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Jagrup Ram Kasaundhan Vs. Kashi Prasad Gupta and ors. - Court Judgment

LegalCrystal Citation
SubjectBanking
CourtAllahabad
Decided On
Reported inAIR1934All658
AppellantJagrup Ram Kasaundhan
RespondentKashi Prasad Gupta and ors.
Excerpt:
- - we are clearly of opinion that it is not an interest within the meaning of para. if, for example, it had been shown that the arbitrator was indebted to one of the defendants and he had failed to disclose that fact to the plaintiff, we are of opinion that it could have been argued with force that the arbitrator was guilty of misconduct with-in the meaning of the paragraph referred to. if that be so, we are clearly of the view that the failure to disclose the fact of the indebtedness would not amount to misconduct. but we have no information either of the nature or the amount of indebtedness and, in these circumstances, we are of opinion that the applicant has failed to establish that the arbitrator has been guilty of misconduct such as would induce the court to set aside his award......note and there was no separate relief claimed against defendant 4. in other words so far as the present suit is concerned the plaintiff impleaded defendant 4 really as a pro forma defendant. it was not disputed that in the present suit the plaintiff would not have been entitled to get from the court any order against defendant 4. as against the decision in abudar beg v. nathumal : air1933all739 , the learned counsel for the opposite party has referred us to the case of bankey lal v. chotey miyan abdul shakur : air1931all453 . in that case two judges of the court held that in a case where the interest of the defendants may be served, there does not appear to be any bar to come of the contesting defendants joining with the plaintiffs in referring the matter in difference between them to.....
Judgment:
ORDER

1. This is an application in revision against an order of the Additional Munsif of Gorakhpur, dated 8th March 1933, in a suit by the applicant against the opposite party. The suit arises out of an arbitration award. On. 25th April 1929, defendants 1 to 3, in the suit, executed a promissory note in. favour of defendant 4. On 19th December 1931, defendant 4 transferred the promissory note to the plaintiff. The plaintiff brought the suit on the basis of the proraissory note against defendants 1 to 3, and he also impleaded defendant 4.

2. Defendants 1 to 3 and the plaintiff agreed to have the question in dispute between them settled by arbitration. An arbitrator was appointed by the Court who heard evidence and arguments on behalf of the parties and finally issued an award in favour of defendants 1 to 3. As a result of this award the learned Munsif passed the order against which this application is preferred. The order is in these terms:

It is therefore held that the award is valid so far as it adjudicates matters between the plaintiff and defendants 1 and 3. As there was no reference by plaintiff and defendant 4, so the matters between them could not be decided by arbitrator. The Court will fix a date for final disposal of the case between plaintiff and defendant i.

3. Learned Counsel for the applicant has invited us to set aside this order upon the following grounds, viz. : (1) that the reference to arbitration is invalid inasmuch as defendant 4 was not a consenting party thereto, (2) the arbitrator was guilty of misconduct inasmuch as he did not disclose to the party the fact that he was indebted to the father-in-law of defendant 1. In support of his contention that the reference to arbitration was invalid because of the non-concurrence therein of defendant 4, he has referred us to three decisions of this Court in Gopal Das v. Baij Nath : AIR1926All238 , Tej Singh v. Ghasi Ram : AIR1927All563 and Abudar Beg v. Nathumal : AIR1933All739 . He has contended that upon the basis of these decisions the reference in the present case is invalid, because all parties who were interested in the suit within the meaning of para. 1, Schedule 2, Civil P.C., had not agreed to the arbitration. Para. 1 is in the following terms:

Where in any suit all the parties interested agree that any matter in difference between thorn shall be referred to arbitration, they may, at any time before judgment is pronounced apply to the Court for an order of reference.

4. We are of opinion that the two earlier decisions referred to by learned Counsel for the applicant do not support the wide proposition which he has invited us to accept, namely, that in all cases before there can be a valid reference to arbitration, all the parties to the suit, no matter what the nature of the suit is, must agree to the reference. The cases, reported in Gopal Das v. Baij Nath : AIR1926All238 and Tej Singh v. Ghasi Ram : AIR1927All563 , are partition cases, and there can be no doubt that in such cases all the parties to the suit are vitally interested in questions in relation to the partition which may be referred by the plaintiff and some of the defendants to arbitration. It is only right therefore that if the questions raised in the suit for partition are to be submitted to the decision of an arbitrator, all the parties should agree to the reference.

5. The decision in Abudar Beg v. Nathumal : AIR1933All739 , which is a Single Judge decision, does at first sight appear to support the argument of the learned Counsel for the applicant. In that case, as in the present case, a promissory note had been executed by the first defendant in favour of the second defendant. The second defendant assigned the promissory note to the plaintiff. The plaintiff filed a suit. The relief claimed against the defendant was that in case the first defendant be found to have made any payment to the second defendant in respect of the promissory note, a decree be passed against the second defendant. The plaintiff and the first defendant only agreed that the matter in dispute should be referred to arbitration. The case was referred to the decision of an arbitrator appointed by the plaintiff and the first defendant without discharging the second defendant from the array of parties. It was held by the learned Judge who decided the case that the second defendant was not pro forma defendant and was as much interested in meeting the defence of the first defendant as the plaintiff himself, because if first defendant's plea prevailed, the second defendant would be exposed to a claim for damages by the plaintiff and therefore the reference was in contravention of para. 1 of Schedule 2 of the Civil P.C. and the award based thereon was invalid. Now in that case the relief claimed was somewhat different from the relief claimed in the present case. In the first case a reference to the plaint discloses that the plaintiff claimed on the footing of the promissory note as against defendant 1 and on the footing of the assignment against defendant 2. In the present case the claim of the plaintiff was directed against the defendants who had executed the promissory note and there was no separate relief claimed against defendant 4. In other words so far as the present suit is concerned the plaintiff impleaded defendant 4 really as a pro forma defendant. It was not disputed that in the present suit the plaintiff would not have been entitled to get from the Court any order against defendant 4. As against the decision in Abudar Beg v. Nathumal : AIR1933All739 , the learned Counsel for the opposite party has referred us to the case of Bankey Lal v. Chotey Miyan Abdul Shakur : AIR1931All453 . In that case two Judges of the Court held that in a case where the interest of the defendants may be served, there does not appear to be any bar to come of the contesting defendants joining with the plaintiffs in referring the matter in difference between them to arbitration. In the course of their judgment the learned Judges say:

If one of the two defendants who were jointly and severally liable and the plaintiff agree that there should be a reference to arbitration, the more fact that defendant 2 did not join will not debar the parties agreeing to an arbitration from making a reference to arbitration.

6. The terms of Para. 1 of Schedule 2 were than quoted and the learned Judges proceeded:

This does not mean that all the parties who are contesting a suit must necessarily join in arbitration. There may be cases in which it would not be possible to decide a case by compartments, i.e. where an arbitrator may be appointed to decide a part of the case and the Court should decide the rest of it; such a case would he a suit for partition, for example. But where the interests of the defendants may be levered, as in this case, there does not appear to be any bar to some of the contesting defendants joining with the plaintiffs in referring the matter in difference between them to arbitration.

7. In that case it will be observed the Court laid down the rule that even where one or more contesting defendants do not agree to the arbitration and if one of the contesting defendants agreed, the arbitration between the plaintiff and him is valid. A fortiori where the nonconcurring defendant is a non-contesting defendant the reference between the plaintiff and the contesting defendant must be valid The case reported in Bankey Lal v. Chotey Miyan Abdul Shakur : AIR1931All453 , does not appear to have been brought to the notice of the learned Judge who decided the case reported in Abudar Beg v. Nathumal : AIR1933All739 . Learned Counsel for the applicant has maintained that there is no distinction in principle between the case reported in Abudar Beg v. Nathumal : AIR1933All739 and the present case and he has referred in particular to a passage in the judgment which is as follows:

If defendant 2 has been impleaded as a defendant and his own rights and liabilities are in anyway affected by the issue arising between the plaintiff and defendant 1, he has as much interest in meeting the defence of defendant 1 as the plaintiff himself because, as already stated, if defendant 1's plea prevails defendant 2 would be exposed to a claim for damages by the plaintiff.

8. We cannot say from the information before us in the present case whether the circumstances and the pleas taken by defendants 1.3 are similar to those which obtained in that case; but if they are we are prepared respectfully to disagree with the decision of the learned Judge in the case reported in Abudar Beg v. Nathumal : AIR1933All739 . In the earlier case Bankey Lal v. Chotey Miyan Abdul Shakur : AIR1931All453 , two learned Judges held that, if the interests of the defendants could be separated then the plaintiff and some of the defendants validly enter into an arbitration which was not joined by the other defendants. Now, the real interest of the defendant 4 in the present suit and in the result of the present suit seems to be really nil. Before the plaintiff could obtain any award against him the plaintiff would have to file a fresh suit, whatever the interest of the non-contesting defendant 4 is in the result of the suit. We are clearly of opinion that it is not an interest within the meaning of para. 1, Schedule 2, Civil P.C. whatever it is, we are of the opinion further that it may be separated from the interest of defendants 1-3.

9. We hold therefore that the reference entered into by the plaintiff and defendants 1-3 was in a valid reference and that the award of the arbitrator is not vitiated by the fact that defendant 4 was not a party to the reference. We would observe further that by his subsequent conduct defendant 4 seems to have consented to the reference. He was in Court throughout the whole of the arbitration proceedings. He must have given evidence in support of the plaintiff's claim in the arbitration proceedings, and we are of opinion that it is not in his mouth now or in the mouth of the plaintiff to maintain that defendant 4 was not a party to the arbitration. With regard to the second ground of objection to the award which was taken by learned Counsel for the applicant, namely, that the award is in-valid because of misconduct on the part of the arbitrator in failing to disclose the fact that he was indebted to the father-in-law of defendant 4 we are of opinion that we cannot sustain this argument;. There is undoubtedly a duty upon the arbitrator to disclose material facts which might reasonably be held to have prevented any of the parties to the arbitration agreeing to his appointment as arbitrator. If he fails to disclose such facts then it would appear, according to the authorities to which we were referred, that the arbitrator is guilty of misconduct within the meaning of para. 1 of Schedule 2 of the Civil P.C. If, for example, it had been shown that the arbitrator was indebted to one of the defendants and he had failed to disclose that fact to the plaintiff, we are of opinion that it could have been argued with force that the arbitrator was guilty of misconduct with-in the meaning of the paragraph referred to. We are not prepared, however to hold that the arbitrator has been guilty of misconduct in the present case. We had no information as to the nature of the indebtedness between the arbitrator and the father-in-law of defendant 1. For aught we know the debt due by the arbitrator to the creditor may have been an ordinary business debt. If that be so, we are clearly of the view that the failure to disclose the fact of the indebtedness would not amount to misconduct. But we have no information either of the nature or the amount of indebtedness and, in these circumstances, we are of opinion that the applicant has failed to establish that the arbitrator has been guilty of misconduct such as would induce the Court to set aside his award. In the result we dismiss this application with costs.


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