Dr. S. B. Dutt vs University of Delhi
Rewritten Version Notice: This is a rewritten version of the original judgment.
Court: supreme-court
Case Number: Civil Appeal No. 229 of 1956
Decision Date: 3 September 1958
Coram: A.K. Sarkar, P.B. Gajendragadkar
In the case of Dr S B Dutt versus the University of Delhi, the Supreme Court delivered its judgment on the third day of September in the year 1958. The judgment was authored by Justice A K Sarkar, who also formed part of the bench together with Justice P B Gajendragadkar. The case was cited as 1958 AIR 1050 and also appeared in the Supreme Court Reports as 1959 SCR 1236. The central question before the Court concerned the validity of an arbitration award that had been made under section 45 of the Delhi University Act of 1922, a provision that incorporates the rules of the Arbitration Act of 1940, and whether such an award could be enforced when it purported to direct a contract of personal service.
The appellant, who was a professor employed by the respondent University, had been dismissed from his position by the University. He challenged the dismissal by invoking the arbitration mechanism provided in section 45 of the Delhi University Act. The arbitral tribunal rendered an award that, among other determinations, held that the dismissal was ultra vires, was made in bad faith, and consequently had no legal effect. The award further declared that the appellant continued to hold the status of professor at the University. The appellant then sought to enforce this award by applying to the Court for a judgment confirming it. The Court was required to consider whether the award, which attempted to enforce a personal service contract, was tainted by a facial error that would render it void.
The Court examined the nature of the award and the statutory framework underlying it. It observed that an award which seeks to enforce a contract of personal service may be set aside if it displays an error apparent on its face, even when the reasoning behind the error is not expressly stated in the award. The Court distinguished this situation from cases such as High Commissioner for India v I M Lall (1948) and Ram Kissendas Dhanuka v Satya Charan Law (1949), which dealt with different factual matrices. It also referred to the principles articulated in Champsey Bhara & Co. v Jivraj Balloo Spinning and Weaving Co. Ltd. (1923) to support the proposition that a facial error can invalidate an arbitral award.
Further, the Court clarified that an award made under section 45 of the Delhi University Act is not to be treated as an award made under the Industrial Disputes Act of 1947. Consequently, the Court rejected any analogy between the two statutes and held that the phrase “any dispute” appearing in section 45 could not be interpreted to include a dispute relating to reinstatement of the appellant or to empower the arbitrator to pass any direction concerning such reinstatement. The Court distinguished the present case from the decision in Western India Automobile Association v Industrial Tribunal, Bombay ([1949] FCR 321), which involved a different statutory scheme.
The procedural history of the matter was as follows. The appellant’s appeal was filed as Civil Appeal No. 229 of 1956, challenging the judgment and order dated the fifteenth of January, 1955, rendered by the Punjab High Court in First Appeal Original No. 119-D of 1954. That judgment arose from a decree dated the twenty-seventh of May, 1954, issued by the Sub-Judge, Class III, Delhi, in Suit No. 206 of 1953. Counsel for the appellant, comprising senior advocates, presented arguments on behalf of Dr S B Dutt, while counsel for the respondent, including the Attorney-General for India and other senior lawyers, represented the University of Delhi. The Court, through Justice Sarkar, delivered its opinion after a thorough consideration of the submissions and the statutory provisions involved.
In its final analysis, the Court held that the arbitral award, which purported to enforce a contract of personal service, contained a clear error on its face and therefore must be set aside. The Court concluded that the award could not be enforced, and it dismissed the petition seeking enforcement of the award. The decision thus reaffirmed the principle that arbitral awards must conform strictly to the statutory framework and may be invalidated where a facial defect is evident, particularly when the award attempts to regulate matters beyond the scope of the arbitration clause, such as reinstatement or personal service contracts. The judgment was pronounced on the third of September, 1958, thereby bringing this dispute to an end.
The award concerned the series of disputes that had arisen between the appellant, who served as a professor at the University of Delhi, and the University itself as respondent. The origins of the controversy dated back many years and, as time passed, the number of contentious matters grew. To understand the questions presented for review, the Court set out a factual narrative. The appellant received his appointment as Professor of Chemistry on 10 May 1944. In August 1948 the Government of India introduced a Selection Grade scheme intended to provide a higher pay scale for certain professors. The appellant asserted that, as a professor, he was eligible for the benefits of this scheme, yet the University refused to grant him the increased remuneration. This denial constituted the first point of disagreement between the parties. In March 1949 the University appointed another academic, Dr Seshadri, to the position of Head of the Department of Chemistry. The appellant claimed that he already held that post and that his removal in favour of Dr Seshadri was wrongful, creating a second dispute. Seeking redress, the appellant attempted to refer the matter to arbitration under the Delhi University Act, 1922, but he alleged that the University authorities obstructed the process. Consequently, on 18 October 1949 he instituted civil proceedings seeking a declaration that his removal as Head of Department was illegal. The University, for its part, lodged complaints against the appellant alleging misconduct of varying seriousness, although the specific details of those allegations were not essential to the Court’s discussion. In October 1950 the parties agreed that their respective grievances would be examined by Sir S. Vardachariar and Sir Tek Chand Bakshi, whose findings would be final and binding. Pursuant to that agreement the appellant withdrew his suit on 3 November 1950. The referees completed their investigation and submitted a report on 1 March 1951, a report that was largely unfavorable to the appellant. He contested the fairness of the investigation and argued that the report was defective and therefore not binding. Accordingly, on 26 March 1951 he filed an application before the Sub-Judge of Delhi under section 33 of the Arbitration Act, 1940, requesting a declaration that no arbitration agreement existed, which would deprive the referees of any jurisdiction to issue an award; alternatively, he asked that any award be set aside.
While the application was pending, the Executive Council of the University passed a resolution on 26 April 1951 terminating the appellant’s service as a professor, basing the decision on the unfavorable findings of the investigators’ report. The Sub-Judge ultimately dismissed the appellant’s application on 11 February 1952. The dismissal was grounded on the view that the arrangement for investigation by Sir Vardachariar and Sir Bakshi did not constitute a submission to arbitration, and therefore section 33 of the Arbitration Act was inapplicable. This decision set the stage for the subsequent appeal proceedings.
The Sub-Judge rejected the application made under section 33 of the Arbitration Act because the alleged agreement between Sir S. Vardachariar and Bakshi Sir Tek Chand concerning the investigation of mutual grievances was held not to constitute a submission to arbitration; consequently, no application under that provision could lie. The appellant appealed this decision to the High Court, but the appeal was dismissed on 22 April 1953 for the same reason. The foregoing narration therefore sets out the earlier history of the disputes between the parties. The Court now turns to the matters that are directly relevant to the present appeal.
On 28 April 1953 the appellant addressed a letter to the respondent invoking section 45 of the Delhi University Act and demanding that the disputes mentioned therein be referred to arbitration. Section 45 provides that any dispute arising out of a contract between the University and any officer or teacher shall, on the request of the officer or teacher, be referred to a Tribunal of Arbitration consisting of one member appointed by the Executive Council, one member nominated by the officer or teacher, and an umpire appointed by the Chancellor. The Tribunal’s decision shall be final and no civil suit may be instituted on the matters decided by the Tribunal. Every such request is deemed a submission to arbitration under the terms of the section, within the meaning of the Arbitration Act, 1940, and all provisions of that Act, except for section 2, shall apply accordingly. By means of that letter the appellant named Professor M. N. Saha, a noted scientist, as his arbitrator and urged the respondent to nominate its own arbitrator. The appellant’s letter identified three specific grievances: (a) his alleged wrongful deprivation of the selection grade; (b) his alleged wrongful supersession when Dr. Seshadri was appointed Head of the Department of Chemistry; and (c) the alleged wrongful nature of his dismissal. A copy of this letter was also sent to Professor Saha.
On 2 May 1953 the appellant wrote again to the respondent, drawing attention to the fact that he had already appointed Professor Salia as an arbitrator and demanding that the respondent appoint its arbitrator within fourteen days as required by law. The respondent replied on 7 May 1953, informing the appellant that its Executive Council had considered the appellant’s 28 April letter on 30 April 1953 and, for reasons that the Court deems unnecessary to repeat, had decided not to take any action. Subsequently, on 18 May 1953 the appellant sent another letter to the respondent stating that the University had failed to appoint its arbitrator within fifteen clear days of the appellant’s notice of 2 May 1953, and that, as a result, the appellant was hereby appointing Professor M. N. Saha as the sole arbitrator to give his award.
In the proceedings the appellant appointed Professor N. Saba as the sole arbitrator and directed him to give his award. The appellant also wrote to Professor Saba in similar terms, asking him to proceed now that he had become the sole arbitrator. On 24 May 1953 Professor Saba wrote to the respondent informing that, having been appointed the sole arbitrator by the appellant, he had fixed 15 June 1953 for the hearing of the case. The respondent replied on 12 June 1953, stating that it had been advised that the appellant possessed no right to invoke arbitration, that the respondent did not recognise Professor Saba as an arbitrator, and that he therefore lacked jurisdiction to act as one. Despite this objection Professor Saba commenced the arbitration proceedings on 16 June 1953. The respondent appeared before him through a lawyer and again contested his jurisdiction. Professor Saba overruled the respondent’s objection, held that he possessed jurisdiction as the sole arbitrator, and observed that the respondents’ representatives retired from the proceedings, which then continued in their absence. Professor Saba subsequently issued an award dated 17 June 1953. The award identified four points for determination: first, whether the Selection Grade of Professors had been rightfully withheld from Dr S. B. Dutt while it was granted to other professors of comparable standing and seniority; second, whether Dr Dutt had been appointed Professor and Head of the Chemistry Department and whether his removal from the headship was lawful; third, whether the dismissal of Dr Dutt by a resolution of the Executive Council dated 26 April 1951 was mala fide, illegal, and therefore wrongful and ineffective; and fourth, whether Dr Dutt had been subjected to harassment by University officials and the effect of such conduct. After careful and earnest consideration Professor Saba concluded that the steps required to confer the Selection Grade on Dr Dutt had been wrongfully omitted by the University, thereby depriving him of the Selection Grade; that the terms of Dr Dutt’s appointment expressly made him Head of the Chemistry Department and that his removal from that position was wrongful; that Dr Dutt’s dismissal was ultra vires, mala fide and had no legal effect, so that he continued to hold the position of professor; and finally, that Dr Dutt had indeed been subjected to harassment. At the request of the appellant, Professor Saba filed the award in the Court of the Sub-Judge, Delhi, on 24 June 1953. The respondent raised several objections to the award. The Sub-Judge examined those objections, overruled them and, on 27 May 1954, issued a decree declaring the award, except for a small portion not relevant to the present appeal, to be a rule of Court.
Two appeals were filed against the decree that had been issued under the award. One appeal was presented in the Court of the Senior Sub-Judge at Delhi and the other was presented in the Court of the District Judge at Delhi, because there was uncertainty as to which of those courts was the correct forum for the appeal. On 26 November 1954 the High Court issued an order withdrawing both of those appeals and taking them before itself for trial. After hearing the matters, the High Court delivered a judgment on 15 January 1955 in which it allowed the appeals and set aside the award, holding that the award contained an error apparent on its face. The appeal that is now before this Court challenges that judgment of the High Court.
The present appeal raises two distinct points. The first point is raised by the appellant and concerns the correctness of the High Court’s conclusion that the award disclosed an error on its face. The second point, raised later by the respondent, concerns a matter that was decided against the respondent and will be addressed in due course. The appellant argues that the High Court was mistaken in holding that the award was erroneous on its face. The High Court had observed that the arbitrator was not empowered to grant Dr S B Dutt a declaration that he remained a professor of the University, a declaration that no Court could or would give him. The High Court further reasoned that such a declaration amounted to the specific enforcement of a contract of personal service, which is prohibited by section 21 of the Specific Relief Act, and therefore the award was tainted with a facial error.
The Court agrees wholly with the view expressed by the High Court. There is no doubt that a contract of personal service cannot be specifically enforced. Section 21, clause (b) of the Specific Relief Act, 1877, together with the second illustration provided under that clause, makes the prohibition unmistakably clear, so that no further elaboration is required. In the present award, the arbitrator appears to intend to enforce a contract of personal service by stating that the dismissal of the appellant “has no effect on his status” and that “he still continues to be a Professor of the University.” When a decree is made in accordance with the award, and where the award is not otherwise exceptionable, such a decree must be passed under section 17 of the Arbitration Act after the award has been filed in Court. That decree would give effect to the award and would direct that the appellant be treated as still in the service of the University, thereby enforcing a contract of personal service and contravening section 21(b). While it may be said that this circumstance could render the award erroneous, that alone is insufficient to set the award aside; it must also be shown that the error is apparent on the face of the award. Counsel for the appellant contended that no such facial error existed because the award itself did not contain the reasoning for the decision. It was further submitted that this proposition derived from the well-known case of Champsey Bhara and Co. v. Jivraj Balloo Spinning and Weaving Co. Ltd., a point that will be considered in the following analysis.
In the case of Champsey Bhara and Co. v. Jivraj Balloo Spinning and Weaving Co. Ltd. the Court was directed to consider observations recorded on page 331 of the judgment, which stated: “An error in law on the face of the award means, in their Lordship’s view, that you can find in the award or a document actually incorporated thereto, as for instance a note appended by the arbitrator stating the reasons for his judgment, some legal proposition which is the basis of the award and which you can then say is erroneous.” The Court expressed its inability to agree with the proposition ascribed to the Judicial Committee by the learned counsel for the appellant. The Court observed that when the Judicial Committee referred to the “reasons for the judgment”, it was considering a situation in which the award itself did not disclose an error, but the reasons set out in a separate appended paper did. The Judicial Committee did not intend to assert that an error could appear on the face of an award only when the award itself contained the reasoning for the decision. In the Court’s view, the essential requirement for an award to exhibit an error on its face is that the award, either within its own text or in any document intended to be incorporated by reference, must contain a legal proposition that, on its face and without any extrinsic assistance, can be identified as erroneous. This principle, derived from the Judicial Committee’s decision in the Champsey Bhara and Co. case (1), was applied to the present award, which specifically ordered the enforcement of a contract of personal service. The Court concluded that such an order embodied a legal proposition that was plainly erroneous.
The appellant also contended that the portion of the award holding that his dismissal had no effect on his status and that he continued to be a professor was merely consequential, amounting to surplusage, and therefore any error disclosed therein would not vitiate the award. The Court found this contention to be without merit. The award expressly held that the appellant had been dismissed wrongly and with malice. It was not a mere consequence of that finding that the dismissal was of no effect; a wrongful and malicious dismissal remains an effective dismissal, even though it may give rise to a claim for damages. Although the award also characterised the dismissal as ultra vires, it did not consequently hold that the dismissal was a nullity and therefore of no effect. Moreover, the Court was clear that the argument that the offending portion of the award was surplusage offered no assistance to the appellant, because it was never suggested that the offending portion could be severed from the remainder of the award and struck out as surplusage. Consequently, the offending portion must remain part of the award, and as long as it remains, it continues to disclose an error on the face of the award, rendering the entire award liable to be set aside.
The Court observed that the portion of the award which was challenged could not be removed from the award. Because it had to remain within the award, the presence of that portion displayed an error on the face of the award and consequently rendered the entire award liable to be set aside. The appellant then argued that a declaration stating he continued in his employment with the respondent despite his dismissal was a declaration that the law allowed and therefore was not erroneous. The appellant’s counsel relied upon a declaration made by the Judicial Committee in The High Commissioner for India v. I. M. Lall (1). The Court found this argument to be without merit. The cited case did not involve a contract of personal service. In that case the respondent’s contract provided that his service was to continue at the pleasure of His Majesty, His Heirs and Successors, as signified by the Secretary of State for India. The respondent’s dismissal had been ordered by the Secretary of State for India, and because his tenure was subject to the Crown’s pleasure, he could not base a grievance on the contract of service. Instead, the respondent’s suit claimed that his dismissal from the Indian Civil Service was void because the mandatory provisions of the Government of India Act, 1935, had not been observed. The Judicial Committee accepted this statutory argument and declared that the purported dismissal was void and inoperative, so that the respondent remained a member of the Service at the date the suit was filed. The declaration therefore rested on a finding of statutory invalidity of an act, not on enforcement of a contract of personal service. The Court therefore concluded that the award’s declaration was not of the type that could be made under the law as it attempted to enforce a contract of personal service.
The appellant’s counsel further relied upon Ram Kissendas Dhanuka v. Satya Charan Law (1) to support the view that the form of declaration in the award was legally permissible. That precedent involved a suit by minority shareholders of a company against its directors, seeking a declaration that an ordinary resolution terminating the appointment of the company’s Managing Agent was void and inoperative because, under article 132 of the company’s Articles of Association, removal of the Managing Agent could only be effected by an extraordinary resolution. The High Court in that case held the ordinary resolution to be void and inoperative. The Court noted that the declaration in that matter addressed the statutory invalidity of the resolution rather than enforcing a personal service contract. Accordingly, the appellant’s reliance on that decision was deemed inapplicable to the present dispute, which centered on the enforceability of a contractual employment relationship rather than the validity of a corporate resolution.
The Judicial Committee upheld the declaration and dismissed the claim that affirming the continuance of the Managing Agent’s appointment amounted to a specific enforcement of a personal service contract in violation of section 21(b) of the Specific Relief Act, 1877. The Court observed that this decision did not apply to the present dispute because the present case did not involve a claim for specific performance of a service contract. In fact, the Managing Agent, who was the subject of the earlier case, was not a party to the present proceedings. As the Judicial Committee had explained, the decree in that earlier case merely prevented the dismissal or termination of managing agents at the behest of a majority when such action contravened the company’s articles of association, which the minority were entitled to enforce. The decree did not, in the relationship between the company and the managing agents, enforce a personal service contract. The Chief Justice of the Calcutta High Court, in his judgment in Ram Kissendas v. Satya Charan (2) at page 331, described the earlier suit as one that did not seek to enforce an employment claim against an employer, but rather to restrain third parties from interfering with the company’s employees who were performing their contracts of service with the company. In other words, the suit was intended to prevent a breach of contract rather than to compel performance of a contract, and consequently section 21 of the Specific Relief Act was inapplicable to that suit.
The counsel for the appellant also argued that the present case was analogous to an ultra vires dismissal, as in I. M. Lall’s case (1), and therefore should be governed by the same principles. He relied on the portion of the award that described the appellant’s dismissal as ultra vires. The Court found no support for this contention. No issue concerning the ultra vires nature of the appellant’s dismissal had been referred to the arbitrator. The points for decision formulated by the arbitrator did not mention any question of ultra vires dismissal. Moreover, the appellant’s letter dated 28 April 1953, which outlined the disputes for arbitration, did not allege that the respondent’s dismissal was ultra vires the respondent’s incorporating statute. Instead, the appellant contended that his dismissal had been malicious and therefore wrongful. He asserted that the dismissal resulted from a resolution of the respondent’s Executive Council, which was based on a report—also called an award—prepared by investigators Sir S. Vardachariar and Sir Tek Chand Bakshi, procured by Vice-Chancellor Dr. Sen. The appellant claimed that the Council members were denied any opportunity to discuss the merits of that report, rendering the resolution improper. Consequently, the appellant’s challenge centred on the alleged malicious and wrongful nature of the dismissal, not on any ultra vires defect in the respondent’s statutory powers.
In his own submission the appellant explained that when the award was presented before the Executive Council, Dr Sen, the Vice-Chancellor, expressly prohibited any discussion of the award, claiming that the document itself precluded debate. He further stated that Dr Sen suppressed individuals who wished to comment, because they believed that the decision, particularly concerning the allegedly altered telegram, was seriously open to doubt. The appellant observed that questions were raised regarding the award but that no answers were provided. He argued that, had Dr Sen not improperly barred discussion, the Council would not have approved the dismissal, nor would it have entertained any allegation of moral turpitude against him. Consequently, the appellant contended that his dismissal was challenged on the basis that Dr Sen, whom he described as being inimically disposed toward him, excluded all discussion of the matter and secured a resolution effecting his dismissal; the appellant claimed that this malicious and wrongful exclusion rendered the resolution itself unlawful. He did not, before the arbitrator, assert that the dismissal was ultra vires the University’s statutory powers or that it was a nullity, and the lower courts had not been presented with such a claim. The appellant’s final argument was based on section 45 of the University Act, whose wording had been set out earlier. Counsel for the appellant argued that the provision states that any dispute arising out of a contract between the University and any officer or teacher, upon request of the officer or teacher, must be referred to a Tribunal of Arbitration. Accordingly, the appellant maintained that a dispute concerning his dismissal and a claim for reinstatement could be referred to arbitration under that section, and that an arbitral award could properly order his reinstatement. To support this contention, counsel referred to the case Western India Automobile Association v. Industrial Tribunal, Bombay, in which the court held that an Industrial Tribunal, exercising power under the Industrial Disputes Act, 1947, could direct the reinstatement of discharged employees. Counsel also cited a passage from a Federal Court judgment at page 332, which observed that any dispute connected with employment or non-employment ordinarily includes all matters requiring settlement between workmen and employers, whether the matters concern the causes of service termination or any other question, and that such disputes encompass the reliefs necessary to achieve harmonious industrial relations. The appellant’s counsel argued that, analogously, the words “any dispute” in section 45 of the University Act should be interpreted to include a dispute involving a claim for reinstatement, thereby granting the arbitrator authority to order reinstatement. The Court, however, found this analogy untenable.
In this case the Court examined the suggestion that an analogy could be drawn from the wording of the Industrial Disputes Act, as cited in the decision reported at (1) [1949] F.C.R. 321. The Court observed that the Industrial Disputes Act deals with matters that are specific to that statute. It noted that the proceedings conducted before a Tribunal created under the Industrial Disputes Act cannot properly be described as arbitration proceedings, and that the decision of such a Tribunal, although termed an ‘award’ in that Act, does not carry the same meaning as the terms ‘arbitration proceedings’ and ‘award’ used in the Arbitration Act. The Court further explained that an award issued under the Industrial Disputes Act cannot be filed in a Court of law, and that the Act contains no provision permitting a party to apply to a Court for setting aside such an award. Consequently, the considerations that govern an award made under the Industrial Disputes Act cannot be transferred to an award made under the Arbitration Act. The Court then turned to the provisions of section 45 of the University Act. It stated that any arbitration conducted under that section must be governed by the Arbitration Act, 1940, and that the validity of an award arising from such arbitration must be assessed according to the rules applicable to that Act. One of those rules requires that an award must not display a patent error on its face. On the basis of this requirement, the Court concluded that the argument seeking to import the powers of the Industrial Disputes Act into the present arbitration was without foundation. Having resolved all the issues raised by the appellant, the Court considered the contention raised by the respondent. The respondent argued that the appointment of Professor Saha as the sole arbitrator was illegal. The respondent claimed that section 9 of the Arbitration Act authorized the appointment of a sole arbitrator, but the Court noted that section 9 applies only where the reference provides for two arbitrators, each to be appointed by one party. By contrast, the correct construction of section 45 of the University Act envisions a panel of three arbitrators: one nominated by each party and a third appointed by the Chancellor of the University. The High Court had already decided against the respondent on this point. However, because the appeal was to be dismissed on the ground that the award contained a patent error, the Court found it unnecessary to decide the respondent’s argument concerning the composition of the arbitral tribunal. Accordingly, the Court declined to express any view on that matter. In conclusion, the Court dismissed the appeal, ordered costs against the appellant throughout, and issued an order of dismissal of the appeal.