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Fida Ali Vs. Amroha Sahkari Kraya Vikaraya Samiti Ltd. and ors. - Court Judgment

LegalCrystal Citation
SubjectArbitration
CourtAllahabad High Court
Decided On
Case NumberF.A.F.O. No. 338 of 1972
Judge
Reported inAIR1977All158
ActsArbitration Act, 1940 - Sections 33; Uttar Pradesh Co-operative Societies Act; Uttar Pradesh Co-operative Societies Rules, 1936 - Rules 115 and 134
AppellantFida Ali
RespondentAmroha Sahkari Kraya Vikaraya Samiti Ltd. and ors.
Appellant AdvocateS.P. Gupta, Adv.
Respondent AdvocateK.C. Saxena, Adv.
DispositionAppeal allowed
Excerpt:
arbitration - reference to arbitrator - section 33 of arbitration act, 1940 - proper reference to arbitrator - must for valid award - reference challenged only under section 33. - - co-operative societies act, the supreme court observed as follows :the appeal must also fail on the ground that even if it is a dispute touching the business of the society within the meaning of section 91(1) of the act, it is not a dispute between a society and a member or a person claiming through a member. if the plaintiff seeks to challenge that the reference itself was bad, his only remedy was to proceed under section 33 of the arbitration act, which, in our opinion, is not inconsistent with the provisions of the u......no. 3, was appointed as arbitrator within the meaning of rule 115 of the rules framed under the co-operative societies act (hereinafter referred to as the rules). the arbitrator called upon the plaintiff to appear on 27th november, 1964, in connection with the claim. the plaintiff filed a written statement refuting the allegations of the society. he also challenged the jurisdiction and the authority of the arbitrator. the arbitrator, however, accepted the claim of the society and gave an award in favour of the society for the amount claimed. fida ali, the appellant, thereupon, filed an application under section 33 of the arbitration act. later on, he valued the action as a suit and paid court-fees for the relief of declaration that there was no valid arbitration between the plaintiff and.....
Judgment:

R.B. Misra, J.

1. The present appeal is a sequel to proceedings under Section 33 of the Arbitration Act and arises in the following circumstances.

2. M/s. Amroha Sahkari Kraya Vikaraya Samiti Limited (hereinafter referred to as the Society) set up a claim for Rs. 21,756.60 p. against Fida Ali, the appellant. The plaintiff denied his liability to pay any amount. Thus, a dispute arose between the parties. Mohammad Umar, Additional District Co-operative Officer, respondent No. 3, was appointed as Arbitrator within the meaning of Rule 115 of the Rules framed under the Co-operative Societies Act (hereinafter referred to as the Rules). The Arbitrator called upon the plaintiff to appear on 27th November, 1964, in connection with the claim. The plaintiff filed a written statement refuting the allegations of the Society. He also challenged the jurisdiction and the authority of the Arbitrator. The Arbitrator, however, accepted the claim of the society and gave an award in favour of the Society for the amount claimed. Fida Ali, the appellant, thereupon, filed an application under Section 33 of the Arbitration Act. Later on, he valued the action as a suit and paid court-fees for the relief of declaration that there was no valid arbitration between the plaintiff and defendant No. 1 and the resultant proceedings, including the award made by respondent No. 3 were without jurisdiction. The stand of the plaintiff was that he was not a member of the defendant Society nor he had any dealings with the Society. There was no agreement between the parties to refer the dispute to an Arbitrator and so the entire proceedings resulting in the award were without jurisdiction.

3. The claim was resisted by the defendant society on the ground that the proceedings under Section 33 of the Arbitration Act were not maintainable and that the appellant and his son had been the members of the society on the date of the dispute and were, consequently, bound by the Rules and Bye-laws of the society.

4. The pleadings of the parties gave rise to fairly a large number of issues.

5. The Additional Civil Judge (Judge, Small Causes Court), Moradabad, dismissed the suit by his order dated 4th September, 1972, holding that the plaintiff was a member of the society on the date of reference. He, however, repelled the contention of the defendant that the pr6ceedings under Section 33 of the Arbitration Act were not maintainable. The plaintiff, feeling aggrieved by the judgment of the Additional Civil Judge, has filed the present appeal.

6. Sri K. C. Saxena, appearing for the Society, raised a preliminary objection that the proceedings under Section 33 of the Arbitration Act were not maintainable. In support of his contention, he placed reliance on Bahadur Singh v. The District Judge, Rampur, AIR 1975 All 12. In that case, a Division Bench of this Court held :

'Sections 14, 17 and 33 of the Arbitration Act are inconsistent with the provisions contained in Sections 98 and 111 of U. P. Co-operative Societies Act, which bar the jurisdiction of Civil Court from entertaining a suit concerning validity of any award. Therefore, a suit to determine the validity of an award given by Registrar under that Act cannot be filed under the provisions of Arbitration Act.'

7. Sri S. P. Gupta, appearing for the appellant, however, refuted this contention. His stand was that the proceedings under Section 33 of the Arbitration Act were maintainable. He also supported his reasons by various authorities with which we shall presently deal with.

8. At this stage, it would be necessary to refer to the relevant provisions of the Arbitration Act and the Co-operative Societies Act and the Rules framed thereunder in order to appreciate the point involved in the case.

9. Section 30 of the Arbitration Act stipulates the grounds on which an award can be set aside. Section 33 authorises any party to an arbitration agreement or any person claiming under him desiring to challenge the existence or validity of an arbitration agreement or an award or to have the effect of either determined shall apply to the Court and the Court shall decide the question on affidavits. Section 46 provides that the provisions of this Act, except Sub-section (1) of Section 6 and Sections 7, 12, 36 and 37, shall apply to every arbitration under any other enactment for the time being in force, as if the arbitration were pursuant to an arbitration agreement, except in so far as this Act is inconsistent with that other enactment or with any rules made thereunder

10. Rule 115 of the Rules framed under the Co-operative Societies Act, 1912 enumerates the proceedings which shall be decided, either by the Registrar or by arbitration. It reads:

'115. Any dispute touching the business of a registered society (i) between members or past members of a society or persons claiming through a member or past members, (ii) or between a member or a past member or persons so claiming and the society or its committee or any officer of the society, (iii) between the society or its committee and any officer of the society, and (iv) between two or more registered societies, shall be decided either by the Registrar or by arbitration and shall for that purpose be referred in writing to the Registrar.'

11. Rule 133 provides for appeal to the Registrar against the award. It reads :

'133. Any party considering itself aggrieved by the award of an arbitrator or arbitrators may appeal to the Registrar within one month of the date of the communication of the award, and the Registrar shall pass such orders as he deems fit provided that the time taken in obtaining a copy of the award shallbe excluded in counting the period of one month.'

12. Rule 134 deals with the consequence of not filing an appeal against the award. It reads :

'134. A decision of an arbitrator or arbitrators under these rules if not appealed against within the said period and an order of the Registrar shall, as between the parties to the dispute, not be liable to be called in question in any civil or revenue Court and shall in all respects be final and conclusive.'

13. In view of Section 46 of the Arbitration Act, the provisions of that Act, except Sub-section (1) of Section 6 and Sections 7, 12, 36 and 37 apply to every arbitration under any other enactment for the time being in force, except insofar as the Arbitration Act is inconsistent with the other enactment or with any rules made thereunder. Consequently, the provisions of Section 33 of the Arbitration Act would also apply to every arbitration, including the arbitration under the U. P. Co-operative Societies Act unless it is inconsistent with the U. P. Co-operative Societies Act. Rules framed under the Co-operative Societies Act do provide for an appeal against the award, but if no appeal is filed, the award shall become final and conclusive and shall not be liable to be called in question in any civil or revenue Court According to Sri Saxena, Rule 134 of the Rules framed under the Co-operative Societies Act is a complete bar and would be taken to be inconsistent with the provisions of Section 33 of the Arbitration Act and that being the position, Section 33 of the Arbitration Act would have no application.

14. Sri S. P. Gupta, however, contended that there is no inconsistency in the Arbitration Act and the U. P. Cooperative Societies Act or the Rules framed thereunder. Rule 133 contemplates an appeal against the award, but if a party wants to challenge the agreement of reference itself or the jurisdiction of the arbitrator, it has no remedy under Rule 133 and it can do so only under Section 33 of the Arbitration Act. If the two provisions can co-exist side by side, one cannot be said to be inconsistent with the other. The non-existence and invalidity of an arbitration agreement could not be the grounds for setting aside the award under Rule 133 and it could be challenged only under Section 33 of the Arbitration Act.

15. In Khardah Co. Ltd. v. Raymon & Co. (India) Pvt. Ltd., AIR 1962 SC 1810, it was laid down that the arbitration clause cannot be enforced when the agreement of which it forms an integral part is held to be illegal. It was further held that :

'a dispute that the contract of which the arbitration clause forms an integral part is illegal and void is not one which the arbitrators are competent to decide under the arbitration clause although it is of sufficient amplitude to take in a dispute as to the validity of the agreement, and in consequence a party to the contract is entitled to maintain an application under Section 33 for a declaration that the contract is illegal and that in consequence the proceedings taken thereunder before the arbitrators and the award in which they resulted were all void..... The party applying under Section 33 is not estopped by its conduct in appearing before the arbitrators and in taking part in the proceedings before them from questioning the validity of the award. What confers jurisdiction on the arbitrators to hear and decide a dispute is an arbitration agreement as defined in Section 2(a) and where there is no such agreement, there is an initial want of jurisdiction which cannot be cured by acquiescence.'

16. It is true that in the case before the Supreme Court, the arbitration was not under the Co-operative Societies Act. It was based on an agreement between the parties, which contained an arbitration clause. The principle laid down in that case is, however, fully applicable to the instant case. If the agreement of reference itself is challenged, the only remedy a party has is to proceed under Section 33 of the Arbitration Act.

17. In Prem Sagar Chawla v. Security & Finance (P.) Ltd., AIR 1968 Delhi 21 (FB), a Full Bench of the Delhi High Court laid down the following proposition :

'Where the challenge to the award is on the ground of factual non-existence of the arbitration agreement, the case would be one of challenge to the existence of the award in Section 33 and not to its validity in Section 30, with the result that such an award will not have to be set aside but adjudged as non-existent. An award on the supposition of an arbitration agreement which does not exist would be void ab initio and, therefore, not worthy of notice in the eye of law forthe purpose of being set aside. The same appears to be the position where the challenge to the award is on the ground that the arbitration agreement is void by reason of non-compliance with any of the conditions precedent to its validity. The existence and validity of the arbitration agreement, therefore, may be challenged by an application under Section 33 even though an award on the basis of the supposed arbitration agreement has been made, and even though an application under Section 33 is made after the expiry of the time prescribed by Article 158 of the Limitation Act of 1908.'

18. In S. P. Bhatnagar v. Balmakund Balla, 1960 All LJ 384 in a similar situation as in the case in hand, a Division Bench of this Court laid down the following proposition :

'The purpose and vision of the two enactments also does not appear to be similar and overlapping. Section 33 is concerned with the existence, scope and validity of the arbitration agreement and the award while the Act of 1912 and the Rules provide a machinery for arbitration over the dispute. The former is directed broadly to matters of vires and other similar questions, while the latter are in our opinion concerned with the merits of the controversy. Our attention has not been drawn to any provision in the Act of 1912 and the Rules which confers plenary authority on the arbitrator to conclusively determine the range of his own jurisdiction. Rule 134 seems to us to assume that the arbitrator's decision is within his authority and it then extends immunity of his award from any challenge on merits in the Court. Again neither this rule nor Rule 137 is concerned with the stage prior to the actual decision. We are, therefore, unable to agree that Section 33 is incompatible with the machinery and procedure of co-operative arbitration. The expeditious intervention of the Court under Section 33 before the giving of the award, as in this case, would neither rob the award of its finality nor make the arbitration machinery unworkable.'

19. The Court below has relied upon Rajdhari Devi v. Deputy Registrar, Co-operative Societies, U. P., Gorakhpur, 1962 All LJ 876 = (AIR 1963 All 113). A similar view was taken in that case. It was held by a learned Single Judge of this Court;

'Section 46 of the Indian Arbitration Act is of general application and was in-tended to make the provisions of the Indian Arbitration Act with the exception of the three sections mentioned in Section 46 itself applicable to all statutory arbitrations. Prima facie, therefore, Section 46 applies to arbitration under the Co-operative Societies Rules also. The extent of the application of the provisions of the Indian Arbitration Act has, however, been cut down by Section 46 itself as it provides that the provisions of the Arbitration Act shall apply to statutory arbitrations only to the extent that they are not inconsistent with the provisions of the statute itself. If, therefore, there is anything in the Co-operative Societies Rules which is inconsistent with the provisions of the Indian Arbitration Act the provisions of the Rules must be preferred and to that extent the provisions of the Arbitration Act will become inapplicable.'

20. Sri K. C. Saxena, however, cited Dist. Co-operative Federation Ltd. Meerut v. Registrar, Co-operative Societies, U. P. Lucknow, AIR 1966 All 489 and contended that the case of Rajdhari Devi v. Deputy Registrar, Co-operative Societies, U. P., Gorakhpur, (AIR 1963 All 113) (Supra) has been overruled by the latter decision.

21. In Distt. Co-operative Federation Ltd. Meerut v. Registrar, Co-operative Societies, U. P., Lucknow, AIR 1966 All 489 (Supra), the Division Bench has overruled the case of Rajdhari Devi v. Deputy Registrar, Co-operative Societies, U. P., Gorakhpur, (AIR 1963 All 113) (Supra) on a different point, but the point with which we are concerned in the present case has been reaffirmed even by the Division Bench. It was observed:

'What Section 46 of the Arbitration Act provides is, that in the absence of any provision relating to any matter connected with an arbitration in the special Act, the provisions of the Indian Arbitration Act would be followed to the extent of the omission, and for that limited purpose a statutory award made under any other enactment shall be deemed to have been made under the Arbitration Act. It is not and it could not be the intention of Section 46 of the Arbitration Act to make a statutory award given under the provisions of a special Act an award under the Arbitration Act for all purposes.'

22. There is yet another aspect from which the case can be considered.Under Rule 134 of the Rules framed under the Co-operative Societies Act, the decision of an arbitrator or arbitrators under these rules, if not appealed against within the said period, shall not be liable to be called in question in any civil or revenue Court and shall, in all respects, be final and conclusive, but the decision or the award of the arbitrator must be under the Rules of the Society. Rule 115 gives the scope of the matters to be decided by the arbitrator. It talks of any dispute touching the business of a registered society between members of a society or person claiming through a member. Therefore, the dispute must be a dispute between the members of the society or between the members and the society. In the instant case, the appellant became a member of the society on 12th September, 1964, when the resolution accepting him as a member was passed It is true that he had applied on 8th January, 1964, for membership of the society, but he was made a member of the society in pursuance of the resolution dated 12th September, 1964. The loan forming the basis of the dispute had been contracted between the plaintiff during the period 5th April, 1964 to 20th May, 1964. The plaintiff was, admittedly, not a member within this period, namely, from 5th April, 1964, and 20th May, 1964. The learned Judge, however, came to the conclusion that he was a member on the date of reference. In our opinion, the view taken by the Court below is not warranted by law.

23. In Deccan Merchants Co-operative Bank Ltd. v. Dalichand Jugraj Jain, AIR 1969 SC 1320, while dealing with Section 91(1) of the Maharashtra Co-operative Societies Act, which corresponds to Rule 115 of the Rules framed under the U. P. Co-operative Societies Act, the Supreme Court observed as follows :--

'The appeal must also fail on the ground that even if it is a dispute touching the business of the society within the meaning of Section 91(1) of the Act, it is not a dispute between a society and a member or a person claiming through a member. It seems to us that before a person can be said to claim through a member, the claim should arise through a transaction or dealing which the member entered into with the society as a member. If a member entered into a transaction with the society not as a member but as a stranger, then he must be covered, if at all, by the provisions ofSection 91(1)(a) or (c). But once it is held that the original transaction was entered into by the member with the society as a member then any person who claims right or title through that member must come within the provisions of Section 91(1)(b).'

24. The plaintiff, therefore, should lave been a member of the Society on the date of the transaction and not on the date of reference. On the finding of the Court below itself, the plaintiff was not a member on the date of the transaction of loan. If he was not a member of the society on the date when the transaction of loan was entered into, the reference could not be within the meaning of Rule 115 and if the reference itself could not be made under Rule 115, the award of the arbitrator will not be an award under the Rules of the Society within the meaning of Rule 134.

25. Unless there was a valid reference, there could be no award under the arbitration agreement. Valid reference gives the jurisdiction to the arbitrator and if the agreement of reference itself falls through, the award cannot stand. If the plaintiff seeks to challenge that the reference itself was bad, his only remedy was to proceed under Section 33 of the Arbitration Act, which, in our opinion, is not inconsistent with the provisions of the U. P. Co-operative Societies Act or the Rules framed thereunder. As observed earlier. There is no provision under the U. P. Co-operative Societies Act whereunder the appellant could have challenged the validity of the agreement of reference itself. Under Rule 134, only the award can be challenged on merits. In the instant case, the appellant had, however, raised an objection before the arbitrator that he had no jurisdiction to proceed with the arbitration proceedings, but as this question could not be decided by the arbitrator himself, the only course open to the appellant was to proceed under Section 33 of the Arbitration Act, which applies to all arbitrations under any Act unless the provisions of the Arbitration Act are inconsistent with the provisions under the special Act. In view of the principles laid down by the Supreme Court in Deccan Merchants Cooperative Bank Ltd. v. Dalichand Jugraj Jain, (AIR 1969 SC 1320) (Supra) the case of Bhadur Singh v. District Judge, Rampur, (AIR 1975 All 12) (Supra) cannot stand in the way of the appellant

26. For the reasons given above, the appeal must succeed. It is, accordingly, allowed and the judgment of the Court below is set aside and the suit stands decreed. In the circumstances of the case, we direct the parties to bear their own costs.


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