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Ram Babu Vs. Lakshmi NaraIn and anr. - Court Judgment

LegalCrystal Citation
SubjectArbitration;Civil
CourtAllahabad High Court
Decided On
Case NumberSpecial Appeal No. 19 of 1952
Judge
Reported inAIR1963All252
ActsArbitration Act, 1940 - Sections 17, 39(2) and 41; Code of Civil Procedure (CPC) - Sections 96 and 100
AppellantRam Babu
RespondentLakshmi NaraIn and anr.
Appellant AdvocateJ. Swarup, ;Hari Swarup and ;K.C. Saxena, Advs.
Respondent AdvocateP.N. Bakshi, Adv.
DispositionAppeal dismissed
Excerpt:
.....39 (2) and 41 of arbitration act, 1940 and sections 96 and 100 of code of civil procedure,1908 - decree passed under section 17 can be challenged in first appeal under section 96 by virtue of section 41 of arbitration act - can also be challenged on appropriate ground in second appeal under section 100 of code of civil procedure - section 17 does not confer right of appeal - curtail existing right of appeal - referees statement on the basis of agreement held binding to the parties. - - the right of appeal which is recognised in this clause of section 17 of the arbitration act, is clearly the right conferred by part vii of the code of civil procedure. the language of the clause contained in this section is clearly in the form of a limitation on an existing right of appeal and does..........of civil procedure applicable to proceedings under the arbitration act and the result is that a decree passed under section 17 of the arbitration act could be challenged by a first appeal under section 96 of the code of civil procedure and on appropriate grounds in a second appeal under section 100 of the code of civil procedure.section 17, however, places some limitations on this right of appeal by laying down that 'no appeal shall lie from such decree except on the ground that it is in excess of, or not otherwise in accordance with the award.'this clause contained in section 17 thus recognised that a decree passed under section 17 is subject to right of appeal by the party aggrieved but places a limitation on that right. the right is curtailed to the extent that an appeal can be.....
Judgment:

Bhargava, J.

1. This special appeal has arisen in the following circumstances. The appellant, a minor, had brought a suit through his father as next friend which was numbered as Suit No. 297 of 1942. That suit was contested by the respondent, Lakshmi Narain, and was ultimately dismissed on the 31st of August, 1943. Against this decision a first appeal was filed by the Appellant which was numbered as Appeal No. 292 of 1943 and was pending in the Court of the District Judge. It was later transferred to the Court of the Civil Judge.

Subsequently, while this appeal was still pending, an agreement for reference of certain disputesto an arbitrator was executed on the 10th of July, 1944. To that agreement there were various parties including the appellant, his father, his grandfather, the respondent and some other persons. The reference to the arbitrator was in respect of a number of disputes including the dispute which was the subject-matter of Appeal No. 292 of 1943.

After this reference had been made, an application was presented on the 7th of August, 1944, jointly by the appellant, respondents and others praying to the Civil Judge to postpone the hearing of the appeal until the delivery of the award in the arbitration. That application was granted and the hearing of the appeal was postponed. The arbitrator gave his award on the 16th of August, 1944, and following that award Lakshmi Narain respondent moved an application under Section 14 of the Arbitration Act praying that a decree be passed on the basis of the award.

This application was contested, inter alia by Ram Babu, appellant, on the ground that the reference to the arbitrator was incorrect and invalid on two grounds. One ground was that the dispute, which was already the subject-matter of the appeal in the Court of the Civil Judge, could not have been referred to the arbitrator without the intervention of the Court. The second ground was that Ram Babu was a minor and there could have been no reference of the dispute without the permission of the Court.

On the 30th of May, 1945, while this objection was pending, an application was moved on behalf of the appellant, saying that the appointment of a referee to decide this objection would be beneficial in the interest of the minor, and requesting the Court for necessary sanction for appointment of a referee in the case. This application was allowed and, thereupon, on that very date, i.e. the 30th of May, 1945, counsel for all the parties including counsel for Ram Babu appellant made a joint statement before the Court appointing one B. Mathura Prasad Kacker Vakil as a gawah hazri giving him power to make a statement after making an inquiry or without an inquiry, the inquiry being either confidential or open, and stating that the statement made by B. Mathura Prasad Kacker Vakil would be binding on all the parties.

The Court, thereupon, made an order to the effect that the parties had stated that B. Mathura Prasad Kacker be appointed as a referee and the prayer of the parties for appointment of B. Mathura Prasad Kacker as a referee was allowed. Mr. Kacker was appointed as a referee and his fee was fixed. The referee was asked to submit his report by the 12th of July, 1945 which was later on extended. The referee, however, gave his statement on the 22nd of September, 1945, to the effect that there was no misconduct or material irregularity which could vitiate the award and the objections were futile.

Even after this statement, the Court proceeded to hold that the award was not binding on Ram Babu appellant but was binding on all other parties to the arbitration agreement. Consequently, the Court passed a decree in terms of the award with the modification that no decree was passed against Ram Babu appellant and a direction was made that the Appeal No. 292 of 1943 would proceed on merits.

Two appeals were filed against this decree-one by Lakshmi Narain respondent and the other by the grandfather of the appellant. Both these appeals were dismissed by the District Judge. Then a second appeal was filed in this Court by Lakshmi Narain which was allowed by the learned Single Judge. In that appeal two main questions arose. One was whether a second appeal at all lay to this Court in the circumstances mentioned above. The second question was whether the statement of the referee was binding on Ram Babu appellant or not and whether the trial Court should have passed the decree in accordance with the award on the ground that the referee had stated that the award was not vitiated by any irregularity. Some other points also arose but it is not necessary to mention them as this special appeal can be fully decided on the basis of these two points only, which have again been raised before us. The other points would not arise if these two points are decided against the appellant.

2. So far as the first point is concerned, the submission of learned counsel for the appellant was that, the appellant having filed an objection that the award was invalid, any order setting aside the award on the ground that it was invalid or rejecting such an objection would be appealable under Section 39 of the Arbitration Act and a second appeal would be barred under Section 39(2) of the Arbitration Act.

This submission, however, ignores the nature of the appeal that came up before this Court. The appeal was not against an order setting aside or refusing to set aside an award. In fact the decision of the trial Court was that the award was not invalid though the trial Court further proceeded to hold that it was not binding on the appellant. In the circumstances, that Court passed a decree on the basis of the award but the decree was in terms which were different from those contained in the award inasmuch as, if the decree had been in accordance with the award, it would have been passed against the appellant also.

If the trial Court had held that the award was invalid and Lakshmi Narain respondent had been compelled to appeal against that order, then the appeal would have been one under Section 39 of the Arbitration Act and no second appeal would have lain. On the other hand, so far as the objection of the appellant was concerned, the decision on it was against the appellant and in favour of Lakshmi Narain inasmuch as the Court held that the irregularities relied upon by the appellant did not invalidate the award as a whole and the Court, therefore, proceeded to pass a decree on the basis of the award. Such a decree could only be passed under Section 17 of the Arbitration Act.

Section 41 of the Arbitration Act makes the provisions of the Code of Civil Procedure applicable to proceedings under the Arbitration Act and the result is that a decree passed under Section 17 of the Arbitration Act could be challenged by a first appeal under Section 96 of the Code of Civil Procedure and on appropriate grounds in a second appeal under Section 100 of the Code of Civil Procedure.

Section 17, however, places some limitations on this right of appeal by laying down that 'no appeal shall lie from such decree except on the ground that it is in excess of, or not otherwise in accordance with the award.'

This clause contained in Section 17 thus recognised that a decree passed under Section 17 is subject to right of appeal by the party aggrieved but places a limitation on that right. The right is curtailed to the extent that an appeal can be filed only on the grounds mentioned in this clause, viz., it is in excess of or not otherwise in accordance with the award. If such grounds do not exist, the right of appeal, which otherwise exists, is taken away by this clause. The right of appeal which is recognised in this clause of Section 17 of the Arbitration Act, is clearly the right conferred by Part VII of the Code of Civil procedure. The Legislature, it appears, did not desire that a decree passed under Section 17 of the Arbitration Act should remain subject to appeal on all grounds under Section 96 of the Code of Civil Procedure and, consequently, proceeded to lay down this limitation in Section 17 on that right of appeal. The language of the clause contained in this section is clearly in the form of a limitation on an existing right of appeal and does not by itself create any independent right of appeal. If the Legislature had intended that a decree passed under Section 17 of the Arbitration Act was not to be appealable under Section 96 of the Code of Civil Procedure and a special provision should be made for an appeal against such a decree, the language instead of being in the negative form would have been in the positive form conferring a right of appeal.

It is a recognised principle that a right of appeal is not an inherent right of any party but is a creation of law. The language of Section 17 of the Arbitration Act, does not create any right of appeal and, consequently, it has to be held that this limitation on the right of appeal was placed by the Legislature only because the Legislature recognised the fact that a decree would be appealable under Part VII of the Code of Civil Procedure because of the applicability of that provision of law under Section 41 of the Arbitration Act.

In this connection, learned counsel for the appellant drew our attention to a decision of a Division Bench of the Patna High, Court in Gopal Choudhary v. Mt. Sundari, AIR 1955 Pat 277 where that Court held that Section 96 is not applicable for filing an appeal against a decree passed under Section 17 of the Arbitration Act. It is true that the decision of the Patna High Court is quite contrary to the view we are taking in this case, but we regret we are unable to agree with the view taken by the learned Judges of the Patna High Court in that case. In deciding that case the learned Judge, who delivered the leading judgment, said:

'In my opinion, Section 17 deals with the finality of the decree based on an award. It no doubt provides for an appeal where the decree is in excess of or not otherwise in accordance with the award, but it does not contemplate a second appeal. Chapter VI, Arbitration Act which deals with appeals also forbids a second appeal to the High Court. Section 41(a), Arbitration Act does not mean that apart from the provisions of that Act appeals will lie under Sections 96, 100 or 104, Civil P. C.'

It has appeared to as that the learned Judge, for some reason or the other, read in the language of Section 17 of the Arbitration Act a provision conferring the right of an appeal where the decree is in excess of or not otherwise in accordance with the award.

As we have indicated earlier, the language of Section 17 of the Arbitration Act does not confer or create any right of appeal at all. All that that section does is to curtail the existing right of appeal so as to give finality to a decree passed on an award in certain circumstances. The right of appeal is preserved and left unaffected in those cases only where an appeal is sought on the ground that the decree is in excess of or not otherwise in accordance with the award. In other cases the right of appeal is taken away. These provisions partly taking away the right of appeal and partly preserving the right of appeal cannot be held to amount to conferring a right of appeal.

3. So far as Chapter VI of the Arbitration Act is concerned, it only deals with appeals from orders and not appeals from decrees. Section 39(1) of the Arbitration Act confers a right of appeal against certain orders with the addition that not even a first appeal is to lie from orders other than those mentioned in that provision. Section 39(2) then takes away the right of second appeal from an order in appeal, under Section 39(1).

It seems to us that Chapter VI, which deals with appeals from orders, cannot be taken into consideration at all when the question to be decided is as to the right of appeal against a decree. If the Legislature had intended to equate a decree under Section 17 with an order under that provision of the Act right of appeal in respect of which is governed by Chapter VI, there was in fact no need to say in Section 17 that the Court shall proceed to pass a decree. It appears that the specific provision that a decree is to be passed, was made clearly with the purpose that such a decree would be subject to all the incidents of a decree under the Code of Civil Procedure. Further, a partial limitation on the right of appeal was placed on such a decree. A decree under Section 17 would thus be an executable decree to which the appropriate sections of the Coda of Civil Procedure and the provisions of Order XXI of the Code of Civil Procedure would apply. Thelanguage used in Section 17 of the Arbitration Act thus makes it clear that a decree under that section would be appealable under the provisions of the Code of Civil Procedure and, if appropriate grounds exist, a second appeal will lie under Section 100 of the Code of Civil Procedure.

It is also to be noticed that the first appeal before the District Judge as well as the second appeal in this Court were directed against the decree passed by the trial Court and the specific point taken- was that the decree was not in accordance with the award inasmuch as the award had directed the settlement of a dispute which was the subject-matter of Appeal No. 292 of 1943 pending in the Court of the Civil Judge to which the appellant was a party. Thus both the appeals were precisely on one of the grounds on which the right of appeal is preserved by Section 17 of the Arbitration Act.

4. The second point urged by the learned counsel was that the learned Single Judge was wrong in holding that the statement of the referee was binding on the appellant and that the objection of the appellant had to be decided in accordance with that statement. Two reasons were advanced in support of this submission. One reason urged by learned counsel was that the effect of the statement of counsel for purposes of referring the dispute, contained in the objection, to B. Mathura Prasad. Kacker Vakil amounted to a reference to an arbitrator for an award and not to a reference to a referee. The other point urged was that the question, referred was a question of jurisdiction and the statement of a referee on a question of jurisdiction cannot be binding on the Court and the Court should, therefore, ignore such a statement in case it is contrary to the correct position about jurisdiction.

So far as the first question raised is concerned, we have carefully perused the record of the joint statement of counsel which was recorded in the trial Court and we find that the terms as contained in the statement clearly constituted B. Mathura Prasad Kacker a referee and not an arbitrator. He was described as a witness who was to appear and give a statement. He was given the power of making a statement without any inquiry if he considered it necessary and, even if he made an inquiry, he was at liberty to make it confidentially or openly. The parties stated that they would be bound by his statement in whatever circumstances it may be made. This case is, therefore, not a case where B. Mathura. Prasad Kacker was called upon to adjudicate any-dispute between the parties. All that he was required to do was to satisfy himself in any manner he liked and then to give a bare statement which would be binding on the parties. This was precisely what B. Mathura Prasad Kacker Vakil did. He stated that there was no misconduct or material irregularity which could vitiate the award and the objections were futile. He did not act like an arbitrator because he was not required to do so. All he did was that, according to his own view, he gave a statement as to what, in his opinion, the correct position was. Such a statement made on the basis of an agreement between the parties would be binding on the appellant.

The second objection also has no force as this statement made by the referee, B. Mathura Prasad Kacker Vakil, did not in any way affect the jurisdiction of the Court before which this statement was made. It neither conferred jurisdiction on that Court nor did it take away jurisdiction vested in that Court. All he did was to give a statement before the Court as to the correctness or otherwise of the objection which had been filed by the appellant. The objection no doubt related to the competence or incompetence of the reference to the arbitrator but in the proceeding, in which this statement was given by the referee, such a question would be either a question of fact or a question of law only to be decided by the Court. The Court was competent to decide whether the objection was or was not to be allowed after considering the ground, whether there had been any misconduct or material irregularity vitiating the award. The Court was competent to give a right decision or a wrong decision on that point which fell within its jurisdiction to decide.

When the Court was competent to decide it rightly or wrongly, it was also competent to decide it on the basis of the statement of the referee appointed with the consent of all the parties who would be bound by the statement. In fact, the proceedings for reference to the referee in this case were initiated at the instance of the appellant himself who moved an application for permission forsuch a reference on the ground that it was beneficial to his interest. After that application had been made on behalf of the minor stating that the reference to the referee was in his interest and the Court had granted the permission for that reference, it is no longer open to the appellant to urge that the referee's statement was not binding on him. The referee's statement being binding, the objection of the appellant had to be dismissed and the decree by the trial Court had to be passed strictly in accordance with the terms of the award. This the trial Court had failed to do and the learned Single Judge rightly corrected that error.

5. Learned counsel wanted to urge before us that the award itself was vitiated on the groundsmentioned above and desired to take us throughthe material and the case law on that point but we have not considered it at all necessary to go into this aspect of the case because once we have heldthat the statement of the referee was binding on the parties and the objection of the appellant had to be decided in accordance with it and the decree had to be passed in accordance with the terms of the award, these questions do not arise at all.

6. As a result, the appeal has no force andas dismissed with costs.


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