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Sreelal Mangtulal Vs. J.F. Madan - Court Judgment

LegalCrystal Citation
SubjectProperty
CourtKolkata
Decided On
Judge
Reported inAIR1925Cal599,(1925)ILR52Cal100
AppellantSreelal Mangtulal
RespondentJ.F. Madan
Cases ReferredHodgkinson v. Fernie
Excerpt:
arbitration - award--question of law--mortgage--effect of undertaking by purchaser to pay mortgage debt. - .....time specified in the order. the time was subsequently extended: and, on the 23rd of february, the learned arbitrator made his award by which he awarded to the plaintiffs the sum of rs. 23,600 with interest at the rate of 6 per cent, from the 12th of september 1922, until the date of actual realisation.9. the learned advocate-general drew our attention during the course of the argument to the fact that in one passage the learned arbitrator had said that the plaintiffs as legal representatives of madan were entitled to recover the sum of rs. 23,600 and in another passage the learned arbitrator said that he decided that the plaintiff firm should get a decree for rs. 23,600. there is no substance in this point; which appears to me an obvious slip on the part of the learned arbitrator, and.....
Judgment:

Sanderson, C.J.

1. This is an appeal by the defendants Sreelal Mangtulal from the judgment of my learned brother Mr. Justice C. C. Ghose, whereby he dismissed an application which was made by the defendants to set aside an award made by the learned Counsel Mr. N. N. Sircar on the 23rd of February 1924

2. The facts which it is necessary for me to state for the purpose of my judgment are as follows:---On the 16th of March 1921, one G. C. Bose borrowed from one Chaturbhuj Dossa a sum of Rs. 20,000 and he executed a promissory note and a memorandum and deposited with Chaturbhuj the title-deeds relating to a share in certain collieriRs.

3. Subsequently Chaturbhuj endorsed the promissory note to J. F. Madan and handed over the title-deeds with the memorandum of deposit to J. F. Madan for valuable consideration.

4. On the 12th of September 1922, G. C. Bose sold the said share in the collieries to the appellants. The conveyance purported to be free of encumbrances; the purchase money was Rs. 70,000 and part of the consideration money was provided for in the following manner:---'Encumbrances on the collieries to be discharged by Sreelal Mangtulal: (a) Due to Mr. J. F. Madan in respect of the equitable mortgage, dated the 16th March 1921, in favour of Chaturbhuj Dossa and assigned over to the said Mr. J. F. Madan on the 8th day of November 1921 (principal and interest) Rs. 23,600.'

5. On the 23rd of March 1923, a suit was instituted by J. F. Madan against the appellant defendants for recovery of Rs. 24, 670 which represented the sum of Rs. 20,000, which I have mentioned, and interest. After the suit was instituted, namely, on the 28th of June 1923, J. F. Madan died and on the 18th of August 1923, the plaint was amended by adding J. F. Madan, the plaintiff firm, and certain persons who were the executors and executrix of J. F. Madan as plaintiffs.

6. Amongst other matters the plaint alleged a specific agreement about the 13th of September 1922, that the defendant would pay to the plaintiff the amount due on the promissory note with interest.

7. In the written statement of the defendant firm it was alleged amongst other things, that there was no valid and binding mortgage created by the promissory note and memorandum; and it was further alleged that the alleged assignment and mortgage to Madan being in fraud of the creditors of Chaturbhuj who was adjudicated insolvent on the 8th of May 1922 was void and inoperative, and the defendant submitted that there was no valid and binding mortgage in favour of the plaintiff. The defendant firm then referred to certain negotiations between the plaintiff and the defendant firm which it was alleged ultimately fell through when the defendants came to discover that there was no valid and binding mortgage or assignment in favour of the plaintiff and the defendants finally submitted that the plaintiff was not entitled to maintain the suit against the defendants.

8. On the 18th of January 1921, by consent of the parties, an order was made by my learned brother Mr. Justice Buckland that all matters in dispute in the suit including the costs not disposed of should be referred to the final arbitration of Mr. N. N. Sircar, Bar-at-Law, who was to make his award within the time specified in the order. The time was subsequently extended: and, on the 23rd of February, the learned arbitrator made his award by which he awarded to the plaintiffs the sum of Rs. 23,600 with interest at the rate of 6 per cent, from the 12th of September 1922, until the date of actual realisation.

9. The learned Advocate-General drew our attention during the course of the argument to the fact that in one passage the learned arbitrator had said that the plaintiffs as legal representatives of Madan were entitled to recover the sum of Rs. 23,600 and in another passage the learned arbitrator said that he decided that the plaintiff firm should get a decree for Rs. 23,600. There is no substance in this point; which appears to me an obvious slip on the part of the learned arbitrator, and in each case he was no doubt referring to the same partiRs.

10. The learned arbitrator set out the Issues and he dealt, in the first place, with the first six, one of winch was 'Was there any valid or binding mortgage 'in favour of the plaintiffs?' He answered all these six issues in favour of the plaintiffs. The result of that was that he found that the plaintiffs had a valid and binding mortgage on the collieriRs. The seventh issue was also decided in favour of the plaintiffs. That issue was' Was the transaction referred to in 'paragraph 2 of the plaint in fraud of the creditors of 'Chaturbhuj Dossa?' Then the learned arbitrator dealt with the issues 8, 9, 10 and 11. The material ones to which reference was made during the argument of this appeal were issues 8 and 9 Issue 8 was 'Was there any agreement for assignment of mortgage 'right of the plaintiff?' and issue 9 was 'Was there ' any agreement that the defendant would pay the 'amount of the promissory note with interest as laid 'down in paragraph 4 of the plaint?' Those two issues refer to the alleged specific agreement on or about the 13th of September. The learned arbitrator came to the conclusion 'There are no merits in the case of 'the defendant firm, but technically there was no 'concluded agreement as has been alleged in the 'plaint.'

11. The learned arbitrator then proceeded as follows: 'Defendants purchased the rights of Gobinda 'Chandra Bose in the collieries by conveyance 'dated the 12th September 1922. The vendor purported 'to convey the properties free from all encumbrances 'for the sum of Rs. 70,000.' The conveyance states:---'In consideration of the said sum of rupees seventy thousand to the vendor paid by the purchaser, the 'receipt whereof the vendor does hereby as well as 'by the receipt hereunder written admit and acknowledge and of and from every part thereof hereby 'release and discharge the purchaser.' He then referred to the consideration and the passage which. I have read, which deals with the incumbrances on the collieries to be discharged by Sreelal Mangtulal. The learned arbitrator then stated as follows: 'Mangtulal's case is, as is also clear from his statement to me, that lie has bought the properties for Rs. 70,000, and he has got to pay Rs. 23,600, either to Mr. Madan or to Gobinda Bose (since adjudicated insolvent) and that neither Gobinda Bose nor the Official Assignee has demanded payment of this amount. I refer to the following questions and answers.

Q. Have you any real objection to pay Mr. Madan. in preference to Gobinda Bose?

A. That is not so. I am prepared to pay if I have a proof of good title.

Q. After the decree of Court if you have got to pay to Mr. Madan, you will have no grievance?

A. Yes, if asked to pay by Court, I have no objection to pay.

12. If the answer of the defendant Mangtulal in which he said ' I am prepared to pay if I have a proof of good title' referred to the question, as I assume it did, whether the plaintiff had a valid and binding mortgage in his favour I should have thought that the learned arbitrator would net have had much difficulty in coming to a conclusion upon this matter inasmuch as the learned arbitrator had already decided that the title of the plaintiff in respect of the mortgage was established.

13. The matter however does not rest there, because the learned arbitrator after finding certain facts, which it is not necessary for me to read in detail,---(amongst them was a finding that the 'defendant firm had Rs. 23,600 earmarked in its hands having undertaken to pay off Mr. Madan)' proceeded to state: 'Counsel for both sides have addressed the arbitrator 'on the question whether the defendant firm is liable, 'by reason of the undertaking mentioned in para-'graph 5 of the plaint.' That I assume was the undertaking referred to or implied in that part of the conveyance to the defendants which dealt with the way in winch the sum of Rs. 23,600 due to Mr. Madan was to be discharged. The learned arbitrator then set out certain decisions to which reference had been made and he proceeded as follows:---'Upon the authorities 'discussed and on facts found by me I hold that the 'position of the defendant firm is analogous to that of 'a trustee in respect of the earmarked Rs. 23,600 in 'its hands.'

14. The learned Counsel on behalf of the defendants-argued that in that passage there was an error of law on the face of the award.

15. The law upon this question has recently been reiterated by the Judicial Committee of the Privy Council in the case of Champsey Bhara and Company v. Jivraj Balloo Spinning and Weaving Company, Limited, [1923] A. C. 480; 28 C. W.N. 397. in which case Lord Dunedin in delivering the judgment referred to the well-known case of Hodgkinson v. Fernie (1857) 3 C. B. (N. S.) 189. and said as follows?:---'Now the regret expressed by Williams J. in 'Hodgkinson v. Fernie (1857) 3 C. B. (N. S.) 189., has been repeated by 'more than one learned Judge, and it is certainly 'not to be desired that the exception should be in' any way extended. An error in law on the face of 'the award means, in their Lordships' view, that 'you can find in the award or a document actually 'incorporated thereto, as for instance a note appended by the arbitrator stating the reasons for his 'judgment, some legal proposition which is the 'basis of the award and which you can then say 'is erroneous.' The learned Lord then mentioned certain matters which it did not mean, and stated that 'the award will stand unless, on the face of it, 'they (i.e., to say the arbitrators) have tied them 'selves down to some special legal proposition which' 'then, when examined, appears to be unsound.'

16. This Court has recently had occasion to draw attention to the law on this point, iii more cases than one, as for instance in the case of U. M. Chowdhury & Co. v. Jiban Krishna Ghose and Son (1922) I. L. E. 49 Calc. 646., the decision in which is to the same effect as the decision of the Judicial Committee to which I have referred.

17. The learned Counsel for the respondents argued that the passage in the award which I have read, was not the basis of the award, and that it was no more than an incidental opinion expressed by the learned arbitrator whereas, as I have said, the learned Counsel for the appellants argued that it was the basis of the award.

18. The first question which this Court has to decide is whether the learned arbitrator did regard that as the basis of his award. The learned Counsel for the respondents' argument is not without some force, but having regard to the way in which the award is framed, it is difficult to avoid the conclusion that the learned arbitrator did regard that as the basis of his award.

19. The next, question which arises is whether the decision of the learned arbitrator in this respect was erroneous in point of law. It is clear to my mind that the defendants were not trustees of any fund held by the defendants for the benefit of the pontiff or his representativ Rs. In fact, it appears from the award that the learned arbitrator did not regard them as trustees; for, he said that the position of the defendant firm was analogous to that of a trustee. I have had considerable difficulty in appreciating what the learned arbitrator meant by saying that the position of the defendant firm was analogous to that of a trustee and that there was a sum of money 'earmarked' in his hands.

20. Consequently I am of opinion that, assuming this was the basis, upon which the learned Counsel relied for his award it was erroneous in law and that consequently this award cannot stand.

21. The appellants have applied that this matter should be remitted to the learned arbitrator. In my judgment, that is the proper course.

22. Therefore, the award wilt be remitted to learned arbitrator in. order that he may deal with the matter. Considerable time has, elapsed already: and we, therefore, think that the-award should He made on or before July 14th, 1924. It will be necessary that the learned arbitrator should have a copy of the order of this Court and therefore we give direction that as soon as the judgment is signed, an office copy should be forthwith prepared which must be obtained by the appellants and served by the appellants upon the learned arbitrator on or before Friday next.

23. Before leaving this case I think it is necessary to add one or two words about the form of the award.

24. The form of the award, in my experience, is unusual.

25. It is more like the judgment of a Judge, which is subject to appeal, than the award of an arbitrator.

26. The learned arbitrator has gone so far as to include in his award part of the evidence; he has referred to cases which were cited, and he has commented on at least one of them. As pointed out in Hodgkinson v. Fernie (1857)3 C. B.(N. S.) 189.: When a suit or matters in difference are referred to an arbitrator, whether a lawyer or a layman, he is constituted the sole and final judge of all questions of law and fact.

27. The award of the arbitrator is intended to be final both in fact and law, and the Courts will not interfere except on certain well-recognised principles and in certain well-defined circumstances.

28. An award made in the form of the award now under consideration is calculated to have an effect, which is the exact opposite of finality, and one might almost say it is an invitation to the parties to embark upon further litigation, as, indeed, the parties have done in this case.

29. Instead of being final and conclusive, the result has been that the parties are still litigating upon the matters in dispute and they have been put to much unnecessary expense.

30. Further, there is no necessity that an award should be made in the form in which the award was made in this case: if there is any real difficulty in point of law as to which the opinion of the Court should be taken, provision is made in Clause 11 of the 2nd Schedule of the Civil Procedure Code for making the award in the form of a special case with the leave of the Court.

31. The result is that the appeal must be allowed and the matter remitted to the learned arbitrator in order that he may make the award within the time which I have indicated; and, we are of opinion that the costs of the proceedings before my learned brother Mr. Justice C. C. Chose and the costs of this appeal must abide the event of the learned arbitrator's award. By that I mean if the learned arbitrator's award is in favour of the plaintiffs the defendants will pay the costs of those proceedings. On the other hand, if the award is in favour of the defendant the plaintiff will pay the costs of the proceedings in this appeal, and in the Court of first instance.

Walmsley J.

32. I agree.


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