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Virendra Saigal Vs. Sumatilal Jamnalal - Court Judgment

LegalCrystal Citation
SubjectArbitration
CourtDelhi High Court
Decided On
Case NumberCivil Revn. No. 482 of 1966, from order of Sub-J., 1st Class Delhi, D/- 30-4-1968
Judge
Reported inAIR1970Delhi14
ActsArbitration Act, 1940 - Sections 2(C), 31, 31(1), 31(2), 31(4) and 34; Code of Civil Procedure (CPC), 1908 - Sections 11
AppellantVirendra Saigal
RespondentSumatilal Jamnalal
Appellant Advocate B.B. Gupta, Adv
Respondent Advocate K.K. Mehra, Adv.
Cases ReferredChittori Subhanna v. Kudappa Subanna
Excerpt:
.....it is competent to entertain such application d) the case involved the application for stay of suit, filed in delhi courts, under section 34 of the arbitration act, 1940 - it was ruled that said application could not grant jurisdiction on delhi court under section 31 of the act e) it was ruled that decisions on question of jurisdiction of the court operated as rest judicata under section 11 of the civil procedure code, 1908 - section 13: [altamas kabir & cyriac joseph,jj] custody of child - welfare of child vis--vis comity of courts - the minor girl child of 3 1/2 years was brought to india by her mother. the minor girl was a citizen of u.k. being born in u.k. her parents had set up their matrimonial home in u.k. and had acquired status of permanent residents of u.k. the child..........so far as the said application under section 34 of the arbitration act by the respondent in the he suit filed by the petitioner is concerned, the contention of mr. k.k. mehra, learned counsel for the respondent is that this application was not an application either regarding the conduct of the arbitration proceedings or in relation to the reference and, thereforee, the filing of this application cannot confer jurisdiction on the delhi court under section 31 of the arbitration act. with regard to the application dated september 12, 1966, it is the respondent's contention that the application itself having been filed in a court which was not competent to entertain it, the provisions of sub-section (4) of the said section could not be invoked for holding that the application dated november.....
Judgment:

1. There were certain transactions as to shares between the parties to this petition. Concerning those disputes, the petitioner on May 3, 1963 filed a suit for accounts in the Court of Commercial Judge, Delhi, against the respondent (as defendant No. 1) and one K.K. Behl(as defendant No. 2). K.K. Behl was made a party defendant on the allegation that he was an agent of the respondent and that through him, the respondent was carrying on business in Delhi. Upon service of the summons of this suit, the respondent filed an application under Section 34 of the Arbitration Act for stay of the suit on the allegation that there was an agreement between the parties for reference of any disputes arising between them to arbitration. This application was dismissed on the ground that K.K. Behl aforesaid, who was a party to the suit as defendant NO. 2 was not a party to the alleged agreement for reference of disputes to arbitration.

2. Upon the dismissal of this application, the respondent filed his written statement and, inter alia, challenged the jurisdiction of the Delhi Courts to entertain the suit. This challenge was no two grounds- (1) that no part of the cause of action had arisen within the jurisdiction of the Delhi Court and (2) that there was an agreement between the parties whereby exclusive jurisdiction had been conferred on the Courts in Bombay. An issue was framed on the basis of this objection and the trial Court, by its order dated April 30, 1964, held in favor of the respondent on both the grounds. The petitioner filed an appeal, being Miscellaneous Civil Appeal No. 1 of 1965, which was disposed of by the Additional District Judge, Delhi, by his order dated January 3, 1966. The additional District Judge dismissed the appeal but only on the ground the no part of the cause of action had arisen in Delhi. He did not agree with the conclusion of the trial Court that there was an agreement between the parties conferring exclusive jurisdiction on the Bombay Courts.

3. It was then that the petitioner on September 12, 1966, filed an application in the Court of the Senior Subordinate Judge, Delhi purporting to be under Section 33 of the Arbitration Act. In paragraph 8 of the application , the petitioner alleged that the transaction in dispute had originated by way of offers from Delhi; that the petitioner had made payment at Delhi and that the respondent had received payments at Delhi, it was further urged by the petitioner in paragraph 9 of this application that the first application under the Arbitration Act had been made by the respondent in the Delhi Courts and, upon the basis of these allegations, it was asserted that the Delhi Courts alone had jurisdiction under sub-section (4) of Section 31 of the Arbitration Act. It appears that during the pendency of this application, in which no appearance was put in on behalf of the respondent the disputes between the parties had been referred to Arbitrators in Bombay who had made their award. The petitioner, thereforee, withdrew this application and filed another application under Sections 14 and 33 of the Arbitration Act in the Court of the Subordinate Judge 1st Class, Delhi, on November 19, 1966 and it is this application which has given rise to this revision. In this application, it was stated by the petitioner that the award had been made on November 7, 1966 and that the award had been given notwithstanding the pendency of the earlier application dated September 12, 1966. It was prayed that the arbitrators, who are named in paragraph 9 of the application, be directed to file their award along with the depositions and other documents product before the arbitrators. Cause of action for invoking the jurisdiction of the Delhi Court was alleged to be based upon the aforesaid application under Section 34 of the Arbitration Act which had been made by the respondent in the aforesaid civil suit which had been filed by the petitioner in Delhi and the earlier application dated September 12, 1966, which had been filed by the petitioner under Section 33 of the said Act but was withdrawn. On November 22, 1966, in the absence of the respondent a notice was issued by the Court to the arbitrators to file their award and, it is not disputed, that the arbitrators did forward their award to the said Court pursuant to this notice. When the respondent field his answer to this petition, he objected to the jurisdiction of the Delhi Court to entertain it and it was, inter aila, alleged that the aforesaid decision of the learned Additional District Judge dated January 3, 1966, operated as rest judicata between theh parties in so far as the issue of jurisdiction was concerned. On these pleadings, the trial Corut framed the following issues:-

'(1) Whether the question of jurisdiction of this Court has already been decided between the parties? If so, its effect.

(2) If it is proved that this Court has no jurisdiction, whethe this petition is triable by this Court?

(3) Relief'.

The trial Court decided both the Issues in favor of the respondent by its order dated April 30, 1968 and it is against this order that the petitioner has filed this revision under Section 115 of the Code of Civil Procedure.

4. In so far as the said application under Section 34 of the Arbitration Act by the respondent in the he suit filed by the petitioner is concerned, the contention of Mr. K.K. Mehra, learned counsel for the respondent is that this application was not an application either regarding the conduct of the arbitration proceedings or in relation to the reference and, thereforee, the filing of this application cannot confer jurisdiction on the Delhi Court under Section 31 of the Arbitration Act. With regard to the application dated September 12, 1966, it is the respondent's contention that the application itself having been filed in a Court which was not competent to entertain it, the provisions of sub-section (4) of the said section could not be invoked for holding that the application dated November 19, 1966 had been filed in a Court having jurisdiction.

5. Section 2 of the Arbitration Act defines 'Court' to mean a Civil Court having jurisdiction to decide the questions forming the subject matter of the reference if the same had been the subject matter of a suit. thereforee, a competent Court within the meaning of Section 31 of the Act must be a court which could have entertained a suit between the parties in whcih the controversies were the same as are the subject matter of the arbitration. Section 31 of the Act is in these terms:-

'(1) Subject to the provisions of this Act, an award may be filed in any Court having jurisdiction in the matter to which the reference relates.

(2) Notwithstanding anything contained in any other law for the time being in force and save as otherwise provided in this Act, all questions regarding the validity, effect or existence of an award or an arbitration agreement or persons claiming under them shall be decided by the Court in which the award under the agreement has been, or may be, filed, and by no other Court.

(3) All applications regarding the conduct of arbitration proceedings or otherwise arising out of such proceedings shall be made to the Court where the award has been, or may be, filed and to no other Court.

(4) Notwithstanding anything contained elsewhere in this Act or in any other law for the time being in force, where in any reference any application under this Act has been made in a Court competent to entertain it, that Court alone shall have jurisdiction over the arbitration proceedings and all subsequent applications arising out of that reference and the arbitration proceedings shall be made in that Court and in no other Court'.

Sub-section (1) provides for the filing of an award. The award can be filed in any Court having jurisdiction in the matter to which the reference relates. The 'Court' referred to in Section 31 is a 'Court' as defined by section 2. Sub-section (2) of Section 31 speaks of Courts which have jurisdiction to decide all questions regarding the validity, effect or existence of an award or an arbitration agreement and it provides that these question shall be decided by the Court in which the award under the agreement has been or may be, filed, and by no other Court. Mr. Desh Bandhu Gupta, learned counsel for the petitioner, has contended that in fact the award has been filed in the Delhi Court and, thereforee, that fact by itself is enough to confer jurisdiction on the Delhi Court within the meaning of Sub-section 92) of Section 31. When sub-section (2) of Section 31 talks of an award which has been filed in any Court, it refers beck to sub-section (1) of Section 31 and, thereforee, the filling of the award has to be in a Court having jurisdiction in the matter to which the reference relates. In other words, if an award has in fact been filed in any Court which has no jurisdiction in the matter to which the reference relates, such filing would not give jurisdiction to the Court under sub-section (2 ) of section 31.

6. Then we come to sub-section (4) of Section 31 which provides that where in any reference any application under this Act has been made in a Court competent to entertain it, that Court alone shall have jurisdiction over the arbitration proceedings and all subsequent applications arising out of that reference and the arbitration proceedings shall be made in that Court and in no other Court, Reliance by the petitioner on the filing of the previous application dated September 12, 1966 in the Delhi court appears to me to be clearly misconceived because one of the conditions necessary to be fulfillled is that the earlier application must have been filed in a Court competent to entertain it. The mere filing of an application in any Court irrespective of whether such Court has jurisdiction in the matter to which the reference relates would not fix that Court permanently as the Court in which all subsequent applications are to be filed. As I have stated above, the question whether the application dated September 12, 1966, had been filed in a competent Court having jurisdiction was not agitated before the Court because that application was withdrawn by the petitioner for reasons which have already been stated above before the respondents pleaded to it. In the result, in may view, the petitioner cannot rely upon the previous application dated September 12, 1966 for the purpose of claiming jurisdiction in the Delhi Court.

7. The next question then is whether the filing of the application under Section 34 of the Arbitration Act by the respondent in the suit for accounts filed by the petitioner against him is an application which is contemplated by sub-section (4) of S. 31 of the Act. Mr. Desh Bandhu Gupta, learned counsel for the petitioner, has placed his reliance on in re: Swastika Scientific Engineering Co., of Ambala Cantt., v. Union of India. In this case the plaintiff had filed a suit on January 2, 1949 for recovery of a specific amount in an Ambala Court. The defendant filed in application under Section 34 of the Arbitration Act for stay of the proceedings and no the same date he also filed his written statement. The proceedings were stayed and, thereafter, the matter went into arbitration. It appears from the judgment that an application was made by the defendant himself for extension of time in the Court of the Senior Subordinate Judge, Delhi. Thereafter, the award was made and objections to the award were filed in the Ambala Court. One of the objections was that the Ambala Court had no jurisdiction to decide these objections on ground that the application for extension having been made in the Delhi Court, alone would have jurisdiction. It was not disputed in this case that the Ambala Court had jurisdiction to entertain and decide the suit which had been filed before it. thereforee, the Ambala Court, was undoutbedly a Court having jurisdiction in the matter too which the reference related within the meaning of sub-section (1) of Section 31. In the view of the learned judge, the arbitration proceedings remained subject toe ht control of the Ambala Curt as it could set aside the order of stay so as to restart the suit which would result in making all proceedings before the arbitratrators invalid under Section 35 and, thereforee, the Delhi Court would not get jurisdiction merely by the unilateral act of the Dominion of the Ambala Court in regard to the award. This case is clearly distinguishable from the present case as in the present case, the application for stay which has been made under Section 34 of the Arbitration Act had been dismissed and the suit had been held to be filed in a Court not having jurisdiction. thereforee, in the present case, the Delhi Court would not be a Court having jurisdiction under section 31(1) of the said Act. The aforesaid case cannot, thereforee, assist the petitioner.

A similar question arose in a case reported in 1963 Pun Lr 444, in re Great Arts Private Ltd., v. Har Gopal Kapur, where a similar contention was repelled. Reliance was placed on a decision of the Calcutta High Court reported in 2nd (1954) Cal 418 in re' Choteylal Shamlal v. Cooch Behar Oil Mills Ltd. In the Calcutta case, an application for stay of a suit under Section 34 of the Arbitration Act had been made in the Cooch Behar court and it was contended that the Cooch Behar court would be the exclusive forum for the filing of the award under Section 14 of the Arbitration Act. It was observed:

'Section 34 does not provide for an application to a Court as defined under Section 2(c). Section 34 provides for an application to the judicial authority before whom a legal proceeding is pending for stay of that proceeding.

The section purposely uses the expression 'judicial authority'. The appellation is made not to the court but to the judicial authority before whom a proceeding is pending.

In my judgment, an application for stay made to a judicial authority under Section 34 of the Act is not an application under the Act in a reference in a Court competent to entertain it as contemplated by Section 31(4) of the Act.

An application for stay of a legal proceeding to the judicial authority before whom it is pending is always an application under the Act to a judicial authority competent to entertain it. The judicial authority, however, need not necessarily be a court competent under Section 2(c) to decide the question forming the subject matter of the reference and it is impossible to hold that the judicial authority becomes the excessive arbitration Court on the making of the application for stay'.

This decision of the Calcutta High Court was followed in a subsequent decision of the same Court which is reported in : AIR1961Cal659 . In re: Harbans Singh v. Union of India, where the following observations have been made'-

'Both Sections 31 and 34 of the Arbitration Act are enacted to avoid conflict and scramble. But the nature of conflict and scramble, intended to be avoided is different in the two sections. Section 34 which provides for stay of suit, is intended to avoid conflict between the public tribunal and the private tribunal intended to be set up by the arbitration agreement. While the conflict intended to be avoided by Section 31 is the conflict between different Courts in respect to arbitration proceedings pursuant to a reference.

Two conditions must be fulfillled to give the Court exclusive jurisdiction under Section 31(4) of the Arbitration Act, First, an application must be made in the court under the Arbitration Act and, second, the application must be made 'in any reference'. Application under Section 34 is no doubt an application under the Arbitration Act. But it is not an application under the Act in a reference in a court competent to entertain it as contemplated by Section 31(4) of the Act.

The phrase 'in any reference' in Section 31(4) means 'in any matter of a reference' and covers an application not merely during the pendency of the reference but also before the reference has taken place. Applications made under Sections 8 and 20 are well within Section 31(4) of the Act, even though these applications are made before any reference has taken place. But an application for stay of suit under Section 34 is not an application belonging to the same category. It has nothing to do with any reference. It is only intended to make the arbitration agreement effective and prevent a party from going to Court contrary to his own agreement that the dispute is to be adjudicated by a private tribunal'.

In my view, the rule laid down in (1963) 65 Pun Lr 444, and the aforesaid two Calcutta decisions is the correct rule and I, thereforee, hold that the filling of the application under Section 34 by the respondent in the civil suit for accounts filed by the petitioner is not such an application which could confer jurisdiction on the Delhi Courts under sub-section (4) of Section 31 of the Act.

The next question is whether the decision of the learned Additional District Judge on the issue of jurisdiction in the suit for accounts filed by the petitioner against the respondent operates as rest judicata. Section 11 of the Code of Civil Procedure talks not only of the decision in a suit being rest judicata in a subsequently instituted suit provided the other conditions are satisfied but it contains a prohibition against the trial of the same issue in a subsequent suit. The petitioner contends that decision on an issue as to jurisdiction cannot operate as rest judicata in a subsequent suit because the principle according to the petitioner is that the principle of rest judicata does not apply to decisions about jurisdiction of a Court. Reliance is placed on the following observations of the Supreme Court in the case reported in : [1966]3SCR300 , in re: Sheodan singh v. Daryao Kunwar:-

'In order that a matter may be said to have been heard and finally decided, the decision in the merits. Where, for example, the former suit was dismissed by the trial Court for want of jurisdiction, or for default of plaintiff's appearance, or on the ground of non-joinder of parties or mis-joinder of parties or multifariousness, or on the ground that the suit was badly framed, or on the ground of a technical mistake, or for failure on the part of the plaintiff to produce probate or letters of administration or succession certificate when the same is required bylaw to entitle the plaintiff to a decree, or for failure to furnish security for costs, or on the ground of improper valuation or for failure to pay additional Court-fee on a plaint which was undervalued or for want of cause of action or on the ground that it is premature and the dismissed is confirmed in appeal (if any) the decision not being on the merits would not be rest judicata in a subsequent suit'.

I do not think this case helps the petitioner. What the Supreme Court decided was that where a suit has been dismissed otherwise than on merits, then such dismissal will not operate as rest judicata in a subsequent suit. What had happened in the supreme Court case was that four appeals which had been consolidated were pending in the High Court. Two of these appeals were dismissed by the High Court - one as being time barred and the other on the ground of failure of the appellant's father to apply for translation and printing of the record as required by the rules of the High Court. The result of the dismissal of these two appeals was that the decision of the lower Court which was on the merits remained. The question arose whether the dismissal of these two appeals would result in the remaining two appeals being hit by the principle of rest judicata. It was contended that the dismissal of these two appeals was not after consideration on merits. The Supreme Court observed:-

'In these circumstances though the order of the High Court itself may not be on the merits, the decision of the High Court dismissing the appeals arising out of suits No. 77 and 91 was to uphold the decision on the merits as to issue of title and thereforee, it must be held that by dismissing the appeals arising out of suits Nos. 77 and 91 of the High Curt heard and finally decided the matter for it confirmed the judgment of the trial Court on the issue of this arising between the parties and the decision of the trial Court being on the merits the High Court's decision confirming that decision must also be deemed to be on the merits. To hold otherwise would make rest judicata impossible in cases where the trial Court decides the mater on merits but the appeal court dismisses the appeal on some preliminary ground thus confirming the decision of the trial Court on the merits. It is well settled that where a decree on the he merits is appealed from, the decision of the trial Court loses its character of finality and what was once rest judicata again becomes rest sub judicata and it is the decree of the appeal Court which will then be rest judicata. But if the contention of the appellant were to be accepted and it is held that if the appeal court dismisses the appeal on any preliminary ground, like limitation or default in printing thus confirming in toto the trial court's decision given on merits, the appeal court's decree cannot be rest judicata, the result would be that even thought the decision of the trial Court dismissed of the appeal on a preliminary ground there can never be rest judicata. We cannot thereforee, accept the contention that even though the trial Court may have decided the matter on the merits there can be no rest judicata if the appeal court dismisses the appeal on a preliminary ground without going into the merits, even though the result of the dismissal of the appeal by the appeal court is confirmation of the decision of the trial court given on the merits. Acceptance of such a proposition will mean that all that the losing party has to de to destroy the effect of a decision given by the trial court on the merits is to file as appeal and let that appeal be dismissed on some preliminary ground, with the result that the decision given on the merits also becomes useless as between the parties. We are thereforee, of opinion that where a decision is given on the merits by the trial Court and the matter is taken in appeal and the appeal is dismissed on some preliminary ground, like limitation or default in printing, it must be held that such dismissal when it confirms the decision of the trial Court on the merits itself amounts to the appeal being heard and finally decided on the merits whatever maybe the ground for dismissal of the appeal'.

9. The next case cited is reported in : AIR1941Cal493 , in re: Meghraj Golab Chand, Firm v. Chandra Kamal where a learned Single Judge has observed that the principles of rest judicata do not apply to decisions about the jurisdiction of the Court. Another decision upon which reliance has been placed for this proposition is reported in : AIR1929All132 , in re: Jwala Debi v. Amir Singh, where a learned Single Judge has held that a question by the defendant, is a question that virtually arises between the plaintiff and the Court itself and it has been contended that a decision as to jurisdiction, thereforee, is not binding on the parties in a subsequent litigation.

10. It is difficult for me to accept the proposition stated as widely as it has been cited hereinbefore. Section 11 of the Code of Civil Procedure prohibits the trial not only of a subsequent suit but also the trial of an issue in the subsequent suit. The issue of jurisdiction in the previous civil suit was raised on the pleadings of the parties and was decided. On principle, I do not see why section 11 does not apply to the retrial of an issue as to jurisdiction in subsequent suit. If the contention of the petitioner is to be accepted, it will lead it startling results. The first suit may be dismissed for want of jurisdiction by a particular Court and if the plaintiff subsequent files an identical suit in the same Court then, according to on behalf of the petitioner, the Court trying the subsequent suit will again be bound to hear the parties on the question of jurisdiction when that plea is raised in the subsequent suit and, upon dismissal of the subsequent suit also, it will be open to the plaintiff to repeat the process of filing identical suits one after another. In my view, in such a case of cases, Section 11 of the Code of Civil Procedure will undoubtedly apply and the trial on the suit or suits will certainly be precluded by reason of the decision on the question of jurisdiction in the first suit.

11. I may here refer to a Division Bench decision of the Calcutta High Court reported in : AIR1954Cal506 , in re; Newton Hickie v. Official Trustee of West Bengal, where it has been observed at page 509;-

'At one time it was thought that the rule of constructive 'res judicata' id not apply to the question of jurisdiction, but the matter has now been set at rest by the decision of the Supreme Court in 'Mohan Lal v. Boney Kishna' : [1953]4SCR377 '

The aforesaid Supreme Court decision contains an observation by Ghulam Hasann J.-

'Even an erroneous decision on a question of law operates as 'res judicata' between the parties to it. The correctness or otherwise of a judicial decision has no bearing upon the question whether or not it operates as 'res judicata' . A decision in the previous execution case between the parties that the matter was not within the competence of the executing Court even though erroneous is binding on the parties'.

In view of these observations, the contention which has been raised on behalf of the petitioner that decisions on question of jurisdiction do not operate as rest judicata cannot be accepted.

12. The petitioner has further relied upon another decision of the Supreme Court reported in : [1965]2SCR661 , in re: Chittori Subhanna v. Kudappa Subanna, and upon the observation that a direction in the preliminary decree cannot operate, in terms of Section 11, Code of Civil Procedure or on general principles, as rest judicata, for the simple reason, that the direction is not based on the decision of any matter in controversy between the parties and is given in the exercise of the power vested in the Court under Order 20, Rule 12(1)(c). It is difficult for me to see the relevancy of this case in so far as the decision of the point before me is concerned.

13. In the result, I do not find any merit in this revision which is dismissed with costs.

14. Revision dismissed.


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