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O. Mohamed Yusuf Levai Saheb Vs. S. Hajee Mohammed HussaIn Rowther (Died) and ors. - Court Judgment

LegalCrystal Citation
SubjectArbitration;Limitation
CourtChennai High Court
Decided On
Case NumberA.A.O. No. 133 of 1958
Judge
Reported inAIR1964Mad1
ActsArbitration Act, 1940 - Sections 2, 3, 14, 17, 30, 32 and 33; Limitation Act, 1908 - Schedule - Article 178
AppellantO. Mohamed Yusuf Levai Saheb
RespondentS. Hajee Mohammed HussaIn Rowther (Died) and ors.
Appellant AdvocateA. Sundaram Iyer and ;T.V. Balakrishnan, Advs.
Respondent AdvocateT.R. Sangameswaran, Adv.
Cases ReferredSee Champalal v. Mst. Samrathbai
Excerpt:
arbitration - cause of action - sections 2, 3, 14, 17, 30, 32 and 33 of arbitration act, 1940 and article 178 of schedule to limitation act,1908 -award in case later accepted by parties would constitute fresh cause of action - there has been division of property and parties entered into possession of properties allotted - defendant not seeking to obtain decision upon existence or validity of award - property divided by consent of parties - award which has not been filed into court in accordance with act and judgment obtained cannot be put up as a defence to an action. - - ) 2. if the answer to the first question is in the negative, whether such an award if performed by one of the parties, can afford a good defence to an action on the original cause 'of action, by the other party; the.....s. ramachandra iyer, c.j.1. this appeal has been directed to be posted before this full bench on account of some divergence of judicial opinion amongst the various high courts in india ok the principal question involved in it. there has also been no uniformity of view in the several cases that have come up before this court on the same matter.2. the questions that fall for determination in this appeal can be formulated thus:1. whether an award made on a reference out of court, and, which has not been filed into court in accordance with the provisions of the indian arbitration act, 1940 can be pleaded as a defence to a suit instituted by a party thereto on the basis of the original cause of action.)2. if the answer to the first question is in the negative, whether such an award if.....
Judgment:

S. Ramachandra Iyer, C.J.

1. This appeal has been directed to be posted before this Full Bench on account of some divergence of judicial opinion amongst the various High Courts in India ok the principal question involved in it. There has also been no uniformity of view in the several cases that have come up before this Court on the same matter.

2. The questions that fall for determination in this appeal can be formulated thus:

1. Whether an award made on a reference out of Court, and, which has not been filed into Court in accordance with the provisions of the Indian Arbitration Act, 1940 can be pleaded as a defence to a suit instituted by a party thereto on the basis of the original cause of action.)

2. If the answer to the first question is in the negative, whether such an award if performed by one of the parties, can afford a good defence to an action on the original cause 'of action, by the other party;

3. Whether such an unfiled award if later on accepted by the parties thereto, can afford a fresh cause of action; and

4. Where an award made on a reference out of Court has not been filed into Court at the instance of any of the parties thereto within the time permitted by the law of limitation, whether it will be open to the Court to pass a decree in terms thereof, if it is produced before the Court by the arbitrators themselves; and if so, whether it would then be competent to the Court to investigate into the validity of such an award.

3. It is now necessary to set out briefly the facts which have given rise to this appeal. The appellant, the first respondent (who died pending this appeal and in whose place his legal representatives have been brought on record as respondents 8 to 18) and the second respondent constituted themselves into a partnership under an agreement dated 1-1-1949 for a period of five years. Differences, however, arose among the partners and on 14-12-1952, those differences were referred for adjudication by two arbitrators. The arbitrators made an award; dissatisfied with it, the respondents 1 and 2 filed 0. P. No. 24 of '1953 in the Sub Court, Ootacamund to have it set aside. No steps were taken by any of the parties to have the award filed into Court. The respondents 1 and 2 allowed their application impugning the award to be dismissed, the award not having been filed into Court. Sometime thereafter the respondents 1 and 2 filed the suit out of which this appeal arises, for dissolution of the partnership firm, and for consequential reliefs. Objection was taken inter alia by the other partners to the maintainability of the suit on the ground that the award by the arbitrators had finally adjudicated the rights of the parties.

During the trial of the suit which was confined only to the preliminary issue on the maintainability of it, the original award appears to have been received by the Court and was marked as Ex. B-l. The learned Subordinate Judge upheld the objection of the appellant and dismissed the suit. On appeal, that decree was set aside by the learned District Judge, Coimbatore, and the suit was remanded for retrial in the light of certain observations made in the judgment. The judgment of the lower appellate Court was that an unfiled award could constitute a valid defence to a suit on the original cause of action if relied on by the defendants in the suit pleading accord and satisfaction; but it also held that if the defendants had denied the award or. refused to accept the same, that would not be available to them as an answer to such a suit is a distinction the soundness of which is open to question. The lower appellate Court further held that the award having been received by the Court in the instant case during the progress of the suit, it would be competent for it to pass a decree thereon, it being open to the appellant (plaintiffs) to impugn its validity, if they failed to snow that it was invalid, the respondents would be entitled to rely on it as a complete defence to the action; if on the other hand, it were to be set aside as invalid, the suit should be tried on its merits.

4. The substantial question for consideration in this appeal is whether it would be open to the respondents (sic) to rely on the award which had not been filed into 'Court and made a decree of Court Under Sections 14 and 17 of the Indian Arbitration Act, 1940 (to be hereafter referred to as the Act). In Suryanarayana Reddi v. Venkata Reddi, ILR (1949) Mad 111 : AIR 1948 Mad 436 Happen and Govindarajachari JJ. held that the provisions of Sections 32 and 33 of the Arbitration Act, did not extend to a defence as opposed to the filing of a suit, and consequently, a defendant would not be precluded from putting forward an award which had been fully performed by him in answer to a claim by the plaintiff based on the original cause of action although such an award had not been filed under the provisions of the Act and judgment obtained. But the observations of the learned Judges went further and extended to a case where the defendant who relied on the unfiled award had not performed his obligations thereunder. It was held that the inhibition contained in Section 32 of the Arbitration Act was confined merely to a plaint by which a decision upon the existence, effect or validity of the award was sought and that its provisions did not extend to a defence as opposed to the filing of a suit thereon. In other words, the defendant who had not even performed his part of the award was held entitled to rely on such an award in answer to a claim based on the original cause of action.

In Surayya v. Anandayya, : AIR1951Mad525 aghava Rao J. accepted the proposition that even an unfiled award would be bar to a suit on the original cause of action. The learned Judge went further and observed that if such an award was pleaded in defence it would not be open to the plaintiffs who had not taken steps under the Act, to have it set aside to plead any invalidating circumstances thereto. But in a later case the same learned Judge expressed himself in a more qualified manner. That was in Venkatasubbayya v. Bapadu, : AIR1951Mad458 . It was held that it was not open to the defendant to rely on an unfiled award in answer to a suit on the original causal of action except in a case where the award had been acted upon by the parties and the defendant had actually performed that part of it which lie was under an obligation to do. In Rajamanickam v. Swaminatha, : AIR1952Mad24 , Basheer Ahmed Sayeed J. accepted the statement of the law as laid down in ILR (1949) Mad 111 : AIR 1948 Mad 436. But it is clear from the judgment in that case that the award had been subsequently accepted and acted upon by the parties.

In an unreported judgment in C.R.P. No. 2110 of 1951 on the file of this Court, Rajagopalan J. expressed the view that the mere existence of an award which did not result in a decree Under Section 17 of the Act could not be deemed to have taken away the right of suit which could be founded on the original cause of action. The learned Judge accepted the correctness of the decision in ILR (1949) Mad 111 : AIR 1948 Mad 436 in so far as it held that an unfiled award could be a valid defence to an action on the original cause of action in cases where the defendant had accepted and acted upon the award. In another unreported judgment of this Court in A. A. 0. No. 296 of 1951 and C.R.P. No. 2228 of 1951, Ramaswami J. took a more stringent view as to the maintainability of a suit on the original cause of action. There were no materials in that case to show whether the defendant had or had not performed the obligation cast on him under the award, me learned Judge held that there being no proof that the defendant had not performed his part of the award, he would be entitled to plead it as a bar to the plaintiff's suit.

5. In this state of authorities, it will be necessary to refer to the relevant provisions of the Act for a proper determination of the first question. But before doing so, and indeed for a due understanding of those provisions, it will be necessary first to consider the nature of the arbitration proceeding and of the award made therein.

6. An arbitration arises either by reason of an agreement between the parties thereto or under certain statutes. We are not concerned in the present case with the latter type of cases, for example, like those contained in the Indian Electricity Act and Co-operative Societies Act, etc.

7. The fundamental basis of the former type of arbitration is an agreement between the parties thereto. In other words, settlement of disputes between the parties by arbitration is strictly a proceeding by which the parties by consent, submit the matter for determination by a tribunal of their own choice in substitution to tribunals provided under the original law. An award is thus a final judgment as it were of the arbitrator or arbitrators, in settlement of the controversy submitted to him or them, partaking the character of both a contract as well as a judicial finding. In Redman's 'Law of Arbitration and awards' 5th Edn. while discussing the enforcement of an award by an action, it is stated at page 224:

'The remedy of the plaintiff is upon the contract contained in the submission which is treated as an agreement to pay such a sum or do or submit to such acts as shall be determined by the arbitrator. The award supplies the terms left uncertain by the submission and the two together form a complete contract. The nature of the contract and the liabilities of the parties are determined by the submission. The extent of the liability is defined by the award so far as it is consistent with the submission.'

Earlier the learned author has stated at page 186,

'An award that one person shall pay to another a sum of money will create a debt from one party to the other; the payment of which may be enforced by action or on an application to enforce the award.'

8. In Subbaraju v. Venkataramaraju, ILR 51 Mad 800 : AIR 1928 Mad 1025 the learned Judges elucidated the concept of an award by stating that an agreement to abide by the decision of an arbitrator was a valid compromise between the parties and that on the passing of the award the compromise becomes complete, The binding nature and inviolability of a valid award is therefore by reason of the contract giving rise to it. Unless a statute requires that the award should be filed in Court it will not be necessary for its validity that it should be so filed; nor is it necessary that the Court should either confirm it or accept it. An award in that aspect has the effect of merging the original cause of action within it. Superseding as it will do the original cause of action the award would thereafter be capable of furnishing the basis by which the rights and liabilities of the parties referred to arbitration could be determined. Therefore, in the absence of any statutory provision, the existence of a valid award will be a bar to any action on the original claim or demand. In its other aspect an award is equivalent to a judgment of Court, albeit the tribunal that renders it is one chosen by the parties to it. In Russell on Arbitration, 16th Edn., it is stated while dealing with the effect of an award, at page 259:

'A valid award on a voluntary reference operates between the parties as a final and conclusive judgment upon all matters referred, unless there is an express provision in the arbitration agreement that it shall have a temporary effect only or it is an interim award.'

9. In Halsbury's Laws of England, 3rd Edn. Vol. 2 the same matter is dealt with thus, at page 45,

'As between the parties to the arbitration agreement award gives rise to an estoppel inter partes with regard to the matters decided therein analogous to that created by the judgment in an action in personam.'

It is this aspect of an arbitration award that was emphasised in Krishna Panda v. Balaram Panda, ILR 19 Mad 290, where it was held that an award duly passed in accordance with the submission of the parties would be equivalent to a final judgment and that there was no necessity for any subsequent consent or approval of the parties thereto in order to give effect to it.

10. But it will be seen from the above that an arbitration award is not the same thing as a judgment of a Court. This will be clear from the following passage in Black on Judgments, 2nd Erin, at page 2,

'Decision of any Arbitrator self-constituted or chosen by the litigants is not judgment. The law speaks only by its appointed organs. It is only when the deliverance comes from a true and competent Court that it is entitled to be called a judgment.'

11. The two aspects of an award, namely, its affording a complete cause of action to the parties in supersession of the original cause of action and of its being equivalent or analogous to a judgment of the Court has been referred to in Bhajahari Saha v. Beharilal Basak, ILR 33 Cal 881 by Mukherjee J. in the following words:

'This conclusion is based upon the elementary principle that as between the parties and their privies an award is entitled to that respect which is due to the judgment of a Court of last resort. The. award is in fact a final adjudication by a Court of the parties' own choice and until impeached upon sufficient grounds in a proper proceeding, the award1 which is on the face of it, regular is conclusive upon the merits of the controversy submitted unless possibly the parties have intended that the award shall not be final and conclusive ... To put the matter in another way as an ordinary rule, a valid award operates to merge and extinguish all claims embraced in the submission and after it has been made, the submission and the award furnish the only basis by which the rights of the parties can be determined any constitute a bar to any action on the original demand.'

12. An award as such not actually being a judgment of a Court it will be only on the principle that a valid award duly and properly obtained effects a merger of the cause of action that the original cause of action could be regarded as completely extinguished. Then alone, the party who has the benefit of the new cause of action on the basis of the award will be precluded from instituting an action upon the original cause of action. If the award does not, by reason of any statutory provision or of the contract between the parties, have the effect of merging in it the original cause of action, it stands to reason that the latter should subsist notwithstanding the award.

13. It is only on the principle of an award giving rise to a cause of action that it has been held that under the common law, an action will lie on the basis of an award. That was indeed necessary, for, although an arbitrator could pass an award, he had no power, in the absence of any statute empowering him to do so, to enforce it. The successful party must therefore resort to an action on] the basis of the award instead of on the original cause; of action; unless such an award is impeached in appropriate proceedings, it will create a conclusive right in favour of the parties. Even if there be statutory provisions for the enforcement of the awards, the mere existence of such provisions which enable their enforcement was held not to bar any action on the award. For example, Section 26 of the English Arbitration Act, 1950 provides for summary enforcement of a private award as a demand, but notwithstanding it, it will be open to a party thereto to enforce the award by an action. In Russel on Arbitration we find the following at page 273 :

'Quite apart from the procedure laid down by Section 25 an award may be enforced by an action, as of right whether the arbitration was upon a written arbitration agreement or upon some parol submission. The submission is an actual mutual promise to perform the award of the arbitrators. ThU9 non-performance of the award is a breach of the agreement under which the arbitration took place ........The obtaining of leave to enforce an award as a judgment Under Section 26 does not prevent the applicant bringing an action on the award; nor does the entry of judgment in the terms of the award under the section.'

14. Prior to the passing of the Indian Arbitration Act, 1940, the statutory provision relating to arbitration consisted of two enactments; The Indian Arbitration Act, 1899 and the second schedule to the Civil Procedure Code, 1908. Under Section 15 of the Indian Arbitration Act, 1899 which applied to the Presidency Towns (there being power in the Provincial Government by notification to declare this Act applicable to any other local area) an award when filed into Court was declared enforceable as if it were a decree of the Court. Paragraph 16 of the second schedule it the Civil Procedure Code was however, differently worded; instead of treating the award if it had been Wed as if it were a judgment, it required the Court to pronounce a judgment according to the award.

15. We will have occasion presently to refer how an award when filed in Court is treated under the Arbitration Act, 1940. Before doing so, it will be useful to refer to the judgment of the Privy Council in E. D. Sassoon and Co. v. Ramdutt Ramkrishandas, ILR 50 Cal 1 : AIR 1922 PC 374. where it was held that an application under the Arbitration Act was not the only way for setting aside an award and that it would be open to the party affected to challenge the validity of the award in a suit filed for the purpose where the arbitrator had acted wholly without jurisdiction; and the mere fact that the award had been made a rule of Court and enforced by execution would not disentitle him to the relief. The law as thus declared led to inconvenient results. A valid award could be questioned long thereafter as and when the party entitled to the benefits thereunder files an action thereon. The Indian Arbitration Act, 1940 has remedied this defect.

16. The Act is an amending and consolidating statute in the nature of a code on the law of arbitration in India. There are certain provisions in it which did not exist under the enactments which it superseded; they do not exist even under the English law. All steps with reference to arbitration proceedings or award have to be taken as provided for under the Act. Sections 14 to 17 provide for the filing of the award, the Court being invested with limited power to modify, or remit the same for further consideration by the arbitration. Section 17 provides for a judgment and decree in terms of the award where the Court sees no reason to remit the whole award or with respect to any matter referred to arbitration or to set aside the award. No appeal would lie from the decree passed on the basis of the arbitration award except to the extent of its being in excess or otherwise not in accordance with the award. Section 18 confers on the Court power to pass interim orders after the filing of the award and before entering judgment on the basis thereon. Even at the earlier stage, that is when the matter is pending with the arbitrator, the Court is Riven power to pass certain orders, vide Section 41 and the matters specified in Sch. II. There is also a power in the Court to supersede the reference itself when the award becomes void or has been set aside.

It will be thus seen that right from the time when the arbitrator enters on his duties there are provisions for approaching the Court for appropriate orders and that the judgment and the decree on the award are but the final stage in an integrated scheme of adjudication of the rights by a private agency. In Hanskumar v. Union or India : [1959]1SCR1177 , the Supreme Court observes:

'Where an arbitration is held in pursuance of such an agreement and that results in a decision, that decision takes the place of an adjudication by the ordinary courts and the rights of the parties are thereafter regulated by it. It is true that under' the law the Courts have the authority to set aside the awards made by arbitrators on certain grounds such as that they are on matters not referred to arbitration or that the arbitrators had misconducted themselves or that there are errors apparent on the face of the award. But where the award is not open to any such objection, the Court has to pass a decree in terms of the award, and Under Section 17 of the Arbitration Act, an appeal lies against such a decree only on the ground that it is in excess of or not otherwise in accordance with the award. In other words, it is the decision of the arbitrator where it is not set aside that operates as the real adjudication binding on the parties and it is with a view to its enforcement that the Court is authorised to pass a decree in terms thereof. There is thus a sharp distinction between a decision which is pronounced by a Court in a cause which it hears on merits and one which is given by it in a proceeding for the filing of an award. The former is a judgment, decree or order rendered in the exercise of its normal jurisdiction as a Civil Court and that is appealable under the general law as for example Under Sections 95, 100, 104, 109 and 110 of the C.P.C. The latter is an adjudication of a private tribunal with the imprimatur of the Court stamped on it, and to the extent that the award is within the terms of the reference, it is final and not appealable'

17. An award passed could be set aside only on the grounds specified in Section 30 of the Act. If judgment has been entered on the award it can be assailed in appeal only on the grounds referred to earlier. Section 31 of the Act deals with jurisdiction of Courts and specifies the Courts competent to deal with matters relating to arbitration any awards. It has reduced the opportunities open to the parties to choose the forum, for the first application fixes the venue of the future proceedings as well. The Act prevents suits with respect to matters relating to arbitration and Section 32 states:

'Any party to an arbitration agreement or any person claiming under him desiring to challenge the existence or validity of an arbitration agreement or an award or to have the effect of either determined shall apply to the Court and the Court shall decide the question on affidavits;

Provided that where the Court deems it just and expedient it may set down the application for hearing on other evidence also, and it may pass such orders for discovery and particulars as it may do in a suit.'

The language of the former section is, no doubt, wide. It has been uniformly held that a suit to enforce an award will be incompetent. But the section appears at first sight to go further than this. It says that no suit shall be for a decision as to the existence of the award. Suppose for example in answer to a suit, the defendant were to set up a mythical award, it would be unreasonable and indeed a mockery of justice, if the Court were to be prevented from going into the question whether there is an award or not, but that the plaintiff should first be asked to go to the appropriate Court, obtain a declaration in the form of a negative relief, namely, that there is no award in existence and then come back to the Court to pursue the suit. To obviate that absurdity a more limited scope of Section 32 should be put. We consider that the word 'award' in Section 32 of the Act should be read as meaning an award which may be or can be filed under Section 14. This was the view taken by Subrahmanyam J. in Duraiswami v. Kistappa, AIR 1958 Mad 420. A non-existent award cannot come within that section.

But where there is a real award Sections 31 to 33 make it clear that no suit can be brought either to enforce or challenge it and that all proceedings with regard to the arbitration agreement or award have to be taken as provided in the Act, and before the Court indicated therein, vide Ratanji Virpal and Co., v. Bhirajlal Manilal, ILR (1942) Bom 452 : AIR 1942 Bom 101. In Moolchand Jothajee v. Rashid Jamshed Sons and Co., : AIR1946Mad346 it was held by this Court that a party to an arbitration award under the Indian Arbitration Act 1940 would not be entitled to enforce such an award by way of a suit. Sir Henry Lionel Leach C. J. observed:

'The Act of 1940 was intended to consolidate and amend the law of India relating to arbitration matters. The scheme of the Act is to prevent the parties to an arbitration agitating questions relating to the arbitration in any manner other than that provided by the Act. The suit which the appellants filed clearly raised the question with regard to the existence and validity of the award and such a suit is expressly barred Under Section 32.'

The foregoing observations would show that none of the parties to an arbitration agreement would be entitled to enforce the award or challenge the same in any proceedings other than those brought for the purpose and under the provisions of the enactment.

18. It is argued on behalf of the appellants that the Act has not the effect of altering the character of a private award, that an unfiled award will be as effective after the Act as it was before, to merge in itself the original cause of action and that the only effect of Sections 17 and 32 would be to deprive a party to the award of one among the two remedies previously available to him to enforce it, namely, the filing of a suit. Learned counsel seeks to derive support for his argument from the fact that an unfiled award will have to be registered and duly stamped if the terms thereof so required and that this would not be so if such an award is to have no legal effect. It is further argued that Section 32 will have the effect of preventing only a suit for enforcing the award and not a defence to a suit based on the original cause of action. Reliance was placed for this contention on the decision in ILR (1949) Mad 111 : AIR 1948 Mad 436.

19. We shall now consider the two lines of the argument. It is clear from the provisions of Section 32 of the Act as well as from the decision reported in : AIR1946Mad346 , that a private award will not furnish a fresh cause of action to sustain a suit. Indeed in ILR (1942) Bom 452 : AIR 1942 Bom 101, Chagla, J. (as he then was) observed :

'That a party cannot possibly be prejudiced by the existence of an award which has not been filed in Court.'

It will follow from the above that the principle on which an award was considered effective under the law as it stood prior to 1940, namely, the merger of the original cause of action in the award which furnished a fresh cause of action to the parties, and also of itself operating as equivalent to a judgment has no longer any validity. It cannot also be said that the original cause of action is satisfied by the mere passing of the award, for without filing it and obtaining a judgment thereon the party cannot enforce it. Secondly an award by an arbitrator after the Act is but a stage in a scheme formulated therein for the adjudication of disputes by a private tribunal. The confirmation of the same by a judgment of Court is essential in order to render it an effective adjudication of the dispute. The mere fact that an unfiled award might have to be registered or stamped cannot be decisive of its effectiveness, as stamping and registration have to be done on account of statutory provisions and not because that it has any force by itself.

In ILR (1949) Mad 111 : AIR 1948 Mad 436, the learned Judges held that although Section 32 used a somewhat wider language in restricting the right of suit, it should be read as co-extensive with the new remedy provided under the Act. As the remedy by way of an application under Section 33 was given to a person desirous of challenging the existence or the validity of the award or to have its effect determined, the provisions of Section 32 will have to be read only as precluding a suit praying for the relief for which an application is provided Under Section 33. In that view the learned Judges held that a defence which involved a decision as to the existence, effect or validity of an award could not be prohibited.

It is no doubt an accepted principle of statutory, interpretation that when a right of suit is taken away and the remedy by way of application is substituted, the prohibition in regard to the filing of the suit should be read as co-extensive with the remedy that is provided. But at the same time a statute which is in the form of a code should be construed as exhaustive on the subject dealt with. In interpreting the provisions contained therein, regard should be had to the intention of the Legislature enacting it. For that purpose its expressed words should be given full effect, consistent with the general scheme of the Act.

As we have pointed out earlier, the Arbitration Act, 1940 enacts an integrated procedure for reference to arbitration, for obtaining an award and for the enforcement of the same providing at the same time a cheap and expeditious remedy for resolving the controversies arising during and further arbitration proceedings. The distinction between a suit and defence is not warranted by the terms of the Act. The inconvenience of adopting the rule laid down in ILR (1949) Mad 111 : AIR 1948 Mad 436, will be obvious by the following illustration. If the defendant were to rely upon an unfiled award for his defence, it should be open to the plaintiff to show to the Court the invalidating circumstances respecting the award for no Court can allow a party to plead the award and at the same time preclude the other party, namely, the plaintiff, from showing that the award was not valid. In such a case the Court will necessarily have to embark upon an enquiry whether the award was valid or not, a procedure which is expressly prohibited by Section 32 of the Act.

As we said, the distinction between a case of forcing the award by a suit and of relying upon it by way of defence besides being artificial is not justified by the terms of Section 32. Indeed the acceptance of such a distinction will facilitate evasion of the specific provisions contained in the statute. For example, take a case where there are a number of parties to an arbitration award. Suppose one of them is anxious to obtain relief on the basis of the award after the period for filing the same had expired; he would be able to do that by merely persuading one of the other parties to the arbitration who is colluding with him, to set up the award by way of defence even though he might not be able to do so himself in the suit and thus practically obtain enforcement of the award by a suit in the very teeth of the provisions contained in Section 32. Again, it is a well-settled principle of law that in partition suits every co-sharer is in the position of a plaintiff. To recognise that an unfiled award could be relied on in defence would only mean that the defendant who is in the position of the plaintiff in such a suit will be enabled to take advantage of it. That however is not the intention of the Legislature. We have already referred to the judgment of this Court in ILR (1946) Mad 840 : AIR 1946 Mad 346, where it was held and the prohibition contained in Section 92 of the Act was against all parties to an action agitating questions otherwise than by means of a procedure prescribed by the Act. There is no hardship in such a view, for a defendant who wishes to rely upon the award could himself have applied for filing it and obtain judgment in terms thereof. His failure to do so should not enable him to take advantage of any unfiled award which under the terms of the Act is only a stage in the process of obtaining judgment and decree

20. We shall proceed to consider the cases decided by the other High Courts. In Sia Kishori v. Bhairavi Nandan, : AIR1953Pat42 , a Bench of the Patna High Court held by reason of Section 32 of the Arbitration Act an award on a private reference to arbitration would not be operative by its own force but that, it would become operative only on being made a rule of Court. This view was accepted in Lachhuman Singh v. Makar Singh, AIR 1954 Pat 27 where a question arose as to the availability of an unfiled award passed prior to the Act of 1940 as a defence to an action instituted later on. S. K. Das J. (as he then was) delivering the judgment of the Court was inclined to hold that it would be difficult to confine the words of Section 32 to the case of a plaint alone, as the latter part of the section was comprehensive enough to preclude any of the parties to the arbitration from agitating the question relating to the arbitration in any manner other than that provided by the Act. In a later case, however, in Government of India v. Jamunadhar, : AIR1960Pat19 , a Bench of the same High Court accepted the distinction made in ILR (1949) Mad 111 : AIR 1948 Mad 436. It does not appear from the judgment of the case that the view expressed by S. K. Das J. in AIR 1954 Pat 27 was brought to the notice of the judges; but the learned Judges have referred to the decision reported in : AIR1953Pat42 , and characterised the observation made therein as more or less an obiter.

21. The precise question as to the availability of an unfiled award as a defence to an action on the original cause of action came up for consideration before the Bombay High Court in Chandra Bhaga v. Bhikchand, : AIR1959Bom549 . The view taken in ILR (1949) Mad 111 : AIR 1948 Mad 436 was not accepted. The learned Judges held that an award will be effective only if a decree were obtained thereon; until it was made so effective it would not be capable of merging the original cause of action. Patel J. observed:

'What is barred is a suit in relation to the arbitration agreement and or the award. It has no reference whatsoever to what was the subject-matter of the award with regard to which there is no prohibition either express or implied and it would not make any difference whether or not the plaintiff mentioned in his plaint that there was an arbitration agreement and an award which was ineffective. It does not take into account the express provisions of Sections 31 and 32 which prohibit the determination of the existence, validity or effect of an award otherwise than under the Act. If the award is unfavourable to the plaintiff .......the defendant or resister then has an equal right to have it made a rule of the Court.'

The effect of this decision is that so long as there has been no merger of the original cause of action in the award, and that would be so when the award has not been made a rule of Court, the provisions of Section 32 of the Act will not have the effect of precluding a suit being filed on the former. In Pamandas v. Manickam Pillai, : AIR1960AP59 , a Full Bench of the Andhra Pradesh High Court took a similar view. The learned Judges were of the opinion that putting forward an unfiled award by way of defence would be tantamount to obtaining a declaration that there was a binding award; that would in effect contravene the provisions of Section 32 of the Act. It was also held that after the passing of the Indian Arbitration Act 1940 there could be a merger of the original cause of action only if the award were made a decree of Court. Firm Gulzarimal Gheesalal v. Firm Rameshchandra Radheshyam, , Kanhayalal v. Ramchandra, : AIR1959MP415 , and Nathulal v. Beharilal, AIR 1952 Nag 65, are cases where the plaintiff sought to enforce by a suit an unfiled award and it was held that such a suit was not maintainable. As in our opinion, there can be no distinct on between a plaintiff who relies on an award for obtaining a decree and defendant who wants to resist the suit relying or, it, the rule laid down in the cases referred to above should also apply to the present case. It would follow that the view taken in ILR (1949) Mad 111 : AIR 1948 Mad 436, that it would be competent for the defendant without any more to rely upon an unfiled award must be regarded as incorrect. So too, is the decision in : AIR1951Mad525 .

22. But we accept the latter decision of the same learned Judge in : AIR1951Mad458 . It follows that we cannot accept the decision of Ramaswami, J. in the unreported judgment in A. A. 0. No. 296 and C. R. P. No. 2228 of 1951 on the file of this Court What we have now stated is in accord with the judgment of Rajagopalan, J. in C. R. P. No. 2110 of 1951 (unreported). The result of the foregoing discussion is that an award made on a reference out of Court but which has not been filed into Court in accordance with the Act, and judgment obtained thereon, cannot ordinarily be put up as a defence to an action. Question No. 1 is answered accordingly.

23. But that does not mean that under no circumstances can an unfiled award be relied on as a defence to an action. If the terms of the award had been fully performed by one of the parties thereto it must certainly afford a good defence to an action on the original cause of action by the other party. In ILR (1949) Mad 111 : AIR 1948 Mad 436, the learned Judges accepted this principle; the judgment in : AIR1951Mad458 , follows the same view. We have referred at an earlier stage that the arbitration proceedings are the result of a contract between the parties, each party agreeing that he would perform what is decided by the arbitrator. If in pursuance of the award a party had done everything he was obliged to do under it, he should be deemed to have fulfilled his part of the contract, and there would thereby be accord and satisfaction in respect of the original cause of action. An accord exists if the two minds agree as to how their obligations inter se should be discharged. The person under such obligation having discharged in the manner contemplated there will be a satisfaction. Therefore if there had been a performance 'in its entirety of the obligations imposed on a party by an award, there would be discharge of the original claim or cause of action. We therefore answer the second question in the affirmative.

24. The next question, namely, whether an unfiled award if later accepted by the parties thereto would constitute a fresh cause of action presents no difficulty as the same has been decided by the Supreme Court in Kashinathsa v. Narasingasa, : [1981]2SCR600 . In that case, there was an invalid award. Subsequently the parties accepted the arrangement contained in the award. The Supreme Court held that Section 32 of the Arbitration Act would be no bar to a defence on the basis of such acceptance. Shaft J. observed-

'It may be sufficient to observe that where an award made in arbitration out of Court is accepted by the parties and it is acted upon voluntarily and a suit is therefore sought to be filed by one of the parties ignoring the acts done in pursuance of the acceptance of the award, the defence that the suit is not maintainable is not founded en the plea that there is an award which bars the suit but that the parties have by mutual agreement settled the dispute and that the agreement and the subsequent actings of the parties are binding. By setting up a defence in the present case that there has been a division of the property and the parties have entered into possession of the properties allotted, defendant is not seeking to obtain a decision upon the existence, effect or validity of the award. He is merely seeking to set up the plea that the property was divided by consent of parties. Such a plea is in our judgment not precluded by anything contained in the Arbitration Act.'

We therefore answer the third question in the affirmative.

25. The learned District Judge has held that the award having been sent to the Court by the arbitrators the provisions of Article 173 of the Limitation Act will not preclude the filing of the award at this stage. There was some controversy before us whether it was the arbitrators that sent the award to the Court or the defendant himself produced it. But that matter can, in our opinion, be investigated hereafter. There can be no doubt that Article 178 of the Limitation Act would not apply for the filing of the award, if it were forwarded to the Court by the arbitrators for being filed. See Champalal v. Mst. Samrathbai, : [1960]2SCR810 . It is also now settled that an application to set aside an award will be maintainable only after the award comes into Court and not earlier and the time for filing such an application would be reckoned only thereafter. The decision in ILR (1942) Bom 452 : AIR 1942 Born 101, and that of the Supreme Court in Kumbha Mawji V. Dominion of India, : [1953]4SCR878 , make this clear. If, therefore, an sward has been sent to the Court by the arbitrators, it would be competent for it after following the prescribed procedure, to have it filed. The plaintiffs/respondents 1 and 2 will however have an opportunity to file an appropriate application within the time limited by law to have it set aside if they so desire and if according to them the award is invalid. The fourth question is answered in the affirmative.

26. The order of remand passed by the lower appellate Court is therefore sustained with a direction to the trial Court to dispose of the suit in the light of the observations contained in this judgment. There will be no order as to costs.


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