1. This appeal arises out of a proceeding under Section 20 of the Arbitration Act (Act X of 1940) initiated by the respondents, the real brothers of the appellant.
2. The facts leading to the said proceeding may be shortly stated. In an action, i.e., O. S. No. 98 of 1950 for partition of joint family properties laid by the appellant against the respondents in Sub Judge's Court, Kakinada, the parties eventually filed an agreed memo and a preliminary decree followed in terms thereof on 21-11-1950. The decree provided for partition and enjoyment of the properties into four equal shares. It also provided that the liabilities of the family agreed upon as per the list signed by all parties and kept with the plaintiff shall be borne in equal shares by all the four brothers. There was further a clear stipulation in paragraph 5 of the decree that in case the parties failed to work out their rights according to the terms stated in the decree within four months from the date of the decree, the reliefs stated in the decree may be obtained in final decree proceedings. The stipulated time was over but final decree proceedings were never initiated. That was because the division of family lands was in fact effected between the parties though of course, agreement could not be reached on the extent of total liabilities. Besides some complications seem to have developed thereafter.
The parties thought it expedient then to refer the disputes to arbitration of Mr. M. Satyanarayana, advocate of Kakinada. They executed an agreement Ex. A-1 dated 28-12-1956 in his favour.
The arbitrator accordingly entered on reference on 14-7-1957. The parties filed their respective statements. Thereafter some adjournments became inevitable. The appellant changed his mind and would not like the arbitration to go on. Before the four months' period had expired from the date of entry on reference, the appellant on 12-11-1957 gave notice to the arbitrator asking him not to proceed with the arbitration. Ineffective such a notice may be in law, the proceedings thereafter seem to have in fact come to a standstill. The period of four months expired meanwhile. The respondents did not apply to the Court to enlarge the time for making the award under Section 28. A long time thereafter, on 20-2-1958, they made the application in question out of which the present appeal arises.
3. The application was resisted mainly on the ground that Section 20 was not applicable and the appellant was entitled to avoid the agreement. The learned Subordinate Judge negatived the contentions of the appellant and decreed the suit with costs as prayed for.
4. Sri R.V. Subba Rao attacks this order on two grounds. Firstly, the facts of the case do not attract the provisions of Section 20 of the Arbitration Act and hence the application thereunder is wholly misconceived; secondly, that since the conduct of the arbitrator had shaken the confidence of the appellant in him he was entitled to avoid the agreement of reference and that no order under Section 20 can be possibly made. It is also urged as no award was made within four months and the time was not sought to be enlarged in that behalf, the arbitrator became functus officio and the agreement can no longer be enforceable. The controversy, it may be seen, turns largely on the construction of Section 20. It is useful to extract that Section here so far as it is material for our purpose. It reads thus:-
'(1) Where any persons have entered into an arbitration agreement before the institution of any suit with respect to the subject-matter of the agreement or any part of it, and where a difference has arisen to which the agreement applies, they or any of them, instead of proceeding under Chapter II, may apply to a Court having jurisdiction in the matter to which the agreement relates, that the agreement be filed in Court.
(2) x x x x
(3) x x x x
(4) Where no sufficient cause is shown, the Court shall order the agreement to be filed, and shall make an order of reference to the arbitrator appointed by the parties where in the agreement or otherwise, or where the parties cannot agree upon an arbitrator, to an arbitrator appointed by the Court.
(5) Thereafter the arbitration shall proceed in accordance with, and shall be governed by the other provisions of this Act so far as they can be made applicable.'
Thus, in order to attract the provisions of Section 20, three conditions are necessary: (i) that the arbitration agreement must have been entered into before the institution of any suit with respect to the subject-matter of an agreement or any part of it; (ii) there must have arisen a difference to which the agreement applies; and (iii) the proceedings under Chapter II must not have been started. The conditions prescribed are cumulative and not mutually exclusive. Unless these conditions are satisfied, there can be no occasion for making an application under Section 20 with the request that the agreement be filed in Court. Nor could the Court entertain and proceed with the case as prescribed in that provision. It follows this section has no application at all to agreements to refer to arbitration, disputes in pending suits as it is intended to cover only those cases where the parties without having recourse to litigation have agreed to refer their differences to arbitration. It is equally clear that in cases of difference to which the agreement applies, the party can apply to the Court under this provision if he has not yet proceeded under Chapter II. The words 'instead of proceeding under Chapter II' used in Section 20 mean and necessarily imply that the application to the Court for filing the award is only an alternative step and not a simultaneous or a supplemental step. Chapter II contains provisions regarding appointment of arbitrators and umpires, their removal, their powers, their award and how it can be modified, corrected by the Court etc. Under the provisions of Section 3, the provisions in the first schedule to the extent possible, are also included in that Chapter.
The object of Section 20 is, that in case of agreement for arbitration where no suit is pending, and the differences arise to which the agreement applies, the Court shall give effect to the agreement if it is lawful and valid by making an order of reference to arbitrators appointed by the parties, or by the Court if none is appointed by the parties. Sub-section (5) makes it clear that after such an order of reference, the arbitrator shall proceed and be governed by the other provisions of law so far as they can be made applicable. The Sub-clauses (4) and (5) furnish clear indicia of the appropriate stage at which the provisions of Section 20 can be availed of. It is manifest that they are to be availed of before an arbitrator has entered on reference. The words 'instead of proceeding under Chapter II' further clarify the stage at which this provision is available. If that stage is passed and the proceedings are started under Chapter II, the provisions of Section 20 will not be available, Judged thus, Section 20 clearly bars the application made by the respondents.
For one thing, the suit which covers the subject-matter of agreement has not ended in a final decree. The decree passed in that case was only preliminary which means further proceedings had to be taken before that suit can be completely disposed of. It is not the case of the parties that that suit has been withdrawn so that it may be said that there was no suit pending at the time of the agreement of reference. What is more important is that the parties actually proceeded under Chapter II. The arbitrator appointed by the parties admittedly entered on reference. His authority could not be revoked under the clear provisions of Section 5 except with the leave of the Court which was not obtained. It was open to him to make an award within the prescribed period.Schedule I Rule (3) provides that this awardshould have been given within four months afterentering on the reference or within such time asthe Court may allow and Section 28 invests theCourt with power to enlarge time for making theaward whether the period has already expired ornot. But it appears that notwithstanding the expiry of the period, the respondents did not makeany such application to the Court to extend theperiod with the result that on the expiry of thatperiod in the absence of any extended time grantedby the Court, the arbitrator became functus officio. That such is the position in law is also clearfrom the dictum in Hari Shankar Lal v. ShambuNath, : 2SCR720 . But on that account Section 20 cannot possibly be called in aid, for whenonce the party had proceeded under Chapter II,there is nothing in Section 20 to enable him tomake an application thereunder. In this view oflaw, on the admitted facts of the case, it was notopen to the respondents to make an applicationunder Section 20 for enforcing the agreement andthe Court below fell into an error in entertainingan application and decreeing the claim of the plaintiffs. The appeal therefore must be allowed. Weallow the appeal accordingly, and set aside theorder of the Court below. In the circumstances, there will be no order as to costs.