This appeal arises from an order dated 28.02.2012 passed by a Division Bench of the High Court of Judicature at Allahabad in First Appeal from Order Defective No. 352/2012.
The facts, in brief, are – Respondent no. 1, R.K. Pandey, was appointed as a Lab Assistant/Technician in the T.B. Section of Dina Nath Parbati Bangla Infectious Disease Hospital located at Kanpur. The Municipal Board of Kanpur set up this hospital on the land given by the Kanpur Improvement Trust in 1944-45.
On 17.07.1956, DNPBID Hospital was taken over by the State Government, that is, the Government of Uttar Pradesh, to establish a new medical college at Kanpur pursuant to a Resolution dated 17.07.1956 passed by the Administrator of the Municipal Board of Kanpur and six members of the Board of the hospital. On 29.03.1957, the State Government accepted the proposal dated 17.07.1956.
On 20.06.1961, a transfer deed was executed between the Nagar Mahapalika of the City of Kanpur and the Governor of the State of Uttar Pradesh. The said deed states that in terms of the G.O. dated 29.03.1957, the entire municipal staff of the hospital, as per the list attached to the indenture, would stand transferred to the State Government service. The staff would not be unfavourably placed as regards emoluments or other service conditions, nor suffer in the matter of emoluments, leave, age of retirement, and other benefits as compared to the terms of service of the Board.
After the settlement was executed, the hospital became a unit of Ganesh Shanker Vidyarthi Memorial Medical College, Kanpur. It is apparent that the employees working in DNPBID Hospital opted for service under the State Government and their consent was accepted. Their service records were thereafter transferred to the State Government. It was agreed that the concessions and privileges enjoyed by the staff before provincialization would continue and they would not be put to any disadvantage because of the take-over. The Board also agreed to pay Rs. 50,000/- keeping in view the liability of the Municipal Board.
Vide letter dated 09.01.1997, the Chief Medical Superintendent of the hospital informed Respondent No. 1, R.K. Pandey, that he would superannuate on 31.03.1997 and requested him to complete pension formalities. In March 1997, Respondent No. 1 filed a writ petition before the High Court claiming that he should retire at the age of 60 years instead of 58 years, relying upon the service rules applicable to the employees of the Municipal Board of Kanpur.
Pursuant to the writ petition, Respondent No. 1 was directed to make a representation, which was subsequently rejected on the ground that he had been serving under the State Government for 42 years and was governed by State Government service rules. The State Government, in its affidavit, asserted that Respondent No. 1 had acquired the status of a State Government employee and was bound by the service regulations applicable to State Government servants. It was further stated that the minimum age for entering government service is 18 years and retirement at 58 years would complete 40 years of service. Since Respondent No. 1 had completed 42 years of service, he would already be 60 years of age.
No interim order was granted in the writ petition, which remained pending until it was withdrawn on 22.04.2009. Consequently, no relief was granted therein.
During the pendency of the writ petition, on 11.01.2008, Respondent No. 1 filed an arbitration suit before the District Judge, Kanpur Nagar, relying upon an alleged arbitration agreement dated 01.04.1957 between the Administrator of DNBPID Hospital and the Governor of Uttar Pradesh. He prayed that the dispute concerning his age of superannuation and rejection of his representation dated 03.04.1997 be referred to arbitration. However, the alleged arbitration agreement had never been mentioned either in the writ petition or in the application seeking withdrawal of the writ petition. Subsequently, on 15.02.2008, Respondent No. 1 withdrew the arbitration suit.
Thereafter, on 29.11.2008, Respondent No. 1 filed two execution petitions before the District Judge, Kanpur, seeking enforcement of two ex parte arbitral awards dated 15.02.2008 and 25.06.2008 passed by Advocates Pawan Kumar Tewari and Indivar Vajpayee respectively. These proceedings were initiated against the State Government and the Principal of GSVM Medical College, Kanpur.
The first ex parte award dated 15.02.2008 decreed the claim of Respondent No. 1 for Rs. 26,42,116/- with interest at the rate of 18% per annum from 21.01.2008 against the State of Uttar Pradesh and the Principal of GSVM Medical College. The award recorded that Respondent No. 1 had appointed/nominated the arbitrator and, since the opposite party had failed to appoint an arbitrator, Pawan Kumar Tewari acted as the sole arbitrator.
The second ex parte award dated 25.06.2008 passed by Indivar Vajpayee awarded Rs. 20,00,000/- with interest at the rate of 9% per annum from 11.02.2008 in favour of Respondent No. 1 and against the State of Uttar Pradesh and the Principal of GSVM Medical College. It similarly recorded that Respondent No. 1 had unilaterally appointed the arbitrator.
Upon receiving notice in the execution proceedings, the appellants filed objections under Section 34 of the Arbitration and Conciliation Act, 1996, questioning the existence and authenticity of the alleged arbitration agreement dated 01.04.1957. The State denied the existence of any such agreement. The alleged agreement was not reflected in the transfer deed dated 20.06.1961, nor had it been mentioned in the writ petition filed in 1997 or in any earlier correspondence. It surfaced for the first time only in 2008 when Respondent No. 1 filed proceedings under Section 11 of the Arbitration and Conciliation Act seeking appointment of an arbitrator.
The objections under Section 34 were dismissed by the trial court as barred by limitation and beyond the condonable period. During the pendency of those proceedings, inquiries were made regarding the existence of the arbitration agreement. The Municipal Corporation stated that no such agreement was available on record and the photocopy supplied was unclear and incapable of verification. The agreement was not signed by Respondent No. 1, nor was he a party to it. Its authenticity therefore remained unestablished.
The High Court dismissed the intra-court appeal on the ground that the objections filed under Section 34 were time-barred.
The Supreme Court observed that intervention was necessary to prevent enforcement of awards which were null and void ab initio. Referring to Bilkis Yakub Rasool v. Union of India and Others, (2024) 5 SCC 481, the Court reiterated that fraud and justice never dwell together and no litigant should benefit from fraud practiced to secure an illegal benefit. The Court held that the so-called arbitration agreement was nowhere available in the official records of either the Municipal Corporation or the State Government. Respondent No. 1 neither possessed the original agreement nor was he a signatory thereto. Since arbitration is founded on party autonomy, the existence of an arbitration agreement is sine qua non for arbitral proceedings and enforceability of an award.
The Court reproduced the alleged arbitration agreement dated 01.04.1957 and observed that it contemplated appointment of arbitrators by the Municipal and Development Board, Kanpur, and the Governor of Uttar Pradesh. It was never the case of Respondent No. 1 that either of these parties invoked the arbitration clause. Therefore, the unilateral appointment of arbitrators by Respondent No. 1 was contrary even to the terms of the purported agreement itself.
The Court further noted the extraordinary delay in invoking the arbitration clause and initiating arbitral proceedings, especially when the writ petition concerning the same dispute had remained pending since 1997. It observed that Respondent No. 1 withdrew the Section 11 proceedings while simultaneously securing ex parte awards through self-appointed arbitrators. The claims were ex facie barred by limitation under Section 3 of the Limitation Act, 1963 read with Section 43 of the Arbitration and Conciliation Act, 1996.
The Court also referred to the Constitution Bench judgment in Central Organisation of Railway Electrification v. ECI PIC SMO MCPL (JV), 2024 INSC 857, which emphasized that arbitral tribunals must function impartially and independently and that unilateral appointment of arbitrators directly affects the fairness of arbitral proceedings. Arbitration, though an alternate dispute resolution mechanism, requires standards of impartiality no less stringent than those applicable to judges.
The Supreme Court held that even at the stage of execution, objections based on fraud and lack of subject matter jurisdiction are permissible under Section 47 CPC. It concluded that the entire arbitral process was a sham and a fraud played by Respondent No. 1 by self-appointing arbitrators who rendered ex parte and invalid awards. Respondent No. 1 was not a signatory to the alleged arbitration agreement, and neither DNPBID Hospital nor the Governor of Uttar Pradesh acknowledged the existence of such agreement.
Accordingly, the Supreme Court allowed the appeal and set aside the two ex parte awards dated 15.02.2008 and 25.06.2008, declaring them null, void, and non-enforceable in law. Consequently, the execution proceedings were dismissed and the appellants were held entitled to costs throughout.