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Y. Rangahathan and anr. Vs. P.L.N. Gupta and ors. - Court Judgment

LegalCrystal Citation
SubjectArbitration
CourtChennai High Court
Decided On
Case NumberO.S.A. No. 93 of 1983
Judge
Reported inAIR1985Mad348
ActsArbitration Act, 1940 - Sections 31, 31(3), 31(4) and 41
AppellantY. Rangahathan and anr.
RespondentP.L.N. Gupta and ors.
Appellant AdvocateS.V.K.S. Rangaswami Iyengar, ;K.V. Prakash and ;C. Hanumantha Rao, Advs.
Respondent AdvocateR. Krishna Iyer, Adv.
Cases ReferredDaulat Ram Phoolchand v. Shriram
Excerpt:
arbitration - jurisdiction - sections 31, 31 (3), 31 (4) and 41 of arbitration act, 1940 - appeal challenging dismissal of application seeking direction to be issued by court to respondents to produce certain documents sought for by arbitrator - as per section 41 only preservation, interim custody, or sale of any goods which are subject matter of reference can be prayed before court - present prayer for direction to produce documents not contemplated in sections 41 or 31 (3) - powers of court during arbitration proceeding restricted to purpose visualised in second schedule - held, application devoid of merits and court has no power to give such directions in pending arbitration proceeding. - - 7. we are not satisfied with the argument of mr......41 of the arbitration act is concerned, it vests this court with a power to protect the subject matter of arbitration being wasted, damages or alienated. with these observations, the learned judge dismissed the application. it is as against this order the present appeal has been filed.4. mr. s. v. k. s. rangaswami iyengar, learned counsel appearing for the appellants, contended that under s. 31(3) read with s. 41 of the arbitration act, the court has power to give such a direction, that unless such a direction is given, the arbitrator will not have any material to decide the case, that the respondents are wilfully suppressing those documents, lest they will reveal the true state of affairs, which will not be in. favour of the respondents and that directions have to be given by this.....
Judgment:

Gokulakrishnan, J.

1. This appeal arises out of the order passed by K.Shanmukham J. in Appln. No. 2648 of 1982. In Appln. No. 3902 of 1976, the appellants herein prayed for the appointment of a sole Arbitrator to decide the dispute between the parties relating to the taking of the accounts of the dissolved firm Yelchur & Co., situated at No. 2. Ramakrishna St, Madras 1,and at Madhanapalli. N. S. Ramaswami J. appointed Mr. M. Shamdas, who is a retired District Judge and now practising as Advocate, Madras, as Arbitrator on 24-2-1977 to decide the dispute between the parties relating to the taking of accounts of the dissolved firm 'Yelchur and Co.' with a direction that the Arbitrator while passing the award shall take into consideration as to whether the mediator gave any finding and whether that finding had been accepted by both the parties or not. The Arbitrator, after taking up the proceedings, passed his first order on 12-11-1979 on the direction petition (be) filed by the appellants on 26-11-1978. In and by this application, the appellants sought for the production of five items including the day book and ledger for the years 1972-73, 1975-76 and 1976-77. The Arbitrator directed the respondents herein to produce all the account books called for in the application. The appellants filed another application seeking for the production of the very same documents which they have prayed for in their first application, dated 10-8-1977. In this application, the Arbitrator passed the following order on 23-2-1982:

'I am of the view that no useful purpose is served in giving directions again for the production of the documents predictably with the same sequal. As to whether evidence already on record' establishes that the respondents are deliberately suppressing available documents calls for a conclusion on appreciation of evidence, which at this stage is premature. If it is ultimately found that the records are suppressed the respondents will suffer the consequences.

It is suggested that once again I should give directions for production of the records and if records called for are not produced within the time fixed, I should myself apply to the High Court to seek suitable directions. Quite apart from other factors involved, I do not see how I can ask for such directions without coming to a conclusion that there is suppression of available evidence on the part of the respondents. I cannot come to any such conclusion at ' this stage. As I said, if ultimately such conclusion is possible, appropriate consequences will follow determining the award.

I therefore do not think any further orders are necessary on this application.'

In spite of these orders, those account books were not produced by the respondents and it is the case of the respondents that they are not with them. Setting out all these facts and also stressing the importance of looking into those documents or otherwise, the Arbitrator will not have any material to decide the arbitration proceedings; the appellants prayed for a direction to be issued by this Court to respondents I and 2 compelling them to produce all the accounts books already sought for by the Arbitrator by duty fixing a date for such production.

2. Respondents I and 2 filed a counter inter alia alleging that there is no provision of law either under the Arbitration Act or under the High Court Original Side Rules, under which such an application can be filed, that S. 31(3) of the Arbitration Act, which is sought to be pressed into service, has no application at all to the facts of the present case, that the said application has no merits, that such type of application are intended to protract the arbitration proceedings and to postpone the payment of huge sum of rupees two lakhs including interest upto date, which is payable by the appellants to the respondents, and that as such, the application must be dismissed with costs.

3. The learned single Judge of this Court held that the Court's power under S. 31(3) of the Arbitration Act is limited to the remedy that can be sought for under S. 31 of the said Act, that it does not enable the Court to pass any order in the matter, which is in the exclusive discretion of the Arbitrator and that so far as S., 41 of the Arbitration Act is concerned, it vests this Court with a power to protect the subject matter of arbitration being wasted, damages or alienated. With these observations, the learned Judge dismissed the application. It is as against this order the present appeal has been filed.

4. Mr. S. V. K. S. Rangaswami Iyengar, learned counsel appearing for the appellants, contended that under S. 31(3) read with S. 41 of the Arbitration Act, the Court has power to give such a direction, that unless such a direction is given, the Arbitrator will not have any material to decide the case, that the respondents are wilfully suppressing those documents, lest they will reveal the true state of affairs, which will not be in. favour of the respondents and that directions have to be given by this Court to produce those documents, the noncompliance of which can be construed as contempt of Court.

5. Mr. R. Krishna Iyer, learned counsel appearing for the respondents, reiterated the contentions of the respondents 1 and 2 to the effect that those documents are not available with them, that the appellants, in order to protract the proceedings, have come forward with such type of applications, that the Arbitrator can form such a opinion as he thinks fit in the arbitration proceedings itself as regards the production of these documents,' that the application itself is not maintainable under any of the provisions of the Arbitration Act and that, in any event, the present appeal cannot be sustained under clause 15 of the Letters Patent.

6. The short point that we have to decide in this appeal is as to whether the present application is maintainable before the learned single Judge of this Court under the provisions of the Arbitration Act, and even assuming that such an application is maintainable, whether the order passed by the learned single Judge is appealable under clause 15 of the Letters Patent.

7. We are not satisfied with the argument of Mr. R. Krishna Iyer learned counsel for the respondents, to the effect that an appeal under Clause 15 of the Letters Patent will not lie in respect of such orders passed by the learned single Judge of this Court.. According to Mr. Krishna Iyer it will not be a judgment giving a finality as such to give right to the party to file an appeal under Clause 15 of the Letters Patent. In Shah Babulal Khimji v. Jayaben D. Kania, : [1982]1SCR187 , the Supreme Court has observed as follows -

'Whenever a trial Judge decides a controversy which affects valuable rights of one of the parties, it must be treated to be a judgment within the meaning of the Letters Patent. Every interlocutory order cannot be regarded as a judgment but only those orders, would be judgments which decide matters of moment or affect vital and valuable rights of the parties and which work serious injustice to the party concerned.'

In view of the wide definition given by the Supreme Court the dismissal of the application filed by the appellants, in our view, can be treated as judgment within the meaning of the Letters Patent. Hence, we are of the view that the appeal is maintainable.

8. See. 31 of the Arbitration Act reads as follows -

'(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 between the parties to the 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.'

S. 41 of the Arbitration Act reads as follows -

'Subject to the provisions of this Act and of rules made there under -

(a) the provisions of the Code of Civil Procedure, 1908 shall apply to all proceedings, before the Court, and to all appeals, under this Act, and

(b) the Court shall have, for the purpose of, and in relation to, arbitration proceedings, the same power of making orders in respect of any of the matters set out in the second Schedule as it has for the purpose of, and in relation to any proceedings before the Court; Provided that, nothing in clause (b) shall be taken to prejudice any power which may be vested in an arbitrator or umpire for making orders with respect to any of such matters.'

The second schedule mentioned in S. 41 of the Arbitration Act reads as follows -

'1. The preservation, interim custody or sale of any goods which are the subject matter of the reference.

'2. Securing the amount in difference in the reference.

3. The detention, preservation or inspection of any property or thing which is the subject of the reference or as to which any question may arise therein and authorising for any of the, aforesaid purposes any person to enter upon or into any land or building in the possession of any party to the reference, or authorising any samples to be taken, or any observation to be made, or experiment to be tried, which may be necessary or expedient for the purpose of obtaining full information or evidence.

4. Interim injunction or the appointment of a receiver.

5. The appointment of a guardian for a minor or person of unsound mind for the purposes of arbitration proceedings.'

9. The Arbitrator appointed by this Court on an application taken by the appellants is seized of the dispute between the parties. As regards the documents sought for by the appellants, two memos were filed by them before the Arbitrator and the Arbitrator has issued necessary directions. While issuing directions the Arbitrator has also observed that if it is found in his proceedings that those documents have been suppressed by the respondent, the respondents will suffer the consequences. The Arbitrator has also brushed aside the request made by the appellants asking the Arbitrator to apply to the Court for necessary directions observing that the Arbitrator cannot ask for such a direction without coming to the conclusion that there is suppression of available evidence on the part of the respondents and that he cannot come to any such conclusion at that stage and if ultimately such a conclusion is possible, appropriate consequences will follow in determining the award. In this background, we can consider as to what exactly the appellants can pray, for by invoking the jurisdicti6n of the High Court under S. 31 of the Arbitration Act.

10. The nature of the application that could be filed before Court while the arbitration proceedings is pending can be spelt out from S. 41 read with the second Schedule to S. 41 of the Arbitration Act. A reading of the Second Schedule and the relief that can be prayed for as per the Second Schedule before Court will refer only to the preservation, interim custody or sale of any goods which are the subject matter of the reference. For that purpose, interim injunction or the appointment of a Receiver can be prayed for. If any minor or person of unsound mind is involved, the appointment of guardian can be asked for. The present prayer for a direction to produce the documents, in our view, . is not contemplated by the Second Schedule to S. 41 of the Arbitration Act, nor can S. 31(3) and (4) of the Act be interpreted to include such type of prayers. The Arbitrator is seized of that matter and he has also made certain observations and given some directions on the applications filed by the appellants, which we have extracted in paragraph supra. To allow such petitions to be filed before Court for directions to produce documents will open the floodgates of litigation and the Court will be mulcted with many number of petitions of this nature leaving the Arbitrator helpless. Arbitration proceedings are intended to give speedy remedy without burdening the Court with cases in which the parties opt for arbitration. If such types of applications, which are not contemplated by the Arbitration Act either under S. 31 or under S. 41 or under the Second Schedule thereof, are allowed to be filed, the purpose of the Arbitration Act itself will be frustrated.

11. The power of the Court under S. 31 read with S. 41 and the Second Schedule of the Arbitration Act was the subject matter of interpretation by various Courts. The Supreme Court in Kumbha Mawji v. Dominion of India : [1953]4SCR878 , has held as follows -

'In the context of S. 31(4), it is reasonable to think that the phrase 'in any reference', means in the matter of a reference. The word 'reference' having been defined in the Act as 'reference to arbitration' the phrase 'in a reference' would mean in the matter of a reference to arbitration'. The phrase 'in a reference' is, therefore, comprehensive enough to cover also an application first made after the arbitration is completed and a final award is made.'

In Ferro Alloys Corporation Ltd. v. A. K. Ghosh and Bros., : AIR1960Cal421 , a single Judge of the Calcutta High Court had occasion to deal with S. 31(4) of the Arbitration Act. The Court held as follows -

'The intention to be gathered from the words used in the section is that only one Court will deal with all matters in relation to a reference whether during the pendency of the arbitration proceedings or after its termination by an award'.

Thus, from the above decision, it is clear that the Court in which the application, against which the present appeal arises, has been filed, has jurisdiction to entertain such an application inasmuch as the Court has appointed the Arbitrator and that the said Court is seized of the Ar6itration proceedings.

12. The next question to be considered is whether an application of the present nature for the purpose of directing a party to produce the records and accounts relating to the partnership firm, can be permitted. Apart from the factual circumstances which will not make the Court to issue such directions, the law on the question has to be culled out from Ss. 23, 31 and 41 of the Arbitration Act. S. 23 of the Arbitration Act states that where a Matter is referred to an Arbitrator, the Court' all not save in the manner and to the extent provided in this Act, deal with such matter in the suit. S. 31 of the Arbitration Act deals with the jurisdiction of the Court. From the decision reported in Ferro Alloys Corporation Ltd. v. A. K. Ghosh and Bros., : AIR1960Cal421 , which has been extracted in paragraphs supra, it is clear that under S. 31(4) of the Arbitration Act, the Court in which the arbitration proceedings can be filed has jurisdiction both before and after the award is made, to entertain application. S. 41, of the Arbitration Act read with the Second Schedule thereto deals with the powers of the Court. In Daulat Ram Phoolchand v. Shriram, : AIR1964MP219 , a single Judge of the Madhya Predesh High Court has held as follows -

'The effect of the provisions of S. 42(b) of the Arbitration.Act is to clothe the Court with the same powers in relation to arbitration proceedings to issue interim orders for the preservation and safety of the subject matter of the dispute as it would have in relation to proceeding pending before itself'.

Proceeding further the Madhya Pradesh High Court held as follows -

'S. 41(b) read with the second Schedule to the Act was intended to empower the Court to pass interim orders for the preservation or safety of the subject matter of the dispute during the pendency of arbitration proceedings.

A combined reading of Ss. 23, 31 and 41 and the Second Schedule of the Arbitration Act makes it clear that the powers of the Court during the arbitration proceedings are restricted to the purpose visualised in the Second Schedule. The Second Scheduled to S. 41 of the Arbitration Act has been extracted already. As correctly observed by the Madhya Pradesh High Court in Daulat Ram Phoolchand v. Shriram : AIR1964MP219 , S., 41(b) read with the Second Schedule to the Arbitration Act, it was intended to empower the Court to pass interim orders for the preservation or safety of the subject matter of the dispute during the pendency of the arbitration proceedings. We are in complete agreement with this interpretation. In the present case, on hand, the Arbitrator himself has directed the production of the account books and other records by the respondents herein. lie has also made certain observations as to what will be the inference that can be drawn if such books are not produced wantonly. The Arbitrator is yet to finalise his award. Meanwhile, the appellants have come forward with an application as if the Court has power to call for such documents. As we have noticed already, such type of applications are not visualised under the Arbitration Act. The present application cannot be considered as one to get orders of the Court for the preservation or safety of the matter in dispute during the pendency of arbitration proceedings. It is only in such matters the affected party can invoke the jurisdiction of the civil Court during the pendency of such proceedings before the arbitrator. Factually also we are of the view that it is not necessary at this stage to pass orders by Court directing the respondents to produce the documents asked for inasmuch as the Arbitrator himself is seized of the matter and has given a direction for producing such documents. Thus, both factually and legally, we are of the view that the present application filed by the appellants is devoid of any merits and that the Court has no power to give such directions in the pending arbitration proceedings. Such type of prayers by invoking the jurisdiction of the Civil Courts are not contemplated under the provisions of the Arbitration Act and any orders passed on such applications will, instead of solving the problem, only complicate the issue.

13. For all these reasons, the appeal fails and the same is dismissed with costs.

14. Appeal dismissed.


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