1. The facts giving rise to this Letters Patent Appeals are as follows.
The present appellant, a joint Hindu family firm named Gogan Ram Lachmi Narain, instituted a suit in the Court of the Senior Subordinate Judge at Hissar against Narsing Das respondent and his two sons, Durga Datt and Hazari Lal, individually as proprietors of the firm Gobind Ram Narsing Das, the firm as such not being impleaded as a defendant, for the recovery of Rs. 12,000/- on account of certain transactions, and also for rendition of accounts and recovery from the defendants of whatever was found to be due from them as partners in the firm.
Only Narsing Das defendant put in an appearance to contest the suit and proceedings were taken 'ex parte' against his two sons. After the suit had been pending for some time, on 23-10-1950, the plaintiff and Narsing Das filed an application under Section 21, Arbitration Act, to refer the whole of the matters in dispute between them to the arbitration of one Badri Narain Mahajan. Statements of these parties were also recorded in Court and the reference was made to the arbitrator in question, who filed his award on 30-11-1950, which was for Rs. 19,044/11/- against all the three defendants.
2. In due course separate objections were filed by Narsing Das and his two sons. The latter objected that their father had no authority to refer the disputes to arbitration on their behalf, and that this was done without any notice to them, while Narsing Das pleaded that there was no valid reference to arbitration since all the parties interested were not parties to the reference.
This objection was accepted by the learned Senior Subordinate Judge who set aside the award, and the arbitration as a whole, and directed that the suit should proceed.
3. Against this order the plaintiff filed an appeal in this Court which was accepted by the learned Single Judge Kapur, J. on 7-4-1953. Thepresent appeal by Narsing Das is against this order.
4. There does not appear to be any ambiguity about the terms of Section 21, Arbitration Act, which reads :
'Where in any suit all the parties interested agree that any matter in difference between them in the suit shall be referred to arbitration, they may at any time before judgment is pronounced apply in writing to the Court for an order of reference.'
The section clearly requires that for a valid reference to be made to arbitration of disputes which form the subject-matter of a suit it is necessary that all the interested parties should join in the application for reference.
There are in fact very numerous authorities of different High Courts in which it has been held, regarding the similar words which appeared in Para. 1 of Schecule 2 to Civil Procedure Code, that unless all the parties interested in a dispute consent, a Court has no jurisdiction to make an order of reference to arbitration, and an order of reference made without the consent of a party who has not appeared is illegal and an award made in consequence of such an order is equally illegal.
The leading case laying down this proposition appears to be -- 'Laduram Nathmull v. Nandlal Karuri', AIR 1920 Cal 113 (2) (PB) (A), a decision of a Full Bench consisting of Sanderson, C. J., Mookerjee and Fletcher, JJ. This case was a particularly hard one from point of view of most of the parties involved, since the defendant, the failure to obtain whose participation in an application to refer the matters in suit to arbitration resulted in the arbitration proceedings being declared void 'ab initio', was an insolvent whose interests were really represented in the suit by the Official Assignee, who had joined in the application. It was decided that although the obtaining of the consent of the insolvent defendant to the reference to arbitration was in the circumstances little more than a formality, nevertheless the arbitration proceedings must be held void in view of the clear terms of the statute.
5. In the present case it is quite obvious that the two sons of Narsing Das were interested parties, since the plaintiff's claim was made jointly and severally against all the three defendants individually as partners in the firm with which the plaintiff-firm had had dealings, and although the fact that they had allowed proceedings in the suit to be taken against them 'ex parte' might be interpreted in a loose or lay sense that they were not interested, it must be held that in the legal sense they were certainly interested. Indeed, when the award came it was against these two defendants, as well as their father, jointly and severally.
6. In deciding the matter in the plaintiff's favour the learned Single Judge has followed the decision of Mukerji and Bennet JJ. in -- 'Bankey Lal v. Chotey Miyan Abdul Shakur', AIR 1931 All 453 (B), which purports to be based on the decision in -- 'Raghunath Sukul v. Ramrup Raut', AIR 1924 Pat 33 (C).
I shall examine the latter case first. The fact's of the case were that the plaintiffs had brought a suit against 15 defendants claiming a declaration of title to, and recovery of possession of, certain land of which the plaintiffs alleged the defendants had dispossessed them. The land consisted of a number of separate plots in the separate possession of different defendants. During the pendency of the suit the plaintiffs and each of the defendants filed an application for the disputes to be referred to arbitration and this was done.
However, when the award was filed, objection was taken on behalf of two minors who had been impleaded as legal representatives of their deceased father, who had died during the pendency of the suit, that the reference was invalid as they had not been properly represented at the time of the application by a 'guardian-ad-litem'. The trial Court accepted this objection and held that since all the interested parties had not joined in the application for reference the award was invalid.
In the appeal against this order Dawson-Miller, C. J. and Kulwant Sahay, J. held that in this particular case, although the plaintiffs had brought a single suit against 15 different defendants, there was clearly a separate cause of action against each individual defendant, since each individual defendant was alleged to be in possession of a particular piece of land of which the plaintiffs were seeking to recover possession. It was therefore hold that although there was no valid reference on behalf of the two minors the rest of the reference of the dispute between the plaintiffs and the other defendants was valid and the part of the award which dealt with their cases could be upheld.
7. In 'Bankey Lal's case (B)', the plaintiffs had filed a suit against two defendants Bankey Lal and Munna Lal for the recovery of the price of goods supplied. During the pendency of the suit the plaintiffs and Bankey Lal entered into an agreement to refer the matters in dispute to arbitration, and an arbitrator was appointed and in due course filed an award against both the defendants.
The terms of the award were embodied in a decree against which both the defendants filed an appeal in the Court of the District Judge. One of their objections was that as Munna Lal defendant had not joined in the arbitration the whole arbitration proceedings were bad and no decree could be passed on the award. To meet this objection the plaintiffs gave up their claim against Munna Lal, who was exempted from liability.
It was then held that the award was good as between the plaintiffs and Bankey Lal defendant, and Munna Lal was exempted from liability and ordered to pay his own costs. Separate appeals were then filed by the defendants in the High Court, Munna Lal's appeal, with which we are not concerned, merely being regarding his costs,
In dealing with the question whether the reference to arbitration and the consequent awardwere good as between the plaintiffs and Bankey Lal, Mukerji, J. simply observed as follows :
'The second point is whether the arbitration itself was invalid because Munna Lal did not join in the reference. The defendants according to the plaint were jointly and severally liable to the plaintiffs. If one of the two defendants who were jointly and severally liable and the plaintiffs agree that there should be a reference to arbitration, the mere fact that defendant No. 2 did not join will not debar parties agreeing to an arbitration from making a reference to arbitration. Para 1 of Schecule 2, Civil P. C., reads as follows :
'Where in any suit all the parties interested agree that any matter in difference between them shall be referred to arbitration. .....'
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 be a suit for partition, for example. But where the interest of the defendants may be served, 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. There is a decision to that effect in the case of 'Raghunath Sukul v. Ramrup Raut (C)'. In this view we do not think that the arbitration is in any way vitiated.'
8. It will be seen that none of the numerous authorities in which it has been held that a refer-rence to arbitration in which all the interested parties in a suit have not joined is void 'ab initio' have been noticed, and all that seems to have been noticed is the headnote in the Patna decision without any reference to the facts of that ease which were quite peculiar.
Indeed it is very strange to find that in the same volume of the All India Reporter there is a decision by the same learned Judges in --'Mohammad Hussain v. Mt. Nanhi', AIR 1931 All 242 (1) (D), decided about two months before 'Bankey Lal's case (B)', on 2-12-1930, in which an award for a sum of money made against a number of defendants had been set aside by the Munsif, who had ordered the suit to proceed, and when this order was challenged in revision in the High Court it was found that one of the defendants had not been a party to the reference and Mukerji and Bannet, JJ. refused to interfere with the order of the Munsif. It was observed as follows by Mukerji J.:
'On the second point it appears that the arbitrator made an award granting a Joint decree for money against all the defendants and against the property mortgaged by Chhedda. It is urged on the authority of 'Raghunath Sukul v. Ramrup Raut (C)', that it was open to the Court below to differentiate and exempt the share of Saddu and to make a decree against the rest. The case quoted however was entirely different from the facts before us.
There the several defendants were severallyand separately in possession of different plots of land, and it was held that if some of the defendants holding separate property were not bound by the award their shares could be exempted. Here we find that the decree was a joint one, and unless we sit down to calculate the different shares distributable to the different heirs we cannot uphold the award even partially.'
In view of the observations I find it rather surprising that in 'Bankey Lal's case (B)', the same learned Judges ignored the general trend of decisions and based their decision on the Patna case which had no application whatever to the facts of 'Bankey Lal's case (B)'. Thus with due respect I do not consider that the decision in 'Bankey Lal's case (B)', was correct and am therefore of the opinion that it ought not to have been made the basis of his decision by the learned Single Judge of this Court.
9. There are no doubt provisions in the Act which did not exist in the old Schedule to the Civil Procedure Code. This is in Section 24 which provides :
'Where some only of the parties to a suit apply to have the matters in difference between them referred to arbitration in accordance with, and in the manner provided by, Section 21, the Court may, if it thinks fit, so refer such matters to arbitration (provided that the same can be separated from the rest of the subject-matter of the suit) ***'
10. This, however, clearly only applies where the dispute between the plaintiff and some of the defendants can be definitely separated from his dispute with the other defendants and it can have no application at all in a suit brought against three defendants in their individual capacity jointly and severally for the recovery of money.
It has, however, been pointed out that during the pendency of the appeal in this Court the plaintiff filed an application in which he gave up his claim against the two sons of Narsing Das, as was done by the plantiff in 'Bankey Lal's case (B)', but this cannot in my opinion affect the fact that throughout the arbitration the reference to arbitration was invalid, and in the absence of the two sons the Court had no jurisdiction to permit the reference. I consider that the reference could only have been valid if the plaintiff had given up his claim against the sons before it was made.
11. The learned counsel for the appellant sought to raise a point which he also raised before the learned Single Judge, but which was not decided by the latter, to the effect that since the defendants were members of a joint Hindu family of which Narsing Das was the manager, he had power to enter into a valid reference to arbitration binding on his sons. It was admitted that there was no evidence on this point, but it was argued that we should now pass an order allowing evidence to be led in the lower Court on it. It seems to me, however, that the answer to this argument is that which has already been given by thelearned Senior Subordinate Judge, before whom also apparently the point was raised. He has observed that in the first instance in an ordinary partnership one partner cannot bind the others in the absence of any usage to the contrary, and it is doubtful whether the position of law would be any different in a joint Hindu trading firm 'qua' the major members who are working in the firm, but, apart from that, the plaintiff cannot possibly raise this point in view of the fact that he chose to bring the suit not against the firm but against the three partners in their individual capacity.
I would accordingly accept the appeal and restore the order of the learned Senior Subordinate Judge setting aside the award and the arbitration, and ordering that the suit should be proceeded with, with costs throughout.
12. I agree.