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Banwari Lal Ram Deo Vs. the Board of Trustees - Court Judgment

LegalCrystal Citation
SubjectCivil
CourtPunjab and Haryana
Decided On
Reported inAIR1949P& H165
AppellantBanwari Lal Ram Deo
RespondentThe Board of Trustees
Cases ReferredIn Monro v. Bognor Urban District Council
Excerpt:
- sections 100-a [as inserted by act 22 of 2002], 110 & 104 & letters patent, 1865, clause 10: [dr. b.s. chauhan, cj, l. mohapatra & a.s. naidu, jj] letters patent appeal order of single judge of high court passed while deciding matters filed under order 43, rule1 of c.p.c., - held, after introduction of section 110a in the c.p.c., by 2002 amendment act, no letters patent appeal is maintainable against judgment/order/decree passed by a single judge of a high court. a right of appeal, even though a vested one, can be taken away by law. it is pertinent to note that section 100-a introduced by 2002 amendment of the code starts with a non obstante clause. the purpose of such clause is to give the enacting part of an overriding effect in the case of a conflict with laws mentioned with the.....achhru ram, j.1. this is a letters patent appeal from the judgment of a learned single judge of the high court of lahore, affirming, on appeal, the decision of a subordinate judge of delhi refusing to stay the suit brought by respondent 1 against the appellants and respondent 2 for a declaration to the effect that the agreement dated 14th july 1942, executed between respondent 1 and the appellants was invalid and unenforceable on grounds of fraud and misrepresentation, and for cancellation of the aforesaid agreement as well as for recovery of a sum of rs. 2,50,000.2. the facts giving rise to this appeal may be briefly stated as follows: the board of trustees of the hindu college, delhi, wanted to construct a hostel for the college on the land allotted to the said college by the university.....
Judgment:

Achhru Ram, J.

1. This is a Letters Patent Appeal from the judgment of a learned Single Judge of the High Court of Lahore, affirming, on appeal, the decision of a Subordinate Judge of Delhi refusing to stay the suit brought by respondent 1 against the appellants and respondent 2 for a declaration to the effect that the agreement dated 14th July 1942, executed between respondent 1 and the appellants was invalid and unenforceable on grounds of fraud and misrepresentation, and for cancellation of the aforesaid agreement as well as for recovery of a sum Of Rs. 2,50,000.

2. The facts giving rise to this appeal may be briefly stated as follows: The Board of trustees of the Hindu College, Delhi, wanted to construct a hostel for the College on the land allotted to the said College by the University of Delhi in what is called 'the University Town.' On 3rd May 1940, they requisitioned the services of Messrs. Master Sathe and Bhuta, a firm of architects, carrying on business in New Delhi, for preparing estimates, drawings and specifications for the hostel and for supervising its construction, agreeing to pay them a lump sum of Rs. 2000 by way of honorarium. The aforesaid firm prepared drawing and specifications of the hostel buildings and estimated their cost at Rs. 1,50,000. The Government of India agreed to provide the said sum to the Board by way of a building-grant.

3. For the purpose of carrying out the work of construction the Board entered into an arrangement with Messrs. Banwari Lai Ram Dev, a firm of contractors, carrying on business at Panchquin Road, New Delhi, who undertook to construct the building at a cost of Rs. 1,49,807-9-0. On 6th June 1941, an agreement embodying the terms on which the contractors had agreed to do the work was duly executed. The agreement provided inter alia, that the contractors would complete the construction within a period of ten months -and would execute the work in every respect in accordance with the drawings and specifications prepared by the architects. It empowered the Board to appoint, with the approval of the architects, a clerk of works' who was to superintend the work in the architects' absence. It provided for payments being made to the contractors by instalments under interim certificate to be issued by the architects. An interim certificate was to be issued by the latter on being satisfied that work approximately of a specified value had been executed in accordance with the contract. A certain percentage of such value, was, however, to be retained and was to be paid on final adjustment of accounts on the completion of the work. The architects were given the power to withhold any certificate if they found that the works or any part thereof, were not being carried out to their satisfaction. Provision was also made for the settlement of all disputes and differences arising out of, or in connection with, the contract or the carrying out of works, whether during the progress of the works or after their completion and whether before or after the determination, abandonment, or breach of the contract, by arbitration. All such disputed and differences we're, in the first instance, to be referred to architects. In oases of disputes and differences relating to certain specified matters which were called excepted matters the decision of the architects was to be final. In all other cases, any party feeling aggrieved from the decision of the architects could ask for the matter or matters in dispute being referred to arbitration. Such party could, within twenty-eight days of the receipt of notice of the architects' decision, require the other party, by means of a written notice specifying the matter or the matters in dispute, to refer such matter or matters to arbitration. If the parties could not agree to the appointment of a single arbitrator who had to be a Fellow of the Indian Institute of Architects, each of them could appoint an arbitrator of his own choice from amongst the Fellows of the said Institute. In that event, the arbitrators had, before entering upon their duties, to appoint an umpire,

4. In exercise of the power conferred on them by the agreement, the Board appointed one Mr. K.C. Boy as the clerk of works.

5. Disputes arose between the parties to the agreement either towards the end of 1941 or early in 1912. The trustees were not satisfied with the work done and the materials used by the contractors, while the latter complained of delay in payment of the amounts of the interim certificates. The architects had, up to January 1942, issued such certificates of the value of RS. 1,88,000, but up to 3ist January 1942, the contractors had been paid only Rs. 1,02,000. By way of protest against what they alleged to be a breach of contract on the part of the trustees, the contractors stopped further work. Inasmuch as the Government had undertaken to foot the bill for the building,' they naturally felt perturbed over this situation. Presumably at their suggestion, Mr. Sulaiman, the then Superintending Engineer of Central P.W.D., was asked by the trustees to inspect the works and to report on the matters in controversy between the parties. He submitted his report on 17th March 1942. Ha assessed the cost of the work executed up to date at Rs. 1,20,000. As regards the quality of the work, he expressed the opinion that the constipation was in accordance with the planar sanctioned by the Government and that the work was otherwise up to the required standard. The differences between the parties could not, however, be settled in spite of this report, and, if anything, became more acute. Finding no other way of resolving the deadlock, the trustees decided to give sole charge of the construction work to one of themselves, viz, Sir Siri Ram, in the hope, presumably, that by reason of his outstanding position in the society and his un. common shrewdness and business acumen, ha would be better able to tackle the contractors.

6. After some negotiations, Sir Siri Ram was able to reach a settlement with the contractors. The terms of the settlement were embodied in an agreement which was executed on 14th July 1942. The cost of the work executed up to date was assessed at Rs l, 65,000. A sum of Rs. 1,02,000 having already been received by the contractors, the latter agreed to receive, and Sir Siri Ram, as representing the trustees, agreed to pay, and did pay, the balance of Rs. 63,000, in full and complete satisfaction of their claim, it being stipulated that neither party was to have, thereafter, any dispute or difference regarding the work already executed, the quality of such work, and the cost thereof. The contractors undertook to take in hand, forthwith, the construction of the remaining building and to complete the same by 15th January 1943. In order to compensate the contractors for the rise in the prices of materials and in the rates of labour, the Board was to pay for the work to be executed by them at rates 40 per cent, in excess of the scheduled rates. The architects were to issue, from time to time interim certificates for the full cost of work done up to date and for the full cost of the material lying at Bite. The contractors were to be paid 90 per cent, of the amount of each certificate immediately, the balance being deposited with the architects who were to pay 76 per cent, of such sum to the contractors as soon as the actual completion certificate was given, and the remaining 25 per cent, on the expiry of the defects liability period. Sir Siri Ram personally guaranteed the payment of all sums that might become due to the contractors after the date of the agreement. In case of default in payment of the amount of any certificate within 15 days of its issue, the contractors were to have the right to determine the contract and to recover from the Board or Sir Siri Ram personally, the amount due in respect of the works executed as well as damages for all losses suffered by them, including loss of anticipated profit on the unexecuted portion of the contract. Any dispute or difference arising out of or in connexion with the contract, or the carrying out of the works, or any other matter was to be referred, in the first instance, to the architects who were to state their decision in writing within 15 days from receipt of the notice thereof. In case of the failure of the architects to give their decision within such period, or in the event of the decision being not acceptable to either of the parties, the matter was to be, and was to be deemed to have been, referred to the arbitration of Messrs. Gregson, Basley and King, A.I.R.B.A., Architect of Bombay, or, failing him, to such other architect as might be nominated by him. It was, lastly, provided that, except in regard to matters specifically dealt with in the new agreement as well as the provisions relating to arbitration, the original agreement dated 6th June 1941 was to remain in force. That original agreement was, however, to be deemed to have been superseded in respect of the matters and the provisions mentioned above.

7. Disputes again arose between the parties. The Board expressed dissatisfaction with the work executed by the contractors and the materials used by them. They also expressed dissatisfaction with the manner in which interim certificates were being issued by the architects, and took strong exception to some of these certificates. As a result of the protests of the Board, the architects withheld and revoked an interim certificate for RS. 33,000 issued by them on 21st October 1942, and declined to issue interim certificates in respect of the bill submitted by the contractors on 14th November 1942. This act of the architects was very strongly resented by the contractors who threatened to stop all further construction in case their grievances were not redressed.

8. The Board in accordance with the provisions contained in the agreement dated 14th July 1942 for the settlement of disputes and differences, referred some of the outstanding disputes between themselves and the contractors to the architects for decision. The architects gave their decision on 12th May 1943. They held that the interim certificate dated 2lst October 1942 had been rightly withheld and revoked, that the contractors' bill dated 14th November 1942 was incorrect, and that the contractors had no justification for stopping further work. They, however, over-ruled the objections of the Board to the quality of the materials used by the contractors as well as to the quality of the work executed by them.

9. The contractors refrained from taking any part in the proceedings before the architects and did not accept the portion of the latter's decision relating to the interim certificate dated 21st October 1942 and the bill dated 14th November 1942. Purporting to act in accordance with the terms of the arbitration clause contained in the agreement dated 14th July 1942, they referred the following matters to Messrs Gregson Basley and King for decision, (1) Whether the architects Messrs. Master Sathe and Bhuta, New Delhi, were justified in withdrawing their second interim certificate issued under their No. K/29626 dated 2ist October 1942. (2) Whether the architects were justified in withholding the issue of 13 interim certificates on submission of bill dated 14th November 1942 duly verified by the clerk of works under instructions of the architects and thus withholding all sorts of payments due thereunder. (3) Taking all the circumstances into consideration whether the contractors were entitled to receive payment of their bills. If not, what amount were they entitled to receive from Sir Siri Ram, the Board of trustees and the architects.

10. On 31st August 1943, the Board put in an application under Section 33, Arbitration Act, for having it declared that this reference was invalid and unenforceable. A number of grounds were given by the Board in support of their allegation as to the invalidity of the reference which it is not necessary to recapitulate for the purposes of the present case. The application was disposed of by the Commercial Sub-Judge of Delhi on 18th February 1944. The learned Judge held the reference of matters Nos. 1 and 2 mentioned above to be valid', overruling all the pleas raised by the Board in their application. He, however, held the reference of matter No. 3 to be invalid only on the ground that, under the terms of the agreement, the matter bad to be referred to the architects for decision in the first instance, and that without such reference, it could not be referred straightway to the arbitrator. Some time later, and after having first referred it to the architects as required by the agreement, this matter seems again to have been referred by the contractors to Messrs. Gregson Basley and King.

11. On their side, the Board approached the new Superintending Engineer of C.P.W.D., the successor in-office of Mr. Sulaiman, for inspection of the building so far constructed and report as to whether it was in accordance with the specifications and otherwise satisfactory. The report received from him was extremely d imaging to the contractors. After the receipt of this report, the Board instituted, on 30th August 1934 the suit, out of which this appeal has arisen, against the contractors (defendant 1) as well as the architects (defendant 2) for cancellation of the agreement dated 14th July 1942 and for the recovery of the sum of Rs. 2,50,000 paid by them to the former as cost of construction under the two agreements, together with future and pendent elite interest. It was alleged by the plaintiffs that the two defendants had, in collusion with each other, practised fraud on them by deliberately making false representations as to the quality and the condition of the building erected by defendant 1 as well as by fraudulent misrepresentation of some facts and fraudulent suppression of others.

12. It was further alleged by them that defendant 2, who had their active confidence, and who was duty bound to keep them informed of the actual condition of the building and to refuse to certify any sum not actually due to defendant 1, had abused the trust and the confidence reposed in him, and had been issuing false interim certificates and giving untrue accounts regarding construction. Defendant 2 was also alleged to have been guilty of gross negligence and dereliction of duty by reason of his having failed to keep proper supervision over the work of construction. The building as erected was alleged to be wholly unsound and rotten, and such as would either require to be dismantled in toto or to be put right after removal of the defects at a very huge cost. The frauds committed by the two defendants were alleged to have been discovered by the plaintiffs in April 1944 on receipt of the Superintending Engineer's report. The plaintiffs claimed to have the right to avoid the agreement on the ground of their consent thereto having been obtained by means of fraud and misrepresentation. Refund of Rs. 2,50,000 was claimed from defendant 1. The said amount was also claimed by way of damages for breach of contract as well as by way of compensation for the loss sustained by the plaintiffs on account of the damage done to the remaining building. Defendant 2 was sought to be made liable for the aforesaid sum on the ground of his having deliberately issued false certificates to enable defendant 1 to receive payments, as well as on the ground of the plain, tiffs having suffered a very heavy loss in consequence of the said defendant's gross negligence and breach of faith.

13. Tne plaint is by no means a happily or carefully drawn up document and certainly does no credit to the counsel responsible for its draft. When the suit proceeded on the merits, I doubt if the learned Subordinate Judge will find it possible to go on with it except after an amendment of the plaint or very substantial amplifications and clarifications of the averments contained, and the claims made, therein.

14. Relying on the arbitration clauses in the two agreements, defendant 1 moved the Court, by means of a petition presented on 18th December 1944 under Section 34, Arbitration Act for stay of the suit. The application was resisted by the plaintiff on the following grounds: (1) Defendant 2 was not a party to the agreement for reference to arbitration, and the liability, according to the claim as made by the plaintiff, of both the defendants was joint and several and could not be split up. The liability of both the defendants had to be determined in the same proceedings and therefore the suit could not be stayed. (2) In case the suit was allowed to proceed against defendant 2 alone and the plain-tiff was compelled to refer his dispute with defendant 1 to arbitration there was danger of conflict of decisions. (3) The contract had beer, determined and rescinded by defendant 1 himself and therefore the aforesaid defendant could not enforce the arbitration clause. (4) All matters in the suit were not covered by the submission clause, for example, the allegation as to the second agreement having been secured by means of fraud and misrepresentation. (5) Difficult questions of fact and law were involved in the suit which could be properly decided only by the Court and should not be left to an arbitrator to decide.

15. The learned Subordinate Judge in whose Court the suit was pending, and to whom the above application under Section 34 had been presented dismissed the application by means of his order dated 30th August 1945. He declined to stay the suit on the following grounds: (1) The agreement dated 14th July 1942 is being impeached in the suit on the ground of its execution having been secured by means of fraud and misrepresentation, and the question whether the agreement is liable to be set aside on the above ground is not one which can be said to be covered by the arbitration clause, or can be retraced to the arbitrator in pursuance of that clause. (2). Defendant 2 against whom damages have also been claimed is not a party to the arbitration clause and the dispute between him and the plaintiffs can in no case be referred to arbitration. (3) Disputes in respect-of payments made before 14th July 1942 which were, in the agreement of that date, admitted to have been finally settled could not be referred because they were not covered by the arbitration clause contained in the second agreement. (4) The award, if any, resulting from the reference said to have been made by defendant 1 will be a nullity because Messrs. Gregson Basley & King had appointed one of themselves as an arbitrator quite contrary to the provisions of the Arbitration clause. (5) Difficult and intricate questions of law are involved in the suit which will better be decided by the Court.

16. Feeling dissatisfied with this order of the learned Subordinate Judge, defendant 1 went up in appeal to the High Court of Lahore. The appeal was heard by a learned single Judge of that Court and disposed of by means of his order dated 29th January 1947. He upheld the decision of the learned Subordinate Judge dismissing the application of defendant 1 for the stay of the suit. He agreed with all the grounds given by the learned Subordinate Judge in support of this decision excepting the fourth ground regarding which he refrained from expressing any opinion. He was of the view that the question of the validity or otherwise of the reference to arbitration bad no bearing on the question which he was called upon to decide inasmuch as, even, if the particular reference was invalid, that could not affect the validity or the operation of the arbitration agreement. Defendant 1 has filed a Letters Patent appeal from the judgment of the learned single Judge.

17. Mr. Bishen Narain, the learned Counsel for the respondents, raised a preliminary objection to the competency of the appeal, relying on the second sub-section of Section 39, Arbitration Act

18. The first sub-section of the aforesaid section provides for appeals from certain specified orders passed under the Act and lays down that an appeal shall not lie from any other order. The order of the learned Subordinate Judge from which appeal was taken to the learned single Judge fell within the purview of clause (v) of the subsection which provides for appeal from an order staying or refusing to stay legal proceedings where there is an arbitration agreement. The second sub-section runs as follows:

No second appeal shall lie from an order passed in appeal under this section, but nothing in this section shall aspect or take away any right to appeal to His Majesty in Council.

19. It was contended by Mr. Bishan Narain that the words 'second appeal' in the sub-section have been used in their ordinary dictionary meaning and include a Letters Patent appeal in a case where the appeal from the original order lies to the High Court and is heard by a single Judge of such Court. In support of this contention, he relied on a judgment of a Division Bench in Penugonda Radhakrishnamurthy v. V.A.Y. Ethirajulu Chetty & Co. A.I.R.1945 Mad. 184 in which in circumstances exactly similar to those of the present case, a Letters Patent appeal was held to be incompetent. He conceded that an opposite view bad been taken by a Division Bench of the High Court of Lahore in Hanuman Chamber of Commerce v. Jassaram Biranand A.I.R. 1948 Lah. 64, of which the judgment was written by my brother Mahajan who expressly dissented from the Madras view and held that the words 'second appeal' in Section 89 (2), Arbitration Act had been used in the same sense in which they had been used in the Code of Civil Procedure, and that the sub-section could not be interpreted as taking away the right of appeal from the appellate judgment of a single Judge of the High Court conferred by Article 10 of the Letters Patent, which was an appeal intra Court and could not be regarded as a second appeal within the meaning of the sub-section. Learned Counsel, however, maintained that the Lahore case had not been correctly decided and that' there was no justification for not giving to the words 'second appeal' as occurring in Section 39(2) their widest meaning so as to include all further appeals from orders passed on appeal from the appeasable orders mentioned in Section 39(1). He urged that the intention of the Legislature in enacting the Arbitration Act of 1940 was to consolidate the whole law relating to arbitration in British India, that the Act must, accordingly, be regarded as an exhaustive and complete Code in itself, and that the right of Letters Patent appeal given by Article 10, Letters Patent of the High Court of Lahore must be deemed to have been, by necessary implication, taken away by Section 39(2), Article 87 of the said Letters Patent having expressly made the Letters Patent, subject to the legislative powers of the Indian Legislature and thus having clearly reserved to the latter the, power to make laws overriding the provisions of the said Letters Patent. He drew our attention to the judgment of a Bench of this Court in Letters patent Appeal No. 1 of 1948, which was an appeal from the order of my Lord the Chief Justice passed on appeal from the order of the Senior Subordinate Judge of Delhi refusing to remit an award to the arbitrator for re-consideration. In that case although the Bench gave no final decision on the subject, and dismissed the appeal on the merits, Khosla, J. who wrote the judgment of the Letters Patent Bench, while discussing the preliminary objection raised on the respondent's behalf to the competency of the appeal, expressed an inclination to agree with the Madras view in preference to that taken by the High Court of Lahore.

20. After a careful consideration of the three judgments mentioned above, and after giving due weight to the arguments addressed to us at the Bar in support of the preliminary objection, I feel no hesitation in expressing my full and respectful agreement with the view taken by the Letters Patent Bench of the High Court of Lahore in Hanuman Chamber of Commerce v. Jassaram Hiranand A.I.R. 1948 Lah. 64.

21. Like all other Codes, the Arbitration Act is exhaustive but only in so far as it goes, i.e., only in respect of matters for which it actually provides A Code has never been held to be exhaustive in the sense that one may not look beyond it even in dealing with situations for which it does not provide. Much emphasis was laid by the learned Counsel for the respondent on the preamble of the Act which runs as follows: 'Whereas it is expedient to consolidate and amend the law relating to arbitration in British India.' However, the preamble to the, Code of Civil Procedure of 1908 is in identical terms and yet it has been held that the Code, though exhaustive in respect of matters for which it does provide, cannot be regarded as exhaustive in an absolute and unqualified sense. There can obviously be no justification for regarding the Arbitration Act as more exhaustive than the Civil Procedure Code or any other Code.

22. It is quite true that, as pointed out in the Madras judgment, the Letters Patent having expressly been made subject to the legislative powers of the Indian Legislature, there was nothing to prevent that Legislature from taking away, in any particular case, the right of appeal from the judgment of a single Judge of the High Court to a Division or a larger Bench given by the relevant Article of the Letters Patent. It was, therefore, certainly open to that Legislature to provide in the Arbitration Act that from the judgment of a single Judge of a High Court in proceedings under the Act no appeal under the Letters Patent shall lie. The question is whether it is possible to read into Section 39 of the Act, which is the only section relating to appeals, a provision that no right to appeal in proceedings under the Act is to exist outside the Act itself and that the right of appeal from the judgment of one Judge of a High Court to a Bench of that Court conferred by the relevant Articles of the Letters Patents of the various High Courts is to be deemed to have been taken away. After a most careful consideration of the language of the section, I find myself unable to answer this question except in the negative.

23. Section 39(1) reads as follows:

An appeal shall lie from the following orders under this Act (and from no others)' to the Court authorised by law to hear appeals from the original decrees of the Courts passing the order.

and then the enumeration of the orders declared appealable follows.

24. The language of the sub-section should leave no doubt in one's mind as to the appeals contemplated by the sub-section being appeals from inferior to superior Courts and not, what Mahajan, J. has aptly called, intra-Court appeals Rule appeals within the same Court, as appeals] under the Letters Patent indisputably are. The] appeal provided for in the sub-section is an appeal from one Court to another, the latter being a Court authorised by law to hear appeals from the original decrees of the former, and therefore necessarily a Court superior to it. A Letters Patent appeal which is an appeal from one Bench to another Bench of the same Court can, not be said to fall within the purview of this provision.

25. For a contrary view as to the interpretation to be placed on Section 39(1), Mr. Bishen Narain drew our attention to a judgment of a Division Bench of the High Court of Calcutta reported as R. Wright v. Governor-General in Council 52 C.W.N. 224, and a judgment of the High Court of Bombay in Jadav Kumar v. Pushpabai : AIR1944Bom29 . The full report of the latter judgment was not available in Simla and, therefore, I am not in a position to examine its ratio decidendi. The Calcutta judgment, undoubtedly, does proceed, in part, on the ground that Section 39(1) applies to Letters Patent appeals as well. With all respect, I must say that in taking this view their Lordships have not paid due attention to the phraseology of the sub-section and have overlooked the fact that the sub-section can, in terms, have no application to cases where the Court passing the order and the Court to which the appeal is to be taken are not two separate and distinct Courts. Their Lordships' attention does not seem to have been drawn to an earlier judgment of their own Court in Debendra Hath v. Bibudhendra A.I.R.1916 Cal. 973) in which, in dealing with the question whether for the purposes of Section 110, Civil P.C., the Court of a single Judge of a High Court can be considered to be a Court immediately below that of a Division or larger Bench of the same High Court when the latter is hearing a Letters Patent appeal from a judgment of the former, answered the question in the negative, holding that the appeal in such a case could not be regarded as an appeal from one Court to another but must be deemed to be an appeal within the Courts it self. After giving the matter my most careful thought I feel constrained to express my respectful dissent from the view taken by the Calcutta Court as to a Letters Patent appeal falling within the purview of Section 39(1). On the question whether a Letters Patent appeal can otherwise be entertained from an order made by a single Judge of a High Court under the Arbitration Act in the exercise of his original jurisdiction when such order does not fall within one of the six categories of orders mentioned in the sub-section. I do not propose to express any opinion, because in the present case the question does not arise at all. Indeed it may never arise in this Court because it will be very rarely, if ever, that this Court will take cognizance of proceedings under the Arbitration Act in the exercise of its extraordinary original civil jurisdiction. Even without bringing Letters Patent appeals within the purview of Section 39(i), it may be possible to uphold the decisions of the Calcutta and the Bombay High Courts--on the ground that orders other than those mentioned in the sub-section cannot be regarded as 'judgments' within the meaning of the relevant Articles of the Letters 'Patent of the several High Courts. I am, however, quite clear in mind that, whether or not it is possible to support these decisions on some such ground, an appeal from one Judge of a Court to other Judges of the same Court is not one of the appeals provided for in the sub-section.

26. It seems to, me to follow as a necessary corrolary from what I have said above, that the 'second appeal' mentioned in the sub-section must also be' an appeal from an inferior to a superior appellate Court. A Letters Patent appeal not being an appeal of this description cannot be taken to fall within the purview of the subsection and to be hit by the prohibition contained therein.

27. Quite apart from the above consideration, my considered view is that the words 'second appeal' have been used in Sub-section (2) in the same sense in which they have been used in the Civil Procedure Code. In that Code, these words have been used in Sections 100, 101,102 and 103 and connote an appeal to the High Court from an appellate decree of a subordinate appellate Court. It is significant to note that in Sub-section (2) of Section 104 where provision is made against an appeal from, an order passed on appeal from an appealable order, the word 'second' has not been used before the word 'appeal.' The sub-section reads as follows: 'No appeal shall lie from any order passed in appeal under this section.' The words 'second appeal' thus appear to have acquired a special signification in legal phraseology relating to civil procedure. During the period o over thirty years that I was at the bar and during the four years that I have been on the Bench, I have never seen or heard these words used in any other sense. In the absence of any indication to the contrary, it may be reasonably assumed that the Legislature at the time of using these words was aware of the meaning that had come to be attached to them in common legal parlance and used them in the same sense. It was held in Jhari Stngh v. Emperor A.I.R.1920 Pat. 349 that in interpreting a statute the settled rule of construction is that where the Legislature uses a legal term which has a known significance it must be assumed that the term has been used in that sense and in no other. In Henrietta Muir Edwards v. Attorney Qeneral of Canada , their Lordships of the Judicial Committee held that in coming to a determination as to the meaning of a particular word in a particular Act of Parliament it is permissible to consider, inter alia, external evidence derived from extraneous circumstances such as previous legislation and decided cases.

28. Quite obviously, the draftsman or draftsmen of the Arbitration Act of 1940 must have had constantly present to his or their mind or minds the provisions of the Code of Civil Procedure while drafting the said Act. The Act in fact is merely a collection of the rules contained in Schedule 2 of the Code, since repealed, and in the Arbitration Act of 1899, also since repealed, with some modifications, additions and alterations. Section 41 thereof expressly provides for the provisions of the Code applying to all proceedings before the Court, and to all appeals under the Act and refers to the powers exercised by the Courts under Schedule 2 of the Code in relation to arbitration proceedings. The said draftsman or draftsmen could not, in the circumstances, be unaware of the sense in which the words 'second appeal' had been used in the Code and cannot reasonably be assumed to have used them in a different sense.

29. Another reason why the words 'second appeal' in the Arbitration Act must be held to connote what they do connote in the Code of Civil Procedure is that the two Acts are in pari materia. In Tribeni Prasad Singh v. Hamasray Parsad A.I.R. 1932 Pat. 80 the Limitation Act and the Cede of Civil Procedure were held to be in pari materia because both of them relate to the law of procedure. The Arbitration Act and the Code of Civil P.C., are much more closely related to each other. While the one prescribes the procedure for the trial of a cause entrusted to a Tribunal of the parties' choice for decision and for the enforcement of such decision, the other prescribes the procedure for the trial of a cause by a Tribunal established and maintained by the State and for the enforcement of the decision of such Tribunal. Indeed, the provisions of the one were, at one time, to a large extent, included in the other, and, even now, are, to a considerable extent, controlled by those of the other. There is abundant authority for the view that Acts of Legislature which are in pan materia must be regarded as forming one family and must be read and construed together. Maxwell in his Treatise on the Interpretation of Statutes (Ed. 7) has quoted at page 29 the following observations or Lord Mansfield:

Where there are different statutes in pari materia, though made at different times, or even expired and not referring to each other, they shall be taken and construed together, as one system and explanatory of each other.

Maxwell himself points out, after the above quotation, that where two Aeta are to be read together every part of each must be construed as if contained in one Act.

30. It will be observed that the provisions of sub-section of Section 39 are not dissimilar to those o Section 104(2), Civil P.C., which have never been held to bar a Letters Patent appeal. I see no reason why Section 39(2) of Arbitration Act, should be given a more extended operation than Section 104(2) of the Code.

31. It will further be observed that Section 39(2) expressly reserves the right to appeal to His Majesty in Council (presumably as provided for in Sections 109 and 110, Civil P.C., or in Article 29 of the Letters Patent of the High Court of Lahore.) It is indisputable that appeal to His Majesty in Council is allowed only from the judgment of a Division or larger Bench of a High Court and not from the judgment of a single Judge. I can see no reason at all why the Legislature should be deemed to have intended to take away the right of appeal to a Division Bench from the judgment of a single Judge, while preserving a right of appeal to His Majesty in Council from the judgment of a Division or larger Bench. There could surely be no reason for it to intend to give greater finality to the judgment of a single Judge than to that of a Division or larger Bench,

32. For the above reasons, I would overrule the preliminary objection and hold the appeal to be competent.

33. Mr. Sawhney, the learned Counsel for the appellant, attacked the order of the learned single Judge on the following grounds: 1. Section 32 of Arbitration Act is a complete and absolute bar to the maintainability of the suit and precludes the plaintiffs from claiming any relief in respect of the agreement dated 14th July 1942 even on the ground of fraud or collusion. 2. No fraud was in fact practised, or could be practised, on the plaintiffs with the object of securing their consent to the agreement made on 14th July 1942. Besides defendant 2, the plaintiffs had a clerk of works whose duty it was to supervise the execution of works and who actually did so. Any appreciable defect in the construction and any noticeable discrepancy between the quality of materials agreed to be used and those actually used could not escape his attention or that of Sir Siri Ram who took such a prominent part in the negotiations preceding the. agreement and who has, since the date of the agreement, held sole charge of the work. Before entering into the agreement the plaintiffs had fully satisfied themselves as to the quality of the work done up to date by having the building examined by a very high and responsible officer of the Central P.W.D. Even after dispute had arisen between the parties, the plaintiffs had been recognizing the agreement as valid and its terms as binding and had actually availed of the provisions of the arbitration clause in seeking the decision of the architects on most of the matters in controversy. It was only after the partial failure of their application under Section 33 and on managing to get a favourable report from the new Superintending Engineer, Central P.W.D. that they thought of putting forward the plea that the agreement of 14th July 1942 has been secured by means of fraud, as a camouflage with the object of wriggling out of the arbitration agreement. 3. Defendant 2 has been impleaded merely with the object of getting another handle for wriggling out of the arbitration agreement. Even if the said defendant is held to have been properly impleaded and if the plaintiffs have any cause of action against him, the suit against him can proceed.

34. However, his impleadment cannot bar the right of defendant 1 to obtain a stay of the suit under Section 34 of Arbitration Act. 4. Disputes regarding payments made before 14th July 1942 have been, on erroneous grounds, assumed to have been settled by reason of the agreement dated 14th July 1942. Those payments having been made in pursuance of the first agreement, and having nothing to do with the agreement dated 14th July 1942, any dispute regarding them must be settled in accordance with the manner provided in the first agreement, i.e., by arbitration. 5. No difficult and intricate questions of law are involved in the case. The alleged reference made by the arbitrator in the Court on two occasions had been made at the instance of, and to accommodate the plaintiffs themselves and not because any really difficult or intricate question of law arose. In any case, the arbitrator being a judge both of the law and facts, if the arbitration clause is binding on the parties, the mere circumstance of any question of law arising, or being likely to arise, can be no justification for refusal to stay the suit and for allowing the plaintiffs to wriggle out of the arbitration clause or to seek their remedy otherwise in accordance with the provisions of that clause.

35. It was in the end contended by Mr. Sawhney that if for any reason, his other contentions did not prevail, and the Court could not see its way to accede to his request for the suit being stayed at the present stage, the trial Court should only decide the question of fraud and, on the decision of that question going against the plaintiffs, and the agreement being found to be binding on them, it should stay the suit and all further proceedings in the suit, leaving the parties to have the dispute settled by arbitration.

36. In so far as the first contention of the learned Counsel is concerned, I have no doubt in my mind that Section 32 is no bar to the maintainability of the present suit. The section runs as follows:

Notwithstanding any law for the time being in force, no suit shall lie on any ground whatsoever for a decision upon the existence, effect or validity of an arbitration agreement or award, nor shall any arbitration agreement or award be set aside, amended, muddied or in any way affected otherwise than as provided in this Act.

The section becomes applicable only where a suit is brought for a declaration about the existence or non-existence, or validity or invalidity, or the determination of the effect of, or for cancellation, either of the arbitration agreement or the award said to have been made in pursuance of such an agreement, or for any amendment or modification being effected in such award. The section does not apply to a case where no relief is sought in respect of an agreement of reference to arbitration or award. If in a suit the plaintiff challenges either the existence or the validity of the contract one of the terms whereof is that any dispute between the parties relating to the execution of that contract must be decided by reference to arbitration, the suit cannot be said to offend against the provisions of this section. In such a suit if the contract itself is held to be either proved to exist, in a case where its existence is impugned, or to be valid, in a case where its validity is challenged, the arbitration agreement automatically becomes operative. If on the other hand, the contract is found to be non-existent or to be invalid, the alleged arbitration agreement goes with the contract itself. The Court is at no stage called upon to give any decision as to the existence or validity or effect of the arbitration agreement independently of the contract itself with which the arbitration agreement stands or falls. The Arbitration Act has been enacted merely with the object of consolidating the law relating to arbitrations, and the question of the existence or validity of the contract containing an arbitration agreement being not a matter falling within the purview of the Act, it cannot be said, with any show of reason, that Section 32 takes away the jurisdiction of the Courts to give appropriate relief in suit brought either to contest or to establish, the existence or validity of the contract. The learned Counsel for the appellant was unable to draw our attention to any authority in sup port of his contention. He referred to Kumba konam Mutual Benefit Fund Ltd. v. G. Ramaswami A.I.R. 1946 Mud. 396 in which a suit to enforce an award was held to be incompetent. He also referred to a judgment of the Bombay High Court in Ratanji Virpal & Co. v. Dhirajlal Manilal A.I.R.1942 Bom. 101 in which a petition for setting aside an award made before the filing of the award was held to be incompetent on the ground that the proper stage for applying for the award being set aside would be after the same had been filed in Court. I for one am unable to see the relevancy of either of these decisions.

38. Reference was also made to a judgment of the High Court of Calcutta in Deokinandcm Dalmia v. Basantlal Ghansham Das : AIR1941Cal527 , in which a learned Judge of that Court dismissed a suit for a declaration that a contract for the sale and purchase of a certain commodity was void, being of a wagering nature, and for cancellation and delivery up of the contract, as barred by Rule 33, Arbitration Act, on account of the contract containing a provision for the settlement of all disputes by reference to arbitration. I presume that his Lordship really meant to refer to Section 32, because it is that section which provides against the maintainability of a suit for a decision upon the existence, effect of validity of an arbitration agreement or award, Section 33, simply prescribing the procedure for getting any of the above questions determined. With all respect I find myself wholly unable to agree with the reasons given by his Lordship in support of his decision, although I do not rule out the possibility of the decision being otherwise correct. In deciding whether a particular agreement for the sale or purchase of a certain commodity was or was not of a wagering nature the sole question that arises for determination is whether the parties to the agreement had agreed that actual delivery of the commodity sold or purchased would not be given or demanded. It may well be that in a given case, the arbitration agreement may be so worded as to leave this question to the decision of the arbitrator. In such a case if a suit is brought for a declaration that the agreement is void by reason of its being one of a wagering nature, Section 32 may possibly be pleaded in bar of the suit. I am not, however, at the moment prepared to commit myself as to whether the plea should succeed.

38. Reliance was, lastly, placed by Mi. Sawhney on the judgment of a Division Bench of the High Court of Lahore in Jawahar Singh Sunder Singh v. Fleming Shaw and Co. Ltd. Amritsar and Karachi A.I.R.1937 Lah. 851. As pointed out by the learned Single Judge, this judgment supports the respondents rather than the appellant. I wish to add that sO far as the contention of the learned Counsel as to Section 82, Arbitration Act of 1940, being a bar to the suit is concerned, the above judgment can obviously have no relevancy. The case was decided, and the judgment delivered, long before the aforesaid Act was passed and the law then in force contained no provision parallel to that contained in Section 32 of the Act.

39. After considering the matter very carefully I feel no hesitation at all in rejecting the first contention of the learned Counsel.

40. As regards his second contention, I am clearly of the view that the present is not the stage for deciding whether the plaintiffs had, in fact, been induced to enter into the agreement dated 14th July 1942, in consequance of any fraud practised on them by the defendants.

41. The question whether defendants 1 and 2 did in fact induce the plaintiffs to enter into the agreement by means of fraud which does, under the law, vitiate the agreement is one of fact and can only be decided after framing a proper issue and after giving the parties an opportunity to produce evidence in support of their respective contentions. The onus of proving' the alleged fraud will, of course, lie on the plaintiffs. It may be that in view of the facts mentioned by the learned Counsel for the appellant, the onus will be exceptionally heavy, and particularly Onerous, and it may not seem likely at all that the plaintiffs will be able to discharge such onus. However, that is not a matter which should influence our decision of the question before us. If the plaintiffs raise a question which is triable, and triable only by the Court and which cannot form the subject-matter of reference to arbitration the Court cannot refuse to decide it merely on the ground that there does not seem to be any reasonable prospect of the plaintiffs' success. In Monro v. Bognor Urban District Council (1915) 112 L.T. 969 while holding that an action impugning the validity of an agreement on the ground of fraud, could not be said to involve a question, dispute, or difference, upon or in relation to, or, in connection with, a matter which was referable to arbitration under the arbitration clause, Pickford, L.J. in dealing with a similar argument made the following observations at p. 971 of the report:

I think the action is with reference to matter wholly outside the powers of the arbitrator and with which he could not possibly deal. It may be a very bad action; the master thinks it is. The defendants, if they have a sufficiently strong opinion about it and if they have sufficient materials to do so, have the power to apply to stay the action or to dismiss it on the ground of its being frivolous and vexatious, or on the ground that the claim-discloses no a sues of action or that it is an abuse of the process of the Court. They have all those steps that they can take if they think if to do so. But that is not the point that we have to decide. What we have to decide is whether this is an action that ought to be brought within the provisions of the arbitration clause by being stayed and the dispute raised on it referred to arbitration within that clause. I do not think that it is an action which comes within the arbitration clause at all, and therefore, I think that there was no power to stay it, and it ought not have been stayed. I think the master proceeded on a wrong basis. He said: I do not think this is a well-founded action. I think there is no case of fraud and therefore I will stay the action and send to arbitration that is to say, I will send to arbitration something that the arbitrator has not power to deal with at all.... That seems to me to be a matter which, if it be correct, is a matter to be decided in the action. It may show that the action cannot be maintained, but it does not show that the action is one' which falls within the terms of the arbitration clause. I think the learned Judge was wrong, and that his decision should be set aside.

Finding myself in full and respectful agreement, with these observations, I reject also the second-contention of the learned Counsel.

42. The third contention of the learned Counsel seems to be equally without force. The plaintiffs allegation being that both the defendants had joined together, and had colluded with each other, for the purpose of defrauding them, it is only proper that such allegation is investigated in the presence of both the defendants. Although there is no legal bar to the Court proceeding with the trial of the suit as against defendant 2 not party to arbitration agreement while the suit, in so far as it affects defendant l, who is a party to arbitration agreement remains stayed, considerations of practical convenience appear to make it eminently desirable that the allegations of fraud and collusion against both the defendants be tried in the same action and at the same time. If required to prove fraud and collusion against defendant 2 in the absence of defendant 1, the plaintiffs may find themselves faced-with serious handicaps. Apart from that, it must not be forgotten that if the plaintiffs can succeed-in proving collusion between the two defendants, that may, by itself, constitute a sufficient ground for a total refusal to stay the suit. According to the arbitration agreement, a reference to defendant 2 for decision must precede a reference to arbitration. There can be no reference to arbitration till after a reference has first been made to defendant 2. It may not be altogether fair to compel the plaintiffs to refer their disputes with-defendant 1 to the said defendant even after they have succeeded in establishing that he had been acting in collusion with defendant 1.

43 The fourth contention of the learned Counsel, however, does appear to me to haver considerable force. Out of the sum of Rs. 2,50,000 paid from time to time by the plaintiff to defendant 1 of which refund is claimed in the present suit, Rs. 1,02,000 was indisputably paid at a time when the first agreement was in force, and under that agreement. Out of the balance of Rs. 1,48,000 a sum of Rs. 63,000 although paid on account of the cost of the work executed under and in pursuance of the first agreement, must be deemed w have been paid under the second agreement, i.e. the agreement made on 14th July 1942, one of the terms of that agreement being that the plaintiffs should pay, and defendant 1 should accept, the aforesaid sum in full and complete settlement of the latter's claim in respect of the work executed upto date. In so far as the sum of Rs. 1,02,000 is concerned, it is obvious that the plaintiffs cannot claim its refund merely as a consequential relief to the main relief claimed by them in respect of the second agreement. Even if the second agreement is held to be void and unenforceable, and the plaintiffs are consequently found entitled to claim restitution of status quo ante such restitution cannot, by any stretch of imagination, be extended to this sum. The validity of the agreement under which it had been paid is not challenged in the present suit, and, therefore, the plaintiffs' claim qua this sum must be deemed to be one for damages for breach of contract. The plaintiffs have, in the alternative, claimed the entire sum of Rs. 2,50,000 as damages for breach of contract, and the plaint does contain general averments as to the building constructed by defendant 1 not being in accordance with the terms of the contract. It may, in the circumstances, be possible to construe the plaint as disclosing a cause of action in respect of the aforesaid sum of Rs. 1,02,000, treating the claim regarding that sum as one for damages for breach of contract. It is, however, not possible to discover any other cause of action qua this sum. Treated as one for damages for breach of contract, the claim in respect of this sum must be held to be covered by the arbitration clause in the first agreement. Either the first agreement, or the arbitration clause contained therein, would not, in respect of the work executed and payments made under the terms of that agreement, be abrogated except by means of a subsequent bilateral agreement clearly and unambiguously manifesting an intention to do so. I cannot find anything in the agreement dated 14th July 1942 from which such an intention can reasonably be inferred.

44. As for the balance of Rs. 1,48,000 if the plaintiffs can make out a right to avoid the second agreement, the payment of that sum cannot be regarded as one made under the terms of a binding agreement, and on the agreement being set aside, the plaintiffs will, ordinarily, be entitled to claim a refund thereof, subject, of course, to such equitable relief as the Court may, on the principle of quantum meruit or otherwise, find defendant 1 entitled to in respect of the building constructed by the said defendant for the benefit of the plaintiffs and of which the latter have in fact the benefit. Unless the contention of defendant 1 that, on the failure of the agreement dated 14th July 1942, the first agreement should be deemed to have been kept alive and should govern all works executed whether before or after the aforesaid date prevails, no question of reference to arbitration of any dispute regarding this claim can arise. Whether the above contention is or is not sound, and whether, on the failure of the second agreement, the first agreement or the arbitration clause therein is to be held to apply to the whole or any part of the construction and to the whole or any part of the aforesaid sum, is a matter regarding which I express no opinion and which I leave it to the learned trial Judge to decide if and when the occasion arises.

45. I also find myself unable to agree with the last ground given by the learned Single Judge in support of his decision The nature of the questions of law alleged to be involved, or to be likely to become involved, in the case has not been disclosed, nor has any attempt been made to show what the questions said to have been referred by the arbitrator to the Court on the two previous occasions were. There is nothing to indicate that those references did in fact involve any difficult or intricate questions of law. In the circumstances, I consider that there is no justification for assuming that such questions either arise, or are likely to arise, in this case.

46. My disagreement with the learned Single Judge regarding two of the grounds on which he has based his decision cannot, however, affect the decision of the appeal itself because the other two grounds with which I have agreed are by themselves sufficient to justify the disallowance of the appellant's petition under Section 34.

47. As regards the last contention of the learned Counsel for the appellant, I do not consider it necessary to express any opinion at this stage. I, however, do wish to indicate, for the guidance of the learned trial Judge that he will be well-advised in trying first the issue of fraud, the effect of fraud, if proved, on the second agreement and the operative ness or otherwise of the first agreement on the second agreement being 'et aside. In case the decision of the issue of fracas goes against the plaintiffs, such decision will obviously end the suit in its entirety, unless the plaintiffs close to press their alternative claim for demagogy or breach of contract. Even if they do choose to do so, such alternative claim can be confined only to a sum of Rs. 85,000. The balance of Rs. 1,65,000 having been expressly paid and received in full and final settlement of all disputes between the parties as to the cost or quality of the work executed upto 14th July 1942, and such settlement having been impugned on no ground other than that of fraud, on the plaintiffs' failure to prove fraud no cause of action at all will be left to them in respect thereof. This was quite frankly conceded by the learned Counsel for the respondents. If after the decision of the above issues, the suit is, for any reason, not finally disposed of, and a stage is reached at which the issues arising between the plaintiffs and defendant 1 are such as fall within the purview of any arbitration agreement binding on them, it will be open to defendant 1 to move the Court for stay of any further proceedings in the suit against himself to enable the parties to get the matters in controversy decided by reference to arbitration.

48. For the reasons given above, I would uphold the decision of the learned Single Judge, affirming the decision of the learned Subordinate Judge refusing to stay the suit under Section 34, Arbitration Act, and would dismiss the appeal. In the circumstances of the case I would leave the parties to bear their own costs of all the Courts.

49. The parties have been directed to appear in the trial Court on 28th June 1948.

Ram Lall, C.J.

I agree.


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