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Nathisand Kalyasang Vs. Jasubha Dansangji - Court Judgment

LegalCrystal Citation
SubjectArbitration
CourtGujarat High Court
Decided On
Case NumberCivil Revn. Appln. No. 802 of 1970
Judge
Reported inAIR1973Guj11; (1972)GLR996
ActsArbitration Act, 1940 - Sections 21
AppellantNathisand Kalyasang
RespondentJasubha Dansangji
Appellant Advocate D.D. Vyas, Adv.
Respondent Advocate N.C. Shah, Adv.
Cases ReferredMahabir v. Manchar Singh
Excerpt:
.....the proceedings. two conditions must be satisfied before passing an order of reference a in a pending suit in the court: in the present case the agreement dated 4th january, 1970 between the plaintiff and the defendant refers the subject-matter of the suit to the arbitration and,.therefore, the first conditions is satisfied. therefore the second condition is not satisfied. it was contended that section 1 of the schedule 2 of the civil procedure code required application in writing by the parties and there was not such application in writing and, therefore order of reference was bad. if all the parties interested in the case do not consent to the passing of the order of reference by the court, the reference made by the court is bad, in air 1924 all 540, mahabir v. the court can pass..........entered into arbitration agreement on 4th january, 1970 with regard to subject-matter of the suit pending the hearing of the suit. chapter ii of the arbitration act deals with arbitration without intervention of a count. chapter iii deals with arbitration with intervention of a court where there is not suit pending. section 20 of the arbitration act provides where any persons have entered into an arbitration agreement before the institution of any suit with respect other subject-matter of the agreement or any part or fit, and where a difference has arisen to which the agreement applies they or any of them instead of proceeding under chapter, may apply to a court having jurisdiction in the matter to which the agreement relates, that the agreement be file din court. sub-section (2).....
Judgment:
ORDER

1. This Civil Revision Application No. 802 of 1970 is filed against the order dated 13th February, 1970, rejecting the application dated 13th January, 1970 filed by the defendant requesting the learned Civil Judge to refer the subject-matter of Civil Suit No. 19 of 1968 to arbitration in view of arbitration agreement dated 4th January, 1970 entered into between the parties pending the suit.

2. Civil Suit No. 90 of 1968 was filed on 5th April, 1968. Pending the suit the plaintiff and the defendant entered into arbitration agreement with regard to subject-matter of the suit on 4th January, 1970. On 13th January, 1970, the plaintiff filed application Ext. 25 along with arbitration agreement dated 4th January, 1970 and requested the learned Judge to pass an order of reference according to the agreement. The defendant resisted the said application and inter alia contended that he did not agree to refer to the matter to arbitration and, therefore, the order of reference should not be passed. The learned Civil Judge observed that in view of provisions of Section 21 of the Arbitration Act, 1940, in a pending suit, the Court can pass an order of reference only if all the parties in interested agree to refer the subject-matter of the suit to arbitration and they play in writing to the Court for an order or reference. In the present case there was an arbitration agreement with regard to the subject-matter of the suit between the parties,. but the application for passing order of reference was made by the plaintiff alone and the defendant a opposed the said application. the defendant did not consent for passing order of reference. Therefore, on order could be passed. The leaned civil Judge rejected the application by order dated 13th February, 1970.

3. The present revision application is filed by original plaintiff against the aforesaid order dated 13th February,. 1970, rejected application filed by the plaintiff for passing order of reference for arbitration with regard to subject-matter of the suit. In the present case the suit was filed on 5th April, 1968. the plaintiff and the defendant entered into arbitration agreement on 4th January, 1970 with regard to subject-matter of the suit pending the hearing of the suit. chapter II of the Arbitration Act deals with arbitration without intervention of a count. chapter III deals with arbitration with intervention of a Court where there is not suit pending. Section 20 of the Arbitration Act provides where any persons have entered into an arbitration agreement before the institution of any suit with respect other subject-matter of the agreement or any part or fit, and where a difference has arisen to which the agreement applies they or any of them instead of proceeding under chapter, may apply to a Court having jurisdiction in the matter to which the agreement relates, that the agreement be file din Court. Sub-section (2) of the Section 20 of the Act provides that the application shall be interest as plaintiff or plaintiffs and the remainder as defendant or defendants, if the application has been presented by all the parties, or, it otherwise, between the applicant as plaintiff an other parties ad defendants. Sub-section (3) of Section 20 provides that the Court shall direct notice of such application to be given to all the parties to the agreement other than the applicants, requirement them to show cause within the time specified in the notice why the agreement should not be filed. Sub-section (4) of Section 20 provides that where no sufficient cause is show, the Court shall makes an order of reference to the arbitrator appointed by the parties, whether in the agreement or otherwise, or, where the parties cannot agree upon the arbitrator, to an arbitrator appointed by the Court. Sub-section (5) of Section 20 provides that the arbitration shall proceed in the accordance with, and shall be governed by, the other provisions of the Act so far as they can be made applicable. From the provisions of Chapter II and III of the Arbitration Act it is seen that where any person have entered into an arbitration agreement before the institution of any suit with respect to the sub-section of the agreement of any part of it and where a difference has arises to which the agreement, applies, it is open to the parties or any party to the agreement to proceed under chapter II of the Act, or to make an application under Section 20 of the chapter III of the Act. However, if any legal proceeding are commenced by an party to an arbitration agreement any party to such legal proceedings may at any other party to the agreement such legal proceedings may at any time before filing the written statement or taking any other steps in the proceeding apply to the judicial authority before which the proceedings are pending to the stay the proceeding and if satisfied there is no sufficient reason why the matter should not be referred to in accordance with the arbitration agreement and that the applicant was that the time when the proceeding were commenced and still remains ready and willing to do all the things necessary to proper conduct of the arbitration . Such authority may, make an order staying the proceedings. Chapter IV provides for arbitration in pending suit. Section 21 provides that where in any suit all the parties interest agree that any matter in difference between them in the suit shall be referred to arbitration, they may at any time before judgment is pronounced apply in writing to the Court for an order of reference. Section 22 provides of appointment of an arbitration. Section 23 provides for passing order of reference. Section 24 provides that the where some only of the parties to a suit apply to have the matters in difference between them referred to arbitration in accordance with, and in the manner a provided by, Section 21, the Court may, if it thinks fit, so refer such matters to arbitration (Provided that the same can be separated from the rest of the subject-matter of the suit) in the manner provided in that section, but the suit shall continued so far as it relates to the parties who have not joined in the said application and to matter not contained in the said reference as if no such application had been made. Section 25 provides that the provisions of the order chapter shall. so far as they can be made applicable. Apply to arbitration under chapter IV looking to the provisions of Chapter IV it is clear that Chapter IV provides for arbitration in pending suits. Under Section 24 before the Court an pass order of reference to arbitration, all the parties interested should have agreed that any matter is difference between them in a suit, should be referred to arbitration and they all most apply in writing to the Court for an order or reference. Looking to the scheme of Section 21 in appears that in a pending suit the Court can pass an order of reference only if all the parties interested agree with any matter in difference between them in the suit, should be referred to arbitration and they apply in the writing to the Court for an order of reference. Two conditions must be satisfied before passing an order of reference a in a pending suit in the Court:--

(1) There must be an agreement between he parities interested that any matter in difference between them in the suit should be referred to arbitration and

(2) all the parties must apply in writing to the Court for an order of reference. In the present case the agreement dated 4th January, 1970 between the plaintiff and the defendant refers the subject-matter of the suit to the arbitration and,. therefore, the first conditions is satisfied. However, the plaintiff alone has applied to the Court of the an order of reference. The defendant resisted the application and did not consent for an order of reference. Therefore the second condition is not satisfied. Therefore, the Court cannot passion order of reference as requisite by the plaintiff. Therefore, the learned civil Judge was right in not passing order or reference and rejecting the application filed by the plaintiff on the ground that the defendant did not consent for order of reference.

4. In ( 902) ILR 29 Cal 167 (PC) , Ghaulam Khan v., Muhammad Hassanm, the Pirvy council considered the provisions with regard to arbitration in civil Procedure Code (Act XIV of 1882). Their Lordships observed that the chapter in the code of civil Procedure Reference to Arbitration (chapter XXXVII), deals with arbitration's under three heads:

1. where the parties to a litigation desire to refer to arbitration any matter indifference between them in the suit. In that case all proceedings from first to last are under the supervision of the Court.

2. Where parties without having recourse to litigate agree to refer their defense to arbitration and it is that the agreement of reference should have the sanction of the Court. In that case all future proceeding are under the supervision of the Court,

3. Where the agreement of reference is made and the arbitration itself takes place whiteout the intervention of the Court had the assistance of the Court is only a sought in Thereafter their Lordships observed:

'In case falling under head 1, the agreement to refer and the application to the Court founded upon it must have the concurrence all parities concerned and the actual reference is the order o f the Court'.

From the above observations in the aforesaid judgment it is clear that in a pending suit before a Court can passed order of reference, the agreement to refer and the application to the Court founded upon it must have the concurrence of all parties concerned. Thus is seen that without consent of the parties, the Court cannot pass order of reference even though the parties might have entered into an agreement for arbitration. In ILR 54 Bom 197 = (AIR 1930 Bom 98) Dinkarrai Lakshminprasad V. Yeshvantrai Hariparasad, the facts were that in August 1923, the applicant filed a suit being suit No. 3579 of 1923 against that respondent for winding up of the partnership business and for other consequential reliefs. The respondent took out a chamber summons under Section 19 of the Indian Arbitration Act, for stay of the suit in view of the clause of arbitration contain din the partnership agreement dated September 28, 1917. In view of the clause in the partner ship agreement dated September 28, 1917, the Court made an order staying the suit on September 19, 1923. Thereafter the parties did nothing and nothing happened until August 2, 1927 when the parties entered in to another agreement, whereby all the matters in dispute and difference in suit No. 3579 of 1923 were referred to arbitration of two arbitrators. On August 5, 1927 the suit came before the Court. The parties appeared and it was stated to the Court that all the matters in dispute and difference in the suit were referred to arbitration. Thereupon the Court dismissed the suit. Thereafter the applicant file application and requested that the agreement in writing dated August 2, 1972 between him and the respondent referring the matter in dispute between them to arbitration be filed in the Court an that an order or reference to the arbitrators be made. The application was made under paragraphs 17 of second schedule of code of Civil Procedure (Act V of 1908. Paragraph 17 is similar to section 20 of the Arbitration Act. The Court considered the question whether the agreement of reference pending the suit between the parities made without the interventions of the Court could be allowed to be filed in accordance with provisions of paragraph 17 of the second seclude of the Code of Civil procedure. In the aforesaid case it is held that an agreement to refer to arbitration matter in difference between the a parties in a pending suit without the order of the Court under paragraphs 1 to 3 of the second schedule is illegal and cannot be filed in the Court under paragraph 17 of the schedule. If in a pending suit the parties shave entered into an agreement to refer the difference between them to arbitration and there by attempt to oust the jurisdiction of he Court, they could only proceed about it in the manner laid down by the second schedule of the Civil Procedure Code and not otherwise. Mere agreement to refer disputes it a pending suit to arbitration cannot be treated as an adjustment of the suit. Provisions of Chapter IV of the Arbitration Act 1940 are similar to paragraph 1 to 3 and Section 20 is similar to the second schedule to Civil Procedure Code (Act V of 1908) and Section 20 of the Arbitration Act is similar to paragraph 17 of the at Schedule. Applying the observations in the aforesaid decision it will be clear that the agreement in the present case to the refer to arbitration matter in difference between the parties in the pending suit without order of the Court under Section 21 in chapter IV of the Act, is illegal and cannot be file din the Court under Section 21 of the Act. If the parties in the pending suit have entered into an agreement to refer the difference between them to arbitration and there by attempt to oust the jurisdiction of the Court, they could only proceed about it in the manner laid down by the provisions of the Arbitration Act and not otherwise. In the aforesaid decision while considering the question of hardship, the leaned Judge had observed that if one of the parties to an arbitration agreement made in pending suit baking out, the suit would go on. The suit is pending before the Court and, therefore, there is not hardship. In 43 Ind App 1 = (AIR 1915 PC 79), Thakur Umed Singh v. Sobhag Mal Dhadha the facts were that all the parties to a pending suit including a minor party by his guardian ad item, signed an agreement to refer the matter in the difference to arbitrations,. An application to the Court to for an order of reference was file under Section 1 of the Schedule II of the Code o f civil procedure, 1908. The parties including the guardian, appeared before the judge and produced the agreement. Thereafter on order was made by the Court. It was contended that Section 1 of the Schedule 2 of the Civil Procedure Code required application in writing by the parties and there was not such application in writing and, therefore order of reference was bad. In the aforesaid decision in the context of those facts it is observed that the Second Schedule to the Code of Civil procedure, which provides by Section 1 that where the parties to a suit have agreed that matter in difference shall be referred to arbitration they may apply in writing to the Court for an order of reference, does not require that the writing should be of necessity be singed. The guardian the was in Court and assented to the application. The requirements of Section 1 of Schedule II to the Civil Procedure Code are complied with. In the aforesaid decision it is clear that at the time when Court passed the order of reference, all the parties were present before the Court and they assented to the order of the reference. From the aforesaid decisions it is clear that the parties must assent to the assign of the order of reference and it is not necessary that the application for making the reference should be signed by all the parties. In (1900) ILR 27 Cal 61, Shama Sundram Iyer v. Abdul Latif, the facts were that the parties an assented to the passing an order of reference to arbitration. The only objection raised was that the application to the Court for referring the case to arbitration was not made in writing. It was contended that the Court acquired jurisdiction to refer a case to arbitration only upon the application being made to it in writing and no otherwise. It was held that the objection was not sound. The Court acquired jurisdiction to refer the case to arbitration upon an application whether in writing or oral being made to it by parties or their duly authorised pleaders advocates. In AIR 1959 Punj 617 (FB) Firm Khetyu Ram Bashamber Dass v. Kashmiri Lal Ratan Lal, Sections 21 and 23 the of the Arbitration Act were considered by the full Bench of the Punjab High Court can it is observed. 'Thus before any matter in volved in a suit pending in a Court can be referred to arbitration (a) there must be an agreement amongst all the parties interest that any matter in dispute between them in the suit shall be referred to arbitrations; (b) if they come to such an agreement, then they have to make an application in all writing to the Court concerned; and (c) therefore the Court has to pass an order referring the dispute to the arbitration agreed upon between the parties.' From these observation of the Full Bench of the Punjab High Court, it is, therefore, clear that there must be agreement of arbitration between all the parties who are interested in the case and application for reference to the Court must be made on behalf of the parties. If all the parties interested in the case do not consent to the passing of the order of reference by the Court, the reference made by the Court is bad, In AIR 1924 All 540, Mahabir v. Manchar Singh, the facts were that in pending suit in the date of hearing the suit, the pleaders for the parties stated that they were agreed to arbitration and wanted to the refer the matter to a certain pleader. their statement were recorded by the Court and the reference was made in accordance with their agreement. The arbitrator made an award to the which objection was thereafter taken that under paragraph 1 of the Second Schedule to the code of Civil Procedure, that agreement ought to have been made in writing. The contention was negative and it was observed that record taken down of an oral agreement make by the parties or their pleaders was an much as a written application made by the parties to their pleaders themselves, and the decision in (1900) ILR 27 Cal 61 (Supra) and 43 Ind App l = (AIR 1915 PC 79) (Supra) were relied upon. From the aforesaid discussion of the authorities cited at the bar, it is order clear that where in a pending suit there is an agreement of arbitration between the parties interested with urged to subject-mater of the suit, all the parties must apply to the Court for an order of reference. The Court can pass an order of reference only after the aforesaid two conditions are satisfied. In present case as pointed out hereinbefore the defendant has not applied to the Court the passing an order or reference but the opposed the application for making the order of the reference. The second conditions required under Section 21 of the Arbitration Act is not satisfied. Therefore, the leaned Judge was right in rejecting the application for passing order of reference.

5. In the result the revision application fails and Rule is discharged with costs.

6. Application dismissed.


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