H.R. Khanna, J.
1. A petition under Section 20 of the Arbitration Act, 1940 (10 of 1940) was presented by Rawalpindi Theaters (Private) Limited petitioner against Shri Patanjal respondent No. 1 and Shri Om Parkash Mehra respondent No. 2, for filing arbitration agreement and referring the dispute to the arbitrator. This petition was allowed by the Commercial Subordinate Judge. An appeal against the above order was filed by the two respondents and the same was accepted by the learned Additional District Judge who dismissed the petition. The petitioner has now approached this Court in revision.
2. The brief facts of the case are that Shri Patanjal respondent No. 1 is the producer of a film entitled 'Warrant'. New Films Corporation of Delhi obtained the distribution and exhibition rights of the aforesaid picture from respondent No. 1. The petitioner claims to have acquired exhibition rights with regard to the aforesaid picture from New Films Corporation under an agreement dated the 25th of January 1961 and to have paid Rs. 15,000 in that connection as advance. Some disputes thereafter arose between the petitioner and New Films Corporation, and according to the rules of Motion Pictures Association, the petitioner claims, the above picture could not be exhibited unless the New Films Corporation paid back Rs. 15,000 to the petitioner.
It is stated that respondent No. 1, who was interested in the early release of the picture, deputed respondent No. 2 to approach the petitioner for entering into an arrangement whereby the petitioner's rights could be secured and the picture released for exhibition. Agreement Exhibit P. 5 was then entered into by the petitioner and respondent No. 2 who, according to the petitioner, represented respondent No. 1. The agreement was to the following effect:--
'M/s. Rawalpindi Theatres (P.) Ltd.,
Chandni Chowk, Delhi.
I write to confirm that I am the rightly appointed legal representative of M/s. Shanti Niketan Films, Bombay, Producers of the film Warrant' and Financiers of M/s. Padam Films, Delhi, and Distributor of the picture 'Warrant' for Delhi and U. P. Circuits. I am enclosing herewith a letter of Authority issued by the above party in my favour.
I further confirm that I am entering into this arrangement with you after consulting Mr. Patanjal the Proprietor of the said firm M/s. Shanti Niketan Films, Bombay, the Producers and this decision is with his knowledge.
I further confirm that you have agreed to write your letter dated 21-7-62 to the Motion Pictures Association, Delhi, informing them that you are withdrawing your claim against the picture 'Warrant' and enabling the release of this picture on my assuring you as under :--
1. That I shall pay to Shri W.N. Chauwdhry, 781, Nicholson Road, Kashmere Gate, Delhi, a sum of Rs. 9500 from the Distributors share becoming due for 'Warrant' of two weeks run at Delite Theaters New Delhi, and Imperial Cinema, Paharganj.
2. I declare that there is absolutely no lien of any type on the said share becoming due from above Theatre and that said share shall not be utilised in any way, whatsoever, other than meeting your dues as above said.
I declare that you have agreed to write the above-said letter to the Motion Pictures Association, Delhi, on my assurances and representation and that if I had not assured you as above, you would not have written the said letter to the Motion Pictures Association, Delhi. It is understood that I am responsible to make good the deficit, if any, to cover Rs. 9,500. In case of dispute R.L. Duggal of 29-D Ramnagar N. Delhi will be the sole arbitrator.
for Shanti Niketan Films: Bombay
Dt. 21st July, 62.
Sd/. Om Parkash Mehra.'M
The petitioner claims that the respondents have failed to perform their part of the agreement and have not paid the amount mentioned in the agreement. Prayer has, accordingly, been made that in view of the arbitration Clause in the agreement the agreement be filed in Court and the matter in dispute be referred to the arbitrator named in the agreement
3. The petition was resisted by the respondent and they denied the allegations of the petitioner. It was averred that respondent No 1 was not a party to the agreement and respondent No. 2 had no authority to enter into agreement on behalf of respondent No. 1 The petition on behalf of the petitioner-Company was stated to be not maintainable and in any case it was alleged that the person signing the petition was not competent to do so. The existence of the arbitration agreement was also denied, Plea was also taken that serious allegations of fraud had been made by the petitioner-Company against the respondents in a criminal complaint and, therefore, the matter be not referred to arbitration.
4. Following issues were framed in the case :--
'1. Whether the plaintiff-company is registered under the Indian Companies Act?
2. Whether the petition has been filed, signed and verified by a duly authorised person on behalf of the plaintiff-company?
3. Whether there is a valid arbitration agreement existing between the parties appointing Shri R. L. Duggal as sole arbitrator?
4. If issue No. 2 is proved, whether the dispute be not referred to the arbitration as alleged?'
The trial Court decided all the Issues in favour of the petitioner and against the respondents.
5. On appeal the learned Additional District judge affirmed the findings of the trial Court on issues 1, 2 and 3 but he reversed the finding of the trial Court on issue No. 4. It was held that even though there was an agreement between the parties to refer the dispute to an arbitrator the matter should not be referred to arbitrator because the petitioner in an earlier complaint in a criminal court had charged the respondents with cheating and misappropriation. The respondent's appeal was, accordingly, allowed and the petitioner's petition was dismissed.
6. I have heard Mr. Prakash Narain on behalf of the petitioner and Mr. Bagai on behalf of the respondents, and am of the view that the learned Additional District Judge was in error in reversing the decision of the trial Court directing the matter to be referred to arbitration. Perusal of agreement Exhibit P. 5, which has been reproduced above, shows that according to its terms respondent No. 2 agreed to pay Rs. 9,500. It was further stipulated that in case of any dispute the matter would be referred to the sole arbitration of R L. Duggal. As the above amount has not been paid and there is a dispute between the parties, the petitioner, in my opinion, was entitled to have the matter referred to arbitration The ground, which weighed with the Court below, was that the petitioner had in a criminal complaint brought against the respondents made allegations of cheating and misappropriation. In this connection my attention has been invited to the statement of W.N. Chawdhry, Director and Special Attorney of the petitioner The witness has stated in cross-examination that the petitioner Company filed a criminal complaint against the respondents. The aforesaid complaint was dismissed in default. In that complaint the petitioner had alleged that respondent had played a fraud and cheated the petitioner regarding the amount due on the agreement.
Reliance on behalf of the respondents has also been placed upon the case of Abdul Kadir Shamsuddin v. Madhav Prabhakar, AIR 1962 SC 406, wherein it was observed that where serious allegations of fraud are made against a party and the party who is charged with fraud desires that the matter should be tried in open Court, that would be a sufficient cause for the Court not to order an arbitration agreement to be filed and not to make the reference. In that case there was a dispute between the parties, arising out of partnership agreement for cutting a forest. Some accounts were produced by the appellant but the case of the respondents was that the statements of those accounts were exaggerated and not correct. The respondents prayed that in accordance with an arbitration Clause in the agreement between the parties the matter should be referred to the arbitrator. This application was resisted by the appellant and one of the grounds urged on his behalf was that as the respondents had made allegations of fraud against the appellant in their application the dispute be not referred to arbitration. The trial Court dismissed the application under Section 20 of the Arbitration Act, but on appeal the High Court referred the dispute to the arbitrator.
When the matter came up before the Supreme Court their Lordships affirmed the decision of the High Court and dismissed the appeal. Wanchoo, J., speaking for the Court observed:--
'There is no doubt that where serious allegations of fraud are made against a party and the party who is charged with fraud desires that the matter should be tried in open Court, that would be a sufficient cause for the Court not to order an arbitration agreement to be filed and not to make the reference. But it is not every allegation imputing some kind of dishonesty, particularly in matters of accounts, which would be enough to dispose a Court to take the matter out of the forum which the parties themselves have chosen.'
It was further observed :--
'We are clearly of opinion that merely because some allegations have been made that accounts are not correct or that certain items are exaggerated and so on that^ is not enough to induce the Court to refuse to make a reference to arbitration. It is only in case of allegations of fraud of a serious nature that the Court will refuse as decided in Russell's case (1880) 14 Ch. D 471 to order an arbitration agreement to be filed and will make a reference.'
7. The facts in the case of Russell v Russell, to which reference was made by their Lordships, were that there was a dispute between two brothers arising out of partnership. The partnership agreement also contained an arbitration clause. One of the brothers gave notice to the other for dissolving the partnership. The other brother then brought an action alleging various charges of fraud and claimed that the notice for dissolution should be declared void. The brother, who was then charged with fraud, moved that the matter be referred to arbitration under the arbitration clause. This was resisted and the Court observed:--
' .... in a case where fraud is charged, the Court will In general refuse to send the dispute to arbitration it the party charged with the fraud desires a public inquiry. But where the objection to arbitration is By the party charging the fraud, the Court will not necessarily accede to it, and will never do so unless a prima facie case of fraud is proved.'
Similar question arose in the case of Osenton and Co. v. Johnston, 1942 AC 130. In that case a firm of estate agents and surveyors resisted the reference to an official referee on the ground that as their professional reputation was involved the matter should not be referred to the official referee. The House of Lords said that as the professional reputation of the firm was involved, that question would be tried before the normal tribunal of a High Court with a jury and should not be left to the final decision of an official referee against which there was no right of appeal.
8. The principle underlying the above authorities is that where serious allegations of fraud are made against a party or where allegations are made affecting the professional reputation of a party and that matter has to be gone into in the dispute between the parties, the party, against whom such allegations are made, can claim that the matter should be tried in a Court of law and should not be referred to arbitration. The reason for that is that in case the award of the arbitrator goes against the party against whom the above allegations are made it would seriously jeopardise the future of that party because the award of the arbitrator would put a stamp of authenticity on charge of moral delinquency or professional misconduct against that party. A party, it is felt, can insist that a finding involving such serious consequences for it should be arrived at only at a regular trial and not in the course of a reference to an arbitrator.
Another factor which has weighed with the Courts is that a party should have a right or appeal to vindicate its honour and to remove that stigma. As no appeal lies against the award or findings of an arbitrator, the Courts have refused to refer disputes involving such allegations to arbitration in case the party against whom the allegations are made resists the reference. Where, however, the dispute to be referred to the arbitrator does not require adjudication into such allegations, the question of declining to make the reference to arbitration would not arise. The mere fact that allegations of fraud or cheating were made in a previous complaint, which was dismissed in default, would not materially affect the position if the matter referred to the arbitrator does not necessitate going into those allegations.
In the present case Mr. Prakash Narain on behalf of the petitioner has unequivocally stated at the bar that for the purpose of the present reference the petitioner makes no allegation of fraud against the respondents and claims no adjudication about that. It is stated that the dispute between the parties now is that the respondents had undertaken to pay Rs. 9,500 in accordance with the agreement reproduced above, and as the respondents have not paid that amount there is a dispute which needs adjudication. The dispute now between the parties, according to the learned counsel, is only with respect to the payment of Rs. 9,500/-. Reference in this connection has been made to the statement of W.N. Chawdhry, Director and Special Attorney of the petitioner, who has come into the witness-box as P. W. 3 and who had deposed that the dispute between the parties was that the respondents were not paying the money to the witness. It would appear from the above that the dispute, which needs adjudication and which is sought to be referred to the arbitrator, is only about the claim of Rs. 9,500/- which, according to the petitioner, the respondents were bound to pay in terms of the agreement referred to above. Such a dispute can validly be referred to arbitrator and the Court below, in my opinion, was not justified in reversing the decision of the trial Court in this respect.
9. Argument has then been advanced on behalf of the respondents that this Court should not in a revision petition interfere with the decision of the Court below. Reference in this connection has been made to Manindra Land and Building Corporation Ltd., v. Bhutnath Banerjee AIR 1964 SC 1336, Abbasbhai v. Haji Gulamnabi, AIR 1964 SC 1341, and Pandurang Dhondi Chougule v. Maruti Hari Jadhav, AIR 1966 SC 153. In these cases the scope of the power of the High Court in a revision petition under Section 115 of the Code of Civil Procedure was discussed. The principle underlying these authorities was enunciated by Gajendragadkar, C. J., who spoke for the Court, in the last mentioned of the above three authorities as under :--
'The provisions of Section 115 of the Code have been examined by judicial decisions on several occasions. While exercising its jurisdiction under Section 115, it is not competent to the High Court to correct errors of fact, however, gross they may be, or even errors of law, unless the said errors have relation to the jurisdiction of the Court to try the dispute itself. As Clauses (a), (b) and (c) of Section 115 indicate, it is only in cases where the subordinate Court has exercised a jurisdiction not vested in it by law, or has failed to exercise a jurisdiction so vested, or has acted in the exercise of its jurisdiction illegally or with material irregularity that the revisional jurisdiction of the High Court can be properly invoked It is conceivable that points of law may arise in proceedings instituted before subordinate Courts which are related to questions of jurisdiction. It is well settled that a plea of limitation or a plea of res judicata is a plea of law which concerns the jurisdiction of the Court which tries the proceedings. A finding on these pleas in favour of the party raising them would oust the jurisdiction of the Court, and so, an erroneous decision on these pleas can be said to be concerned with questions of jurisdiction which fall within the purview of Section 115 of the Code. But an erroneous decision on a question of law reached by the subordinate Court which has no relation to question of jurisdiction of that Court, cannot be corrected by the High Court under Section 115.'
The above dictum, in my opinion,' if anything helps the petitioner rather than the respondents because the decision of the Court below has a bearing on the question of jurisdiction. The parties are at variance on the question as to whether the dispute between them should be tried by a domestic forum chosen by them or whether it should be tried in a Court of law. The trial Court held that the matter should be gone into by the arbitrator, but the learned Additional District Judge decided that the dispute should be tried in a Court of law. As the, decision of the Court below has a relation to the question of the jurisdiction of the Court, the decision, if contrary to law, can be set right in revision.
10. It has also been pointed out by Mr. Bagai on behalf of the respondents that the present revision was initially filed as a second appeal but when it was pointed out by the office that such an appeal was not maintainable the petitioner prayed that the appeal might be treated as a revision. It is urged that the grounds on which the order of the Court below is assailed are so couched as if they were grounds of appeal and not grounds of revision. This fact, in my opinion, does not materially affect the case because the main ground of attack has been specified in the grounds and it if stated that the order of the learned Additional District Judge is wholly illegal and untenable. This Court is concerned with the substance of the attack. The grounds give the substance of the attack and as the matter is such wherein interference is called for in revision, the Court would not stay its hands because of the fact that the revision petition was initially drafted as an appeal.
11. Lastly, it has been argued on behalf of the respondents that the petitioner Company has not been registered in India and that the decision of the Courts below on issue No. 1 is not correct. I, however, see no sufficient ground to interfere with the concurrent finding of the Court below on issue No. 1. It is significant that according to P. W. 2 Shri T. Wilson of the office of the Registrar of Companies, the petitioner Company, which was originally registered at Lahore, continues to be registered even after partition. The witness has added that the registration of the petitioner Company was transferred from Lahore to Delhi vide orders dated 16th July 1948 and 14th July 1950.
12. I, therefore, accept the revision petition, set aside the order of the learned Additional District Judge and restore that of the trial Court. The parties, in the circumstances of the case, are left to bear their own costs throughout.