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Manilal Motilal Vs. Gokaldas Rowji - Court Judgment

LegalCrystal Citation
SubjectArbitration
CourtMumbai
Decided On
Case Number O.C.J. Appeal No. 12 of 1920
Judge
Reported inAIR1921Bom310; (1920)22BOMLR1048
AppellantManilal Motilal
RespondentGokaldas Rowji
DispositionAppeal allowed
Excerpt:
civil procedure code (act v of 1008), order viii, rules 8 and 9; order xxiii, rule 3; second schedule, paras 1 to 17 - arbitration- reference to arbitration after suit -award-adjustment or compromise of the suit-decree in terms of the award-practice-procedure.;after the plaintiffs had filed a suit against the defendants, the matters in dispute were referred to arbitration. the plaintiffs attended the first meeting held before the arbitrator, and subsequently wrote to the arbitrator, before the second meeting was held, that they revoked his authority as arbitrator and cancelled the submission, the arbitrator notwithstanding made his award. the plaintiffs then moved for an ex parts decree on the ground that the defendants had not filed their written statement in the suit. the court of first.....norman macleod, kt., c.j.1. the plaintiffs died this suit against the defendants claiming rs. 2,925 as damages for breach of a contract dated the 10th duly 1917. by an agreement of reference, dated the 25th september 1919, the matters in dispute were referred to the sole arbitration of one ramchander pitamber without the intervention of the court. the first meeting before the arbitrator was held on the 17th october: the next on the 29th november when only the defendants were present. the arbitrator made his award on the 30th november allowing rs. 1750 for damages and rs. 50 for costs to the plaintiffs. meanwhile the plaintiffs had written, on the 25th' november, to the arbitrator that they revoked his authority as arbitrator and cancelled the submission. the plaintiffs then moved for an.....
Judgment:

Norman Macleod, Kt., C.J.

1. The plaintiffs died this suit against the defendants claiming Rs. 2,925 as damages for breach of a contract dated the 10th duly 1917. By an agreement of reference, dated the 25th September 1919, the matters in dispute were referred to the sole arbitration of one Ramchander Pitamber without the intervention of the Court. The first meeting before the arbitrator was held on the 17th October: the next on the 29th November when only the defendants were present. The arbitrator made his award on the 30th November allowing Rs. 1750 for damages and Rs. 50 for costs to the plaintiffs. Meanwhile the plaintiffs had written, on the 25th' November, to the arbitrator that they revoked his authority as arbitrator and cancelled the submission. The plaintiffs then moved for an ex, parte decree on the ground that the defendants had not filed their written statement, but the defendants were given time to enable them to file the award. On the 21st January 1920 the defendants gave notice that they would move that the award should be recorded as an adjustment or compromise of the suit, and for a decree being passed in terms thereof. The motion was heard before Kajiji J. who dismissed it on the ground that the award could not be recorded as an adjustment under Order XXIII, Rule 3, while as the agreement to refer had been made without the intervention of the Court, the application could not be made under the Second Schedule of the Civil Procedure Code.

2. This brings before us a question which has caused much difference of judicial opinion. We are dealing with an agreement to refer made by the parties to a suit without the intertion of the Court, followed by an award. We are not concerned with what may be the rights of the parties when an agreement to refer has been made and nothing further has been done. Clearly that cannot be recorded as an adjustment. If the parties wish to make it an order of Court they can do so under Part 1 of the Second Schedule. Here there has been an award, the validity of which is disputed by one of the parties. It was held in Pragdas v. Girdhardas I.L.R. (1901) Bom. 76 : 1882 Bom. L.R. 431 that such an award could be recorded as an adjustment under Section 375 of the Code of 1882, corresponding to Order XXIII, Rule 3, of the present Code. There was a conflict of decisions between the Calcutta, Madras and Bombay High Courts on the one side and the Allahabad High Court on the other on the question whether the Court could pass a decree on an adjustment except with consent of the parties, and the addition of the words 'where it is proved to the satisfaction of the Court' have been added to set at rest that conflict. If, then, an award is disputed, can a party ask the Court to try the question whether or not the award is valid, and if proved to be valid, to pass a decree in accordance therewith? This was doubted by Beaman J. in Rukhanbai v. Adamji I.L.R (1908) Bom. 69 : 10 Bom. L.R. 336 as the learned Judge thought that an application could only be made under Order XXIII, Rule 3 where the parties had accepted the award. In Shavakshaw v. Tyab Haji Ayub I.L.R (1916) Bom. 836 : 18 Bom L.R. 559. I held that Section 89 excluded any such applications being made under Order XXIII, Rule 3 as that section directed that all references to arbitration whether by an order in a suit or otherwise, and all proceedings thereunder should be governed by the provisions contained in the Second Schedule save so far as it was otherwise provided by the Indian Arbitration Act, 1899, or by any other law for the time being in force. In Harakhbai v. Jamnabai I.L.R (1912) Bom. 639 : 15 Bom. L.R. 340 it was held by Davar J. that Order XXIII, Rule 3, came within the definition of 'any other law for the time being in force' but with all due respect for that learned Judge I cannot agree. In the first place Order XXIII, Rule 3 makes no mention whatever of references to arbitration and I do not think it was ever intended by the Legislature that it should apply to arbitration proceedings as such. It is only by treating an agreement to refer combined with the award as an adjustment by lawful agreement or compromise that arbitration proceedings can possibly be brought within the scope of that rule. But beyond that it would be contrary to all canons, of construction of statutes that, where an Act lays down that certain proceedings should be governed by the provisions contained therein relating thereto, save where provision was made by some other law in force, the provisions of the Act itself should be considered as laying down 'some other law for the time being in force'. The words 'except as provided for in this Act' would have to be used. If, then, references to arbitration made otherwise than by an order in a suit, as the reference in this case was and all proceedings thereunder, are to be governed by the provisions of the Second Schedule, unless the Indian Arbitration Act or some other Act applies, and no such Act applies to this case, we must look to the Second Schedule to see whether any of its provisions lays down the procedure to be followed by the parties to this reference. It has been contended that none of the provisions covers the case of an agreement to refer made by the parties to a suit without the intervention of the Court. In Harivallabhdas Kalliandas v. Utamchand Manekchand I.L.R.(1879) Bom. 1 : 15 Bom. L.R. 340 it was held that an agreement to refer by parties to a suit could be filed under Section 523 of the Code of 1882. The Court was of opinion that Section 525 also contemplated arbitration without the intervention of the Court by 'any person' and with respect to 'any matter' and contained no express exception as to parties to a suit or to matters in litigation in a suit actually pending. It was remarked that the procedure in such cases, as provided by Sections 523 and 525, viz. that the application should be numbered and registered as a suit was not the best adapted to a case where the matter was already before the Court, and would necessitate an application for stay of proceedings in that suit. In Vyankatesh Mahadev v. Hamchandra Krishna I.L.R. (1914) Bom. 687 : 16 Bom. L.R. 653, where the application was also to stay the suit after an agreement to refer without the intervention of the Court had been entered into, Hayward J. considered that that decision must be looked upon as a doubtful authority since the decision of the Privy Council in Ghulam Khan v. Muhammad Hassan I.L.R.(1901) Cal. 167, P.C. The facts in that case were that after a suit had been tiled the matters in dispute were referred to arbitration. When the award was made both parties objected to it. The Subordinate Judge before whom the application to set aside the award was heard overruled all objection and passed a decree in terms of the award. From this decree the defendants tiled an application for leave to a-ppeal to the Chief Court of the Punjab. The Judge who admitted the appeal being of opinion that no appeal lay allowed the application to be amended so as to make it an application for revision in case the Court that heard the appeal should decide that no appeal lay The question whether or not an appeal lay or was prohibited by the last clause of Section 522 of the Civil Procedure Code of 1882 was referred to a Full Bench which decided that no appeal lay Thereafter an application for revision was entertained and the decree of the Subordinate Judge was modified. From this decision of the Full Bench and the judgment of the Division Bench on revision the defendants appealed to the Privy Council The whole argument turned on the proper construction of Section 522, now represented by para 16 of the Second Schedule. Their Lordships said at p. 182 ;

The Chapter in the Code of Civil Procedure on reference to Arbitration (Chapter XXX VII) deals with arbitrations under throe heads: -

1. Where the parties to a litigation desire to refer to arbitration any matter in difference between them in the suit, in that case all proceedings from first to last are under the supervision of the Court.

2 Where parties without having recourse to litigation agree to refer their differences to arbitration and it is desired that the agreement of referent should have the sanction of the Court. In that case all further proceedings are under the supervision of the Court.

3. Where the agreement of reference is made and the arbitration itself fakes place without the intervention of the Court and the assistance of the Court is only sought in order to give effect to the award.

3. Then at p. 183 occurs the following passage :

In cases falling under Heads II and III the provisions relating to cases under Head I are to be observed so far as applicable. But there is this difference which does not seem to have been always kept in view in the Courts in India, In cases falling under Head I the agreement to refer and the application to the Court founded upon it must have the concurrence of all parties concerned and the actual reference is the order of the Court. So that no question can arise as to the regularity of the proceedings up to that point. In cases falling under Heads II and III proceedings described an a suit and registered as such must be taken in order to bring the matter the agreement to refer or the award as the case may be-under the cognizance of the Court. That, is or may be a litigious proceeding-cause may be shown against the application-and it would seem that the order made thereon is a decree within the meaning of that expression, as defined in the Civil Procedure Code.

4. Eventually it was held that there was no appeal from the-decree and that the application for revision was incompetent.

5. In Tincowry Dey v. Fakir Chand Dey I.L.R.(1902) Cal. 218 the parties to a suit agreed to refer the matters in dispute to arbitration. An application was made under Section 375 to record the agreement as an adjustment and the learned Chief Justice in dealing with the question remarked incidentally that the decision in Ghulam Khan v. Muhammad Hassan seemed to import that Section 523 did not apply where there was a pending suit, and doubted that the decision in Harivallabhdas Kalliandas v. Utamchand Manekchand could stand. In Venkatachala v. Rangiah I.L.R. (1911) Mad. 353 it was held that an order of a Court filing an agreement to arbitrate presented by the parties to a suit is a decree and in appealable. Ghulam Khan v. Muhammad Hassan was referred to and the Court considered that the three Heads under which arbitrations were classified in that case corresponded to arbitrations initiated by applications under Sections 506, 523 and 525 of the old Code. That is perfectly correct, but the learned Judges were only concerned with the question whether the application be them, an agreement to refer by parties in a suit, was cover by para 17 of the Second Schedule. Clearly it was not, but the question whether para 20 covered applications such as the before us was not and could not have been considered.

6. Nor, as I have pointed out, was that the question before the Court: in Vyankatesh Mahadev v. Ramchandra Krishna. Still it is clear that the second Head in the judgment of the Privy Council in Ghulam Khan's case covers only arbitrations by parties who have not had recourse to litigation, and that therefore an agreement to refer by parties to a suit cannot be tiled under para 17 of the Second Schedule. But it is contended that it is by no means so certain that the third Head covers only arbitrations by parties who have not had recourse to litigation. In my opinion, however, the description of the first Head of arbitrations makes it clear that the parties to a litigation, who desire to refer their disputes to arbitration, must go to the Court for an order of reference if they wish the arbitration proceedings to continue under the provisions of the Second Schedule. And there is no reason why they should proceed under para 17 when paras 1 to 16 prescribe the procedure to be followed in a most exhaustive manner.

7. The decision, therefore, in Harivallabhdas Kalliandas v. Utamchand Manekchand I.L.R. (1879) Bom. 1 must be considered as overruled.

8. I also have come to the conclusion that my decision in Shavakshaw v. Tyab Haji Ayub I.L.R. (1916) Bom 386 : 18 Bom. L.R. 559 allowing the application under Order XXIII, Rule 3, to be altered to one under para 20 of the Second Schedule was wrong. But I cannot agree with Kajiji J. when he says that an award in a reference by parties to a suit without the intervention of the Court cannot be a valid award. Nor can I agree with the dictum in Vyankatesh Mahadev v. Ramchandra Krishna which, with due respect, appears to be obiter, that the action of parties to a suit in withdrawing and obtaining a decision by private arrangement can be treated as a nullity, as it can form the foundation for another suit.

9. It is quite true that the Court will not take cognizance of any proceedings by the parties which in effect oust its jurisdiction. It will not stay its own proceedings merely because one party brings to its notice that there has been an agreement to refer the suit to arbitration. Nor, if there is an award, will it proceed in the manner provided by any of the provisions of the Second Schedule.

10. But there is no reason why, when the award is brought to its notice, it should not try the issue whether the award is not binding on the parties under the general principles of the law of contract by proceeding under Order XXIII, Rule 3.

11. It is not usual when the parties to a suit are agreed upon terms to formally record the agreement under Order XXIII, Rule 3 and then pass a decree in terms thereof.

12. But when parties have been negotiating for a settlement, and one party considers a settlement has been arrived at, which the other party denies, or where there has been a settlement which one party seeks to avoid on any of the grounds on which an agreement can be avoided, recourse is had to Order XXIII, Rule 3, so that the Court may determine whether an adjustment has actually been made or whether an adjustment made is one which can be recorded.

13. When the terms of the adjustment have been settled by an arbitration and award out of Court, the same considerations apply by analogy. The parties may agree to ask for a consent decree. In such a case the true position appears to be that the Court will not look at the arbitration proceedings, but only at the consent terms, as it makes no difference whether those terms have been arrived at by agreement between the parties acting by themselves or have been settled by a third party chosen by them. There is no particular reason in either case for having recourse to Order XXIII, Rule 3.

14. But if the plaintiff ignoring the award proceeds with the suit the defendant may plead that there has been an adjustment. This is in effect what has happened in this case.

15. In Lowes v. Kermode (1818) 8 Tau. 146 the facts were somewhat similar. The defendant obtained a rule to stay proceedings on the ground that after issue joined and notice of trial given, the parties had agreed to refer the cause to arbitration and that an award had been made. The plaintiff said he had revoked the submission before award made. The Court said :

What we should do in ease of an undisputed award, is another question. Here, the award is disputed; and the Court will not, upon motion, decide the controverted matter. The award must be pleaded, when the plaintiff may either reply or demur; but the question will most properly be disposed of by a jury.

16. So in Storey v. Bloxam (1796) 2 Eap. 504at the hearing the defendant proposed to give in evidence an award made in his favour on an agreement to refer the cause after issue had been joined and Lord Kenyon held that it could not be given in evidence but must be pleaded as a plea puts darreign Continuance.

17. If the procedure prescribed by those decisions should be followed in this Court, when the plaintiff moved for an ex parte decree for want of a written statement, the defendant should have been told to file his written statement pleading the award instead of being given time to apply that the award should be tiled.

18. Then the question could be tried in the suit and not by motion, whether the award was binding on the parties.

19. Since the decision in Praydas v. Girdhardas High Court Rule 242 has been passed, which provides that no decree in a suit save as provided in Rule 348 (decree in terms of an award filed under para 10 of the Second Schedule) shall be passed unless the suit appears on the daily trial board. As Order XXIII, Rule 3, contemplates the passing of a decree if the adjustment is recorded, the proper procedure is not by motion, but by putting Down the suit for hearing, and it is desirable that the party relying on an adjustment should plead it beforehand so that the issue can be properly tried. Leave can always be obtained for a supplementary pleading.

20. In Harakhbai v. Jamnabai I.L.R. (1912) Bom. 639 : 15 Bom. L.R. 340 the order made was :

The suit will be set down for hearing...when the first defendant will, in the first instance, proceed to satisfy the. Court that the adjustment has been properly and justly obtained and the plaintiff will then be entitled to urge any ground that may be open to her to show that the award which is sought to be enforced against her as an adjustment ought not to be recorded and a decree passed in terms thereof.

21. Whether the suit is set down for hearing an application to record an adjustment, or is set down for trial, an order must be passed recording or refusing to record the adjustment, as an appeal lies against such an order though not against the decree passed in terms of an adjustment. This somewhat paradoxical procedure is necessitated by the fact that the term 'consent decree' is applied to a decree passed against a party who stoutly denies he has given his consent, when as a matter of fact it is found that he has consented. The result is that if a defendant pleads an award and the Court finds that the award is binding the Court passes a consent decree, but must first make an order which is appealable that the award is binding.

22. In Pragdas v. Girdhardas I.L.R. (1901) Bom. 76 : 3 Bom. L.R. 431 the appellant contended inter alia that the award was falsely and fraudulently made by the arbitrators, purporting to make the same without holding any meetings or examining any books of account and without giving the defendant any opportunity of appearing before them in support of his case.

23. These questions do not appear even to have been considered by the trial Court or the Appeal Court which confirmed the decree passed in the terms of the award.

24. Jenkins C. J. said:

Several objections have been taken to the decree under appeal. First it is said that Chapter XXXVII of the Civil Procedure Code, 1882, is an exhaustive exposition of the power to refer to arbitration pending a suit. I can find nothing, however, in Chapter XXX VII which invalidates a proceeding not in accordance with its provisions beyond the result that non-compliance deprives a party of a right to claim the consequences the Chapter prescribes, and I therefore hink the objection cannot succeed.

25. It was contended from this judgment by Beaman J. in Rukhanbai v. Adamji I.L.R. (1908) Bom. 69 : 10 Bom. L.R. 366 that a party objecting to an award had to submit to a decree in terms of the award without his objections being heard, and there are grounds for such a conclusion from the bare record of the case as reported If that had really been decided I should be inclined to say it was wrong, but it does not appear whether the defendant actually persisted that his objection should be heard or merely objected to the procedure.

26. It certainly cannot be that a party to a suit submitting to arbitration would be under an implied promise to accept the award whatever its nature might be and however it had been arrived at. And this was the view taken by Davar J. in Harakhbai v. Jamnabai. It all comes to this, that a party to a suit setting up an award by arbitration out of Court must satisfy the Court that there has been an adjustment by lawful agreement which entitles him to ask that the suit should be stopped and a decree passed in terms thereof. The Court must then decide on the general principles of the law of contract whether or not there has been such an adjustment. In the case of an arbitration and award Order XXIII, Rule 3, requires a certain amount of amplification. The suit is not adjusted by the agreement to refer, but by what is implied in that agreement, namely, that the parties agree to be bound by the terms of an award which has been properly made in accordance with the agreement. If the award is proved to have not been so made then there can be no adjustment.

27. It may be as well to summarise the procedure to be adopted by parties in a suit who enter into an agreement to refer the matter in dispute in the suit or part of it to arbitration.

28. They may make the agreement an order of Court and then paras 1 to 16 of the Second Schedule apply.

29. If they do not make the agreement an order of Court,

(a) they cannot ask for the agreement to be filed under para 17;

(b) they cannot ask. for the award if made to be filed under paras 20 and 21;

(c) if an award is made and both parties accept it they can apply for a consent decree in terms thereof, and there will be no need to apply for an order recording the terms of the adjustment;

(d) if the plaintiff disputes the award for any reason and proceeds with the suit the defendant can plead the award and have the ease set down for hearing on the issue whether the award is binding as an adjustment;

(e) if the defendant disputes the award, the plaintiff can set the case down for trial on the issue whether the adjustment should be recorded;

(f) either party can file a suit to enforce the award and apply for a stay of the original suit.

30. The provisions of the Code of 1882 relating to arbitration were transferred with certain modifications to a separate Schedule in the hope that at no distant date they might be transferred into a comprehensive Arbitration Act. Unfortunately that hope has not been realised with the result that the law relating to arbitration still remains in a most undesirable condition.

31. The appeal must be allowed, but, 1 think, the order giving time to the defendant to file the award was also wrong. He should have been told to file his written statement pleading the award. I am told that he has now filed his written statement so that he can apply to have the suit set down for trial on the issue whether the award is binding.

Fawcett, J.

32. The questions for determination may be stated as follows:-

(1) Do paragraphs 20 and 21 of Schedule II of the Civil Procedure Code apply to cases where the matters referred to arbitration are already the subject-matter of a suit between the parties to the reference?

(2) If they do apply, what effect does a decree under paragraph 21 have upon the suit?

(3) If the parties to a suit agree to refer the matters in dispute to arbitration without the intervention of the Court, and an award is made on such submission, prior to the decision of the suit, can the submission and award be recorded under Order XXIII, Rule 3, Civil Procedure Code, as an agreement adjusting or compromising the suit, and a decree be passed in terms of the award?

(4) If questions (1) and (3) are answered in the negative, what remedy is open to a person interested in the award to enforce it ?

33. I agree with the learned Chief Justice that the first question should be answered in the negative. The words 'any matter' and 'any person' used in paragraph 20 are no doubt very wide, and it contains no express exception as to parties to a suit or to matters in litigation in a suit actually pending. But the same applies to paragraph 17, with the substitution of 'difference' for 'matter'; and the ruling in Harivallabhdas Kalliandas v. Utamchand Manekchand I.L.R. (1879) Bom. 1 that Section 523 of the Code of 1877 (corresponding to this paragraph 17) applied to parties between whom a suit is pending about the matters referred to arbitration, is virtually overruled by Ghulam Khan v. Muhammad. Hassan I.L.R. (1901) Cal. 167. as pointed out by Hayward J. in Vyankatesh Mahadev v. Ramchandra Krishna I.L.R. (1914) Bom. 687 : 16 Bom. L.R. 653. I also concur with his view in the same case that paragraphs 1 to 1G are intended to prescribe the only provisions in the Schedule by which the Courts' jurisdiction to determine the matter in dispute after a regular hearing can be ousted by a submission to arbitration and an award thereon. This is supported by the general nature of the heading to paragraphs 1-16, viz., 'Arbitration in suits', and the fact that paragraphs 17 and 20 both require that an application under them 'shall be numbered and registered as a suit'-a procedure which is inappropriate, where a suit between the parties is already pending. These considerations apply as much to paragraph 20 as to paragraph 17; and in Ghulam Khan's case it seems to me their Lordships of the Privy Council intended Head III of those specified in the judgment (at p. 182) to exclude (just, as much as Head II) the case dealt with in Head I, viz;: 'Where the parties to a litigation desire to refer to arbitration any matter in difference between them in the suit.' The words 'the agreement of reference' in Head III were, I think, intended to refer to an agreement of the kind specified in Head II, viz. 'where parties without having recourse to litigation agree to refer their differences to arbitration'. If so, the obiter dictum in Harivallabhdas Kalliandas v. Utamchand Manekchand in regard to Section 525 (now Schedule II, para. 20) is also dissented from by the Privy Council.

34. In view of the above answer to the first question (which agrees with the view taken in Vyankatesh Mahadev v. Ramchandra Krishna), the second does not arise. But even supposing the first question is answered in the affirmative, 1 think that a decree obtained under para. 21 (2) cannot operate of itself as a decree in the suit. The proceedings under paras. 20 and 21 would not be proceedings in the suit, but entirely separate proceedings like those for filing an award under as. 11 to 15 of the Indian Arbitration Act, 1899. This has already been ruled in Shivlingrao v. Rango (1906) 8 Bom. L.R. 577. The decree could, it seems to me, at most, operate as rets judicata under Section 11, Civil Procedure Code, as being a decision in a 'former suit' (cf. Explanation I to Section 11; para. 20 (2) of Schedule II; Wazeer Mahton v. Chuni Singh I.L.R. (1881) Cal. 727; Vyankatesh Chimaji v. Sakharam Daji I.L.R. (1896) Bom. 465; Muhammad Newaz Khan v. Alam Khan I.L.R (1891) Cal. 414, and Ponnusami Mudali v. Mandi Sundara Mudali I.L.R (1903) Mad. 255. Otherwise, the Court would still have to decide the issues after a regular hearing, according to the procedure laid down by the Code, unless the suit is withdrawn in consequence of the decree obtained under para. 21, or a consent decree is passed.

35. On both these grounds 1 concur with the learned Chief Justice in thinking that the decision in Shavakshaw v. Tyab Haji Ayub I.L.R (1916) Bom. 386 : 18 Bom. L.R. 559 should be overruled.

36. The third question is one on which, in my opinion, a good deal can be said on either aide. But 1 have come to the conclusion that there is no sufficient ground for our differing from the view taken in Pragdas v. Girdharda I.L.R. (1901) Bom. 76 : 3 Bom. L.R. 431, and that the question should accordingly be answered in the affirmative, at any rate until Pragdas v. Girdhardas is overruled by a Full Bench or the Privy Council.

37. There is certainly a very considerable weight of authority in favour of the view that an agreement to refer the matter in suit to arbitration and the award made thereon may amount to an adjustment of the suit by lawful agreement, within the meaning of Order XXIII, Rule 3, Civil Procedure Code, and the corresponding Section 375 of the Code of 1882. in the arguments reported (at p. 689) in Vyankatesh Mahadev v. Ramchandra Krishna I. L. R (1914) Bom. 687 : 16 Bom. L.R. 653, it was stated that all the High Courts were in agreement on this point. 1 am not sure if this is correct; but at any rate there are the following reported opinions to that effect: Samibai v. Premji Pragji I.L.R (1895) Bom. 304 per Starling J.; Ghellabhai v. Nandubai I.L.R (1896) Bom. 335 per Fairan C.J.; Pragdas v. Girdhardas I.L.R (1901) Bom. 76 : 3 Bom. L.R. 431, per Jenkins C.J. and Starling J.; Harakhbai v. Jamnabai I.L.R (1912) Bom. 639 : 15 Bom. L R. 340, per Davar J.; Venkatachala v. Ran and China Venkatasami Naicken v. Venkatasami Naicken I.L.R (1919) Mad. 625 per Wallis C. J. and Seshagiri Ayyar J. This view seems also supported by the remarks of Vaughan Williams L. J. and Farwell L. J. in Doleman & Sons v. Ossett Corporation [1912] 3 K.B. 257. The former says (at pp. 263-4), referring to a case like the present and the 11th section of the Common Law Procedure Act, 1854, allowing a stay of an action ponding arbitration proceedings:

The only effect of failing to obtain the order to stay the action was to leave the parties in the same position in which they were before the passing' of the 11th section of the Common Law Procedure Act, 1854, i.e., in the position that the jurisdiction of the Courts was not ousted, and that the Court ignored the pendency of the arbitration, and therefore held a plea. of pendency of an arbitration in the same matter to be bad, but allowed the plea of an executed award to be good, and I think allowed it to be good even if the award was executed after action brought. It was allowed, in fact, as accord and satisfaction completed after action...It is true that, generally speaking, the obstacles in the way of the arbitrator, if one of the parties refuses to attend, are so great that it is difficult, and sometimes practically impossible, for the arbitrator to go on with the arbitration; but if the arbitrator gets over these difficulties, and goes on and makes his award, I think- his award constitutes accord and satisfaction.

38. Farwell L.J. in the same case says (at pp. 272, 278):-

It is also clear that any binding agreement between the parties settling all the disputes raised in the action made after writ is a good defence as a plea puts darreign continuance (now pleaded under Order XXIV, whether such agreement is a direct settlement between the parties themselves, or made by Means of: a third person to whom they have referred the dispute after writ, or by means of an award made after writ in an arbitration existing before writ, if both parties subsequent to writ carry on the arbitration, and agree to an award being made notwithstanding the action. But this is because it is always open to litigants to settle their differences after writ as they please.

39. Fletcher Moulton L.J. no doubt holds (p. 269) that-

There cannot be two tribunals each with the jurisdiction to insist on deciding the rights of the parties and to compel them to accept its decision....

40. But he expressly except the case where 'the parties agree de now that the dispute shall be tried by arbitration, as in the case where they agree that the action itself shall be referred'. His objection that the Courts' jurisdiction cannot be ousted applies to a case (like the one there under consideration) where there was a reference to arbitration, subsequent to the commencement of the action, without the consent of one of the parties.'

41. Order XXIII, Rule 3, Civil Procedure Code, contains provisions corresponding to the plea of 'accord and satisfaction after writ'; referred to in the case just cited. The principle of treating an agreement to refer to arbitration after suit, together with the award thereon, as on the same footing as a direct settlement between the parties themselves, for the purposes of such a plea, appears to me to be one which has very high authority in its favour. After all it is only an application of the maxim certain est quod certum reddi potest. There is an agreement to settle the matters in dispute in the way decided on by the arbitrator, and as soon as he decides, the result is an ascertained settlement, as much as if the parties had settled the dispute themselves.

42. I would, however, qualify the above by predicating that the award to be effective for such a plea must be a valid one, according to the general rules of law governing the validity of awards in arbitration proceedings. This in effect would mean the English Common Law on the subject, which in turn is substantially expressed in paragraph 15 (1) ((a) and (b) of Schedule II of the Code (cf. Ganga Sahai v. Lekhraj Singh I.L.R (1886) All. 253.

43. In Rukhanbai v. Adamji I.L.R (1908) Bom. 69 : 10 Bom. L.R. 366, per Beaman J. Beaman J. objects that--

Under the principle) of Pragdas v. Girdhardas, no sooner has a party made an irregular submission, on which an award, no matter how full of defects, has been passed than the other party can bring it in under Section 375 and, without having any objections investigated, get a final decree upon it.

44. With due respect, I submit that in Pragdas v. Girdhardas the Court went on the assumption that the award was a valid one. No doubt one of the grounds of appeal (No. 5) was that the award was improperly passed, but no reference is made to this in the reported arguments of the appellant s counsel (pp. 77, 78). The probability is, therefore, that this objection was not pressed. Also 1 can see no sufficient ground for saying that the Court cannot go into objections to the validity of an award under Order XXIII, Rule 3. The Court under that rule has to be satisfied that the suit has been adjusted by a lawful agreement or compromise; and even though there may have been a lawful agreement to refer the matters in dispute to arbitration, still there will have been no real, 'adjustment', if the reference has merely resulted in an invalid award. Under general principles of justice, equity and good conscience the Court is surely just lied in holding that an award improperly procured or vitiated by corruption or misconduct on the part of the arbitrator does not constitute an 'adjustment1' under Order XXIII, Rule 3. Or it may be put in another way. There can of course be an express agreement in the submission that the parties will raise no objection to the award on the ground of misconduct, etc., of Halsbury's Laws of England, Vol. I, Article 990, at p. 481; but otherwise I take it that the implied objection to perform the award of the arbitrator will not be extended beyond an obligation to perform an award which (to use the language of the Privy Council in Muhamman Newaz Khan v. Alam Khan I.L.R (1891) Cal. 414 has 'ordinary legal validity,' i. e., an award which is not a legal nullity or liable to be set aside for misconduct, & c. In the latter view there is no 'agreement' to accept an award of the kind just mentioned, so as to bring the ease under Order XXIII, Rule 3. As an instance of a Court going into such questions under Order X.XIII, Rule 3,I may cite Kulsnm, Fatima v. All Akbar I.L.R (1917) All. 401.

45. With due deference, it seems to me that to make a distinction between a case where both parties accept the award (which Beaman J. in Rukhanbai case at p. 74 says will constitute an adjustment under the rule) and a case where one of the parties dishonestly repudiates his submission (as in Rukhanbai case) or raises unsustainable objections to the validity of the award, is giving the latter an advantage, which is contrary to the terms of Order XXIII, Rule 3 of, Khobhari v. Jhuman (1915) 23 C.L.J. 482. It is in principle a reversion to the view that a disputed compromise did not fall under Section 375 of the Code of .1882. The Legislature has shown its approval of the decisions that such a dispute did not prevent the application of the provisions in question by the insertion of the words 'where it is proved to the satisfaction of the Court that' at the commencement of the rule.

46. Another objection taken in Rukhanbai'' case at p. 73 is, that Chapter XXXVII of the then Civil Procedure Code (corresponding to Schedule II of the present Code) provides a special procedure for extraordinary extra-judicial methods of settling disputed claims, and it must have been the intention of the Legislature that that procedure and no other was to be followed. But this seems to me to be opposed to the same learned Judge's opinion in Vyankatesh Mahadev v. Ramchandra Krishna (at p. 698) that : 'Doubtless any parties litigating in Court have perfect liberty to compose their differences among themselves by entering into any lawful agreement, compromise or satisfaction'. The passages I have cited from Dolman & Sons v. Ossett Corporation [1912] 3 K.B. 257 show that there is the highest authority for treating a submission to arbitration made after suit, plus the award thereon, as an adjustment of the suit by lawful agreement; and it seems to me very improbable that the Legislature intended to prevent such an adjustment being made. The view taken on this point in Pragdas v. Girdhardas is, I submit, correct.

47. Then does Section 89 of the Code prevent Order XXIII, Rule 3, Civil Procedure Code, operating in such a case On this point I concur with the view taken by Davar J. in Harakhbai v. Jamnabai I.L.R.(1912) Bom. 639 : 15 Bom. L.R. 340, which is also taken by the Madras High Court in China Venkatasami Naicken v. Venkatasami Naicken I.L.R. (1919) Mad. 625. No doubt the words 'other law for the time being in force' are inappropriate for covering a provision of the Code itself, such as Order XXIII, Rule 3. But the Legislature in enacting Section 89 probably had not that particular rule at all in their mind, and had no intention of affecting it one way or the other. The main object of s 49 clearly is to give effect to the provisions of Schedule II as if they had been enacted in the body of the Code. Section 89 was needed only because of the relegation of Chapter XXXVII of the Code of 1882 to a Schedule and no change of procedure was, in my opinion, intended. This is in accordance with the general rule that 'the Legislature must not be taken to intend any alteration in the law beyond what it explicitly declares in express terms or by unmistakeable implication.' (Maxwell on Interpretation of Statutes, 3rd Edn., p. 113; In the matter of Candas Narrondas I.L.R. (1886) Bom. 138 and Bhagwant v. Kedari I.L.R.(1900) Bom. 202 : 2 Bom. L.R. 986. It seems to me to be a case where the rule of construction laid down by Romilly M. R. in Pretty v. Solly (1859) Bom 606 should be applied. He says:- -

The general rules which are applicable to particular and general enactments in statutes (if they were repugnant) are very clear, the only difficulty is in their application. The rule is, that wherever there is a particular enactment and a general enactment in the same statute, and the latter, taken in its most comprehensive sense, would overrule the former, the particular enactment must be operative, and the general enactment must be taken to affect only the other parts of the statute to which it may properly apply'.

48. Here Order XXIIL, Rule 3, constitutes a particular enactment (read with Section 121) regarding the compromise of a suit, while Section 89 is a general enactment regarding arbitration, for the words 'all references to arbitration whether by an order in a suit or otherwise, and all proceedings thereunder' are of a general nature: they could scarcely be made any wider than they are. I think, therefore, that in accordance with the rule of construction I have mentioned, Section 89 should not be read as affecting the particular enactment contained in Order XXIII, Rule 3, so far as that covers the case of an award on a reference to arbitration. In these circumstances I do not see why the words 'save in so far as is otherwise provided... by any other law for the time being in force'' should not be construed as covering a law enacted by the Code itself. Taken in their literal and ordinary meaning the words are wide enough to permit of this interpretation; and the mere fact that particular provisions of the Code are not specifically excepted does not, in my opinion, suffice to exclude them from the benefit of the saving clause, if they otherwise appropriately fall under it.

49. There is no clear evidence of any intention of the Legislature to exclude Order XXIII, Rule 3, from this benefit; and (as I have already said) there is a presumption against any alteration of the law regarding Section 375 of the Code of 1882, as laid down in Pragdas v. Girdhardas.

50. I do not think that the words 'other law,' as used in the Code, must necessarily mean some law other than that contained in the Code. Thus in Section 96 (1) of the Code, a general right of appeal (not restricted to certain grounds as a second appeal is by Section 100) is given from 'every decree passed by any Court exercising original jurisdiction'. The only saving is 'where otherwise expressly provided in the body of this Code or by any other law for the time being in force.' This 'other law' must, I think, be read to cover the provisions in Schedule II, paras 16 (2) and 21 (2), which restrict the right of appeal from a decree under those paras to one upon the specific ground that ' the decree is in excess of, or not in accordance with, the award.' Otherwise there is a repugnancy between the general right conferred by Section 96, and this specific enactment. It may be noted that the provisions of the Second Schedule are not given legislative effect 'as if enacted in the body of this Code', like the provisions of the First Schedule under s 121 : so that they can only come under the saving clause in Section 96 by treating them as any 'other law for the time being in force.' The case is stronger with regard to Order XXIII, Rule 3, which under a 121 has effect as if enacted in the body of the Code, and is therefore on an equal footing in this respect to Section 89. Also 'other law' in a 89 is clearly a law other than the Indian Arbitration Act, 1899 whereas in Section 96 it might be argued that 'other law' must mean a law other than the Code.

51. As to the fourth question, I agree with the learned Chief Justice that, if Order XXIII, Rule 3, cannot be availed of, either party, who wishes to enforce the award, can file a suit to enforce it, and apply for a stay of the original suit. Also a defendant can, under Order VIII, Rules 8 and 9, Civil Procedure Code, with the leave of the Court, plead the award in bar of the action on the original demand' of. Bhajahari Saha Banikya v. Behary Lal Basak'.

52. But in view of my answer to the third question, I concur in allowing the appeal with costs throughout.

53. As to the question of the proper procedure for having the award considered by the Court in the suit, it seems to me that Original Side Rule 242 only debars the Court from passing a decree, unless the suit appears on the trial board. There is no. thing in it, therefore, to prevent the Court from proceeding at any rate up to the stage of ordering the agreement (comprised in the agreement to refer and 'the award thereon) to be recorded under Order XXIII, Rule ?>, and it can then direct the suit to be set down on the trial board for passing a decree in accordance with this order. But I understand that the procedure preferred by the learned Chief Justice will put the Court in a better position to decide any questions in issue by taking evidence in the ordinary way. Also there is the precedent of the rule in England that, if an action is compromised out of Court, and the compromise is not made an order of Court, it cannot be enforced by motion in the action (Halsbury's Laws of England, Vol. XXIII, p. 167, foot-note (h)). I defer, therefore, to his opinion in the matter. At the same time, to prevent possible misapprehension, I may say that we are both agreed that, so far as the mofussil is concerned, the requisite proceedings can be taken on a mere application to have the alleged agreement recorded under Order XXIII, Rule 3, and that a formal pleading of the award under Order VIII, Rule 9, in unnecessary.


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