Supreme Court of India
K.K. JOHNversusSTATE OF GOA
- Citation
- 2003 INSC 496
- Decided
- 18 September 2003
- Disposal
- Dismissed
- Bench
- V N KHARE
Holding
Sub‑section 3 of Section 16 applies only to a wholly remitted award; a partially remitted award does not become void and the unremitted portion remains enforceable.
Summary
The appellant, a contractor, entered into a construction contract with the State of Goa that provided for arbitration of disputes. An arbitrator rendered an award in 1994, but the civil court remitted the award on two specific points for reconsideration. The arbitrator resigned before completing the reconsideration, and the civil court appointed a new arbitrator, directing a de‑novo award. The High Court held that only the two remitted points could be revisited and the rest of the award remained valid, rejecting the civil court’s de‑novo direction. On appeal, the Supreme Court examined Section 16 of the Arbitration Act, 1940, holding that sub‑section 3 applies only when the whole award is remitted; partial remission does not render the award void and the unremitted portion stays enforceable. Consequently, the appeal was dismissed.
Issues considered
- Whether sub‑section 3 of Section 16 of the Arbitration Act, 1940 renders an award void when only part of it is remitted for reconsideration.
- Whether the civil court could direct a de‑novo award after the arbitrator’s resignation and partial remission of the award.
Legislation cited
- Arbitration Act, 1940s. 16(1), s. 16(2), s. 16(3), s. 20, s. 8(b)
Subjects
ArbitrationAward remissionPartial remissionVoid awardSection 16 Arbitration ActDe novo awardCivil court jurisdiction
Judgment
K.K. JOHN A
v.
STATE OF GOA
SEPTEMBER 18, 2003
B
[V.N. KHARE, CJ AND S.B. SINHA, J.]
Arbitration Act, 1940:
S.16-Award-Remission partly ofby civil court to arbitrator-Effect
on remainder-Arbitrator filed award before civil court for being made C
rule of the court--Civil court remitting the award as regards two points-
Arbitrator resigned-Application for appointment of a new arbitrator-
Civil court holding that since the earlier arbitrator did not give his award
within time, the whole award became void-It appointed a new arbitrator
and directed him to give a de-nova award- Held, the contractor did not D
challenge the order ofthe Civil Judge whereby and whereunder it was held
that the other part of the Award shall remain intact and only two points
were required to be determined-The said order has attainedfina/ity and
cannot be permitted to be reopened-A perusal of sub-section (1) of s.16
shows that the court may from time to time remit the award or any matter E
referred to arbitration to the Arbitrator or Umpire for reconsideration
upon such terms as it thinks fit-Thus, sub-section (1) of Section 16 is in
two parts and talks of two distinct factors; one is for remission ofthe entire
Award and the other 'any other matter'-Whereas sub-section (3) of
Section 16 of the Act provides that an award remitted under sub-section F
(1) shall become void on the failure of Arbitrator or Umpire to reconsider
it and submit his decision within the time fixed; it is silent as regards 'any
other matter'-lt is a well settled principle of law that no word used in
a statute should be presumed to be surplus-In the case, the entire award
was not remitted to the Arbitrator-The Arbitrator was only required to
give determination on two points and, therefore, sub-section (3) is not G
applicable-The Parliament advisedly has restricted sub-section (3) of
Section 16 of the Act to an award which would mean the whole award or
a part of it-The valid part of the award always remains enforceable in
a court of/aw-In any view of the matter, the applicability ofsub-section
(3) a/Section 16 ofthe Act, in the facts and circumstances of the case, does H
937
938 SUPREME COURT REPORTS [2003] SUPP. 3 S.C.R.
A not arise inasmuch as the matter is still pending before the Arbitrator.
Johnson v. Latham, (1951) 20 Law Journal 236, referred to.
Brahma Swaroop Gupta v. Diwan Chand Manotra, AIR (1963) Cal.
B 583; Goverdhan Dass v. Gaya I'rasad and Ors,. ILR (1981) All. 310·and
Mehta Teja Singh and Co. v. Fertilizer Corporation ofIndia Ltd. and Anr.,
AIR (1968) Delhi 188; referred to.
"Law of Arbitration" by Russell; referred to.
C CIVIL APPELLATE JURISDICTION : Civil Appeal No. 1247 of
1998.
From the Judgment and Order dated 31.7.97 of the Bombay High
Court in A. No. 7 of 1997.
D Prashant Kumar, Jay Sayla and Ms. Reena Bagga for the Appellant.
T.L.V. Iyer and Ms. A. Subhashini for the Respondent.
The following Order of the Court was delivered :
E
The interpretation of sub-section 8 of Section 16 of the Arbitration
Act, I 94C (hereinafter called, for the sake of brevity, the Act') arises for
consideration in this appeal, which arises out of the judgment and order
dated 3 lst July, 1997 passed by the High Court of Bombay, Appellate Side,
F Panaji Bench, Goa in Appeal No. 7 .of 1997.
The appellant and the respondent herein entered into an agreement
whereby and whereunder the appellant undertook to carry out certain
constructions. The agreement also provided for resolution of dispute by an
Arbitrator. It appears certain dispute arose as a result of which the appellant
G herein preferred a claim on 19th September, 1990 and subsequently on 26th
October, 1990, first reference was made. On 12th March, 1991, the
respondent herein terminated the agreement. As a result of termination of
agreement, the appellant herein made another reference on 26th June, 1991
and put in second claim on 27th September, 1991. The Arbitrator
H appointed, with the consent of the parties, gave an Award on 25th February,
K. K. JOHN V. STATE 939
1994. Thereafter the Arbitrator filed an Award for being made a Rule of A
the Court. The appellant filed an objection before the learned Civil Judge,
Senior Division, Mapusa, in the State of Goa. The learned Civil Judge in
tenns of the order dated 6th July, 1995 elaborately considered the
contentions raised by the appellant herein and came to the following
conclusion :
B
"20. There appears some glaring mistake under item no. 1
and 2 when the arbitrator mentioned that the earth excavation is
nil though the quantity appear to have been admitted by the
respondent. But on this ground the award cannot be set aside.
c
21. Similarly, the claim no. 2 though the arbitrator has stated
"could not be ascertained" there is no explanation as to why he
could not do so and if it would not be ascertained what would be
the finding to that effect."
The learned Civil Judge, Senior Division, observe thus :
D
"Considering the no objection of the learned Advocate for
the respondent, I feel that the award has to be remitted on two
points as under :
E
(i) To decide the additional tenns and reference by order dated
26.6.91 regarding the illegal closure of the contract and
(ii) The undennined part of item no. 1 and 2 as mentioned in page
7 of the award, to specify the tenn "could not be ascertained"."
F
The Arbitrator in concluding part of the order held that the other part
of the Award stands not affected by the said order.
On 10th October 1995, the Arbitrator resigned. Under such circum-
stances, the appellant herein instead of moving an application under G
Section 8(b) of the Act, filed a petition under Section 20 thereof for
appointment of a new Arbitrator on 6th February, 1996. On 28th May,
1997 the learned civiljudge, after hearing the parties, was of the view that
since the earlier Arbitrator did not give his Award within time, the whole
Award has become void. Consequently, he appointed a new Arbitrator with H
940 SUPREME COURT REPORTS [2003) SUPP. 3 S.C.R.
A the consent of the parties with a direction to the Arbitrator to give a de-
novo Award. Aggrieved, the State of Goa preferred an appeal before the
High Court. The High Court was of the view that since the other part of
the Award remained intact, the proceeding was required to be restricted
to the aforementioned two points only on which earlier the Court wanted
B determination and, therefore, it was not open to the learned Civil Judge to
have directed to resolve the dispute de-nova. It is against the said judgment
the appellant is in appeal before us.
Mr. Prashant Bhushan, learned counsel appearing for the appellant
C raised two submissions. The first submission is that since the two points
on which the learned Civil judge required determination were incapable
of being decided, therefore, the Arbitrator was required to resolve the
dispute de-nova. The second submission is that once the Arbitrator has
resigned and could not give the Award within the stipulated period,
the Award was rendered void under sub-section (3) of Section 16 of
D the Act.
We do not find any merit in both the submissions. So far as the first
submission is concerned that the appellant did not challenge the order of
the learned Civil Judge dated 6th July, 1995, whereby and whereunder the
E learned Civil judge held that the other part of the Award shall remained
intact and only two points were required to be determined. The said order
has attained finality. The same, thus, cannot be permitted to be reopened.
The submission of Mr. Prashant Bhushan to the effect that before the period
for filing the revision application expired, the Arbitrator resigned and, thus,
F there was no occasion for the appellant to question the said order is
misconceived. Irrespective of the resignation of the Arbitrator, the judg-
ment of the learned Civil Judge remained operative and enforceable. If,
thus, the appellant was in any manner aggrieved thereby, the only remedy
open to it was to move the high Court. It having failed to do so cannot
now be permitted to raise the said question again before this Court. It is
G trite that what could be done directly cannot be permitted to be done
indirectly. So far the second submission is concerned, it is relevant to set
out Section 16 of the Arbitration Act, 1940, which reads as under :
"16. Power to remit award (I) The Court may from time to
H time remit the award or any matter referred to arbitration to the
K. K. JOHN v. STATE 941
arbitrators or umpire for reconsideration upon such terms as it A
thinks fit -
(a} where the award has left undetermined any of the matters
referred to arbitration, or where it determines any matter not
referred to arbitration and such matter cannot be separated without B
affecting the determination of the matters referred; or
(b) where the award is so indefinite as to be incapable of
execution; or
(c) where an objection to the legality of the award is apparent C
upon the face of it.
(2) where an award is remitted under sub-section (I) the Court
shall fix the time within which the arbitrator or umpire shall
submit his decision to the Court;
D
Provided that any time so fixed may be extended by
subsequent order of the Court.
(3) An award remitted under sub-section (1) shall become void
on the failure of the arbitrator or umpire to reconsider it and E
submit his decision within the time fixed."
A perusal of sub-section ( 1) of Section 16 shows that the Court may
from time to time remit the Award or any matter referred to arbitration to
the Arbitrator or umpire for reconsideration upon such terms as it thinks F
fit. Thus, sub-section (I) of Section 16 is in two parts and talks of two
distinct factors; one is for remission of the entire Award and the other 'any
other matter'. Whereas sub-section (3) of Section 16 of the Act provides
that an Award remitted under sub-section (I) shall become void on the
failure of the Arbitrator or Umpire to reconsider it and submit his decision
within the time fixed, it is silent as regards 'any other matter'. It is a well G
settled principle of law that no word used in a statute should be presumed
to be surplus. In the event the contention of Mr. Prashant Bhushan is
accepted, the words 'or any matter referred to arbitration' become otiose.
Sub-section (3) of Section 16 is referable to sub-section (I) thereof. It is
not in dispute that an Award could be good as regard one part thereof and H
942 SUPREME COURT REPORTS [2003] SUPP. 3 S.C.R.
A bad as regards the rest. In Russell on Arbitration 19th Edition at page 484
it is stated :
"An award bad in part may be good for the rest. If,
notwithstanding that some portion of the award is clearly void, the
remaining part contains a final and certain detennination of every
B question submitted, the valid portion may well be maintainable as
the award, the void part being rejected."
In the present case, we find that the entire Award was not remitted
to the Arbitrator, The Arbitrator was only required to give detennination
C on two points, and therefore, sub-section (3) is not applicable in the present
case. The Parliament advisedly has restricted sub-section (3) of Section 16
of the Act to an Award which would mean the whole Award or a part of
it. The valid part of the Award always remains enforceable in a Court of
law.
D
What can be held to be void is that part of the Award which has not
been made a Rule of Court by sustaining the objections raised with regard
thereto inter a/ia on the ground that the same suffers from an error apparent
on the face of the record or for any other reason; in the event the Arbitrator
or umpire fails to reconsider it and submit his decision within the time fixed
E therefore by the Court. In other words, the word 'Award' within the
meaning of sub-section (3) would also include a part of the Award, which
has been the subject matter of the order of remission by the competent
Court. In any view of the matter the applicability of sub-section (3) of
section 16 of the Act, in the facts and circumstances of the present case,
F does not arise inasmuch as the matter is still pending before the Arbitrator.
This View of ours find support from the following :
Johnson v. Latham, reported in (1851) 20 Law Journal 236 at 238
reads :
G "Suppose an award good as to three points and bad as to the
fourth, and sent back as to that alone, as at present advised, I am
of opinion that the arbitrator is functus officio as to the three, and
cannot alter his judgment as to them."
H Para 618 of Halsbury's Laws of England reads as :
K. K. JOHN v. STATE 943
"Partial remission. The whole or only a part of an award may be A
remitted; in the former case the award so remitted is of no effect,
in the latter only that portion of the award which is remitted is
avoided, and the remainder is valid and enforceable."
Para 19 of 74 Calcutta Weekly Notes reads as :
B
This very point may be considered from another angle. Under
section 16(1) of the Act there are two kinds of remission, viz., (I)
remission of the Award and (II) remission of any matter referred
to the arbitration. In the instant case if we proceed on the footing
that only certain matters and not the Award were remitted by the C
court below for reconsideration-the question arises whether the
Award will be void under Section 16(3) of the Act in such cases
even if the arbitrator fails to reconsider these matters and submit
his decision within the time fixed. It appears that, although the
court has power to remit any matter referred to the arbitration D
under section 16(1) of the Act the consequence that follows on
the arbitrator's failure to comply with the court's direction to
reconsider and submit his decision on such matters is not the
same. Under section 16(3) it is only when the Award is remitted
and the arbitrator fails to reconsider and submit his decision, the E
Award shall become void. But not so, in cases where only certain
matters are referred to for this purpose by the court as, clearly,
the words "any matter" referred to the arbitration are significantly
absent in the provision of sub-section (3) of section 16 of the Act
and that only shows, in such cases section 16(3) may not have any
application at all. In other words, it may be said that if there is F
any failure of the arbitrator to reconsider and submit his decision
on certain matters referred to him the Award does not become
void; In this connection we may usefully refer to a passage in
Sarkar's Tagore Law Lectures, 1942 on the 'The Law of Arbitration
in British India' in which it is stated (at page 207, printed Edition G
1942) as follows :
" .... Under sub-section (3) of Section 16 an award remitted
becomes void on failure of the arbitrator or umpire to reconsider
it and submit his decision within the time fixed, but there is no H
944 SUPREME COURT REPORTS [2003] SUPP. 3 S.C.R.
A provision to cover the case where instead of the award, 'any
matter referred to arbitration' is remitted. In re Aitken 's Arbitra-
tion, (1857) 3 Jur. (D.S.) 1296, only one question out of several
left undecided was remitted. Apparently in a case like this, section
16(3) has no application."
B Even so, we do not think it necessary to decide finally this
aspect of the matter in the facts and circumstances of the present
case. For the reasons, however, already given the question of
superseding the arbitration under section 19 of the Act on the
ground of 'the award' being void, does not arise at all."
c Page 494 of Russell on the Law of Arbitration states :
"Invalidity of remitted award
An award when remitted may cease to have any validity.
D
An award made by an arbitrator appointed to assess
compensation under the Lands Clauses Act, 1845 was remitted at
the request of the claimants. For seven months nothing was done,
and then, on the claimants notifying their desire to have the
compensation settled by a jury, the railway company applied for
E an extension of time to make the amended award. The C.A., on
account of the delay, refused the application and left the matter
to go before a jury for determination : Re Dare Valley Ry. (1869)
L.R.4 Ch. 554.
F But where only one or more matters out of several are
remitted, a question may arise whether the award remains valid
as regards the matters therein not remitted. "What became of the
award as to the residue of the matters which were not sent back
pending the second reference? It seems to be in a manner
suspended." (Per Erle J. Johnson v. Latham, [1851] 20 L.J.Q.B.
G 236 at p. 238). Apparently, therefore, the part not remitted will
continue valid."
In Brahma Swaroop Gupta v. Diwan Chand Minatra, reported in AIR
1963 Calcutta 583, Division Bench of the Calcutta High Court considered
H the question as regards the order of remission in relation to the whole
K. K. JOHN v. STATE 945
Award and some of the matters referred to Arbitration in the following A
terms :
"7. If the whole award is remitted, the effective award is the
second award, see Brearcy v. Kemp, [1855] 24 LJ QB 310 at 312.
On such an order being made, the arbitrator must make a fresh B
award on all the matters referred to arbitration. Sec. 16(3) shows
that on the failure of the arbitrator to reconsider the award and
submit his decision within the time fixed, the award remitted to
the arbitrator becomes void, see also Mohun Kishen v. Bhoobun
Shyam, 7 Suth WR 406. In this context it would appear that the
first award is avoided altogether also on the making and filing of C
the fresh award, see Ganpatrai and Sons v. Ramgopal Nanda
Kishore, 59 Cal WN 807 at P. 809 : (S) AIR (1955) Cal 302 at
p. 303.
8. But if only one or some of the matters referred to arbitration D
is remitted to the arbitrator for reconsideration, pending the
second reference, the award as to matters not sent back to the
arbitrator seemed to be in a manner suspended. The arbitrator is
functus officio as to those matters and cannot alter his judgment
as to them, see [1851) 20 LJ QB 236 at p. 238. The order under E
Sec. 16( I) may be made on such terms as the Court thinks fit. The
Court may, therefore, give directions to the arbitrator as to tile
form of the fresh award. The arbitrator is bound to abide by and
carry out the directions of the Court in this behalf. In the absence
of any such direction the arbitrator acting under an order referring F
back some of the matters for reconsideration, must make a fresh
award, confirming and repeating the first award as to matters not
sent back which he could not alter "as it were a dry pen", thus
the fresh award would embrace all matters originally referred, and
in the result the first award would become null and inoperative,
see (I 851) 20 LJ QB 236 at pp. 239 and 240. In that case it was G
held that as the first award became thus, null, the Master's
allocatur for costs issued under it also became null though the
second award repeated the terms of the first award as to costs. In
this context the observation in Halsbury's Law of England, 3rd
Edition, Vol. II, Art. 122, page 57 to the effect that where only H
946 SUPREME COURT REPORTS [2003] SUPP. 3 S.C.R.
A a part of the award is remitted, the remainder is valid and
enforciable, appears to be too broad. I am, however, inclined to
think that where the order of reference back of one or some of
the matters referred to arbitration specially directs the arbitrator
to make his fresh award limited to the matters remitted to him,
the fresh award must be limited to those matters and consequently
B
the first award with regard to the matters not remitted to the
arbitrator would remain operative."
In Goverdhan Dass v. Gaya Prasad and Ors., reported in ILR 1981
Allahabad at page 310, K.N. Singh, J., (as His Lordship then was), followed
C the decision of the Calcutta High Court in Brahma Swaroop Gupta's case,
stating as under :
"If the court instead of referring the entire award remits only
certain matters for reconsideration to the arbitrator and if the
arbitrator fails to submit his award within time specified by the
D
court, the consequence as contemplated by s. 16(3) would not
arise. This would be clear on a close scrutiny of the language used
in s.16(1) ands. 16(3) of the Act. The consequence contemplated
by s. 16(3) would arise only when the entire award is remitted as
s.16(1) confers power on the court either to remit the entire award
E or to remit any matter for consideration. By enacting s.16(3) the
Legislature has laid down that if the entire award is remitted for
reconsideration and the arbitrator fails to consider the same within
the time specified by the court, the entire award would become
void but that situation would not arise in a case where only certain
F matters are referred to the arbitrator for reconsideration. Therefore
s.16(3) will not be applicable and the award in respect of those
matters which are not remitted to the arbitrator for fresh award
would become final between the parties."
G Yet again in Mehta Teja Singh and Co. v. Fertilizer Corporation of
India ltd. and Anr., reported in AIR (1968) Delhi 188, the law has been
stated in the following terms :
"(9) The order under Section 16(1) may be made on such
terms as the Court thinks fit. The Court may, therefore, give
H directions to the arbitrator as to the form of the fresh award. The
K. K. JOHN v. STATE 947
arbitrator is bound to abide by and carry out the directions of the A
Court in this behalf. In the absence of any such direction the
arbitrator acting under an order referring back some of the matters
for reconsideration, must make a fresh award, confirming and
repeating the first award as to matters not sent back which he
could not alter, as it were with a dry pen', thus the fresh award B
would embrace all matters originally referred, and in the result the
first award would become null and inoperative.
"Where the order of reference back to on or some of the
matters referred to arbitration specially directs the arbitrator to
make his fresh award limited to the matters remitted to him, the C
fresh award must be limited to those matters and consequently the
first award with regard to the matters not remitted to the arbitrator
would remain operative."
Shri Chawla has also referred us to Russel on Arbitration (17th D
Edition) and has submitted that the observations at page 305 that
not only an award but the matters or any of them can be remitted,
are based on a misappreciation of the ratio decidendi of the
English decision in Johnson's case [1851] 20 L.J. QB 236. Same
comment has been made in regard to paragraph 122 ofHalsbury's E
Laws fof England, Third Edition, Vol. II."
We agree with the views expressed in the aforementioned decisions.
For the aforesaid reason, we do not find any merit in this appeal. The
appeal fails and is, accordingly, dismissed. There shall be no order as to F
costs.
R.P. Appeal dismissed.
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