no territorial
jurisdiction to entertain and try the Developer’s application under section 14
of the Act. According to the trial court, there was one more reason for saying
that it had no territorial jurisdiction. According to the trial court the
agreement (Ex. P-1), pertained to immovable property at Saket and when a
dispute arose between the parties, the appellant herein had moved the Delhi
High Court under section 20 of the Act in which the address of the appellant
was shown as G-13, Saket, New Delhi. The trial court also look into account
one more circumstance, namely, that the Developer had instituted Civil Suit
No. 945/92 against the appellant herein. In that suit, the Developer had asked
for a decree for permanent injunction. In that suit the appellant herein was
the defendant. In that suit, the address of the appellant as defendant was also
shown as G-13, Saket, New Delhi. In the circumstances, the trial court held
that the Developer had invoked the territorial jurisdiction of the Delhi High
Court much prior to his application under section 14 of the Act to the trial
court herein on 12.4.1994. In the circumstances, the trial court held that the
proviso to section 16 CPC was not applicable and that the application filed
by the Developer under section 14 of the Act dated 12.4.1994 should have
been instituted in the Delhi Court within the local limits of whose
jurisdiction the suit property stood located. In the circumstances, it was held
by the trial court that clause 21 of the agreement conferring jurisdiction to
the Faridabad court cannot be implemented. The trial court observed that
since the appellant had moved the Delhi High Court under section 20 of the
Act for appointment of a new arbitrator in the year 1993 and since that
application was prior to 12.4.1994 and since that application was anterior to
the reference, the appellant’s application under section 20 of the Act fell
within the purview of section 31(4) of the Act. According to the trial court,
since a petition under section 20 of the Act was pending prior to 12.4.1994
in the Delhi High Court, the Developer should have moved his application
under section 14 also before the Delhi High Court. In this connection
reliance was placed on the judgment of this court in the case of Union of
India v. Surjeet Singh Atwal reported in AIR 1970 SC 189. Aggrieved by
decision of the trial court dated 24.9.1996, the Developer moved the Delhi
High Court by way of the CRA. In the CRA the Developer contended that
under the agreement (Ex. P-1) vide clause 21 it was agreed between the
parties that the Faridabad courts alone shall have the jurisdiction in case of
any dispute between the parties and, therefore, the trial court had territorial
jurisdiction to entertain and try application dated 12.4.1994 under section 14
of the Act. It was contended, in the alternative, that where two courts have
concurrent jurisdiction, the parties by agreement can choose the jurisdiction
of one of them and such a choice was not against the public policy. It was
contended that an agreement whereby jurisdiction of the court stood
specified was not contrary to section 28 of the Contract Act and to the public
policy. It was further contended that where two courts had territorial
jurisdiction to try a case, it is open to the parties to enter into an agreement
whereby jurisdiction of the court stood specified. On behalf of the Developer
it was further contended that, at the time of execution of the agreement (Ex.
P-1) the appellant herein resided at Faridabad and his subsequent change of
address cannot change clause 21 of the agreement. It was further urged on
behalf of the Developer that an application under section 20 of the Act was
filed by the appellant herein in the Delhi High Court and it had no relevance
with clause 21 of Ex. P-1. According to the Developer, filing of such suit
under section 20 of the Act before the Delhi High Court cannot alter the
terms of Ex. P-1. It was further urged on behalf of the Developer that it had
instituted the above suit for permanent injunction in the Delhi High Court.
That suit was Suit No. 945/92 for permanent injunction which was for a
relief which had no correlation with the arbitration matter. Moreover, that
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suit was for permanent injunction. Such a suit could have been filed in Delhi
courts alone as in that suit it was alleged that the appellant herein was
attempting to interfere with the Developer’s possession. Such a suit did not
constitute a waiver. On behalf of the Developer, it was further urged that the
trial court had erred in coming to the conclusion that Ex. P-1 cannot be given
effect as the suit property was located at Saket, NewDelhi and that the
parties were residing at Delhi.
On behalf of the appellant herein, it was sought to be argued before
the High Court that although Ex. P-1 was executed at Faridabad and
although at the relevant time the appellant resided in Faridabad, the dispute
was in connection with recovery of possession and, therefore, the civil court
at Faridabad had no jurisdiction to entertain, try and dispose of the
Developer’s application under section 14 of the Act. It was also urged that
subsequently the appellant had shifted his residence from Faridabad to Saket
in New Delhi and, therefore, the trial court was right in refusing to entertain
the Developer’s application dated 12.4.1994 under section 14 of the Act.
Accordingly, on behalf of the appellant herein it was urged that no
interference is called for in the CRA.
By the impugned judgment, the High Court held that Delhi High
Court was not a competent court as the parties had chosen to confer
exclusive jurisdiction upon the Faridabad court. In the circumstances,
section 31(4) of the Act was not applicable. The High Court further held that
there was no waiver on the part of the Developer by invocation of the
jurisdiction of the Delhi court when the respondent instituted Suit No.
945/92 for permanent injunction. The High Court held that Suit No. 945/92
had no correlation with the arbitration matter. The High Court further held,
that on the facts and circumstances of the present case, section 20 CPC was
applicable; that section 20 CPC refers to institution of suits other than those
covered by section 16 CPC on the basis of residence of defendant or cause
of action. In the circumstances, the High Court allowed the Revision Petition
holding, that the trial court at Faridabad had jurisdiction to entertain and try
application dated 12.4.1994 under section 14 of the Act; that section 31(4) of
the Act was not attracted; that the arbitrator had entered upon reference on
the application of appellant herein and, therefore, there was no occasion for
the appellant moving the Delhi High Court under section 20 CPC seeking
reference. Hence this civil appeal.
As stated above, the short point which arises for determination in this
civil appeal is whether application dated 12.4.1994 filed by the Developer in
the trial court at Faridabad was maintainable.
At this stage, it may be mentioned that the trial court at Faridabad
following the impugned judgment of the High Court had dismissed the
objections of the appellant herein and it has made said Award dated
29.3.1994 the rule of the court. This was on 31.5.2006. On 23.1.2007 the
Developer’s Suit No. 945/92 for permanent injunction stood dismissed in
default.
The basic point which needs to be decided by us is whether clause 21
of Agreement dated 16.3.1990 (Ex. P-1) conferring jurisdiction on the
Faridabad court was ineffective and whether the appellant is right in his
contention that the application made by the Developer under section 14 of
the Act was not maintainable in the Faridabad court on the ground of lack of
territorial jurisdiction.
Mr. Sunil Gupta, learned senior counsel appearing on behalf of the
appellant submitted that the Award made by the arbitrator dated 29.3.1994
being an ex parte Award was non est as it was passed after expiry of four
months from the date when the arbitrator entered upon the reference. He
contended that on 20.8.1992 the appellant had referred the dispute to the
arbitrator. On 24.8.1992 the arbitrator entered upon the reference and fixed
the date of hearing on 5.9.1992 on which date the appellant was present. On
that date neither the arbitrator nor the Developer was present. On that date,
the appellant herein sought the next date of hearing. Despite the telegram
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seeking the next date of hearing, the arbitrator did not respond. During the
period October, 1992 and November, 1992 disputes arose when the MCD
had issued notices directing the appellant herein to show cause why the
building plan submitted by the Developer should not be revoked. Learned
counsel pointed out that on 15.10.1992 the Developer had in fact instituted
Suit No. 945/92 in the civil court at Delhi for permanent injunction. In that
suit, vide para 16, the Developer had invoked jurisdiction of the Delhi court.
In the circumstances, it was not open to the Developer to move the trial court
at Faridabad on 12.4.1994 under section 14 of the Act. Learned counsel
urged that both the parties were aware that the dispute was in respect of the
suit property located at Saket in New Delhi. The dispute, according to the
learned counsel, was for possession of the suit property. The appellant herein
had sought possession of the suit property even before the arbitrator. The
Award of the arbitrator, according to the learned counsel, itself indicates that
the arbitrator has given relief in favour of the Developer concerning
immovable property and, therefore, the trial court was right in coming to the
conclusion that the application made on 12.4.1994 under section 14 by the
Developer was not maintainable on the ground of territorial jurisdiction in
view of section 31(4) of the Act. The second contention advanced on behalf
of the appellant before us was that the impugned Award dated 29.3.1994
was non est. According to the learned counsel, four months time available to
the arbitrator under clause 3 of Schedule I read with section 3 of the Act
expired on 24.12.1992.After that date the arbitrator became functus officio.
In the circumstances, the appellant herein filed an application under section
20 of the Act on 14.10.1993 before the Delhi High Court for appointment of
an arbitrator for adjudication of the dispute with the Developer. This
application was converted into Suit No. 2482/93. It is only thereafter that the
arbitrator suddenly purported to act as an arbitrator by fixing the date of
hearing on 20.2.1994 when the appellant herein requested the arbitrator in
the light of the above facts not to proceed with the arbitration proceedings
since the entire matter was before Delhi High Court in Suit No. 2482/93.
Despite the request made by the appellant, the arbitrator proceeded to make
an Award dated 29.3.1994 being an ex parte Award. Learned counsel further
pointed out that in fact prior to his application under section 20, M.C.D. had
revoked the sanction for construction of the complex and it was the appellant
herein who had filed a writ petition in the Delhi High Court being Writ
Petition No. 5038/93 against the revocation by M.C.D..
On the first question on the lack of territorial jurisdiction, we do not
find any merit in the contentions advanced on behalf of the appellant. We
have examined Ex. P-1 between the appellant and the builder (Developer)
dated 16.3.1990. The agreement describes the appellant as the owner. It
describes M/s Chopra Land Development Pvt. Ltd. as the builder. Under the
agreement, the appellant remains the owner. Under the agreement, the
appellant applies to D.D.A. for time to construct a housing complex on a
plot of land at Saket owned by the appellant. Under the agreement, the
Developer agrees to construct a housing complex on the plot bearing No.
G-13, Saket, New Delhi. Under the agreement, the entire construction cost is
financed by the Developer. Under the agreement, the housing complex
consisted of basement, ground floor, mezzanine first floor, second floor and
third floor. Under the agreement, the Developer agreed to construct the
housing complex without prejudice to the owner’s right. Under the
agreement, the owner was required to give permission to the builder to
construct the housing complex. Under the agreement, the entire cost of
construction was to be borne by the Developer. Under the agreement, the
building plan, the completion certificate etc. were to be signed by the
appellant-owner. Under the agreement, vide clause 15, the Developer agreed
to pay to the appellant-owner a sum of Rs. 5 lacs in consideration of his
seeking permission to construct the housing complex. This was in addition
to the construction cost to be incurred by the Developer. Clause 16 of the
agreement stated that in consideration of the Developer’s services to
construct the housing complex, the appellant agrees to allow the ownership
of the basement, ground floor and mezzanine along with proportionate
interest in the land to be transferred in the name of the Developer. At this
stage, it may be noted that under the ex parte Award dated 29.3.1994 the
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arbitrator has passed his Award in terms of para 16 and, therefore, it was
contended before us on behalf of the appellant that the dispute related to
possession of the property; that the dispute was comparable to a suit for land
and that the submission was made specifically in view of the Award being
passed in terms of para 16 of the agreement (Ex. P-1). It was urged that since
the arbitrator has passed the Award directing the appellant to transfer the
ownership of basement, ground floor, mezzanine along with the
proportionate interest in the land in favour of the Developer, the present
dispute related to recovery of possession and since the lands were located in
Saket the trial court had no jurisdiction to make the Award rule of the court
under section 14 of the Act. As stated above, we do not find merit in the
contention advanced on behalf of the appellant. We have examined Ex. P-1
in entirety. Apart from the above clauses of Ex. P-1, we have already quoted
clauses 11, 20, and 21 by which the parties agreed that in case of dispute
between the parties the same shall be referred for arbitration to the sole
arbitrator at Faridabad and his decision shall be binding on both the parties.
Under clause 21, the parties agreed that the Faridabad court alone shall have
the jurisdiction in case of any dispute between the parties. On our examining
the terms and conditions of Ex. P-1 along with the surrounding
circumstances thereto, we are of the view that Ex. P-1 was a pure
Development Agreement. The agreement is merely an agreement whereby a
party agrees to develop certain property for a certain consideration. Under
the agreement, the appellant herein continues to remain the owner. He has to
apply for permission to construct the building to the D.D.A.. The Developer
agrees to construct on the land. The Developer agrees to finance the entire
construction cost and in lieu of the Developer’s services in the matter of
construction of housing complex the owner (appellant herein) agrees to
permit transfer of the ownership a part of the complex to the Developer. It is
for this reason, as indicated by the events enumerated above, that M.C.D.
had issued notice to the appellant on 21.9.1992 to show cause why the
building plan submitted should not be revoked. It is for the above reasons,
that M.C.D. ultimately revoked the sanction for the construction of the
housing complex on 18.5.1993 and it is the appellant herein as owner who
had sought to challenge the revocation vide Writ Petition No. 5038/93. On
the facts of this case, therefore, it cannot be said that the trial court at
Faridabad had no jurisdiction to make the Award the rule of the court under
section 14 of the Act. Section 31(1) of the Act provides that an Award may
be filed in any court having jurisdiction in the matter to which the reference
relates. Under that section, the Award can be filed in the court within whose
jurisdiction the property in dispute lies. Parties cannot give jurisdiction to a
court under section 14 by consent if that court does not has jurisdiction. If an
award refers to an immovable property, the court having jurisdiction in
respect of the same will entertain an application under section 14. In order to
decide as to which court has jurisdiction to entertain a petition under section
14, reference has to be made to section 2(c) read with section 31(1) of the
Act. Merely because the arbitrator chooses to hold the proceedings in a place
where no suit could be instituted, and chooses to make an award at that
place, it would not give the court of that place territorial jurisdiction to
decide the matter under the Act. Section 30 refers to ground for setting aside
an award. Section 30 is to be read with section 33. The idea behind the entire
scheme of the Arbitration Act appears to be that an application by a party
challenging the validity of correctness of the award on whatever ground has
to be made under section 33. Section 33 is the only section under which a
party is given the right to apply to the court to challenge either the
agreement or the award. Under the Act, therefore, after the Award has been
filed a party is permitted to make an application under section 33 to bring all
kinds of defects to the notice of the court and the court will give reliefs
either under section 15 or section 16 or even under section 30 of the Act. In
an arbitration without the intervention of the court, an award can be filed in
any court having jurisdiction in the matter to which the reference relates.
The award can be filed only in the court which would have jurisdiction in
respect of the subject matter of the dispute. In order to decide the jurisdiction
of the court, it is necessary to decide whether the court would have
jurisdiction to try a regular suit between the parties in which the relief is
claimed. Section 33 does not prescribe the court before which an application
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under this section may be filed, but section 31 makes such provision. Section
31(2) provides that all questions regarding the validity, effect or existence of
an award or an arbitration agreement shall be decided by the court in which
the award has been filed or may be filed. Section 2(c) lays down the forum.
The application has to be moved in the court within whose jurisdiction the
opposite party resides or carries on business or within whose jurisdiction any
part of the cause of action arises. Residence or carrying on business of a
party, apart from the place of accrual of a cause of action is relevant for
determining the territorial jurisdiction of the court in arbitration cases, if the
question so arises in connection with the subject matter of the dispute.
Applying the above tests to the facts of the present case, we are of the
view that at the relevant time the appellant resided at Faridabad. He resided
at Faridabad when the contract was made. Under the contract, the parties
agreed to refer all disputes to the Faridabad court. Apart from the residence,
we are also concerned with the place of accrual of the cause of action. In the
present case, a bare reading of the agreement indicates that it is an
agreement to develop. The appellant remains the owner, the Developer
remains the contractor. The Developer is the financer. The appellant is the
owner of an asset. The contractor/ Developer agrees to exploit that asset on
behalf of the owner. The Developer funds the scheme. The building plans
remained in the name of the owner. The D.D.A. informs the owner regarding
revocation of the building plan. The owner files the writ petition challenging
the revocation. The contractor is paid consideration in terms of a part of the
property. In the circumstances, it cannot be said that this case is similar to a
suit for land. One cannot look at para 16 alone in isolation. On the other
hand, with open eyes, the parties had entered into the contract, they had
agreed to refer all disputes to an arbitrator at Faridabad and they had agreed
that the Faridabad court alone shall have jurisdiction. In a matter of this
kind, it cannot be said that the claim is similar to a suit for land. A housing
complex has to be constructed at the site. When dispute arises, it will not be
confined only to immovable property. Such disputes also require accounts to
be maintained. The disputes also involve rendition of accounts. In the
circumstances, in our view, section 20 CPC alone is attracted. Therefore, in
our view, the High Court was right in holding that the Faridabad court had
jurisdiction to make the Award the rule of the court.
As stated above, one of the points raised on behalf of the appellant
herein is that ex parte Award dated 29.3.1994 was non est since it was made
beyond four months from the date when the arbitrator entered upon the
reference. We do not find any merit in this contention. Chapter II of the
Arbitration Act covers references, in which the parties may proceed, if
nothing goes wrong, up to the stage of delivery of the award, without the
intervention of the court. This does not mean that the court has no authority
to intervene at an early stage, should it become necessary. In the present
case, as stated above, the arbitrator entered upon a reference pursuant to the
notice given by the appellant on 24.8.1992. The notice was given on
20.8.1992. Therefore, section 8 of the Act has no application. Section 8
applies only where the parties do not concur in the appointment. Section 8
and section 20 operate in different provinces. Section 20 confers power on
the court to order the agreement to be filed and to make an order of reference
to the arbitrator appointed by the parties or where they do not agree, the
court can appoint any other person of its choice as an arbitrator. This
discussion is important. This difference between section 8 and section 20
shows that the reference flows from an agreement between the parties in the
cases falling under section 8. The reference flows from the agreement in
cases falling under Chapter II of the Arbitration Act and as long as the
agreement stands, the reference remains valid unless it is superseded by an
order of the court under section 19. Under that section, where award
becomes void under section 16(3) or where an award is set aside, the court
may by an order supersede the reference and shall thereupon order that the
arbitration agreement shall cease to have effect. Therefore, till such time as
the order is passed by the court under section 19 superseding the reference,
the same shall remain valid till the agreement is superseded. This is the
scope of section 8 read with section 19 of the Act. On the other hand, in
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cases falling under section 20 of the Act, power is conferred on the court to
make an order of reference to the arbitrator. That power is conferred on the
court which orders the agreement to be filed before it. In a proceeding under
section 8, disputes are presented by the parties before the arbitrator. Whereas
in proceedings under section 20, the disputes are referred by the court. It is
for this reason that it has been repeatedly held that merely because an
arbitrator does not make an award within the specified period of four months
the court has the power to extend the period. The award given by an
arbitrator after four months is not binding on the parties. Such an award is
vitiated as the arbitrator has no power to make an award after four months.
However, a bare failure of an arbitrator to make an award within the time
allowed by law will not involve the consequences of it being set aside only
on that ground. The court has ample powers in a given case to extend the
time and give life to the vitiated award by exercising judicial discretion
under section 28 of the Act. An application to have the award set aside on
the ground that it was made beyond time prescribed has to be moved under
the Act. No separate suit would lie for that purpose. Section 28 is not limited
only to references to arbitration made in a suit pending before the court.
Further, the power given to the court under section 28 is so wide that it can
extend the time even if the award is made beyond four months from the date
of the arbitrator entering upon the reference. The only restriction is that it
must be exercised with judicial discretion. In the present case, as state above,
the Developer moved an application for making the award the rule of the
court on 12.4.1994. Unfortunately, the appellant chose not to appear before
the trial court. In the circumstances, an ex parte decree came to be passed on
31.5.2006. We have used the word unfortunately because the appellant
herein had filed his objections before the trial court. Those objections were
dismissed as he chose to remain absent. The appellant chose to remain
absent as he had moved or decided to move this Court in special leave
petition against the impugned judgment of the High Court on the point of
territorial jurisdiction. The judgment of the High Court is dated 19.4.2006.
The Award is made the rule of the court by the trial court on 31.5.2006 in
view of the impugned judgment of the High Court. We have also gone
through the Award. We do not wish to express any opinion on the merits,
however, the fact remains that the arbitrator entered upon the reference on
24.8.1992. He fixed the date of hearing on 5.9.1992. On 5.9.1992 the
appellant appeared before him. The arbitrator was absent. The Award has
been given almost after fourteen months and that too after 14.10.1993 when
the appellant herein moved an application under section 20 of the Act for
appointment of a new arbitrator. Taking into account the above
circumstances, we set aside the ex parte Order dated 31.5.2006 passed by the
trial court at Faridabad making Award dated 29.3.1994 the rule of the court.
Consequently, we direct restoration of the matter to the file of the Court of
Additional Civil Judge (Senior Division), Faridabad in Case No. 7 instituted
on 12.4.1994 titled M/s Chopra Land Developers Pvt. Ltd. v. Jatinder
Nath and anr.. We may clarify that the trial court will proceed on the basis
that it has territorial jurisdiction to decide the application made by the
Developer under sections 14 to 17 of the Act. The said application will be
decided on merits alone in accordance with law. In other words, the trial
court will re-examine the question on merits as to whether the Award given
by the arbitrator on 29.3.1994 should or should not be made the rule of the
court. The trial court will have to decide whether to extend the period for
making the Award or not, whether to supercede the reference or not. The
trial court will proceed in accordance with law. Any observation on the
merits of the case mentioned hereinabove shall not be treated as opinion of
this Court. Further, the trial court will proceed on the basis that it has
territorial jurisdiction to decide the above matter.
Subject to above, the civil appeal is dismissed with no order as to
costs.