B. Subbarama Naidu vs B. Siddamma Naidu and Others

Rewritten Version Notice: This is a rewritten version of the original judgment.

Court: Supreme Court of India

Case Number: Civil Appeal No. 12 of 1958

Decision Date: 5 April 1961

Coram: J.R. Mudholkar, Raghubar Dayal

The case entitled B. Subbarama Naidu versus B. Siddamma Naidu and others was decided on the fifth day of April, 1961 by the Supreme Court of India. The judgment was authored by Justice J. R. Mudholkar, and the bench consisted of Justice J. R. Mudholkar together with Justice Raghubar Dayal. The petitioner in the proceeding was B. Subbarama Naidu and the respondents were B. Siddamma Naidu and the other parties named in the suit. The official citation of the decision appears as 1962 AIR 671 and also as 1962 SCR Supl. (1) 784. The matter concerned the application of the Arbitration Act of 1940, specifically sections twenty‑three sub‑section one and thirty, which deal respectively with the requirement that an order of reference must specify the time within which an arbitral award is to be made, and with the circumstances in which an award may be set aside. The headnote of the judgment identified two principal questions for determination. The first question was whether the arbitral award was invalid because the trial court had failed to comply with the mandatory provision of section twenty‑three sub‑section one that requires the reference order to fix the time for the award. The second question was whether the arbitrator had erred by awarding the appellant less than a half share of the properties that were the subject of the partition suit. The Court held that, under section twenty‑three sub‑section one, it is essential that the time for making the award be fixed, but the omission of that specification in the reference order does not automatically render the reference invalid if the time limit is indicated elsewhere in the proceedings. The Court therefore concluded that where the order sheet of the court, read together with the order of reference, made clear that the arbitrator was required to file his award by the date to which the suit had been adjourned, the statutory requirement had been satisfied. The Court also referred to the decision in Raja Har Narain Singh v. Chaudbrain Bhagwant Kuar (1891) L.R. 18 I.A. 55 in support of this view. Regarding the second question, the Court held that the award could not be declared void or otherwise invalid merely because the appellant received less than his due share. The Court emphasized that it could not interfere with the arbitrator’s findings of fact or the exercise of discretion unless there was proof of dishonest conduct on the part of the arbitrator.

The appeal arose under the civil appellate jurisdiction and was numbered Civil Appeal No. 12 of 1958. It was filed by special leave against the judgment and order dated 6 April 1953 handed down by the Madras High Court in an appeal against order No. 54 of 1949. Counsel for the appellant were identified as S. T. Desai and K. R. Choudhri, while the respondents, numbered one through five, were represented by K. N. Rajagopala Sastri and T. V. B. Tatachari. The judgment was delivered on 5 April 1961. In its opening, the Court observed that the appellant, by way of a special leave petition, challenged the validity of an award made by an arbitrator appointed by the trial court in a suit concerning the partition and recovery of possession of certain properties. The appellant advanced three grounds of challenge. The first ground asserted that the reference to arbitration was itself invalid because the trial court had failed to observe the mandatory requirement of section twenty‑three sub‑section one of the Arbitration Act, 1940, which demands that the order of reference specify the time within which the award must be rendered. The second ground contended that the arbitrator had filed the award after the expiry of the time subsequently granted by the court for its filing. The third ground alleged that the arbitrator had erred in allocating to the appellant less than a half share in the properties that were the subject of the suit. The Court, after examining the material, concluded that none of these grounds possessed any substantive merit.

The appellant challenged the award on three separate grounds, contending that the arbitration process was defective and that the award itself was unjustified. The first ground alleged that the reference to arbitration was invalid because the Court had failed to comply with section 23(1) of the Arbitration Act, 1940, by not specifying a deadline for the award. The second ground asserted that the arbitrator had submitted his award after the deadline that the Court later extended, thereby violating the time limit that had been fixed. The third ground claimed that the arbitrator incorrectly allocated to the appellant less than an equal half of the share in the properties that were the subject of the suit. The Court examined each of these contentions and concluded that none of them possessed any substantive real merit. It first observed that section 23(1) unquestionably requires that any order referring a dispute to an arbitrator must contain a specified period within which the award must be rendered. The requirement to fix the time is mandatory, but the Court held that omitting the deadline in the reference order does not automatically invalidate the reference. If the deadline is fixed in another order or entry in the record, the reference remains therefore effective. The Court also relied on the decision in Raja Har Narain Singh v. Chaadhrain Bhagawant Kuar and another, a case heard under the Code of Civil Procedure. The Privy Council held that although the provision is mandatory, a failure to specify the deadline in the reference order is not fatal if the Court fixes a hearing date that sets the award time. The Privy Council emphasized that the essential requirement is the fixation of a time, not necessarily its inclusion in the initial reference order. The Court noted that, similar to the present case, the reference was later followed by several orders that extended the time and thereby established a new deadline for the award.

The Court then examined the court’s B‑Form Diary, which recorded that the dispute was referred to arbitration on 22 January 1948. The diary entry for that date read: “Subject matter of suit is referred to Arbitration on joint petition. Call on…… 24‑2‑1948”. The phrase “call on” was interpreted by the Court to indicate that the arbitrator was expected to file his award by the date to which the suit was adjourned, namely 24 February 1948. Reading this diary notation together with the formal order of reference, the Court concluded that a definitive deadline for filing the award had indeed been fixed for 24 February 1948. Consequently, the mere omission of that date from the written order of reference did not invalidate the arbitration reference. Regarding the allegation that the arbitrator failed to file the award within the prescribed period, counsel for the appellant argued that despite the deadline, the award was not filed until after the extended date. The Court observed that the appellant’s contention centered on the arbitrator’s delay beyond the deadline that had been subsequently extended by the Court. Having established that the reference itself was valid, the Court indicated that the issue of the arbitrator’s lateness would be addressed on the basis of the procedural record and the extensions granted. The Court therefore determined that the appellant’s first two grounds concerning procedural defects could not succeed, and the focus would shift to the substantive allocation of shares.

In this case, the Court noted that the entry in the B Form Diary showed that on 24 February 1948 the suit had been adjourned to 25 March 1948 and that the remark “call on” preceded the mention of the adjourned date. The High Court interpreted this to mean that the Court had extended the time for filing the arbitral award on 24 February 1948 to 25 March 1948. The diary entry dated 25 March 1948 recorded the request for further time, stating “Further time wanted. File Award 23‑6‑1948”. Subsequent entries documented that the Court again extended the filing date on three occasions: “23‑6‑1948 Call on … 28‑6‑1948”, “28‑6‑1948 Call on … 6‑7‑1948”, and “6‑7‑1948 Award filed. Objections 13‑7‑1948”. From these entries it was clear that the Court had granted extensions on three separate occasions, and that the award was ready on 28 June 1948 but was actually filed in Court on 6 July 1948. Counsel for the appellant tenuously argued that an application had been made to the Court on 2 July 1948, before the award was filed, seeking supersession of the arbitration, and therefore the award could not be filed thereafter. The Court held that a mere application of that nature could not affect the reference, especially because the award had already been prepared before the application was filed, rendering the attempt to supersede the arbitration untimely. Regarding the substantive dispute over the land, the High Court had concluded that although the portion of land allotted to the appellant was less than one‑half of the total land in suit, there was no evidence to show that its value was likewise less than one‑half of the total value. The Court agreed that, on the record, it could not be said that the appellant had received less than his due share. The Court then examined the statutory framework under section 30 of the Act, which permits setting aside an award only on three grounds: (a) misconduct by an arbitrator or umpire; (b) issuance of an award after a Court order superseding the arbitration or after the arbitration became invalid under section 35; and (c) an award that is improperly procured or otherwise invalid. The Court found that the appellant’s objection did not fall within sub‑clause (a) or sub‑clause (b), nor within the first part of sub‑clause (c). The only remaining question was whether the objection could be placed within the second part of sub‑clause (c), that is, whether the award was “otherwise invalid”. Counsel argued that the award was bad on its face, but the Court expressed difficulty in understanding how the award could be considered bad on its face. Consequently, the Court concluded that the objection could not be sustained under the statutory grounds provided.

When a dispute is referred to arbitration, the arbitrator is required to resolve it according to his best judgment and to act honestly. In the present case, the arbitrator, after considering the evidence, allocated to the appellant certain parcels of land whose combined area was less than one half of the whole property that was the subject of the suit. The appellant contended before the arbitrator that he was entitled to receive one half of the entire land. Despite hearing that specific contention, the arbitrator issued an award that reflected a division of the land that was less than the half claimed by the appellant. The record contains no allegation or indication that the arbitrator acted dishonestly or with improper motive in making that determination. Accordingly, the argument that the award was “bad on its face” could not be sustained, because the award was not the product of misconduct or a manifest error of law. The Court, agreeing with the view expressed by the High Court, dismissed the appeal and ordered the appellant to pay the costs of the respondent who had contested the award. The appeal was therefore dismissed.