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Lovely Benefit Chit Fund and P. Ltd. Vs. Puran Dutt Sood Etc. - Court Judgment

LegalCrystal Citation
SubjectArbitration
CourtDelhi High Court
Decided On
Case NumberCivil Revision Appeal No. 174 of 1971
Judge
Reported in1975RLR296
ActsArbitration Act, 1940 - Sections 20; Code of Civil Procedure (CPC), 1908 - Sections 39 and 115
AppellantLovely Benefit Chit Fund and P. Ltd.
RespondentPuran Dutt Sood Etc.
Advocates: S.K. Mehra,; S.K. Chhibbar and; Balmukund Gupta, Advs
Cases ReferredFirm Managal Chand Banarsi Lal v. Firm Pvare Lal Air
Excerpt:
contract - agreement - section 2 of arbitration act, 1940 - to constitute arbitration agreement in writing - not necessary that it should be signed by parties - it is sufficient if terms reduced in writing and agreement of parties established. - 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 with her mother was supposed to return to u.k. but the mother cancelled her tickets and remained behind in india. the husband thereupon started procededings before the high court of justice,..........the effect of the dicta in that case is to reduce the difference between jurisdiction error and error of law within jurisdiction almost to vanishing point. the practical effect of the decision is that any error of law can be reckoned as jurisdictional. this comes perilously close to saying that there is jurisdiction if the decision is right in law but none if it is wrong. almost any misconstruction of a statute can be represented as 'basing' their decision on a matter with which they have no right to deal 'imposing an unwarranted condition' or 'addressing themselves to a wrong question. the majority opinion in the case leaves a court or tribunal with virtually no margin of legal error, whether there is excess of jurisdiction or merely error within jurisdiction can be.....
Judgment:

S. Rangarajan, J.

(1) The petitioner is M/s. Lovely Benefit Chit Fund and Finance Private Ltd. which is aggrieved by the order dt. 4-11-71 of the Additional District Judge passed in appeal against the order dt. 24-11-69 of the suborinate Judge, Delhi. Later had dismissed the application of the petitioner under Section 20 of the Arbitration Act on the ground that Puran Dutt Sood the principal debtor, as well as. his two sureties Ganesh Gupta and Surinder Singh Sood has not agreed to refer any dispute arising out of the said contract to arbitration. Shri D.R. Khanna, Additional District Judge, held that Puran Dutt Sood alone was a party to the clause in the contract pertaining to arbitration but not the two sureties. The petitioner has filed a further Revision to this Court under Section 115 Civil Procedure Code contending that there was a case of failure to exercise of jurisdiction against the two sureties and that this Court must direct that the dispute comprises the sureties as they were also parties to clause pertaining to referring disputes arising under the contract to arbitration.

(2) The first question argued before me is whether a revision petition lies. Section 39 of the Arbitration Act, 1940 (10 of 1940) provides for an appeal against certain orders ; in accordance with that one appeal was filed in this case. But Section 39(2) provides that there will be no second appeal. Section 41 of the said Act

(3) The next question for consideration is whether it is possible to hold that any error, assuming it was an error, regarding the interpretation of the surety-ship agreement vis-a-vis the invoking of the arbitration clause could be said to be one pertainting to the exercise of jurisdiction within the meaning of Section 115 C.P.C. This subject has been dealt with comprehensively by Mathew J. speaking for the Supreme Court in M.L. Sethi V. R.P. Kapur : [1973]1SCR697 , who ordered in paras 10 and 11 of the judgment that:- '10. The word 'jurisdiction' is a verbal cast of many colours. Jurisdiction originally seems to have had the meaning which Lord Reid ascribed to it in Anisminic Ltd. v. Foreign Compensation Commission (1969) 2 Ac 147, namely, the entitlement' to enter upon the enquiry in question'. If there was an entitlement to enter upon an enquiry into the questions then any subsequent error could only be regarded as an error within the jurisdiction. The best known formulation of this theory is that made by Lord Desman in R.V. Bolton (1841) Iqb 66 and said that the question of jurisdiction is determinable at the commencement, not at the conclusion of the enquiry. In Anisminic Ltd. (1969) 2 Ac 147 it was said. 'But there are many cases where although the tribunal had jurisdiction to enter on the enquiry; it has done or failed to do something in the course of the enquiry which is of such a nature that its decision is a nullity. It may have given its decision in bad faith. It may have made a decision which it had no power to make. It may have failed in the course of the enquiry to comply with, the requirements of natural justice. It may be, in perfect good faith has mis-construed the provision giving it power to act so that it failed to deal with the question remitted to it and decided some question which was not remitted to it. It may have refused to take into account something which it was required to take into account. Or it may have based its decision on some matter which under the provision setting it up, it had no right to take into account. I do not intend this test to be exhaustive. Lack of jurisdiction may arise in various ways. There may be an absence of formalities or things which are conditions precedent to the Tribunal having any jurisdiction to embark on an enquiry or the tribunal may at the end make an order that it has no jurisdiction to make or in the intervening stage while engaged on a proper enquiry, the Tribunal may depart from the rules of natural justice; or it may ask itself the wrong questions ; or it may take into account matters which it was not directed to take into account. Thereby it would step outside its jurisdiction. It would turn its enquiry into something not directed by Parliament and fail to make also enquiry which the Parliament did direct. Any of these things would cause its purported decision to be nullity.' 11. The dicta of the majority of the House of Lords, in the above case would show the extent to which 'lack' and 'excess' of jurisdiction have been assimilated or in other words, the extent to which we have moved away from the traditional concept of 'jurisdiction'. The effect of the dicta in that case is to reduce the difference between jurisdiction error and error of law within jurisdiction almost to vanishing point. The practical effect of the decision is that any error of law can be reckoned as jurisdictional. This comes perilously close to saying that there is jurisdiction if the decision is right in law but none if it is wrong. Almost any misconstruction of a statute can be represented as 'basing' their decision on a matter with which they have no right to deal 'imposing an unwarranted condition' or 'addressing themselves to a wrong question. The majority opinion in the case leaves a court or tribunal with virtually no margin of legal error, whether there is excess of jurisdiction or merely error within jurisdiction can be determined only by construing guidance. It is really a question if how much latitude the court is prepared to allow. In the end it can only be a value judgment (See H.W.R. wade, 'Constitutional and Administrative Aspects of the Anisminic case Law Quarterly Review, Vol. 85, 1969, Page 198)'? Why is it that a wrong decision on a question of limitation or rest judicata was treated as a jurisdictional error and liable to be interfered with in revision It is a bit difficult to understand how an erroneous decision on a question of limitation or rest judicata would oust the jurisdiction of the Court in the premptive sense of the term and render the decision or a decree employing the decision a nullity liable to collateral attack. The reason can only be that the error of law was considered as vital by the Court and there is no yardstick to determine the magnitude of the error other than the opinion of the Court.'

(4) The exception in favor of the question of limitation and rest judicata, Mathew J. pointed out, is difficult to understand; the exception probably stemmed from the concept of mistake of law being grave and having such an impact on the decision as to warrant interference under section 115 Civil Procedure Code We have here the linking of the gravity of the error of law with the scope for interference. As Mathew J. put it, the expression of 'jurisdiction is a verbal cast of many colours'. After the decision of House of Lords in Anisminic Ltd. v. Foreign Compensation (1969) 2 Ac 147, in the language of Mathew, J. 'We have moved away from the traditional concept of 'Jurisdiction'. The effect of the dicta in that case is to reduce the difference between jurisdictional error and error of law within jurisdiction almost to vanishing point.'

(5) MATHEW. J., after explaining the legal position in the above manner, refused to interfere with the order passed in that case, which was one ordering of discovery. The situation here is different because the learned Additional District Judge when he reversed the order of the learned Trial Judge thought, that in spite of the sureties acquainting themselves with the facts and cirumstances relating to the transaction when they signed the surety bond such acquaintance alone did not show that they had agreed to the arbitration clause. If this view is not correct then it will amount to a refusal to exercise of the jurisdiction so for as the sureties are concerned. It is in this light that the question of the correctness of the said view becomes crucial. What has to be construed, thereforee, is whether the sureties in this case did agree not only to the obligation of the principal debtor under his contract with the petitioner company but whether they had also agreed that any dispute between the Company as the principal debtor should be referred to arbitration in the manner stated therein. Such an agreement could be spelt out of the principal's agreement with the Company (Exhibit A/8) and the ureties agreement (Exhibit A/4) with the company to which the principal debtor was also a party, have to be read as one agreed between all the parties concerned to the extent to which it effects each one of them. If it can be so read, indeed it has to be read, then it would require interference under Section 115 C-P.C. Clause 20 of Exhibit A/3 provides that every dispute, difference or question which may arise at any time between the parties thereof or any person claiming under them touching or arising or in respect of the said agreement or the subject matter thereof shall be referred to the sole arbitration of Bk Harbans Singe Puri etc. The Surety bond (Exhibit A/4) signed by the Company through its director as well as by the principal debtor Puran Datt Sood contains the clauses to which Shri D.R. Khanna referred, as follows :-

'WHEREASthe party of the Second Part and the Party of the Third Part having accquainted themselves with all facts and circumstances relating to this transaction, and out of their own free will and accord have offered themselves Sureties for and on behelf of the Party of the first Part'.

(6) Both the agreements Ex A/3 and A/4 bear the same date. They were signed simaltaneously on so close to each other in point of time as to make them part of the same transaction and the same witness attested both of them. It is not without signifiance that the sureties were ex parte. It is important that in reply to the application which the petitioner had filed under section 20 they did not dispute their having agreed to refer the matter to arbitration, as it was stated in the petition.

(7) The learned trial Judge took the view, which is obviously incorrect that there had been no agreement to refer the matter to arbitration. He misdirected himself on the scope of Section 2 of the Arbitration Act, which defines an arbitration agreement as meaning a written agreement whether an arbitrator is named there in or not. He thought that not only should the arbitration agreement be in writing but that it must also be signed by the parties concerned. Mr. Balmukand Gupta, learned Counsel for the respondents, has pressed the same interpretation before me also. But on the question the Supreme Court speaking through Venkatarama Ayyar J. in Jugal Kishore Rameshwardas v. Mrs. Golhal Hormusil : [1955]2SCR857 , has clearly held as follows :-

'ITmay be argued that if the contract note is only intimation of a sale or purchase on behalf of the constituent, then it is not contract of employment, and that in consequence, there is no agreement in writing for arbitration as required by the Arbitration Act. But it is settled law that to constitute an arbitration agreement in writing it is not necessary that it should be signed by the parties and that it is sufficient if the terms are reduced to writing and the agreement of the parties thereto is established'

(8) This aspect has come up for consideration before the various High Court both before and after the above decision of the Supreme Court. It is needless to refer to all of them in the light of what the Supreme Court has said. It seems instructive, however, to set out observation of Mahajan J. in Firm Managal Chand Banarsi Lal v. Firm Pvare Lal Air 1949 P & J 199.

'The result of the above decision is that it can be safely said that at the present moment both in England and in India the law is well settled. What S. 2(a), Arbitration Act of 1940 speaks of an agreement in writing all that it means is that the terms of the agreement should be expressed in writing and that the agreement be such that it binds both the parties and that the actual signatures of both the parties on the agreement are not essential. The agreement may be in the from of a signed document by both the parties containing all the terms or a signed document containing the terms of a submission to arbitration agreed to orally by both the parties. It is sufficient if one party signs the submission and the other accepts it. The acceptance may be by word of mouth or may be by conduct,'

(8) The existence of an agreement within the meaning of Section 2(a) of the Arbitration Act in this case to refer the dispute in question to arbitration is between not only the principal debtor but also the sureties also is thus apparent and clear.

(9) Section 126 of the Contract Act defines the contract of guarantee as one to perform the promise or discharge the liability of a third person in case of his default. Section 128 says that the liability of the surety is Co-extensive with that of the principal debtor unless it is otherwise provided by the contract. There being no other contract suggesting the contrary, obligations of the sureties in this case are under law, co-extensive with that of the principal debtor.

(10) In the result, the impugned order of Shri D.R. Khanna, declining to direct the dispute inter se between the parties on one side and of the sureties also on the other side should be referred to arbitration is set aside; in other words, it is hereby directed that all the disputes inter se between the petitioner on the one side and Puran Datt Sood the Principal Debtor as well as his two sureties Ganesh Gupta and Surinder Singh Sood on the other should be referred to the arbitration of Bk. Harbans Singh Puri as per Clause 20 of Exhibit A/3. The revision petition is accepted accordingly but in the circumstances without costs.


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