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Daulat Ram Phoolchand Vs. Shriram and ors. - Court Judgment

LegalCrystal Citation
SubjectArbitration
CourtMadhya Pradesh High Court
Decided On
Case NumberCivil Revn. No. 19 of 1962
Judge
Reported inAIR1964MP219
ActsArbitration Act, 1940 - Sections 20(1) and 41
AppellantDaulat Ram Phoolchand
RespondentShriram and ors.
Appellant AdvocateB.D. Gupta and ;M.L. Gupta, Advs.
Respondent AdvocateJ.M. Anand, Adv.
Cases ReferredIn Chhedilal Hariniwas v. Brit
Excerpt:
- - but so far as the arbitrators have failed to effect the partition......the same has been filed, the court has been given powers under section 18(1) of the act to pass interim orders. section 41(b) read with the second schedule to the act was intended to empower the court to pass interim orders for the preservation or safety of the subject-matter of the dispute during the pendency of arbitration proceedings. in a case a where an application is filed before the court under section 20(1) of the act, or where the reference to arbitration is made through the intervention of the court, the court has seisin of the case and can undoubtedly pass interim orders. but there is no reason to suppose that the court has no power under section 41(b) of the act read with the second schedule to prevent the properties in dispute from being wasted during the pendency of the.....
Judgment:
ORDER

P.R. Sharma, J.

1. This revision application has been preferred against the order dated the 1st of January, 1962 passed by the Addl. District Judge, Gwalior, in Civil Misc. Case No. 19 of 1961 whereby the present petitioner's application under Section 41 of the Indian Arbitration Act read with Section 151 of the Code of Civil Procedure was dismissed.

2. The parties to the action appointed arbitrators on 23-9-1960 for the partition of their joint family property; but so far as the arbitrators have failed to effect the partition. The petitioner formerly submitted applications under Sections 20 and 41 of the Indian Arbitration Act (hereinafter referred to as the Act) which were both dismissed by the Additional District Judge, Gwalior on 28-4-1961. On an appeal being preferred against that order it was held by a Division Bench of this Court that since no difference had arisen between the parties with regard to any of the matters to which the arbitration agreement applied, Section 20 of the Act could not be invoked by the present petitioner. Thereafter the present petitioner filed a fresh application under Section 41 of the Arbitration Act praying for the appointment of a receiver. The Court dismissed this application on the short ground that an application under Section 20 of the Act must be filed in order to enable the Court to take action under Section 41 of the Act. Since the application under Section 20 of the Act had already been dismissed once and the order of its dismissal had been upheld by the High Court, the application under Section 41 of the Act could not in the opinion of the lower Court, be entertained on its own strength.

3. Clause (b) of Section 41 of the Act runs as under :

'Subject to the provisions of this Act and of rules made thereunder--

(b) the Court shall have, for the purpose of, and in relation to, arbitration proceedings the same power of making orders in respect of any of the matters set out in the Second Schedule as it has for the purpose of, and in relation to any proceedings before the Court :

Provided that nothing in Clause (b) shall be taken to prejudice any power which may be vested in an arbitrator or umpire tor making orders with respect to any of such matters.

The Second Schedule which lays down the powers of the Court under Section 41 of the Act provides for the preservation, interim custody or sale of any goods which are the subject-matter of the reference. Item No. 4 of the Second Schedule provides for power to issue interim injunctions or to appoint a receiver.

4. The question which falls for consideration in this case is whether the powers of the Court under the Second Schedule could be exercised even in a case where the reference to arbitration has been made without the intervention ot the Court, and no proceedings are pending in connection therewith in any Court. The answer to this question depends on the interpretation of the words 'lor the purpose of and in relation to arbitration proceedings' used in Clause (b) of Section 41. Reliance was placed in support of the view taken by the lower Court on the decision in Nagarchand Goenka v. Surendra Nath, AIR 1946 Pat 70. In that case the only question which came up for consideration was whether the Court had jurisdiction to appoint a receiver on the mere presentation of an application under Section 20(1) of the Act before notice of such application had been given to all the parties concerned. Section 20, it may be noted, applies only to those cases where any persons have entered into an arbitration agreement, and a difference has arisen between the parties to the agreement with respect to any of the matters covered by the agreement, and where they or any of them instead of proceeding under Chapter II apply to the Court praying for the agreement to be filed in Court. Obviously Section 20 (1) of the Act can have no application to a case where the parties have without the intervention of the Court referred their dispute to their own arbitrators in pursuance of an arbitration agreement and the arbitrators have entered on and are actually proceeding with the reference. To say that no application under Section 40(b) of the Act would lie except after an application has been moved under Section 20(1) of the Act would be to insist upon a condition which can simply not be fulfilled in such cases. The word 'proceedings' has been used in relation to the proceedings held by arbitrators in Section 11 of the Act. The conduct of proceedings before the arbitrators is comprehensively provided for in Section 12 of the English Arbitration Act, 1950. There is, in my opinion, no reason to suppose that the words 'arbitration proceedings' in S 41 of the Indian Arbitration Act refer to only such proceedings as are held by the Court of competent jurisdiction in pursuance of an arbitration agreement. In those cases where the arbitrators have already given an award, and the same has been filed, the Court has been given powers under Section 18(1) of the Act to pass interim orders. Section 41(b) read with the Second Schedule to the Act was intended to empower the Court to pass interim orders for the preservation or safety of the subject-matter of the dispute during the pendency of arbitration proceedings. In a case a where an application is filed before the Court under Section 20(1) of the Act, or where the reference to arbitration is made through the intervention of the Court, the Court has seisin of the case and can undoubtedly pass interim orders. But there is no reason to suppose that the Court has no power under Section 41(b) of the Act read with the Second Schedule to prevent the properties in dispute from being wasted during the pendency of the proceedings before the arbitrators. Such an interpretation would have the effect of depriving the successful party of the fruits of the decree which is eventually obtained by him on the basis of an award.

5. In Russell on Arbitration (Sixteenth Edition) at page 190 the following passage occurs :

'In addition to its powers to make orders relating to merely procedural matters the Court had wide powers to make orders for the purpose of preserving the status quo pending arbitration.

These powers include those of making orders for the preservation, interim custody or sale of any goods, the subject-matter of the reference, or for the detention or preservation of any property or thing concerned in the reference; of appointing a receiver; and of granting an interim injunction.'

6. It is noteworthy that Section 12(6) of the English Arbitration Act, 1950 on which the aforesaid observations are based provides that 'the High Court shall have, for the purpose of and in relation to the reference, all the powers enumerated thereunder. Clause (b) of this sub-section provides for the power to issue interim injunction or to appoint a receiver.

7. The expression 'arbitration proceedings' was substituted in Section 41(b) in the Indian Arbitration Act for the words 'a reference' in order to cover the various kinds of proceedings which the Act contemplates. Surely enough the intention of the legislature by effecting this amendment was to include within the scope of Clause (b) of Section 41 all those proceedings which are held in pursuance of an arbitration agreement whether with or without the intervention of the Court. To hold otherwise would have the result of rendering superfluous the words 'as it has for the purpose of and, in relation to any proceedings before the Court' which occur in Section 41(b) of the Act.

8. I am for the reasons stated above of the opinion that the effect of the provisions of Section 41(b) of the Act is to clothe the Court with the same powers in relation to arbitration proceedings to issue interim orders for the preservation and safety of the subject-matter of the dispute as it would have in relation to proceedings pending before itself.

9. In Chhedilal Hariniwas v. Brit-over Ltd., 52 Cal W N 45 an injunction was sought against the defendant company to restrain it from operating on the letter of credit which was due to expire on a certain date. The defendant-company replied by an application under Section 34 of the Indian Arbitration Act for stay of all proceedings in the suit on the ground that the parties had agreed that all disputes arising between them with respect to the subject matter should be settled by arbitration in London. Without staying the suit the Court, in view of the urgency of the matter, considered it expedient and proper first to take up and deal with the application for injunction. It was held that the power conferred on the Court in the 4th Item in the Second Schedule was for 'the purpose of or in relation to arbitration proceedings' and that it was not in terms limited to pending arbitration proceedings. The present case stands on a much stronger footing, inasmuch as the arbitration proceedings are actually pending in this case. The arbitrators have not been vested by the Act with any powers to grant interim orders for the protection and safety of the subject-matter of the dispute. Such powers had, therefore, to be vested in the Court under Section 11(b) of the Act read with the Second Schedule. I do not find anything in that section or in the Second Schedule to justify the view that the power to grant interim orders for the protection and safety of the properties in dispute cannot be exercised until proceedings under some other section of the Act are started. To import such a limitation into the provisions of Section 41(b) of the Act and the Second Schedule would have the effect of introducing therein words which do not Bud place in the said provisions. Such a limitation cannot, in my opinion, be placed upon the powers vested in the Court under Section 41(b) of the Act read with the Second Schedule.

10. The result is that this revision application is allowed, the order passed by the Court below is set aside and the case is sent back to it with a direction that it should dispose of the application for appointment of a receiver on the merits. Costs shall follow the event.


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