Bhimraj Kanai Lal (firm) And Ors
v.
Munia Sethani
(High Court Of Judicature At Patna)
Civil Revn. No. 589 of 1934 | 11-03-1935
Courtney Terrell, C.J.
1. This petition originally came before Wort, J., and he has referred it for final disposal to a Bench of this Court. One Munia Sethani, the wife of one Tejpal, sued the defendants in the Small Cause Court for a sum of money for rent of a certain house. The defence set up was that relationship of landlord and tenant did not exist and that the house in question was really the property of the defendants. When the suit had begun and was pending the plaintiff and the defendants appear to have entered into an agreement that all disputes between them should be referred to the arbitration of a certain named gentleman. It appears that persons other than the actual parties to the suit were interested in the matter and were themselves disputants of various points and the husband of the plaintiff was one of these parties. There were others, but it is not necessary to mention them. It appears that the husband was at that time an undischarged insolvent.
2. Before the arbitrator could proceed to his award the defendants for reasons of their own purported to withdraw from the arbitration. The arbitrator however heard such of the parties as he thought fit and proceeded to make what purported to be an award, whereupon the plaintiff applied to have the award filed and stated that the suit had been adjusted, that the provisions of O. 23, R. 3, Civil P.C., governed the case, and that the award should be recorded as a compromise of the suit. The defendants objected on the ground that there were defects in the award, that it was invalid, that there had not been a reference to arbitration as provided by Sch. 2 of the Code, that the husband of the plaintiff was an undischarged insolvent and incapable of making a mutual agreement with respect to property, and various other contentions. The Small Cause Court Judge however accepted the award and gave a decree for a sum of money which the arbitrator considered that the defendants should pay to the plaintiff. From this order the defendants came to this Court in revision.
3. The matter of whether a voluntary arbitration between the parties, not under the auspices of the Court, entered into after a suit has been begun can be regarded as a compromise of the suit under O. 23, R. 3 has been the subject of much discussion in the Courts. The Courts of Bombay, Allahabad and Pingoon have taken the view that O. 23, R. 3 applies to the matter and that in such circumstances the award can be recorded. The High Court of Bengal and the High Court of Lahore have taken the opposite view of the matter. I turn therefore first to a short consideration of the cases which have so far been decided in this Court. They leave the question open for our present decision and are not conclusive one way or the other.
4. The first case to which we have been referred is that of Kokil Singh v. Ramasrey Prasad, 1924 Pat 488 = 81 I C 994 = 3 Pat 443. The one conspicuous feature which is sufficient to differentiate this case from the case before us is this. The plaintiff had brought a suit for accounts and an agreement was entered into to refer the matter to arbitration. This was after the suit had begun. The agreement provided that the suit should be dismissed ; and accordingly the parties, as they had a right to do, went before the Subordinate Judge and asked that the suit be dismissed and showed their agreement that that course should be taken. The suit was accordingly dismissed and the Court had no longer seisin of the matters in dispute. The parties therefore went away free to do as they liked, they wont to arbitration, then came hack to the Court for the enforcement of the award as provided by R. 20, Sch. 2, Civil P.C. It was contended before this Court that inasmuch as the agreement to go to arbitration had been entered into while the suit was still pending notwithstanding that the actual award took place after the suit had been dismissed, the award was not an award to which the Court could give effect. That argument was overruled for two reasons. In the first place Ross, J., expressed the opinion that there was, even though a suit might, be pending at the time, nothing to prevent the parties from making a valid contract that the suit should be dismissed and the matter referred to arbitration ; but further the argument was overruled because the learned Judge found as a fact that after the suit had been dismissed there was a further agreement for reference to arbitration, that is to say contract had been made at a time when it could not he denied that there was no suit before the Court, and therefore even if the argument was valid in itself it had no application to the facts of the case. Therefore this decision has no bearing upon the matter before us; it has no bearing upon the fundamental question as to whether the agreement and the award taking place while the suit was pending can be treated as a compromise.
5. The next case of this Court is Ramadhar Rai v. Subedar Pathak, 1932 Pat 205 = 138 I C 82 = 11 Pat 237. In that case the parties, while the suit was pending, came to an agreement to submit their disputes to arbitration. They did not, as provided by the earlier part of Sch. 2, apply for an order of reference, but they went away to the arbitrator selected by them. The arbitrator came to an award and the award was accepted by the parties as being the award in fact. Thereupon the parties came back to the Munsif and asked that the award should be recorded under O. 23, R. 3. This case to some extent illustrates a situation which frequently arises in the Courts. The proper duty of a party coming for relief to the Court is to set forth the facts and ask for the remedy which he desires. It is quite immaterial whether in the course of his argument he states that he relies upon such and such rule or enactment gives him the remedy and it is meaningless to state that the application which he makes is made "under such and such rule." The mere fact that his application is headed with the number and name of a statute or rule is entirely immaterial. It is the duty of the Court to proceed to consult the law and find out if it has power in the circumstances to award the relief or any suitable relief which the plaintiff may have asked. The constant use of the words in making an application "under such and such a rule" is much to be deprecated and leads to a great deal of misunderstanding.
6. Now in the case to which I have referred, Ramadhar Rai v. Subedar Pathak, 1932 Pat 205 = 138 I C 82 = 11 Pat 237, the learned Judges came to the conclusion that notwithstanding that there had been an arbitration and an award one of the parties had raised no objection to it. This was merely a case of the parties coming to the Court and stating that they had arrived at an agreement with respect to their disputes and asking that the compromise which they had arrived at should be recorded. If parties do come before a Court with a cut and dried settlement of their disputes, it is no part of the business of the Court to inquire as to how that dispute was in fact settled. It might have been settled by tossing a coin; it might be that the matter was referred to arbitration, it might even be that the parties had agreed to accept the decision of the arbitrator even though the arbitrator had grossly misconducted himself. If parties agree to an order which is to be made, then the application for recording that compromise and passing a decree in accordance therewith is a matter to be dealt with under O. 23, R. 3 of the Code and the matter of the conduct of the arbitration is immaterial For that reason the decision to which I have just referred was right and it is of no assistance in solving the question before us, not with standing that in the course of the discussion the learned Judges mentioned the various authorities in which there was a conflict of opinion on the real question now before us. So much for the cases which have come before this Court. I now turn for a moment to a consideration of the legislation which is material. S. 89, Civil P.C., is to my mind clear and specific, para, (1) states:
Save in so far as is otherwise provided by the Arbitration Act, 1899, or by any other law for the time being in force, all reference to arbitration whether by an order in a suit or otherwise and all proceedings thereunder, shall be governed by the provisions contained in Sch. 2.
7. The words "or by any other law for the time being in force" have been the subject of some discussion; but, in my opinion, the words clearly must be read ejusdem generis with reference to a specific piece of legislation, the Arbitration Act, 1899, and it means that it contemplated that further legislation may take place or that there may be already in existence specific legislation dealing with arbitration. It was not the intention; of the legislature to override either the Arbitration Act or any other specific piece of legislation, but the intention; was to state that all references to arbitration of whatsoever kind, if they are in tended to be given a binding effect, must be conducted and instituted according to the provisions of Sch. 2 of the Act. Now it has been suggested further that the words "by any other law for the time being in force" contemplate that the provisions of O. 23, R. 3 are contemplated by those words; but a reference to the various provisions of the Code will show that the Code was carefully drafted and that where a saving was intended to be made with respect to other provisions in the Code itself those provisions were specifically mentioned and specifically expected. In my opinion the proceeding under O. 23, R. 3 for the recording of a compromise between the parties is not an exception to S. 89 and that section does not take into contemplation that rule at all as being one of the proceedings by way of arbitration to which the section and the schedule are not to apply. I now turn to the cases which support the view which I have attempted to enunciate. The first is an important judgment by Rankin, J., as he then was in Amar Chand Chamaria v. Banwari Lal, 1922 Cal 404 = 69 I C 803 = 19 Cal 608.
8. I respectfully agree with the judgment of that very learned Judge that the policy of the legislation was that when parties come to the Courts of the land for a settlement of their disputes, they cannot withdraw from the jurisdiction so long as the suit is pending. It is perfectly open to them if they wish to come to the Court and say specifically that they do not wish it to have anything more to do with the matter, the suit will be withdrawn and thereupon they can go away and do anything they like with the subject-matter of their dispute; but so long as they are before the Court it was in the contemplation of the legislature that that Court shall retain its jurisdiction, and therefore the first part of Sch. 2, that is to Rr. 16 to 19 inclusive of the Code, contemplates what is to be done when a suit is pending and the parties desire to have recourse to arbitration rather than the arbitrament of the Court and specific provisions are made that in those circumstances the parties must apply fur an order of reference and the subsequent conduct of the proceedings is to be according to those rules. Parties are at liberty moreover, according to Rr. 17 to 19, Sch. 2, without beginning a suit at all, to come to the Court and state that they desire that their dispute shall be referred to arbitration and ask that the arbitration shall be conducted under the aegis of the Court just as if a suit had in fact already begun. R. 20 and those which follow contemplate the case of parties who have not begun a suit, who have submitted their differences to arbitration and who then come to the Court to have the award of the arbitrator enforced. In either of those three cases the conduct of the arbitration is always subject to the criticism that the rules in Sch. 2 have not been followed and if so the Court will refuse to enforce the award.
9. It has been contended on behalf of the plaintiff in the suit before us that there can be no possible difference between an application to the Court to enforce an agreement that such and such an order shall be made in the suit by way of decree and an application asking that the order of a person to whom the matter had been referred should itself be enforced. To my mind there is all the difference in the world. In the one case the Court is asked to enforce the agreement between the parties; in the second case it is asked to enforce the decision of another tribunal. The policy of the legislation, in my opinion, is that when the Court is asked to enforce the decision of another voluntary tribunal the conduct of that tribunal should be under its guidance and subject to its control and subject moreover to the special provisions which are laid down in Sch. 2, otherwise 1 can see no meaning to be put upon the words of S. 89 which are stringent and require that an arbitration shall not take place except under the terms set forth in the schedule; and therefore with the view of Rankin, J. to that effect I respectfully agree. Big decision was subsequently followed in the Calcutta High Court in two cases, one in (sic) Dassi v. Tarini 1927 Cal 887 = 104 I C 360 = 55 Cal 538 decided by a Division Bench and the other in Rohini Kanta v. Rajani Kanta, 1934 Cal 643 = 151 I C 761. A similar view has been expressed by the Lahore High Court in Hari Parshad v. Soogni Devi, 1921 Lah 232 = 67 I C 123. Now the decisions on the other side have largely turned upon the question of what is meant by a compromise in O. 23, R. 3, it has been argued in this case that there is no difference between a compromise which says that a certain sum of money shall be paid or a certain thing shall be done, and a compromise which says that the parties shall abide by a decision of another person. With that argument I have already dealt. In the case of Gajendra Singh v. Durga Kumari, 1925 All 503 = 88 I C 768 = 47 All 637 (F B) two of the learned Judges of the Allahabad High Court decided in favour of the view that the agreement and arbitration operated as an adjustment of the suit, but Mukherji, J., with whose argument I respectfully agree, took the opposite point of view. His discussion of the matter is to be found at p. 658 of the report and the passage which, to my mind, sums up his argument, is as follows:
These can be no doubt that the Civil Procedure Code uses a recognised expression for the proceeding which involves a reference of their dispute by the contending parties to a third party for his decision. This has been described as an "arbitration." Nowhere in the Code has the word "arbitration" been used in a sense co-extensive with that of an adjustment of a dispute by lawful agreement or compromise.
10. In other words the provision relating to an agreement and compromise are of the character entirely different from those which govern the conduct of a voluntary tribunal. I do not think it necessary to analyse in detail the decision in Chanbasappa Gurushantappa v. Baslingyya Gokurnava. 1927 Bom 565 = 105 I C 516 = 51 Bom 908 (F B) which was arrived at after a very lengthy etymological discussion of the derivation of the word compromise. As was pointed out by my brother Agarwala, J., in the course of this discussion, the current meaning of any particular word may differ widely from that of the words from which it was derived, and I think therefore that no useful purpose is served by such method of consideration. The decision in Laljee Jesang v. Chander Bhan Shukul, 1931 Rang 58 = 131 I C 57 = 9 Rang 39 proceeded upon similar lines although not at such great length and I venture however similarly to disagree with it as with the decision in Subharaju v. Venkataramaraju, 1928 Mad 1025 = 113 I C 632 = 51 Mad 800 (F B).
11. I agree with the opinion expressed by Wort, J., who referred this matter to a Bench, upon this point. He has pointed out that if parties come to the Court with a cut and dried statement that the matters in dispute between them have been adjusted then O. 23, R. 3 applies, but if they come to the Court stating that it is true that they have referred their dispute to arbitration but that they do not agree mutually to accept the decision which has been arrived at by another person, then the matter is no longer governed by O. 23, R. 3, and in that case there being no agreement, the matter must be considered in the light of Sch. 2; in fact O. 23, R. 3 distinctly contemplates that if the agreement, compromise or satisfaction presented to the Court is fit to be recorded there and then a decree in accordance therewith shall be passed. It is obvious that an agreement to go to arbitration and accept the award is not of such a nature that a decree can be passed in accordance therewith and the award which is ultimately made by arbitration is in no sense a part of the agreement. I would therefore direct that the order of the Small Cause Court Judge giving effect to this alleged compromise be set aside and the matter be remanded to the lower Court to be dealt with according to law. The application is allowed with costs: hearing fee ten gold mohurs.
C.M. Agarwala, J.
12. In so far as it is material for the purposes of the present appeal O. 23, R. 3, provides as follows:
Where it is proved to the satisfaction of the Court that a suit has been adjusted wholly or in part by any lawful agreement or compromise .........the Court shall order such agreement or compromise to be recorded, and shall pass a decree in accordance therewith so far as it relates to the suit.
13. It is clear that when the parties come to a Court in which a suit is pending and state the terms on which they have adjusted their differences, the Court is bound to accept those terms as the terms on which the suit is to be settled, apart from any consideration as to the manner in which those terms have been arranged. But if one of the parties denies that the matter in dispute has been settled on the terms alleged by the other party, the latter is required to prove the settlement to the satisfaction of the Court. If he alleges that the alleged settlement is the result of an arbitration proceeding agreed to between the parties, the Court is confronted with the difficulty that under S. 89 of the Code
all references to arbitration, whether by an order in a pending suit or otherwise, and all proceedings thereunder, shall be governed by the provisions contained in Sch. 2,
unless otherwise provided by the Indian Arbitration Act, or by any other law for the time being in force. Turning to Sch. 2 of the Code it is found that that schedule contemplates two classes of arbitrations, that is to say, arbitrations in pending suits, and arbitrations regarding matters which are not the subject matter of pending suits. Arbitrations in pending suits are governed by paras 1 to 16 of the schedule. Arbitrations in cases in which the dispute is not the subject matter of a pending suit fall into two classes, governed respectively by para. 17 and by paras 20 and 21 of the Schedule. Para. 17 deals with the class of cases in which, there being no suit pending, the parties agree in writing to refer their dispute to arbitration and require that the arbitration shall be conducted under the auspices of a Court. Paras 20 and 21 contemplate a case in which, there being no suit pending, the parties refer their dispute to arbitration without seeking the assistance of the Court and then apply to the Court to enforce the award. It is clear to me that, so far as pending suits are concerned, the matter in dispute can be referred to arbitration only in accordance with paras 1-3 of the Sch. 2, that is to say, the parties must apply to the Court in which the suit is pending for a reference to an arbitrator, and the Court is then required to proceed to appoint an arbitrator and direct a reference to him. S. 89 is, in my opinion, mandatory and it follows from this view that when a suit is pending, the matter in dispute may be referred to to arbitration only in accordance with that Schedule. Not only does this view appear to be in accordance with the express provisions of the Code but also it avoids the anomaly of a Court proceeding with the trial of a suit in which the parties, behind the back of the Court, have sought the adjudication of an arbitrator and are endeavouring to obtain a decision in two tribunals at the same time. I respectfully agree with the observation of Beaman, J., in Vyankatesh Mahadev v. Ram Chandra, 1914 Bom 184 = 27 I C 46 = 38 Bom 687 that
where the Court is seised of a cause, its jurisdiction cannot be ousted by a private and secret act of parties, and if they, after having invoked the authority of the Court and placed themselves under its superintendence, desire to alter the tribunal and substitute a private arbitrator for the Court, they must proceed according to the law laid down in the first sixteen clauses of Sch. 2.
14. This view of the matter in no way entails disagreement with the decision of a Division Bench of this Court in Ramadhar Rai v. Subedar Pathak, 1932 Pat 205 = 138 I C 82 = 11 Pat 237. In that case a dispute which was the subject matter of a pending suit, was referred to arbitration by the parties, without the intervention of the Court. Although at one stage the plaintiff in the suit appears not to have accepted the award that was made the decision appears to have proceeded on the basis that eventually neither party disputed the award (see bottom of p. 240 of the report). In these circumstances the Court directed the suit to be disposed of in terms of the award. The decision in Kokil Singh v. Ramasrey Prasad, 1924 Pat 488 = 81 I C 994 - 3 Pat 443 is not in conflict with this view. There the parties agreed to withdraw the suit and have the matter in dispute settled by arbitration. The suit was accordingly withdrawn and the arbitration proceeded. An application by one of the parties was subsequently made to the Court to file the award. At this time there was no pending suit and the Court therefore had power under para. 20 of Sch. 2, Civil P.C., to file the award. It remains to notice another argument, namely, that the words "any other law" in S. 89, include O. 23, R. 3. It would however be contrary to all canons of the construction of Statutes that, where a Code lays down that certain proceedings shall be governed by provisions contained therein and relating to those proceedings, words, referring to "other laws" should be taken to refer to the Code itself. It is not open to us to substitute for the words "by any other law" in S. 89 the, words "except as provided in this Act} or by any other law. If this had been the intention of the legislature it would, have been made clear as in Ss. 96, 100 and 104.
15. I agree to the order proposed.
Advocates List
For Appellant/Petitioner/Plaintiff: S.M. Mullick and S.C. Mazumdar For Respondents/Defendant: K. Husnain, R.S. Chatarji and S.K. Ray
For Petitioner
- Shekhar Naphade
- Mahesh Agrawal
- Tarun Dua
For Respondent
- S. Vani
- B. Sunita Rao
- Sushil Kumar Pathak
Bench List
Hon'ble Judge Courtney Terrell
Hon'ble Judge 
Hon'ble Judge 
C.M. Agarwala
Eq Citation
AIR 1935 PAT 243
LQ/PatHC/1935/60
HeadNote
Civil Procedure Code, 1908 — O. 23, R. 3 — Compromise of suit — Arbitration — Pending suit — Arbitration Act (10 of 1899), S. 89 — Sch. 2 — Held, that where a suit is pending, the matter in dispute can be referred to arbitration only in accordance with Sch. 2, Civil P.C., and not otherwise — Any other law in S. 89, Civil P.C., does not include O. 23, R. 3, Civil P.C. — Hence, an agreement to refer to arbitration and an award made thereunder, while a suit is pending, cannot be treated as a compromise of the suit under O. 23, R. 3, Civil P.C.