1. This appeal has been directed to be posted before a Full Bench of three Judges, because the learned Judges, Happell and Govindarajachari, JJ., who heard it in the first instance, were of the opinion that there was a conflict between the decisions of two division benches of this Court in Bala Pattabhirama Chetti v. Seetharama Chetti I.L.R. (1894) Mad. 498 and Muthyala Narayanappa v. Muthyala Ramachandrappa (1930) 60 M.L.J. 676 : I.L.R. 54 Mad. 469 and that the view taken in the latter decision of the judgment of the Privy Council in Sadiq Husain v. Nazir Begum (1911) 21 M.L.J. 1151 : 1911 L.R. 38 IndAp181 : I.L.R. All 743 seemed to require reconsideration.
2. The appellant Satyanarayanamurthi and Krishnamurthi were brothers. The respondents are the legal representatives of Krishnamurthi who died pendente life. The appellant and Krishnamurthi executed, on March 25, I935, a muchilika agreeing to refer certain disputes between them, relating to their joint cultivation and to a business carried on by them in partnership with a stranger, to the decision of an arbitrator, one Pydah Ramakrishnayya (Ex. P-3). It is common ground that this arbitrator did not make any award. On 7th October, 1938, the two brothers along with another brother named Subba Rao executed another muchilika in favour of a different arbitrator, one Nalam Ramalingayya, referring to him disputes relating to the partition of joint family properties as well as the disputes between the two brothers, viz., the appellant and Krishnamurthi (Ex. P-2). Ramalingayya made an award in respect of the partition of joint family properties on February 28th, 1942, but none in respect of the disputes between the two brothers. On 7th August, 1942, Krishnamuthi filed in the Court of the Subordinate Judge, Coconada, an application under paragraph 17 of Schedule II to the Civil Procedure Code. He prayed that the muchilika, dated 25th March, 1935, in favour of Ramakrishnayya and the muchilika, dated 7th October, 1938, in favour of Ramalingayya be filed into Gourt, and an order of reference be made to the said arbitrators or any other arbitrator who may be chosen by the parties. The application was registered and numbered as a suit, O.S. No. 34 of 1942. On 4th January, 1943, the Subordinate Judge rejected the plaint for non-payment of deficit court-fee. Krishnamurthi died and the present respondents, as his legal representatives, filed an appeal to the District Court, East Godavari. The appeal was dismissed on 21st October, 1944. There was a second appeal to this Court, No. 444 of 1945, which was allowed on 13 th November, 1945 and the suit was remanded to the Court of the Subordinate Judge for disposal on the merits.
3. Meanwhile, on 19th July, 1943, Ramalingayya had died. At the hearing of the suit, after remand, an objection was raised on behalf of the appellant that the Court had no power to appoint a new arbitrator in the place of the deceased Ramalingayya. This objection was upheld and the suit dismissed. On appeal, the learned District Judge, East Godavari, set aside the dismissal of the suit, directed the reference to arbitration to be filed and the suit restored to the file and proceeded with. The learned Judge indicated that Ramakrishnayya might be appointed arbitrator or a new arbitrator or arbitrators who may be chosen by both the parties or the Court may itself appoint an arbitrator. The defendant appeals against this order of the learned District Judge.
4. The question for decision can be formulated as follows: Where two persons agree that the differences between them shall be referred to the arbitration of a named individual and that individual dies before an award is made, has the Court power to appoint another arbitrator in his place? This question must be answered with reference to the provisions of Schedule II of the Civil Procedure Code, 1908, which have been repeated by the Indian Arbitration Act, 1940. Paragraphs 1 to 16 of that schedule relate to arbitration in suits. Paragraphs 17 to 19 relate to agreements to refer made when no suit is pending, and their enforcement by the Court. Paragraphs 20 and 21 deal with arbitration without the intervention of a Court.
5. Paragraph 17 in so far as it is material for the purpose of this case runs as follows:
(1) Where any persons agree in writing that any difference between them shall be referred to arbitration, the parties to the agreement, or any of them, may apply to any Court having jurisdiction in the matter to which the agreement relates, that the agreement be filed in Court.
(4) Where no sufficient cause is shown, the Court shall order the agreement to be filed, and shall make an order of reference to the arbitrator appointed in accordance with the provisions of the agreement or if there is no such provision and the parties cannot agree, the Court may appoint an arbitrator.
6. Paragraph 19 is next relevant. It says:
The foregoing provisions, so far as they are consistent with any agreement filed under paragraph 17, shall be applicable to all proceedings under the order of reference made by the Court under that paragraph, and to the award and to the decree following thereon.
7. Of such ' foregoing provisions ', the only one that needs mention is the provision contained in paragraph 5. It provides, inter alia, that
where an arbitrator dies or refuses or neglects to act or becomes incapable of acting or leaves British India without a prospect of early return, on the application of a party the Court may appoint an arbitrator.
8. I am clearly of opinion that when the agreement provides for arbitration by named arbitrator or arbitrators, and such arbitrator or any one of such arbitrators is not available on account of death, refusal to act or other reasons before an application is made under paragraph 17, the Court has no power to appoint an arbitrator in his place. The language of paragraph 17, sub-paragraph (4) renders such a conclusion inevitable. It is only if there is no provision in the agreement for the appointment of an arbitrator and the parties cannot agree, that the Court has power to appoint an arbitrator. It follows a fortiori that paragraph 19 will not come into play because it refers to an agreement ' filed under paragraph 17.' This is the view taken in Salig Ram Bhagat Ram v. Kishan Singh Sant Ram I.L.R. (1938) Lah. 23 and Tara Prasad Baliasey v. Baijnath Prasad Baliasey I.L.R. (1940) Pat. 927.
9. This case, however, cannot be disposed of on this ground because when the application under paragraph 17 was filed, Ramalingayya, the arbitrator appointed under the agreement, was alive. He died nearly a year after the institution of the application, i.e., on 19th July, 1943. According to the decision of this Court in S.A. No. 444 of 1945, the application, registered and numbered as a suit, was wrongly rejected by the Subordinate judge. It is a well-established rule that no party should suffer on account of the mistake of the Court. It has now been found that there was no sufficient cause shown by the appellant why the agreement should not have been filed on the date on which the application was made. The Court was therefore bound to make an order of reference to the arbitrator appointed in accordance with the provisions of the agreement, viz., Ramalingayya. This case should therefore be decided on the footing that there was a valid order of reference to him and thereafter he died.
10. The question, therefore, is whether the provisions in paragraph 5 for the appointment of an arbitrator by Court in the place of a deceased arbitrator can be held to be applicable to the case. This depends ultimately on the construction of the particular agreement sought to be filed. This is Ex. P-2. It is executed in favour of Nalam Ramalingayya and runs as follows:
Since partition of the moveable and immoveable properties belonging to our family has not been settled, we are disputing. Further, the disputes relating to the trade and cultivation carried on jointly by Satyanarayanamurthi and Krishnamurthi, out of us, have not been settled. Hence, assuring you that all of us shall abide by the award given by you, that we shall all abide by your award as final, this panchayati muchilika has been executed with the consent of all of us.
11. The question resolves itself into a question of construction, viz., whether the provisions in paragraph 5 for the appointment of an arbitrator in the place of the arbitrator appointed under the agreement is consistent with the agreement. I consider that it is not. It is not necessary to decide whether there is any subtle distinction between the words ' so far as they are consistent with ' in paragraph 19 and the words ' so far as they are not inconsistent with ' which occur in the corresponding Section 326 of the Code of 1859. Muthuswami Aiyar, J., in Bala Pattabhirama Chetti v. Seetharama Chetti I.L.R. (1894) Mad. 498 evidently was of the view that there was no distinction and the words mean ' in the absence of anything to the contrary '. If at all, the words 'so far as they are consistent with' emphasise the importance to be attached to the provisions of the agreement which should be the governing factor. I am of the opinion that if the intention of the parties as expressed in the muchilika in this case is to be bound by the decision of a particular arbitrator, it follows that any provision which enables the Court to appoint another arbitrator would not be consistent with the agreement. The choice of a particular arbitrator by the parties is the result of personal confidence and trust in his knowledge, character and qualification. I am not able to hold that the question of the personnel of the arbitrator is a subsidiary and incidental matter. An agreement to refer to arbitration under paragraph 1 when a suit is pending stands on a different footing. That paragraph in general terms provides that where in any suit all the parties interested agree that any matter in difference between them shall be referred to arbitration, they may at any time before judgment is pronounced apply to the Court for an order of reference. The parties, when they so agree, are aware that the provisions in paragraphs 2 to 16 of the second schedule would apply to the pro-ceedings following such an agreement. On the other hand, when parties merely agree to refer the disputes between them to arbitration, it cannot be said that they contemplate at that stage proceedings in Court to enforce it. Without the intervention of Court, an award can be made and it is only thereafter that a person interested in the award may apply to the Court to have the award filed. The parties must be presumed to intend that the terms of the agreement would primarily govern the arbitration.
12. There are cases in which the agreement may disclose a general intention to have the disputes decided by arbitration without emphasis on the particular individual or individuals as arbitrators. As observed by Henderson, J., in Rajani Kanta Karati v. Panchanan Karati I.L.R. (1937) Cal. 434
An agreement to have a dispute settled by one or more individuals is one thing; an agreement to go to arbitration rather than to litigate in the Courts is quite another.
13. Where by agreement parties decide to settle disputes by the arbitration of ascertained persons without the intervention of the Court, the Court has no power under paragraph 5 to direct the appointment of a new arbitrator in the place of one declining to act.
It is now necessary to refer to the two decisions of this Court between which, the learned Judges, who made the order referring the case to the Full Bench, thought there was a conflict. In my opinion, on a close analysis of the facts of the two cases, there is no irreconcilable conflict between the two decisions. In Bala Pattabhirama Chetti v. Seetharama Chetti I.L.R. (1937) Cal. 434
An agreement to have a dispute settled by one or more individuals is one thing; an agreement to go to arbitration rather than to litigate in the Courts is quite another.
Where by agreement parties decide to settle disputes by the arbitration of ascertained persons without the intervention of the Court, the Court has no power under paragraph 5 to direct the appointment of a new arbitrator in the place of one declining to act.
14. It is now necessary to refer to the two decisions of this Court between which, the learned Judges, who made the order referring the case to the Full Bench, thought there was a conflict. In my opinion, on a close analysis of the facts of the two cases, there is no irreconcilable conflict between the two decisions. In Bala Pattabhirama Chetti v. Seetharama Chetti I.L.R. (1894) Mad. 498 three brothers entered into an agreement referring the matters in difference between them to two named arbitrators and an umpire for decision. The agreement was filed in the District Court of Coimbatore under Section 523 of the Civil Procedure Code, 1882, which corresponds to paragraph 17 of the second schedule, and the Judge made an order of reference in accordance therewith. But one of the two arbitrators refused to act as arbitrator and the District Judge appointed another in his place under Section 510 of the Code of 1882, corresponding to paragraph 5 of Schedule II. It was urged that as one of the arbitrators refused to act, the agreement became inoperative. The learned Judges, Muthuswami Aiyar and Best, JJ., negatived this contention. In Muthyala Narayanappa v. Muthyala Ramachandrappa (1930)60 M.L.J. 676 : I.L.R. 54 Mad. 469 the facts were entirely different. There, the parties agreed to have their disputes relating to the partition settled by three specified arbitrators. During the course of arbitration proceedings, one of the arbitrators died. Thereafter, one of the parties filed a suit for enforcement of the arbitration and for the appointment of a fresh arbitrator in the place of the deceased one. It was held by Ananthakrishna Aiyar and Sundaram Chetti, JJ., that the agreement became inoperative and came to an end on the death of the arbitrator and it could not thereafter be filed in Court under paragraph 17 of Schedule II of the Civil Procedure Code and that paragraph 19 would apply only after the order of reference had been made under paragraph 17. It is clear that while, in the earlier case, the appointment of a new arbitrator was after the order of reference had been made, in the later case the arbitrator died before an application under paragraph 17 was made to the Court. There is therefore no conflict between he actual decisions in the two cases.
15. There are several observations in the course of the judgment of the two learned Judges in Narayanapppa's case (1930) 60 M.L.J. 676 : I.L.R. 54 Mad. 469 which indicate that they were not in agreement with the view taken by the learned Judges in Bala Pattabhirama Chetti v. Seetharama Chetti I.L.R. (1894) Mad. 498 as to the effect of the words ' so far as they are consistent with any agreement so filed ' in paragraph 19 in regard to an agreement to refer to the arbitration of specified person or persons. Ananthakrishna Aiyar, J., says at page 478,
As we construe the agreement before us, the provisions of the second schedule are not consistent with the agreement regarding the appointment of fresh arbitrators by Court. The agreement was to refer to the arbitration of three specified persons. There is no provision as to what is to happen in case any of the three died.
16. Sundaram Chetti, J., at page 485 observes,
If...the parties wanted to abide by the decision of all the three specified arbitrators, any reference made by the Court to two of them only, or after substituting a new arbitrator in the place of one who subsequently died, would not be valid as it would not be consistent with the provisions of the agreement.
17. I respectfully agree with these observations. On a construction of the agreement in question in this case, I am of the opinion that the provisions in paragraph 5 for the appointment by Court of a new arbitrator would not be consistent with the agreement. The lower appellate Court erred in directing a new arbitrator to be appointed.
18. It only remains to consider the ruling of the Judicial Committee in Sadiq Hussain v. Nazir Begum (1911) 21 M.L.J. 1151 : 1911 L.R. 38 IndAp 181 : I.L.R. 33 All. 743 (P.C.). In that case, there was a suit for the administration of the estate of Aga Hasan Khan which was settled by a compromise in terms of which a decree was made. The terms of the decree provided for the allocation of properties between the parties to be made by arbitrators nominated by the parties. The matters were referred to the arbitrators. But one of them refused to act. The District Judge, in the exercise of his discretion under Section 510 of the Code superseded the arbitration and himself determined the matters submitted to the arbitrators. It was held by the Judicial Committee that the District Judge should, under Section 510, have appointed a new arbitrator, which he had power to do notwithstanding that the arbitrator refusing to act had not first consented to do so. I agree with Ananthakrishna Aiyar and Sundaram Chetti, JJ., that all that was decided in that case was that the expression ' refusal to act ' includes the case where an arbitrator never accepted the arbitration and is not confined to the case of an arbitrator accepting the arbitration but subsequently refusing to act. A decree had been passed by Court on a compromise which was to be worked out by arbitrators. Substantially, there was an order of reference by Court on the agreement of parties. I do not think any assistance can be derived from this decision in deciding the present case; nor do I think that the view taken by the learned Judges in Muthyala Narayanappa v. Muthyala Ramachandrappa (1930) 60 M.L.J. 676 : I.L.R. 54 Mad. 469 of this decision of the Judicial Committee requires reconsideration.
19. In the result, the appeal is allowed and the suit dismissed with costs throughout.
Frederick William Gentle, C.J.
20. I agree and have nothing to add.
Yahya Ali, J.
21. I agree.