Skip to content


Chandrabhaga Sadashiv and anr. Vs. Bhikachand Hansaji - Court Judgment

LegalCrystal Citation
SubjectArbitration
CourtMumbai High Court
Decided On
Case NumberLetters Patent Appeal No. 30 of 1956
Judge
Reported inAIR1959Bom549; (1959)61BOMLR364; ILR1959Bom838
ActsCode of Civil Procedure (CPC), 1908 - Sections 9; Arbitration Act, 1940 - Sections 11, 14, 15, 16, 17, 31, 32 and 33; Registration Act - Sections 14(1) and 40
AppellantChandrabhaga Sadashiv and anr.
RespondentBhikachand Hansaji
Appellant AdvocateV.B. Rege, Adv.
Respondent AdvocateR.B. Kotwal, Adv.
Excerpt:
.....the plaintiff and the refund of earnest money to the plaintiff was referred to arbitration by the parties. when the award made by the arbitrators was sought to be filed in court under the arbitration act, 1940, the court refused to pass a decree in terms of the award on the 3 ground, alleged by the defendants, that the award which was compulsorily registrable was hot registered. the plaintiff then filed a suit against the defendants to recover the earnest money paid by him to the defendants. on the question whether the suit was barred under sections 31, 32 and 33 of the arbitration act, 1940, by virtue of the award:-;that as the award had no legal existence, it did not bar the plaintiff's suit which was based on his original cause of action.;babui s.k. kuer v. b.n. sinha (1952) i.l.r...........award to be filed in court and when this is done the court shall give notice of its filing to the parties. sections 15 and 16 empower the court to modify the award or to remit it to the arbitrators for further consideration. section 17 states that when the court sees no cause to remit the award for reconsideration, it shall, after the time for making an application has been made and refused, proceed to pronounce judgment according to the award, and upon the judgment so pronounced a decree shall follow. it is further provided that there should be no appeal from that decree except on limited grounds which are not relevant for the purpose. it appears that there does not appear any option in the court to do anything to pass a decree in terms of the award, it sees no reason to remit the.....
Judgment:

Patel, J.

1. The plaintiff appellant filed the suit for refund of earnest paid, under an agreement to purchase, to the defendant on 6-2-1950. According to him the defendant has committed the breach. Previous to this there was an arbitration between the parties, but the application made by the arbitrator for a decree in terms of the award was dismissed by the Court as the award was not registered. The defendants raised various contentions to the claims by their written statement one amongst them being a legal one, that the suit was not maintainable in view of Sections 31, 32 and 33 of the Indian Arbitration Act 1940 as there was a previous arbitration.

2. The trial Judge raised a preliminary issue and held that the suit was barred and dismissed the same with costs. Plaintiff's appeal to the District Court failed.

3. The plaintiff thereupon came to the High Court in Second Appeal which was heard by Mr. Justice Bavdekar. He did not accept the view of the Courts below. He held agreeing with the Calcutta High Court that the award had a factual existence but no legal existence. He also held that it is only a valid award which is a defence to a suit. In the result he set aside the decisions of the Courts below and remanded the suit for disposal in accordance with law. He, however, gave leave under Clause 15 of the Letters Patent and hence this appeal.

4. The question, therefore, which falls to be decided is whether the award between the parties had the result of preventing the plaintiff's suit on his original cause of action.

5. The question must necessarily be decided by reference to the Indian Arbitration Act of 1940. Section 9 of the Civil Procedure Code provides for the jurisdiction of the Civil Courts to entertain all suits of a civil nature. A party, therefore, has the right of enforcing his civil rights & remedies by a suit unless it has been taken away by statute either expressly or by necessary implication as provided by Section 9. Mr. Rege for the appellant, insists that remedy of the plaintiff is taken away by Section 31, 32 & 33 of the Indian Arbitration Act, and it is equally insisted by Mr. Kotwal for the other side that these sections have not either by express language or by necessary implication taken away his right to file a suit on the original cause of action.

6. Section 14 of the Arbitration Act requires the arbitrators to sign the award and give notice of the fact in writing to the parties. Sub-section (2) provides that at the request of a party the arbitrator shall cause the award to be filed in Court and when this is done the Court shall give notice of its filing to the parties. Sections 15 and 16 empower the Court to modify the award or to remit it to the arbitrators for further consideration. Section 17 states that when the Court sees no cause to remit the award for reconsideration, it shall, after the time for making an application has been made and refused, proceed to pronounce judgment according to the award, and upon the judgment so pronounced a decree shall follow. It is further provided that there should be no appeal from that decree except on limited grounds which are not relevant for the purpose. It appears that there does not appear any option in the Court to do anything to pass a decree in terms of the award, it sees no reason to remit the award as shown by the words 'shall pass' in Section 17. Section 33 provides that any party to an arbitration agreement or award desiring to challenge the existence or validity of the arbitration agreement or award or to have the effect of either determined shall apply to the Court and the Court shall deem it just and expedient, it may set down the application for hearing on evidence also and may pass such orders as it may do in suit. It appears that one of the purposes of this section is to enable the parties to file their objections to the award on a notice under Section 14. It, however, appears from the provisions of Section 17 of the Arbitration Act, that it was intended that the Court must carry to this conclusion may proceedings commenced in Court and from the provisions of Sections 31, 32, 33 that it is the final decree of the Court which can be executed. Section 31 provides an exclusive jurisdiction in the Court for the purpose of deciding any question with regard to the validity, effect or existence of an award or an arbitration agreement. Section 33 in consonance with the exclusive jurisdiction conferred under Section 31 requires that a party desiring to challenge either the existence or validity of an arbitration agreement or award or to have the effect of either determined shall apply to that Court and the Court shall decide that question. Section 32 is as follows:

'Notwithstanding any law for the time being in force, no suit shall lie on any ground whatsoever for a decision upon the existence, effect or validity of an arbitration agreement or award, nor shall any arbitration agreement or award be set aside, amended, modified or in any way affected otherwise than as provided in this Act.'

As natural corollary and in consonance with the intention of the Act it provides that no suit should lie on any ground whatsoever for a decision upon the existence, effect or validity of an arbitration, agreement or award or for the other purpose mentioned there. The Act of 1940, as the preamble shows, was enacted to consolidate and amend the law relating to arbitration in India; and the scheme of the Act appears to be to bring all arbitrations under the control of the Court and treat them as effective only if a decree were obtained on the award in accordance with the Act and to prevent the parties from agitating any question relating to existence, validity, or effect of an arbitration agreement or award in any manner other than that provided by the Act. These sections do not by express language or by implication provide that a suit on the original cause of action after an abortive or incomplete arbitration would not lie.

7. Mr. Rege contends that Sections 31, 32 and 33 exclude the right of the plaintiff to file the suit on the original cause of action. As stated before the sections themselves do not contain any prohibition nor do the words used necessarily imply such a prohibition. The award cannot be regarded as a judgment as that stage was not reached. After it becomes a judgment in accordance with the Act the provisions of Section 11, Civil Procedure Code, would apply and a suit on the original cause of action barred. It is, therefore, not possible to accept Mr. Rege's contention that the suit of the plaintiff is barred by anything to be found within the terms of Sections 31, 32 and 33.

8. Mr. Rege has relied on the case of Laldas Jibhai v. Bai Lala, 11 Bom. L.R. 20 and Bhaurao Jivaji v. Radhabai, 11 Bom, L.R. 406. The decision in these two cases are to the effect that an award is as much binding as a judgment and is indistinguishable from a judgment. However, as explained in the case of Bhajahari Saha v. Behary Lal, ILR Cal 881, it is only a valid award that could operate to extinguish the original cause of action. In this case this is what Mr. Justice Mookerjee has observed:

'To put the matter in another way, as an ordinary rule, a valid award operates to merge and extinguish all claims embraced in the submission, and after it was been made, the submission and award furnish the only basis by which the rights of the parties can be determined and constitute a bar to any action on the original demand. See Curley v. Dean, (1822) 4 Coun 259 : 10 Am Dec. 140. It is a mistake, therefore, to contend that, if an award has been validly made, as it has been found to have been made in this case, it does not become operative until it has been enforced by suit or application; in reality, it possesses all the elements of vitality even though it has not been formally enforced, and it may be relied upon in a litigation between the parties relating to the same subject-matter. Obviously, if such reliance is placed upon the award, it is open to the party against whom it is sought to be used, to question its validity; but if it is established to be valid award, it is binding upon the parties as embodying an adjudication of their rights.'

It would also appear on a reference to the case of Muhammad Newaz Kahn v. Alim Khan, 18 Ind. App. 73, that if an award is a legally valid award then it would be binding between the parties. Unless therefore the award is one which can be operative, it will not merge in itself the original cause of action and since after the enactment of the Arbitration Act of 1940 an award is ineffective unless made a rule of the Court, even on general principles it is difficult to say that the original cause of action would merge in the award which has no vitality of its own. Indeed the Act of 1940 being an Act to consolidate and amend the law relating to arbitrations in India, it is doubtful if recourse to the previous law and general principles is permissible. Even assuming however it is open to consider the general principles, for the reasons mentioned before, even according to general principles, unless the award is legally effective, it would not merge in itself the original cause of action, the determination of which in any suit is by express terms of Section 32 of the Act prohibited. This is the view taken in the case of Sia Kishori Kuer v. Bhairve Nandan Sinha, : AIR1953Pat42 with which we respectfully agree.

9. Mr. Rege has relied upon the decision of the Nagpur High Court in Nathulal Khunilal v. Beharilal Bisheshwerlal, AIR 1952 Nag 65. In that case the dispute between the plaintiff and the defendant related to damages for breach of contract in respect of purchases of cotton seed for non-delivery. The matter between the parties was referred to the Nagpur Chamber of Commerce Ltd. The defendants challenged the jurisdiction of the arbitrators. The arbitrators overruled that contention and awarded compensation to the plaintiffs. The plaintiffs' application to have a decree in terms of the award was dismissed by the Court as it was filed after the period of limitation was over. The plaintiffs, thereafter brought a suit for damages for the breach of the contract. In the plaint the plaintiffs recited the history of the infructuous arbitration. Their Lordships referred to the case of Manik Lal v. Shiva Jute Bailing Ltd., 52 Cal WN 389 and the case of Chaturbhuj Mohanlal v. Bhicam Chand Chororia and Sons, 53 Cal W.N. 410 which related to the opening words of Section 33, 'any party to an arbitration agreement' and then they say that 'while it is not necessary to consider the full effect of the second ruling quoted above, it is obvious that the plaintiff cannot escape being called a party to the arbitration agreement, whatever may be said of the defendant.' They further say 'some difference at least should be made between a plaintiff who, having pushed the arbitration proceedings to an award, seeks to get rid of the award by ignoring it, and defendant who has not taken any part in the proceedings at all and has objected to the jurisdiction and legality thereof. It appears to us that a plaintiff, in the given circumstances is especially hit by the bar contained in Sections 31 to 33 of the Arbitration Act, 1940'. What is barred is a suit in relation to the arbitration agreement and/or the award. It has no reference whatsoever to what was the subject-matter of the award with regard to which there is no prohibition either express or implied and it would not make any difference whether or not the plaintiff mentioned in his plaint that there was an arbitration agreement and award, which was in effective. It does not take into account the express provisions of Sections 31 and 32 which prohibit the determination of the existence, validity or effect of an award otherwise than under the Act. If the award is unfavourable to the plaintiff or actor before the arbitrator, the defendant, or resistor then has equal right to have it made a rule of the Court. We therefore are with respect unable to agree with the conclusion.

10. The conclusion that a suit on the original cause of action is not barred by the provisions of Sections 31, 32 and 33 appears to be one justifiable on principle and is supported by authority. We hold therefore accordingly. The appeal must therefore fail and must be dismissed with costs.

Gokhale, J.

11. The only point which falls for consideration in this appeal is whether the plaintiff's suit is barred under the provisions of the Indian Arbitration Act by virtue of the award which the Court under the Arbitration Act refused to file on the ground that it was inadmissible in evidence being compulsorily registrable, Mr. Justice Bavdekar was of the view that the award had no legal existence and therefore could not come in the way of the plaintiff's suit.

12. Now, at one stage of his arguments Mr. Rege seemed to contend that the view of the Court in the arbitration proceedings that the award being compulsorily registrable could not be looked into at all was wrong in view of Section 49 of the Registration Act. But he had to concede that the objection as to registration was taken by his own client and the finding of the Court would be binding on both the parties. He, however, contends that an award is not a mere agreement but operates as a judgment and is binding on the parties in matters which it professes to decide, and once an award is passed the rights of the parties become merged in that award, whether the award has merged into a decree or not. In this connection, he relied on two ruling of this Court in 11 Bom. L.R. 20 and 11 Bom. L.R. 405. We are concerned in this case with an award passed after the Arbitration Act, 1940, came into force. Prior to the passing of this Act, the view was undoubtedly held that an award did not lose its effectiveness merely because it was not filed or it was not made the subject of any proceedings under the Arbitration Act. A valid award was then an operative award by itself and a suit filed to enforce such an award was competent. But it was only a valid award that could operate to merge and extinguish all claims which were involved in the submission to arbitration and then it could furnish the only basis by which the rights of the parties could be determined and it was a valid award that could constitute a bar to any action on the original demand. See ILR Cal. 881. After the coming into force of the Arbitration Act of 1940, however, it is well settled that a suit to enforce an award is not maintainable. See Bai Narbadabai v. Natverlal Chunilal : AIR1953Bom386 . It was held in this case that the expression 'effect of the award' in Section 32 of the Indian Arbitration Act, 1940, was wide enough to cover a suit to enforce an award. But in the present case, the plaintiff is not asking the Court to give him relief on the basis of the award that was passed by the arbitrators. On the defendants' objection the Court refused to file the award on the ground that it was inadmissible in evidence for want of registration. In my opinion, therefore, plaintiff's suit cannot now be defeated by the defendants on the ground that it would be barred by virtue of the provisions of Sections 31, 32 and 33 of the Arbitration Act. In Nani Bala v. Ram Gopal : AIR1945Cal19 , it was held by the Calcutta High Court that want of registration is a defect de hors the award and in case of such an award the proper order which the Court should pass on an application for filing it is one of dismissal as there would be no legal evidence to show what the award was. That was what precisely the Court did in connection with the present award when it was sought to be filed, and once it is held that the award does not legally exist it would be difficult to hold that such an award would be a bar to the maintainability of plaintiff's suit. In Venkatasubayya v. Bapadu, : AIR1951Mad458 , a single Judge of the Madras High Court held that where the defendant, who is himself relying upon the award, does not take steps to have it filed and dealt with under the appropriate provisions of the Arbitration Act, not is the award fully performed by him, it is not competent to him to rely upon it is answer to an action. This case clearly goes against Mr. Rege's contention. But Mr. Rege drew our attention to another Division Bench ruling of the Madras High Court in Suryanarayana v. Venkata Reddy, AIR 1948 Mad 436, where it was held that a party to an award was not precluded by the provisions of the Arbitration Act from putting forward an award which was fully performed by him but which was not filed under Section 14 and according to which a judgment was not pronounced or a decree given under Section 17, in answer to the other party's claim which was the subject matter of the reference and the award. But this case was rightly distinguished in the later case in : AIR1951Mad458 referred to above, on the ground that in the earlier Madras case the defendant had actually performed that part of the award which had to be performed by him. In the present case, the defendant has not only failed to act up to the award but actually resisted the filing of it, by contending that it could not be looked into for want of registration. In : AIR1953Pat42 an award was made by an arbitrator appointed under a private reference relating to the partition of moveable and immoveable property held in common by the family of the plaintiffs and the family of the defendants. The award was duly registered but the application was made by either party to file the award under Section 14, Sub-section (1) of the Arbitration Act, 1940. Subsequently, as the defendants refused to comply with the directions of the arbitrator, the plaintiffs filed a suit for partition on the original title and it was held that the suit was not barred by reason of the award made by the arbitrator. In my opinion, the principle of this case would be applicable to the case before us.

13. The result is that the view of Mr. Justice Bavdekar that the award set up by the defendant as a bar to plaintiff's suit had no legal existence and therefore could not make the plaintiff's suit incompetent appears to me to be correct. I, therefore, agree that the present appeal should be dismissed with costs.

14. Appeal dismissed.


Save Judgments// Add Notes // Store Search Result sets // Organizer Client Files //