(1) The litigation between the parties which has given rise to this appeal has a long and chequered history and it still appears to be unending. Firm Tara Chand Mohan Lal has been carrying on the brick-kiln business and owed Rs. 5,700/- to Bhartu defendant and to secure the payment of this amount the plaintiff firm executed the writing, Exhibit P-1, on 1st December 1951 pleading about five or six lacs of bricks at their kiln in village Bohla, the possession of which was said to have been delivered to the defendant. Under this agreement the plaintiff was, however, permitted to carry on the sale of bricks till Phagan Badi 15, sambat 2008 Bk., but the sale proceeds had to be paid to the defendant in satisfaction of his debt. So long as the entire amount remained unpaid the bricks referred to above remained pledged with the defendant who could sell the same at the market rate and appropriate the sale proceeds to the amount due to him. The amount realised in excess on the debt had, however, to be paid to the plaintiff firm and for that purpose, it is alleged, the defendant had to keep the accounts.
(2) Some of the pledged bricks were sold by the defendant from time to time, but no accounts of the sale proceeds were rendered to the plaintiff. Accordingly, on 29th November 1954 firm Tara Chand Mohan Lal brought the suit, out of which this appeal has arisen, asking for a decree for rendition of accounts and payment of the amount realised in excess of the debt owed by it to defendant Bhartu. In contesting the suit the defendant denied his liability for accounts and pleaded that he had never sold any part of the pledged bricks, nor was he ever in possession of the same under the agreement dated 1st December 1951.
According to the defendant the entire stock of pledged bricks remained in the plaintiff's possession and he had been selling the same from time to time. All the same the defendant admitted that he had taken 1,50,000 bricks from the plaintiff, but he pleaded that these bricks had been purchased by him from the plaintiff prior to the agreement dated 1st December 1951 and their price duly adjusted. The various matters arising for determination out of the pleadings of the parties were out in form of issues, one of them being whether the defendant was liable to render accounts.
On 6th December 1955 the trial Judge granted the plaintiff firm a preliminary decree directing the defendant to render accounts to the plaintiff for 2,00,000 of bricks. This was on the finding that 1,50,000 bricks had been appropriated by the defendant after the execution of the agreement, Exhibit P-1, and he had also sole another 50,000 bricks out of those pledged with him.
(3) An appeal against this decree was taken to the Senior Subordinate Judge, but before it could be heard on merits on 19th May 1956 the parties presented an application to the appellate Court stating that they had decided to refer their entire dispute to the sole arbitration of Shri Maru Singh Advocate of Rohtak and accordingly the matter be referred to him. The learned Senior Subordinate Judge thereupon recorded the statements of both the parties, but instead of sending the papers to the arbitrator appointed by the parties remitted the record to the trial Court with the following order:
'In accordance with the statements of the parties their application is forwarded to the Court concerned after due attestation. The aforesaid Court shall make over the case to the arbitrator and inform this Court of the final result of this case, so that if need be, this appeal be heard. Till then this appeal shall stand adjourned. The parties are directed to appear in the trial Court on 4th June 1956. * *'
(4) On receiving the papers from the appellate Court, the trial Judge made them over to Shri Maru Singh Advocate, the arbitrator appointed by the parties, and directed him to make his award by the 25th June 1956. The proceedings were not concluded by the arbitrator by that date and the trial Judge granted him extension till 6th July 1956. On that date the arbitrator filed his award granting a preliminary decree to the plaintiff, the operative portion of which runs as follows:
'I find that the defendant is liable to render accounts for the sale of two lacs of bricks to the plaintiff. A preliminary decree to that effect may be passed in favour of the plaintiff against the defendant.'
(5) Both the parties felt dissatisfied and preferred objections to this award, but later on the defendant withdrew his objections, vide his statement dated 23rd August 1956. At this stage it is unnecessary to go into the objections raised by the plaintiff firm. Suffice it to say that the learned trial Judge after hearing the objections remitted the award to the arbitrator as he was of the opinion that the entire matter in dispute between the parties had not bee adjudicated upon by the arbitrator.
(6) Thereafter the arbitrator gave his second award on 16th August 1956 awarding the plaintiff a decree for Rs. 74/- against the defendant but leaving the parties to bear their own costs.
(7) The plaintiff still felt dissatisfied and objections to this award were also put in before the trial Judge. The learned Subordinate Judge rejected the objections and making the award of the arbitrator dated 16th August 1956 rule of the Court passed a decree in terms of the same in the plaintiff's favour on 31st August 1956. An appeal against this decree was taken to the Senior Subordinate Judge, before whom the two cross appeals against the original decree of the trial Judge dated 6th December 1955 were still pending. On 17th December 1956 all the three appeals were dismissed by the Senior Subordinate Judge and he affirmed the decree of the trial Court dated 31st August 1956 which had been passed on the basis of the arbitrator's award dated 16th August 1956.
(8) The matter was brought to this Court by the plaintiff in Civil Revision No. 190 of 1957. Revision Petition was accepted by Mehar Singh J, on 27th November 1958. His Lordship accepted the plaintiff's contention that the entire proceedings taken by the trial Judge after the parties had entered into an arbitration agreement while their appeals were pending in the Court of Senior Subordinate Judge were without jurisdiction and, accordingly, the decree passed by the trial Judge on the basis of the arbitrator's award was null and void and could not be affirmed by the Senior Subordinate Judge. The case was remanded to the first appellate Court. The concluding portion of the order of this Court dated 27 November 1958 runs as follows:
'The result is that the order of the trial Court making the award a rule of the Court and the order of the appellate Court upholding that award are set aside. The two appeals by the parties from the first decree by the trial Court are revived and placed back to the file of the appellate Court. It will now consider those to appeals and the award made by the arbitrator in those two appeals and it will then proceed to dispose of the hole case, after proper hearing of the parties, according to law:'
This time when the cast went back to the Court of the Subordinate Judge further objections to the award of the arbitrator were put in by the plaintiff firm. It was contended, inter alia, that the agreement of reference was itself bad, the arbitrator was guilty of misconduct and that the award of the arbitrator was void as the time for making it as originally fixed had already expired and the extension granted by the trial Court was without jurisdiction.
The learned Senior Subordinate Judge went into the various objections. He however, upheld the validity of the reference but set aside the award on the following grounds:
(i) That the award had been made beyond the time originally fixed by the trial Court and the subsequent extensions of time granted by that Court were without jurisdiction;
(ii) that the final award dated 16th August 1956 was a nullity as the trial Judge had no jurisdiction to remit the award for reconsideration of the arbitrator;
(iii) that the arbitrator was guilty of judicial misconduct as he had not considered all the material that was placed before him.
(9) As a result of setting aside the award the learned Senior Subordinate Judge superseded the reference to arbitration and accepting both the appeals on merits granted the plaintiff a preliminary decree for rendition of accounts 'in respect of the bricks pledged with the defendant by the deed, Exhibit P-1, on 1st December 1951 and actually lying on the kiln on that date'. It is against this appellate decree that the defendant has come up in second appeal.
(10) Shri K. C. Puri appearing on behalf of the appellant has contended that the final award of the arbitrator dated 16th August 1956 was perfectly valid and the learned Senior Subordinate Judge was bound to pass a decree in accordance therewith. He has further argued that the learned Senior Subordinate Judge had no jurisdiction to examine the award of the arbitrator with reference to the merits of the case and to set it aside on the untenable ground that the arbitrator had failed to apply his mind to the material before him.
The first ground on which the final award of the arbitrator had been held to be vitiated is that it was made beyond the time originally fixed by the trial Court and though the time was extended subsequently the Court concerned had no power to grant the extension. This argument proceeds on the fallacy that the reference to arbitration was made by the trial Judge. Admittedly it was during the pendency of the appeals before the Senior Subordinate Judge that the parties had agreed to appoint an arbitrator and for that purpose they made an application to the Senior Subordinate Judge to made a reference and the same was accepted. Though the Senior Subordinate Judge did not himself issue the necessary order to the arbitrator and directed the trial Judge to do so, his action clearly amounted to making a reference to the arbitrator and it was the Senior Subordinate Judge who had to deal with all the matters arising out of the reference and the award made in the dispute between the parties.
It was in this view of the matter that Mehar Singh J. held in Civil Revision No. 190 of 1957 that the trial Judge had no jurisdiction to deal with the award and the objections to the award must be dealt with and adjudicated upon by the Senior Subordinate Judge. No time within which the award was to be made was to be made was fixed by the Senior Subordinate Judge, nor was there any reference to the period in the application which the parties has presented for appointment of the arbitrator. It was only when an intimation of his appointment as arbitrator was sent to Ch. Maru Singh that the trial Judge directed the arbitrator therein to file his award by 25th June 1956. Subsequently two extensions were granted by the same Court and the first award which was filed by the arbitrator on 6th July 1956 was within such extended period. Even the second award which was given by the arbitrator on 16th August 1956 after the case had been remitted to him for reconsideration was filed within the period allowed by the trial Court. It is true that the trial Court had no jurisdiction to extend the time as it has been held by Mehar Singh J. that the proceedings relating to the reference had to take place in the Court of the Senior Subordinate Judge and not the Subordinate Judge, but at the same time the trial Judge had no jurisdiction to fix the time within which the award was to be made and that part of his original order has also be treated as a nullity. It is thus obvious that the direction given to the arbitrator by the trial Court to make his award by 25th June 1956 was without jurisdiction and of no effect.
(11) The time for making the award was not fixed either by the parties in their application for reference, or by the Senior Subordinate Judge who alone had jurisdiction to deal with the proceedings arising our of this arbitration. In the absence of any such order of the Court or agreement of the parties the arbitrator had four months to make his award after entering on the reference as laid down in para 3 of the First Schedule to the Arbitration Act. In the present case both the awards were made long before the expiry of that period and thus the award could not be assailed on the ground that they had been made beyond the prescribed period.
(12) Another ground on which the learned Senior Subordinate Judge has set aside the award is that the arbitrator was guilty of judicial misconduct. For arriving at this finding the learned Judge has pointed out that no written record of the proceedings was maintained by the arbitrator, that he did not examine any witness and the arbitrator had neither applied his mind to the material before him nor had he considered certain facts which had been brought to his notice.
On going through the judgment of the Senior Subordinate Judge on this part of the case I find that in dealing with the award and scrutinising it on merits he has acted as if he was sitting in appeal over the verdict of the arbitrator. This is not the function of a Court before whom an award is filed for making it a rule of the Court. The learned Senior Subordinate Judge clearly over-stepped his jurisdiction. Even if it be assumed that a Court of law would have taken a view of the matter different from the one that the arbitrator had taken and that the arbitrator had given a wrong decision that would not empower the Court to set aside the award. The arbitrator by whose decision the parties had agreed to be bound was the final judge both on law and facts and, however, erroneous his decision may be, it cannot be interfered with by any Court. An error of judgment is not tantamount to judicial misconduct.
(13) In support of the contention that the failure to jeep a written record of the evidence or to examine necessary witnesses amounted to misconduct, the learned counsel for the respondent has placed reliance on Ram Chand v. Buta Ram, AIR 1931 Lah. 65(1). The head-note in that case is misleading. The relevant observations found in the body of the judgment of Jai Lal J. who decided that case are as follows:
'Apart from that the nature of the dispute was such that it could not be settled without evidence and admittedly no witnesses were examined by the arbitrator. He says that he merely examined the books of the parties and that the parties stated that they did not with to produce any further evidence. On this point the evidence produced by the appellant is contradictory.
Considering all the facts on the case I do not feel justified in interfering with the opinion of the Senior Subordinate Judge, who recorded the evidence of the parties in this case.'
(14) These observations take us nowhere and obviously they are no authority for the proposition that the non-examination of witnesses even when the parties stated before the arbitrator that they do not wish to adduce any evidence amounts to judicial misconduct or vitiates the award. On the contrary, in a subsequent decision of the same learned Judge (Ram Dhan Das v. Shankar Das, AIR 1936 Lah. 492) it was observed that there was no law which required an arbitration to keep a record of his proceedings. The learned Judge went further and held that though an arbitrator should make an enquiry his failure to do so was not judicial misconduct. In the case before us the arbitrator has stated that he had considered all the relevant evidence, taken into account the statements and admissions made by the parties before him and the parties had stated before him that they did not wish to examine any witness. In these circumstances, the learned Senior Subordinate Judge was wrong in holding that the arbitrator was guilty of judicial misconduct.
(15) There is, however, one fact which makes the award of the arbitrator dated 16th August 1956 a nullity. This award was made by the arbitrator as a result of the order passed by the trial Judge remitting the first award for reconsideration. Since it has been found that the matters arising out of this arbitration, his order remitting the first award for reconsideration was bad and, consequently, the proceedings taken in pursuance of that order by the arbitrator had filed his first award on 6th July 1956 he had become functus officio. He could reconsider the matter provided the award had been remitted to him for reconsideration by a competent Court. There was no such order of the Senior Subordinate Judge, who alone had the jurisdiction to deal with the matters arising out of this arbitration. Consequently, the award of the arbitrator dated 16th August 1956 had no valid existence and it could not be made a rule of the Court.
(16) These observations, however, do not apply to the first award which the arbitrator gave on 6th July 1956. Thus it has to be consider whether or not that award should be made a rule of the Court. When that award should be made a rule of the Court. When that award was filed, both the parties had objected to it, but subsequently the defendant withdrew his objections and the learned trial Judge found that the award had not deal with the entire matter which had been referred to the arbitrator and, therefore, remitted the same to him for reconsideration.
The objections by the plaintiff firm to the first award were practically the same that have been urged before the Senior Subordinate Judge who was considering the question of making the second award a rule of the Court. None of those objections, except that the arbitrator was guilty of judicial misconduct for his failure to record evidence and to consider certain matters, has appealed to the Senior Subordinate Judge. I have found above that the finding of judicial misconduct given by the Senior Subordinate Judge cannot be sustained.
Thus there is nothing which vitiates the first award but before making his award a rule of the Court it has to be considered whether it completely disposes of the entire matter that had been referred to the arbitration. On this point I find that the award dated 6th July, 1956 cannot be upheld. By this award the arbitrator merely granted a preliminary decree to the plaintiff for accounts. On reference to the application of the parties by which the arbitrator was appointed we find that the question which was referred to him was not merely the liability of the defendant of account, but the entire dispute arising out of the agreement, Exhibit P. 1 by which five or six lacs of bricks lying at the brick-kiln of the plaintiff firm had been pledged to the defendant. Thus it was the duly of the arbitrator to adjudicate upon the entire dispute and to determine the nature and extent of the liability of the parties under the agreement. For this reason the award dated 6th July 1956 has to be remitted to the arbitrator for reconsideration.
(17) I, accordingly, accept the appeal and set aside the judgment and decree of the Senior Subordinate Judge. The award shall be remitted to the arbitrator for reconsideration and decision of the entire dispute between the parties. The arbitrator shall make his award within the time fixed by the Senior Subordinate Judge or such further time as is allowed by him. The award shall then be dealt with by the Senior Subordinate Judge in accordance with law in view of objections, if any preferred by the parties.
(18) Costs of this appeal shall abide the event.
(19) Parties are directed to appear before the Senior Subordinate Judge on 28th August 1961, when he shall remit the relevant records to the arbitrator and fix a date by which the award is to be made as also the date on which they are to appear before the arbitrator.
(20) Appeal allowed.