N.H.BHATT - (1.) THIS appeal has been filed under sec. 39 of the Indian Arbitration Act 1940 by the Union of India owning and representing the Western Railway against the respondent who had filed a Misc. Applica- tion No. 5g of 1967 in the court of the Civil Judge (S. D.) Porbandar under sec. 30 of the said Act for setting aside the award dated 1st April 1967 by the original non-applicants Nos. 1 and 2 the arbitrators. THIS first appeal had originally come before the learned Single Judge of this Court who having found that the ruling reported in the case of VINAYAK VISHNU SAHASRABUDHE V. G. GADRE AND OTHERS A.I.R. 1959 BOMBAY 39 was not good law had referred the same to the Division Bench.
(2.) THE facts of the case are that the present respondent M/s. Karsha- ndas Jethabhai and Company had undertaken some contract work of the Railways and a dispute had arisen between this Company and the Railways regarding certain amounts of payment. As per the agreement contained in the arbitration clause the matter was referred to the arbitration of one Shri S. K. Iyer Deputy Chief Engineer (South and Central) Western Railway and Shri N. K. Rewari Deputy Financial Adviser Western Railway Churchgate Bombay. After hearing both the parties and after affording an opportunity to both the sides to lead whatever evidence they wanted to lead the arbitrators had given their award on 1st April 1967 which was got filed by the original applicant-the contractor by filing an application before the court under sec. 14 of the Act THE award was accordingly filed by the arbitrators and then the contractor filed their objections Ex. 13 on 7 August 1967 praying for the setting aside of the award as per sec. 30 and (c) of the Act. THE said prayer was resisted by the Union of India before the trial Judge but no evidence was led before the court. THE court held that the arbitrators were duly appointed but set aside the award on the ground that the arbitrators and no jurisdiction in so far as they had failed to appoint an Umpire before proceeding with arbitration as per clause 63(3) (b) of the General Conditions of the Contract as laid down in Book of 1955 governing the relevant contract and also under the pro- visions of the Indian Arbitration Act. Against this setting aside of the award by the trial court the present appeal has been filed by the Union of India.
(3.) AS far as the question on the basis on which the award in question is set aside be the trial court is concerned the earlier Bombay view reported in the case of Vinayak Vishnu (Supra) referred to above has been set at naught by the subsequent Division Bench of the Bombay High Court which held that the view expressed in the case was no longer good Law. The case of Vinayak Vishnu (Supra) was decided by the Single Judge of the Bombay High Court. The said case came to be reviewed by the Division Bench of the Bombay High Court in the case of M/S. MODERN BUILDERS V. HUKMATRAI N. VADIRANI A.I.R. 1967 BOMBAY 373. Interpreting Clause 2 of the first schedule the Division Bench held that the provision of the said clause regarding the appointment of an umpire are merely directory and not mandatory. The Division Bench in this connection has observed as under : Although an umpire has no function to perform in the absence of a dis- agreement between the arbilrators or their failure to make an award in the time allowed the terms of clause 2 clearly show that the Legislature intended that the arbitrators shall appoint an umpire as a matter of course irrespective of whether they do or do not agree with each other. Mr. Dhanuka pointed out in this connection that prior to the Arbitration Act of 1940 it was not obligatory on the arbitrator when they were even in number to appoint an umpire. The corresponding clause in the First Schedule to the Indian Arbitration Act of 1899 provided that the arbitrators may appoint an Umpire at any time within the period during which they have power to make an award. In clause 2 of the First Schedule of the Arbitration Act of 1940 the language was changed and it was provided that the arbitrators shall appoint an Umpire not later than one month from the latest date of their respective appointments. The change was undoubtedly deliberate and it appears to have been made because the Legislature felt that the arbitrators if they rail to agree on the matters referred to them may also disagree on the nomin- ation of an Umpire and that it was desirable that they should nominate an umpire soon after they are appointed arbitrators. Relying on this legislative history Mr. Dhanuka argued that the use of the word shall in clause 2 of the First Schedule instead of the word may which appeared in the corresponding clause of the earlier Act showed that the Legislature intended that the provision of clause 2 should be mandatory and not directory. We do not agree that the use of the word shall is decisive of the question. When the Legislature had used the word may in the former clause the appOintment of an Umpire by the arbitrators was discretionary. With the use of the word shall in the present clause the appointment has been made obligatory. It is however obvious that an obligatory rule may be either mandatory or directory depending upon whether the Legislature intended that non-compliance with the rule should or should not result in the nullification of subsequent proceedings. The real question therefore is whether the legislature intended that the failure of the arbitrators to appoint an empire should result in depriving them of the power to proceed with the arbitration an in rendering in- valid any award made by them. We are in perfect agreement with the view expressed by the Division Bench of the Bombay High Court and we also hold that the terms of the cont- ract which are in pari materia with clause 2 of the First Schedule of the Arbitration Act cannot be interpreted in such a way that the non-compliance with which would set at naught the award given by arbitrators.;