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Ramvallabh Tibrewalla Vs. Dwarkadas and Co. - Court Judgment

LegalCrystal Citation
SubjectArbitration
CourtSupreme Court of India
Decided On
Judge
Reported inAIR1966SC402; 1966MhLJ213; [1966]1SCR689
ActsIndian Arbitration Act, 1940 - Sections 2(A), 20, 20(1), 34, 35 and 37; High Court Rules - Rule 391; Code of Civil Procedure (CPC), 1908
AppellantRamvallabh Tibrewalla
RespondentDwarkadas and Co.
Cases ReferredHira Ram v. Ram DittaA.I.
Excerpt:
.....effective arbitration agreement came into existence when suit was withdrawn - after withdrawal of suit agreement can be filed under section 20 - apex court set aside judgment of high court and remanded case for disposal according to law. - haryana urban(control of rent and eviction)act,1973[har.act no.11/1973] -- section 4(2)(b): [m.m. kumar, hemant gupta, ajay & kumar mittal, jj] determination of fair rent held, the fair rent of building under the section is to be determined on the basis of rent agreed between landlord and tenant preceding the date of application. in the absence of rent agreed between parties the basic rent is required to be determined on the basis of rent prevailing in locality for a similar building or rented land on the date of application. if on the date of filing..........of a court under chap. ii; [2] arbitration with intervention of a court where there is no suit pending, under chap. iii, and [3] arbitration in suits under chap. iv. an arbitration agreement between the parties to a pending suit for reference of any dispute in the suit entered into while the suit is pending may be enforced under chap. ib only by obtaining an order of reference from the court in which the suit is pending and not by proceeding under chaps. ii and iii. but an arbitration agreement entered into while no suit with respect to its subject matter is pending cannot be enforced under chap. iv, and there is nothing in chap. iv or the general scheme of the act, which precludes the enforcement of such an agreement under chaps. ii and iii. the effect of a subsequent suit with.....
Judgment:

Bachawat, J.

1. This appeal raises a question of construction of s. 20 of the Indian Arbitration act, 1940. The appellant instituted Suit No. 1712 of 1949 in the Bombay High Court against the respondent claiming a decree for money said to be due on account of various dealings between the parties. On or about February 18, 1954, the parties entered into an arbitration agreement for reference of the disputes to the arbitration of Sri Ramrikhdas Parasrampuria. The agreement also provided for withdrawal of the suit. In view of the agreement the suit was duly withdrawn. Sri Parasrampuria was subsequently removed and in his place, two other arbitrators were appointed. These arbitrators were also subsequently removed, and in their place, Sri S. V. Gupte was appointed the arbitrator. The time for making the award was extended by orders of court from time to time up to March 21, 1958. Two more applications for extension of time were rejected by the Court. Sri S. V. Gupte was unable to make the awarded by March 25, 1958.

2. On April 3, 1958, the appellant applied to the Court for (a) the filing of the arbitration agreement under s. 20 of the Indian Arbitration Act, 1940, (b) extension of the time of Sri. Gupte to make the award, (c) in the alternative, reference of the disputes to some other person^ and (d) an order for exclusion of the time from February 18, 1954 up to April 3, 1958 so as to save the bar of limitation, if any. The prayer for extension of the time of Sri. Gupte to make the award was rejected by K. K. Desai, J. and also by the appellate Court, and that prayer is no longer pressed by the appellant. Both Courts also rejected the appellant's prayer for the filing of the arbitration agreement under s. 20. K. K. Desai, J. held that in order to attract s- 20, the applicant must prove that the subject-matter of the arbitration agreement was not the subject-matter of any suit already instituted. The appellate Bench held that the arbitration agreement having been entered into five years after the institution of the suit, could not be said to be an arbitration agreement before the institution of any suit with respect to the subject-matter of the agreement as contemplated by s. 20(1). The appellant now appeals to this Court by special leave.

3. The respondent contends that the opening words of s. 20 preclude the filing of the arbitration agreement dated February 18, 1954, as the agreement was entered into after the institution of a suit with respect to the subject matter of the agreement. The appellant contends that [1] s. 20 permits the filing of an arbitration agreement entered into during the tendency of such a suit, if the suit is not pending when the party applies for the filing, in the alternative [2] s. 20 permits the filing of an arbitration agreement entered into while no such suit is pending, though such a suit might have been instituted previously, and [3] the arbitration agreement dated February 18, 1954 was intended to be operative upon, the withdrawal of the suit and was thus an agreement entered into while the suit was no longer pending and it could properly be filed under s. 20.

4. Sub-section [1] of s. 20 reads:

'Where any persons have entered into an arbitration agreement before the institution of any suit with respect to the subject matter of the agreement or any part of it, and where a difference has arisen to which the agreement applies, they or any of them, instead of proceeding under Chapter II, may apply to a court having jurisdiction in the matter to which the agreement relates, that the agreement be filed in Court'.

5. The dispute turns on the proper meaning to be given to the words 'before the institution of any suit with respect to the subject-matter of the agreement or any part of it'. Four alternative interpretations of these words are suggested; (1) The word 'before' suggests precedence in point of time; the section contemplates an arbitration agreement followed by a suit with respect to its subject-matter and if there is no such suit, the section is not attracted; (2) The words 'before the institution of any suit' mean 'where no suit has been instituted'; the section precludes the filing of an arbitration agreement entered into after the institution of the suit, even though the suit may have been withdrawn before the making of the agreement. (3) The words 'before the institution of any suit' mean 'while no suit is pending'; the section permits the filing of an arbitration agreement entered into while no suit is pending, though previously such a suit was instituted; and (4) the words 'before the institution of any suit' etc. qualify the words 'may apply'; the section permits the filing of all arbitration agreements provided the application for filing is made while no suit is pending.

6. The object of the opening words is to restrict the operation of s. 20 to a limited class of arbitration agreements. It is obvious that the opening words admit of more than one meaning. For the purpose of resolving the ambiguity, it is legitimate to refer to the other parts of the section, the heading of Chap III and the general scheme of the Act.

7. The Arbitration Act, 1940 contemplates three classes of arbitrations [1 arbitration without intervention of a court under Chap. II; [2] arbitration with intervention of a court where there is no suit pending, under Chap. III, and [3] arbitration in suits under Chap. IV. An arbitration agreement between the parties to a pending suit for reference of any dispute in the suit entered into while the suit is pending may be enforced under Chap. IB only by obtaining an order of reference from the Court in which the suit is pending and not by proceeding under Chaps. II and III. But an arbitration agreement entered into while no suit with respect to its subject matter is pending cannot be enforced under Chap. IV, and there is nothing in Chap. IV or the general scheme of the Act, which precludes the enforcement of such an agreement under Chaps. II and III. The effect of a subsequent suit with respect to the subject matter of the agreement is considered and dealt with in Sections 34 and 35 of Chap. V.

8. The heading of Chap. III shows that the subject matter of s. 20 is arbitration with intervention of a court where there is no suit pending. The heading is wide enough to include arbitration u under an arbitration agreement entered into while no suit with respect to the subject matter is pending.

9. The words 'instead of proceeding under Chapter II' in s. 20 suggest that the parties may proceed under Chap. III where they could proceed under Chap. II. Reading Chap. II with s. 2[A], it is lain that an arbitration agreement entered into while no suit with respect to its subject matter is pending may be enforced under Chap. II. Since such an agreement is enforceable under chap. II prima facie it is also enforceable under Chap. III.

10. The opening words of s. 20 contemplate that a suit with respect to the subject-matter of the arbitration agreement may or may not be filed. In order to attract s. 20, it is not, therefore, necessary that the arbitration agreement should be followed by a suit with respect to its subject-matter. The word 'before' is not used in the strict grammatical sense of priority in order of time. In the light of the other parts of s. 20, its heading and the general scheme of the Act, we think that the legislature used the word? 'before the institution of any suit' in the sense of 'while DO suit is pending' and not in the sense of 'where no suit has been instituted' The former meaning, is more in harmony with the real intention of the legislature. If the agreement is entered into while no suit with respect to its subject-matter is pending, the fact that its subject-matter was the subject-matter of a previously instituted suit would not preclude its enforcement under Chaps. IT and Itl. We think, therefore, that the words 'before the institution of any suit with respect to the subject-matter of the agreement or anypart o it' mean 'while no suit with respect to the subject-matter of the agreement or any part of it is pending'- These words qualify the preceding words 'an arbitration agreement' and not the succeeding words 'may apply'. In other words, s. 20 is attracted to an arbitration agreement entered into while no suit with respect to its subject-matter is pending. If it is entered into while such a .suit is pending, it cannot be enforced by an application under :-. 20, though the ;ipplicat:on is made when the suit is no longer pending.

11. Learned counsel for the parties cited before us the following cases decided under paragraph 17 of Sch. II of the Code of 1908. viz., Kftkil Singh v. Ramasmy Prasad Choudlwiy1924 I.L.R. 3 Pat.443, Lal Chand v. Sri KamA.I.R 1930 Lah. 1066, Hira Ram v. Ram DittaA.I.R 1935 Lah. 59 and Dinkarrai Lakshmi' prasad v. Yeshwantrni Hariprasad 1930 54 bOM. 197It is to be noticed that the heading of Chap. II. Arbitration with intervention of a court where there is no suit pending and the words in s. 20 before the institution of any suit with respect to the subject matter of the agreement or any part of it and instead of proceeding under Chap. II do not find any counterpart in the corresponding provision of Sch. II of the Code of Civil Procedure, 1908. In the circumstances, we think that the cases decided under paragraph 17 of Sch. II of the Code of 1908 are not decisive on the question of construction of s. 20 of the present Act, and that section must be constructed in the light of its own language and the scheme of the present Act.

12. Now, the question is whether the agreement dated February 18, 1954 is an agreement to which s. 20 is attracted. The relevant operative portion of the agreement reads:

'All matters in disputes in suit No. 1712 of 1949 [Ramvallabh Tibrewalla v/s Messrs. Dwarkadas and Co.]. in Bombay High Court including the question of whether the accounts were made up and adjusted and/or settled between the parties as pleaded in the written statement of the Defendants and the costs of the suit be referred to the sole arbitration of Ramrikhdas parasrampuria.... The intention of the parties is that the said matters in dispute between them be decided by arbitration and it is agreed that the said suit will therefore be withdrawn.'

13. The agreement was signed on February 18, 1854, while the suit was pending. Before us, it is admitted by counsel for both parties that the suit was withdrawn on or about the same date. The parties obviously intended that the pending suit would be withdrawn immediately so that the disputes might be resolved by arbitration without recourse to litigation. On a proper interpretation of the agreement, the withdrawal of the suit was the essential condition, upon the fulfillment of which the agreement would become operative. Thus, the effective arbitration agreement came into existence when the suit was withdrawn and may property be said to have been entered into while no suit with respect to its subject matter was pending. The agreement can, therefore, be filed under s. 20.

14. The ground upon which the courts below dismissed the application for filing the arbitration agreement under s. 20 cannot, therefore, be upheld. A technical objections as to the frame of the application based on Rule 391 of the High Court Rules is no longer pressed. But the respondent also contends that [1] the appellant elected to proceed with the arbitration under Chap. II, and having so elected, he cannot not claim arbitration under Chap. II [2] the application is barred by limitation, and the prayer for exclusion of time under s. 37 ought not to be allowed; and [3] the parties intended that the arbitration would be by Ramrikhdas parasrampuria only, and as he is not willing to act and/or has been removed, there can be no further arbitration. The courts below have not considered these contentions of the respondent. Having heard learned counsel on both sides, we think that the respondent is entitled to ask for the final disposal of the application after consideration of these points by the lower appellate Court, and for that purpose, this case should be remanded.

15. In the result, the appeal is allowed, the judgment and decree dated February 21, 1964 of the Bombay High Court in Appeal No. 58 of 1960 are set arise and the aforesaid Appeal No, 58 of 1960 is remanded to the court below for disposal in accordance with law. The respondent shall pay to the appellant the costs of this appeal.

16. Appeal allowed.


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