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Damadar Gulabrai Belani and ors. Vs. Metharam C. Khahtwani - Court Judgment

LegalCrystal Citation
SubjectArbitration
CourtMumbai High Court
Decided On
Case NumberCivil Revn. Appln. No. 1009 of 1964
Judge
Reported inAIR1968Bom277; (1967)69BOMLR867; 1969MhLJ9
ActsPresidency Small Cause Courts Act, 1882 - Sections 38; ;Arbitration Act, 1940 - Sections 30
AppellantDamadar Gulabrai Belani and ors.
RespondentMetharam C. Khahtwani
Advocates:N.H. Pardasani, Adv.
Excerpt:
.....(xv of 1882), section 38 - decree in terms of award passed upon dismissal of petition to set aside award -- application for new trial under section 38 whether entertainable by full court -- arbitrator -- point of law referred to-erroneous decision of arbitrator on point whether binding on parties.;when after a contested suit is by an order referred to arbitration and a decree in terms of the award is passed by the trial court upon dismissal of a petition or an application to set aside the award either party is entitled to approach the full court for a new trial under section 38 of the presidency small cause courts act, 1882. - - 1,660. in paragraphs 1 to 3 of the plaint the petitioners recited the facts of the recoveries made and failure of the opponent to account for the above sum of..........this affidavit may be taken to be the petition of the plaintiffs for setting aside of the award. the trial court dismissed the petition by observing that the award was not erroneous as contended by the advocate of the plaintiffs. the arbitrator had taken into consideration all facts and 'had come to conclusion and given the award. the arbitrator was the sole judge of the facts and law and the award had been properly given.' (5) the full court application against the above decision of the trial court was dismissed on the ground that under s. 38 of the presidency small causes courts act the petitioners were not entitled to make the full court application.(6) in connection with the above findings of the full court, mr. pardasani for the petitioners contends that the full court had.....
Judgment:

(1) This is a revisional application on behalf of the original plaintiffs against the decision of the Full Court of the Court of Small Causes dated February 11, 1964, whereby the Full Court dismissed the plaintiffs' Full Court Application No. 51 of 1961 on the ground that the decree challenged was passed in terms of the award and that against such a decree a Full Court Application was not maintainable under Section 38 of the Presidency Small Cause Courts Act.

(2) The facts which require to be noticed are as follows:-

One Gulabrai Kalyandas Belani prior to his death carried on business of warehousing and clearing agents in the firm name and style of Sindhi Clearing Agency. The opponent (original defendant) was employed in the above business by Gulabrai inter alia to recover amounts due to the Sindhi Clearing Agency. The petitioners are heirs of Gulabrai. The petitioners' case was that the opponent had recovered Rs. 1,660 from the debtors of the Sindhi Clearing Agency and had not accounted for the same. This sum had become due after Sept. 1, 1953. In connection with the misappropriation of the above amount by the opponent, a prosecution was launched against the opponent. That prosecution was compromised. The opponent then executed a writing dated August 21, 1955. The writing inter alia states: 'In all Rs. 1,660 (Rupees one thousand six hundred and sixty only) is due from me to the above firm which was the subject matter of the case. I agree and undertake to pay the above amount by instalments to the above firm as soon as possible'.

The petitioners file Summary Suit No. 2113/11301 of 1958 in the Court of Small Causes to recover from the opponent the above sum of Rs. 1,660. In paragraphs 1 to 3 of the plaint the petitioners recited the facts of the recoveries made and failure of the opponent to account for the above sum of Rs. 1,660 and also of the criminal prosecution and the compromise and execution of the writing. The cause of action mentioned in paragraph 5 of the plaint was:

'There is now due and payable by the defendant to the plaintiffs Rs. 1,660 due and payable by the defendant to the plaintiffs as per defendant's writing Ex. A'.

By the written statement the opponent stated that he had not misappropriated any amounts. He had not recovered, Rs. 1,660 and retained the same.

'The writing dated 21st August 1956 which is the basis of the suit was given by the defendant against his will in order to save himself from the criminal prosecution pending against him and is illegal, inoperative and unenforceable'

(3) The suit was referred to arbitration and the learned arbitrator by his award dismissed the suit and in that connection mentioned the following grounds:-

'I dismiss the suit of the plaintiffs as the writing dated the 21st August 1955 on which the suit herein is based is void in law as the same was obtained from the defendant by Messrs Sindhi Agency during the pendency of a non-compoundable criminal prosecution.'

(4) By an affidavit dated February 4, 1961, filed in the above suit, the petitioner stated that the arbitrator erred in holding that the cause of action arose on the basis of the writing. The suit was filed on the original cause of action viz. moneys had and received. The writing of the defendant was relied upon to show the correctness of the amount due and as an acknowledgement of liability to pay the amount the award of the arbitrator was based upon incorrect position of law assumed by the arbitrator. This affidavit may be taken to be the petition of the plaintiffs for setting aside of the award. The trial Court dismissed the petition by observing that the award was not erroneous as contended by the advocate of the plaintiffs. The arbitrator had taken into consideration all facts and 'had come to conclusion and given the award. The arbitrator was the sole Judge of the facts and law and the award had been properly given.'

(5) The Full Court Application against the above decision of the trial Court was dismissed on the ground that under S. 38 of the Presidency Small Causes Courts Act the petitioners were not entitled to make the Full Court Application.

(6) In connection with the above findings of the Full Court, Mr. Pardasani for the petitioners contends that the Full Court had jurisdiction to entertain and try the application filed by the petitioners. He further contends that even when a point of law is referred to an arbitrator, if on the face of the award it is apparent that the point is wrongly decided, the award would be liable to be set aside. The Courts below were, therefore, not right in not considering the question raised in the above petition for setting aside of the award.

(7) In this connection, it first requires to be noticed that having regard to the absence of appropriate rules in respect of suits referred to arbitration, the order of the trial Court dated March 7, 1964 was:

'I, therefore, confirm the award and pass the decree in terms of the award.'

If appropriate rules had existed, the trial Court's order would have been as follows:-

'Petition to set aside the award dismissed.' By a separate order, on a separate application for the purpose, a decree in terms of the award would have been made. The true effect of the trial Court's order was dual viz. (i) to dismiss the petition to set aside the award and (ii) to pass a decree in terms of the award.

(8) Now, it is clear that under S. 38 of the Presidency Small Cause Courts Act, in every contested suit either party is entitled to claim a new trial. Where, therefore, a decree in terms of the award is passed by the trial Court upon dismissal of an application to set aside the award, it would not be appropriate to hold that the suit was not contested. This could never be the position where a contested suit is referred to arbitration and an award by consent of parties is not made. A decree in terms of an award passed in the circumstance would entitle either party to approach the Full Court for a new trial under S. 38. It is quite clear that the order passed by the Full Court merely on the ground that since a decree on award was passed the petitioners were not entitled to a new trial under S. 38 was wrong and liable to be set aside. In arriving at its decision, the Full Court failed to exercise jurisdiction which it had under S. 38 to entertain and try the petitioners' application for a new trial.

(9) Before referring back the matter of the Full Court Application of the petitioners to the lower Court, the following required to be stated:-

(10) It is well established that when a point of law is referred to an arbitrator, an erroneous decision of the arbitrator on that point would be binding on the parties. But if it is apparent on the face of the award that it is illegal and contrary to law it is liable to be set aside. This was observed by the Privy Council in the case of Champsey Bhara and Co. v. Jivraj Ballo Spinning and Weaving Co. Ltd., ILR 47 Bom 578: AIR 1923 PC 66. In this case, the arbitrator dismissed the petitioners suit on the sole ground that the writing executed by the opponent was obtained from him 'during the pendency of a non-compoundable criminal prosecution'. It is possible to advance cogent arguments for the contention that the assumption in the award that pendency of a non-compoundable criminal prosecution does not permit parties to arrive at any arrangement independently of prosecution is not correct. The assumption of law made in the award may turn out to be entirely erroneous. If that error is apparent on the face of the award, it would be duty of the Court to set aside the award on that sole ground. The Full Court accordingly will consider this question before disposing of the application of the petitioners.

(11) It is necessary that in connection with arbitrations in suits in the Court of Small Causes appropriate rules should be framed.

(12) The rule is accordingly made absolute. No order as to costs.

(13) Rule made absolute.


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