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Sukhamal Bansidhar Vs. Babu Lal Kedia and Co. - Court Judgment

LegalCrystal Citation
Decided On
Reported inAIR1920All258; (1920)ILR42All525
AppellantSukhamal Bansidhar
RespondentBabu Lal Kedia and Co.
act no. ix of 1899 (indian arbitration, act), section 4(b) - arbitrations-submission--submission inferred from the contents of several documents--arbitrator acting outside the limits of the submission. - - the sellers, namely, babu lal kedia are members of an association in delhi known as the delhi piece goods association, which, following the example of commercial firms in england, and other places, endeavors, as far as possible, to remove from the ordinary law courts disputes which arise upon purely trade questions and to have them decided by arbitrators or surveyors experienced in the trade, well-known to the traders, who may be taken to be competent to give prompt and satisfactory decisions on points which arise every day over contracts between traders, and in which the same ready.....piggott and walsh, jj.1. these four revisions arise out of four orders of the district judge of cawnpore, dated each of them the 11th of september, 1919, directing (inter alia) four awards to be filed. the awards had been made by a sole arbitrator who had been appointed by one of the disputing parties only, to decide disputes which had arisen between two firms, one the present applicants, sukhamal bansidhar, who are traders in cloth in cawnpore, and the other babu lal kedia & co. who are importers in delhi, apparently with a branch office also in cawnpore, with reference to four contracts or indents numbered respectively 415, 416, 417 and 418, relating to the sale of cloth goods. the sellers, namely, babu lal kedia are members of an association in delhi known as the delhi piece goods.....

Piggott and Walsh, JJ.

1. These four revisions arise out of four orders of the District Judge of Cawnpore, dated each of them the 11th of September, 1919, directing (inter alia) four awards to be filed. The awards had been made by a sole arbitrator who had been appointed by one of the disputing parties only, to decide disputes which had arisen between two firms, one the present applicants, Sukhamal Bansidhar, who are traders in cloth in Cawnpore, and the other Babu Lal Kedia & Co. who are importers in Delhi, apparently with a branch office also in Cawnpore, with reference to four contracts or indents numbered respectively 415, 416, 417 and 418, relating to the sale of cloth goods. The sellers, namely, Babu Lal Kedia are members of an Association in Delhi known as the Delhi Piece Goods Association, which, following the example of commercial firms in England, and other places, endeavors, as far as possible, to remove from the ordinary law courts disputes which arise upon purely trade questions and to have them decided by arbitrators or surveyors experienced in the trade, well-known to the traders, who may be taken to be competent to give prompt and satisfactory decisions on points which arise every day over contracts between traders, and in which the same ready appreciation by ordinary courts of law cannot, in the natural course of things, be expected. This Association has adopted a definite form of contract or indent in which provisions regarding arbitration are. contained, and which include various additions to or modifications of the Indian Arbitration Act, IX of 1899, and they have also printed on the reverse side of the Indent ' General Survey and Arbitration Rules.' The construction of a very important provision contained in these rules is involved in the question which now comes before us. On a general reading of these rules it would appear that the intention is that the surveyor, as he is called, should hold meetings with the surveyor or arbitrator of the other side to examine the goods on behalf of the party whom he represents, although it by no means follows from the rules that that is necessarily so; but a general reading of the rules makes it clear that the survey and the arbitration, although these terms are used interchangeably, are two separate and distinct things. It is perhaps no business of ours, but it follows from the discussion which has taken place in this case, which has been very thoroughly argued on both sides, and from the view which we have formed about this rule, that it is desirable that some of the rules of this Association should be amended with a view to greater simplicity in expressing the intention a very laudable intention--of their framers.

2. It is hardly necessary in these days to repeat that the courts will not set aside an award on the ground that the arbitrators have gone wrong, or that the finding appears to them to be erroneous or unfair, and further, for the same reason that no appeal is allowed against the decision of an umpire or arbitrator, no revision against it can be entertained. That view was laid down very clearly by the Privy Council in the leading case of Ghulam Khari v. Muhammad Hassan (1901) I.L.R. 29 Calc. 167, in 1901, and has been consistently followed by the courts in India.

3. As no point was taken before us to-day that we bad no jurisdiction in revision for very good reason, because, if it had been a good point it would only have resulted in the applicants' making a fresh application for extension of time to appeal which would have re-opened the whole question in another form, we are not called upon to decide whether or not an appeal lies from such an order as the one complained of in this case, namely, filing an award under Section 11 of the Arbitration Act of 1899. That may be a difficult technical question. Of course, if an appeal lies, no revision can be entertained by the express terms of Section 115 of the Code of Civil Procedure, and upon that question I prefer to keep an open mind, merely assuming that as no objection has been taken and as no appeal has in fact been brought, no appeal in fact lies.

4. In my opinion the questions in the case can really be reduced to a small compass. The award in question was admittedly made ex parte, Although the submission was to two arbitrators, one to be appointed by each party, only the firm of Babu Lal Kedia appointed an arbitrator. It was contended before the learned Judge, and before us, by the firm Sukhamal Bansidhar who had refused to take part in the arbitration, that there had never been any submission. Section 4, Sub-section (b), of the Act, which defines submission, is in terms which correspond to the definition given in the English Act. It provides that submission means 'a written agreement to submit differences.' We agree with the view taken by Mr. Justice Woodroffe in Ram Narain Guriga Bissen v. Liladhur Lowjee (1901) I.L.R. 29 Calc. 167, and with the majority of the English cases on this point, particularly Caerleon Tinplate Company v. Hughes (1891) 60 L.J. Q.B. 640, that that provision involves a submission signed by both parties or their agents. But we agree that the agreement to submit, provided it is an agreement, may be collected from a series of documents, even though connected by parole evidence, and signature of any document, forming part of the agreement is sufficient to bind the party signing to the submission contained in the agreement. In the face of the documents in this case, namely, the invoices or ' indents, and the acceptances, the submission is clear and binding upon both parties.

5. The next point which arises is that the provisions of Clause 15 were not complied ,with, It is necessary to set out the greater part of this clause in order to a clear understanding of it. And it should be observed and under the general survey or arbitration rules of the Delhi Piece Goods Association the buyer and seller have the option of nominating 'an European or a native as their surveyor who must be a principal partner, or representative of a firm in Delhi; ' so that the field from which a selection could be made by a firm in Cawnpore is somewhat limited. The second rule of the general Code provides that one of the surveyors must be a partner or representative of an importing firm which is a member of the Delhi Piece Goods Association. The result of which would be of course that if the surveyor first appointed by one party happened not to be a member of the Association, the obligation would be thrown upon the other party to make his selection of an arbitrator who was a member, otherwise the appointment would not comply with submission, so that, the choice of the second party would in that event be further restricted. What happened in the case in question was that the vendors, namely, Babu Lal Kedia, having intimated by a letter of an earlier date their intention to appoint one Mr. Ratnam of the firm of Ratnam and Company, their surveyor or arbitrator, that gentleman on the 5th of February, gave notice in writing to the other party, the present applicants, to appoint their arbitrator and to attend the survey for a final decision on the 25th of February, failing which a decision would be arrived at by him alone in their absence. The question is whether that was a good notice and whether in the events which happened he was legally the sole arbitrator and had jurisdiction to make the award. The material parts of the clause run as follows:

Any claim or dispute arising in connection with this contract must be referred to arbitration in Delhi in accordance with the survey and the arbitration rules of the Delhi Piece Goods Association.

When arbitrators or surveyors disagree and do not appoint an umpire, the Delhi Piece Goods Association, i applied to by either party to the dispute, shall appoint an umpire. The decision of the arbitrators or surveyors or of the umpire shall be final and binding on both parties. In all other respects the Indian Arbitration Act, IX of 1899, shall apply. It is further agreed that if within 20 clear days, and if the 20th day be a Sunday it will not count, (that provision is of great assistance in construing this clause, as it clearly indicates that the 20th day was regarded as a business day by both parties) after being requested by letter addressed to them at their usual place of business either party fail to appoint an arbitrator or surveyor ready and willing to act, the decision of the arbitrator or surveyor appointed by the other party shall in like manner be binding on both parties. It shall be obligatory on the party raising the dispute to see that a survey takes place within 20 clear days from the date of his letter raising the dispute, failing which he or they lose the right to survey.

6. We agree that this clause takes the place of the provision contained on the same subject in Section 9, Sub-clause (6), of the Arbitration Act, where seven clear days are allowed to the other party to appoint his arbitrator, and in case of default, the first party may appoint a sole arbitrator. Clause 15 seems to have been submitted to every conceivable construction in the first court except what we think is the true one. The party now applying in revision put his objection in the court below in a different form, but we think there is no doubt as to the meaning of the clause. The party to whom notice is given must be allowed 20 clear days in which to appoint, In this case he admittedly had less. The award was actually made on the 25th of February, which was only 19 days from the request to appoint the arbitrator made to Sukhamal Bansidhar, assuming that the letter addressed to them by Babu Lal Kedia of the 5th of February reached them in Cawnpore on the same day. In my opinion this failure to give the requisite number of clear days for the appointment is fatal to the appointment and the jurisdiction of Mr. Ratnam as sole arbitrator. The result is that no arbitrator has been lawfully appointed with authority to act alone within the terms of the submission made by the parties themselves

7. It is said, and it seems at some time or another to have been the view of each party, that the award itself must be made within the same 20 clear days. This construction is not a possible one. It makes nonsense of the clause. The arbitration could not take place before the time had expired within which the parties had a right to appoint their arbitrator. If another 20 clear days are intended, it is impossible to work it with the 20 days allowed for the appointment. We think that the provision taking away from any party the right to a survey, unless (if he is the party raising the dispute) he sees that the survey takes place within 20 days from the time of his raising the dispute, must mean a survey or examination of the goods. This view receives strong confirmation from an earlier provision in the same clause dealing with the case of goods at the port of discharge, where the same language, namely, ' survey ' is used.

8. It was stoutly contended before us on behalf of Babu Lal Kedia that in this case the period of 20 clear days allowed by the submission no longer operated, because before its expiration Sukhamal had repudiated the submission altogether and absolutely declined to appoint an arbitrator. In other words, the respondents to this application founded themselves upon the well-known principle in contract law of an anticipatory breach, the general principle of which is laid down, in language which could not be improved upon and is invariably referred to as the test, in the judgment) of Lord Esher in Johnstone v. Milling (1886) 16 Q.B.D. 460 (467).

9. We do not think that this principle is applicable to the case of a submission to arbitration. Rule 15 is, no doubt, part of the contract, but it is a rule based upon procedure affecting the staius and jurisdiction of the arbitrator. In refusing to appoint, Sukhamal did not in our opinion waive, and cannot be held to have waived, his right to appoint within the 20 clear days. The 20 clear days were obviously provided, by business men for business people to enable full reflection before taking a final step, and before being bound by the very serious penalty of having the whole of their rights submitted to a person who might be a partizan of their opponent;. We think that in spice of their refusal to appoint during the period they had a locus poenitentiae They might in the interval have been better advised; they might have chosen to change their minds, and in our view an appointment made at any time up to the end of the 26th of February, assuming that they received the notice on the 5th of February, would have been a good appointment in spite of their previous correspondence. ,The result is that the award ceases to have any legal effect There was no arbitrator in the eyes of the law; he could not arbitrate, and his award is worthless.

10. For my part I think the notice to appoint was bad on another ground. It called upon the other party to appoint a man to meet the arbitrator already appointed on a fixed date. Apart from the fact that one arbitrator could not make a decision of that kind until he had lawfully become the sole arbitrator, the notice limited the other party to the choice of an arbitrator who could make it convenient to attend on the 25th of February. There is nothing in the provision for calling upon the other party to appoint an arbitrator which enables a party to impose restrictions upon his freedom of action or to restrict his choice in this way.

11. It further appears, (but in this matter I think it doubtful whether the question can be raised upon an application for filing an award; it might be necessary for the party objecting to move the court to set aside the award on the ground of misconduct), that there does appear to be reason for thinking that this award was not properly obtained because the other party were not given any real opportunity of being heard. I merely mention this matter because it seems to me that the rules of the Association, while endeavouring to carry out a very laudable object, have not clearly kept in view the pitfalls into which parties are liable to fall unless they walk with circumspection. There seems to have been a confusion of thought between the right to appoint a sole arbitrator, which is one thing, and entitling him to sit alone without hearing the other side, and so deciding the matter entirely on the evidence laid before him by one side. There was stronger reason for giving the other side an opportunity of being present and presenting their case because they had no representative upon the arbitration tribunal. It is really not necessary to decide any other point and I should not refer to it if it had not been necessarily raised and been involved in questions which arise in a matter which I shall have to refer to in a moment because it has been argued with these four revisions. I refer to the execution case. It seems to me that in any event there is a formidable objection to this award upon the ground that it is not enforceable as an award. I agree with the view expressed in Baijnath v. Ahmed Musaji Saleji (1912) I.L.R. 40 Calc. 219, following the English case In re a Bankruptcy Notice (1907) 1 K.B., 470, that when the court is asked to enforce an award, it has to see whether it is enforceable in the same way as a decree would be enforceable if it were a decree. This award is remarkable. Whether it is an illustration of the sort of oversight into which a commercial man may fall even in matters familiar to him, when he is in a hurry, or whether it is a warning to an arbitrator that two heads are better than one, does not really matter, but all that the award really does, while deciding against the absent party all objections on the merits, is to direct the contract to be carried out. No court could execute a decree of this kind in a case of sale of goods. What is to happen if delivery is not made? The award is silent. What is to happen if the money for the goods is not forthcoming? The award is silent. What is to happen if the goods are destroyed by the act of God before the time for complying with the court's order for execution arrives? Again the award is silent. The respondents seemed to me to suggest at one time that it was the business of the execution court to supply deficiencies. If that is the argument I entirely reject it. It seems to me that that is doing just what the English Court of Appeal in the case quoted, decided could not be done, namely, turning it into a workable decree when the award had left it unworkable. In my view Section 13 was intended to meet such a case and Section 13 gives power to the court to remit to the arbitrator, and as at present advised, I think this power may be exercised either when an application is made to file the award, or when an application is made to enforce the award, or when an application is made by the resisting party on an objection that the award as filed is not workable. In either of these cases the court may remit the award for the reconsideration of the arbitrator. If that had been done a great deal of argument would have been saved, but the effect of the order which we are now making will be to achieve much the same result. We hold that this award, as it stands, is worthless and ought not to be enforced or filed. In my view the learned Judge, having before him clear, uncontradicted evidence that the award according to the proper construction of the submission was not a Legal document at all, and that the arbitrator as such had no jurisdiction, was bound to refuse to file the award, and therefore in my view, assuming that there is no appeal, he has exercised a jurisdiction which he did not possess in filing the award, and the case is brought within the express language of Section 115. It is further to be observed that according to the decision in In re Stone and Hastie 1903) 2 K.B.D., 463, the objection that the arbitrator had no jurisdiction may be taken and decided upon an application to enforce the award. That was decided by the English Court of Appeal upon a provision of the English Arbitration Act which is in precisely similar language.

12. But there is even now nothing to prevent the parties from going to arbitration. Indeed somehow or another the disputes which have arisen between them must be eventually decided, and unless they now mutually agree to have recourse to the courts, no law court could entertain a suit in the face of this submission. I think they would be well-advised to start again with fresh notices and it is for this reason that I have expressed my view that the notice given to Sukhamal Bansidhar was in various ways a bad one. The result of that is that Execution First Appeal No. 399, which has been argued before us together with and as part of this revision, must be allowed and the order in that case necessarily falls to the ground, although I should otherwise have felt great difficulty in dealing with it, it being merely, as I understand, a refusal to grant a stay of execution. In my view the applicants, although they have succeeded in this application more by the mistakes of their opponents than anything else, have been stupid and obstinate; stupid in refusing to appoint an arbitrator when they had clearly agreed to do so and when they no doubt could have got a littie more time allowed them if that was their real difficulty; obstinate, in persisting throughout that they had never submitted to arbitration when they clearly had done so from the first. On these grounds I think that, notwithstanding that they -have succeeded, they ought to pay their own costs in all the oases, in both courts.

Piggott, J.

13. In dealing as briefly as possible with the somewhat complicated matters which have been argued out before us in connection with these applications, I prefer to begin by asking myself what the District Judge ought to have done at each stage in connection with the various applications presented to him. The matter came before him under Section 11, Clause (2), of the Indian Arbitration Act, No. IX of 1899, on a petition presented by the gentleman who claimed to be the sole arbitrator in this dispute between the parties. Objections were immediately taken by the firm of Sukhamal Bansidhar. The first point raised by those objections was that there had never been a submission binding on the parties, within the meaning of the definition in Section 4 of Act No., IX of 1899. That question, if tried out separately, should have resulted in an order holding that there had been a valid submission to arbitration binding upon both parties. Had such a finding been separately recorded and embodied in a formal order, it is at least possible that Messrs, Sukhamal Bansidhar would have re-considered their position, at least to the extent of asking the District Judge to remit the award for re-consideration.

14. The next point was whether, on the terms of the submission by which both parties were bound, the gentleman who presented what he called his award to be filed in court had or had not been properly and regularly appointed and empowered to act as sole arbitrator. The discussion on this point was complicated in the court below by the curious interpretation sought to be put on a part of Clause 15 in the arbitration agreement between the parties. I take it to be beyond question that this clause must be read as a whole, and if 'possible, so as to avoid any irreconcilable conflict between different portions of it. I agree with Mr. Justice Walsh that this clause, superseding for practical purposes Section 9 of the Arbitration Act itself, gave the present applicants a right to demand 20 clear days' notice within which they had a right to appoint an arbitrator to act on their behalf. The whole proceedings of the arbitrator himself and the argument which took place thereon in the court below seem to me to have got off the lines, because this important stipulation was ignored and stress was laid on a provision which follows, making it obligatory on the party raising a dispute to see that a '' survey ' takes place within 20 clear days of his letter raising the dispute. This clause can only be reconciled with the preceding by presuming that the ' survey ' therein referred to is an actual inspection of the goods, were such inspection is considered by either party to be a necessary preliminary to the settlement of the dispute between them. It cannot, in this particular context, refer to the arbitration itself; because the arbitration could not be completed within 20 days of the beginning of the dispute, after the party seeking arbitration had given the opposite party 20 clear days' notice within which to appoint its own arbitrator. Moreover, the penalty attached to failure to take steps for obtaining a ' survey ' within 20 days is that the party so failing loses the right to a survey. It could not have been the intention of the rules that, by mere negligence in asserting a right to claim arbitration, a party not desiring arbitration at all should be allowed to wriggle out of the submission. The question, therefore, as it was actually discussed by the learned District Judge, was complicated by the introduction of irrelevant matters, and the argument in his court seems to have got a great deal off the lines. 1 agree in substance with what Mr. Justice Walsh has said about this matter. I think the arbitrator appointed by the firm of Babu Lal Kedia and Company, though he may have acted in good faith and have conceived himself bound by the interpretation which he pub upon the clause in the agreement about a ' survey ' taking place within 20 days, did nevertheless offend against the provisions of the submission to arbitration when he took it upon himself to give the opposite party notice that he would proceed to determine the dispute, as sole arbitrator, on the 25th of February, if they failed to nominate their own arbitrator before that date, and whether or not they chose to enter an appearance before him. Having reached this point, the learned District Judge should have considered whether under the circumstances, it was possible for him to remit the award for consideration by the gentleman who claimed to be sole arbitrator, or whether it was not within his jurisdiction to do what we now suggest should be done, namely, to see that both parties were offered a full and fair opportunity of complying with the terms of the submission and of obtaining an adjudication upon their dispute before an arbitration tribunal regularly constituted in accordance with the terms of that submission.

15. I think, therefore, that the orders which have been passed by the District Judge in this case are not good orders and that they are not just to the party which has brought the matter before us in revision. I have felt some difficulty in the course of argument as to whether we had jurisdiction to interfere in revision, once we came to the conclusion that there had been a valid submission to arbitration. It is arguable, on the one hand, that the dispute between the parties as to whether or not the terms of the submission had been duly complied with was one which the Legislature intended to leave to the determination of the court before which it was raised, without any right of appeal or of revision. On the other hand, it seems to me a very arguable point whether the order complained of was not appealable under Section 104, Clause (1)(f), of the Code of Civil Procedure. I am very little impressed with the argument that the Indian Arbitration Act, No. IX of 1899, is a self-contained Statute. It undoubtedly is so, in respect of all matters with which it expressly deals; and it is worth noticing that the framers of this Act went out of their way to provide that sections 523 to 526. of the former Code of Civil Procedure, Act No. XIV of 1882, corresponding with paragraphs 20 and 21 and other paragraphs of the 2nd Schedule to the present Code of Civil Procedure (Act No. V of 1908), should not apply to arbitrations conducted under the provisions of this Act. They said nothing as to the applicability or otherwise of the sections of the Code of Civil Procedure dealing with appeals. When the present Civil Procedure Code was enacted, nine years after the passing of Act No. IX of 1899, the Legislature had an opportunity of making it clear beyond dispute that the appeal allowed by Section 104, Clause (1) (f), related only to orders passed for filing or refusing to file an award presented to the court under the circumstances dealt with in the Second Schedule;but we find the clause in question worded in the widest possible terms. It gives a right of appeal against an order filing an award in an arbitration without the intervention of the court. Surely an arbitration under Act No. IX of 1899 is nonetheless an arbitration without the intervention of the court because it happens to be an arbitration governed by certain special provisions. I quite admit that there is something to be said on the other side, and I mention this matter because it raises a consideration which has materially influenced my decision in the case now before us In paragraph 21 of the Second Schedule to Act No. V of 1908 it is quite clear that the award is not filed until the court has made an express order to that effect. On the other hand, Section 11 of Act No. IX of 1899 speaks in very general terms of the arbitrators or umpire causing the award to be filed in the court, and the wording of Section 15 which follows leaves it at least open to the contention that unless the court either remits the award for re-consideration to the arbitrator or umpire, or sees reason for setting it aside, the award will be filed, as it were automatically, without any express order of the court to that effect, and will become enforceable as if it were a decree by reason of the provisions of Section 15 aforesaid. I wish to say, to begin with, that I did not stand committed by the order which we are about to pronounce to any final decision as to whether an appeal would or would not lie from a proceeding of a competent district court which merely recorded a finding, by way of a declaration, that a certain paper presented to the court, on a certain date, through a certain agency, was a valid award by a properly constituted umpire or arbitrator under the provisions of Act No. IX of 1899. The order before us is one which expressly purports to file the award. Its operative portion is as follows: 'It is ordered and decreed that the award be filed.' The learned District Judge, therefore, in dealing with this case, did not take the alternative view which I have above suggested, but definitely conceived that the award of the sole arbitrator would not be filed and become operative as a decree of the court unless he passed a formal order directing it to be filed. On this state of things my view is that, if the order of the court below is a good one, it is an appealable order. If it is not an appealable order, the only reason that can be given for holding it to be not appealable is that it is an order which the court below was not intended to pass under the provisions of Act No. IX of 1899 and which, therefore, in that view of the case, it could fairly be held that it had no jurisdiction to pass. Taking this view of the matter, I see no adequate reason why I should not concur in the order proposed by Mr, Justice Walsh which I am quite satisfied meets the justice of the case.

16. I may add that in my opinion the award returned by the sole arbitrator in these matters, even if it were open to no other objection, was one which ought to have been remitted by the District Judge for re-consideration. As it stands, it is either a mere declaration of the respective rights and liabilities of the parties in respect of a particular contract, or it is an attempt to pass a sort of order or decree for specific performance, in a matter in which no such decree can be passed in law. No doubt an arbitrator, duly appointed by the parties, may commit errors of law, as well as in the decision of questions of fact, and the parties will be bound by the errors so committed. But the application of that principle to the facts of this case would be most unfortunate, not to the applicants in revision but to the opposite party. In my opinion this award as it stands, and as the, court below has directed it to be filed, would not be enforceable at all if it were a decree of court. More particularly, it would not be enforceable in the way in which the opposite party have sought to enforce it, namely, as if it were a simple money decree ordering the payment of a certain sum of money by one party to the other. For this reason also I am well content to concur in the order proposed by my learned brother.

17. By the Court: The order of the Court is that these applications are allowed; that the order of the learned Judge directing the award to be filed is set aside; that this Court declares the award to be invalid and the order directing a stay of execution is also set aside. Both parties will pay their own costs in both courts.

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