M/S DODSAL PVT. LTD.versusDELHI ELECTRIC SUPPLY UNDERTAKING OF THE MUNICIPAL CORPORATION OF DELHI

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                               M/S. DODSAL PVT. LTD.                                    A
                                             v.
               DELHI ELECTRIC SUPPLY UNDERTAKING OF THE
                    MUNICIPAL CORPORATION OF DELHI

                                  FEBRUARY 14, 1996
                                                                                        B
                 [B.L. HANSARIA AND K. VENKATASWAMY, JJ.]

             Arbitration and Conciliation Ordinace 1996.

              Sections 4, 7(2)-Contract between Delhi Electric Supply Undertaking       C
        (DESU) and a consumer-Arbitration agreement-Appointment of Ar-
        bitrators-Question of jurisdiction raised by DESU-High Court holding that
        the contract was void inasmuch as Sections 201 and 203 of Delhi Munieipal
        Co1poratio11 Act r/w bye law 3 (1 )(a) were violated--On appeal held, in view
        of a Constitution Bench decision matter referred to another Five- Judge
        Bench, as certain questions were not raised before the Constitution Bench in    D
        Waverley Jute Mills Case. Delhi Municipal Coiporation Act-Sections 20 I,
        203.

              Waverley Jute Mills Co. Ltd. v. Raymon and Co. (India) Pvt. Ltd., AIR
        (1963) SC 90 and Krishun Lal v. State of J & K, (1994] 4 SCC 422 referred
        to.                                                                             E

              Ridge v. Baldwin, (1964) AC 40 and Anisminic Ltd. v. Foreign Com-
        pensation Commission, (1969) 2 AC 147 referred to.

              'Administrative Law' by Wade and Forsyth, 7th Edn. pages 339 to 344,
        referred to.                                                                    F

              CIVIL APPELLATE JURISDICTION: Civil Appeal Nos. 2372-74
        of 1987.

             From the Judgment and Order Dated 16.2.83 of the Delhi High
        Court in FA.O. (O.S.) Nos. 50-52 of 1979.                                       G
              Rajiv Tyagi for Gagrat & Co., for the Appellants.

              The following Order of the Court was delivered :

              An absolutely inequitable stand taken by the respondent (Delhi            H
                                         629
    630                  SUPREME COURT REPORTS                   l 1996] 2 S.C.R.

A Electric Supply Undertaking) has led us to examine some fundamental
    questions of law. We have opened with this observation inasmuch as the
    respondent has challenged the award of the arbitrators made in favour of
    the appellant on the ground that the contract, which contained arbitrator
    agreement, is void, because of which there is no agreement to refer the
    dispute to arbitration; and so, the arbitrators had no jurisdiction to pass
B   impugned award. Such a stand flies on the face of the respondent inasmuch
    as of the two arbitrators, one, namely Shri K.L. Vijh, had been appointed
    by the respondent itself. But as the award ultimately went in favour of the
    appellant, it raised the question of jurisdiction. We.have no doubt in our
    mind that such a stand is inequitable, indeed highly inequitable. Question,
C   however, is whether the law permits such a question to be raised.

          2. The High Court accepted the contention that the contract was void
    inasmuch as sections 201 and 203 of the Delhi Municipal Corporation Act
    read with bye law 3(1)(a) were violated. Dr. Singhvi, appearing for the
D   respondent has urged that the contract being void, along with it fell the
    arbitration agreement contained in the contract, because of which the
    arbitrators had no jurisdiction to pass the award in question.

           3. It is further submitted that in such a case appearance of the
    respondents in the proceeding, i.e. its acquiscence, would, not, alter the
E   situation in view of what has been held by a Constitution Bench of this
    Court in Waverley Jute Mills Co. Ltd. v. Raymon and Co. (India) Pvt. Ltd.,
    AIR (1963) SC 90, in. paragraph 21 of which it was stated that" an
    agreement for arbitrator is the very foundation of which the jurisdiction of
    the arbitrators to act rests, and where that is not in existence, at the time
    when they enter on their duties, the proceedings must be held to be wholly
F
    without jurisdiction. And this defect is not cured by the appearance of the
    parties in those proceedings even if that is with9ut protest, because it is
    well settled that consent cannot confer jurisdiction".

          4. The aforesaid stand brings to the fore the following fundamental
G questions of law :

             (1) Whether the present was a case of contract being void or
             voidable ?

H            (2) Whether a mandatory provision cannot at all be waived ?
             .      .
                     DODSALPVf. LTD. v. D.E.S.U.                       631

       5. As we are proposing to refer to the matter to a Constitution Bench, A
we may not dilate the questions, except stating that a perusal of 'Ad-
ministrative Law' by Wade and Forsyth (7th Edn. Pages 339 to 344 would
show that in Ridge v. Baldwin, (1964) AC 40, some of the dissenting Judges
of the House of Lords suggested that even ultra vires action might be
merely voidable. Reference has also been made to what was held in B
Anisminic Ltd. v. Foreign Compensation Commission, (1969) 2 AC 147,
which has dealt with the question whether there are degrees of nullity. As
to of waiver of a mandatory provision, we may refer to a recent decision
of this Court in .Krishan Lal v. State of J & K, [1994) 4 SCC 422, in which
this aspect has been dealt in paras 16 to 25. It has been pointed out that
even a mandatory provision can be waived, if the provision be intended for C
the benefit of the concerned person, as distinguished from one which serves
"an important purpose" in which case there would be no waiver.

      6. In this connection we may also refer to the provision contained in
section 4 of the Arbitration and Conciliation Ordinance, 1996, which is on D
the subject of "Waiver of right to object". It has laid down that a party who
knows (a) any provision of this Part from which the parties may derogate,
or (b) any requirement under the arbitration agreement, has not been
complied with and yet proceeds with the arbitration without stating his
objection to such non-compliance without undue delay shall be deemed to
have waived his right to so object.                                           E

      7. Another legal aspect is also ·involved in the present case. The
same is whether an arbitration agreement can be read de hors what was
contained in the contract. The respondent having itself appointed one of
the arbitrators in writing, an examinable question arises whether this act    F
cannot be said to constitute an implied agreement to refer the matter to
arbitration. It may be pointed out that section 7(2) of the aforesaid Or-
dinance recognises a separate agreement also.

      8. Though the aforesaid questions were not examined in Waverley G
Jute Mills' case and it would have been open to us to decide the same
ourselves, we do not propose to do so, lest it be thought that we are
overreaching the decision by a larger bench. Instead, we desire that a
5-Judge Bench - Waverley being a rendering by such a Bench - should
decide whether in the context of the legal aspects mentioned by us above,
it is open to a person like the respondent to raise the question of lack of   H
    632                   SUP~EME COURT REPORTS                  [1996) 2 S.C.R.

A jurisdiction of the arbitrator (s) and thereby deny the fruits (to other side)
    of a long fought and won battle, involving huge expenditure of time, money
    and energy, and thereby cause serious daiµage to enquity also, which is an
    equally !mportant facet to be borne in mind by the courts when seized with
    deciding a lis between parties.

B         9. Let the Registry lay the papers before the Hon'ble Chief Justice
    of India for doing the needful.

    G.N.                                                   Appeals disposed of.