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ThA. Duraiswami Naidu Vs. Krishnappa Naidu - Court Judgment

LegalCrystal Citation
SubjectArbitration
CourtChennai High Court
Decided On
Reported in(1958)1MLJ324
AppellantThA. Duraiswami Naidu
RespondentKrishnappa Naidu
Cases ReferredBai Narbadabai v. Natvar Lal Chunilal
Excerpt:
- .....a and b. but the agreement endorsed on the award can. section 32 does not, in my opinion, bar a suit to enforce the agreement endorsed on the ' award '. the prohibition enacted in section 32 cannot be invoked except where the arbitration agreement or the award forms the basis of the relief claimed in the suit. the prohibition cannot, in particular, be invoked where, on the allegations made in the plaint, the plaintiff's right to relief is not to any extent dependent upon the validity of the alleged arbitration agreement or award.12. in support of the position that the appellant's suit was barred by section 32, the learned district judge relied on the ruling in moolchand jothajee v. rashid jamshed sons and co. : air1946mad346 . the plaintiff's claim in that suit was based on the.....
Judgment:

Subrahmanyam, J.

1. The plaintiff in O.S. No. 290 of 1953 on the file of the District Munsif, Ranipet, is the appellant in this Second Appeal.

2. The suit was for specific performance of a contract of sale entered into by the defendant-respondent and for possession of the property agreed to be conveyed. The plaintiff alleged that on 25th December, 1949, he and the defendant entered into an agreement that, in consideration of the plaintiff giving up certain debts owing to him by the defendant and his father, and the plaintiff conveying to the defendant a half share in a site, the defendant would convey the suit property to the plaintiff by a registered sale deed before 12th June, 1950.

3. The defendant denied the alleged agreement. He pleaded that the plaintiff had taken his signature fraudulently .on some documents.

4. During trial, the agreement alleged in the plaint was sought to be proved by filing the arbitration agreement, Exhibit A-1, a decision or award by some of the arbitrators, Exhibit A-1 (a) and the endorsement made on that decision by the plaintiff and the defendant.

5. The learned District Munsif found that the defendant's signatures which appeared in the arbitration agreement and in the endorsement made on the award were taken under duress, without disclosing to him the contents of those documents. The District Munsif held that the agreement set up in the plaint was neither true nor valid and dismissed the suit.

6. In appeal, the learned District Judge held that it was not necessary to go into the question whether the signatures of the respondent appearing in the arbitration agreement and in the endorsement on the award had been taken in circumstances of duress and fraud. Issue 4 framed in the suit was, whether the suit as framed was maintainable That was the only issue which, according to the learned Judge, needed consideration. He said that, even assuming that the arbitration agreement' and the award were valid and binding on both parties, the suit was barred by Section 32 of the Indian Arbitration Act. For that proposition, he relied on Moolchand jothajee v. Rashid Jamshed Sons and Co : AIR1946Mad346 . It was strenuously urged before him that the plaintiff was not seeking relief on the basis of the arbitration agreement, or the award and that the relief sought was enforcement of the agreement that had been endorsed on the decision or the award. In regard to that argument, namely, that the endorsement made on the ' award ' formed a separate, enforceable contract, which was not hit at by the provisions of Section 32, the learned Judge said that the endorsement created no independent rights or obligations and that any attempt to enforce that endorsement would necessarily bring into question the existence of the award, the terms of the award and their validity, and that an investigation of those questions was barred by Section 32 of the Indian Arbitration Act. In that view, the learned appellate Judge held that the suit was not maintainable and dismissed the appeal.

7. The point for determination is whether the suit is barred under Section 32 of the Indian Arbitration Act.

Section 32 of the Arbitration Act enacts:

Notwithstanding any law for the time being in force, no suit shall lie on any ground whatsoever for a decision upon the existence, effect or validity of an arbitration agreement or award.

Section 2(a) of the Act states that an award means an arbitration award. To ascertain what an arbitration award is, we should turn to Section 14 of the Act. It says:

(1) where the arbitrators or umpire have made their award, they shall sign it and shall give notice in writing to the parties of the making and signing thereof....(2) The arbitrators or umpire shall, at the request of any party to the arbitration agreement or any person claiming under such party or if so directed by the Court and upon payment of the fees and charges due in respect of the arbitration and award and of the costs and charges of filing the award, cause the award or assigned copy of it, together with any depositions and documents which may have been taken and proved before them, to be filed in Court....

8. The Court may, under Section 17 of the Act, pronounce judgment and pass a decree in accordance with the award.

9. The word ' award ' in Section 32, has in my opinion, to be read as referring only to an award which may be filed in Court under Section 14 and in accordance with which a decree may be passed under, Section 17. Section 32 can be invoked in regard only to a suit in which an award, which may be filed in Court under Section 14, forms the basis of the relief claimed.

10. Let us take a case where an award is validly made by arbitrators appointed under an arbitration agreement. Let us suppose that, after the award is made, the parties to the agreement consider the award not completely satisfactory, and endorse on the award an agreement that they would abide by the terms of the award, subject to the modifications set out in that endorsement. If, thereafter, one of the parties resiles from the agreement endorsed on the award, would a suit lie to enforce the agreement The answer is clearly in the affirmative. The award itself cannot be filed in Court, because it has been superseded by the agreement endorsed on the award. But the award would have to be proved for the purpose of proving the terms of the agreement. The agreement endorsed on the award would be un-understandable, without the award being read. The suit, in such a case, is based on the agreement endorsed on the award, and the validity of the plaintiff's claim would in no way be dependent on the validity of the award. To a case of that kind, the prohibition enacted under Section 32 of the Act can have no application.

11. Let us take a case where, by an arbitration agreement signed by A and B three persons, X, Y and Z are appointed arbitrators to decide certain disputes between them. Let us suppose that A and B write to X, Y and Z telling them that they might decide the disputes on the basis of the documents sent to them and that no further evidence need be taken and that no oral hearing is necessary. Let us suppose further that Z finds it inconvenient to act as arbitrator, and that X and T alone in good faith act as arbitrators (without the arbitration agreement being modified so as to constitute them the sole arbitrators) to the exclusion of Z, and that they pass an award and send copies of it to A and B. As an award, the decision is of no effect. But let us suppose that the decision given by X and Y gives complete satisfaction to A and B, and that they, knowing that the decision is void as an award make an endorsement on the 'award' that they would abide by it and act in accordance with its terms. The 'award' of its own force cannot give rise to any rights or obligations as between A and B. But the agreement endorsed on the award can. Section 32 does not, in my opinion, bar a suit to enforce the agreement endorsed on the ' award '. The prohibition enacted in Section 32 cannot be invoked except where the arbitration agreement or the award forms the basis of the relief claimed in the suit. The prohibition cannot, in particular, be invoked where, on the allegations made in the plaint, the plaintiff's right to relief is not to any extent dependent upon the validity of the alleged arbitration agreement or award.

12. In support of the position that the appellant's suit was barred by Section 32, the learned District Judge relied on the ruling in Moolchand Jothajee v. Rashid Jamshed Sons and Co. : AIR1946Mad346 . The plaintiff's claim in that suit was based on the allegation that the award had become final, conclusive and binding on the parties. They asked for a decree in terms of the award. There can be no doubt, if I may say so with great respect, that a suit of that kind is barred by Section 32.

13. Similarly in Bai Narbadabai v. Natvar Lal Chunilal : AIR1953Bom386 it was conceded that the suit was filed to enforce an award (see page 859) of the Report. On that statement of the plaintiff's case the learned Chief Justice held that the suit was clearly not a suit to enforce an agreement which was in any way independent of the award.

14. In the case before us, the suit was not to enforce an award. It was to enforce an agreement whose terms had to be ascertained by reading a document which was called an award. The arbitration agreement, Exhibit A-1, purports to refer the disputes between the parties to the arbitration of thirteen persons including the writer, Doraisami. The arbitration agreement says that the parties would be bound by any decision which might be given by the arbitrators unanimously. The arbitrators, who have signed the decision, Exhibit A-1(a) are ten including the writer, Doraisami. The decision, therefore, was not an award capable of being filed under Section 14, or giving rise to rights or obligations as between the parties to the agreement. On that decision or ' award ' the parties made an endorsement that they with one mind accepted the decision. If the defendant signed that endorsement freely and voluntarily consenting to the terms of the document referred to as the 'decision' and knowing that it was not enforceable as an award, then, the suit to enforce that agreement would be maintainable. On the questions whether that endorsement was made by the defendant freely and voluntarily and with full knowledge of all the relevant facts, and whether the Court should exercise its discretion under the Specific Relief Act to enforce the agreement, no findings have been given by the learned District Judge.

15. The judgment and decree of the District Judge are set aside. He will restore the appeal to its original number on his file and dispose of it afresh in the light of the observations made above. The Court-fee paid on the memorandum of Second Appeal will be refunded to the appellant. The respondent will pay the appellant the rest of his costs.

Leave granted.


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