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Ramaswami Chettiar Vs. Venkatarama Iyer and ors. - Court Judgment

LegalCrystal Citation
Decided On
Reported in91Ind.Cas.745
AppellantRamaswami Chettiar
RespondentVenkatarama Iyer and ors.
Cases ReferredMerali Visram v. Sheriff Devji
civil procedure code (act v of 1908), schedule ii, paras. 14, 15 - arbitration--power conferred on arbitrators to sell property--rules for conduct of sale, power to make--dispute as to interpretation of rules--arbitrators, whether entitled to adjudicate on dispute--misconduct--award made without jurisdiction, validity of--procedure--award, whether must be remitted to arbitrators. - .....nos. 4 and 6 held one share in the business among themselves and that, in objecting to the re-sale, plaintiffs nos. 5 and 6 associated themselves, with the 4th plaintiff, see ex. j. one of the arbitrators examined as r.w. no. 6 before the district munsif on this point said, 'none of the parties requested us to collect the damages from ramsami chettiar and his brother and nephew, plaintiffs nos. 4 to 6. we did not question ramswami chettiar and his people why damages should not be allowed against them. there was no enquiry about the matter. as ramaswami, kesava and govindan, that is, plaintiffs nos. 4 to 6 are members of the same family and as they were doing everything about the mill together we decreed damages against the last two also. we did not enquire whether they were.....

1. Those two civil revision petitions are presented against the order of the District Munsif of Mayavaram confirming an award in the matters in dispute in O.S. No. 505 of 1919 on his file, dismissing petitioners objections and granting the respondents a decree in accordance therewith. The petitioners challenge the order on various grounds, the chief contention being that the arbitrators decided two matters beyond the scope of the reference and, therefore, beyond their jurisdiction, and, therefore, the lower Court, in accepting their decision on these points and incorporating it in its decree, has exceeded its jurisdiction. The arbitration was in the matter of the dissolution of partnership between the six plaintiffs in the suit and the defendants, who were jointly working a mill concern. The reference to arbitration, Ex. A, gave the arbitrators authority, inter alia, to sell the property, moveable and immoveable, by public auction to the highest bidder, whether he be a partner or a stranger, to collect the sale-proceeds and to distribute them among the partners according to the interests they had in the concern. The arbitrators were also to sell book debts and out standings, but among the partners only. The final amounts due to the various partners were then to be settled and adjusted with reference to any liability incurred by any partner who may have been a successful bidder at any of the sales. The arbitrators held a public sale of the mill itself and its machinery on 30th May 1920 and they were knocked down to the 4th plaintiff, one of the petitioners, for Rs. 28,000. One of the conditions of the sale, see Ex. D, was that the bidders should deposit Rs. 1,000 as soon as the sale was knocked down. The 4th plaintiff was able to deposit only Rs. 500. Under a further condition, any bidder who thus made default in. paying his deposit, had to run the risk of a re-sale, his own sale being cancelled and he being responsible for any loss arising out of the re-sale. Accordingly a re-sale was held on the same terms on 19th July 1920, at which the highest bidder was one M.K.V. Kandasami Piilai for Rs. 20,000, see. Ex. U. He had deposited Rs. 100 before bidding and before the sale was closed was asked to pay up the balance of Rs. 900 to make up the initial deposit of Rs. 1000. This was prima facie a clear breach of the rules. He went away saying that he had no money. The property was, therefore, not knocked down to him but was again put up to auction, and this time one Ramachandra Iyer bought it for Rs. 14,950. The arbitrators in their award have taken Rs. 14,950 as the sale-proceeds and, in their adjustment, have debited plaintiffs Nos. 4 to 6, the present petitioners, with the difference between that figure and Rs. 28,000, the amount for which the property was knocked down to 4th plaintiff at the first sale.

2. Three points are hereon raised by the petitioners: first, that the arbitrators had no jurisdiction to break their own rules of sale and refuse to knock down the 2nd sale to Kandasami Pillai, because he had not paid up the full Rs. 1,000 and thus make petitioners responsible for a deficit of Rs. 28,000 minus Rs. 14,950 instead of Rs. 28,000 minus Rs. 20,000 secondly, that the arbitrators had no jurisdiction to adjust this deficit in calculating the amounts due to each partner; and thirdly, that, in any case, they had no jurisdiction to debit the shares of plaintiffs Nos. 5, and 6 with any portion of this deficit. We are of opinion that all these points are valid. The reference, Ex. A, empowers the arbitrators to sell and carry over to the general adjustment the sale-proceeds. The power to sell would, no doubt, naturally carry with it the power to make rules for the conduct of the sale and such rules, embodied in Ex. D and subscribed to by the bidders, would, in the case of such parties to the reference as subscribed to these rules, extend to the arbitrators authority to sell according to these rules, but would not extend to them any power to act outside these rules, or, and this is the important point, any power to decide in a case of controversy whether or not these rules had been complied with. Neither the terms of the reference nor the terms of the sale imply any consent by the parties to submit to the decision, of the arbitrators on any controversy regarding the arbitrator's own conduct of the sales or re-sales, and such consent cannot be considered to be inherent in a consent to have the sale or re-sale conducted according to the rules laid down by the arbitrators. Cine would require a very definite and specific term in the reference before concluding that the parties to it agreed to be bound, in a matter of the arbitrator's own conduct of the sale, by the arbitrators' own decision. We are clear that the arbitrators, in deciding that there had been no sale to Kandaswami Pillai and that, therefore, the petitioners were liable for the difference between Rs. 28,000 and Rs. 14,950, were acting outside the scope of their reference.

3. As to the second point, the reference itself contains no provision for adjusting the deficit on a resale against a partner. If it is within the scope of the arbitrators' jurisdiction, it can only be so under the rules of sale consented to by the bidders and would only bind the subscribers to it. Now, the 6th plaintiff did not subscribe to Ex. D at all, and so, it cannot bind him. The 4th and 5th plaintiffs subscribed to a condition in Ex D that 'for the loss aiding from the re-sale we will be responsible,' and again that 'in case the plaintiff in the said suit buys at the auction, we agree to pay the remaining amount out of the remaining sum that ought to be paid excluding the share amount that is due for the balance according to the terms of the agreement'. But neither of these conditions implies to our minds any surrender by the partner subscribers of the right possessed by them, as much as by stranger subscribers to have the opportunity of challenging the arbitrators' conduct in the matter of re-sale and contending that the amount fixed by them as a deficit on the re-sale was not owing at all or was owing only in part. None of the documents concerned with the reference and the sale draws any distinction in this matter of a possible deficit on a re-sale between the position of the partner and that of the stranger-purchaser and, therefore, the arbitrators have no greater-power of dealing with such deficits in the case of a partner than they have in the case of a stranger. On this point we have the admission of one of the arbitrators himself R.W. No. 3 that 'it does not appear from the reference petition that we can award damages but we thought we had such power. The parties did not tell us to award damages against this or that person. We did what we thought proper. If any stranger was the last bidder in the first sale of the mill and he had made default we would have written in the award that the said bidder was liable to pay damages and that the parties should file a suit against him to recover that amount'. It seems clear from that statement that the arbitrators themselves recognised the true position and that they had exceeded their jurisdiction in thus awarding damages.

4. As to the third point, namely, debiting the shares of the plaintiffs Nos. 5 and 6 with a portion of this deficit, their lack of jurisdiction seems to be still more obvious. As the arbitrators cannot enforce in these proceedings the collection of the deficit from the purchaser, 4th plaintiff, still less can they enforce it against the plaintiffs Nos. 5 and 6 who were not purchasers at all. The only reason put forward by them is that plaintiffs Nos. 4 and 6 held one share in the business among themselves and that, in objecting to the re-sale, plaintiffs Nos. 5 and 6 associated themselves, with the 4th plaintiff, see Ex. J. One of the arbitrators examined as R.W. No. 6 before the District Munsif on this point said, 'None of the parties requested us to collect the damages from Ramsami Chettiar and his brother and nephew, plaintiffs Nos. 4 to 6. We did not question Ramswami Chettiar and his people why damages should not be allowed against them. There was no enquiry about the matter. As Ramaswami, Kesava and Govindan, that is, plaintiffs Nos. 4 to 6 are members of the same family and as they were doing everything about the mill together we decreed damages against the last two also. We did not enquire whether they were divided', which amounts merely to saying that the arbitrators believed among themselves that the 4th plaintiff was binding also for plaintiffs Nos. 5 and 6; but as to the grounds for their belief their statements are particularly vague. Even if the reference permitted, which we doubt, the arbitrators to make a roving enquiry as to who was the real purchaser in the final sale, it certainly does not authorise them to make such an enquiry as to who was the real purchaser at a sale, subsequently cancelled, and therefore, not a sale at which 'sale proceeds' available for distribution by the arbitrators were realised. It is also quite clear that at the time of sale the arbitrators did net treat plaintiffs Nos. 5 and 6 as the purchasers. The property was not knocked down to them, nor were their signatures taken as the highest bidders; nor did the arbitrators give any notice to plaintiffs Nos. 5 and 6 in the terms of the notice Ex. G which they sent to the 4th plaintiff. On this point no subsequent evidence or statements in the nature of admissions by the 5th plaintiff in, his evidence before the District Munsif can be relevant to validate a preceding decision in the award which was invalid, at the time of the award. It is quite clear that at the time of the sale the person accepted by the arbitrators as the purchaser was the 4th plaintiff and the 4th plaintiff alone. We are satisfied, therefore, that, in fastening the damages of the deficit at the re-sale on plaintiffs Nos. 5 and 6 also, the arbitrators were clearly exceeding the terms of their reference.

5. It is not necessary to go into the other points raised, on some of which the lower Court has dilated at great length. It is obvious that, if the arbitrators have decided matters outside the scope of their reference, the Judge was not entitled to include such matters in his decree. It is no part of the Judge's business to decide whether the plaintiff's objection to the arbitrators' conduct in the re-Sale and the allocation of the deficit is justified or not by the facts proved in evidence before him.' The only point that he has to consider is whether the disposal of such objections was within the scope of the reference or not, and, if it was not, then he has nothing to do with it at all. The Judge has treated the case far too much as if it was an appeal against the arbitrators' findings. That is not a proper point of view at all. He seems to regard the case at its worst, as raising merely questions of misconduct of the arbitrators on which, of course, if there is no question of lack of jurisdiction, or material irregularity in the exercise of it, his finding is final and cannot be attacked either by way of appeal or revision. See Gulam Khan v. Muhammad Hussain 29 I.A. 51 : 12 M.L.J. 77: 25 P.R. 1902 Kalicharan Sirdar v. Sarat Chunder Chowdhry 7 C.W.N. 515 and Batcha Sahib v. Abdul Gunny 21 Ind. Cas. 308: 14 M.L.T. 314: (1914) M.W.N. 142. But a party is entitled to be protected by the law against a decision by arbitrators on points not referred to them at all, and against a decree of Court based on such a decision, all the more because he has no right of appeal: see Merali Visram v. Sheriff Devji 12 Ind. Cas. 687 : 13 Bom. L.R. 1017. The real point at issue here is the question of lack of jurisdiction for the arbitrators. It is in fact contended by the respondent that all that has been urged by the petitioners is mere misconduct on the part of the arbitrators and not want of jurisdiction. The distinction has, no doubt, to be kept in mind but there is no doubt in our minds in this case about the answer. Misconduct must be misconduct in carrying out the terms of the reference and within the scope of it. Anything beyond that is action without jurisdiction whether or not it may amount also to misconduct. If the arbitrators' award is then beyond their jurisdiction and, therefore, was made without jurisdiction, then obviously the decree which embodies it is also made without jurisdiction. The duty of the lower Court, when an award sent to it is beyond the jurisdiction of the arbitrators, was not to pass a decree in accordance therewith but to remit it back to the arbitrators under the terms of Section 14 of Schedule II of the C.P.C.

6. The order of the lower Court cannot, therefore, be supported. We must hold that it is without jurisdiction and we must set it aside. No other grounds of attack on the lower Court's jurisdiction have been urged before us. In the circumstances we set aside the lower Court's order and direct it to pass an order in accordance with law.

7. Plaintiffs Nos. 4, 5 and 6 will have their costs (one set). Past and future costs in the lower Court will abide the result.

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