# '; . I":.• THE STATE OF BIHAR v. M/s. KARAM CHAND THAPAR &' BROTHERS LTD. ''

- **Citation:** [1962] 1 S.C.R. 827
- **Court:** Supreme Court of India
- **Decided:** 1962
- **Case number:** Civil Appeal No. 209 of 1959
- **Source:** https://unisonlegal.in/judgment/supreme-court-of-india/i-the-state-of-bihar-v-m-s-karam-chand-thapar-brothers-ltd-2096
- **Pages:** 9

## Headnote

·' t. i
tl 'S;C:R. SUPREME 'COURT REPORTS
827
'; .
I":.•
THE STATE OF BIHAR
v.
M/s. KARAM CHAND THAPAR &'
BROTHERS LTD. ''
(S. Ki DAS, J. L. KAPUR, M. H,I.DA~ATULLAH,
J. 0. SHAH and T. L. VENKATARAMA Ai)'A~, JJ.),
Stamp-Award-Arbitrator sending cop,ies of the award to
parties and to the court, duly signed-Validation of unstamped
award-Decree passed thereon-Validity-Indian Stamp Act, I899
(2 of 1899), S, 35·
.
Arbitration-Agreement to refer to arbitration-:Execution on
behalf of Governor by person specifically ~uthorized-Requirements
ofauthorization-Government of India Act, 1935 (25 & 26 Geo. 5
Ch, 42), s. I75(J).
, A dispute between the respondent company and 'the
Government of Bihar over the bills for the amount payable to
the company in respect of the construction works carried out
by it for the Government was referred to arbitration. The
agreement to refer to arbitration was executed .on behalf of the
Go.vernor by L, an executive engineer, who had been specifically authorised to do so by a Secretary to, the Government.
The arbitrator made his award an.d sent copies thereof to the
parties. The respondent applied to the C9urt under the provisions of the Arbitration Act, 1940, for a decree in terms of the
award.. The State filed objections thereto and the matter was
registered as a suit. While the suit was pending. the arbitrator
sent to the court a copy of the a'Y.ard duly signed by him for
being filed as provided in the Ad, and on .the receipt thereof
the respondent had it validated on payment of the req:'iisite
stamp duty under s. 35 of the ·Indian Stamp Act, 1899. The
appellant, the State of .Bihar, ,conteftded .that no decree could be
passed on the basis of the award. op the grounds (1) that the
agreement) or' reference to arbitration did not comply with the
requirements of s. r75(3) of the Government of India Act, 1935,
inasmuch as it was not signed by the person 1authoris'ed to do so
tlnder the notification issued by the'1Government of Bihar on
April r, 1937, in exercise of the ·powers conferred by s.,175(3);
and (2) that the instrument before th~ court was a certified copy
and that under .s. 35 of the ,Indian Stamp Act, 1899, a copy
could not be validated or acted~upon.
· ·
'
Held, tha~ s. r75(3) of the Government of' India Act, 1935,
does not prescribe any particular mode in which authority
must be conferred and that where authorisation is·· conferred
ad hoc on any· person, the requirements of the section must be
held to be satisfied.
April 7.
'
828
SUPREME COURT REPORTS
[1962;)
' -- '
State of Bihar
v.
Karam Chand
Thapar 0,
Brothers Ltd.
'
Held, further, that the award sent by the arbitrator to the
court was the original and not a copy of the award and by
applying the provisions .of s. 35 of the Indian Stamp Act, 1899,
it was effectively, validated.
The Rajah of Bobbili v. Inuganti china Sitaramasami Garu,
(1899) L.R. 26 I.A. 262, referred to.

## Text

·' t. i
tl 'S;C:R. SUPREME 'COURT REPORTS
827
'; .
I":.•
THE STATE OF BIHAR
v.
M/s. KARAM CHAND THAPAR &'
BROTHERS LTD. ''
(S. Ki DAS, J. L. KAPUR, M. H,I.DA~ATULLAH,
J. 0. SHAH and T. L. VENKATARAMA Ai)'A~, JJ.),
Stamp-Award-Arbitrator sending cop,ies of the award to
parties and to the court, duly signed-Validation of unstamped
award-Decree passed thereon-Validity-Indian Stamp Act, I899
(2 of 1899), S, 35·
.
Arbitration-Agreement to refer to arbitration-:Execution on
behalf of Governor by person specifically ~uthorized-Requirements
ofauthorization-Government of India Act, 1935 (25 & 26 Geo. 5
Ch, 42), s. I75(J).
, A dispute between the respondent company and 'the
Government of Bihar over the bills for the amount payable to
the company in respect of the construction works carried out
by it for the Government was referred to arbitration. The
agreement to refer to arbitration was executed .on behalf of the
Go.vernor by L, an executive engineer, who had been specifically authorised to do so by a Secretary to, the Government.
The arbitrator made his award an.d sent copies thereof to the
parties. The respondent applied to the C9urt under the provisions of the Arbitration Act, 1940, for a decree in terms of the
award.. The State filed objections thereto and the matter was
registered as a suit. While the suit was pending. the arbitrator
sent to the court a copy of the a'Y.ard duly signed by him for
being filed as provided in the Ad, and on .the receipt thereof
the respondent had it validated on payment of the req:'iisite
stamp duty under s. 35 of the ·Indian Stamp Act, 1899. The
appellant, the State of .Bihar, ,conteftded .that no decree could be
passed on the basis of the award. op the grounds (1) that the
agreement) or' reference to arbitration did not comply with the
requirements of s. r75(3) of the Government of India Act, 1935,
inasmuch as it was not signed by the person 1authoris'ed to do so
tlnder the notification issued by the'1Government of Bihar on
April r, 1937, in exercise of the ·powers conferred by s.,175(3);
and (2) that the instrument before th~ court was a certified copy
and that under .s. 35 of the ,Indian Stamp Act, 1899, a copy
could not be validated or acted~upon.
· ·
'
Held, tha~ s. r75(3) of the Government of' India Act, 1935,
does not prescribe any particular mode in which authority
must be conferred and that where authorisation is·· conferred
ad hoc on any· person, the requirements of the section must be
held to be satisfied.
April 7.
'
828
SUPREME COURT REPORTS
[1962;)
' -- '
State of Bihar
v.
Karam Chand
Thapar 0,
Brothers Ltd.
'
Held, further, that the award sent by the arbitrator to the
court was the original and not a copy of the award and by
applying the provisions .of s. 35 of the Indian Stamp Act, 1899,
it was effectively, validated.
The Rajah of Bobbili v. Inuganti china Sitaramasami Garu,
(1899) L.R. 26 I.A. 262, referred to.
CIVIL APPELLATE JURISDICTION:
Civil Appeal No.
209 of 1959.
Appeal from .. the judgment and order dated October 5, 1956, of the Patna High Court in Miscellaneous
Appeal No. 367 of 1953.
L. K. Jha and R. C. Prasad, for the Appellant.
M. C. Setalvad, Attorney-General for India, N. De
" •
and P. K. Mukherjee, for the respondents.
1961. April 7.
The Judgment of the Court was
delivered by
Venkatarama
VENKATARAMA AIYAR, J.-This is an appeal against
Aiyar J.
the Judgment of the High Court of Patna in an
appeal under the Arbitration Act, 1940. The appellant is the State of Bihar, and the respondents am a
company registered under the Indian Companies Act,
doing business as building contractors. They entered
into three contracts for the construction of aerodrome,
hangarettes, buildings, stores and other works at
Ranchi, the first of them being contract No. 21 of
1942 dated November 5, 1942, and the other t.wo
being contracts Nos. 6 and 8 dated April 5, 1943.
After the above works were completed, disputes arose
between the parties over the bills and eventually by
an agreement dated February 6, 1948, they were
referred to the arbitration of one Col. A. W. s: Smith.
The arbitrator made his award on June 4, 1948, and
sent a copy thereof to the parties. The respondents
thereupon filed a petition \mder ss.- 17 and 20 of the
Indian Arbitration Act, 1940, for' a depree in terms of
the award. The appellant filed objections thereto,
and the petition was then registered as Title Suit No.
53 of 1951. While this suit was pending, the 11rbjtrator who had meantime left for Hong Kong sent to
the court of the Additional Subordinate Judge of
•
) "
1 S.C.R. SUPREME COURT REPORTS
829
Ranchi , before whom the suit was pending a copy of
the award duly signed by him, for being filed as pro-
'vided in the Act. Notices were issued by the court
under s. 14(2) of the Act, and, in an'swer thereto, the
appellant filed an application to set aside the award
on various grounds. To this, the respondents filed
their reply statement. In view of this application,
the respondents did not press their . petition under
ss. 17 and 20 of the Arbitration Act, which was in
consequence dismissed, and the proceedings which
commenced with the receipt of the award from the
arbitrator were continued as Title Suit No. 53of1951.
After an elaborate trial the Additional Subordinate
Judge, Ranchi, passed a decree in terms of the award
except as to a part which he held to be in excess of
the claim. The appellant took the matter in appeal
to the' High Court of Patna which confirmed the
decree of the Subordinate Judge but granted a certificate under Arts. 132 and 133(1) of the Constitution,
and hence this appeal.
Though -the controversy between the parties ranged
in the courts below over a wide area, before us, it was
restricted to two questions-whether there was a
valid agreement of reference to arbitration binding on
the Government and whether a decree could be passed
on the unstamped copy of the award filed in the
court. On the first question, the appellant contends
that the agreement for reference to arbitration does
not comply with the requirements of s. 175(3) of the
Government of India Act, 1935, which was the Constitutional provision in force at the relevant date,
and it is therefore void, that the a ward passed in
proceedings founded thereon is a nullity and th"'t
no decree should be passed in terms thereof. Section 175(3) is as follows:-
"Subject to the provisions of this Act with respect to the Federal Railway authority, all contracts
made in the exercise of the executive authority of
the Federation or of a province shall be expressed
to be made by .. the Governor-General, or by the
Governor· of the Province, as the case may be, and
all such contracts and , all assurances of property
r96r
Staie of Bihar
v,
I<aram Chand
Thapar &
Brothers 'Lfd.
V enkatarama
Aiyar J.
196I
State of Bihar
v.
Kararn Chand
Thapar '"'
Brothers Ltd.
Venkatarama
Aiyar J.
830
SUPREME COURT REPORTS
'[1962]
made in the exercise of that authority shall be
executed on behalf of the · Governor-General or
Governor by such persons and in such manner as
he may direct or authorise."
Under this section, a contract entered into by the
Governor of a Province must satisfy three conditions.
It must be expressed to be made by the Go-Vernor; it
must be executed; and the execution should be by
such persons and in such manner as the Governor
might direct or authorise. We have now to e:i;;amine
whether the agreement to refer to arbitration dated
February 6, 1948, satisfies the ab~ve conditions. It
is expressed to be made between the Governor of
Bihar and the respondents. It is also a formal document executed by one Y. K. Lall, Executive Engineer, Ranchi Division, and by the respondents .. So the
only point that remains for consideration is whether
the Executive Engineer was.a person who was directed
or authorised by the Governor to execute the agreement in question. The appellant contends that he
was not, and relies in support of his contention on a
notification dated April 1, 1937, issued by the Government of Bihar. That notification, in so far as it is
material, is as follows:
"In exercise of the powers conferred by sub-section (3) of section 175 of the Governmen~ of India
Act, 1935, the Governor of. Bihar is pleased, in
supersession of all existing orders, to direct that the
undermentioned classes of deeds, contracts and
other instrument may be executed on his behalf as
follows:-
A.
In the case of the Public Works Department
{subject to any limit fixed by Departmental orders).
·································
2.
All instruments relating to the execution of
works of all kinds connected with buildings, bridges,
roads, canals, tanks, reservoirs, docks and harbours
and embankments,
and
also instruments relating
By Secretaries to
Government, Chief
Engineers, Superintending Engineers,
Divisional Officers,
Sub-divisional Offieers, Assistant or
Assistant Executive
I ..
• , .. ;
/
' ...
hS.C.R.
SUPR.1£~E COURT .REPORTS
831
to the construction of water
:work's, se\vage works, the
erection of machinery, and
the working of coal mines.
12. All deeds and instruments relating to any
matters other .than those
. specified in heads 1 to 11.
Engineers, and the
Electric Inspector .
By Secretaries and
Joint Secretaries to
Gove.rnment".
There was a discussion in the courts below as to whether the present agreement fell within item 2 or item
12. l£ the :agreement could be held to be an instrument.'J'elati!)g to the execution of works, it would fall
withimitem 2; and the Executive Engineer would be a
person authorised under this notification to enter into
this contract; but. if it does not fall within that item,
it: must. fall within entry 12, in which case he would
not be competent to execute the agreement. Both the
courts below have held that the· agreement to refer to
arbitration was not one relating to execution of works
as that had been completed and the dispute related
only to payment of the bills, and that further the
esse,ntial feature of an arbitration agreement was the
constitution of a private Tribunal and it could not
therefore·be brought within item 2 and that accordingly itfe'!U within item 12. But the learned Judges
of.the Rig& Court were also of the opinion that Y. K.
Lall, the Executive Engineer had in fact been specifically authorised to execute ·the arbitration agreement,
and that that was sufficient for the purpose of
s. 175(3); .!rhe appellant impugns the correctness of
this conclusion and contends that it is not warranted
by the record. · I:t becomes, therefore, necessary to
refer in some detail to the correspondence bearing on
this point. On July 26, 1947, Mr. Murrel, Secretary
to,the Government, wrote to Col. Smith as follows:
"I am directed to say that the Government of
Bihar propose to appoint you as Arbitrator for the
settlement of a claim put forth by Messrs. Karam
Chand Thapar and Brothers Limited in connection
. ;with, the ,Qonstruction of the Hinoo Aerodrome at
. ,;l;ta~(l]ii--,J ob108 ...... ~f,you.agree tq undertake the
State of Bihar
v.
Karam Chand
Thapar &
Brothers Ltd.
Venkatarama
Aiyar ] .
I96I
State of Hihar
v.
J(aram Chand
Thapar &
Brothers Ltd.
V enkatarama
Aiyar ].
SUPREME COUR1' REPORTS
[1962]
work, ...... the necessary forms of acceptance of
appointment of Arbitrator etc. may please be forwarded to this Department for completion by the
Government of Bihar and by the Contractor."
To this, Col. Smith sent a reply agreeing to act as
arbitrator. In that letter he also suggested that the
contract between the parties might be suitably
amended so as to permit arbitration. This is significant, because under cl. 23 of the contract, all disputes
between the parties had to be referred to the Superintending Engineer whose decision was to be final,
and if that had- been amended as suggested, the
arbitration clause would have become part of the
original contract and there would have been no occasion for the present contention. Referring. to the
above suggestion for amending the agreement, the
Secretary, Mr. Murrel, wrote on September 5, 1947,
to Col. Smith that the opinion of the Legal Remembrancer would have to be got. On January 19, 1948,
Col.
Smith wrote to the Secretary that he was ready
to take up his duties as arbitrator and ·again desired
that the contract should be amended so as 'to provide
for arbitration. On January 27, 1948,'the Secretary to
the Government informed Col. Smith that opinion had
been received from the Legal Remembrancer that an
agreement for arbitration should be executed in accordance with the provisions of the Arbitratioll. Act and
that a "draft agreement (copy enclosed) has been
drawn up accordingly and steps are being taken to
execute it as quickly as possible". On the same date,
the Executive Engineer wrote to the respondents as
follows:-
"It has since been decided by Government to
determine your claims in connection with the above
through arbitration conducted in accordance with
the provisions of the Arbitration Act I of 1940.
You are therefore requested to please attend the
Divisional Office immediately to execute necessary
agreement for the purpose.''
·
Pursuant to this letter, the respondents joined hi the
execution of the agreement dated February 6, 1948,
along with' the Executive ~ngineer for referring the
•..
' •
I
•
..
t ..
I S.C.R. SUPREME COURT REPORTS
833
dispute to arbitration. On February 25, 1948, the
Secretary informed the arbitrator that the draft agreement had been slightly modified in consultation with
the Government Pleader, and he also wrote to the
Executive Engineer that certain formal corrections
should be made in the agreement and signed by both
the parties. And that was done.
Having carefully gone through the correspondence,
we agree with the learned Judges of the High Court
that the Executive Engineer had been ·authorised by
the Governor acting through his Secretary to execute
the agreement for reference to arbitration. It will be
seen that it was the Secretary who from the very
inception took the leading part in arranging for
arbitration. He was throughout speaking in the
name of and on behalf of the Government and he
did so "as directed". The subject-matter of the
arbitration was a claim which concerned the Government. The proposal at the earlier stages to amend
cl. 23 of the original contract so as to include an
arbitration shows that the intention of the parties was
to treat the agreement for arbitration as part and
parcel of that contract. Even after the agreement
was executed, the Secretary made corrections and
modifications in the agreement on the basis that it
was the Government that was a pa:rty thereto. The
conclusion from all thfa is, in our judgment, irresistible that Y. K. Lall, the Executive Engineer had ·
been authorised to execute ·the agreement dated
February 6, 1948.
It was suggested that the Secretary was possibly
labouring under a mistaken notion that the agreement
to refer to arbitration was covered by item 2 and
acting under that misconception he directed Y. K.
Lall to execute the agreement. Even if that were so,
that would not .make any difference in the position;
because the Secretary undoubtedly did intend that
Y. K. Lall should execute the agreement and that is
all that is required under s. 175(3).
It was further argued for the appellant that there
being a Government notification of a formal character,
105
State of Bihar
v.
Karam Chand
Thapar &-
Brothers Ltd.
V 1nkatarama
.A.iyar ].
State of Bihar
.v.
Karam Chand
Thapar &
Brolhers Ltd.
Venkataran1a
Aiyar ].
834
SUPREME COURT REPORTS
[1962]
we should not travel outside it and find authority in
a person who is not authorised thereunder. But
s. l 75(3) does not prescribe any particular mode in
which authority must be conferred. Normally, no
doubt, such conferment will be by notification in the
Official Gazette, but there is nothing in the section
itself to preclude authorisation being conferred ad hoc
on any person, and when that is .established, the
requirements of the section must be held to be satisfied. In the result, we hold that the agreement dated
February 6, 1948, was executed by a person who was
authorised to do so by the Governor, and in consequence there was a valid reference to arbitration.
It is next contended that as the copy of the
award in court was unstamped, no decree could have
been passed thereon. The facts are that the arbitrator
sent to each of the parties a copy of the award signed
by him and a third copy also signed by him was sent
to the court. The copy of the award which was sent
to the Government would appear to have been insufficiently stamped. If that had been produced in court,
it could have been validated on payment of the
deficiency and penalty under s. 35 of the Indian Stamp
Act, 1899. But the Government has failed to produce
the same. The copy of the award which was sent to
the respondents is said to have been seized by the
police along with other papers and is not now avail-
. able.
When the third copy was received in court,
the respondents paid the requisite stamp duty under
s. 35 of the Stamp Act and had it validated. Now
the contention of the appellant is that the instrument
actually before the court is, what it purports to be, "a
certified copy", and that under s. 35 of the Stamp Act
there can be validation only of the original, when it is
unstamped or insufficiently stamped, that the document in court which is a copy cannot be validated and
"acted upon" and that in consequence no decree could
be passed thereon. The law is no doubt well-settled
that the copy of an instrument cannot be validated.
That was held in 'l.'he Rajah of Bobbili v. Inuganti
China Sitaramasami Garu (1), where it was observed:
(1) (1899) L.R. 26 I.A. 262.
•
•
..
I-
..J.
j
)
•
, ,
I S.C.R. SUPREME COURT REPORTS
835
"The provisions of this section (section 35) which
allow a document to be admitted in evidence on
payment of penalty, have no application when the
original document, which was unstamped or was
insufficiently stamped, has not been produced; and,
accordingly, secondary evidence of its contents cannot be given. To hold otherwise would be to add
to the Act a provision which it does not contain.
Payment of penalty will not render secondary
evidence admissible, for under the stamp law
penalty is leviable only on an unstamped or insufficiently stamped document actually produced in
Court and that law does not provide for the levy of
any penalty on lost documents".
Therefore the question is whether the award which
was sent by the arbitrator to the court is the original
instrument or a copy thereof. There cannot, in our
·opinion, be any doubt that it is the original and not
a copy of the award. What the arbitrator .did was to
prepare the award in triplicate, sign all of them and
send one each to the party and the third to the court.
This would be an original instrument, and the words,
"certified copy" appearing thereon are a mis-description and cannot have the effect of altering the true
character of the instrument. There is no substance
in this contention of the appellant either. In the
result, the appeal fails and is dismissed with costs.
Appeal dismissed.
State of, Bihar
v.
Karam Chand
Thapar &.
BrOthers Ltd.
Venhataranta
Aiyar ].